Philippines - Rural Electrification Project

FILE COPY Document of The World Bank FOR OFFICIAL USE ONLY Report Now P-2258-PH REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMEI TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE NATIONAL ELECTRIFICATION ADMINISTRATION WITH THE! GUARANTEE OF THE REPUBLIC OF THE PHILIPPINE FOR A RURAL ELECTRIFICATION PROJECT March 13, 1978 This document has a restricted distribution and may be used by recipients only in the performance of their officil duties, its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Calendar 1977 January 1978 Currency unit = Peso (P) P US$1.00 = Pesos (P) 7.4 7.4 P 1.00 = US$0.135 0.135 PRINCIPAL ABBREVIATIONS AND ACRONYMS ADB = Asian Development Bank DOE = Department of Energy MECO = Manila Electric Company NEA = National Electrification Administration NPC = National Power Corporation FISCAL YEAR January 1 to December 31  PHILIPPINES FOR OFFICIAL USE ONLY RURAL ELECTRIFICATION PROJECT LOAN AND PROJECT SUMMARY Borrower: National Electrification Administration (NEA) Guarantor: Republic of the Philippines Amount: US$60 million equivalent Terms: The loan would be for a term of 20 years, including a grace period cf 5 years, with an interest rate of 7.45% per annum. Relending Terms: NEA would relend the proceeds of the loan to the rural electric cooperat:ives on varying terms. The Government would bear the foreign exchange risk on the Bank loan if NEA is unable to meet these costs from its own revenues. Project Description: The project would support NEA's rural electrification program during L979-80, thereby assisting the Government in meeting its target of bringing electric service to the entire popula- tion by 1990. One of the program s main objectives is to improve the standard of living of people in provincial towns and rural areas. The project would provide access to elec- tricity services for some 877,000 families (or 5.3 million individuals) in these areas, help create new job opportunities, and thereby increase incomes among the rural population. The primary risk relates to the fact that the rural electric cooperatives which are now in operation are still within the five-year grace period of their initial loans from NEA and have therefore not yet established a repayment record. There is likely to be considerable variation in the financial per- formance of individual cooperatives due to differences in the degree of economic development in the area, the sizes of the cooperatives, and the varying costs of power in different regions of the country. NEA has been successful in ensuring that the cooperatives follow efficient operating procedures, and has the ability to monitor closely the performance of each cooperative. In the event that some of the cooperatives have difficulty in servicing their loans, NEA has the authority, and wiLl consider steps, to alleviate the position of the cooperatives which experience higher costs due to their remote locations in order to enable them to meet their financial obli- gation, while keeping tariffs at reasonable levels. Ultimately, the success of the rural electrification program will depend upon thie ability of the population in rural areas to pay for the program, which is directly related to the successful imple- mentation of the policies and programs which the Government has established to increase the level of development in rural areas. 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.  - ii~ - Estimated Cost: Local Foreign Total ($ million) Materials 20.2 61.3 81.5 Labor 16.7 - 16.7 Consultants 0.2 0.3 0.5 Transportation and administration 4.0 - 4.0 Engineering 5.1 - 5.1 Special projects, head- quarters, working equipment and load promotion 15.4 4.5 19.9 Subtotal 61.6 66.1 127.7 Physical contingencies 4.3 3.4 7.7 Price contingencies 12.8 12.3 25.1 Subtotal 17.1 15.7 32.8 Total 78.7 81.8 160.5 Financing Plan: Local Foreign Total Source Government equity to NEA 78.7 - 78.7 World Bank - 60.0 60.0 Other External Sources - 21.8 21.8 Total 78.7 81.8 160.5 Bank Fiscal Year Estimated ($ million) Disbursements: 1979 1980 1981 Annual 16.00 36.82 7.18 Cumulative 16.00 52.82 60.00 Rate of Return: 22% Appraisal Report: NG. 1843a-PH dated March 13, 1978  REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE NATIONAL ELECTRIFICATION ADMINISTRATION WITH THE GUARANTEE OF THE REPUBLIC OF THE PHILIPPINES FOR A RURAL ELECTRIFICATION PROJECT 1. I submit the following report and recommendation on a proposed loan to the National Electrification Administration (NEA) with the guarantee of the Republic of the Philippines for the equivalent of $60.0 million to help finance a Rural Electrification Project. The loan would have a term of 20 years, including 5 years of grace, with interest at 7.45% per annum. NEA would finance interest during the grace period. The proceeds of the loan would be relent to approximately 120 electric cooperatives on varying terms. The Govern- ment would bear the foreign exchange risk on the Bank loan if NEA is unable to meet these costs from its own revenues. PART I - THE ECONOMY 2. An economic raission visited the Philippines in July/August 1977 and its report, "The Philippines: Country Economic Memorandum" (No. 1765-PH of October 26, 1977), was distributed to the Executive Directors under Secretary's Memorandum PHL77-2 on October 27, 1977. A basic economic report, entitled The Philippines: Prioritiess and Prospects for Development (SecM-76/366), was previously distributed to the Executive Directors on May 18, 1976. Macroeconomic Performance 3. During the 1960s, the Philippines economy grew in real terms at an annual rate of about 5-1/2%. However, the rate of growth was less than what might have been achieved if the country's considerable natural and human resources had been utilized more effectively. The benefits of growth were also' distributed relatively unevenly, both with respect to regions and income classes. While overall agricultural growth was reasonably satisfactory, repeated food deficits were experienced. The growth of productive employment opportunities failed to keep pace with the expansion of the population and labor force. Low levels of taxation resulted in inadequate public expenditure for necessary infrastructure and social services. Poor export performance combined writh the heavy import dependence of domestic industry led to chronic weakness in the balance of payments. 4. The growth of the Philippine economy accelerated slightly to an annual rate of 6% in the 1970s. Fluctuations, however, have been significant. In the period 1970-72., when the effects of a balance of payments stabilization program initiated in 1970 were being felt, the economy grew less rapidly, exports and imports of goods and services were roughly equal, and the shares of public and private fixed investment in GNP were stable at still relatively low levels. Economic growth was unusually good in 1973 as sharply higher prices for traditiona:L export commodities stimulated demand, agricultural production rebounded strongly from the natural disasters of the previous year, and the balance of payments registered a substantial current account surplus. The export-led income boom of 1973 was followed by an investment  -2- boom. The resulting high investment rate, together with favorable sugar prices, temporarily sheltered the economy from the impact of the oil price increase in late 1973 and the following world recession, and real GNP growth was maintained at 6% in 1974-75. The first half of the 1970s also saw significant structural changes in the economy, the most important of which were an increase in the level of public investment, financed in large part by a greater tax effort, a recovery in export growth, a shift of the domestic terms of trade in favor of agriculture, and the slowing of the population growth rate. 5. The collapse of sugar prices in late 1975, following earlier declines in the prices of other major export commodities, altered the external situation dramatically. The terms of trade dropped by 23% in 1975, and as a result the current account deficit rose to 6% of GNP, and the overall balance of payments deficit to $500 million. Thus, the necessity of restoring balance to the external accounts was superimposed on the Government's longer term objectives of faster economic growth and a better distribution of its benefits. To maintain the momentum of growth and investment, the Government adopted a policy of increasing capital inflows in the near term to finance the resulting expanded current account deficits while accelerating export growth in the longer term. In 1976-77, the economy - led by exports, public investment, agriculture and construction - has continued to grow at 6% per year. Unfor- tunately, much of the stimulus from an expansion in export volume was offset by further deterioration in the terms of trade. However, inflation, which reached a peak of 31% in 1974 as a result of externally generated pressure on domestic prices, has slowed to a rate of about 7% because of the deceleration in international inflation and a conservative monetary-fiscal policy. Development Strategy 6. The Government's development objectives and policies, which were recently set out in a five-year plan for the period 1978-82, call for further acceleration of economic growth, first to 7% and then to 8%. The development strategy focuses on an expansion of more productive employment opportunities at a rate of 3.6% per annum, reduction of income disparities, greater self- sufficiency in food and energy, strengthening the balance of payments, and increased development in rural areas. In addition, the plan includes strategies for development in each of the country's thirteen regions. In general, the plan is an elaboration of the policy directions pursued by the Government in recent years. It is also broadly consistent with the Bank's basic economic report, although investment, manufacturing output, and exports are projected to grow more rapidly than visualized therein. It should be feasible to accelerate the overall growth rate to 7% as the terms of trade stabilize, but more rapid expansion of manufacturing is necessary to do so, and effort needs to focus on improving the efficiency of investment. Agriculture 7. For a country with fairly good soils and a reasonably literate rural population, agricultural yields in the Philippines are relatively low. Possible reasons for this situation are the low quantity and quality of  irrigation facilities and high vulnerability to weather risks; land tenure patterns; and weak agricultural credit, extension, and other supporting services. Agricultural production has, nevertheless, grown at an average rate of 4-1/2% per year in the 1970s. The performance of the sector was exceptionally strong in 1976 and 1977, as production increased by 7%, and the Philippines has been virtually self-sufficient in rice, its main staple, for the past three years. 8. The Government gives high priority to agriculture and rural development. It has undertaken a number of steps to increase the availability of irrigation and supporting services, and has also expanded programs to improve living conditions in rural areas, including rural electrification, health and family planning, and rural roads. However, while irrigation investment has been raised substantially, improvements in the quality of supporting services - particularly credit and extension - are necessary. 9. For historical reasons, land ownership in the Philippines is inequitably distributed. The land transfer program, which has been in operation for five years and covers rice and corn growing areas, proceeded quite rapidly when larger landholdings were the focus of concentration, but progress has been slower recently as the focus has been on a larger number of medium-sized holdings, which often belong to middle-class landowners. As of June 1977, an estimated 120,000 tenants, or 30% of the total tenants under the program, had received Certificates of Land Transfer, which established their claim to the land. Despite the difficulties in the process of implemen- tation, the transfer program remains an important part of the Government's rural development strategy. Industry 10. During the 1960s, Philippine industrialization was promoted by high tariff protection and subsidized finance, and consequently industrial growth was primarily in the area of import-substitution with a high capital intensity. Performance was disappointing with respect to employment, exports, and the overall rate of growlth of output. In the early 1970s the Government floated the exchange rate, which then depreciated significantly, and introduced policy changes to reduce tariffs and realign industrial incentives. Further efforts to reduce remaining biases in favor of import substitution and capital intensity will still be needed, however, to accelerate the rate of industrial growth as projected in the Five Year Development Plan. 11. MIanufacturing industry has grown at a relatively slow average rate of about 6% in the 1970s. Moreover, due to the slow increase in national income and demand because of the decline in the terms of trade in the last two years, manufacturing growth has also slowed, and investment has stagnated. On the other hand, industries producing nontraditional exports have expanded rapidly from a very low base as their exports increased almost fivefold in the four-year period 1973-76 in response to exchange rate adjustment and special measures designed to alleviate existing restrictions on imports and thus reduce the bias towards production for the domestic market. As noted above, further efforts in this direction will be needed if industrial exports are to continue to grow at a rapid rate. The construction industry has also grown rapidly as the expansion of relatively construction-intensive public investment and large tourism investments in the Manila area raised construction expendi- ture from 6% of GNP in the early 1970s to 12% in 1976.  -4- Employment, Incomes and Population .12. Employment increased by about 4.6% annually during 1973-76, a considerable improvement over the historical growth rate of 2.4%, and was able to keep pace with the rapid growth of the labor force. Particularly noteworthy was the growth of employment in manufacturing, which essentially stagnated during 1970-74, but grew by 8% annually during 1975/76, resulting in part from the growth of labor-intensive production for export. However, because manufacturing's share of total employment is small, agriculture and services continue to function as residual sources of employment and account for most of the growth in total employment. 13. Preliminary survey data show that the share of income received by the poorest 40% of families, which remained constant during the 1961-71 period, increased from 12% in 1971 to 15% in 1975. The income share of the top 20% of families remained about the same as in 1971, while that of middle income families declined correspondingly. Due to the improvement in agriculture's terms of trade, the growth of agricultural production, the decline in urban real wages following the devaluation in 1970, and the stagnation of industrial employment until 1975, the ratio of the average rural income to the average urban income rose from 48% in 1971 to 57% in 1975. Real per capita consumption increased by about 2% annually in 1971-75. Hence, after allowance for price increases, real incomes in rural areas, where most of the poor live, have probably increased somewhat, while real urban incomes have remained about the same. 14. The population is estimated at 43.3 million in 1976 and is currently growing at 2.8% as compared to a 3.0% growth rate during the 1960s. The Philippines has an active family planning program registering approximately 650,000 new acceptors per year. Although the number of new acceptors has reached a plateau as the program faces the increasingly difficult problem of reaching rural areas, the estimated proportion of married women of reproductive age practicing family planning increased from 20% in 1974 to 25% in 1977. Investment and Savings 15. Due largely to the buoyant export performance in 1973 and the subsequent increase in incomes, investment boomed in 1974-75. Private investment rose from 14% of GNP in the early 1970s to 20% in 1975. Public investment was raised from 2% to 4% of GNP with the growth in revenue from international trade taxes, improvements in tax administration, and improved project implementation capacity. Subsequently, public investment has been raised further to an estimated level of 6-1/2% of GNP in 1977. The private investment rate, on the other hand, has fallen somewhat to an estimated 18% of GNP. Although the private investment rate is well over the 14% average of the early 1970s, the revival of private investment is an important short-term problem. Furthermore, the high incremental capital-output ratio, the relatively modest growth of manufacturing output and employment, and the structural underutilization of capacity in some industries suggest that the efficiency of investment also needs to be improved.  16. Aggregate savings performance has improved during the last decade and is comparable to t:hat of other countries at a similar stage of economic development. In 1976--77, gross domestic savings maintained the level of 25% of GNP achieved in 1975 and financed about 80% of total investment, with the balance coming from foreign savings. In order to increase the efficiency of financial markets in intermediating between savers and investors, the Govern- ment has made significant improvements in financial policy. Organized banking institutions have been strengthened. Interest rates were realigned in 1976 and again in 1977 to encourage a greater flow of financial savings into time and savings deposits relative to short-term deposit substitutes, and to reduce the spread between borrowing and lending rates. Further reforms are required to increase the availability of long-term domestic currency resources. Special credit programs have been adopted to expand lending to the credit-short agricultural sector and rural areas and to serve the needs of medium- and small-scale industries. However, a deterioration of loan recovery rates has been experienced by all government financial institutions and credit programs, creating a difficult policy dilemma. On the one hand, the programs have become costly means of achieving their objectives, and the growth of arrears reduces the overall efficiency of resource mobilization and allocation. On the other hand, the programs do redress imbalances in the availability of credit so that arrears have to be reduced without closing necessary credit charnels. Government Expenditures and Revenues 17. Public expenditures and revenues have historically claimed a much smaller share of national resources in the Philippines than in many other developing countries. In the early 1970s, general government expenditure averaged only 12% of GNP, public investment was strikingly low at about 2% of GNP, and tax revenues stood at 11% of GNP. Government expenditures were dominated by general administration and social services, particularly education. This situation had resulted from a variety of factors including difficulties in raising tax revenue and weak implementation capacity in the public sector. Since the early 1970s, the Government has taken steps to correct the situation and raise both the overall level of expenditures and the share going to economic services and public investment. By 1977 govern- ment expenditures had reached an estimated 18% of GNP, and public investment, which has risen very rapidly in the last two years, equaled about 6-1/2% of GNP. 18. Recognizing that a large increase in tax revenues would be required to finance expansion of the public investment program, the Government has undertaken a comprehensive program of tax reform to raise the needed revenues equitably and efficiently. In the short term, needed revenues have been raised through revisions in indirect taxes. In the long term, structural changes are to be made to raise the built-in elasticity of the tax system, to reduce distor- tions in economic incentives and dependence on cyclically volatile taxes on international trade, and to improve equity by increasing the proportion of revenues coming from direct taxes. The Government has increased the ratio of domestic taxes to GNP by an impressive 1.5 percentge points between 1975 and 1977 through new tax measures and vigorous efforts to improve taxpayer compli- ance and collection performance. However, much of the success in mobilizing  - 6 - revenue from domestic sources has been offset by a sharp decline in the yield of export taxes and import duties due to cyclical fluctuations. Total tax revenues, which had been raised from 11% of GNP to 13.6% by 1975, rose to only an estimated 14.1% in 1977. Greater resource mobilization by government financial institutions and government corporations, whose irvestment programs have grown rapidly, is also needed. External Trade and Capital Flows 19. Largely as the result of a 23% decline in the terms of trade in 1975, the current account recorded a deficit of $900 million, or 6% of GNP. To meet the immediate payments problem, the Government drew down its international reserves, obtained loans under various IMF facilities, and expanded its borrowing program to finance necessary imports. For the longer term, a strategy was adopted of accelerating export growth both to hold the current account deficit about constant, while it declined relative to GNP, and to meet the debt service payments on the higher level of external borrowing. 20. Some progress in these directions was made in the last two years. In 1976, in spite of a further 11% deterioration in the terms of trade, a substantial increase in export volume and slow growth of import payments narrowed the trade deficit and partly offset the higher net interest payments. Although somewhat larger than in 1975, the current account deficit was stabil- ized at 6% of GNP. Net capital inflows were nearly doubled to $1.1 billion. Most of the inflow was from medium- and long-term loans, two-thirds of which were public loans reflecting in part increased disbursements from official sources. Estimates for 1977 show a further substantial expansion in export volume which, with little expected change in the terms of trade, import volume, services or transfers, would reduce the current account deficit to 4% of GNP and eliminate the overall payments deficit. Hence, on the whole, the balance of payments position has strengthened significantly. 21. To achieve a 7% growth rate in real GNP, as projected for the period 1978-82, imports will have to grow faster than they have recently and a net capital inflow of at least $1 billion per year will be required. Assum- ing continued sound debt management and the maintenance of a balanced maturity structure of foreign borrowings, the overall level of external debt of the Philippines is expected to remain within reasonable limits. The ratio of debt service payments to exports and nonfactor services would average about 19%, of which 7% would be public debt service, during the plan period (1978-82). 22. In order to ensure that the long-term capital transfer is commensu- rate with the level of development expenditures which will be required during 1978-82 and that debt service obligations remain within reasonable limits, the Government sought commitments of official assistance of $750-800 million in 1978 at the meeting of the Consultative Group for the Philippines, held in Tokyo on December 1 and 2, 1977. This amount is likely to be available. However, since many of the planned projects which are to be financed from external sources have a low foreign exchange component, some local cost finan- cing is necessary, in appropriate cases, co meet the Philippines' external financing requirements.  PART II - WORLD BANK OPERATIONS IN THE PHILIPPINES 23. By February 28, 1978, the Philippines had received 51 Bank loans /1 (of which two were on Third Window terms) and three IDA credits for a total of $1,362.7 million, net of cancellations. About one-third of Bank Group lending ($465.4 million) has been for infrastructure projects in power, transporta- tion, and water supply and another third ($493.4 million) has been for agriculture. Of the remainder. $278.4 million has been for industry and 8125.6 million has been for social sector projects in education, population and urban development. There has been a marked improvement in the execution of Bank-financed projects in the last four years compared with experience in the 1960s, when there were serious problems caused by a shortage of local currency and poor administration. All ongoing projects are now being imple- mented reasonably well. Annex II contains a summary statement of Bank loans, IDA credits and IFC irnvestments as of January 31, 1978, and notes on the execu- tion of ongoing projec:ts. 24. The Bank's lending program has been designed to continue to support the Philippine development effort with its emphasis on agriculture and infra- structure and its growing attention to the needs of lower income groups. More than 40% of Bank lending planned for the next few years would be for agricul- ture and rural development projects and about a quarter would be for needed basic infrastructure projects, mainly in the fields of transportation and power. The amount of lending for social sector projects, including education, popula- tion and urban development, is expected to continue to grow rapidly and account for more than 15% of future lending. The balance of future lending would be for industrial development, where growing attention is being given to the needs of small and medium industries with high employment potential. The rapid growth in public revenues during the past five years has allowed for a significant expansion in public investment and both the ambitious Philippine development program and the Bank's growing lending program have been designed to meet the country's substantial future needs. In view of the per capita income of the Philippines, its level of external debt, and the generally good management of the economy, a limited amount of IDA financing will be proposed in the Bank Group's overall lending to the Philippines. 25. This is the fifth loan to be presented to the Executive Directors in FY78. Loans for rural infrastructure, industrial finance and for a multi- purpose dam project are expected to be ready for consideration by the Executive Directors within the next few months. 26. As of January 31, 1977, IFC had made commitments in the Philippines totalling $86.3 million for investment in 16 projects in the fields of develop- ment banking, power, telecommunications, ceramic tiles, petroleum products, nickel mining and refining, chemicals and synthetic fibres and edible oils. Of these investments, $36.1 million had been sold, cancelled and repaid, leaving a net portfolio of $50.2 million, including $5.0 million undisbursed. /1 Including the fift'i loan to the Private Development Corporation of the Philippines (PDC1' V) for $30 million (approved on January 31, 1978), and the second loan for the National Irrigation Systems Improvement Project (NISIP II) for $155 million (approved on February 28, 1978).  - 8 - 27. At present the share of the Bank Group in the Philippines' total external debt disbursed and outstanding is about 11% and its share in debt service is about 5%. These ratios are expected to increase to around 19% and 8% by the end of the present decade. PART III - THE POWER SECTOR Power Development in the Philippines 28. The three major regions of the Philippines (Luzon, Mindanao, and the Visayas) are currently in very different stages of power development. Most of the existing power development has taken place on the island of Luzon, where 46% of the households are electrified. Although some grid development has taken place on the island of Mindanao, particularly in the northern part where the availability of easily developed and low cost hydropower has attracted industry, only 15% of the households in Mindanao have access to electricity. Power development is even less extensive in the Visayas, where only 13% of the households have access to electricity. 29. The Government is committed to a policy of rapid industrialization which is central to its objectives of fostering growth in exports and employ- ment. It is also committed to a policy of dispersing industrial growth from the already congested Manila Metropolitan Area to other regions of the country. In order to meet these objectives and to realize the planned annual growth in the gross national product of more than 7% during the next 10 years, it is estimated that electricity consumption in the Visayas, Mindanao and Luzon will need to grow at annual rates of about 16%, 13%, and 10%, respectively. 30. The electrification of the country has been progressing steadily. The total electricity supply in 1976 was estimated at about 13.9 billion kWh; 50% was provided by the Manila Electric Company, 23% by National Power Corpora- tion, 20% by self-generating industries, 6% by small utilities, and 1% by cooperatives. Many small self-generating utilities have provided substandard service with power available for only a few hours each day in many areas. Electricity generation in the Philippines grew at an annual rate of 11% from 1970-76, while GDP grew at a rate of 6% over the same period. The per capita consumption of electricity in 1976 was estimated at 300 kWh, compared with 490 kWh in Korea, 184 kWh in Thailand, and 120 kWh in India. Over 30% of the population is currently served with electricity compared with 23% in 1970. Organization of the Power Sector 31. Historically, ownership of the power sector has been fragmented with the result that the sector has been poorly coordinated and uneven in performance and institutional strength. The largest utility in the country has been the privately-owned Manila Electric Company (MECO). The National Power Corporation (NPC), which is the second largest utility and totally Government-owned, generates and transmits power in bulk, selling to other utilities and large indus.rial consumers. In addition, there are a number of small, highly inefficient utilities in the country, operating largely in isolation from power development elsewhere. As of end-1977, about 78 out of approximately 100 rural electric cooperatives that had been organized by the National Electrification Administration were supplying customers.  - 9 - 32. Because fragmented ownership has rendered the integrated development of the sector slow and cifficult, the Government has taken steps to consolidate its ownership. NPC has been made responsible for construct-ing all future generation facilities and for establishing island grids. The Government is now in the process of purchasing most of MECO's generating plants, which will be operated by NPC in the future. When this process is completed, MECO will become primarily a power distributor. The National _Eectrification Administra- tion (NEA) was created in 1969 with responsibility for integrating small utili- ties and for extending power service to rural areas, a duty which it has approached with vigor by establishing consumer cooperatives throughout the country. NEA's activities will eventually result in only about the ten largest private utilities remaining in business. In October 1977, the Government abolished the Energy Development Board and the Power Development Council and established the Department of Energy (DOE) to be responsible for the formula- tion of policies and programs on energy, including the coordination of the activities of all organizations connected with electric power. DOE will also be responsible for the development of primary energy resources, including geothermal energy, water, oil, gas, and coal. Power Generation 33. About 80% of the power genera:ed in the Pnilippines is currently dependent on imported oil and the remaining 20% on hydro resources. The Government has begun to diversify its energy resources by developing indigenous hydro and geothermal -,ower and by introducing nuclear energy. Construction of the first geothermaL power plant is underway in Southern Luzon. Development and exploration of geochermal energy are being underlaken in several other parts of the country and have alreadv shown promisin- results. Investigations of potential hydropower si-- are also u-nderway and several projects are planned in the near future, T_ -d--on, NFC is constructing its first nuclear power plant with financing from tue United States Export-Import Bank and commercial banks. Although the objective of diversifying energy resources is reasonable since it is the least cost alternative, the program is ambitious and involves certain risks. Financial constri--ts may hinder the timely development of capital-intensive hydropower projects, and technical problems may arise in developing nuclear and geothiermal sources of energy. In addition, NPC will need to improve its capacity for system planning and financial management and control., to streamline and improve its internal organization, and to develop effective training programs for its personnel. Sector Investment Program and Costs 34. The sector program required to meet the anticipated future power demand is huge. It will almost triple the countr. 's ge erating capacity by expanding it from aboult 3,54u " in 1976 to about 8,500 MW in 1985. The development program etvisa-ed through '9E3 will ren- 4re a total investment of about $7.3 billion (1 54.0 billion) at current prices, including finance charges and price escalation; this would represent an increase in the share of power in public investmient from W0% in recent years to about 35% in the future. For this reason, the National Power Corporation (NPC) and the Natlonal Elec- trification Administration (NEA), the agencies primarily responsible for the expansion of power generation and distribution, have critical roles to play in helping the Philippines realize its economic objectives.  - 10 - 35. It is expected that NPC's share of the power investment program through 1983 will amount to about $6 billion, or 82% of the total. NEA's share will amount to $500 million, about 7% of the total. Investment by the Manila Electric Company9 which holds the franchise for the greater Manila area, will be about $400 million through 1983. Investment in the remainder of the sector by other major utilities will be about $400 million. 36. The Bank has made seven loans and one IDA credit to NPC and to the Government, amounting to $218.3 million, net of cancellations, to assist in the development of the Philippines power sector. The most recent was a loan of $58.0 million (Loan 1460-PH) in 1977 to finance the expansion of trans- mission systems in Luzon, the first stage of a central load dispatching system, the services of management consultants, and a training school for NPC's staff. Although some of the projects financed either exceeded the original execution schedules or experienced cost overruns, all of them are being operated satisfactorily. Under the loan agreements, NPC is required to earn an 8% rate of return on its revalued net fixed assets in operation. In 1977, NPC is estimated to have earned a rate of return of a maximum of 5%. A major tariff increase has now been introduced in Mindanao, however, and further increases in the Visayas and Luzon are under consideration. 37. IFC made a loan of $8 million to MECO and an equity investment of $4 million in 1967, which was sold in 1977. The project performance audit report on the Fourth Power Project (Sec. M76-35) suggested that the Bank should agree with NPC on procedures for annual review and revision of tariffs and specific targets for transmission expansion. It also suggested that the Bank should assist in the development of management training programs. These comments have been taken into account in the design of subsequent projects, including Loan 1460-PH to NPC. National Electrification Administration (NEA) 38. NEA was created in 1969 under Republic Act 6038 which established total electrification of the country through electric cooperatives as a national policy; NEA is now governed by the provisions of Presidential Decree 269 of 1973. NEA has set targets of completing the country's main primary distribution system, or "backbone" system, by 1980, providing electricity to all barrios /1 by 1984 and of attaining total electrification of the country by 1990. By end-1977, a total of about 100 cooperatives had already been formed, of which 78 were operating. The cooperatives have purchased the assets of over 100 private and municipal utilities, largely at the request of consumers because tariff rates were exorbitant, service poor and confined mainly to the commercial areas of provincial towns. Each cooperative normally includes 5-10 municipalities and approximately 100,000-150,000 people. About 20 cooperatives remain to be formed under NEA's program. /1 Villages  - II - 39. NEA has becoms a well managed and efficient organization with a well trained and highly dedicated staff. In addition to its responsibilities for carrying out the rural electrification program, it has established programs to develop irrigation and industrial cooperatives to help ensure that the provision of electricity in rural areas contributes to growth in productive activities and employment. In 1975, the Bank provided $2.3 million (Loan v 998-PH of June 1974) to NEA to set up industrial cooperatives in rural areas. 40. The National Rural Electric Cooperative Association of the United States has provided assistance to NEA in setting up its organization and procedures. USAID has also provided financial and technical assistance to NEA since 1972, which in aggregate has amounted to approximately $90 million. In addition, materials for the program have been financed by the Government of Japan and a French supplier's credit. As NEA's capital requirements have grown rapidly and USAII) is now phasing out its assistance, NEA has requested the World Bank and other foreign assistance agencies to finance a substantial part of its future requirements. The proposed Bank loan would be the first to support NEA's rural electrification program. PART IV - THE PROJECT 41. The project was prepared by NEA. A Bank mission visited the Philippines in September/October 1977 to appraise the project. Negotiations were held in Washington on February 27-28, 1978; the leader of the negotiating team was His Excellency, Eduardo Z. Romualdez, Philippine Ambassador to the United States. The Appraisal Report (No. l848a-PH)is being distributed separately to the Executive Directors. Annex III of this report provides supplementary project data. Project Objectives 42. NEA's rural electrification program is designed to bring electric service to the entire population by 1990. The proposed project would help finance NEA's rural electrification program during 1979 and 1980. It would energize about 500 towns and 8,540 villages throughout the country and would provide reliable electricity service to some 877,000 familes, or 5.3 million persons. 43. One of the fundamental objectives of the proposed project is improvement of the standard of living in the rural areas. Once a permanent and reliable electric supply is available, NEA and the cooperatives would go on to try to organize water supply projects to improve sanitation in the barrios, pump irrigation projects to open the way for increased farm output, and small-scale industry projects to generate new employment opportunities. Pumps, motors and other machinery would also be provided to the electric cooperatives to sell to individuals and small businesses on a hire/purchase basis in order to to assist them in the conversion of mechanical to electrical power and to promote the use of electricity in households, shops, rice mills, and small workshops. In addition, project construction work would provide employment for approximately 12,000 individuals.  - 12 - Project Description 44. The proposed project would assist in financing the 1979-80 program of NEA. It comprises the construction of about 230 individual subprojects, including the rehabilitation of some old distribution facilities acquired by the cooperatives from private franchise holders or from municipalities. 45. The main items included in the project are: (a) 476 km of 69 kv transmission lines; (b) 20,334 km of primary distribution lines at 13.2/7.6 kv; (c) 8,743 km of secondary distribution lines at 220 v; (d) radio communication and other equipment; (e) electric motors, pumps, and machinery for load promotion; and (f) headquarters facilities, including warehouses for cooperatives. 46. The cooperatives included in the proposed project are located on the islands of Luzon, Mindanao, and the Visayas. The cooperatives have all been the subject of feasibility studies; the locations of the cooperatives to be formed have been determined by the need to have proximity to existing generating and transmission facilities. Priority has initially been given to establishing cooperatives in provinces with the largest populations, but consideration is also given to providing an equitable distribution of cooperatives among regions. Cooperatives in each of the country's 72 provinces will establish primary distribution systems. Project Implementation 47. The implementing agency for the overall project would be NEA. The subborrowers of NEA would be approximately 120 rural electric cooperatives operating throughout the country. NEA is a stock corporation, fully owned by the Government, with an authorized capital stock of P 2 billion ($270 million), of which P 618 million ($83.5 million) was paid up at end-1976. Corporate powers are vested in a Board of Administrators of five members, including the Acting Administrator (NEA's chief executive), who is an ex-officio member; the General Manager of NPC is also a member of the Board. The Chairman and members are Presidential appointees and serve for a six-year term. 48. NEA is empowered to make loans to public service entities with preference to cooperatives. It is responsible for granting electric power utility franchises, and the Government has agreed that NEA will continue to exercise this authority under the new DOE (see Section 3.02 of the draft Guarantee Agreement). Since 1972, NEA has granted franchises primarily to rural electric cooperatives, about 100 of which were in existence at the end of 1977; 78 were supplying electricity and 22 had buildings, backbone lines and distribution systems under construction.  - 13 - 49. The cooperatives are organized with the help of NEA at the request of district electrification committees that are formed from local municipal representatives. A feasibility study is carried out of the proposed coopera- * tive area by NEA to ensure that the cooperative would be financially viable. The cooperative is then registered with NEA and a board of directors is elected, with each member representing one or more muncipalities. An annual election of the directors has ensured that the cooperative members in rural and provincial areas have an influence on management decisions, which makes the program well attuned to the needs of the local community. The board is responsible for the financial viability of the cooperative and for the construction schedule of laterals within the cooperative's area. A general manager and architectural and enginering consultants are appointed on terms and conditions and with qualifications and experience satisfactory to NiEA. The cooperatives are generally well managed because of NEA's effective training programs for cooperative staff. 50. Three deputy administrators in NEA are responsible, respectively, for administration and cooperative development, engineering and materials, and finance and franchises. In addition, training, special studies and other divisions report directly to the Administrator. NEA has training programs for its own staff and for all the personnel required to man the cooperatives, incuding managers, accountants, linemen, electricians, and plant operators. By the end of 1977, NEA had conducted a total of 780 courses with 28,150 participants. Consequently, NEA and the cooepratives are well-manned with adequately trained and qualified staff. 51. NEA staff follow closely the formation and operation of the cooper- atives and have developed manuals which lay down standard operating procedures to be followed by the cooperatives. NEA auditing, engineering, and other administrative staff ensure that these procedures are followed. The coopera- tives use the services of local architectural and engineering firms for engineering design arLd supervision of construction; these firms are supervised by NEA with the assistance of Stanley Consultants, Inc. (USA), whose present contract extends through 1980. Provision has also been made in the proposed loan for additional consultant assistance after this contract expires or to assist in improvement in organization and managment should the need arise. The transmission lines and the backbone distribution systems financed under the project would be constructed by private contractors. The lateral lines from the backbone and the service drops to the consumers would be undertaken by the cooperatives through force account. 52. Planning Unit. While NEA and the cooperatives have done an excellent job in their initial years, some improvement in their planning and operational capabilities will be needed to meet their growing responsibilities in the years ahead. Ten-year plans are currently compiled for the cooperatives in the initial feasibility and architectural and engineering studies. These plans have not usually been updated, however, after the cooperatives have begun their operations. In addition, neither NEA nor the cooperatives currently make short and medium-term analysis of their power markets or of likely trends in consumption by categories and numbers of consumers. It has been agreed that NEA will form a Planning Unit that would, inter alia, assist the coopera- tives in preparing five-year plans and forecasts by end-1978 and revised  14 - ten-year plans by end-1979; thereafter all plans would be updated annually. It has also been agreed that an information section will be established within the Planning Unit to consolidate the monthly reports that the cooperatives submit to NEA on their constuction program and operations as a basis for more effective monitoring of the activities of the cooperatives (see Section 4.03 of the draft Loan Agreement). 53. Insurance. In general, the cooperatives carry only motor vehicle insurance and are therefore not adequately insured. NEA, however, is now in the process of establishing a mutual insurance fund to provide adequate coverage to the cooperatives. It has been agreed that all cooperatives would hold insurance coverage for their facilities satisfactory to the Bank (see Section 4.02 of the draft Loan Agreement). 54. System Losses. System losses in the cooperatives in 1977 averaged 22% of generation; the high losses are mainly due to the fact that the old distribution networks acquired by the cooperatives are generally inadequate and overloaded. It has been agreed that NEA will use its best efforts to have the cooperatives carry out a program of rehabilitation of the old distribution network in order to reduce losses to a 12% average by 1982 (see Section 3.05 of the draft Loan Agreement). 55. Audit. The audit of NEA's annual accounts is carried out by the Auditor of the Administration who is appointed by the Auditor-General, the ex-officio Government auditor. The Auditor of the Administration serves full-time in NEA headquarters and approves all checks prior to payment; the procedure used has been, in effect, a pre-audit rather than a post-audit analysis of the balance sheet. It has been agreed that the Government, with the assistance of the Bank, would undertake a review of the auditing proce- dures of NEA and make recommendations in time for their incorporation in the FY79 audit (see Section 3.03 of the draft Guarantee Agreement). The audits of the cooperatives are carried out by NEA staff. However, a year-end audit of the accounts is not carried out and the annual income statements and balance sheets of each cooperative have no audit certificate. It has been agreed that the annual accounts of each cooperative will be certified by auditors accept- able to the Bank beginning with the year ending December 31, 1978 (see Section 5.02 (b) of the draft Loan Agreement). Financial Analysis 56. NEA has received all its equity capital in the past (P. 623 million, or $84 million at end-1976) from Government. Foreign financing has come from USAID, the Government of Japan, and a small amount from other sources. By end- 1976, NEA had lent P 761 million ($103 million) to about 90 cooperatives; small amounts had also been lent to private and municipal utlilities. NEA's lending program for the future is expected to increase significantly; it plans to lend at least P 3,282 million ($444 million) during the 1977-1982 period, about four times the total loans at end-1976. In addition, about P 52 million ($7 million) will be required to meet NEA's equipment and develop- ment expenditures, bringing total capital requirements during 1977-1982 to P 3,334 million ($450 million). NEA expects to borrow about 59% of the total from abroad, government equity would provide 37%, and internal cash generation would provide 6%, including 2% for working cash.  - 15 - 57. NEA's future financial position is expected to remain sound; the debt/equity ratio is expected to reach a maximum of 53/47 in 1982. In order to safeguard this positiDn, NEA has agreed to adopt and to issue a Statement of Policy (see Annex III to Staff Appraisal Report) which will make clear the financial objectives of both NEA and the cooperatives and the means to implement those objectives. The issuance of the Statement of Policy has been made a condition of loan effectiveness, and any change in the policy Statement would be subject to the prior approval of the Bank (see Sections 3.01(a), 6.01(b) and 7.01 of the draft Loan Agreement). In addition, it has been agreed that the Governed would indemnify NEA for any additional costs in servicing the proposed loan arising from fluctuations in exchange rates. 58. The debt service requirements of NEA and the cooperatives have been small during the initial years of the program, when the cooperatives have been constructing their systems and have not been required to pay interest during the grace period on their loans. Debt servicing will begin to increase significantly from 1978 onwards, however, and careful attention will be needed to ensure that the cooperatives continue to operate their systems properly and service their loans. The Statement of Policy will provide that NEA will conduct its operations, arrange to obtain loan and equity funds, and lend or otherwise provide funds to borrowers through means to ensure that: (i) adequate working capital and cash levels are maintained; (ii) its annual operating expenses and interest payable will not exceed 90% of operating revenues; and (iii) its cash generation, including operating income, depreciation, and loan repayments, will be at least 1.2 times annual debt service. 59. There is currently a large variation in tariff levels among the cooperatives, ranging from USJ2 per kWh (P 0.15) to USJ16 (P 1.16), depending on the source of supply, the number of years the cooperative has been in operation, the degree of development in the area, and the size of the cooper- ative. The anomalies in the tariffs throughout the country are being addressed in a tariff study curre!ntly being undertaken under Loan 1460-PH, made to NPC in 1977. Under this loan, it has been agreed that the Government will consult with the Bank on its tariff policies when the ongoing tariff study is completed, which is expected by the end of 1978. 60. NEA's rural electrification program follows the system and design standards of the National Rural Electric Cooperative Association of the United States. A 13.8 kV backbone line designed to cover 10 years' load growth is constructed initially and is the least cost solution for this type of program. Laterals are then connected to villages and towns each year to connect consumers. This approach is appropriate for rural electrification programs where load growth builds up gradually, after initially heavy and indivisible investment in the backbone system. The system therefore does not become fully operational for 10 years and this influences the ability of the cooperatives to generate revenues during this period. NEA's policies require that eiach cooperative be considered as an individual entity which is financially self-supporting. NEA, therefore, intends to exert its best efforts to have cooperatives fix and charge tariffs at levels that will recover the economic  - 16 - costs of supplying power as soon as possible after commencing operations. NEA's loan agreements with the cooperatives provide that each cooperative will set tariffs at a level sufficient to cover cash operating expenses /1 in the first year of operation. The revenue of each cooperative is expected to cover, during the second through fifth years of operations, cash operating expenses plus 15%, 25%, 35%, and 50% of the sixth year's debt service, respec- tively. NEA's Policy Statement provides that NEA will enforce these guidelines and, in addition, that NEA will be guided by the principle that cooperatives should achieve as soon as possible after the fifth and not later than the tenth year of operation an annual rate of return of 8% on revalued net fixed assets in operation. NEA also plans to monitor closely the financial performance of each cooperative and to consider steps to alleviate the position of coopera- tives which experience higher costs due to their remote locations through merger with other cooperatives or through variations in NEA's relending terms. Project Cost and Financing 61. The total cost of the project is estimated at $160.5 million, of which $81.8 million would be in foreign exchange. The cost estimates include a physical contingency of 5% for materials and 8% for civil works. The price contingencies, which amount to 16% of the total costs, have been calculated on the basis of an assumed inflation rate of 7.5% p.a. from 1978 and 1979 and 7% thereafter for foreign exchange costs, and 8% p.a. for local costs. 62. The proposed Bank loan of $60 million would be made to NEA for 20 years, with 5 years of grace. The loan would finance 73% of the foreign exchange, or 37% of the total cost of the project. NEA expects to finance from other external sources the balance of $21.8 million of the foreign exchange costs which will be needed in 1980 to complete the 1979-80 program. OECF is expected to finance NEA's program in the Cagayan Valley, and NEA has been discussing the possibility of additional financing with other external sources. Local costs of $78.7 million equivalent would be provided by the Government. In the unlikely event that foreign assistance in an amount suffi- cient to finance all the foreign costs of the 1978-80 program is not forth- coming, the Government would finance the balance (see Section 2.02 of the draft Guarantee Agreement). The Government has also agreed that, in the event NEA is unable to meet the additional costs, if any, of service on the Bank loan resulting from fluctuations in the rate of exchange, the Government will meet those additional costs (see Section 2.02 (ii) of the Guarantee Agreement). 63. NEA's initial loans to the cooperatives for the construction of the backbone system have been on the following terms: (a) 30 years, including five years of grace with interest at 3% p.a., for those cooperatives connected to the NPC grid; (b) 35 years, including five years of grace, with interest at 2% p.a., for those that self generate. NEA finances interest on the loan during the grace period. The proceeds of the Bank loan would be relent on these terms for initial loans to the cooperatives for the construction of backbone systems or purchase of assets from existing utilities. About 100 cooperatives have already signed initial loan agreements with NEA and about 20 more are expected to be signed. However, NEA, in accordance with its Policy Statement, plans to reduce repayment terms and increase interest /1 Operating expenses exclude depreciation, interest, and amortization.  - 17 - charges on second and subsequent loans that NEA makes to the cooperatives commensurate with the increasing capacity of cooperatives to service debts on harder terms. Such loans would have a maximum term of (a) 25 years, including five years of grace, wirth interest not lower than 3% p.a., for cooperatives connected to the NPC grid; and (b) 30 years, including five years of grace, with interest at 2% p.a., for those cooperatives which generate their own electricity. These provisions of NEA's Policy Statement take into account the J~ need to place the rural electrification program gradually on a more commercial basis while at the same time providing the flexibility which will be needed at this stage in the program to take into account the varying requirements of individual cooperatives. This matter will be kept under close review to ensure that the terms and conditions for relending the proceeds of the loan are appro- priate and satisfactory to the Bank (Section 3.01(b) of the draft Loan Agreement). Procurement 64. Contracts for equipment and materials of more than $50,000 to be financed by the proposed loan would be awarded on the basis of international competitive bidding in accordance with the Bank's guidelines for procurement. For purposes of bid comparison, a preference limited to 15% of the c.i.f. price of imported goods, or the customs duty, whichever is lower, would be extended to qualified local manufacturers. Contracts for materials and equipment of $50,000 or less up to an aggregate limit of $350,000, and civil works contracts (which the Bank would not finance) would be tendered on a competitive basis in accordance with NEA's normal procedures, which are satisfactory to the Bank. 65. NEA would act: as the procurement agent for all goods and related, services required for the project. NEA would allocate materials to the cooperatives on a cost plus handling and freight basis. NEA is planning to issue invitations to b:id for the first materials and equipment contract ($14 million) after the proposed loan has been approved by the Bank. The first partial delivery is expected to arrive in the Philippines in November/ December 1978. Disbursements 66. The proposed loan would be disbursed for 100% of the foreign exchange cost of imported equipment and materials, 100% of the ex-factory cost of locally-procured equipment and materials, 65% of the cost of foreign equipment procured locally, and 100% of consultants' services. As execution of the rural electrification program is a continuous process, any undisbursed amount from the proposed loan would be applied to components of the program similar to those included in the project, after the approval of the Bank. Economic Benefits and Project Risks 67. For the purpose of the economic analysis, cooperatives that will construct backbones, laterals, and service drops over the next two years were selected as representative of the rural electrification program as a whole. These cooperatives are expected to energize over one-third of the towns and villages in the Philippines by the end of 1984.  - 18 - 68. To serve as a proxy for benefits, direct revenues attributable to the project were calculated based on the 1977 weighted average border prices per kWh paid by customers of existing cooperatives. The only indirect benefit to be quantified was the savings that would be generated by replacing kerosene with electricity. Since the net savings on kerosene captures only a part of the consumers' surplus, the benefits are considerably understated. Using NPC's marginal cost of power, and the incremental costs of investment and operation less taxes, all at 1977 border prices, the internal economic rate of return (IRR) is about 22%; if demand drops by 10%, the IRR would be 17%; if costs increase by 10%, it would be 18%. The IRR is relatively high since the power sector in rural areas is only now beginning to be developed, and the unit administrative costs and the losses within the distribution system are currently high. Substantially lower system losses and economies of scale can be expected to emerge as the program expands. 69. The IRR given above is considered the minimum based on the benefits which have been quantified. It is expected that substantial additional benefits will be gained because most of the beneficiaries are among the lowest income groups (55% are farmers and 80% live in rural areas) and several supple- mentary programs of NEA are designed to extend economic and social services to these groups. Electricity would mean less drudgery at home, longer working hours on farms, especially during peak agricultural seasons, and improved labor productivity in local industries. 70. A team of specialists provided by the Government of the Philippines' Inter-Agency Committee on Ecological Studies is preparing an environmental assessment of possible adverse consequences for the environment arising out of the rural electrification program; no adverse impact on the project is expected. However, it has been agreed that NEA will submit this study for review by the Bank by June 30, 1978, and consideration will be given at that time as to which, if any, of its recommendations should be incorporated in the project. 71. The main risk associated with the project relates to the fact that most of the rural electric cooperatives are new and are still within the five-year grace period of the loans that have been made to them by NEA. A pattern of repayment performance has therefore not yet emerged. While there is some variation in the performance of the individual cooperatives, NEA has been successful in ensuring that the cooperatives follow efficient operating procedures and has established reasonable standards for setting tariffs. If some of the cooperatives have difficulty in servicing their loans, NEA has the authority and will consider steps, such as the merging of less viable cooperatives into larger cooperatives, and variations in relending terms, to alleviate the position of the financially weaker cooperatives while keeping tariffs at reasonable levels. Both the Bank and NEA will closely monitor this aspect of the program. Ultimately, the success of the rural electrification program will depend upon the ability of the population in rural areas to pay for the program, which is directly related to the successful implementation of the policies and programs which the Goverment has established to increase the level of development in rural and provincial areas.  - 19 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 72. The draft Loan Agreement between the Bank and the National Electrifi- cation Administration, the draft Guarantee Agreement between the Republic of the Philippines and the Bank, and the Report of the Committee provided for in Article III, Section 4(iii), of the Articles of Agreement are being distributed to the Executive Directors separately. Special conditions of the project are listed in Section III of Annex III. 73. The issuance by NEA of a Statement of Policy acceptable to the Bank has been made an additional condition of effectiveness of the Loan (Section 7.01 of the draft Loan Agreement). 74. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bankc. PART VI - RECOMMENDATIONS 75. I recommend that the Executive Directors approve the proposed Loan. Robert S. McNamara President Attachments Washington, D.C. March 13, 1978   ANNEX I TABLE 3A Page 1 of 4 pages PHILIPPINES - SOCIAL INDICATORS DATA SHEET LAND AREA (THOU KM2) ------------------------------------------------- _---------------. PHILIPPINES REFERENCE COUNTRIES (1970) TOTAL 300.0 MOST RECENT AGRIC. 109.6 1960 1970 ESTIMATE THAILAND IURKEY KOREA SOUTH ** GNP PER CAPITA (US$) 140.0* 230.0* 410.0*/a 210.0 * 500.0* 280.0* POPULATION AND VITAL STATISTICS POPULATION (MID-YR; MILLION) 27.4 36.9 43.3/a 36.3 35.6 32.2 POPULATION DENSITY 144.0/a PER SQUARE KM. 91.0 123.0 140 71.0 46.0 327.0 PER SQ. KM. AGRICULTURAL LAND 32S.0 375.0 395.0/a 263.0 65.0 1371.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 45.1 44.2 43.8 44.3 40.6 35.0 CRUDE DEATH RATE (/THOU,AV 17.9 13.2 10.5 13.7 14.4 11.4 INFANT MORTALITY RATE (/THOU) 84 o R .0 72.0 80.0 153.0/a LIFE EXPECTANCY AT BIRTH (YRS) 49.4 55.6 58.5 55.5 54.4' 65.0 GROSS REPRODUCTION RATE 3.5/a 3.3 3.3 3.2 2.6/b C 2.6 POPULATION GROWTH RATE (%) TOTAL 3.0 3.0 2.8 3.1 2.5 2.3 URBAN 4.0 4.0 3.9 4 9 4.9/d 6.4 URBAN POPULATION (% OF TOTAL) 25.3 27.6 29.8 15.0 38.7 41.2 AGE STRJCTIJRE (PERCENT) O TO 14 YEARS 45.7 45.6 43.2 45.1 41.7 42.1 IE TO 64 YEARS 51.6 61.6 54.0 51.8 54.0 54.5 65 YEARS AND OVER 2.7 2.6 2.8 3.1 4.3 3.4 AGE DEPENDENCY RATIO 0 9 0.9 0.9 0.9 0.9 0.8 ECONOMIC DEPENDENCY RATIO 1.3/b 1.5 1.3/b 1.1 1.1/e 1.4 FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) .. 320.0 4065.0/a 470.0 . 4424.7 USERS (% OF MARRIED WOMEN] . 2.0 25.0/a 10.0 8.2 42.0 EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 10100.0 12400 o 15400.0/a i6700.0 14500.0/f 10200.0 LABOR FORCE IN AGRICULTURE %) 61.0/C 55s. /a 52.67ia 79.0 67.0 50.4/a IINFMP"I Y-n (1% 9 LABOP -DCe 7.6 4.C * 4.0 4,- INCOME DISTRIBUTION % OF PRIVATE INCOME RECOD BY- HIGHEST 57 OF HOUSEHOLDS 28.8 , , * * 22.0 32.g/h 17.1 HIGHEST 20% OF HOUSEHOLDS 56.2 5^4- 53.3 51.1 60.6 /h 44.5 LOWEST 20% OF HOUSEHOLDS 4.2 . . 5.6 2.9 LOwEsr 40% OF HOUSEHOLDS 11.9 11.7 14.7 14.3 9.4 /h 17.7 DISTRIRUTION OF LAND GWNEa.1, % OWNED BY TOP 10% OF OWNERS .. 43.0/c . 53.0 26.0 % OWNED BY SMALLEST 10% OWNERS .. .. 2.0/c * 0.9 2.o HEALTH AND NUTRITION POPULATION PER PHYSICIAN .. . 1190.0/d 7970.0 2250 /0 2110 b0 POPULATION PER NURSING PERSON . .. 0._0t 6650.0 1770.0 / 2170.0/b POPULATION PER HOSPITAL BED 1180.0 B50.0 880.0 890.0 500.0 1900.0 PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) 83.0 93.0 105.7 103.0 110.0 103.0 PROTEIN (GRAMS PER DAY) 44.0 45.0 55.6 52.0 78.0 65.0 -OF WHICH ANIMAL AND PJLSE 19.0/d 22.0 .. 17.0 /a 22.0 | 19.0 O9ATH RATE (/THOU) AGES 1-4 9.0/e 6.6 7.5 ,, 14,7 /k EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 95.0 1t3.0 117.0 81.0 109.0 104.0 SECONDARY SCHOOL 26.0 49.0 49.0 16.0 28.0 41.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 10.0 10.0 10.0 12.0 11.0 12.0 VOCATIONAL ENROLLMENT (% OF SECONDARY) 14.0/f 6.o/b 9.0 14.0 /b 14.0 1_.0 ADULT LITERACY RATE (%) .. . 87.0 79.0 55.0 /1 87.0 HOUSING PERSONS PER ROOM (URBAN) . * .. * 1.9 2.7 OCCUPIED DWELLINGS WITHour PIPED WATER (%) 80.0 76.0 - . 64.0 80.0/c ACCESS TO ELECTRICITY (% OF ALL DWELLINGS) 17.0 23.0 31.0 .. 41.0 50.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY (0) . 7.0 10.0 .. 15.0 30.0 CONSUMP T ION RADIO RECEIVERS (PER THOU POP) 22.0 72.0 . . 78.0 89.0 126.0 PASSENGER CARS (PER THOU POP) 3.0 8.0 8.0 5.0 4.0 2.0 ELECTRICITY (KWH/YR PER CAP) 100.0 235.0 291.0 124.0 247.0 307.o NEWSPRINT (KG/YR PER CAP) 1.3 2.0 1.5 1.0 0.7 3.5 SEE NOTES AND DEFINITIONS ON REVERSE  AiNhEX I Page 2 of 4 pages NOTZS Pnleso otbesise . noted, data for 1960 refer co any year between 1959 and 19612 for 1971 between 1968 and 1970 end for Mont R-cevoc E0tif-te betweer. 1973 and 1975. ONP? pet capita data are based en the World Bank Atl- pethdology (1974-76 basti). 05 Korea has leer selected as on objective country on the beets of its stmilor popolacton, location ard iecone level end like the Phflitpise, it is e-pe-t-d to g_on r-pidly iK tbe coneg teare. peiHyIIPINES 196) /a 1950-55 /b Ratio of papulati-o oeder 15 and 65 aed oser to total labor force; t A p-e-rcentage of enplcyne-t; FHILIPP7NES _96Q /d 1960-62;