Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 37006-PH PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$83.752 MILLION Public Disclosure Authorized TO THE REPUBLIC OF THE PHILIPPINES FOR A MINDANAO RURAL DEVELOPMENT PROJECT IN SUPPORT OF PHASE 2 OF THE MINDANAO RURAL DEVELOPMENT PROGRAM Public Disclosure Authorized (APL) March 1,2007 Rural Development, Natural Resources and Environment 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 August 2006 Currency Unit = Philippine Peso Php 52 = US$1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AFMA - Agriculture and Fisheries Modernization Act AFMPs - Agriculture and Fisheries Modernization Plans APL - Adaptable Program Loan ARMM - Autonomous Region in Muslim Mindanao AusAID - Australian Agency for International Development Barangay AFMP - Barangay Agriculture and Fisheries Modernization Plan BDPs - Barangay Development Plans BFs - Barangay Facilitators BFAR - Bureau of Fisheries and Aquatic Resources BSWM- Bureau of Soils and Water Management BAWASA - Barangay Waterworks and Sanitation Association CAS - Country Assistance Strategy CDD - Community Driven Development CFAD - Community Fund for Agricultural Development CIDA - Canadian International Development Agency CMBC - Coastal Marine and Biodiversity Conservation CO - Central Office COA - Commission on Audit CPAR - Country Procurement Assessment Report DA - Department of Agriculture DAR - Department ofAgrarian Reform DBM - Department of Budget and Management DENR - Department of Environment and Natural Resources DesA - Designated Account DFIMDP - Diversified Farm Income and Market Development Project DILG - Department ofInterior and Local Government DOF - Department of Finance DTI - Department ofTrade and Industry DPWH - Department ofPublic Works and Highways EA - Environmental Assessment ECC - Environmental Compliance Certificate EIS - Environmental Impact Statement EMB - Environmental Management Bureau FOR OFFICIAL USE ONLY eNGAS - Electronic National Government Accounting System FM - Financial Management FMR - Financial Monitoring Report FMRs - Farm-to-Market Roads FSDE- Feasibility Study/Detailed Engineering GEM - Growth with Equity in Mindanao GOP - Government ofthe Philippines IA - Irrigators Association ICR - Implementation Completion Report ICT - Information and Communications Techno1 gY IFC- International Finance Corporation IGR - Investments for Governance Reform IPS- Indigenous Peoples IPM - Integrated Pest Management IRA - Internal Revenue Allocation JNA - Joint Needs Assessment KALAHI - Kapit-Bisig Laban sa Kahirapan LARR - Land Acquisition Rehabilitation and Resettlement LGC - Local Government Code LGU or LGUs - Local Government Unit/s MA0 -Municipal Agricultural Office MDFO - Municipal Development Fund Office MEDCO - Mindanao Economic and Development Coordinating Office MFs - Municipal Facilitators MLGUs - Municipal Local Government Units MPDO - Municipal Planning Development Office MPMIUs - Municipal Program Management and Implementation Units MRDP1- Mindanao Rural Development Project APL Phase 1 MRDP2 - Mindanao Rural Development Project APL Phase 2 MSCs - Multi-sectoral Committees MTPDP - Medium Term Philippine Development Plan NCB - National Competitive Bidding NCIP -National Commission for Indigenous People NEDA - National Economic and Development Authority NG - National Government NGAS - National Government Accounting System NGOs - Non-Government Organizations NIA - National Irrigation Administration NIA-PI0 - National Irrigation Administration - Provincial Irrigation Officer NRh4 - Natural Resources Management 0 & M - Operation and Maintenance PA0- Provincial Agricultural Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. PASUC - Philippine Association of State Colleges and Universities PBD - Philippine Bidding Document PCO - Program Coordination Office PLGUs - Provincial Local Government Units PAB - Program Advisory Board P/MAO - ProvincialMunicipal Agriculturist’s Office PMBO - ProvincialMunicipal Budget Office PMEO- ProvincialMunicipal Engineer’s Office PMPDO - ProvincialMunicipal Planning and Development Office POs - Peoples’ Organizations PPMrUs - Provincial Program Management and Implementation Units PRA - Participatory Rural Appraisal PSO - Program Support Office RA - Republic Act RAFCs - Regional Agricultural and Fisheries Councils RFUs - Regional Field Units of the Department ofAgriculture RI- Rural Infrastructure RIARC - Regional Integrated Agricultural Research Center RPABs - Regional Program Advisory Boards RPCO/s - Regional Program Coordination Office/s RWSA - Rural Waterworks and Sanitation Association SBD - Standard Bidding Document SLM- Sustainable Land Management SPCMAD - Special Project Coordination and Management Assistance Division SOE - Statement of Expenditure SUCs - State Universities and Colleges USAID - United States Agency for International Development Vice President: James Adams, EAPVP Country Director: Joachim von Amsberg, EACPF Sector Director Christian Delvoie, EASSD Sector Manager: Rahul Raturi, EASRE Task Team Leader: Carolina V. Figueroa-Geron, EASRE PHILIPPINES Mindanao Rural Development Project .Phase ll CONTENTS Page I. STRATEGIC CONTEXT AND RATIONALE ......................................................... 1 A . Country and sector issues .................................................................................................... 1 B. Rationale for Bank involvement ......................................................................................... 2 C . Higher level objectives to which the project contributes .................................................... 3 I1. PROJECT DESCRIPTION......................................................................................... 3 A . Lending instrument ............................................................................................................. 3 B. Program objective and Phases ............................................................................................ 3 C . Project development objective and key indicators.............................................................. 5 D. Project components ............................................................................................................. 5 E. Lessons learned and reflected in the project design ............................................................ 8 F. Alternatives considered and reasons for rejection .............................................................. 9 I11. IMPLEMENTATION .................................................................................................. 9 A . Partnership arrangements., .................................................................................................. 9 B. Institutional and implementation arrangements. ................................................................. 9 C . Monitoring and evaluation ofoutcomeshesults., .............................................................. 11 D. Sustainability and Replicability ........................................................................................ 11 E. Critical risks and possible controversial aspects ............................................................... 11 F. Loadcredit conditions and covenants ............................................................................... 12 IV. APPRAISAL SUMMARY ......................................................................................... 13 A . Economic and financial analyses ...................................................................................... 13 B. Technical ........................................................................................................................... 14 C . Fiduciary ........................................................................................................................... 15 D. Social................................................................................................................................. 16 E. Environment ...................................................................................................................... 16 F. Safeguard Policies ............................................................................................................. 17 G. Policy Exceptions and Readiness ...................................................................................... 17 Annex 1: Country and Sector or Program Background ......................................................... 18 . Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 24 Annex 3: Results Framework and Monitoring ........................................................................ 25 Annex 4: Detailed Project Description...................................................................................... 31 Attachment 1 to Annex 4: Mechanism and Guidelines for Perfonnance-Based Grants .......... 49 Attachment 2 to Annex 4: Anti-Comption Plan ...................................................................... 53 Annex 5: Project