Philippines - Agricultural Support Services Project

Document of - The World Bank FOR OFFICIAL USE ONLY Report No. 3378-PH STAFF APPRAISAL REPORT PHILIPPINES AGRICULTURAL SUPPORT SERVICES PROJECT June 23, 1981 Projects Department, Agriculture II East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS US$1.00 = Pesos (P) 7.5 P 1.00 = US$0.133 REPUBLIC OF THE PHILIPPINES FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES = METRIC SYSTEM 1 hectare (ha) = 2.47 acres 1 kilometer (km) = 0.62 miles 1 square kilometer (sq km) 0.3881 square miles 1 meter (m) - 39.37 inches 1 cubic meter (cu m) = 35.31 cubic feet 1 millimeter (mm) - 0.039 inches 1 kilogramn (kg) = 2.2 pounds ABBREVIATIONS APPU - Agricultural Project Preparation Unit (of MOA) ARO - Agricultural Research Office (of MOA) BAEcon - Bureau of Agricultural Economics (of MOA) BAEx - Bureau of Agricultural Extension (of MOA) BAT - Bureau of Animal Industry (of MOA) BCOP - Bureau of Cooperatives (of MOA) BPI - Bureau of Plant Industry (of MOA) BS - Bureau of Soils (of MOA) DBP - Development Bank of the Philippines ETD - Extension Training Division (of BAEx) FAO/CP - Food and Agriculture Organization (of the U.N.) Cooperative Program FNP - Food and Nutrition Plan FNRI - Food and Nutrition Research Institute IPB - Institute of Plant Breeding (of UPLB) IRRI - International Rice Research Institute MOA - Ministry of Agriculture MOB - Ministry of the Budget NEDA - National Economic and Development Authority NFAC - National Food and Agricultural Council (of MOA) NFA - National Food Authority NNC - National Nutrition Council NSDB - National Science and Development Board ')CARR - Philippine Council for Agriculture and Resources Research PDED - Project Development and Evaluation Division (of MOA)  FOR OFFICIAL USE ONLY PMC - Project Management Committee (of MOA) PMO - Project Management Office (of MOA) PPD - Planning and Programming Division (of MOA) RCC - Research Coordinating Committee (of MOA) RIARS - Regional Integrated Agricultural Research Station SSD - Special Studies Division (of MOA) UPLB - University of the Philippines, Los Banos Campus USAID - United States Agency for International Development VISCA - Visayan State College of Agriculture 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.   PHILIPPINES AGRICULTURAL SUPPORT SERVICES PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. 1. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . 1 . . . . l Introduction . . . . . . . . . . . . . . . . . . . . . . 1 . . 1 Agricultural Sector . . . . . . . . . . . . . . . . . . . . . 2 Experience with Past Lending . . . . . . . . . . . . . . . . . 4 2. AGRICULTURAL SERVICES AND INSTITUTIONS . . . . . . . . . . . . . 6 Ministry of Agriculture ... . . . . . . . . . . . . . . . . 7 Agricultural Research . . . . . . . . . . . . . . . . . . . . 9 Philippine Council for Agriculture and Resources Research . 9 University of the Philippines, Los Banos . . . . . . . . . . 10 Food and Nutrition . . . . . . . . . . . . . . . . . . . . . . 11 3. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Identification and Preparation . . . . . . . . . . . . . . . . 12 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Detailed Features: 13 Agricultural Research . . . . . . . . . . . . . . . . . . . 13 Technology Generation ... . . . . . . . . . . . . . . 13 Technology Verification . . . . . . . . . . . . . . . . . 14 Regional Integrated Agricultural Research Stations * * * 14 Applied Communications . . . . . . . . . . . . . . . . . . 14 Plant Breeding . . . . . . . . . . . . . . . . . . . . . 14 Small-Farm Systems . . . . . . . . . . . . . . . . . . . . 15 Plant Regulatory Services. . . . . . . . . . . . . . . . . . 15 Commodity Analysis . . . . . . . . . . . . . . . . . . . . 15 Plant Certification . . . . . . . . . . . . . . . . . . . 15 Plant Quarantine . . . . . . . . . . . . . . . . . . . . 16 Livestock Regulatory Services. . . . . . . . . . . . . . . . 16 Feed Analysis. . . . . . . . . . . . . . . . . . . . . . . 16 Livestock Quarantine . . . . . . . . . . . . . . . . . . . 16 Livestock Field Services . . . . . . . . . . . . . . . . . 17 Livestock Disease Diagnosis. . . . . . . . . . . . . . . . 17 Vaccine Production . . . . . . . . . . . . . . . . . . . . 18 vaccine QIullity Ccntrol -. . . . . . . . . . . . . . . 18  -2- Page No. Agricultural Planning . . . . . . . . . . . . . . . . . . . 18 Project Preparation Service. . . . . . . . . . . . . . . . 18 Data Development . . . . . . . . . . . . . . . . . . . . . 19 National Nutrition Survey. . . . . . . . . . . . . . . . . 20 Project Implementation Project Management Office. . . . . . . . . . . . . . . . . 20 Transportation .20 4. PROJECT COST AND FINANCE.. . . . . . . 21 Cost Estimates . . . . . . . . . . . . . . . . . . . . . . . . 21 Financing ..21 Procurement . . ..25 Disbursement . . .. . . . . . . . . . . . . . . 26 Accounts and Audit . . . . . . . . . . . . . . . . . . . . . . 26 5. ORGANIZATION AND MANAGEMENT ..27 Project Management ..27 Food and Nutrition Plan . . . . . . . . . . . . . . . . . . 27 Agribusiness ..28 Training ..28 Agricultural Research Office . . . . . . . . . . . . . . . . 28 Agricultural Research . . . . . . . . . . . . . . . . . . . . 29 Technology Generation. . . . . . . . . . . . . . . . . . . . 29 Technology Verification. . . . . . . . . . . . . . . . . . . 29 Regional Research . . . . . . . . . . . . . . . . . . . . . 30 Applied Communications ..30 Plant Breeding ..30 Small-Farm Systems .. 30 Plant Regulatory Services. . . . . . . . . . . . . . . . . . . 31 Livestock Regulatory Services. . . . . . . . . . . . . . . . . 31 Agricultural Planning ..31 Project Preparation Service. .31 Data Development . . . . . . .32 National Nutrition Survey. . . . . . . . . . . . . . . . . . 32 6. BENEFITS, JUSTIFICATION AND RISKS . . . . . . . . . . . . . . . 32 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Justification ..33 Sensitivity ..34 Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7. RECOMMENDATIONS AND LOAN CONDITIONS. . . . . . . . . . . . . . . 36  -3- Page No. ANNE XE S 1. Detailed Cost Tables, Tables 1-24 . . . . . . . . . . . . . . 38 2. Overseas Consultants Terms of Reference . . . . . . . . . . . 62 3. Estimated IBRD Disbursements .... . . . ..... . . . . . 65 4. Project Implementation Schedule . . . . . . . . . . . . . . . 66 5. Project Management Office and Monitoring Unit Terms of Reference . . . . . . . . . . . . . . . . . . . . 67 6. Economic Analysis, Tables 1 and 2 . . . . . . . . . . . . . 69 CHARTS Chart 1: Reorganized Ministry of Agriculture (May 1981) Chart 2: Organization for Project Implementation (Explanatory Notes with charts) MAP IBRD #15455 WORKING PAPERS (in Project File) 1. Agricultural Research and Institutions 2. Regional Integrated Agricultural Research Stations 3. Plant Regulatory Services 4. Livestock Regulatory Services 5. Agricultural Planning 6. Project Implementation   PHILIPPINES AGRICULTURAL SUPPORT SERVICES PROJECT 1. BACKGROUND Introduction 1.01 The Government of the Republic of the Philippines has requested Bank assistance in financing a project aimed at enhancing the agricultural research, regulatory and planning capability of the Ministry of Agriculture (MOA). The project would complement the National Extension Project,/l appraised in 1978 and designed to strengthen MOA's agricultural extension service. It also supports the nationwide Food and Nutrition Plan (FNP),/2 presented to the Philippine Consultative Group meeting in January 1981. 1.02 A condition of the National Extension Project was a reorganization of MOA designed to decentralize its technical Bureaus to 12 new Regional Offices (Chart 1). Under the reorganization,/3 the Bureaus (plant, animal, soils and extension) gave up most of their functions in the regions except for a few select activities, national in scope, related to crops, livestock and soils. As a result, the Regional Offices have taken over responsibility for most agricultural activities within their regions. Seventy eight Provincial Agricultural Officers have been appointed to deal with extension, plant, animal, soil, and cooperative work at the provincial level and to supervise the District Agricultural Officers. The respective responsibilities of MOA Central Office, the Bureaus, and the Regional Offices, are set out in MOA Administrative Order No. 2 Series of 1981. 1.03 The FNP has three key objectives: (a) to increase and diversify production of food and other agricul- tural commodities, and to continue to achieve gains in the product- ivity of both land and labor; (b) to improve the diet of all Filipinos; and /1 Philippines: National Extension Project Staff Appraisal Report No. 2049-PH. East Asia and Pacific Regional Office, October 24, 1978. /2 Philippines: Food and Nutrition Plan - Objectives and Strategies. MOA, Manila, December 1980. /3 Authorized by Presidential Decree No. 1579, June 11, 1978: "Amending Presidential Decree No. 461 to create Ministry-wide Regional Offices in the Ministry of Agriculture."  (c) to assure a basic minimum diet for those who are undernourished. Apart from direct intervention to provide food supplements for the most needy, implementation of the FNP requires increased farm production for consumption and for export or import substitution, and improved marketing efficiency. These measures will make new demands on the country's agricultural services including planning and research. 1.04 The proposed project also provides a base for two projects which MOA is preparing for possible Bank financing - the commercial tree crops and second rainfed agricultural development projects. Both of these will depend on the development and testing of new crop and farm-system packages specific to the areas to be developed. The project also provides a foundation for later projects including a national agricultural research project and prospective regional projects for which the Government intends to seek Bank assistance. 1.05 The project has been the subject of several Government Working Papers, and was described in the Identification /1 and Preparation /2 Reports prepared by FAO/CP working in association with the Agricultural Projects Preparation Unit (APPU) of MOA. This report is based on the findings of a Bank appraisal mission comprising Messrs. Parbery, ter Vrugt and Kim (Bank), and Messrs. Coaldrake and Whittem (consultants), which visited the Philippines during April-May 1980, and of a follow-up mission in October 1980 comprising Messrs. Parbery, ter Vrugt and Kim. Agricultural Sector 1.06 Agriculture dominates the Philippine economy. Over 30 million people, or 70% of the population, live in rural areas. Agriculture accounts for 30% of GNP, employs over half the nation's labor force, and contributes about 60% of foreign exchange earnings. About 70% of the nine million hec- tares of land under cultivation is used for growing cereals, of which rice and corn predominate. Approximately 1.2 million hectares are irrigated, mainly for rice production; the remainder is planted to rainfed annual and perennial crops, including tree crops. 1.07 Although agriculture's share of GDP has been declining by comparison with other sectors, there was a steady rise in food production averaging 5.3% per annum during the 1970-79 period, when rice production expanded at 4.7% per annum and legumes and fruits at 8.2% and 6.8%, respectively. This was facili- tated by strong Government initiatives including substantial investments in irrigation infrastructure, high-yielding varieties and technical packages /1 Philippines: Agricultural Support Services Project Identification Report. FAO/CP Report No. 41179 PHI 20. September 1979. /2 Philippines: Agricultural Support Services Project Preparation Report Volumes I, II and III. FAO/CP Report No. APPU-80-000. February 8, 1980.  - 3 - coupled with extension and farm credit. The Bank assisted both the irriga- tion and credit programs by funding a series of projects in these two subsectors. 1.08 There has been substantial growth in the commercial production of pigs (5.7% per annum) and poultry (6.1% per annum) over recent years, but the rates of growth for cattle (2.3% per annum) and water buffalo (1.8% per annum) have not matched the increase in human population which is growing at about 2.5% annually. The national demand for livestock protein is expected to increase by about 40% for beef, pork, and poultry, over the same period. 1.09 Rice is by far the most important crop, in terms of human consump- tion, comprising about 105 kg per capita out of a total average per capita consumption of 310 kg of crop produce. Principally through the introduction of a rice production support program known as Masagana 99, the country achieved self-sufficiency in 1977. Since then, the Philippines has been able to export small quantities of rice annually. 1.10 Masagana 99 was part of a national food self-sufficiency program, created in 1969 under the administrative supervision of MOA and coordinated by the National Food and Agricultural Council /1 which has the Minister of Agriculture as chairman. NFAC programs to achieve self-sufficiency in the production of other crops such as corn (Maisan 77), fruits and vegetables (Gulayan sa Kalusugan), and efforts to encourage multiple cropping have had mixed success because of management and disease control problems. Insufficient production of cornbased feedstuffs appears to be a major constraint affecting livestock development which has increased only slowly over the last decade. The private sector has taken the lead in introducing high-yielding disease-resistant varieties, but it will be some time before these can be introduced to large numbers of small farms. 1.11 Farm prices for rice and other major crops are generally below world market levels. However, the recent increase (October 1980) in paddy rice price to P 1.45 per kilo and concurrent upward adjustments in the prices of other food commodities are bringing them closer to international levels, and should stimulate production. 1.12 Despite favorable developments in production and farm prices, as many as 40% of rural families are believed to earn incomes below the level required to provide adequate nutrition and essential goods for minimal standards of living. According to the first national nutrition survey,/2 /1 NFAC is a policy making body charged with the coordination of the National Food Self-sufficiency Program, created in 1969 under the admnis- trative supervision of MOA with the Minister as Chairman. /2 Philippines: First Nationwide Nutrition Survey, 1978. Food and Nutrition Research Institute, Manila. October 1979.  -4- and the Bank-s recent report on poverty in the Philippines,/2 the average Filipino diet provided only 89% adequacy in food energy. More than 30% of urban and rural households, comprising six members on average, were found to consume diets with less than 80% of energy adequacy. 1.13 The Philippines has 2.35 million farm units, 85% of which are smaller than 5 ha. The national average farm size is 3.6 ha. Even marginal land, particularly in the low areas, has already been brought under cultiva- tion because of population pressure. Since new land availability is limited, most increases in production have to come from established areas by increasing productivity. 1.14 The proposed project has been designed to address some of the above problems of the agricultural sector. It will focus on increasing the production of crops other than rice, particularly food crops, with an emphasis on developing small-farming systems to improve land productivity, thereby improving farm incomes and diets and assisting in the alleviation of rural poverty. Experience with Past Lending 1.15 The proposed Agricultural Support Services Project is the third Bank assisted project to be implemented by MOA. The first was the National Extension Project (Loan 1626-PH, US$35 million) which aims to strengthen the extension service through the provision of improved facilities, equip- ment, additional technical staff, and training with the objectives of: (a) increasing crop and livestock production, (b) improving the quality of rural life by providing higher incomes, as well as better nutrition and home management; and (c) reducing rural unemployment by assisting out-of-school youths to establish backyard farming enterprises. Management of the Project is the responsibility of the Bureau of Agricultural Extension (BAEx), and its Director is Project Manager. Since he has transferred most of the functions of his former line Bureau to the 12 new Regional Offices, he applies himself almost fulltime on implementation of the Project. After a slow start, while the Ministry worked out new procedures for handling a project of such magnitude and adjusted to the reorganization, the project is gaining momentum and purchases of vehicles and equipment, the construction of extension centers, the appointment of new staff, technician and farmer training, and three consultancies are underway. Although substantial amounts have been committed, disbursements lag significantly behind appraisal estimates, principally because of MOA's unfamiliarity with the procedures concerning loan withdrawal. Steps are being taken by Government to remedy this situation. /1 Aspects of Poverty in the Philippines. A Review and Assessment, Volumes I and II. East Asia and Pacific Regional Office. December 1, 1980.  - 5 - 1.16 The first Rainfed Agricultural Development (Iloilo) Project (Loan 1815-PH, US$12 million) was the second Bank-assisted activity through MOA. The loan became effective in June 1980 and is in the early stages of implemen- tation. The project is applying rice-based multiple cropping "Kabsaka" technology, developed by the International Rice Research Institute (IRRI) in cooperation with MOA, to raise agricultural productivity of lowland areas within Iloilo Province (Region VI) which have sufficient rainfall for crop- ping, but are without irrigation. 1.17 The Rainfed Project has a wide range of components. It promotes livestock investments, along with multiple cropping, and includes small-scale water impounding and irrigation, investments to improve marketing and transport of products as well as nutrition for rural families, institutional reform and manpower training. It also provides assistance for applied research and the preparation of a future rainfed project. A coordinating committee, at MOA Central Office, and a management unit in the field, have been established to implement the project. Start-up has been slow due to the complexity of some of the early implementation arrangements, which have been modified subsequently by reducing the number of representatives on the interagency project coordinating and project management committees. 1.18 In addition to the projects which are being implemented directly under the auspices of MOA, the Bank has for many years been supporting livestock and some crop development through various credit projects. Among the credit projects which have been completed are two livestock projects funds for which were channelled through the Development Bank of the Philippines (DBP), and three rural credit projects which were funded through the Central Bank/rural banks. Project completion reports have been prepared on the First Livestock Credit project and the first three Rural Credit projects. The lessons learned concerned mainly the need for institutional strengthening which have been taken into account in designing the ongoing Third Livestock/Fisheries credit project. The need to meet a multiplicity of needs faced by the farmers which is not served by a single purpose loan is reflected in the proposed project by the importance which is being attached to small-farming systems research.  - 6 - 2. AGRICULTURAL SERVICES AND INSTITUTIONS 2.01 Both the private and public sectors are involved actively in servicing the Philippine farming community. The public sector is primarily concerned with policy formulation and planning, the generation and testing of technology, the promotion of its use through the extension service, and, to a lesser extent, the maintenance of livestock and the marketing of produce. The Government also provides a substantial part of rural credit needs through the Central Bank to a network of rural banks, the Philippine National Bank, the Development Bank of the Philippines, and the Land Bank which assists land reform beneficiaries. 2.02 The private sector imports, produces and distributes fertilizers, pesticides, feedstuffs and veterinary supplies, distributed by more than 2,000 licensed dealers operating, competitively and efficiently, through retail out- lets in every municipality of the country. Some dealers advance credit for farm inputs and others provide technical advice, including farm trial plots. The private sector also plays the major role in purchasing, processing, and distributing marketed farm products. Even where Government commodity agencies exist, such as the National Food Authority (NFA) or the Philippine Coconut Authority, private traders often act as intermediaries between farmers and the agencies. Private rural banks, the principals of which are generally affluent people from the provinces in which the banks operate, provide about 12% of farm credit. 2.03 Within the Government, responsibility for the agricultural sector is divided among a number of Ministries and a large number of related institu- tions and agencies. The Ministry of Agriculture (MOA) is the lead Ministry; other important Ministries include Natural Resources (responsible for fisheries, forestry, with some land classification and soil conservation); Agrarian Reform; Education and Culture; Local Government and Community Deve- lopment (mainly small-scale projects); Public Works which contains the National Irrigation Authority; and Human Settlements which operates a large number of rural projects in addition to urban. The recently created National Food Authority (NFA), which has superseded the National Grains Authority /1 /1 "Reconstituting the National Grains Authority to the National Food Authority, broadening its functions and powers, and for other purposes. Presidential Decree No. 1770, January 14, 1981.  and become independent of MOA, could have an important bearing on future food and nutrition work. However, the precise nature of NFA-s programs (other than those inherited from the National Grains Authority) is not yet clear. Ministry of Agriculture 2.04 Although it is the principal Ministry servicing the agricultural sector throughout the country, MOA has generally been short of funds to implement its programs. To overcome this problem, several revenue-producing corporations, which are Government-owned and controlled, have been created (Chart 1). Other attached, and supervised, agencies which are funded both by MOA and from supplementary sources have also been created. The Ministry's budget is applied directly to its Central Office services, including Planning, Management, Administration, Crops and Livestock under the control of Assistant Secretaries; a computer facility; and a coordinating unit which liaises with the Ministry of Agrarian Reform. 2.05 MOA includes six technical Bureaus: the Bureaus of Plant Industry (BPI) and Animal Industry (BAI) established in 1929; the Bureau of Soils (BS) in 1951; the Bureau of Agricultural Extension (BAEx) in 1952; the Bureau of Agricultural Economics (BAEcon) in 1963; the Bureau of Coopera- tives Development (BCOD) transferred from another Ministry in 1980; and 12 new (1980) Regional Offices which have absorbed most of the former functions of the Bureaus in their regions (para. 1.02). The Bureaus' remaining principal function is to provide advice to the Minister and his senior staff on technical and policy maters. The Bureaus were never funded adequately to perform all their functions. It was in recognition of this problem that the Bank supported the National Extension Project which provides substantial support to BAEx. 2.06 MOA's medium and long-term planning functions have been handled by its planning service, which comprises three divisions: Project Development and Evaluation (PDED), Project Planning and Programming (PPD), and Special Studies (SSD). The preparation of projects for external financing is handled by the Agricultural Project Preparation Unit (APPU), which was created with funds provided by the Bank under the Smallholder Treefarming and Forestry Project (Loan 1506-PH). MOA has recently implemented steps to bring together its planning, programming, and project preparation capabi- lities. Under the new arrangements, while APPU and the Planning Service retain their separate identities, PDED is being linked with APPU in project preparation; PPD will assume a new function and will be responsible for implementing the FNP; and SSD will become a policy making arm of the Ministry. SSD's research (survey) function will be transferred to BAEcon. 2.07 Before reorganization, the Bureau of Plant Industry (BPI) was responsible for applied research on agricultural crops; the production of improved seed and plant material; the protection of crops from pests and diseases; the development and improvement of farm equipment, structures and  - 8 - practices; or any other function related to crops as prescribed under the law. It is one of the two oldest Bureaus and was the key agency in the crop production programs executed by NFAC during the 1970s (paras. 1.09 and 1.10). It has a good performance history. Operational divisions included agricultural research (mostly of an applied nature), seed and plant produc- tion services (including seed certification), crop protection services (including plant quarantine), and field trial services. BPI also had agricultural engineering and laboratory services divisions, including laboratory facilities, to complement the four crops division. The Philippines is a signatory of the Plant Protection Convention of FAO, and a member of the Plant Protection Committee of Southeast Asia and the Pacific. It is bound to conduct rigid commodity inspections and affect the necessary treatment of exported plant products, to satisfy the requirements of importing countries. Under reorganization (para. 1.02), BPI has given up many of its stations and functions to the Regional Offices, but has retained responsibilty for commodity analysis in its central laboratory complex, plant certification, and quarantine; matters that are national is scope. 2.08 The Bureau of Animal Industry (BAI) is also a long established agency with a good performance history within the confines of limited funding, since plant and crop production, rather than livestock, have always been given top priority by government. Before reorganization, it serviced the nation's livestock industries with seven operational divisions: research and deve- lopment, animal disease control, livestock (poultry) and dairy development, diagnostic and laboratory, animal feed control, meat inspection, and general administration and support services. The Bureau-s head office is in Manila, but it operated stock farms, conducted applied research, maintained breeding stations, and had diagnostic and veterinary laboratories all around the country, some of which it has retained after reorganization since the Regional Offices are not yet equipped to assume total responsibility for livestock activities. BAI also is responsible for national livestock quarantine, and vaccination programs against major pests and diseases. Generally, the laboratory and field facilities of BAI are inadequate due to a lack of funding to perform the services for which they were designed. 2.09 The Bureau of Agricultural Economics (BAEcon) is a younger agency within MOA, and a less influential one in that it has always been a staff Bureau, with no line function in the regions although it has offices there. However, it provides essential services to national programs of intensified food production and rural development. The Bureau has four main activities: estimates and statistics, economic research, data processing, and marketing services. Itts head office is in Manila, but staff are distributed throughout the country. BAEcon is to be strengthened by the transfer to it of the research (surveys) function of the Special Studies Division of MOA-s Planning Service, since functions of the two agencies tend to overlap. Under regional reorganization, BAEcon retains its regional facilities independent of the new Regional Offices of MOA. 2.10 The 12 Regional Directors and 24 Deputy Regional Directors of MOA are responsible directly to the Minister. All the Directors and Deputy  Directors are former senior Bureau staff who were serving in various parts of the country. The Regional Offices are assuming responsibility from the technical Bureaus for most of the field research, experimental and service stations. These facilities have not been fully operational mainly due to lack of funding. As a first step in building up the strength of the Regional Offices, one Regional Integrated Agricultural Research Station (RIARS) would be developed from an existing MOA station in each region. Staff for the RIARS would be drawn from former Bureau staff. They would be responsible for undertaking applied research programs to verify improved small-farm systems technology developed at the national research centers and the Universities, before it is released to farmers through the extension service. 2.11 MOA employs almost 21,600 staff, about 8,770 of which are assigned to the regions. More than 80% are technical and less than 20% are adminis- trative personnel. About 84% of staff hold either college degrees in agriculture or related subjects or certificates, but the standards of higher education offered by the country's many agricultural universities vary considerably and are sometimes low by international comparison. Only 150 staff (0.7%) hold postgraduate credentials. The Ministry is particularly short of highly qualified staff to provide technical leadership in applied research, laboratory analysis, planning, project preparation and implementation. Agricultural Research 2.12 Philippine Council for Agriculture and Resources Research (PCARR). In addition to the work of the Bureaus of MOA, agricultural research in the Philippines is conducted by many universities and institutions. It is coordinated by PCARR which is attached to the National Science Development Board (NSDB) under the Office of the President. The policy making body of PCARR is its Governing Council which has the chairman of the NSDB as chairman, and the Ministers of Agriculture and Natural Resources as vice chairmen. A Technical Program Planning and Review Board, chaired by the PCARR Director, serves in an advisory capacity to review national research programs, formulated by the national and regional research centers, before they are referred to the Governing Council for approval. A secretariat in Los Banos comprising a core staff in seven technical units (crops, fisheries, livestock, forestry, mines, soils and water, and socio-economic research) organizes National Commodity Teams which draw on local expertise to coordinate, review, and evaluate national and regional research programs. PCARR itself has only a small administrative budget but the agency is empowered to allocate government funds earmarked for agricultural research. Public revenue for agricultural and natural resources research is appropriated from the special science fund, commodity tax levies, private sector contributions, and foreign aid. Private foundations and bilateral assistance are also tapped for grants or loans. 2.13 The agricultural research programs approved by PCARR-s Governing Council, are the basis for all agricultural and natural resources research in the country. In 1978, the Governing Council approved the creation of a  - 10 - national research network made up of four multi-commodity national research centers,/l five single commodity research centers,/2 nine regional research centers7,/3 and 111 cooperating field stations. To strengthen research capability at the network's centers and stations, PCARR allocated funds from two USAID soft loans (US$5 million in 1975, followed by US$10 million in 1979), to a comprehensive development program including site and utility development, infrastructure, and the general provision of modern research facilities. In addition, an extensive manpower development program was initiated, for both degree and nondegree workers throughout the country, utilizing the USAID loans. PCARR's network of research stations and centers also undertake location specific verification trials, and disseminate successful results through an applied communications service which provides support to the seven technical units of the secretariat and produces outreach materials, develops indicative extension materials, and assists in the analysis of research problems. 2.14 University of the Philippines, Los Banos (UPLB). The College of Agriculture in UPLB was established in 1909 as one of the first two colleges of UP. Since that time it has grown into the first autonomous campus of UP, and is a reputed National and Asian center for higher education, research and training in all fields related to agriculture and rural development. The College has benefitted over the years since the second world war from extensive assistance from American institutions particularly the College of Agriculture at Cornell University in New York State with which it had a USAID funded mutual exchange contract for a long period. UPLB's agricultural education program was supported under the First Education Project (Loan 393-PH), and the Colleges of Forestry and Veterinary Medicine and the Department of Animal Science were assisted substantially under the Fourth Education Project (Loan 1374-PH). The new Animal Science Department, and the College of Veterinary Medicine complex, should be completed within two years. Besides the various technical departments, the core of the UPLB research complex is the Institute of Plant Breeding (IPB) established in /1 The University of the Philippines at Los Banos, the Central Luzon State University, the Visayan State College of Agriculture (VISCA) and the University of Southern Mindanao. /2 The Forest Research Institute at Los Banos, the Philippine Sugar Commission (at La Granja), the Philippine Coconut Authority, the Philippine Tobacco Research and Training Center, and the Philippine Cotton Research and Development Training Center. /3 Mariano Marcos State University, Isabela State University, Mountain State Agricultural College, Palawan National Agricultural College, La Granja Experiment Station (BPI), Central Mindanao University, Davao Experiment Station (BPI), Camarines Sur Agricultural College, and Philippine Rootcrops Research and Training Center (VISCA)  - 11 - 1975, the National Crop Protection Center, established in 1976, and the National Institute of Biotechnology and Applied Microbiology, established in 1979. A fourth institute, for Post Harvest Horticultural Research and Training, also belongs to the College of Agriculture. Plans are being prepared to add four additional institutes on: farming systems, soil resources, the food industry, and animal production and health. The IPB would be supported directly under the proposed project. 2.15 IPB's programs, developed and executed in collaboration with the Departments in the College of Agriculture, deal with the development, testing, and multiplication of new crop varieties. They are reviewed annually by an advisory board, chaired by the Minister of Agriculture, providing an essential link with the MOA. The IPB is headed by a Director and has six crop research groups, six specialized research laboratories, and three service units for farm operations, seed production and distribution, and a germplasm bank all of which need additional funding to support new research programs on small- farming systems. 2.16 The Department of Agronomy, built up under the Cornell program within the College of Agriculture, would also be supported by the project under which it would be responsible for initiating a small-farm systems research program which could later become another institute program under ULPB. The Department has an impressive record in crop research, and is well placed to expand its programs to further benefit small farmers, complementing the work at IPB. Food and Nutrition 2.17 The National Nutrition Council (NNC) was created in 1974 as a policy making and coordinating body to formulate a national nutrition plan under the Philippine nutrition program. The NNC is constituted with the Chairman/ Coordinator of NFAC (the Minister of Agriculture) as chairman, the Minister of Health as Vice Chairman, and the Ministers of Education and Culture, Local Government and Community Development, Social Services and Development, and the Chairman of the National Science Development Board (NSDB), as members. Representatives from the private sector include the executive director of the Nutrition Center of the Philippines, and the presidents of the Philippine Medical Association, and the Nutrition Foundation of the Philippines.  - 12 - 2.18 The government-s central agency for research into food and nutri- tion, which has grown tremendously over recent years, is the Food and Nutri- tion Research Institute (FNRI), an implementing agency of the NSDB. The FNRI was created in 1973 and its functions include coordinating nutrition research activities, by both government and private agencies, serving as a clearing house for nutrition data and information, and promoting a national nutrition program. The FNRI was responsible for conducting the first national nutrition survey which was the basis for the national Food and Nutrition Plan (para. 1.03), and would receive funds under the proposed project for the second nationwide nutrition survey. 3. THE PROJECT Identification and Preparation 3.01 The targets for increased agricultural production set in the Food and Nutrition Plan (FNP) (para. 1.03) and the strategies to attain them will place new demands on the agencies servicing the agricultural sector, particu- larly those within the jurisdiction of MOA. Strengthening some of the decentralized agencies of MOA under the National Extension Project is helping the Ministry to meet this challenge. However, without complementary invest- ments in other related support services, the efforts in agricultural extension are unlikely to be maximized. 3.02 Pursuing the objectives of the FNP will require increasing invest- ment in agricultural research to ease technical, social, and economic constraints on production and productivity. As the already heavy pressure on land increases, more emphasis should be given to designing and testing farm systems with intensive land use, and to developing land conservation measures. Both make demands on research and regulatory services which the Government is presently ill-equipped to meet. The envisaged major agricultural expansion programs will need to be supported by strong insti- tutions and programs for planning, monitoring and staff development. It was with these broad considerations in mind that MOA proposed the project.  - 13 - Objectives 3.03 The project would, over a six year disbursement period beginning in FY82: (a) strengthen agricultural research capability in the Philippines by (i) providing MOA with funds, to be channelled through the PCARR network, in support of farm technology generation; and (ii) directly supporting UPLB-s established Institute of Plant Breeding (IPB), and the farm systems research program being developed within the Department of Agronomy; (b) strengthen applied agricultural research and experimental capability of MOA, by providing the Ministry with a technology verification fund; (c) strengthen the new Regional Offices of the MOA, by upgrading nine Regional Integrated Agricultural Research Stations (RIARs) on which appropriate small-farm technology, covering crops and livestock, would be tested before being released for farmer use through the extension service; (d) strengthen two MOA staff Bureaus responsible for regulatory matters affecting crops and livestock; (e) strengthen MOA Central Office by improving project planning, preparation, implementation, management, and monitoring capability specifically by funding staff training, and special studies on food, nutrition, and the rural economy; and (f) provide for a second national nutrition survey to be conducted by the Food and Nutrition Research Institute (FNRI). 3.04 To implement MOA-s components, a Project Management Office (PMO) would be established within the Ministry, responsible to a Project Management Committee (PMC) headed by the Minister of Agriculture (Chart 2). UPLB and FNRI would be responsible for implementing their components. Detailed Features Agricultural Research (US$29.60 million) 3.05 Technology Generation. Coordination of agricultural research in the Philippines is the responsibility of the PCARR (paras. 2.12 and 2.13) which allocates funds to many programs around the country. The more fundamental work is carried out at the national centers, including UPLB (para. 2.14). Under the project, a technology generation fund would be provided to MOA which would support work at these centers. Each project proposed would be  - 14 - scrutinized by MOA and be funded under a MOA-PCARR contract which would specify the executing agency in the PCARR network. Funds provided under the project would primarily support research projects in food and feed crops, and small-farm systems including backyard livestock. Expenditures would be for agricultural research equipment and incremental operating costs (Annex 1, Table 1). Contracts would be processed by the Agricultural Research Office (ARO) in MOA (para. 5.08) after the projects had been reviewed and cleared by a Research Coordinating Committee (RCC)(para. 5.09) to be established in MOA. 3.06 Technology Verification. Funds would be provided under the project to develop MOATs capacity to undertake applied agricultural research, parti- cularly the testing of existing, new or modified small-farm systems, on the Ministry's own field stations where technology packages could be tested under controlled conditions, and on farmers fields. These funds would also be processed by the ARO, after clearance by the RCC, and would be expended on civil works, equipment, vehicles and incremental operating costs (Annex 1, Table 2). 3.07 Regional Integrated Agricultural Research Stations (RIARS). Since small-farm systems research needs integrated facilities for crops, livestock, soils and management research, funds would be provided under the project to upgrade one existing MOA research station in each region into a RIARS (para. 2.10) in nine of the country-s 12 regions, with which the 12 new regional offices of MOA correspond. The three omitted are Regions III and VI where RIARS are already funded from other sources, and Region I where more work is required to select and design an adequate site (technical assistance for this purpose would be provided). Investments under the project would include site and utilities development, buildings, machinery, equipment, supplies, and incremental operating costs (Annex 1, Table 3). The RIARS are designed to test not only the small-farm systems technology generated within the stations but also research results from other sources in the PCARR network. The RIARS would bring together the technical expertise of staff formerly in the line Bureaus under the administrative supervision and management of the Regional Directors of agriculture. Before new technology is released to the extension service, research results from the RIARS would be unified by teams of provincial agriculturalists who would conduct trials on farm fields. To ensure that successful new technology is incorporated quickly into the extension system, National Extension Project subject matter specialists would also be following research work in the RIARS. 3.08 Applied Communications. PCARR would receive direct funding under the project for its applied communications service (para. 2.13) including office and photographic reproduction equipment, and incremental operating costs (Annex 1, Table 4) to improve the flow of technical information from the research centers to the extension service and other users. 3.09 Plant Breeding. UPLB is the leading national center in agricul- tural research. Its college of agriculture is internationally recognized, and its Institute of Plant Breeding (IPB) (para. 2.15) well respected. To  - 15 - assist Philippine farmers to diversify into other crops, besides the basic food grains of rice and corn, the project would support an expanded program of work at IPB by providing for experimental farm and laboratory development, improved variety seed production, the establishment of a germplasm bank, vehicles, training, and incremental operating costs (Annex 1, Table 5). 3.10 Small-Farm Systems. In support of the rapidly expanding interest in whole-farm development, the Agronomy Department of UPLB (para. 2.16), in collaboration with the IPB, is embarking on a new program of small-farm systems research. The program would be supported by the project with investments in experimental supplies, laboratory and field station equipment, vehicles, training and incremental operating and maintenance costs (Annex 1, Table 6). Some of the programs will be carried out in the regions, in cooperation with the national research centers, and will be linked to MOA