C-3 Report No 1441a-PH FILE COP Philippines: Appraisal of a Rural Y Development (Land Settlement) Project (Rural Development 11) April 28,1977 RETURN TOC Agriculture and Rural Development Department REPORTS DESK Rural Development Division WITHIN FOR OFFICIAL USE ONLY U~~~~~~~ Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance ot their ofticial duties Its contents may not otherwise be disclosed without World Bank authorization CURRENCY EQUIVALENTS US$1.00 = Pesos (1) 7.50 f 1.00 = US$0.133 WEIGHTS AND MEASURES - METRIC SYSTEM 1 hectare (ha) 2.47 acres 1 kilometer (km) 0.62 miles 1 square kilometer (km2) 0.3886 square miles 1 meter (m) 39.37 inches 1 square meter (m2) 10.76 square feet 1 cubic meter (m3) = 35.31 cubic feet 1 million cubic meters (Mm3) = 810.7 acre feet 1 millimeter (mm) 0.039 inches 1 kilogram (kg) = 2.2 pounds 1 cavan (paddy) 50 kg 20 cavans 1 metric ton ABBREVIATIONS ASC - Agricultural Service Center ARES - Agrarian Reform Education Service (DAR) BAEX - Bureau of Agricultural Extension (DA) BBR - Bureau of Barangay Roads (DPH) BFD - Bureau of Forest Development (DNR) BLADD - Bureau of Land Acquisition, Design and Development (DAR) BPI - Bureau of Plant Industry (DA) BS - Bureau of Soils (DA) BURE - Bureau of Resettlement (DAR) CPMU - Central Project Management Unit DA - Department of Agriculture DAP - Development Academy of the Philippines DAR - Department of Agrarian Reform DH - Department of Health DLGCD - Department of Local Government and Community Development DNR - Department of National Resources DPH - Department of Public Highways FMT - Farm Management Technician IPCC - Inter-agency Project Coordinating Committee MARA - Mindanao Agricultural--Resettlement Agency NEDA - National Economic Development Authority NGA - National Grains Authority NIA - National Irrigation Administration FISCAL YEAR Government: January 1 to December 31 CB: January 1 to December 31 Rural Banks: January 1 to December 31 FOR OFFICIAL USE ONLY PHILIPPINES RURAL DEVELOPMENT II TABLE OF CONTENTS Page Summary and Conclusions i-iv I. Introduction 1 II. Background 1 General 1 Agriculture and Rural Development 1 Land Resources and Population Pressure 2 Land Settlement Program 3 III. Project Settlements 4 Selection Criteria 4 Specific Features 5 IV. Project Components 8 Summary 8 Detailed Features 9 A. Program Support 9 B. Settlement Development 10 V. Project Costs and Finance 16 Cost Estimates 16 Financing 18 Budgeting 18 Procurement 18 Disbursements 19 Accounts and Audit 20 VI. Organization and Management 20 General 20 Central Project Management Unit 20 Organization at Settlement Level 21 Project Committee 22 Reports and Annual Work Plans 23 Implementation 23 VII. Production, Marketing and Farm Incomes 23 ' Introduction 23 Farm and Crop Development 23 Production 25 Marketing and Prices 26 Farmer Benefits 27 Environmental Impact 28 Thi document hM a auiced dntribution and may be usd rcipiet onb a the performance of their official duties. Its contnts may not otherwise be dck_d without Wofid bnk author*_on. -2- Page VIII. Economic Benefits and Costs 28 Project Objectives 28 Replicability and Cost Recovery 29 Economic Rate of Return and Project Risks 29 IX. Recommendations 30 Annexes 1. Support for the Forward Settlement Program 2. A Profile of the Project Settlements * 3. Farm and Crop Development * 4. Crop and Farm Budgets * 5. Agricultural Technical Services * 6. Agricultural Credit * 7. Cooperatives Development * 8. Marketing * 9. Infrastructure *10. Land Allocation *11. Settlement Health Services *12. Forestry Component 13. Project Costs and Accounts 14. Disbursements *15. Project Organization and Management *16. Personnel Development and Development Support Communications *17. Monitoring and Evaluation 18. Economic Analysis 19. Schedule of Early Events Maps Agusan Settlement Area, No. 12483 Bukidnon Settlement Area, No. 12484 Capiz Settlement Area, No. 12485 The report is based on the findings of the mission that visited the Philippines in July 1976, consisting of Messrs. S. V. Allison, M. Furst, C. Keil, B. MacLeod and D. Leeuwrik; and on the findings of a follow-up mission in February 1977 consisting of Messrs. A. M. Mercer, B. MacLeod and R. R. Patten (consultant), assisted by Mr. D. J. Steel (Loan Officer, Philippines, AEA). * Retained in Project File - available on request. PHILIPPINES APPRAISAL OF A SECOND RURAL DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS i. The Government of the Philippines (GOP) has requested the Bank to assist with the reformulation and implementation of its ongoing land settle- ment program administered through the Department of Agrarian Reform (DAR). Faced with (i) the situation of increasing land scarcity; (ii) spontaneous movement of rural landless families into the remaining underdeveloped public lands; and (iii) the need to provide an agricultural livelihood for families displaced as a result of ongoing development programs, Government is giving renewed emphasis to programs of organized land development and settlement. The proposed project would (i) strengthen and support the technical capacity of DAR to more effectively plan and design land development programs for set- tlement areas, (ii) accelerate development in three of the older settlement areas through integrated programs aimed at improving the living conditions of existing farmer populations and (iii) through implementation in the three settlements, test the collective impact of a number of GOP ongoing programs of special relevance to low income rural people, including village road and small-scale irrigation programs, cooperative development and agricultural credit, agricultural extension, demonstration and farmer training systems, rural health and family planning services. ii. The project would be the Bank's second rural development project in the Philippines, following the Mindoro project (Loan no. 1102-PH, dated July 28, 1975), and the first project to give primary emphasis to the development of rainfed agriculture in a mixed upland-lowland terrain. Progress under the Mindoro project is satisfactory, as is the case for 13 other projects addressed to rural problems in the Philippines that are currently under supervision. iii. Organized settlement and development of public lands has been a program of the Philippine government since before the Second World War and has been administered by a variety of agencies. Currently, the program is a responsibility of the DAR, which was created in 1971 with a broad mandate to carry out agrarian reform policies and programs. The Department had 34 settlements under its jurisdiction in 1976, accounting for about 700,000 ha of land and over 400,000 people, settlements being scattered throughout the Philippines, though mainly in Mindanao island. Many of these settlements were originally opened up in the mid-1950s and early 1960s, when for a time the program attracted considerable resources. Progress since then has been slow, much productive potential remains unutilized and living standards among the resident populations are typically well below national or even rural standards for the Philippines. iv. Government is aware that the planning and implementation of an effective settlement program will require a number of changes in organizational arrangements and procedures. Under the proposed project, DAR's manpower and resources would be focused on settlement design, planning, policy formulation and coordination. At field level, the project would support the extension of the programs of a number of agencies to the selected settlements, in contrast with the present situation where DAR itself has attempted to provide directly - ii - a wide range of developmental services, including force account construction of roads and irrigation, agricultural advisory services, credit, and community services. During project preparation, detailed plans were worked out for three of the existing larger settlements, accounting for about 10% of the total area and about one-fifth of the total settlement population. These areas are situated in the Dumarao-Cuatero area of Capiz province (25,000 ha and 26,000 population), in the Prosperidad-Talacogon area of Agusan del Sur Province (16,000 ha and 10,000 people) and in the Pangantucan-Kalilangan area of Bukidnon province (36,000 ha and 46,000 people). There are a further 10 large settlement areas, of 25,000 ha or more, many of which have similar problems and potentials and for which Government is preparing new development plans. V. The composition of the proposed project would be as follows: a. Technical Assistance - At Headquarter level, in the DAR, the project would establish a Central Project Management Unit (CPMU), with capability (i) to provide technical supervision and overall management of the development progams to be undertaken in the settlement areas selected for accelerated development under the project, including evaluation; (ii) to undertake identification and pre- paratory studies of possible new areas of public land suitable for development on the basis of settlement by small farmers and of existing, partially developed settlement areas; and (iii) to assist and advise GOP in drawing up a 10-year policy perspective and program for settlement. These activities would be undertaken by a small staff group supplmented by consultancy services, both local and expatriate. b. Area Development In the three settlements selected for accelerated devel- opment, the project would support the following principal activities: - construction and improvement of 290 km of farm-to-market roads and upgrading of access roads; minor irrigation and drainage works covering 5,000 ha; housing, multi- purpose buildings and equipment for field staff; village water supplies and sanitation; and village health units; - a program of village woodlots (fuelwood) and small forests covering 5,000 ha; and mechanical and manual soil conservation on 10,000 ha; - iii - services for extension, farmer training and com- munication; community and cooperative development; agricultural trials and demonstration farms; - term credit for work animals and implements, threshers, crop driers, abaca establishment, processing and marketing facilities. Seasonal credit for crops (rice, sugar, corn, coffee and abaca). vi. The project would be executed over a five-year period. Total cost is estimated at about US$33 million, including seasonal credit requirements. Contingencies would amount to US$8.5 million, of which US$6.1 million would be for expected price increases during the five-year period. The proposed Bank loan of US$15 million equivalent would finance 50% of total costs excluding duties and taxes, comprising estimated foreign exchange requirements (US$11.8 million) and 18% of local currency costs (US$3.2 million). GOP would fund other costs through annual budget appropriations. vii. Civil works (US$12.8 million) required under the project for road construction, irrigation and drainage, scheme buildings and facilities includ- ing agricultural facilities would generally be small, of varied design and geographically scattered. They would not be of sufficient size to attract international bidders and would therefore be constructed under contract following local competitive bidding procedures which are acceptable. A limited amount of civil works in more remote areas would be undertaken by force account where contractor interest is insufficient to secure competitive bids. Equipment and vehicles for force account construction, operation and maintenance (US$1.8 million) would be bulked into sizeable packages and procured through international competitive bidding in accordance with Bank Group Guidelines. A preference limited to 15% of the CIF price of imported goods, or the customs duty, whichever is lower, would be extended to local manufacturers in the evaluation of bids. Items financed under term credit (US$1.8 million) would be obtained in the local market, where competition is keen and repair facilities adequate. Contracts for locally available consul- tants and technical services (US$0.6 million) would be awarded after local advertisement in accordance with standard GOP procedures. Contracts with foreign firms or individuals (US$0.4 million) would be awarded in accordance with the Bank's Guidelines on the Uses of Consultants and on terms and condi- tions approved by the Bank. viii. Project execution would be coordinated and supervised by a Central Project Management Unit, established in DAR and responsible to the Secretary of the Department. The Manager for the proposed project has been appointed and suitable candidates for the three Area Manager posts have been selected. Project management would be assisted by an internationally recruited advisor with suitable experience and qualifications. Individual agency responsibil- ities for implementation would be set out in the form of a Presidential Letter of Instruction which is now ready for signature. - iv - ix. Farm and crop development under the proposed project would primar- ily involve rice, corn, abaca and sugar. Incremental rice and corn production would contribute to closing the food deficit of the Philippines; abaca and sugar would contribute to foreign exchange earnings. Incremental production at full development is estimated at 37,000 tons of rice, 26,000 tons of corn, 15,000 tons of sugar and 4,000 tons of abaca fiber. x. Current per capita incomes are estimated to be about US$60 per capita equivalent in the Capiz and Bukidnon settlements and below US$40 in Agusan, all well below the general poverty threshold calculated for the Philippines as a whole at US$140. Incomes reflect extremely low levels of productivity in these remote and hitherto neglected areas of the country, which have resulted in exceptionally poor conditions. Over approximately a 12-year period, after allowing for some increase in population, especially in Agusan, where settlement is not yet complete, incomes should increase to an average level varying from US$100 - 160 per capita. While these benefits can be expected to accrue in varing amounts, in part reflecting the quality of the landholding and in part the vigor and enterprise of the settler far- mer, nevertheless a broad diffusion would be achieved with on-farm employ- ment projected to increase by 80% as a result of the project. Since very few farmers in the settlements have incomes above the poverty threshold and since diversion of benefits through absentee land ownership is limited, the distributional impact is very favorable. xi. On the basis of the agreed investment plan and phasing of projected benefits, the economic rate of return would be about 28% overall, 17% in Agusan, 31% in Bukidnon and 41% in Capiz settlement area. The project bene- fits are based on assumptions that incorporate a relatively long development period and prudent estimates of yield at full development. The relatively high rates also reflect the considerable sunk costs in farm establishment and physical infrastructure, especially in Bukidnon and Capiz. Costs per family for incremental fixed investments under the proposed project, measured at baseline economic values, including physical contingencies, would be US$2,200 in Agusan, US$1,200 in Bukidnon and US$800 in Capiz. On the other hand, the project has significant risks, notably the uncertainty of response to improved technology on the part of low income farmers operating under rainfed condi- tions, market uncertainties for some crops (though project risks are reason- ably spread over four different crops), and the integrated and coordinated response called for on the part of the participating agencies. Nevertheless, the economic justification for the proposed project is a strong one. With realized benefits only half those projected, the overall rate of return would sLill be acceptable, at 15%. xii. The proposed project is suitable for a Bank loan of US$15.0 million for a period of 20 years at the standard Bank rate. The borrower would be the Republic of the Philippines. PHILIPPINES APPRAISAL OF A SECOND RURAL DEVELOPMENT PROJECT I. INTRODUCTION 1.01 The Government of the Philippines has requested Bank Group assist- ance to strengthen the settlement program administered by the Department of Agrarian Reform (DAR) and to finance the ongoing development of three existing settlement areas, one on the island of Panay, about 400 km from Manila, and two on Mindanao, about 800 km from the capital. At the central level, program strengthening would be accomplished through creation of a project unit within the DAR, together with the technical and financial re- sources required to execute a series of critical policy and planning studies for settlement development, in addition to management of the field level activity. In the settlement areas selected, the project would support pro- grams of infrastructural, agricultural and institutional development, designed to increase agricultural production and to bring standards of living to levels comparable with those of more favored rural areas in the Philippines. 1.02 The project was prepared by the Government of the Philippines with assistance from Bank staff. This report is based on the findings of an appraisal mission which visited the Philippines in July 1976, composed of Messrs. S. V. Allison, M. Furst, C. Keil, B. MacLeod and D. Leeuwrik (Bank). A follow up mission consisting of A. Mercer, B. MacLeod (Bank) and R. Patten (Consultant) discussed a draft report with Government in January 1977. II. BACKGROUND General 2 2.01 The Philippines covers some 297,000 km scattered over more than 7,000 islands between the Pacific Ocean and the China Sea. The 45 largest islands account for 98% of the area. The population is around 43 million (1975), growing at a rate of about 2.8% annually. Real GNP, which had a trend growth rate of 5% to 6% in the 1960s, grew by 10% in 1973 due to high prices for export commodities, but has grown at only about 6% in 1974-75 as some industries have been adversely affected by the recession in the Philippines' trading partners. Inflation related to high export prices and increased oil and food prices was a major problem in 1974, but abated markedly in 1975. Unequal income distribution and underemployment remain major eco- nomic problems, together with high population growth. Agriculture and Rural Development 2.02 Almost three quarters of the population in the Philippines live in the rural areas, where social services are poor, economic activities limited, agricultural productivity low and underemployment high. Character- tistic of Philippine agriculture are the dominance of small farms and the pervasiveness of tenancy, particularly among rice and corn farmers. To remedy past neglect, the government is giving high priority to the economic develop- ment of rural areas, and is complementing its economic programs with actions designed to increase the share of benefits that accrue to the small producer. These actions include agrarian reform (transfer of land title to tenant tillers, leasehold reform and land settlement programs), innovative programs for cooperative development to provide access to institutional credit and other services, extension and supervised credit programs better geared to the needs of small farmers, and improved provision for health care and other social needs in rural areas. 2.03 Agricultural sector performance will be crucial in determining whether the drive towards a rapid but more equitable income expansion suc- ceeds. The major goals for the sector are self-sufficiency in cereals, particularly rice and corn; development of the livestock and fisheries sector; expansion of agricultural exports; better conservation of natural resources; and strengthening of institutional support. Agriculture acecounts for about one-third of net domestic product, about 55% of total employment and 70% of export earnings. During the 1960s the rate of growth of agricultural output accelerated gradually and averaged 4.2% per year for the 1965-70 period, stimulated mainly by the spread of improved rice varieties. During the next five years, the spread of new varieties decreased; typhoons in 1972 and high fertilizer prices in 1974 further affected agricultural output. The trend growth rate of rice production from 1970 to 1976 was 2.7% a year. Much of the growth of employment in recent years has taken place in agriculture and although value added per worker in agriculture has increased in current prices, it has declined in real terms, implying growing rural underemployment. Land Resources and Population Pressure 2.04 The substantial expansion of domestic food and feed supplies the government is hoping to achieve are likely to be met mainly from programmed developments of rural infrastructure, particularly of irrigation, and improved services to agriculture that are addressed mainly to the traditional lowland areas of food crop production in the Philippines. But an effective program to tackle the agricultural problems of the mixed and upland areas, including settlement areas, would also contribute significantly. Moreover, without more effective programs for these areas a substantial element of the land base could be subject to an irreversible loss in potential through inappropriate land management and land use following unplanned, spontaneous incursions of landless migrants. 2.05 Historically, most underdeveloped land has been in Mindanao island, and with a continuing, largely spontaneous flow of rural migrants, the rural population of Mindanao, now about 7.5 million, has continued to grow rapidly, by about 50% during the 1960s, after doubling during the 1950s. But a number of indicators suggest that the relatively easy phase of expansion of the land frontier has now come to an end. In the Philippines as a whole, the rate of expansion of the cultivated areas has fallen from over 3% per annum in the - 3 - L950s to less than 1% per annum in the 1970s. By the early 1970s the net migratory flow to rural Mindanao had slowed to a trickle. Agricultural census data show a trend towards smaller holding size due to fragmentation, particularly in rice cultivation, indicating the increasing pressure on the agricultural land base of the nation. The pressure on land is likely to iincrease for at least another 20 years; with the most optimistic assumptions, there will still be roughly half a million more farm families in 1996 than in 1L976. With the currently available farm technology and projected improvements iLn living standards, each family would need 3-5 ha of mixed quality unirrigated land to attain reasonable minimum level of income, calling for about 2 mil- lion additional ha of new land to be made available. 2.06 Because of the lack of a complete inventory of lands in the Philip- pines and inadequate mapping, it is not possible to estimate the potential for future land development and settlement with any precision. Nearly one-third of the total land area of 30 million ha is yet to be classified and this area contains most of the sites for new settlement development on public lands. In many cases, land becomes available for settlement as logging is completed and, while classified as generally suitable for agricultural development, often a substantial portion would in fact be better suited to permanent forest or tree cropping. The typically broken terrain makes access to the relatively small pockets of lowland difficult and adds on extra dimension to the formidable .Land clearing and land development problems faced by settler farmers. In general, these areas are of only moderate agronomic potential, with a mix of upland and lowland terrain that requires careful land management if the full potential is to be realized and sustained. Land Settlement Program (Annex 1) 2.07 Organized settlement and development of public lands has been a program of Philippine Government since before the second world war and has been administered by a variety of agencies. Currently, the program is a responsibility of the Department of Agrarian Reform (DAR), which was created in 1971 with a broad mandate to carry out agrarian reform policies and pro- grams. Settlement areas are established by presidential proclamation from :Lands of the public domain which have been classified as "alienable and disposable", i.e. suitable for agricultural usage. Substantial legislative and executive authority exists for the Department to undertake directly or through contract all major activities relating to settlement development. Wlithin such designated areas, the DAR through a settlement field team backed by services from higher level units, can undertake a range of activities including: survey, layout and allocation of farm and house lots to newly arrived or locally approved settlers; construction of community buildings, roads and irrigation facilities; administration of loans for settler housing, work animals and implements; organization of farmer cooperatives; and provision of agricultural extension services. 2.08 The Department had 34 settlements under its jurisdiction in 1976, accounting for about 700,000 ha of land settlements being scattered through- out the Philippines, though mainly in Mindanao island. Settlements vary in - 4 - extent from 100,000 ha down to areas as small as 1,000 ha, with about 75% of the total land in settlements of 25,000 ha or more. The total population, consisting in great part of low income farmers, is probably about 400,000. About two-thirds of this total are registered settler families or family members, the remainder being either descendants of original settlers or occupants of public land in areas not yet surveyed and allocated. Most settlements were originally opened up in the mid-1950s and until the early 1960s the program attracted considerable resources. Progress since then has been slow, few settlements have been fully developed, and development of newer areas is held back pending completion of operations in these older areas. The failure to achieve an adequate level of performance has weakened the case of the agency to obtain the necessary resources vis-a-vis other claims on the budget and competing priorities, thus accentuating the problems. In general, only limited development work is presently ongoing in the older settlement areas and in most the bulk of the activity of the field team is taken up with ongoing administrative routine - minor repair to existing roads, bridge breakdown etc., adjudication of land disputes, provision of some medical and community services. Substantial inefficiencies in program execution are also in evidence. For example, while heavy equipment for road construction may be available to a settlement, budgetary support for its operation may be so inadequate as to idle that equipment for much of the year; similarly, a resident settlement team of 25-35 staff may be left to operate with only one (fully depreciated) vehicle. 2.09 Many problems stem from the lack of a planning framework both for the settlement program as a whole and for each individual settlement. The program is lacking a comprehensive framework or strategy to address such critical questions as: the scope of the program of settlement in relation to competing uses for public land, criteria for selection of areas in the public domain for settlement development and appropriate time sequencing of activities in areas selected. Settlement development is not "projectized" with a specific rationale for proposed actions and time horizon for their accomplishment leading to the phasing out of operations. Resolution of outstanding issues both for policy planning and implementation is now more urgent given the higher priority governemnt is according to settlement. With some 25 settlement teams in the country (and more planned to start up in newly proclaimed settlement areas), the operating expenses of the program accounts for about V7 million per annum. Capital outlay has averaged some 100 million per annum for the past three years for the department as a whole, the bulk of which is destined for settlement development. III. PROJECT SETTLEMENTS Selection Criteria 3.01 Project components (Chapter IV) have been formulated to alleviate the program constraints outlined in Chapter II. Complimentary to actions directed towards improvements in the design and implementation of the settle- ment program as a whole, existing settlements would be developed on a selec- tive basis under the proposed project. The expectation is that practical experience in developing these settlements would provide a depth and focus for the work of reformulating the broader policies and operational guidelines. The settlements selected have problems representative of those found in a wider range of areas, have reasonable productive potential, and are of suffi- cient size to warrant a more intensive application of technical, financial and human resources. The three selected exhibit the mix of more and less produc- tive upland and lowland terrain which is characteristic of settlements every- where in the Philippines, and all three are presently at, or only a little above subsistence farming in terms of current agronomic practice and levels of living. All three will also benefit from planned or ongoing major roadworks affecting their access to main market outlets. As indicated by the locational inserts on the project maps (attached) the islands of Panay and Mindanao are both remote from Manila and, within these large islands, the settlement areas selected are isolated by considerable stretches of poor road from the prin- cipal centers of population and government services. In Capiz and Bukidnon road improvements will be supported by the IBRD Third Highway loan, with work to be completed in 1979/80. In Agusan, the main highway linking the settlement north and south with major ports is to be completed this current year with bilateral assistance. Specific Features 1/ 3.02 The settlement in Agusan del Sur, a province on the island of Mindanao, is the smallest and least developed of the three selected. It was activated in 1968 with a total land area of about 16,500 ha, of which an estimated 3,000-5,000 ha are currently cultivated by 1,700 families. The topography of the project area in large part consists of broken terrain with some extensive flat areas along the rivers. Altitude varies from 10-30 meters above sea level in the flatter portions to about 200 meters in the uplands. The area is drained by small and intermittent creeks which discharge into the bigger drainageways of the Gibong and Agusan rivers. The flat portions of the settlement area are devoted to lowland rice, although a large portion remains in secondary forest and bush. Highland areas are covered mainly by secondary forest growth with patches planted to abaca, corn, upland rice, root and tree crops. Forests are of the primary type on the higher slopes. Loam and clay loam soils in the level areas are poorly drained; soils on the slope are subject to erosion when cleared. Rainfall is heavy (3,300 mm per annum) with no real dry season; at a low altitude, the climate of the area is humid and tropical. The settlement area sits to the east of a vast zone of mixed upland/lowland terrain (including extensive swamps to the south) which is presently still subject to logging operations, but which is gradually being made more accessible. Successful development of the settlement 1/ A profile of the three settlements is provided in Annex 2 of this report; Annex 3 describes the agronomic potential and existing farming systems. -6- area would provide a model applicable to this larger area. The environmental and human costs likely to be associated with unplanned expansions and incur- sions otherwise likely to take place can thus be avoided. Population density in the Agusan del Sur Province, at less than 20 persons per sq km, is among the lowest in the Philippines. 3.03 Incomes of the resident population, over 90% of whom list farming as principal activity, are the lowest among the three settlements, with 84% reporting less than F3,000 per annum per family (equivalent to US$400) in the survey conducted in September 1975 for project preparation. Crop yields are uniformly low in the area even by Philippine standards, with major factors being the difficult agricultural conditions (excessively steep slopes in the upland areas, poorly drained lowland areas and much primary land clearing to be completed) combining with an extremely poor development of access and connecting roads and relative isolation from main markets. The farm plot layout, which up to now has been on a grid pattern of equal sized holdings regardless of agronomic potential, has also hindered on-farm development and contributed to farmers' problems. Of the total population, about 700 are legal settlers, with certificates of allocation from DAR, with the remainder being considered as prospective applicants. The registered settlers occupy designated farm lots averaging 4.6 ha, of which some 840 have thus far been demarcated, covering 3,880 ha. For most villages, supplies and produce are moved by back-pack or carabao-drawn sled over tracks or deteriorated logging trails. Over 80% of the population live in straw huts, without water supply systems; medical facilities are limited to one health station manned by a DAR doctor; malaria and schistosomiasis are endemic in the area and fever/ pneumonia related illnesses are a common cause of death. 3.04 The settlement in the province of Bukidnon, also in Mindanao island, is the largest of those selected, with over 7,000 families (mid-1975 census data) or almost 50,000 people, distributed over 36,000 ha of which approxi- mately 19,000 ha or 55% are under crops. The topography conforms to that of a semi-denuded inclined plateau, with incised fast flowing streams, at eleva- tions of 500-1,100 meters above sea level. The land form is basically one of rolling and undulating slopes with limited areas of flat land, mainly in the area of Kalilangan. Vegetation is mostly cultivated crops and grasses, with some residual forests on the mountainous slopes; a substantial volume of corn is grown for cash sale and lesser amonts of rice for local consump- tion. The settlement area experiences no very pronounced maximum rainfall period and no totally dry season. Rainfall varies from 400-500 mm per month in the wettest period (May-October) and falls below 100 mm per month in the period January-March. Soils belong mainly to clay and clay loam series, with top soil of moderate depth and well drained. The problem of accelerated soil erosion is evident in certain areas and under continuous cropping without fertilizer, extensive depletion of natural fertility is occurring. An effec- tive approach to the agricultural problems of the settlement is of potentially wide application in the much larger corn growing area of the Bukidnon plateau, an area with a population of about half a million growing rapidly at a rate approaching 8% per annum. The Bukidnon settlement is also directly linked with a series of settlements comprising some 250,000 ha, that run roughly southwest into the Cotabato valley many of which are corn/rice areas with substantial portions underdeveloped. 3.05 While crop yields and incomes are generally low, the Bukidnon settlement comprises a relatively well developed community, with sizeable trading centers at Kalilangan and Pangantucan and a considerable degree of social and economic diversity among the local population. Data collected in the socio-economic survey indicate about 20% of households with incomes Of F5,000 or more, 20% in the middle V3,000-5,000 range and 58% at lower income levels. The average income level among farm households was F2,800, (about US$65 per capita), about double the average in Agusan. Some 2,500 iramilies were settled in the area during the early active phase of develop- ment during the 1950s, augmenting a considerable local population clustered along the lowland valleys. Some 5,000 farm lot subdivisions were made, mainly in the range of 2 ha in the lowland rice areas, and 6 ha and 8 ha in t:he upland zones. Twenty years later, the process of abandonment of agro- nomically worthless plots together with subdivision, sale of user rights and mortgaging of cultivated lots has considerably modified the original situa- tion. Of 4,400 currently occupied farm lots, some 7% are in the range 4.5 ha and below; 86% between 4.5 and 9.5 ha and the remaining 7% of larger size. I:n many cases, these occupied farm lots have been further subdivided in terms of de facto usage. Despite the length of period since settlement, and con- siderable changes occurring during that time, relatively few land patents (see Annex 1) have been applied for and fewer still issued. Lack of title is an impediment to farm investment in permanent assets and in obtaining t:erm credit for work animals, implements and development loans for plantation or other permanent crops. 3.06 The road network within the settlement, while better developed than in either Agusan or Capiz, remains extremely poor, and poses continuing prob- lems in evacuating crop surplus and receiving crop inputs. Partly for this reason, farmgate prices are well below economically appropriate levels and below GOP support levels which inhibits the adoption of improved tech- nology. DAR agricultural staff are largely ineffectual for want of techn- nical back up from subject matter specialists, organized work schedules and materials for demonstration and farmer training; the lack of adequate seed supply and timely availability of fertilizer have also hindered the efforts of the technicians; only in 1976 was a rural bank established in Kalilangan to provide institutional credit to local farmers. 3.07 The Capiz settlement on the island of Panay covers a total land area of 25,000 ha, of which about 10,000 ha are cultivated, and has a popu- lation of 4,600 families, roughly 25,000 people. The topography of the project area is generally mountainous, undulating to extremely steep slopes, with some rolling to relatively flat land and numerous isolated valley bottoms associated with the many rivers and creeks that crisscross the area. The main types of vegetation in the area are secondary forest, grasses, and cultivated crops. Considerable portions of the upland have been abandoned for cultivation, allowing grasses and shrubs to grow. The grass vegetation is extensive and predominantly imperata. Principal crops are sugar cane and rice. The area has no pronounced dry season and climate is of the humid tropical type. Rainfall exceeds 200 mm per month May-December and averages 2,000 mm per annum. Clay and clay loam soils are predominant, which are readily susceptible to erosion due to runoff on moderate slopes, and erosion control measures are necessary on the now relatively small upland area suit- able for and still subject to cultivation. 3.08 Unlike either the Bukidnon or Agusan del Sur settlements, the Capiz settlement had been opened up under the Homestead Acts well before the settle- ment proclamation in 1965 so that a considerable population was resident at that time, with established and, in some cases, patented land rights. Hence, very little resettlement into the area has been possible and only 6% of the population are migrants from other provinces of the Philippines. Without a stong pioneer focus, the Capiz settlement has not developed its own centers of populations to any marked degree, and up to now has relied for services on municipal centers located outside the settlement area, especially Dumarao. Under the administration of the settlement authority, some 3,000 farm lots were surveyed and all-ocated, two-thirds to the existing population and the remainder to local pioneers. While the basic allocation was 5 ha-6 ha plots, pre-existing land rights were validated and in some cases under the Homestead Act these lots were up to 24 ha in extent. Many of the lots have since been formally or informally subdivided, with currently second or third genera- tion occupancy of the land. There is also a substantial group of some 800 tenant farmers who have been identified as potential beneficiaries under land reform, involving 300 owners and some 1,300 ha of land in the settlement area. Socioeconomic differences associated with landholding are accentuated by the marked differences in profitability of crops, notably as between sugar and upland rice/corn. Income data collected during preparation show an average of r2,700, about the same level as for Bukidnon settlement. But it is likely that the sample missed many high income households who reside outside the settlement area but draw their incomes from farming and other activities inside it. A more skewed income distribution is also suggested by extremely low incomes at the bottom of the scale. IV. PROJECT COMPONENTS Summary 4.01 The project would consist of: (a) program support to secure improvements in the design and implementation of the settlement program as a -9- whole, including provision for technical assistance and feasibility studies for new and existing settle- ments; (b) support for physical infrastructure development, agri- cultural and other services in the three selected settlements. Detailed Features 1/ 4.02 The detailed features of the proposed project are presented below for the main components. A. Program Support 4.03 Planning and Technical Studies ($1.3 million): Expansion in DAR's capability through technical assistance for (i) feasibility studies and pro- grams for 200,000 ha of new and existing settlement areas; (ii) definition of a 10-year action program for settlement development, together with proposals for revised implementation procedures, agency responsibilities, and appropri- ate overall policy review (Annex 1). An assurance was obtained that these studies would be completed by December 1979 (feasibility studies) and December 1980 (policy studies). 4.04 Management Support, Staff Training and Evaluation (US$1.1 million): Equipment, staffing and technical assistance for a Central Project Management Unit (CPMU) in Dar to program, supervise and coordinate project activities (Annex 15). DAR's training capability and training programs for settlement staff including a limited amount of training abroad would also be strength- ened; training would focus on the three settlements selected for accelerated development, but would not be confined to them (Annex 16). Evaluation studies and monitoring of ongoing progress would be undertaken in all three settlement areas utilizing local consultants (Annex 17). An assurance was obtained that DAR would employ qualified consultants to complete a suitable design in con- sultation with the Bank by November 1977. 4.05 To assist with the activities described under 4.03 and 4.04, provi- sion would be included for up to 36 man-months of international expertise on short term contract and for substantial locally available assistance from private firms and other institutions. Internationally recruited consultants would be employed primarily to train government technicians through practical example and on the job demonstration so as to strengthen government capabili- ties to prepare future projects. Project management would also be assisted by an internationally recruited advisor, to be hired for a three-year term, who would bring to bear international experience in settlement development both 1/ Project costs are quoted in June 1977 prices, updated from July 1976 appraisal estimates and include physical contingencies. - 10 - for field level implementation and in the programming aspects of future set- tlement development. A suitable candidate for this post has been selected; his appointment is proposed as a condition of loan effectiveness. B. Settlement Development (Three Settlements) 4.06 Road Construction (US$9.9 million): A more adequate road network both within the settlement areas and for access to major routes outside the settlements is an essential condition for future agricultural development. 290 km of village feeder roads would be constructed or upgraded to estab- lished Barangay Road standards. 140 km of access roads (generally classified as provincial or national highways) would also be upgraded to a standard commensurate with prospective usage patterns and traffic densities. In Capiz settlement, provision is also included for 100 km of low grade tracks, pri- marily for evacuation of sugar cane from an expanded area of cultivation. The road lengths were selected for upgrading or construction on the basis of preliminary surveys conducted during project preparation and would provide adequate market access for some 85%-90% of farm families resident in the settlements. 4.07 Road costs (including extensive cross-drainage and bridgework to replace deteriorated facilities) would range from US$12,000 to US$16,000 equi- valent per km for new construction and from US$8,000 to US$13,000 per km for upgrading. Roads would be widened (with minor embankments in low lying areas) using a bulldozer, followed by surfacing and shaping of the formation by motor grader and compaction by towed roller. For village roads, the design standard to be adopted would allow for a formation width of 7.0 meters with a central section of 4.0 meters surfaced to 20 cm of gravel. A higher standard would be adopted for upgrading designated national and provincial highways, but traffic volume does not justify upgrading to full network standards; no extensive re- alignments are contemplated for these roads. 4.08 The Department of Public Highways (DPH) would be responsible for detailed design and construction of roads and maintenance of national and provincial highways; the Bureau of Barangay Roads (BBR), a relatively new sub-agency of DPH, would be responsible for village road maintenance, pri- marily through force account. Initial equipment needs for maintenance (US$1.0 million), would be provided under the project. MIaintenance costs, following construction and initial consolidation, are estimated at between US$800 and US$1,400 per annum. Some savings might be effected through the use of more labor intensive techniques which are presently under study in the DPH with ILO technical assistance. This possibility would be kept under active review through the life of the project; however, since the largest element in main- tenance costs is accounted for by transport of gravel from external sources, the possibility of any great reduction appears to be slight. An assurance was obtained that detailed proposals, designs and specifications for major construction or upgrading of project roads would be forwarded by DPH to the Bank for approval prior to construction (Annex 9). - 11 - 4.09 Irrigation and Drainage (US$4.0 million): In all three settlement areas, opportunities for development of minor irrigation facilities and improved water management for lowland rice cultivation would be exploited. Project works range from extremely simple regulatory structures and realign- ment of existing drainage channels for mini-projects (10-50 ha) with the work to be done by the farmers or farmer irrigator associations, to slightly more elaborate schemes involving small diversion structures plus unlined canals to provide water for service areas that are generally below 500 ha. The latter schemes are of the communal type, similar to those being developed under the first Rural Development project in Mindoro island (Loan No. 1102-PH) by the National Irrigation Administration (NIA) and would be constructed to similar standards. A total of about 3,000 ha would be served by these larger systems; the total program would serve some 5,100 ha. NIA would prepare designs for larger systems and would supervise implementation; field engineers from the DAR would design and supervise construction of smaller systems by force account, with unskilled labor contributions from farmer beneficiaries. Cost estimates were based on preliminary designs following field surveys carried out by NIA and DAR engineers during project preparation. An assurance was obtained that final design and cost estimates for the three larger systems would be made available for inspection by Bank staff before construction. 4.10 NIA requires the formation of an Irrigator Service Association (ISA) of beneficiary farmers to enter into a contractual agreement covering costs, repayments and water distribution once the feasibility of a scheme is assured. Formation of these ISAs would be the responsibility of the Department of Local Government and Cooperative Development (DLGCD) as part of the cooperative development program. Once built, maintenance and operation of the systems would be a continuing responsibility of the ISA. Under established NIA pro- cedures for cost recovery from communal systems, farmer beneficiaries would be expected to repay amounts equivalent in present value to about one-third of the capital cost of scheme construction (net of the farmers' own labor con- tribution). This is about the same recovery as is anticipated under the larger irrigation systems being constructed in the Philippines with Bank sup- port. After deduction of other costs including farm labor, participating farmers would pay between 15 and 20% of their incremental income from irri- gated rice as loan repayment and system maintenance, which is reasonable given their low income status. An assurance was obtained that NIA would make appropriate arrangements for maintenance and for recovery of costs from the beneficiaries (Annex 9). 4.11 Forestry (US$0.9 million): Equipment and technical services would be provided to DAR with objectives (i) to encourage appropriate land use by planting marginal land to trees or reserving areas for forestry development and (ii) to meet the requirements of the settlers for wood for fuel building and other purposes. The Bureau of Forest Development and the Department of Agriculture would provide technical assistance. In Bukidnon and Capiz settlements, small blocks (unallocated and abandoned farm lots) would be planted with quick growing trees total area 2,200 ha, and in Agusan an area of about 2,800 ha of existing forest, most of which has already been selec- tively exploited at some time in the past, would be managed according to - 12 - sustained yield principles. Small nurseries to supply seedlings of fruit and amenity trees to farmers in all three settlements, as well as supplying the seedlings needed for forest plantations in Bukidnon and Capiz, would also be established (Annex 12). 4.12 Other Land Development (US$0.3 million): In total between 10,000 and 15,000 ha under cultivation are estimated to be subject to more or less serious erosion, involving substantial and progressive crop losses. In the Bukidnon settlement equipment would be provided for the construction of large transverse bunds, giving protection to some 8,000 ha. Project works would be carried out by DAR personnel, with technical advice from the Depart- ment of Agriculture (Bureau of Soils). An assurance was obtained that tech- nical specifications and detailed design would be discussed with the Bank prior to procurement of equipment. Elsewhere hand methods would be used, involving construction of small terraces and use of improved farm practices, including contour ploughing and crop rotation (Annex 9). 4.13 Agricultural Services (US$2.4 million): Support would be provided under the project for adaptive research, extension, and farmer training in each of the settlements. Services are currently provided by DAR staff, as part of the resident settlement team. Besides the severe shortage of DAR technicians, available staff suffer from lack of training and facilities, poor supervision and weak linkages with ongoing programs of agricultural research and technical development. Farmer training has been virtually absent in Capiz and Bukidnon, though in Agusan, the Mindanao Agricultural Resettlement Agency (MARA) - a private body sponsored by the Philippine Council of Churches - has been providing such services, under an agreement with the DAR. 4.14 Because of the backward condition of these areas, a greater input by well-trained staff is needed, together with a stronger location-specific focus on the agricultural problems in these areas. The project would estab- lish in each settlement area an Agricultural Services Center (ASC), which would serve as the headquarters for adaptive research, extension and training. The centers would have buildings, equipment and facilities for staff training and farmer training and a small area of land (5-10 ha) for conducting verification trials and demonstrations with a small portion devoted to seed propagation and tree nurseries. The center would be designed as a permanent facility to be maintained after the settlement phase is completed, at that stage to provide services both within the settlement areas and to areas outside the immediate boundaries. The Department of Agriculture (DA) would supply the necessary technical specialists and field workers, and provide the overall direction and coordination for agricultural activities. 4.15 For technical advisory services to farmers, the proposed project would test an approach that has been successfully applied elsewhere in Asia with Bank support - the so-called training and visits system of extension. This system involves considerably closer supervision of field agents, who would work to predetermined daily work schedules with specific farmer groups, with bi-monthly training sessions conducted by senior technicians at the service center. The work of field agents would be made more effective by utilizing selected farmers to assist them in the dissemination of improved - 13 - practices. These farmers (farmer counselors) would be given special training at the ASC, including training in how to impart skills to others. This system has been successfully introduced in several provinces in the Philippines. 4.16 Initial screening of new crop varieties considered suitable for the conditions of the settlement areas would be conducted at the ASC farm, as would the testing of new production technology, particularly those elements embodying a relatively high risk factor for the farmer. Most adaptive exper- iments of satisfactory locally screened technology would be carried out on farmers' fields, under the technical guidance and supervision of agricultural staff. The system proposed would be similar to that used by the International Rice Research Institute (IRRI) in their out-reach programs; technical back-up, funded under the project, would be available from IRRI and from the University of the Philippines (College of Agriculture). For sugar development in Capiz, the Philippine Sugar Institute (PHILSUGIN) would provide a sugar technologist for the settlement. Under a new agreement between DAR, DA, DLGCD and MARA, MARA would continue to provide services within the framework of the proposed project in Agusan (para 4.13) (Annex 6). 4.17 Credit and Cooperative Development (US$3.4 million): Provision of adequate and timely input supplies involve activities that are both complex and vital to the full success of the proposed project. Currently, only minimal amounts of agricultural credit are available in the settlement areas and past efforts by DAR to supply credit directly have not been effective. Under the project, credit requirements for seasonal production (seeds, fertilizer, plant chemicals and labor: U$1.2 million) would be made available, in line with the projected adoption rates for improved technology (Annex 4). M4edium-term credit (work animals and implements, threshers, crop driers, marketing facil- ities and abaca establishment loans: US$1.8 million) would also be included. The financial returns on these investments, generally above 50%, are satis- factory (Annex 6, Tables 8 through 11). Credit would be channeled through the Central Bank (CB) to specified rural banks in the settlement areas on terms and conditions consistent with those of the Fourth Rural Credit project (Report No. 1415-PH) (RC IV). 1/ Terms would be those applicable to agrarian reform beneficiaries under CB regulations, with interest at 1% per month (seasonal credit), or 12% per annum, plus a 2% service charge. For term credit, the period of repayment would depend on the cash flow projections of the investments, and would generally be between three and five years. The participating rural banks and the investor would each contribute 10% of the investment cost. 4.18 Prior to the provision of credit under the project, during the first year (two years in Capiz), a series of steps would be taken to deal with the deficiencies of existing institutional arrangements in the settlement areas. 1/ The RC IV project could not be used for finance credit for this project primarily because over 80% of items proposed for this project would be ineligible under RC IV. - 14 - These measures are described in some detail in Annex 6. Briefly summarized, they involve (i) debt collection and settlement, to be undertaken by DAR staff in conjunction with DLGCD. Most debts are owed to DAR, in most cases incurred many years ago. Debts would be either rescheduled, written off or brought to litigation; (ii) the Central Bank would review the financial status of the two operating rural banks, in Bukidnon (a new bank, established in 1976) and in Agusan (a bank established with Philippine Council of Churches support in 1973). In Agusan steps would be taken to reduce the present level of arrears from 39% to the level of 25% stipulated under CB regulations. A condition of disbursement of loan proceeds for credit would be that the respective bank meet the normal CB eligibility criteria; (iii) a new rural bank would be established to serve the needs of the settlement population in the Capiz set- tlement (see para 4.19 below). An assurance was obtained that every effort would be made to make this bank fully operational by June 1979. The CB would provide for special monitoring of performance of the rural banks, including access to the services of the Management Advisory Unit and the Technical Support Unit. 4.19 GOP's Samahang Nayon village cooperative program would be developed and strengthened under the project to promote rural savings and self-help efforts in these areas. Under this program, initiated in 1973 and managed by the DLGCD, considerable progress has already taken place in the Agusan and Bukidnon settlements, where over 50% of the population are members, with sav- ings funds of about F250,000. Under the project, registered societies in good standing would borrow from the rural banks as marketing cooperatives to acquire necessary facilities, primarily grain threshers and driers. Util- izing their savings funds, cooperatives would also purchase equity in the rural banks serving these areas. In Capiz, a new rural bank would be estab- lished, to be jointly owned by the cooperatives; initial funds would be provided by cooperative savings together with a loan (Y250,000) from DAR's Fund for Direct Assistance, repayable over 15 years at 6% interest. Cooperatives would also be used in support of the agricultural extension and demonstration program (para 4.16). DLGCD would be responsible for the cooperative program and DLGCD staff and facilities in the settlements would be strengthened for this purpose. In respect of the Capiz bank to be established, DLGCD would provide management assistance over a five-year period, under a Management Training and Assistance Program established for such purposes (Annex 6). 4.20 Health, Family Planning and Village Water Supply (US$1.0 million): The project would extend the ongoing national program of rural health care, nutrition and family planning of the Department of Health (DH) to the settle- ment areas, with construction of 15 village health posts and two rural health units (one is already in operation) plus equipment and staffing for these facilities, including the rural health center already in operation. Standards of service would be the same as those being supported under the Bank's Population project (Loan No. 1035-PH) for rural areas. Family planning is virtually absent from these areas at present and the medical services provided - 15 - by the DAR are ineffective for want of adequate staff, supplies and technical backup. The approach proposed would facilitate full integration with existing provincial and national health care levels of service. The proposed component would also strengthen the malaria eradication control program and support selective public health measures relating to the control of schistosomiasis in the Agusan settlement, where these are serious problems (Annex 11). 4.21 Materials would be provided for construction of low cost village water supplies on a self-help basis (US$0.3 million), utilizing designs prepared by DAR engineers and under their supervision. It is estimated that about 50% of the villages in the settlement areas could benefit from systems of this type. The work involves primarily tapping local streams upstream of the village, which because of hydrological and topographical features are relatively free of pollution, and conveying water (under gravity) through plastic pipe to tanks in or near the village. For villages lacking such a water source (often the case in the Agusan settlement) alternative systems need to be considered. Provision is included under the proposed loan to finance a study by local consultants of the alternatives (Annex 9). 4.22 Management, Staff Facilities and Other Services (US$2.2 million): Additional offices, equipment, housing and staff would be provided to supervise implementation of the programs detailed above. Sites for the major facilities are in the process of being acquired; satisfactory building designs and site plans have been prepared. 4.23 Land Allocation and Titling: A special problem to be addressed early in the life of the project is land allocation and titling in the settle- ment areas. Despite the considerable period since the inclusion of these areas in the settlement program, many settlers continue to operate under usufruct systems, few settlers have received title to land and in most cases official settlers continue to operate under thle original Certificate of Allocation, which, with the passage of time, has sometimes changed hands a number of times or is applicable to a designated farm lot that has de facto been subdivided (e.g., through accommodation of second or third generation descendants of the original designated allocatee). Cases of illegal tenancy arrangements, through which a number of plots are effectively controlled by a third party, also occur in the Capiz and Bukidnon settlements. The absence of a land title or equivalent instrument is an impediment to obtaining institu- tional credit, increases the dependence on local moneylenders, and inhibits investment in permanent assets. DAR is taking steps to strengthen its capability at the settlement level to deal with these problems and new pro- cedures would be instituted to regularize the existing situation and permit the rapid issuance of land title or an equivalent instrument. The elements of an improved approach are summarized in Annex 10 and include (i) revision of new plot design procedures to reflect potential net income criteria instead of solely area size criteria; (ii) criteria for the revision of the boundaries of currently uneconomic plots; (iii) revision of review procedures to allow rapid issuance of a certificate of title (or other suitable instrument) shortly after land allocation; (iv) wider discretionary powers to land allocation - 16 - officers to effect the foregoing; and (v) the establishment of a local repre- sentative land committee in each settlement area to work with and assist officials, and to ensure local views are taken into account. Drafts of revised procedures were discussed at negotiations and an assurance was obtained that the new procedures would become operational not later than December 1977. V. PROJECT COSTS AND FINANCE Cost Estimates 5.01 Total project costs are estimated at US$32.6 million, of which 11.8 million or 36% is foreign exchange. Local taxes and duties would account for US$2.6 million equivalent. Foreign consultant services have been costed at US$65,000 per man-year (including housing allowance or per diem, inter- national travel and local transportation). Project costs are based on esti- mates made by the appraisal mission in mid-1976, updated to June 1977. Physical contingencies of between 15% and 20% have been used. Costs due to expected price increases over the implementation period would amount to about 19% of total project costs, assuming the following annual inflation rates: Annual Inflation Rates (%) 1977-79 1980-82 Civil Works 9 8 Equipment and Services 7.5 7 - 17 - 5.02 Details of project costs are presented in Annex 13 and summarized below: Project Cost Summary Peso Millions US$ Millions Foreign Base Local Foreign Total Local Foreign Total Exchange Cost A. Program Support Staff Salaries and Allowances 3.48 - 3.48 0.47 - 0.47 - 2 Technical Services 4.42 3.67 8.09 0.59 0.49 1.08 45 4 Staff Training 1.45 0.52 1.97 0.19 0.07 0.26 27 1 Other Costs 1.20 2.03 3.23 0.16 0.27 0.43 62 2 Sub-Total 10 .55 6. 22 16.77 1.41 0.83 2.24 B. Settlement Infrastructure Civil Works - Roads 34.65 21.23 55.88 4.62 2.83 7.45 38 31 - Irrigation 12.76 7.80 20.56 1.70 1.04 2.74 38 11 - Other Works 2.33 1.42 3.75 0.31 0.19 0.50 38 2 Equipment for Force Account 4.37 8.93 13.30 0.59 1.19 1.78 67 8 Sub-Total 54.11 39.38 93.49 7.22 5.25 2 1247 C. Settlement Services Forestry - Buildings and Equipment 1.28 0.97 2.25 0.17 0.13 0.30 43 1 - Staff Salaries and Allowances 0.05 - 0.05 0.01 - 0.01 - - - Other Operating Costs 1.98 1.20 3.18 0.26 0.16 0.42 38 2 Agriculture and Cooperative Development - Buildings and Equipment 7.02 4.13 11.15 0.94 0.55 1.49 37 6 - Staff Salaries and Allowances 6.50 - 6.50 0.86 - 0.86 - 4 - Other Costs 1.48 0.67 2.15 0.20 0.09 0.29 32 1 Health - Buildings and Equipment 1.23 0.67 1.90 0.16 0.09 0.25 35 1 - Staff Salaries and Allowances 1.31 - 1.31 0.17 - 0.17 - I - Other Costs 0.70 0.38 1.08 0.10 0.05 0.15 38 1 Administrative, Engineering Support and Settlement Services - Buildings and Equipment 4.95 3.75 8.70 0.66 0.50 1.16 43 5 - Staff Salaries and Allowances 7.33 - 7.33 0.98 - 0.98 - 4 - Other Costs 1.02 1.05 2.07 0.13 0.14 0.27 50 1 Sub-Total 34.85 12.82 47.67 4.64 1.71 6.35 D. Credit Funds 'Term Credit 9.22 3.90 13.12 1.23 0.52 1.75 30 7 Seasonal Credit (Revolving Fund) 4.59 4.58 9.17 0.61 0.61 1.22 50 5 Sub-Total 13.81 8.48 22.29 1.84 1.13 2.97 E. Total Base Costs (June 1977) 113.32 66.90 180.22 15.11 8.92 24.03 100 Physical Contingencies 12.05 6.30 18.35 1.60 0.84 2.44 10 Price Contingency 30.21 15.60 45.81 4.03 2.08 6.11 26 Total Cost 155.58 88.80 244.38 20.74 11.84 32.58 136 - 18 - Financing 5.03 The proposed Bank loan of US$15 million would finance the foreign exchange costs of the project (US$11.8 million), together with 18% of esti- mated local currency costs (US$3.2 million). For medium- and long-term credit provided under the project, participating rural banks and sub-borrow- ers would each finance 10% of investment costs, together amounting to about US$300,000. The Central Bank would provide the balance for on-lending to farmers through selected rural banks. GOP would fund other items through annual budget appropriations. To ensure the continuous and timely flow of funds, an agreement was obtained that the Government would establish a special project fund, to be replenished by Government at regular monthly intervals to a level equivalent to the estimated requirements for the next two months. Establishment of such a special fund is proposed as a condition of loan effectiveness. Budgeting 5.04 All items financed under the project would be subject to annual budgetary approval within the framework of an Inter-agency Project Coordinat- ing Committee (IPCC). Proposed project expenditures would be formulated by line agencies and DAR at settlement level, thereafter reviewed and agreed by all member agencies of the IPCC and ultimately approved by the Commission of the Budget as part of the regular annual budget preparation. Funds would subsequently be allocated to a special project fund administered by the Central Project Management Unit (CPMU) of the DAR from which agencies would be reimbursed for their approved expenditures. Expenditures would take place in conformity with the budgetary provisions and, at settlement level, after approval by the settlement area managers as appropriate. Procurement 1/ 5.05 Equipment and plant for force account construction, operation and road maintenance (US$1.8 million) would be bulked into sizeable packages and procured through international competitive bidding in accordance with Bank Group Guidelines. A preference limited to 15% of the cif price of imported goods, or the customs duty, whichever is lower, would be extended to local manufacturers in the evaluation of bids. Technical and office equipment and a small number of vehicles (to a total of US$1.1 million) are of limited amounts by detailed specification and local procurement procedures, which include adequate competition and provision for the participation of foreign firms, are acceptable. Local procurement is also appropriate for off- the-shelf items costing less than US$10,000 each because the advantages of international competitive bidding would be clearly outweighed by the administrative costs involved. The total cost of such items would not exceed US$300,000. Material inputs (fertilizer, plant protection chemicals) financed under seasonal credit (US$1.0 million) would be procured by sub-borrowers from 1/ Figures shown in parentheses are June 1977 base figures. - 19 - local dealerships of international manufacturers. Items financed under term credit (US$1.8 million) including work animals, threshers, driers and chain saws, would be obtained in the local market, where competition is keen and repair facilities adequate. 5.06 Civil works (US$12.8 million) required under the project for roads, irrigation and drainage systems, buildings, forestry and conservation works would generally be small, of varied design and geographically scattered. They would not be of sufficient size to attract international bidders and would therefore be constructed under contract following local competitive bidding procedures administered by DAR for building, housing and conservation works, DPH for roads, and by NIA for the larger irrigation and drainage systems. The competitive bidding procedures of these agencies are considered acceptable. A limited amount of civil works through force account procedures in these remote areas would be expected where contractor interest is not sufficient to secure competitive bids. An assurance was obtained from GOP that the amount of work done by force account would not exceed 40% of the total cost of the work, without prior approval by the Bank. 5.07 Contracts for locally available consultants and technical services (US$600,000) would be awarded after local advertisement in accordance with standard GOP procedures which are considered satisfactory. Contracts with foreign firms or individuals (US$380,000) would be awarded in accordance with the Bank's Guidelines on the Uses of Consultants and on terms and conditions approved by the Bank. Disbursements 5.08 Disbursements would be made at the rate of 100% of the foreign exchange cost of directly imported equipment and vehicles, 100% of the ex- factory cost of locally manufactured equipment and vehicles, and 65% of the cost of equipment and vehicles procured locally; 100% of the foreign exchange cost of consultants and training abroad; 65% of local consultants' costs; 45% of civil works and other services; and 60% of disbursements made by the Central Bank for term credit. Details and categories are shown in Annex 14. 5.09 Disbursements of the Bank loan would be made against standard Bank documentation except for expenditures for civil works by force account, salaries of project personnel and other operating expenses, term credit, and, irrespective of category, item cost of less than US$3,000. Disbursements for the specified exceptions would be made against a Statement of Expenditure, the documentation for which would not be submitted for review, but retained by the Borrower and available for inspection by the Bank during the course of project supervision. These expenditures would be listed by account code and category on a monthly basis for certification by the Project Manager and the Financial Controller. It is expected that disbursement would be completed by June 30, 1983, approximately one year after the end of construction. Upon completion of the project, any undisbursed funds would be cancelled. Annex 14, Tables I through 3 show the estimated expenditures schedules and Table 4 an estimated semi-annual disbursement schedule. - 20 - Accounts and Audit 5.10 All participating agencies, with the exception of the rural banks through which project credit is to be provided, are organizations of Govern- ment and their accounts are audited annually by the Government's Commission on Audit. Government has agreed that agencies participating in the project would maintain separate accounts for their portions of the project and that after audit, the project accounts, together with the auditor's comments, would be sent to the Bank within four months of the close of each financial year. The Department of Rural Banks and Savings and Loan Association (DRBSLA) of the Central Bank (CB) would audit each rural bank participating under the project once a year and would audit sub-borrower accounts on a random basis. VI. ORGA4IZATION AND MANAGEMENT (Annex 15) General 6.01 The project would focus on creating a replicable pattern of inter- agency coordination for settlement development and would strengthen DAR's capability to undertake responsibility for the coordination of activities, perform specialist functions relating to land allocation and resettlement, and settlement planning. DAR staff and line bureaus would also be fully responsible for project execution in respect of those components of the proposed project to be implemented by DAR. Nevertheless, the proposed arrangements for management and execution of the project involve substantial changes from those that now apply. Government recognizes the need for a substantial reorientation of the program together with changes in DAR's own organizational structure relating to settlement activities. Further changes may be required as a result of experience gained under this project, both in field level implementation and through the series of policy studies to be undertaken with reference to the future settlement program. Central Project Management Unit (CPMU) 6.02 It is proposed to establish a Central Project Management Unit (CPMU) reporting directly to the Secretary of the DAR, incorporating essen- tial line and staff functions relating to project activities. The structure of the GIPU is described in Annex 15 and shown in Chart 3. The Project Manager has already been appointed from the DAR senior staff. He would supervise the activities of a small staff group, which is now assigned from the existing staff bureaus at DAR headquarters, with capability to: (i) draw up detailed programs and budget requests for the three settlement areas and to maintain financial control of these activities; (ii) liaise with cooperating agencies, both in respect of field level implementation and in obtaining staff inputs for policy and technical studies relating to the future land settlement program; (iii) supervise the accomplishment of feasibility studies and reports on specific existing and new settlement areas; and (iv) supervise the work of consultants hired under the project. The project manager would be supported - 21 - by an Assistant Secretary of the Department, designated the Operations Coor- dinator of the project, who would handle any major issues involving interagency relationships. An assurance was obtained that the Bank would be consulted should any change in the individual designated as project manager become necessary. 6.03 The CMPU would be responsible for drawing up the terms of reference and contractual arrangements for local and international consultants needed for feasibility studies (para 4.03). An assurance was obtained that arrange- ments satisfactory to the Bank to hire and retain such consultants for feas- ibility studies would be made by May 1978, following a preliminary review of the existing and new settlements available for accelerated development. For these studies and for the policy and programming studies for the longer term (10-year) perspective on land settlement, CPMU would draw on the full re- sources of the DAR staff Bureaus, including the DAR Planning Secretariat and the Bureau of Resettlement. Consultancy funds would also be made available to utilize the services of suitable institutions - e.g., the Development Academy of the Philippines; policy studies would be carried out in close cooperation with other agency planning groups (Department of Agriculture, Department of Natural Resources) and would be coordinated by the National Economic Develop- ment Authority. The report and recommendations of this group would be reviewed by an ad hoc sub-committee of the Cabinet Coordination Committee for Rural Development to consist of the Secretaries of DA, DNR and DAR under the chairmanship of the Secretary-General of the NEDA. Organization at Settlement Level 6.04 Project actions in the selected settlements, while specific to the distinct conditions, land use potential, and activity patterns of each sepa- rate area, would nonetheless conform to a system or plan directed at dealing with common problems, utilizing approaches that are replicable or adaptable to other situations. The concept of a resident settlement team whose basic function is to accomplish the relatively short-term and transitional goals associated with a "take off" phase of development has been retained. The proposed arrangements also take into account the need to establish service units that can be integrated into the structure of local and national adminis- trative and technical services at the end of the project period. The length of the necessary transitional phase varies according to the mix and initial stage of development in the settlement and its size, but in general the appropriate horizon under Philippine conditions is between five and ten years; this phase would be completed with the five years disbursement period of the project in two of the three settlements selected. 6.05 Area Manager. The proposed interim organization and heightened pace of development activity involves a substantial, though temporary, increase in staff at the settlement level and a substantial increase in responsibilities relating to the use of the project facilities. Thus, the job requirements for the Area Manager considerably exceed those of the settlement team leaders who occupy the corresponding post under present arrangements. The task of coor- dinating the work of several agency implementing sub-units posted to the - 22 - settlements is also a new feature in the proposed plan. It has therefore been agreed that the three area managers would be recruited as contract staff for the duration of the project, being in all cases well-qualified Filipino nationals. Selection of suitable persons for these important posts has been completed and their appointment is proposed as a condition of loan effectiveness. 6.06 The Area Manager would coordinate the work of a number of units which in functional terms cover infrastructure development, land and water, agriculture, credit, settlement services (including land allocation) and in some cases special units such as those for forestry and abaca develop- ment. Details are shown in Annex 15 and Chart 4. These units would in most cases be staffed and managed as line agency teams, with technical supervision and back-up from the parent agency. The Area Manager would coordinate the activities of these agency units and would monitor their performance; he would also direct the work of administrative and accounting services relating the program as a whole as well as DAR staff units assigned to the settlements. Project Committees 6.07 At national level, an Inter-agency Project Coordinating Committee (IPCC) would be established, under the chairmanship of an Assistant Secretary of the DAR. This committee would be composed of senior staff from the agen- cies involved in the project, normally a departmental director or his equiva- lent. Some 11 agencies would thus be represented. 1/ The committee would deal with (i) annual work plans for implementation and budgetary allocations, (ii) inter-agency responsibilities for project preparation and programming of the forward settlement program and (iii) resolution of inter-agency conflicts or disputes. Secretariat for the committee would be provided by the CPMU. The Operations Coordinator would report to the Secretary of DAR and to the Cabinet Coordinating Committee for Rural Development. The latter committee would resolve outstanding inter-agency issues that could not be resolved at the IPCC. 6.08 At the regional level, the Area Manager would be assisted by an Advisory Committee under the chairmanship for the Provincial Governor, to consist of the Regional Directors of line agencies with staff units posted to the settlements, together with the NEDA Regional Director. The prime objective of this committee would be to ensure continuing mutual understand- ing among senior regional officers of progress under the project, and to provide any necessary coordination for other non-project related development programs ongoing in the region. 6.09 Agreements have been drawn up between DAR and participating agencies covering the responsibilities of each agency under the proposed project. A Presidential Letter of Instruction spelling out the responsibilities of the 1/ Consisting of DAR, DA, DH, DLGCD, DNR, DPH, the NIA, the NGA and NEDA in addition to the Central Bank (Rural Banking Branch) and the Budget Commission. - 23 - Government agencies implementing the project and establishing an Interagency Project Coordinating Committee (IPCC) has been finalized; its signature is proposed as a condition of loan effectiveness. Reports and Annual Work Plans 6.10 The CPMU, in conjunction with line agencies represented on the IPCC would draw up annual budgets and work plans, in accordance with estab- lished GOP procedures. An assurance was obtained that these plans would be available for review by Bank staff prior to being finalized. Participating agencies, through the Area Managers, would render monthly progress and financial reports to the CPI4U. CPMU would prepare quarterly and annual progress and financial reports under a format acceptable to the Bank, with copies to the Bank within 45 and 90 days respectively. Implementation 6.11 A schedule of early events is included as Annex 19. VII. PRODUCTION, MARKETING AND FARM INCOMES Introduction 7.01 Differences in agro-ecological conditions in the three settlements under the proposed project are reflected in their production patterns. Broad features that the settlements have in common are: (i) high annual rainfall, more or less evenly distributed throughout the year; (ii) uniform temperatures which are rarely limiting to plant growth; (iii) a mix of upland and lowland terrain of moderate agronomic potential; (iv) generally acid soils of heavy texture and low fertility which are often badly eroded in the upland terrain; (v) many smallholdings which are farmed at, or a little above, subsistence level because of the lack of services and physical infrastructure, and hence opportunities for commercial farming. In the lowlands, rice is the most important crop. In the uplands, corn and upland rice are grown, the latter mostly for subsistence. The main cash crops are abaca in Agusan, corn in Bukidnon and sugar cane in Capiz. Farm and Crop Development (Annexes 3 and 4) 7.02 A number of project activities would assist smallholders to raise productivity and farm income. Technical packages for crop development are, however, based mainly on results of research and trials conducted elsewhere than in settlement areas, and are primarily oriented towards relatively advanced commercial farmers. This has been taken into account in projecting development following their more intensive application in the settlement areas. Yield expectations and response rates have been estimated at levels below what could be expected were a more situation-specific technology available. The adaptive research work and extensive local trials to be - 24 - carried out and supported by the project are expected to have an extremely high pay-off considering the very limited efforts focused in this direction in the past. However, the projections do not incorporate benefits of new research findings, which at this stage are necessarily hypothetical. 7.03 The yield improvements estimated to result from project actions are shown below. "Unimproved" yields approximate those currently realized in the settlement areas; these are generally below Philippine averages, reflecting in part the moderate potentials of the areas, but also other adverse factors: (i) use of unimproved (traditional) seeds and planting materials, and incorrect application of improved technology (e.g., use of degenerate hybrid corn seed) reflecting inadequate technical services for agriculture; (ii) absence or low levels of use of fertilizer and plant protection chemicals - stemming in part from the lack of an effective credit program and weak incentive under prevailing market conditions (roads); poor post-harvest technology (threshers, driers, storage) coupled with adverse conditions (year-round rains and difficulty in evacuating crops); and other factors - e.g., extensive rat damage and a need for heavy weeding in the upland- terrain. Project actions designed to deal with these problems are discussed in-Chapter IV. Projected Yield Improvements: Tons/Ha Unimproved Improved Full Package Ave- Tons/Ha Area % Ton/Ha Area % Tons/Ha Area Z rage Rice (unmilled) - Lowland Irrigated 1.8 10 3.0 30 3.5 60 3.2 - Lowland Rainfed 1.5 20 2.5 30 3.0 50 2.6 - Upland 0.8 40 1.3 40 1.8 20 1.4 Corn 0.8 40 1.7 45 2.0 15 1.4 Sugar Cane 32 20 50 30 65 50 51 Abaca (fiber) 0.5 10 1.5 40 2.0 50 1.6 /a At full development, generally 10-12 years after projection inception, 15 years in the case of abaca.. 7.04 A full discussion of yields and anticipated farmer response is provided in Annex 3 of the report. At full development, projected yields, - 25 - including yields based on the "full package" technology 1/, would be well within the range obtained by better farmers in the Philippines - with the partial exception of upland rice, for which the full package treatment would involve use of improved varieties that have only recently been developed. Substantial areas under upland rice and corn are expected to remain at unim- proved levels of productivity, which areas are judged incapable of benefiting .from known on-farm technology (though some small benefit should result from improved market conditions and post-harvest technology). In general, the element of uncertainty in the projections relates less to technical considera- ions than to the judgments about farmer response implicit in the calculations of percentage area subject to improvements (particularly difficult to estimate for upland rice and corn). For abaca and to some extent sugar cane, progress would be most heavily influenced by marketing factors (for both of these crops, yields substantially exceeding those projected are readily obtained in well organized commercial establishments). Marketing of sugar and abaca is discussed in paras 7.08-7.09 below. Production 7.05 Incremental production resulting from the project is estimated as follows: Year 5 Year 10 Year 15 - -- '000 tons ---------- Rice (unmilled) 17 36 37 Corn (shelled) 13 26 26 Sugar Cane 78 146 147 Abaca (fiber) 0.7 3.2 4.4 As well as increased yields, the production projections also reflect some changes in cropping pattern and an expanded area of production in the case of certain crops. In summary these are anticipated to be: (i) an addi- tional 5,000 ha of land under irrigated rice; (ii) an expansion of 3,000 ha in sugar cultivation in Capiz, facilitated by a network of new penetration tracks to be constructed under the project; (iii) an expansion in abaca plant- ing of 2,500 ha in Agusan into new areas; and (iv) an expansion in cropped area under corn in Bukidnon, associated with a reduction in fallow related to increased use of inputs. A small expansion (650 ha) in area planted to robusta coffee would also be supported in Bukidnon. The area planted to upland and rainfed lowland rice would decrease by 3,000 ha. Excluding the undeveloped Agusan settlement, the increase of production over the 1/ The difference between "improved" and "full package" technology re- flects primarily in the case of the latter a higher level of material inputs on the part of better farmers on the better land: all farmer adopters should benefit in some degree from use of improved inputs, market access and post harvest technology. - 26 - development period would be at an average annual rate of between 8% and 11% a year with reference to current levels. 7.06 Forestry development for local fuelwood and building purposes would be undertaken on 5,000 ha, using block development techniques in Capiz and Bukidnon and selected improvement of existing second growth in Agusan. From year 7 onwards, approximately 55,000 m of household wood would be available annually to consumers in Bukidnon and Capiz, at prices below those now pr vailing and with full cost recovery. In Agusan, an annual supply of 10,000 m could be harvested almost immediately after project start-up. Proper management would ensure the sustained production of local requirements of wood for fuel, building and other household purposes. Marketing and Prices (Annex 8) 7.07 At projected prices, available technologies offer considerable incentive to adopting farmers, with net return per ha ranging from roughly 110% to 200% above current returns for major crops (after charging in- creased labor input as a production cost). For rice and corn, marketing arrangements are influenced by the Government through support prices to farmer-growers and price ceilings for consumers. The National Grains Authority (NGA), using its own and rented facilities (warehousing and trans- port) intervenes to maintain appropriate prices and handles imports of grains. Its intervention in the settlements, however, has been quite limited and grain prices to farmers into these areas have tended to be well below support levels. Under the project, a combination of actions would be taken to improve the marketing situation (improved roads, cooperative development and post- harvest facilities); NGA would be a party to the inter-agency agreement for the project thereby committing itself to maintaining an effective presence in the areas. Projected farmgate prices are well within economically justified levels; incremental grain production would serve to reduce grain imports, in line with Government's self-sufficiency objectives. 7.08 For sugar production, GOP also operates a national pricing and marketing policy that in the past has provided a substantial subsidy for domestic users and consumers (domestic use accounts for about one-third of total production). Market prospects, however, depend primarily on the world market situation and international contracts negotiated by the Govern- ment with importers. The appraisal is based on Bank commodity forecasts, which project a considerable improvement in prices over the development period of the project, relative to the current depressed state of the market. Price projections also allow for the continuation of a subsidy for domestic users. In the local area, one of three sugar mills accessible to the settle- ment - the mill through which most settlement production is now processed - is doubling its milling capacity. It is also anticipated that the comparative advantage of the area for sugar production would be raised on completion (by 1980) of major and minor road upgrading under the Bank's Third Highway Project (Loan No. 1353-PH). Incremental sugar production from the project would constitute a very small fraction of projected Philippine supply. - 27 - 7.09 Abaca production in the Agusan settlement is also primarily geared towards export markets, mainly Japanese and US markets involving a variety of end uses, including the traditional cordage manufacture and for use as mix fiber in the production of high quality paper. Export prices have shown considerable fluctuations, with the very high levels of 1974 followed by a steep decline and some recent recovery. Appraisal price projections assume a continuation of recent low prices, with, however, some improvement in benefit to growers through the formation of a marketing cooperative and actions to improve fiber quality. A rapidly growing domestic market for abaca is based primarily on handicraft manufacture; with the proposed expansion under the project, and better access to the major centers (main highway upgrading has been recently completed), it maybe possible through project implementation to develop marketing contracts at considerably more advantageous prices. To reduce the exposure to market risks, the production scheme proposed for this component is geared to a mixed farming system under which growers would be encouraged to develop not more than 2 ha of a 5 ha lot under abaca, with the balance devoted primarily to food crops. The DA would extend its specialized program for this crop to the area, including an abaca specialist. MARA has pioneered the introduction of other crops possibly suitable for the upland terrain - notably coffee and rubber - and progress with these efforts would be monitored for possible wider application in the interests of further diversification. Farmer Benefits 7.10 Under present circumstances farm incomes are extremely low in all three settlements but particularly so in Agusan, the newest and least developed of the three. Current income status of farm households, as re- ported in the sample survey undertaken as part of project preparation, is shown below. Agusan Bukidnon Capiz #2,000 and below (%) 76 38 55 g2,001-4,999 (%) 18 40 36 t5,000 and above (%) 6 22 9 Average Income (P) 1,600 2,800 2,700 No. Farm Families 1,550 6,700 3,850 % of all Families 91 90 82 7.11 The share of off-farm income and income generated by crops other than those to be developed under the project accounts for 20%-40% of the the amounts shown above. A very considerable range in cropping patterns is typical of the mixed upland/lowland terrain and variation in soil types found in each settlement area. Farm budgets are therefore only broadly indicative of projected developmental impact of actions supported under the project (Annex 4). The seven farm budgets constructed relate to lowland, intermediate and upland conditions and take into account dif- ferences between the three areas. Allowing for off-farm income, they show net income increases ranging from 100% to almost 400% at full development. - 28 - Among farmers whose holdings are marginal and who could not therefore be expected to obtain major direct benefit within the limits of known technology, some benefit will result through opportunities for hired labor, though these will be diminished by the likely impact of further population growth, current- ly estimated at about 3% per annum. Environmental Impact 7.12 Improved approaches to land management in upland terrain typical of settlement areas is a prime concern of the project. The problems of soil erosion and depletion would be addressed by a combination of actions includ- ing improved farm husbandry, a pilot project involving mechanical methods for the construction of large transverse bunds and forestry development on the steeper slopes. Programs are included that address the problem of malaria control and schistosomiasis in the Agusan settlement area. Improved village water supply systems would also be provided under self-help arrangements. VIII. ECONOMIC BENEFITS AND COSTS (Annex 18) Project Objectives 8.01 The primary objective of the proposed project is to develop and test methods for the better exploitation of the remaining public lands in the Philippines suitable for development as settlement schemes for small farmers. Towards this objective, the project would support and help develop improved management systems for GOP's settlement program, strengthen and extend the capability to undertake appropriate feasibility studies for exist- ing and new settlement areas, and support a better overall focus on the problem by provision for a greater degree of inter-agency coordination, so bringing to bear the varied and considerable expertise available under ongoing sectoral programs at the national level. The project would also support the development of three existing settlements and carry them forward to the stage of full integration with the rural community at large. 8.02 Primary emphasis would be given to the establishment of a viable farming system in these agronomically backward and difficult areas. The anticipated increases in farm incomes, as described in the preceding section, would raise average incomes (after allowing for non-farm income) to an equiva- lent per capita of between US$120 and US$160 in the three settlements. While considerable variation in this average can be anticipated, depending in part on the vigor and enterprise of the participant farmers and the variation in agronomic potential of the landholding, very few farmers in these areas now enjoy incomes above the national poverty threshold estimated at US$140 per capita. Indeed, on the basis of known technology and the projections made in this report based on its application, not more than 60% would achieve incomes above this level at full development. On the other hand, without the project the situation would be likely either to remain about the same as currently exists and for some farmers, would worsen due to continuing soil depletion and erosion. - 29 - 8.03 While the Philippines has a number of innovative and well directed programs at a sectoral level aimed at dealing with the problems of rural poverty, it is fair comment that these tend to be rather poorly coordinated one with another. In a wider sense than encompassed by settlement develop- ment, the joint application of these various programs in a well organized and structured setting, as is envisaged under this project for the three areas, offers an opportunity to observe their potential for a collective impact that exceeds the sum of the constituent parts. If successful, the application of a similar structured approach to very much larger areas could be a result of major importance, applicable both within and outside settlement areas as such. Replicability and Cost Recovery 8.04 Incremental capital outlays on infrastructure to be disbursed over the five-year period of the project are equivalent to US$2,200 per family in Agusan (the least developed of the three settlements), US$1,200 per family in Bukidnon and US$800 per family in Capiz, all measured in economic prices and including physical contingencies. Recurrent costs at full development (pri- marily for roads upkeep and agricultural services) would range between about US$140 in Agusan and US$30 in Capiz per family, or US$750,000 in total. Full cost recovery would apply to all credit outlays and forestry development, and partial recovery of irrigation development costs (para 4.10). Taking into account the substantial element of road building included in the project (including outlays on national and provincial roads with benefits to farmers outside the settlements as well as to settler farmers), these costs appear reasonable. Through project implementation and as a result of the new feasi- bility studies to be undertaken, some reduction in the costs of developing new areas may be possible. Economic Rate of Return and Project Risks 8.05 On the basis of the agreed investment program and the estimated phasing of project benefits, the economic rate of return to the project, would be 28% overall, and 17% in Agusan, 31% in Bukidnon and 41% in Capiz. The calculation excludes social service costs and benefits - mainly health infrastructure and family planning, and certain other minor items for which adequate indicators of project benefit were not available. Project benefits are prudently phased and are based on reasonable yield improvements. The relatively high rate of return reflects in part considerable sunk costs in on-farm development and physical infrastructure, particularly in Capiz and Bukidnon. The principal risk is the uncertainty of response on the part of the low income farmers to the improved environment for development, a response conditioned by domestic and international market factors and by the rainfed conditions under which most of them would continue to farm. The integrated and coordinated response called for on the part of the many agencies involved with implementation will also test GOP capabilities in implementing the project to schedule. However, Government is fully committed to the - 30 - project and has demonstrated an impressive capability in its handling of ongoing bank supported projects aimed at the rural sector. The farm develop- ment risk is reasonably spread between four different principal crops - two for domestic use and two primarily geared towards export markets. Finally, the economic rate of return would still be 15% with realized benefits only half those projected. IX. AGREEMENTS REACHED AND RECOMMENDATIONS 9.01 During negotiations, agreement with the Government was reached on the following principal points: (a) feasibility studies would be completed by December 1979 and policy studies by December 1980 (para 4.03); (b) DAR would employ suitable local consultants to produce a final design for monitoring and evaluation of the project in consultation with the Bank by November 1977 (para 4.04); (c) technical specification and detailed design of soil conservation measures for the Bukidnon settlement would be discussed with the Bank by DAR prior to procurement of equipment (para 4.08); (d) for road construction and upgrading and irrigation works, final engineering designs of such works and arrangements for their implementation, together with arrangements for their operation and maintenance, and, where appropriate, cost recovery, would be agreed by the Bank prior to the initiation of construction (paras 4.08, 4.09 and 4.10); (e) the Central Bank would make every effort to make the new rural bank in the Capiz settlement operational by December 1978 and in any event not later than June 1979 (para 4.18); (f) new procedures and guidelines in respect of land allocation would be introduced by December 1977 (para 4.24); (g) the special project fund would be replenished at monthly intervals to a level equivalent to the estimated require- ment for the next two calendar months (para 5.03); (h) civil works under force account procedures would not exceed 40% of the estimated total for civil works without prior consultation with the Bank (para 5.06); - 31 - (i) contracts with foreign firms or individuals would be awarded in accordance with Bank guidelines and on terms and conditions approved by the Bank (para 5.07); (j) agencies participating in the project would maintain separate accounts in respect of project outlays (para 5.10); (k) after audit, the project accounts, together with the auditor's comments, would be sent to the Bank within four months of the close of each financial year (para 5.10); (1) the accounts of each rural bank participating under the project would be audited once a year by the Central Bank and sub-borrower accounts would be audited on a random basis (para 5.10); (m) the Bank would be consulted before any new appointments to the posts of Project Manager, Area Manager(s), and Expatriate Advisor, should changes be necessary through the life of the project (para 6.02); (n) DAR would make arrangements satisfactory to the Bank to hire and retain consultants for feasibility studies by May 1978 (para 6.03); (o) the annual work program and budget drawn up by the IPCC/DAR would be made available for review by the Bank prior to final approval (para 6.10); and (p) quarterly and annual progress reports and financial reports under a format acceptable to the Bank would be forwarded by CPMU within 45 and 90 days respectively (para 6.10); 9.02 Conditions of effectiveness would be (a) appointment of the inter- nationally recruited advisor (para 4.05) and the three area managers (para 6.05); (b) the establishment of a special fund for the project by the Government (para 5.03); and (c) signature of a Presidential Letter of Instruction (LOI) setting out the arrangements for inter-agency coordination including the establishment of the IPCC, and agency commitments for project implementation (para 6.09). 9.03 Condition of disbursement of the loan proceeds for credit would be (a) that a subsidiary loan agreement has been duly executed on behalf of Govern- ment and the Central Bank of the Philippines (para 4.17); and (b) that the respective rural banks meet normal CB eligibility criteria (para 4.18). 9.04 A loan of US$15 million is proposed with a 20-year term and 4-1/2 year grace period, and with interest at the standard Bank rate. The borrower would be the Republic of the Philippines. ANNEX I Page 1 PHILIPPINES RURAL DEVELOPMENT II SUPPORT FOR THE FORWARD SETTLEMENT PROGRAM A. The Ongoing Program of Settlement Historical Background 1. Organized settlement and development of public lands has been a program of the Philippine Government since before the Second World War. The Department of Agrarian Reform (DAR) which currently administers the program, is the successor to the Land Authority (1963-1971) and the National Resettle- ment and Rehabilitation Administration (NARRA), which carried out development work in the most active phase of the program, during the mid-1950s. Under the NARRA, some 30,000 families were accommodated in 30 settlement projects, which is about 70% of the accomplishment of the program over the entire post-war period. Under the Land Authority, 4 more areas were proclaimed for settlement, but very little development took place. The Department of Agrarian Reform, created in September 1971, took over the settlement program, then comprising some 27 settlement areas, as part of its broader mandate to implement land reform programs. With additional areas proclaimed since 1971 (including 5 in September 1975) the DAR is now (1976) responsible for 34 settlements, with active programs and field staff posted in 25 of them. The present program, covering some 700,000 ha shows settlements at all stages of development, with a substantial number of old settlements established well back in the 1950s and early 1960s at a time when population pressure was lower than now. Some 70% of the program area is located in Mindanao, though there is a broad scatter of organized settlement throughout the Philippines. Settlements vary in extent from 100,000 ha down to areas as small as 1,000 ha, with about 75% of the total land in settlements of 25,000 ha or more. The total population, consisting in great part of low income farmers, is probably about 400,000. About two-thirds of this total are registered settler families or family members, the remainder being either descendants of original settlers or occupants of public land in areas not yet surveyed and classified. Program Execution 2. Settlement areas are established by presidential proclamation from lands of the public domain which have been classified as "alienable and disposable", i.e. suitable for agricultural usage. Substantial legislative and executive authority exists for the Department to undertake directly or through contract all major activities relating to settlement development. Within such designated areas, the DAR through a settlement field team backed by services from higher level units, undertake the following activities: ANNEX 1 Page 2 (a) Planning and layout of farm lots and townsites. (b) Cadastral survey of farm and town lots and allocation of use rights. (c) Layout and construction of roads. (d) Construction of community multipurpose buildings which are used as schools, medical clinics, and market facilities. (e) Construction of housing for settlers in the form of both temporary bunkhouses (later used as schools, etc. or torn down) and individual homes for families. (f) Provision of direct assistance in the form of interest free loans in kind for food, tools, work animals. (g) Provision of basic medical services to settlers. (h) Construction of irrigation facilities, frequently on a joint basis with settlers providing much of the labor. (i) Organization of agricultural cooperatives for purchase of farm supplies and marketing of products. (j) Organization of various forms of cooperative farming ventures. (k) Farm management extension services and provision of seeds and planting materials. 3. Acquisition of public lands for settlement purposes is initiated by petition to DAR from landless farmers requesting that action be taken in respect of a certain area in the public domain. Following receipt of such a petition, the DAR may organize a reconnaissance team to the area to collect agronomic and physical data, socio-economic status (existing settlement), access to communication networks, and to verify the status of the area by enquiry at the Bureau of Lands and Bureau of Forestry Development (i.e. classification as alienable and disposable hence suitable for agricultural purposes). On the basis of the report and recommendation of the team, and after HQ review, the Secretary DAR may forward a draft Presidential Decree (proclamation) through the Secretary, Department of National Resources, for decision at presidential level. The proclamation specifies (a) the site and boundaries and (b) cooperating agencies to carry out developmental works and organize resettlement, and constitutes the legal authority for DAR to initiate action programs. 4. Settlement and resettlement is undertaken with the eventual ob- jective of providing land title in farm and house lots for the landless and ANNEX 1 Page 3 near landless. Subject to general qualifications (all applicants must be heads of families, landless, capable of tilling the land personally with the aid of the immediate family and of good character) a priority list is established with the following categories: (a) "Pioneers" who have stayed in the settlement area for not less than one year and have introduced improvements thereon; (b) Displaced farmers who, by virtue of government action or court order, are deprived of the farms they are tilling; (c) Applicants residing in the province where the settlement project is located; (d) Surrendered dissidents who take an oath of loyalty and show sincere desire to support the Constitution of the Philippines; (e) Applicants who have work animals, farm implements and other facilities; and (f) Other applicants. 5. In practice, the great majority of settlers of the past 20 years have been locally approved or "pioneer" settlers some of whom are already cultivating at the time of proclamation. For a selection of settlements where adequate data were available some 30% were moved in, 20% locally approved (i.e. already resident at time of declaration) and 50% "pioneers" who do not receive direct assistance in moving to the settlement and estab- lishing themselves there. 1/ For "moved in" settlement, the BURE takes responsibility for initial selection, transport to site and initial estab- lishment loans to settler families, covering subsistence, medical facilities and agricultural supplies, against accounts established in the name of each such settler. Other loans have also been available in varying amounts and for various purposes including housing, work animals and agricultural imple- ments, irrigation pumps and, in a few cases, tractors. 2/ 6. Allocation of farm and home lots to settlers is theoretically based on a lottery procedure, though in fact many locally approved applicants es- tablish prior claims by right of occupancy and prior cultivation. Allocated 1/ Inter-agency Resettlement Study team report, April 1974. 2/t See Credit Annex for detail on settler indebtedness. The most recent tractor line of credit is available to all beneficiaries of land reform (including settlers) for hand tractors and accessories and is channeled through class A Samahang Nayon cooperative groups at interest of 12% over six years with 20% down payment. ANNEX 1 Page 4 farm lots are of variable size, reflecting prior occupancy of the better land (with small allotments), to lots of 8-10 ha in marginal upland areas. The average on existing settlements ranges from 3.1 ha to 10.2 ha. There is no well-defined procedure for relating design and allocation of farm lots to land capability and physical planning considerations, though there is both capability and executive authority for cadastral and aerial survey, prepara- tion of base maps and assessment of land use capability for settlement area development (all of which can be undertaken by contract). 7. Registered settlers acquire Certificates of Allocation as the first step in the process leading to titling of land. In theory, after prequalifi- cation as a cultivator for five years and with 60% of the land cleared, the settler becomes eligible to apply for a land patent through the DAR, which after approval is registered as title to the land. There are other procedures covering transfer of certifications of allocation (involving valuation and sale of improvements and rights to eligible purchasers) and mortgaging the land; subsequent sale of the land patent is also subject to DAR approval, as issuing authority, for a 10-year period. 8. Infrastructure development is undertaken by a mix of force account and contract under supervision from DAR HQ engineers, who also draw up designs and schedules. In practice, without a well-articulated plan of development, the allocation of equipment and operating expense is somewhat haphazard and in the older settlements, resource limitations confine the program largely to maintenance of existing facilities. In newly settled areas, initial actions may include provision of bunkhouses for staff and settlers, and later, con- struction of settler houses, roads and irrigation facilities. Problems and Progress in Land Settlement: A Critique 9. Land settlement in Philippine conditions poses a variety of prob- lems - economic, technical, social and managerial. In general, while some significant progress has been achieved in a number of the older settlements, it is also recognized that the DAR and its antecedent agencies have not achieved the level of performance needed to cope successfully with these problems. In particular, despite considerable outlay and continuous presence of field personnel, it has not proved possible to develop more than a small number of settlements to the stage where these areas and their resident pop- ulations can be fully integrated with the local communities. In consequence, available resources are spread ever more thinly over an increasing area and number of settlements (as new settlements are added to the program and old settlements are not phased out) while the failure to achieve an adequate level of performance has weakened the case of the agency to obtain the necessary resources vis-a-vis other claims on the budget and competing priorities, thus accentuating the problems. In general only limited development work is presently ongoing in the older settlement areas and in most the bulk of the activity of the field team is taken up with ongoing administrative routine - minor repair to existing roads, bridge breakdown, etc., adjudication of land disputes, provision of some medical and community services. ANNEX I Page 5 10. Many problems stem from the lack of a planning framework both for the settlement program as a whole and for each individual settlement. There is not now, nor has there been, a comprehensive framework or strategy to address such critical questions as: the scope of the program of settlement in relation to competing uses for public land; criteria for selection of areas in the public domain for settlement development; and appropriate time sequencing of activities in areas selected. One consequence is that the present program - extending over some 700,000 ha and involving a resident population of perhaps 400,000 people, consists of areas, both large and small, scattered widely throughout the Philippines. Many existing settle- ments are too small to justify either the detailed planning and technical feasibility work needed for their long-term development or the presence of a field team staffed by qualified personnel with the caliber of leadership and management that is required. On the other hand, there are areas in the public domain, extending over several hundred thousand hectares, being logged or recently logged over, which should be surveyed for agronomic potential, as a preliminary to consideration for settlement development. For the higher potential areas, outline physical planning should be undertaken to provide approximate developmental cost-benefit data thus facilitating a planning decision on future land use. There is little evidence that criteria and studies of this kind have ever been much used in the settlement program, initial surveys carried out by local DAR teams as described in the preceding section notwithstanding. A further point is that the settlement program has perhaps never given due weight to the long-term agricultural development of the settlement areas, as distinct from the legal and administrative services relating to provision of land for settlers. Given the modest agronomic potential of almost all the areas involved, which consist generally of a mixed upland/lowland terrain, there is a special need for land capability assessment and land management services, relating both to plot allocation and advisory services to farmers. The importance of these tasks in enhanced by the scarcity of land and the plentitude of settlers or potential settlers. Under present circumstances, almost any opportunity to establish farms, whether following the initial opening up of an area following logging and construction of forestry roads or otherwise, is quickly seized upon. In these conditions, the problem is not to provide settlers with adequate incentive and motivation to develop the land but to manage and direct the spontaneous flow in ways that (a) provide reasonable opportunities to develop a sound sustainable farming system with reasonable income and (b) that preserve the mutual rights and opportunities to so develop by appropriate land use regulation in accordance with land capability. 11. With some 25 settlement teams in the country (and more planned to start up in newly proclaimed settlement areas), the operating expense of the program accounts for about ?7 million per annum. Capital outlay has averaged some 1IOO million per annum for the past three years for the department as a whole, with roughly 60% for surveys, land acquisition and construction works and the balance for direct loan assistance. The great bulk of this outlay is destined for settlement development. Planning within DAR is undertaken on the basis of a five-year horizon, with annual statements of accomplishment ANNEX 1 Page 6 and forward requests in the context of the annual budget cycle. The latest available comprehensive statement, dated August 1975, presents a program covering the period FY1975/76-1979/80, for 29 settlements. The Plan is largely a catalogue of projected expenditures against physical targets in each settlement, plus estimates of new settlers to be accommodated and assisted. In total some 16,000 families are programmed for resettlement and with loan assistance at roughly US$3,700 per family, the total project cost is US$59 million. Infrastructure development is costed at US$30 million. B. Project Actions to Support the Program Policy and Agency Planning 12. The project would support a policy and organization review and the establishment of a capability to undertake feasibility studies of possible new and additional existing settlement areas. The policy review would address the problems identified above and, in particular, would pro- vide specific recommendations relating to: (a) The overall scope of land settlement programs over a 10-year period, including approximate size of area to be included, criteria for their selection, and investment programming needed to bring them to a stage at which continuing development is assured by self-reliance and access to ongoing national programs. (b) Resolution of possible policy and programming conflicts between alternative uses of available public lands, including usage for large-scale enterprise farming vs small farmer settlement. (c) Appropriate agency responsibilities under such a program, for initial survey and pre-engineering design, selection of settler farmers, delineation and allocation of farm lots; loan and other credit assistance to be made avail- able to farmer beneficiaries and arrangement for cost recovery; implementation procedures including the staffing of settlement teams, agency responsibilities for sectoral components; and finally arrangements for performance audit, including evaluation of settlement impact. 13. Except to a minor extent in Agusan, proposed actions in the three settlements selected for more intensive development do not involve questions of settlement per se nor extensive technical studies of land potential for such settlement. The proposals do nevertheless embody considerable modifica- tions from ongoing procedures in settlement development with the inclusion (a) of cost/benefit justification of proposed actions and defined termina- tion dates for settlement activity, (b) an emphasis on line agencies charged ANNEX 1 Page 7 with implementing national programs for implementation, rather than - as at present - virtually all responsibility and activity resting with the DAR and (c) improved budgetary and reporting procedures and management structures. Experience under the project in these three areas will provide extensive feedback for the policy studies. 14. Primary responsibility for these studies would be assigned to a project unit in DAR HQ. Details of staffing, consultant services, organiza- tion and costs are provided in Annex 15. Preparation of Feasibility Studies 15. Support would be provided to undertake feasibility studies for settlement development in respect of existing settlement areas or new areas, including the five areas recently proclaimed. There are some 450,000 ha in existing larger settlements some of which have been newly opened up; many of these would be suitable for inclusion in the program. Initial preparation would include: (a) the compilation of maps showing land capability and existing land use population distribution and infra- structure; (b) the definition of appropriate technical packages for increasing agricultural production; (c) the execution of socio-economic surveys and studies to relate agricultural technology, land capability and target incomes to provide the basis for decisions regarding sizes of land parcels to be allocated in each settlement, and preliminary physical planning for future land use; (d) articulation of arrangements for organization and manage- ment during the development period, including explicit provision for phasing out DAR at the end of the period; (e) identification and costing of needed additions to infra- structure; and (f) analysis of the projected economic, financial and social impact of each project. 16. Implementation would be undertaken under supervision of the CPMU (see Annex 15), using inter-agency teams, together with local and interna- tional consultants. An important objective to be accomplished through this approach is upgrading GOP's capabilities to prepare feasibility studies on integrated rural settlements for national and international financing. While there exists a fairly good capability to prepare economic and financial as- pects, the engineering and agro-institutional aspects are very much wanting ANNEX 1 Page 8 in terms of trained technical personnel. The primary emphasis in the use of expatriate consultants is thus the improvement, through on-the-job training, of the capabilities of selected technicians from allied agencies. The end product of the scheme would be a series of project proposals ready for donor appraisal. Costs 17. For technical studies, involving aerial photography production of maps, physical survey, etc., quotations were obtained from local consulting firms and used as the basis for preparation of cost estimates. These esti- mates, together with costing for expatriate services and agency personnel are included under Annex 15, Tables 1-4. ANNEX 2 Page 1 PHILIPPINES RURAL DEVELOPMENT II A PROFILE OF THE PROJECT SETTLEMENTS Introduction 1. As part of a program for supporting and strengthening the settlement program, three of the existing settlements would be provided with resources for accelerated development so that the practical experience in operating a new approach to settlement development would be acquired, feeding back to the design and set of operating procedures for use in the broader program. This annex describes the current status of the selected settlements in terms of general development, socio-economic characteristics, activities of develop- ment agencies (principally the DAR) and any special features other than those covered in the technical annexes. 2. In selecting these settlements, an attempt was made to include a set with problems representative of those found in a wider range of areas but at the same time which have reasonable productive potential and are of suf- ficient size to warrant a more intensive application of technical, financial and human resources. The three selected include two older settlements (in Capiz and Bukidnon provinces) and one comparatively recent settlement, with much uncleared land (Agusan del Sur). All exhibit the mix of more and less productive upland and lowland terrain which is characteristic of settlements everywhere in the Philippines and all are presently at or only a 'little above subsistence farming in terms of current agronomic practice and levels of living. It is anticipated that the two older settlements would, as a result of the program, be suitable for declassification at the end of a five-year period, while the less developed third area would continue as a settlement beyond this period and perhaps form the nucleus of a second phase expansion in organized settlement for the large adjacent areas of Agusan del Sur that present similar problems and are similarly underdeveloped at the present time; Agusan del Sur is among the least densely populated areas of the Philippines with an average density in 1975 of 20 persons per sq. km. Agusan del Sur Settlement 3. The Agusan Settlement was activated in 1968 with a total land area of about 16,500 ha, of which an estimated 3,000-5,000 ha are currently cultivated by 1,700 families. It is within the political jurisdiction of the municipalities of Talacogon, Prosperidad, San Francisco, San Luis, and Esperanza, all in the province of Agusan del Sur, on the island of Mindanao. Of the total population, about 700 are legal settlers, with certificates of Allocation, with the remainder considered as prospective applicants. The ANNEX 2 Page 2 registered settlers occupy designated farm lots averaging 4.6 ha, of which some 840 have thus far been demarcated, covering 3,880 ha. In respect of the settler-families, about half first came to the settlement area in the period after 1969, when the settlement was activated; about 40% of the total are migrants originally from the Visayas region (Cebu, Bohol). 4. Over 90% of the households in the settlement list farming as principal economic activity with mixed crop systems, including tree crops, predominating. The vast bulk of the farms are in 4-5 ha plots, of which 2-4 ha are cleared and planted. For a smaller sample of some 600 settler-farmers, 1973 survey data indicate a farm holding of 4.4 ha, of which 3.2 ha are cultivated and 2.7 planted to field crops. 5. As indicated in Annex 3, crop yields are uniformly low in the area even by Philippine standards, with major factors being the difficult agri- cultural conditions (excessively steep slopes in the upland areas, poorly drained lowland areas and much primary land clearing to be completed) combin- ing with an extremely poor development of access and connecting roads and relative isolation from main markets. In consequence, incomes in the settle- ment are very low, with 84% of farm housholds reporting incomes below 03,000 per annum, and only 6% in the I5,000 and above range, indicating the virtual absence of any moderate to high income class in this new community. Average household income reported for the sample was only P1,600, equivalent to about $32 per capita; 1/ 91% of households reported farming as main income source. 6. Developmental actions on the part of the DAR are ongoing, having begun in 1969. So far, a small township has been established (del Monte), which includes a substantial office block (with radio telephone link up to HQ in Manila); facilities for repair and operation of construction equipment, which currently includes relatively new, but out of service, bulldozer and grader plus three old trucks; and grain storage. So far, about 40 km of new road have been constructed and maintenance is performed on a further 100 km of old logging roads. The settlement is linked with a section of the Japan- Philippine Friendship Highway from Butuan to Davao City by a 20 km graveled access road (itself a national highway), which is planned to be further developed with a major bridge crossing of the Agusan river at Talacogon (currently under construction), thus linking the settlement to underdeveloped areas west of the present area. Butuan in the north is about 98 km from the settlement and Davao City 230 km to the south. The final construction work to the main Butuan-Davao highway is presently ongoing and when completed in 1977 will constitute a major two-lane all concrete highway running north-south. The developmental potential opened up by this new road is one of the reasons why the Agusan settlement was chosen for accelerated development under the proposed project. 1/ Data from a socio-economic survey undertaken by the Bureau of Agricul- tural Economics, a part of project preparation in September 1975. ANNEX 2 Page 3 7. In addition to road construction, DAR is also assisting with a communal irrigation facility (diversion dam) which on completion will provide benefits to more than 300 ha for lowland rice cultivation. A health center has also been established with one of the rare doctors available to DAR in post. In general, however, amenities are very limited in this pioneer area; primary schools are very few and housed in temporary buildings (half the children do not attend school), communities lack water systems (though a small minority of householders collect rainwater from the roof in purpose-built containers); virtually all lighting is by local lampara (the del Monte town- site is helped by a DAR generator which supplies current at certain times of the day); over 80% live in one or two room straw huts (about 40 wooden settler houses have been constructed by DAR); and virtually all households cook by open wood fires. Malaria and schistosomiasis are endemic in the area and fever/pneumonia related illnesses are a common cause of death. 8. By special agreement with the DAR, agricultural extension, market- ing services and credit have been delegated to the Mindanao Agricultural Re- settlement Agency (MARA) whose staff and operations are funded by the National Council of Churches of the Philippines (NCCP). Working with a staff of 10 extension agents, concentrating on about 400 farmers, with back up from one subject matter specialist (rice), a considerable part of current achievement is due to the efforts of this agency. For credit and marketing, consumer and producer cooperatives have been established (including a store, shop, and cono-type rice mill), and NCCP money has been available to establish a rural bank in del Monte. Considerable efforts have also been devoted to various minor crops - rubber, coffee, albizzia falcata, etc., as well to small livestock in efforts to diversify cropping systems and farm income sources. 9. It is difficult on balance to weigh up the progress made in this pioneer settlement without a clear understanding of the starting point some six years ago. 10. DAR itself has not maintained the considerable momentum of activity in the early years, and the farm plot layout, which has been on a grid pat- tern of equal-sized holdings regardless of agronomic potential, has hindered on-farm development and contributed to farmers' problems. Financial resoures have been very limited for infrastructure development and the balance of equipment available, e.g. for road construction, is very inefficient, with an obvious lack of trucks or resources to obtain them through local hire. Management of the machinery and repair facilities is inadequate, leading to considerable losses in down time for expensive items like bulldozers and motor graders. Part of the problem reflects inappropriate capital budgeting from central offices and poorly timed release of funds. Similarly, while MARA has done useful work, the agency has lacked the contacts and expertise to avail itself of support from other government agencies to exploit some productive potential, e.g. for abaca development; in addition the agency has lacked a trials and applied research facility to test out the applicability of technical packages and innovations, so that the introduction of new crops and varieties tends to proceed on a hit-or-miss basis, with the settler- farmers bearing the brunt of the costs. ANNEX 2 Page 4 11. A more general question that would also be addressed under the proposed project is the appropriate mix of land use in the longer term development of the area, given substantial parts of the upland terrain that should remain under tree crops or general forest resources, but may or may not do so, without firm management. This is an important general problem in the Philippines that has not yet been solved in a satisfactory manner and one that is particularly relevant to the future of the Agusan valley. The settlement area sits to the east of a vast zone of mixed upland/lowland terrain (including extensive swamps to the south) which is presently still subject to logging operations, but which, in the course of logging operations is gradually being made more accessible. How to approach the systematic development of such an area is part of the wider significance of the Agusan settlement; successful development here will pave the way for a successful expansion of the land frontier, without the environmental and human costs likely to be associated with the unplanned expansion and incursions that are otherwise likely to take place. Bukidnon Settlement 12. This is the largest of the selected settlements, with a popula- tion of 7,400 households (mid-1975 census data) or almost 50,000 people, distributed over 36,000 ha of which approximately 25,000 ha or 68% are cul- tivated including fallow. The settlement is within the political jurisdic- tion of the three municipalities of Maramag, Pangantucan and Kalilangan; these municipalities are administrative subdivisions of Bukidnon province on the island of Mindanao. Unlike Agusan, the area has little reserve of land for further expansion, and indeed at the present stage exhibits many signs of overly ambitious extensive cultivation, with significant soil depletion and erosion on steeper slopes. This settlement was opened in 1955 under the administration of NARRA, during the most active phase of the resettlement program of President MIagsaysay. At that time considerable numbers of people were resettled - involving about 2,500 families - from various parts of the Philippines, including substantial minorities from the Ilocos and Batanes areas of northern Luzon. These "moved in" settlers were in addition to a con- siderable local population clustered along the lowland valleys with a trading center at Kalilangan. At the time of resettlement, the logging operations had been virtually completed and, except on the upper slopes, evidence of logging in the form of stumps, uncleared logs and residual (unwanted) primary forest species has virtually disappeared. Some 5,000 farm lot subdivisions were made, mainly in the range of 2 ha in the lowland rice reas, and 6 ha and 8 ha in the upland zones. Twenty years later, the process of abandonment of agronomically worthless plots together with subdivision and reallocation (sale of user rights and mortgaging) of cultivated lots has considerably modified the original situation. Of 4,400 currently occupied farm lots, some 7% are in the range 4.5 ha and below; 86% between 4.5 and 9.5 ha and the remaining 7% of larger size. In many cases, these occupied farm lots have been further subdivided in terms of de facto usage within family groups (to accommodate second generation families from the original settler-family of 20 years ago) and in some cases, informal rental or sharecropping arrangements have ANNEX 2 Page 5 been established, giving a few families control of as much as 40 to 60 ha of land. Despite the length of period since settlement, and considerable changes occurring during that time, relatively few land patents (see Annex 1) have been applied for and fewer still issued. So far of only 1,100 applications, .530 have been approved and a mere 99 issued. 1/ The relatively few applica- tions probably reflect a reluctance on the part of many low income cultivators to embark on a process that is recognized to be bureaucratically complicated, time consuming and possibly expensive. It has, however, been argued that the lack of title has not been of great importance; in relatively large areas of the Philippines, including more densely settled and socially more complex areas, there is a similar lack of formal titling of land, despite well-under- stood and general respect for traditional customary usage rights. 2/ In a new area, therefore, the Certificate of Allocation has generally proved a satis- factory instrument for most purposes; indeed it has been argued that too rapid a titling process could encourage speculation and would accelerate a concen- tration process in terms of ownership. 3/ On the other hand, lack of title is an impediment in obtaining term credit for work animals, implements and development loans for plantation or other permanent crops since land serves as collateral. This issue is discussed in Annex 6. 13. While agriculture (principally rice and corn) is the main activity of some 80% of households in the settlement, there are a substantial minority of non-farm households, clustered in and around the small trading and commer- cial centers of Kalilangan and Pangantucan. These centers are on an important connecting route (provincial highway) linking development areas to the west of the Bukidnon settlement in the provinces of Lanao del Sur and Cotabato with the national highway running north-south from the port city of Cagayan de Oro (in the north) to General Santos and Cotabato City in the south. The settlement itself is linked to the national highway at Maramag by a 25 km stretch of gravelled road; from Maramag to Cagayan de Oro (the main market and port outlet for surplus production from the area) is 160 km. This highway is to be upgraded to class II status with support from the fourth IBRD High- way Project (appraised mid-1976), and a significant expansion in activities should follow, as the present route is extremely slow, owing to a very poor gravel surface and inadequate bridge work for the considerable volume of traffic. As described in Annex 9, the road network within the settlement, while better developed than in either Agusan or Capiz, remains extemely poor, and poses continuing problems in evacuating crop surplus and receiving crop inputs. Partly for this reason, farmgate prices are well below economically 1/ Data as at September 1975. 2/ The lack of documentation and survey has been one important reason for the comparatively slow progress in the land reform program, which in- volves transfer of land to tenant tillers from owners. 3/ Inter-agency Report: April 1974 "Resettlement in the Agrarian Reform Program of the Philippines". ANNEX 2 Page 6 appropriate levels and below NGA support levels and this inhibits the adop- tion of improved technology; nevertheless income levels in this settlement are substantially above those reported in Agusan and the spread is also sig- nificantly wider. Data collected in the socio-economic survey indicate about 20% with incomes of f5,000 or more, 20% in the middle f3,000-5,000 range and 58% at lower income levels. The average income level among farm households was ?2,800, i.e. about US$65 per capita. The generally higher status of the population is also confirmed by a significantly better quality of housing with greater use of wood and tin roofing (and in some cases cement and brick structures with glass windows), and in the variety and range of goods produced and sold in the local markets. 14. As a relatively developed settlement community, infrastructure and service facilities in Bukidnon are also considerably more advanced than in Agusan; the areas has 22 primary schools with a total enrollment of 1,200; rural health centers (manned in part by DAR staff and in part by DPH staff) are established in Kalilangan and Pangantucan, and there are barrio health posts in five villages. In addition to the DPH physicians stationed at Kalilangan, there are also 3 doctors in private practice, 10 midwives (of which 8 are government employees) and 6 family planning motivators. In terms of agricultural infrastructure, the settlement has some 22 corn mills (6 roller, 16 grinder), about 50 kiskisan rice mills, 4 cono-type mills, plus warehousing (40,000 tons) and commercial vehicles (113 registered in the 3 municipalities, with a capacity of 340 tons). Finally, a rural bank has just been established (1976) in the settlement area at Kalilangan (some credit for seasonal and term credit has been available from the rural bank at Maramag, outside the settlement area). 15. DAR and its antecedent agencies have maintained a staff and facil- ities since the earliest days. Currently there are some 37 staff in post, stationed at Pangantucan, including 12 agricultural staff, a small machine/ construction unit, as well as accounting and administrative capability. The well-maintained construction capability, mainly used for road construction and upkeep, has only a very limited program for want of funds. Agricultural staff are largely ineffectual for want of technical back-up from subject matter specialists, organized work schedules and materials for demonstration and farmer training. Their work is not well coordinated with those of BAEX and BPI technicians some 8 of whom work out of Kalilangan almost exclusively in connection with the Masagana 99 and Masaganang Maisan supervised credit programs for rice and corn. The lack of adequate seed supply and timely availability of fertilizer have hindered the efforts of these specialist agency technicians, together with the difficult market environment in which to work with farmers on high input technologies. 16. The Bukidnon settlement is long past the stage at which much ef- fective settlement work in a narrow sense can be undertaken; rather, the task is one of agricultural and infrastructure development and establishing a cropping system that will preserve the somewhat precarious balance between man and land. The DAR has been struggling with these latter tasks for some ANNEX 2 Page 7 considerable time, without much to indicate a possible completion of them in prospec-L. At one level, a quick and sustainable boost to production and farm income would follow the upgrading of the road network that is proposed under this project (together with benefits from upgrading major connecting highways under other programs) plus exploitation of the relatively limited opportuni- ties for irrigation. After completion of such a program, the settlement area would not merit the continuing presence of a DAR team and could be integrated with the surrounding communities, from which it does not markedly differ ex- cept perhaps in respect of isolation exacerbated by the poor communication system now existing. 17. However, this settlement provides a challenge for a more ambitious program which is both to support and assist in the development of more appro- priate farm and cropping systems than are now available, and in the process, to tackle related problems in the fields of credit, post harvest technology and marketing that greatly hinder the spread of such improved technology as is now available. The specific actions and agency responsibilities relating to these objectives are discussed in the relevant technical annexes; a more general point though is that such systems, while in part specific to the special environment of the Bukidnon settlement area, are also of potentially wide application in the much larger corn growing area of the Bukidnon plateau, an area with a population of about half a million and growing rapidly at a rate approaching 8% per annum. Finally, the Bukidnon settlement is directly linked with a series of settlements that run roughly southwest into the Cotabato valley, including Wao (18,000 ha), north Cotabato No. 1 (100,000 ha), north Cotabato No. 2 (28,000 ha), and Sultan Kudarat Nos. 1 and 2 (100,000 ha), many of which are actually or potential corn/rice areas with substantial portions underdeveloped. Subject to improvement in peace and order conditions (this settlements are located in a zone of Muslim/Christian conflict), some or most of these areas would be suitable for development in a second phase project. Capiz Settlement 18. The Capiz settlement covers a total land area of 25,000 ha, of which about 10,000 ha are cultivated, and has a population of 4,600 families, roughly 25,000 people. It is within the political jurisdiction of the three municipalities of Dumarao, Cuartero, and Maayon in the Province of Capiz, on the island of Panay in the western Visayan region. Capiz was proclaimed as a settlement area in 1965 in the period of the Land Authority. Relative to Bukidnon or Agusan del Sur, Capiz is a small, considerably more densely populated province (150 persons per sq km), with generally easy access to the provincial capital, the port of La Roxas in the north, and the Iloilo City in the south. Moreover, unlike either Bukidnon or Agusan del Sur settlements, the Capiz settlement had been opened up for settlement under the Homestead Acts well before the settlement proclamation so that a considerable popula- tion was resident at that time, with established and, in some cases, patented land rights. Under the administration of the settlement authority some 3,000 farm lots were surveyed and allocated, two-thirds to existing occupants and ANNEX 2 Page 8 the remainder to local pioneer settlers; these cover some 15,000 ha. The remaining 10,000 ha, covering mainly the more mountainous areas, has not been surveyed. Hence, very little resettlement into the area has been possible, although partial survey of the area provided a legal basis for titling and validation of user rights. In this settlement, only 6% of the population are migrants from other provinces of the Philippines. Without a strong pioneer focus, the Capiz settlement has not developed its own centers of populations to any marked degree, and up to now has relied for such services as there are, on municipal centers located outside the settlement area, especially Dumarao. Dumarao is only 8 km to the east and connects with the main through- route serving the lowland agricultural areas of the settlement. 19. Information on farm lot and farm characteristics is particularly difficult to interpret in this area and the sample survey undertaken as part of project preparation was not sufficiently large to generate reliable data. The basic allocation under Land Authority guidelines was 5 ha-6 ha plots. However, the pre-existing land rights were validated and in some cases under the Homestead Act these lots were up to 24 ha in extent. Many of the lots have been formally or informally subdivided, with currently second or third generation occupancy of the land. In this area of old settlement, some particularly vivid examples of demographic expansion were uncovered during project preparation. In one case, a young landless family representing the third generation from the time of original settlement was one of six such households now living on the original family plot of 18 ha (considerable parts of which have now gone out of production due to soil depletion). There is also a substantial group of some 800 tenant farmers who have been identi- fied as potential beneficiaries under land reform, involving 300 owners and some 1,300 ha of land in the settlement area. About 70 owners are reported as having holdings larger than 7 ha. 20. In this settlement socio-economic differences associated with land holding are probably accentuated by the marked differences in profitability of crops, notably as between sugar and upland rice/corn. Some 70% of the existing sugar land is located in six barrios, whose population accounts for about one-third the total number of households; many of the larger holdings are also in areas where sugar can be grown on an extensive scale. In general, the scope for sugar development in particular, while limited by agricultural considerations, is also constrained by the very poor road network, most of which is unpassable except by carabao sled and horsepack. 21. Income data collected during preparation indicate a pattern in which almost 75% of farm households had incomes below P3,000; a further 17% between t3,000-V5,000 and only 9% at higher levels. The average was P2,800, about the same level as for Bukidnon settlement. In this case, however, rather more caution than usual is necessary since there is a probability that the sample missed many high income households who reside outside the settlement area but draw their incomes from farming and other activities inside it. It seems likely that the distribution including such households would be rather similar to the Bukidnon case, i.e. exhibiting fairly wide ANNEX 2 Page 9 spread about a low average, with a significant minority of middle income and well-to-do households. A further indication of extremely low income at the bottom of the scale were reported wage rates (r3.50/4.00 per day and two meals), a shade lower than in either Bukidnon or even Agusan. 22. Conditions generally in the settlement area indicate that while some residents - perhaps half of the total - enjoy benefits from relatively easy access to facilities (schools, medical centers) outside the settlement itself, many remain isolated from them, both by distance and the extremely poorly developed road network. DAR and its antecedent agencies have done least, in this settlement, as compared with the other two. Currently, the small team occupy physical facilities markedly inferior to those found else- where and have virtually no equipment or transport to work with. Most of them have in fact been allocated to work with the very active land reform program in the Capiz province, rather than with settlement work. Given the relatively small and rather isolated areas available for sugar and rice cultivation, little attention has been given to the area from production technicians from Philsugin or the Department of Agriculture. 23. Even more than is the case of Bukidnon, in Capiz major settlement potential has long been exhausted. The need here is for infrastructure de- velopment, particularly in the form of access farm-to-market roads which are economically justified by opportunities for upgrading existing sugar and rice lands and extending the former to areas now devoted to minor field crops, prin- cipally corn and upland rice. Broader impact will also be achieved as part of this program, by upgrading a central barrio, with strategic importance as a road junction, to enable a new municipality to be created that will serve the needs of the local settlement area population more effectively with credit, agricultural sources, and marketing facilities. It is anticipated that a rebuilt facility for project staff HQ would serve the immediate needs and at the end of the project be converted to serve as municipal center for this area. PHILIPPINES RURAL DEVELOPMENT II Sumsary of Project Costs by Type of Ixpanditure (US$ '000) Price Total Baseline Physical Contin- Project Less Duties Net F.E. Costs Costs Contin- Sub- gencies Cost and Taxes Project Z of (Table 2) genciesi/ Total (Table 3) (Cash Flow) Z Amount Cost Net Costs A.uint A. Ca vital Expenditure a. BCaildings 1,69L 254 1,948 538 2,486 3 75 2,411 20 4b2 b.-e. Vehicles, Heavy Plant and Equipment 2,755 - 2,755 572 3,327 25 832 2,495 80 1,996 f. Infrastructure by Contract 8,463 La 10.156 L2995 14,151 8 1,132 13,019 41 LID38 12,912 1,947 14,859 5,105 19,964 2,039 17,925 7,816 B. Operating Costs & Force Account a. 'Salaries and Allowances 2,443 - 2,443 3,176 - 3,176 b.-d- Transport, Office Running & Other Supplies 875 _ 875 263 1,138 20 228 910 62 564 e. Forest Establishment 385 _ 385 139 524 8 42 482 20 96 f. Civil Works - Force Acci.unt 1,506 301 1,807 534 2,341 15 351 12990 58 5,209 301 5,510 1,669 7,179 621 6,558 1,814 C. Other Items a. Consultancy Services 1,042 - 1,042 273 1,315 - 1,315 45 592 b. Pre-Service Training Courses 50 - 50 6 56 - 56 10 6 c. Foreign Travel (Senior Staff Training) 66 - 66 12 78 - 78 95 74 d. Schistosomiasis Control 55 - 55 18 73 - 73 20 15 1,213 1,213 309 1,522 1,522 687 D. Credit Term Credit Items 1,620 - 1,620 576 2,196 - 2,196 30 609 Seasonal Credit 1,222 - 1,222 501 1,723 50 862 2, 842 2g,842 1,077 3,919 3,919 1,521 Total Project Costs 22,176 2,2148 24421 8.i160 21660 S 24 140 838 1/ From Table 2. flNU 13 Table 2 PRILIFPDS RURAL D3VEKL0M II Prolect Baseline Costs by Cost Category and Componendt (USS '00) A.M.U. Civil Works Admin. loads, Settlement Irrigation Evaluation Drainage, Engineering Soil Con- Cooperative Support A.M.U. anpower servation Development Physical Figures Credit Agri- A.M.u. Development Water Sup- and Credit Credit Contingency from C.P.M.U. Assistance culture Forestry Health (Training) plies, etc. Assistance Funds Total Z Amount Onnem (15) (15' (5) (12) (11) (16) (9) (7) (6) A. Capital Costs a. Buildings i. houses 327 265 17 19 75 703 15 105 ii. other 319 522 14 136 - 991 15 149 Sub-total nr 787 3 1 1 55 75 1,694 254 b. Vehicles & initial spares 44 Z39 336 20 19 55 713 c. leavy plant & spares & related equipment 1,612 1,612 d. Office equipment, tools 6 technical equiprent 57 169 S0 4 44 10 9 372 e. Other equipment 4 12 36 1 58 Sub-total T101 420 75 46 1,612 69 2,755 f. Contract/force account expenditure in: i. forestry roads 6 tracks & maintenance (221) 221 221 20 44 ii. roads 5,478 5,478 20 1,096 iii. irrigation & drainage 2,493 2,493 20 499 iv. soil conservation experimental designs & structures 27 27 20 5 v village water supplies 244 244 20 49 vi. health facilities (40) (40) 20 Sub-total 8,463 6tS B. Operating Costs a. Salaries & allovances 429 905 656 60 162 85 146 2,443 b. Vehicle operating costs & transportation 112 143 142 24 9 16 2S 474 c. Office supplies 13 13 33 11 2 9 81 d. Other supplies 96 100 54 70 320 a. Forestry satsblishast costs 385 385 i. Civil Works - Force Account i. roads (consolidation 20 and rehabilitation) 1,319 1,319 264 ii. soil conservation 187 187 20 37 Sub-total 650 1,1T 1 480 241 103 1,506 183 5,209 301 C. Other Items a. Conaultancy services 999 43 1,042 b. Pre-sersice-oriestatiom courses (extension) 50 50 c Yoreigi tradel (senior staff training) 66 66 d. Schiatosomiasis contzol (capital 6 recurrent) 55 Sub-total l, T5 93 1,213 D. Credit b. Seasmol credit 1,222 1,222 b. Term credit _ _ _ 1,620 1,620 Gross Baseline Costs 1,816 2,215 2,092 535 526 242 11,581 327 2,842 22,176 2,248 (756) (566) 1/ Source: See Annexes of appropriate headings. 2 M MS$%74 roads; U0$653 irrigation and drainage; US$85 soil conservation. ANNEX 13 Table 3 PHILIPPINES RURAL DEVELOPMENT II Price Contingency Calculati,ons- (US$ '000 Anticipated Percentage Outlay by Years Annual Costs by Years 1 2 3 4 5 0 1 2 3 4 5 Total A. Capital Expenditures a. Buildings 20 40 40 - - - 390 779 779 - - 1,948 b.-e. Vehicles, Heavy Plant and Equipment 60 30 5 5 - - 1,653 826 138 138 2,755 f. Infrastructure by Contract 10 20 25 25 20 - 1,016 2,031 2,539 2.539 2,031 10,156 Sub-total incl. Physical Contingencies 3,059 3,636 3,456 2,677 2,031 14,859 Annual Inflation Rate (%) 10 9 9 8.5 8 8 Compound Factor (7) Used 15.0 25.3 36.2 47.5 59.3 Projected Price Contingencies 457 920 1,253 1,271 1,204 5,105 B. Operating Costs & Force Account a. Salaries and Allowances 15 23 23 23 16 - 366 562 562 562 391 2,443 b.-d. Transport, Office Running & Other Supplies 15 23 23 23 16 - 131 201 202 201 140 875 e. Forestry Establishment 4 13 22 32 29 - 15 50 85 123 112 385 f. Civil Works - Force Account 21 20 20 20 19 - 380 361 362 361 343 1,807 Sub-total 892 1,174 1,211 1,247 986 5,510 Annual Inflation Rate (%) 8 7.5 7.5 7.5 7 7 Compound Factor (%) Used 12.1 20.5 29.5 38.9 48.6 Projected Price Contingencies 108 240 357 485 479 1,669 C. Other Items a. Consultancy Services 25 25 24 17 9 260 261 250 177 94 1,042 b. Pre-Service Training 100 - - - - 50 - - - - 50 c. Foreign Travel 20 80 - - - 13 53 - - - 66 d. Schistosomiasis Control 10 10 34 23 23 6 5 19 13 12 55 Sub-total 329 319 269 190 106 1,213 Annual Inflation Rate (%) 8 7.5 7.5 7.5 7 7 Compound Factor ('I.) Used 12.1 20.5 29.5 38.9 48.6 Projected Price Contingencies 40 65 79 74 51 309 0. Credit Term Credit - 305 446 417 452 1,620 Annual Inflation Rate (%) 8 7.5 7.5 7.5 7 7 Compound Factor (%) Used 12.1 20.5 29.5 38.9 48.6 Projected Price Contingencies - 62 132 162 220 576 Seasonal Credit (Revolving Fund Basis) 1,222 1,222 Compound Factor (%) Used 41.0 Projected Price Contingencies 501 501 Total Projected Price Contingencies 605 1287 1,821 1,992 2,455 8,16 1/ Based on July 1976 costs with anticipated start of project July 1977. Arm= 14b Table 1 RURAL DEVELOPMENT II Sumawury Of PraoPoed Flnancing Proposed Total 1/ IBRD Disburse- Category Costs Local Loan ment 2/ (Table 2) Funds Allocation % - I. Ebnlaet: 3,000 800 2,200 (a) Directly imported items 100 Foreign costs (b) Other procurementa 100 ex local factory 65 Other purchases II. Civil Works: 3/ (a) Building construction 2,000 1,100 90 J l 45 (b) Other civil works 12,700 7,000 5,700- 45 III. Consultantas Services and Overseas Trainine 900 200 700 100 Foreign costs 65 Local costs IV. Project Personnel Salaries and other Operatinf Costs 4,300 2,400 1,900 45 V. Term Credit Fund 1,900 1,000 900 47 (60) VI. Unallocated 6,100 3,400 21700 Sub-total 30,900 15,900 15,000 Seasonnl Credit 1,700 1,700 - Total Project Cost 32,600 17,600 15,000 a.a, .......m.. u.... ...... ... Foreign Exchange Costs (from Annex 13, Table 1) 11,838 =..ma.. 1/ Total cost (cash flow) includes duties and taxes estimated to be US$2.6 million. 7/ Calculated at flat rate disbursement percentages of total project outlays (cash flow) for each category except for category V, see footnote 3. 3/ Includes approx. $0.1 million force account works. 1V Inrludes approx. $1.1 milUln force account works. Represents 60% of Centrnl Bank on-lending which represents approx. 80% of total costs. ANNEX 14 Table 2 PHILIPPINES RURAL DEVELOPMENT II Project Costs by Principal Account Categories (US$ '000) Add 50% Crtegory Base Price Allocated Costs Contingency Total Funding I. Equinment: Vehicles, Plpnt, Office and Technical Equipment 2,755 286 3,041 3,000 II. Civil Works: (a) Building construction materials, labor (or contract) 1,694 269 1,963 2,000 (b) Other civil works: (i) road improvement, irrigation, - and land development 8,463 1,997 10,460 (ii) road rehabilitation and consolidation 1,506 267 1,773 (iii) forest establishment 385 70 455 10,354 2,334 12,688 12,700 III. Consultants' Services and (a)-Expatriate services 377 50 427 (b) Local services 324 42 366 (c) Foreign travel (training) 66 6 72 767 98 865 900 IV. Management and Technical Services: (e) Salaries 2,443 367 2,810 (b) Transport, office running and other supplies 875 131 1,006 (c) Pre-service training 50 3 53 (d) Schistosomiasis control 55 9 64 (e) Inter-.gency secondments and mapping 341 44 385 3,764 554 4,318 4,300 V. Term Credit 1,620 288 1,908 1,900 VI. Unallocated: (a) Physical contingencies 2,248 (b) 50% price contingencies 3,830 6,078 6,100 Total 30,862 30,900 1/ Seasonal Credit (US$1.7 million) excluded. ANNEI 14 PHILIPPINES RURAL DLVEILOPFT II 1/ Estimated Schedule of Ependitures (US* 1000) Base Costs & Fiscal Physical Year COntingencies Term Price Less Credit Credit Caitingencies Expenditure 1977/78 4,585 605 5,190 1978/79 5,301 305 1,287 6,893 1979/80 4,900 446 1,821 7,167 1980/81 3,926 417 1,992 6,335 1981/82 2,870 452 1,954 5,276 Total 21,582 1,620 7,659 30,861 Estimated Schedule of Disbursements (US$ '000) Bank Account Categories fDisbursement Fiscal II, IV, VI (unallocated Loan Year I and V III contingencies) Amount 1978 1,824 1,320 2,603 1,170 167 135 596 264 2,889 1979 912 660 4,608 2,073 255 206 1,118 497 3,436 1980 152 110 5,355 2,41 0 195 159 1,465 650 3,329 1981 152 110 4,542 2,050 164 133 1,477 656 2,949 1982 3,770 1,697 84 67 1,422 633 2,397 5-Year Totals 3,040 20,878 865 6,078 15,000 =.... .. .... ..... ...... 1/ Excluding seasonal credit (US$1.7 million). ANNEX 14 Table 4 PHILIPPINES RURAL DEVELOPMENT II Estimated Schedule of Disbursementsl/ (US$ '000 equivalent) IBRD Fiscal Year Estimated 2/ Cumulated Balance and Semester Disbursemenr Disbursement of Loan Fiscal 1978 1st Semester _ _ 15,000 2nd Semester 1,300 1,300 13,700 Fiscal 1979 1st Semester 1,600 2,900 12,100 2nd Semester 1,700 4,600 lo,400 Fiscal 1980 1st Semester 1,700 6,300 8,700 2nd Semester 1,700 8,000 7,000 Fiscal 1981 lst Semester 1,600 9,600 5.400 2nd Semester 1,500 11,100 3,900 Fiscal 1982 1st Semester 1,50O 12,640 2,4oo 2nd Semester l,4oo 14,000 1,000 Fiscal 1983 1st Semester 1,000 15,000 g/ Calculated on basis of an average lag between expenditure and disbursement of six months. 2/ Figures in Annex l1, Table 3 rounded. ANNEX 18 Page 1 PHILIPPINES RURAL DEVELOPIMENT II ECONOMIC ANALYSIS 1. Cost and benefit flows from project actions in the three settlement areas, adjusted to economic prices are shown in Table 1. Rates of return were for Agusan 17%, for Bukidnon 31%, and for Capiz 41%. The combined rate of return was 28%. Excluded Items 2. The costs shown are those necessarily incurred in achieving the projected incremental outputs of rice, corn, sugar, abaca and coffee. While justified on social grounds and having some bearing on the achievement of project objectives, the relatively small costs for health services and village water supplies (US$1.0 million) are not included for want of adequate indica- tors of project benefit. Similarly, the small forestry component (US$0.9 million) has also been excluded, again because economic prices for timber in the local areas where it would be consumed are difficult to assess, although the component is expected to generate a financial return at least 10% (see Annex 12) and the economic return would almost certainly exceed this estimate. Cost Items 3. Costs for roads and irrigation are taken from Annex 9, Tables 2 and 6, adjusted to economic values using the estimates for tax and duty content shown in Table 2. Costs include physical contingencies. Costs for administrative and technical services are adjusted from the financial data of Annex 5, Tables I and 2 (agricultural services), Annex 7, Table 2, and Annex 15, Tables 5, 6 and 7 for other administrative and management costs. Adjustments for local taxes and duties for these items are also shown in Table 2. 4. On-farm incremental costs - for seasonal and long term develop- mental inputs - were derived from the financial estimates summarized in Tables 1 to 7 of Annex 4, together with the projected rates of development shown in Table 4 of Annex 3. The crop budget estimates, together with ex- planation of the adjustments to economic values, are shown in Table 3. Foreign Exchange 5. Because of import taxes and quantitative restrictions, the official exchange rate understates the value to the economy of foreign exchange to be utilized in carrying out the project and earned or saved by incremental outputs. In the absence of the detailed information needed to compute ANNEX 18 Page 2 specific conversion factors, the estimated standard conversion factor (SCF) for the Philippines was about 0.9 for the three years 1972-74. This ratio implies a shadow exchange rate of US$1.00 = M8.33, which was used in the economic analysis. Labor Costs 6. One reflection of the chronic poverty of these areas is the consider- able volume of low productivity working and unemployment found in all three of them. Approximately 90% of the combined population of the 13,700 families gain their principal income from farming. With an average farm family size of six persons, the total labor force available for agriculture is in excess of 30,000 man-years, assuming roughly 2.5 full-time equivalent adults per family. Crop work in respect of project crops (the vast bulk of the total) currently accounting for about 42,000 cropped ha, is calculated to require some 3.5 million man-days of labor. At 250 man-days per annum, the 30,000 man-years of labor would be equivalent to some 7.5 million man-days. Hence, direct crop requirements currently account for under 50% of the total labor supply. In the three areas, non-crop derived income (including livestock, casual labor, trade and service income) varies between 30% and 40% of crop income for farm families. Average earnings per day from supplementary sources are estimated as equal to the average derived from crop work, about f 6 per day. On this assumption, the labor required for non-crop related work can be estimated as 1.3 million man-days. 7. Under the project, at full deelopment, an additional 20,000 ha would be cropped and improved technologies to be introduced under the project require on average about 20% more labor input per ha. Hence, the labor requirement for crop production is estimated to increase by 2.9 million man-days, i.e. by some 80%, at full development. The economic cost of the substantial incremental employment generated by the project is largely a question of likely trends in the labor markets accessible to the growing settlement populations, which markets may be local (in and around the settle- ment areas) and more distant, with access conditional on temporary or permanent migration from the settlement area. There is considerable evidence and numerous studies for the Philippines that indicate a likely continuing problem in generating jobs in sufficient volume to match increasing population. 1/ Real wages in agriculture and for unskilled urban occupations have stagnated or declined in real terms in recent years. The prospects for improved employ- ment opportunities and incomes in the absence of the project appear therefore somewhat bleak for the expanding local or migratory population. Economic cost calculations assume: 1/ The Basic Economic Report of 1976 projects an annual increment to the labor force of one half million per annum over the next decade. ANNEX 18 Page 3 (a) larger number of workers retained in the area (or attracted to it) than would be the case otherwise as a result of the project; (b) higher utilization rates in terms of workdays per worker. 8. The prospect of higher earnings for crop-related work on farm should stimulate a supply response which, in respect of existing farm families, would either reduce underutilization, or result in some diversion of labor from non-crop related work, or most likely, some combination of the two. Diversion would be limited because crop calendars in all three areas are fairly flexible with the relatively even distribution of temperature and rainfall. It is assumed that two-thirds of higher labor input on crop-related tasks would be economically costless (i.e. serving to reduce existing under- employment) and that one-third would be diverted from non-crop work. In effect, these assumptions imply that labor utilization among farm families would increase in total from about 65% currently (4.8 million man-days of 7.5 million man-days available - para 4), to 5.6 million man-days i.e. to 75% of labor availability. Incremental labor provided for project crops would then be 1.2 million man-days, with 0.4 million man-days drawn from existing alter- native uses, at a value assumed to be V6 per day. The remaining incremental demand of the project for labor, accounting for 1.7 million man-days (para 6), is assumed to be met by workers (farm families) that would otherwise have migrated out of the settlement (in settlements where natural increase exceeds the labor requirement - easily the case in Bukidnon and Capiz) or from workers who migrate into the settlement (Agusan). It is assumed in respect of this type of incremental employment that earnings foregone are equivalent of current average agricultural incomes in Capiz and Bukidnon, implying a cost of t6 per man-day. For Bukidnon and Capiz, combining both the element of higher utilization per man and additional numbers of workers, gives an average economic cost for incremental labor required by the project of about r4.50 per incremental man-day of employment, i.e. 75% of the going market wage. For Agusan, incremental labor requirements are high and existing population is small so that larger external flows of workers to the settlement are required. For this settlement therefore a full rate of r6 per man-day was charged 100% of the going market wage. Project Benefits 9. Production projections were taken from Table 4 of Annex 3; economic pricing is shown in Table 4. Project benefits are slightly underestimated by the failure to allow for (i) road user savings in respect of passenger traffic and existing (current) marketed production from the project areas, and (ii) benefits from soil conversion practices (erosion control). On the other hand there is some ongoing farm development for certain crops in certain areas - e.g. rice and corn in Bukidnon and rice in Agusan, and some presumption that this would continue in the absence of the project. Costs and uncertainties associated with taking full account of these factors were adjudged not worth ANNEX 18 Page 4 the gain precision resulting therefrom. Similarly, because the vast majority of the population fall into the poverty target group, a calculation of a social rate of return to the project would clearly yield a social rate above the economic rate and in view of the justification for the project provided by the latter is superfluous. Sensitivity Analysis 10. Important risk factors are of three types in this project: (i) a slower pace of implementation than foreseen, leading to a slower building up of project benefits; (ii) farmer response below that anticipated, affecting the rate of adoption of improved technology; and (iii) domestic and inter- national price factors affecting the prospects for particular crops. The latter is of particular concern, since it would affect both the economic valuation of incremental output and incremental output itself, though an impact on farmer response (point ii). In addition, the failure or partial failure of abaca would have serious consequences for development in Agusan, ditto sugar in Capiz, ditto corn in Bukidnon. The other face of the coin, however, is the low probability of failure in all crops simultaneously. Similarly, given the number of agencies and variety of cost streams built into the project, partial success would still be achieved with major cost overruns in respect of any one item or with failure on the part of one or more agencies to perform according to the requirements of the project. 11. Rates of return on the basis of certain adverse assumptions of project development are shown below. With the most adverse combination, representing an outcome judged highly unlikely, the project is marginally viable. Rate of Return Agusan Bukidnon Capiz Combined Costs + 20% 11 24 32 21 Benefits - 20% 14 26 34 23 Benefits - 50% 7 16 23 15 ANNi 18 TABLE I PHILIPPINES Rt003 D0V9110NAU1T C0o1C ANALYS1I Elrgin Rote of . esson Calculation ('D00 Peso.) 1. FfY PY2 py3 fl4 P76__ py7 PY8 n io Pill Fy12 pylS Fy16 PYS-20 1. AGUSAN SETTLEMENT AREA A. Loonoolo Costs 1. Roads 2782 5366 5493 5555 1772 1656 1656 1656 1656 1656 1656 1656 1656 1656 1656 2. Irrigation and drainage 1952 3515 3604 3553 472 (588) 472 472 472 472 472 472 472 472 472 5. Ad4inlotiati-n and tochnicnl eoei.eo_/ a. capital costs 1626 2070 965 33 - - - - - - - - - - - 6. operating costs 215 1153 1176 1143 859 600 600 600 600 600 400 400 400 400 400 4. On-fooo coot. - 3729 3633 6465 92499 11440 12796 13528 13638 13168 13085 13162 13244 13330 13525 Total 7075 15833 14871 16789 12352 13108 15524 16256 16366 15896 15613 15690 15772 15858 16053 B. Etonn.l B.nnfilts 1. Abaa - - 181 1086 2534 4344 6154 7964 9774 11765 12670 13575 14480 15928 15928 2. Rice _ 552 1277 4632 8759 12795 16021 17539 18325 19065 19382 19974 20496 20622 20795 Tatol - 552 1458 5718 11293 17139 22175 25503 28099 30830 32052 33549 34976 36550 36725 C. Net BOnofito -7075 -15281 -13413 -11071 -1059 4031 6651 9247 11733 14934 16439 17859 19204 20692 206750 Ecoco-ic Rato of Retuer: 17% ~1. B0KI125N SOLEttO9T ARiA A. Ecotonic Cntos 1. Roads 6271 11507 7574 7029 2679 2296 2296 2296 2296 2296 2296 2296 2296 2296 2296 -. [etigasioc .nd drainage 2671 3860 343 120 135 (375) 135 135 135 135 135 135 135 135 135 3. Adc.inisc-ti-t and technicalse1 nicn. a. capital cones 2733 2611 2026 441 - (420) - - - - - - - - b. apcating cootn 906 1270 1293 1300 1064 500 500 500 506 500 250 250 250 250 250 a. -r-tr -ota - 1347 3340 5536 7262 9312 12255 13226 14665 15383 15470 15302 15340 15571 15571 Total 12501 20595 14554 14426 11640 11313 15186 16157 17596 18314 18151 18103 18221 18252 18252 B. Ecocosic Bennefit2 1. Corn - 1910 5375 9042 12609 16276 19954 22068 24181 25268 2526S 25268 25268 25268 25268 . R6cr 486 2707 4855 7201 9452 11485 11973 12499 13083 13314 13314 13314 13314 13314 3. Coff-ee 1182 1530 1948 2476 3060 3756 4452 6538 7234 7029 8486 8833 9042 9042 fatal - 3578 9612 15043 22286 28788 35195 38493 43210 45585 46511 47068 47415 47624 47624 C. Net Bentfit -12581 -17017 -4942 1419 10646 17475 20009 22336 25622 27271 28360 28885 29194 29372 29372 Eco-n-in Rate no f R-t-: 314. * CAREI SEiCItEMENt AREA A. Econa-ic Costs 1. Roads 2696 5574 4074 756 547 657 652 657 657 657 657 637 637 657 657 . Irrigation nod drainage 255 759 1764 1063 112 112 112 112 112 112 112 112 102 112 112 3. Adoiristratin ad tec-hic-. services a. capit.1 costs 2253 2467 1778 106 - (515) - - - - - - b. oporaccod costs 928 1481 1504 1511 1090 500 500 500 500 500 250 250 250 250 250 a4 vT 1. tm costs _ _- 2311 4367 5946 0316 10463 11621 12673 12887 13425 13492 13492 13492 13492 roc. l 6132 10281 11406 7803 7695 9870 11752 12890 13942 14156 14694 14761 14261 14761 14261 B2. Economic_benefi ts i. S 4dr- 5294 9226 11934 15025 18452 21604 22108 22338 22843 22843 22843 22843 22843 2 Rico - - 1073 2773 5759 7280 10186 11456 12380 13021 13291 13425 13425 13425 13425 3. Corn - - 259 351 480 527 553 663 728 773 838 884 004 884 084 Total _- - 6626 12350 10173 22832 29191 35723 35217 36132 36972 37152 37152 37152 3252 C. Not Benofits -6132 -12821 -4780 4347 10478 13762 17439 20033 21275 21976 22298 22391 22391 22391 22391 Econoinc nate of r tarn. 41% Prcrot Net Benefit Econonic Rate af Ratnrn: 2867 I/ Cnsts arc rednced by t-sid,al -ala- of ncnh-m bnildingo (oncept agei-1lnnel bnildings) and faore -cco-nt oqaipoont in Capio nd BIkidnon. Corn of technical .cd .datciscrotito strvices years PY6-10 isciude maoit.nan.. of agricultural nervicos; aftne PY10 these so tines geoorato benefits so a nod er are- and casts atrtnib- aiin to tin ortalsarIt are reduced pro rata. Rn Agnean, fall naintonanco of peojett facilitiog in .ss17 d co PY10. ANNEX 18 TTh3 2 PHILIPPINES RURAL DEVELOPMENT II TAX, DUTY AND FOREIGN EXCHANGE CONTENT USED IN ECONOMIC COST ESTIMATES % Duties % Foreign and Taxes Exchange (net of taxes) 1. Road Construction Constructi n Materials: Gravel l/ 8 38-23 Equipment 25 70 Labor - - Other 5 10 Maintenance Equipment 15 80 Maintenance Operating Costs 20 50 Contractor Services 5 - 2. Irrigation and Drainage Construction Materials 5 30 Equipment Purchase 15 80 Operation and Maintenance 20 27-36 Wages Design, Engineering Overhead - 10 Miscellaneous 5 10 3. Technical and Administrative Services Buildings and Iousing 10 20 Vehicles 40 80 Supplies and Equipment 10 25 Salaries - - Vehicle O&M 20 50 Travel 5 60 Training - 10 Other 10 20 4. On-Farm Costs (see also Table 3) Seed/Animal Traction - - Fertilizer/Chemicals - 80 Tool 50 1/ Includes cost of transport. AIqNX IS 34 ~~~~~~~~~~~~~~~~TABLE 3 0- -- - - - - - --~ 4 --- -- -- -- - - - - - - - - - - - - -- - - - - - - - - - 2 2 2 2 .'.44;40 ~ ~~~~~~~~--34344-40 . - - - - - - - - - - - - - - - - - - - - - 34 3 -- - - - - -- - - - -- - -- - -- -- -- - -- -- -- -- -- -- - 40~~~~~~~~~~~~~ 4--! 44~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. 3 0-~~~~~~~~40-- - - -- - -- - -- - -- - -- - - 34-4-44 34 ~ - - -- - -- -- - -- - -- -- - -- - 4-4' 2'~~~~~~~ 340~t - - - - - - - - --- - - - - - - - - PHILIPPINES RURAL DEVELOPMENT II ECONOMIC AN&LYSIS Price Structure for Project Crops, 1985- 1. R I C E 2. C O R N o/Ton US$/Ton f/Ton USS/Ton Export price of Thai Export price, US No2, fob Gulf 975 117 25-35% broken, fob Bangkok 2066 248 Ocean freight and insurance 250 30 Ocean freight and insurance 183 22 Import price, cif Manila 1225 147 Import price, cif Manila 2249 270 Less transport and insurance Less transport and insurance from project areas-2/ 211 25 from project areas 211 25 Rice price ex-mill, project areas 2040 245 Farmgate corn price 1016 122 Paddy equivalent price (63% recovery) 1283 154 (Financial farmgate price) Milling costs less value of by-products 1283 154 Farmgate paddy price (Financial farmgate price)- 3. S U G A R fTon US$/Ton 4. C O F F E E /Ton $/Ton ABACA /on US$/Ton Export sugar price, fob Iloilo4/ 2649 318 Export price fob Latin American Export price (average S2 Ports 13869 1665 & G grades) fob Davao City 4885 586 Transport and handling, msill/to Iloilo- 42 5 Ocean freight and insurance 250 30 Exporters costs & profits2 1000 120 Sugar price, ex mill 2607 313 Import price, cif Manila 14119 1695 Buying price, Davao City 3885 466 Milling costs 1140 137 Less transport and insurance Transport and handling from project areas 211 25 farm to Davao City 265 32 Transport costs, farmgate to mill2/ 32 4 Farmgate coffee price 13911 1670 Farmgate abaca price 3620 434 Farmgate sugar price 1435 172 (Financial farmgate price) (6000) (Financial farmgate price) (2750) Export molasses price, fob Iloilo4/ 333 40 Transport and handling, mill to Iloilo-/ 42 5 Molasses price, ex mill 291 35 Milling and local transport costsV' - - Farmgate molasses price 291 35 Farmgate sugarcane price-6 153 18 (Financial farmgate price) 116 1/ f or US$/ton at constant mid-1976 prices. Shadow exchange rate is used of US$1.00 = t8.33. 2/ Includes 50 percent foreign exchange costs, calculated at US$1.00 - f8.33, the domestic cost component calculated at official rate of US$1.00 = P7.50. 3/ From crop budgets of Annex 4. I! 4/ Based on projected price fob Caribbean minus US$10 for transport differential. 5/ Assumed to be covered by milling and local transport costs of sugar. 6/ Based on milling rate from sugar cane of 3 percent molasses and 10 percent sugar. ANNEX 1 9 Page 1 PHILIPPINES RURAL DEVELOPMENT II SCHEDULE OF EARLY EVENTS 1. First Civil Works Contracts- Upgrading of Stretches within Access Roads (90 km gross length) (a) DPH completes detailed engineering design and tender documents and advertises July 1977 (b) Preparation and submission of bids Aug/Sept. 1977 (c) Evaluation of bids and award contracts September 1977 (d) Start construction November 1977 2. First Civil Works Contracts - Village Roads (a) DPH and BBR complete engineering design and tender documents and advertise (115 km) December 1977 (b) Preparation and submission of bids Jan/Feb. 1978 (c) Evaluation of bids April 1978 (d) Start construction June 1978 3. Procurement of Force Account Construction Equipment (a) DAR and DPH complete tender documents for force account eouipment and advertise (ICB) July 1977 (b) Evalunte bids and award contracts September 1977 (c) Receive construction equipment April/May 1978 4. First Force Account Construction (a) DAR and BBR complete survey of initial priority works for road rehabilitation July 1977 (b) Complete repAirs existing machinery August 1977 (c) Complete detailed work program for P Y 1 road rehabilitation work September 1977 ANNEX 19 Page 2 (d) NIA complete review of two partially completed communal irrigation schemes September 1977 (e) Start road rehabilitation work September 1977 (f) Start construction of small irrigation structures not requiring new construction eauipment September 1977 (g) DAR and NIA complete review of San Vincente irrigation scheme and start minor works construction January 1978 (h) DAR and NIA complete survey of small comunal irrigation projects in Capiz and commence detail design March 1978 (i) Start construction of access tracks and expand road rehabilitation in program with new construction equipment May 1978 (j) Start irrigation construction works requiring new construction equipment in Bukidnon June 1978 (k) DAR and NIA complete survey and design of other minor irrigation schemes in Bukidnon and Agusan July 1978 (1) NIA completes survey of Sianib communal irrigation scheme (Agusan) and commences detail design July 1978 (m) DAR and NIA canplete design of first minor and mini-irrigation schemes in Capiz July 1978 Offices Agricultural Services Centers and Other Buildings (a) Complete designs and acquire sites June 1977 (b) Complete prep;ration of tender documents for priority building construction and advertise July 1977 (c) Preparation and submission of bids Aug/Sept. 1977 (d) Evaluate bids and award contracts Sept/Oct. 1977 (e) Start force account and mini-contract construction of minor buildings and alteration to existing buildings October 1977 (f) Start contract construction of priority buildings November 1977 (g) Complete construction of first buildings Jan/Feb. 1978 AMINEX 19 Page 3 6. Manpower and Training (a) Appoint project manager and nucleus support staff March 1977 (b) Prepare tenders and advertise for initial office equipment and minor vehicles May 1977 (c) Acquire new HQ office accoumodation June 1977 (d) Select area managers, expatriate advisor and other key support staff June 1977 (e) Complete details of training schedule for first six months June 1977 (f) GCnplete new recruitment schedule for first year and advertise for early requirements June 1977 (g) Receive initial office equipment and early required vehicles July 1977 (h) Start new staff recruitment and initial transfers to CPMU July 1977 (i) Finalize details of initial staff orientation training course and arrangements for those to attend July 1977 (j) Start training courses August 1977 (k) Start new postings to field positions October 1977 (1) Principal settlement level staff positions filled January 1978 (m) 80% of gross settlement level staff in position June 1978 7. Evaluation and Monitoring (a) Preliminpry discussions on evaluAtion and monitoring system requirement with DAP and other suitable agencies May/June 1977 (b) Alternative draft agreements between DAR and DAP (or alternatives) for production of suitable design drawn up and submitted to Bank for review July 1977 (c) Ccnsultancy contract for production of evaluation and monitoring design awarded Aug/Sept. 1977 ANNEX 1 9 Page (d) Alternative designs completed and submitted to Bank for review November 1977 (e) Start full implementation of approved mcnitoring and evaluation system January 1978 8. Mapping, Plot Design and Land Allocation (a) Aerial photography available to DAR (BLADD) August 1977 (b) Preliminary determination of priority areas for bnae mapping established August 1977 (c) Base map production of 1:5000 scale commences September 1977 (d) Reexamination of settlement level cantrol beacons completed by survey personnel September 1977 (e) Location of control beacons onto base maps commences October 1977 (f) Land capability plot design work for Agusan starts December 1977 (g) Base msps start to became available for field staff January 1978 (h) Land allocation teams posted to settlements Cppiz January 1978 Bukidnon February 1978 Agusan March 1978 9. Agriculture (a) Selection of half FMT cadre complete July 1977 (b) FMPs commence orientation training courses August 1977 (c) Selection of sites area for individual FMrs comnplete September 1977 (d) Complete draft outline of applied research program for calendar 1978 trials September 1977 (e) PMTs posted to field positions January 1978 (f) Complete logistical arrangements for calendar 1978 trials Nov/Dec. 1977 (g) Half of gross applied research staff in field positions January 1978 (h) Complete trainer training April 1978 (i) Start field level training at ASC May 1978 1BR80 12483 __ ~ 125i5O' The boAn.lsdm A Fwp (1n p.l ,,p A.} nnt - - NOVEMBER 1976 /LUZON X ~~~~~~~~POSSIBLE FUTURE T<nggiA A \ - IRRIGATION PROJECT * N P ' -8-35' 835 - _ N ( r, MC J A SIANBO < ./ MfegguN SIAN13NPROJECTto Bo h B a M V C 0 jPHASE Tl(BIOSHA; <Jr A t X pSsAoN,EVCTcn A L SAN VICENTE B ~ ~\5 / /N ___U < - / GATR -u W eggoans SPAOJECTROJECT ;R to Rah ,a''P( EC T InesQ' -2 PoosdIioro rs AN,~~~~~~~~~~~~~~~~~~~~~~~~~~ RnVAP fsX - -(Narionel Camponay r~~~~~~~~~~~~I 35 Caaso,aMar, RALEC DEEOMN PRJC '-a -Rod obeIPoe Gorre.)a, ~ ~ ~ ~ N AGUAN ETLEMNT RE rj R,z.I r r . __-- OS Bag_ I F ,siob d ArBas g(>- - Natnacpl Rod!BBo n OaIB) POSSIBL e PlE LO LI oao od MANGEENTPRCET 'N Rast s SPO (3100APHAl A 71 / -. - SettIBroBoR ArBa Boundary - /" RUR <4 Cauaga AGUS AN 2 3 4 A A I I ~~~~PoosdIrrgtonAa /~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Ntoa Roo une Constrerscf,on __ 1) \ ff!~~~~~~~~~~~~~~~~~~~~~~~~~/N 125
Groupe de la Banque mondiale · Staff Appraisal Report
Philippines - Second Rural Development - Land Settlement Project
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Organisation
Groupe de la Banque mondiale
Type de document
Staff Appraisal Report
Pays
Philippines
Source
Banque mondiale