Philippines - Small Coconut Farms Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 20213 IMPLEMENTATION COMPLETION REPORT (CPL-32040; SCL-3204A) ON A LOAN IN THE AMOUNT OF US$ 121.8 MILLION TO THE REPUBLIC OF THE PHILIPPINES FOR A SMALL COCONUT FARMS DEVELOPMENT PROJECT June 6, 2000 Rural Development and Natural Resources Sector Unit East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective as of March 31, 2000) Currency Unit = Peso (P) 1 pesos = US$ 0.0245 US$ 1.00 = 40.85 FISCAL YEAR Government: January 1 - December 31 ABBREVIATIONS AND ACRONYMS AADC Ayala Agricultural Development Corporation ARDB Agricultural Research and Development Branch (PCA) BSPC Begumbayan Seed Production Center CDO Coconut Development Officer CSPC Coconut Seed Production Center (Aroman) DA Department of Agriculture DBM Department of Budget and Management DRC Davao Research Center ERR Economic Rate of Return FOB Field Operations Branch (PCA) FRR Financial Rate of Return GOP Government of the Philippines ICR Implementation Completion Report LGU Local Government Unit ODA Overseas Development Agency (UK) - now DFID PCA Philippine Coconut Authority PTAL Plant Tissue Analysis Labatory SAR Staff Appraisal Report SZOPAD Special Zone of Peace and Development ZRC Zamboanga Research Center Vice President: Jemal-ud-din Kassum, EAPVP Country Manager/Director: Vinay K. Bhargava, EACPF Sector Manager/Director: Geoffrey B. Fox, EASRD Task Team Leader/Task Manager: Syed Husain, EASRD  FOR OMCAL USE ONLY CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 8 6. Sustainability 8 7. Bank and Borrower Performance 10 8. Lessons Learned 11 9. Partner Comments 13 10. Additional Information 19 Annex 1. Key Perfornance Indicators/Log Frame Matrix 20 Annex 2. Project Costs and Financing 22 Annex 3. Economnic Costs and Benefits 25 Annex 4. Bank Inputs 26 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 28 Annex 6. Ratings of Bank and Borrower Performance 29 Annex 7. List of Supporting Documents 30 This docment has a rericte dist ibutio and may be used by recipients only in the pe1form ace of their offici duties. s ontes may not odrwise be disclosed without World Bak titio.   Project ID: P004552 Project Name: COCONUT FARMS DEVT. Team Leader: Syed Husain TL Unit. EASRD ICR Type: Core ICR Report Date: June 6, 2000 1. Project Data Name: COCONUT FARMS DEVT. L/C/TF Number: CPL-32040; SCL-3204A Country/Department: PHILIPPINES Region: East Asia and Pacific Region Sectorlsubsector: AM - Agro-Industry & Marketing; AP - Perennial Crops KEY DATES Original Revised/Actual PCD: 03/09/88 Effective: 09/14/90 11/14/90 Appraisal: 06/14/89 MTR: Approval: 05/24/90 Closing: 06/30/96 12/31/99 Borrower/lImplementing Agency: R.P./PHILIPPINES COCONUT AUTHORITY Other Partners: ODA (UK) - now DFID STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum A. Karaosmanoglu Country Manager: Vinay K. Bhargava Rolando Arrivillaga Sector Manager: Geoffrey B. Fox D.M. Dowsett-Coirolo Team Leader at ICR: Syed Husain David Meadows ICR Primary Author: J.H. Weatherhogg (FAO) 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: Yes  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The project objectives were to launch a long-term program of coconut development and productivity improvement, supported by the necessary infrastructure and strengthened technical and support services; to increase the incomes of small-scale coconut farmers by improving coconut yields and copra quality; and to boost foreign exchange earnings by ensuring an increasing and reliable supply of higher quality copra for processing and the export market. As described in the Staff Appraisal Report (SAR), the coconut sub-sector in the Philippines was of considerable importance. Coconuts covered over 25% of the cultivated area, and coconut-based products were the third largest foreign exchange earner, accounting for 10% of total value of exports and 40% of the agricultural exports. Furthennore, the small-scale coconut farmers were a major poverty group in the country, with a poverty incidence of 75%. Investment in the coconut sub-sector under the project was thus aimed at benefiting a large section of the rural poor while also increasing the productivity of the coconut sub-sector and increasing foreign exchange earnings. The sub-sector suffered from a steadily increasing proportion of coconuts over-age or senile, lack of fertiliser application, and poor processing resulting in low quality copra production. A levy had been made on copra sales over the period 1973 to 1982, but was suspended after controversies arose relating to its operation. Only a part of the levy collected was used for schemes benefiting coconut farners. In 1987, the new Govermment reaffirmed interest in a long-term smallholder coconut development program. The project was prepared and appraised over the period 1988-90. The project's objectives were clear and focussed on a sub-sector of major importance to the economy and one that included around half a million families living in poverty. It was, therefore, fully sensitive to the borrower's needs and development priorities. The basic project design was simple, and the project was not perceived at appraisal as being particularly risky. 3.2 Revised Objective: T'he project's objectives remained unchanged throughout the extended implementation period. 3.3 Original Components: The project was intended as the first phase of a long-term small coconut farms development program with a 20-year target of replanting some 743,000 ha of senile coconuts and rehabilitation of about 418,000 ha of low-yielding palms. The components of the project were: (i) establishment of seed gardens and nurseries to produce high-yielding hybrid coconut seedlings, which would, at full capacity, sustain a replanting program of about 50,000 ha/year; (ii) replanting with selected tall seedlings (9,600 ha) and hybrids (15,400 ha), including provision of inputs for inter-cropping during the first three years of replanting; (iii)rehabilitation of 348,000 ha of middle-aged palms through application of fertilizers for four consecutive years; (iv) nutrient support (fertilizers) for some 50,000 ha of immature palms established over the previous ten years under various schemes sponsored by the Philippine Coconut Authority (PCA); (v) copra quality improvement through equipping of an existing laboratory in Manila for aflatoxin assay and establishment of a second regional copra quality control laboratory in Cebu; support for a pilot scheme to introduce hot-air copra dryers to smallholders in 2 or 3 major mill catchment areas; and provision of technical assistance and training; and (vi) institutional strengthening of PCA through additional staff, vehicles and equipment, improved premises for six regional offices, technical assistance, training, strengthening of the Coconut Extension Training Center, and upgrading of PCA's coconut research program. -2 -  The components were generally well related to the project's objectives. The project was targeted to small coconut farmers owning no more than 10 ha and aimed to ensure equity and to maximise number of beneficiaries by limiting project-supported replanting to one ha (later increased to two ha) and rehabilitation to three ha per farmer. 3.4 Revised Components: With the exception of the copra quality improvement component, for which the pilot program was not implemented, the general design of the components remained as set out at appraisal. 3.5 Quality at Entpy: The quality at entry is rated satisfactory, since the project was in line with Government policies and strategy. The project's commodity focus was in response to the erratic and declining exports of coconut oil from the Philippines in the 1980s, and the need to re-establish confidence among end-users in the future supply of better quality coconut products vis-a-vis supply of substitutes like palm kernel oil from other countries. The project thus appropriately sought to have an immediate production impact through rehabilitation (fertilisation) of mature coconut trees, and to increase coconut production and land use efficiency in the long term through replanting with high-yielding hybrid varieties. However, there were some questionable aspects of quality at entry: (i) the project targets for replanting and rehabilitation were too ambitious within the five-year time frame for implementation, considering the lack of previous experience of PCA in handling a program of this mnagnitude, uncertainties of seed nut supply, and lack of adequate field staff; (ii) the choice given to farmers of cover crops or inter-crops for the replanting component was inappropriate: cover cropping is an essential element of success in cultivation of tree crops. In Malaysia, Indonesia and Thailand, developing oil palm and rubber without a legume cover crop will never be considered. Only in the later part of project implementation was cover cropping made mandatory; (iii) indicators and procedures for monitoring and evaluation of project impact were undefined; and (iv) while rehabilitation of mature palms was the main project component in terms of investments, there was no discussion in the SAR of post-rehabilitation activities for sustainability of the component. It was only in 1998 that the post-rehabilitation policy and techniques were developed. 4. Achievement of Objective and Outputs 4.1 Outcome/achievementofobjective: The project outcome is rated satisfactory as the project was reasonably successful in achieving its objectives. However, there was a delay of about four years in project implementation. Performance was poor in the first five years. By June 1996, the original loan closing date, disbursement was only about 40% of the Bank loan, replanting 36% of the appraisal target (actually lower since many of the replantings were later discarded due to poor quality), and rehabilitation of mature palms 29% of the target. This was due to multiple problems including inadequate field staff, an acute shortage of hybrid seed nuts, insufficient counterpart funds, poor project management, delays in fertiliser procurement and distribution, etc. The project remained a "problem project" from late 1993 to mid-1997. A major turnaround effort after June 1996, using six-monthly action plans, led to achievement of most project outputs by loan closing in December 1999. Substantial progress has now been made in initiating a long-term coconut development program, and small coconut farm productivity and incomes have risen (sections 4.2 and 4.4). If all project farmers continue to apply inorganic and organic fertilizers to their replanted and rehabilitated farms, incremental copra production from the project in year 2004 is estimated at 382,000 tons (valued at US$128 million in 1999 constant terms), compared to 405,000 tons expected at appraisal. If all project farmers stop using inorganic fertilizers, incremental production will be about 90,000 tons per annum (valued at US$30 million). About half of the project benefits accrued to the Special Zone for Peace and Development areas in Mindanao, which have been receiving a high priority by the Govemment and the Bank in recent -3 -  years for development assistance. A major issue at project completion is the lack of consensus in the Government regarding the precise elements of the long-term coconut development program to be followed, which could build on and expand the project's main accomplishments (see firther section 6.1). 4.2 Outputs by components. Seed Gardens and Nurseries. Perforrnance on this component was uneven. At appraisal, it was expected that five seed gardens would be established - one by PCA and four by the private sector. However, only one private seed garden, owned by the Ayala Agricultural Development Corporation (AADC) in Mindanao, was contracted and that also in 1996, after the original loan closing date. The seed garden, using an existing 200 ha plantation of tall palms to produce hybrid seeds, had an average annual production potential of around 2 million seed nuts, sufficient to replant an area of 8,000 ha. The production was a difficult undertaking because of the height of the palms (10 meters), which hampered quality control, resulting in a higher than normal rate of off-types during the first two years of production. In its three years of production (through June 2000), the AADC seed garden would have produced about 4.9 million nuts, enough to plant 20,000 ha of hybrid coconuts. The PCA seed garden developed at Aroman in Mindanao has had a number of problems, particularly relating to security and squatters. As a result, it has been possible to develop only 234 ha of the 303 ha originally planned. Despite these difficulties, the garden is now expected to deliver some 0.9 million seed nuts in 2000 (sufficient to plant 3,750 ha), and, at full development in 2002-2003, should have an annual production of some 1.8 million seed nuts (stifficient to plant 7,500 ha). Both seed gardens have suffered very badly from drought resulting from El Nifio. Seed nut production at AADC fell by over 50% in 1999, while production at Aroman stopped almost entirely. Nursery development has been in conformity with the annual replanting program. However, management of the nurseries and the quality of seedlings produced are still among the weakest points in the field operations of PCA. The condition of the nurseries varies greatly from Region to Region. In some Regions, most of the recommended nursery techniques are not applied. The main problems observed are: absence of planning, poor seedbed management, lack of irrigation facilities, half-filling of the polybags, insufficient seedling selection, and poor overall maintenance. On the other hand, some nurseries have now reached a very good quality level, with a high rate of germination and excellent homogeneity of the seedlings produced. This quality improvement has not been lost on the farmers who are now keen to avail of such planting material, and some of whom are even prepared to buy it. In the post-project period, PCA should continue to focus on nurseries as show-windows of its technical know-how. Replanting. The replanting component has had a mixed implementation experience. In total, some 25,680 ha was replanted, compared with an appraisal target of 25,000 ha. However, due to a severe drought in 1992/93 and another in 1998, and the poor quality of seedlings distributed in early project years, the extent of replanted area surviving at project completion is estimated at around 19,300 ha (77% of the appraisal target), of which hybrids accounted for 16,100 ha and talls 3,200 ha (Annex 1). In the last three years of the project, a concerted effort was made to improve the quality of seedlings, and criteria for the selection of eligible farmers were changed (earlier, only agronomic suitability of the land was considered for replanting). This has resulted in much better survival of replantings, as demonstrated by the second replanting survey conducted in late 1999. -4 -  The progress made with cover-cropping and inter-cropping of replanted areas was unsatisfactory, as only 2,268 ha was cover-cropped (in 1999), and only 5,586 ha inter-cropped (mostly in 1999). The low proportion of cover-cropping and inter-cropping (12% and 29%, respectively, of the area replanted) was due to non-release of funds by PCA in earlier years for a variety of reasons, including cash flow problems. Although under-planting (that is, planting coconuts under the old ones which are felled at a later stage, all at once or staggered) was allowed in the last years of the project on an experimental basis, no under-planting had been reported by the end of 1999. Rehabilitation of Low-Yielding Palms The targets set at appraisal have been largely achieved by the end of the implementation period, as shown in the following table (ha receiving fertiliser applications): 4 applications 1 3 a Dlications 1 2 a Dlications I application | Total I .. ...................... hectares ............................................. ApRraisal target 80.000 88,000 100,000 - 80.000 348 000 Actual achievement 155300 1 130700 28.400 62 400 1 406.800 I/ 1/ If only areas which have received at least 2 applications are considered, the total area is about 344,400 ha. Generally, implementation of the component has been satisfactory. Single fertilisers were procured, and farmers were required to mix them before application in the field. Due to this premixing, and the fact that the mixture included sodium chloride, which may be toxic for most other crops, the diversion of fertilisers to other crops appears to have been prevented. However, two criticisms were made during project implementation on the project policy relating to fertiliser use: emphasis on inorganic fertilisers rather than organic fertilisers, and procurement of single rather than compound fertilisers. Regarding the first criticism, a high dosage of mineral fertilisers (an average of 4.5 kg/palm/year) was clearly required to rehabilitate mature unfertilised coconuts. The four-year application period was necessary to allow build-up of the nutrient content of the soil back to an appropriate level of fertility before entering the post-rehabilitation period with reduced inputs. Regarding the second criticism, compound fertilisers are more expensive than single fertilisers (Peso 350 per bag of 50 kg against Peso 250/bag), and their manufacturing and use presupposes a known given balance among nutrients, which in reality does not exist over large coconut areas. As regards the impact of rehabilitation on copra yields, the two rehabilitation impact studies carried out in 1997 and 1999 confirm the favourable outcome. The reported yields exceed appraisal expectations. Yields on a large representative sample of mature local talls rehabilitated from 1991 onwards, as reported in the 1997 study (which interpreted yield data collected by the PCA's Coconut Development Officers), went up on average from 1,032 kg/ha of copra before rehabilitation to 1,521 kg/ha after one year, 1,756 kg/ha after two years, 1,855 kg/ha after three years, and 2,136 kg/ha after four years. The 1999 study (which was based on a survey of a representative sample of farmers, and relied on the information supplied by the farmers rather than on yield measurements) reported an average yield level of 1,770 kg/ha of copra on rehabilitated farms, compared to 872 kg/ha before rehabilitation. These reported yield increases are significantly higher than that estimated at appraisal (700 kg/ha and 1,467 kg/ha of copra before and after rehabilitation, respectively). One uncertain factor is the effect of El Nifto on the yields obtained. As a result of the drought, nut production was well down in 1998 and 1999 when the second impact assessment was made. That assessment reported a decline in average yields on rehabilitated farms to 1,312 kg/ha and 1,169 kg/ha of copra 2-3 years and 3-4 years after rehabilitation, respectively, which corresponds to 1998 and 1999, respectively. -5 -  An issue for yield sustainability during post-rehabilitation is the farmers' ability and willingness to continue to apply inorganic fertilisers to their rehabilitated coconuts (further details are in para. 6.1(b)). PCA extension advice in earlier years was to apply organic fertilisers to sustain yields. While it is important to maintain a good level of organic matter in the soil, regular inorganic fertiliser applications are essential to compensate the loss of nutrients taken away with the crop, and to sustain the yield. This has been consistently proved in trials conducted by PCA. A post-rehabilitation extension program (not developed at appraisal) was launched in 1998. It included inter alia a leaflet for 350,000 farmers and farrmer training on recommendations relating to fertiliser use and cultural practices in the post-rehabilitation period. Essentially, the post-rehabilitation extension drive was aimed at motivating farmers to use inorganic fertilisers, at application rates lower than that used for rehabilitation, supplemented with organic fertilisers, including coconut husks and other organic material or compost. Intensification of the extension program is needed in the post-project period. It is also important that PCA adopt the recommended post-rehabilitation techniques on its own plantations and research centers, and establish demonstration plots on selected farmers' fields. Nutrient Support to Immature Palms. During implementation, it was found that the area of immnature palns requiring additional fertilisation was less than that estimated at appraisal - largely due to poor survival of some of the earlier plantings. The total area finally treated was some 21,000 ha, compared with a target of 50,000 ha at appraisal. Copra Quality Improvement. At the time of project appraisal, aflatoxin level in copra meal was a big issue in view of the anticipated tightening of the import regulations of the European Community. Over the first two years of the project, the ODA (now DFID)-funded technical assistance was very useful and laboratory equipment for copra quality testing was provided. However, analysis revealed that the hot air dryers were economically unviable. Given the excess milling capacity, the competition among copra buyers was strong, thus undermining the development of a quality-based pricing system for copra. The pilot program for hot air dryers was, therefore, not introduced, and no Bank loan disbursernent for the component (which accounted for 5.5% of total project cost and 3.6% of Bank loan) was made (see further Co-financier's Comment in Section 9). Institutional Strengthening of PCA. The support for institutional strengthening envisaged at appraisal was largely implemented. It did not prove possible for PCA to build up the number of extension staff- the Coconut Development Officers (CDOs) - to over 1,300 expected at appraisal (the actual total was about 1,000), and no staff were seconded from the Department of Agriculture (DA). Infrastructure improvements were made as planned (Annex 1) but with a delay that was extremely disappointing, particularly for the plant tissue analysis laboratory (PTAL), which became operational only in November 1999. With the PTAL, PCA can now have an annual program of leaf sampling to improve its fertiliser recommendations for coconuts (PTAL should also offer its services to public and private sector customers, and thus strive to be self-financing). However, to complement the PTAL analyses, and to calibrate the fertiliser dosage recommended on the basis of leaf analysis results, a network of fertiliser reference trials in the main coconut growing areas is also needed. The project's staff training program was successfully implemented (Annex 1). Technical assistance provided by ODA amounted to about 37 months. As for the research sub-component, two research proposals were submitted by PCA in 1998 and agreed by the Bank. The first research would have lasted three years, and would have directly assisted in the design of diversified coconut-based farming systems under the long-term coconut development program of PCA. The second research would have lasted two years, and would have contributed to Integrated Pest Management on coconut through control of damages by the Oryctes beetle and the red weevil. Due to slow decision-making in PCA, only the second research proposal was partly implemented by project completion. - 6-  4.3 Net Present Value/Economic rate of return: The ERR for the whole project, assuming that all farmers continue to apply fertilisers at the recommended rates after project completion, and using a standard conversion factor (SCF) of 1.0 for labor and other non-tradeables, is re-estimated at 32%, compared to 40% at appraisal. The NPV is Peso 7.2 billion, discounted at 10%, and Peso 3.3 billion, discounted at 15%. With a SCF of 0.9 for non-tradeables (as assumed at appraisal), the ERR improves to 39%. Since the main project investment was in fertilisers, which resulted in a rapid increase in yields and production, a relatively high rate of return is to be expected. A sensitivity analysis carried out shows that, even if all fanners discontinue applying inorganic fertilizers after project completion, the ERR would remain at 32%, although the NPV at 10% and 15% discount rates will decline to Peso 4.3 and 1.9 billion, respectively. The ERR remains unchanged because the reduced cost of labor and fertilizers, and the residual favorable effect of fertilizer application under the project on copra yields in the first few years after the project, neutralize the adverse effect of the eventual decline in yields in later years of project life. 4.4 Financial rate of return: Incremental net returns per ha and per family labor day, estimated at project completion, are quite attractive (Annex 3). In particular, the incremental net return of Peso 8,590/ha from rehabilitation of mature palms is very significant, considering that less than Peso 600/ha is needed to buy inorganic fertilisers and thereby sustain post-rehabilitation yields. For replanting with hybrids, the incremental return of Peso 19,042/ha at full development does not include an income of Peso 60,000/ha from sale of logs immediately after palms are felled for replanting. The average net returns per family labor day, ranging from Peso 834 for replanting with local tails to Peso 1,235 for replanting with hyrbrids, are also very attractive, compared to the prevailing wage rate of about Peso 100 per day. 4.5 Institutional development impact: Project impact on institutional development of PCA has been positive and significant: (i) the establishment of the Aroman seed garden has provided valuable technical experience to PCA in operating a fairly large-scale planting material production facility; (ii) the project helped bring two of the Branches of PCA - the Field Operations Branch and the Agricultural Research and Development Branch - closer, although a lot of team spirit between the two Branches still needs to be fostered; (iii) the concerted efforts made during the last years of the project to improve nursery management have resulted in establishment of some nurseries of high quality, although furither improvement in many Regions is clearly required; (iv) the technical basis for the long-term coconut development program was firmly established under the project through formulation of revised selection criteria for farmers eligible for the replanting program; through preparation of the Techno-Guides on Replanting and Rehabilitation, Advisory Guide for PCA Agriculturists for Post-Rehabilitation, and Post-Rehabilitation Guide for the farmers involved in the rehabilitation program; and through the training of farmers and PCA staff on application of these techno-guides; (v) PCA developed some skills in handling the process of procurement, transport and distribution of large quantities of fertilisers annually, although a couple of Regions were unable to handle the process efficiently; (vi) the two impressive replanting surveys undertaken by PCA staff in 1997 and 1999 to determine the quality of replantings provided a valuable experience to PCA in carrying out high-quality monitoring and evaluation activities to assist management in taking corrective action; and (vii) the establishment of PTAL has provided a sophisticated instrument to PCA to help refine its fertiliser recommendations. Although strengthening of the Small Coconut Farmers' Organizations (SCFOs) was not an explicit objective of the project, the SCFOs acquired considerable experience under the project in organizing and managing replanting and rehabilitation programs. -7 -  5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: Natural disasters have significantly affected the project. In particular, there was a severe drought attributed to El Nifno in 1998, which had a severe adverse impact on coconut production and coconut seed garden output. Civil disturbance has also been a problem in some locations, and has created difficulties for the PCA Aroman seed garden in Mindanao. 5.2 Factors generally subject to government control. Government compliance with covenants was generally satisfactory, but allocation of counterpart funds was frequently inadequate, and Government support was not given to secondment of DA staff to work in the field for PCA. Moreover, the long-term coconut development program and its financing arrangements were not prepared until 1997, and even now, there is no consensus among the central agencies on the precise elements of the long-term program to be pursued. 5.3 Factors generally subject to implementing agency control: There were several significant factors under the control of PCA, which were not addressed effectively and which consequently delayed project implementation and reduced its benefits: (i) for the replanting component, inadequate attention to the technical standards of nursery management and to farmer selection criteria in the early years of the project resulted in a significant net reduction in the replanted area; (ii) fund releases for cover-cropping and inter-cropping of replanted areas were unduly delayed, thus undermining the benefits of the component; (iii) weak monitoring arrangements for fertiliser transport and distribution and lack of decisive and prompt action resulted in a huge backlog of undistributed fertilisers in at least two Regions, and undermined the benefits of the rehabilitation component; and (iv) serious problems in management of the infrastructure component resulted in an enormous delay in its implementation, and consequently prevented the benefits, particularly of PTAL, from being realised during project implementation. 5.4 Costs andfinancing: Total project cost at completion is estimated at US$146.2 million or about 95% of the appraisal estimate of US$154.7 million (excluding hired labor cost financed by farmer beneficiaries). The cost saving in dollar terms was due to the significant depreciation of the Peso 1/. In Peso terms, and excluding hired labor cost, there was an overall cost overrun of about 18% (Peso 4.5 billion at project completion, compared to Peso 3.8 billion at appraisal), which consisted of an overrun of 37% in Government counterpart contributions (Peso 1. I and 0.8 billion at completion and appraisal, respectively), and an overrun of 10% in Bank loan proceeds (Peso 3.3 and 3.0 billion at completion and appraisal, respectively). Expenditure on the rehabilitation component was significantly higher than expected at appraisal (Annex 2) due to larger area covered, and PCA's operating costs were higher due to the extended project implementation period. The total Bank loan disbursed was US$108.2 million, or 89% of the original loan amount of US$121.8 million. US$10.9 million had been canceled earlier, and the remaining US$2.7 million was canceled on May 11, 2000. 1/ From Peso 22 per US$ in July 1989 to Peso 40.85 per US$ in March 2000. 6. Sustainability 6.! Rationale for sustainability rating: Project sustainability is not an issue, since even in the adverse scenario where all project farmers discontinue applying inorganic fertilizers, the returns on investments are not appreciably affected and the NPV and ERR remain very attractive (para. 4.3). However, to maximize farmer incomes by maintaining post-project yields at a high level, continued application of inorganic along with organic fertilizers would be needed: - 8 -  (a) The funding required to provide fertilizers for the replantings undertaken in the last few years of the project is quite small. For the year 2000, the fertilizers already procured in 1999 (and being distributed now), the carry-over funds from 1999, and the Peso 50 million allocation in the approved 2000 budget to sustain the project are adequate to take care of the fertilizer, seed nut and nursery requirements of the replantings under the project. As for year 2001 and later, the Government and PCA appear to be committed to the replanting program. (b) As regards prospects for continued fertilization of rehabilitated areas, the issue was studied in some depth as part of the second rehabilitation impact survey undertaken in 1999. The results of the survey show that (correcting for some obvious data errors), of all the farmers whose farms had been rehabilitated under the project (four applications of fertilizers), 45% were using organic fertilizers after rehabilitation, 10% were using inorganic fertilizers, 8% were using both organic and inorganic fertilizers, and 37% were not using any fertilizers at all. The proportion of farmers using either inorganic or both organic and inorganic fertilizers is fairly high in the provinces of Agusan del Sur (54%), Agusan del Norte (50%), and Antique (49%). These survey results contradict the general impression so far that farmers in the Philippines do not use inorganic fertilizers for coconuts, although in six of the 24 provinces surveyed, less than 10% of farmers use inorganic or both organic and inorganic fertilizers, with four provinces showing close to zero usage. It is possible that the demonstration of yield increases from rehabilitation under the project has induced some farmers to use inorganic fertilizers and many farmners to use organic fertilizers. There could be many reasons for the relatively low usage of inorganic fertilizers by farmers, including inconsistent extension messages from PCA, and farmers' expectations of more fertilizer distribution on a grant basis (the rehabilitation survey results show that, of the farmers not using fertilizers on rehabilitated farms, 45% did so because they were waiting for a free supply of fertilizers from PCA). Addressing the above factors could result in a lot more farmers using inorganic or both inorganic and organic fertilizers in the future. Apart from the direct use of fertilizers for coconuts discussed above, one should also consider the indirect effects on coconut yields of the usage of fertilizers on inter-crops. The second rehabilitation impact survey results show that 91% of farmers use inter-cropping on rehabilitated farms, and all of them use fertilizers (58% inorganic, 36% organic, and 6% both). This means that coconut on 58% of the rehabilitated farms is indirectly benefiting from the use of inorganic or both inorganic and organic fertilizers for inter-crops. When one adds the direct use of fertilizers for coconuts to the indirect benefit from fertilized inter-crops, the prospects for relatively high post-project rehabilitation benefits appear reasonably good. However, PCA should intensify its post-rehabilitation extension and demonstration programs (Section 4.2, page 6). The project was intended to be the first phase of a long-term (20-year) coconut development program. A program had been prepared in 1997 and the Government had committed to the Bank to find adequate funding for it 2/. The precise committed amount has not yet been provided. However, this issue affects expansion of project activities rather than their sustainability. If a follow-on Tree Crops Project, which is currently being conceptualized and discussed among Government agencies, materializes, a long-term coconut development programn is likely to be its major component. Moreover, a compromise proposal to unlock the considerable accumulated levy funds is now being worked out by the Government. If this happens, funding of a long-term coconut development program, which is likely to include expansion of some of the important activities initiated or completed under the project, will cease to be an issue. 2/ Letter from the then Secretary, Department of Agriculture, to the Bank, dated May 12, 1997: ".. .1 am pleased to inform you that the Philippine Government through the Department of Agriculture in coordination with the Departmnent of Budget and Management commits to raise P450 M a year or such amount as may be necessary to fund the critical minimum of the Long Term Coconut Development Plan beginning Year 2000 - 2013." - 9-  6.2 Transition arrangement to regular operations: It is essential for PCA to prepare a Project Operation Plan (POP), which should include the operation of the Aroman seed garden, nurseries and the PTAL, and intensification of the post-rehabilitation program. It is also important that indicators of project sustainability be agreed with the DA and other central agencies, and future M&E work focus on these indicators. Some suggested indicators are: (i) annual production of hybrid seed nuts in PCA-managed and private seed gardens, and the annual replanting with hybrids; (ii) quality of replantings in terms of survival rate of seedlings planted, growth as measured by collar girth, and copra yield/ha in areas coming into production (this monitoring can be done by conducting replanting surveys similar to those conducted in 1997 and 1999 by PCA staff); and (iii) copra yield/ha, and use of organic and inorganic fertilisers on coconuts and inter-crops in rehabilitated areas (this analysis should be done through sample surveys conducted by independent consultants). 7. Bank and Borrower Performance Bank 7.1 Lending: Through identification, preparation and appraisal, Bank performance was generally satisfactory. However, project targets for replanting and rehabilitation could have been more realistic in the light of risks which had already been perceived by appraisal. Moreover, the Bank should have assisted PCA in locating private sector seed gardens early in the project, given the uncertainties relating to the Aroman seed garden. 7.2 Supervision: Project supervision by the Bank was regular, appropriately staffed and generally constructive and supportive of project implementation. The Bank agreed to four extensions of the loan closing date, which is a rare practice in the Bank. The Bank also assisted PCA in organising the workshop on Coconut-Based Farming Systems in June 1997, when the issue of inter-cropping was discussed in detail. Several changes in project policies followed the workshop, including increase in allowable replanting per farmer from one to two ha, making of cover-cropping mandatory for replanting, increase in maximum entitlement per farmer for inter-cropping and cover-cropping assistance, increase in the budget for nurseries, etc. The Bank also agreed in February 1999 to the Government's request to increase the disbursement percentage for Incremental Operating Cost from 25% to 90%, in line with the Bank's new policy to assist the Philippines in overcoming the counterpart funding problem resulting from the Asian financial crisis. The Bank's Quality Assurance Group (QAG) included this project in the first Rapid Supervision Assessment (FY97), and gave highly satisfactory rating to overall quality of supervision, focus on development impact, and adequacy of supervision inputs and processes, and satisfactory rating to supervision of fiduciary aspects and realism of project performance ratings. 7.3 Overall Bank performance: The overall Bank performance was satisfactory. Project objectives were relevant to the country's needs and Government and Bank development priorities and strategy; project preparation and appraisal were sensible and mostly pragmatic; and project supervision was sensitive, supportive and effective. - 10-  Borrower 7.4 Preparation: Preparation was mostly satisfactory. The ambitious size and scope of the project were reduced at appraisal, and should have been reduced further. 7.5 Government implementation performance: This is rated reasonably satisfactory. The main problems were inadequate counterpart funds and slow releases of cash; extreme delay in producing a long-term coconut development program and its financing plan (received by the Bank on May 12, 1997 instead of June 30, 1993 stipulated in the Loan Agreement); delay in resolving land reform problems relating to the Aroman seed garden; and the inability of the DA to release field staff on secondment to PCA, and the subsequent delay in allowing PCA to recruit the necessary staff (the approval was finally given in mid-1995). 7.6 Implementing Agency: The performance was mixed but satisfactory overall. The significant areas where improved PCA performance was possible are listed in para. 5.3 above. Moreover, PCA's accounting system remained weak, resulting in suspensions and disallowances of some project expenditures by the Commission on Audit. Progress on settling these suspensions and disallowances remained unsatisfactory until loan closing because of lack of concerted initiatives by PCA. 7.7 Overall Borrower performance: The overall performance was satisfactory. The main problem was the extreme delay in preparing a long-term coconut development program. This program still needs to be fimned up, agreed, and adequately funded in the future. 8. Lessons Learned * A clear strategy and a development program for the coconut sub-sector are needed. Although a long-term coconut development program had been prepared by an Inter-Agency Conmnittee of the Government in 1997, there is a lack of consensus on the precise elements of the strategy and the long-term program. This appears to be largely due to the controversy about a commodity focus as opposed to a "holistic" approach. The case for a commodity focus arises due to the unique status of coconuts in the Philippines (like that of rubber and oil pahn in Malaysia and Indonesia), the issue being whether the Philippines should attempt to maintain its predominant position in world coconut exports (which have earned US$0.8- 1.0 billion per annum for the country in recent years), particularly in view of the rapid expansion of exports of substitutes (principally, palm kernel oil) by some other countries in east Asia, and the threat that the end-users will switch to these substitutes due to lack of confidence in coconut oil availability, thus reducing the Philippines' share of world lauric oils market. The issue is linked to low productivity and unstable production which remain the main problem in the coconut industry. If the Government objective is to retain the Philippines' predominance in coconut oil exports, a commodity focus to any project or program for the sub-sector is unavoidable. Another issue to consider is the technical (agronomic) constraint on viable inter-cropping in coconut areas due to the shading problem: the closed canopy of mature coconuts does not provide enough light to ensure reasonable yields for most inter-crops. These two issues - the competition faced by coconut oil from substitutes in export markets, and the agronomic constraint of shading - need to be taken into account seriously. Fortunately, because of the size of the sector (about 3 million ha), it is possible to have both elements in a long-term coconut development program: a commodity focus in areas which are suitable for high-yielding coconut and where farmers are interested in keeping coconut as the principal crop, - 11 -  and a "holistic" approach in areas where farmers prefer to keep coconut as a secondary crop or to diversify out of it to other profitable crops or uses. Replanting with potentially high-yielding hybrid varieties (along with cover-cropping and inter-cropping in the initial years), as part of the long-term program, would make it possible to obtain the same or higher production of copra on a much smaller area, thus facilitating the release of significant areas now under low-yielding coconut to more profitable crops or uses, and thus promote land use efficiency. To make this strategy work, the Coconut Preservation Act (Republic Act 8048 of 1995) needs to be reviewed. Under the Act, the coconut farmers are not allowed to diversify out of coconut to other crops, even if they are more profitable. This is inherently contradictory to the "holistic" approach, which, by definition, should aim to maximize farmers' income. The coconut farmers are the only group of farmers in the country who do not have the freedom of choice to change their cropping pattern. This unfair and discriminatory treatment should end, and a clear strategy and a development program based on full farmer freedom should be formulated and implemented. Forging of a consensus on the strategy and a long-term development program is the most difficult immediate challenge facing the Government for the effective development of the coconut sub-sector. * In the perennial crops sub-sector, a single project can not address all major problems. Because of the relatively long gestation period between planting and harvesting, and problems with the availability of long-term fnance, tree crops development needs to be handled as a continuous program, rather than through a single project. - Private sector role needs to be actively exploited. Project experience showed that when rapid production of seed or other planting material is required, it is better to rely on contract services with the private sector rather than attempting to establish a separate public sector facility. * Innovative financing mechanisms are usually needed in the perennial crops sub-sector. Because of the long gestation period, both the shortage of long-termn finance and farmers' unwillingness to borrow are common problems in planting and replanting of perennial crops. Such operations can be financed on a grant basis from a cess levied on production or exports. However, due to the scandal surrounding the coconut levy in the early 1980s, this option appears politically unfeasible in the Philippines at this stage. As an alternative, cost-sharing arrangements between the public sector and the small coconut farmers would need to be evolved to finance a long-term replanting program. 3 Commercialisation of coconut replanting is feasible. Project experience shows that when high-quality coconut seedlings are available at reasonable prices, farmers are willing to buy the seedlings. Because of the relatively high cost of planting material production at present, there is a need for innovative mechanisms to reduce the cost without sacrificing the quality, and thus help develop a market for hybrid seedlings. * Hybrids outperform tall coconuts. Project experience demonstrated that hybrids perform better than tall coconut palms: they start producing earlier and produce more. Moreover, talls were found to be no more tolerant than the hybrids to poor ecological and agricultural conditions. Even for resistance to typhoons, some of the PCA hybrids have very thick trunks and may perform as well as the talls. For a crop which will occupy the land for over 50 years, it is worth producing and using the best planting material. * Project readiness at entry is critical to timely implementation. The deficient quality of the project at entry into the portfolio due to uncertainties of seednut supply, lack of adequate field staff, undefined procedures for fertilizer transport and distribution, and unclear M&E arrangements, seriously delayed project implementation and undermined its benefits. - 12 -  9. Partner Comments (a) Borrower/implementing agency: COMMENTS FROM PCA Section 4.1. - On the issue of a long termn development program for the coconut industry, the PCA is determined to implement the program prepared in 1997 but on a limited scope because of the uncertainty of sustainable funding for the program. The current activities of the PCA is a combination of the banner program "Maunlad Na Niyugan Tugon Sa Kahirapan" (Maunlad Program for brevity) which promotes the adoption by the coconut farmers of an intensive integrated coconut based farming system and the sustainability of the SCFDP which includes both replanting and fertilization programs. With respect to the issue of the coconut farmers' ability to continue with the application of inorganic fertilizers, many of the coconut farmers are willing to continue with the fertilization program. However, they also express preference that the government continue to supply the fertilizers for free. With the expected improvement in the earning capacity of the coconut farmers through the successful implementation of the Maunlad Program, which seeks to ensure additional income for the farmers from the intercropping and other agricultural and aquaculture activities in the coconut farms, the farmers will have the capability to purchase the required inorganic and organic fertilizers for the coconut palms. And to further increase farmers' awareness and receptiveness to the fertilization program, the PCA will intensify post-rehabilitation activities as envisioned in the SCFDP. The SCFDP has greatly helped the govermment's effort to sustain coconut production and alleviate the living conditions of the coconut farmers. The importance and need for adequate funding whether from international or foreign lending institution like the World Bank or internally generated funds (other than government appropriation), is critical to the development of continued viability of the coconut industry. It is for this reason that the PCA is looking at the implementation of the Small Tree Crop Diversification and Development Project as a sustainable effort to pursue the gains and investments made under the SCFDP and the tree crop sector as a whole. Section 4.2, page 4. - The PCA is seriously considering the privatization of the seedgarden at Aroman, Carmen, North Cotabato, if funding for the continued operation of the seedgarden becomes unavailable or uncertain. In the meantime, the PCA has secured the assurance of the Secretary of Agriculture that the operation of the Aroman Seedgarden will continue to receive support from the Department of Agriculture ("DA"). Further, to sustain the replanting program, the PCA is also looking at establishing mini-seedgarden of about 50 hectares in each region, and later in strategic provinces within the region, to provide much needed seedlings. In addition, the PCA has developed a synthetic variety ("synvar") of coconut which would allow the farmers to directly plant the seednuts from the (synvar) coconut palms planted in the farms without the need of setting up seedgarden. Section 4.2, Page 4. - We agree that the condition of the nurseries varies from Region to Region and that management and maintenance of the nurseries have not been satisfactory. However, as noted in the ICR, the PCA has been upgrading its capability in managing and improving the condition of the nurseries. The participation of the Agricultural Research and Development Branch (ARDB) has been strengthened and the flow of funding for the nurseries will be facilitated to ensure the improvement in nursery maintenance. - 13 -  Section 4.2, Page 5. - On inorganic (mineral) fertilizer vs. organic fertilizer, in SCFDP farms (representative of selected Regions) which achieved only marginal to slight increase in yields, the ARDB in 1998 analyzed leaf samnples from said farms and found these deficient in either one or more micronutrients (boron, zinc, manganese, copper) which indicates (i) the single fertilizers used did not optimize coconut yields in at least 100,000 has. out of 406,800 has. fertilized due to micronutrient deficiency; (ii) the combination of inorganic mineral fertilizers and organic fertilizers could insure sufficiency of both macronutrients and micronutrients, considering that organic fertilizers, particularly chicken manure based organic fertilizers, contain high concentration of micronutrients B, Zn, Cu, Mn and Fe. The application of organic fertilizers is important not only as a source of micronutrients but also in farming sustainability because they induce high productivity and restore or conserve the physical, fertility and biological environment of coconut soils. On application of single fertilizer vs. compound fertilizer, using the "cheaper" single fertilizer as against the "'more expensive" compound fertilizer as the criterion in the selection of the proper fertilizer to apply, without considering the preference of farmers to have "one fertilizer grade supplying all the nutrients" required by coconut palms, does not contribute to sustainable coconut farming. In fact, the price of single fertilizer is more expensive than compound fertilizer. Based on current local prices of single fertilizer (FPA Report, February 2000), not on the SCFDP procurement price that is usually 10% lower because of international competitive bidding, the cost per tree of 4.5 kg. fertilizer (1.5 kg. 21-0-0 + 2 kg. 0-0-60 + 1 kg. 0-20-0) is P26.10, while compound fertilizer (using the common 14-14-14 price of P395/50 kg. bag) at different rates of application (i.e., 2 kg./tree = P15.8, 2.5 kg./tree = P19.75, 3.0 kg./tree = P23.70). Further, while the single fertilizer has an application rate of 4.5 kg/tree/year, a compound fertilizer with components of 14-5-20 + 0.2% borax, which also contains at least 15% Cl and 5% S, has a recommended application rate of only 2 kg./tree/year, has clearly indicated by recent research findings of the PCA Davao Research Center (please see attached information). On a per hectare (100 trees/ha.), the total cost of single fertilizer (P26.10/tree) is higher at P2,610 as compared to compound fertilizer (P1 5.80/tree per 2 kg. fertilizer or P23.70 per 3 kg. fertilizer) of only 1,580 (2 kg. fertilizer) or P2,370 (3 kg. fertilizer). The advantage of compound fertilizer as a cheaper alternative to single fertilizer is evident from recent research finding that a balance nutrient (physiologically based nutrient uptake of coconut) compound fertilizer containing 14-5-20 + 0.20% borax requires a lower application rate than single fertilizer. A 50 kg. bag of three (3 ) single fertilizers combined can fertilize only 11 coconut trees, while a 50 kg. bag of compound fertilizer can fertilize 16 to 25 trees. Section 4.2, Page 6. The PCA is currently looking into other technology on copra drying. Section 4.2, Page 6. The SCFDP funded two (2) officers of PCA in finishing their PhDs: Ms. Nemesia San Juan Bachiller in the field of Plant Pathology, and Mr. Rolendio N. Palomar in the field of Wood Science. Section 4.2, Page 6. - Studies on leaf analysis with fertilizer trials conducted by PCA during the FAO/UNDP support period (1972-78) reviewed by the IRHO Director for Research, Mr. M. Ollagnier, show the reliability of PCA's use of leaf analysis to diagnose nutrient deficiencies in coconut farms in this country and improvement in yield (30% to 300%) from the formulate site-specific fertilizer combinations. Thus, even without a network of on-farm fertilizer trials, the knowledge and information generated by PCA before the implementation of the SCFDP allow 80%-85% reliability of PCA-ARDB recommendation. It is true that fertilizer recommendations based on field trials is the best method, but this is time consuming and expensive. The PCA is using an acceptable and quicker tool - leaf analysis (not "trial and error method"). - 14 -  Moreover, the result of reference field trials is very location specific, in a Philippine environment characterized by diversity of soils, climatic conditions and cropping systems. Section 5.2. - The apparent absence of a definite long term program to sustain the SCFDP was largely due to the uncertainty of funds to finance the major components of the project. Nevertheless, the present administration is exerting great effort to secure sufficient funding to sustain the investment under the SCFDP, i.e., operation of the seedgarden; replanting and fertilization. The PCA has received the unqualified support of the Secretary of Agriculture in its effort to implement developmental projects and programs for the coconut industry, such as the Maunlad Program and sustainability of the critical aspects of the replanting and fertilization components of the SCFDP. Section 5.3. - Please see comments on Section 4.2, page 4. Section 7.6.- The majority of the suspensions and disallowances refer to transactions made and entered into during the first seven years (1991 to 1998) of implementation of the SCFDP. Some of the transactions or contracts involved are questionable while a few, but involving huge amounts, are the subject of court proceedings for which the present administration is prevented from making any disposition without a definite ruling of the courts exercising jurisdiction. Section 8, Lessons Learned, Par. 1. - We totally agree that the coconut industry deserves a special focus because of its strategic importance to the Philippine economy. The PCA is committed to maintain the Philippine's predominant position in world coconut exports. With the Philippines' accession to the WTO and a world economy marked by enhanced competition, it can ill afford to allow the collapse of the coconut industry where it has a clear advantage. The PCA is committed to encourage private business participation in the development of high value coconut products and by-products to further secure and enhance its position in the world market for coconut products. Section 8, Lessons Learned, Par. 1. We do not agree that the RA 8048 should be reviewed to give farmers the freedom to diversify into other profitable crops. What are needed are (i) a more geographically specific program for coconut production and (ii) intensive integrated coconut based farming system to increase the income of coconut farmers. On the first requirement, the PCA and Department of Agriculture has already identified specific agricultural zone where coconut productivity can be further increased and sustained. Current efforts of the PCA is directed towards ensuring that production is increased and improved varieties of coconut are available in these specific areas. On the second requirement, the PCA has launched the Maunlad Program which encourage the diversification of crops within the coconut farm with coconut as the main crop and provides additional skills to the coconut farmers to improve their knowledge and capability in producing and marketing coconut by-products and other agricultural crops and products. Section 8, Lessons Learned, Par. 4. - We have been receiving positive feedback from the private sector to share in the burden of financing a long term development project for the coconut industry. The possible areas of convergence of public and private investments are the establishment and maintenance of seedgardens and nurseries and development of post-harvest facilities and technology. Yields Projections. - Based on PCA Zamboanga Research Center reports, from 12 years onwards, the difference in the yield between tall varieties and hybrids is small. It is, therefore, possible that the yield of local tall varieties has been underestimated. -15 -  Attachment-I EFFECTS ON COCONUT YIELD (30-YEAR OLD LAGUNA TALL VARIETY) OF THE APPLICATION OF MINERAL FERTILIZER (14-5-20 PLUS 0.2% BORAX), 1993-98 PCA-DAVAO RESEARCH CENTER,BAGO OSHIRO, DAVAO CITY Table 1. Annual Nut production (nuttree/year) as affected by Compound 14-5-20 + 0.2% borax fertilizer KG FERTILIZER YEAR (PER TREE/YEAR) 1993 1994 1995 1996 1997 19981 1 55.40 115.00 116.00 116.60 100.30 87.20 2 57.50 117.60 121.20 117.30 107.90 92.70 3 59.80 122.00 116.20 116.20 104.00 89.77 AVERAGE 57.57 118.20 117.80 116.70 104.07 89.77 Est. nuts/haI20 tre s 6912 14.184 14136 14004 12.480 10.764 Table 2. Copra Weight (ginut) KG FERTILIZER YEAR (PER TREE/YEAR) 1993 1994 1995 1996 1997 19981 1 204 222 219 228 235 199 2 213 227 218 226 234 190 4 204 227 227 239 235 206 AVERAGE 207 225 221 231 235 198 Table 3. Annual Copra Yield (per tree/year) as affected by Compound 14-5-20 + 0.2% borax fertilizer KG FERTILIZER _ YEAR __ | (PER TREE/YEAR) 1993 1994 1995 1996 1997 19981 1 12.50 25.50 25.10 24.00 23.50 17.50 2 12.20 26.90 26.30 26.50 25.60 17.60 4 12.30 27.70 26.50 27.80 24.40 18.50 AVERAGE 12.33 26.70 25.97 26.10 24.50 17.87 Est. t copra/ha 0120 trees 1.47 3.20 3.10 3.13 2.93 2.13 affected by El Niflo Source: ISFM CBFS, PCA-DRC -16-  Attachment 9 Chemical Analysis and Average Nutrient Contents of Chicken Manure from Some Sources in Philippines (1999) URTADO FARM' ILUMINADA DOMINGO ALABEL TANAY NUTRIENT (Bago-Gallera, FARM 2 FARM' FARM2 FARM AVERAGE RANGE DC) (Bago-Gallera, (Bago Saka,DC) (Alabel, (Tanay, Rizal) DC) Sarangani) MArRON ITERIFNT3 Total Nitrogen (%) 2.93 3.06 0.89 1.15 2.47 2.10 0.89 -3.06 Total Phosphorus (%), P205 5.49 7.48 2.25 1.39 2.64 3.35 1.39 -7.48 lv Total Potassium (%), K20 2.87 6.79 1,57 3.05 1.20 3.10 1.20 - 6.79 Total Calcium (%), CaO 7.54 6.64 0.80 9.07 2.67 5.34 0.80 - 9.07 Total magnesium (%), MgO 2.63 2.53 1.30 2.48 0.80 1.95 0.80 - 2.63 Sodium (%), Na 1.17 1.21 0.50 1.76 0.21 0.97 0.21 -1.76 Chlorine (%), Cl 0.76 1.37 0.39 0.47 0.20 0.64 0.20 -1.37 Sulfur (%), S 0.86 2.72 (T) (T) (T) 0.90 (T) - 2.72 uMaomuIaRIn3 Boron (ppm), B 4 46.00 52.00 14.00 15.00 100.00 45 14.00 - 100.00 Zinc (ppm), Zn 1,489.00 651.00 345.00 210.00 253.00 589 210.00 -1,489.00 Copper (ppm), Cu 222.00 86.00 143.00 42.00 88.00 116 42.00 - 222.00 Manganese (ppm), Mn 5,581.00 481.00 1,718.00 571.00 207.00 1,711 207.00 - 5,581.00 Iron (ppm), Fe 16,731.00 1,157.00 63,417.00 15,753.00 41,047.00 27,621 1,157.00 - 63,417.00 Moisture Content (%) 15.10 13.10 18.90 7.80 14.20 _ 7.80 -18.90 from Broilers 2from Layers 3 analyzed by dept. of Agriculture laboratories (BSWM and PCA) (T) Trace or almost nil Source (Magat, 2000) - 17 -  Attachmnt-3 Estimated Fertilizer Cost: Single Fetilizers and Compound Fertilizers [ { Price LP) ' Average Rate Cost/YearjP) Fertilizer Material Per 50 kg Per kg Per Tree/year Per tree Per Ha baa (kg) 2 Sinale Fertilizer3 21-0-0 (Amosul) 220 4.4 1.5 6.60 0-0-60 (KCI) 350 7.0 2.0 14.00 0-20-0 (Solowhos) 275 5.5 1 1. 5.5 4.5 26.1 2610 O ComDound Fertilizer 14-14-14 395 7.9 2.0 15.8 1580 2.5 19.75 1975 3.0 23.7 2370 1 FPA Fertilizer Price Monitoring, February 2000 2 @ 100 trees/ha 3 Note: 50 kg bag of combined 3 single fertilizers @ 4.5 kg/tree I 11 trees 50 kq baq of combined fertilizer: @ 2 kg/tree 25 trees @ 3 kg/tree 16 trees (b) Cofinanciers: (Comments from Natural Resources International, Ltd, DFID) The equipment installed in the existing aflatoxin laboratory in Quezon City has been very heavily used. However, the quality control laboratory, which was located in Davao rather than Cebu, has not been used to its full potential since the ending of the ODA-funded project. It was decided to locate the regional copra quality control laboratory in Davao, because surveys conducted by the project revealed that aflatoxin levels were highest in this region. Research fimnly established that practically all aflatoxin contamination occurred during the initial two week period, following the splitting of the coconut. The high levels of aflatoxin in Davao were associated with production of copra by sun-drying, whereas traditional smoke drying imparted a resistance. Local oil mills subsequently changed policy, and promoted smoke drying rather than sun-drying. A colour brochure summarising the research findings and entitled 'Save the European Market: down with aflatoxin to 20 ppb in copra, copra cake and copra meal' was published. This brochure, together with a colour flyer showing the yellow-green mould that produces aflatoxin, was used to extend the Project's findings in all the major copra-producing regions. A revised regulation to implement new copra classification standards (Administrative Order No. 01, series of 1991) was based on the research findings and encouraged early drying and introduced a mould classification with associated premiums for low mould and discounts for high mould levels. This new classification did not prove very effective early in - 18-  the marketing chain, where it was needed most, due to adherence of primary traders to traditional trading practices, and a shortage of supply which tended to reduce the effect of a quality-based pricing system. A study tour delegation, headed by the Chairman of the PCA, visited the major European importers of copra by-products and informed them of the actions being taken to meet the recently introduced aflatoxin limit (20 pg/ kg). The irnporters were convinced that copra by-product produced in the Philippines could meet the new regulation, and that the marginal increase in PAH levels due to increased use of smoke driers could be removed at negligible cost during processing. The threatened loss of the valuable ($75 million in 1987) European market for copra by-product was thus averted. (c) Other partners (NGOs/private sector): N/A 10. Additional Information N/A - 19 -  Annex 1. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: Launch a long-term program of coconut N.A. The project has initiated and laid the basis development for a long-term program. Increase small coconut farm incomes: Without project With project Without project With project P per ha P per ha (1988 Constant Terms) (1999 Constant Terms) (a) Fertising mature local talls 4,370 6,857 6,766 15,355 (b) Nutrient support for hybrids 2,146 12,044 6,164 17,436 (c) Replanting with hybrids 2,237 19,315 3,184 22,226 (d) Replantng with local talls 4,320 10,469 2,945 15,016 Increase copra producton: Incremental tons in 2004 Incremental tons in 2004 405,000 382,000 - 20 -  Output Indicators: Indct~Matu1~PIatP /J~ ~GuaULatt~tin Seedgardens Number 52 Area (ha) 250 each CSPC 303 AADC 200 Seed production 4th Year 409,000 9,353,795 (1) 5th to 6th year 1,336,000 Replanting Tall area (ha) 9600 3200 Hybrid area (ha) 15400 16,100 RehabilBtaton Mature palmis area (ha) 348000 406,800 Immature palms area (ha) 50000 21,047 (2) Insftitutonal Number of staff recruited Professional 78 499 (3) Support 683 387 Number of vehicles Cars 72 139 Light trucks 8 Tractors 7 Bus I Motorcycles 1700 661 Motorized banca 5 Technical assistance man/months ODA financed for CQ1 97 36.5 Intemationlly recruited 12 mosi/p.a. 2 Staff Training (No.) CDOs 1800 787 Overseas training Study tours to ASEAN countries 50 3 Short-term couses 5 35 Local Training MSc courses 1 0 8 Ph.D courses 5 2 Short-term courses 50 1447 Infrastructure Number of buildings renovated 1 2 Number of new buildings 4 4 Structures in CSPC 10 (1) Aside from CSPC and AADC, production forcecast includes PCA DRC and ZRC, BSPC, WA and Tagnanan Talls assources of scednuts. (2) The 21,047 ha was the eligible area found for the Nutrient Support Comiponent. There was an over-estimation at appraisal of the area needing NS. (3) Includes 455 contractual CDOs that were supposed to be seconided from the Department of Agriculture. The secondment did not miaterialize because of devolution under the Local Government Code and transfer of the agriculturists from the DA to the Local Govemmient Units. Note: The column 'Projected in last PSR' refers to projections in SAR. End of project - 21 -  Annex 2. Project Costs and Financing Proect Cost by Com onent (in US$ million uivalent) Di i g rND~~~~~~S ~ Replanting 17.50 20.87 90 Rehabilitation 58.40 100.19 125 Nutrient Support 15.50 6.14 30 Copra Improvement 6.30 1.30 21 Research 4.70 4.42 74 Extension and Training 5.30 4.04 58 Institutional Strengthening 8.10 9.21 89 Total Baseline Cost 115.80 146.17 Physical Contingencies 10.00 0.00 Price Contingencies 28.90 0.00 Total Project Costs 154.70 146.17 Interest during construction Total Financing Required 154.70 146.17 Note: (i) Appraisal total cost excludes hired labor cost of US$21.9 million equivalent, to be financed by farmer beneficiaries. (ii) Actual/latest total cost excludes hired labor cost, financed by farner beneficiaries. (iii) In the column 'Percentage at Appraisal', appraisal costs are inclusive of contingencies. - 22 -  Prolect Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) 1. Works 2.70 0.80 0.70 0.00 4.20 (2.50) (0.70) (0.60) (0.00) (3.80) 2. Goods 105.10 0.80 9.40 0.50 115.80 (94.70) (0.50) (8.00) (0.00) (103.20) 3. Services 0.00 0.00 0.90 0.80 1.70 (0.00) (0.00) (0.90) (0.00) (0.90) 4. Miscellaneous 0.00 0.00 27.50 0.00 27.50 (0.00) (0.00) (8.40) (0.00) (8.40) 5. Miscellaneous 0.00 0.00 5.50 0.00 5.50 (0.00) (0.00) (5.50) (0.00) (5.50) 6. Miscellaneous 0.00 0.00 0.00 21.90 21.90 (0.00) (0.00) (0.00) (0.00) (0.00) Total 107.80 1.60 44.00 23.20 176.60 _______________________ (97.20) (1.20) (23.40) (0.00) (121.80) Note: The total cost of US$176.60 million includes hired labor cost of US$21.9 million equivalent, to be financed by farmer beneficiaries. Project Costs by Procurement Arrangements (ActualULatest Estimate) (US$ million equivalent) 1. Works 0.00 1.36 1.49 0.00 2.85 (0.00) (1.20) (1.34) (0.00) (2.54) 2. Goods 81.50 4.00 23.46 0.20 109.16 (81.50) (1.20) (5.00) (0.00) (87.70) 3. Services 0.00 0.00 1.21 1.00 2.21 (0.00) (0.00) (1.21) (0.00) (1.21) 4. Miscellaneous 0.00 0.00 29.25 0.00 29.25 (0.00) (0.00) (14.04) (0.00) (14.04) 5. Miscellaneous 0.00 0.00 2.70 0.00 2.70 (0.00) (0.00) (2.70) (0.00) (2.70) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 81.50 5.36 58.11 1.20 146.17 (81.50) (2.40) (24.29) (0.00) (108.19) "Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. v Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local govermment units. -23 -  Project Financin b Com ponent (in US$ million e uivalent) Civil Works 3 ;80 0.40 _ __ 2.54 0.31 66.8 77.5 0.0 Equip. and Spare Parts 3.50 0.10 2.50 0.37 71.4 370.0 0.0 Vehicles and Spare Parts 5.10 0.10 2.94 0.02 57.6 20.0 0.0 Copra Improvement 4.90 2.00 1.30 0.00 0.10 1.20 0.0 5.0 92.3 Research 0.30 0.00 0.00 0.0 0.0 0.0 Extension and Training 5.50 2.70 0.00 49.1 0.0 0.0 Technical Assistance 0.40 1.21 0.00 302.5 0.0 0.0 Farm Inputs 89.90 10.00 82.26 20.87 91.5 208.7 0.0 Increm. Operating Costs 8.40 19.00 14.04 15.11 167.1 79.5 0.0 Total 121.80 31.60 1.30 108.19 36.78 1.20 88.8 116.4 92.3 Note: (i) Government financing at apparaisal of US$31.60 million excludes hired labor and local materials cost of US$21.9 rmillion, which was expected to be financed by farmer beneficiaries. In addition, inmputed incremental family labor cost of USS33 million equivalent was estimated at appraisal (ii) Government financing at project completion of US$36.78 mnillion excludes hired labor cost, financed by farmer beneficiaTies. (iii) The cofinancier's contnbution of US$1.20 million equivalent atproject completion is by DFID (formerly ODA)/ Natural Resources Internaional Ltd, (E820,900, of which