Philippines - Third Ports Project

Document of The World Bank FIL COPY FOR OFFICIAL USE ONLY Veport No.2830a-PH PHILIPPINES STAFF APPRAISAL REPORT THIRD PORTS PROJECT April 30, 1980 Projects Department East Asia and Pacific Regional 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 otherwise be disclosed without World Bank authorization.  CURRENT EQUIVALENTS - = Peso P :- US$0.137 . k~.on = US$137,000 = P 7.30 WEIGHTS AND MEASURES I mte() = 3.28 feet (ft) 1 Ig -i2.r (km) 0.62 mile (mi) (kg) = 2.2 pounds (lb) rL4i0t= 0.98 long ton (ton) ABBREVIATIONS ADB * Asian e . -- Bank BOC - Bureatt BPW - Bureau w-Jt i ._ GR ross .. I ' IATCTP - lnter-Age - ;-S-: cal Committee on Transport Planning ILMLW - .iean Lowe-i er M. TC - linistri. - i:ort and Communications NIH - Ministr', s -Lc Highways MPW - Ministry O. ic Works MPWTC - Ministry of T>iU Works, Transportation and Communications PAL - Philippine 3 L,nes PEA - ]?hilippine. :te Authority PMU - port mana&&. M tit PNR - Philippine wisl Railways PPA - Philippine Authority PPDO - 1'lannin- e = ct Development Office PTS - Phllpp.-- ort Survey NEDA - National' -'c Development Authority NRT - net reg. ons NTSS - National ' t Systems Study GOVERNMENT OF HIE REPUBLIC OF THE PHILIPPINES FISCAL YEAR January 1 to December 31  PHILIPPINES FOR OFFICIAL USE ONLY APPRAISAL OF THE THIRD PORTS PROJECT Table of Contents Page No. 1. TRANSPORT SECTOR ....................... 1 General ............................................................ 1 Transport Subsectors ...................., 2 Transport Planning, Coordination and Strategies ...................... 5 Previous Bank Assistance in the Transport Sector ..................... 7 2. PORT SUBSECTOR ....................................................... 8 PPA Organization ................................ . . . 8 Management, Staff and Training ........................................ Existing Port Facilities ........................................ 10 Traffic .............................. 13 Operations .............................. 15 Tariffs and Costs .............................. 18 Budget, Accounting and Audit ......................................... 19 3. INVESTMENT PLAN AND PROJECT .19 PPA's Investment Plan 1980-86 . -- 19 The Project and the Proposed Loan .20 Description of the Main Project Items . 21 Cost Estimates ...................................................... 23 Financing Plan .. ............................ 25 Project Implementation .................................. 25 Procurement and Disbursement ......... ....................... 26 Ecology .................................. 26 4. ECONOMIC EVALUATION .................................. 27 Traffic ................................ 27 Benefits .......,.. ..............30 Economic Evaluation and Sensitivity Analysis ....................... .. 35 5. FINANCIAL EVALUATION ................................................ 37 General .. 37 Present and Future Financial Performance - Project Ports ... 38 PPA Consolidated Financial Performance .. . 39 Sensitivity Analysis .-------------...----..... 42 6. AGREEMENTS REACHED AND RECOMMENDATIONS -------------------- - 43 This report is based on the findings of a Bank mission which visited the Philippines in October 1979, comprising Messrs. K. C. Rodley (senior financial analyst) and F. Khin-Maung-Gyi (engineer) from the Bank; and Mr. J. Bigosinski (economist - consultant). 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.  -2- Page No. TABLES IN TEXT 2.01 Philippine Ports Forecast Traffic Smmary ... ..................... 14 2.02 Project Ports Forecast Traffic Summary .......................... 15 3.01 PPA Investment Plan 1980-84 .l....... ... . .. . . . . .. . . .. . .. . .. . .. . .. . 20 3.02 Project Cost Sumnary ....... 24 3.03 Project Financing Plan .. ............................... 25 4.01 Economic Rate of Return ............ .......... 36 4.02 Switch Value Analysis ***...................**g..... 36 4.03 Net Present Value .............................. 37 5.01 Summary Project Port Income & Expenditure Account 1979-86 ....... 38 5.02 Summary PPA Income & Expenditure Account 1980-86 ................ 39 5.03 Summary PPA Consolidated Balance Sheet 1980-86 ..6................ 40 5.04 Summary PPA Consolidated Cash Flow Forecast 1980-84 ............. 41 5.05 Sensitivity Analysis ........... .0.0.0.0.o ............... ..... 43 ANNEXES 1. Outline Terms of Reference for Technical Assistance ............... 46 2. Supporting Tables, Charts and Maps .........................$ .... 47 3. Selected Documents and Data Available in the Project File .... ..... 49 April 1980  PHILIPPINES STAFF APPRAISAL REPORT THIRD PORTS PROJECT 1. Transport Sector A. General 1.01 In the last decade, t'he Philippines has made significant advances in the transport field, far exceeding any previous ten-year period both in terms of funds expended and results achieved. Between 1968 and 1978, the total public transport expenditures amounted to P 14 billion (US$1.9 billion) representing over 30% of total public investment outlays. Since 1975, annual public transport expenditures increased rapidly (although only representing about 1.3% of GNP), with highways absorbing about 74% of the total; of the remainder, airports received 10%, ports 9% and railways 7%. These transport expenditures for the development and improvement of thle hithierto neglected transport system were necessary to meet the increased demand for movement of goods and passengers in the seventies, which had resulted fromo higher income, population and industrial and agricultural production. 1.02 The 1978-81 projections for commodity flows and passenger traffic indicate a larger increase in inter-island movements of freight and passengers between the food deficit areas of Luzon and the agricultural surplus areas of Xindanao than for road transport within the major islands. Accordingly, the 1979-82 Investment Program allocates a greater share of total public transport expenditures to the expansion of ports and airports; 19% for ports, 14% for airports, 9% for railways, and 58% for highways. No significant public funds are allocated for shipping investment since it is largely financed by the private sector. 1.03 The total transport investment tentatively allocated in the Govern- ment's indicative 1979-82 Investment Program is F 14,374 million (JS$1,942 million);/1 an increase of about one third over the previous four- year period. However, the transport share of total public investment will decrease from the previous level of one third to about one fifth of the total program; the power sector will receive an increased share of the allocation to implement the Government's objective to reducing dependence on imported petroleum by constructing hydro, nuclear, and geothermal power plants as alternative sources of electrical energy. /1 A ten-year transport investment program is under preparation by the Ministry of Transport with the assistance of the National Economic Development Authority and foreign advisors.  -2- 1.04 Between 1970-76, transport developed somewhat faster than the economy as a whole: freight and passenger movements grew by about 8% and 7% p.a. respectively, while real GNP grew by 6%. Freight and passenger movements by inter-island shipping accounted for much of this increase, at 14% and 8% respectively, with road transport growing at a lesser pace: 4% for freight and 5% for passengers. The average annual target growth rate of GNP is 7.5% during 1978-85. In the light of the projected growth of the economy, both road freight and passenger transport is expected to grow at 8% during the same period. 1.05 goad transport is the dominant mode within the two major islands of Luzon and Mindanao, estimated to account for nearly 80% of passenger traffic; but it is estimated that the road's share of total freight traffic has decreased from 57% in 1970 to 44% in 1976. Although reliable data are not available, privately operated inter-island shipping, serving a population scattered over hundreds of islands, appears to be the largest transport mode (about 54%) for freight traffic. The increased share of inter-island traffic has been due to the growing commerce between the food deficit areas of Luzon and the agricultural surplus areas of Mindanao. Relatively short inland distances have limited railways to a small fraction of total traffic. B. Transport Subsectors (Map 14769) Highways 1.06 The public road transport system in the Philippines is made up of three major interlocking components: (a) national; (b) provincial, municipal and city; and (c) barangay (mainly farm-to-market) roads. The total network consists of about 152,800 km of roads, of which 22,900 km are classified as national, 29,000 km provincial, 13,400 km city and municipal, and 87,500 km barangay roads. National roads include about 122 km of toll expressways with grade separated intersections north and south of Manila. Except for the toll roads, road classification is often arbitrary as it is not always based on function. In remote areas such as northeastern Luzon and many parts of Mindanao, national roads serve as penetration roads providing the only access to the villages. In many parts of the country, provincial and barangay roads are indistinguishable, both being characterized by low volume traffic serving the limited influence areas to move agricultural inputs and outputs and to connect the rural communities with administrative and market centers.  -3- 1.07 Despite Government efforts /1 since 1969 to develop a modern highway network, the system is still inadequate for the current level of traffic. Although sufficient in location and extent, for the most part, condition of the roads is deplorable, and missing bridges effectively isolate many rural communities. Most unimproved roads are in poor condition due to: (a) defi- cient designs resulting in inadequate drainage, embankment and pavements; (b) lack of proper maintenance; (c) damage from frequent overloading (many of the trunk roads were built long ago and intended to carry only a small number of vehicles); and (d) insufficient funds to repair flood damage caused during the rainy and typhoon seasons. Moreover, vehicle operating and travel costs are generally high, as only 42% of the national highways and 13% of the provincial roads are paved, (compared with 85% and 35% in Thailand). Railways 1.08 The Government-owned Philippine National Railways (PNR) has a network on Luzon totalling 1,060 km, of which 740 km of main line and 80 km of branch lines and sidings are operating. Most of PNR's track was relaid during the 1960s with Japanese aid; the rest is in very poor condition. Management, maintenance and operations of the railways have been inadequate. Except in the Bicol region, the main line is paralleled by highways for most of its length and, as haulage distances for most commodities are relatively short, and commodities are in small shipments, the railway is not presently competitive with trucks and buses. It is unlikely that this situation will change in the near future. 1.09 The Government's present objective is to improve PNR operations to permit the railroad to cover at least current operating costs. Programs under the 1971-76 Rehabilitation Plan have improved services and passenger and freight traffic have increased somewhat since 1973. In 1977, PNR obtained a loan from the Asian Development Bank (ADB) to rehabilitate its Southern Line (about 450 km), which serves the area between Manila and Legaspi. A second railway, the privately owned Panay Railway operates an antiquated 117 km of track on Panay Island: it is presently unsafe but is undergoing minimum rehabilitation to permit limited services on Panay Island which will include the transport of sugar to Iloilo port for export. /1 Major road improvement activities began in 1969 following completion of the Philippine Transport Survey (PTS), a two-year study conducted under UNDP financing with the Bank acting as Executing Agency. The PTS recommended improvement of about 6,000 km of national roads, reorganization of the highway administration, and improvments in road maintenance procedures. Most of the priority roads identified in the PTS have been or are being improved with local resources, supplemented by assistance from Japan, USAID, ADB and the Bank. Between 1969 and 1979 about 4,800 km of national and 5,200 km of provincial roads have been constructed or improved.  -4- Ports 1.10 There are 18 major and 76 minor national ports, and about 390 municipal ports throughout the Philippine archipelago, plus over 200 private piers and wharves. Manila, the largest port, accounts for about 46% of the 23 million tons of cargo handled each year by public ports. Most long- established public ports are located where natural protection is available but sedimentation problems occur in many ports. More modern private piers and wharves, which handle mainly petroleum products and iron ore, are generally located to take advantage of naturally deep water. Many public ports suffer from inadequate work areas and transit sheds, and poor maintenance. The cumulative effect of these deficiencies is congestion which unduly restricts the movement of cargo, slows stevedoring and lengthens ship turn-around time. 1.11 In the past few years the Government has received assistance from the ADB for improvement of port facilities at Manila, Davao and Cotabato, from the Federal Republic of Germany for port works at Davao and Iligan, and from the IBRD for the expansion of the ports of Cagayan de Oro and General Santos under Loan 939-PH (Second Ports Project). As a part of the project, the Bank supported the establishment of the Philippine Ports Authority (PPA) which was mandated to consolidate and assume the port-related functions which had previously been fragmented between the Bureau of Customs (BOC) and Bureau of Public Works (BPW) in the former Ministry of Public Works, Transportation, and Communications (MPWTC). Since it became operational in 1976, PPA has taken over the management and operation of all national ports, expanded its technical staff and improved accounting procedures with the assistance of Bank-financed consultants. 1.12 The Bank's objective in the port sector is to assist the PPA in developing a national port policy, increasing port capacity to meet industrial development in secondary urban growth centers, and improving administration, operations, and planning for all major national ports. PPA's current Investment Plan (1979-83) not only aims at increasing capacity at major ports, but also at consolidating ports of various sizes and functions in outlying areas where improved overland mobility makes economies of scale and efficiency possible. The selection of ports for future improvement has been determined in the context of the traffic-patterns of the total transport network, the development potential of the hinterlands, and the natural conditions of the harbors. Details on the subsector are given in Chapter 2. Inter-Island and Coastal Shipping 1.13 Despite its status as the most important transport mode for freight, the potential of inter-island and coastal shipping has not yet been fully realized, mainly due to inadequate port facilities and the antiquated local shipping fleet. There are about 480 inter-island vessels of over 100 gross tons, and many more smaller ships. In 1976, more than 34% of the inter-island fleet and 41% of the ocean-going fleet were 25 or more years old. Most smaller ships are converted naval or military vessels, and over-loading is characteristic. There are about 50 Philippine inter-island vessel operators,  but the majority of the fleet is owned by only ten major firms. In addition to the inter-island fleet, there are smaller craft providing low cost, short- haul transport of agricultural products for local as well as inter-island markets, and barges are used extensively to move raw or refined sugar, rice, and other produce. Coastal transport is frequently a logical alternative in areas where cross-island road construction is made difficult by mountainous terrain; thus numerous roadsteads and shallow water ports have been developed where land access to communities is severely limited. 1.14 The increasing regional specialization in production patterns and rural development has given inter-island shipping a new impetus to play a major role in the Government's plans for increased food production and regional balance in economic and social development. The growing need for food in deficit areas has to be met by increased production in surplus areas such as Mindanao. This in turn, requires efficient marine transport of both agricultural inputs and outputs. In recognition of this need to improve inter-island shipping services, the Bank provided a loan of US$20 million in 1974 for a shipping project. Since 1977 ten interisland container vessels have been put into service by major operators financed locally and more are expected as port facilities are improved. Civil Aviation 1.15 Manila, Cebu and Zamboanga, Philippines' international airports are served by 20 international and regional airlines, including Philippine Air Lines (PAL). The latter provides international services, and is the prin- cipal carrier for 78 domestic airports operated by the Government. Domestic passenger traffic has increased by about 12% p.a. over the past six years, while air freight is still insignificant. With the assistance of a US$26 million loan from ADB, the Manila International Airport is being rehabilitated and extended to meet the traffic demand expected by 1983. C. Transport Planning, Coordination and Strategies 1.16 Until mid-1979, transport planning had been the joint responsibilty of the National Economic and Development Authority (NEDA) and the Ministry of Public Works (MPW). As a central planning agency, NEDA had overall respon- sibility for public capital investments through its Infrastructure Program and Project Office, which reviewed and approved investments proposed by each transport operating agency. NEDA was assisted in this task by the Inter- Agency Technical Committee on Transport Planning (IATCTP), staffed by repre- sentatives from each transport agency, including the MPH and MPW. IATCTP prepared standards and guidelines for the formation of agency plans for devel- opment and coordination of transport programs and projects. It also served as a forum for the resolution of operational problems of transport agencies. 1.17 MPW, the other major participant in the joint planning activity, used its Planning and Project Development Office (PPDO) to undertake regional planning studies on infrastructure investments and formulate  - 6 - priorities for major infrastructure projects. PPDO maintained liaison with NEDA and provided the bulk of technical input to transport planning. The Board of Transportation (BOT), as a semi-detached unit of the MPW, also handled the quasi-judicial function of granting routes to transport companies and enforcing rates and regulations for their operations on the basis of IATCTP policy guidelines. 1.18 In July 1979 the Ministry of Transport and Communications (MOTC) was created to undertake transport planning, coordination and regulation. It became operational with a small staff drawn mainly from PPDO of MPW and BOT. The Ministry is still evolving and is in the process of defining its functions, expanding its staff and preparing to take necessary steps to absorb the transport planning functions now discharged by NEDA. However, it will be some time before MOTC can assume full responsibility for transport planning, coordination and regulation. In the interim, MOTC will continue to be assisted by NEDA, IATCTP and expatriate advisors. 1.19 One of the important transport planning activities is the Govern- ment's National Transport Systems Study (NTSS) undertaken in preparation of a ten-year transport investment program. As a result of the Bank's Trans- port Planning Mission's recommendations, several resident planning advisors were appointed in 1977 to assist the Government under the Manila Urban Development Project (Loan 1282-PH) in carrying out this study. The advisors were expected to assist individual line agencies and MPW with matters concerning transport policy, coordination and modal planning. However, completion of the transport study has been delayed due to changes in the advisory staff, a high turn-over among the counterpart team, and the lengthy period required for data collection. Accordingly, the Bank's Fourth Highway Project (Loan 1661-PH) included additional advisory services to allow completion of the first phase of the transport study by mid-1980. Completion of the entire study is not expected until late 1981. 1.20 Transport improvement programs are designed to promote the Govern- ment's objectives of (a) increasing food production and rural incomes; (b) promoting regional balance in socio-economic development by establishing growth poles away from Metropolitan Manila; and (c) expanding industrial production for domestic and foreign markets. To increase transport capacity so that it can meet the growing demand, broad strategies are being pursued concerning two main aspects: investment and operational. 1.21 Investment strategies embody two major elements: (a) transport sector and program review; and (b) strengthening the planning capabilities of operating agencies. At the center, MOTC/NEDA are assisted by foreign advisors to undertake review and evaluation of operating agency proposals for their consistency with i. sectoral and overall development objectives such as agricultural and industrial development; ii. financial resource availability; iii. inter-modal efficiency; and iv. agency implementation capabilities. Needless to say, the task of analyzing least cost solutions for the achievement of the desired development objectives is a complex one. It will take long, deliberate and persistent efforts on the part of the Government  planners to effectively analyze feasible alternatives (e.g., a greater utilization of existing facilities in lieu of new investments) and assess socio-economic effects of major investment projects in arriving at optimal investment choices. However, a good beginning has been made by the Government in a systematic collection of data and analysis with which to undertake coordinated investment programming. 1.22 To enable MOTC/NEDA to carry out inter-modal planning functions, the analytical capacity of transport agencies both at the center and at the regional and provincial levels must be greatly strengthened. The Philippine archipelago, with its chain of over 7,000 islands, provides a strong case for delegating major planning responsibilities to regions and provinces. It is at this level where relevant data must be assembled to identify specific trans- port problems, examine alternatives in terms of costs and benefits and rank priorities on the basis of the intimate local knowledge of the transport facilities under their control. Effective transfer and strengthening of local planning responsibilities can be accomplished only in the long term. However, the Government has clearly established the direction in which it intends to move. 1.23 In order to reduce the need for capital expenditures or, at least, make it possible to postpone investment needs, the Government is making an increasingly greater effort to improve the operational efficiency of exist- ing facilities and administrative procedures. Plans are currently being formulated to improve vehicle operations in Metropolitan Manila through a comprehensive scheme of traffic management. Greater attention is being focussed on the maintenance of roads and ports, and on a restructuring of the management staffing and procedures for port operations and transport regulation. These operational improvements would make existing and future investments more productive and would yield much higher benefit cost ratios than similar sized investments in new projects. D. Previous Bank Assistance in the Transport Sector 1.24 The Bank Group's assistance to support the Government's efforts to modernize and expand the transport sector included the First Port Loan (290-PH) in 1961 amounting to US$8.5 million which financed procurement of dredging equipment. However, US$1.1 million of the loan amount was cancelled due to failure to operate and maintain the dredgers in an efficient manner. In 1973, a Second Port Loan (939-PH) of US$6.1 million was provided to assist the expansion of two important ports on Mindanao: Cagayan de Oro in the north and General Santos in the south. Project completion was delayed by three years mainly because of retendering, dredger mobilization difficulties and inadequate project supervision control by BPW. 1.25 The Bank's First Shipping project was prepared to help modernize the old inter-island fleet, provide technical assistance to strengthen planning and administrative capabilities in the maritime industry sector and formulate a ten-year investment program for inter-island shipping. Until recently,  - 8 - implementation of this project has been delayed by institutional problems. They related to the uncertainty about how various financial institutions would handle interest rate issues and subloan administration and appraisal, subborrowers' reluctance to assume foreign exchange risks, and a disagreement about how ship safety inspection is to be undertaken. Some of these issues are now being resolved, and accordingly, the rate of commitment has increased substantially. 1.26 The highway sector has received the bulk of the Bank's lending for transport in the Philippines: four loans (Loans 731-PH, 950-PH, 1353-PH and 1661-PH) totalling US$271 million have been made for the improvement of important sections of national highways and connecting feeder roads, and for a country-wide maintenance organization for national roads, including improvement of workshops and procurement of maintenance equipment, spare parts and workshop machinery. These projects have also helped to develop the Philippine contracting industry through experience in fulfilling a steadily increasing stream of contracts. Philippine consulting firms have also gained valuable experience through their association with foreign consultants on the design of the project roads. 2. PORT SUBSECTOR PPA Organization 2.01 PPA is a quasi-government corporate body created by Presidential Decree in 1974. An amending decree in 1975 widened PPA's powers and functions which require the authority to develop, maintain, operate, supervise and regulate port services and facilities of national ports in the Philippines. PPA's governing board, responsible directly to the Minister of Public Works, comprises seven directors, five of whom are cabinet ministers. The private sector is represented by one director, and PPA's general manager is a member ex-officio. PPA is empowered inter-alia to fix rates and charges, determine terms and conditions of service for its employees broadly consistent with Civil Service rules and regulations, adopt recurrent income and expenditure budgets and capital expenditure budgets, invest surplus funds in Government securities and borrow money after consultation with the Central Bank and the Department of Finance and with the approval of the President. Dues, which are defined in the enabling decree as including harbor fees, tonnage and wharfage dues, berthing charges, port dues, and any other dues or fees imposed by virtue of existing law or the decree, are increased or decreased by the President upon the recommendation of PPA, to provide a satisfactory return on the Authority's assets and adjustments may be similarly made to dues so as to reflect the costs of providing the services. 2.02 During 1977 two Presidential Decrees (Nos. 1177 and 1234) resulted in fundamental changes to PPA's financial autonomy with effect from January 1,1978 by requiring PPA (and other agencies) to: (i) remit all  - 9 - revenues to Treasury for crediting to a Special Account in the Government's Ceneral Fund; (ii) obtain quarterly, in advance, budget allotment authorization from the Government's Budget Commission to enable PPA funds to be released by Treasury to meet recurrent and capital expenditures; and (iii) maintain financial records in accordance with governmental budget accounting rules. The application of these regulations has in the past resulted in reduction by the Budget Commission of PPA's spending powers below the levels approved by PPA's own board. Some relief from budgetary constraints has been available to PPA for financing certain capital works through the utilization of surplus funds (termed "corporate") which it had accrued up to December 31, 1977. However, these funds are gradually being depleted. In addition to maintaining commercial accounting records, PPA is now required to provide supplementary financial data in compliance with government budgetary procedures. 2.03 PPA's full-time General Manager (and ex-officio Vice-Chairman of the Board), who exercises day-to-day control, is an experienced and competent administrator. Chart 21268 shows PPA's organization. 2.04 Port Management Units (PMUs) have been established at major national ports with each PMU exercising control over neighboring minor national ports. There also exist over 200 private piers and wharves in the Philippines from which traffic PPA derives revenues. Since its treation PPA's approval is required before any private port can be constructed or expanded. There are also some 390 municipal ports most of which offer only basic and simple landing facilities for small craft. Management, Staff and Training 2.05 M4anagement is generally very satisfactory, but there remains a need to develop certain areas, in particular strengthen development project planning and execution, and improve financial and operational information available to management to assist in both day-to-day control and corporate planning. 2.06 The experience gained by PPA through the Third Ports Project Feasibility Study should be consolidated by allocating PPA's project planning and supervision activities to permanently staffed units suitably interlinked. A permanent planning division staffed with experienced engineers, economists and statisticians is necessary to fulfill PPA's wide responsibilities in developing Philippine ports. The supervision of major projects also will require a nucleus of full-time engineers for years to come. Appropriate organizational structure changes are now being considered by PPA to achieve these goals. PPA agreed during negotiations to discuss proposed major changes with the Bank prior to implementation [para. 6.02(a)] The establish- ment of a hydrographic division is required in view of PPA's extensive dredging responsibilities and the cost of related staff training and equipment is included in the proposed project. The cost of a civil engineering adviser for the duration of project construction, and training courses abroad for MPW and PPA port engineers is also provided under the proposed loan.  - 10 - 2.07 More accurate and succinct data are required for effective manage- ment control and to assist in corporate planning. The Bank's appraisal revealed the inadequacy and inaccuracy of some of PPA's statistical data much of which is derived from shipping and arrastre companies. Consequently many productivity indices computed for PPA ports are unreliable. More emphasis is needed on quality rather than on quantity and greater presenta- tional uniformity is required to enable more useful comparisons to be made especially of data supplied by PMUs. The scope, content and accuracy of financial reporting also needs improving substantially. The proposed project includes the cost of a port experienced economist and a management accountant to assist PPA staff in these areas. These experts would also assist in the determifiation of reliable productivity indices which would enable PPA and the Bank to subsequently agree on suitable operational targets for the project ports. Agreement on these targets will be reached by no later than December 31, 1981 [para 6.02(b)]. 2.08 PPA operates a training school which was established in 1975 with ILO/NORAD assistance. Initially the school trained stevedore and wharf labor; subsequently PPA introduced various work-oriented training courses for lower and middle management operational and administrative staff. Existing Port Facilities (Map 14860) 2.09 Cagayan De Oro (Map 14771). Cagayan de Oro has a 451 m long, 23 m wide marginal reinforced-concrete wharf on piled foundations, of which 291 m consists of an earlier existing facility which was recently repaired and upgraded when a 160 m new extension was added, both sections having a dredged alongside depth of 8.5 m below MLLW. The new extension was completed under the Second Ports Project which also provided paved storage and working areas behind the wharves, as well as transit sheds, administra- tive and other buildings, fencing and gates, drainage and other service facilities. 2.10 The tidal range is less than 1 m and siltation is virtually nonexistent along the present wharves. However, to the south, where the next extension is proposed, are shallow log-ponds divided by rock bulkheads. Currently, these log ponds are leased to private companies. Some 200 squatter huts are also present outside the south boundary fence of the port. The early termination of the log-pond leases and their removal, and the relocation satisfactory to the Bank of all huts encroaching within the proposed project area by no later than June 30, 1981 was agreed with the Government during negotiations [para. 6.01(a)]. The city government is already taking action to move site occupants to an available temporary site pending final resettlement in permanent quarters. The cost of relocation is estimated at $40,000 to be borne by the relevant government agencies. 2.11 Just outside the proposed project area, an oil company has a tank farm and supply depot. The incoming supply pipes cross the project area and are to be relocated. This was confirmed with PPA during negotiations. 2.12 The partly salvaged and partly submerged wreck of a small warship lies to the south of the port, about 430 m from the existing wharf. As it  - 11 - lies in the path of the proposed construction, its removal is included in the project. 2.13 The 500 m long access road to the proposed project site will be an extension of a newly paved road leading from the Iligan-Cagayan de Oro-Butuan highway to the recently completed Agora Market. Early right-of-way acquisition will be necessary; both this and a construction schedule was agreed by the Government during negotiations [para. 6.01(b)]. 2.14 Cebu (Map 14770). Cebu has a narrow marginal waterfront for cargo handling, open storage and roadway. The width varies from 28 to 45 m over an overall length of 3.8 km with alongside depths of water varying between 3 to 6.5 m below MLLW. Most of the berths are in poor condition. Except for a 9 m alongside depth foreign berth and one 6.5 m alongside depth domestic berth, maximum depth is 5 m due to existing structural foundation limitations. In addition, there are three finger piers, each 33 m wide and 155 m long, with alongside depths varying from 3 to 5 m below MLLIJ, which are all in very poor condition. Existing structural foundation limitations of the piers do not allow increasing the dredged depths beyond 5 m below MLLW. 2.15 Tidal range is 1.6 m maximum; the tides are diurnal and currents are insignificant. Some maintenance dredging is necessary, but information is insufficient to determine necessary frequency and quantity. PPA proposes to conduct observations and review maintenance dredging requirements by no later than December 31, 1982. This was agreed during negotiations [para 6.02(c)]. 2.16 Some wrecks lie in the areas to be dredged for an access channel to the proposed quay. As removal powers do not rest solely with PPA, removal of these wrecks, which is not included in the project, was agreed by the Government during negotiations [para. 6.01(c)]. 2.17 Iloilo (Map 14772). Iloilo has two sections of port facilities: (a) a narrow 10 m wide marginal waterfront extending about 2 km along the west bank of the Iloilo river used by domestic traffic; and (b) a deep water wharf for foreign and large domestic vessels located on the Iloilo strait side. 2.18 The river front wharves are generally of very old mass concrete and reinforced concrete construction, said to be built at the turn of the century, plans of which are no longer available. Part of the wharves are deck platforms supported on open timber shallow depth piled foundations, which do not permit dredging alongside depths beyond 5 m below MLLW. The wharf structures need extensive rehabilitation, but this is considered uneconomic as a main city street and a railway track frequently used for passenger traffic prevent further widening of the narrow wharf aprons.  - 12 - 2.19 Heavy siltation occurs in the river and past dredging has provided only temporary improvement to the channel. Siltation would rapidly fill the dredged channels until stability was reached when depths returned to between 3 m and 4 m below MLLW. A detailed study of the siltation phenomena is necessary to determine whether more effective and less expensive measures can and should be taken to maintain existing depths for craft using PPA and other upriver facilities, e.g. small ship repair yards. However, as already stated, depths alongside the river wharves cannot exceed 5 m due to structural limitations. The cost of such a study is included in the project. The mean tidal range in the river and in the Iloilo strait is 1.6 m. 2.20 Built in 1968, the deepwater wharf located just beyond and south of the mouth of the Iloilo river, faces the Iloilo strait. It is a reinforced concrete wharf with a deck 12 m wide and 345 m long, on rein- forced concrete piled foundations, having a maximum alongside depth of 9 m below MLLW. A 140 m long, 18 m wide transit shed is located on the wharf structure. An open shed for passengers, a private warehouse, and a small cargo equipment maintenance workshop make up the port buildings in this area, all of which are in good condition. Road access to the city, security lighting, water supply and fencing also are adequate. The berth nearest to the mouth of the Iloilo river is subject to heavy siltation, whilst further expansion at the other end is not possible because of exposure to heavy wave action and erosion. 2.21 The site of the proposed quay for Iloilo lies north of the mouth of the Iloilo river, and faces the Iloilo strait. It will be located northeast of the suburb known as Barrio Obrero. Since early construction of a 1-km long temporary access road will be necessary to transport construction materials and equipment from the city to the project site, its cost is included in the project. Prompt acquisition of the right-of-way, and the construction of the road was agreed by the Government during negotiations [para. 6.01(b)]. Funds are also provided in the project for a permanent road access, its alignment to be decided when the proposed urban development of the new area behind the new port facility has been finalized. During negotiations the Government confirmed that suitable arrangements will be made to construct a railway spur line for the conveyance of export sugar to the proposed quay. 2.22 Zamboanga (Map 14773R). Zamboanga has a tee-head jetty which was constructed prior to 1939. Constructed in reinforced concrete on open piled foundations, the main wharf is 270 m long and 12 m wide, accessible to the shore by a skewed approach jetty of similar construction, 22 m wide, 165 m long on its western side and 125 m long on its eastern side. A reinforced concrete finger pier addition, 54 m long and 9 m wide, joins the jetty approach structure midway on its eastern side. Behind the approach jetty and contiguous to the port land, is a reinforced concrete sheet-piled  - 13 - marginal wharf 268 m long with a paved apron 35 m wide, completed in 1964 and extending eastward of the approach jetty0 Depths at the outer berths of the main wharf of the tee-head range from 5.6 m to 8.8 m below MLLW, at the inner berths from 5 to 7.1; at the finger pier from 5 to 5.8 m; and at the marginal whar