Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4554 PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES RICE PROCESSING PROJECT (LOAN 720-PH) June 15, 1983 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS APU Agriplan Unit of DBP DBP Development Bank of the Philippines GPR-PR General Performance Review and Recommendations for Project Revisions NGA National Grain Authority PCRO Project Completion Report Overview FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES RICE PROCESSING PROJECT (LOAN 720-PH) TABLE OF CONTENTS Page No. Preface ..................................... Basic Data Sheet ................. .. . . ..... ..................... 11 Highlights ......................................................... iii PROJECT PERFORMANCE AUDIT MEMORANDUM I. SUMMARY............ 1 Project Preparation and Design ..................... 1 Initial Implementation ........................ 2 Project Redesign/Reappraisal ............................. 2 Implementation after June 1974 .................... 3 Results ............................................... 3 Physical Facilities ..................................... 4 Sub-Loans ....o.o...............................o... 5 Loan Repayments ........................ ................ 5 Working Capital ..................................... 5 Economic Rate of Return ................................... 5 II. ISSUES ............................. ........o....... . 5 Bank Performance ... .. ........... ---oo----oo-.o o .oo.... 5 Monitoring/Management Information ...... 7 Mill Profitability/Loan Repayment/Economic Rate of Return/Working Capital ......................... . ... 9 Final Comments .... ...................... 10 Attachment 1: Borrower Comments by The National Economic and Development Authority .................... 11 Attachment 2: Borrower Comments by The Development Bank of the Philippines ............................... 13 Attachment 3: Borrower Comments by The Development Bank of the Philippines ......................... 17 PROJECT COMPLETION REPORT OVERVIEW The Objective of the Project ........ .... ..... 20 Project Design ........ .............. .. ... ..... 20 Project Implementation . o . o. .oooo.......... o o... 21 Project Impact ................. ..... . . ... .o... 22 Economic and Financial Evaluation -... ............ 23 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES RICE PROCESSING PROJECT (LOAN 720-PH) PREFACE This is a performance audit of the Rice Processing Project in the Philippines, for which Loan 720-PH was approved in January 1971. The loan was fully disbursed and closed in March 1981. The audit report consists of a memorandum prepared by the Operations Evaluation Department (OED) and a Project Completion Report Overview (PCRO) dated November 1, 1982, prepared by the East Asia and Pacific Regional Office; while the Project Completion Report (PCR) prepared by the Borrower's executing agency, the Development Bank of the Philippines (DBP), also forms part of the report, it is not attached due to length and volume, but a copy is available in OED files. An OED mission visited the Philippines in November 1982. The mission held discussions with officials of DBP, and agencies of Government both at headquarters and in field sites. Private grain millers were inter- viewed in addition to grain traders, bankers and farmers. The information obtained was used to test the validity of the analysis and conclusions reached in the PCR and PCRO. The audit memorandum is based on the discussions, on interviews with Bank staff associated with the project, and on a review of the PCR, the PCRO, the President's Report (No. P890) dated January 13, 1971, the Appraisal Report (No. PA-47a) dated January 11, 1971, the General Project Review and Recommendations for Project Revision (No. 379-PH) dated March 28, 1974, the Loan Agreement dated February 4, 1971 as amended May 14, 1974, correspondence with the Borrower, and internal Bank memoranda on project issues as contained in Bank files. Copies of the draft report were sent to the Borrower on March 30, 1983; comments received from DBP and the National Economic and Develop- ment Authority have been incorporated in the report and are reproduced as attachments. The audit finds that the data and most of the analysis contained in the PCR and PCRO provide a generally accurate presentation of the project's principal achievements and shortcomings. The audit memorandum consists of a summary of the project-s salient design, redesign and performance features, a discussion of the Bank's performance, and discussion of two selected areas of concern. The valuable assistance provided by the Government of the Philip- pines, and by the DBP staff, during preparation of this report is gratefully acknowledged.  - ii - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET PRILIPPINES: RICE PROCESSING PROJECT (LOAN 720-PH) KEY PROJECT DATA Appraisal Actual or Actual as I of Item Estimate Estimated Actual Appraisal Estimate Total Project Costs (US$ million) 20.9/L 18.9L 91% Loan Amount (US$ million) 14.3 14.3 1001 Date Board Approval 01/26/71 Date Effectiveness 05/10/71 05/10/71 100% Date Physical Components Completed 06/75 03/81 230b Proportion completed (2) by above date 9 100 - Closing Date 06/30/75 03/31/81 230% Economic Rate of Return (%) 25% 20t/c Financial Rate of Return (%) - Satisfactory - Institutional Performance Less than expected - Number of Direct Beneficiaries (sub-borrowers) 66 313 474% CUMULATIVE DISBURSEMENTS FY73 1FY74 FY75 FY76 FY77 FY78 , FY79 FY80 FY81 Appraisal estimate (US$ million) 3.8 9.8 14.3 14.3 14.3 14.3 14.3 14.3 14.3 Actual (US$ million) 0.2 0.5 1.4 4.6 8.2 10.6 12.2 13.98 14.3 Actual as % of estimate 5 5 9 32 57 74 85 97 100 Date of final disbursement March 1981 MISSION DATA Date No. of Mandays Specializat)ons Performagce Types of Mission (mo./Yr.) Persons in Field Represented.; TrendLf Problema/i Identification 09/67 3 45 Preparation 03/68 5 125 Appraisal I 04/69 4 100 Appraisal II 02/70 2 14 Subtotal 284 Supervision 1 09/71 2 14 - - - Supervision 2 02/72 1 5 - - - Supervision 3 02/73 2 22 2 2 M,O Supervision 4/h 08/73 2 22.5 3 1 M Supervision 5 10/74 2 20 3 1 M Supervision 6 09/75 2 10 1 2 M Supervision 7 02/76 2 20 1 2 - Supervision 8 10/76 2 20 1 2 - Supervision 9 04/77 2 20 2 2 F,M Supervision 10 10/77 3 15 2 2 F,M Supervision 11 06/79 4 36 a,b,c,d 2 2 F,M Supervision 12 03/80 2 15 a,d 1 2 F,M Supervision 13 11/80 1 2.5 a,b,c 1 1 F Subtotal 222 Completion L! 10/82 Total 506 * 101 manweeks OTHER PROJECT DATA Borrower The Republic of the Philippines Executing Agency Development Bank of the Philippines Fiscal Year January 1 - December 31 Name of Currency (abbreviation) Peso (p) Currency Exchange Rate: Appraisal Year Average 1971 US$ 1.00 - P6.15 Intervening Years Average 1975 US$ 1.00 - P7.2 Completion Year Average 1981 US$ 1.00 - P8.13 Follow-on Project: Name: Second Grain Processing Project Loan Number: 1269-PH Loan Amount (US$ million): 11.5 Date Board Approval: may 25, 1976 /a Excludes sub-borrower equity investments and excludes working capital loans. Tb Calculated from date of Board approval. Te Reflects lower range of calculation in PCR. Audit unable to confirm - see text of PPAM. /d a - agriculturist; b - agricultural economist; c - financial analyst; d - young professional; e - rice/corn milling expert; f - civil engineer. /e 1 - problem-free or minor problems; 2 - moderate problems; and 3 - major problems. 7f 1 - improving; 2 - stationary; and 3 - deteriorating. i F - financial; M - managerial; T - technical; P - political; and 0 - other. h This mission led to revision of project design. Ti Completion report was done by borrower, DBP.  - iii - PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES RICE PROCESSING PROJECT (LOAN 720-PH) HIGHLIGHTS This project was prepared during a period of considerable optimism concerning rapidly increasing levels of national grain production in the Philippines. The project was designed to increase rice milling efficiency through the installation of a number of large integrated rice milling facili- ties of a type previously unused in the country. Simultaneously, the project represented an attempt by Government to provide an alternative financial channel to the grain processing industry through the Development Bank of the Philippines (DBP) on lending the amounts necessary to finance the installa- tions included in project design. The project was initiated in early 1971 and was expected to be completed by mid-1975; however, the initial technical specifications (and the concurrent procurement procedures) proved inappropriate to the country situ- ation, and simultaneously confidence declined in both the investment climate and in regard to rapid rises in grain production levels. The project was refocused in early 1974 to permit more flexible, more numerous and smaller investments in the grain processing industry. While the new focus was sensible and technically appropriate, disbursements under the project were slower than expected and the project was not completed until early in 1981. The slow progress in the early years was partly associated with the then political and institutional environment; but also resulted from lack of appropriate organizational/procedural arrangements within DBP and, subsequently, absence of sound monitoring systems. The project contributed to increased storage and made a reasonable contribution by increasing the national inventory of improved milling capa- city; however, use of installed capacity is probably below expectation (PPAM, paras. 38-44) and poor loan repayments have adversely affected the financial position of DBP. There are two principal sets of lessons: First, it is unwise to base the whole of a project on a technology that has not been proven in country specific conditions. It is particularly unwise to attempt to force the adoption of a new technology by denying alternative options to sub- borrowers in credit projects (PPAM, para. 25). Second, when it is necessary to refocus a project's investment profile it is extremely important to care- fully examine the implications, or need, for changes in organizational and procedural matters within the implementing institution; it would be wise to arrange for these changes at the project's redesign stage, and, during imple- mentation to ensure adequate monitoring of them (PPAM, paras. 32 and 34). - iv - The following additional points may be of particular interest: - this project highlights the need for regular re-examination of the validity of co-efficients used in sub-loan appraisal methodology within credit projects, and such re-examination could usefully be an automatic part of the monitoring process (PPAM, para. 38); - a new technology often requires more new skills and more training than is often appreciated (PPAM, para. 26); - it is unwise to allow demands for ICB procedures to outweigh pragmatic implementation considerations (PPAM, paras. 28-29); - inadequate numbers of supervision missions can have serious adverse consequences - particularly in "first project" or problem project situations (PPAM, para. 33). - 1 - PROJECT PERFORMANCE AUDIT MEMORANDUM PHILIPPINES RICE PROCESSING PROJECT (LOAN 720-PH) I. SUMMARY 1. Based on major policy objectives established in 1966, the Rice Processing Project forms part of the Government of the Philippines efforts towards meeting self-sufficiency in grain production. This project, formu- lated in the period 1967-71, attempted to address storage needs and milling efficiency factors in the rice processing sub-sector of the food grain industry. At a cost of US$20.88 million, towards which the Bank approved a loan of US$14.3 million in 1971, the project was expected to provide ad- ditional integrated milling and storage facilities of a type, previously unused in the Philippines, that had high efficiency and quality ratings. Project Preparation and Design 2. The Government adopted the major recommendations of grain industry studies carried out by consultants during a period of considerable optimism concerning growth in grain production. These recommendations envisaged two investment phases in grain processing. The first would provide for a sub- stantial increase in strategically located storage; the second would include improved milling machinery and grain-drying facilities. 3. The Development Bank of the Philippines (DBP), on behalf of Govern- ment, requested Bank assistance in financing the first phase, construction of 203,000 metric tons of static storage, mainly the traditional sack handling type but with the introduction, on a trial basis, of some modern grain silo systems. The storage was to be available for either rice or maize. 4. Over a period of three and one-half years, including two appraisal missions, Bank staff reformulated the project in consultation with DBP. The resulting project re-directed the investment towards efficient milling, including only working storage for a number of modern integrated rice milling installations. 5. The project called for the construction of 36 completely new instal- lations, of which 6 large ones were estimated to cost approximately US$1.0 million each, and the balance about US$270,000 each. In addition, 30 modest existing facilities would be converted to the integrated technical design at an estimated cost of US$200,000 each. 6. The installations were to be operated by private companies or legal associations, which were expected to provide at least 20% of the necessary capital as equity plus some US$9 million of working capital, to be borrowed from commercial banks. Eighty percent of the capital requirement would be borrowed from DBP, with the Bank loan covering the foreign exchange cost. - 2 - 7. The Bank loan would also cover the foreign exchange costs (80%) of consultants' fees estimated at US$1.0 million. The consultants were to form a core group within a newly established unit in DBP charged with responsi- bility for project execution. The consultants had veto power over technical design, were to assist in sub-loan appraisal and were to formulate details and internal procedures for procurement. Initial Implementation 8. The project was finally initiated in 1971 at the start of a two-year period of setbacks in rice production, when optimism was declining. Simul- taneously uncertainties concerning political stability and later the rapid rise in oil prices inhibited investment. The project immediately ran into serious problems. Project management had great difficulty identifying poten- tial clients (sub-borrowers) prepared to enter into novel (to them) integrated and sophisticated milling operations - particularly in the absence of middle level managers and artisans familiar with the type of machinery and installa- tions demanded by the rigid technical design. And a number of entrepreneurs who perhaps in normal circumstances would be prepared to accept this type of risk were inhibited by the then current investment climate. 9. Project management also found it almost impossible to reconcile the valid wishes of those few potential clients actually identified, with the constraints placed on procurement methodology by the Loan Agreement. 10. As at the end of FY1974 loan disbursements had reached only US$0.5 million (or about 5% of the level anticipated), most of which consisted of consultants' fees. Project Redesign/Reappraisal 11. The Bank became aware of serious problems as a result of a super- vision mission in early 1972, and over the next two years the project was adjusted in a series of steps1/; the first set of adjustments retained the basic concept of large integrated installations but recognized that smaller investments as additions to existing storage and/or milling facilities were also desirable. The minimum sub-loan was established at US$30,000, and the procurement procedures were relaxed somewhat. 12. Despite these adjustments, and further adjustments which included reducing the minimum sub-loan amount to US$10,000, progress was minimal, and following a Bank supervision mission in late 1973 (which prepared the GPR-PR) the Loan Agreement was amended on May 14, 1974. 1/ The major ones are documented in the President's Memoranda R72-140 and M74-244 dated June 8, 1972 and April 15, 1974, respectively. The latter is further elaborated in a "General Performance Review and Recommendations for Project Revisions" (GPR-PR) - Report No. 329-PH dated March 28, 1974. - 3 - 13. The effects of the new agreements were to retain the construction of large integrated installations where possible, but in general to allow the proceeds of the loan to be on-lent for any reasonable purpose in the grain processing industry and accordingly the minimum sub-loan was further reduced to US$2,000. The new arrangement included maize processing in addition to rice; eligible sub-borrowers were expanded to include individuals (previously only companies and associations), local governments and parastatals; procure- ment procedures were relaxed to allow sub-borrower preferences regarding makes and models of equipment; and ICB was only applied to items costing US$100,000 or more without specific obligation to bulk similar items. The agreements permitted the financing of feed grain plants, trucks, barges, on-farm grain driers, on-farm storage, small milling machinery and equipment, small civil works, and the repair/rehabilitation of existing facilities. The Loan Closing Date was established as June 30, 1977. 14. For illustrative presentational purposes the GPR-PR included a number of possible investment models and used these in forecasting anticipated results and in preparing financial tables. However, the clear implication of the text of the report is that these models and tables were not intended as specific implementation targets; far greater flexibility was intended - and eventually acted upon. The GPR-PR did not address key organizational issues that might arise from the very substantial change in project focus. Implementation after June 1974 15. Progress with on-lending was substantially slower than anticipated by the GPR-PR, and the loan closing date was progressively revised through June 1979, September 1980 and finally March 1981, when the final disbursement occurred. Although, some 85% of the loan had been disbursed by the end of FY79, problems in disbursing sub-loans to two large sub-borrowers caused the final two years' delay. 16. During implementation serious organizational and procedural problems became evident as the small staff group, in place to handle the original project, attempted to adapt from a substantially technical orientation to one which required emphasis on developing and monitoring a sub-loan appraisal methodology suitable for the wide diversity of situations in the new project focus. Results 17. Comparisons of actual results with original intent are totally inappropriate, and comparisons with the indicative targets in the GPR-PR are not very meaningful. It should be noted, however, that the PCR attempts the latter, and in doing so quotes the GPR-PR as if in the context of ap- praisal - this can be misleading unless the context is carefully scrutinized. -4- Physical Facilities 18. (a) Milling The project resulted iq a theoretical annual increase in rice milling output capacityP amounting to 600,000 tons; and in addi- tion the replacement of existing mills, totalling 70,000 ton capa- city, with more efficient models. Maize mill and feed mill capacity increased by 195,000 tons. (b) Storage Storage facilities involved 179 separate civil works ranging from totally new construction to repairs and extensions to existing buildings; almost all facilities were of the traditional sack storage type, and most were adjuncts to the milling facilities. The static capacity of this storage totals 181,800 tons. (c) Other Other investments included 17 mechanical driers, a number of traditional cement sun drying floors, 143 units of transport and a number of miscellaneous machinery repair activities. Sub-Loans 19. The total sub-loan portfolio amounts to 313 loans totalling US$15.53?! million, excluding working capital loans. There was a wide spread between the loans, illustrated in Table 1. Table 1 Range (US$) Number of US$ Loans over - under Average 3 550,000 - 1,525,708 22 95,000-550,000 169,806 72 41,000- 95,000 61,132 51 20,000- 41,000 30,486 84 5,500- 20,000 10,763 73 2,250- 5,500 4,594 8 - - 2,250 2,173 1/ Capacity figures assume manufacturers' hourly output rating multiplied by constant daily usage for most of the year - probably an optimistic assumption. 2/ An average exchange rate of P7.34 = US$1.00 is used. -5- Loan Repayments 20. DBP's information system does not readily reflect the up-to-date loan repayment position for project investments. The latest available figures (in November 1982) reflected the June 30, 1981 position when some US$2.25 million was in arrears; this reflects simple arrears, i.e., does not include accrued interest on overdue amounts. Some 10% of the arrears are overdue by more than three years, and a further 45% by 1-3 years. In the absence of firm data, officials indicated a belief that this record had deteriorated further in the subsequent sixteen months.!- Working Capital 21. Neither the original nor subsequent project design made an allowance within project costs for working capital. However, the original appraisal calculated that approximately US$9 million would be required, which it was assumed would be provided from sub-borrowers' own resources or commercial banks. The GPR-PR did not address the issue. The original appraisal document discussed a DBP obligation to assist sub-borrowers in acquiring working capital, and the Loan Agreement (Section 3.12) required DBP to make working capital loans where necessary. Under this heading, DBP advanced US$7.1 million.VY Repayments are US$1.13 million in arrears. Economic Rate of Return 22. The PCR, endorsed by the PCRO, does not attempt to calculate an economic rate of return based on all the numerous ranges of situations for which investments have been made. For indicative purposes theoretical model activities of alternative milling situations were developed and costs and benefit streams applied; from these the PCR and PCRO arrive at indicative ERRs varying between 20% and 43%. 23. The audit accepts that the models and calculations methodology is a reasonable way of approaching what is otherwise an intractable problem. However, the audit question6 the validity of one very important variable assumption used in the actual calculations and is unable to verify the indica- tive ERR quoted, (see para. 37). II. ISSUES Bank Performance 24. The audit finds that the Bank's performance was mixed and in several respects unsatisfactory. 1/ However, see borrower comments, indicating that loan recovery actually improved. 2/ This amount was not reimbursable from its Loan proceeds. - 6 - 25. Initial Project Design. The appraisal process correctly identified some erroneous assumptions in the original consultants' report; notably the over-optimistic assumption on the pace of increased grain production levels. And appraisal was correct in identifying a need for simultaneous improve- ment in the milling process together with some level of increased storage. However, there was not then, nor now, a need to integrate the two requirements into single sites, nor a specific need to require large units. The only rationale for large units would be in the economies of scale, particularly when using modern grain silos for storage; and appraisal assumed that silos were the long-term technical answer to the Philippines storage problems. This assumption, based on the success of silos in certain other parts of the world, ignored the very different and humid conditions prevalent in the Philippines. In brief, appraisal insisted on a new technology which was totally unproven to the situation and in effect demanded that the private entrepreneurs trust appraisal judgement and accept any risks involved. 26. In designing the integrated processing installations, appraisal ignored or did not take fully into account two other major factors. Appraisal included a small training component in the project, but precisely what this could achieve does not appear to have been subjected to critical path analy- sis, and the degree of new skills required to operate the new installations was seriously underestimated. The necessary constant flow techniques through the plants' driers, conveyers, silos, mills and dispatch machinery would require new skills of workers and artisans at all levels, in addition to high quality management control. Secondly, a constant flow of product to the plant (storage per se was designed to even out minor irregularities in flow) pre- supposes product supplies in reasonable proximity to the plant. In the Philippines, grain production is highly seasonal on an area basis, and farmers have little on-farm storage and in any case are usually obliged to sell produce immediately following harvest. Road conditions were, and in many cases still are, extremely poor at certain periods - thus the logistical problem of procuring steady flows of grain and arranging its transport is far greater than experienced in many other countries, and is one of the sub- stantive reasons why large milling units are less than ideal and are not a common feature in the Philippines. 27. Appraisal can also be faulted for not carrying out serious market research of the potential client group (sub-borrowers). There is no evidence that appraisal identified a group in general or a specific core group in particular that wished to, or was prepared to, invest in the specifically designed installation. There is plenty of evidence of willingness to invest in grain processing per se, and in improved techniques in particular, but not within the rigid confines of project design. 28. The various loan agreements pertaining to procurement, were ill- designed for project purposes even if the constraints outlined above had not been present, and in the event they were completely unworkable. Inter alia agreements demanded the bulking of the different component items in the technical design, and seriously limited the number of procurement contracts that could be entered into; by inference requiring that a fairly large number of approved sub-borrowers be established before commencing the procedures and implying that all borrowers would agree to a standard design of com- ponents, irrespective of variations in local site conditions. - 7 - 29. The Bank's major concerns implicit in the agreed procurement pro- cedures appear to have been (a) that most of the procurement should be through ICB; and (b) that there should be a high degree of standardization of designs, which (when considered together with other agreements) would give a large measure of control to expatriate consultants over what was actually procured. 30. After discovering the problematic situation in early 1972 the Bank exhibited willingness to adjust the project; however, the Bank did not ap- preciate the depth of the problem. While procurement procedures were identi- fied as being unsuitable and while it was recognized that the scope of the project should be widened, the major focus remained on the new technology of integrated milling installations - the Bank unfortunately did not question or re-examine the central technical parameters. 31. This project reinforces earlier evidence!1 that indicates the Bank's technical ability in agro-industrial matters may need strengthening. 32. Project Review/Reappraisal. The GPR-PR issued in March 1974 results from a routine supervision mission (a Bank staff member supported by a tech- nical consultant), which visited the Philippines in August 1973 for 15 days during which period another project was also supervised. With the benefit of hindsight, the audit finds the 'GPR-PR to be a remarkably perceptive document in analyzing the revised types of investments that would assist the country's needs and be capable of good economic results. However, unfortunately and possibly due to time constraints and the nature of the mission, the GPR-PR did not review, in depth, revised organizational staffing and procedural systems necessary for the substantially revised project focuses. 33. Supervision. In the five-year period 1971 through 1975 only six missions were dispatched, and there was little continuity of Bank staff between missions. Only during 1973 were two missions mounted and coincidently led by the same staff member (with good results). It is surprising that, following early identification of problems in 1972, there was a year's inter- val until the next mission, and after the August 1973 mission (which resulted in the substantial changes) a follow-up mission did not occur until October 1974. It was only as a result of the latter mission that inadequate staffing and organizational/procedural matters were brought to the attention of Govern- ment, and subsequently a further year elapsed before the next mission. In the audit-s view, the Bank consequently missed an opportunity of contributing to the institution-building aspects of DBP, with far reaching significance (see following paragraphs). Monitoring/Management Information 34. A fundamental problem in project execution has been DBP's reporting systems which limit themselves almost exclusively to numbers of loans being processed, numbers outstanding and the financial implications thereof. Further, while branch offices regularly submit these types of numbers to headquarters, they are usually branch totals covering all activities.l/ 1/ See for example OED reports numbered 2324, 2492 and 2497 referring to projects in Indonesia, Costa Rica and Tunisia. 2/ The DBP comments that this statement presents an over-simplification of the reporting system (see Borrower comments). - 8 - Thus, as illustrated by lack of information on loan repayments (see para. 20), the headquarters staff lack up-to-date information of even this simple type for a project with specific objectives..1/ And other information neces- sary for decision making is not available at all. For example, the data generated by this project do not allow an identification of those investments generating the worst or best returns; there is no method of assessing whether sub-loan appraisal procedures identified potential problems, whether they generated good risks or allowed poor risks. The system captures the obvious fact that loan repayments are poor but not the data that might explain why this should be so, i.e., the system does not capture essential data for rational decision making in any situation where technical or social parameters have to be related to the financial ones. 35. There are references in Bank files to concerns with inadequate monitoring of the project and indications that the Bank brought the matter to the attention of DBP on several occasions, but there is no evidence of con- sistent follow-up or of serious attempts by Bank staff to assist DBP by formulating specific monitoring proposals. Middle and junior level officials within DBP express dissatisfaction with the present situation but state that DBP's senior management wishes to avoid separate information systems for specific projects. Thus, no single unit within DBP has been really addressing the issue at either macro or micro levels. Including this project the Bank has made loans to a total of US$625.5 million2/ involving DBP; empirical evidence, and discussions with associated Bank staff suggest that similar situations exist in these projects. 36. DBP has a number of planning cells and some very competent person- nel, but each of these works in a semi-vacuum and each has to generate the data needed for analytical work; their findings are therefore isolated and do not necessarily attract the attention they deserve. In the audit's opinion, the coordination of these units and linking them into a more positive manage- ment information system would pay large dividends, and the Bank might well have played a more positive role in bringing this about than was evident during the project period. 37. Management policies within DBP naturally influence a firm commitment or otherwise to the institution of the type of systems indicated above, however while DBP's management objected to project specific systems there is no evidence that DBP would not have welcomed a positive assistance input towards improved macro information systems. Indeed the audit is informed, by Regional staff, that more positive steps are being taken to improve management of the agricultural portfolio, and that there is now a current program by DBP to install a bank-wide management information system, which is partly financed and assisted by the Bank. 1/ The DBP comments that individual repayment arrears in excess of Peso 50,000 are monitored irrespective of specific objectives. However, this would only draw attention to early defaults by fairly large borrowers. 2/ 16 loans of which 8 are in the agricultural sector, 1 in agriculture and industry and 7 in the industrial sector. 3/ See for example PPAR (No. 3969) on the Small and Medium Industries Project (Loan 1120-PH) particularly paragraphs 9, 10, 19 and 34. - 9 - Mill Profitability/Loan Repayment/Economic Rate of Return/ Working Capital 38. The illustrative theoretical milling models used in the PCR and supported by the PCRO generate a favorable ERR of 20% to 43%, and the finan- cial rates of return are between 19% and 25%, which would imply strong profitability and therefore ample resources to meet loan repayments - however, the loan repayment record is poor. Assuming DBP makes reasonable efforts to collect amounts due, and empirical evidence suggests this to be true,!/ then either the conclusions drawn from the illustrative models are faulty, or the sub-loan appraisal methodology is inadequate in forecasting the future cash flow position of sub-borrowers. The audit concludes that it is highly probable that both the model projections and appraisal methodology include a highly optimistic assumption concerning the actual effective use that can be, and is being made of the theoretical installed milling throughput capacity, but the audit emphasizes that this conclusion is based on empirical evidence only and is contrary to some survey findings. 39. The appraisal methodology used by DBP assumes a minimum of 200 days of 12 hours each at manufacturers rate of output capacity.V! This assumption is apparently confirmed by a fairly sophisticated respondent type survey amongst borrowers, which gave a mean of 199 days milling and an indi- cation of an average 12 hours' milling per day but with seasonal peaks of almost continuous milling on a 24-hour basis. 40. However, an audit cross check over a few borrowers with different sized operations failed to verify the survey findings. The audit posed to the sub-borrowers similar key questions as used in the survey and in each case received initial answers which appeared to correspond with survey findings; however, when probed in depth a very different situation emerged. Although the respondents confirmed that in certain periods their machinery worked more than 12 hours a day, these periods were limited and the audit did not find a single case where actual output was above 63% of survey findings on an annual basis, and most cases were below this level. In one case the borrower dis- closed to the audit his confidential and detailed records which showed actual mill output at slightly below manufacturers' rated hourly capacity and 1,670 hours of annual use, of which (by calculation of hours to actual product output) some 20% had to be "idle" hours. 41. In the Philippines as a whole the 1980 capacity of rice milling machinery was over 5,200 tons per hour, by applying the time use factors employed in the sub-loan appraisal methodology (para. 39 above) this would imply an annual output of at least 12.5 million tons or almost double actual rice production. Even when a number of old model kiskisan mills are dis- counted this clearly illustrates that, in the Philippines conditions, optimal throughput is difficult to sustain. 1/ Except that the inadequate monitoring procedures do not provide an early warning system of possible difficult loan situations. 2/ The content of this sentence has been changed from original draft to reflect borrower's comments. - 10 - 42. This was checked by the audit with a variety of millers including one of those generally regarded as perhaps the most efficient by all his peers. The principal problem is the seasonality of local (mill vicinity) production combined with the farmers' need to dispose of production immedi- ately after harvest. Mill operators, in short, have great difficulty in maintaining a steady flow to the mill machinery; a major problem for most millers is lack of adequate working capital to buy up supplies for periods considerably in excess of the inventory supply periods used in DBP sub- borrower appraisal methodology. Those mill operators with higher than average output find it necessary to accumulate supplies beyond their own storage capacity, and they do this by a combination of pre-paying for produce from well regarded farmers who have minor storage, and by arrangements whereby they assist in financing the operations of small grain traders. 43. In summary, the flow of grain within the rural areas of the Philippines is extremely complex, and the success or failure of millers is governed more by business acumen in attaining adequate supplies than on the type of milling facilities per se. Further, success depends in large measure on the assurance of adequate working capital. In the audit-s view, this factor has not received adequate attention by DBP or the Bank. 44. In the absence of firm data, but with the above empirical evidence, the audit concludes that loan defaults probably arise from a mixture of cases where new DBP-promoted operations have been unable to adequately break into the complex, established grain flow systems, and other cases where individuals are attempting to build up working capital resources in lieu of paying off debts. Final Comments 45. Notwithstanding the critical tone of this report, the project has resulted in an increased storage capacity close to that requested by the Philippines previous to the appraisal process; and the project has made a reasonable contribution to the national inventory of improved quality rice milling machinery (even at a 50% capacity utilization those mills will process about 5% of present national production). Subject to modifications in DBP's processing/monitoring procedures, the project has created a potentially viable and valuable alternative financing mechanism for the milling industry. While attempts to concentrate on large mills were ahead of their time for this project, nevertheless a number of valuable lessons for the future were learnt. As the Philippines moves towards potential exports the rationale for large milling units attains a sounder base, especially if other institutional development in handling storage and grain flows maintains pragmatic direction. - 11 - Attachment I Repubhlic of the Phlippines Page 1 NATIONAL ECONOMIC 4N) DEVELOPMFN1 ,ITIORITY 1)() Bo\ I 16. Manila leei% 50-139- 711to95 (Cable \ddre,, \1 I)1111il 17 May 1983 Mr. Shiv S. Kapur Director, Operations Evaluation Department The World Bank 1818 H. Street, N.W. Washington, D.C., U.S.A. Dear Mr. Kapur: Re: Project Performance Audit Report on Philippines Rice Processing Project (Loan 720-PH) Thank you for sending our office for comment a copy of the first draft of the project performance audit report on the Philippines Rice Processing Project supported by World Bank Loan 720-PH of 1971. We have reviewed the document and noted with great interest the report's substantial findings. On the whole, we think that the report has correctly analyzed the critical factors behind the project's performance. We would like, however,to touch further on the following areas for your consideration. 1. Project Preparation and Design - The project's basic weakness appears to have been in its preparation and design, that is, there was failure to adequately examine the suitability of the proposed technology to local conditions in the Philippines. Partly as a result, the specific target market (sub-borrowers) for the new tech- nology was not identified at that early stage. The proposed technology could be considered experi- mental as it was yet "totally unproven" in the country (para. 25). It would therefore have been more appreciate to have undertaken it on a limited pilot basis. The integrated milling and storage operation could have been suitable for large operators, particularly the National Food Authority which could have the advantage of economies of scale. There is at present better scope for its adoption considering surpluses in rice production during the past years. - 12 - Attachment I Page 2 2. Loan Disbursement - Slow disbursement of loan proceeds was evident in the project's performance. By our own experience with projects, slow progress in disbursement could be attributable to one or a combination of the following common causes: (a) lack or low demand for the kind of financing offered; (b) adverse investment climate; and (c) problem on procurement. In this project, all three causes were present, however, (a) and (c) could have been avoided or minimized even at an early stage. Information on the type of credit facility demanded should - have been available and promotions should have been undertaken. Relatedly, procurement conditions could have been tailored more appropriately if uses of credit was adequately studied. 3. Loan Repayment - In para. 20 of the PPAR, it was not indicated what por- tion of total loan amount due was in arrears (as of last reporting). It would also be helpful to know the amount of accrued interest on overdue amounts. 4. Working Capital - Likewise, it would be informative to know what portion of working capital repayments are in arrears (para. 21). Also, it is not clear whether DBP's assistance in providing working capital (having advanced US $7.1 M) would be reimbursed by IBRD. 5. Monitoring and Management Information - Para. 35 suggests that DBP's monitoring be done on a per project basis, especially of loan repayments. NEDA strongly supports this recommendation which has been similarly suggested in our review of other completed projects, particularly, prog- ram-type projects, in order to identify specific problem and performance areas. 6. Mill Use Efficiency - The report points to seasonality of local rice produc- tion and marketing (buying/selling) practices in the Philip- pines as reasons for the sub-optional level of operation of mills (para. 41). Seasonality accounts for irregularity of supply which also dictates the buying-selling practices among - 13 - Attachment II Page 1 EANGKO SA PAOPAPAUNLAO NO PILIPINAS OFFICE OF THE CHAIRMAN May 19, 1983 MR. SHIV KAPUR Director Operations Evaluation Department International Bank for Reconstruction and Development 1818 H. Street, N.W. Washington, D.C., 20433 USA Dear Mr. Kapur: SUBJECT: Project Performance Audit Report on Philippines Rice Processing Project (Loan 720-PH) This is in reply to your letter of March 30, 1983 requesting for comments on the performance audit report on captioned project. To be able to give a fair view on the said report, we requested for the comments of those who were involved in the implementation of the project and/or in the preparation of the Project Completion Report. Based on their comments, we are pleased to inform that we agree with the audit findings except on the following: 1. Loan Repayments (par. 20, p. 7) While the latest available figures shown to the OED representative during his visit in November 1982 reflected the June 30, 1981 position, it was never indicated by our staff that said record "haddeteriorated further in the sub- sequent sixteen months." We would like to mention that based on information from DBP's 43 Branches /Sub-branches collection rate for accounts under Loan No. 720-PH as of September 30, 1982 improved considerably over the June 30, 1981 figure, contrary to the observation reflected in the Project Performance Audit Report. DEVELOPMENT BANK OF THE PHILIPPINES TELEX. RCA 22197 DP PH HEAD OFFICE: MAKATI, METRO MANILA. PHILIPPINES GLOBE-MACKAY 45128 DBPHIL PM P 0. BOX OO MAKATI COMMERCIAL CENTER 3117 EASTERN 63771 OBP PN CABLE PHILDEBANK MANILA TELEPHONE. la-9511 TO 9520 88 9611 TO 9620 - 14 - Attachment II Page 2 2. Mill Profitability/Loan Repayment/Economic Rate of Return/Working Capital (on the conclusion that the assumption used in PCR model projections, specifically on the capacity utilization of the ricemill illustrative models, are highly optimistic) We maintain that the capacity of the ricemill models assumed in the PCR are realistic in view of the following: a. The World Bank audit mission made a different impression that the utilization of 80% would mean 200 milling days at 12 hour per day. (80% of 250 or 300 hours, see paragraph 38 on page 18 of the audit report). Actually, the PCR assumes 50% capacity utilization for the compact type ricemill models and 80% for the cono models using 200 milling days a basis. For illustration purposes, the 80% factor utilization would actually mean 160 milling days at 12 hours a day and not 200 days as assumed in the audit report. This would repre- sent only 64% using 250 days milling as interpreted in the audit report. b. The assumption of 200 milling days has been used in the evaluation of Grains Processing Projects both for the first (720-PH) and the second project (1269-PH) after thorough study of the ricemilling industry, the harvest pattern as well as the trading practices of the farmers. This is still applicable and presently being used. c. Contrary to the audit findings, the previous World Bank supervision missions (who likewise conducted checkings on the borrowers at random) have accepted the above assumption except for the supervision mission in April-May 1979 wherein said assumption was considered to be very conservative. (Refer to paragraph 33, page 16, Annex 6 of the Grains I and II Supervision Mission Report, April 16-May 18, 1979). It is worth mentioning that because of the findings of the 1979 Supervision Mission, DBP adopted a policy of allowing working capital loan equivalent to require- ment-for 16 hours operation per day for forty five (45) days instead of for 12 hours operation per day for 25 days. - 15 - Attachment II Page 3 d. The audit mission inspected few borrowers and they failed to verify the PCR survey findings (mean of 199 days milling). A larger number of borrowers should have been used in the cross checkings as practiced by previous World Bank missions. In addition to the above comments, we would like to point out the findings of the audit mission with respect to a borrower which showed actual milling output at slightly below manufacturers rated hourly capacity. The World Bank may get the impression that this is true in the case of all DBP borrowers as well as the whole of the ricemill industry. It should be emphasized that this is an isolated case. Moreover, DBP conducts test-run prior to the final release on the amount allocated for the machinery to be assured that the mill attains the specified capacity as well as recovery. Please accept our appreciation for soliciting our views/comments on the Project Performance Audit Report. Very truly yours, JOSE R. TENGCO, JR. Acting Chairman - 16 - Attachment II Page 3 farmers, traders (middlemen), and millers. Perhaps DBP should look into how it can operate in the context of the institutional factors to achieve the desired level and flow of grains for the mills. The role of the National Food Authority in the system (especially in buying and storage) relative to traders and producers should also be reviewed. 7. DBP's Role in Future Project Preparation - Lastly, perhaps DBP as an institution that shares in the risk of investments (Note: in this project it advanced working capital), should have a role in project preparation particularly the identification of potential clients and types of credit facility needed. We hope that the above comments would be useful to the final PPAR on the project. Best regards. Very truly y urs, E D RDO G. UZ Assistant Dire ptor-General Attachment III Page 1 - 17 - 1ANOKO A PACPAPAUNLAO NO PILIPINAS May 26, 1983 Mr. Shiv S. Kapur Director Operations Evaluation Department World Bank, 1818 H Street, N. W. Washington, D.C. 20433, U.S.A. Dear Mr. Kapur: I have taken note of the draft of the project performance audit report on Loan 720 PH and I wish to make two exceptions on the topic of Monitoring/ Management Information. 1. The statement in Par. 34 on the content of the reporting system is an over-simplification. Reports on arrears on sub-sectoral claksification are generated by the Bankts computer semestrally, derived from the Branches. semestral reports on the status of all accounts. True that these reports are in totals by Branch by sub-sector and do not reflect totals for WB-financed accounts, and could be one whole semester behind because of limited computer capability. But these reports give indications of comparability of arrearages with other sub-sectors within the Branch jurisdiction, and from Branch-to-Branch, as well as region to region. Also, quarterly reports are required from the Branches on each specific account with arrears of P50, 000 and above. The latter report, though not classified by sub-sector, trace actions taken by the Branches on individual accounts in arrears. These reports are consolidated and submitted by the Internal Control Office to the Chairman with their comments and observations. Again this report does not identify whether an account is WB-financed or not. Both reports are monitoring systems that serve some man- agement purpose. 2. Please refer to Par. 35, particularly the statement, "Thus, no single unit within the DBP is really addressing the issue. x x x" The Branches' reporting difficulties have to be evaluated within the perspective of internal and external constraints. TELhX FICA 22197 D:P PH DEVELOPMENT BANK OF THE PHILIPPINES ITT 12110 DPP EASTERN 63771 DSP PN HEAD OFFICE MAKATI, METRO MANILA. PHILIPPINES CAS.E PHILDEBANK MANILA PO BOX 800 MAKATI COMMERCIAL CENTER 3117 TELEPHONES 018-0611 to 9620 "ANG UTANG DAPAT SAYARAN NANG TAYO'Y PAGKATIWALAAN- a1 9611 to *620 - 18 - Attachment III Page 2 Geography, limited facilities, personnel shortage and the extremely large number of accounts serviced by the Branches compound the problems of programs monitoring and reporting. Also, report requirements from the branch units are so voluminous that devising a separate system of reporting for a specific program is a priority issue contending with many other programs simultaneously being pursued in the branches. The statistical comparisons would dramatize this conflict for priority: the total of 318, 000 accounts (representing 90% of all accounts of the DBP) serviced by the branches, as against the 319 grain processing loan accounts they handle. Increases in the number of personnel that we were able to push through from year to year were easily negated by a faster rising volume of loan applications. But this monitoring/reporting problem certainly occupied much attention. As mentioned in the PCR, the Bank engaged in 1979 the services of a consulting firm (GIRD) to set up a monitoring system, to start on a livestock program then being handled in the Head Office. Unfortunately, the firm was not able to accom- plish its task. In 1980, the Bank engaged the services of the SGV to do a study of the management information system that would be adequate for the Bank's total requirements up to a reasonable time in the future. Substantial progress have been attained since then, and last year the Bank created a subsidiary to pursue the implementation of the approved system. It is moving, although the applications may still take some time to be fully operational. Let me thank you for this opportunity to express the foregoing observations on the draft report. Sincerely, Bf..ANA LO Executive Officer for Research - 19 - THE WORLD BANK PROJECT COMPLETION REPORT OVERVIEW PHILIPPINES RICE PROCESSING PROJECT (LOAN 720-PH)  - 20 - PHILIPPINES RICE PROCESSING AND STORAGE I PROJECT (LOAN 720-PH) Bank Overview of DBP.Project Completion Report 1. This overview is based on the Project Completion Report for the Philippines Rice Processing and Storage Project, prepared by the Agriplan Unit (APU) of the Development Bank of the Philippines (DBP) on behalf of the Government of the Philippines. Generally, the report is a satisfactory document describing virtually all aspects of the project, and, except as indicated in paras. 3-14 below, the Region agrees with its analysis and conclusions. The Objective of the Project 2. The objective of the project was to assist the Government of the Philippines in carrying out a program to expand and to modernize the Phil- ippine grain processing and storage industry. The project was intended to add to the country's milling capacity, to reduce grain spoilage, and to increase the efficiency of grain processing. The project financed the con- struction, equipping, and operation of modern grain processing and storage facilities. It also included provisions for the funding of equipment and facilities for on-farm grain drying and storage and included the financing of equipment for the manufacture of rubber rollers for paddy hullers. Project Design 3. The PCR faults the original appraisal mission for recommending large (4 mt per hour) integrated rice mills and states that these large units were "unsuitable under local conditions then obtaining in the milling industry." Hindsight shows this to be the case in 1971-74 before the National Grain Authority (NGA) began constructing large integrated rice processing facilities. However, the macroeconomic conditions in the Philippines during the first semester of 1969 when appraisal occurred changed drastically over the following years, particularly during project start-up, 1971-74. In 1969, rice output was growing with expectations that the country could export rice within five years, the political situation was relatively stable and inflation was modest and manageable. These factors created an optimistic investment climate. However, during the 1971-74 period, rice production stagnated, martial law came into effect and the oil crises raised havoc with the balance of payments account, inflation and exchange rates, which turned the investment climate to one of pessimism and a "wait and see" attitude among rice millers. Furthermore, the National Grain Authority began to assume a more important role in rice processing and marketing without Any clear policy guidelines. Thus the conditions under which the project was originally designed and appraised changed during project execution. - 21 - 4. The project was reappraised in August 1973, and the Loan Agreement vas substantially amended in May 1974. The general effect was a broadening of the project scope by financing individuals in the rehabilitation and expansion of existing mills, and by financing corn mills and accompanying capital investment in storage facilities, grain driers, trucks and manufacturers of rubber hullers. The PCR acknowledges the appropriateness of these alterations to the project. Project Implementation 5. .Supervision Missions. The PCR does not comment on the fact that supervision of the project during the first four years was inadequate as there was only one mission per year in 1971, 1972 and 1974. There was no supervision mission in 1978 and only one in 1979. More intensive supervision may have had a beneficial impact on project execution. 6. Postponement of Closing Date. There were three postpone=ents of the Closing Date which originally was set at June 30, 1975 and was later extended to June 30, 1977 to June 30, 1979 and finally to March 31, 1981. The PCR does not highlight the fact that the last postponement was due, in large part, to contractor disputes with one large subborrower that dragged on for two years while 85% of loan proceeds had been disbursed by June 30, 1979. 7. Consultants. Under the original project design, an expatriate- owned, local consulting firm assisted DBP in the review of subloan applications, adherence of subprojects to modern rice processing and storage construction and equipment, and preparation of bid specifications for International Competition Bidding. The PCR is critical of the fact that consultants were hired in the first place and judges their contribution to project execution as unimportant. However, the PCR does not point out that the consultants were to assist DBP in handling the*technical aspects of the large integrated rice mills, which were never constructed under the project. Bank supervision missions reported that the consultants carried out their terms of reference satisfactorily, but there was no need for continued service under the revised project. 8. Project Promotion. The project made a slow start in 1971-74. The PCR fails to mention that one factor in this was that little, if any, promotion of subloans was made among potential subborrowers. Instead, it takes the position that promotion was not necessary because "word gets around" about the availability of financing for grain processing and storage. This has not been the case in the Second Grains Project where an active promotion campaign on the part of DBP had positive results in Increasing subloan applications, and more active promotion would probably have helped in this first project. 9. Procurement. According to DBP, the ICB procurement procedures required by the World Bank proved to be a hindrance to quicker project disbursement without the expected benefits. Civil works or goods costing - 22 - US$100,000 or more were required to go through ICB procedures. Other contracts for civil works or goods were purchased through regular commercial channels. These procedures appeared to cause delays in the implementation and installation of large subprojects. Some prospective subborrowers have either chosen not to participate in the financing program or contented themselves with smaller projects in ordcr to avoid ICB procurement. The procurement issue was not resolved during the implementation of the First Rice Processing Project, but in the Loan Agreement for the follow-on project, the Bank approved DBP's request to eliminate ICB under the project, but required DBP to submit all subloan applications greater than US$600,000 equivalent for prior review by the Bank. Project Impact 10. In general, the project successfully achieved its major objectives of increasing rice milling capacity and storage facilities. In terms of . physical achievement, the project exceeded the revised appraisal estimates, but in a different form, as follows: - Revised appraisal projections - Actual No. Capacity No. Capacity (units) ( 000 mt/yr) (mt/unit/yr) (units) ('000 mt/yr) (=t/unit/yr) Rice mills 215 335 1,560 252 674 2,670 Corn mills 60 120 2,000 43 157 3,640 Feed mills - - 4- 40 10,000 Storage facilities 219 66 300 179 182 1,020 Kechanical grain driers 200 40 200 17 5 280 The PCR does not break down total subloan amounts in either US dollars or pesos by type of mill - rice, corn, feed. 11. The PCR pointed out that the project had a substantial impact in encouraging project subborrowers to accept and use rubber roll hullers in ailling operations. This contributed to a higher-than-industry average recovery rate of about 67% achieved by the project rice mills. Also the PCR does not bring out the fact that the project encouraged larger-scale mills than those in operation in the country with the beneficial effect of reducing the unit costs of milling. 12. The impact of the project on DBP was twofold. The project enhanced the institutional build-up of DBP by causing a gradual improvement of DBP's technical capability in evaluating large subloans. It also caused staffing - 23 - increases and organizational changes directed at enhancing overall work flow and quality of subloan evaluation and supervision. On the other hand, as the PCR states, the project adversely affected the financial position of DBP, mainly because of the latter's unsatisfactory collection performance. Econonic and 71.incial .valuation 13. We agree with the ecoiiomic and financial analysis given in the PCR: (a) -For the cono-type mill with milling capacity of 2,500 M ton/yr, the economic rate of return is 43.7% and the financial rate of return is 24.5%. The comparable unit analyzed in the SAR is a rice mill of 2,000 m ton capacity which was estimated to have an economic rate of .return of 28.3% and financial rate of return of 18.2%. (b) For the compact-type mill with milling capacity of 2,000 m ton/yr, the eccnomic and financial rates of return are both 20%. This is comparable to the SARs kiskisan replacement model, which had an economic "rate of return greater than 50%. 14. The PCR states that because 90% of the grain storage and processing units financed under the project were rice mills, DBP carried out the econo- mic and financial analysis for rice mills only. Also, corn mills were large units with several unique features and they did not lend themselves to model -analysis. CHINA (MAINLAND) Tu. r2o CAGAYAN VALLEY ILOCOS & MOUNTAIN PROV. j San Fernando L U,. SULU CENTRAL LUZON c. rad SOUTHERN TAGALOGORTH CLEES ANILBORNEO SEA MANI LA 1VA'L c (J atangas Naga Colopdn BOGc Sorsogon 0 EASTERN VISAYAS Kolibo 9D EG LRoxNs Tire obon WSTERN VISAYAS P A N A Y Ormoc City B,R -lod Clt Puerto SPri ncesa u z u NORTHEAST MINDANAO roquiele 0 Cogayan-de-Oro Dipolog Ozamis NI I N D A N A 0 REGIONAL BOUNDARIES City NFAC RICE & CORN PROGRAM PRkORITY AREAS 0C1 !Dovoo Zarmboango SOUTH.-E :Ti M l[ MCE FCESS2P2WECT O 25 50 7 5 10O KILOMETERS MARCH 1070 IBRD --2623R