Philippines - Manila Urban Development Project

Document of The World Bank FOR OFFICIAL USE ONLY FILE COPY Report No. 1032a-PH PHILIPPINES STAFF PROJECT REPORT MANILA URBAN DEVELOPMENT PROJECT May 5, 1976 Transportation and Urban Projects Department This document ha a restricted distribution and may be used by recipients only in the performance of their oficial duties. Its contents may not otherwise be disclosed without World Bank authorization.  CUR2RENCY EQUIVALENTS Currency Unit = Peso (P) 1 Peso = US$0.1333 US$1 = P 7.5 US$1 million = P 7,500,000 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 (mi) 1 square kilometer (sq km) = 0.386 square mile (sq mi) 1 centimeter (cm) = 0.39 inch (in) 1 square centimeter (sq cm) = 0.155 square inch (sq in) I hectare (ha) = 10,000 square meters (sq m) or 2.47 acres (ac) 1 liter (1) = 1.057 quarts liquid or 0.26 US gal- lon (gal) or 0.908 quart dry (qt) 1 liter per capita per day (lpcd) = 0.26 US gallon per capita (ged) ABBREVIATIONS AND ACRONYMS BCS Bureau of Census and Statistics BOT Bureau of Transport BPW Bureau of Public Works BVM Barangay Volunteer Medics CBR California Bearing Ratio CITRUS Central Institute for the Training and Relocation of Urban Squatters CBD Central Business District DBP Development Bank of the Philippines DPH Department of Public Highways DPWTC Department of Public Works, Transportation and Communications GOP Government of the Philippines GSIS Government Service Insurance System MASICAP Medium and Small-Industry Coordinated Action Program MBMR Manila Bay Metropolitan Region Study MMA Metropolitan Manila Area MMC Metropolitan Manila Commission MWSS Metropolitan Water and Sewerage System Authority NEDA National Economic Development Administration NHA National Housing Authority NPCC National Pollution Control Council PAHRA Presidential Assistant on Community and Resettlement Agency PBSP Philippine Business for Social Progress PHHC Peoples Homesite and Housing Corporation PNB Philippine National Bank PNR Philippines National Railways PPDO Planning and Project Development Office PRECHUR Presidential Committee for Housing and Urban Resettlement PSC Public Service Commission PVC Polyvinylchloride SPDC Sapang Palay Development Committee SSS Social Security System TFDPO Tondo Foreshore Dagat-Dagatan Development Project Office (formerly Tondo Foreshore Development Authority) GOVERNMENT OF THE PHILIPPINES FISCAL YEAR July 1 to June 30  FOR OFFICIAL USE ONLY PHILIPPINES STAFF PROJECT REPORT MANILA URBAN DEVELOPMENT PROJECT TABLE OF CONTENTS CHAPTER Page No. INTRODUCTION AND SUMMARY ........................ i-xv I. PROJECT COMPONENTS, COSTS AND FINANCING .... ..... 1 A. The Project ................................. 1 B. Cost Estimates .............................. 9 C. Financing ................................... 19 II. BORROWING AND EXECUTING AGENCIES ........ ........ 21 III. DESIGN STANDARDS AND PROJECT SPECIFICATIONS ..... 27 A. Upgrading and Sites and Services .... ........ 27 B. Community Facilities, Nutrition and Health Programs .................................. 36 C. Loans for Small-Businesses and Loans for Building Materials ........................ 40 D. Major Roads ................................. 43 E. Traffic Improvements ........................ 44 IV. PROJECT IMPLEMENTATION .......................... 47 A. Procurement ................................. 47 B. Disbursement ................................ 47 C. Technical Assistance ........................ 49 D. Monitoring and Evaluation ..... .............. 52 E. Supervision ................................. '53 V. FINANCIAL ANALYSIS .............................. 55 A. Cost Recovery ............................... '55 B. Affordability ............................... 61 C. Demand for Shelter and Replicability ....5.... 65 D. Project Cash Flow ........................... 66 This report is based on the findings of the Appraisal Mission, which comprised Bank staff members: D.B. Cook (Chief of Mission), A. Pellegrini, D. Steel, S. Basta, B. Veuthey and R. Middleton. The report was prepared by D.B. Cook and A. Pellegrini. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -2- Page No. VI. ECONOMIC ANALYSIS ..... * * * S ............ 68 A. Project Benefits ....* ........***.....* 68 B. Economic Analysis ........................... 69 C. Distribution of Benefits .................... 71 VII. CONCLUSIONS, RECOMMENDATIONS AND LOAN CONDITIONS. 71 Photographs and Sketches (back of report) Typical Conditions in th Tondo Foreshore (1) Typical Conditions in the Tondo Foreshore (2) Example of Existing Conditions Example of Existing Conditions New Tondo Pilot Area Example of Existing Conditions Old Tondo Pilot Area Aerial View of Tondo Foreshore Aerial View of Old Tondo Aerial View of Dagat-Dagatan Maps Project Areas Tondo and Dagat-Dagatan Main Infrastructure Tondo Foreshore Land Use Plan Water and Sewerage Networks (Old Tondo Pilot Area) Dagat-Dagatan Proposed Layout Traffic Improvement Measures Annex Related Documents and Data Available in the Project File  INTRODUCTION AND SUMMARY THE URBAN SECTOR A. Urban Development in the Philippines 1. The Philippines will continue to feel the impact of population growth and urbanization in the next two or three decades. The population is forecast to reach 77 million by the year 2000 (from 41 million in 1974), with the urban population growing from 32 percent to approximately 46 percent. The number of people living in urban centers could grow from 13.2 million in 1975 to 35 million by the year 2000. 2. 'The urbanization problems facing the country are accentuated by the predominance of metropolitan Manila. The Metropolitan Manila Area (MMA) had an estimated population in 1975 of 5.5 million, or 13 percent of the national total. With an average annual growth rate of 5 percent since 1960, Manila's population is increasing faster than those of other urban areas, which had been growing at 3-4 percent annually, because of higher rates of migration to Manila. If present trends continue, 23 million persons could be living in the Manila region by the end of the century, fully 65 percent of the urban and 30 percent of the total population. 3. The Government has recognized the magnitude of the problems facing the urban sector. It is planning and executing programs in the MMA, which faces by far the most serious of the Philippines' urban problems. It is also trying to promote decentralization in urban growth by developing small- and medium-sized cities in addition to channeling resources into the MMA. 4. Rapid growth in the service sectors, especially the informal service sector 1/, has prevented urban population growth from being translated into open unemployment in the cities. As in most cities, this sector accounts for over two-thirds of total urban employment. It is likely that a large portion of the growth in service sector employment has been in the informal service subsector, which is estimated to account for over 60 percent of total service employment in both urban and rural areas. 5. Despite the significantly higher average incomes of urban areas compared to rural areas, living standards are not necessarily higher, and substantial poverty exists. If absolute standards of poverty are used, about 30 percent of the urban population, or 3.2 million persons, were es- timated to be living at or below the minimum subsistence level 2/ in 1971, with inadequate housing and limited or no access to water, toilets and electricity. 1/ Includes domestic services and personal services in transport, commu- nication, government, commerce, business water and sanitation and recreation. 2/ The minimum subsistence level is defined as the ability to afford a minimmum adequate diet as recommended by FAO/WHO; and in the Philippines the per capita income necessary to sustain a minimum subsistence level in 1971 was estimated to be $140 equivalent.  - ii - 6. The housing shortage and inadequacy of service levels in urban areas is severe and is growing rapidly. The 4.5 percent average annual growth rate in urban housing construction from 1960 to 1970 implies that the growth in housing in urban areas just kept pace with population growth and did not allow for the replacement of physically inadequate dwelling units. At the end of the 1960s, only half of all urban dwelling units had piped water, a fifth electricity for lighting, and a tenth had a flush toilet. 7. The urban poor occupy the least desirable of this already inadequate housing stock. They are at a particular disadvantage because of relatively inactive public sector involvement in housing construction and financing, and because neither private nor public housing finance programs have significantly assisted the lower income groups. 8. The Government's response to these problems has been to promote decentralization in urban growth by developing small- and medium-sized cities in addition to channeling resources into the MMA. The Government has recently initiated several important programs to encourage the develop- ment of small and medium scale industries many of which provide employment in cities outside MMA and a minucipal water supply program to establish effective water supply systems in a large number of cities. But, this two- pronged approach cannot obscure the fact that by far the largest part of the country's urban problems is concentrated in Manila. B. Urban Development in the Metropolitan Manila Area (MMA) 9. Manila has a larger area (870 sq km), a larger population base and a faster annual population growth rate than other urban areas in the Philippines; a higher unemployment rate than the national average (11 per- cent in Manila compared to 7 percent nationally in 1971); and by far the worst housing conditions in the country. While the proportion of the urban poor is about the same in Manila as in other urban areas, Manila's poor are the largest concentrated poverty group in the Philippines totalling 1.5 million, or nearly one half of the Philippines' urban poor. 10. Employment in the MMA presently accounts for about 10 percent of the national total. In 1971, 1.5 million persons were employed in the MMA, of which 960,000 (or 64 percent) were in the services sector. Of the balance, industry employed 29 percent, and agriculture and other 7 percent. Although the informal subsector provides a large amount of employment, the earnings and savings potential in that subsector is often not much greater than that found in rural areas. In 1971, median family income in the MMA was estimated by the Bureau of Census and Statistics to be about $825. However, as a re- sult of inflation between 1972-74, real wages in the MMA declined, with wages for unskilled workers declining by about 25 percent. 11. The city's most pressing problems relate to shelter, health and nutrition, urban transport and institutional capabilities. An acute housing  - iii - shortage has been caused by rapid population growth, an inadequate existing housing stock, and the absence of a coordinated institutional framework to address construction and financing of housing. In 1972, approximately 50 percent of physically inadequate dwelling units in the Philippines and 80 percent in all urban areas were in the MMA. About 1.8 million persons now live in substandard structures on unserviced lots with a very low level of environmental sanitation. 12. The inadequacy of sanitation facilities and of health and medical services, compounded by flooding and standing stagnant water, have led to a deterioration in the level of health. Cases of typhoid, cholera, other gastrointestinal infections and malnutrition have risen noticeably since 1968, and it is clear that population increases have strained available medical and health facilities. 13. The MMA also suffers from major transportation problems. Chronic congestion has become a common condition because of population growth and a rapid growth in the number of private passenger vehicles. In 1975, the MMA had about 325,000, or 42 percent of all registered motor vehicles, of which 70 percent were private passenger vehicles. The situation is exacerbated by inefficient use of existing road capacity. Public transport is mostly pro- vided by the private sector which, because of deterioration in financial conditions and uncertainty about Government policy towards private sector fleet owners, has steadily reduced its investments in vehicle maintenance and fleet renewal in recent years. 14. The organization of local governments in the MMA has not been conducive to effective metropolitan-wide planning or administration. How- ever, in November 1975, the Metropolitan Manila Commission (MMC), headed by a general manager, was established and consolidated 17 jurisdictions into one. Previously, the MMA's government was fragmented into 32 juris- dictions. 15. The largest slum, and the one in most pressing need of basic urban services, is the Tondo Foreshore. The Tondo was reclaimed from the sea in the late 1940s and squatters moved in shortly thereafter. This community, the upgrading of which is the centerpiece of the proposed project, covers almost 180 ha and has a population of 27,500 families (180,000 persons) in 17,500 structures. The median family income is about $576 a year, which is about 60 percent of the median income of the MMA. 16. In the Tondo, the majority of households are first-generation mig- grants. Because of its central location, the Tondo has been a convenient place from which to attempt to find employment and to adjust to urban life. 17. Some land registration by squatter families has taken place mostly in the old foreshore (Old Tondo), which comprises approximately one third of the total area. The new foreshore area (New Tondo) is still largely publicly owned land. The fact that some households have tenure, or have been offered it, while others have no legal right, has given rise to much unrest over the years.  - iv - 18. The Tondo's level of environmental sanitation is very low because of the high population density, inadequate water and sewerage facilities and very poor drainage. Partly as a result of this, the area's residents suffer from severe health problems. According to a 1975 survey, infant mortality is about 130 per 1,000 live births per year; 80 percent of pre- school children are undernourished; more than three-quarters of the population suffer from roundworms; 30 percent of the adult female population and more than 40 percent of the children suffer from anemia; and much of the population also suffers severe Vitamin A deficiencies. In 1974, there were around 500 hospital admissions for cholera in Tondo, and 707 deaths attributed to tuber- culosis. 19. Until now, the Government's main response to the problems of slum and squatter areas has been a series of ad hoc projects generally involving major relocations to distant sites, which have not been very su-ccessful. Principal difficulties have been a lack of nearby employment opportunities and inadequate services, especially transportation. The Government is now planning a program, of which the proposed project is a part, designed to upgrade blighted areas in the MMA, provide better employment opportunities and improve the standards of operation of the responsible Government agen- cies. To begin this program, the Government in 1974 created the Tondo Fore- shore Development Authority (TFDA) which, together with appropriate Govern- ment agencies, was to be responsible for executing a program of upgrading the Tondo Foreshore. The TFDA has now been incorporated into the National Housing Authority (NHA), which was created in July 1975, to consolidate the six agencies formerly concerned with the provision of housing in order to help meet the growing requirements for better shelter in the Philippines. 20. The poor health and living conditions of the large percentage of families living in slum and squatter areas suggest that the highest priority, in the near term, should be to extend minimum urban services to the worst slum areas. This effort, if made on a comprehensive area-by-area basis and accompanied by measures which regularize land tenure, should help improve the living conditions of Manila's poor. At the same time, a long-term shelter program can be undertaken to help meet the needs of the approximately 40,000 new families being added annually to the population and slow the spread of squatter areas. The Government's programmdiscussed in the preceding para- graph are important steps to help meet these needs. 21. Considerable development is taking place in the areas immediately adjoining the Tondo Foreshore. Immediately to the south, reclamation and construction of the International Port is taking place. The first phase of port improvement will require the relocation of approximately 1,500 squatter families to Dagat-Dagatan two miles away. At Dagat-Dagatan, reclamation is continuing on 367 ha of unused fishponds, the first 40 ha of which would be used by the proposed project. To the northwest of Dagat-Dagatan, reclamation and construction of a fisheries port and associated industrial area at Navotas, partially financed by the Asian Development Bank (ADB), is nearly complete, and will soon require the relocation of several thousand squatters to Dagat- Dagatan.  C. The Project Purposes of the Project 22. The major components of the project would respond directly to the shelter, sanitation, employment and infrastructure problems of the Tondo Foreshore and to the urban transport and institutional problems of Manila in general. The upgrading of the Tondo and the new sites and services devel- opment in Dagat-Dagatan would provide 180,000 persons in a major slum and squatter area with secure land tenure and adequate urban services, in such a manner that project beneficiaries will be able to afford to pay for these services. The traffic improvement component would focus on low-cost, high- return investments for all of Manila by providing for urgently needed traffic control measures and equipment necessary for the efficient use of existing infrastructure. The project would help strengthen two new institutions, the National Housing Authority (NHA) and the Metropolitan Manila Commission (MMC), by providing technical assistance; it would also have a formative impact on the Government's urban program because it would be its first comprehensive slum upgrading project. In the course of the four-year pro- ject implementation period, the NHA is expected to significantly increase its capacity to plan and implement similar upgrading and sites and services projects in other parts of Manila and in other cities in the Philippines. 23. Looking beyond the individual components, the project aims to assist the Government in initiating a new approach to the city's pressing shelter and sanitation problems and to encourage transport investment pro- jects involving relatively low capital input. The project seeks to de- monstrate that upgrading and improvement in situ is an appropriate alter- native to resettlement, which has hitherto been the policy adopted by the Government. The integration of health, nutrition and other social service improvements with physical improvements in water supply, sewerage and drainage, both in the Tondo Foreshore and at Dagat-Dagatan, is expected to demonstrate an approach which is not only comprehensive but is also replic- able in other slum areas of Manila and other cities in the Philippines. 24. The project was prepared by the Government with the assistance of various short-term consultants. Bank missions appraised the project in July and November 1975, and Negotiations were held in Washington in April 1976. The Government's negotiating team was led by His Excellency Eduardo Z. Romualdez, the Philippine Ambassador to the United States. Project Components and Design Standards 25. The project would provide improved environmental sanitation infra- structure and social services for the Tondo Foreshore, one of Manila's worst slums, develop a first phase of sites and services settlement at neighboring Dagat-Dagatan and build and improve trunk roads in the Tondo Foreshore area. It would also provide traffic engineering and management  - vi - improvements and technical assistance for the Metropolitan Manila Government. Included in the project, at the request of the Government, is technical assistance for national transportation planning. The project would in- clude: (a) Tondo Foreshore Upgrading. Upgrading a 180 ha area, with a population after development of about 160,000 persons living in 15,000 structures, by providing basic urban infrastructure and health, education and other welfare services, materials for house improvement and cottage industry loans, about 1,000 new serviced lots and core units on now vacant land, and about 15 ha of land for industrial and commercial use; (b) Dagat-Dagatan. Development of a residential community for about 20,000 persons after development on about 40 ha by providing basic infrastructure and health, education and other welfare services, materials for house improve- ment and cottage industry loans, 2,000 residential lots with simple sanitary core units for lease with option to purchase by families displaced from the Tondo Foreshore, and about 3.5 ha of land for industrial/commerical use; (c) Offsite Infrastructure. Rehabilitation of the exist- ing Tondo Sewerage Pumping Station and construction of a new outfall sewer to replace the existing sewer, which has deteriorated to the point that it is inadequate for the efficient and sanitary discharge of existing or anticipated sewage flows from the Tondo Foreshore; and construction of stabilization ponds and temporary (above ground) water mains at Dagat-Dagatan; (d) Major Roads. Construction of 5.4 km of the R-10 road between C-1 and Dagat-Dagatan, construction of 1.7 km of circumferential roads C-2 and C-3 and construction of 0.4 km of the Dagat-Dagatan road to provide access to the Dagat-Dagatan resettlement site and to facilitate traffic movement out of the International Port area; (e) Traffic Improvement. Construction of junction improvement, road markings and footpaths, and bus shelters and provision of signals, signal-linking equipment and mobile radios to improve the use of existing infrastructure; and (f) Technical Assistance. Consultants (about 46 man-years) would be retained by: (i) the NHA for detailed design and construction super- vision of the physical works in the Tondo Foreshore and Dagat-Dagatan; organization, management and  - vii - financial planning for the NHA and the Tondo Foreshore Development Unit; and feasibility studies to develop a possible second urban development project; (ii) the Metropolitan Waterworks and Sewerage System (MWSS) for detailed engineering of the outfall sewer; (iii) the Department of Highways (DPH) for detailed design of project roads and for design and implementation of the traffic engineering and management component of the project; (iv) the Department of Public Works, Transportation and Communications (DPWTC) for: a metropolitan Manila transport/land-use study; and on behalf of the MMC for a fiscal base study, a cadastral survey for metro- politan Manila to update the existing survey which covers only half the land, a municipal services study, and staff training; and (v) the DPWTC to assist in preparing a national trans- portation investment plan for 1977-80 and a national transport systems study; and to help strengthen the planning capabilities of the various Government transportation agencies. 26. The design standards selected for the Tondo Foreshore and Dagat- Dagatan provide for individual water and sewer hookups and, in the case of Dagat-Dagatan, for individual electricity connections. These design stand- ards were selected after full consideration of several alternative solutions ranging from individual pit latrines to group facilities. They would mini- mize the need for relocation of Tondo Foreshore residents, but nevertheless about 500 families will be relocated to Dagat-Dagatan because of improvements to roads and the introduction of infrastructure. In addition, the project will provide sites at Dagat-Dagatan for another 1,500 families, most of whom would be dislocated from the International Port area because of Port expan- sion and from the Navotas Fisheries Port. All lots at Dagat-Dagatan would be provided with a common wall, basic plumbing and a concrete floor, all of which would be financed by the monthly lease payment. New lot occupants would bring existing structures from their present location. A variety of materials for house improvement would also be available for purchase, and house materials loans would be available to enable project beneficiaries to make improvements. Project Execution and Management 27. The NHA, established in late 1975 to plan and execute a national housing program, would be the principal Government agency implementing the project. The staff of the former TFDA has been absorbed by the NHA and are now in the Tondo Foreshore/Dagat-Dagatan Project Development Office (TFDPO),  - viii - which is the unit in the NHA with prime responsibility for executing the Tondo Foreshore and Dagat-Dagatan parts of the proposed project. The NHA would also be responsible for coordinating very closely with the other Government agencies which execute other parts of the project: (a) the DPH, which would be executing the major roads components and the traffic improvement component, for the execution of which it has agreed to institute a training program for traf- fic engineers in traffic engineering and management satisfac- tory to the Bank by December 31, 1976 (see Section 3.04 of the Loan Agreement); (b) the MWSS, which would construct the sea outfall sewer and the Tondo Pumping Station and which would provide technical assistance to the NHA for the water supply and sewerage elements; (c) the DPWTC, which would be responsible for major flood drain- age works, the transport/land-use study, the fiscal base study, the cadastral survey, the municipal services study, and staff training; and (d) the Development Bank of the Philippines (DBP), and at NHA's option, the Philippine National Bank (PNB) or Philippine Business for Social Progress (PBSP), which would administer the lines of credit for cottage industry. In addition, the DPWTC will be executing agency for the technical assistance in national transportation planning. These agencies are suitably staffed and organized to carry out their responsibilities under the proposed project; the DPH, the MWSS and the DPWTC would also employ suitably qualified consult- ants on terms and conditions satisfactory to the Bank (see Section 3.03 of the Loan Agreement). 28. The NHA would also coordinate with six other agencies which would be taking over operation and maintenance of project facilities, once they have been completed by the NRA: (a) the Department of Education and the Manila City Schools Office, which would be responsible for operation and maintenance of the completed educational facilities; (b) the Department of Health and the Manila City Health Office, which would be responsible for operation and maintenance of the health centers and clinics; and (c) the National Nutrition Council and the POPCOM, which would run the nutrition and family planning programs, respectively, included in the project.  - ix - 29. The relevant responsibilities of the agencies involved have been spelled out in a draft Presidential Letter of Instruction (LOI). In order to ensure that the NHA, a new agency, can successfully execute and manage the project, the project includes financing for a substantial amount of technical assistance in engineering, planning, organization and financial management. The NHA agreed during negotiations that this would be carried out by suitably qualified consultants on terms and conditions satisfactory to the Bank. The employment of engineering consultants by NHA and the issuance and effectiveness of the LOI would be conditions of effectiveness of the proposed loan (see Section 7.01 (b) and 7.01 (c) of the Loan Agreement). 30. The NHA also agreed, during negotiations, to a satisfactory plan of organization for the TFDPO (see Section 4.04 of the Loan Agreement) and agreed to arrangements satisfactory to the Bank for filling key staff posi- tions with suitably qualified personnel (Section 4.05 of the Loan Agreement). In addition, the NHA agreed to establish and staff a project monitoring and evaluation system to monitor the progress of the project (see Section 4.03 of the Loan Agreement). With these arrangements, the Government would be able to execute the project satisfactorily. Project Cost and Financing 31. The estimated total cost of the project is $65 million, with a foreign exchange component of $32 million, or 49 percent of total project costs. The estimates include an overall 10 percent physical contingency allowance. This includes a 25 percent allowance on tertiary infrastructure items, because of great difficulties in determining in advance of actual work the specific requirements of each individual lot; and a 56 percent allowance on the interceptor sewer, because of extremely difficult soil con- ditions. The estimate also include an allowance for increases in domestic and foreign prices on the basis of an annual increase of 10 percent cal- culated in accordance with the Bank's guidelines. The average man-month cost of consultant services is estimated to be $5,800. The project is scheduled for completion by March 1981. 32. The proposed Bank loans for this project would be for the equivalent of $32 million and would consist of a Third Window Loan of $10 million and a Bank loan of $22 million. The loans would be made to the Government and would finance the foreign exchange costs. Of the balance of $33 million, the NHA would finance $19.2 million, the MWSS $0.3 million and the Govern- ment $13.5 million. The Bank loan would be for a term of 22 years, including a grace period of 5 years, at the standard Bank interest rate. The Third Window Loan would be made on standard Third Window Loan terms. 33. Of the total proceeds of the loans, $17.6 million would be relent to the NHA under a subsidiary loan agreement, on the same terms as those of the Bank loan, to help finance the Tondo Foreshore, Dagat-Dagatan, tech- nical assistance to NHA, and lines of credit for materials for house improve- ment and cottage industry; $1.3 million would be relent to MWSS under a sub- sidiary loan agreement on the same terms as those of the Bank loan, to help  x finance the outfall sewer and the Tondo Pumping Station. The conclusion of these subsidiary loan agreements would be conditions of effective- ness of the proposed loan (see Section 7.01 (a) of the Loan Agreement). About $10.8 million would be allocated to the DPH for construction of the major roads and for the implementation of the traffic engineering component; and $2.3 million would be allocated to DFWTC to finance the land-use/transport study, the national transportation planning assistance, and the fiscal base study, the municipal services study, training and cadastral surveys that DPWTC is administering for the Metropolitan Manila Commission. For the housing materials loans ($2.9 million), NHA would enter into an agreement with DBP, and for the cottage industry loans ($0.4 million) with DBP and, at NHA's op- tion, with PNB or PBSP to administer the loans. The onlending institutions would receive a 3 percent spread on funds and provide loans to ultimate bor- rowers at an interest rate of not less than 12 percent per annum. For cottage industry loans, a special one-time fee of 2 percent would also be charged and retained by NHA, which would share the risk of default under arraignments to be agreed with the lending institutions referred to above. Cost Recovery for the Tondo Foreshore and Dagat-Dagatan Components 34. While housing has been increasingly recognized as an urgent need and while squatting on unserviced land has become an increasingly difficult problem, mobilization of resources into the housing sector has been hindered in the recent past by the belief that the poor cannot afford to pay for the housing and services they would receive, and that large-scale subsidies would be required to initiate any substantial program. The general approach adopted for the proposed project was to seek full cost recovery, while simultaneously including in the project other sources of revenue that could be used to help pay for the project and thus reduce charges to the low-income families now living in the area. Project charges to beneficiaries have, therefore, been reduced by the amount of revenue anticipated from the sale or lease of about 19 ha of industrial and major commercial property in the project area. The sale and lease of this property is expected to produce gross revenues equiva- lent to about $13.5 million. 35. In Dagat-Dagatan, costs would be further reduced by a total of $2.5 million, which is the estimated incremental cost of upgrading the lots of those families who have to be relocated in Dagat-Dagatan because of works being undertaken by the Philippine Port Authority (PPA) and the DPH, which are implementing respectively a port expansion project at the International Port and the major road projects in the Tondo Foreshore area. The Government agreed during negotiations to make satisfactory arrangements for the provision of the funds necessary to pay for the incremental cost of providing lots to families who will have to be resettled as a result of port expansion and highway construction (see Section 5.05 of the Loan Agreement). These arrange- ments would enable the NRA to charge identical lease prices in both the Tondo Foreshore and Dagat-Dagatan, even though unit costs at Dagat-Dagatan are higher than the unit upgrading costs at the Tondo Foreshore. The total cost of the Tondo Foreshore and Dagat-Dagatan infrastructure, excluding schools and health clinics, is $27.9 million. The cost reductions, totalling about  - xi - $16 million, would leave a net balance of about $12 million to be recovered from project beneficiaries to finance the full cost of the internal infra- structure in the Tondo Foreshore and at Dagat-Dagatan. The Government agreed during negotiations to recover these costs (see Section 5.04 of the Loan Agreement). 36. Cost recovery in Tondo and Dagat-Dagatan will generally be through 25-year renewable leases, with an option to purchase after 5 years. Monthly lease payments (and assessment taxes) would be set to cover the development costs referred to in the preceding paragraph over 25 years at an annual interest rate of 12 percent. A feature of the lease will be its transfer- ability. Lease holders may sell their leases should they decide to move. Since the lease in this case will be an increasingly valuable asset and will have many similarities to ownership it is expected that there will be a con- siderable incentive to residents to continue to make monthly payments and to invest in and improve their property. 37. The project has been designed to enable the great majority of existing Tondo Foreshore residents to afford the project benefits. A lease payment of $0.13/sq m per month equivalent would cover full development costs after the cost reductions described in paragraph 35. In addition, a family would pay normal charges for water and sewerage, property taxes and, if con- nected, electricity. It is estimated that an average family would make a monthly payment of $6.60 for all these expenditures except electricity in 1978, compared to $3.75 in 1974. In real terms, this would be an increase of $1.15 per month by 1978. On this basis, an average size lot could be afforded by about 75 percent of the Tondo Foreshore families, and a some- what smaller lot could be afforded by about 85 percent. 38. It has not been possible to provide individual living accommodations that would be affordable by all income groups in the Tondo Foreshore, but the vast majority of persons with incomes below the 15th percentile are tran- sients and/or renters of small rooms. These persons are expected to continue renting rooms in the area and to receive substantial indirect benefits from the project. Procurement and Disbursement 39. Civil works contracts of more than $1 million each, for a total of about $14 million, would be awarded on the basis of international competitive bidding in accordance with Bank Group Guidelines. Because of the need to undertake the work in small areas on a block-by-block basis, civil works con- tracts of less than $1 million each, for a total of about $15 million, are not suitable for international competitive bidding. These would be awarded on the basis of competitive bidding advertised locally in accordance with Government procedures which are acceptable. 40. For equipment and material procurement except materials for house improvement, all contracts above $100,000 would be procured on the basis of international competitive bidding in accordance with Bank Group guidelines.  - xii - A preference limited to 15 percent of the c.i.f. price of imported goods, or the customs duty whichever is lower, would be extended to local manufacturers in the evaluation of bids. Contracts below $100,000 and for materials for house improvement ($2.9 million) which would be phased over the project implementation period and cannot easily be bulked, would be awarded on the basis of competitive bidding advertised locally in accordance with Govern- ment procedures which are acceptable. For the cottage industry loans, equip- ment would be procured on the basis of DBP's guidelines, which are satisfactory. 41. For the Tondo Foreshore, Dagat-Dagatan, offsite infrastructure, major road and traffic engineering components, disbursements would be made against 100 percent of the c.i.f. cost of directly imported equipment, mate- rials and supplies; 65 percent of such items procured locally. For civil works, the disbursement percentages are based on the estimated foreign ex- change costs and with the exception of the outfall sewer, would be at the rate of 40 percent against certified monthly progress payments or expendi- tures. For the outfall sewer, disbursements would be made against 60 per- cent of expenditures. For consultants' services, disbursements would be made against 100 percent of foreign costs or 80 percent of total expenditures. Disbursements for small-business loans would be made against 60 percent of the value of loans against supporting evidence of disbursements on a quarter- ly basis. 42. Retroactive financing is recommended for about $2 million equiva- lent for consultants' services in assisting with project preparation since September 1975 and for initial civil works carried out at Dagat-Dagatan and the Tondo Foreshore. Since January 1976. This work was essential for the effective initial implementation of the project and was undertaken in consultation with the Bank. Monitoring 43. The Government has included a system of monitoring in the project. This will ensure that data essential to project execution is provided to project managers, and that the design and execution of future projects be- nefits from the experience of this project. Monitoring of the upgrading, sites and services, health and employment generation components of the project will be under the general supervision of a special unit within the NHA. Monitoring of the transportation component will be the responsibility of the Planning and Project Development Office (PPDO) in the DPWTC. Justification and Economic Analysis 44. The Tondo Foreshore and Dagat-Dagatan components will improve the health and living conditions of the Tondo Foreshore residents, stimulate the creation by the private sector of approximately 800 jobs in the indus- trial/commercial estate and create 200 jobs through the cottage industry loan program. Approximately 12,000 man-years of direct employment, associated with project construction activities, will also be created. The transport- ation component would improve the efficiency of the existing road network,  - xiii - through improvements in the capacity of key junctions and also through pro- vision of important links in the circumferential-radial road network of the city that would serve to divert port-related traffic away from the heavily congested urban center. The provision of technical assistance to DPWTC for the new Metropolitan Manila Commission (MMC) would assist the development of the new Manila Government and help improve metropolitan-wide management and cadastral information. 45. The project would directly benefit the 180,000 persons now residing in the Tondo Foreshore area, who are among the poorest families in Manila. The current median family income in this Tondo area is about $576 a year which, with an average family size of 6.6 persons, is a per capita income of $87 a year. 46. The benefits of the traffic improvement component would be more widely distributed, and would also provide substantial benefits for low-* income persons. The portion of the R-10 constructed under the project would provide for more efficient distribution of port traffic, and would provide access to the Dagat-Dagatan site. 47. The measurement of economic benefits for the slum upgrading, sites and services, and industrial estates components of the project is based upon estimates of increases in property values brought about by the provision of infrastructure and other services; and on this basis, the economic rate of return for the residential component is 21 percent, and the economic rate of return for the industrial/commercial development in the project area is 40 percent. 48. The benefits arising from the major road components were considered to be savings in road transport costs of all diverted traffic from their pre- sent heavily congested routes in the Central Business District to the project roads. The economic rate of return for the R-10 road is estimated to be 36 percent (between circumferential roads C-1 and C-2) and 45 percent (between C-2 and the Dagat-Dagatan road). For the section of C-2 to be construc- ted under the project, the economic rate of return is estimated to be 18 percent. Rates of return for the C-3 and the road in Dagat-Dagatan were not calculated because the works are very small. The estimated weighted average economic rate of return for the Tondo Foreshore, Dagat-Dagatan, and Major Road components of the project is 27%. Conclusions, Major Loan Conditions and Recommendations 49. The project would be the first attempt to tackle some of the major problems facing metropolitan Manila and, if successful, should demonstrate the practicality of this approach for upgrading the standards of living of the 3.2 million persons now estimated to be living at or below the minimum subsistence level there and in other fast growing urban areas. It would also help the Government to develop institutions and formulate policies and pro- grams which deal efficiently with the problems of urban growth.  - xiv - 50. During the course of project preparation, several issues were addressed, the most important of which were: (a) Land-Use. The original proposals for the Tondo Foreshore area involved a low density development that would have entailed demolition of most housing units and relocation of up to some 70 percent of the Tondo residents. To reduce the amount of relocation, the alignment of the R-10 was shifted from a path that would cut through the center of the area to an alignment along the port wall that minimizes relocation, and still meets the present and anticipated access needs of the port. The proposed density levels were also increased. (b) Design Standards. The standards of the core units and the sizes of lots to be provided in Dagat-Dagatan were reduced, and the use of self-help house construction was increased in order to reduce costs and ensure affordability. In the Tondo Foreshore, houses would be realigned along roads and footpaths to improve circulation after consultation with the residents of particular blocks to minimize social disruption. (c) Land Tenure. Tenure in the Tondo area is a long-standing political issue, the satisfactory resolution of which was critical to the achievement of the project's social objectives and the orderly implementation of the project. A Presidential Decree has been signed recently, which now provides long-term leases to residents with options to purchase after five years. (d) Cost Recovery. Bank staff and the Government discussed the question of cost recovery extensively during the early stages of project preparation and the Government recognized that effective cost recovery was essential given the very large future investments necessary to meet growing urban needs. The cost recovery formula described in paras 34-38 is the result of these discussions and has the full support of the Philippine Government. 51. The major risks inherent in the project relate to the fact that the NHA is newly created and inexperienced in the type of work proposed. The project would require a high level of cooperation and coordination be- tween the NHA and different agencies of the Government, as well as with the residents of the Tondo area. It would also require a major commitment by the Government in staff, financing and effort to ensure successful execution. The Government is fully aware of the organizational efforts involved and has agreed to take the necessary steps to ensure successful execution, since it attaches high priority to the urban sector. Inter-agency coordination would be insured through the Presidential Letter of Instruction (LOI) described in para 29. The covenants relating to NHA are discussed in paras 29 and 30  - xv - of this report. The risks associated with the project are considered reason- able in light of the substantial benefits to the urban poor that will be generated. Technical assistance and monitoring and evaluation arrangements have been incorporated to assist management in the execution of this project and design of future projects. In addition, supervision, at least in the initial stages of project implementation, would require a heavy commitment of the Bank's staff time.   PHILIPPINES MANILA URBAN DEVELOPMENT PROJECT I. PROJECT COMPONENTS, COSTS AND FINANCING A. The Project 1.01 The project aims to assist the Government in starting a process which will begin to address the dominant urban problems facing Manila, es- pecially those of shelter, environmental sanitation and transport. It also seeks to demonstrate that upgrading in situ is a satisfactory approach to slum improvement in contrast to resettlement, which has hitherto been the policy adopted by the Government. The project would be the first compre- hensive slum upgrading effort of the Philippine Government, and the first upgrading project of the newly-created National Housing Authority (NHA). In the course of the four-year project implementation period, the NHA is expected to significantly increase its capacity to plan and implement similar upgrading and sites and services projects in other parts of Manila and in other cities of the Philippines. The project also seeks to shift transport investment towards projects involving a relatively low capital input, i.e. those projects which increase the efficiency of existing infrastructure through traffic engineering and management methods. Technical assistance provided under the project would support project execution; metropolitan- wide fiscal administration; a metropolitan area land-use and transport study; and the preparation of feasibility studies for similar projects ln other parts of Manila and in other cities. The Government also requested that a package of technical assistance supporting national transportation planning also be included in the project. Project investments will include: (a) upgrading the Tondo Foreshore, including an outfall sewer from the Tondo Sewage Pumping Station; (b) provision of sites and services units on vacant land within the Tondo Foreshore and development of the first phase of a new low-income residential area at Dagat-Dagatan; (c) support for community facilities and health and education programs; (d) employment promotion programs in Tondo and Dagat- Dagatan; (e) construction of major road links along the north shore; (f) provision of traffic improvements in the metropolitan area; and (g) technical assistance.  - 2- Upgrading the Tondo Foreshore 1.02 The site selected by the Government for upgrading is the Tondo Foreshore (see map 11888), which is Manila's largest slum and a site that ex- hibits most of the problems, challenges and opportunities posed by poor sani- tary conditions and low incomes in dense urban areas of the Philippines. 1.03 The upgrading of the Tondo Foreshore will consist of the provision of basic urban services, including water supply, sewerage, surface-water drainage, roads, footpaths, street lighting and community facilities. In addition, programs promoting economic development and community health in the area will be provided. Credit facilities for materials loans will be available so that families with sufficient income can improve over time the structures in which they live. 1.04 Individual water and sewer services will be supplied to almost every structure. The inherent difficulties in undertaking work of this kind are considerable: upgrading of a built-up area is a slow tedious process requiring analysis on a block-by-block basis, with each cluster of buildings treated individually, and a specific design worked out with the people to be served. Installation of the services in narrow meandering alleyways will be slow and difficult. In some cases, a number of properties will have to share a single water connection or sewer hook-up, to reduce the cost of the system and minimize structural disturbance. Cost estimates for tertiary infrastruc- ture are based on designs in three pilot areas that are considered repre- sentative of the whole. 1.05 Approximately $6 million of minor work will be undertaken by very small contractors, including surface-water drainage, internal plumbing, minor roads and footways. In order to do this in an efficient manner, the Authority proposes to purchase items of civil engineering equipment 1/ and make this available to the contractors on a lease or hire basis. 1.06 Installation of facilities would be preceded by an extensive com- munity relations program, to consult with residents and to promote under- standing of upgrading. Residents will participate on a barangay-by-barangay basis in decisions concerning final layout of tertiary infrastructure, and any movement of structures that might be required. Sewage Outfall 1.07 The present disposal of sewage from metropolitan Manila is constrained by the extremely bad condition of the existing 42" outfall sewer 1/ Comprising: Ten water pumps with hose and accessories; ten three-ton chain blocks; one hydraulic trench excavator; one ten-ton pneumatic- type road roller; one heavy-duty grader; one three-quarter cu yd traxcavator; three eight-ton trucks; two one-ton forklift; two one- ton service pickups; ten three-hundred-gallon trailer-mounted water trucks; and ten one-and-one-half-ton pickup trucks.  - 3 - from the Tondo Sewage Pumping Station. With the introduction of an addi- tional loading of sewage from the Tondo Foreshore, the existing outfall will prove entirely inadequate. Since these conditions cannot be improved simply by installation of additional pumping units, it is necessary to con- struct an interim outfall to discharge into the Pasig River, avoiding the International Port and discharging at a point not closer to the shoreline than the present outfall. 1.08 This will enable the present pumping chamber, with one pump motor enlarged, and its mechanical electrical equipment overhauled to not only take care of the Tondo Foreshore input but, also, to improve the existing conditions for the sewage flows from Greater Manila until such time as the master plan for sewage disposal can be executed. Sites and Services 1.09 The 3,000 new residential units provided under the project include about 1,000 plots to be located in open spaces and reclaimed land within the Tondo Foreshore, and about 2,000 plots to be built at Dagat-Dagatan. Dagat- Dagatan is a large 367 ha site of currently disused, privately-owned fish ponds located about 4 km north of Tondo (see map 11888). Land acquisition and reclamation at the site have already begun. At full development, the Dagat-Dagatan site is expected to provide improved shelter and services for a population of approximately 260,000 persons. In Phase I, approximately 40 ha will be developed. The first stage development, however, at Dagat-Dagatan has been deliberately kept to a minimum because the overall development plans together with the design of the estero improvement have not been completed. The project includes technical assistance in land-use planning, and hydraulic engineering to analyze and design a satisfactory solution to the estero and river flows. 1.10 Core Units. All new lots will be provided with individual water, sewerage and electricity connections. Street lighting will be installed along major access roads and at main circulation points. Lot sizes will vary, ranging from less than 35 sq m to 240 sq m, with the majority of lots approxi- mately 48 sq m in size. At a density of over 100 units per ha, these lots are smaller than in any previous Bank project, reflecting the high value of land in the project areas and the low-income levels of beneficiaries. 1.11 Lots will be provided with service connections, basic plumbing fixtures and a party wall along the service core, concrete slab and a soil cement floor 1/ area. Structures will be completed by families, using existing houses brought from the Tondo Foreshore, or by utilizing prepared packages designed to complete the houses in incremental stages. These pre- engineered packages will be financed through materials loans and will be 1/ Providing it can be demonstrated that the reclaimed land fill can be satisfactorily stabilized with a cement additive.  - 4 - provided up to a maximum of P 3,000; they will be available to those families who can afford them. Technical assistance will be provided by the imple- menting agency's architects and tradesmen. 1.12 Layouts. The layouts for the new sites and services developments (see map 11890) in Tondo and Dagat-Dagatan provide for lots to be grouped into clusters around small open spaces, which keep vehicle penetration to a minimum. A central road will pass through the Dagat-Dagatan site and will serve as a bus route and main artery. The site will also have approximately 900 lineal meters of estero frontage, which will allow the fishermen at Dulo Puting Bato (a narrow slip of land abutting the International Port) and those resettled from the Fisherman's Channel at Tondo to have riparian frontage. A grid of pedestrian walkways provides access to each lot and contains sanitary sewerage pipes and stormwater drainage channels. Off-Site Infrastructure 1.13 The existing Tondo Sewage Pumping Station will be upgraded and a new outfall provided. Temporary (above ground) water supply mains and stabiliza- tion ponds will be constructed to serve Dagat-Dagatan. Flood control designs and land-use planning for the entire Dagat-Dagatan area are not complete, but designs for the first-stage development financed under this project have been done in such a way that any work undertaken will not compromise long-term engineering decisions. Community Facilities and Health Education Programs 1.14 Living conditions in the densely settled Tondo Foreshore are charac- terized by extremely high levels of infant mortality, malnutrition and communi- cable diseases. Improved sanitation will alleviate some of these conditions which are increasing at an alarming rate. In addition to the provision of utilities, the project includes the following preventive health programs: (a) the training of over 300 volunteer medics and community health workers (BVMs); (b) identification and treatment of malnourished children; (c) infant food preparation; (d) nutrition education; (e) immunization; (f) deworming; (g) vermin and rodent control; (h) Vitamin A and iron supplement; and (i) family planning.  - 5 - The details of these public health and nutrition programs are ouitlined in paras 3.21 to 3.26. They will be closely monitored and evaluated, using on- going surveys as a baseline. 1.15 The project aims to improve educational facilities by building 119 primary school classrooms at Tondo, 45 primary school classrooms at Dagat- Dagatan and a new 49-room high school at Tondo. The primary schools will work on a double-shift basis and the high school on a three-shift basis. Existing municipal health centers and Government/Tulangan centers (social welfare and health centers) will be upgraded, and two new health centers with a 25-bed capacity will be constructed in Tondo and Dagat-Dagatan. Playgrounds and playlots will also be provided. Twenty-five barangay (multi-purpose) community centers will be provided in the Tondo Foreshore, and three centers will be built at Dagat-Dagatan. The centers will be used for nurseries and mothercraft classes in the morning, vocational training in the afternoon and general meetings at night. They will consist of multi-purpose areas, which would include a barangay meeting center, playlot and, for some, a basketball court. Social workers and guidance counsellors will use those centers as their base of operation. The barangay councils will also avail themselves of the building's facilities. The concerned ministries, municipalities and others have agreed to equip and staff the facilities adequately, and inter- agency agreements setting out the extent, range and depth of the cooperation required have been drafted. Resettlement of Families 1.16 The resettlement of families affected by the project will need careful handling. Prior to moving, discussions will be held between the family and technical officers of the project unit of NHA to ascertain the portion of the existing structure to be preserved and the method of demolition to be adopted (which will facilitate subsequent re-erections). Adequate notice to move will formally be given, and assistance will be available to enable affected residents to move and re-erect their shelters at the new sites as speedily and efficiently as possible. Social workers, barangay leaders, church groups and others will also assist. Employment Promotion 1.17 To alleviate the high level of poverty that has persisted in the Tondo area, the Government has given high priority to employment promotion. The principal means by which the project addresses employment promotion are through the development of 9.2 ha of new industrial property in the project area and through programs supporting very small businesses and c:ottage in- dustries. In addition, substantial skills training will be undertaken to improve the effectiveness of the local labor in construction work and in self-help construction. This should have spillover effects in the estab- lishment of small contracting firms. Additional classrooms will be pro- vided to a successful vocational training center in Tondo.  -6- 1.18 Industrial/Commercial Estates. Approximately 5.7 ha of vacant and reclaimed land in the Tondo Foreshore will be developed into industrial and commercial estate property. In Dagat-Dagatan 3.5 ha will be newly developed for industrial uses, and another 2 ha will be developed for mixed commercial/ residential use. This represents the first stage of a substantially larger industrial estate proposed for Dagal:-Dagatan. In selecting among applicants for the sites, preference will be gi'ven to labor-intensive businesses. 1.19 Small-Scale Business Promotion. This component aims at assisting very small businesses and cottage industries found in the project areas. It is an experimental effort that includes both technical/managerial services and credit facilities for small businesses. The technical services will be provided through the Medium and Small-Industry Coordinated Acti-on Program (MASICAP) of the Department of Industry. Several three-person MASICAP teams will be established in the Tondo ancd Dagat-Dagatan areas, composed of persons with accounting and business training. These teams will identify projects and proponents; assist in preparation of feasibility studies; review all aspects of projects including the technical approach, marketing, sources of supply and financial viability; identify further professional assistance, training or other preparation required to improve prospects for project suc- cess; establish liaison with other Government and private agencies providing assistance; assist in loan applications; and advise as necessary during imple- mentation and supervision. Special courses in business management and ele- mentary accounting and record keeping will be offered under the auspices of NRA, and an existing skills training center in Tondo will be augmented. 1.20 A line of credit in the amount of P 2.5 million will be provided for this purpose to NHA. NlA would enter into an agreement with the Devel- opment Bank of the Philippines (DBP) to administer this component for sub- projects involving manufacturing or having a substantial capital content; and at NHA's option, either the Philippine National Bank (PNB) or the Philippine Business for Social Progress (PBSP) for subprojects of a purely commercial nature. Types of businesses in the area that would be supported include general manufacturing of furniture, household implements and simple tools; woodcraft and shelicraft, machine shops and repair shops and others. The package is primarily designed to fill a gap in financing for small businesses and cottage industries whose assets are less than P 150,000 ($20,000). While funds for small businesses are nominally available, Banks have tended to channel funds to larger, more secure investments. Under the proposed Tondo project, the minimum-size loan would be P 400 ($53), and the average is expected to be about P 15,000 ($2,000). The terms and conditions of the small-business loans are provided in paras 3.37 to 3.48. Major Roads 1.21 The major roads constructed under the project provide necessary access to one of the project sites and are central links in Manila's radial,  -7 - circumferential system. The 5.4 km of R-10 serves both as a port access road and diversion road; it will also assist to open up the Dagat-Dagatan site and offer commercial opportunities in selected areas. The constructiLon of C-2 (1.4 km), which has long been part of the development plan for the Tondo Foreshore, should have a particularly beneficial effect in providling a way for heavy port traffic to avoid the major shopping center at DiviLsoria. C-2, between Estero de Vitas and Governor Forbes Road, will in part be provided by Tayuman, an existing four-lane concrete road. The portions of- C-3 (0.3 km) and the Dagat-Dagatan spine road (0.4 km) to be built under this project are short two-lane roads from the R-10, to give access to the new development at Dagat-Dagatan. These roads will not be extended eastwards, and no bridges will be constructed along C-3 or the spine road, until the pattern of future development at Dagat-Dagatan (in particular, the alignment of improved and widened drainage channels) has been decided. Two bridges over the Estero de Vitas will be included in the project, one at Rodriguez Street to replace the existing narrow bailey bridge and the other at Velasquez Street to replace the bridge damaged during the Second World War. As far as possible, existing abutments will be retained but some realignment may be undertaken at the Rodriguez Street crossing to shorten the span. Traffic Improvements 1.22 The traffic improvement component of the project seeks to improve traffic and transport services in metro Manila by construction of low-cost infrastructure improvements and improvements in traffic management and en- gineering. 1.23 Junction Improvements. The main hindrance to traffic movement in Manila occurs at street junctions. Traffic flow could be considerably improved by achieving a better balance between the performance of these junctions and the road network. The project provides: (a) Signalization - 88 sets of signals (50 existing and 38 new) close to or within the area circumscribed by C-2 will be linked (see map 11891). The operational capa- city of police to deal with traffic control will be assisted through the provision of mobile radios and equipment for a traffic monitoring center. (b) Geometric Improvements - The objective of geometric improvements, like signal improvements, is to improve the operation of junctions, which currently limit the performance of the road network as a whole. Geometric improvements will be made to key junctions which will partly overlap with junctions for which (see map 11891) linked signals are to be provided. In designing geo- metric improvements, considerable importance will be given to movement of pedestrians along and across roads.  - 8 - 1.24 Road Markings. Adequate road markings are almost non-existent. Those that have been provided are generally worn out due to a combination of climatic factors and low-quality cold paint. New markings utilizing thermo plastic material will be provided within 50 m of 200 junctions all within the boundary of the C-4 and for introducing 200 crosswalks in mid- block positions. 1.25 Footpaths and Bus Shelters. Footpaths are grossly inadequate, often forcing persons to use motorized transport, even for relatively short distances, because there is no practical route by which to walk. There is also underprovision of bus shelters. Over 20 km of footways will be improved or provided, and over 150 bus shelters will be installed. 1.26 Priority Lanes for Buses and Jeepneys. As a means of improving the capacity of the existing road network to carry increased volume of pas- sengers, the project also will include over 20 km of exclusive and priority lanes for buses and jeepneys (see map 11891). Technical assistance, pro- vided under the project, will assist the Government in identifying additional streets suitable for reservation for public vehicles, and in conducting studies of further measures designed to restrain the uneconomic use of pri- vate vehicles, including such means as increased parking charges and area road pricing. 1.27 Technical Assistance. The project includes technical assistance for (i) land use/transportation planning to develop policies and programs for long-term transport development, short-term proposals to effect imme- diate improvements, and the administrative and financial framework for policy implementation; (ii) traffic engineering, including implementation and signal management; and (iii) training in traffic management. Technical Assistance in National Transportation Planning 1.28 A Bank Transportation Sector Mission visited the Philippines in June 1975 and reviewed the Government's transportation investment program for 1976-79 and the planning capability of transport sector agencies. In- vestment in transportation has expanded rapidly in recent years, and the Gov- ernment has made considerable progress in improving the planning and imple- mentation capacity of transport sector agencies. However, further improve- ments are necessary particularly in view of the large transport sector investments proposed in the Government's Four-Year Investment Program, 1976-79, amounting to P 11.2 billion ($1.5 billion), and which is largely based on priorities established by the Philippine Transport Survey conducted in 1969-70 with the assistance of consultants financed by the United Nations Development Programme. The Bank sector mission found that revisions in the Program would be necessary to ensure that transport sector investments were planned on a sound economic basis, and that better means were developed for determining priorities both between and within transport modes. Recognizing this need, the Government has decided to implement only the 1976 program  -9- and is now in the process of up-dating the program for 1977-80. But Gov- ernment needs substantial technical assistance to complete this task. There is also an urgent need to upgrade staff capabilities in various Government agencies, so that in the future they can carry out more effective planning on a continuing basis. The Government has, therefore, requested the Bank to finance technical assistance needed to: (a) prepare a transportation investment plan for the period 1977-80 and a national transport system study; and (b) help strengthen the various public transportation agencies. B. Cost Estimates 1.29 Total project costs (see Tables I-1 and T-2), including reclamation at Dagat-Dagatan and acquisition of the former DPH compound in the Tondo Foreshore, are estimated at @ 487.82 million ($65.03 million), of which approximately 49% is for foreign exchange. Estimates are based on preliminary engineering. Cost estimates for the tertiary infrastructure to be provided under the upgrading component, are based on designs in three pilot areas that are considered representative of the whole. Because of the nature of this work, more reliable estimates can only be determined as work proceeds. Physical contingencies for tertiary infrastructure, therefore, have been increased to 25%. Trial holes, dug along the alignment of the Tondo inter- ceptor sewer, indicate that considerable difficulty may be experienced with groundwater, and 56% contingencies have been provisionally allocated to this component. The design of the interceptor, which remains to be finalized, may include one or more pumping stations resulting in increased running costs with lower capital costs. An engineering economy study will establish the optimal solution. After making allowances for these contingencies, the over- all physical contingencies amount to 10.3%. Price contingencies are estimated at 10% per year, or an overall average of 26% of base costs.  -10- MANILA URBAN DEVELOPMENT PROJECT Table I-1: SUMMARY OF PROJECT COST ESTIMATES P (millions) $ (millions) % of Foreign Local Foreign Total Local Foreign Total Component A. Tondo Foreshore Land, including Survey 10.32 1.36 11.68 1.38 0.18 1.56 11 Civil Works 52.09 40.91 93.00 6.94 5.46 12.40 44 Community Facilities 13.09 10.29 23.38 1.75 1.37 3.12 44 Housing Materials Loan and Core Units 7.69 2.56 10.25 1.02 0.34 1.36 21 anall-Business Loans 1.25 1.25 2.50 0.17 0.16 0.33 50 Experimental Area 1.78 1.39 3.17 0.23 0.19 o.42 44 Sub-total 86.22 57.76 1243.98 11..49 7.70 19.19 40 B. Dagat-Dagatan Land and Reclamation 5.06 9.40 14.46 0.67 1.25 1.92 65 and Survey Civil Works 8.25 6.48 14.73 1.10 o.86 1.96 44 Community Facilities 3.73 2.48 6.21 0.50 0.33 0.83 40 Housing Materials Loan and Core Units 7.44 2.48 9.92 0.99 0.33 1.32 25 Relocation 0.11 o.16 0.27 0.02 0.02 0.04 59 Sub-total 24.59 21.00 45.59 3.28 2.79 6.07 46 C. Sewage Outfall 3.20 4.80 8.oo 0.43 0.64 1.07 60 D. Major Roads and Bridge.s Land 27.83 - 27.83 3.71 - 3.71 C Highway Construction, R-10, C-2, C-3 and Spine Road 10.58 15.88 26.46 1.41 2.12 3.53 60 Steel Sheet Piling 6.29 9.44 15.73 0.84 1.26 2.10 6c Bridges over Estero de Vitas 4.70 7.04 11