Philippines - Samar Island Rural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3208 PROJECT COMPLETION REPORT PHILIPPINES SAMAR ISLAND RURAL DEVELOPMENT PROJECT (LOAN 1772-PH) DECEMBER 21, 1990 Agriculture Operations Division Country Department II Asia Regional Office This document has a restricted distribution an may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Appraisal year average (1979) - US$1.00 = Pesos (P$) 7.4 Completion year average (1988) - US$1.00 = Pesos (P$) 20.9 GOVERNMENT OF THE PHILIPPINES FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CIS - Communal Irrigation System DPWH - Department of Public Works and Highways ERR - Economic Rate of Return FAO - Food and Agriculture Organization FAO/CP - FAO-World Bank Cooperative Program FSDC - Farm Systems Development Corporation GOP - Government of Philippines IAD - Integrated Area Development IBRD - International Bank for Reconstruction and Development MPWTC - Ministry of Public Works, Transportation and Communications MUV - Manufacturing Unit Value NEDA - National Economic and Development Authority NIA - National Irrigation Administration P$ - Peso PCR - Project Completion Report PPA - Philippines Port Authority PPDO - Project Planning ard Development Office SAR - Staff Appraisal Report SCF - Standard Conversion Factor SIRDP - Samar Integrated Rural Development Project SIRDPO - Samar Integrated Rural Development Project Office WB - World Bank  FM OFFCIL US ONLY THi WOtLD BANK Washilngton. DC 20433 U.S A fi 0 octrW-CrCWal MagM, EVakietwn December 21, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report - Philippines Samar Island Rural Development Project (Loan 1772-PH) Attached, for your information, is a copy of a report entitled "Prcject Completion Report - Samar Island Rural Development Project (Loan 1772-PH)", prepared by the Asia Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment This document has a rmtricted distribution and may be used by rwcipients only in the performance of their oMcial duties. its contents may not otherwise be disclosed without World Dak authorination  FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT PHILIPPINES SAMAR ISLAND RURAL DEVELOPMENT PROJECT (LOAN 1772-PH) TABLE OF CONTENTS Page No. Preface .......................................... 1 Evaluation Summary .... *.....**t .. ............. .***............ iii PART Is PROJECT REVIEW FROM BANK'S PERSPECTIVE ....O....*** 1 1. Project Identity ........................................ .............. 1 2. Background ............... .............................. 1 3. Project Objectives and Description..................... 2 4. Project Design and Organization..0*0*0*0 .............. 3 5. Project Implementation..... .......... .................. . 4 6. Project Reut ..................................... 5 7. Project Sustainability.: ....................................... . 6 8. Bank Performance..*,.,,,... .......... *.....*.. ..... 7 9. Borrower Performance7................................. 7 10. Project Relationships ............................... . 7 11. Consulting Services. .......t..... ................. ... 7 12. Lessons Learned. ....... too ............................. 8 13. Project Documentation and Data....,..........."........4 8 PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE.............. 9 PART III: STATISTICAL INFORMATION ................................ 11 1. Related B ankLoan sandCredits 11 2. Project Timetable........... ... too ...... 12 3. Loans Disbursements.... ............. . ... 13 4. Project Implementation .............................. . 14 5. Project Costs andFinanci ng ......... ... 16 B. Project Fnancingo ......... ............ 17 6. Project Results............ 17 A. Direct Benefits ... o.o .... . ............................ 17 B. Economic Impact ..................................... 18 C. Financial Impact........ ............... 20 D. Studies ......... *........................... ...... 21 7. Status of Covenants ............ ..... ..... to..... 21 8. Use of Bank Resources.,............. .. ... ....... ..o... 22 A. Staff Inputs ........ .......et.............. 22 B. Missions ............ ................... 09..................too. 23 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.  TABLE OF CONTENTS (Cont'd) Page No. Annext Detailed Assumptions Regarding Economic Analysis ... 25 Tables 1. Economic Analysis - (Roads Component) ....... 28 2. Paddy Crop Financial Ha Budgets ................. 31 3. Economic Crop Budget (R) .... ......... ............ 32 4. Economic Crop Budget (IRR/W/O) ................. 33 (Cropping Intensity 1002) 5. Economic Crop Budget (IRR/W) ... ................ 34 (Cropping Intensity (150%).......... 6. Economic Price of Rice ........................ 35 7. Economic Pices of Fes ertilizer ................ 36 8. Economic Analysis (Irrigation Component) ... 37 9. Economic Analysis .***... ...................*.0*0 38 (Roads and Irrigation) 10. Economic Analysis (Roads and Irrigation) ........ 39 11. Port Component - Catbalogan Ports Inward/ ....... 40 Outward Cargo and Passengers 1979 to 1987 MAP IBRD 14344  PROJECT COMPLETION REPORT PHILIPPINES SAMAR ISLAND RURAL DEVELOPMENT PROJECT (LOAN 1772-PH) PREFACE This is the Project Completion Report (PCR) for the Samar Island Rural Development Project in the Philippines, for which Loan 1772-PH in the amount of US$27.0 million was approved on December 4, 1979. The Loan Closing Date was extended three times to March 31, 1988. The Loan was fully drawn when the last disbursement was made on February 24, 1988. Parts I and III of the PCR were prepared by staff of the Agriculture Operations Division if Country Department II of the Asia Regional Office (AS2AG). These were based on a draft report by the FAO/World Bank Cooperative Program (FAO/CP) on behalf of the Government of the Philippines (GOP). Detailed terminal reports for the various project components were provided by GOP through the Project Office which had been responsible for coordinating project implementation. Use was also made of the Staff Appraisal Report (No. 2627-PH), Bank supervision reports, project progress and annual reports, and interviews with staff of the Bank and the Borrower who were involved in project design and implementation. The Asia Regional Office wishes to express its appreciation to the officials of the Departments and other agencies of the Borrower for their 7aluable assistance in producing this PCR. The d.aft PCR was sent to the Borrower and its agencies for their comments on August 31 for inclusion in Part II, and a reply was received from the National Irrigation Administration on October 2, 1990.  - iii - PROJECT COMPLETION REPORT PHILIPPINES SAMAR ISLAND RURAL DEVELOPMENT PROJECT (LOAN 1772-PH) Evaluation Summary Project Background 1. The Samar Island Rural Development Project was one of a series projects developed by the Government of the Philippines (GOP) during the 1970s, under the aegis of its Integrated Area Development (IAD) program. With a rural per capita income of only US$85, compared to the national average of US$135 (1975), Samar Island was one of the least developed areas of the Philippines at the time the project was identified. Agriculture dominated the local economy, but annual production and average yields were very low despite abundant rainfall and good soils. The main obstacle to development in Samar was considered to be the limited availability and poor condition of rural infrastructure: farmers isolated from markets had little incentive to produce a surplus, and most did not use purchased inputs due to high transport costs. Low productivity was also believed to be a consequence of poor health, with some 8Zto 142 of the population being infected by schistosomiasis. Prolect Obiectives and Description 2. The project was designed to support parts of a comprehensive development plan for Samar Island, in parallel with other externally (Australia, Japan, World Bank) and locally funded operations. It was expected to induce socio-economic development by improving the transportation network, extending irrigation facilities, and providing safe water supply and better disease control to raise rural health standards. The major components included the improvement of about 230 km of dational roads in Eastern Samar; rehabilitation of the Catbalogan port in Western Samar; construction of about 2,000 he of communal irrigation systems in Northern and Western Samar; construction and improveaent of about 2,300 wells and 300 springs in rural communities; support for schistosomiasis control activities; and consulting services for a feasibility study for the development of the Catubig Valley in Northern Samar. The project was costed at US$62.6 million. Bank Loan 1772-PH of US$27.0 million was signed on February X, 1980. The Closing Date was extended three times from June 30, 1985 to March 31, 1988, and the Loan was fully drawn when the last disbursemen' was made on February 24, 1988.  - iv - Project Implementation 3. Effective project organization and management arrangements contributed to the relatively smooth physical implementation of the project, notwithstanding unforeseen delays due to natural calamities (typhoons, floods and earthquakes), an adverse peace and order situation, cumbersome procedures for obtaining budgetary allocations and release of funds, and prolonged negotiations over the procedures for covering the foreign exchange portion of payments due to contractors. 4. The main variances between planned and actual project activities included a significant change in road standards and a 502 reduction in the targets of the communal irrigation component; there were also minor reductions in the targets of the roads and water supply components. Local engineering staff pressed for higher road standards than those recommended by the appraisal mission, because Samar is typhoon-prone. The Bank finally agreed three years after Loan effectiveness, with the result that the cost of the roads component nearly doubled from US$25 to US$50 million. Irrigation potential was overestimated at appraisal, with problems including insufficient water availability in some catchments, unsuitability of other areas and land tenure problems. Project Results 5. Project objectives did not change during implementation, and most revised physical targets were achieved, particularly those concerning better health standards, safe village drinking water and an improved road network. Nonetheless, the project has had only a limited economic impact, because of the much higher costs of the roads component and the lower than expected benefits of most components. The impact of the very expensive road component has been severely reduced because of a missing link between the East Samar road network assisted under the project and the national network in the West, which was to have been constructed under GOP's regular program, but was not yet finished at project completion. Rehabilitation of Catbalogan port has had only a limited impact: overall cargo movement has increased, but passenger traffic declined because of a new modern ferry link between Northern Samar and Luzon, and a pier extended under the project was damaged by successive typhoons and rendered unusable pending completion of repairs. Irrigated paddy yields attained were a satisfactory 3.5 tons/ha, but slightly more than half of the 1,009 ha of the communal irrigation schemes still require some additional work at completion; and 402 of the wells constructed were suffering from mechanical defects at project completion. The health component had very impressive results: schistosomiasis on Samar Island was reduced to a controllable 42 to 62, and the strategy of integrating village health workers, midwives and sanitary inspetXors into the schistosomiasis control program proved very successful. 6. The re-estimated economic rate of return at completion for the roads component (accounting for 792 of final project costs) was 42; the ERR for the communal irrigation component (32 of costs) was negative; the ERR for port rehabilitation could not be recalculated, but it would most likely be negative as well. The substantial benefits of the successful health  -v - component are not captured in the ERR analysis. The overall project ERR may improve in future if the missing road link between the East and West Samar road networks (para. 5) is completed, but benefits are not likely to compensate the expensive road standards finally adopted. Project Sustainability 7. Sustainability of project benefits will depend mainly on the extent to which project activities are integrated into the regular programs of the line agencies. Current under-funding of maintenance work by GOP is a particular concern, because deficient maintenance will aggravate the potential damage from typhoons, floods, etc. and reduce the economic life of the project infrastructure. Bank Performance 8. Weak technical preparation of several components and less than thorough appraisal were important factors underlying the unsuccessful outcome of the project. Project supervision by the Bank was adequate. Borrower Performance 9. Greater involvement of line agencies in project preparation would have been desirable, but project management during implementation was generally satisfactory. The Borrower's delay in completing related, non- project investments (namely the link between the East and Wast road networks) and inadequate funding for maintenance of project infrastructure are having a depressing effect on project results. Findings and Lessons Learned 10. Even relatively small communal irrigation systems require more -areful site selection, technical preparation and analysis of economic viability than was the case in this project. 11. More advanced preparation of transport infrastructure should have been achieved prior to appraisal, with careful attention to alternative sites (port rehabilitation component) and to the economic implications of alternative design standards (roads component). 12. All investments on which the economic outcome is dependent should have been included in the project (road link between East and West networks); in addition, a specific undertaking should have been included in the Loan Agreement, reflecting the Borrower's commitment to complete essential non-project investments in a timely manner. 13. Greater attention should have been paid to arrangements for ensuring adequate maintenance of project infrastructure after completion. 14. Project risks should have been better identified at appraisal, and carefully reflected in the project implementation schedule and in the analysis of the economic viability of the project.  PHILIPPINES SAMAR ISLAND RURAL DEVELOPMENT PRCjECT (LOAN 1772-PH) PROJECT COMPLETION REPORT PART I - PROJECT RE-.EW FROM BANK'S PERSPECTIVE 1. Project Identity Project Name : Samar Island Rural Development Project Loan No. : 1772-PH RVP Unit : Asian Region Country : Philippines Sector : Agriculture Subsector : Rural Development 2. Background 2.1 Samar Island, with a population of 1.1 million (lQ'5) and a total area of 1.34 million ha, was one of the least developed a.