Philippines - Second Population Project

Document of The World Bank FILE FOR OFFICIAL USE ONLY Report No. P-2559-PH REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF THE PHILIPPINES FOR A SECOND POPULATION PROJECT May 21, 1979 This docunent has a restricted distribution and may be used by reciPients only in the performance of their official duties. Its contents may not otherwise be disblsed without World BDk authorization.  CURRENCY EQUIVALENTS US$1.0 5 P 7.40 P 1.00 - US$0.135 P 1 million = US$135,135 P 1 billion - US$135 million .ABBREVIATIONS IEC - Information, Education and Communication MIS - Management Information System MOH - Ministry of Health POPCOM - Commission on Population RHCDS - Restructured Health Care Delivery System UNFPA - United Nations Fund for Population Activities USAID - United States Agency for International Development WHO - World Health Organization FISCAL YEARS July 1-June 30 (up to June 30, 1975) July 1-December 31, 1975 (interim) January 1-December 31 (from January 1, 1976)  FOR OFFICIAL USE ONLY PHILIPPINES SECOND POPULATION PROJECT Credit and Prolect Summary Borrower: Republic of the Philippines Amount: $40 million equivalent Terms: Standard IDA terms Project Description: The project is designed to assist the Philippines to reduce fertility levels over the next five years and, at the same time, decrease infant mortality and malnutrition among children and improve the health status of semi-urban and rural populations. The major components are aimed at assisting: (i) the Population Commission to improve and extend its programs to motivate family planning acceptance and to provide population training, and (ii) the Ministry of Health to improve and expand health and family planning services. The principal beneficiaries of the project will be lower income persons, mostly in rural areas, who, because of financial constraints, must depend upon the public sector for family planning and primary health care services. It is estimated that an additional 3.3 million persons will be provided with primary health care coverage, and another 3 million persons would have access to services from new health facilities. Social programs of this kind are by nature difficult to implement effectively. The major risks involved in this project relate to the capability of the Government to strengthen the Commission on Population and the Ministry of Health to enable them to provide the strong, consistent support that will be necessary for the full success of the National Population Program. The Government is in the process of upgrading the quality of these institutions and the project provides for further institutional reform, technical assistance and training, which should contribute significantly to the improved implementation of the national population and health pro- grams. Another risk is related to the community participa- tion approach in two components of the project - barangay health station construction and primary health care. This risk is offset by the potential benefits of increased community outreach and possibilities for cost-effective services. This docurment 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.  -2- Estimated Local Foreign Total Cost: --- $ million Expansion of service infrastructure 15.8 6.9 22.7 Training 10.2 1.0 11.1 Information, education & communication 8.1 8.5 16.6 Management information system 0.6 1.9 2.5 Research activities 3.5 0.7 4.1 Innovative activities 1.0 1.0 2.0 Total base cost 39.2 20.0 59.2 Contingencies: physical 1.2 0.5 1.7 price 7.4 3.7 11.1 Subtotal 8.6 4.2 12.8 Total Cost 47.8 24.2 72.0 Financing Source Local Foreign Total Plan: --- $ million ---- The Government 32.0 - 32.0 IDA 15.8 24.2 40.0 Total 47.8 24.2 72.0 Estimated Disbursements: FY: 1981 1982 1983 1984 1985 -------- million) --------- Annual 9.0 8.9 10.8 6.3 5.0 Cumulative 9.0 17.9 28.7 35.0 40.0 Rate of Return: Not applicable Staff Appraisal Report: No. 2453-PH dated May 11, 1979.  REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF THE PHILIPPPINES FOR A SECOND POPULATION PROJECT _ 1. I submit the following report and recommendation on a proposed development credit to the Republic of the Philippines for the equivalent of $40 million on standard IDA terms to help finance a second population project. The United Nations International Children's Educational Fund has agreed to provide a grant of $200,000 to support local costs of organizing communities to use and supervise primary health care services. PART I - THE ECONOMY /1 2. An economic mission visited the Philippines in July/August 1977 and its report, "The Philippines: Country Economic Memorandum" (No. 1765-PH of October 26, 1977), was distributed to the Executive Directors under PHL-77-2, dated October 27, 1977. An updating economic mission is currently in the field. A basic economic report, entitled The Philippines: Priorities and Prospects for Development (Sec1-76/366), was previously distributed to the Executive Directors on May 18, 1976. Macroeconomic Performance 3. During the 1960s, the Philippine economy grew in real terms at an annual rate of about 5-1/2%, but with more effective economic management the rate of growth could have been higher. The pattern of growth was also structurally unsatisfactory in a number of respects. The benefits of develop- ment were distributed relatively unevenly, with respect to both regions and income classes. While overall agricultural growth was reasonably satisfactory, repeated foodgrain deficits were experienced. The growth of productive employment opportunities failed to keep pace with the expansion of the labor force. Low levels of taxation resulted in inadequate public expenditure for necessary infrastructure and social services. Finally, poor export performance combined with heavy import dependence of domestic industry led to chronic weakness in the balance of payments. 4. During the 1970s there have been significant improvements in economic management. Public revenues have been increased substantially, public sector implementation capacity has been strengthened, and the ratio of public investment to GNP raised from 2% in the early 1970s to 5% in 1976-78. Private investment also increased, and the ratio of total fixed investment to GNP rose from 16% in the early 1970s to 25% in 1976-78. As a consequence of /1 This section of the report is substantially the same as that contained in the President's Report for the Second Provincial Cities Water Supply Project (R79-114), which will be considered by the Executive Directors on May 29, 1979.  - 2 - higher levels of investment the construction industry boomed. Agriculture has performed well in response to the spread of irrigation and higher yielding rice varieties, more favorable price policies, and some improvements in supporting services. Selective steps were taken to promote nontraditional manufactured exports, which have grown rapidly. On the other hand, the performance of that part of the manufacturing sector oriented to the domestic market has remained only "fair" in a comparative sense and has been inadequate in relation to the Philippines' need to generate productive employment opportunities. The net effect of the above developments has been acceleration in the trend GNP growth rate by one percentage point to 6-1/2%. 5. An important constraint has been placed on Philippine development options by the sharp deterioration of its terms of trade since 1975, stemming from the increase in oil prices and depressed prices for major Philippine commodity exports such as sugar and copper. As a result, real national income has been growing more slowly than real national product, and with the higher level of investment the dependence of the economy on foreign savings has increased. Although the terms of trade have recently stabilized, the current account deficit is still about 4% of GNP. Development Strategy 6. The Government's development objectives and policies, which were set out in a Five-Year Development Plan for the period 1978-82, call for further acceleration of economic growth, first to 7% and then to 8%. The development strategy focuses on an expansion of productive employment oppor- tunities at a rate of 3.6% per annum, reduction of income disparities, greater self-sufficiency in food and energy, a strengthening of the balance of payments, and increased development of rural areas. In addition, the Plan includes growth strategies for each of the country's thirteen regions. In general, the Plan is an elaboration of the policy directions pursued by the Government in recent years. It is also broadly consistent with the Bank's assessment of priorities, although Plan projections for investment, manufacturing output and exports are somewhat higher than Bank staff estimates. It should, however, be feasible to accelerate the overall growth rate to 7%, but more rapid expansion of manufacturing is necessary to do so, and the efficiency of investment also needs to be improved. Agriculture and Rural Development 7. In recent years the trend growth rate of the agricultural sector has been slightly over 4%, which by international standards is quite good. However, variations among subsectors have been considerable. Due to the spread of irrigation and high yielding varieties, irrigated rice production has increased rapidly. The Philippines, once a chronic importer of rice, actually exported 100,000 tons of rice in 1977/78. With completion of large irrigation projects now under implementation, continued rice self-sufficiency appears assured for the 1980s. On the other hand, locally adapted technologies for improving yields of rainfed grains, particularly corn, are still under development, and rainfed agricultural areas have a high incidence of poverty. Productivity in the coconut sector is relatively low because of a large number of overaged trees, but a major replanting program is scheduled for the early 1980s when a sufficient number of HYV seedlings becomes available. Increasing  - 3 - pressure of population on the land and inadequately controlled commercial logging have led to soil erosion and deterioration of some forest areas. The Plan calls for a major reforestation effort, but this will require substantial upgrading of Government administrative capabilities in this area, develop- ment of new hill cropping technologies, and resolution of difficult land tenure problems. 8. As well as providing greater support for agricultural production, the Government has substantially expanded programs such as water supply, electrification, rural roads, and health to improve living conditions in rural areas. An agrarian reform was also instituted in 1972 which provided for transfer of tenanted holdings of rice and corn land in excess of seven hectares and enforcement of leasehold instead of sharecropping on remaining tenanted holdings. As of March 1978, only about 10% of the estimated number of land transfer beneficiaries had completed all formalities, but about 60% had received Certificates of Land Transfer (the initial step in the process establishing their claim to the land). Industry 9. Manufacturing has grown at an average rate of about 6-1/2% during the 1970s. The greater part of the sector, oriented to the domestic market, has been promoted by high tariff protection and an incentive system which has favored the use of relatively capital-intensive production techniques. Relatively little employment has been generated in relation to Philippine factor endowments. Macro statistics such as the incremental capital-output ratio suggest that the efficiency of investment has been low, and most manufacturing plants have located in the greater Manila area. Reform of tariffs and other industrial incentives to bring these into line with develop- ment objectives are presently being considered by the Government. 10. Beginning in 1970, selective measures have been introduced to promote nontraditional manufactured exports, including permitting firms in selected export industries to import needed goods free of duty and establishing export processing zones. Entrepreneurs have responded to these opportunities, and receipts from nontraditional manufactured exports increased from $116 million in 1972 to more than $1.0 billion in 1978. Employment 11. Employment increased by about 4.6% annually during 1973-77, a considerable improvement over the historical growth rate of 2.4%, and was able to keep pace with the rapid growth of the labor force. With the exhaustion of most new land resources suitable for cultivation and the exploitation of the most easily irrigable areas, industry will have to provide employment for about one half of the new entrants to the labor force in the next decade. Employment in manufacturing essentially stagnated during 1970-74, but grew by 7% annually during 1975/77, resulting in part from the growth of labor-intensive production for export. However, because manufacturing's share of total employment is small, agriculture and services still continue to function as residual sources of employment and accounted for most of the increase in total employment.  - 4 - 12. For historical reasons, income distribution has been highly skewed in the Philippines, and there is a small elite which is conspicuously wealthy. Recent trends in income distribution are mixed but, on balance, positive. Because of the improvement in agriculture's terms of trade, the growth of agricultural production, the decline in urban real wages following the devaluation in 1970, and the stagnation of industrial employment until 1975, the ratio of the average rural income to the average urban income rose from 0.48 in 1971 to 0.57 in 1975. Real per capita consumption has increased by about 2% annually. Hence, real incomes in rural areas, where most of the poor live, have probably increased somewhat, while real urban incomes have not improved substantially. As a result, although accurate statistics are not available, the share of family income received by the poorest 40% of families appears to have increased somewhat, the income share of the top 20% has remained about the same, and that of the middle-income families has declined correspondingly. Nevertheless, the incidence of poverty remains high, at 40-45%, in both rural and urban areas, and malnutrition is wide- spread. Public Finance 13. The public sector has historically claimed a much smaller share of national resources in the Philippines than in many other developing countries. In the early 1970s, general government expenditure averaged only 12% of GNP, public investment was strikingly low at about 2% of GNP, and tax revenues stood at 11% of GNP. Government expenditures were dominated by general administration and social services, particularly education. This situation had resulted from a variety of factors including difficulties in raising tax revenue and weak implementation capacity in the public sector. Since the early 1970s, the Government has taken steps to correct the situation and has raised both the overall level of expenditures and the shares going to economic services and public investment. By 1978 government expenditures reached an estimated 16% of GNP, and public investment, which has risen rapidly in the last three years, equaled about 5% of GNP. This expansion in the public investment program has brought about badly needed improvement in basic infra- structure particularly in transportation, power and irrigation, as well as the development of more effective programs in the fields of urban development, health and family planning. 14. Recognizing that a large increase in tax revenues would be required to finance expansion of the public investment program, the Government has undertaken a comprehensive program of tax reform to raise the needed revenues equitably and efficiently. Despite a sharp cyclical decline in the yield of export taxes and import duties, the overall tax ratio was raised by more than two percentage points through a series of new, mainly indirect, tax measures and vigorous efforts to improve taxpayer compliance and collection performance. Moreover, import tariff exemptions were reduced and the financial position of certain public enterprises was improved through selective price increases. However, further reform measures will be needed to improve the equity of the tax system and to strengthen its responsiveness to the growth in GNP, mainly by increasing the proportion of revenues coming from direct taxes. In addition, fiscal and tariff incentives will need to be rationalized further to eliminate remaining biases favoring import substitution and capital  -5- intensity. Continued effort will be needed to ensure that Government corporations finance an appropriate share of their investments from their own savings. Private Savings and the Financial Sector 15. Aggregate savings performance has improved during the last decade and is comparable to that of other countries at a similar stage of economic development. Gross domestic savings now finance about 85% of total investment, with the balance coming from foreign savings. In order to increase the efficiency of financial markets in intermediating between savers and investors, the Government has made significant improvements in financial policy. Organized banking institutions have been strengthened. Interest rates were realigned in 1976 and, again, in 1977 to encourage a greater flow of financial savings into time and savings deposits relative to short-term deposit substitutes and to reduce the spread between borrowing and lending rates. Further reforms are required to increase the availability of long-term domestic currency resources. Special credit programs have been adopted to expand lending to the credit-short agricultural sector and rural areas and to serve the needs of medium- and small-scale industries. A deterioration of loan recovery rates was experienced by all government financial institutions and credit programs. The Government has already taken a number of steps to improve collections; further efforts in this direction are necessary to improve financial discipline and ensure an adequate flow of credit to the productive sectors without burdening the public finances. External Trade and Capital Flows 16. To meet the acute balance of payments problem in 1975, which largely resulted from the decline in terms of trade, the Government drew down its international reserves, drew upon various IMF facilities, and expanded its borrowing program to finance necessary imports. For the longer term, the Government adopted a strategy of accelerating export growth both to hold the current account deficit about constant in absolute terms, while letting it decline gradually relative to GNP, and to meet the debt service payments on the higher level of external borrowing. 17. In spite of a further deterioration in the terms of trade since 1975, the current account deficit has behaved as anticipated over the last three years - averaging $1.0 billion per year but declining from 6% of GNP in 1976 to an estimated 4% in 1978. Export volume, although constrained in 1978 by the depressed sugar market, increased substantially over the three-year period as a whole. Import payments, after growing slowly in 1976 and 1977, accelerated with the recovery of private investments in 1978. To finance the current account deficits, net capital inflows were nearly doubled from the 1975 level of $580 million to an average of $1.1 billion per year in 1976-78. Most of the inflow came from medium- and long-term loans. About two thirds of this was from public loans, a reflection in part of increased disbursements from official sources. As a result of increased borrowing, the debt service ratio has risen from 16% in 1975 to 20% in 1978. 18. To achieve a 7% growth rate in real GNP, as projected for the initial years of the Plan period (1978-82), import volume will have to grow at a similar rate, and a net capital inflow of at least $1 billion per year  - 6 - will be required. However, the commencement of oil production, which now accounts for 15% of domestic consumption, early this year promises some longer term relief on the import side. Assuming a continued effort to promote exports and sound debt management, the overall external debt of the Philippines is expected to remain within reasonable limits. The ratio of debt service payments to exports of goods and nonfactor services is expected to average around 21%, of which half would be public debt service, during the Plan period and to decline thereafter. 19. In order to ensure that the long-term capital transfer is commensu- rate with the level of development expenditures required during 1978-82 and that debt service obligations remain within reasonable limits, the Government sought commitments of official assistance of $850-900 million in 1979 at the last meeting of the Consultative Group for the Philippines, held in Paris in November/December of 1978. This amount is likely to be made available. However, since many of the projects planned for financing from external sources have a low foreign exchange component, some local cost financing is necessary, in appropriate cases, to meet the Philippines' external financing requirements. PART II - WORLD BANK OPERATIONS /1 20. As of April 30, 1979, the Philippines had received 61 Bank loans /2 (of which two were on Third Window terms) amounting to $1,929.9 million and four IDA credits amounting to $60.2 million. At that date, IFC investments totalled $88.4 million. The share of the Bank Group in total debt disbursed and outstanding is about 11% and its share in total debt service is about 5%. These ratios are expected to be about 12% and 5%, respectively, by the end of the present decade. Annex II contains a summary of IDA credits, Bank loans and IFC investments as of April 30, 1979, as well as notes on the execution of ongoing projects. 21. The Bank Group has financed projects in virtually all sectors of the economy with particular emphasis on agriculture and basic infrastructure, which have each accounted for about one-third of total Bank Group lending. In agriculture, emphasis has been given to expanding the irrigation system to /1 This section is substantially the same as that contained in the President's Report for the Second Provincial Cities Water Supply Project (R79-114) which will be considered by the Executive Directors on May 29, 1979. /2 Includes Loan 1661-PH, Fourth Highway Project, $100 million, which was signed on March 9, 1979, and is not yet effective. Does not include the Second Provincial Cities Water Supply Project, $22 million IDA, $16 million IBRD which will be considered by the Executive Directors on May 29, 1979.  - 7 - increase food production and to credit programs to support foodgrain produc- tion and processing and livestock, fisheries and tree farming production. Support has also been provided for integrated rural development projects in low income areas. The Bank Group has also provided large amounts of assistance in developing power and transportation to provide the basis for future growth of the productive sectors. Substantial improvement in basic infrastructure has been needed to compensate for many years of past neglect due to low levels of public expenditure. In the industrial sector, the Bank's main thrust has been on strengthening the capacity of public and private development finance institutions with increasing attention given to meeting the needs of small and medium industries. In the social sectors, the Bank Group has provided support for education programs designed to improve the quality of primary and secondary education and to meet trained manpower requirements in agriculture and industry. In urban areas, assistance has been provided for water supply projects and for programs to upgrade slum living conditions and to develop low-cost sites and services. Support has also been provided to the Philippines' population program through assistance for the development of rural health services and for training of family planning staff. 22. There has been a marked improvement in the execution of Bank- financed projects in the last five years compared with the experience in the late 1960s, when there were serious problems caused by a shortage of peso counterpart funds and weak administration. Almost all ongoing projects are now being implemented reasonably well and the supervision and project comple- tion reports indicate that the economic benefits for most projects are likely to be in line with appraisal estimates. However, the overall rate of disburse- ment is marginally below what would be expected given the generally good project implementation, and the Government is currently reviewing disbursement performance on an agency-by-agency basis to identify possible reasons for disbursement lags and to find appropriate solutions. 23. As noted in Part I of this report, the Government's Five-Year Development Plan highlights a strategy which focuses on the expansion of production and employment in agriculture and industry, reduction in income disparities, greater self-sufficiency in food and energy, and increased development in rural areas. The Bank's future lending program has been designed to assist the Government in achieving these objectives. Agricul- tural and rural development will account for the largest part of future lending with continued emphasis on food production and programs to increase the productivity and incomes of small farmers. However, the program provides for several needed new initiatives, including support for strengthening the national agricultural extension service through the recently approved loan and a first loan for developing multiple cropping systems in rainfed areas, where there is substantial rural poverty. Increased assistance will also be provided for integrated rural development projects whch will support the Government's objectives of redressing regional imbalances in income. Substantial assistance will also continue to be given to industry with  - 8 - considerable attention given to expanding the development of labor-intensive, small and medium industries outside of the Metropolitan Manila area. The share of the lending for social sector projects is expected to continue to increase primarily as a result of greater emphasis on construction of urban water supply and sanitation systems and further assistance for slum upgrading and low-cost sites and services projects. The Bank Group will continue to provide support for improving the quality of education and for expanding the Government's population program in rural areas. While the Bank Group will continue to provide support for transportation and power infrastructure needed to support the Philippine development effort, the share of Bank lending for these sectors will decline somewhat in the years ahead primarily because alternative sources of financing are available to finance a large part of the power generation program. 24. As noted in Part I, the Philippines has experienced a serious deterioration in its international terms of trade in the last several years which has necessitated substantial foreign borrowing. While the overall level of debt remains manageable, the Philippines will need to obtain some foreign assistance on concessional terms in the near term to support its expanding development program. In view of this consideration, the per capita income of the country and the generally good management of the economy, a limited amount of IDA financing has been included in the Bank Group's overall lending to the Philippines. 25. This is the eighth loan to be presented to the Executive Directors this fiscal year. A loan for medium industries development is expected to be ready for presentation soon. Loans for rural development and education projects are in advanced stages of preparation, and may be ready for pre- sentation in the first half of the next fiscal year. PART III - THE POPULATION SECTOR 26. Rapid population growth remains one of the most serious problems facing the Philippines over the next two decades. It affects all aspects of the Philippine economy, seriously undermining the country's efforts to provide adequate levels of education, housing, employment, food and health care to its people. Although in recent years there has been some decline in the average annual rate of population growth, from 3% in the 1950s and 1960s to 2.7% by 1975, and probably 2.5% by 1978,/1 the potential for sustained high population growth rates remains great because fertility levels are still high, the population is relatively young, and mortality levels (particularly for those under the age of five) should and are expected to be reduced further. Demographic Trends and Prospects 27. Seven censuses conducted between 1903 and 1975 show that the population of the Philippines has increased more than fivefold - from 7.6 million in 1903 to 42.3 million in 1975 to an estimated 45.5 million in 1978. /1 The demographic information presented in the text differs somewhat from the Social Indicators Data Sheet in Annex I (page 1), which is currently being updated to reflect more recent data.  - 9 - Crude birth rates remained relatively constant through the 1950s and 1960s at a level of 45-50 per 1,000 population. In 1975, the crude birth rate was estimated at 37 per 1,000 down from the 39-43 per 1,000 estimated in 1970. 28. This decline in the crude birth rate was due mainly to later age of marriage, an increase in non-marriage, and some fertility decline in urban areas where family planning services have been available since the early 1970s. In rural areas, people still marry young and few practice contra- ception. Total marital fertility has remained almost unchanged on average between 1958 and the early 1970s (around 9.6 children per married woman of reproductive age). Crude death rates declined steadily between 1948 and 1960, but are still relatively high at 10.4 per 1,000 in 1975. Since the late 1960s, mortality reduction has been less pronounced. Rough estimates of infant mortality suggest a decline over the period 1950-1965. However, analyses of data between 1968 and 1973 show no evidence of a decline in that period. This explains in part the slower decrease in total mortality in recent years. Presently, one-fourth of all deaths are those of children under one year. Malnutrition levels are alarming, as about 78% of all the children surveyed in 1977 were shown to be malnourished. High fertility contributes to existing health problems: large family size and insufficient spacing of pregnancies contribute to low standards of living, low nutrient intake, low productivity and a continuously increasing burden on the health services. Population and Health Policy 29. Because population growth and attendant socioeconomic pressures were recognized as serious constraints in reaching medium- and long-term development goals, the Government adopted a national population policy in 1970 as part of its overall economic development strategy. The objectives of the National Population Program were to reduce the annual population growth rate to 1.6% and reach a total population size of no more than 70 million and a net reproduction rate of 1 by the year 2000. These goals, while ambitious, are achievable if program efforts already begun can be improved and sustained. This long-term goal was restated in the Five-Year Philippine Development Plan (1978-82). Improvements in socioeconomic conditions as stated in the Plan, particularly in health and nutrition levels, are also expected to contribute to lower fertility and mortality and, probably with a time lag, considerably lower population growth rates. 30. During the 1960s, the family planning service delivery was carried out mostly through the private sector. In 1967, the President of the Philippines signed the UN Declaration on Population, recognizing population growth as a major consideration in long-range socioeconomic planning. In 1968, a small unit for maternal and child health and family planning was created in the Ministry of Health (MOII). Shortly thereafter, in 1969, the Commission on Population (POPCOM) was created to plan, coordinate and fund various activities in the population field as a research and advisory body. In 1970, acting upon POPCOM's recommendations, the Government launched a national population program aimed at reducing the high rate of population  - 10 - educational programs to encourage the adoption of family planning methods, coordination of relations with international organizations concerned with population problems, and responsibility for ensuring that all acceptable family planning methods are made available to the public. POPCOM's role, which initially consisted of policy-making, monitoring, and evaluating the population program has expanded over the last four years as POPCOM has become directly involved in organizing and helping local governments run family planning services delivered by non-health field workers. Furthermore, POPCOM has had, since its inception, difficulties in gaining acceptance from the agencies it is supposed to coordinate. This is due in part to managerial and technical weaknesses aggravated in recent years by a high turnover of pro- fessional staff, but it is also the result of a lack of clear policy guidelines, overall plans and strategies, and weak support from higher Government levels. Government support and POPCOM's organization are now beginning to improve. Recently the Government has restated that POPCOM should remain as a coordinating body, while local governments and other participating agencies should gradually assume full responsibility for implementing the various parts of the program. This transition will take some time and should be carefully undertaken in order to avoid disruptions in the field activities. 31. The Government decided in the early 1970s that the delivery of family planning services should be integrated into the Government's health care delivery system. The Ministry of Health, in time, became the principal source of family planning services (by 1977 MOH was providing services to 64% of all family planning acceptors in the country). In 1975-76, under the Restructured Health Care Delivery System (RHCDS), supported by the first Bank project (Loan 1035-PH), the MOH redistributed family planning functions among the health team members to achieve better utilization of doctors and nurses through the delegation of certain health care functions to auxiliary personnel. Some progress has been made thus far (about 45% of the MOH health staff has been retrained), but much remains to be done to extend services to the one-third of the total population (mostly rural) who now lack access to health and family planning services. The Government has decided to test further innovations in low-cost health care in several provinces based on strategies for primary health care endorsed by both the World Health Organi- zation (WHO) and UNICEF. Achievement and Constraints 32. As of end-December 1977, there were almost 3,000 public and private family planning clinics in the country, 672 sterilization centers and 21,500 Barangay Service Supply Points. The family planning services provided by the national program have contributed to the decline in the birth rate in the 1970s as a result of the cumulative increase in the number of contraceptive users. The nationwide contraception prevalence rate increased from an estimated 15% in 1973 to 27% in 1978. Compared with most countries with fertility reduction programs, this improvement over a five-year period is impressive. However, other countries in East Asia (some with older programs) have prevalence rates from 30-75%. The trend in new program acceptors, whose  - 11 - numbers increased until 1974, leveled off between 1974 and 1976 and the annual number of new acceptors declined by almost 10% in 1977. The average number of new acceptors per clinic is declining, apparently because the couples eager to practice family planning have already been recruited. This is the pattern experienced by many national programs, which can be remedied only by intensive and effective motivational programs and improved coverage. 33. Data on contraceptive method mix between 1971 and 1976 show that new acceptors increasingly favored condoms while the proportion accepting pills and IUDs declined. This shift to less effective methods was most marked between 1971 and 1974. One reason for this trend was the expansion of the program to rural areas where the shortage of adequately trained health staff reduced the willingness of women to accept methods such as IUDs and pills that, although more effective, may produce side effects. It is important to note that since 1975, the average number of months of effective protection has been increasing due to the introduction of sterilization. Acceptance of this method of contraception rose from almost 17,000 in 1975 to 42,000 in 1976 and 69,000 in 1977. Female sterilizations constitute almost 90% of the cases. 34. In the area of service delivery, by 1977 about 30% of the country's 4,800 doctors and 4,300 nurses worked in public health. Although the annual output of medical, nursing and midwifery schools is theoretically adequate, there are problems of uneven distribution of health personnel throughout the country. The Government is aware of this problem and is committed to taking remedial action, but realistically this situation can be changed only over a number of years. This makes the potential for using para-professional workers more important. An inter-ministerial committee is preparing guide- lines on the use of para-professional health workers by governmental agencies, including whether and how much these cadres should be paid. 35. In January 1977, the President of the Philippines commissioned a Special Committee, headed by the Commission on Government Reorganization, to undertake a comprehensive review of the population program to determine the causes of the downward trend in new acceptors, and to find solutions to the organizational, managerial and technical weaknesses in the program. The final report of this review, which was submitted to the President in November 1978, offers a sound evaluation of policies and program activities, and makes valuable recommendations on major policy, program and research directions. It includes significant recommendations on POPCOM's organization and specific program strategy questions which have mostly been accepted by the Government and are reflected in the program that the proposed project would support. In December 1978, the population situation was discussed as a special subject at the Bank-sponsored Consultative Group meeting on the Philippines. The Bank and other population donors presented their views on the strengths and weaknesses of the program, and future directions for external assistance. The President has instructed POPCOM and participating agencies in the population program to prepare a five-year national population plan to implement the recommendations of the Government's report. It has been agreed that this plan, already partially completed, would be made available to IDA  - 12 - for review and comment by December 31, 1979 and by March 31, 1980 the Govern- ment would consult with the Association on a timetable for implementation of such plan (Section 4.05 of the draft Development Credit Agreement). 36. The present health and family planning delivery system of the MOH has a number of administrative and organizational problems. These include: (a) over-centralization in planning, management and decision-making; (b) existence of many offices/bureaus/units at the central level, with no clear definition of functions; (c) scarcity of adequately trained professionals; (d) inadequate technical and administrative support, which contributes to inefficient utilization of resources, inadequate training and supervision of personnel, logistics and supply system failures, and inadequate outreach of the health personnel into the community; and (e) weak coordination of MOH's programs with those of other relevant ministries. 37. Recognizing these problems, the MOH decided that a functional analysis of the health delivery system would be carried out in 1979 to identify the weaknesses of the health services and to suggest remedies. This study is being financed under an amendment to the first Bank-financed population project. Financing 38. Currently, the public sector has responsibility for providing health care services to about 67% of the population of the country, but reaches only half that number. One-third of the population, mostly in urban areas has access to private medical care. Health services in the public sector are financed primarily from the national budget. Health ranked fourth in total new Government appropriations in 1978, with 4% of the total national budget. Of the total Government health appropriation, 82% went to the Ministry of Health; the remainder went to small health programs carried out by other Governmental agencies. The private sector spends about the same amount as the total public health sector, mainly for medical care services. 39. Until 1973, external assistance for population activities accounted for more than 60% of the total program financing. In 1977, the share of foreign assistance had declined to about 45% of total expenditures. This proportion is expected to level off at about 20% in 1982. The main external donor has been the United States Agency for International Development (USAID), and the next largest contributors have been the Bank and the United Nations Fund for Population Activities (UNFPA). The Government contributed $44 million through 1977. The main external financial assistance received for the health programs in the Philippines in recent years has been through the first Bank-assisted population project. Also, two other Bank-assisted projects - one rural and one urban development project - have health components which provide buildings for main health centers and barangay health stations. The next largest health contributor has been USAID, in the past mainly for the nutrition program and, more recently, for health and family planning services. 40. POPCOM has organized three projects (with USAID assistance) designed to provide family planning information, education and communication (IEC) services through non-health field workers to rural areas with limited or no  - 13 - available clinic services. In practice, however, these services have often overlapped with those of MOH. Coordination problems between USAID and Bank population operations were experienced in the early 1970s when the national program was starting and resulted mainly from differences in styles and strategie- for assistance (i.e. whether the introduction of family planning services was sufficient without a parallel improvement in the main service delivery institutions such as MOH); these differences have been overcome and both agencies are now working in close coordination. Remaining coordination problems between POPCOM and MOH have been discussed in depth, and the Government has agreed that by December 31, 1979, arrangements will be made satisfactory to the Association, on complementarity between population field workers and the clinic services under the Government's population program (Section 4.06 of the draft Development Credit Agreement). WHO and UN4ICEF provide technical assistance in a wide range of areas in the health field. The latter also provides financial support for training, equipment and vehicles for maternal and child health care; recently it approved financing for a four-year vacci- nation program. Throughout the preparation of the proposed project, USAID, UNFPA and the Association have been in close coordination to ensure that there will be no overlapping of assistance. Bank/IDA Assistance for Population 41. The first Bank-assisted project (Loan No. 1035-PH) was designed in 1973-74, when the population program was just starting. The Government had identified the 140H network as a main conduit for family planning services and adopted a policy of integration of health and family planning services. Other donors, most prominently USAID, were providing the bulk of the external assistance for the software aspects of the program, such as contraceptives, salaries, research and evaluation. 42. The first project is expected to be completed by December 31, 1979. At that time the health centers built will be operating in over 200 towns scattered in 56 of the 76 provinces of the Philippines; they will serve as referral points for midwives who work in rural barangays surrounding the centers and will provide services to persons living nearby. The 5,000 midwives hired through the project are trained and posted in rural barangays. Nine of the scheduled 12 regional training centers are now operating, housing trainees and teaching staff for in-service health and family planning courses. 43. The impact of the first project on health improvement and fertility reduction will be measured on a continued basis through the Management Inforaation System (MIS) established under the project. The first such data are expected by mid-1981. Although there are still organizational and technical shortcomings in the two agencies that the project was designed to assist (MOH and POPCOM), the environment for improving their programs has definitely been enhanced as a result of the first project. Another result has been that a strong and constructive dialogue has been established not only between the Bank and the two implementing agencies but also between  - 14 - POPCOM and MOH, and among international and bilateral agencies assisting the population program. Also, a number of lessons learnt from the implementation of the first project have contributed to the design of the second project. In particular the proposed second project takes a much broader perspective in terms of identifying and addressing the institutional problems of implementing nationwide health and population programs, and provides for more comprehensive improvements in management and manpower training, which will be needed to ensure the longer-term effectiveness of these programs. PART IV - THE PROJECT 44. The project was prepared by the Government, with the assistance of consultants and IDA missions. It was appraised in October 1978. Credit negotiations took place in Washington in April/May 1979. The Government was represented by a delegation chaired by His Excellency Eduardo Z. Romualdez, Philippine Ambassador to the United States. The Staff Appraisal Report, No. 2453-PH, has been distributed separately. Attached as Annex III is a Supple- mentary Project Data Sheet. Project Concept 45. The proposed project is designed to assist the Philippines in its efforts to reduce fertility levels over the next five years and, at the same time, to decrease infant mortality and malnutrition among children and improve the health status of semi-urban and rural populations. There are four general considerations that have determined the design of the project. Firstly, the design is based on the premise that fertility reduction, improved child survival and better family health are interrelated events. An initially important factor in stimulating family plannning practice, for example, is informing parents about how to raise healthy children. Improve- ments in the provision of health services and health education may therefore be significant in making the practice of family planning widely acceptable. A second assumption basic to the design of this project is that health services are an effective way to deliver family planning services, and that to improve these services it is necessary to address the major problems and constraints of the parent health system. A third consideration is that, apart from the direct effects of improved health and family planning service on fertility reduction, there is need for support and institutional development of the coordinating structure of the national population program (POPCOM) at the central, regional and local levels in order to ensure more effective policy- making, planning, coordination, and evaluation of all population-related activities. A fourth aspect taken into account is that widespread parti- cipation of informed and knowledgeable communities is as important to the improvement and expansion of health and family planning services as are more and better facilities and personnel. Personnel training and information, education and communication (IEC) activities are thus essential components of this project. The project will assist the two main agencies involved in the population program: POPCOM, the "umbrella" coordinating body, and MOH, the main family planning service provider. The arrangements for project  - 15 - implementation take into account the strengths and weaknesses of the overall health/family planning program and, specifically, the experience gained from the first Bank-assisted project, as well as the recommendations of the Government's recent review of the national population program. Project Description 46. The project focuses on the requirements of POPCOM and MOH in carrying out their longer-term programs, and includes the following: Part A. Commission on Population (POPCOM) (a) constructing, furnishing and equipping seven POPCOII regional office buildings, contraceptive warehouses and vehicle maintenance workshops; (b) equipment for Information, Education and Communication (IEC), training and Management Information Systems (MIS) for central, regional and provincial population offices; and vehicles to ensure adequate transportation for population program personnel; (c) other development costs including: (i) advisory services to support the improvement of population MIS, research, IEC and training activities; (ii) international and local fellowships, study tours and special courses for population staff; (iii) design and production of population IEC materials, and the carrying out of research studies and evaluation; (iv) architect and construction management consultant fees; (d) incremental recurrent costs, including salaries for project administration and incremental activities; travel, per diem and materials for training, IEC, MIS and population research activities; vehicle and equipment operation and maintenance; distribution of IEC materials; and (e) innovative activities, i.e. population activities which would enhance the fulfillment of project objectives and would be identified at a later stage of the project as important complements to the POPCOM program. Part B. Ministry of Health (MOH) (a) constructing, furnishing and equipping 75 health centers and 915 barangay health stations; (b) equipment for health, IEC, training and MIS activities in central, regional and provincial health offices, materials and vehicles for health training, IEC and service delivery;  - 16 - (c) other development costs including: (i) advisory services for MIS, IEC, training, logistics and primary health care design; (ii) architect and construction management consultant fees; (iii) international fellowships for health staff; (iv) design of prototypes for and production of health IEC materials and evaluation of primary health care activities; and (v) seed funds for primary health care schemes; (d) incremental operating costs, including salaries for project adminis- tration and incremental activities; travel and per diem for training, IEC, MIS, and research activities; vehicle and equipment operation and maintenance; and distribution of IEC materials; and (e) innovative activities, such as health activities which would enhance the fulfillment of project objectives and would be identified at a later stage of the project as important components to the MOH program. Implementation 47. Realistically, it will be many years before the health and popu- lation programs of the Philippines are fully developed to provide consistently high quality services to the entire population. A significant beginnning has been made toward this goal and the proposed project is intended to build upon that base. It is not feasible to have all important decisions taken before committing additional funds. These key actions which will be needed for implementing the project effectively have been agreed with the Government. They are shown as conditions of the credit and are timed to take place as soon as ongoing work will permit. 48. Administration and implementation of Parts A and B of the project will be the separate responsibilities of POPCOM and MOH, respectively. As mentioned in para. 45, these are the two main agencies responsible for coordinating and implementing the population program. The project has been designed to complement the programs of both agencies, emphasizing the strengthening of the institutions in parallel with improved and expanded motivational and service activities. The complexity of the proposed project reflects the difficulty of the problems being addressed. To augment the overall plan that has been prepared and to facilitate project execution, both POPCOM and MOH will provide to the Association for consultation, a copy of their annual plans for IEC, training, MIS, research and primary health care, construction and procurement not later than September 30 of each project year (Section 4.04 of the draft Development Credit Agreement). 49. As noted in para. 30, POPCOM has had major difficulties in providing adequate leadership and coordination for the population program. The Government is committed to strengthening POPCOM and has taken a number of steps in this  - 17 - direction. A recent salary increase for POPCOM's personnel has significantly removed constraints for recruiting qualified staff in POPCOM and most key leadership positions have now been filled. The Government has agreed to fill the remaining positions of Associate Director for Planning and Chief of Research, apnoint project coordinators, and complete an analysis of further staff requirements and job classification system in POPCOM in accordance with a mutually acceptable timetable (Section 4.03(b) of the draft develop- ment Credit Agreement). The implementation of the agreed actions should ensure that POPCOM has the capacity to carry out its program and the project effectively. Furthermore, POPCOM's financial staff has recently been reorga- nized into a single Finance Division (in the past, several separate finance units had been set up to handle funds from different external sources). It was agreed that the Government would entrust responsiblity for all financial matters related to Part A of the project to POPCOM's Finance Division (Section 4.03(a) of the Draft Development Credit Agreement). 50. As noted in paras. 36 and 37 of this report, MOH needs to strengthen its capabilities and is currently undertaking a financial/managerial study which is expected to lead to substantial reform. The Government has agreed to furnish the Association the result of said functional/managerial study of its health services, now under preparation, by December 31, 1979, and, by April 30, 1980, to consult with the Association on a timetable for implement- ing the recommendations of the study (Section 4.07 of the draft Development Credit Agreement. Agreement was also reached on actions designed to ensure effective project implementation which include the appointment of project coordinators, the creation and filling of additional positions, and other organizational changes (Section 4.08 of the draft Development Credit Agreement). Construction under the project (both for POPCOM and MOH) would be implemented by an MOH Construction Unit which would be placed under the Project Coordinator for Part B. The Government would appoint a suitably qualified chief for the construction unit by December 31, 1979. 51. MOH's Financial and Management Service and POPCOM's Finance Division would design and implement, by December 31, 1979, accounting systems for the project, acceptable to the Association. Adequate staff assistance for the project coordinators would be provided in both POPCOM and MOH. There have also been major weaknesses in the Government audit. The Government agreed that independent auditors acceptable to the Association will audit the project accounts (Section 4.02 of the Development Credit Agreement). Furthermore, an understanding was reached with the Government that it would request its Commission on Audit to engage consultants to assist in improving the annual auditing of this' project, if the Association finds that such improvement is necessary in the future. 52. Special implementing arrangements would be necessary to utilize local participation in the construction and operation of the 915 barangay health stations to be constructed under the project. Construction of barangay health stations would be undertaken by the Ministry of Local Government and Community Development through force account or directly by the local communities. The Ministry of Local Government and Community Development, in cooperation  - 18 - with the project construction unit of MOH, would carry out public information campaigns for construction of barangay health stations, by utilizing its regular contacts with barangay development councils. The project includes an experimental primary health care component which would rely on community health workers to provide services in rural barangays. These workers will be paid by the communities. The project would provide seed funds to each of the 4,000 barangays to start income-generating projects whose profits would then be used to support the local cost of the primary health care scheme, parti- cularly salaries for the workers. The project would also provide seed funds to start cooperative village level pharmacies. Both approaches have been tested successfully in the Philippines. Training and supervision of the community health workers would rest with the MOH rural health staff. UNICEF would provide technical assistance and other costs for the social preparation of the communities. The Ministry of Local Government and Community Development's community workers would undertake community organization for income-generating schemes. The Government gave assurances that it would develop a policy on primary health care which would set guidelines on the use of barangay health workers, including whether and how these cadres should be paid, and that it would make such policy available to the Association not later than April 30, 1981 (Section 4.09 of the draft Development Credit Agreement). Monitoring and Evaluation 53. A timetable for the implementation of each project component has been discussed and agreed with the Government, and this would be used by POPCOM, MOH and the Association as the basis for monitoring the physical progress of the project. Project evaluation would be done through the Management Information Systems of POPCOM, MOH, and the National Nutrition Council. These information systems would provide both regular health and family planning service statistics, separated by project and non-project facilities, as well as special surveys as needed, for all project components. Evaluation of the IEC component would be facilitated by a survey in 1980 to collect baseline data on the impact of health and population IEC programs. Evaluation criteria for the training components of POPCOM and MOH have been developed by the POPCOM/MOH Joint Training Coordinating Team. Cost Estimates and Project Financing 54. The total estimated project cost is $72 million, of which $24.2 mil- lion, or 34% is the estimated direct and indirect foreign exchange component. The cost estimates include physical contingencies estimated at 10% of base civil works costs, and professional fees and price contingencies averaging 19% of the base cost plus physical contingencies. Price contingencies were calculated on the assumptions that: (a) average construction costs would increase by 7% per year; (b) all other salaries and maintenance costs would increase by 5% per year; and (c) prices of all imported goods would increase by 6% per year during the project period. The average cost of foreign advisory services is estimated at $5,000 per man-month and local advisory services at $1,500 per man-month. Project cost estimates also include salaries for incremental staff, which amount to about 5% of total project cost.  - 19 - Incremental Recurrent Costs 55. Government recurrent expenditures for health, population and nutrition in FY78 amounted to about P 1,096 million (about $148 million), or 3.2% of the total national budget in FY78. The project would add about P 7 million (about $946,000) at 1978 prices to MOH's annual current expenditures (or 6.5%) and P 15 million (about $2 million) to POPCOIM's annual current expendi- tures (or 8% of total POPCOM current expenditures) in 1985 after completion of the project. The increase seems reasonable in view of the priority assigned by the Government to these programs and the considerable expansion of service included under the project. Project Financing 56. The IDA credit of $40 million would finance the foreign exchange cost of $24.2 million and local cost of $15.8 million (33% of total local cost). The justification for local cost financing is set out in paragraph 19 of this report. UNICEF would provide local costs of organizing communities to participate under the primary health care component of the project under its regular agreement with the Government. Those costs (expected not to exceed $200,000) are not included in the project cost. The Government would provide the balance of project costs of $32 million from budgetary resources. Procurement 57. To the extent practicable, contracts for equipment, vehicles, and materials would be grouped in appropriate packages of not less than $80,000. Contracts estimated to cost $80,000 or more would be awarded on the basis of international competitive bidding in accordance with the Bank's Guidelines for Procurement; contracts estimated to cost less than $80,000 equivalent, but not exceeding $800,000 equivalent in total, would be procured on the basis of competitive bidding advertised locally in accordance with Government procedures acceptable to the Association. To allow for reasonable flexibility, contracts for small items costing not more than $8,000 but not exceeding $200,000 in total, and any contract for the supply of tools and materials for constructing barangay health stations, would be procured on the basis of prudent shopping after inviting quotations from at least three suppliers. A preference margin of 15% of the c.i.f. price of imported goods, or the prevailing customs duty, whichever is the lower, would be extended to eligible local manufacturers when comparing evaluated bids obtained through international competitive bidding. 58. Where reasonable, civil works would be grouped in appropriate bid packages on the basis of geographical locations by region or province as suitable. The contracts would nonetheless be relatively small and would not be suitable for international competitive bidding. Therefore civil works contracts would be awarded after local bidding in accordance with Government  - 20 - procedures acceptable to the Association. Foreign contractors would not be excluded from bidding, and all contractors who participate in bidding would be required to have prequalified. Construction of health centers or barangay health stations would be implemented by force account in cases where no reasonable bids are obtained, or where communities are unable to implement part of the work; the total amount of such work would be about $5.2 million. Disbursement 59. Disbursement would be made at the rate of 50% for civil works upon submission of normal documentation. Disbursements for furniture, equipment and vehicles would be at 100% of the c.i.f. cost of direct imports, 100% of the ex-factory cost of locally manufactured goods and 65% of the cost of locally procured items. Disbursements for advisory services, professional fees, studies, fellowships, seed money, and materials would be at the rate of 100%. Disbursements for IEC contracts, innovative activities, travel and per diem allowances would be made at the rate of 50%. Payments for work under- taken by force account will be made against certificates of expenditure, whose content and form of certification have been agreed upon. Benefits 60. The national targets to increase the percentage of couples practicing contraception from 27% now to 50% in 1987, and the resulting decline sought in the annual average population growth rate from 2.5% in 1978 to 2.1% in 1987 and 1.6% in 2000, will require a considerably expanded, intensified and more effective program effort. The additional goals of the health sector of reducing: (i) infant mortality; (ii) the incidence of second and third degree malnutrition among pre-schoolers; and (iii) morbidity from communi- cable diseases will be difficult to achieve unless health service coverage is expanded during the next decade to the remaining one-third of the population presently not served. This project would contribute significantly to increasing the scope and depth of both the population program activities and the health services. 61. This project, if successfully implemented, would have a major impact on the Government's health and family planning programs, institutions and policies, through its provision of basic support to programs of critical importance to the Philippines. Although it is not possible to estimate reasonably the number of births and deaths directly averted by this project, the primary health scheme would provide coverage for an additional 3.3 mil- lion persons, and access to services from new health facilities to another 3 million persons. The increase in coverage through these two components represents about 40% of the population now outside the reach of adequate health services. The project strategy of combining a strengthening of the formal health system with the introduction of primary health care schemes is designed to maximize the yield of both efforts. In addition, the insti- tutional impact and effect of the program on both POPCOMI and MOH should enable them to provide the needed policy direction and level of services to achieve the health and fertility goals of the Government. Project Risks 62. The risks involved in this project are mainly related to the success or failure of Government authorities to render strong support to the organiza- tional changes and managerial and technical upgrading which have been agreed  - 21 - upon by the Government and the Association as necessary conditions - both in POPCOM and MOH - for successful implementation of the rural health and population programs. There are, however, favorable signs that such sustained support will be forthcoming. Government officials have repeatedly indicated that primary health care, population and nutrition are important priorities for the Government's development efforts and that they recognize the need for a major upgrading of both POPCOM and MOH to achieve these goals. A functional analysis of the Ministry of Health, which should result in recommendations for revisions of present job descriptions, functional respon- sibilities and, possibly, reorganization, is already under way with financing from the first Bank-financed population project. The improvements required in POPCOM consisting of upgrading salary levels, and managerial and technical capabilities of the staff, which are crucial for the effective implementation of the program, have already started, but should be carefully followed up to prevent future recurrence of past problems. Another risk that should not be ignored relates to the community participation approach to be tested in two components of this project - barangay health station construction and primary health care. Problems and constraints surrounding this approach have been recognized and carefully weighed during project design. It was concluded that the potential benefits in terms of increased community outreach and increased possiblities for providing cost effective services make such a risk worthwhile. PART IV - LEGAL INSTRUMENTS AND AUTHORITY 63 The draft Development Credit Agreement between the Republic of the Philippines and the Association and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 64. Special conditions of the project are listed in Section III of Annex III. 65. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. PART V - RECOMMENDATION 67. I recommend that the Executive Directors approve the proposed Credit. Robert S. McNamara President Attachment Washington, D.C. May 21, 1979  - 22 - A ., xI or S PHIIIPP!41S - SACIAI. INTIrCATOpS DATA SHOFT REFERENCE GROUPS CADIJSTED AVR.AC.ES LAN- ArAA (THOLSANt SQ. KM.) - 0OST RIFCPNT PtTIMATFI W.W )AIr .o SAM! SAMVE NEXT H81HER A.R(CLLTHR.AL 8S.b MOST RF I F GT ctGE.APIIIC INCOME LNCImrP 1960 Lb 1970 Lb ESTIMATI 'b REf;ION Le C.R01:? Ld CR(t.P LE CGP PtR CAPtTA (VSS) 160.0 230.0 450.0 616.0 432.3 867.2 ENFACR CfssV4PFTIOI PER CAPITA (lI 4)r.RA.S OF CUAL EQUIVALENT) 117.0 301.0 326.0 522.0 251.7 578.1 POPULATION AND VITAL STATISTICS TUTAL PVPK .ATLON, MID-YEAt OIILLL10SI 27.4 36.9 64.5 LURBAN PPLIATION (PERCENtT O TOTAL) 25.3 27.6 29.8 30.1 24.2 46.2 POPULATION DEISITY PER SQ. KM. 91.0 123.0 148.0 156.8 42.7 50.8 PP.t SQ. Kl. AGRICULTULAL LAND 360.0 *72.0 520.0 794.8 95.0 93.3 POPULATION ACE STRUCTJUtR (PERCENT) - 0.14 IRS. 45.7 45.6 42.9 60.8 44.9 42.9 15-64 TnS. 51.6 51.6 54.2 55.4 52.8 53.5 65 nRS. AND AROVE 2.7 2.8 2.9 3.2 3.0 3.5 POPULATION GROWT RATE (PERaCNT) TOTAL 3.0 3.0 2.8 2.3 2.7 2.5 UIRAJ 4.0 4.0 3.9 5.1 8.8 4.7 CRUDE BIRTH RAT (PER TRtaSAND) 45.0 43.0 35.0 34.6 42.2 37.8 CRUDE DEATH RATE (PER THOuISAND) 15.0 11.0 9.0 8.7 12.4 10.8 GROSS ILEPRODLCTION RATE 3.5 jf 3.3 2.4 2.6 3.2 2.5 FAMILT PLAINCiR ACCEPTORS. ALNNUAL (TROUSANDS) .. 191.7 750.8 USERS (PERCENT OF AtALED WUD!CEN) .. 2.0 25.0 22.1 14.2 20.0 FOOD AND NUTRITION hRDra oF FOOD PRODUCTIO ?ER CAPITA (1970-100) 99.1 100.0 110.8 106.8 104.3 107.3 PER CAPITA SUPPLT 0f CALORIES (PERCENT O0 REQUIRDVErTs) 83.0 86.0 87.0 108.7 99.5 105.3 PROTEINS (GRAMS PER OAT) IA.O 45.0 50.0 57.7 56.8 63.0 o0 WHIC8 ANIMAL AND PULSE 19.0 LA 22.0 19.2 17.0 17.5 21.7 CTILD (ACES 1-4) MORTALITY RATE 9.0 6.6 7.5 4.0 7.5 8.0 REALTH LIFE EXPECTANCY AT 81RTH (YEARYS) 49.4 57.0 60.0 59.0 53.3 57.2 INrANT KORTALITY RATE (PER THOUSAND) 84.6 81.0 0.0 44.0 82.5 53.9 ACCESS TO SAtE WATER (PtEtCINT OF POPULAT ION) TOTAL .. .. p9.0 21.9 31L.1 56.8 UtLBAN .. 1.0 58.3 68.5 79.0 RI.AL .. *. 3l. 9.8 18.2 31.8 ACCESS TO EXCILtTA DISPOSAL (PEIRCENT oF POPLLATION) TOTAL .. .. 56.0 28.6 37.5 30.9 U(RAM .. *. 76.0 66.6 69.5 45.4 ItL1 . 40.0 44.0 14.8 25.4 16.1 POPULATION PER PHYSICIAN .. 315040 103.1 9359.2 2706.8 OPOULATION PER bUIRSINC PERSONI .. 3840.0 499o0.0 1520.2 2762.5 1462.0 POPULATIIN PER HOSPITAL RED 70;TAL 1180.0 850.0 81n0 657.1 786.5 493.9 LC82 .. .. . A145 .5 278.4 229.6 OIL .. .. .A. 1011.8 1358.4 2947.9 ADMISSICOS PEt W)SPSTAL 8D .. .. .. 19.0 19.2 22.1 HOUS I NC AVEtCE SIZE OF HOUSEtOLO ToTAL 5.8 5.9 .. 5.2 ..5. UN(AI .. 6.2 .. 5.2 .. 5.0 tURIAL . 5.8 5.4 .4 AVt ACE 71L.IElR Of PERtSOS PER ROOM TOTAL .. 2.3 .. .. .. 2.0 UAIBAN - 2.1 .. .. 2.3 1.5 E RAL .. 2.4 .. .. .. 2.7 Acrss In .CTnRCIcT (PERCENT or D117!mNs) TvTAL 17.0 213.0 31.0 19.1 28.3 64.1 tRs9A .. 60.4 .. .. .. 67.8 tRRAL *- 7.0 10.0 *- 10-3 34.1  - 23 - ANIrX I F-!a of 5 P.iSea TA81QP IA PHILIPPINY.S - SOCIAL INDICATORS DATA SHFFT REFERENCE GROUPS (ADJUSTED AVERAGES PFILIPFENES - MOST RECENT ESTIMATF) - SAME SAMfE NEXT HIGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /b STMLATE lb REGION /c GROUP /d GROUP Le EDUCATInN ADJUSTED ENROLLMENT RATIOS PRLKARY: TOTAL 95.0 114.0 105.0 95.6 75.8 99.8 FEKALE 93.0 113.0 103.0 93.7 67.9 93.3 SECONDARY: TOTAL 26.0 50.0 56.0 43.3 17.7 33.8 FEMALE 25.0 50.0 57.0 38.6 12.9 29.8 VOCATIONAL (PERCENT OF SEO)NDARY) 14.0 .. .. 11.3 7.4 12.8 PUPIL-TEAaiER RATIO PRIMARY 36.0 29.0 29.0 30.0 34.3 34.9 SECONDARY 27.0 33.0 31.0 25.4 23.5 22.2 ADULT LITERACY RATE (PERCENT) 71.9 82.6 87.0 84.0 63.7 71.8 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 3.0 8.0 8.0 9.3 7.2 12.4 RADIO RECEIVERS PER THOUSAND POPULATION 22.0 72.0 *- 97.6 71.1 104.5 TV RECEIVERS PER THOUSAND POPULATION 1.4 10.0 17.0 21.8 14.1 28.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 17.0 14.0 18.0 25.9 16.3 45.2 CINEMA ANNUAL ATTENDANCE PER CAPITA 0.6 .. 7.6 4.6 1.6 4.6 EMPLOYMENT TOTAL LABOR FORCE (THOUSANDS) 10100.0 12400.0 16200.0 FErMALE (PERCENT) 34.4 33.1 35.3 33.2 28.0 25.7 AGRICULTURE (PERCENT) 61.0 55.0 50.0 48.4 54.1 46.2 INDUSTRY (PERCENT) 15.2 15.8 14.0 PARTICIPATION RATE (PERCENT) TOTAL 39.8 36.6 35.3 38.9 37.8 33.8 MALE 52.1 48.6 47.1 48.6 50.3 48.1 FEMALE 27.4 24.4 23.3 28.4 20.9 17.3 ECONOMIC DEPENDENCY RATIO 1.3 1.5 1.3 1.2 1.3 1.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 28.8 .. .. 17.3 19.5 23.6 HIGHEST 20 PERCENT OF HOUSEHOLDS 56.2 54.0 53.3 45.6 48.9 52.3 LOWEST 20 PERCENT OF HOUSEHOLDS 4.2 3.6 5.5 6.5 5.9 4.3 LoWEST 40 PERCENT OF HOUSEHOLDS 11.9 11.7 14.7 17.3 15.7 13.1 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN *- *- 250.0 140.8 155.9 191.9 RIURAL .. .. 190.0 112.8 97.9 193.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 132.0 .. 143.7 319.8 RURAL .. .. .. 76.8 87.3 197.7 ESTIMATED POPULATION BELOW POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 39.0 27.7 22.9 19.8 RURAL .. .. 44.o 40.4 36.7 35.1 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are population-seighted geometric means, excluding the extreme values of the indicator and the most populated country in oach group. Coverage of countries among the indicators depends on availability of data and is not uniform. lb Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Moot Recent Estimate, between 1973 and 1977. /c East Asia & Pacific; /d Lower Middle Income (5281-550 per capita, 1976); Le Intermediate Middle Income (5551-1135 per capita, 1976); /f 1950-55; IR Av. 1960-62.  - 24 - ANE _NNX DEFINITIONS OF SOCIAL INDICATORS *9ASG S of S plges Hostj The adjusted group averages for each indicator are population-weighted geomsetric means, excluding the extrem values of the indicator end the most populated counatry io each group. C-oveag of countries emag the indicators depends on avilability of data and is not uniform. Sue to lack of data, group averages for Capital Surplus Oil Exporters and indicators of access to watar and excrete disposal, housing, income distribotion and poverty are simple population-weighted geometric meansa without the exclusion of extraw values. LANDl AREA (thousand sq. km) Population per hospital bad - total, urban. end rural. - Population (total, Total - Total aurface areg comprising land area and inland waters, urban, and rural) divided by their reepective number of hospital beds Agricultural - Mo0st recant estimate of agricultural area used temporarily available in public and private general and specialized hospite1 end re- or permanently for crops, pastures, market and kitchen gardens or to habilitationo centers. Hospitals are establishments permanently staffed by lie follow, at least oue physician. Establishments providing principally custodial care are nor incloded. Rural hospitals. how-eve, include health and medi- GNP PER CAPITA (US$) - iNP' per capita estimates at currant market prices, cal centers not permanently staffed by a physician (but by a medical as- cooltdby sa conversion method as World Bank Atlas (1975-77 basis); sistant, or,eidwife, etc.) which offer in-patieot acc-datloc sod 1960, 1970, eod 1977 data, provide a limited range of medical facilitie.. Admissions per hospital bed - Trotal number of admissicons to or diochorges ENERGY CONSUMPTION PER CAPITA - Annual consumption of commercial energy from hospitals divided by the number of beds. (coal and lignite, potroleum, natural gas and hydro-, nuclear and geo- thermal electricity) in kilograms of coal sqivalent per capita. HOUSING Averase esie of household (persons per ho ..shold) - total, urban, and rural-- POPULATION AND VITAL STATISTICS A household conesits of a group of individuals who share living qoartern Total pouain id-veer (million.). As of July 1; if not available, and their main mueals. A boarder or lodger may or say not be included in average ,uofitwo ne'nd-year estimates; 1960, 1970, and 1977 data, the household for statistical purposes. Statistical definitions of house- Urban population (percen.t of total) -Ratio of urban to total popula- hold vay. tion; different definitions of orban areas may effe-r mp.arbility Avar.as number of_ Persons par room- total, urban, and rasrl - Averoo oo of dato smong coun tries, her of persons per room in all, urban. snd rural occupied conv-tiono.l Population density dwellings, respectively. Dwelling exclude non-permanent structures cod Per mu. k=. - Mid-year population per square kilometer (100 hectares) unoccupied parts. of total orea. Access to electricity (percent of dwellings) - total, orban, and rural - Per sq. ho. ogriculture land - Computed as shove for agricultural land Conventional dwellings with electricity in living quertore as percentoge only, of total, urban, sod rural dwellings reopective1y. Population sac structure (percent) - Children (0-14 years), working-age (15-64 yearn), sod retired (65 years and over) as percentages of mid- EDUCATION year populotion. Adjusted enrollment ratios Population growth rate (percent) - total, and urban - Compound annual Primary school - total,..ad female - Tots1 sod female enrollment of all ages growth raico of total1sod urban mid-year populations for 1950-60, at the primary level es peroontages of reopectively primary -hro-c-gr 1960-70, and 1970-75. populations ; no rmalIly ilocldes children aged 6-11 pears but adjusted for Crude birth rste (per_thousand) - Annual live births per thousand of different lengths of primary education; for cruotrien with univerool ed.- mid-year population; ten-year srithmetic avra,ges ending in 1960 and cation enrollment may emceed 100 percent oince some pupils are below or 1970 sod five-year avrage ending in 1975 for most recent estimate, above the official school age. Crude death rate (per thouaand) - Annual deaths per thousand of mid- Secondary school - total, and female - Computed as above; secondary educa- year populotiom; ten-year arithmetic averags. coding in 1960 and 1970 tiosraquiros at Ie...t four years of approved primary instruction; pro- and fiv-yeor average ending in 1975 for most recest estimate. video generel vocational , or t-ehr training instructions for pupils Greon reproduction rate - Average number of daughters a woman will bear usually of 12 to 17 years of age; correspondence courses are gene.rally in her norml seproductive period if she c.opriences present age- excluded. specific fectility rates; ouo..lly five-year averages ending in 1960, Vocational enrollment (percent of secondary) - Vocational institutions in- 1970, and 1975. clude technical, industrio1, or other programs which operate iodepend.rrliy rally pl-aoing - acccptors, annuo (thousandx) - Annal. number of or as depart men ts of necondary institutions. acceptors of birth-rontrol devires under auspices of national family Pupil-teacbar rstio - primary, and secondary - Tdol students enrolled is planning program. primary end sec.onary levels divided by numbers of teac.hers is the corro- Fomily planning - users (percent of married women) - Percetage of spondiag levels. married women of child-bearing ego (15-44 years) who usac birth-control Adult literacy frae (percent) - Literate adults (shin to read sod wrtn) a devices to oil married women in saeaegroup. a perrcentage of total adult population agod 15 yosr and over. FOOD ADil NUTRITION CON-SUMPTION Tnde. of food production per fcalpita (d1970-100) - Index oumber of per Passenger cars (per thouaand population) - Passenger car coprise motor cats capita annual production of allfoo comeditiem. seating less than eight persons; e-sludes amb.lance, hearses and military Per capita supply of csloriex (percent of requirements) - Computed from vehicles.. energy equivalent of net food soppliem available in country per capita Radio receivers (per thousand population) - All types of receivers for radio Per day. Available supplies comprise domestic production, imports less broadcaatm to general public per thousa.nd of population; escludos onlicensed esports, and changes in stock. Net supplies exclude animal feed, seeds, receivers is coun.tries and in yearn when registreti-s of radio sets woo is q-atiti.a used is food process.ing, andlse in distribution. Re- effect; data for recent yeers nay not he coparble since most -nutries quicements wore estimated by PAO based on phymiologicel needs for nor- abolished licensing. mel activity sod health considering enviroomental temperature, body TV receivers (per thousand nopslation) - TV receivers for broadcast to gener.A weights, age ond sex distributions of population, and allowing 10 per- public per thousand population; e.cludas unlicen..od TV receivers in coo- cent for w-s te borhusehoid level, trios and in years when registration of TV onto wa is effect. Per capita supply of protein (ares per day) - Protein content of per Newspaper circuistios (per thousand population) - Shows the overage circulo- capita set supply of food per~ day. Net supply of food ix defined as tiuo of "daily general interest new.. sper", defined so a periodical publi- above. cequirements for all contries established by USDA provide for cstion devoted primarily to recording general new s, It is conidered to minimum allowance of 60 grams of totai protein per day and 20 grana be "daily" if it oppesro at least four tines c winkh of animal and pulse protein, of which 10 groas should be animal protein. Cinema annual attendanc.e per capits per year - B a.ed on tho number of tickers These standards are lower that those of 70 gras. of total protein and sold during the year. including admissions to drive-is cienas.. an d mobile 23 gram of animal proteis n an average for the world, proposed by units.. FAO in the Third World Food Survey. Per capits protois upyfrmaia and pulse - Protein supply of food EMPLOYMENT der ived from asimais and pulses in gram per day. Total labor force (thousands) - Economically active persons, including armed Child (ages 1-4) mortality rate (per thousan.d) - Annual deaths per thou- forces and unemployed but eacludiog houseive, scodonts, etc. Defiol- and in age group 1-4 years., to cbildren in this age group. tions in various coutries are not coparable. Female (pnrcent) - Pemale labor rorce so percentage of total labor forc.. HEALTH Agriculture (percent) - Labor force in Earning, forestry, bunting and fishing Life. epetaooyat bir~th(ears) - Average number of years of life am perce.tago of total labor force. remaining at birth; usually five-year averages ending in 1960, 1970, Induatry (percent) - Labor frore in mining, construction, nasufacturing asd and 1975. electricity, water and gas as percentage of total labor force. Infant mortality rste (per thousood) - Annal deaths of infants under Participation rate (percent) - total, male, end fensle - Total, male, and sine year of age per thousand live birhts. female lebor force so percentages of their respective popyaiotlns, Access to safe water (Percent of population) - total, urban, and rural - Thes are ThOis adjusted participation r-tec reflecting af--n Numbor of people (coral, urban, and rural) with rea..os.ble access. to structore of the popsiotton, and 1Osf time trend. safe water supply (includes treated surface waters or untreated but Economic dependency ratio - Ratio of population under 15 ccd 65 ond use to uncntaminated water such as that from protected boreholes, springs. the labor force in age group of 15-hi pears. and sanitary omlia) as percentages of their respective populatioSe. Is an urban area a public fountain or standpost located not more INqCOME DISTRIBUTION than 200 meters from a house may be considered as being within rua- Percentage of priv-te income (both in rah and bind) reciv-d by richest -onb le aceso hat house. In rural areas reasonable access would percent, richest 20 percent, poorest 2) Percent, and poorest 4i percent imply tha'tcethe ohousewife or members of the household do not have to of households.. spend a disproportionate part of the day in fetching the faily's water needs. POVERgn TARGET iGRosiP tccon. tc encrats disposal (percent of population) - total, urban. and Estimated absolute poverty incoma level (US$5 per capita) - urban and cral - rural - Number of pooplo (tota.1 urbas, and rural) served hyamorts Absolute povety i_ooms .. lee i chat ic-u 1-ro below which minimal disposal so percetages of their respective populations, Excreta nutritionally adequate diet plus essential cnn-food requiremen.ts in not disposal nay In,clude the collection and disposal, with or without affordable. trsatmeot, of hu-a nortaad waste-wter by water-bone sytstms Estimated relative poverty income level (US) per capita) - urba an-d -"rlI or the use of Pit privies and similar installations, Relative poverty income leve is that income level less than one-third Population per physician - Population divided by namber of practicing per capita personal incme of the country. phyniciaso qualified fron a sedical school ar tuiversity level. Estimated .popultion below poverty imoons level (percent) - urban and rural1 Population per nursing person - Population divided by number of Percent of population (urban and rural) who are either "absolute poor" or practicing male and female graduate nurses, practical nurses, and "relstive poor" whichever is greater. assistantnus. Economic and Social Pots Divinico Economic Anslynis and Prcjncci... Dnpcrtmect  - 25 - ANNEX 1 Page 4 of 5 pages SELECTED ECONOMIC DATA Actual Prelim. Projected Growth Rates (%) 1972 1973 1974 1975 1976 1977 1978 1980 1985 1972-78 1978-85 National Accounts (billions of pesos at 1972 prices) GDP 56.3 61.2 63.8 68.8 74.2 78.5 81.9 93.8 136.6 6.5 7.4 Terms of trade adjustment 0.0 1.5 1.3 -0.1 -1.8 -3.0 -2.5 -1.6 0.0 - - GDY 56.3 62.7 65.1 68.7 72.4 75.5 79.4 92.2 136.6 5.9 8.0 Imports - volume 10.3 10.8 12.9 13.5 13.7 14.6 15.6 16.6 24.3 7.1 6.5 Exports - volume 9.9 11.3 10.0 10.0 11.8 14.9 14.3 15.7 23.4 6.3 7.3 Exports - adjusted for terms of trade 9.9 12.8 11.3 9.9 10.0 11.9 11.8 14.1 23.3 3.0 10.2 Resource gap 0.4 -2.0 1.6 3.6 3.7 2.7 3.8 2.5 1.0 - - Consumption 45.2 48.1 51.1 53.5 55.4 57.8 61.0 70.6 100.9 5.1 7.5 Investment 11.6 12.5 15.7 19.0 20.6 20.4 22.1 24.1 36.6 11.3 7.5 National savings 10.7 14.4 14.7 15.2 16.8 17.5 18.2 21.1 35.0 9.2 8.5 Domestic savings 11.2 14.5 14.1 15.4 17.0 17.7 18.4 21.6 35.6 8.6 9.9 Sector Output (billions of pesos at 1972 prices) Agriculture 16.0 17.0 17.5 18.2 19.7 20.5 21.4 23.7 30.2 4.2 5.0 Industry /a 17.4 19.6 20.7 22.7 24.9 26.8 28.5 33.9 55.6 8.6 10.0 Services 22.6 24.3 25.9 27.5 29.0 30.6 32.0 36.2 50.8 6.0 6.8 Prices (1972 = 100) Export price index 100 141 223 214 197 196 214 249 353 Import price index 100 124 197 215 233 245 260 278 354 Terms of trade index 100 114 132 100 85 80 82 89 95 Selected Indicators ICOR 4.5 2.4 4.8 3.1 3.5 4.8 6.0 3.7 3.2 Import elasticity 0.93 0.55 4.61 0.59 0.19 1.13 1.58 0.98 1.03 Average savings rate 19.5 23.0 21.4 21.9 22.3 21.8 21.4 22.5 25.6 Imports/GDP 18.3 17.6 20.2 19.6 18.5 18.6 19.0 17.7 17.7 Investment/GDP 20.6 20.4 24.6 27.8 27.8 26.0 22.0 26.1 26.8 Resource gap/GDP 0.1 -3.2 2.5 5.2 5.0 3.4 4.6 2.7 0.7 Value added Labor force V. A. per worker Output, Labor Force & Productivity in 1976 Peso million % Million % Pesos x Agriculture 38,440 29.0 8.1 50.0 4,746 58.0 Industry 44,934 33.9 2.3 14.0 19,537 238.8 Services 49,148 37.1 5.0 31.0 9,830 120.2 Unemployed . . 0.8 5.0 Total/Average 132,522 100.0 16.2 100.0 8,180 100.0 Public Finance 1972 1975 1976 1977 1978 (National Government) ------------ (% of GDP in current prices) - ------- Current revenue 12.2 15.0 13.9 13.2 14.2 Tax revenue 9.7 12.0 11.6 11.2 12.1 Current expenditure 13.0 13.2 12.3 11.6 11.4 Current surplus 0.8 1.8 1.6 1.6 2.8 Capital expenditures 1.9 3.0 3.5 3.4 3.7 /a Includes mining, manufacturing, construction, and utilities. East Asia and Pacific Region May 1979  - 26 - ANNERX 1 Page 5 of 5 pag.es BALANCE OF PAYMENTS AID EXTBRNAL ASSISTANCE (U5$ millio) Actual Prelim. Projected /e 1972 1973 1974 1975 1976 1977 1978 1980 1981 1982 1985 Sumary of Balance of Payments Exports (GNFS) 1432 2445 3357 3076 3330 4021 4155 5793 7028 8238 12197 Imports (GNFS) 1484 2057 3784 4116 4383 4788 5251 6821 7713 8712 12715 Resource balance -52 388 -427 -1040 -1053 -767 -1095 -1027 -685 -475 -519 Net factor service income /s -125 -114 -54 -201 -323 -320 -352 -508 -595 -673 -810 Interest (net) -93 -59 15 -53 -185 -240 -257 -393 -470 -535 -626 Direct investzent income (set) -32 -55 -69 -148 -138 -80 -95 -115 -126 -139 -184 balance on goods 4 services -177 274 -481 -1241 -1376 -1087 -1447 -1534 -1281 -1147 -1329 Transfers (net) 186 246 276 318 269 260 315 347 382 420 560 Current Account Balance 11 521 -205 -923 -1107 -827 -1132 -1167 -899 -727 -769 Private direct inve-t-est (set) -22 64 28 125 144 216 160 193 212 234 310 Public MLT loan disbursements 235 184 180 349 869 903 1049 1142 1241 1321 1521 Repaymetsv -78 -108 -68 -118 -165 -163 -419 -481 -499 -520 -738 Net disbursements 157 76 112 231 704 740 630 662 742 801 783 Other MLT loan disbursements 137 196 276 331 538 326 726 845 508 359 562 Repayments -154 -201 -244 -205 -202 -381 -522 -437 -549 -584 -506 Nlt disbursements -17 -5 32 126 336 -55 204 408 -41 -226 -244 Total MLr luau disburne=ents 372 380 456 680 1407 1229 1775 1987 1749 1680 1783 Repayments -232 -309 -312 -323 -369 -544 -941 -918 -1048 -1104 -1244 Net disbursements 140 71 144 357 1040 685 834 770 701 576 539 Net drawings us IMF 7 -21 -11 110 214 79 -20 -70 13 -85 -80 Shbrt-t-rr capital (net) 56 74 231 102 -96 311 147 195 222 253 375 Capital transact.. ns, .e.i. -98 -45 -77 292 -35 -300 116 0 0 0 0 Change in net reserves (- - increuse) -94 -664 -110 521 160 -164 55 -200 -250 -250 -376 International reserves (end-year) /b 551 1038 1504 1358 1640 1524 1883 1800 1900 2000 2800 Grants and Loan Commitments Official grunts 0.0 0.0 0.0 0.0 0.0 0.0 Total public loans 422.0 232.4 840.1 753.7 1894.0 1294.7 IBRD 29.5 85.7 217.5 114.0 226.0 317.5 IDA 10.0 12.7 9.5 0.0 0.0 0.0 Other multilateral 43.3 53.6 83.1 106.0 64.2 207.3 Governments 275.5 63.4 199.5 182.3 391.6 294.3 Of which CPE 0.0 0.0 0.0 13.2 5.9 0.0 Suppliers 2.0 1.9 69.0 37.3 68.1 73.7 financial Institutions 61.7 15.1 244.5 314.2 776.9 272.3 Bonds 0.0 0.0 17.1 0.0 367.2 129.7 Other MLT loans 130.0 128.0 306.0 283.0 472.0 495.5 Mem.rsodme Items Grant element of commitments 28.0 28.4 22.3 16.4 8.8 14.7 Average interest (%) 5.4 6.1 6.5 7.4 8.3 7.9 Average maturity (years) 17.3 24.2 18.2 16.7 13.1 15.3 Medi-m and Long-Term Debt (disbursed only) Outstanding Total debt outstanding (end of period) 1828.7 1910.2 2070.7 2362.0 4063.0 5149.9 DOcc-ber 31, 1977 Including undisbursed 2584.5 2625.9 3506.3 3755.6 6496.0 8109.0 Esternsl Debt Amount Percent Public debt service -149.6 -214.5 -187.7 -230.2 -222.7 -441.9 (disbursed only) Of which: interest -51.6 -31.3 -43.1 -73.4 -87.1 -215.2 IBRD 403.7 13.5 Other MLT debt service -167.6 -185.8 -247.5 -239.2 -300.0 -357.1 Bank Grsup /d 432.6 14.5 Total debt service -317.2 -400.3 -435.2 -469.4 -522.7 -799.0 Other multilateral 155.4 5.2 Governments 873.1 29.2 Debt Burden Of which centrally Debt service ratio 22.1 16.4 13.0 15.6 16.0 19.9 planned economies 0.0 0.0 Debt service ratio /c 24.5 18.8 15.3 18.1 18.1 21.4 Suppliers 86.5 2.9 Debt service/GDP 3.8 3.8 3.0 3.0 2.9 4.0 Financial institotions 914.9 30.6 Public debt service/government revenue 17.0 13.9 7.6 8.1 7.9 15.7 Bands 523.1 17.5 Total public MLT debt 2,985.1 100.0 Terms Other MIT debt 2,164.8 72.5 Internst on total DOD/total DOD 6.1 3.6 4.0 5.4 4.1 6.4 Other MLT debt (incl. Total debt service/total DOD 17.7 24.7 17.3 16.9 10.5 15.8 undisbursed) 2,489.7 83.4 Total Public debt (incl. Dependency Ratios undisbursed) 5,619.3 188.2 Grass disbursemenrs/inpurtn (GNFS) 25.1 18.5 12.1 16.5 32.1 25.6 Total MLT debt (incl. Net transfer/imports (GNFS) 3.7 -1.0 0.6 5.1 20.2 10.5 undisbursed) 8,109.0 217.7 Net transfer/gross disbursements 14.9 -5.3 4.6 30.8 62.9 41.0 Imposure IBRD disb./gross total disb. 4.7 4.6 5.8 12.6 6.5 9.5 Bank Group dinb./gross total disb. 4.8 4.8 7.5 13.9 7.3 9.6 IRD DOD/total DOT 7.8 7.8 7.9 10.1 7.8 9.3 Bank Group DOD/total DOD 7.8 7.8 8.3 9.6 8.4 10.0 IBRD debt service/total debt svs. 4.4 5.1 5.4 5.5 6.6 5.6 Bank Group debt service/total debt svs. 4.4 5.1 5.4 5.6 6.7 5.6 /a Remittances of Filipinos employed abroad are included in "Transfers." /b Grass reserves of the Central Bask ("International reserves", IFS). /c Including net direct investment income. /d Excludes IFC. 7e These projections were prepared in May 1978. Revised prnjectinns sill be prepared following the return of an economic mission in Jane 1979. East Asia and Pacific Regional Office May 1979  - 27 - ANNEX II Page 1 of 14 pages THE STATUS OF BANK GROUP OPERATIONS IN THE PHILIPPINES A. STATEMENT OF BANK LOANS AND IDA CREDITS As of April 30, 1979 Loan or Credit Am.o.n ($ oillion) Nueber FY Borrower Porpo.e Baok IDA Sodlsborood Sixiteen loans and two creditn folly dinborned 252.4 19.5 720-PH 1971 Rice Proressing and Storage 14.3 2.1 809-PH 1972 National Power Corporatioo Power 22.0 1.2 349-PH 1973 Republic of the Philippines Education II 12.7 1.0 891-PH 1973 " Fisheries 11.6 3.0 /a 939-PH 1973 ' Ports 6.1 0.5 950-PH 1973 " Second Righoays 68.0 5.5 984-PS 1974 A-rora-Per..anda Irrigation 9.5 3.3 998-PH 1974 DFC-DBP I 50.0 4.2 1034-PH 1974 National Power Corporation Poae- 61.0 5.3 1035-PH 1974 Republic of the Philippines Population 25.0 14.8 1048-PH 1974 " Shipping 20.0 12.0 1052-PH 1974 Philippine Nationol Bank DFC 30.0 10.1 1080-PH 1975 Republic of the Tarloc Philippioes Irrigation 17.0 0.1 1102-PH 1975 Rural Developoent 25.0 17.9 1120-PH 1975 Small and Mediuo "oduntrieo 30.0 2.6 1154-PH 1976 Magan Irrigotion 42.0 23.5 1190-PH 1976 DFCG-DBP 11 75.0 19.6 1224-T-PH 1976 Education III 25.0 18.3 1225-PH 1976 Li-entonk II 20.5 9.1 1227-PH 1976 Chico Irrigation 50.0 42.3 1272-T-PH 1976 Manila Drhar 10.0 7.2 1282-PH 1976 Manila Urban 22.0 15.8 1269-PH 1976 Second Grain Processing 11.5 11.2 1270-PH 1976 S Sncond Fisheries 12.0 7.5 1353-PH 1977 Third Highways 95.0 84.4 1367-PS 1977 Jalaur Irrigation 15.0 11.1 1374-Pg 1977 Fourth Education 25.0 20.4 1399-PH 1977 C-tcral Bank of Fourth Rural the Philippines Credit 36.5 25.3 1414-PH 1977 Ripublic of the National Trriga- Philippines tion Syste.s hnltprnnesrnt 50.0 42.2 1415-PH 1977 Protn= ial lition Water Supply 23.0 20.0 1421-PH 1977 SInoad Rural De-elop tent- Land Settle-e-t 15.0 14.4 1460-PH 1977 National Povor Corpyraltin Seventh Power 58.0 57.5 1506-PH 1978 Republic cf the Smallholder Tree Philippines FPrming 8.u 8.0 1514-PH 1978 Philippine National oahk DFC (PDCP) 30.0 3U.0 1526-PH 1978 Republic of the S-cond National Philippione IrrigaItor Syntemo I.pron-oent 65.0 64.2 790-PH 1978 Republic of the Rural Infra- Philippirne stratrtre 28.i. 28.0 S.8-PH 1978 Republic of the Philippiene Educati-o 2.0 1.98 1547-PH 1978 Republic of the Roral Electri- Philippines fiati-on 60.0 60.0 1555-PH 1978 Philippine Nati-nal Bank DFC-PI80 15.0 13.4 1567-PH 1978 Republic of tho Philippione MAGAT II 150.0 113.8 1572-PH 1978 Repblic of the Industrial Philippioeo Invest-eot III 80.0 71.7 1615-PH 1978 Reublin of the Maoila Water Philipplnen Water Supply-ll 88.0 88.0 1626-PH 1979 Republic of the National Philippines Et lenion 35.0 35.0 1639 PHa 1979 Republic of the Magat River PhilippInes Multipurpose 21.0 21.0 1646 PH* 1979 Republic of the Small Farmer Dev. Philippioes Land Sack 16.5 16.5 L647 PH-0 1979 Republic of the Sacood Urban Philippines Development 32.0 32.0 1661 PH-tO 1979 Republic cf the Highways IV 100.0 5O0.0 Philippicne Total 1,929.9 60.2 1,2302.2 of which hao been repaid (Bask and third parties) 132.5 - Total new outstanding 1,797.4 60.2 Anount sold 23.9 of which has been repaid (third partieo) 13.1 10.8 - Total now held by Bank and IDA (prior tn e-change rate adjustenctal 1,786.6 60.2 Total oodisbursed 1,173.2 29.0 1,202.2 Ua Undisbarsed aocunt is $193.08. 0 Effective April 25, 1979. E0 iffective April 26, 1979. 500 Not yet offectlie.  - 28 - ANNEX II Page 2 of 14 pages B. STATEMENT OF IFC INVESTMENTS As of April 30, 1979 Fiscal Amounts ($ million) Year Company 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 & 1977 Philippine Petroleum Corporation 6.2 2.1 8.3 1972 Marinduque Mining and Industrial Corporation 15.0 - 15.0 1973 Victorias Chemical Corporation 1.9 0.3 2.2 1974 Filipinas Synthetic Fiber Corporation 1.5 - 1.5 1974 Maria Christina Chemical Industries, Inc. 1.5 0.5 2.0 1974 Republic Flour Mills Corporation 1.2 - 1.2 1975 Philippine Polyamide Industrial Corporation 7.0 - 7.0 1976 Philagro Edible Oils, Inc. 2.6 0.2 2.8 1977 Acoje Mining Company, Inc. 2.3 1.2 3.5 1977 Sarmiento Industries, Inc. 3.5 - 3.5 1978 Cebu Shipyard and Engineering Works, Inc. 2.1 - 2.1 Total gross commitments 73.1 15.3 88.4 Less sold, acquired by others, repaid or cancelled 30.2 12.0 42.2 Total commitments now held by IFC 42.9 3.3 46.2 Undisbursed 5.1 - 5.1  - 29 - ANNEX II Page 3 of 14 pages C. PROJECTS IN EXECUTION /1 Agricultural Sector Loan No. 720 Rice Processing and Storage; $14.3 Million Loan of February 4, 1971; Date of Effectiveness: May 10, 1971; Closing Date: June 30, 1979 This project is providing long-term credit through the Development Bank of the Philippines to finance a program for the development and modern- ization of the rice and corn processing industry. Originally the project was restricted to rice and to the private sector, and the emphasis was on the construction of new integrated large capacity rice mills. Due in part to poor harvests and in part to large cost increases for rice mills, the demand for subloans for new integrated rice mills turned out to be small and, as explained in the President's Memorandum, dated June 8, 1972 (R72-40), the Loan Agreement was amended to shift the project emphasis to rehabilita- tion of existing rice milling facilities. The Loan Agreement was further amended in April 1974 to: (a) expand the scope of the project to include corn in addition to rice, (b) enable local governments and the National Grains Authority to borrow funds under the project, and (c) streamline procurement procedures (President's Memorandum SecM74-244 of April 15, 1974). As a result of these amendments, the project is now generally progressing satis- factorily, although mounting arrears are a source of concern and DBP is now stepping up its supervision and collection efforts to deal with this. Bank loans for subloans have been fully committed; however, because of the long construction period of the large subprojects, full disbursement will be delayed until mid-1979 and the Closing Date has been postponed to June 30, 1979. Credit No. 472 Aurora-Penaranda Irrigation; $9.5 Million Credit and Loan No. 984 $9.5 Million Loan of May 14, 1974; Date of Effectiveness: August 22, 1974; Closing Date: June 30, 1980 The project is financing the construction of two dams and trans- basin diversion channels to divert water from the Aurora basin to the Panta- bangan reservoir to provide year-round irrigation for about 26,000 ha of rice lands in the Peharanda area of Central Luzon, which is also to be improved and extended under the project. The work on the dams and transbasin diver- sion channels has been completed. Diversion from one of the two dams started in July 1975, about one year ahead of schedule. There were initial delays in the award of contracts for the service area improvement works and following /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.  - 30 - ANNEX II Page 4 of 14 pages award some additional delays were experienced due to an extended period for irrigation water delivery in 1977. These setbacks have caused a two-year delay in project completion which is now scheduled for June 30, 1980. Loan No. 891 Fisheries; $11.6 Million Loan of May 21, 1973; Date of Effectiveness: December 5, 1973; Closing Date: June 30, 1979 The loan is fully committed; only about US$0.1 million remains to be disbursed before the Closing Date (June 30, 1979). Nearly 15,000 ha of brackish water fishponds are being developed or rehabilitated with the help of subloans. Loan approvals also include 35 fishing vessels with tonnage varying between 70 and 130 tons, one ice-plant and one slipway. DBP has initiated the preparation of the Completion Report. Loan collections have deteriorated during the last few months, and in spite of intensive collection efforts mounted by DBP in the recent months, the desired result has not so far been achieved. DBP is now being asked to study in depth the position of all borrowers whose accounts are overdue fDr more than six months, and to take suitable measures in each case to rectify the position. Loan No. 1080 Tarlac Irrigation; $17.0 Million Loan of January 27, 1975; Date of Effectiveness: April 27, 1975; Closing Date: December 31, 1980 The project is assisting the Government to improve 21,000 ha of land under three existing national irrigation systems and to extend irrigation to 13,000 ha of additional land in Central Luzon. Upgrading of project roads and construction of new roads also are included. In addition, the project provides for a groundwater irrigation pilot project, a National Irrigation Systems Improvement Study (NISIS), and a water management training program. All major civil works contracts are in progress and the remaining work is under way. General progress, although slower than originally estimated, is improving. Progress on the groundwater, water management training and NISIS components of the project is satisfactory. Due to the necessity of adding drainage systems not included originally, completion of the project is now expected to be delayed until the end of 1980. Loan No. 1102 Rural Development; $25.0 Million Loan of April 16, 1975; Date of Effectiveness: July 28, 1975; Closing Date: June 30, 1981 The project is assisting the Government to carry out rural develop- ment on the island of Mindoro. Progress in the implementation of irrigation systems and on the improvement of the port of Calapan is now accelerating. Progress has also been made on the Mangyan (Minority) Assistance Program, reforestation of watersheds and drainage of schistosomiasis affected areas. The rate of progress for road construction has now improved considerably after delays caused by the unsatisfactory performance of a number of contractors. Disbursements, which currently stand at 39% of projections, are lagging  - 31 - ANNEX II Page 5 of 14 pages behind physical accomplishment due to difficulties encountered in prompt processing of force account work and in coordinating disbursement requests between agencies. Steps are now being taken to streamline disbursement procedures. Loan No. 1154 Magat Multipurpose Project; $42.0 Million Loan of August 7, 1975; Date of Effectiveness: November 4, 1975; Closing Date: June 30, 1982 The project is assisting the Government to improve and expand irrigation on 35,000 ha of land in the Cagayan Valley of Northern Luzon. Consultant's work on engineering and economic evaluation studies of the proposed Magat dam and reservoir has been completed. Civil works by local contract and force account for rehabilitation and new construction of canals, drains and access roads are progressing well. The water management training is continuing satisfactorily. Loan No. 1225 Second Livestock; $20.5 Million Loan of April 8, 1976; Date of Effectiveness: September 13, 1976; Closing Date: June 30, 1982 Investments in pig and poultry subloans continue to dominate the Development Bank of the Philippines (DBP) project lending activities, with sub- loans for beef production development lagging well behind appraisal estimates. As a consequence the project's list of goods was recently amended to allow for this fact. Disbursements are in line with appraisal projections but subloan commitments are running ahead of schedule. Project funds will probably be fully committed in early 1980 but a recent resurgence of demand for loans may shorten the period. Repayments of principal of the majority of DBP's borrowers under the project are still under grace but a build-up of interest arrears is beginning to emerge. Principal and interest arrears under the first phase project have reached about 18% of the portfolio and we are assisting DBP with the development of an intensive action-oriented collection program to be implemented during the next three months. Thanks to government approval of increased salary scales, DBP has significantly improved its staffing position. Various improvements to DBP's organizational structure have been instituted and other organizational developments are under consideration. The Bank is involved in a continuing dialogue with DBP on various institutional issues. Loan No. 1227 Chico River Irrigation Project; $50.0 Million Loan of April 8, 1976; Date of Effectiveness: July 19, 1976; Closing Date: June 30, 1981 The Erosion Control Study and input-output monitoring program are progressing satisfactorily. NIA' s force account operations on canals and access roads has improved following delivery of construction equipment. All of the major contracts have been awarded, and it is expected that construc- tion of irrigation works will proceed smoothly. Road construction is now proceeding satisfactorily, although it began substantially behind schedule.  - 32 - ANNEX II Page 6 of 14 pages Loan No. 1269 Second Grain Processing Project; $11.5 Million Loan of July 2, 1976; Date of Effectiveness: November 12, 1976; Closing Date: June 30, 1981 The project is providing long-term credit through the Development Bank of the Philippines to assist in modernizing and expanding the Philippine grain processing industry. Initial progress under the project is satisfactory. Subloan commitments are expected to begin shortly, now that Loan No. 720 is fully committed. Loan No. 1270 Second Fisheries Project; $12.0 Million Loan of July 2, 1976; Date of Effectiveness: November 12, 1976; Closing Date: June 30, 1981 Due to problems related to procurement procedures for fishing vessels and increased deployment of staff on loan recovery work, the Develop- ment Bank of the Philippines slowed down the processing of subloan approvals in the second half of 1977. However, loan approvals had picked up considerably in the first half of 1978. As of June 30, 1978, 398 fishpond farmers had been assisted with construction of new fishponds or rehabilitation of their existing ponds. Eight 9OGT fishing vessels, six 45GT fishing vessels and two ice-plants with cold storages have been financed. It is expected that the project will be completed on schedule. Loan No. 1367 Jalaur Irrigation Project; $15.0 Million Loan of February 14, 1977; Date of Effectiveness: May 12, 1977; Closing Date: December 31, 1982 NIA's force account operations on access roads and drains has improved following delivery of construction equipment in December 1978. The detail design for a major part of the works has been completed and many contracts have been awarded. The overall progress of the project is satis- factory. Loan No. 1399 Fourth Rural Credit Project; $36.5 Million Loan of April 11, 1977; Date of Effectiveness: June 2, 1977; Closing Date: December 31, 1980 The slow commitment rate continued to improve to 50% of appraisal estimates, but recovery of the shortfall to date is no longer considered possible within the original three-year implementation period. The shortfall is due in large part to the sharp decline of demand for four-wheel tractors and the absence of compensating growth in demand in other subloan categories. Heavy damages inflicted by recent typhoons may further delay commitment. The Central Bank is now conducting a reassessment of the lending program, and is expected to submit to the Bank a proposal recommending necessary changes in project design which would expedite the commitment but, at the same time, would ensure the effective use of project funds.  - 33 - ANNEX II Page 7 of 14 pages Loan No. 1414 National Irrigation Systems Improvement Project; $50 Million Loan of May 13, 1977; Date of Effectiveness: August 9, 1977; Closing Date: December 31, 1981 Initial delays in assembling design staff have now been overcome. With the delivery of equipment in September 1978, the pace of construction has accelerated. Overall progress of work is about 10% of total project works. Loan No. 1421 Second Rural Development (Land Settlement) Project; $15.0 Million Loan of June 10, 1977; Date of Effectiveness: October 27, 1977; Closing Date: December 31, 1982 The previously reported budget release and staff recruitment problems are being steadily resolved. With staff now taking up field positions, progress is accelerating, and although the project is currently 14 months behind anticipated schedule, physical matters should be completed within the project period. Institutional progress continues to be satisfactory, noting, however, that the innovative nature of the project will continue to illustrate problem areas and issues. Project impact will become more apparent during the next year, but there is already an increase in confidence at the settlement level illustrated by a significant increase in participatory actions by farmers. Loan No. 1506 Smallholder Tree Farming and Forestry Project; $8.0 Million Loan of January 23, 1978; Date of Effectiveness: May 11, 1978; Closing Date: December 31, 1982 Eight months after effectiveness, operations had started in all project components except research, but progress has been lagging behind schedule; the DBP smallholder tree farming component has met with a slow rate of farmer enrollment due to problems with legal requirements, land availability and farmers' reluctant attitude arising from lack of previous experience. However, DBP remains committed to the project and is working on ways in which to stimulate progress. In the Abra pine plantation component insufficiency of Government funds has caused the program of vehicle acquisition and building construction to fall a year behind schedule, but it is expected that the delay will be made up to a large extent during 1979. Disbursements have not yet begun, due to the early stage of the project and the initial delays. Loan No. 1526 Second National Irrigation Systems Improvement Project: $65 Million Loan of March 15, 1978; Date of Effectiveness: June 20, 1978; Closing Date: December 31, 1984 Topographic surveys and mapping have been completed for about 60% of the project area and design of project works is underway. The construction work started recently is primarily devoted to service roads and structures along main and secondary canals. Overall progress of the project is satisfactory.  - 34 - ANNEX II Page 8 of 14 pages Credit No. 790 Rural Infrastructure; $28 Million Credit of April 21, 1978; Date of Effectiveness: Date of Effectiveness: July 21, 1978; Closing Date: December 31, 1983 Construction work on communal irrigation systems, village water supply and health stations has started. Consultants have been engaged to undertake the design of village roads for four of the six project provinces. Contracts for the improvement of one port will be awarded soon. Overall progress of the project is satisfactory. Loan No. 1567-PH The Magat River Multipurpose Project-Stage II; $150 Mil- lion Loan of May 23, 1978; Date of Effectiveness: August 24, 1978; Closing Date: December 31, 1983 The project will assist the Government through completion of Stage II of this project, to provide water to irrigation systems and improve systems operation on 102,000 ha. Preconstruction works have been completed and works on dam foundation grouting, drainage gallery tunneling and river diversion tunnels are under way and expected to be completed this year. The civil works contract for the main dam has been awarded and the contractor is completing the advanced stage process of mobilizing staff and equipment. Loan No. 1626-PH National Extension Project; S32.0 Million Loan of December 21, 1978; Date of Effectiveness: March 27, 1979; Closing Date: December 31, 1982 The project will assist the Government to strengthen effectiveness and expand coverage of the national extension service through the provision of facilities and equipment, and institutional changes. The loan was signed on December 21, 1978, and was declared effective on March 26, 1979. Loan No. 1639-PH Magat River Multipurpose Project; Stage II Irrigation; $21.0 Million Loan of January 26, 1979; Date of Effectiveness: April 25, 1979; Closing Date: December 31, 1983 The project will assist the Government to increase agricultural production and consequent employment opportunities though irrigation and power development in the Cagayan Valley. The loan was signed on January 26, 1979, and was declared effective on April 25, 1979. Loan No. 1646-PH Small Farmer Development Project through the Land Bank of the Philippines; $16.5 Million Loan of January 26, 1979; Date of Effectiveness: April 25, 1979; Closing Date: June 30, 1982 Proceeds of the loan will be relent to the Land Bank of the Philippines to provide small farmers with credit to increase productivity and to generate off-farm employment. The loan was signed on January 26, 1979 and was declared effective on April 25, 1979.  - 35 - ANNEX II Page 9 of 14 pages Transportation Sector Loan No. 939 Second Ports Project; $6.1 Million Loan of October 24, 1973; Date of Effectiveness: December 19, 1973; Closing Date: July 15, 1979 The project is being carried out under two civil works contracts, one each for General Santos and Cagayan de Oro. The work at General Santos was completed in December 1978. At Cagayan do Oro, 75% is completed and the remainder is expected to finish in May 1979. Traffic operations at the project ports continue satisfactorily. The Government is considering the establishment of a National Port Advisory Council to assist PPA in formulating policies. Tariff adjustment proposals have been drafted based upon a study of port services costs. Good progress is being made on feasibility studies at five provincial ports in preparation for a proposed third ports loan in early FY81. Loan No. 950 Second Highway; $68.0 Million Loan of December 12, 1973; Date of Effectiveness: February 27, 1974; Closing Date: June 30, 1979 While over 98% of the construction program has been successfully completed, one of nine national roads is far behind schedule due to difficulties experienced by the contractors in prosecuting the work. For this reason, project completion is expected to be delayed 24 months beyond the appraisal schedule. UNDP-financed road feasibility studies were completed in June 1975, detailed engineering for the Third Highway Project (Loan 1353-PH) in August 1976, and detailed engineering for the proposed Fourth Highway Project in October 1977. Weighbridges for axle load control have been procured, civil works for permanent weigh stations are virtually completed, and the axle load control program is being implemented. The total cost of the project has increased substantially (about 32% above the appraisal estimate) due to the oil price increases in late 1973, delays in project execution, and continuing inflation. Disbursements have reached 90% of the loan amount but the present Closing Date of June 30, 1979 will require extension to allow time for final disbursements after project completion, expected in mid-1979. Loan No. 1048 Inter-island Shipping; $20 Million Loan of October 29, 1974; Date of Effectiveness: January 15, 1975; Closing Date: June 30, 1980 Progress under the US$20.0 million loan for the acquisition of used interisland ships, repair of existing ships and technical assistance has been slow. As at December 31, 1978 only about half of the available funds had been committed by the Development Bank of the Philippines and only US$7.0 mil- lion had been disbursed from the loan. Uncertainties about the type of foreign exchange risk to be borne by subborrowers and offers of cheaper finance by new government financing institutions have delayed implementation. Changes in administrative procedures are under discussion and may require Board consideration in due course to resolve these matters.  - 36 - ANNEX II Page 10 of 14 pages Loan No. 1353 Third Highway Project; $95.0 Million Loan of January 12, 1977; Date of Effectiveness: March 30, 1977; Closing Date: June 30, 1981 Contracts have been awarded for all national roads and work has begun. Consultants for supervision of construction have been appointed and have established themselves in the field. The technical assistance advisors for maintenance improvement and road restoration took up their duties in September 1977. The training advisors began work in July 1977. The consul- tants for the road and ferry feasibility studies began work in November 1977 and completed the studies in December 1978. Consultants for workshop design and construction supervision began work in May 1977. Designs are completed and bids for all contracts have been received and are being evaluated with contracts for 8 out of 28 workshops awarded. After a delay of about 12 months, the road maintenance and restoration program is now beginning to be implemented with planning and execution of road restoration projects under way, procurement contracts for maintenance equipment, parts, tools and machinery being awarded and normal maintenance activities being organized. Overall, project costs are expected to remain close to appraisal estimates but indications are that project execution will be delayed by about 18 months due to the late start of some critical activities. Loan No. 1661 Fourth Highway Project; $100 Million Loan of March 9, 1979; Expected Date of Effectiveness: June 12, 1979; Closing Date: December 31, 1982 This loan was signed on March 9, 1978, and is expected to be declared effective on June 12, 1979. Education Sector Loan No. 1224 Third Education Project; $25 Million Loan of April 8, 1976; Date of Effectiveness: July 29, 1976; Closing Date: June 30, 1981 Since loan signature, the project unit has made commendable progress in implementing the textbook development program. Editorial and production preparations have been completed for 31 titles (out of 71 to be completed by June 1981). Some 17 titles have been printed for a total of 9.5 million copies (out of 27 million by 1981), of which 8.2 million copies have been distributed to schools. Project costs are close to appraisal estimates. Loan No. 1374 Fourth Education Project; $25.0 Million Loan of March 25, 1977; Date of Effectiveness: June 9, 1977; Closing Date: December 31, 1981 Implementation of the project is generally on schedule, with the exception of civil works contract awards which have been delayed by about eight months because of delayed government clearances. Project costs are within appraisal estimates.  - 37 - ANNEX II Page 11 of 14 pages Loan No. S-8-PH Educational Radio Technical Assistance; $2 Million loan of April 21, 1978; Date of Effectiveness: August 22, 1978; The project is being implemented by an Educational Communications Office (ECO , established for this purpose within EDPITAF. ECO is functioning smoothly and is successfully preparing and distributing radio programs and printed materials for the two major project subcomponents - Radio Assisted Teaching in Elementary Schools (RATES), and Continuing Education for Teachers (CET). These programs have reached Pargasinan Province, and will reach Leyte on schedule in mid-1979. CET will most likely begin unscheduled utilization in Mindanao during 1979. In order to provide information on the desirability of nationwide project implementation, the pilot project includes a substantial evaluation component which is proceeding smoothly. Urban Sector Loan No. 1272T Manila Urban Development Project; $10.0 Million and Loan No. 1282 $22.0 Million Loans of June 9, 1976; Date of Effectiveness: December 9, 1976; Closing Date: September 30, 1981 Construction has been completed on the high school, health clinic, and the "reblocking" of twenty-five blocks in the upgrading area. Fifteen hundred new serviced sites in Dagat-Dagatan and 350 in Tondo are now being occupied by families who are building very satisfactory dwellings by means of self-help. The project is generally progressing satisfactorily with many of the initial difficulties overcome and valuable lessons learned which should hasten implementation of the remainder of the project. Loan No. 1415 Provincial Cities Water Supply Project; $23 Million Loan of May 13, 1977; Date of Effectiveness: September 9, 1977; Closing Date: March 31, 1982 Work on well construction has started in two cities, and bid documents for pipe supply and installation are 95% complete. Civil works contractors are currently being prequalified and major construction should start within the next few months. Overall project implementation is several months behind schedule because of administrative delays and difficulties in land acquisition for well sites following hydrogeological studies by consult- ants. The preparation of feasibility studies for water supplied to 11 cities is on schedule as is also the Manila Sewerage Design Study. The Government is about to start training of staff in the design of community water supplies. Loan No. 1615 Second Manila Water Supply Project; $88 Million Loan of July 26, 1978; Date of Effectiveness: December 21, 1978; Closing Date: December 31, 1983 This loan is assisting the Government to provide safe water for an additional four million people in Metropolitan Manila, as well as improve the service to some 3 million who are inadequately served at present. The preparation of design drawings, bid documents and appointment of consultants is well in hand. Loan 1647-PH Second Urban Development Project; $32.0 Million Loan of January 26, 1979; Date of Effectiveness: April 26, 1979; Closing Date: December 31, 1983 onApril 26hiW}rn was signed on January 26, 1979, and was declared effective  - 38 - ANNEX II Page 12 of 14 pages Power Sector Loan No. 809 Fifth Power; $22.0 Million Loan and $10.0 Million Credit Credit No. 296 of April 3, 1972; Date of Effectiveness: July 1, 1972; Closing Date: December 31, 1979 The project is helping the National Power Corporation to finance the second unit of 150 MW at the Bataan thermal power plant, expansion of the transmission system in Luzon and consultants' services. The project was completed in mid-1977, two years behind schedule. Due to cost overruns, a part of the transmission project was transferred to the Sixth Power Project. The actual project cost as finally constructed is about UIS$59.3 million - an increase of about US$11.0 million over the original estimates. The closing date of the loan has been postponed from December 31, 1978 to December 31, 1979 to allow full disbursement of committed funds. Credit 296-PH was fully disbursed in April 1975. Loan No. 1034 Sixth Power; $61.0 Million Loan of July 31, 1974: Date of Effectiveness: November 15, 1974; Closing Date: June 30, 1981 The project consists of a 100 MW hydropower plant at Pantabangan, Luzon, transmission lines for the expansion of the Luzon grid and consultants' services. The generating plant was commissioned in April 1977. The trans- mission facilities will now be completed late in 1980, more than two years behind schedule. The revised cost of the project is estimated at US$114.1 million, an increase of about 24% over the original estimate (US$92.0 million). The cost overrun for the foreign exchange component is US$5.2 million (9%). The closing date of the loan has been postponed from December 31, 1978 to June 30, 1981 to allow additional time for completion of the transmission systems and payment of the retention money. Loan No. 1460 Seventh Power Project; $58.0 Million Loan of August 9, 1977; Date of Effectiveness: January 6, 1978; Closing Date: June 30, 1982 Progress on works is slightly behind schedule. The Government requested the Bank to waive the covenanted rate of return of 8% for 1978. The 7.3% rate of return achieved by NPC in 1978 was a substantial improvement compared to 1977. Tariffs in Luzon were increased by 10.5% last November and another increase of 10% will become effective on May 1, 1979. Loan No. 1547 Rural Electrification; $60.0 Million Loan of April 4, 1978; Date of Effectiveness: August 17, 1978; Closing Date: December 31, 1981 The project is behind schedule due to the initial slow pace of preparation of tender documents and delays in procurement. Progress on procurement has been stepped up in the first quarter of 1979 and about 48% of the contracts for materials will have been awarded during April 1979.  - 39 - ANNEX II Page 13 of 14 pages Industrial Sector Loan No. 998 Industrial Investment and Smallholder Tree-Farming; $50.0 Million Loan of June 12, 1974; Date of Effectiveness: September 9, 1974; Closing Date: December 31, 1981 The proceeds of the loan were relent to the Development Bank of the Philippines (DBP). The industrial portion of the Loan ($48 million) has been used by DBP to finance direct imports for medium and relatively large industrial projects. DBP is using the balance ($2 million) to finance about 1,300 smallholders in a pilot tree-farming project in Mindanao. Loan No. 1052 Private Development Corporation of the Philippines; $30 Million Loan of November 12, 1974; Date of Effectiveness: February 7, 1975; Closing Date: June 30, 1979 The proceeds of the loan are on-lent by PDCP to financially and economically viable industrial subprojects. After some slowdown in commit- ments and disbursements experienced in 1976 and 1977 the loan has now been fully committed. Overall progress is satisfactory. Loan No. 1120 Small and Medium Industries Development; $30.0 Million Loan of June 5, 1975; Date of Effectiveness: August 20, 1975; Closing Date: August 31, 1979 The DBP portion ($15 million) and IGLF ($12 million) portions of the loan have been fully disbursed. After a slow start, commitment and disbursements of funds under the Industrial Guarantee and Loan Fund accelerated in late 1977. However, the Rural Industrial Cooperative Program ($2.3 million) which is being implemented by the National Electrification Administration is facing management and staffing problems because of its experimental nature. Therefore, disbursements on this component have been slow. The Small Business Advisory Centers program ($0.7 million) of the Ministry of Industry has been implemented and is working satisfactorily. Overall progress of the project is satisfactory. Loan No. 1190 Industrial Investment; $75.0 Million Loan of January 28, 1975; Date of Effectiveness: April 6, 1976; Closing Date: March 31, 1980 The proceeds of the loan are relent by the Development Bank of the Philippines for subloans to finance the foreign exchange components of medium and relatively large industrial projects. The Executive Directors approved a proposal to reallocate $25 million of the funds for small and medium in- dustries on February 25, 1977, and an amendment to the Loan Agreement to this effect was signed on March 16, 1977. Commitments of funds, which were ini- tially much slower than expected due to a slowdown of investment in the in- dustrial sector as a whole, improved in 1978. As of February 28, 1979, the allocation of $50 million for medium- and large-scale industry had been fully  - 40 - ANNEX II Page 14 of 14 pages committed. In addition, $17.7 million had been disbursed against the allocation for small- and medium-scale industries. Loan No. 1514 Private Development Corporation of the Philippines (PDCP); $30 Million Loan of February 9, 1978; Date of Effectiveness: June 23, 1978; Closing Date: March 31, 1982 This loan is being relent by PDCP for financing the direct and indirect foreign exchange component of capital goods and services for productive enterprises. As of February 28, 1979 commitments under the loan amounted to $6.5 million. The project progress is satisfactory. Loan No. 1555 Philippine Investments Systems Organization (PISO); $15 Million Loan of May 8, 1978; Date of Effectiveness: May 12, 1978 Closing Date: December 31, 1982 Proceeds of the loan are relent by PISO for financing the foreign exchange component of capital goods and services for eligible productive enterprises in the Philippine private sector. As of February 28, 1979, commitments for subloans totalling US$13.5 million had been made. Since the pace of commitment is much faster than anticipated during loan appraisal, the loan is expected to be fully committed by early 1979. Overall progress of the project is satisfactory. Loan No. 1572 Third Industrial Investment Credit Project through the Development Bank of the Philippines; $80 Million Loan of June 6, 1978; Date of Effectiveness: September 15, 1978; Closing Date: June 30, 1982 The proceeds of the loan are relent by DBP for financing the direct and indirect foreign exchange component of imported as well as locally procured capital goods and services for eligible productive industrial enterprises in the Philippines. Of the total loan, $50 million is allocated for large scale industries, $29.7 million for small and medium-scale industries and $0.3 mil- lion for establishment of an institute for training executives and staff of smaller development financing institutions. Commitments for subprojects under the large industry component amounted to $9.4 million as of February 28, 1979. In addition, as of the same date the small and medium industry component had been disbursed to the extent of $1.6 million. The overall progress of the project is satisfactory. Population Loan No. 1035 Population; $25.0 Million Loan of July 31, 1974; Date of Effectiveness: November 13, 1974; Closing Date: December 31, 1979 Implementation of the project continues satisfactorily. As of January, 1979, 15 of the 219 project facilities had yet to be started, partly due to political problems in two regions. Contractors had completed 80% of all construction work. Management problems within the Commission on Popula-- tion (POPCOM) are being addressed through agreements which have been reached on organizational reform under a second population project scheduled for Board presentation on June 5, 1979.  - 41 - ANNEX III Page 1 PHILIPPINES SECOND POPULATION PROJECT Supplementary Project Data Sheet Section I: Timetable of Key Events (a) Time taken by the country to prepare the project The project was prepared in approximately 16 months (June 1977 to October 1978). (b) The agency which has prepared the project: It was prepared by two project preparation groups - one in POPCOM and one in MOH, assisted by local consultants. (c) Date of first presentation to the Association; and the first Bank mission to consider the project: Both in June 1977 (d) Departure of appraisal mission: October 5, 1978 (e) Completion of negotiations: May 4, 1979 (f) Planned date of effectiveness: September 1, 1979 (estimated) Section II: Special Bank Implementation Action A supervision mission is planned immediately following signing to assist prompt initiation of project implementation. Section III: Special Conditions The fo&llowing special conditions are incorporated in the draft Credit Agreement: (a) POPCOM will complete the population plan of action and will make it available to the Association for its review and comment by December 31, 1979 (para. 35), and will take the necessary steps to improve its financial and administration operations and to enable it to carry out Part A of the project effectively (para. 49); (b) MOH will take all necessary measures to ensure an effective coor- dination in the execution of Part B of the project (para. 50); will provide the Association, by December 15, 1979, the results of the  - 42 - ANNEX III Page 2 functional analysis study of the Health services and agree with the Association, no later than April 30, 1980, on a mutually acceptable timetable for implementing agreed recommendations (para. 37); and will take steps necessary to carry out Part B of the project effectively, including designing, not later than December 31, 1979, an accounting system for the project acceptable to the Association (para. 51); (c) POPCOM and MOH will reach an agreement on complementarity between Project Outreach and the MOH clinic services not later than December 31, 1979 (para. 40), and will provide the Association, by September 30 of each project year, a copy of the plans for primary health care, IEC, training, MIS and research, for review and comment (para. 48); and (d) the Government will develop a policy on primary health care, to be made available to the Association by April 30, 1981 (para. 52).  IBRD 14067 JANUARY 1979 LU Ui Z Z 0- u > 0 z z =Z 0 ui 2 ui cx_ 0 0ol0 0 (5 z -Az qw. f .5a. 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