Philippines - Rural Roads Improvement Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 9522 PROJECT COMPLETION REPORT PHILIPPINES RURAL ROADS IMPROVEMENT PROJECT (LOAN 1860-PH) APRIL 15, 1991 Infrastructure Operations Division Country Department II Asia 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.  CURRENCY EOUIVALENTS Currency Unit - Philippine Peso (P) US$1.00 P 7.4 (at appraisal in 1979) P 21 (at completion in 1988) = P 17.25 (average over the period) MEASURES meter (m) 3.28 feet kilometer (km) - 0.62 miles ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank DBM - Department of Budget and Management (former Ministry of Budget) DLG - Department of Local Government (former Ministry of Local Government and Community Development) DOF - Department of Finance DOTC - Department of Transportation and Communications DPWH - Department of Public Works and Highways (former Ministry of Public Works) ERR - Economic rate of return NEDA - National Economic and Development Authority PCR - Project Completion Report USAID - United States Agency for International Development  Fot OmCIL uSE ONLY THE WORLD BANK Washington. DC 20433 USA Office of OV.ctoer-ewfal Ostmatm IVakigeim April 15, 1991 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Philippines Rural Roads Improvement Project (Loan 1860-PH) Attached, for information, is a copy of a report entitled "Project Completion Report on Philippines Rural Roads Improvement Project (Loan 1860-PH)" prepared by the Asia Regional Office. No audit of this project has been made by Lhe Operations Evaluation Department at this time. Attachment 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.  FOR OFFICIAL USE ONLY PHILIPPINES RURAL ROADS IMPROVEMENT PROJECT (LOAN 1860-PH) PROJECT COMPLETION REPnRT Table of Contents Page No. Preface . . . . . . . . . . . . . . . . . . . . . . .i Evaluation Summary .ii PART I. BANK REVIEW OF THE PROJECT . . . . . . . . . . . . . . .1 Project Identity . . . . . . . . . . . . . . . . . . . .1 Background .1 Project Objectives and Description . . . . . . . . . . . 2 Project Design and Organization . . . . . . . . . . . . 3 Project Implementation . . . . . . . . . . . . . . . . . 5 Project Cost . . . . . . . . . . . . . . . . . . . . . . 7 Project Results . . . . . . . . . . . . . . . . . . . . 7 Project Sustainability . . . . . . . . . . . . . . . . . 8 Bank Performance . . . . . . . . . . . . . . . . . . . . 8 Borrower Performance. 8 Project Relationships . . . . . . . . . . . . . . . . . 9 Consulting Services . . . . . . . . . . . . . . . . . . 9 Project Documentation and Data . . . . . . . . . . . . . 9 Findings & Lessons Learned . . . . . . . . . . . . . . . 9 PART II. BORROWER REVIEW OF THE PROJECT . . . . . . . . . . . . 11 PART III. STATISTICAL INFORMATION . . . . . . . . . . . . . . . 12 1. Related Bank Loans . . . . . . . . . . . . . . . . . 12 2. Project Timetable . . . . . . . . . . . . . . . . . 13 3. Loan Disbursements . . . . . . . . . . . . . . . . . 14 4. Project Implementation . . . . . . . . . . . . . . . 16 5. Project Costs and Financing . . . . . . . . . . . . 20 6. Status of Covenants . . . . . . . . . . . . . . . . 24 7. Project Results .27 8. Use of Bank Resources . . . . . . . . . . . . . . . 28 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.  PHILIEPINES RURAL ROADS IHPROVEMENT PROJtCT (LOAN 1860-PH) PROJECT COMPLETION REPORT ,Preface This is the Project Completion Report (PCR) for the Philippine Rural Roads Improvement Project, for which Loan 1860-PH in the amount of US$62 million was approved on May 29, 1980. The loan was closed on June 30, 1988, three years later than scheduled, when about 80% of the loan had been disbursed. US$4 million was cancelled in 1988 and about US$7.8 million was cancelled on January 6, 1989, the date of the final disbursement under the loan. The PCR was jointly prepared by the Infrastructure Operations Division of the Asia Regional Office (Preface, Evaluation Summary, Parts I and III). The borrower's review of the project is documented in a draft Project Completion Report, which is on Bank files. Preparation of the PCR was started during the Bank's project supervision mission in September 1988. The report is based, inter alia, on a draft Project Completion Report prepared by the Borrower, the Staff Appraisal Report, the Loan Agreement, supervision reports, correspondence between the Bank and the Government, and the Bank's internal memoranda. This PCR has been read by the Operations Evaluation Department.  - ii - PHILIPPINES RURAL ROADS IMPROVEMENT PROJECT (LOAN 1860-PH) PROJECT COMPLETION REPORT Evaluation Summary i. Obiectives. In the late 1970s, with a shift in government policy toward rural development and decentralization of development responsibilities, the Government planned to strengthen local government capabilities to plan, construct and maintain rural roads and to significantly increase its investments in farm-to-market and feeder roads. To implement this plan, the Government Tequested World Bank assijtance in financing a rural roads project. The long- term objectives of the project were to provide improved transport services to the rural population in order to stimulate agricultural production and increase rural incomes. Its immediate objectives were: (a) to reconstruct, rehabilitate and maintain priority rural roads and (b) to strengthen the capacity of provincial highway authorities to plan, design, administer, and execute rural road programs and to maintain their rural road network under the overall direction of the Department of Local Government (DLG).1' The project also included reconstruction and improvement of a national road in Occidental Mindoro to provide all-year road access to the island's western coastal area where substantial agricultural investments were planned. ii. The project had three components: construr.ion and maintenance of rural roads, construction and improvement of a nat. anal road, and technical assistance for transport planning. The rural roads co-nonent was carried out by DLG and the provincial governments and included: (a) c.nstruction and improvement of about 730 km of proviicial and barangay roads in the provinces of Iloilo, Cebu, Aklan, Quezon, Camarines Norte and Ilocos Sur; (b) a maintenance program for the six provinces, with support for workshops, laboratories equipment, spare parts, tools, and machinery; and (c) technical assistance to DLG and the six provinces for improved transport planning, engineering, quality control, construction supervision, and maintenance, and for technical and on-the-job training in road maintenance. The Department of Public Works and Highways (DPWH)ZV was responsible for the national road component which mainly involved reconstruction and improvement of about 150 km of road linking San Jose and Mamburao along the western coast of the island of Mindoro. The project roaI would serve fertile agricultural areas which were accessible only by sea during part of the year. Under the third component, technical assistance was provided to the Department of Transportation and Communications (DOTC)VI and the National 3d Then called the Ministry of Local Government and Community Development (MLGCD). Then called the Ministry of Public Highways. Al Then called the Ministry of Transportation and Communications (MOTC).  - iii - Economic and Development Authority (NEDA) for continuation of transport planning advisory services financed by the Bank under previous projects and for the implementation of a study for the preparation of the national transport investment program. To ensure that critical organizational and management improvements were made in DLG and the provincial governments, the project included an extensive Action Program, which the Government agreed to under a rather general covenant in the Loan Agreement. iii. Implementation Experience. Project works were completed by December 1988, four years later than expected. In general, the project suffered from (a) the economic recession of 1983-84, which significantly constrained the availability of counterpart funds and delayed government payments to contractors; (b) the devaluation of the peso against the U.S. dollar from P 7.4 in 1980 to P 21.4 in 1988, which resulted in a sharp increase in the cost o. some project Inputs; (c) diffictlties in obtaining inflation adjustments for civil works carried out by contractors, who slowed down or stopped their work when the contract prices were not increased; and (d) the political disruption throughout the mid-1980s and the change in government in 1986, which resulted in widespread staff changes and the need to retrain the newly-appointed staff. iv. At project completion only about 63% of the rural road program had been completed wlile another 24% was still in progress. In retrospect, the objectives of the component, i.e., to strengthen DLG to assume major administrative responsibility for the rural road network and to upgrade provincial capabilities so that they could develop and maintain the rural road network independently, were overly ambitious. Too many institutional changes were introduced in too short a time. While substantial technical assistance was provided to both DLG and the provinces (about 400 person-months of advisory services and 120 person-months for training), most of this was concentrated in about a two-year period ending in late-1982/early 1983, although the project was not slated for completion until end-1984. The design of the component was also overoptimistic regarding the availability of local funds and qualified staff. The scope and scale of the component were therefore too large, given the pilot nature of the project and its complexities. v. Aside from the design of the component and the generally poor fiscal and political environment prevailing during implementation, the pace of works was affected by: political insurgency in some project areas which forced contractors to slow down or abandon work; the failure to transfer overall responsibilities for rural roads to DLG, so that at least five government agencies and the local governments retained overlapping responsibilities for the roads, causing long delays in decision-making and inefficient operations; delays throughout implementation due to the confused administrative structure and the Government's financial constraints; and poor maintenance of rural roads due, among other things, to a lack of funds. A high proportion of the roads improved under the project are now believed to be in poor corndition. vi. Improvement of the San Jose-Mamburao road was originally to be completed by end-1983 but most works were not finished until end-1987. Bridge and spillway works, including one important bridge, were not completed until May 1990, about a year after loan closing. Implementation delays were largely due to: inadequate detailed designs which required redesig.a of structures and road  - {v - realignrent to fit actual. field conditions; typhoons, which damageed the road during construction and several times after completion, necessitatl.ig redesign or repair of some structuves and road sections; delayed payments to contractors; the inaccessibilizy of some roa4 areas during the rainy season; the scarcity of construction materials; and the weakness of one contractor. vii. The transport planning component was completed in August 1982, four months earlier than scheduled at appraisal. viii. The project cost totaled P 1,346.6 million, or about 73% higher than the P 776.4 million estimated at appraisal. The increase mainly resulted from several devaluations of the peso and consequent sharp increases in the cost of construction materials. In U.S. dollar terms, the project cost US$82.3 million or 21% less than the US$104.9 million estimated at appraisal. The decrease was largely due to the revaluation of the U.S. dollar vis-a-vis the peso as well as overestimated equipment costs at appraisal. ix. Results. The project showed very mixed results with respect to its immediate objectives to: (a) reconstruct, rehabilitate and maintain priority rural reads, and (b) strengthen provincial government capacity to develop and maintain the rural road network under the overall direction of DLG. Many rural roads improved under the project deteriorated rapidly due to the poor quality of improvement work and lack of maintenance. Transport services, therefore, were improved but not to the extent expected. The institutional goals were also only partly achieved. Both DLG and the six provincial highway authorities began building up their respective capacities, but the scope of changes expected could not take place as rapidly as originally planned, even with the help of technical assistance. X. The project also fell short of its long-term goal of improving rural transport services to stimulate agricultural production and increase rural incomes. DLG carried out project impact surveys for ten sample rural roads constructed under the project with a total length of about 125 km, or 27% of the total road length (463 km) completed under the project. The surveys showed that (a) contrary to expectations, there had been no significant changes in farm technology, (b) there had, however, been increases in the production of certain crops and in the prices received by the farmer at the farmgate, (c) work opportunities were still very limited, and (d) average annual daily traffic had increased significantly. However, all ten sample roads showed major signs of deterioration, characterized by excessive surface wearing, potholes and run-off canals within the roadway. The main causes of deterioration were increased axle loads, insufficient drainagc, typhoons, and the absence of maintenance. It is therefore unlikely that ro'ads in such poor condition could reduce transport costs and have an appreciable social or economic impact. Nevertheless, DLG's re- estimated economic rates of return (ERR) for the sample road sections ranged from about 14% to 41%, compared to the 17% to 55% estimated at appraisal. The re- estimated overall ERR for the component was 25% compared to 31% at appraisal. xi. Construction of the San Jose-Mamburao road was originally expected to have a weighted average ERR of 23%, with quantifiable benefits arising from increased agricultural production and savings in vehicle operating costs. Calculation of the actual ERR could not be carried out due to a lack of data on  agricultural output in the area of the project road. However, it is unlikely that the estimated ERR was realized since the road was not fully In service until very recently, when an important bridge was completed. Without this bridge, traffic on the road has been in the range of 65 to 213 vehicles per day. xii. Sustainabilit . To maintain an acceptable level of net benefits throughout its economic life, the rural roads and bridges improved or built under the project must be maintained properly and adequately. So far, this has not been done. xiii. Findings and Lessons Learned. The project experienced many problems and delays. Some of the problems were undoubtedly due to the very difficult fiscal situation and political climate prevailing in the Philippines during most of the 1980s. Some of the problems were due to the project's expectations, first, that well-established line agencies and politically motivated local governments would relinquish their authority over the rural roads subsector to DLG and, second, that the provincial governments, with largely inexperienced and inadequately trained staff. would become capable of assuming major responsibility for the rural. roads subsector in a relatively brief time. Finally, some of the problems were due to the Bank's inadequate supervision of the project, which seems to have received only about 70 days of field supervision during its eight- year life and little attention to the crucial institutional improvements to be made under the project Action Program. The lessons to be learned from the project are therefore as follows: (a) major institutional changes should be assessed for their viability and, if found feasible, should be expected to take a fairly long time to carry out; (b) major institutional changes should preferably be completed as a condition for further processing of a proposed project, e.g., prior to appraisal, rather than after a loan has been approved; and (c) projects carried out by inexperienced entities in remote areas of the country require intensive, conscientious supervision.  PART I: Bank Review of tha Project Prolect Identity Project Name Rural Roads Improvement Loan Number :1860-PH RVP Unit Asia Country : Philippines Sector : Transport Subsector : Highways Background 1. During the 1970s, the Government of the Philippines concentrated most of its transport sector investments on developing an adequate all-weather road network to serve Luzon and Mindanao, the country's most 1eveloped regions which comprise about 70% of the land area and have about three quarters of the population. In the late 1970s, however, with a shift in government policy t;oward rural development and decentralization of development responsibilities, the Government planned co strengthen local government capabilities to plan, construct and maintain rural roads ani to significantly increase its investments in farm- to-market and feeder road!s. To implement this plan, the Government requested World Bank assistance in financing a rural roads project. 2. The Bank had previously financed rural roads in the Philippines but always as road components of irrigation, multipurpose and rural development projects. Central government agencies, mainly the Department of Public Works and Highways (DPWH),AI had been responsible for the execution of these road components. While this approach helped meet the immediate need for improved physical facilities and better transport in the rural areas, it did not directly address the problem of strengthening local institutions to support the Government's decentralization policy. The Bank therefore broadaned its lending strategy for highways to include (a) expanded participation in the improvement of farm-to-market and feeder roads to support food production and (b) assistance to the Goverrment in building up the operational and financial management capabilities in the 73 provinces, under the overall guidance of the Department of Local Government (DLG).P' 3. Development of the rural road system was also being supported at this time by the Asian Development Bank (ADB) and the TJnited States Agency for International Development (USAID), with the former assisting DPWH and the latter providing direct help to local governments in planning and executing rural roads projects. 4/ Then called the Ministry r .blic Highways (MPH). l/ Then called the Ministry of Local Government and Community Development (MLGCD).  Project Objoctives and Descripticn 4. The long-term objective of the project was to provide improved transport services to the rural population in order to stimulate agricultural production and increase rural incomes. Its im-.diate objectives were: (a) to reconstruct, rehabilitate and maintain priority rural roads and (b) to strengthen the capacity of provincial highway authorities to plan, design, administer, and execute rural road programs and to maintain their rural road network under the overall direction of DLG. The project also included reconstruction and improvement of a national road in Occidental Mindoro to provide all-year r: access to the island's western coastal area where substantial agricultural investments were planned. 5. The project had three components: (a) construction and maintenance of rural roads, (b) construction and improvement of a national road, and (c' technical assistance to the Department of Transportation and Communications (DOTC)6I and to the National Economic and Development Authority (NEDA) for transport planning. 6. The rural roads <.mponent was carried out by DLG and the provincial governments and included: (a) construction and improvement of about 730 km of provincial and barangay roads in the provinces of Iloilo, Cebu, Aklan, Quezon, Camarines Norte and Ilocos Sur; (b) a maintenance program for the six provinces consisting of (i) construction and improvement of provincial workshops and qu. .ity control laboratories, and (ii) procurement of road maintenance equipment, spare parts, tools, and machinery for provincial workshops and for quality control laboratories; (c) procurement of engineering tools and equipment, training apparatus and supplies for DLG and the six provinces; (d) technical assistance (i) to DLG and the six provinces for improved transport planning, engineering, quality control, construction supervision, and maintenance, and for technical and on-the-job training in road maintenance, and (ii) to DLG and DPH's Planning and Project Development Office (PPDO) for services provided to prepare the project, including traffic surveys and analyses (under retroactive financing); and (e) consulting services for detailed engineering and construction supervision of (a) and (b) above, and for feasibility studies to prepare a future rural roads improvement project. 7. DPWH was responsible for the national road component which included: (a) reconstruction and improvement of about 150 km of road linking San Jose and Mamburao along the western coast of the island of Mindoro, Then called the Ministry of Transportation and Communications (MOTC).  -3- to serve fertile agricultural areas which were accessible only by sea during part of thus year; (b) construction of new facilities for the DPWH Soils and Materials Qualit.r Control Service (SMQCS); and (c) consulting services for construction supervision of (a) above and for detailed engineering and construction supervision of (b) above. 8. Thb DOTC and NEDA were responsible for the transport planning component which included continuation of transport adviso y services financed by the sank under previous projects to help improve transport planning and the implementation of a study for the preparation of the national transport investment program. Project Design and Organization 9. The design and organization of the national road 'tnd transport planning components were straightforward and appropriate. The former dealt with the construction of one road and was the responsibility of only one government agency, DPWH. The latter dealt with technical assistance and was also the responsibility of one government agency, DOTC. 10. However, the rural roads component, accounting for about 62% of the estimated project cost, was, in retrospect, overambitious. The component was designed to support the Government's priority objectives of rural development and decentralization, and was a continuation of a long-term effort, initiated by the Government with USAID assistance, to upgrade provincial capabilities to the point where they could develop and maintain the rural road network independently, with only general guidance from DLG. 11. The ix pilot provinces -- Iloilo, Cebu, Aklan, Quezon, Camarines Norte and Ilocos bar -- were selected for inclusion in the project to achieve adequate impact with the resources available. With greatly different fiscal and implementation capabilities, the six provinces represented a cress-section of the country's 73 provinces. Ii Alo and Cebu were relatively better off and further advanced than Quezon and Aklan, while Ilocos Sur and Camarines Norte were among the poorest and least-developed provinces. DLG expected to use the experience gained during implementation of this component to develop the road planning, construction and maintenance capacities of all provinces countrywide, replicating the approaches where applicable and modifying them where necessary. 12. Prior to project implementation neither DLG nor the provincial governments had sufficient resources and capabilities to carry out the activities envisioned under the project. Furthermore, responsibilities for rural roads were still ill-defined and overlapping. The project addressed these deficiencies through covenants in the Loan Agreement (see Part III, Section 6) as well as an Action Program for Project Implementation (see Staff Appraisal Report (SAR) pages 37-42), the main remedies of which were as follows:  (a) the National Government, through DLG, and the provincial governments were to provide sufficient funds for the construction and maintenance of rural roads; (b) DLG, DPWH, the Department of Finance (DOF), the Department of Budget and Management (DOBM) and the project provinces were to agree on a division of responsibilities for constructing and improving local roads, including budgetary authority and funding allocations, with DLC( responsible for overall administration of the roads regardless of the source of funding; (c) DLG and the project provinces were required to improve their management and organization and to recruit experienced staff to fill key positions in road planning, design, construction and maintenance; and (d) local and expatriate consultants were to be hired to assist DLG and the provincial governments to implement the component and to train staff. The project included: six technical advisors to DLG for a two-year period (totalling 144 person-months); nine advisors to each of the six provinces for two years (totalling 216 person-months); 48 person-months of consultant assistance to help develop a training program; and 72 person-months of technical assistance to institute an on-the-job training program in road maintenance in the six provinces. 13. The conceptual foundation for the rural roads component was appropriate and clear: rural development and decentralization. The design was also clear. However, it was based on too many institutional changes intxi-duced in too short a time. Technical assistance to aid DLG and the provinces to assume their new responsibilities was provided for only about two years up to December 1982, although the project was not slated for completion until end-1984. In addition to the overly-ambitious implementation schedule and targets to be achieved, the design of the component was overoptimistic regarding the availability of local funds and qualified staff. The scope and scale of the component were therefore too large, given the pilot nature of the project and its complexities. It would have been better to start the project only if and when the Government had accomplished most of the institutional improvements and chianges included in the Action Program. 14. The Staff Appraisal Report for the project correctly identified one of the major project risks as DLG's and the provinces' implementatiou capacity in view of their lack of trained staff and the broad new responsibilities being given them. However, the measures taken to minimize the risks -- the provision of massive technical assistance, organizational changes and an Action Program to be carried out by the Government -- were not implemented as envisioned -- the organizational changes did not take place as planned, the technical assistance did not perform as well as expected and the Government did not implement the agreed action program as planned. 15. It is revealing that during project preparaticn USAID expressed reservations about the Bank's approach and design of the project. USAID's  objectives in rural road development in the Philippines had been more to develop decentralized institutional capacity at the provincial level and to reach the rural poor, laying a sound bpsis for more equitable long-run economic growth, rather than to maximize short-run economic potential. USAID felt that the level of sophistication and control sought by the Bank in project design and implementation necessitated heavy use of foreign consultants and precluded full local-level involvement. It also objected to the project's focus on six provinces, which under-utilized established institutional capacity in many other provinces. Proiect Implementation 16. Project works were completed by December 1988, four years later than expected. In general, the project suffered from (a) the economic recession of 1983-84, which significantly constrained the availatility of counterpart funds and delayed government payments to contractors; (b) the devaluation of the peso against the U.S. dollar from P 7.4 in 1980 to P 21.4 in 1988, which resulted in a sharp increase in the cost of some project inputs; (c) difficulties in obtaining inflation adjustments for civil works carried out by contractors, who slowed down or stopped their work; and (d) the political disruption throughout the mid-1980s and the change in government in 1986, which resulted in widespread staff changes and the need to retrain the newly-appointed staff. 17. Rural Roads ComRonent. A detailed draft Project Completion Report for this component, prepared by DLG, is on Bank files. At project completion in 1988 only about 63% of the rural road program had been completed and another 24% was still in progress. Among the major problems affecting implementation were the 1983-84 recession and the political unrest in the country, both of which could not have oeen foreseen at the time of project preparation and were beyond the conttol of the Government. The recession brought on a series of problems, including the peso devaluations and the consequent sharp increases in the costs of construction materials, fuel, equipment, spare parts and labor, which, in turn, increased the Government's contribution to project financing. The Government was unable to provide the hi,her than estimated amount of funds and delayed payments to contractors, a number of whom were forced to abandon wo.k. To help, the Bank agreed to include the project in the Special Action Program in 1984 and to increase its contribution to financing project civil works from 55% to 72%. Political insurgency also forced some contractors to slow down or abandon work. 18. Three other problems affecting implementation also stand out: the failure to transfer responsibilities for rural roads to DLG, the delays that affected every phase of the project, and poor maintenance of rural roads: (a) Although DLG had been expected to become the main agency responsible for rural roads, existing laws provided DPWH with authority for rural road supervision and financial matters until 1988. DOF, DOBM, NEDA, and the local governments also continued to be involved to some extent. The overlapping responsibilities and long delays in decision making resulting from this situation contributed to slow implementation.  (b) Partly due to the confused administrative responsibilities for the rural roads and partly due to the Government's financial constraints, the component was plagued by numerous delays to almost every phase of its implementation including: the hiring of technical assistance and qualified staff, the preparation of detailed engineering and bidding documents, the preparation of annual programs for construction and maintenance of rural roads, approval of DLG budgets, the acquisition of road rights-of-way, the approval of contract awards and payments, the release of funds, and the execution of contracts. (c) Although it was recognized at project appraisal that road maintenance was the greatest weakness in the Philippine highway sector, the project's maintenance program for provincial and barangay roads was not carried out properly, mainly due to lack of funds and diversion of funds and equipment from maintenance to other purposes, often for political reasons. As a result of inadequate maintenance, all roads in the project provinces, including those improved under the project, deteriorated very rapidly. In its PCR for this component, DLG estimates that from 15% to 25% of the gravel roads and about 25% of the paved roads were in poor condition in 1989 because of the poor quality of improvement work and maintenance. Since both DLG's PCR and Bank supervision reports indicate that these problems were wide-spread in all six project provinces, the actual percentages of roads in poor condition might be much higher. 19. Mechanical workshops financed under the Bank-assisted Third and Fourth Highway Projects (Lns. 1353 and 1661-PH) were considered adequate for maintaining and repairing the equipment of both DPWH and DLG. Therefore, only one workshop in Ilocos Sur Province was actually built under the project, rather than the six originally envisioned. A contract for the construction of this workshop was signed in June 1983, but the contractor abandoned the site because of delays in adjusting the contract prices to reflect price increases. Construction was eventually completed in September 1986. 20. National Road CogWonent. A detailed draft Project Completion Report for this component, prepared by DPWH, is on Bank files. Improvement of the San Jose-Mamburao road (171 km at completion) was originally to be completed by end- 1983 but most works were not finished until end-1987. Bridge and spillway works, including a newly designed bridge over the Bugsanga River, were not completed until May 1990, about one year after loan closing. Completion of works therefore took about eight years as compared to the three years estimated at appraisal. 21. Implementation delays were largely due to: (a) typhoons, which damaged the road during construction and several times after completion, necessitating redesign/repair of some structures and road sections; (b) redesigns required due to faulty detailed designs; (c) delayed payments to contractors; (d) the inaccessibility of some road areas during the rainy season; (e) the scarcity of construction materials; and (f) weakness of one contractor. The quality of works was average, and the quality of maintenance was poor because of lack of funds.  22. Construction of DPWH's Central Soils and Materials Laboratory was expected to be completed in two years by mid-1984. However, the contract for construction was not signed until February 1983, and construction did not start until January 1987 because the site was occupied by squatters. Construction was completed in September 1987. 23. TransRort Planning Component. This component, consisting of technical assistance to DOTC and NEDA for transport planning and a study for the preparation of the national transport investment program, was completed in August 1982, four months earlier than estimated at appraisal. Project Cost 24. The actual total project cost was about P 1,346.6 million, or about 73% higher than the P 776.4 million estimated at appraisal. This increase was mainly brought about by several devaluatioais of the peso and consequent sharp increases in the cost of construction materials. The actual total project cost in U.S. dollars was about US$82.3 million or 21% less than the US$104.9 million estimated at appraisal. The decrease was largely due to tne revaluation of the U.S. dollar vis-a-vis the peso as well as overestimated equipment costs at appraisal. Project Results 25. The project showed very mixed results with respect to its immediate objectives to: (a) reconstruct, rehabilitate and maintain priority rural roads, and (b) strengthen the capacity of provincial highway authorities to plan, design, administer, and execute rural road programs and to maintain their rural road network under the overall direction of DLG. Many rural roads improved under the project showed evident signs of deterioration caused by the poor quality of improvement work and lack of maintenance. Transport services, therefore, were improved but not to the extent expected. The institutional goals were also only partly achieved. Both DLG and the six provincial highway authorities began building up their respective capacities, but the scope of changes expected could not take place as rapidly as originally planned, even with the help of technical assistance. 26. Similarly, the project seems to have fallen short of its long-term goal of improving transport services to the rural population to stimulate agricultural production and to increase rural incomes. DLG carried out project impact surveys for ten sample rural roads constructed under the project with a total length of about 125 km, or 27% of the total road length (463 km) improved under the project. The 3urveys, conducted in May 1986 and in January 1989 (see Part III, section 7), showed that (a) contrary to expectations, there had been no significant changes in farm technology, (b) there had, however, been increases in the production of certain crops and in the prices received by the farmer at the farmgate, (c) work opportunities were still very limited, and (d) average annual daily traffic had increased significantly. 27. According to the surveys, all ten sample rural roads showed major signs of deterioration, characterized by excessive surface wearing, potholes and run-off canals within the roadway. The main causes of deterioration were  * 8 - identified as follows: increased axle loads, insufficient drainage, typhoons, and the absence of maintenance. It is therefore unlikely that roads in such poor condition could reduce transport costs and have an appreciable social or economic impact. Nevertheless, DLC's re-estimated economic rates of return (ERR) for the sample road sections ranged from about 14% to 41%, compared to the 17% to 55% estimated at appraisal. The re-estimated overall ERR for the component was 25% compared to 31% at appraisal. 28. Construction of the San Jose-Mamburao road was originally expected to have a weighted average ERR of 23%, based on quantifiable benefits in the form of increased agricultural production and savings in vehicle operating costs. Calculation of the road's actual ERR was not carried out by DPWH in its PCR for this component and could not be carried out by Bank staff due to a lack of data on agricultural output in the area of the project road. However, lt is unlikely that the estimated ERR was realized since the road was not fully in service until very recently, when the Bugsanga River bridge was completed. Without this bridge, traffic on the road has been in the range of 65 to 213 vehicles per day. Project Sustainability 29. To maintain an acceptable level of net benefits throughout its economic life, the rural roads and bridges improved or built under the project must be maintained properly and adequately. So far, this has not been done. Bank PerfQrmance 30. The Bank performed relatively well from project preparation to project effectiveness. However, if more weight had been given to USAID's reservations about the Bank's approach and design for the project, some problems during project implementation might have been avoided. 31. The Bank did not perform well during project implementation. It sent 18 supervision missions to the Philippines from October 1980 to September 1988, i.e., about two missions per year, with a total of 270 days in the field over the life of the project or an annual average of 34 days. However, each mission supervised an average of four projects, suggesting that about one quarter of the total time, or about 68 days, was actually spent in field supervision of the Rural Roads Improvement Project. This was not sufficient for a project spread over a number of provinces and implementing agencies and requiring 3ignificant organizational changes. During project preparation and appraisal, the Bank showed great concern about DLG's and the provincial governments' deficiencies that could adversely affect project implementation and therefore required a lengthy action Program and numerous covenants in the Loan Agreement to facilitate implementation. However, once the project was approved, these provisions were not assiduously enforced. Borrower Performance 32. The borrower did not perform well. The loan covenants and Action Program were not fully implemented, and steps to overcome problems in implementation were taken very slowly. It is not possible to attribute responsibilities among the various agencies involved in the project. However,  - 9 - DLG should not be considered fully responsible for the numerous problems that affected the rural roads component since it was not given the authority for rural roads as planned. Furthermore, this was the first large road project to be implemented by DLG. Project Relationship 33. The Bank and the borrower maintained a steady dialogue throughout the course of the project in an attempt to overcome the internal and external constraints on projec implementation. The borrower requested, and the Bank agreed to, various measures to facilitate project completion, including several extensions of the loan closing date, the implementation of jointly-prepared action programs to speed the course of works, the establishment of a Special Account and an increase in the disbursement rate for civil works from 55% to 72% in 1984 to ease local financing constraints, the reallocation of loan proceeds, and the adjustment of contract prices. Consulting Services 34. All consultants hired under the project seem to have performed relatively well. The Bank's files contain little information about the quality of the consultants' work, but DLG's PCR on the rural roads component indicates that the consultants involved possessed the required technical competence, but were lacking in management skills and were initially rather lax about quality control. These deficiencies, however, were rectified over time. Proiect Documentation and Data 35. The quality of project documentation was uneven. The appraisal report was carefully prepared, clear and provided a useful framework for the Bank and the Borrower during project implementation. While it might have been technically preferable if the Loan Agreement had included specific covenants reflecting the Action Plan, it is unlikely that this would have influenced compliance with the Action Plan, considering the generally difficult circumstances prevailing during project implementation. Supervision reports were often inadequate, however. Findings and Lessons Learned 36. The project experienced many problems and delays. Some of the problems were undoubtedly due to the very difficult fiscal situation and political climate prevailing in the Philippines during most of the 1980s. Some of the problems were due to the project's expectations, first, that well- established line agencies and politically motivated local governments would relinquish their authority over the rural roads subsector to DLG and, second, that the provincial governments, with largely inexperienced and inadequately trained staff, would become capable of assuming major responsibility for the rural roads subsector in a relatively brief time. Finally, some of the problems were due to the Bank's inadequate supervision of the project, which seems to have received only about 70 days of field supervision during its eight-year life and little attention to the crucial institutional improvements to be made under the project Action Program. The lessons to be learned from the project are therefore as follows: (a) major institutional changes should be expected to take a fairly  - 10 - long time to carry out, particularly if legislative changes are necessary for their implementation; (b) major institutional changes should preferably be completed as a condition for further processing of a proposed project, e.g., prior to appraisal, rather than after a loan has been approved; and (c) projects carried out by inexperienced entities in remote areas of the country require intensive, conscientious supervision.  - 11 - PART II: BORROWER REVIEW OF THE PROJECT Section A: Rural Roads Component - Department of Local Government The borrower's review of the project is documented in a draft Project Completion Report, which is an Bank files.  - 12 - PARTIII STATISTICAL INFORMATION 1. EgJ aa Bank Loans Year of Loan Title Purpose Approval Status Comments Loan 1661-PH To improve transport 1979 Completed PCR issued 4th Hwy Project services to rural po- on 03/31/89 pulations and main- tenance of national and secondary roads, to train DPWH staff, and to strengthen provincial highway authorities Loan 2716-PH To help alleviate po- 1986 Underway Completion 2nd Rural Roads verty in rural area expected by Project through improvement 06/30/91 and maintenance of rural and provincial roads Loan 1815-PH To increase cropping 1980 Completed PCR issued Rainfed intensity and crop on 06/24/:'8 Agricultural and livestock produc- Development tion in Iloilo Project Loan 1809-PH To develop irrigation 1980 Underway Completion Medium-scale potential in Mindoro expected by Irrigation and Palawan by build- 12/31/1990 Project ing seven irrigation systems covering a total area of 37,800 ha  - 13 - 2. Prolect Timetable Date Date Date Item Planned Revised Actual - Identificatlon 08/15/79 - 08/15/79 - Preparation 11/17/78 - 11/78 - AppraLsal Mission 10/79 - 10,'79 - Loan Negotiation 04/80 - 04/80 - Board Approval 05/29/80 - 05/29/80 - Loan Signature 06/13/80 - 06/13/80 - Loan Effectiveness 10/08/80 - 10/08/80 - Loan Closing 06/30/85 06/30/87 06/30/88 06/30/88 = Project Completion 12/31/84 03/85 06/85 09/85 06/86 06/30/87 06/30/88 12/31/88 12/31/88  - 14 - 3. Lgan Disbursements A. Cumulative Estimated and Actual Disburs.ements (US$ million equivalent) Appraisal Actual as % Actual as % of Semester Ending Estimate Actual of Estimate Loan Amount December 31, 1980 0.1 0.7 700.0 1.1 June 30, 1981 0.5 1.7 340.0 2.7 December 31, 1981 4.0 2.8 70.0 4.5 June 30, 1982 10.0 6.2 62.0 10.0 December 31, 1982 1.5 9.3 50.3 15.0 June 30, 1983 28.5 11.9 41.8 19.2 December 31, 1983 39.5 20.5 51.9 33.1 June 30, 1984 51.5 23.8 46.2 38.4 December 31, 1984 60.5 24.5 40.5 39.5 June 30, 1985 62.0 27.4 44.2 44.2 December 31, 1985 31.3 50.5 June 30, 1986 35.5 57.3 December 31, 1986 36.1 58.2 June 30, 1987 37.2 60.0 December 31, 1987 41.8 67.4 June 30, 1988 42.9 69.2 January 9, 1989 50.2 81.0  _ 15 _ 3. Loan Disbursements B. Final Disbursement Allocation in USS by Category Disbursements Category Cancellations Total (1) Civil Works (a) Construction and Improvement of rural roads, Part A (i) 13,662,896.15 (b) Construction and Improvement of Workshops and Labs, Part A (ii) 0.00 (c) Construction of National and Provincial Roads, Part B (i) 11,039,687.86 (d) Construction of the Central Laboratory 419,233.71 (2) Equipment and materials 9,460,645.66 (3) Consultants, Technical Assistance, and overseas training 15,592,297.63 Special Account 16,924.54 Total Disbursements 50,191,685.55 Cancelled on May 5, 1988 4,000,000.00 Cancelled on Jan 6, 1989 7,808,314.45 Total Cancellations 11,808,314.45 Origihal Loan Amount 62,000,000.00  4. Proiect Im2lementation - 16 - Progect Targets Exteutfng SAR Actual Actual as Agency Project Conponent Targets Targets of g&M OLO 1. Rural Roads2 a. Construction and Inprovem5nt - tetal road length in km 721 463.0 64 -cogpletion time in months 41 60 1f9 -total coat in P million 310.6 358.9 - average cost per km in P OOO 430 775 180 - total cost in US mtllion 42.0 191 - average cost per km in ussooo4 58 41 71 2. Road Maintenance Program a. Construction and ifprovemegt of workshops and laboratories - number ofnrow facilities 5 1 20 - number of existing facilities a 2 25 - conpletion time in months 24 38 158 - total cost in P million 8.4. 7.1 a5 - total cost in US mfillion 1.1 0.4 36 b. Procurement of Road Equipment, Parts, Tools, Office & Training Equipment, etc - completion time In months 39 37 n - total cost in P million 90.8 60.6 67 - total cost In US million7 12.3 5.2 42 3. Technical Assistance a. Advisors to OLG and Provinces - duration of services in months 39 74 190 - total man-months 360 402 112 - total cost in P million 29.5 53.1 10 - average cost per man-month In P OOO 82 132 161 - total cost in USS millfon 4.0 4.6 115 *averag, cost per man-month in USSIOOO 11.0 11.5 103 b. Training Development of a training progrm - duration of services in months 33 43 130 - total man-months 48 55 115 - tottl cost in P million 4.2 11.4 271 -average cost per men-month in POOO 87 207 237 - total cost in US million 0.6 1.0 167 - average cost per Man,montA In USS000 12.S 18.2 146 On-the-job training progrm -duration of services In months 24 0 -total man-months 72 0 -total cost in P million 3.4 - 0 - average cost per man-month In PBOOO 47.2 - 0 - total cost in US$ million 0.4 - 0 - avera cost per man-month in US# OOO 5.6 - 0 4. Consulting Services a. Detailed Engineering for item Is and 2a aove - totat road tlnth in km 721 no.6 100 - completion time in months 17 43 253 - total man-months 2447 -total cost in P fillion - 11.4 *averag cost per men-month in POOO - 4.6 - total cost In US$ sillion 1.4 - average cost per ma9qonth in USS5000 2.7 0.6 Breakdomi between PEO nd PEC By PEO - rod length In km 333.8 - cwletion tim In months - 43 mn-months - 1,81S - cost In P million - 3.8  - 17 - Eso11 Actual Actual as Agwncy Project Conent Targt1 Targets of 5AM aewg cost per mn-month In P1000 2.1 total cost In U mIllIon 0.5 *are cost per mn-mnth In US1000 0.3 ay PlC *oa lngth In km 386.8 completion tim in months 29 mn-months 632 Cost in P milltin - 7.6 *Yre cost per mn-month In POOO 12 .0 cost in US# million 12 0.9 averag ect per man-month In US$ 000 2.7 1.4 b. Praulification, bidding and awards coplotion tim fn months 17 33 194 c. Construction supervision of It_m a an 2. total rodltwth In km 721 707 98 coepletion tim In months 41 so 195 total mn-months 8.538 total cost in P million 41.1 evere cost per man-month in P0ooo 4.8 total cost in USS miLtion 2.4 wverae cost per mn-month In USS'000 0.3 Breakdown between PEO nd PEC y PEO road leth in km 340 333.4 96 completion tim in months 19 6 337 mn-months 5,497 cost in P million - 15.4 wverage cost per man-month in P'000 - 2.8 cost in USS million 0.7 average cost per mn-month In USt-000 - 0.1 By PEC -road ltnth in km 381 373.6 98 - completion tim In months 22 96 436 man-mnths - 3.041 cost In P milion - 25.7 avere cost per mn-month In rooo - 8.5 cost In USS mitlion - 1.7 avere cost per mn-month in USS'000 2.7 0.6 d. fe"ability Study for p -aration of 2nd Rural Road Project - total mn-months 144 - total cost In P miltion 14.8 23.4 158 verae cost per man-month in P1000 162.5 -total cost in USS million 2.0 1.9 95 average cost per mn-month in USSOOO 13.2 o. Updating of feasobility studies - total mn-months 25S - total cost In P mllion - 3.2 - averag cost per mn-month in PSO00 125.5 - total cost In USS million 0.3 - avere cost per mn-month in USS1000 11.8 f. Detalled Engineering for 2nd Rural Roads Project - total mn-months - total cost In P million 11.9 averag cost per mn-month in P total cost in USS million 0.6 average cost per mn-month in US$ OPWII 1. Nationat & ProvinciaL Road a. Construction & luprovent - total road length in km 150 171 114 - copletion tim In months 36 65 181 total cost in P million 17S.4 402.9 230 awverag cost per km in P million 1.2 2.4 200 - total cost In USS million 23.7 20.0 66  - 18 - 2SCeutiqg l14 Actual Actual as A8sncy Project Component Targets Targets x Of S" - args coat per km In US$'Oao 158.0 117.0 74 b. uprvislon - copletion timI 8months 39 65 167 * total mnomanths 1.297 -total cost In P million 11.1 43.9 394 * averge cot per wmn month In P 000 33.8 total cost In USS siltlon 1.5 3.3 220 verage cost per mn-month In U# 000 2.5 2. Central Soils & Material Laboratory a. Conmtruction - copletfon time in monthe 24 63 263 total coat in P million l 28.1 17.8 63 - total cost In USS million 3.8 0.8 21 OOTC/tEDA 1. Technical Assistance a. Contlimation of Trwnsport Pl ming Advisory Services -duration of services in months 30 22 73 -total mannonths 124 191 154 - total cost in P mitlion 12.6 25.3 201 *cost per mn-month in P'000 101.6 132.S 130 - total cost In US$ illion 1.7 2.2 129 - cost per mn-month In US$000 13.7 11.5 84  - 19 - NOTES I All costs are inclusive of physfcal and price contingncfes. 2 Key fndic*tors * of Jun 30, 196, project complethi date, are not avail ble. Those given fn DLO's PCi are as of Deesober 25, 1966. 3 As of DOeceSbr 25. 1968, the status of tho rural roads improvement work was a follows: Roads Roads Completed Underway Totat km km km - by contract 463.0 176.3 639.3 * by force account 0 0 130 0 3 * total 463.0 306.3 769.3 4 Because of the US dollar reevaluation, the project costs in US dollars were lower then estimted at apprasal. At epprasel : US#1 a p 7.40 At completion : USS1 * p 21.00 Average (project) : US$1 * P 17.25 Average (rurat roads):US#1 a P 18.40 5 This cowon nt was scaled down becouse workshops bufit under the Thfrd nd Fourth Highway Projects CLn 1353-PH nd Ln 1661-PH) were used not only for OPWH's equipsent but for DLO's as well. 6 At appraisal, procurerent of office nd training -quipment was scheduled to take place from September 1980 to Augut 1962, uereas it actually took place from December 1963 to August 1965. 7 Excluding additional equipent, worth US$2.4 millfon, that ias procured from llovoer 1967 to December 1988. Cost of equipment wa overestimtd at appreisal. 8 The project provfded for (f) 48 mn-months of consulting services to delop a training progrm for OLC md the six province, (sf) 72 mn-months to prepare en on-the-job training proorm fn road mintenane operation, (fii) oversea advanced training for 10 staff members of OLO and provinces for 1 year each, and (fv) technical study tours for 10 staff umbers of OLO and province for 4 months ach. 9 on-the-Job training was not carried out because of financial constrains. 10 Detafled Engineering and Supervfsfon (s 4 c) wre carrfed out by Provnceial Engineer's Offices (PEO) id Provincial Engineering Consultants (PEC). Pleae, note that the cost of PEO' work indicated In this table is not fncluded in tabl&s 5 A, 8, C and 0. 11 All costs are inclusive of physical wid price contingencies. 12 The SAU target indicated here is the estimted mn-month cost for local consultants (SAR, pera 3.26, poge 27). 13 Detaile engineering for the 2nd Rural Road Pro!ect (USS0.5 millfon), and updating of feasibility study. 14 All costs are inclusivo of physical an price contingencies. 15 out of the actual 1,29? man-mnths, 112.5 were supplied by expatrfate consultants ad 1,184.5 by local ones. 16 Laboratory equpsnt, fnitially not provided for, was purchased for USS2.1 million under the project.  - 20 - 5. Proiect Costs and FinAncing A. Proiect Cost in USS million1 Appraisal Estimfte Actual2 Local Foreign Total Local Foreign Total Project Conponents Cost Cost Cost Cost Cost Cost US X USS X A. Implementation through DLG 1. Construction & inprovement of rural roads 31.5 10.5 25 42.0 19.0 6.3 25 25.3 2. Provincisl Workshops & labs 0.7 0.4 36 1.1 0.3 0.1 36 0.4 3. Procurement of road maintenance equipment & tools 0.4 10.5 96 10.9 0.2 4.7 96 4.9 4. Procurement of other equipment 0.0 1.4 100 1.4 0.0 0.3 100 0.3 5. Procurement of additional equipment 0.0 0.0 0.0 0.0 2.4 100 2.4 6. Technical assistance to OLG & Provinces 0.0 4.0 100 4.0 0.0 4.6 100 4.' 7. Training for DLG & Provinces 0.1 1.1 92 1.2 0.2 1.8 92 2.0 8. Consulting services 2.7 2.0 43 4.7 3.1 2.3 43 5.4 9. Sthtotal A 35.4 29.9 46 465.3 22.8 22.5 50 4S.3 S. Imelementation throuai OPWN 1. Construction & improvement of national & provincial roads 15.6 8.1 34 23.7 16.9 8.7 34 25.6 2. Construction of DPWH central soils & materials laboratory 1.6 2.2 58 3.8 0.3 0.5 58 0.8 3. Laboratory equipment 0.0 0.0 0.0 0.0 2.1 100 2.1 4. Technical assistance 8 consulting services 0.3 1.6 84 1.9 0.6 3.4 84 4.0 5. Subtotal a 17.5 11.9 40 29.4 17.5 14.7 45 32.5 C. IMolementatfon throuoh DOTCtNEDA 1. Technical asistance 0.0 1.7 100 1.7 0.0 2.2 100 2.2 0. TOTAL (A through C) 52.9 43.5 45 96.4 40.6 39.4 49. 80.0 E. Law t U4t 1. Rights-of-way and land 8.5 0.0 0 8.5 2.3 0.0 0 2.3 F. 9IP TOTA1L MA U 41 1. 9L IVA 48 U A3 1 Including physical and price contingencfes. 2 The actual total project costs in Pesos and US dollars wore considerably affected by several devaluation of the Peso vis-a-vis US dollar (see Part I, pares 6.02 nd 9.01).  - 2i - 5. Project Cos-ts and Einmcing B. Project Financing in USS mlllion Appri"l Estfmt Actual Gov kflk 0Ba ank Project Components Sher Share Total Share Share Total US, X US. X A. Il_pmntatfan through DLO 1. Construction & lprovemnt of rural road 20.2 21.8 52 42.0 11.6 13.7 54 25.3 2. Provincfal Workshops & Labe 0.5 0.6 50 1.1 0.4 0.0 0 0.4 3. Procurmnt of road maintenance equipmnt L tools 0.4 10.5 96 10.9 0.2 4.7 96 4.9 4. Procurement of other equipment 0.0 1.4 100 1.4 0.0 0.3 100 0.3 5. Procuremnt of additional equfunt 0.0 0.0 0.0 0.0 2.4 100 2.4 6. Technical ssfstance to DLO L Provincf 0.0 4.0 100 4.0 0.0 4.6 100 4.6 7. Training for OLO L Provinces 0.0 1.2 97 1.2 1.0 1.0 50 2.0 8. Consulting ervices 0.0 4.7 100 4.7 0.0 5.4 100 5.4 9. Subtatl A 21.1 44.2 68 65.3 13.2 32.1 71 45.3 . ignoeentatfon throuch 0PWN 1. Construction & irprovemnt of ,wational & provincial roads 11.8 11.9 50 23.7 14.6 11.0 43 25.6 . Construction of DPIH central soils S materials laboratory 1.5 2.3 60 3.8 0.4 0.4 50 0.8 3. Laboratory equipment 0.0 0.0 0.0 0.0 2.1 100 2.1 4. Technical assistance & consulting services 0.0 1.9 100 1.9 1.7 2.3 58 4.0 S. Subhtotal a 13.3 16.1 SS 29.4 16.7 15.8 49 32.5 C. Iwlemtntation throuwh DOTC/NEDA 1. Technicel assistance 0.0 1.7 100 1.7 0.0 2.2 100 2.2 0. TOTAL (A thqroh C) 3&.4 62.0 64 96.4 29.9 50.1 63 80.0 E. Land ulsI*tfgo 1. Rights-of-way and Land 8.S 0.0 0 8.5 2.3 0.0 0 2.3 F. GRAM TOAL 42 9 2 59 1049 9.Z 50. 61 Ka  - 22 - 5. Prolt Cons andi C. project Cost in P million1 AppWaial IEtinte Actual2 Local Forefgn Total Local Foreign Total Project Components Cost Cost Cost Cost Cost Cost US, X US, X A. Iplpem_nt atfn through OLO 1. Construction * iprovemn t of rurat roads 233.0 77.6 25 310.6 356.5 118.9 25 475.4 2. Provincial Workshops * labs 5.6 2.8 33 6.4 4.8 2.3 33 7.1 3. Procurwe_nt of road mintena nce equipmsnt & tools 3.2 77.4 96 60.6 2.3 54.2 96 56.5 4. Procurement of other eoulpnsnt 0.0 10.2 100 10.2 0.0 6.1 100 4.1 S. Procurenmnt of additional equipent 0.0 0.0 0.0 0.0 50.0 100 50.0 6. Technical assistance to OLO & Provinces 0.0 29.5 100 29.5 0.0 53.1 100 53.1 7. Training for OLG & Provinces 1.0 8.3 89 9.3 2.5 20.2 89 22.7 S. Consulting ervices 19.6 14.8 43 34.4 40.9 30.9 43 71.8 9. Subeotal A 262.4 220.6 46 45.0 407.0 333.7 4S 740.7 0. ImtImantation through Dm4 1. Construction & iiprovsent of national & provincial roadb 11S5. 60.1 34 175.6 282.1 145.4 34 427.5 2. Construction of DPW1 central soils & materals laborstory 11.5 16.6 59 28.1 7.3 10.S 59 17.8 S. Laboratory equipment 0.0 0.0 0.0 0.0 43.2 100 43.2 4. Technical assistance A consulti-g services 2.0 11.9 86 13.9 7.8 48.1 86 55.9 S. subtotal 129.0 80.6 41 217.6 297.2 2&7.2 4S 54.4 C. tmplamntctfcn throuah DOTC/NEDA 1. Technical assistance 0.0 12.8 100 12.8 0.0 25.2 100 25.2 0. TOTAL (A to C) 391.4 322.0 4S 713.4 704.2 606.1 46 1.310.3 E. L nd *clofJtfgn 1. Rights-of-.ay nd land 63.0 0.0 0 63.0 36.6 0.0 0 36.6 F. GCIlI TOFAL MAf U 322. 74a1 AA 1J3LI I includfng physical and price contingencis. 2 The actual total project costs In Pesos and US dollers were considerably affected by several devaluation of the Peso vis-a-vis US doller (se Part I pars" 6.02 nd 9.01).  - 23 - 5. Project Costs and Financing D. Pro1ect Financing in P million Appraisal Estimto Actusl Gov Sank Gov I" Project Coqponrwnts Share Share Total Share Share Total US$ X us-$ A. Implemmntation through OLG 1. Construction & improvement of rural roads 149.1 161.5 52 310.6 2186? 256.? 54 475.4 2. Provfncial Workshops & Labs 4.2 4.2 50 8.4 7.1 0.0 0 7.1 3. Procurement of road mintenance equipment & tools 3.2 77.4 96 80.6 2.3 54.2 96 56.S 4. Procurement of other equipment 0.0 10.2 100 10.2 0.0 4.1 100 4.1 5. Procurement of additfonal equipment 0.0 0.0 0.0 0.0 50.0 100 50.0 6. Technical assistance to DLG L Provinces 0.0 29.5 100 29.5 0. 53.1 100 53.1 7. Training for OLG * Provinces 0.3 9.0 97 9.3 11.3 11.4 50 22.7 8. Consulting services 0.0 34.4 100 34.4 0.0 71.8 100 71.80 9. Subtotal A 156.8 326.2 68 43.0 239.4 501.3 48 740.7 8. Itnletnetation thrgh DP 1. Construction & fmprovement of national & provincial roads 87.8 87.8 50 175.6 243.7 183.8 43 427.5 2. Construction of OPWN central soils & materials laboratory 11.2 16.9 60 28.1 8.9 8.9 50 17.8 3. Laboratory equipment 0.0 0.0 0.0 0.0 43.2 100 43.2 4. Technical assfstance A consulting services 0.0 13.9 100 13.9 23.5 32.4 58 55.9 S. Subtotal S 99.0 118.6 5S 217.6 276.1 268.3 49 SU4.4 C. Imflementation throuch DOTC NEDA 1. Technicel fesfatance 0.0 12.8 100 12.8 0.0 2S.2 100 25.2 0. TOTAL (A through C) 255.8 457.6 64 713.4 515.5 794.8 61 1,310.3 E. Lsnd cumisition 1. Rights-of-uay and land 63.0 0.0 0 63.0 36.6 0.0 0 36.6 F. CtZhD t31b &ESh W ta. S21 794.8 59 1 346  - 24 - 6. Status of Covenants Covenant Article Status Project implementation shall 3.01 Project implementation was be undertaken by the Borrower marked by delay due to politi- with due diligence and effi- cal, economic, administrative, ciency, and in accordance with financial and budgetary fac- appropriate engineering, admi- tors and/or policies. nistrative and financial prac- tices, and with adequate and timely budgetary stipulation and provide funds, facili- ties, and service required. Qualified consultants and 3.02 Complied with. technical experts, acceptable to the Bank, shall be employed by the Borrower to assist in project implementation. Project plans, specifications, 3.02(a) Reports and relevant documents reports, contract documents, have been regularly updated and procurement schedules and and material promptly submitt- any modifications shall be ed for Bank's information and promptly submitted to the review. Bank. Adequate records and procedu- 3.02(b) Manuals, guidelines, and pro- res to be used in project mo- cedures were developed by DLG nitoring, equipment procure- with the assistance of expa- ment and contract services, triate and local consultants. shall be maintained by the Borrower and be made available (records, documents, facili- ties) for the Bank's inspec- tion and information. A cost sharing formula, satis- 3.07(a) Cost sharing formula never factory to the Bank will be fully implemented due to agreed upon by DLG and Project provinces' severe financial Provinces. constraints. An action program with parti- 3.07(b) Action programs never fully cular emphasis on staffing and implemented due to delays institutional improvement throughout implementation. shall be implemented by the Borrower.  - 25 - Covea nt Article Status The Borrower shall maintain 4.02 Records of DLG reflected the adequate records to reflect operations, resources and the project's operations, expenditures of the project, resources and expenditures. and were updated regularly. The Borrower shall establish 4.05 RRIP training unit in DLG was training units within the DLG established in 1982 and was and an evaluation system to operational until 1985. In appraise and monitor effecti- June 1987, RRIP conducted a veness of man power develop- road maintenance orientation moent and training programs on seminar in the project a continuous basis. provinces. The original concept of the training pro- duction unit was scrapped be- cause of financial constraints. Memoranda of Agreement to be 4.03(a) Not fully in compliance due to implemented according to delaye to implementatiop. programs and timetables satisfactory to the Bank. Memoranda of agreement to be 4.03(b) Complied with. concluded by December 31, 1980. Implementation of program 4.04 Budgetary problems and satisfactory to the Bank for political changes weakened the organization and management capacity of the project changes in DLG and the project agencies and prevented provinces. implementation of the envisioned changes. The Borrower shall take neces- 4.06(a) RRIP/DLG developed a mainte- sary actions to maintain the nance management system for road network adequately and to provincial roads and tested it repair it promptly according in the project provinces. The to sound engineering practices results were good, but funds and shall provide the funds, from the Government were facilities, services and other either insufficient or releas- resources to maintain roads ed late. Roads could not be and to repair equipment as, maintained adequately. and when, needed. The Borrower shall cause DLG 4.06(b) and the project provinces: (i) to implement a rural road (i) the maintenance program maintenance program satisfac- was not implemented tory to the Bank; satisfactorily;  - 26 - (1I) to furnLsh annual detail- (ii) in Septeiber 1988, two ed physical targets and budget project provinces had not yet requirements for this program submitted their annual program to the Bank not later than and budget to DPWH, because of Octobet 31; political problems; (III) to dispose of all non (iII) five project provinces serviesable equipment, scrap disposed of non-serviceable parts and components in the equipment, etc regularly. The equipment pools and workshops sixth province, Cebu, began in the project provinces as only in 1987; they reach the end of their economic life In accordance with and annual program satisfactory to the Bank; and (iv) to furnish semi-annual Complied with. progress reports on road main- tenance to the Bank,  - 27 - 7. Project Rewtlts A. Economic Imoact The project roads, including the San Jose-Mamburao road, served predominantly agricultural areas. At appraisal, major quantifiable benefits were expected to result from the provision of more economical transportation in those areas where an existing or potential transport demand had been identified. Because the project would provide remote barrios with low-cost transport and easy access to agricultural extension workers, farmers were expected to be able to introduce hybrid varieties, to adopt diversified production and multicropping and to cultivate idle land. Ultimately, agricultural production was expected to increase. In addition, a number of case studies undertaken in the Philippines had shown a close correlation between improved roads and higher farmgate prices for agricultural commodities as well as increased transfer of modern farming techniques through agricultural extension services. Benefits from traffic were expected to be generated as a result of reduced transport costs of non-agricultural commodities, such as consumer goods, minerals, and passengers. The average annual daily traffic on the project roads ranged from 10 to 933 vpd. Traffic was expected to grow at about 5-6% per year. At appraisal, the returns on the rural roads ranged from 17% to 55% with an overall ERR of 31%. The return on the San Jose-Mamburao road was a weighted average of 23%. The overall ERR of all roads was 28%. At project completion, DLG carried out impact surveys on ten rural roads and one bridge totalling about 124 km, or 27% of the total road length (463 km) completed under the project. These surveys showed that (i) contrary to expectations, there had been no significant changes in farm technology, (ii) there had been increases in the production of certain crops and in the prices received by the farmer at the farmgate, (iii) work opportunities were still very limited, and (iv) average annual daily traf'ic ranged from 44 to 1,034. Also, according to those surveys, all ten sample rural roads showed major signs of deterioration, characterized by excessive surface wearing, potholes and run-off canals within the roadway. The main causes of deterioration were increased axle loads, insufficient drainage, typhoons, and the absence of maintenance. It is unlikely that roads in such poor condition could allow significantly reduced transport costs or have a substantial social or economic impact. The re-estimated rates of return (ERR) of the ten rural roads and one bridge included in the impact surieys ranged from 14.5% to 41.5% as compared to 17% to 55% estimated at appraisal. The re-estimated overall ERR was 25% as compared to 31% estimated at appraisal. The ERR for the San Jose-Mamburao road (171 km) was originally estimated at 23%, with benefits in the form of increased'agricultural production stimulated by the road and savings in vehicle operating costs. Calculation of the actual ERR was not carried out by DPWH in its PCR for the component and could not be carried out by the Bank due to the lack of data on agricultural output in the area of the project road. B. Studies Under the project, consultants carried out feaiibility studies for rural road improvements in 22 additional provinces as preparation of a second rural roads project. They started in September 1980 and finished in August 1982.  8. U8s gf Bank Resources - 28 - A. Staff Inputs in-staff-weeks Stage of Project Cycle Planned Revised Final Comments Through Appraisal - - 131.5 Appraisal through Effectiveness - - 18.5 Supervision - - 107.8 Total - - 257.8 B. MISSIONS Stage of Month/ Nuwer of Days Specielizati4s Performmnee gating Types of3 Project Cycle Year Persons in Field Represented Status Problems Through Appraisal 03-04/79 2 28 1 ECO /I EGR 06/79 2 21 1 ECO /I EGR 09-10/79 1 12 1 TRO 10-11/79 2 35 1 ECO /I EGR Appraisal through Board Approval Board Approval through Effectfveness - - - Supervision 10/80 1 19 1 EGR 2 NIT 02/81 3 21 2ECO /I EGR 2 F/M/T 05/81 2 16 1 ECO I 1 EGR 2 F/N/T 05-06/82 2 14 1ECO /I EGR 2 MIT 10/82 1 13 1 ECO 2 NIT 03/83 2 18 IECO / I EGR 2 M/T 10/83 4 14 2 ECO I 2 EGR 2 N/T 02/84 2 9 1ECO / 1 EGR 2 N/T 06/84 1 11 1 EOR 2 N/F 02-03/85 1 614 1 EGR 2 N/F 10/85 1 ? I EGR ? ? 06/86 1 11 I EGR 2 N/F 10-11/86 1 8 1 EGR 2 N/F 03-04/87 1 11 1 EOR 3 N/F 06/87 1 7 I EOR 3 N/F 11/87 2 8 I ECO /I EGR 2 N/F 03/88 2 15 I EGR 2 N/F 08-09/88 1 10 1 EGR 2 N/F 1 Koy to Specializations:ECO * Economist, EGR * Engineer, TRO a Training Officer 2 Key to Stetus:1 a Problem-froe or Minor Problems, 2 a Moderate Problems, 3 a Major Probleme 3 Key to Problems: F * Financil, N * Managerial, T a Technical 4 Report not found.