RESTR I CTED

Report No. PTR-68a

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

APPRAISAL OF

A HIGHWAY PROJECT

PHILIPPINES

March 25, 1971

Transportation Projects Department

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Currency Equivalents:

Currency Unit - Pesos (t)U$1 - = P 6.ooP 1 = U6$0.17P 1 million = U$166,667

* The exchange rate has been floatingsince February 21, 1970; the rate usedin this report is indicated above.

Fiscal Year:

July 1 to June 30

bystem of Weights and Measures: Metric

Metric: British/US Equivalent

1 meter (m) = 3.28 feet (ft)1 kilometer (km) = 0.62 mile (mi)1 sqruare kilometer (km2) = 0.386 square mile (sq mi)1 kilogram (kg) = 2.205 pounds (lb)1 metric ton ( m ton) 0.98 long ton (lg ton)

= 1.1 Ub short tons (sh tons)

Abbreviations and Acronyms:

BPH Bureau of Public HighwaysUNDP = United Nations Development ProgrammeNIP = Net Domestic ProductPNR = Philippine National RailwaysPRC = Philippine Railroad CompanyBOC = Bureau of CustomsBPW = Bureau of Public WorksDPWC = Department of Public works and CommunicationsGRT = Gross Register TonPAL = Philippine Air LinesCAB = Civil Aviation BoardHbF = Highway bpecial FundAJJB = Asian Development BankvoC = Vehicle Operat ig Costs

PHILIPPINES

APPRAISAL OF A HIGHWAY PROJECT

TABLE OF CONTENTS

Page No.

SUMMARKY AND CONCLUSIONS ................. . . .. . . . . . .. . . i-ii

I. INTROD9UCTION ................. 1

II. BACKGROUND ........ o.. ...... 2

A. General . ................... 2B. Transportation ..... 2... .. -. .. ... t. 2C. Transport Planning and Coordination .... 4

III. TRE HIGHWAY SECTOR .5..................... 5

A. Highway Network ... .... 5B. Highway Traffic .. . .......... 6C. Highway Administration . ...... 7D. Highway Planning and Financing ......... 7E. Highway Design and Construction 8F. Highway Maintenance . ..... 9

IV. THE PROJECT ...................... .. ....... 10

A. General............. 10B. Construction and Improvement ........... 10C. Consulting Services for Detailed

Engineering and ConstructionSupervision ... ... ........ 11

D. Feasibility Studies 11E. Technical Assistance to BPH. 11F. Cost Estimates and Foreign Exchange

Component a 12G. Project Financing and Execution 14H. Disbursements . .15

V. ECONOMIC EVALUATION ......................... 16

A. General ..... .. 000... .... 16B. Cotabato - Digos Road .................. 16

VI. RECOMMENDATIONS 17

(Continued)

TABLE OF CONTENTS (Continued)

TABLES:

1. Domestic Goods and Passenger Transport 19682. Five-Year Infrastructure Program FY 1971-19753. Highway Network 19694. Motor Vehicle Statistics 1962-19695. Motor Vehicle Gasoline Consumption PY 1962-19696. Revenues from Use and Ownership of Motor thicles PT 19665w19697. Expenditures on Highways FY 1967-19758. Design Standards9. Roads Included for Feasibility Studies10. Estimated Schedule of Disbursements11. Estimated Traffic Volumes on Cotabato-Digos Reo 1968-199212. Vehicle Operating Costs13. Rates of Return of Cotabato-Digos Road

ANNEX: Interim Measures for Reorganization of the Bureu oif PublieHighways

CHART: Existing Bureau of Public Highways Organisation

MAP Republic of the Philippines - Highway Project.

PHILIPPINES

APPRAISAL OF A HIGHWAY PROJECT

SUHMARY AND CONCLUSIONS

i. This report appraises a project in the Philippines for: con-struction and improvement in Mindanao of the 160 km road between Cotabatoand Digos; consulting services to the Bureau of Public Highways (BPH) fordetailed engineering of several roads and construction supervision of theabove road; feasibility studies of about 1,000 km of roads; and technicalassistance to improve the administration and operations of the BPH. Thiswould be the second transportation loan to the Philippines; the first hav-ing been for harbor dredging in 1961.

ii. The Philippine islands have historically depended on the sea anduntil recently, transport development was oriented toward island and over-seas trading. The difficult terrain, heavy rainfall, and poor soil condi-tions have tended to discourage cheap land transport. During World War II,most land transport infrastructure then in existence was destroyed. Reha-bilitation of the land transport system has been slow, and economic growthhas made increasing demands on the inadequate system. For this reason,the Government of the Philippines and the United Nations Development Pro-gramme (UNDP) undertook in 1968 an overall Transport Survey for which theBank acted as Executing Agency. Following the Survey's recommendations,the Government now places highest priority on highway network improvementsand intends to improve about 13,000 km during the next 5 years.

iii. The 160 km Cotabato-Digos Road, which was given high priority inthe Transport Survey, is the only overland link between eastern and westernMindanao, the second largest Philippine island. This road serves largecorn and rice-producing regions rich in agricultural potential. Althoughit is heavily trafficked, most of the road is unpaved and is nearly impas-sable during the monsoon season. Improvement to a two-lane paved standardis, therefore, of high priority and should yield a rate of return of 18Zfrom savings in vehicle operating costs. Detailed engineering of thisroad and of two other roads in Luzon (Lucena-Legaspi and Cabanatuan-Tuguegurao) is included in the project for retroactive financing (aboutUS$750,000 equivalent). The two latter roads, totalling 765 km, will beimproved with bilateral assistance from Japan, which supplied equipmentfor this purpose.

iv. The project also includes feasibility studies to determine priori-ties for improvement of a further 1,000 km of roads, together with technicalassistance to help the Government increase the efficiency of the BPH. TheGovernment has requested financial assistance from the UNDP for both feasi-bility studies and technical assistance, with the Bank as the ExecutingAgency. Consulting services also will be provided under the project forsubsequent detailed engineering of roads identified by the feasibilitystudies as being of highest priority.

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v. The total project cost, including contingencies and interestduring construction, is estimated at US$15.8 million equivalent. Theforeign exchange costs, corresponding to 63% of, project costs, would beabout US$9.9 million; of that amount the Government is requesting a Bankloan of US$8.0 million for construction costs and consulting services,and UNDP finance of US$1.9 million for studies and technical assistance.Local costs will be met by the Government. The construction eontractswill be awarded after international competitive bidding; constructionsupervision and other expert services will be carried out by consultants.The BPH will be responsible for project execution.

vi. The project is suitable for a Bank loan of US$.O million equiva-lent. Based on the economic life of the project, an approptiate term ofthe proposed loan is 24 years including four years of grace.

PHILIPPINES

APPRAISAL OF A HIGHWAY PROJECT

I. INTRODUCTION

1.01 The Governmen. of the Philippines has asked the Bank to helpfinance a highway project consisting of:

(a) construction and improvement of about 160 km of primaryroad between Cotabato and Digos;

(b) consulting services to the Bureau of Public Highways(BPH) for detailed engineering of a number of roads andfor construction supervision of the above road;

(c) feasibility studies of other high priority roads; and

(d) technical assistance to the BPH.

The project cost is about US$15.8 million equivalent. The proposed loan ofUS$8.0 million equivalent is for the foreign exchange costs of items (a)and (b) and for interest during construction. The Government has requestedUS$1.9 million from the United Nations Development Programme (UNDP) foritems (c) and (d).

1.02 This would be the second Bank loan in the Philippines for trans-portation. The first loan (290-PH, June 1961) was US$8.5 million equivalentfor harbor dredging. Performance for that project was only fair and theundisbursed balance of about US$1.1 million was cancelled on the closingdate. Groundwork for this current project was laid in 1967 when the Bankassisted the Government in requesting UNDP finance for a Transport Survey.The Survey was carried out in 1968/69 by METRA International of Prance in

association with SAUTI of Italy; the Bank acted as the Executing Agency.The current project is based on the findings of the Survey.

1.03 This report was written by Messrs. M. W. Dickerson (Engineer) andH. Hansen (Economist), who appraised the project in July 1970, and wasedited by Mrs. P. Valad. Mr. A. Imperatrice (Consultant) participated inthe appraisal mission to deal with organizational matters.

II. BACKGROUND

A. General

2.01 The Republic of the Philippines lies in the North'Pacific Oceanoff the southeast coast of Asia and consists of some 7,000 islands witha land area of about 300,000 km2 (roughly the same size as. Italy). Luzon,which includes the capital city of Manila, and Mindanao'are=the two largestislands and make up about two-thirds of the area. They also account'forthree-quarters of the 36.6 million population. The annual populationgrowth rate of about 3.1% is among the highest in the world.

2.02 Agriculture is the basis of the economry. It geherates about 35%of the Net Domestic Product (NDP), accounts for about 70% of exportearnings (coconut, forestry products, and sugar), and employs about 55%of the labor force. About 28% of the areA is cultivated (primarily riceand corn) and about 33% is commercial forests. Manufacturing accounts forabout 17% of the NDP, considerably more than in nearby Malaysia, Thailand,and Indonesia. The Philippines has abundant natural resources, with par-ticular potential for tropical agriculture, forestry, and mineral develop-ment (copper, gold, iron, chrome, and nickel). Economic growth in i970was 4.4%. Gross National Product per capita is about US$160.

2.03 Economic development in the Philippines depends on access tothe various geographical regions. h'ith its many islands, trade has prin-cipally been by water. On the larger islands, however, the difficultterrain, heavy rainfall, and poor soil conditions have tehided to dis8-courage cheap land transport. As a result, the Philippines is cur'rentlyserved by both a fairly extensive maritime network linking scattered iS-lands and an inadequate system of land transport within the islands. In-dustrial and agricultural activity is, as a result, concentrated in thecoastal areas. Table 1 shows domestic trAnsport volumes by mode.

B. Transportation

(a) General

2.04 During World War II, most of the transport infrastructure wasdestroyed. Since the War, funds for transport infrastructure have beenlimited and reconstruction has been slow. There have also been deficien-cies in transport administration and organization. Emphasis has beenplaced on short-term requirements rather than on long-term needs. Rmc-ognizing these deficiencies and the importance of economic plannihg inthe transport sector, the Government in 1968 requested UN P finance fora Transport Survey (para. 1.02). This Survey reviewed the existingtransport system and recommended improvements, based on a ten-year trans-port investment program (FY 1971-1980). Recoimenlations for organiza-tional changes were also included in the Strvey. Feasibility studiesof high priority highways were carried out under the Survey.

2.05 The Government also, in 1968, created a Commission on Reorgani-zation which reviewed overall Government structure, including transportcoordination, and is recommending steps for improvement. These recommend-ations will be submitted for Congressional action in May 1971 (para. 2.17).

2.06 The new Five-Year Infrastructure Program (FY 1971-1975) reflectsthe high priority given to improvement of the transport system. Approximately45% of the Program has been allocated to transportation with 70% of this in-vestment going to highways (Table 2).

(b) Highways

2.07 The highway network (Table 3), consisting of about 13,000 ka ofpaved roads and about 51,000 km of unpaved roads, is concentrated on theislands of Luzon, Samar, Leyte, and Mindanao. Past highway planning, main-tenance, and construction have been inadequate. Vehicle overloading, fre-quent wash-outs of bridges, and an inadequate feeder road network haveresulted in pbor quality service and high road transport costs. The high-way system is discussed further in Chapter III.

(c) Railways

2.08 There are two Government-owned railways: the Philippine NationalRailways (PNR) and the Philippine Railroad Company (PRC). PNR is the mostimportant, with 1,028 km ot single-line track on Luzon; PRC plays an insig-nificant role, with only about 117 km of line on the islands of Panay andCebu. A number of other lines in Luzon are privately owned, mainly bysugar and logging companies, but they are not significant in the overalltransport picture. Traffic on PNR in FY 1969 was about 1,200 millionpassenger-km and 150 million freight ton-km. While passenger traffic hasrecently increased moderately, freight traffic has been constant.

2.09 The Transport Survey concluded that, with rehabilitation, therailroad could play a useful role in the Philippine's transport system.The Survey's proposals for PNR included a phased rehabilitation programfor track and rolling stock. Changes in administration, operations, andfinancing were also proposed, and recommendations were made for increasedfreight rates and passenger fares. No improvement program was considerednecessary for PRC at this time.

2.10 Although the Government agrees with the general conclusionsof the Transport Survey and has included rehabilitation funds in theInfrastructure Program (Table 2), it is still reviewing specific proposalsfor rehabilitation of the PNR.

(d) Ports and ShippS n8

2.11 For both foreign trade and domestic transport, ports and shippinghave been important to the economy. There are now about 80 national and390 municipal ports, as well as numerous private piers and wharves. Althoughmost ports are well located and naturally sheltered, many require continuous

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dredging and lack adequate sheds and cargo handling equipment. The Bankis presently assisting the Government in defining the scope and consultingservices required for feasibility studies of four ports to whose improve-ment the Government has given high priority based on the Transport Survey.These studies are expected to be financed by the UND? and will be the basisof a subsequent project to be submitted to the Bank for consideration.

2.12 Ports in the Philippines are run by both the national and municipalgovernments. National ports are operated by the Bureau of Customs (BOC) inthe Ministry of Finance; design, construction, maintenance, and dredging,on the other hand, are the responsibility of the Bureau of Public Works(BPW) in the Department of Public Works and Communications (DPWC). Coordi-nation has been inadequate between BOC and BPW, and thus port works havenot always been related to needs; improvements are expected under proposedGovernment reorganization plans (para. 2.17). Municipal ports are owned,operated, and maintained by municipalities.

2.13 The Philippine merchant fleet totals about 1.2 million GrossRegister Tons (GRT), including about 0.7 million GRT of ocean-going vesselsand 0.3 million GRT of inter-island vessels. Also many small craft carrylocal traffic. Inter-island shipping, particularly passenger transport,has increased in recent years, and this service is adequate except tosome smaller outlying islands.

(e) Aviation

2.14 Manila, the only international airport in the Philippines, isserved by a number of the world's major airlines, as well as the PhilippineAir Lines (PAL), which operateh both internationally and within the coun-try. An extensive network of domestic airports is served by three domesticcarriers. In addition, ten air taxi operators serve outlying areas withsmall traffic volumes. Domestic passenger transport has been increasingrapidly (about 17Z p.a.), with PAL, which the Government partly owns, carry-ing about three-quarters of the traffic. Air freight is still insignificant.

2.15 The Transport Survey concluded that airport infrastructure hasnot kept pace with increased traffic and that a pressing need exists forbetter runways, navigational aids, and terminal facilities. It recommeadedrevision of the existing tariff policy because airlines are losing moneyon domestic traffic. The Government has accepted the Transport Survey'srecommendations. It has allocated funds in the Infrastructure Programfor the suggested improvements, and is considering requests from the air-lines for increased domestic air fares. The United States Federal AviationAdministration will assist the Philippines in preparing development plansfor local airports.

C. Transport Planninu and Coordination

2.16 Immediate economic and social problems, resulting from a largeand rapidly expanding population with consequent high uneamployment, havein the past received overriding attention, while long range problems such

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as transport coordinati3n and planning have been handled inadequately ona piece-meal basis. In the present administrative framework, coordina-tion has been difficult as responsibilities have been diffused between alarge number of offices and agencies. Responsibility for design, construc-tion, and maintenance relating to ports, highways, and aviation lies withthe DPWC, in which the Land Transport Commission, BPW, BPH, and CivilAviation Administration are subordinate agencies. The railways are ac-countable to the Office of Economic Coordination, while the Civil AviationBoard (CAB) and the Bureau for Maritime Affairs report to the Departmentof Commerce and Industry. Road transport regulations with respect to op-erating permits, route allocations, and rates are the responsibility ofthe Public Service Commission. The CAB performs this function for air-lines, but scheduled domestic airline franchises are awarded by Congress.Railway rates are supervised perfunctorily by the Office of Economic Co-ordination.

2.17 The Transport Survey and the Commission on Reorganization gen-erally reached the same conclusions about the transport situation. Bothcited the confusion in transportation planning and coordination, and con-cluded that all transportation matters should be brought under the DPWC'sauthority and that the DPWC itself should be reorganized and strengthened.The Commission's proposals for overall Government reorganization are dueto be presented by the President to Congress in May 1971; the proposalswill be presented as a package, to be either accepted or rejected by Con-gress. If accepted, the proposals would be implemented during 1971-73.During the loan negotiations, the Bank discussed with the Governmentrepresentatives these proposals insofar as they affect transportation.The proposals incorporate a number of the Bank's comments and suggestionsmade during and subsequent to appraisal and, if accepted and implemented,would result in some operational improvements in the transport sector.There ia, however, some uncertainty on how effective and efficient theproposed new DPWC organization will be in transport planning and coordina-tion and this is a matter which will be reviewed and discussed furtherwith the Government during thie execution of this project. Assuranceswere obtained during loan negotiations that the Government will furnishthe Bank a copy of the final proposals as submitted to Congress and willkeep the Bank informed of the progress of the Bill and any subsequentimplementation. For additional assurances regarding BPH reorganizationsee para. 3.09.

III. THE HIGHWAY SECTOR

A. Highwy Network

3.01 The main highway network extends from north to south over thefour islands of Luzon, Samar, Leyte, and Mindanao (Map). The principalartery of the country is the 2,000 km long Pan-Philippine Highway, whichextends from Aparri in North Luzoni to Davao in southern Mindanao. The

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two major inter-island crossings on this highway are served by ferries.Minor highway networks exist on some of the other 7,000 islands, butthey are small in relation to the main network.

3.02 The existing network consists of about 64,000 km, of which about13,000 km are paved. The system is divided into five classes: express-way, primary, secondary, municipal, and feeder (Table 3). Expressways,primary roads, and about one-third of the secondary roads comprise thenational system under the authority of the central Government. Provin-cial or city governments are responsible for the remainder of the second-ary roads, with municipal authorities looking after municipal and somefeeder roads. Many feeder roads, constructed under political pressure,are without an authority responsible for their maintenance. The ratioof 1 km of road to 600 people in the Philippines is better than that ofsimilar insular countries (the ratio for Indonesia being 1 km to 1,400people), but most roads are badly aligLned and in poor condition.

3.03 While the Government has been aware of deficiencies in the highi-way network, it has been hampered by lack of planning and a critical short-age of funds. However, from FY 1971-1975, it intends to improve about13,000 km of the network, including 1,300 km of the Pan-Philippine High-way which will be constructed with Japanese assistance (primarily equip-ment). Inter-island vehicular ferry services will also be improved.

B. Highway Traffic

3.04 The motor vehicle fleet at the end of 1969 was about 447,000units as compared with 199,000 in 1962, reflecting an average increaseof 12% p.a. (Table 4). Of the total, about 80% are registered in Luzon(about half of which are in greater Manila), 10% in Nlindanao, and 10% inthe other islands. Gasoline consumption for the same period increased byabout 10% p.a. (Table 5). There are about 110 inhabitants per vehicle(compared to about 300 in Korea, 120 in Thailand, anid 50 in ilalaysia).

3.05 Trucking is carried out on an own-account basis (about 90%) andby general haulers (about 10%). Although there are no restrictions onentry into road haulage, the trucking rates which have been set by laware low and discourage the growth of the general haulers. Wider generaltrucking operations would be encouraged by the improvement of the roadnetwork and by greater flexibility in trucking rates. The latter couldfollow the review of transport policies which would be made after re-organization proposals have passed into law.

3.06 Traffic counts have recently been carried out on all primary andsecondary highways through a system of control and coverage stations. Atcontrol stations, about 200 km apart, traffic counts are taken 68 times ayear and at coverage stations, about 20 km apart, twice a year. Although asignificant amount of traffic information is consaquently available, it isnot yet fully used for highway planning and maintanance programming. Duringloan negotiations, assurances were obtained that traffic counts would becontinued and that the processing and retrieval of traffic data would beimproved.

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3.07 Motor vehicle reFulations are generally satisfactory. The legalvehicular load is 8,000 kg on a single axle and 14,500 kg on tandem axles.Patrols of the Land Transport Commission and the national and local policeare responsible for enforcing regulations. As there are no permanent weigh-ing stations and this commission owns only a few portable units, overload-ing is widespread. Assurances were obtained during loan negotiations thateffective axle load control measures would be introduced and enforced.

C. Highway Administration

3.08 The Bureau of Public Highways (BP3) is responsible for the nationalroad network. This Bureau, which is part of the Department of Public Worksand Communications (DPWC), is headed by a Commissioner (a political appointee)and administered by a Deputy Commissioner and a Chief Engineer. Proliferationof technical and administrative divisions abounds at headquarters (Chart) andconsiderable overstaffing exists both at headquarters and in the field.Though there has been only a minor increase in the road network, the numberof districts has doubled from 54 to 110 since 1954. These new districtsappear to have been created to coincide with local political spheres ofinfluence. Consequently, improvement programs are fragmented, overheadcosts have increased, and financial control has suffered. Field operations,carried out by district engineers, are not effectively controlled by BPHheadquarters in 'Manila due to the remoteness of the areas served and thepoor communications.

3.09 Certain proposals by the Commission on Reorganization for improve-ments in the BPH do not require legLslative action. These will be imple-mented under this project, together with other measures proposed by the Bankto improve BPH operations. Basically, tthese interinm measuires (detailed intihe Annex) are: reductioni of utaff, "pparaLion or admLnimtrative a3nd- tuch-nical fucticLonn, dLvIsioni of constructLoLl anid mainiteanace reaponsibiliLies,and revitalization of regional office functionss. During negotiations theGovernment confirmed that these measures were corisistent witlh the Commisq-sion's overall proposal.s. Also during negotlatlons, the Governlment gaveAssurances tlhnt it would implemenit thtese interim measures with the asist-ance of consultants over a period of two years.

D. Highway Planning and Fin ancing

3.10 Highway planning begins at the local level with requests frommayors and other officials. District engineers draw up preliminary plansand cost estimates wiich are then checked and consolidated by BPH head-quarters. The overall program is next reviewed by the National EconomicCouncil and then by the Presidential Economic Staff and the Budget Commis-sion. The resulting program is the Five-Year Infrastructure Program. An-nual budget requests based on this Program are presented to Congress forapproval.

3.11 Most road works have involved short sections on existing pre-World War II alignments and little economic planning or analysis hasbeen undertaken. The Government has now adopted the investment program

suggested in the Transport Survey as the basis for its Five-Year Infrastruc-ture Program. Feasibility studies and detailed engineering will precedeconstruction of major projects, although political considerations may con-tinue to influence selection of smaller works.

3.12 Funds for highway construction, maintenance, and a. -inistrationnow come mainly from the Highway Special Fund (HSF), which w2s set up bylegislation in 1953 (Table 6). HSF revenue is from motor fuel taxes andvehicle registration fees; additional highway revenue comes from generalbudget allocations and bond sales, making a total of P 400 million (aboutUS$65 million) available for highways in FY 1970 (Table 7). Over the nextfew years, funds will also be available from the recently imposed ExportTax, 25% of which will be used toward the local currency costs of inter-nationally financed projects. By law, HSF funds are distributed 44.5%each to maintenance and construction, with the riaaniniig 11% being allocat-ed to administration and emergencies. Of the maintenance allocation, aboutone-third is distributed equally between provinces and cities; the remainderis distributed on the basis of road length, population, and vehicle registra-tion. Two toll roads exist, with the construction contractors collectingtolls to pay for their construction and operation. In FY 1969, HSF's rev-enue covered the cost of highway administration and maintenance, as wellas about 50% of construction costs. If non-earmarked customs duties onmotor vehicles were added, total road user revenue would roughly equalhighway expenditures.

3.13 The Government's previous Four-Year Highway Plan (FY 1967-1970)called for a total expenditure of about P 1,000 million (about US$170million equivalent) and this target was substantially achieved. Thecurrently proposed Five-Year Infrastructure Program requires expenditureof about P 2,300 million (about US$370 million equivalent); of this, theGovernment hopes to obtain about P 500 million of external financing.The plan is ambitious and,some slippage may be expected into FY 1976.

E. Highway Design and Construction

3.14 At BPH headquarters, roads and bridges are designed by twoseparate divisions: Hlighway Location and Design, and Bridge Design.As most recent projects have been small, a large part of the designwork has been undertaken by Regional and District Offices and checkedby headquarters. Although design staff are able, their offices couldbe better equipped and organized. These shortcomings will be reviewedby the technical assistance team (para. 4.08). Field Offices basetheir design on guidelines prepared by BPH headquarters. Highway andbridge design standards are generally satisfactory. Although SAUTI(para. 1.02) is now the only foreign consultant employed by the BPH, somemajor bridge projects have been bid on a design and construct basis withoverseas consultants employed by the bidders.

3.15 Until recently, highway construction was uadertaken by both forceaccount (two-thirds) and contract (one-third), with the headquarters Con-struction Division acting as a clearing house and coordinating agency for

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district and regional proposals. To maintain better control of funds andto promote the local contracting industry, the Government recently put aP 75,000 (about US$12,500 equivalent) ceiling on individual force accountprojects. This is expected to reduce considerably the amount of forceaccount work.

3.16 Government contracts are awarded on a competitive basis with par-ticipation normally limited to local firms. In November 1970, a new law(Republic Act 6142) was enacted allowing the President to waive existinglaws which prohibit bidding by foreign firms for works partially financedfrom external sources. International competitive bidding procedures cantherefore be employed for such works.

3.17 Recently awarded road contracts for sections of the Pan-PhilippineHighway have greatly increased the amount of work being undertaken by thedomestic road contracting industry. A few major contractors (some workingwith United States firms) have already gained roadworks experience both onUnited States military base projects and on smaller Government and cityworks. Domestic road contractors readily form joint ventures to com?etefor larger works.

F. Highway Maintenance

3.18 Road maintenance is poor, with routine maintenance almost non-existent and periodic maintenance confined to reconstruction of small,isolated sections of pavement. At any time, therefore, the network con-sists of only short sections of new pavement interspersed with rapidlydeteriorating longer stretches.

3.19 Road maintenance is the responsibility of district and cityengineers, and their work should be inspected by the Maintenance Divisionsat Bureau headquarters and at regional level. In fact, this inspectiondoes not occur. Consequently, the district engineers' tendency to favorminor improvement works prevails at the expense of essential routine main-tenance. Similarly, failure to allocate equipment specifically for main-tenance has contributed to further deterioration of the road network.

3.20 Road maintenance programming is non-existent; district main-tenance allocations are at the discretion of the district engineer.Maintenance funds (averaging about US$500/km p.a., excluding equipmentdepreciation) appear at first sight to be adequate, but chronic over-staffing and diversion of funds to improvements have left little forroutine maintenance. Furthermore, a sizeable portion of both maintenanceand construction funds is spent on emergency work, particularly typhoondamage (14 occurrences from 1968 to date).

3.21 The Government is aware that road maintenance must be improvedand that reorganization of the BPH is an essential step. Technical as-sistance to help with reorganization and to assist BPH staff in improvingroad maintenance methods (para. 4.08) is provided under this project.Preliminary recommendations by the technical assistance team are expected

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to be available six months after work begins. During loan negotiations,assurances were obtained that on the basis of the above recommendationsthe Government would: (a) formulate a program satisfactory to the Bankfor provision of adequate maintenance funds for the road network; and (b)take the necessary steps thereafter to improve road maintenance operationsin accordance with the agreed program.

IV. THE PROJECT

A. General

4.01 The project consists of the following:

(a) construction and improvement of the 160 km Cotabato-Digos Road;

(b) consulting services to BPH for detailed engineering(the 160 km project road, 765 km of Japanese-financedPan-Philippine Highway, and about 700 km resulting from(c) below) and construction supervision of (a) above;

(c) feasibility studies of about 1,000 km of roads; and

(d) technical assistance to the BPH for administrative andoperational improvements.

The Government has asked the Bank to finance the foreign exchange costs ofitems (a) and (b) above and has requested financial assistance from theUNDP for items tc) and (d) above.

B. Construction and Improvement

4.02 The 160 km road to be constructed and improved runs from Cotabatoon the west coast of Mindanao to Digos on the east coast. Improvement ofthis road was given high priority in the Transport Survey (para. 1.02) andwas confirmed in a detailed feasibility study.

4.03 Short stretches of the present road, totalling 50 km, have beenpaved recently, but the remainder is poorly aligned with unsurfaced stretcheswhich are virtually impassable in the monsoon season. Under the project,these unimproved sections will be upgraded and paved to two-lane standard(Table 8); the proposed design standards are acceptable to the Bank. Inaddition, shoulder construction and minor drainage works will be carriedout where necessary on the recently paved sections.

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C. Consulting Services for Detailed Engineering and ConstructionSupervision

(a) Current Detailed Engineering

4.04 The Government in 1969 retained the services of SAUTI to under-take the detailed engineering of the Cotabato-Digos project road, as wellas that of the Lucena-Legaspi and Cabanatuan-Tuguegurao Roads on Luzon,totaling about 925 km (Map). The contract arrangements were satisfactoryand the Bank agreed to consider the inclusion of the foreign exchange costsof these services (about US$750,000) in the proposed loan for retroactivefinancing. The Government indicated that construction of the latter tworoads would be part of the proposed Bank project, but subsequently informedthe Bank that these roads would be constructed under bilateral assistancefrom Japan. Design work commenced in February 1970 and was completed bythe end of that year. Maximum use of BPH staff was made in the work.

(b) Construction Supervision

4.05 SAUTI will also undertake construction supervision of theCotabato-Digos Road. BPH staff will again fill as many appropriate postsas possible in the consultants' supervision organization. This arrange-ment is satisfactory and the staffing arrangements were agreed duringnegotiations.

(c) Further Detailed Engineering

4.06 It is expected that the feasibility studies (para 4.07) willidentify about 700 km of high priority roads, for which detailed engineer-ing would be justified and which could be the basis of further Bank lendingfor highway construction. Detailed engineering by a firm of consultants,therefore, is included under this project.

D. Feasibility Studies

4.07 Feasibility studies under the project will cover about 1,000 kmof existing primary and secondary roads on Luzon (Table 9 and Map), asrecommended in the Transport Survey. These studies will be undertaken bya firm of consultants, and will include comprehensive economic evaluationsand identification of alternative solutions for improving the roads, to-gether with plans for implementation of the optimum solutions. The Govern-ment has asked the Asian Development Bank (ADB) to finance similar studiesfor roads in Samar and Mindanao, and close liaison will be kept with ADB.

E. Technical Assistance to BPH

4.08 The Government wants to improve BPH operations and has agreedthat technical assistance be included in the project for this purpose.The assistance will be provided by about 11 experts (including a transporteconomist) from a consulting firm. During a two-year period, the team will

- 12 -

review and assist in implementing the interim BPH reorganization, as dis-cussed in the Annex, and will advise on Overall road maint6iance, workshopoperations, and road planning. Training t otocal staff will be providedboth at headquarters and in the field. The team will test revised main-tenance techniques in a selected number of pilot distrtits for subsequentimplementation on a country-wide basis. Duritig loan negotiations, techni-cal assistance details rere agreed and an assurance was obtained that,prior to completion of the team's two-year assignment and in consultationwith the Bank, the Government would review thle progress And aAsess the needfor further technical assistance.

F. cot In ExchAnge Conent

4.09 Total project colts, including contingencies, are estimated asfollows:

- 13 -

Pesos Million US$ Million Equiv. ForeignLocal Foreign Total Local Foreign Total Exchange

Part I. Items to be fi-nanced by Bank

1. Construction and im-provement of Cotabato-Digos Road (160km) 15.9 19.6 35.5 2.6 3.3 5.9 55

2. Consulting Services:(a) Detailed engineer-

ing of 925 km /a ofroad including 1 4.2 4.5 8.7 0.7 0.8 1.5 /b 55

(b) Supervision of 1 1.8 3.6 5.4 0.3 0.6 0.9 65(c) Detailed engineer-

ing (about 700 km)resulting from 5 6.6 7.2 13.8 1.1 1.2 2.3 50

Sub-total 12.6 15.3 27.9 2.1 2.6 4.7

3. Contingencies:(a) On 1 - Physical (10%) 1.6 1.9 3.5 0.2 0.3 0.5

Price (11%) 1.6 2.0 3.6 0.3 0.4 0.7(b) On 2 - Physical (10%) 1.2 1.5 2.7 0.2 0.2 0.4

Sub-total 4.4 5.4 9.8 0.7 0.9 1.6

4. Interest during con-struction - 7.2 7.2 - 1.2 1.2

Total of Items to befinanced by Bank 32.9 47.5 80.4 5.4 8.0 13.4 60

Part II. Items to be fi-nanced by UNDP

5. Feasibility Studies(1,000 km) 1.6 4.2 5.8 0.3 0.7 1.0 70

6. Technical Assistance 1.1 6.0 7.1 0.2 1.0 1.2 85

7. Contingencies on 5 & 6Physical (10%) 0.3 1.0 1.3 - 0.2 0.2

Total of Items to befinanced by UNDP 3.0 11.2 14.2 0.5 1.9 2.4

Total Project Costs 35.9 58.7 94.6 5.9 9.9 15.8 63

/a Made up as follows: Cotabato-Digos (160 km), Cabanatuan-Tugegurao (375km) and Lucena-Legaspi (390 kn). The latter two roads will be con-structed with Japanese bilateral assistance.

/b Cost of completed detailed engineering for the 925 km was lower thannormal as most of the field survey and soils exploration work wascompleted by BPH staff prior to commencement of consultants' assign-ment.

- 14 -

4.10 SAUTI has made cost estimates for road construction and improve-ments based on the quantities derived from detailed engineering and thelocal costs of labor, equipment operation, materials and overheads, as wellas comparable costs for work elsewhere. Feasibility study cost estimatesare based on those of similar studies in the Philippines and other coun-tries. Cost estimates for detailed engineering are taken from the contractbetween the Government and SAUTI. Construction supervision estimates arebased on a schedule of staffing requirements and SAUTI's man-month rates(para. 4.05). Estimates of costs for further detailed engineering, result-ing from the feasibility studies, and the costs for technical assistance,are based on comparable assignments elsewhere in Southeast Asia. A 10lcontingency allowance for quantity overruns is believed to be adequate forconstruction and consulting services. The 11% price contingency for con-struction is based on 5% p.a. increase in the foreign component and 6% p.a.increase in the local component from the date of cost estimates (December1970) to completion of construction (about mid-1974). During loan nego-tiations, final cost estimates were agreed.

4.11 Foreign exchange components of the various items are determinedby different factors. For road construction, if all work were done by foreigncontractors the foreign exchange component would be 60% (US$3,6 million equi-valent); if all work were undertaken by local contractors the foreign ex-change component would be 44% (US$2.6 million equivalent). However, mostlocal firms interested in the project have indicated their intention toform joint ventures with foreign firms (a 50-50 joint venture would resultin a foreign exchange component of 52%). On the basis that contracts willbe won by joint ventures or a foreign firm (also likely to employ localsub-contractors) a 55% foreign exchange component Las been used in thecost estimates. These foreign exchange estimates were made by SAUTI andare considered satisfactory. For feasibility studies, the foreign exchangecomponent is based on the cost of foreign experts' salaries and equipment.The component of detailed engineering is lower than found in other coun-tries due to maximum use of BPH staff (on Government salaries); whileconstruction supervision and technical assistance reflect the rel4tivelyhigh input of foreign personnel with foreign exchange components of 65%and 85% respectively.

G. Project Financing and Execution

4.12 The proposed loan to the Government will finance the foreign ex-change component of the construction and detailed engineering elements ofthe project together with interest and other charges during construction,with the feasibility studies and technical assistance to be financed bythe UNDP. 1/ Local cost financing will be made available through an Ex-port Tax (para. 3.12) and no undue difficulties are expected.

1/ The Government has submitted an application to the UNDP for the fi-nancing of these elements. UNDP management has indicated that thenecessary funds will be included in the progrEm to be submitted tothe Governing Council in June 1971.

- 15 -

4.13 The BPH will be responsible for executing the project, assistedby qualified consultants under terms and conditions satisfactory to theBank. During loan negotiations, assurances were obtained that the Govern-ment will promptly retain consultants for construction supervision and,subsequently, for detailed engineering (para. 4.06).

4.14 To encourage the domestic contracting industry to bid for theroad works, the total contract will be advertised in two sections of aboutequal value with contractors bidding for one or both sections. Contractswill be based on unit prices. The Government has requested and the Bankhas agreed that contract documents require alternative bids for differenttypes of pavement construction using asphalt or cement concrete. Contractswill be awarded on the basis of the lowest evaluated bids.

4.15 The Government has agreed to amend its present contract biddingand award procedures in accordance with the Bank's "Guidelines on Procure-ment". Amendments permitting foreign firms to compete on an equal basisfor contracts of this nature are embodied in Republic Act 6142 which wasenacted in November 1970 (para. 3.16). Other major amendments, such asbidding periods and bid evaluation necessary to ensure compliance withbidding procedures satisfactory to the Bank have been made at Departmentallevel.

4.16 The potential of the project construction for relieving unemploy-ment in the Philippines has been considered. Total unemployment in thecountry is currently estimated at about 8%, but the unemployed are foundprimarily on the island of Luzon and in the larger urban areas (particu-larly Mlanila). In Iindanao, where the project is located, there is noserious unemployment problem and the population is principally engaged inyear-round farming of the rich agriculture land, particularly along theproject road (para. 5.03). The possibility of moving unemployed labor1,200 km from the island of Luzon to Mindanao is impractical because ofethnic differinces, the long arduous journey required, and a reluctanceon the part of the urban unemployed to move away from potential city op-portunities. The construction of the project road using labor intensivemethods is therefore considered impractical.

4.17 Construction contracts will probably be awarded in the thirdquarter of 1971, and the works should be completed towards the middle of1974. Feasibility studies will cormmence mid-1971 with completion ex-pected in the first quarter of 1972, to be followed by detailed engineer-ing (para. 4.06). The technical assistance team would be retained frommid-1971 until mid-1973. The timing of project execution was agreedduring loan negotiations.

R. Disbursements

4.18 Disbursements from the loan account would be on the basis of 55%of the cost of road construction; the actual foreign exchange cost of con-sultants' services; and the actual loan interest and other charges duringconstruction. Surplus funds in the loan account on project completion willb2 cancelled. The schedule of estimated disbursements is given in Table 10.

- 16 -

V. ECONOMIC EVALUATION

A. General

5.01 The Philippines has traditionally provided for its highway improve-ment needs on a short-term basis for small road sections rather than by long-term, comprehensive planning of construction and maintenance for the entireroad network. Although this has resulted in a considerable amount of recentimprovement tworks, a logical plan for future development is essential. TheGovernment has accepted the priorities recommended by the Transport Surveyas a basis for future planning. Road works included in the current projectare given high priority in the Survey.

5.02 The objectives of the project are to:

(a) reduce transport costs on the most i.nportant primaryhighway in Mlindanao;

(b) establish the technical and economic feasibility, andprovide the detailed engineering, of other roadsidentified as being of high priority in the TransportSurvey; and

(c) imuprove the BPH organization and its operations,particularly for road maintenance.

Benefits from feasibility studies and technical assistance to BPH, (b) and(c) above, have not been quantified. Although no detailed economic eva-luation was made of the two roads Lucena-Legaspi and Cabanatuan-Tugueguraoas they will be constructed with bilateral assistance from Japan, they areexpected to yield an acceptable rate of return based on the findings of theTransport Survey and the feasibility studies.

B. Cotabato-Digos Road

5.03 The Cotabato-Digos Road is the only east-west link in centralMindanao. It connects the two main cities and administrative centers,Cotabato and Davao, and it serves an agricultural area including the maincorn and one of the main rice-producing regions in the Philippines. Futureagricultural growth potential in this area is among the highest in thecountry. 1/

1/ Southwest Mindanao is one of the rice andC corn priority areas, accord-ing to the National Food and Agriculture Council. It is expected tobenefit from the recently approved Bank financed Rice Processing Proj-ect (Loan Na. 720-PH) and an ADB irrigatlon project.

- 17 -

5.04 Average daily traffic in 1968 on the Cotabato-Digos Road wasabout 550 vehicles, of which about 65% were trucks and buses. Trafficvolumes were somewhat higher at the two ends than in the middle. Pasttraffic growth information is limited and variations occur between countingstations. However, based on available information, passenger car and jeep-ney 1/ traffic recently grew by about 24% p.a. and 16% p.a., respectively,with truck traffic growing by about 8% p.a. and bus traffic remaining moreor less constant. Table 11 shows present and expected traffic on sectionsof the road. Forecasts are based on past traffic trends and on projectionsby the UNDP consultants of the total production of goods and services andof per capita income in the influence zones. The forecasts used forpassenger cars and buses are somewhat lower than those used by the UNDPconsultants for the feasibility study and assume that the traffic growthrate will decline from about 11% p.a. through 1972 to about 6% by 1983.Growth rates are considered reasonable.

5.05 Reduction in vehicle operating costs (VOC) due to improved run-ning surfaces is the readily quantifiable benefit used in the economicevaluation. Benefits from the project are, however, somewhat underestimatedbecause savings of passenger time and reduction in road maintenance costsand accidents have not been considered. Moreover, savings include onlythe difference between present and expected operating cost levels and donot take into account the future increases in operating costs that wouldtake place if the project is not carried out.

5.06 Conditions of terrain, cost, traffic, and other features aregenerally consistent throughout the length of the road, and its justifi-cation has, therefore, been evaluated as a single entity. Based on savingsin VOC (Table 12) and the estimated traffic growth over 20 years, the in-vestment in the road would yield a rate of return of 18%. The sensitivityof this result was tested on the basis of a plus or minus 10% change inconstruction costs, 20% change in traffic growth rates, and 20% changein VOC savings. This resulted in a range of 11-25% as the minimum andmaximum possible returns. Returns on the various combinations are givenin Table 13. The project is, therefore, justified.

VI. RECOMMENDATIONS

6.01 During loan negotiations, assurances were obtained from the Gov-ernment that it would:

(a) implement the interim BPH reorganization measures withthe assistance of consultants over a period of two yearsin accordance with the Annex (para. 3.09);

1/ Jeep-type vehicles converted for fare-paying passengers and widelyused for short distance travel in the Philippines.

- 18 -

(b) with the assistance of consultants, formulate a programsatisfactory to the Bank to provide adequate maintenancefunds for the road network within one year of the dateof the Loan Agreement and take necessary steps thereafterto improve road maintenance operations in accordance withthe agreed program (para. 3.21); and

(c) review the progress and assess the need for further tech-nical assistance, in consultation with the Bank, prior tocompletion of the two-year assignment of the technicalassistance team (para. 4.08).

6.02 The project constitutes a suitable basis for a Bank loan ofUS$8.0 million equivalent with a term of 24 years including a four-yeargrace period.

TABLE 1

PRIIPPDI2

HIGTWA! PROJECT

Domestic Goods and Passeager Transport 19681'

Goods Ton kilometers %(million)

Road Transport 3,520 57Maritime Transport 2,,510 41Railway Transport 150 2Air Transport 10 -

Total 6j190 100

Passengers Passenger kilometers %(million)

Road Transport 15,650 82Maritime Transport 1,570 8Railway Transport 1,210 6Air Transport 780 4

Total 19,210 100

1/ Primary transport network, as defined in the Transport Survey,comprising 10,000 km of national highways, 37 national ports,740 km of railroads, and 37 airports. No information or esti-mate available for balance of network.

Source: UNDP Consultants.

March 1971

TABLE 2

P440

HIGHWAY P%WV

Five-Year Infrastructure ?rogr ? aa

Local Foreign riTtely

(iw2iion)

Highways 1,800 81 2,300 32.5

Airports and air navi-gational facilities 179 49 474 6.5

Railroad 30 26 186 2.6

Portworks _7 4

Sub-total Transportation 2,166 185 3,273 46.0

Balance 1,859 1.2.5

Total Program 41,c5 100.025

1/ Based on exchange rate of US$ 1 - P 6.00.

Source: Presidential Economic Staff

March 1971

TABLE 3

PHILIPPINES

HIGHWAY PROJECT

Highway Network 1969(km)

General Classification

Authority Classification

Expressway Primary Secondary Municipal/Feeder Total

BPH 46 9,080 8,969 18,095

Provincial - - 23,775 23,775

city _ 5,408 _ 5,408

Municipal - - 16,315 16,315

Total 46 9_080 16,315 63,593

Road Trype

Authority Concrete Bituminous Gravel Earth Total

BPH 1,836 4.,98 4 10,085 1,190 18,095

Provincial 152 2,166 15,691 5,766 23/,77/

City 182 1,679 2,377 1,170 5,4082/

Municipal 355 1,017 8,526 6,417 16,315

Total 2,525 9,846 36,679 14,543 63,593

1/ For maintenance purposes Government does not distinguish between municipal andfeeder roads -- the mileage of the latter is uncertain and many of these roadsare not maintained.

2/ 2,023 kn of provincial roads receive national aid.

3/ 359 km of city roads receive national aid.

cource: Bureau of Public Highways.

March 1971

TABLE 4

PffILIPPINES

HIGHWAY PROJECT

Motor Vehicle Statistics 1962-196,:

Year Cars Jeeps Jeepneya Trucks Buses Other- Total

1962 55,693 26,217 14,353 60,222 14,055 24,122 198,6621963 58,910 29,051 15,744 72,881 14,903 17,253 208,7421964 71,262 34,477 16,585 8i,4oo 13,5542 37,618 254,8841965 84,262 43,369 18,483 90,415 12,983- 23,711 273,22-31966 95,146 45,296 22,543 97,489 14,218 35,961 31J0,6531967 118,729 53,075 24,582 104,524 12,028 50,110 363,04O1968 135,872 66,131 31,137 118,447 14,327 47,303 413,2171969 163,424 70,616 35,570 124,139 13,662 39,360 446,771

% Annual Change

1962-1969 16.6 14.6 13.8 10.9 (0.4) 4.9 12.3

Changing Composition

1962 28 13 7 31 7 14 1001969 36 16 8 28 3 9 100

1/ Military, public service, etc.

Source: Land Transport Commission

March 1971

TABLE 5

PHILIPPINBS

HIGJWAI PROJECT

Motor Vehicle Gaooline Consumption F 962-1969

Fiscal Year Annual Consu ption(million liters)

1962 1,1091963 1,1861964 1,3751965 1,3451966 1,4861967 1,7781968 1,8781969 2,206

% Annual Increase

1961-1969 10.3%

Source: Bureau of Public Highways

March 1971

TABLIE 6

PHILIPPINEs

HIGHWAY IRO1G

Revenues from Use and QwDrabip oiMotor Vehicles P11965-1969

(? miliion)

Fiscal bars1965 1966 I6

Earmarked for Higfa,yaSpecial Fund

Gasoline and lubricat-ing oil tax 114.6 12j.6 145.1 152.9 181.3

Motor Vehicle Regis-tration fees 50.7 56.2 55.2 72.2 74.7

Licenses, plateo andmiscellaneous 1J.) 3-4 10.5

Total 170.6 ".2 21. 6 2

Other Revenues

Customs duties onmotor vehicle n.a. n.a. n.a. 100.9 92.1

Tolls 0.7 o.6 1.0 1.4 8.5

Total n.a. n.a. n.a. 100.6

source: Presidential Economic Staff; Bureau of Public Highways and LTC

March 1971

TABLE

PHILIPPINES

HIGHWAY PIOJECT

r;xpenditureo on Highw%s' Ff1967-1M7(F million)

Fiscal learnItem 1967 1966 1969 am 1971 1972 1974 197

(Actuaf - -c (Estimated)

Ackainistration

Highway special Fund 6.1 7.6 8.9 9.3 10.0 11.0 12.0 13.0 14.0

Construction

Highway bpecial Fund 101.0 118.0 121.5 100.0 147.0 123.02/ 124.0 150.0 150.0General Budget and Bond

Salea 76.o 100.0 86.7 81.2 j6.01/ 115.0-/ 171.0 240.0 3D0.0Foreign loans - lW4.5 3.6 34.0 44.0 60.o 72.0 93.0 115.0Reparations - 1.2 39.5 65.6 31.0 22.0 22.0 22.0 22.0Export tax _ _ _ 56.0 60.0 71.0 6. -

bub-total (Construction) 177.0 363.7 251.3 280.8 314.0 j80.0 460.o 561.0 587.0

Maintenance

Highway dp.cial Funa 106.j 128.0 125.8 110.4 140.0 150.0 160.0 170.0 170.0

Total 289.4 49 .3 ,86.0 LC0.5 464. i1.0 63M 744.0 771.0

I/ bhowe replacement of General Budget funds by introduction of Export Tax

2/ f proposalb currently before Congress are approved, HbF revenues could increaae by about P130 millionin this and subsequent years, thus reducing the dependence on General Budget revenues.

bource: Bureau of Public Highways, Presidential Economic btaff ana UNDP Consultant

March 1971

TABLE 8

PHILIPPIMI

HIOWAY PR0JIT

Characteristics Unit Fl.t ta

Geometric: Speed k/}A 70.0 6o.o 50.0

Maximm gr*dAint % 3.0 4.0 5.0

Pavemt width a 6.7 6.7 6.7

Shour width a 3.0 2.5 2.0

Kinium raftug a 170.0 V 120.0 0.0

StopOiag *2ghtdistaaco 90.0 70.0 60.0

Right-of-way a 60.0 60.0 60.0

Pavewnt: ASUO sthod using an 18,000 lb alo

Bridg I AAHO H20.416

Minimuum on.y - 80 km/h employed for most oecT,ion tkroigh flat terrain,

Source: Bureau of Public Highways and UNDP Consultants

March 1971

TABLL 9

PHILIPPINES

HIGMWAY PROJECT

Roads Included for Feasibility Studios (See Map)

ApproximateLangth Construction Cost(km) (US$ miLlion)

Manila North Road (Obando-Tabang-Laoag) 427 22

Manila East Road (Pasig-Sta. Cruz) 95 4

San Fernando-Olongapo Road 79 2

Rosario-Bauang Road 70 2

Sta Tomas-Batangas-Cavite-Las Pinas Loop Road 194 5

Tarlac-Sta. Rosa & Gapan-San Fernando, Pampango 88 3

Bugallon-Damortis Road 51 2

Total 1.^ 4

Source: Presidential Economic Staff, Bureau of Public Highwqa, andUNDP Consultants

March 1971

TABLA 10

PHILIPPINEb

HIGHwAY PROJECT

Estimated bchedule of Di**w..witS

MM Fiscal Year Cumulative Disbursebentand Quarter at gd of Mr

1972

beptswber JD, 1971 1,300December ., 1971 1,625March 31, 1972 1 7M40June jD, 1972 2,585

deptaber 30, 1972 3s,85December 31, 1972 4,275March al, 1973 5,375June J0, 1973 6,005

.eptemnber 30, 1973 6,505December i,. 1973 6,890March 31, 1974 7,190June 3D, 1974 7,510

1975

eptem 30, 1974 7,510Dember 31, 1974 7,750March 31,. 1 975 7,750June 30, 1975 8,000

bource: Bureau of Public Highway and Mission E;stimates

March 1971

RXIHWAI 1RIQJCT

Estimated Traffic Vol=me on Cotabato-Ditos Road 1968-1992

Average Annual Dail Traffic timated Traffic Growth (% p.I.jRoad Sections 1968 1973 1977 1962 1987 1992 1968-1972 1973-1977 1978-1982 1953-1987 1988-1992

(Actual) - - (Estimated)-----------

1 -Cars 78 157 247 405 606 858 15 12 10 8 7

Jeepneys 232 409 577 765 803 803 12 9 5 0 0

Buses 91 147 207 307 418 539 10 9 8 6 5

Trucks 255 411 580 860 1,172 1,510 10 9 8 6 5

2 -args 66 133 209 343 513 726 15 12 10 S 7

Jeepneys 94 166 234 310 325 395 12 9 5 0 0Buses 95 153 216 320 437 563 10 9 8 6 5Trucks 170 274 386 573 781 1,007 10 9 8 6 5

3 -Care 41 82 130 213 318 1451 15 12 10 8 7

JLepneys 130 210 338 41L 470 470 13 J 5 0 0Du&" 154 248 30 £19 70 912 10 9 8 6 5

Trwks 16o 258 364 532 735 9s ID 9 a 6 5

it - cars 37 74 117 192 287 407 15 12 1D 7

J.epn,rs 76 140 198 262 275 334 13 9 5 0 0

Busea 74 119 168 249 310 438 10 9 8 6 5

Trucks 143 230 325 482 657 847 10 9 8 6 5

5 - Co 28 56 89 1145 217 309 15 12 10 8 7

Jmpneys 232 427 603 799 839 839 13 9 5 0 0

i.s" 151 2143 3143 509 6914 894 10 9 8 6 5

Trucks 392 631 891 1,322 1,802 2,322 10 9 8 6 5

6 - Cars 86 173 272 446 668 9463 15 12 10 8 7

J.epn.ys 119 210 285 375 393 393 12 8 5 0 0

Ause8 168 2n 368 521 678 833 10 8 7 5 4Truc ks 300 462 628 U89 1,156 1,420 9 8 7 5

SwAre: Dur.m of Public naU,o NW tmt d YAMi8i 104UMU8

March 1971

TBES 12

per a

New od StioA4

6---767-67.6s ~~~~ ";a1 3g 32b9 8 4333 0,31j9 0. 0319 o 265 0 o 47N 0. O 43 0.0 2 32 0*2 31 o0. 231 o 45 oo2 7

Swa?iT o 9.0 D-- D :D 0.2 S0t~ 30%l 30% .ŽZ% 3% 29%

OOpIIe k 3w3O: 0st.$ 0 2971 M092 0.292 0 22. 0o 30Nw Road 03.246 0,243 0. 24 0.246

2~~wtxLg ~~ 0.0 3 0.049 U~~~~i9 b,oo1 0.5.% 2.&% 17 2.7%1 1X 8

"SlKieU t7 0 X866 0.0- 0,832 -O. i2 0.1 o.343,Ieow Road o.W61 0 604 03604 o .60o4 0 06.L o 60

S&~Vbng ;TJ U V~R 0.03272% ISvIng % P9% 27% 21% 6) 29%

IWd.t3 RoA93 O 3 ,98 0 *et o1 0t701 0092.2New Road C.6) '5 64 0.64 0,64. Dx60 o,

%6 '3vL-g 31: -% 29% 2 -

Mar¢tMj,,98,

TABLE 13

PIIILIPPINES

HIGHWAY PROJECT

Rates of Retu?n of Cotabato-Digos Road

Assumptionsl/f 2/ Rates of Return

Most likely values of investment,traffic growth,and VOC 18

Most likely values of investmentand traffic growth, but conserva-tive assumption of VOC 15

Most likely values of investmentand VOC, but conservative assump-tion of traffic growth 15

Most likely values of trafficgrowth and VOC, but conservativeassumption of investment 17

Conservative assumption of invest-ment, traffic growth,and VOC 31

Most likely values of investmentand traffic growth, but optimis-tic assumption of VOC 21

Most likely values of investmentand VOC, but optimistic assump-tion of traffic growth 21

Most likely values of trafficgrowth and VOC, but optimisticassumption of investment 20

Optimistic assumption of invest-ment, traffic growth,and VOC 25 _

1/ Conservative assumptions are: (i) 10% increase in investment; (ii) 20% decreasein traffic growth rates,and (iii) 20% decrease in vehicle operating cost savings.

2/ Optimistic assumptions are: (i) 10% decrease in investment; (ii) 20% increasein traffic growth rates,and (iii) 20% increase in vehicle operating cost savings.

Source: Mission Estimates

March 1971

ANNEXPage 1

PHILIPPINES

HIGHWAY PROJECT

Interim Measures for Reorganization of theBureau of Public Highways

Introduction

In connection with the proposed highway project, certain interimmeasures to improve the efficiency and operations of the BPH are to beundertaken; these do not require legislation for implementation. The mea-sures are consistent with the Commission on Reorganization's proposals forall Government Departments, particularly with those for the DPWC and itssub-agencies (including BPH). Implementation of the measures will requireoutside technical assistance, which is part of the proposed highway project.

Headquarters Organization,_(Page 4)

(a) Establish the Post of Chief Administrator: To separateclearly technical and administrative functions, the Administrator should beresponsible for all administrative divisions within the BPE. He should beon the same level as the Chief Engineer and should report directly to theDeputy Commissioner or the Commissioner.

(b) Detach Internal Audit and Legal Services: These shouldbecome staff offices reporting directly to the Deputy Commissioner orCommissioner and should not continue to operate as two of many administra-tive and technical divisions.

(c) Reduce the Present Number of Administrative Divisions: Thepresent six administrative divisions should be consolidated into two orthree divisions with the following functions:

(i) Administrative;(ii) Accounting and Finance; and(iii) Personnel.

(d) Reduce the Present Number of Technical Divisions: Thepresent nine technical divisions should be consolidated into six with thefollowing functions:

(i) Programming and Planning;(ii) Design;(iii) Construction;

(iv) Maintenance;(v) Materials and Research; and

(vi) Equipment and Workshops.

ANNEXPage 2

Field Ormanization

(a) nReorgaize Regional Offices: These offices (presentlynamed divisions) should have six sections:

(i) Administration;(ii) Design;(iii) Construction;(iv) Maintenance;(v) Materials; and(vi) Equipment and Workshops.

Thes,e sectioas should be staffed and equipped to cater to expected workloadin different regions. In this respect, design activities should be con-centrated At regional level and not within districts, as at present. Toallow Regional Offices to function efficiently, their authority and respon-sibility should be extended to the maximum presently allowed (AdministrativeOrder No. 2, 1954).

(b) Establish Regional Workshops: Only four of seven regionalworkshops in the ten BPH regions are not operative. Workshops should beestablished in each region with staff and facilities commensurate withexpected regional workload.

(a) Refrain from Creating New Highway Districts: The Commissionproposes to rcduce the number of districts from 110 to equal the number ofprovinces (68); however, as this requires legislation, the Government firstshould refrain from creating new districts.

(d) Separate Highwa Construction and Miaintenance Functionswithin the Districts: Because construction (including betterments andrehabilitation) has in the past been carried out at the expense of main-tenance, these two activities should be separated at district level. Sec-tions should be created for each and equipment permanently assigned formaintenance.

(a) Establish District Workshops: These will carry out normalservicing of equipment, together with minor repairs. M4ajor repairs willbe made at reglonal level.

(f) Introduce Highway Mlaintenance Planning: Planning of allmaintenance activities should be undertaken, based upon expected trafficvolumes, surface type, etc. This skftld be underzaken at all levels(headquarters, regional and distriat) and should form the basis for futureallocation of funds. Maintenance tedhniques also should be reviewed and,where possible, improved.

ANTEXPage 3

(g) Define Lines of Command: Present procedures neither en-courage efficient field operations, nor clearly define authority and re-sponsibility, and it is necessary to establish clear lines of command fromspecialist divisions at headquarters through the appropriate regional sec-tions to the district level.

(h) Reduce Staff and Improve Staff Training Facilities: Refrainfrom engaging additional head office staff except specialists required toimplement the interim measures; generally staff should be reduced to equatewith actual requirements. In the field, positions should be reduced to aminimum. Institute at regional level training facilities for districtstaff, including instruction (both theory and practice) to supervisors,foremen, and artisans.

Timiing and Execution

It is proposed t[hat the above measures will be implemented withthe assistance of a technical assistance team. The team's assignment willbe in the following two phases:

(a) Phase 1 (5 men for 6 months):

(i) review the Commission on Reorganization's latest pro-posals for the BPR and also the BPH's own recommenda-tions;

(ii) prepare a program. for the reduction and merging ofthe administrative and teclhnical divisions;

(iii) review the requirements of individual Regional Officesand prepare a program for setting up (or reducing) theinternal sections;

(iv) estimate the equipment workshop needs for each regionand the necessary facilities to be provided; and

(v) review, similarly, the overall highway maintenanceneeds of the country and prepare a plan for estimatingdistrict needs and implementing the proposed improve-ments in operations.

(b) Phase 2 (11 men for 18 months): This phase will consist ofimplementation of the program prepared with the assistance of the Phase 1team. Emphasis will be placed on improving organizational procedures andoperations at field level and it is expected that three districts will bechosen for pilot schemes.

PHILIPPINESHIGHWAY PROJECT

INTERIM BUREAU OF PUBLIC HIGHWAYS REORGANIZATION MEASURES

COMMISSIONER|

= =~-FINTERNAL AUDI EUYCMISOE LEGAL

CHIEF ADMINISTRATOR HIG CHIEF EHIGHWAYS ENGINEER P

ADMIISTRTION ANDCFINANC PERSONNEL AN LNIGDESIGN MATERIALS

CONSTRUCTION MAINTENANCE EQUIPMENT

10 REGIONAL OFFICES >WITH Z

DlISTRI CT AN D CITY OFFi CES G)ZSOURCE: Mission Proposals X

IBRD-5374(R)

PHILIPPINESHIGHWAY PROJECT

EXISTING BUREAU OF PUBLIC HIGHWAYS ORGANIZATION

.................... ..................................................

SECRETARY FOR PUBLIC WORKSAND COMMUNICATIONS

.C..........S.......... ..................E.

COMMISSIONER

DEPUTY COMMISSIONER|

CHIEF HIGHWAY ENGINEER

SPECIAL SERVICES DIVISIONS SPECIALIZED ENGINEERING DIVISIONS

PROGRAMMING BRDEDSG HGWYElNPESNEL ACCODUNTING INTERNAL AUDIT LEGAL ADMINISTRATION EQUIPMENT AND PLANNING BIG EIN HGWYDSG

BUDGET ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~DEVELOPMENTANDGFNNET MAAEETPROPERTY MAINTENANCE MTRASOEINLNSPROJECTS CNTUTO

10 HIGHWAY ENGINEERINGFIELD DIVISIONS (REGIONS)

ABOUT 11 DISTRICTS lAND 5 CITY OFFICES PER DIVISION IBRD 5375

SOURCE: Bureou of Public High-oy ond UNDP Consultorts.

iu8S 1220 1l40i~~~~~~~~~~~~~~~~~~~~~~~~~~

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NOVEMB Ee 1970 22I 3418

NOVEMBER 1970 IBRD 3789