Philippines - Agrarian Reform Communities Development Project

Document of The World Bank Report No. 15624-PH STAFF APPRAISAL REPORT PHILIPPINES AGRARIAN REFORM COMMUNITIES DEVELOPMENT PROJECT October 24, 1996 Agriculture and Environment Operations Division Country Department I East Asia and Pacific Regional Office  CURRENCY EOUIVALENT (as of September 1996) Currency Unit - Peso (P) US$1 i26 ii = US$0.038 WEIGHTS AND MEASURES 1 hectare (ha) = 2.47 acres 1 kilometer (km) = 0.62 miles 1 square kilometer (kmi2) = 0.3886 square miles 1 meter (m) = 10.76 square feet 1 cubic meter (mi3) = 35.31 cubic feet 1 million cubic meters (mcm) = 810.7 acre feet 1 millimeter (mm) = 0.039 inches 1 kilogram (km) = 2.2 pounds 1 cavan = 50 kilogram 20 cavans = 1 metric ton ABBREVIATIONS AND ACRONYMS ARB - Agrarian Reform Beneficiaries ARC - Agrarian Reform Communities ARF - Agrarian Reform Fund BLGF - Bureau of Local Government Finance CARL - Comprehensive Agrarian Reform Law CARP - Comprehensive Agrarian Reform Program CPO - Central Project Office DA - Department of Agriculture DAR - Department of Agrarian Reform DENR - Department of Environment and Natural Resources DOF - Department of Finance DPWH - Department of Public Works and Highways DOST - Department of Science and Technology GFIs - Government Financial Institutions IRA - Internal Revenue Allotment LBP - Land Bank of the Philippines LGU - Local Government Unit MDF - Municipal Development Fund NEDA - National Economic Development Authority NIA - National Irrigation Administration PARC - Presidential Agrarian Reform Council PAROs - Provincial Agrarian Reform Officers PCIT - Provincial CARP Implementing Team PMB - Project Management Board Pos - People Organizations FISCAL YEAR January 1 - December 31  PHILIPPINES AGRARIAN REFORM COMMUNITIES DEVELOPMENT PROJECT LOAN AND PROJECT SUMMARY Borrower : Republic of the Philippines. ImplementinQ Agencv : The Department of Agrarian Reform (DAR) with the respective Local Government Unit (LGU), and the National Irrigation Administration (NIA). Beneficiaries : Rural Communities of which at least 50% of their members are Agrarian Reform Beneficiaries. Poverty Categorv : Program of Targeted Interventions. Amount : A USS Single Currency Loan of US$50 million. Terms : The Bank loan would be for 20 years, including five years of grace at the Bank standard LIBOR-based variable interest rate for US dollar. Commitment Fee : 0.75% on undisbursed loan balances, beginning 60 days after signing, less waiver. Onlendincr Terms : About US$27 million to finance the Infrastructure Component would be transferred by the Government of the Philippines (GOP) to the respective LGUs in the form of: (i) grants of up to 90% of the Agrarian Reform Communities (ARCs)' eligible investment which would represent the GOP portion in the cost-sharing arrangements with the local governments. The level of the grant element would vary depending on the type of investments; and (ii) subsidiary loans of about 10 of the ARCs' eligible infrastructure investment for 15 years maturity including a 5 year grace period. Interest rate would be fixed for several years and would be based on related market reference rates such as the prevailing weighted average of treasury bills rate for medium and long term maturity plus a premium. The foreign exchange risk would be borne by GOP.  - iii - Financincr Plan See para. 3.24 ERR : 22% Map : IBRD No. 27553 Prolect Identification No : 37079  - iv - PHILIPPINES AGRARIAN REFORM COMMUNITIES DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. LOAN AND PROJECT SUMMARY . . . . . . . . . . . . . . . . . . . . . ii I. AGRICULTURE IN THE ECONOMY . . . . . . . . . . . . . . . . . . 1 II. AGRARIAN REFORM . . . . . . . . . . . . . . . . . . . . . . . . 2 A. The Agrarian Reform Community (ARC) Strategy . . . . . . . 3 B. The Agrarian Reform Beneficiaries (ARBs) . . . . . . . . . 3 C. Credit for Farm Production .S... . . . . . . . . . . . . 5 D. Government Policy . . . . . . . . . . . . . . . . . . . . 6 E. Issues ....... .. ... ... .. ... .. .. . . 7 F. Lessons Learned ..... . .. . . .. . . .. . . .. . 8 III. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . 9 A. Project Formulation and Design . . . . . . . . . . . . . 9 B. Rationale for Bank Involvement . . . . . . . . . . . . . 9 C. Project Scope and Objectives . . . . . . . . . . . . . . 10 D Project Description . . . . . . . . . . . . . . . . . . 11 E. Detailed Features ..... . . . . .. . . . . . .. . . 12 F. Estimated Project Costs and Financing . . . . . . . . . . 18 G. Procurement . . . . . . . . . . . . . . . . . . . . . . . 20 H. Disbursement ..... .. . .. . .. . .. . .. . . . 23 I. Accounts and Audit . . . . . . . . . . . . . . . . . . . 25 IV. PROJECT IMPLEMENTATION . . . . . . . . . . . . . . . . . . . 25 A. Design Consideration . . . . . . . . . . . . . . . . . . . 25 B. Organization and Management . . . . . . . . . . . . . . . 26 C. Operations Manual . . . . . . . . . . . . . . . . . . . . 27 D. Selection of Project Area . . ...... . 27 E. Eligibility Criteria .... . . . . . . ....... . . . 28 F. Details of Individual Component Implementation . . . . . . 28 G. Financing Arrangements .... . . . . . ...... . . . 32 H. Monitoring and Evaluation and Report Requirements . . . . 33 I. Environmental Impact .... . . .. . ........ . . 35 This report is based on the findings of appraisal and preappraisal missions comprising Messrs/Ms. A. Chupak (mission leader), P. Harrison, T. Jackson, D. Lucks, J. Mercader, R. Montemayor and R. Ravanera (consultants), who visited the Philippines in October 1995, February 1996, and June/July 1996. Task Manager: A. Chupak; Peer Reviewers: Messrs. Jaime Roman, and Thomas Wiens. Documents clearance was provided by Messrs. Javad Khalilzadeh-Shirazi, Director, EAl and J. Gutman, Chief, EA1AE. Assistance in preparing the documents was given by Ms. B. Phillips.  - v - V. PROJECT IMPACT, BENEFITS. and RISKS . . . . . . . . . . . . . . 36 A. Economic Benefits ... . . . . . . . . . . . . . . . . . 36 B. Financial Impact of the Project on Participants . . . . . 38 C. Risks ........................ 40 VI. AGREEMENTS AND RECOMMENDATION ... . . . . . . . . . . . . . 41 ANNEXES 1. The Comprehensive Agrarian Reform Program 2. Detailed Cost Tables 3. Disbursement Schedule 4. Central Project Office 5. Sub-projects' Eligibility Criteria (a) Community Development (b) Partner NGOs Accreditation Criteria (c) Infrastructure investments 6. Community Development & Technical Assistance Program 7. Rural Infrastructure 8. Monitoring and Evaluation 9. Supervision Plan 10. Economic and Financial Analyses 11. Documents in Project File  I. AGRICULTURE IN THE ECONOMY Sector Structure and Performance 1.1 Agriculture continues to play a significant role in the economy, both in terms of its direct contribution to production and employment and as a basis for activities in the manufacturing and service sectors. During the first four years of the 1990s, agriculture's direct contribution amounted to about 22% of GDP, agri-based industry accounted for another 13*, while as much as one-third of value added in the service sector was also linked to agriculture. Agriculture remains the most important source of employment directly providing income to 43% of the labor force. Although the sector's direct contribution to national output and employment has dropped continuously over the past two decades, the pace of change has been remarkably slow compared to other countries in the region. This slow structural shift is a reflection of industry's failure to become the main engine of growth and principal source of labor absorption over the last two decades. 1.2 Following a decline in output during the crisis years of the early eighties, the agriculture sector recovered to grow at an average annual rate of 3%, contributing about 16% to domestic growth between 1985 and 1990. The early l990s were characterized by stagnation in both agricultural output and value added in agro-processing. The sectoral growth rate during the period of economic recovery was below both growth in the rest of the economy and the sector's comparatively strong performance during the 1970s. Sectoral value added, agricultural exports, and food production per capita have lagged far behind those in most other East and South Asian countries. Several factors account for this slowdown, including the fact that the fruits of the green revolution had largely been exploited by the end of the 1980s, an overall downward trend in international commodity prices for the Philippines' traditional export crops, natural calamities, and a series of macro-economic and sector specific impediments which have led to underinvestment in the sector. Among the latter two figure an exchange rate that became overvalued in the late 1970s, the absence of long term credit, deterioration of intersectoral terms of trade, weak rural infrastructure and an inefficient transport system, feeble support services and slow implementation of agrarian reform in the early 1990s. Rural Poverty 1.3 Persistent widespread rural poverty is the most disappointing aspect of past economic performance in the country. Over two-thirds of all poor households live in rural areas, where both the incidence and the severity of poverty remain high. The incomes of just under half of all rural households fall below the rural poverty line (US$304 per capita in 1994) and the number of rural poor households has increased by over 52% from 2.3 million to 3.5 million between the mid-1960s and the late 1980s and fallen to 3 million by 1994. Several factors account for this, including a continuing high growth rate of population (which in turn led to falling farm sizes despite a 60% increase in cultivated land between 1965 and 1990 and contributed to the stagnant real agricultural wages), inadequate growth of the agriculture sector and a failure of the economy as a whole to provide sufficient employment opportunities outside agriculture. Sustained sectoral growth, combined with increased employment opportunities  - 2 - outside the agriculture sector in rural areas will be indispensable to reduce rural poverty in the years to come. The proposed project would assist in achieving these goals through the provision of needed term lending facilities for financing rural development activities. 1.4 Only 60 percent of total farm area is owned by the farmers themselves, large areas continue to be tenant farmed. An agrarian reform program has been underway for some 40 years in the country, however, it has only been a priority since 1988. With such a large number of tenant farmers, poverty remains a major concern in the rural areas. The latest estimate of the poverty incidence (1994) indicates that about 36% of families live below the poverty line. 1994 estimates made by the National Statistical Board indicate that about 47% of rural families and 24* of urban families live below the annual per capita poverty thresholds of P8,035 and i9,910, respectively. Widespread poverty also has its impact on the market for food, particularly on children. According to the Bureau of Agricultural Statistics, approximately 18.2% of households in 1994 (10.6% in the urban areas and 25.7% in the rural areas) do not obtain sufficient food to avert malnutrition, while child malnutrition, is estimated at up to third of children. Government StrateqV 1.5 Aware of the critical role that agriculture plays in economic recovery and in spearheading the attack on rural poverty, the Government has implemented a series of institutional reforms to strengthen sector management and policy reforms aimed at reducing government interventions in pricing and marketing and at eliminating discrimination against agriculture. It has also embarked on the Comprehensive Agrarian Reform Program (CARP) to achieve better distribution of cultivable lands and aims at increasing allocation of public resources to agricultural development. The Government's sectoral objectives as stated in the Agricultural Development Plan (1990) are: (i) to increase the productivity and real incomes of small farming and fishing families; (ii) to attain self- sufficiency in rice and corn for food security; (iii) to help attain a favorable balance of trade for the country; and (iv) to help ensure productivity of the agricultural resource base over the longer term. The focus of this broad plan has been refined under the Medium Term Agricultural Development Plan 1993-98, which has also been adopted as the country's action program for enhancing agricultural competitiveness following its ratification of the GATT-Uruguay round in late 1994. During implementation of this, Government intends to concentrate its efforts on the development of Key Production Areas (KPAs) which it has defined for different crops. The KPA approach aims to achieve greater and more diverse aggregate production as a result of increased specialization and hence higher yields. In 1994, GOP adopted the Social Reform Agenda (SRA) as it's operational blueprint for the strategy to fight poverty. Under the SRA, Agrarian Reform Communities (ARCs) were declared as convergence points for agricultural development flagship programs II. AGRARIAN REFORM 2.1 An important cause of poverty and under-development in the Philippines is the way in which the nation's primary resource - land - is used and controlled.  Legislative efforts to change this situation trace back to 1936, with the most recent being the 1988 Comprehensive Agrarian Reform Law (CARL). However the implementation of the law has been slow until 1992, when significant achievements have been made by the Government. The present leadership in the Philippines is committed to pursue an even faster, fairer and more meaningful implementation of land and agrarian reform through the Comprehensive Agrarian Reform Program (CARP), to empower the farmers and increase agricultural productivity. The key implementing strategy of the CARP is the Agrarian Reform Communities (ARCs) Development Program, which is basically an area-focused, resource-based, community-centered and impact-oriented approach to rural development. Details on CARP's operation are given in Annex 1. A. The Agrarian Reform Community (ARC) Strategy1 2.2 Faced with limited resources and the possibility of spreading them thinly all over the country without visible effect, the Department of Agrarian Reform (DAR) had adopted the ARC strategy as provided for under Republic Act 7905 dated February 23, 1995. This involves harnessing the efforts and resources of government agencies, NGOs, the private sector and to a certain extent specific communities where the greatest concentration of CARP lands and beneficiaries are located. Since 1993, over a thousand communities have been identified and designated as ARCs. ARCs are considered building blocks for rural industrialization of a larger area which may comprise a province. They are in various levels of physical and organizational development. As such, investment in these communities would require careful matching of resources and needs. The ARC strategy is in line with the decentralization effort of the government and has elicited greater participation and involvement of NGOs and People Organizations (Pos) as well as the local government units. Also, under the SRA, the ARCs are designated as conduits for agricultural development, basic infrastructure implementation and productivity improvement efforts. B. The Agrarian Reform Beneficiaries (ARBs) 2.3 Agrarian Reform Beneficiaries (ARBs) are among some of the most disadvantaged communities in the Philippines. Almost all types of physical infrastructure are lacking, including: irrigation, roads, bridges, potable water, health and education facilities, and post-harvest handling and processing centers. The CARP has focused on the land acquisition and distribution priorities mandated by the government; however, the beneficiaries have been without much needed support services to address community building, agricultural 1/ An ARC is a barangay or cluster of barangays which has been declared an ARC by DAR within which at least 50% of the households are headed by ARBs; a barangay (village) is the smallest political unit. Under this project, the average ARC would comprise about three barangays. The number of people in each of the ARCs is varied from an average of about 700 (if the ARC comprises one barangay) to several thousand, if it comprises more barangays.  - 4 - extension, physical infrastructure, credit, and marketing support. Physical infrastructure is considered a priority amongst all ARBs. Basic infrastructure, particularly: irrigation systems, post harvest facilities, good rural roads, ports, and interland shipping, is essential to the development of the Philippine agricultural sector. The high cost of production and marketing of goods in many of the rural areas places these farmers at a serious competitive disadvantage. Transport costs account for some 35 to 50 percent of the grain (rice, corn) marketing costs. Part of this high cost can be attributed to the limited number of marketing centers and the widely dispersed growing area, however, poor access infrastructure and the high marketing cost for regional transport is the principle reason for such costs being approximately 25 percent higher than in neighboring countries. 2.4 The economic situation of many ARBs - whether they live in- or outside an ARC - is a precarious one. Most of them were, until q-uite recently, share- croppers, landless farm workers, or "illegal" occupants of public lands. Once they receive land under the CARP, they have to become farmer-entrepreneurs in their own right. Henceforth, they have to make all farm management decisions themselves, secure timely availability of inputs, and arrange for marketing their produce. In the years to come - with CARP maintaining its momentum - many more farm households will have to go through this transition process. It is all the more difficult to make this transition, because many ARBs work under difficult circumstances. By definition, this is the case in the ARCs, because these have been established in "depressed" barangays. Farms are small, with a maximum size of three hectare, set by law. But many farms are much smaller and many ARBs have to till marginal lands. 2.5 Farm incomes of many ARBs are below the national poverty threshold for rural areas of P48,200 for a family of 6 per annum (P8035 per capita) . Most commonly, farm incomes range from 124,000 to 130,000 per family per year (excluding non-farm income and transfers.) Wages for farm labor range from 150 (about US$2) plus food to P75 (about US$3) plus food per day, depending on the season and type of work. Sometimes there are opportunities for off-farm work (for example, in masonry, carpentry, and tri-cycle driving) . But in other cases the opportunities are limited, exacerbated by the lack of skills of the people. The combination of small farms, low farm incomes, and limited off-farm employment, indicates a widespread prevalence of underemployment. This is also reflected in the shadow wage rate of unskilled labor, which has been set at 0.6 times the market wage rate by the National Economic Development Authority (NEDA). 2.6 The low farm incomes would seem to be directly related to: (i) a lack of basic infrastructure and know-how of improved technologies and marketing information on the part of the farmers and their organizations; and (ii) inadequate credit to buy inputs, tools and equipment to increase yields and cropping intensity, to treat appropriately post-harvest crops, to engage in processing of farm produce, and to develop other livelihood activities. These issues would be dealt with under the project (paras. 3.2 to 3.25).  C. Credit for Farm Production 2.7 New ARBs at best have some working capital and farm tools. In a large number of cases they have neither. They also do not have access to formal credit. Therefore, they have to resort to informal credit, at high interest rates. Production loans for a period of about 4 months, are reported to cost between 20% and 30%. They are often linked to the marketing of produce, typically including a reduction of about 10% in the price paid by the trader/money-lender. Informal credit for one month is reported to cost between 10% and 20%2. The consequence of the high price of credit is that farmers limit the use of inputs (e.g. certified HYV-seed) and the purchase of farm equipment (for example, a hand tractor) . Also, the high price of credit reduces the income of farm households, thus limiting their savings capacity and making it difficult to break out of the circle of continuously working with expensive credit. And this seems exactly to be the situation in a number of ARCs, where it was reported that 90%, or "almost everybody" makes use of informal production credit. 2.8 Savings and formal credit facilities are essential for ARBs development. Undercapitalization is a major problem in a number of cooperatives and ARBs communities; credit is badly needed. But aggressive credit policies without prudent criteria and procedures can do more harm than good. Experience with credit program for ARBs in particular and farmers in general, repeatedly provides justification for placing agricultural credit in the hands of formal financial institutions, who will undertake the credit risk and give them maximum leeway in assessing the credit-worthiness of these borrowers. Most of funding programs where a government line agency like DAR assumed control over loan approvals, or where lending conduits were fully freed from credit risks, ended up with inordinately poor collection rates, many failed projects, and eventually became unsustainable. This lesson has been incorporated in the design of the proposed project (para. 3.24). 2.9 Saving is being encouraged through the village-level Development Facilitators (DFs) of DAR, particularly in the early stages of the development of a community and by the Land Bank of the Philippines (LBP) through its field offices. Presently, most formal credit in the ARCs, both for production purposes and for farm investments, originates from LBP. However, LBP, in order to reduce operating costs and risks, only lends to registered cooperatives either for onlending to their members or for their own investments. The issue of a credit delivery mechanisms for non-members of cooperative groups, would seem to 2/ The formal credit is provided mainly by LBP and its current rates are 14% for production loans and 16% for investments. LBP lends only to cooperatives for onlending to their members or refinancing agricultural loans made by rural banks. While the usual rate for on-lending by cooperatives to their members/farmers is about 24% (2% per month), the rates charged by the rural banks range from 25% to 30% per annum. However, LBP's outreach, either through its accredited rural banks or through its client/cooperatives, is presently limited to about 10% to 15% of total farm families in the country.  be problematic, particularly in light of the Cooperative Development Authority (CDA) policy of not allowing the registration of a new cooperative if a group of the same type already exists within its locality. This issue would be addressed by the project (paras. 3.23 and 3.24). D. Government Policy 2.10 Economic growth is a platform underpinning the Government of the Philippines (GOP) Medium Term Development Plan (MTDP), which emphasizes the need for world competitiveness and people empowerment to achieve a per capita gross national product of US$1,000 by the year 2000, and an annual GNP growth rate of 6 to 8 percent. This plan also contains an unequivocal commitment to reduce poverty from 35.7 percent of families in 1994 to 30 percent by 1998. Economic growth and poverty reduction form the framework for all regional and sectoral policies, programs, and projects. 2.11 The Government of the Philippines has made agrarian reform, and particularly CARP, a priority to achieve the goals of Philippine 2000 (to be a Newly Industrialized Country by the year 2000). The Department of Agrarian Reform (DAR) has been given the lead role in the implementation of CARP, however eight GOP line agencies play an active role in the delivery of CARP. These include: DAR, Department of Agriculture (DA), Department of Environment and Natural Resources (DENR), Department of Trade and Industry (DTI), Department of Labor and Employment (DOLE), Department of Public Works and Highways (DPWH), Land Bank of the Philippines (LBP), and National Irrigation Administration (NIA). 2.12 CARP has set out ambitious targets for land acquisition and delivery over the ten year period 1988 to 1998. The overall target is 10.3 million hectares, with this being divided into 3.8 million ha for DAR and 6.5 million ha of public alienable and disposable lands to be disposed under the supervision of DENR (the DENR scope was later reduced to 5.919 million ha). In 1995, CARP scope was revised from 10.3 million ha to 7.8 million ha. Of this revised scope, DAR was mandated to distribute 4.3 million ha of agricultural lands while DENR was assigned with 3.5 million ha. As of 1992 land distribution accelerated and by March 1996 about 2.2 million ha or 51% of DAR's revised mandated area was acquired and distributed (based on preliminary PARC report). Similarly, DENR distributed 1.6 million ha or 45t of its assigned area. Collective efforts and political will of the current DAR management made it possible. This impressive accomplishment, however, is well behind CARP targets. Reasons for delays are many, however, they can be summarized as: (i) inadequate institutional capability and capacity; and (ii) financial resource limitations. At the current time, CARP is moving ahead rapidly. The past two years have seen a considerable increase in accomplishments and this has brought about new questions about the sustainability of the program without more extensive support to the beneficiaries. 2.13 The CARP, instituted by the Government, is mandated to: (a) distribute public and private lands to farmer beneficiaries in an effort to increase agricultural productivity, enhance income, and improve the standard of living of Agrarian Reform Beneficiaries (ARBs) and their respective farmers' organizations,  - 7 - and (b) deliver support services. To maximize the impact of the available limited resources, the Department of Agrarian Reform (DAR) has identified the Agrarian Reform Communities (ARCs) as the focus of government (national and local) intervention in providing community development assistance, livelihood support including agro-business activities, and basic infrastructure investments. E. Issues 2.14 To advance the objectives of the CARP the following three main areas of challenges/problems have been identified: (a) farmer beneficiaries and their respective communities; (b) NGOs/ Peoples' Organizations (POs); and (c) CARP Line Agencies and Local Government Units (LGUs). (a) Farmer beneficiaries and their communities are facing relatively poor economic conditions due to inter-related technical, financial, and social constraints which include respectively: (i) low cropping intensity, low productivity, little use of improved inputs, limited technical knowledge amongst ARBs, limited exposure to alternative cropping options and lack of marketing infrastructure; (ii) inadequate financial resources for post harvest and processing facilities, limited access to formal credit, limited financial base/indebtedness of POs, inadequate savings, lack of management skills to plan and operate economic activities and lack of internal control systems in POs; and (iii) weak organizational base of POs, weak leadership within the ARCs and POs, poor social infrastructure, and limited education amongst ARBs. (b) Local NGOs and POs. The main constraints affecting the ability of local NGOs/POs to assist the ARCs development process are the inadequate or lack of qualified staff to provide the necessary technical support to ARCs, insufficient funds for wider deployment of staff and delayed funding from DAR, inadequate or inappropriate training of staff, lack of prior relationship to ARCs and diversity of or non-complementary objectives of NGOs/POs leading to differing opinions on the required interventions for ARCs. (c) CARP Line Agencies and LGUs: Budget restrictions which include the overall funding availability; timing of budget allocation and releases along with a cumbersome bureaucracy and internal control and audit systems are the main issues affecting CARP performance. These constraints are the main cause for relatively slow land surveys (ie: inadequate equipment, communications facilities, and data processing/ lack of computers), the slow pace of reducing legal challenges (ie: lack of access to legal libraries, court references, mobility, communication and computerization), shortage of trained ARC development facilitators in some provinces, mobility and communication, and inadequate support and commitment from other government line agencies. The main challenges affecting the performance of the LGUs regarding the development of ARCs are adjustments to devolution, inadequate management experience,  - 8 - shortage of funds, mobility of staff, linkages with national government support services such as agricultural research and extension (DA), irrigation (NIA), and infrastructure (DPWH). F. Lessons Learned 2.15 The broad lessons that emerged from the review of Bank experience in rural development projects3 are: (i) ownership is vital, not just by government, but by implementing agencies and the rural people directly affected; (ii) project design must be flexible; (iii) goals must be realistic and precise; (iv) project design must be simple, without a large number of unrelated components; (v) credit and farm inputs are often critical to success; (vi) beneficiaries participation is necessary; (vii) arrangement for infrastructure maintenance have to be in place from the start; and (viii) community organization and build up should precede infrastructure development. 2.16 Experience with projects in the Philippines have paralleled the broader experiences described above. The Bank has supported numerous projects in agricultural development, irrigation, and rural infrastructure with varying degree of success. The key issues/lessons which are relevant to this project relate to the planning, design, and implementation of rural infrastructure including roads, water supply, and small scale irrigation. The overriding finding is that centrally planned and executed investments in rural infrastructure tend to receive only secondary attention from the line ministries which are more focussed on larger scale infrastructure investments. As a result delays are endemic, monitoring of quality is limited, and sustainability in terms of maintenance and operation is uncertain at best (reference Second Rural Roads Improvement Project - Loan 2716-PH, and First Water Supply, Sewerage and Sanitation Project - Loan 3242-PH) . The conclusion is that active local participation and responsibility from planning to design to implementation is essential. This approach is consistent with the Government's substantial fiscal decentralization effort. The Central Visayas Regional Project (Loan 2360-PH) represented a more locally oriented approach and was considered very successful except that the cost of administration per dollar invested was very high. Presently, the Environment and Natural Resources Adjustment Program (SECAL) Loan 3360-PH and Credit 2277-PH, is pursuing a locally oriented approach and the use of NGOs in project implementation which is proceeding successfully. 2.17 These lessons have been incorporated in the design of the proposed project, by applying the following elements: (i) a community development plan would be designed and implemented by the community. This would allow adequate flexibility to support Agrarian Reform Communities (ARCs) in different stages of development and needs thus enabling more ARCs to benefit from project activities; (ii) appropriate development targets for each ARC would be set by the community; (iii) cost sharing arrangements between beneficiaries and government (local and 3/ World Bank Experience with Rural Development, Report No. 6883; OED Lessons and Practices (No. 3) Area Development Projects, September 1993; OED Precis No. 39 -Maintaining Rural Roads.  - 9 - national) concerning the implementation of the respective community development would be the basis for project support; (iv) a minimum level of community maturity (determined by agreed criteria) would be a pre-requisite for project support; and (v) credit and financial services would be provided by an existing financial institution with a wide network of branches and field offices in the rural areas. III. THE PROJECT A. Prolect Formulation and Design 3.1 The need to support the Agrarian Reform Beneficiaries (ARBs) and their communities was discussed as early as 1991. The initial approach was to assist beneficiaries in selected tree crop estates (particularly rubber) which have already been offered for voluntary sale to Government, and the small farmers outgrowers surrounding these estates, to organize into group farming arrangements as a means to effectively use advanced production, processing, marketing, and management expertise and facilities in order to sustain and possibly expand production levels. A Japanese grant fund was obtained and a consultant firm submitted in 1993 their project preparation report. The proposed project was reviewed and found to be unjustifiable in terms of its potential positive impact. In 1994 the Government requested the Bank to review the possibility of supporting the ARBs through their Agrarian Reform Communities (ARCs). Accordingly, a Bank mission identified the project in October 1994. The original Japanese grant fund was used for project preparation which was completed in August 1995. The project was pre-appraised in October 1995 and February 1996, appraised in June/July, 1996. Negotiations were held in October, 1996. 3.2 The main design alternatives considered for the project were a pre- determined area-based intervention or a demand driven fund concept. The latter alternative was chosen as it would allow adequate flexibility to support Agrarian Reform Communities (ARCs) in different stages of development and needs thus allowing more ARCs to benefit from project activities. A demand driven approach with cost sharing financing among project's beneficiaries, local and national governments, would positively respond to beneficiaries' self identified needs, maximize available local resources, and thus ensure ownership and sustainability of community sub-projects. This is also in line with Government policy to focus its intervention on the ARCs in providing community development assistance, agricultural and enterprise development support, and basic infrastructure investments. B. Rationale for Bank Involvement 3.3 The proposed project is consistent with the Country Assistance Strategy (CAS) which was presented to the Board on April 4, 1996. The main objective of Bank assistance strategy in the Philippines, as defined in the CAS document, is to promote sustainable development and help achieve a more rapid reduction in poverty. Within this framework, four specific objectives have been identified: (a) supporting the Government's efforts to convert the current economic recovery into a period of sustained growth, which is vital for poverty reduction;  - 10 - (b) strengthening the country's infrastructure to enable such growth; (c) assisting in the design and implementation of more effective and efficient mechanisms for poverty alleviation while upgrading the quality of social services available to the poor; and (d) supporting sustainable management of natural resources and protecting the environment. The proposed project would contribute to these objectives. In particular, it would address the problems of rural poverty through support to: (i) rural infrastructure development including farm- to-market roads and post-harvest facilities; (ii) irrigation development and rehabilitation; (iii) intensification and diversification of farm production and other income-generating activities; and (iv) community development and self-help approach which are seen as essential to improve ARBs' standard of living. Thus the project would have a direct impact on poverty alleviation through the increase of ARBs farm production, productivity, and incomes. C. Project Scope and Obiectives 3.4 The project would assist the Government in strengthening farmer organizations in Agrarian Reform Communities (ARCs) to plan and undertake development activities which would raise farmers' incomes and provide further opportunities for sustainable growth. In particular, the project would: (i) assist Agrarian Reform Beneficiaries (ARBs) and other farm families in the selected ARCs4 to gain access to productive resources, social and physical infrastructure; and (ii) support CARP line agencies, Local Government Units (LGUs), NGOs, People Organizations (POs) and coordinate their activities. 3.5 Considering presently available financial resources, the project would support the development activities of up to 100 ARCs in ten suitable provinces, selected on the basis of several factors including: (i) land distribution has almost been completed; (ii) ARCs in the provinces are associated with, or will be associated with the Key Production Area program; (iii) LGUs are capable and willing to participate in the project; (iv) farmers organizations have reached an acceptable level of maturity, and (v) presence of relevant support agencies. These criteria are consistent with existing national programs, including the targets of Philippines 2000, DA's Medium Term Agriculture Development Plan (MTADP), and DAR's Strategic Operating Provinces (SOPs) . On this basis, the preliminary list of selected provinces is as follows: Isabela, Leyte, Davao Del Norte, Albay, Ilocos Norte, Surigao Del Norte, Southern Leyte, Misamis Oriental, Davao Oriental, and Quezon. The project would finance viable economic activities in ARCs that either have been or will be identified by the communities and their members. This would allow maximum flexibility in supporting ARCs that are at significantly different stages of development and needs. Project financing would be based on cost sharing arrangements among project's beneficiaries, LGUs, and national government. 4/ Under the project, 'beneficiaries' refers to the total population of the ARC; this includes (i) the Agrarian Reform Beneficiaries of CARP and previous land reform programs; and (ii) other people living in the area.  - 11 - D. Prolect Descrintion 3.6 The project would be implemented over six years, and would comprise the following three components. (a) Community Development and Technical Surport (US$7.6 million). This component would enable ARCs to achieve community-determined objectives through more detailed and realistic planning, development of organizational capability and more effective management of human, physical and financial resources (especially in support of initiatives in the Agriculture and Enterprise Development component) . The two sub-components would address these aims. Community Development would concentrate on (i) increasing community participation in barangay planning processes, in implementation of development activities, in addressing social issues such as the role of women in the community, and in maximizing the sustainability of project interventions; and, (ii) organizational development which would strengthen the operations and activities of community groups within the ARCs, such as cooperatives, associations, farmers groups, women's groups, auto-savings groups and clubs. Support provided would include cooperative management training, financial management and enterprise development training and assistance in improving coordination with other agencies. Technical Assistance would focus on (i) technical advisory services of the beneficiaries and by providing marketing support and technical consultancy services to the ARC organizations; and (ii) providing the necessary staff development in terms of training and support for effective project operations. (b) Rural Infrastructure (US$59.0 million). This component would support infrastructure requirements within selected ARCs, based on the community's assessment of its needs during the above planning process. It would comprise three sub-components: (i) rural access would improve vehicle and pedestrian links from ARC barangays to existing all-weather roads. Works would include reconstruction or rehabilitation of about 600-900 kms of existing roads, associated bridges, causeways and culverts, and additional materials and technical assistance would be provided for spot improvements on about 300-500 km of farm access tracks; (ii) irrigation would include rehabilitation or extension of existing irrigated areas and, to a lesser extent, construction of new schemes on a total area of about 10,000 - 15,000 ha. Irrigation would support diversification into non-traditional crops and activities would include headworks5, intake structures, water conveyance canals, drainage channels, access roads and flood protection measures. Support would be restricted to irrigation managed by farmers on a communal basis where beneficiaries would repay development costs and take S/ Mainly run-of-river diversion weirs, but also Small Water Impounding Projects (SWIPs) in upland areas (small dams and reservoirs).  - 12 - responsibility for operation and maintenance of completed works; and (iii) community infrastructure would include rehabilitation or construction of drinking water supply schemes, both point sources and piped systems; and development of multi-purpose buildings for community use, such as meeting halls. Investment priority would be given to rural access and communal irrigation, with rehabilitation of existing facilities given preference over new construction. All investments would be technically sound and environmentally acceptable, with rural access and irrigation also being economically viable. Proven, labor-based technology would be adopted wherever possible, through local employment. (c) Agriculture and Entervrise Development (US$33.6 million). This component would be directed towards the promotion and development of farm production and other income generating activities of the beneficiaries, their cooperatives, and the ARCs. Agricultural and enterprise development activities would be market-oriented and would involve government agencies and private enterprises for technology transfer, input supply, and processing and marketing of farm products. It would consist of four sub-components: (i) technical advisory services to assist in the preparation of feasibility reports and provide business consultancy services to beneficiaries as they undertake individual and community enterprises; (ii) marketing assistance to equip beneficiaries with accurate and timely market information and help establish sustainable market linkages and viable outlets for their products and services; (iii) farm extension services to upgrade the technical skills of local farm extension workers and effectively disseminate modern and appropriate technology to beneficiaries; and (iv) credit services to co-finance production, processing, and marketing activities of the beneficiaries and their cooperatives. E. Detailed Features 3.7 The project would include the following three components: (i) Community Development and Technical Support component (CD&TS); (ii) Rural Infrastructure and (iii) Agricultural and Enterprise Development. Community Development and Technical Support 3.8 Scope and Obiectives. The objective of the component is to develop effective community participation, allowing the project to respond to beneficiaries' self-identified needs, maximize available support and ensure sustainability of community sub-projects through developing the capabilities of the POs. To achieve this, beneficiaries require assistance to generate meaningful participation, articulate their needs, develop detailed and realistic long-term and short-term plans, and to organize and manage socio-economic activities. Community development efforts would foster group cooperation and discipline, promote savings generation, and encourage the establishment of small- scale self-help ventures.  - 13 - 3.9 ARC Pre-prolect Planning Process. The objective of the Pre-Project Planning phase is to ensure that the activities implemented through the Project are in line with the development priorities of both the communities and the LGUs. The approach followed would comprise of four steps (i) the most critical community needs are identified at a General Assembly meeting of each barangay; (ii) LGU support is sought and technical feasibility studies initiated; (iii) a more detailed farming systems development plan for the community, including collection of baseline data for project monitoring is undertaken and a detailed annual action plan prepared; and (iv) implementation of the action plan. Progress achieved in relation to the community plans would be reviewed by the community as well as by DAR and the LGUs and would be up-dated on an annual basis. For the first ten ARCs, project preparation would be undertaken utilizing Japanese Trust funds. Detailed proposals for this are set out as Annex 4.2 3.10 Capability Building of the ARCs. The assistance provided under the project would encompass community organizing, training, and facilitation at all levels of project operation. Activities at the ARC level would cover assisting the community to fulfil their action plan, strengthening community organizations and supporting the economic activities of the Agricultural and Enterprise Development component. At the municipal and provincial levels, the project would focus on staff training and mobilizing available resources required by the ARC in realization of their objectives. Strengthening of the ARCs would comprise four complementary sub-components: (a) Community Development would concentrate on improving community participation in project activities and would aim to strengthen the ARC's People Organizations (POs). Field staff of DAR and NGOs would stimulate local understanding of development potentials and opportunities through a more comprehensive ARC development planning process. Strategies employed to increase community participation would be (i) self-generation and analysis of baseline data, (ii) skills development of beneficiaries in identifying resources, assessing feasibility and prioritizing; (iii) increase in information dissemination on proposed community plans to all beneficiaries rather than only to barangay and cooperative leaders; (iv) encouragement of general assembly meetings to discuss local social, economic and environmental issues and to engage in joint community self-help ventures (e.g. capital build-up, tree planting, ground clearing, road maintenance, etc.); and, (v) involvement of elected community members in supervising the program-of-work for infrastructure construction, in post-project maintenance of joint facilities and in directly monitoring project activities. (b) Organizational Development assistance would strengthen the operations and activities of community groups within the ARCs. The level of organizational development and economic activity throughout the ARCs is highly variable so project interventions would be tailored to the specific needs of the organization. NGO Community Development Workers (CDWs) and the Development Facilitators (DFs), with the assistance of the Municipal Agrarian Reform Officer (MARO), would be instrumental in identifying the needs of each PO. Where  - 14 - possible, training and other support would be provided through NGO partners, the Bureau of Agrarian Reform Information and Education (BARIE), Beneficiary Development and Coordination Division (BDCD); other local resource organizations and the Provincial Economic Development Advisor (PEDA)6. Organizational development would be particularly important for prospective ARCs which do not yet qualify under the selection criteria. These would be identified by the DAR provincial office and an organizational development program would be designed to overcome the specific weaknesses of each ARC. (c) Technical Assistance would include technical advisory services which would concentrate on specific skills training for the PO members and prominent farmers, particularly where related to required support for the Agriculture and Enterprise component. Skills training courses for beneficiaries are likely to be available at municipal and provincial levels and would include accountancy for co- operatives and business staff; financial and business management; maintenance of post-harvest equipment; infrastructure maintenance; Integrated Pest Management (IPM); garment making; livestock rearing, etc. A database on available courses would be compiled by BARIE for dissemination among the ARCs to enable members to more easily select and apply for relevant courses. In addition to the existing courses, funding would be allocated for reactive learning through apprenticeships, marketing initiatives and specific consultancy services. (d) Staff Development would particularly focus on improving CDW and DF capabilities in community participatory planning and skills transference techniques so that dependency on community organizers is avoided and ARC independence and autonomy is increased and sustained. Additional CD training for DFs may be required in areas were there is no NGO presence. Included under this sub-component would be field monitoring and evaluation costs to ensure that flexible, responsive and appropriate project operations are maintained. 3.11 The coverage of the targeted ARCs by interested and capable NGOs is variable with some ARCs being able to access support from several NGOs, whereas many ARCs have no NGOs available in their area. Wherever possible, NGOs would be involved in the implementation of the component on a continuation of the tri- partite agreement between the ARCs, DAR and CARP Implementing Agencies (CIAs) and NGOs. As defined by the project, NGOs could include development NGOs, people's organizations (POs), foundations, academic institutions and other non-profit development organizations. Profit-making organizations may also qualify if the organization s objectives are oriented towards community development and profits are shared by members or reinvested in the organization's development work. 6/ The recruitment of PEDAs is designed to minimize project risks due to (i) the difficulties in mobilizing resources for the ARCs; and (ii) the lack of enterprise expertise in DAR at present.  - 1 5 - Partner NGOs would be selected according to their alliance with beneficiaries and relevant skills capability (see para. 4.16 for more details regarding selection criteria). Due to the wide variance among provinces in terms of community development needs and the availability and capabilities of NGOs, the selection of NGOs would be the responsibility of the DAR provincial office. Qualified NGOs would be sought based on the specific needs of the province. Rural Infrastructure 3.12 Scope and Obiectives. The main objectives of the component are to raise farmers' incomes through increased crop production and improved access to markets, and enhance living conditions through provision of community infrastructure. The project would improve about 600-900 km of all-weather road barangay road connections to remove transport bottlenecks which presently constrain social and economic development of ARCs. Assistance would also be provided for spot improvements to 300-500 km of farm access tracks. The project would provide new irrigation to about 3,000-5,000 ha, and rehabilitate non-functional irrigation on a further 7,000-10,000 ha in selected ARCs. The project would also support improvements in community infrastructure, including rehabilitation or construction of drinking water supply schemes, and development of multi-purpose buildings for community use. Rehabilitation of existing facilities would be given preference over new construction, with labor-based methods used wherever technically and economically feasible. 3.13 Planning and Selection. All project interventions at ARC level would be planned and implemented as part of the community development plan, drawn up through an integrated and consultative process involving beneficiaries, Local Government Units (LGUs) and concerned support agencies. This participatory procedure, described under the community development component, would identify infrastructure requirements. In this way, the project would adopt a flexible, demand-driven approach, responding to felt needs of beneficiaries. LGUs and ARCs would be required to comply with minimum standards to qualify for project support. Proposed infrastructure requirements would also conform to specific eligibility criteria. LGUs would screen infrastructure proposals to determine those worthy of further investigation. These eligibility criteria are presented in Annex 4.2(c). 3.14 Designs would be undertaken by competent engineers and would conform to agreed technical standards, which would not fall below those of technical line agencies. Improvements to barangay roads would include restoration of road formation and width, and provision of a gravel-surfaced carriageway, drainage structures, slope protection works and concrete pavements on steep sections. Materials and assistance would also be given for spot improvements to farm access tracks which would be undertaken by farmers on a self-help basis. Irrigation improvements would include headworks, intake structures, water conveyance canals, drainage channels, access roads and flood protection measures. Most irrigation development would benefit gravity schemes reliant on diversion of water from perennial streams or rivers. However, small dams would also be considered for irrigation or rural water supply in upland areas without an alternative water source. These small dams and associated reservoirs are referred to as Small Water Impounding Projects (SWIPs).  - 16 - 3.15 Support would be restricted to small irrigation schemes managed by farmers on a communal basis. Community infrastructure would include (i) rehabilitation or construction of drinking water supply schemes, both point sources and pipe systems; and (ii) development of multi-purpose buildings for community use. The project would give priority to rural access and communal irrigation, and to maximize benefits, rehabilitation would take priority over new construction. All infrastructure investments would be technically sound and, with the exception of community infrastructure, would be economically viable. Proven labor-based technology would be adopted wherever possible through local employment. 3.16 Operation and Maintenance. LGUs would be responsible for maintaining all barangay roads improved under the project. A MOA between the Department of Agrarian Reform (DAR) and LGUs (at provincial level) would ensure that adequate resources would be provided for ongoing road maintenance. LGUs in default of maintaining roads improved by the project would have to repay the grant or have the grant converted into a loan to be repaid directly from their Internal Revenue Allotment (IRA) . For irrigation, the MOA between NIA and the Irrigation Association (IA) would require that the latter take full responsibility for the operation and maintenance of completed irrigation facilities. However, major repairs, beyond the capability of IAs, would be carried out by LGUs with full cost recovery. Drinking water supply schemes would adopt similar arrangements based on a MOA between LGUs and Waterworks and Sanitation Associations. Agriculture and Enterprise Development 3.17 Scope and Obiectives. The objective of the Agriculture and Enterprise Development component of the project is to increase the family incomes of beneficiaries by providing economic support services and developing the individual and collective capacities of the beneficiaries to undertake sustainable income-generating activities. It would build upon the increased potential commercial opportunities resulting from improved physical infrastructure. 3.18 Income-generating activities would be purposely market and private sector- oriented, with credit, farm inputs and technical support services directed at improving productivity and ensuring ready access to viable outlets for the products of the beneficiaries and their cooperatives. An effort would also be made to coordinate and integrate these activities with the overall agricultural and economic thrusts of the Government, particularly with regard to rural development, and with other programs for the development of ARCs. 3.19 The key agencies that would be involved in the component would be the Land Bank of the Philippines (LBP), DA, Department of Science and Technology (DOST), Department of Trade and Industry (DTI), DAR and the NGOs/POs. Given that agricultural enterprise programs are currently being provided by various government agencies, the main responsibility of the PEDA would be to ensure that these services are sufficiently and effectively channelled towards ARCs. To maximize the impact of this collaboration, the project would focus on the provision of technical advisory services, farm extension, marketing assistance, and credit.  - 17 - 3.20 Technical Advisory Services would initially focus on the refinement of community development plans of participating ARCs, as described in the Community Development and Technical Support component. An evaluation would be made to identify production, enterprise and other income-generating opportunities that can be feasibly undertaken by the beneficiaries and/or their cooperatives. Community development plans would include a time frame for the development of income generating activities, revised indicative budgets, and possible sources of funds. It would also account for possible integration of enterprise activities with other ARCs and cooperatives in nearby areas. 3.21 Technical advisory services would be directed at assisting cooperatives in evaluating commercial-scale business options, identifying market outlets, and packaging proposals for external financing. This would involve opportunities for improving farmers' incomes through improved primary farm production and other income generating activities such as processing, cottage industries, farm machinery pooling, and other agribusiness concerns that exist within ARCs. 3.22 Farm extension would involve the dissemination of appropriate technology and provision of technical assistance on the production of crops and other products that have been incorporated in community development plans. Emphasis would also be given to the promotion of post-harvest and processing technologies that would significantly improve the value added of raw farm products before these are sold in the market. Extension services would be provided by the LGU including technical training, on-farm demonstrations, printed and audio-visual materials, and radio programs. To the extent possible, private firms who enter into marketing and other commercial ties with cooperatives would also be encouraged to provide extension services. 3.23 Marketing Assistance would be provided by the PEDA and DAR/FAO Investment and Marketing Assistance Program (IMAP) and would include the identification of markets for diversified crops and market outlets. Contract growing, marketing and/or joint venture arrangements between cooperatives and private investors would be promoted through the conduct of investment fora and tours and the packaging of investment proposals. An additional activity would be the provision of accurate and timely markets. Efforts would also be undertaken to coordinate the production and marketing activities within regional markets. Finally, dialogues and interaction among ARCs and other cooperatives would be undertaken to ensure implementation and encourage business linkages aimed at achieving better economies of scale and maximizing credit usage among the groups. 3.24 Finance for expanded economic activities would be required for both incremental real working capital and private investment in such items as livestock, tree crop development, and buildings and equipment for agricultural production, processing, marketing and other rural businesses. Availability of finance would be an essential ingredient of economic development; it would need to come from a combination of small farmers' equity, private investment by local entrepreneurs and credit. Formal Credit would mainly be provided by LBP under a prioritized program through its accredited local cooperatives. These would include adjustment of its eligibility criteria for newly accessing borrowers, and expand the scope of its lending programs to accommodate long-gestating projects, NGOs and other non-traditional credit conduits, and non-ARB rural entrepreneurs  - 38 - and private investors. The credit program undertaken through the cooperatives would incorporate both (i) a continuous savings generation and capital build-up component among the farmers and their cooperatives, and (ii) a management development program that would upgrade the capacities of the cooperatives in business administration, project planning and evaluation, auditing, management information systems, and internal control. In this connection, the Cooperative Development Authority (CDA) policy of allowing only one cooperative per barangay would have to be clarified and liberalized in case it hinders the formation and development of viable ARC cooperatives. DAR and LBP, and DAR and the CDA would enter into a MOA to these effects as provided for in the Operations Manual (para. 4.7). At the same time, the DAR would encourage the utilization and mobilization of existing cooperatives in or near the ARCs to accommodate the beneficiaries. F. Estimated Proiect Costs and Financing 3.25 Total project cost over the six year development plan is estimated at US$106 million or P3.3 billion, including a foreign exchange component of US$32 million or P1.0 billion (30%) . Taxes and duties (mainly VAT) estimated at US$5 million are included in the total cost figure. Project costs include costs incurred by both GOP and by the beneficiaries themselves (including funds received as credit for the economic development of the ARCs) . Within the project cost table, training and support services costs for agriculture and enterprise development are included under Community Development and Technical Support. Project base costs were estimated using January 1996 prices obtained during project pre-appraisal mission. Physical contingencies equivalent to 10% have been added to the base costs for infrastructure works and agricultural and enterprise development; and 7% for community development and project management. Price contingencies were calculated on base costs plus physical contingencies and compounded annually as follows: (a) for all local costs 11% for 1995, 8.5% for 1996, 7% for 1997, and 6% for 1998 and 1999, and 5% thereafter7; and (b) for all foreign costs, the Bank's February 1996 estimates for the MEV index were used viz: 2.4% for 1996 and thereafter. Total contingencies are equivalent to about 36% of base costs in Peso terms, or 20% of total project costs in terms of US dollars. Estimates of project costs and the sources of financing are summarized in Table 3.1 and detailed in Annex 2. 7/ The exchange rate used for base costs is P26 = US$1. Exchange rate is assumed to change over time to maintain purchasing power parity; consequently, price contingencies, initially calculated in local terms, have been converted to US$ using exchange rates that correct the difference between the expected rate of domestic inflation and the expected trend in world inflation.  - 19 - Table 3.1: Estimated Total Project Cost ... .US$ Million .... ... P Million... Local FX Total Local FX Total Community Development 5.1 1.3 6.4 133 33 166 Infrastructure 31.3 16.9 48.2 815 439 1,254 Agr/Enterprise 20.8 6.9 27.7 540 180 720 Project Management 3.7 1.2 4.9 95 32 127 Base Costs 60.9 26.3 87.2 1,583 684 2,267 Physical Contingencies 5.8 2.5 8.3 150 66 216 Price Contingencies 7.1 3.1 10.2 550 238 788 Total Costs 73.8 31.9 105.7 2,283 988 3,271 3.26 Proposed Bank financing would comprise US$50 million or 47% of project costs, US$46 million of which would be to finance part of the cost of rural infrastructure, and US$4 million for part of the project management cost. Project beneficiaries would provide about US$20.1 million (19%), including part of the cost of infrastructure as well as a significant proportion of the incremental investment in agricultural and enterprise activities, both directly as individuals and through their cooperatives and other local based organizations. About US$20.4 million (19%) would be extended by the Land Bank of the Philippines (LBP) or other financing institutions such as QUEDANCOR, who would channel funds to beneficiaries largely through ARC based cooperatives for agricultural and enterprise investments. LGUs would provide US$4.6 million (4%) from their own resources, and US$10.7 million (10%), which may be reduced by donors' participation in community development costs, would be provided through DAR. Estimates of project cost and sources of financing by component and year are summarized in Tables 3.2 and 3.3 below. Table 3.2: Financing By Component - With Contingencies (US$ Million) ARCs LGU DAR LBP IBRD Total Percent Community Devt & TS 1.5 - 6.0 - - 7.5 7.2% Infrastructure 6.2 4.6 1.8 0.2 46.0 58.8 55.6% Agr/Enterprise Devt 12.4 - 1.0 20.2 - 33.6 31.7% Project Management - - 1.8 - 4.0 5.8 5.56 Total Costs 20.1 4.6 10.6 20.4 50.0 105.7 100.0% Percent Financing 19.0% 4.3% 10.1% 19.3% 47.3% 100.0%  - 20 - Table 3.3: Phased Project Cost and Financing With Contingencies (US$ Million) Year 1 2 3 4 5 6 TOTAL By Component Community Devt & TS 0.4 1.4 1.7 1.5 1.4 1.1 7.5 Infrastructure 2.7 8.4 11.5 14.8 12.1 9.3 58.8 Agr/Enterprise Devt 3.2 4.8 6.6 8.5 6.9 3.6 33.6 Project Management 1.0 1.1 0.9 0.9 0.9 1.0 5.8 By Financing Source ARCs 1.5 3.0 4.0 5.0 4.1 2.5 20.1 LGU/GOP 0.2 0.7 0.9 1.2 1.0 0.6 4.6 GOP/DAR 0.8 1.8 2.2 2.2 1.9 1.7 10.6 LBP 2.0 2.8 4.0 5.1 4.2 2.3 20.4 IBRD 2.8 7.4 9.6 12.2 10.1 7.9 50.0 Total By Year 7.3 15.7 20.7 25.7 21.3 15.0 105.7 3.27 The sharing of project cost between the participants is in line with current practice in the Philippines for these types of activities. To permit the project to be incorporated within the 1997 budget and each year thereafter, the whole of the project cost contributed by or through GOP (including that drawn down under the World Bank loan) would be under DAR appropriation, but either used by DAR directly, or allocated to MDF or NIA, as appropriate (for detail, see paras. 4.28 and 4.29). Substantial cost recovery by project beneficiaries is provided for irrigation, agricultural production, and enterprise development financing. Agrarian Reform Beneficiaries (ARBs) however, are among the poorest segment in the rural areas and further expanding the cost recovery to other project activities seems to be inappropriate, particularly as ARBs would be required, under the project, to participate either in the form of labor and materials or cash in financing the works related to road rehabilitation and reconstruction. G. Procurement 3.28 Procurement of all goods, works, and services financed under the Bank loan would be carried out in accordance with Bank procurement guidelines ("Guidelines for Procurement under IBRD Loans and IDA Credits" of January 1995 updated in January 1996, and "Guidelines for the Use of Consultant by World Bank Borrowers and by the World Bank as Executing Agency" of August 1981). Procurement associated with rural infrastructure would be undertaken by LGUs and supervised by the Central Project Office (CPO) for roads and community infrastructure, and by NIA for irrigation. NIA has satisfactory experience of procurement under Bank funded projects. DAR through the CPO would be the responsible agency for procurement under the Community Development and Technical Support and Project Management components, while for agriculture and enterprise development, procurement would be undertaken directly by project beneficiaries and their  - 21 - cooperatives, supervised in those cases where credit is involved by LBP. Foreign bidders are eligible to participate in National Competitive Bidding (NCB). The project expenditure items, their estimated costs, and proposed methods of procurement are summarized in Table 3.4 and discussed below. 3.29 Procurement arrangements are summarized as follows: Table 3.4: Summary of Proposed Procurement Arrangements (US$ million equivalent) Procurement Methods Total Project Element NCB Others a/ NBF Cost Civil Works 31.6 27.2 58.8 (28.4) (17.6) (46.0) Vehicles and equipment for CPO 0.5 - 0.5 (0.4) - (0.4) Consultancy/Prof. Staff (CPO) - 3.0 3.0 (3.0) (3.0) Other Costs (CPO) 2.3 2.3 (0.6) (0.6) Farm Inputs/Livestock/ Equipment/Minor Works - 33.6 33.6 & Working Capital Items Community Development & TS Training & Support Services - 3.7 3.7 - Travel, Subsistence & Others - 3.8 3.8 Total 32.1 32.5 41.1 105.7 (28.8) (21.2) (50.0) a/ Includes force account, national shopping, simplified procurement procedures for small works, and consulting services, training, and other services. It also includes commercial practices by beneficiaries. Note: Figures in parentheses are the respective amounts financed by the Bank Loan. N.B.F. Not Bank-financed 3.30 Civil Works. As no contract is likely to exceed US$2.5 million and as contracts of lesser value are unlikely to attract international bidders, International Competitive Bidding (ICB) is not applicable under the project. Therefore other procurement procedures (see below) would be used. Foreign contractors and in some areas local contractors are not likely to be interested as most rural infrastructure activities would be small-scale, widely scattered over the country, and, in several instances, located in remote areas, and would  - 22 - likely follow current practice of using labor intensive methods to generate employment in local communities. NIA has considerable experience with this, using both force account and sub-contracted piecework arrangements with farmers. Activities which require a concentration of effort, such as drainage and slope protection structures, would be constructed under local contracts. More complex structures such as bridges, causeways or irrigation headworks, estimated to cost US$31.6 million, would be awarded on the basis of NCB procedures acceptable to the Bank. Construction materials would also be procured in this way. Overall about US$31.6 million of civil works would be procured through NCB; about US$6.9 million by force account (Force Account for all infrastructure work excluding irrigation, would require Bank's prior approval and would be used only if LGU capacity to undertake this work were confirmed by the CPO and if local contractors were more expensive or not interested, particularly in cases of small and scattered works in remote locations for which qualified construction firms would be unlikely to bid at reasonable prices); about US$15.2 million of very small value of contracts (less than US$100,000) which may only interest contractors in their vicinity, would be awarded through simplified procurement procedures similar to National Shopping applying Government procedures by comparing at least three price quotations to be obtained from small contractors within the locality; and the balance of about US$5.2 million, which would be contributed by beneficiaries in the form of labor and local materials would be procured by them under normal commercial practices. Beneficiaries contribution would ensure sustainability through community ownership and therefore adequate maintenance. 3.31 Goods. The estimated cost of goods (mainly vehicles, office equipment and computers) is US$0.5 million inclusive of contingencies, taxes and duties. Contracts of over US$200,000 equivalent would normally be procured through ICB. However, it is unlikely that any contract would exceed US$200,000. Purchases of goods valued at less than US$200,000 but above US$100,000 would be procured through NCB procedures acceptable to the Bank. Whenever possible, purchases would be grouped into packages of at least US$100,000. Time phasing of project's needs suggest that about four such packages in the aggregate amount of about US$0.5 million, would be expected under the project for vehicles and office equipment in years one and two. However, goods valued less than $100,000 would be procured through national shopping by comparing at least three price quotations. A margin of preference of 15% of the c.i.f. bid price or actual custom duties, whichever is less, would be allowed to domestic manufacturers. Agricultural inputs, and other items procured by project beneficiaries as part of the Agriculture and Enterprise Development component of the project, estimated at US$32.6 million, would follow normal commercial practices. A small proportion of about US$1 million of incremental agricultural investment would be in the form of seeds, fertilizers, and other materials distributed by Government under various assistance programs, would be procured through National Shopping with price quotations of at least three domestic suppliers. 3.32 Consultancy, Traininc and Other Services. Procurement of consultancy services, training inputs and NGO support would be done in accordance with Bank guidelines for the selection of consultants and the contracting would follow Bank Standard Form of Contract for Consultants' Services. About US$3 million would be for individual consulting contracts to provide for those CPO positions not  - 23 - filled by secondment or internal reorganization, and US$3.7 million, administered by the CPO, for contracting NGOs and other service providers to ARCs on a province by province basis. 3.33 Procurement of miscellaneous items including support staff, travel, lodging and subsistence, office supplies and utilities for both the CPO (US$2.3 million) and the Community Development and Technical Support component (US$2.4 million), would follow normal government procurement procedures, which have already been used on many other Bank projects in the Philippines and found to be satisfactory. Beneficiary contributions to the Community Development and Technical Support component amounting to about US$1.5 million would be self- supplied or be procured using normal commercial practices. 3.34 Procurement Review. Procurement packages for goods and works are valued at a level below the experimental prior review threshold for the Philippines, which was set at US$1 million and US$5 million, respectively. However, the first three contracts for works, goods, and NGOs in amount below these thresholds, in each implementing year of the project, would be subjected to Bank's prior review. Other contracts for goods and works would be reviewed by the Bank on a sample basis, subsequent to their award. The sampling ratio to be used in such post review would be 25% in the first year of the project, 20% in the second and the third years, 15% in the fourth year, and 10% in next two years. All CPO's consultant selection arrangements and contracts that are estimated to cost more than $100,000 for firms ($50,000 for individuals) would be subject to Bank's prior review. H. Disbursement 3.35 The proposed Bank loan would be disbursed over a period of six years, during Bank FY97 through 2003. The disbursement estimate is based on experience and pattern of other agricultural projects in the Philippines and the Region. Disbursement schedule is presented in Annex 3. The Bank loan disbursement would be at about 47% of total project expenditures. The expected Loan Closing Date would be December 31, 2003, a year after project completion, to allow adequate lag time for releasing contractors' retention and processing withdrawal applications. Disbursement of the loan proceeds would finance infrastructure investments, and project management activities. The Bank would finance (i) about 90% of civil works and irrigation costs (excluding ARCs' contribution), which would cover the whole of the 'grant element', net of tax, and part of the LGU's contribution for roads and community infrastructure; and (ii) 100% of some elements of: (a) project management costs, specifically the cost associated with contracted professional staff (consultants), and the respective incremental operating costs, including CPO vehicles operating costs, CPO staff travel and subsistence, and CPO office supply; and (b) cost of project management training and seminars.  - 24 - 3.36 Reimbursement and disbursement applications for expenditures would be consolidated by the CPO and forwarded to the Bank. Disbursement for NCB civil work contracts would be through reimbursement to MDF on the basis of payments to contractors and certification of completion. Disbursement for all expenditures would be based on full documentation except for actual expenditures of: Ci) small civil works amounting to less than the equivalent of US$5 million; (ii) works under force account and training; (iii) purchases of goods duly batched and yet less than US$1 million equivalent; and (iv) operating or maintenance costs; and (v) expenditures under contracts for consulting firms below US$100,000 equivalent and contracts for individual consultants below US$50,000 equivalent, which would be made on the basis of Statement of Expenditures (SOEs). All supporting documents for (i), (ii), (iii), (iv) and (v) above would be held by the respective LGU office and/or the Central Project Office (CPO) - All disbursement applications for force account and piece-work through SOEs would be based on proper cost accounting, and would refer to physical progress of the related work. Retroactive financing of up to US$1 million equivalent is also proposed for eligible expenditures associated with the establishment of the CPO, to fund the contracting of CPO's professional staff, training, and operating costs incurred after August 1, 1996. Table 3.5: Summarv of Disbursement Categories Amount of the Loan % of Allocated (US$ million Expenditures Categorv Equivalent) to be Financed 1. Civil Works la. Farm to market Road 90% of cost and Other Comm. Infra. 22.4 excluding lb. Irrigation 15.3 beneficiaries' contributions Total Civil Works 37.7 2. Vehicles, Equipment, and Office 100% of foreign furniture 0.4 and office furniture expenditures and 100% of local expenditures (ex- factory) and 90% of local expendi- tures for other items procured locally 3. CPO Operating Costs 0.5 100% 4. Consultants' Services 2.5 100% 5. Unallocated 8.9 Total 50.0  - 25 - Special Account 3.37 GOP would establish a Special Account in accordance with Bank guidelines for carrying out project activities and to facilitate rapid disbursement of the Bank loan. An initial deposit of US$2.0 million would be made by the Bank into the Special Account, representing about 25% of the expected first year disbursements. Withdrawal from the Special Account would be fully accounted for by expenditures eligible for Bank funding under the project terms and conditions. The borrower would open and maintain in US Dollars a Special Account in a commercial bank specifically authorized for this purpose by the Bangko Sentral ng Pilipinas (BSP) and approved by the Bank. Applications for replenishment of the Special Account supported by appropriate documentation, would be submitted regularly (preferably monthly, but not less than quarterly) or when the amounts withdrawn equal 50% of the initial deposit. I. Accounts and Audit 3.38 All Government (National and Local) agencies accounts are subject, by law, to an annual audit by the Government's Commission on Audit (COA) . Therefore, the project's accounts including its Special Account would be audited annually by COA. Separate project accounts indicating the various sources of funds received and expended (by project component and ARC) would be maintained by the CPO and the respective LGU office (for its ARCs), ensuring that proper accounting and auditing procedures are followed. As part of the audit process, the project annual financial statements, together with the related auditor's report and opinion, as well as the auditor's separate opinion on the project statement of expenditures would be sent to the Bank within six months of the close of each fiscal year. Assurances to this effect were obtained during negotiations concerning the above accounting and auditing arrangements [para. 6.1(a)]. IV. PROJECT IMPLEMENTATION A. Design Consideration 4.1 The organizational and management design of the project is based on the need for effective coordination, efficient utilization of resources and performance - oriented control to ensure its success. It is consistent with and supportive of government policies on devolution and people empowerment and thus, recognizes that the barangay level community organizations and population are the core of ARC operations. It maintains DAR's role as the key implementing agency for agrarian reform. It provides for effective collaboration of efforts and resources of government, non- government, peoples' organizations and the private sector. The design further recognizes that the project is complex due to the involvement of several entities and the fragmentation of critical activities that need to be effectively orchestrated. Key considerations are the management system's institutionalization, sustainability, ease, and flexibility in project operation. It therefore attempts to simplify, adopt and or adapt existing systems and procedures within the existing legal framework.  - 26 - 4.2 Given the project components, the design assumes the following: (a) the LGUs are the key direct implementors of the project with regard to the basic infrastructure and agricultural extension; and (b) DAR remains the lead coordinator for agrarian and related development efforts. B. Organization and Management 4.3 Oversight responsibility for the project would rest with DAR. A high level Project Management Board (PMB) chaired by DAR would be established and would comprise representatives of DOF, NEDA, DBM, DA, NIA and LBP; the CPO director would serve as the PMB secretary. The PMB would provide policy guidance for the implementation of the project and approve the annual plan for the various components. It would be assisted by a Central Project Office (CPO) which would be set up at DAR. The CPO, reporting directly to DAR through the PMB, would manage, monitor, evaluate and coordinate all project activities and components. It would be responsible for sub-project approval and supervision, budget preparation, consolidation of accounts, procurement and disbursement. It would liaise with BLGF on MDF matters; LBP for credit operations; and with relevant GOP agencies such as DBM, DOF, DTI, NIA, DPWH, DA, BSWM, LGUs and others as required. More details regarding the CPO, its structure, terms of reference of the CPO's key positions, and the project organizational chart are presented in Annex 4. The establishment of the PMB and the CPO with functions and responsibilities acceptable to the Bank would be a condition of loan effectiveness [para.6.2(a)J. 4.4 To effectively undertake its task, the CPO would maintain high level professional staff with competence in sub-project investment appraisal, planning, budgeting and financial processing, monitoring and evaluation and rural infrastructure engineering. In all it would comprise about 45 staff: ten high level professional staff, ten Provincial Economic Development Advisors (PEDAs) - one for each participating province - and about 25 support staff. The appointment of suitable persons with qualifications and experience acceptable to the Bank to fill the following positions: (a) project director; (b) chief of project financial and administrative unit; (c) chief of the M&E unit; (d) chief economist to head the sub-project appraisal unit; and (e) chief rural infrastructure engineer would be a condition of loan effectiveness [para.6.2(b)]. 4.5 The CPO would be responsible for the preparation and the implementation of the project training and technical assistance program with the objectives of supporting sustainable operations of the ARCs and the implementation and the maintenance of their development plans. The preparation of the training and TA programs would be completed and updated annually. At negotiations assurances were obtained that the training and TA be carried out in accordance with a program satisfactory to the Bank and that the annual training programs would be furnished to the Bank for review by November 15 of each year Eparas. 6.1 (b)]. 4.6 At the provincial level, an existing CARP Officer (CARPO) would be designated as the Provincial Project Coordinator, reporting directly to the CPO. Under the supervision of the CARPO, the municipal Agrarian Reform Officer (MARO) would supervise Development Facilitator (DFs) and coordinate with agencies at the municipal and provincial level. At the ARC level, coordination of various  - 27 - project activities would rest with the DF who prior to project start-up, would have been trained in effective project coordination and management. The DF would be supported by an NGO community development worker, where available. They would facilitate community participation by linking various interest groups to the municipal LGU concerned for agricultural extension, social, infrastructure and other services; to the LBP field offices or branches for credit, and to other agencies for other required services. C. Operations Manual 4.7 Project implementation would be governed by an operations manual covering eligibility criteria, cost sharing arrangements, approval procedures, fund flows, and organizational arrangements, reflected in Memorandum of Agreements (MOAs) between DAR and the various participating agencies such as DOF for MDF, DA for NIA, LBP and LGUs. A draft of this manual has been reviewed by Bank mission and Government officials (representing various agencies) and a revised draft was prepared. The final manual would he jointly approved by the PMB and the Bank, and its adoption and implementation would be a condition of loan effectiveness {para. 6.2(c)]. During negotiations, agreements were reached on (a) the inclusion of the key policy and procedural issues in the manual and (ii) that the Operational Manual would not be revised without prior consultation with and approval of the Bank [para. 6.1 (c)]. Subject to agreement by DAR and the Bank, the manual would be periodically updated to reflect necessary policy and operational changes. D. Selection of Proiect Area 4.8 The project would finance about 100 ARCs in about ten provinces (para. 3.3) over a period of six years. Provinces which are funded under the Agrarian Reform Support Project (ARSP), the Belgium Agrarian Reform Support Project (BARSP), and those with three or more sites funded under the Agrarian Reform Infrastructure Support Project (ARISP) are excluded. Further, provinces which have related projects funded by the European Union (EU), Dutch Government, Asian Development Bank (ADB), US Agency for International Development (USAID) and others are also eliminated. The selection of participating provinces would be based on their land distribution accomplishment (minimum of 70% of the total provincial scope and at least 20,000 hectares of land distributed). The final selection of around ten provinces was dependant on the LGU's willingness and financial capability to participate in the project given the Local Government Code's (LGC) provision that debt service of LGUs should not exceed 20% of their Internal Revenue Allotment (IRA) and their commitment to provide adequate agricultural extension services to the ARCs in their area, and the numbers of potential ARCs in their province. 4.9 From the participating ten provinces, about ten ARCs have been selected for project implementation in the first year. This approach is intended to gain a more in-depth insight into ARC's operations to minimize costly mistakes in handling a larger number of ARCs at the project's initial stage. Prior to project implementation, preparatory activities to upgrade their plan would be undertaken by DAR and the concerned LGUs, with the support from FAO-TSARRD. This  - 28 - arrangement is expected to considerably improve the capability and absorptive capacity of the selected ARCs. E. Eligibility Criteria 4.10 Preliminary eligibility criteria for the selection and assessment of provinces, ARCs, LGUs, NGOs and infrastructure requirements are presented in Annex 5. These criteria are based on the following considerations: (i) criteria for ARCs selection which include: (a) LGUs capacity and willingness to adequately support the participating ARCs in their jurisdiction areas (para. 4.8); (b) organizational maturity of the respective ARC; (c) potential of project impact in terms of economic and financial benefits to the respective ARC's members as a result of project intervention (mainly rural infrastructure sub-projects such as irrigation systems and access roads); and (d) availability of technical support in the area who can provide support to ARCs such as NGOs, academic institutions, and other technical agencies; (ii) criteria for accrediting partner NGOs which would concentrate on their stability and capacity to manage and implement the proposed project activities, including community training, fund management, supervision, and monitoring and reporting; (iii) criteria for sub- project (mainly infrastructure investment) approval would focus on technical, economic, and financial viability (paras. 4.21 and 4.22) . To ensure sufficient flexibility during implementation, these criteria would be subject to periodic review, and modified to reflect operational experience. Significant changes would require approval of both DAR and the Bank. F. Details of Individual Component Implementation Community Development and Technical Support 4.11 For the community development sub-component to be effective, it must address the constraints faced by the beneficiaries (described in para 2.14) to the fullest extent possible. A high degree of input in all categories is required in order to bolster the impact and sustainability of the other components and the work of other agencies within the targeted communities. The improvement of community participation in planning, implementation, and maintenance would be critical to the success of the project. Therefore, full community support and cooperation for project activities would be generated. As a demand-driven project design, it is imperative to identify the community demands. These are currently expressed in generalized terms by a five-year community development plan. Whilst the plans provide an indication of community needs, there is little detail on community priorities and specific requirements. The community participation interventions would strive to increase the number of beneficiaries involved in the planning process, conduct pre-feasibility exercises on priority activities, produce resource profiles, and would assist the community to develop an annual action plan. 4.12 The component would mainly draw on available resources from DAR, NGOs, and other resource organizations but would also provide additional training to both DAR and NGO field staff where necessary. This support would be supplemented by  - 29 - a community development specialist in the CPO and the Provincial Economic Development Advisors (PEDAs), who would be the technical counterpart to the CARPO at provincial level. The PEDA would be responsible for facilitating the supply of technical and extension services from LGU, and the respective CARP implementing agencies; coordination between NGOs, DAR, LBP and other projects resources in the province; assisting with project training programs and workshops; and providing direct business management advice to ARC organizations. 4.13 As government planning functions have been devolved to the LGUs with the institution of the Local Government Code, community development plans would be forwarded to the LGU to be incorporated into barangay, municipal and provincial plans, thus increasing the voice of the ARCs at LGU level, allowing maximum coordination on the use of scarce resources, avoiding duplication and providing a basis for monitoring and evaluation. 4.14 The LGUs would play a pivotal role in the project. Community development plans would be channelled through the Municipal and Provincial CARP Implementing Teams (MCIT & PCIT, respectively) and the local development councils (barangay, municipal, province and the region) . Project implementation would be coordinated through these bodies. The LGUs' support is also critical for obtaining funding for the ARCs as their commitment to financial contribution would be a requirement for ARC selection. The Municipal Development Officer (MDO) would also work closely with the Municipal Agrarian Reform Officer (MAROs) to coordinate development activities in the municipality. 4.15 The project is designed to maximize effective cooperation between NGOs, ARCs and DAR. Operating Memoranda of Agreement (MOAs) would be drawn up between DAR and NGOs at provincial level according to a mutually agreed program of work based on provincial priorities. More details regarding this component is presented in Annex 6. 4.16 Selection of Partner NGOs. Partner NGOs for the project would operate at provincial and/or local level. The selection process would be concentrated at the provincial level but DAR central office and the CPO would also be consulted before final selection. For the project, NGOs would be required to fulfill selection criteria as detailed in Annex 5(b). Rural Infrastructure 4.17 At central level (CPO), a Rural Infrastructure Engineer, assisted by two other engineers, one for irrigation, and one for roads would be responsible for coordination and management of the rural infrastructure component. At provincial level, responsibility for implementation would be with: (i) LGUs for rural access and community infrastructure; and (ii) the National Irrigation Administration (NIA) for irrigation development. At provincial level, each agency would designate an engineer to take responsibility for project infrastructure activities. MOAs between DAR, LGUs and NIA would detail the individual responsibilities of each agency, as provided for in the Operations Manual. Arrangements concerning rights of way for roads, irrigation schemes and other infrastructure would be handled within the ARCs at a community level. There would be no acquisition of land by either the National or Local Government under  - 30 - the project. Compensation to persons affected by rural infrastructure sub- project would be settled internally by the community in accordance with principles acceptable to the Bank which would be reflected in the project's Operations Manual; and assurances to these effects were obtained at negotiations [para. 6.1(d)). Initial investment proposals would be screened at the provincial level, with support from the CPO as required prior to detailed preparation. 4.18 Rural Access and Community Infrastructure would be implemented by LGUs through their engineering offices at provincial and municipal levels. If needed, support services would be contracted from the private sector or technical agencies such as the Department of Public Works and Highways (DPWH) . LGUs would prepare costed designs for submission to CPO for technical evaluation and approval. Rural access would also be subject to economic justification. Where feasible, the project would require the use of competent local contractors. In the absence of contractors, LGUs would undertake works directly under force account through contracts, negotiated with CPO. Maintenance of barangay roads is important, and would be included in the MOA between DAR and LGUs. LGUs in default of maintaining roads improved by the project would have to repay the grant or have the grant converted into a loan, to be repaid directly from their IRA. This would be covered in a provision of the grant agreement. For drinking water supply, LGUs would follow a participatory approach to ensure sustainability. 4.19 Irrigation would be implemented by NIA through their provincial offices. NIA would prepare costed, and economically justified proposals for submission to CPO for evaluation and approval. The project would require the use of local contractors for irrigation headworks and other large structures. Remaining works would be undertaken directly by NIA, through contracts negotiated directly with CPO. An Irrigators' Association (IA) would be formed to ensure the participation of beneficiaries from the outset. 4.20 LGU Capability. As rural access and community infrastructure activities would be the responsibility of LGUs, they would be required to comply with minimum standards to qualify for project support. The CPO would conduct a thorough evaluation of relevant LGUs to determine their technical, administrative and financial capacity to undertake the proposed activities and take responsibility for subsequent maintenance. 4.21 Approval Process for Rural Infrastructure Activities. A two-stage process would be adopted for selection and approval of infrastructure proposals eligible for project support. First, following the participatory planning process, proposed infrastructure requirements would be submitted by the MARO and ARC representatives to the Municipal Development Council for technical consideration. After preliminary investigation by LGUs or NIA, further surveys and detailed design would then be carried out by technicians from the respective agencies or the private sector, if required. Second, completed designs, costs and estimated benefits would be reconfirmed at the field level, and then submitted to the CPO for appraisal and approval of the technical, environmental, financial, economic and administrative feasibility of proposals. Bank concurrence would be required for all sub-projects' infrastructure investment above US$300,000 equivalent.  - 31 - 4.22 The criteria for selection of rural access works would include linkage of at least one ARC barangay to an existing all-weather road, and/or linkages to other barangays. Road-works would concentrate on improvements to existing roads, technical specifications would conform to agreed standards and benefits would generate an acceptable economic rate of return. The preparatory cycle would normally require about eight months. For irrigation, selection criteria would require that at least 80% of the irrigated service area would fall within the selected ARC, an 80% probability of sufficient water and, an acceptable economic and financial rate of return. For new irrigation, this preparatory work would require about 24 months, including confirmation of water resources. For rehabilitation, about eight months would normally suffice. More details related to the component is presented in Annex 7. Agriculture and Enterprise Development 4.23 The component would utilize the existing resources and implementation structure of DA, LBP, LGUs and other support institutions. The CPO would be responsible for coordinating all activities related to this component at the national level, including the finalization of MOAs and similar agreements with respect to allocation of funds, personnel, roles and responsibilities among co- operating agencies at the national and local levels. At the Provincial level, the PEDA and the CARPO would act as coordinators between the ARC, LBP and the supporting organizations. 4.24 Support for agriculture production and related activities would be obtained through the DA's Key Production Area (KPA) program and the agriculture development offices of participating LGUs. Farmer training and support needs for each ARC would be identified through the FAO-TSARRD Farming Systems Development Program. DAR field staff and LGU extension workers would also participate in the Farm System Development (FSD) program which will in turn result in improved agricultural services to the ARC. The DA's research and training programs and network would be utilized to provide more specialized training for LGU extension workers. Other services accessed through DAR, DA and DENR would be provision of improved seeds and planting materials, agricultural inputs and assistance with livestock breeding and health. 4.25 Investment and marketing assistance would be augmented by the PEDA and the provincial-level of the Investment and Marketing Assistance Program (IMAP) units being developed by DAR, LEP and FAO-TSARRD. Services would include business linking opportunities, financial assistance for product research and development, and sponsorship of visits to potential market outlets, such as fairs or major distributors. The PEDA and CARPO would assist the ARCs in accessing market information from ongoing programs of the Bureau of Agricultural Statistics (BAS). 4.26 Enterprise development support would primarily be the responsibility of the PEDA in conjunction with LBP and other existing support organizations such as DTI and NGOs. During the ARC planning process advice would be provided on the enterprise proposals of the POs. Where required, the PEDA would conduct detailed feasibility studies or arrange for studies to be conducted by suitably qualified institutions/individuals. Training would be provided on book-keeping and other  - 32 - aspects of enterprise development through the community development and technical support component. 4.27 For credit services, the LBP would prioritize lending to target ARCs, adjust eligibility criteria for newly accessing borrowers, and expand the scope of its lending programs to accommodate long-gestating projects, NGOs and other non-traditional credit conduits, and non-ARB rural entrepreneurs and private investors. The PEDA, DAR staff and LGUs would be instrumental in introducing potential borrowers to the financing institutions but all lending would be subject to the terms and conditions required by the relevant institutions. G. Financing Arrangements 4.28 Arrangements for cost sharing between project's participants and flow of funds under the project would adopt the current practice in the Philippines, and normal government, MDF and LBP systems for disbursements and reimbursements, respectively. Systems of financing and cost sharing by component are set out below: Community Development would be financed directly from DAR budget, with ARC beneficiaries bearing part of the cost of training courses through contributions to travel and food costs. Irrigation would be implemented by NIA, following their standard practice for communal schemes. MDF would release funds to NIA against an agreed work schedule using funds which would be initially sourced from ARF. Statements of expenditure (SOEs) would be issued by NIA to DAR as a basis for the subsequent stage payments on any individual scheme. The non tax elements of these expenditures would be covered 100% from the Bank Loan, being disbursed against the SOEs. On completion of individual contract(s), the ARF funds, which would have been used essentially to pre-finance NIA's operations would be recycled into a Trust Account held within LBP. Irrigation beneficiaries, who would be formed into lAs, would contribute 10% of the scheme construction cost initially, and would pay the remainder back to NIA over 50 years (without interest). Access Roads and Community Infrastructure would be implemented by LGUs and standard financing conditions for less developed areas would apply. Under the present arrangements, access roads would receive 80% - 906 grant, depending on LGU status, while the grant element for community infrastructure would be 70% for rural water supplies and 30% for multipurpose buildings. The amounts not covered by the grant would be financed partly by ARC beneficiaries' contribution and partly by the LGU, either using its own budget resources, or borrowing from the MDF  - 33 - under standard MDF terms. The loan/equity mix would depend on the availability of the LGU's own resources. Repayments of the sub-loan element by the LGU to MDF would be retained and revolved by MDF for similar purposes. The grant element would be administered by either MDF or DAR. The Bank Loan would finance 100% of the non tax element of both the grants and the loans to LGUs, with disbursements mainly against SOEs. Agriculture and Enterprise Development would be financed partly by beneficiaries themselves, partly through LBP loans, via the cooperatives and partly through ongoing GOP agency programs such as the 5-25-70 program. The Bank Loan would not be disbursed against this component. - Proiect Management This would be financed by DAR and the Bank. The Bank Loan would cover the cost of professional services (including contract staff for the CPO), equipment, vehicles, and associated operating costs and TA (net of any taxes or duties). The balance would be financed through GOP via DAR's budget (seconded CPO staff, office space and utilities, field staff supporting the ARCs in the regional and provincial offices, municipal staff travel and subsistence). 4.29 Funds for project management which consist of loans proceeds and ARF allocations would be channelled to the CPO through the MDF. The funds flow would require careful coordination by the CPO to ensure that funds from various sources are available at the time, place and quantity required by the ARCs' sub-projects. Effective coordination would minimize costly project delays and commitment fees accumulation. H. Monitoring and Evaluation and Report Recauirements 4.30 To monitor project implementation, and evaluate its performance, a monitoring system would be set up under the detailed guidance of the Monitoring and Evaluation (M&E) specialist in the CPO (A chart indicating major items of information to be monitored is given in Annex 8). Field data for the ARCDP monitoring and evaluation system would be channelled through four different sources (see below) . In addition, Bank supervision would be carried out on a regular basis and would include periodic reviews with DAR and other national implementing agencies on all project activities (a project supervision plan is presented in Annex 9). Progress reports would be produced every six months by the CPO and discussed at workshops in order to evaluate and disseminate lessons learned and institute corrective measures. The CPO would also be responsible for the preparation of an annual review of all project components and the preparation and submission of an Implementation Completion Report to the Bank within six months of the closing date of loan disbursement. Assurances to these effects were obtained at negotiations [paras. 6.1(a) and 6.1(e)].  - 34 - (a) DAR network would provide on a monthly basis, basic statistics on progress according to the ARC action plans and of NGO support in relation to the project MOAs. Information collected by the DF would be channelled via the MARO to the CARPO-BDCD and then to the CPO. (b) FAO-TSARRD would generate baseline surveys during the FSD program. The survey would be repeated as part of the mid-term and final evaluations. FAO-TSARRD also, as standard procedure, produces ratings of the ARC organizations every six months. Data gathered by FAO-TSARRD would be forwarded directly to the CPO with a copy to DAR central office. (c) Physical progress of the infrastructure works and credit would be available from the LGUs and DAR's Provincial office or the implementing agencies, such as MDF, NIA & LBP. LBP would provide the CPO with quarterly reports on credit extended to the beneficiaries, amounts outstanding, repayment performance and portfolio quality (aging of past dues) . Similarly, MDF would provide quarterly reports on the disbursements of loans and grants to the LGUs, NIA, and the CPO. Physical progress data would be provided directly to the CPO on a monthly basis and would be measured according to the MOA governing each separate sub-component. (d) CPO staff field reports and special interest studies initiated by the CPO/DAR would serve to substantiate/identify discrepancies and gaps with data collected through other sources 4.31 Key Performance Indicators would be centered around trying to measure (i) the increase in beneficiary household income attributable to the project; and (ii) sustainability. Sustainability would include (a) increased capability and independence of POs, (b) increased support for the ARCs from the LGU and corresponding improvement in the civic responsibility shouldered by the beneficiaries, and (c) continuing maintenance of infrastructure and enterprises assisted under the project. Some of these items are difficult to measure directly, or cannot be easily assessed as part of a regular reporting system and so proxy indicators need to be tracked. Key performance indicators proposed (detailed in Annex 8) are as follows: Indicators which would be maintained and updated on a regular basis: (a) Number of participating ARCs (an indication of project coverage); (b) length and cost of roads rehabilitated and reconstructed (a proxy for decrease in transportation costs and improved access); (c) area and cost of new and rehabilitated irrigation (a proxy for improvement in the agricultural resource base); (d) change in OMA Ratings of Organizations within participating ARCs (a proxy for strengthening of ARCs and sustained impact); and  - 35 - Indicators to be assessed annually: (e) Change in cropping intensity on irrigated areas (a proxy for increased agricultural production); and (f) quality of road and irrigation maintenance and their financing (indicator of sustainability of rural infrastructure). Indicators to be assessed from baseline and subsecuent surveys: (g) Level of business assets in ARCs - livestock, machines, permanent crops, business premises (this would provide an ex post assessment of the level of investment in agriculture and other enterprises and give an indication of the potential sustainability of business activity); and (h) household income by source (on a sample basis - but potentially the most critical indicator of direct project impact). I. Environmental Impact 4.32 Rural infrastructure activities would not be expected to have any significant adverse environmental impact as works would be small-scale in nature and not require forest clearing. Road improvements would largely follow existing alignments, and irrigation works would usually benefit areas where rice is already grown. Water rights would be observed and pollution minimized through environmentally sound management practices. In the case of new roads and irrigation sites (on a sub-project basis), an environmental impact assessment with mitigation plans would be submitted for review and clearance by the Department of Environment and Natural Resources (DENR). The responsibility of ensuring that no sub-projects with undesirable environmental and social impact would be financed by the project would rest with the CPO and the respective LGUs. Each sub-project would be appraised, approved, and supervised by the CPO. This process would ensure, among other things (para. 4.21), that adequate environmental screening, mitigation measures, if required, and monitoring compliance would be in place. Agreements were reached at negotiations that: (i) the CPO would specify that LGUs for sub-projects carried out in their jurisdiction areas would be responsible for compliance with all laws and regulations of the Philippines related to environmental protection; (ii) the responsibility for the preparation of environmental impact assessment, if needed, and the related mitigation planning and activities would be rest with the LGU who would initiate the sub-project preparation and the contractor who would implement it; and (iii) that the CPO would be in charge of supervising compliance and (iv) that (i), (ii), and (iii) above would be incorporated in the Operations Manual (para. 6.1(f)J.  - 36 - V. PROJECT IMPACT, BENEFITS, and RISKS A. Economic Benefits 5.1 The project would benefit about 100 ARCs, comprising about 80,000 households, with a total number of beneficiaries of about 0.5 million. It is anticipated that indirect benefits of infrastructure works would benefit an additional 40,000 households (approximately 250,000 people). The effect of better access roads and social infrastructure would be to both raise the quality of rural life and improve linkages/reduce costs with local and regional markets, allowing ARCs to move from a subsistence-based economy to a semi-commercial or commercial operating base. Agricultural productivity and farm level profitability would rise due to: (a) enhancing the resource base through additional irrigation; (b) facilitation of the use of inputs resulting from improved access, hence lower transport costs, relevant extension and training support, and better access to credit; and (c) the introduction of higher value crops and livestock enterprises to add value. The lower transport costs and shorter journey times which make marketing easier together with better access to credit and technical and management support for non agricultural business investments would also contribute towards income diversification and employment creation. Another major benefit of the project would be the enhancement of devolution of planning, operation and maintenance responsibilities to LGUs and community organizations (i.e. POs), both with respect to infrastructure facilities and economic activities. 5.2 It is estimated that the Project would yield an overall economic rate of return of between 20% - 25%, depending on the detailed sub-component mix. The details of model ERR calculations for the rural roads and irrigation components are shown in Annex 10. In making these estimates, the evaluation has been done at early 1996 prices. Financial prices have been converted to economic prices in order to take out the effects of taxes, subsidies, and other distortions by using economic conversion factors (ECFs), except in the case of rice, where a detailed calculation of the border price has been made. 5.3 A summary of the economic analysis for each component is as follows: (a) Roads: (i) for barancTay access, about 70% of roads are assumed to be rehabilitated and 30% reconstructed. Benefits result from vehicle operating cost savings, time savings and generated traffic benefits. The rural access model used to estimate the base ERR of 20* assumes a 5 km road costing an average of P748,000 (US$29,000) per km, including bridges, accessing 3,000 people (500 families). Traffic volumes are derived from DPWH standard generators for rural roads. (ii) Farm access tracks supported under the project would be designed to allow access by wheeled trailers, rather than sleds to the production areas. In the base case, a 2km access track costing US$5,300 per km for spot improvement, would provide access to 900 tons/year of produce. The ERR as a result of transport cost saving is estimated at 24%. Additional benefits would accrue if as a result of improved access cropping intensity increased or farmers switched to higher output crops.  - 37 - (b) Irrigation: based on 70% rehabilitation and 30% new irrigation, the average cost per ha, including EVAT, is estimated as P72,000 (US$2,800) for new irrigation, and P39,000 (US$1,500) for rehabilitation. As a result of introducing irrigation, wet season yields would improve, in line with the national average, by about 1.2 tons of paddy per ha; furthermore an estimated 50% of the area would sustain a dry season crop. Although higher returns would probably be obtained by growing other crops, the analysis has been conservatively based on rice production in the dry season. The base case ERR is estimated at 25% for this component. (c) No model has been developed for Agriculture and Enterprise Development. However experience of rural investment in the Philippines indicates that such investments would only be made if the entrepreneur decision makers and the banks financing them, believe they will achieve real financial rates of return of well in excess of 15%. A reasonable assumption therefore might be that such investments would show FRRs in real terms of 151-30%, with similar ERRs. (d) Benefits from community development and skills and business training would be partly realized through specific irrigation and agriculture/enterprise investments. They would also partly be reflected through better performance and higher incomes of the vast majority of ARC members who are not involved in specific project- supported investments. Before the project, about 80,000 families of average family income P25,000 per year would have been living in the ARC areas supported by the project. If, as a result of improved management and organization, the project were to be able to increase family incomes by 1% in year three, rising to 4% in years six through 20 (over and above the increases which would come directly from investment in irrigation, improved roads, or agricultural enterprises), then there would be an economic rate of return of about 20% on the $11 million spent on the Project Management and Community Development and Technical Support components. Clearly, provided a modest uplift in incomes can be achieved as a result of the project, it would be well worthwhile in economic terms.  - 38 - 5.4 A summary of project Investment Costs and ERRs for the different project components, are shown below. Investment Base Nominal ERR US$M Rural Access Roads 24.5 20% Farm Access Tracks 2.1 24% Irrigation 18.6 25% Social Infrastructure 4.0 n.a Agriculture/Enterprise 27.7 15-30% (say 22%) Community Development Project Management 11.3 n.a. Total/Wtd Average a/ 72.9 22% a/ Excludes Community Infrastructure, Community Development and Project Management Costs. 5.5 Because this is a demand-led project, the actual ERR achieved ex-post could vary considerably from the indicative 22% shown above. Indeed, if the project is to significantly raise real incomes, a high ERR is essential. As a broad brush cross check, overall investment per family amounts to about P28,600 (US$1,100) in base cost terms. If by the end of the project period real incomes would have risen on average from P25,000 to P35,000 per family, as a result of the project, and would then be sustained at that level, the ERR, taking account of all project costs would be 27%. Even at this level, average income would be well below (only 73% of) the official rural poverty level of P8,000 per capita, P48,000 for a family of six. B. Financial Impact of the Prolect on Participants Beneficiaries 5.6 ARBs and other families living in the project area would generally benefit from the project through improved training, better organization, greater linkages with the outside world, and more productive agricultural resources. Some beneficiaries, those getting irrigation, would find the project has a substantial impact on their family incomes - a two hectare farmer would more than double his income under the project - but for most (probably more than three quarters of all beneficiaries would not receive irrigation), the impact would be largely indirect in that as transport becomes cheaper and easier and community enterprises are strengthened, opportunities for developing other skills and doing more productive work would also improve. For these people, incremental increases in income resulting from the project might average 20%-30* by Project Year 6. 5.7 Beneficiaries would be required to contribute towards the infrastructure (US$6.3 million) and training costs (US$1.5 million) of the project, as well as making equity investments estimated at US$12.4 million in their own farms and  - 39 - enterprises. These levels of contribution would be manageable given the expected benefits. Contributions towards infrastructure would be highest for the direct beneficiaries of irrigation, who would need to put up 10% of the irrigation cost. For a two hectare beneficiary, this would amount to a nominal figure of about 110,000. Such a sum could be provided partly as materials (sand and gravel) and partly as labor. With a wage rate of 170 per day, this figure is the equivalent of about 140 days labor, provided there are 2-3 family members of employable age, it should be possible to contribute this work to the scheme without reducing other income. That is, farmers contribution can simply involve harnessing some of the underemployment in the ARC. Contributions towards the cost of barangay access roads by beneficiaries would be subject to site specific agreements with the LGU concerned. The main element of these, which are estimated to total 5% of road costs would be expected to be materials, although some labor might also be provided. This too would be unlikely to cause any reduction in overall family income. Contributions to training costs would largely comprise the provision of food to meeting participants. Its cost would average 190 (US$3) per family per year with contingencies. - Equity investment in agriculture and enterprise development would generally be harder to secure. Part would be in kind - the labor element of incremental real working capital or investment such as planting trees or constructing buildings, or else livestock retained which would otherwise have been sold. But a significant proportion would need to be as be cash. Some of this would result from small farmers' savings and some from entrepreneurial investment from wealthier people, such as rice millers, who respond to the improved potential for investment in the area. The peak requirement for equity is estimated at US$3.7 million in project year 3. This is equivalent to about 4% of family income for the whole project of which perhaps one third would be small farmers' cash contribution. Local Government Units 5.8 As a result of the project, local government units would be generally strengthened through their involvement with the project in the ARC planning process. However, the project would make some demands on their finances. Depending upon the status of the municipality 10% to 20% of the capital cost of road improvement and up to 30% of the cost of community infrastructure is likely to need to be met by the LGU. On average, the contribution towards roads and community infrastructure by LGUs would be about 11.4 million (US$50,000) per ARC, including contingencies, part of which is likely to be borrowed under the  - 40 - project. Additionally, municipalities would also bear the cost of road maintenance, likely to amount to about PO.4 million (US$15,000) annually per ARC. Incremental income resulting from improved roads would be indirect. It would come from improved trade within the municipal area and, therefore, increased revenues from licenses, together with increased revenues from higher real estate taxes. National Government 5.9 The project would impose additional costs on the national government. These would include: (i) part of the incremental costs of the DAR project management; (ii) the incremental costs of the community development aspects of the project to the extent they are not able to find donor funding for these; and (iii) servicing borrowing from the World Bank in order to finance part of the infrastructure and project management costs. Incremental direct income would result from collections from lAs by NIA. On aggregate the project would impose a net direct budgetary cost on Government, estimated to average about US$3 million per year, including both their own contribution and loan interest during the implementation phase, and about US$5 million per year in debt service thereafter. To partly offset this, Government would receive indirect income through higher taxation on those businesses within the project area which make additional profit and pay tax. C. Risks 5.10 Based on past experience, potential risks associated with the implementation and realization of the Project's objectives include (i) difficulties in GOP making available timely counterpart funding; (ii) possible inadequate capacity within NIA, LGUs, NGOs and POs to (a) successfully undertake the required feasibility studies for infrastructure facilities and economic activities, (b) resist political pressure to support marginal or uneconomic infrastructure investments, and (c) adhere to technical and environmental standards during construction of physical infrastructure; and (iii) lack of commitment by LGUs and local community organizations to operate and maintain infrastructure after Project completion. 5.11 By using DAR, which has access to the Agrarian Reform Fund as the lead agency, and ensuring that adequate budget provision is made for the project, the first of these risks would be minimized. Careful selection by the CPO of ARCs to be supported and project implementing staff, in line with the Operational Manual to be agreed upon as a condition of effectiveness, would help insure that programs are properly designed. Community Development, although a relatively small project component in financial terms, would be crucial for sustainability of the project. For certain types of investment, e.g. irrigation schemes or community warehouses, successful development of appropriately funded community organizations would be a precondition for the investment itself, thereby mitigating the risk of lack of future commitment. For roads, the MOA between the CPO, MDF and the LGU to be signed as a condition of grant would provide for significant penalties should LGUs fail in their maintenance provision, thereby substantially lowering, but not eliminating the risk of poor road maintenance.  - 41 - VI. AGREEMENTS AND RECOMMENDATION 6.1 During negotiations agreement was reached with the Government of the Philippines on the following: (a) the CPO would submit to the Bank: Ci) quarterly progress report; (ii) audited accounts along with auditors' report on project's accounts, the project Special Account, and the Statement of Expenditures related to project activities within six months after the end of each of project's fiscal year; and (iii) part two of the Project Implementation Completion Report within six months after the loan closing date (paras. 3.38 and 4.30); (b) the project training and TA would be carried out in accordance with a program satisfactory to the Bank and the project annual training program would be submitted for Bank review by November 15 of each year (para. 4.5); (c) ARC financing under the project would be governed by an Operations Manual to be agreed between GOP and the Bank. Changes in the manual would require prior agreement between both parties (para. 4.7). The Operations Manual would address the following main subjects: Ci) investment financing package including beneficiaries' participation, LGUs undertaking, and National Government contributions (paras. 3.26, 4.29, and 4.30); (ii) credit provision to project beneficiaries for agricultural and enterprise development activities (paras. 3.19 and 4.28); (iii) sub-project eligibility criteria regarding community development accomplishment; environmental soundness as well as technical, financial, and economic viability and sustainability of infrastructure, agricultural and enterprise investments (paras. 4.10 and 4.32); (iv) community development activities, accreditation and selection of partner NGOs and POs (paras. 4.12 to 4.17); (v) obligations and functions of LGUs regarding the implementation of the ARCs development program, including extension services, technical and operational support, and main features of the MOAs to be signed by DAR, the CPO, and the respective LGU (para 4.14 to 4.19, 4.21, and 4.25);  - 42 - (vi) infrastructure implementation arrangements, particularly for road construction or rehabilitation, and irrigation investments (paras. 4.19, 4.20, 4.22, and 4.23); and (vii) approval process and fund flow for all sub-projects (paras. 4.21, 4.22, 4.29, and 4.30); (d) Arrangements concerning rights of way for rural roads, irrigation schemes and other infrastructure would be handled within ARCs at a community level. Compensation to persons affected by rural infrastructure sub-project would be settled internally by the community in accordance with principles acceptable to the Bank and reflected in the project Operations Manual (para. 4.17); (e) an annual review of all project components would be undertaken, to assess progress and ensure adjustment to prevailing conditions and policy (para. 4.30) and (f) the CPO and LGUs would diligently follow existing guidelines and procedures for environmental protection as stated in para. 4.32. 6.2 Conditions of loan effectiveness would be as follows: (a) the PMB and the CPO have been established with functions and responsibilities acceptable to the World Bank (para. 4.3); (b) the appointment of suitable persons with experience and qualifications acceptable to the Bank (i) to fill the following positions: (a) project director; (b) chief of project financial and administrative unit; (c) chief of M&E unit; (d) chief economist to head the sub-project appraisal unit; and (e) chief rural infrastructure engineer (para. 4.4); and (c) the Operations Manual acceptable to the Bank has been approved and put into effect by the PMB and the umbrella MOAs between DAR and the agencies implementing the project (DOF for MDF, DA for NIA, LBP) signed as required under the Operations Manual (para. 4.7). 6.3 With the above agreement and assurances, the proposed project is suitable for Bank loan of US$50 million equivalent (a US$ Single Currency Loan) to the Republic of the Philippines. The loan would have a term of 20 years including a five year grace period on repayment of principal, and carry the prevailing Bank's standard Libor-based variable interest rate for US dollar.  - 43 - Annex 1 Page 1 of 4 PHILIPPINES AGRARIAN REFORM COMMUNITIES DEVELOPMENT PROJECT THE COMPREHENSIVE AGRARIAN REFORM PROGRAM BACKGROUND 1. Republic Act 6657, the Comprehensive Agrarian Reform Law (CARL) was enacted in June 1988 to promote justice and industrialization in the rural areas. The law envisioned a massive restructuring of the agrarian tenurial landscape of the country. The law also provided for a mechanism for implementation through the Comprehensive Agrarian Reform Program (CARP). 2. The Philippine Agrarian structure is complex and for decades has been the subject of various political agenda. Until mid-1980's, 83% of agricultural land was controlled and owned by 9% of families in the country. Land ownership was highly skewed, that of the estimated 10 million agricultural workers, 50% were landless. Of the remaining 5 million workers, 2 million were tenants and 3 million were either owners, cultivators or squatters on public land. 3. Until early 1990's, not much progress has been made in changing the country's agrarian structure. Efforts during the first six decades of the century were focused on the conversion of sharecropping to leasehold tenancies. In the 1970's Presidential Decree #27 (Operation Land Transfer) was enacted and effected nominal transfer of rice and corn lands to few tenants. CARL extended the coverage of agrarian reform to all agricultural lands with provision for substantial agricultural support services to beneficiaries. This enabled greater participation of farmers and NGOs in policy formulation, local community planning, and implementation. Under CARL, individual ownership is limited to 5 hectares of agricultural land with additional provision of 3 hectares for each family member, 15 years and above, up to a maximum of 3 children per family. Such provision requires that the beneficiary children are actively involved in farming or managing the land. Land owners are compensated based on a formula consisting of three criteria: a) productive value of land; the value as declared in tax returns; and the value of the land as indicated by comparable sales in the area. Agrarian Reform Beneficiaries (ARBs) amortize the land in 30 years at an interest rate of six percent. 4. The Comprehensive Agrarian Reform Program (CARP) covers an area of 7.8 million hectares of which 4.3 million are private lands and 3.5 million hectares are public or government owned. The program envisaged the distribution of these lands over a period of ten years beginning 1988. Distribution would be undertaken by phases as follows:  - 44 - Annex 1 Page 2 of 4 A. Phase I (Year 1 to 4) i. remaining rice and corn land under PD 27 ii. idle and abandoned land iii. private lands voluntarily offered for sale to the Department of Agrarian Reform (DAR) iv. lands foreclosed by government-owned financial institutions v. lands acquired by the Presidential Commission on Good Government B. Phase II (Year 1 to 4) i. public agricultural land ii. private lands greater than 50 hectares per parcel C. Phase III i. private lands 24 to 50 hectares (Year 4 to 7) ii. private lands in holding less than 24 hectares (on Year 6 to 10) 5. CARL provided for the creation of the Support Services Office within the DAR. Further, Executive Order 406 mandated certain departments and agencies to "align their respective programs and projects with CARP'. Under the Philippine Constitution, "appropriate technology and research and adequate financial, production, marketing and other support services' are to be provided to former laborers and tenant farmers. INSTITUTIONS INVOLVED IN CARP 6. The core institutions involved in CARP are the Presidential Agrarian Reform Council (PARC), the Department of Agrarian Reform (DAR), the Department of Environment and Natural Resources (DENR), the Department of Agriculture (DA), Land Bank of the Philippines (LBP), Department of Public Works and Highways (DPWH), Land Registration Authority (LRA), National Irrigation Administration (NIA), Department of Trade and Industry (DTI), Department of Labor and Employment (DOLE), and Local Government Units (LGUs). NGOs, peoples organizations and research and training institutions actively participate in the implementation of the CARP. 7. The PARC which administers the Agrarian Reform Fund (ARF), provides policy guidance and coordination to the program. It is chaired by the President of the Philippines with the DAR Secretary as the Vice Chairman. A more detailed discussion on PARC is shown in Appendix A. 8. DAR is the lead implementing/coordinating agency for CARP implementation. Headed by a Secretary, it consists of several offices as shown in Appendix B.  - 45 - Annex 1 Page 3 of 4 9. Under CARP, DENR is mandated to conduct surveys and classification of forest lands, distribution of alienable and disposable (A and D) lands, allocation of lands to agroforestry and assists forest occupants. DA which was originally mandated to provide extension services to ARBs had devolved its extension function to LGUs and has little participation in CARP. LBP is the financial arm of CARP and is primarily responsible for processing compensation for lands under the program; providing financial assistance to ARBs and the collection of land amortization. The Land Registration Authority undertakes the registration and titling of Emancipation Patents (EPs); Certificate of Land Ownership Awards (CLOAs) and Free Patents (FPs) to the beneficiaries. DOLE is mandated to provide and protect the welfare of rural workers. The Local Government Code widened the scope of responsibility of LGUs and the latter has become instrumental in CARP implementation. They now provide agricultural extension services, undertake public works and social services. 10. The other agencies are focused on the provision of direct support services to ARBs. The DPWH provides for the rural infrastructure needs of the program except irrigation which is being undertaken by the NIA. DTI provides technical assistance related to farm enterprises such as management, investment and financial counseling, marketing assistance and others. 11. Various NGOs and peoples organizations (POs) are involved in various levels of CARP operations. They are primarily involved in organizational and cooperative development. The major network NGOs involved are the Philippine Agrarian Reform Foundation for National Development (PARFUND), the Philippine Business for Social Progress (PBSP) and the National Confederation of Cooperatives (NATCCO). These NGOs are discussed in greater detail under the community development component. CURRENT STATUS OF CARP 12. Land distribution, the key measure of success of CARP had been extremely slow during the first four years of the program. DAR distributed only 16% of the 3.8 million hectares it was mandated to distribute under the program. And these consisted largely of government and private lands under PD 27. In 1995, CARP scope was reduced from 10.3 million ha to 7.8 million ha. Of this reduced scope, DAR was mandated to distribute 4.3 million ha of private agricultural lands while DENR was assigned 3.5 million ha. As of early 1990's, land distribution accelerated and by March 1996 about 2.2 million ha or 51% of DAR's mandated area was acquired and distributed (based on preliminary PARC report). Similarly, DENR distributed 1.6 million haor 45% of its assigned area. Collective efforts and political will of DAR and DENR current managements made this possible. Limited survey capability, however, has taken its toll on the speed of land distribution. 13. An equally important component of CARP is the provision of support services to the ARBs which is mandated by the Philippine Constitution. DAR has taken an aggressive stance in the delivery of support services, largely, through the ARF and foreign assistance, notably, from the European Union, JICA, CIDA and the Dutch Government. Support services provided under the program covers institutional development, provision of physical and social infrastructure such as irrigation facilities, roads and bridges, power and water supply and support to various livelihood/enterprise development schemes. Since 1987, DAR had  - 46 - Annex 1 Page 4 of 4 conducted 49,662 training sessions in various subjects for 2.2 million ARBs. Rural roads with an aggregate length of 4,320 kilometers have been put in place. 100 small irrigation schemes with a command area of 19,020 hectares have been made operational and 312 common service facilities that provided income opportunities for 17,087 ARBs have been set up. ,  - 47 - Annex 1 Appendix A Page 1 of 8 Core Agencies Associated With Agrarian Reform Council 1. The core institutions involved in CARP implementation are the Presidential Agrarian Reform Council (PARC), Department of Agrarian Reform (DAR) and cooperating agencies. Non-government organizations, people's organizations, and research and training institutes, however, also play a critical role in the overall agrarian reform process. A. Presidential Agrarian Reform Council (PARC) 2. PARC is the highest policy-making and coordinating body on all matters related to CARP. Its functions include the formulation and/or implementation of policies, rules and regulations necessary to implement each component of the CARP. It may authorize its members to formulate rules and regulations concerning aspects of agrarian reform falling within their particular areas of responsibility. 3. It administers the Agrarian Reform Fund (ARF) and has the sole authority over the programming and/or allocation of ARF resources among the components and various activities of CARP. This authority is exercised through its approval of the annual budget ceilings of the implementing governmental agencies based on policies and guidelines set by it, which may include, among others, the percentage distribution and/or allocation of ARF resources between land acquisition and distribution (LAD) and supporting services. 4. The PARC is chaired by the President of the Republic of the Philippines with the DAR Secretary as Vice Chairman. Its members are the Secretaries/ Heads of the Department of Agriculture, Department of Environment and Natural Resources, Department of Budget and Management, Department of Finance, Department of Labor and Employment, Department of Interior and Local Government, Department of Public Works and Highways, Department of Trade and Industry, National Economic and Development Authority, Land Bank of the Philippines, six representatives of the agrarian reform beneficiaries (ARBs); and three representatives of affected landowners. 5. The PARC convenes at least once every three months or as frequently as is necessary to discharge its responsibilities. Assisting the PARC in the performance of its tasks are the PARC Executive Committee, PARC Technical Committee, Provincial Agrarian Reform Coordinating Committee, and Barangay Agrarian Reform Council. PARC Executive Committee (EXCOM) 6. The PARC EXCOM reviews and/or recommends policies, rules and regulations necessary in the implementation of CARP as well as the program of implementation covering physical targets, implementation approaches, schedules and support requirements. It also oversees and coordinates the implementation of policies formulated by the PARC. Relative to ARF, it is authorized by the PARC to approve  - 48 - Annex 1 Appendix A Page 2 of 8 fund allocation/programming among the agencies based on policies issued by the PARC. 7. The EXCOM is headed by the DAR Secretary as Chairman and has as members, the Executive Secretary of the Office of the President, Secretaries or Heads of DA, DENR, DPWH, DTI, DBM, DOF, NEDA, LBP, and the Department of Transportation and Communications (DOTC), Department of National Defense (DND), National Irrigation Administration (NIA), Land Registration Authority (LRA), Philippine Commission for Good Government (PCGG), Asset Privatization Trust (APT), National Statistics Office (NSO), and representative of farmer beneficiaries and landowners may also be invited to attend meeting as may be deemed necessary. It meets at least once a month or as frequently as necessary. PARC Technical Committee (TECHCOM) 8. The PARC TECHCOM was created through an EXCOM Resolution in 1989. It is composed of the duly designated representatives of the PARC EXCOM members to study and deliberate on important policy-related matters prior to presentation to the EXCOM. The TECHCOM is chaired by the Council Secretary who is also the Undersecretary for Policy and Planning of the DAR and meets on a monthly basis prior to the meetings of the EXCOM. The TECHCOM has no decision-making authority. PARC Secretariat (SEC) 9. The PARC Secretariat provides general support and coordinative services such as inter-agency linkages, program and project appraisal and evaluation, and general operations monitoring for the PARC. It is headed by the Director-General who is also the DAR Secretary and is organized along two major functional areas: Planning, Policy and Coordination Division and the Finance and Management Division. 10. While the PARC SEC exercises recommendatory functions to higher authorities, it plays a key role in the administration of ARF through its review of annual agency budget proposals. The results of the review provide the basis for determining the CARP budget allocation among the agencies. Its subsequent review of Work and Financial Plan (WFP) of each agency is also vital since this serves as the basis for the release of the Advice of Allotment (AA) and the Notices of Cash Allocation (NCA) by the DBM. The WFP is no longer subject to Council or EXCOM endorsement/approval prior to its submission to DBM. The PARC SEC also exercises a certain degree of control on the flow of funds during the budget implementation phase through its review of the agencies' request for the release of their respective allotments as well as requests for reprogramming and realignments. 11. The PARC SEC also has a monitoring function which is vital since it is the main source of the information used in formulating appropriate policies, guidelines, rules and regulations for the effective and efficient implementation of CARP.  - 49 - Annex 1 Appendix A Page 3 of 8 Provincial Agrarian Reform Coordinating Committee (PARCCOM) 12. The PARCCOM coordinates and monitors the implementation of CARP in the province; and provides information on CARP guidelines issued by PARC and other existing and applicable agrarian laws, including the progress of CARP in the province. The PARCCOM does not play any role in the budget preparation and utilization of ARF, nor does it have any control over the funds allocated for the province. 13. The Chairman of the PARCCOM is appointed by the President based on the recommendation of the EXCOM. Members consist of the Provincial Agrarian Reform Officer (PARO) as Executive Officer and one representative each from the DA, DENR, and the LBP; one representative each from existing farmers organizations, agricultural cooperatives and non-governmental organizations in the province; two representatives from landowners, at least one of whom is a producer representing the principal crop of the province; and, two representatives from farmer and farm worker beneficiaries, at least one of whom is a farmer or farm worker representing the principal crop of the province. In areas where there are cultural communities, each has one representative. 14. In some provinces, the PARCCOM assumes an active role in the implementation process at the provincial level. A generalization regarding its overall effectiveness however, cannot as yet be made as its operation is still undergoing modifications. In one province for example, the members deemed it necessary to appoint the Governor as honorary chairman to gain the support (including resources) from the local government. Functions of Barancjav Agrarian Reform Council (BARC) 1S. The main functions of the BARC are as follows: (a) Mediate and conciliate between parties involved in an agrarian dispute including matters related to tenurial and financial arrangements; (b) Assist in the identification of qualified beneficiaries and landowners within the barangay; (c) Attest to the accuracy of the initial mapping of the beneficiary's tillage; (d) Assist qualified beneficiaries in obtaining credit from lending institutions; (e) Assist in the initial determination of the value of the land; (f) Assist the DAR representative in the preparation of periodic reports on the CARP implementation for submission to the DAR; (g) Coordinate the delivery of support services to beneficiaries;  - 50 - Annex 1 Appendix A Page 4 of 8 (h) Perform such other functions as may be assigned by the DAR Secretary or the PARC. The BARC has been found most effective in the performance of the first three functions: 16. BARC is composed of the following: (a) Representative of farmer and farmworker beneficiaries (b) Representative of farmer/farmworker non-beneficiaries (c) Representative of agricultural cooperatives (d) Representative of other farmer organizations (e) Representative of the Barangay Council (f) Representative of NGO (g) Representative of Landowners (h) DA official assigned in the barangay Ci) DENR official assigned in the barangay (j) Representative of the LBP (k) DAR Agrarian Reform Technologist(s) assigned in the barangay who shall act as the Secretary of the BARC. B. The Department of AQrarian Reform 1. The Department of Agrarian Reform (DAR) is the lead agency responsible for implementing the CARP and is mandated to improve the land tenure system in the country and the socio-economic status of program beneficiaries by coordinating and ensuring the timely provision of support services. It is headed by a Department Secretary whose main responsibilities are to: Ci) establish and promulgate operational policies, rules and regulations and priorities for agrarian reform implementation; (ii) formulate policies, guidelines, rules and regulations for the operation of the Department pursuant to the President' s program of government; (iii) issue orders, directives, rules and regulations necessary to carry out Department objectives policies and functions; (iv) provide direction, supervision and control over all bureaus and other offices under the Department; and (v) devise workable strategies for obtaining cooperation and participation of government agencies. 2. Under the current leadership, significant changes of the DAR's organizational structure have been introduced in compliance with the memorandum on streamlining of the government bureaucracy. Policy and PlanninQ Office (PPO) 3. PPO has the primary responsibility of providing advice and assistance to the Secretary in the development, integration and prioritizing of plans, programs and projects of the Department, as well as in the coordination of policy and planning-related activities of the different offices, bureaus and attached agencies of the Department. The Office consists of three service units which are as follows:  - 51 - Annex 1 Appendix A Page 5 of 8 (a) Policy Staff: This is mainly responsible for spearheading and institutionalizing mechanisms for policy formulation, reform, and advocacy, and conceptualizing and operationalizing the DAR's Research and Development (R & D) agenda. The Policy staff is comprised of three divisions: (i) Policy Analysis and Coordination Division; (ii) Policy advocacy Group; and, (iii) Economic and Socio- Cultural Research Division. The Group has the task of processing and translating research findings into concrete implementable policy recommendations. (b) Planning Staff: The Planning and Programming Division and the Program Monitoring and Evaluation Division constitute the Planning Service. It formulates plans in coordination with the different offices of the DAR consistent with the Philippine Development Plan and PARC and DAR's policies. It also provides guidelines and assists in the development of DAR's Central, bureaus, regional and provincial plans and programs. The development and implementation of a system for monitoring and evaluating the implementation of DAR' s plans and programs is also its responsibility. The Planning staff prepares DAR's quarterly and yearly accomplishment reports and closely liaise with the policy staff regarding impact of agrarian reform programs on beneficiaries and rural communities for planning and decision-making purposes. (c) Management Information Service: The Service is composed of two divisions namely: Systems Development Division and Data Management and Technical Support Division. Its main functions are the provision of technical inputs for information requirements and developing the corresponding system; recommendation of changes/revisions in existing systems and procedures with the end in view of expediting the flow of accurate information; administration of databases; preparation of reports and statistical information; and provision of technical assistance to users in system maintenance. Field Operations and Support Services (FOSS) 4. This office is headed by an Undersecretary assisted by an Assistant Secretary for Land Tenure Improvement. The office assumes general responsibility for five bureaus, and the field offices of DAR. In effect, the office is DAR's direct channel to the barangay level. The main tasks of the office are to advise and assist the Secretary in implementing policies, guidelines, rules and regulations for field operations and support services to attain the DAR targets; assist the Secretary in providing over-all direction on field operations; establish and maintain an effective working relationship with DAR's cooperating agencies; establish linkages with foreign funding institutions; evaluate field operations, programs and projects, accomplishments, linkages with line agencies, local government units (LGUs), non-governmental organizations (NGOs) and people' s organizations (POs) in line with field operations work; and more importantly, oversee the operations of the Regional, Provincial and Municipal offices of the Department. The attached offices and bureaus under FOSS and their specific functions are as follows:  - 52 - Annex 1 Appendix A Page 6 of 8 (a) Project Development and Management Service (PDMS): This unit was formerly with the Policy and Planning Office. With the streamlining, this falls now directly under the office of the Undersecretary for Operations and Support Services. This is in view of its vital role in generating projects and sourcing of funds in support of specific activities/components of the CARP. Functions of the former Support Services Office (SSO) and other project- related activities being undertaken by other units are now lodged with the PDMS, as follows: (i) programming of economic/infrastructure projects such as irrigation, roads, pavements, post-harvest facilities, credit assistance, etc.; (ii) monitoring of projects financed under the Development Bank of the Philippines-Window III which was done by the former Special Projects Office; and (iii) monitoring of projects under CARP-Barangay Marketing Centre. The PDMS provides support for project development to the Department bureaus, attached agencies, and regional offices in accordance with the approved priority areas for local and foreign funding. It initiates project identification, development, appraisal and packaging; monitors and evaluates foreign and locally- funded projects; and undertakes negotiations with foreign and local funding institutions. These tasks are performed by the three Divisions within PDMS which are the Project Development Division; the Project Monitoring and Evaluation Division; and the Resource Mobilization Division. (b) Bureau of AQrarian Reform Information and Education (BARIE) The Bureau develops and conducts continuing training and education programs for the acquisition of knowledge, value formation, and development of skills and favorable attitudes among beneficiaries and personnel of DAR and other agencies. It also disseminate information and communication materials on the aforesaid tasks which are accomplished through the Bureau' s three Divisions namely: Beneficiaries Education Division; Personnel Education Division; and, Education Programs, Research and Development Division. (c) Bureau of Agrarian Reform Beneficiaries Development (BARBD): The Bureau' s mission is to assist DAR field implementors in the establishment of mechanisms and structures that effect the empowerment of the agrarian reform beneficiaries (ARB). The Bureau aims to: (i) promote the organization of ARB and all forms of farm cooperation in all CARP areas and (ii) assist in the creation of an environment conducive to beneficiaries' greater productivity and higher farm income. The Bureau consists of three divisions whose functions may be similar but have clear area focus. The Institutional Development Division is primarily concerned with OLT, VLT, VOS and CA areas. The Community Services Development Division focuses on DAR administered settlements, CARP areas with no amortization scheme, and non-land transfer scheme. The Livelihood and Enterprise Development Division concentrates on the achievement of the second objective.  - 53 - Annex 1 Appendix A Page 7 of 8 (d) Bureau of Land Development (BLD): The Bureau consists of the Land Survey and the Land Capability and Development Division. The Land Surveys Division formulates guidelines to facilitate the conduct of survey activities in CARP areas; provides technical assistance in the resolution of survey bottlenecks at the field level; coordinates with other agencies to synchronize survey targets and resolution of survey problems; monitors and evaluates performance on land surveys; and assists in the execution of surveys in CARP areas when deemed necessary. The Land Capability and Development Division prepares plans, detailed work programs including technical specification for land use, slope, hydrology, soil and socio-economic survey of selected agrarian reform communities; provides staff support in the processing of land use applications including design for land development and conservation and preservation of prime lands for agricultural purposes; draws up work plans, guidelines, procedures as to maintenance of photo maps, programs and designs for agricultural development under the land consolidation scheme; and compiles and maintains basic land data records/documents. (e) Bureau of Land Acquisition and Distribution (BLAD): BLAD consists of Land Acquisition and Distribution Division and the Land Tenure Improvement and Documentation Division. The Land Accuisition and Distribution Division's main concern is the formulation and dissemination of procedures in the acquisition and distribution of private and government-owned lands. It coordinates with other CARP implementing agencies in the area of land valuation, landowner compensation, title registration and distribution. It also identifies and resolves bottlenecks on acquisition and distribution, and monitors performance and maintains records on all LAD activities, The Land Tenure Improvement and Documentation Division is primarily concerned with the formulation of procedures and guidelines on various non-land transfer schemes under CARP. Complementary activities are the formulation of monitoring and evaluation schemes for all non-land transfer activities; development of plans, programs, policies, guidelines and procedures relative to land tenure documentation of landholdings covered by CARP; and the establishment of an information system on land tenure development and land transfer actions. (f) DAR ReQional, Provincial and Municipal Offices: These offices implements the laws, policies, rules and regulations, and programs/ projects in relation to the agrarian reform program of the Department. Likewise, they facilitate land acquisition and distribution and promote the development of program beneficiaries into viable agrarian reform communities. Under the new set up, there is greater flexibility in the deployment of personnel at the field level with the criteria formulated in classifying provinces by the DAR according to scope of work. Within the provinces, there is likewise flexibility in clustering municipalities depending on the workload.  - 54 - Annex 1 Appendix A Page 8 of 8 Legal Affairs (LA) S. This office provides advice to the Secretary on all legal matters pertaining to agrarian reform and its implementation; resolves agrarian conflicts and land tenure-related problems including cases arising from the administrative implementation of the agrarian reform program; resolves cases affecting DAR personnel; evaluates and review contracts, policy matters and the legal aspects of guidelines and issuances of the Department. The Bureau of Agrarian Legal lAssistance (BALA) and the Legal Affairs Staff (LAS) fall directly under the supervision of an Undersecretary. 6. BALA performs its functions through its three divisions, namely: the Litigation Division, Claims and Conflicts Division, and the Information, Mediation and Counseling Division. The Bureau' s primary concern is the extension of legal services to agrarian reform beneficiaries and related activities. 7. LAS performs its functions through its own three divisions: the Legislative Research and Statistics Division, the Investigation Division, and the Administrative Cases Resolution Division. The two latter divisions are concerned mainly with the extension of legal services to DAR personnel as the need arises or conversely it may file charges against erring DAR personnel. Financial and Administrative Affairs (FAA) 8. This office advises the Secretary in implementing policies, guidelines, rules and regulations for efficient and effective financial and administrative operations; and establishes and maintains contact with the Commission on Audit (COA), DBM, Bureau of Treasury, Land Bank of the Philippines and other concerned offices. The Assistant Secretary, Administrative Service Staff, and the General Services Staff.  - 55 - PHILIPPINES Annex 2 AGRARIAN REFORM COMMUNITIES DEVELOPMENT PROJECT Page 1 of 8 Table 1. PROJECT BASE COST (Jan 1996 Currency Tenns) Unit No Unit Project Project AV FE % FE Cost Cost Cost AMOUNT P'000 Pesos M USS M COMMUNITY DEV AND TECH SUPPORT Community Development ........ see Table 4 ........ 64.3 2.47 Organizational Development ........ see Table 4 ........ 57.0 2.19 Technical Support ........ see Table 4 ........ 32.7 1.26 Staff Development ........ see Table 4 ........ 11.8 0.45 TOTAL COMMUNITY DEV AND TECH SUPPORT 165.9 6.38 20% 1.28 INFRASTRUCTURE ROADS Reconstruction Km 250 819 204.8 7.88 Rehabilitation Km 560 491 275.2 10.58 Bridges M 810 161 130.0 5.00 Farm-Market Tracks - Spot Improvement Km 400 137 54.6 2.10 Sub-total Roads 664.5 25.56 IRRIGATION Rehabilitation ha 7,000 39 269.5 10.37 New/Extension ha 3,000 72 214.5 8.25 Sub-total Irrigation 484.0 18.62 OTHER INFRASTRUCTURE Water Supply ARC 100 630 63.0 2.42 Multi-Purpose Halls unit 80 263 21.0 0.81 Other ARC 100 210 21.0 0.81 Sub-total Other Infrastructure 105.0 4.04 TOTAL INFRASTRUCTURE 1253.5 48.21 35% 16.87 AGRICULTUREIENTERPRISE Crops (incremental WC) ha 160,000 2 320.0 12.31 Livestock ARC 100 2,000 200.0 7.69 Processing/Trading ARC 100 2,000 200.0 7.69 TOTAL AGRICULTURE & ENTERPRISE DEVT 720.0 27.69 25% 6.92 PROJECT MANAGEMENT Equipment & Vehicles ........ see Table 5 ........ 10.7 0.41 Professional Staff ........ see Table 5 ........ 66.3 2.55 Other Costs ........ see Table 5 ........ 49.8 1.91 TOTAL PROJECT MANAGEMENT 126.7 4.87 25% 1.22 TOTAL BASE COSTS 2266.2 87.16 30% 26.29 - Physical Contingencies 217.8 8.38 2.53 - Price Continingencies 787.5 10.16 3.07 TOTAL PROJECT COSTS 3271.5 105.70 31.89  - 56 - Annex 2 Page 2 of 8 Table 2. PHASING AND CONTINGENCIES - Underlying Parameters Year 1995 1996 1997 1998 1999 2000 2001 2002 Inflation Local within yr 11.0% 8.5% 7.0% 6.0% 6.0% 5.0% 5.0% 5.0% Local yr-yr 7.8% 6.5% 6.0% 5.5% 5.0% 5.0% Foreign within yr 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% Foreign yr-yr 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% FX Rate Start of Year 26.00 27.55 28.79 29.80 30.85 31.63 32.43 FX Rate Mid Yr 26.77 28.17 29.29 30.32 31.24 32.03 32.84 Local Index Start of Year 100.0 108.5 116.1 123.1 130.4 137.0 143.8 Foreign Index Start of Year 100.0 102.4 104.9 107.4 110.0 112.6 115.3 Project Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Mid Point Jun/Jul Jun/Jut Jun/Jul Jun/Jul Jun/Jul Jun/Jul 1997 1998 1999 2000 2001 2002 Index based on Start 1996=100 Local 112.3 119.6 126.8 133.7 140.4 147.4 Foreign 103.6 106.1 108.7 111.3 113.9 116.7 Exchange Rate Av for Project Year 28.17 29.30 30.33 31.24 32.04 32.85 PHASING OF COMPONENT REAL COSTS Community Development & Tech Support 5.5% 19.3% 23.3% 21.6% 16.0% 14.3% Infrastructure 5.0% 15.0% 20.0% 25.0% 20.0% 15.0% Agriculture/Enterprise Devt. 10.0% 15.0% 20.0% 25.0% 20.0% 10.0% Project Management 16.2% 19.9% 16.2% 16.1% 15.8% 15.8%  - 57 - Annex Table 3. PHASING AND CONTINGENCIES - Detailed Calculations Page 3 of 8 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 TOTAL Base Costs (USSM) FE % Community Devt & Tech Spt 20% 0.35 1.23 1.48 1.38 1.02 0.92 6.38 Infrastructure 35% 2.41 7.23 9.64 12.05 9.64 7.23 48.21 Agriculture/Enterprise Devt. 25% 2.77 4.15 5.54 6.92 5.54 2.77 27.69 Project Management 25% 0.79 0.97 0.79 0.78 0.77 0.77 4.87 62 13.59 17.46 21.U4 16.9 11.69 87.1 Physical Continuencies (USSM) Conts % Community Devt & Tech Spt 7% 0.02 0.09 0.10 0.10 0.07 0.06 0.45 Infrastructure 10% 0.24 0.72 0.96 1.21 0.96 0.72 4.82 Agriculture/Enterprise Devt. 10% 0.28 0.42 0.55 0.69 0.55 0.28 2.77 Project Management 7% 0.06 0.07 0.06 0.05 0.05 0.05 0.34 0.0 t122 t68 2Q 114 1.2 IA Price Contingencies (USSM) Community Development & Tech Support 0.01 0.08 0.14 0.17 0.15 0.16 0.71 Infrastructure 0.10 0.49 0.92 1.49 1.48 1.33 5.80 Agriculture/Enterprise Devt. 0.11 0.28 0.53 0.86 0.85 0.51 3.13 Project Management 0.03 0.06 0.07 0.09 0.11 0.14 0.51 0.25 0 91 t66 2.1 2 59 na. TOTALS COSTS including Continoencies (USSM) Community Development & Tech Support 0.39 1.40 1.73 1.64 1.24 1.14 7.54 Infrastructure 2.75 8.44 11.53 14.75 12.09 9.28 58.84 Agriculture/Enterprise Devt. 3.16 4.85 6.62 8.47 6.94 3.55 33.59 Project Management 0.88 1.10 0.92 0.93 0.94 0.96 5.73 TOTALS 7.17 15.79 20.79 25.80 21.21 14.94 105.70 Base Costs (Pesos M) FE % Community Devt & Tech Spt 20% 9.1 32.1 38.6 35.9 26.5 23.8 165.9 Infrastructure 35% 62.7 188.0 250.7 313.4 250.7 188.0 1,253.5 Agriculture/Enterprise Devt. 25% 72.0 108.0 144.0 180.0 144.0 72.0 720.0 Project Management 25% 20.5 25.2 20.6 20.4 20.0 20.0 126.7 1641 3 5A 4532 549.6 4412 3. 2.266.2 Physical Contingencies (Pesos Ml Conts % Community Devt & Tech Spt 7% 0.6 2.2 2.7 2.5 1.9 1.7 11.6 Infrastructure 10% 6.3 18.8 25.1 31.3 25.1 18.8 125.4 Agriculture/Enterprise Devt. 10% 7.2 10.8 14.4 18.0 14.4 7.2 72.0 Project Management 7% 1.4 1.8 1.4 1.4 1.4 1.4 8.9 15.5 33.6 43.8 12 42.7 29.1 217. Price Contingencies (Pesos M) Community Development & Tech Support 1.2 6.7 11.0 12.9 11.4 12.1 55.4 Infrastructure 8.5 40.5 73.8 116.2 111.4 98.1 448.4 Agriculture/Enterprise Devt. 9.7 23.3 42.4 66.7 64.0 37.5 243.6 Project Management 2.7 5.3 5.9 7.3 8.6 10.2 40.0 221 133 1 A 2Q2 191.1 1572 787.5 TOTALS COSTS Indudina Continaencies (Pesos Mt Community Development & Tech Support 10.9 41.1 52.3 51.3 39.8 37.5 232.9 Infrastructure 77.4 247.3 349.6 460.9 387.2 304.9 1,827.3 Agriculture/Enterprise Devt. 88.9 142.1 200.8 264.7 222.4 118.7 1,035.6 Project Management 24.7 32.3 27.9 29.1 30.1 31.6 175.6 TOTALS 201.9 462.7 630.5 808.1 679Z4 4.8 3.271.5  - 58 - Annex 2 Page 4 of 8 Table 4. COMMUNITY DEVELOPMENT & TECHNICAL SUPPORT COMPONENT (Pesos '000) Year 1 Year 2 Year 3 Year 4 Year 5 Year S TOTAL -Financed by- COST DAR/NG ARCs No. of ARCs (cumulatve) 10 80 90 100 100 100 Community Development Workers (NGO) No. 30 45 50 50 20 20 Community Development Community Development Workers Costs - Salary: P8,000/ month 2,340 3,510 3,900 3,900 1.560 1,560 16,770 16,770 - Travel Expenses: P1,000/month 360 540 600 600 240 240 2,580 2,580 - Bonus: P 1,000/yr 30 45 50 50 20 20 215 215 - Overhead60%ofCDWcost 1.638 2,457 2,730 2,730 1,092 1,092 11,739 11,739 On-site Group Meetings (Meals P50/pax50 pax; 12 meetings/year/ARC) 300 1,800 2,700 3,000 3,000 3,000 13,800 13,800 Coimnunity Planning (P10.000 for Yr 1/bgy) 300 1,800 2,700 300 600 600 6,300 6,300 FSD module (P1000,001/ARC) 1,000 5,000 3,000 1,000 1,000 1,000 12,000 12,000 Offsite meetings (1 day) (P250/meeting. 8/rARC for 3 consecutive yrs) 20 120 180 180 200 200 900 540 360 Sub-total Community Development 5,988 15,272 15,860 11,760 7,712 7,712 64,304 50,144 14,160 Organleatlonal Development Coop Development (On-site) (P22,500/3daysession 3conseculiveyrs/ARC) 225 1,350 2,025 2,025 2,250 2,250 10,125 6,750 3,375 Leadership Training (P22,500/3daysession 3consecutiveyrs/ARC) 225 1,350 2,025 2,025 2,250 2,250 10,125 6,750 3,375 Decision-making Training (P22.5DO/3 daysessioni2inyrs 1&3IARC) 225 1,125 900 1,350 675 675 4,950 3,450 1,500 Introductbon to Financial mngt & enterprise development (P22,500/3daysession*3consecutiveyrs/ARC) 225 1,350 2,025 2,025 1,125 675 7,425 4,950 2,475 Issue-based seminars (P10,000/2 days'2 in Yrsl &3 /bgy) 300 1,500 1,200 1,800 900 300 6,000 3,000 3,000 Cross-visits (P40,000: 10 persons/yr/ARC) 400 2,400 3,600 4,000 4,000 4,000 18,400 16,100 2,300 Sub-total Organisatonal Development 1,500 9,075 11,775 13,225 11,200 10,150 57,025 41,000 16,025 Technical Support (Training & Business Advice) Business Management Training (P2ODO/paxx*5pax/ARC 3) 105 630 945 945 525 315 3,485 3,300 185 Financial Management Training (P2,000/pax'Spax/ARC-3) 105 630 945 945 525 315 3,465 3,300 185 Basic Accounting Course (P2,000/pax ' 10 paxlARC ' 2 for 75% of ARCs) 158 945 1,260 788 473 3,824 3,452 173 Advanced Accounbng Course (P3,000/pax'5pax/ARC 2for75%ofARCs) 136 136 698 930 582 349 2,830 2,703 128 IPM/Farming Systems/Sustainable Agriculture (PlO,O0O/training:4trainings/ARC) 100 600 1,800 2,000 800 400 5,700 3,990 1,710 Apprentceship Sponsorship (P20,000'2paxl30%ofARCs) 120 800 360 360 360 360 2,180 2,180 Marketing Support & Assistance (P25.000/ARC for 3 yrs) 250 1,500 2,250 2,500 2,500 2,500 11,500 10,600 900 Sub-total Technical Support 974 5,041 8,258 8.488 5,785 4,239 32,744 29,504 3,240 Staff Deveopment Advanced Community Development (P1100001 pax(DF)/ARCInYr.1) 100 500 300 200 200 100 1,400 1,400 Business Management (P5,000/pax: 2 pa/ARC) 100 500 300 100 200 200 1,400 1,400 FinancIal Management (P5,000ipax :2 pax/ARC) 100 500 300 100 200 200 1,400 1,400 Technical Training (P5,000/pax: 2 pcx/ ARC' 5) 100 600 900 1,000 200 200 3,000 3,000 Field Monitoring & Evaluation (P10,0001AC/r) 100 600 900 1,000 1,000 1.000 4,600 4,600 Sub-towl Staff Development 500 2,700 2,700 2,400 1,800 1,700 11,800 11,800 TOTALS 90tL 32ORR 'AR193 35P3 28477 23.80n1 I AZa7 1,37448 33,42 100.0% 79.8% 20.2%  - 59 - Annex 2 Page 5 of 8 Table 5. PROJECT MANAGEMENT COSTS (Pesos '000) Unit No. of Unit Cost TOTAL Financed By: Unie P 000 YearI Year2 Yasr3 Year4 Year6 Year6 COST WB DAR Capital Equipment Central Prolect Office Computer and Printer Desk Top Computers & Printem Unit 8 S0 480 480 437 43 Laptop Computem Unit 4 75 300 300 273 27 Laser Printers Unit 2 S0 100 100 91 9 SupportPowerSupply Unit 4 25 100 100 91 9 Computer Software Value 1 250 2S0 250 228 23 Office Eaulamen Photo Copier Unit 2 160 320 320 291 21 Fax Machine Unft 1 25 25 25 23 2 AirCondiUoner Unit 3 40 120 120 109 11 Office Fumiture Set 1 300 300 300 273 27 Vehicles Passenger Vehicle Unit 2 450 S00 900 819 81 Four-whsil Drive Pick-up Unit 1 750 750 750 6S3 183 Provincial Offices Comoutem and Printers Desk Top Computer & Printer Unit 20 S0 360 840 1,200 1,092 103 Support Power Supply Unit 10 25 75 17S 250 228 23 ComputerSoftware Value 1 250 75 175 250 228 23 Ofltc hulman Photo Copier Unit 10 80 240 860 800 728 72 Fax Machines Unit 10 26 75 175 250 228 23 Office Fumiture Set 10 130 390 110 1,300 1,183 117 Vehicles 125 cc Motorcycles Unit 50 so 900 2,100 3,000 2,400 600 Sub-total Capital Equipment 5,760 4,935 10,698 9,282 1,413 Professional Staff/Services Central Prolect Offce CPO Director Manmth 72 94 1,123 1,128 1,128 1,128 1,128 1,128 8,768 6,788 0 Chief Rural Infrastructure Eng. Manmth 72 56 672 672 672 672 672 672 4,032 4,032 0 M&E Speciallst Manmth 72 40 480 480 480 480 480 480 2,880 2,880 0 Senior Economiat Manmth 72 43 516 816 516 516 518 816 3,096 3,096 0 Chief FinancialAdmin. Officer Manmth 72 40 480 480 480 480 480 480 2,880 2,880 0 Administrative Officer Manmth 72 40 480 480 480 480 480 480 2,880 2,880 0 OtherEnginers Manmth 144 30 720 720 720 720 720 720 4,320 4,320 0 Economists/FInancial Analyst Manmth 144 30 720 720 720 720 720 720 4,320 4,320 0 Community Development Spec. Manmth 72 26 300 300 300 300 300 300 1,800 1,800 0 Agribusiness Specialist Manmth 72 40 480 480 480 480 480 480 2,880 2,880 0 ConsultancySupport(lnclAgBus) Manmth 72 78 936 336 936 936 936 936 5,616 5,616 0 Provincal Offices Provincial Econ. Dev. Advisors Manmth 636 39 1,404 4,860 4,880 4,580 4,680 4,650 24,804 24,804 0 Sub-total Professional StaflfServices 8,316 11,862 11,892 11,192 11,592 11,892 68,276 66,278 0 Support Staff/Other Costs CPO Supoort Staff Costa b Other Services Manmth 2,376 2 792 792 792 792 792 792 4,752 0 4,752 PMBIHonorarla 1 1,300 300 300 300 300 300 300 1,800 0 1,800 CPO Runnin Cost Vehicle Repsir & Maintenance Value 1 600 70 70 90 100 120 150 600 600 0 Vehicle Fuel & Oil Value 1 Boo 100 100 100 100 100 100 600 600 0 OMce Supplies Value 1 1,130 150 186 200 200 200 200 1,130 1,130 0 Staff Tral v Subsistence Value 1 8,0S0 1,000 1,800 1,500 1,500 1,500 1,500 8,500 3,500 0, Office Rental Month 100 72 1,200 1,200 1,200 1,200 1,200 1,200 7,200 0 7,200 Power&Wster Month 25 72 300 300 300 300 300 300 1,800 0 1,800 Communicadons Month 15 72 180 180 180 180 180 180 1,080 0 1,080 Other Servkes (JanitorlaiRepalr) Value 1 2,100 300 S0 S00 S00 500 500 2,800 0 2,300 ARC Related Provincial & Field Staff Cosb TravalandSubsbtence MsnYr 700 11 700 1,40 1,400 1,400 1,400 1,400 7,700 0 7,700 MICycle Running Costa Mclyr 265 12 150 600 600 600 S00 600 3,180 0 3,180 Support Staff A Other Services Manmth 6,768 1 628 1,223 1,226 1,228 1,228 1,228 6,768 0 6,786 Staff Trminino A Seminam Monitoring A Evaluaton Coumre Coume 2 1S0 180 180 380 360 0 Project Management Coumes Course 2 210 210 210 420 420 0 Rura Development Coumes Coumr 2 130 180 10 360 360 0 Agriculture Courses Course 2 180 1S 180 360 360 0 Community Development Coumes Course 2 1S0 180 10 360 350 0 Sub-total Support StaffS Other Costs 6,470 3,710 8,00 8,760 8,420 8AN 4S,770 12,0!0 37,080 TOTALS 20,54S 25,237 20,852 20,382 20,012 20,042 126,741 88,248 38,493 100.0% 69.8% 30.4%  - 60 - AneA2 Page 6 of 8 Table 6. PROJECT FINANCING BY COMPONENT & YEAR Financing - Average Ratios ARA LQU DARING L&E W Toa Community Development & Tech Support 20.2% 79.8% 100.0% Infrastructure 10.6% 7.9% 3.1% 0.3% 78.1% 100.0% AgriculturelEnterprise Devt. 37.0% 3.0% 60.0% 100.0% Project Management 30.4% 69.6% 100.0% Financing - With Contingencies by Agency (Pesos M) ARCs L5iU DARING LEE WB Iobl Percent Community Development & Tech Support 47 0 186 0 0 233 7.1% Infrastructure 193 144 56 6 1,427 1,827 55.9% AgrculturelEnterprise Devt. 383 0 31 621 0 1,036 31.7% Project Management 0 0 53 0 122 176 5.4% Total Costs gm 144 32z 628 5 3271 100.0% Financing - With Contingencies by Agency (US$M) ARCs LS _ LUE yD ITobl Percent Community Development & Tech Support 1.5 6.0 0.0 0.0 7.5 7.1% Infrastructure 6.2 4.6 1.8 0.2 46.0 58.8 55.7% Agriculture/Enterprise Devt. 12.4 1.0 20.2 0.0 33.6 31.8% Project Management 1.7 0.0 4.0 5.7 5.4% Total Costs 2Q.Z4 2MA 50.0 1Z 100.0% Percent 19.1% 4.4% 10.0% 19.3% 47.3% 100.0% Financing by Year - With Contingencies (USSM) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 By Agency ARCs 1.5 3.0 4.0 5.0 4.1 2.5 20.2 LGU 0.2 0.7 0.9 1.2 1.0 0.7 4.6 DAR 0.8 1.9 2.2 2.3 1.9 1.6 10.6 LBP 1.9 2.9 4.0 5.1 4.2 2.2 20.4 World Bank 2.8 7.4 9.6 12.2 10.1 7.9 50.0 Total Financing L.2 1g.f 2Q ZLfl 21.2 14.9 1057 By Component Community Development & Tech Support 0.4 1.4 1.7 1.6 1.2 1.1 7.5 Infrastructure 2.7 8.4 11.5 14.8 12.1 9.3 58.8 Agriculture/Enterprise Devt. 3.2 4.8 6.6 8.5 6.9 3.6 33.6 Project Management 0.9 1.1 0.9 0.9 0.9 1.0 5.7 Total Costs 12 15 2Q.A Z5. 212 14. 10.;  Table 7. PROJECT FINANCING BY SUB-COMPONENT (Pesos M) -inancing Proportions by Asency AMOUNTS FINANCED BY AGENCY Y Project W LGU NGIDAR LBP ARCs WB LGU NG/DAR LBP ARCs Cost Pesos M COMMUNI DEV MAND TECH SUPPORT CommuwniyDevlopment 64.3 - 78.0% - 22.0% - - 50.1 - 14.2 Orgmizantional Devslopmmt 57.0 7- 1.9% - 28.1% - - 41.0 - 18.0 Tedmical Support 32.7 - 90.1% - 9.9% - - 29.5 - 3.2 Staff Developmeit 11.8 - 100.0% - - - - 11.8 TOTAL COMMUNITY DEVANO TECH SUPPORT 165.9 - 79.8% 20.2% 132.4 - 33.4 INFRASTRUCTURE ROADS R.conatrution 204.8 81.0% 150% - - 4.0% 165.8 30.7 - - 8.2 RelhbWlitaiori 275.2 80.0% 15.0% - - 5.0% 220.1 41.3 13.8 Briks 130.0 80.0% 15.0% - - 5.0% 104.0 19.5 6.5 Fom-Me" Aua 54.6 50.0% 10.0% - - 40.0% 27.3 5.5 - - 21.8 Sub-total Roads 664.5 77.8% 14.6% - - 7.6% 517.3 97.0 - - 50.3 IRRIGATION Ruhdbitaon 269.5 82.0% 8.0% 10.0% 221.0 - 21.6 - 27.0 Ngw/ExlMuion 214.5 82.0% 8.0% 10.0% 175.9 17.2 - 21.5 Sub-totel Irrigation 484.0 82.0% - 8.0% - 10.0% 396.9 - 38.7 - 48.4 OTHER INFRASTRUCTURE ef.rSLA*I 63.0 70.0% 30.0% 44.1 - 18.9 MuJU.PsaposNf 21.0 30.0% 20.0% 50.0% 6.3 - - 4.2 10.5 O0w 21.0 70.0% 10.0% 20.0% 14.7 21 - - 4.2 Sub-otal Ohw Irfrasbcue 105.0 65.1 2.1 4,2 33.6 TOTAL INFRASTRUCTURE 1,253.5 78.1% 7.9% 3.1% 0.3% 10.6% 979.3 99.1 38.7 4.2 132.3 AG88CULTUIREIENTERPRISE Cmps (wtowuntl VWC) 320.0 Livaodc 200.0 PtolaGTrads 200.0 TOTAL AGRICULTURE & ENTERPRISE DEVT 720.0 - - % 6.% 37.0% - - 21.6 432.0 266.4 PROJECT MANAGEMENT Ewmwt&Vehicles 10.7 86.8% - 13.2% - - 9.3 - 1.4 - - Profnuuoral Staf 63.3 100.0% - - 66.3 - - - - Oer Costa 49.8 25.5% 74.5% - - 12.7 37.1 TOTAL PROJECT MANAGEMENT 126.7 69.8% - 30.4% - - 88.2 - 38.5 - - TOTAL BASE COSTS 2,266.2 47.1% 4.4% 10.2% 19.2% 19.1% 1,067.5 99.1 231.3 436.2 432.1 ID -Phyalal Corencs 217.8 - Prib Cork*orciea 787.5 0 X TOTAL PROJECT COSTS 3,271.5 47.4% 4.4% 10.0% 19.2% 19.0% 1,649.8 144.4 326.8 627.5 623.0 CO ta  Table 7(a). PROJECT FINANCING BY SUB-COMPONENT (US$ '000) -Rw-----Fnancing Pmportins by Agency AMOUNTS FINANCED BY AGENCY Proded WB LGU NGIDAR LAP ARCs WB LGU NGIDAR LBP ARCs Cost Peos M COUMUNITY DEV AND TECH SUPPORT Commuity Dopnert 2.5 - - 78.0% - 22.0% - - 1.9 - 0.5 O 0grkationsl Develpment 2.2 - - 71.9% - 28.1% - - 1.6 - 0.8 TeodvtcsSupport 1.3 - - 90.1% - 9.9% - - 1.1 - 0.1 StUffDvsiopnM 0.5 - - 100.0% - - - - 0.5 - - TOTAL COMMUNIfY DEV AND TECH SUPPORT 6.4 - - 79.8% - 20.2% - - 5.1 - 1.3 IIIRASIRUCTURE ROADS RFe -tiion 7.9 81.0% 15.0% - - 4.0% 6.4 1.2 - - 0.3 R I It" n 10.6 80.0% 15.0% - - 5.0% 8.5 1.e - - 0.5 Bridgp 5.0 80.0% 15.0% - - 5.0% 4.0 0.8 - - 0.3 Fwm-MUrkAcoS 2.1 50.0% 10.0% - - 40.0% 1.1 0.2 - - 0.8 S-loW Roads 25.6 77.8% 14.6% - - 7.6% 19.9 3.7 - - 1.9 IRIWGATION Rs h_cn 10.4 82.0% 8.0% 10.0% 8.5 - 0.8 - 1.0 N _eEfluuion 8.3 82.0% 8.0% 10.0% 6.8 - 0.7 - 0.8 Sat.kgdEl. gipn 18.6 82.0% - 8.0% - 10.0% 15.3 - 1.5 - 1.9 OTHER WdFRASTRUCTURE .sr StWp 2.4 70.0% 30.0% 1.7 - - - 0.7 SU-Pupo_ HNd. 0.8 30.0% 20.0% 50.0% 0.2 - - 0.2 0.4 OW 0.8 70.0% 10.0% 20.0% 0.6 0.1 - - 0.2 S'l4-to Otter ItrAssaxe 4.0 2.5 0.1 0.2 1.3 1 TOTAL INFRASTRUCTURE 48.2 78.1% 7.9% 31% 0.3% 10.6% 37.7 3.8 1.5 0.2 51 AGRICULTUREI_TERPSE Crps (icrsmua WC) 12.3 LlnWO 7.7 P. gN*WclTrd 7.7 TOTAL AGRICULTURE & ENTERPRISE DEVT 27.7 - - % 60.0% 37.0% - - 0.8 16.6 10.2 PROJECT MANAGEMENT EqA*xnrB&Vhi*S 0.4 8B.8% - 13.2% - - 04 0.1 - - P.eorml SWl 2.5 100.0% - - - - 2.5 - - - - OerCosts 1.9 25.5% 74.5% - - 0.5 1.4 TOTAL PROJECT MANAGEMENT 4.9 69.6% - 30.4% - - 3.4 - 1.5 - TOTALBASECOSTS 87.2 47.1% 4.4% 10.2% 19.2% 19.1% 41.1 3.8 8.9 16.8 16.6 * Ptfl Co ot.nci 8.4 - Prkm Corrl*ie 10.2 TOTALPROJECTCOSTS 106.7 47.3% 4.4% 10.0% 19.3% 19.1% 50.0 4.6 10.i 20.4 20.2 0P 0 M OD ,X  - 63 - Annex 3 PHILIPPINES AGRARIAN REFORM COMMUNITIES DEVELOPMNNT PROJECT Disbursement Schedule 1/ (US$ million) Cumulative Cumulative Bank Fiscal Cumulative Disb. as % % of Standard Year/Semester Disbursement Disbursement of the Loan Disb. Profile 2/ FY 97 Second 0.9 0.9 1.8 0.0 FY 98 First 1.1 2.0 4.0 6.0 Second 2.6 4.6 9.2 10.0 FY 99 First 3.6 8.2 16.4 14.0 Second 5.1 13.3 26.6 22.0 FY 2000 First 5.4 18.7 37.4 30.0 Second 5.4 24.1 48.2 42.0 FY 2001 First 5.4 29.5 59.0 50.0 Second 4.5 34.0 68.0 58.0 FY 2002 First 4.3 38.3 76.6 66.0 Second 3.0 41.3 82.6 78.0 FY 2003 First 3.0 44.3 88.6 86.0 Second 3.0 47.3 94.6 94.0 FY 2004 First 2.7 50.0 100.0 98.0 Second 100.0 1/ Loan effectiveness and closing dates are assumed to be on November 30, 1996 and April 30, 2003, respectively. 2/ For all regions agricultural projects as of June 30, 1995.   - 64 - Annex 4 Page 1 of 2 PHILIPPINES AGRARIAN REFORM COMMUNITIES DEVELOPMENT PROJECT THE CENTRAL PROJECT OFFICE 1. The Central Project Office (CPO) would be responsible for managing, monitoring and evaluating, and coordinating all project activities. It would liaise with the Bureau of Local Government Funding (BLGF) on the Municipal Development Fund (MDF) matters, Land Bank of the Philippines (LBP) for credit operations, and relevant Government of the Philippines (GOP) agencies such as Department of Budget and Management (DBM), Department of Finance (DOF), Department of Trade and Industry (DTI), National Irrigation Administration (NIA), Department of Public Work and Highways (DPWH), Department of Agriculture (DA), Department of Environment and Natural Resources (DENR), Bureau of Soil and Water Management (BSWM), Local Government Units (LGUs), NGOs, and People Organizations (POs). The CPO would report to the Department of Agrarian Reform (DAR) through the Project Management Board (PMB), which would be chaired by DAR and would comprise representatives of DOF, DBM, DA, NIA, LBP, and the National Economic Development Authority (NEDA). The CPO Director would serve as the PMB Secretary. The CPO would prepare the annual project work program and the respective budget for PMB's approval. The PMB would also formulate policy guidelines for the implementation of the project. Terms of reference for various key positions of the CPO are presented in Appendix A. CPO Composition 2. To effectively undertake its tasks, the CPO would maintain high level professional staff with competence in sub-project investment appraisal, planning, budgeting and financial processing, monitoring and evaluation, and rural infrastructure engineering. The CPO would consist of the following four units: (a) Sub-project Investment; (b) Technical Support; (c) Administration and Finance; and (d) Monitoring and Evaluation. 3. The Sub-orolect Planning and Appraisal Unit would provide assistance in the preparation and review of development plans proposed by the ARCs. It would appraise ARCs' infrastructure sub-projects and submit its recommendations for project financing, through the MDF, either in the form of loans and/or grants. The unit would be headed by a qualified and experienced person (senior rural infrastructure engineer or economist/financial analyst), and would be assisted by 3 engineers, agriculturist, and economist/financial analyst. 4. The Technical Support Unit would provide assistance to the ARCs in the areas of agriculture and enterprise development, as well as in community development activities. The unit would be staffed by two specialists: the  - 65 - Annex 4 Page 2 of 2 agribusiness specialist, and the community development specialist. The agribusiness specialist would assist, supervise, and provide guidance to the ten Provincial Economic Development Advisers (PEDAs) assigns to the project participating provinces. He/she would be responsible for the implementation of the agriculture and enterprise development component including the coordination with the DA, DTI, and LBP. The community development specialist would be responsible for developing system for the selection and deployment of NGOs as well as providing assistance in the implementation of the community development and technical assistance component. 5. The Administration and Finance. Unit would be responsible for budgeting, accounting, bookkeeping, Bank loan disbursement (reimbursement and/or the use of the project Special Account), and provision of general administrative support to the project, particularly to the CPO and its units. Headed by the project financial controller, he would be assisted by accountants, bookkeepers, property custodian and other support staff. 6. The Monitoring and Evaluation (M&E) Unit would be responsible for the design and implementation of the project monitoring system. The unit would assist, through the provision of timely progress reports and the identification of outstanding issues, in the conduct of project evaluation and review. The unit would be staffed by technical staff with adequate experience in M&E work, as well as support staff, and would be headed by a M&E specialist. 7. It is envisioned that the CPO would comprise about 45 staff including the CPO manager. At full operation, the CPO would have about 10 high level professional staff, 10 PEDAs, and about 25 technical and support staff. It is expected that, most of the CPO staff would be seconded from DAR or other Government agencies. However, provision would be made, under the project, for hiring professional services on a need basis. The project organization chart is shown in the Project's Operations Manual. 8. Facilities and Technical Assistance. The project would provide funds for the procurement of office equipment and furniture, basic transport, development of a computerized local area network to enable the CPO to function efficiently. Technical assistance would also be provided for the design and installation of the supplemental monitoring systems, conduct of baseline surveys and project performance evaluation. The above facilities and funds would be additional to those already available within DAR.  - 66 - Annex 4 Appendix A Page 1 of 7 TERMS OF REFERENCE FOR CPO'S KEY POSITIONS A. Proiect Director 1. The project director will be responsible for the day to day operation of the Agrarian Reform Community Development Project (ARCDP) and will have a direct responsibility of the efficient and effective functioning of the Central Project Office (CPO). With policy guidelines from the Project Management Board (PMB) to which he/she will be accountable to, he/she will implement the project following the provisions of loan and project agreements (with the World Bank) and the project's Operations Manual approved by the PMB and the World Bank. 2. Specifically he/she would: (a) Set up the central project office and with the assistance of his/her staff will develop and implement the following: (i) sub-project approval system covering technical, financial, economic, social, and environment aspects; (ii) M&E systems; (iii) administrative and financial systems, including internal control program; and (iv) NGOs' selection and deployment mechanisms. (b) Promote the project and ensure its successful implementation. (c) Maintain effective working relations with and among project partners such as LGUs, MDF, other related Government agencies, LBP, NGOs, and POs. (d) Provide directions in the day to day activities of the CPO units. (e) Ensure the preparation and the submission to the PMB and the World Bank a periodic project progress reports highlighting the outstanding operational issues. (f) Liaise with the World Bank, DBM, and other entities related to the approval of budget, disbursement, and replenishment of project funds. (g) Assist the PMB in deliberations on all project related subjects including sub-project proposal evaluations. (h) Ensure that funds are made available for all project components in adequate amount and at the right time.  - 67 - Annex 4 Appendix A Page 2 of 7 (i) Ensure that contracts or agreements related to the project are drafted adequately and are executed in accordance with the terms of such contracts/agreements. (j) Other duties as the PMB may assign. 3. Oualification Recquirements. The position would require a minimum of 10 years experience in management, of which 5 years would represent direct management experience of relatively large scale rural development project. Aside from general management capacity, he/she would be well versed in project planning, appraisal, and evaluation. A mix of successful management experience in community development, rural infrastructure, and agricultural development is crucial. Graduate certificate (Bachelors degree, Masters preferred) in management and bachelors degree either in engineering, economic, agriculture or rural development fields comprise part of minimum entry requirements. B. Chief Rural Infrastructure Engineer (CRIE) 1. The CRIE would be locally contracted or seconded from another government agency and would be based in the CPO. He/she would manage in accordance with the project's Operations Manual the rural infrastructure component of the project and be responsible for all matters related to the implementation of this component. Specifically, the CRIE would: - conduct a thorough evaluation of relevant LGUs to determine their eligibility for project support in relation to their technical, administrative and financial capacity to implement proposed rural infrastructure activities; - review specifications for rural infrastructure works (rural access, irrigation and community infrastructure) and prepare and agree on standard designs and specifications for use by LGUs' and the National Irrigation Administration (NIA); - define the scope and purpose of the standard work items to be undertaken by LGUs and NIA; - carry out inspection of selected sites, advise LGUs and NIA on the surveys needed, procedures for drawing up the bills of quantities for force account work based on standard work items, advise and explain the work standards required by the project; - establish mechanisms and standard costs to be used in determining the work item unit costs that would be used as the means to release funds 1/ In this context, the term LGUs refers to provincial and municipal engineering offices and/or their implementing agencies.  - 68 - Annex 4 Appendix A Page 3 of 7 to LGUs for completed work and establish procedures for approving variations in planned work and for resolving claims for extra payments; - review contractors claims for additional payments, extension of time or other such claims and make recommendations on appropriate actions to be taken; and - propose revision (where necessary) to procedures, standards, specifications and work item unit cost calculations. 2. The CRIE would work closely with LGUs and NIA and implementing agencies in all aspects of the project, and ensure that competitive bidding and other contractual procedures conform with the requirements of the Bank and the Government (Tenders Board) . He/she would report directly to the Project Manager of the CPO. The CRIE would hold a professional qualification in civil engineering, and be a member of the Philippine Institution of Civil Engineers, or equivalent organization recognized by this institution. 3. Oualification Recuirements. The CRIE would have at least five years experience of implementing rural infrastructure in the Philippines including design, construction and maintenance of all-weather gravel roads, irrigation works and rural water supplies. He/she should have also adequate knowledge and experience in carrying out these works without adversely affect the environment. The RIE would have technical and administrative experience of civil works undertaken on force account and using contractors. The CRIE would have experience in preparation of contract tender documents, evaluation of contract bids and, the use of labor intensive methods. The CRIE would be engaged on a full-time basis for the six year period of the project. C. Community Development Coordinator (CDC) 1. The CDC would be locally contracted or seconded from another government agency and would be located at the CPO. The CDC would manage and be responsible for all matters related to the Community Development and Technical Support (CD&TS) Component of the project, and in particular, for the implementation of this component in accordance with the project's Operations Manual. Specifically the CDC would: (a) coordinate with the FAO-TSARRD its input regarding the community planning process, monitoring and improving the effectiveness of the process and ensuring that community priorities are followed up; (b) coordinate with the CPO's M&E specialist and the FAO-TSARRD the production and analysis of the baseline data collected through the Farming System Development Program and subsequent evaluation; (c) coordinate with DAR Provincial Office the accreditation and selection process of NGOs including the related MOAs, particularly to ensure  - 69 - Annex 4 Appendix A Page 4 of 7 that the NGOs are fully conversant with and endorse the specific objectives and strategies of the project; (d) assist NGOs in the implementation of the community organizing activities, monitoring feedbacks on these support activities at the ARC level through DAR's Development Facilitators (DFs), LGUs, and the directly from the ARCs' organizations and members; (e) verify the training needs of the community and identify suitable resource organizations to conduct the training program, ensure the adequacy of the training syllabus and advise the selected trainers of its content, and facilitate in the carrying out of these training courses. 2. The CDC would work closely with the Provincial Economic Development Advisors (PEDAs), DAR central and field offices, LGUs, NGOs, and FAO-TSARRD to ensure that all aspects of the CD&TS component is implemented effectively and in accordance with the priorities stated by the communities. The CDC would report directly to the Project Manager of the CPO and would closely coordinate with other professional staff of the CPO. 3. Qualification Recruirements. The CDC would have at least five years experience in economic-oriented community development, with a minimum of two years at managerial level. Experience of working with NGOs and rural cooperatives would be an advantage. The CDC must be ready to spend at least 40% of his/her time visiting ARCs and their sub-projects. D. Monitoring and Evaluation Specialist (MES) 1. The MES would be locally contracted (or seconded from another government agency) and would be located in the CPO. He/She would coordinate and manage the Monitoring and Evaluation (M&E) unit of the CPO. More specifically, the MES would: (a) design and install effective M&E system for the project, detailing required indicators in line with project objectives and its Operations Manual, data flow, responsible agencies for collecting of data and methods of analysis and reporting; (b) ensure that all agencies and personnel involved in data collection fully understand the M&E system and submit the required data in a timely, complete and accurate manner; (c) coordinate with FAO-TSARRD and the CPO CD Specialist in production and analysis of the baseline data collected through the Farming System Development (FSD) Program and through subsequent evaluations; (d) be responsible for the preparation of monthly progress reports based on information submitted to the CPO and collected by CPO staff, DAR  - 70 - Annex 4 Appendix A Page 5 of 7 and other implementing agencies; ensuring that the report format is appropriate as a basis for managerial decisions by the CPO and the PMB; (e) be responsible for designing and preparing the mid-term and end of project evaluations and analyses, and any other targeted studies of certain aspects of project operation deemed necessary by the Project Manager and the PMB. 2. The MES would report directly to the Project Manager and would work closely with other staff of the CPO, DAR central office and its field staff, LGUs. FAO- TSARRD and other agencies involved in project implementation to ensure that all aspects of the project are effectively monitored. 3. Qualification Reauirements. The MES would have at least five years experience in project management at executive level, with a minimum of one year of specific experience in managing a monitoring and evaluation system. A proven record of designing M&E systems and the familiarity with the appropriate computer system would be desirable. E. Provincial Economic Development Advisor (PEDA) 1. A PEDA would be deployed for each province of project operation. The PEDA would be locally contracted or seconded from another government agency, would be located in DAR provincial office and would be reporting to the CPO. The PEDA would facilitate the implementation of the project in accordance with the project's Operations Manual and within the designated province, coordinate among ARCs, LGUs, DAR, NIA, LBP, and other support organizations, particularly in the promotion, preparation, and the operation of income generating activities within the respective ARCs. Specifically, the PEDA would: (a) oversee all aspects of project implementation at the provincial and municipal levels on a day-to-day basis, acting as a project representative during project activities in the absence of related CPO professionals; (b) be actively involved in the ARC planning process, in particular acting as a resource person to explain the economic focus of the project and to organize/provide basic training to the members and leaders of the ARCs on matters related to the potential feasibility of their priority activities, including assessment of community capability for contribution to project activities; (c) provide direct business advice to ARCs and their POs on the opportunities available to them on the findings of the FSD course, their proposed and current economic activities, conducting feasibility estimates on medium-scale enterprises, assisting the POs  - 71 - Annex 4 Appendix A Page 6 of 7 in obtaining LBP's credit facilities through the preparation of detailed technical and financial feasibility studies where required; (d) assist the Community Development Specialist and DAR staff in identifying suitable resource organization, assessing training needs for cooperative members and their leaders, agriculture and business development, and organizing training courses; (e) investigate marketing linkages within the province for the ARC prime commodities and other potential products, effecting market linkages among potential buyers and the ARCs where possible, but without becoming directly involved in commercial negotiations. 2. The PEDA would act as a CPO counterpart to the DAR CARPO designated to be responsible for the project within the province, advising on project policy and implementation methodology. The PEDA would report directly to the CPO Agri- business Specialist and work closely with other CPO staff, DAR provincial office and field staff, LGUs, FAO-TSARRD, and support agencies to ensure that all aspects of the project are effectively implemented. 3. Oualification Reauirements. A PEDA would have at least five years experience in the agri-business field, preferably in private sector management; college education in agriculture or business. Additional experience of working with cooperatives would be an advantage. As the position would require working closely with the POs and also with Provincial Officials, the PEDA should be of sufficient maturity and sensitivity to operate at each level. F. Chief Economist/Head of Sub-orolects Apnraisal Unit 1. The head of the Sub-project Appraisal Unit (SAU) would be locally contracted or seconded from another government agency and would be located at the CPO. He/she would be responsible for effectively and efficiently carrying out the approval process of all sub-component investments funded by the project and ensure that final approval would be obtained, based on the agreed criteria, in a timely manner. Specifically the Head of the SAU would: (a) manage the sub-projects' appraisal process, and take responsibility for ensuring that the CPO has the appropriate skills to focus on reviewing each individual sub-project proposal; (b) set up investment benchmarks to be used in initial sub-project screening for different types of investment and establish detailed models and working procedures so that LGUs and other agencies such as NIA are clearly aware of the methodology used in sub-component evaluation; (c) establish and disseminate a set of procedures (in line with the Operations Manual) to ensure an orderly and timely flow of component investment proposals;  -72- Annex 4 Appendix A Page 7 of 7 (d) together with the Project Manager agree on a series of time-bound processing targets for sub-projects' appraisal process; (e) together with the M&E specialist, establish a system of recording and monitoring the appraisal process, to allow the evaluation of the SAU performance; (f) arrange seminars and training for the PEDAs, NIA and LGUs related staff in sub-component preparations. 2. The Head of the SAU would work closely with all CPO professional staff and various specialist consultants, contracted to participate in individual sub- projects' preparation. He/she would also maintain contact with both public and private sector agencies involved in rural economic and development activities and ensure the flow of up-to-date information which would be necessary to guarantee the quality of the appraisal process. Most appraisals would be conducted by teams of 2-3 persons, including both technical and analytical skills. An important part of the Head of the SAU's job would be the selection, motivation, and supervision of these teams. Initially he/she would be expected to undertake and actively participate in sub-projects appraisals. While the position would be head office based, a considerable amount of travel, including site visits would be required. 3. Qualification Reauirements. The SAU Head would either be an economist with a strong background in rural infrastructure and environment operations, or an engineer with training and experience in economics and environment. He/she would be a university graduate, preferably to at least master degree level and would have at least ten years professional experience including a minimum of two years at managerial level. At least three years of the professional experience would have been 'hands on' in investment project preparation and appraisal.  I  -73 - Annex 5 Page 1 of 5 PHILIPPINES AGRARIAN REFORM CORMUNITIES DELOPMZNT PROJECT SUB-PROJECT ELIGIBILITY CRITERIA A. Community Development Eligibility Criteria Selection Criteria of Priority Provinces: 1. These criteria are based on DAR proposals and discussions with BARBD and PDMS. (a) CARP LTI Program has almost been completed (minimum of 70% accomplishment/scope ratio) (b) Relatively big land distribution accomplishment in absolute hectarage (minimum of 20,000 has) (c) LGU willingness and capability to participate in the Project (Provincial level) (d) Overall maturity level of farmer organizations (e) Presence of reputable NGO/potential partner in the area 2. Provinces with other large programs are disqualified from the project, as are provinces with an unstable peace and order situation. SRA provinces which fulfil the above priority would be given preference. Criteria for ARC Selection: (a) LGU Support (Municipal level). This criterion may be assessed by the willingness of LGU to shoulder its counterpart, through allocation of its available resources, especially to deploy the necessary technical field personnel. As the LGUs would have a counterpart in infrastructure projects, account should be taken of: a) IRA of the LGU and b) Outstanding loans of LGU. Consideration should also be given to the capability of LGU to undertake rural infrastructure projects (farm-to-market roads) particularly on the availability of technically-qualified personnel and the necessary equipment for road maintenance. (b) Organizational Maturity. The lead organization should be registered with the Government and should have an OMA rating of 2.0 and above. Organizations with an OMA rating below 2.0 may be considered on a probationary basis but must have reached a rating of 2.0 within one year to qualify for the project. ARCs with OMA rating below 2.0 would be provided assistance in community development, potable water system, and agricultural extension. (c) Potential for Prolect Impact. ARCs which would greatly increase their productivity and income through project intervention (mainly rural infrastructure projects such as irrigation system and access roads) would be given priority. Larger ARCs with a large number of ARBs would be given preference.  - 74 - Annex 5 Page 2 of 5 (d) Availability of Technical SuDDort. Presence of POs, NGOs, academic institutions and technical agencies in the area who can provide support to ARCs will be taken into consideration. Preferences will be given to ARCs which have been selected by LGU and CIAs as a priority/convergence area (e.g. KPA) as this would ensure complementation of services. B. Partner NGO Selection Criteria 3. Partner NGOs for the project would operate at national, provincial and/or local level. The selection process would be concentrated at the provincial level where the specific requirements of the ARCs in the province are best known. BARBD at DARCO would also be consulted before final selection. For the Project, NGOs would be required to fulfil the following : (a) Should have a juridicial or legal personality registered with any of the following institutions : (i) Securities and Exchange Commission; (ii) Bureau of Rural Workers of the Department of Labor and Employment; and/or (iii) the Cooperatives Development Authority. (b) Should have a bank account in the name of the organization and be able to produce audited balance sheets for the last three years. (c) Should operate according to objectives which are compatible with the project. (d) Should be acceptable to the community, its organizations, the LGU, DAR and other institutions in the area. (e) Should have a minimum of two years field experience of community organizing and development work relevant to the ARCDP. (i.e. preferably with economic or agricultural focus) (f) Should demonstrate the capability to manage and implement the proposed Project activities including community training, staff supervision, funds management, monitoring and reporting. C. Eligibility Criteria for Financincr Infrastructure Activities LGU CaDability 4. Rural access and community infrastructure would be the responsibility of LGUs, either directly, or using technical services from the private sector or technical agencies. The success of the sub-components would therefore depend, in large part, on the capability of LGUs. Due to the limited resources at municipal level, it is envisaged that most engineering support for the project activities would be provided from the Provincial Engineering Office (PEO) with the Municipal Engineering Office (MEO) providing assistance with supervision and subsequent maintenance. The assessment of LGUs would be undertaken by CPO through the Rural Infrastructure Engineer. 2. The factors to be considered in evaluating LGUs would include the following: (i) the technical and administrative capacity of LGUs and/or their  75 - Annex 5 Page 3 of 5 implementing partners to undertake the proposed rural infrastructure activities either on force account, or through contractors; (ii) LGUs commitment to take full responsibility for subsequent maintenance of barangay roads improved under the project; and (iii) provision by LGUs of counterpart funding (equity) for at least 10-20% of total costs for access infrastructure, and at least 30% of total costs for community infrastructure. 3. Additional qualified staff may need to be hired, or local consultants engaged to strengthen the capacity of LGUs to implement sub-component activities. In terms of engineering capability, LGUs would be required to appoint a qualified civil engineer to take responsibility for project infrastructure activities. Supporting staff would include at least one field surveyor, one draughtsman and one site supervisor for each project site. There would be adequate office facilities, survey equipment and access to suitable transport for field mobility. Selection of Sub-Component Activities 6. Each sub-component activity would be evaluated based on its technical, financial, economic and administrative feasibility. The following points would be taken into consideration: - design and cost estimates would be based on sound engineering and technical practices; - the least-cost solution would be selected; - for irrigation and community infrastructure, rents, fees or other charges would be set to recover operation and maintenance costs and debt service liabilities; and - investments in rural access and irrigation improvements would need to have an internal economic rate of return of at least 15%; 7. The following rural infrastructure activities would be considered eligible for project support: - reconstruction and/or rehabilitation of existing baranQav roads including associated bridges causeways and culverts; rehabilitation and/or extension of existing irriaation schemes and construction of new schemes, to include headworks (diversion dam/weir or small dam1), intake structure, water conveyance canals, drainage channels, access/service roads and flood protection measures; spot improvements to farm access tracks with the aim of upgrading to allow transit by animal or small tractor drawn wheeled trailers rather than sleds. 1/ Small dams built across valleys to impound rainfall runoff during the rainy season, known as Small Water Impounding Projects (SWIPs).  - 76 - Annex 5 Page 4 of 5 rehabilitation and/or construction of drinking water supply schemes, to include point sources (wells, springs or small dams) and piped, gravity-flow distribution systems (to communal water points); chemical water treatment plants and pumped systems would be excluded; - rehabilitation and/or construction of multi-purpose buildings primarily for community use; - commercial facilities (markets, warehouses, solar driers, etc.) would only be supported through credit; and - education, health and energy (electrification) facilities would be excluded as ongoing programmes are supporting these sectors, and to minimise institutional complexity. 8. The above activities would receive routine consideration for project support. However, in special circumstances, applications for other activities would be considered on an individual basis. Rural Access 9. The criteria for selection of rural access activities in the project are: - any road (other than a farm access track) selected for improvement would link at least one ARC barangay to an existing all-weather road; - on the basis of standardised models, proposed rural access improvements (both barangay roads and farm access tracks) would generate an economic rate of return of at least 15%; - beneficiaries would be actively involved in, and concur with, planned improvements; - feasibility studies would demonstrate that any negative environmental impact can be mitigated; - roadworks would concentrate on improvements to existing roads; only in exceptional circumstances would entirely new construction be considered; - road gradients would not exceed 12%, except for short sections (to be paved with concrete); - major bridge construction would be minimised, with low-cost structures such as spillways and low-level causeways where possible; - confirmation of suitable foundation conditions for bridge and causeway structures; - provision of side drains, cross drainage and slope protection measures to minimise erosion damage;  - 77 - Annex 5 Page 5 of 5 definition of geometric design standards, technical specifications, road cross section and minor structure designs as specified by Provincial Engineering Offices; and generally to exclude any road with a per kilometre cost exceeding P1.5 million (US$57,000), to avoid roads with unduly high costs2. Exceptions would require approval from DAR and the Bank. Irrigation3 10. The criteria for selection of irrigation activities in the project are: - limits on scheme size: Ci) the smallest scheme would serve at least 20 farmers; and there would be no upper limit on scheme size; - at least 801 of the irrigated area would fall within the selected ARC; - there would be no quarrying within one kilometre upstream or downstream from the diversion site; - the water source would be free from salinity and mine tailing problems; - there would be an 80%- probability that adequate water would be available for the planned command area (based on dry season flow measurements over at least three years); - farmer beneficiaries would be members of an IA and actively involved in, and concur with planned improvements; IAs would be required to commit themselves to equity participation and amortization of the chargeable costs; average irrigated holding size would be less than two hectares; the feasibility study would demonstrate that: (i) using a standardised model, the economic internal rate of return is not less that 15%; (ii) any negative environmental impact can be mitigated; and (iii) offtake of water to meet irrigation requirements would comply with water rights, and not adversely affect downstream users; to avoid unduly high costs4, the per hectare development cost for: (i) new irrigation development would not exceed P105, 000 (US$4,000); and (ii) rehabilitation of existing irrigation would not exceed P55,000 (US$2,100); Exceptions would require approval from DAR and the Bank. 2/ Based on 1995 prices. 3/ Derived from requirements set by NIA for communal irrigation works. 4/ Consistent the Bank-funded irrigation project: Communal Irrigation Development Project (CIDP II).   - 78 - Annex 6 Page 1 of 3 PHILIPPINES AGRARIAN REFORM COIWUNITIIS DEVELOPMeNT PROJECT COMMUNITY DEVELOPMENT AND TECHNICAL SUPPORT 1. The Community Development and Technical Support component of the project is not a stand-alone set of activities but has been designed as an central and integral methodology in achieving the project's main objectives. The output of the component will be organized and skilled communities which are capable of a high degree of participation in the other project components and of achieving continuing development after the end of project interventions. 2. The CPO would field a Community Development Specialist who would be responsible for the component with assistance from the PEDAs and FAO-TSARRD, but DAR, government support agencies and NGOs (see Appendix A) would be the implementors. At the ARC level, the DF and NGO community development workers (CDW) would provide regular contact with the beneficiaries, ensuring that component activities are responsive to the needs of the community. 3. The component would concentrate on assisting the POs to identify and harness their available resources, giving them a collective strength and sufficient equity to increase participation in economic development within the community. Further, it would aim to strengthen the exposure and impact of the POs within the ARCs, thus drawing in new members, increasing the investment capacity of the PO and ensuring that project benefits reach the maximum number of beneficiaries. 4. Since the ARCs and POs targeted are relatively advanced and have already undergone basic social mobilization and cooperative formation trainings, to achieve a stronger PO base for the project, emphasis would be given to more advanced and specific interventions based on an intensive planning support program (see Appendix B) and thereafter on the specific weaknesses of the individual organizations. 5. Some indication of the skills gap for each PO would be generated through the FAO-TSARRD OMA data (see Appendix C). In addition, training requests would be sought from the PO itself and the supporting DF/CDWs. Commonly required assistance is expected to be in the realm of advanced cooperative management and economic development, i.e. in feasibility assessment, financial management, savings generation and enterprise development. 6. The general policy towards training and technical input would be to provide as much assistance as possible at the ARC level (i.e. on-site). This is for three reasons, (i) to keep the costs within reasonable parameters; (ii) to tailor the  - 79 - Annex 6 Page 2 of 3 training to the community environment; and, (iii) to make the assistance as widely available to community members as possible. 7. Support for organizational development would not only focus on formal training but would also be geared more towards "learning by doing" through supported collective activities such as fund raising fairs, one-off trading activities, "bayanihan'"1, production of a barangay newsletter, etc. POs would also be expected to actively contribute to the Project through providing catering for local based training courses, paying a contribution for off-site training courses, hosting other cooperatives on cross-visits and by encouraging members who have undergone training to share their new knowledge with other AREs. 8. Credit and financial management training has been identified as a critical area for the advancement of leaders and cooperative managers within the community. A lack of understanding of the financial structure of the community is evident in most communities. Formal credit has been unsuccessful in many communities due to a lack of understanding of bank procedures and of the need to continue amortization for continuing credit and of selecting the most beneficial financing channel. Similarly, some cooperatives retain a high savings deposit which is not invested to provide the community with a return on investment. Others have no strong savings policy or invest their savings on high risk enterprises. The ARCs need to develop a deeper understanding of their options and the implications of various courses of action, so that the beneficiaries can improve their decision-making capacity. 9. Similarly, the quality of business management seen within the ARCs has been variable but lacking in most respects. Before agrarian reform, many of the ARBs were tenant farmers with little experience of commercial practices. To build this expertise within the ARCs requires a continuous and progressive input throughout the period of the project. Project training would need to be levelled according to the particular stages of the potential trainees. 10. For accountancy, improving technical skills are critical to maintaining and developing the financial health of the organizations yet the experience to date shows that whilst the mechanisms of accounting have already been covered by previous training, the potential of financial figures for management information has not yet been fully realized. The calculation of profit also is not yet sufficiently advanced to allow the organizations to have an accurate picture of their true financial situation. 11. Training for all of the above would be expected to occur on several levels. A general concientization session for all the PO members would be covered under the organizational development sub-component. This would allow the members to learn how to interpret a basic balance sheet and profit/loss account. Organizational control would also be covered so that accounting procedures will be transparent. More advanced training would be offered to cooperative officials and barangay leaders. As many participants as possible from one ARC would be included to ensure that if one official leaves the organization, all the knowledge is not lost. The training would be intensive, conducted by a mixture of professional trainers, bankers and commercial figures so that the knowledge imparted would cover the theoretical, procedural and operational aspects of each subject. 1/ Collective contribution of labor for community welfare, eg. clearing ground for a children's playground, clearing a waterway, etc.  - 80 - Annex 6 Page 3 of 3 12. It is expected that other training needs for specific subjects would emerge during the course of the project. These may cover training on specific types of businesses such as rice mill operation, or may be funded to provide training to individual members where there would be an impact on the community (e.g. model farming or farm machinery repair and maintenance). 13. In the main, most of the training courses envisaged would already be available within the Line Agencies e.g. DA, DTI, DSWD or through NGOs, academic institutions or professional training institutions. The BARIE and BDCD of DAR would coordinate these activities, on occasions incorporating resource personnel from more than one source to ensure adequate coverage of the subject area. Use of local resource institutions would be continued wherever possible. This would not only reduce the costs but would also enhance the capacity of institutions which the ARCs would continue to tap beyond the project duration. 14. For specific training requirements, not covered by available courses, a suitable trainer would be contracted to provide services either directly to an ARC or ARC representatives with similar needs. The trainer would be assigned to work with a community designated counterpart(s) and would contract, not only to fulfil the designated task, but also to work with the counterparts to transfer skills to the community for continuation of the activity as far as is possible. Such flexibility for on-the-spot support to ARC is liable to be as valuable as the more formal trainings and contribute significantly to sustainability of training impact. 15. Staff development would particularly focus on improving DF, CDW and P0 capabilities in participatory planning, economic development and skills transference techniques. This is necessary to avoid dependency relationships being developed which cannot be sustained after the end of the Project. Additional training for DFs and P0 leaders may be required in areas where there is no NGO presence. The municipal and provincial DAR personnel would also require additional training in supporting the initiatives of the increased ARC development activity. Specifically, there is a need for improving management and communication techniques. FA0-TSARRD has already identified this need and has been developing a management development program for MAROs. The CPO would liaise closely with TSARRD staff on the staff development activities. 16. To maximize investments on human resources, P0 leaders which have successfully undertaken Project activities may be tapped as consultants for other ARCs. Cooperatives which have been successful in business activities could be sponsored to offer apprenticeships to business managers of emerging POs. Similarly, CDWs would be recruited for four years, spending two years consecutively with two ARC. This halves the need for CDW training, capitalizes on accumulated field experience and encourages a phase-out approach by the CDWs.   - 81 - Annex 6 Appendix A Page 1 of 4 Partner NGOs 1. NGos have been officially recognized by the GOP as partners in national development in the 1987 constitution. The line agencies, including DAR, have instituted the necessary policies and mechanisms to concretize this partnership. DAR's framework of CARP implementation is based on a tripartite partnership between government NGOs and POs, with the ARC as the focus. 2. NGOs have the capability to work closely with poor rural communities. They are organizationally flexible and relatively free of bureaucratic red tape enabling them to respond efficiently to the various communities that they work with. They also have the capacity to mobilize not only the beneficiaries but also coordinate with other institutions including government agencies to facilitate timely delivery of social and basic services. 3. The NGO sector, however, is not a monolithic entity. In the Philippines NGOs are relatively small and numerous in number. While there are networks and umbrella organizations, each NGO functions independently according to its avowed objectives and programs. To maximize their resources, they operate only in selected areas where their services can have greater impact. Over the years, NGOs have either expanded their operations across a wide variety of concerns or have developed an area of specialization. Profiles of possible partners which illustrates their different characteristics are included below. Consequently, NGOs have varying capacities, scope and fields of expertise. They also differ in the focus of their work. Some concentrate on policy advocacy, some emphasize social development, whilst others stress economic development whilst others have gained reputation as project implementors. Only a few can combine these functions in one organization. 4. Consequently, selection of partner NGOs and definition of their input to the project would be the joint responsibility of the ARC, LGU, DAR and the CPO. Selection of NGOs at the provincial level has been experienced by DAR and the NGOs as being the most successful selection method. First, a province-wide consultation of NGOs and POs would be held to present the Project and the ways by which NGOs can participate. Secondly, interested NGOs/POs would be requested to submit proposals based on the project selection criteria (see Annex 4.3) and a specified TOR. DAR provincial office, in consultation with the CPO would select the NGOs based on the approved proposals.  - 82 - Annex 6 Appendix A Page 2 of 4 5. The role of NGOs in the project would be seen as catalytic in strengthening the POs to be able to independently continue development activities within a two year time frame. As the ARCs selected would already have relatively strong organizations, this is not an unrealistic objective but both POs and NGOs would require strong orientation towards this procedure from the commencement of the project. Direct NGO field support (ie. CDW placement) would be expected to occur in approximately half of the ARCs. In the other ARCs, NGO support would be sought for specific training input as desired by the community. Profiles of Possible ARCDP Partners 1. PHILDHRRA - National. The Philippine Partnership for the Development of Human Resources in Rural Areas (PHILDHRRA) is a well-established national network of 66 social development organizations. The members themselves cover a wide variety of activities ranging through community organizing, leadership training, education, primary health care, issue advocacy, agriculture extension, appropriate technology development, income generation and cooperative development. PHILDHRRA acts as a senior resource agency for its members, mainly in the areas of training, consultancy and sourcing of funds. The members continue to operate autonomously according to their own priorities, often with multiple funding sources but in addition to relying on PHILDHRRA as a major source of technical support, they collaborate the network on major NGO consultations and large joint NGO-government development programs such as the Tripartite Partnership for Agrarian Reform and Rural Development(TRIPARRD), Upland Development Program, Fisheries Development Program, Alternative Tourism, and Politics and Governance. Through TRIPARRD, PHILDHRRA has implemented social development programs for DAR, especially in social mobiliszation, community organizing and local NGO management. Whilst PHILDHRRA acting as a funds manager for DAR did simplify the national project management and lessen the administrative burden on DAR staff, during implementation the disparity of focus and modus operandi between the PHILDHRRA partners made effective coordination at provincial level problematic. 2. NATCCO - National. NATCCO is a tertiary level organization comprising five secondary cooperative federations. Initially focussing on education and training for cooperatives, NATCCO has now widened its scope of activities to include auditing and consultancy services, research and publications, a mutual benefit association and a farmers' marketing federation. They do, however, specialize in registered or pre- cooperative development, providing a specific input to the financially oriented realm of the NGO sector. Servicing over one thousand primary cooperatives, NATCCO has a wide network of affiliates nationwide. NATCCO and DAR have already successfully acted as partners, with NATCCO acting as the funds and operations manager for the cooperative development component of the DAR Farmers Exchange Cooperative Project. 3. MASSPEC - Regional. MASSPEC is the regional arm of NATCCO in Mindanao. It has been operating closely with FAO-TSARRD on its cooperative organizational development programs as a resource institution. They have provided training courses on (i) participatory planning (community level), (ii) participatory  - 83 - Annex 6 Appendix A Page 3 of 4 planning courses for DFs & CDWs (iii) capability building for cooperative leaders, (iv) savings mobilization, and (v) enterprise development. 4. PARFUND - National. The Philippine Agrarian Reform Foundation for National Development (PARFUND) is a recently founded private funding and advisory mechanism for NGO initiatives in resource tenure and productivity improvement in rural areas. It plans to act as a catalyst in (i) accelerating land transfer operations, (ii) community organizing, (iii) capability building of beneficiaries, implementors and institutions, (iv) productivity systems development, and (iv) model building, resource development and policy advocacy. Whilst PARFUND itself has no field network, the Board of Trustees are mainly drawn from other NGO networks. Whilst this organization appears to have the closest correlation in objectives and implementation strategy to the ARCDP and is staffed by well qualified and experienced staff, it has no independent track record. 5. PLAN INTERNATIONAL - International. PLAN INTERNATIONAL is a prominent international NGO which raises funds internationally for specific development projects. In early operations it focussed on supporting educational opportunities for children by "Adopt a Child" campaigns in donor countries. Within the last ten years, their focus has changed towards integrated community development, including community mobilization, health and education, rural infrastructure, advocacy and income generation, thereby providing a healthier growth environment for the most disadvantaged children. PLAN International works on an area concentration strategy, targeting severely impoverished communities which have minimal external assistance. They have coordinated successfully with DAR because they have well qualified community organizers who work closely with the DFs, and their own source of funds which supplements DAR financial inputs. This opportunity for partnership however is limited according to where the ARCs coincide with PLAN's area of operation. 6. PROCESS INC.- Provincial. The Participatory Research Organization of Communities and Education towards Struggle for Self-reliance (PROCESS) commenced in Iloilo but has extended its activities to other surrounding provinces in the Visayas and in N. Luzon. It focuses on community empowerment through intensive social mobilization (family planning, womens' development, paralegal services), training (leadership, resource identification. forestry development) and community organization. Their speciality is social mobilization in the early stages of community organization through a barangay-based community organizer, contracting in other expertise once the community reaches higher levels of organizational maturity. It has enjoyed a long association with DAR both through DAR/PHILDHRRA projects as a network member and through direct DAR/PROCESS partnerships. 7. TAITAU - Provincial. TAITAU, signifying a "bridge towards progress" in the local dialect, provides assistance to the poorest of the poor in remote areas of three provinces. They focus on economic development, using micro-credit as an entry point to the community. Most of the assistance is provided to micro-vendors to develop their activities. They have a strong focus on capital build-up and credit discipline and encourage formation of small homogenous groups within the  - 84 - Annex 6 Appendix A Page 4 of 4 community. They have been selected by DAR to act as a provincial partner on Operation Sugarland. 8. HIMAKAS FOUNDATION INC.- local. The HIMAKAS foundation was established in 1990 to assist several marginalised communities. This NGO maintains a staff of eight development officers and four support staff. Within the five years of existence the organization has acquired a sound reputation for community organization, networking with other agencies, issue advocacy and development consultancy. Although their field implementation activities remain centered on their originally targeted communities, they have expanded their reach by working as consultants for other NGOs on community feasibility studies and in financial management. They have worked with DAR on Operation Sugarlands and in livelihood development training on a contract basis.  - 85 - Annex 6 Appendix B Page 1 of 2 Pre-Proiect Planning Process 1. The objective of pre-project planning is to ensure that the activities implemented through the project are according to the priority needs of the ARCs, in line with the development priorities of both the communities and the LGUs. The approach followed will comprise of four steps as follows: a. Plan Validation. Existing ARC development plans will be re-validated and prioritized by the community to identify the most critical needs. This will be achieved by a half-day barangay level planning workshop, which will be facilitated by the DFs, Municipal Development Officers (MDO) and a FAO-TSARRD trainer. The DFs and MDOs would receive prior training in workshop organization at a one-day provincial-level seminar covering conducted by FAO-TSARRD. b. LGU Approval. Barangay representatives will then be assisted by the DF and MARO to present their plans to the Local Government Council, local engineers, a representative from LBP and other concerned agencies. This will enable the LGU to ensure that the proposed activities are in accordance with the overall Municipal Development Plan and that the technical feasibility of the proposed activities are worth further investigation. Once infrastructure proposals are approved, the relevant agencies (LGUs or NIA) will be requested to carry out further investigation. c. Farming Systems Development. A team consisting of two to three farmer leaders from the ARC, LGU, NGO and DAR repesentatives will be selected to participate in the FAO-TSARRD Farming Systems Development (FSD) course which would include: Phase 1. is a pre-training conference to orientate the participants; Phase 2. involves collection of secondary data; Phase 3. will provide the farmers with an introduction to theory of the FSD approach; Phase 4. consists of data collection within the community which will provide benchmark data and will form the basis for development of a farm development plan; Phase 5. involves a week residential session for the participants to consolidate and analyze the data, then produce a realistic and detailed farming systems approach to the plans of the community. This phase will include a review of the OMA results for the organizations to identify the priority training needs of the community; Phase 6. covers the presentation of findings of the survey to the entire ARC at a further General Assembly for information, re-affirmation or re-direction of community priorities and for finalization of an annual action plan by the community.  - 86 - Annex 6 Appendix B Page 2 of 2 d. Implementation. This stage will cover implementation of the plans, encompassing training, agricultural and enterprise activities and infrastructure development. Supported by the MARO and DF, General Assembly meetings will be convened as needed, but at least once monthly, to review the progress of implementation at intervals decided by the community.  - 87 - Annex 6 Appendix C Page 1 of 1 Organizational Maturity Assessment 1. The Organizational Maturity Assessment (OMA) is an operational and management tool which has been designed by FAO-TSARRD. The objective of the OMA is to provide a method of quantifying the strength of ARC organizations, consolidating information regarding the organizations and assessing the weakest areas of organizational operation in order to design effective development programs. 2. The OMA is carried out at the ARC level by the Development facilitator (DF) who was trained by FAO-TSARRD in the OMA methodology. The procedure is based on a detailed questionnaire during which the DF rates the answers and activities of the organization. The questionnaire covers three major considerations, namely Social/organizational aspects, Technical/financial aspects and Institutional aspects. Within each categories there are detailed indicators by which the performance of the organization is assessed. These indicate the strength of the leadership, the commitment of the PO members in terms of membership attendance, how active the organization is, the savings and credit position, and the relationship of the PO to other institutions within the area. 3. The average score for each category is recorded in a score sheet and the overall score for the organization is based on a weighted average over the three aspects. Although the overall score gives a quick method of assessing the strength of the organization, the most beneficial output from the exercise is the computation of where the lowest scores occur. It is on this information that DAR training programs for both staff and the organizations are currently based. 4. For the project it is a potentially useful tool as it pinpoints the concentration of the strongest organizations thereby aiding in the selection process. The OMA also provides management information to the CPO and PMB as to which areas should be prioritized for project operations. Most usefully, it allows analysis of what type of organizational and technical input is required, in what quantum in each province. Finally, if the procedure is repeated throughout the project period, trend analysis would also become possible which would add to the monitoring data and provide a basis for future project planning. 5. FAO-TSARRD is presently developing a similar tool for analysis of the human resources within DAR so that staff training needs can be identified and better human resource management would be possible. It is expected that this tool would also contribute to the value of management information available to DAR and the CPO. Consequently the CPO and FAO-TSARRD would work closely together. Other activities conducted by the project include the farming systems development program (FSD) and market linkage development (IMAP) which have been described under the Pre-project planning process and in the Agriculture and Enterprise Development component.   - 88 - Annex 7 Page 1 of 15 PHILIPPINES AGRARIAN REFORM COMAUNITIES DBVZLOPMENT PROJECT RURAL INFRASTRUCTURE I. DESIGN CONSIDERATIONS A. Technical 1.1 For improvements to rural access, the following guidelines would be taken into consideration: (a) rehabilitation and improvements to existing roads would take preference over new construction; (b) labour-based methods would be used wherever technically and economically feasible; (c) detailed design of barangay roads would follow existing technical guidelines for flat, rolling and mountainous terrain; (d) existing roads would be improved by restoring the formation to the specified width, compaction of the subgradel, and provision of a gravel running surface; and (e) new alignments would depend on geotechnic conditions, public safety and economic viability. 1.2 The improvements to barangay roads would normally facilitate all-weather access to traffic levels of up to 50 vehicles per day (vpd) and not exceeding axle loads of five tons. Two levels of improvement are envisaged: (i) reconstruction of existing roads, which are seasonal due to their poor condition2; and (ii) rehabilitation of existing roads which had adequate specifications in the past, but have deteriorated due to lack of maintenance. Most improvements would therefore following existing alignments, though reconstruction would require similar works to new construction. Overall specifications are given in Table 1, and dimensions for the proposed cross section in Figure 1. 1.3 Run-of-river irrigation improvements would normally comprise the following requirements: diversion dam/weir (headworks), intake structure, water conveyance canals, drainage channels, access/service roads and flood protection measures. The project would also support SWIPs where alternative water sources are not available. 1/ California Bearing Ratio (CBR) of at least 7%. 2/ Seasonal tracks with minimal formation and inadequate provision of drainage structures.  - 89 - Annex 7 Page 2 of 15 1.4 Small gravity water supply systems would use either a spring water source or a perennial stream. In the latter case, sand filters would remove suspended solids, but chemical treatment would not be provided. Works would include spring protection, construction of storage reservoirs and piped distribution to communal standpipes and ablution facilities. The construction or improvement of hand-dug wells would also be supported. B. Environmental 1.5 The project's rural infrastructure component is not expected to have any serious adverse environmental effects since construction works would be small-scale and not require forest clearing or affect ecologically sensitive areas. As most road improvements would follow existing alignments, only limited problems are anticipated, with minor requirements for additional land and disturbance to property. Works would include bridge and drainage improvements, raising embankments, wider road shoulders and some alignment improvements, which would improve both environmental conditions and road safety. 1.6 The environmental effects of irrigation works are also likely to be small, as most areas are already growing rice, either rainfed or irrigated. Moreover, no significant social conflicts and/or problems over land acquisition or rights of way are anticipated. All irrigation works would observe water rights, avoiding possible conflict with downstream consumers. Pollution of water sources through increased use of agricultural chemicals would be minimised through environmentally sound management practices such as: integrated pest management, soil conservation, rotation cropping and agro-forestry systems for hill-slope cultivation. In the case of new irrigation sites, an environmental impact assessment and mitigation plans would be submitted for review by the Department of Environment and Natural Resources (DENR). C. Cost SharinQ and Recovery 1.7 Access roads would be implemented by LGUs, with 80% - 90% grant (administered by MDF), depending on LGU status. The 10% - 20% not covered by the grant would be financed partly by ARC beneficiaries contribution and partly by the LGU, either using its own budget resources, or borrowing from the MDF under standard MDF terms. To cover these grant and loan expenditures, made using standard MDF procedures, MDF would draw down funds from the WB Loan. Repayments of the sub-loan element by the LGU to MDF would be retained and revolved by MDF for similar purposes. 1.8 Irrigation would be implemented by NIA, following their standard practice for communal schemes, but with DAR releasing funds to them against statements of expenditure. The non tax elements of these expenditures would be covered 100% from the WB Loan. Irrigation beneficiaries, who would be formed into IAs, would contribute 10 of the scheme construction cost initially, and would pay the remainder back to NIA over 50 years (without interest). 1.9 Community infrastructure would also be handled by LGUs with grants and possible loans from MDF. However, the equity portion provided by ARCs would vary. For farm access roads, LGUs would provide only materials and equipment and technical advice for spot improvements with beneficiaries providing labor and  - 90 - Annex 7 Page 3 of 15 local materials. For community infrastructure (water etc.), the grant element would be 70%. In the case of multipurpose buildings, the grant would be 30%, with the balance financed by the community. II. DEVELOPMENT PROPOSALS A. DescriDtion 2.1 Project support for rural infrastructure would comprise three sub-components: (b) rural access would improve vehicle and pedestrian links from ARC barangays to existing all-weather roads. Works would include reconstruction or rehabilitation of about 600-900 kms of existing roads, associated bridges, causeways and culverts, and additional materials and technical assistance would be provided for spot improvements to about 300-500 kms of farm access tracks; (b) irrigation would include rehabilitation or extension of existing irrigated areas and, to a lesser extent, construction of new schemes on a total area of about 10,000-15,000 ha. Irrigation would include diversification into non-traditional crops and activities would include headworks3, intake structures, water conveyance canals, drainage channels, access roads and flood protection measures. Support would be restricted to irrigation managed by farmers on a communal basis where beneficiaries would repay development costs and take responsibility for operation and maintenance of completed works4; and (c) community infrastructure would include rehabilitation or construction of drinking water supply schemes, both point sources and piped systems (levels 1 and 2 ); and development of multi-purpose buildings for community use, such as meeting halls. 2.2 Investment priority would be given to rural access and communal irrigation, with rehabilitation of existing facilities given preference over new construction. All investments would be technically sound and environmentally acceptable, with rural access and irrigation also being economically viable. Proven, labor-based technology would be adopted wherever possible, through local employment. 3/ Mainly run-of-river diversion weirs, but also Small Water Impounding Projects (SWIPs) in upland areas (small dams and reservoirs). 4/ Defined by NIA as Communal Irrigation Schemes (CISs), normally under 1,000 ha. 5/ Level 1 systems serve about 15-30 households from a point source (well or spring); level 2 systems serve about 50 households from a piped system with communal standpipes; (level 3 systems provide individual house connections).  - 91 - Annex 7 Page 4 of 15 B. Processing Selection 2.3 A two-stage process would be adopted for selection and approval of infrastructure proposals eligible for project support: (a) following the participatory planning process, proposed infrastructure requirements would be submitted by the MARO and ARC representatives to the Municipal Development Council for technical consideration. After preliminary investigation by LGUs or NIA. Further surveys and detailed design would then be carried out by technicians from the respective agencies or the private sector, if required; and (b) completed designs, costs and estimated benefits would be reconfirmed at the field level, and then submitted to the CPO for appraisal of the technical, environmental, financial, economic and administrative feasibility of proposals. 2.4 The criteria for selection of rural access works would include linkage of at least one ARC barangay to an existing all-weather road, and/or linkages to other barangays. Road-works would concentrate on improvements to existing roads, technical specifications would conform to agreed standards and, benefits would generate an acceptable economic rate of return. The preparatory cycle would normally require about eight months. For irrigation, selection criteria would require that at least 80% of the irrigated service area would fall within the selected ARC, an 80% probability of sufficient water and, and an acceptable economic and financial rate of return. For new irrigation, this preparatory work would require about 24 months, including confirmation of water resources. For rehabilitation, about eight months would normally suffice. Desian 2.5 Designs would be undertaken by competent engineers and conform to agreed technical standards, which would not fall below those of technical line agencies. Improvements to barangay roads would include restoration of road formation and width, and provision of a gravel-surfaced carriageway, drainage structures, slope protection works and concrete pavements on steep sections. Materials and assistance would also be given for spot improvements to farm access tracks which would be undertaken by farmers on a self-help basis. Irrigation improvements would include headworks, intake structures, water conveyance canals, drainage channels, access roads and flood protection measures. Most irrigation development would benefit gravity schemes reliant on diversion of water from perennial streams or rivers. However, small dams would also be considered for irrigation or rural water supply in upland areas without an alternative water source. These small dams and associated reservoirs are referred to as Small Water Impounding Projects (SWIPs). C. Procurement 2.6 Most rural infrastructure activities would be small-scale and following current practise would normally carried out under force account using labor  - 92 - Annex 7 Page 5 of 15 intensive methods to generate employment in local communities. Activities which require a concentration of effort, such as drainage and slope protection structures, would be constructed under local contracts. More complex structures such as bridges, causeways or irrigation headworks would be awarded to pre-qualified contractors on the basis of national competitive bidding procedures acceptable to the Bank6. Construction materials would also be procured in this way. Implementation through the private sector would be preferred, where competent local contractors are available. Purchases valued at less than US$0.2 million but above US$100,000 would be procured through National Competitive Bidding (NCB). Purchases for group of items valued at less than US$250,000 would be procured through international or direct competitive shopping on the basis of at least 3 quotations. D. Operation and Maintenance 2.7 Maintenance of rural roads has been seriously neglected in the past, largely due to inadequate funding from the DPWH, formerly responsible for these roads until 1991. Under the Local Government Code (LGC), funds for road maintenance are now channelled direct to LGUs7. Therefore, unlike the past, LGUs now have better control over available funds for road maintenance. LGUs would be responsible for maintaining all barangay roads improved under the project. A MOA between the Department of Agrarian Reform (DAR) and LGUs (at provincial level) would ensure that adequate resources would be provided for ongoing road maintenance. LGUs in default of maintaining roads improved by the project would have to repay the grant or have the grant converted into a loan to be repaid directly from their Internal Revenue Allotment (IRA). 2.8 For irrigation, the MOA between LGUs and the Irrigation Association (IA) would require that the latter take full responsibility for the operation and maintenance of completed irrigation facilities. However, major repairs, beyond the capability of IAs, would be carried out by LGUs with full cost recovery. Drinking water supply schemes would adopt similar arrangements based on a MOA between LGUs and Waterworks and Sanitation Associations8. III. IMPLEMENTATION A. Organisation and Manaaement 3.1 Within the CPO, a Rural Infrastructure Engineer, assisted by two other engineers, one for irrigation, and one for roads would be responsible for coordination and management of the rural infrastructure component. At provincial 6/ No civil works contracts are likely to exceed US$2.5 million, the threshold for international competitive bidding. 7/ By law, at least 20% of the Internal Revenue Allotment (IRA) from central government to LGUs must be used for development purposes, including the construction and maintenance of roads. 8/ Cost recovery and O&M arrangements would follow those detailed in the proposed Rural Water Supply and Sanitation Sector Project, to be financed by the Asian Development Bank (ADB).  - 93 - Annex 7 Page 6 of 15 level, responsibility for implementation would be with: (i) LGUs for rural access and community infrastructure; and (ii) the National Irrigation Administration (NIA) for irrigation development. At provincial level, each agency would designate an engineer to take responsibility for project infrastructure activities. MOAs between, DAR, LGUs and NIA would detail the individual responsibilities of each agency, included in the Operations Manual. Arrangements concerning rights of way for roads, irrigation schemes and other infrastructure would be handled within the ARCs at a community level. There would be no acquisition of land by either the National or Local Government under the project. Any ownership adjustment for compensation would be settled internally by the community which would retain ownership of the property. Initial investment proposals would be screened at the provincial level, with support from the CPO as required prior to detailed preparation. B. Rural Access and Community Infrastructure 3.2 These sub-components would be implemented by LGUs through their engineering offices at provincial and municipal levels. If needed, support services would be contracted from the private sector or technical agencies such as the Department of Public Works and Highways (DPWH). LGUs would prepare costed designs for submission to CPO for technical evaluation and approval. Rural access would also be subject to economic justification. Where feasible, the project would require the use of competent local contractors. In the absence of contractors, LGUs would undertake works directly under force account through contracts, negotiated with CPO. Maintenance of barangay roads is important, and would be included in the MOA between DAR and LGUs. LGUs in default of maintaining roads improved by the project would have to repay the grant or have the grant converted into a loan, to be repaid directly from their IRA. This would be covered in a provision of the grant agreement. For drinking water supply, LGUs would follow a participatory approach to ensure sustainability. C. Irrigation 3.3 Irrigation would be implemented by NIA through their provincial offices. NIA would prepare costed, and economically justified proposals for submission to CPO for evaluation and approval. The project would require the use of local contractors for irrigation headworks and other large structures. Remaining works would be undertaken directly by NIA, through contracts negotiated directly with CPO. An Irrigators' Association (IA) would be formed to ensure the participation of beneficiaries from the outset. D. LGU Catabilitv 3.4 As rural access and community infrastructure activities would be the responsibility of LGUs, they would be required to comply with minimum standards to qualify for project support. The CPO would conduct a thorough evaluation of relevant LGUs to determine their technical, administrative and financial capacity to undertake the proposed activities and take responsibility for subsequent maintenance. E. Monitoring and Evaluation 3.5 DAR, as the executing agency, would continuously monitor the physical progress of implementation, and the economic, financial, social and environmental  - 94 - Annex 7 Page 7 of 15 impacts of project activities. This would be carried out by the CPO through the field-level offices of DAR. Physical progress of the component would be available from the LGUs and DAR's Provincial office or the implementing agencies, such as MDF and NIA. MDF would provide quarterly reports on the disbursements of loans and grants to the LGUs. Physical progress information would be provided directly to the CPO on a monthly basis and would be measured according to the MOA governing each separate sub-component. IV. PHASING AND COSTS 4.1 Rural infrastructure would be phased in relation to ARC development plans. Ten ARCs would be planned9 prior to project implementation, which would enable activities to commence during the first year of the project. However, new irrigation would not commence until year two, due to the long period required (24 months) for feasibility and design. The tentative phasing of rural infrastructure activities is shown in Table 2. 4.2 Total base costs for the rural infrastructure component are estimated at US$48 million. These have been derived from requirements in existing ARC development plans. As actual requirements would evolve during implementation, they are only indicative. Unit costs for individual sub-components are given in Table 3. The project would benefit an estimated 100 ARCs during the six year project period, resulting in the following rural infrastructure and investment costs: 9/ This would be carried out in the provinces of Isabela, Leyte and Davao del Norte with technical assistance from an ongoing project: FAO-Technical Support for Agrarian Reform and Rural Development (FAO-TSARRD).  - 95 - Annex 7 Page 8 of 15 US$ ARC 'Model' US$ Project Total (100 ARCs) million Rural Access 9kms of barangay road improvements, including 900km of barangay road drainage works and 272,700 improvements: 27.2 bridges: (90,000) - 300km of reconstruction (9.0) - 3km for reconstruction;(108,000) - 600km of (10.8) - 6km for rehabilitation (52,200) rehabilitation; (5.2) - 9 metres of bridge (22,500) - goom of bridges (2.3) - 4.5km of spot - 450km of spot improvements improvements Irrigation lOOha of irrigation improvements', including l0,OOOha of irrigation access roads: 169,500 improvements: 16.9 - 30ha as new irrigation; (75,000) - 3,000ha as new (7.5) - 70ha of rehabilitation irrigation; of existing irrigation (94,500) - 7,000ha as (9.4) rehabilitation of existing irrigation Community Infrastructure: 38,400 3.8 - rural water supply; (23,000) - rural water supply (2.3) - multi-purpose (7,700) - multi-purpose (0.7) buildings; (7,700) buildings; (0.8) - other - other Total (one ARC): 480,000 Project Total: 48.0 a/ A typical Communal Irrigation Scheme (CIS) would service about 200-300ha; it has been assumed that only one third of the selected ARCs would include irrigation. V. BENEFITS 5.1 The project would benefit about 100 ARCs, comprising about 80,000 households, with a total number of beneficiaries of about 0.5 million. It is anticipated that indirect benefits of infrastructure works may benefit an additional 40,000 households (approximately 250,000 people). The main benefits from improvements in rural access would be lower transport times and costs, reduced vehicle operating costs, improved access during the rainy season, and increased traffic. Secondary benefits would include enhanced marketing opportunities, reduced transport damage, timely supply of inputs and services (agricultural extension), improved access to social services, and employment opportunities during construction. 5.2 The main benefits would be derived from increased rice production attributable to a sufficient and reliable supply of irrigation water. The project would increase the area under effective irrigation by about l0,OOOha,  - 96 - Annex 7 Page 9 of 15 benefitting some 10-15,000 farm households"'. Net incomes on newly irrigated land are expected to more than double, with sufficient savings to cover operation and maintenance costs and repayment of investment costs. The main benefits include increased cropping intensity and yields, increased household incomes, crop diversification, and employment opportunities during and after construction. 5.3 The main benefits from community infrastructure would include improved supply of drinking water, relieving human resources for more productive activities, particularly women (and children), and improved community hygiene and public health. VI. RISKS 6.1 The main risks associated with the rural infrastructure component include the timely availability of counterpart funding, the capability within LGUs and implementing agencies to implement project sub-components, the adherence to technical and environmental standards during construction, and the capacity of LGUs and beneficiaries to operate and maintain investments after project completion. 6.2 The bulk of infrastructure funds (about 90%) would be provided through MDF, and their availability would depend on efficient administration of processing procedures. The balance of funds would depend on the availability of resources from LGUs, and their willingness to borrow for any additional requirements. The mission concluded that LGUs would be capable of producing the necessary counterpart funding, subject to screening and assurances during implementation. Project design has incorporated specific measures to address the remaining risks. lo/ Existing irrigated holdings range in size from 0.5-3.Oha; the average holding is 1.7ha; new irrigated holdings would probably be smaller.  -97- Annex 7 Page 10 of 15 TABLE 1 : Barancrav Road SDecifications Terrain Conditions Specifications Unit Normal a/ Severe b/ design speed km/hr 30-50 15-30 single axle loading tons 5 5 formation width m 6 6 carriageway (surfaced) m 4 4 shoulder width m 1 1 surface type selected local materials (rock/gravel) thickness cm 15 15 cross slope % 2-4 4-6 minimum curve radius m 30 10-15 maximum gradient % 12 12-18 bridge width m 3.5 3.5 turnouts (3m x 20m) per km 1 2 a/ FLat or rolling topography with general slopes below 12Z b/ HilLy or mountainous topography with general sLopes over 20X  TABLE 2 : Tentative Phasing of Rural Infrastructure Unit Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Total --------------------------------------------------------- Rural Access - (re)construction of barangay roads km 15 60 75 90 45 15 300 - rehabilitation of existing barangay roads km 30 120 150 180 90 30 600 - 'spot' improvements to farm access tracks km 23 90 113 135 68 23 450 Irrigation - new irrigation or extension of existing schemes ha 150 600 750 900 450 150 3,000 - rehabilitation of existing irrigation ha 350 1,400 1,750 2,100 1,050 350 7,000 Casuaity Infrastructure - drinking water supply a/ h/holds 1,150 4,600 5,750 6,900 3,450 1,150 23,000 - multi-purpose buildings b/ 100 m2 3 11 14 17 8 3 55 o0 Notes: The project would be led by demands from ARCs; therefore the rate of progress, and distribution of activities is notional, based on previous ARC plans and field experience Phasing assumes completion of sub-component activities: Year 1 (5%); Year 2 (20%); Year 3 (25%); Year 4 (30%); Year 5 (15%); Year 6 (5 a/ based on budget estimate of S100 pre household served (level 1 and 2) b/ based on budget estimate of $140 per m2 (a typical barangay hall is 70-80 m2) C' OQ 0( MiX Lns  - 99 - Annex 7 Page 12 of 15 TABLE 3 : Unit Costs (page 1) 1. RURAL ACCESS (Costs per kilometre) A. Reconstruction Total Cost Description P '000 1. General Site Clearance 70 2. Earthworks Formation 270 3. Gravelling 200 4. Drainage Structures 140 5. Surveys and Design 30 6. Supervision 70 7. Total Reconstruction Costs (rounded 780 per kilometre US$ 30,000 B. Maintenance per km/year a/ 45,000 per kilometre US$ 1,700 C. Rehabilitation 1. General Site Clearance 20 2. Earthworks Formation 100 3. Gravelling 200 4. Drainage Structures 80 6. Surveys and Design 20 7. Supervision 40 S. Total Rehabilitation Costs (rounded 468 per kilometre US$ 18,000 Notes: a/ Economic Maintenance Kilometrage (EMK), 1995 vatue = P62,400 Barangay Road < 5m = P62,400x0.9x0.8 r P45,000 per year Source: Department of PubLic Works and Highways, ManiLa Agrarian Reform Infrastructure Support Project, Project Study, June 1994 Action Plan for the GATT-Uruguay Round, Agricultural Sector, Decanber 1994  - 100 - Annex 7 Page 13 of 15 TABLE 3 : Unit Costs (page 2) 2. IRRIGATION (Costs per hectare) A. New Irrigation Total Cost Description P 1. Site Preparation 2,700 2. Diversion Works 21,700 3. Conveyance Structures/Canals 24,400 4. On-Farm Terminal Facilities 5,400 5. Feasibility Surveys and Design 5,400 6. Supervision 5,400 7. Total New Irrigation (rounded) 65,000 per hectare US$ 2,500 B. Maintenance per hectare/year 550 per hectare US$ 20 C. Rehabilitation 1. Site Preparation 1,500 2. Diversion Works 11,700 3. Conveyance Structures/Canals 13,100 4. On-Farm Terminal Facilities 2,900 5. Feasibility Surveys and Design 2,900 6. Supervision 2,900 7. Total Irrigation Rehabilitation 35,000 per hectare (rounded) US$ 1,350 Source: Department of Agrarian Reform, Manila, October 1995 Agrarian Reform Infrastructure Support Project, Project Study, June 1994  - 101 - Annex 7 Page 14 of 15 TABLE 3 : Unit Costs (page 3) 2. IRRIGATION D. Small Water Impounding Project (SWIP) a/ Total Cost Description P ------------------------------------------------ 1. Access and Site Preparation 260,000 2. Embankment Construction 455,000 3. Spillway 520,000 4. Irrigation Facilities 65,000 5. Feasibility Surveys and Design 130,000 6. Supervision 130,000 7. SWIP (rounded) 1,560,000 per SWIP US$ 60,000 37,100 per hectare US$ 1,400 E. SWIP Maintenance per year 39,000 per SWIP US$ 1,500 Note: a/ Add 30% to construction costs for works on contract TypicaL SWIP: embankment height 10m, Length 68m reservoir volume (fuLL) 195,000m3, irrigation command area 42ha Source: Department of Soil and Water Management, Manila, October 1995  - 102 - Annex 7 Page 15 of 15 TABLE 3 : Unit Costs (page 4) 3. COMKUNITY INFRASTRUCTURE A. Rural Water Supplies Total Cost Description P 1. Small Gravity System - spring protection 17,000 - distribution pipes 282,600 - storage tanks 113,000 - pressure relief valves 17,000 - taps and fittings 45,200 - installation materials 84,800 - skilled labour 5,700 - survey and design 28,300 - supervision 56,500 sub total: Gravity System 650,000 per 250 households US$ 25,000 or $100 per household 2. New Hand-Dug Well (with handpump) - materials 9,300 - tools and equipment 5,600 - skilled labour 22,300 - supervision 1,900 39,000 per 10 households US$ 1,500 or $150 per household B. Multi-Purpose Building a/ - materials 375,000 - tools and equipment 50,000 - skilled labour 75,000 - supervision 25,000 525,000 each US$ 20,200 Notes: a/ 15mxlOm (150m2) a P3,500 per m2 Source: Department of Agrarian Reform, ManiLa, October 1995   - 103 - Annex 8 Page 1 of 4 PHILIPPINES AGRARIAN REFORM COMMUNITIES DEVELOPMENT PROJECT MONITORING AND EVALUATION 1. The Agrarian Reform Communities Development Project has three operational components and a range of implementors covering DAR, other government agencies, education/training establishments, NGOs, POs and the beneficiaries themselves. Isolation and quantification of project impact is likely to involve considerable coordination in order to produce accurate and verifiable monitoring data without overburdening field staff with data collection activities. 2. The impact of the project is likely to be a function of a number of contributory and inter-related factors. To reduce the risks involved in effectively assessing project performance, the Monitoring and Evaluation System would be based on not only simple measurable proxy indicators but also on qualitative analysis at national, provincial and ARC levels. For qualitative analysis a strong feedback loop of consolidated data is required to obtain the required judgmental analysis from the relevant skilled personnel at the above levels. Triangulation from the various information sources would provide verification of performance to the fullest extent possible. 3. During project implementation, progress would be measured in line with half yearly progress targets, as produced by the CPO. Targets would be based mainly on quantitative data generated at field level. Discrepancies in target achievement would be analyzed to enable the CPO to use management by exception tools' for more in-depth qualitative analysis where necessary. The combination of information produced by the Monitoring and Evaluation System will provide the fullest information possible for future planning and policy direction, produce more realistic targeting for the next period of assessment and provide a verifiable base of information for the project supervision missions. 4. For these reasons, the CPO would include a Monitoring and Evaluation Specialist (see TOR in Annex 4) whose responsibilities would include finalization of performance indicators and design of an appropriate monitoring system showing responsible agencies, information flows, data required and methods of collection and analysis. The M&E Specialist would report to the Project Manager on the progress of each component, highlighting outstanding issues. 5. The project system would, as far as possible be coordinated with existing systems of DAR and other participating agencies to avoid repetition of data i.e. identification of data anomalies for deeper research into areas of progress which do not correspond to expectations.  - 104 - Annex 8 Page 2 of 4 generation but the system of analysis would include cross-reference where data sources do overlap.Field data for the M&E system would be channelled through four different sources (see SAR Paras 4.30) In addition there would be supervision missions by the World Bank at regular intervals and periodic reviews by DAR and other national implementing agencies. 6. DAR has a comprehensive monitoring and recording system which includes the following activities (i) manual and computerized database management; and, (ii) preparation and submission of reports. It covers both Agrarian Reform Community (ARC) and non-ARC areas. This system can not only provide much information to the CPO but can provide control information from non-ARC and non- project ARC areas. 7. The information gathered on the nationwide Beneficiaries Development Program would be of most relevance to this project. This covers (i) information and education; (ii) education and training programs for ARBs; and, (iii) community media. DAR also gathers data on physical infrastructure projects, economic support services, networking and linkages. The method used for generating the data for these activities is through the normal reporting structure by the field staff of DAR. At national level, DAR also maintains records on education and training programs for DAR personnel, communications development support and other specific problems issues and concerns. 8. Data handling within DAR is the responsibility of the Management Information Section of the PMEU which until recently consolidated all data received, forwarding summaries to the Regional and Central Offices disallowed detailed national analysis. This system is currently under review to reduce the volume of data flow, to generate disaggregated data and increase the specificity of information gathered. 9. Under the programs of FAO-TSARRD and the Farming Systems Development Program (FSD), there is a strong emphasis on accurate data gathering and analysis. This would also provide a valuable source of information. The FSD course trains the participants to generate socio-economic baseline data on the community and to produce a researched area resource profile (including demographic details such as household size, ages and schooling, to agricultural details such as landholding, crops cultivated yields and investment levels. It also includes a household income by source estimate). 10. Although income levels are notoriously difficult to assess, the FSD approach does allow for cross-verification of income data with investment and production figures. As the results of the survey are also made known to the community, there is also a peer cross-check built into the system. 11. As all project ARCs would be required to undergo the FSD training program in the pre-project stage, the information generated through the exercise would form the basis of the project baseline information and similar surveys would be repeated at mid-term and final evaluation to give a measure of project impact. 12. The Organizational Maturity Assessment (OMA) rating of FAO-TSARRD has now become an entrenched management system within DAR for assessing the progress of  - 105 - Annex 8 Page 3 of 4 the POs within the ARCs. The tool involves a six monthly assessment of organizational progress against a comprehensive list of 33 indicators which are grouped under the headings of (i) social/organization - measuring attendance, organizational structure, leadership qualities and effectiveness of the operational policies/ by-laws; (ii) technical/financial - recording progress of on-going activities, participation of members, methods and quantum of income generation and capital build-up, repayment rates for credit, standards of record keeping and training attendance; and (iii) institutional - quantifying linkages and support services accessed by the PO in terms of technical assistance, credit, grants, increase in marketing linkages and other types of alliances with support organizations. 13. Other participating Line Agencies, NGOs, research organizations and DAR special projects would be tapped for additional information as required to cover the range of activities under the project. In addition, special studies on key issues identified under the management by exception practice would be commissioned to suitable research bodies to investigate areas of project progress which show complexities which cannot be clarified by the normal M&E system. Performance Indicators 14. Key performance indicators would be centered around trying to measure (i) the increase in beneficiary household income attributable to the project; and (ii) sustainability. Sustainability would include (a) increased capability and independence of POs, (b) increased support for the ARCs from the LGU and corresponding improvement in the civic responsibility shouldered by the ARBs, and (c) continuing maintenance of infrastructure and enterprises assisted under the project. Some of these items are difficult to measure directly, or cannot be easily assessed as part of a regular reporting system and so proxy indicators need to be tracked. Key Performance Indicators are summarized in Appendix A and are as follows: Indicators which would be maintained and updated on a reQular basis: a. No of participating ARCs (an indication of project coverage). b. Length and cost of roads rehabilitated and reconstructed (a proxy for decrease in transportation costs). c. Area and cost of new and rehabilitated irrigation (a proxy for improvement in the agricultural resource base). d. Change in OMA Ratings of Organizations within participating ARCs (a proxy for strengthening the ARCs and sustainability of impact). Indicators to be assessed annually: e. Change in cropping intensity on irrigated areas (a proxy for increased agricultural production). f. Budgetary provision and utilization of funds for infrastructure maintenance (indicator of sustainability of rural infrastructure).  - 106 - Annex 8 Page 4 of 4 Indicators to be assessed from baseline and subsecruent surveys: g. Level of business assets in ARCs - livestock, machines, permanent crops, business premises (this would provide an ex post assessment of the level of investment in agriculture and enterprises and give an indication of the potential sustainability of business activity). h. Household income by source (on a sample basis - but potentially the most critical indicator of direct project impact).  - 107 - Annex 8 Attachment A KEY PERFORMANCE INDICATORS PHILIPPINES: AGRARIAN REFORM COMMUNITIES DKVELOPMENT PROJECT objectives Key Performance Unit CY97 CY98 CY99 CY00 CYOl CY02 Increase in a. Change in net _ 20 _ 40 Household real income' income b. Cropping % _ 25 - 50 Intensification2 increase Incremental a. Farm to market km cum 20 100 240 420 600 800 Physical roads Infrastructure b. Irrigated area ha cum 250 1,50 3,750 6,500 8,750 9,750 0 Sustainability a. Budgetary Grade - A _ A - A provision and level3 utilization of funds for infrastructure maintenance b. Incremental US$000 100 200 business assets in the ARCs (weighted average) c. Number of cum. 10 40 60 80 100 _ participating ARCs d. Average _ - 5 - 10 - 20 increase in OMA4 1/ Subject to data collected under the FSD process (paras. 8 & 9 of Annex 8). 2/ Crop intensification is a ratio calculated on the basis of irrigated area which measures area cropped by year over cropable area. This measure covered the area provided with irrigation under the project. Cropping intensity is expected to increase by 25% two years after construction and by 50% in the third year. 3/ Two grade levels: Adequate (A) and Inadequate (In) in accordance with standards established by the Department of Public Works and Highways. 4/ For details see para. 12 of Annex B.   - 108 - Annex 9 Page 1 of 2 PHILIPPINES AGRARIAN REFORM COMMUNITIES DEVELOPMENT PROJECT SUPERVISION PLAN 1. Bank supervision input: staff inputs indicated in the table below are additional to regular supervision needs for the review of progress reports, sub- projects above the free limit, correspondence etc., estimated at 38 staff weeks in the field, as follows: 12/sw during the first project year, 6/sw during the three following years, and 4/sw per year thereafter. Supervision missions would concentrate on reviewing progress, identifying outstanding issues, and as much as possible resolving them. About two missions per annum are planned and would include the Task Manager and, as required, a Rural Engineer; a Community Development (CD) specialist; an agriculturist; and/or other professional, as necessary. Each mission would focus on different component and concentrate on the resolving of the main issues. An indicative supervision plan for the first three years (it is assumed that the coming missions would follow more or less the same pattern in terms of their composition and objectives) is provided below. Approximate Skill Staff Dates Activitv Reauirements Weeks February 1997 Sunervision Mission Task Manager 6 - Expedite start-up Rural engineer, and - Review: implementation of CD specialist. organizational arrangements; functioning of the CPO and the PMB; procurement matters; and ARCs CD and infrastructure investment programs. June 1997 Sunervision Mission Task Manager, 6 Review progress in CD and Rural Engineer, training, infrastructure inv. agriculturist, agricultural and livelihood and CD specialist. development, flow of funds, and CPO operations. January 1998 Supervision Mission Task Manager, 3 Review progress in all project Rural Engineer, components, focussing on CPO, and CD specialist. CD, and procurement. July 1998 Supervision Mission Task Manager, 3 Review progress and identify Agriculturist, issues, focussing on agriculture and Rural Engineer. and infrastructure.  - 109 - Annex 9 Page 2 of 2 Anoroximate Skill Staff Dates Activity Recuirements Weeks March 1999 Supervision Mission Review progress and identify Task Manager, 3 issues, concentrating on CD Rural Engineer, infrastructure and procurement. and CD specialist. September 1999 Supervision Mission Review progress and identify Agriculturist 3 issues, concentrating on Rural Engineer agriculture and infrastructure.  - 110 - Annex 10 Page 1 of 17 PHILIPPINFS AGRARIAN REFORM COMMUNITIES DEVELOPDNT PROJECT ECONOMIC AND FINANCIAL ANALYSIS I. OVERVIEW 1. The economic impact of the project will result directly from project activities; improvement of barangay roads; rehabilitation and investment in new irrigation systems; and community and commercial development of ARC based organizations. The likely economic impact of both the rural road improvement and the irrigation sub-components can be assessed directly on a model basis. Benefits from diverse investments and improvements in agricultural and other businesses which result from (i) skills training, (ii) organizational strengthening, (iii) the advent of lower cost transportation (as a result of improved roads), (iv) increased productive potential (caused by improved irrigation and further availability of inputs) and (iv) consequential improved access to credit are more difficult to assess accurately. II. RURAL ROADS Baranqav Roads 2. The main road construction under the project is likely to be barangay roads, which link the barangay center to the provincial or national road system. In most cases investment in these roads will comprise upgrading and improving existing road alignments which generally are not all weather and which, at least for part of the year, cannot be used by normal motor vehicles. The benefits from improving such roads include the following: i. Reduction in vehicle operation costs resulting from (a) lower cost per km; and (b) the possibility to switch to more cost effective modes (e.g. from carabao to truck). These reductions in vehicle operating costs apply to: transport of people; transport of non-agricultural goods; transport of agricultural production. ii. Benefits resulting from time savinQ both of passengers and vehicle operators. iii. Generated Benefits. As a result of reduced vehicle operating costs, incremental traffic is generated resulting in benefits for each type of transport outlined above. 3. In order to assess rural road development projects, DPWH has a developed and regularly updates a set of standard vehicle operating costs broken down between (i) distance related costs; and (ii) time related costs. Furthermore it has also developed a series of traffic generators which relate  - 111 - Annex 10 Page 2 of 17 volume of non-agricultural traffic and passenger traffic to population and road quality. 4. Under the project it is intended that individual road developments will be subject to specific analysis, partly based on information obtained from the project site and partly using standard data from DPWH. The attached "Rural Road Model" indicates the likely costs and benefits from reconstructing a typical project road. This is based on some 5km of road serving a total population of 4,000 people of whom 80% are the families of ARBs and other farm families having an average farm size of 2.0 ha. Road costs are likely to vary considerably, depending upon whether the works involve reconstruction i.e. essentially building a new road along an existing alignment or whether the road can be brought up to standard by 'rehabilitation'. Additionally, the need for bridges would also have a substantial bearing on average cost per km. Estimates of average costs, at 1996 prices are P0.82 million/km, including design costs for reconstruction and P0.49 million/km for rehabilitation. In addition, bridges, which are expected to average about 1 meter span per km of access road would cost a further P161,000/m. These figures all take account of the newly introduced EVAT. On the basis that about 70% of roads can be rehabilitated, but 30% need reconstruction average financial cost per kilometer would be P0.75 million/km (US$29,000/km). Maintenance costs, with project, are estimated to be P45,000 km/year compared with P30,000 km/year without project. The average travel journey along the road is estimated at 3km and the impact of the project in terms of road quality is to upgrade a gravel/dirt road from "very bad gravel" to "good quality gravel" (see section A of model). These costs are converted from financial to economic prices using a standard conversion factor (SCF) of 0.81. 5. As a result of road improvement, the average vehicle composition and mix is assumed to change for freight from 20% carabao sled2 and 80% jeepney without project (WOP) to 70% jeepney and 30% trucks with project (WIP); while for passengers it would change from 70% tricycles; 30% jeepneys to 30% tricycles and 70% jeepneys (Bl and 2). 6. Freight transported along the road comprises (i) agricultural freight - WOP 40% of agricultural produce is assumed to be shipped to outside the area while WIP, as a result of both better roads and improved yields stemming from other project factors, this would increase to 60%) (B3); and (ii) non- agricultural freight, the volume of which is assumed to be dependent on road condition. The freight generating factors for non-agricultural traffic in the model used are the standard factors for the Philippines developed by DPWH (B4). These indicate an increase in non-agricultural freight per head of population from 0.6kg/day on very bad gravel roads to 2.0kg/day on good gravel roads. 7. Passenger traffic with and without project is also generated based on (i) assumed growth in population; and (ii) the change in road conditions which / This new SCF of 0.8 is based on the SCF used in recent Bank analysis in the Philippines of 0.833, adjusted downwards to reflect the newly introduced EVAT. 2/ Carabao sled is the means of freight transport generally used when roads are impassable to wheeled traffic. It is particularly relevant in the wet season.  - 112 - Annex 10 Page 3 of 17 would result in the number of trips per day per capita increasing from 0.08 to 0.12 (Philippines standard data - B5). 8. Average vehicle operating costs (VOCs) are based on the DPWH standard figures. These figures are at economic prices, being in effect long run economic marginal costs. They allow for the fact that (i) not all vehicles are commercially operated; and (ii) savings in operating costs do not necessarily always transfer into fleet cost reductions. The time cost element only takes account of the likely proportion of passengers who are travelling during work periods or to and from work, valuing this time at 100% and 50% respectively of the appropriate wage rates. It does not include the value of leisure time saved. 9. The operating cost for carabao sled transport has been developed by the mission based on information from the Philippines Carabao Center. Average daily hire costs for a carabao plus driver vary between P180 and P250 - an average of P210 has been taken; the average daily hours worked are assumed to be 6 and the average travel speed 4 km per hour. Because carabaos would be almost entirely handling agricultural traffic, they would only operate at a 50% efficiency level (i.e. without back loads) (B6). This factor has been reflected in the operating costs per km rather than in the average amount of freight carried. Taken together, these figures give a financial cost of carabao haulage of P17.5 per effective km travelled. Some of the carabao transport would be at peak times, when the opportunity cost of the carabao and driver is high i.e. the financial price only needs adjusting by the standard (or consumption) conversion factor to give an economic price, while during other times of the year the opportunity cost of man and carabao is quite low. Overall, a conversion factor of 0.6 is used, resulting in an economic cost per km of P10.5. 10. On the basis of the likely population growth and the freight generators, the average daily freight and passengers with and without project can be generated (C in model). These figures, together with the average economic unit VOCs for freight and passengers (D) are used to estimate the project's costs and benefits (E) taking account of the following: i. investment costs - road investment is seen to take slightly over one year with 10% of project investment (largely design costs) in year minus one and the remainder in year 0; ii. O&M costs with project start in year 1; iii. VOC savings for freight are based on the without project freight volume, i.e. the average saving per ton/km multiplied by the total numbers of ton/km shipped without project; iv. VOC savings for passengers are calculated similarly, i.e. the volume of passenger traffic without project multiplied by the average saving per passenger/km; v. Generated benefits for both freight and passengers - as can be seen from the diagram - is the area between the transport demand curve and the with project VOC over the range from the WOP volume to the WIP volume.  - 113 - Annex 10 Page 4 of 17 VOC WOP \ Transport Demand Saving SAVINGS Tno v AT WOP 0 VOC WIP VOLUME GENERATED BENEFITS 8C1 Volume Volume WOP WIP Quantity of Traffic with a 'straight line' demand curve, this area is a triangle with an area of 50% of the incremental volume multiplied by the unit price reduction; this approximation is used to estimate Generated Benefits for both passenger and freight traffic. vi. Finally the operation and maintenance cost for the WOP situation (which is saved), is also counted as a project benefit. 11. Based on these assumptions and calculations, the model shows an economic internal rate of return of 27%. This is considered to be the most likely level, and is the one used in the base case economic analysis of the project as a whole. 12. It is clear that there will be considerable variation between different ARC road investments, due to factors such as terrain. Manipulation of the model clearly shows that population influenced by the road is a key factor in the road' s likely viability. This is evidenced by the table below which shows the sensitivity of the ERR to variations in both total population affected in year -2 and the level of investment per km (but using base case parameters for other items). Sensitivity to Unit Investment and Population Served (figures shown are ERR percentages) Population ------------------Investment per km (PM)--------------- Served 0.4 0.6 0.8 1.0 1.2 1.4 1,000 9 5 2 0 -ve -ve 2,000 24 16 12 9 7 5 3,000 36 25 19 15 12 10 4,000 48 33 25 21 17 15 5,000 59 41 32 26 22 19 6,000 70 49 37 31 26 23  - 114 - Annex 10 Page 5 of 17 13. The bold figures in the table indicate combinations of investment and population under which satisfactory ERRs would be achieved. It is clear that while low cost roads e.g. those costing below P600,000 per km can be viable with relatively small populations (anything over 2,000), more expensive roads, costing say P1.4 million/km would need to serve at least 4,000 people. An average cost rehabilitated road (P491,000/km without bridges) would yield at least the cut off ERR of 15% provided population exceeded 1,600. 14. Other important factors affecting sub-component viability are concerned with the WOP situation. Generally, good rates of return are obtained when, in the without project case, a significant amount of freight comes out from the project area using non-vehicular means e.g. carabao or other animal cartage, which is very expensive per ton km. This situation particularly applies with roads which are subject to seasonal impassability. Changing the base case from 20% carabao sled freight to 50% WOP would raise the ERR to 34%, while lowering it to zero would cause it to fall to 22%. 15. In addition to the economic benefits shown in the model, there are also substantial costs, in the without project situation, which are not fully accounted for within the DPWH averaging of WOP vehicle operating costs. In particular, there are significant costs associated with vehicles becoming stuck and damaged when being extricated from "stuck situations" (the WOP cost of these would be a project benefit, as the project would eliminate them). Furthermore, the DPWH policy of not including as an economic benefit increased non-work traffic, appears quite conservative. Within the transport studies on which the DPWH data are based, an argument has been put forward that "only productive savings with an impact on domestic product should be given ..... leisure trips are thus regarded as having a social value rather than an economic." Including all non-commercial time saving as a project benefit and valuing it at 60% of the wage rate would increase the ERR in the model by about three percentage points. Lastly, the model took account of freight and passenger growth based on expected increases in population, but it was conservative in that no provision has been made for increased per capita income, other than increased agricultural production. This too would be likely to generate further incremental traffic, hence benefits. 16. It is proposed under the ARCDP only to finance rural road sub- projects which show ERRs of at least 15%. Given the lack of development in many of the potential project areas, the relatively high population density and the poor condition of the barangay roads, the ERR of this sub-component is likely to be well above this cut off level, as indicated by the range of positive results in the model. Farm Access Roads 17. Improving the means of getting produce from the area where it is grown to the barangay (local market) would also be supported under the project, through the provision of advice and materials. All labor for these tracks would be provided by the beneficiaries. In general, the types of intervention would be spot improvements e.g. installation of culverts which would allow access to the production zone by wheeled trailers, either animal or hand tractor drawn, rather than by carabao sled. This would allow the typical load per journey to be increased from about 3 sacks to 15 (150kg - 750 kg). Such investments are particularly worthwhile in areas where bulky crops e.g. banana, pineapple,  - 115 - Annex 10 Page 6 of 17 vegetables or sugar are grown because the transport requirement per ha is much higher than with rice or corn. 18. The 'farm road model', presented on page 14 considers a typical 2 km road, (with a 'catchment area' of about 500 m either side), serving 180 ha of land cropped, with a mixture of bulk crops and grain crops, yielding a total of 5 tons per ha per year of output. On the basis of cost saving alone, an ERR of 30W would result from an estimated total investment of P274,000 (US$11,000). In doing this analysis, financial costs were converted to economic costs, using the standard conversion factor for investment and VOCs3, but a lower figure of 0.75, to reflect the labor content for O&M. Because of the big differences in spot improvement costs, areas accessed, length of road needed and average yield, each individual proposal would need to be assessed using the simple model - and only access investments with ex ante ERRs in excess of 15% would be supported. 19. An indication of the sensitivity to tonnage transported (which is the product of yield and area impacted) and road cost per km for a 2km road is given in the table below, which considers both tonnages and investments at half and double the base figures. Sensitivity of Farm Access Roads to Unit Investment and Tonnage Shipped (figures shown in table are ERR percentages) Tonnage -------Investment per km (Pl000)--------------- Handled 68.5 137 274 Per Year 450 23 10 1 900 60 30 14 1,800 134 67 33 20. Improving agricultural access would be likely to have additional benefits, over and above the VOC savings based on existing cropping, which are provided for in the model. In particular, better access to fields would be likely to result in both greater cropping intensity and also a switch to higher value bulkier crops. III. IRRIGATION IMPROVEMENT 21. Irrigation improvement under the project is to be geared towards rehabilitating existing gravity schemes which are no longer functional or extending the amount of irrigated land from existing water sources. Virtually all of the irrigation water would be for rice (paddy) in the wet season and in the dry season could be used for rice or other crops. While the financial returns from irrigation will vary considerably depending upon which other crops are grown in the dry season, it is prudent to undertake the economic analysis 3/ Because cartage of produce has to be done as soon as the crop is ready, in any location, this will be at about the same time for most farmers, thereby causing a strong demand for local transport facilities, in consequence, the SCF of 0.8 is used rather than 0.6 for Carabao sled transport on barangay roads which is not so time critical.  - 116 - Annex 10 Page 7 of 17 based on paddy. This is because paddy is the main tradable crop produced in the country and if, as a result of irrigation, production of higher value crops increases in the sub-project area, the likelihood is that it will be correspondingly reduced in other areas because the domestic market is probably the limiting factor; other land previously used for higher value crops would as a result revert to paddy. It is appropriate to do a marginal analysis using the actual crops grown in the sub-project areas only when the crops are tradables i.e. incremental production will either increase exports or reduce imports. 22. The impact of irrigation is assessed through a simple model set out on pages 15-17. This model looks at the incremental impact of increasing the area of land under irrigation. It considers situations where land which is not irrigated without project (either due to no system being present, or that part of the system under consideration being inoperative) becomes irrigated as a result of the project. WIP there would be 100% cropping in the wet season and some cropping in the dry season (average 50%), whilst WoP there would be unirrigated wet season cropping only. Implicitly, this assumes that the constraint to dry season production is water for rice and markets for upland crops. Thus even if some of the areas to be irrigated under the project were partially cropped with upland crops, WOP, this production would simply be shifted to other areas with no input or output reduction, consequently, the dry season rice grown and associated costs would be incremental. 23. Within the model, current financial output values and costs are adjusted by economic conversion factors (ECFs) to give the economic value of outputs and cost of inputs. The conversion factor for paddy of 0.71 is used to relate the domestic price (P7.5/kg) to the freight and milling adjusted international price (see Table on Page 17) . The same conversion factor is used for seed. For fertilizers, chemicals, animal traction for cultivation and harvest time transport the standard conversion factor of 0.8 is used (see para 4), while for labor the ECF is 0.6. A conversion factor of zero is applied to the irrigation fees as these are simply transfer payments and the cost of irrigation is included within the overall project costs. The conversion factor used on loan interest and insurance payment of 0.5 is designed to eliminate the interest charge but leave the insurance fee as a true cost of production. Threshing charges are basically labor costs and so the same ECF (0.6) is used for these as for labor. 24. The average financial costs for new irrigation are estimated at P72,000 including project design, while for rehabilitation the per hectare cost is estimated at P39,000. (These figures are in line with indexed up figures, to end 1995 for the Second Communal Irrigation Project, modified by an adjustment for EVAT). Annual O&M costs are estimated to average P550 per year or P370 per crop on a 150% average cropping basis. For irrigation construction the standard conversion factor of 0.8 is used. While the figure for O&M which has a higher labor content is 0.75. 25. The economic rates of return assuming the proportion of dry season cropping is 50% are 17% for new irrigation and 31% for rehabilitation, giving an average of 25% (based on 70% rehabilitation, 30% new construction). These ERRs are calculated taking account of additional working capital by considering incremental costs to be incurred on average three months ahead of receiving incremental benefits.  - 117 - Annex 10 Page 8 of 17 26. The investment costs of schemes and the proportion of dry season cropping will vary considerably from sub-project to sub-project. These are the key parameters in determining the economic viability of investment in irrigation and a careful review would need to be made of each scheme proposed, taking account of these two critical variables. A sensitivity analysis, holding other factors constant, for a range of investment costs and a range of dry season cropping intensities is shown in the table below. The bold figures of over 15% indicate combinations of investment costs and potential dry season cropping which would be likely to be economically viable. On the basis of this analysis, the maximum investment to be justified in irrigation for rice having 50% dry season cropping would be about P80,000 per hectare. But on specific schemes where there is a strong reason to believe higher cropping intensities are achievable, greater investment would be justified up to perhaps P105,000/ha. (gives 15% ERR at 85% dry season cropping). Sensitivity of ERR to Per ha Investment and Cropping Intensity (figures shown in table are ERR percentages) Investment Cost (P'000/ha) ----Proportion Dry Season Area Cropped---- 25% 50% 759 100% 25 37 47 57 66 50 18 25 30 36 75 11 16 20 24 100 7 11 15 18 27. The viability of irrigation development is also quite sensitive to rice prices. The base analysis has been done using WB estimates of world rice prices for the year 2000 (US$287/ton in constant 1996 prices for Thai 5% brokens ex Bangkok). However, within the WB projected range for rice prices at the 70% confidence level, economic returns (at average investment cost, and 50% cropping intensity) would vary as follows. Sensitivity of ERR to World Rice Prices World Rice4 Price $/ton ERR Basis of Economic Price 187 12% A. Bottom of WB's 70% confidence interval for 2000 287 25% B. WB Forecast Year 2000 (Base Case) 330 31% C. WB Forecast 1996 416 41% D. Top of WB's 70% confidence interval for 2000 28. Financial viability to farmers. Because the level of paddy prices in financial terms are well above economic prices (the current farmgate financial price of P7.5/kg relates to a world price of about US$436/ton), yet the charges made to farmers for irrigation are well below the economic cost of irrigation, investment in new irrigation or irrigation rehabilitation is very attractive at the farm level. The financial model indicates that in the base case situation 4/ Indicator Price for Thai 5% brokens ex Bangkok (Feb 6, 1996 estimates).  - 118 - Annex 10 Page 9 of 17 of 0S dry season cropping, improvements in farm income, after taking account of the cost of the farmers' own labor, would amount to some P13,000 per hectare. The incremental financial benefit:cost ratio to the farmer would be over 3:1 in the wet season, and about 2:1 in the dry season. It is likely that more progressive farmers who move from a non-irrigated situation to an irrigated situation, would take advantage of the opportunity to grow a wider diversity of crops than paddy alone and so considerably improve their income by growing higher value products such as vegetables - particularly in situations when the new irrigation and the associated network of field roads makes cartage between the farm and market simpler and cheaper. IV. OTHER DIRECT INVESTMENT 29. The third main area of investment under the project is investment by ARC level businesses, farmers, cooperatives and private traders in commercial activities which are catalyzed by improved rural infrastructure, community development and business training. These investments would be made on a commercial basis either using farmers', traders' or other business enterprises' equity, or else using money borrowed from various commercial sources including LBP. Types of development likely to take place within the project ARCs would include: - livestock development (poultry, pigs, cattle fattening); - fruit tree crops; - incremental inputs for the production of annual crops (e.g. more fertilizer, chemicals etc. for rice); - grain drying facilities; - grain storage facilities; - processing facilities, particularly rice milling; and - transportation (tricycles, jeepneys, etc.). 30. Financial and economic returns from this range of investments would clearly vary depending on the local market, the skills of the entrepreneur, etc. However, experience elsewhere in the Philippines indicates that once areas become accessible, the types of investment outlined above follow and, given the general economic climate within the country, such investments would only be made if the entrepreneur decision makers and the banks financing them, believe they will achieve financial rates of return of well in excess of 20%. Under this project a significant proportion of the costs of these investments would be born by the entrepreneurs themselves. Consequently, they would only be undertaken in the expectation that they would be profitable. It is only in the case of storage buildings that there are likely to be subsidy elements (around 25%) which might result in decisions being made without the expectation of the sub-project being fully commercially viable. Preliminary estimates are that within the project ARCs, total direct investment amounting to some P7 million per ARC (in base cost terms) would be made over a six year period. A reasonable assumption might be that such investments would show an FRR of 25%, with a similar ERR (overall, the downwards adjustment from FRR to ERR resulting from agricultural goods with protected prices is assumed to be offset by the shadow prices of labor and the taxes on imported inputs and transport).  - 119 - Annex 10 Page 10 of 17 V. POSSIBLE BENEFITS FROM COMMUNITY DEVELOPMENT AND TRAINING 31. The estimated overall cost of project management and the provision of community and business support services amounts to about P290 million at base prices. Before the project, about 80,000 families of average family income 325,000 per year would be living in the ARC areas supported by the project. If, as a result of improved management and organization, the project is able to increase family incomes by 1% in year three, rising to 4%5 in years six through 20 (over and above the increases which come directly from investment in irrigation, improved roads, or agricultural enterprises), then the training/management component of the project would show an economic rate of return of about 20%. Clearly, provided a modest uplift in incomes can be achieved as a result of the project, it would be well worthwhile in economic terms. 5/ e.g. if family incomes would have remained at P25,000 in real terms WOP, they would need to reach P26,000 in real terms WIP from years 6-20.  - 120 - Annex 10 Page 11 of 17 Rural Road Model A. KEY BASIC PARAMETERS TOTAL POPULATION SERVED 4,000 POPULATION GROWTH RATE (p.a.) 2.5% PROPORTION OF FARMERS IN POPULATION 80.0% ARB & OTHER AGRICULTURAL POPULATION 3,200 AGRICULTURAL FAMILY SIZE (nutber) 6.0 LAND/AGRICULTURAL FAMILY (ha) 2.0 Fin Pr ECF Ec Cost AVERAGE ECONOMIC ROAD COST/KM (P'000) 748 0.80 598 ANNUAL ECON MAINT/KM WOP (P'000) 30 0.75 23 ANNUAL ECON MAINT/KM WIP (P'000) 45 0.75 34 ROAD LENGTH (Km) 5.0 AVERAGE JOURNEY LENGTH (km) 3.0 B. ESTIMATES OF TRAFFIC VOLUME & MIX 1. VEHICLE COMPOSITION - PROPORTION FREIGHT CARRIED WITHOUT PROJECT: WITH PROJECT: CARABAO 20% JEEPNEY 70% JEEPNEY 80% TRUCK 30% 2. VEHICLE COMPOSITION - PASSENGER TRAFFIC WITHOUT PROJECT: WITH PROJECT: TRICYCLE 70% TRICYCLE 30% JEEPNEY 30% JEEPNEY 70% 3. AGRICULTURAL TRAFFIC ESTIMATES WOP WIP TOTAL NUMBER OF FARMERS 533 533 AGRICULTURAL AREA (ha) 1,067 1,067 AGRICULTURAL OUTPUT (t/ha/yr) 4 5 PURCHASED INPUTS (t/ha/yr) 0.2 0.3 % OUTPUT SHIPPED 40% 60% 4. TRIP GENERATING FACTORS FOR NON-AGRI TRAFFIC (Philippine Standard Data) AVE. NON-AGRI COMMODITIES/DAY ROAD CONDITION IN KG PER POPULATION GOOD-FAIR/BAD (WIP) 2.0 BAD-BAD/VERY BAD 1.6 VERY BAD (WOP) 0.6 EARTH 0.5 IMPASSABLE 0.4 5. TRIP GENERATING FACTORS FOR PASSENGERS (Philippine Standard Data) TRIP RATE PER ROAD CONDITION CAPITA PER DAY GOOD-FAIR/BAD (WIP) 0.12 BAD-BAD/VERY BAD 0.10 VERY BAD (WOP) 0.08 EARTH 0.03 IMPASSABLE 0.01  - 121 - Annex 10 Page 12 of 17 6. AVERAGE LOADING & ECONOMIC VOC per KM TON KM & PASSENGER KM (Philippine Standard Data) FREIGHT PASSENGERS ---- VOCIKM ---- ---- VOC/TKH--- (ton) (number) WOP WIP WOP WIP CARABAO 0.15 10.500 70.000 n.a. JEEPNEY (FR) 1 6.896 3.094 6.896 3.094 TRUCK 8 7.012 0.877 --- -VOC/PKM--- TRICYCLE 3 5.250 1.663 1.750 0.554 JEEPNEY (PAX) 11 9.195 3.822 0.836 0.347 C. AVERAGE DAILY TONNAGE OF FREIGHT & NUMBER OF PASSENGER TRIPS --------WITHOUT PROJECT -------- ----------WITH PROJECT--------- ---INCREMENTAL-- YEAR POP AGRI NON AGR TOTAL PAX AGRI NON AGR TOTAL PAX TOTAL PAX FREIGHT FREIGHT FREIGHT FREIGHT FREIGHT FREIGHT FREIGHT -2 4,000 5.3 2.4 7.7 320 0.0 0 -1 4,100 5.3 2.5 7.7 328 0.0 0 0 4,203 5.3 2.5 7.8 336 0.0 0 1 4,308 5.3 2.6 7.8 345 1.9 8.6 10.5 517 2.7 172 2 4,415 5.3 2.6 7.9 353 3.9 8.8 12.7 530 4.8 177 3 4,526 5.3 2.7 8.0 362 5.8 9.1 14.8 543 6.9 181 4 4,639 5.3 2.8 8.0 371 7.7 9.3 17.0 557 8.9 186 5 4,755 5.3 2.9 8.1 380 9.6 9.5 19.2 571 11.0 190 6 4,874 5.3 2.9 8.2 390 9.6 9.7 19.4 585 11.2 195 7 4,995 5.3 3.0 8.3 400 9.6 10.0 19.6 599 11.4 200 8 5,120 5.3 3.1 8.3 410 9.6 10.2 19.9 614 11.6 205 9 5,248 5.3 3.1 8.4 420 9.6 10.5 20.1 630 11.7 210 10 5,380 5.3 3.2 8.5 430 9.6 10.8 20.4 646 11.9 215 11 5,514 5.3 3.3 8.6 441 9.6 11.0 20.7 662 12.1 221 12 5,652 5.3 3.4 8.7 452 9.6 11.3 20.9 678 12.3 226 13 5,793 5.3 3.5 8.7 463 9.6 11.6 21.2 695 12.5 232 14 5,938 5.3 3.6 8.8 475 9.6 11.9 21.5 713 12.7 238 15 6,086 5.3 3.7 8.9 487 9.6 12.2 21.8 730 12.9 243 16 6,239 5.3 3.7 9.0 499 9.6 12.5 22.1 749 13.1 250 17 6,395 5.3 3.8 9.1 512 9.6 12.8 22.4 767 13.3 256 18 6,554 5.3 3.9 9.2 524 9.6 13.1 22.8 787 13.6 262 19 6,718 5.3 4.0 9.3 537 9.6 13.4 23.1 806 13.8 269 20 6,886 5.3 4.1 9.4 551 9.6 13.8 23.4 826 14.0 275 D. AVERAGE VEHICLE OPERATING COSTS PER TON KM OR PASSENGER KM ---- P - ----WIP--- SAVING FREIGHT (per tkm) % VOC/tkm % VOC/tkm VOC/tkm CARABAO 20% 70.00 JEEPNEY 80% 6.90 70% 3.09 TRUCK 30% 0.88 WEIGHTED AVERAGE 19.52 2.43 17.09 PASSENGERS (per pkm) ,- % VOC/pkm % VOC/pkm VOC/pkm TRICYCLE 70% 1.75 30% 0.55 JEEPNEY 30% 0.84 70% 0.35 WEIGHTED AVERAGE 1.48 0.41 1.07  - 122 - Annex 10 Page 13 of 17 E. ECONOMIC COST & BENEFIT FLOW (P/000) VOC VOC 0 & M TOTAL SAVINGS SAVINGS -GEN BENEFITS- 0 & M TOTAL NET YEAR INVEST COST OUTFLOW FREIGHT PSGR FREIGHT PAX COST INFLOW FLOW COST WIP WOP VOL WOP VOL WOP -1 299 299 0 (299) 0 2,693 2,693 0 (2,693) 1 169 169 147 402 25 201 113 888 719 2 169 169 148 412 45 206 113 924 755 3 169 169 149 423 64 211 113 960 791 4 169 169 151 433 84 217 113 997 828 5 169 169 152 444 103 222 113 1,034 865 6 169 169 153 455 105 228 113 1,053 885 7 169 169 155 467 106 233 113 1,073 905 8 169 169 156 478 108 239 113 1,094 925 9 169 169 157 490 110 245 113 1,115 946 10 169 169 159 502 111 251 113 1,136 968 11 169 169 160 515 113 258 113 1,159 990 12 169 169 162 528 115 264 113 1,181 1,013 13 169 169 163 541 117 271 113 1,205 1,036 14 169 169 165 555 119 277 113 1,228 1,060 15 169 169 167 569 121 284 113 1,253 1,084 16 169 169 168 583 123 291 113 1,278 1,109 17 169 169 170 597 125 299 113 1,303 1,135 18 169 169 172 612 127 306 113 1,330 1,161 19 169 169 174 628 129 314 113 1,357 1,188 20 169 169 176 643 131 322 113 1,384 1,216 ECONOMIC RATE OF RETURN 27% F. AVERAGE DAILY VEHICLE USE (NUMBERS OF VEHICLE TRIPS) --------WITHOWT PROJECT --------- ----------WITH PROJECT--------- --- INCREMENTAL VEHICLE USE--- YEAR . .FREIGHT .... ... PASSENGER ... . .FREIGHT .... ... PASSENGER.... CARABAO J'NY TRICYCLE JINY J'NY TRUCK TRICYCLE J'NY CARABAO TRICYCLE J'NY TRUCK -2 10.2 6.1 74.7 8.7 -1 10.3 6.2 76.5 8.9 0 10.4 6.2 78.4 9.2 1 10.5 6.3 80.4 9.4 7.4 0.4 51.7 32.9 (10.5) (28.7) 24.6 0.4 2 10.5 6.3 82.4 9.6 8.9 0.5 53.0 33.7 (10.5) (29.4) 26.6 0.5 3 10.6 6.4 84.5 9.9 10.4 0.6 54.3 34.6 (10.6) (30.2) 28.7 0.6 4 10.7 6.4 86.6 10.1 11.9 0.6 55.7 35.4 (10.7) (30.9) 30.8 0.6 5 10.8 6.5 88.8 10.4 13.4 0.7 57.1 36.3 (10.8) (31.7) 32.9 0.7 6 10.9 6.5 91.0 10.6 13.6 0.7 58.5 37.2 (10.9) (32.5) 33.6 0.7 7 11.0 6.6 93.2 10.9 13.7 0.7 59.9 38.1 (11.0) (33.3) 34.4 0.7 8 11.1 6.7 95.6 11.2 13.9 0.7 61.4 39.1 (11.1) (34.1) 35.2 0.7 9 11.2 6.7 98.0 11.5 14.1 0.8 63.0 40.1 (11.2) (35.0) 36.0 0.8 10 11.3 6.8 100.4 11.7 14.3 0.8 64.6 41.1 (11.3) (35.9) 36.8 0.8 11 11.4 6.9 102.9 12.0 14.5 0.8 66.2 42.1 (11.4) (36.8) 37.7 0.8 12 11.5 6.9 105.5 12.3 14.7 0.8 67.8 43.2 (11.5) (37.7) 38.6 0.8 13 11.6 7.0 108.1 12.6 14.9 0.8 69.5 44.2 (11.6) (38.6) 39.5 0.8 14 11.8 7.1 110.8 13.0 15.1 0.8 71.3 45.3 (11.8) (39.6) 40.4 0.8 15 11.9 7.1 113.6 13.3 15.3 0.8 73.0 46.5 (11.9) (40.6) 41.3 0.8 16 12.0 7.2 116.5 13.6 15.5 0.8 74.9 47.6 (12.0) (41.6) 42.3 0.8 17 12.1 7.3 119.4 14.0 15.7 0.8 76.7 48.8 (12.1) (42.6) 43.3 0.8 18 12.3 7.4 122.4 14.3 15.9 0.9 78.7 50.1 (12.3) (43.7) 44.3 0.9 19 12.4 7.4 125.4 14.7 16.2 0.9 80.6 51.3 (12.4) (44.8) 45.4 0.9 20 12.5 7.5 128.5 15.0 16.4 0.9 82.6 52.6 (12.5) (45.9) 46.4 0.9  - 123 - Annex 10 Page 14 of 17 Farm Road Model Basic Parameters Financial ECF Economic A. Road Cost per Km (P'000) 137 0.80 109.6 B. Maintenance Cost/km/yr 1 0.75 7.5 C. Length (km) 2 D. Area Served (ha) 180 E. Average journey (km) 1.25 F. Yield/ha/year 5.00 G. Total Produce Hauled (tons) 900 H. Total Tonkms of transport 1,125 Transport Costs Cost/km Av Load Unit Cost ECF Econ Cost Peso Tons P/tkm _ P/tkm I. Carabou Sled (WOP) 17.5 0.15 116.7 0.80 93.3 J. Carabou Cart (WIP) 20 0.75 26.7 0.80 21.3 K. Savings per tonkm (l-J] 90.0 72.0 L AnnuaL Savings (P'000) [H*KJ/1000 101.2 81.0 Calculation of ERR (P'000) year Capital O&M Total Total Net Econ [A*CJ [B*C] Cost Benefits Benefit 0 219 219 -219 1 15 15 81 66 2 15 15 81 66 3 15 15 81 66 4 15 15 81 66 5 15 15 81 66 6 15 15 81 66 7 15 15 81 66 8 15 15 81 66 9 15 15 81 66 10 15 15 81 66 11 15 15 81 66 12 15 15 81 66 13 15 15 81 66 14 15 15 81 66 15 15 15 81 66 16 15 15 81 66 17 15 15 81 66 18 15 15 81 66 19 15 15 81 66 20 15 15 81 66 ECONOMIC RATE OF RETURN 27X  - 124 - Annex 1 0 Page 15 of 17 Irrigation Model (oer ha) WITH PROJECT (WIP) Financial Economic Unit VoLume Price Value ECF VaLue (WET SEASON CROP - IRRIGATED) Paddy Sales kg 3,300 7.5 24,750 0.71 17,628 Costs Seed kg 100 9 900 0.71 641 Fertilizer kg as 100 18 1,800 0.80 1,440 Chemicals Peso 800 1 800 0.80 640 Labor (incl family) md 55 70 3,850 0.60 2,310 Animal Power ad 10 140 1,400 0.80 1,120 Irrigation Fee ha 1 925 925 0.00 0 Loan Int/Ins Pmt Peso 8,000 20% 1,600 0.50 800 Threshing Charge cavan 66 15 990 0.60 594 Cartage to Barangay cavan 66 4 264 0.80 211 Costs 12,529 7,756 Margin 12,221 9,872 (DRY SEASON CROP - IRRIGATED) Paddy Sales kg 3,500 7.5 26,250 0.71 18,696 Costs Seed kg 100 9 900 0.71 641 Fertilizer kg as 100 18 1,800 0.80 1,440 Chemicals Peso 700 1 700 0.80 560 Labor (incl family) md 70 70 4,900 0.60 2,940 AnimaL Power ad 10 140 1,400 0.80 1,120 Irrigation Fee ha 1 925 925 0.00 0 Loan Int/Ins Pmt Peso 8,000 20% 1,600 0.50 800 Threshing Charge cavan 70 15 1,050 0.60 630 Cartage to Barangay cavan 70 4 280 0.80 224 Dry Season Costs 13,555 8,355 Margin for Crop 12,695 10,341 AnnuaL Margin (100% Dry Season Cropping) 24,916 20,213 AnnuaL Margin (50% Dry Season Cropping - Base Case) 18,568 15,042 WITHOWT PROJECT (WOP) (WET SEASON CROP ONLY - UNIRRIGATED) Paddy Sales kg 2,100 7.5 15,750 0.71 11,218 Costs Seed kg 100 9 900 0.71 641 Fertilizer kg as 75 18 1,350 0.80 1,080 Chemicals Peso 550 1 550 0.80 440 Labor (incl family) md 70 70 4,900 0.60 2,940 AnimaL Power ad 10 140 1,400 0.80 1,120 Loan Int/Ins Pmt Peso 0 20% 0 0.50 0 Threshing Charge cavan 42 15 630 0.60 378 Cartage to Barangay cavan 42 10 420 0.80 336 Costs 10,150 6,935 Annual Margin 5,600 4,283 Wet Season Improvement 6,621 5,589 Dry Season Improvement (100% Cropped) 12,695 10,341 Potential Improvement (100% Dry Season Crop WIP) 19,316 15,930 Average Improvement (50% Dry Season Crop WIP - Base Case) 12,969 10,760  -125- Annex 10 Page 16 of 17 Base Case Irrigation Cost/ha (P'OO0) Financial ECF Econ New 72,000 0.80 57,600 Rehab 39,000 0.80 31,200 Average 48,400 0.80 38,720 O&M 550 0.75 413 X Dry Season Cropping 50X Economic Rate of Return CalcuLation (Average) ADJ a/ YEAR INVESTMENT O&M COSTS - INCR COSTS---- ---INCR BENEFITS--- NET ECON NET ECON COST U SEASON D SEASON W SEASON D SEASON FLOW FLOW -1 (3,872) (3,872) (3,872) 0 (34,848) (34,848) (35,939) 1 (413) (821) (4,178) 6,410 9,348 10,347 10,347 2 (413) (821) (4,178) 6,410 9,348 10,347 10,347 3 (413) (821) (4,178) 6,410 9,348 10,347 10,347 4 (413) (821) (4,178) 6,410 9,348 10,347 10,347 5 (413) (821) (4,178) 6,410 9,348 10,347 10,347 6 (413) (821) (4,178) 6,410 9,348 10,347 10,347 7 (413) (821) (4,178) 6,410 9,348 10,347 10,347 8 (413) (821) (4,178) 6,410 9,348 10,347 10,347 9 (413) (821) (4,178) 6,410 9,348 10,347 10,347 10 (413) (821) (4,178) 6,410 9,348 10,347 10,347 11 (413) (821) (4,178) 6,410 9,348 10,347 10,347 12 (413) (821) (4,178) 6,410 9,348 10,347 10,347 13 (413) (821) (4,178) 6,410 9,348 10,347 10,347 14 (413) (821) (4,178) 6,410 9,348 10,347 10,347 15 (413) (821) (4,178) 6,410 9,348 10,347 10,347 16 (413) (821) (4,178) 6,410 9,348 10,347 10,347 17 (413) (821) (4,178) 6,410 9,348 10,347 10,347 18 (413) (821) (4,178) 6,410 9,348 10,347 10,347 19 (413) (821) (4,178) 6,410 9,348 10,347 10,347 20 (413) (821) (4,178) 5,876 9,348 10,347 11,597 Average ERR for Project (as above) 25% ERR for New Construction 17X ERR For RehabiLitation 31X a/ Incremental Costs are incurred on average 3 months ahead of IncrementaL Benefits.  - 126 - Annex 10 Page 17 of 17 Estimate of Economic Price of Paddy at Barangay and the ECF for Paddy FinanciaL -------Economic----- Pesos/ton ECF Pesos/ton USS/ton Rice Rice World Price (forecast for 2000 in '96 terms) a/ 287.0 Quality Adj (5% broken - 25% broken) b/ 20.0 Freight to Philippines 40.0 307.0 Landed Cost Manila (@Peso 26/US$) 7.982 Port Handling 150 0.80 120 4.6 Importers Margin (7.5%) 599 1.00 599 23.0 Transport to Wholesale Center 200 0.80 160 6.2 Wholesalers Margin (3%) 268 1.00 268 10.3 Rice at Philippines Wholesale Market 9.129 351.1 Less Rural Mill to Market (incl sacks, shrinkage transport) 610 0.80 488 18.8 Free at Rural Mill 8.641 332.3 - Milling Cost 480 0.80 384 14.8 + Bran Value (P5/kg - 10 kg bran/65kg rice) 769 0.75 577 22.2 Value to Trader/Miller in Rice Terms 8.833 339.7 Paddy Paddy Convert to Paddy (65%) 5,742 220.8 Less Paddy Traders Cost & Margin 500 0.80 400 15.4 Ex Barangay Value Dry Paddy Basis 5,342 205.5 Domestic Price Paddy (P/ton) 7,500 ECF For Paddy (Economic/Domestic [5,342/7,500J) 0.71 Memo: Economic Retail Price of Rice based on WB 2000 estimate. Wholesale Price 9,129 351.1 Transport to Shop P300/ton 300 7.8 Retail Margin + 10% 943 24.5 Retail Price 10,371 398.9 a/ WB Indicator price for year 2000 in 1996 currency terms (Feb '96 estimate) b/ Based on 1995 differential of USS30 per ton between indicator prices for 5% and 35% brokens i.e. differential between 5% and 25% brokens is 2/3 X US$30 = US$20/ton.   - 127 - Annex 11 PHILIPPINES AGRARIAN REFORM COMMUNITIES DEVELOPMENT PROJECT DOCUMENTS IN PROJECT FILE 1. Identification Mission' Reports (a) Agricultural Report (D'arcy Gibbs, November 1994) (b) Potential for NGOs' Involvement (Alan Smith, December 1994) (c) Challenges for ARCs (Patricia Ruby, November 1994) (d) Cooperatives and ARCs (Raul Montemayor, November 1994) (e) Problems and Prospects of Community Organizations (Alvin Ulrich, November 1994) 2. Prolect Preparation Reports (a) Economic and Financial Aspects (Jan Vingerhoets, June 1995) (b) Agriculture Development and Livelihood Support Program for ARCs (Raul Montemayor, June 1995) (c) Community Development and NGO Participation (Roel Ravanera, June 1995) (d) Project Implementation and Financing Arrangements [Johnson (Ton) Mercader, November 1995) (e) Rural Infrastrcutre, rural roads and irrigation (Israel Noar, June 1995) 3. Working Papers (a) Rural Infrastructure (Timothy Jackson, March 1996) (b) Community Development and Technical Assistance (Dorothy Lucks and Roel Ravanera, November 1995) 4. Project's Operations Manual   IBRD 27553 6- 12'1~~~ 144- 1; CLASSIFICATION OF PROVINCES BY ADMINISThATIV! REGIONS I ILOCOS VI WESTERN VSAYAS PHILIPPINES -20- 1 hc ah38 Aklon _W 2 loeo SNOw 39 Cap8 3 La Union 40 Ahiaque BATAJES 4 Pangainon 41 lao a 6 NATIONAL CAPITA CORDILLERA ADMINISTRATWE 42 Negro Oclddwt Q REGION (CAM 43 Gninx _ t_ NaBOUN_ES 5 Afr Vii CENTRALVISAYAS O 6 * uain P 44 _ Co _iw REGION BOUNDARIES 8 ahgo, 46 Ua"ol 9 Bnngud 47 Sqqr 1 INTERNATIONAL BOUNDARIES 11 CAGAYAN VALLEY VIII NSMVISAYAS 10 Solon.. 48 Norlbem So.w 6 * ~~~~~~~~~~~~~NOE- hemw Awa~ olbgonsw mid Provning eiwo on #Aop 1 1 Cogaan 49 Waem tSamw 12 2kablo 50 Ea" SnS w t R d.ini/n aswoa b,loH.f I 13 Nu.a VIa 51 L1 . 14 Quin 52 Suwwttn 2 1y2- III CENTtALWZON 53 Wwiron l 2 1 1 SNL Edja IX WESIERN MNDOANA 16 c S46Twl 5 ZonNboong,d Nt. .: 17 nbooninl 55 ZWnboa dSwr 18 kPnpongo 56 BwianI P 20 Bn ~~~~~X N0frIHE N MINDKA KLOM wv)2;*&TM 1 20 Bolkor, 57 Suio elNro NA&TIONAL CAPrrAL REGION (NCR) 58 Com4gn ; 4 .-o IV SOL1TH1EN' TAGALOG 59Au15dlNf 21 Aurora ~~~60 Noo,*itOriened 6 23 Aurorm 61 _m _i O/dwdol L U Z 0 ,N 23 Ri- 62 &hbdnon 17 19 - 24 C.,il e~~~~3 Ahumn d W X\\g.PIlPN Sur . 24V Cnisg 63Augon. 1, 25 Wgunc, Xi SOUTHERN MJNOANWO 25 Sang 64 Surigoo,del Sw23ILP NE A 27 Morlnd 66 70 tnoo d Norl 28 Cd6n AUONMOSRSOO ow 1-4. I p ,. -K6 28 Min,doro Orignio 67 Do1oo del Sw ' 29 R~nombioddno 68 SouhI Colobaft 33MA 69< Umnar 31J4 g.t -; Xilwt I 5q+tALg+9ND < A V BICOI. 70 Loa de No' 3 2ComdosIn Node 70Lnode ot 33 Cmn.wdeSur 7 T sub.. Ku* 34 Conkondunon AUTOVNOMOUS REGION OF 35 Ajbo1 MWUSt MINDANAO ~AW4 2 36 Suloun 72 Lanoo delSu w 37 m_osbo. 73 Mog> ulndo6 75 WuIu4 123 76 Tmwi,ow 1 SCOUTH CHINA SEA v CI & 6 <0, PACZFIC t ttPALA0 t) '-e' d Scl<t W.Ra:~~~~~~~~~~~~~~~~~~e' , A. h-d iel..y - de- or or PACIF)C O hO OCEAN MAUAO pP~4ES R" U Celebes Sea, h I N a OJN1 0 1 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 17tr 1 f4'1T lIjl1995 lwimc * 2 Rgpii#bil 13SITIR F    I-D L,Ll .1U ti ll' I.-. ,.n . T) C-) x'D P