RESTR I CTED Report No. PTR-68a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF A HIGHWAY PROJECT PHILIPPINES March 25, 1971 Transportation Projects Department Currency Equivalents: Currency Unit - Pesos (t) U$1 - = P 6.oo P 1 = U6$0.17 P 1 million = U$166,667 * The exchange rate has been floating since February 21, 1970; the rate used in this report is indicated above. Fiscal Year: July 1 to June 30 bystem of Weights and Measures: Metric Metric: British/US Equivalent 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 sqruare kilometer (km2) = 0.386 square mile (sq mi) 1 kilogram (kg) = 2.205 pounds (lb) 1 metric ton ( m ton) 0.98 long ton (lg ton) = 1.1 Ub short tons (sh tons) Abbreviations and Acronyms: BPH Bureau of Public Highways UNDP = United Nations Development Programme NIP = Net Domestic Product PNR = Philippine National Railways PRC = Philippine Railroad Company BOC = Bureau of Customs BPW = Bureau of Public Works DPWC = Department of Public works and Communications GRT = Gross Register Ton PAL = Philippine Air Lines CAB = Civil Aviation Board HbF = Highway bpecial Fund AJJB = Asian Development Bank voC = Vehicle Operat ig Costs PHILIPPINES APPRAISAL OF A HIGHWAY PROJECT TABLE OF CONTENTS Page No. SUMMARKY AND CONCLUSIONS ................. . . .. . . . . . .. . . i-ii I. INTROD9UCTION .................1 II. BACKGROUND ........ o.. ......2 A. General . ................... 2 B. Transportation ..... 2... .. -. .. ... t. 2 C. Transport Planning and Coordination .... 4 III. TRE HIGHWAY SECTOR .5..................... 5 A. Highway Network ... .... 5 B. Highway Traffic .. . .......... 6 C. Highway Administration . ...... 7 D. Highway Planning and Financing ......... 7 E. Highway Design and Construction 8 F. Highway Maintenance . ..... 9 IV. THE PROJECT ...................... .. ....... 10 A. General............. 10 B. Construction and Improvement ........... 10 C. Consulting Services for Detailed Engineering and Construction Supervision ... ... ........ 11 D. Feasibility Studies 11 E. Technical Assistance to BPH. 11 F. Cost Estimates and Foreign Exchange Component a 12 G. Project Financing and Execution 14 H. Disbursements . .15 V. ECONOMIC EVALUATION ......................... 16 A. General ..... ..000... .... 16 B. Cotabato - Digos Road .................. 16 VI. RECOMMENDATIONS 17 (Continued) TABLE OF CONTENTS (Continued) TABLES: 1. Domestic Goods and Passenger Transport 1968 2. Five-Year Infrastructure Program FY 1971-1975 3. Highway Network 1969 4. Motor Vehicle Statistics 1962-1969 5. Motor Vehicle Gasoline Consumption PY 1962-1969 6. Revenues from Use and Ownership of Motor thicles PT 19665w1969 7. Expenditures on Highways FY 1967-1975 8. Design Standards 9. Roads Included for Feasibility Studies 10. Estimated Schedule of Disbursements 11. Estimated Traffic Volumes on Cotabato-Digos Reo 1968-1992 12. Vehicle Operating Costs 13. Rates of Return of Cotabato-Digos Road ANNEX: Interim Measures for Reorganization of the Bureu oif Publie Highways CHART: Existing Bureau of Public Highways Organisation MAP Republic of the Philippines - Highway Project. PHILIPPINES APPRAISAL OF A HIGHWAY PROJECT SUHMARY AND CONCLUSIONS i. This report appraises a project in the Philippines for: con- struction and improvement in Mindanao of the 160 km road between Cotabato and Digos; consulting services to the Bureau of Public Highways (BPH) for detailed engineering of several roads and construction supervision of the above road; feasibility studies of about 1,000 km of roads; and technical assistance to improve the administration and operations of the BPH. This would be the second transportation loan to the Philippines; the first hav- ing been for harbor dredging in 1961. ii. The Philippine islands have historically depended on the sea and until recently, transport development was oriented toward island and over- seas trading. The difficult terrain, heavy rainfall, and poor soil condi- tions have tended to discourage cheap land transport. During World War II, most land transport infrastructure then in existence was destroyed. Reha- bilitation of the land transport system has been slow, and economic growth has made increasing demands on the inadequate system. For this reason, the Government of the Philippines and the United Nations Development Pro- gramme (UNDP) undertook in 1968 an overall Transport Survey for which the Bank acted as Executing Agency. Following the Survey's recommendations, the Government now places highest priority on highway network improvements and intends to improve about 13,000 km during the next 5 years. iii. The 160 km Cotabato-Digos Road, which was given high priority in the Transport Survey, is the only overland link between eastern and western Mindanao, the second largest Philippine island. This road serves large corn and rice-producing regions rich in agricultural potential. Although it is heavily trafficked, most of the road is unpaved and is nearly impas- sable during the monsoon season. Improvement to a two-lane paved standard is, therefore, of high priority and should yield a rate of return of 18Z from savings in vehicle operating costs. Detailed engineering of this road and of two other roads in Luzon (Lucena-Legaspi and Cabanatuan- Tuguegurao) is included in the project for retroactive financing (about US$750,000 equivalent). The two latter roads, totalling 765 km, will be improved with bilateral assistance from Japan, which supplied equipment for this purpose. iv. The project also includes feasibility studies to determine priori- ties for improvement of a further 1,000 km of roads, together with technical assistance to help the Government increase the efficiency of the BPH. The Government has requested financial assistance from the UNDP for both feasi- bility studies and technical assistance, with the Bank as the Executing Agency. Consulting services also will be provided under the project for subsequent detailed engineering of roads identified by the feasibility studies as being of highest priority. - ii - v. The total project cost, including contingencies and interest during construction, is estimated at US$15.8 million equivalent. The foreign exchange costs, corresponding to 63% of, project costs, would be about US$9.9 million; of that amount the Government is requesting a Bank loan of US$8.0 million for construction costs and consulting services, and UNDP finance of US$1.9 million for studies and technical assistance. Local costs will be met by the Government. The construction eontracts will be awarded after international competitive bidding; construction supervision and other expert services will be carried out by consultants. The BPH will be responsible for project execution. vi. The project is suitable for a Bank loan of US$.O million equiva- lent. Based on the economic life of the project, an approptiate term of the proposed loan is 24 years including four years of grace. PHILIPPINES APPRAISAL OF A HIGHWAY PROJECT I. INTRODUCTION 1.01 The Governmen. of the Philippines has asked the Bank to help finance a highway project consisting of: (a) construction and improvement of about 160 km of primary road between Cotabato and Digos; (b) consulting services to the Bureau of Public Highways (BPH) for detailed engineering of a number of roads and for construction supervision of the above road; (c) feasibility studies of other high priority roads; and (d) technical assistance to the BPH. The project cost is about US$15.8 million equivalent. The proposed loan of US$8.0 million equivalent is for the foreign exchange costs of items (a) and (b) and for interest during construction. The Government has requested US$1.9 million from the United Nations Development Programme (UNDP) for items (c) and (d). 1.02 This would be the second Bank loan in the Philippines for trans- portation. The first loan (290-PH, June 1961) was US$8.5 million equivalent for harbor dredging. Performance for that project was only fair and the undisbursed balance of about US$1.1 million was cancelled on the closing date. Groundwork for this current project was laid in 1967 when the Bank assisted the Government in requesting UNDP finance for a Transport Survey. The Survey was carried out in 1968/69 by METRA International of Prance in association with SAUTI of Italy; the Bank acted as the Executing Agency. The current project is based on the findings of the Survey. 1.03 This report was written by Messrs. M. W. Dickerson (Engineer) and H. Hansen (Economist), who appraised the project in July 1970, and was edited by Mrs. P. Valad. Mr. A. Imperatrice (Consultant) participated in the appraisal mission to deal with organizational matters. II. BACKGROUND A. General 2.01 The Republic of the Philippines lies in the North'Pacific Ocean off the southeast coast of Asia and consists of some 7,000 islands with a land area of about 300,000 km2 (roughly the same size as. Italy). Luzon, which includes the capital city of Manila, and Mindanao'are=the two largest islands and make up about two-thirds of the area. They also account'for three-quarters of the 36.6 million population. The annual population growth rate of about 3.1% is among the highest in the world. 2.02 Agriculture is the basis of the economry. It geherates about 35% of the Net Domestic Product (NDP), accounts for about 70% of export earnings (coconut, forestry products, and sugar), and employs about 55% of the labor force. About 28% of the areA is cultivated (primarily rice and corn) and about 33% is commercial forests. Manufacturing accounts for about 17% of the NDP, considerably more than in nearby Malaysia, Thailand, and Indonesia. The Philippines has abundant natural resources, with par- ticular potential for tropical agriculture, forestry, and mineral develop- ment (copper, gold, iron, chrome, and nickel). Economic growth in i970 was 4.4%. Gross National Product per capita is about US$160. 2.03 Economic development in the Philippines depends on access to the various geographical regions. h'ith its many islands, trade has prin- cipally been by water. On the larger islands, however, the difficult terrain, heavy rainfall, and poor soil conditions have tehided to dis8- courage cheap land transport. As a result, the Philippines is cur'rently served by both a fairly extensive maritime network linking scattered iS- lands and an inadequate system of land transport within the islands. In- dustrial and agricultural activity is, as a result, concentrated in the coastal areas. Table 1 shows domestic trAnsport volumes by mode. B. Transportation (a) General 2.04 During World War II, most of the transport infrastructure was destroyed. Since the War, funds for transport infrastructure have been limited and reconstruction has been slow. There have also been deficien- cies in transport administration and organization. Emphasis has been placed on short-term requirements rather than on long-term needs. Rmc- ognizing these deficiencies and the importance of economic plannihg in the transport sector, the Government in 1968 requested UN P finance for a Transport Survey (para. 1.02). This Survey reviewed the existing transport system and recommended improvements, based on a ten-year trans- port investment program (FY 1971-1980). Recoimenlations for organiza- tional changes were also included in the Strvey. Feasibility studies of high priority highways were carried out under the Survey. 2.05 The Government also, in 1968, created a Commission on Reorgani- zation which reviewed overall Government structure, including transport coordination, and is recommending steps for improvement. These recommend- ations will be submitted for Congressional action in May 1971 (para. 2.17). 2.06 The new Five-Year Infrastructure Program (FY 1971-1975) reflects the high priority given to improvement of the transport system. Approximately 45% of the Program has been allocated to transportation with 70% of this in- vestment going to highways (Table 2). (b) Highways 2.07 The highway network (Table 3), consisting of about 13,000 ka of paved roads and about 51,000 km of unpaved roads, is concentrated on the islands of Luzon, Samar, Leyte, and Mindanao. Past highway planning, main- tenance, and construction have been inadequate. Vehicle overloading, fre- quent wash-outs of bridges, and an inadequate feeder road network have resulted in pbor quality service and high road transport costs. The high- way system is discussed further in Chapter III. (c) Railways 2.08 There are two Government-owned railways: the Philippine National Railways (PNR) and the Philippine Railroad Company (PRC). PNR is the most important, with 1,028 km ot single-line track on Luzon; PRC plays an insig- nificant role, with only about 117 km of line on the islands of Panay and Cebu. A number of other lines in Luzon are privately owned, mainly by sugar and logging companies, but they are not significant in the overall transport picture. Traffic on PNR in FY 1969 was about 1,200 million passenger-km and 150 million freight ton-km. While passenger traffic has recently increased moderately, freight traffic has been constant. 2.09 The Transport Survey concluded that, with rehabilitation, the railroad could play a useful role in the Philippine's transport system. The Survey's proposals for PNR included a phased rehabilitation program for track and rolling stock. Changes in administration, operations, and financing were also proposed, and recommendations were made for increased freight rates and passenger fares. No improvement program was considered necessary for PRC at this time. 2.10 Although the Government agrees with the general conclusions of the Transport Survey and has included rehabilitation funds in the Infrastructure Program (Table 2), it is still reviewing specific proposals for rehabilitation of the PNR. (d) Ports and ShippS n8 2.11 For both foreign trade and domestic transport, ports and shipping have been important to the economy. There are now about 80 national and 390 municipal ports, as well as numerous private piers and wharves. Although most ports are well located and naturally sheltered, many require continuous -4- dredging and lack adequate sheds and cargo handling equipment. The Bank is presently assisting the Government in defining the scope and consulting services required for feasibility studies of four ports to whose improve- ment the Government has given high priority based on the Transport Survey. These studies are expected to be financed by the UND? and will be the basis of a subsequent project to be submitted to the Bank for consideration. 2.12 Ports in the Philippines are run by both the national and municipal governments. National ports are operated by the Bureau of Customs (BOC) in the Ministry of Finance; design, construction, maintenance, and dredging, on the other hand, are the responsibility of the Bureau of Public Works (BPW) in the Department of Public Works and Communications (DPWC). Coordi- nation has been inadequate between BOC and BPW, and thus port works have not always been related to needs; improvements are expected under proposed Government reorganization plans (para. 2.17). Municipal ports are owned, operated, and maintained by municipalities. 2.13 The Philippine merchant fleet totals about 1.2 million Gross Register Tons (GRT), including about 0.7 million GRT of ocean-going vessels and 0.3 million GRT of inter-island vessels. Also many small craft carry local traffic. Inter-island shipping, particularly passenger transport, has increased in recent years, and this service is adequate except to some smaller outlying islands. (e) Aviation 2.14 Manila, the only international airport in the Philippines, is served by a number of the world's major airlines, as well as the Philippine Air Lines (PAL), which operateh both internationally and within the coun- try. An extensive network of domestic airports is served by three domestic carriers. In addition, ten air taxi operators serve outlying areas with small traffic volumes. Domestic passenger transport has been increasing rapidly (about 17Z p.a.), with PAL, which the Government partly owns, carry- ing about three-quarters of the traffic. Air freight is still insignificant. 2.15 The Transport Survey concluded that airport infrastructure has not kept pace with increased traffic and that a pressing need exists for better runways, navigational aids, and terminal facilities. It recommeaded revision of the existing tariff policy because airlines are losing money on domestic traffic. The Government has accepted the Transport Survey's recommendations. It has allocated funds in the Infrastructure Program for the suggested improvements, and is considering requests from the air- lines for increased domestic air fares. The United States Federal Aviation Administration will assist the Philippines in preparing development plans for local airports. C. Transport Planninu and Coordination 2.16 Immediate economic and social problems, resulting from a large and rapidly expanding population with consequent high uneamployment, have in the past received overriding attention, while long range problems such -5 as transport coordinati3n and planning have been handled inadequately on a piece-meal basis. In the present administrative framework, coordina- tion has been difficult as responsibilities have been diffused between a large number of offices and agencies. Responsibility for design, construc- tion, and maintenance relating to ports, highways, and aviation lies with the DPWC, in which the Land Transport Commission, BPW, BPH, and Civil Aviation Administration are subordinate agencies. The railways are ac- countable to the Office of Economic Coordination, while the Civil Aviation Board (CAB) and the Bureau for Maritime Affairs report to the Department of Commerce and Industry. Road transport regulations with respect to op- erating permits, route allocations, and rates are the responsibility of the Public Service Commission. The CAB performs this function for air- lines, but scheduled domestic airline franchises are awarded by Congress. Railway rates are supervised perfunctorily by the Office of Economic Co- ordination. 2.17 The Transport Survey and the Commission on Reorganization gen- erally reached the same conclusions about the transport situation. Both cited the confusion in transportation planning and coordination, and con- cluded that all transportation matters should be brought under the DPWC's authority and that the DPWC itself should be reorganized and strengthened. The Commission's proposals for overall Government reorganization are due to be presented by the President to Congress in May 1971; the proposals will be presented as a package, to be either accepted or rejected by Con- gress. If accepted, the proposals would be implemented during 1971-73. During the loan negotiations, the Bank discussed with the Government representatives these proposals insofar as they affect transportation. The proposals incorporate a number of the Bank's comments and suggestions made during and subsequent to appraisal and, if accepted and implemented, would result in some operational improvements in the transport sector. There ia, however, some uncertainty on how effective and efficient the proposed new DPWC organization will be in transport planning and coordina- tion and this is a matter which will be reviewed and discussed further with the Government during thie execution of this project. Assurances were obtained during loan negotiations that the Government will furnish the Bank a copy of the final proposals as submitted to Congress and will keep the Bank informed of the progress of the Bill and any subsequent implementation. For additional assurances regarding BPH reorganization see para. 3.09. III. THE HIGHWAY SECTOR A. Highwy Network 3.01 The main highway network extends from north to south over the four islands of Luzon, Samar, Leyte, and Mindanao (Map). The principal artery of the country is the 2,000 km long Pan-Philippine Highway, which extends from Aparri in North Luzoni to Davao in southern Mindanao. The - 6 - two major inter-island crossings on this highway are served by ferries. Minor highway networks exist on some of the other 7,000 islands, but they are small in relation to the main network. 3.02 The existing network consists of about 64,000 km, of which about 13,000 km are paved. The system is divided into five classes: express- way, primary, secondary, municipal, and feeder (Table 3). Expressways, primary roads, and about one-third of the secondary roads comprise the national system under the authority of the central Government. Provin- cial or city governments are responsible for the remainder of the second- ary roads, with municipal authorities looking after municipal and some feeder roads. Many feeder roads, constructed under political pressure, are without an authority responsible for their maintenance. The ratio of 1 km of road to 600 people in the Philippines is better than that of similar insular countries (the ratio for Indonesia being 1 km to 1,400 people), but most roads are badly aligLned and in poor condition. 3.03 While the Government has been aware of deficiencies in the highi- way network, it has been hampered by lack of planning and a critical short- age of funds. However, from FY 1971-1975, it intends to improve about 13,000 km of the network, including 1,300 km of the Pan-Philippine High- way which will be constructed with Japanese assistance (primarily equip- ment). Inter-island vehicular ferry services will also be improved. B. Highway Traffic 3.04 The motor vehicle fleet at the end of 1969 was about 447,000 units as compared with 199,000 in 1962, reflecting an average increase of 12% p.a. (Table 4). Of the total, about 80% are registered in Luzon (about half of which are in greater Manila), 10% in Nlindanao, and 10% in the other islands. Gasoline consumption for the same period increased by about 10% p.a. (Table 5). There are about 110 inhabitants per vehicle (compared to about 300 in Korea, 120 in Thailand, anid 50 in ilalaysia). 3.05 Trucking is carried out on an own-account basis (about 90%) and by general haulers (about 10%). Although there are no restrictions on entry into road haulage, the trucking rates which have been set by law are low and discourage the growth of the general haulers. Wider general trucking operations would be encouraged by the improvement of the road network and by greater flexibility in trucking rates. The latter could follow the review of transport policies which would be made after re- organization proposals have passed into law. 3.06 Traffic counts have recently been carried out on all primary and secondary highways through a system of control and coverage stations. At control stations, about 200 km apart, traffic counts are taken 68 times a year and at coverage stations, about 20 km apart, twice a year. Although a significant amount of traffic information is consaquently available, it is not yet fully used for highway planning and maintanance programming. During loan negotiations, assurances were obtained that traffic counts would be continued and that the processing and retrieval of traffic data would be improved. - 7 - 3.07 Motor vehicle reFulations are generally satisfactory. The legal vehicular load is 8,000 kg on a single axle and 14,500 kg on tandem axles. Patrols of the Land Transport Commission and the national and local police are responsible for enforcing regulations. As there are no permanent weigh- ing stations and this commission owns only a few portable units, overload- ing is widespread. Assurances were obtained during loan negotiations that effective axle load control measures would be introduced and enforced. C. Highway Administration 3.08 The Bureau of Public Highways (BP3) is responsible for the national road network. This Bureau, which is part of the Department of Public Works and Communications (DPWC), is headed by a Commissioner (a political appointee) and administered by a Deputy Commissioner and a Chief Engineer. Proliferation of technical and administrative divisions abounds at headquarters (Chart) and considerable overstaffing exists both at headquarters and in the field. Though there has been only a minor increase in the road network, the number of districts has doubled from 54 to 110 since 1954. These new districts appear to have been created to coincide with local political spheres of influence. Consequently, improvement programs are fragmented, overhead costs have increased, and financial control has suffered. Field operations, carried out by district engineers, are not effectively controlled by BPH headquarters in 'Manila due to the remoteness of the areas served and the poor communications. 3.09 Certain proposals by the Commission on Reorganization for improve- ments in the BPH do not require legLslative action. These will be imple- mented under this project, together with other measures proposed by the Bank to improve BPH operations. Basically, tthese interinm measuires (detailed in tihe Annex) are: reductioni of utaff, "pparaLion or admLnimtrative a3nd- tuch- nical fucticLonn, dLvIsioni of constructLoLl anid mainiteanace reaponsibiliLies, and revitalization of regional office functionss. During negotiations the Government confirmed that these measures were corisistent witlh the Commisq- sion's overall proposal.s. Also during negotlatlons, the Governlment gave Assurances tlhnt it would implemenit thtese interim measures with the asist- ance of consultants over a period of two years. D. Highway Planning and Fin ancing 3.10 Highway planning begins at the local level with requests from mayors and other officials. District engineers draw up preliminary plans and cost estimates wiich are then checked and consolidated by BPH head- quarters. The overall program is next reviewed by the National Economic Council and then by the Presidential Economic Staff and the Budget Commis- sion. The resulting program is the Five-Year Infrastructure Program. An- nual budget requests based on this Program are presented to Congress for approval. 3.11 Most road works have involved short sections on existing pre- World War II alignments and little economic planning or analysis has been undertaken. The Government has now adopted the investment program suggested in the Transport Survey as the basis for its Five-Year Infrastruc- ture Program. Feasibility studies and detailed engineering will precede construction of major projects, although political considerations may con- tinue to influence selection of smaller works. 3.12 Funds for highway construction, maintenance, and a. -inistration now come mainly from the Highway Special Fund (HSF), which w2s set up by legislation in 1953 (Table 6). HSF revenue is from motor fuel taxes and vehicle registration fees; additional highway revenue comes from general budget allocations and bond sales, making a total of P 400 million (about US$65 million) available for highways in FY 1970 (Table 7). Over the next few years, funds will also be available from the recently imposed Export Tax, 25% of which will be used toward the local currency costs of inter- nationally financed projects. By law, HSF funds are distributed 44.5% each to maintenance and construction, with the riaaniniig 11% being allocat- ed to administration and emergencies. Of the maintenance allocation, about one-third is distributed equally between provinces and cities; the remainder is distributed on the basis of road length, population, and vehicle registra- tion. Two toll roads exist, with the construction contractors collecting tolls to pay for their construction and operation. In FY 1969, HSF's rev- enue covered the cost of highway administration and maintenance, as well as about 50% of construction costs. If non-earmarked customs duties on motor vehicles were added, total road user revenue would roughly equal highway expenditures. 3.13 The Government's previous Four-Year Highway Plan (FY 1967-1970) called for a total expenditure of about P 1,000 million (about US$170 million equivalent) and this target was substantially achieved. The currently proposed Five-Year Infrastructure Program requires expenditure of about P 2,300 million (about US$370 million equivalent); of this, the Government hopes to obtain about P 500 million of external financing. The plan is ambitious and,some slippage may be expected into FY 1976. E. Highway Design and Construction 3.14 At BPH headquarters, roads and bridges are designed by two separate divisions: Hlighway Location and Design, and Bridge Design. As most recent projects have been small, a large part of the design work has been undertaken by Regional and District Offices and checked by headquarters. Although design staff are able, their offices could be better equipped and organized. These shortcomings will be reviewed by the technical assistance team (para. 4.08). Field Offices base their design on guidelines prepared by BPH headquarters. Highway and bridge design standards are generally satisfactory. Although SAUTI (para. 1.02) is now the only foreign consultant employed by the BPH, some major bridge projects have been bid on a design and construct basis with overseas consultants employed by the bidders. 3.15 Until recently, highway construction was uadertaken by both force account (two-thirds) and contract (one-third), with the headquarters Con- struction Division acting as a clearing house and coordinating agency for - 9 - district and regional proposals. To maintain better control of funds and to promote the local contracting industry, the Government recently put a P 75,000 (about US$12,500 equivalent) ceiling on individual force account projects. This is expected to reduce considerably the amount of force account work. 3.16 Government contracts are awarded on a competitive basis with par- ticipation normally limited to local firms. In November 1970, a new law (Republic Act 6142) was enacted allowing the President to waive existing laws which prohibit bidding by foreign firms for works partially financed from external sources. International competitive bidding procedures can therefore be employed for such works. 3.17 Recently awarded road contracts for sections of the Pan-Philippine Highway have greatly increased the amount of work being undertaken by the domestic road contracting industry. A few major contractors (some working with United States firms) have already gained roadworks experience both on United States military base projects and on smaller Government and city works. Domestic road contractors readily form joint ventures to com?ete for larger works. F. Highway Maintenance 3.18 Road maintenance is poor, with routine maintenance almost non- existent and periodic maintenance confined to reconstruction of small, isolated sections of pavement. At any time, therefore, the network con- sists of only short sections of new pavement interspersed with rapidly deteriorating longer stretches. 3.19 Road maintenance is the responsibility of district and city engineers, and their work should be inspected by the Maintenance Divisions at Bureau headquarters and at regional level. In fact, this inspection does not occur. Consequently, the district engineers' tendency to favor minor improvement works prevails at the expense of essential routine main- tenance. Similarly, failure to allocate equipment specifically for main- tenance has contributed to further deterioration of the road network. 3.20 Road maintenance programming is non-existent; district main- tenance allocations are at the discretion of the district engineer. Maintenance funds (averaging about US$500/km p.a., excluding equipment depreciation) appear at first sight to be adequate, but chronic over- staffing and diversion of funds to improvements have left little for routine maintenance. Furthermore, a sizeable portion of both maintenance and construction funds is spent on emergency work, particularly typhoon damage (14 occurrences from 1968 to date). 3.21 The Government is aware that road maintenance must be improved and that reorganization of the BPH is an essential step. Technical as- sistance to help with reorganization and to assist BPH staff in improving road maintenance methods (para. 4.08) is provided under this project. Preliminary recommendations by the technical assistance team are expected - 10 - to be available six months after work begins. During loan negotiations, assurances were obtained that on the basis of the above recommendations the Government would: (a) formulate a program satisfactory to the Bank for provision of adequate maintenance funds for the road network; and (b) take the necessary steps thereafter to improve road maintenance operations in accordance with the agreed program. IV. THE PROJECT A. General 4.01 The project consists of the following: (a) construction and improvement of the 160 km Cotabato- Digos Road; (b) consulting services to BPH for detailed engineering (the 160 km project road, 765 km of Japanese-financed Pan-Philippine Highway, and about 700 km resulting from (c) below) and construction supervision of (a) above; (c) feasibility studies of about 1,000 km of roads; and (d) technical assistance to the BPH for administrative and operational improvements. The Government has asked the Bank to finance the foreign exchange costs of items (a) and (b) above and has requested financial assistance from the UNDP for items tc) and (d) above. B. Construction and Improvement 4.02 The 160 km road to be constructed and improved runs from Cotabato on the west coast of Mindanao to Digos on the east coast. Improvement of this road was given high priority in the Transport Survey (para. 1.02) and was confirmed in a detailed feasibility study. 4.03 Short stretches of the present road, totalling 50 km, have been paved recently, but the remainder is poorly aligned with unsurfaced stretches which are virtually impassable in the monsoon season. Under the project, these unimproved sections will be upgraded and paved to two-lane standard (Table 8); the proposed design standards are acceptable to the Bank. In addition, shoulder construction and minor drainage works will be carried out where necessary on the recently paved sections. - 11 - C. Consulting Services for Detailed Engineering and Construction Supervision (a) Current Detailed Engineering 4.04 The Government in 1969 retained the services of SAUTI to under- take the detailed engineering of the Cotabato-Digos project road, as well as that of the Lucena-Legaspi and Cabanatuan-Tuguegurao Roads on Luzon, totaling about 925 km (Map). The contract arrangements were satisfactory and the Bank agreed to consider the inclusion of the foreign exchange costs of these services (about US$750,000) in the proposed loan for retroactive financing. The Government indicated that construction of the latter two roads would be part of the proposed Bank project, but subsequently informed the Bank that these roads would be constructed under bilateral assistance from Japan. Design work commenced in February 1970 and was completed by the end of that year. Maximum use of BPH staff was made in the work. (b) Construction Supervision 4.05 SAUTI will also undertake construction supervision of the Cotabato-Digos Road. BPH staff will again fill as many appropriate posts as possible in the consultants' supervision organization. This arrange- ment is satisfactory and the staffing arrangements were agreed during negotiations. (c) Further Detailed Engineering 4.06 It is expected that the feasibility studies (para 4.07) will identify about 700 km of high priority roads, for which detailed engineer- ing would be justified and which could be the basis of further Bank lending for highway construction. Detailed engineering by a firm of consultants, therefore, is included under this project. D. Feasibility Studies 4.07 Feasibility studies under the project will cover about 1,000 km of existing primary and secondary roads on Luzon (Table 9 and Map), as recommended in the Transport Survey. These studies will be undertaken by a firm of consultants, and will include comprehensive economic evaluations and identification of alternative solutions for improving the roads, to- gether with plans for implementation of the optimum solutions. The Govern- ment has asked the Asian Development Bank (ADB) to finance similar studies for roads in Samar and Mindanao, and close liaison will be kept with ADB. E. Technical Assistance to BPH 4.08 The Government wants to improve BPH operations and has agreed that technical assistance be included in the project for this purpose. The assistance will be provided by about 11 experts (including a transport economist) from a consulting firm. During a two-year period, the team will - 12 - review and assist in implementing the interim BPH reorganization, as dis- cussed in the Annex, and will advise on Overall road maint6iance, workshop operations, and road planning. Training t otocal staff will be provided both at headquarters and in the field. The team will test revised main- tenance techniques in a selected number of pilot distrtits for subsequent implementation on a country-wide basis. Duritig loan negotiations, techni- cal assistance details rere agreed and an assurance was obtained that, prior to completion of the team's two-year assignment and in consultation with the Bank, the Government would review thle progress And aAsess the need for further technical assistance. F. cot In ExchAnge Conent 4.09 Total project colts, including contingencies, are estimated as follows: - 13 - Pesos Million US$ Million Equiv. Foreign Local Foreign Total Local Foreign Total Exchange Part I. Items to be fi- nanced by Bank 1. Construction and im- provement of Cotabato- Digos Road (160km) 15.9 19.6 35.5 2.6 3.3 5.9 55 2. Consulting Services: (a) Detailed engineer- ing of 925 km /a of road including 1 4.2 4.5 8.7 0.7 0.8 1.5 /b 55 (b) Supervision of 1 1.8 3.6 5.4 0.3 0.6 0.9 65 (c) Detailed engineer- ing (about 700 km) resulting from 5 6.6 7.2 13.8 1.1 1.2 2.3 50 Sub-total 12.6 15.3 27.9 2.1 2.6 4.7 3. Contingencies: (a) On 1 - Physical (10%) 1.6 1.9 3.5 0.2 0.3 0.5 Price (11%) 1.6 2.0 3.6 0.3 0.4 0.7 (b) On 2 - Physical (10%) 1.2 1.5 2.7 0.2 0.2 0.4 Sub-total 4.4 5.4 9.8 0.7 0.9 1.6 4. Interest during con- struction - 7.2 7.2 - 1.2 1.2 Total of Items to be financed by Bank 32.9 47.5 80.4 5.4 8.0 13.4 60 Part II. Items to be fi- nanced by UNDP 5. Feasibility Studies (1,000 km) 1.6 4.2 5.8 0.3 0.7 1.0 70 6. Technical Assistance 1.1 6.0 7.1 0.2 1.0 1.2 85 7. Contingencies on 5 & 6 Physical (10%) 0.3 1.0 1.3 - 0.2 0.2 Total of Items to be financed by UNDP 3.0 11.2 14.2 0.5 1.9 2.4 Total Project Costs 35.9 58.7 94.6 5.9 9.9 15.8 63 /a Made up as follows: Cotabato-Digos (160 km), Cabanatuan-Tugegurao (375 km) and Lucena-Legaspi (390 kn). The latter two roads will be con- structed with Japanese bilateral assistance. /b Cost of completed detailed engineering for the 925 km was lower than normal as most of the field survey and soils exploration work was completed by BPH staff prior to commencement of consultants' assign- ment. - 14 - 4.10 SAUTI has made cost estimates for road construction and improve- ments based on the quantities derived from detailed engineering and the local costs of labor, equipment operation, materials and overheads, as well as comparable costs for work elsewhere. Feasibility study cost estimates are based on those of similar studies in the Philippines and other coun- tries. Cost estimates for detailed engineering are taken from the contract between the Government and SAUTI. Construction supervision estimates are based on a schedule of staffing requirements and SAUTI's man-month rates (para. 4.05). Estimates of costs for further detailed engineering, result- ing from the feasibility studies, and the costs for technical assistance, are based on comparable assignments elsewhere in Southeast Asia. A 10l contingency allowance for quantity overruns is believed to be adequate for construction and consulting services. The 11% price contingency for con- struction is based on 5% p.a. increase in the foreign component and 6% p.a. increase in the local component from the date of cost estimates (December 1970) to completion of construction (about mid-1974). During loan nego- tiations, final cost estimates were agreed. 4.11 Foreign exchange components of the various items are determined by different factors. For road construction, if all work were done by foreign contractors the foreign exchange component would be 60% (US$3,6 million equi- valent); if all work were undertaken by local contractors the foreign ex- change component would be 44% (US$2.6 million equivalent). However, most local firms interested in the project have indicated their intention to form joint ventures with foreign firms (a 50-50 joint venture would result in a foreign exchange component of 52%). On the basis that contracts will be won by joint ventures or a foreign firm (also likely to employ local sub-contractors) a 55% foreign exchange component Las been used in the cost estimates. These foreign exchange estimates were made by SAUTI and are considered satisfactory. For feasibility studies, the foreign exchange component is based on the cost of foreign experts' salaries and equipment. The component of detailed engineering is lower than found in other coun- tries due to maximum use of BPH staff (on Government salaries); while construction supervision and technical assistance reflect the rel4tively high input of foreign personnel with foreign exchange components of 65% and 85% respectively. G. Project Financing and Execution 4.12 The proposed loan to the Government will finance the foreign ex- change component of the construction and detailed engineering elements of the project together with interest and other charges during construction, with the feasibility studies and technical assistance to be financed by the UNDP. 1/ Local cost financing will be made available through an Ex- port Tax (para. 3.12) and no undue difficulties are expected. 1/ The Government has submitted an application to the UNDP for the fi- nancing of these elements. UNDP management has indicated that the necessary funds will be included in the progrEm to be submitted to the Governing Council in June 1971. - 15 - 4.13 The BPH will be responsible for executing the project, assisted by qualified consultants under terms and conditions satisfactory to the Bank. During loan negotiations, assurances were obtained that the Govern- ment will promptly retain consultants for construction supervision and, subsequently, for detailed engineering (para. 4.06). 4.14 To encourage the domestic contracting industry to bid for the road works, the total contract will be advertised in two sections of about equal value with contractors bidding for one or both sections. Contracts will be based on unit prices. The Government has requested and the Bank has agreed that contract documents require alternative bids for different types of pavement construction using asphalt or cement concrete. Contracts will be awarded on the basis of the lowest evaluated bids. 4.15 The Government has agreed to amend its present contract bidding and award procedures in accordance with the Bank's "Guidelines on Procure- ment". Amendments permitting foreign firms to compete on an equal basis for contracts of this nature are embodied in Republic Act 6142 which was enacted in November 1970 (para. 3.16). Other major amendments, such as bidding periods and bid evaluation necessary to ensure compliance with bidding procedures satisfactory to the Bank have been made at Departmental level. 4.16 The potential of the project construction for relieving unemploy- ment in the Philippines has been considered. Total unemployment in the country is currently estimated at about 8%, but the unemployed are found primarily on the island of Luzon and in the larger urban areas (particu- larly Mlanila). In Iindanao, where the project is located, there is no serious unemployment problem and the population is principally engaged in year-round farming of the rich agriculture land, particularly along the project road (para. 5.03). The possibility of moving unemployed labor 1,200 km from the island of Luzon to Mindanao is impractical because of ethnic differinces, the long arduous journey required, and a reluctance on the part of the urban unemployed to move away from potential city op- portunities. The construction of the project road using labor intensive methods is therefore considered impractical. 4.17 Construction contracts will probably be awarded in the third quarter of 1971, and the works should be completed towards the middle of 1974. Feasibility studies will cormmence mid-1971 with completion ex- pected in the first quarter of 1972, to be followed by detailed engineer- ing (para. 4.06). The technical assistance team would be retained from mid-1971 until mid-1973. The timing of project execution was agreed during loan negotiations. R. Disbursements 4.18 Disbursements from the loan account would be on the basis of 55% of the cost of road construction; the actual foreign exchange cost of con- sultants' services; and the actual loan interest and other charges during construction. Surplus funds in the loan account on project completion will b2 cancelled. The schedule of estimated disbursements is given in Table 10. - 16 - V. ECONOMIC EVALUATION A. General 5.01 The Philippines has traditionally provided for its highway improve- ment needs on a short-term basis for small road sections rather than by long- term, comprehensive planning of construction and maintenance for the entire road network. Although this has resulted in a considerable amount of recent improvement tworks, a logical plan for future development is essential. The Government has accepted the priorities recommended by the Transport Survey as a basis for future planning. Road works included in the current project are given high priority in the Survey. 5.02 The objectives of the project are to: (a) reduce transport costs on the most i.nportant primary highway in Mlindanao; (b) establish the technical and economic feasibility, and provide the detailed engineering, of other roads identified as being of high priority in the Transport Survey; and (c) imuprove the BPH organization and its operations, particularly for road maintenance. Benefits from feasibility studies and technical assistance to BPH, (b) and (c) above, have not been quantified. Although no detailed economic eva- luation was made of the two roads Lucena-Legaspi and Cabanatuan-Tuguegurao as they will be constructed with bilateral assistance from Japan, they are expected to yield an acceptable rate of return based on the findings of the Transport Survey and the feasibility studies. B. Cotabato-Digos Road 5.03 The Cotabato-Digos Road is the only east-west link in central Mindanao. It connects the two main cities and administrative centers, Cotabato and Davao, and it serves an agricultural area including the main corn and one of the main rice-producing regions in the Philippines. Future agricultural growth potential in this area is among the highest in the country. 1/ 1/ Southwest Mindanao is one of the rice andC corn priority areas, accord- ing to the National Food and Agriculture Council. It is expected to benefit from the recently approved Bank financed Rice Processing Proj- ect (Loan Na. 720-PH) and an ADB irrigatlon project. - 17 - 5.04 Average daily traffic in 1968 on the Cotabato-Digos Road was about 550 vehicles, of which about 65% were trucks and buses. Traffic volumes were somewhat higher at the two ends than in the middle. Past traffic growth information is limited and variations occur between counting stations. However, based on available information, passenger car and jeep- ney 1/ traffic recently grew by about 24% p.a. and 16% p.a., respectively, with truck traffic growing by about 8% p.a. and bus traffic remaining more or less constant. Table 11 shows present and expected traffic on sections of the road. Forecasts are based on past traffic trends and on projections by the UNDP consultants of the total production of goods and services and of per capita income in the influence zones. The forecasts used for passenger cars and buses are somewhat lower than those used by the UNDP consultants for the feasibility study and assume that the traffic growth rate will decline from about 11% p.a. through 1972 to about 6% by 1983. Growth rates are considered reasonable. 5.05 Reduction in vehicle operating costs (VOC) due to improved run- ning surfaces is the readily quantifiable benefit used in the economic evaluation. Benefits from the project are, however, somewhat underestimated because savings of passenger time and reduction in road maintenance costs and accidents have not been considered. Moreover, savings include only the difference between present and expected operating cost levels and do not take into account the future increases in operating costs that would take place if the project is not carried out. 5.06 Conditions of terrain, cost, traffic, and other features are generally consistent throughout the length of the road, and its justifi- cation has, therefore, been evaluated as a single entity. Based on savings in VOC (Table 12) and the estimated traffic growth over 20 years, the in- vestment in the road would yield a rate of return of 18%. The sensitivity of this result was tested on the basis of a plus or minus 10% change in construction costs, 20% change in traffic growth rates, and 20% change in VOC savings. This resulted in a range of 11-25% as the minimum and maximum possible returns. Returns on the various combinations are given in Table 13. The project is, therefore, justified. VI. RECOMMENDATIONS 6.01 During loan negotiations, assurances were obtained from the Gov- ernment that it would: (a) implement the interim BPH reorganization measures with the assistance of consultants over a period of two years in accordance with the Annex (para. 3.09); 1/ Jeep-type vehicles converted for fare-paying passengers and widely used for short distance travel in the Philippines. - 18 - (b) with the assistance of consultants, formulate a program satisfactory to the Bank to provide adequate maintenance funds for the road network within one year of the date of the Loan Agreement and take necessary steps thereafter to improve road maintenance operations in accordance with the agreed program (para. 3.21); and (c) review the progress and assess the need for further tech- nical assistance, in consultation with the Bank, prior to completion of the two-year assignment of the technical assistance team (para. 4.08). 6.02 The project constitutes a suitable basis for a Bank loan of US$8.0 million equivalent with a term of 24 years including a four-year grace period. TABLE 1 PRIIPPDI2 HIGTWA! PROJECT Domestic Goods and Passeager Transport 19681' Goods Ton kilometers % (million) Road Transport 3,520 57 Maritime Transport 2,,510 41 Railway Transport 150 2 Air Transport 10 - Total 6j190 100 Passengers Passenger kilometers % (million) Road Transport 15,650 82 Maritime Transport 1,570 8 Railway Transport 1,210 6 Air Transport 780 4 Total 19,210 100 1/ Primary transport network, as defined in the Transport Survey, comprising 10,000 km of national highways, 37 national ports, 740 km of railroads, and 37 airports. No information or esti- mate available for balance of network. Source: UNDP Consultants. March 1971 TABLE 2 P440 HIGHWAY P%WV Five-Year Infrastructure ?rogr ? aa Local Foreign riTtely (iw2iion) Highways 1,800 81 2,300 32.5 Airports and air navi- gational facilities 179 49 474 6.5 Railroad 30 26 186 2.6 Portworks _7 4 Sub-total Transportation 2,166 185 3,273 46.0 Balance 1,859 1.2.5 Total Program 41,c5 100.025 1/ Based on exchange rate of US$ 1 - P 6.00. Source: Presidential Economic Staff March 1971 TABLE 3 PHILIPPINES HIGHWAY PROJECT Highway Network 1969 (km) General Classification Authority Classification Expressway Primary Secondary Municipal/Feeder Total BPH 46 9,080 8,969 18,095 Provincial - - 23,775 23,775 city _ 5,408 _ 5,408 Municipal - - 16,315 16,315 Total 46 9_080 16,315 63,593 Road Trype Authority Concrete Bituminous Gravel Earth Total BPH 1,836 4.,984 10,085 1,190 18,095 Provincial 152 2,166 15,691 5,766 23/,77/ City 182 1,679 2,377 1,170 5,4082/ Municipal 355 1,017 8,526 6,417 16,315 Total 2,525 9,846 36,679 14,543 63,593 1/ For maintenance purposes Government does not distinguish between municipal and feeder roads -- the mileage of the latter is uncertain and many of these roads are not maintained. 2/ 2,023 kn of provincial roads receive national aid. 3/ 359 km of city roads receive national aid. cource: Bureau of Public Highways. March 1971 TABLE 4 PffILIPPINES HIGHWAY PROJECT Motor Vehicle Statistics 1962-196,: Year Cars Jeeps Jeepneya Trucks Buses Other- Total 1962 55,693 26,217 14,353 60,222 14,055 24,122 198,662 1963 58,910 29,051 15,744 72,881 14,903 17,253 208,742 1964 71,262 34,477 16,585 8i,4oo 13,5542 37,618 254,884 1965 84,262 43,369 18,483 90,415 12,983- 23,711 273,22-3 1966 95,146 45,296 22,543 97,489 14,218 35,961 31J0,653 1967 118,729 53,075 24,582 104,524 12,028 50,110 363,04O 1968 135,872 66,131 31,137 118,447 14,327 47,303 413,217 1969 163,424 70,616 35,570 124,139 13,662 39,360 446,771 % Annual Change 1962-1969 16.6 14.6 13.8 10.9 (0.4) 4.9 12.3 Changing Composition 1962 28 13 7 31 7 14 100 1969 36 16 8 28 3 9 100 1/ Military, public service, etc. Source: Land Transport Commission March 1971 TABLE 5 PHILIPPINBS HIGJWAI PROJECT Motor Vehicle Gaooline Consumption F 962-1969 Fiscal Year Annual Consu ption (million liters) 1962 1,109 1963 1,186 1964 1,375 1965 1,345 1966 1,486 1967 1,778 1968 1,878 1969 2,206 % Annual Increase 1961-1969 10.3% Source: Bureau of Public Highways March 1971 TABLIE 6 PHILIPPINEs HIGHWAY IRO1G Revenues from Use and QwDrabip oi Motor Vehicles P11965-1969 (? miliion) Fiscal bars 1965 1966 I6 Earmarked for Higfa,ya Special Fund Gasoline and lubricat- ing oil tax 114.6 12j.6 145.1 152.9 181.3 Motor Vehicle Regis- tration fees 50.7 56.2 55.2 72.2 74.7 Licenses, plateo and miscellaneous 1J.) 3-4 10.5 Total 170.6 ".2 21.62 Other Revenues Customs duties on motor vehicle n.a. n.a. n.a. 100.9 92.1 Tolls 0.7 o.6 1.0 1.4 8.5 Total n.a. n.a. n.a. 100.6 source: Presidential Economic Staff; Bureau of Public Highways and LTC March 1971 TABLE PHILIPPINES HIGHWAY PIOJECT r;xpenditureo on Highw%s' Ff1967-1M7 (F million) Fiscal learn Item 1967 1966 1969 am 1971 1972 1974 197 (Actuaf - -c (Estimated) Ackainistration Highway special Fund 6.1 7.6 8.9 9.3 10.0 11.0 12.0 13.0 14.0 Construction Highway bpecial Fund 101.0 118.0 121.5 100.0 147.0 123.02/ 124.0 150.0 150.0 General Budget and Bond Salea 76.o 100.0 86.7 81.2 j6.01/ 115.0-/ 171.0 240.0 3D0.0 Foreign loans - lW4.5 3.6 34.0 44.0 60.o 72.0 93.0 115.0 Reparations - 1.2 39.5 65.6 31.0 22.0 22.0 22.0 22.0 Export tax _ _ _ 56.0 60.0 71.0 6. - bub-total (Construction) 177.0 363.7 251.3 280.8 314.0 j80.0 460.o 561.0 587.0 Maintenance Highway dp.cial Funa 106.j 128.0 125.8 110.4 140.0 150.0 160.0 170.0 170.0 Total 289.4 49 .3 ,86.0 LC0.5 464. i1.0 63M 744.0 771.0 I/ bhowe replacement of General Budget funds by introduction of Export Tax 2/ f proposalb currently before Congress are approved, HbF revenues could increaae by about P130 million in this and subsequent years, thus reducing the dependence on General Budget revenues. bource: Bureau of Public Highways, Presidential Economic btaff ana UNDP Consultant March 1971 TABLE 8 PHILIPPIMI HIOWAY PR0JIT Characteristics Unit Fl.t ta Geometric: Speed k/}A 70.0 6o.o 50.0 Maximm gr*dAint % 3.0 4.0 5.0 Pavemt width a 6.7 6.7 6.7 Shour width a 3.0 2.5 2.0 Kinium raftug a 170.0 V 120.0 0.0 StopOiag *2ght distaaco 90.0 70.0 60.0 Right-of-way a 60.0 60.0 60.0 Pavewnt: ASUO sthod using an 18,000 lb alo Bridg I AAHO H20.416 Minimuum on.y - 80 km/h employed for most oecT,ion tkroigh flat terrain, Source: Bureau of Public Highways and UNDP Consultants March 1971 TABLL 9 PHILIPPINES HIGMWAY PROJECT Roads Included for Feasibility Studios (See Map) Approximate Langth Construction Cost (km) (US$ miLlion) Manila North Road (Obando-Tabang-Laoag) 427 22 Manila East Road (Pasig-Sta. Cruz) 95 4 San Fernando-Olongapo Road 79 2 Rosario-Bauang Road 70 2 Sta Tomas-Batangas-Cavite-Las Pinas Loop Road 194 5 Tarlac-Sta. Rosa & Gapan-San Fernando, Pampango 88 3 Bugallon-Damortis Road 51 2 Total 1.^ 4 Source: Presidential Economic Staff, Bureau of Public Highwqa, and UNDP Consultants March 1971 TABLA 10 PHILIPPINEb HIGHwAY PROJECT Estimated bchedule of Di**w..witS MM Fiscal Year Cumulative Disbursebent and Quarter at gd of Mr 1972 beptswber JD, 1971 1,300 December ., 1971 1,625 March 31, 1972 1 7M40 June jD, 1972 2,585 deptaber 30, 1972 3s,85 December 31, 1972 4,275 March al, 1973 5,375 June J0, 1973 6,005 .eptemnber 30, 1973 6,505 December i,. 1973 6,890 March 31, 1974 7,190 June 3D, 1974 7,510 1975 eptem 30, 1974 7,510 Dember 31, 1974 7,750 March 31,. 1 975 7,750 June 30, 1975 8,000 bource: Bureau of Public Highway and Mission E;stimates March 1971 RXIHWAI 1RIQJCT Estimated Traffic Vol=me on Cotabato-Ditos Road 1968-1992 Average Annual Dail Traffic timated Traffic Growth (% p.I.j Road Sections 1968 1973 1977 1962 1987 1992 1968-1972 1973-1977 1978-1982 1953-1987 1988-1992 (Actual) - - (Estimated)----------- 1 -Cars 78 157 247 405 606 858 15 12 10 8 7 Jeepneys 232 409 577 765 803 803 12 9 5 0 0 Buses 91 147 207 307 418 539 10 9 8 6 5 Trucks 255 411 580 860 1,172 1,510 10 9 8 6 5 2 -args 66 133 209 343 513 726 15 12 10 S 7 Jeepneys 94 166 234 310 325 395 12 9 5 0 0 Buses 95 153 216 320 437 563 10 9 8 6 5 Trucks 170 274 386 573 781 1,007 10 9 8 6 5 3 -Care 41 82 130 213 318 1451 15 12 10 8 7 JLepneys 130 210 338 41L 470 470 13 J 5 0 0 Du&" 154 248 30 £19 70 912 10 9 8 6 5 Trwks 16o 258 364 532 735 9s ID 9 a 6 5 it - cars 37 74 117 192 287 407 15 12 1D 7 J.epn,rs 76 140 198 262 275 334 13 9 5 0 0 Busea 74 119 168 249 310 438 10 9 8 6 5 Trucks 143 230 325 482 657 847 10 9 8 6 5 5 - Co 28 56 89 1145 217 309 15 12 10 8 7 Jmpneys 232 427 603 799 839 839 13 9 5 0 0 i.s" 151 2143 3143 509 6914 894 10 9 8 6 5 Trucks 392 631 891 1,322 1,802 2,322 10 9 8 6 5 6 - Cars 86 173 272 446 668 9463 15 12 10 8 7 J.epn.ys 119 210 285 375 393 393 12 8 5 0 0 Ause8 168 2n 368 521 678 833 10 8 7 5 4 Truc ks 300 462 628 U89 1,156 1,420 9 8 7 5 SwAre: Dur.m of Public naU,o NW tmt d YAMi8i 104UMU8 March 1971 TBES 12 per a New od StioA4 6---767-67.6 s ~~~~ ";a1 3g 32b9 8 4333 0,31j9 0. 0319 o 265 0 o 47 N 0. O 43 0.0 2 32 0*2 31 o0. 231 o 45 oo2 7 Swa?iT o 9.0 D-- D :D 0.2 S0 t~ 30%l 30% .ŽZ% 3% 29% OOpIIe k 3w3O: 0st.$ 0 2971 M092 0.292 0 22. 0o 30 Nw Road 03.246 0,243 0. 24 0.246 2~~wtxLg ~~ 0.0 3 0.049 U~~~~i9 b,oo1 0.5. % 2.&% 17 2.7%1 1X 8 "SlKieU t7 0 X866 0.0- 0,832 -O. i2 0.1 o.343 ,Ieow Road o.W61 0 604 03604 o .60o4 0 06.L o 60 S&~Vbng ;TJ U V~R 0.03272 % ISvIng % P9% 27% 21% 6) 29% IWd.t3 RoA93 O 3 ,98 0 *et o1 0t701 0092.2 New Road C.6) '5 64 0.64 0,64. Dx60 o, %6 '3vL-g 31: -% 29% 2 - Mar¢tMj,,98, TABLE 13 PIIILIPPINES HIGHWAY PROJECT Rates of Retu?n of Cotabato-Digos Road Assumptionsl/f 2/ Rates of Return Most likely values of investment, traffic growth,and VOC 18 Most likely values of investment and traffic growth, but conserva- tive assumption of VOC 15 Most likely values of investment and VOC, but conservative assump- tion of traffic growth 15 Most likely values of traffic growth and VOC, but conservative assumption of investment 17 Conservative assumption of invest- ment, traffic growth,and VOC 31 Most likely values of investment and traffic growth, but optimis- tic assumption of VOC 21 Most likely values of investment and VOC, but optimistic assump- tion of traffic growth 21 Most likely values of traffic growth and VOC, but optimistic assumption of investment 20 Optimistic assumption of invest- ment, traffic growth,and VOC 25 _ 1/ Conservative assumptions are: (i) 10% increase in investment; (ii) 20% decrease in traffic growth rates,and (iii) 20% decrease in vehicle operating cost savings. 2/ Optimistic assumptions are: (i) 10% decrease in investment; (ii) 20% increase in traffic growth rates,and (iii) 20% increase in vehicle operating cost savings. Source: Mission Estimates March 1971 ANNEX Page 1 PHILIPPINES HIGHWAY PROJECT Interim Measures for Reorganization of the Bureau of Public Highways Introduction In connection with the proposed highway project, certain interim measures to improve the efficiency and operations of the BPH are to be undertaken; these do not require legislation for implementation. The mea- sures are consistent with the Commission on Reorganization's proposals for all Government Departments, particularly with those for the DPWC and its sub-agencies (including BPH). Implementation of the measures will require outside technical assistance, which is part of the proposed highway project. Headquarters Organization,_(Page 4) (a) Establish the Post of Chief Administrator: To separate clearly technical and administrative functions, the Administrator should be responsible for all administrative divisions within the BPE. He should be on the same level as the Chief Engineer and should report directly to the Deputy Commissioner or the Commissioner. (b) Detach Internal Audit and Legal Services: These should become staff offices reporting directly to the Deputy Commissioner or Commissioner and should not continue to operate as two of many administra- tive and technical divisions. (c) Reduce the Present Number of Administrative Divisions: The present six administrative divisions should be consolidated into two or three divisions with the following functions: (i) Administrative; (ii) Accounting and Finance; and (iii) Personnel. (d) Reduce the Present Number of Technical Divisions: The present nine technical divisions should be consolidated into six with the following functions: (i) Programming and Planning; (ii) Design; (iii) Construction; (iv) Maintenance; (v) Materials and Research; and (vi) Equipment and Workshops. ANNEX Page 2 Field Ormanization (a) nReorgaize Regional Offices: These offices (presently named divisions) should have six sections: (i) Administration; (ii) Design; (iii) Construction; (iv) Maintenance; (v) Materials; and (vi) Equipment and Workshops. Thes,e sectioas should be staffed and equipped to cater to expected workload in different regions. In this respect, design activities should be con- centrated At regional level and not within districts, as at present. To allow Regional Offices to function efficiently, their authority and respon- sibility should be extended to the maximum presently allowed (Administrative Order No. 2, 1954). (b) Establish Regional Workshops: Only four of seven regional workshops in the ten BPH regions are not operative. Workshops should be established in each region with staff and facilities commensurate with expected regional workload. (a) Refrain from Creating New Highway Districts: The Commission proposes to rcduce the number of districts from 110 to equal the number of provinces (68); however, as this requires legislation, the Government first should refrain from creating new districts. (d) Separate Highwa Construction and Miaintenance Functions within the Districts: Because construction (including betterments and rehabilitation) has in the past been carried out at the expense of main- tenance, these two activities should be separated at district level. Sec- tions should be created for each and equipment permanently assigned for maintenance. (a) Establish District Workshops: These will carry out normal servicing of equipment, together with minor repairs. M4ajor repairs will be made at reglonal level. (f) Introduce Highway Mlaintenance Planning: Planning of all maintenance activities should be undertaken, based upon expected traffic volumes, surface type, etc. This skftld be underzaken at all levels (headquarters, regional and distriat) and should form the basis for future allocation of funds. Maintenance tedhniques also should be reviewed and, where possible, improved. ANTEX Page 3 (g) Define Lines of Command: Present procedures neither en- courage efficient field operations, nor clearly define authority and re- sponsibility, and it is necessary to establish clear lines of command from specialist divisions at headquarters through the appropriate regional sec- tions to the district level. (h) Reduce Staff and Improve Staff Training Facilities: Refrain from engaging additional head office staff except specialists required to implement the interim measures; generally staff should be reduced to equate with actual requirements. In the field, positions should be reduced to a minimum. Institute at regional level training facilities for district staff, including instruction (both theory and practice) to supervisors, foremen, and artisans. Timiing and Execution It is proposed t[hat the above measures will be implemented with the assistance of a technical assistance team. The team's assignment will be in the following two phases: (a) Phase 1 (5 men for 6 months): (i) review the Commission on Reorganization's latest pro- posals for the BPR and also the BPH's own recommenda- tions; (ii) prepare a program. for the reduction and merging of the administrative and teclhnical divisions; (iii) review the requirements of individual Regional Offices and prepare a program for setting up (or reducing) the internal sections; (iv) estimate the equipment workshop needs for each region and the necessary facilities to be provided; and (v) review, similarly, the overall highway maintenance needs of the country and prepare a plan for estimating district needs and implementing the proposed improve- ments in operations. (b) Phase 2 (11 men for 18 months): This phase will consist of implementation of the program prepared with the assistance of the Phase 1 team. Emphasis will be placed on improving organizational procedures and operations at field level and it is expected that three districts will be chosen for pilot schemes. PHILIPPINES HIGHWAY PROJECT INTERIM BUREAU OF PUBLIC HIGHWAYS REORGANIZATION MEASURES COMMISSIONER| = =~-F INTERNAL AUDI EUYCMISOE LEGAL CHIEF ADMINISTRATOR HIG CHIEF E HIGHWAYS ENGINEER P ADMIISTRTION ANDCFINANC PERSONNEL AN LNIGDESIGN MATERIALS CONSTRUCTION MAINTENANCE EQUIPMENT 10 REGIONAL OFFICES > WITH Z DlISTRI CT AN D CITY OFFi CES G)Z SOURCE: Mission Proposals X IBRD-5374(R) PHILIPPINES HIGHWAY PROJECT EXISTING BUREAU OF PUBLIC HIGHWAYS ORGANIZATION .................... .................................................. SECRETARY FOR PUBLIC WORKS AND COMMUNICATIONS .C..........S.......... ..................E. COMMISSIONER DEPUTY COMMISSIONER| CHIEF HIGHWAY ENGINEER SPECIAL SERVICES DIVISIONS SPECIALIZED ENGINEERING DIVISIONS PROGRAMMING BRDEDSG HGWYElN PESNEL ACCODUNTING INTERNAL AUDIT LEGAL ADMINISTRATION EQUIPMENT AND PLANNING BIG EIN HGWYDSG BUDGET ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~DEVELOPMENT ANDGFNNET MAAEETPROPERTY MAINTENANCE MTRASOEINLNSPROJECTS CNTUTO 10 HIGHWAY ENGINEERING FIELD DIVISIONS (REGIONS) ABOUT 11 DISTRICTS l AND 5 CITY OFFICES PER DIVISION IBRD 5375 SOURCE: Bureou of Public High-oy ond UNDP Consultorts. iu8S 1220 1l40 i~~~~~~~~~~~~~~~~~~~~~~~~~~ Aporri h R E P U B L I C £VIMNA HANGHAi Laoag OF T H E P H I L I P P I N E S -a -- _AWA NTRiOM R-6 -c-pR6 20- PA CIFIC 20- Lti t_ > uguegorao HIGH WAY PROJ ECT OCEAV logan L AU z N _ t JX r J j S~~~~~~~~~~~~~~~~~~~ABANi S_ Fenando 0 -A 0' hon Jos W 14 ation e PAPUS..~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~2. bon Jseu0 Okingo Tabbng p H / 1 , P P N f Jose Pongariban -14' ~~~~Nas 14- N zz~,t u 03 i 8 v a y2bc 0 SEA t , l ° O k , V S, , a r Si A/<,-W ~ ~ ~ I.EV TE IOu -~~~ 6t/OLf r S.Car2 'P ..ea su%:~i~ 'e rtoPricesa_ L E G E N D- ri J ~~~~~~Priminry Highwcys > ( i < PROJECT ROADS: M/ D A N A O Construction V, …- Detaied Engineering S E A Butuan -- Feasibility Studies -.---.--.--o- PMPlippine Na#tonal Ritwoys an de Or * * .--e-.--. - PPhippine Railroad Company Ozamia Iligan 8- a Principal Ports B.- 4 Principal Airports 00 '0 00 00 0. ouconooS~ ~ ~ ~ ~0taot rJ. 0 o0 00 7 o R 0 ZAA 0>~~~~4 G F \ = >< \ i ^ ~~~~~~~~~C E iD E i5 if S S F A N, General Sw~le,to fe NOVEMB Ee 1970 22I 3418 NOVEMBER 1970 IBRD 3789