Document of The World Bank FOR OFFICIAL USE ONLY Report No: 20214 IMPLEMENTATION COMPLETION REPORT (CPL-32610; SCL-3261A) ON A LOAN IN THE AMOUNT OF US$ 46.2 MILLION TO THE REPUBLIC OF THE PHILIPPINES FOR A SECOND COMMUNAL IRRIGATION DEVELPMENT PROJECT (CIDP II) May 30, 2000 Rural Development and Natural Resources Sector Unit East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their I official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective as of March 31, 2000) Currency Unit = Peso (P) I peso = US$ 0.0245 US$ I = 40.85 FISCAL YEAR Government: January 1 - December 31 ABBREVIATIONS AND ACRONYMS ADP Agricultural Development Plan CAS Countiy Assistance Strategy CIDP First Communal Irrigation Development Project CIDP II Second Communal Irrigation Development Project CIP Communal Irrigation Project (New construction) cIS Communal Irrigation Scheme (Rehabilitation) DA Department of Agriculture DBM Department of Budget and Management ERR Economic Rate of Return FRR Financial Rate of Return GOP Government of the Philippines HYV High Yielding Variety IA Irrigators' Association ICR Implementation Completion Report IDO Institutional Development Officer IPM Integrated Pest Management LGU Local Government Unit MIS Management Information System MOA Memorandum of Agreement NIA National Irrigation Administration NPK Macro Nutrients of a Fertiliser (Nitrogen, Phosphorous and Potassium) PBME Project Benefit Monitoring and Evaluation POW Program of Work PWC Provincial Working Committee ROW Right of Way SAR Staff Appraisal Report SZOPAD Special Zone of Peace and Development Vice President: Jemal-ud-din Kassum, EAPVP Country Manager/Director: Vinay K. Bhargava, EACPF Sector Manager/Director: Geoffrey Fox, EASRD Task Team Leader/Task Manager: Syed Husain, EASRDJ FOR OMCI4L USE ONLY CONTENTS Page No. 1 . Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 2 5. Major Factors Affecting Implementation and Outcome 7 6. Sustainability 7 7. Bank and Borrower Performance 9 8. Lessons Learned 10 9. Partner Comments 11 10. Additional Information 12 Annex 1. Key Performance Indicators/Log Frame Matrix 13 Annex 2. Project Costs and Financing 15 Annex 3. Economic Costs and Benefits 17 Annex 4. Bank Inputs 18 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 20 Annex 6. Ratings of Bank and Borrower Performance 21 Annex 7. List of Supporting Documents 22 This document has- a resticted distnbution and may be used by recipients only in the perfonnance of their official duties. Its contets may not otherwise be disclosed without World Bank authoon. Project ID: P004572 Project Name: COMMUNAL IRRIG. II Team Leader: Syed Husain TL Unit. EASRD ICR Type: Core ICR Report Date. May 30, 2000 1. Project Data Name.' COMMUNAL IRRIG. II L/C/TFNumber. CPL-32610; SCL-3261A Country/Department: PHILIPPINES Region: East Asia and Pacific Region Sector/subsector: Al - Irrigation & Drainage KEY DATES Original Revised/Actual PCD: 11/27/1989 Effective: 02/06/91 01/11/91 Appraisal: 03/16/1990 MTR: 11/01/92 03/03/95 Approval: 10/04/1990 Closing: 12/31/96 12/31/99 Borrower/lImplementing Agency: ROP/NIA Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum A. Karaosmanoglu Country Manager: Vinay K. Bhargava Rolando Arrivillaga Sector Manager.' Geoffrey B. Fox Donna Dowsett-Coirolo Team Leader at ICR. Syed Husain C. Gunasekara ICR Primary Author: Alvaro Bueno (FAO) 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U-Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome. S Sustainability. L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time. No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The project's principal objective was to provide continuity and improvement to the implementation of the Government's on-going communal irrigation development efforts, through Ihe construction and rehabilitation of 180 communal irrigation schemes in impoverished rural areas, thereby contributing to poverty alleviation by enhancing the farm income of about 20,000 rural famrilies. A secondary objective was to strengthen the capacity of the National Irrigation Administration (NIA) and Irrigators' Associations (IAs ), contributing further to the improvement of communal irrigation. The objectives were clear, realistic, and in line with the Bank's Country Assistance Strategy (CAS) of restoring economic growth, while reducing poverty and improving equity, through accelerated and environmentally sustainable rural development and support to infrastructure. The objectives were consistent with the high priority given by the Government of the Philippines (GOP) to poverty alleviation and to expansion of communal irrigation as an instrument of poverty alleviation. 3.2 Revised Objective: The project objectives remained unchanged during implementation. 3.3 Original Components: The project had four components: (a) Rehabilitation and Construction of Communal Irrigation Schemes; (b) Development of Communal Irrigators' Associations (IAs ); (c) Institutional Strengthening of NIA; and (d) Agricultural Development. 3.4 Revised Components: The project design remained unchanged throughout implementation, although some irrigation schemes identified at appraisal were dropped as they were found to be economically not viable, and other schemes were substituted, including 30 new schemes in the Special Zone of Peace and Development (SZOPAD) areas in Mindanao which were added in 1998 at Government request. The inclusion of SZOPAD schemes was in line with the Government's high priority to social and infrastructure investments in parts of Mindanao. 3.5 Quality at Entry: Quality at entry is rated satisfactory in view of clear and realistic project objectives, which were consistent with the Bank's CAS and GOP priorities for the sub-sector. Project design was coherent, incorporating lessons from the previous Communal Irrigation Development Project (CIDI', Loan 2173-PH), and was consistent with the capability of the implementing agency. However, implernentation was quite demanding because of the wide geographic dispersion of the irrigation schemes, often in areas with difficult access. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The outcome of the project in terms of its contribution to the Government's goals of poverty alleviation and increased food security is rated satisfactory. Overall, the project is estimated to have benefited about 26,000 mostly poor farm families (130% of the SAR estimate of 20,000 families), with about 10,640 families benefiting substantially from incremental irrigated areas, and the rest benefiting from increases in yields on rehabilitated farms. In addition, about 6,000 farm families are estimated to have benefited from the incremental irrigated area under schemes carried over from CIDP (see fiarther para. 4.4 for financial impact of the project). The incremental paddy production under the project is estimated at 73,200 tons/year, or about 90% of the appraisal expectation of 81,175 t/year. In addition, the carried over - 2 - schemes from CIDP are expected to produce an incremental 25,000 tons/year. Contrary to expectations at appraisal, farrn production was not significantly diversified, detracting from the potential benefits of the project. The project also provided support for the establishment and strengthening of lAs in all communal irrigation schemes and helped improve their levels of organisation and maturity. These lAs are now able to mobilise farmers and local authorities for support to system maintenance and farm production. 4.2 Outputs by components: Rehabilitation and Construction of Communal Irrigation Schemes. The output of civil works is rated satisfactory. The SAR envisaged the construction of new irrigation works on about 10,000 ha, consisting of about 65 new communal irrigation schemes (CIP), and the rehabilitation and improvement of about 15,000 ha served by about 115 existing communal irrigation schemes (CIS). The increase in wet season (WS) irrigation was expected to be 14,000 ha (from existing 11,000 ha to 25,000 ha with the project) and in dry season (DS) irrigation to be 8,250 ha (from 8,000 to 16,250 ha). In addition, unfinished schemes carried over from CIDP were to be completed (12 CIP covering 3,750 ha, and 5 CIS covering 2,100 ha). Activities related to erosion protection, provision of service and link roads, and grain drying facilities were also planned. During implementation, changes in the number of schemes and service area were made. Of the 99 CIP and 114 CIS identified in the SAR, only 13 CIP and 23 CIS had been fully evaluated for implementation in the first year of the project. Of the remaining schemes, 53 CIP (service area of 6,843 ha) and 56 CIS (10,417 ha) were later dropped as they were not found technically and economically viable, and were substituted by 23 CIP (3,234 ha) and 20 CIS (1,646 ha). Moreover, 30 CIS (7,816 ha) in SZOPAD areas in Mindanao were added to the project in 1998. The project thus funded 69 CIP (8,163 ha) and 108 CIS (16,855 ha), and the total service area of 25,018 ha at completion was about the same as anticipated at appraisal, but the service area of CIP was lower than the appraisal figure by about 2,000 ha. At completion, the incremental irrigated area in WS under CIP was 5,336 ha, compared to 10,000 ha expected at appraisal, and that under CIS was 3,767 ha, compared to 4,000 ha expected at appraisal. The total incremental irrigated area under the project in WS was thus 9,103 ha. This was lower than the 14,000 ha expected in WS at appraisal due to the lower service area of CIP at completion, coupled with the fact that 1,442 ha of this area was already under irrigation in WS before the project, and that the irrigated area at completion (6,778 ha) was less than the service area (8,163 ha). The total incremental irrigated area of 10,232 ha in DS at completion was higher than the 8,250 ha expected at appraisal (Annex 1) due to the much larger contribution of CIS (5,104 ha) at completion. The increase in irrigated cropping intensity under the project (from 137% before the project to 178% after the project) is almost the same envisaged at appraisal (from 141% to 177%). The irrigated area under CIP is expected to increase further by 954 ha in each season beginning year 2001 after completion of the remaining work, which could not be finished by loan closing, and which requires an additional Peso 45 million (funding from the Government is expected). In addition to the incremental irrigated area achieved under the project, the existing irrigated area of 13,603 ha in the wet season and 10,946 ha in the dry season was rehabilitated, with consequent increases in yields. As regards the carried over schemes from CIDP, the number increased to 28 from 17 expected at appraisal. The schemes included 19 CIP (total service area of 14,500 ha, of which 7,200 ha could not benefit under CIDP) and 9 CIS (total service area 6,081 ha, of which 1,909 ha could not benefit under CIDP). The completion of the 18 CIP (one scheme - Bulod - could not be completed even after ten years of implementation) and of all the CIS is expected to generate about 6,440 ha in both seasons in year 2000, compared to 5,850 ha expected at appraisal from 17 schemes. -3 - About 30 km of service roads along the main canals in eight irrigation schemes were constructed and are being maintained by the LAs. A total of 113 km of link roads connecting 47 schemes to the nearest barangay roads were constructed, but no reliable scheme for their maintenance has been introduced and their construction was discontinued from 1993. About 730 km of hedgerows of vetiver grass were planted and maintained by lAs in areas prone to soil erosion in 59 irrigation schemes. A total of 45 drying pavements were constructed to facilitate better storage of grains and consequent higher farmgate prices for farmers. Development of Communal Irrigators' Associations (IAs). The project supported training and related activities for the establishment and strengthening of lAs in all CIDP II schemes and the 28 carried-over schemes from CIDP. The output of this component is rated satisfactory. NIA's guidelines, which require that an Institutional Development Officer (IDO) should commence formation/strengthening of the IA six to nine months prior to the start of construction, and that, to be eligible for funding, an IA should have at least 80% membership of farmer beneficiaries, was helpful in the institutional development of the lAs. A total of 480 training sessions for farmers were conducted in the subjects of Group Dynamics, Basic Leadership Development, Financial Management, Cost Reconciliation and System Management, benefiting 12,836 farmers (Annex 1). Also in 1991, NIA selected and trained a number of Farmer Irrigator Organisers as an alternative to IDOs, but it appears that the approach has not yet made much progress. Institutional Strengthening of NIA. The output of this component is rated satisfactory. The component comprised technical assistance (training and consultancies) for improvement: of procedures for assessment of hydrology to determine sufficiency of water for communal irrigation systems, for improvement of NIA's communal irrigation accounting system and collection efficiency, and for strengthening of IA's and NIA's monitoring and evaluation capacity; support for construction/rehabilitation of office premises; acquisition of vehicles, office equipment and furniture; and reconditioning and repair of run-down construction equipment and vehicles. Short duration training abroad was provided to 25 NIA staff in England ( 4 staff), Netherlands ( 2 staff), Thailand ( 12 staff) and Australia ( 7 staff). Activities implemented to strengthen both IA's and NIA's Management Information System included the development and implementation of simple systems for financial reporting, and for monitoring institutional development, physical accomplishment, water distribution and crop production. A total of 235 IDOs were trained in the application of these improved procedures (Annex 1), but their practical use has been limited. The assessment of project impact was conducted by the Project Benefit Monitoring and Evaluation (PBME) unit of NIA, and is a continuation of the system developed under the CIDP. It consists of a base line survey, conducted prior to construction or rehabilitation; seasonal farm management surveys, conducted during four consecutive seasons after system turn-over to lAs; and an ex-post evaluation survey, conducted after the last farm management survey. These surveys were conducted in 37 project schemes, and their results have been partly used in the economic and financial analyses for the ICR. Major findings of these surveys are described in the following section on Agricultural Development. Premises and facilities rehabilitated/constructed, and office and construction equipment and vehicles acquired/repaired under this component are listed in Annex 1. Due to various reasons, the repair program for equipment was abandoned. Instead, 100 new double-cab pickups were procured in 1999. Agricultural Development. The project supported the preparation and implementation of agricultural development plans (ADPs) for all irrigation schemes newly constructed or r ehabilitated, including - 4 - establishment of demonstration trials of improved technologies and support to the Department of Agriculture (DA) officers at Provincial and Municipal levels. Provincial Working Committees (PWC) were organised in all provinces and a Memorandum of Agreement (MOA) for each province was signed between NIA, DA and LGU, identifying activities, responsibilities and funding mechanisms for implementation of the agricultural support component, based on guidelines of the Agricultural Support Service Manual (Green Book) developed jointly by NIA and DA. The output of this component is rated satisfactory. A total of 215 demonstration plots covering most crop production and protection subjects and 110 nurseries (119% and 61% of SAR estimates, respectively) were established in most schemes during the lifetime of the project. Agricultural support equipment consisting of 151 knapsack sprayers, 106 soil test kits and 180 motorbikes were distributed to Provincial agricultural offices and lAs (84%, 59% and 100% of SAR estimates, respectively). A total of 229 training sessions for farmers ( 127% of SAR estimate), covering crop production and protection subjects, were conducted, involving 4,762 farmers (Annex 1). Project farmers benefited from the extensive training on Integrated Pest Management (IPM) provided by the DA at Provincial and Municipal levels. Estimated rice yields at appraisal were 3.5 t/ha in the wet season and 3.7 t/ha in the dry season. Farmers in all the seven project schemes visited by the ICR mission reported yields well above those projected at appraisal. They attributed the significant increase in yield of rice after the project to use of improved varieties, more reliable and constant water supply, and good technical support provided by the Municipal agricultural staff. However, the PBMVIE results based on data collected from a few schemes show that rice yields in the wet season in CIP schemes were 2.89 t/ha in the base line survey, remained at an average of 2.88 t/ha during the following four seasons, and increased to 3.27 tlha in the year of the ex-post survey. During the dry season, the first survey showed a yield of 2.96 t/ha, which remained constant during the following four seasons and decreased slightly in the ex-post survey to 2.86 t/ha. In the CIS schemes, the average yield reported in the base line survey in the wet season was 3.35 tlha and decreased to an average of 3.19 tlha during the following five seasons. In the dry season, the average reported in the base line survey was 3.12 t/ha and increased slightly to an average of 3.19 tlha during the following five seasons. These data, which do not appear very reliable, indicate that, in CIPs, there was a slight increase in yield in the wet season, but not in the dry period. This is contrary to expectations, and could be explained (if the data is correct) by factors lying outside the control of farmers, such as droughts or significant pest damage. For the CIS schemes, again the data do not fit expectations because the changes in yield do not reflect the improvements made in the irrigation schemes. It is not clear whether and to what extent droughts, floods and pest infestation, particularly the drought experienced in 1998 due to El Nino, affected the CIP and CIS yields reported in the PBME survey. As for fertiliser use, two of the schemes visited by the ICR mission indicated use of 6 bags (50 kg each) of a complete NPK mixture and urea, as recommended by the DA. However, data collected in the PBME surveys indicate that very little change has occurred in fertiliser use during the monitoring period: amounts applied in the ex-post period are very similar to those in the base line survey, and correspond roughly to two bags of complete NPK (14-14-14) and two bags of urea (46-0-0). As regards integrated pest management (IPM), considerable awareness about the technology exists among the farmers in the project schemes. Many farmers reported to the ICR mission a significant decrease in their pesticide use after IPM. However, once again, the PBME survey data indicate that the amount of pesticide application and percentage of farmers applying it have remained fairly constant during the monitoring period. There is a continuing need for the IAs and NIA to seek effective partnerships with relevant line agencies and ensure the delivery of an efficient agricultural support services program. - 5- 4.3 Net Present Value/Economic rate of return. The ERR was re-estimated following the methodology used in the SAR, but with updated prices, costs, cropped areas, cropping intensities, crop yields and inputs. Relevant crop models were constructed for irrigated and rain-fed rice cultivated in wet and dry seasons in CIP and CIS. Crop models were also constructed for corn, but not for other crops, which occupy less than 5% of the cropped area. Since the PBME data on the sample schemes is unreliable, and the farmers reported to the ICR mission rice yields above appraisal estimates, the appraisal yield estimates (3.5 tons/ha in the wet season and 3.7 tons/ha in the dry season) were used for the ERR calculation. Following the SAR methodology which excluded costs and benefits of schemes carried over from CIDP, and using a standard conversion factor (SCF) of 1.0 for labour and other non-tradeables, the ERR is re-estimated at 15%, compared to the appraisal estimate of 19%. With a SCF of 0.9, the ERR will improve to about 17%. The lower incremental irrigated area in the wet season, compared to that expected at appraisal (Section 4.2) accounts for most of the difference between the appraisal and completion ERRs. The NPV at 10% discount rate is Peso 489.8 million (Annex 3). 4.4 Financial rate of return. Crop budgets show that net return/ha for an additional irrigated crop in the drv season is quite attractive at about Peso 17,840 (US$440). The incremental net return/ha (over the rain-fed crop) in the wet season is about Peso 8,300 (US$203), an increase of almost 100% over without-project situation. For rehabilitated communal schemes experiencing only increases in yields, the incremental net, returns/ha range from Peso 4,470 in the wet season to Peso 4,900 in the dry season. The net return per family labor day for an additional irrigated crop in the dry season is Peso 470, and the incremental return (over the rain-fed crop) in the wet season Peso 224. These returns per family labor day are very attractive, compared to the prevailing wage rate of unskilled labor in rice areas of about Peso 100 per day. 4.5 Institutional development impact: The project had some impact on the institutional development of NIA, as NIA carried on and refined the system, established under the preceding CIDP (Loan 2173-PH), of preparing feasibility studies, agricultural development plans, and institutional development plans for the lAs, in full consultation with and with the participation of the lAs. The improved planning of technical, agricultural and institutional aspects was reflected in the relatively smooth implementation of most schemes. The project, however, had a substantial institutional development impact on the lAs, which contributed to better co-operation among lAs, LGUs and other line agencies involved in promoting improved management of irrigation systems and increased farm production. The project was the subject of an NGO case study, prepared in September 1998 by the Philippines Rural Reconstruction Movement. The case study, based on document reviews, interviews with the lAs, and a sample study of six sub-projects, indicated beneficiaries' satisfaction with the project as a whole. It reported that "although fanners and lAs had little involvement in the identification phase of the project, they played a crucial role in implementation and monitoring phases, with farmers themselves initiating their plans, O&M and M&E, and taking ownership of the completed project." The results of this case study (among others) were reported in the Quality of Participation Study (October 1999 draft) by the World Bank Social Development Department as follows: "This project is notable for the high and sustained level of Primary Stakeholder participation, from preparation through sub-project planning and implementation to monitoring and evaluation", and, further: "The project is remarkable for its built-in means of checks and balances, for installing "walk throughs" of various construction phases, and for encouraging consistent participation during a sub-project's "pre-during-post" phases by the stakeholders. There are also numerous fora for primary stakeholder participation, capacity-building and feed back throughout the project's preparation, implementation and monitoring/evaluation cycle." -6 - 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: The implementation of a number of communal irrigation schemes was affected by the occurrence of typhoons during the construction period and law and order problems. The repairs to the damage increased cost and delayed implementation. 5.2 Factors generally subject to government control: During the first two years of the project, the pace of implementation was seriously affected by the inadequate allocation of counterpart funds and cash releases. The main cause for the delay was the practice adopted by the Department of Budget and Management (DBM) of quarterly cash releases against the confirmation of the liquidation of 100% cash expenditures of the previous quarter. The release of cash improved from 1993 onwards, but annual allocations continued to be lower than project requirements. The devolution of the responsibility for communal irrigation to the LGUs in 1991 under the Local Government Code also slowed the pace of the project. The LGUs were not technically or financially ready to assume the responsibility. The subsequent Government decision to continue with NIA as the executing agency for the project improved implementation. The activities intended for the improvement of NIA's procedures for the financial management of communal irrigation were not carried out as planned, because the Office of the President never gave a decision on the issue of accounting of amortisation payments made by lAs, which currently accrue to NIA as its income (see further Section 6.1, para. 3). 5.3 Factors generally subject to implementing agency control: NIA provided the necessary staff and resources, exercised effective management for the implementation of civil works and institutional development, and had good coordination with DA for implementation of the agricultural support component. However, monitoring of progress of the schemes could have been more effective and remedial actions (such as for the Bulod scheme carried over from CIDP and for Haghonghong which remained a problem scheme until loan closing) could have been more prompt and effective. 5.4 Costs andfinancing: Including about US$9.68 million equivalent for schemes carried over from CIDP, the total project cost at completion is estimated at US$56.80 million equivalent (SAR estimate was US$64.40 million). The cost in dollar terms became lower due to the continuous devaluation of the peso from Peso 22.8 to the dollar in 1990 to above Peso 40.0 in 1999. Except for the cost of engineering, supervision and administration, which exceeded the appraisal estimate due to increases in staff salaries and longer than expected implementation period, the cost of all other components was lower than at appraisal (Annex 2). The average cost/ha for incremental irrigated area in CIP was Peso 127,000 (US$3,100) in 1999 constant terms, while the rehabilitation cost/ha in CIS (which also included some incremental irrigated area) was Peso 51,000 (US$1,250). These estimates are based on the cost of civil works plus 25% of civil works costs for administration, supervision and engineering. The financing by the Bank (Annex 2) was US$36.80 million (80% of the original Bank loan of US$46.20 million), and that by the GOP US$20.00 million (110% of SAR estimate). 6. Sustainability 6.1 Rationale for sustainability rating: The sustainability of the newly constructed/rehabilitated schemes, given the effective commitmnent of lAs, is likely, but further expansion of communal irrigation will require stronger LGU commitment for funding and establishment of procedures to avoid negative political influence in the selection of sites, while assuring - 7 - high quality in preparation and implementation of works. An important policy change relating to the farmers' equity contribution to the costs of communal irrigation schemes was implemented under the Administrative Order (AO) No. 17 of August 31, 1998. The policy prior tc) the AO 17 was that the amount payable as equity (10% of the chargeable costs) was collected in stages as construction progressed. Payments were either in kind (usually construction materials), or cash, or in the form of labor, or a combination of the above. Under AO 17, equity during construction was waived, and the minimum amortisation payment of 1.5 cavans/ha/year was reduced to one cavan (50 kg) /halyear. The implications of this policy change are difficult to assess at this time. However, since the equity payments were seldom equal to even 10%, and, in the event of a lower payment, were added to the chargeable cost to be amortised, there is unlikely to be any significant adverse impact of this policy change on the sustainability of communal irrigation schemes. Among the essential requirements for sustainability of communal irrigation schemes are adequate preventive maintenance and timely repairs of the irrigation network. The present maintenance by some IAs leaves much to be desired, and although they manage to keep the water running, some farms may not receive it in sufficient quantities or on time. The lAs have to be further trained and motivated for proper maintenance of the existing systems to save them from deterioration. The proposal for setting up earmarked O&M funds (to be financed from the IA's share of irrigation service fee collection), being considered for national irrigation systems, should also be seriously considered for the communal irrigation schemes to ensure a self-sustaining system for O&M. To address the need for major repairs and rehabilitation, the Government should consider whether to set aside the amortisation payments made by the IAs for each communal scheme in a trust fund. At present, these amortisation payments accrue to NIA as its income. This is inconsistent with Presidential Decree 552 of 1974, which stipulated that recovery of costs of construction and/or rehabilitation of communal irrigation systems "shall accrue to a special fund for irrigation development." Although the Office of the President never gave a decision on this issue of accounting of amortization payments (an issue which had been highlighted by the consultant study of NIA's accounting system for communal irrigation), it is extremely important for the sustainability of communal irrigation schemes that the amortization payments accrue to a trust fund for major repairs and rehabilitation. The sustainability of the institutional framework is highly likely as the lAs are generally strong and well organised. As regards agricultural development, crop yields, especially rice yields, can certainly increase in the project area if adequate levels of crop inputs, high quality certified seed and proper pest control measures are applied. The continued technical assistance from Provincial and Municipal Agricultural Offices is fundamental for sustainability and further increase of crop productivity. 6.2 Transition arrangement to regular operations: The CISs improved under the project do not require any specific transition arrangement since the lAs already exist and training, as required for various facets of management, was provided during the implementation of system improvement. There is, however, a formal handing over of the improved facilities to the IA, when it has an opportunity to point out the defects/shortcomings that have to be rectified by NIA. An IDO continues to be responsible for further strengthening of the IA for at least two crop seasons. For the CIPs, NIA maintains and operates the systems for two seasons and remedies the teething problems before handing over the systems to the lAs. After handing over to the IA, an IDO continues to assist the IA for one crop season or more, if necessary. NIA also carries out annual audit and review of IA accounts. As regards performance indicators to help monitor future operations and impact of the project, the existing - 8 - monitoring and evaluation system (PBME) with its indicators (including cropped area and cropping intensity, rice yields, fertiliser utilisation, pesticide use, etc.) should be continued, but should be refined and strengthened to ensure greater data reliability. There is also a need for a follow-on project within the framework of the Local Government Code but with a national-level agreement among LGUs, central oversight agencies, and NIA regarding financing arrangements and respective roles (including a possible role for NGOs and the private sector) for the future development of the communal irrigation sector. 7. Bank and Borrower Performance Bank 7.1 Lending: The Bank lending performance was highly satisfactory. The preparation assistance assured completion of proper design of civil works of a sufficient number of schemes that would qualify for implementation in the first year of the project. The lessons learned from the previous Bank-supported project (CIDP), which included procedures for improved system assessment, and the need to provide drying facilities, agricultural support services, erosion control, IA development and proper accounting, were reflected in the design of the institutional development and agricultural support components. There were no major issues at appraisal and the loan became effective within two months after signing 7.2 Supervision: Bank supervision is rated satisfactory. The supervision missions reviewed the progress of civil works and institutional development activities almost every six months (Annex 4a). Apart from the shortage of counterpart funding in the initial years, there were no major issues to be resolved. The agricultural support program was extensively reviewed midway through the project and the implementation of the program and the impact thereof were later reviewed through the data collected by NIA's PBME unit. The procurement reviews were carried out by the Resident mission beginning October 1996, thus expediting Bank decisions. The Quality Assurance Group (QAG) of the Bank included this project in the third Rapid Supervision Assessment (FY99), and gave satisfactory rating to focus on development impact, supervision of fiduciary aspects, adequacy of supervision inputs and processes, realism of project performance ratings, and overall quality of supervision. 7.3 Overall Bank performance: The overall Bank performance was satisfactory. The Bank was very flexible in administering the loan and assisted the GOP in the resolution of the problem of shortage of counterpart funds. The disbursement percentage for civil works was increased from 70% to 95%, and for technical assistance from 75% to 90%. The Bank established, at GOP's request, the Project Special Account (PSA) and agreed to a later request for the use of 90-day advance from the PSA to the field offices for faster implementation of works. The Bank also agreed to three one-year extensions of the Loan closing date. Borrower 7.4 Preparation: The preparation by the Borrower of the various components for project appraisal was satisfactory. The Borrower completed the detailed designs of 25 schemes before negotiations, along with a plan for quality control. Irrigators' Associations were established in all schemes and were actively involved in all phases of planning, construction and rehabilitation. Necessary linkages between NIA, DA and LGUs for implementation of the agricultural support program were established with clear identification of responsibilities and mechanism of funding. 7.5 Government implementation performance: The performance of the Borrower during the first two years of project implementation is not considered -9- satisfactory with regard to the availability of counterpart funds. lhe situation improved from 1993 onwards, but allocations continued to be lower than project requirements, resulting in a slow pace of implementation which, eventually, required extensions of the Loan closing, date. 7.6 Implementing Agency: The project implementation period of nine years (mainly due to shortage of counterpart funds) is about the same as the Bank standard profile for such projects. Overall, the performance of the main implementing agency, NIA, was satisfactory. The investigations and surveys for the CIPs were adequate, except at two schemes: Bulod CIP, a carried-over scheme from CIDP and Haghonghong CIP, a regular project scheme, where extensive rock excavation was eventually required for the main canals, increasing the cost of works and extending the implementation period. In general, civil works implementation was satisfactory. Civil works were mostly carried out under force account and use of small contracts (paquiao) with the LAs. Maintenance of project accounts by NIA was satisfactory, and submission of audit reports timely. 7. 7 Overall Borrower performance: The overall Borrower performance was satisfactory. The Borrower complied with all requirements to start the project on time, but shortage of counterpart funds slowed the pace of imnplementation during the first two years. The implementing agency has developed effective linkages with 1As, LGUs and line agencies. 8. Lessons Learned * Communal responsibility is an effective way of ensuring sustainable irrigation schemes.The small-scale communal schemes are cost effective, economically viable and can, if properly sited, constructed and maintained, contribute to poverty alleviation. * Successful implementation of communal irrigation requires clear directions on the roles and responsibilities of each stakeholder, including a comprehensive institution-building program. Given the fact of devolution of communal irrigation schemes to the LGUs, there is a need for a national-level agreement among LGUs, central oversight agencies, and NIA regarding financing arrangements and respective roles (including a possible role for NGOs and the private sector) for the future development of the communal irrigation sector. Responsibilities of different agencies for design, construction, operation and maintenance, institutional arrangements, and provision of agricultural support services should be clearly defined. * A self-sustaining system for O&M and repair and rehabilitation needs to be evolved. Inadequate maintenance and frequent natural calamities (mainly typhoons and floods) lead to deterioration of irrigation systems, and the farmers become dependent on Government funds for major repairs and rehabilitation. Establishment of earmarked O&M funds (financed from the IA's share of irrigation service fee collection) and trust funds for major repairs and rehabilitation (financed from the amortisation payments by communal schemes) should be seriously considered for sustaining the performance of the communal irrigation sector. * Improvement of irrigation facilities should be complemented by agricultural support services. The lAs of communal irrigation schemes should forge effective partnerships with relevant line agencies, LGUs and Peoples' Organisations providing agricultural support services to maximise on-farm productivity. * Technical innovations are long overdue in the communal irrigation sector. To achieve better operation and maintenance, more equitable distribution of water, and greater efficiency in water use, - 10 - there is a need to move away from the current labor-intensive technology based on gated control structures to a simpler technology involving little or no operation. Long-crested weirs for water level control, and proportional dividers and reduced pipe sizes for equitable distribution of water, which are now being successfully introduced in the national irrigation systems under the Bank-supported Second Irrigation Operations Support Project (Loan 3607-PH) and Water Resources Development Project (Loan 41 1 0-PH), should be a standard feature of communal irrigation schemes. 9. Partner Comments (a) Borrower/implementing agency: The efforts of ICR Mission in preparing the comprehensive assessment report for CIDP II are hereby commended. The project data and statistical parameters are, in general, acceptable to NIA. In view of the observation, analysis, and recommendations that were systematically and objectively presented, the NIA's comments are discussed below. * Additional schemes in Mindanao. The 30 irrigation schemes that were approved by the Bank in 1998 and to be implemented in 1999 under the project have been substantially completed despite the squeezed schedule of one year (ideally two dry seasons) from feasibility studies to construction. The Bank and the oversight agencies contributed significantly in facilitating the budgetary requirements for the fast track implementation of these 30 schemes. * Effect of Local Government Code. The project loan signing was done before the effectivity of local government code which mandates the local government unit (LGU) to handle the implementation of communal irrigation development and the agriculture extension and related programs. The project has an agricultural support services component, originally (at appraisal) to be implemented by the Department of Agriculture from headquarters to regional and finally to the provincial/municipal level. The Code devolved the Agricultural Extension Officers and Technicians to the LGU hence the NIA and DA worked out the arrangement with the LGU to implement such component. A memorandum of agreement (MOA) between DA and the concerned LGU (mostly provincial) was prepared identifying the terms of references for all parties. With some difficulties encountered in this arrangement, the farmers through their lAs were supported both by the project and LGU and complemented by other DA programs for agricultural technology transfer and extension. * Reliability of PBME data. The mission observation of not very reliable data provided by the Project Benefit Monitoring and Evaluation (PBME) maybe true given the macro indicators at the central office. The average or median system of calculating the yield of paddy (harvested grain) could be further improved if the evaluators had more or less balanced statistics. In PBME's four seasons of monitoring, the average results cover crop production seasons with effect of drought (El Nino), flood (La Nifna) and infestation (Tungro virus, black bugs, etc.) The El Nino phenomena apparently occurred once in every three years from 1991 - 1999. The frequent typhoons and heavy flooding were also common in the Philippines. If PBME would eliminate the cropping seasons affected by yield decreasing factors, the average will greatly improve and will be equal to if not better than the estimate gathered by the mission. * Construction of premises. Given the financial problem, especially in the availability of cash support, the project prioritized the activities that will provide impact i.e. irrigation rehabilitation and IA trainings, instead of more building and premises. * Selection of schemes. Following the minimum criteria in the selection of subprojects, many - 1 1 - proposed schemes were carefully re-evaluated by the Project Management Office (PMO) and dropped if they did not qualify. It means that at the start, quality standard for subproject selection was already practiced by the project personnel. * Completion of remaining works. As committed to the mission, all schemes that were started under the project shall be completed by NIA. * Farmer Irrigator-Organizer (FIO). Not much progress was made in training farmers to become organizers because of limited number of IA members who can devote full time to this job. * IDOs trained in agricultural extension. One IDO per province was trained in agricultural technology and extension and was given inter-regional tour to various institutions involved in applied research and extension in the Philippines. The idea was to guide the farmers on their agricultural production requirements as the IDO is always in actual contact with the fanners. * Sustainability of the program. To partially support the LGU and IA in communal irrigation development, the Department of Agriculture (DA) recently launched the Balikatan Sagip Patubig Prograrn (BSPP). This is a tripartite scheme with counterpart funding from the DA through NIA, LGU and IA. After construction, the IA assumes the O&M. It is required (through MOA) that during O&M, the IA should set aside portion of their irrigation service fee (ISF) to a sort of trust fund. The fund will be utilized for preventive system maintenance. Initially there is a revolving fund of PI OO million for the programn. The DA is committed to replenish any expended amount for BSPP that will maintain the P100 million at any point in time. The program, however has to be acceptable to the LGUs, who have to provide the counterpart fund (10% to 50% of subproject cost less labor, considering LGU income class). * Follow-on- project. The NIA is now in close consultation with the National Economic Development Authority (NEDA) for the preparation and packaging of the follow-on project within the framework of the Local Govermment Code and the Agricultural and Fisheries Modemization Act (AFMA) of 1997. More or less, some provisions of the Bank assisted Mindanao Rural Development Project (MRDP) shall be adopted. All lessons learned in CIDP I and CIDP II shall be considered to improve the overall project design. Lastly, the Bank's overwhelming support to the project is hereby acknowledged. The club of 29, in particular, is of great help in solving many implementation problems, and served as a focal point where coordination among various agencies was facilitated. Despite many constraints and bottlenecks, NIA is very much pleased to receive a satisfactory rating for the project. (b) Cofinanciers: N/A (c) Other partners (NGOs/private sector): N/A 10. Additional Information The project's environmental category was appropriately rated B at appraisal. There has been no significant increase in application of fertilisers and pesticides under the project. - 12- Annex 1. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _A c *uaY R*. t E t a e Farmers benefited (No.) 20,000 26,000 Incremental Income/ha (Peso) 12,840 (Constant 1990 prices) 17,840 (Constant 1999 prices) Incremental paddy production (tVyear) 81,175 73,216 Output Indicators: A- Civil Works Service area of irrigation schemes (ha) Regular schemes 25,000 17,202 Schemes carTied over from CIDP 5,850 9,109 SZOPAD Schemes None 7,816 Total 30,850 34,127 Incremental irrigated area WS/DS (ha) Regular schemes 14,000/8,250 8,303/8,982 Schemes carried over from CIDP 5,850 6,432/6,445 SZOPAD schemes None 800/1,250 Total Not quantified 15,535/16,677 Construction service roads (km) Not quantified 30 Construction link roads (km) Not quantified 113 B- Development of lAs (No.) Group dynamics and leadership training Batches 127 130 Participants Not quantfied 4,396 Financial management training Batches 123 138 Participants Not quantified 3,904 System management training Batches 175 176 Partidcipants Not quantfied 3,496 Other training for IA members Batches None 36 Participants None 1,040 IDO (NIA staff) training (No.) Staff development Not quantified 235 Field exposure Not quantified 204 Pre-deployment Not quantified 85 Facilitator/organiser Not quantfied 144 - 13 - C- Strengthening of NIA Buildings (No.) Renovation Regional Offices 7 5 Construction Provincial Offices 9 15 Constructon Engineer's quarters 15 2 Construction equipment shed 11 1 Site development (Pesos) 2.5 million None Vehides (No.) Double cab pickups None 100 Construction equipment (No.) Dump trucks 68 68 Concrete mixers 49 49 Generators 20 kwa 12 12 Welding machines 28 28 Equipment repair (Pesos) 98.44 million 3.44 million Office equipment (No.) Fax machines 36 36 Desk calculators 134 134 Typewriters 27 inches 67 67 Typewriters 18 inches 67 67 Steel cabinets 240 240 Computers 79 79 Blueprinting machines 6 6 Photocopying machines 6 6 D- Agricultural Development Demonstration farms 180 215 Nurseries 180 110 Farmers' training Batches 180 229 Participants Not quantified 4,762 Knapsack sprayers 180 151 Soil test kits 180 106 Drying pavements None 45 Hand tractors None 2 Warehouse None 1 Mechanical dryer 60 1 Moisture meter None 1 Motorcydes 180 1 B3) Certified seed (25kg bags) None 355 Organic fertiliser (50 kg bags) None 1,400 I I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-________________________________ Note: The column 'projected in Last PSR' refers to projections in SAR. End of project - 14 - Annex 2. Project Costs and Financing Project Cost by Component (in US$ million equivalent) --lo , A -- -oww . E_tIn! ': EO ff"On Rehabilitation and Construction of Communal Irrigation 34.00 38.58 93 Schemes Development of Communal Irrigators' Associations 2.70 2.01 59 Institutional Strengthening of NIA 11.30 6.72 52 Agricultural Development 0.90 0.73 70 Engineering and Administration 4.50 8.76 158 Total Baseline Cost 53.40 56.80 Physical Contingencies 4.50 Price Contingencies 6.50 Total Project Costs 64.40 56.80 Total Financing Required 64.40 56.80 Note: In the column 'Percentage of Appraisal', appraisal costs are inclusive of contingencies. Project Costs by Procuremt Arrangements (Appraisal Estimate) (US$ million equivalent) 1. Works 0.00 9.90 39.70 0.00 49.60 (0.00) (6.90) (27.80) (0.00) (34.70) 2. Goods 5.50 3.00 0.70 0.00 9.20 (4.30) (2.50) (0.60) (0.00) (7.40 3. Services 0.00 0.00 0.50 0.00 0.50 .________________________ (0.00) (0.00) (0.30) (0.00) (0.30) 4. Miscellaneous 0.00 0.00 5.10 0.00 5.10 (0.00) (0.00) (3.80) (0.00) (3.80) 5. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) 0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 5.50 12.90 46.00 0.00 64.40 (4.30) (9.40) (32.50) (0.00) (46.20) -15 - Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) 1. Works 0.00 1.10 46.78 0.00 47.88 (.00) (0.80) (28. ]L4) (0.00) (28.94) 2. Goods 4.40 0.50 0.23 0.00 5.13 (4.40) (0.40) (0.19) (0.00) (4.99) 3. Services 0.00 0.00 0.29 0.00 0.29 (0.00) (0.00) (0.22) (0.00) (0.22) 4. Miscellaneous 0.00 0.00 3.50 0.00 3.50 (0.00) (0.00) (2.65) (0.00) (2.65) 5. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 4.40 1.60 50.80 0.00 56.80 (4.40) (1.20) (31.20) (0.00) (36.80) Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. vIncludes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units. Project Financin b Com onent (in US$ million e uivalent) Civil and Agricultural 34.70 14.90 28.94 18 94 83.4 127.1 0.0 works Equipment, vehicles 7.40 1.80 4.99 0.14 67.4 7.8 0.0 Irrigators' Association 2.40 0.82 1.44 0-57 60.0 69.5 0.0 Development Training 0.25 0.10 0.20 0.06 80.0 60.0 0.0 Technical Assistance to 0.25 0.21 0.22 0.07 88.0 33.3 0.0 NIA Monitoring and Evaluation 1.20 0.37 1.01 0.22 84.2 59.5 0.0 Total 46.20 18.20 36.80 20.00 79.7 109.9 0.0 -16- =_ Annex 3: Economic Costs and Benefits Present Value of Flos (1999 Constant Terms) Econom c Analvsis Financia Analvsis Appraisal Latest Estimate Appraisal Latest Estimate Economic rate of return (%) 19 1S5 Net return/ha (dry season) (Peso) 23,568 17,840 NPV at 10% (Peso Million) 166.1 489.8 _ Note: The appraisal net return/ha (Peso l2, 840) and NPV at 10% discount rate (Peso 90.5 million) have been converted to 1999 constant terms using the consumer price index. -17 - Annex 4. Bank Inputs (a) Missions._ Stage of Projt Cycle No. of Persons and Specialty Performc ng (e.g. 2 E it 1 FMS, etc.)t X :00 Implementation Development Month/Year Count Specialty Progress Objecive Identification/Preparation 6 A,B,C,D,E,F Feb/Mar/1989 Aug/1989 4 A(2),C,D Appraisal/Negotiation Pre-Appr. Nov/1989 5 A,B,C,D,F Appr. Mar/Apr/1990 4 A,B,C,D Nego: 9/90 Board 10/90 Sign.: 11/90 Effec: 01/91 Supervision Feb/1991 I C S HS Nov/1991 2 C S HS Apr/1992 I C HS HS Dec/1992 I C HS HS July/1993 I C HS HS Feb/1994 1 C May/Jun/1994 I C HS HS Feb/Mar/Apr/1995 4 A,B,C,E S S Mar/1996 3 A,B,C S S May/1996 I C Dec/1996 2 B,C S S Mar/Apr/1997 3 B,C,E Jun/1997 2 B,C Oct/Nov/1997 2 B,C S S Mar/1998 2 B,C S S Aug/Sep/1998 3 B,C S S Mar/1999 2 B,C S S Aug/Sept 1999 4 B,C,D,E S S ICR Pre-ICR- Dec/1999 2 B(2) Feb/Mar/2000 4 A,B,C(2) Speciality: A: Agronomist B: Economist C: Engineer D: Financial Analyst E: Institution Development F: Water Resource Economist - 18 - (b) Staff. Stage of Project Cycle ActuaULatest Estimate No. Staff weeks US$ (,OOO) Identification/Preparation 37 111.0 Appraisal/Negotiation 28.5 85.5 Supervision 65 227.5 ICR 9.0 42.75 Total 139.5 466.75 19- Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating ZMacro policies O H OSUOM O N * NA Sector Policies O H OSUOM ON I * NA Z Physical O H *SUCM O N O NA O Financial O H *SUCM O PN () NA 2 Institutional Development 0 H O SU 0 M 0 N .) NA E Environmental 0 H O SU 0 M 0 N P NA Social I Poverty Reduction 0 H 0 SU 0 M 0T N0 NA Z Gender O H OSUOM ON C) NA Z Other (Please specify) 0 H O SU C M 0 Ar C) NA (Stakeholder Participation) O Private sector development O Public sector management O Other (Please specify) -20 - Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating N Lending OHS OS OU OHU X Supervision O HS OS Ou OHU F Overall OHS OS O U O HU 6.2 Borrowerperformance Rating X Preparation O HS OS O U O HU 2 Government implementation performance 0 HS 0 S 0 U 0 HU Z Implementation agency performance 0 HS * S 0 U 0 HU Z Overall OHS OS OU O HU - 21 - Annex 7. List of Supporting Documents Back-to-Office Report of the ICR Mission (March 10, 2000) Aide Memoire of the ICR Mission (March 27, 2000) Report of Base-line and Ex-post PBMNE surveys Report of Seasonal Farm Surveys Financial and Economic Analyses QAG Report on the Third (FY99) Rapid Supervision Assessment (October 18, 1999) Quality of Participation Study (Draft Report, October 1999, by WB Social Dev. Department) - 22 -