v ReporNi 736- -Philippines Forestry,Fisheries, and Agricultural Resource ManagementStudy (ffARM Study)

January17, 1969

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1983 11.1 1984 16.7 1985 18.6 1986 20.4 1987 20.6

An ACMMX25

AMC Annual Allowable Cut AhD Alienable and Disposable ACIPHIL Philippinas Association of Independent Conaultants AID/USAID U.S. Agecy for International Development AIJ Asian Institute of Journalism APT Agricultural Production Te-hntcian AR Artificial Reefs BAI Bureau of Animal Industry B/C Benefit-cost Analysis BFAR Bureau of Fisheries and Aquatic Resources BFD Bureau of Forest Development (now FHB) BOX Board of Investmnts CARP Conprehensive Agrarian Reform Program CamR Comunity Enviro mnt end Natural Resources Officer CFL Cowsunity Forest Lease. now Comunity Forest Stewardship CLAO Citizens Legal Assistance Office COA Co_mission on Audit CSC Certificateof Stewardship Contract CTUP Community Timber Utilization Permits CVRP Central Visayss Regional Project DA Department of Agriculture DAR Department of Agrarian Reform dbh Diameter at breast beight DeRIR Department of dnvironment and Natural Resources DL5 Department of Local Covernments DOH Department of Health DOTI Department of Trade and Industry EDF Economic Development Foundation EIB Environmental Management Bureau (replaced NEPC and NPCC) FFF Free Farmers Federation FMB Forest Management Bureau FOSA Forest StewardshipAssociation CDP Gross Domestic Product GNP Gross National Product GOP Government of the Philippines "ED Human Resource Development IAMSAS Integrated Area Management Services IIRR International Institute for Rural Reconstruction IPAS Integrated Protected Areas System IRRI International Rice Research Institute ISF Integrated Social Forestry nT Industrial tree planting IUCN International Union for the Conservation of Nature LMB L.nd Management Bureau LiMP Local Resource Management Project MAF Ministry of Agriculture and Food (now DA) MM Metro Manila MKC Metro Manila Commission mm Ministry of Natural Resources (now DENR) MRLF Moro National Liberation Front NANRIA National Mapping and Resource Information Authority NEA National Electrification Agency NEDA National Economic Development Authority NEPC National Environmental Protection Council (now EMM) NFA National Food Authority NGO Non-Governmentel Organization NHA National Housing Authority NIA National Irrigation Administration NACIAD National Council for Integrated Ares Development NPCC National Pollution Contrul Commiision (now EnB) NRDC Natural Resources Development Corporation PBSP Philippine Business for Sociel Progress PFA Philippine Coconut Authority PDS Provincial Development Staff PENRO Provincial Environment and Natural Resources Officer PIADP Palawan Integrated Area Development Project PICOP Paper Industries Corporation of the Philippines POPCOM Population Comission PUo Private voluntary agency RDC Regional Development Council RED Regional Executive Director RP Republic of the Philippines RRDP Rainfed Resources Development Project RTD Regional Technical Director SALT Sloping Agriculture Land Technology SEC Securities and Exchange Commission UP University of the Philippines UPLB University of the Philippines at Los Bsanos USLE Universal Soil Loss Eq tion FOR OMCIAL LSE ONLY Preface

This report was prepared principally by members of a mission that visited the Philippines twice in 1987, for three weeks in March and four weeks in November-December. It was revised following discussions with Government in November 1988. In addition to extensive discussions in Manila and Los Banos, the main mission visited various field sites to explore natural resource management issues, including, in Luzon, the t-ingayen Gulf, Pantabangan and Magat watersheds, and Bataue; in the Visayas, the provinces of Cebu, Bohol, Negros Oriental, and Siquijor; in Mindanao, Bukidnon Province; and Palawan. The mission received much information, assistance, and suggestions from officials and others in these localities, as well as from those in many agencies and institutions, including the National Economic Development Authority (NEDA); Departments of Environment and Natural Resources (DENR), Agriculture (DA), and Agrarian Reform (DAR) and their attached agencies; NIA; PCARRD; NACIAD; the University of the Philippines at Los Banos and Dilliman, and Silliman University; the Haribon Society; the International Center for Living Aquatic Resources Management (iCLARM); ADB; USAID; IRRI; Center for Research and Communications (CRC); Philippine Wood Producers Association; and the Paper Industries Corporation of the Philippines (PICOP). The mission was hosted in Manila by NEDA and DENR, and in the field by management ar.d staff of the Bank's Central Visayas Regional Project and Watershed Management Project, and the Palawan Integrated Area Development Project. A workshop held in March was sponsored by the Haribon Society, with funding provided by the international Institute for Economic Development (IIED).

In support of the ffARM Study, the Swedish Government (BITS) funded a satellite reconnaissance and mapping of land uses in the Philippines, which was completed by the Swedish Space Corporation with the astistance of DENR's National Mapping and Resource Information Authority (NXAMRIA);the land use map included in this report is one small part of the final product. Support for consulting services was provided by the Canadian Government (CIDA); and UNDP, as part of a project entitled "Pilot Phase for Natural Resources Management and Economic Development." Studies to provide information for ffARM on the biological diversity issue in the Philippines were funded by USAID through a contract with IIED and subcontracts with the Haribon Society and the Conservation Monitoring Center of IUCN in Cambridge, England.

Aside from extensive review of available literature, the mission benefited greatly from commissioned papers whose authors participated in a Manila workshop in November. The authors, who have also reviewed and commented on the draft report, were Ma. Concepcion Cruz, Wilfredo Cruz, Garonimo Silvestre, Rodelle Lasco, Wilfredo David, Warlito Natividad, and Owen Lynch, Jr.

The March mission was led by John Cleave, and included Celso Roque (envi- ronmentalist), Norman Myers (ecologist), and Charles Cicchetti (economist). The main mission was led by Tom Wiens, and included Norman Myers (ecologist), Christopher Gibbs (institutional specialist), John McEachern (coastal zone specialist), Bert Reid (forester), John Ambrose (land use specialist), William Hyde (economist), and Louise Fallon (economist). Belinda Barlow (research assistant) contributed to report prt*parat ion.

This documenthas a xstricted distributionand may be used by recipientsonly in the performantce of their offcial duties. Its contents may not otherwisebe disclosedwithout World Bankauthorization. PHILIPPINES

FORESTRY. FISHERIES. ANDM AGRICULTURA RESQURCE MANAGEMENT STD (Sh2Hx)

Table 2f Contentsg

EXECUTIVU M MR...... i-xiv......

I. INTRODUCTION ...... 1 Population Growth ...... 2 Urban EnvironmentalProblems ...... 3 IndustrialPollution ...... 4 Rural Natural Resource Management Issues . . 5

II. i UPLANDS...... 9 Land Classificationin the Philippines. 9 Natural Resources in the Uplands.10 Forestry Policy and Practice.17 Uplands Populationand Crop Cultivation.21 Social Forestry.24 Soil Erosion.24 Watershed Degradation.27 Downstream Losses.29 Biodiversity.30

III. THE COASTAL ZQN . .. 33 Mangrove Forest .. 34 Coral Reefs .. 36 Inshore Fisheries .. 41

IV. INSTITUTIONALAND ORGANIZATIONALINFLUENCES . .47 Resource ManagementOrganizations . .47 Government Organizations .. 48 Non-GovernmentalOrganizations .. 54 Organizational Issues . .. 55

V. TH ECONOMICSQF PHILIPPINERESOURCE MANAGEMENT . .61 Economic Costs of Degradationand Depletion . .61 Economic Evaluationof AlternativeForms of Intervention .. 68 Economic Policy .. 80

VI. STRATEGICPROPOSALS FOR IMPROVEDRESOURCE MANAGEMENT . .85 The Core of a Strategy ...... 85 Institutionaland OrganizationalRecommendations . .92 Forestry Program Recommendations . .97 Coastal Program Recommendations . .103 Establishmentof an IntegratedProtected Areas System .. 106 BiQs in Text

Box 1 - The PICOP Project ...... 15 Box 2 - The WatershedManagement ane. Erosion Control Project . 28 Box 3 - Palawan IntegratedEnvironmental Plan . 62 Box 4 - The Central Visayas Regional Project (CVRP) . 74 Figures iBntZe Figure 1 - Forest Land Cover by Region . 12 Figure 2 - Value Added in Forstry . 16 Figure 3 - Aggregate Fish Production,1973-86 . 43

Annexes

Annex 1 - Mapping of Land Uses in the Philippines. .. 109 Table 1. SPOT Land Cover Statistics Table 2. Classificationof Land Area from SPOT Survey Table 3. Forest and NonforestLand Uses Table 4. SPOT CultivatedArea Estimates,1987 Table 5. SPOT Farming Land Use Percentages,1987 Table 6. SPOT Estimate of Upland Farming Population Table 7. Comparisonof SPOT and Other Forest Statistics

Annex 2 - Soil Erosion and Watershed Degradation. 125 Table 1. Sample Calculationsby Modified Universal Soil Loss Equation Table 2. Crop Cover Coefficient Table 3. EstimatedErosion Loss of Magat and PantabanganWatersheds

Annex 3 - General StatisticalAnnex . 134 Table 1. Lar. Use Status by GeographicalRegion, 1981 Table 2. Average Bole Volume of DiptercarpOld Growth and Residual Forest Table 3. Average Number of Saplings in DiperocarpForest Table 4. Average Rattan and Bamboo Occurence Table 5. Total Volume of Trees Table 6. ComparisonBetween Forest Land and Actual Forest Cover Table 7. Local Projectionsof Forest Land-Use, 1985-2035 Table 8. Local Projectionsof Annual Timber Supply and Demand Table 9. Gross Value Added in Forestry,Wood and Paper Products Table 10. Contributionof Forest-basedIndustries to Foreign Exchange Earaings and GNP, 1981-86 Table 11. Exports of Selected Forest Products,1980-86 Table 12. Government Charges, Fees and Tax Receipts from the Forestry Sector, 1970-82 Table 13. GovernmentCharges and PotentialRents from Forest Sector Table 14. ProcessingPlant Locationsand Activity, 1985 Table 15. Distributionof ProcessingActivity, 1985 Table 16. EstimatedReforestation Cost Table 17. Summary of Accomplishmentsof IntegratedSocial Forestry Program, 1983-86 Table 18. Upland PopulationStatistics, 1948-88 Table 19. Range of PopulationDensity Levels by Region Table 20. Populationand Area of Municipalitiesin Upland and Timber ConcessionAreas Table 21. Migration to Upland AReas, 1975-80 Table 22. Tctal Upland Area and Area Suitable for Upland Agriculture and Population Absorption Table 23. Fish Production, by Sector, by Year Table 24. Fish Production, by Sector, by Region 1986 Table 25. Comparison of Potential with Actual Production of Philippine Fishing Areas Table 26. Estimate Annual Average Value of Production from One Hectare of Mangrove Table 27. Agriculture Sector Expenditures by Department/Agency and by Type Table 28. Preliminary Priority List for Protected Areas Table 29. Candidate Sites for Protected Area Status

Annex 4 - Priority Research Topics ...... 165

Annex 5 - Recent Measures Taken by DENR Relating to ffARM Study Recommendations ...... 167

Chart 1. Philippines Department of Environment and Natural Resources Organizational Structure

Chart 2. Philippines Department of Agriculture Organization Structure

Chart 3. Philippines Department of Agrarian Reform Proposed Organi- zation Chart

Kan 1. Philippines Land Classification by Region (IBRD 20975)

N .. Land Use: Natural Conditions of the Philippines (IBRD 20974) FORESTRY. FISHEES. AM AGRICUL RESOURCE MANAGEMENTSTUDY (ffAM)

EXECUTIVE SUNMARY

1. The purpose of the ffARM study is to address the most significant issues of natural-resouipemanagement in the Philippines. These include the disappearence or degradation of forests; erosion and changes in hydrological regimes; the conversion of mangrove swamps to fishponds; degradationof coral reefs; and depletion of nearshore fisheries through overfishingand destructivetechniques. The issues addrtssed concern the extent and rate of degradationof these resource stocks, thM impact thereof on the national economy, and the scope for ameliorativemeasures through policy responses,management changes, and investments.

2. The Governmentis responsiblefor management of public resources, which include over half of the land area of the Philippinesas well as the coastal waters. Historically,public management bas been less than opti- mal, as evidencedby an unsustainablerate of deforestationand the recent stagnation or decline in extractive fisheries, despite the presen^e of a thicket of laws and regulations and a large componen* of the bureaucracy tasked with enforcement. Indeed, public lands and coastal waters have come to be viewed by the populationas open access resources. Rapid environmen- tal degradationand resource depletionhave been the results.

3. Consciousnessof this problem has grown in the last few years, and the Government appears determined to reverse the process (Annex 5). The issue is difficult because it is inextricablybound up with the populationand poverty problems:some of the most significantcomponents of tne degradationand depletion process are a result of activities of local, impoverished,and expandingpopulations. The issue is also closely linked to the problem of unequal access to resources.The linkages of the process of degradation and depletion to population growth, poverty and unequal access are sketchedbelow.

The Process of Dezradation

4. In the Philippines,half the land is classifiedas "Alienableand Disposable" (A&D),which may be privatelyowned, and the other half, mostly above 18 percent slope, as public "Forest Land". Of the 15 million ha of Forest Land, only six million ha have any significanttree cover, and only one million ha is productive,old-growth forest. Government underpricing of r-ghts to harvest the public forest has induced excessive logging, and discouraged interest in reforestationor plantation forestry. Logging in the uplands has opened new areas for settlement through road creation and partial clearing of forests. It also hps reduce-'to critically-lowlevels the forest habitat of the many species of flova and fauna endemic to the Philippines,and directly contributedto short-run soil erosion problems. It is mainly due to logging (licensed or illegal) that 90% of the old- growth dipterocarp forests, the most valuable commercially and environmentally,has been lost in only 30 years. - ii -

5. Rapid population greath, resulting diminution of unoccupied lowland arable land, inequitable land distributionand landlessness,and general impoverishmentcreate a pressure for migration. Because of the availabilityof semi-clearedland in the uplands, on which immigrants can build a better livelihood,the directionof migration is to the uplands, as well as the urban areas. As a result, today about 18 million people, one third of the total Philippine population, live in upland areas, of which perhaps 8-10 million are farming on Forest Land. Continuing immigration accounts for the high rates of growth in resident population. If growth continues unchecked, by 2020, when the PhilipDine population may have doubled to nearly 120 million, the upland population could triple to as much as 50 million.

6. Immigrating farmers, as well as most long-establishedupland populations,employ extensive and subsistence-dominatedfarming techniques (mainly shifting cultivation of rice, corn and root crops). Shifting cultivation is employed because it minimizes labor and cash input requirementsby substitutingland for labor and fertilizer. In areas of o-en access, which applies de facto to most upland areas includingall the newly settled land, lack of secure tenure or titling provides no incentive for land improvementor nutrient maintenance as the viability of shifting cultivationdiminishes. These farming techniquestend to promote very high rates of erosion.

7. In the upstream areas of watersheds, erosion leads to direct loss of soil, abandonmentof fields and compensatoryconversion of further forest areas to cultivation. Downstream, erosion and unchecked rainfall runoff contributes to siltation, causes alternate floods and water shortages, and critically reduces the efficiency of water use. In combination,these effects are damaging to water conservancysystems in the lowlands, reducing productivity and increasing costs of maintenance and restoration of the irrigation and hydropower systems. Deteriorating productivity in the lowlands contributes to the migratory "push" (com- pleting a vicious circle). The degradation of the uplands thus entails high social costs.

8. Like the uplands, coastal and near-shore fisheries are a public resource, the open-access nature of which has attracted the most impoverished elements from adjacent agricultural and coastal areas and induced them to use non-sustainableextraction techniques. Most of this population is dependenton the near-shore (municipal)fisheries, which are extremely sensitiveto two habitats which figure in different parts of the life cycles of various fish, namely the mangrove forests and the coral reefs. The accelerated cutting for fuelwood and conversion of mangrove areas to brackish water fishpondshave reduced the 450,000 ha of mangroves thought to exist in 1918 to 240,000ha in 1980 and 150,000 ha today. Coral reefs have been destroyedby the cutting and export of coral and severely damaged by certain fishing techniques. Only 30 percent of the remaining reefs are considered to be in good to excellent condition. Near-shore habitats are also ecologically linkeL with the inland and upland areas: increased ater turbidityand reduced light penetrationeie to soil erosion reduces growth, or even kills through smothering,the oft-shorecoral reefs and seaweed beds. Destructionof coastal mangrove forests opens interior areas to increasedtyphoon damage, creating a backwards linkage. - iii -

9. Most of the roughly one million people employed by the fishing industry are poor, and have few livelihoodalternatives which do not add to excessive pressure on the resource base. Overfishing beyond the sustainable yield, and use of destructive fishing methods which are efficient from the viewpoint of the individual,are general consequences. Competitionbetween commercial fisheries (mainly larger boats, supposed to keep well off-shore),and the small-scale"municipal fisheries" (with boats under three tons), is also severe, even in the near-shore areas. The municipal capture fisheries account for 75 pk.rcent of employment in fisheries and for 50 percent of annual production, while the commercial fisheries employ only six percent of the workers but catch 26 percent of the fish (the remainderbeing aquaculture).

OrganizationalIssues

10. The new Constitutiongives explicit recognitionto managementof the environuent,linking the better use of natural resources to the goals of expanded productivity,sustainability and equity through open democratic processes and distributive justice. The agencies with the most diract responsibility for the achievement of these ideals are the Department of Environmentand Natural Resources (DENR), the Depa7tment of Agriculture (DA) and the Department cf Agrarian Reform (DAR). The establishment of DENR represents a major effort to create a natural resource and environmentallead agency. DENR is responsiblefor management of public lands, includingforest land and coastal mangroves, whereas DA's efforts are confined to A&D land. Management of coastal fisheries by default falls largely within the authorityof DA's Bureau of Fisheriesand Aquatic Resources (BFAR), although in principle small-scale, near-shore fisheriesare supposed to be under municipal control. DAR's focus has been on agrarian reform in rice and corn areas and limited areas of re:ettlement in the uplands, although it is now cbargedwith overall coordinationof the Comprehensive Agrarian Reform Program (CARP), which is scheduled to distribute some three million ha of public land.

11. At the national level, the most significantorganizational issues relating to natural resour:e management stem from the inappropriate mandates, resource limitatio.s,confusion arising from reorganization,and potential for corruptionof the line agenciescharged with managing natural resources, and from the ineffectivenessof local governments and user groups which still need to be empowered. DENR's predecessorwas primarily a regulatory agency rather than a developmental one. It viewed the management of the public Forest Land as its exclusive responsibility,was unwilling to recognize ancestral land rights of indigenous Filipinos and the de facto rights of recent immigrants to the uplands, and resisted attemptsby other agencies to servicE,the upland population. However, DENR has begun to take a developmentalrole, which needs further articulation. The .ENR is not equipped to provide the range of services required under its current mandate, especially in meeting the needs of upland farmers. The nucleus of a service program exists within DENR's Integrated Social Forestry (ISF) program, but it requires strong leadership, training, and the resources for a major expansion. Poor mobility and communications limit the ability of DENR field staff to perform their traditional - iv -

functionsas forest managers,mueli less services to agriculturalcommunities in which they have no comparativeadvantage.

12. Conversely,DA, although long developmental in orientation,has concentratedon the lowlands and lacks the expertise (not to mention the staff, travel budget, transportand communicationsequipment) required to contribute to agriculturaldevelopment in rainfed hilly lands. It has recently initiated a new thrust toward support of upland agriculture,tLt is not yet equipped to challengeDENR's monopoly on public land. The field organization absorbed from BFAR suffers from the same deficiencies in relation to the artisanal fisheries. In general, the services which are required in the uplands and coastal communities include: (a) community organizing; (b) assistance in securing or i.proving-- resource tenure; (c) research on and extension of appropriateproduction technologies;and (d) modest provisi-n of credit or equivalentsubsidized inputs.

13. Effective provisior.of such services can only occur at the communlty level, yet power and authority in the Philippines have traditionally been concentrated at the apex of the administrative hierarchy. Hence, the ongoing government reorganization, which has involved a commitment to regionalized management of line agencies, increased empowbc-mentof local governments, and improved collaboration between government and private organiTations (NGOs) at all levels is a positive development. Nevertheless,actual devolution of power has been slow and effectively resisted by the central bureaucracy. Genuine empowermentof local government awaits provision of a local revenue base, as well as some revisions in legal codes. Although the most effective measures to build local capacity for resource management have been associatedwith NGOs working from the bottom-up the numbers of NGOs with effective field capabilitiesare few, and fewer still are the NGOs able to serve and strengthenother NGOs.

14. The potential for corruption is particularilyhigh in those agencies directly responsible for allocation,management or regulation of natural resources use (notably FMB and BFAR). Reliance on rules and administrativediscretion, rather than a proper pricing system for access rights, gives officialsat all levels the power to command illegalpayments and the users an incentiveto employ them. The sums can be significantly more valuable than government salaries, and although the Government has made an issue of the need to replace the pracLices of the past with new levels of integrity, the potential rewards to unprofessionalbehavior are still very high. In particular, unless the system for allocation, management and regulation of resource use is first changed to reduce reliance on rules and administrativediscretion and increase mandatory resource use fees to levels commensoratewith economic rents, government decentralizationprograms may simply decentralizethe locus of corruption.

The Economics of PhilippineResource Management

15. Environmentalconcerns are often presumed to conflict with economic development, and remedial measures to require a sacrifice of economic growth. This perception stems mainly from a failure to recognize the magnitude of costs to the present and future economy resulting from environmen-al depletion and degradation,which are likely to provide a sufficient economic rationale for major preventativeor remedial efforts. The consequencesof a "policy" of inaction are quite clear: the primary forest will disappearwithin a few years as 7-8 million cu m are extracted each year (under license or illegally). The residual, left in poor shape from the first cut, will be further degraded as continued migration from the lowlands and upland population growth adds to the existing pressure. By the year 2000, perhaps one-fourthof the residual will remain, but with little commercial value; the remaining area will be under shifting cultivation,grassland, and brush. Possibly 30 years from now, long before hardwood forests plarted today could mature, timber suitable for furniture or constructionuse will have been exhausted, and fuelwood and pulpwood will be in short supply. Fuelwood demands will long since have depleted the remaining mangroves, and the areas will have been converted into fishponds to partially offset the expected decline in the coastal fisheries, due to excessive pressure, reef dsstruction, and growth overfishing.

16. The economic losses arising from this scenario (within the span ,f a single generation) include relative losses to the future Philippine population arising from excessiveexploitation of resourcesby the current population, as well as absolute losses arising from unproductive or destructiveuses of resources. Even rough quantificationof these costs is quite difficult, because (a) understanding of some of the biophysical processes involved in degradationremains incomplete,and (b) insufficient monitoring of various forms of degradation in the Philippines prevents extrapolationfrom individual cases or pilot studies. Nevertheless, the magnitude of social costs is certainlyetiough to justify serious concern.

17. Other losses to the future population,although more difficultto evaluate, are even more dramatic. It is clear that soil erosion is leading to significantlosses of fertility in seven to eight million ha of upland area which will eventually be needed for crops or tree plantations. In areas of overgrL.zedgrassland, as in the Magat Watershed, annual losses of soil and nutrient may cost more than P 1,000 (US$ 50) per ha, on a replacementcost basis. There are about two million ha of open grasslands nationwide,indicating an annual cost on the order of P 2 billion (US$ 100 million). Downstream losses - drastically shortened life of dams, increased maintenance and rehabilitationcosts for irrigation facilities, and loss of crops due to flooding or decreased dry season water availability - are also significant. Estimates of current and future annual losses to fisheries arising only from excessive fishing pressure (excludingdestructive methods) are in the range P 1.0-1.8 billion (US$ 50- 90 million). Loss of the remaining habitats which harbor the diverse and often unique flora and fauna of the Philippines entails future losses of potential tourist revenues (an industry which now annually generates over US$ 600 million in receipts,and which has been growing at 17% p.a.), and incalculablelosses associatedwith the potential developmentof medicines, pharmaceuticals,various biochemicalproducts and planting materials based on the genetic pool now preserved in tropical forests and coral reef environments.

18. Economic analysis, if applied to choices among various forms of - vi - intervention, can improve the cost-effectivvnessof resource management programs. For example:

(a) clearcutting combined with reforestation using fast-growing speciesmay often be economicallypreferable to selectivelogging and regenerationusing the original species, although potential susceptibilityof fast-growingspecies to pests and diseases must be considered;

(b) labor-intensivelogging techniques,such as caribao logging, may be preferable to capital-intensivemethods at least in unproduc- tive or residual forests, criticalwatersheds, or environmental- ly-fragileareas;

(c) natural regeneration has established cost advantages over reforestation,offset at least partially by' higher costs of protectingthe stand;

(d) criteria for selectionof critical watershedsby FMB and NIA need reconsideration,as neither is fully consistent with economic logic;

(e) a variety of improvements can be made in upland farming technrques, to make them more sustainable and less degrading, some more suitable for fariaerswith secure tenure, others for farmers with short time horizons; some involving continuous farming, others applicableto rotationalsystems; some with high investmentcosts and long waiting periods, others with minimal cost and quick payoff: the full range and relative costs and benefits of various technicalimprovements to upland agriculture have not been given adequate study in the Philippines, an-' urgently require this before trial turns into mass extension;

(f) although trees and tree crops are scmetimes economical y- justifiedand envirormentally-valuableelements of upland fal.ming systems, this is not always so and indiscriminateinsistence on tree planting, or agroforestry,as critical to sustainableupland farming is unwarranted;

(g) 'xtensiveranching activities in the uplands typically involve overstocking and pasture burning, and are a major source of de,radation,while th-ir contribution to the economy is very sr/All; as more intensive forms of management are probably not profitable, and are impractical in an open access context, ranching on erosible lands should be discouragedby cancellation of pasture leases; and

(h) few of the economic activities now offered in programs for coastal dwellers are proven profitable,and the attractivenessof many (such as mangrove replanting, artificial reefs, etc.) may lie in the privatization of coastal resources; generally, promotion of a large variety of new activities,and especially activitiesnot based on the sea or foreshore strips of public - vii -

land, is needed to significantlyimprove livelihoodsof coastal dwellers.

19. Evaluation of the impacts of economic poliey on natural resource management involve issues of income distribution,financial golicv, and macroeconomic Rolicy. The major income distribution issue is that, inasmuch as the natural resources discussed are public property providing "rents" to both the public and various users, any changes in resource use involve redistribuitionof income among these parties. The issue is complicatedby the existence of conflicting property claims over public resources,most unrecognizedby the central government,some recognized by local governments or the courts, and others by the user community. Legislativeaction is needed to clear up these conflicts,else any changes in management policy will be a source of serious political conflict. The major economic policy cnange required is the impositionof fees for use of natural resources which approximate economic rents (that portion of the value of the resource attributable to its scarcity or renewal cost and which, in a market context, would accrue to its owners). The purpose of this policy change would be to eliminate the rent-seekingbehavior which now causes land use patterns to deviate from economic optima - in particular,exploitation of public land where use of private land would be more appropriate (e.g., fishponds); preference for extraction over production; and use of wasteful extractive techniques. By reducing the private value of access to publi. resources,public collectionof economic rents would also deflate the struggle over access.

20. The major financial oolicv issues are (a) where to find sources of finance for conservation and restoration activities, in view of the limitedbudgetary resourcesof government;and (b) how to channel financial resourcesefficiently for sustained impact,in view of the often transitory effects and inequitabledistribution of subsidiesto private activitiesand the ineffective implementation of past public investment programs. Collectionby Government of rent now accruing to timber concessionaires, fishpond operators,and commercial fishermenwould be sufficientto fund an extensive conservationprogram, and such revenues might be earmarked for conservation in order to encourage collection. Finding appropriate channeling mechanisms is a far more difficult issue. Because most conservation activities are long-term and risky, and property is not available to serve as collatoral,directed credit on unsubsidizedterms may not prove attractive to either private lenders or borrowers. Social externalities and/or poverty considerationsmay justify selective and strategic use of grants or other forms of subsidies,e.g., provision of seedlings at cost or public loan guarantees. For the conservation and livelihood activitiesof upland farmers and artisanal fishermen, the most promising approach is to set up, through NGOs, local revolving funds for development(including conservation) activities.

21. In many developingcountries, macroeconomic Rolicies which affect such variables as the terms of trade between agriculture and industry, exchange rates, employment and wage rates, also have some differential impact on environmentaldegradation. However, followingchanges in trade, taxation, and marketing policy as well as successive devaluationsin the last few years, it is difficult in the Philippinesto identify significant instances where such general policies tend to promote environmental - viii - degradation. Such policies play a minor role compared to (a) adverse trends in world prices for most tree crops, discouragingplanting in the uplands, and (b) the surrender of rents on public resources to their exploiters.

22. The major adverse influences of macroeconomicpolicies on natural resourcemanagement in the Philippinesare to be found in the structureof tariffs, taxes and fees. For examples, the low tax on diecel relative to gasoline contributes to the profitability of commercial trawlers, the tariff exemption for imported capital equipment favors mechanized logging, and the tax advantagesof an agriculturaloccupation provide an incentive Zor upland ranching. The low level of government charges for fuelwood extractedfrom public lands has depressedmarket prices, discourageduse of substitute fuels, and made fuelwood production an unviable proposition. Collection of government timber revenues largely as flat fees based on volume removed contributes to the selective cutting of more valuable species, the high proportionof waste, and excessivedamage to the residual forest. Subsidies to local processing through prohibitionson import of pulp and export of logs, as well as regulationsrequiring timber concession holders to maintain local processingfacilities, have tended to discourage industrial efficiency and encourage wasteful processing, leading to an economic and environmental loss in the form of excessive harvesting required to produce a given final product.

A Strategy for ImprovedManagement

23. Improved management of natural resources requires an attack on underlying causes of degradation and depletion, specifically excessive populationgrowth and poverty, which are the main sources of migratory 'push" into the uplands and coastal areas. A strong program to reduce nopulation growth rates, especially in the rural areas: effective implementationgf CARP includingmeasures to reduce rents paid by tenants on private lands: and measures to create jobs for unemployed and underemployedrural residents (especiallyyoung males) will be crucial to the long-runprospect for reducing the rate of environmentaldegradation.

24. In addition to these measures,which are not elaboratedon in this study, the main thrust of Government Rolicy should be to develop an institutionaland incentive structure which leads to use of sustainable resource management techniques. Supplementedby regulatory improvements and better enforcementmechanisms, such a structureshould involve a blend of three approaches: (a) full extraction of economic rents by the Governmentin return for limited rights of access to public resources; (b) increased privatization of user rights, including titling with use restrictionsand/or improved forms of leaseholdson public land; and (c) devolutionof management authorityover much of the public domain to thos_ user communitiesprepared to institutecommon property management regimes. These principles should be applied to both the upland and the coastal/nearshoreresources.

25. The Unlands. Application of these principles to the uplands requires the followingmeasures: - ix -

(a) delineationby Governmentof areas which need to be protectedand managed in perpetuity by Government at central or regional levels. This should include parks, biological reserves and wilderness areas, primary and productive residual timberlandsor mangrove swamps, critical watersheds, buffer areas surrounding the foregoing,and little else. The area would include much of the remaining six million ha of public forest plus part of some 2.5 million ha of denuded Forest Land with slopes exceeding 30%, for a total (excludingforested A&D land) of about 25% of the land area of the Philippines,largely concentrated in northern Luzon, Palawan, Mindoro, and Mindanao.

(b) within these areas, determination of areas which should be excluded from logging for environmental reasons, managed for sustained yield of the original mix of species, or of faster- growing species;

(c) intensificationof management of these areas of public domain by DENR, involvingthree main tasks:

(1) instituting a land use or timber extraction pricing and policy system which captures the full market value of economic rents (for logs, as much as P 900 per cubic meter) and creates incentives for sustained forest management and efficient timber harvesting. This would involve determina- tion of stumpage value on new concessions through auction bidding, and revised fee structures and/or co-production arrangements for any existing concessions which cannot be cancelled;

(2) devising incentives for cooperation of local populations (shifting cultivators and forest dwellers), including creation of employment opportunitiesthrough promotion of labor-intensive logging techniques, implementation of community forestryprograms, legal recognitionof tenure and managementrights of indigenouscultural groups over their ancestral domains, and strengthening of the Integratea Social Forestry program and the tenure instrument (Certificationof StewardshipContract, or CSC) on which it is based; and

(3) upgrading DENR management capabilities through training, improved mobility and communications, introduction of a monitoring system with cross-checkssufficient to maintain integrity,and provisionof budgetary resources adequate to support a competentfield staff.

(d) disposal, through privatizationor devolutionof control, of all other areas of public land, in order to satisfy tlheland-hunger of the Philippine population. In addition to some very steep lands under terraced cultivation,this involves about six million ha of deforestedland with slopes in the range 18-30%. More than half of this land is already under cultivation; the majority (about 1.7 million ha) of the remainder is in Mindanao. A - x - disposal policy would recognize that most of this land is suitable for settled crop cultivationor tree farming, if proper techniquesare used, and that tenure security is a necessary but insufficient condition for adoption these activities. The followingmeasures are required to implementthis policy:

(1) an executive order or, if necessary, legislation which establishes that land with slopes exceeding 18% may be declared -suitable for agriculture if effective erosion control practices like terracing and contour planting are employed,and provides for reclassificationas Alienable and Disposable lands, public lands which are farmed using such practices. Such lands, following titling, woald be subject to conservation-orientedland use restrictions.Presidential Decree No. 1998 (1985) provides a legal precedent, although it applies only to Cebu and Benguet Provinces and has not yet been implemented.

(2) development of a transitionaltenure instrument, available to all upland farmers, which vould allow them ten years in which to demonstratetheir eligibility for titling through adoption of sustainablecultivation techniques. This may be accomplished through a revision by DENR of the administrativeregulations and guidelinesconcerning the CSC contract. For aspiring upland cultivators, qualified as CARP beneficiaries,this would serve as the only legitimate entry point.

(3) where existing occupantscan already demonstratetheir long- term use of suitable farming techniques, even if the land exceeds 18% in slope, the land should be reclassifiedA&D subject to land use restrictionsand titled through the CARP program; or, in the case of indigenous communities with historicalland claims in some upland areas, collectiveland tenure rights should be formally recognized, and efforts should be made to develop or reinforce existing common property management schemesat the communitylevel.

(4) for the upland farming communities,whatever the form of tenure, Governimentshould provide the technical support neeessary to promote settled upland agriculture using sustainableproduction techniques which maximize retention of soil and water. Appropr;:.atetechniques are known and undergoing trials in many parts of the Philippines, but -iere is a need to identify which techniques are most profitable to farmers, with minimal subsidies, and to develop programs to promote their widespread adoption, not merely unreplicateddemonstrations. At present DENR lacks extension staff and agriculturalexpertise and DA lacks the budget and understandingof upland farming systems required to service upland cultivators. Either a rational division of labor between DA's extension service and DENR's Integrated Social Forestry program should be agreed and provisionsmade for appropriateupgrading of budget, staff, - xl -

and equipment, or else new organizationalarrangements for servicing this population,perhaps drawing on NGO resources, should be made.

(e) critically review other macroeconomic policies which distort incentives for sustainable resource management (para. 21), including the tariff exemption for imported capital equipment, tax advantages and pasture leases extended to upland ranching, fee structure for log extraction, and the various regulations affecting the efficiency of local processing, and make the appropriateadjustments in policy.

26. Coastal Areas. The main coastal resources - the coastal strip and nearshore fisheries - are already subjected to excessive pressure. Rather than "intensification"of production, reduction of pressure on the resources through the introductionof common-propertymanagement systems as well as alternativescurces of employment should be the main thrust of strategy; this is likely to increase total production and labor productivity. The second thrust would be to make access to coastal resources more equitable,by limiting, redistributingor simply enforcing access rights. Common-property management systems can only be run successfullyby users and local governmentsin cooperation,which indicates that regulation of access to coastal strips and municipal fisheries basically should be decentralized to the municipal level and user organizationsfurther strengthened. However, this must be reinforced by common national regulations and stronger central government enforcement efforts. The measures required include:

(a) legislation to grant to municipalities the rights to license municipal fishing boats, fish traps, fish attracting devices, maricultureoperations, artificial reefs, mangrove plantings,and gathering activities on coastal strips, nearshore areas, and coral reefs, within the framework of restrictionsimposed under current or subsequentnational regulations;

(b) legislationto exclude from municipalwaters (definedin terms of distance from the shoreline)all gears similar in nature to trawl nets or purse seines; studies of the impact of an increase in the legal minimum mesh size from 3 cm to 5-6 cm for both commercial and smaller-scale trawlers, and similar, albeit perhaps less stringentmesh size restrictionsfor stationaryfish traps;

(c) tenure instruments for tha replanting and/or sustained use of mangrove areas, such as a modified CSC contract or restricted titling, and shorter-term tenure instruments for control of nearshoreseabeds;

(d) legislativeprohibition of the use of sodium cyanide by tropical J fish collectors,and provisionof increasedstaff, equipment,and budget with a mandate to enforce this and already existing prohibitionson cczmercialfishing in municipal fishing grounds, dynam±te fishing, muro ami fishing on nearshore reefs, use of small mesh sizes, and harvestingof live corals; - xii -

(e) better enforcement of the prohibition on new conversions of mangrove areas to fishponds,coupled with measures to discourage use of outstanding conversion permits or underutilization of existing fish ponds, such as permit cancellationor a increased tax or fee structurewhich recovers rents on public land; and,

(f) provision of finance and technical assistance to support non- degradinglivelihood activities for small-scalefishing families, includingmangrove rep'Lanting/maintenance,artificial reefs, fish attractants,mariculture and opportunitiesin the tourist trade; and more generallyto support intensificationof agricultureand development of commercial and industrial activities independent of aquatic resources in areas subject to excessive fishing pressure.

27. Preservationof Biological Diversity. The Government should protect for the benefit of future generationsa representativeselection of the critically-limitedremaining areas of relatively undegraded habitats for flora and fauna native to tropical forests, mangrove swamps, and coral reefs. This requires that Government:

(a) identify appropriate sites for preservation, based mainly on considerationsof biodiversity, size, ability to protect from degrading activities,and tourismvalue;

(b) provide the budgetary funds and programs to gradually upgrade management of parks and reserves,beginning with a small number of high-prioritysites; and

(c) protect priority sites from degradation by existing and new occupants, largely by prevention of illegal logging, kaingin, forest fires, and hunting and gathering activities (including fishing,within marine reserves).

28. In pursuit of these objectives,there is an immediateneed to survey the conditions of the 60 existing parks and reserves,none of which conforms to internationalstandards, and identify candidate sites which could fill gaps in or better serve the purposes of a protected areas system. Representation of lowland forests, freshwater swamp, mangrove, tropical pine forest, and the marine environmentsuiould be given special consideration;and existing reserves in degraded condition or which serve nD legitimatepurpose should be disposed of. Based on a prioritizationof sites, and estimates of budgetary costs for adequate development and maintenance,including a program to obtain support from existing occupants, a developmentprogram for an "IntegratedProtected Areas System" should be formulated,and enabling legislationprepared.

29. 4 EncouragePrivate Investment. In both forestry and fisheries, future growth in production, if any, will come almost exclusively from cultural (as opposed to extractive)activities. In tbe uplands, aside from public investments in reforestation,means (investment funds and tenure instruments)should be found to facilitateprivate-sector industrial tree planting. Fresh and brackishwateraquaculture are developingwell largely on private sector initiativesand strong market demand; the main task for - xiii - government is to make sure that future growth does not come at the expense of coastal fisheries via further conversion of mangroves to fishponds. Mariculture has the least-developedpotential, and requires research and extension support. Governmentmight also assist in expandingthe range of commercialfishing, includingassessment of potential in underfished areas such as the Palawan Barrier Reef and the CamarinesNorte Reef Banks.

30. Public InvestmentNeeel. The strategy presentedabove minimizes the requirement for additi al public investments by emphasizing institutional and policy changes to create a proper regulatory and incentive environment for private action. Moreover, the increased government revenues derivable from better rent recovery on public land - especially stumpage fees (which should total about P 3.6 billion, or US$ 180 million per year) or equivalentco-production revenues - would provide the wherewithal for an expanded natural resource renewal and preservation program, and arguably should be earmarked for this purpose. Taxes earmarked for local government use should be collected on public land in return for private tenure rights extended through the upgraded-CSC instrument or titling, providing a source of revenues for local resource management efforts. In addition, grants and concessional loans from international donors would be readily forthcoming for a well-planned program backed up by institutionaland policy reforms.

31. Drawing on the at-ov,sources of incremental funds, a public investment program to upgrade natural resource management in the Philippines might include the following elements (the budgetary requirementsin most cases remain to be determined):

(a) protection of critical watersheds and taieirreforestation or stabilizationby vegetative or other means;

(b) r.ursery establishment and subsidization for production and distributionof plant propagation materials required in upland conservationfarming and agroforestry (including trees and tree crops, grass seeds and cuttings for vegetativebunds, and legume seeds for vegetativemulching and fertilityrestoration);

(c) provision of equity to existing or newly-establishedinstitutions to serve as extra-governmentaldevelopment fund(s) which would (1) subsidize community-basedNGO and local government projects to improve resource management and enhance livelihood among upland farming and artisanal fishing populations, and (2) support, through some mix of risk-sharing equity investments, guarantees,and direct lending, private-sector-managedefforts to expand tree plantations and tree crops in upland areas through nuclear estate or contract farming schemes;

(d) provision of vehicles, boats, horses, communication and monitoring equipmentrequired to upgrade the efforts of regional line agencies and local governmentunits charged with regulation and technicalsupport in the above program activities;

(e) infrastructure and equipment for an expanded and improved national parks and biological reservessystem; and - xiv -

(f) technical assistance for high-priority research and monitoring (see Annex 4) designed to clarify the natural resource management issues highlighted in this study and provide the quantitative parameters requiredby sound planning.

32. In addition,budgeted recurrent costs of government operations would have to be increasedto provide support for:

(a) salaries, training, and travel expenses (including fuel) for a major expansion of field operationsof DA in uplands areas, BFAR in coastal areas, DENR's Integrated Social Forestry program and Protected Areas and Wildlife Bureau, in parallel with the expansionof their responsibilities;and

(b) survey, planning and administrative work dictated by the recommendedinstitutional and policy changes.

33. A family which squanders its inheritance is destined for impoverishmentor extinction. As poor as the Philippinesis now, continued depletion and degradation of its natural resources will leave future generationswith little basis for livelihood. It is the eleventh hour and a serious action program is necessary to preserve the common natural heritage of the Philippinepeople. 1. INtROWCTION

1.1 The purpose of the ffARM study is to address the most significant issues of natural resource management in the Philippines. The natural resources of concern in this study include principallyvegetation, notably forests and their watershed functions; soils, togetherwith their nutrient stocks; water supplies, used for irrigated agriculture,hydropower, and industrialand household needs; and fisheries,both marine and inland. The issues addressed concern the extent and rate of degradation of these resource stocks, the impact thereof on the national economy, and the scope for ameliorativemeasures through policy responsesand management changes. The initial sections of the report deal with the status of the natural resource base and the process leading to its degradation, including the fundamen.alcauses. Subsequent sections evaluate the public and private institutionsinvolved in resource management;and apply a largely economic perspective in reviewing the social costs of degradation, critiquing alternative interventions, and examining the impacts of the economic policy environment. The final section outlines a comprehensivestrategy for improving natural resource management combining institutional and policy reforms with programs of extension and public investment. Recent efforts by Government in the same directionare summarizedin Annex 5.

1.2 The study is selective in its coverage of environmentaland natural resource managementproblems. It emphasizesthose issues judged to be of greatest economic significance to the Philippines economy, where policy changes and other interventions could achieve significant enhancement of natural resource management and thus make a substantial contributionto the country'sprospects for sustainabledevelopment. These issues include the disappearance or degradation of forests, which once covered nearly one-half of the Philippine land area; the erosion and changes in hydrologicalregimes which result from the conversionof forest to other land uses, notably shifting cultivation and pasture; the conversionof mangrove swamps to fishponds;degradation of coral reefs; and depletion of nearshore fisheries through overfishing and destructive techniques.These problems are linked in three ways: (a) all involve use of common access resources which in theory are publicly-owned,but in practice have been subject to nearly unrestrainedprivate exploitation;(b) all involve the livelihood of a large, impoverished,and largely neglected segment of the rural population, includingupland farmers and small-scale coastal fishermen; and (c) all are related to each other through the physical or biological links of common ecosystems.

1.3 Other problems of natural resource management,such as depletion of mineral resourcesand air and water pollution,exist in the Philippines, and are serious in particular areas, but they are omitted here because of their impact on the Philippine economy has been judged less significant. The causes oI :hese problems are relatively obvious, most frequently arise from point se xces, and strategiesfor solution involving a combinationof regulation and investments are more readily identified, even if their implementationremains beyond the capacities of the Philippine government at present. Moreover, some of the basic ideas for improved resource management of the uplands and coastal areas will be applicable to other public resources.

1.4 Rather than totally ignoring those aspects of environmental problems which are not the focus of the ffARM study, this section will provide, as background,cursory reviewsof the issues associatedwith three general categories - population growth, the urban environment, and induistrialpollution. The reviews, drawn from a separate Bank summary of Philippine environmental issues, attempt to identify key problems and priorities; measures being undertaken to address these problems; and deficienciesin knowledgeand impedimentsto effectiveaction.

PopulationGrowth

1.5 The 1987 population of the Philippines is estimated to be 61.5 million increasing naturally at a 2.4% annual rate which, if maintained, would double the population in one generation. About 40% of the 1987 population is considered urban. Rapid population growth since WW II is widely acknowledgedas a major force in the overrapid use and degradation of Philippine agricultural, forest and marine resources and in the deteriorationof urban living conditionsparticularly in Metro Manila (MM).

1.6 During the 1970s the Philippineshad developed a fairly strong national family planning program with assistance from external donors. In the early 1980s a variety of factors combined to derail this program. The Government is currently reorganiz5-- the population program, and recent public statements indicate that the importanceof strengtheningthe family planning program is now recognized.

1.7 Following from the 1987 Constitution'semphasis on improving the overall quality of life, a recent Population Commission (POPCOM) policy statementemphasizes that fertilityreduction must be only part of a broad- er governmenteffort to assist family units. Operational responsibilities for family planning have recently been removed from POPCOM (now policy level only) and transferredto the Departmentof Health (DOH). At present, DOl delivery systems at regional and community levels are unsettled or nonexistent,particularly in rural areas. A Rank mission in the Philip- pines in early 1988 has assessed the program's reorganizationand identi- fied possible assistance,in a separatereport.

1.8 From a purely practical point of view, delivery of family planning services will continue to be the paramount family assistance problem faced by government. Interagency programs have enjoyed some success in urban areas, notably in Bank-assisted shelter projects implementedby the National Housing Authority (NHA) in MM and some regional cities. Community facilitiesin both upgradingand serviced sites projects have provided loci for effective social programs including preschool, nutrition, income generationand family planming components. However, new Bank assistance in the form of the Shelter Sector Loan will emphasize private sector construction of low cost shelters. The corresponding diminutionof government'smanagement role in future low cost projects will undoubtedly be matched by diminished community-basedsocial programs in private estates unless effectivecountermeasures are taken. 1.9 Delivery of rural family planning services cannot possibly be undertaken directly by the very limited DOH regional staffs. Either expanded regionalbudgets or some form of interagencystaff reallocationis needed, perhaps marshalling the largely unutilized human resources of the country's 1,500 local governments. However, the rural population segment responsible for the most severe environmental degradation is the upland shifting cultivators, and it is precisely this segment that is least accessible and, in any event, least likely to accept the notion that limiting family size is in their best interests. As long as open access to public land prevails, childrenwill be viewed as additionallabor to clear and cultivatemore land which, in turn, produces more setious environmental problems which will be examined in subsequentsections of this report.

Urban EnvironmentalProblems

1.10 More than 20 millions Filipinos currently reside in urban areas, and, with rural-urbanmigration, this total is expected to reach more than 30 million by the ytar 2000. About 8 million people live in the Metro Manila area with about 13 million expected by the year 2000. The two regional centers of Cebu and Davao have populations approaching one million. Less than 10 other regional centers exceed 100,000 and about 150 additionalmunicipalities exceed 10,000.

1.11 Critical urban environmentalproblems ,.- concentratedin the MM area where they have, in at least several cases, reached proportions such that remedies will be extremely costly. About 35% of the MM population lives below the 1983 absolute poverty threshold of $245 per capita annually, and a high percentage of these people live in slums where population densitiesreach 2,000 per hectare. Only 10-12% of MM households are served by waste water disposal systems. On-plot septic and other disposal systems are generallyunserviced and most waste water simply runs off into "esteros"and other waterways. MM will generate about 7,000 tons of solid waste daily in 1988 of which only 65% will be collected leaving 2,000 tons daily to be burned, thrown in waterways, or to moulder on the ground. It is asserted that all MM rivers are biologically dead (the dissolved oxygen content at most downstream points falls well below a minimum standard of 5 milligrams/literrequired to sustain aquatic life) and virtually unnavigableas the result of pollutionand heavy siltation.

1.12 About one million vehicles, more thanihalf the country's total, operate in the MM area of which only half are thought to meet even minimal emission standards. About 65% of the country's1,500 recognizedindustrial enterprises are located in the MM area, of which only 1/3 to 1/2 are thought to comply with minimal air and water pollution emission standards. Although comparable data are lacking, MM's air quality is generally believed to -v among the worst in SoutheastAsia.

1.13 The basic cause of MM's severe environmentalproblems is that eight million people are utilizing infrastructure(much of which dates from the US colonial period) estimated to be adequate for two million at most. A large portion of solid and liquid waste is simply inaccessible for collection by virtually any means due to dense squatter settlement patterns, inappropriatecollection systems, and simple lack of services such as septic tank desludging. -4-

1.14 These problems are exacerbatedby government'sinability to stop polluters. For instance,in 1981 the composite team composed of personnel from the National Pollution Control Commission (NPCC), Land Transport Commission, and the Constabulary Highway Patrol Group apprehended only 5,060 vehicular "smoke-belchers"in MK out of an estimatedone-half million possibilities. The NPCC, now the EnvironmentalManagement Bureau (EMB) of DENR, oversees enforcement of all environmental regulations but shares operationalresponsibilities with 22 other governmentagencies. NPCC is so seriouslyunderstaffed that in 1979 it was able to secure only 40 fines (on the order of 1,000 pesos, or US$50 per day) against industrialpolluters, many after months and even years of judicial proceedings. Business permits for industrialfirms are st'll controlledby local mayors who have little knowledge of or incentiveto enforce environmentalregtlations.

1.15 In short, a convincing argument can be made that MM's environmental pzoblems are insoluble without: 1) truly gargantuan investmentsin land, equipment, and infrastructure; 2) drastic reform of the area's system of governancewhich now consists of 17 local governments and the remnants of the abolished Metro Manila Commission (MMC); and 3) a major program of regional develcpment to encourage industries,potential immigrants, and even existing residents to settle in other cities. At minimum, some form of metropolitangovernment must be reestablishedin MM before any coherent investmentprogram can proceed.

1.16 bimilarly,the regional developmentemphasis must be elevated to the level of national policy complete with appropriate Cabinet-level institutionalsupport. At present the 60 chartered cities and 150 urban municipalitiesof the Philippineshave no establishedaccess to management and planning assistanceor credit, a situationbrought about mainly by the unlamented demise of the Ministry of Human Settlements which has usurped these functionsfrom the then-Departmentof Local Governmentsand Community Developmentin the late 1970s. The Department of Local Governments (DLG) continues todel, although considerably diminished, and with appropriate assistance and revitalization would seem to provide the logical irstitutionalbase for reestablishingthe regional developmentprogram.

IndustrialPollution

1.17 Philippine industry is closely linked to a variety of environmentalproblems. As noted earlier, the majority of t.hecountry's industrial firms are located in and around MM and contributeheavily to problems there. Outside of Manila, isolated though serious problems occur usually as the result of the large industrial concerns located along the coasts. Iligan, for instance, is frequently coated in dust from a nearby cement plant and portions of Davao del Norte province face a potentially catastrophiC S4tuation due to mercury cyanide runoff from unregulated gold mining in the interior.

1.18 Major constraintsface attempts to correct industrialpollution in the Philippines. First, baseline data for the industrial sector does not seem adequate. The Department of Trade and Industry (DOTI) and the Board of Investments (BOI), the major gcvernment agencies concerned with promoting irndusttialdevelopment and foreign investments,are preoccupied -5-

with creating jobs rather than monitoring of resultant environmental issues. Mayors issue business permits for most industrial concerns generally without reference to environmentalregulations or any system of planning guidelines. The National EnvironmentalProtection Council (NEPC), now EMB, does not have the resources to assemble data from these disparate sources and a general lack of useful informationis the result.

1.19 Second, specific informationabout the nature of environmental problems related to industry also appears to be lacking. Monitoring has suggested,for example, that 58% of monitored firms contributedto air pollution, and attributed 80% of total industrial pollution to power generatingplants. About 20% of water pollution in MM was attributed to industrialdischarge. Aside from such rather general statements,hard data characterizingthe extent and nature of industrialpollution have not been collected or compiled. Indeed, NEPC has almost no staff, budget or equipment for monitoringof industrialpollution. Obviously, solutions to industrial pollution problems cannot be prescribed until the problems themselveshave been properly analyzed.

1.20 Third, the country lacks an effective system of incentivesand sanctions to induce industries to control pollution. Governmental sanctions of any kind are not notably successful in the Philippines,but institutional arrangements for attempting enforcement of environmental regulationsmust be simplifiedand strengthened. For example, if NEPC is successfulin obtainingclosure orders through the time consuming judicial process, its first recourse is to attempt to induce local government authoritiesto rescindbusiness permits from offendingindustries. Failing this, it must rely on the Department of Defense to force closure which entails a lengthy traverse of the chain of command assuming, of course, that military forces are even availablewhere required.

1.21 In view of the lack of reliable information on industrial pollution, there is justification for a baseline study of Philippine industry and related environmentalissues similar to the ffARM study. In addition to identifyinggaps in the data base, the study should: assist government in categorizing industries with particular emphasis on the large, readily identifiable firms nationwide for which antipollution technology is already widely available; design an incentive package, perhaps including Bank financing, to support industrial reinvestment in less polluting,modern equipment;support developmentof a local pollution control service capability preferably in the private sector; examine institutional constraints to effective governmental enforcement of environmentalregulations; and review approaches to encourage industrial growth (and, possibly, dispersal from the MM area) in regional centers as an importantintersectoral issue.

Rural Natural Resource ManagementIssues

1.22 Rural natural resources play an important part in the Philippines'economy. Agriculture,forestry and fisheries together employ half the labor force, earn two-fifthsof export revenues and contribute about one quarter of Gross Domestic Product (GDP). In addition, over 60 percent of the populace lives in rural areas. In terms of national - 6 - comparativeadvantage, the agriculturalsector has been shown to be a more efficientearner and saver of foreign exchange than the industrial sector.

1.23 In light of the importance of rural natural resources to the Philippineseconomy, this study will address a number of key questions: - to what extent have resource stocks been degraded to date? That is to say, what has been the rate of deforestation? How much loss of soil productivity is occuring due to erosion? What changes are occurring in hydrologicalregimes, especially river flows and groundwater levels? Do extractivefisheries approach or exceed potential sustainablecatch?

- without better management,what are the likely trends in the country's natural resources, the damage associated with degradation, and the consequent effects on future economic activity?

- what are the main causes of degradation and depletion, i.e. mis-use and over-use of resource stocks, includingnot only the immediatebut also the underlyingcauses? What ecological and economic linkages associatedwith resource degradationrelate one sector to another?

- above all, to what extent can the consequences of natural- resource degradation be quantified, so as to suggest the priorities for improved management? How much soil erosion, for example, is associated with alternative upland land-use practices? What direct productivitylosses car be attributedto soil erosion? How much loss of productive life of dams is attributable to increased sedimentation? To what extent can increased lowlands flooding be attributed to deforestation in upland watersheds? How much damage does siltation do to near- shore coral reefs and the fisheriesthey support? To what extent is declining fish stocks associatedwith mangrove destruction? What loss of potential fish catch is attributable to excess fishing effort at present?

1.24 In general, this study evaluates issues of resource depletion from a social cost-benefitperspective. Put simply, incrementaldepletion of a resource is consideredacceptable if the social benefits exceed social costs. Frequently,degradation becomes a social problem when the implicit private benefit-cost calculc..differs from the correspondiL.gsocial calculus. The three most common reasons for this divergence are: (a) costs and/or benefits external to the individualbut internal to society are not accounted for in the private calculus; (b) the parametersreflected in the private calculus - prices and discount rates - are not equivalent to the social parameters; and (c) the social calculus may not be indifferent to the distribution of benefits and costs to different individuals (or classes of individuals). Strategies for improved management of natural resources, i.e., for reducing degradation and bringing the patterns and rates of depletion into conformity with the social benefit-costcalculus, may include elements of two approaches: (a) inducing a change in the private calculus, e.g., by internalizing externalitiesor bringing market prices into line with social valuations; -7-

or (b) applying regulation to force individualsto disregard their private calculus.

1.25 The following sections assess the present state of the natural- resource base of the Philippines, including past trends of depletion or degradation,as well as renewal activities. Logically,the subject divides geographicallyinto the "uplands"and the "coastalzone", and economically into variods subsectors or activities, each requiring an in-depth discussion. However, there is a danger in such a division of losing sight of the forest for the trees. The followingpresents a unifying description of the socio-economicprocesses contributing to upland and coastal resource degradation, prior to an elaborationof individualelements:

1.26 In the Philippines,half the land is classifiedas "Alienableand Disposable"(A&D), whiichmay be privatelyowned, and the other half, mostly above 18 percent slope, as public "Forest Land". Of the 15 million ha of Forest Land, only six million ha have significanttree cover, and only one million ha is productive, old-growth forest. Government underpricing of rights to harvest the public forest has induced excessive logging, and discouraged interest in reforestationor plantation forestry. Logging in the uplands has opened new areas for settlementthrough road creation and partial clearing of foresta. It has also reduced to critically-lowlevels the forest habitat of the many species of flora and fauna endemic to the Philippines,and directly contributedto short-run soil erosion problems. It is mainly due to logging (licensed or illegal) that the old-growth dipterocarpforests, the most valuable commercially,have shrunk from 10 million ha in the 1950s to only one million ha today.

1.27 Rapid population growth, resulting diminution of unoccupied lowland arable land, inequitable land distributionand landlessness,and general impoverishmentcreate a pressure for migration. Because of the availabilityof semi-clearedland in the uplands, on which immigrants can build a better livelihood,the directionof migration is to the uplands, as well as the urban areas. As a result, today about 18 million people, one third of the total Philippine population, live in upland areas, of which perhaps 8-10 million are farming on Forest Land. Continuing immigration i accounts for the high rates of growth in resident population, as much as 3.5 percent in logging concession areas, compared with a national average of about 2.4 percent.

1.28 Immigrating farmers, as well as most long-establishedupland populations,employ extensive and subsistence-dominatedfarming technxques (mainly shifting cultivation of rice, corn and root crops). Shifting cultivation is employed because it minimizes labor and cash input requirementsby substitutingland for labor and fertilizer. In areas of open access,which applies de facto to most upland areas including all the newly settled land, lack of secure tenure or titling provides no incentive for land improvementor nutrient maintenance as the viability of shifting cultivationdiminishes. These farming techniquestend to promote very high rates of erosion.

1.29 In the upstream areas of watersheds, erosion leads to direct loss of soil and nutrients, abandonmentof fields and compensatoryconver- sion of further forest areas to cultivation. Downstream,erosion and un- checked rainfall runoff contributesto siltation, causes alternate floods - 8 -

and water shortage,and criticallyreduces the efficiency of water use. In combination,these effects are damaging to water conservancysystems in the lowlands, reducing productivity and increasing costs of maintenance and restoration of the irrigation and hydropower systems. Deteriorating productivity in the lowlands contributes to the migratory "push" (com- pleting a vicious circle). The degradation of the uplands thus entails high social costs.

1.30 Like the uplands, coastal and near-shore fisheries are a public resource, the open-access nature of which has attracted the most impoverished elements from adjacent agricultural and coastal areas and induced them to use non-sustainableextraction techniques. Most of this population is dependenton the near-shore (municipal)fisheries, which are extremely sensitiveto two habitats which figure in different parts of the life cycles of various fish, namely the mangrove forests and the coral reefs. The accelerated cutting for fuelwood and conversion of mangrove areas to brackish water fishpondshave reduced the 450,000 ha of mangroves thought to exist in 1918 to 240,000ha in 1980 and 150,000 ha today. Coral reefs have been destroyed by the cutting and export of coral and severely damaged by certain fishing techniques. Only 30 percent of the remaining reefs are considered to be in good to excellent condition. Near-shore habitats are also ecologicallylinked with the inland and upland areas: increasedwater turbidityand reduced light penetrationdue to soil erosion reduces growth, or even kills through smothering,the off-shorecoral reefs and seaweed beds. Destructionof coastal mangrove forests opens interior areas to increasedtyphoon damage, creating a backwards linkage.

1.31 Most of the roughly one million people employed by the fishing industry are poor, and have few livelihoodalternatives which do not add to excessive pressure on the resource base. Overfishing beyond the sustainable yield, and use of destructive fishing methods which are efficient from the viewpoint of the individual,are general consequences. Competitionbetween commercial fisheries (mainly larger boats, supposed to keep well off-shore),and the small-scale"municipal fisheries" (with boats under three tons), is also severe, even in the near-shore areas. The municipal capture fisheries account for 75 percent of employment in fisheries and for 50 percent of annual production, while the commercial fisheries employ only six percent of the workers but catch 26 percent of the fish (the remainderbeing aquaculture).

1.32 By clarifyingthe linkages among phenomenawhich are often viewed in isolation,the above descriptionof the process of degradationindicates that there are multiple points at which interventionscould be made to slow, halt or reverse the degradationprocess - determiningwhich points of interventionshould be targeted is the essence of strategy formulation. Interventionswhich ignore the main causative relationshipsand deal only with minor causes or symptomswill serve merely as temporarypalliatives. -9-

II. THE UPLANDS

Land ClassificationJi the Philippines

2.1 Land statisticsin the Philippinestend to be impreciseand ever- changing as new survey or collationefforts supercede older ones. Indeed, the only constant figure is the total land area, which was estimated in 1900 to be 29,694,000ha. For public policy, the most importantbreakdown of this figure is between "Alienable and Disposable (A&D) Land' and the rest, which is termed "Forest Land" or "Timberland".Under national policy enshrined in the 1987 Constitution, only agriculturalland of the public domain may be privatelv titled, whereas Forest Land is reserved to public ownership in perpetuit,. The legal definition of agriculturalland is now almost exclusively contingent on its certificationby the DENR as A&D. Pursuant to Section 15 of the Revised Forestry Code, however, all public land above 18% slope cannot be certifiedas A&D.

2.2 Over several decades, all but a residual 4 percent (1.19 million ha) of the land area has been classified into either A&D or Forest Land categories(unclassified land, by default, is treated as Forest Land). The Forest Management Bureau (FMB) administers (but doesn't always directly manage) Forest Land; and administrativeresponsibility for land classed A&D rests with the Land Management Bureau (LMB) (both within DENR). A review of land classificationsin 1986-87,prorpted by the ComprehensiveAgrarian Reform Program (CARP), resulted in a reduction of area labelled A&D land and an increase of Forest Land (to 13.85 and 14.96 million ha respectively),reserving almost exactly 50% (or 54%, if the unclassified residual is included) of total land area for public ownership and management. In principle, land which is under 18% (roughly 10 degrees) in slope may be transferred to A&D status. This is supposed to insure that roughly 45% of total land area will be retained for "forest purposes" (i.e., most of some 56% of total land area which exceeds 18% in slope). However, of the area presently classed as A&D land, it appears that at least 13% and, according to more recent estimates, perhaps 35% has slopes in excess of 18%. Conversely,as much as 28% of Forest Lands is estimated to have slope under 18%, althoughmost of this is found at higher altitudes in mountainousareas.

2.3 Most forests are found on Forest Land, and most cropland is A&D land. However, these land uses are not coextensive with the legal classifications: earlier (1981) governmentestimates suggested that 13% of productive forests, and 21% of old-growth (i.e., primary) productive forests were found on A&D land, whereas 29% of total area in permanent or annual crops was on Forest Land. In 1983, the Bureau of Forest Development (BFD, predecessorof FMB) estimatedthat some 23% of Forest Land was under crops and another 3% under pasture leases, not counting crop or pasture areas ion lands licensed or reserved for "forest purposes". Moroever, the two legal land classes cannot be clearly distinguishedby location: for example, 20% of the area within game refuges and wildlife sanctuarieswas A&D land. - 10 -

2.4 In the absence of reliablebreakdowns of land class by land slope or land use, the statisticscited above are only informed guesses. Nevertheless,it should be clear that the main distinctionsbetween A&D ani Forest Land are legal and bureaucratic,not biogeographic. Forest Land may be neither steeply sloped nor forested. Therefore the term unlands will be used to refer to the more steeply-slopedareas (above 18%), and uland areas to refer to administrativeareas where three-quartersor more of the land is steeply sloped.

Natural Resourcesli the Uplands

2.5 Much of the Philippines is hilly or mountainous. By the above definition, the uplands comprise about 16.8 million hectares or 56% of national territory. Some 46% of the uplands feature 18-30% slopes, over half of which lie in Mindanao. The uplands are the locus of most remaining forested areas, the source of environmentaldamage due to erosion, and, in addition to the cities, the general direction of the thrust for rural populationmigration.

2.6 In the past, the governmenthas regarded the uplands as marginal or unsuitable for crop cultivation, or suitable only for forests or pasture. In fact, less than half of the uplands remain under any significantlevel of tree cover, and a significantupland area is already being used for crop cultivation. From environmental or economic viewpoints, the 18% slope criterion is an :.nsufficientguide to desirable land use. Indeed, a major resource management issue is under what circumstances, including land quality, climatic conditions, market accessibility,criticality of watershed, etc., as well as slope criteria, should various parts of the uplands be put to different uses, including crop cultivation?

2.7 Forests. Statistics on the extent of forest cover in the Philippineshave long been regarded as unreliable,due to (a) lack of a national-scaleinventory in recent years; (b) a high rate of extra-legal deforestation; and (c) reluctance to acknowledg6 the extent of deforestationwhich has occured. Official estimates of forest cover up to the early 1980s were based on annual updates of statistics derived from 1940s aerial photographyand a 1962-68 national forest inventory. LANDSAT photographyfor 1970-82, supplementedby 1970s aerial photography,was used in a project completed in 1984, which provided a check on the official estimates. A new forest inventory,assisted by the West German Government, is almost complete, although only preliminary results are known. And a land use study using SPOT satellite technology, conducted for the World Bank by the Swedish Space Corporation (SSC) and financed by the Swedish Government (BITS),now provides estimatesfor 1987-88which may be compared with earlier findings.

2.8 Official estimates for 1981 suggested that there were 12.3 million ha of "forest" in the Philippines,of which 10.8 million ha were on Forest Land - that is, two-thirds of Forest Lands were indeed 'forested", where "forest"was defined to include any area with 10% coverage of trees, tree seedlings or saplings,bamboo, or brush. However, if large areas of very young or sparse plantingswere excluded ("Reproduction-Brush"),forest area totalled 8.6 million ha (including0.6 million ha on A&D land). The - 11 - official figures were roughly confirmedby the LANDSAT estimates from the 1970s (which identified8.1 million ha of forest on forestLand alone; see Table 1). The remaining Forest Land consisted of some 2.9 million ha classed as "ReproductionBrush" and nearly six million ha of open lands, grasslands,or crop lands.

2.9 The most val"-ble forests commercially are the old-growth dipterocarp forests, which are dominated by various hardwood species loosely classed as Philippine mahogany. In the mid-1950s they reportedly covered 10 million hectares. By the early 1980s, their area had fallen to only 2.2 million ha (or 2.8-2.9 million ha, including A&D land), the remaining stands being either young, degraded, or of no commercial potential. The present inventoryon public land has fallen to about one million ha, confinedmainly to northeasternLuzon (40%), Mindanao (29%) and Palawan (10%) (Figure 1). If the impliedharvesting rate of about 200,000 ha per year were to continue, these would only last another five years. There also remain some 3-4 million ha of logged-overand disturbed and/or second-growthdipterocarn forests, most of which are subject to degradation through shifting cultivation and illegal logging. Without better protectionand management,these also are unlikely to survive the century.

2.10 Timber _Vl_um. Reliable estimatesof standing timber volume in the Philippines, including yields by type of forest cover, have only recently been made, through the German-assistedinventory work. The total volume of trees exceeding 15 cm diameter (breast-height)is about 750 million cu m, about half being hardwoods. However, the volume exceeding the harvestable size of 55 cm is oniy 260 million cu m, of wrhich 181 million cu m are "common hardwoods". Significant volumes of mature hardwoods are found mainly in northeasternLuzon (35%) and Mindanao (38%). Old-growth forests in Palawan are characterizedby very low recoverable volume and lack of hardwoods,and so have much less commercialsignificance than their area would imply. Corresponding estimates of commercially- recoverable volumes are not yet available, but one might conservatively assume these volumes to be about 80, 40 and 120 cu m/ha for virgin forest, second-growth,and tree plantations respectively.Ll If the corresponding areas are approximately1.0, 3.4, and 0.1 million ha respectively,then total recoverablevolume would be 228 million cu m, of which only one-third would be from virgin forests and most of the remainder from second-growth forests which are, however, already under pressure from shifting cultivators,illegal logging and forest fire.

2.11 At present, the annual harvest under timber license agreementsis about 3.5-4.0 million cu m per year; addition of illegal or unlicensed logging and various forms of destructionmight well double this figure. Thus standing timber volume could be exploitedat present rates for no more than thirty years; and for a much shorter time if increased harvesting is allowed in response to expected growth in export demand. Either way, hardwqod forests 2lanted today would not be mature enough for a first cut before present resourcesare exhausted.

LI For virgin and second-growthforest, these estimates are about half of total standing volume per hectare of common hardwoods, or one-third of total volume of all trees in old-growthand one-fourthin residual forests. Figure 1

Forest Land Cover 2000 By Region Mossy & Submarginol

U Pine

1500- Residual

Old growth

5000

ca~~~ m

0

-j± GuatioRegion Cora . NResul ts o C>_fS Source: RP-GermanForest ResourcesInventory Project, citedFn eulmatico, ConroadoVP. "Resultsof the Forest Resource InventoryProject". - 13 -

2.12 The above assumes no improvement in management practice. Alternatively, one might suppose that FMB could concentrate its limited management resourceson bringing about "sustainedyield management"of the most productive remaining forests, while devoting no major effort to reforestationor the protection of the most degraded portion of Lasidual forest. Under this scenario,one could imagine that only about two million hectares of present forest land (roughly the area covered by primary and secondary stands not yet subject to major degradation)would be available by the turn of the century for productionof hardwoods on a sustainedyield basis. With optimal management,the rotationage of these forests would be in the neighborhoodof 80 years. With a selectivecutting cycle of about 35± years, producing 100± cu m/ha on a sustained yield basis, this rotation would permit an annual cut of 100,000± ha, to produce an annual harvest of about 10 million cu m. The future product would be of lesser quality and value than the timber presently produced. Nevertheless,the volume could approximatelymatch current production of sawtimber,and could probably meet domestic requirementsfor the next few decades at the expense of a declining volume of exports (compare local projections in Annex 3 Table 8). Thus, sustained self-sufficiencyin sawtimber, not a dynamic export sector, is an attainable goal, but one which may argue for concentration of management resources on a more limited area of Forest Land.

2.13 Fuelwood and Pulpwood. While the attention of policymakersis mainly focussed on the demand for logs and lumber, future shortages of fuelwood (including charcoal) and pulpwood are also likely, and fuelwood shortagesmay be the most serious problem from an environmentalviewpoint. Fuelwood is already thought to account for 70 percent of all wood used, and about one-third of all commercial or non-commezcial energy consumed (or roughly equivalent to total oil consumption). This large scale of consumption is fostered in part by the low cost of fuelwood relative to most other energy sources - as low as a ratio of 1:4 for the same energy level. Total consumptionin 1985 is estimatedto have been 28.5 million cu m, of which 82% was for household use. Annual growth in demand is likely to be 2-3%, so that an additional 12 million cu m per annum may be required by the year 2000. In the face of the dwindling area of natural forests, how is incrementaldemand to be met?

2.14 Puelwood or charcoal are the main cooking fuels for rural households. Historically,most of the demand could be supplied through gathering from sources outside forests proper, but increasing population pressure and deforestation in most lowland rural areas have created a lively market in fuel. This has become an importantsource of cash income to uplands dwellers encroaching on the remaining forests or logged-over areas. As this is mainly extra-legal or illegal activity, statistics do not record the volume, but the supposition is that the degradation of second-growth forests is partly associated with firewood gathering and charcoal making. Destruction of mangroves has also been associated with commercial demand for fuel: reportedly the illegal cutting of the remainingmangrove areas in Palawan provides fuel for the ovens of Manila bakeries.

2.15 Puelwood and pulpwood lend themselvesto plantationforestry, and a few examples of financially-viabletree plantation ventures in the Philippines suggest some potential for this approach. As the PICOP - 14 -

experience in eastern Mindanao has demonstrated(see Box 1), on good sites and with good managementpractices, fast-growing,multi-species plantations can yield aboet 200 cu m/ha on an 8-10 year cycle, or 20-25 cu m/ha annuallymainly of pulpwood. About half this .evelof productivitymay be expected on average in less favorableconditions, so that about one million ha of fuelwood plantations,planted within the next few years, would be required to meet incrementalfuelwood demands in the year 2000; and more to reduce existing pressure on natural stands. However, the overall area presently in forest plantationsis probably only between 0.1-0.2 million ha (official estimates of 0.6 million ha for 1985 appear to be highly exaggerated). Why has "industrial tree planting" (ITF' been so unattractivein the Philippines?

2.16 First, the market for pulnwood has its limitations:about 350,000 ha would meet total domestic demand in the 1990s, and its growth rate is not projected to be high (although the export market is now and can be expected to remain buoyant). Second, high transport costs limit the economic distance of tree plantations from pulpmills (alternatively,a guaranteed market presented by a nearby pulpmill is a key to successful promotion of private tree plantations). At present, pulpwood plantations meeting the above criterion producing about 70% pulpwood (the remainder split between logs and fuelwood) should be financiallyviable. But the roadside price of fuelwood is only about 25% of the price of pulpwood (transportcost would correspondinglycut deeper into profit margins), and it is therefore unlikely that fuelwood production would be an attractive proposition other than as a joint product. In addition, the open access nature of most land suitable for tree plantations,combined with a high probabilityof loss to fire or other depradations,discourage private land uses with a long time horizon in the Philippines - it is notable, for example, that the PICOP-sponsoredplantations are confined to A&D land. Finally, even if commercial funds were available for lending in this sector, commercial terms in the Philippines cannot accommodate the 8-10 year negative cash flow characteristicof tree plantations.

2.17 The projected fuelwood shortage presents a conundrum: present high levels of use and projected growth rates largely reflect currentlylow prices, due in turn to free (if often illegal) access to the forest areas as well as the poverty of the main user groups. The expectation of low prices also make fuelwood plantations financiallyunviable. However, as the potential for gathering on public land declines, prices would be expected to increase. But a price increase large enough to make investmentsattractive might reduce the advantage of fuelwooi relative to other energy sources, and drive the poor to adopt cheaper substitutessuch as crop residues and animal dung which might otherwise be recycled to maintain land fertility.

2.18 Forestry and the Economy. For several decades, the forest and wood industry of the Philippineswas an importantsegment of the economy, in tcrms of contribution to GDP and export earnings, but, as timber resourceshave been exhausted,its role has begun to decline (Figure2). As a proportionof GDP, logging represented2.5 percent in 1975, declined to 2.2 percent in 1984, and slumped to 1.6 percent under more restrictive government policies in 1986. In spite of the availabilityof local raw materials, the performance of the wood, furniture, and paper products industrieshas been disappointing: from 1.6 percent of GDP (6.4 percent of - 15 -

Agz 1. The PICOP Proiect The Paper Industries Corporationof the Philippines (PICOP) has sought to establish commercial tree plantationson the island of Mindanao, involving large areas operatedby PICOP and a few large landownersas well as smaller tree farmersplanting 15-30 ha each on their own land. PICOP's goals were to create a reliable source of pulpwood and fuelwood supply to its Bislig Bay processing plant, but also to maintain ecological equilibrium and to improve the socio-economicstatus of the rural opulation.

After coming t. the conclusion that natural regeneration of tropical forests in eastern Mindanao was not performing as well as expected even where selective logging practices were adhered to, PICOP developed a plan to convert degraded residual stands into tree plantations. Falcata (Albizzia falcataria) and bagras (Eucalyptus deglutta) were selected as fast-growingspecies suitable to edstern Mindanao and with good market prospects. Government permission was obtained in order to clear-cut areas of poorly regenerating forest stands and convert these to plantation forestry under direct PICC? management. Shifting cultivators threatening the company's forest concession were used as a source of labor, to alleviate some of the pressure on the forest, increase rural income, and give the rural population a stake in the company'soperations. Cultivators were encouraged to plant food and oth3r crops on part of the land to sustain them until the trees could be harvested. This program was enhanced in the early 1970's when the World Bank, through the DeveloDment Bank of the Philippines(DBP), begar. financing a small tree farmer c onent, which was limitedby DBP to titled land owners within a 75 km adius of the mill.

As of 1987, PICOP had about 35,000 ha of high density tree plantations, many on their second cycle, and planned to add 17,000 ha. Some 4,000 small tree farmers participate, with 15,000 ha 1.. ited mostly to falcata, a species used primarily for pulpwood, wood chips, and fuelwood. Growth rates of 30 cu m per year are being obtained on better sites with adequate maintenance. In 1986, 1,400 ha of private trees were harvested and sold mainly to PICOP, representing20 percent of aggregatelog deliveries to the PICOP millsite. Most of farmers are making good profits from their tree farms. A propouil to plant an additional 35,000 ha along the eastern coast of Mindanao to encourage the economic development of this presently depressed region was recently presented to government and international financing institutionsfor financing.

Major setbacks have occured due to natural conditions and inextperienced management. Fungus and weeds threatenedyoung seedlings, and insects the maturing tree; PICOP found that seed and site selection, as well am rigorous maintenance, including hand clearing of areas around the seedlings,were crucial to the health of stands. In 1982, a major typhoon hit Bislig, causing extensive damage,but the plantationsrecovered in two years. As requirements for successful tree plantations, PICOP also stresses the need for: (E.)long term land tenure on reasonable terms; (b) a mix of large and small landholdings,due to needs for iechiticals-upport and financial underpinnings;(c) adequate infrastructure(roads, ports), markets, and marketing organizations; (d) long-term financing at "reasonable"costs, not only for establishmentand maintenance,but also harvesting; and (e) an organizationwith the necessary control to channel financing to tree planters and recover costs at harvest. Figure 2

Value Added in Forestry, Wood & Paper Products 800- +4- Woc>d& Paper n3 Foresry GDP

400

t 200

4- = 4- - -- W. 4- 4 _--

cmwi ~gcr VI 0% cm at ea m 0iCV

Year Source: PhilippineStatistical Yearbook, 1987, NEDA. - 17 -

manufacturing)in 1975, it has fallen to 1.2 percent (4.7 percent) in 1984, and 0.9 percunt (3.8 percent) in 1986.

2.19 Similarily,in 1968, when timber production was over 11 million cu m, forestry and wood processing contributed almost one-third of the total foreign exchange earnings of the country. This fell to around seven million cu m and 12% respectivelyin 1974, and to about four million cu m and five percent in 1986. The volume of log exports peaked in the 1969- 1971 period at an average of 8.6 million clum per year, representingabout 77% of total production. The export value (1970) was US$ 243 million for logs and US$ 58 million, or 19 percent of total export value, for processed wood products (lumber,plywood, veneer). By 1979, processedwood products had grown to 73 percent of total wood export value, and, following increasingly strict log export prohibitions in the 1980s, rose to 90 percent in 1986. However, this did not reflect any success in stimulating domesticprocessing for export - in fact, the U.S. dollar value of exports of processed wood products in 1986 had fallen to only 57 percent of the 1979 level (partly reflecting declining 4nternationalprices - volume did not fall as rapidly).

2.20 Logging employs only about 21,000 workers nationwide. Sawmills and plywood and veneer production add another 39,000; the wood products, furniture, and paper industries employ about 42,000, bringing the total labor force in the forest and forest products industry to about 100,000 (presumablyexcluding small-scale or illegal operations). Thus forestry makes a trivial contribution(0.1 percent) to rural employment,whereas the wood products industry contributes to manufacturing employment at a rate on par with its contribution to GDP in the sector (around 4 percent).

Forestry Polivj and Practice

2.21 Timber Pricing Sgm. Despite public ownership of Forest Land, rights to exploit timber resources historically have been granted to private licenseeswith no correspondingobligation to compensatethe public for the resulting resource depletion - that is, to pay a full economic rent for use of resources. Rather, the governmenthas collectedvarious taxes, fees and charges from the sector as a potential offset to the costs of reforestation. If the total economic rent is defined as the difference between product value and costs of production, including reasonable operator profit, then potentialannual rents on exported logs are estimated to be in the range P700-900 (US$35-45) per cu m. Thus the annual extractionof about 4 million cu m of timber (as recorded)provides a total of P2.8-3.6 billion (US$140-180million) in potential rents. Capture by Government of more than half of the potential rents generated from the public forests would provide the wherewithal to finance a major forest renewal program. (Realizedrents fall below potential rents, because most timber is not directly exported, and local processing, especially into plywood, involves a loss of rents due to inefficient conversion of logs into processedproduct and poor quality of processing. In effect, some of the rent is sacrificedas a subsidy to local processors.)

2.22 In the past, the government has been unable or unwilling to capture a significantportion of this rent, despite use of a plethora of tax instruments,as follows: - 18 -

(a) forest charges (regular and special),based on volume of timber extracted, ranging from P 6-13 (US$ 0.3-0.65) per cu m before 1980, and increasedto P 30 (US$ 1.50) in 1984;

(b) annual license fee, 5 percent of the "value" of the allowable cut, with timber "valued"at the forest charge;

(c) license applicationfee, a onetime charge of one peso per ha;

Beginning in the 1970s, addition sourcesof revenue included:

(d) domestic sales tax, at 10 percent of gross sales of wood and wood products;

(e) export tax, at 20 parcent for logs, four percent for lumber and veneer, and zero for plywood (dropped in 1984);

(f) municipal graduatedsales tax, levied under a complicatedformula discriminatingagainst both exports and sales of small producers; and a

(g) realty tax on timberland, at one percent of "assessed value", where the latter is calculatedas the allowablecut "valued" at P 80 (US$ 4) per cu m.

2.23 Prior to the 1970s, when only instruments (a) - (c) were employed, and at lower rates than today, revenues were a particularily small proportion of potential rents - probably in the vicinity of five percent. The addition of various forms of sales tax in the 1970s brought revenue yields to around 9 percent of potential rents or 14 percent of realized or actual rents. At their peak value in 1979, the above taxes collectivelyyielded only about P 440 million (US$ 22 million), and the subsequent decline in (at least legal) logging and log exports brought about a corresponding decline in revenues. Failure of Government to collect a significant rent from licensees largely explains the rapid depletionof timber resourcesduring the last two decades.

2.24 The Logging Concession Syst. The exploitationof publicly- owned timber resources in the past has been delegated to the private sector through 25-year timber licence agreemen-s or concessions,which could be renewed (subjectto officialwhim) fot another 25 years. Violationsof the myriad regulations imposed on concessionaires can result in license cancellation,at the discretionof the DENR - and most concessionaireshave violated regulations. The license terms and associated regulations, the minimal taxes and fees relative to the value of the standing timber, the insecure tenure, and the discretionarypower of the DENR bureaucracyhave encouraged the operatorsto "mine" the forest (or "cut and get out"), and employ bribery to obtain concessionsand evade regulations.

2.25 The typical timber concessioncovers some 40,000-60,000ha, with an Annual Allowable Cut (AAC) of 1-2 cu m per hectare. If rent accruing to operators has been at least P700 (US$35) per cubic meter, then obtaining and retaininga concessionprovided income potentiallyapproaching $1.4-4.2 million per annum - less any net costs of obtaining the concession and - 19 -

evading regulations. There are currentlysome 130 concessionsoutstanding, Although frequent complaints about multi-national firms obtaining concessions are voiced, currently most concessions are licensed to or financed by local residents.

2.26 A selectivelogging system for dipterocarpforests was introduced in 1954. This is a 'diameterlimit' cut, where, for instance, trees 50 cm dbh and below are supposed to remain as residuals and varying percentages of the larger diameter trees are also left as maternal stock to encourage renewal. This is supposed to allow for a second-cyclecut (not rotation) in about 30 years. However, concessionaireshave no interest in the second cut, and extract as much as possible on the first cut. This is mainly due to financial self-interest:the net value of the second cut, discounted to the present at interestrates reflectingthe opportunitycost of capital in the Philippines,is trivial compared to the value of the initial harvest. There is little incentive to protect the residual stand. Consequently, mechanized logging methods (encouragedin the past by tariff exemptions for imported capital equipment) are employed, in spite of the damage these methods do to the residual. Concessionairesalso will not bear the high costs of protecting the stands from swiddeners,charcoal makers, firewood gatherers,and unlicensed small-scaleloggers who follow the legal logging, and collectivelycomplete the destructionof the residual.

2.27 Excessiveharvesting is facilitatedby the official AAC formula, which was originally based on limited samplings of better quality stands than most of the country supported. Despite subsequent reduction in the MAC, ar.ddespite local evasion of regulations,actual cuts, as reported, seldom, if ever, approach the AAC; yet the residual is more de-raded than the MAC calculation assumes. A 1976 report from eastarn Mindanao found that 57-67% of the residual stand was damaged or destroyedafter high-lead (winch and cable) logging, and about 38 percent following tractor logging. In addition, logged-overforests are most often left to fend for themselves - the timber stand enrichment program that is supposed to ensure the quality and volume of future growing stock is razely executed. The end result is a second-growth forest with yields well below expectations, containingmore non-commercialand weed species than commercialcrop trees. It is clear that selective logging a practiced in the Philippinescannot lead to sustainedyields.

2.28 Commercial logging is a major contributing factor to land degradationand soil erosion. A study of the smotheringof the coral reef in Bacuit Bay, Palawan, with silt establishedthat snifting cultivation(on 7 percent of the drainage area) was not a significantcausative factor, but the logging of steep slopes surrounding the bay was. It appears that access roads and skid trails were the main culprits,although (a) properly constructed logging roads (rare in the Philippines)can minimize erosion problems, and (b) most of the damage is done during road constructionand log skidding (however,large volumes of soil washed off at these times are deposited in stream beds or lower parts of the watershed, and become a long-term contributor to sedimentationproblems). More capital-inter.sive logging techniquestend to cause the greatest damage to the residual stands and terrain. Unfortunately,labor-intensive logging methods, while less disturbing,also require denser road networks. - 20 -

2.29 Timber utilization standards in the Philippines are reportedly low, but they are not necessarily any worse than in other developing countries. It is reported that for every cubic meter of timber extracted from the forest, another 0.8 cubic meters is left as logging residues in the form of tops, branches, stumps, damaged small-diametertrees, broken logs, etc., indicatinga utilizationfactor of 55%. Between 30% and 50% is lost in the processing,so that the total end recovery is about one-third (some say one-fifth) of standing volume. In cont-rast, in some industrializedcountries, recovery is reported to be about 85% each in logging and processing. The differencemay lie partly in the financial incentives: high profit margins on logs due to low stumpage fees, combined with regulations requiring concessionairesto maintain sawmills, create little pressure for efficient exploitation of raw materials. The differencealso lies partly in the sawmillequipment - few Philippinemills are equipped to make use of chips or sawdust. Further study is required to determinewhether this is due to lack of a scale sufficientto justify the investment, lack of technologyfor use of hardwood chips or sawdust (as opposed to softwood use, which is well-developedelsewhere), or incentive problems.

2.30 The legal basis for the existing concessionsystem was undercut by Article XII, Section 2 of the 1987 Constitution, which implicitly rescinds DENR's power to license private exploitation of national resources. As an alternative,it provides that "the State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporationsor associationsat least sixty oer centum of whose capital is owaed by such citizens." Implementationprocedures have yet to be piloted, although the government's lack of financial resources leaves production- sharing as the only option. E.O. No. 192 and sections of P.D. 705 also adopt stumpage valuation as an official instrumentfor determiningmarket value of timber. Reflecting a general reorientationof natural resource management policies during the current administration,DENR has (a) not licensed any new concessions;(b) piloted stumpage bidding as a means of capturing full economic rents for timber resources; (c) raised stumpage fees for existing licenseeson an initial basis to P250 per eu m; and (d) imposed on licensees the requirementto deposit P10,000 per ha of required reforestationwork, as an assurance that denuded areas will be replanted, if not by the licensee,then by contractors. These new approazhesindicate DENR's determinationto strike at the root causes of forest depletion and degradation.

2 31 Protective Forestry. Meaningful estimates of how much upland area should be reforestedstrictly for protectivereasons are unavailable, not to mention measures of past accomplishmentsin this area. Areas requiring protection would include at minimum "critical watersheds". However, protectivemeasures other than reforestationmay in many cases be both effectiveand less costly. FMB, which is responsiblefor designating critical w-tersheds, has chosen only eight watersheds for inclusion, and within these only about 500,000 ha are consideredhigh-priority areas. An external estimate suggests that there are over five million ha of ieforested area which have deteriorated into fire-prone grasslands, of which some 1.3 million ha lie in "critical watersheds". FMB's determinationof criticalityemphasizes slope and erosion potential. The National Irrigation Authority (NIA), which is concerned with potential - 21 -

losses to downstreamworks, would designateas criticalwatersheds 18 major river basins with drainage areas ranging from 143,000hectares to 2,564,900 hectares.

2.32 Reforestation,exclusive of plantation forestry, in the past has been at rates too low to match the rate of degradation,much less make a dent in any of the above figures. FMB statistics record newly replanted areas of about 60-80,000 ha p.a. during 1978-83, subsequentlyfalling to the 25-35,000ha range. About one-half of the replanting is attributed to the private sector, mostly to timber licensees;and one might suppose the statistics reflect contractualobligations better than actual performance. The recorded achievementsof government-financedprograms are also suspect - the statistics do not indicate anything about survival of these plantings, which is believed to be low (50 percent is often cited). In order to improve survival rates, DENR policy recently has begun to emphasizemaintenance rather than new plantings,and contract reforestation rather than force-accountplantings.

2.33 Based on its estimate of 500,000ha of denuded critical watershed areas, FMB presently targets an annual rate of 100,000 ha of new plantings, of which 50,000 are supposed to be privately-financedefforts. However, budgetary provisionshave been made for only 20 300 ha, a rate well below levels of the late 1970s. As reforestationcosts about P18,000 (US$900) per hectare, a strictly government-financedprogram meeting the 100,000 ha target would cost about P1.8 billion (US$90 millior.)per year, or 1.7 per- cent of total 1986 national government expenditures(equivalent to 12 per- cent of capital outlays for that year, or 92 percent of net inflows of financial resources from external sources). Protective reforestation clearly could absorb massive amounts of capital, and merits correspondingly close scrutiny - where is it justifiedand where is it not?

TRlandlPolpulation and Crop Cultivation.

2.34 Aside from the impact of logging, deforestationin the uplands and associated environmentaldegradation are mainly due to the advent in recent years of large numbers of immigrantsfrom the lowlands. These immi- grants are mainly people who know little about the ecological constraints of farming in the uplands, with the high risk of soil erosion on deforested slopes. Moreover many of the immigrantsemploy subsistancefarming techni- ques, and being impoverishedpeople for the most part (the average per- capita income of P2,168 in 1985 was well-below the official poverty line), they cannot afford to deploy conservationtechnologies, nor can they envi- sage investmentswith payoffs in the longer-termfuture. Lacking security of tenure,moreover, they have scant access to credit of whatever sort.

2.35 Migrationpatterns in the Philippineshave been studied based on census data. However, the nature of these data limit the discriminationof an "uplands population" to individualsresiding in municipalitieswith a high proportion of Forest Lands - by no means is the entire uplands popula- tion, so-defined,responsible for environmentaldamage. The studies indi- cate net migration from the lowlands to the uplands, as well as to the cities- and from upland areas with high populationdensities to those with low population densities. In particular,the uplands (as well as lowlands) in Central and Western Visayas, where population densities today are about - 22 -

280 and 167 persons/sqkm respectively,have experiencedsignificant outmi- grations, notably to Northern and Southern Mindanao (densitiesof 142 and 118 persons/sqkm respectively). Southern Tagalog (including Palawan and Mindoro),with a density of 72, has drawn migrants from the uplands of the National Capital Region and Bicol (165). The Cagayan uplands (61) has attracted immigrants from the uplands of Ilocos (111) and Central Luzon (169). Not coincidentally,those areas of uplands receiving major net inflows of migrants are also the remaining areas with large forest lands availablefor occupancy.

2.36 The current upland population (as defined above) approaches 18 million persons, or 30 percent of the national population. How many of these are practicing farming on steeply-slopedareas? FMB's annual "cen- sus" of forest occupants recognizes the existence of about 280,000 fami- lies, and something over one million people, but the under-enumerationis so obvious that DENR now acknowledges a Forest Land population of 3-5 million (apparentlyfor 1980, which implies4-6 million today). An outside estimate,which takes only the population of the 69% of upland municipali- ties which lie entirely within mountainousareas, and further discountsfor an estimated 25 percent of urban or other A&D land in these municipalities, concludes that Forest Land occupants in 1980 totalled 8.2 million (about 10.8 million today). Considering the potential threat to remaining forests, a more interestingestimate is of the total population in those municipalitieswith major timber concessions,which was 4.3 million in 1980 (5.6 million today). In any of these figures, a high proportion would be members of (non-hispanicized)ethnic minorities,whose total population is estimated at five million. The remainder is split between hispanicized indigenes and more recent arrivals, the latter comprising immigrants from the lowlands or other upland areas.

2.37 The uplands population (on the broadest definition)grew at an annual rate of 2.6 percent in 1975-80, reflecting a gradual decline from levels of around three percent in 1950-70. In the timber concession areas, growth rates remained much higher, at around 3.5 percent. Extrapolationof future upland population trends is hazardous,because the migratory impulse has an additionaloutlet in the urban areas and, as population densitiesin upland municipalitiesreach 150-250persons/sq km, the rate of in-migration appears to decline and the population growth rate seenz to fall towards a growth rate of 1.8 percent. On the other hand, population growth and other economic pressures in the lowlands provide a "push" to continuing out- migration.

2.38 Projectionsbased on past trends alone would imply an uplands populationby the year 2000 of between 24-26 million, and densities in the range 160-175persons/sq km. If only 20 percent of the increment in popu- lation can be absorbed in urban upland areas, then an additional 5-6.5 million persons, on top of perhaps 10.8 million at present (making up a total of nearly three million families),will be looking to Forest Lands for their livelihoodby 2000. Typical farm sizes in the uplands are as low as one hectare, in overcrowdedareas such as Cebu, or 2-3 ha in less dense- ly populated areas. If the average farm size necessary for support of an upland family is minimally equivalent to the present average Stewardship - 23 - Contract covering 2.6 haL], then somethinglike eight million ha of Forest Land will be needed to support all of these families. This is equivalent to almost the entire area of Forest Land presently not under any form of tree cover. It also would bite heavily into available land in the 18-30 percent slope range.

2.39 Many of the upland farming community practice some form of shifting cultivation, known in the Philippines as kaingin farming (a "kaingin" is a patch of cropland in cleared forestland).A stereotypical cropping pattern includes upland rice, maize, and root crops cultivated with little or no input of fertilizeruntil the yields begin to decline as fertility approaches exhaustion (as little as two years), after which new fields are opened and the original fields are fallowed. However, this is usually supplemented with income derived from tree crops, minor crops, forest gathering, charcoal making, and various off-farm sources, which together may exceed income from shiftingcultivation.

2.40 A d-istinctioncan often be drawn between the traditionalupland farming techniques of indigenes (including the ethnic minorities),which have been sustainable and not environmentallydestructive, and those of more recent immigrants from the lowlands,whose practices are maladapted to the upland environment and more destructive. For example, the lengthy fallowing characteristicof traditionalforms of swidden allows more time for vegetative cover to re-establishitself and fertility to regenerate. Some indigenous groups reportedly "manage" their fallow, by planting trees and other cover crops. Various conservationtechniques are practiced by particularminorities, such as tree planting, rock walls, intercropping,or even such engineering marvels as the paddy rice terraces of Banaue and Bontoc in central Luzon. The distinction is one of attitude as well as technique - indigenes are likely to retain more concern for the land and state of the loc.I environment than immigrant groups. Therefore the distinctionbetween indigenousand immigrantgroups should be made (or the 'ancestral domains" of indigenes should be identified) as an important element of resource management strategy.

Z.41 However, in areas heavily impacted upon by outside forces, traditionalswiddeners may end up contributingto environmentaldegradation to the same degree as their immigrant counterparts. More aggressive lowland immigrantshave often pushed minority cultivatorsfurther back onto the steeper slopes, where shifting cultivationis most damaging in terms of soil erosion. Although the erosion due to clearing within forests is minimizedby a buffer of trees, this applies to only about 30,000 ha of the cultivated uplands in the Philippines (SPOT result) - almost all kaingin- making now occurs on the fringes of forests, and often swidden is practiced in degraded areas long denuded of trees. 2educed area available to indigenes, along with population growth, has led inexorably to shorter fallows. Even the owners of the Banaue rice terraces (not immigrant lowlanders)are cutting the forests which protect their water regime, and supplementingtheir rice production with shifting cultivation of corn on L] This presumes settled agriculture. If shifting cultivation were practiced, with two years of fellow for every year of cultivation,six ha per family would be required to support two ha of cultivationannually, and the present non-foresteduplands would be just about sufficientto support only the present populationof upland farmers. - 24 -

steep slopes (see also para. 2.57). In sum, it is arguable that (a) shifting cultivation is no longer an environmentally-acceptabletechnique in the Philippines, no matter what the cultural affiliation of its practitioner and (b) both indigenous and immigrant groups are relevant targets of interventionsto improve sustainability,although interventions should be founded on the distinctionsbetween these groups (para. 2.40).

Social Forestry

2.42 The Integrated Social Forestry (ISF) program arose in the 1980s as an extension of older programs dealing with the human occupants of forest lands ("Forest Occupancy Management", "Community Tree Farm", etc.). The program, planned by an ISF Division in FMB and managed from the regional offices of DENR, starts from recognition that food, rather than forestry, is the chief priority of upland dwellers. By promoting agro- forestry, with emphasis on food crops and introduction of conservation methods as well as new sources of livelihood, the ISF program seeks to minimize the damage caused by inappropriatefarming techniques, shifting cultivation,and forest exploitation.

2.43 The program is based on issue of Certificate of Stewardship Contracts (CSCs), which, like other instruments for use of public land, tenure not exceeding 25 years (renewable for an additional 25 years). Recipients, who are mainly upland cultivators occupying their land since 1981, are obligated to assist in protecting adjacent forest areas (includingfire suppression),plant at least five fruit trees per ha, and avoid harvesting timber on their own leasehold "when notified" by FMB that they should not do so. They are to be encouraged to develop farms combining trees and agricultural crops, and are supposed to receive training and material assistance from a Social Forestry Officer in this endeavor. CSCs are heritable within the 25-year limit, but otherwisenon- transferable(indeed, they can be cancelled at the discretion of FMB), so they are not a "bankable" instrument. Despite the weakness of the CSC, it at least strengthensthe hand of land occupantsagainst conflictingclaims, e.g., of powerful absentee claimants, but it is precisely in such situations of conflict that absentees exert their influence to forestall CSC issue.

2.44 By late 1987, the ISF program had issued some 64,000 individual, and seven collective CSCs, covering 189,000 families and 460,000 ha (an individualCSC on average covers 2.6 ha). The collectiveagreements, known as Community Forest StewardshipAgreements, are issued mainly to organized tribal groups for common management of their community area. A major weakness of the ISF program in the past has been lack of "content control" - until recently, there was actually a registration target assigned to regional directors which led to careless certificate issue. Insufficient attentionhas been paid to parcel managementand little budget provided for support services.

SoilnErsi 2.45 Soil erosion appears to be such a widespread and pronounced problem that it is generally ranked as the most serious environmental problem in the Philippines. It was suggestedin a recent Philippinepublic -25 - statement on the extent of environmental degradation that every year the equivalent of 100,000ha of soil one meter deep is washed into the sea. This gives the false impressionof a highly visible impact;however, if the implied erosion rate of 50 tons per hectare is averaged over the entire Philippinesland area, it amounts to only 3 mm off the soil horizon - too small to be readily :.ticed. In the monsoonal climate, all but a small fraction of total sediment discharge occurs in conjunction with a few extreme storm events each year. Sediment resulting is washed from watershed areas into streams and then rivers, and its impact is finally concentratedon limited geographicalareas downstream or at outlets into the sea, where the sediment may be disbursed or hidden. This process cannot be observed by satellite reconnaisoncebecause of cloud cover during rainy periods, and it is difficult to gauge sediment content of stream flows at the height of tropical storms.

2.46 Nevertheless,land is likely to be prone to soil erosion in a country where more than one-half is over 18 percent in slope, and mostly montain forest land with thin topsoil layers; rainfall is heavy and seasonally concentrated, and typhoons are frequent; and where logging, shifting cultivation, and grazing have removed a large proportion of protective cover. These facts - rather than actual surveys - account for the alarming statistics on the areal extent of badly eroded land which are sometimes recited in the Philippines.

2.47 Deferring to a Section V the issue of when erosion "matters", there is some evidence in the Philippinesas to the volume of soil erosion associated with different land uses in the uplands. The evidence ranges from informed speculationto extrapolationsfrom limited empirical studies, and does not inspire too much confidence. The weakness of the data and analytical methodology are explored in Annex 2; only some general conclusionsare drawn below.

2.48 Undisturbed forest lands are the best soil conservers, with annual soil losses typically under 1.0 t/ha/year. With decreasing vegetative cover, soil loss rises exponentially: a combination of high- intensityrainfall, steep slopes, erodible soil, and poor cover can lead to rates of 300-400 t/ha/yearon tilled kaingin plots. Overgrazedgrasslands, burned regularily, can involve soil loss rates as high or higher than kaingin. In between these extremes, the closer the cover approaches the combinationof upper canopy and protective undergrowthor litter possessed by the natural forest, the lower the rates of erosion. Compared to primary forest with dense undergrowth,second growth forest with good undergrowth and high mulch cover has erosivity about three times higher; degraded second growth forest mixed with shrubs and plantation crops, about six times higher; and industrial tree plantations,depending on their density and mulch or cover crcp characteristics,as much as sixty times higher.

2.49 Agro-forestrytree species can also show considerablevariation in erosion rates, but since high-productionfruit or nut trees require sparser planting and control of undercover,erosivity can be comparable to that of, say, rice (100-200 times primary forest). If grasslandsare well established,undisturbed, and allowed to regrow shrubs, erosion potential falls to about the level of disturbed second growth fcrest; but, conversely, increased grazing, burning, and/or removal of shrubs causes exponentialincreases in erosivity. - 26 -

2.50 The erosivity of various land uses can also be affected by alternative conservationor managementpractices. Such practices as land shaping (bench terraces, contour strip cropping, and contour plowing), mulching and cover management, tillage and residue management, use of vegetative mulch, and tillage practiceswhich reduce soil disturbance can all significantlyreduce erosion even on steep slopes. With combinations of several conservationmanagement practices, erosivity in cropped areas can be reduced to tolerable levels. For example, contour strip farming of corn on a 25 percent slope, with 60 percent coverage of mulch or cover crop and mulch tillage could reduce erosion to levels comparable with undisturbed grassland or disturbed second growth forest, and possibly better than typical tree crops or industrialtree plantations.

2.51 The broadest observationis that it is the combinationof cover removal and soil disturbance which creates the largest potential for erosion. While nothing can equal the erosion protection of undisturbed primary forest, quite low levels of erosivity can be achieved on steep slopes with undisturbed grasslands and upland crop cultivation with a mixture of conservationmanagement measures. Trees may or may not be part of the land use picture, but are not an essential element in soil conservation; moreover orchards and tree plantations established by clearing of grasses and shrubs are likely to worsen erosion.

2.52 The most common form of vegetation in the Philippineuplands is grass - usually cogon grass (Imperata cylindrica) or bagocboc (Themeda triandra), which typically follows deforestationand is prevalent dur.Ing fallowingof swidden plots. The question arises, what should be done about these grasslands? Should they be left undisturbed, or replanted to forests, or used for grazing? These grasses appear to have ambiguous characteristicswith respect to erosion potential. For example, the thick mat of root fibres in the topsoil serves to reduce soil erosion, and contributes to the replacement of soil organic matter; but the same attributeprevents rainwaterfrom penetratingfar into the soil, so it does not stem water run-off during rainfall. Moreover the plant's coarse growth form does not offer the fine network of stems and leaves that break the impact of tropical downpours. On the other hand, undisturbed cogon grasslands are an excellent medium for natural re-establishmentof brush and trees, which help compensatefor these deficiencies.

2.53 The problem is that cogon lands are commonly used as pasture, even in critical watersheds and under official licensing. As such, their carrying capacity is probably lower than 0.25 animal units (0.3 cattle) per hectare. Cogon's nutritive value declines soon after early growth: mature cogon has a textureand toughnessthat make it unsuitable for use as forage for domestic livestock. So stockmen burn their cogon pastures regularlytoward the end of the dry season,which contributesto wild fires penetrating adjacent tree stands and prevents re-establishmentof other vegetation. At least as important, the grassland burning leaves the soil much less protectedat the critical time when heavy rains fall at the start of the morsoon. Overgrazing during the period of regrowth completes a destructivepattern which makes degraded cogon grassland the single most significantsource of soil erosion in the Philippines. - 27 -

Wat2rshg Degradation.

2.54 If the only concern were the loss of soil through erosion, and its effects on upstream productivity,discussion of the subject could stop here.- However, damage resulting from the delivery of eroded soil downstream has been i traditional source of concern, and the main justification for remedial projects and programs aimed at reversing the process of watershed degradation (see Box 2). The link between upst_eam erosion and downstream damage is not straightforward, since silt accumulatesin route and, in a large watershed, it may be years before the full downstream damage is felt. This has important implications for remedial measures: (a) reductions in erosion upstream today would have their impact on reduced siltation downstream only well into the future (whereas engineering works downstream would have immediate effect); (b) reduction of the volume, velocity and dcurationof peak flows of water runoff through the watershed would have a more immediate effect on downstream silt and sediment delivery than measures which reduce upstream soil erosion. The studies of erosion in the Magat Watershed provide an illustrationcf these issues (Annex 2 discusses some technical problems with these studies).

2.55 Magat Watershed. The Magat reservoir is partly intended to supply water to the largest irrigation system in the country, and thus to spearhead the economic development of the entire Cagayan valley. At appraisal in the early 1970s, its design should have given it an operationallifetime of 100 years, based on curlent estimates of the rate of sediment delivery to the reservoir. Later estimates reduced the i probable lifespan to as little as 25 years, and this reduction has been blamed on continuingwatershed degradation due to upstream activities.

2.56 An analysis based on current land uses in the Magat watershed estimates aia upstream sheet erosion rate averaging about 50 t/ha at present. Forest now covers only 46 percent of the area, and grassland 38 percent. In much of the open grasslands sheet erosion is estimated to average 122 t/ha (ranging from 10 tons on 3-8 percent slopes, to 33 tons on 8-15 percent slopes, 56 tons on 15-25 percent slopes, and 240 tons on 40- plus percent slopes). Where over-,;razingis heavy, the average is 250 t/ha, and on farmed hillsides 100 tons. In reforested areas, by contrast, the rate is assumed to be only 30 tons per hectare per year. The grasslands - grazed, farmed, or ungrazed - are estimated to contribute 93 percent of all eroded materialswashed away downstream;and 85 percent of the total is estimatedto come from areas with greater than 25 percent slopes.

2.57 A part of the damage is attributed to some 6,000 families practicing shifting cultivationon only 11,000 ha (less than 3 percent of the area). These are largely indigenouskaingineros, whose occupancydates from before the initiation of dam construction. A second and, for Magat, probably more important source of damage is the ranching activity, which puts around 10,000 animals on some 33,000 ha of leased or illegally- occupied pasture. From the late 1970s to the present, unimproved and overgrazedpasture has been the most visible land use at Magat (the kaingin activities are mostly higher up, in less accessible parts of the watershed). - 28 -

i2A 2. WatershedManageme Mi Erogin gntrol Prol1ct

The project seeks to rehabilit.ate open grasslands, reduce the sedimentation of major multipurpose reservo,irs, and provide employment to occupants of the Pantabangan and Magat watersheds. Implementation was coordinated by the National Irrigation Administration (NIA), but also involved DENR's Bureau of Forest Development (now FMB) and DA's Bureau of Animal Industry.

At Pantabangan, the dam completed in 1974 created a reservoir of about 8,000 ha within an 82,900 ha catchmentarea. Almost one-half of the 30,000 watershed occupants were displaced when the reservoirwas filled, and many of these chose to migrate into the uplands surroundingthe reservoir. The project is, in part, an attempt to provide for the needs of the displaced people whose living standard was still inadequate six years after the completion of the dam. Since 1980 the project has established and maintained roads, fire control systems, nurseries and approximately18,000 ha of plantationsproducing fruit, nuts, pulpwood and timber. At Magat, the High Dam was completed in 1983, creating a reservoirof 4,900 ha within a very large and diverse catchmentof 414,000 ha. Many lessons learned in implementationat Pantabanganwere applied at Magat, and the project had establishedabout 6,300 ha of plantationsby the end of 1987.

When the dams were completed, they were estimated to have operational lifetimesof about 100 years. Due to siltationbeyond estimated rates, the lifetimes for both dams are now estimated to be about 40 years. Actual erosion rates are more that double those previously assumed, and the probability of continuing encroachment on forests by the watershed population is great, leading to further degradationof the watershed arsas.

The main thrust of the project was to develop tree plantations on public land, offering employment to watershedoccupants but limited participation. At appraisal, evaluation of project returns were based on the expectation that income generatedby the tree plantings would be sufficient to justify cost of establishmentand also provide long-termemployment to occupants, but this has proved illusory. The plantationswere developed at high cost on relatively poor soils, and many of the species and arrangementsadopted were inappropriateto acidic and infertile slopes. Catchment revegetation has been fragmentary and slow, and productivityvery limited. A pasture improvementand livestock development component were eventually cancelled due to poor management. Moreover, the problems which gave rise to the projects remain: soil erosion continues to affect the reservoir and the irrigationsystems downstream,and the occupantsof the watershed have only just begur.to acquire rights to land through CSC contracts fifteen years after leaving their original homes. The need remains for low-cost methods to control fires and rehabilitate slopes covered with cogon (Imperata cylindrica). Top-down planning and implementation has led to the dependence of the inhabitants on public funding, but limited budgetary resources imply that this cannot continue indefinitely. - 29 -

2.58 Is Magat an example of a rapidly degrading watershed, or one which has long been degraded,or is degradationeven a serious problem? If it is, what should be done about it? These questions are not easily answered, despite a variety of studies. For one thing, the rates of dam sedimentation now observed were predictable before dam construction was complete: the increase over feasibilitystudy estimates is attributableto changes in rainfall runoff patterns between 1949-64 and 1976-81. Whether the difference is attributable to "normal hydrologic variations" or to watershed degradationis also uncertain. If the former, then the present higher rates of sedimentationmay be a temporaryphenomenon; if the latter, the degradationmight be a long-standingand gradualphenomenon.

2.59 Suppose, however, that rapid degradation is continuing: would protective measures upstream significantly reduce dam sedimentation? Clearly most of the silt anc-sediment reaching the dam today was lost from upstream sites long ago. Equivalently,even if upstream soil loss were stopped today, downstream sedimentationwould continue for many years, because so . _h silt and sediment is trappedwithin the watershed and would continue to be washed downstream. However, reductions in the volume, velocity and duration of peak flows through the watershed would have an immediate effect, because the peak flows largely determine the extent of gullying and mass wasting (possiblymore importantthan sheet erosion) and also the amount of silt and sediment picked up within the watershed and conveyed downstream. Therefore protective measures upstream could generally pay less attention to reduction of sheet erosion and more to reducing volume and velocity of rainfall runoff (in this respect, cogon grass is inferior - see para. 2.52).

Downstre&aLosses

2.60 The effects of watershed degradation have consequences for livelihoodand the economy downstream. Not all consequencesare negative - topsoil from the uplands (or some part of dissolvedplant nutrients)may be depositedin farmer's fields in the lowlands,increasing fertility. In the Philippines it is difficult to find evidence of such positive effects, whereas there is widespread awareness of negative consequences. Unfortunatelythis awarenesshas not induced any systematic documentation of damages, with the exception of the few watersheds, such as Magat or Pantabangan where the effective lives of reservoirs are threatened by siltation.

2.61 As a result of watershed degradation,peak storm flows are enlarged,more concentratedin time, and thereforecarry a heavier load of silt and gravel. Consequencesdownstream may include (a) more frequent and more serious flooding; (b) more rapid siltationof irrigationchannels; and (c) deposits of gravel as well as silt in delta areas. Water infiltration (hence retention upstream) is enhanced by the soil organic matter, surface litter and brush associated with the natural forest. When this is lost during a process of deforestation,reduced river flows and water tables during the dry season may result (even though the trees alone act as "pumps" rather than "sponges"). These effectshave not been systematically documented in the Philippines or elsewhere, preventing quantificationof the relationshipto watershed degradation,or even the extent of increase in the phenomenaover time. The National IrrigationAuthority (NIA) is not - 30 -

tasked with collecting data on flooding (the National Disaster Commission is responsible for assessment of flood damage, but only to evaluate emergency assistance requirements), and since it regards the FMB as reponsible for watershed protection, neither does it assemble any other evidence of the costs of watershed degradation. Perhaps this will be remedied if or when the proposed new WatershedManagement Department in NIA is established.

Biodiversity

2.62 The Philippines archipelago of over 7,100 islands presents a complex ecological mosaic. The mountainous island geography, tropical location, and a biota with multi-faceted biogeographic origins have combined to make the Philippineshome to an exceptionallyrich assemblage of both terrestrialand marine life forms. Altogether the Philippines is estinatedto harbour about 12,000 plant species (8,000 flowering),of whioh 3,800 are endemic to the country, i.e. found nowhere else in the world, and these are mostly native to primary forest (notablyferns, dipterocarps,and palms). The mangrove areas account for about 86 plant species. As for fauna, the Philippinesis estimatedto harbor about 170,000 species,mostly insects and mostly unidentified. The number of identified terrestrial vertebrate species is about 960 (43% endemic),of which over 500 are birds and 167 are mammals (59% endemic). About 500 species of coral have also been identified. Although the present tense has been used here, the severe contractionof forest area and the degradationof coral reefs in the last few decades may have already resulted in a significant number of extinctions.

2.63 Species-richnessvaries greatly from one island to the next, and the local distribution of endemic species is both complex and insufficientlystudied. Nevertheless,study of vertebrates leads to some preliminary conclusions about distributionwhich may hold for flora as well. Whether we speak of all species or single-island endemics, three islands - Mindanao, Luzon and Palawan - account for the laLgest portion: 86 percent of all terrestrialvertebrates (ranging from 77 percent of the mammals to 92 percent of the birds), and 72 percent of single-island endemics. Still, 28 percent of the single-islandendemics occur on other islands (about half of these on Negros, Mindoro, and Bohol), and this percentage is larger for some categories of vertebrate. WitVin a single island, there is a tendency for the most fauna to be found at middle- to high-altitudes in forest environments,although some species - e.g., of snakes - prefer lowland environments. Flora, on the other hand, are more varied in lowland forests. There is evidence that some species may be endemic to a particular portion of an island. Primary forests generally have been the original habitats, but many species - perhaps half - can survive in moderately disturbedenvironments.

2.64 Within the archipelago, over 60 national parks, wildlife sanctuaries,or equivalent reserves covering some 1.3 million ha exist on paper, although only a handful are of any size. Only 10 parks are larger than 10,000 ha, and seven account for 250,000 ha. Although the Philippines aspires to international standards in its definition and management of national parks, in fact the International Union for Conservationof Nature (IUCN) has reported that the number meeting such standardsdeclined from 23 in 1975 to 7 in 1982, and local observers doubt - 31 -

that any would qualify today, due largely to absence of resources,funds, personnel and political will to manage and protect the system. Most reserves are totally lacking in protectionor management. Some were poorly chosen or without meaning or importance. In general,the overall area covered is insufficient,existing reserves are usually too small to be viable and include an inadequaterange of biogeographicalelements. As a result, few of the threatened faunal or floral populations are afforded even paper protection. The area of forests on limestone is virtually the only habitat type adequately covered. Freshwater swamp, mangrove or tropicalpine forest, and lowland forests are habitats which receive little or no representation. The marine environment in general is underrepresented.

2.65 National parks have been subject to conflictingland uses - many were established on land already logged over and/or partially settled; others were released from reserve status to allow logging and then reclaimed as parkland; and still others have been subject to the same illegal exploitationcharacteristic of most Forest Lands. Little solid information is available on the condition of most parks - even the boundaries are not well established,due to lack of surveys or use of trees (perhapslong since cut or defaced) as boundary markers. Aside from boundary surveys, there is an urgent need for aerial surveys of land uses, ground surveys of infrastructure,and a full census of occupants, as a basis for determinationof whether it is worthwhile to maintain, amend, or abolish individualparks.

2.66 A developmentplan for the national park system was prepared by Government in 1975, but has not been acted upon. New studies currently underway, carried out by the Haribon Society with internationalsupport, are updating data on biodiversityand the parks and other protected areas in the Philippines, and will lead to formulation of an "Integrated ProtectedAreas System" (IPAS). The IPAS is to be imbedded in a National ConservationStrategy under developmentby DENR and would be supported by an integratedlegal code eliminatingthe ambiguitiesand conflicts implicit in present legislation.

2.67 A number of sites in the Philippineshave been identifiedby IUCN as candidatesfor priority attention as centers of plant diversity. They inelude areas covered by two existing national parks - Mt. Apo (Mindanao) and Mt. Pulog (Luzon) - as well as more general primary forest areas where no reserves exist at present and specific sites remain to be identified - Palawan, Samar, and the Sierra Madre Mountains of Northern Luzon. Mt. Apo covers an area of about 73,000 ha, but there has been considerabledistur- bance from logging, shifting cultivation, and other forms of human encroachmentmainly around the edges of the park and at lower altitudes, and only a fraction of the original area is in relativelypristine condi- tion. Mt. Pulog appears from interpretationof SPOT satellite images to be a mosaic of mossy and pine forest and grasslands - hardly any undegraded dipterocarpforest remains. Samar still has two or three large tracts of primary lowland rain forest. The Sierra Madre Mountains, ranging from Aurora to Cagayan on the Pacific Coast of Luzon, have the largest high- quality tract of primary diptercarp forest remaining in the islands, and probably accounts for the majority of present logging activity. Palawan has the highest percentage of closed-canopyforest cover (54%, from SPOT intArpretation)in the Philippines,although much of it is mossy or sub- - 32 - commercialquality. A 1984 botanical survey identified the Thumb Peak-Mt. Beaufort-IrawanValley area west of Puerto Princesa in central Palawan as an optimum site for conservationactivity; an existing national park (St. Paul SubterraneanRiver National Park, probably the only park benefiting from active management)located further north has been the primary focus of a debt-for-natureswap sponsoredby the World Wildlife Fund. Of the candi- date areas identified,all but Palawan are currently subject to "reace-and- order" problems and thereforedifficult to access, much less control.

2.68 The IUCN candidateswere selected strictly on the criterion of botanical diversity; inclusion of other criteria leads to different and broader lists of sites for preservation. For example, a recent exercise sponsored by DENR prioritized a list of twenty sites (mainly existing national parks; see Annex 3 Table 28) for possible inclusion in the IPAS. The only overlap between the IUCN and Haribon lists was Mt. Pulog National Park. surprisingly,neither Mt. Apo nor the St. Paul SubterraneanRiver National Parks were included. The longest list of candidatesites emerged from a recent Haribon Society workshop on IPAS (Annex 3 Table 29). The 71 areas identifiedappear to provide a balanced coverage of terrestrialand marine biogeographicalelements, and would be a good starting point for further evaluationwork. - 33 -

III. IME COQAsL ZONE

3.1 The most prominent geographicfact of the Philippinesis that it consists of 7,107 islands with a total coastline of 17,460 km. Political boundariesreflect this orominenceas 80 percent of the country'sprovinces and two-thirds of all municipalitiesshare the coast. About 55% of the population resides in some 10,000 coastal barangays, plus larger urban centers. Seventeen of the 25 cities having populations in excess of 100,000 people are on the coast. Associated land use activities concentratedon the coast are transportationinfrastructure, industrial and commercialdevelopment, lowland agriculture(especially rice and coconut), aquaculture,tourism and recreation,land reclamationand waste disposal.

3.2 Fisheriesproduction has generally exhibited growth during the past 35 years, but in recent years productionhas levelled off and in some cases declined due to overfishing. In particular, small pelagicl. fish, some species of juvenile tuna, nearshore demersalLl stocks and municipal fish stocks are being economicallyand biologicallyoverfished. Along the coast, the communities depAnding upon fishing have remained poor as pop- ulation growth has absorbed catch increases in the municipal sector. Poverty has been exacerbatedby the recent absolute reduction in catch and use by fishermenof destructivefishing practices.

3.3 There is extensive evidence of deteriorationin other marine ani terrestrial resources on which the livelihood of coastal communities de- pends. Examples are: physical and chemical damage to coral reefs, disruption of benthic (ocean bottom) habitat through bottom trawling, mangrove clearing, pollution of freshwater lakes, swamps, and rivers, and lowered quality of coastal water (marine,brackish, and fresh) by sedimen- tation and pollutants.

3.4 The 'coastal zone", as defined in this study, consists simply of that linear strip of land with adjacent ocean area, which is characterized by productivenatural resourcesof mangrove, coral, and fishes, and is home to nearly two-thirds of the country's 1,525 municipalities.This loose definition is simply an analytical convenience,employed to describe some important resources of the coast and examine problems of degradation. A coistal zone perspectivestresses the interdependenciesbetween the various resources and their users. It contributesto evaluatingpast interventions in resource management,and deriving strategiesfor improvedmanagement and future development.

1I Demersal refers to bottom-dwelling,and pelagic to surface-dwelling species, although most species fluctuatebetween demersal and pelagic over their life-cycle. ,,t practice, the distinction between demersal and pelagic is based on whether the species is more abundant in the catches of demersal (e.g., trawl) or pelagic (e.g., purse seine, ring net, bag net) fishing gears. - 34 -

Mangrove Forest

3.5 Numerous species of mangrove flora are representedin Philippine stands. There are 29 species of true mangrove, and numerous other plants which commonly grow in associationwith the true mangroves. The dominant species are those in the family Rhizophoraceae(Rhizophora. CerioRs. and Bruguiera sp.), and to a lesser extent Sonneratiaceae(Sonneratia g2k.), and Avicenniaceae. There is also a strong correlationbetween productive coastal fishing grounds and their proximity to mangrove swamps. These swamps are among the richest and most productive ecosystems, and form the foundationof the food chain for coastal fishe:ies. They contribute large amounts of organic material to coastal waters through the build-up of detritus from plant litter, periodic release of larva, and abundance of invertebratelife. During high tides fish move into the mangrove to feed on invertebrates,juvenile fishes and detritus. Mangroves are also the nursery ground for a variety of fishes and prawns and home to crabs, bivalves, and other invertebrates. Reportedly, the most abundant species of fishes found itiPhilippine mangroves are those in the Mugilidae (or mullet) and Carangidae (or jacks) families, which are correspondingly prominent in coastal waters. Countlessother species have been identified, falling within 68 families of fishes. Finally, mangroves and associated flora have been an important source of firewood, charcoal, fish trap sticks,poles and wood for housing of coastal families.

3.6 Approximately 450,000 ha of mangrove were thought to exist in 1918. By 1970, this had dwindled to 288,000 ha and to 242,000 ha a decade later. However, the 1970-80 figures include so-called "reproductive brush", which refers to residual after cutting. Excluding this possibly meaningless category, the 1980 LANDSAT study indicated that 175,000 ha remained,whereas the 1987-88 SPOT satellite survey indicate a residual of about 149,000 ha - that is, 29 percent of the 1918 area. The remaining stands are widely scattered, but tend to be concentratedon Palawan (with 22 percent of total area), the east and southwest coasts of Mindanao (32 percent) and the Eastern Visayas and Bohol (with 23 percent).

3.7 The decline in the areal extent of mangrove is better documented than qualitative losses such as (i) changes in species mix through excessiveharvesting of useful mangroves, to the exclusion of others, (ii) the shift in age structure towards younger stands as larger trees are felled, and (iii) a possible decline in timber productivityas successive generations of mangrove are harvested, c.amparedwith virgin and first generation yields. In terms of biological diversity and economic value, the decline in mangroves has been more significant than strictly areal measures would imply. FMB and LANDSAT statistics for the early 1980s indicatedthat there was almost no old-growthmangrove left in the country - about 10,000 ha were identified,of which two-thirdswere in Palawan and one-third in Zamboangadel Sur. The remainderis second growth.

3.8 The steady reduction in the past several decades can be attributed to the harvesting of mangroves for charcoal or fuelwood production, followed by forest clearing for fish pond establishment. Physical expansion of coastal communities may also have played a role. According to the SPOT survey, about 95 percent of the present fishpond area of 205,000ha was derived from mangroves. Between the years 1952 and 1987, fish ponds increased from 89,000 ha to 205,000 ha, at an average rate of - 35 -

3,600 hectares/year, close to the rate of decline of mangrove area. Despite supposedly tight restrictionson conversion of mangrove areas to fishpondsafter 1980, in the last seven years, the estimated reduction in mangrove area of 3,700 ha/year has continued to parallel the increase in fishpond area of 4,100 ha/year.ja

3.9 Fishpond conversionsare often the final product of a process of destructionwhich convincesauthorities that particularmangrove stands are no longer of value. Coastal mangrove stands above a certain size are legally part of the public domain (Forest Land), and fall under the authority of FMB. The latter, however, has little or no presence in mangrove areas, and no ability to prevent illegal cutting. Once the mangrovesare degraded through logging or natural causes, or in response to political influence, they are likely to be reclassifiedas A&D land, and jurisdictinntransferred to BFAR, which in turn is likely to approve leases for fishpond conversion in the interest of raising fisheriesproduction.

3.10 Newly establishedmangrove stands are susceptive to losses from natural agents: for example, in Bohol, reference was made to the damaging effects of barnacles and oysters which attach themselves to the young seedlings. Near villages, untethered goats and pigs may also destroy the newly planted propagules. Plantings made along the exposed coast are particularlysusceptible to monsoonalwind damage and storms. During the northwest monsoon in early January 1986, well-roo:ed seedlings of 3 to 6 months age were destroyed at two field sites. Tropical storms or typhoons can be devastating. Typhoon Nitang swept the Central Visayas in 1984, wiping out planted areas of young mangrove up to 3 years old. Additional sources of stress have been revealled in studies of a mangrove forest in Perak, Malaysia, including: (a) invasive competitionby light-lovingferns of the genus Acrostichyum which prevents n;.turalmangrove regeneration after it is cleared; (b) destruction of new mangrove seedlings by crabs (particularlySesarma Sp.) which devour the inner tissues of propagules; and (c) competitionby other fast-growingmangrove species of low economic value.

3.11 Nevertheless, overharvestingand lack of replanting is usually the initial source of degradation,as with upland forests. Most of the generalizationsabout logging policy and practice in the Philippinescited earlier are even more applicable to mangroves, which suffer from even weaker attention and unenforced regulation. Harvesting often concentrates on the market>>;.especies, bypassingthe low-valuespecies. Local fuelwood demands lead to continuous cutting of branches and results in stunted shrubby trees which further tilts future use towards local suosistence. Chronic over-cuttingcontributes to soil erosion and may produce changes in soil composition,e.g., replacementof muddy-claymangrove soils with sandy coastal soils, contributingto a drop in growth and a poor environmentfor regeneration.

LI~ Pinpointing the geographical locations of on-going conversions is difficult because of the uncertain accuracy of official statistics. However, Zamboaga del Sur shows a major loss of mangrove area in 1980-87 (possiblythe last of its old-growthmangrove) and a correspondingincrease in fishpond area. Region VI, notably Negroes Occidental, also shows an inverse relationship,but of lesser magnitude. - 36 -

Coral Reefs

3.12 Historically,coral reefs were one of the great natural treasures of the Philippines,because their species diversity,prolific growth, and excellent quality of the living reef contributed substantially to the fisheriesresource base. Today, however, evidence of reef degradationis widespread, and it seems unlikely that stress on this resource can be reduced sufficiently to permit it to recover to its former state. Nevertheless,Philippine corals remain unique on a world scale for their diversity: a total of 488 species of coral in 78 genera have been described from the Philippines.The Philippines is less well known than other reef environmentsand new species await discovery. The diversity of coral is also reflected in diversityof related life forms. A phycological survey of benthic algae produced 971 species in 209 genera. Furthermore, many of the more than 2,000 fish species recorded in the Philippines are associatedwith the reef complex.

3.13 Determining the extent of coral reefs in an archipelago as complex as the Philippines is problematic at best. A 1977 estimate suggested that there are 44,000 sq km within the 40 fathom isobath, or 33,000 sq km within the 20 fathom isobath, throughout the 7,000 islands comprising the Philippines. However, most corals are found in shallow water at less than 15 fathoms with a preponderanceof growth occurring in the first 10 fathoms. But even within the 10 fat.aomisobath, estimates range from 12,000-27,000 sq km. Efforts to map this resource using satellite imagery and traditional aerial photography can also be unreliable. This is due to the inherentdifficulty in surveyinga resource that occurs discontinuouslyin small non-reef patches or in narrow fringes, coupled with the problems of surface reflectancewhen the photography is conducted at an oblique angle, and the difficulty of recording detail through the water column at depths varying from 1 to 50 meters in conditions of varying turbidity. Thus the SPOT satellite reconnaissance identifiedonly 3,527 sq km of coral reefs immediatelysurrounding the main islands (representing,so to speak, the tip of the iceberg). In any case, existing statistics,maps and photographicsurveys all tend to exaggerate the extent of the resource by counting reef flats as indicative of the presence of the living coral reef resource.

3.14 Production. In otherwise nutrient-poortropical waters, coral reefs collect, retain, and recycle nutrients from adjacent nearshore areas such as mangrove estuaries, seagrass beds, and reef flats. The solid substrateof the reef is a habitat for a diverse array of bottom-dwelling plants and animals, and the reef's structure provides protective habitat for organismswhich live in the water column. Several thousand species of invertebratesand fish are associatedwith coral reefs, many being valuable for food and other uses. The importance goes beyond the catch from the reef itself, as fish caught elsewhere may have spent part of their life cycle in the reef environment.

3.15 The annual fish yield (excludinginvertebrates) of Philippine reefs ranges between five and 24 tons/sq km, depending on fishing intensity,bottom type, coral quality (percentof living coral cover) and other envLronmentalfactors. For example, Sumilon Reef produces at least 14 to 24 t/sq km on a sustainedbasis, and the Apo Island Reef an estimated - 37 -

11.5 t/sq km (both of these reefs fell into the "good" class, with 50-75 percent living coral cover, and both include fish sanctuaries). Yields at Selinog Island in the Mindanao Sea (about 25 percent cover) and Hulao-hulao in Panay Gulf were estimated at 5.9 t/sq km and 5.0 t/sq km respectively. The relationshipbetween yield and percentage of living coral cover is not linear: a complete loss of cover might replace a 20 t/sq km yield (100 percent cover) with a yield of 2-5 t/sq km of a quite different species mix.

3.16 Earlier estimates of the total production from coral reef fisheries were based on the product of estimates of sustainable yields under selective fishing times estimated coral area, or on the percentages of recorded total (finfish) catch which could be identified as species associated with coral. On the assumption that maximum sustainable fish yield on average would be about five t/sq km, the former suggested that sustainablecoral reef fisheries productionrepresented five to 12 percent of total fish production in 1975, but since actual fishing effort exceeded the sustainablelevel, 15 percent or more of total fish might be attributed to reef fisheries. The latter found that 8-10 percent of total recorded finfish production came from the coral reefs (but that the absolute volume may have been higher than estimated because of inadequate recording of subsistencefisheries product). However, the more recent studies of fish yields cited above imply a much broader range of sustainable yields, dependingon coral cover, than earlier assumed (e.g., 2-25 t/sq km, instead of 2-5 t/sq km), and a weighted average yield for Philippine reefs as high as 7.0 t/sq km (based on their condition in 1976-81). Philippine coral reefs could then have accounted for total fish production as high as 210,000 tons per year (30,000 sq km x 7.0 t/sq km). Because total fish production has grown in the interim to over two million tons, today this representsno more than ten percent of total national production.

3.17 Since all the evidence suggests that stress on the reef fisheries from overexploitationand reef destructionhas been high and increasing,it must be assumed that both sustainableand actual fish yields have been on the decline. Currently, on the more accessible reefs, the population of reef fish is uncommonly low with a noticeable absence of adults or larger specimens - a clear indication of overfishing. It follows that reduction in stress would certainlyrequire reduced fishing effort and more selective harvesting, at least on inshorereefs.

3.18 On the other hand, there are a large number of offshore subsurface reefs which are reportedly underutilized,relative to maximum biological yields - for examples, the Western Palawan Barrier Reef and the CamarinesNorte Reef Banks. Rough estimatessuggest po-ential yields from these sources as large as total present productionfrom the inshore reefs. However, the potential new fishing grounds are both more distant and less calm than the present ones, implying higher costs and a limited role for the small-scalefisherman.

3.19 Coral Reef Condition. A 1976-81 underwater survey of Philippine reefs, sponsoredby the NNR (DENR),has provided indicationsof the extent of degradation. Approximately600 survey sites throughout coastal Luzon, the Visayas, and Mindanao, and on smaller islands and islets, were investigatedby divers using a transect/quadratmethod, and classified in terms of the percentage of living coral cover on the reef crest and slopes. - 38 -

The survey suggests that Philippine reefs are more stressed in comparison with other reefs surveyed in the Indo-Pacificregion. A greater proportion of Philippinereefs fall into the "poor" and "fair" (0-25 and 25-50 percent cover) categories,while surveysof reefs in the Indian Ocean and South Pa- cific show a distributionskewed towards "good" and "excellent"(50-75 and 75-100 percent cover). Nationwide, 32 percent of the sites surveyed were classified as poor, 39 percent as fair, only 24 percent as good, and less than 6 percent as excellent./l

3.20 Sources of Degradation. Not all signs of reef destructionin the Philippinesshould be uncriticallyascribed to human interference,as there are natural agents continuallyat work which can, and frequentlydo, result in reef destruction or obliteration. These include agents of biological destruction which bio-erode the substrate, such as fish and echinoid (starfish)grazers; bacteria, fungi, and algae that etch their way into it; and sponges, bivalve molluscs, sipunculans(worms) and polychaetes (annelid worms) that bore holes in it. Catastrophicmortality of corals through physical processes can result from uncommon siltation levels, excessive rainfall, and tropical storms. Storms inflict direct mechanical damage by high energy wave action. Storm waves uproot coral colonies, fracture and fragment them, and leave behind a bare substrateor rubble field. In some cases, corals which survive storms, will succumb to consequent changes in environmentalconditions. The decimation of live corals on the reef flat at Pescador Island (Cebu)by Typhoon Nitang in 1984 is one example of storm damage. However, the impact of soil erosion, destructivefishing methods, and coral mining are undoubtedlythe most serious sources of degradation.

3.21 Siltation. The authors of 1976-81 survey of coral reefs pointed to siltation due to forest denudationas one of the major sources of coral degradation in the Phillipines. Quantitative data on the debilitating effect of siltation is unavailable,but turbidityis apparent in nearshore waters. Siltation probably has the greatest aggregate effect on living coral in coastalwaters. As sediment load is a function of the size of the upland drainage basins and state of deforestation, one would expect stressed reefs to be located near to the rivers wh'ch drain the major basins: Cagayan, Mindanao, Agusan, Pampanga, Agno, Abra, Pasig-Laguna, Bicol, Abulug, and Tagum-Libuganon. (Only a few extreme cases could be confirmed from SPOT satellite observation.) In some of the most extreme cases, the siltation is associatedwith outfalls of mine tailings - e.g., the Atlas and Marcoppermines, where the sedimentationhas entirely buried coral over large areas. Marcopperoperations were temporarilyshut down in 1988 by DENR order due to protests fr)m local fishing communitiesover this issue.

3.22 In only one instance has the process of degradation through siltationbeen documentedas it occured: a study of Bacuit Bay in northern

LI As the site sample was heavily biased towards the Western Visayas and western Luzon, to the virtual exclusion of eastern Luzon, Samar, and most of Mindanao, the sample averages may differ from national averages. Re- weighting of provincial averages using SPOT estimates of coral area alone reduces the percentage of sites in poor condition from 32 percent to 22 percent. Unsampled areas are generallymore remote or along less populated coastlines,hence may be in better condition. - 39 -

Palawan showed that sediment deposits largely tracable to the effects of recent logging operations led to a 50 percent loss of coral cover in a one year period on reefs near the outlet of a small river. Among the other significantfindings:

(a) some coral species are more resistant than others to sedimentation, so the main effect (barring complete smothering)is reduction of diversity rather than complete destruction (death of corals may occur due to reproduction of microbes in the sediment overlaying thr coral surface, rather than to lack of oxygen or sunlightuer se);

(b) fish diversity decreased significantly in parallel with reduced diversityand coverage of corals; and

(c) coral larvae were inhibitedfrom settlingby even a fine (< 1 mm) layer of sediment, so that an entire year's reproductive effort might be wiped out if the larvae (producedmainly in May, at the beginningof the wet season) cannot find a suitable settlement site during their competentperiod.

3.23 Blast Fishing. This is singled out by the survey authors as a second major cause of direct damage to coral in the Philippines. The coral rubble which results from dynamitingwas observed by ffARM mission members; and blast fishing occured before or during several diving excursions. In some areas, as many as two to six blasts per hour may be heard, each blast killing a circle of coral one to three meters in diameter. Blast fishing is ubiquitous throughout the archipelago, and in many communities is accepted by residents as a normal and natural fishing technique, although fishermen (who are aware of its destructivenessand illegality) tend to blame it on outsiders or perhaps to practice it in fishing grounds other than those of their own community. (However, in the Lingayen Gulf, for example, acceptance is facilitatedby the fact that other households in the community gain a share of any large catch.) Blast fishingmay be practiced by the poorest of fishermen, since the material costs may be funded by wealthy patrons in return for a share of the catch. The raw materials required are widely available - often the explosive is made from chemical fertilizer- with the exceptionof blasting caps, which cannot be homemade. It persists because, quite simply, in the short run it produces a respectablecatch with no more than two-thirds of the labor input of more acceptablemethods.

3.24 Cyanide Use. Death or stress to corals as well as reef fish occurs as a by-product of underwateruse of sodium cyanide (NaCN),employed by tropical fish collectors to capture fish housed in the protection of coral heads. Cyanide was first used in the Philippinesin 1962 at Lubang Island, Batangas. Its use spread throughout the Philippines with the expansion of companies engaged in the tropical fish trade: from three companies in the 1960s to 35 companies by 1986. The Philippines is the source of three-quartersof the global tropical marine fish market, due to species diversity, low labour costs, availability of air shipment, and depletion in stock supplies from competing areas such as Florida, Hawaii, and other areas. - 40 -

3.25 Commonly, aquarium fish exporters supply the collector-divers with the cyanide for use with their squirt bottles. Dissolved sodium cyanide in the form of hydrocyanic acid is sprayed around the coral head and the estimated one-half of the stunned fish which are still alive are easily retrieved, while the rest die in-situ. Added to this is the estimated90% delayed mortality of the captured aquarium fish as they make their way along the chain of distributionfrom the Philippinesto overseas markets.

3.26 The higher mortality is managed by collectinga greater number of fish than needed, in anticipationof subsequent losses. Collectors using poison have a far higher collection success rate than those without. A BFAR research team has demonstratedthat, with repeated applications,the poison kills most hard and soft corals within three months of the appli- cation. These findings are corroboratedby former cyanide fish collectors who report that coral he&ds exposed to cyanide die within one week to one month.

3.27 Muro-ami Fishing. "Muro-ami"describes the coordinatedeffort of a group of swimmers who swim together in a line, scaring fish before them towards a bag net or gill net, using vertical scare-lines festooned with streamers. Each swimmer controls the surface end of the line, while attached to the bottom of the line is a stone weight or piece of anchor chain which keeps the line vertical and acts as a noise-makerwhen bounced along the bottom. The reef fish are driven into the net by the threat of the approachingnoise and sight of a "movingwall" comprisedof hundreds of streamers. It is the incessant impact of scare-line weights on the seabottomwhich break up the brittle hard corals.

3.28 A distinctionhas been drawn between the common near-shoreuse of muro-ami using small motorized bancas, and offshore practice utilizing large commercial vessels employing 205-300 youths. The former tend to inflict greater localized damage as t.heymay sweep the same area several times before lifting the gill net. By comparison, the offshore group sweeps an area once, although the area is more extensive. It is reported that the commercialmuro-ami fishing, officially banned in December 1986, is largely the province of a single businessman,utilizing 25 vessels and operatingout of southern Cebu. Most of the thousandsof families involved are reportedlyin debt to his company.

3.29 The impetusbehind adoption of the muro-ami tecbniqueis the high catch per unit effort it produces in a coral reef environment. In one survey, the catch per unit effort of municipal fishermen at Hulao-hulao using a variety of gear was approximately:spear gun, 1.0 I-E/man-hour; hand-line, 1.3 kg/man-hour;gill net, 2.8 kg/man-hour,and muro-ami, 142 kg/man-hour. At Selinog Island the catch per unit efforts of different gear types, averaged over the two monsoon seasons, show the same advantage to muro-ami: bamboo traps, 0.15 kg/man-hour;spear gun, 1.9 kg/man-hour; hand-line, 2.1 kg/man-hour;gill net, 6.8 kg/man-hour; and muro-ami, 52 kg/man-hour.

3.30 The damage to coral caused by muro-ami can be cut in half by replacingrocks with chain links as weights for the scare-line. However, the negative effects include the non-selective capture of a large pro- portion of marine life including juveniles and trash species which are - 41 -

corralled into the net. Reefs which can be sustainably fished with traditionalgear can easily be overfishedusing muro-ami.

3.31 Coral Mining _ad Harvesting. Little is currentlyknown with re- spect to coral mining for use in construction. Historicallycoral has been used as a source of building material for a number of purposes and projects such as tile-makingaround Cebu, as fill material for a runway extension on Pagasa (Thi-Tu) Island, Kalayaan Islands, and for other construction. In these instances of extensive coral removal, accelerated erosion of the coastlinehas resulted. The rapid breakdown and erosion of the western and southern portions of Pagasa Island is reported as a particularlyserious example.

3.32 The ornamental shell trade is closely tied to the stony coral trade. Harvesting of these items for export reached an estimated annual production level of 2,000 tons in the mid-1970's,but has apparently de- clined due to executive bans of 1977 and 1980 on the export of unworked stony coral. The current amount collected is unknown because it is an illegal activity. However,it is claimed that 4,000 families residing in Bohol, Zamboanga City, Tawi-Tawi, Surigao and Palawan are active coral collectors. In the absence of enforcement,collecting and illegal shipment to Australia and New Caledonia from Mindanao and Cebu, and disguised shipmentsto Europe proceed largelyunchallenged.

Inshore Fisheries

3.33 ScoRe. Because the focus of this section is on management of coastal resources, the offshore commercial fishery has been largely excluded from the discussion, even though it represented 26 percent of total fish production in 1986. Inshore fisheries includes the "municipal fisheries" sector (combining marine coastal and inland waters) and aquaculture(freshwater culture of carps and tilapia,brackishwater culture of milkfish, tilapia, shrimps and crabs, fish pens and caged rearing of these and other species in open water, and maricultureof oysters, mussels, and seaweeds).

3.34 This focus crosses some statistical boundaries established for purposes of administrationand management. Fisheries in the Philippines are broadly categorizedas either "marine' or "inland". Marine fisheries are subdivided into "commercial"or "municipal"sectors depending on the scale of boat utilized in the saltwaterfishery. By definition,commercial fisheriesincludes the offshore resource insofar as it involves the use of vessels over three gross tons, but much of the commercial effort may be directed to inshore waters. The municipal or artisanal fisheries involves the use of boats of three gross tons and less, including the ubiquitous bancas, as well as fishing activities which do not require use of water- craft.

3.35 Major Species. As typifies a tropical fishery, there is a wide mix of species contributingto total landings. For example, there are 23 species showing production levels above 20,000 tonnes, whicl LuSeLAterac- count for 80% of annual catch. Landings of four species exceed 150,000 tonnes: milkfish, freshwatermolluscs, scads, and sardinellas. The bulk of the fish caught in marine waters is tuna, scad, sardines, mackerel, - 42 - slipmouth, anchovies,bream, snapper and perch species. Milkfish, tilapia and shrimp are the main species derived from inland waters and aquaculture.

3.36 Production. From 1973 to 1986, overall annual fisheries produc- tion increased from 1,205,000 tonnes to 2,089,000 tonnes, with approxi- mately half of the annual take coming from the municipal sector. Growth is ascribable to the municipal and aquaculturesectors which have increased from 640,000 to 1,072,000 tonnes and 100,000 to 471,000 tonnes respec- tively, between the years 1973 and 1986. (Note that figures for aqua- culture as defined by the BFAR can be misleading as "seaweed"production is included with shrimp, fish and shellfish). The commercial sector production has remaining relativelyconstant at 0.5 million tons per year during the past 14 years.

3.37 Most of Philippine production is consumed domestically as a staple food furnishing 55 percent of the animal protein intake of the population. The average per capita consumptionof aquatic products in 1982 was 40 kg. Fisheriesaccounts for 5.1% of GNP and annually contributesnet foreign exchange earnings of P 4.47 billion to the economy.

3.38 The 1985 estimated primary employment figure for the fisheries sector is 1,04U,000, or 3-4 percent of the national labor force, although these figures are unreliable, particularily for the municipal and aquaculture sectors. In addition, approximately 30,000 persons operate shore facilities or are engaged in fish drying. Reportedly municipal fishing accounts for 75 percent of the employment,while commercialfishing amounts to only four percent, and aquaculture contributes 21 percent. There are 464,000 municipal fishing bancas, compared with 3,100 licensed commercialvessels, operating in Philippinewaters.

3.39 Aguaculture. The significanceof aquaculture,in the context of this study, includes its role in the depletion of mangroves, potential competition with capture fisheries (fishpen culture), and also its potential, if any, as a high-growthsector in replacingany future declines in capture fisheries and providing employment to the coastal population. By weight of product (see Figure 3), the aquaculturesector is dominatedby brackishwater pond production (in 1985, 191,250 tons, or 56 percent of production excluding seaweed), followed by fishpen culture (29 percent), which is principallylocated in the freshwaterof Laguna de Bay. Milkfish (Chanos chanos) is the main product of brackishwaterculture, although it is declining in importance as ponds are converted to culture of the jumbo tiger shrimp (Penaeus monodon). Milkfish and also Tilapia nilotica are the major species cultivated in fish pens, freshwater ponds, and cages. Like conversionof mangroves to fishponds,fishpen constructionis supposed to require a BFAR license, although earlier surveys indicated that most fishpen operators had paid for licenses from municipal or lower administrativeunits and few had acquiredBFAR licenses.

3.40 Aquaculture has grown relatively rapidly, largely due to increased productivity. Nevertheless, production intensity is quite variable - average yield of fishpondsremain less than one ton per hectare, and it is believed that a significantproportion of fishpondarea is unused or underutilized. Most fishpond operators raising milkfish apply organic and sometimes chemical fertilizersand little else, whereas prawn culture is more feed-intensive (and more profitable). Fishpen raising takes Figure 3

Aggregate Fish Production, 1973-1986 2500 Aquacultur, 8 Municipal -XE Commercala 2000 -,Cmmrb .~~~~~-- Total

1500-

° 1000-

500

0- . I I * I - rU , I I I I

ON0 Os 0 Gb 3 43 @3 0 @3CO _3 _3 _3 _ Ye r

Source: 1986 PhilippineFisheries Profile, BFAR. - 44 - advantage of the natural fertility of Lake Laguna; however, supplementary feeding is common, even though its effects on yields are uncertain. The majority of fishponds and fishpens are under 10 hectares in size; in general, decreasing returns to scale set in at size ranges above 5-10 ha for fishpondsand 1-5 ha for fishpens.

3.41 BFAR statistics estimate employment in aquaculture on the assumption that one man-year of employmentis associatedwith every hectare of fishpond. This assumption seems contrary to available survey data on production technclogy: a 1974 scudy of samples of both fishpond and fishpen milkfish-raisingoperations indicated that the labor requirements in these activities were about one man-month and 150 man-days per hectare respectively(nearly 70 percent of the fishpen labor time was employed in surveillance,i.e., theft prevention). A 1983 estimate indicatedthat the value of productionper hectare of mangroves,utilized on a sustainedyield basis, was on the order of P 7,000 per annum, including wood products, direct harvest of fish, shrimp and prawns, crab meat, mollusks, and sea cucumbers, and indirect harvest from nearshore fisheries due to the presence of the mangroves. If about 70 percent of this represents net income (mainly returns to labor), then sustained use of one hectare of mangroveswould provide the eguivalentof about a man-year'searnings for a typically poor fisherman. whereas conversion to fishponds would provide onlv one month's earnings to labor.

3.42 Municipal Fisheries. The sustainable yield limits of many nearshore marine and inland water areas have allegedly been reached or exceeded in recent years through a combination of over-exploitation and resource depletion. The absence of an effective nationwide program of coastal and fisheries resource management has exacerbated the problem, which has arisen from:

(a) overcapacityor increasedeffort in the municipal fish- eries as measured by the number of full-time and part-time fishermen, and the number of boats operating with more efficientgear;

(b) use of destructivefishing methods with the dual effect of indiscriminateresource depletion and habitat destruction;

(c) widespread harvesting of undersized,juvenile or young fish which are captured prior to reaching reproductivematurity or even attainingadult weight; and

(d) pollution and siltation conditions in specific areas which are depressingthe natural levels of basic productivity.

3.43 Municipal capture fisheries production, although essentially stagnant since 1983, has not yet shown significantdeclines. Moreover, the alleged overcapacityor increased effort is largely hypothetical,and the evidence mostly indirect. For the municipal sector, there are no reliable time series statisticson, e.g., numbers of fishermen,quantity or quality of gear, or catch per fisherman, per boat, or per unit area fished. This has made it difficult to devise any meaningful fisheriespolicy. The one exception is suggestive, however: the number of bancas increased 26 percent between lV80 and 1985, and the proportion which was motorized rose -45- from 29 percent to 42 percent. Over the same period, the total municipal catch grew by only 17 percent.

3.44 On the other hand, there is statisticalevidence that catch per unit effort in trawl fisheries has significantly increased rather than declined over time (1961-81),even in the heavily-fishedManila Bay area. This is apparently an artifact due to technological improvement in gear during this time period - otherwise one would infer, for example, a 150 percent increase in fish density. Nevertheless,greater efficiency,due to finer or better designed nets, motorization,and changing proportions of various gears, has more than offset any declines in total catch which might otherwise have resulted from overexploitation. This in turn has made it difficult to "prove" overexploitation,or to make plausible quantitative estimates of existing biomass or sustainable yield levels. (It is interestingto note that complaints about declining catch per unit effort and over-fishingof coastal areas have been common in the Philippinessince the early 1950s, yet the total catch has increased several-foldduring the interim.)

3.45 However, the concensusamong Philippinesfisheries scientists and many officials is that the magnitude of marine landings have largely reached or exceeded the limits of sustainability. The concensus was formally assessed in a 1980 workshop of experts which used the "Delphic method"/l to estimate total potentialcatch by fishing zone, which was then compared with statistical records of actual catch. The conclusions were that total potential catch ranged from 1.45-1.85million tons per year (the present actual marine catch is around 1.3 million tons). Moreover, almost all trawlable soft bottoms were considered to be fully exploited or overexploited, whereas hard grounds, usually with extensive coral formations, were more often considered to be underfished (with the exception of areas such as the Lingayen Gulf and many parts of the Visayas).

3.46 Areas with apparent (but unproven) potential for expanded fisheries included the waters around Palawan and in the south and west of the Sulu Sea, the Tawi-Tawi area, the Moro Gulf, and most of the Pacific coast. Unfortunately,among these areas, the hard grounds which are less appropriatefor commercialfisheries than for municipal fisheries,are also distant from the main artisanal fishing populations. Fisheries on the Pacific coast are also limited by rough seas for half the year, and considerable technical advance might be necessary to exploit this area. Consequently,there is no basis for optimism about expansionpotential for marine fisheries,much less for municipalfisheries.

3.47 The most valiant attempt to quantify the state of demersal fisheriestook the "apparent"increase over time in fish biomass in Manila Bay as a lower-boundto a measure of the rate of improvementin efficiency of gear and skill of fishermenrqtionwide. Given this assumption, it was possible to use data on yield per unit effort from the trawl fisheries to estimate the downward trend in demersal biomass in Philippine soft-bottom fishing grounds from the 1940s to about 1980. The results suggest that by the early 1980s, biomass had declined to about 30 percent of levels in the late 1940s. Conventional fisheries theory suggests that maximum

LIJ, The Delphic method is a methodology employed by social scientists to obtain an expert concensus,particularily on uncertain statistics. - 46 -

sustainable yield can be obtained by reducing biomass to about 40-50 percent of its virgin or unexploited level; or higher, if the costs of fishing effort are accounted for. The result further implies that excessive fishingpressure on demersal resourcescosts society on the order of US$50-90 million per year, reflecting the reduction in biomass below optimal levels and marginal social costs of fishing effort in excess of optimal levels. In other words, reduction in effort - e.g., through reducednumbers of fishermen,boats, and gear, or changes in gear designed to reduce pressure on the resource - could increase total value-added in demersal fisheriesby these amounts.

3.48 Competitionfrom Commercial Fisheries. Measures were taken to legally exclude commercialboats (over threc tons) from municipalwaters in the early 1980s, because the competitionthey offered was a major cause of declining catches of artisanal fishermen. P.D. 704 restrictedcommercial vessels from areas under seven fathoms; however, the seven fathom contour is almost entirely within municipal waters (it usually lies about 0.5 km offshore), so this restriction has been ineffective. It also limited trawlers and purse seiners to fishing grounds more than seven km offshore. These forms of gear were responsiblefor much of the pressure on demersal stocks (trawlers alone account for about three-fourthsof the commercial demersal catch, and one-fourthof total demersal catch). However, there is little differencebetween a purse seine and a ring net, and by conversion of gear, commercial vessels also have been able to escape this ban. An effective ban on commercial fishing in municipal waters would have to prohibit use of "encirclingnets hauled by means of power block or winch" within at least 5.5 km of the shoreline. The partial exclusion of commercialtrawlers has contributedto the proliferationof "baby trawls", which are mainly dug-out bancas at or just under three tons with 2-5 hp gasoline engines. In the early 1980s, baby trawls accounted for an additional 5 percent of total demersal catch, but the proportion has probably grown rapidly. The commarcial trawlers use diesel instead of gasoline engines,benefiting from a major tax differentialwhich is said to account for their profitabilityrelative to smaller boats.

3.49 Mesh Size. The problem of excessivefishing effort is compounded by the problem of "growthoverfishing", that is, the depletionof small and innuaturefish. There is little incentiveto leave such fish alone, as small fish which 6re regarded as "trash f'sh" elsewhere,in the Philippinesare priced (per kg) almost as high as large fish. The technologicalcauses of growth overfishing include blast fishing (discussed above) and use of small-meshednets. The present legal minimum mesh size limit for trawlers, for instance, :s 3 cm (and was 2 cm until 197), but exceptionsare given when the targets are fish fry for fishponds and species such as shrimp -hich by nature are small, allowing widespreaduse of smaller mesh sizes. The fish population structure can be optimized to maximize biological yields by avoiding depopulationof juveniles up to sizes which vary by species. For fishing grounds elsewherewith faunal compositionsimilar to those in the Philippines,the estimated optimum mesh size is in the range 5-6 cm. It has been estimated that growth overfishingin the Philippines is reducing the potential annual harvest from demersal resourcesby about 20 percent. - 47 -

IV. INSTITUTIONALAND ORGAIZATIQM" INFLUENCES

4.1 This section has two main bjectives: (a) to review the objectives, interests and capabilitiesof the major governmentaland non- governmentalinstitutions involved in natural resource management in the Philippines,with a view to recommendingchanges which would increase their effectiveness;and (b) to identify the institutionalfactors which have contributed to natural resource degradation or which account for the success or failure of past and present efforts to improve resource management. Very recent initiativesby Governmentto improve institutional and organizationalimpact in the sector are listed in Annex 5.

4.2 In this report the word institution is used to include two distinct but complementaryconcepts: (a) institutionalarrangements which define property rights in resources and the rights and obligations of individualsand groups with respect to natural resource use defined in law or custom; and (b) organizationalarrangements which include the ordered groups of people who administeror use natural resources. This distinction may appear to be artificial, since the legitimacy of organizations is closely linked to the prevailing institutionalrules. However, maintaining the distinctionfacilitates exploration of the separableeffects of rights of access to resources and public and private managementactions.

Resource ManagementOrganizations

4.3 There are five major groups of organizationsinvolved in natural resource management in the Philippines: (a) agencies of the national government; (b) levels of local government; (c) non-governmental organizations (NGOs) or private voluntary organizations(PrOs); (d) user groups; and (e) donor organizations. This report is focused on (a) - (d). Although the findings of the report may have significantimplications for donor organizxations,their roles are not analyzed here. All these groups function under the umbrella created by the new Constitution and the operations of the recently-electedCongress.

4.4 The New Constitution. The 1987 Constitution, ratified by plebiscite on February 2, 1987, embodies explicit provisions for the protection and enhancementof the environment. These include a fundamental statementof policy that "the State shall protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature" (Article II, Section 16). In the management of the public domain, the Constitutioninstructs Congress to take "into account the requirementsof conservation,ecology and development" (Article XII, Section 3), insisting that "forest lands and natural parks shall be conserved and may not be increased or diminished, except by law" and requiring "measuresto prohibit logging in endangeredforests and watershed areas" (ArticleXII, Section 4).

4.5 The 1987 Constitution also calls for rural development and argarian reform (Article II, Section 21), promotion of the rights of indigenous cultural communities (Article II, Section 22) and the encouragement of non-governmental, community-based or sectoral organizationsthat promote the welfare of the country (Article II, Section - 48 -

23). In Article XIII on social justice and human rights, the State is pledged to enhance human dignity and reduce inequities through the acquisition,ownership, use and dispositionof its property. Specifically, there is a requirement for "agrarian and nataral resources reform" that gives land to the landless (Section 4), requires the participation of farmers and independent farmer organizations in planning, organizing and managing such a process (Section 5) and applies the principles of land reform to the disposition and utilization of lands in the public domain, subject to the prior rights of small settlers and indigenous communities (Section6). With respect to coastal areas, the Constitutionrequires that the State "protect, develop and conserve marine resources" (Article XIII, Section 7) and protect "the rights of subsistencefishermen, especially of local communities, to the preferential use of the communal marine and fishing resources,both inland and offshore" (Constitution,Annex 1). The new Constitution,therefore, gives explicit recognition to management of the environment, linking the use of natural resources to expanded productivity,sustainability and equity through open democratic processes and distributive justice. It is against this background of high and competitiveideals that government reorganizationfor natural resource and environmental management has been proceeding. However, the basic legislationgoverning natural resources and the environmentpredating the new Constitutionremains in place (Constitution,Annex 2).

GovernmentOrganizations

4.6 The Department of Environmentand Natural Resources (DENR). The DENR was created under Executive Order 192, issued on June 10, 1987 in order to consolidatemanagement of natural resourcesand the en-.Lonmentia: a single agency. Until 1987 there were at least 24 government agencies dealing fully or partially with environmental management and administration. Agencies other than DENR still share some responsibility for natural resources and the environment, and a particular need for coordinationexists between DENR, the Department of Agriculture (DA) and the Department of Agrarian Reform (DAR) with respect to upland and coastal area management. However, the establishmentof the DENR representsa major effort to create a natural resource and environmentallead agency.

4.7 The DENR is responsible for the conservation, management, development and *use of forest and grazing lands, mineral resources and other lands in the public domain. The DENR's principle responsibilityis for public forest lands, defined in PD 705 to includelands with a slope of 18 percent or more and mangrove forests of 20 ha or more. The line functions of DENR are being decentralized and will be managed through Regional Environment and Natural Resource Offices, located in regional capitals and headed by Regional Executive Directors (REDs). The REDs report to assistant secretariesfor field operations in Luzon, the Visayas and Mindanao,who in turn report to the Undersecretaryfor Field Operations in Quezon City. The Secretary of DENR is assisted by four additional undersecretariesfor policy and planning, legal services,natural resources management and environmentand iesearch (Chart 1).

4.8 The DENR has six staff bureaus: three for natural resources and three for environment. These include: (a) the Forest Management Bureau (FMB) comprisedof the former Bureau of Forest Development (BFD) and Wood - 49 . 0

Industry DevelopmentAuthority (WIDA),witlh responsibility for forest land use, forest management, reforestationand social forestry; (b) the Land Management Bureau with responsibilitvfor the survey, classificationand disposition of public lands; (c) Mines and Geo-Sciences Bureau with responsibilityfor terrestrial and marine geological surveys, mines and metal technology; (d) the EnvironmentalManagement Bureau, comprising the former National EnvironmentalProtection Council (NEPC), staff activities of the Pollution Control Commission axAdthe EnvironmentalCenter of the Philippines; (e) the Ecosystem Research and Development Bureau, which absorbed the former Forest Research Institute and the National Mangrove Committee and contains specializedunits for coastal zones, grasslands and degraded ecosystems,forests, upland farms and technology transfer;and (f) the ProtectedAreas and Wildlife Bureau, responsiblefor all national parks and wildlife sanctuaries, including those presently belonging to other ministries and bureaus. Through decentralization,former line agencies, such as the BFD, which wielded considerablepower over staff and budgetary resourcesprior to 1987, have been restructuredas staff bureaus, and their line functions are now assigned to regional operational staff. Through consolidation,other organizationswhich formerly functioned as centers or commissions,such as the NPCC and the NPEC, have been made integral parts of the DENR.

4.9 In addition, several agencies or corporationsare attached to the DENR and report directly to the Secretary. These include: (a) the PollutionAdjudication Board which replaced the National Pollution Control Commission (NPCC); (b) the National Mapping and Resource Information Authority (NAKRIA) which becomes the central mapping and natural resource informationagency, as well as the major land classificationinstitution; (c) the Natural Resources Development Corporation, which will become involved in de,eloping and financing industrial tree plantations, agro- forestry ventures and the proposed stumpage sales system; and (d) the National ElectrificationAgency (NEA) which deals with aspects of energy policies,programs and plans not carried out by the private sector.

4.10 The DENR is currently in the midst of a complex and far reaching reorganizationwhich is attemptingto: (a) consolidateall major natural resource and environmental functions within a single agency; (b) decentralize staff from Quezon City to the regions and provinces; (c) devolve decision making from the Secretary to the REDs and below; (d) consult more actively with the public about policies, programs and projects; and (e) transform its image from thbt of a corrupt regulator to an enlightened developer. The broad parameters of this process are to shrink the DENR from approximately25,000 staff with 35 percent at the center and 65 percent in the field, to an initial target of approximately 23,000 staff with 15 percent at the center and 85 percent in the field (i.e. the staff of the DENR will shrink by 2,000 and 4,600 staff will be moved from central staff functions to field operations). There is no timetablefor implementingthese changes since movementson this scale must be ratified by Congress but, if they can be achieved, an intention exists to consider reducing the size of the central office even further to under 5 percent of the total staff allotment. A further challenge the DENR faces in its reorganization is that posed by the separation of "natural resources"from "environment." How DENR decision making will be organized to reflect these interests is not yet clear. - 50 -

4.11 Budget allocations for the Department/Ministry of Natural Resources, the forerunner of the DENR have declined steadily in recent years (Annex 3, Table 27). This declinewas comparableto that experienced by all rhe "agricu'tural"agencies in the Philippinesand was in response to the severe financial crisis that developed in 1983. Between 1981 and 1986 DNR's budget declined in real terms by 4.4 percent per annum. However, the appropriationfor 1987 representsan increase of 8.4 percent restoring the budget to its 1983 level but still short of the peak levels achieved between 1979 and 1982. If the appropriation for 1987 is implemented,it represents a positive step in implementingthe Government's recovery program which emphasizes agriculture and rural development but not a complete return to pre-crisis levels. As a consequence, the DENR appears to have expanded responsibilitiesand a budget below the peaks achieved 6-9 years ago which it hopes to employ more effectively through decentralizedoperations.

4.12 The Department of Agriculture (DA). The role of the DA is to support developmentby "providingthe policy framework, public investment and support services needed for domestic and export-oriented(agricultural) enterprises"according to EO 116 issued on January 30, 1987. The primary function of the DA is to "improve farm income and generate work opportunities for farmers, fishermen and other rural workers." In addition,the DA is required "to provide integratedservices to farmersand fishermen", to be responsible for the planning, policy formulation, regulation, execution and monitoring of agriculture programs, and to coordinatewith other publi.cand private agencies in matters affecting its plans, policies ana programs.

4.13 The organizationalstructure of the DA has seven undersecretaries reportirg to the Secretary of Agriculture (Chart 2). The undersecretaries are responsible for: (a) Policy and Planning; (b) Staff Operations; (c) Field Operations; (d) Attached Agencies, includingfour councils and eleven commodity boards and corporations; (e) Special Concerns; (f) the Philippines Coconut Authority; and (g) the National Food Auithority. The Undersecretaryfor Regional Operations is responsible for the Production Group, comprising four key staff bureaus (AnimalIndustry, Plant Industry, Soils and Water Management,and Fisheriesand Aquatic Resources) and field operationsin the 12 regions.

4.14 The DA has been in the process of decentralizing and regionalizingits operationssince 1978 when the National ExtensionProject was implemented to create ministry-wideregional offices under PD 1579. This required the abolition of the various bureaus at the regional level and their merger into an integrated service under the supervision of a regional director. The bureaus were retained at the national level but deprived of their line functions. PD 1579 also saw the attachment of the various councils, commodityboards and corporationsto the then Ministry of Agriculture. Further organizationalstructural change took place in the 1980s. In 1982 EO 803 provided for the establishment of the Integrated Area Management System for AgiculturalServices (IAMSAS) to coordinate and strengthen the delivery of government services to farmers in specific areas, and in 1984 EO 965 renamed the Ministry of Agriculture as the Ministry of Agricultureand Food (MAF). This also involved the transfer of the Bureau of Fisheries and Aquatic Resources (BFAR) from the Ministry of Natural Resources (MNR) and its conversion to a staff bureau. Similarly, - 51 - the Philippine Fisheries DevelopmentAuthority was transferredfrom MNR to MAP, and the Fishery Industry DevelopmentCouncil was abolished. In the Philippines, public ownership of the fishery is divided between the offshore resource directly controlled by the national government through BFAR and the coastal fishery which is assigned to municipalities. The boundary between these fisheries is set at three nautical miles from the shore. However, the enabling act, PD 704, grants only limited powers to municipalities, specificallymanagement of fish corrals, oyster culture beds, fry gathering, and licensing of boats under three tons. Remaining powers by default fall to BFAR.

4.15 Despite the Government'sefforts to consolidateand decentralize agriculturalservices, there is still a proliferationof agencies dealing with the same commoditiesand policy formulationand implementationremains commodity- and agency-oriented. Each agency pursues a specific concern with little regard for other units of governmentresulting in overlaps and conflicts. In addition, the regional and provincial base of operations remains weak since the planned integrationof the bureaus at the regional level has not been completed. The TechnicalDivision which is responsible for operations does not have a direct link with the field personnel and facilities needed to provide program and project services to farmers and fishermen. Field personnel in regular contact with the latter are expected to be generalists capable of dealing equally well with all aspects of farming systems, despite their prior training and experience as specialists. These and other flaws are the result of a process of reorganization and decentralization that was not planned in detail, resisted by the bureaus and is still incompleteafter almost a decade.

4.16 Approximately24,100 staff are employed by the DA proper, of whom 3,440 (14 percent) are in the central office and 20,640 (86 percent) are in regional and district offices. An additional 12,600 DA contractual employees and about 14,000 staff and contractual employees of attached agenciesbrings total employmentwithin the DA system to about 50,700. As with DENR, the budget of DA declined drasticallyin real terms between 1981 and 1984, a reductionof 40 percent, but recoveredmost of this in 1985 and 1986. The appropriationfor 1987 representsa significantgain for DA in line with the Government'srecovery program.

4.17 The Department of Agrarian Reform (DAR). Until 1987 the main function of the DAR was to implement the land reform program initiated by PD 27 issued in 1972. However, EO 229 issued in August 1987 instituted a ComprehensiveAgrarian Reform Program (CARP) on all private agricultural lands, regardless of tenure or commodityproduced, as well as for selected lands in the public domain. The objectivesof CARP are to: (a) expand the scope of agrarian reform to cover all agriculturallands includingtenanted and noa-tenantedrice and corn lands, idle and abandonedlands, sequestered and foreclosed lands, public and private agriculturallands; (b) accelerate the completion of the Operation Land Transfer Program under PD 27; (c) strengthencollaboration efforts among governmentagencies, and synchronize activities in the implementationof the CARP; (d) expedite the resolution of conflicts and issues on land titling, registration,land disputes and ownership; (e) promote the organizationof agrarian reform beneficiaries and all forms of cooperativesserving as channels of support services to ensure greater productivityand higher farm income; (f) provide specific investmentopportunities, alternative employment, and other incentives for - 52 - landowners affected by agrarian reform; (g) implementan agriculturalland tax scheme that will prevent land hoarding and/or speculation;(h) improve the data base system to enhance the c.;apabilitiesof agencies in implementing the CARP; and (i) improve administrative and technical capabilities at the various structural levels of the organization.

4.18 Republic Act No. 6657, signed on June 10, 1988, cleared up most of the questions left unsettledby EO 229. For example, it stipulatesthat a landownermay retain not more than five hectares plus three k.ectaresfor each of his heirs provided that the latter are at least fifteen years of age and actually tilling or directly managing the farm. This applies to A&D land - public lands not classed as A&D (more than one-half of the land tc be covered by CARP) will fall under DENR's ISF program, and beneficiarieswill receive stewardshipcontracts (CSCs) rather than titles. DENR will be responsiblefor the provision of CSCs, and DAR for provision of titles. Responsibilityfor the provision of support services in all agrarian reform areas (technology transfer, marketing, and credit) is distributedamong DA, the Departmentof Trade and Industry (DTI), Land Bank of the Philippines (LBP) and other financial institutions,while provision of infrastructureis the concern of the Department of Public Works and Highways (DPWH). DAR has the difficult task of overall coordination of these activities (see also para. 4.31).

4.19 The CARP will cover an aggregate area of 10.3 million ha to be distributed to 3.9 million farmer beneficiaries. Implementationis to be in three, not necessarilysequential phases: Phase I, covering 1.5 million ha of rice and corn lands, idle and abandoned lands, voluntarily-offered, surrendered or sequestered agricultural lands, is targeted to benefit 765,000 farmers; Phase II, covering 7.5 million ha involving public A&D lands, lands under agriculturallease, resettlementares, ISF areas, and private agriculturallands in excess of 50 hectares per landowner, is to benefit some 2.7 million farmers; and Phase III, covering 1.4 million ha, mainly of the remainingprivate lands in excessive of retention limits, is to be distributedto some 0.3 million farmers.

4.20 In anticipationof CARP, the DAR has been reorganizedas shown in Chart 3. The Secretary is assisted by four undersecretaries: for Policy and Planning, Legal Affairs, Operations, and Finance, Management and Administration. In addition, there are twelve assistant secretaries,one each for Planning and Project Management, Policy and Strategic Research, Finance, Management and Administration,Support Services, Legal Affairs, Legistlative Affairs, and three each for Field Operations and Agrarian Reform AdjudicationBoard. Like DENR and DA, the DAR is decentralizingand is creating office teams in municipalities,in order to (a) increasepublic participationin decision-makingat the local level; (b) adapt the program to local conditions,based on the expressedneeds of beneficiaries;and (c) increase the level of responsibilityof DAR employees and local community leaders in program implementation.

4.21 The National Irrigation Administration (NIA). The NIA was an operating division of the Bureau of Public Works before it became a separate government corporation in 1963. The NIA is responsible for the planning construction,development, and operation and maintenance of all national irrigation systems. It also has the authority to supervise and administer temporarily all communal irrigation systems (farmer/user- - 53 -

operated systems) which have been constructed,repaired or improved with public funds. In addition the NIA has responsibility for watershed management in special areas, includingparts of the Pantabanganand Magat Watersheds. However, these represent unusual departures for NIA which generally manages water frcm reservoirs, rivers and underground sources without responsibility for catchments or recharge. Administrative responsibility for upstream and downstream water resources is typically separate.

4.22 National Economic Development Authority (NEDA). The prime functions of NEDA are macroeconomicplanning and monitoring and evaluation of development. NEDA is a central agency of the national governmentbased in Metro-Manilawith 12 regional planning offices. All official foreign- funded projects require NEDA approval. Current policy requires NEDA tc devolve some of its central authorityto the regions in order to strengthen regional developmentplanning and budgeting. Regional development plans will in future be prepared in the regions, a share of the national budget will be transferred directly to the regions and regions will be empowered to make decisions over larger financial outlays without reference to Manila. For example, in Public Works and Highways, all contracts over P500,000 were formerly referred by regional directors to Manila, whereas now, at the urging of NEDA, the ceilinghas been raised to P3 million. To implement this policy, the regional staff of NEDA will be doubled over the next 3 years and the Regional Development Councils, which act as NEDA's regional boards, will be streamlined. They will be reduced in size to a maximum of 30-70 members, have private sector membership of 25 percent and be supported by NEDA's strengthened regional staff. Beginning in the Marcos years, NEDA became involvedin project implementation. During 1987- 88, NEDA acquired temporary responsibilityfor IntegratedArea Development Programs (IADPs, now transferred to the authority of the Regional DevelopmentCouncils) and began audits of foreign-fundedrural development projects to reassess their objectives, strategies and relative efficiencies. While NEDA's economic planning capabilitiesare extremely strong, its capacity to integratenatural resource and environmentalissues into macroeconomic planning at the national and regional levels remains underdeveloped.

4.23 Local Government. Local government in the Philippines embraces those levels of government from the provincial, to the municipal and barangay levels. These levels of local government are headed by elected representatives (governors, mayors and barangay captains) who convene provincial,municipal and barangay developmentcouncils to plan and oversee developmentprograws and projects. The importancoof local governmentsto natural resource management stems from: (a) their closeness, and the closeness of their constituentsas resource users, to the issues posed by resource degradation; (b) their lack of legislative control over most of the natural resources within their boundaries; and (c) the personnel and financial resource limitations they face for planning and implementing development. Local government expenditures have stabilized at a level equivalentto only 10-12 percent of rational expenditures,and an excessive proportion of local expenditureshas been based on funds transferredfrom the national government and in response to decisions made in Manila. The inabilityof local governmentsto raise revenues for their own purposes and their lack of influence over the management of natural resources has made them ineffectivepartners in the developmentprocess at a time when more - 54 - responsive local management of resources has been demanded. The current trend towards decentralizationof government to the regional level has been handicappedby failure to address the absence of either a revenue base or management infrastructureat the subregional,i.e., local governmentlevel.

Non-GovernmentalOrganizations

4.24 NGOs have been active in the Philippinesin various forms since Independence. Both religious and non-religious groups, with and without foreign assistance, have been most active in the fields of relief work, formal and non-formal education and health but more recently NGOs have proliferatedin areas of economic development,environmental conservation, human rights and social justice. NGOs have become a featureof development in the 1980s for several reasons, including: (a) a growing willingnessby the Government to strengthen and rely on private sector institutions generally; (b) the perception that NGOs can be effective in reaching the poor; (c) a sharp decline in public developmentresources, necessitating a search for more cost-effectivealternatives; (d) the realizationthat NGOs mobilize significantvolumes of resources from public and private sources; and (e) recognitionof the capacity of some NGOs to carry out programs at local, regional or national levels.

4.25 NGOs have generallybeen described as representingthree types, or levels of concern: (a) NGOs offering relief and welfare to individuals or families in response to immediate crises by providing essential goods and services; (b) NGOs sponsoring small-scale, self-reliant local development to villages or neighborhoods by teaching and supporting management over the life of a project; and (c) NGOs facilitating or influencing the strategic management of development regionally or nationally by addressing institutional or policy constraints systematically. While roles remain for NGOs of all three types or levels, it is clear that scope for NGO operation is significantlybroader today than a decade ago.

4.26 In the Philippines NGOs of all three types exist, and their identities may be found in recently published NGO directories. Their potential importancein natural resourcemanagement cannot be over-stressed because not only do they perform a variety of roles effectivelybut they are accepted and encouraged to participateby government. Some bilateral aid agencies, such as USAID and CIDA, have successEullydeveloped major componentsof their Philippinesprograms around NGOs. The principal roles played by NGOs in natural resource management in the Philippinesare found in: (a) advocacy of the rights of the poor and under-represented;(b) community mobilizationand organization; (c) capacity building and skill development; (d) participatoryresearch and extension; (e) provision of access to resources; and (f) the provision of linkages and communication among NGOs and between NGOs and governments. However, the popularity of NG¢s also presents some risks. For example, as NGOs become conduits for increasingamounts of public funds there is a risk that they will lose some of the independence and freedom of action that made them credible, effective and attractive to beneficiary groups in the first place. Also the cost-effectiveness of NGOs may be based more on anecdotes than substance, as their capacity for monitoring and evaluating their own performance is limited. NGOs also cover all parts of the political - 55 - spectrum from right to left, influencing their attractivenessto donors. Most importantly,the current demand for NGO services significantlyexceeds the supply. Under these circumstances,existing NGOs may be tempted to expand and over-commit themselves, thereby lowering their effectiveness, and governmentsand donors may be unprepared to support the organizational expansionof NGOs to serve larger numbers of clients. A significantnumber of outstandingNCOs have also evolved around the activities of a single dynamic and influentialperson. When this person ceases to participate in NGO affairs, the effectivenessof the NGO may decline. However, despite these risks, NGOs have clearly demonstratedtheir comparativeadvantage in a number of important areas of natural resource and environmental management in the Philippines. Moreover, there are NGOs in the Philippines capable of assisting other NGOs expand their competence through the provision of training and other forms of support, e.g., PhilippineBusiness for Social Progress.

4.27 User Groups. User groups or organizationsof beneficiaries represent an important subset of NGOs who play a very significantrole in natural resource management in the Philippines. The most important and best documentedof these are water user associationsincorporated to manage communal irrigation systems. These average approximately100 ha in area, cover more than 0.5 million hectares in total and equal in total service area the national irrigation systems. While development of user groups to manage upland and coastal area resources is a more difficultchallenge, effective examples do already exist and the role of user groups in these areas is bound to expand. Centralized, service-deliveryapproaches to benefiting the rural poor have frequently failed largely because of: (a) their limited reach; (b) their inabilityto sustain necessary local action; (c) their limited adaptability to local circumstances; and (d) their creation of dependence. For these reasons, greater participationby user groups in planning and implementationof sustainable development at the local level is desirable. Current Government policies favoring decentralization and devolution are opening opportunities for active involvementof user groups in resource management,and the organizational skills needed to form or develop such groups can be found in the educationaland NGO communities.

OrganizationalIssues

4.28 At the national level, the most significant organizational issues relating to natural resource management stem from limited mandates, resource limitations,confusion resulting from reorganization,potential for corruption of the line agencies charged with managing natural resources, and the ineffectivenessof local governments and user groups which need to be empowered. The agencies most involved include the DENR, DA and DAR and the issue of mandate has two main aspects: (a) changing roles; and (b) overlapping responsibilities. With respect to changing roles.,the predecessorof DENR (MNR), from the time of its separation from the Ministry of Agriculture in the mid-1970s, consistently viewed all aspects of management of the public forest land as its exclusive respo.-ibility. As a result, an enormous amount of energy has been expended in resisting the efforts of other agencies to enter its enormous 'territory' and flirting with the provision of a range of services to upland people that foresters and engineers are ill-equipped to provide. - 56 -

Furthermore,while the need for the DENR to transformitself from an almost exclusively regulatory body that raises revenues and manages forests, minerals and, until recently, fisheries to a developmentalagency has been recognized,very little energy has been devoted to understandinghow such a transformationcan be achieved and making it happen. This process has now been started but in a sovewhat ad hoc way.

4.29 OverlaRRingresponsibilities refers mainly to the DA's lack of involvement in the uplands where one-third of the population lives dependent on rural occupationsfor most of their welfare. Within the DA, the charge to be developmentalhas existed for a long time but attention to upland development was precluded, outside a few special projects, by authorityvested in DENR under the 18% slope criterion. In addition, the DA has chosen for so long to emphasize commodity programs for irrigated lowland agriculture that its ability to say useful things about agriculturaldevelopment in rainfed hilly lands is severely limited. If lowland agriculture can be characterized by homogeneity of soils and climates, control of productionthrough irrigationand mechanization,high energy inputs and a small number of major commodities,upland and rainfed agriculturecan be characterized,in contrast,by heterogeneityof growing conditions, limited control of production, low energy inputs and a large range of major and minor crops. In addition, lowland crops are typically annials grown as monocultureswhose productionis increasinglyunrelated to livestock systems, while upland crops are most often grown in polycultures that may include both annuals and perennials, whose production is more closely linked to livestock as sources of manure. As a consequence, understanding upland agriculture systems requires very different perspectives and skills from understanding their better-studied lowland counterparts. The DA as never chosen to invest heavily in understanding upland agriculturaltechnologies and upland farmers are left without access to a research and extension system.

4.30 The Aquino Governmenthas insisted that national governmentbe more decentralized,that decision-makingbe devolved to a greater degree than before, that local governmentsassume a more important role, and that the process of public policy-makingbe participatory. There remains an imbalance of resources and decision-makingauthority with too much at the center and too little at the periphery. As a consequence, most line agencies are undergoing processes of reorganization to meet these requirements. These reorganizationsare to involve significantmeasures of both decentralizationand devolution,putting more resources and decision- making power into the hands of regional,provincial and district managers. In the case of DENR, DA and DAR, only the initial stages of reorganization appear to be planned. Most importantly,if the principle that form follows function is to be applied, a great deal more energy should have been invested in identifying the functions of these agencies before defining their new organizationalforms.

4.31 It is important for these agencies both individually and collectivelyto ensure coordinationof action over occupied public lands and lands suitable for settlement to avoid duplication or conflict. However, while it is apparent that the senior administratorsof public agencies are willing to cooperate in ways that would have been impossible in earlier days, administrativemechanisms to facilitate this are just beginning to be put in place. Good examples of progress include the - 57 - clustering of departments in Cabinet concerned with rural development and the implementation of population policy, the memorandum of agreement between DENR, DA and DAR to implement the CARP, and the specification within DENR of the authority and scope for action by regional managers. However, many more actions like these are required to improve coordination and make decentralizedadministration fun-Letiont effectively. Unless these processes of administrativereform proceed further and faster, resource management agencies will be unable to carry our their new mandates and roles and reverse the tide of unsustainableresource use.

4.32 The resource limitations of national agencies take several forms, covering both personneland financialresources. Personnelresource limitations refer mainly to limitationsof type of personnel, skills and levels of skills since both the DENR and the DA appear not to lack adequate numbers of staff. Within the DENR there is an acute scarcity of staff who can deal effectivelywith people in public forests and the problems they pose in their search for more secure tenures and more productive production systems to generate livelihood. The ISF program contains a small nucleus of such people which can be built upon, but they tend to be junior staff, in need of training, experience and effective leadership. The program needs to be greatly expanded to match more accuratelythe scale of the task it faces, and the staff responsiblefor upgrading an expanded ISF program needs to be separatelyfirmly from that of the Forest Management Bureau to reflect a significantdifference in mandate, approach and necessary skills. Within BFAR, the same deficiency exists in relation to the artisanal fishery. Upland farmers and artisanal fishermen require certain specific services to improve their livelihoods sustainably. These services generally include: (a) community organizing services; (b) services to secure or improve resource tenures; (c) extension services to improve production and income levels; and (d) small-scale credit provision. In none of these areas are DENR, DA or DAR yet well equipped to serve their clients.

4.33 Financial resource limitationsaffect line agencies in several common ways, including: (a) lack of vehicles and/or fuel; (b) lack of communications;and (c) lack of daily and travel allowances. Particularly in the DENR, the combinationof a tradition of over-centralizeddecision- making and poor financial backing for field operationshas resulted in a staff tha- is not oriented or disposed favorably to field work. The lack of operational vehicles, fuel and maintenance systems means that professional staff have little mobility and become dependent on concessionaires to take them to the field. The lack of effective communicationssystems means that staff are often isolated in the field without recourse to advice or support. Poor mobility and poor communicationsbecome overwhelmingfactors in areas where personal safety may be put at risk or security is believed to be weak. Staff are unwilling to go to the field in insecure areas with the knowledge that they cannot return readily or call for support. The lack of operating funds for travel allowancescreates no incentiveto leave the office and travel into the hills regardless of the security situation or the availability of transport. These same factors mitigate against agriculturalstaff taking to minor .oads and tracks to serviceupland farmers. The staff of BFAR may be better off since most coastal communities are well-served by public transport systems on coastal highways that follow the settled shoreline. However, none of the main resource managementagencies has a strong field - 58 - traditionof working with upland farming or coastal fishing communitiesand this weakness is exacerbated by: (a) the security situation; and (b) the corruptionof the resource management systems.

4.34 The problem of the potentialcorruption of the line agencies is an issue which applies particularlyto the forerunnersof DENR, including the BFD and BFAR and refers to the public perception of favoritism and dishonesty in government over the dispositionof public resources. This includes both the explicit use of public resourcesas rewards and the abuse of regulatory power by officials. The reliance on rules and administrative discretion, rather than a proper pricing system for access rights to valuable resources, createa opportunitiesfor financial abuse at almost every step in the resource management process from inventory, to extraction, transport, processing and export. The sums involved can be significantlymore valuable than government salaries and allowances. With respect to the BFD, the public perception was of consistentlyhigh levels of secrecy and impropriety throughoutthe bureau. The current Government in general, and the incumbent DENR Secretary in particular, have made an issue of the need to maintain high standards of integrity. Recent senior appointmentsdrawing on people from outside the system, increasedsalaries, enhanced public awareness of the problem and greater transparency in operations, all contribute to this objective. However, the potential rewards to corrupt behavior are still very high and staffing and procedures in field operations have undergone few changes. Unless the system for allocation,management and regulation of resource use is first changed to reduce scope for administrativediscretion and increase mandatory resource use fees to levels commensuratewith economic rents, current programs of decentralizationwithin these bureaus may simply decentralizethe locus of corruption.

4.35 Power and authority in the Philippineshas traditionallybeen concentrated in the central government which stands at the apex of the administrativehierarchy. Until recently, decisions flowed unilaterally from national line agencies to the three-tieredlocal government structure of provinces (73), municipalities (approximately 1,600) and barangays (approximately42,000). These political subdivisionsare grouped into 13 administrativeregions with the machinery (RegionalDevelopment Councils) for coordinating sub-national government programs in each region. Governmentpolicy is to move increasingamounts of authorityand control to the sub-nationallevel, but actual devolutionhas been slow. The result is that local governmentsstill act largely as understaffedand underequipped implementorsof national programs.

4.36 If the Government carries through its plans for decentralization the capabilitiesof local governmentsat all levels must be strengthened. Currently, local governmentssuffer acute resource limitationsin personnel and finances. The areas where local government have received some strengtheningin the past include planning, infrastructuredevelopment and fiscal administration. Mobilizing local financial resources is still particularlyweak with almost total dependenceon the rea' property tax and transfers from the central government. However, revived support for all three areas is necessary if decentralizationis to be meaningful, combined with improved reliability and timeliness of inputs from central to local governments. Until local governmentsare empowered to plan and implement more at their discretion, the effectivenessof local governmentswill be - 59 -

checked and resource management will not be as responsive to local developmentopportunities and constraintsas it should be.

4.37 Current policy also encourages more effective collaboration between government and private organizationsto improve natural resource I management. Private organizationsinclude private corporations, private voluntary organizationsand user groups. Since corporate and user groups are frequentlythe agents of resource degradation,effective collaboration is extremely importantif it can lead to change. Some private cornorations in the Philippines such as PICOP have been inr.ovativeand exemplary in their relationswith governmentand resourceusers but most have not. Lack of effective control by agencies of central government has made private * corporations the Al facto managers of many public resources, and private ! corporations with the potential to contribute to resource conservation, such as t:rough contract reforestation,have only recentlybeen identified.

4.38 Non-zovernmental organizations are already active in the Philippines in natural resource management in communities on forest lands and in artisanal fisheries both independently and in association with government,as in ISF. NGOs have demonstratedtheir capacity for community organization,advocacy of community positions and extension of effective low-cost technologies. However, there are limitednumbers of NGOs directly active with projects in the field or with the strategic capabilities necessary to serve and strengthenother NGOs. Since much of the process of resource degradation in the uplands and coastal areas involves the subtle underminingof the resource base by poor people in search of a livelihood, i.e. a highly localized process, the failure to develop NGOs beyond their current levels reduces the effectiveness of conservation measures. Facilitationof local resourcemanagement can and does come from government but the most effective measures, in terms of sustained local capacity building at low cost, have been associated in the Philippines with NGOs working from the bottom-up, independentlyor in associationwith government agencies. - 61 -

Vl THE ECONOMICSQE PHILIPPINERESOURCE MANAGEMENT

Economic Costs Qf Degradationand Degletion

5.1 In previous sections, the extent of remaining natural resources and the rates and sources of degradationor depletion in the Philippines have been described, wherever possible in quantitativeterms. The first purpose of this section is to consider, in economic terms, the extent to which environmentaldegradation and resource depletion "matter", that is, involve a significant cost to society. Usually attention of development planners is focussed on means of increasing production (involving exploitationor extraction of natural resources),which is valued in the national accounts (GNP or even Net National Product,which does account for depreciationof man-made assets) with no regard for decreases in value of natural resources (social assets) which result. Conventional national accounting gives no immediate credit for activities which conserve or restore natural resources,thereby facilitatingfuture production./l Since conservationalor restorativemeasures may involve immediate social cost with no apparent conventionaleconomic payoff, the purpose here is to draw attention to the future economic losses attributable to inaction which could offset the present costs of remedial measures.

5.2 Estimating the costs of degradationand depletion in the sectors of concern to this report is exceedingly difficult because these costs are not usually directly reflected in the marketplace. This is partly because costs are often external to the decisionmakingunits responsible for degrading or depleting activities- for instance, the downstreamcosts of soil erosion. Also, the natural resources are often public property, subject to nearly open access, rather than private property. Thus, whereas the degradationor depletionof the value of a private asset is often fully reflected in declines in the market sale or rental value of the asset, the costs studied here must be estimatedby more indirect means. This is in theory - in practice, there is so little quantitative data in the Philippines or elsewhere on the effects of degradation that meaningful calculations can rarely be attempted. A partial exception concerns the island of Palawan, where external consultants developed an "Integrated EnvironmentalProgram," including an environmentalmonitoring system, and also made the first attempt in the Philippines to apply benefit-cost analysis to a program of environmentalinterventions (see Box 3).

5.3 Future With Inaction. The net social benefits of any program of interventionsto protect the environmentmust be weighed against the net social benefits resultingfrom inaction,that is, in the absence of changes in policies or investmentsto remedy the effects of private exploitation. Both an interventionprogram and inactionproduce time streams of benefits. In general, if degradationand/or depletion is occuring, inaction produces a "front-loaded"benefit stream, larger in the short run and declining or

/I Alternative social accounting approacheswhich rectify this weakness have been discussed at a series of UNEP/World Bank sponsored workshops. Selected papers will be published in Y. J. Ahmad, S. El Serafy, and E. Lutz, eds., Environmentaland Resource Accounting and Their Relevance -t the Measuremet gf SustainablWeDeveIoRment (World Bank Symposium Paper Series, forthcoming). - 62 -

Box 3. Palawan IntegratedEnvironmental Plan

The Palawan Integrated Area Development Project (PIADP) is one of the several IAPDs under the general umbrella provided by the National Council on lntegratedArea Development (NACIAD). The project's goal is to promote sustainable economic development that Is responsive to both human and ecological requirements.The PIADP includes the Integrated Environmental Program (IEP), the overall goal of which is to maintain socio-economic balance between development and environmentalconservation. Regulatory, resource assessment and monitoring activities, as well as developmental activitiesare all included in key projects.

The IEP is based on a strategic plan with six priorities: (a) control of shifting cultivation on steep slopes; (b) rehabilitation of severely degraded catchments; (c) improved regulation of logging practices; (d) acceleration of lowland agricultural development to absorb population growth; (e) developmentof stable farming practices in the low hill zone; and (f) progressive integration of PIADP environmental activities with those of the Provincial Governmentof Palawan. IEP strategy distinguishes a "low hills zone' separating the coastal plain from the steeper and more fragile mountainous spine of Palawan, and argues that this area, now characterized by low population density and low-intensity agriculture, should be developed for agricultural cultivation to absorb immigration pressures and serve as a buffer protecting the montain areas. The IEP preparation documents are also notable for their attempt to apply social cost-benefit analysis in order to evaluate the economic impact of the environmentalprogram.

A strength of the program lies in the recognition of the need for a comprehensivedevelopment plan with a significantenvironmental component. Lack of local input is one weakness of the plan. The planning process is consultative but consultation is formal, between PIADP employees and representatives and officials of elected bodies. Links to local governmentsexist but are limited, and plans are generallyperceived to be the product of PIADP. The lack of resources of the line agencies responsible for both forests and fisheries limits enforcement of the regulatory component, effectively conferring the rights to regulate resourne use to the concessionairesand the fishermen. Corruption also interfers with the regulation process, hindering the implementationand success of projects. Some projects function only with foreign funding, which has decreased recently partly due to the failure of overambitious programs. Although repozts rate PIADP's overall impact as positive, negative environmental effects include: drainage problems resulting from irrigation;increase in shifting cultivationas a result of improvementsin communications; erosion of steep lands due to poor road construction; marine pollution due to developmentof ports and oil; and increasinguse of insecticides,herbicides and pesticides,especially DDT. - 63 - disappearingin the future. A useful interventionprogram is likely to involve reduced or negative social benefits in the short run, rising to higher levels in the future. The net benefit stream from a program which targets "sustainability"may to rise to an equilibrium level which is maintained indefinitely. Because the pattern of benefits over time differs as between inaction and most intervention programs. intertemporal comparisonsare required,typically based on an interest or discount rate.

5.4 Avoiding a discussion of the basis of the interest or discount rate in economic theory, it should be recognized that the discounting of future costs and benefits is normally based on the time preferencesof this generation - future generations are not consulted! That is not unreasonableas a descriptionof socioeconomicbehavior, but should have no normative implicationsfor social decisionmaking. In other words, this generation,individually or collectively,would be expected to favor a mix of programs and inactions ranked using a positive discount rate, i.e., favoring present income, whereas the next generationwould place no value on income streamsprior to its own tenure. Use of a zero discount rate or, more narrowly, the objective of "sustainability"may represent adequate intergenerationalcompromises, and legitimate, if not always feasible, social targets. Theoretical approaches which give explicit weight to future generationsare under development. However, until reliable data on the rates of degradation and their associated costs are collected, quantitative analysis cannot proceed much further than the following, rather speculativecomparisons.

5.5 The expected future trends under a "policy" of inaction are roughly as follows: the area of primary forest will continue to decline as 7-8 million cu m are extracted cach year. The residual,left in poor shape from the first cut, will be further degraded as continued migration fromt the lowlands and upland population growth adds to the existing pressure. By the year 2000, pezhaps one-fourthof the residualwill remain, but with little commercial value; the remaining area will be under shifting cultivation, grassland, and brush. Possibly 30 years from now, timber supplies will approach exhaustion, and fuelwood and puLpwood will be in short supply. Fuelwood demandswill long since have depleted the remaining mangroves, and the residual will have been converted into fishponds to partially offset the decline in the coastal fisheries, due to excessive pressure, reef dentruction,and growth overfishing.

5.6 The directionsof the economic consequencesare not difficult to evaluate, but the rates of change are unpredictable. There will be net benefit streams from extraction of lumber, fuelwood, and fish, some of which may remain unchanged for a few more years, but then decline. How fast and how far depend on the strengthof equilibriatingforces: if other parts of the economy show vigorous growth and draw labor away from the natural resource-based sectors, perhaps migration to the uplands and fishing pressure will decrease or reverse direction,reducing the rates of degradation and depletion. Perhaps growing relative scarcity of the resources will increase their unit values and work in the opposite direction, even inducing renewal activities. On the whole, however, stagnation or decline in sectors dependent on extraction and processing of these natural resources seems more likely. Against this "future with inaction,' it is possible in principle to weigh the net benefit streams resulting from interventionsdesigned to slow or reverse the process of - J% - degradationand depletion. These can be expected to promise more sustained future benefits as against greater costs (or lower benefits) up-front.

5.7 It is probable that the comparisonof direct benefit streams will indicate that many interventions are not privately or even socially attractive,parricularily if high discount rates reflectingthe poverty and capital-scar^ity of the Philippines are applied in weighting future benefits. Foi this reason, it is important to consider the indirect or hidden consequences of environmental degradation which are ignored in conventional social accounting: if they are valued and included in the calculus, are they significant enough to make some interventions substantiallymore attractive?

5.8 Soil Erosion. A major externalor indirectconsequence of forest degradation on sloping lands is an increase in soil erosion. Its relationshipto various upland land uses has been explored in Section II. Educated guesses con be made about the physical magnitude of (some forms of) erosion (see Annex 2), and it remains only to estimate the values of costs attributableto these magnitudes. However, this proves to be a major stumblingblock. The costs of soil erosion include upstream (on-farm)and downstream components. The former can be measured as the decline in the productivityof the soil as nutrients are lost and structuralproperties such as moisture retention are degraded. The latter includes the future reductions in agricultural and industrial production as reservoirs and channels usec for irrigation and power generation are silted up, and the losses to the coastal sector associated with damage to coras reefs from siltation.

5.9 There are two major difficultiesassociated with valuation of upstream losses: (a) only losses that result in changes in present or future production should be counted; (b) the productivity losses are the outcome of poorly-understoodbiophysical and geophysical processes, in which erosion is one of several influences. In the first place, it is necessary to evaluate which upland areas are now or will in the future be used in production. If no productiveuse is expected. there is no social loss. regardlessof the volume of nutrientswhich ma be "transferred"from unlands to the sea. One complication is that interventions may make productiveuse likely where it would otherwisebe improbable,in which case the interventionsshould be creditedwith the net benefits.

5.10 For areas which are likely to be used for production, it is then necessary to evaluate various influences on productivity. These include primarily soil nutrient status (availabilityof nitrogen, phosphorus, and potassium, as well as micronutrients)and moisture retention. Future soil nutrient status is determined by initial status, less losses of nutrient due to plant offtake and erosion, plus replenishment through use of chemical or organic fertilizers, decay of organic matter, and mineral weathering. The most common method of valuing the cost of erosion assumes that nutrients lost due to erosion will be replaced with the equivalent chemical fertilizers, in order to prevent a net reduction in nutrient - 65 -

availability.Ll The cost is quite significant: an estimate of the costs of replacing nutrients lost due to sheet erosion on open grassland in the Magat Watershed is about P 1,000 (US$ 50) per hectare per year. Applied to some two million ha of open grasslandsnationwide, which are now or will be required for cultivation (para. 2.38), this indicates that the gross loss to the Philippineeconomy attributableto grasslandsheet erosion alone is |n the order o US$ 100 million per year.

5.11 If this method of calculatingloss is to be trusted, there is no need to look any further to justify a massive public program to promote erosion control and/or to induce farmers to take the required measures. There is one point of uncertainty: the assumption that added chemical fertilizerequivalent to losses of nutrient to erosion is required in order I to prevent continuous decline in soil fertility ignores other, countervailing restorative influenv;-e.particularily decay of organic matter, natural weathering of minerals, and replenishmentof some nutrients through clearing and burning vegetation. After all, that is what fallowing is all about: presumably,within 6-8 years, original fertility levels are restored, in spite of ongoing soil erosion. However, as increasing populationpressure has led to decreased fallowingperiods and insufficient time for full recovery of land fertility, the net social loss due to erosion may still approach the magnitudessuggested above.

5.12 Downstream losses due to sediment delivery, which are only pertinent where there are downstreamstructures (or coral reefs offshore), are also measurable in principle. For example, the effective life of a reservoirwill be reducedby higher sedimentation,and agriculturalproduct attributableto use of its water or the industrialproduct resulting from hydropowergeneration will eventually disappear. If, as may often happen, the impact isn't felt for decades, use of a positive discount rate may make the present value of this social cost rather low./2 This could make it difficult to economically justify remedial measures with high up-front costs. Equally if not more serious, the link between upstream erosion and downstream sediment delivery isn't well understood (Section II). If upstream interventionsare employed, how long will it take for reductions in downstream sedimentationto result? In large watersheds, a matter of years may be involved, and again positive discount rates may reduce the present value of net benefits.

L/ This probably differs from the private calculus: the upland farmer may prefer to mine the soil, if he has no security of tenure or the option of moving on to other plots of land, or lacks the cash to purchase chemical fertilizer. If the soil profile is deep and fertile, and a positive social discount rate exists, it may also differ from the social calculus.

/2 For example, a feasibility study for a project to reduce upstream erosion in the Magat watershed claimed as potentialbenefits the extension of reservoir life by 21 years, valued at net benefits from irrigationand power generation of r 2.5 billion per year in years 50-71. The benefits unfortunatelyonly begin to be felt when silt and sediment fills up the "dead" (unusable)storage of the reservoir. However, if these benefits are discountedat a rate of 10 percent p.a., their present value would only be P200 million, compared to an estimated project cost of nearly P800 million. If, as other studies indicate, "live" storage is lost at an earlier stage, the discountedpresent value could be considerablyhigher. - 66 -

5.13 HydrologicalDeterioration. This encompassesthe effects on the hydrological regime of the inability of a degraded watershed to retain water, so that runoff is concentrated in volume and higher in velocity (para. 2.61). The upstream on-farm consequencesinclude moisture stress, leading to immediate reduction in crop yields. Downstream sediment delivery is increased due to channel scouring during peak flows, without the lagged relationship between upstream cause and downstream effect. Flooding and attendant damage may become more common. Availability of water during the dry season is reduced and flows may even cease, preventingdry season irrigationfrom run-of-the-riversystems.

5.14 In principle, all these effects can be measured and valued; in practice, in the Philippines they are not. Compared to soil erosion, hydrologicaldeterioration has almost immediateeffects downstream,and the downstreambenefits of improvedupstream water retentiondo not suffer from a high discount rate. For the upland farmer, moisture conservation measures also have more immediately beneficial effects than soil conservationmeasures (many measures serve both purposes, but not equally well). If a short time horizon is a significant constraint to adoption, perhaps moisture conservationshould be a major focus of extension.

5.15 BiodiversityLosses. The reduction of species diversity due to contractionof forest arna and destructionor degradationof mangroves and coral reefs is not merely of concern to biologists - there is also an associated economic loss. An obvious component, but not necessarily the most significant,is the potential attractionwhich unspoiled environments and their complement of flora and fauna have for the tourist or recreation industries. Demand for the "services'of such facilities has far higher income elasticity than the products which are extracted in the course of degradation,and at present a high proportion of the income generated is foreign exchange. For example, the Philippine tourist industry in 1986 produced about US$ 647 million in total receipts, and this sum has grown at a rate of 17 percent p.a. since 1970, or 14 percent p.a. since 1980. Tourist receipts now rival log and lumber exports as a source of foreign exchange, and should soon surpass them. National parks and biological reserves in the Philippines now contribute little to these receipts, because of their poor development; but the potential for future contributionis high.

5.16 The economic valuationof conservationactivities for the sake of preserving or increasing tourist and recreational attraction must be applied selectively to particular habitats and species. It is unlikely that preservationof diversityof bats, rodents, or snakes can be justified on these grounds. But targeted investmentsin preservationof a select assortment of habitats, including the few remaining upland, coastal, and offshore habitats presently in relatively pristine condition, and concentrationon species with high interest value for particular tourist groups (e.g., bird watchers, reef divers) or of general popular appeal (large mammals or endangeredspecies) can easily be economicallyjustified on this rationale. It should be kept in mind that preservationof habitats large enough to sustain large birds or mammals will also suffice to sustain many smaller species.

5.17 Use of the tourist rationale for preservation of species diversity has several implications: (a) investmentin facilities designed - 67 -

to give tourist access to preservation areas is just as necessary as protective investments; (b) employment and income generation from the tourist industry is an essential 'ncentive for the cooperation of local populations,whose present incomes may depend on degrading activities; and (c) the profits of resort operators often depend on the preservation of the habitats which attract their customers, which suggests a strategy of involving such operators in habitat management on a contractual basis. Political support for mairntenanceof a good national park system is also difficult to build if the facilitiesare not accessibleto the public.

5.18 There is an additional, incalculable economic payoff to preservation of species diversity - the pool of genetic resources has substantial potential for eventual buman economic benefit. The economic value is expressed mainly through sa'lesof products of pharmaceuticaland biological engineering enterprises which depend on screening of natural populations to identifynew chemicals or genetic capabilitiesof practical utility. It has been estimated that one in four medicinal and pharmaceuticalproducts owes its origin, in some way or another, to plants and animals of trcpical forests. The commercial value of these products worldwide reportedly exceeds US$ 20 billion per year. Tropical forests (especially lowland forests) and coral reefs both are compressed environmentsin which the struggle of many species to survive has resulted in the evolution of unique biological responses to competitive pressures. Economic interest mainly relates to a subset of plant, insect, coral and other benthic species. In terms of pharmaceulogicalapplications, extracts from organisms are used directly as drugs, or as materials in drug synthesis; they offer templates for chemical synthesis of drugs; or serve as research aids for drug and biomedical research and development. There are also many examples of uses of biota from these environmentsin other sectors - e.g., insectsas natural predatorsor plants as genotypes for new crops in agriculture;or extractionsfrom "minor forest products" such as essential oils, edible oils, gums, resins, latexes, waxes, tannins, dyes, etc. used in industrial processes or products. Current economic significance reflects only limited exploration of potentials among the thousandsof species found in tropical forests and coral reefs.

5.19 A problem associatedwith the genetic pool justificationis that benefits may be largely external to the Philippines- rDirectprofits may accrue to internationalcompanies, and consumer surpluses to international consumers, at least as readily as to Philippine ones. Thus, preservation of the rich genetic pool found in Philippine rain forests or coral reef habitats has an option value for mankind in general and certain companies in particular. This justifies a significant transfer element in internationaldonor support of biodiversitypreservation, and ways of capi- talizing on this should be explored.

5.20 Mangroves. Coral Reefs. and Inshore Fishing. In the case of the upland farmer, the degrading effects of soil erosion may have sufficient direct economic impact on the farmer's own livelihood to provide an incentive to induce adoption of some remedial measures. In the coastal zone, however, it seems that degradationis not very costly in the short run to the degrader - in general, it increasesprivate efficiency - but there is a negative external impact on the livelihoodsof others, present and fut.2re. Quantitative evaluation of the external impacts is almost impossibleat present, so economic logic must be applied indirectly. - 68 -

5.21 One approach to the problem is to ask whether any of the sectoral activities are in fact adding to net social product for the present and/or future generations. A tentative answer is that past conversion of mangroves to fishpondsmay have made a contribution,in that the value of the total annual productionsustainable by coastal resourcesmay have been thereby increased,and the cost of production reduced. This answer rests on the observationthat fish farming involves a new input to the fisheries sector - feed based now on largely waste products such as animal manures and crop byproducts - as well as opening up the (largely unexploited) potential to benefit from industrial inputs such as chemical fertilizers; and at the same time a reductionin harvestingeffort through concentration of fish biomass into a small and fixed area. Also, the estimated loss to nearshore fisheries through mangrove conversion to fishponds is under 500 kg per ha of mangrove, less than half the yield of fishponds,which still has great potential for increase. Brackishwater fish farming currently accounts for total annual fish and shrimp production of about 207 million tons, roughly equivalent to estimated total production of coral reef fisheries. 3ince productivityof reef fisheries are also constrainedby other factors, such as the poor condition of reefs, growth overfishing, destructivepractices, etc., it seems unlikely that reconversionof fish ponds to mangrove swamps would have a major positive impact on coastal fisheries,even if regenerationtime is disregarded.

5.22 However, this does not imply that (a) mangrove swamps were the best locations for brackishwaterfishponds, or that (b) further conversions are socially desirable (see below). Moreover, the impact on total employmentof fishpond conversionsappears to have been distinctlynegative (para. 3.41), hence the income distributionhas been worsened.

5.23 It is doubtful that even non-destructiveimprovements in private efficiency in the coastal fisheries can increase social efficiency (by redicing effort per unit catch), as the biological maximum harvest of inshore fisherieshas apparentlybeen exceeded,and further improvementsin private efficiencyare likely to reduce total harvest as well as worsening income distributionand employmentopportunities in the sector. This would not necessarily be so if significant growth in employment and income- generation outside the sector could be expected. It follows that reduced effort, particularilyinvolving destructive technologies, is the only path to increased social product in the inshore fisheries.

E_onomic Evaluation of AlternativeForms of Intervention

5.24 There has been insufficientevaluatiorn of the costs and benefits of various forms of interventionsin the uplands or coastal area, in the Philippinesor elsewhere,to justify strong recommendationsof any particu- lar packages of interventionsfor private or public implementation. Never- theless, there is mileage to be gained by examining some of the discrete choices among policies and technologiesproposed for dealing with the prob- lems of degradationand depletion. Aside from the relative magnitudes of net economic benefits, the impact on the distributionof incomes (that is, the poverty or employmentproblem) needs to be identified.

5.25 Management of Productive Forests. DENR policy towards the remaining dipterocarp forests is based on a strategy of selective logging - 69 -

combined with regeneration using the original species. In principle, restrictionson allowablecuts (AACs) and site maintenancerequirements are supposed to lead to sustained yield forestry. However, in practice sustained yield forestry has been neither enforced nor enforceable in the Philippines. Contributingfactors have been over-optimisticassessment of sustainable yields (reflected in high AACs) and excessive dependence of DENR field operationson logger cooperation. Logging concessionaireshave no reason to support the long rotations, highly selective cuts, and slow- growing mix of species associatedwith genuine sustained yield forestry - even though the second and subsequent cuts would be of high-qualitytimber, thaeirvalue discourted to the present at prevailing rates of interest is trivial relative to the first cut. It is in the logger's financial interest to have a quick rotation of lower value trees - implying clearcutting and reforestation following an industrial tree plantation approach. It is also in their interest to maximize (or evade the limits of) the AAC. Th. incentive to do so is increased by high fixed costs arising largely from Government requirementsto maintain local processing facilities.

5.26 Is it also in society's economic interest to log heavily (even clearcut) and convert primary forest to IT? or at least faster-growing species? In fact, potential use of land for ITP provides no justification for more rapid logging, as ITP expansion in the Philippinesis constrained by lack of capital, itnvestorinterest and managerial expertiserather than by shortage of suitable sites; and most suitable sites are already logged over, whereas most remaining primary forest is on steep, fragile and/or inaccessiblesites. Therefore the question boils down to how rapid should the rate of depletion of old-growth dipterocarp forest be? Conventional economics, consideringonly the interestsof the present generation (para. 5.4), would observe that the expected grow-thrate of the value of mature timber and other products in primary or regeneratingcut-over dipterocarp forest is very unlikely to exceed the present social rate of discount (10- 15%), hence merchantable resources should be harvested without social restraint,except where negative externalitiesoccur. This would, however, entirely deprive future generations of the opportunity to exploit the present natural resource base, and conflicts with the Government's Constitutionalmandate (para. 4.4).

5.27 If that mandate is taien to be the preservationof the remaining area of dipterocarp forests as presently constituted,it is arguable that the gnly reliable approach is to prevent any commercial logging (and avoid development of access roads). If (or where) commercial logging is unavoidable and some inevItabledeterioration of quality can be accepted, then a truly sustainable system is needed, implying much more selective logging practices than presently prevail. Greater selectivity, in turn, involves an apparent tradeoff between the cost of replacing harvested timber and the costs of access (especially logging roads and other infrastructurerequired for selective logging). The more selective the cut, the lower the costs of site restoration/replenishment(ranging from zero if the cut is selective enough to permit natural regeneration, to about $500 per ha for enrichment plantings under present harvesting practices. It is very unlikely that any semblance of the full tropical hardwood forest can be re-establishedon heavily cut-over land). A larger cut will also make land clearing under kaingin less costly, encouraging conversion to agricultural use. But, for a given volume of timber - 70 - extracted, more selective and more frequently repeated harvesting means more extensive initial investment in roads and higher maintenance costs, thus higher Mg front fixed costs per cubic meter of timber extracted and lower initial margins of rents/profits.Although the significanceof this tradeoff requires evaluationbased on case studies, it indicatesthat there is an added incentivefor loggers, who bear the cost of road construction but have evaded responsibilityfor site replenishment,to maximize, not only the total annual cut in a concession,but also the site concentration of that cut, in both respects to the detrimentof sustainability.

5.28 Reforestation Strategy. In view of the limited resources available with which to provide forests for future use, reforestation strategy should be based on benefit-costanalysis. Natural regeneration and enrichment planting of degraded forests are least costly approaches, and should have first priority. Replantingof deforestedareas is the most costly approach, and the least likely to succeed, particularilyon sites characterizedby poor or deterioratedsoils (see Box 2). If watershed protection is the primary goal, cheaper and more effective alternatives should be explored (para. 5.41). Where reforestation is regarded as essential, ensuring survival of plantings to maturity should be the major focus of strategy.Probably the greatest impedimentto reforestationis the threat which reforested public lands pose to the interests of existing settlers and potential encroachers (cultivatorsor ranchers, including those whose sole purpose is to establish a land claim), because reforestationreinforces the Government'sclaim on the land. Hence only an approach which is fully accepted by the local community is likely to succeed. This will involve livelihood assistance, and short-term assistance such as employment in reforestation programs will not be sufficient: once seedlings are established, the young growth generates little income or employment (and of course providesno food), so sustaining community incentivesto protect it is difticult and should be the focus of strategy. An approach to longer-termlivelihood assistance used by CVRP is to mix fruit trees with longer-maturing timber species in fixed proportions, creating earlier income flows to the local community. Also, fast-growingspecies for fuelwood (ideally fertility-restoringleguminous trees) should precede or be mixed with longer-maturing species. Intercroppingwith annual or tree crops should be supported, as well as interplanting of "minor" forest products like rattan. Phasing reforestation over several years to arrive at mixed age stands, and developing a community organization for management (including selective harvesting) of the maturing forest would also be essential elements. By implication, benefit-cost evaluation of reforestation projects should encompass the livelihood activities of the population with self-perceived claims on the land. This kind of "communityforestry" program should not remain something experimental,while most reforestation is carried out independentlyof the local community - rather, this should be the only acceptablebasis for future reforestationefforts.

5.29 Capital-Versus Labor-IntensiveForestr.y. Mechanized logging, as practiced in the Philippines,does more damage to the residual forest and terrain than labor-intensivemethods (Section II). It is encouraged by tariff exemptions for logging equipment. There is scope for labor- intensive harvesting in commercially "unproductive"or residual forests where mechanized extraction costs could not easily be amortized, in critical watersheds or fragile environments,and for reserves where highly - 71 - selective thinning or harvesting is necessary for conservationpurposes. These are appropriate candidate areas for the "community forestry" approach. Such methods may not prove technicallyfeasible for large logs in first-cut operations. More generally, compared to mechanized methods, labor-intensiveoperations have lower fixed costs but possibly higher variable costs, which would be consistentwith small concession sizes and more selective cutting. High labor intensity also translates into increasedemployment and income generationfor the local populatiorn,rather than rents for concessionaires.

5.30 Selection f Critical Watesheds. There is an apparent choice between the FMB approach,based on susceptibilityto erosion, and the NIA approach, based on importance of downstream water conservancy systems. Neither approach fully approximates an economic understanding of criticality,which might be stated as follows: a particular watershed should be classed as "critical" if the upstream and downstream,direct and indirect social benefits of a particular menu of interventionsto prevent or reduce degradationsufficiently exceed the correspondingsocial costs. Since "criticality" is operationally useful in prescribing land use practices and prioritizingpublic investments,the menu of interventions should in theory be watershed-specific- e.g.. remedial interventions if degradation is already serious, and preventativeinterventions otherwise. Moreover, criticality has degrees, and identification of a list of watershedsmerely approximatesa ranking.

5.31 Criticality depends on the outcome of social cost-benefit evaluationbut, because there is limited information,approximations based on "rules of thumb" may be used. This can provide considerableguidance on classification methodology. For example, it indicates that, ceteris 2aX_bus, (a) less degraded watersheds should be more likely to be "critical" than more degraded ones (prevention is usually cheaper than cure); (b) watersheds with high erosibil'ty potential should not be considered "critical" if no present or future production loss can be expected from erosion (contrary to the FMB criterion); and (c) small watersheds should have at least as much chance of inclusion as larger watersheds,l (contraryto the NIA criterion),since the benefit/costratio rather than She absolute size of net benefits is the proper ranking criterior.

5.32 Upland Farming. Experience in the Philippines indicates that upland farmers are there to stay - exclusion is difficult and eviction impossible on any scale. If upland cultivation techniques are a major source of degradation, then there are only two options for dealing with their practitioners - absorption of farmer!,into other occupations, or adoption of techniques which are less degrading. The former may seem impracticalor costly, but the investmentrequired to establisha family in a rural, non-farm occupation may be a good base against which to measure cost per beneficiary of projects to extend conservation techniques to upland farmers. Adoption of such techniques may be forced, subsidized, or unsubsidized. The issue of StewardshipCertificates (CSCs), which obligate the recipient to adopt some measures of protection on threat of cancellation,combine force and subsidy. Most Government or NGO-sponsored

LI Probably a greater chance: the link between upstream degradationand downst,eam damage is more direct and immediatein smallerwatersheds. - 72 -

programs appear to employ some measure of subsidy - e.g., seed, seedling and/or fertilizer distribution - to induce adoption. Instances of unsubsidized adoptions, often highly selective of techniques, are also observed, particularilyon the fringes of subsidizedprograms. These are almost never monitored, although they provide the best indicatiois of farmers'perceptions of utility. Or, as was observed at a CVRP development site, thefts of nursery stock demonstrate a strong demand for the technology.

5.33 Upland farmers in general lack land titles, cash savings, access to credit, and extension support. It is believed that lack of titles leads to tenure insecurity,hence a short time horizon (or strong preference for current over future income). In the absence of transferabletitles, formal or informal credit institutionsare reluctant to extend even short-term loans, and poverty dictates minimal investment in cash inputs. These observationsshould be qualified somewhat: where local tenurial systems are strong and enforceable even without legal sanction, farmers' lack of titles may not be an important constraint (the Banaue rice terraces were constructed under such conditions). In the Visayas, the CVRP experience has been t..atfarmers who have cultivated public land for decades feel their tenure secure enough to invest at least their labor in longer-term conservationmeasures. Titling also may be necessarybut not sufficientto induce more intensive cultivationtechniques where the surroundingland is still an open access resource. A rational farmer strategy in such cases would be utilizatirn of titled land for long-maturityuses such as tree farming, while additional public land is exploited for short-maturity crops.

5.34 Conservationtechniques can be introducedwithin the frameworkof rotational cultivationor involve a shift to continuous cultivation. They can be selected to emphasizelong-term or short-termbenefits for either or both environmentalconservation and farm income. They can target one or multiple problems - nutrient conservation and replenishment, moisture conservation,and soil or runoff prevention. In the Philippines,there has been little attempt to clarify the relationshipsbetween objectives, the technologies extended, ane the local physical and institutional environment;and there has been a marked tendency to adopt a single-package approach.

5.35 The package which has been most widely promoted, by NGOs and by Government through DENR's ISF program and lately DA's upland extension work, has been an alley cropping system developed and popularized by the SALT (Sloping AgriculturalLand Technology)Project of the Mindanao Rural Life Baptist Center in Davao del Sur. The SALT technologyinvolves growing annual and perennial woody crops on contour strips between one-meter-wide hedgerows composed of two rows of Giant Ipil-ipil (L. Leucocephala),a leguminousshrub the cut foliage of which serves as green manure or fodder. Over time, the soil b1iildupbehind the Leucaena hedgerows tends to form terraces. The recommended crop proportions of SALT plots is about 20 percent Leucaena, 25 percent woody perennials,and 55 percent annual crops.

5.36 The main advantage of the SALT technology is that it is an integratedpackage which addresses almost all of the objectives described above. It provides short-term subsistenceand long-term cash income; it reduces soil erosion and replenishessoil nitrogen. It is, however, a form - 73 -

of continuouscultivation, and this raises questionsabout how farmers are induced to make the transition from rotational to continuous cultivation: do they continue to practice rotationalor shifting cultivationof annual subsistencecrops while developing SALT plots? If not, how in the short run do they make up for the loss of nearly half of their annual crop area to Leucaena and tree crops? Studies have suggested that use of Leucaena leaves as green manure roughly doubles yields of annual crops like corn in the short run, but is this sustainablein the long run without commercial inputs of fertilizer? There are indicationsthat commercial fertilizers are applied to establishedSALT demonstrationplots, and it is obvious that there must be market access for the tree crops as well as to obtain fertilizers - to what extent does this limit farmer adoption? How much working capital is required to establish a mature SALT plot, and how is an upland farmer to obtain it? Answers to these questions await more comprehensivestudies of extension and adoption of alley cropping, which has apparently not been widespread although demonstrationsplots may be found in many parts of the Philippines.

5.37 Studies of the conservationeffects of SALT so far have compared it with kaingin farming, and not with the effects of other conservation measures. Results suggest that SALT does reduce soil erosion, although not compared to, e.g., conventional cropping of sweet potatoes, where the creeping vines provide cover and soil retention capability. On the other hand, SALT without inclusion of a high percentage of woody perennials appears to have little, if any, effect on rates of water runoff. Other drawbacks include the 20 percent area lost to hedgerows, and the reduced light penetrationand consequentlyreduced annual crops yield due to strips of woody perennials. Finally, the species of Inil-iRil promulgated throughout tk.ePhilippines was devastatedby psyllid infestation in the last few years, forcing a search for other leguminous species which could serve the same purpose. Presently madre de cacao (Glericidiasepium) is the most common replacement,but it must be propagatedfrom cuttings,which take a long time to collect, transport, and plant. Other promising species, being tested by the SALT team in Davao, include Flemingia congesta,Acacia vellosa, L. diversifolia,and Desmodiumsyroides.

5.38 Even if SALT or somethirg similar is the most appropriatelong- term model for upland cropping, there is a need to offer a broader menu of techniquesbased on an incrementalapproach to conservation- that is, the conservation objectives are to reduce erosion and runoff below current levels, but not immediatelyto a minimal long-term target. This has been the CVRP approach,which has had visible success in obtaining adoptions of some of the various techniques offered (Box 4). The point is that even "halfway measures" should result in high percentage reductions in erosion and runoff for each farm and, by inference, a major improvement for the watershed as a whole.

5.39 Consider first the rotationalcultivator who is interestedic. an immediate increase in annual crop yields with little or no cash costs: moisture conservationand fertility enhancementshould be the emphasis of technical extension, to provide the incentive for adoption. For moisture conservation, this could include contour plowing, between strips of unplowed ground left in cogon grass; mulching and/or minimal tillage practices; and greater emphasis on crops with good ground cover, like sweet potatoes. Intercroppingof corn with tropical legumes improves ground - 74 -

&z 4. The CentralVisavas Regional Project (CVRP)

CVRP is a Bank-supportedrural development project aimed at increasing productivityin upland and nearshore areas depressed by rural poverty and environmental degradation. This pilot project is implemented in the provinces of Cebu, Bohol, Negros Orientrl, and Siquijor in Region VII by a Board of Directors and Regional Project Office under the authority of the Regional Development Council. It aims to raise incomes and living standards of upland farmers, forest occupantsand artisanal fishermen, all of whom belong to the most disadvantagedrural poverty groups. To achieve this, the project focuses on improvements in local management of the natural resources on which rural livelihoods are based - inshore and reef fisheries,mangroves, uplrnd farms, small-scaletree plantationsand forest products processing. Assistance is also given to the Government in planLing and implementationof decentralizedand participatorydevelopment activities.

CVRP is openly experimental,attempting to meet its objectives through a participatorylearning process. Lessons learned in the field are adapted quickly for inclusion in on-going programming To accomplish this, CVRP makes use of a level of human, logistic and financial resources which is significantlygreater than unassisted line agencies or local governments normally have access to. Project managementacknowledges that, if its work is to continue and be replicated,costs must be significantlyreduced and its program and staff absorbed into local governments and regional line agencies,a process now underway.

The keys to CVRP's success have been the creation of rights to resources among small groups of resource users, mediation and support for poverty groups in the conflicts that resource rights issues create, and a high level of intensive care in project implementationby a committed group of managers and technicians. CVRP works with farmers and fishermen in the smallest manageable units - in barangays, sitios, puroks and micro- watersheds. Links have been made with NGOs serving the same target groups, although these are still weak. The project represents a valuable pilot activity, blending the right mix of low-cost techniques with local management and decentralizedadministratioi.. the next step is to move beyond a pilot stage, lower operational costs and share implementation responsibilitiesmore fully with local governments.

At inception, CVRP's main thrust was extension of a package of interventions assembled from trials and demonstrationselsewhere in the Philippinesto watersheds selected as target areas. This approach quickly ran into obstacles, viz. (a) lack of tenure security and conflicting property claims limited the numbers of watershed residents willing to participatein project activities,forcing a focus on units smaller than a watershed and on A&D land; and (b) initial lack of cooperation by management of line agencies at the central and regional levels led to delays in crucial project components,notably in upland communityforestry. Subsequently, project management shifted away from the "technological package" approach, to emphasizedevelopment of mechanisms for participatory natural resource management (communityorganizing). Consciousof the 1989 completion date, management is now concerned with fully internalizingthis process in core barangays and integrating CVRP-developedapproaches and objectives into line agencies and local governments. - 75 - cover and fertility. Undersowingof pasture legumes (perhapswith improved pasture grasses) following the inter-row cultIvation of the last crop before land fallowing creates a much more productive fallow in terms of forage and nitrogen,and one with better ground cover. Increasedlivestock raising, resulting from improved pasture resources, also feeds animal manures back into tF.a system. Stall-feeding, to permit concentration, collection,and applicationof animal manures, would be advantageous (but perhaps practicableonly with decreasedreliance on cogon grass pastures).

5.40 In situationswhere the farmers are more confident of tenure (or where tenure claims can be reinforced by adoption of longer-term improvements),innovations with longer gestation can be introduced. The objective is to increase productivityof, and commitment to, a fixed area of cultivation,to the point that traditionalfallowing systems are viewed as less productiveand are abandoned. At this point, there is a question of what to do with the protective contour strip, which detracts from land productivity,does not provide the most efficient barrier against runoff, and harbours cogon grass, which in turn eventuallyposeE. a weed problem for adjacent strips. The option employed in the SALT technology is to use multiple rows of a woody legume to retain soil and also supply fertilityor fodder. An alternativeis to replace the cogon with a more valuable fodder grass (which unfortunatelyis likely to draw cattle onto the plot).

5.41 A third alternative,which is finding increasing favor in other tropical countries, is to plant single rows of Vetiver grass (Vetiveria zizanioides), a native of India and Ceylon (found throughout the Philippines under various names: amoras or muda in the Visayas, anias, ilib, or anis de moras in Luzon, and norawastain Sulu). The advantagesof Vetiver planted as a "hedge" on contour strips include: (a) it quickly forms a dense and almost impenetrablebarrier to soil, which builds up behind the strip, eventuallyforming a terrace; (b) it is widely adapted to varying tropical environments,and resistant to both drought and severe storm runoff; (c) the varieties used are essentiallynot self-propagating, so tnat the hedges retain their shape and do not pose a weed threat; (d) in its mature form, it is unappealingto cattle as feed; (e) unlike leguminous trees, it does not shade the adjacent crops, and (t) the width of the vegetativestrip is one-half metez or less, cutting in half the sacrifice of crop area. The main disadvantageis that it must be propagated from root divisions, but, since it is already widely available in the Philippines,it would not be difficult to multiply it. Its applicability as a more cost-effectivealternative to reforestationon non-cultivated slopes is now being tested in the Magat watershed by Watershed Management and Erosion Control Project.

5.42 Finally, there are "engineering"alternatives such as terracing, and constructionof rock walls, earth bunds, or runoff diversion ditches. If well-maintained,these can be effective solutions,but they are costly in terms of labor and inadequate maintenance is in fact their main deficiency. Most engineeringapproaches require more labor than a single farm family can field, so that cooperationamong farmers must be organized and often maintained in perpetuity. If a local cultural tradition favorable to such works does not pre-exist, the vegetative approach is likely to be more readily adopted without major subsidies,and to require little maintenance. A possible exceptionwhich merits continuedmonitoring is being promoted by CVRP: ditches dug off gullies divert water across the - 76 - slopes of a "microwatershed"(of 5-10 ha). As the ditches are closed at the far end and carefully contoured,runoff is slowed and spread over the side-slopes. The acceptanceof this techniquein some project areas is due to the fact that farmers can then get acceptable crop yields on the side- slopes, rather than confining cultivation to more level fields near the bottom of gullies. This technique has been well-received on Siquihor Island, which has a population density of 200 persons/sq km and where 90 percent of the land area is A&D land. Where land tenure is less secure and land shortage less marked, farmer receptivitymust still be proven.

5.43 How Important ArE Trees? The uplands is the province of foresters,and it could be said that agroforestryrepresents a reluctant concession by foresters that upland populations, and their interest in annual crops, cannot be driven out - hence the insistenceof agroforestry that "woody perennials"be mixed in with annuals to the maximum feasible extent, and the promotion of multi-story cropping systems (mainly tree crops) as a near-ideal simulation of the natural forest. However, the enthusiasm of impoverishedupland farmers cultivating untitled land for trees or tree crops is mixed. To be sure, most farmers will enthusiasticallywelcome distributions of seedlings of mango, papaya, jackfruit, kalamansi, and other fruits, and plant them in groves around their house or even on field borders. Thus it is not difficult for them to meet the CSC terms which require planting of at least five fruit trees per hectare. Wealthier farmerswith a sense of tenure security may even plant a few trees of slow-maturing timber species to pay for their grandchildren'seducation. But larger-scaletree plantingshave invariably been subsidizedto the extent of full compensationfor labor and materials, or (under Philippine trials of the "taungya" system/l) with rights to intercropwith annuals until the shadingbecomes too severe. Consequently, the plantings are usually not regarded as belonging to the community: trees planted on public land cannnot be harvested by the planters without FMB licensing,unless they were planted under a Woodlot Lease in the first place. Even CSC contracts give FNB veto power on harvestingof trees.

5.44 So the question arises, why must upland cropping systems involve trees to receive official blessing? Scatteredtrees, treed field borders, or even narrow strips of tree crops, which so far represent the main physical accomplishmentsof the ISF program, are unlikely to make any significant difference to soil erosion or runoff, and alternative techniques (e.g., Vetiver grass strips) may be more efficient in serving these purposes. In upland agricultural areas, trees make a major difference if retained as protective groves serving as erosion control buffers and embankment stabilizers along water courses; they can prevent land movement on steep slopes, and may slow runoff from the tops of watersheds. Aside from these functions,the major reason to encouragetree planting by upland farmers is to provide fuelwood (and concurrently to protect timberlands against this source of degradation). This has implicationsfor the selection of species and location of plantings which should be recognizedin upland extensionprograms.

LI A system developed in Burma where workers were allowed to cultivate annuals between the trees they planted. - 77 -

5.45 Skepticism about the need to associate upland cultivation wit' trees or tree crops does not imply that agroforestry, including alley crop-ing with woody perennialsand various multi-storysystems, should not be promoted, if the economicsare favorableand the tenure situation favors adoption. If reforestation work is threatened by a local population, "taungya" may be a necessary, if not sufficient,protective measure; but "taungya" may not be advantageous compared to conservation agriculture without perennials. Finally, tree planting can even contributeto erosion, relative to some alternative land uses, if establishment involves significantland disturbanceor if, as with cashew trees, plantingsmust be kept clear of xndergrowth to obtain adequate growth rates and product yields.

5.46 Pasture Management. In view of the high proportion of uplands area which is now grasslands, measures to control degradation due to ranching activities - especiallyoverstocking and pasture burning - should have a high priority, but this is complicatedby the political power of ranching interests (which are not part of the impoverished upland population, but are in fact often lowlands-based). Grazing is basically incompatiblewith natural regenerationof forests or reforestationefforts. In other upland contexts, managed pasture in improved grasses and tropical legumes, with limited stocking rates, could be a tolerable land use strategy. Although such strategies have been tried in various demonstrations in the Philippines, they have typically failed, often because of the difficultyof closing off access to pasture on public land.

5.47 Although the ffARM study has not studied the economicsof upland ranching on cogon grasslands, it is suspected that this activity is not very profitable,but may often be carried on for reasonsmarginally related to cattle production,such as establishingthe basis for a land claim, or a claim to an agricultural occupation (an entitlement to tax or lending preferences). To the extent that this is so, it is an instance of policy- induced economic distortions. In any case, overstocking and pasture burning are so prevalent as to be intrinsic to prevailing production technology and uncontrollableby administrativemeans. Unfortunately,it is doubtful that more intensive forms of management, involving higher investments in physical or working capital (fencing, seed, and fertilizers),would prove financially profitable without subsidy. While these suspicions require empirical verification,they suggest that upland ranching should be discouraged by cancellation of pasture leases or impositionof fees.

5.48 Artificial Reefs. Mariculture and Mangrove Planting. These are three of the approaches commonly offered for improving the livelihood of coastal dwellers without increasingpressure on the resourcebase. At the time CVRP was appraised, there was data suggesting the favorablepotential of these productionactivities; after severalyears of subsidizedpromotion under CVRP, some limitationsare becoming more appare'-. These activities have been readily accepted by project beneficiaries,but this may be because (a) most investmentcosts have been paid for out of project funds, and (b) artificial reefs and mangrove planting effectively privatize or "enclose" a portion of the "commons" for the exclusive use of benefici- aries. - 78 -

5.49 Artific.al reefs (ARs), which are simple structures made of bamboo, cement, rubber tires, or other materials, represent an attenLp'to approximate the nutrient-trappingfunction of the natural coral reef, although it is impossible (at reasonable cost) to match a design which evolved over millenia precisely to serve these functionsmost efficiently. By increasing the votlumeof favorablehabitat, ARs may also add something to total biomass, but some experts doubt that this is significant. Hence their major economic advantage is to reduce material costs for a given catch (AR fishing requiresno fuel). ARs also tear aietsand keep trawlers away, thus redistributingthe catch in favor of small fishermen. They clearly are effective attractants, or concentrators of fish (and can thereby permit more efficient over-fishing!). Consequently,areas lying between ARs will have reduced biomass, and increaseddensity of ARs, beyond some uncertain optimum, will lead only to decreased yields per AR. It is apparent that some form of licensing or other limiting influence may be necessary to prevent a recurrenceof open access problems.

5.50 CVRP thus has been forced to severely limit AR density and, to maintain an equitable distribution of access, the fishing communities themselves initially decided to share among five families AR clusters designed to support a single family. This allowed about 40 families per linear km of coastlineto benefit from ARs. CV1RPARs have been regarded as a supplementaryincome source, or insurance policy (e.g., during stormy weather, when fishermen cannot get to offshore areas). How much of a supplement is uncertain, nor is it yet clear that fishermen will replace deterioratedARs when subsidies are witbheld. It appears, however, that investment of P5,000 in an AR cluster adds about Pi,0-120per week in additionalfishing revenues. For bamboo ARs with a short lifespan, this is not an adequate financialreturn.

5.51 Similar issues arise with mangrove replanting,although there is no question that this activity, which also can involve mari-silviculture (culture of crustaceans or bivalves under mangroves), increases total social product. To induce the replanting effort, fishermen must gain harvesting rights over the replanted area, which is now accomplishedby issuing CSCs. Tha.seffectively privatizes public land, and there is a distributionalconflict with other individualswhose subsistence depends partly on coastal gleaning, as well as with potential developers of fishponds or resorts. Consequently,instead of an area of two hectares sufficientto support a family, local communitiesare limiting development rights to 0.2 ha per family, which suffices only to provide a small supplementto family incomes. Clearly CVRP's experiencewith both mangrove planting and ARs indicates that the density of the coastal population is too great for these activitiesalone to make much of a dent in the poverty problem.

5.52 Other activitieswhich have some promise but are still unprcven include establishmentof reef sanctuaries,which are assumed to increase fishing yields in nearby areas, and mariculture,which ranges from seaweed, mussels and clams to more exotic shellfish, such as the giant clam or abalone. Mariculture of the more common species seems to offer correspondinglymodest returns, but there is some scope for expanded production. The culture of exotic species, which are of increasing scarcity as captured products and are in high demand in special markets in, e.g., Hong Kong or Japan, is still in the trial stage. Silitan University - 79 -

in DumagueteCity is a research center, and CVRP is involved in production trials.

5.53 Three general conclusionscan be safely drawn: (a) there is a need for closer monitoring of the economics of the various production opportunities open to coastal dwellers, to determine which deserve widespread promotion; (b) a large variety of new activities are needed if significant improvements are to be made in the incomes of coastal residents; and (c) activities which do not depend on tne sea or the foreshorestrips of public land - especiallyindustrial activities - may in the end prove more importantin reducing pressure on the resourcebase.

5.54 Biodiversity= Efficient PreservationARproaches. Preservation of biological diversityinvolves economicbenefits to society (para. 5.18), which justify some level of investments,as well as policy decisions, to protect this national legacy. Even though that level cannot be quantitativelyspecified, cost-minimizationprinciples can be applied to selectionof interventions,to obtain the maximum social efficiency. This requires acceptingthat some species and some habitats cannot be preserved, and concentratingattention and investmenton others. For example, as the great majority of species are found on the three largest islands of Mindanao, Ltlzon and Palawan, selection of preservation areas should emphasize these islands. A single large habitat can serve to protect the survival of more species than an equal area of many small habitats; but as species are specific to particular habitats, maximum impact requires some diversificationof attention - e.g., to high-altitude and low-altitude forests. Priority as preservationareas should therefore be accorded to large and diverse habitats. Protection costs include elimination of licensed and illegal logging as well as degradation attributable to shifting cultivators and ranchers. Isolated areas with minimal local populationsand forests with relatively low commercialvalues can be more effectively protected at lower cost. Palawan is favored by both these conditions.

5.55 Efficient EnforcementTechniques. The same principles of cost- effectiveness need to be applied to enforcement programs designed to control degrading or depleting activities. An obvious point of departure is that budgeting and staffing for area protection should be proportionate to the expectedvalue of resource losses in the absence of protection - in forestry, the extent and value of timber resources weighted by likely threats from various quarters; in fisheries,perhaps the extent of pressure from growth overfishing and destructive techniques in various fishing grounds. An equally obvious point is that mobility and communicationsare essential to enforcement - which translates to vehicles, horses, boats, fuel, walkie-talkies,etc.

5.56 It seems widely accepted that close community involvement in enforcement is an efficient approach. This may be easier in fisheries, where most violations of regulationsare at the expense of the community as a whole, than it is in upland areas where this is not the case and where residents are widely scattered and less socially cohesive. Still, it may be possible to directly tie individual livelihoods to resource preservation, to create an incentive for enforcement cooperation. The function of the community is to identify and report violations,as well as - 80 - applying moral suasion; aprrehensionand penalizationmust still rest with government authorities. If the local enforcement officials (a) are not hontst and cooperative; (b) are not armed and equipped; and/or (c) are rotated throngh the community too quickly to establish links, then communitycontrol approacheswill also be ineffective.Ll

5.57 Enforcementefficiency also depends on identificationof easily- observed "choke points" or "bottlenecks"through which process or product must flow. Thus enforcementbased on apprehensionat sea is bound to be more costly and less successful than enforcement based on inspection of gear in port (e.g.. for mesh size) and examinationof product in the market (e.g., for evidence of blast fishing). Similarily, logs, which require marking and proper documentation,must move down roads to sawmills or ports, limiting the number of inspectionpoints needed and nakingpossible cross-checkswithin the enforcementbureaucracy. If the demand for illlgal logs were choked off by 24-hour inspectionat the sawmills and ports (there are only 120 fixed sawmills in the Philippines),as proposed within DENR, illegal logging could be largely stopped.

Economic Policy

5.58 Income Distribution. Many of the alternative interventions discussed above are not neutral with respect to income distribution,and some explicit policy decisions need to be made on the extent to which distributionalconsiderations should influence the choice and what degree of compensationshould be offered to losers. The distributionalissue is highlighted because in theory virtually all the resources discussed are public property, and, in view of the minimal fees charged for resourceuse, a large proportion of financial returns to present users is rent "due" to the public. Changes in resourceuse would often involve transfersof these rents from some users to others.

5.59 The distributional issue is complicated by conflioting or contradictorylegal traditions,including Homestead Act provisions as well as local custom which take "tax declarations",long-term residency, and improvements as evidence of private rights over "public land". Local courts will frequently treat tax declarations as equivalent to titles, despite Constitutional reservation of Forest Land to perpetual public ownership. Thus, for example, at the local level, leaseholds granted by the central government do not have clear legal precedence over tax declarationsor even less formal claims; and practices like sharecropping which are banned on private land continue to exist on public land because the central governmentignores the ownershiprights of the landlords.

5.60 As CVRP experience has denonstrated,if this legal confusion is not first straightened out, few proposed changes in land use can be implemented. If case-by-case,negotiated settlements of property rights were necessary, it would require all the energy and much of the financesof voluntary or public agencies which are responsible for extension or

LI These lessons are distilled from CVRP and other experiences. Local BFAR officers, for example, are given very short rctations so that travel allowancesand other perks can be shared widely within the bureau. implementationof land use changes, with limited prospects for success. - 81 -

For example, in parts of the Central Visayas, there are "tenants" on "public land" whose 'landlords"either will violently oppose anythingwhich tends to establish a tenant claim to land tenure (such as major improvementsor CSC certificates),or will insist on a 30-5G percent share of any benefits. In such cases, tenants are unable or unwilling to adopt improved technologies.

5.61 Assuming the land tenure issues can be cleared away, there remains the question of the extent to which the public's right to rents on public property should be transferred along with land use rights (essentiallythe present situation,as resource use fees are so low). For property which is not to be re-classifiedA&D and titled, it is most important to institute land use fee structures which approximate economic rents. Aside from increasing government revenues, the main purpose would be to eliminate the rent-seeking behavior which now causes land use patterns to deviate from economic optima - in particular,exploitation of public land for uses which could be equally served by private land (e.g., fishponds), and preference for extractive uses over production (e.g., logging over plantation forestry or processing). By reducing the private value of public resources, this could also reduce oppositionwhen changes in land use or land occupancy are favored by public policy. It is also possible to use the land use fee structure to internalize externalities, including costs such as the downstream effects of erosion or the loss of fisheries production due to mangrove conversion, and benefits such as reduced erosion due to reforestationor increased fisheries yield due to mangrove replanting.

5.62 It may be argued that the impoverishedpopulation now occupying public lands cannot afford to pay land use fees, but those who now derive the most rents from public lands - logging concessionaires, pasture leaseholders,and fishpond operators - are not among this group, and the unit values of economic rent on degraded forest lar.ds or nearshore fisheries resources are not very high. It is, of course, possible to exempt families falling,below the poverty line from paying such fees, and collectionof small sums from suct,groups will not be a very cost-effective process. In any case, disposal of public land to poverty groups through A&D classification and titling or an improved form of CSC would be preferable to retention as public land, to create incentives for adoption of settled agricultureand conservationtechniques.

5.63 Finally, certain land uses, or technological alternatives for land use, have implications for income distribution, which should be recognized in land use policy. For examples, the following appear to be policy choices which would increase income of impoverishedfamilies at the expense of wealthier families or groups:

(a) caribao logging (in residual or secondary forests), as opposed to capital-intensivelogging; and community concessions, as opposed to individualconcessions;

(b) upland crop cultivation, as opposed to ranching;

(c) sustained use of mangroves (or mangrove replanting),as opposed to fishpond use; and intensification of fishpond production,as opposed to new conversions;and - 82 -

(d3 control of trawling effort (commercial and baby), as opposed to restrictionson other gears.

In these particular examples, economi- analysis of social benefits and costs, accounting for environmental impacts, would probably agree with distributionalconsiderations, but this may not always be the case. Given the difficulty of directly redistributingincomes through taxation powers and the severity of the poverty problem, distribution policy can legitimatelyoverride considerationsof efficiency or the environment.

5.64 Financial Policy. Improved resource management in the uplands and coastal areas involves introductionof new practices to sevezal million farmers and fishermen who are almost all cash-poor. Most of these practiceshave up-front financial costs, or result in transitory decreases in income. It is simply impossible for the current government budget, supplementedby the funds of foreign donors to bear more than a small fraction of the investmentrequirements. Yet past government interventions have involved major subsidies to adopters - really all but their labor, on the grounds that the beneficiariesare 2oor and unable to repay. As a result, public resources have permitted only pilot projects or demonstrations, and attempts at cost recovery have been rare. If a strategy for major transformationof resource management is to be carried out, how is it to be financed?

5.65 Public or private institutionalcredit will probably not be a significantpart of the answer, at least until land reform provides titles or other bankable instrumentsto serve as collateral and the laral rate of interest comes closer to single-digitlevels. Even then, credit is more likely to be directed to short-term working capital requirementsthan to long-term investments such as trees or tree crops. However, credit for working capital frees up farmer cash for other uses.

5.66 A possible strategywould be to concentratebudgetary investment funds on activities with longer gestation periods. Otherwise, emphasis should be placed on low-cost, high-return activities (when such can be identified),financed by a mixture of institutionaland private credit, self-financing, and/or specially-organized community revolving funds provided with seed money. Some NGOs in the Philippineshave established local revolving funds for development (includingconservation) activities, and their (mixed) success deserves further study, to establishcriteria for support of such funds. As Filipinostypically regard publicly-runprograms or projects as welfare activities requiringno repayment, revolving funds should not be set up directl.yby government,but only by NGOs.

5.67 The extent of subsidierwhich can be justified on the grounds of externalitiessuch as environmentalpiotection is a financing issue which requires further analysis by both the government and the World Bank. A good case in point is the proposal by PICOP to finance, through a non- profit organization funded by external donors, further development of small-scale pulpwood plantations in eastern Mindanac. Expected returns look satisfactory,with a financial rate of return estimated at over 30 percent (ignoring the risk of losses), and yet PICOP and other private organizations interested in pulpwood development insist that subsidized rates of interest (8-10 percent) are necessary for project viability. As - 83 - it happens, the PICOP proposal involves low-slopedA&D land draining mainly into :he sea, with virtually no downstream structures; in this circumstance, the externalities due to erosion reduction probably have minimal value and could not be usei to justify subsidies.

5.68 Macroecor.omic Policy. In many developing countries, macroeconomic policies which affect such variables as terms of trade between agriculture and industry, exchange rates, employment and wage rates, also have some differential impact on environmental degradation. For example, it can be argued that policies which generally depress agriculturalprices reduce incentives for farmland development, including improvements contributing to soil conservation. Also, policies discriminatingagainst export crops and/or in favor of food crops may accelerate soil degradation,because many export crops grow on trees and bushes that provide continuous root structure and canopy cover: coffee, cacao, palm oil, bananas, other fruits, tea, spices and so on. On the other hand, most basic food crops have high erosion potential, if grown in the uplands.

5.69 The more general macroeconomicpolicies cannot be said to play a major role in environmentaldegradation in the Philippines. There is minor overvaluationof the exchange rate due to import restrictions(dictated in turn by a balance of payments problem arising from high external debt) and restrictions on imports of rice, corn, and sugar, and these may cause slight bias against most export crops (usually tree crops) and in favor of grain production. However, these biases are surely less significant than adverse trends in world prices reflecting internationalsurpluses of most tree crops. If internationalprices were more favorable,many more upland farmers in the Philippines would be tempted to grow tree crops. (In contrast, the favorable internationalmarket for cassava products has led many upland farmers to base their shifting cultivationon one of the most nutrient-depletingcrops, leading to extremely short rotations.)

5.70 Taxes and subsidies too play a discriminatory role in the Philippines,but the effect is trIvial compared to the surrender of rents on public resources to their exploiters. Within =griculture, lowland farmers receive the benefit of subsidized irrigation and extension services; upland farmers receive nothing. But that should also help to reduce rates of migration to the uplands. A tax-bias exists in favor of capital-intensivetechniques of production (the proportion of the tax burden falling on labor, relative to capital, is high in the Philippines), which reduces employment potential of industry (including logging) and perhaps contributes to the migration "push". The influence of specific taxes has been mentioned elsewhere in this report: the low tax on diesel relative to gasoline contributingto the profitabilityof trawling,and the tariff exemptions for imported capital equipment favoring mechanized logging, and the tax advantagesof an agriculturaloccupation providing an incentive for upland ranching.

5.71 Prominence should be given to the system of forest charges practiced in the Philippinesas a major cause of environmentaldegradation. The lack of government charges for fuelwood extracted from public lands, asid- from representingrevenues foregone, has probably depressed market pricL , discouraginguse of substitute fuels and making private fuelwood production an unviable proposition. The collection of government timber - 84 - revenues largely as flat fees baseJ on volume removed (not total merchantable timber volume, and with little or no differentiation by species, grade, and site condition)contributes to the selectivecutting of more valuable species, the high proportion of slash left on the forest floor, and excessive damage to the residual. Any of a number of alternative systems - highly differentiatedspecific charges, ad valorem charges, income taxes, or site rents - would promote more complete utilization of merchantable timber, reduce wasteful deforestation, and simultaneously increase the economic benefits accruing to the local economy. Excessive harvesting, on the other hand, is also promoted by Governent requirements that logging concessionairesmaintain processing facilities,which add to their fixed overhead.

5.72 Two specific trade restrictionsshould be mentioned: an import prohibition on pulp, and a partial export prohibition on logs. Since export of pulpwood is exempted from the export prohibition,the pulp import ban mainly sustains the profitabilityof PICOP's processing operations,as the export ban subsidies local lumber mills, plywood and furniture manufacturers. Both regulationstend to discourage industrial efficiency and involve an economic loss to society in the form of excessiveharvesting required to produce a given final product, due to wasteful processing. The additional jobs in the processing industry are bought at a high cost in terms of logs consumed and export revenues foregone. A proposed export prohibition on lumber, designed to force processing further downstream, will not improve efficiency. On the other hand, the recent eliminationof tariffs on imported timber, designed to reduce the pressure on Philippine forests, will be meaningful only if export prohibitionshave not reduced domestic timber prices significantlybelow imporc costs. - 85 -

VI. STRATEGICPROPQSALS fQ IMPROVEDRESOURCE AG

6.1 It is misleading to speak in terms of a single strategy for improving natural resource management in the Philippines. Genuine and comprehensive progress will require some major and potentially controversial institutional changes which would be the core of any strategy. The remaining elements of the strategy would depend on the extent to which the core reforms proved feasible. The proposals presented below presume a willingnessto undertake some fundamentalcPanges, failing which the effectiveness of most individual strategic actions would be doubtful.

The Core of a Strategy

6.2 Environmentaland natural resource management issues in the Philippines are inextricably bound up with the population and poverty problems: some of the most significant sources of degradation and depletion (uplandssoil erosion, coastal overfishing,and reef and mangrove destruction) result largely from activities of local, impoverished populationsdriven onto marginal areas by the weight of their own numbers. The issue is also related to the problem of unequal access to resources, and unequal access is in turn related to public ownership or control of most of the sloping land and coastal or nearshore resources. An strategy for sustainabledevelopment of natural resources will founder if it does not sim,ultaneouslyaddress the issues o RoRulation growth. imWoverishment And unequal access. and the absorption of labor into manufacturing and intensifiedlowl agriculture.

6.3 Population Growth and Impoverishment. Excessive population and inequality of income arLdproperty are underlying causes of poverty and sources of migratory "push" into the uplands and coastal areas. As the Bank has produced or is producing separate tudies of the population, land reform, and poverty problems (Section I), and the Government is initiatirg more vigorous actions to deal with these problems, this study need only emphasize that a strong nrogram to reduce noRulation growth rates. especially in the rural areas: effective implementationof CARP. including measures to reduce rents naid by tenandts on Rrivate lands: and measures to create jobs for unemployed and underemRloyedrural residents (esoecially young males) will be crucial the long-n prosRect for reducing the rate o environmetal degradationand depletion. Two other links between upland and coastal resourceson the one hand, and populationand poverty issues on the other, have strategic implications: (a) the open access nature of these resourceshas provided an economic stimulus for unbridled population growth; and (b) their existence has provided a "vent for labor surplus" relieving poverty, and will provide a crucial supplement to the limited private land now available for redistributionunder CARP.

6.4 Scope of Public Lands. Lands aSove 18 percent slope, officially considered to be "ForestLands", are supposed to be public and inalienable. However, only a small area of public lands now has tree resources worth protecting. The major portion is in open grasslandand/or degraded forest. Part of this could regenerate naturally and a part could be protected - 86 - through silvicultureor other conservationtechniques, but neither activity will be successful if local populations do not cooperate in protection. Similar problctmsapply to resources on or in coastal strips and nsarshore waters. Lacking such cooperation,administrative measures can protect only a small fraction of the areas ar.dresources involved. In attempting to manage it all, the resources of hehcentral government,inclvding DENR and BFAR in particular,have been stretch-ekdmuch too thinly. Concurrently,a substantial portion of public lands have been settled and de facto privatized,often with private claims pre-dating public claims. A further area will be needed to absorb future population growth and migratory pressures - the amount will be greater ii lowland population control, land reform, and poverty alleviationprograms are unsuccessful.

6.5 The basic recommendation for dealing with these conflicting demands on public lands involves a reduction of areas under direct central government management and correspondingincrease in local and/or Rrivate management. Although this is already a thrust of government policy, it needs to go faster and further than currently envisioned. In the past, decisionsregardirg suitable uses of public lands have been exclvsivelyin the hands of DENR (althoughsubstantial areas of pub]4c land are managed by other government agencies). DENR's almost-completealand classification exercise is expected to add only another 350,000 ha to A&D land, reserving nearly 52% of total Philippine land area for permanent public ownership. The classificationmethodology, however, was so designed as to insure that sloping land (and any other land currently remote from markets), whatever the current land use practices, will be classed as unsuitable for agriculture and remain in the public domain. Although the power to reclassify land currently remains in the executivebranch, it is unlikely to be exercised in the absence of legislativeaction by the Congress.

6.6 The Cabinet and Congress need to agree on which areas will be protected and managed in RerRetuity by the central government, and concentrategovernment resources on these areas, letting all other areas gradually devolve to local and/or private management. To use a military analogy, the 18% slope criterion (or the equally-arbitrarycriteria that 40% or 50% of land area should be targeted for forest) is an indefensible Maginot Line, which has already been breached and outflanked. A truly defensible "front line" is required,one which is drawn more tightly around the areas most worth defending and excludes most of the 'invading" population;and one commensuratein area with the resourcesGovernment will have available for defense. Where this line should lie - that is, which areas should be intensivelymanaged by public authorities - is debatable, but vS should probably include parks, biological reserves and wilderness areas, primary and productive residual timberlands or mangrove swamps, critical watersheds (defined on the criteria discussedabove), buffer areas surrounding the foregoing, and little else. 'ithT the completion of the timber inventory and SPOT land use surveys. and current DENR-NGO joint efforts to define a proper national park and wilderness area system, most of the informationneeded to draw the boundarLeson a map is now available. No simple rules of thumb, such as a slope criterion, can be presented for legislativelyidentifying this area, but the total (excludingforested A&D land, but includingbuffer zones not now under forest) would be about 25% of the land area of the Philippines. - 87 -

6.7 The strategy of reducing the area to be managed by the central government would not automatically lead to better management - it is a necessary but not sufficient condition. The remaining conditions are discussed in the next section. -;7hestrategy would also reduce, but not eliminate,the problem of dealing with resident populationson public land. Even the most fragile areas of the public domain already have resident populations, including indigenous and immigrant peoples. Most of these cannot be resettled, and need not be because the numbers are relatively small. Management can affordably concentrate on mak.ng improvement of their livelihoodsconsistent with protection of the resource.

6.8 For all natural resources, the main concerns of the "public" should be the sustainablemanagement of the resource and the disposal po rents attributjb_l to the resource. Form and terms of ownership or use rights should be shaped by these concerns, as well as equity considerations. The issues of rent dispositionand proper management are inse-trable: the absence in the past of adequate recovery by the government of rents for the use of public resources has been one fundamentalcause of mismanagement. Because the management resources t.at Governmentcart bring to bear on the natural resource sector are l.mited and need to be used most efficiently, xroperpricing of use rights should be the 2rimary instrumentfor inducingRroRer resource management.and gublic regulation only a supplementary instrument. The best way of promoting proper pricing is to bring resource pricing under the influence of the market. Unless these markets are artificiallyconstrained from operating, use rights (such as logging concessionsand commercial fisheries licenses) are best allocated through competitivebidding or, where this is precluded by existing law or contract, by an administrativeapproximation of the results of competitivebi6ding. A high proportion of areas not reserved for perpetual public management could, in due course, be classed A&D and disposed of through titling. For resourceswhich are retaine under public or collectiveownershiR. limitedmana-gerial resources ae best conserved y devolvir.gprimary management authority and. in som situations. rent- recover. rights to the lowest governmental or social level capable of applying zggo managementprincigles. This might be the regional level for timber or park management, the provincial level for occupied, non-forested public land, the municipal level for nearshore water areas, or the community level where indigenous communities already have adequate local management systems. Flexibili*y, experimentation and attention to incentives for sustainable management are called for in determining the appropriatemanagement level and timing of devolution.

6.9 Concerning the roughly 25% of public Forest Land which should no longer be targeted for perpetual central government management: much of this land is already farmed with varying degrees of intensity, and the remainder is in cogon grass or brush. Since the centrally-reservedForest Land will absorb all the financial and personnel resources which can conceivably be mobilized by Government, the central Government can have little direct coi-trolover the use of this "residual"public land, but can create incentives for sustainable land use. Some of this and is too degraded or marginal for any productive use, or too steep for sustainable farming, unless terraced. Such land, which may be significant to local watershedprotection but is beyond the scope of national management,should probably be turned over to local public or community control. However, a larger proportion, with slopes in the range of 18-35% (or higher, if - 88 - terraced),can be sustainablyfarmed with some combinationof conservation ag-iculture and agroforestry techniques. The obiective in these areas. which provide a livelihoodfor the major part of tbe present upland farming Ropulation and in the future may be needed to absorb c-ontinuingRopulation pressures originating li the lowlands, is to induce adoRtion of more sustainabletechniques of land use

6.10 There is sufficientexperience in the Philippines and elsewhere to indicate the conditions under which this can be accomplished. The techniques must be identified and their advantages to the farmer demonstrable.Support services, including extension, provision of inputs, and marketing assistance,are likely initial requirements. A secure and stable tenure arrangement - meaning no perceived threat of eviction by government or landlord, restricted opportunities for further kaingin- making, and unrestricted and undivided rights to the fruits of farm investments (including rights to self-planted trees) - is a crucial condition.

C.11 These recommendations - e stated as general principles, but considerable tinkering will be required to realize them in practice. Consider severalmajor issues:

(a) Tenure. The options for providing tenure rights to occupants of public land range from unrestricted (Torrens) titles to restrictedand temporaryuse rights such as l-heCSC. The 1987 Constitution allows titling only of "agriculturalland" of the public domain. Although DENR's classificationexercise permits hardly any of the land at issue here to be classed as "agriculturalland", reclassificationand thus the poten- tial titling of occup.antsmay still be within the powers of the Executive branch. The Constitutionrestricts leaseholds on public land to terms of 25 years, renewable up to 50 years, but otherwise definition of the terms of the CSC and similar leases falls within the administrativediscretion of DENR. In between the extremes, there could be titling with land use restrictions,leaseholds providing more secure tenure for lessees, or even leaseholdswhich serve as a transitionalinstrument to titling. Titling is probably neither practical nor desirable as a general program in the short run, because (a) the CARP program will tie up the governmentaladministra- tive resourcesrequired for a decade; (b) titling of public lands prior to that of private and public A&D lands under CARP would be a major attrantant of new migrants to the uplands; and (c) it would be preferable if titles were a reward for adoption of sustainableagricultural techniques. There could be pilots, however, such as one authorizedby PresidentialDecree No. 1998 (1985) but never implemented,which provides for reclassificationas alienable and disposable lands, all lands above 18% slopes in Cebu and Benguet Provinces which are farmed *isingeffective erosion control prac- tices like terracing and contouring. Implementationguidelines have been locally suggestedwhich would subject titles to conservatiot:-orientedland use restrictions. Further recommendationson tenure provision specific to various kinds of public resource are given below.

(b) Populationson Reserved Public Land. Even the areas which should be perpetually retained for central Government management are populatedby occupants numbered in at least the hundreds of thousands,many with valid claims to property and livelihood. This population must be differentiatedto distinguish appropriateways of dealing with it. For - 89 -

example, a rather high proportionmay be indigenes with long-established land claims, who may be dealt with by organizing or legally recognizing indigenous common management regimes, which offe; collective tenure in return for cooperation in resource management and exclusion of new immigrants. Better-establishedgroups might be able to form development corporationsto undertake management or conservationprograms within fhe public forest under contract from DENR. Particularlyimpoverished gro.ps might be the target for employment involving resource protection and facilities maintenance. Gatherers of forest products or fuelwood might have their access legitimizedthrough licer.singin return for rbservanceof some en'xironmentally-protectiveregulations, since selective gathering and harvesting are not inconsistentwith conservation. Farmers demonstrating willingness to use soil conservation tecbn4ques, p.rticularily in buffer areas, might be offered an improvedversion of the CSC contract (redefined to provide tenurial s;curity). Other individualsmight be offered newly- classifiedA&D land elsewhereto encourageresettlement. These offers must not be open to future immigrants. The strategy would depend on the accurate differentiationof settlers which will be assisted by a censvs of forest occupants,now scheduled for April-May 1989.

(c) New Imm4i.rants. The prospect of tenured land occupancy, along with any other economic improvementsto upland or coastal areas, is bound to attract new immigrants. Due to this dilemma, the ISF program has been confined to occupants who can demonstratepre-1981 residence in the uplands. This solution is weak because new immigrants can well assume that, when the numbers of post-1981 immigrantsreaches some critical mass, the cutoff date will again be adjusted. Moreover, the cutoff date approach is in conflict with the spirit of CARP, that public land should be deliberatelyused to satisfy the land-hungerof the Phi.ippinepopulation. An alternative approach is to require new immigrants to pay for their occupancy rights on terms comparableto those of lowland beneficiariesof land reform, allowing for lower land productivitylevels. This would be unnecessary for longer-term residents, who usually can already claim ownershiprights by virtue of their length of residency,tax declarations, and land improvements.

(d) Illegal Tenancies. As suggested above (Section V), tenanciesbased on landlord claims to ownership of public land established through tax declarationsare alreadyprevalent, and instancesin which CSCs have been extended to pseudo-landlordsrather than lan4 occupantshave been reported. Such land claims are unrecognizedunder national law, although recognizedby local governments(as they can be an important source of tax revenue), local courts, and even local banks. As a result, they are not subject to restrictionson land holding size under Republic Act No. 6657 or prohibitions of share rental forms of tenancy under national law. The existence of such potentially-cor._lictingclaims is often a formidable obstacle to any program which would result in land improvements or strengthenalternative claims, such as by occupantswho are pseudo-tenants. Government_^tion is needed _t undercut or weaken this nractice. including particularly (a) provision of alternative sources of local government revenues:kbt also (b) regulatop.Xmeasures to preclude use of tax claims on public land as collatoral _X banks: and/or (c) titling of such land, but only to actual occupants. - 90 - (e) gasture Leaseholds. In general,no pasture leases should be allowed in critical watersheds or near protected forests, where they are allowed at present (Section V), since the suitability of cogon lands as pasture depends on burning, Through legislative action, if necessary, Government should be given the power to cancel pasture leases at least in such areas, with a compensation formula allowing no scope for litigation. The cost of such compensation,if based on actual improvements,is likely to be minimal. Alternatively,the fee structure for pasture leases could be set at prohibitively-highlevels for environmentally-fragileareas, perhaps based on existing land classificationcategories. Only intensive Rasture manaieet is An acceptable uRlan land use, and tMis is not feasible gn ogen-accesspublic land.

(f) StewardshipContracts. The CSC contract should be revised to strengthen its incentive value in promoting conservationagriculture, agroforestry,and silviculture. It should be transferable,but only to land occupants; automaticallyrenewable, heritable and probably divisible; subjet.:to cancellation only upon failure of occupants to meet very explicit responsibilities;and should give rights to harvest or exploit all improvementsmade to the land, such as trees planted. This would give the CSC market and collateralvalue, and the recipienta considerabledegree of tenure security. In order not to undercut its market value, CSCs should be available gratis only to established occupants, and otherwise should be sold by Government to new immigrants. The quid pro quo for secure tenure on pubv.c land should be the willingnessof the CSC recipientto adopt some mir.imumlevel of environmentally-acceptablepractices, in farming as well as silviculturalactivities. It would be best, however, if the CSC did not preclude full titling, but rather was interpretedas a transitionaltenure instrumentto allow the recipient a sufficientperiod (e.g., ten years) in which to demonstratesuitability of his site for sustainableagriculture or agroforestry (thus eligibilityfor A&D status), after which full titling (subject to zoning restrictions)would automaticallybe conveyed. Further study and pe;:hapswell-monitored pilot projects are required to determine how to translatethese principles- that the leaseholdshould be a stimulus and full titling a reward for adoption of sustainable techniques - into implementableprograms. The Community Forest Lease should be redesigned along similar lines, to create the strongest possible stake in sustained forest management.

6.12 Zoning Restrictions. A major objection to titling of public lands voiced in the Philippinesis that it would confer complete freedom of land use on title holders, irrespectiveof the effects of undesireableuses on public welfare. However, the concept of zoning restrictionson private property uses is well-established in some countries as a means of controlling such external effects. It is often the main resource management tool of local government,and it is suggestedthat this approach be developed in the Philippines as one aspect of strengtheningof local governments. It is clear that the municipalityis the appropriate level for zoning for most environm:-4talexternalities: for downstreameffects in a large watershed, provincial restrictionsmight be necessary, but the governmentalunit res,onsible for restrictionsshould be close enough to the grassroots to re-lect community interests as well as to notice and punish violations. Necessary steps in the introductionof a zoning system into Philippine municipal government include authorization and establishment of zoning authorities, determination of the appropriate - 91 - standards, zonal mapping, and measures for bringing esdsting land use into conformitywith standards.

6.13 TeghMlogy for Uplapds and Coastal Developmer. The exploitation of the uplands and coastal areas in the Philippines has not emphasized intensive production through improved technology, so much as private usurpation of a 3hare of public resources./; Although this "rent-seeking behavior" has been practiced most successfullyby the wealthy, through the political process of obtaininZ concessions,leaseholds, and licenses, the poor have followed suit. A strategy for sustainable development must emphasize intensification of production, so that livelihoods can be improvedwithout destroyingor depletingresources. Both proper incentives and grofitable technologiesfor intensificationare required.

6.14 Incentives. As long as access to natural resourcesis relatively costless, neither the concessionaireor leaseholder,nor the small farmer and fishermanwill be interestedin intensifiedproduction. This applies to the fishing areas, the mangroves, the cultivated uplands, and the forests. Gaining access to the resourcesmust be made much more costl- to the individual or corporate group. ihis can be done by privatizationof the natural resources,and most of the proposalsabove involve some form of privatization. But privatization without adequate compensation to the publ'.csector is a tactic recommendedonly where the resourceshave already been de facto privatized,or where the beneficiary is extremely poor. The alternative approach, recommended in all other situations as a matter of social equity and economic efficiency,is that a full economic rent for the use or purchase of resourcesbe captured by the public sector, for example throu:h open auction bidding for access rights. This should be applied to licensing of commercialand baby trawlers, large-scalefish traps, timber and mineral concessions,pasture leases, etc. Increasing licensing fees and taxes is a second-bestsolution, albeit one which may avoid the need for legislativeaction and which should be applied in situationswhere the license or concession has already been granted. Where there are social costs, external costs, and/or opportunitycosts which won't necessarilybe covered by auction prices, these (and only these) should determine price floors for bidding./2

6.15 Fo. the public sector to succeed in capturing rents, Government control of acc,ss to the resource will have to be better enforced, so that illegal use or "grabbing" of resources becomes more costly than legal licensingor purchase. In view of t-h3costs of enforcement,upgrading of enforcementeffc ts should be designed with revenue-yieldingefficiency as the main criteAion. The implications of efficient capture of economic rents by Government for resource management are several-fold: (a) there would be ample sources of funds for resource renewal programs; (b) larger scale farmers and fishermenwould begin to find intensificationof product- ion ,uoreadvantageous than extensiveproduction utilizing a larger share of the resource base; and (c) the preemption of rents by government would deflate the politicaland social conflict over access to public resources.

/l This does not apply to the ancestralhomes of indigenes,which, on the contrary,have been subject to public usurpation of private resources. ta DENR AdministrativeOrder No. 10 (1988),which purports to define a "price floor" for timber bidding, needs review and correction. - 92 -

6.16 ProfitableTechnologies. The other requirement is for improved technologies to make intensifica-tionprofitable, or provide alternative sources of livelihood (these are needed, as well, in the lowlands, to reduce the "push" of population onto ecologically-fragile areas). Restrictions, such as throughzoning or CSC/CFL conditionalities, are unlikely to be enforced if foresters, farmers and fishermen are not also attracted by the benefits of technologies which do not degrade the environment. It is dismaying that the new technologiesnow being extended in the Philippines,e.g., artificialreefs, maricultureof giant clams, and upland farming techniques like SALT, are hardly proven; in particular, there is little firm evidence yet to indicate that fishermen or farmers would adopt them in the absence of subsidies. In short, there is an urgent need to demonstrate through economics-orientedfield research, including studies of why these technologiesare or are not readily adopted, that there is something to offer the coastal or upland dweller before the government plunges into a costly program to extend these technologies beyond the trial level. An extensive agenda of economic research can be developed from Section V, along with more technical research agendas from Sections II-III (see Annex 4).

Institutionaland OrganizationalRecommendations

6.17 The recommendationsabove imply not only a reduction in the area of public land administeredby governmentagencies, but also an improved or intensified management role on the remaining areas. They also imply decentralizationof management,often to the communitylevel, or increased interaction with community interests, and correspondingly increased advisory input from the central agencies. This section sketches the implications for the organization and operation of government agencies involved in resource management. As a presentational framework, the discussion is segregated into four major resources areas, which pose distinct management problems for different agencies and user groups, usually in different locations: (a) optimal management of the remaining public forest; (b) expansion of the forest plantation system; (c) development of sustainableupland agriculture;and (d) optimal management of the municipal capture fishery.

6.18 Managing the Remaining Public Forest. The single most important recommendation for organizational change to reverse the >.ocess of ciegradationof the remaining public forest is for the DENR to regain control of forest management from the concessionaires. To accomplishthis a well-coordinatedlong-term program of bureaucraticchange must take place within the field operationsof DENR. To a certain extent such a program of change has already been startedbut it appears to lack a strong conceptual foundation,a specific strategy and guidelines,or adequate resources for implementation. Strengtheningthis process organizationallywill require:

(a) systematicstrengthening of forestrypolicy formationand Rlanning, and training of DENR field operations and support staff in the operationalskills of "forestmanagers";

(b) substantial increases in resources to improve mobility and communicationsat the field level, and the means to track and - 93 -

account for the movement of logs from the harvest site to the mills, processingplants, and ports;

(c) improvingintegrity in DENR operationsby builling multiple checks into monitoring systems, transparency and accountability in decisionmaking, and developing performance criteria with correspondingincentives for improvedperformance;

(d) developing further a staged implementationplan and detailed guidelines for decentralizationcovering all aspects of field operation, and regional redistributionof DENR's resources in line with its changing functions;

(e) identifying areas where existing forest and long-established (ancestral) land claims overlap, and creating new local organizations to share management responsibilities for such areas;

(f) creating new organizationalarrangements for the involvement of existing settlers in managementof protectionforests in critical watersheds,on fragile lands and mangroves;and

(g) strengtheningthe research capabilityof DENR's EcosystemResearch and Development Bureau (ERDB) by giving it a more applied focus and an orientation that serves field operations, and enhancing the capability of both NEDA and DENR to undertake applied research on natural resource policy and the economics of alternativeapproaches to resource management;

6.19 To support these recommendations,the concepts of forest, public forest, and Public Forest Land must become clearly separated,and the role of DENR must be redefined with respect to each of them. The current confusion of "forests' and "sloping land" is not only misleading but serves to stretch the resources of the DENR far beyond reasonable limits and to generate frustratingand wasteful "turf" battles between the DENR and competing line agencies, local governments,indigenous communitiesand upland immigrants. Therefore,necessary recommendationsinclude:

(a) defining, in terms of specific areas which -,represently under forest cover (not including"reproduction-brush') or which are to be reserved for reforestationfor reasons other than slope alone, the public forest to bc managed for production and protection purposes;and

(b) evaluating in detail the current concession system according to criteria of efficiency,equity and sustainability,and replacing it with a system applicable to a reducea public forest to be managed in perpetuity.

6.20 xanded Forest PlantationDevelopments. Future supplies of low- value wood products will have to come from imports or domesticplantations. The Government of the Philippines should consider dedicating significant areas of Forest Land to plantations to be establishedand managed by the private sector. Such plantations should be created to meet identified or - 94 - identifiabletimber and industrialfiber requirements. Organizationally, this would require:

(a) strengtheningof the Natural Resources Development Corporation within DENR as its agent for transactions with the private sector;

(b) arrangements for secondment or detachment of DENR staff for participationin managementof tree plantationswhich are neither an undesired "overhead"burden on the private sector nor a cause of "brain-drain"for DENR; and

(c) support for research to evaluate new fast-growingspecies and new processing or utilization methods to expand the scope for plantationforestry beyond pulp and fuelwoodproduction.

6.21 Effectiveplantation development will require institutionalrules that create long-term incentivesfor large- and small-scale producers -o invest in plantationson land that is currentlypublic land, and that gives them freedom to operate as entrepreneurswith a minimum of regulationby DENR. Creating such an environmentwill require:

(a) a public willingness to confer long-term leases with a high degree of tenure security on public land, or enter into risk- sharing arrangements, with plantation operators who operate within clear, consistant,and monitorablestandards;

(b) performance standards that allow private lessees or partners to respond to technicaland market changes as they see fit; and

(c) monitoring systems which do not impose onerous burdens on either DE R or the plantation operators but which protect the public interest with respect to land use practices, environmental effects and equity.

6.22 Developmentof Sustainable plan Agriculture. The phrase is used here to include all sustainable forms of shifting or settled agriculturaland agroforestrysystems practiced on lands with a slope of 18% or more and currently defined as Public Forest Land. If it is recognized that the vast majority of public land occupants are making agriculturaluse of the land, that the objective is to make land use practices sustainable,and that DENR has no comparativeadvantage in this task, then organizationalrequirements should include:

(a) full recognition that the servicing of ISF program beneficiaries is a shared responsibility, to ensure that they receive agricultural and agroforestry extension services, credit and marketing support from the agencies with the comparative advantage in these areas, whether in DENR, DA, DAR, or the NGO community;

(b) identificationof a suitablelocus for managementof extensionand community organization services directed towards upland agriculture (utilizing existing government staff or NGO alternatives),to include a program in support of research and - is

testing of applicable technologies, training of extension workers, provision of special incentivesfor work in the uplands, creation or expansion of nurseries, and provision ef means of transportand communication;and

(c) redirectionof the ISF effort within DENR, or development of a special ISF component,to focus on gaining the support for forest preservationof local populationswithin the areas which continue to be managed as public forests or reserves and in buffer zones around these areas.

6.23 If DENR continues to retain exclusive responsibilitv for servicingoccupants of public land on anything like the current scale, and if this is to be managed through an expanded ISF program, then:

(a) establish an ISF Bureau independent of the FMB to reflect the significance of the scale of the ISF task and to signal recognition of the need for new management approaches, skill requirementsand orientationto serve upland populations;

(b) expand significantly the scale of the resources available to DENR's Field Operations to implementthe ISF program in all its aspects, namely community organization, provision of secure tenure, and provision of upland agricultural and agroforestry support;

(c) cooperativeprograms betwefen the DENR and the DA to accelerateand expand research and extension on practical, low-cost upland agriculturaland agroforestrysystems appropriate to hilly lands of all tenures;

(d) major upgrading of the in-service training and skill upgrading received by DENR staff in support of community-basedaction for sustainableupland agriculture;and

(e) further expansionof the mix of skills within DENR to includemore social and agricultural science skills, and the creation of career paths and promotion prospects for non-foresters both within an ISF Bureau to be created, and within a corps of ISF specialistsin Field Operations.

6.24 Regardless of whether or not DENR retains exclusive responsibility for servicing occupants of publit' land, additional requirementswould inclule:

(a) expansion of the offices of Special Concern within DENR, DA and DAR and their improvedcoordination to develop proactiveprograms dealing with problems of the autonomous regions and indigenous communities'ancestral lands; and

(b) expansion of the role of user groups and local NGOs in planning and implementingsustainable upland agriculturalsystems. - 96 -

6.25 The major recommendationsfor institutionalchange all relate to improving access to upland resources and tenu.^esecurity for users, and include:

(a) use of the 1989 Census of Forest Land occupantstogether with SPOT satellite mappings of forest areas to disti..uish areas of concentration of upland farming and prospective buffer areas around forests, to provide geographic targets for service delivery;

(b) upgrade the CSC to resemble a land title as closely as possible within the limits of existing legislation,and consider allowing CSCs to mature into titles after sufficient time has passed to demonstrate that upland agriculturaland agroforestrypractices are sustainable(a subject for new legislation);and

(c) agree on flexible and realistic practical guidelines on what should be considered "sustainable practices" in different environmental and socioeconomic contexts, in order to define objectivesof upland servicedelivery.

6.26 Management of the MuniciRal Capture Fishery. Despite its significance,there is no apparent integratedapproach to regulating and managing municipal fisheries. The municipal capture fishery can only be managed sustainablyfor sustenance,local employment and income generation by users and local governments,with definition of ground rules and substantialenforcement assistance from the central government. Currently, local governments and the BFAR have very litt.e of benefit to offer municipal fisheries with respect to controllingresource access, securing tenure for those with access, fishery community organization or the provision of appropriate technologiesand credit. Improving the current situationwill require organizationalchanges, including:

(a) creation and strengtheningof local organizationsof municipaland barangay fishery resource users to assist in control of access and management of stocks, and provide conduits for the provision and mobilization of extension services, credit and local infrastructure;

(b) legislative empowerment of municipal governments to regulate access to municipal fisheries,with associationsof users serving an advisory function;

(c) more active protection by BFAR and DA field staff, with the support of law enforcement agencies, of municipal waters from illegaluse by commercialfishermen;

(d) more active protectionby DENR and local governmentsof municipal fishery waters from pollution;

(e) expanded use of NGOs to promote cooperation among users of municipal fisheries,to protect and maintain fish habitat and to improve their resourcemanagement capabilities; and - 97 -

(f) education of municipal fishery users on habitats, life cycles and ecological systems interactions, to equip them to take more appropriateactions in their own interests.

6.27 Fishing in Philippines'municipal waters is a zero-sum game in which jointuess can be maintained only when fishing pressure is matched with the ability of the stock to sustain it. Municipal fisheries are so diverse and localizedand municipalfishermen operate on such a small scale that formal external regulation is virtually impossible. Municipal fisheriesmust, therefore,involve a considerabledegree of self-mar gement under local control. To accomplishthis institutionalchanges are required in order to:

(a) create sea and shore tenure instrumentsfor identifiablegroups of users in units appropriateto local circumstancesand traditions; and

(b) support municipal fishery users in transforming the open access fishery into a managed common property by segregating the near- shore fisheries from the offshore more effectivelyand reserving the near-shore fishery for use by the artisanal fisherman.

6.28 Gender Issues. The activities of both upland and coastal families in the Philippinesinvolve pronounced gender specialization: in the uplands, men typically are responsible for land clearing activities, planting of traditional crops, tree cutting, firewood gathering, and charcoal making-activitiesmost directly associated with environmental degradation. Women are more frequently involved with cash crops and marketing. Such distinctionsare also prominent in the coastal zone, with the men tending to concentrateon fishing and agriculturalcultivation and the women and children providing most subsistenceproducts by intertidal gleaning, and cash income from handicrafts, trading, and sometimes mariculture. Coastal women are also likely to take leadership roles in community organizations to promote livelihood activities. Extension activities in upland and coastal areas (and gender roles within the extension services) therefore should be designed to reflect and exploit these differentialinterests.

Forestry Progr Recommenaations

6.29 Forestry Planning. With the newly available forest inventory data and the additional SPOT satellitemapping of forest resources, it is possible for the first time to carry out a realisticplanning exercise as a basis for determining the commitment of land and investment resources to the forestry sector. Reportedly,an 'IntegratedForestry Master Plan" is to be prepared beginning in 1988. There are two pitfalls to be avoided, lest this opportunitybe wasted on a "paper exercise": (a) the planning should indeed be "integrated"and comprehensive,rather than exclusively concernedwith industrialforestry (i.e., it should concern all sourcesand uses of all kinds of wood and wood products,accounting for both public and private land); (b) the plan should not make inflexible assumptionsabout demand, which is to a considerableextent determinedby policy as well as prices and income growth. - 98 -

6.30 The planning exercise should be staged, with the first stage providing options and Darame_te for study by the Government,which should review these for their implications for the budget, foreign trade, industrialgrowth, and consumer demand, and land use. The Government, in turn, should make the choices which determine the scope and compositionof the second stage and final plan. A third stage - a review of sectoral policies and practicesin the light of the plan - should follow. Among the issues which should be consideredare:

(a) identificationof areas which should be excluded from commercial logging for environmentalreasons, including parks, biological reserves, fragile areas, and forests in critical watersheds; cooperationwith NIA and NPC in identifyingpotential downstream losses in criticalwatersheds would be necessary;

(b) dispositionof the remaining 1.2 million ha of virgin old growth dipterocarpforests, includingareas to be preservedundisturbed, managed on a sustained yield basis, or replaced with faster growing species to shorten the growing cycle; and, in the light of these, realistic allowable annual cuts to sustain production for varying numbers of years;

(c) disposition of the remaining 3-4 million ha of logged-over, disturbed dipterocarp f..rests,including areas to b9 protected and/or enriched for sustainedyield, to.be harvested and replaced. with fast-growingspecies, or to be surrendered to other uses. Alternative options and associated costs and benefits should be identifiedhere, as it is probably unrealistic to preserve or recover all of this area for high-valuehardwood production;

(d) identificationof areas of grass and brushland particularily suitable for industrialtree plantations,accounting not only for factors such as soil and slope, but also accessibility to processing, costs of development (notably roads), and ease of protectionfrom shifting cultivators;and

(e) identification of areas where a concentration of upland cultivatorsor a lack of strong justificationfor forestry uses suggests a focus on agroforestryor annual crop cultivation,or where nearby population centers create pressure on fuelwood supplies.

6.31 The first-stageplan should provide the inputs necessary for the Governmentto make judgmentson some key policy issues. In particular,the plan should recognize and evaluate the tradeoff between, on the one hand, budgetary cost for protection and replanting and availabilityof upland area to absorb future agriculturalpopulation pressures, and, on the other hand, the future ability of the Philippinesto meet domestic ard potential foreign demand for various varieties and qualities of wood. Moreover, it should recognizethat the "technicalparameters' of these tradeoffsare not fixed - efficiency of tree use and substitution of alternative raw materials (e.g., electricity and/or petroleum products for fuelwood) are functionsof the price structureand investments. - 99 -

6.32 The planning approach recommended above would largely obviate "land use classification"exercises, of the forms presently carried out by DA's Bureau of Soils and Water Management and DENR's NAMRIA (or at the Field Operations level). These exercises are straightforward but unnecessaryfor sites where the present land use coincideswith the "ideal" use suggested by physical and environmental characteristics. Where, however, site characteristicspermit alternative land uses and/or present uses are less than 'ideal", the evaluation process is complex and difficult. As there are costs in changing from existing to new land uses, evaluation proceduresshouid properly bias the choice towards maintaining existing land use. In the case of the classificationof Forest Lands, even though a sophisticatedProcedural Manual exists to guide the exercise, it is unlikely that such complexitiesare allowed to intrude, because: (a) classificationof Forest Land between forest use and A&D use (interpreted as "not needed for forest') is made at the central level by NAMRIA, whereas subclassificationwithin forest categories is done by field teams; (b) "minimum requirementsof land use categories",as defined in the Manual, force the classificationof nearly all public lands into forest categories (with "Protection Forest" absorbing the residual); and (c) the field classificationexercise is managed by foresters.

6.33 Eir;& Polifv. In general, governmentpolicy should be to extract for its own use as much of the economic rent attributableto the resource as politically possible, in order to -improve incentives for efficient productionand processingand provide the wherewithalfor resource renewal. Stumpage pricing determinedby competitivebidding is strongly recommended for new concessionsas the most flexible and efficientpricing system, and the one leaving the least room for corruption. The recent imposition on existing concessionsby DENR of additionalforest charges amountingto P250 per cu m of log extracted plus a forest-renewaldeposit of P10,000 per ha to be logged may bring total revenues to one-half or more of economic rents, and puts the burden of proof that regulatedreforestation activities have been completedon the loggers. This is thereforea major step in the right direction. Draft legislationrecommended by the Cabinetmay complete the process - but should be carefully formulated to ensure that logging fees keep up with market timber price trends. Alternative methods of assessing charges (para.5.70) should also be explored to increase incentivesfor more complete utilizationof merchantabletimber. Moreover, the policy of requiring replantingusing the same species in all cases (as opposed to faster-growingspecies), which has never been fully implemented and is not recommended by foresters, is not economically sound or technicallyfeasible in all cases and should be modified.

6.34 Log Zaort and Import Controls. The full economic costs of the log export ban ar- unknown, since it has forced an unknown quantity of timber into illegal and unrecorded export channels. Theoretically,the effect of such a ban would be a social loss due to increased inefficiency (includingexcess cutting of timber to provide a given processed product), as well as a substantial loss of foreign exchange and customs revenues. However, minimum processingmay have been used to partially circumvent the ban. The earlier system of a 20 percent export tax, would be theoretically preferable,assuming some subsidy to local industry is desired, although it has been argued that, because of misdeclarations,this system too was evaded. The addition of restrict'.ons on lumber exports, now being consideredwithin DENR as a means of forcing further processing, is likely - 100 - to lead to additional social losses. The recent elimination of restrictionsand duties on log imports is a measure that, at first glance, appears socially advantageous, although if the export ban has forced domestic log prices below internationalmarket values, it may have no effect at all. Further study of these measures is necessary to draw less ambiguous conclusions, if the necessarydata can be obtained.

6.35 ReforestationPractices. The past force-accountreforestation and plantation forestry practices of BFD have been largely unsuccessfulif judged by results. In general, the current policies, that reforestation should be contracted ott, with ample attent!on to maintenance, and plantation forestry should be left to the private sector (including production sharing ventures relying on private sector management), are steps in the right direction. One problem which has persistentlysabotaged reforestationwork - late budgetary releases which miss the normal season for preparing planting materials - has reportedlydiminished in importance under current procedures,which allow carryover of funds between one year and the next. Whether DENR's contractingand monit ring procedures and the capacities of private contractors can meet the challenge of the high reforestationtargets funded under the recent ADB loan remains to be seen. The targets them3elvesmerit continuingreview: priority in use of limited funds and personnel should go to ensuring natural regenerationof primary forests opened to loggers, secondarilyto enrichment planting in residual forests, and last of all to reforestationof deforestedand degraded lands. For protective purposes alor.e,cheaper and more effective alternatives,to reforestationsuch as protectionwith vegetative strips (para. 5.41) should be considered. Most important, as most deforested lands are subject to private land claims or encroachment, only a anDroach which is fully accepted and 2articiRated in b the local RoRulation (Rara. 5,28) is likely t succeed iB establishingforests which survive t maturity. Thus the community forestry approach which DENR now considers experimentalshould quicklybe upgraded to a major thrust of the reforestationprogram.

6.36 Upand P22uation. Both protective reforestationand plantation forestry depend, for realization of their potential, on the support and involvementof the local upland population. Realistic assessment of the potential threat, from fire or other forms of destruction, to expected timber yields should be a mandatorypart of evaluationof public or private projects, and no project deserves support which does not include (and budget for) adequate measures to minimize the threat. At present there is little experience and no definitions of policy on which to determine "adequacy". This urgently needs to be addressed through a combination of studies and larger-scale experimentationwith alternative approaches to insure that the local community has a financial "stake" in the success of reforestation (and not merely in the process). The range of experimentationshould include (a) generation of parallel income sources, e.g., through simultaneous support of agroforestry programs in reforestationareas; (b) employmentof locals in planting, maintenanceand harvesting )erations, and defined rights to firewood trimming and gathering,t s.nnedtimber, or shares of harvest revenues; and (c) complete community forest developmentprograms organizedthrough NGOs. However, it is safe to say that, if the re-establishmentof forest threatens the subsistence or the perceived property rights of local farmers, there is little chance of success. An accurate census of land occupants is thereforecrucial to the identificationof suitablereforestation areas. - 101 -

6.37 Because silviculture,in whatever form, involves a long waiting time before most income is realized, it is likely to play only a supplementaryrole in the livelihood of most upland communities. While DENR should obviously take the lead in promotion of that role, what is Its responsibilityin promoting overall communitydevelopment? It is tempting to evade this responsibilityby assuming that the presence of an upland population it a transitoryphenomenon; and that eventually this population will be reabsorbed in the lowlands. Unfortunately,there is nothing in current economic trends to support this assumption,and more justification for assuming that upland populationscannot be absorbed in the lowlands for decades. If it is to be regardedas the lead agency for general management of the uplands, DENR therefore needs at least to stimulate thinking and commitment of resources by other government agencies to meet the needs of upland communities for services, livelihood opportunities, and general cultural development. Most such services should be supplied by local governments, which should be encouraged (and financed) to expand their administrativeand service apparatusinto such communities.

6.38 Upland AgXiculture. Because of its capacity for providingbasic subsistanceand cash income, annual cropping will continue to play a major role in livelihood for upland populations. The long-run objective of government agencies should be to promote settl.edupland agricultureusing sustainable techniques which are not only productive but also maximize retention of soil and water. In the short run, *identificationand promotion of any and all technical improvements leading in the proper direction should be the main task of ur'.andextension work. Emphasis should be placed on techniques adoptable ..ith minimal subsidy because of profitabilityto the farmer, and on widesoread adoption, not unreplicated demonstration. Agroforestry - the combination of woody perennial and annual crops - must be measured against alternativeconservation techniques on these criteria.

6.39 Manag2ment gf Productive Forests. DENR policy towards those remaining dipterocarp forests open to commercial logging is based on a strategy of selective logging combined with regenerationusing the origi- nal species (para. 5.25). This is not justified by conventionaleconomic analysis, and conflicts with the financial interest of Philippine loggers in a strategy based on an initialharvest of all merchantable timber suc- .eeded by quick rotations of lower value trees - implying clearcuttingand reforestion following an industrial trea plantation approach. However, DENR's policy can be justified if it reflects a Government political com- mitment to transfer natural resources intact to future generations. The problem is to determinemethods of enforcing it, in view of the conflicting interestsof loggers and the weaknesses of DENR field operations. Toward this end, the followingmeasures should be considered:

(a) DENR should reform its methodology for estimating the Annual Allowable Cut, in the light of new data on timber inventory before and after the first cut, with the objective of obtaining truly sustainabileharvesting;

(b) site management practices should be based on highly selective harvesting permitting natural regeneration of the residual without costly enrichment planting, which should be enforced through the recently-imposedforest renewal deposit; - 102 -

(c) governmentshould adjust the incentivestructure faced by loggers to make it as consistentas possible with sustainableharvesting, through full rent recovery from stumpage fees, a fee structure (or co-production revenue sharing arrangement)which minimizes waste and site damage (para. 5.71), reduction of the fixed cost overhead born by loggers through removal of requirements to maintain processing requirements and government assumption or sharing of road constructioncost (para. 5.27), and promotion of more labor-intensivelogging methods (para. 5.29); and

(d) enforcement of regulations should be strengthene!tdby reducing dependenceof field operationson logger cooperation (para. 6.17 a-c).

6.40 Labor-IntensiveForestry. This should be promoted to the extent economically feasible, and policy biases (such as tariff advantages on machinery used in extraction) should be detected and removed or offset. Labor-intensive harvesting methods, such as caribao logging, and the associatedconcessional arrangements, such as for community forestry, are at minimum recommendedfor commercially"unproductive" or residual forests, critical watershedsor fragile environments,and for reserves where highly selective thinning or harvesting is necessary for conservationpurposes. They may not be feasible for large logs in first-cut ooerations. More generally,compared to mechanizedmethods, labor-intensiveoperations have lower fixed costs but possibly higher variable costs. This would be consistent with small concessionsizes and more selectiveharvesting.

6.41 Fuelwood Forestry. At present, pure fuelwood plantations or woodlots are not financiallyviable, because of low fuelwood prices, yet industrialand household demand will continue to increase simultaneously with declines in available supply. Eventuallyprices are likely to rise and eradicate the cost advantageof fuelwood relative to substitutefuels, which may make industrialplantings profitable, but equally will add to incentivesto cut residual supplies. Measures can, however, be taken now to improve future supplies. Insofar as current fuelwood prices are depressedby the free availabilityof supplies from public land, the social opportunitycost exceeds market prices and subsidies to fuelwood planting are justified (to what extent remains to be determined). If restricting access to fuelwood on public land, or extractionof rents, fees, or taxes on fuelwood harvested from public land, are rejected by Government as socially-unacceptable options, the best remaining option is to rely on the jointnessof fuelwoodwith pulpwood or timber production,or even to empha- size species appropriatefor fuelwood in the reforestationprogram. As the volume of demand for fuelwood at present and in the future overwhelmsthe demand for other wood uses, maintenance of this element of the natural resource base for future generationsought to take priority over hardwood species.

6.42 Financing Private Plantation Forestry. Although there is commercialinterest in plantationforestry, may be contingenton provision of long-term finance (ten years or more) at interest rates considerably below market levels. The demand for interest subsidiesapparently reflects the risk aversion of the commercialsector, rather than low expected rates of return to such investments.At the moment, long-term finance is not generally availablefrom the banking system even at market rates - there is - 103 -

thus an unfilled need for financial intermediation between short-to-medium term private sector lending sources and the long-term financing requirements of tree ilantations. The case for an interest rate subsidy depends on demonstration of social benefits in excess of prlvate benefits. Because plantation forestry does not always reduce soil erosion, and downstream damage may or may not be significant, a Rrimafacie case for such subsidies cannot be made. A better case could be made for public sharing of both the risks and returns involved in plantation forestry through equity investments or lending guarantees. Joint public-private equity investments in plantation forestry should be considered as an alternative (or supplement) to debt finance. A foundation or development fund would have to be establishel to manage such investments. Further examination of the feasibility of thts approach is beyond the scope of this study.

Coastal Progr Recommendations

6.43 General IS&MZy. The main coastal resources - the coastal strip and nearshore fisheries - are already subjected to excessive pressure. Rather than "intensification" or "increased effort", to use the fisheries terminology, reduction of effort gr pressure gn the resgUrces through introduction gf common-Dronerty management syatems should be the main thrust of strategy; this is likely to increase total production and labor productivity. Withdrawal g;E labor -force from .activitie,s dependent gn. .oastal resources, i.e., absorption into other production activities is a related objective. If population growth is not reduced, the strategy is unlikely to succeed. The second thrust of general strategy would be to makeo access tow l res e more eguitable. y limiting. redistributing gX s1nAm) enfrrL.g access rights. This may involve some privatization of common access resources, and also promotion of labor-using fishing techniques even if they are not the most economically efficient. 6.44 Labor Abso2rti . Fishing is normally a part-time seasonal occupation for coastal farmers, or vice versa - i.e., fishermen find seasonal employment in agriculture. This is partly due to seasonal complementarity between these two types of activity - agriculture is mainly a monsoon season activity and fishing a dry season activity. Prospects for intensification in agriculture are far better than in fisheries, so logically measures to encourage intensifisation should be concenrated in agriculture in order to retain or attract labor which would otherwise flow into fisheries. However, which measures would have the desired effect requires careful consideration. For example, land distribution under CARP might be helpful if landless fishermen were targeted as beneficiaries (as opposed to existing tenants, who may or may not be part-time fishermen. However, there is not much evidence that CARP in the lowlands will result in substantial improvement in labor absorption. Intensification of dry- season land use through irrigation would have an unambiguously positive effect by creating an alternative demand for labcr during the normal fishing season. Investments in otherwise-feasible irrigation schemes targetet gn ,areas wherX nici2al fiisherih om=1m=t , ighieet thus may reduce pressure on the resource more efficiently than direct investments in fisheries production activities. - 104 -

6.45 eggWLAti2ngf Effort. Reduction of fishing effort, including elimination of destructive methods, requires few additional regulations. Rather, the chief requirementsare enforcement of regulations already on the books, along with provision of alternativelivelihood opportunities as an inducement to voluntary compliance. One issue where a change in regulation is recommended is the problem of "growth overfishing", i.e, indiscriminatecapture of immature fish. The increase of the legal minimum mesh size from 3 cm to 5-6 cm for both commercial and baby trawls, and removal of exceptions when meaningful differentiation of catch is impossible,should be considered: the possible tradeoffs between loss of some species (e.g., anchovies and milkfish fry), costs of net replacement (possiblysubsidized by the Government),and increasedtotal yield require study, possibly in conjunctionwith an experiment or demonstration in a selected fishing ground. PD 704 needs amendment to exclude all gears similar in nature to trawl nets or purse seines from municipal waters. Similar, albeit perhaps less stringentregulations, might be consideredfor stationary fish traps. Most destructive methods - including coral harvesting, blast fishing, cyanide use, and muro-ami - are already prohibited through legislationor administrativeorder. Reduced effort can also be obtained through proper pricing of use rights: fees for commercial fishing and rentals for fishpondsshould be increased,following review of the existing fee structure.

6.46 Enforcement. Aside from the organizational changes in enforcementmechanisms discussedabove, priority of emphasis of enforcement efforts should be on prevention of (a) coinercial fishing in municipal fishing grounds; (b) use of small mesh sizes; (c) blast fishing; (d) cyanideuse; (e) nauro-amifishing on nearshore reefs; and (f) harvesting of live corals, in roughly that order. The equipment inventory of DA field operations should be reviewed to determine if the kinds, amount, and distribution by enforcement site are adequate to the task of maritime enforcement (relevantmainly to commercialfishing). If local DA fisheries officers cannot be armed, then a cooperativeenforcement program with the Coast Guard should be developed and appropriatelybudgeted. Mesh size restrictionsare most easily enforced through inspectionsin port of gear and fish landings. Blast fishing, cyanide use, and muro-ami could be reduced by choking off the sources of finance and material inputs - probab- ly requiring some well-publicized prosecutions of individual financiers/suppliers,followed up by a system of rewards for information leading to the convictionof violators.

6.47 AlthrnmatveCoastal Livelihoo Activities. There is a dearth of technicatly-and economically-provenproduction activities based on coastal resources to offer the small-scalefisherman in place of decreased effort in fishing. As such activities are desperately needed as incentives to support regulatory programs, this is a high priority area for research, experimentation and careful evaluation. As with agroforestry, pre- :equisitesfor wide.spreadadoption of such production activities is likely to include secure tenure and sources of capital, as most candidate activities involve fairly long gestation periods. The present menu of candidate activities, in addition to activities r3lated to the tourist trade, includes mangrove replanting/maintenance,artificial reefs, and various forms of mariculture. A lesson from CVRP is that multiple types of these activities should be introducedon a communitybasis, in conjunction witk oAVsJL.^tLonal effort4 to Introduce common-property management - 105 - regimes. Otherwise potential incentives for participatorymanagement are wasted, and difficultdistributional problems may arise, as there are more fishing families than any individual type of activity can support. Recommendationsfor these activitiesare as follows:

6.48 Mangros. The prehibition against conversion into fishponds should continue, and enforcementshould be strengthened. Cancellationof outstandingconversion permits, or licesses for idle fishponds should be considered,and license fees raised to capture full economic rents. The potential for using non-mangrove lowland for aquaculture development is significant, and land use capability surveys are needed to identify brackish w4ter fishpond sites at higher elevations beyond the intertidal zone or in marginal unforested lands where there is a varying degree of salt intrusion or salt beds. A general program should be developed for restricted titling or long-term leasing of both partially degraded and entirely denuded rmangroveareas (including idle or partially-developed fishpond areas) for replanting and sustained production as a source of firewood and mari-silviculture(para. 5.51). A similar program should be applied to undegradedor second-growthmangroves, although perhaps based on common-propertymanagement systems organized,at the communitylevel.

6.49 Coral Reefs. The existing prohibition on use of poison in fishing.which should be enforced primarilyby testing of exported aquarium fish and penalties on exporters,may be reinforcedat the community level by continued implementationof a training program in the use of fine mesh nets and related management procedures for fish collectors. The prohibitionof harvestingof live coral also must be enforced at the export level, particularily by prevention of smuggling. Blast fishing can be detected from the marketed product with proper equipment,and the catch can be confiscated. The need is for staff, budget, and particularilyDA/BFAR and municipal govertment determination to enforce the prohibitions. Fishermenueed also to be educated about the value of live coral to their livelihood.

6.50 Artificial Reefs. These are recommended, not so much as production-increasingdevices, but as means of (a) excluding trawlers from nearshore fishing grounds (where this is a problem), (b) "privatizing"the resource, to limit the numbers of coastal fishermen,and (c) providing a productivity-increasingnucleus around which more extensivecommon property management schemes may be constructed (i.e., an incentive for individual participation). Research to establ)oh benefit-costratios, and optim'ze designs for cost, durability, nutrient- and fish-aggreg.tionpxoperties, volume and spacing should be supported.

6.51 Mariculture. Priority should be given to applied research to develop production-technology for the higher-value and exotic species identified as promising. Appropriate tenure instruments for control of seabed and shoreline areas need to be defined and evaluated, to promote user investments in mariculture. Resources with high potential for mariculture, with recognized domestic and export markets, are molluscs (abalone, scallop), echinoderms (sea cucumbers, urchins), crustaceans (lobster,blue crab), seaweeds, and fiab (grouper,snapper, sea bass, and ornamentalfish). - 106 -

6.52 Tourim. Scenic views of the sea, exceptional beaches, living coral reefs, the presence of islands, or unusual geological formations create opportunities for cottage tourism, and tourism development can reinforce sustainable resource management and habitat protection. At least a handful of such sites, chosen on the basis of a combination of environmental rationales and income-generation needs, should be targeted for mixed public-private development. There are at present numerous "missed opportunities"for locals to capitalize on the tourist trade by provision of tourist information,water taxis, selling of curios, guide services, tourist accommodations, and other facilities. However, successfuldevelopment of tourism requires external service support in such areas as transport,communications, power, and informationprovision. 6.53 Alternativesfor CommercialFLheries. The brunt of income sacrifices, in the interest of reducing effort without suppressing the small-scale municipal fisheries sector, must be born by commercial fishermen. Government should attempt to partiallyoffset these sacrifices through assistance in expanding the range of commercial fishing, including assessment of potential in underfished areas such as the Palawan Barrier Reef and the Camarines Norte Reef Barks and identificationof appropriate gears for these and other more difficultareas.

EstablisbmentQf n Integrate Protecte4Areas SZstem

6.54 The Government should protect for the benefit of future generations a representative selection of the remaining, relatively undegraded habitats for flora and fauna native to tropical forests, mangrove swamps, and coral reefs. This requires that the Government:

(a) identify appropriate sites for preservation, based mainly on considerations of biodiversity, size, ability to protect from degrading activities, and tourismvalue;

(b) provide the budgetary funds and programs to gradually upgrade management of parks and reserves, beginning with a small number of high-prioritysites; and

(c) protect priority sites from degradation by existing and new occupants, largely by prevention of illegal logging, kaingin, forest fires, and hunting and gathering activities (including fishing, within marine reserves).

6.55 The DENR has accepted the need to create an Integrated Protected Areas System for the Philippines, with assistance from domestic and internationalNGOs, in order to pursue the above objectives. This cannot be accomplishedovernight, but requires a sequence of actions roughly as follows:

(a) following an initial priority ranking agreed between DENR and NGOs, carry out aerial surveys of land uses and ground review of infrastructure and personnel for existing parks and reserves;

(b) carry out a similar review of sites outside the present protected areas system, which could fill gaps or better serve the purposes - 107 -

of that system. Representation of lowland forests, freshwater swamp, mangrove, tropical pine forest, and the marine environment should be given special consideration;

(c) based on the above reviews, construct an overall IPAS priority ranking combining existing and new sites; determine the approximate area and boundaries of high-priority new sites an.' adjustments (expansion or contraction) required to existing sites to insure viability; identify buffer areas as appropriate;

(d) prepare a basic management plan for each park and corresponding estimates of budgetary requirements, including adequate provision for personnel, operating expenses, infrastructure development, and programs to gain the support of existing occupants;

(e) based on consideration of priority rankings, budgetary costs, and likely availability of resources from the budget and external donors, segregate the list of sites into first, second, and lowest ranking groups, and prepare recommendations for the disposition of the lowest ranking sites;

(f) prepare enabling legislation for an IPAS, which should remedy the lack of clarity of definition and objectives in existing legislation, and establish the sites and areas to be initially covered by the system, and existing sites or portions thereof to be disposed of;

(g) prepare a long-term plan for upgrading management of the IPAS, and short-term budgetary requests and project proposals for external donors;

(h) carry out ground surveys of park aud reserve boundaries, along with a census and socioeconomic survey of the occupying population; and

(i) initiate training of management and staff for the IPAS, and programs for dealing with the resident population. 6.56 Public Investment Needs. The strategy presented above minimizes the requirement for additional public investments by emphasizing institutional and policy changes to create a proper regulatory and incentive environment for private action. Moreover, the increased government revenues derivable from better rent recovery on public land - especially stumpage fees (which should total about P 3.6 billion, or US$ 180 million per year) or equivalent co-production revenues - would provide the wherewithal for an expanded natural resource renewal and preservation program, and arguably s',ould be earmarked for this purpose. Ultimately, if improved tenure rights or titling of public land results in improvements, local governments should receive a share of any rental or tax revenues which result; similarily, regulatory rights transferred to local governments should include the right to retain fees collected, providing sources of revenues for local resource management efforts. In addition, grants and concessional loans from international donors would be readily forthcoming for a well-planned program backed up by institutional and policy reforms. A recent ADB loan of US$ 120 million, to be disbursed over - 108 -

two years mainly for contract reforestation;the US$ 25 million World Bank- financed Central Visayas Regional Project; and a prospective New Zealand grant of about US$ 15 million for industrialtree planting in Mindanao are examples of such assistance.

6.57 Drawing on the above sources of incremental funds, a public investment program to upgrade ratural resource management in the Philippines might include the following elements (the budgetary requirementsin most cases remain to be determined):

(a) reforestation of critical watersheds at a rate of at least 100,000 ha each year, costing about P 1.9 billion p.a.;

(b) nursery estab-.shment and subsidization for production and distribution of plant propagation materials required in upland conservationfarming and agroforestry;

(c) provision of equity to establish an extra-governmental development fund which would (1) subsidize community-basedNGO and local governmentprojects to improve resource management and enhance livelihood among upland farming and artisanal fishing populations,and (2) support, through some mix of risk-sharing equity investments, guarantees, and direct lending, private- sector-managedefforts to expand tree plantationsand tree crops in upland areas throulghnuclear estate or contract farming schemes;

(d) vehicles, boats, horses, communicationand monitoring equipment required to upgrade the efforts of regional line agencies and local governmentunits charged with enforcementof national and local resource use regulations in forestry and fisheries, and with technicalsupport to upland agriculture,community forestry, and coastal livelihoodactivities;

(e) infrastructurefor an expanded and improved national parks and biological reserves system;and

(f) a program of high-priority research (see Annex 4) designed to clarify the natural resource management issues highlighted in this study and provide the quantitativeparameters required for sound planning.

6.58 In addition, budgeted recurrent costs of government operations -ould have to be increasedto provide support for:

(a) salaries, training, and travel expenses (including fuel) for a major expansion of field operationsof DA in uplands areas, BFAR in coastal areas, DENR's Integrated Social Forestry program and Protected Areas and Wildlife Bureau, in parallel with the expansionof their responsibilities;and

(b) survey, planning and administrative work dictated by the recommendedinstitutional and policy changes. - 109 -

ANNE J.. SPO MUIpNr OF LAN USE IN ME PHILIPPINES/1

1. A study of land use in the Philippinesusing SPOT imagery was carried out in support of the ffARM study. Technical assistance was provided under contract to the Bank with the Swedish Space Corporation, financed by a grant from the Swedish Government (BITS). Data from the SPOT satellite was used for resource assessment anw mapping of the natural conditions in the country with an emphasis on evaluating the conditions of forests, extensive land uses in the uplands, intensive (agricultural)land use, and marine areas.

2. The main justification for the study was that existing statistics on the state of natural resources were widely regarded as untrustworthyor out of date, and some types of statistics simply were not collected. Although a forest inventoryhad been underway for several years with assistance from the German government, it covered only public Forest Land, was not yet complete, and would yield no informationon other land uses. The main product of the study can be described as a "snapshot" of land uses in the Philippines in 1987. This may serve as a baseline for monitoring the performance of DENR's decentralizing natural resource management system, as well as suggestingthe rate of degradationprevailing in the immediate past. It also serves to pinpoint the locations of remaining forests and of severely degraded areas, pro-vidinga basis for geographicalprioritization of resource managementprograms.

3. References to the SPOT survey results 8nd comparisons with earlier work are scatteredthroughout the text, and wi-llnot be replicated here. Tables attached to this annex summarize the aggregate areas identified for each category of land use by province. The land use map included in the ffARM report provides a summary visual interpretationof results, which have also been received by both the Bank and Government in the form of thematic maps and colour imagery on a scale of 1:250,000 and computer tapes of SPOT scenes on a scale of 1:100,000.

4. DENR's ongoing land classificationexercise is supposed to determine areas suitable for agriculture, agroforestry and other uses. With the newly-availablefor%:st inventory data and the additional SPOT satellitemapping of forest resv'trces,it is possible for the first time to carry out a realistic planning exe-Aise as a basis for determining the commitmentof land and investmentresources to the forestry sector.

Methodology

5. The SPOT study employed both visual interpretationand (as a limited demonstration) digital classification in its interpretation of data. The object of the latter was to eliminate the subjectivityinvolved in visual classificationand delineatemore classes and sub-classesof land use than would be possible in using only visual interpretation.

LI A more detailed descriptionmay be found in Swedish Space Corporation, Hauting the Natural Conditions gf Srhn fhiliRRines: Final Report (Solna, Sweden:April 30, 1988). -110

6. The SPOT satellitewas first programmed on March 18, 1987, to receive scenes from the Philippines. To obtain a maxiium amount of scenes in the short cloud-free time available, multiple viewing was practiced. The mirrors of the satellitewere tilted up to the maximum 26 degrees so that orbits outside land could be used for registrationof land areas. The first scene was received at the SSC station in Esrange, Sweden, on March 20, 1987, and altogether i62 scenes were acquired before the cloudy season forced the satelliteprogramming to be terminated in mid-July. The second session began in mid-September,1987, and the satellite was programmed to cover the remaining areas region by region with due considerationgiven to the periods in which they were likely to be affected by cloud cover. The last scene was acquired at Esrange on February 26, 1988.

7. Collection of ground truth data and local advice and information to the extent possible in various parts of the Philippinesproceeded from April 27 to June 12, 1987, and has served as a basis for the visual interpretationand digital classificationwork. Seven ground surveys and aerial photoes were used as references. DENR's NAMRIA assisted throughout the field work through provision of staff members, LANDSAT imagery, and maps.

8. After the ground truthing,visual interpretationof the 190 SPOT scenes was carried out in Sweden at SSC offices. This included classificationand interpretationwork, precision correctionand mosaicking of SPOT scenes, scanning of interpretationmaps and photographicwork. The interpretationwas made on 1:100,000 individual SPOT scenes, which were then reduced to 1:250,000 and mosaicked together manually. Supporting material consisted of the slides taken during the reconnaissances, topographic maps, forest resources condition maps and LANDSAT satellite images.

9. The legend for the interpretationof data was based on four groups of land cover classes,namely forest, extensive land use, intensive land use, and non-vegetatedland and other areas. There are 22 land cover classes, two symbol classes and two marine classes (see Table 1 for a full list of categoriesand statistics).

Results

10. The Philippinesis divided into 12 regions which in turn are further divided into 74 provinces. For each province, the area was calculated for each of the 22 interpreted land cover classes and the 2 marine classes. In total, 98.2 percent of the land area of the Philippines was classified.

11. Forest in the study is defined as forest trees and reproductivebrush areas with less than 10 percent cultivatedor other open areas. Four forest types have been expressed on the land use map at the end of the ffARM report. The Dipterocarpforests cover the largestportion of forest lanl up to approximately800 meters above sea level. This type was divided into two categories,those forest areas in which mature trees cover more than 50 percent, or closed canopy, and those areas covered by less than 50 percent mature trees, or open canopy. On the map, mossy forest is included in the closed canopy category. Pine forest occurs at - ill -

high altitudes (greater than 700 meters) in areas with a distinct dry season - mainly in northern and central Luzon. Mangrove forest occurs in tidal zones with brackish water. Forested land accounts for 25 percent of total land araa in the Philippines.

12. The distinctionbetween primary and secondary forest in this study is defined as that between closed and open canopy forest. Primary forest thur refers to well-stocked forests or, at high altitudes, fully closed forests. Such a definition incorporates areas which have been subject to a certain amount of human activity, and which therefore should not be considereduntouched forests.

13. Small areas that could be defined as forest in a more detailed survey are excluded from the SPOT definition because they are either too small to be included due to the scale of the presentationor they are in a stage of degenerationdue to the agriculturalactivities in the surrounding areas. Another exclusion from the "forest" category is areas where trees and brush are mixed with agriculturaland degraded land.

14. Extensive land use was defined as areas with more than 10 percent open/cultivatedland ard less than 70 percent cultivated land. This forms a broad class between forest and intensive land use, and accounts for 41 percent of national land area. This classification includes large areas of degraded uplands. The land use map divides this into cultivated area mixed with brushland and grassland, and grassland, with grass covering more than 7C 2ercent of the area. This also includes cultivated areas within forest, identifiedon regional thematic maps by a fire symbol representing50 ha of clearedarea.

15. Intensive land use was defined as areas where more than 70 percent of the land is cultivated. Land under intensivecultivation makes up 34 percent of the national total area, and is classified into coconut plantations, other plantations,arable land (mainly cereals and sugar), cropland mixed with coconut plantations, cropland mixed with other plantations,and fishponds.

16. Non-vegetatedland includes eroded areas, quarries, other barren land, and riverbeds. Built-up areas, marshy areas and swamps, lakes, and coral reefs are all classified as Other, but are separately indicated on thematic maps. Siltation patterns, where transported materials alter reflectancefrom the water, were also identified.

Co2parisons.Limitations. and Extralolations

17. A number of difficultiesarise in the comparison of SPOT land use data with other data sources. These derive from (a) the limitationsof the SPOT satellite reconnaissance technology; (b) the conceptual differencesbetween aerial and ground based statistics;(c) the weaknesses of the Philippines statistical system Der se; and (d) the general difficultieswhich confront any statisticalsystem trying to describe land use patterns as fragmentedand mixed as those in the Philippines.

18. SPOT technology is limited by the need for cloud-free images, which can only be acquired during the dry season. Detection of ongoing - 112 .

soil erosion is difficultduring this time, as is measurementof cultivated area, which may be difficult to distinguishfrom grasslandor pasture land. Limited penetration of water, especially at high tide, light reflection from water surfaces when vieued at an oblique angle, water turbidity, and inclusion only of SPOT scenes containing land in combination resulted in the identificationof only 3,500 sq km of coral reef areas, compared to rough estimates by others of 15,000-30,000 sq km. The latter may be exaggerated,but the SPOT results are so obviously incomplete that they provide no meaningful check on back-of-the-envelopecalculations.

19. Difficulty distinguishingbetween different sorts of forest cover is another technological limitation of SPOT. Official statistics include three categories of forest: primary, residual stands (or secondary),and reproductivebrush. The last refers to little more than seedlings mixed with brush and grass, and neither SPOT nor aerial photography can reliably distinguish this category from general grass or brushlands. Similarily, SPOT cannot distinguish between primary and secondary forest, only whether or not the canopy is closed. If pine forests are not very dense, crown coverage appears low because of the shape of trees and the fineness of needles, causing them to be classified into non-forestcategories. Thus SPOT findings differ from those of the forest inventoryproject: SPOT reports 81,000 ha of pine forests,while the German inventory indicates 239,000 ha. Accurate differentiationalso cannot be made between closed dipterocarp and mossy forest, or between normal or stunted trees. Consequently, the area of mossy forest has been underestimated, and that of closed canopy dipterocarp correspondingly overestimated. If the commercial potential of a forest needs to be accurately assessed, then satellite reconnaissancemust be supplementedby a ground inventory.

20. The Philippinesdoes not publish an estimate of cultivatedarea, and its censuses of agriculturecould be afflictedby seriousbiases due to difficult in accuratelyspecifying a sampling frame in the context of dense mixtures of crops, tree crops, grasslands, and forests. SPOT land use classificationsand the resultinglaps and statistics may have utility in devising a better sampling frame. Although the SPOT survey did not take identificationof cultivated area as an otjective, it is possible to estimate this by applying to the land use statisticsrough estimatesof the proportion of each category of land used in cultivation. Since the category "extensive cultivation"is mainly co-extensivewith farming on steeply sloped land, it is also possible to roughly estimate the area cultivated in the uplands (keeping in mind that the existence of shifting cultivationraises questionsabout the appropriatedefinition of cultivated area, which have here been bypassed).

21. Table 4 presents these estimatesby land use category, and Table ' aggregates the data to distinguish upland (extensive) land uses from annual and plantation (tree) crops. The total estimatedcultivated area of 11.3 million ha, or 38% of total land area (consistingof about 13% upland, 8% plantation crops, 16% annual crops, and 1% fishponds) is at least plausible, although the margin of error is certainly wide. The estimates of upland cultivated area can also be used to estimate the numbers of upland cultivatorsas about 8.5 million nationwide,using a rough guess at average cultivated area per upland farm and persons per family. Because - 113 - farm sizes differ regionally, the provincial and regional population estimates should not be taken too seriously.

22. Due to the weakness of the Philippinestatistical system, it has generallynot been possible to compare SPOT resultswith earlier statistics in order to derive measures of change in land use. Comparison of results of a survey done in the early 1980's using a combinationof LANDSAT photos and military aerial reconnaissancewith SPOT statistics reveals many inconsistencies in the data, even though national or even regional aggregate statistics appear consistent. For example, in some provinces, forested areas appeared to have doubled in five years, while in othera the forests seemed to have disappeared. In Palawan, the SPOT figure for c7losed dipterocarpforests as a percentage of the reported early 1980s figure is 233 percent.jl The SSC suggests that the resolutionof the LANDSAT photos from which the earlier interpretationwas performed was much inferior to SPOT scenes. Whatever the reason, clearly comparisons over time require great care. Improving technology may cause difficulties in comparing satellite-basedsurvey results over time; if making such comparisons is envisioned, a special effort may be necessary to make present analytical work comparablewith earlierwork.

/1,, However, the SPOT results for Palawan are quite consistentwith 1972 LANDSAT interpretations,indicating a loss of about 369,000ha of forest in 15 years, one-half of which is attributable to logging of closed canopy forest and the remainderto destructionof the residual. ANMEX - 114 - Table 1

PHILIPPINES

ffARM STUDY

SPOT Land Cover Statistics for the Entire Country

Code Category km2

Fp Pine forest 812 Fy Mossy forest 2,455 Fdc Dipterocarp forest, closed coaopy 24,345 Fdo Dipterocarp forest, open canopy 41,940 Fm Mangrove vegetation 1,494

Es Cultivated and other open areas in forest 304 Eg Grassland 18,129 Ec Cultivated area mixed with brushland and grassland 101,143

Epc Coconut plantations 11,326 ipo Other plantations 908 Ic Arable land, crops mainly cereals and sugar 43,923 Imc Cropland mlxed with '.oconutplantations 37,478 Imo Cropland mixed with other plantations 3,652 Ifm Fishponds derived from mangrove 1,952 Ifo Other fishponds 101

Ne Eroded areas 7 Nq Quarries 86 Nr Riverbeds 818 No Other barren land 103 B Built-up areas 1,314 M Marshy areas 1,035 L Lakes 2,054

Total Classified Land Area 295,379

(Unclassified land area 5,462)

Siltation patterns in lake or along the coast 284 Coral reefs 3,527

Classified Area 299,191

Distribution in Percentase Amon,.

Forested land, classes Fp to Fm 25 Extensively cultivated land, classes Es to Ec 41 Intensively cultivated land, classes Ipc to Ifo 34

Source: Swedish Space Corporation, Mappin% of the Natural Conditions of the Philippines (Solna, Sweden: 1980 -115 - ANNEX I Table 2

PHILIPPINES

ffARM STUDY

Classification of Land Area from SPOT Survey ('000 ha)

Land cover Area

Forest 7,226 Pine 81 Mossy/unproductive 246 Dipterocarp 6,629 Closed 2,435 Open 4,194 Mangrove 149 Other -

Extensive Cultivation 11,958 Open in forest 30 Grassland 1,813 Mixed /a 10,114

Intensive Cultivation 9,729 Plantation 5,336 Coconut 1,133 Other 91 Coconut and cropland 3,748 Other and cropland 365 Cropland 4,392

Fishponds 205 Fishponds from mangrove 195 Other fishponds 10

Other Land/Lakes 542

Unclassified Area 546

Total 30,205

/a Mixed grass, brush, plantation and other crops.

Source: S.S.C., 1988. - 116 - ANNEX 1 Table 3 Page 1

PHILIPPINES

ffARM STUDY

Forestand NonforestLand Uses ('000 ha)

Dipterocarp Total Non- Unclas- Total Pine Mossy Closed Open Mangrove Other forest forest sified land

Region I 75 4 28 182 - - 289 1,868 - 2.157 Abra 3 79 7 71 - - 84 313 - 398 Benguet 47 2 1 8 - - 57 209 - 266 Ilocos Norte 1 - 8 36 - - 45 295 - 340 Ilocos Sur I - - 8 - - 10 2'48 - 258 La Union - - - 2 - - 2 148 - 149 Mt. Province 24 1 9 44 - - ;8 132 - 210 Pangasinan - - - 14 - - 14 523 - 537

Region II 6 112 484 862 6 - 1,470 2,092 78 3,640 Batanes ------21 21 Cagayan - 14 116 207 5 - 342 501 58 900 Ifugao 2 5 6 43 - - 57 195 - 252 Isabela - 82 203 170 - - 455 612 - 1,067 Kalinga-Apayao 3 5 113 215 - - 335 370 - 705 Nueva Vizcaya 2 1 11 107 - - 121 269 - 390 Quirino - 5 36 120 - - 161 145 - 306

RegionIII - - 89 203 2 - 294 1,529 - 1,823 Bataan - - y17 13 - - 103 - 137 Bulacan - - 45 21 - - 66 197 - 263 Nueva Ecija - - 8 52 - - 59 469 - 528 Pampanga - - - 8 1 - 9 210 - 218 Tarlac - - 3 39 - - 42 264 - 305 Zambales - - 13 71 - - 84 287 - ,71

Region IV - 114 662 512 47 - 1,334 3,331 176 4,840 Aurora - 28 75 15 1 - 258 66 - 324 Batangas - - - I - 1 316 - 317 Cavite - - - 1 _ 1 128 - 129 Laguna - - 1 8 - - 9 199 - 208 Marinduque - - - - 3 - 3 93 - 96 Metro Manila - - - 2 - - 2 62 - 64 Occidental Mindoro - 9 13 37 1 - 60 522 6 588 Oriental Mindoro - 5 7 13 2 - 27 410 - 437 Palawan - 72 491 145 33 - 741 631 118 1,490 Quezon - - 70 118 7 - 195 624 53 871 Rizal - - 4 13 - - 17 166 - 183 Romblon - - - 20 1 - 20 115 - 136

Region V - - 11 97 11 - 118 1,645 - 1,763 Albay - - 7 1 - 8 247 - 255 Camarines Norte - - 2 9 3 - 14 198 - 211 Camarines Sur - - 4 26 3 - 33 494 - 527 Catanduanes - - - 38 1 - 39 113 - 151 Masbate - - - - 2 - 2 403 - 405 Sorsogon - - 5 17 2 - 24 191 - 214 -117 - ANNEX I Table 3 Page 2

Dipterocarp Total Non- Unclas- Total Pine Mossy Closed Open .Mngrove 0ither forest forest sified land

Region VI - 2 41 95 3 - 140 1.870 13 2,022 Aklan - - 12 18 - - 30 152 - 182 Antique - - 7 36 - - 43 197 13 252 Capiz - - 7 8 2 - 17 246 - 263 Iloilo - - - 12 - - 13 520 - 532 Negros Occidental - 2 15 21 1 - 38 755 - 793

Region VII - 35 9 - 45 1,450 - 1,495 Biliran ------Bohol - - - 17 9 - 25 387 - 412 Cebu - - - 2 - - 2 507 - 509 Negros Oriental - - - 17 1 - 17 523 - 540 Siquijor - - - 1 - - 1 34 - 34

Region VIII - 3 146 384 26 - 559 1.582 1 2,142 Eastern Samar - 3 93 6 177 257 - 434 Leyte - - 5 77 4 - 85 541 - 626 Northern Samar - - 1 53 7 - 61 289 - 350 Southern Leyte - - 5 21 - - 26 147 1 174 Western Samar - - 58 141 10 - 210 349 - 559

Region IX - 1 58 235 25 - 318 1,275 276 1,868 Basilan - - - 12 6 - 18 111 4 133 Sulu ------160 160 Tawi Tawi ------109 109 Zamboanga Del Norte - 1 26 145 - - 172 490 - 662 ZamboangaDel Sur - - 32 77 18 - 128 674 3 805

Region X - 1 350 678 11 - 1,040 1,790 3 2,833 Agusan Del Norte - - 8 57 2 - 66 193 - 259 Agusan Del Sur - 1 174 417 - - 592 304 - 897 Bukidnon - - 120 102 - - 222 608 - 829 Camiguin - - - 1 - - 1 22 - 23 Misamis Occidental - - 11 13 1 - 24 170 - 194 Misamis Oriental - - 8 65 - - 73 284 - 357 Surigao Del Norte - - 30 23 9 - 62 210 3 274

Region XI - 9 321 637 8 - 975 2,194 - 3,169 Davao Del Norte - 7 62 193 - - 261 552 - 813 Davao Del Sur - - 67 54 - 121 517 - 638 Davao Oriental - 1 68 113 2 - 184 332 - 517 South Cotabato - - 66 115 - - 181 275 - 455 Surigao Del Sur - 2 58 162 6 - 229 518 - 747

Region XII - - 245 275 3 - 523 1,807 - 2,329 Lanao Del Norte - - 62 1 - 83 226 - 309 Lanao Del Sur - - 136 35 - - 170 217 - 387 Maguindanao - - 15 33 - - 48 457 - 501 North Gotabato - - 32 31 - - 62 594 - 657 Sultan Kudarat - - 43 115 1 - 159 312 - 472

National Total 81 246 2,434 4,194 149 - 7.105 22,433 546 30,083

Source: S.S.C., 1988. - 118 - NE ANNEX I table 4 Page I

PHILIPPINES

ffARM STUDY

SPOT Cultivated Area Eatimater. 1987 ('000 ha)

Cultivated Grass- Mixed Plantations Arable Crops and Fishponds Total tn forest land extensive Coconut Other crops Coconut Other Mangrove Other cultivated

Region I 2 85 320 4 - 362 13 7 Abra 7 10 810 I I9 68 - - 20 - - - - Benguet - 12 50 - - 7 - 2 - - 71 IlocosNorte - 16 48 - - 58 1 - - - 123 liocos Sur - 8 48 - - 49 3 - - - 108 La Union - 2 28 - - 35 2 - - I6 Mt. Province - 8 31 - - 4 - I _ - 45 Pangasinan - 20 47 4 - 189 7 4 6 9 286

Region It 6 105 326 2 - 469 14 6 1 - 928 Batanesa ------Cagayan 1 19 65 1 - 139 10 3 1 - 241 lfugao - 25 31 - - 3 - - - - 60 Isabela 1 22 57 - - 244 4 1 - - 331 Kalinga-Apayao 2 13 88 - - 37 - I - - 141 Nueva Vizcaya 1 22 49 - - 25 - - - - 97 Quirino 1 3 35 - - 20 - - - - 60

Region III 2 72 128 _ - 537 19 6 52 - 815 Bateaan T 6 1-7 7 16 T -5 4-6- Bulacan - 3 18 - - 73 - 3 22 - 118 Nueva Ecija 1 27 26 - - 201 - I - - 256 Pampanga - 3 8 - - 101 - - 24 - 137 Tarlac - 11 19 - - 116 - - - - 146 Zambales - 23 39 - - 30 19 - I - 114

Region IV 5 43 496 414 - 300 409 7 19 Aurora - 1,692 - - 7 10 - 8 - - - 39 Bastangas - - 22 21 - 74 70 1 1 - 188 Cavite - - 6 21 - 42 17 - I - 87 Laguna - - 7 58 - 31 17 3 - - 118 Marinduque - - 17 19 - - 13 - - - 50 Metro Manila - - - - - 7 1 - I - 9 Occidental Mindoro - 22 114 - - 39 22 - 5 - 203 Oriental Mindoro - 4 79 8 - 31 69 - 3 - 194 Palawan 3 8 140 10 - 30 92 - I - 284 Quezon 1 5 55 265 - 18 69 - 8 - 421 Rizal - 2 24 1 - 14 - 3 - - 45 Romblon - - 24 1 - 2 30 - - - 57

Region V 1 31 141 214 - 198 403 - 12 - 1.000 Albay - I - 27 - 25 53 - - - 14 CamarinesNortu - - 19 40 - 2 63 - 3 - 127 CasmarinesSur - 1 51 84 - 81 105 - I - 304 Catanduanes - - 21 1 - 3 31 - - - 58 Masbate - 29 9 7 - 76 102 - 6 - 229 Sorsogon - - 8 75 - 11 44 - 2 - 140 119- IANNEX~~~~~~~~~~~~~~~~~~~~~~~~~~~~~NE I Table 4 Page 2

Cultivated Grass- Mixed Plantations Arable Crops and Fishponds Total in forest land extensive Coconut Other cropa Coconut ther Mangrove Other c ltivated

Regiou VI 20 312 16 - 422 146 2 55 974 !gXxianV' I -i 5 -381 19 - 8 - 74 Antique - 4 40 2 - 17 27 - - - 90 Captz - 3 39 1 49 24 - 19 - 135 Iloilo - 9 87 5 - 115 35 - Is - 266 Negros Occidental - 4 115 3 - 232 42 1 13 - 410

Region VII - 19 289 18 - 102 247 2 8 - 685 BilLran - - - - - Bohol - 4 87 4 - 29 46 - 4 - 174 Cebu - 6 73 6 - 33 147 1 3 269 Negros Oriental - 9 124 8 - 34 47 2 2 - 225 Siquijor - 1 5 - - 6 6 - - - 18

R=gion VIII 2 3 334 141 - 111 187 - 3 - 782 Eastern Samar I - 66 1 1 3 Leyte - I 72 82 - 84 79 - I - 320 jNrthern Samar - - 68 22 - 14 30 - - - 135 SouthernLeyte - 1 34 11 - 8 16 - - - 69 Western Samar 1 2 94 10 - 4 32 - 2 - 145 ! RegtonIX 1 2 175 19 12 70 411 16 25 - 729 Basilan - - 11 1 5 1 50 - 2 Z 69 Sulu _ _ _ _ Tawi Tavi - - - - - ______Zamboanga Del Norte - - 92 7 1 14 134 1 1 - 251 Zamboanga Del Sur - 2 71 11 6 56 227 16 21 410

Region X 3 37 304 9 24 210 244 26 5 - 862 Agusan Del Norte - I 43 T - 4 32 - 2 83 Agusan Del Sur 1 - 54 - 6 41 45 2 - - 149 Bukidnon 1 15 99 - 18 137 - 24 - - 295 uamiguin - 1 2 3 - - 7 - - 13 MisamisOccidental - 5 13 3 - 3 75 - 2 - 101 Misamis Oriental - 9 49 1 - 11 61 - I - 132 Surigao Del Norte - 6 45 - - 14 25 - I - 90

Region XI 3 27 388 83 35 122 352 92 5 - 1.108 Davao Del Norte T 1 96 2T 18 29 I1I 17 1 - 294 Davao Del Sur 1 3 100 40 5 20 88 3 2 - 261 Davao Oriental - - 70 14 - 5 56 16 1 - 163 South Cotabato 1 24 99 8 12 44 15 50 - - 254 Surigao Del Sur I - 23 1 - 23 81 6 1 136

Region XII 1 17 225 43 6 273 262 99 5 - 932 Lanao Del Norte - - 26 T7 - 28 - - 5 Lanao Del Sur - 2 19 10 1 71 3 2 - 108 Iaguindanao - 9 48 7 1 41 77 25 3 - 211 North Cotabato - 3 83 4 - 91 104 31 - - 316 Sultan Kudarat 1 3 50 5 4 42 16 42 - - 162

National Total 26 462 3,439 963 77 3,173 2,708 263 195 10 11,317

Note: Based on the following assumed percentages of agricultural use In each category of land use (in addition, cultiva- ted area - 85X of agricultural use):

- Cultivated areas in forest - jOOX - Grassland - 302 - Mixed cultivation/brushland/grassland - 402 - Coconut and other plantations - 1002 - Arable erops - 852 - Cropland mixed with coconut or other plantations - 852 (50:50 tree crops and annual crops) - Fshponds - 1002.

Source: Computed from land use areas given in S.S.C., 1988. - 120- ANNEX 1 Table 5 Page 1

PHILIPPINES

ffARM STUDY

SPOT Farming Land Use Percentages, 1987

Total Percentages land Total Upland/ Tree Annual Fish- ('000 ha) cultivated excensive crops crops ponds

Regionl 2,157 38 19 1 17 1 Abra 398 27 2- 5 - Benguet 266 27 23 - 3 - Ilocos Norte 340 36 19 - 17 - Ilocos Sur 258 42 22 1 19 - La Union 149 46 20 1 24 1 Mt. Province 210 22 19 - 2 - Pangasinan 537 53 13 2 36 3

Region II 3,640 26 12 - 13 - Batanes 21 - - - - - Cagayan 900 29 10 1 17 - Ifugao 252 24 22 - 1 - Isabela 1,067 31 8 - 23 - Kalinga-Apayao 7':5 20 15 - 5 - Nueva Vizcaya 390 25 18 - 6 - Quirino 306 20 13 - 7 -

Region III 1,823 45 11 1 30 3 Bataan 137 33 17 T 12 3 Bulacan 263 45 8 1 28 8 Nueva Ecija 528 48 10 - 38 - Pampanga 218 63 5 - 47 11 Tarlac 305 48 10 - 38 - Zambales 371 31 17 3 11 -

Region IV 4,840 36 12 13 11 - Aurora 324 12 2 4 5 - Batangas 317 59 7 18 34 - Cavite 129 68 5 23 39 1 Laguna 208 57 4 33 20 - Marinduque 96 53 18 27 7 - Metro Manila 64 14 - 1 12 1 Occidental Mindoro 588 35 23 2 9 1 Oriental Mindoro 437 44 19 10 15 1 Palawan 1,490 21 11 4 6 - Quezon 871 52 7 37 6 1 Rizal 183 25 15 2 8 - Romblon 136 42 18 11 12 -

Region V 1,763 57 10 24 23 1 Albay 255 56 13 22 21 - Camarines Norte 211 60 9 34 16 1 Caw rines Sur 527 58 10 22 25 - Catanduanes 151 38 14 11 12 - Kasbate 405 57 10 14 31 1 So sogon 214 65 4 46 15 1 - 121 - ANNEX 1 Table 5 Page 2

Total Percentages land Total Upland/ Tree Annual Fish- ('000 ha) cultivated extensive crops crops ponds

Region VI 2,022 48 17 4 25 3 Akian 182 iiil5 8 10 z Antique 252 38 18 6 13 - Capiz 263 51 16 5 23 7 Iloilo 532 50 18 4 25 3 Negros Occidental 793 52 15 3 32 2

Region VII 1,495 46 21 10 15 1 Bohol 412 42 22 7 13 T Cebu 509 53 16 16 21 1 Negros Oriental 540 42 24 6 11 - Siquljor 34 52 16 9 26 1

Region VIII 2,142 36 16 11 10 - Eastern Samar 434 26 15 7 4 - Leyte 626 51 12 19 20 - Northern Samar 350 39 20 11 8 - Southern Leyte 174 40 20 11 9 Western Samar 559 26 17 5 4 -

Region IX 1,868 39 10 13 15 1 Basilan 133 53 9 TY 20 T Sulu 160 - - - - - Tawi Tawi 109 - - - - - Zamboanga Del Norte 662 38 14 11 12 Zamboanga Del Sur 805 51 9 17 22 3

Region X 2,833 30 12 6 12 - Agusan Del Norte 259 17177 8 T Agusan Del Sur 897 17 6 3 7 - Bukidnon 829 36 14 4 18 - Camiguin 23 56 12 28 15 - Misamis Occidental 194 52 9 21 21 1 Nisamis Oriental 357 37 16 9 12 - Surigao Del Norte 274 33 19 5 10 -

Region XI 3,169 35 13 11 11 - Davao Del Norte 813 36 12 TY 1T - Davao Del Sur 638 41 16 14 10 - Davao Oriental 517 32 14 10 8 - South Cotabato 455 56 27 12 17 - Surigao Del Sur 747 18 3 6 9 -

Region XII 2,329 40 10 10 19 - Lanao Del Norte 309 44 9 15 19 1 Lanao Del Sur 387 28 5 3 19 - Maguindanao 505 42 11 12 18 1 North Cotabato 657 48 13 11 24 - Sultan Kudarat 472 34 11 8 15 -

National Total 30,083 38 13 8 16 1

Source: Annex 1, Tables 3 and 4. -122 - ANNEX I Table 6 Page 1

PHILIPPINES

ffARM STUDY

SPOT Estimate of Upland Farm Population, 1987

Upland cultivated Estimated farm area ('000 ha)la population /b ('000)

Region I 407 877 Abra 88 189 Banguet 62 133 Ilocos Norte 65 139 Ilocos Sur 56 120 La Union 30 65 Mt. Province 40 86 Pangasinan 67 '45

Reglon1II436 940 Batanes - - Cagayan 86 186 Ifugao 56 121 Isabela 80 173 Kalinga-Apayao 103 222 Nueva Vizcaya 72 155 Quirino 39 83

Region III 202 435 Bataan 24 52 Bulacan 21 45 Nueva Ecija 53 115 Pampanga 11 23 Tarlac 30 65 Zambales 63 136

Region IV 544 1,172 Aurora 8 17 Batangas 22 48 Cawite 6 13 Laguna 8 17 Marinduque 17 37 Metro Manila - - Occidental Mindoro 137 295 Oriental Mindo-o 83 179 Palawan 151 325 Quezon 61 131 Rizal 27 58 Romblon 24 52

Region V 173 372 Albay 33 70 Camarines Norte 20 43 Camarines Sur 52 113 Catanduanes 21 46 Masbate 39 83 Sorsogon 8 18 -123- ANNEXI Table 6 Page 2

Upland cultivated Estilated farm area ('000 F'a) population /a ( 000)

Region VI 333 717 Aklan 33 -72 Antique 44 94 Capiz 42 90 Iloilo 95 206 Negros Occidental 119 256

Region VII 308 664 Bohol 91 T9-6 Cebu 79 171 NegrosOriental 132 285 Siquijor 6 12 RegionVIII 339 731 EasternSamar 67 1M4 Leyte 73 157 NorthernSamar 68 147 SouthernLeyte 34 74 WesternSanar 97 209 RegionIX 177 382 Basllanu 11 24 Sulu Tawi Tavi - ZamboangaDel Norte 93 200 ZamboangaDel Sur 73 157 RegionX 345 742 AgusanDel Norte 44 95 AgusanDel Sur 55 119 Bukidnon 116 249 Camiguin 3 6 lisamis Occidental 17 37 Misamis Oriental 58 125 SurigaoDel Norte 51 110 Region XI 419 902 DavaoDel Norte 97 29 DavaoDel Sur 103 222 DavaoOriental 71 152 SouthCotabato 124 267 Surigao Del Sur 24 52 Region XII 244 525 Lanao Del Norte 27 57 LanaoDel Sur 21 46 Maguindanao 57 123 North Cotabato 86 185 SultanKudarat 53 114 NationalTotal 3,927 8,459

/a Includes cultivated areas in forests and grasslands,and in areasof mixedcultivation/brushland/grassland, fromAnex 1, Table 4 /b 2.6 ha/farmand 5.6 persons/farm. - 124 - ANNEXI Table 7

PHILIPPINES

ffARM STUDY

Comparisonsof Statisticson Forest Cover (-000 ha)

SPOT German LANDSAT Official 1988 inventory/a 1980 /b 1981 /c

Forest 7,226 6,100 8,146 8,651

Pine 81 239 227 193

Mossy/unproductive 246 1,681 1,320 1,759

Dipterocarp 6,629 4,403 6,304 6,588 Closed 2,435 1,042 2,940 2,794 Open 4,194 3,361 3,363 3,794

Mangrove 149 - 175 112

Other - 121

/a RP-GermanForest ResourcesInventory Project. Based on an aerial photo- graphy and ground truthing 1980-88. Covers only classifiedForest Lands, which would exclude as much as 1.4 million ha of "forest"on A&D land. Mangroves not reported.

/b Open canopy treated as synonymouswith "residualstands" or "young growth." Mangrove includes both mature and residualstands, as does Pine. However, "reproduction-brush"here is not counted as "forest."

/c Based on continuousupdating of earlier estimatesof inventorydata, includingolder aerial photos. "Reproductive-brush"excluded from "forest." However, "unproductivedipterocarp" is included in the "other" category along with bauAboo.

Source: SSC, 1988; RP-GermanForest ResourcesInventory Projects, cited in Conrado V. Gulmatico,Results of the Forest Resources Inventory Project (unpublished,1988); LANDSAT from unpublishedcomputer printout;official 1981 from Annex 3, Table 1. - 125 -

ANNEX MQILEROQIN AM YATEEtSHEDDEGRADATION

1. The experimentalevidence on the extent of erosion associated with various upland land uses in the Philippinescomes from localized and non-standardizedstudies of sheet erosion under different forms of land cover.l Such studies are rarely comparable across localities or between times (partly because most of the loss is associated with extreme storm events), and therefore are of little predictive utility. An alternative approach is to quantify the major influenceson soil loss rates in the form of a "UniversalSoil Loss Equation" (USLE, originally developed for modest slopes under temperate-zoneconditions), modified and roughly calibrated for Philippine conditions. Although it is predictivelyuseful and has been adjusted to be roughly consistentwith the measured rates of erosion in the Philippines, the modified USLE is largely "judgmental" and requires more extensive calibration before it can be considered reliable./2 Nevertheless,taking the USLE as the embodiment of the best professional judgment, some cautious generalities can be made (some quantitative predictionsbased on the USLE are shown in Tables 1-3).

2. Undisturbed forest lands are the best soil conservers,with annual soil losses typically under 1.0 t/ha/year. With decreasing vegetative cover, soil loss rises exponentially: a combinationof high- intensityrainfall, steep slopes,erodible soil, and poor cover can lead to rates of, e.g., 300-400 t/ha/year on tilled kaingin plots. Overgrazed grasslands,burned regularilycan involve soil loss rates ar high or higher than kaingin. in between these extremes, the closer the cover approaches the combination of uppe; canopy and protective undergrowth or litter possessed by the natural forest, the lower the rates of erosion. Taking primary forest with dense undergrowthas having an erosivityfactor of 100, then second growth forest with good undergrowth and high mulch cover is about 300; degraded second growth forest mixed with shrubs and plantation crops, about 600; and industrial tree plantations, depending on their density and mulch or cover crop characteristics,can be higher than this by a factor of ten.

3. Agro-forestrytree species can also show considerablevariation in erosion rates, but since high-production fruit or nut trees require sparser planting and control of undercover,erosion potential can approach that of, say, rice (100-200 times primary forest). If grasslandsare well established,undisturbed, and allowed to regrow shrubs, erosion potential falls to about the level of disturbed second growth forest; but,

Li Sheet erosion is the most readilymeasured form of erosion, but gully- ing, channel erosion, and mass wasting (e.g., due to landslides)also con- tribute to soil loss, and their relative importanceis uncertain. A study of the Magat watershed concluded that sheet erosion accounted for only 40 percent of total erosion; however, the assumptionsare open to question.

/2 The modified USLE relates soil loss in t/ha/year to five, multiplicativefactors: a rainfall erosivity index value; a length-slope factor, approximatedfrom percent slope; a cover factor; a soil erodibility value; and a composite factor reflecting the conservationor management factors being practiced. See Tables 1-2 for estimates of the cover and conservationfactors employed in the equation. - 126 - conversely,increased grazing, burning, and/or removal of shrubs causes exponentialincreases in erosivity.

4. In addition to the erosivity of alternativeland uses, the modi- fied USLE takes into ac'ount the effects of alternative conservation or management practices. A variety of practices may be employed simulta- neously in different combinationson varying slopes, and the effects of such permutationshave not been well-studied. Therefore the USLE assess- ment of effects should be regarded as having primarily heuristic value. However, the modified USLE is useful in that it separates the impact of indivdualpractices which have otherwisebeen evaluatedmainly in the con- text of complete "packages"(such as the "SlopingAgricultural Land Techno- logy", or SALT, developed in Davao).

5. The modified USLE distinguishesthree forms of conservationor management practice: a) land shaping, b) mulching and cover management, and c) tillage and residue management. The first consists, in order of decreasing effectiveness,of bench terraces, broad-based terraces (i.e., with level areas cut out of otherwiseunmodified hillsides),contour strip cropping, and contour plowing. On slopes of 18 percent, these would reduce erosion to 12, 16, 40, or 80 percent respectivelyof the base level; and on 25 percent slopes, to 14, 20, 50, or 95 percent. The second factor relates to the proportioa of ground surface covered by mulch or vegetation, and ranges from two to 100 percent. For example, 60 percent ground coverage is estimated to reduce erosivity to 20 percent of base level. The final factor reflects the choice among conventional,zoned, mulch, and minimum tillage: zoned or mulch tillage are expected to reduce erosion to about 25 percent and minimum tillage to about 50 percent of base level. As these factors are assumed to be multiplicative,a combination of conservation management practices could drastically reduce erosivity. For example, contour strip farming of corn on a 25 percent slope, with 60 percent coverage of mulechor cover crop and mulch tillage is projected to reduce erosion to about 2.6 percent of the base level for corn with ordinary management, that is, to levels comparable with undisturbed grassland or disturbedsecond growth forest, and possibly better than typical tree crops or industrialtree plantations.

6. The broadest conclusion is that it is the combination of cover removal and soil disturbance which creates the largest potential for erosion. While nothing can equal the erosion protection of undisturbed primary forest, quite low levels of erosivity can be achieved on steep slopes with undisturbed grasslands and even upland crop cultivation with certain conservationand managementmeasures. Trees may or may not be part of the land use picture, but are not an essential element in soil conservation; moreover orchards and tree plantations established by clearing of grasses and shrubs are likely to worsen erosion. Of course, this refers to sheet erosion - a closed tree canopy may reduce gullying by breaking the velocity of rainfall,and its root structure is more effective in preventingmass wasting.

Watershed Degradation.

7. The USLE, properly interpreted,only suggests the amount of sheet erosion upstream at the source; it provides no informationon other - 127 -

forms of erosion, and none on where the eroded soil ends up - at the sea or at other points downstreamof the source. To gain insights into latter, it is necessary to assess the transport of silt downstream,as it progresses through a watershed. This is a te4hnically-complicatedissue, as an example will show.

8. iagasWatershed The effects of erosion in this watershed are probably the most thoroughlystudied in the Philippines,as it has been the focus of preparationfor a large watershed protectionproject. Also, much of the "calibration,of the modified USLE has been based on these studies. At appraisal in the early 1970s, the design of the Magat Reservoir should have given it an operationallifetime of 100 years, based on an estimated rate of sediment delivery to the reservoir of 5.5 million tons/year. During its construction, concern about increased degradation in the watershed upstream of the dam led to re-estimation using more recent hydrologicaldata on river flows./l This raised the estimated sediment delivery rate to 11 million t/year. A slightlyhigher figure resulted from a hydrographicsurvey of the decrease in reservoir capacity over the first two years followingimpoundment; a slightly lower figure from 1986 sediment flow measurements upstream from the dam site; and a drastically lower figure seems to being emerging from measurementsin the "dry year" of 1987.

9. Each of these estimates is individuallyquite unreliable. For example, the measured decrease in reservoirvolume is well within the mar- gin of error of measured reservoirsize. Sediment yield sampling typically has required extrapolationto the extreme storm events which carry 95 per- cent of the sediment (it is difficult to sample at extreme flood stage), using unverified assumptions. Nevertheless,the estimates (prior to 1987) collectively suggest true sediment delivery 60-90 percent gr3ater than assumed at appraisal (or, over the entire basin, delivered sediment of 32- 38 t/ha, compared to 20 t/ha assumed). With no further increase in sedi- mentation rate, this implies also an effective life for the reservoir less than half of that assumed in the feasibilitystudy (25 years).

10. On the other hand, the modified USLE approach has been applied to land use data for the Magat basin to project an upstream sheet erosion rate averaging about 50 t/ha at present.LZ How is this to be reconciled with the downstream sediment delivery estimates? This question cannot be answered with confidence. The difference between upstream erosion rates and downstream delivery involve two unknown factors (in addition to the uncertaintiesattached to upstream and downstreamsedimentation estimates) - the proportion of sheet to total erosion (including gullying, channel scouring,etc.) and the "sedimentdelivery ratio". A formula developed by the U.S. Departmentof Agriculture,and based on total watershed size, was used to estimate the latter at 20 percent. But the formula (meant for

Li The appraisal estimate was based on the 16 years of river flow data before 1965, extrapolatedfor eight more years from rainfall data, along with measurementsof suspendedsediment load. The update used 1975-81 data on riverflow-durationrelationships which indicated a shift toward higher flows compared to the averages based on earlier data.

LZ The calculations involve some unstated estimates of proportions of grassland which are a) undisturbed,b) overgrazedand/or burned over; and c) utilized for shifting agriculture. - 128 - watersheds with fairly homogeneous land uses, unlike Magat, where degradation downstream is much more extensive than upstream) assumes a decreasingdelivery ratio with increasedwatershed size, and a recent study of "nested subwatersheds" at Magat has shown this assumption to be incorrect. If 20 percent had been correct, then downstream sediment delivery of 32-38 t/ha would be reconciledwith sheet erosion upstream of 50 t/ha as follows:

Gross upstream erosion - between 32/0.20 and 38/0.20 (or 160-190 t/ha)

Erosion due to gullying, etc. - between 160 - 50 and 190 - 50 (or 110- 140 t/ha)

Thus the sheet erosion measured by the USLE approach at best would account for only the smaller part of total gross erosion.

11. Is t-gat a rapidly degrading watershed, or one which has long been degraded? This too cannot be answered with confidence, if recorded trends in official land use data are discounted./l The differencebetween the feasibility and post-feasibilityestimates of sediment delivery is attributableto differingaverage duration of high flow events on the Magat River as estimated from 1949-64 and 1976-81 records respectively. Whether the difference is attributable to "normal hydrologic variations" or to watershed degradation is uncertain, but, even assuming the latter, these changesmay have taken place over as long as a 25 year period (that is, not merely in the few years since reservoir impoundment,or even the decade following the feasibility study). In short, the data used in the 1970s feasibilitystudy may have been already obsolete at that time. What is needed, particularily in the light of the finding of drastically reduced sediment delivery in 1987 (para. 8), is to put the sediment delivery sample findings into the statisticalcontext of long term variationsin river flow and rainfall.

12. The problems in interpretingthe measurementsand calculations for the Magat watershed,which has been better studied than all but a few watershedsin tropical 6veloping countries,should give us pause in trying to extrapolate to wider areas. The link between upland erosion and downstreamsilt delivery is especiallyproblematic: clearly in the short run the majority of the soil lost upstream does not reach the dam, much less the sea. Correspondingly,most of the silt reaching the dam today was lost from upstream sites long ago. The watershedbasin acts as a sink for silt and sediment,much like the dead storage in a reservoir,but one which is partially scoured by the flow of water through the system. Presumably the silt and sedimnent delivery downstream, far from being a constant proportion of gross erosion upstream, as posited in models based on constant "sediment delivery ratios", depends on the physiographic characteristicsof the basin, the silt and sediment load in the "sink" and its locational characteristics,the velocity and volume of water flow through the system, and its silt and sediment load from upstream. Lack of realisticmodels of this process is the weakest link in quantificationof costs of upstream erosion and benefits of protectiveprograms.

LI Part (often a large part) of changes recorded in Philippinestatistics on the uplands reflects improved collection efforts, increased coverage, and greater awareness of the problemswhich the statisticselucidate. - 129 - ANNEX 2 Table 1 Page 1

PHILIPPINES

ffARM STUDY

Sample Calculations by Modified Universal Soil LOss Equation of the Soil Loss Rates Under Various Climatic, Slope, Land Use and Cover Management Conditions

Rainfall erosivity value --120 ----- 250----…

Soil erodibility,K /a (silty clay) 0.20 0.20

Slope (X) 18.00 30.00 48.00 18.00 30.00 48.00 10.00 19.70 36.70 10.00 19.70 36.70

(R) x (K) x (LS) value /b /c 240.00 472.80 880.80 500.00 987.00 1,835.00

Erosion rate, ton/hectare/year or (R) x (K) x (LS) x (C) /d without any conservation practice whatsoever Primary forest (C0.001) 0.24 0.47 0.88 0.50 0.99 1.84 Well-established,undisturbed grassland (C-0.007) 1.68 3.31 6.10 3.50 6.91 12.84 Cashew orchard, 5 years or more (C-0.08) 19.20 37.82 70.46 40.00 78.96 146.80 Corn crop (C-0.4) 96.00 189.12 352.32 200.00 394.8C 734.00 Old kaingin (C-0.8) 192.00 378.20 704.64 400.00 789.60 1,468.00

Erosion rate, ton/hectare/year,with the following conservation practice(s) Cashew orchard Establish grsss intercrop, such as centrosema, 80% surface cover (P-0.11) /e 2.11 4.16 7.75 4.40 8.69 16.15 Grass intercrop, 60% surface cover (P-0.23) 4.42 8.70 16.21 9.20 18.16 33.76 Broad-based terraces (P-0.20) with cover intercrop at 80X cover (P-0.23) 0.88 1.74 3.24 1.84 3.62 6.75 -130 - ANNEX 2 Table 1 Page 2

Rainfallerosivity value ---120 ------250--

Erosion rate, ton/hectare/year,with the following conservationpractice(s) (cont'd) Corn Contour-stripcropping (P-0.40-0.50) 38.40 94.56 176.16 80.00 197.40 367.00 Zoned tillage (P-0.25) with contour- ing (P-0.90-0.95) 21.60 44.91 83.67 45.00 93.77 174.32 Zoned tillage, contour farming and mulching at 401 cover (P-0.40) 8.64 17.96 33.47 18.00 37.51 69.73 Broad-basedterraces (P-0.18-0.20), contouringand mulching at 40. cover 6.22 14.37 26.77 12.96 30.00 55.78 Broad-basedterraces with mulch tillage (P-0.26) contour farming 4.04 9.34 17.40 8.42 19.50 36.26 Broad-basedterraces, mulching at 801 cover (P-0.15), zoned tillage (P-0.25) and contouring 0.58 1.35 2.51 1.21 2.81 5.23

Old kaingin Contour strip cropping,mulching at 601 cover (P*0.30), zoned tillage contour farming 5.83 12.12 22.59 12.15 25.31 47.07 Left undisturbed for natural grasses to establish themselves, 2 to 4 years after (C-0.01) 2.40 4.72 8.81 5.00 9.87 18.35 Left undisturbed for 10 years for second-growthforest establishment (C-0.003) 0.72 1.41 2.64 1.50 2.96 5.50

/a K - [(0.043)(pH)+ 0.62/OM + 0.00825 - 0.0062C] Si where OM - organic matter content in percent S - percent sand C - clay ratio - % clEy/(% sand + X silt) Si - X silt/100

/b R - A Pim where R - daily rainfall > 250.0 mm i - counter for the days of the year A - 0.002 m - 2

/c LS - land slope

/d C - cover value factor (Table 2)

/e P - product of the conservationor management factors being practiced.

Source: W.P. David, "Soil Erosion and Land Utilization"(Report for World Bank ffarm mission), December 1987. ANNEX2 - 131 - Table2 Page 1

PHILIPPINES

ffARM STUDY

Crop Cover Coefficient/a for the Common Cover Conditionsof PhilippineWatersheds Calculatedby Modified UniversalSoil Loss Equation

Ratio over that Cover C value forprimary forest

Bare soil 1.0 1,000

Primary forest (with dense undergrowth) 0.001 1

Second-growthforest with good undergrowthand high mulch cover 0.003 3

Second-growthforest with patches of shrubs and plantation crops of 5 years or more 0.006 6 lndustrialtree plantation(UITP)

Benguet Pine with high mulch cover 0.007 7 Mahogany,Narra, 3-8 years with good cover crop 0.05-0.10 50-100 Mahogany,Narra, 8 years or more with good undergrowth 0.01-0.05 10-50 Yemane, 8 years or more 0.08 80 Mixed stand of ITP plant species, 8 years or more 0.07 70

Aaroforestrytree species

Cashew, mango and jackfruit,less than 3 years, without intercropand with ring weeding 0.25 250 Cashew,mango and jackfruit, 3 to 5 years without inter- crop, without ring weeding 0.15 150 Cashew, mango and jackfruit, with intercrop or native grass undercover 0.08 80 Mixed stand of agroforestry species, 5 years or more with good cover 0.08 80 Coconut with tree intercrops 0.05-0.1 50-100 Coconuts, with annual crops as intercrop 0.1-0.30 100-300 Ipil-ipil,good stand, first year with native grass intercrop 0.2 200 Ipil-ipil,good stand, 2 years or more with high mulch cover 0.1 100 Ipil-ipil,newly cut for leaf meal or charcoal 0.3 300 -132 - ANNEX 2 Table 2 Page 2

Ratio over that Cover C value for primary forest

Grasslands

Imperata or themeda grasslands, well established and undisturbed, with shrub 0.007 7 Imperata or themeda grasslands, slightly grazed, with patches of shrub 0.15 150 Shrubs with patches of open, disturbed grasslands 0.15 150 Well-managed rangeland, slightly grazed cover of slow development, first year 0.3-0.8 30)o-800 Well-managed rangeland cover of fast development, first year, ungrazed 0.05-0.1 50-100 Well-managed rangeland, slightly grazed cover of slow development, 2 years or more 0.01-0.1 10-100 Well-managed rangelarnd,cover of fast development, ungrazed, 2 years or more 0.01-0.05 10-50 Grassland, moderately grazed, burned occasionally 0.2-0.4 200-400 Overgrazed grasslands, burned regularly 0.4-0.9 400-900

Annual cash crops

Corn, sorghum 0.3-0.6 300-600 Rice 0.1-0.2 100-200 Peanut, mungbean, soybean 0.3-0.5 300-500 Cotton, tobacco 0.4-0.6 400-600 Pineapple 0.2-0.5 200-500 Bananas 0.1-0.3 100-300 Diversified crops 0.2-0.4 200-400 New kaingin areas, diversified crops 0.30 300 Old kaingin areas, diversified crops 0.80 800

Others

Built-up rural areas, with home gardens 0.20 200 Riverwash 0.50 500

/a The crop cover coefficient (C value) is a factor in the Modified Universal Soil Loss Equation. This stipulates that E -R . K . LS . C . P

where E = soil loss rate in tons/hectare/year R - rainfall erosivity index LS length-slope factor which may be approximated on the basis of percent slope C - cover factor value K - soil erodibility P - product of the conservationor management factors being practiced.

Source: W.P. David, "Soil Erosion and Land Classification"(Report forWorld Bank ffarm Mission), December 1987. ANNEX 2 table 3 PHILIPPINES

ffARM STUDY

EstimatedErosion Loss of Magat and PantabanganWatersheds (tons per hectare per year)

Open Irrigated Rainfed Diver- AveraSe Slope range Primary Secondary grass- Irrigated Rainfed terraced terraced sified Built-up Rlver- Resi- for all in degree forest forest lands paddy paddy rice rice Savannah Kaingin crops Orchard areas wash dential land uses

Pantabangan

0-3 - - - 0.18 0.22 ------10.17 3.60 0.48 3-8 - 0.41 10.01 - 0.81 ------2.60 8-15 - - 25.72 ------25.72 w 15-25 0.86 - 141.70 - 5.56 - - - 280.85 177.77 - - - 169.00 141.33 25-40 - - 139.95 8.82 - - - 120.85 374.88 - - - - 161.10 140.45 >40 2.25 7.03 264.03 - 25.26 - - 238.99 586.51 - - - 985.97 333.40 113.40 Averaga for all slope 2.22 6.95 210.72 0.45 0.64 - - 194.83 507.88 177.77 - - 418.39 103.20 108.20 magat

0-3 - 0.06 2.44 0.21 0.21 0.09 - - - 4.13 1.95 5.11 10.86 - 2.07 3-8 0.0! 0.34 9.79 0.67 - 0.41 0.40 - - 9.00 6.77 12.05 - - 4.99 8-15 0.16 0.96 32.73 1.52 2.69 1.29 1.66 - - - 31.48 61.64 - 25.58 15-25 0.32 2.05 55.57 3.74 4.04 2.34 3.57 - - 68.97 74.44 90.92 165.25 - 31.24 25-40 0.63 3.73 126.24 10.43 7.07 4.44 - - - 144.46 - 160.83 410.92 - 57.21 >40 1.28 8.79 240.60 10.92 £4.03 9.42 - - - - - 282.57 1,125.22 - 72.23 Average for all slope 1.03 5.73 122.01 1.03 2.75 .8: 2.04 - - 10.95 45.98 12.88 93.81 - 49.99

Source: W.P. David and C.V. Collado, Jr., "An Assessmentof Land and Water Resource for the Kagat Watershed (PIDS Uplsud ResourcePoltcy Program, Technical Report No. 2), 1987. - 134 -

GENERL STATISTI1AL ANNEX 3 Table I

PHILIPPINES

ffARM STUDY

Land Use Status byGorayhical1 Region. 1981 ('000 hectares)

Philippines Luzon Visayas Mindanao Palawan Forest Forest Forest Forest Forest Category Total Land AMD Total Land A&D Total Land AMD Total Land AMD Total Land AMD

Forest 12,253 10,809 1,444 4,498 3,760 738 1,679 1,340 339 4,798 4,628 170 1,278 , 197

Productive 10,494 9,081 1,413 3,584 2,850 733 1,531 1,2e1 331 4,446 4,283 163 933 747 186 Dipterocarp 10,062 8,677 1,385 3,370 2,642 729 1,466 1,144 321 4,331 4,176 156 894 715 179 Rep-brush 3,474 2,811 663 1,779 1,537 242 851 614 236 519 482 37 326 178 148 Young growth 3,794 3,659 135 878 830 47 296 272 24 2,478 2,425 53 142 131 11 Old growth 2,794 2,207 587 714 274 440 319 258 61 1,334 1,269 65 426 405 21 Mangrove 239 213 26 21 18 3 66 56 9 114 107 7 39 32 7 Rep-brush 119 101 17 7 5 2 64 55 9 25 23 2 23 19 4 Young growth 110 102 8 14 13 - I I - 84 80 4 10 8 2 , Old growth 11 10 ------5 5 - 6 5 - Pine 193 191 2 193 191 2 ------

Unproductive 1,759 1,728 31 914 910 4 147 139 8 353 346 7 345 333 11 Dipterocsrp 1,422 1,398 24 753 749 4 127 125 3 229 223 6 312 301 11 Mossy 329 328 1 161 160 - 13 13 - 123 122 1 33 33 - Bamboo 8 2 6 - - - 7 ------

Nonforest 17,747 5 864 11,884 7,612 2,911 4,700 4,700 4,522 3,200 5,402 1,568 3,833 121 62 150 Open land 1,096 719 377 230 228 1 304 190 114 495 268 227 x T T Managed pasture 612 507 104 315 244 71 93 77 16 187 171 17 16 16 - Marsh and small water 115 2,129 32 34 24 10 12 6 6 66 49 17 2 2 - Plantation cropland 7,307 2,191 5,178 3,441 1,014 2,427 2,155 539 1,616 1,668 573 1,095 43 3 40 Cultivation cropland 7,760 235 5,569 3,197 1,293 1,904 1,638 432 1,206 2,842 457 2,385 82 8 76 Urban and others 858 - 623 395 108 287 320 77 243 143 50 93 - - -

Grand Tptal 30,000 16,672 13,328 12,110 6,671 5,438 6,201 2,662 3,539 10,200 6,197 4.003 1,490 1,142 347

Note: A&D - Alienable & Disposable; Rep-brush-Reproduction-brush.

Source: Philippine Council for Agriculture and Resources Research and Development and Ministry of Agriculture, Land Use andLand Use Systems Planning (Workshop Prceedings, May 13-14, 1982), undated. ANKEX 3

PHILIPPINES

iffARM STUDY

Average Sole Volume of Dipterocarp Old Growth and Residual Forest age(cubic meters per hectare)

Commonhardwoods Construction & furniture Soft woods Others .Total Residual Residual Residual Residual Residual as S as X as X as X as S Old of old Old of old Old of old Old of old Old of old Region growth Residual growth growth Residual growth growth Residual growth growth Residual growth growth Residual growth

1 108.0 28.1 26.0 89.5 62.9 70.3 3.2 0.4 12.5 23.3 26.0 111.6 224.0 117.4 52.4 2 167.0 100.5 60.2 70.8 48.8 68.9 1.7 0.6 35.3 27.3 22.7 83.2 227.7 172.6 75.6 3 133.5 46.7 35.0 154.1 98.1 63.7 0.0 0.4 - 23.4 26.4 112.8 311.0 171.6 55.2 . 4.1 158.1 81.3 51.4 56.6 55.6 98.2 2.6 0.9 34.6 27.6 21.6 78.3 244.9 159.4 65.1 c 4.2 10.3 7.5 72.8 129.9 101.5 78.1 4.4 2.3 52.3 35.6 30.9 86.8 180.2 142.2 78.9 5 170.8 78.4 45.9 46.8 33.0 70.5 1.4 1.6 114.3 21.9 18.3 83.6 240.9 131.3 54.5 6la - ______7 7a ------8 144.7 81.4 56.3 55.3 45.8 82.8 1.9 0.7 36.8 25.5 21.3 83.5 227.4 149.2 65.6 9 157.1 98.6 62.8 100.2 67.5 67.4 6.0 1.4 23.3 30.7 24.4 79.5 294.0 191.9 65.3 10 137.0 53.3 38.9 59.3 27.4 46.2 6.2 6.1 98.4 16.7 12.4 74.3 219.2 99.2 45.3 11 146.6 38.8 26.5 52.8 31.6 59.8 8.2 3.7 45.1 25.0 16.7 66.8 232.6 90.8 39.0 12 165.6 116.4 70.3 61.5 46.7 75.9 5.8 2.8 26.0 32.9 28.5 86.6 265.8 194.4 73.1

/a Samplingongoing.

Source: RW-GermanForest ResourcesInventory Project, cited in ConradoV. Gulmatico,"Results of the Forest ResourcesInventory Project," unpublished, 1Q88. ANNEX3 Table 3

PHILIPPINES

ffARM STUDY

Average Number of Saplings (5 cm < dbh < 25 cm) In Dipterocarp Forest (per hectare)

Construction Common hardwoods and furniture woods Others Total Residual Residual Residual Residual Old Resld- as X of Old Resld- as x of Old Resid- as 2 of Old Resid- as 2 of Region growth ual old growth growth ual old growth growth ual old growth growth ual old growth

1 299 91 30 454 335 74 207 324 157 960 750 78 2 304 323 106 218 224 103 249 245 98 771 792 103 3 133 113 85 410 402 98 261 294 113 804 809 101 4.1 398 216 54 203 214 105 317 265 84 918 695 76 4.2 18 21 117 445 440 99 320 311 97 783 772 99 5 211 218 103 298 196 66 414 321 78 923 735 80 6/a - _------77a ------8 195 213 109 261 196 75 273 291 107 729 700 96 9 239 250 105 272 274 101 320 305 95 831 829 100 10 811 388 48 339 166 49 444 336 76 1,594 890 56 11 327 236 72 183 180 98 324 319 98 834 735 88 12 253 205 81 200 182 91 348 306 88 801 693 87

/a Sample ongoing.

Note: dbh = diameter at breast height.

Source: RP-German Forest Resources Inventory Project, cited in Conrado V. Gulmatico, in "Results of the Forest Resources Inventory Project," unpujblished,1988. AN=E 3 Table 4

PHILIPPINES

ffARMSTUDY

AverageRattan and BambooOccurrence (linearmeters per hectare)

Rattan occurrence Bamboo occurrence Old growthforest Residualforest Old growthforest Residualforest Region d < 2 cm d > 2 cm Total d < 2 cm d > 2 cm Total d < 2 cm d > 2 c Total d < 2 cm d > 2 cm Total

1 1,477 334 1,811 227 40 267 2,187 417 2,604 3,551 4,680 8,231 2 1,323 624 1,947 1,035 413 1,448 681 396 1,077 1,332 572 1,904 3 859 700 1,599 411 229 640 797 295 1,092 2,781 4,144 6,928 4.1 1,049 355 1,404 741 214 955 1,049 355 1,404 741 214 955 4.2 1,061 393 1,454 946 224 1,170 3,648 602 4,250 2,728 923 3,651 5 311 28 339 432 50 482 1,225 202 1,427 2,172 566 2,738 6/a ------77; ------8 687 510 1,197 416 169 585 1,010 7,038 8,048 2,278 1,555 3,833 9 599 397 996 422 470 892 2,362 367 2,729 3,800 1,341 5,141 10 624 1,348 1,972 279 477 756 108 412 520 163 553 716 11 693 1,180 1,873 214 212 426 367 639 1,006 280 615 895 12 1,038 643 1,681 604 170 774 5,423 2,120 7,543 4,749 1,339 6,088

/a Sampleongoing.

Note: d < 2 cm - diameter< 2 cm.

Source: RP-GermanForest Resources Inventory Project, cited in ConradoV. Gulmatico,"Results of the ForestResources InventoryProject," unpublished, 1988. - 139 - ANNEX 3 Table 5

PHILIPPINES

ffARM STUDY

Total Volume of Trees (millioncubic meters)

Total Volume of Trees > 15 cm dbh Total Volume of Trees > 55 cm dbh Comon Constr.& Common Constr. & Region hardwoods furn. woods Others Total hardwoods furn. woods Others Total

1 8.478 11.070 23.318 42.866 5.260 2.685 4.548 12.493

2 133.625 60.393 32.192 226.210 63.305 10.494 5.183 78.982

3 10.436 14.911 4.659 30.006 4.971 6.113 0.580 11.664

4.1/a 35.764 20.646 8.895 65.305 18.204 5.276 1.302 24.782

4.2/a 2.208 26.926 9.212 40.346 0.911 8.935 2.202 12.048

5 5.656 2.080 1.195 8.931 3.321 0.378 0.129 3.828

6/a 5.194 2.011 1.178 8.383 2.877 0.349 0.116 3.342

7/a 0.789 0.311 0.183 1.292 0.439 0.054 0.018 0.511

8 31.610 16.532 7.981 56.123 12.915 4.074 0.642 17.291

9/a 26.004 17.508 6.628 50.140 13.6"6 5.232 1.368 20.276

10 52.742 18.572 13.582 84.896 21.167 3.058 1.702 25.927

11 43.861 22.052 16.216 82.129 19.978 4.444 3.595 28.017

12 30.997 12.328 9.207 51.532 14.560 4.184 2.611 21.355

Total/a 387.373 227.340 133.446 748.159 181.244 55.276 23.996 260.516

dbh - diameter at breast height.

/a Preliminaryresults.

Source. RP-GermanForest Resources InventoryProject, cited in Conrado V. Gulmatico,"Results of the Forest ResourcesInventory Project," unpublished,1988. -140 - ANNEX 3 Table 6

PHILIPPINES

ffARM STUDY

ComparisonBetween Forest Land and Actual Forest Cover by Region Z(O000he`ctares)

Actual Forest Cover /b Forest Dipterocarp Mossy & Region Land /a Old growth Residual Pine Submarginal

1 1,149 51 103 183 99 2 2,594 418 631 53 459 3 783 25 152 2 61 4.1 1,556 74 296 1 150 4.2 1,119 100 157 - 320 5 545 12 46 - 11 6 619 7 51 - 48 7 576 1 8 - 10 8 1,129 48 303 - 12 9 981 40 200 - 10 10 1,770 126 577 - 226 11 1,974 118 602 - 142 12 1,352 22 235 - 133

Total 16,147 1,042 3,361 239 1,681

/a BFD statistics,1986.

/b RP-GermanForest ResourcesInventory Project, preliminary results.

Source: RP-GermanForest ResourcesInventory Project, cited in Conrado V. Gulmatico,"Results of the Forest ResourcesInventory Project," unpublished,1988. - 141 - 141 - ~~~~ANNEX73FTable

PHILIPPINES

ffARM STUDY

Local Projectionof Forest Land-Use Scenario

1985 1990 2000 2015 2035

Forest (in million hectares)

Com_rcial old-growth 1.0 0.6 - - - Adequatelystocked second-growth 2.6 2.2 1.4 1.1 1.0 Inadequatelystocked second-growth 1.8 1.9 2.4 2.7 3.4 Reproductionbrush 2.0 1.9 1.8 1.5 1.1 Non-commercial/protection forests and reservations 2.4 2.1 1.4 1.2 1.2 Special-useareas 0.3 0.3 0.3 0.3 0.3 Rangelands/grasslands 1.0 1.0 1.1 1.3 1.5 Agroforestlands 0.6 1.0 2.0 2.5 2=5 Unproductivegrass/ brush lands 4.3 3.4 2.2 0.4 - Sawtimberplantations 0.1 0.1 0.2 0.4 0.7 Pulpwood/fuelwood plantations 0.2 0.4 0.6 0.9 1.5 Other tree crops - 0.1 0.1 0.1 0.3

Total 16.3 15.0 13.5 13.5 13.5

VegetativeCover Summary

Adequatelystocked forests 6.6 5.8 4.0 4.0 5.0 Inadequatelystocked forests 3.8 3.8 4.2 5.2 4.5 Open lands 5.9 5.4 5.3 4.2 4.0

Total 16.3 15.0 13.5 13.5 13.5

Source: Forestry DevelopmentCenter, UPLD-CF. Fifty Year Forestry DevelopmentProgram for the Philippines(Los Banes, 1985). -142- JMU 3

PHUIPlNES

EfARH STUDY

Local Projection of Annual Tiber Supply and Demnd

1985 1990 2000 2015 2035

eced AnulSuPPlY illion cubic meters) /a

Old-growth forests: Sawti.ber 5.6 4.2 - - - Pulpwood/fuelwood 2.4 1.8 - - -

Second-growth forests: Sawtimber 3.2 6.0 5.2 3.5 3.0 Pulpwood/fuelwood 4.0 5.7 4.4 2.9 2.5

Plantations: Sawtimber 0.4 0.4 0.8 1.6 2.8 Pulpwood/fuelwood 4.0 8.0 12.0 18.0 30.0

Agroforests: Pulpwood/fuelwood 2.4 4.0 8.0 10.0 10.0

Total Sawtimber 9.2 10.6 6.0 5.1 5.8

Total Pulpwood/Fuelwood 11.2 19.5 24.4 30.9 42.5

Projected Annual Demand

Lumber (million bdft) Local demand (reduced level) 670 750 750 850 1,060 (current level) 670 760 950 1.280 12830 Foreign demand 310 465 2,070 5390 9,820

Plywood (million bdft) LocaJldemand (reduced level) 230 21C 230 240 280 (current level) 230 260 330 440 630 Foreign demand 450 710 1s740 6,570 19.450

Veneer (millions sq.ft.) Forelgn demand 1,810 22280 3,180 5,680 13,250

Log requirementsof above wood product (million eu. in.) Local demand (reduced level) 4.4 4.7 5.0 5.4 6.3 (current level) 4.4 5.D-- 6.3 8.4 12.1 Foreigo demand 5.0 7.3 15.7 48.2 117.9

Household fuelwood /b 23.5 26.7 33.5 45.1 64.4 (million cu.m.)

Industrial fuelwood 4c (million cu.m.) 5.0 5.8 7.7 11.7 20.7

Pulpwood (for paper) /d (million cueM.) 4.1 4.7 5.9 8.0 11.4

Pulpwood for fiber/ particle board /e 0.05 0.2 0.7 1.4 2.4

Note: bdft - board foot

/a The above estimates include illegally cut timber as veIl as damaged commercial size trees in forest areas subjected to all kinds of exploitation, legal or Illegal. lb Assuming that 60 of all household shall use fuelwood; exclude other blofuels. /c A growth rate of 2.9X p.a. is moat consistent with projected growth of energy demand overall. /d Bsed on 0.025 ton/capita/year. To' Excluding wood watee; particle and fiberboards are expected to replace a big portion of the demand for plywood.

Sources Forestry Development Center, UPLB-cf F Year ore Development Prouram for the Philippin. R.. - 143 - ANNEX 3 Table 9 PHILIPPINES

ffARM STUDY

GROSS VALUE ADDED IN FORESTRY,WOOD & PAPER PRODUCTS (f '000,000at 1972 constant prices)

Wood and Furniture Paper and cork products and fixtures paper products Forestry

1971 582 86 345 2,012

1975 471 74 486 1,265

1976 558 79 538 1,394

1977 588 90 520 1,583

1978 518 157 195 1,564

1979 686 114 202- 1,435

1980 665 132 191 1,386

1981 707 139 188 1,175

1982 704 140 172 983

1983 716 142 196 819

198. 588 142 182 765

1985 536 109 158 706

1986/a 388 120 172 654

/a PreliuinaryEstimate as of May 1987.

Source: National Accounts Staff, NEDA, StatisticalYearbook,1987. -144- ANNEX3 Table 10

PHILIPPINES

ffARN STUDY

Contributionof Forest-basedIndustries to ForeignExchange Earnings and GNP, 1981-86

Foreign Exchange (US$ million) GNP (billionpesos) Total Z Forestry Z Forestry Year Forestry export contribution Forestry GNP contribution

1981 450 5,720 7.9 6.2 303.6 2.0

1982 389 5,021 7.8 7.4 335.4 2.2

1983 454 5,005 9.1 7.5 378.8 2.0

1984 394 5,391 7.3 12.0 526.3 2.3

1985 361 4,629 7.8 10.9 595.1 1.8

1986 318 4,842 6.6 9.9 604.1 1.6

Source: Cited in Mu:ray-North,Ltd. and Ministry of Forestry,New Zealand, Appraisalof the Bukidnon IndustrialPlantation Project (July 1987). - 145 -ANE3 Table 11

PHILIPPINES

ffARM STUDY

Exports of Selected Forest Products, 1980-1986 (US$ mlllions)

Commodity 1980 1981 1982 1983 1984 1985 1986

Logs 176.9/a 206.3/a 182.6/a 78.6 93.7 45.9 23.0

Lumber 181.2 125.7 123.7 149.1 107.0 90.4 95.4

Veneer/core 35.7 33.8 22.0 27.8 14.1 13.9 10.3

Plywood 110.6 110.6 67.3 76.7 57.5 53.8 51.8

Toral 504.4 476.4 395.6 332.2 272.3 204.0 180.5

La Log exports adjusted to comply with Import Country data.

Source: Cited in Murray-North, Ltd. and Ministry of Forestry, New Zealand, Appraisal of the Bukidnon Industrial Plantation Project (July 1987). - 46 ANNEX 3 Table 12

PHILIPPINES

ffARM STUDY

GovernmentCharges, Fees and Tax Receipts From The Forestry Sector 1970-82 ('000 pesos)

Forest charges and Year service fees Export tax /a Total

1970 67,247 139,382 206,629

1971 72,486 162,795 235,281

1972 65,780 58,216 123,996

1973 125,611 102,258 227,869

1974 106,175 28,897 135,072

1975 82,888 27,397 111,285

1976 88,065 39,201 127,266

1977 86,484 38,452 124,936

1978 82,969 50,886 133,855

1979 82,531 336,911 419,442

1980 95,551 198,437 293,988

1981 169,752 168,742 338,494

1982 165,502 201,051 366,553

/a Estimates.

Source: E.L. Boado, "IncentivePolicies and Forest Use in the Philippines," (Washington,D.C.: World ResourcesInstitute, 1986). ANNEX 3 -147 - Table 13

PHILIPPINES

ffARM STUDY

GovernmentCharges and PotentialRents from Forest Sector, 1979-82

Available Government rent in charges, fees absence of and tax receipts Percentage Potential Total log domestic from forestry of charges Year rent per m3 production processing sector /a to rent (US$) ( 000 m ) (USS000) (Uss$odUT

1979 69 6,578 453,882 57,277 12.6

1980 78 6,352 495,456 39,440 8.0

1981 55 4,514 248,270 43,208 17.4

1982 57 5,400 307,800 43,312 14.1

Total 22,844 1,505,408 183,237 12.2

/a Based on estimates.

Source: EufresinaL. Boado, "IncentivePolicies and Forest Use in the Philippines,"(Washington, D.C.: World ResourcesInstitute, 1986). - 148 - ANN 3 Table 14

PHILIPPINES

ffARM STUDY

Processing Plant Locations and Activity, 1985

Log Processing Number of plants Production require- Utili- plant Luzon Visayas Mindanao Total volum1 ment zatlon ( 000 a ) ( 000 m 3) (X)

Sawmills 103 9 62 174 923 3,374 54

Plywood 9 1 28 38 333 3,305 20

Veneer 1 - 6 7 61 311 39

Pulp I - 1 2 - - - Block, particle and fiberboard 5 - 16 21 - - -

Total 122 10 114 246 1,317 6,990 38

Source: Cited in Murray-North, Ltd. and Ministry of Forestry, New Zealand, Appraisal of the Bukidnon Industrial Plantation Project (July 1987). - 149 - ANNME 3

PHILIPPINES

ffARM STUDY

Distributionof ProcessingActivity (1985)

Luzon _Vigayas Mindanao . ital Sector m9 Z m' XXo

Logs 991,876 29 265,214 8 2,170,379 63 3,427,469 100

Lumber 490,665 53 27,677 3 405,165 44 923,507 100

Plywood 39,018 12 - - 294,369 88 333,387 100

Veneer 3,364 5 - - 57,838 95 61,202 100

Average Exclud- ing Logs 533,047 40 27,677 2 757,372 58 1,318,096 100

Source: Cited in Murray-North,Ltd. and Ministry of Forestry,New Zealand, Appraisalof the Bukidnon IndustrialPlantation Project (July 1987). iso - 3 ,~~~~~~ANNEXTable 16

PHILIPPINES

ffARM STUDY

Estimated Reforestation Cost /a (per hectare)

Unit cost 2 of total (Pesos) expenditures

By Item of Expense

Personal service 8,300 44

Maintenance and operating expenses 7,550 40

Capital outlay 2,900 16

Total 18,750 100

By Major Activity

Nursery operations 2,300 12

Plantation establishment 6,250 33

Maintenance and protection 8,400 45

Administration/supervision 1,800 10

Total 18,750 100

/. Based on Madecor Study, 1986.

Source: Ministry of Natural Resources/Bureau of Forestry Development, in cooperation with the Forest Research Institute, National Forestation Program of the Philippines, 1986-2000 (Los Banos, 1987). - 151 - ~~~ANNEX3 Table 17

PHILIPPINES

ffARM STUDY

Summaryof Accomplishmentsof the IntegratedSocial ForestryProgram (1983-86)

1983 1984 1985 1986

Area (^000 ha)

Area under census 547 818 885 933

Area covered by ISFP 286 320 381 418

Area under CSCs 32 78 134 161

Area developed 38 72 97 123

Number of Projects 875 1,042 1,412 834

Number of Families ('000)

Familles under census 194 254 274 293

Familiesparticipating in ISFP 86 102 130 170

Familieswith CSCs 12 28 50 61

AgroforestryAspect

Nurseriesestablished (no.) 528 603 599 620

Area coverage of nurseries (ha) 189. 209 189 211

Planting stock produced (million) 12 9 6 7

Planting stock distributed(million) 9 8 4 5

Source: ISFP Annual AccomplishmentReport, 1985; DENR Natural Resources Profile, 1987. - 152 - ANNEX 3 Table 18

PHILIPPINES

ffARM STUDY

Upland Population Statistics, 1948-88

Region 1948 1960 1970 1975 1980 1988 /a

Population by Region ('000)

1 756 973 1,205 1,317 1,446 1,678

2 402 592 832 971 1,129 1,437

3 285 409 633 742 844 1,036

4 422 666 958 1,129 1,299 1,660

5 496 741 916 988 1,059 1,185

6 861 1,069 1,179 1,362 1,478 1,682

7 1,035 1,217 1,462 1,640 1,840 2,212

8 567 659 794 863 945 1,091

9 199 275 422 461 570 800

10 384 554 875 1,047 1,254 1,675

11 309 689 1,225 1,504 1,834 2,'19

12 152 348 607 678 743 860

Total 5L 86 8 8,192 11,108 12,702 14,441 17.835

Population growth (X) 2.98 3.03 2.73 2.59 2.67 average annual rate over previous period

Population density persons per square kilometer 39 55 74 85 96 119

/a Estimated population based on projections from 1975-80 level.

Source: Ma. Concepcion Cruz and I. Zosa-Feranil, "Policy Implications of Population Pressure in Philippine Uplands," (unpub.ished, 1988). -153 - ANNEX 3 Table 19

PRILIPPINES

ffARM STUDY

Range of PopulationDensity Levels by Region (personsper square kilometer)

Regional Range of density levels Regional Region density, 1980 for constituentprovinces, 1980 density, 1988 /a

1 96 31-212 111

2 48 21-80 61

3 138 101-402 169

4 56 22-513 72

5 147 68-223 165

6 147 90-207 167

7 233 156-424 280

8 111 70-219 128

9 103 59-219 145

10 107 49-197 142

11 86 66-147 118

12 77 48-185 89

/I Estimatedpopulation based on projectionsfrom 1975-80 level.

Source: Ma. ConcepcionCruz and I. Zosa-Feranil,"Policy Implicationsof PopulationPressure in PhilippineUplands," (unpublished,1988). ANNEX3 Table 20

PHILIPPINES

ffARM STUDY

Populationand Area of MunicipalLtLesln Uplandand Tiaber ConcesslonAreas /a

Total number Number Total of municL- Number of of munl- Total population in Annual population palities municipali- cipalities Forest zone population municipalities Forest zone growth rate in munLeLpalities classified tles In the with timber land area in the forest wlth timber population with timber concesslons Region as upland forest zone concessions (km") zone (1980) concessions density 1948-60 1960-70 1970-80

1 115 86 6 13,586 1,246,010 87,935 92 1.69 2.37 1.45 2 67 54 19 21,088 1,017,045 436,509 48 3.17 2.49 3.75 3 34 17 - 4,125 605,566 - 147 - - - 4 72 49 9 15,062 984,980 190,483 65 9.28 5.76 4.19 * 5 50 36 1 6,024 907,267 32,659 151 0.10 1.44 0.41 6 61 39 - 8,499 1,145,538 - 135 - - - 7 72 53 - 6,124 1,252,435 - 204 - - - 8 53 43 5 7,763 754,742 72,399 97 1.83 3.35 2.04 9 28 14 10 4,178 305,680 630,847 73 2.04 4.62 4.25 10 55 38 16 9,354 1,033,005 396,972 110 5.05 1.65 3.32 11 68 40 36 16,318 1,235,242 1,887,978 76 5.61 7.10 4.15 12 34 21 12 7,308 588,226 522,706 80 7.20 2.79 2.08

Philippines 709 490 114 119,429 11,075,736 4,258,483 93 4.58 4.72 3.49

/a The area classifiedas upland comprisesabout 16.8 million ha or 56Z of nationalterritory. This includesboth AID and officiallyheld Forest Land.

Source: Ma. ConcepcionCruz and I. Zosa-Feranll,"Policy Impllcations of PopulationPressure in PhilippineUplands," (unpublished, 1988). -155 - ANNEX 3 Table 21

PHILIPPINES

ffARM STUDY

Migration to Upland Areas, 1975-80

Intraregional Interregional Migrants to upland Total out- areas from other In-migrantsto migrants lost to Regional provincesof the upland areas from upland areas in upland net Region same region other regions other regions migration

1 11,657 17,279 18,017 -738

2 8,680 17,670 8,912 8,758

3 5,855 17,792 15,775 2,017

4 11,361 40,216 12,101 28,115

5 5,684 11,094 13,487 -2,393

6 6,644 9,951 23,934 -13,983

7 4,959 20,332 39,950 -19,618

8 2,860 10,056 18,985 -8,929

9 2,881 8,354 14,668 -6,314

10 21,781 48,228 23,088 25,140

11 23,653 47,120 21,863 25,257

12 5,247 26,195 16,147 10,048

Source: Ma. ConcepcionCruz and I. Zosa-Feranil,"Policy Implicationsof PopulationPressure in PhilippineUplands," (unpublished, 1988). -156 - ANNEX 3 Table 22

PHILIPPINES

ffARM STUDY

Total Upland Area and Area Suitablefor Upland Agricultureand PopulationAbsorption

Total Total Area X of population upland suitable for total in the forest Pseudo- Region aria agriculiure/a area zone (1980) density /4 (km ) (km ) (persons/kim)

1 15,122 3,564 24 1,246,010 350

2 23,437 11,199 48 1,017,045 91

3 6,119 3,898 64 605,566 155

4 23,062 14,491 63 984,980 68

5 7,188 3,149 44 907,267 288

6 10,080 7,441 74 1,145,538 154

7 7,892 7,061 89 1,252,435 177

8 8,538 6,603 77 754,742 114

9 5,520 4,401 80 305.680 69

10 11,762 9,226 78 1,033,005 112

11 21,282 5,077 24 1,235,242 243

12 9,698 9,395 97 582,226 63

Philippines 149,699 85,505 57 11,075,736 130

/a Based on slope up to 30I.

/b An indicatorof future potential for populationabsorption.

Source: Na. ConcepcionCruz and I. Zosa-Feranil,"Policy Implicationsof PopulationPressure in PhilippineUplands," (unpublished,1988). - 157 - ANNEX3 Table 23

PHILIPPINES

ffARM STUDY

Fish Production,by Sector (1973-86) ('000 metric tons)

Year Aquaculture/a Municipal /b Commercial Total

1973 100 640 465 1,205 1974 113 684 471 1,268 1975 106 732 499 1,337 1976 159 726 508 1,393 1977 164 82i 518 1,509 1978 217 858 506 1,580 1979 241 839 501 1,581 1980 289 895 488 1,672 1981 340 939 495 1,773 1982 392 978 526 1,897 1983 445 1,146 519 2,110 1984 479 1,089 513 2,080 1985 495 1,045 512 2,052 1986/c 471 1,072 546 2,089

/a Aquacultureincludes its three sub-sectorsnamely mariculturefor oyster, mussel and seaweeds;brackishwater culture for fishpond;and freshwater culture for fishpen, fish cage and fishpond. /b Municipalincludes fishing done in coastal and inland waters with or without boat of 3 gross tonnage or less. /c Preliminarydata.

Source: Bureau of Fisheriesand Aquatic Resources,Fisheries Statistics Section, 1986 PhilippineFisheries Profile. Adjustments/revisions were made from 1976-1986based on the new classificationof Fisheries Sector. PHILIPPINES

ffARM STUDY

Fish Production, by Sector, by Region 1986 ('000 metric tons)

Municipal Aguaculture Fish Production Fisheries Productior Fishponds Fish Marine Grand Region Fresh Brackish Fishpen cages Oysters Mussels Seaweeds Total Marine Inland Total commercial Total

NCR - 0.6 7.0 0.3 - 3.6 - 11.5 6.3 - 6.3 167.21 185.0

I 1.8 22.9 - - 8.1 - - 32.8 16.2 0.6 16.8 3.6 53.2

II 1.3 0.9 - 0.2 - - - 2.4 9.2 3.0 12.2 7.9 22.5

III 11.0 66.5 - 0.3 0.5 - - 78.3 20.1 5.9 26.0 8.0 112.3

IV 0.2 17.5 31.0 4.4 5.3 5.7 1.9 66.0 124.9 213.8 338.7 55.6 460.3

V 0.1 7.4 - 3.9 0.1 - - 11.5 79.6 3.4 83.0 41.0 135.5

VI 0.4 61.9 - - 2.4 1.0 - 65.7 144.3 2.4 146.7 111.7 324.1

VII - 6.7 - - - - 11.5 18.2 30.1 - 30.1 21.7 70.0

VIIl 0.1 2.5 - - - I.1 4.0 8.3 36.4 0.6 37.0 11.1 56.4

IX-A - 0.8 - - - - 128.2 129.0 52.2 0.1 52.3 10.3 191.6

IX-B 0.1 8.1 0.2 - - - 22.9 31.3 139.6 1.2 140.8 62.5 234.6

X 0.4 2.2 - - - - - 2.6 70.3 2.4 72.8 6.2 81.6

XI 0.1 5.5 - 0.2 - - 0.2 6.0 53.9 0.8 54.7 38.9 99,6

XII 0.1 3.6 - - - - 3.7 24.4 30.9 55.3 0.3 59.3

Total 15.6 207.1 38.2 9.3 16.4 12.0 168.7 467.3 807.5 265.1 1,072.7 546.0 2,085.8

Source: Bureau of Fisheries and Aquatic Resources, Fisheries Statistics Section, 1986 Philippine Fisheries Profile, 1988, - 159 - T.ble 25

PHILIPPINES

ffARM STUDY

Comparisonof Potentialand Actual Productionof PhilippineFishing Areas /a

Estimated Fishing potentialproduction 1983/84 productioa Possibleincrease region Pelagic Demersal rotal BFAR statisticalarea Pelagic Demersal Total Pelagic Demersal Total

1 120,000 90,000 210,000 4. Tayabas Bay 15,150 7,005 22,155 0 0 0 14, CamotesSea 13,886 7,178 21,064 15. Visayan Sea 119,014 79,002 198,016 17. Sibuyan Sea 30,070 12,406 5,476 18. Ragay Gulf 26,091 11,921 38,012 19. Samar Sea 24,853 17,240 42,093 Subtotal 229,064 134,752 363,816

II 112,000 84,000 196,000 8. South Sulu Sea 68,738 22,736 91,474 0 0 0 9. East Sulu Sea 96,186 18,663 114,849 12. Bohol Sea 37,580 16,433 54,013 16. Guimaras Strait 49,118 44,430 93,548

Subtotal 251,622 102,262 353,884

III 80,000 60.000 140,000 10. Moro Gulf 89,906 31,380 121,286 0 20,429 6 11. Davao Gulf 10,517 8,191 18,908

Subtotal 100,423 39,571 139,994

IV 264,000 198,000 462,000 5. West PalawanWaters 17,505 8,358 25,863 100,178 152,700 252,878 6. Cuyo Pass 41,435 11,295 52,730 7. West Sulu Sea 91,775 21,360 113,135 3. BatangasCoast 13,107 4,287 17,894

Subtotal 163,822 45,300 209,122

V 64,000 48,000 112,000 1. LingayenGulf 5,570 4,981 10,551 39,980 14,748 54,728 2. Manila Bay 13,660 23,690 37,350 24. BabuyanChannel 4,790 4,581 9,371 23. Palawan Bay - - -

Subtotal 24,020 33,252 57,278

VI 160,000 !20,000 280,000 13, Leyte Gulf 24,939 24,531 49,470 91,351 49,032 140,883 20. Lagonoy Gulf 8,252 12,480 20,732 22. CasiguranSound 1,872 1,153 3,025

Subtotal 68.649 70,968 139,617

Oceanic 250,000 - 250,000 Oceanic areas 138,783 - 138,783 111,217 - 111,217

/a Potentialestimated in NRMC/FIDC(1980); actual BFAR productionstatistics for 1983/84.

Source: GeronimoT. Silvestre."Philippine Marine Capture Fisheries- Exploitation,Potential and Options for SustainableDevelopment," (unpublished, 1987). - 160 - ANNEX 3 Table 26

PHILIPPINES

ffARM STUDY

Estimated Annual Average Value of Production from One Hectare of Mangrove Managed for Wood Products on a Sustained Yield Basis (1983 prices)

Resource Value

Wood products, /a 12.5 MT of firewood at P 86.50 1,081 Fish, direct harvest, 100 kg at P 7.11 /b 711 Fish, indirect harvest, 400 kg at P 7.11 /c 2,844 Shrimp and prawns, 52 kg at P 20.07 /d 1,G44 Crab meat, 15 kg at P 27.88 /e 418 Mollusks, 200 kg at P 2.23 /f 446 ,ea cucumbers, 40 kg at P 1f.15 /g 446

Total 6,990

/a Based on analysis of (i) development of a new area into a mature bakawan (Rhizophora mucronata) stand in 25 years, or (ii) development of a pagatpat (Sonneratia caseolaris) fuelwood operation, or (iii) management of existing mangrove area. /b Estimate based on preliminary Philippine field survey data and 200 kg/ha annual production estimate for subtropical estuarine seagrass communities (Regusion and Adams, 1979), areas with productivity levels similar to mangrove. /c 3. The 1980 BFAR harvest estimate for fish groups known to have mangrove dependent species (282,366 MT) divided by remaining mangrove area of 200,000 ha (an average of the 249,188 ha 1977 BFD and the 149,139 ha 1979 NRMC estimates) - equals 1,412 kg/ha. Assuming one third of the harvest is composed of mangrove dependent species, 470 kg/ha/year is attributed to mangrove. 2. Philippine field data indicate 10,100 fingerlings per hectare at time of sampling (April and May). Assuming an average stay in the nutrient rich mangrove narsery of 2 months, this equals 60,000/ha/year. Assuming 42 (2,400) survive to an average weight of 0.5 kg and 33X of these are harvested (1.32 of fingerlings), the result is 400 kg/ha/year. 3. r3ulfof Mexico harvest of fish known dependent on intertidal vegetation (mangrove and saltmarsh grass) is 573 kg/ha/year. /a The average of 1, 2, and 3 is 481 kg. /d Shrimp harvest has been shown to be closely related to area of intertidal vegetation (mangrove in the Philippines) which serves as an essential nursery area for prawn and mat.,penaeid shrimp species /2/3 1976-80 average harvest divided by estimate of remaining mangrove gives 104 kg/ha. Assume half to be mangrove dependent. /e Unpublished data from A.C. Alcala, Silliman University. 7?1 Unpublished field data gathered by S. Alcazar, Silliman University, from Bais Bay mangrove area in Negros Oriental indicates an annual harvest worth P 5,800/ha. One tenth taken as average value. Li Unpublished Alcazar field data on sea cucumbers indicates annual harvest worth P4,500/ha. One tenth taken as average.

Sources: (1) Pryke, Philip, Central Visayas Regional Project, World Bank, 1983. (2) Peters, D., D. Ahrenholz and T. Rice, "Harvest and Value of Wetland Associated Fish and Shellfish," in Wetland Function and Values: The State of Our Understanding, 1978. (3) Turner, R., "Intertidal Vegetation and Commercial Yields of Penaeid Shrimp," in Trans. Am. Fishing Society, 1977. (4) Martosubroto, P. and N. Naamin, "Relationship Between Tidal Forests (Mangroves) and Commercial Shrimp Production in Indonesia," in Marine Research Indonesia, 1977. PHILIPPINES

ffARM STUDY

AgricultureSector Expendituresby Department/Agencyand by Type (P million, constant 1972 prices)

Allot- Appro- Growth Actual obligations ments priations rates (% p.a.) 1981 1982 1983 1984 1985 1986 1987 1981-86 1986/87

Current OperatingExpenditures 595 581 498 325 359 454 559 -4.4 10.9 Dept. of Agrarian Reform 52 50 48 33 34 40 46 -4.4 7.7 Dept. of Agriculture& Food 204 191 171 124 151 197 258 -0.6 14.5 Dept. of Natural Resources 128 138 114 79 74 93 115 -4.4 8.4 NIA 67 74 66 44 47 57 66 -2.7 8.1 DPWH (rural roads) 46 54 39 24 20 32 47 -6.2 22.2 Other /a 97 74 61 21 33 32 26 -17.1 -8.9

CapitalOutlays 1,042 923 827 483 388 395 679 -14.9 31.0 Dept. of AgrarianReform 15 15 28 6 17 10 11 -6.4 5.7 Dept. of Agriculture& Food 51 33 78 87 62 52 96 0.4 36.2 Dept. of Natural Resources 9 1 8 2 3 6 6 -5.1 -2.6 NIA 705 594 476 242 193 229 301 -17.1 14.8 DPWH (rural roads) 125 147 106 57 55 59 88 -11.8 22.0 Other /a 137 132 132 89 58 39 176 -18.8 111.9 ,..

GRAND TOTAL 1,637 1,504 1,325 808 747 850 1.238 -10.3 20.7 s|

Capitaloutlays/grand total 0.64 0.61 0.62 0.60 0.52 0.46 0.55

/a IncludingCorporate Equity InvestmentFund and subsidy to GovernmentCorporations and Government- suppnrtedentities such as PCA, PVA, PVTA, etc.

Source: DMB and staff estimates. - 162 -

ANNEX 3 Tab,le28

Preliminary Priority List for Protected Areas /

PRIIRIT7 PROTECTED AREAS BASED ON IPAS CRITERIA

Priority Number Name Region Score

1 Mt. Malindang NP, Misamis Occidental 10 82 2 Mt. Pulog NP, Benguet, Ifugao, N. Vizcaya 1&2 81 3 Mt. Iglit-Baco NP, Mindoro Occidental 4 75 4 Quezon National Park, Atimonan, Quezon 4 70 5 Biak-na-Bato NP, Bulacan 3 58 Mt. Kanlaon NP, Negros Occidental 6 58 6 Mt. Banahaw-San Cristobal NP, Laguna and Quezon 4 57 Mt. Data NP, Bontoc, Mt. Province 1 57 7 Yami et. al., Batanes 2 55 8 Mayon Volcano NP, Albay 5 51 9 Mahagnao NP, Leyte 8 50 10 Bulusan Volcano NP, Sorsogon 5 45 11 Timber Producers and Marketing Corporation Wilderness 8 44 12 Lake Danao NP, Leyte 8 42 13 Rungkunan NP, Lanao del Sur 12 40 14 Taal Lake NP, Batangas 4 39 Bicol National Park, Camarines Norte 5 39 15 Lake Dapao, Lanao 12 38 16 Mt. Isarog NP, Camarines Sur 5 32 17 Salikata NP, Lanao del Sur 12 31 18 Aurora NP, Baler, Quezon 4 27 19 Rajah Sikatuna, Bohol 7 25 20 Philippine Deer Sanctuary, Antique 6 21

J/ Existing parks, reserves, and protected areas. Scoring by DENR/ Haribon Society-sponsored Technical Workshop on Integrated Protected Areas Systems for the Philippines. - 163 -

ANNE3

Candidate Sites for ProtectedAre Stat.t Luzon

1. Sabtang/ItbayatIslands, Batanes 2. Mr. Iraya, Batanes 3. Sierra Madre Mountains,Infanta-Baler Area 4. Palani Island, Sta. Fe, Cagayan 5. Cagayan River, Cagayan Valley 6. Magat Forest Reservation,Ifugao-Benguet-Nueva Vizcaya 7. Dalton Pass, Nueva Vizcaya 8. Mt. Pulog, Benguet 9. Mt. Data, Bontoc 10. Mt. Pinatubo,Zambales 11. Mt. Arayat, Pampanga 12. Candaba Swamp, Pampanga 13. Mt. Binuang, Sierra Madre 14. Balayan Bay, Batangas 15. Pagbilao Bay, Quezon 16. West CalataganReefs, Batangas 17. Taal Lake, Bantagas 18. Lobo, Batangas 19. La Laguna Marsh, Lopez, Quezon 20. Quezon National Park, Atimonan,Quezon 21. Mt. Makiling, Los Banos, Laguna 22. Mt. Banahaw, Laguna & Quezon 23. Minasawa Island, Pollilo 24. Tayabas Bay 25. Manlubas Swamp, Labo 26. Ragay Gulf, Bicol 27. Mt. Labo, CamarinesNorte 28. Bicol National Park, CamarinesNorte 29. Mt. Isarog, CamarinesSur 30. Mayon Volcano, Albay 31. Mt. Bulusan/BulusanLake, Sorsogon 32. Lake Buhi, Camarines 33. Lake Bato fjindoro

1. Mt. Iglit-Baco 2. Mt. Halcon 3. Lake Naujan 4. Puerto Galera Bay 5. Apo Reef

1/ As recommendedby DENR-HaribonSociety sponsoredTechnical Work- shop on IntegratedProtected Areas System for the Philippines. -164 -

ANNEX 3 Table 29

Palawan

1. St. Paul bay 2. Manguao 3. Mt. Matalingahan 4. Langen Island 5. Ursula Island 6. Balabac 7. Malampaya Sound 8. Mt. Bloomfield/IrawanValley 9. Cleopatra'sNeedle 10. TubattahaReef

Visayas

1. Mt. Canlaon, Negros Island 2. Twin Lakes, Negros Island 3. Lake Danao, Leyte 4. ChocolateHills, Bohol 5. Mt. Baloy, Panay Island 6. Gato Island 7. Olango Island, Cebu 8. Cuernos Mountains 9. Catubig Area

Sibuyan

1. Mt. Giting-Giting

Mindanao/Sulu

1. LiguasanMarsh 2. CotabatoRiver 3. Lake Lanao 4. Lake Sebu 5. Lake Buluan 6. Turtle Island 7. Coral Reefs of Sitangkay Island 8. Mt. Apo, Davao 9. Mt. Malindang,Misamis Occidental 10. Mt. Kitanglad 11. Mt. Hilong-Hilong 12. Camiguin Island 13. Siargao/DinagatIsland - 165 -

4. RESEARCHRECOMHENDED 1BY FFARM STD

1. The ffARM Study has identifieda variety of issues for which the state of existing kncwledge does not permit firm (or quantitative) conclusions. These are usually issues which merit research priority in the Philippines. The Study also notes some applied technological research which could improveproductivity of natural resourcemanagement. This does not include planning and survey work required in support of ffARM policy recommendations. The research agenda presented in the text is summarized below:

(a) Based on RP-German Forest Inventory, estimate commercially- recoverable volume of various kinds of timber, including fuelwood,under alternativeharvesting strategies(para. 2.10);

(b) Estimate potential and realized economic rents recovered in logging operations (para. 2.21);

(c) Determine whether disincentives,insufficient scale, or poorly- developed technology are responsible for low utilization of timber by Philippine sawmills, and recommend appropriate policy actions (para. 2.29);

(d) Further development and verificationof the Modified Universal Soil Loss Equation as a basis for (a) evaluating watershed criticality and (b) quantifying acceptability of various combinationsof upland conservationtechniques (Annex 2);

(e) Improvementof predictive techniquesrelating upstream erosion to downstream silt and sediment delivery (para. 5.12 and Annex 2);

(f) Paired studies of the hydrological effects of watershed degradation (i.e., studies which use a nearby, undegraded watershed as a control to eliminate effects of intertemporal meteorologicalvariations unrelated to degradation) (para. 5.13 and Annex 2);

(g) Long-term pilot studies of alternative forest harvesting and replanting tpproaches (clearcut vs. selective cut, original species mix vs. faster growing species), to establish what the economic and environmentaltradeoffs might be (paras.5.25-27);

(h) developmentof a manual for planning and implementingcommunity forestry,based on experience in current pilot projects (pasas. 5.28 and 6.36);

(i) Comparison of economic and environmental tradeoffs of labor- intensive and capital-intensivelogging techiques, to determine types of forests where former are feasible (para. 5.29);

(j) Economic criteria of "criticality" for watersheds, and classificationof Philippine watersheds on the basis of these criteLia (paras. 5.30-31); - 166 -

(k) Surveys and pilot studies of the effects of land tenure security, including the impact of upgraded CSCs, on adoption of conservation-orientedfarming technologiesin the uplands (paras. 5.33 and 6.11);

(1) Studies of trials of both technical packages (e.g., SALT) and individualtechniques for conLrol of soil erosion, water runoff, and nutrient replenishment. Trials should always involve comparison of alternative measures with each other and with a base condition of no measure; cost-benefit analysis should be used to integrateresults and draw conclusionsfor extensionwork (paras. 5.34-42);

(m) Evaluation of economics of upland ranching on cogon grasslands, along with other incentivesfor this activity (para. 5.47);

(n) Cost-benefit evaluation and design optimization of artificial reefs; development of production technology for new forms of mariculture and mari-silviculture; economic evaluation of sustainedmanagement of mangroves (paras. 5.48-53, 6.50-51);

(o) Long-term pilots of effects of increased minimum mesh size on fish populationand catch of various species (para. 6.45);

(p) Effects of tax, tariff, and exchange rate policies in the Philippineson natural resource management (paras.5.68-70);

(q) Effects of log export, import, and processing restrictions on domestic efficiency of lumber extraction and processing (para. 5.72);

(r) Evaluation of alternativefast-growing tree species; processing or utilization methods to expand the scope for plantation forestry beyond pulpwood production (para. 6.20); and

(s) Fishing potential and appropriate gears for underfished commercialfishing grounds (para. 6.53). - 167 -

ANNEX 5. RECENT MEASURES TAKEN BY THE DEPARTMENT OF ENVIRONMENT AND NTRL RESOURCEMANAGEMENT RELATING TO ffAM STUDY RECOMMENDATIONS1i

1. Cancellationof 22 logging concessions (1986-87)and suspension of 39 others for non-compliancewith logging regulations;forty sawmills closed down for processir.gillegally-cut logs.

2. Issue of E.O. No. 277 (July 1987) making illegal logging and gathering of forest produce (including purchases and possession without proper documents) a criminal offense chargeable under the Penal Code, and authorizingconfiscation of forest products, equipment and conveyanceused in the commission of the offense (not yet implemented).

3. Pilot of competitivebidding for stumpage price determination under Timber ProductionSharing Agreements for timber resource exploitation (mandatedby 1987 Constitution).

4. Census of Forest Occupants,targeted for completionin 1989.

5. Initiation of task force, in cooperation with Haribon Foundation,to develop IntegratedProtected Areas System.

6. Impositionof P10,000 per logged hectare reforestationdeposit on existing timber license agreements and a P250 per cubic meter provision forest management fee on expiring timber license agreements.

7. Under AD Forestry Sector Program Loan;

(a) Review of mechanisms for enforcementof forestry regulations;

(b) Transition from force account to contractualreforestation;

(c) Revised draft guidelines for private-sector ITP and community forestry;

(d) Introductionof indepetndent(remote-sens5ng-based and NGO occular) monitoringof reforestationwork; and

(e) initiationof Master Plan for Forestry Developmentstudy.

8. Memorandum of Agreement among DA, DENR and DAR delineating functions of each agency in implementationof CARP and providing for coordinationof delivery of support servicesunder the program.

LI Measures given prominence in main text discussion are omitted. | CHBUTt - 168 - I fH l !I ootlRusnz I r {: R } 11 1 I {3 1

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