World Bank Document...tural production activities are limited, agricultural productivity is low and underemployment is high. 1.03 Although agriculture's share of GDP has been falling

Document of

The World Bank L

FOR OFFICIAL USE ONLY

Report No. 3850-PH

STAFF APPRAISAL REPORT

PHILIPPINES

COMMUNAL IRRIGATION DEVELOPMENT PROJECT

May 12, 1982

Agriculture Division IIProjects DepartmentEast 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 EQUIVALENTS

Currency Unit - Philippine Pesos (P)

P 1 = US$0.123US$1 = P 8.1SDR I = US$1.111

WEIGHTS AND MEASURES

1 ha = 2.47 acres

I m = 3.28 ft

1 km = 0.62 milesI sq m = 10.76 sq ft1 cu m = 35.31 cu ft1 mm = 0.039 in

1 kg = 2.2 lb1 cavan = 50 kg

20 cavans = 1 metric ton

(referred to as ton inthis report)

ABBREVIATIONS

AFT - Agriculture and Food TechnicianCIDP - Communal Irrigation Development ProjectCIS - Communal Irrigation SystemCO - Community Organizer

COA - Commission of AuditFSDC - Farm Systems Development CorporationGDP - Gross Domestic ProductIIYV - High Yielding Variety

IA - Irrigators' AssociationIFAD - International Fund for Agricultural DevelopmentIRRI - International Rice Research Institute at Los BanosMAR - Ministry of Agrarian ReformM&E - Monitoring and EvaluationMOA - Ministry of Agriculture

MPWH - Ministry of Public Works and HlighwaysNEDA - National Economic and Development AuthorityNFA - National Food AuthorityNFAC - National Food and Agricultural CouncilNIA - National Irrigation AdministrationNWRC - National Water Resources CommissionO&M - Operation and MaintenanceOED - Operations Evaluation DepartmentPDD - Project Development DepartmentPIE - Provincial Irrigation Engineer

FOR OFFICIAL USE ONLY

PIO - Provincial Irrigation OfficePPAR - Project Performance Audit ReportRID - Regional Irrigation DirectorRIO - Regional Irrigation OfficeSEC - Securities and Exchange CommissionTSP - Triple Super-Phosphate

GLOSSARY

Palay = Threshed Unmilled RiceBarangay = Village

GOVERNMENT OF THE PHILIPPINESFISCAL YEAR

January 1 - December 31

|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


Table of Contents

Page No.

1. BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . 1

General .*.*. ,.* 1The Rural and Agricultural Sector . . .. . . . . . 1Irrigation Subsector Institutions . . . . . . . . . . . . . 2Agricultural Support Services . . . . . . . . . . . . . . . 5Agricultural Inputs .... . . . . . . . . . . . . .... 6Irrigation Development in the Philippines . . . . . . . . . 7Communal Irrigation Subsector . . . . . . . . . . . . . . . 8Future Development of the Communal Irrigation System. . . . 10The Participatory Approach to Development of Communal

Systems. . . . . . . . . . . . . . . . . . . . . . . . . . 11Experience with Past Lending ... . ..... . . . . . . . 12

2. THE PROJECT AREA . . . . . . . . . . . . . . . . . . . . . . . 13

Natural Conditions .... . . . . . . . . . ...... . . 14Socioeconomic Conditions . . . . . . . . . . . . . . . . . . 16Existing Infrastructure. . . . . . . . . . . . . . . . . . . 18

3. PROJECT FORMULATION ................... 18

NIA Program ......... .......... 18Major Components ....... . .......... 19Other Components . . . . . . . . . . . . . . . . . . . . . . 20

4. THE PROJECT . . .. .. . . 21

Project Objectives ................... 21Project Description . . . . .. . . . . . . . . . . . . . 22Detailed Project Features . . . . . . .. . . . . 22Status of Engineering. . . . . . . . . . . . . . . . . . . . 30

This report is based on the findings of an appraisal mission in September/October 1981, consisting of Rafique Qureshi, Robert Hindle, John Macgregor,Abate Menkir, and Johannes ter Vrugt (Bank), and Jasper Ingersoll(Consultant).

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Page No.

5. PROJECT COSTS AND FINANCING. . . . . . . . . . . . . . . . . . 31

Cost Estimates .31

Financing. . . . . . . . . . . . . . . . . . . . . . . . . . 32

Procurement .34

Disbursements. . . . . . . . . . . . . . . . . . . . . . . . 35

Accounts and Audit .... . . . . . . . . . . . . . . . . . 37

6. ORGANIZATION AND MANAGEMENT ................ . 37

Project Implementation ... . . . . . . . . . . . . . . . 38

Operation and Maintenance . . . . . . . . . . . . . . . . . 40

7. AGRICULTURAL PRODUCTION . . . . . . . . . . . . . . . . . . . 41

Present Cropping Pattern .41Future Cropping Patterns .42Yields and Production. . . . . . . . . . . . . . . . . . . 42

Harvest, Drying, Storage and Processing .45

8. MARKET PROSPECTS, PRICES, FARM INCOMES AND COST RECOVERY . . 45

Market Prospects .45

Prices .46

Farm Incomes . . . . . . . . . . . . . . . . . . . . . . . 47

Cost and Rent Recovery .48

9. BENEFITS, JUSTIFICATION AND RISKS. . . . . . . . . . . . . . 52

Benefits .52Financial and Economic Analysis. . . . . . . . .. . . 54

Sensitivity Analysis .55

Environmental Effects. . . . . . . . . . . . . . . . . . . 56

Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . 57

10. AGREEMENTS TO BE REACHED AND RECOMMENDATION. . . . . . . . . 58

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Page No.

ANNEXES

1. Climatic Characteristics by Region . . . . . . . . . . . . . 60

2. Table 1 - Strengthening of Provincial Irrigation OfficesClassification Levels . . . . . . . . . . . . . 61

Table 2 - Office, Survey and Hydrologic Equipment. . . . . . 62Table 3 - Construction Equipment, Machinery and Vehicles . . 63Table 4 - Estimated Schedule of Expenditures . . . . . . . . 64Table 5 - Estimated Schedule of Disbursements. . . . . . . . 65Table 6 - Proposed Allocation of IBRD and IFAD Loan . . . . 66

3. Estimated Crop Labor Requirements . . . . . . . . . . . . . 67

4. Table 1 - Rice Farms: Physical Inputs, Yields and UnitPrices. . . . . . . . . . . . . . . . . . . . . . 68

Table 2 - Farm Budgets: Rainfed Rice Farms . . . . . . . . . 69Table 3 - Farm Budgets: Irrigated Rice Farms . . . . . . . 70Table 4 - Farm Budgets: Rainfed Corn Farms . . . . . . . . . 71Table 5 - Farm Budgets: Economic Prices. . . . . . . . . . . 72

5. Annual Operation and Maintenance Cost of Typical CommunalIrrigation System .... . . . . . . . . . . . . . . . . . 73

6. Accounting Procedures for Force Account Work and MinorContracts .... . . . . . . . . . . . . . . . . . . . . . 74

7. Related Documents and Data Available in the Project File. . . 76

CHARTS:

Figure 1.1 - NIA OrganizationFigure 1.2 - Regional and Provincial Offices' OrganizationsFigure 6.1 - Communal Irrigation Development Project Organizational ChartFigure 6.2 - Sample Flow Chart: Subproject ActivitiesFigure 6.3 - Implementation Schedule

MAP:

IBRD #16197

PHILIPPINES

COMHUNAL IRRIGATION DEVELOPMENT PROJECT

1. BACKGROUND

General

1.01 The Government of the Philippines has requested the Bank and theInternational Fund for Agricultural Development (IFAD) to assist in financ-ing the National Irrigation Administration's (NIA) program of communal irri-gation development. The project would strengthen the Provincial IrrigationOffices (PIOs) which are responsible for implementing the program. It wouldfinance the construction of about 25%, by area, of the expected NIA program

for communal irrigation works during the project period, adding about 3% tothe existing area, and would also rehabilitate 3% of the present communalirrigation area.

The Rural and Agricultural Sector

1.02 Agriculture is the predominant sector in the Philippine economy,accounting for about 30% of the gross domestic product (GDP), 60% of foreignexchange earnings and over half of total employment. About 70% of thepopulation lives in rural areas, where nearly two-thirds of the householdsdepend on small farms for their main source of income. About 85% of the2.35 million farms in the Philippines are smaller than 5 ha; the average

size is 3.6 ha, and rice farms average only 1.8 ha each. Between 50% and60% of all farmer and farm-laborer households subsist below the absolutepoverty income level of US$195 per capita (in 1980 prices). Populationpressure has caused even the most marginal lands to be brought under culti-vation, and most future increases in production must come from higher yieldsand cropping intensities. Yet adverse price ratios retard the use of

yield-enhancing fertilizers and crop protection chemicals; supporting ser-

vices of research, extension, marketing and training are often inadequate;formal credit is severely limited and informal credit expensive; andinsecure land tenure limits many farmers' willingness or ability to adoptinnovations in production techniques. Hence higher yields do not comeeasily. Higher cropping intensities are also limited by existing cropvarieties, inadequate extension support, and inadequacy of water throughrainfall or irrigation. Rural social services are inadequate, nonagricul-tural production activities are limited, agricultural productivity is lowand underemployment is high.

1.03 Although agriculture's share of GDP has been falling relative toother sectors, food production rose during the 1970s at an average of 7%p.a. This was facilitated by heavy government investments in high-yieldingcrop varieties and technical packages coupled with extension and farm

credits and to a lesser extent irrigation. Most of these initiatives were

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directed at rice and corn, which together account for about 36% of the valueof agricultural production, 57% of the area, and 70% of employment.

1.04 Rice is the primary staple of over 80% of the population, andaccounts for about 30% of total harvested area. The Masagana 99 program ofrice production support was instrumental in helping the country to achieverice self-sufficiency in 1977, and since then the Philippines has exportedsmall quantities of rice each year except 1981, when adverse weather andlower prices limited production to about the level of consumption. Corn isthe primary staple of a sixth of the population and the main feed componentof the livestock industry. Recent progress in developing varieties resistantto downy mildew offers the prospect that corn yields, now among the lowest inAsia at under one ton per ha, might rise enough to reduce or even eliminatethe chronic need for corn imports, but this is only now being tested on acommercial scale. Coconuts and sugarcane are the third and fourth mostimportant crops, both major foreign exchange earners whose profitability andproduction depend on unstable and currently depressed world prices. Acombination of factors including relative prices, yields, soils and climatehas limited the use of the expanding irrigation infrastructure largely torice cultivation.

1.05 Government Objectives and Strategy. The Government's current(1978-82) five-year development plan sets general objectives of high growth,greater resource mobilization, reduced income disparities and improvedenvironmental quality. All of these apply to rural sector development, butspecific goals most relevant to the agricultural sector are poverty reduc-tion, continued food self-sufficiency and more diversified agricultural pro-duction. These goals are closely interlinked, since policies aimed atachieving one goal inevitably affect the others. Recognizing this, theGovernment has chosen to place most of its agricultural sector investments ininfrastructure-building to support the broadest range of economic activities,while launching specific programs to address particular problems. Thespecific programs include land tenure reform, crop research, and a wide rangeof crop production programs combining credit, input supply and/or technicalsupport. The infrastructure investments emphasize power, irrigation andhighways. The problem of poor and often deteriorating ratios between pricesof production inputs and farmgate prices of the major crops is a major con-straint on the poverty reduction and agricultural production goals, and hasnot yet been adequately addressed. The Government s draft development planfor 1983-87 states that performance during the current plan period has beensatisfactory, and sets the attainment of sustainable economic growth, equi-table distribution of the fruits of development, and total human developmentas the major national goals for the next plan period.

Irrigation Subsector Institutions

(a) National Irrigation Administration

1.06 Organization. NIA, the central institution in irrigationdevelopment, was established in 1963 as the successor organization to the

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irrigation division of the Bureau of Public Works. NIA's mandate is a broadone. It is responsible for the planning, development, construction, andoperation and maintenance (O&M) of nearly all irrigation works in thePhilippines. Specifically, NIA is to (a) investigate and study all waterresources for irrigation purposes; (b) construct, operate and maintain allnational irrigation systems; (c) construct, temporarily administer andperiodically repair communal and pump irrigation schemes; (d) collect watercharges; (e) construct multipurpose water resource projects; and (f)construct drainage facilities in collaboration with the Ministry of PublicWorks and Highways (MPWH). In the past NIA has largely concentrated onconstruction of large new schemes and rehabilitation of existing ones, andO&M have received relatively lesser support. For both technical andfinancial reasons this historical concentration on large new capital works isshifting largely to smaller works with increasing attention to rehabilitationand O&M issues. The smaller works are largely located in the communalirrigation subsector.

1.07 Although as a semiautonomous agency NIA has a large degree of oper-ational freedom, it is attached to the MPWH for program and policy coordinat-ion. NIA is governed by a Board of Directors appointed by the President. Atpresent Board members are the Minister of Public Works and Highways(chairman), the Administrator of NIA (vice-chairman), the Director General ofthe National Economic and Development Authority (NEDA), the Minister ofAgriculture, the General Manager of the National Power Corporation and aSecretary. The Board takes an active role in setting guidelines anddirections for the agency. The President appoints the Administrator and allAssistant Administrators of NIA. Within the headquarters at Manila, NIA'soperations are divided among four Assistant Administrators: (a) ProjectDevelopment and Implementation; (b) Operations; (c) Finance and Management;and (d) Personnel and Administrative Services. Most field activities areunder the supervision and control of Regional Irrigation Directors (RIDs).(See Figure 1.1 for organization chart of NIA.)

1.08 NIA has a Regional Irrigation Office (RIO) in each of the 12 Regionsas well as PIOs in 72 provinces. (See Figure 1.2 for the organizationalstructure of each Regional Office.) The identification, preparation andappraisal of communal irrigation systems (CISs) is initially handled by thePIOs. The RIOs review these proposals and assist in further preparation,particularly on agricultural and economic aspects. The proposals are thensent to the headquarters office where they are screened and annualoperational programs are established. Detailed engineering and economicaspects are reviewed first by RIDs and then at headquarters by the ProjectDevelopment Department (PDD). The approved program is then carried out by thePIOs.

1.09 Financial Situation. At the end of 1980 NIA had total assets ofP 8.8 billion, the bulk of which (68%) represents civil works completed orin process. Equity capital from the Government amounted to P 1.0 billion.Total assets grew 27% over the previous year, although there is also an

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element of overstatement as NIA's investments are carried at original cost.NIA's current liabilities have been growing rapidly and at the end of 1980amounted to f 2.2 billion. Government public works appropriations andequity contributions are by far the largest sources of NIA's income, butrecent cutbacks have caused a constriction of liquidity which is slowing theimplementation of some large projects. Increased irrigation fee collection(6% of total revenues in 1980) and reduced salary overheads (as completion ofsome major projects has allowed staff reductions) have not been sufficient toease the tight liquidity.

1.10 Accounts. As regards individual foreign-funded projects, NIA'saccounting procedures and staff are good. For the agency as a whole, how-ever, there are problems with the present system. First, the number ofseparately maintained accounts leads to errors. Second, NIA has somedifficulty in ensuring accountability of cash disbursement officers in thefield. Finally, and perhaps most importantly, the financial records systemis too unwieldy to supply timely financial information to managers and toprovide at any one point in time a complete picture of all NIA financialoperations. Improving financial reporting and accounting for nonforeign-funded opeations is a high priority for NIA's management, and steps have beentaken to strengthen reporting at the head office. In addition, a privateauditor has been engaged to review selected accounting subsystems. Muchremains to be done, however, to ensure development of a fully integratedand responsive accounting system and to train requisite numbers of staff.

(b) Farm Systems Development Corporation (FSDC)

1.11 The FSDC, created in 1975, plays a minor role in the irrigationsubsector. It has responsibility for farm technology development andextension, and entered the irrigation field largely through its work inestablishing small pump irrigation systems and irrigators' associations (IAs,see para. 1.25). Until 1981 it had responsibility for organizing CIS farmersinto IAs under an agreement with NIA in which NIA undertook all engineeringtasks and FSDC all organizational tasks. This agreement also assigned FSDCthe task of collecting on NIA's behalf the capital costs of CISs from thebeneficiaries. In practice, there were many problems with this arrangement.NIA's PIOs were inadequately equipped to carry out their engineering tasks;FSDC's institutional organizers were too few, often inadequately trained inproblems of irrigation, and isolated from the PIOs. Farmers did not getinvolved in the design and construction of irrigation systems; theirinvolvement only began when the completed systems were turned over to them.Further, farmers' problems during O&M of the systems related mainly totechnical matters which FSDC's institutional organizers were not trained toresolve. Disputes over design and costs have kept nearly half of the 350CISs built in the last four years from being turned over to farmers. FSDC'sorganizers made little or no progress in improving the capital repaymentrecord. In view of these problems, NIA and FSDC have agreed to phase outtheir joint operations by 1984, after which NIA will take full responsibil-ity - organizational and engineering - for all CISs of over 100 ha and also

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for many smaller systems, amounting to about 80% of the communal irrigationsubsector; FSDC will assume responsibility for the small systems only,mainly in pump irrigation, constituting not more than 20% of the CISs. NIAhas always had, and would continue to have, full responsibility for thenational irrigation systems.

Agricultural Support Services

1.12 Extension. A number of institutions provide extension and otherforms of support to farmers in irrigated areas. The Ministry of Agriculture(MOA) is responsible for the extension service, providing on the average oneagriculture and food technician (AFT) for every 104 farmers nationwide. TheBank's National Extension Project (Loan 1626-PH) is strengthening thisservice. Various credit institutions, rural banks, FSDC and the Ministry ofAgrarian Reform (MAR) also provide some technical support to farmers. NIAitself trains water management technicians to help farmers use their irriga-tion systems efficiently. The National Food and Agricultural Council (NFAC)is responsible for coordinating the activities of all national agencies infood production while local municipal action committees and IAs coordinateat the level of individual irrigation systems. It is recognized that theextension and other support services provided by various agencies needbetter coordination, and that extension agents need broader training. AFTsare often ill-trained to advise farmers on irrigated rice production tech-niques, and water management technicians seldom receive much training inagronomy; the two sometimes provide conflicting advice to irrigators. Theproposed project's training component addresses this need in relation to thecommunal irrigation subsector.

1.13 Rice Research. In addition to the central research facilitiesprovided by the College of Agriculture of the University of the Philippinesand the International Rice Research Institute (IRRI), both at Los Banos,there are six rice experiment stations run by MOA and a number ofsubstations located all over the country. The main emphasis of the work onrice in these stations is on varietal screening, foundation seed productionand certification, fertilizer trials and intensified land utilization throughmultiple cropping. High yielding varieties (HYVs) of rice, better farmmanagement techniques and more appropriate farm machinery and tools arecontinually being developed at these facilities. Irrigated rice yields atthese stations often exceed seven tons per ha per crop.

1.14 National agricultural research is coordinated and evaluated by thePhilippine Council for Agriculture and Resources Research which assists inthe formulation of relevant research programs and assists MOA in thepackaging of technology for promotion by the extension service. Likewise,the National Nutrition Council, together with the concerned ministries andsuch agencies as the National Media Production Center, the Nutrition Centerof the Philippines and the Food and Nutrition Research Institute are engagedin drawing up nutrition technology packages suitable for national programs.

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Agricultural Inputs

1.15 Seed. At present the average seeding rate is about 80 kg/ha,mainly because of poor germination, damage to seedlings during transplanting,too many seedlings per hill, improper spacing, and anticipation of drought orfloods. Most of the seed is obtained by retention of on-farm production,though it is not uncommon for farmers to purchase seed from registeredgrowers or from other farmers who grow the desired variety. In the future,given an assured supply of high quality seed and irrigation water, it isestimated that the average seeding rate will be about 50-60 kg/ha. Nodifficulties are foreseen in the production and distribution of registeredseed. Most farmers are well informed about the new improved varieties andtheir characteristics and readily purchase the output of registered seedgrowers.

1.16 Fertilizers. The 1980 national annual consumption of fertilizerwas about 820,000 tons, of which three fourths was imported. About half ofthe imported fertilizer was urea. Application rates on rice farms vary from50 kg/ha or less in some rainfed areas subject to flooding to 250-300 kg onbetter farms with reliable irrigation. Farmers often use the wrongfertilizers or apply it at the wrong time, and tend to underrate theimportance of a proper basal dressing. Sometimes, however, farmers arehesitant to apply the recommended amounts of inputs because of unassuredwater supply and unattractive price ratios between palay and fertilizer.The existing fertilizer distribution network is adequate and could easily beexpanded to meet increased demand.

1.17 Agrochemicals. Agrochemicals are readily available in thePhilippines and are widely used in small to modest quantities. Surveys showthat most rainfed areas and almost all irrigated areas receive somepesticide application but these average only half or less of the recommendeddosages. Consequently the applications are not always effective. Seriousoutbreaks of insect pests and diseases are, however, not common. Farmersare also well acquainted with herbicides, and about 50% of all rice farmsreceive some herbicide application, often at a lower dosage than recommended.Extensive rat damage has been reported for most irrigation systems at onetime or another over the past six years. A rodent control component isincluded in the BPI-German Surveillance Program which, among otheractivities, trains plant pest control officers. For the future, theapplication rates of agrochemicals are not expected to increase dramatically,mainly because of increasing prices of these petrochemical products.

1.18 Credit. CIS farmers receive an estimated 35% of their seasonaland investment credit from formal credit institutions; the remainder comesfrom various informal sources. The major formal credit program affectingCIS farmers is the Masagana 99 program launched in 1973 to boost riceproduction by combining a noncollateralized supervised credit program with aproduction input package. This input package combines HYVs, fertilizers,

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biocides and technical advice on cultural practices. Masagana 99 credit isextended through Philippine National Bank branches and the rural banks undera rediscount arrangement with the Central Bank. Credit is for a term ofabout six months at an annual interest rate of 12%. All supervised credit isrequired to be insured to 100% of the value of the inputs. Repayment rateshave been low, and a problem now facing many Masagana 99 beneficiaries isthat, having defaulted on past Masagana 99 loans, they no longer qualify forcredit on such attractive terms. Many rural banks, victims of widespreadloan defaults have become ineligible to participate in the supervised creditprograms, and are therefore precluded from access to the Central Bank'srediscount facilities. The Government has recently reviewed the arrearsproblem and has taken steps which will result in the requalification of anumber of rural banks, and hence a corresponding increase in credit availa-bility. Loan defaults under Masagana 99 are also being rescheduled undersome circumstances to allow a larger number of borrowers to participate.

Irrigation Development in the Philippines

1.19 Farmer associations were building, operating and maintaining irri-gation systems in the Philippines before the Spanish era. Many of thesesystems are still in operation, as are about 180,000 ha of similar systemsconstructed in the Spanish times. Under American rule, the area covered bythese simple systems is estimated to have doubled. Establishment of irriga-tion systems remained largely a local voluntary affair until the mid-twen-tieth century. The first government-financed irrigation project was comple-ted in 1923. By 1940, ten such irrigation systems covering 80,000 ha hadbeen completed. By 1981, irrigated area totaled over 1.2 million ha out ofabout 3.5 million ha judged suitable for irrigation. The country's projectscan be classified in three groups: national systems, communal systems andpump systems.

1.20 National irrigation systems are constructed, operated and main-tained by the Government through NIA (see paras. 1.06-1.10). Irrigatorswithin the systems are expected to pay water fees sufficient to cover O&M,insurance and capital costs. These systems range in size from less than 200to 78,000 ha, and average about 3,300 ha. Much of the post-independencenational systems were financed with foreign assistance, including that of theBank. Actual irrigated area under the existing 144 national systems nowtotals about 470,000 ha. Foreign-assisted national irrigation projects nowunder construction are expected to add about 300,000 ha of new area to thetotal of national irrigation systems by the end of 1985, while foreign-assisted rehabilitation efforts should improve the operation of a further220,000 ha in existing systems.

1.21 Communal irrigation systems are the type constructed in thePhilippines in the pre-colonial and Spanish periods. Unlike nationalsystems, they may be built with or without government assistance. Anassociation of irrigators rather than a government agency owns, operates andmaintains the facilities of most systems. When Government assistance is

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involved in construction, IAs are expected to pay fees to cover capitalcosts, excluding the costs of roads and NIA's engineering and overhead costs.With the rising cost of investment, farmers are increasingly seekinggovernment assistance to improve their systems as well as to construct newones. Government assistance to communals rose very rapidly from about30 systems in the late 1950s to over 900 systems in the late 1970s. Atpresent, the communal irrigation development program has a budgetappropriation of about P 150 million per year. Table 1.1 shows the growthof government assistance to communals. This assistance, mainly in design,construction and financing, was carried out with little local consultation orlocal contribution. Hence farmers were often reluctant to identify with thesystems, and felt that the works were poorly adapted to local conditions andalso that system maintenance was the Government's responsibility and nottheir own.

Table 1.1: GOVERNMENT ASSISTANCE TO CISs, 1955-1980

No. of CISs Area (ha)/aPeriod completed During period Cumulative

1955-1959 51 7,500 7,5001960-1964 109 12,000 19,5001965-1969 135 17,000 36,5001970-1974 340 61,800 98,3001975-1978 887 149,100 247,4001979 368 63,300 310,7001980 241 47,400 358,100

/a Includes new as well as rehabilitationschemes.

1.22 Pump irrigation systems are nearly all privately-owned and opera-ted. Most of these draw water by diesel, gasoline or electric pumps fromrivers or lakes and a few tap groundwater resources. The Irrigation ServiceUnit of NIA is responsible for the construction and supervision of pumpschemes. About 190,000 ha are presently irrigated by pump systems. The highcost of fuel or electricity to operate the pumps reduces their financialattractiveness and constrains the further growth of pump irrigation. NIA isgradually phasing out its pump irrigation program.

Communal Irrigation Subsector

1.23 Economic and Physical Aspects. The roughly 5,700 CISs account forabout 45% (550,000 ha) of total irrigated area and 38% of irrigated riceproduction. A 1980 survey indicates that nearly 85% of CIS service area is

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irrigated (systems seldom being managed and maintained well enough to achieve100%); virtually all of it is devoted to rice. About 13% of CIS farm area isdevoted to coconuts, corn, sugarcane and vegetables. CISs comprise about390,000 farm households with nearly 2.4 million people. They range in sizefrom a few hectares to over 4,000 ha, but average slightly under 100 ha each,with half under 50 ha and over 70% smaller than 100 ha. Over one third ofthe systems, covering less than 20% of the total area, are in Region 1(Northwestern Luzon), although they can be found in nearly all of the 73provinces, along small rivers and tributaries of larger rivers as they flowout of the foothills into the river basins. The modest water supply andmoderate topography in these areas have enabled local farmers to achievelimited water control with very simple temporary diversion structures oftenbuilt of rocks or brush. Yields are generally low, about 2.8 tons per ha percrop of irrigated rice.

1.24 CIS Farmers. The farmers within CISs operate small farms, averag-ing 1.4 ha each. Farms are smallest in Region 1 (Northwestern Luzon - lessthan 0.9 ha) and largest in Region 11 (Southeastern Mindanao - about 1.8 ha).Farm households have an average of six members. With such small farms andlow yields, farm income is low, and farm families earn about half of theirtotal income from off-farm sources (nonfarm labor or labor on neighboringfarms). Even with this supplementary income, the average per capita incomeof CIS households is estimated to be US$150-190 p.a., below the absolutepoverty level. Contributing to their hardships is the fact that half the CISfarmers do not own their lands, but operate as share tenants (about 30%) orleaseholders (about 20%). Just under 50% are owners, ranging from 74% inRegion 1 to 30% in most other regions.

1.25 Organizational Aspects. Communal irrigation systems vary widelyin the way they are managed. Smaller systems tend to depend on informalleadership by village leaders or large landowners. These leaders call onirrigators to perform needed maintenance and may reprimand violators of thetacit water distribution rules. Management structure becomes more formalas system size increases. Over 90% of systems over 100 ha have IAs. 70%have people responsible for water distribution, 50% have paid personnelto operate control structures, perform maintenance and carry outadministrative duties, and 40% have regular maintenance schedules andirrigation fees. Less than 25% of systems under 50 ha have any of thesecharacteristics. A typical IA is registered with the Securities and ExchangeCommission (SEC), and has an elected board of directors and a roster ofofficers, and has monthly meetings of members. In most cases, canals andfarm ditches are cleaned, desilted, reshaped, repaired or cleared at leastonce per year, and usually twice per year. Most farmer-members contributefree labor and materials for system maintenance.

1.26 At present, irrigation service fees are collected by slightly lessthan half of all IAs. Fee collection arrangements are more common amongNIA-assisted systems and systems in Mindanao and Southern Luzon. Most IAs

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collect fees in kind based on area irrigated. Fees range from 0.5 to 4.5cavans of palay per ha per year, with a mode of about 2 cavans. About 80% ofthe members pay at least part of their dues. Delinquent farmers are threetimes as common among NIA-assisted systems as among non-NIA systems. Thismay be because NIA-irrigator consultations were inadequate during design andconstruction, leading irrigators to the conclusion that their CIS is reallythe Government's responsibility. It may also be connected with the factthat fee collection is more common in NIA-assisted CISs. Delinquentfarmers in general report that they receive poor water service, get waterfrom elsewhere, have crop failures or financial problems, or simply arenever billed.

Future Development of the Communal Irrigation System

1.27. Potential. NIA is placing increasing emphasis on the developmentof communal systems. These can be completed in as little as one year andgive immediate benefits, and their future operating burden on NIA is farlower than that of national systems because O&M is largely performed by IAs.A preliminary NIA planning document envisages about 500,000 ha of communalirrigation development during the decade 1981-90; however, funding limita-tions and higher design standards could limit the area to under 250,000 ha.Additionally, small national systems covering an area of about 25,000 ha areplanned for conversion to communal systems.

1.28 Problems. General agricultural sector problems such as adverseprice ratios, inadequate support services, insecure land tenure andinfrastructural inadequacies were noted in para. 1.02. Three other problemsmore specific to CISs must be resolved if the subsector is to be developed asenvisioned:

(a) Institutional Support. The PIOs of NIA are ill-equipped to carryout the type and scale of communal irrigation programs assigned tothem. Training of PIO staff in organizational aspects of communalirrigation development is crucial, as is the provision of equipment.

(b) Irrigation Association Development. In the past, most NIA-assisted systems were constructed with little or no effort to pre-pare the IAs which were expected to operate and maintain them.This has resulted in poor water distribution, water use conflictsand unsatisfactory conflict resolution, unfulfilled farmerexpectations, poor maintenance, and low capital cost repayment.These problems are serious also on many non-NIA-assisted systems.Careful organization and training efforts are necessary to buildstrong IAs which can make the best use of available physicalfacilities.

(c) Engineering Design. Most CISs depend on diversion weirs ofrocks or brush which cannot withstand floods. Frequent

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rebuilding of these weirs is a major drain on labor whichmight be better employed in other tasks. Most systems alsofail to divert as much water as farmers need to maximizecropping intensities, allow further losses through unnecessaryseepage and poor design of distribution systems, and lack controlstructures and roads for maintenance. NIA-assisted CIS works areof a far superior design, and generally eliminate the drawbacks oftraditional designs.

The Participatory Approach to Development of Communal Systems

1.29 In order to deal with the above constraints, and at the same timerealize the full potential of CISs, NIA has developed a new participatoryapproach to the planning, design, construction, and operation and maintenanceof CISs. Under this concept the active collaboration among irrigationofficials and farmers organized in IAs is an essential feature of someexisting and all future CISs in the Philippines. The need for a new orimproved irrigation system is the unifying element, and the strategy is toensure full participation by officials and farmers from initial planningthrough construction, operation and maintenance. The technical goal is toconstruct properly designed physical systems; the institutional goal is toimprove the capability of farmers to organize and sustain their association,improve their farm practices, and assume responsibiity and a sense ofownership of their system.

1.30 The organization of the IAs is built from the base upwards, ratherthan the conventional procedures of centralized, top-down design,construction and operation of most irrigation systems. The observedweaknesses of that conventional approach prompted NIA in 1976 to launch aspecial experimental communal project with Ford Foundation assistance to testnew methods to integrate institutional and technical development by havingfarmers participate actively with NIA officials in both of these functionsfrom the earlier stages of design through construction to operation. Theencouraging results of this experimental project prompted NIA and the FordFoundation to extend the program to 2 additional pilot projects in 1979, to12 more in 1980, and to 24 more in 1981.

1.31 The participatory approach benefits NIA, its PIOs and the irri-gators. It enables NIA to reduce per hectare construction costs, transfervirtually all O&M costs to IAs, and improve the rate of cost recovery fromthe IAs. It enables the PIO to construct or rehabilitate more hectares ofcommunal irrigation on a constant budget by shifting more costs to thedirect beneficiaries. Finally it enables the farmers to get permanentwell-designed and well-located systems requiring minimal maintenance andrehabilitation costs, achieve better responsiveness in their dealings withofficials, and acquire their own modern systems. The result is abetter-operated and -maintained set of systems, which ultimately meanshigher and more stable incomes for the farmers.

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1.32 The participatory approach includes activities, both institutionaland technical, for farmers at every stage of the project process. In theidentification phase, the farmers organize themselves into an IA and requestNIA assistance. In the design phase, they formulate by-laws, register theirIA, obtain a water permit, establish IA committees as needed, conduct a man-power survey of IA members in preparation for construction, work with tech-nical staff on land surveys and negotiate over each version of the technicaldesign, secure rights of way, and sign a pre-construction memo of agreementwith NIA on the estimated cost of the proposed communal system. In theconstruction phase, they contribute labor, monitor construction materials,equipment, and costs, reconcile construction costs with NIA records, attendvarious training seminars, accept the completed system, and sign the loanwith NIA. In the O&M phase, they take over full control of their system andcontinue attending training courses for water management, and financialcontrol. The participatory approach thus combines the benefits of localinitiative and self-reliance of the old indigenous communal systems with thebenefits of modern technical design and construction. The historical contextand details of the participatory approach to the implementation of CISs areavailable in the project file.

Experience with Past Lending

1.33 NIA has extensive experience in the planning, design and construc-tion of irrigation projects. Sixteen projects have received Bank assistance,while thirteen others were assisted by the Asian Development Bank. Othermain agencies involved in irrigation development include the United StatesAgency for International Development and Japan's Overseas Economic Coopera-tion Fund. NIA has established itself as a well managed and technicallycompetent organization. Of the sixteen Bank-assisted projects, one was forwatershed management and erosion control, and three for rural development.The remaining twelve Bank loans were mostly for large national irrigationprojects providing irrigation and drainage facilities for new as well asrehabilitation areas, better road systems for efficiency of system operationand for marketing of farm products, and support services to assist farmers inadopting the new irrigation techniques needed to increase production.Implementation progress has been generally satisfactory on most projects.Some projects have experienced delays because of local funding constraints,design changes, contractor problems, or local order problems. Two projectshave been completed. The first Bank-assisted project, Upper Pampanga RiverIrrigation Project (Loan 637-PH), was completed in December 1977. TheProject Performance Audit Report (PPAR), prepared by the Bank's OperationsEvaluation Department (OED) in June 1980, found that the dam was completed 10months ahead of schedule, despite changes in design. However, there weredelays of up to 30 months in construction of the irrigation facilities due toprocurement problems, poor performance of contractors, and interruptions ofwork to allow for delivery of irrigation water to farmers. The cost overrun-was 105%, of which about 80% was due to inflation during the implementationperiod. While dry season cropping rose rapidly from less than 10,000 ha in1974 to 55,000 ha in 1976 as a result of the project, the appraisal estimateof increase in annual cropping intensity proved overoptimistic. However, thepaddy yields achieved in the project were higher than expected. The PPARcomputed the revised economic rate of return of the project at 14% compared

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to 13% estimated at appraisal. The PPAR concluded that NIA's current excell-ent project preparation and farmer support capabilities were developed andnurtured within the organization which was created for the Upper PampangaProject. The second project, Aurora-Penaranda Irrigation Project (Loan/Credit984/472-PH), was completed in December 1981 and preparation of the CompletionReport is underway. While work on the two dams and the transbasin canal wascompleted about one year ahead of schedule, difficulties in awarding con-struction contracts delayed the start of improvement works in the serviceareas which were further hampered by severe typhoon damages in 1978 and 1980.

1.34 Bank assistance to communal irrigation development began in 1975with the Mindoro Rural Development Project (Loan 1102-PH), which included asmall communal irrigation component of about 3,000 ha in conjunction with thedevelopment of about 12,000 ha ot national irrigation systems. These irriga-tion systems were completed about two years behind the appraisal schedule,mainly due to design changes and difficulties in right of way acquisition andshortages of construction materials and supplies. Under the Rural Infra-structure Project (Credit 790-PH), about 9,400 ha of CISs in six provinceswere included which were subsequently expanded to 10,400 ha. Implementationprogress is satisfactory in four provinces but is behind schedule in two pro-vinces. Delays are due to inadequate or late release of local funds,unusually severe weather, late design finalization for diversion weirs, andFSDC's ineffectiveness in organizing the farmers. The project is expected tobe completed in 1983, one year behind the appraisal schedule. About 2,000 haof CISs form part of the Samar Rural Development Project (Loan 1772-PH).Construction progress of one of the new subprojects is satisfactory, whilethe second was abandoned due to strong protests by the concerned farmersas they were not satisfied with the selection and preparation of thesubproject which had been done without adequate prior consultation with them.Substitute subprojects are under investigation and evaluation. Rehabilitationot the 23 existing CISs and improvement of buildings is progressingsatisfactorily with 20 systems completed, one system under way, one systemdeferred and one system deleted.

1.35 The Philippines Agricultural Sector Operations Review by OED(Report No. 3796 dated February 10, 1982) concluded that while irrigationassociations in the large national schemes have posed problems, communalassociations have been relatively more successful. As communal schemesultimately become the property of the associations, construction or rehab-ilitation is usually carried out using their ideas and suggestions. They areespecially successful where local farmers have actively participated in thedesign and siting of structures and canals.

2. THE PROJECT AREA

2.01 The project would involve institutional strengthening in 67 provin-ces in eleven of the Philippines' twelve regions, and construction or reha-bilitation of 144 communal irrigation subprojects covering about 33,500 ha

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in 35 provinces of 11 regions. A summary of areas by region and provincewhere irrigation facilities would be provided or upgraded is shown inTable 2.1.

Natural Conditions

2.02 Climate. In general the climate in the Philippines is wet tropicalwith average temperatures around 270 C throughout the year in the wholecountry, allowing a twelve-month growing season with irrigation. The Philip-pines lie under the influence of the monsoons and in the path of tropicaltyphoons. The generally north-south alignment of mountain ranges leads towide variations among regions in annual rainfall and its seasonal distribu-tion. Four main types of climate can, however, be distinguished. Type A andType B climates are similar in that they both have annual rainfall of1,500-2,000 mm and well defined dry seasons, although Type A has a morepronounced seven-month dry season beginning in October whereas Type B has afive-month dry season starting in December. The Type C climate has annualrainfall of 2,500-4,200 mm. Rainfall is heavy from October through March,and at its maximum from November to January. There is effectively no dryseason since monthly rainfall between April and September is generally about200 mm. In the Type D climate, annual rainfall of 2,000-3,500 mm is more orless evenly distributed over most of the year, with the wettest period fromApril to December, but rainfall is not as intense as in Type C; the dryseason is short from January through March or April. The rainfall is gener-ally adequate in the country for a single rice crop in the wet season exceptin the southern part of Mindanao, although provision of irrigation wouldreduce risk and improve yields. Dry-season cropping entails, however, agreater risk, and irrigation is essential to ensure a crop. Typhoon frequen-cies generally increase from south to north with the largest incidence inNorthern Luzon (averaging about seven a year in the 1948-77 period). OnlySouthern and Central Mindanao are relatively free from typhoons. Annex 1gives details of climatic conditions for each of the Philippines 12 regions.

2.03 Topography. The Philippines has complex physiographic patterns.The entire country rests on a series of stress lines along which numerousfaulting, folding and volcanic activities have taken place. The extensiveearth movements have resulted in numerous mountain ranges which divide theislands into small watersheds with short and usually rapidly flowing riversand isolated alluvial plains. The project areas are located along smallrivers and tributaries of larger rivers as they flow out of the foothillsinto the river basins.

2.04 Soils. The dominant soil types are relatively young silty clayloams, clay loams and sandy clays. These soils are mostly derived frombasalt andesites, volcanic rocks and tuffs, and limestones under intense andrapid natural weathering caused by high temperature, heavy rainfall andlimited forest coverage. Most of the irrigable soils are in plains andvalleys with deep alluvial deposits. Where volcanoes are present, as in

Table 2.1: SUMMARY OF PROJECT AREAS BY REGION AND PROVINCE

INew Rehabilitation Total New Rehabilitation Total

No. Area No. Area No. Area | No. Area No. Area No. AreaRegion/Province (ha) (ha) (ha) IRegion/Province (ha) (ha) (ha)

Region I: ILOCOS |Region VII: CENTRAL VISAYASLa Union 1 100 2 330 3 430 | Cebu 1 250 2 250 3 500Mt. Province 3 600 - - 3 600 | Negros Oriental andPangasinan - - 1 100 1 100 I Siquijor 5 1,440 2 180 7 1,620

Subtotal 4 700 3 430 7 1,130 Subtotal 6 1,690 4 430 10 2,120

Region II: CAGAYAN VALLEY |Region VIII: EASTERN VISAYASIfugao 4 670 1 250 5 920 | Southern Leyte 3 395 1 480 4 875Quirino 3 720 - - 3 720 | Northern Leyte 4 960 1 380 5 1,340Cagayan - - 2 650 2 650 |Isabela 1 220 1 150 2 370 | Subtotal 7 1,355 2 860 9 2,215Nueva Vizcaya 2 450 2 390 4 840 |

IRegion IX: WESTERN MINDANAOSubtotal 10 2,060 6 1,440 16 3,500 | Zamboanga del Sur 3 690 1 120 4 810

I Zamboanga del Norte 4 1,080 1 280 5 1,360Region IV: SOUTHERN TAGALOGAurora 1 410 2 600 3 1,010 | Subtotal 7 1,770 2 400 9 2,170Marinduque 1 120 1 200 2 320Romblon 4 620 - - 4 620 |Region X: NORTHERN MINDANAOBatangas 3 340 1 80 4 420 | Surigao del Norte 2 1,220 - - 2 1,220 >

Quezon 3 350 - - 3 350 |

| Subtotal 2 1,220 0 0 2 1,220Subtotal 12 1,840 4 880 16 2,720 I

- Region XI: EASTERN MINDANAORegion V: BICOL REGION I Surigao del Sur 6 940 0 - 6 940Catanduanes 2 300 3 230 5 530 | Davao del Norte 3 1,600 - - 3 1,600Masbate 3 815 1 100 4 915 Davao del Sur 4 1,100 1 110 5 1,210Sorsogon 1 160 5 810 6 970 | Davao Oriental 4 640 - - 4 640Albay 5 1,580 2 370 7 1,950 | South Cotabato 2 670 2 640 4 1,310Camarines Sur 2 750 3 1,130 5 1,880 |Camarines Norte 2 130 3 360 5 490 | Subtotal 19 4,950 3 750 22 5,700

Subtotal 15 3,735 17 3,000 32 6,735 |Region XII: CENTRAL MINDANAO| Sultan Kudarat 3 650 1 1,000 4 1,650

Region VI: WESTERN VISAYAS | Maguindanao 2 720 2 720 4 1,440Negros Occidental 5 1,050 5 450 10 1,500 | North Cotabato 2 1,100 1 300 3 1,400

Subtotal 5 1,050 5 450 10 1,500 I Subtotal 7 2,470 4 2,020 11 4,490

I Total 94 22,840 50 10,660 144 33,500

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Bicol and Southern Mindanao, volcanic ash or tuff material is mixed withthese deposits. The soils in the lowlands are usually heavy textured andwell-suited for paddy production. On higher ground, soils are generallydeep and loamy, with moderate to good internal drainage. There are no realproblem soils in the Philippines, except for small spots of saline soils inMindanao.

Socioeconomic Conditions

2.05 Population. In 1980, when the population totalled 47.9 million,the population growth rate nationwide was about 2.4%, down from the averageof 2.7% during the 1970s. However, population pressure on land is severe,and relatively little unexploited cultivable land remains. The projectbeneficiaries, an estimated 144,000 people in 24,000 families, wouldrepresent a cross section of the ethnic groups of the Philippines and therural poor. A survey in 1980 of sample communal systems reported an averageannual household income of P 7,140, a per capita income of P 1,190 or 80%of the rural poverty income level in 1980 prices.

2.06 Farm Size and Land Tenure. Philippine agriculture is characterizedby the predominance of small farms (70% are smaller than 3 ha) and the per-vasiveness of tenancy, particularly among rice and corn farmers. The averagefarm holding in communal systems ranges from 0.9 ha in Regions I and II to1.8 ha in Mindanao, with a national mean of 1.4 ha. In national irrigationsystems the range is much wider and the national mean 70% larger. Averagefarm sizes by region are shown in Table 2.2. According to a detailed tech-nical and economic survey of 25 communal systems proposed for financing underthe project, the average size farm was 1.6 ha, ranging from about 0.4 ha to3.1 ha. About 54% of the farms in these systems range from 1.0 to 2.5 ha,and 29% are less than 1.0 ha. About 50% of the total area of the 25 samplesystems consists of farms of 1.0-2.5 ha, 22% of 2.6-4.0 ha, 20% over 4.0 haand about 8% less than 1.0 ha.

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Table 2.2: AVERAGE RICE FARM SIZES(ha)

Region National systems Communal systems

I Ilocos 0.56 0.89II Cagayan Valley 2.81 0.89III Central Luzon 2.59 1.54IV Southern Tagalog 2.17 1.60V Bicol 0.93 1.60VI Western Visayas 1.56 0.95VII Central Visayas 2.61 0.95VIII Eastern Visayas 0.96 0.95IX Western Mindanao 4.03 1.83X Northern Mindanao 3.82 1.83XI Southern Mindanao 2.79 1.83XII Central Mindanao 3.65 1.83

National Average 2.37 1.39

2.07 About 50% of all farmers cultivate their own land, almost 30% areshare tenants, paying an agreed percentage of their harvest; and the resteither rent extra land for their own use (11%) or are partowners (about 9%).In the 25 sample communal systems included in the project, about 46% areowner-operators, 25% are share tenants, 18% are lease holders (paying a fixedrent), and 11% are part-owners. The Government has pursued a program ofagrarian reform aimed at the transfer of land ownership to tenant farmers onrice and corn lands since 1972, when the country's one million tenanted riceand corn farms covering some 1.5 million ha were declared land reform areas.The Land Reform Program is being implemented in two ways: "Operation LandTransfer," begun in 1972, applicable to all landowners who have more than7 ha, whereby the tenants become owner-cultivators of rice and corn land inexcess of 7 ha undertaking to pay for the land over a period of 15 years; andthe Leasehold Enforcement Program for all farms up to 7 ha whereby the tenantreceives security of tenure on the land being cultivated. Overall by October1981, Certificates of Land Transfer had been issued to 416,000 tenants farming645,000 ha, or about 88% of the area originally targetted for transfer.Leasehold contracts had been given to 550,000 tenants farming 615,000 ha, or64% of the originally targetted area.

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Existing Infrastructure

2.08 The 35 provinces in which construction and rehabilitation under theproject are planned include over 13,000 existing irrigation systems with aservice area of about 744,000 ha, or about 61% of the total irrigated area inthe country. By category, 68 are national systems irrigating about 289,000ha, over 3,500 are communal gravity systems covering about 360,000 ha, andnearly 9,600 are small pump systems serving about 95,000 ha. The actualirrigated area in 1980 in the various regions of the country as a percentageof the technically potential irrigable area ranges from about 16% in Region X(Southern Mindanao) to about 60% in Region I (Ilocos).

2.09 The network of roads over most of the project area is sparse,averaging about 0.4 km per 100 ha. Road structures vary from paved nationaland provincial highways to gravel surfaced and unsurfaced barangay andprivate roads. Nationally about 80% of the freight and 60% of the passengertraffic move by road. Interisland traffic is largely by small vessels and toa limited extent by airplane. The Government and private sectors are cooper-ating in the development of port facilities. Postal and telecommunicationsservices are available at major provincial cities and towns. Most of thecommunication facilities are still generally inadequate. Domestic watersupply is also inadequate, although some of the areas included in theproposed project are provided with piped water systems. Most barangayfamilies get their water supply from shallow wells.

3. PROJECT FORMULATION

NIA Program

3.01 NIA's management recognizes that budgetary constraints and decreas-ing opportunities and need for large national projects will gradually changeNIA's role. Inevitably, NIA's operations must shift from large new construc-tion toward the operation, maintenance and rehabilitation of existing sys-tems. Many of the remaining opportunities for new construction would tend tobe smaller in scale, and well suited for communal system development. Thissuggests that future NIA programs will rely heavily on the PIOs. The PIOsare responsible for O&M and some rehabilitation of completed national sys-tems, and for the construction and rehabilitation of communal systems. Asnational projects now under implementation are completed, as the communalirrigation subsector expands, and as all systems age and begin to requirerehabilitation, the demands on PIOs will grow. However, while the NIA cen-tral office, the RIOs, and the offices of project managers managing largeforeign-assisted irrigation projects are well-equipped and competent organi-zations, the PIOs, who have not yet had the advantage of participating inforeign-assisted projects, are deficient in staff, buildings and equipment tocarry out their tasks. The cornerstone of NIA's future program is,

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therefore, the strengthening of its PIOs. A concomitant element of theprogram is increased relative emphasis on communal irrigation development.And the most successful method of implementing communal irrigation projectshas been found to be the participatory approach described in Chapter 1. Thecomponents of the proposed project reflect these conclusions.

3.02 In consultation with the Bank and IFAD, NIA prepared a proposal forBank and IFAD assistance in financing the strengthening of its PIOs and theconstruction of a portion of its communal irrigation development program.The proposal was designed to be an integral part of NIA's overall irrigationdevelopment program, and to address directly the three specific CIS problemsidentified in para. 1.28.

Major Components

3.03 The most important element of NIA's program, PIO strengthening,became the central element of the proposed project. Strengthening of PIOsinvolves training of staff and providing buildings and equipment. Thespecific support for each PIO was determined on the basis of its presentresources and its potential role in communal subsector work. These weredetermined in a collaborative preparation effort by the PIOs, the RIDs, andthe PDD, Equipment Management Department and Farmers' Assistance Departmentof NIA's headquarters. Sixty-seven PIOs were selected for strengthening;the other five PIOs are already being strengthened under other projects.

3.04 The preparation of the communal irrigation construction componentfollowed similar lines. PIOs identified subprojects on the basis of presentproblems which could be addressed by irrigation works (low yields, lowcropping intensity and poor land drainage), and potential for irrigationdevelopment (available water resources, extent of arable lands, potentialirrigable area and possible alternative developments). PIOs are well suitedto the task of identifying subprojects because they have grassroots contactswith the farming community and first-hand knowledge of the relative needs andpotential of areas within their jurisdiction. Subproject proposals werereviewed by the RIDs, then forwarded to the NIA headquarters for final selec-tion. This is the normal procedure for approval of communal subprojects,and the PIOs identified a large number of subprojects for possible Bankfinancing. The list of 144 subprojects covering 33,500 ha, picked up forinclusion in the project, is indicative of the type and quality of subpro-jects to be financed. Specific subprojects included for Bank financing maychange if unforeseen problems arise with some, while a few subprojects notcurrently included may qualify for inclusion in the project. Thirty-threesample subprojects, prepared by NIA in sufficient detail, were appraised bythe Bank mission, and the financial and economic viability of the construc-tion component extrapolated from the sample results. This procedure isjustifiable since the sample size is large, and the sample subprojects arefairly representative; the complete list of subprojects to be financed is not

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firmly determined, but NIA will subject it to the same criteria stipulatedfor the 33 subprojects noted above.

3.05 The innovative aspect of communal system financing in the proposedproject was the decision that all subprojects would be prepared under theparticipatory approach described in paras. 1.29-1.32. As noted, this approachhas been tested on about 40 subprojects, and found to strengthen the IAs.While the participatory approach itself is no longer innovative, its use in aBank-assisted irrigation project in the country is. NIA was attracted to theapproach after seeing many of its engineering efforts wasted because IAs werenot prepared to operate and maintain communal systems properly. The partici-patory approach to be pursued under the project proceeds within the sameinstitutional structure as is used in existing systems, but relies on improv-ing its operations. The only organizational changes have been the establish-ment of an advisory Communal Irrigation Committee under NIA's AssistantAdministrator for Operations to set policies and goals and to monitor parti-cipatory developments, and the fielding of community organizers (COs) at thevillage level to work with farmers to build strong IAs in preparation fortaking full responsibility for their part in designing, constructing andoperating their own communal system. The participatory approach depends onfarmers organizing themselves to play an active role in developing theircommunal system, and on PIO officials accepting farmers as partners in thisdevelopment. The training of officials and farmers in joint, consultativeplanning was from the beginning recognized as a prerequisite to the successof the new approach.

Other Components

3.06 NIA already has a training program but it is not large enough tomeet all the needs of the communal subsector. Under the project, the ongoingtraining program would be expanded to include not only all PIO staff, but alsofarmers, NIA regional staff and technicians from the Ministry of Agriculture.The Asian Institute of Management and the Institute of Philippine Cultureassisted in the design of the training component. To test the effectivenessof the participatory approach and the subproject design standards, a monitor-ing and evaluation component was also included in the project. It would bemuch simpler and more specific than similar components in past Bank-assistedirrigation projects in the Philippines, using only a sample of project andnonproject systems, and aimed at measuring differences in net benefits toirrigators on communal systems of varying types. Finally, the Bank appraisalteam suggested, and NIA agreed, to include in the proposed project a study toprepare the way for an integrated financial management and reporting system(see para. 1.10).

3.07 Funds for detailed engineering studies for two multipurpose pro-jects (Lower Agno and Jalaur II) were included in NIA-s project preparation.Feasibility level studies for these two projects have been completed recentlywith Bank assistance. NIA had proposed, and the appraisal mission had

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agreed, to include financing for the second phase of the studies in theproposed project. Subsequent to the appraisal, however, it was concludedthat these studies may be financed from the unutilized funds available underthe Second National Irrigation Systems Improvement Project (Loan 1526-PH) andthe Jalaur Irrigation Project (Loan 1367-PH). At negotiations the Bank wouldreview justification, funding needs and sources for these studies. If theyare to be included in the proposed project, total project cost would rise byabout US$2.0 million.

3.08 In sum, a large share of the Philippines infrastructure developmentbudget has been invested in irrigation, many future irrigation projects areplanned, and further investments must be made to ensure that the fullpotential of past and future projects is realized. The inevitable shift inNIA's activities from new construction toward operation, maintenance andrehabilitation, and the expected shift from national to communal systemdevelopment, creates a need for strong PIOs. The growing emphasis oncommunal irrigation development calls for more effective communal systeminstitutions and better training of those involved in communal irrigation toensure proper design, construction, and O&M of the new system. Efforts toimprove communal system development need to be monitored and theireffectiveness evaluated. Finally, the management of NIA must have easyaccess to accurate and complete financial information in order to plan andimplement the entire irrigation development program efficiently. Theproposed project was formulated to meet these needs.

4. THE PROJECT

project Objectives

4.01 The project would have the following objectives:

(a) supporting a national program under which farmers would effectivelyparticipate in planning and construction of CISs and, aftercompletion, would assume full control of the O&M of the systems;

(b) strengthening the ability of PIO's to select, design and implementefficient CISs, and to maintain and operate small nationalsystems. The project would also enhance NIAs capability tosupport IAs in the repair of CISs in case of exceptionaldamage to the systems by typhoons, etc.;

(c) increasing the incomes of about 12,000 farm families currentlygrowing rainfed crops by providing irrigation and support servicesto produce rice, and improving the incomes of another 12,000families by rehabilitating and upgrading their present run-downCISs; and

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(d) development of NIA's capability to undertake the selection of CISsubprojects according to criteria agreed with the Bank (para. 4.15),and to determine the phasing of their implementation. In thisrespect, the project places substantial responsibility on NIA toplan and execute nationwide CIS investments in the coming years,with regard to both new projects as well as the rehabilitationof existing projects.

Project Description

4.02 Over a period of five years, the project would:

(a) strengthen 67 PIOs through provision for: (i) construction andimprovement of office buildings and workshops; (ii) equipmentand vehicles for construction, improvement, and O&M of irrigationfacilities; (iii) equipment for offices and workshops; and (iv)instruments for topographic surveying and hydrologicalobservations;

(b) support training of about 2,600 COs and technical staff of PIOs,MOA extension staff, and farmer leaders from about 1,900 IAs;

(c) provide for the construction of about 94 new communal irrigationsubprojects on about 22,800 ha, and for the rehabilitation andextension of about 50 communal irrigation subprojects coveringabout 10,700 ha;

(d) establish a system for monitoring the implementation, andevaluating the impact, of the project; and

(e) finance a study to improve NIA's internal financial reportingsystem.

Detailed Project Features

4.03 Strengthening of Provincial Irrigation Offices. Under the project,the PIOs would be directly involved in, and be principally responsible for,the organization of IAs and the application of the participatory approachin the planning, design, and construction of CISs. In order to removeconstraints which are inhibiting the efficient performance of PIOs and alsoto enable them to handle a considerable increase in their responsibilities,the project would include: construction of 23 new office buildings and work-shops; rehabilitation of 36 existing office buildings and workshops; andprovision of office and workshop equipment, and instruments for topographicsurveying and hydrologic observations. The project would also provideequipment, machinery and vehicles for the construction of minor andscattered works under force account and for O&M activities.

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4.04 The 67 PIOs to be strengthened are in eleven regions. The follow-ing criteria were used to determine the appropriate level of investments:

(a) Office buildings would be similar in all provinces. Thesewould have a floor area of about 200 sq m and workshops of about100 sq m; plot areas would be about 1,000 sq m.

(b) Requirements of equipment for offices and workshops, instrumentsfor topographic surveys, mapping and hydrologic observations, andconstruction machinery and vehicles have been based on a classi-fication of each province. For this purpose the provinces weregraded by giving numerical weights to: (i) estimated annual poten-tial area for planning and investigation, (ii) average annualconstruction program of communal irrigation development, (iii) theO&M support to the existing CISs (pump and gravity), and (iv) theO&M requirements of the existing small national irrigation sys-tems. Level I would represent the basic operating office.Requirements of office, survey, hydrological, and constructionequipment and vehicles would progressively increase to Level V.

4.05 The basic facilities to be provided in PIOs of differrent classifi-cation levels are summarized in Table 4.1. The classification level of eachof the 67 provinces is given in Annex 2, Table 1. Total equipment require-ments for the project are listed in Annex 2, Tables 2 and 3. Incrementaltechnical staffing requirements for each PIO would be one planning engineer,one construction foreman, one mechanic, on instrument man, one survey aide,one accounting clerk and one driver. Additional COs would be appointed ineach PIO on the basis given in para. 6.04. Most of the incremental technicalstaff is available within NIA as some of the ongoing projects are nearingcompletion. Recruitment of the remaining staff is expected to be completedby end of July 1982. Recruitment of 46 COs for the project was completed inFebruary 1982; they are undergoing training prior to their assignment to thefield.

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Table 4.1: PIO CLASSIFICATION LEVELS AND BASIC FACILITIES

Classification levelI II III IV V

Office machines 5 6 6 7 7Drafting equipment 2 2 2 4 4Surveying instruments 4 5 5 8 10Hydrological instruments 1 1 1 2 2Communications equipment 1 1 1 1 1Vehicles and trucks 4 7 7 10 10Track-type tractors 1 1 1 2 2Excavators 1 1 1 1 1Motor graders - - - 1 2Compactors - 1 1 1 1Concrete equipment 1 1 1 1 2Workshop tools 1 1 1 1 1

4.06 Training. The project would support expansion of a program ini-tiated with assistance from the Ford Foundation to train officials andfarmers to work together effectively to develop CISs. Training provided toPIO staff would also enhance their ability to operate and maintain smallnational systems. The program would extend to all provinces of the country,reaching some 2,600 NIA and MOA staff and some 1,900 IAs during the nextfive years. Training would be provided to a wide variety of staff includingRIO and PIO economists and engineers, monitoring and evaluation teams, COs,MOA extension workers, technicians, construction workers and equipmentoperators. They would receive broad based training in their own functionsand would become familiar with the functions of others with whom they mustcollaborate.

4.07 COs would get training in three modules of about two weeks each.The first module would be given immediately after hiring. It would include:orientation to NIA, particularly communal irrigation development using theparticipatory approach, subproject profile writing, integrating with thefarming community, mobilizing farmers and assisting them in organizing them-selves, and matters related to subproject design. The second module would begiven about two months before the start of construction. It would include:the technical and institutional process during the construction phase,coordinating IA organizational work with construction work, recordingconstruction costs, organizing farmers counterpart participation, financialmanagement for farmers, and cost reconciliation. The third module would be

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given about six months after the start of construction. It would include:assistance to farmers in O&M, water management, conflict resolution, feecollection, crop production, and communal monitoring procedures.

4.08 The technical staff of PIOs would receive training in threemodules of about two weeks each at times appropriate to their working needs.It would include feasibility studies and project planning, the institutionalprocess during the planning, design and construction phases, project program-ming and budgeting, and design of irrigation structures, canals and on-farmfacilities, organizing and staffing, construction cost recording, projectaccounting, performance measures, potential problem analysis, assistance toIAs in the O&M phase, water management, communal system monitoringprocedures, and follow-up activities with IAs.

4.09 Planning Engineers and CO supervisors of RIOs would be trainedtogether in the review and assessment of socio-technical project profiles.They would also receive two weeks of training for trainers, with subsequentbrief refresher courses. The training of irrigation technicians would bebasically similar to that of CO supervisors, with additional emphasis onassisting farmers during the O&M phase in water management and crop produc-tion. To improve coordination they would receive water management and cropproduction training together with farm management technicians of MOA. Designengineers working on communal irrigation systems would further their skillsthrough training with NIA engineers who have been trained abroad under theNISIP II project (Loan 1526-PH). Field engineers and construction foremenwould receive an orientation on the participatory approach lasting about aweek. This would be followed by a planning workshop held jointly withconstruction staff, COs and IA leaders before starting construction of anycommunal system. The NIA central office monitoring and evaluation super-visory team and nine regional teams would be given about two weeks of train-ing in monitoring and evaluation of CISs. It would include an orientation tothe organization and work of the regional offices, PIOs and IAs, the partici-patory approach, and the main tasks and problems of O&M.

4.10 IA leaders and selected members would be given training in sessionsof one to three days at different times through the course of development oftheir system. The first module would be a one-day session for the entiremembership and would include a presentation and discussion of feasibilitydesigns and an introduction of the technical and institutional processes tobe followed during the detailed design phase. In the second module, aboutone month before construction, training would be provided to IA leaders onkeeping records of construction costs, cost reconciliation procedures, andof counterpart participation by the IA. For the farmers convenience, thistwo-day module would be divided into shorter one-day or half-day sessions,as would the later modules. About three months after the beginning of con-struction, a two-day training module would be held for IA leaders in themanagement of the financial affairs of the IA, stressing bookkeeping proce-dures for all expenditures and receipts. Before completion of construction

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but at least a month before the IA begins to operate the system, the firsttraining for O&M would be given. It would include: O&M procedures, conflictresolution, management of fee collection, follow-up on record keeping, andthe procedures for subproject monitoring (for those systems to be monitored).This module would last one day for the entire membership and about two daysfor selected IA leaders. Shortly after the IA begins operating the system asecond training session of about three days would be provided for the O&Mphase, stressing water management and crop production for all members of theIA.

4.11 A team drawn from three of the 40 pilot communal systems composedof about nine IA farmer leaders and about six NIA personnel (engineers, COs,CO supervisors) would be sent overseas in 1982 to study various aspects ofirrigation practices, water management, O&M and crop production. A secondteam from three other systems would receive similar training in 1983. By1984 six model communal systems would be established, two each in Luzon, theVisayas and Mindanao. These would serve as demonstration and training cen-ters for farmers from other communal systems in the Philippines.

4.12 At the beginning of each year PI0 technical and institutionalstaffs would meet for a three-day regional workshop to review their exper-ience in coordination, study cases, receive additional training in coordina-tion and conflict resolution skills, and set their general coordinationplans for the year. The technical and institutional staff would then meetat least once each month with their PIE for a review session.

4.13 Communal Irrigation Rehabilitation and Development. The projectwould provide for the improvement of irrigation facilities on about 10,700 hain 50 existing CISs and the construction of new irrigation works on about22,800 ha, consisting of 94 new communal irrigation subprojects. The sub-projects range in size from 50-1,000 ha and would be based on run-of-the-river supply, served by gravity irrigation. Typical subprojects would beserved by diversion weirs; a few would need intake structures only. Thediversion weirs would be of concrete ogee type with a crest height of 1-2 mabove the stream bed. The length of each weir would be determined by the25-year frequency flood. Intake structures would be steel-gated withconstant head orifice turnouts for discharges up to 1 cu m/sec. Water flowmeasuring devices would be included in structures discharging more than 1 cum/sec. Generally, the main canals would be unlined: concrete lining wouldbe used only where soils are susceptible to erosion and where possibility ofexcessive seepage is identified. Check structures and gated turnouts wouldbe provided as necessary to ensure effective water control.

4.14 For areas smaller than 100 ha or where the service area iselongated, secondary canals would be eliminated and the main canal wouldserve the distribution system. Secondary unlined canals would be providedfor larger subprojects, as necessary. Service roads of 4.0 m width and 15 cmthick gravel surface would be built along the main canals, and access roads

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would connect service roads to the nearest barangay, provincial or nationalroad. Drainage would be provided through outlets to secondary drains andnatural channels. Farm drainage, in most cases, would be from one field tothe adjacent lower field.

4.15 Subproject Selection Criteria. All NIA communal irrigation sub-projects would meet following minimum criteria:

(a) the expected cropping intensity should be at least 130%;

(b) the proposed subproject area should be suitable for irrigated cropproduction;

(c) there should be minimal conversion of land use from productivepermanent crops like coconuts and orchards;

(d) the area should not be less than 50 ha or more than 1,000 ha;

(e) the average farm size should not be more than 2 ha;

(f) the internal economic rate of return of the subproject should benot less than 10%; and /1

(g) farmers should be actively involved in preparing, and should concurwith, the initial feasibility design of the subproject.

During negotiations agreement was reached with the Government that NIA wouldby December 31, 1983, begin to implement a phased program satisfactory to theBank and IFAD with a view to achieve by December 31, 1985, a uniform set ofselection criteria and design standards satisfactory to the Bank and IFADto be applied to all its CISs, regardless of financing source.

4.16 Subproject Preparation and Evaluation. Feasibility studies of33 sample subprojects were prepared before appraisal. These were evaluatedin detail by PDD and appraised by the Bank mission. Detailed engineeringdesign of these subprojects would be undertaken by the RIDs of NIA andreviewed by the Project Manager. Construction is scheduled to start byJanuary 1983. The preparation of the remaining subprojects including topo-graphic mapping, soil and water resources studies, layout and cost estimateswould be done by the respective PIOs. Short gestation subprojects would begiven priority. Completed feasibility studies and subproject profiles wouldbe evaluated by a multidisciplinary team from the PDD. Detailed engineering

/1 The rate of return of the 33 sample subprojects evaluated by PDDvaries from 10% to 36%.

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design would then be undertaken by the RIDs and would be reviewed by theProject Manager against standard design criteria. The technical andinstitutional staff of the PIOs would be responsible for finalizing thedesign and undertaking requisite preconstruction and construction activitiesin consultation with the IAs. Supervision of field work would be theresponsibility of the RIDs who would regularly report their findings to theProject Manager. During negotiations agreement was reached with theGovernment that NIA would submit for review by the Bank prior toimplementation full evaluation reports for subprojects costing more thanP 5.0 million each and summary data forms for subprojects costing less thanP 5.0 million.

4.17 Monitoring and Evaluation. In order to learn from experiencegained under the project, NIA would improve its existing monitoring and eval-uation (M&E) system with the intention of improving CIS policy and adminis-trative procedures and developing more effective training programs for thestaff and farmers involved. This would be done in two ways: NIAs existingreporting requirements for communal works would be expanded and a new M&Escheme would be implemented.

4.18 NIA has an established program of monthly reporting of CIS con-struction progress from the PIO to the RIO and then to the NIA centraloffice. This system is being computerized to increase its usefulness toNIA's senior management. Under the project, reporting would be extended toinclude progress during the design phase of a CIS including establishment ofthe IA, fielding of the CO, obtaining of water permit, completion of design,and selection of farmer committees.

4.19 NIA would also establish a system to monitor the O&M of a sampleof communal subprojects by lAs during the first three years after thecompletion of construction and to evaluate the impact of these subprojectsafter the first and third years of cropping. The sample would comprise40 Bank-assisted subprojects and 40 locally-funded subprojects in order tocompare the benefits achieved in the two sets of CISs with regard to types,amount and distribution of benefits to members. A supervisory team in NIA'sFarmers' Assistance Department would design and oversee the M&E work. Thisnational team would comprise a statistician, an economist, an agriculturalistand a sociologist. Nine comparable teams at the regional level would conductstudies, supervise local data collection, and supervise and train one farmer-member from each of the 80 IAs who would be employed at a modest wage toconduct periodic data collection. Regional teams would comprise an agri-cultural economist, an agriculturalist and a sociologist. Work would proceedin three phases: benchmark survey, O&M monitoring, and O&M evaluation.During negotiations agreement was reached with the Government that NIA wouldsubmit for review by the Bank and IFAD before December 31, 1982, theindicators that would be monitored and other details of the M&E system.

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4.20 A benchmark survey would be carried out during construction of eachof the selected systems. This would measure level of farmer organization,water control and cropping practices, use of inputs, level of outputs andlevel of agricultural incomes. Regional teams would verify data beforeanalyzing and summarizing them for the IA, the PIO, the RIO and the NIAcentral office team.

4.21 During the wet and dry cropping seasons of the first three yearsof system operation, simple surveys would be conducted of a sample of IA mem-bers twice each cropping season regarding input availability and distributionsystem, input utilization and farm management practices, adequacy of irriga-tion water and water management practices, O&M of irrigation facilities, andcrop production levels and farm income. The regional teams would also gatherdata once each cropping season regarding IA organization, management andperformance. The regional teams would verify data and analyze and present itfor review by the IAs, PIOs, and RIOs. Results of each periodic survey wouldthen be presented and discussed in a provincial meeting of IA leaders and thePIO. This joint IA-PIO review of progress and problems arising from monitor-ing reports would be a critical channel for improving the performance of someCISs, providing useful recommendations for training and helping PIO staffimprove their contribution to the large number of CISs not included in theM&E sample.

4.22 After the second year of monitoring, survey forms and system-levelmonitoring studies would be modified to prepare for evaluation. Provisionswould be added that would help compare third year system outputs more com-pletely with the benchmark data and would help compare system benefits morecompletely with project objectives. The third year of monitoring would thusbe somewhat more extensive in that it would enable NIA to make a thoroughevaluation of impacts and benefits from the sample systems. After completionof the third year of monitoring (in the fourth and fifth years of theproject), the regional teams and central M&E teams would produce a generalevaluation of accomplishments and recommended redirection of NIA strategies.A copy of this report would be forwarded for review by the Bank and IFAD.

4.23 Review of NIA's Financial Reporting System. The project wouldsupport a consultant study of NIA's financial reporting system. Thepurpose of the study would be to review the present system and prepare afive-year work program to develop an integrated financial management andreporting system. Work undertaken for this component would be coordinatedwith NIA's ongoing efforts to improve its electronic data processing andmanagement information sytem. It is estimated that about 35 man-months oflocal consulting services would be required at about US$4,500 per man-monthinclusive of overheads, office costs, and local travel. Assurance wasobtained during negotiations that NIA would prepare by December 31, 1982, forreview by the Bank, terms of reference for consulting services for thefinancial reporting system study.

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Status of Engineering

4.24 Feasibility grade designs, layouts, and drawings have been preparedby NIA for 33 sample subprojects (22 new areas and 11 rehabilitation areas)covering 6,700 ha in 24 provinces or about 20% of the total project area.This would serve as the basis for the entire first year construction program.Construction quantities have been estimated for the diversion works, main andsecondary canals, tertiary canals and drains, access and service roads andall appurtenant structures, from plans and profiles supported by fieldsurveys and site investigations. Adequate investigations have also beenconducted to ensure the availability of ample supply of construction mater-ials. Designs and drawings for buildings in all provinces have been prepared.Preparation of bid documents for equipment and vehicles is underway. Prepa-ration of detailed designs and tender documents is thus sufficiently advancedfor procurement and construction to start soon after loan effectiveness (seepara. 6.06).

4.25 Hydrological and soil studies, and determination of water require-ments for the 33 sample subprojects have been completed. Studies for theremaining subprojects are underway. Hydrological studies were carried outby the Research and Development Section of the Agricultural Division in eachregional NIA office. Data on temperature, relative humidity, wind velocityand rainfall were collected from the various ordinary rainfall and synopticstations operated and maintained by the Ministry of Public Works and Highways(MPWH), and the Philippine Atmospheric Geophysical and Astronomical ServiceAdministration. Evaporation data for the study were taken from elevenstations located near the project areas. In areas where no evaporation datawere available, Penman's formula was used to estimate the monthly evaporationrate. Estimates of monthly stream flows for ungauged rivers and creeks andfor areas with incomplete data on river discharges were correlated withnearby gauged streams, using concurrent periods of operation studies usingsynthesized flow records and estimated water requirements and assuming noreturn flows. Available water supply was assumed to be about 90% of riverflow for subprojects with diversion dams and about 70% for subprojects pro-vided with intakes only. Water quality is suitable for agriculture. Only5 rivers out of the 33 sample project rivers have prior approved water rightsto users other than the proposed communal subprojects. Previously appropri-ated waters are small compared to the total discharges of the rivers andwould not affect the irrigation supplies for the project.

4.26 For each of the sample subprojects, available supply of water wasmatched against the projected water requirements for an annual croppingintensity of 165%. The proposed cropping calendars for the sample projectswould maximize the use of rainfall for both wet- and dry-season cropswithout exceeding local manpower constraints. Field water requirements havebeen estimated for most provinces and differ from each other mainly becauseof varying evapotranspiration according to different climatic conditions,growth stage of the crop, and varying percolation losses depending on thepermeability of the soils. The annual diversion requirements were estimated

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by adjusting the field water requirements with the effective rainfall in thearea and the efficiency of the irrigation delivery system.

4.27 Studies done by NIA show that all sample subprojects have soilssuitable for rice cultivation. Soil maps and land-use maps from the Bureauof Soils were used in the identification of subproject areas. Compositesoil samples (four samples/ha) were processed either in the regional soillaboratories of the Bureau of Soils or in one of NIA's own soil and waterlaboratories.

5. PROJECT COSTS AND FINANCING

Cost Estimates

5.01 Detailed cost estimates for 33 sample subprojects based on feasi-bility grade designs (para. 4.24) were examined at appraisal. Cost estimatesfor the remaining 111 subprojects, for which surveys and designs are beingprepared, have been derived from the detailed estimates of the sample sub-projects by a process of comparator extrapolation. For the canal systems,the sample subprojects were grouped into new and rehabilitation schemes.Each of the two categories were further divided into three subgroups accord-ing to size: below 250 ha, 251-500 ha, and 501-1,000 ha. Based on thesample subproject estimates, the average costs per ha for each subgroup weredetermined. The costs of the canal systems for the remaining 111 subprojectswere then determined using the appropriate unit cost per ha corresponding tothe size and category of each subproject. For the diversion works, theestimated cost per meter of weir length for various heights of weirs weredetermined on the basis of actual detailed engineering designs and layouts ofthe sample subprojects. These unit costs were then applied to determine thecosts of diversion weirs for those of the remaining subprojects wherein theapproximate heights and lengths of diversion weirs had been decided by actualfield investigations. For rehabilitation of diversion works, the averagecost of the sample rehabilitation subprojects was used to determine the costof the remaining rehabilitation subprojects.

5.02 Total project costs are estimated at US$120.8 million, of whichUS$61.5 million or about 51% is foreign exchange. Including a capitalizedfront-end fee of US$1.05 million on the proposed Bank loan, the totalfinancing required for the project is estimated at US$121.85 (rounded toUS$121.8). Taxes equivalent to 3% of the costs of contracts for civil worksare included in the cost estimate. The Government exempts NIA from payingtaxes or duties for equipment, materials and consulting services procuredunder foreign-assisted projects. NIA's costs for design and constructionsupervision are included. Unit prices are based on recent quotations forsimilar items received by NIA and are indexed to mid-1982. Physicalcontingencies of 20% for irrigation works, 10% for buildings, training andmonitoring and evaluation, and 5% for equipment have been applied. Pricecontingencies have been applied at the following rates:

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Annual inflation rate (%)1982 1983 1984 1985 1986 1987

Equipment & Civil WorksLocal 10.0 8.0 8.0 8.0 8.0 8.0Foreign 8.0 8.0 7.5 7.0 6.0 6.0

Over the implementation period these amount to about 24% of the base costplus physical contingencies. Cost estimates are presented in Table 5.1.

Financing

5.03 The proposed Bank loan of US$71.1 million, including capitalizedfront-end fee, and the IFAD loan of SDR 10.8 million (US$12.0 millionequivalent) would together finance about 71% of total project costsexcluding taxes and the cost of land acquisition, or about 68% of the grosstotal costs. The loan would cover 100% of the foreign exchange requirement(US$62.5 million) and also about 35% (US$20.6 million) of the local costs.Financing of local costs is justified by the shortage of counterpart fundsin the Philippines. Of the remaining project cost of about US$38.7 million,Government would finance about US$33.7 million and the rest would becontributed by farmer beneficiaries through their equity contributions tocommunal irrigation system construction through land, labor, materials orcash. The full amounts of the loans would be channeled through Governmentdirectly to NIA. In the past, the Goverment has treated transfer of theseresources as direct public works appropriations or as an equity contributionto NIA and no onlending arrangement between the Borrower and NIA has beennecessary. At present Government is considering changes in its financialtreatment of NIA and other autonomous institutions. At negotiationsGovernment agreed that in the event NIA would be responsible to service thisdebt obligation, the terms and conditions of the onlending agreement wouldbe discussed with the Bank and IFAD.

5.04 In order to begin construction of project works in 1983, the firstyear of project implementation, certain preparatory works would have to beundertaken. PIO buildings would need to be constructed and office equipmentand construction machinery purchased for the provinces where the first sub-projects, selected from among the sample communal systems for which feasibi-lity studies and preliminary cost estimates have been prepared, are to beimplemented. Staff would need to be trained and community organizers mobi-lized to help form IAs to review and concur with the preliminary design andcost proposals. Detailed topographic surveys would be carried out and thedetailed design prepared in advance. To provide for these preconstructionactivities during the course of 1982, expenditures of up to $1.5 million, madeafter January 1, 1982, would be considered for retroactive financing.

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Table 5.1: COST ESTIMATE /a

Foreign PercentageLocal Foreign Total Local Foreign Total exchange of base cost

----- (P000) -- -- ---- (US$000) ------- (%) (%)

Strengthening of ProvincialIrrigation Offices (PIO)

Office buildings 11,275 7,517 18,792 1,392 928 2,320 40Workshops, sheds and site works 7,484 3,208 10,692 924 396 1,320 30Office equipment 2,025 8,100 10,125 250 1,000 1,250 80Survey and hydrological equipment 527 4,738 5,265 65 585 650 90Construction machinery and vehicles /b 5,988 113,659 119,637 738 14,032 14,770 95Workshop equipment and tools 97 1,847 1,944 12 228 240 95

Subtotal 27,386 139,069 166,455 3,381 17,169 20,550 84 24

TrainingLocal programs 14,783 - 14,783 1,825 - 1,825 -Foreign programs 405 3,645 4,050 50 450 500 90Consulting services 1,620 2,430 4,050 200 300 500 60

Subtotal 16,808 6,075 22,883 2,075 750 2,825 27 3

Irrigation SystemsDiversion and intake works /c 80,190 80,190 160,380 9,900 9,900 19,800 50Main canals /c 40,873 33,444 74,317 5,046 4,129 9,175 45Service and access roads /c 30,051 45,077 75,128 3,710 5,565 9,275 60Distribution canals and drains 14,029 11,486 25,515 1,732 1,418 3,150 45On-farm ditches and drains 34,968 28,617 63,585 4,317 3,533 7,850 45Topographic survey, mapping and services 8,505 5,670 14,175 1,050 700 1,750 40

Subtotal 208,616 204,484 413,100 25,755 25,245 51,000 50 60

Land AcquisitionStrengthening of PIOs 3,022 - 3,022 373 - 373 -Irrigation systems 26,017 - 26,017 3,212 - 3,212 -

Subtotal 29,038 - 29,038 3,585 - 3,585 - 4

Monitoring and EvaluationPersonnel and training 8,586 - 8,586 1,060 - 1,060 -Equipment and vehicles 146 584 730 18 72 90 80Materials and supplies 680 1,020 1,700 84 126 210 60

Subtotal 9,412 1,604 11,016 1,162 198 1,360 15 2

Engineering, Supervision & Administration /dStrengthening of PIOs 4,374 486 4,860 540 60 600 10Irrigation works 37,908 4,212 42,120 4,680 520 5,200 10

Subtotal 42,282 4,689 46,980 5,220 580 5,800 10 7

Financial Reporting System Study 324 1,296 1,620 40 160 200 80 -

Base Cost 333,866 357,226 691,092 41,218 44,102 85,320 52 100

Physical contingencies /e 45,878 49,702 95,580 5,664 6,136 11,800 52Expected price increases 100,716 91,133 191,849 12,434 11,251 23,685 48

Total Project Cost 480,460 498,061 978,521 59,316 61,489 120,805 51

Front-end Fee on Bank Loan /f - 8,511 8,511 - 1,051 1,051 100

Total Financing Required 480,460 506,572 987,032 59,316 62,540 121,856 51

/a Indexed to mid-1982.7T Includes 10% of cost for spare parts.7T Includes 3% tax on civil works contracts.Th About 10% of irrigation works, 5% of buildings and 2.5% of equipment costs./e About 20% of irrigation works, 10% of buildings, training, and monitoring and evaluation, and 5% of equipment./f Based on Bank loan of US$70.0 million.

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5.05 Special Account. Government's time-consuming reimbursement pro-cedures and sometimes untimely budgetary allocations during each fiscal yearhave presented difficulties for smooth project implementation. At the levelof project implementing agencies, such as NIA, liquidity is frequentlyconstrained by the agency's inability to plan and manage its own workingcapital resources. This situation would be exacerbated in the communalirrigation project because its geographically dispersed nature and the largenumber of small individual disbursement requests to be submitted for eachsubproject extend further the processing time between agency expenditure andfinal reimbursement. Moreover, the whole approach to participatory communaldevelopment assumes continuity of work and timely responsiveness to farmerinputs and places a premium on smooth implementation. And finally, becausethe small contractors and suppliers who will be servicing the project havevery limited financial resources, prompt payment of their claims is vital forensuring continuity of their services which would otherwise be subject tofrequent and serious interruption. Because of these considerations, and atthe specific request of NIA and the Government, it is proposed to establish aspecial account to accelerate disbursements.

5.06 A peso account (the Special Account) would be established in thePhilippines National Bank with advances from the proposed loans. The initialadvance from the Bank loan account would amount to $250,000 rising to amaximum of $850,000, as needed. IFAD would advance up to $150,000 pari passuwith the Bank advance. Disbursements from the Account would cover the Bank-sand IFAD's shares of expenditures for force account civil works, small civilworks contracts (less than P 1,000,000), and small local purchases of equip-ment and materials (items costing less than P 50,000 equivalent).Replenishment of the Special Account would take place periodically on theauthorization of requests by NIA-s Assistant Administrator for Finance.Justification for disbursements made out of the Account would be submitted byNIA prior to replenishment, and a separate annual audit by an external auditorwould be provided. It is NIA's intention, with which the Bank agrees, toextend gradually the purposes for which funds in the Account are used and toensure that the Account continues to provide liquidity after loan closing.Therefore, NIA would fund its liquidity by opening and maintaining a counter-part account (the Operating Account) during project years 2-6 with the depositof the equivalent of US$250,000 per year from its own resources. This wouldresult in an established fund of over US$1.5 million equivalent for generalcorporate purposes after the end of the Bank replenishment of the SpecialAccount. The creation of the Special Account would constitute, therefore, animportant institution-building element, the significance of which extends wellbeyond the proposed project. During negotiations, agreement was reached withthe Government that NIA would establish the Special Account and thecounterpart Operating Account and maintain and operate the accounts in amanner satisfactory to the Bank and IFAD.

Procurement

5.07 Goods. Construction machinery, vehicles and spare parts, equipmentfor offices and workshops, surveying and hydrologic instruments and con-struction materials and supplies, totalling about US$19 million equivalent,

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including contingencies, would be grouped in appropriate bidding packages andprocured by international competitive bidding (ICB) in accordance with BankGuidelines. Qualifying domestic manufacturers would receive a preference inbid evaluation of 15% of the c.i.f. price of imported goods, or the importduty, whichever is lower. Miscellaneous items of equipment and machinery,costing less than US$20,000 each and totalling not more than US$3 million,including contingencies, would be procured under local competitive biddingprocedures, which are satisfactory to the Bank and IFAD.

5.08 Works. Office buildings and workshops totalling about US$5 mil-lion, and the diversion works, main canals and roads totalling about US$56million, including contingencies, are scattered over 67 provinces and 145locations. The small size and wide geographical dispersion of these worksare unlikely to attract foreign contractors. To the extent possible,contracts would therefore be let by local competitive bidding procedureswhich are satisfactory to the Bank and IFAD and in which foreign bidders havethe opportunity to participate. In cases, where the small size or remotenessof works discourage even local bidders, works would be done by force account,up to a maximum of US$14 million. The balance of civil works, totalling aboutUS$18 million, including contingencies, consist of minor works related todistribution systems, onfarm facilities and appurtenant structures and are notlikely to interest local contractors. Therefore these works would be carriedout under force account. Assurance was obtained during negotiations that theaggregate cost of civil works done by force account (including US$18 millionfor minor works and up to US$14 million of the diversion works, main canalsand roads) would not exceed 40% of the total cost of civil works, or US$32million.

5.09 Contract Review. Between 300 and 400 bidding packages are expectedto make up the estimated US$61 million in domestic civil works contracts andUS$22 million in the procurement of goods, including US$19 million under ICBprocedures. All bidding packages for works estimated to cost over US$400,000equivalent and bidding packages for goods over US$200,000 equivalent would besubject to the Bank's prior review of procurement documentation. This wouldresult in a coverage of about 40% of the total estimated value of civil workscontracts and about 75% of goods contracts. About 25% of the total number ofpackages or between 75 and 100 contracts amounting to about US$41 million(US$17 million in goods and US$24 million in works) would be subject to priorreview over the five-year period, which represents a reasonable work load forBank staff and is consistent with NIA-s record of good performance in thepreparation of procurement documents. The balance of contracts would besubject to random review by the Bank after contract award.

Disbursements

5.10 Disbursements would be made as follows: (a) 100% of foreign expend-itures for directly imported equipment and materials, 100% of the ex-factorycost of such items manufactured locally, and 80% of the cost of importeditems procured locally; (b) 75% of expenditures for civil works; and (c) 100%of expenditures for training, consultants' services, and the monitoring andevaluation of component. Disbursements for force account civil works wouldbe made against statements of expenditure based on agreed unit rates. NIA

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would submit a detailed unit rate analysis with supporting documents for Bankreview before September 30, 1982, or before claiming the first reimbursementfor force account work, whichever is earlier. These unit rates would excludedepreciation of the equipment directly financed under the project. Disburse-ments for minor civil works contracts (less than P 1,000,000) would also bemade against statements of expenditure based on actual progress payments madeto contractors. In addition, statements of expenditure would be used forminor local expenditures for equipment and materials (items costing up to P50,000 equivalent), for local training programs, and for expenditures underthe monitoring and evaluation component. The use of statements of expenditurefor these items is justified because of the small and frequent paymentsinvolved. NIA has the institutional capability to maintain related records ina satisfactory manner, and supporting documentation would be made availablefor review by visiting the Bank missions. All disbursements shall beapportioned by the Bank, as nearly as practicable in the circumstances,between the Bank loan and the IFAD loan in the ratio of 6:1.

5.11 It is expected that disbursements would be completed by June 30,1988, approximately one year after the end of construction, due mainly torequired lagtime for releasing contractors' retention monies. An estimatedschedule of disbursements is given in Annex 2, Table 5, which also includes acomparison with regional and country disbursement profiles for the irrigationsubsector. The proposed allocation of IBRD and IFAD loan proceeds is given inAnnex 2, Table 6. The country disbursement profile shows higher disbursementpercentages than the regional profile during the first four years ofimplementation but both profiles indicate that full loan disbursement isaccomplished in eight years. Despite these indications, it is expected thatthe proposed loan would be disbursed in six years owing to the followingfactors:

(a) the project provides for retroactive financing from January 1,1982. Therefore, the effective disbursement period is 6-1/2 years;

(b) the proposed project is essentially different from other projectsin the disbursement profile insofar as it would pick up atime-slice of ongoing activity in the subsector. CISs covering anarea of over 300,000 ha have been implemented during the decade1971-80;

(c) the project comprises a large number of small subprojects whichare easy to design and construct under the authority delegated toa large number of regional and provincial offices;

(d) a large number of subprojects would be implemented simultaneouslyby small contractors and independent force account crews indifferent provinces;

(e) the status of engineering on 33 subprojects is sufficientlyadvanced to permit an early start on project implementation, andthe engineering of the remaining subprojects is expected to becompleted well ahead of implementation;

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(f) the project would not suffer from land acquisition delays (seepara. 6.07).

Accounts and Audit

5.12 The NIA is a government agency and its accounts are audited annuallyby the Government's Commission on Audit (COA). Assurances would be obtainedduring negotiations that NIA would cause all its regional and provincialoffices to maintain separate accounts for the project. The project accountswould be collated by the Project Manager. After audit by the COA, the pro-ject accounts, together with the auditor's comments, as well as his opinion onthe certification of expenditure on force account works, would be sent to theBank within six months of the close of each fiscal year. Accounting proce-dures for force account work and minor contracts are given in Annex 6.

6. ORGANIZATION AND MANAGEMENT

6.01 NIA would be responsible for all components of the project, whichwould be under the Assistant Administrator for Operations. An ad-hoc advisorycommittee, named the Communal Irrigation Committee, consisting of specialistsfrom within and outside NIA, has been in existence for some years and wouldcontinue to advise the Assistant Administrator for Operations on policy issuesand provide feed-back on the state-of-the-art in communal irrigation develop-ment. A Project Manager has been appointed to handle the day-to-day imple-mentation of the project and supervision of the work of concerned Provincialand Regional offices, and of the project-connected functions of other agenciesin NIA central office. He would also assist the Assistant Administrator forOperations to oversee the entire communal irrigation subsector and partic-ularly to monitor the adherence to the subproject selection criteria (para.4.15). He would be responsible for compiling and submitting to the Bankquarterly progress reports covering all project activities. The organizationof the Project Manager-s office and its interrelationship with other agenciesconcerned with the implementation of the project are shown in Figure 6.1. TheProject Development Department of NIA central office would have responsibilityfor support functions related to the overall preparation and economicviability of the subprojects; Design and Specifications Department, for theengineering design of civil works; Equipment Management Department, forequipment specifications and procurement; Farmers' Assistance Department, forinstitutional development and agricultural coordination, and for the M&Ecomponent; and Training and Development Division, for the training componentof the project. The Project Manager took up the assignment end-October 1981and started preparatory activites for project implementation.

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6.02 The Project Manager, under the guidance of the Assistant Adminis-trator for Operations of NIA, would plan, schedule and coordinate the variousactivities of the project. He would arrange for release of funds, maintainrecords of financial transactions and exercise overall control of funds forthe project. He would conduct inspections of project works to ensure compli-ance with standards of quality, examine progress of work in all regions toensure that status of construction and institutional development is on target,coordinate with other departments to facilitate extension of agriculturalsupport services to the project areas, and arrange for the training of projectpersonnel and farmers. He would prepare required reports on the project forsubmission to the NIA Board and the Bank.

6.03 The regional directors would review the plan of work prepared by thePIOs and request the Project Manager for release of funds. They would alsoreview subproject designs prepared by the PIOs and prepare the design ofstructures beyond the technical capability or delegated authority of PIOs.They would supervise construction, conduct inspections, watch progress ofwork, supervise formation and organization of IAs and conduct training ofproject personnel and farmers. One CO supervisor in each RIO would assist theregional directors in the functional supervision of the work of institutionaldevelopment under the participatory approach. RIOs have adequate staff and donot need further strengthening.

6.04 The PIOs would be the principal functionaries of the project. Theywould maintain lists of promising communal irrigation sites and undertakesociotechnical profile studies of potential subprojects as a basis for initialselection. A feasibility study would be done of selected subprojects toascertain that necessary conditions exist for development. The PIOs wouldprepare plans of work for subprojects included in the project, prepare designsof canals and structures, assist farmers in formation and organization of IAs,and arrange and supervise construction of subprojects. They would processdisbursement vouchers, maintain accurate records of financial transactions andcontrol budget. Aside from the technical staff, a number of COs would assisteach PIO in the work of institutional development under the participatoryapproach. Normally, one CO would be assigned in each subproject less than200 ha. Additional COs would be assigned in larger subprojects or in sub-projects with unusually small land holdings. NIA already has about 150 COsand there is a continuing program of further recruitment and training.

Project Implementation

6.05 Project implementation would follow established NIA procedureswith some adaptations for the participatory approach in which NIA staff andfarmers would together build viable IAs and work together through all phasesof designing and building the system. Farmers would be organized into an IAprior to final design, and the IA would agree to the construction of thesubproject. The coordinated technical and institutional process is derivedfrom NIA's experience with about 40 communal projects undertaken in the pastfive years with assistance from the Ford Foundation.

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6.06 Implementation of a typical subproject is depicted in the flowchart Figure 6.2 which describes the sequential steps from feasibility studyof the subproject to completion of construction and turnover of the system tothe IA for O&M. COs were fielded beginning January 1982 in about 20 sub-projects, where IAs were already sufficiently organized, to review and concurwith feasibility design and cost proposals. While the technical staff wouldconduct detailed surveys and investigations, and prepare final designs andcost estimates, the CO would assist the farmers to adopt a set of by-laws,register with the SEC, obtain a water permit, and acquire land for construc-tion. Continuing close coordination between officials and IAs would enablefarmers to understand and jointly review the construction designs and costestimates, so that tender and contract documents could be prepared to permitan early start of the tendering process and the award of construction con-tracts for diversion works, main canals and service and access roads soonafter loan effectiveness. The cycle would be repeated and the number ofsubprojects increased in subsequent years of the project. Land acquisitionand procurement of materials for construction of buildings and workshops for22 PIOs was started in November 1981 and construction would be undertaken in1982. Land for the remaining 45 PIO buildings and workshops would beacquired, and tender documents prepared, so as to commence construction earlyin 1983. Preparation of tender documents and technical specifications forconstruction machinery, office and workshop equipment, surveying and hydro-logical instruments was started in November 1981 and is making good progress.Bid invitations would be issued soon after loan effectiveness so that award ofsupply contracts can be made in early 1983. To enable an early start ofnoncontract activities and force account works, a limited quantity of con-struction machinery and equipment for offices and workshops would be procuredlocally. Field investigation, preliminary design, consultation with IAs,design finalization, and preparation of tender and contract documents would becarried out for groups of subprojects covering about 5,500 ha in 1982, 7,500ha 1983, 9,500 ha in 1984, and 11,000 ha in 1985 for implementation in therespective subsequent years. An estimated schedule for project implementationis given in Figure 6.3.

6.07 In the past, some projects for the construction of national irri-gation systems have experienced land acquisition delays. The proposed projectdesign specially addresses this problem. Firstly, since the farmers wouldthemselves own the irrigation system after completion of construction, theGovernment or NIA would not be "acquiring" land in the usual sense, but thefarmers would be "contributing" land to the IA, of which they would bemembers. So the farmers would in a sense continue to own the "acquired" landwhich would vest in the community. Secondly, the farmers would fully parti-cipate in all stages of designing and constructing the irrigation system.Various alternative layouts of the system would be fully discussed in farmers'meetings, and the layout finally adopted would be fully acceptable to thefarmers. By the same token, once a layout is adopted, it would be verydifficult for any member of the community to refuse to provide his land to theIA. Finally, if any subproject has land acquisition problems which cannot besatisfactorily resolved, it would be dropped in favor of another as the sizeof the subsector affords a large field of selection.

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6.08 Overall supervision of the project's training component would be thefunctional responsibility of the NIA Training and Development Division. TheDivision-s functions include preparing long-range manpower development pro-grams, establishing training needs and course curricula, evaluating trainingeffectiveness and administering NIA's external and overseas training program.NIA's training capability has been strengthened through implementation ofprevious Bank-assisted projects, particularly the substantial training compo-nent under the Second National Irrigation Systems Improvement Project (Loan1526-PH). Staffing is adequate both in the central Training and DevelopmentDivision and in the regional Farmer's Assistance Divisions. Only eight addi-tional positions of trainers would be required in NIA. MOA's Bureau of Agri-cultural Extension would train the agricultural extension workers. Outsidespecialist assistance would consist of three consultants from the AsianInstitute of Management, two from IRRI, and one from the Development Academyof the Philippines. The Asian Institute of Technology, Bangkok, would assistNIA in the formulation of a training program for supervisors on subprojectdesign and management. Training would be provided at the 11 regional centersand at NIA's national training center at San Raphael.

6.09 NIA's Farmers' Asistance Department would have overall functionalresponsibility for the M&E component of the project. Two previous Bank-assisted projects, Chico River Irrigation Project (Loan 1227-PH) and theSecond National Irrigation Systems Improvement Project (Loan 1526-PH), helpedin the establishment of a large scale input-output monitoring system in NIA.These projects have helped to enlarge NIA's responsibilities and shift NIA'sconcern just with irrigation to concern for the broader problems of produc-tion. NIA no longer concentrates solely on how to design dams or aligncanals, but is now also interested in securing adequate inputs for producersand in arranging for well-organized disposition of their products. NIA hasacquired substantial experience and expertise in the M&E of large irrigationsystems which would be modified and simplified for the small-scale, widelyscattered systems under the project. This process of adaptation and applica-tion has already started. Incremental staff required for the M&E component ofthe project is given in para. 4.19.

Operation and Maintenance

6.10 Upon completion of construction and the computation and final recon-ciliation of costs, the PIO would turn over the system to the IA. The IAwould accept this responsibilty by contracting with NIA to pay back theconstruction costs. Before operations begin, IA leaders and members wouldreceive training in O&M, including record keeping, fee collection and systemsupervision. After operations have begun they would have another trainingworkshop in water management and crop production. With this training andcontinuing help from various officials, the IA would take charge of allirrigation functions: water allocation, system maintenance, conflict reso-lution, and fee collection. The CO would remain with the IA during theinitial settling-in phase and facilitate assistance from MOA extension agents,suppliers of inputs and sources of credit. The technical and institutional

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processes would become integrated into a joint process of continuing effortsby the IA to deal with both the technical and organizational problems ofsustaining the irrigation system in order to improve agricultural production.During negotiations agreement would be reached with the Government on atypical proforma of the memorandum of agreement that would be signed by NIAand the concerned IA at the time of turnover of a completed system, settingout the rights and obligations of both parties, and the terms of repayment bythe IA of the construction costs of the system.

6.11 The IA would pay water tenders to inspect structures, canals andditches regularly and to do minor maintenance work, such as clearing debrisfrom the water and from the screens of intakes, and patching minor cases oferosion. IA members would form work parties to repair eroded places alongcanals and remove silt from them. The IA capacity to maintain the physicalsystem and collect water fees regularly is essential to keeping the systemsolvent. Further, capacity to resolve disputes, deliver water to membersreliably, and to increase the availability of agricultural inputs andmarketing facilities to members is crucial to lAs benefitting from thesystem.

6.12 For purposes of analysis, the annual O&M cost has been estimatedat about P 125 per ha (see Annex 5). This would include materials andsupplies (P 20); salaries of gatekeeper/water tender, ditch tenders andhonorarium and traveling expenses for officers of the IA (P 80); equipmentrental and operation (P 15); and miscellaneous expenses (P 10). Freelabor would be contributed by the IA members. Fee collections by the IAsfrom their members would cover the O&M expenses - either in cash or in kind -as well as the loan repayments to NIA. Major repairs beyond their technicalcapability would be referred by the IAs to NIA for execution assistance aswell as funding. The amount incurred by NIA for such major repairs would becharged to the IA concerned, and would be capitalized as an addition to theloan for construction of the system.

7. AGRICULTURAL PRODUCTION

Present Cropping Pattern

7.01 In most of the project systems land preparation for the first orwet-season crop begins in May or June and transplanting is usually completedby July/August, while the harvesting is done between November and January.The second or dry season crop usually extends from December to April/May.In general, cultivation is by animal-drawn implements. The croppingcalendar for rainfed paddy is dependent on the arrival of the southwestmonsoon which can vary by a month or more from year to year. According toa national survey, about 75% of all rice paddies (irrigated and rainfed) areplanted with high yielding varieties (HYVs). These HYVs require high levels

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of physical inputs and management which are often lacking. Practically allrice is transplanted from field nurseries onto previously puddled land. Ingeneral, farmers use low levels of fertilizer and only small amounts ofinsecticides and herbicides. Crops are usually hand-weeded twice during aseason and are manually harvested and threshed. Grain is sun-dried on mats,roads, drying floors or other suitable surfaces, and stored in the house forhome consumption, seed or sale.

Future Cropping Patterns

7.02 In the absence of the project, there would be no significantchange in cropping patterns. The majority of the potential subproject areaswould continue to have one wet season rainfed rice crop or an inadequatelyirrigated crop and only a limited area would have a second, rather risky, dryseason crop depending on water availability, rains and timely planting.However, with the project, farmers would grow only irrigated rice in theproposed CISs. Cropping intensities for the individual systems would dependon the available water supplies. However, no subproject with a realisticpotential for future cropping intensity of less than 130% would be acceptedin the project, and the average cropping intensity of the systems isexpected to be 165% at full development, four years after completion of eachsubproject. Yields would vary depending on the degree of water control, theavailability of extension services, credit and input supplies.

Yields and Production

7.03 Without the project, yields in the rainfed areas are estimated toincrease at 1.25% per year, and at 1.4% per year in the presently irrigatedareas needing rehabilitation. This means a yield increase by 1990 ofabout 0.4 tons/ha over the present level of 1.7 tons/ha for rainfed areas,and of about 0.5 tons/ha over the present level of 2.2 tons/ha for irrigatedareas in need of rehabilitation. These yield increases would be inducedby improved infrastructure, better availability of inputs and more effectiveextension services, but offset somewhat by the continued deterioration ofthese systems.

7.04 Yields with the project are estimated at 3.3 tons/ha four yearsafter implementation of each subproject. Increases would be due mainly tothe availability of a reliable supply of water in the project areas, togetherwith better access to institutional credit and physical inputs, and improvedrice extension service support through adequate hiring and training of riceproduction technicians from NIA and MOA. Present and projected palay(threshed unmilled rice) yields are shown in Table 7.1. With the project,palay production would increase from the present 61,000 tons to about186,000 tons at full development in 1990. Phasing of production from startof irrigation facilities under the project to full development is given inTable 7.2.

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Table 7.1: PRESENT AND FUTURE PALAY PRODUCTION, 1990

/b /c /dPresent Present Future without project Future with project

Phase status /a Hectares Yield/ha Production Yield/ha Production Yield/ha Production……------------------------- (ton) --------- …-------------------

1 New 1,100 - - - - 3.5Rainfed 2,200 1.7 3,740 2.1 4,570 -Irrigated 2,200 2.2 5,800 2.7 7,750 3.5

Subtotal 5,500 9,540 12,320 31,315

2 New 1,300 - - - - 3.4Rainfed 2,650 1.7 4,510 2.1 5,500 - -Irrigated 3,550 2.2 9,370 2.7 12,510 3.4

Subtotal 7,500 13,880 18,010 42,070


Subtotal 9,500 17,570 22,810 52,505


Subtotal 11,000 20,360 26,420 59,895

Total 33,500 61,350 79,560 185,785

Assumptions:/a In new subprojects, the area is estimated to be 50% rainfed rice, 25% irrigated by

systems requiring rehabilitation, and 25% expansion; all existing CISs included in theproject are irrigated by run-down systems that need rehabilitation.

/b Cropping intensity 100% for rainfed and 120% for irrigated land./c Cropping intensity 100% for rainfed and 130% for irrigated land./d All areas are irrigated with a cropping intensity of 165%.

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Table 7.2: PHASING OF PALAY PRODUCTION WITH AND WITHOUT PROJECT, 1990 /a(tons)

Phase Hectares 1983 1984 1985 1986 1987 1988 1989 1990

With Project /a

1 5,500 9,540 14,640 19,740 24,840 29,950 30,395 30,850 31,315

2 7,500 13,880 14,740 20,620 27,360 34,100 40,840 41,450 42,070

3 9,500 17,570 18,655 19,740 26,110 34,650 43,190 51,730 52,505

4 11,000 20,360 21,610 22,860 24,010 30,245 40,130 50,015 59,895

Total 33,500 61,350 69,645 82,960 102,320 128,945 154,555 174,045 185,785

Without Project /a

1 5,500 9,540 10,115 10,690 11,265 11,840 11,995 12,155 12,320

2 7,500 13,880 14,740 15,600 16,460 17,300 17,530 17,770 18,010

3 9,500 17,570 18,655 19,740 20,825 21,910 22,210 22,510 22,810

4 11,000 20,360 21,610 22,860 24,010 25,380 25,720 26,070 26,420

Total 33,500 61,350 65,120 68,890 72,560 76,430 77,455 78,515 79,560

Incremental - 4,525 14,070 29,760 52,515 77,100 95,530 106,225

/a It is assumed that with the project, yields would continue to increase by 1.5% p.a.after full development of each phase, and that without the project, yields wouldincrease 1.4% p.a. for irrigated areas and 1.25% p.a. for rainfed areas after 1987.

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Harvest, Drying, Storage and Processing

7.05 Rice is normally harvested by hand, and threshed either mechanicallyby pedal- or motor-driven portable threshers, or by hand in the case of easyshattering rice varieties which need to be threshed shortly after harvest. Inthose areas with a pronounced dry season such as in Northern Luzon, farmersstack the second rice crop for a while until they have the opportunity to renta motorized thresher. The National Food Authority (NFA) and the private sec-tor have about 1,900 threshers available in the 35 project provinces. Afterthreshing, the paddy is sun-dried on whatever suitable surface is availablebefore being stored at home or carried to mill or market. NFA and privatetraders provide in some instances portable mechanical dryers in those areaswhere the harvest of the first crop coincides with heavy rainfall or in caseof an extended rainy season. Most of the larger rice mills have concretedrying floors. Major private and NFA milling/storage centers have dryingfloors and a total of some 500 mechanical dryers in the project provinces.Existing drying arrangements are generally adequate for present productionlevels, and in the past, both NFA and the private sector have reacted fairlyquickly to meet increasing demand for drying facilities.

7.06 As of 1980 about 45% of NFA's total storage capacity of about1.75 million tons was located in the project provinces and distributed over431 warehouses. Some 1,200 smaller private warehouses provide additionalstorage for 0.4 million tons. NFA plans to increase its overall storagecapacity over the next few years to meet the projected production increasesof all irrigation projects under implementation, including the approximately125,000 ton production increase with the proposed project which is onlyabout 1% of the national production. The private sector is expected toundertake some storage investments to accommodate the increased production.

7.07 In the project provinces there are about 6,900 rice mills andhullers with a total capacity of about 5,000 tons of palay per day. Themilling capacity is evenly distributed throughout the project area. In thefuture, incremental milling capacity would be required to process the addi-tional palay to be generated by the project. No difficulties are anticipatedin the provision of expanded milling facilities since the private sector isenterprising, has access to development financing earmarked for this type ofinvestment, and is fairly quick to react to market demand.

8. MARKET PROSPECTS, PRICES, FARM INCOMES AND COST RECOVERY

Market Prospects

8.01 CIS farmers sell most of their surplus palay to local assemblers,millers and wholesalers; about 10% of all palay production is purchased bythe NFA. At the end of 1981, private middlemen were paying farmers about

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P 1.50/kg, while NIA paid P 1.55/kg. Private middlemen sell rice to otherintermediaries, in a complex pattern which usually involves several transac-tions before rice reaches consumers. The complexity of the transaction net-work raises the final price of rice considerably, but also engenders healthycompetition among middlemen and a reasonably robust market.

8.02 The production of rice lagged behind consumption for practicallythe entire post-war period, until rapid growth in yields during the mid-1970s

at last produced a rough balance in 1976/77 and an exportable surplus in 1978.Exports grew from 46,000 tons in 1978 to 236,000 tons in 1980, or about 6% oftotal milled rice production. During this time, total end-of-year stocks ofrice were also increased from 836,000 tons to 1,660,000 tons. Populationgrowth is expected to slow from 2.4% in the early 1980s to 1.9% in the1995-2000 period. With a moderate 3% p.a. per capita income growth and anaverage income elasticity of demand of 0.09, the growth of total domestic riceconsumption would slow from 2.65% p.a. in the late 1980s to 2.18% p.a. in thelate 1990s. With large increases in production expected as national irriga-tion projects now under construction come onstream and as new varieties andbetter cultural practices are adopted, the surplus of rice could grow to over600,000 tons a year about 1990 and about 900,000 tons a year in the year2000./1 There are tentative plans for a limited government consumptionsubsidy for the poorest elements of the population, which would reduce thissurplus somewhat. The major outlet, however, must be the export market.Because Philippine milled rice is of low quality by world standards, it is notnow a profitable export. Concerted efforts to improve milling standards couldremove this constraint, and open to Filipino producers a large world marketwith good long-term prospects.

Prices

8.03 Since 1957, the Government has purchased a portion of palay produc-tion (up to 18%) at a support price set to encourage production. Governmentpurchases have built price stabilization stocks and also provided contacts inthe world rice market. Through 1972, the farmgate support price for palay andthe domestic retail price of. rice kept pace with changes in the world marketprice of rice. Between 1972 and 1975, to keep domestic prices down in theface of record high world prices for rice, the Government subsidized consumers

/1 The estimates of surplus are from the draft Philippines Irrigation ProgramReview prepared by the Bank. The draft is now under revision, based onrecent discussions with, and data provided by, various Philippine agenciesconcerning yields, cropping intensities, and estimated future rainfed areaon the supply side, and also per capita income growth and income elasti-city of demand. In general, the Philippines- agency estimates of long-term supply are lower, and of long-term demand somewhat higher, than thoseof the Bank. On this basis, the surplus projected by the Bank could belower than noted above.

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by maintaining a low official ceiling price for rice and a correspondingly lowfarmgate price for paddy through sales of imported rice below cost. At thesame time, the enormous increase in oil prices caused a near doubling of thefertilizer-to-palay price ratio, with attendant declines in farm yieldsbecause of reduced application, and also lower net incomes. After 1975, theratio fell slightly, then began a gradual increase to a record high in 1981.Widespread typhoon damage compounded this adverse price trend, holding 1981rice production to the 1980 level while domestic consumption rose 2.5%. Riceexports were cut off and government rice stocks released on the market tomaintain price stability.

8.04 Bank projections of world market prices of Thai 5% broken rice indi-cate an increase from US$434/ton FOB Bangkok in 1980 to US$557/ton in 1985 andUS$575/ton in 1990 (in constant 1980 dollars). Rice exported by the Philip-pines in recent years has generally contained 25-35% brokens, and has sold ata 30% discount below Thai 5% brokens. If this quality and price differentialis maintained, the world market price of Philippine export rice would beUS$390/ton FOB in 1985 and US$402/ton in 1990. However, in the expectationthat it will have continuing surpluses, the Government has already taken someinitial steps to enhance its competitive efficiency, e.g., establishment ofrice mills which incorporate the latest design and technology. The designa-tion of export production zones and steps to promote varietal uniformity wouldbe among the other steps which would narrow the price differential betweenPhilippines and other rice exporters. The 1981 average farmgate price ofpalay was almost the same as the estimated 1982 export parity price of P1.50/kg. Farmgate prices are expected to approximate export parity pricesduring the 1980s. The appraisal of the project recognizes that predictions ofthe long-term rice price trends are not very reliable; it also assumes thatprice ratios of rice and other project goods and services will remain constantover the period of project analysis and that farmgate rice prices will reflectthe cost to the Government of importing equivalent amounts of rice. Detailsof the calculation of this cost are in in the project file, in financial andeconomic terms. A similar project file shows the price structure for corn,for which irrigated rice would substitute on part of the project area.

8.05 Farmgate fertilizer prices used in the farm budgets and economicanalysis are based on the Bank's price projections for urea, triple super-phosphate (TSP) and muriate of potash. Observed 1981 prices are converted tomid-1982 farmgate prices by adding estimated inflation factors of 5.5% forurea, 5.9% for TSP and 2.9% for muriate of potash. World prices for thesefertilizers are expected to increase rather slowly during the 1980s, roughlyin line with the expected increase in the world price of rice and otherproject inputs. Price structures for these fertilizers are included in theproject file.

Farm Incomes

8.06 Samples of CIS farms show generally low household incomes, butwide variation between regions in total household income and proportion

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coming from on-farm production. A 1978 survey showed average CIS annualhousehold incomes in the four regions studied were about P 9,300 but rangedfrom P 3,800 to P 17,400, of which the share of on-farm production rangedfrom 11% to 69%. A smaller 1980 sample showed 80% of total income averagingP 7,140 was from on-farm production. These variations make generalizationsabout farm incomes and their growth due to the project difficult, but a roughapproximation can be made through farm models representing common farm types.The models represent typical farms of 0.9 ha and 2.4 ha, for owner-operatorsand share tenants, and for new irrigation and rehabilitation. Assuming thatonfarm income is two thirds of total household income for communal systemhouseholds, seven-eighths of project households are below the rural povertyincome level; the project would reduce this share to two-thirds. Theproject's impact on rainfed farms would be greatest, with net farm incomesrising 170-260% on presently rainfed rice farms and 280-350% on presentlyrainfed corn farms. Irrigated rice farm net incomes would rise 80-100%. Theproject's effect on rice farm incomes is summarized in Table 8.1, and farmmodels are presented in detail in Annex 4, Table 2-5.

Cost and Rent Recovery

8.07 Cost recovery never approaches 100% on irrigation projects in thePhilippines because irrigators, being largely a low-income group, are favoredby a government policy which allows 50 years for government constructionexpenses to be repaid at zero interest. The project's direct beneficiarieswould be subject to the same terms that other CIS beneficiaries face: duringconstruction IAs would contribute labor, materials and/or cash worth 10% ofsubproject costs./I The remaining 90% must be repaid over a period of up to50 years at zero interest. These repayments are set in terms of palay withfarmers agreeing to pay a fixed number of cavans of palay per irrigatedhectare per year or the cash equivalent in current palay prices. Repaymentsare, therefore, indexed roughly to the rate of inflation. For the project,average annual repayments would be about two cavans per ha for rehabilitationsubprojects and about three cavans per ha for new subprojects. Total costrecovery for communal systems has three sources: the 50-year stream ofcapital cost repayments, the initial IA 10% contribution, and incremental landtaxes, in order of magnitude. Land taxes are 1% of assessed value underP 3,000 per ha and 2% of assessed value of P 3,000 per ha and above; andwould rise by P 2.3 million per year at full development as irrigationraises land values. In present value terms, water charges would account for53% of recovered costs, IA contributions 29%, and incremental land taxes 18%.The irrigation construction component's overall cost recovery index /2 is28.2%. Operation and maintenance charges are not included in the calculation

/1 Administrative overhead and construction of maintenance roads are notincluded in subproject costs used to calculate the IA contribution.

/2 Present value of recovered costs divided by present value of constructioncosts.

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Table 8.1: SUMMARY OF FARM INCOMES FOR SAMPLE SUBPROJECTS /a

(US$)

Farm incomePercent

Present Future Future increaseirrigation Farm Pre- without with Incre- (C/A x

Farm type status size sent project project mental 100%)

(A) (B) (C)

Rice FarmsOwner-operator /b Rainfed 0.9 190 206 637 430 209Owner-operator Tb Rainfed 2.4 532 597 1,698 1,101 169Owner-operator T7 Irrigated 0.9 269 319 637 318 100Owner-operator lb Irrigated 2.4 780 941 1,698 757 80

Share tenant /c Rainfed 0.9 90 99 320 221 223Share tenant /c Rainfed 2.4 241 264 947 683 257Share tenant __ Irrigated 0.9 134 169 320 151 89Share tenant /c Irrigated 2.4 356 507 947 440 87

Corn Farms /dOwner-operator Rainfed 0.9 100 142 637 495 349Owner-operator Rainfed 2.4 268 379 1,698 1,319 348Share tenant Rainfed 0.9 58 85 320 236 278Share tenant Rainfed 2.4 154 226 947 721 319

/a Excludes off-farm and nonfarm income.

/b Incremental income figures apply also to leaseholders and amoritizingowners.

/c Landlord pays varying percentages of input costs, depending on typeof input and receives 50% of gross production; farm income figures for sharetenants exclude the landlord's share.

/d Corn farms become rice farms in the future-with-project case.

- 50 -

of this index because, as farmers would pay all such charges, the costsare never incurred by government and so cannot be recovered by government.Although the cost recovery index shows a high degree of subsidy, thebeneficiaries are asked to pay a larger share of costs than their neighborson recent Bank-assisted national systems, where the appraisal estimates ofthe cost recovery index average about 17%.

8.08 The project rent recovery index /1 measures the economic impact ofthe project and the burden of water charges on beneficiaries. Project rentis the incremental cash income from the project less allowances for costs offarmer capital, labor, farm management and risk. The rent recovery indexranges from 12% to 28% for various farm types analyzed. It is 19.0% for theirrigation construction component as a whole. The rent recovery indices onthe three most recent Bank-assisted national irrigation projects are 20% forMedium Scale Irrigation Project (Loan 1809-PH), 24% for Magat II IrrigationProject (Loan 1639-PH) and 30% for the Second National Irrigation SystemsImprovement Project (Loan 1526-PH). Table 8.2 shows the details of the costand rent recovery analysis.

8.09 The proposed project charges on beneficiaries (10% of costs paidat the time of construction, and the rest paid over 50 years at zero inter-est) are consistent with the objective of narrowing the gap between ruraland urban incomes. Although the beneficiaries could bear higher charges,the proposed charges are at their legal limits. NIA is exploring the possi-bility of a change in the law which would allow high repayments in the firstfew years with any remaining balance written off as an explicit grant to theirrigators. This option would greatly increase the cost recovery index, butmust be designed carefully to avoid excessive burden on farmers in theinitial years. The following agreements would be reached with theGovernment during negotiations:

(a) the Government would not reduce the existing level of capitalcost repayment expected of project beneficiaries; and

(b) NIA would send to the Bank by December 31, 1983, a reportdetailing current estimates of the level of water charges,the capacity of the beneficiaries to pay, and actualcollection rates, and explaining the Government's policyon project cost recovery and measures to improve collectionof water and charges.

/1 Present value of incremental water charges divided by present value ofproject rent.

Table 8.2: COST AND RENT RECOVERY /a(Pesos/years)

Present Land Use: Rainfed rice Irrigated rice Rainfed corn New areas0.9 ha 2.4 ha 0.9 ha 2.4 ha 0.9 ha 2.4 ha 0.9 ha 2.4 ha Total

Owner- Share Owner- Share Owner- Share Owner- Share Owner- Share Owner- Share Owner- Share Owner- Share projectoperator tenant operator tenant operator tenant operator tenant operator tenant operator tenant operator tenant operator tenant (P mln)

At Full DevelopmentIncremental gross value of production /b 5,464 5,464 14,570 14,570 3,602 3,602 9,605 9,605 6,335 6,335 16,894 16,894 8,162 8,162 21,765 21,765Less: Incremental cash production

costs /b 1,977 3,673 5,653 9,038 1,025 2,375 3,470 6,044 2,325 4,427 6,210 11,055 3,005 5,569 8,010 14,096

Equals: Incremental cash income 3,487 1,791 8,917 5,532 2,577 1,227 6135 3,561 4,010 1,908 10,684 5,839 5,157 2,593 13,755 7,669

Less: Incremental:Imputed return on own capital /c 150 - 283 163 150 - 174 62 150 - 397 163 150 - 400 163Imputed value of family labor 77 353 353 941 941 240 240 642 642 510 510 1,357 1,357 728 728 1,940 1,940Imputed value of farm management /e 546 546 1,457 1,457 360 360 960 960 634 634 1,689 1,689 816 816 2,176 2,176Allowance for risk and uncertainty /f 546 273 1,457 728 360 180 960 480 634 317 1,689 845 816 408 2,176 1,088

Equals: Project rent /g 1,892 619 4,779 2,243 1,467 447 3,399 1,417 2,082 447 5,552 1,785 2,647 641 7,063 2,302

Incremental water charges 329 125 878 334 171 68 458 183 329 125 878 334 329 125 878 334Incremental water charges as a % of

incremental cash income 9 7 10 6 7 6 7 5 8 7 8 6 6 5 6 4

During Project's LifeProject rent Th 14,832 4,853 37,465 17,584 11,501 3,505 26,647 11,108 16,322 3,505 43,525 13,993 20,752 5,025 55,371 18,047 420.3Incremental water charges /i 2,578 980 6,882 2,618 1,341 533 3,590 1,435 2,578 980 6,882 2,618 2,578 980 6,882 2,618 80.0 e

Rent recovery index (%) /j 17 20 18 15 12 15 13 13 16 28 16 19 12 20 12 15 19.0Project costs /h 346.0Cost recovery index (X) /k 28.2

/a All calculations in expected mid-1982 prices.7b From Annex 4.77 Assumes 10% p.a. (5% per crop) return on portion of cash costs from farmer's own resources, excluding (for share tenants) landlord's crop share.77 Shadow wage rate of rural unskilled labor taken at P 4.9/day./e Ten percent of incremental gross value of production.7?f Ten percent of incremental gross value of production for owner-operetor and 5X for share tenant.7i Rent is for farm operator regardless of land tenure status; share tenant rent is low, while absentee landlord rent, if computed, would be very high.7Ih Present values in 1982 discounted at 10% p.a. over the construction loan repayment period (50 years). Total project rent includes landlord rent.77 Total project water charges are made up of irrigation fees with a present value of P 51.8 million and the 10% initial IA contribution to construction with a present value of P 28.2 million.73 For individual farm types, the index counts only irrigation fees in rent recovery; the IA contribution is added to this in the total project index.7k Revenue is present value of IA contribution to construction plus 50-year stream of capital cost repayments plus incremental land taxes.

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9. BENEFITS, JUSTIFICATION AND RISKS

Benefits

9.01 The proposed project would contribute to government objectives ofrural poverty reduction and increased rice production. At full development(1990), the irrigation construction component would result in increased palayproduction of 106,000 tons a year through higher yields, higher croppingintensities and expanded physical area under rice. At current milling stand-ards for Philippine rice, this additional production would have an exportvalue of about US$37.1 million in estimated mid-1982 world prices, or US$22.5million in farmgate prices. After deducting production costs, it would meanincremental net income of US$14.1 million to project farmers, or about US$588per year for each of nearly 24,000 farm families. The nationwide strength-ening of NIA's PIOs, and training of NIA and MOA staff and farmer leaderswould improve the efficiency in the implementation of NIA's planned irrigationprogram, involving several hundred thousand ha of construction or rehabilita-tion in the next ten years. No attempt has been made to quantify the benefitsof this institution strengthening, but it would introduce large improvementsin the quality, speed and efficiency of NIA works, including the O&M ofnational systems managed by the PIOs, and in the O&M of communal systems byirrigators. By organizing and training farmers and involving them in thedesign and construction of their systems, it would improve the capacity andincentive of irrigators to keep their systems in optimum condition, maximizingproduction while reducing the future burden on NIA of O&M and costly rehabili-tations. The irrigation construction component would cost about US$1,825 perha, or US$2,550 per directly-benefitting farm family (1982 prices); this is inline with the per hectare costs of previous Bank-assisted irrigation projectsin the Philippines, and considerably cheaper than the historical average costper direct beneficiary.

9.02 Beneficiaries. Of the nearly 24,000 farm families representingroughly 144,000 people who would benefit directly from the irrigationconstruction component, those currently growing rainfed crops and thoseopening new areas to cultivation would benefit more than farmers currentlyusing irrigation in both absolute and proportionate terms. Share tenantfarmers would gain more in proportionate terms than owner operators, but lessin absolute terms. Absentee landlords, receiving the difference betweenincremental net income of owner-operators and share tenants, would get aboutone-fifth of the total incremental net incomes at full development. They arenot included among benefitting families because no reliable estimate of theirnumbers is available. Smaller owner-operators would gain proportionatelyslightly more than larger owner-operators and the reverse would be true forshare tenants. Most of the CIS farmers in the country not directlybenefitting from project irrigation construction would receive indirect

- 53 -

benefits from the training and PIO strengthening components of the project,since they depend on the PIOs for periodic assistance in dealing withtechnical problems and in undertaking rehabilitation works.

9.03 Fiscal Impact. Because of the easy repayment terms which locallaws offer to IAs on construction loans, there would be an element ofindirect subsidy for the CIS farmers in the project (para. 8.07). Inaccounting terms, the net charge on the Government-s fiscal resources wouldbe the interest payments on the Bank loan, less additional revenues from landtaxes resulting from higher values on project-assisted land (estimated tototal roughly P 2.3 million per annum at full development).

9.04 Employment Effect. The project would create additional employmentfrom three sources: (a) initial construction activities generating over31,000 man-years of full-time employment - about 63% of which would be paidin cash, the remainder credited to the IAs 10% share of construction costs -over a period of about five years, assuming 250 man-days per year; (b) opera-tion and maintenance of new and rehabilitated systems generating 400 incre-mental man-years per year at full development (although incremental paidlabor would exceed 500 man-years owing to the expected shift in O&M respon-sibilities toward regular paid IA employees);/l and (c) more intensivefarming operations generating over 10,000 incremental man-years per year atfull development. The incremental farm employment represents an increase of80% in rice farm labor use by directly benefitting farmers. This additionaldemand for labor would not represent a constraint on production, but ratherwould greatly reduce seasonal unemployment in the benefiting area, and wouldbe increasingly important in the future as the rural labor force,particularly landless labor, continues to grow in numbers. Even at peakmonths the demand is unlikely to exceed labor supply, assuming 24 man-daysper month and 2.5 workers per family. The project would help to maintainconstant or even slightly improved real wages for local unskilled labor,preventing any continuation of the deterioration of real wages seen duringthe 1970s.

9.05 Effect on Food Availability and Prices. Incremental project pro-duction would increase food availability, particularly in relatively remoteareas. Food availability in most areas is of less concern than food afford-ability. The project would greatly increase the total purchasing power ofthe small farmers who comprise the bulk of its beneficiaries, while contri-buting marginally to the restraint of rice price increases. The irrigationconstruction component of the project would greatly increase local riceproduction, but would add only about 1% to national production in 1990.Existing trade channels minimize inter-regional rice price variations, andhence the project is expected to have negligible effect on rice prices.

/1 With the project, total O&M labor would be 957 man-years, 653 of whichwould be paid in cash. Without the project, total O&M labor would be556 man-years, only 151 of which would be paid in cash.

- 54 -

Financial and Economic Analysis

9.06 Financial Analysis. The financial analysis of the project dealswith quantifiable benefits and costs; benefits of PIO strengthening andtraining are not readily quantifiable, and were not included in the analy-sis, nor were their costs. Benefits included in the analysis were limitedto the increased value of palay production in 1982 farmgate prices. Costsincluded were of two types: increased costs of rice production, and irri-gation system construction costs. Benefits and production costs were esti-mated by compiling farm budgets for twelve farm types: for currently rain-fed rice, irrigated rice and rainfed corn, owner-operator and share tenantcases were selected, and within each case larger and smaller farms weremodeled. The approximate number of farms represented by each type, andtheir phasing of entry into the project, were also estimated. Then the farmtypes were aggregated to yield total farm benefits and costs. These werematched against construction costs, and assumed to extend for 30 years. Thebudgets are shown in Annex 4, Tables 2, 3 and 5. The total capital costs ofconstruction activities would be US$61.3 million, yielding a financialinternal rate of return of 21.5% over 30 years.

9.07 Economic Analysis. Economic analysis measures the net impact ofthe project on the economy; thus the distinction between owner-operator andshare tenant is no longer important, since both farm types use similarresources and techniques to produce similar outputs. Farm size also wasfound to be relatively unimportant in determining net crop revenue per ha.Annex 4, Table 5 therefore shows the farm budgets in economic terms forrainfed and irrigated farms on a per ha basis. Unit prices are shown inAnnex 4, Table 1 and are assumed to remain constant over the period ofanalysis. All tradeable components are valued directly in foreign exchangeand converted to local currency at the official exchange rate and adjustedfor local transport and handling. Specific coversion factors have been usedfor all nontradeable inputs and outputs. Farm labor is priced at P 4.90per day, based on an average financial wage of P 11.30 per day adjusted bythe conversion factor of 0.52 for rural unskilled labor and the consumptionconversion factor of 0.84. Construction costs were adjusted by the con-struction conversion factor of 0.827. Aggregation of farm budgets was doneas in the financial analysis, and the overall results of both financial andeconomic analyses are shown in Table 9.1. The economic internal rate ofreturn, based on the 33 representative sample subprojects, is estimated at19.2% over 30 years.

- 55 -

Table 9.1: FINANCIAL AND ECONOMIC COSTS AND BENEFITS /a(P million)

Incremental Incremental Constructionproduction production costs/b costs Net benefits

Project Finan- Eco- Finan- Eco- Finan- Eco- Finan- Eco-year cial nomic cial nomic cial nomic cial nomic

1 - - - - 3.9 3.2 (3.9) (3.2)2 7.7 6.7 2.9 3.1 84.6 69.9 (79.8) (66.3)3 25.8 22.2 9.6 10.3 112.8 93.2 (96.5) (81.4)4 56.6 48.7 21.1 22.7 119.6 98.9 (84.1) (72.8)5 102.2 88.1 38.1 41.0 121.5 100.5 (57.4) (53.4)6 140.1 120.8 52.2 56.2 54.4 45.0 33.4 19.57 167.2 144.7 62.5 67.4 - - 104.6 77.38 182.0 157.6 68.1 73.4 - - 114.0 84.230 182.0 157.6 68.1 73.4 (124.2) (102.7) 238.1 186.9

Netpresentvalue /a 1,122.5 971.1 419.5 452.1 338.8 286.1 364.1 238.7

IRR 21.5% 19.2%/c

/a Discount rate 10%.

/b O&M would be the responsibility of the Irrigators' Association and notNIA. As such O&M costs are reflected in the production costs.

/c Of the 33 subprojects appraised in detail, 25 are new systems and 8 arefor rehabilitation of existing systems. The rates of return for the indi-vidual new subprojects range from 10% to 31%, and for the individualrehabilitation subprojects from 16% to 36%.

Sensitivity Analysis

9.08 Both financial and economic analyses were subjected to tests todetermine the response of the internal rate of return to adverse changesin benefits and costs. The results are summarized in Table 9.2. The mostadverse changes would be delays in benefits with costs incurred onschedule; a lag of three years in the onset of benefits would reduce thefinancial and economic rate of return to 11.2% and 9.4%, respectively.Such a long delay is highly unlikely on such small, simple systems. Aone-year lag, which is more possible, and an accompanying cost overrun of20% would reduce the rates of return to 12.3% and 9.9%, respectively.

- 56 -

Switching values, based on a 10% opportunity cost of capital, show the ratesof return to be far more sensitive to reductions in benefits than to increasesin costs. Even so, benefits would have to fall by 32% (financial) and 25%(economic) in order to reduce the project's financial and economic rates ofreturn to the opportunity cost of capital.

Table 9.2: SENSITIVITY ANALYSIS

Financial EconomicRate of Rate of

Test Return (%) Return (%)

Base case 21.5 19.2Benefits lagged one year 16.6 14.5Benefits lagged three years 11.2 9.4Benefits down 20% 14.6 11.8All cost up 20% 18.0 16.0Costs up 20%, benefits lagged 15.8 13.1one year 12.3 13.1

Switching values at 10% discount rate /aBenefits -32 -25Construction costs 81 53Incremental farm costs IU/ b)

/a Percentage change in net present value of stream necessary to reduceinternal rate of return to 10% (the opportunity cost of capital).

Environmental Effects

9.09 CISs generally would have slight environmental impacts because theywould be small, widely dispersed, near foothills on well-drained upper plains,and without storage structures. Hence, schistosomiasis and malaria vectorsare seldom a problem. Only seven subprojects, in four provinces, are locatedin schistosomiasis endemic areas, and most of the subprojects located inmalaria endemic provinces are at elevations where malaria rarely occurs.Since canals are used for domestic purposes such as swimming and laundering,some health risks would occur if human, animal or household wastes find theirway into the canals. Optimum levels of fertilizer, herbicide and pesticideuse are seldom achieved in CISs, but use rates are expected to rise under theproject, and some harm to downstream aquatic and shore life could result. Todeal with these minor potential problems, several measures have been planned:(a) drainage facilities have been included in each subproject design; (b) the

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Ministry of Health would continue its current monitoring of disease vectors inendemic areas; (c) the project's monitoring program of selected subprojectswould examine water quality; (d) crop production training programs wouldstress the environmental and economic importance of the appropriate use ofchemical inputs; and (e) water management training courses for IAs wouldinclude explanations of the health as well as the agricultural importance ofinspecting and maintaining irrigation and drainage systems.

Risks

9.10 The National Irrigation Administration has had a long and generallysuccessful experience with the construction of CISs, and hence no risks areforeseen in construction activities. The O&M and cost repayment aspects ofsuch systems have a less sucessful history, however, and the participatoryapproach to future communal irrigation development has not been tried on sucha large scale as NIA is now planning to undertake (see para. 1.30). Yet itoffers the most reasonable prospect of solving the managerial/O&M problems ofCISs. The management of NIA is fully committed to the participatory approach,and would monitor its progress carefully in order to correct any problems assoon as they are identified. Hence, this area of risk is also the best hopefor future development of the communal irrigation subsector.

9.11 Projected crop yields which assume a significant increase in the useof fertilizers, crop protection chemicals and other inputs may not materializeif the increases in prices of the inputs are not adequately compensated by acorresponding higher price for palay. There is the added uncertainty thatmany farmers may be ineligible to borrow funds from the rural or other banksbecause of their default of past loans. Moreover many of the rural banksthemselves do not have access to the Central Bank's rediscounting mechanismbecause of a high level of arrears in their outstanding portfolio. Theseproblems affect the entire agricultural sector and can only be addressed bypolicies which improve the economic efficiency of input supply and whichsuitably modify the regulations governing the operation of rural banks. TheGovernment continually reviews the ratio of input to product prices, and hasmade periodic adjustments to the latter to reflect rising production costs,having regard at the same time to the interest of consumers. With regard tocredit, the Government has recently taken steps, through suitable amendmentsto the regulations of the Monetary Board, to enable a larger number of ruralbanks (including many which were hitherto excluded) to participate in agri-cultural credit programs. Loan defaults by borrowers have been dealt with byrescheduling the repayments, particularly where arrears result from naturalcalamities like typhoons and floods; it is the Government's policy to dealsympathetically with defaults arising from force majeure.

9.12 Unrestrained deforestation in the watersheds poses a general riskto irrigation development. While the overall encroachment of the watershedsis to some extent unavoidable because of a growing shortage of cultivableland, the Government is committed to a program of regulated watershedmanagement, and has already obtained the assistance of the Bank and other

- 58 -

donors in this regard. The ongoing Bank-assisted Watershed Management andErosion Control Project (Loan 1890-PH) includes a provision for two feasibil-ity studies which are expected to create a basis for further Bank support towatershed protection and development. In the communal irrigation areas it isalso expected that the participatory approach would be particularly effectivein engendering an interest in protecting the watersheds.

10. AGREEMENTS TO BE REACHED AND RECOMMENDATION

10.01 During negotiations agreement was reached with the Government on thefollowing principal points:

(a) NIA would by December 31, 1983, begin to implement a phasedprogram satisfactory to the Bank and IFAD with a view to achieve byDecember 31, 1985, a uniform set of selection criteria and designstandards satisfactory to the Bank and IFAD to be applied to all itscommunal irrigation systems, regardless of financing source(para. 4.15);

(b) NIA would submit for review by the Bank prior to implementationfull evaluation reports for subprojects costing more thanP 5.0 million each, and summary data forms for subprojectscosting less than P 5.0 million (para. 4.16);

(c) NIA would submit for review by the Bank and IFAD before December 31,1982, the indicators that would be monitored and other details ofthe M&E system (para. 4.19);

(d) NIA would prepare by December 31, 1982, for review by the Bank,terms of reference for consulting services for the financialreporting system study (para. 4.23);

(e) NIA would establish the Special Account and the counterpart Operat-ing Account and maintain and operate the accounts in a mannersatisfactory to the Bank and IFAD (para. 5.06);

(f) NIA would ensure that the aggregate cost of civil works done byforce account would not exceed 40% of the total cost of civilworks, or US$32 million (para. 5.08);

(g) NIA would cause all its regional and provincial offices to maintainseparate accounts for the project. These would be collated by theProject Manager. After audit by the COA, the project accounts,together with the auditor's comments, as well as his opinion onthe certification of expenditure on force account works, would besent to the Bank within six months of the close of each fiscalyear (para. 5.12);

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(h) the existing level of capital cost repayment expected of projectbeneficiaries would not be reduced, and NIA would send to the Bankby December 31, 1983, a report detailing current estimates of thelevel of water charges, the capacity of the beneficiaries to pay,and actual collection rates, and explaining the Government's policyon irrigation project cost recovery and measures to improve collec-ion of water charges (para. 8.09).

10.02 Subject to the above assurances, the proposed project would besuitable for a Bank loan of US$71.1 million. The loan, which includes acapitalized front-end fee of 1.5% on the Bank loan, would have a term of20 years, including 5 years of grace, with interest at 11.6% p.a. Theborrower would be the Republic of the Philippines.

PHILIPPINES


Climatic Characteristics by Region

Total rainfall Monthly rainfall AverageWet Dry Wet season Dry season no. of

Type of Annual season season Months Max. Min. Months Max. Min. typhoonsRegion climate ----------------------------------- mmm-------------------------------- per year

I. Ilocos } 7.2III. Central Luzon } A 2,000 1,700 300 Jan-Sep <500 275 Oct-May 100 } 3.2IV. S. Tagalog (W) } (25)/a (17) (15) (2) }

II. Cagayan Valley (W) B 2,200 1,900 300 Jun-Nov 300 175 Dec-May 150 20 }(28) (20) (20) (5) }

7.2IV S. Tagalog (E) } D 3,500 2,800 700 May-Dec 450 250 Jan-Apr 200 150 }II. Cagayan Valley (E) } (20) (18) (18) (15) }

VI. W. Visayas A 1,800 1,400 400 Jun-Nov 350 200 Dec-May 125 20 3.8(20) (15) (15) (5)

VII Central Visayas B 2,000 1,600 400 Jun-Dec 210 135 Jan-May 115 55 1.4(18) (15) (13) (11)

V. Bicol } C 4,000 2,600 1,400 Oct-Mar <500 250 Apr-Sep 250 150 3.8VIII. E. Visayas 1 (27) (14) (20) (15)

IX. W. Mindanao } B 1,500 1,000 500 Jun-Nov 300 175 Dec-May 125 40 1.4X. N. Mindanao } (a9) (12) (10) (6)

XI. S. Mindanao C 4,200 2,800 1,400 Oct-Mar <500 250 Apr-Sep 300 170 0.2(26) (18) (21) (15)

XII. Central Mindanao D 2,000 1,650 350 Apr-Dec 250 175 Jan-Mar 125 50 0.2(19) (15) (10) (6)

/a Figures in parentheses are number of rainy days in a month.

ANNEX 2

- 61 - Table 1

PHILIPPINES


Strengthening of Provincial Irrigation Offices

Classification Levels

I

Serial | SerialRegion number Province Level | Region number Province Level

I 1 Abra II | VI 37 Aklan II2 Benguet II | 38 Antique III

3 Ilocos Norte IV | 39 Capiz II4 Ilocos Sur III | 40 Iloilo IV5 La Union III 41 Negros Oc. IV

6 Mount. Province II |7 Pangasinan V |

I VII 42 Bohol IIII 8 Cagayan V | 43 Cebu I

9 Ifugao II | 44 Negros, Or. II10 Isabela IV |11 Kalinga-Apayao III |12 Nueva Vizcaya IV | VIII 45 Leyte, N. IV13 Quirino II | 46 Leyte, S. I

| 47 Samar, Or. IIII 14 Bataan II | 48 Samar, N. I

15 Bulacan IV | 49 Samar, Oc. II16 Nueva Ecija IV |17 Pampanga III18 Tarlac IV | IX 50 Zamboanga, N. II19 Zambales IV | 51 Zamboanga, S. IV

IV 20 Batangas II I X 52 Agusan, N. II21 Cavite IV | 53 Agusan, S. III22 Laguna III | 54 Bukidnon I23 Marinduque I I 55 Misamis, Oc. I24 Mindoro, Oc. IV | 56 Misamis, Or. II25 Mindoro, Or. III | 57 Surigao, N. I26 Palawan /a - I27 Quezon III | XI 58 Cotabato Del S. IV28 Aurora, Ma. IV | 59 Davao Del N. IV29 Rizal I | 60 Davao Del S. III30 Romblon I | 61 Davao, Or. II

| 62 Surigao Del Sur IIV 31 Albay III |

32 Camarines, N. II | XII 63 Cotabato Del N. IV33 Camarines, S. IV | 64 Lanao Del N. II34 Catanduanes I | 65 Lanao Del S. III35 Masbate III | 66 Maguindanao II36 Sorsogon II | 67 Sultan Kudarat III

/a Strengthening in Palawan comprises provision of buildings only.

- 62 - ANNEX 2

Table 2

PHILIPPINES


Office, Survey and Hydrologic Equipment(US$ 000)

UnitItem Quantity cost Amount

Typewriter, 18" carriage 78 0.7 54.6Typewriter, 27" carriage 66 1.0 66.0Photocopying machine 66 0.6 39.6Blue printing machine 55 3.7 203.5Drafting equipment 153 1.5 229.5Calculator, display type 348 0.1 34.8Calculator, desk, printing 66 0.3 19.8Mini-computer and components 12 18.5 222.0Radio transceivers 66 5.0 330.0Furnishings LS 37.0Theodolite, one second 55 3.8 203.5Theodolite, six second 152 1.2 182.4Engineers level, automotic 152 0.7 106.4Steel measuring tape 304 0.3 91.2Current meter 86 0.1 8.6Meteorological equipment 86 0.3 25.8Miscellaneous items LS - 5.3

Total 1,860.0

- 63 - ANNEX 2

Table 3

PHILIPPINES


Construction Equipment, Machinery and Vehicles(US$'000)

UnitQuantity cost/a Amount

Crawler tractor, with dozer, 90 hp 35 40.2 1,407.0Crawler tractor, with dozer, 60 hp 67 30.4 2,036.8Backhoe excavator, crawler mounted, 0.5 cu m 67 28.8 1,929.6Motor grader, 125 hp 22 42.0 924.0Dumptrucks, 4x6, 6 ton 153 22.8 3,488.4Motor car, sedan, 5 passenger, 2,000 cc 2 11.3 22.6Utility vehicle, diesel engine, 4x4 100 10.4 1,040.0Pick-up truck, diesel engine, 1 ton 145 10.6 1,537.0Motor cycle, 100 cc 250 0.6 150.0Concrete mixer, 150 1 103 1.1 113.3Concrete vibrators, 40 mm diameter, pin type 206 0.5 103.0Sheepsfoot roller, 5 ton 22 1.8 39.6Portable jack hammer, gasoline engine 50 1.0 50.0Water pump, 150 mm diameter, diesel engine 72 3.1 223.2Water pump, 100 mm diameter, diesel engine 216 1.5 324.0Generator, diesel engine 4 kw 72 1.5 108.0Workshop equipment and tools - LS 240.0Spare parts for equipment vehicles (about 10%) - LS 1,273.5

Total 15,010.0

/a Indexed to mid-1982.

- 64- ANNEX 2Table 4

PHILIPPINES


Estimated Schedule of Expenditures(US$ million)

Totalcost 1982 1983 1984 1985 1986 1987

Strengthening of provincial irriga-tion offices:Buildings and workshops 3.64 0.30 0.81 0.81 0.91 0.81 -Construction machinery; office and

field equipment 16.91 0.40 3.58 4.38 3.98 4.57 -Training of staff and farmer leaders 2.83 0.30 0.51 0.51 0.61 0.60 0.30Irrigation systems:

Diversion works, main canals androads 38.25 - 6.71 9.01 9.32 9.21 4.00

Distribution and on-farmfacilities 12.75 0.40 1.99 2.59 2.99 3.18 1.60

Monitoring and evaluation 1.36 0.10 0.19 0.29 0.29 0.29 0.20Engineering, supervision and adminis-

tration; land acquisition 9.38 0.91 1.61 1.81 2.02 2.02 1.01Financial reporting system study 0.20 - 0.10 0.10 - - -

Base Project Cost 85.32 2.41 15.50 19.10 20.50 20.70 7.11

Physical contingencies 11.80 - 2.00 2.60 3.00 3.00 1.20

Cost Without Price Increases 97.12 2.41 17.50 21.70 23.50 23.70 8.31Foreign 50.24 1.31 .8.91 11.21 12.20 12.30 4.31Local 46.88 1.10 8.59 10.49 11.30 11.40 4.00

Expected price increases /aForeign 11.25 0.01 0.81 1.89 3.09 4.12 1.33Local 12.43 0.03 0.79 1.91 3.17 4.35 2.18

Total 23.68 0.04 1.60 3.80 6.26 8.47 3.51

Total With Price Increases 120.80 2.45 19.10 25.50 29.76 32.17 11.82

Annual Inflation Rate (%)Foreign - 8.0 8.0 7.5 7.0 6.0 6.0Local - 10.0 8.0 8.0 8.0 8.0 8.0

/a Calculated by compounding the rate of increase in prior years by one-halfthe rate of increase in the year concerned, except in 1982 (for which,because of the uneven distribution of expenditures over the year, only 40%of the expenditures were subjected to a half-year of price increases) and1987 (for which, because expenditures would be completed by mid-year, onlyone quarter of that year's price increase was applied).

Note: Totals may not add because of rounding of the decimals.

- 65 - ANNEX 2Table 5

PHILIPPINES


Estimated Schedule of Disbursements(US$ million equivalent)

Cumulative disbursementYears from IBRD Cumulative disbursements profiles for theapproval fiscal year end of semester irrigation subsector (M)/a

Year & Semester and semester IBRD IFAD Total % Regional Country

1 First FY83 First 2.1/b 0.2 2.3 2.8 0.3 0.0Second Second 3.6 0.4 4.0 4.8 3.0 3.4

2 First FY84 First 9.0 1.3 10.3 12.4 7.4 9.1Second Second 15.5 2.4 17.9 21.5 13.4 16.1





7 First 89.8 88.5Second 94.3 93.4

8 First 97.6 97.2Second 100.0 100.0

/a The regional profile covers 44 projects, and the country profile covers 10projects. The proposed project is essentially different from its predeces-sors in so far as it would pick up a time-slice of ongoing activity in thesubsector. Detailed reasons in support of the estimated schedule of dis-bursements are given in para. 5.11.

lb High initial disbursements are due to the front-end fee (US$1.05 million)and the retroactive financing (of up to US$1.5 million) for expendituresfrom January 1, 1982.


PHILIPPINES


Proposed Allocation of IBRD and IFAD Loan

Proposed Disburse-Costs loan ment

Category Total Foreign Total IBRD IFAD---- (US$ million) ------ ()

Civil WorksOffice buildings 2.32 0.93Workshops, sheds and site works 1.32 0.40Irrigation systems 51.00 25.24

Subtotal 54.64 26.57

Price contingencies 13.70 5.81

Total 68.34 32.38 51.75 44.25 7.50 75

Equipment, Materials and Vehicles /aSurvey and hydrological equipment 0.65 0.58Construction machinery and vehicles 14.77 14.03Workshop and office equipment and tools 1.49 1.23M&E equipment, vehicles, materials

and supplies 0.30 0.20

Subtotal 17.21 16.04


Total 20.96 19.53 20.25 17.10 3.15

Consultants' Services and TrainingStudy 0.20 0.16Training 2.83 0.75

Subtotal 3.03 0.91


Total 3.70 1.08 3.70 3.15 0.55 100

Monitoring and Evaluation 1.06 -Price contingencies 0.29 -

Total 1.35 - 1.30 1.10 0.20 100

UnallocatedLand acquisition 3.58 -Engineering and administration 5.80 0.58Physical contingencies 11.80 6.14Remaining price contingencies 5.27 1.78

Total 26.45 8.50 5.05 4.45 0.60

Front-end Amt.Fee 1.05 1.05 1.05 1.05 - due

GRAND TOTAL 121.85 62.54 83.10 71.10 12.00

/a Disbursement will be 100% of foreign expenditures, 100% of local expendi-tures (ex-factory) or 80% of imported items procured locally.

- 67 - ANNEX 3

PHILIPPINES


Estimated Crop Labor Requirements(Man-days/ha)

Future without Future withPresent project projectIrrigated Irrigated Irrigated

Rain- Crop Crop Rain- Crop Crop Rain- Crop Cropfed 1 2 fed 1 2 fed 1 2

LuzonLand preparation 22 20 18 20 19 19 - 20 18Nursery and trans-

planting 20 20 21 20 21 21 - 24 25Crop management 18 20 21 21 21 21 - 24 25Harvesting 21 23 23 24 24 24 - 32 32

Total 81 83 83 85 85 85 - 100 100

VisayasLand preparation 21 19 19 19 20 20 - 19 18Nursery and trans-planting 20 20 21 20 21 21 - 23 23

Crop management 18 21 21 21 21 21 - 25 25Harvesting 21 23 23 23 24 24 - 33 34

Total 80 83 84 83 86 86 - 100 100

MindanaoLand preparation 22 19 19 20 20 20 - 19 18Nursery and trans-

planting 20 20 21 20 21 21 - 23 23Crop management 19 20 21 22 21 21 - 25 25Harvesting 24 21 23 24 24 24 - 33 34

Total 85 80 84 86 86 86 - 100 100


PHILIPPINES


Rice Farms: Physical Inputs, Yields and Unit Prices

Irrigated InputRain- Crop Crop Unit Prices

Unit fed 1 2 Financial Economic

Present

CultivationMechanical % area 10 20 20 Peso/ha 302.40 261.60Animal % area 90 80 80 Peso/ha 164.30 142.10

Seeds kg/ha 60 70 70 Peso/kg 1.60 1.34Fertilizer - N/ha kg nutrient 30 35 35 Peso/kg 6.40 6.10

P/ha kg nutrient 5 7 7 Peso/kg 6.67 6.27K/ha kg nutrient 3 4 4 Peso/kg 2.75 2.59

Plant protection Peso/ha 100 150 150 Peso/ha 100-150 86-130(various chemicals)ThreshingMechanical % area 30 44 44 Peso/ha 7% of yield 7% of yield

value valueManual % area 70 56 56 - - -

Yield ton/ha 1.7 2.2 2.1 ton 1,499 1,556

Future Without ProjectCultivationMechanical % area 20 30 30}Animal % area 80 70 70 }

Seeds kg/ha 60 65 65 }Fertilizer - N/ha kg nutrient 40 60 60 }

P/ha kg nutrient 10 20 20 }K/ha kg nutrient 5 10 10 }-------- (prices unchanged) -----

Plant protection Peso/ha 200 250 250 }(various chemicals) }

Threshing }Mechanical % area 40 50 50 }Manual % area 60 50 50 }

Yield ton/ha 2.0 2.6 2.6 }

Future With ProjectCultivation

Mechanical % area - 40 40 }Animal % area - 60 60}

Seeds kg/ha - 60 60 }Fertilizer - N/ha kg nutrient - 80 80 }

P/ha kg nutrient - 40 40 }K/ha kg nutrient - 10 10 }-------- (prices unchanged)…

Plant protection Peso/ha - 350 350 }(various chemicals) }

Threshing }Mechanical % area - 50 50 }Manual % area - 50 50 }

Yield ton/ha - 3.3 3.3 }

- 69 -ANNEX 4Table 2

PHILIPPINES


Farm Budgets: Rainfed Rice Farms /a(Pesos/year)

-------------------------------------- Financial prices -------------------------------------0.9 ha 2.4 ha

Future with- Future with Future with- Future withPresent out project project /b Present out project project /b

Production Costs /cCultivation /d 160 (150) 173 (162) 326 (293) 427 (401) 461 (433) 868 (781)Seeds/transplanting /e 86 (45) 86 (45) 143 (80) 230 (120) 230 (120) 380 (213)Fertilizer 210 (44) 302 (63) 1,197 (227) 561 (117) 807 (169) 3,193 (606)Plant protection

chemicals 99 (54) 198 (109) 572 (269) 264 (145) 528 (290) 1,525 (717)Water charges /f - (-) - (-) 329 (125) - ) - 878 (334)Harvesting /g 48 (32) 76 (50) 286 (189) 128 (79) 201 (135) 762 (503)Interest /h 106 (80) 144 (104) - (283) 69 (211) - (277) - (-)Other /i 27 (14) 27 (14) 45 (22) 72 (36) 72 (36) 119 (59)Land tax/landlord'scrop share /j 22 (1,147) 22 (1,349) 107 (4,081) 58 (3,058) 58 (3,598) 285 (10,883)

Total Cash Costs 758 (1,566) 1,028 (1,896) 3,005 (5,569) 1,809 (4,167) 2,357 (5,058) 8,010 (14,096)

Cross Crop Revenue /k 2,293 (2,293) 2,698 (2,698) 8,162 (8,162) 6,116 (6,116) 7,195 (7,195) 21,765 (21,765)

Net Crop Revenue 1,535 (727) 1,670 ( 802) 5,157 (2,593) 4,307 (1,949) 4,838 (2,137) 13,755 (7,669)

Incremental Net CropRevenue /1 - (-) - (-) 3,487 (1,791) - (-) - (-) 8,917 (5,532)

/a Figures in parentheses are for share tenants; other figures are for owner-operators. Production costs include cost oflabor.

/b Values shown are for rainfed land converted to irrigated land, and reflect a cropping intensity of 165%.77 Share tenants and owner-operators apply inputs at equal rates. Extensive surveys show that landlords pay varying shares

of share tenant inputs depending on type of input./d Proportion of paid mechanical cultivation 10% at present, 20% in future without project, and 40% in future with project.7e Cost is for seeds: seedling pulling, bundling, scattering and transplanting is done by exchange labor.7f Water charges are the sum of P 125/ha for operation and maintenance, and 2% of the debt per hectare incurred by the

irrigators' association for system construction. Debt per hectare is 90% of total capital cost per ha, and based on asample of 25 proposed projects for 1982 would average about P 13,300/ha.

/g Includes threshing, of which 30% is mechanical at present, 40% in future without project, and 50% in future withproject.

/h All production credit is for six months, with loan size based on any excess of an assumed minimum consumption level ofP 4,800 over net crop revenue but never exceeding cash production costs (excluding the landlord's crop share). Forowner-operators, interest would fall from 28% p.a. to 20% p.a. with the project because higher net revenues wouldincrease the share of low-cost formal credit in total borrowings. For share tenants, the same effect would reduceaverage interest from 38% to 26% p.a.

/i Minor costs of sacks, string, etc.73 Land tax is 1% of assessed value if value is no more than P 3,000/ha, or 2% if value exceeds P 3,000/ha. Assessed

values are assumed to he P 2,400/ha for rainfed land, P 3,200/ha for unimproved irrigated land, and P 3,600/ha fornew or improved irrigated land. Landlord's share is 50% of gross crop revenue.

/k Farmgate palay price mid-1982 is P 1,499/ton. Share tenants and owner-operators achieve equal yields./1 Incremental is excess of future with over future without project.

PHILIPPINES


Farm Budgets: Irri4ated Rice Farms /a(Pesos/year)

---------------------- Financial prices ------------------------------0.9 ha 2.4 ha

Future with- Future with Future with- Future withPresent /b out project /b project /c Present /b out project /b project /c

Production Costs /dCultivation /e 207 (190) 240 (219) 326 (293) 553 (509) 642 (584) 868 (781)Seeds/transplanting 121 (65) 122 (66) 143 (80) 323 (174) 324 (175) 380 (213)Fertilizer 304 (61) 638 (128) 1,197 (227) 811 (163) 1,700 (340) 3,193 (606)Plant protectionchemicals 178 (93) 292 (146) 572 (269) 475 (247) 780 (390) 1,525 (717)

Water charges 158 (57) 158 (58) 329 (125) 420 (151) 420 (155) 878 (334)Harvesting /f 109 (72) 160 (105) 286 (189) 290 (192) 426 (281) 762 (503)Interest 190 (130) 277 (174) - (283) - (347) - (-) - (-)Other 32 (16) 35 (18) 45 (22) 86 (43) 94 (47) 119 (59) oLand tax/landlord'scrop share 58 (1,767) 58 (2,280) 107 (4,081) 154 (4,713) 154 (6,080) 285 (10,883)

Total Cash Costs 1,357 (2,451) 1,980 (3,194) 3,005 (5,569) 3,112 (6_539) 4,40 (8,052) 8,010 (14,096)

Gross Crop Revenue 3,535 (3,535) 4,560 (4,560) 8,162 (8,162) 9,426 (9,426) 12,160 (12,160) 21,765 (21,765)

Net Crop Revenue 2,178 (1,084) 2,580 (1,366) 5,157 (2,593) 6,314 (2,887) 7,620 (4,108) 13,755 (7,669)

Incremental Net CropRevenue - (-) - () 2,577 (1,227) - () - () 6,135 (3,561)

/a Figures in parentheses are for share tenants; other figures are for owner-operators.7b Cropping intensity 130%.7c Rehabilitation raises cropping intensity to 165%.7d Except where footnoted, production cost calculation basis is same as for rainfed farms. a,7e Proportion of paid mechanical cultivation 20% at present, 30% in future without project, and 40% in future with X M

project. L >

/f Includes threshing, of which 44% is mechanical at present, 50% in future without project, and 50% in future withproject.

- 71 -ANNEX 4Table 4

PHILIPPINES


Farm Budgets: Rainfed Corn Farms /a(Pesoslyear)

------------------------------------ Financial prices ------------------------------…----0.9 ha 2.4 ha

Future without Future with Future without Future withPresent project project Present project /b project /b

Production Costs /cCultivation /d - ( -) - ( -) 326 (293) - ( -) - ( -) 868 (781)Seeds /e 57 ( 30) 57 ( 30) 143 ( 80) 151 ( 79) 151 (79) 380 (213)Fertilizer /f 176 ( 37) 350 ( 74) 1,197 (227) 468 ( 98) 934 (196) 3,193 (606)Plant protectionchemicals /g - ( -) 54 ( 30) 572 (269) - ( -) 144 (79) 1,525 (717)

Water charges - ( -) - ( -) 329 (125) - ( -) - (-) 878 (334)Harvesting - ( -) - ( -) 286 (189) - ( -) - (-) 762 (503)Interest /h 57 ( 27) 95 ( 43) - (283) 151 ( 71) 151 (115) - ()Other /i 94 ( 47) 102 ( 51) 45 ( 22) 252 (126) 252 (136) 119 (59)Land tax/landlord scrop share 22 (609) 22 (914) 107 (4,081) 58 (1,624) 58 (2,436) 285 (10,883)

Total Cash Costs 406 (750) 680 (1,142) 3,005 (5,569) 1,080 (1,998) 1,800 (3,041) 8,010 (14,096)

Gross Crop Revenue /j 1,218 (1,218) 1,827 (1,827) 8,162 (8,162) 3,247 (3,247) 4,871 (4,871) 21,765 (21,765)

Net Crop Revenue 812 (468) 1,147 (685) 5,157 (2,593) 2,171 (1,249) 3,071 (1,830) 13,755 (7,669)

Incremental NetCrop Revenue - - - - 4,010 (1,908) - - - - 10,684 (5,839)

/a Figures in parentheses are for share tenants; others are for owner-operators Production costs include costof labor.

/b Values shown are for rainfed corn land converted to irrigated rice land, and reflect a cropping intensity of165%. See Annex 4, Table 1 for quantities and prices.

/c Share tenants and owner-operators apply inputs equally; landlords pay varying shares of input costs for sharetenants, depending on type of input.

/d No cash costs until conversion to rice, when 40% of land cultivated mechanically.7e Corn seeds cost P 3.50/kg; 18 kg sown per ha./f Use is 20 kg/ha N and 10 kg/ha P at present; both rates double in future without project./S At P 120/standard application/ha on corn land, half of the standard application is used in future without

project./h See Annex 4, Table 2, footnote./h/i Includes costs of bags, etc. at P 1.50/use for corn farmer.74 Corn is priced at P 1,353/ton.

PHILIPPINES


Farm Budgets: Economic Prices /a

(Pesos/ha/year)

Present Land Use Rainfed rice farms Irrigated rice farms Rainfed corn farmsFuture Future Future Future Future Futurewithout with without with without with

Present project project Present project project Present project project

Cash CostsCultivation 154 166 313 199 214 313 - - 313Seeds 80 80 133 113 105 133 53 53 133Fertilizer 222 320 1,262 321 672 1,262 185 369 1,262Plant protection

chemicals 86 173 500 156 260 500 - 52 500Water charges - - 365 176 176 365 - - 365Harvesting 65 102 346 147 198 346 - - 346Other 30 30 30 30 30 30 94 102 30

Subtotal 637 871 2,949 1,142 1,655 2,949 332 576 2,949

Value of labor lb 402 417 858 547 607 858 418 437 858

Total Costs 1,039 1,288 3,80 1,689 2,262 3,807 750 1,013 3,807

Gross Crop Revenue /c 2,645 3,112 8,472 4,077 5,259 8,472 1,365 2,048 8,472

Net Crop Revenue 1,606 1,824 4,665 2.388 2,997 4,665 615 1,035 4,665

Incremental Net CropRevenue - - 2,841 - - 1,668 - - 3.630

/a Quantities of items specified are those used in farm budgets. Interest and taxes are excluded; othercosts are proportional to cropped area.

/b Labor priced at P 4.90/day, based on financial wage of P 11.30 adjusted by unskilled rural laborconversion factor of 0.52 and consumption conversion factor of 0.84. For rice farms, this line excludeslabor costs embodied in cultivation and harvesting costs. For corn farms, all labor costs are included '¢ Xin this line, as are animal-assisted tasks which are priced at P 13/man-animal day. > 4

/c Economic farmgate values estimated for mid-1982 are P 1,556/ton for palay and P 1,365/ton for corn.

ANNEX 5- 73 -

PHILIPPINES


Annual Operation and Maintenance Cost of Typical Communal Irrigation System/a

(Area = 200 ha)

Pesos

Salary and Wages 16,200

Honorarium for officers of the Farmer's Association6 officers at P 50/month = P 3,600/year

Personnel for direct operation and maintenace of irrigationfacilities

1 gatekeeper/water tender at P 350/month = P 4,200/year2 ditch tender at P 350/month = P 8,400/year

Equipment Operation 2,784

Desilting of canal = 320 cu mOperator = 320 x P 0.40 = P 128.00Fuel and oil = 320 x P 1.30 = P 416.00Equipment rental = 320 x P 7.00 = P 2,240.00

Materials and Supplies 4,000(P 20.00/ha)

Miscellaneous Expenses 2,000

Total 24,984

Cost/ha 124.92Say 125.00

/a O&M should be the responsibility of the Irrigator's Associations.

-74 ANNEX 6Page 1

PHILIPPINES


Accounting Procedures for Force Account Work and Minor Contracts

1. Force account work for the proposed project would include theconstruction of on-farm facilities for all subprojects, construction oflaterals for new subprojects up to 500 ha size, and repair and improvementof diversion works and laterals for all rehabilitation subprojects. Someoffice buildings and workshops may also be constructed through force account.In the past, NIA has experienced considerable difficulty in attracting bidsfor such works. On-farm development has the added difficulty of execution onshort notice to avoid interrupting the growing season and to account for badweather. Moreover, farmers can appreciate the construction of such works ontheir fields only when they see palpable evidence of water availability afterthe construction of the main conveyance facilities. Reimbursement for forceaccount expenditures would be based on the statements of expenditureprocedure. The same procedure would be used for minor civil works contractsless than P 1 million each. The aggregate amount of civil works done byforce account would not exceed 40% of the total cost of civil works, orUS$32 million.

2. NIA maintains reliable records on physical progress of works,materials quantities and payments to contractors. Systems and procedures atboth headquarters and provinces are adequate to account for these expenditureson an item by item basis. Under the proposed project Statements ofExpenditure (SOEs) would be used to justify disbursements for both forceaccount work and certain payments to contractors. NIA's system for preparingand verifying SOEs is good; Bank supervision missions would verify at randomcompleted works and related accounts.

3. NIA receives yearly budget allocations from the Government for eachproject. The project office prepares a detailed work plan and assigns jobcodes. Separate job codes are assigned for contract and force account works.Detailed cost estimates are prepared for each job by the field offices withheadings for equipment use and time, major materials (centrally procured),miscellaneous materials (locally procured), direct labor, fuel and lubricantsand engineering supervision. These cost estimates are subject to the reviewof an auditor from COA attached to each project/regional office. For theproposed project, the expenditure would be incurred and monthly accounts wouldbe submitted by each provincial office to the regional office. All paymentvouchers and monthly accounts are reviewed by the Auditor. The accountingsection of the regional office would verify expenditures for each job codeagainst the estimated cost and submit to the project manager in NIA's centraloffice a summary of expenditure with copies of payment vouchers. NIA'scentral office would prepare the withdrawal application using the monthlysummary for the project.

- 75 - ANNEX 6Page 2

4. Regarding force account works, disbursements would be based on apercentage of the product of quantities of the following major items of workand agreed unit rates. Documentation to support disbursements would identifythe location of the completed works. The unit rates would be based on theanalysis for each item to be submitted by NIA with supporting documents forBank review before September 30, 1982, or before claiming first disbursementfor force account work, whichever is earlier. These unit rates would excludethe depreciation of the equipment directly financed under the project. Unitrates would be revised periodically based on NIA's detailed accounts andverification of actual expenditures by supervision missions. For minorcontracts subject to the statement of expenditures procedure, NIA would retaincopies of contracts, progress reports, invoices and evidence of payments madeto contractors for periodic review by Bank and IFAD staff.

Item Unit

1. Construction of on-farm facilitiesincluding farm ditches, farmdrains and related structures. ha

2. Construction of laterals (dividedinto a number of subitemsdepending on size). km

3. Shaping, cleaning and rehabilitationof existing channels (divided intoa number of subitems depending on kmsize).

4. Concrete structures (divided intoa number of subitems dependingon size). each

5. Construction of buildings sq m of floor area

- 76 -ANNEX 7Page 1

PHILIPPINES


Related Documents and Data Available in the Project File

A. General Reports and Studies related to the Project and the IrrigationSubsector.

Al NIA, "Communal Irrigation Development Project - Feasibility Report,"June 1981.

A2 Frances F. Korten (Ford Foundation), "Building National Capacity toDevelop Water Users' Associations: Experience from thePhilippines," September 1981.

A3 NIA, "Corporate Plan for Irrigation Development during 1981-1990,"June 1981.

A4 World Bank, "Philippine-Irrigation Program Review" Draft ReportNo. 3545-PH, January 1982.

A5 World Bank, "A Handbook on Monitoring and Evaluation of Agricultureand Rural Development Projects," November 1981.

B. General Reports and Studies related to Communal Irrigation Systems

B1 Institute of Philippine Culture, "Managing Communal Gravity-Systems," March 1980.

B2 Institute of Philippine Culture, "47 Communal Gravity Systems -Organization Profiles," March 1980.

B3 Institute of Philippine Culture, "Communal Gravity Systems - FourCase Studies," March 1980.

B4 Institue of Philippine Culture, "The Farmers in Communal GravitySystems - Rice Yields, Work and Earnings," March 1980.

C. Staff Reports and other material related to the ProjectCl Staff Note on the Participatory Approach to the Implementation of

Communal Irrigation Projects in the PhilippinesC2 Staff Note on the Monitoring and Evaluation component of the

ProjectC3 Staff Note on the Monitoring component of the ProjectC4 lWater Requirements and Cropping PatternsC5 Annual Operation and Maintenance Cost of Typical Communal Irri-

gation SystemC6 Summary of Base Cost Estimates of Individual Sample SubprojectsC7 Draft Memorandum of Agreement by and between the NIA and the IA.C8 Typical By-laws for lAs.

- 77 - ANNEX 7Page 2

C9 Securities and Exchange Commission, Registration Form for IAsCIO National Water Resources Commission, Water Permit FormCll Phasing of Farm ModelsC12 Share Tenancy Sharing ArrangementsC13 Construction Cost RecoveryC14 Water ChargesC15 Landlords Incremental IncomeC16 Employment ImpactC17 Interest PaymentsC18 Sources of Income for Typical FarmC19 Financial and Economic Analysis - Computer PrintoutsC20 Proposed Subproject Selection CriteriaC21 Existing Post-Harvest Facilities in Project ProvincesC22 Project Status Report dated November 20, 1981, prepared by the

Acting Project Manager, Communal Irrigation Development ProjectC23 Typical Staff Positions in Provincial Irrigation OfficesC24 Fertilizer Price StructuresC25 Rice Price StructureC20 Corn Price Structure.

PHILIPPINESCOMMUNAL IRRIGATION DEVELOPM.ENT PROJECT

NIA Organization

NIA Board of Direstors

r Eneootion ,F-- - Adminisroo - _- Commission on Coormitton ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Aiud it

Corporation Planning Puli Af|r nStaff fflfOnnormtion Sattf

l~~~~~~~~~~~~~.~l: l -l I

Assistant AdminIstrator for Project Assistant Admin-stnatat for As'sant Ad mn fsstgntot Ag st-tn Admin-atnaor fotDey.loP-enl .. d I plem-nTaRion 0P rti-n ~Fironco and Management Adminisnatfios S-rvi-ss

Ptojscs Dsoelopoant _ _ Construction MenagM ment F.,mar' AsMistncn _ Systems Management ContMoll-rahip Trognuny Potsonnal end Record Pro-utament andDepartment Deparsmens Separsmsnn Dnparnment DOpnrtmtn_ DDp-rtmaot Manegment Department PhyPysial Rasourcas DeDpartmr t

ProNsj- Inuns-igation Construction Pl-tning fnstitutional DO-alopmen- OpNatior and Main-.nuocO General Accoonminq Cash Division Training nod Droalopme-n Procursnt DivisiDivision end Sched.ling Divisio- Divisio. Divi.ion Division R.vnus Generation Division Propety Diuison

LFnrd Ranurne Use and Contract Administration Agricol-urgi Coordination Rnhsbilisation Division Foreign Loan A..ounting Servioga Divisinn Pe-sononl Diision Building end FcililtiEconomics Division Division Division Research and De-nlopm-nt Division Reaords M- -agnmeot Maintsntnnn Divio

Pl.n F-rul.li.n Pr.j-c Monitoring -d Divisio B.dg, DiisoMn Divisio G.n.r.1 S-r c DM,.Division Ev.luwwion Division Anelysis and R.ports Medinel/D.ntal Unit

Utiliti., Divisio

Eqzuicmocv _ Design end r Special Projects Management Senices lLwllsManagement Deeernmenn' r Sp-cifications Departmeyt Group Department |Depanmat

Equipment Planning and | Civil Works Design Division National Sys-tms lmpnov-ment | | Organation end Methods Litigation DiolsionSpecifications Division Spatfirteions Division Proiacts I ad 11 Div , Con

Equipment Utili-etion and Arhi-tecure and Drafting L-rlly-fundd Communl M-nagoort-t AuditRep ir Logmtisti Division | Dm-on Prj- Dommuna tr mmuna Managment nA

SPeci l Equipment Op11- CaTn-u |Development,Project M- -Divio tin

DN't- D-lw-l~Frer'Asisgc Fyoerng Sstm Manaemen Syipen MOiMsrsisFi nc n

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World B.nk-23506 1-

PHI LIPPINESCOMMUNAL IRRIGATION DEVELOPMVIENT PROJECT

Regional and Provincial Offices' Organizations

RegionalIrrigation Office

Farmers' Assistance Systems Management E D Equipment Management Administrative Finance and Management

Division Division Engineering Division Division Division Division

Institutional Operations Section Planning and Investigation Control and Personnel Development Management and

Development Section Evaluation and General Services Budget

Section Section Section SectionResearch and Development Design and Specifications

Agriculturai Section Section Inspection and Procurement and Property Accounting Section

Coordination Constr(iction Maintenance Section Cash Section

Secti on SectionSection Legal Section

Shop Operation Medical and Dentaland Repair UnitSecti on

I Foreign-Assisted j Provincial Irrigation

i Projects | Offices

L____ T____ _

e 9 ~~~Equipment Agricultural AdiitaieEgneig prtosAmnsrtvEngineering ~~Management Development AdiitatvSninernprtosAmnsrtv

Dvsio Division Division Division Section Section Section

Field r Locally-Funded I t gaion Communal I

Construction National Irrigation Irrigation IOffices Project I Systems B -Projects I

World Bank-23504

PHI LIPPINESCCMMUNAL IRRIGATION DEVELOPMENT PROJECT

ORGANIZATIONAL CHART

AssistantAdministrator

forOperations

Design andSpecificationsDepartment

Project Office of Farmers' AssistanceDevelopment __ the -__ D amDepartment Project Manager Epment

EquipmentManagementDepartment O

0

FarmersEngineering Staff Administrative AssistanceI ~~~~Staf f Staff

-- --- ----- --r- | - ---- --r--r--

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World Bank-23505

PHI LIPPINESCOMMUNAL IRRIGATION DEVELOPMENT PROJECTSAMPLE FLOW CHART: SUBPROJECT ACTIVITIES

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PHILIPPINESCOMMUNAL IRRIGATION DEVELOPMENT PROJECT

Implementation Schedule

Project Activities 1982 1983 1984 1985 1986 1987

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STRENGTHENING OF PROVINCIAL IRRIGATION OFFICES

Office Buildings and Workshops

Office, Field and Construction Equipment

TRAINING

PIO Staff, Agricultural Extension Workers and Farmer Leaders

IRRIGATION SYSTEMS

Subproject Identification and Investigation _ _ = Z f IZZF_

Subproject Profile and Feasibility Study _==== - I_-=]eeaee P l_ E

IA Organization and Subproject Design Finalization _=--- _ -==--- A - aeC..

Detailed Topographic Mapping and Design Finalization 7===-_11 I IEEl= X W

Tendering and Award of Contracts == 1 I I I I I I I ld___ oo

Construction

Contract: Diversion, Main Canal and Road Works * _____uit _ _

Force Account; Distribution and On-farm Works

MONITORING AND EVALUATION

ENGINEERING, SUPERVISION AND ADMINISTRATION

FINANCIAL REPORTING SYSTEM STUDY

SUBPROJECT NOTATIONS

Group 1/ ( 5,500 ha) Sample subprojects for which feasibility grade designs were prepared at appraisal, (selected from 6,700 ha).*in U ~* Group 2/ 7,500 ha) Subprojects proposed to be prepared in 1983 and to be implemented beginning in 1984.*.= =W.|||5 Group 3 ( 9,500 ha) Subprojects ProPosed to be prepared in 1984 and to be implemented beginning in 1985.

hill__ Group 4/ (1 1,000 ha) Subprojects proposed to be prepared in 1985 and to be implemented beginning in 1986.

World Bank-23507

IBRD 161971160 120 1240 JANUARY 19B2

CLASSIFICATION OF PROVINCES PHILIPPINESBY GEOGRAPHICAL REGIONS

ItLOCOS 'IWESTERN VISAYAS COMMUNAL IRRIGATION DEVELOPMENTI llocos Norte 37 Aklan2 Abra 38 Capiz PROJECT3 llocos Sur 39 Antique 200

200 4 ont, 40 blilb82'-20° 4 Mounta,n 41 Negrons Occidental PROJECT PROVINCES (IRRIGATION WORKS)

La Bn300 V'IICENTRAL VISAYAS7 e el 43 N2 Cebo CIP (NEW PROPOSED SAMPLE SUBPROJECT)

IICAGAVAN vALLEY 44 Bohol A CIS (REHABILITATION SAMPLE SUBPROJECT)3 8atanes 45 Siquiior9 Cagayan VIIIEASTERN VISAYAS -

10 Kalinga-Apayao 46 Northern Samar I I I RAILWAYS

11 Isabela 47 Samrtr12 If uga0 48 Eastern Samar , RIVERS13 Nueva Vizcaya 49 Leyte 1 P BONARE14 Quirino 50 Southern Leyte PROVINCIAL BOUNDARIES

IICENTRAL LUZON IX WESTERN MINDANAO -'I '' REGIONAL BOUNDARIES15 NTeva Ecga 52 Zamboanga del Sur 2 o _ INTERNATIONAL BOUNDARIES

17 Zambales 53 Basilan t18 Pampanga s'4 Solo u.4N' 1:l~,'N;:N N:.Ot

19 Sulacan 55 TawiTami t3.. . e ,.t20 Bataan X NORTHERN MINDANAO N 0t vs-sT; ,., To ... rC ,I-C-g,

IVSOUTHERN TAGALOG 56 Surigao del Norte OInortLaaAyjJ4 '2 0F

21 Guezon 52 Cameiguin Son 6 - '122 Rizel 58 Agusan del Norte *\ L UZ JN 24 Quezna MCsarne Oriental I4a> 0 50 too 150 200 260 300

160 25 Batangas 60 Misam KILOMETERS 16°-26 Marinduque 61 Bukid 0 130 160 20027 Mindoro Oriental 62 Agusan del Sur -3 r 0 . MIE28 Mindoro Occidental Xi SOUTHERNM?NDANAO29 Romblon 63 Surigao del Our } 3arIa 4/ Cbanhnudo32 palasa, 64 Davao Oina Ii -VBICOL 65 Davo del Norte 19 - '-31 Camarines Norte 66 Davao del Sur AoSelP - 19;32 Ca,marnes Sur 67 South Cotabato 0100aRnp 2 21.3 Catanduanes XiiSO JTHWESTERN MINDANAO2N N34 Albay 68 Lanao del Norte a

25 Sorsogoo, 68 Lanao del Our36 Masbate 70 North Cotabato

71 Maguindanao 411 ~ nPboN 0'pr 72 Sultan Kudarat ' B-soaIToerbaoael

sBatanhas 'I-2>|" 32 } g /.3

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