Philippines - Population Project

F1LI aCOP- DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Not For Public Use Report No. P- 1473-PH REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF PHILIPPINES FOR A POPULATION PROJECT June 20, 1974 This report was prepared for official use only by the Bank Group. It may not be published, quoted .or cited without Bank Group authorization. The Bank Group does not accept responsibility for the 'accuracy or completeness of the report.  Currency Unit = Peso (P) US$1 = 6.8 P 1 = US$.148 P 1,000 - US$148 P 1,000,000 = US$148,000 Fiscal Year - July 1 to June 30  REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF THE PHILIPPINES FOR A POPULATION PROJECT 1. I submit the following report and recommendation on a proposed loan to the Republic of the Philippines for the equivalent of $25.0 million. The loan would be for a term of 25 years including a five year grace period with interest of 7.25 percent per annum to help finance a population project designed to assist the broad objectives of the population program and to strengthen the health and family planning delivery system of the Department of Health. Parts of the project would be financed on a parallel basis with grants by the United Nations Fund for Population Activities and the United States Agency for International Development. PART I - THE ECONOMY 2. The most recent Economic Report - "Current Economic Position and Prospects of the Philippines" (No. 78-PH of April 20, 1973) was circulated to the Executive Directors on May 2, 1973 (R73-85). An economic mission visited the Philippines in April and its preliminary conclusions are incorporated below. The full report of the mission will be distributed to the Executive Directors in due course. Annex I contains country data. Recent Developments 3. Since 1972, the Government has re-formulated its development strategy by introducing a number of important and potentially far-reaching economic and social reforms through decrees in such areas as agrarian reform, taxation, customs administration and tariffs, banking and government organi- zation. These reforms provide an opportunity to improve the performance of the Philippine economy. Aided by the recent commodity boom in the inter- national markets, economic activity in the Philippines has increased consid- erably. The growth in real GNP, which had been about 5% a year for more than a decade, is estimated to have doubled and reached 10% in 1973. However underemployment and unemployment remain quite high, and in common with most other countries the rate of inflation has increased appreciably in the past year. T'hese problems and the long-term implications of the energy crisis for domestic production, the balance of payments, costs and employment are now being examined by the economic mission. 4. The strong recovery of the economy in 1973 resulted from increased agricultural production, a recovery in the industrial sector including manufactured exports, a boom in export incomes and an expansion in public and private investment. The agricultural sector, which had suffered from adverse weather conditions during the previous three years grew by 11% in 1973. Rice production in the present crop year is estimated to have increased by 30% over the level of the previous year when floods reduced production levels. This increase has been mainly due to favorable weather conditions,  - 2 - increased use of fertilizers, more supervised credit and increased investments in supporting rural services as part of a general drive for rice self-suffi- ciency. The Government has vigorously implemented a program of agrarian re- form among rice and corn tenants concentrating mainly on the larger holdings in the first phase. Titles are being transferred to tenants and supporting services improved. 5. The increased activity in agriculture has provided the base for renewed expansion of the industrial sector. The growth of industrial produc- tion for exports has also been stimulated by the Government's industrial export drive which included a range of export incentives. Nontraditional industrial exports, which have been increasing since 1970, are estimated to have doubled in 1973 to about $200 million. The prospects of increased profitability are attracting a large amount of new investment into industries such as plywood, textiles and garments, handicrafts, light consumer durables and electronics. 6. The growth in production was also assisted by the sharply acceler- ated public development outlays in 1973 made possible by a significant im- provement in the financial position of the Government. The Government has implemented a series of long-needed tax reforms and improvements in tax administration, such as customs and tariff reform, tax amnesties, reforms in corporate and local taxation, continuation of the export tax, and increased taxation on luxury items and on gasoline. These reforms resulted in a 37% increase in tax revenues in FY 1973, and an estimated 40% this fiscal year. As a result the ratio of Central Government tax revenues to GNP has increased from an average of 9% in recent years to an estimated 12% this fiscal year. 7. High prices for the Philippines' chief exports, including coconut products, sugar, copper and wood products, were largely responsible for an increase in merchandise receipts of almost 70% in 1973. The merchandise trade account recorded a surplus of about $270 million, as compared with a $120 million deficit in the previous year. International reserves rose by $594 million during the year and stood at $876 million, equivalent to about five months of imports, at the end of the year. 8. However, in the latter part of 1973 inflation emerged as a major problem in the Philippines. Since mid-1973 consumer prices have been rising at an annual rate of more than 40%. This has been caused by the higher rate of world inflation, by higher export prices, by domestic food shortages, and more recently by the increased cost of petroleum. Provided the Government obtains sufficient cereal imports for the coming July-September lean period for domestic supplies, and provided there is a good harvest later in the year, the rate of inflation should moderate in 1975, but it probably will take 1-2 years for the price effects of the energy crisis to work themselves out fully. The rapid inflation has also exacerbated the decline in real wages which fell by a total of about 25% between 1969 and 1973. The urban wage earners have been most affected. In the past year, agricultural incomes have improved very substantially, while, with some exceptions, entrepreneurs have been able to pass on increased costs. Money wages will have to be raised in the near future if further deterioration in the living standards of wage earners is to be avoided.  -3- The Energy Cri sis 9. Imported petroleum provides some 93% of the Philippines' total energy requirements. In 1973 the equivalent of 71 million barrels of petroleum crude and other petroleum products were imported at a cost of about $230 million c.i.f. When the energy crisis developed late last year, it looked as though economic activity in the Philippines would be severely disrupted. There were temporary dislocations while reduced quantities of petroleum were available, but the Government moved quickly with conservation measures to reduce non-essential consumption. By March these problems had been overcome and the Philippines is now obtaining sufficient petroleum for its needs. In 1974 imports of petroleum and products are likely to be about 73 million barrels at a cost of about $820 million c.i.f. 10. In response to the energy crisis the Government has decided to accelerate the development of local energy sources, especially hydropower and geothermal energy. These will be supplemented with nuclear energy in the 1980's. The transport sector, which now accounts for 40% of total energy consumption, is likely to continue to be the major consumer of energy. The growth in demand for energy will therefore be influenced by policies that affect the pattern of expansion in this sector. In any event, total demand for energy is expected to grow at about 10 percent a year, and even with more rapid development of natural power sources, petroleum would still account for 85% of total energy needs by 1980. The Philippines does not have any commercial oil fields, but the Government has recently taken steps to encourage more exploration. Growth Prospects 11. Earlier this year the Government decided that, despite the energy crisis and rapid inflation, the growth momentum built up last year should be maintained, to provide for a continued increase in employment and to ensure that export income expands rapidly enough to meet most of the country's foreign exchange needs. The labor force will continue to grow at almost 3Z a year for another decade. Providing half a million new jobs a year as well as dealing with unemployment and underemployment will be a major task. 12. The economy has the potential to continue growing at 7-8% a year in real terms. This growth is not likely to be seriously constrained by lack of foreign exchange, for despite the big increase in the cost of petroleum and other imports, continued high prices for major export commodities will result in another overall balance of payments surplus this year. Moreover, the rapid increase in export prices at a time when external debt has not been changing, has resulted in a sharp fall in debt service from 23% of export earnings in 1972 to an estimated 14% this year. There has also been a sub- stantial improvement in the climate for private investment in the Philippines, especially in exports. Unless there is a calamitous drop in export prices, the Philippines should be able to maintain a reasonable balance of payments position throughout the rest of the decade. There will probably be a substan- tial increase in financing requirements, but with rising domestic incomes and  - 4 - a substantially improved capacity to borrow abroad, it should be possible to mobilize the needed resources. 13. A substantial increase in both public and private investment to support the growth and employment strategy is required, with priority being given to increasing food production, to export ventures and to selective import-replacing investments. The Government plans to spend about P 17 bil- lion on infrastructure and other public investments during FY 1974-77; about 40% of the proposed investment program would be allocated to the transport sector, 21% to power and 13% to irrigation. This would mean doubling the pro- portion of these expenditures to GNP from 1.7% in FY 1968-72 to about 3.5% in FY 1974-77. To finance this program, the ratio of taxes to GNP would have to be increased to 15-16%, and public savings would have to be raised from the present level of 1.4% of GNP to beyond 2% in the next few years. With the Government's program for further tax reforms, there are reasonable prospects for achieving these objectives. Even so, it would mean continued heavy reliance on public borrowing from the local market and from abroad. Implenienting this program would also call for continued improvements in public sector management which has already been strengthened by the Government reorganization. 14. The improved climate for private investment is attributable to the strong performance of the economy in 1973 after three years of stagnation, the current higher prices for many commodities, and the efforts of Govern- ment to attract more foreign investment. A number of big projects are proposed in mining, wood processing, fertilizer, steel, aluminum and other industries which seem likely to push up the private investment rate from recent levels of about 16% of GNP to perhaps 22% by the latter part of the decade. A large portion of the funds for these projects is likely to come from abroad. Even so, the supply of long-term funds from domestic sources will need to increase substantially. Balance of Payments 15. Because of continued high prices for major export commodities, ex- port receipts are expected to increase by 33% this year to $2.5 billion. Merchandise imports are likely to increase by about 66% to $2.6 billion, largely because of the increased cost of petroleum. In response to the energy crisis the Central Bank negotiated a series of standby credits with various foreign commercial banking groups earlier this year. However, be- cause of the improved outlook for export receipts, these standby credits may not be used this year. The economic mission estimates that the overall balance of payments will record a surplus of about $250 million this year, with international reserves increasing to about $1.1 billion, the equivalent of about 3-1/2 months of imports. With export prices continuing at relatively high levels, a small deficit in the overall balance of payments is likely in 1975. 16. After allowing for continued reserve accumulation and repayment of loans, the total foreign exchange requirements for the period 1975-79 would be about $7 billion. About $2.5 billion would be provided by remittances,  - 5 - official grants, direct investment, and short-term trade finance. The re- maining $4.5 billion would have to come from foreign borrowing. Last year the Bank estimated total requirements for 1974-78 at about $4 billion. In June 1973 the Consultative Group for the Philippines met and accepted the need for rising levels of commitments for development projects to support the Philippines' increased development program. The increased estimate of re- quirements reflects the effects of inflation, the more optimistic outlook for growth in the Philippines, and the improved capacity to carry foreign debt. 17. Borrowing on this scale would not pose serious problems for balance of payments and external debt management. At the end of 1973, the Philippines' medium and long-term external debt stood at about $1.9 billion, of which pub- lic debt was 44%. Because the Government has exercised strict control over the amount and type of new external borrowings, the total amount of debt out- standing has not increased much since 1970, and the maturity structure has improved. Moreover, the debt service ratio is expected to remain at about 14% in 1975. With this moderate debt burden the Philippines will be able to contract substantially larger amounts of external debt which would probably lead to a small increase in the debt service ratio, perhaps to about 14-15% by the early 1980s. 18. The Philippines' development program will continue to require re- sources in excess of the foreign capital which will become available for fi- nancing the import component of development projects. Some financing of local currency expenditures will be justified, especially for projects of economic and social importance which need only limited amounts of foreign exchange. PART II - BANK GROUP OPERATIONS IN THE PHILIPPINES 19. The Philippines has received 23 Bank loans and three IDA credits totalling $466 million, net of cancellations. About 48% of the Bank/IDA lending or about $225 million has been for infrastructure projects in power, transportation, water supply and for education. The remainder has been divided between agriculture and industry. About $126 million of this has been for irrigation, livestock, fisheries, rice processing and rural credit and about $115 million for industry in three loans to the Private Development Corporation of the Philippines and one loan to the Development Bank of the Philippines. There has been a marked improvement in the way Bank Group projects in the Philippines have been executed in the last two or three years compared with experience in the 1960's when shortages of peso counterpart funds combined with poor administration caused serious problems. Apart from the rice processing project, where the scope of the project has been revised because of changed circumstances (see Annex II), all our projects are now going well. Annex II contains a summary statement of Bank loans, IDA credits and Ik'C investments as of May 31, 1974, and notes on the execution of ongoing projects.  20. The Bank lending program increased substantially last year to $165 million reflecting the ambitious development program of the Government and its improved capaciLy to prepare and implement projects. Future Bank lending will continue to concentrate on public infrastructure and agriculture. We will also continue to help industry and provide more assistance for projects in the social sectors. 21. The following projects are among those which may be ready for Board consideration in FY 75 -- Power VI, Inter-Island Shipping, Tarlac Irrigation, Mindoro Rural Development and Small Industry. The sixth power loan would help the National Power Corporation (NPC) to expand its power generating and transmission facilities in Luzon, while the loan for inter-island shipping would be relent through DBP to private shipping companies for the acquisi- tion of new and used ships and conversion and repairs of existing ships of the inter-island fleet. The Tarlac Irrigation project would help rehabili- tate irrigation systems in a heavily tenanted area of Central Luzon, while the Rural Development project would help finance a range of rural investments designed to promote the integrated development of the island of Mindoro. The small industry loan would provide funds for relending to small firms and technical assistance to help strengthen the institutions serving these firms. 22. Since 1972 the Philippines has received a limited amount of assist- ance from IDA, but on the basis of a reappraisal of the prospects for the Philippines' balance of payments in the light of changes in commodity prices, and in view of the sharply increased needs of the poorer members of IDA for concessional assistance, further IDA lending to the Philippines does not appear to be justified. The Philippines now has the capacity to borrow larger amounts abroad to meet the needs of the increased investment program now planned. The Bank's share in this higher level of foreign borrowing will be reviewed in the light of the findings of the recent economic mission. At present, the Bank/IDA share in total debt outstanding is about 9% and its share in debt service is about 5.5%. Since the Philippines will have the capacity to service more commercial debt in future, it is unlikely that the Bank's share in debt service will rise even with a higher level of lending. 23. IFC has made commitments in the Philippines totalling $68.0 mil- lion for investments in ten companies in the fields of development banking, power, telecommunications, ceramic tiles, paper, petroleum products, nickel mining and refining, chemicals and synthetic fibers. Of these investments, as of MHay 31. 1974, $18.2 million have been sold, $0.4 million cancelled and $.S million repaid, leaving a net portfolio of $47.6 million. On the same date $12.6 million was undisbursed. Preliminary proposals have been received for an aluminum smelter and other projects in the pulp and paper, dinner ware, metal alloys and shipbuilding fields.  PART III - THE POPULATION SECTOR 24. The demographic problem of the Philippines is essentially one of very rapid growth resulting from high fertility and declining mortality. Its present population growth rate of 3 percent per annum, which is among the highest in the world, requires a large proportion of annual investment just to maintain the present low level of per capita income. The birth rate is estimated at about 40 per 1000 population, the death rate about 10 per 1,000, and the total fertility rate 1/ at 6.4. As the relatively high infant mortality rate (about 80 per 1,000 live births) comes down the population growth rate will become higher unless fertility is reduced. If the current level of fertility continues the present population of 40 million would exceed 100 million by the year 2000. A successful family planning program, however, could limit the population to about 80 million by the year 2000. Organization and Performance 25. About 25 different organizations in the Philippines are involved in family planning programs. When the Government became more directly concerned with the population issue around 1969-70, various private and semi-private groups and several local and provincial Governments were already working on programs designed to encourage fertility decline. Notable among those private agencies which carried out pioneering work in this field are the Institute of Maternal and Child Health (IMCH), the Family Planning Organ- ization of the Philippines (FPOP) and the Responsible Parenthood Council (RPC). Altogether the private agencies carry out a large portion of the present family planning services offered to the population. However, they operate mostly in urban areas and the task of reaching the rural and remote regions, where 70 percent of the population lives, with family planning advice and service will mainly be the responsibility of the Government. 26. In 1971, the Government established the Commission on Population (POPCOM) as the official coordinating agency of family planning in the Philippines. It is chaired by the Secretary of Social Welfare and it includes as members the Secretaries of Health and Education and the Director of the National Economic Development Authority. Its role has been strengthened by recent Presidential decrees and its functions include: formulating long term programs in family planning; making demographic studies; coordinating family planning programs -- including services, training and communications -- and making family planning part of a broad educational program. The population program has the strong endorsement of the President of the Republic who has recently stated: "It is recognized that a high population growth rate consumes vital resources from the economic development effort. In our country where resources are scarce and critical, a high population growth rate is untenable and demands immediate solution." 1/ Live births per woman in the reproductive ages.  27. There are over 2,100 family planning clinics in the Philip,ines operating under 25 different agencies. Included in this number are 1,300 Rural Health Units (RHUs) belonging to the Department of Health (DOH) which, offer family planning services. The frequency of the services offered by these clinics varies widely from full time to one afternoon a week sessions. Understaffing and inadequate staff training in family planning are common, and in general, clinic facilities are in too poor a condition to provide sound clinical services to patients (e.g. only about a third of the RIUs occupy Government owned buildings suitable for their specific functions; the rest are housed in various locations such as municipal buildings, multipurpose halls and rented private premises). Moreover even this relatively large number of clinics can provide family planning services to only about a third of the population. The rest of the population, which is almost entirely rural, does not have access to family planning advice and services. Since the private organizations and many of the provincial governments are offering family planning services through outpatient clinics in the large urban areas, the Department of Health plans to concentrate on making such services avail- able in small urban and rural areas with particular emphasis at the barrio level, and establishing post-partum institutional programs in its hospitals. However, a new health and family planning delivery system will have to be adopted to reach almost two-thirds of the country's population which is now without services. This includes upgrading of the administrative and physical condition of RHUs so that they will be able to assume the additional task of an expanded family planning program. 28. The Department of Health (DOH) is also involved in training medical, paramedical and promotional personnel for the family planning program in seven Regional Training Centers coordinated by the Office of Health Education and Personnel Training with headquarters in Manila. However, none of the present accommodations are suitable for training as they consist mostly of provisional arrangements for the use of office space within the Regional Health Offices. 29. The performance of the national family planning program to date has been encouragirg. Over the past four years there has been almost a five- fold increase in the number of new acceptors from about 90,000 in FY 1970 to over 440,000 in FY 1973. The Government's policy is to offer several methods of contraception, in particular the pill, intrauterine devices, rhythm, conventional contraceptives, etc.; couples are free to choose the most suitable method for spacing or limiting the family size. While considerable progress has been made over the past few years, many aspects of the program need attention. A large number of family planning agencies perform poorly and there is a concentration of clinics in urban areas. Clinic services in RHUs and hospitals need to be put on a daily basis and information education and communication efforts are needed to parallel the extension of clinic services. 30. Although progress has been encouraging, it is only a beginning. In order to achieve a population growth rate of 2.5 percent by the year 1985, the proportion of married women in the childbearing ages who practice contra- ception regularly would have to increase from 19 percent in 1974 to 36  - 9 - percent in 1985 (about 60 percent of these couples would require program services). Achieving these goals will depend on the expansion of services to semi-urban and rural areas as well as the effectiveness of educational and promotional efforts to change people's attitudes toward family size. Financing 31. The population program of the Philippines relies heavily on external funds. USAID, which has assisted the program since its early stages, has made the largest financial contributions. It provided US$25.0 million in the period 1967-73, and appropriated US$7.0 million for FY 1974. lJsaid assis- tance has been mainly for family planning training, provision of contracep- tives and general program support to the POPCOM. The UNFPA signed a US$3.3 million agreement in January 1972 with the GOP, covering both on-going and planned projects of which about half (US$1.4 million) is for family life education in public schools. Recently, a new agreement was worked out through which the UNFPA has committed to the Government US$6 million for programs in training, communication, research and evaluation in the next five years, which are additional to those included in the 1972 agreement. 32. Other donors include the Ford Foundation, the Pathfinder Fund, the International Planned Parenthood Federation, the Population Council and the Rockefeller Foundation. Direct government allocations to pqpulation programs were minimal up to FY 1973 when ? 5.9 million was appropriated. With the reduction in USAID iinancing of salaries of family planning workers and the overall expansion of the program, the government budget for family planning increased considerably in FY 1974 to about p 40 million. PART IV - THE PROJECT 33. The proposed project is based on the results of an IBRD population sector survey undertaken in early 1972 and on a Government re-examination of the national family planning program undertaken in late 1972. Bank missions appraised the project in March 1973 and in July-August 1973. During the various phases of project preparation, appraisal and negotiations, close coordination with other donors, particularly USAID and UNFPA, was maintained. The loan was negotiated in May 1974 and Mr. Pio de Roda, Under Secretary of Finance, led the Government's negotiating team. The Appraisal Report (No. 333 PH on the proposed project is being circulated separately to the Execu- tive Directors. Annex III provides a loan and project summary. Description of the Project 34. The project will help the Government to reduce the fertility rate by improving its ability to reach and motivate the rural population with family planning services, information and advice; for this purpose assistance will be given to both the Commission on Population (POPCOM) and the Department of Health (DOH). The project will provide for the construction and equipping  - 10 - of Rural Health Units and training facilities. Technical assistance and salary support to some innovative parts of this program will be significant in terms of the volume of activity which they will generate and their influence on the national family planning program. More specifically, there are four main components to the project: Part A would strengthen the coordinating capability of the POPCOM and support the development of field staff to direct the family planning program. Part B would extend and reinforce the rural health and family planning services of the Department of Health by establish- ing a new system of health delivery in rural areas. Part C would provide facilities and additional services for the training program of the Department of Health. Part D would provide additional staff and technical assistance to the Department of Health to strengthen its capacity to coordinate and evaluate its program. Under the proposed loan the Bank would help finance parts B, C and D of the project while the United Nations Fund for Population Activities (UNFPA) and the United States Agency for International Development (USAID) will finance separate items of Part A of the project. Because of the substantial participation of other donors in family planning activities in the Philippines the project has been designed to complement the inputs of other agencies. 35. Part A of the project would include the establishment in POPCOM of an Information Education and Communications (IEC) Division to be financed under a separate agreement wiTH UNFPA approved on March 21, 1974. The main functions of the IEC Division will be to plan and coordinate all the diverse communications efforts of the numerous family planning agencies operating in the Philippines. The project would also provide for the establishment of a Training Division in POPCOM and strengthen POPCOM's regional offices. These items will be financed under separate agreements with USAID. The Training Division would enable POPCOM to coordinate and improve all population related training by ensuring that existing and planned training programs meet the priority needs of the national family planning program, recommending and implementing training policies, providing guidelines and standards on the preparation and conduct of training programs and monitoring and assessing on-going training programs. USAID hias committed funds to finance the salary and equipment costs of the Training Division for the next four years. The regional offices of POPCOM were recently established to help develop and implement the famnily planning program at the regional level, help solve field problems and elicit participation from official and private sources for the family planning effort. USAID will finance for one year the salaries and other operating expenses of the eleven regional offices. 36. Under Part B of the project about 200 Rural Hlealth Units will be provided to bring family planning services to the rural population, without whose participation the Government's program to reduce fertility could not be  achieved. About 160 Type A Rural Health Units serving municipalities of 10,000-50,000 population, and about 45 Type B RHUs, serving smaller municipa- lities would be constructed, equipped, and furnished. Construction of the Barrio Health Stations (BHS) is not financed through the project, but the Government has agreed to rehabilitate or establish BHSs within municipalities where RHUs will be constructed as complements of the project facilities. The Government has also agreed to undertake a survey of existing BHSs and formu- late a program to rehabilitate them. As part of the revised RHU service procedures, the project would provide simple radio/telephone equipment to link the base RHU with the Barrio Health Stations. About 40 of the Type A units in the more difficult areas would have two houses for staff attached to them and one house would be provided for each of the Type B units. These new RHUs to be built through the project would replace dilapidated and inadequate facilities, some of them hardly in operation, and thereby considerably improve the availability of family planning and health services to over one million (or 18 percent) women in the child bearing ages. The project would also include the procurement of 200 jeeps for use by RHUs, together with spare parts for new and existing vehicles and funds for vehicle maintenance. In addition, it would provide for the employment of about 2,400 additional mid- wives to work in the Rural Health Units and Barrio Health Stations. It is expected that about 480 additonal midwives would be employed in each of the next five years. The loan would also finance on a declining basis a part of the salaries of a core staff in the Health Department to organize implementa- tion of new procedures applicable to the Rural Health Units. 37. Under Part C of the project about eleven Regional Training Centres, under the Department of Health, would be constructed, equipped, and furnished. These centres would be used for in-service health and family planning training of Government staff. Each centre would have, besides teaching and administra- tive facilities, a library, living accommodation for trainees and staff, and vehicles. The loan would also help finance additional materials and services for about nine workshops for staff of the regional training centres. A signi- ficant activity in the training centres will be a three month pre-service course for midwives which will help them become family planning/community health workers in RHUs and resident staff in Barrio Health Stations. As midwives will play a big role in the new health family planning delivery system, the Government has agreed to form a committee to review policy for the training of midwives. Funds would also be provided for 33 midwifery fellowships for graduate nurses who would be employed as trainers in the Re- gional Training Centres and as supervisors in the rural health program. The project would also provide 24 man months of technical assistance to the Department of Health to advise on the organization and coordination of train- ing and development of midwife/community health/family planning training programs. 38. Part D of the project would help develop an improved statistical system in the Department of Health by helping to finance on a declining basis the salaries of additional staff to establish a health statistics unit, provide needed equipment and provide six man months of technical assistance for statis- tical services. This system would be the basis of RHU performance evaluation, central data analysis, production of periodic health/family planning statis- tical reports and a feedback system to the RHUs. Funds would also be provided for study tours for three senior nurses in the Department of Health, for 18  - 12 - man months of technical assistance for advisory services on logistics of drug distribution and new rural health unit procedures. Provision is also made in this project for financing an evaluation study of project facilities and programs. This study would serve as the basis for the design of facilities needed for further expansion of the system. The main objective of this evaluation will be to relate capital and operating costs to (a) staffing patterns and worktime (b) use of facilities and (c) the amount of services delivered. 39. Besides these provisions for evaltuation, the Government has agreed to carry out an evaluation of its family planning program through the Plann- ing Division of its Commission on Population. The evaluation would relate program inputs (personnel years, visits, number of clinics, costs etc) to both intermediate results (number of acceptors, continuing users etc.) and fertility decline. The results of such a continuing evaluation would be used to further improve the program's effectiveness and to measure its results. Project Execution 40. The Commission on Population would co-ordinate the work of the various Government agencies participating in the execution of the project. Construction of facilities would be the responsibility of a Project Construc- tion Unit to be established within the Department of Health. The Unit would be headed by a Director of Project Construction and staffed by a full time project architect, and such support staff as a project accountant and an equipment specialist. Additional staff, such as personnel from DPWTC to help in site selection, would be borrowed from other government departments as required. Since cost control and maintaining the pace of construction in the rural areas will be a difficult managerial task, the Government has agreed to employ construction management consultants in addition to consultant archi- tects. 41. Our review of the progress of the project would be closely co- ordinated with the other donors participating in the project. This task will be made easier by the presence of a UNFPA coordinator and the USAID mission in the Philippines. Project Cost 42. The estinated total cost of the project net of taxes and duties is $50.0 million equivalent. Assuming all civil works contracts are won by domestic firms, the estimated foreign exchange component of the project would be $15.4 million (31 percent of total project cost). The proposed Bank loan would cover 50 percent of the total project cost of which $15.3 million would finance foreign exchange costs and $9.7 million would finance local costs. Under separate agreements the UNFPA would provide a grant of $0.4 million and USAID would provide a grant of $0.5 million. The Government would finance the balance of $24.1 million. All project costs have been updated to June 1974. Future escalation for civil works costs has been estimated based on  - 13 - recent and expected price increases in the Philippines at an average rate of 38% in the first 18 months and 12% per annum thereafter. Physical contin- gencies are estimated at 10% of the base cost of civil works. Price escala- tion for other project items has been estimated at an average annual rate of about 10% a year during the five-year period. The project is scheduled for completion by 1979. Procurement 43. As far as practicable all contracts would be packaged in amounts of not less than $70,000 equivalent. All contracts estimated to cost the equivalent of $70,000 or more would be awarded on the basis of international competitive bidding. For contracts less than $70,000 the Government may use its normal methods of procurement, provided that the total of such contracts does not exceed the equivalent of $200,000. Domestic manufacturers of furni- ture and equipment (including spare parts) would be accorded a margin of preference equal to 15 percent for purpose of comparison with other bids. Disbursement 44. For vehicles, spareparts, equipment, and furniture, disbursement would be made on the basis of 100 percent of foreign expenditure or the ex- factory cost of locally procured items. For technical assistance, disbursement would be made on the basis of 100 percent of total expenditures. For civil works and incremental recurrent costs the loan would finance 39 percent of total expenditures, making the loan equivalent to 50 percent of total project cost. Disbursements for incremental recurrent expenditure would be made on the basis of 90 percent of expenditures during the first year after signing and 70 percent, 50 percent and 30 percent and 30 percent in successive years thereafter. Retroactive financing is recommended for up to $350,000 equiva- lent for expenditures incurred after May 1, 1974 for preliminary engineering and architectural work and to set up the Project Construction Unit. Project Justification 45. The national population program is designed to reduce the total fertility rate by about 25 percent -- from 6.4 in 1970 to 4.8 in the year 2000. Over 15 million births would be averted during that period as a result of the program. Family planning practice is also expected to increase independently of program efforts, as a result of improvements in socio-economic conditions. If this effect is also included, a total of 25 million births could be averted from 1970 to the year 2000. Total population would then be close to 79 million, almost double the current population, but some 23 million lower than the 102 million persons which would result if fertility remained constant. The population growth rate would be 2 percent per annum in the year 2000 instead of the current 3 percent. 46. The project is estimated to contribute directly to at least one sixth of the projected fertility decline of the national program -- by averting 2.5 million births between 1979 and the year 2000. This direct  - 14 - effect of the project would result from bringing family planning servi- ces to the rural population, whose participation is essential to achieve such a fertility decline. The new RHUs, the network of Barrio Hlealth Stations and the additional midwives will provide services to at least 7.8 million more people by 1979 than at present (or 1.6 million more women in the reproductive ages). 47. Other important, but non-quantifiable benefits can also be expected from the project. These result from information-education and communication activities which are expected to increase the demand for family planning services, training of family planning personnel at the regional level, tech-- nical assistance for training and communication activities, continuing evaluation of the program, transportation, etc. These elements of institu- tional development for the POPCOM and the DOH may well be as important in making the program more effective and reducing the population growth as the direct effect of the services provided through Rural Health Units and Barrio Health Stations. 48. The above demographic effects will have important social and economic consequences. Smaller families will mean an improvement in the quality of life through more food and better nutrition for each family member, better maternal health and child care, improved education opportunities, etc. The poorer families of the rural population will be the main beneficiaries of this program. In the long run a less rapidly growing labor force is likely to make the serious unemployment and underemployment problems that the Philippine economy is now facing, more manageable. PART V - LEGAL INSTRUMENTS AND AUTHORITY 49. The draft Loan Agreement between the Republic of the Philippines and the B.nk, the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement of the Bank and the text of a draft resolutior approving the proposed loan are being distributed separately to the Executive Directors. The features of particular interest referred to in Part IV - The Project - are set forth in Section 3.05, 4.05 (b), 4.04 and 3.06 (b) of the Loan Agreement. The establishment of the Project Construction Unit (referred to in Section 3.02) and appointment of its Director and Archi- tect is an additional condition to the effectiveness of the Loan Agreement (see Section 6.01 of the Loan Agreement). 50. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank.  - 15 - PART VI - RECOMMENDATION 51. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments June 20, 1974   ANN 1 Page 1 of 3 pages OotgVay DATA - PHILIPPINES 297 k 39oOion (id-1972) Pr klof arobl land pferaoo CmmtriAs Philippines CotoiA a Cp'Pt r4l&LSOAnO I PU CAIST M4 (fUB USm) A 160 / 210 ! 340 210 200 rr&Ur Wrth rate (par thousand) 42 44 44 43 Crude death rate (par thousand) . 10 17 10 Infant mortality rate (par thouand live birtho) 80 70 A 123 80-90 Litf expctay at birth (yeara) 50 / 56 A 59 50 59 Oross raeroduction rate A 2.9 5.1 3.0 3.2 Population growth lsa 1a 3 0 3.0 3.2 2.5 3.1 opulation groh r - urbn 4 /d 5 /d 5 4 5 Ap atructure (peroent) 0-l' 46 43 47 43 15-a 51 53 50 54 65 nd oer 3 4 3 3 Denendonoy ratio A 1.5e l.3/erf 1.7 0.9 Urban population as peront of total 30 /d 35 /d 56 43 Family plarmings I, of aooeptore cumulativse (thous. 409 316 200 490 No. of users (% of married wan) 8 9 10 TRtaT-l bor foro (thousand) 9,120 13,220 f 6,200 9,170 16,900 /Z Peroentag esploed in agriculture 61 56 f 41 55 77 Perontag unexployed 6 7 i 7 3 1 IlObDISIRllm V iM of national inoome roosived by highest 5% 29 25 .. Percent of national inome rooeived by higheat 20S 56 /h 54 'if1 Percent of national inoom recsived by lomeot 20 5 4 If i Percent of national inoome received by lowest 4CS 13 i. 12 /f USTIWT OF LAND O IP1SEV S owned by topt1 Ow ner. a % owned by malleat lOS of owner. RIALTH AND NSTION Population per phyadoian 1,6ca / 2,820 2,230 2 000 6,600 Population per cursing person 2,050 2,700 1,400 2,670 Population per hospital bed 1,180 A 910 420 470 1,500 Per capita calorie supply as S of requirements /5 80 /1 87 /m 89 124 100 Per capita protein supply, total (grams per day) 48 71 53 7# 55 76 51 Of which, animal and pulse 19 7 22 h 29 19 17 n Death rote 1-4 years 7 9 77 ZWCATION /Ju d /8 primary school enrollment ratio 91 / 119 o 95 /c 70 90 Adjusted secondary school enrollment ratio 26 49 22 A 30 13 Years of echooling provided, first and second level 10 10 11 12 12 Vocational enrollmnt as % of aec. school enrollmcnt 14 10 / 22 ZP 16 13 Adult literacy rate % 72 /g 72 26 70 HOUSIf Averaep No. of persons per room (urban) 1.6 Percent of occupied units without piped water 80 77 / 61 Access to electricity (as % of total population) 20 70 13 /r Percent of sural population connected to electricity 10 /c 36 CONSUIG'lION Radio receivers per 1000 population 22 45 /c 105 132 78 Passenger cars par 1000 population 3 8 7 4 5 Electric power consumption (kih p.c.) A10.4L 229 378 268 lo6 Newsprint consumption p.c. kg per year 1.4 1 8t 2.4 1.0 1.2 Notes Figures refer either to the latest periods or to - ocount of envirorental temperature, body weights, and the latest years. Latest periods refrr in principle to distribution by age and sex of national populations. the years 1956-60 or 1966-7p; the latest years in prin- A Protein standards (requiresments) for all countries as estab- ciple to 1960 and 1970. Only significantly different limhed by USDA goonomio Research Service provide for a minimum periods or years are footnoted separately. allowance of 60 gras of total protein per day, and 20 grams of } The Per Capita aNP estimates for year. other than 1960 animal and pulse protein, of which 10 grams should be animrl is at market prioes, oaloulated by the aame conversion protein. These standards are somewhat lover than those of 75 technique as the 1972 World bank Atlas. grams of total protein and 23 grass of anima protein as an 2 Average number of daughters per woman or reproduotive average for the world, proposed by 7AO in the Third World Food age. survey. Pcopulation growth ratas arflbr the decades ending in L7 Sons studies have suggeated that crude death rates of children 1960 and 197g. agea 1 through 4 nay be used ae a first approximation index of L Ratio of under 15 and 65 and over age brackets to malnutrition. those in labor force bracket of ages 15 through 64. /8 Percentage enrolled of corresponding population of school age Li FAO reference standards represent physiological re- as defined for each country. quirements for normal activity and health, taking /a 194b/49. / 19D5/70. /c 19685 Ld For the definition of urbon sec 1Y Demographic Yearbook 1971 p. 156. Patio of population under 15 and ;5 und over to total labor force. If 1971. /Z Zmploved lobor force. /h 1964. /i Tleouehod. A floweht qu,ltile, rural population only. A 1962. L 1960/62. /n 1969. /n 1964/66. /o Includes -verage students a 1967. / 15 years and over. r Does not include Bangkok netropilitan area where 63% of the population has scceos to electricity. 1963 /t Imports only. /u Computed by applying to the 19;0 figure the growth rate of GNP/capita in real terms from 1960 to 1970. 77 1971 estimated per capita ONP of $240 based on revised national accounts and includes US inflation. R3, June 4, 1974  ANNEX I Page 2 of 3 pages 1/ ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1975 ANNUAL KATE OF GROWTh (*, constant prices) Pesos Mln. 1960-65 1965-70 1971 1972 1975 GNP at Market Prices 71,766 100.0 5.5 5.7 6.5 4.3 10.0 Gross Domestic Investment 13,942 19.4 12.6 1.6 5.9 -3.5 9.4 Gross National Saving 17,013 23.7 15.0 3.6 13.2 -8.2 49.L Current Account Balance -3,071 2. . .. Exports of Goods, NFS i6,836 23.5 11.0 4.5 5.0 1.5 18.7 Imports of Goods NFS 13,000 18.1 7.3 7.2 5.4 2.7 13.1 OUTPUT lABOR FORCE AN", PRODUCTIVITY IN 173 Value added Labor Force -/ V. A. Per Worker Us$ Mln. % MRn. % US$ $ Agricultuire 1,49L 32.2 7.0 5-2.9 213 61.0 Industry 1,228 26.4 2.0 15.2 6i14 175.9 Services 1,922 41.4 4.0 31.6 481 137.8 Unallocated . . 0.3 0.2 4,644 100.0 13.5 100.0 3349 100.0 GOVERRNImENT FINANCE General Government Central Government Mln.) % of GDP (Pesos Mln.) % of GDP 197 197 196 -7 1973 1971 1972 1973 Current Receipts .. .. .. 6,989 8.9 8.3 9.8 Current Expenditure .. .. .. 5.995 8.0 7.6 5.4 Current Surplus .. .. .. 994 0.9 0.7 177 Capital Expenditures .. .. .. 1,444 5/ 0.5 1.6 s/ 2.0 External Assistance (net) .. .. .. 249 .. 0.7 .4 MONEY. CPRDIT and PRICES 1965 1969 1970 1971 1972 1973 (Million pesos outstanding end period) Money and Quasi Money 5.136 8,959 10o140 11,720 13,2L3 16,837 Bank credit to Public Sector 950 3,565 3,479 5,907 14.778 6,541 Bank credit to Private Sector 8,223 13,139 15,396 18,010 22,392 25,377 (Percentages or Index Numbers) Mioney and Quasi Money as % of GDP 21.1 27.0 25.0 23.2 23.5 25.5 General Price Index (1965=lo) 100.0 111.4 1357.7 159.3 175.3 218.4 Annual percentage changes in: General Price Index 2.2 1.5 23.6 15.7 10.0 24.6 Bank credit to Public Sector .. 27.9 -2.4 12.3 22.3 56.9 Bank credit to Private Sector .. 9.0 17.2 17.0 27.0 10.9 1 No projections are provided in this annex since existing projections are being revised in tbe light of higher oil prices by the economic mission. 2 Constant 1967 prices. 3/ Total labor force; unemployed are allccated to sector of their normal occupation. "Unallocated" consists mainly of unemployed workers seeking their first job. 4/ Based on "actual' figures from the "Cash Budget". Data prior to 1971 not available. 5/ Counterpart funds from external commodity aid. I/ Economic mission estimates. 77 Covers credits from all important financial institutions. not available not applicable  ANNEX I Page 3 of 3 pages TRADE PAYMENTS AND CAPITAL FLOWS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1971-73) US$ Mln. 1971 1972 1973 (Million us$) Coconut Products 284.7 21.5 Sugar Products 244.3 18.4 Exports of Goods, NFS 1,397 1,432 2,443 Forest Products 314.3 23.7 Imports of Goods, NFS 1,422 1,484 2,008 Mineral Products 254.0 19.2 Resource Gap (deficit = -) -25 -52 +435 Fruits and other 87.7 6.6 agricultural products Interest Payments (net) -76 -92 -53 Other manufactures 140.7 io.6 Workers' Remittances Total 1,525.7 100.0 Other Factor Payments (net) -24 -33 -60 Net transfers 134 188 234 EXTERNAL DEBT, DECEMBER 31, 1973 6/ Balance on Current Account +9 EXT A D55EM uS$ Mln Direct Foreign Investment -4 -22 77 Net MLT Borrowing Public Debt, incl. guaranteed 829.9 Disbarsements 338 590 377 Non-Guaranteed Private Debt l,O4l.0 Amortization 502 250 335 Total outstanding and Subtotal ; 75 42 disbursed 1,870.9 Capital Grants Other Caoital (net)21 134 15 -43 Other items n.e.l. 144 -106 -38 DEBT SERVICE RATIO FOR 1973 5 Increase in Reserves (+) X +31 TT +594 Gross Reserves (end year 4 524 755 1,416 Public Debt, incl. guaranteed 7.9 Net Reserves (end year) -20 80 753 Non-guaranteed Private Debt 10.4 Int. Reserves (end year) 244 282 876 Total outstanding and disbursed 18.3 Fuel and Related Materials IBRD/IDA LENDING, (May 31, 1974 (Million US$) Imports of Goods, NFS 1,422 1,514 2,008 of which: Petroleum 141 147 184 Outstanding and Disbursed 154.1 3.2 RATE OF EXCIHANGE Undisbursed 141.9 19.5 Outstanding incl. 1965-69 1970-71 Undisbursed 296.0 22.7 us $ 1.00 = Ps. 3.92 6.43 Ps. 1.00 - US $ 0.26 0.16 Since April 1972 us $ l.oo = Ps. 6.78 1.00 = US $ 0.15 j Includes SDR's, short-term private loans, Central Bank liabilities and use of IMF credit. j Errors and omissions. 3/ Includes net commercial bank holdings plus foreign exchange holdings of Central Bank and monetary gold. This entry is equivalent to the change in international reserves. I/ Includes Central Bank and commercial bank reserves. 5/ Gross reserves of Central Bank plus net reserves of commercial banks. t Excludes short-term debt and IMF standby credit and is on a disbursement basis. 7 Ratio of Debt Service to Exports of Goods and Non-Factor Services. not available not applicable   ANNEX II Page 1 of 6 pages PHILIPPINES POPUIATION PROJECT THE STATUS OF BANK GROUP OPERATIONS A. Statement of Bank Loans and IDA Credits to the Philippines as of May. 31.3 1974 1 Loan or (Us$ millions) Credit Amount less Cancellations, Number Year Borrower Purpose Bank IDA Undisbursed 11 loans fully disbursed 168.5 607-PH 1969 Central Bank of Agricultural Credit 12.5 0.9 the Philippines 637-PH 1969 Republic of the Irrigation 34.0 10-.-9 Philippines 720-PH 1971 Republic of the Rice Processing 114.3 13.6 Philippines and Storage 731-PH 1971 - - First Highway 8.0 3.3 809-PH 1972 National Power Power 22.(O 21.7. Corporation 296-PH 1972 Republic of the Power - 10.0 6.e Philippines 823-PH 1972 - It - Livestock 7.5 6.7 349-PH 1973 - " - Second Educatibon 12.7 12.7 891-PH 1973. - - Fisheries 11.6 11. 939-PH 1973 - - Ports 6.1 6.1 950-PH 1973 - - Second Highway 68.0 67.1 352.-5 22.7 l6, .4 of which has been repai4 (Bank and 3rd Parties) 56-5 - Total now outstanding 296.o 22.7 Amount sold 13.2 of Vwhich has been repaid (3rd parties) 12.1 1.1 - Total now held by Bank and IDA (prior to exchange rate adjustments't 294.9 22.7 Total undi.sbursed 1141.9 1'9. 161.4 1/ A loan of $9.5 million and a credit of $9.5 million for the Penaranda- Aurora Irrigation project, a lcan of $50 million for an Indl?stria.1 Investmpent acnd Srna3lholder Tree-farmers Prz.ioct and a nhan of S,22 rnillirn for a Th-rd Rural Credit Project were approved and signed subsequent to the above da-te of Statement A. They are not yi't effective.  ANNEX II Page 2 of 6 pages B. Statement of IFC Investments in the Philippines as of May 31, 1974 - Fiscal Year Company (Amount US$ million) Loan Equity Total 1963 & 1973 Private Development Corporation of the Philippines 15.0 4.4 19.4 1967 Manila Electric Company 8.0 - 8.0 1967 Meralco Securities Corporation - 4.0 4.0 1970 Philippine Long Distance Telephone Company 4.5 - 4.5 1970 & 1972 Mariwasa Manufacturing Inc. 0.8 0.4 1.2 1970 Paper Industries Corporation of the Philippines - 2.2 2.2 1971 Philippine Petroleum Corporation 6.2 1.8 8.0 1972 Marinduque Mining and Industrial Corporation 15. - 15.0 1973 Victorias Chemical Corporation 1.9 0.3 2.2 1974 Filipinos Synthetic Fiber Corporation 1.5 - 1.5 1974 Maria ChristinaChemicals 1.5 .5 2.0 Total 54: 13.6 68.o Less sold, acquired by others, repaid or cancelled 13.3 7.1 20.4 Now held h1.1 6.5 47.6 Undisbursed 11.2 1.4 12.6 1/ Loan Investment of $1.2 million in Republic Flour Mills Corporation for a Meat Processing Project was appro-ved by the Board on April 23. The loan agreement has not yet been signed.  ANNEX II Page 3 of o pages C. ProJects in Execution -/ Ln. No. 607-PH Second Rural Credit; US$12.5 million Loan of June 4, 1969; Closing Date: June 30, 1974 The slow progress of the project at the beginning was mainly due to the steep rise in the prices of farm machinery after the peso was allowed to float in February 1970. The subsequent increases in prices of farm produce together with decentralization of loan approvals, strengthen- ing of staff and promotional efforts have helped improve the pace of disbursement. This has particularly quickened over the last nine months. The Closing Date, originally March 31, 1973, has been postponed to June 30, 1974. As of March 25, 1974, a balance of only $42,450 remained uncommitted. Ln. No. 637-PH Irrigation; US$34.0 million Loan of August 18, 1969; Closing Date: June 30, 1976 This is the first major irrigation project in the Philippines and will supply water year-round to nearly 77,000 hectares. The project's on-farm development scheme is setting a pattern for future irrigation development in the country. Some delays were caused by the 1972 floods but construction of the dam is now progressing ahead of schedule. All work is expected to be completed and the loan fully disbursed by June 30, 1976, the original completion date. Project costs have increased 34 percent over appraisal estimates largely due to inflation, devaluation of the peso and design changes in the dam. However, as a result of close coordination established between irrigation and agricultural supporting services, the project is expected to reach full development in 7 years after completion of construction instead of 13 years as appraised. The project remains economically viable. Ln. No. 720-PH Rice Processing and Storage; US$14.3 million Loan of February 4. 1974; Closing Date: June 30, 1975 This project provides long-term credit through the Developmnt Bink of the Philippines to finance a program for the development and modernization of the private sector of the rice processing industry. It included six large integrated processing plants to produce the high quality rice required for the anticipated exportable surplus, which did not materialize owing to set- backs in rice production. The President's memorandum to the Executive 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evalua- tion of strengths and weaknesses in project execution.  ANNEX II Page 4 of 6 pages Directors dated June 8, 1972 (R72-L0) proposed amendments te the loan agreement to shift the emphasis to rehabilitation of existing facilities and to streamline procurement procedures. In spite of this the project has made very little progress and by the end of February 1974, only US$0.5 million had been disbursed. During the critical shortage of rice last year the Government successfully encouraged an increase in maize production, and the ccnsumption of maize mixed with rice. This has led to a demand for maize processing, storage and handling facilities, and Government has proposed the project be expanded to include grains other than rice. Much of the new demand will come from public entities and small individuals, so that Government has proposed they also be included, and that the minimum size of sub-loan be reduced to cover the smaller processors. These amendments, designed to widen the project's objectives, to cover the changed conditions and to facilitate speedy and full implementation, were presented to the Executive Directors in the President's Memorandum dated April 15, 1974 (Sec M74-244). The Executive Directors approved the proposals and the Loan Agreement has been amended accordingly. Ln No 731-PH Highway; US $8.0 million Loan of April -1., 1971; Closing Date: May 15, 1975 The project for the construction and improvement of the Cotabato- Digos road (160 km) in Mindanao is in general progressing satisfactorily. Work was suspended in March 1973 because of civil disturbances in the Cot'abato area, but the contractor has since resumed work from the Digos end which is outside the area affected by the fighting. The project also includes two components financed by UNDP: technical assistance to the Bureau of Public Highways (BPH) for operational improvements and feasibility studies for future highway projects. Work on the technical assistance component is progressing well and the feasibility studies have been completed. Ln No 809-PH and Fifth Power; US $22.0 million and US $10.0 million loan Cr No 296-PH and Credit of April 3, 1972; Closing date: June 30, 1978 The project is helping the National Power Corporation (NPC) to finance the construction of a second thermal unit of 150-MW at Bataan and transmission facilities in Luzon. The project is behind schedule because procmrement has taken longer than expected. The Closing Date has been postponed to June 30, 1978 to allow time for delayed procurement and because retention monies will not be paid to the major equipment supplier until at least one year after the plant is commissioned. A tariff increase was imposed in January 1973 because of rapid domestic inflation. The situation has also been improved by the imposition in July 1973 of a surcharge to cover increased fuel costs. A further tariff increase has been approved, effective July 1, 1974 and this should enable NPC to achieve its covenanted rate of return in FY 7h,75.  ANNEX II Page 5 of 6 pages Ln No 823-PH Livestock; US $7.5 million Loan of May 25, 1972; Closing Date: December 31, 1978 The project is assisting Government in carrying out its livestock development program through credit supervised by the Development Bank of the Philippines. The project is progressing satisfactorily. Cr. No 349-PH Second Education; US $12.7 million; Credit of January 5, 1973; Closing Date: December 31, 1976 The project will assist Government to improve such areas as education, planning, management and curriculum devel3pment, science teacher training, and training of technicians, skilled craftsmen and farmers. Although no disbursements have been made, the project is progressing on schedule. Ln No 891-PH Fisheries; US $11.6 million Loan of May 21, 1973; Closing Date: June 30, 1979 This project is designed to provide long term credit to the private sector through the Development Bank of the Philippines for marine and inland fisheries development. The loan became effective on December 5, 1973. The demand for loans appears adequate and the organization to implement them has been properly established. The project is progressing satisfactorily. Ln No 939-PH Second Ports; US $6.1 million Loan of October 24,1973; Closing Date: December 31, 1977 This project provides for the rehabilitation and expansion of the ports of General Santos and Cagayan de Oro in the island of Min anao. The loan became effective on December 19, 1973. The project is progressing satisfactorily. Ln No 950-PH Second Highway; US $68.0 million Loan of December 12, 1973; Closing Date: December 31, 1977 The project is helping the Government to implement its program of construction, improvement and rehabilitation of its highways and feeder roads. The loan became effective on December 27, 1973. The signing of the Project Documents for the UNDP financed Road Feasbility Studies (Phase II), included in this project was completed on March 22, 1974 by the Government, UNDP, and the Bank as Executing Agency. The project is progressing satisfactorily.  ANNEX II page 6 of 6 pages Cr No 472-PH Irrigation; US $9.5 million; Credit of May 1h, 1974 Closing Date: June 30, 1979 Ln No 984-PH Irrigation; US $9.5 million; Loan of May 14, 197h Closing Date:June 30, 1979 The project will assist the Government to rehabilitate and open up 25,300 hectares of land in Central Luzon to year round irrigation for rice growing. It also provides for a study of irrigation development in Central Luzon. The Credit and Loan Agreements were signed on May 14, 197h. They have not yet become effective.  ANNEX III Page 1 PHILIPPINES POPULATION PROJECT LOAN AND PR0JFCT SUMMARY _orrower: The Republic of the Philippines Amount: US$25.0 million equivalent Terms: The loan would be for a term of 25 years including a grace period of 5 years, and at an interest rate of 7-1/4 percent per annum. Project Descri-ption: A loan of US$25.0 million is proposed to finance 50 percent of the costs of a population project over the next five years. The project is an integrated package designed to assist the hroad program objec- tives of the population program and to strengthen the health and family planning delivery system of the Department of Health. It consists of two main components. The first supports a number of activi- ties of the Popul-ation Commission (Information- Education-Communication, Training and strengthening the Regional. Offices of the POPCOM), while the second supports the Department of Hiealth, mainly through the construction and equipping of 11 trainin,, centers and 205 rtural health units through which health and family planning services would be delivered to tlhe poTutlation. Estimated Cost: US$50.0 million equivalent of which US$34.6 million is expected to he local currency and US$15.4 million foreign exchange.  ANNEX III Page 2 ProFect Cost by Purpose of Expenditures (USS million) Local Foreign Total Items Financed with IBRD Participation Program Administration - 0.1 0.1 Delivery of Family Planning Services 26.9 10.7 37.6 Training 6.2 4.0 10.2 Hlealth Statistics 0.3 0.2 0.5 Evaluation and Research 0.2 0.3 0.5 Project Constrtction Unit 0.1 - 0.1 Subtotal 33.7 15.3 49.0 Iters Financed with ITUNFPA ParticiDation Information, Education and Communication 0.4 0.1 0.5 Subtotal 0.4 0.1 0.5 Items Financed with USAID Parti cipat ion Training 0.2 - 0.2 Program Administration 0.3 - 0.3 Subtotal 0.5 - 0.5 Total. Project Cost 34.6 15.4 50.0 Financing Plan IBRD 9.7 15.3 25.0 TN FPA 0.3 0.1 0.4 USAID 0.5 - 0.5 Government 24.1 - 24.1 Total. 34.6 15.4 50.0 Estimated Disbursements: Calendar Year US$ million 1974 0.35 1975 2.04 1976 8.46 1977 18.36 1978 23.38 1979 25.00  ANNEX III Page 3 Procurement: As far as practicable, all contracts will be packaged in amounts of more than $70,000 equivalent. Contracts of $70,000 equivalent and above will be awarded on the basis of international competitive bidding. For contracts of less than $70,000, the Government may use its normal methods of procurement, provided that the total of such contracts does not exceed the equivalent of $200,000. Domestic manufac- turers of furniture, equipment and vehicles including spare parts) will be accorded a margin of preference equal to 15 percent in comparison with other bids. Retroactive financing is recommended for up to US$350,000 for certain expenditures incurred after May 1, 1974. Consultants: Consultants will be appointed shortly for construc- tion supervision and construction management. The project includes 48 man months of technical assistance to the DOH: 12 man months for the organization of training; 12 man months for the development of the mid-wife/community health training programs; 6 man months for logistics and distribution of medi- cation and supplies for RHUs; and 6 man months for the health statistics office. The project would also include 9 man months of technical assistance to the IEC Division of POPCOM. Consultants would also be employed to carry out facilities evaluation study of project facilities and programs. Appraisal Report: Report No. 333 PH dated May 22, 1974, Population and Nutrition Projects Department   IBRD 10813- I 18. I1O.2 124~ ~6 DECEMBER 1973 CLASSIFICATION OF PROVINCES ,-? PHILIPPINES CITY OF MANILA 35. AKLAN ABRA 6.ATIU 99POPULATION PROJECT 2. ALCBR NRT 37. ILOILO 18- 2 ~ LCOS ORTE 38. CAPIZ 1 4. LAC UNOUR 39. NEGROS OCCIDENTAL 4. LAOUNTION PRVNE 4. OBO ------PROVINCIAL BOUNDARIES S. MOUNTAIN PROVINCE 40. ROMBLON Aparri1, REGIONAL HEALTH BOUNDARIES 6. BENGUET I I REINLTANN ETR 7. IFUGAO 41. BOHOL 10 EINLTRNN ETR 6. KALINGA-APAYAO 42. CEBUA 43. NORTHERN LEYTE 9. BATANES 44.SOUTHERN LEYTE 10. CAGAYAN 45. EASTERN SAMAR NT:SETX O OAINO 12. NUEVA VIZCAYA 47. NORTHERN SAMAR ~~~~NTE:SE TET OR OCTIO O 11. ISABELA 46. NEGROS ORIENTAL RURAL HEALTH UNITS 49. WESTERN SAMAR 3 13. BATAAN 7 14. RULACAN Son Fe,n.,1d 15. NUEVA ECIJA 49. AGUSAN DEL NORTE J 6. 16'1 6 PAMPANGA SO. EUKIDNON OeM 17. PANGASINAN 51. LANAO IDEL NORTE (~~ 68. TARLAC 52. LANAO DEL SUR 19. ZAMBALES 53. MISAMIS OCCIDENTAL- 7,0 0 10 5 0 54. MISAMIS ORIENTAL 17____IL__________200___ 20, BATANGAS 55. SURIGAD DEL NORTE 2MILES 21. CAVITE ~56. SURIGAO DEL SUR ' S 22. LAGUNA DELSUR ~ ~ IIT 5 0 50 00 50 200 22. LAGUNA 57. AGUSAN DEL OUR N1 V ~~~~~~~~~~~~~~~~~~KILOMETERS 23. MARINDUQUE 68. CAMIGUIN 24. MINDORO OCCIDENTAL 1~ 25. MINDORO ORIENTAL 1 26. PALAWAN59. COTABATO 13A oOoeInCI 27. OUEZON 60. DAVAO DEL NORTE MANLAO-A-(Z -1-28 RIZAL 61. ZAMBOANGA DEL NORTE Pa lf c 14- 29. ABY62 ZAMBOANGA DEL OUR 29. ALBAY ~~~~63. SULU 22 30 30. CAMARINES NORTE 6.CTBT E U .- 64. COTABATO DEL SUR~Ocea 31. CAMARINESSUR 65. DAVAGODEL SUR 32ea 32. CATNDUANES 66. DAVAO ORIENTAL /N 33. MASBATE 31 34. SORSOGON L - ~~~~~~~29 ~24 IN -- .. ~~~34 S5ou/h C2I'n a 40-- ~1 6 G ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~4 39~~~~~~~~~~ 36 37 39 AoC.ba 2l 6 *0 Pue,to P-iceso 46~~~~~~~~~~~~~~~9 5 -' ~~~~~~~~~~~Su/u Sea 5 (-12 ?