Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 363 17-PH PROJECT APPRAISAL DOCUMENT ON A Public Disclosure Authorized PROPOSED LOAN IN THE AMOUNT OF JAPANESE YEN 11.710 MILLION (USSl 00 MILLIONEQUIVALENT) TO THE LAND BANK OF THE PHILIPPINES WITH THE GUMTEEOF THE REPtlBLIC OF THE PHILIPPINES Public Disclosure Authorized FOR A SUPPORT FOR STRATEGIC LOCAL DEVELOPMENT AND INVESTMENT PROJECT May 3 1,2006 Urban Development Sector Unit East Asia and Pacific Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective May 1,2006) Currency Unit = Philippine Pesos (PhP) PhP51.5 = US$1 PhP 1.00 = US$0.019 FISCAL YEAR January 1 - December 3 1 ABBREVIATIONS AND ACRONYMS ADB Asia Development Bank BAC Bids and Awards Committee BSP Bangko Sentral ng Pilipinas CAS Country Assistance Strategy CDS City Development Strategy CIDA Canada International Development Agency COA Commission on Audit DBP Development Bank of the Philippines DENR Department of Environment and Natural Resources EA Environment Assessment ECC Environmental Compliance Certificate EIS Environment Impact Study EMP EnvironmentalManagement Plan FM Financial Management FS Feasibility Study FSL Fixed Spread Loan GFI Government Financial Institution GOP Government of the Philippines GPPB Government Procurement Policy Board HBD Harmonized Bidding Document IBRD InternationalBank for Reconstruction and Development ICB International Competitive Bidding IEE Initial Environmental Examination IFC International Finance Corporation IRA Internal Revenue Allotment IRR ImplementationRules and Regulations LBP Land Bank of the Philippines LCP League of Cities of the Philippines LGU Local Government Unit LGUGC Local Government Unit Guarantee Corporation MDFO Municipal Development Fund Office NCB National Competitive Bidding NEDA National Economic Development Authority NPL Non-performing Loan ODA4 Overseas Development Assistance PDF Philippines Development Forum ROPOA Real and Other Properties Owned or Acquired PCN Project Concept Note PFI Private Financial Institution PhP Philippines Peso PMO Project Management Office PMU Project Management Unit SBD Standard Bidding Document SIL Specific Investment Loan TA Technical Assistance TOR Terms of Reference VSL Variable Spread Loan WBI World Bank Institute WDDP Water District Development Project Acting Vice President: Jeffery Gutman Country Director: Joachim von Amsberg Sector Director: Keshav Varma Task Team Leader: Ming Zhang PHILIPPINES Support for Strategic Local Development and Investment Project CONTENTS Page A . STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1. Country and sector issues.................................................................................................... 1 2 . Rationale for Bank involvement ......................................................................................... 3 3 . Higher level objectives to which the project contributes .................................................... 5 B. PROJECT DESCRIPTION................................................................................................. 6 1. Lending instrument ............................................................................................................. 6 2 . [IfApplicable] Program objective and phases .................................................................... 6 3 . Project development objective and key indicators. ............................................................. 6 4 . Project components ............................................................................................................. 6 5 . Lessons learned and reflected in the project design ............................................................ 7 6. Alternatives considered and reasons for rejection .............................................................. 8 C. IMPLEMENTATION .......................................................................................................... 9 1. Partnership arrangements (if applicable) ............................................................................ 9 2. Institutional and implementation arrangements .................................................................. 9 3 . Monitoring and evaluation ofoutcomeslresults .................................................................. 9 . *. 4 . Sustainability..................................................................................................................... 10 5 . Critical risks and possible controversial aspects ............................................................... 10 6 . Loadcredit conditions and covenants ............................................................................... 11 D. APPRAISAL SUMMARY ................................................................................................. 12 1. Economic and financial analyses ...................................................................................... 12 2 . Technical ........................................................................................................................... 13 3 . Fiduciary ........................................................................................................................... 13 4. Social................................................................................................................................. 14 5 . Environment...................................................................................................................... 15 6 . Safeguard policies ............................................................................................................. 15 7 . Policy exceptions and readiness ........................................................................................ 16 Annex 1: Country and Sector or Program Background......................................................... 17 Annex 2: Major Related Projects Financed by the Bank andlor other Agencies ................. 23 Annex 3: Results Framework and Monitoring ........................................................................ 24 Annex 4: Detailed Project Description...................................................................................... 28 Annex 5: Project Costs ............................................................................................................... 33 Annex 6: Implementation Arrangements ................................................................................. 35 Annex 7: Financial Management and Disbursement Arrangements ..................................... 40 Annex 8: Procurement Arrangements ...................................................................................... 47 Annex 9: Economic and Financial Analysis ............................................................................. 54 Annex 10: Safeguard Policy Issues ............................................................................................ 61 Annex 11: Project Preparation and Supervision ..................................................................... 65 Annex 12: Anti-Corruption Measures ...................................................................................... 66 Annex 13: Documents in the Project File ................................................................................. 70 Annex 14: Statement of Loans and Credits .............................................................................. 71 Annex 15: Country at a Glance ................................................................................................. 74 Map: IBRD 34814 PHILIPPINES SUPPORT FOR STRATEGIC LOCAL DEVELOPMENT AND INVESTMENT PROJECT PROJECT APPRAISAL DOCUMENT EAST ASIA AND PACIFIC EASUR Date: May 3 1,2006 Team Leader: Ming Zhang Country Director: Joachim von Amsberg Sectors: General water, sanitation and flood Sector ManagerlDirector: Keshav Varma protection sector (30%); Sub-national government administration (20%); Roads and highways (20%); Solid waste management (20%); Housing construction (10%) Themes: Other urban development (P); Municipal finance (P); Decentralization (S) Project ID: PO64925 Environmental screening category: Financial Intermediary Assessment Lending Instrument: Specific Investment Loan Project Financing Data [XI Loan [ ] Credit [ 3 Grant [ ] Guarantee [ 3 Other: For LoanslCreditslOthers: Total Bank financing (uS$m.): 100.00 Proposed terms: Variable spread, with a maturity of 20 years, inclusive of five years grace, and front-end fee of 1% ofthe loan (with a waiver of 0.75%) NSTRUCTION AND ~~ Borrower: Land Bank ofthe Philippines 1598 M. H, Del Pilar St. Malate Metro Manila Philippines 1004 Tel: (632)812-4056 Fax: (632)812-4056 www.landbank.com Responsible Agency: Land Bank of the Philippines Manila, Philippines FY 07 08 09 10 11 12 13 Annual 3 -00 6.00 11.00 22.00 26.00 26.00 6.00 Cumulative 3 -00 9.00 20.00 42.00 68.00 94.00 100.00 Does the project depart from the CAS in content or other significant respects? Re$ [ ]Yes [XINO PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7 [ ]Yes [XINO Have these been approved by Bank management? r-- ]yes r INO Is approval for any policy exception sought from the Board? E ]yes jNo Does the project include any critical risks rated