Philippines - Fourth Development Corporation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4565 PROJECT COMPLETION REPORT PHILIPPINES - PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES (LOAN 1052-PH) June 17, 1983 East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  ABBREVIATIONS ADB - Asian Development Bank CB - Central Bank of the Philippines ERR - Economic Rate of Return FEBTC - Far East Bank and Trust Company FRR - Financial Rate of Return GNP - Gross National Product IFC - International Finance Corporation IGLF - Industrial Guarantee and Loan Fund LIBOR - London Interbank Offered Rate OBO - Off-shore Banking Unit PDCP - Private Development Corporation of the Philippines PMG - Project Management Group PNB - Philippine National Bank SAL - Structural Adjustment Loan SBP - Small Business Program EXCHANGE RATES 1974 US$1 = P 6.72 1975 US$1 = P 7.25 1976 US$1 = P 7.44 1977 US$1 = P 7.40 1878 US$1 = P 7.38 1979 US$1 = P 7.38 1980 US$1 = P 7.51 1981 US$1 = P 7.90 1982 US$1 = P 8.50 FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT PHILIPPINES - PR:IVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES (Loan 1052-PH) Table of Contents Page No. PREFACE ..................................... i BASIC DATA SHEET .... . . . . . . . . . . . . . . . . . . . . . ii HIGHLIGHTS . . . . .u. . . . . . . . . . . . . . . . . . . . . . . iii-iv 1. INTRODUCTION .... . . . . . . . . . . . . . . . . . . . . . 1 2. ENVIRONMENT .... . . . . . . . . . . . . . . . . . . . . . . 2 3. PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES . . . . . . 3 4. LOAN OBJECTIVES.. ................... 4 5. UTILIZATION OF LOAN 1052-PH ................ . . 4 Resource Transfer . . . . . . . . . . . . . . . . . . . . . . 4 Subproject Characteristics. . . . . . . . . . . . . . . . . . 5 Operational and Economic Performance of Subprojects . . . . . 8 Status of Subloans. . . . . . . . . . . . . . . . . . . . . . 10 Effective Cost of Bank Funds to Subborrowers. . . . . . . . . 10 6. INSTITUTIONAL DEVELOPMENT .................. . 10 Institutional Aspects .................... 10 Standards and Procedures. . . . . . . . . . . . . . . . . . . 11 Resource Mobilization ....... .. ... .. .. .. . . 12 7. OPERATIONAL AND FINANCIAL PERFORMANCE OF PDCP . . . . . . . . . 13 Operational Performance . . . . . . . . . . . . . . . . . . . 13 Financial Performance .17 8. DEVELOPMENT ROLE OF PDCP .19 9. CONCLUSIONS .20 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Page No. ANNEXES 1. List of Shareholders (as of April 30, 1982) 22 2. Summary of Interest Rates Charged to Borrowers 23 3. Schedule of Estimated and Actual Disbursements 24 4. List of Subprojects, Commitment Date and Amount of Disbursement 25 5. Reasons for Delay in Completion of Subprojects 26 6. Characteristics of Subprojects Financed Under Loan No. 1052-PH 28 7. Sectoral and Geographical Distribution of Subprojects 29 8. Financial Performance of Subprojects 30 9. Economic Performance of Subprojects 31 10. Current Status of Subloans as of December 31, 1981 32 11. Effective Interest Rate for Loan 1052-PH 33 12. Domestic Resource Mobilization, 1974-82 (June 30) 34 13. Foreign Currency Resource Mobilization, 1963-82 35 14. Projected and Actual Lending Operations 1974-78 36 15. Summary of Operations 1977-81 37 16. Equity Investments, December 31, 1981 38 17. Summary of Guarantee Operations, 1977-81 39 18. Characteristics of Loans Approved, 1963-81 40 19. Projected and Audited Balance Sheets, 1974-78 41 20. Summarized Balance Sheets, December 31, 1977-81 42 21. Projected and Audited Income Statements, 1974-78 43 22. Summarized Statements of Income and Unappropriated Retained Earnings for the Years Ended December 31, 1977 to 1981 44 23. Projected and Actual Financial Ratios, 1974-78 45 24. Collection Performance, 1978-81 46 25. Analysis of Loans in Arrears, 1976 - March 31, 1982 47 26. Comparative Statement of Arrears Position, 48 December 31, 1977 to 1981 CHARTS 1. Project Management Group Organization 49 Attachments A. Comments Received from PDCP 50 B. Comments Received from Apex Development Finance Unit of Central Bank 57 C. Comments Received from Philippine National Bank 58 D. Comments Received from Ministry of Finance 59 E. Comments Received from Ministry of Finance 60  PROJECT COMPLETION REPORT PHILIPPINES - PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES (LOAN 1052-PH) PREFACE This project: completion report (PCR) presents a review of the fourth Bank loan made to the Private Development Corporation of the Philippines (PDCP) for US$30 million approved in November 1974. The loan was disbursed, after cancellation of US$0.21 million, in September 1981. The PCR covering experience under this loan was prepared by the Bank's East Asia and Pacific Regional Office on the basis of a mission, and a project completion report and data provided by PDCP. Comments received from PDCP have been taken into account in finalizing the report and are reproduced as Attachment A to the PCR. Additional comments from the Apex Development Finance Unit of the Central Bank, the Philippine National Bank and the Ministry of Finance are contained in Attachments B, C, D and E, respec- tively. This projec1: has not been audited by the Operation Evaluation Department.   - ii - PROJECT COMPLETION REPORT PHILIPPINES: PRIVATE DEVELOPENT CORPORATION OF THE PHILIPPINES (LOAN 1052-PH) BASIC DATA SHEET Amounts (US$M) As of 1/31/83 Original Disbursed Cancelled Repaid Outstandinp Loan 1052-PH 30.0 29.79 .21 11.75 18.04 CUMULATIVE LOAN DISBURSEMENT December 31 1975 1976 1977 1978 1979 1980 1981 (i) Planned .8 12.5 27.0 30.0 30.0 30.0 30.0 (ii) Actual 1.7 5.4 10.1 14.6 24.6 28.7 29.8 (iii) (ii) as X of (i) 212 43 37 49 83 96 99 PROJECT DATA Original Actual or Date Re-estimated Board Approval 11/05/74 11/05174 Loan Agreement 11/12/74 11/12/74 Effectiveness 2/07/75 2/07/75 Loan Closing 6/30/79 6/30/81 MISSION DATA Month, No.of No. of Date of Year weeks Persons Manweeks Report Identification - - - - - Appraisal 5/74 2 2 4 10/14/74 Supervision I 6/75 2 2 4 8/08/75 Supervision II 2/77 2 2 4 4/28/77 Supervision III 8/77 2 2 4 12/14/77 Supervision IV 9/78 2 2 4 11/08/78 Supervision V 12/79 4 2 8 2/29/80 Supervision VI 9/80 4 2 8 4/07/81 Supervision VII 7/81 3 1 3 9/10/81 Supervision VIII 2/82 2 2 4 4/05/82 Completion 7/82 2 1 2 Total 21 37 POLLOW-ON PROJECT Private Development Corporation of the Philippines V (Loan 1514-PH) for US$30 million, approved on February 9, 1978. OTHER DATA Borrower: Philippine National Bank Executing Agency: Private Dev. Corpn. of the Philippines Fiscal Year: January 1 - December 31 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) - Peso Year: Appraisal Year Average: 1974 Exchange Rate: US$ 1 - P 6.72 Intervening Years Average: 1977 US$ 1 = P 7.40 Completion year: 1981 US$ 1 - P 7.90   - iii - PROJECT COMPLETION REPORT PHILIPPINES - PRIVNTE DEVELOPMENT CORPORATION OF THE PHILIPPINES (LOAN 1052-PH) HIGHLIGHTS This report covers experience under Loan 1052-PH for US$30 million made by the Bank to the Private Development Corporation of the Philippines (PDCP). The objectives of the loan were: (a) transfering foreign exchange resources to promote the development of widely-based, export-oriented manu- facturing industries; and (b) continuing institution-building efforts, particularly by encouraging PDCP to achieve greater regional dispersion of its investments, and to provide greater support to smaller industries. The loan was su,cessful in meeting its objectives. The funds were transferred to a satisfactory number of subprojects with broad sectoral representation and significant export orientation being achieved. The ex-ante financial and economic rates of return for these subprojects were generally high, and ex-post rates, calculated for a number of subprojects, were generally found to be satisfactory, averaging 35.4% and 45.3%, respectively (paras. 5.09--5.10 and 9.01 of PCR). In line with the other objectives, PDCP has: established seven branch offices which have been helpful in improving the regional dispersion of PDCP's investments and promoting small and medium industry loans (para. 8.02 of PCR); undertaken equity participations in a select number of private development banks (para. 5.05 of PCR); and increased significantly the volume of operations under its small business program (para. 7.03 of PCR). Actual disbursement of the loan proceeds was considerably longer than the anticipated year-end 1978 estimated at the time of appraisal. The reasons for the slow disbursement are complex and include: (a) an uncertain business climate caused by two rounds of oil price increases during the project implementation period; and (b) the fact that the currencies disbursed by the Bank were appreciat:ing considerably against the peso thus causing Bank funds to be relatively expensive and therefore less attractive to the end-user who carried the foreign exchange risk (para. 5.01 of PCR). The quality of PDCP-s portfolio has been consistently deteriorating since 1976 when total arretars represented 7.4% of the outstanding portfolio; as of March 31, 1982, total arrears were 11.5% of the outstanding portfolio. While part of this decline may be attributable to certain institutional  - iv - deficiencies (optimistic appraisals and weak supervision),/l most of the poor performance is due to adverse economic conditions. To improve its portfolio quality and hence its own profitability PDCP needs to: (a) improve its project supervision, particularly by increasing supervision staff- and (b) undertake a thorough review of projects in arrears with a view toward determining whether these projects would be viable given an appropriate amortization schedule and improved economic conditions. A major institutional change which has occurred since appraisal of this loan is PDCP's tie-up with the Far East Bank and Trust Company (FEBTC), the sixth largest commercial bank in the Philippines. This tie-up arrange- ment allows both PDCP and FEBTC to continue to operate separately while at the same time allowing FEBTC to emerge as a strong universal bank and providing PDCP with a potential source of domestic currency resources. With regard to lessons learned under this project, it is very difficult to arrive at general conclusions given the unique set of economic conditions which prevailed during project implementation. The two oil price increases and resulting high inflation contributed to an uncertain business climate in the mid-to-late 1970s. The economic recession which has prevailed since 1979 has certainly had an adverse impact on the projects financed under the loan. The disbursement problem of the loan arising from the hard currencies which would be required to be repaid has already been addressed by the Bank through the recently introduced currency pooling system. With regard to the few institutional inadequacies pointed out, PDCP is introducing procedures to improve the quality of its subproject appraisals and is well aware of the fact that its supervision of subprojects requires improvement. In summary, the 1975-81 period during which the project was implemented was a period of basic structural adjustment in the economy, to which PDCP, as a well-managed financial institution, responded quite well. /1 PDCP, however, feels that this conclusion may be unduly influenced by hindsight and that at the time appraisals were made, the assumptions utilized were considered to be realistic and valid. With regard to project supervision, PDCP emphasized that its Project Management Group is considered to be a well-managed group and that the adverse economic situation and prolonged recession contributed materially to PDCP's higher level of arrears and past dues (Attachment A, page 1).  PHILIPPINES PROJECT COMPLETION REPORT PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES 1. INTRODUCTION 1.01 This project completion report reviews Loan 1052-PH, the fourth loan made by the Bank to the Private Development Corporation of the Philippines (PDCP)./l Thus far, PDCP has received five loans from the Bank totalling $125 million and is a recepient of $36 million under Loan 1984-PH, which was made to the Central Bank (CB) of the Philippines in 1981. PDCP also received a $15 million loan from IFC in 1972. Basic data concerning Loan 1052-PH is given below. Table 1.1: BASIC DATA FOR LOAN 1052-PH Loan amount $30 million Board approval November 5, 1974 Loan signing November 12, 1974 Effectiveness February 7, 1975 Free limit $1.5 million Aggregate free limit - Maximum subloan size $2.5 million Interest rate 8% to PNB, the borrower; 8.75% to PDCP Terminal date December 31, 1978 Scheduled closing date June 30, 1979 Actual closing date June 30, 1981 Amount disbursed $29.79 million Amount cancelled $0.21 million /1 Bank loans to PDCP have been coursed through the Philippine National Bank (PNB).  - 2 - 2. ENVIRONMENT 2.01 During the 1970s, the Philippines followed a much more dynamic growth-oriented development strategy than in the past. The growth rate of GNP was raised from 5% in the 1960s to almost 7% at the end of the 1970s. Recently, however, the world recession has been reflected in the domestic economy. The second round of oil price increases and resulting upsurge [n inflation, together with declining commodity prices and export demand explain the recessionary conditions which have recently prevailed in the Philippines and which have severely curtailed industrial investment for the past few years. Real GNP growth fell from almost 7% in 1977/78, to an estimated 2.5% in 1982. 2.02 During the 1970s, manufacturing industry as a whole grew only at about the same rate as GNP; manufactured exports, however, grew dramatically during the decade in response to various export promotion measures introduced in the early 1970s. Towards the end of the 1970s and through the early 1980s as industrial sector growth deteriorated markedly, it was increasingly recognized that the industrial sector was facing some major structural problems. Past trade, financial and industrial policies geared to support import substitution and capital intensive industries resulted in low effi- ciency and misallocation of investment. In order to correct the import substitution and capital-intensive biases of previous industrial and trade policies and to promote those industries having comparative advantage, the Government developed a phased policy reform program to be implemented over a five year period. The first phase, which is already being implemented by the Government, consists of a major tariff reform/trade liberalization program and export promotion measures. The second phase, currently under preparation, will cover investment incentives and their administration, industrial restructuring and subsector programming. To support the Government in its first phase of policy reform, the Bank approved in September 1980 a $200 mil- lion Structural Adjustment Loan (SAL I). Support by the Bank of the second phase of reforms is being considered under a proposed SAL II, currently under preparation. 2.03 In conjunction with the trade and industrial policy reforms, in 1980-81, the Government introduced a comprehensive set of banking and finan- cial sector reforms. These reforms included: liberalizing banking regula- tions to allow different types of financial institutions to undertake expanded activities, thereby increasing competition within the financial sector; and lifting interest rate ceilings for loans over two years maturity, resulting in positive real interest rates for the first time since 1978. These reforms aimed at increasing savings and the availability of term-finance and reducing fragmentation and inefficiency in financial institutions. The reforms were supported by the Bank's Industrial Finance Project (Loan 1984-PH), approved in May 1981.  - 3 - 2.04 In retrospect, the 1975-81 period during which the project was implemented was both a, turbulent time for PDCP and a period of basic struc- tural adjustment in the economy which required changes in PDCP's character. The decline in the economy, starting in 1979 following the second round of oil price increases and resulting in a lack of investment demand, significantly slowed PDCP's loan commitment rate. In addition, declining demand, both domestic and export, caused many of PDCP's borrowers to experience repayment problems and resulted in a deterioration in the quality of PDCP's portfolio. 3. THE PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES 3.01 PDCP was established as a privately-owned corporation in 1963 with active Bank Group assistance. Its main objectives are to: assist in the creation, expansion and modernization of private production enterprises in the Philippines; encourage private capital participation from local and foreign sources; and develop local technical, financial and managerial knowledge. For these purposes, PDCP-s Articles of Incorporation allow it to extend medium- and long-term loans, invest in equity capital, underwrite or take up equity and debt security issues, guarantee loans and provide managerial and technical assistance to its borrowers. At the time of its establishment, IFC subscribed P 800,000 ($205,200 equivalent at the exchange rate then prevailing) of PDCP's initial capital stock which it subsequently sold at a profit in 1967. PDCP's initial share capital of P 25.0 million has been periodically increased and as of April 30, 1982, amounted to P 100.0 million ($11.8 mil- lion equivalent). 3.02 The emergence of expanded commercial banks under the 1980 finan- cial sector reforms (para. 2.03) made it necessary for PDCP to reassess its organizational structure! and overall business strategy in order to retain its competitive position in the country's financial system. PDCP's stock- holders therefore approved in May 1981 a stock swap with the Far East Bank and Trust Company (FEBTC) through which FEBTC would acquire at least 51% of PDCP'6 outstanding shares. FEBTC is the sixth largest commercial bank in the country and is a widely-held institution. As of April 30, 1982 FEBTC held 87% of PDCP's shares; no other single stockholder, however, held more than 1% of PDCP's shares (Annex 1). The tie-up with the FEBTC allowed both PDCP and FEBTC to continue to operate separately and provided other added advantages to both institutions: FEBTC would emerge as a strong universal bank with a large capita:L base, extensive banking experience, and newly gained expertise in project lending, while PDCP would continue to perform its development finance i-unctions with the added advantage of having access to funds from FEBTC./1 FEBTC's control of PDCP necessitated a revision of PDCP's Statement of General Business Policies to delete the provision /1 PDCP notes that the merger has helped to strengthen both institutions. Cofinancing between FEBTC and PDCP is progressing, the management of accounts is coordinated to provide full services to clients, and the marketing of services of the whole group is now being done by both PDCP and FEBTC loan officers (Attachment A, page 4).  - 4 - calling for broad dissemination of PDCP's ownership. FEBTC, however, wculd continue to keep ownership of its stock widely dispersed in compliance with Central Bank regulations relevant to expanded commercial banks. The Bank had been duly consulted by PDCP prior to the finalization of the tie-up and approved the arrangement. 4. LOAN OBJECTIVES 4.01 The main objective of Loan 1052-PH was to transfer foreign exchange resources to support the Government's policy of promoting the rapid development of widely-based, export-oriented manufacturing industries by financing the foreign exchange component of subprojects in the industrial, agro-industrial, tourism and transport sectors. It was expected that the loan would cover, on an approval basis, 65% of PDCP's foreign currency requirements for a 1.5 year period (fourth-quarter 1974 to first-quarter 1976). A second objective was to continue institution-building efforts with PDCP, particularly to encourage PDCP to achieve greater regional dispersion of its investments and to provide greater support to smaller industries. It was expected that PDCP would achieve these objectives by: (a) continuing to lend to financially and economically viable subprojects; (b) expanding its newly developed Small Business Program; (c) helping to develop industrial estates; (d) taking equity investments in private development banks (PDBs); and (e) establishing branch offices. 5. UTILIZATION OF LOAN 1052-PH Resource Transfer 5.01 Rate of Utilization. As shown in Annex 3, the utilization of Loan 1052-PH was much slower than estimated at the time of appraisal. While it was estimated that this loan of US$30 million would be fully disbursed by year-end 1978, as of that date only 49% of the loan had been disbursed. The reasons for the slow rate of disbursement are complex and include (a) an uncertain business climate caused by two rounds of oil price increases and resulting high inflation; and (b) the fact that the hard currencies disbursed by the Bank (Yen, Swiss Franc and Deutsch Mark) were appreciating considerably against the peso thus causing Bank funds to be relatively expensive and therefore less attractive to the end-user who carried the foreign exchange risk (para. 5.12). In addition, with LIBOR funds going at 6-8% during this time period, Off-Shore Banking Units (OBU-s) were increasingly more attractive to borrowers, the result being much slower than projected growth in PDCP's  lending operations with prepayment and cancellation of loans increasing. Due to the slow rate of disbursement, the original closing date of June 30, 1979 was first extended to June 30, 1980 and finally to June 30, 1981. On September 15, 1981, $211,503 of the loan was cancelled. 5.02 Fund Allocation. As summarized in Annex 4, Loan 1052-PH was used to finance seven "A" subprojects ($14.8 million) above the free limit of $1.5 million /1 and thirty-nine "B" subprojects ($15.0 million) below the free limit. Within the "A" grouping of subprojects, one borrower (Mariwasa Manu- facturing) received two separate subloans from the proceeds of Loan 1052-PH, while for the "B" subprojects, three separate borrowers (L.S. Sarmiento, Cagayan Electric Power and Light Co., and Philippine Development and Industrial Corp.) each received two subloans. In most cases, the second sub- loan to the same borrower was to provide financial support for an additional expansion of the enterprise, although in one case the initial project underwent revision and required supplemental funds. To ensure that the loan would be used to finEnce a relatively large number of subprojects, a subloan ceiling of $2.5 million was established. In the case of two subprojects, however, this ceiling was waived by the Bank. The average subloan size amounted to $647,576 which is satisfactory, especially when considering that nearly half of the proceeds of the loan went to "A" subprojects. The Bank reviewed all seven of the "A" subprojects and provided comments on four of the seven projects. The Bank's comments were generally made to elicit more detailed project information from PDCP and in all cases, PDCP satisfactorily responded to the issues raised by the Bank. Subproject Characteristics 5.03 The table below summarizes data on the subprojects financed under Loan 1052-PH, while Annex 6 presents detailed information on the character- istics of these subprojects. /1 A subloan to one subproject (Gonzalo Puyat and Sons, Inc.) of $939,918 although technically below the free limit is an A subproject because the subloan amount originally requested and approved by the Bank was $1,780,000.  - 6 - Summarized Data on Subprojects Estimate/a Actual No. of subprojects 40-45 46 A subprojects 10-12 7 B subprojects 30-33 39 Average subloan size $600,000 $647,576 Nature of subproject New - 10 Expansion or modernization - 36 Total project cost (P '000) 658,482 /b 640,546 /b Total PDCP financing (P '000) - 237,019 Bank funds ($ million) 30.0 29.8 Peso funds (P '000) - 16,537 Bank financing as % of total cost - 34.4 PDCP financing /c as % of total cost - 37.0 Total incremental employment 8,468 /d 8,420 /d Investment cost per job (P '000) 76.0 75.0 Total sales (P '000) /e 753,838 /f 778,684 /f Total profit (loss) (P '000) /e 84,682 7f (6,165)-7f Total exports (P '000) /e 208,800 166,760 Exports as % of sales /e 43.7 36.8 Total value aded (P '000) 348,800 314,883 /g /a Based on either estimates made at the time of Bank appraisal or contained in subproject appraisal reports prepared by PDCP. /b Excluding 6 projects for which data could not be obtained. /c Including Bank financing. /d Excluding 6 projects for which data could not be obtained. /e Based on second full year of operations. /f Excluding 11 projects for which data could not be obtained. /g Excluding 17 projects for which data could not be obtained.  - 7 - 5.04 Regional Distribution. At the time of appraisal for Loan 1052-PH, PDCP was criticized, perhaps unjustly, for providing a large proportion of its resources to subprojects located in Metro Manila. Actually, the trend of resources going to Metro Manila had been very erratic: between 1963-71, 19% of loan approvals (by amount) were for Metro Manila; in 1972 this decreased to 7% before rising sharply to 33% in 1973; in 1974, the percentage fell to 3% so that for the period 1963-74, 17% of PDCP's loan approvals were for projects located in Metro Manila. 5.05 In an effort to improve the regional distribution of its financing, however, PDCP stated Its intentions at the time of appraisal to: (a) open promotional branches in Davao, Cagayan de Oro and Cebu; (b) help develop industrial estates for small- and medium-scale industries in Paete and Davao; and (c) take up participation in the equity of local private development banks (PDBs). PDCP's efforts at establishing branches have been most successful: as of June 30, 1982, seven branches have been established and have proved to be effective vehicles for promoting and financing small and medium industries in the regions. Equity investments in selected PDBs have been limited, with PDCP taking up 25% ownership of the Davao City Development Bank in 1975, 18% of the Southern Negros Development Bank in 1976 and 30% of the Northern Mindanao Development Bank in 1981, for an aggregated cost of P 4.6 million. With regard to the development of industrial estates, PDCP's efforts in identifying/developing industrial estates in Paete and Davao were unsuccessful. In Paete, the estate plans were abandoned due to the prohi- bitive cost of the major road construction which would have been required, the difficulties encountered in trying to gain property ownership and the decline of the market of wood furniture and carvings, the subsector the estate was intending to promote. The Davao industrial estate was intended to promote the region's metal working industries. The failure of the entrepreneurs in the region to agree on a project site (due to various vested interests), coupled with the world-wide recession resulted in PDCP's withdrawal from the project. Government agencies, however, subsequently took over development of the estate. 5.06 The regional distributon of subprojects financed under Loan 1052-PH is given in Annex 7. On the whole, the distribution was satisfactory. While Metro Manila (25.5%) and Southern Tagalog (5.3%) together accounted for 30.8% of the subprojects receiving financing, 19% went to Central Luzon, 19.9% of the loan proceeds were for projects in Central Mindanao, 12.5% went to Northern Mindanao and 7.2% went to Southern Mindanao. This distribution is especially good considering that regional dispersion of investment has historically been a problem. The dependence of import substituting consumer good industries on imported inputs created a strong incentive for these industries to locate near Manila, the country's major port and largest consumer market. Excluding resource based industries, nearly 90% of all manufacturing value-added has been produced in and around the capital city.  - 8 - 5.07 Sectoral Distribution. The sectoral distribution of projects financed under Loan 1052-PH was evenly balanced and thus, satisfactory (Annex 7). As a percentage of the total number of projects financed, textiles and nonmetallic mineral products each accounted for 17%, followed by wood/wood products with 13%, shipping and transportation project- with 11% and chemicals/chemical products and electric power/ apparatus each receiving 6.5%. The remaining subsectors each received about 4% of subprojects with the exception of "miscellaneous" which accounted for 11%. In terms of amount disbursed, the dominant subsectors were wood/wood products (29%), nonmetallic mineral products (20%), mining (11%), chemicals/chemical products (10%) and textiles (9%). 5.08 Interlocking Directorships and Repeater Loans. At the time of appraisal for Loan 1052-PH, PDCP was criticized for making too many loans to companies who had Board members also sitting on PDCP's Board of Directors. PDCP was also faulted for making repeater loans to the same borrower rather than spreading out its resources to perhaps better stimulate industrial development. Under Loan 1052-PH only two subloans (4% by number, 3% by amount disbursed) went to companies having an interlocking directorship with PDCP. With regard to repeater loans, 50% of the subborrowers had received previous loans from PDCP, which is reasonable given the fact that the investment climate was rather unfavorable and that PDCP, in order to limit its business risks, prefers to lend to clients with whom it has had previous experience. Operational and Economic Performance of Subprojects 5.09 Operational Results. Operational data on the projects financed under Loan 1052-PH are provided in Annexes 6, 8, and 9. Cost estimates made by PDCP at the time of subproject appraisal were very realistic. While 19 subprojects had cost over-runs ranging from 0.1% to 18.6%, 20 subprojects had actual costs of 0.1% to 66.0% less than the original cost estimate./1 The cost over-runs were generally explained by changes in equipment or project design or long delays in implementation; the large under-runs were generally caused by the scaling-down of projects after subproject appraisal had been completed. While 24 subprojects experienced delays in implementation ranging from 1 to 34 months, 16 subprojects were completed on time or ahead of schedule./1 The delays in project implementation were due mainly to: (a) the protracted time required by some borrowers to comply with predisbursement conditions; (b) changes in, or problems with the equipment supplier; and (c) the recessionary climate which caused borrowers to delay acquisition of fixed assets. With the exception of those borrowers who delayed project implementation due to their inability to meet PDCP's collateral requirements or predisbursement conditions, most of the factors causing delays were outside PDCP's control. Annex 5 provides information regarding the subprojects which had implementation delays of six months or longer. Estimated and actual sales /1 For the remaining subprojects, data was either not available or the subproject is still in the process of being implemented.  - 9 - data were available for 34 subprojects. As shown in Annex 8, actual total sales for both the first and second year of operations were marginally more than PDCP's appraisal estimates. Actual profits for the first and second years of operation, however, were significantly less than estimated profits. Only three of the thirty-four projects for which data were available had actual profits exceeding estimates for the second year of operations, the remaining experiencing losses to varying degrees, such that total aggregate losses for the second year of operations amounted to P 6.2 million, compared to estimated profits of P 84.7 million. It should be noted, however, that neither the first nor second years of operation are truely representative of a project's profitability as these initial start-up years are usually the most (lifficult in terms of adjusting pricing policies to actual production cosl:s. In the case of many of the subprojects financed under this loan, this adjustment process was particularly difficult given the increase in oil prices coupled with rising inflation and a deteriorating business climate. In addition, actual profits are often understated for tax purposes. As indicated by the FRRs given in Annex 9, however, these initial losses did not imply financial disaster for the subprojects financed under the loan. Ex-post FRRs were calculated for 27 subprojects. While the FRRs for six of the subprojects were negative, the remaining subprojects had FRRs ranging from 1.3% to cver 200%, with a weighted average of 35.4%. This suggests that while the first few years of operations may have been difficult for many subprojects in terms of profitability, the subprojects were able to overcome these problems and were indeed financially viable. 5.10 Economic Performance. Details of the economic performance of the subprojects financed under Loan 1052-PH are presented in Annex 9. Ex-post ERRs were calculated for 23 subprojects. Three of the subprojects had nega- tive ERRs while the remaining 20 subprojects had ERRs ranging from 6.4% to 260%. The weighted average ERR for the 20 subprojects was 45.3%. Based on data available for 38 subprojects financed under the loan, a total of 8,420 jobs were created at an average cost per job of P 73,694 or $US9,328./1 By comparison, for 47 subloans made by the Development Bank of the Philippines under Loan 1190-PH (effective April 1976), the average cost per job was about $24,500. The relatively low average cost per job value indicates that very few capital intensive projects were financed under Loan 1052-PH, although most of subprojects financed belonged to medium-to-large-scale industries. Estimated and actual data on export sales were available for 34 subprojects and are summarized in Annex 9. While export sales were projected to represent 43.7% of total sales, they actually amounted to 36.8% which is quite satisfactory as the projects were operating in a recessionary period during which export demand was not very strong. Value-added for 28 subprojects amounted to P 314.9 million compared to estimates of P 348.8 million. /1 Based on 1981 exchange rate P 7.90 = US$1.00.  - 10 - Status of Subloans 5.11 As of December 31, 1981, 23 loans were in arrears, 16 were up-to- date in terms of repayment and 7 had heen either repaid in full or prepaid (Annex 10). Six subloans had been rescheduled, of which four were once again in arrears. Total arrears of principal and interest amounted to P 42.1 mil-- lion, representing 10%. of the principal outstanding for subloans financed under Loan 1052-PH. The level of arrears for these 46 subloans is about the same as for PDCP's overall lending operations and reflects the deteriorating business climate which has prevailed over the last few years. Effective Cost of Bank Funds to Subborrowers 5.12 PDCP has estimated the effective cost of Bank funds to its sub- borrowers under Loan 1052-PH by using a discounted cash flow analysis (Annex 11). The effective rate of 20.4% compared to the nominal rate of 12.5-16.0o%/l represents the average annual borrowing cost to PDCP subborrowers over a period, starting with the first disbursement and assuming that the outstanding balance of the loan is repaid as of January 15, 1982. The high effective cost of Bank funds caused some subborrowers under Loan 1052-PH to prepay their subloans. Since this loan was made, the Bank introduced currency pooling arrangements, thereby correcting to a certain extent, the inequitable burdetn among Bank borrowers resulting from the Bank's currency disbursement practices. 6. INSTITUTIONAL DEVELOPMENT Institutional Aspects 6.01 Management/Organization. PDCP's Board of Directors consists of 11 members, 9 of whom are also incumbent directors of FEBTC. Despite the FEBTC control, PPCP is expected to be guided by its own corporate goals and will continue to be active both in development banking and investment hanking activities. DDCPss organizational structure and management team have basically remained the same since the appraisal of Loan 1052-PH. PDCP's top management, consisting of its President, Executive Vice President and Senior Vice "resident, has recently been strengthened by the addition of another Senior Vice President. In an effort to decentralize and strengthen middle management, four new Assistant Vice President positions have also been established. PDCP has divided its operations among eleven departments which form three groups (Operations, Project Management and Administration, /1 PDCP's interest rate to subborrowers, including its service fee, ranged from 12.5% to 16% over the time taken to disburse the proceeds of Loan 1052-PH (Annex 2).  - 11 - and Accounting and Finance) each of which is headed by either an Executive or Senior Vice President. PDCP recognizes that the current organizational structure places a great deal of responsibility on the Vice President heading the Project Management and Administration Group, considering the growing volume and intensity of project supervision required. Although PDCP appointed a full-time Department Head for the Project Management Group in June 1982,/l, the burden on the Senior Vice President remains the same. 6.02 Staffing. Between 1974-81, PDCP's staff increased from 157 (101 of whom were professionals) to 280 (185 of whom are professionals). Despite this increase, the adequacy of staff, particularly project supervision staff who number only 28, requires further management review. The rate of staff turn-over has been a historical problem for PDCP; while the staff turn-over rate was about 10% in 1974, it was 17% in 1981. The chief reasons for staff turn-over have remained consistent over the years, however: strong demand from other financial institutions for PDCP-trained professionals, and the higher positions and therefore higher financial emoluments offered by competitors to PDCP's experienced staff. PDCP management feels that as long as there is demand for people well-trained in the field of project finance there will always be staff turn-over. PDCP has, however, reviewed its salary structure to ensure its competitiveness and expanded its middle-management positions to provide some promotional avenues for its more senior and experienced staff. In addition, to diminish the problems caused by turn-over, PDCP operates an active recruitment program and has a well-established training system for new staff. Standards and Procedures 6.03 Operating Policies. PDCP's Statement of General Business Policies, adopted in March 1964, was last amended in April 1981, so as to be consistent with the amended Articles of Incorporation brought about by PDCP's tie-up with FEBTC (para. 3.02). PDCP's operations have always been guided by these policies and no significant deviation has been noted. 6.04 Project Appraisal. PDCP-s project appraisal procedures are well established and are consistently applied by its staff, resulting in project appraisal reports which are generally thorough and informative. As can be seen in Annexes 8 and 9, however, actual subproject performance under Loan 1052-PH, was lower than appraisal estimates in terms of profitability, although, on average, the financial and economic rates of return were satisfactory (para. 5.09-5.10). While the appraisal estimates may have been adversely affected by the relatively poor economic climate prevailing when the projects became fully operational, it also appears that PDCP's evaluation of projects tended to be somewhat optimistic. Optimistic projections may have resulted in PDCP providing shorter grace and repayment periods which could help push a project into arrears. PDCP's management has also recognized a problem in appraisal of projects, particularly in light of the growing number of projects in arrears (para. 7.14), and is working to identify the critical factors which spell success or failure for a project. As an immediate step to /1 See Attachment A, page 3.  - 12 - strengthen the quality of project evaluation and also achieve greater impact on improving project design, PDCP has recently formed a Preappraisal Review Committee (comprising the heads of the Operations and Administrative Group, the Project Evaluation, Project Management and Business Development Departments and the relevant industry specialist of the Project lanagement Group), to screen all applications for assistance prior to undertaking any extensive evaluation. Using this procedure, the collective experience and judgment of the committee members is pooled to identify the possible strengths and weaknesses and potential problems of the project. Since 1979, PDCP has also routinely undertaken sensitivity analysis for subprojects receiving loans of $500,000 or more. l/ 6.05 Project Supervision. Responsibility for project supervision, which starts with loan signing, rests with the Project Management Group. Nearly all IBRD appraisal and supervision missions to PDCP emphasized the need to strengthen the staffing and management of this group. The ratio of staff to projects, however, has remained relatively constant since 1974 with the number of staff increasing from 15 in 1974 to 28 in 1981 and the number of outstan- ding loans increasing from 312 in 1974 to 538 as of year-end 1981. As can be seen in Chart No. 1, since 1974 the management and organization of the Project Management Group (PMG) has also become more complex with specialization (according to degree of project problems) and additional managers being introduced. Despite these improvements, PDCP's project supervision calls for further strengthening. PDCP-s management recognizes this and is currently trying to recruit a person to head PMG on a full time basis and is considering the need to introduce additional staff (para. 6.02). In addition, PDCP has: established a separate unit within PMG for small and medium industry project supervision; introduced the position of Collection Coordinator to assist in collection activities; introduced a computerized integrated billing system; and established an acquired assets management unit. PDCP's management feels that the combined effect of these changes will be to strengthen project supervision thereby eventually improving collection performance and reducing the level of past due accounts. In its letter to the Bank of May 2, 1983 (Attachment A), PDCP indicated additonal organizational changes contemplated for May 1983, including: (a) dividing PMG into two groups, project monitor- ing/supervision and problem projects/acquired assets; (b) increasing PMG staff by nine persons and (c) increasing the active participation of senior executives in rehabilitating past due accounts. Resource Mobilization 6.06 Domestic Currency. Between 1974-77 PDCP relied essentially on its equity to meet its domestic currency requirements. Starting in 1978, however, when the Central Bank imposed a 16% ceiling on the yields of money market operations, thereby increasing the availability of funds for place- ment in longer-term operations, PDCP initiated a program of borrowing, through the issuance of its own promissory notes, mediumr to long-term funds from savings banks and insurance companies. As shown in Annex 12, these domestic currency borrowings amounted to P 26 million in 1978, peaked at P 43 million in 1979, and started to decline significantly in 1980. The /l See Attachment A, page 2.  - 13 - decline in term borrowings of domestic resources was due chiefly to an interest rate structure which did not allow PDCP to raise these resources at a cost low enough to enable it to lend at a reasonably positive margin. While domestic resources have been readily available for the smaller projects which PDCP is able to 100% refinance with the CB's Industrial Guarantee and Loan Fund (IGLF), peso lending for larger projects has been constrained both by PDCP's inability to raise substantial domestic currency resources and by its relatively poor collection performance (Annex 24). In order to provide some domestic currency financing to larger-scale borrowers, PDCP, in 1980, introduced a scheme whereby its loans to the borrower were refinanced through the sale of the borrower-company's long-term commercial paper. In addition, PDCP has had to rely increasingly on its syndication operations, which have increased from P 50.2 million in 1977 to P 198.6 million in 1981 (Annex 15). With respect to meeting future domestic currency resource requirements, PDCP plans to raise funds by gaining access to new resource mobilization programs with FEBTC and to gradually build-up its paid-in capital from P 100 million in 1981 to P 190 million by 1986. 6.07 Foreign Currency. At the time of appraisal for this loan, it was noted that the administered interest rate structure made it impossible for PDCP to mobilize long-term resources carrying a fixed interest rate from foreign capital markets, even through a syndicated arrangement with IFC. It was therefore necessary for PDCP to rely chiefly on the Bank and the Asian Development Bank (ADB) for its foreign currency requirements. In addition to Loan 1052-PH, the Bank made a fifth loan to PDCP in 1978 (Loan 1514-PH). In 1981, PDCP was allocated $60 million by the Central Bank, $36 million of which was from the $150 million Industrial Finance Loan (Loan 1984-PH) the Bank made to the Central Bank in 1981, and $24 million of which was from the Central Bank's own commercial borrowings. During appraisal for Loan 1984-PH, it was determined that the Central Bank would be able to command better terms and conditions for borrowings from foreign markets than would the private financial institutions on their own. Since 1969, ADB has made a total of five loans to PDCP, the last: coming in 1980. In 1977, PDCP received a DM 5 million (US$2.1) loan from the German Development Bank (DEG) and in 1978 a $10 million equivalent loan from a syndicate of banks led by the Bank of Tokyo (BOT) was arranged. The BOT loan, which represents PDCP's only borrowing from nonofficial sources, was difficult to utilize, however, as the minimum disbursement was fixed at $1.0 million and the interest mark-up on the loan to PDCP was set at 1.25% above LIBOR. For its projected foreign resource requirements, PDCP expects to continue to rely heavily on Bank and ADB support, although borrowing from some unspecified commercial sources is also anticipated. A summary of PDCP's foreign currency borrowings is given in Annex 13. 7. OPERATIONAL AND FINANCIAL PERFORMANCE OF PDCP Operational Performance 7.01 Overall Lending Operations. The level of PDCP's lending operations projected at the time of appraisal of Loan 1052-PH for the period 1974-78 and the actual levels achieved are presented in Annex 14. With regard to total  - 14 - approvals, commitments and disbursements, the actual results fall consistently short of the projected amounts for each year in the 1974-78 period. The actual approvals, commitments and disbursements relating to PDCP-s foreign lending operations were considerably below the projected levels. With the exception of 1975 when actual total foreign currency disbursements reach 103.4% of the project level, actual disbursements amounted to only about 20-30% of projected levels for the 1975-78 period. An explanation of the wide discrepancy between projected and actual operations is that the projections made in 1974 were premised on the expectation that the healthy economy of the early 1970s would continue in the following years. At that time, a continuing increase in investment was forecast due to: (a) Govermnent emphasis on developing export-oriented manufacturing industries; (b) advanced investment plans of local companies in anticipation of much higher equipment costs in the future; and (c) the shift in foreign investment (particularly Japanese investment) from Hongkong, Taiwan and Korea to the Philippines. However, the unexpected and sharp increase in oil prices and resulting upsurge in inflation and interest rates adversely affected investment plans, thereby severely curtailing borrowings from local firms and effectively reducing the rate of growth of PDCP's approvals, commitments and disbursements particularly those relating to its foreign currency lending operations. Although PDCP introduced measures to increase its lending operations, such as providing working capital and small- and medium-industry financing and expanding its branch network, it was not able to meet the forecast levels of operation until 1978 when total investment approvals amounted to P 488.2 million compared to a projected level of P 476.9 million. 7.02 PDCP's lending operations for the five year period 1977-81 are summarized in Annex 15. As noted above, lending operations began to pick-up in 1978 with total loan approvals amounting to P 321.0 million compared to P 81.9 million in 1977. Similarly, equity investments increased from P 4.3 million to P 11.8 million, and syndications rose from P 50.2 mil- lion to P 112.0 million. Loan and equity investments and syndications continued to grow steadily in 1979. Although loan approvals decreased to P 288.7 million in 1980, total approvals (loans, syndications, guarantees and equity investments) increased by 86% due to a very large (483%) increase in syndications. The huge increase in syndications is explained, in part, by PDCP's lack of domestic currency resources (para. 6.06). In 1981, however, syndications decreased by nearly two-thirds from the previous year's approvals. While loan approvals recovered somewhat in 1981 (P 316.8 mil- lion), equity investments fell from P 28.2 million in 1980 to P 7.6 mil- lion in 1981 due largely to PDCP's domestic currency constraint. 7.03 Small Business Program. Under its Small Business Program (SBP), PDCP finances industrial projects meeting the Government s asset-based definition of small and medium industries, /1 as well as agricultural /1 Currently borrowers having assets of up to P 2.5 million are classified as small-scale industry and those with assets up to P 10 million are classified as medium-scale industry.  - 15 - projects. Although the SBP was launched in 1972, it gained momentum after September 1976 when PDCP was accredited with the Central Bank's Industrial Guarantee and Loan Fund (IGLF). Through IGLF, PDCP is able to obtain 100% refinancing of the industrial loans it makes to small- and medium-scale borrowers. PDCP's SBP has been growing steadily since 1972-73 when 13 loans were approved for P 2.1 million. In 1980, 49 loans for P 42.4 million were approved, representing 15% of PDCP's total loan approvals for the year. Depending on project location, PDCP's SBP loans are processed both at the head office and the branches and PDCP's branches have contributed significantly to the increase in approvals under the Program. Although SBP loan approvals decreased by 5% in 1981, this is explained by PDCP's domestic currency constraint which effectively restricted PDCP to making only industrial loans eligible for refinancing under IGLF. 7.04 Equity Investments. PDCP's direct equity investment operations account for only a small proportion (3.6% of investments outstanding in 1981) of its total operations. With the current uncertainty in the economy, PDCP has adopted a cautious attitude in the acquisition of new equity investments, which accounts for the recent decline in approvals. PDCP's outstanding equity portfolio as of year-end 1981 is summarized in Annex 16. Due to the depressed condition of the equity market, PDCP's outstanding equity portfolio of P 52.7 million has depreciated to P 47.5 million (book value) representing a 10% decline of acquisition cost. The allowance for decline in market value for PDCP's equity investments is adequate to cover this depreciation, however. 7.05 Guarantee Operations. As seen in Annex 17, PDCP's guarantee oper- ations have been erratic over the 1977-81 period. PDCP's guarantees normally supplement its direct financial assistance and are issued against suppliers' credits or peso accommodations of local financial institutions. However, in certain instances they have been used to help clients finance prepayment of their foreign exchange obligations to PDCP, the purpose being to retain business relations and compensate for the loss of future interest income on the loan being prepaid. As of December 31, 1981, outstanding guarantees amounted to P 96.2 million. As the gurantees are fully secured and experience has been good (as of December 31, 1981, there have been no advances on guarantees), PDCP does not make provisions against losses on guarantees. 7.06 Syndications and Underwriting Operations. Through its syndication operations, which began in 1969, PDCP is able to maximize its assistance to clients with viable projects without violating the prudent exposure limits for a single enterprise established in its Statement of Business Policies. Also, as a leading investment house in the Philippines, PDCP resorted to this device to mitigate its own domestic currency resource constraint. Over the 1980-81 period, PDCP's syndications fluctuated greatly in volume, due largely to the fact that 1980 was an exceptionally good year (para. 7.02). PDCP's underwriting/private placement operations have also fluctuated over the 1977-81 period (Annex 15). In 1981, despite the unattractive conditions affecting the capital market, PDCP was able to underwrite seven debt security issues for P 25.3 million.  - 16 - 7.07 Money Market Operations. PDCP originally initiated its short-term money market operations to maximize the yield on its liquid resources and tap excess liquidity in the market for channeling to businesses temporarily in need of additional working capital. For the period 1977-81, PDCP's money market borrowings as a percentage of total assets increased stee'ily from 7.1% in 1977 to 17.1% in 1980 before deceasing to 14.3% in 1981. Income from money market operations as a percentage of total income increased from 4.7% in 1977 to 9.1% in 1980, before sharply falling to 2.1% in 1981. Over time, due to the deteriorating quality of its portfolio and poor loan collections, PDCP has had to use its short-term money market funds to cover maturing debt liabilities. As of December 31, 1981, the variance between the sum of PDCP's cash assets and short-term investments less bills payable amounted to a negative P 71.3 million; the first negative varience experienced by PDCP occurred in July 1979 and amounted to P 15.7 million. 7.08 Loan Characteristics. The sectoral distribution of PDCP's loan portfolio has been historically dominated by loans to the manufacturing sector, which accounted for 62% of the loans approved by PDCP between 1963-81 (Annex 18). While loans to certain manufacturing industries or loans to other sectors (i.e. transportation, communications) may have accounted for a large share of approvals in any given year, the overall loan portfolio is quite well diversified. Over the period 1963-81, 61.6% of the cummulative total of PDCP's loan approvals (by amount), went to the manufacturing sector. Within this sector, projects producing non-metallic mineral products accounted for 12.5% of approvals, followed by chemicals/chemical products (12.0%) and wood/wood products (8.2%). Other sectors receiving a significant proportion of PDCP's approvals (by amount) included: transportation (12%), communication (6.9%) and mining (5.8%). In line with industrial development in the Philippines, loans for projects located in Metro Manila have represented as much as 45% of PDCP's annual approvals (1980) but surprisingly account for only 30% of approvals for the period 1963-81. The introduction of PDCP branch offices has helped improve the regional distribution of the projects it finances. PDCP opened its first branch office in 1974 in Davao, and since then has established six other offices throughout the Philippines (para. 8.02). In conjunction with its tie-up with FEBTC, PDCP's Articles of Incorporation have been amended to allow it to undertake lending operations in Asean countries, such that in 1981, 23% of loan approvals (by amount) went to projects in Asean countries,/1 25% went to Metro Manila and 24% went to projects in Luzon (excluding Metro Manila). The average size of PDCP-s loans has grown steadily from P 2.4 million for the period 1963-78 to P 4.4 million for 1981, reflecting, largely, the affects of inflation. /1 PDCP's participation in these projects represented part of the Philippine contribution to officially designated ASEAN projects; Bank funds are not involved in the financing of these projects.  - 17 - 7.09 According to its Statement of General Business Policies, a major objective of PDCP is the development of private productive enterprises through term and equity financing. As shown in Annex 18, however, PDCP has always tended to finance expansion projects rather than new projects. This preference has been even more pronounced in recent years (1979-81) when loans for expansion projects represented from 78% to 95% of annual loan approvals. PDCP ex]?lains its high investment in expansion projects as a result of its being a private corporation: in order to ensure its stock- holders a reasonable return, PDCP is willing to assume the risks inherent in new project financing only to a limited extent. This is particularly true during recessionary periods when expansion projects of existing clientele provide a much safer form of lending. Financial Performance 7.10 Financial Position. PDCP's projected and actual balance sheets for the period 1974-78 are presented in Annex 19 while audited balance sheets for the period 1977-81 may be seen in Annex 20. The growth of PDCP's total assets has been very erratic since 1974. While actual total assets exceeded projections in 1974 and 1975, for the three year period 1976-78, the projected levels of total assets were not achieved, due largely to the lower than expected growth in PDCP's lending operations (para. 7.01). The slow growth in PDCP's loan portfolio was caused by the stagnation in lending operations and some large loan prepayments in advance of maturity. For the period 1978-80, PDCP's total assets grew impressively by an average annual rate of 18%, reflecting PDCP's successes in both short- and long-term bor- rowings. For 1981, however, total assets grew by only 7% which is attribu- table to the prevailing recessionary climate. Balance sheet items showing notable growth over the last few years include: (a) short-term money market borrowings which have steadily increased from P 64.3 million in 1977 to a high of P 254.2 million in 1980 before decreasing to P 226.9 million in 1981; (b) long-term borrowings which were static at P 591.8 million for 1977-78 but then steadily increased to P 994.7 million in 1981; and (c) acquired assets which first appeared on PDCP's balance sheet in 1980 at P 17.6 million and increased to P 76.0 million in 1981. The increases in short-term money Market borrowings and acquired assets reflect the collection difficulties PDCP is currently experiencing which stems from the general deterioration of the economic environment. 7.11 Capital Structure and Liquidity. PDCP's paid-in capital which remained at P 73.4 million from 1976-80, increased to P 100.0 million in 1981; total equity, however, has increased from P 123.7 million in 1976 to P 187.1 million in 1981. PDCP's total debt/equity ratio,/1 though steadily increasing to 8.0:1 in 1981, has remained within the 10:1 limit established by PDCP. The long-term debt/equity ratio has also steadily increased and /1 Total debt and long-term debt include guarantees.  - 18 - amounted to 6.5:1 in 1981 which is still within the contractual limit of 8:1 agreed to with the Bank under Loan 1984-PH. PDCP-s short-term debt/equity ratio has been climbing from 0.7:1 in 1977 to 1.7:1 in 1980 and 1.5:1 in 1981, reflecting the pattern and magnitude of its short-term borrowings. PDCP's liquidity position as measured by the difference between current assets (excluding maturities on term loans) and current liabilities (excluding current maturities on term debt) has been erratic. While the difference was P 49 million (5.6% of total assets) in 1976 and P 27.4 million (3% of total assets) in 1977, by 1981 it was only P 3.5 million (0.2% of total assets). PDCP has maintained a net liquidity ratio of at least 4% of total assets as agreed with IFC. Under loan 1514-PH, the Bank and PDCP agreed to a minimum liquidity ratio of 1.15 times current liabilities (with principal and interest overdue more than 180 days being deducted from current assets). Based on 1981 audit figures, this ratio amounted to only 1.11:1. PDCP's tight liquidity position is largely due to its poor collection performance (para. 7.14) which is forcing PDCP to utilize its short-term money market borrowings not for short-term investments but instead for making good on the past dues of its borrowers. 7.12 Profitability. PDCP's projected and actual income statements for the period 1974-81 and audited income statements for the period 1977-81 are found in Annexes 21 and 22, respectively. While PDCP's gross income grew at an average annual rate of 16.5% for the period 1977-81, net income grew only marginally during 1977-80 (averaging 7.7% p.a.) and actually decreased in 1981 to P 17.5 million (36% less than the 1980 value). Financial expenses as a percentage of gross income steadily increased from 56.4% in 1977 to 72.8% in 1981 which, in part, is explained by the cost of PDCP's short-term "money market" borrowings which was not adequately offset by interest income from its money market investments. As a result of the increasing level of arrears (para. 7.14), PDCP also substantially increased its provisions for doubtful accounts by P 9.9 million in 1981. 7.13 Audit. As always in the past, PDCP's auditor, Sycip, Gorres, Velayo & Co., issued its report for 1981 operations without qualification. 7.14 Quality of Portfolio. Since 1978, when PDCP-s collections amounted to 87% of the amount of principal and interest falling due and past due, collection performance has deteriorated with yearly collections amcunting to around 67% of the amounts due and past due (Annex 24). While collection of current due principal and interest were 77% and 84% respectively, in 1981, collections of overdue principal and interest came to only 13% and 28%. The status of PDCP's loan portfolio for the period 1977-81 is given in Annexes 25 and 26. Due to the deteriorating collection performance, loan arrears steadily increased from P 57.2 in 1977, representing 7.7% of the loan portfolio, to P 134.5 million in 1981, representing 9.7% of the loan portfolio. The portfolio affected by arrears also increased substantially from 24%, by amount, and 53%, by number, in 1977 to 37%, by amount, and 67% by number in 1981. While arrears of more than 12 months have declined from 3.7%  - 19 - of the outstanding loan portfolio in 1978 and 1979 to 3.1% in 1980 and 3.3% in 1981, this is most probably due to the extensive reschedulings which occurred in 1980-81./l The increasing level of arrearages is attributable to several factors. The worldwide economic recession and tightening of domestic credit following the 1981 financial crisis resulted in a number of PDCP clients facing liquidity problems. The appreciation of foreign exchange obligations also caused major repayment problems for many of PDCP-s clients as all foreign exchange risk is borne by the borrower. In addition, several factors within PDCP's control also contributed to the arrears problem. First, a Vice President solely in charge of the Project Management Group (PMG) has yet to be appointed and management of this important group is left to the Senior Vice President who is also in charge of Administration. Also as pointed out in para. 6.07, the PMG has gone through a number of organizational changes over the last few years but still appears to remain understaffed and subject to staff turnover. Finally, overly optimistic projections prepared during project appraisals resulting in shorter than required grace periods, may have added to the arrears problem. As of December 31, 1981, PDCP's provisions for losses amounted to P 21.1 million (1.8% of the total loan portfolio outstanding), a level considered adequate by its auditors. The level of provisions is based on a detailed review of the portfolio taking into account past collection experience, collateral values,/2 and other information important to the project and its proponent. For 1981, PDCP had one write-off for P 12.6 million. 8. DEVELOPMENT ROLE OF PDCP 8.01 In the nineteen years of its existence, PDCP has developed into a mature DFC and has made a significant contribution toward the growth of the country's private industry. PDCP is second only to DBP as the country's most important source of long-term finance for industry. As a matter of policy, PDCP closely alligns its operations to the economic priorities set by the Government. PDCP's appraisals of projects are comprehensive and PDCP is /1 In 1980, 42 loans representing P 81.5 million in principal outstand- ing (7.4% of the total loan portfolio) were rescheduled; in 1981, 44 loans representing P 68.9 million in principal outstanding (6% of the total loan portfolio) were rescheduled. /2 For its regular lending operations, PDCP's loans are adequately secured by collateral (fixed assets and real estate) which is conservatively valued by PDCP; in the case of its IGLF loans, when the borrower does not have sufficient collateral, PDCP requires that he obtain an IGLF collateral - short guarantee.  - 20 - selective in its choice of projects, assisting only those which satisfy its criteria for financial, managerial, technical, market and economic viability. PDCP assists both large- and small-scale industries, including projects relating to mining, public utilities, transport and manufacturing. In addition to providing financial assistance, PDCP has also served as a valuable training institution, as reflected by the number of PDCP-trained staff actively recruited by other financial institutions (para. 6.02) and by the willingness of PDCP's management to accept staff from development finance companies of other countries for training with PDCP. 8.02 Economic Impact. Over the period 1963-81, PDCP assisted 1,089 pro- jects by providing financial assistance amounting to P 4.9 billion (inclu- ding equity, syndication and guarantee operations). Based on appraisal estimates, the investment requirements of these projects amounted to P 9.5 billion of which P 2.7 billion (28%) was financed directly by PDCP. The total amount of incremental employment generated by PDCP directly-assisted projects since 1963 is estimated at about 58,600. Since 1963, PDCP assisted projects have generated about P 12.8 billion in sales, contributing P 5.3 billion to the country's net domestic product. Because PDCP gives priority to projects which earn or save foreign exchange, the foreign exchange impact of PDCP-s directly-assisted projects is significant: the cummulative total of foreign exchange earnings/savings as of year-end 1981 is estimated at $432.4 million. In a continuing effort to improve the regional distribution of its investments, in 1981, PDCP opened a branch office in Bacolod City, the center of the country's sugar industry. This brought the total number of PDCP-s branch offices to seven, the others being located in Davao, Cagayan de Oro, Iloilo, Cebu, Legazpi and Dagupan. 8.03 Development Strategy. In early 1980, PDCP formulated its second development strategy which is intended to guide PDCP's operations through the 1980s. Key elements of the strategy include PDCP's intentions to: (a) increase its contribution to domestic capital formation by establishing higher targets of financial assistance to productive projects; (b) gear its financial expertise to resource mobilization activities to meet the increasingly more complex funding requirements of large industrial ventures; (c) diversify its portfolio to reflect a more regionally oriented distribution of assisted projects; (d) continue expanding its assistance to small and medium-sized industries; and (c) continue to provide training opportunities for its own staff and to disseminate its expertise to the private and government sectors. 9. CONCLUSIONS 9.01 Overall, PDCP has been quite successful in meeting the lending objectives established under Loan 1052-PH. Although disbursement under the loan was slower than anticipated at the time of project appraisal, PDCP was successful at transferring foreign exchange resources to support industrial  - 21 - development. While many of the subprojects financed under this loan suffered initial operating problems, by and large, the subprojects eventually proved to be economically and financially viable, as confirmed by ex-post ERR and FRR calculations which averaged 45.3% and 35.4%, respectively. The subprojects financed had the added merit of being relatively labor-intensive and many were export-oriented. Since 1974, DDCP has also been most successful in estab- lishing its presence in the regions. The establishment of seven branch offices, starting in 1974, illustrates PT)CP's commitment to promoting indus- trial development throughout the country. PDCP's branch network, in combin- ation with its dynamic Small Business Program, have improved the overall regional distribution of subprojects financed by PDCP, while at the same time providing long-term resources and project counselling to borrowers who would have previously had to rely on short-term, collateral-based lending from local commercial banks. 9.02 PDCP continues to be a well-managed financial institution. While staff turn-over has presented PDCP with some problems, these are adequately being addressed through an active recruitment and training program. Project appraisal standards have been satisfactory, although greater moderation is recommended with regard to projections of profits and rates of return. Supervision of projects has historically been a problem for PDCP, and despite numerous organizational and procedural changes, PDCP's Project Management Group still needs to be strengthened further. 9.03 PDCP's financial performance has been seriously affected by the adverse economic environment and the resulting deterioration of its port- folio; this matter will continue to require the serious attention of PDCP's management. Decreasing collections have been compensated for by short-term borrowings which are now beginning to have repercussions on PDCP-s liquidity position. Assuming that the projects currently in arrears are not going to find solutions to their repayment problems in the short run, PDCP's manage- ment must find ways to raise long-term domestic currency resources in order to meet PDCP's repayment obligations without further damaging its liquidity position. 9.n4 Due to the increased competition in the financial sector resulting from the 1980 financial sector reforms, PDCP was forced to enter into a tie-up arrangement with FEBTC in order to emerge as part of an expanded banking facility. A major advantage of this tie-up arrangement is that PDCP will now have a source of long-term peso resources, although the particulars regarding peso borrowings from FEBTC remain to be worked out./l Such borrowings would not only help remove the peso lending constraint under which PDCP has operated for the last few years, but they would also help decrease PDCP's dependence on short-term borrowings, thereby improving its liquidity position. /1 PDCP stated that FEBTC's domestic currency resources remain unavailable to PDCP due to a limitation in the General Bank Act. PDCP is currently investigating the possibility of receiving an exemption from this limitation from the Monetary Board (Attachment A, page 4).  - 22 - ANNEX 1 PHILIPPINES PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES (LOAN 1052-PH) PROJECT COMPLETION REPORT List of Shareholders (as of April 30, 1982) No. of Amount Stockholders Nationality shares (Pesos) % Class A Far East Bank & Trust Company Filipino 6,006,985 60,069,850 60.06 Manuel N. Tuason, Jr. Filipino 100,279 1,002,790 1.00 Manila Electric Company Filipino 80,000 800,000 0.80 Marquez, Manuel J. Marquez and/ or Pilar C. Filipino 40,355 403,550 0.40 Gerry Roxas Filipino 39,993 399,930 0.40 Acacia Mutual Aid Society Filipino 20,394 203,940 0.20 Magin San Juan Filipino 17,843 178,430 0.18 Cifra & Co., Inc. Filipino 15,713 157,130 0.16 J.A. Delgado Memorial Foundation Inc. Filipino 14,580 145,800 0.15 Homero delos Reyes Filipino 14,014 140,140 0.14 Luzon Stevedoring Corporation Filipino 12,571 125,710 0.13 Elena Uichico Filipino 12,571 125,710 0.13 Nellie C. Delgado Filipino 11,995 119,950 0.12 Carosal Development Corporation Filipino 10,057 100,570 0.10 Trusteeship Inc. Filipino 9,992 99,920 0.10 Liberty Insurance Corporation Filipino 9,992 99,920 0.10 1,003 other shareholders holding less than 9,992 shares each Filipino 582,666 5,826,660 5.83 Total Class "A" 7,000,000 70,000,000 70.00 Class B Far East Bank & Trust Company Filipino 2,698,566 26,985,660 26.98 Deutsche Gesellshaft Fuer Wirtshaft German 97,818 978,180 0.98 Boston Overseas Financial Corp. American 77,942 779,420 0.78 Banca Nazionale del Lavoro Italian 62,857 628,570 0.63 Private Investment Co. of Asia Other alien 28,571 285,710 0.29 Carosal Development Corporation Filipino 250 2,500 - 46 other shareholders holding less than 250 shares each Various 33,996 339,960 0.34 Total Class "B" 3,000,000 30,000,000 30.00 Total Shares Outstanding 10,000,000 100,000,000 100.00 AEPID August 24, 1982  - 23 - ANNEX 2 PHILIPPINES PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES (LOAN 1052-PH) PROJECT COMPLETION REPORT Summary of Interest Rates Charged to PDCP's Borrowers (percent per annum) Foreign currency loans Local currency loans Interest Service fee Total Interest Service fee Total 1974 11.75-12 1-2 12.75-14 12-14 1/2-1.5 12.5-15.5 1975 12-14 2 14-16 12-18 3-5 15-19 1976 12 2 14 12 5 17 1977 10.5-12 2 12.5-14 12-14 7 19-21 1978 10-12 2 12-14 12 6-7 18-21 1979 10-12 2 12-14 12-15 6 18-21 1980 12-13 2 14-15 13.2-14 6-7 19.2-21 AEPID October 5, 1982  - 24 - ANNEX 3 PHILIPPINES PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES (LOAN 1052-PH) PROJECT CONPLETION REPORT Schedule of Estimated and Actual Disbursements (US$ million) Estimated Actual Cumulative % of amount amount actual total per quarter per quarter disbursements loan 1975 Third quarter 0.2 1.4 1.4 4.7 Fourth quarter 0.6 0.3 1.7 '5.7 1976 First quarter 1.2 0.8 2.5 8.4 Second quarter 2.5 0.8 3.3 11.1 Third quarter 3.5 0.8 4.1 13.8 Fourth quarter 4.5 1.3 5.4 18.1 1977 First quarter 4.5 1.7 7.1 23.8 Second quarter 4.0 1.3 8.4 28.2 Third quarter 3.5 1.4 9.8 32.9 Fourth quarter 2.5 0.3 10.1 33.9 1978 First quarter 1.5 1.8 11.9 39.9 Second quarter 0.9 2.0 13.9 46.6 Third quarter 0.5 0.6 14.5 48.7 Fourth quarter 0.1 0.1 14.6 49.0 1979 First quarter 4.2 18.8 63.1 Second quarter 2.4 21.2 71.1 Third quarter 1.8 23.0 7/.2 Fourth quarter 1.6 24.6 82.5 1980 First quarter 0.1 24.7 82.9 Second quarter 0.7 25.4 85.2 Third quarter 1.2 26.6 89.3 Fourth quarter 2.1 28.7 96.3 1981 First quarter 0.0 28.7 96.3 Second quarter 0.5 29.2 98.0 Third quarter 0.6 29.8 100.0 Fourth quarter AEPID July 1982  - 25 - ANNEX 4 PHILIPPINES PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES (LOAN 1052-PH) PROJECT OOMPLETION REPORT List of Siibprojects, Commitment Date and Amount of Disbursement Equivalent disburse- Commitment Disbursement ment in Name of subproject /a Date (US$) F'000 /b A Subprojects A-01 Central Sant:os Lopez Co., Inc. ------------- Cancelled ------------ A-02 D.O. Plaza Enterprises, Inc. 10/28/76 2,500,000.00 18,600 A-03 Acoje Mining; Co., Inc. 08/05/77 3,000,000.01 22,200 A-04 Gonzalo Puyet & Sons, Inc. 02/10/78 939,917.73 6,946 A-05 M&S Co., Inc.. 05/12/78 3,699,999.99 27,343 A-06 Mariwasa Manufacturing, Inc. 08/28/77 2,170,000.00 16,058 A-07 Maria Cristina Chemical Co., Inc. 02/12/79 2,405,615.73 17,753 A-08 Mariwasa Manufacturing, Inc. 09/07/80 70,000.00 525 Subtotal 14,785,533.46 B Subprojects B-01 Aguilar Shipping 07/08/75 150,000.00 1,087 B-02 William Lines, Inc. 09/11/75 1,226,890.76 8,895 B-03 Amalgamated Specialities Corp. 07/22/75 85,973.54 623 B-04 L.S. Sarmiento 09/11/75 143,491.94 1,040 B-05 Cagayan Electric Power & Light Co. 09/17/75 443,319.12 3,214 B-06 Evertex Industries, Inc. 09/11/75 210,000.00 1,522 B-07 Radio Comm. of the Philippines, Inc 09/24/75 1,249,489.24 9,059 B-08 L.S. Sarmiento & Co., Inc. 01/30/76 420,000.00 3,125 B-09 Pilipino Telephone Corp. 01/19/76 850,000.00 6,324 B-10 Marblecraft, Inc. 01/16/76 100,092.58 745 B-il Encore Textile Manufacturing Corp. 01/30/76 209,844.60 1,561 B-12 Matling Induatrial & Commercial Co. 07/23/76 250,000.00 1,860 B-13 Republic Dynamics Corp 07/23/76 167,821.90 1,249 B-14 Richfield Eenip Industries Co. 07/28/76 116,982.00 870 B-15 Permaline - Aadec Container Corp. 08/19/76 376,128.26 2,798 B-16 Nasipit Lumber Co., Inc. 09/27/76 785,112.07 5,841 B-17 Royal Porcelain Corp. 12/29/76 1,099,957.48 8,184 B-18 Marcelo Steel Corp. 01/06/77 350,000.00 2,590 B-19 Tarrosa - Benedicto Development Corp. 02/04/77 65,913.47 488 B-20 MAS Rubber Products, Inc. 09/22/76 21,355.57 159 B-21 Nitro Chemicail Philippines Inc.. 07/27/77 150,000.00 1,110 B-22 Cagayan Electric Power Co., Ltd. 07/27/77 14,753.54 109 B-23 Union Glass and Container Corp. 08/24/77 1,219,321.83 9,024 B-24 Sherwill Plastic Co., Inc. 11/04/77 350,000.00 2,604 B-25 Alfa-RTW Manufacturing Corp. 11/10/77 120,000.00 893 B-26 Burlingame Hosiery Corp- 01/25/78 64 784.34 479 B-27 J&C Deep Sea Fishing Corp 05/12/78 119,999.70 887 B-28 Pennell Commercial Co., Inc. 06/29/78 240,000.00 1,774 B-29 Empire Printing Co., Inc 08/14/78 346,684.64 2,562 B-30 Philippine Dev. & Indus. Corp. (PDIC) 10/25/78 810,000.00 5,986 B-31 Mariveles Apparel Corp. 12/04/78 675,846.81 4,994 B-32 Lorenzo Shipping Corp. 12/15/78 420,000.00 3,104 B-33 Phil-Taiyo Electronic Corp. 12/26/78 107,677.63 795 B-34 Pacific Equipsent Corp. ----------- Cancelled ------------ B-35 Isalama Machine Works Corp. 11/24/78 45,084.25 333 B-36 Jocardo Manufacturing Corp 03/28/80 860,056.68 6,459 B-37 Interbag Corp 10/07/79 450,000.00 3,321 B-38 Falcon Minerals Inc. 05/28/80 178,655.50 1,342 B-39 Chemical Bulk Carriers Inc. 01/11/81 152,693.22 1,206 B-40 PDIC 03/28/81 354,932.47 2,803 Subtotal 15,002,963.14 Total 29,788,496.60 /a "A' subprojects are those for which the amount of the subloan exceeds the free limit of U';$1.5 million /b Based on the conmversion rate prevailing at the time of commitment. AEPID October 1982  - 26 - ANNEX 5 Page I PHILIPPINES PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES (LOAN 1052-PH) PROJECT COMPLETION REPORT Reasons for Delay in Completion of Subprojects /1 1. Acoje idiniag Co., Inc. (Estimated - January 1978; Actual - January 1979) The one-year delay in project start-up was brought about by two events: (a) loan signing took place almost ten months later than projected due to prolonged discussion over terms and conditions; and (b) a market slump beginning 1978 forced management to delay acquisition of fixed assets. 2. Pilipino Telephone Corporation (Estimated - March 1977; Actual - September 1977) The project was delayed six months due to the supplier's error. Instead of a 1,200-2 party line inside plant capacity, ITT delivered a 600-2 party line inside plant. This was subsequently corrected by the supplier. 3. Royal Porcelain (Estimated - May 1977; Actual - September 1978) Construction delays were due to technical problems: delay in the supply of special form bricks for the kiln, misunderstanding with Japanese supplier of their kiln during construction and test firing. 4. Nitro Chemical Phils. (Estimated - September 1977; Actual - March 1978) Construction delays were caused by the late arrival of the Taiwan- ese equipment and the modifications incorporated by Taiwanese technicians into the building. 5. Sherwill Plastics, Inc. (Estimated - March 1978; Actual - September 1979) Construction delay was due to modifications in the design and size of the factory building, late arrivals of imported machinery and bad weather. 6. J&C Deep Sea Fishing (Estimated - October 1978; Actual - June 1979) The project was delayed due to the following factors: (a) late compliance with the predisbursement requirements, specifically the completion of the mortgage documents; (b) contractor's delay in the completion of con- struction of the lightboat; and (c) inability of suppliers to deliver the machineries and fishing equipment on time. /a Delays of six months or longer.  - 27 - ANNEX 5 Page 2 7. Pennell Commercia'L Corporation (Estimated - July 1978; Actual - May 1979) The project was delayed due to the time required to comply with predisbursement conditions which led to the delay in opening of the Letters of Credit. 8. Falcon Minerals, ]:nc. (Estimated - August 1980; Actual - not yet fully disbursed) Difficulty in complying with PDCP's collateral requirements resul- ted in a delay of funds drawdown. The dearth of a local market for barite in 1981 further forced management to stop equipment acquisitions for the project. AEPID August 24, 1982  - 28 - ASmX 6 RdLIPPIX13 n AT1 mElOiIN0T 0UO8UTIOU OF TIL YIULIPPES (LOAN 1052-Pb) PN.OJ1CT .0l11iou EPORT Cbaracterlstica of SnkvrojIcts Financed Under Loan No. 1052-Pb FOCP Financing Project Copletion Date Nature Projoect cost (F 000) 7 of Differ- of sub- Estimated Actual Overrun ID Peso re- Total ctul ence /b Subproject nuaber/borroMr project - (P 000) - (B) (g 000) sources (P 000) project Estimated Actual (oothe) cost A Subparcts A-O1 Cntr.l Santo Lopes Co., Inc. Cancelled A-02 D.O. PFles Enterpriess. Inc. N 129,679 129,520 (0.1) 2,500.0 0 18,600 14.4 Apr 78 Apr 78 0 A-03 Acoje Mining Co., Inc. E 53,287 54,464 2.2 3,000.0 0 22,200 40.7 Jan 78 A-04 Gonealo Puyat A Sons, Inc. N 24,497 24,196 (1.2) 939.9 0 6,946 28.7 Jan 79 liov 78 -2 A-OS HAS Co.. laec. 48,262 43,042 10.8 3,700.0 0 27,343 63.5 Sep 79 Yeb 80 +5 A-06 MAriLwas Manufacturing, Ine. N 24.640 19,227 (22.0) 2,170.0 0 16,058 83.5 Aug 79 Aug 79 0 A-07 Meri Cristina Chemicel Co., Inc. E 87,745 n.a. - 2,405.6 0 17,753 - Jan 80 Proj. being revised A-08 Mariwase Manufacturing. inc. 1 5,945 5,498 (7.5) 70.0 0 525 9.5 Feb 81 Her 81 +1 B SubproJects 8-01 Aguilar Shipping E 1,565 1.430 (8.6) 150.0 0 1,087 76.0 Sep 75 Oct 75 +1 B-02 William Lines, Inc. E 16,000 15,330 (4.2) 1,226.9 0 8,895 58.0 Nov 75 Oct 75 -1 B-03 Amalgamsted Specialities Corp. N 2,339 1,826 (21.9) 86.0 1,000 1,623 88.7 May 76 May 76 0 8-04 L.S. Saraiento B 1,409 1,560 10.7 143.5 0 1,040 66.7 Dec 75 Nov 75 -I N-05 CoNgyan Electric Power 4 Ligbt Co. g 8,295 8,712 5.0 443.3 0 3,214 36.9 Mar 77 Mar 77 0 8-06 Evertex Industries, Inc. N 86,340 101,053 17.0 210.0 O 1,522 1.5 Oct 75 Jan 76 +3 B-07 Radio Communication of the Philippines, Inc. X 13,615 n.a. - 1,249.5 0 9,059 89.1 Aug 76 Jun 78 +22 B-08 L.S. Sarmiento A Co., Inc. E 3,375 4,003 18.6 430.0 0 3,125 78.1 Apr 76 J.n 76 -3 B-09 Pilipino Telephone Corp. I 18,100 19,902 9.9 850.0 0 6,324 31.8 Mar 77 Sep 77 +6 8-10 Merblecraft, Inc. E 2,450 2,193 (10.5) 100.1 0 745 34.0 Apr 76 Apr 76 0 B-11 Encore Textile Manufacturing Corp. B 2,495 1,587 (36.4) 209.8 0 1,561 98.4 Apr 76 Jan 76 -3 B-12 Metling Indutrial & Commercial Co. B 2,735 3,150 15.2 250.0 600 2,460 78.1 Oct 76 Dec 76 +2 B-13 Republic Dynamics Corp e 9,215 3,729 (59.5) 167.8 492 1,741 46.7 Dec 76 Sep 79 +34 8-14 lichfield Hemp Industries Co. B 2,630 2,000 (23.9) 117.0 0 870 43.5 Jul 77 Oct 78 15 B-15 Permaline - Aedec Container Corp. N 7,870 6,965 (11.5) 376.1 0 2,798 40.2 Jan 77 Aor 77 +3 B-16 Nasipit Lueber Co., Inc. E 12,620 12,014 (4.8) 785.1 0 5,841 48.6 Jan 82 Oct 81 -2 B-17 Royal Porcelain Corp. E 17,750 18,434 -3.9 1,099.9 0 8,184 44.4 May 77 Sep 78 +16 8-18 Mercelo Steel Corp. B 5,000 5,234 4.7 350.0 0 2,590 49.5 Jul 77 Oct 77 +3 B-19 Tarross - Nenedicto Developmnt Corp. B 582 n.e. - 65.9 0 488 /c Mar 77 /c /c B-20 MAS Rubber Products, Inc. B 552 267 (51.6) 21.4 60 239 89.5 Mao 77 Jun77 +3 B-21 Nitro Chemical Philippines Inc. N 9,440 9,813 4.6 150.0 1,500 2,610 26.6 Sep 77 Nar 78 +6 5-22 Cagayan Electric Power Co., Ltd. E 1,080 n.&. - 14.8 0 109 - Sep 78 n.a. B-23 Union Glass and Container Corp. E 17,500 17,516 0.1 1,219.4 1,500 10.524 60.1 Jul 78 oct 78 +3 B-24 Sherwill Plastic Co., Inc. N 13,935 13,399 (3.8) 350.0 0 2,604 19.4 Mar 78 Sep 79 +18 B-25 Alf&-RTW Manufacturing Corp. E 11,224 12,017 7.1 120.0 2,500 3,393 28.2 Jan 78 Jan 78 0 B-26 Burlingame Hosiery Corp. B 1,575 536 (66.0) 64.8 0 479 89.3 Feb 78 Jan 78 -1 B-27 J4C Deep Sea Fishing Corp E 2,530 2,790 10.3 120.0 500 1,387 49.7 Oct 78 Jun 79 +8 B-28 Pennell Co_rcial Co., Inc. B 3,165 3,155 (0.3) 240.0 500 2,274 72.1 Jul 78 May 79 +io 8-29 Empire Printing Co., Inc E 4,625 4,162 10.0 346.7 440 3,002 72.1 Apr 79 Jan 79 -3 B-30 Philippine Dev. & Industrial Corp. (PDIC) N 18,865 20,299 7.6 810.0 0 5,986 29.5 Jul 79 Sep 79 +2 8-31 Mariveles Apparel Corp. E 18,890 21,246 12.5 675.8 7,000 11,994 56.4 Mer 79 Jan 80 +10 B-32 Lorenzo Shipping Corp. g 4,535 3,883 14.4 420.0 425 3,529 90.9 Mar 79 Feb 79 -1 8-33 Phil-Taiyo Electronic Corp. N 2,300 1,575 (31.5) 107.7 0 795 50.5 Aug 79 Jan 79 -7 8-34 Pacific Equipnt Corp. Cancelled 8-35 Isalam Machbine Works Corp. B 420 403 (2.4) 45.1 0 371 92.1 Jul 77 Mar 79 +20 B-36 Jocardo Manufacturing Corp 8 17,100 16,162 (5.5) 860.1 0 6,459 40.0 Oct 80 Jan 81 +3 8-37 Interbag Corp. N 20,648 21,782 5.5 450.0 0 3,321 15.2 Jan 80 May 81 +16 8-38 Falcon Itinerals Inc. B 8,300 n.a. - 178.7 0 1.342 - n.0. n.e. B-39 Chemical Bulk Carriers Inc. B 16,848 a.e. 152.7 0 1,206 - Jul 81 Not Fet completed B-40 PDIC B 6,680 6,452 (3.4) 354.9 0 2,803 43.4 Oct 81 Feb 82 +4 Total /c 641,275 640,546 29,788.5 16,537 237,019 37.0 /a B - Expansion; I - Modernietion; N - New. 7i; An explanation for project implementation overruns of 6 months or wre iL provided in Annex 5 7i Total does not includ data for projects which are not yet operational (B-39), not implemented (A-07, 8-19 and B-38) or for which relevant information could not be obtained by PDCP (5-07 and B-22). ARPID October 1982  - 29 - AN[EX 7 PHILIPPINES PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES (LOAN 1052-Pdt) PROJECT COMPLETION REPORT Sectoral and Geographical Distribution of Subprojects Number % of Amount % of of sub- total disbursed total dis- Sectoral Distribution projects/a number (US$ mln) bursements Textiles and wearing apparel 8 17.4 2.7 9.1 Nonmetallic mineral products 8 17.4 5.8 19.6 Wood and wood products 6 13.0 8.5 28.7 Shipping and transportation 5 11.0 2.2 7.4 Chemicals and chemical products 3 6.5 2.9 9.8 Electric power/apparatus 3 6.5 0.6 2.1 Mining 2 4.3 3.2 10.7 Communications 2 4.3 2.0 6.8 Metal products 2 4.3 0.7 2.4 Agric. business 2 4.3 0.2 0.7 Other 5 11.0 0.8 2.7 Total 46 100.0 29.7 100.0 Number of % of Loan amount % of subproj- total approved /b total loan Geographical Distribution ects /b number (I3S$ mln) approvals Region I Ilocos 0 - - Region II Cagayan Vnlley 0 - -- Region III Central Luzon 6 13.3 6.1 19.0 Region IV Metro ManLla 18 40.0 8.2 25.5 Region IV-a Southern T'agalog 5 11.1 1.7 5.3 Region V Bicol 1 2.2 0.2 0.6 Region VI Western Visayas 0 - - - Region VII Central Visayas 1 2.2 1.4 4.4 Region VIII Eastern Visayas 0 - - - Region IX Western 11 ndanao 0 - - - Region X Northern Mindanao 5 11.1 4.0 12.5 Region XI Southern Mtindanao 3 6.7 2.3 7.2 Region XII Central Mindanao 3 6.7 6.4 19.9 Nationwide 3 6.7 1.8 5.6 Total 45 100.0 32.1 100.0 /a Excludes cancelled projects. 7T Excludes cancelled and discontinued projects. AEPID October 1982  o- . I --