Philippines - Third Urban Development Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. 2703a-PH PHILIPPINES THIRD URBAN DEVELOPMENT PROJECT STAFF APPRAISAL REPORT February 26, 1980 Urban Projects Dep,artment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Peso (P) 1 Peso = US$0.1351 US$1 = P7.4 WEIGHTS AND MEASURES 1 meter (m) = 39.37 inches (in) 1 square meter (sq m) = 10.8 square feet (sq ft) 1 cubic meter (cu m) = 35.3 cubic feet (cu ft) 1 kilometer (km) 0.62 mile tmi) 1 square kilometer (sq km) 0.386 square mile (sq mi) 1 hectare (ha) 10,000 square meters (sq m or 2.47 acres (ac) ABBREVIATIONS AND ACRONYMS BLISS - Bagong Lipunan Improvement of Sites and Services CIF - Capital Improvement Folio COA - Commission on Audit DBP - Development Bank of the Philippines ESC - Environmental Sanitation Center LOI - Letters of Instruction MCB - Management Coordination Board MHS - Ministry of Human Settlements MMINUTE - Metro-Manila Infrastructure, Utilities and Engineering Program MRA - Metro Manila Area MMBIDP - Metro-Manila Barangay Industries Development Program MMC - Metro Manila Commission MMTA - Metro Manila Transport Authority MOB - Ministry of Budget MOF - Ministry of Finance MPH - Ministry of Public Highways MPW - Ministry of Public Works MWSS - Metropolitan Water and Sewerage System NACIDA - National Cottage Industry Development Authority NEDA - National Economic and Development Authority NHA - National Housing Authority NHMFC - National Home Mortgage Finance Corporation NMYC - National Manpower and Youth Council PBSP - Philippine Business for Social Progress PD - Presidential Decree PROGRESS - Program for Removing Sewage from Streets RAD - Research and Analysis Division SIR - Slum Improvement and Resettlement Program SSE - Small Scale Enterprise TRC - Technology Resource Center TUVD - Technology Utilization Ventures Division UNDP - United Nations Development Program UPISSI - University of the Philippines Institute for Small Scale Industry ZIP - Zonal Improvement Program FISCAL YEAR January 1 to December 31  FOR OFFICIAL USE ONLY PHILIPPINES THIRD URBAN DEVELOPMENT PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. Chapter: I. BACKGROUND ..................... 1 A. The Urlban Sector .1 B. The Metro Manila Area .. .4 II. THE PROJECTr ............................................... 14 A. Objectives ....................................... .... 14 B. Project Components ...... ......................... .... 15 C. Detailed Features ............... .. .................. 16 III. PROJECT COSTS AND FINANCING . . . 23 A. Cost Estimates ....... ................................. 23 B. Financing Plan ............. .......................*.. 25 IV. PROJECT IMPLEMENTATION . . . 27 A. Project Organization, Management and Monitoring ....... 27 B. Executing Agencies . . . 33 C. Flow of Funds, Budgeting and Programming . . 35 D. Implementation Schedule . . . 37 E. Procur,ement and Disbursements . . . 37 F. Operations and Maintenance ...................... ... . 40 G. Supervision ... 40 V. FINANCIAL ANALYSIS .................................. 42 A. Cost Recovery .......................................... 42 B. Terms to Beneficiaries and Affordability .............. 42 C. Impact on Municipal Finance and Program Replicabi]Lity. 45 This report is based on the findings of Messrs. Williams, Whlitehead and Messrs. Racki, Ter Woort and Walker (consultants) who visited the Philippines in February 1979 to pre-appraise the project. A follow-up mission comprising Messrs. Williams, Whitehead, Ramani and Messrs. Boyle and Gsottschneider (consultants) visited the Philippines in June 1979 to complete the Appraisal. FThis document has a restricted distribution and may be used by recipients only in thie performance| of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.j  Table of Contents (Continued) Page No. VI. PROJECT JUSTIFICATION .................................... 46 A. Economic Benefits ... 46 B. Urban Poverty Impact ..47 C. Project Risks ..47 VII. AGREEMENTS REACHED AND RECOMMENDATIONS .49 CHARTS 20840 Community Upgrading Programs in Metro-Manila and expected impact on unserviced population 20841 Comparative Statement of Income and Expenditures. Cities and Municipalities calendar year 1978-79 20842 Institutional Structure for ZIP and MMINUTE programs 20902 Implementation Schedule 20871 Operational and Maintenance Responsibility for Project Components 20872 Cost Recovery 20843 Ministry of Human Settlements. Organization Chart 20837 Metropolitan Manila Commission. Organization Chart 20838 National Housing Authority. Organization Chart 20844 Technology Resource Center. Organization Chart 20901 ZIP yearly Project and Program Cycle ANNEXES 1. ZIP Program Financing Plan 2. Sites and Services Financing Plan (Government-developed) 3. Sites and Services Financing Plan (by private developers) 4. Planning Criteria and Design Standards 5. Residual Disposition of Bank Loan 6. List of Documents on Project File MAPS 14586 MMA Land Use 14587 Population Densities 14657 Household Income 14588 Project Locations 14665 Example layout plans for ZIP site 14666 Example layout plan for MMINUTE area Photographs of ZIP and MMINUTE Sites  I. BACKGROUND A. The Urban Sector Urban Struc ure and Growth 1.01 The Philippines' urban population in 1975 was estimated at 14.3 million, or approximately 33% of the country's total population of 42.2 million. Some 12.5% of the country's population or 40% of its urban popula- tion live in Metro Manila itself. Another 1.3% reside in urban centers which are closely associated with Manila. There are only seven urban areas including Metropolitan Manila which have urban populations greater than 100,000 and a furt:her eighteen centers with urban populations from 50,000 to 100,000. Only 5.2% (2.1 million persons in 1975) live in large urban centers that are distinct from Metro Manila. 1.02 The urban population is presently growing at about 3.5% compared to 2.8% per year overall. Growth rates have been uneven among cities of different sizes wiLth Metro Manila and smaller cities growing fastest. Within the next twenty years the population of the Philippines will have grown to 75 or 80 million people, almost double its present size and up to two-thirds of the added popu'Lation may have to be absorbed in urban areas even under optimistic projecitions of rural employment. Based on present trends Metro Manila would have a population of 16 million by the year 200C0. Urban Poverty and Employment 1.03 The urban poverty threshold for the Philippines in 1977 is esti- mated at F1,877 ($250) per person per year based on a least cost diet. Although available data is not precise, it indicates that 39% of families in urban areas and about 80-90% of famhilies in typical slum areas of major cities have per capita incomes below that level. In Metro Manila, 35% of the population, or about 2.1 million people live below the poverty level. Thus Metro Manila alone accounts for 30% of the urban poor in the Philippines. Recent data show a decline in rates of urban unemployment to about 8% of the workforce in 1976. In addition, high levels of underemployment are indicated by the high proportion of part-time work by heads of househoLds and by low wages of F12 per day ($1.60) for an unskilled urban laborer. Real incomes for this group are estimated to have declined by one-third between 1970-1978 and are likely to decline further if the present high rates of inflation persist. A number of national programs exist to promote industrial and business expansion including small-scale industry. However, the lack of an integrated system for assisting small business, weak coordination and duplication of functions have prevented the programs from becoming fully effective. Urban Services and Shelter 1.04 Most of the country's cities and municipalities have not kept pace with expanding demands for provision of basic infrastructure, partly because of financial constraints at the local level and partly due to other national priorities. As a result municipal infrastructure is generally inadequate to  - 2 - service the basic needs of large segments of the urban population. Almost 25% of all urban households in the Philippines and over 30% in Metro Manila, live in squatter and slum settlements without secure tenure and lacking safe water supply, drainage, human waste disposal and clean access. Available studies indicate disease rates and infant mortality from 3 to 8 times worse than for non-slum areas of the city and a level of disease and malnutrition higher than their low income counterparts in rural areas. 1.05 The historic lack of relevant shelter programs for the increasing low income population has created severe over-crowding especially in low income urban areas where gross residential densities in central city slums reach almost 2,000 persons/hectare. Studies indicate that in the country as a whole from 1960 to 1970 there was an increase of 1.3 households for every one dwelling unit and this imbalance was much worse in urban slums, which in Metro Manila grew over three times more quickly than the city as a whole over the decade 1958-68. It is estimated that two dwelling units are built per 1,000 population in the country as a whole, whereas six per 1,000 are required to accommodate growth and eliminate the backlog. In the MMA alone, 45,000 units a year are needed, or over three times the present rate of housing construction. Urban Institutions 1.06 A number of important new institutions have recently been estab- lished and are beginning to significantly effect the development of national urbanization policies. In July 1975 the National Housing Authority (NHA) was established to consolidate Government housing efforts, previously dispersed among six separate bodies. The Ministry of Human Settlements (MHS) was established in July 1978 with responsibilities for national human settlements planning, especially land use planning and environmental management, technical assistance and regulation. Better coordination of planning, and delivery of services and improved local government administration in the Metro Manila area has been initiated with the establishment of the Metro Manila Commission (MMC). The Ministry of Public Works (MPW) has recently established a process for investment planning and for identification of service deficiencies which is already being implemented in Metro Manila and in major regional cities within the framework of regional development planning now being introduced by National Economic and Development Authority (NEDA). In 1978 the Government established the National Home Mortgage Finance Corporation (NHMFC) to provide a secondary market for home mortgages. Urban Issues 1.07 Among the numerous urban issues facing policymakers in the Philippines there are four of paramount importance and on which the Bank's urban lending strategy is increasingly being focussed. Provision of Basic Services. Secondary and tertiary infrastructure, especially in low income areas has been badly neglected in the past and the need to expand these services and improve their distribution to the poor in conjunction with regularization of tenure, is particularly important. The Government's recent initiatives in slum upgrading and expansion of low-cost  sites and services provides the legislative basis and the national support necessary to begin dealing with these problems. The early projects which demonstrated this approach were assisted through the Bank's iirst two urban loans. The project will contribute towards this objective by assisting large-scale programs focussing exclusively on the urban poor in Metro Manila whose extent and concentration offer the greatest opportuni:--- to improve living conditions and incomes. Employment and Productivity. The Government places a high priority on increasing employment and productivity in view of (i) the skewed income distribution, which could be improved by stimulating expansion and higher productivity among small businesses, (ii) the high level of skills, and education and low comparative wages of Philippine labor which should enable it to expand exports, especially from the sectors of small machinery, consumer products and crafts. These objectives, will become increasingly important as urbanization absorbs the surplus rural wor1-force. A twin strategy is needed which would encourage expansion of larger 'generating' enterprises together with stimulating links with small businesses in the regional cities, and within Metro Manila, to discourage large 'generating' enterprises, especially heavy and polluting ones, and encouraLge higher productivity in small businesses. The project is designed to support this objective in Metro Manila. Urban Investment Planning and Resource Generation. This concerns the critical links between expressed priorities, actual investment patterns and generating the resources to pay for them. Public investments in the past have been geared towards primary infrastructure and large-scale industry. Although, the Government has recently placed priority on services for the urban poor, basic infrastructure serving poor areas still represents only a small proportion of investments in Metro Manila, and there has been no system to regularly review priorities and monitor the impact of investment programs. The Capital Improvement Folio review conducted by the MPW and financed through the first urban loan is the first effort to make a comprehensive analysis of investments in the Metro Manila Area (MMA) and is proving a useful tool for generating discussion and providing a basis for decision-makiLng among agencies. The project will finance an extension of this approach to other cities in the country. At the same time local government finances require strengthening in order to minimize reliance on central government investments and subsidies. The proJiect also provides technical assistance to the MMC to further develop its organizational structure and strengthen its administrative and financial systems. Regional Development and Urbanization Strategy. In the past, the intermecdiate and small cities and their needs for infrastructure and industry have been neglected as a focus of policy. There is also a need to develop smaller urban centers in a support role for rural development. These measures are important in order to (i) improve the distribution of incomes across regions, (ii) improve the level of services, incomes and living environ- ments in rural areas and small towns and thus minimize migration, and (iii) direct surplus migration to intermediate and smaller urban centers. More recently National Economic and Development Authority (NEDA) and MRS have directed their attention towards regional planning and administration and a development study for one region has been prepared with UNDP finance. These efforts are expected to lead to more effective planning on a regional basis.  - 4 - However, strong support at the national level to budgeting and investment programming by regional bodies and local governments remains a high priority need. Technical assistance to support these efforts through MPW, NEDA and MHS is included in the project. Shelter Policy 1.08 A major re-orientation of shelter policy has been unde-rway since 1976, away from squatter removal and relocation and towards in situ improve- ment of slums and expansion of urbanized land for low income settlement. Based on the impact realized through the Tondo Foreshore improvements, Govern- ment has now given this policy a high priority among urban infrastructure investments. Letters of Instruction, issued by the President in 1977 insti- tuted slum improvement as the principal national program for servicing the basic needs of the large and rapidly growing low income communities. Local governments are required to organize a staff to prepare 3-year, 5-year and long term programs of slum improvement, in conjunction with the National Housing Authority (NHA). The Zonal Improvement Program (ZIP) has been desig- nated as the Metro Manila component of the national program. In. addition to physical improvements the program involves acquisition, or expropriation, where necessary, of squatter land from absentee landowners for resale to residents in order to provide a secure basis for residents to improve their housing. The slum improvement program is now established in five regional cities and in Metro Manila NHA and the local governments have established permanent teams for ZIP, prepared feasibility studies, and executed initial improvement works in ten slum areas. New sites and services projects are also under construction in Manila (Dagat-Dagatan) and in three regional cities. If these programs are continued and are successful they will have a major impact over the next 10 years on the lives of the poorest 30% to 40% in the country's towns and cities. 1.09 In addition to these programs of basic services the Ministry of Human Settlements has recently introduced a housing program called Bagong Lipunan Improvement of Sites and Services (BLISS). The principal concept is the development of mixed income communities with emphasis on employment and a degree of self-sufficiency. The program has two major components: "rural BLISS" for small settlements in regional cities involving a demonstration project commencing with ten hectare developments in each settlement, and "urban BLISS" for central and inner-ring sites in Metro Manila. The "rural BLISS" program is similar in service standards and costs to the higher range of NHA's sites and services and housing programs and appears affordable to moderate and middle income people. The Metro Manila BLISS presently consists of four- storey walk up apartments costing P75-90,000 per unit excluding land and infrastructure and affordable to low income families only on the basis of substantial subsidies. Based on the MMA income distribution, yearly construc- tion by private developers of about 500 to 700 units of this type for upper- middle income groups in Metro Manila would be appropriate, but the high investment cost and considerable cross-subsidy required would ruLe out this approach to providing shelter for lower income groups on an extensive scale. B. The Metro Manila Area (MMA) Population and Economy 1.10 Following World War II the MMA expanded from a population of 1.6 million in 1948 to its present size of over 6.0 million. Almost 40% of this  population presently results from in-migration. At the present rate of expansion of 4% per year, by the end of the century 16 million persons or 44% of the Philippine urban population could be living in the Manila region. 1.11 Building on its traditional advantages of the port and the seat of Government, 'he economy of the MMA has diversified into a wide variety of activities. In 1974 industry accounted for 38% of value-added and 25% of total employment in the MMA. Almost half of all the small firms in the country are located in Metro Manila, and the annual growth rate of small and medium industries is now 15.2%. Fully 80% of employment in the industrial sector is in small and cottage industries which have a high capacity for absorbing labor and offer the highest value-added per unit of capital. However, the major share of investments in industry have, in the past, been directed towards thLe large and medium firms. Commerce (30% value-added, 17% of employment), services (17% value-added, 38% of employment), transport and construction represent the other significant economic sectors. Unemployment at about 7% is sometwhat lower than for the country as a whole and in view of the ratio of growth in employment to the population (2.5:1.0 over 1961-71) the MMA has clearly proven attractive to both migrants and natives. With 15% of the national population the MMA now accounts for about 40% of total GNP and 15% of its public sector capital investments. This latter figure is likely to rise in the next years from projects already committed in the MMA. Diversification across the modern sectors of the economy is being achieved, yet the disparity in incomes and living conditions within the city is pronounced (Map 14657). 1.12 Spatial change in the MMA is illustrated by the low growth rate in Manila City (1.6%/year) combined with expansion of the innetr ring which doubled its population share from 1948-1970, and now the present outer ring is growing fastest at 7-1/2%/year. Distribution of formal employment has changed in a similar manner to the spatial growth of the city. A large road building program from the late 1950s through to the mid 1970s in conjunction with development oiE the new government center at Quezon City, a new commercial center at Makati and extensive 'villages' of upper income sub--divisions in Quezon City, San Juan and Makati, stimulated a rapid spatial expansion to the northeast and southeast of the city. Expansion of radial roads and construc- tion of new circumferential roads has also encouraged new industries to locate along them and at the perimeter of the city, especially to the east, southeast and north, but flooding and lack of water offer constraints to further devel- opment to the sout]heast and south respectively. Apart from upper income sub-divisions and office complexes the urban texture tends to be a uniform, dense two and three-storey residential mixed land use with little public open space except for roads (Maps 14586 and 14587). Distribution of Services and Low Income Areas 1.13 Services are unevenly distributed in the MMA and the maintenance of local infrastructure is very poor. Per capita expenditures on services vary widely among local governments depending on local fiscal resources (para. 1.24). Variations in levels of service between low income areas and the rest of the city are difficult to define statistically, but a general indication for most slum areas can be drawn from a study on Tondo in 1974 which indicated service provision of about 30% to 60% of that provided for  - 6 - Manila City as a whole. Water service networks do not extend to slum and squatter areas except for occasional standpipes where both the volume and pressure are low. Some areas in the south (Taguig, Pateros) have neither piped water nor wells, and supplies are brought in by tanker at high cost. Low income families may pay up to P60/month or up to 15% of income on water bought from vendors. The water situation will become increasingly critical until 1983/84 when an increased bulk supply and supplementary networks will be completed under the Bank-financed Manila water supply project. A sewerage network exists in the central areas and most upper and middle income communi- ties have septic tanks but about 40% of families in the MMA still do not have any type of sanitary toilet and sanitation problems are exceptionally severe in low income areas. Lack of proper toilets and sewage disposal is compounded by flooding and stagnant water due to the absence of effective surface water drainage systems. In conjunction with poor medical services and with high densities these conditions have led to incidence of disease and malnutrition which are over three to eight times that for the rest of the city. 1.14 About 1.8 million of the 6.0 million population of the MMA live in slum and squatter areas lacking adequate water supply, sanitation and drainage, education, health or community facilities. Mass squatting has been prevented by fairly effective control by the NHA, local governments and private owners. With little provision of new settlement areas which can be afforded by the poor, the trend over the past ten years has been towards increasing densifica- tion of existing slum and squatter areas by further sub-division and high rates of room occupancy which reach 9 persons per room in some areas (Map 14587). The NHA has identified 415 slum sites of which about 212 have poten- tial for upgrading. The other 203 are marginal settlements located on canals, rivers and transport rights of way and comprise about 30,000 families. They are not included in the upgrading program and their residents will be accommo- dated in serviced sites or infil plots in due course when major infrastructure facilities require their removal. Many of the settlements which are suitable for upgrading are centrally located, and high densities and lack of available resettlement sites dictate minimum relocation. Pocket slums, usually of less than 5 hectares but also of high densities, are dotted throughout the MMA. In addition, beach slums occupied mainly by fishermen, and low density perimeter settlements have proliferated at the urbanizing fringe of the MMA. In all cases land title and basic sanitation services are the most urgent priorities. In addition to these depressed settlements there is a range of 'grey' areas - neighborhoods which lack certain critical services but where tenure is estab- lished and housing quality is adequate. A further one and a half million people in the MMA live in these areas. 1.15 Surveys of social, economic and housing conditions have been made on about 30 sites for which ZIP feasibility studies have been prepared. These surveys reveal the following general characteristics. About half of the settlements illegally occupy government-owned land and the remainder are built on private land, the majority of the structure owners paying a land rent to the landowners, who in many cases have deliberately sub-divided the land for this purpose. Most of the land is in large parcels, owned by absentee land- lords who have held it since colonial times, or by institutions. Yearly land rents range from about P6/m2 to P24/m2 (or P20 to P60/house/month) and den- sities range from less than 200 persons per hectare at the periphery of the MMA  - 7 - to over 1700 persons per hectare in central areas such as Leveriza and Juan Luna. Provision of land tenure to the settlers would help to stabilize the areas and minimize further sub-division. There is a wide variation in house tenancy and monthly rents for individual rooms vary from P40 to F200 depending on location, condition and size. Among renters, families, rather than single people, predominate in most of the settlements, the majority having lived in the same house for more than seven years. The treatment and rights for renter families is an important issue when the transfer of land title is planned (see para 2.06). Infrastructure Investment Planning 1.16 UrLtil recently, implementation of rational planning for urban land use, cross-sectoral investments and sectoral planning has been weak or non- existent with inadequate implementation or coordination powers. A Strategic Plan for the Metropolitan Bay Region was initiated in 1973 but not completed. Zoning ordinances which are generally out-dated and based on inadequate land use plans are executed by local governments but in an ad-hoc manner, unrelated to overall priorities. Government's investment program for MA 'has tended to assist and stimulate the modern sector of the economy and its immediate beneficiaries, and services to provide for basic needs and to increase the productivity and incomes of the poor have been largely neglected. Proposed investments in the MMA in the past have not received a systematic review against averall priorities and resources available to execute them. 1.17 The CapitaL Improvement Folio (CIF). Over the past lEi months the MPW has led efforts to obtain a more rational and integrated approach to investment planning in the MMA in the light of implementing capaicity and financial constraints. A recent compilation of projects proposetd by govern- ment agencies (the Capital Improvement Folio) indicated an increase in invest- ments to F4-5 billion in 1980 from P2.2 billion originally estimated for the year by the 1978 CIF review. This would represent an increase in the proportion of government expenditure in the Metro-Manila region from 11% of the national infrastructure budget in 1977 (P843 million actually spent) to over 37% in 1980. Although actual expenditures are normally only 55% to 65% of those actually budgeted, such an increase involving about 60 projects in Metro Manila would severely strain implementing capacity, fuel :Lnflation, reduce domestic liquidity and divert resources from other regiolns of the country. In view of these problems, the CIF was discussed by an inter-agency committee including MPW, other sectoral agencies, MHS, MMC, Ministry of Budget (MOB) and NEDA. Three alternative investment packages were prepared for the committee's review, which represented expenditures for 1980 of P1.5 billion, 12.5 billion or F3.5, billion. In each package, projects were accorded priorities in the light of criteria including level of commitmeint (on-going and committed foreign-assisted projects were accorded highest priority), pov- erty impact, employment generation and technical relationships with other pro- jects. Through elimination and re-phasing of projects, a revised CIF of p3.3 billion for 1980 emerged, of which F2 billion comprised on-going or fully committed projects. Expenditure levels of between F3.5 and Y4.5 billion per year in current costs from 1981 through 1983 are proposed as new projects are brought in. In viewq of the serious resource constraints and administrative capacity, the proposed P3.3 billion program for 1980 will probably not be  - 8 - achieved. Based on past trends, actual funding of up to P2.7 billion may be required. The MPW and MMC are now reviewing the implementation prospects of each project in more detail with a view to defining a likely level of dis- bursement. The revised CIF proposes a significant shift in the balance of sectoral expend'ture for the years 1980-83 compared to the expenditures in 1977-79. Water and Sewerage projects rise from 24% of the 1977--79 expendi- tures to 38.5% for the 1980-83 budget. Community upgrading also rises from 5.5% to 14.1%. Increases for housing and new towns (2.0% to 3.4%), adminis- trative buildings (4.3% to 8.0%) and health and education facilLties (1.6% to 2.1%) are also proposed. There is a drop in relative importance of flood protection (26.4% to 11.7%) and transport (40.6% to 22%). The increase in water supply and community upgrading indicates an emphasis on services to the urban poor, which have been neglected in the past. Nevertheless, due to the expected increase in overall expenditures in 1980-82 (F11.5 billion) from 1977-79 (P4.5 billion), every sector shows an absolute increase in expendi- tures and a further review of those new projects which do not directly benefit the poor or increase their productivity, is warranted. New projects involving urban transport, conventional sewerage, new towns and housing, and administrative complexes should come under special scrutiny. The CIF review is now expected to be further developed and integrated into the MMC's planning and budgeting process. The project provides for technical assistance to the MMC for this purpose. The Bank would be closely involved in this process in the expectation that the next loan for the MMA would fund a broad range of essential services emerging from a balanced investment program. Agreement was obtained at negotiations that the Government will discuss with the Bank the proposed annual and three year investment program for the MMA prior to its approval. 1.18 Community upgrading (Chart 20840). The government has developed four major programs to address the environmental needs of low income com- munities in the MMA. The Zonal Improvement Program (ZIP) is designed to comprehensively upgrade the legal, environmental, social and economic condi- tions of slum residents, with minimum relocation. Initiated in 1977 it is a 15-year program building up to an output of 15,000 upgraded plots per year (150,000 persons/year) after 1983 to eventually serve 2.2 million people (Annex 1). The second program, the Metro-Manila Infrastructure Utilities and Engineering Program (MMINUTE), conceived by the MNW in 1978, is designed to be complementary to ZIP. It is restricted to infrastructure improvements and maintenance in existing rights of way and does not deal with problems of tenure, physical replanning and social and economic development. As such it provides less benefits than ZIP but can move more rapidly. The Program for Removing Sewage from Streets (PROGRESS) is the third upgrading program, designed by the MWSS as a low cost alternative to new central sewerage sys- tems. It improves the collection and disposal of foul and surface water wastes from streets and is also simple and rapid to implement. The MMINUTE and PROGRESS programs are very similar and will be executed by the same staff and with integrated management. Together they would provide cr-itical improve- ments in drainage, sanitation, water supply and access to about 4.8 million people over 8 years. They are designed to start in the worst areas of the MMA, then move into the "grey" areas. The ZIP starts in a separate range of sites, then proceeds to upgrade the housing blocks bounded by streets which have received upgrading under MMINUTE and PROGRESS. In order to accommodate the growth of low and moderate income groups in the MMA, the NHA initiated in  -9- COMMUNITY UPGRADING PROGRAMS IN MAETRO-MANILA AND EXPECTED IMPACTS ON THE UNSERVICED POPULATION Population (Millions) 4.0 3.5 Decrease in population Iliving in poorly-serviced Progress ,/areas vvith all programs 0 o/ 3.0 Increase in saum population without ZIP and sites and services programs. 2.5 - / /& ~~~~~~MMinute 2.0 - \ ~~~ 7 /' \ / / ~~~~~~~~~~~~~ZIP/ 15 slum populati'on 1.5 with TONDO, ZIP and sites and c_ services ' 1.0 * \Sites and / / / ~~~~~~~~~~~~~~~< ~~~~Services 0.50 Tondo / , " \ 000 00- Connections to Dagupan and Pandacan Sewerage Extension ~~ n I ~I I I I I I I I I I I I I 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 1980 Years VWorld Bank - 20840  - 10 - 1975 a long-term program of low cost new serviced sites. The first major development at Dagat-Dagaton was assisted by the Bank's first and second urban loans and the project will continue to support this program by devel- opment of perimeter sites at the urban fringe. Without these programs the slum population is expected to grow from 1.8 million today to a;- ut 3.8 million by 1995. If all four programs are pursued as planned ( e Chart 20840) the present slum population of 1.8 million plus a further 1.5 million people living in poorly serviced areas together with the increase of the low-income population are expected to be provided with a reasonable minimum level of service by 1995. So far over P75 million has been spent on physical works in ZIP, staff and management structures are largely in place for all programs and rapid expansion in their activities is anticipated. 1.19 The Bank expects to have a continuing involvement in these programs which are focused on the urban poor. This project would finance a three year slice of the ZIP and MMINUTE programs with expectation of the Bank financing a subsequent slice, depending on implementation performance. Metropolitan Administration and Finance 1.20 The loosely defined role of local governments in the Philippines has led to substantial disparities in the delivery of municipal services and to the extensive involvement of national government and ad hoc agencies in local services, particularly in the provision of major infrastructure works. The principal functions of the local governments in Metro Manila include local drainage and solid wastes management; streets and footpaths; secondary educa- tion and local clinics; and markets and slaughterhouses. Water supply and sewerage systems are operated by a government corporation and electricity by a private utility. Privately operated jeepneys, and buses operated by the Metropolitan Transit Authority make up the public passenger transport system. The four cities and 13 municipalities which, together with the MMC, comprise the local government structure in the 635 sq km area of Metro Manila are particularly varied in terms of their area, population and service needs on the one hand, and their economic base, fiscal and technical resources on the other. 1.21 Fiscal Performance. Although the rapid population growth in the MMA has increased the relative importance of its municipalities, the four cities still predominate with about 60% of the population and generating about 70% of local revenues (77% of local property taxes). Fiscal performance (see Chart 20841) varies widely between individual local governments with Manila City operating to a $52.7 million budget compared to $175,000 for Pateros Municipality. Per capita revenues range between $10 to $29 for cities and $3 to $22 for municipalities. A similar range exists for expenditures. Quite good growth in revenues of about 20% per year has been experienced in recent years although this too has varied considerably between individual jurisdictions highlighting the effect of improved collection performance in some local governments. Taxes on real property and on businesses constitute the major revenue sources administered locally and together represent about 65% of total revenues including central government budgetary support which overall accounts for about 15% of local government revenues in the Metropolitan area ranging between 10% to 63% for individual local governments. Local  PHI LIPPINES THIRD URBAN DEVELOPMENT PROJECT COMPARATIVE STATEMENT OF INCOME AND EXPENDITURES CITIES AND MUNICIPALITIES CALENDAR YEAR 1978-1979 ALL FUNDS (In Million Pesos) 500 _ 400 300 200 100 50 40 20 10 0~~~~~~~~~~~~~~~~~0< C, X0 L 0 10 LL0 &s<< fief,>C<> ;eb9 0#