Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 4504-PH

STAFF APPRAISAL REPORT

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

October 26, 1983

Projects Department, Agriculture II

East Asia and Pacific Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENCY

US$1.00 Pesos (P) 14.00P1.00 = US$ 0.07

REPUBLIC OF THE PHILIPPINES

FISCAL YEAR

January 1 - December 31

ABBREVIATIONS

AIP - Annual Investment ProgramBFAR - Bureau of Fisheries and Aquatic ResourcesBFD - Bureau of Forest DevelopmentCDW - Community Development 'WorkerCVRPO - Central Visayas Regional Project OfficeFAO - Food and Agricultural Organization

(of the UN)FNP - Food and Nutrition PlanFSI - Forest Stand ImprovementGDP - Gross Domestic ProductGRP - Gross Regional ProductGSRC - Government Survey and Reorganization

Commiss ionIAD - Integrated Area DevelopmentIBRD - International Bank for Reconstruction

and Development (World Bank)ICB - International Competit:ive BiddingIRP - Integrated Reorganization PlanLCB - Local Competitive BiddiLngMA - Ministry of AgricultureMB - Ministry cf BudgetMCO - Municipal Coordinating OfficerMDO - Municipal Development OfficerMNR - Ministry of Natural ResourcesMPWH - Ministry cf Public Works and HighwaysNACIAD - National Council on Integrated Area

DevelopmentNEDA - National Economic and Development

AuthorityNFA - National Food AuthorityNFAC - National Food and Agricultural

Council

FOR OFFICIAL USE ONLY

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NIA - National Irrigation Administration

NPV - Net Present ValueNRO - NEDA Regional OfficePCA - Philippine Coconut AuthorityPCO - Provincial Coordinating OfficerPCR - Philippine Commission for Reorganization

PDC - Provincial Development CouncilPDO - Provincial Development OfficerPEO - Provincial Engineer's OfficePPF - Project Preparation FacilityRBFAR - Regional Office of the Bureau of

Fisheries and Aquatic ResourcesRBFD - Regional Office of the Bureau of

Forest DevelopmentRDC - Regional Development CouncilRDIP - Regional Development Investment Program

RFORI - Regional Office of the ForestryResearch Institute

RMA - Regional Office of the Ministry ofAgriculture

RPO - Regional Projects OfficeSCF - Standard Conversion FactorSMU - Site Management UnitSOE - Statement of ExpenditureT&V - Training and VisitUNDP - United Nations Development Program

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

PHILIPPINES: CENTRAL VISAYAS REGIONAL PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Page No.

I. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . 1

Introduction .... . . . . . . . . . . . . . . . . . . . 1Rural Sector. . . . . . . . . . . . . . . . . . . . . . . . 1Support Services and Institutions . . . . . . . . . . . . . 2Government Objectives and Strategy . . . . . . . . . . . . 4Experience with Past Lending . . . . . . . . . . . . . . . 4

II. REGIONALIZATION . . . . . . . . . . . . . . . . . . . . . . . 5

Historical Background .... . . . . . . . . . . . . . . . 5Present Situation .... . . . . . . . . . . . . . . . . . 7Planning and Development. . . . . . . . . . . . . . . . . . 7Central Visayas (Region VII) . . . . . . . . . . . . . . . 9

III. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . 10

A. Preparation . . . . . . . . . . . . . . . . . . . . . . . 10B. Objectives . . . . . . . . . . . . . . . . . . . . . . . 12C. Detailed Features .12

Watershed Management. . . . . . . . . . . . . . . . . . 13Upland Agriculture. . . . . . . . . . . . . . . . . . 13Social Forestry .13Nearshore Fisheries .15Infrastructure. . . . . . . . . . . . . . . . . . . . 16

Support Services .18Institution Strengthening . . . . . . . . . . . . . . 18Regional Office of the Ministry of Agriculture . . 18Regional Office of the Bureau of ForestDevelopment . . . . . . . . . . . . . . . . . . . 18

Regional Office of the Bureau of Fisheriesand Aquatic Resources . . . . . . . . . . . . . .

Regional Projects Office . . . . . . . . . . . . . 19Training and Technical Assistance . . . . . . . . . . 19Research. . . . . . . . . . . . . . . . . . . . . . . 19

Project Preparation . . . . . . . . . . . . . . . . . . 20

This report is based on the findings of an appraisal mission in November1982, consisting of David Parbery, Wayne Ringlien, Robert Hindle, AbateMenkir, Takeichi Ishikawa, and Robert Hecht (Bank); Bill Bilbo and PhilipPryke (consultants).

Page No.

IV. PROJECT COST AND FINANCING .. . ..... ...... . .. 20

Cost Estimates . . . . .. . . . . . . . . . . . . . . . . 20Financing . . . . . . . . . . . . . . . . . . . . . . . 20Procurement . .. . . . . .. 22Disbursement. . . . . . . . . . . . . . . . . . . . . . . 24Accounts and Audit . . ,, ... . . . . . ....... . 25

V. ORGANIZATION AND MANAGEMENT ... . . . . . . . . . . . . . 25

Regional Development Council . . . . . . . . . . . . . . 26Regional Project Office . .. .26Site Management Units. .. . . .27

Client Associations . . .. . . . . . . . . . . . . . . . . 28Regional Office of BFD . . . . .. 29

Regional Office of MA .. . . . . . . . . . . . . . . . . 30Regional Office of BFAR . .30Provincial Engineers' Offices . . . . . . . . . . . . . . 30

VI. PRODUCTION, MARKETING AND PRICES . . . . . . . . . . . . . . 31

Production . . . . . . . .31Marketing . . . . . . .37Prices . . . . . . . . .40

VII. BENEFITS, JUSTIFICATION AND RISKS . . . . . . . . . . . . . 41

Benefits . . . . . . . . .41

Environmental Impact . . . . . . . . . . . . . . . . . . 44Justification . .. . . . ... 44Risks ... .. 46Cost Recovery .. . .. 47

VIII. AGREEMENTS TO BE REACHED ANI) RECOMMENDAT:[ON . . . . . . . . 47

TABLES IN THE TEXT

4.1: Project Cost Summary . . . .. . ........ . . . . . . . 214.2: Project Financing by Activity . . . . . . . . . . . . . . . . 236.1: Project Stewardship Contracts by Site and Year . . . . . . . 326.2: Project Participant Families by Site . . . . . . . . . . . . 346.3: Incremental Production from Upland Agricu:Lture at Full

Development . . . . . . . . . . .. . . . . . . . . . . . 35

7.1: Family Income by Production Model . . . . . . . . . . . . . . 427.2: Summary of Rate of Return Analysis . . . . . . . . . . . . . 44

Annex 2, Table 1: Land Classification and Popu:Lation, ProjectSites . . . . . . . . . . . . I . . . . . . . . . . . . . . . . 55

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ATTACHMENT

1. Procurement Arrangements

ANNEXES

1. Regional Development Investment Program2. Regional and Project Setting3. Training and Technical Assistance4. Estimated IBRD Disbursements5. Project Implementation Schedule6. Input and Output Prices7. Economic Analysis8. Related Working Papers in the Project File

MAPS

IBRD #17219IBRD #17031IBRD #17032IBRD #17033

I. BACKGROUND

Introduction

1.01 The Government of the Philippines has requested the Bank's assis-tance to finance a project which forms the first part of a regional devel-opment investment program in Central Visayas. The project is designed toraise rural incomes in four poor watersheds in this relatively backwardregion through the establishment of systems of resource management. Thesewould include rehabilitation and conservation, to arrest degradation of thefarming, forest and fishery resources in upland and nearshore habitats. Itwould also support institutional changes to help implement Government'spolicy of decentralization of responsibility for programs of economicdevelopment.

Rural Sector

1.02 Agriculture is the predominant sector in the Philippine economy,accounting for about 30% of gross domestic product (GDP), 60% of foreignexchange earnings and over half the total employment. Although agricul-ture's share of GDP is falling, food production rose during the 1970s at anaverage of 7% p.a. This was achieved by the introduction of high yieldingcrop varieties and technical packages coupled with improved extension andfarm credit and, to a lesser extent, irrigation. Most of these initiativeswere directed at rice and corn production, which together account for aboutone third of the value of agricultural production, two thirds of ruralemployment, and over half of the cropped area.

1.03 Rice is the primary staple of over 80% of the population, andaccounts for about 30% of the cropped area. The Masagana 99 program, whichwas launched in the early 1970s, played a significant role in helping thecountry achieve rice self-sufficiency in 1977. Since then, the Philippineshas exported small quantities of rice each year except in 1981, when adverseweather and lower prices limited production to about the level ofconsumption.

1.04 Corn is the primary staple of a sixth of the population and themain feed component for the livestock industry. A recent breakthrough indeveloping varieties resistant to downy mildew offers the prospect that cornyields, now among the lowest in Asia at under one ton per ha, might riseenough to eliminate the growing need for corn imports, and eventuallyprovide some exports.

1.05 Coconut and sugarcane are the third and fourth most importantcrops, both major foreign exchange earners whose profitability andproduction depend on world prices which fluctuate widely and are currentlydepressed.

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1.06 About 70% of the country's population lives in rural areas, wherenearly two thirds of the households depend on small farms for most of theirincome. About 85% of the 2.35 million farms in the Philippines are smallerthan 5 ha. The average farm size is estimated to be 2.7 ha. About 58% offarmers own their land, 30% are share tenants, and the remaining 12%,excluding squatters, have a variety of tenancy arrangements including lease-holding. About 40% of all rural households subsist below the absolutepoverty income level of US$204 per capita (in 1983 prices).

1.07 Population pressure has r esulted in marginal lands being broughtunder cultivation, and most future increases in production must come fromhigher yields on existing crop land. At present, high prices inhibit theuse of yield-enhancing fertilizers and crop protection chemicals; supportingservices of research, extension, marketing and training are often inade-quate; formal credit is limited and informal credit expensive; and insecureland tenure limits many farmers' willingness or ability to adopt innovationsin production. Higher cropping intensities are also constrained by existinglow yielding crop varieties and inadequacy of water from rainfall orirrigation. A large part of the agricultural area consists of sloping landof marginal quality which, together with the current exploitive land usepractices, is reducing productivitvy even further.

Support Services and Institutions

1.08 Both the private and public sectors are actively involved inserving the farming sector through the provision of inputs and services.The private sector imports, produces, and distributes fertilizers, pesti-cides, feedstuffs and veterinary supplies, which are distributed by morethan 2,000 licensed dealers through retail outlets in every municipality ofthe country. Some dealers advance credit for farm inputs and others providetechnical advice, including farm trial plots. The private sector also playsthe major role in purchasing, processing, and diistributing marketed farmproduce. Even when government commodity agencies exist, such as thePhilippine Coconut Authority, private traders often act as intermediariesbetween farmers and the agencies. Private rural banks, often owned bylocal residents, provide about 12% of farm production credit.

1.09 The public sector is actively involvecl in policy planning andimplementation, research and training, and agricultural extension. Withinthe Government, responsibility for the agricultural sector is divided amongseveral ministries and other agenci-es not under the direct control of theprincipal sector ministries. There is an urgent: need to rationalize themultiple ministries, agencies and committees involved in the sector anddelineate responsibilities, roles and tasks in order to avoid duplication ofservices.

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1.10 The Ministry of Agriculture (MA) is primarily responsible forcrops, soils, livestock, applied research and extension services; productionof improved seed, plant material and animal breeds; plant and animal diseasecontrol; and farmer cooperatives. In accordance with the policy of decen-tralizing government services, 12 regional offices of MA were created in1980 to improve services to the regions./I The Ministry has five relatedagencies /2 under administrative supervision, and another 12 attachedagencies /3 whose role is to promote crop production or control aspects ofagricultural development. The Minister chairs a coordinating body, theNational Food and Agricultural Council (NFAC) which, since its inception in1969, has been the implementor of food self-sufficiency programs such asMasagana 99 (rice) and Maisan 77, 99 and 22 (corn), Gulayan sa Kalusugan(vegetables), Bakahyong Barangay (Carabeef), Gatasang Barangay (dairy), andBiyayang Dagat (blue revolution). Late in 1981, it was mandated to execute anew national rice and corn production program (Maisagana).

1.11 The Ministry of Natural Resources (MNR) is responsible forforestry, fisheries, lands and mining. Responsibility for the control offorest resources, reforestation and forest management rests with the Bureauof Forest Development (BFD). Responsibility for fisheries is vested in theBureau of Fisheries and Aquatic Resources (BFAR) for regulation, research,extension and statistics. Land surveying and classification are theresponsibilities of the Bureau of Lands. Unlike MA, the Ministry has notbeen reorganized regionally. However, its Bureaus all have regionaloffices. Besides its Bureaus, MNR also has six agricultural agencies /4attached for policy and program coordination.

/1 Authorized by Presidential Decree No. 1579, June 1978. Responsibilitiesare set out in MA Administrative Order No. 2, Series of 1981.

/2 Green Revolution Expanded Program Action Committee, LivestockDevelopment Council, National Artificial Rain Stimulation Committee,National Food and Agricultural Council, and National Meat InspectionCommission.

/3 Abaca Industry Development Authority, Coconut Investment Company,Fertilizer arid Pesticide Authority, Pagkian ng bayan National AdvisoryCouncil (Food for the Needy), Philippine Agricultural Training Council,Philippine Cotton Corporation, Philippine Dairy Corporation, PhilippineTobacco Administration, Philippine Training Center for Rural Develop-ment, Philippine Virginia Tobacco Administration, Philippine VirginiaTobacco Board, and Presidential Committee on Agricultural Credit.

/4 Commission on the Settlement of Land Problems, Fishery IndustryDevelopment Council, Forest Research Institute, Natural ResourcesDevelopment and Management Council, Philippine Fisheries DevelopmentAuthority, and Presidential Committee on Wood Industries Development.

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1.12 The Ministry of Agrarian Reform carries; out the country-s ruralreform program applicable to rice and corn land. The development, operationand maintenance of all national irrigation systems in the Philippines is theresponsibility of the National Irrigation Administration (NIA), a governmentcorporation organized under the Ministry of Public Works and Highways(MPWH). The organization of communal irrigation schemes is the jointresponsibility of the Farm Systems Development Corporation, which answers tothe Ministry of Human Settlements, and NIA. The National Food Authority(NFA) acts as a residual buyer of grains, and through Food Terminal Inc.,its wholly owned subsidiary, also handles other food commodities such asvegetables, poultry, eggs, fish, oil, sugar and milk. It has a mandate tostabilize food prices, maintain food reserves and control grain imports andexports. NFA is under the Office of the President and the administrator hasministerial rank. Other important bodies under the President's Office arethe Philippine Coconut Authority (PCA) and the Philippine Sugar Commission.Formerly, each of these organizations received funds from industry levieswhich enabled them to operate independently of the ministries although,recently, depressed copra prices have changed the status of PCA.

Government Objectives and Strategy

1.13 The Government-s latest (1983-87) five-year development: plan setsgeneral objectives of high growth, greater resource mobilization, reducedincome disparities and improved environmental quality. All of these applyto rural development, but specific goals most relevant to the agriculturalsector are poverty reduction, continued rice self-sufficiency and morediversified agricultural production. These goals are closely interlinked,since policies aimed at achieving one goal inevitably affect the others.Recognizing this, the Government has placed most of its agricultural sectorinvestments in infrastructure-building to support the broadest range ofeconomic activities, while launching specific programs to address particularproblems. The specific programs include land tenure reform, crop research,and a wide range of crop production programs combining credit, input supplyand/or technical support. The infrastructure investments emphasize ruralelectrification, irrigation and roads.

Experience with Past Lending

1.14 A total of 38 loans and credits have been granted to thePhilippines for investments in agriculture, fisheries and rural development.Of these loans, 12 were for irrigation development or rehabilitation andanother 12 were for agricultural credit. The current rural portfolio willcomprise, by the end of 1983, 20 projects including seven for areadevelopment, five for irrigation, three for support services, two foragricultural credit, and three others for watershed management, fisheriesand treecrops.

1.15 The experience with lending for agriculture has been mixed. Thelending portfolio has reflected well the major objectives and priorities ofnational development plans./l Developments in irrigation have been posi-tive, including the establishment of a strong institution (NIA) and anexpansion of irrigated crop lands. In credit, operations have been largelysuccessful in providing funds for onfarm investment, but serious institu-tional and loan recovery problems remain. Ongoing area development projectssuch as Mindoro Rural Development (Loan 1102-PlH), Land Settlement I (Loan1421-PH), Samar Island Rural Development (Loan 1772-PH), and RainfedAgricultural Development (Loan 1815-Pll) have encountered implementationdelays due to problems of interagency coordination and lack of authority atthe local level but, nevertheless, appear likely to attain their objectives.

II. REGIONALIZATION

Historical Background

2.01 Regionalization in the Philippines dates back to 1954 when theGovernment Survey and Reorganization Commission (GSRC) was established. Oneof its plans, adopted in 1956 but never fully implemented, divided thecountry into eight administrative regions to promote decentralization ofgovernment functions. During the 1960s, several development authoritieswere created to implement regional and subregional projects, but control oftheir operations remained largely centralized in Manila.

2.02 In 1968, a major reorganization of Government resulted in replace-ment of the GSRC by the Philippine Commission on Reorganization (PCR) whichproduced the Integrated Reorganization Plan (IRP) enacted into law inSeptember 1972 under Presidential Decree No. 1, the first decree to besigned by the President after the imposition of martial law earlier in themonth. The plan provided for the creation of a National Economic andDevelopment Authority (NEDA) to be responsible for national economicplanning and for implementing the regionalization program set down in theIRP. The NEDA took over the functions of the National Economic Council, thePresidential Economic Staff, and various ad hoc entities and councilsinvolved in economic planning, all of which were abolished.

2.03 Many factors were considered in defining the regions and selectingregional centers including geographic, economic, ethnic, demographic and

/1 Sector Operations Review: Agricultural and Rural Development Programin the Philippines. Operations Evaluation Department Report No. 3796.February 10, 1982.

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political characteristics. In 1970, PCR recommended ten regions. However,the number was increased to 11 when the draft IRP was presented to Congressand PD No. 1 described 11 regions. The number increased to 12 in 1975 withthe creation of Southern Mindanao (Region XII). In 1976, the regions wereincreased to 13 with the division of Region IV into Metro Manila (Region IV)and Southern Tagalog (Region IV-A). Subsequently, in 1978 Region IV becamethe National Capital Region, and Region IV-A became Region IV. The 12regions, excluding the National Capital Region, comprise 73 provinces and 56cities.

2.04 The NEDA was regionalized as soon as it was formed and itsRegional Development Staff set up Regional Development Councils (RDCs)during the period 1973-75. The functions and membership of the RDCs weredescribed in Letter of Instruction (LOI) No. 22./1 They were established tofacilitate regional planning and representation in lawmaking bodies,/2 andto coordinate all planning and programming activities of local and nationalbodies at the regional level.

2.05 Regionalization required Ministries to establish regional officeswith adequate powers to act over a wide range of administrative mattersdesigned to improve public services. Regionalization was also designed tomake the regions focal points for planning and development and to encourageidentification of projects at the local level for incorporation intonational programs. In 1976, a system of regional budgeting was institutedto provide a link with regional planning. It provided that regional officesdevelop their budgets to conform with RDC priorities, and that the Ministryof the Budget (MB) advise the RDC of budgetary releases to regional offices.The RDCs were strengthened in 1977 and 1978 when additional budgetary andadministrative powers were transferred to them.

2.06 A major political innovation in 1978 was the adoption of regionalrepresentation in the national lawmaking body, the Batasang Pambansa.

/1 Current RDC membership comprises provincial governors; chartered citymayors; assemblymen; regional directors of the Ministries of AgrarianReform, Agriculture, Education, Health, Human Settlements, Labor, LocalGovernment, Public Works and Highways, and Social Services; President ofthe Barangay Captains- Association; Commander of the PhilippineConstabulary; General Managers of regionally located developmentauthorities; and a NEDA representative. A smaller Executive Committeedeals with operational aspects of regional planning and budgeting. RDCmembership reflects the Board composition of NEDA Central.

/2 Subsequently, in 1981, the judiciary was reorganized into 13 regionalcourts under the Judiciary Reorganization Act of 1980.

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Representatives sit on the RDCs as invited members. Subsequently, theSangguniang Pampook or Regional Assembly, and the Lupong Tagapagpaganap ngPook or Regional Executive Council, were created in the newly declared"autonomous" Regions IX and XII in deference to their special ethnic andreligious characteristics. The Assemblies are designed to exercise legis-lative power and the Executive Councils act as the executive arm of regionalGovernment. The two Councils were merged in 1982. The administrativestructure in the two "autonomous" regions, and the emergence of the NationalCapital Region, based on the older Metropolitan Manila Commission, indicatedby their respective statutes some characteristics of local governmentsincluding the power to tax.

Present Situation

2.07 At present, there are 15 ministries /1 with ministry-wide regionaloffices. An additional four ministries /2 havTebureau-wide regionaloffices. Two others /3 have partial regional representation. Surveys in1975, 1977, 1978, and 1981, administered by PCR, have indicated that"regionalization" is interpreted differently in the various ministries andthat stipulated administrative powers have not been fully delegated in mostcases. The Government is urging that the designated powers be fullydelegated, and that additional administrative powers for the regionaldirectors be implemented during 1983, including more direct budgeting,contracting, accounting, and staff control.

2.08 The Ministry of Budget (MB) has been requiring ministries toidentify their programs on a regional basis. In 1977, MB initiated regionalbudget hearings wherein regional offices of national government agenciespresented their proposals together with RDC comments. Currently, about 30percent of the national budget is designated for regionally formulatedexpenditure.

Planning and Development

2.09 With assistance from a Bank-executed UNDP-financed technicalassistance project,/4 the NEDA produced in 1977 the first national and

/1 Agrarian Reform; Agriculture; Budget and Management; Education, Cultureand Sports; Health; Human Settlements; Labor; Local Government; MediaAffairs; National Defense; NEDA; National Science-and TechnologyAuthority; Public Works and Highways; Social Services and Development;and Trade and Industry.

/2 Finance, Justice, Natural Resources, Transportation and Communications.

/3 Tourism and Muslim Affairs.

/4 NEDA-UNDP/IBRD Technical Assistance Project on Regional Planning andDevelopment, 1975-present.

regional five-year, 10-year and year 2000 development plans. The Governmentand the Bank agreed in 1977, to formulate a regional development program forthe Central Visayas (Region VII). As a result, Region VII became a pioneerarea for regional development. In line with methodology stipulated in thefive-year plan, an area development strategy was adopted to formulate aRegional Development Investment Program (RDIP) (Annex 1) which could bereplicated in other regions. The in-country work was supported by a Bankmission in 1978 which set guidelinies for the first Bank-supported regionalproject in the Philippines./l

2.10 As a result of the successful experimental preparation of a RDIPin Region VII, which became the basis for the Central Visayas regionalproject, the President instructed the other regions to prepare similarprograms./2 NEDA, in collaborationl with the RDCs, began preparation of theother RD1Ps during the latter half of 1978 as a means of translating thefive-year regional development plans into projects. Draft RDIPs werecompleted for all 12 regions by thes end of 1980. They are to serve as thebasis for public sector resource a:Llocations to the regions, and alldevelopment activities of the national government, semi-government bodies,and local governments are to be made consistent with them.

2.11 The regional five-year pLans were revised in 1982 for the secondfive-year period (1983-87). The RDIPs are currently being updated and willbecome the basis of future regionaL projects as well as the basis forregional budgeting which is being introduced by MB. In 1981, under a jointNEDA/MB instruction, Annual Investment Programs (AIPs) were defined for eachregion. After RDC approval, the A[Ps were submitted to NEDA central forconsolidation, and to MB for integration into the national budget. RDIPprojects can be submitted for external funding by the Development BudgetCoordinating Committee of MB, as is the case for Central Visayas.

2.12 Despite the progress noted above, the RDCs remain limited in theirinfluence over regional development as they have no supervisory authorityover the regional offices of line agencies, local governments or statutorybodies operating in the regions, such as the National Council on IntegratedArea Development (NACIAD), nor do they have substantial budget resources oftheir own to fund projects. They do, however, receive small allocationsfrom the Regional Development Fund - a line item in the national budgetwhich so far has not received significant funding. At the present time, theGovernment is considering a linkage between the RDCs and NEDA with the Prime

/1 The Philippines: A development strategy and investment priorities forthe Central Visayas (Region VII). Two volumes. World Bank ReportNo. 2264-PH. January 4, 1979.

/2 Adopting the Regional Development Investment Program as the implementingframework of the Five-Year Regional Development Plan. PresidentialExecutive Order No. 589. April 19, 1980.

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Minister's Office, created after the 1978 national election, through aCouncil of RDC Chairmen. They would be redesignated as RegionalCommissioners or Administrators with enhanced powers, to be jointly respon-sible for overall coordination of regional planning and development. Thealliance would also incorporate NACIAD which transferred to the PrimeMinister's Office during 1982.

Central Visayas (Region VII)

2.13 The Central Visayas Region comprises the island provinces of Cebu,Bohol, Siquijor, Negros Oriental (eastern Negros) and a number of smaller,minor islands (Map #17219). The Region has a limited agricultural potentialdue mainly to its rugged and inaccessible topography, but possesses exten-sive mineral reserves (Annex 2): 27% of the nation's copper, substantialdeposits of limestone and clay suitable for cement, and coal. The Regionaccounts for only 6% of the total national gross value added in agriculture(including fisheries and forestry), but 26% of the gross value added inmining and quarrying. Agriculture's share of gross regional product (GRP)has dropped from 25% in 1978 to 20% in 1980, while the industrial sector'sshare has increased from 30% of GRP in 1978 to 34% in 1980. The share ofGRP contributed by services has remained static at around 45%.

2.14 Over the years, the pattern of land use in the Central Visayas hasbeen characterized by insecurity of tenure which leads to short-term,low-cost production strategies, and inequities due to conflicting policiesof government agencies regarding land allocations for fish ponds, grazingand logging. In turn, this has led to deterioration of the natural resourcebase and perpetuated poverty for thousands of settlers on forest land,uplands, and nearshore areas - constituting 46% of the Region's area.

2.15 The Region has pioneered a land stewardship program under whichleases are granted to present land occupants. Stewardship contracts providesettlers with security of tenure, for 25 years extendable to 50, on condi-tion of compliance with a resource management plan, which would be evaluatedperiodically. To support the stewardship policy, larger scale concessionson public lands within the Region for fish ponding, timber cutting andgrazing have become more difficult to obtain.

2.16 The concept of land stewardship for the occupants of public landswas developed during the preparation of the proposed project. It builds onthe existing forest occupancy management program, and received so muchfavorable attention at the national level that the President ordered anational stewardship program. The regional office of the Bureau of ForestDevelopment (RBFD) has drafted an administrative order for issuingstewardship contracts, as part of the Region's innovative "Integrated SocialForestry Program."

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2.17 The Bank's review of poverty in the Philippines /1 identified theRegion as the second poorest (after Region X - Northern Mindanao) having anaverage poverty incidence /2 of almost 60% in 1975, with urban poverty at52.5% and rural at 62.6%, compared with 45%, 40% and 47.5%, respectively,for the country as a whole. The Region ranks among the poorest in thePhilippines in terms of per capita distribution of arable land and agricul-tural productivity. For these reasons the Region was chosen in 1977 by thenational Government for implementation of the nation's first regionalproject. Northern Mindanao has been nominated as the second.

III. THE PROJECT

A. Preparation

3.01 The Central Visayas Regional Project (CVRP) was conceived origi-nally as a single, multi-sectoral investment program in support of the RDIP.In early 1981, it was agreed that the project should be processed as twoseparate, but related, rural and urban projects. Technical preparationof the rural project began in 1981 following the creation of the CentralVisayas Urban and Rural Project Office,/3 the first region-based projectpreparation unit to be established in the Philippines.

3.02 The preparation of the rural project continued from mid-1981through 1982, when a report /4 was presented to the Bank. Preparation wasfinanced in part by a US$500,000 Project Preparation Facility (PPF) advance(PO36-PH) from the Bank. A work plan for pre-implementation, betweenappraisal and loan effectiveness, is being financed in part from a secondPPF advance (P055-PH) of US$500,000. Preparation of the urban project isbeing funded in part from a US$8 million Engineering Loan (Ln 2067-PH) andappraisal is scheduled later in 1983.

/1 Aspects of poverty in the Philippines: A Review and Assessment.World Bank Report No. 2984-PH. December 1, 1980.

/2 Poverty incidence was measured against poverty lines based on the 1975family income and expenditure survey: rural poverty line at e 827 percapita, and urban poverty line at P 1,103 per capita.

/3 Presidential Executive Order No. 694 creating the Central Visayas Urbanand Rural Projects Office and providing funds thereon, May 21, 1981.

/4 Philippines: Central Visayas Resource Management Project. ProjectPreparation Report. Four Volumes. CVRPO. September 9, 1982 (ProjectWorking Paper No. 10).

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3.03 Preparation of the rural project was assisted by three FAO/IBRDCooperative Program missions which visited the Region in January/Februaryand June/July, 1981 and May/June, 1982. The project's lengthy preparationperiod can be attributed to the innovative nature of the work, the lack ofproject preparation capability in the Region which had to be developed fromscratch, and the slow resolution of disagreements among regional andnational entities as to what should constitute the "regional project."

3.04 Initially, the rural project was to be region-wide, benefitingeach municipality (Annex 1). However, it became apparent that resourceswhich could realistically be mobilized were not sufficient to support aregion-wide program. Regional needs were scrutinized and a modified andcurtailed area approach was adopted focused on the watershed, i.e. onsmall farmers, particularly forest and upland occupants, and nearshorefishermen in distinct units.

3.05 The original project proposal covered 12 watershed sites in thefour provinces of Cebu, Negros Oriental, Bohol and Siquijor. The sites hada total area of 265,000 ha and a population of 400,000 with implementationscheduled over six years. Owing to budgetary constraints and therealization that the proposed new procedures for regional development needtesting, the Government reduced the initial project to five sites. However,the Government has requested that the remaining seven sites be considered ina subsequent project after the first has been evaluated.

3.06 The revised project is based on the following principles:

(a) a burgeoning population's demand for food and raw materials hasoutpaced the ability of the soil, forest and marine habitats toregenerate their productive capacities; the system needs to bechanged from exploitive to self-regenerative and the project'sproduction models have been developed accordingly;

(b) the maintenance of sustained yields over time requires thatproducers have secure tenure over their production units. Theproject's concepts of 50-year stewardship contracts andsmallholder forest operations are designed to meet thisrequirement; and

(c) resource management practices and their delivery must be respon-sive to the socioeconomic needs of project participants andappropriate to the biophysical conditions of the sites. Toachieve integration at the farm level, and because the Regionhas a limited agricultural resource base, but a substantialforestry and fisheries potential, the watershed was chosen asthe planning unit rather than the municipality. The project isto be managed by units located on the sites, easily accessibleto participants, and responsive to local needs and priorities.

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B. Objectives

3.07 The project, on a pilot scale, addresses the two most importantrural problems in the Region: declining productivity in upland and near-shore areas due to continuing environmental degradation, and the associatedpoverty of the rural population. It is intended to demonstrate "replica-bility" for adoption elsewhere in Region VII, and in other Regions.Strengthening the resource management capabilities of both Government andsmall farmers and fishermen would be part of the first phase of a long-termregional development program which aims to develop institutional capabilityfor project development and management.

3.08 Specifically, over a five-year invastment period beginning inFY84, the project would:

(a) raise the incomes and living standards of poor, small-scaleproducers in project areas, particularly upland farmersand artisanal fishermen;

(b) improve the management of the forest, upland, and nearshorehabitats in these areas, both by arresting the rapid degradationof the environment and augmienting the resource base; and

(c) reinforce the Government's regionalization program, set out in

the IRP (para. 2.02), to ensure greater administrative andbudgetary autonomy for the Region, direct and timely flow ofdevelopment funds, maximum financial accountability by projectmanagers and staff, and maximum participation by localofficials and beneficiaries.

3.09 The project would improve the tenure status of upland occupants,facilitate construction of upland conservation works and upgrade agrofores-try, agricultural, livestock and fisheries production systems. Access roadsand trails would be constructed or upgraded. Support institutions would bestrengthened and the project would fund specialized training, technicalassistance and research in support of the production activities, and prepar-ation activities for future projects.

C. Detailed Features

3.10 The project would be implemented in five sites (Map #17031),consisting of watershed managment programs in each of four provinces and asocial forestry site in Negros Oriental Province. The sites involve a totalland area of 140,000 ha, a coastline of 200 km and a population of about200,000 (Annex 2). Project sites were selected according to provincialdevelopment priorities, relative poverty of inhabitants, degree of ecologi-cal degradation, development opportunities including public land availabil-ity, and attitudes of the people toward development.

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Watershed Management (US$20.4 million)

Upland Agriculture

3.11 The component is designed to develop and manage four watersheds/iand create within the Region the institutional capability to plan anddevelop others. A major goal is to assist upland farmers in a transforma-tion from shifting cultivation of annual crops which causes serious soilerosion to stable systems utilizing perennials, livestock and reduced annualcropping by offering them security of tenure over their land.

3.12 Farm systems would be introduced to control soil erosion, increasesoil water retention, boost soil fertility, intensify land use, increaseperennial and annual crop production, and increase livestock production.Planting materials and livestock would be the main investment items but handtools and small quantities of agricultural chemicals would be included(Annex 8 - Working Paper No. 8, Table 1, and Working Paper No. 1).

3.13 Nurseries established under the project would supply plantingmaterial for appropriate and profitable crops which fit the overall water-shed management approach. Perennial tree crops such as ipil-ipil, mango,jackfruit, cashewnut, and avocado would be promoted. Planting materialwould be provided as payment in-kind for soil conservation and replantingwork according to farm development plans conceived with, and supervised by,project technical staff. Farmers would also be paid in-kind by the provi-sion of young cattle and goats once adequate shelter and fodder reserveshave been established. About 11,600 cattle and goats would be distributedunder the project. As the value of the in-kind payments is equivalent tothe economic value of the work undertaken, there is no implied subsidy tofarmers.

3.14 Management units would be established at each site includingbuildings, equipment, vehicles, staff, travel, materials, maintenance,consultancies and contracts (Annex 8 - Working Paper No. 8, Table 2). Eachunit would include 4 to 5 ha for buildings, a plant nursery and stockholding facilities.

Social Forestry

3.15 The social forestry site is under government control and had astable population of approximately 450 occupant families before the timberlicense agreement was cancelled in 1979, when approximately 750 slash-and-burn farmers (kaingin) entered the forest and claimed land. Furtherincursions have occurred subsequently. The influx has resulted in thedenudation of forests areas and reforestation blocks. Illegal forestoccupants are destroying logged-over areas which are drier and burn readily.

/1 Watershed is defined as the river system, from its land source to itssea outlet.

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3.16 A timber evaluation study of the site showed that about 750 ha ofvirgin forest and 8,000 ha of logged-over area remain and need to be main-tained, although an additional 7,153 ha have already been converted to opencogon grassland. The soils are relatively shallow, derived from volcanicand sedimentary rocks. Occupants farm small plots, and gather secondaryproducts from the remaining forest. They are poor and social unr est hasbeen a growing problem since the late 1970s.

3.17 The main constraint to forest recovery in the open land is theintentional or careless burning of young trees by forest occupants to openup land to meet their subsistence needs. In the past, RBFD has used guardsto dislodge the slash-and-burn intruders from logged-over areas thusreducing fire destruction of reforested areas but this practice incurred thewrath of displaced settlers and is no longer being practiced actively.

3.18 The objective of the social forestry component is to improve liv-ing conditions for poor families occupying government timber land by creat-ing employment and increasing incomes, and to conserve forests by reducingdestruction of logged-over forests and implementing reforestation to preventerosion under land stewardship agreements with Government which offer thesettlers security of tenure over their land. The forestry component has twomain activities: forest stand improvement and reforestation. The firstwould be implemented on the logged-over forest ar-ea of about 8,000 ha whichis beginning to regenerate. The reforestation program would be executed onabout 8,000 ha of grass, brush and cultivated area: about 5,000 ha forreforestation and the balance for subsistence cropping.

3.19 Forest Stand Improvement (FSI). The cutting of virgin forest hasresulted in the rapid growth of weeds, vines and other minor vegetationwhich hamper the growth and development of seedlings and young trees. FSIinvolves the thinning of crowded young trees and the cutting of defective ordeformed trees; the cut wood is used for firewood, lumber and posts. Underthe project, forest stewardship groups, comprised of reforestation partici-pants, would guard against intrusion into the logged-over areas. The groupswould be allocated an area for FSI operations as follows: 8 ha per familyto be worked in stages (1.6 ha annually over five years). Cut wood would beprocessed into firewood, lumber and posts by hand tools and sold, providingan additional incentive for settlers to join the program. In addition toproviding income to project participants, thinning would encourage healthywood growth.

3.20 Reforestation. Each farmer would be allocated 5 ha of open cogongrassland and participants would be organized into forest stewardshipgroups; each participant would be granted a stewardship contract over hisland. A total area of 5,000 ha of open cogon land would be developed. Con-tract planting using individual family labor, and community tree farmingusing communal labor, would be utilized. The project would support invest-ments in seedlings, fertilizer, herbicides, tools and fire preventionequipment (Annex 8 - Working Paper No. 8, Table 3, and Working Paper No. 2).

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3.21 A management unit would be established in the social forestry siteincluding investments in buildings, vehicles, equipment (including that forfire prevention) and materials. Provision would be made for staff salariesand allowances, and maintenance. A tree nursery would also be establishedto service the project (Annex 8 - Working Paper No. 8, Tables 4 and 5). Theunit would provide seedlings and materials. Under community tree farming,the trees planted would belong to the farmers and maintenance would be theirresponsibility. Under the reforestation scheme, intercropping of annualswould be encouraged. The income from planted trees and intercropping wouldbe an incentive to the occupants to prevent fire.

3.22 Under family contract planting, trees would belong to the Govern-ment and the management unit would pay wages to the occupants based on thenumber of seedlings which survive. Responsibility for fire prevention wouldrest with participating farmers, i.e., if young trees were burned, the SMUwould recover their cost, so participants would have an incentive to main-tain planted seedlings. Planting payment would be made as follows: 70% ofthe labor cost in each year would be paid at planting and 30% would be paidapproximately nine months after planting. Both payments would be based onthe number of trees surviving.

Nearshore Fisheries

3.23 The nearshore fisheries component comprises:

(a) establishment, and allocation of user rights to cooperatingfamilies, of a system of artificial reefs, the technology forwhich has already been tested in the Region, in the watersadjacent to three upland agriculture sites in Cebu, Siquijorand Bohol Provinces and the forestry site in Negros Oriental;

(b) replanting of mangroves, in areas where they have been cleared,and allocating use rights to the replanted areas, at the foursites; and

(c) establishment of coral reef sanctuaries in the four sites.

3.24 The four sites have an aggregate coastline of about 200 km with150 km of fringing reefs, 10,000 ha of mangrove and about 8,000 fishinghouseholds. Some 7,000 bancas (fishing boats), of which 1,570 (22%) aremotorized, operate in the project areas.

3.25 Artificial Reefs. The project would establish artificial reefsover 114 km in the four sites. Use rights would be conferred on full-timemunicipal fishermen, preferably the poorer ones, those without motorizedbancas. Families would be assisted in the siting and construction of reefproduction units so that four families would benefit from each km ofartificial reef. The project would provide reef construction materials, a

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nonmotorized barge suitable for transporting artificial reef modules fromthe beach assembly point to placement locations, a motorized banca with fuelfor towing the barge, construction tools and staff to assist with construc-tion (Annex 8 - Working Paper No. 8, Table 6, and Working Paper No. 3). Eachparticipating family would provide additional labor for establishment andcarry a share of the expense of reef replacement which could begin in thefifth year after placement. Each site and beneficiary would be registeredwith the local municipality under a renewable permit system similar to thatused for stationary fish cages. Permit renewal would depend on theparticipant restoring his part of the reef.

3.26 Mangrove Replanting. About 650 ha in the four sites would bedivided into 2 ha blocks and leased by the Regional Office of the Bureau ofForest Development (RBFD) under stewardship contract to families responsiblefor mangrove replanting. They would 'be paid for their labor and be granteduser rights as incentives to join the program. Again, preference would begiven to full-time fishermen without motorized bancas. Mangrove replantingby families would be supervised by the community development workersaccording to block plans worked out with each family. The project wouldinclude seed collection from existing mangrove areas to provide seedlingsfor replanting.

3.27 Reef Sanctuaries. In conjunction with artificial reef developmentand mangrove replanting, the coastal population would be educated on theimportance of healthy reefs and mangrove stands in restoring and maintainingfish production. After the above programs had been established, probably bythe fourth year of the project, local people would be assisted to identifyand establish sanctuary areas in cooperation with municipal authorities.The project would provide reef marker buoys, anchor wraps and anchors andassist in their placement (Annex 8 - lWorking Paper No. 8, Table 6).

3.28 Subsite management units would be established at the four coastalsites, including investments in buildings, equipment, vehicles, staff,supplies and maintenance (Annex 8 - Working Paper No. 8, Table 7).

Infrastructure

3.29 In order to provide adequate access to the project sites and toservice the upland agriculture, forestry, and nearshore areas scheduled fordevelopment, the project would support investments in rural roads and trails(Annex 8 - Working Paper No. 8, Table 8, and Working Paper No. 4). Therural roads component (Maps #17032 and #17033) of the project includes:

(a) construction of about 97 km of new barangay (village) roadsand the improvement of about 125 km of existing roads underlocal contracts; grading of about 475 km of trails underpiecework contract in the five project sites including thenearshore locations; and maintenance of all project roads,including spot improvement, under force account or contractdepending on local conditions;

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(b) the procurement of equipment, vehicles, materials, and suppliesfor the improvement and maintenance of barangay roads; and

(c) appointment of consultants to assist with route survey, thepreparation of detailed design, and road construction supervision.

3.30 Barangay Roads. The project roads would have gravel surfacedpavement for the operation of medium-sized trucks and light utility vehi-cles. The geometric design standards would be similar to those prescribedfor the Rural Roads Improvement Project (Loan 1860-PH). For the improve-ment of existing roads, the subgrade would be reformed to the original leveland adequately compacted prior to the placement of the gravel surface.Embankment materials for new roads and sections of roads to be improvedwould be obtained from adjacent cuts or from suitable borrow pits. Minordrainage structures would consist of single or multiple reinforced concretepipe culverts. Crossings over major rivers and streams would be on 4 mwide reinforced concrete deck girder bridges of standard spans. The majordrainage structures and bridges would have a free-board of 1 m above theestimated maximum flood water level (within the last 10 years), and would bedesigned and built to comply with MPWH specifications.

3.31 Graded Trails. The project trails would facilitate access fromremote farms and agroforestry areas to roadsides and market centers. Theywould be used by animal drawn carts and sleds for hauling agriculturalproduce and for moving timber to sawmills. The trails would have a minimumwidth of 1.50 m with widened sections of 3.00 m at about 50 m intervals toallow for passing. Density would be about 1.5 to 2.0 km per 100 ha ofagroforestry area.

3.32 Status of Engineering. Road planning, preliminary design studiesand cost estimates were prepared by CVRPO, the Provincial Engineers' Officesand Provincial Development Staff assisted by the FAO/World Bank CooperativeProgram. The project roads were identified and checked in the field inconsultation with prospective users and were classified into three groupsbased on terrain conditions: flat, rolling and mountainous. The followingcriteria were used for road evaluation and selection:

(a) project roads would provide access to roads of equal or betterstandard and would not be less than 2 km in length;

(b) proposed roads would conform with the provincial roaddevelopment program and their service area would not overlap withthose of existing or other planned roads; and

(c) project roads would serve a minimum of two barangays and atotal population of 100 or more per km.

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Support Services (US$7.1 million)

Institution Strengthening

3.33 As part of the support services component of the project, threeexisting regional offices of two Ministries would be strengthened and onenew regional project management office would be established. The RegionalOffice of the Ministry of Agriculture (RMA) would provide soil and livestockservices; the Ministry of Natural Resources' (MNR) Regional Office ofthe Bureau of Forest Development (RBFD) would contribute off-farmreforestation and general regulatory services; and MNR's Regional Office ofthe Bureau of Fisheries and Aquatic R7esources (RBFAR) would stregthen itsregulatory services to control illegal fishing. A new Regional ProjectsOffice (RPO) would be established to manage the project overall.

3.34 The Regional Office of the Ministry of Agriculture (RMA). Bothoff-farm and on-farm soil conservation works, designed to stabilizeerosion-prone areas of the watershed,, would include gully check dams made ofstones and earth, and banks planted to permanent vegetative cover. Theirconstruction would be the responsibility of the management units withtechnical assistance from RMA.

3.35 On-farm works would consist of contouring, including ditches andbunds, the planting of erosion control vegetation and construction of smallcheck dams to reduce water flow according to farm development plans preparedin collaboration with the farmers and the management units. RMA would beprovided funds for buildings and civil works, vehicles, equipment, staff,travel and soil survey materials and operations to strengthen the service(Annex 8 - Working Paper No. 8, Table 9).

3.36 In order to provide livestock, cattle and goats, required underthe project, the Ministry's Ubay sto,ck farm on Bohol Island and the goatbreeding station at Siaton, Negros Oriental Province would be upgraded bythe provision of buildings, utilities, equipment, vehicles, pasture,fencing, yards, supplies and stock (Annex 8 - Working Paper No. 8, Table10).

3.37 The Regional Office of the Bureau of Forest Development (RBFD) -particularly its planning, regulatory and reforestation services - would bestrengthened to participate in the social forestry component of the projectand to develop additional social forestry programs in the Region. It would beprovided funds to reforest land in the watersheds not required fcr forestry oragricultural production. Additional staff, specialized buildings, equipment,vehicles, and related expenditures would be provided under the project (Annex8 - Working Paper No. 8, Table 11). RBFD would also be provided with fiveforest guards and motorized bancas to patrol the 5,000 ha of mangrovewilderness and forest swamp preserve in northern Bohol. Part of the abovereforestation fund would be utilized for tree planting within the mangrovepreserves.

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3.38 The Regional Office of the Bureau of Fisheries and Aquatic Resources(RBFAR) - particularly its regulatory services - would be strengthened tocontrol illegal fishing in the region. The office would be provided equip-ment, staff, fuel oil and travel funds under the project to upgrade theservice (Annex 8 - Working Paper No. 8, Table 12).

3.39 A Regional Projects Office (RPO) has been established within theRegion, under the Prime Minister, to coordinate implementation of the project.It is a new office and would be provided with staff, office equipment andvehicles (Annex 8 - Working Paper No. 8, Table 12). No permanent building isenvisaged at the outset and office space would be rented.

Training and Technical Assistance

3.40 The training and technical assistance component would address tworelated needs within the Region. First, there is a shortage of skilledpersonnel qualified to implement watershed management activities; landoccupants also lack the knowledge and skills needed to adopt and practicethe innovative technology proposed. Second, facilities for training areinadequate to accommodate project requirements.

3.41 The objectives of the training and technical assistance componentare to: improve the skills of project staff, farmers and fishermen, andrelated line agency personnel; strengthen regional training facilities;provide technical assistance and training from outside the Region as needed,and generate additional data from special studies as required to enhanceproject performance.

3.42 Training would cover 22 courses dealing with all aspects of theproject, since it is a major new undertaking, including 9 for project staffand participants, and 13 for related line agency personnel. Study tours andfellowships would be provided to complement project-funded training. Atotal of 12 local study tours tours and 32 fellowships would be offered in11 subjects (Annex 3, Table 1). Consultancies would be provided to assistproject and line agency staff implement the project. The project would fundabout 27 staff-years of consultant time covering all aspects of the work sinceit is the country's first regional project, about one third of which wouldcome from overseas (Annex 3, Table 2), comprising studies on management,agriculture including credit, forestry, fisheries, communal irrigation,socioeconomics, and training materials development (Annex 8 - Working PaperNo. 8, Tables 13, 14 and 15).

Research

3.43 The project would support applied research aimed at improvinglow-input farming systems for the slopes and uplands of the Region. Fundswould be provided to RMA to conduct on-farm trials in the project sites.The Ministry's research focus would be on upland farm systems, including

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annual and perennial crops and livest:ock, and the program would beintegrated with research by the Farm Systems and Soil Research Institute ofthe University of the Philippines at Los Banos which is active in theRegion. Funds would also be providedl RMA to establish an upland researchstation and to complement the Ministry's lowland research facilities onBohol Island which are being upgraded under another Bank-supported project(Ln. 2040-PH: Agricultural Support Services). Forestry research would bestrengthened by funding an expanded program by the Regional Office of theForest Research Institute (RFORI) (Annex 8 - Working Paper No. 8, Tables 16and 17).

Project Preparation (US$6.7 million)

3.44 The proposed loan would include repayment of two advances from theBank's Project Preparation Facility (PPF), which partly funded the prepara-tion and preimplementation of the project. Additional funds would be pro-vided to assist preparation of other regional projects including a possiblesecond phase of the proposed project,, and for preimplementation of the secondCentral Visayas Regional Project (Urban) due for appraisal in FY84 (Annex 8 -Working Paper No. 8, Table 18).

IV. PROJECT COST AND FINANCING

Cost Estimates

4.01 Total project cost is estirmated at US$44.4 million, of whichUS$21.0 million would be in foreign exchange (Table 4.1), and includingtaxes and duties representing about US$1.8 million equivalent (Annex 5,Table 1). Expected price increases over the project period amount to about25% of total base costs plus physica:lL contingencies; project costs reflectprice estimates at the date of loan negotiations (third quarter 1983).Inflation of local costs was estimated at 12.0% for 1984, 8.0% for 1985, and7% through 1990; inflation of foreign exchange costs was estimated at 7.5%for 1984, 7% for 1985 and 6% thereafter. Physical contingencies, at 5% ofbase cost for buildings and 10% for equipment and civil works, have beenapplied but not for on-farm development costs as these are based on actualfarming costs. Consultancies (US$1.4 million excluding contingencies),including about 8 staff-years of overseas and 19 istaff-years of localconsultancies, are required to implemaent the project and are estimated tocost on average about US$10,000 (including international travel andsubsistence) and US$1,700 per month, respectively. Detailed project costsare provided in Project Working Paper No. 8 (Annex 8).

Financing

4.02 The proposed Bank loan of US$25.6 million, including the capita-lized front-end fee of US$0.1 million would contribute 60% of total project

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Table 4.1: PROJECT COST SUMMARY

% ofLocal Foreign Total Local Foreign Total foreign--- (P million) --- -- (US$ million) -- exchange

Water shed ManagementUpland agriculture 63.9 11.9 75.8 4.6 0.8 5.4 15.7

Social forestry 37.3 8.5 45.8 2.7 0.6 3.3 18.6

Nearshore fisheries 11.3 4.8 16.1 0.8 0.3 1.1 29.9

Infrastructure 50.7 97.7 148.4 3.6 7.0 10.6 65.8

Subtotal Watershed Management 163.2 122.9 286.1 11.7 8.7 20.4 42.6

Support ServicesInstitution strengtheningMinistry of Agriculture

Soil services 6.0 2.5 8.5 0.4 0.2 0.6 29.9

Livestock dispersal 11.5 7.3 18.8 0.8 0.5 1.3 38.7

Ministry of Natural Resources 12.5 2.1 14.6 0.9 0.1 1.0 14.3

RBFD 0.3 0.1 0.4 0.1 0.1 0.2 19.3

RBFAR 7.4 2.9 10.3 0.5 0.2 0.7 28.4

Regional Projects Office

Training 4.1 2.4 6.5 0.3 0.2 0.5 37.1

Technical assistance 8.6 11.7 20.3 0.6 0.8 1.4 57.6

Research 13.7 5.5 19.2 1.0 0.4 1.4 28.5

Subtotal Support Services 64.1 34.5 98.6 4.6 2.5 7.1 35.0

Project preparation 14.9 78.3 93.2 1.1 5.6 6.7 84.0

Total Baseline 242.2 235.7 477.9 17.3 16.8 34.1 49.3

Physical contingencies 6.4 12.6 19.0 0.5 0.9 1.4 66.7

Price contingencies 78.8 44.6 123.4 5.6 3.2 8.8 36.2

Total Project 327.4 292.9 620.3 23.4 20.9 44.3 47.2

Front-end Fee on Bank loan /a - 0.9 0.9 - 0.1 0.1 100.0

Total Financing Required /b 327.4 293.8 621.2 23.4 21.0 44.4 47.3

/a Bank loan of US$25.6 million.

/b Figures rounded to nearest US$100,000.

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cost, excluding taxes, and cover the total foreign exchange cost of US$21.0million plus local costs equivalent to US$4.6 million (Table 4.2). Theremaining US$18.8 million would be provided by Government. The partialcoverage of local costs by Bank lending is designed to assist the Governmentat a time of overall budgetary stringency.

4.03 Because of Government's current budgetary constraints, anassurance was obtained at negotiations that the Government (MB) hassufficient funds to begin implementation of the project in 1984. Annualrecurrent costs, subsequent to the project and for which the Governmentwould be entirely responsible after the fifth year, approximate US$3.3million, inclusive of contingencies.

Procurement

4.04 Attachment 1 gives an overview of procurement arrangements forthe various project inputs. Construction equipment for the PEOs to beutilized for road improvement and maintenance (US$0.9 million) and vehicles(US$0.6 million) would be bulked where suitable and purchased throughinternational competitive bidding (ICB) in accordance with Bank guidelines.Eligible domestic manufacturers would receive a preference of 15% of thec.i.f. price of the imported goods, or the import duty, whichever is lower.The Provincial Engineers' Offices (PEOs) would prepare the appropriatespecifications and bidding documents for the construction equipment, and theRPO would prepare documents for the vehicles.

4.05 Equipment (mostly hand tools) for on-site development of farming,forestry and nearshore fisheries (US$1.4 million) as well as plantingmaterials, fertilizers, chemicals, and other materials (US$4.4 million) wouldbe purchased through local competitive bidding (1CB) in accordance withprocedures satisfactory to the Bank; foreign suppliers are well representedin the country and would be eligible to participate. Other equipmentcosting less than US$10,000 per lot but not more than US$150,000 in totalwould be purchased by prudent shopping based on three price quotations.

4.06 Contracts for construction of new secondary roads, trails and stockfarm works (US$8.2 million) and civil works contracts for the constructionof buildings (US$1.4 million) would be awarded under LCB, because the smallsize and dispersed location of the works would render them unsuiltable forICB; however, foreign contractors would not be precluded from bidding.

4.07 The improvement and maintenance of roads and watershed rehabili-tation works would be carried out by, force account because of the remoteterrain, and consequently the problem of attracting contractors to theupland sites. The construction of artificial reefs and nearshore workswould also be carried out by force account to ensure proper implementationof the relatively new technologies. Work carried out under force accountwould be limited to an aggregate amc,unt of US$500,000. Constructionmaterials and supplies would be procured through normal commercial channels.

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Table 4.2: PROJECT FINANCING BY ACTIVITY /a(US$ million)

Government IBRD TotalActivity Amount x Amount % amount

Civil works and buildings 2.3 20 8.8 80 11.1Equipment and vehicles 0.4 10 2.8 90 3.2Production inputs,

livestock and materials 0.7 10 6.0 90 6.7Salaries and allowances 8.3 100 - - 8.3Travel, maintenance and

office supplies 4.3 100 - - 4.3Training and technical

assistance 1.2 40 1.9 bO 3.1Project preparation /b 1.6 20 6.0 80 7.6Front-end fee - - 0.1 100 0.1

Total 18.8 42 25.6 58 44.4

/a Inclusive of price and physical contingencies.

/b Including repayment of two advances from the Project Preparation Facilitytotaling US$1.1 million with interest.

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4.08 Livestock purchases (US$1.7 million) wou:Ld be procured by directpurchase from local ranchers at prices agreed on by a review committeecomprising a representative from project management, RMA and the farmers.

4.09 Overseas consultants for technical assistance would be contractedaccording to Bank guidelines.

4.10 Contract Review. All bidding packages for goods and civil worksover US$100,000 would be subject to prior review by the Bank (Attachment 1).This would result in coverage of about 68% of amount of goods, and 75% ofcivil works procurement. The balance of contracts would be subject torandom post reviews by Bank staff after contract award.

Disbursement

4.11 Disbursements from the loan would cover:

(a) 80% of civil works expenditures (US$8.8 million);

(b) 100% of foreign expenditures for vehicles, construction equip-ment, production inputs and materials; 100% of local expenditureswhen locally manufactured (ex-factory); and 70% of other localexpenditures (US$8.8 million);

(c) 100% of foreign or 80% of local expenditures for consultants,technical assistance, and overseas training (US$1.9 million);

(d) 100% of foreign or 80% of local expenditures for CVRP II (Urban)and other regional project preparation activities (US$4.9 million);

(e) refinancing of CVRP Project Preparation Facility advances(US$1.1 million); and

(f) the front-end fee (US$0.1 million).

4.12 Disbursements for civil works carried out by force account and forlocally purchased items costing less than US$10,000 under (b) above would bemade against statements of expenditure. Disbursernents for other expendi-tures would be made against full documentation. All statements of expendi-ture would be certified by the Project Manager and Financial Controller.Supporting documents would be retaine!d in the RPO and made available forreview by Bank supervision missions.

4.13 A schedule of estimated disbursements is presented in Annex 4.This is based on a six year disbursement period. Area development projectshave been slower to disburse (9 years) but the project has been reduced inscope to pilot scale covering only five watersheds (para. 3.05); it isanticipated that the other seven watersheds will constitute a second phase.Further, the design of the proposed project departs significantly fromearlier models to speed implementation. For example, the project has been

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given a strong preimplementation phase utilizing the PPF; it is nonintegrated

in that no component is dependent on any other; it has been provided with

direct funding and simplified management; and the technologies are known inthe Region. The investment schedule is presented in Annex 5.

Accounts and Audit

4.14 Consolidated project accounts would be maintained by the Financial

Controller in the RPO and be audited annually in line with establishedpractice for all Bank-assisted projects in the Philippines. The Controllerwould also supervise accountants at each site unit and help train localpersonnel in project procedures. Accounting experience at the regional andprovincial level is not extensive although both provincial and regional

offices have budget, accounting and audit staff. Nevertheless, the scale of

the proposed project is sufficiently large, and the accounting requirementsfor statements of expenditure (SOE) are sufficiently rigorous, to requireaccounting training. Therefore, the terms of reference for the FinancialController at the RPO would include establishment of an SOE accountingsystem, acceptable to the Bank, immediately following his appointment.

4.15 The Financial Controller would submit through the Project Manager

certified copies of the audited accounts and auditors' reports to the Bank nolater than six months after the end of the Philippine fiscal year. The auditreport should certify that funds disbursed against SOE had been used for the

purpose for which they were provided. Assurances were obtained at negotia-tions that RPO would appoint a Project Financial Controller by May 31, 1984who would follow the above accounting and auditing procedures and who wouldforward to the Bank by June 30 each year, beginning in 1985, the projectaccounts and auditors' reports for the Philippine fiscal year.

4.16 A revolving fund of up to $2.0 million would be established withinthe Central Bank to expedite disbursements and help overcome currentbudgetary constraints. The fund would cover all categories of expendituresto be financed under the loan. It is a condition of loan effectivenessthat the revolving fund be established as a Special Account within theCentral Bank under the name of the Central Visayas Regional Project.

V. ORGANIZATION AND MANAGEMENT

5.01 CVRP is the first major foreign-funded project in the Philippinessupporting regionalization. The project is innovative in nature as it pro-poses fiscal and administrative reforms to strengthen decentralization, andnew institutions and procedures to bring it about. A new Regional ProjectsOffice (RPO) has been created in the region, responsible to the PrimeMinister, to implement regional projects in cooperation with the regionaloffices of line ministries and the offices of local (provincial and municipal)government.

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5.02 The project is designed as a pilot scheme, to implement part of theCentral Visayas (Region VII) RDIP, and its scope is consistent with thecurrent budgetary situation and with the objective of allowing new regionaladministrative procedures to be tested. The RPO would establish site manage-ment units in five watersheds to implement the first phase of the projectincluding programs in upland agriculture at four sites, social forestry atone, and nearshore development at four subsites. Road and trail constructionwithin the sites would be the responsibility of the Region's four ProvincialEngineers' Offices. Support services would be provided by the RegionalOffices of MA (para. 1.10), BFD and BFAR (para. 1.11). Project preparationfunds are being applied in part to the proposed project and in part to otherregions where formulation of regiona:L projects has begun.

5.03 Project implementation is based on three main objectives: first,that project participants be made responsible for their own development;second, that involved government agencies be made accountable to projectclients and their local political rep.resentatives; and third, that funds bepassed directly from the Ministry of Budget (MB) to the regional body todecentralize implementation authority and minimize wastage. It is alsorecognized that regionalization is a long-term process which is evolvingsteadily as the Government decentralizes its services.

5.04 The Regional Development Council (RDC) has primary responsibilityfor regional planning, programming and budgeting. Projects to be implementedby the RPO must be approved by the RDC, as part of the RDIP, to ensure orderand consistency in regional integrated development. Executive Order (EO) No.907 has amended earlier legislation and created the RPO as an implementingagency which has taken over from the CVRPO which was responsible for pre-implementation of the project under previous arrangements.

5.05 A Central Visayas Regional Projects Board has been designated by thePrime Minister to establish and direct the RPO. The chairman of RDC serves aschairman. Board membership comprises four local government officials who areeither Governors or City Mayors in the Region, and two Regional Directors,probably BFD and the Ministry of Local Government (MLG). The RegionalDirectors of MA and MPWH serve as ex-officio members of the Board. Inaddition, the NEDA Regional Director, the RPO Executive Director, and theRegional Director of the Ministry of Human Settlements (MHS) attend meetingsand participate in deliberations but do not have voting rights.

5.06 The RPO would be funded directly by MB, according to RDC-approvedannual schedules of expenditures (paira. 3.38). The RPO is empowered torecruit staff, and to contract work with Government and private agencies, thesubstance of which is being formulated during preimplementation. The officewould be under the day-to-day supervision of an overall project manager,preferably drawn from the Region, who would be technically and manageriallyproficient to supervise the project. The Executive Director for the RPO hasbeen nominated and would hold overall responsibi:Lity for all investments inRegion VII and for this project. The Executive D)irector has been involved inthe planning of this project since its inception. Formal appointment of thenominated Executive Director and conlfirmation of the designated Board membersare expected shortly.

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5.07 Specifically, the RPO would prepare staff terms of reference,negotiate and supervise contracts, coordinate and implement training, admin-ister project funds, and design, establish and operate a project monitoringand evaluation system covering all components. The RPO would also review theSMU annual development plans and work programs, prepare budgets for the RDCand allot funds as directed by the RDC.

5.08 Effective project monitoring is considered central to implementation

of the regional development project, while evaluation is essential to aid thepreparation of subsequent phases of this project, and other regional projects.Design of the project monitoring and evaluation system is being incorporatedinto the management structure of both the RPO and the site units. Technicalassistance is being provided under the PPF, and by the Bank, to formulate asuitable system during 1983 and to establish it in the RPO immediatelyfollowing loan effectiveness.

5.09 The RPO would be responsible for part of the project preparationfunds provided under the project (para. 3.43), including a possible secondphase of this project. Funds have been utilized by the former CentralVisayas Regional Project Office (CVRPO) in preparing the project and taking itthrough preimplementation under two advances (a total of US$1.1 million) fromthe Bank's Project Preparation Facility (PPF). Another part of the allocationwould support preimplementation of the second regional project (urban). Afurther part would be administered by NEDA Central to support the preparationof other regional projects already identified.

5.10 Site Management Units (SMUs), under the RPO, would be responsiblefor implementing agricultural programs (paras. 3.11 through 3.14) in fourwatershed sites: Badian-Alegria, Cebu Province; Bayawan River, Negros OrientalProvince; Ipil River, Bohol Province; and Siquijor Island, Siquijor Province,and the social forestry program (paras. 3.15 through 3.22) in the Ayungon-Bindoy site, Negros Oriental Province. An Action Program has been agreedwith the Government to ensure the establishment and staffing of site manage-ment units for the various project components (Section 3.06 and Schedule 5 ofthe draft Loan Agreement). Most of the arrangements for implementing theProgram are in place. The immediate implementation of the Action Programwould ensure that project activities would commence on schedule. The SMUswould work directly with project participants training them in recommendedtechnologies and instructing them in self-management. The units would also beresponsible for designing and implementing public works and reforestation toprotect the watersheds from further degradation. The social forestry unitwould be assisted by RBFD of MNR because regional authorities do not yet haveauthority to license and control timber cutting and extraction, or to grantleases on timberlands.

5.11 Specifically, the SMU staff would constitute the field staff of theRPO and would prepare overall site development plans and annual work programs,negotiate services, promote client associations, and monitor the physical andfinancial progress of the project (Annex 8 - Project Working Papers Nos. 1 and2). Each SMU would be headed by a manager and employ about 30 support staff.It would be located on about 5 ha of land in a central position in the water-shed. The land would be utilized for office, housing, nursery and livestock

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facilities. Dormitory accommodation and training facilities, with electricand water utilities, would also be provided. Assurances were obtained fromGovernment at negotiations that the RPO would acquire land, selected during1983; establish five SMUs to implement the upland agriculture and socialforestry programs of the project; and appoint five SMU managers by June 30,1984.

5.12 The social forestry SMU would operate like the SMUs at the fourupland agriculture sites. However, to ensure tenure over the site, anassurance was obtained at negotiations that RPO would request that BFD CentralOffice reserve the Ayungon-Bindoy site for the social forestry program byJune 30, 1984.

5.13 The social forestry SMU would be responsible for issuing stewardshipcontracts on forest land to settlers selected from the itinerant occupants,according to established criteria, a feature of the social forestry componentof the project. The substance of the contracts has already been drafted, asthe program began in the Region. The SMU would arrange surveys, preparedocumentation, issue contracts, enforce stewardship conditions and collectfees. In addition to stewardship contracts, the unit would encourage settlersto form self-help associations, formulate farm plans in collaboration with thesettlers and supervise their execution, and undertake off-farm reforestationto stabilize the subproject area.

5.14 Sub-SMUs would be responsible for managing the nearshore fisheriesprograms (paras. 3.23 through 3.28). Each subunit would be managed by adeputy site manager who would, with extension specialists, formulate andsupervise work programs for the community development workers (CDWs) andartificial reef crews. He would also be responsible for liaising withmunicipal officials to gain their support, and in formulating appropriateordinances and permits required under the project.

5.15 The subunits would be located on the coast, about midway along thesection of coast to be covered by the project but EIs near as possible to themain watershed management units to which they would be subordinate. Eachsubunit would have from two to four artificial reef siting and constructioncrews equipped with motorized bancas, nonmotorized barges and appropriateconstruction tools (Annex 8 - Project Working Paper No. 3). An assurance wasobtained from Government at negotiations that the RPO would establish foursub-SMUs to implement the nearshore fisheries program of the project, andappoint four deputy SMU managers by June 30, 1984.

5.16 Although membership in an association would not be mandatory forparticipation in the project, the fornation of client associations would beencouraged by the SMUs since successful implementation of the project dependson the combined actions of thousands cof smallholders in the Region's forests,uplands and nearshore areas. The annual development plans and work programswould be approved by the associations, in consultation with the SMU managers,before being submitted to regional authorities for finalization (Annex 8 -Project Working Paper No. 6).

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5.17 To achieve the above aims, project staff at the SMUs would need toprovide effective extension, promote producer associations, and train parti-cipants. Extension would be provided by a corps of CDWs including about 55 inthe uplands, 20 in the nearshore areas and 6 in the social forestry siteassisted by specialist staff from the Ministries of Agriculture and NaturalResources. In the upland agriculture and forestry sites, extension wouldemploy the Training and Visit (T&V) system currently being implemented in thePhilippines under the National Extension Project (Loan 1626-PH). The ratio offarmers to CDWs would be 100:1 in the early years and 500:1 at fullimplementation.

5.18 In the nearshore areas, as the technology is newer and innovative,the ratio of fishermen to CDWs would be 40:1 for mangrove and artificialreef stewards. The improved fisheries development program to be designedunder the project would also utilize the T&V extension system.

5.19 Many Philippine community associations in the past have founderedbecause of "over-bureaucratization," particularly in the formative stages,and because members were inadequately trained to discharge their duties.The project would attempt to improve on earlier associations by:

(a) forming flexible groups of producers performing similar functions,such as soil conservation works, in the early stages of theproject. Only in later years would more complex tasks beattempted, such as input purchasing, produce marketing and creditprovision;

(b) specialized training of selected barangay leaders: two in eachproject village or about 272 during the life of the project, halfof which would be women since they are equally responsible withthe men for many production tasks; and

(c) specialized training of all 1,200 project participants in foreststand improvement, an innovative feature of the social forestrycomponent.

5.20 The agricultural development program would be linked to the researchcomponent through the upland research fund which provides for trials on farmfields, and by having farm systems research staff train CDWs and extensionpersonnel. The program would be monitored by project management so thatimprovements would be made during implementation.

5.21 The Regional Office of the Ministry of Agriculture (RMA) would beresponsible for providing soil and livestock services under the project(paras. 3.34 through 3.36). In addition, RMA would be responsible for estab-lishing an upland research station (para. 3.42), administering an uplandresearch fund, and providing packages of technology (techno-packs) to farmers(Annex 8 - Project Working Paper No. 1). RMA would also be responsible for

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the agricultural part of the training and technical assistance components(paras. 3.39 through 3.41) of the project (Annex 8 Project Working Paper No.5). All RMA support activities would be done under memoranda of agreementwith RPO, and an assurance was obtained from Government at negotiations thatthe RPO would designate RMA to provide support services under the project asset out in Project Working Papers No. 1 and No. 5 (Annex 8), under memorandaof agreement with RPO, and appoint officers-in-charge of the services byJune 30, 1984.

5.22 The relevant sections of the Regional Office of the Bureau ofForest Development (RBFD) would assist the SMU as required in forestevaluation and law enforcement, watershed management, and reforestation. Theassistance would be defined in memoranda of agreement between RBFD and theRPO, and the relevant sections of RBFD which would also be responsible foroff-farm reforestation at all sites under the project (para. 3.37). Inaddition, RBFD would be responsible, through the Regional Office of the ForestResearch Institute (RFORI), for forestry research activities under the project(para. 3.42). Details of both activities are set out in Project Working PaperNo. 2 (Annex 8). RBFD would also implement the forestry part of the trainingand technical assistance components (paras. 3.39 through 3.41) of the projectas set out in Project Working Paper No. 5 (Annex 8).

5.23 All RBFD support activities would be done under memoranda ofagreement with RPO, and an assurance was obtained from Government at nego-tiations that the RPO would designate RBFD to provide support services underthe project, as set out in Project Working Papers No. 2 and No. 5 (Annex 8),under memoranda ot agreement with RPFO, and appoint officers-in-charge of theservices by June 30, 1984.

5.24 The Regional Office of the Bureau of Fisheries and AquaticResources (RBFAR) of MNR would be responsible for providing fishing regulatoryservices (para. 3.38) under the project and implementing the fisheries part ofthe training and technical assistance components (paras. 3.39 through 3.41)of the project (Annex 8 - Project Working Papers No. 3 and No. 5). Anassurance was obtained from Government at negotiations, that the RPO woulddesignate RBFAR to provide support services under the project under memorandaof agreement with RPO, and appoint officers-in-charge of the services byJune 30, 1984.

5.25 The four Provincial Engineers' Offices (PEOs) of Cebu, NegrosOriental, Bohol and Siquijor Provinces would imp:Lement the infrastructurecomponent (paras. 3.29 through 3.32,1 of the project under memoranda of agree-ment with the RPO (Annex 8 - Project Working Paper No. 4). Construction of 97km of new, and improvement of 125 km of existing roads in the five sites wouldbe undertaken by the PEOs in consultation with the SMUs which would establishpriorities and allocate funds. A rural road conStruction section would beestablished within each PEO, and wotLld be responsible for implementing theprograms with assistance from qualif-ied local consultants. The PEO planning

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division would prepare terms of reference, appoint consultants acceptable tothe Bank, and administer the contracts. An assurance was obtained fromGovernment at negotiations that the RPO designate the four PEOs (Cebu, NegrosOriental, Bohol and Siquijor Provinces) to implement and maintain the infra-structure program of the project, under memoranda of agreement with RPO, toestablish rural road construction sections within the PEOs, and to appointofficers-in-charge of the programs by June 30, 1984. The detailed engineeringdesigns for about 15% of the project roads were completed during 1983 andthe first year's program should be ready for bidding in early 1984.Maintenance would be carried out by the rural road units within the PEOs, incollaboration with the respective Barangay captains and the Ministry ofLocal Government, using vehicles and equipment procured under the project.Trails would be constructed under piece-rate contracts between the PEOs,representing the SMUs, and farmer groups who would be responsible for trailmaintenance on completion.

VI. PRODUCTION, MARKETING AND PRICES

Production

6.01 Socio-economic surveys conducted during 1981 in seven watershedsin the Region, as part of project preparation, show that project benefici-aries are generally poor and work small parcels of land with decliningproductivity. They have medium-to-large families and live on their land insimple bamboo and wooden houses with few amenities. They are poorlyeducated, practice subsistence agriculture and are generally suspicious ofall outsiders, particularly government officials. Average farm size variesfrom 0.4 ha in Siquijor to 2.2 ha in the Bayawan River Watershed, NegrosOriental Province.

6.02 Land is farmed by household members in simple, family groups;husband, wife and unmarried children. Many household heads possess taxdeclaration papers which they believe legitimize their land occupancy.However, a general sense of tenure insecurity prevails since the Governmentdoes not recognize the declarations as substitutes for titles.

6.03 The granting of stewardships over the land is designed to elimin-ate tenure insecurity. It is estimated that 5,800 stewardship contractswould be awarded during the five-year project implementation period (Table6.1). The contracts would include about 4,500 for upland farmers on mixedagroforestry sites at three watersheds: Badian-Alegria, Bayawan and IpilRivers; 325 for municipal fishermen managing mangroves at four sites:Badian-Alegria, Ayungon, Siquijor and Ipil River; and 1,000 for forestoccupants at the Ayungon social forestry site. The contract projectionsassume that all participants, except those on Siquijor Island where all landis alienable and disposable (A and D),/1 occupy public land where steward-ship would be applicable (Annex 8 - Project Working Paper No. 7).

/1 A and D lands are non-forested and available for titling and private

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6.04 Farm labor is provided by the conjugal family members and can besupplemented by help from kinsmen, neighbors and friends, especially throughlabor exchange groups known in the Region as "alayon." Labor may also behired, but wage workers contribute only a small fraction of the work done onupland farms. Hired workers receive a low wage, P 6-10 daily, or insteadare remunerated in-kind particularly at harvest.

Table 6.1: PROJECT STEWARDSHIP CONTRACTS BY SITE AND YEAR

Number of contractsSite PY 1 PY 2 PY 3 PY 4 PY 5 Total

Upland AgricultureBadian-Alegria 0 160 400 560 540 1,660Bayawan River 0 140 320 440 423 1,323Ipil River 0 160 360 500 470 1,490

Subtotal 0 460 1,080 1,500 1,433 4,473

Social ForestryAyungon 200 500 300 - - 1,0

Nearshore FisheriesIpil River 10 27 28 27 28 120Siquijor 0 5 8 8 15Badian-Alegria 5 17 18 11 18 /5Ayungon 5 2/ 28 2/ 28 115

Subtotal 20 76 79 76 74 325

Total 220 736 1;359 1,776 1,707 5,798

6.05 The project's payments-in-kind (with livestock and inputs) forsoil conservation and reforestation works should overcome producer reluc-tance to participate in the project. In forestry areas, the project wouldpromote forest stand improvement, labor intensive logging, reforestation, andforest protection. In upland agriculture, the project would promote theconstruction of contour terraces andl ditches, and introduce improved mixedfarming systems utilizing livestock with annual and perennial crops. Innearshore areas, the project would establish arti'ficial reefs, replantmangrove areas, and improve the management of coral reefs through thedesignation of sanctuaries.

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6.06 The technologies being introduced under the project are simple,inexpensive and do not depart radically from current practices. In fact,examples of all the advocated technologies can be found within the Region.The project aims to promote the wider adoption of the best of these, asdescribed in the Project Working Papers, and to measure their impact overtime so that further refinements can be made.

6.07 Upland Agriculture. In Cebu Province, despite growing populationpressure in the upland areas, the total cultivated area is not increasing.However, the upland farms have reached their limit of productivity andyields are dropping as soil is lost through continued erosion caused byannual food cropping. Therefore, soil stabilization measures, such asterracing and the planting of fodder grasses with legume and fruit trees,have been incorporated in the project. Ruminant livestock, given as pay-ment-in-kind for soil conservation work and reforestation, would be raisedon pasture and crop residues from the farm, and on grass from nearby verges.Composting and fertilizers would be utilized to enhance soil fertility sothe area cropped for food could be reduced as yields increase allowing soilstabilizing enterprises to be introduced and expanded. A farm model incor-porating these measures has been developed for a typical upland farm,0.75 ha with mixed cropping and livestock, on 35% slope (Annex 8 - ProjectWorking Paper No. 1, Table 71).

6.08 Population pressure in the Negros Oriental and Bohol sites is lessintense than in the Cebu and Siquijor sites. Average farm size is larger,soil fertility is higher, and in Negros Oriental, there is more shiftingcultivation. In Bohol, there has been less immigration and local agricul-ture is stable, based on non-irrigated rice production. Farmers are awareof the limits of these systems and are better prepared for change thanfarmers in the more isolated locations on Cebu Island. Two hectare farmmodels, on 25% slope, are presented for the Bohol and Negros Oriental sites.Both incorporate soil stabilization measures and show a reduction in thecultivated area for subsistence food crops as yields increase in favor ofincreased livestock and perennial fruit tree production (Annex 8 - ProjectWorking Paper No. 1, Tables 78 and 89).

6.09 Population pressure is higher on Siquijor Island and farm size issmaller than for the other provinces. A 0.6 ha mixed farm model, on 20%slope, is presented incorporating soil stabilization measures, livestockproduction and a shift from food crop cultivation as yields increase, toperennial tree crop production, including fruit (Annex 8 - Project WorkingPaper No.1, Table 92).

6.10 In the Cebu, Negros Oriental and Bohol sites, where the farmersare operating forest land, stewardship contracts would be awarded toconsolidate the holdings and provide incentives for farmers to rehabilitatetheir farms. This would not be the case in Siquijor Island, where the landis all A and D and farmers already have an incentive to improve their

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incomes as they have titles to the land. Farmers in the first three siteswould be able to invest in agro-forestry on unutilized land for additionalincome. A representative one-hectare model of an agro-forestry enterprisewith livestock, on 30% slope, is presented for general application (Annex 8- Project Working Paper No. 1, Table 100).

6.11 In the upland agriculture program, 20,250 households are locatedon the 110,200 ha of the four project sites. About 5,700 families wouldparticipate directly in the project (Table 6.2). These farmers wouldintroduce improved cropping and agro-forestry praLctices on about 6,000 ha.

Table 6.2: PROJECT PARTICIPANT FAMILIES BY SITE

Upland Social NearshoreSite agriculture forestry fisheries

Badian-Alegria 1,660 - 1,398Bayawan River 1,323 - -Ipil River 1,490 - 2,206Siquijor 1,225 - 3,127Ayungon-Bindoy - 1,200 974

Total 5 698 1 o00 7,705

6.12 Production increases from the upland agriculture program would besubstantial (Table 6.3). At full production, project participants wouldgenerate incremental annual crop production of about 9,000 m tons.Incremental production from perennial crops, inc:Luding firewood, and alsofrom livestock would also be significant (Annex 8 - Project Working PaperNo. 1, Table 102).

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Table 6.3: INCREMENTAL PRODUCTION FROM UPLAND AGRICULTUREAT FULL DEVELOPMENT

QuantityCommodity (m tons)

AnnualsGrainsRice 1,140Corn 2,900

TubersCassava 1,380Sweet potato 1,460

LegumesPeanuts 1,130Mungbean 950

Subtotal 8,960

PerennialsTrees (fruit)Mango 19,080Bananas 6,000Jackfruit 3,800Avocados 2,500Cashew 1,670

Trees (wood)Firewood 13,410 cu m

LivestockCattle 1,030 (liveweight)Goats 260 (liveweight)

6.13 Social Forestry. It is envisaged that each family in the socialforestry program would be settled on a 7 ha lot, 5 ha of which would be usedfor reforestation and two for subsistance food production. During theestablishment period, farmers would receive compensation for their labor,related to farm wages in the site, and be given planting materials until thefifth year when they would begin to derive an income from harvesting woodagainst which an annual stumpage fee would be charged. From the sixth year,the investment cost would be financed under a second phase of the project,or by Government. Each family would also be expected to pay a servicecharge equivalent to 5% of production value for marketing assistance. Theimpact of the project on farmer income is demonstrated by two farm models,one for reforestation and one for forest stand improvement (Annex 8 -Project Working Paper No. 2, Tables 4 through 9).

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6.14 In the case of reforestation, investments in seedlings,fertilizer, baskets, firebreaks, seed and herbicide are made during thefirst four years as the trees are established. Maintenance costs peak bythe thirteenth year and fluctuate at lower levels thereafter. The farmfamily is dependent on in-kind payments from the SMU until the sixth yearwhen the first cuts are made. In the case of forest stand improvement,costs of selective thinning peak in the fourth year and fluctuate at lowerlevels thereafter.

6.15 About 1,200 families would participate in the social f'orestryprogram (Table 6.2). Production from forest stand improvement is expectedto be 15,000 cu m of logs and 232,000 poles during the first five years ofthe project. Production from reforestation would be 423,000 m tons offirewood, 1,330,000 cu m of sawn logls, 4,512,000 pieces of rattan, and300,000 posts during the life of the project from the 1,200 familiesparticipating directly in the project.

6.16 Nearshore Fisheries. Estimates of fis'h production from coral reefareas have traditionally been in the range of 4--6 m tons per sq km yearlyfor tropical waters like those in the Philippines. More recent records,from the Philippines and Western Sarimoa, show yields of 12-20 m tons per sqkm yearly for areas with a high percentage of living coral cover and lowfishing pressure. Since neither of these latter conditions are common inthe Philippines, especially in the Central Visayas with its relatively highpopulation density, current harvests from natural coral reef within theproject area are assumed to average 4 m tons per sq km yearly, but arefalling at a rate of 100 kg per year due to contamination and destruction ofthe reef, and overfishing.

6.17 Based on results from a nearby, existing coral reef sanctuary, inwhich the reef fish harvest doubled over a five-vear period after 17% of thereef was declared a sanctuary and closed to fishing, it is assumed that if20% of a reef is protected, the catch in the remaining 80% will double, from3.2 to 6.4 m tons per sq km yearly in five years. Under the project, it isproposed to establish 36 sq km of reef sanctuary which would, at fullproduction, produce an incremental catch of 115 D1 tons per year (Annex 8 -Project Working Paper No. 3, Attachment 3, Tables 22 and 23).

6.18 Harvest from each kilometer of artificial reef is expected toreach 2 m tons per linear km yearly, at full development. Researchindicates higher yields should be attainable, but because of the paucity ofdata on artificial reef production in the Region, a conservative estimatehas been used. At full development, the project's 114 linear km ofartificial reef would yield 227 m tons of fish per year (Annex 8 - ProjectWorking Paper No. 3, Attachment 3, T'ables 15, 16 and 17).

6.19 An average hectare of mangrove is expected to yield 12.5 cu m perha yearly of firewood, at full development, or 8,125 cu m from 650 ha

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proposed for replanting under the project. Direct harvest of fish productsper ha at full development would reach 100 kg finfish, 25 kg shrimp, 15 kgcrabmeat, 200 kg molluscs and 40 kg sea cucumber. In addition, an indirectharvest of up to 400 kg of finfish and 75 kg of shrimp is expected frommangrove-dependent species which mature and are harvested elsewhere (Annex 8- Project Working Paper No. 3, Attachment 3, Tables 18, 19 and 20).

6.20 There are an estimated 7,705 families in the four nearshore fish-eries areas, over 4,000 of whom depend on fishing as their sole or majorsource of income (Table 6.2). Improving the productive base of the near-shore resource by establishing artificial reefs, protecting the naturalcoral reefs, replanting mangroves and better managing existing mangroveswould benefit all those who are fully or partly dependent on the nearshoreresource for income or food. Direct benefits, at full development, areestimated to be 8,125 cu m of fuelwood, 400 m tons of finfish and 180 m tonsof other sea products.

6.21 For artificial reefs and new mangrove plantings, use rights wouldbe allocated through a permit system - stewardship contracts for mangrovereplanting and municipal permits for artificial reefs. On the basis of fourfamilies per linear kilometer of artificial reef, 440 families would benefitdirectly from the project. An additional 325 families would be awardedstewardship contracts over the 650 ha of mangrove area proposed forreplanting.

6.22 Yield increases and positive farm cash flows would result almostfrom the first year of the project, from improved annual cropping and frompayment-in-kind by the Government for beneficial works. The financialrewards to producers are substantial and immediate. Financial analyticaldata are presented in Project Working Paper No. 9 (Annex 8).

Marketing

6.23 There is a well established and reasonably efficient privatesector marketing network to handle production inputs and project output inthe watershed areas of the project, and marketing margins for both inputsand output are commensurate with costs and risks involved. Where marketinginfrastructure is deficient, traders often link provision of credit andsupplies to purchases of farm output. Often, strong business bonds arebased on principles of allegiance and reciprocity between farmers andmarketing agents. The improved road and trail access provided by theproject would help reduce transport costs and improve marketing services inthe project areas, particularly after the pilot phase is completed.

6.24 Grains. Rice is a well established crop in the project areas,particularly in the inner valleys and lowlands. Most of the paddy is soldby farmers to traders and millers who are tied into the crop because ofeither advanced financing or traditional bonds. A significant amount of

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project output is consumed on the farm or traded for other foods fromneighbors. Finally, about 2% to 4% of the rice would be sold directly toNFA buying stations. Rice for home consumption is usually custom milled inrelatively small, locally operated mills.

6.25 The Visayans' staple food is white corn, the production of whichis 2.5 times that of rice in the Region. Most of the corn, which isproduced on small-sized farms, is consumed by the farm family or traded forother foods. Surplus white corn is sold to local buyers to mill into grits.Cebu is a national marketing center for corn and virtually all the majorfeed mills with headquarters in Manila have branches in Cebu.

6.26 Tubers. Central Visayas is a net food importer of all projectcommodities except tubers. The best fresh tuber market prospect is forsweet potato while the best processed tuber market prospect is for cassavawhich is chipped, diced and powdered for animal feed usually as a substitutefor corn. In Bohol Island, the Philippine Starch Industrial Corporation hasbegun operations on 4,500 ha, with plans to increXase to 18,000 ha, toconvert cassava chips into starch, of which aboul: 70% is expected to beexported; by-products of glucose and powdered waste would be sold in thedomestic market. However, project participants would largely consume theirtuber output on the farm.

6.27 Legumes. The international price of peanuts is about half thedomestic price which indicates high costs of production as well as strongconsumer demand. There are six peanut processors in Cebu producing mainlysalted nuts, but also other products; incorporating nuts such as dessertnougat and candies. Mungbean is the legume stap:Le in the Visayas andmaintains a steady market.

6.28 Tree Crops. The most important fruit grown in the project area ismango. The fruit is sold at local markets either directly by the farmer orby traders; farm owners often sell the crop on the tree and the purchaserharvests the fruit. About 50% of mango production is dehydrated as about17 small firms are active in mango drying in the Region. Some of the highquality packs of slices are sold abroad to Hong Kong, Singapore and Taiwan.One of the main problems facing the industry, thes lack of raw material inthe off-season, is gradually being overcome, in part, by chemically inducedflowering to spread the fruiting season.

6.29 Bananas are grown on most farms. Trade is usually restricted tofresh bananas due to lack of markets, and susceptibility of the fruit tobruising. However, three firms are currently processing the "cardaba"variety into chips for export with considerable success. Banana puree isalso being processed and sold as infant food and as a tomato substitute incatsup.

6.30 The bulk of jackfruit production is consumed as a fresh vegetableor as fresh fruit, but the demand for jackfruit preserves is increasing for

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ice cream flavoring and desserts. Farmers sell jackfruit in smallquantities either to truckers at the farmgate or take their fruit, usuallyby bus, to the local market for direct sale.

6.31 A small quantity of avocados are produced in the Region. They aremainly consumed on-farm as fresh fruit because of their susceptibility tobruising during transport over rough roads. About 20% of production entersthe commercial trade like other fruits. Recently, Carnation MilkCorporation of Manila has begun to extract oil from avocados and hasstrengthened the market for this fruit.

6.32 Cashewnuts, for which there are good prospects both on the localand international markets, are at present produced largely in Luzon andPalawan. However, growing conditions for cashewnuts are favorable in theproject areas.

6.33 Livestock. Cattle and goats would be given to project farmers aspayment for soil conservation works carried out on their farms. There areactive livestock markets throughout the Central Visayas which not onlysupply Cebu City, but also Manila with better quality red meat. Farmers ortraders usually walk the livestock to auction centers where they are soldand trucked or shipped to urban centers.

6.34 Timber. Sawlog production has been virtually prohibited in theRegion since 1979. Under the project, in the Ayungon-Bindoy watershed,small farmers would undertake reforestation and labor-intensive loggingutilizing fast growing species. Trees would be cut by hand and the logshauled to roadsides by carabao, then trucked to the Ayungon wharf where theywould be loaded onto barges for shipment to Cebu City. The most popularspecies, Albizzia falcataria, is a desirable wood for furniture.

6.35 A major objective of Government is to substitute fuelwood for oilwhere technically and economically feasible. The giant ipil-ipil species isplaying a key role in this program. In addition to its use as fuelwood, thetree leaves are dried and ground as a substitute for alfalfa in animalfeeds. Domestic feedmills are buying the leaf material and two firms in theRegion are exporting the product regularly to Japan.

6.36 The market for firewood is substantial and is growing rapidly.Because of its high thermal rating, mangrove wood commands a premium pricein the market, particularly from bakeries. The demand is likely to increaserapidly as the dendrothermal power plants in Cebu and Negros Occidental comeon stream.

6.37 Fisheries. At the municipal level, fish marketing is usuallyhandled by a female member of the household. Part of the catch is retainedfor home consumption, part is bartered for other produce, and the remaindersold, usually in the local market through brokers, who sometimes provide

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informal credit. During peak seasons, the catch is sold at sea tocommercial boats for shipment to ma-jor urban markets. RBFAR statisticsindicate that regional fish production declined 23% from 74,800 m tons in1976 to 57,800 m tons in 1980. Estimates of regional demand by 1981 are161,300 m tons which indicate that the Region as a whole is in deficitmainly due to strong demand from the Cebu City metropolitan complex.

6.38 The increased production of fish and f-ish products resulting fromthe project is expected to be absorbed entirely by the existing -market.Incremental production is expected to grow gradually and, given theincreasing demand and current shortages of fish in the Region, is notexpected to lead to oversupply. Most of the fish would be sold in localmarkets with the remainder transhipped to urban centers outside the Region.

Prices

6.39 With the project, the use of inputs would rise significantly bycomparison with the small amounts applied at present. The initial seeds andplanting materials would be supplied by commercial firms which do a lot oftheir own applied research and seed multiplication covering a variety ofcrops. The government research stations would take the lead in supplyingcattle, goats and appropriate pasture species for the maintenance ofanimals. Summaries of financial and economic pr:tces for project inputs andoutputs are provided in Annex 6, Tables 1 and 2. Price derivations for keycommodities are included in Project Working Paper No. 9 (Annex 8).

6.40 Fertilizer supplies and prices are controlled by Governmentthrough a complicated system of import licenses, import duties, subsidiesand price ceilings. Private firms uLndertake the management of fertilizerstocks and distribution to farmers along normal commercial channels.Agricultural chemicals and veterinary medicines are available in the projectarea through several private firms. The marketing system for those inputsis less well developed in the uplands and would be improved by the upgradingof rural roads and construction of trails which would encourage localmerchants to extend their operations.

VII. BENEFITS, JUSTIFICATION AND RISKS

Benefits

7.01 The main focus of the pro,ject and its primary economic benefitwould be the increased incomes of some 14,600 poor families in five water-sheds of Central Visayas, with indirect benefits for many others, throughincremental production of agriculture, forestry and nearshore fisheries. Atpresent, the incomes of these families are declining due to severe soilerosion and fishery habitat degradat-ion. The project is designed to promotecultural practices which would reverse the trend and improve productivity of

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the watersheds. The project would also create more effective regional andlocal institutions for implementation of rural development activities inCentral Visayas and test the concept for broader application regionwide, andultimately for other regions in the country as well.

7.02 Direct project benefits are derived from the production modelsrelated to prospective project participants in upland agriculture, forestryand nearshore fisheries. The incremental per capita incomes derived directlyfrom project investments range from P 230 to P 4,300 which are modestcompared with average incomes around the country. For example, the nationalaverage per capita rural income demarcating the absolute poverty line isestimated to be about P 2,000 (in 1983 prices), and per capita incomesresulting from project activities fluctuate around this level although theywould be significantly higher than at present. Per capita incomes without theproject could be expected to decline further in most cases (Table 7.1).

7.03 In addition to income derived from project activities, agriculturalparticipants would also engage in off-farm seasonal work and the forestryparticipants would engage in supplementary subsistence agriculture. Never-theless, project participants are among the absolute poor and while theireconomic position would improve under the project, they would still berelatively poor because of limited resources and the pressure of populationwhich forces these families onto small plots and reduced fishing areas.

7.04 Only part of the benefits from rehabilitating upland farming systemswould go to participating farmers as increased income from increased agricul-tural and wood production. Benefits to other producers would includeincreased nearshore fish production due to reduced reef siltation, reducedflooding and damage to downstream farms and roads, reduced soil runoff leadingto increased moisture supply for crop production, increased employment asupland production increases, and reduced urban migration.

7.05 The labor requirement to implement the upland agriculture componentof the project, including agro-forestry, would be substantial. It is esti-mated that almost two million man-days would be required to implement andmaintain the new farm systems until they reach full development. Althoughmost of the labor would be provided by members of 5,700 participant families,some would be contributed by other workers seeking employment within the fourwatershed sites.

42 -

Table 7.1: FAMILY INCOME BY PRODUCTION MODEL(Expressed in pesos at 1983 prices)

__ Future/a Incremental /bWith Per

Pres- proj- Without capitaFarm model ent ect project Family /c

Upland AgricultureIpil River - 2 ha farm with 25% slope 2,780 L7,650 2,380 15,270 2,545Bayawan - 2 ha farm with 25% slope 2,655 17,440 2,145 15,295 2,550Badian-Alegria - 0.75 ha farm with35% slope 2,050 11,285 1,680 9,605 1,600

Siquijor - 0.6 ha farm with 20% slope 1,695 7,680 1,460 6,220 1,035General - 1 ha agroforestry farm

with 30% slope - 20,515 - 20,515 3,420

Social Forestry /d5 ha reforestation plot /e - 24,825 - 24,825 4,3058 ha forest stand improvement plot ,'f - 2,610 - 2,610 435

1 ha off-farm reforestation plot /g - 1,365 - 1,365 230

Nearshore Fisheries1 km of artificial reef /h 25,310 43,660 25,310 4,588 7652 ha mangrove plantation 7i - 8,964 - 8,964 1,4941 km of fish sanctuary /j 41,575 67,425 31,980 3,544 590

/a At full development./b Compares future "with" and future "without."/c Assumes 6 members per family./d The forestry model assumes that w:Lthout project there would be no activity

in the project area./e Would comprise an agroforestry farm unit./f Supplemental income to project beneficiaries sesttled in the project area

through labor-intensive harvesting techniques./g Cutting and replanting of buri, bamboo and rattan./h Four families would be responsible for the maintenance of the artificial

reefs and would have exclusive rights to fish those waters./i Replanting and harvesting of a 2 ha unit would be carried out by one

fisheries family./j Fish would be harvested from a 5 km area adjacent to the 1 km sanctuary;

about 10 families would fish these waters.

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7.06 Indirect benefits from the nearshore fisheries component would besignificant. If, as trials indicate, each hectare of mangrove contributesabout 400 kg of finfish and 75 kg of shrimp to the nearshore fishing area,the planting of 650 ha new mangrove would contribute 260 m tons yearly offish and 16 m tons yearly of shrimp in indirect harvest. The proper manage-ment and enrichment of the 5,000 ha of preserve and wilderness would alsohave a significant impact on fish and sea-life production in the nearshoreareas, although it is unquantifiable since the quality of existing mangrovesis not known. The planting of mangroves in shoreline areas would reducebeach erosion which is serious in many places throughout the Region. Adirect benefit would be the consequent reduction in road maintenance costsalong these shorelines. The persistent educational effort proposed underthe nearshore component, with support from RBFAR's law enforcementofficials, should lead to a reduction of destructive and illegal fishingmethods in project areas.

7.07 The regional line agencies, RBFAR and RBFD, would be strengthenedunder the project through improved resource management by field staff andimproved fishpond extension through better mangrove management. Also, tothe extent that survey and research contracts are awarded to them, the twoprivate universities in the Region with marine research programs wouldenhance their contribution to the fishing industry.

7.08 Long-term employment generation in fisheries is not a primaryobjective of the nearshore component of the project as the municipal fisheryis overcrowded already. However, the studies (para. 3.41) proposed toinventory nearshore habitats and to survey the prospects for seaweed culturecould lead to alternative employment opportunities.

7.09 The major economic benefits from the social forestry component ofthe project would be incremental production and income from timber andrattan. Also, there would be foreign exchange savings resulting from apartial substitution of firewood for imported bunker oil in sugar milling.Employment benefits would accrue to the 1,200 participant families and themultiplier effect of increased incomes would have a positive effect oncommunities adjacent to the social forestry site. The project would help tostabilize the Cebu-based rattan furniture industry as inadequate and unreli-able supply of poles is a primary constraint to increased production.Timber supplies would also be improved as lumber consumption within theRegion is estimated at 38 million bd ft yearly which requires 178,000 cu mof logs all of which come from outside the Region.

7.10 As for upland agriculture, significant indirect benefits wouldalso be derived from the social forestry component: reduced soil erosion,reduced water runoff (less flooding), reduction in reef siltation, andincreased tree production due to reforestation and stabilization of thewatershed.

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Environmental Impact

7.11 The project is designed to have a beneficial environmental impactranging from stabilization and rehabilitation of t:he upland forestry andagricultural areas, which are badly eroded, to reductions in siltation anddamage to the nearshore mangrove and reef areas leading to increased pro-ductivity from all parts of the watershed. Possible adverse effects result-ing from the use of agricultural chem:icals would be minimized through theuse of composting and the introduction of farm systems that reduce rainfallrunoff so that residues from the small amounts of chemicals applied wouldnot be carried downstream.

Justification

7.12 The net present value (NPV) of the productive components of theproject, with benefits and costs discounted at the opportunity cost of capitalof 10%, is US$26.7 million (Table 7.2). Of this total, about IJS$15.7 millionis contributed by the upland agricultural component and US$9.0 millionoriginates in the social forestry component while US$2.0 million by nearshorefisheries. About 30% of project costs generate benefits regionwide, or inother regions of the country and have been excluded from the NPV and ERRcalculations.

Table 7.2: SUMMARY OF RATE OF RETtRT ANALYSIS

EconomicComponent Net present rate of Switching values/b

value Cc 10% /a return Benefits Costs(US$ million) (%) …--(--) … -------

Total Production Components 26.7 17.5 -40 +67

Upland agriculture 15.7 17.7 -38 +62Social forestry 9.0 17.4 -44 +77Nearshore fisheries 2.0 16.4 -42 +73

/a The opportunity cost of capital measured in constant terms is estimatedat 10%.

/b Defined as the percentage change in benefits or costs which would resultin a net present value of zero or which would generate an economic rate ofreturn equal to the opportunity cost of capitaLl.

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7.13 The production components of the project, including infrastructure,

account for about 70% of total costs, and show an economic rate of return of17.5% (Table 7.2). Returns to project components are: agriculture 18%,forestry 17%, and nearshore fisheries 16%. In these calculations, the costsfor soil services, BFD institutional strengthening, research and projectpreparation are excluded from the economic analysis since the investmentsbenefit the entire region or country. The main assumptions behind the NPVand ERR estimates are the following:

(a) the economic analysis was based on efficiency prices usingborder prices as a point of reference. Conversion factors wereused to reduce domestic currency values for nontraded projectinputs and outputs and to correct for distortions in relativeprices. The value of traded goods in pesos was adjusted by theappropriate conversion factor(s) to obtain the farmrgateequivalents in terms of border prices;

(b) the standard conversion factor (SCF) was 0.82, but threespecific conversion factors were used to arrive at economicefficiency values expressed in local currency at border prices.For fertilizers, pesticides and agricultural chemicals, 0.87;for equipment, 0.86; for rural unskilled labor, 0.75;

(c) all taxes, forest charges and price contingencies are excludedin the economic valuation of project output and input, butphysical contingencies are included in the project economiccosts;

(d) all livestock, training, technical assistance and regionalmanagement costs are included in the economic analysis sincethese activities are required to realize measurable projectbenefits during the project life;

(e) future financial prices of internationally traded projectoutput are expressed in constant 1983 prices (based on Bankprojections), and for products not internationally traded,

quoted farm-gate and market prices were obtained and adjustedby the SCF of 0.82; and

(f) because considerable seasonal and structural unemploymentexists in the rural unskilled labor market, the economic costof that labor (P 8.25/day) was assumed to be 75% of themarket wage.

Details of the economic rate of return analysis by components are presentedin Annex 7, Tables 1-4 and Project Working Paper No. 9 (Annex 8).

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7.14 Project returns are sensitive to changes in the benefit and cost

streams. For the production components of the project, a decline in benefitsof 40%, or a cost increase of 67%, would reduce the NPV to zero, or theeconomic rate of return to 10% (Table 7.2). Benefits could be reduced ifthere is less participation in the p-roject than expected, or if yields fail toreach projected levels, or reach them later than anticipated. In any of theabove cases, the ERR is unlikely to be reduced below about 12%. It isunlikely that costs will rise significantly. Returns are also moderatelysensitive to labor costs; if the financial cost of local unskilled labor(11 pesos per day) were used instead of the economic cost, the economic rateof return would decline to 16.5%. If benefits should lag by three yearsleading to an eight-year disbursement period, but with costs incurred asscheduled, the return would be reduced to 12%.

Risks

7.15 Since neither the Bank nor the Philippine Government has supportedsuch a large systematic development effort in a single region before, theproject's main risks are mainly institutional in nature. Project design hasattempted to minimize these risks, but it is recognized that new systems ofdecentralized budgetary and administrative control would take time toconsolidate under the evolving process of regionalization.

7.16 In upland agriculture, the region's poor agricultural resource baserequires that innovative measures of soil conservation and upland farming beintroduced so that there are also some technical risks. While the technologyproposed under the project has proven effective, much of it within Region VIIitself, it remains to be seen if existing "slash and burn" farmers can betransformed into permanent settlers under the land stewardship program beingintroduced under the project and maintain stable enterprises on small plotsover time. The project concept of reserving certain water areas for projectbeneficiaries to build artificial reefs and enjoy exclusive fishing rightswould require extra efforts by government law enforcement officials who havenot been entirely successful in stopping detrimental activities in the past.

7.17 BFAR's current programs in the Region, formulated at head officein Manila, are promoting more sophisticated gear for municipal fishermen andthe clearing of more mangroves for fishponds, twc, practices which are incon-sistent with those proposed in this project. Also, BFAR central is unwill-ing to stop destructive "muro-ami" fishing /1 on the reefs because of thelack of alternative employment for fishermen. If the p-roject is to besuccessful, the above practices would have to be curtailed, if not stopped,and they are the subject of continuing discussions between the central andregional offices of the Ministry of Natural Resources.

/1 Dropping rocks onto reefs to frighten fish into nets.

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7.18 Other risks of the fisheries component are that an excessivebuild-up of fishermen in the nearshore areas would negate positive benefitsfrom the project; the danger that controlling open access to artificialreefs, mangroves and, later, coral reefs would lead to social unrest; andthe possibility that assumed yields with the project are optimistic sincethe research on which they are based is limited.

7.19 Land occupants at all sites have expressed strong interest inparticipating in the project. The prospect of long-term stewardship overtheir land is a powerful incentive to join the programs. The settlers arealso attracted by the proposal to reward labor for conservation and rehabili-tation works with payments in-kind, and by the opportunity to be introducedto, and be advised on, new production technologies. The project providesadequate management resources and support services to achieve its objectives.

Cost Recovery

7.20 The project would not attempt to recover the relatively smallinvestment costs from farmer and fishermen participants for two reasons: (a)beneficiaries' income at full development would be only moderately aboveabsolute poverty levels; and (b) a modest government input is necessary toinduce farmers and fishermen to shift from current practices to practiceswhich conserve the soil and nearshore resources in the project areas.Conservation measures to be carried out on the upland farms would result inbetter soil retention, reduced water runoff and reduced siltation of therivers and coral reefs leading to benefits to all producers rather thanmerely the project participants. In the forestry component, the projectwould attempt to recover the initial on-farm investment costs frombeneficiaries through stumpage charges, which would be a percentage of themarket price of the cut wood at the farm gate. The details of amount andtiming of the stumpage charges would be recommended by the SMU and decidedby the RPO in coordination with RBFD during project execution. Benefitsfrom the planting of mangroves, building of artificial reefs and controlledfishing would likewise extend beyond project beneficiaries to a largerpopulation of fishermen and sportsmen. In any case, labor contributed byproject participants would be equal to or greater than the in-kindcompensation which they would receive as planting material, tools, livestockand agricultural chemicals.

VIII. AGREEMENTS TO BE REACHED AND RECOMMENDATION

8.01 During negotiations agreement was reached that:

(a) Government (MB) has sufficient funds to start the project in1984 (4.03);

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(b) RPO would appoint a Project Financial Controller by May 31, 1984 whowould follow accounting and auditing procedures satisfactory to theBank, and who would forward to the Bank by June 30 each year,beginning in 1985, project accounts and auditors' reports for thePhilippine fiscal year (4.15);

(c) RPO would acquire land, selected during 1983, establish fiveSMUs to implement the upland agriculture and social forestryprograms of the project, and appoint five SMU managers by June 30,1984 (5.11);

(d) RPO would request that BFD Central Office reserve theAyungon-Bindoy site for the social forestry program by June 30, 1984(5.12);

(e) RPO would establish four sub-SMUs to implement the nearshorefisheries program of the project, and appcint four deputy SMUmanagers by June 30, 1984 (5.15);

(f) RPO would designate RMA to provide support services under the pro-ject, as set out in Project Working Papers No. 1 and No. 5, undermemoranda of agreement with RPO, and appoint officersin-charge ofthe services by June 30, 1984 (5.21);

(g) RPO would designate RBFD to provide support services under theproject, as set out in Project Working Papers No. 2 and No. 5, undermemoranda of agreement with RPO, and appoint officersin-charge ofthe services by June 30, 1984 (5.23);

(h) RPO would designate RBFAR to provide support services under theproject, as set out in Project Working Papers No. 3 and No. 5, undermemoranda of agreement with R.PO, and appoint officers-in-chargeof the services by June 30, 1984 (5.24); and

(i) RPO would designate four PEOs (Cebu, Negros Oriental, Bohol,Siquijor Provinces) to implement and maintain the infrastructureprogram of the project, under memoranda of agreement with RPO, toestablish rural road construction sections within the PEOs, and toappoint officers-in-charge of the programs; by June 30, 1984(5.25).

8.02 The following key actions to implement the project are conditionsof loan effectiveness:

(a) that RPO's Board, through the Executive Director would establisha revolving fund as a Special Account within the Central Bankunder the name of the Central. Visayas Regional Project (4.16); and

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(b) that RPO's Board, through the Execu.ive Director, would place inRPO an overall Project Manager with qualifications and experiencesatisfactory to the Bank (5.06).

8.03 Subject to the above conditions, the proposed project would besuitable for a Bank loan of US$25.6 million equivalent to the Republic of thePhilippines, with a term of 20 years including a grace period of 5 years.

- 50 - Attachment I

Page 1

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

Procurement Arrangements

Procurement arrangements are summarized in the tables below(US$25.6 million including front-end fee):

Procurement method TotalProject element ICB LCB Other N.A. cost

U--------- (US$ million) …------------

Construction equipment & 1.5 - - - 1.)vehicles (1.4) (1.4)

Equipment for farming, forestry - 1.4 - - 1.4& fishing (1.3) (1.3)

Buildings - 1.4 - - 1.4(1.1) (1.1)

Roads, trails & other - 8.2 0.5 - 8.7construction (6.6) (0.4) (7.0)

Livestock - - I./ - 1.7(1.5) (1.5)

Seeds, seedlings, fertilizers, - 4.4 0.2 - 4.6chemicals, reef & other (4.0) (0.1) (4.1)materials

Salaries & allowances - - - 8.3 8.3

Travel, maintenance & officesupplies - - 4.3 - 4.3

Training & technical - - 3.1 - 3.1assistance (1.9) (1.9)

Project preparation - - 7.6 - 7.6(6.0) (6.0)

Physical contingencies /a - - - 1.7 1.7

(1.2) (1.2)

Front-end fee - - - 0.1 0.1(0.1) (0.1)

Total 1.5 15.4 17.4 10.1 44.4(1.4) (13.0) (9.9) (1.3) (25.6)

/a Includes price contingency on physical contingency.

Note: Figures in parentheses are the respective amiounts financed by theBank.

_ 51 _ Attachment 1

Page 2

Procurement Profile

Estimated contract No. of Cumulative % totalsizes (including contracts value above value abovecontingencies) (estimated) threshold threshold(P '000)

I. Goods

Above 1,000 2 2.3 22500 to 1,000 3 3.9 38250 to 500 5 4.8 47110 to 250 10 7.0 6850 to 100 40 9.9 95under 50 75 10.3 100

II. Civil works

Above 1,000 1 1.5 12500 to 1,000 3 3.6 30250 to 500 3 4.8 39100 to 250 17 9.2 7550 to 100 30 11.0 90

under 50 45 12.2 100

Construction equipment and vehicles (US$1.3 million) will be purchasedthrough ICB, in accordance with Bank guidelines. Eligible domesticmanufacturers would receive a pretenure at 15% of the c.i.f. price of theimported goods, or the import duty, whichever is lower. The ProvincialEngineers' Offices would prepare the appropriate equipment and civil worksspecifications and bidding documents. Hand tools and miscellaneous smallequipment as well as seeds, fertilizers, chemicals, reef and other materials(US$6.8 million) would be purchased through LCB in accordance with Bankguidelines; foreign suppliers would be eligible to participate. Otherequipment costing less than US$10,000 per unit will be purchased by prudentshopping based on at least three price quotations. Civil works contracts(US$8.2 million) will be awarded for the construction of new barangay roads,trails and buildings after LCB. The size and scattered location of thefacilities will not be suitable for ICB; however, foreign contractors willbe eligible to participate. Resource conservation measures, including theconstruction of artificial reefs and nearshore works, and their maintenancewill be carried out under force account by site management units which wouldprocure construction materials and supplies through normal commercialchannels. Consultants for training and technical assistance and the surveyand design of secondary roads would be selected in accordance with Bankguidelines. Procurement procedures would not apply to incremental salariesand allowances for force account works. The first ICB document for equip-ment and the first civil works contract would be subject to prior Bank review.

ANNEX 1_52 Page 1

PHILIPPI.NES

CENTRAL VISAYAS REGIONAL PROJECT

Regional Development Investment Program

1. In the Philippine context, integrated area development (IAD) meansthe grouping of adjoining municipalities and cities within the provinces of aregion. A prime rationale for grouping in the Central Visayas was to achieveeconomies of scale in the development process since many municipalities hadlimited staff and financial resources. Another motivation was the need toincorporate "local" projects, those generated from within municipalities andto facilitate their integration into IAD programs. In Region VII, the mayorsof the grouped municipalities and cities constituted an IAD council, and achairman and vice chairman were elected from among them. An IAD Officer wasalso appointed to the IAD Council, one of the regional line agency directors,providing a valuable link to the RDC, in addition to that provided by NROstaff who also sat on the IAD councils. The IAD Chairmen became automaticmembers of the Provincial Development Councils (PDCs) thus completing thelinkages between the key regional development agencies. The municipal andprovincial development officers (MDOs and PDOs), employed by the Ministry ofLocal Government, as well as the municipal and provincial coordinatingofficers (MCOs and PCOs), employed by local governments, were key personnel inIAD programming.

2. The MDOs or MACOs, with the mayors, compiled and fomulated localprojects, and presented them at public hearings as a prelude to "legitimiza-tion" through formal adoption of the IAD plans by the RDC. Because of limitedexpertise, funds and equipment, technical assistance had to be provided to theIAD staffs by either NEDA, the provincial governments, the regional lineagencies, or local consultants. Designation of technical assistance to theIADs was the responsibility of the NEDA Regional Executive Director, as ViceChairman and Executive Officer of the RDC.

3. The IAD project packages were consolidated into a regional program.During this process, the IAD projects were screened to enhance the viabilityand efficiency of the package. In addition, ongoing, pipeline, and proposedprojects of the national and regional line agencies were catalogued, reviewed,and integrated with the IAD projects. Moreover, projects related to theprivate sector "interface" were included. These were public investmentsdesigned to facilitate investments by the private sector, and arose fromdialogues between the RDC and representative private sector organizations suchas the Chamber of Commerce, the Bankers Association, the Tourist Board, andthe Dean-s Committee of private universities. The next step was a review ofthe total regional project package, relating it to the objectives of theregional development plan. Any prograin "voids" were filled by "augmentation,"

ANNEX 1- 53- Page 2

the adding of projects conceived by the regional team to complete the RDIP.The procedures are described in detail in the Region VII Inception Report./l

4. Once the compilation of TAD, line agency, private sector interface,and augmented projects was completed, the RDIP was segmented along sectorallines to facilitate regional budgeting and agency funding. The sectoralsegments were presented together to comprise the fully "integrated" RDIP whichwas to become the basis for regional budgeting. In Region VII, preparation ofthe inception report took six months, including the initial training of NEDA,line agency and IAD staff.

5. Subsequent stages of RDIP preparation involved more detailedanalyses of projects in financial and economic terms. The Region VII reportscontained detailed project description sheets which facilitated data record-ing. As the projects were more thoroughly costed, the budget requirements forthe RDIP were estimated, including disbursement time frames, foreign exchangerequirements, and contingencies to compensate for inflation. Since the RDIPwas designed to implement the five-year plan, a five-year time frame wasadopted.

6. An assessment of RDIP funding prospects and possibilities wasincluded. Projects could be funded from local (municipal and provincial),regional, national, or international sources recognizing that sub-nationalsources of revenue were limited. Methodology was devised to "prioritize"projects.

7. Special studies and investigations were necessary to fill data gapswhich improved the formulation of certain projects. In the case of RegionVII, commodity flow, industrial, and public finance and credit surveys, aswell as refinement of regional macro-economic indicators and projections, wereincluded among the studies. The Region VII RDIP proceeded through threestages. Following an inception report prepared in 1978, an interim report wascompleted by the end of March 1979. It included details of projects,including their integration into programs, their sectoral segmentation,and preliminary cost analyses. The third and final stage of the Region VIIRDIP was completed in the form of a Regional Development Project Report /2 bySeptember 30, 1979. Preparation of the first draft of the Region VII RDIPtook about eighteen months and part of it was presented to the Bank as thebasis for a possible regional project./3

/1 Central Visayas RDIP Project Inception Report. RDC and NRORegion VII. August, 1978.

/2 Philippines: Regional Development Investment Program for CentralVisayas (Region VII). Seven volumes. Region VII RDC and NRO.September, 1979.

/3 Phillippines: Proposed RDIP package for World Bank regional projectfunding. Central Visayas (Region VII). Region VII RDC and NRO.October, 1979.

ANNEX 2- 54 - Page 1

PHILIPPINES

CENTRAL VISA.YAS REGIONAL PROJECT

Regional and Project Setting

Regional Setting

1. The Central Visayas has a total land area of 14,950 sq km, orabout 5% of the country-s total area. The province of Negros Orientaloccupies 36% of the regional land area, Cebu 34%, Bohol 28% and SiquiLjor 2%.Of the total area, about 46% is classified as forest land of which 26.6% istimberland and 19.2% is unclassified public land. Alienable and disposable(A&D) /1 lands comprise the other 54% of the classified area.

2. Soils. The soils of the! Region are of variable fertility andhighly erodible. The soil parent material in Cebu and Bohol is mainlylimestone, especially along the coastal areas, but inland soils are oftenformed from shales with a high calcareous content. The soils of NegrosOriental are formed predominantly from acidic igneous materials, with lowcalcium content, except for the northeastern and western parts which areformed from limestone. Siquijor I'sland is mostly of coralline limestoneformation except for the central area where soils are formed from calcareousshale.

3. Climate. Located south and west of the Philippine typhoon zone,most of the Central Visayas has a short dry season lasting from one to threemonths during the high sun period (April to September). Southwestern Boholreceives evenly distributed rainfall with no distinct seasonality.Southwestern Negros Oriental has a four-month dry season during the low sunperiod (October through March). Average daily mean temperatures rangefrom 180 C to 350 C. The wet season extends from May to December with anaverage annual rainfall ranging from 1,500 to 2,500 mm. During heavy rains,mainly between June and October, run-off is rapid even on moderate slopescausing severe soil erosion.

4. Population. The Region's population reached 3.8 million in 1980,representing 8% of the Philippine total, and grew at an annual rate of 2.3%during the decade 1971-80. It is distributed unevenly among tlhe fourprovinces: 55% in Cebu, 22% in Negros Oriental, 21% in Bohol and 2% inSiquijor. About 70% of the total population is defined as rural. Average

/1 Alienable and disposable lands are non-forested, available for titlingand private ownership.

ANNEX 2- 55 - Page 2

density is 253 persons per sq km or 60% greater than the national average.Cebu Province, in particular, has a high population density - 410 personsper sq km - not only in urban areas such as Cebu City, the country's secondlargest city, but also in rural areas where the density of population percultivated area is greater than on the other islands. The population isyoung, with 43% under age 15 years.

5. Economy. The regional economy grew at an annual rate of about 5%during the period 1978-80 with gross regional product (GRP) rising fromP 12.6 billion in 1978 to P 18.8 billion in 1980 at current prices. Itsshare (7%) of gross national product ranks fifth in the country. Per capitaGRP was P 4,960 in 1980, and has been growing at a rate of 2.9% annuallysince 1978. Although 10-15% lower than the national average, it iscomparable to rates for regions outside metro Manila.

6. The Central Visayas has a relatively small agricultural sector butlarge industrial and service sectors. Agriculture, fisheries and forestry,while providing some of the Region's major export commodities (sugar, coconutand copra) account for about 20% of the regional economy - the lowestcontribution by agriculture to GRP in any region except metro Manila. Onthe other hand, industry (mining and quarrying, manufacturing, construction,electricity, gas and water) accounts for the highest share of any regionaleconomy except metro Manila because of above average contributions by mining,agro-processing and services (shipping and commerce).

7. The official rate of unemployment is about 7% for the Region, andis higher in Cebu (8%) than in the other provinces. Average family incomeis estimated to be 12% less than the national average, but is about the sameas in regions other than metro Manila. In 1975, the poorest 60% of theRegion's families received 15% of total family incomes, while those in the10% highest income bracket received 37%. The average reported rural income(P 4,700/family/year) was 72% of the average reported urban income(P 6,500).

Project Setting

8. Sites. Project sites are located in the municipalities of Badian,Alegria and Dalaguete in Cebu Island Province; in the municipalities ofBayawan and Basay in the Bayawan River watershed of Negros Oriental Province;in the municipalities of Talibon, Trinidad, San Miguel, Ubay and Danao in theIpil River watershed of Bohol Island Province; and in the six municipalitiesof Siquijor Island Province.

9. Social Forestry. The social forestry site in the Ayungon and Bindoymunicipalities of Negros Oriental Province was chosen independently by localauthorities and RBFD as the most appropriate area for testing a socialforestry development model for future regionwide and national application.The 17,363 ha site was formerly part of a timber concession licensed to the

ANNEX 256 Page 3

Philippine-American Timber Company Inc. It has a significant remnant ofprimary forest and a large area of ::Logged over forest in which indigenous andimmigrant cultivators have settled since local forest concessions werecancelled in 1979.

10. As Cebu Island is long and narrow, there are few large rivers andthe watersheds are correspondingly small. In the Badian-Alegria site,several smaller watersheds have been combined. This is in contrast withboth the Bohol and Negros Oriental sites where watersheds are larger andpopulation densities lower. The larger watersheds would be developed onlypartially during the project period but are treated as whole developmentunits to be consistent with the project concept of the watershed as the basicproject unit. To provide more flexibility in planning and subsequentdevelopment, all of Siquijor Island has been included as one site. Like thelarger watersheds, it is expected thilat only part of the Island would bedeveloped during the project period.

11. Nearshore Fisheries. Nearshore sites are tied to the watershedsin that the municipalities in which the watershed river meets the sea areincluded. As this area may be smal.L, sites have been extended along thecoastlines to provide project units of reasonable size and to include nearbyareas of special interest. For example, the Badian-Alegria nearshore sitehas been extended northward to Ronda to include the coral reef area ofMoalboal and Capton Bay with its mangrove areas.

12. The upland agriculture and forestry sites encompass 19 municipal-ities with 20,248 farm families. Nearshore sites include 18 municipalitieswith 7,700 fishing families. Total area of the sites is more than 140,000ha, 55% (77,053 ha) of which is public land, and the total population isjust over 200,000 (Table 1).

Table 1: LAND CLASSIFICATION AND POPULATION, PROJECT SITES

Total Ali,enable andarea di3posable Public land Population

Site (ha) Ha % Ha % (1982)

Siquijor 29,550 26,800 90 2,750 10 58,068Badian-Alegria 24,600 9,519 39 15,081 61 41,094Bayawan 31,148 2,348 8 28,800 92 37,460Ayungon 17,363 4,066 23 13,297 77 7,200Ipil River 37,567 20,442 54 17,125 46 63,444

Total 140,228 63,175 45 77,053 55 202,266

- 57 -

ANNEX 3Table 1

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

Training and Technical Assistance

Fellowships /1

Numberof Project

Subject matter Type Local Foreign fellows year(s)

RPO Project planning Non-degree X 2 PY3

RMA Upland farming Non-degree X 4 PY2-5Soil conservation Non-degree X 4 PY2-5Tree crops Non-degree X 4 PY2-5

RBFD Appropriatetechnology Study tour X 4 PY2-5Soil conservation Non-degree X 4 PY2-5Smallholderforestry Non-degree X 2 PY1-2

Mangrove manage-ment Non-degree X 2 PY1-2Forest standimprovement Study tour X 10 PY1-2

PY3Reforestation Study tour X I PY1-2

X 1 PY3Forest protection Study tour X 1 PY1-2

X 1 PY3

PEOs Road engineering Study tour X 4 PY2

Total 44

/1 Fellowships would complement project-funded training activities.A total of 12 local study tours and 32 overseas fellowships wouldbe offered in 11 different subjects. Refer Project Working PaperNo. 5.

- 58 -

ANNEX' 3Table 2Page 1

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

Training and Technical Assistance

Consultancies /1

Numberof staff- Project

Title Type months year(s)

RPO

Project management Foreign 20 PY1-2,4Personnel evaluation Local 3 PY1,2

Sociology Local 7 PY1-4Socio-economic surveys Special study - PYl

Project planning Foreign 6 PY3,4Project planning Local 12 PY3,4

Training Local 48 PY1-4Communications Local 1 PY1Extension materials Foreign 2 PY1-3

Monitoring and evaluation Foreign 17 PY1-5Monitoring and evaluation Local 34 PY1-5

Upland development Local 8 PY1-3Soil conservation Foreign 8 PYI-3Low-cost pasture Foreign 2 PYl

Social forestry Foreign 9 PY1-5Forest Products Marketing Local 15 PY1-5Community organizations Local 36 PY1-5

Marine extension Local 5 PY1-5Marine extension Foreign 5 PY1-5Fisheries curriculum dev. Local 5 PY1-5

Aerial Photo GroundControls Mapping Special Study - PY-1

- 59 -

ANNEX 3Table 2Page 2

Numberof staff- Project

Title Type months year(s)

Fisheries monitoring design Foreign 4 PY1,3Fisheries monitoring design Local 4 PY1,3Fisheries monitoring data col. Local 20 PYl-5Fisheries monitoring data anal. Foreign 4 PY3,5Fisheries monitoring data anal. Local 4 PY3,5

Construction supervision Foreign 18 PY2-3Mabinay irrigation feasibility Special study - PY3San Isidro impoundingreservation Special study - PY3

Subtotal 297

RBFDLegal services Special study - PY1-5Forest stand improvement Local I PYIResource inventory Local 3 PyiMonitoring Local 3 PyiSilviculture Local 3 PY2Socio-economic survey Special study - PYiForest market survey Special study - PY2Photogrammetry and Special study - PY1,2,5

interpretation

RMAFarming systems research Local 5 PyiResearch management Local 3 PYiSoil fertility Local 3 Pyi

- 60 -

ANNEX 3Table 2Page 3

Numberof staff- Project

Title Type months year(s)

RBFARFishpond supervision Foreign 3 PY3Fishpond supervision Local 6 PY3Seaweed inventory Special Study - PY2-3Coastal waters mapping Special Study - PY2-3

Subtotal 30

Total 327

/1 Consultancies would provide support to project and line agencypersonnel in implementing the project and replicating it in otherwatersheds of the Region. "Consultancies" include individualassignments filled by outside technical and managerial specialists,and special studies and services vital to effective implementationof the project. These latter studies and services would be awardedto outside groups on a contractual piece-rate basis. TbLe projectenvisions a total of 327 staff-months of consultants' services,including 98 staff-months of foreign technical assistance and 229staff-months of local consultants. In addition, the project wouldcommission ten special studies and management services on apiece-rate basis. Consultancies and special studies supplieddirectly to the RPO and SMUs would account for 297 staff-months;technical assistance to the line agencies would cover 30 staff-months. Refer Project Working Paper No. 5.

- 61 - ANNEX 4

Table 1

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

Estimated IBRD Disbursements(US$ million)

RepresentativeBank profiles/c

IBRD Fiscal Year Region-wide Bank-wide

and Semester Semester Cumulative % Cumulative Cumulative

1984 2nd /a 3.1 3.1 12 0 0

1985 1st 1.0 4.1 16 2 1

2nd 1.5 5.6 22 4 4

1986 1st 2.0 7.6 30 8 7

2nd 2.0 9.6 38 13 11

1987 1st 2.0 11.6 45 19 17

2nd 3.0 14.6 57 26 23

1988 1st 3.0 17.6 69 33 30

2nd 3.0 20.6 80 41 38

1989 1st 3.5 24.1 94 49 46

2nd /b 1.0 25.1 98 57 54

1990 1st 0.5 25.6 100 65 63

2nd - - - 72 72

1991 1st - - - 79 78

2nd - - - 86 85

1992 1st - - - 91 91

2nd - - - 96 96

1993 1st - - - 100 100

/a Estimated loan effectiveness date: March 31, 1983. Immediate

disbursements include repayment of the PPF ($1.1 million) and the

revolving fund ($2.0 million).

/b Estimated loan closing date: September 30, 1990, one year after

completion.

/c Profiles for Region-wide and Bank-wide Area Development projects:

28 and 85 in number, respectively. -

- 62 - ANNEX 5

Table I

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

Investment Schedule /a(P million)

TotalUS$

1984 1985 1986 1987 1988 Pesos million

Watershed ManagementUpland agriculture 13.8 11.7 20.4 26.7 33.1 105.7 7.6Social forestry 12.2 0.5 13.3 15.3 12.7 62.0 4.4Nearshore fisheries 4.8, 3.6 3.9 4.3 4.6 21.2 1.5Infrastructure 22.5 57.8 52.,3 44.0 22.0 198.6 14.2

Subtotal Watershed Management 53.3 81.6 89.,9 90.3 72.4 387.5 27.7

Support ServicesInstitution StrengtheningMinistry of Agriculture

Soil 2.1 1.7 2.6 2.2 2.7 11.3 0.8Livestock 3.7 7.2 10.2 2.8 1.0 24.9 1.8

Ministry of Natural ResourcesRBFD reforestation 4.6 2.6 3.5 3.5 5.3 19.5 1.4RBFAR regulatory 0.1 0.1 0.1 0.1 0.1 0.5 0.1

Regional Projects Office 2.6 2.7 3.3 2.7 2.0 13.3 0.9

Training 2.0 1.8 1.6 1.4 1.4 8.2 0.6Technical assistance 9.3 4.5 6.9 1.4 2.2 24.3 1.7Research 11.4 3.4 3.4 2.9 3.1 24.2 1.7

Subtotal Support Services 35.8 24.0 31.6 17.0 17.8 126.2 9.0

Project preparation 41.8 44.3 19.0 1.7 - 106.8 7.6

Total Project Costs 130.9 149.9 140.5 109.0 90.2 620.5 44.3

Taxes 5.4 5.4 5.3 5.2 4.6 25.9 1.8Foreign exchange 77.8 85.0 65.9 40.1 24.4 293.2 20.9

/a By calendar, and Philippine fiscal year. Totals include contingencies.

PHILIPPINES

CENTRAL VISAYAS REGONAL PROJECT

IMPLEMENTATION SCHEDULE

Year1985 1986 1987 1988 1989 1990

Watershed ManagementStaff recruitment _

BuildingsBid preparationAward/implementation _

Civil worksBid preparation _

Award/implementation _

Support ServicesRPO recruitmentMA civil works

Bid preparationAward/implementation

MNR civil worksBid preparationAward/implementation

Training ._--_-

Research

Project Preparation

Note: Bid preparation and award of contracts for establishing SMV's and to carry out projectinfrastructure works would continue on later years works as physical implementation prceeds. C15

31~

LR

- 64 - AŽNEX 6Table 1Page 1 of 2

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

Summary of Financial and Economic Prices of Project Inputs

(1983 constant Pesos)

1983 1995Conversion Conversion

Unit Financial factor Economic Financial factor Economic

FARMING AND FORESTRYRural unskilled labor day 11.00 0.75 8.25 11.00 0.75 8.25BFD unskilled labor day 15.00 0.55 8.25 15.00 0.55 8.25

FertilizersUrea MT 2,787 0.87 2,415 3,935 0.87 3,42514-14-14 MT 2,676 0.87 2,328 3,797 0.87 3,3030-18-0 MT 1,494 0.87 1,300 2,120 0.87 1,844Ammonia sulfate MT 1,254 0.87 1,090 1,770 0.87 2,034

PesticidesThiodin 60 cc bt 13.83 0.87 12.03 19.62 0.87 17.07Sevin 80 oz bt 39.00 0.87 33.93 55.34 0.87 48.15Lannate qt ht 94.78 0.87 82.46 134.48 0.87 117.00Asodrin qt bt 63.55 0.87 55.29 90.16 0.87 78.44

FungicidesBenlate kg 33.45 0.87 29.10 47.46 0.87 41.29

Other ChemicalsMango bloom it 35.68 0.87 31.04 50.62 0.87 44.04Glyphosate lt 111.50 0.87 97.00 158.19 0.87 137.62

Veterinary MedicineAntibiotic 100 cc 243 0.82 199.26 243 0.82 199.26Anti-ticks 500 g 285 0.82 233.70 285 0.82 233.70Vitamins A, D, E

and B complex 150 cc 112 0.82 91.84 112 0.82 91.84

SeedsPaddy kg 1.90 0.82 1.56 1.90 0.82 1.56Corn traditional kg 1.45 0.82 1.19 1.45 0.82 1.19Corn improved kg 2.90 0.82 7.31 8.92 0.82 7.31Corn hybrid kg 18.96 0.82 9.14 11.15 0.82 9.14Peanuts kg 8.92 0.82 10.39 8.92 0.82 10.39Mungbean kg 11.15 0.82 9.14 11.15 0.82 9.14Sweet potato kg 1.67 0.82 15.54 18.96 0.82 15.54Albizzia It 55.80 0.82 45.76 55.80 0.82 45.76Gmelina It 16.70 0.82 13.69 16.70 0.82 13.69Swietenia 10 lt 56.00 0.82 45.92 56.00 0.82 45.92Rattan/Burt 1,000 seeds 22.00 0.82 18.04 22.00 0.82 18.04Bamboo 100 seeds 55.80 0.82 45.75 55.80 0.82 45.75

Other Planting Material

Mango seedling 5.00 0.82 4.10 5.00 0.82 4.10Cacao seedling 2.00 0.82 1.64 2.00 0.82 1.64Jackfruit seedling 5.00 0.82 4.10 5.00 0.82 4.10Banana 10 shoots 5.00 0.82 4.10 5.00 0.82 4.10Avocado seedling 5.00 0.82 4.10 5.00 0.82 4.10Cashew seedling 5.00 0.82 4.10 5.00 0.82 4.10Ipil-Ipil seedling 2.00 0.82 1.64 2.00 0.82 1.64Sawlog seedling 5.00 0.82 4.10 5.00 0.82 4.10Gabi 50 shoots 5.00 0.82 4.10 5.00 0.82 4.10Grass cuttings 1,000 pieces 5.00 0.82 4.10 5.00 0.82 4.10

-65 - ANNEX 6

Table 1PRop 2 of 2

1983 1995Conversion Conversion

Unit Financial factor Economic Financial factor Economic

FARMING A4D FORESTRY (Cont'd)Equipment and ServicesCarabao with operator day 17.80 0.86 15.30 17.80 0.86 15.30Pick piece 72.50 0.86 62.35 72.50 0.86 62.50Digging bar piece 72.50 0.86 62.35 72.50 0.86 62.35Shovel piece 72.50 0.86 62.35 72.50 0.86 62.35Machete piece 50.20 0.86 43.17 50.20 0.86 14.17Trombone sprayer piece 335.00 0.86 288.10 335.00 0.86 288.10Backpack sprayer piece 560.00 0.86 481.60 560.00 0.86 481.60Plow point piece 50.20 0.86 43.17 50.20 0.86 43.17Heavy duty hoe piece 50.20 0.86 43.17 50.20 0.86 43.17Water tank piece 3,345 0.86 2,877 3,345 0.86 2,877Plastic bags 1,000 bags 55.8 0.86 50.00 55.8 0.86 50Wlheelbarrow piece 223 0.86 192 223 0.86 792Planting hoe piece 128 0.86 110 128 0.86 110Brush hooks piece 156 0.86 134 156 0.86 134Bow saw piece 167 0.86 144 167 0.86 144Pruning shears piece 117 0.86 100 117 0.86 100Log picks piece 89 0.86 76 89 0.86 76Log tongs piece 95 0.86 82 95 0.86 82Chain saw, 36" piece 5,854 0.86 5,034 5,854 0.86 5,034

FISHERIESBamboo poles pole 6.69 0.82 5.49 6.69 0.82 5.49(tropical reefs)Fishing gear - hook line man 111.50 0.86 95.89 144.95 0.86 124.66

Fish traps trap 167.25 0.86 143.83 167.25 0.86 143.83Nylon twine 100 m 6.69 0.86 5.75 8.72 0.86 7.50Rice bags (polyethylene) bag 2.23 0.86 1.92 2.90 0.86 2.49Mangrove seedlings ha 557.00 0.82 456.74 557.00 0.82 456.74

Reef markers- buoys buoy 111.50 0.86 95.89 144.95 0.86 124.66- anchor rope rope 3.90 0.86 3.35 5.07 0.86 4.36- anchor anchor 167.30 0.86 143.88 167.30 0.86 143.88

Nonmotorized banca- 7-3M banca 1,561.00 0.86 1,342.46 1,951.00 0.86 1,342.46

Gillnet unit 892.00 0.86 767.12 1,160.00 0.86 997.60

- 66 - hNNLX 6

Table 2

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

Summary of Financial and Economic Prices of Project Outputs(1983 constant Pesos)

1983 1995Unit Financial Economic Financial Economic

Annual CropsRice (paddy) kg 1.34 1.44 1.64 1.74Corn kg 1.12 1.07 1.22 1.27Cassava kg 0.45 0.37 0.45 0.37Sweet Potatoe kg 1.00 0.82 1.00 0.82Gabi (Taro) kg 1.34 1.10 1.34 1.10Peanuts kg 3.68 3.02 5.13 4.21Mungbeans kg 6.13 5.03 6.91 5.67

Tree Crops

Cacao kg 26.86 22.03 27.47 22.53Jackfruit piece 4.47 3.66 5.59 4.58Mango kg 2.23 1.83 2.79 2.29Banana 100 pieces 3.90 3.12 3.90 3.12Avocado piece 0.67 0.55 0.84 0.69Cashew kg 6.24 5.12 7.80 6.40Ipil-ipil leaves kg 0.50 0.41 0.75 0.62

LivestockCattle kg lw 11.00 12.07 11.00 12.07Goats kg lw 7.25 7.96 7.25 7.96

Upland ForestryFuelwood /aMixed species on-farm cm 55.85 75.84 83.77 1L13.76Dipterocarps/Gmelina m tons 78 291 117 408Albizzia m tons 78 233 117 326

Flitches from Dipterocarps 100 bd ft 14.50 11.89 14.50 11.89Swietenia poles pole 27.88 22.86 27.86 22.86Rattan poles pole 10.69 8.64 10.69 8.69Buri poles pole 5.58 4.57 5.58 4.57SawlogsAlbizzia cu m 217 377 281 470Gmelina cu m 329 572 426 725Swietenia cu m 830 1,436 1,070 1,819

Coastal ForestryMangrove cu m 86.50 117.47 130.00 176.54Nipa cu m 90.00 122.22 135.00 183.33

Marine ProductsFinfish kg 7.11 5.83 10.66 8.74Shrimp kg 20.07 16.46 30.10 24.68Crabmeat kg 27.88 22.86 41.82 34.29Molluscs kg 2.23 1.83 3.35 2.75Sea cucumber kg 11.15 9.14 16.73 13.72

/a The mixed species collected from small farmers by truckers and traders isassigned a lower farm-gate price than the special species such asDipterocarps, Gmelina and Albizzia, which are assumed to he grown inAyungon-Bindoy, i.e. Social Forestry component of the project, and sold tothe sugar mills of Negros Provinces with the accompanying benefit of reducedtransportation and trading costs.

- 67 -ANNEX 7Table 1

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

Incremental Costs and Benefits('000 Pesos at end 1982 prices)

NetIncremental Incremental incremental

No. Year costs benefits benefits

1 1984 51,540 -13 -51,5532 1985 68,887 1,012 -67,8763 1986 77,539 5,766 -71,7734 1987 77,081 12,686 -64,3955 1988 71,472 21,099 -50,3746 1989 28,073 34,224 6,1517 1990 24,580 48,700 24,1208 1991 23,809 63,652 39,8439 1992 25,487 75,455 49,96810 1993 28,027 96,107 68,08011 1994 18,739 129,446 110,70812 1995 21,249 176,012 154,76213 1996 23,744 194,766 171,02214 1997 25,689 166,417 140,72815 1998 27,691 179,794 152,10316 1999 28,680 202,194 173,51417 2000 29,225 162,210 132,98518 2001 29,781 139,292 109,51119 2002 30,429 145,477 115,04920 2003 31,078 155,994 124,91621 2004 31,320 156,459 125,13922 2005 31,462 157,017 125,55523 2006 30,556 156,915 126,35924 2007 30,517 230,931 200,41425 2008 31,473 230,137 198,665

Sensitivity analysis: ERR NPV at 10%(P million)

Base case 17.5 267.1Costs up 20% 14.8 187.5Benefits down 20% 14.2 134.0Benefits delayed 2 years 13.7 151.6

Switching value of benefits -40.1Switching value of costs 67.1

- 68 -ANNEX 7Table 2

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

Upland Agriculture: Incremental Costs and Benefits('000 Pesos at end 1982 prices)

Costs BenefitsSite Incremental

Incremental Management Technical Infra- Regional totalNo. Year cost Labor unit aIssistance Livestock structure Training management benefits

1 1984 - - 9,510.0 2,223.1 4,592.1 7,680.6 534.0 621.4 -

2 1985 4,239 1,140.3 7,856.5 912.9 3,755.5 18,528.0 396.4 617.2 164.53 1986 5,288.6 3,818.9 11,268.0 1,235.1 6,289.0 15,918.2 318.1 593.8 2,508.24 1987 14,760.0 7,331.8 11,210.0 507.0 658.5 12,303.9 276.2 559.4 7,544.95 1988 23,699.5 10,075.1 10,893.2 394.6 557.8 5,915.4 253.8 384.6 15,095.36 1989 509.3 6,674.5 5,311.8 1,593.4 2,374.6 406.9 24,415.17 1990 1,323.8 5,098.0 5,311.8 1,593.41 2,374.6 406.9 31,917.78 1991 3,162.8 2,756.1 5,311.8 1,593.4 2,374.6 406.9 44,276.89 1992 5,997.4 1,870.7 5,311.8 1,593.4 2,374.6 406.9 57,562.910 1993 9,136.4 1,085.5 5,311.8 1,593.4 2,374.6 496.5 67,539.511 1994 10,065.2 1,202.8 2,374.6 406.9 76,297.012 1995 11,311.3 1,320.1 2,374.6 406.9 83,369.213 1996 12,912.1 1,437.5 2,374.6 406.9 88,889.114 1997 14,875.5 1,554.8 2,374.6 406.9 94,313.515 1998 16,737.5 1,672.1 2,374.6 496.5 99,482.716 1999 18.399.0 1,789.4 2,374.6 406.9 105,233.917 2000 19,720.1 1,903.5 2,374.6 406.9 109,986.518 2001 20,441.4 1,999.2 2,374.6 406.9 112,954.519 2002 20,619.2 2,059.1 2,374.6 406.9 113,768.120 2003 20,620.6 2,073.8 2,374.6 496.5 114,312.621 2004 20,614.6 2,073.8 2,374.6 406.9 114,778.122 2005 20,601.2 2,073.8 2,374.6 406.9 115,335.723 2006 20,583.1 2,073.8 2,374.6 406.9 115,234.124 2007 20,566.0 2,073.8 2,374.6 406.9 114,668.725 2008 20,566.0 2,073.8 2,374.6 406.9 113,874.7

Sensitivity analysis: ERR NPV at 10%(Pmillions)

Base case 17.7 156.6Costs up 20% 14.7 105.8Benefits down 20% 12.6 74.5Benefits delayed 2 years 13.6 85.3

Switching value of benefits -38.1%Switching value of costs 61.6%

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

Social Forestry: Incremental Costs and Benefits

('000 Pesos at end 1982 prices)

Costs Benefits

Investmentcost Labor cost Site Forest

Tree reforest- forest stand management Technical Regional Infra- strand Off-farm

No. Year nursery ation improvement unit Training assistance management structure Reforestation improvement reforestation

1 1984 557.1 362.1 - 8,199.6 534.0 2,223.1 621.4 7,680.6 - - -13.1

2 1985 485.8 2,159.5 233.7 3,559.0 396.4 912.9 617.2 18,528.0 - 846.3 -38.9

3 1986 827.1 5,194.4 799.5 3,153.7 318.1 1,235.1 593.8 15,918.2 - 2,961.9 -103.2

4 1987 436.6 6,528.5 1,104.1 3,740.3 276.2 507.0 559.4 12,303.9 - 4,231.4 -133.0

5 1988 78.7 4,632.6 1,076.6 3,740.3 253.8 394.6 384.6 5,915.4 - 4,231.4 -221.5

6 1989 76.6 1,076.6 2,812.7 406.9 2,374.6 2,034.6 4,231.4 -146.2

7 1990 252.0 933.1 3,557.5 406.9 2,374.6 8,138.5 3,668.7 -125.5

8 1991 291.1 574.5 1,815.8 406.9 2,374.6 10,681.7 2,262.1 145.6

9 1992 178.6 359.4 1,815.8 406.9 2,374.6 9,586.2 1,418.2 349.8

10 1993 138.6 359.4 1,815.8 496.5 2,374.6 20,033.1 1,418.2 528.3

11 1994 483.1 359.4 406.9 2,374.6 44,322.7 1,418.2 961.7 1

12 1995 1,519.0 359.4 406.9 2,374.6 83,385.4 1,418.2 1,242.8 a

13 1996 2,296.0 359.4 406.9 2,374.6 96,246.2 1,418.2 1,546.9 '

14 1997 2,159.6 359.4 406.9 2,374.6 62,094.7 1,418.2 1,893.5 1

15 1998 2,025.4 359.4 496.5 2,374.6 69,775.3 1,418.2 2,388.8

16 1999 1,504.0 359.4 406.9 2,374.6 86,291.4 1,418.2 2,490.2

17 2000 502.7 359.4 406.9 2,374.6 41,343.1 1,418.2 2,670.7

18 2001 242.6 359.4 406.9 2,374.6 15,348.1 1,418.2 2,748.5

19 2002 651.8 359.4 406.9 2,374.6 20,700.3 1,418.2 2,748.5

20 2003 1,136.5 359.4 496.5 2,374.6 30,672,3 1,418.2 2,748.5

21 2004 1,720.3 359.4 406.9 2,374.6 74,516.9 1,418.2 2,748.5

22 2005 1,821.4 359.4 406.9 2,374.6 94,653.3 1,418.2 2,748.5

23 2006 933.7 359.4 406.9 2,374.6 42,884.5 1,418.2 2,748.5

24 2007 911.8 359.4 406.9 2,374.6 37,185.9 1,418.2 2,748.5

25 2008 1,929.7 359.4 406.9 2,374.6 123,820.0 1,418.2 2,748.5

Sensitivity analysis: ERR NPV at 10%

(P million)

Base case 17.4 89.7

Costs up 20% 15.0 66.5

Benefits down 20% 19.9 37.0

Benefits delayed 2 years 14.0 54.0

Switching value of benefits -43.6%

Switching value of costs 73.4%

(1.) -

- 70 -ANNEX 7Table 4

PHILIP]?INES

CENTRAL VISAYAS REGIONAL PROJECT

Nearshore Fisheries: Incremental Costs and Benefits

('000 Pesos at end 1982 prices)

CostsSite Benefit

Incremental management Technical Regional IncrementalNo. Year cost /b Labor /b unit Training assistance management benefit

1 1984 433.4 - 2,389.0 534.0 2,223.1 621.4 -2 1985 981.3 - 1,641.3 396.4 912.9 617.2 70.03 1986 981.3 - 1,641.3 318.1 1,235.1 593.8 399.44 1987 1,034.4 - 1,641.3 276.2 507.0 559.4 1,042.85 1988 1,064.6 10.4 1,641.3 253.8 394.6 384.6 1,992.96 1989 18.0 371.1 2,914.5 406.9 3,688.97 1990 113.8 527.5 1,641.3 406.9 5,099.68 1991 155.7 536.9 1,641.3 406.9 5,885.89 1992 208.9 539.6 1,641.3 406.9 6,537.710 1993 275.0 430.9 1,641.3 496.5 6,588.111 1994 275.0 383.1 406.9 6,446.612 1995 328.8 440.6 406.9 6,595.913 1996 328.8 440.6 406.9 6,665.814 1997 328.8 440.6 406.9 6,697.315 1998 275.0 383.1 496.5 6,728.716 1999 275.0 383.1 406.9 6,760.217 2000 328.8 440.6 406.9 6,791.718 2001 328.8 440.6 406.9 6,823.119 2002 328.8 440.6 406.9 6,842.320 2003 275.0 374.0 496.5 6,842.321 2004 275.0 307.4 406.9 6,842.322 2005 328.8 307.4 406.9 6,842.323 2006 328.8 307.4 406.9 6,842.324 2007 328.8 307.4 406.9 6,842.325 2008 266.5 307.4 406.9 81,423.5

Sensitivity analysis: ERR NPV at 10%(P millions)

Base case 16.4 20.8Costs up 20% 14.1 15.1Benefits down 20% 13.6 11.0Benefits delayed 2 years 13.3 12.3

Switching.value of benefits -42.3%Switching value of costs 73.4%

- 71 - ANNEX 8

PHILIPPINES

CENTRAL VISAYAS REGIONAL PROJECT

Related Working Papers in the Project File

1. Upland Agriculture2. Social Forestry3. Nearshore Fisheries4. Infrastructure5. Training and Technical Assistance6. Community Development7. Land Use and Tenure8. Detailed Cost Tables and Procurement Profile9. Financial and Economic Analysis10. Project Preparation Report, Vols. 1-4. September 1982.

1BRD 17219

116e CLASSIFICATION OF PROVINCES l20, 12e~ARL18

IlY EOGRARHICAL REGIONS,

NC(i NATIONAL CAPITAL REGION

I, ILOCOS WESTERN VISAYAS HL P( E1 lacosNorte. 38 Aklan

2Abra 3 ai CENTRAL VISAYAS REGIONAL PROJECT3 IfocnsSu 40 Antique

20' 41 tltob 20'-

I Mauntion 42 Negt-os Occidental Project Provinlces6 Bzg~tCENTRAL V1SAYAS

Banquet ~~~43 Cebu ___ PROJECT AREA7 Penasn6 ane 44 NegrosOriental MNCTE

11CAGAYAN VALLEY 45 Bohol ± MAIROR CTIS

8 Batanes 46 Siqaijor AIRPOA TS

9 Cagayan EASTERN VISAYAS _ 9 ÷- ROAILAY

10 Kelinga-Apayao RAILWAYSanl V~cPJBONARE

11 Isabela ~~48 western Samtar REG-- OIONCAL BOUNDARIES

1 2 IftSao 49 Eastemt Samar Rpr NERNAIONAL BOUN DARIES

13 Nueva Viscape 50 Leyte 1NENTOALBUDRE

14 Qulrino 51 Southern Leyte t.OOO

III CENTRAL LUZON ')1 WESIERN M4INDANIAO /

15 Nueva Ecija 52 Zamboanga del Norte16 TatrIac 13 Zamboanga del Saur 2

1 7 Zembales 54 B.anilnI IS PAnspange 55 Sulu

19 8ulacan 56 Tawi-Tawi O1k20 Battan /NORTHfERN ISINDANAO ~

IV SOUTHERN TAGALOG. 57 Agusan del Norte SWa ~ 12 1Aurora 58 A9usana del Sur Fernando 5~

23 Rital ~~~~60 Camniguins 0 o SD 5G0 200 20 300

le 24 Cavite 61 PA isan Ocnidental 16'14KOM7E

25 Laguna 62 MAsamini Oriental Mt15L AES,

25 Betangat ~~~63 SurigaO del Norte o 50 ot6 15 20

27 Maerinduque /EASTERN MINDANAO,an229 Mlindoro Oriental 64 Dauo de Norte TC I

29 Mindoroc Occidental 65 Danao Oriental 1 1 * cbnlo

30 Rombhlon 66 Davao,oel Sur Agel~ 1

31 Pedawar, 67 South Cotabato C

X! ICOL 68SrgodlOrO'nao 2 2 \ H IIIPP INE S E A32 Gamarines Niorte 7?,II SOUTHIERN MINDANA0

33 Camarines Stir 69 Lanao det Norte24 -/

35 Albay 71 Maguindanao ogI

36 Sorsogor 72 North Cotelato \

37 Masbate 73 Sullen Rudiiat e3

31

5OUTH C H I N A~~~~~~~Pna GI 2

Princena urs9~~~~~~~~~~~~Ale

CHEA A 3/ 1 I

5 N~~~~~~~~~~3

J~~~~~~1R/OAAD N~ ~~~~~~~~~~~~~~~~~~~etN GEL EEES SEA~~~~~~~~~~~ul

YS,~~~~~~~~~N N ~ ~ ~ ~~,- ,,- Th!,-ht S,w~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

MAAYIA4 Ntr o,sen ,eaeenttt e,narese twenyIPuertonnenno

4,te wo,, -N enwnerf te teno anwa /t Wntzw oa heknerOt/

Gd r'noae Cnwwaan eta eownootnns maotA tnO nnoAleas/tOwn n Sha me 4/t6o

/ 0000 o noat t o Ihoe B/txSht/t t(tetn//tA Aonc C,nnahen Otht/A/Coh

N 0 en I Aoteetogarsatns n$a, 065/ttoSYor ate e/t,sowentarccoe?ance/t ~a/t/t D/tn/toneS

SULU S2CA28

IBRD 17031l H > 2343 ¶ f20fi3B gV 70 ¶345 bARClf 3033 1

J Ph,lopiT U. 8 VrSAYAN Sif A

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X i t 3acood Cily f |~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~7o

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s t -80 C C I D E N TA L <SCAMfOrE,, SEA

} _ir / C SfJ ogWnsan -> 4 70020

do '.'shd~~~~~~~~~~~~~~~~~~~~~esed,J< ~~/ s°0XarcjroL A/ tow

--N E G Rois /R E -N TZA 7 _L-C~

/ k /) < - < st~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3030

PHILIPPINES

( \4DumCagueReC- S;q Uijor A CENTRAL VISAYAS REGIONALPROJECT

PROJECT LOCATIONS

-, i)07 ; 4gJ \ _ Project Areas~~~~~~b- ~~~~~~~~~~~~~Major Roads

4L Ports

± AirportsMunicipal Boundaries 9°00

J - Provincial Bourncries

3514.0$,O t 20 30KL OMETERS' T3 - 2t t0

o23-D 1933t 120,00 124230 0

13RD 17032

' ;-, 2,5 0A. >; 4BADIAN-ALEGRIA ;''u'9 _ ('>I![E

- Xi9 feanlo rrvaon~t_St*7: &00; 00\;

li;it; \;0f'i;.0U.Ei v 2 2'it t,^-- .. i ...fsongl; <sV ,/ '2:20 ;; ::: 00 0~~~~~~~~~~~~~~~~~.........

1X ''"D , iA X~~~~~~~~~~~~D 'J X m |f =b ! ; t r / U r - i- X /~~~~~~~~~~~j-

1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 0"S t'H 0 :\tOToblson'~-- / I , ,,< ;§gT '- \;?$' ) = " 'CENTRAL VISAYAS REGIONAL DEVELOPMENT PROJECT

<;/a n d u n C &<Rm°MentXi - > - ~~BADIAN-ALEGRIA, 1PIL RIVER, SIQUIJOR-MARIA WATERSHEDS

s q i ;ru 'S91;S<t \'t 4* AoK(Sb i > 4||*^''' r a Eyisr......... ..... diD' . -'r. 0 B ' . t i . , < qtilo:nS s>z>6aXSp:t>~~~~~~~........... E--~ ads - rry- n,

t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.d p.p.r !', '.d~ ff.-g> ~ Mncp---tie & 2iE t 0 i ¢ F 5 t u X c:v y szq~~~~~~~~~~~~~~~~~ .... - '.- Int° bounamqyl s( r

IBRRD 17033

/ ~~~~~~~~~~~~~~BAYAWAN RIVER ',y- AYUNGON-BINDOY-WMRH18/ ~~~~~~~ ->7Th ~~~~~~~~~~~PHILIPPiNES MRHt~

~~. tb - ~~~~~~~ /2 ~~CENTRAL VISAYAS5&5O~4' ~ / REGIONAL DEVELOPMENT PROJECT

/ <NLoxuhTi~oonOlbAYUJNGON-BINDOY,L A.-~~~~Nbhn BAYAWAN RIVER WATERSHEDS

I ~~~~~~~Project budre7 MxasIjmO -' > * A9q~~~~ ~ ~~ngon Existing national roads

A ---->~~~~~~-i " . (JondoWmo:sn Sumenius tys;oxois - Existing barangoy roads~~~~~~~~~~......... xitin baargy rad

A I -~~~~~~~~~~~~~~~~~--- ~~~~~~~G--Roads proposed for improvements

K / C~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~Proposed basangay roads

C; / >3 .11 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~--~~Ml-lRivers or creeks

-. / 2 Optuenutee ~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 Municipalities

,,..~~~~~~.., N Mobut~~~~~~~~~~~359 C,. j ~~~~~~~~~''2 Tixub 0 Barangays~~~~~~~~~~0 Baanay

N vNi< 7 7 \~~~~~~~~~~~ ; N I -..- '..--. Municipal oovndarixs~~~~~~~~~~~~~Muncialboudaie

KuIu,ub'1{>. ~u Q~-u7- .......- Provnicial boundaries

0

f C ~~ I\ (7 Couljso -- - International....boundaries,

unouon~~~~~~~~~~~a '{ '2 '2 3. ~~~~~~~~~~~~~~~~~~~~BeTdoy®

'1 '5~~~~~~~~~~~~~'

ongka.

p '. '2 tIlTS ®m ,rCRIA 3 0 2 4 u 8 IC~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Z 2 4 8 1

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IDA -5osuoe T~~~~~~~~~~~~~~~~~~~~~~~~~~~v1

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