Philippines - Third Livestock and Fisheries Credit Project

Document of FILE COpy The World Bank FOR OFFICIAL USE ONLY Report No. P-2843-PH REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF THE PHILIPPINES FOR A DEVELOPMENT BANK OF THE PHILIPPINES THIRD LIVESTOCK AND FISHERIES CREDIT PROJECT June 24, 1980 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit - Philippine Peso (FP) P. 1 5 US$0.135 P. 7.40 = US$1 WEIGHTS AND MEASURES 1 ha - 2.47 acres 1 km = 0.62 miles 1 sq km - 0.386 sq mi 1 mi - 3.28 ft 1 sq m - 10.76 sq ft 1 cu m - 35.31 cu ft 1 M cu m - 810.7 ac ft I mm = 0.039 in 1 kg - 2.2 lb ABBREVIATIONS ACA - Agricultural Credit Administration APD - Agricultural Projects Department BAAD - Branches and Agencies Department BAI - Bureau of Animal Industry BFAR - Bureau of Fisheries and Aquatic Resources DBP - Development Bank of the Philippines FAO - Food and Agriculture Organization FIDC - Fisheries Industry Development Council ICB - International Competitive Bidd4ng LBP - Land Bank of the Philippines NEDA - National Economic and Development Authority PCR - Project Completion Report GOVERNMENT OF THE PHILIPPINES FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY PHILIPPINES DEVELOPMENT BANK OF THE PHILIPPINES THIRD LIVESTOCK AND FISHERIES CREDIT PROJECT Loan and Prolect Summary Borrower: The Republic of the Philippines Beneficiary: The Development Bank of the Philippines Amount: $45 million equivalent Terms: 20 years, including 5 years of grace, with interest at 8.25% p.a. Relending terms: $41.3 million would be onlent to the Development Bank of the Philippines (DBP) on the same terms as those of the Bank loan, of which $40.0 million would be onlent by DBP to subborrowers for investment projects in the livestock and fisheries subsectors. The remaining $1.3 million would fund technical assistance to DBP by way of consultancies. Prolect Description: The project objectives are to increase production of animal protein and to strengthen the institutional capability for implementing this and future projects. Its subcomponents will be broadly determined by an annual lending program prepared by DBP in consultation with concerned agencies of the Government and the Bank. The project's credit components are envisaged to include financing of small livestock and cattle, fishponds and marine vessels and other items to support the two sub- sectors, including slaughter-houses, iceplants, etc. Although production is its principal objective, the project aims to support small- and medium-scale entrepreneurs in order to redress some of the regional development imbalances. Noncredit components include consultant services and support to sectoral agencies. The main risks include the possibility of inadequate interagency coordination, possible lack of regional focus and narrowing profit margins if output prices continue to be held down by Government. The loan agreement contains a number of provisions concerned with interagency coordination and the strengthening of the regional focus. This document has a restricted distribution and may be used by recipients only in the performance Kof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -ii - Foreign Estimated Cost: Local Exchange Total ------ $ million--------- A. Credit /1 Small livestock 36.7 2.2 38.9 Cattle 2.5 0.1 2.6 Fishponds 27.7 3.1 30.8 Marine (vessels) 6.7 10.0 16.7 Base Cost of Credit 73.6 15.4 89.0 Price Contingency 29.2 4.2 33.4 Total - Credit 102.8 19.6 122.4 B. Noncredit /2 Base Cost of Noncredit 10.3 1.7 12.0 Contingency: Physical 1.2 0.2 1.4 Price 4.5 0.4 4.9 Total - Noncredit 16.0 2.3 18.3 C. Total Project Base Cost 83.9 17.1 101.0 Contingencies 34.9 4.8 39.7- Total Project Cost 118.8 21.9 140.7 Financing Plan: Borrowers' equity DBP/Gov't /3 IBRD Total ------------------ $ million ----------------- A. Credit 15.12 67.32 39.95 122.39 B. Noncredit - 13.22 5.05 18.27 Total 15.12 80.54 45.00 140.66 /1 The final mix of subprojects is unknown as funds for this component are provided to DBP on a flexible basis. The above breakdown represents a possible combination of subprojects, based on past subloan demand and DBP's loan processing capacity. /2 Support and consultancies to the Bureau of Animal Industry, Fisheries Industry Development Council, Bureau of Fisheries and Aquatic Resources and DBP. /3 Includes $15 from the proceeds of the Yen Bond (No. 1 Series Issue) of 1978.  - iii - Estimated $ million Disbursements: Bank FY 1981 1982 1983 1984 Annual 4 15 16 10 Cumulative 4 19 35 45 Rate of Return: Composite economic rate of return is about 28%. The rate will vary substantially depending on the final mix of subprojects. Staff Appraisal Report: No. 2828-PH, dated June 13, 1980   REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF THE PHILIPPINES FOR THE DEVELOPMENT BANK OF THE PHILIPPINES THIRD LIVESTOCK AND FISHERIES CREDIT PROJECT 1. I submit the following report and recommendation on a proposed loan to the Republic of the Philippines for the equivalent of $45.0 million to help finance the Third Livestock and Fisheries Credit Project through the Development Bank of the Philippines (DBP). The loan would have a term of 20 years, including 5 years of grace, with interest at 8.25% per annum. $41.3 million of the proceeds of the loan would be relent to the Development Bank of the Philippines on the same terms as those of the Bank loan. The Government would also relend to DBP the equivalent of $15 million from the proceeds of the Yen Bond (No. 1 Series Issue) 1978 to finance part of the credit component of the project. 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 visited the Philippines in May/June 1979, and its report, entitled "The Philippines: Domestic and External Resources for Development"' (No. 2674-PH), was distri- buted to the Executive Directors under SecM79-822, dated November 16, 1979. 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 devel- opment 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 were 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 5.5% 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 /1 This section of the report is substantially the same as that of the President's Report for the Watershed Management and Erosion Control Project, scheduled for Board presentation on July 1, 1980.  - 2 - consequence of 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 the country's terms of trade since 1975, stemming from the increase in oil prices, acceleration of international inflation and depressed prices for some major Philippine commodity exports. 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 6% 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 opportunities 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 overall growth, investment, manufacturing output, and exports are somewhat higher than Bank staff estimates. Agriculture and Rural Development 7. In recent years the trend growth rate of the agricultural sector has been about 5%, 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, has exported over 300,000 tons of rice since 1977. With the completion of large irrigation projects now under implementation, continued rice self-sufficiency appears assured for the 1980s (see para. 32). 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 to begin in 1980 when a sufficient number of high yielding variety seedlings will become available. Increasing pressure of  - 3 - population on the land and inadequately controlled 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, development 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, and health in rural areas. An agrarian reform was also instituted in 1972 which provides 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 July 1979, about 75% of land transfer beneficiaries had received Certificates of Land Transfer (the initial step in the process of establishing their claim to the land), and about 18% had completed all steps necessary to begin amorti- zation payments. About 67% of leasehold beneficiaries cultivating rice and corn land had established written contracts with their landlords. 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 manu- facturing plants have located in the Greater Manila area. Reforms of tariffs and other industrial incentives to bring these into line with development objectives are presently being considered by the Government. 10. Beginning in 1970, selective measures have been introduced to promote nontraditional manufactured exports, including various arrangements to permit firms in selected export industries to import needed goods free of duty. Entrepreneurs have responded to these opportunities, and receipts from nontraditional manufactured exports increased from just over $100 mil- lion in 1972 to an estimated $1.3 billion in 1979. Population Growth, Employment and Income Distribution 11. The 1979 population is estimated at 46.7 million. The population growth rate fell from 3.0% in the intercensal period 1960-70 to 2.8% in the intercensal period 1970-75. The Philippines has an active family planning program registering approximately 650,000 new acceptors per year. Although the number of new acceptors has reached a plateau as the program has faced the increasingly difficult problem of reaching rural areas, the estimated proportion of married women of reproductive age practicing family planning increased from 15% in 1973 to 27% in 1978. However, by East Asian standards, this index is still relatively low.  - 4 - 12. Employment increased by about 4.6% anually during 1973-78, a con- siderable improvement over the historical growth rate of 2.4%, and in recent years has kept 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. 13. For historical reasons, income distribution has been highly skewed in the Philippines, and there is a small elite which is conspicuously wealthy. Due to a structural improvement in agriculture's terms of trade, the growth of agricultural production, the decline in urban real wages following the devaluation in 1970, and subsequent acceleration of interna- tional inflation 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. Nevertheless, the incidence of poverty remains high, at 40-45%, in both rural and urban areas, and malnutrition is widespread. Public Finance 14. 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 this 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 equaled about 5.5% of GNP. This expansion of public expenditures has brought about badly needed improvement in basic infrastructure particularly in transpor- tation, power and irrigation, as well as the development of more effective programs in the field of urban development, health and family planning. 15. Recognizing that a large increase in tax revenues would be required to finance expansion of the public investment program, the Government has undertaken a program of tax reform to raise the needed revenues equitably and efficiently. The overall tax ratio was raised by more than two percent- age points between 1975 and 1978 through a series of new tax measures and  - 5 - vigorous efforts to improve taxpayer compliance and collection performance. However, the recent rapid growth of the public investment program has made the Government's budget position quite tight in 1978-79. Continuation of a strong revenue effort, both by the Government and the government corporations, is necessary to allow for further expansion in infrastructure and social services. Private Savings and the Financial Sector 16. 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 invest- ment, 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 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 initially experienced by all government financial institutions and credit programs. The Government has taken a number of steps to improve collections; continued 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. 17. In response to the large balance of payments deficit in 1975 (see para. 5 above), 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. External Trade and Capital Flows 18. The current account initially behaved as anticipated - averaging $1.0 billion per year but declining from 6.2% of GNP in 1976 to 4.1% of GNP in 1977. However, since then actual developments have deviated from the original scenario. First, the volume of commodity exports, particularly sugar, has increased less rapidly than expected. Second, real import growth has, on the other hand, been more rapid than anticipated, partly as a result of a recovery of private investment and partly because of speculative importing in 1979. Third, although prices for some commodity exports (coconut products, copper) have increased substantially, the terms of trade in 1979 were only marginally better than in 1976-77 due to the increased price of petroleum imports and the acceleration of inflation in the OECD countries which supply most of the Philippines' non-oil imports. The combined effect has been a widening of the current account deficit to an estimated $1.8 billion in 1979.  - 6 - 19. In order to maintain growth and investment rates in the face of the worsened external environment, major structural adjustment is necessary to improve the balance of payments position. Initial steps have already been taken with respect to export promotion, and major changes in trade, industrial and financial policies are currently under consideration. However, such adjustments will require a number of years to effect the needed structural improvement in the balance of payments. The medium-term outlook, therefore, is for high current account deficits although falling as a percentage of GNP from 6% in 1980 to 4.7% in 1982. 20. Net capital inflows doubled from the 1975 level of $580 million to an estimated $1.2 billion in 1979, leaving an overall deficit of about $500 million. Most of the capital inflows came from medium- and long-term loans, with about 40% from official sources. In 1980, a net capital inflow of at least $1.8 billion will be required, increasing to $2.2 billion per year in 1981 and 1982. The ratio of debt service payments to exports of goods and nonfactor services is expected to rise from an estimated 20% in 1979 to an average level of 22% during the 1980-82 period, and to decline thereafter. 21. In order to ensure that debt service obligations remain within reasonable limits, the Government sought commitments of official assistance of at least $1.0 billion in 1980 at the last meeting of the Consultative Group for the Philippines, held in Washington, D.C. in December 1979. The Group endorsed the Government's request. 22. Satisfactory progress has been made in domestic resource mobiliza- tion (paras. 15-18). However, because of the increase in the Philippines' external financing requirements arising from the deterioration in the terms of trade, and the fact that many of the projects planned for official assistance have low foreign exchange costs, the necessary resource transfer can be achieved only with some financing of local costs of projects, or through non- project lending. PART II - WORLD BANK OPERATIONS /1 23. As of April 30, 1980, the Philippines had received 68 Bank loans (of which two were on Third Window terms) amounting to $2,181.9 million and six IDA credits amounting to $122.2 million, together with an advance of $50,000 under the Project Preparation Facility. At that date, IFC investments totalled $93.8 million. The share of the Bank Group in total debt disbursed and outstanding is currently about 13% and its share in total debt service is about 6%. These ratios are expected to be about 23% and 16%, respectively, by 1985. Annex II contains a summary of IDA credits, Bank loans and IFC investments as of April 30, 1980, as well as notes on the execution of ongoing projects. /1 This section is substantially the same as that contained in the President's Report for the Watershed Management and Erosion Control Project, scheduled for Board presentation on July 1, 1980.  - 7 - 24. 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 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 assis- tance 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. 25. 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, disbursements have been somewhat less than might be expected for a country having a relatively high level of management capability, and the Government has recently adopted a number of measures to expedite implementation of the public investment program incuding more flexible budgetary and contract review procedures. 26. 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. Agricultural 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 agricultural diversification through a commercial crops project and for small fishermen through a national fisheries project. Assistance will also be provided for integrated rural development projects which will support the Government's objectives of redressing regional imbalances in income. Substantial assistance will also continue to be given to industry with considerable attention given to policy reform through a structural adjustment loan and a financial sector loan, and to expanding the development of laborintensive, small and medium industries outside of the Metropolitan Manila area. A significant share of Bank lending will continue to be directed to social sector projects to upgrade living conditions of low-income people in urban areas, improve the quality of education and expand the Government's  - 8 - 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. 27. This is the second loan to the Philippines to be presented to the Executive Directors this fiscal year. A program loan to support structural adjustment in the industrial sector has been appraised and is scheduled for Board presentation in the next month or two. PART III - THE AGRICULTURAL SECTOR The Rural and Agricultural Sector 28. Some 31 million people or 70% of the Philippine population live in rural areas where social services are poor, economic activities limited, agri- cultural productivity often low and underemployment high. About 60% depend directly on agriculture. The rural population is growing at 2.7% per year, reflecting a natural increase of about 3.2% and an annual rate of migration to the cities of 0.5%. 29. Agriculture is the dominant sector of the Philippine economy, accounting for about 30% of GDP, slightly more than 50% of total employment, and 55-60% of the foreign exchange earnings. Nearly three-quarters of the land under cultivation is devoted to grains production, notably rice and corn. Other principal crops are sugar, coconuts, abaca, pineapple and tobacco. 30. The major part of the Philippines' agriculture comprises small-scale farms. The national average landholding is about 3.6 ha. Most of the nonmarginal lands, especially in the lowland areas, are under cultivation, and agricultural development and improvement of farm incomes critically depend on increased productivity of the already cultivated lands. Government's Sectoral Objectives 31. Government's agricultural policy emphasizes food and feed produc- tion, particularly to achieve nutritional improvements, crop diversification, reforestation and stronger linkages between agriculture and industry. Key components of the development strategy are agrarian reform of rice and corn lands and rural infrastructure development, improved extension and credit programs aimed at food and feedgrain self-sufficiency, and malnutrition pre- vention programs. Progress has already been achieved with this strategy, as is evident from increased farm production, the achievement of sustained  - 9 - self-sufficiency in rice and a more favorable growth rate of rural family incomes compared to incomes of urban families. Nonetheless, of the 15 million people in the lower 40% of the income scale, 12 million are found in the rural areas; 39% of the rural population are poor compared with 23% in urban areas. 32. With the achievement of self-sufficiency in food grain production, development priorities are no longer directed principally towards rice, particularly since growth in the other food producing subsectors has not been satisfactory. The Government is now preparing a "Food and Nutrition Plan," a strategy for accelerating food production and improving consumption, with assistance from Bank staff. Agricultural Credit 33. Agricultural credit programs in the Philippines form part of an Integrated Agricultural Credit Plan which covers the period 1977-82 and which is overseen by the Presidential Committee on Agricultural Credit. Within the framework of the Plan, annual plans are established and evaluated. The Plan covers both production and term credit, and takes into account all credit programs implemented both by public and private institutions. The principal government financial institutions are the Philippine National Bank, the Development Bank of the Philippines (DBP), the Land Bank of the Philippines (LBP) and the Agricultural Credit Administration (ACA). The private financial institutions are the commercial banks, rural banks, savings and mortgage banks, and savings and loan associations. Apart from the several operations which the Bank has supported through DBP, it is also assisting LBP in the implementation of a project for agrarian reform beneficiaries and, in association with the Central Bank, is assisting the rural banks in implement- ing a fourth phase rural credit project. As part of a recent restructuring of the ongoing Fourth Rural Credit Project, the private development banks have been incorporated as eligible financial intermediaries. ACA is the principal agency for the Bank-assisted land settlement project. 34. Formal agricultural credit in the Philippines rose from F 5.7 billion in 1971 to P 12.1 billion in 1978, of which about 95% was for short- term production credit. A major part of the remaining 5% is accounted for by DBP, the main source of medium- and long-term institutional credit for agriculture. Nevertheless, DBP's involvement in agriculture accounts for only about 20% of its lending, while industry and other loans account for 50% and 30% respectively. DBP's agricultural lending covers commercial crops, food crops, livestock, fisheries, grain processing and storage, most of which are supported by Bank-assisted programs. It provides about 20% of all institutional lending for livestock and 30% of lending for fisheries on a nationwide basis. The majority of these loans were made under the World Bank-assisted livestock and fisheries projects; the second projects in each of these subsectors will be completed in the near future. Animal Protein Subsector 35. Demand. The projected population of the Philippines in 1985 is about 57 million, or one fourth higher than the 46 million estimate for 1978.  - 10 - At the same time, per capita income is expected to grow in real terms by 3.0% p.a. As a result, the national demand for animal protein in 1985 is estimated to increase by 42% over 1978 for beef, with corresponding increases of 40% for pork, 37% for chicken and 30% for fish. 36. Supply. In spite of substantial annual growth rates in the commer- cial sector (in part supported by previous Bank loans) the overall annual growth of total cattle and carabao population has not kept pace with human population increases. However, commercialization has had a significant impact on the number of pigs and poultry and, therefore, on total supply. For fish the growth in marine catch has slowed somewhat, while investments in the inland subsector have only recently begun to yield positive results. Although production increases of about 4% a year can be expected in the fish catch from all sources, thereby keeping demand and supply in balance, resource depletion in areas which are heavily fished (particularly, but not exclusively, by artisanal fishermen), vessel obsolescence and growing exports could a-l result in curtailing supply to the domestic market. While the incremental production attributable to the project would only be 1.1% of the total fish supply, DBP's lending should nevertheless be based on a careful assessment of the market for incremental production. On the other hand, there is likely to be a shortage of meat by 1985, amounting to 16% for pork, 19% for poultry and 24% for beef if no new investments were made. 37. Government's Subsector Strategy. The overall strategy is to promote increased production and productivity in the animal protein subsector util- izing predominantly smaller scale middle income entrepreneurs. However, the Government has also evolved a regional approach to take advantage of favorable local ecological and economic conditions and the need to utilize these advantages for balanced regional economic development (see also para. 26). The Development Bank of the Philippines (DBP) 38. General. DBP is well known to the Bank, having served as the credit channel for six agricultural and four industrial projects financed by the Bank during the seventies. It was set up by the Republic Act 2081 in 1958 as an autonomous, fully government-owned development bank. It has since become the largest supplier of medium- and long-term agricultural credit in the country. DBP has about 4,800 employees, divided equally between its Makati (Metro Manila) head office and its 40 branches, 12 subbranches and seven agencies. DBP's agricultural lending at the head office is handled by two Agricultural Projects Departments (APDs), APD I for crops and processing and APD II for livestock and fisheries. The latter would be responsible for overall coordination of the project, and the Branches and Agencies Departments (BAAD I and II) for project lending and repayment recovery through the branch network. DBP's current intention is to crente a separate Metro ManiLa Branch and transfer to it APD II's lending activittes in the Metro Manila area, thus freeing APD II for intensified quaLIty control over all Ltvestock and fisheries Lending country-wide and also enabling it to concentrate on tech- nicaL assistance to the branches and on training activities. Restructuring of the various departments ts required to be compLeted hy December 31, 1980 (Section 3.10 of the draft Loan Agreement). 39. DBP Resources and their Uses. Renouirces have a[.most doubled over the Last three years, growing from 11.1 hbltlion in June 1976 to  - 11 - P 19.9 billion by June 1979, drawn almost equally from domestic and foreign sources, with IBRD now accounting for about 24% of the foreign funds. Lending for agriculture as a proportion of DBP' total assets declined from 14.9% on June 30, 1976 to 11.7% three years later, and as a proportion of the total loan portfolio from 24.3% to 19.4%. Within the loan portfolio this decline has been offset mainly by increased lending for industrial projects, whose proportion rose from 46.0% to 49.4%, as well as for other nonagricultural loans, which rose from 29.7% to 31.2%. The slowdown in agricultural lending can largely be attributed to DBP's involvement from mid-1977 onwards in Government directed, socially oriented programs to help the small farmers and fishermen, collectively known as "social loans"; these efforts diverted a substantial portion of staff and other resources to this task, involving over 100,000 small loans to financially weak borrowers. Another activity undertaken on an extensive scale (and through substantial investment of staff time) was an overall review of DBP's agricultural portfolio in 1977, including evaluation of collateral values to determine the required provision for insufficiently covered loans. 40. Agricultural Portfolio. DBP's agricultural loan portfolio shows a higher percentage of arrears than its other lending categories. Adjusted for various distortions (including "social loans"), the agricultural past dues as percentage of loans outstanding as of June 30, 1979 are about 22%, compared to 8% for industrial loans and about 14% for DBP loans as a whole. By age of arrears, however, agriculture loans appear to be in a better situation than DBP's portfolio as a whole. For instance, 76% of agricultural arrears were less than three years old, compared to DBP as a whole with 56% as of June 30, 1979. Corresponding percentages for the IBRD-financed livestock and fisheries projects were 92% and 97%. DBP is committed to improving the arrears' situation. In the past massive collection drives did not, however, produce results commensurate with the effort of tackling the portfolio of over 200,000 agricultural subloans. A new arrears reduction plan which was introduced recently represents a new approach in that it is selective in terms of subproject type, amount and age of arrears and specific DBP branches and should therefore achieve better results. The system is under the control of a special task force consisting of senior managers. Section 4.03 of the draft Loan Agreement requires DBP to furnish to the Bank by December 31, 1980 a report on the results of the plan and proposed actions based on it. 41. Operating Policies. Results and Financial Condition. DBP functions on the basis of established operating policies which have been adjusted as needed during the last two years in consultation with the Bank, leading to improvements in financial management, standardization and rationalization of lending terms for agriculture, and liberalization of lending terms and conditions for smaller agricultural loans. Over the three years ending December 31, 1979 DBP's income grew by 86% while its expenses increased by 98%. The main reason for the more rapid growth of expenses was increased borrowings at higher costs. As a consequence of higher financial costs and the consequent narrowing spread (see paras. 68 and 73), the net profit declined proportionately during that period, although it grew in absolute terms. DBP's debt to equity ratio, including guarantees, has remained stable over the past three years at around 5:1 and thus well below its authorized ceiling of 10:1. A substantial portion of DBP's deposits are government funds. In general terms, DBP's liquidity is in a vulnerable situation given  - 12 - the possibility of large withdrawals of government deposits and the relative shortage of long-term domestic funds. However, as recorded in the Agreed Minutes for the Third Industrial Investment Project (Loan 1572-PH), the Government has confirmed that it would take due account of DBP's liquidity situation before withdrawal of its deposits from DBP. Experience with Previous Livestock and Fisheries Projects 42. Both previous livestock projects /1 provided finance through DBP for the support of small- and medium-sized piggery and poultry enterprises, cattle development, slaughterhouses and technical services. In the two previous fisheries projects /2 funds were provided through DBP for the financing of expansion and rehabilitation of brackish water fishponds, fishing vessel construction, iceplants and slipways. The Project Completion Report (PCR) and the Project Performance Audit Report on the first livestock project comment favorably on the project execution and results. The PCR for the first fisheries project is now under preparation and its findings are also generally favorable. 43. The experience of the previous livestock and fisheries projects over the last eight years has contributed to the institutional development of DBP, the growth of interagency coordination and the geographical spread of the project funds to meet the growing demand for subloans in the livestock and fisheries subsectors. DBP's institutional growth is closely linked to various organizational changes whose principal objective has been to increase DBP's subproject appraisal and supervision capability. At all stages DBP has proved to be flexible in its organizational arrangements to meet new challenges. In terms of financial administration DBP is a well organized, stable institu- tion. Over the last two or three years, however, it has increasingly found itself constrained by lack of appropriate management information relating to progress of specific projects. 44. Substantial progress has been achieved in interagency coordination. DBP's techical capability has been strengthened by the development of closer links with the Bureau of Animal Industry (BAI) and the Bureau of Fisheries and Aquatic Resources (BFAR). This has enhanced DBP's ability to provide techni- cal assistance to its borrowers. In both cases Bureaux staff are being seconded to DBP to support its lending in the two subsectors and further strengthening of these ties is envisaged in the proposed project. The Govern- ment would cause DBP to furnish to the Bank by December 31, 1980 proposals for future collaboration (Section 3.08 of the draft Loan Agreement). 45. In the small livestock subsector the project participants have enjoyed generally good results due to continuing undersupply of pork, chicken /1 Loan 823-PH, $7.5 million, signed in M4ay 1972, fully disbursed by September 1976 (two years ahead of Closing Date) and Loan 1225-PH, $20.5 million, signed in April 1976, expected to be disbursed by June 1981 (a year ahead of Closing Date). /2 Loan 891-PH, $11.6 million, signed in May 1973, fully disbursed by August 1979 (two months after the original Closing Date) and Loan 1270-PHI, $12.0 million, signed in July 1976 expected to be disbursed by September 1980 (nine months ahead of Closing Date).  - 13 - and eggs. Their financial rates of return were seldom found below 20%. A similar situation has existed in the inland fisheries sector. As a conse- quence, loan demand from both subsectors was strong and exceeded appraisal estimates. Over the last twelve to eighteen months, however, the rising costs of inputs and fuel, and a more competitive market place have lowered the profit margins. In the cattle subsector only a few loans were made, mainly in Masbate and Mindanao, but limited investment opportunities on existing leasehold and freehold farms continued to be confirmed. The marine subsector, on the other hand, continued to suffer from continuing fuel price increases and general cost escalations in new construction and operating costs. This has caused a gradual movement to smaller fishing vessels better able to fully utilize their capacity in terms of catch per unit of effort. In addition, this had led to efforts to achieve economies of scale, better fleet management, and a new emphasis on the catch of high value species for export. 46. Agricultural Credit - The Next Steps. Although DBP will continue to be a major channel for Bank-assisted projects, it is also becoming increas- ingly evident that there is no clear line of demarcation between the respective roles of the various institutions involved in agricultural credit, particularly for term lending. The Bank's lending for agriculture through DBP will increasingly be consolidated, as is being done in the proposed project, and it is planned to move towards a single consolidated loan to DBP for agri- culture by about 1985. It is also proposed to review the Bank's association with all credit channels in the Philippines with a view to rationalizing the arrangements. This can only be accomplished, however, within the context of a comprehensive review by the Government of the entire credit mechanism, including large segments with which the Bank is not involved. It is proposed to discuss this subject as part of a proposed financial sector review which would analyze the supply-demand relationships in agricultural finance as well as the role of the concerned institutions. PART IV - THE PROJECT Background 47. The proposed project was prepared by the Development Bank of the Philippines with the assistance of FAO/IBRD Cooperative Program and appraised in September 1979. Negotiations took place in Washington, D.C., in June 1980. The Philippine negotiating team was led by Mr. Jose V. de Ocampo, Vice- Chairman of DBP. The Staff Appraisal Report (No. 2828-PH, dated June 13, 1980) is being distributed separately. Supplementary project data are provided in Annex III of this report. Pro-lect Oblectives 48. The project would, over a period of three years, support the Government's policy of increased animal protein supply through provision of medium- and long-term credit to both the livestock and fisheries subsectors, and by strengthening the institutional capability for planning and implementing the present and future programs. For the agricultural credit component DBP will have maximum flexibility to apply project funds to subprojects of the type already identified under the Government's current strategy, or to new types of subprojects which may be identified in the future. Although basically a production project, it is DBP's policy to  - 14 - provide support to small- and medium-scale enterprises in various parts of the country aimed at redressing income inequalities and imbalances in regional development. The project's institutional arrangements envisage a direct linkage between Government agencies which have responsibility for strategy formulation and DBP as the provider of medium- and long-term investment funds. The Borrower would cause DBP to establish, by June 30, 1981 a reporting system for the communication of regional findings and decisions to DBP (Section 3.11 of the draft Loan Agreement). The project includes non-credit components to strengthen each of the participating agencies in matters of immediate relevance to the project and for items whose early introduction would support other planned activities./l Project Area 49. The credit component of the project would finance subprojects in areas covered by the DBP branch network located in Luzon, the Visayas and Mindanao. In the allocation of funds to the branches DBP would follow regional and provincial priorities as determined by its annual lending program. Project Description 50. The components of the proposed project are: (a) Credit Component. The provision of credit through DBP for (i) medium and small-scale commercial production of pigs and other small livestock; (ii) expansion of the national cattle herd through development of cattle breeding on pasture land, and the transfer of young stock to the villages for fattening and breeding; (iii) construction and equipping of fishing vessels to supply both the domestic and export markets; (iv) rehabilitation and expansion of inland fishponds; and (v) other subprojects in both subsectors to be identified during the course of the project period; (b) Noncredit Component. Strengthening of participating institutions through financing of: (i) sectoral development program - cattle; (ii) other Bureau of Animal Industry (BAI) programs; (iii) Fish- eries Industry Development Council programs; and (iv) technical assistance to DBP. Credit Components 51. DBP's lending would be based on an annual lending program which would be formulated and implemented on a flexible basis to enable it to be fully responsive to variations in loan demand, DBP's administrative capacity and Government's regional development priorities. The following description of detailed features represents the appraisal mission's judgement of likely subloan demand and DBP's administrative capacity. The quantified lending program has been used primarily to estimate total loan size. /1 These include the second phase of the Agricultural Support Services Project, now under appraisal, and the National Fisheries Project, due for appraisal before the end of CY 1980.  - 15 - 52. Small Livestock. The majority of the subborrowers for piggeries would be operating a small, probably 5 sow, unit, located near an urban area. Subprojects would raise the sow number to about 20 and introduce commercial practices. Subborrowers for egg production would include existing operators with up to 5,000 layers: a typical subproject would increase flock size from about 400 to 1,600 layers. Past DBP lending has included broilers, ducks, goats, rabbits and quail. These and other livestock production units could also be financed where subproject viability can be demonstrated. 53. Cattle. BAI would identify villages suitable for fattening and breeding about 50 head of stock for village level production. The sub- borrowers would be either (i) entrepreneurs owning the 50 head and operating the traditional cattle profit-sharing scheme (Paiwi) with 50 villagers selected to care for one animal each, or (ii) individual-villagers, borrowing on his or her own account. Limitation to BAI selected villages is contained in para. 8, Schedule 5 of the draft Loan Agreement. 54. The Government grants pasture leases for extensive cattle develop- ment of about 400 ha each, particularly in the hilly areas of Masbate and Mindanao. The recent increase in demand for pasture bred young stock at village level now warrants changing management practices of these pastures. Subloans would support these changes through provision of finance for breed stock purchases, infrastructure and pasture improvement to intensify the production levels. Constraints in the issue of pasture leases /1 would affect lending volumes but the project would also be based on existing freehold and leaseshold land. This component is viewed as the beginning of a long-term program to build up the national herd on these pastures so as to supply an ever increasing number of young stock to support village level operations. 55. As in the past, lending for cattle on pastures in the coconut groves and similar small-scale operations would be eligible for assistance under this project. For all cattle lending, however, this project would reimburse DBP only for those subloans made to enterprises in designated priority areas. 56. Marine Fisheries. Subprojects are expected to finance fishing vessels ranging from 12 GT to 150 GT. Of the estimated total of 75 subloans, about 60 are expected to be for vessels smaller than 30 GT. In addition, the project would support the financing of large traditional outrigger canoes (bancas) operated by artisanal fishermen, and fishing for tuna for export markets. Other investments are expected in the re-equipment of vessels and the establishment of a limited number of stationary fishtraps. /1 The constraints include difficulties in removing illegal settlers, con- siderations of ecological and social balance, boundary disputes, and absence of demarcation.  - 16 - 57. Inland Fisheries. Typical subprojects would improve milkfish production technology levels in existing fishponds through rehabilitation and expansion of pond dikes and water control structures, and also improve pond management. Some lending is expected for shrimp culture, eels and tilapia cage culture. Government is at present considering the creation of large fishpond estates and the financing of this innovative prograui could be included subject to prior consultations between the Bank and DBP regarding evaluation criteria and procedures (para. 9 of Schedule 5 of the draft Loan Agreement). 58. Other Lending. Past DBP lending has included slaughterhouses, slipways and iceplants. These and any other new ventures, such as commercial vaccine production, day-old chick production and other similar ventures, which would be in direct support of animal protein production, would be assisted if shown to be viable. B. Noncredit Components 59. The project includes a number of noncredit components which are essential to the long-term development of the two subsectors. They would either support programs which have already been initiated on a modest scale and have proven to be effective or others on which a beginning has to be made as soon as possible in conjunction with other planned projects (para. 48). 60. In the livestock subsector the project would support BAI's cattle dispersal program, under which BAI acquires young stock for distribution to selected villages in preparation for their future participation in credit schemes; the breed stock upgrading program, under which approximately 55 purebred cattle would be imported to upgrade the existing herd on BAI's Milagros stock farm; small livestock nutrition research, to conduct research and extension on (noncommercial) piggeries and poultry, utilizing locally available low cost nutrients; the pasture and legume seed propagation program for which the project would finance the importation of selected range of pasture and legume seeds; and cattle markets, which the project would support by financing 50 weighing scales. The project would also fund the cost of technical assistance to the Ministry of Agriculture to review livestock policies and planning and assist with the formulation of a long-term strategy for the livestock subsector and associated investment programs. 61. In the fisheries subsector, the project would provide funds for technical assistance to the Fisheries Industry and Development Council (FIDC) to develop an extension package on the use of currently available deep sea fishing gear, suitable for local conditions and technical assistance to develop the design specifications for a specially constructed deep sea research vessel and its research program. Technical assistance would also be funded to review current regulatory practices under the marine regulations with a view to instituting effective control over access to coastal waters by type and size of fishing vessel and gear used, and related studies. 62. Technical assistance would be provided to DBP for the promotion of feed mill construction and operation in rural areas in order to support more  - 17 - efficient poultry production and to avoid current dependence on the feed mill- ing industry centralized around Manila and Cebu;/l other items include development of a new management information system for DBP, development of training programs for agriculture staff and training of in-house trainers; and continuation and expansion of the ongoing monitoring and evaluation study initiated under the Bank-financed Second Livestock Project, undertaken by DBP with technical assistance from consultants. To ensure continuity of the study a sum of up to $100,000 equivalent would be financed retroactively. The Borrower would cause DBP by December 31, 1980 to: (a) appoint consultants for the development of a new management information system and the training pro- gram (Section 3.04(b) of the draft Loan Agreement); and (b) furnish the Bank a plan for future monitoring and evaluation activities (Section 3.12 of the draft Loan Agreement). Implementation 63. Implementation of the credit components would be on the basis of an annual lending program established by DBP in consultation with the Ministries of Agriculture and Natural Resources, their relevant Bureaux, the National Economic and Development Authority (NEDA) and the Presidential Committee on Agricultural Credit. This annual lending program would establish indicative lending volumes and broad sectoral and regional priorities. It would be reviewed by the Bank, and the agreed program would form the basis for evalua- ting implementation progress. DBP would continue and further intensify its present arrangements under which BAI and BFAR provide it with technical staff on secondment. DBP is currently introducing a number of departmental restruc- turing arrangements aimed at rationalizing control over quality aspects of lending on the one hand and over branch implementation of the lending program on the other. Moreover, measures will be introduced to strengthen DBP's agro-economic expertise required for preparation of future lending programs. Implementation of the non-credit components by the respective implementing agencies would be based on a physical plan, implementation schedule and budget, forwarded to the Bank for comment prior to commitment of funds. The Borrower would cause DBP to furnish the Bank with an annual lending program prior to January 1 of each project year (Section 3.09 of the draft Loan Agreement). Submission of a program for the balance of CY1980 to the Bank would be a condition of disbursement of funds for the credit component of the project (para. 4(c) of Schedule I of the draft Loan Agreement). The execution of a Subsidiary Loan Agreement between the Government and DBP is an additional condition of effectiveness (Section 5.02 of the draft Loan Agreement). Cost Estimates and Financing 64. The total project cost, inclusive of price contingencies, is estimated to be $140.7 million: the credit component is estimated at $122.4 million and the noncredit component at $18.2 million. Physical contingencies ranging from 10% to 15% have been included in the noncredit component. The price contingency is based on the following expected price increases during 1980 through 1983: local costs 16%, 10%, 7%, 7% and foreign costs 10.5%, 9%, 8%, 7%. /1 Funds for the rural feed mills are currently available under the Second Grain Processing Project, IBRD Loan 1269-PH.  - 18 - 65. The proposed loan of $45.0 million would contribute 32% of total project costs, including about $23.1 milion of local costs (para. 22). It would contribute about 37% of the total cost of the credit component, net of subborrowers' contributions. The loan would be made to the Republic of the Philippines for a term of 20 years including a grace period of five years at an interest rate of 8.25% per annum. The Government would onlend to DBP $41.3 million, of which $40 million equivalent would be for the project's credit component and $1.3 million equivalent for the support of DBP's long- term institutional development, both on terms and conditions identical to those of the overall loan to the Government. The Government would bear the foreign exchange risk. The balance of the Bank loan ($3.7 million) would be channeled by the Government to the line agencies concerned and the Fisheries Industry Development Council (FIDC). 66. In addition, the Government would relend $15 million to DBP from the proceeds of the Yen Bond No. 1 Series Issue of 1978 to finance part of DBP's credit component under the project. This loan would have a term of seven years, including three years of grace and an interest rate of 9.5%. DBP would also pay a premium of 0.75% on amounts withdrawn and outstanding to cover the foreign exchange risk. 67. Consultancies. The staff-month costs including fees, international travel and subsistence, are estimated to fall within the range of $7,500 and $12,000, depending on the number of trips necessary. The consultancies include expertise in the following fields: small livestock nutrition research, livestock planning, fishing gear technology, marine legislation, management information system design including computerization and internal audit, staff training systems, monitoring and evaluation. The total involved amounts to about 143 staff-months with a total cost estimated at $1.4 million. This also includes local travel and other reimbursable expenses and vehicles and equipment in support of some of the consultancies. 68. DBP Lending Terms. DBP would onlend to its subborrowers at an annual rate of not less than 12% for subloans up to P 150,000, at not less than 14% for subloans up to P 3.0 million and at not less than 16% above P 3.0 million, where subloans are secured by land. For subloans not secured by land the rates would be 2% higher. These are standard rates, established in December 1979, covering all the credit subcomponents. These rates would be reviewed from time to time by DBP in consultation with the Bank (Section 3.03(a) of the draft Loan Agreement). The rate of domestic inflation is expected to decline from its 1979 level of 22% to about 16% in 1980, with further decreases in subsequent years (para. 64) and DBP's interest charges will, therefore, represent a positive rate in the foreseeable future. 69. Procurement (a) Credit Component. In line with procedures established in the pre- vious livestock and fisheries projects, procurement of goods and services would be on the basis of DBP's procedures, which require prudent shopping in most cases and competitive bidding locally ad- vertised for some larger items. However, international competitive bidding would be required for fishing vessels constructed from mate- rial other than wood and any single item of equipment costing more than $300,000, with a total value between $3.0 and $5.0 million.  - 19 - (b) Noncredit Components. Funds are provided for various programs (para. 59 through 62) to be undertaken by participating Government entities including the Ministry of Agriculture, the Mfinistry of National Pesources, their technical Bureaux, FIDC and DPB, which will directly support the lending program. Items to be procured are few in number and diverse in nature and cannot be bulked to attract international bids. Procurement would be on the basis of Government procurement regulations except for two BAI items: cattle imports (about $150,000), which would be by limited international tendering, and legume seeds (about $40,000) which would be procured on the basis of prudent international shopping. (c) Consultants would be appointed on terms and conditions satis- factory to the Bank. Disbursements 70. Disbursements for the credit component would be made against statements of expenditure, at the rate of 37% of subloans made by DBP; no disbursements would be made until the lending program for the balance of calendar year 1980 had been submitted (Schedule 1, para. 4(c) of the draft Loan Agreement). Disbursements for the noncredit components would be 100% of foreign exchange cost of imported equipment and materials; 100% of the ex-factory cost of locally manufactured items and 50% of the cost of locally procured items. For cattle the disbursements would cover 100% expenditures for imported breeding stock and 50% of the cost of cattle for the dispersal program. Disbursements for consulting services would cover 100% of contract costs. In all cases eligibility for financing would be conditional on establishment of a detailed physical plan, equipment list, implementation schedule and budget in consultation with the Bank. Retroactive financing is recommended for consultants' services for DBP's monitoring and evaluation study in an amount of up to $100,000 for expenditures incurred after December 31, 1979. An additional condition of disbursement for the noncredit compo- nent is that the Bank be furnished with a detailed physical plan, equipment list, implementation schedule and budget (Schedule 1, para. 4(b) of the draft Loan Agreement). Project Benefits and Justification. 71. Because of the explicit flexibility in DBP's lending program (para. 48) and the consequent uncertainty about the final mix of subprojects to be financed, an estimate of the impact of the entire project on the economy could only be made on the basis of a notional three-year lending program, which excludes the banca fisheries and village livestock subcomponents which have a very short pay-back period and would, therefore, have had an upward bias on the rate of return. Also excluded were the noncredit components. The resulting composite economic rate of return is 28%, but this would vary substantially with the composition of the subproject mix. Economic rates of return have been calculated for the various subcomponents on the basis of appropriate accounting ratios to convert financial prices to economic prices. The rates of return range from 17% for piggery enterprises and 18% for  - 20 - fishpond reconstruction projects to 72% for some of the smaller fishing vessels and aver 100% for the village cattle subprojects due to virtually cost-free grazing, crop residues and family labor which has little opportunity cost. The economic models least sensitive to cost/price changes are bancas and hill cattle, followed by fishponds with minor rehabilitation and vessels of various sizes. The most sensitive are the piggery and poultry models. In the case of piggeries, a 10% increase in costs would reduce the ERR to 2% but a 10% increase in price would increase it to 32%. The small-scale poultry model shows even a greater sensitivity to cost and price changes thereby indicating the highly risky nature of smaller ventures in this field. 72. Utilizing the indicative numbers that underlie the project costs calculation, an assessment of employment and production has been made. These results are only illustrative, and not intended as forecasts of the final outcome of this project. For the livestock subsector the aggregate direct annual incremental employment at full development would be about 2,000 and for the fisheries about 5,300. The production impact in the livestock subsector would be about 33,400 tons of incremental meat production and about 112,300 tons of fish capture. 73. Project Impact on DBP. In nonfinancial terms the project's most significant long-term impact would be the introduction of a new management information system and departmental restructuring. In financial terms the project's cash flows would be largely determined by the annual lending programs and the resulting mix of subprojects. DBP's analysis of previous years shows that the average all-inclusive administrative costs for agricultural lending are about 4% p.a. of the value of the average amount of loans outstanding. Combining this with the estimated cost of the World Bank and Japanese Yen loans and DBP funds, estimated at about 9-1/2% p.a., the income to DBP as generated by the project would, on the average need to be about 14% p.a. This is approximately the average rate expected to be charged for the project's mix of subloans and on this basis the project would be financially self-sustaining. Risks 74. The project's approach to lending requires interaction among various governmental agencies and DBP. While channels for such interaction do exist, they have not to date been used for the establishment of an annual lending program. Any lack of collaboration among the agencies concerned would seriously affect the responsiveness of the project to national objectives and the changing economic scene. Related to this is the need to establish a "regional focus" on the basis of periodic data collection and evaluation by DBP to ensure that the annual lending program fully reflects regional needs and priorities. There is a risk that the highly centralized process which has characterized past DBP lending programs may militate against the regional focus. 75. Over the past year there has been a general narrowing of profit margins, particularly of the smaller and medium-scale entrepreneur. Continued efforts by the Government to hold the product prices to an artifi- cially low level would erode profit margins and eliminate producers at the lower income levels. This would have adverse social implications as well.  - 21 - 76. Environmental Impact. No adverse impact on the environment is expected. Effluent from large piggeries is typically placed in sewage treatment lagoons. The small piggeries' waste materials are often used to generate methane gas for household cooking. Alternatively, the waste is used in food gardens and the rice fields. All droppings frQia poultry are dried and utilized as fertilizer for vegetable production or in fishponds. In the hill country, manure from cattle aids pasture production, increasing soil moisture retention. In the villages cattle droppings are used as fertilizers for subsistence crop production. In the inland fisheries sub- sector the project would also have a positive environmental impact. The fish farmers generally have much to lose by pollution of the environment and they constitute an important pressure group against pollution. For ecological reasons the Government policy aims at preventing uncontrolled use of coastal mangrove swamps for fishpond development. Very few leases have been issued in recent years for fishponds in those areas. The major pro- portion of the project's support for fishponds would be for reconstruction and rehabilitation of existing ponds rather than for wholly new farm development. PART V - LEGAL INSTRUMENTS AND AUTHORITY 77. The draft Loan Agreement between the Republic of the Philippines and the Bank and the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement of the Bank are being distri- buted to the Executive Directors separately. 78. Special conditions of the project are listed in Section III of Annex III. Additional conditions of disbursement would be: (a) for the noncredit components of the project, the provision to the Bank of detailed physical plans, equipment lists, implementation schedules, budget and terms and conditions of employment of consultants for such components; and (b) for the credit component, the submission of the annual lending program for the balance of CY1980 (Paragraphs 4(b) and (c) of Schedule 1 to the draft Loan Agreement). 79. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 80. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments Washington, D.C. June 24 , 1980  - 22- ANNX I Page 1 of 5 TABLE 3A PHILIPPINES - SOCIAL INDICATORS DATA SBEET PHILIPPINES REPERENCE GROUPS (WEIGHTED AVP4AGHS LAND AREA (THOUSAND So. EN.) - lDST RECENT ESTIHATE) TOTAL 300.0 AGRICULTURAL 90. 7 HOST RECENT MIDDLE INCOME MIDDLE INCOME 1960 b 1970 /b ESTIMATE b ASIA & PACIFIC LATIN AMERICA & CARIBBEAN GNP PER CAPITA (USS) 140.0 230.0 510.0 894.8 1384.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 147.0 301.0 339.0 842.4 1055.9 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 27.4 36.9 45.6 URBAN POPULATION (PERCENT OP TOTAL) 30.3 32.9 35.4 39.1 63.4 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 75.0 STATIONARY POPULATION (MILLIONS) 126.0 YEAR STATIONARY POPULATION IS REACHED 2075 POPULATION DENSITY PER SQ. KM. 91.0 123.0 152.0 376.1 28.1 PER SQ. KM. AGRICULTURAL LAND 360.0 472.0 503.0 2350.4 81.7 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 44.7 45.5 44.8 40.4 41.4 15-64 YRS. 52.3 53.6 52.1 56.2 54.7 65 YRS. AND ABOVE 3.0 2.9 3.1 3.4 3.9 POPULATION GROWTH RATE (PERCENT) TOTAL 2.7 3.0 2.7 2.4 2.7 URBAN 3.9 3.9 3.7 4.1 4.1 CRUDE BIRTH RATE (PER THOUSAND) 45.0 44.0 35.0 28.7 34.8 CRUDE DEATH RATE (PER THOUSAND) 15.0 11.0 9.0 7.9 8.9 GROSS REPRODUCTION RATE 3.5/c 3.3 2.4 1.9 2.5 PAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 191.7 509.0 USERS (PERCENT OF MARRIED WOMEN) .. 2.0 22.0 39.0 POOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 102.0 101.0 114.0 116.9 106.9 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 88.0 92.0 97.0 108.9 107.4 PROTEINS (GRAMS PER DAY) 45.0 50.0 53.0 60.3 65.6 OF WHICH ANIMAL AND PULSE 17.0 20.0 2L.0 18.8 33.7 CHILD (AGES 1-4) MORTALITY RATE 16.0 10.0 7.0 5.3 8.4 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 51.0 57.0 60.0 63.0 63.1 INFANT MORTALITY RATE (PER THOUSAND) 98.0 9s.0 74.0 52.8 66.5 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. .. 39.0 42.4 65.9 URBAN .. .. 51.0 62.1 80.4 RURAL .. .. 33.0 29.7 4.0: ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. 56.0 52.8 62.3 URBAN .. .. 76.0 71.1 79.4 RURAL .. .. 44.0 42.4 29.6 POPULATION PER PHYSICIAN .. .. 2758.0 4120.1 1849.2 POPULATION PER NURSING PERSON .. 3840.0 3058.0 2213.6 1227.5 POPULATION PER HOSPITAL BED TOTAL 1208.0 850.0 639.0 819.4 480.3 URBAN .. .. RURAL ADMISSIONS PER HOSPITAL BED . 28.8 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.8 5.9 URBAN .. 6.2 RURAL .. 5.8 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. 2.3 URBAN .. 2.1 RURAL .. 2.4 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 16.5 22.9sd 31.0 URBAN .. 62.8l. RURAL .. 9.81/ 0l.o0;  - 23 - ANNEX I Page 2 of 5 PEILIPtPINS - SOCIAL IDICAXS DATA SBUMT PHILIPPINES EFERIENCE GROUPS (WEIGITED AvWGS - MCST RECENT ESBTIMLTE) MDST RECENT MIDDIZ INC0ME laDDLE INCOKE 1960 A 1970 a ESTIMATE A ASIA & PACIFIC LATIN AMERICA & CARIBBEAN EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 95.0 114.0 105.0 98.6 9.7 MALE 98.0 115.0 103.0 99.2 101.0 FEMAIE 93.0 113.0 108.0 97.7 99.4 SECONDARY: TOTAL 26.0 50.0 56.0 55.5 34.4 MALE 28.0 59.0 65.0 60.7 33.5 FEfALE 25.0 42.0 47.0 49.9 34.7 VOCATIONAL ENROL. (l OF SECONDARY) 15.0 6.0 .- 13.7 38.2 PUPIL-TEACHER RATIO PRIMARY 36.0 29.0 29.0 34.6 30.5 SECONDARY 27.0 33.0 31.0 28.5 14.5 ADULT LITERACY RATE (PERCENT) 71.9 82.6 87.0 85.8 76.3 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 3.0 8.0 8.9 9.0 43.0 RADIO RECEIVERS PER THOUSAND POPULATION 22.0 46.0 41.0 118.9 245.3 TV RECEIVERS PER THOUSAND POPULATION 1.4 11.0 17.0 39.4 84.2 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 17.0 14.0 18.0 .. 63.3 CINEMA ANNUAL ATTENDANCE PER CAPITA 0.6 .. 7.6 4.9 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 10893.2 13478.1 16310.9 FEMALE (PERCENT) 34.4 33.1 32.0 36.8 22.2 ArRICULTURE (PERCENT) 61.0 53.0 48.0 51.9 37.1 INDUSTRY (PERCENT) 15.2 15.8 16.0 21.9 23.5 PARTICIPATION RATE (PERCENT) TOTAL 39.8 36.6 35.3 39.1 31.5 MALE 52.1 48.6 47.1 48.5 48.9 FEMALE 27.4 24.4 23.3 29.6 14.0 ECONOMIC DEPENDENCY RATIO 1.2 1.3 1.2 1.1 1.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 28.8 .. HIGHEST 20 PERCENT OF HOUSEHOLDS 56.2 53.9 53.3 LOWEST 20 PERCENT OF HOUSEHOLDS 4.2 3.7 5.5 LOWEST 40 PERCENT OF HOUSEHOLDS 11.9 11.9 14.7 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 250.0 RURAL .. .. 190.0 192.1 190.8 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 132.0 .. 474.0 RURAL .. .. 87.0 182.5 332.5 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 39.0 RURAL .. .. 44.0 33.2 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970 between 19 and 1971; and for Most Recent Entimte, between 1974 and 1978. Ic 1950-55; /d 1967, household. April, 1980  -24 - ANNEX I: Page 3 of 5 DEFINITIONS OF SOCIAL )DWICALTOOD NOcts: Although th. data ... draw from souca .gesflly judged th. moat authoitativa and raliabln, it should alsob hantod that tbay ma not ho tote- naWtiona lly cosparahl haoaaa of tha lack of st.al-dar -d dofiottitna and -nopta nod by diffar-t coutrIns toooiotn tha data, Tha data t.. none- theisas,.. uaful to dactibn orders of ngi a indlicate tranda, and hbara.tcrta certain saJor dif faraooaa batarwn... outria.. Thorofcaaa roua re (1) th. aaato o gr..a0pof aha auhiant -toary an (2) a coun try grou.p winh au bthSIahncv.ag t _o than tha county ac.u, of tho sojn outy(n-apt for "Capital Surpl.a Oil Eoportara" groop hors. "Iiddla lacun ffornh Africa and faiddla Eant" to chonen hannos of anrongar atct-cltnr.lffiiiaa). T tha rafaranon grop da ta tha avra.gan an. population waightad arithmtic mamn for anh infototr and aba only whoa at lathoif oftlbs ooootia tI o a Sroop h.. data for that indicator. Sin- tho aorg oftoain aonnhidnaradpdsn theoratlailiyo dat and t.oo ant uafrm ation stat he aasrtiaad ia ralattag avaraaao of ann indinator toaobr ha vrgsea-ol afi ornaiog ltha vof of one indi.tat atfa time amon tha country and ratfera..a groopa.. !,r.1I f,i-cpr. .- LOtNO -O (othuand a-b.)t'oaticc car 'hcattta - Paplauta utntaa by numor at prta-tt t pghy- Tao -Tta cufa ca rs noeprisino land ara and inland gaar.at -n quaifind roaZi-al school at an ivars.ity lana. Aaric-lturel - fEtimats of anialurl ra uad ntporarily or paranatly Poeniatiu noPI ran Parson -. FPalation .di~id.d.bY n-bar of pra-ito for crpa, pasnrna. marbat aad kitohan gurdana or to lita felIne; 197-7data, easan aal rdnato ua prartica nas,edeaittoua. Poniabanca isntalga -total. orba. a rora1 - Popolation rtcI, 097PtCPTA (UI!) - GNP Par capita asntaat. at corrant arbat price.. to)-- ura,adcoa)dvdd bycortapti'alr fheiclhd cuisted pby acecomanion eethnd as World Mob Atlas (1976-78 haao) 160, available in publin and peivata ganra and apacialiand boapita1 and r- 1ulo, sod 1078 data. habilitationtnara Hopinsia at. antabliaht.et pacmaaatly atff a INUGY ONSUMTION F CAPIA A. 1-_-pt.. of ci.l .. rgy(..I bytat.leat on phyatiia, Establishment. proidign priti..pa11cgioi adigieperola, ntrlgsad hYdra-,. ...aa an d aa-t Ionalalac ..soare not PoraM-tytaffe byapytia (but by I medical asistat, tririty) It kitogsm of col- qivltpat ta.pita; 1960, 1971. 9an lOtnrs iwia t, bt of fni-ain noedta n rnd data. ~~~~~~~~~~~~limited rasg of "aical fniFoatPr tagiatinal purpoan urban hoapi- rts. incids WHD. printtpl genaraI and aparielined boapitela, and rune PcPUfLuTION ANT VITAL) STATESTOCS hoptal loa crrrlbarti n edr ad -at.rnity c.ntera Total Population. Mid-Yaar (eillitna.. As of loly 1; 1960, i9709, end 1970 hdalpatun ca -tnta Bad. - Toital.nueho of detsrn ordicare 'rhb" Ponulaion!1 (cattant of total) -Ratio of urban to total pcpnlation:h!'a. ll. yt. bro .. di,ffoen dfinitinca of urban ara nay affat cnparability of data HOoUtING among.. tcuttia; 1960, 1970,..ad 1970 dato. Aveoa us f gH-jhold (nersoaorhaaol)-tnl rbn n ,r Porulo1tilan Proactoar 00-C-. ...i.po.ta.v .. ia A moouashol'd cona.tat of a group otdidulwhohrotlining q-atars Poplaton n cac 100- urrct opuatin pcjetins ra aea onlog edh chir aio meals. A hoards. or lodger nay or nay no ha inclodad to tota population by aga and a- nod choir mortality and fertility rats... the hooaahold far notte.tioal purpea. Frola-rion pa nasfor mortality ratee cnepnie of thr.. lana.s.asur. A-c-rn atbar of pnr-o pa nr roe-total. urben, and rural - AnaraS.cn ing life ep-ct-ny at birth i..cr..aiag with ...aotry'a par capita iocon bar of par..aa per root Ia all ura,ad ruralI- oooptsd nooan-iona 1o1, and f-1nslaiot onpc-,t atahilaing. at7 y75 yanre. T'hapr- dsioarsacnay lwaltnsecu atpraatsrcaa n mee. fr fa-tility Irt lohon thr...ani aaaeio dtino inuocpid:ra faoioacrdicg to Incoe i1-1 and.past family plaaiag prpeac, A...a.a to'Dioc`tnit*,ty (Pefar..t of d-Ilitna) - atacl. urban. eed co..ai - Each country Ia than anaigoad one of cheon nian cobinations of mortality EC..nanti..a. d-olitS. rith ai1ctrtoity in linin quartessparntg and fertilIty trends fur projection purpaa. o oa, to,ad ua aniasrepoia Stationar.y rorulatim I - En a attionary population there in no growth atoco fttl b,.drr1d.1~ tho btrrl rat O qalto tho et rt,ad aa h g trutr anios constant. This is schiavad only etter factil icy ratas~~~~~~c dacitast Adlented foro1lmat Ratios ,ho rnplacaat lunel f antitnet r-prduction rate, han - Sob ga aian Primary school - totl, mal and f-1al - G.... total, male ad fnmal ofwmnrplceitaf stly, The atetionry pnpa1ianto aiaewssrima falna ttepimr aa aonae frnatv eooiaatd ccth cbsmat oftho projactad chaIlrecteiation of cbs popltin cimary -thoo-aga p-1orn nrmlY inclndna cbildraa agd h-li In oh. ysar 2101, and the rata of dnclIIno of tarlitty cots to rapias- yenra-ht adjotad for ditffreat lanotha of potmary education; for want L_nai. cnnro ith ani-r-aI adenat.a aarnllnett naynomd 1)0 parcaa.t -ncatti Par oaaion Is rac-bad - Tha yan rhan stationary popolation .ics nn paptil nra he1le or a.,ahor th WfIcia achnol aga. att hasita ahd tnaysho - ttal.lnaa and tamal - lumpatd aaabona;eacunIda Foralation lacaity education requiras at lasso foor y-Ar of appr-rd primar -tuarttion Per s1 ho.. i fd-ynar population par square kilctiar (100 hbatctres of Pr,nda i g-ns, vocti.onal *o ta...har training i-struttinas far popik Per at. an. asricultural Land - as.t . bho cur aaricc1tura. lend useIp f1)t 7 r of aINs; corepondenc c rrsea goSra1ly only. O~~~~~~~~P ano~~~~ludad. l,uli, icruc,tur (partcat) -Childr- (0-lA years), ari-ge(15- .ocationltenrollment ercnt" of saton,dar)y Voationa Iatitatton Pocolatino tan ~~~~~~~incide thoica1, iadpuatriel, or ros prgr-awich oparte indapn- hA years), and-atitd (1ysssdon)asor tosfaiA-yaer op.p- dntly c e dopar-tean of e.t..dary Ti-aiuoos lotio; 190, 170, nd 100 daa. Pral-sacbrrtn-orar.ndscdrn-Total student. enro1lld to Poroletion Icowo ht I rrcnI - total - Annua grctth rotna of toctal mid- prinary and IoNadarylevels divided by nmesof tc..chara In the yac1tp p iulttn too 1950-60. l9b0-7E, and 1970- 78.crrpodnlae. I'clail Ooyh at fontanu - urban- anua growth rates of urbc coca- Autitsavna(ea)-Lit.tnrt adults labia no rand and -it.e)- lotions for 1950-60, 1960-70,an 197078.asanooaorltnlautppueiaaeL5 ar n c. Crude Birtch Rats (par thousad) - annul Lion biroha par thous...d of mid-yoac a . ..o ttlautpp.i. . 5y...d.c population; 1960, 17,ad 19 78 data..cC.NSUMPTIO Crudn Death gate (Per thousand) -A Anua deaths par thoa..and of nid-ya- Pa...anr la actoandpneaia - P...nga tas mpiamtor popu1anirn; 1960 1970, and 1670 dect. cas saig loss than igh poralntia; nanude amoan.c hasa n ir... nenrud-ctiot Rate-Average n-anbr of daughtarn a oa ill baa. In iitr nbcs. igt..d ablo.,h ..Id bar irty rardciapro fse eetnn rsn g-acifu Be a tdi Raei ps o. thousad popalatier)l - All typostf rtiesf or redo cilit rats; uuall fiv-psa evaagesanAlg in 1960, 170, an 97 raosso aaa ulcprtosd Io ppuaton Ia'ld" unit- Famiy rlann-EatPaoetfsridnmn -Fracg fere onro abolisHed piablndagf. Pu0d1rd... p...010t0..it coo tr ..iesc a . to-yrae whe riatryttn of TO eas onsi affaio Indn f on Pndoctn arCeits(169711If Idea o prcaia ana Owrae Circlatio C et honsnd tnultian - Sows thaona irut- L.inl vrg cIdcrpiewihsc16-).90 a 90dae ibt eddrn the yer. icudn ad missitna no.d.ilu-in otlimas L nad g eqf iaFan of " net foodtspp9ia antalodin fcnr por capita hAo-oc Poutl aPr or.tinof ad chaaf to stoc.ne e .p.is aluda. au..u fed,ees,ade foresan oepiyn.bt eluin:idiwna, tum le act quantities usd. l.b fno prcessing and. ..eans in odistibutio. leuro siottiona int cpri-oc l c tn s era.. 000 comparale 1960 1975end- nants ware ostimaqed by FAt asod on phystelagicel aFedaator...rmalf.cti- 1970 date ci.ty sod tag_b c dse ibletnicnds-oe tsseaturp body, caigfta age Feoie (A-c-Ir -ttPamel lbo for sprcnaec tota laborfore Pr c aciaorir fooni aoaccdn -I drutoiA cocoent ofdperioapft...tdc.... tpecen)I-Laor orc tolting, catctt. eten tot auply offcd pa.r dayt Oe sohply 19f food is1 de-od usiatone. Op-d d dlcticty oath, end ites pecnun fttl ao ore OS qarant of allcoonrie ea...tslad by .ISI pciie ( d e tm17 an 176dta pula proein c whichbl 10pl. a-riee hcud-htina protein.ob Thots stand- t. Laborit rates ate coptd as tcts-i,nab, en fe-a..... iebor udrcaa quM tmal prutainasfanro g for tho. erd, propose.dibytFAGtoi oh ThiMrd 1060, 1970. end 1975data Thar era din'g parn-icietnnterfat Acri Food urvpy-196165,9170 an11977date ago rou 1- por., o tildan ~ ths ae goup furcaunt deteloinecu' to te ttallabrafroe ,Id 11,tr1b.ti.. of p.pul.ci.%, urercoutsa of rivat loas(both to cas and-tied of tehv. yrihs hf ..::,c toci (ees)-iAorgutlbo-o yLracblferamf-ng S rLo, icfe 20petet,porsc f7 eren. and prat AS poren so brth 191, 1970 and 197 9dta It.hushod. .r..t190170.d98W infao _Pnuit. Ratsl (pa thdnsed - -Atua datb of -nfatauodar en-pac. fi.hi. TAAO iOpar..tg fttllbrfr. ofaePerd thousandpl live birthsd. fnt-Ima.tsd Absolute Paovrt Incomei Lani.i5. oreia9-ob nad oa Accese to feorcer (rrato oulto)-otl ubc n ua - dhalote very, u-om lse i hadncm level 19owwic a 0ot fste 6suppl (iclde vrstod surf tacs espc'd ccunrotd h0g..of 0 ncntannat0 efude19be. oeeruhn hat h frm o Sc _ boeoe, r n Pngeed sen toyaia.o siaa aatine ct. Poet1ocm ee (059 nor capta -u.rba fandr c' percsateges of hem respective opulatiote. loa uban erAs a9 public 1ura 0 reatne 97 povety Thnnoa ln IisOna-.tipthido avraepe apt coaida red ts hingwti -- eoaSjr bls -Ied.ftathus.I rura aZrds ee with dutmat for hio cos of. pultinu in urbtere. Wreaon hia oas wo mpytht h huswf96o1enar f6hehush7d EsIatd oulcunaeowasout ovrt ocflLve (etttl-o ga Acarst oct ilLsl(aca of dccularic -tcv i urban7 sod .dd- .-' ruci-Otfumhatc..pscclr p(todsl.u961eo1ecdtrur_i.al)I spreedatohfyopocrnte.r15.. 6 .d dispcesl ea percentaes of theic h....cdi - Abo.ua dico h. EPc.t die ooinantScil at Dviio pChild nay includ theclipyoRtonaddipel aipaccrtctu traosc- tcnod A Iyt)adPrjeton faato of. husac eaot yand.t nahn-ldtr. by wterhi orto 'ystan ccr -the use April, 1980 ccc pccvtee end simile. tostellhat20pittne.... 2 p.-1 -dp- ~ pa ..  ANNE1X I - 25 - Page 4 or 5 pege.s ECONOMIC DEVELOPMENT DATA SHEET Annual average 1979 Actual Est. Proiected grs wth rates (Z) share 1972 1975 1976 1977 1978 1979 1980 1981 1985 1972-78 1978-80 1980-85 of ODr National Accounts (millions of US$ at 1975 prices and exchange rates) GDP 12,929 15,769 16,822 17,865 18,928 20,077 21,298 22,594 29,392 6.5 6.1 6.6 100.0 Terms of trade adjustment 168 0 --456 -613 -70 -70 -387 -465 -262 - - - GDY 13,097 15,769 16,366 17,251 18,695 20,006 20,910 22,129 29,129 6.1 5.8 6.9 99.6 Imports - constant prices 3,304 4,116 4,460 4,799 5,489 5,865 6,068 6,484 8,271 8.8 5.2 6.4 29.2 Exports - constant prices 3,020 3,000 3,,784 4,644 4,592 4,425 4,852 5,362 8,022 7.2 2.8 10.6 22.0 Exports - adjusted for terms of trade 3,189 3,000 3,327 4,030 4,359 4,355 4,464 4,897 7,760 5.4 1.2 11.6 21.1 Resource gap 115 1,116 1,133 768 1,129 1,510 1,604 1,586 511 - - - 7.5 Consumption 10,221 11,977 12,270 12,756 13,861 15,646 16,393 17,262 21,421 5.2 8.8 5.5 77.9 Investment (incl. stocks) 2,991 4,907 5,228 5,264 5,963 5,822 6,176 6,552 8,524 12.2 1.8 6.6 29.0 National savings 3,016 3,983 4,098 4,435 4,743 4,718 4,948 5,360 8,410 7.9 2.1 11.2 23.5 Domestic savings 2,876 3,791 4,095 4,495 4,833 4,537 4,807 5,227 7,328 9.0 -0.3 8.8 22.6 Sector Output (millions of us$ at 1975 prices) Agriculture 3,993 4,535 4,897 5,140 5,385 5,417 5,688 5,972 7,259 5.1 2.7 5.0 27.0 Industry la 4,087 5,314 5,836 6,285 6,690 7,043 7,536 8,064 11,061 8.6 6.2 8.0 35.1 Services 4,849 5,920 6,089 6,440 6,853 7,617 8,074 8,558 11,072 6.0 8.5 6.5 37.9 Prices (1975 = 100) Export price index 47.4 100.0 86.2 86.6 99.2 117.6 123.2 131.6 180.3 13.1 11.4 7.9 - Import price index 44.9 100.0 98.0 99.8 104.5 119.5 133.9 144.1 186.4 15.1 13.2 6.8 - Terms of trade index 105.6 100.0 87.9 86.8 94.9 98.4 92.0 91.3 96.7 -1.7 -1.6 1.0 - Selected lIdicators ICOR lb 4.5 3.4 3.4 3.6 3.6 4.4 4.0 3.9 3.3 Import elasticity 0.93 0.59 1.24 1.22 2.32 1.13 1.12 1.12 2.08 Average savings rats 19.5 24.7 24.4 25.0 25.3 23.1 22.9 23.4 26.8 Imports/GDP 25.5 26.1 26.5 26.9 29.0 29.2 28.5 28.7 28.1 Investment (iocl. stocks)/GDP 23.1 31.1 31.1 29.5 31.5 29.0 29.0 29.0 29.0 Resource gap/GDP 0.9 7.1 6.7 4.3 6.0 7.5 7.5 7.0 1.7 Public Finance 1972 1975 1976 1977 1978 (Central Governmentl -- (X of GDP in current prices) --- Labor lorce in 1978 /c Millions (x) Current revenue 12.2 15.0 13.9 13.2 14.0 Agriculture 7.4 44.4 Tax revenue 9.7 12.0 11.6 11.2 11.9 Industry 2.7 16.2 Current expenditare 13.0 13.2 12.3 11.6 11.3 Services 5.6 33.0 Current surplus 0.8 1.8 1.6 1.6 2.7 Unemployed 1.1 6.4 Capital expenditures 1.9 3.0 3.5 3.4 4.1 Total Labor Force 16.8 100.0 1s Includes mining, manufacturing, construction, and utilities. /b The ICOR is defined as the ratio of fixed capital formation in the previous period to the current increase in GDP over the previous period. /c Estimate based on second quarter, 1978. East Asia and Pacific Region November 1979  ANNEX I - 26 - Page 5 of 5 BALANCE OF PAYMENTS AND EXTERNAL ASSISTANCE (US$ million) Actual Eat. Projected 1972 1975 1976 1977 1978 1979 1980 1981 1985 iunnoaro of Balance of Payments Exports of goods ans services 1,455 3,170 3,387 4,161 4,736 5,790 6,620 7,650 15.500 Of waic21: exports of goods 1,136 2,294 2,574 3,151 3,425 4,260 4,900 5,700 12,100 Inports of goods and services 1,632 4,412 4,763 5,248 6,322 7,910 8,920 10,210 17,400 Of eiriop; lf :pOrts of goods 1,230 3,459 3,633 3,915 4,732 6,000 6,720 7,6905 13,100 Transfers (aiet) 188 318 269 260 312 340 370 400 600 Current Account Balance 11 -924 -1 107 -827 -1,274 -1,780 -1.930 -2,180 -1,400 Dir-ct investmeait (net) -22 125 144 216 163 150 150 170 250 i,bT Loans (net) 140 359 1,040 662 834 1,000 1,300 1,670 1,140 OtficiaL-source loans (net) 94 117 282 332 333 420 520 710 780 Prsvate-scurce loans (net) 46 242 758 330 501 580 780 960 400 Otlner capitol /i 56 -81 -238 113 233 47 100 120 170 Overall Ba-ance lb 94 -521 -161 164 -54 -583 -380 200 400 International reserves (end-year) /c 551 1,358 1,640 1,525 1,883 2,423 2,130 2,130 3,200 Grants and Loan Comerit..nts Official grants 0.0 0.0 0.0 0.0 0.0 Total public loa-s 422.0 769.4 1,577.4 1,372.7 2,417.0 IBRD1 29.5 114.0 226.0 317.5 533.0 IDA 10.0 0.0 0.0 0.0 28.0 Other multilateral 43.3 106.0 64.2 207.3 189.2 G-oeronents 275.5 182.3 391.6 122.3 370.4 of which CPE 0.0 13.2 5.9 0.0 0.0 Shappliers 2.0 52.5 52.0 194.2 76.7 Financial institutions 61.7 314.6 476.4 341.7 1,000.5 Bonos 0.0 0.0 367.2 129.7 219.2 other ' t.T loans 130.0 283.0 603.6 134.8 914.0 Ite-or-adsa Itens Gras1t element of commitments 28.0 16.4 8.8 14.7 16.8 Average interest (I) 5.4 7.4 8.3 7.9 7.4 Avvrage maturity (years) 17.3 16.7 13.1 15.3 15.9 Itedi-1 6 Long-Tern,l Debt (disbursed only) Total aabt outstanding (end of period)1,890.0 2,965.0 4,383.0 5,554.0 6,839.0 Including undisbursed 2,638.0 4,520.0 6,817.0 8,155.0 10,856.0 Paslic debt service -149.6 -225.3 -239.2 -441.9 -468.1 ot whichi: interest -51.6 -73.0 -97.9 -215.2 -167.1 other HILT debt service -167.6 -232.7 -283.5 -357.1 -441.9 Totac debt service -317.2 -458.0 -522.7 -799.0 -910.0 Delt Burden Ou'ostanding Deut service ratio 22.1 14.9 15.7 18.0 20.0 December 31. 1978 Debt service ratio /d 22.7 15.6 16.4 19.5 20.6 AMount Percent Debt servilce/GDP 3.8 3.0 2.9 3.7 4.0 External Debt (1US ci.) Pubsic debt service/governnent (disbursed only) revenae 17.0 9.1 9.9 12.0 20.1 IBRD 546 13.0 Bank Group /e 57h 13.8 Ge ros Other multi- lateral 27' 6.6 Interest on total DOD/total DOD 6.1 5.4 4.1 6.4 4.0 Covernments 1,039 24.8 Total debt service/ttoal DOD 17.7 16.9 10.5 15.8 13.3 Suppliers 271 6.5 Financial oepcadencv Ratios institutions 1,254 29.9 Bonds 771 18.4 Gross disbursements/imports (GNFS) 30.2 21.4 37.9 28.7 34.3 Total public Net tra.sfer/imports (GNFS) 12.7 7.7 6.1 5.4 5.4 MLT debt 4,188 100.0 Net transfer/gross disbursements 41.9 36.2 16.2 18.9 23.2 Other MLT debt 2,651 63.3 Other NLT debt txposure (incl. un- disbursed) 3,291 78.6 IBRD disb./gross total disb. 4.7 9.8 5.5 7.4 8.3 Total public Bank Groap ditb./gross total disb./e 4.8 10.7 6.2 7.5 8.3 debt (incl. IBRD DOD/total DOD 7.8 8.0 7.2 7.3 8.0 undisbursed) 7,563 180.6 Bank Groap DOD/total DOD /e 7.8 8.6 7.8 7.8 8.4 Total HIT debt IBRD debt ser.ice/retal debt service 4.4 5.5 6.6 5.6 6.9 (incl. un- Barik Group debt serv./total debt. serv./e 4.4 5.6 6.7 5.6 7.0 disbursed) 10,85t 259.2 /d Short-ter- capital, monetization of gold, allocation of SDRs, and errors and omissions. /b Eq1als change in net international reserves. /c Gross reserves of the Central Bank ("International reserves", IFS).East A /d Includes net direct investment income. sia and Pasific Region T. Exclud.s IFC. February :*980  ANNEX II Page 1 of 18 THE S7TT' (INS BANE (E1PO UPiRATIONS IN TiE PEILIPPINES A. STATEliENT OP BLUsNN LOATIS AND IDA CREDITS As of April 30, 1980 Loae or Ccedit Amount (less cancellations) Neh cl r PF Borrower P Lrpe' I Bank IDA Undisbursed Seventeen loans and two cre, its tully disbursed 264.0 19.5 72()-P1t 1971 Rep. of the Philip. Rice Processing & Storage 14.3 0.3 80S9-Ph 19'12 National Pow/er Corp. Po)wer 22.0 0.2 149-PH 1973 Rep. of thc Philip. Educoti n 11 12.7 0.0 /a 939-PHi 1973 " Ports 6.1 0.1 950-Ph 1973 " Second llghiways 68.0 1.6 984-Ph 1974 " Aurora-Penaranda Irrigation 9.5 I.8 998-Ph. 1974 IDBP T 50.0 4.0 1034-PH 1974 National Power Corp. Power 61.0 3.2 1035-Ph1 1974 Rep. of the Philip. Population 25.0 12.2 1S43-PH 1974 SulippinF 20.0 8.3 1052-Pli 197a, Phtlip. NatLonal Bank PDCP IV 30.0 5.1 1060-Ph lQ75 Nep. of the Philip. Tarla, Irrigation 17.0 6.2 1132- H 1975 Rural Development 25.0 11.6 1120-PH 1975 Smnll s Mledium Induistries 30.0 0.7 1154-P1I 19876 lNagat Irrigation 42.0 16.6 1190-PH 1976 lEPE I7 75.0 7.4 1224-I-Ph 197s " Education III 25.0 13.1 12375-P1 1976 li-vestock 7I 20.5 6.4 12 7-1P 1917 " LilCh Irrigat ion 50.0 35.6 1272-T-PH 1976 Manila Urban 10.0 5.8 1268'-PF 1976 Manila Urban 22.0 12.7 1269-Pl: 1976 " Second Grain Processing 11.5 9.7 1270-PEl 197h Second 1isheries 12.0 3.2 1353-P1' 1977 " Third highways 95.0 71.8 1367-Ph 197i " Jalaur Trrigation 15.0 9.0 1374-Pli 1977 " Fourth Eduration 25.0 15.4 13Q)9-P.i 1977 Central Sac1 c,i the Nou,rth Nural Credit Philippines 36.5 21.7 1414-Ph 1977 Rep. of the Phil ip. liational ITrr. Sys. Inprov. 50.0 39.9 1415-PHl 1977 " Provincial Cities Water Sup. 23.0 17.9 1421-Ph 1977 " Rural Dev. Land Stlit. II 15.0 13.2 1460-E1' 1977 satri--l P-oer Corp. Seventh Power 51.0 55.6 1506-P1, 1978 Rep. of tne Philip. Snlellhlder Tree Farning S.0 7.6 1514-PiH 1978 Philip. Natt-onal Bank PDOP V 30.0 23.1 1526-PI: 197S rop. oi the Philip. 2nd Ilatul . Irrg. Sys. Improv. 65.0 54.1 790-PP 1978 PEral Infrastructure 28.0 27.4 S.S-PE 1975 7 iEducation 2.0 1.9 1547-Ph 1978 Nat. Electrif. Adnin. Rural Flectrification 60.0 37.4 1555-PE 1979 Philip. ';ational bank PIlL. 15.0 4.5 15t7-P1 1978 Rep. of the Philip. Iagat 11 150.0 96.0 1572-PE 1978 " Industrial Investment III 80.0 5t.6 1615-Pit 1979 ' lianila Water Supply II 88.0 86.7 162b-l'h 1979 ' National Extension 35.0 35.0 1h39-PH 1979 Magat River Multipurpose 21.0 18.9 1646-Ph 1979 Snall Farner Dev. Land Bank 16.5 15.3 1647-PNi 1979 " Second Urban Development 32.0 29.9 1661-PH 1979 Highways IV 100.0 99.7 1710-PH 1979 " Water Supply II 16.0 16.0 920-PHi 1979 " Water Supply II 22.0 22.0 1727-PH 1979 " Small & Mledium Industry II 25.0 25.0 923-PH 1979 Population 7I 40.0 40.0 1772-PH/b 1980 S Samar Island Rural Devel. 27.0 27.0 1786-Ph/b 1980 F Pisheries Trng. (Educ. VI) 38.0 38.0 1809-PH/c 1980 " Rledium-Scale Irrigation 71.0 71.0 1814-Ph/c 1980 " flanila Sewerage & Sanitation 63.0 63.0 1815-PH/c 1980 " Rainfed Agric. Dev. (Iloilo) 12.0 12.0 Total /, 2,181.9 122.2 1,318.4 of wHIMc auas been rosaId (Bank and third partlies) 163.2 Total now outstanding 2.018.7 122.2 Amount sold 24.3 of which has bee ro paid (third parties) 16.0 8.3 - Total now held by Bank and IDA (prior to exchange rate adjustaents) 2.010.4 122.2 Total undisbursed 1,229.0 89.4 1.318.4 /a Balance of S28,207.60 to be disbursed in say/June 1980. /b Became eifectire in Mlay 1980. /c Not yet effective. /d Not included: Urban IIT, $72 million, signed June 2, 1980; Ports III, $67 million, signed June 13, 1980; and Rural Roads Improvement, $62 million, signed June 13, 1980.  - 28 - ANNEX II Page 2 of 18 B. STATEMENT OF IFC INVESTMENTS As of April 30, 1980 Fiscal Amounts ($m_illion) Year Company Loan Equity Total 1963 & 1973 Private Development Corporation of the 15.0 4.4 19.4 Philippines 1967 Manila Electric Company 8.0 - 8.0 1967 Meralco Securities Corporation - 4.0 4.0 1970 Philippine Long Distance Telephone 4.5 - 4.5 Company 1970 & 1972 Mariwasa Manufacturing, Inc. 0.8 0.4 1.2 1970 Paper Industries Corporation of the - 2.2 2.2 Philippines 1971 & 1977 Philippine Petroleum Corporation 6.2 2.1 8.3 1972 Marinduque Mining and Industrial 15.0 - 15.0 Corporation 1973 Victorias Chemical Corporation 1.9 0.3 2.2 1974 Filipinas Synthetic Fiber Corporation 1.5 - 1.5 1974/1979 Maria Christina Chemical Industries, Inc. 1.5 0.7 2.2 1974 Republic Flour Mills Corporation 1.2 - 1.2 1975 Philippine Polyamide Industrial 7.0 - 7.0 Corporation 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 1979 General Milling Corporation 4.0 1.1 5.1 1980 PISO Leasing Corporation - 0.1 0.1 Total gross commitments 77.1 16.7 93.8 Less sold, acquired by others, 34.3 12.3 46.6 repaid or cancelled Total commitments now held by IFC 42.8 4.4 47.2 Total Undisbursed 1.5 - 1.5  - 29 - ANNEX II Page 3 of 18 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: September 30. 1980 Project funds have been fully committed. Final disbursements are expected to be made by September 1980 on completion of a warehouse con- struction project, now about 40% complete. The repayment arrears situation has improved with arrears of principal and interest amounting to 10% of the loans outstanding. Half of the arrears are less than 12 months old. 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 Overall progress of the project is satisfactory. Work on the dams and transbasin diversion channels was completed in 1975, about one year ahead of schedule. There were initial delays in the award of contracts for the service area improvement works. Further delays were caused by a typhoon in 1978 which damaged some of the project area. Completion is now planned for 1980 - a two-year delay in the original schedule. Due to increased costs, a reduced cropping intensity and delays in construction, the internal rate of return is expected to be close to 12% compared with the appraisal estimate of 17%. Loan No. 1080 Tarlac Irrigation; $17.0 Million Loan of January 27, 1975; Date of Effectiveness: April 27. 1975; Closing Date: December 31, 1980 All major civil works contracts are in progress and the remaining work is under way. Progress continues to be slow, with about 70% of project works completed. Due to initial delays and recent shortages of fuel and cement, the project is likely to be completed by June 1982. The total project area is likely to be reduced by about 20%, mainly due to elimination of areas subject to deep flooding by the Chico, Camiling and Agno rivers. The project cost has increased from $34 million at appraisal to about $44.1 million, with the result that the economic rate of return will be reduced from 15% at appraisal to about 10%. /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 evaluation of strengths and weaknesses in project execution.  - 30 - ANNEX II Page 4 of 18 Loan No. 1152 Rural Development; $25.0 Million Loan of April 16, 1975; Date of Effectiveness: July 28, 1975; Closing Date: June 30, 1981 Physical implementation of the irrigation and drainage components is about 62% of the appraisal estimate. Due to delays in contract award and recent shortages of fuel and construction supplies, construction has slowed down. However, now that the Pula river irrigation system contract has been awarded, progress is expected to improve. The road subpro1ect is about 68% complete. Disbursements are in line with physical projects, with 50% of the loan amount allocated for road works disbursed. Loan No. 1154 Magat Multipurpose Project; $42.0 MIillion Loan of August 7, 1975; Date of Effectiveness: November 4, 1975; Closing Date: June 30, 1982 Consultants' work on engineering and economic evaluation studies of the proposed Magat dam and reservoir has been completed. Civil works by local contract and force acount for rehabilitation and new construction of canals, drains and access roads are progressing well, and the project is about 70% complete. The water management training is continuing satis- factorily. A delay in the contract award for improvements to the project diversion dam will mean about a year's delay in the completion of the project. 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 exceed appraisal estimates, with subloans for beef production development lagging behind. The project's list of goods has been amended to allow for this fact. Funds for the project's nutrition research funds are unlikely to be used, due to difficulties in recruitment of consultants. A revised component will be included in the next project. The establishment of the monitoring and evaluation system is proceeding satisfactorily, and procurement of laboratory equipment for the Feed Quality Control Program is complete. Project funds have been fully committed, and the loan should be fully disbursed by mid-1981. Repayments of many of DBP's borrowers under the project are still under grace, but a build-up of interest arrears is beginning to emerge. The Bank has assisted DBP with the development of an intensive action- oriented collection program which will be further reinforced under the proposed Third Livestock and Fisheries Credit Project. 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.  - 31 - AiENEX II Page 5 of 18 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 project had a slow start due to delays in procuring construc- tion equipment for force account works. Changes in the design of the Chico diversion weir, the main diversion dam and the main canal siphon resulted in contracts being awarded behind schedule. Even though progress has improved since the contracts were awarded, and work is now proceeding satisfactorily, the project is about two years behind schedule. Loan N4o. 1269 Second Grain Processing Project: $11.5 Million Loan of July 2, 1976: Date of Effectiveness: October 4, 1976; Closing Date: June 30, 1981 Due to delays in implementing the first phase project, handling of applications for the project only started about 2 years after effectiveness. After three years of bumper rice crops, medium and large millers continue to make reasonable profits, but Government controls have affected the investment climate. DBP has undertaken to intensify its technical assistance to the smaller millers, and this should result in better repayments. Demand for subloans has also been slowed down by what is perceived by prospective applicants as slow processing of subloans by DBP. The Bank has, in consultation with DBP, developed a list of detailed recommendations on actions to be taken. Recently, the Bank approved various amendments to broaden the scope of the project for the loan to become more responsive to current needs and to speed up disbursements. New proposals have recently been made for the Grains Losses Study which represent a change in the previously agreed terms of reference and reflect the change in focus caused by the Philippines currently achieving a rice surplus situation. 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 Development Bank of the Philippines slowed down the processing of subloan approvals in the second half of 1977. However, loan approvals had picked up considerably during 1978; the loan was fully committed in August 1979, and is expected to be fully disbursed by September, 1980.  - 32 - ANNEX II Page 6 of 18 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 Overall progress of the project is about 28% compared with appraisal estimates of 34%. Force account work is proceeding satisfactorily. Nine of the 24 contracts for civil works have failed, and NIA has taken over eight of them for completion by force account. With the equipment now on hand, NIA is capable of completing this work satisfactorily. 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 After two and a half years of project implementation, commitments and disbursements are roughly one-half of appraisal estimates. The Central Bank has reassessed the project and as a result new categories of lending (for medium-size trucks, tree crops and working capital), and a new set of financial intermediaries (private development banks) have been included in the project. Although these should accelerate implementation, it is tentatively estimated that the completion date will be delayed by about 18 months. A better idea of eventual performance will be obtained by late summer of 1980, when the above changes, which were introduced in late February 1980 will have been effective for six months. 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, 1982 Progress in project implementation has been slow due to staffing and design problems. Contracts for drainage works in Leyte are to be awarded shortly, and those for the Abulog works have already been awarded. Progress is now expected to proceed satisfactorily. 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 Satisfactory overall progress is being maintained with infra- structure and in work towards appropriate technical packages in agriculture. Problems associated with legitimatizing land holdings are now better understood by concerned authorities. Some initial steps toward resolving them have now been taken. Feasibility studies towards a forward program is well underway, and have been expanded to include policy studies on the future use of, or developments within, unalienated lands in general.  - 33 - ANNEX II Page 7 of 18 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, 1983 Operations have started in all project components except research, which is expected to begin early in 1980. However, progress has been lagging behind schedule. In order to stimulate the slow smallholder enrollment rate in the treefarming component, DBP eased the collateral terms and application procedures for treefarm subloans. Insufficiency of government funds has delayed the other components to varying degrees, particularly the Abra pine plantation component for which vehicles have still not been been acquired. A gradual improvement of this situation is expected, although funding could continue to be a problem in 1980. Disbursements have started at a moderate rate. 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 Project equipment has been procured ahead of schedule and has started to arrive at the project sites. Topographic surveys and mapping have been completed for about 80% of the project area and design of project works is under way. Construction work has started and is primarily devoted to service roads and structures along main and secondary canals. A new Project Manager and his Assistant are providing excellent leadership in getting the project moving. Overall progress of the project is satisfactory. Credit No. 790 Rural Infrastructure; $28 M4illion Credit of April 21, 1978; Date of Effectiveness: July 21, 1978; Closing Date: December 31, 1983 Construction work on communal irrigation systems, village water supply, health stations and ports is proceeding well. Construction of about 70 km of roads has started and about 50% of the design work on the remaining 680 km has been completed. While construction of the road component is behind schedule, overall progress of the project is satisfactory. Loan No. 1567-PH The Magat River Multipurpose Project - Stage II; $150 Million Loan of May 23, 1978; Date of Effectiveness; August 24, 1978; Closing Date: December 31, 1983 Progress is generally satisfactory. Work on the diversion tunnels and the main dam and spillway has accelerated due to a marked improvement in the management, planning and execution of the contractor's operations. River diversion through both tunnels was completed on Mtay 1, 1980. Excavation on the main contract is ahead of schedule, but there has been some delay with the batching plant.  ANEX II Page 8 of 18 Loan No. 1626-PH National Extension Project: $32.0 Million Loan of December 21, 1978: Date of Effectiveness: March 27, 1979; Closing Date: June 30, 1983 A Management Committee has been created under the Chairmanship of the Minister of Agriculture, and appropriate subcommittees established. Nominations have been approved by the President for 12 MOA Regional Directors, and 24 Assistant Directors. The first staff appointments have been contracted. Allocation of 500 proposed agricultural centers has been made to all 75 Provinces and negotiations on site ownership and registration are in progress. The first year's vehicle allotment is being procured, including about 1,000 motorcycles with sidecars which will be purchased by extension workers under the project's newly estabished special vehicle loan fund. Training is well under way. The first consultancy, to establish project monitoring and evaluation procedures within BAEx is about to begin. The appointment of a second consultant should be contracted soon. Pilot areas have been selected in all 12 regions of the Philippines for introduction of the "training and visit" extension system, and specialized training of the district agricultural extension supervisors, who will administer the pilot areas, has been completed. Four pilot areas are operational, and the remaining eight will be as soon as the benchmark agroeconomic surveys are completed in 1980. 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 Force account construction started in early 1980. There have been some delays in awarding major construction contracts. Bowever, NIA was expecting contractors to begin work in April/May 1980, and completion is still expected, as scheduled, by end-1982. 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, 1983 Since the loan became effective, the Land Bank has improved internal procedures and strengthened field operations, although staffing is still below required strength. Lending under the project for agricultural term credit has commenced in most subcomponents, although loan disbursement has been very slow. No disbursements have been made for infrastructure improvements due to difficulties with the Government's budgetary procedures which are currently in the process of being resolved. The trend in implementation is improving, although progress will be slower than expected in the foreseeable future.  - 35 - ANNEX II Page 9 of 18 Loan No. 1772-PH Samar Island Rural Development Project; $27.0 million Loan of February 1, 1980; proposed Date of Effectiveness: June 30, 1980; Closing Date: June 30, 1985 This loan was signed on February 1, 1980, and is expected to be declared effective on June 30, 1980. Loan No. 1809-PH MIedium-Scale Irrigation; $71.0 million Loan of March 28, 1980. Proposed Date of Effectiveness: June 30, 1980; Closing Date: December 31, 1985 This loan was signed on March 28, 1980 and is expected to be declared effective on June 30, 1980. Loan No. 1815-PH Rainfed Agriculture (Iloilo); $12.0 million Loan of March 28, 1980; Proposed Date of Effectiveness: June 26, 1980; Closing Date: June 30, 1986 This loan was signed on March 28, 1980 and is expected to be declared effective on June 26, 1980. 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, 1980 Project civil works at General Santos were completed and turned over to the Philippine Ports Authority (PPA) on December 7, 1978. At Cagayan de Oro, 99% of the project is complete, and PPA is already using the new quay extension. The Closing Date of the loan has recently been extended to July 15, 1980 to cover civil works contract guarantee retention monies and the costs of the next ports project feasibility study. The latest project cost estimate is $20.2 million compared to $12 million at appraisal. Loan No. 950 Second Highway; $68.0 Million Loan of December 12, 1973; Date of Effectiveness: February 27, 1974; Closing Date: June 30, 1980 Overall, the project is about 99% complete. Difficulties have been encountered by contractors at various times in the execution of the works which, together with inflation, have resulted in cost increases and time delays. These problems have now been overcome. Further major problems are not anticipated, and the project is expected to be completed by May 1980, except for one bridge reconstruction, which is scheduled for completion in  - 36 - ANNEX II Page 10 of 18 August 1980. This represents a delay of about 3 years, with a new Closing Date of June 30, 1980. Total project cost is now estimated at about $189 million, an increase of about 47% over the original appraisal estimate, due primarily to inflation and the serious time delays that have been experienced throughout the project. Loan No. 1048 Inter-Island Shipping; $20 Million Loan of October 29, 1974; Date of Effectiveness: January 15, 1975; Closing Date: June 30, 1981 The Closing Date was extended recently to June 30, 1981 to allow for the completion of training programs and for ship construction guarantee payments. About 50% of the loan has been disbursed. Loan applications covering the balance of uncommitted funds are under consideration by DBP. 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 Overall, the project is about 30% complete. Miajor problems have been encountered in the implementation of the national roads contracts, with 7 out of 14 contracts terminated due to unsatisfactory performance by the contractors. Two new contracts have been awarded and bidding is underway for the remainder. As a consequence, delays and costs higher than the original bids are expected. Contracts for the improvement of minor roads have been awarded but Presidential approval is being awaited for some of them before work can begin. After substantial initial delays, the road maintenance and restoration programs are now making satisfactory progress. All 28 workshop contracts have been awarded but work has only begun on 8 of them, awaiting release of budgetary funds for the rest. Procurement of road maintenance equipment, tools and other machinery is virtually complete. Consultants for supervision of construction of roads and workshops are in place and the road and ferry feasibility studies have been completed. The technical assistance advisors to MPH completed their assignment in November 1979. Training advisors to MPH completed their work in Mfarch 1980. Overall project costs are expected to remain close to appraisal estimates, but project completion is likely to be delayed until late 1982, more than 24 months later than the appraisal schedule. This delay is due to the late start of some critical activities and to the serious delays in the execution of some of the road construction contracts. Loan No. 1661 Fourth Highway Project; $100 Million Loan of March 9, 1979 ; Date of Effectiveness: June 15, 1979; Closing Date: December 31, 1983 The project has made a slow start, but prequalification of contrac- tors for the road construction works is underway, utilizing new procedures agreed during loan negotiations. Proposals for the technical assistance to MPH and MLGCD have been received from the short-listed consulting firms and evaluation is in process. A short-list of prospective consulting firms for  - 37 - ANNEX II Page 11 of 18 the design and construction supervision of workshops has been prepared and proposals requested. Preparatory work for the continuation of the road maintenance and road restoration programs begun under the Third Highway Project (Loan 1353-PH) has begun. Selection of technical assistance consultants to MPWTC/NEDA for the continuation of the transport planning advisory services, begun under a previous project (Loan 1272-T/1282-PH) is in process. Land acquisition for road construction and workshops is under way. Prequalification for equipment suppliers has begun. Loan No. 1855 Third Ports Project; $67 Million Loan of June 13, 1980; Proposed Date of Effectiveness: September 11, 1980; Closing Date: June 30, 1984 This loan was signed on June 13, 1980 and is expected to be declared effective on September 11, 1980. Loan No. 1860 Rural Roads Improvement Prolect; $62 Million Loan of June 13, 1980; Proposed Date of Effectiveness: Septem- ber 11, 1980; Closing Date: December 31, 1984 This loan was signed on June 13, 1980 and is expected to be declared effective on September 11, 1980. Education Sector Loan No. 1224T Third Education Project; $25 Million Loan of April 8, 1976; Date of Effectiveness: July 29, 1976; Closing Date: June 30, 1981 The project has established an autonomous textbook agency to manage book development, production, and distribution for public elementary and secondary schools. It includes the writing of 75 textbook titles and production of 27 million textbooks. Good progress has been made towards achieving the key institution-building feature of the project. Implementation is proceeding well with minimal delays in textbook publishing/printing and teacher training. About 18 million textbooks have been produced and distributed. Delays are greatest in construction of the central warehouse complex, which is about 20 months behind schedule. Project costs are close to appraisal estimates, and disbursements are about 69% of 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 about one year behind schedule because of delayed contract awards, shortages of building materials and rapid price escalation. Remedial measures have been taken by the Go-vern- ment and the delays arrested. Enrollment projections and staff development programs show that the project is making steady progress towards its development impact targets. Project costs are close to appraisal estimates, but disbursements are about 41% of appraisal estimates, reflecting the implementation delays.  - 38 - ANNEX II Page 12 of 18 Loan No. S-8-PH Educational Radio Technical Assistance: $2 Mfillion Loan of April 21, 1978; Date of Effectiveness: August 22, 1978; Closing Date: December 31, 1981 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 the two selected pilot areas on schedule (Pangasinan and Leyte Provinces). CET started another experimental utilization in Mlindanao in late 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 and is expected to be completed in the mid-1980s. Loan No. 1786-PH Fisheries Training Project; $38.0 Million Loan of February 1, 1980: Date of Effectiveness: May 19, 1980: Closing Date: June 30, 1985 This loan was signed on February 1, 1980, was declared effective on May 19, 1980. A monitoring and evaluation unit has been established within EDPITAF and the collection of base line data is in progress. A review of combined World Bank and bilateral sources assistance shows that the fishery technical assistance program is well coordinated and mutually complementary. 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 Overall construction on the Tondo project is about 57% complete. The 65-classroom high school is now occupied, and final designs for the remaining four schools are nearing completion. 95% of the infrastructure and 1,480 of the 2,000 units in the Dagat-Dagatan sites and services component are complete. Both packages for the Radial Road (R-10) have now been awarded. The project is generally progressing satisfactorily with many initial diffi- culties overcome and lessons learned which should hasten implementation of the remainder of the project. Loan 1415-PH Provincial Cities Water Supply Project, $23 Million Loan of May 13, 1977; Date of Effectiveness: September 9, 1977; Closing Date: March 31, 1982. Contracts have been awarded in all six Water Districts for distri- bution networks, pumping stations and reservoirs. The scope of subprojects was revised by LWUA and approved by communities in public hearings. Difficulties in contracting local firms for drilling have resulted in delays  - 39 - ANNEX II Page 13 of 18 in the preparation of feasibility studies in remote areas. LWUA has been requested to present a plan for assistance to Water Districts in institution-building, and proposing solutions to the scarcity of local well drilling contractors. Loan 1615-PH Second Mlanila Water Supply Project; $88 Million Loan of July 26, 1978; Date of Effectiveness: December 21, 1978; Closing Date: December 31, 1983. Delays in ADB-financed components of the project have resulted in similar delays in IBRD-financed parts of the project. Nevertheless, according to new re-scheduling prepared by consultants, it is expected that the original target of completing the project by June 1983 will be met. Because of the overall impact of inflationary pressures resulting from recent oil increases, the increase in water rates of P 0.25 per cubic meter ori- ginally scheduled for October 1979 has been postponed to about mid-1980. MWSS now expects to achieve a rate of return of 5% on net revalued fixed assets in 1981 instead of 1980. Loan No. 1647-PH Second Urban Development Project; $32.0 Million Loan of January 26, 1979; Date of Effectiveness: April 26, ,1979; Closing Date: June 30, 1984 Implementation hlas begun on earthworks, sewage and drainage contracts in Manila and the three regional cities of Cebu, Davao, and Cagayan de Oro. Designs for community facilities in Dagat-Dagatan are complete, and those for the elementary and high school are in various stages of production. Credit 920-PH Second Provincial Cities Water Supply Project; $22 Million Loan 1710-PH Credit and $16 Million Loan of June 27, 1979; Date of Effectiveness: November 30, 1979; Closing Date: December 31, 1985. Consultants to assist LWUA in the preparation of feasibility studies for the first group of 20 cities have been hired. A new project manager was appointed and LWUA is actively promoting the creation of new Water Districts. Work has started on the development of a financial planning and control system. Loan 1821-PH Third Urban Development Project; $72 Million Loan of June 2, 1980; Proposed Date of Effectiveness: September 2, 1980; Closing Date: December 31, 1984. This loan was signed on June 2, 1980, and is expected to be decleared effective on September 2, 1980.  - 40 - ANNEX II Page 14 of 18 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: June 30, 1980 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, and the actual project cost as finally constructed was about $59.3 million, an increase of about $11.0 million over the original estimate. The Closing Date of the loan has been postponed from December 31, 1979 to June 30, 1980 to allow full disbursement of committed funds. As of the end of December 1979, the undisbursed funds amounted to $1.0 million. 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, and the transmission facilities are now expected to be completed in the first quarter of 1981, more than three years behind schedule. The revised cost of the project is estimated at $124.2 million, an increase of about 35% over the original estimate ($92 million). 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 The revised foreign exchange component is estimated at $44.4 million, compared with the original estimate of $58.0 million. Procurement has been slow, with the result that disbursements have been behind schedule. The Bank waived the 8% rate of return requirement for 1978 and the Government has requested that this be repeated for 1979. NPC's financial performance was reviewed by the Bank during the energy sector review in April/May 1980. In the meantime, the Government authorized a 31% power rate increase effective February 1980, and NPC expects to meet the covenanted 8% rate of return in 1980. Plans for establishing a training center, which was to be financed by the Bank, have been deferred. Loan No. 1547 Rural Electrification; $60.0 Million Loan of April 4, 1978; Date of Effectiveness: August 17. 1978; Closing Date: December 31, 1981 Execution of the project is now improving, after initial delays in tender document preparation and procurement. Following reorganization of  - 41 - ANNEX II Page 15 of 18 NEA's management, the first contracts for purchase of Bank project materials were awarded in April 1979. Construction started in late l1/9 following receipt of project materials, and first disbursements are expected before June 1980. Bid documents for the third and last package of materials have been prepared, and contract awards are expected in September 1980. NEA's financial performance in 1978 and 1979 was satisfactory, and steps are being taken by NEA to strengthen its monitoring of the financial performance of the cooperatives, especially their compliance with the Government's finan- cial performance guidelines. 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 industrial portion of the Loan ($48 million) has been fully drawn down by DBP to finance 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; this part of the loan is almost fully disbursed. 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, 1980 The loan is for on-lending by PDCP to financially and economically viable industrial subprojects. After some slowdown in commitments and dis- bursements 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: December 31, 1980 The DBP ($16.7 million) and IGLF ($12 million) portions of the loan have been fully disbursed. The Rural Industrial Cooperative Program ($0.6 million) which is being implemented by the National Electrification Administration is facing management and staffing problems because of its experimental nature. 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.  - 42 - ANNEX II Page 16 of 18 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 were intended to be used by DBP to finance large-, medium- and small-scale industries. Commitments of funds, which were initially much slower than expected due to a slowdown of investment in the industrial sector as a whole, improved in 1978 and 1979. The loan has since been fully committed by DBP for subprojects. Disbursement is now proceeding satisfactorily. 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 The proceeds of the loan are being on-lent by PDCP for financing viable private industrial enterprises. As of March 31, 1980 commitments under the loan amounted to $18.5 million. The project progress is satisfactory. Loan No. 1555 Philippines Investments Systems Organization (PISO); $15 Million Loan of May 8, 1978: Date of Effectiveness: May 12, 1978; Closing Date: December 31, 1982 The actual pace of commitment of the loan was much faster than anticipated during loan appraisal, and the loan has since been fully committed by PISO. As of March 31, 1980, disbursements amounted to $10.5 million. 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 Out of the total loan of $80 million, $50 million is earmarked for financing large industry and $29.7 million for small-scale industry projects and a small portion ($0.3 million) for technical assistance. Commitments for subprojects under the large industry component amounted to $43.5 million as of March 31, 1980. In addition, as of the same date the small and medium industry and the technical assistance components had been disbursed to the extent of $7.6 million. The overall progress of the project is satisfactory.  - 43 - ANNEX II Page 17 of 18 Loan No. 1727 Second Small and Medium Industries Development Project; $25 Million Loan of June 29, 1979; Date of Effectiveness: November 9, 1979; Closing Date: June 30, 1983 In the last quarter of 1979, the Government and the Central Bank worked on the introduction of policy changes in IGLF, for which purpose $24.5 million was provided under the loan. Loan utilization is now progressing well. Overall progress of the project is satisfactory. Population Sector Loan No. 1035 Population; $25.0 Million Loan of July 31, 1974; Date of Effectiveness: November 13, 1974; Closing Date: June 30, 1980 As of March 1980, 193 of the 219 project facilities had been comple- ted, 12 were under construction and 14 had not been started. Contractors have completed about 92% of all construction work. During the period January to October 1979, many project components experienced implementation delays due to non-availability of Government counterpart funds. While this problem was partially solved by internal transfer and reallocation of funds it is likely that there will be a 6- to 12-month delay in project completion. Following the disbanding on December 31, 1979, of the administration unit for this project, a Project Coordinator wras appointed for both this and the second project. This action is expected to speed up significantly the completion of this first project. In January 1979 the project was amended to include financing of additional vehicles and equipment for service delivery; training; information, education and communication campaigns; and studies in preparation for the second population project. The amended total project cost is $40 mil- lion. The total cost estimate had decreased from the estimate at appraisal, due mainly to price increases not materializing as forecast. The management situation in the Commission on Population (POPCOM) is improving and a func- tional analysis of the Ministry of Health is completed. The recommendations of this study are being considered to strengthen the integrated health/ nutrition/family planning programs.  ANNEX II Page 18 of 18 Credit No. 923 Second Population Project; $40.0 Million Credit of June 29 , 1979; Date of Effectiveness: October 15, 1979; Closing Date: June 30, 1985 This credit was declared effective on October 15, 1979. Implemen- ting agencies obtained sufficient GOP budget allocation for CY1980 and have started several significant activities under this project. A new construction unit has been established to monitor and coordinate all civil works under the project. Most of the contracts for operational research and production of communication materials have been finalized. The Ministry of Health is streamlining the project management activities into its line functions. A national task force is engaged in developing the operational policies, guidelines and manuals for implementation of Primary Health Care Program and two independent studies to strengthen the finance/accounts management and integrated health/population/nutrition management information system are underway. Though due to delayed release of GOP funds implementation is slightly behind the schedule, the overall progress is satisfactory.  - 45 - ANNEX III Page 1 PHILIPPINES DEVELOPMENT BANK OF THE PHILIPPINES THIRD LIVESTOCK AND FISHERIES CREDIT PROJECT Supplementary Project Data Sheet Section I - Timetable of Key Events (a) Agency which prepared the project: DBP with assistance from FAO/CP. (b) Date of first presentation to the Bank and date of the first Bank mission to consider the project: October 1977 and March 1978 (c) Departure of Appraisal mission: August 23, 1979 (d) Negotiations completed: June 13, 1980 (e) Planned date of effectiveness: October 17, 1980 Section II - Special Bank Implementation Action None Section III - Special Conditions (a) DBP to present to the Bank before December 31, 1980: (i) report on the results of the current arrears' reduction plan and a plan for future actions (para. 40); (ii) draft agreements defining collaboration between DBP on the one hand and BAI and BFAR on the other (para. 44); (iii) terms of reference and a short-list of consultants for the development of DBP's new management information system and for the development of an agricultural staff training program in sufficient time to enable appointments to be made by December 31, 1980 (para. 62); (iv) plan for monitoring and evaluation studies of agricultural subprojects (para. 62); and  - 46 - ANNEX III Page 2 (v) a lending program for the balance of the year ended December 31, 1980 and by January 1 of each subsequent project year an Annual Lending Program (para. 63). (b) Other matters to be attended to by DBP: (i) structural changes reallocating departmental responsibilites would be completed by December 31, 1980; the Branches and Agencies Department of DBP would establish by June 30, 1981 a reporting system to record and report on decisions reached at regional/provincial development councils (paras. 38 and 48); (ii) lending for cattle in villages would be limited to villages selected by BAI (para. 53); (iii) lending for fishpond estates would be subject to consultation with the Bank (para. 57); and (iv) annual project accounts would be redesigned and the internal audit system would be reviewed to reflect the new management information system (para. 62); (v) DBP would make subloans on terms and conditions satisfactory to the Bank, which would be reviewed from time to time in consultation among the Bank, the Borrower and DBP (para. 68). (c) An additional condition of effectiveness is the execution of a Subsidiary Loan Agreement between the Government and DBP (para. 63). (d) Conditions of disbursement: (i) for the noncredit component, the submission to the Bank of a detailed physical plan, equipment list, implementation schedule and budget (para. 63); (ii) for the credit component, the submission to the Bank of DBP's lending program for the balance of calendar year 1980 (para. 70).  IBRD 14744 1160 520 JANUAIRY 1O CLASSIFICATION OF PROVINCES BY GEOGRAPHIC REGIONS PHILIPt I COS V3I WESTARN VISAYAS Developmffent Bank of Philippines 2 Abra 38 Capiz THIRD LIVESTOCK AND FISHERIES CREDIT PROJECT 3pooDs Sur 39 Antiqsue 20 _zp3 ltoeoS Sur ~40 Bioito8 5 La Union 4 Ms Occidsnta r 6 8en9uet VlI CENTRAL VISAYAS S,ra Glf PIMA?1Y FPStlNOROUND 7 PnlnoaSr 42 lebu R - PEGIONAL $UNWVISION OF FtSHIlNG.GROUND 43 qroao lrelntig I - E 11 CAGAYAN VALLEY 44 aohol --- PROWt4IAL 80J4ARIES 8 Bat1es 45 Sjujiie [ Cn L IAE 9 Cagayan VllI EASTERN VJSAYAS | 8 el ' _ RE & UOIJNOARIES 10 KaltApseyao 46 Nrwn |w- - tNTEMATIONAL UMIWARIES 11 1s2bel 47 Sanar 1 12 1fugeo 48 EaRern Samar 2Aper" t 13 Nuev Vizcaya 49LeV t b tI 14 Xtlao 50 South ern 20 11 C:ENTRAL LUZON IX WESTERN MINDANAO 10 -K. t 15 Ntueva Etila 51 Zemboange de[ Norl - 1REGION I 16 Tarlac 52 Z np delSur S - 3 17 Zrnbaes 53 SeSiOlet I I 11 818 Prmpenga 54 -lh 12 19 gutwasr 655 TawI w \ \ r b 20 BEaton X fRHBMINDANAOg < _( 3 t 14, tq NV ETROPOLITAN X NORTHIERNIN3 AI 6 MhL 56 Surigga del Notte 7/ I-, SOUTHERN TAGALOG 57 Candguin i - . 15 21 Quezon 58 Agusan del Norte 22 Rlzat 59 ?4eatis Orienrtl 6 16 | 23 GoalIe7 24 Laguna 60 MUamins = I E16Ilf9 k \! 25 Batanga, 6loal*ldnon N -~P II 21 26 Ma* inue 62 Agrmn det Sur - 2 27 Mindoro Orienti7 Xi SOUTHERN MINDANAO 28 Mindoro --aernal 63 Surigo det Sur G ON _ 29 Robo 64 Do"*, Oridoal 31 30 Palawan 65 Dao i v ICOL I66 *W' de3Sur 31 Camarimes Norte 67 SIth COD | SEA 32 Cnimis Sur Xi- CENTRAL MINDAEAG 33 Catanduaes 68 Lanoo dtel Namrte 34 Alboy 69 Lia. del Sur 35 SorsOion 70 N,rth COtbato I v/ 72 Urttm Kuaat /29 fi >s] r / 12K,. x '%S. athat iL 7 2 -120 ~~ ~ ~ KN ''1 - \\3 j >"SOy\ Soc, - i SOUTH CHINA SA0 / 0 4