ASIAN DEVELOPMENT BANK

PPA: PHI 16070

PROJECT PERFORMANCE AUDIT REPORT ON THE SORSOGON INTEGRATED AREA DEVELOPMENT PROJECT (Loan 915-PHI[SF]) IN THE

REPUBLIC OF THE PHILIPPINES

December 2000

CURRENCY EQUIVALENTS Currency Unit Peso (P) Sorsogon Integrated Area Development Project (Loan 915-PHI[SF]) At Appraisal (30 September 1988) P1.00 = $0.047 $1.00 = P21.34 At Project Completion (1 March 1998) P1.00 = $0.0249 $1.00 = P40.01 ABBREVIATIONS ADB ADTA BME CIS DPWH EA EIRR FGD IA LGU MDF NGO NIA O&M OEM PCR PMU PPAR PPTA RRP RWSA SAC SSTA TA VOC Asian Development Bank advisory technical assistance benefit monitoring and evaluation communal irrigation system Department of Public Works and Highways executing agencies Economic Internal rate of return focus group discussion irrigators association local government unit Municipal Development Fund nongovernment organization National Irrigation Administration operation and maintenance Operations Evaluation Mission project completion report project management unit project performance audit report project preparatory technical assistance report and recommendations to the President Rural Water and Sanitation Association Social Action Center small-scale technical assistance technical assistance vehicle operating cost
NOTES

At Operations Evaluation (31 May 2000) P1.00 = $0.0233 $1.00 = P42.976

(i) (ii)

The fiscal year (FY) of the Government and the Executing Agencies ends on 31 March. In this report, $ refers to US dollars.

Operations Evaluation Office, PE-558

CONTENTS Page BASIC DATA EXECUTIVE SUMMARY MAP I. BACKGROUND A. Rationale B. Formulation C. Purpose and Outputs D. Cost, Financing, and Executing Arrangements E. Completion and Self-Evaluation F. Operations Evaluation PLANNING AND IMPLEMENTATION PERFORMANCE A. Formulation and Design B. Achievement of Outputs C. Cost and Scheduling D. Procurement and Construction E. Organization and Management ACHIEVEMENT OF PROJECT PURPOSE A. Operational Performance B. Economic Reevaluation C. Sustainability ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS A. Socioeconomic Impact B. Environmental Impact C. Impact on Institutions and Policy OVERALL ASSESSMENT A. Relevance B. Efficacy C. Efficiency D. Sustainability E. Institutional Development and Other Impacts F. Overall Project Rating G. Assessment of ADB and Borrower Performance ISSUES, LESSONS, AND FOLLOW-UP ACTIONS A. Key Issues for the Future B. Lessons Identified C. Follow-Up Actions ii iii v 3 3 3 3 4 4 4 5 5 5 6 6 7 8 8 13 14 15 15 16 16 16 16 17 17 17 17 17 18 18 18 20 20 21

II.

III.

IV.

V.

VI.

APPENDIXES

ii BASIC DATA Sorsogon Integrated Area Development (Loan 915-PHI[SF])

Project Preparation TA No. TA Name 475 Sorsogon Integrated Area Development 929 Sorsogon Integrated Area Development (Update) 1054 Community Mobilization and Development Key Project Data ($ million) Total Project Cost Foreign Exchange Cost Local Currency Cost ADB Loan Amount/Utilization Foreign Exchange Cost Local Currency Cost Key Dates Appraisal Loan Negotiations Board Approval Loan Agreement Loan Effectiveness First Disbursement Loan Closing Project Completion Months (effectiveness to completion) Key Performance Indicators (%) Economic Internal Rate of Return Financial Internal Rate of Return Borrower Executing Agencies Appraisal 17.6 PCR 11.5 PPAR 5.2 As Per ADB Loan Documents 30.1 12.4 17.7 24.1 12.4 11.7 Expected Actual 29.9 12.6 17.3 22.9 12.6 10.3 Actual 521 Jul 1988 56 Oct 1988 3 Nov 1988 27 Dec 1988 18 Aug 1989 12 Dec 1989 15 Apr 1997 Dec 1997 100 Amount ($) 350,000 75,000 100,000 Approval Date 19 Aug 1982 2 Dec 1987 3 Nov 1988

27 Mar 1989 31 Aug 1995 Feb 1995 71

Government of the Republic of the Philippines Provincial Government of Sorsogon Department of Public Works and Highways Department of Health National Irrigation Administration Department of Agriculture No. of Missions 1 1 1 9 1 1 12 1 No. of Person-Days 72 85 25 125 10 33 193 45

Mission Data Type of Mission Fact-Finding Appraisal Project Administration Inception Review Loan Disbursement Project Completion Review Total Operations Evaluation

= not calculated. ADB = Asian Development Bank; PCR = project completion report; PPAR = project performance audit report; TA = technical assistance.

EXECUTIVE SUMMARY The Project is located in Sorsogon Province, one of the least developed regions in the Philippines with an incidence of poverty of 78.6 percent at appraisal in 1988. The objective of the Project was to reduce rural poverty by increasing income, generating employment, and improving living standards of subsistence farmers and fishing communities in Sorsogon Province. The Project comprised five components: (i) road improvement and rehabilitation; (ii) communal irrigation systems (CISs) and flood control; (iii) health services through schistosomiasis control and domestic water supply; (iv) support services for agriculture and fisheries, including abaca rehabilitation, plant nurseries, and artificial reefs; and (v) project management and training. The Project also attached an advisory technical assistance (ADTA) for Community Mobilization and Development. The project cost was estimated at $30.1 million at appraisal, financed by a loan of $24.1 million from the Asian Development Fund, and the remaining by the Government. The actual project cost at project completion was $29.9 million. However, as some road works were still ongoing, the Government provided its own funds to continue, and completed the remaining construction by 1998. Consequently, the final project costs at the time of the project performance audit report (PPAR) were $32.3 million. By focusing on poverty reduction in a neglected region, the Project was highly relevant to the strategic objectives of the Government and the Asian Development Bank (ADB). Road development improved rural infrastructure and stimulated the local economy. The trickle down impact of economic growth induced by the Project was effective when the majority of the population was poor; the Project reduced rural poverty by about 15 percent in the project area. The integrated interventions through schistosomiasis control, domestic water supply, and mitigation of floods improved health conditions of the poor. However, the subcomponents of abaca and plant nurseries were less relevant as their outputs (free seedlings) contributed little to the Projects objective. The Project accomplished most of the major targets set for the major components, such as roads, flood control, CISs, and health services. Some minor subcomponents, such as plant nurseries and abaca, did not fulfill their targets (but the shortfall of these targets did not seriously affect the Projects objective because these subcomponents were less relevant). Project implementation suffered serious delays in the first three years but accelerated later when project staff gained experience. As a result, the Project was completed with a delay of 34 months. The project economic internal rate of return (EIRR) of 17.6 percent estimated at appraisal was reduced to 11.5 percent at the time of the project completion report (PCR), and further reduced to 5.2 percent at PPAR. The EIRR at appraisal and PCR overestimated the benefits from the agriculture component, and the substantial shortfall in its actual achievements let to the sharply reduced EIRR.1 The Projects sustainability varies by component. Roads, flood control, and health services, which accounted for over 70 percent of the Projects cost, are likely to be sustainable as they have been maintained well by government agencies that have a sufficient amount of regular budget, competent staff, and adequate equipment. The sustainability of the CISs is at risk but can be strengthened if urgent steps are taken immediately. The sustainability of the plant nurseries and the abaca laboratory is poor.

However, the EIRR calculation does not capture the substantial amount of indirect and unquantifiable economic benefits generated by the road development component, which stimulated the local economy.

2 The Project had a significant institutional impact on local governments, which were strengthened by absorbing most of the project staff that received substantial training and gained extensive experience under the Project. It is envisaged that these staff will play a valuable role in future design and implementation of development projects in Sorsogon Province. The Projects institutional impact on beneficiaries is limited by the short implementation period of the ADTA and the lack of continued institutional support after project completion. Overall, the Projects development impacts in Sorsogon Province are readily visible. It improved rural infrastructure, stimulated business, and promoted economic growth. As 11 out of 16 municipalities upgraded their classification levels of economic development, the Province no longer has any Class VI municipalities (the poorest). The Project achieved its objective and reduced rural poverty by about 15 percent in the project area. Based on the above assessments, the Project is rated successful. The performance of both ADB and the Government is satisfactory. Key issues were identified. First, the Project suffered serious delays in its initial years, with a major cause being the lack of readiness of the project offices at the start of project implementation. Due to the lack of financing before loan effectiveness, these offices, although established, were unable to recruit staff, conduct staff training, and prepare workplans. In the future, project approval should focus on their readiness for implementation. Otherwise, sufficient time should be provided for the start-up phase of project implementation. Second, the slow release of project funds was the primary reason for most delays under the Project, caused by (i) the large number of signatures required for processing disbursement vouchers, and (ii) insufficient staff capacity in the agencies involved in approval and release of funds. Future projects should minimize the number of government agencies involved in the funds flow process; full-time staff should be assigned to speed up paper processing in the agencies that are needed in this process. Third, while the Project reduced poverty, about 50-60 percent of people in the project area remained poor. These were mainly landless and jobless laborers who were in too weak a position to make use of the physical infrastructure invested under the Project. The impact of the community development under the ADTA was minimal due to its short implementation period and the lack of continued institutional support. To maximize the poverty reduction impact, future projects should include social preparation for the poor before the physical investment. Institutional support for the poor should be continued after project completion, which could be financed by ADTAs. Lastly, the sustainability of the CISs is poor, primarily due to farmers lack of willingness to pay for operation and maintenance, with an underlying factor being the weak leaders of the irrigators associations and their lack of ownership of the CISs. Demand analysis for future irrigation projects should be based on farmers willingness to pay, which should be secured by written agreements with enforcement measures. In addition to the above issues, the Project provided lessons relating to the design of poverty reduction projects. The approach to reduce poverty through improving infrastructure and promoting economic growth is effective when the majority of the population is poor. However, as many landless and jobless poor are less capable to take advantage of the new infrastructure, direct interventions are needed to remove the key constraints that they face. The impact of irrigation projects on poverty reduction will be limited if the majority of the poor have no access to land, and the projects will benefit mainly the relatively better-off groups, such as landlords, small landowners, and tenants with regular incomes.

3 I. A. Rationale BACKGROUND

1. The Project was located in Sorsogon Province, one of the least developed regions in the Philippines with an incidence of poverty of 78.6 percent at appraisal in 1988.1 A major policy focus of the Government at that time was to reduce widespread rural poverty, as stated in the MediumTerm Philippine Development Plan 1987-1992, which aimed at equitable, efficient, and environmentally sustainable growth, and which emphasized rural development as a key mechanism for poverty reduction and employment generation. The Asian Development Bank (ADB) supported the Governments strategy, as stated in its country strategy study for the Philippines, which emphasized rehabilitation of public infrastructure, improvement of basic social services, and balanced regional development. As a major step in implementing the Governments poverty reduction plan, the Project was highly relevant to ADBs strategic objectives. Its focus on poverty reduction in a poor region received strong support from ADBs Management and Board. B. Formulation

2. On 19 August 1982, ADB approved a project preparatory technical assistance (PPTA) to finance a feasibility study for an integrated area development project in Sorsogon Province.2 Implemented from May 1983 to January 1984, the PPTA prepared a long-term development strategy for Sorsogon Province up to 2000 together with an investment proposal. Due to a severe budgetary constraint on the part of the Government, the Project did not proceed further in the next three years. A supplementary small-scale technical assistance (SSTA) was approved in December 1987 to update the 1984 feasibility study.3 The SSTA was completed in April 1988 and the Project was appraised in July 1988, with Board approval in November 1988. C. Purpose and Outputs

3. The objective of the Project was to reduce rural poverty by increasing income, generating employment, and improving living standards of subsistence farmers and fishing communities in Sorsogon Province. The Project included five components: (i) road improvement and rehabilitation; (ii) communal irrigation systems (CISs) and flood control; (iii) health services through schistosomiasis control and domestic water supply; (iv) support services for agriculture and fisheries, including abaca rehabilitation, plant nurseries, and artificial reefs; and (v) project management and training. Recognizing the need to mobilize communities to fully utilize the infrastructure and support services, the Project attached an advisory technical assistance (ADTA) for Community Mobilization and Development through the services of a nongovernment organization (NGO). 4 4. Expected project outputs included (i) 156 kilometers (km) of roads; (ii) 15 CISs with a service area of 2,750 hectares (ha); (iii) flood control structures to mitigate the perennial flooding problem affecting about 2,000 ha of irrigated farmland; (iv) health services to control schistosomiasis in 22 affected villages; (v) domestic water supply including two level III systems, 15 level II systems, and 52 level I units;5 (vi) plant nurseries including one provincial nursery and 50 communal nurseries; (vii) rehabilitation of about 2,000 ha of abaca plantations; and (viii) establishment of four artificial reefs

1
2 3 4 5

Loan 915-PHI(SF): Sorsogon Integrated Area Development Project, for $30.1 million, approved on 3 November 1988. TA 475-PHI: Sorsogon Integrated Area Development Project, for $350,000, approved on 19 August 1982. TA 929-PHI: Sorsogon Integrated Area Development Project (Update), for $75,000, approved on 2 December 1987. TA 1054-PHI: Community Mobilization and Development, for $100,000, approved on 3 November 1988. Level III refers to a piped water supply system with household connections; level II, a piped water supply communal system; and level I, a point source communal system.

4 each with 750 modules. It was expected that the Project would benefit about 4,000 farm families and 1,000 fisherfolk; most of them lived in poverty. D. Cost, Financing, and Executing Arrangements

5. At appraisal, the project cost was estimated at $30.1 million, comprising $12.4 million in foreign exchange costs and $17.7 million equivalent in local currency costs (Appendix 1). An ADB loan of SDR18.67 million (equivalent to $24.1 million) from the Asian Development Fund, representing about 80 percent of the total project cost, was provided to finance the entire foreign exchange cost and 66 percent of the local currency cost. The Government was to finance the remaining $6 million of local currency cost. The ADTA was estimated at $105,600, with $100,000 financed by a grant and the remaining $5,600 equivalent by the Government. The Project involved five Executing Agencies (EAs), namely the provincial government of Sorsogon, Department of Public Works and Highways (DPWH), National Irrigation Administration (NIA), Department of Health (DOH), and Department of Agriculture (DA). E. Completion and Self-Evaluation

6. The Project was completed in December 1997. A project completion report (PCR) prepared by ADBs Agriculture Department (East) was circulated to the Board on 29 June 1998. The PCR provided detailed information on the Projects design, implementation, and accomplishments. It rated the Project generally successful, which was supported by the evidence that in spite of serious delays in the initial three years, the Project picked up speed in later years and was completed largely according to plan. The quality of the construction was good and the Projects economic internal rate of return (EIRR) was acceptable. Major problems identified in the PCR included: (i) reduction in the project EIRR from 17.6 percent as estimated at appraisal to 11.5 percent recalculated at PCR; and (ii) delays in loan effectiveness, recruitment of project staff and consultants, release of funds, and procurement of vehicles and equipment. The PCR focused heavily on the Projects physical achievements without sufficient analysis of the appropriateness of project design, the factors underlying the serious delays, and the problems relating to the sustainability of the CISs (paras. 1215, 24-28). Finally, the PCR did not provide an assessment on ADTA. F. Operations Evaluation

7. This project performance audit report (PPAR) assesses the Projects design, implementation, outputs, and impacts, focusing on the Projects sustainability and long-term development impacts, and drawing on lessons learned that can improve ADBs future operations. The PPAR presents the findings of an Operations Evaluation Mission (OEM) that visited relevant government agencies and conducted fieldwork in Sorsogon Province in May 2000.6 The OEMs initial findings were presented in provincial and national seminars; comments from the seminar participants were incorporated into the PPAR. The PPAR draws its conclusions and recommendations from three sources: (i) a desk review of project files; (ii) discussions with government officials in relevant national agencies, EAs, and local government units (LGUs); and (iii) focus group discussions and household interviews with project beneficiaries. Copies of the draft PPAR were submitted for review to the EAs, other relevant government agencies, and concerned ADB departments or divisions. Comments received from the reviewers were taken into consideration in finalizing the PPAR.

The OEM visited 14 of the 16 municipalities in Sorsogon Province, held meetings with EAs and local government units, inspected project facilities in 20 project sites, conducted focus group discussions with project beneficiaries, and visited several poor households.

5 II. A. PLANNING AND IMPLEMENTATION PERFORMANCE

Formulation and Design

8. The project design was based on many studies, including the PPTA conducted in 19831984, a number of socioeconomic surveys in 1985-1987, and the SSTA in 1988. Considering the complicated factors underlying rural poverty and the need for simultaneous implementation of multiple interventions, the technical assistance (TA) consultants recommended an integrated area development approach. The original project design prepared by the consultants comprised 10 components, including road development, health services, irrigation, crop production, fisheries, livestock, small enterprise development, rural credit, natural resource management, and project management. ADBs fact-finding mission adopted the consultants approach but reduced the project components to seven, including the five components listed in para. 3 as well as a social forestry program and a credit line. The last two components were deleted after appraisal in order to simplify the project design. It was expected that the Governments national reforestation projects and credit programs would cover Sorsogon Province and supplement the Projects activities. Based on a review of the consultants feasibility reports, the consultants performance is considered satisfactory. 9. The OEM found that the Government had implemented a national program on social forestry that covered Sorsogon Province. However, that program concentrated mainly on Mount Bulusan National Park. The Project could have controlled the soil erosion problems in the CIS sites if a social forestry component had been included under the Project to strengthen watershed management in the upstream area of the CISs. Such a component could also have contributed to poverty reduction among the upland poor. Similarly, while another credit line under the Project was not necessary as other credit programs covered Sorsogon Province, a component on microenterprise development under the Project could have directly helped the landless and jobless poor. In fact, the need to simplify the project design could have been met by deleting the less relevant subcomponents such as the plant nurseries. 10. The OEM supports the Projects focus on poverty reduction through promoting economic growth in a neglected region, which was effective when the majority (78.6 percent) of the population was poor. The use of an integrated approach to simultaneously provide rural infrastructure, social services, and production support was appropriate. However, the Project did not include direct measures to address the root causes of poverty among the landless poor, such as control of overfishing and illegal fishing, or employment generation for jobless laborers and poor municipal fisherfolk. Furthermore, the outputs under the agriculture component were less relevant. For example, abaca rehabilitation and plant nurseries provided seedlings, which were not the key sector constraint nor the root cause of poverty. The artificial reefs were intended to help poor municipal fisherfolk. Due to weak law enforcement, however, many of the benefits from the artificial reefs were captured by commercial operators (para. 40). B. Achievement of Outputs

11. Appendix 2 provides a summary of the Projects major outputs achieved versus their targets set at appraisal. (Detailed discussions of the achievements by project component are given in Chapter III.) As shown in Appendix 2, the physical targets of the major components were largely fulfilled, including 141 km of roads, 14 CISs, flood control structures, and health services. However, achievement in the water supply subcomponent was substantially below target: the number of level I units was reduced from 52 to 23; level II systems were cancelled completely; and the number of level III systems was reduced from two to one. The subcomponents for abaca rehabilitation, plant nurseries, and artificial reefs also failed to meet their targets, with causes analyzed in paras. 34-40.

6 The OEM inspected project facilities in 20 subproject sites and found that most of the project facilities completed were of good quality, especially the roads, flood control structures, and CISs. C. Cost and Scheduling

12. At appraisal, the project cost was estimated at $30.1 million with a loan amount of $24.1 million. The Project was to be implemented in six years from 1989 to 1995. Actual implementation experienced serious delays in the initial three years but accelerated in later years. As a result, the loan was extended for one year to 31 August 1996, actually closed on 15 April 1997, and the Project was completed in December 1997. At loan closing, the loan disbursement was SDR16.03 million (equivalent to $22.9 million); the unused loan balance of SDR2.64 million (equivalent to $3.61 million) was canceled; the actual project cost was $29.9 million. However, as some road works were still ongoing, the Government provided its own funds to continue, and completed the remaining construction by 1998. Consequently, the final project costs at PPAR were $32.3 million (Appendix 1). 13. The OEM identified three factors as the major causes underlying the serious delays in the first three years. First, the project design underestimated the time needed for the project start-up phase. The appraisal mission correctly assured the establishment of project offices before loan effectiveness including the project management unit (PMU). However, the set-up of the project offices did not guarantee normal operations. In fact, until the loan became effective and funds released, it was difficult for the EAs and LGUs to recruit project staff. As a result, the PMU operated initially with only 10 temporary staff detailed from various provincial offices. It was not until one year later (July 1990) that the majority of the 32 PMU staff were working. Due to the pressure to catch up with the elapsed time, the new staff started their jobs without going through proper training. Their lack of preparedness led to mistakes in submitted budget applications and contributed to the slow approval and release of project funds. 14. Second, the slow flow of project funds was a primary cause underlying almost all other delays. The large number of signatures required for liquidation of funds was a serious problem.7 Although liquidation involved the Provincial Treasury Office, Provincial Accountants Office, and Provincial Auditors Office, no additional staff were assigned to these offices to handle the Projectrelated papers. Staff in these offices could not give high priority to the Project, which was just an additional task upon their normal workload. The slow paper processing in these offices contributed to the delays in release of funds. 15. Third, political intervention was a major factor underlying some prolonged delays. For example, the prolonged delay in the assignment of the PMU Director directly led to the six-month delay in loan effectiveness. The one-year delay in PMU staff recruitment and changes in their positions were also affected by politics. D. Procurement and Construction

16. The procurement of vehicles and large equipment items was through international competitive bidding or international shopping. Procurement suffered most delays due to the slow release of project funds, cumbersome procedures, and a temporary ban on vehicle imports issued by the Office of the President in 1991. It was reported that some procurement was still being pursued when the Loan was to be closed in August 1996. Some vehicles were delivered in the last year of project implementation, making little contribution to the Projects achievements.
7

At the local level, it was reported that about 20 initials and signatures were required for the processing of a disbursement voucher.

7 17. Civil works construction for the CISs was conducted through force account. Construction of roads and flood control structures was carried out through local competitive bidding. The contractors employed local skilled and unskilled labor as anticipated at appraisal. Engineering supervision was carried out by incremental staff employed by the EAs. Survey and design works for irrigation and roads used EAs in-house staff. The quality of construction was satisfactory. Awarding of contracts followed standard government procedures acceptable to ADB. For road construction, contracts with amounts exceeding P10 million were awarded and paid by the Central Office of DPWH while the bid evaluation was conducted by its regional office. There were two contract packages where the contractors performed poorly due to a shortage of equipment and financial difficulty. A major cause of the problem was a lack of effective measures to screen out unqualified contractors during prequalification. The termination of their contracts lasted for more than a year as these contractors requested reconsideration and an opportunity to improve their performance. Since no significant improvement was made, the contracts were finally terminated, leading to serious delays in the concerned road works. E. Organization and Management

18. The Projects integrated approach necessitated the involvement of multiple government agencies. Incorporating lessons learned from previous projects that highlighted the difficulty of coordinating multiple agencies at the national level, the Project correctly placed its coordination at the provincial level. Each of the EAs regional offices assigned a project manager to supervise the implementation of its respective project component. The PMU was responsible for coordinating project activities, consolidating work and financial plans, monitoring project implementation, and submitting reports to the national government and ADB. A project board was established comprising regional directors of the EAs and chaired by the Governor of the Province. It did not function well in its initial years but improved significantly in later years with assistance from the Governments oversight agencies (such as the National Economic and Development Authority, Department of Finance, and Department of Budget Management), and ADB. Meeting on a quarterly basis, the project board provided overall policy direction, supervised project planning, and approved resolutions addressing emerging project issues. At the national level, high-ranking officials of the National Economic and Development Authority and ADB staff played a valuable role in coordinating EAs and oversight agencies. 19. The Project, for the first time in an ADB loan, used the Municipal Development Fund (MDF) to directly channel loan proceeds to project offices at the local level without going through line agencies at the national level. While MDF had the advantage of allowing the EAs to maintain their unused funds across years without returning them to the national treasury, significant delays in the flow of funds still occurred, partly due to the complex procedure in approval and release of funds under the MDF scheme. 20. The OEM concurs with the PCRs assessment that the Governments compliance with loan covenants was satisfactory. In particular, the Government provided sufficient budgetary funds for the maintenance of roads and flood control facilities. ADB dispatched 11 review missions during the seven years of project implementation, provided guidance to government staff on ADB policies and procedures, recommended actions for overcoming problems, and contributed to improved disbursement in later years. Overall, ADB was responsive on matters relating to disbursement, and took the initiative in coordinating with the Governments oversight agencies. However, ADB did not act proactively on other issues that contributed to the prolonged delays. For example, the termination of certain contracts (para.17) could have been speeded up if ADB had provided strong support when receiving reports on this issue.

8 21. The Project provided 18 person-months of international consultant services and 205 personmonths of domestic consultant services. The international consultants assisted (i) the PMU in project management, and (ii) the Provincial Engineers Office in road equipment selection and training. The domestic consultants provided a wide range of services to the PMU and EAs, including advice on management systems, procedures, benefit monitoring and evaluation, perennial crop production, as well as design and construction of artificial reefs, and flood control structures. The OEM confirms the PCRs assessment that the consultants performance was generally satisfactory, and their hands-on training for project staff was effective. However, since project implementation was seriously delayed in its initial stages, some consultants spent their time when there were few activities in project implementation. For example, due to delays in the construction of the artificial reefs, the consultant assisted in the design of the modules but not in their deployment, which was a more difficult task. III. A. ACHIEVEMENT OF PROJECT PURPOSE

Operational Performance 1. Road Improvement and Rehabilitation

22. The aim of this component was to improve and rehabilitate 156 km of roads in five years. The target was revised to 142 km after detailed engineering design. The actual completion was 138 km at loan closing when the remaining road works were still ongoing. The Government provided its own funds to continue and completed another 3 km in 1998, making a total accomplishment of 141 km. The OEM inspected most of the project roads and found the construction quality to be good. Based on interviews with beneficiaries, traffic increased significantly in Sorsogon Province after road rehabilitation. Overall, this component achieved its objective of reducing poverty through improving rural infrastructure and promoting the local economy. As a result, the LGUs in most municipalities in Sorsogon Province upgraded their classification levels of economic development after the Project (Appendix 3).8 2. Irrigation Development and Flood Control

23. Irrigation Development. This component was to improve 15 CISs in five years with a service area of 2,750 ha, which was revised to 2,547 ha after detailed engineering design. The actual implementation lasted for seven years and the achievement was 2,049 ha as the TabonTabon scheme, the largest CIS with a service area of 502 ha, was deleted. Construction of the Tabon-Tabon CIS encountered serious delays due to internal conflicts among irrigators in the subproject area. When the conflict was finally resolved in 1995, it was too late to complete this large system. Other factors such as slow release of project funds and delays in vehicle procurement also contributed to delays in the construction of the other CISs. The OEM inspected the CIS schemes and found that the construction quality was good. 24. This component also targeted the strengthening of irrigators associations (IAs) in the 14 CISs, which were to be turned over to the IAs after the construction. To prepare the IAs to assume their mandates, the Project conducted 78 training programs for them, ranging from operation and maintenance (O&M), financial management, group leadership, and monitoring. In spite of the substantial amount of training, few IAs performed satisfactorily. The OEM assessed the 14 IAs and found that only five of them had strong leadership and active member participation (Appendix 4). In particular, water charge collection was very low in most of the IAs, averaging 12 percent (Appendix
8

Municipal LGUs in the Philippines are classified into six categories in accordance with their annual revenues from Class I to Class VI in reverse order, with Class VI being the poorest.

9 5).9 Due to insufficient O&M funds, some major canals were heavily silted; some damage from a typhoon in 1998 was still unrepaired at the time of the OEM in May 2000, resulting in water losses and reduced service area. 25. Farmers lack of capacity to pay was not a major cause of the problem, as the water charges were a very small portion (averaging less than 5 percent) of the incremental benefits received by the farmers (Appendix 5). Discussions with farmers found that the major cause of the problem was farmers lack of willingness to pay, which, in turn, resulted from three factors. First, in the poorly performing IAs, the members lost confidence in their leaders and did not participate in O&M activities. Second, many IAs did not have effective measures to discipline those who did not pay, which undermined the repayment moral of those who paid. Last, some farmers did not receive water due to (i) poor O&M of the CISs and the unrepaired damage, which reduced the service area; and (ii) El Nio in 1998, which dried up water sources in many CISs. Although El Nio had gone, the poor O&M and damage remained, forming a vicious cycle of poor irrigation services and poor payments. 26. The above issue was not anticipated at appraisal. The appraisal report included detailed O&M arrangements, including clear descriptions on the responsibilities of the government agencies and beneficiary groups involved. However, neither the report and recommendation of the President (RRP) nor the appraisal report specified the O&M funding sources. While consultations with farmers took place before the CIS investment, farmers willingness to pay was not documented in written agreements, nor were effective enforcement measures. In particular, responsibility for the repair of future damage in the CISs was not clearly defined. While the responsibilities of the IAs included minor repairs, minor or major repairs were not defined. The OEM found that much of the unrepaired damage was medium requiring a budget of about P100,000. Due to frequent typhoons in Sorsogon Province, such medium damage could occur in about five out of the 14 CISs in one year. NIA said that it did not have the budget to meet such frequent requests for public assistance; farmers said that repairing such damage was beyond their means. As farmers were waiting for help and NIA did not have the funds to do so, the CISs deteriorated and more areas lacked irrigation services. 27. A more fundamental factor underlying poor O&M of the CISs was the weak leadership of the IAs. The OEM observed that under the same climate conditions, five CISs were maintained well, largely due to the strong leaders of the IAs, who stimulated the active participation of their members in O&M activities. In contrast, the poor O&M of a CIS always related to the weak leaders of the IA, who developed an attitude of relying on government assistance, or waiting for the next election to request help from politicians.10 The OEM also observed that in some CISs, landlords (some of them were leaders of the IAs) benefited from the improved irrigation systems but did not share in paying the water charges, which were paid entirely by the tenants. 28. Poor O&M of the CISs was also caused by a weak sense of ownership on the part of the LGUs. Since the LGUs were not involved in CIS design and implementation, they considered the Project as belonging to the national government and did not commit themselves to the sustaining the CISs. The LGUs also have too few extension workers, largely due to budgetary constraints.11 Since agricultural extension was devolved to LGUs in 1992, NIA has considered the CISs as

In some CISs, members of the IAs contributed labor to compensate for the insufficient collection of water charges. In general, however, O&M of the CISs suffered from insufficient funding because of the poor collection of water charges. 10 In one case, the OEM found that the IA Chairman was a landlord who did not even live in the village. In this case, few IA members actively participated in O&M activities or paid water charges. 11 The Provincial Irrigation Office had only two irrigation technicians who had to take care of 55 IAs throughout the province. Such a ratio was substantially higher than the optimal ratio of 5-8 IAs per extension worker.

10 LGUs responsibility and did not provide sufficient extension services for the IAs after project completion. 29. Flood Control. This subcomponent aimed at alleviating the flood problem in the IrosinJuban Valley through widening the Cadacan River at Sankayon, Buraburan, and Juban. While this objective was achieved, its accomplishment was delayed from the four years anticipated at appraisal to seven years, primarily due to the slow release of project funds, which led to delays in detailed engineering design and construction. At project completion, the flood discharge capacity of three subsections along the Sankayon-Juban section of the Cadacan River was improved, and two units of rainfall-runoff gauges were installed as planned. The OEMs field inspection found that the flood control facilities were of good quality. 3. Health Services

30. Schistosomiasis Control. To break the life cycle of schistosomiasis, a number of measures were implemented in 1991-1992, including the repair of schistosomiasis control channel drains, installation of water-sealed toilet bowls, construction of concrete footbridges, and spraying of molluscicide in snail-positive areas. Delay under this subcomponent was limited primarily due to its small size: no consultant was recruited or large items procured. As targeted, schistosomiasis prevalence dropped from 6.8 percent in 1990 to 2.4 percent in 1997, and has remained at 2-3 percent since project completion. According to DOH, a prevalence rate of 5 percent or below is considered not to be a public health problem. 31. Domestic Water Supply. This subcomponent was to (i) rehabilitate the level III water supply system in the municipality of Irosin; (ii) construct a level III system in the municipality of Juban; and (iii) develop 15 level II and 52 level I systems in Irosin and Juban. The first target was achieved in spite of delays due to the slow release of project funds. As envisaged at appraisal, a Rural Water and Sanitation Association (RWSA) was established to take care of the O&M of the water supply system. However, the RWSA was unable to collect enough user fees to finance system O&M, which was taken over by the Irosin municipal government after two years of system operations. As the annual collection of water tariffs (about P700,000) was insufficient to cover O&M costs (about P1.2 million), the Irosin municipal government subsidized the water consumers. The RRP did not anticipate this issue and overestimated the RWSAs capacity to finance and manage the water system. 32. The construction of the level III system in Juban encountered serious problems relating to territorial jurisdiction between the municipalities of Juban and Casiguran. The latter demanded financial compensation for the former using the water resources in Casiguran.12 As the Project did not provide a budget for water purchase, ADB approved the shift of the water resources from Casiguran to Juban, which was more costly and less reliable. When the above issue was finally resolved after two years, many of the constructed pipelines had been stolen during the long period of interruption. When the system was finally completed in 1997, farmers in the nearby area illegally tapped water for irrigation, resulting in about 45 percent water loss and damage to the pipelines. Worst of all, after operating for about two years, the water collection box collapsed due to soil erosion caused by heavy rains. It was concluded that it was better to build a larger collection box including measures to control the soil erosion than to repair the old box. However, since there were no funds either to rehabilitate the old box or build a new one, the level III system in Juban

12

This issue was not foreseen at appraisal. The mayors of the two municipalities reached a oral agreement on the use of the water resources before the investment. The territorial issue emerged when a large portion of the investment had been made.

11 remained out of operation. The RRP did not foresee these issues, and the Project did not have extra funds to be reallocated to the water supply component. 33. The insufficient funds also led to the cancellation of all 15 level II systems and the reduction of the number of level I units from 52 to 23. The OEM found that 22 of the 23 level I units had stopped operating due to lack of sense of ownership and a maintenance system. Only one level I unit was still working at the time of the OEM inspection, and this was managed by one family that collected a monthly fee of P5 from the 20 users around the unit. If the successful experiences of this unit had been studied and replicated during project implementation, the other level I units might have continued operating. 4. Agriculture and Fisheries Support

34. Plant Nurseries. This subcomponent was intended to upgrade one provincial nursery and establish 50 communal nurseries. The latter target was revised to 16 municipal nurseries and 13 communal nurseries after the devolution of extension services to LGUs in 1992. The target of producing and distributing 1 million planting materials was underfulfilled: the Project produced 413,780 seedlings and distributed 389,750, largely due to the slow release of project funds and problems relating to the management of the nurseries, as discussed below. 35. It was envisaged at appraisal that the communal nurseries would be managed by community groups. While the NGO engaged under the ADTA organized 22 farmer groups, none of them sustained operations, and none of the 13 communal nurseries continued their operations (para. 43). Of the 16 municipal nurseries, only 11 were still operating at the time of the OEM inspection, as they received insufficient financing from municipal LGUs. The cost recovery plan for the nurseries (i.e., selling seedlings) was not realized, since other government programs were distributing seedlings free of charge. As a result, all planting materials under the Project were distributed free. 36. The provincial nursery was upgraded as planned; its operations were financed by the provincial government. Due to insufficient funds, however, the nursery reduced its scale of operations, resulting in underutilization of the capacity upgraded under the Project. Similarly, most of the municipal nurseries suffered from insufficient funds and could not maintain normal operations. It would now be better to allow the nurseries to sell their seedlings at a cost-recovery price to finance operations. However, government officials strongly believe that government should provide seedlings to farmers free because farmers are poor.13 37. Abaca Rehabilitation. This subcomponent targeted the rehabilitation of 2,000 ha of abaca plantations that were damaged by a typhoon in 1987. The target was to be achieved through the provision of abaca seedlings by establishing an abaca tissue culture laboratory. At project completion, only 922 ha had been rehabilitated, primarily due to the slow release of project funds that resulted in a shortage of equipment and supplies for the laboratory. While the laboratory continued its operations after project completion, its production and distribution fell sharply, primarily due to insufficient funds and their delayed release, which caused interruptions in the supply of chemicals and resulted in a large loss of tissue cultures. To operate within its budget, the laboratory reduced the scale of its operations, leading to underutilization of the facilities invested under the Project. It would be financially better for the laboratory to divert its operations (such as expanding to banana culture) via contracts with other government agencies or private entities so as to self-finance its operations.

13

In fact, many of the recipients of the free seedlings were not poor; one of them received seedlings worth P10,000.

12 38. In spite of the poor achievement under this subcomponent, the PCR expected that rehabilitation of the remaining abaca plantations would be completed by 2002. The OEM found such an expectation highly unlikely. Since 1992, the spread of bunchy top disease has wiped out about 40 percent of the 18,000 ha of abaca plantations in Sorsogon Province. Of the remaining 11,000 ha, only 2,000 ha have not been affected; 4,000 ha have been controlled; and another 5,000 ha of the affected area have not been controlled due to insufficient funds. 39. Artificial Reefs. This subcomponent was to enhance fisheries resources and increase the income of poor fisherfolk through the establishment of 3,000 artificial reef modules at four sites in four municipalities. The actual achievement was only 2,445 modules due to delays in release of funds. As targeted at appraisal, four fisherfolk associations were organized. A municipal ordinance was issued in each of the four municipalities to declare the artificial reef sites intensive marine management areas for the exclusive use of, and management by, the fisherfolk associations. 40. While fish biomass increased substantially around the artificial reefs as reported by divers, an unanticipated outcome was observed. The greater number of fish at the four sites attracted commercial vessels to the artificial reefs (within municipal waters), which fished using powerful lights. This was especially so in Bulan Municipality, although commercial fishing in municipal waters and the use of powerful lights were prohibited by law, enforcement of the law was weak. The fisherfolk associations were unable to control the commercial vessels encroachment due to a lack of speedboats, equipment, and strong support from politicians.14 5. Project Management and Training

41. This component financed the PMUs operations as well as training for project staff and beneficiaries. These tasks were finished by project completion, including a benefit monitoring and evaluation (BME) system that conducted an extensive socioeconomic survey to collect benchmark information. Due to delays in the release of project funds, recruitment of project staff, and procurement of vehicles, however, the benchmark survey did not start until the fourth year of project implementation and was completed in the fifth year. There was no report on the use of the survey results, and BMEs contribution to project monitoring was limited. The Projects quarterly progress reports were prepared by each EA and consolidated by the PMU without active participation of the BME staff. The BME would have contributed more to project monitoring if its design had focused on a few key indicators instead of a comprehensive survey that was costly and time-consuming. 42. A total of 47 training programs for project staff and 59 for project beneficiaries were organized, with 280 staff and 3,350 beneficiaries trained. It was reported that the training on project staff was effective, especially that on project planning and management, financial budget preparation, and implementation monitoring. The substantial amount of training on project beneficiaries also contributed to enhancing their capacity. By tapping technical staff in the government agencies as trainers in the beneficiary training, the Project reduced training costs. The impact of the training on beneficiaries, however, was not impressive (para. 24).

14

While destructive fishing such as dynamite and cyanide fishing were substantially reduced, this new form of illegal fishing by commercial vessels in municipal waters was not effectively controlled except in some municipalities where the mayors had a strong commitment to controlling illegal fishing and used coast guards to enforce the law. In these municipalities, strengthening the coast guards through the provision of speedboats and communications equipment might have seen the fisherfolk associations, instead of the commercial operators, benefit from the artificial reefs.

13 6. ADTA on Community Mobilization and Development

43. The ADTA had an implementation period of 24 months with a target to organize 30 community groups into financially viable and self-sustaining economic units. A leading NGO in Sorsogon Province, the Social Action Center (SAC) was engaged to provide these services. SAC trained and fielded 14 social development workers, who organized 22 farmer groups and eight fisherfolk groups, with an average of 20 members per group. The majority of the group members received basic training on community development. Small-scale income-generating activities were also organized among the group members. While the ADTAs quantitative targets were achieved, the quality and sustainability of the beneficiary groups were less satisfactory. A review conducted jointly by SAC and the PMU in November 1990 (after 1.5 years of technical assistance [TA] implementation) found that over half the beneficiary groups were weak (Appendix 6). At the time of the OEM inspection, none of these groups was operating. Overall, the ADTA is rated less than successful. 44. Several factors contributed to this problem. First, the delay in release of funds caused financial difficulties to SAC and delayed payments to social workers. Second, delays in setting up the plant nurseries and artificial reefs caused confusion to the social workers who were organizing the community groups to take care of these facilities. Third, the TA implementation period was too short. While the RRP correctly foresaw the need for social mobilization of the poor, the limited time (two years) for TA implementation restricted the success of community development, which was by nature a long-term process. Lastly, institutional support did not continue for the beneficiary groups after TA completion. B. Economic Reevaluation

45. The OEM reestimated the EIRR for the entire Project and by project component, as shown in Appendix 7, which presents the results and the methodology used. The reestimated project EIRR (5.2 percent) was substantially below the appraisal estimate (17.6 percent) and the PCR estimate (11.5 percent). A major cause of the sharp variance was overestimation for achievements in the agriculture component, which accounted for 92 and 81 percent, respectively, of the Projects incremental economic benefits in the EIRR calculation conducted at appraisal and PCR.15 46. The OEM found that the actual achievements in the agriculture component were substantially below the estimation made at appraisal and PCR. First, the abaca rehabilitation subcomponent achieved 922 ha, 54 percent below the 2,000 ha used in the EIRR calculation in both the appraisal and PCR.16 Second, the plant nurseries distributed 389,750 seedlings, 61 percent below the target of 1 million. Third, CISs rehabilitated 2,049 ha, 25 percent below the target of 2,750 ha. Furthermore, the EIRR estimated at appraisal and PCR included incremental benefits from annual crops (mango, cassava, corn, mungbean, peanut, sweet potato, and upland rice) with a total area of 3,157 ha, which were to be interplanted with perennial crops. Since the Project did not provide any support for the annual crops (neither seedlings nor extension services) and the expected increase in the annual crops did not materialized, the EIRR that was reestimated at PPAR excluded these crops. 47. The substantial amount of indirect and unquantifiable benefits generated by the road component, which greatly stimulated the local economy and led to upgraded classification levels of economic development for most municipalities in Sorsogon Province (para. 22), is not captured by
15 16

See Appraisal Report, Appendix 14, Table 6 and PCR, Appendix 9, page 1. While only 922 ha was rehabilitated at project completion, the PCR expected that the remaining targets would be completed by 2002 (para. 38) and therefore used the expected 2,000 ha in its EIRR recalculation.

14 the EIRR calculation. The road component accounted for 58 percent of the Projects base cost but contributed only 7 percent of the Projects incremental benefits in the EIRR estimated at appraisal. In contrast, the agriculture component accounted for 26 percent of the Projects base cost but contributed 92 percent of the Projects benefits.17 Consequently, the substantial reduction in the actual achievements of the agriculture component led to the sharply reduced project EIRR. C. Sustainability

48. The Projects sustainability varied by component. According to the OEM, the roads, flood control structured, and health facilities have been properly maintained by DPWH (responsible for national secondary roads and flood control facilities), Provincial Engineers Office (provincial roads), and DOH (health facilities). These offices have regular budgets, competent staff (strengthened under the Project), and adequate equipment (provided by the Project). In particular, the impact of schistosomiasis control has been sustained and the prevalence rate has remained at a low level since project completion. The artificial reefs need only minimal maintenance and have been maintained well. The sustainability of the abaca laboratory and plant nurseries is at risk, as these institutes bear the responsibility for distributing seedlings free of charge while receiving insufficient funds for their operations (paras. 36-37). Their sustainability will be improved if they are allowed to operate on a commercial basis, or if they are privatized. The level III water supply system is currently maintained by the Irosin municipal government, which has subsidized about 40 percent of the systems O&M cost (para. 31). It seems that the subsidy is necessary in the short run as the beneficiaries are unable to finance the entire O&M costs, and the social costs of letting the water system deteriorate are high. In the long run, however, a solution needs to be developed with the joint efforts of the municipal government, beneficiary groups, and private sector. 49. The sustainability of CIS is an urgent issue requiring immediate action. While 5 of the 14 IAs have strong leadership and therefore active member participation and satisfactory O&M status, the rest of them are weak. In particular, four CISs have already shown deterioration due to unrepaired damage and poor maintenance. 50. The OEM discussed several of remedial measures with NIA staff, LGUs, and leaders and members of the IAs. As a first step to the long-term goal, an intensive information and education campaign should be launched to raise farmers awareness of their rights and responsibilities. It should be made clear to the irrigators that they are the owners of the CISs and that they should not rely on the government to take care of the systems for them. To ensure that they have sufficient funds to repair the existing and future damage in a timely manner, a reserve fund needs to be established, which should be used exclusively for damage repair. This fund could be collected from the beneficiaries in financially good (or normal) years and used in a bad year. The water charges for routine O&M and the reserve fund together would likely add up to about 10 percent of the incremental rice yields, which is considered a reasonable burden to most beneficiaries. NIA could provide matching funds to the IAs to encourage the establishment of the reserve fund. 51. The IAs need to be substantially strengthened. Currently, payments to the leaders of the IAs are too low to obtain satisfactory services. The number of leaders in the IAs should be cut substantially, and the remaining leaders should receive an attractive financial package linked to the performance of their services, including collecting user fees, conducting routine O&M of the systems, and organizing damage repair. LGUs should play a key role in strengthening the IAs, by facilitating the election of their leaders and providing sufficient extension services. Considering both the crucial role of extension workers in strengthening the IAs and most LGUs weak financial capacity to employ enough extension workers, it may be necessary for LGUs to receive a portion
17

See Appraisal Report, page 23 and Appendix 14, page 8.

15 of the collected user fees to finance salaries for extension workers. This approach will provide financial incentives for the LGUs to actively participate in strengthening the IAs and CISs. NIA should continue to monitor CIS operations and provide technical support to the IAs. IV. A. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

Socioeconomic Impact

52. Appendix 8 summarizes the Projects socioeconomic impact by project component. In particular, beneficiaries highlighted the impact of the improved roads, which (i) linked the isolated rural villages to the mainstream of economic development and opened job opportunities for local residents; (ii) reduced travel time and enabled the selling of perishable products (such as fish and vegetables) to outside markets where prices were better; (iii) facilitated farm extension and social workers visits to remote villages; and (iv) improved local residents access to public services, including hospitals in cities. 53. The Project did not include a component specifically targeting women. Nevertheless, focus group discussions and household interviews with beneficiaries revealed the Projects positive impacts on women. For example, the number of women-managed shops and women vendors (those who buy and sell fish, vegetables, or cooked-food items) increased along the improved roads. The new bus stations helped women find employment (such as maids) in cities. It was reported that some women assumed positions in IAs and fisherfolk associations, such as accountants. They also received training under the Project. 54. The Projects impact on poverty was significant, as shown in Appendix 9, which provides the poverty estimates made by the OEM together with a technical note on the methodology used.18 The estimates show that rural poverty in the project area was reduced from about 70-80 percent before the Project to a current level of 60-65 percent on a cash income basis, or from 55-70 percent to 40-60 percent including both cash and noncash income. This implies that about 15 percent of the people had moved above the poverty line by the end of the Project. The OEM found that a large amount of those who became nonpoor were tenants with access to land. It also found that the poors living conditions had improved by the end of the Project as the local economy improved. Except for the poorest (the sick and elderly), most of the poor could afford three meals a day. No hunger or serious malnutrition was evident in the project area. 55. However, about 50-60 percent of people in the project area remained poor, most of them landless and jobless laborers, including a large number of municipal fisherfolk who did not have boats and worked as casual laborers with irregular incomes. Interviews with the poor revealed that they received proportionally fewer project benefits compared to the nonpoor. Primarily due to their weak capacity, especially their lack of access to land, capital, and other assets, these poor were in too weak a position to make use of the public facilities invested under the Project, such as roads, irrigation systems, and artificial reefs. The CISs benefited those who had access to irrigated farmland, such as landlords, small landowners, and tenants with regular incomes. These were the relatively better-off groups in a typical poor village in Sorsogon Province; they accounted for about 20 percent of the population, whereas the poor municipal fisherfolk accounted for about 60 percent, and the upland poor, 15-20 percent. The landless poor might benefit indirectly from the CISs if the increased rice harvest required more labor. However, this impact was not really felt as the rising population intensified competition among laborers looking for work. The artificial reefs were intended to benefit municipal fisherfolk. However, due to weak law enforcement, much of the
18

Since there were no updated official data on poverty in Sorsogon Province, the OEM made a rough estimate of rural poverty in seven municipalities based on focus group discussions with project beneficiaries.

16 increase in fisheries resources was captured by commercial operators (para. 40). Similarly, many of the free seedlings distributed under the Project benefited the nonpoor (para. 36). B. Environmental Impact

56. As envisaged at appraisal, the Project did not cause negative environmental problems as it concentrated on rehabilitation of existing roads and irrigation systems and not new construction. Positive environmental impacts were generated by the control of schistosomiasis. The artificial reefs contributed to regenerating fisheries resources. C. Impact on Institutions and Policy

57. The Projects institutional impact on LGUs was significant: PMU staff received substantial training and gained extensive experience in project management; the majority of them remained in public service after project completion.19 The capacity of the project staff in other EAs and LGUs was also strengthened substantially. Today, the Provincial Engineers Office is capable of not only maintaining existing roads, but also building new roads. Some municipalities (such as Juban) have also gained the capacity to build roads. 58. The Projects impact on beneficiaries was less impressive. The Project organized 22 farmer groups and 8 fisherfolk groups, but none of them remained in place at the time of the OEM. The Project provided substantial assistance to the 14 IAs, but only 5 of them remained strong. The above inputs could have had sustainable impacts if there had been follow-up institutional support after project completion. The substantial beneficiary training could have been more effective if it had focused on practical learning instead of classroom lecturing.20 V. A. Relevance OVERALL ASSESSMENT

59. By focusing on poverty reduction in a neglected region, the Project was highly relevant to the development strategy of the Government and the operational strategy of ADB at the time of appraisal. It was even more so at the time of the OEM as ADB has since made poverty reduction its overarching goal. The outputs of the road development, flood control, and CIS components achieved the Projects objective as they contributed to poverty reduction through improving rural infrastructure and promoting the local economy. The health services and water supply components directly improved the living conditions of the poor. However, the agriculture and fisheries component was less relevant as the free seedlings provided by the abaca laboratory and plant nurseries contributed little to the Projects objective. The artificial reefs were intended to benefit the poor but, due to weak law enforcement, benefited mainly the rich. As the agriculture and fisheries component accounted for only 5 percent of the Projects cost, the Project is still rated relevant.

19

PMU staff detailed to the Project went back to their original offices after project completion. The majority of contractual staff were absorbed by provincial and municipal governments. 20 For example, a competition among the IAs could have been organized with an award granted to the best IA that effectively maintained their CIS. A study tour could have been organized to allow the IA leaders to visit the best CIS and exchange working experiences. Similar competitions and awards could have been organized for the best fisheries association, the best mayor, and the best village captain who contributed to effective control of illegal fishing.

17 B. Efficacy

60. The physical targets of the Projects major components, such as roads, flood control, CISs, and health services, which accounted for over 85 percent of the Projects cost, were largely accomplished, and these achieved the Projects objective. Some minor subcomponents, such as domestic water supply, plant nurseries, and the abaca laboratory did not fulfill their targets. Since the nurseries and laboratory were less relevant, this did not affect achievement of Project objective. Overall, the Project is rated efficacious. C. Efficiency

61. Project preparation lasted for six years including a three-year interruption. Project implementation suffered serious delays in the first three years, accelerated in later years, and finished with a total delay of 34 months. In general, the EAs, consultants, and contractors performed well in project implementation. The Government provided the required counterpart funds, albeit with delays in release of funds. While the roads, flood control structures, health services, and CISs have been fully utilized, the plant nurseries and the abaca laboratory are operating below capacity. The Projects EIRR fell sharply from 17.6 percent at appraisal to 5.2 percent at PPAR, largely due to the overestimated agricultural benefits at appraisal and the substantial reduction in actual achievements. Overall, the Project is rated less efficient. D. Sustainability

62. The roads, flood control structure, and health services have been maintained well by the government agencies. They have sufficient regular funds, competent staff, and adequate equipment. The sustainability of the plant nurseries and the abaca laboratory is poor; that of the CISs is at risk but can be strengthened if action is taken immediately (para. 71). Since the components with good sustainability (roads, flood control structures, and health services) accounted for over 70 percent of the project cost, project sustainability is rated likely. E. Institutional Development and Other Impacts

63. The Project had a significant institutional impact on LGUs, which were substantially strengthened through absorption of most of the project staff who received substantial training and gained extensive experience under the Project. The EAs are now capable of implementing donorfunded projects. The Projects institutional impact on beneficiaries was limited due to a lack of continued institutional support after project completion. The Project did not have an adverse impact on the environment, and its positive impact on rural poverty was significant. Overall, the rating for institutional development and other impacts is moderate. F. Overall Project Rating

64. The Projects development impact in Sorsogon Province was readily visible: it improved the rural infrastructure, promoted local business, stimulated economic growth, and upgraded the classification levels of most municipalities. Today, there are no more Class VI municipalities (the poorest) in the Province. The agriculture and fisheries component was less successful, but accounted for only 5 percent of project cost (Appendix 1). Sustainability of the CISs which accounted for about 11 percent of project cost, was poor. The other project components performed well. Overall, the Project achieved its objective and reduced rural poverty by about 15 percent. Using a weighted average of the rating based on the above five criteria, the Project is rated successful (see Table below).

18 Assessment of Overall Project Performance

Criterion 1. 2. 3. 4. 5. Relevance Efficacy Efficiency Sustainability Institutional Development Overall Rating Assessment Relevant Efficacious Less Efficient Likely Moderate Successful Rating (0-3) 2 2 1 2 2 Weight (%) 20 25 20 20 15 100 Weighted Rating 0.40 0.50 0.20 0.40 0.30 1.80

Assessment Ratings: Relevance: 3 = highly relevant; 2 = relevant; 1 = partly relevant; 0 = irrelevant. Efficacy: 3= highly efficacious; 2 = efficacious; 1 = less efficacious; 0 = inefficacious. Efficiency: 3 = highly efficient; 2 = efficient; 1 = less efficient; 0 = inefficient. Sustainability: 3 = most likely; 2 = likely; 1= less likely; 0 = unlikely. Institutional Development and Other Impacts: 3 = substantial; 2 = moderate; 1 = little; 0 = negligible. Overall Rating: HS = highly successful S = successful LS = less than successful US = unsuccessful 2.5 < HS < 3.0 1.6 < S < 2.5 0.6 < LS < 1.6 < 0.6

G.

Assessment of ADB and Borrower Performance

65. ADB designed the Project in accordance with its own and government strategies, in spite of certain weakness in the design of the agriculture component. ADB closely monitored project implementation; its review missions improved project implementation in the later stages and contributed to project staff capacity building. The Government generally complied with the major loan covenants. Most EA/PMU staff performed well in project management. Overall, the performance of both ADB and the Government was satisfactory. VI. A. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

Key Issues for the Future 1. Lack of Readiness in Project Implementation

66. The Project suffered serious delays in the first three years; such delays are common in ADBs projects in the Philippines.21 One major cause was the lack of readiness of the project offices at the start of project implementation. The lack of financing before loan effectiveness restricted the recruitment and training of project staff as well as preparation of workplans before project implementation. It is encouraging that this issue has been brought to the attention of the Government, which recently introduced a project readiness filter to ensure that a project is ready for implementation when it is approved. To facilitate the implementation of the new policy, the Government has included in its budget for 2001 the establishment of a project start-up facility with an initial fund of about P2 billion to finance the operation of project offices before loan effectiveness. For other developing member countries, if a government is unable to finance the
21

A special study on 41 evaluated projects in the Philippines reported that the average delay of these projects was nearly three years.

19 project offices before loan effectiveness, ADB should include in the financing package the funding of the start-up phase for 6-8 months as part of the loan to provide sufficient time for staff recruitment, training, and workplan preparation.22 The Projects experiences show that time spent on adequate preparation can be rewarded by smooth project implementation later. 2. Slow Flow of Project Funds

67. The slow release of project funds was the primary cause of most delays under the Project. The large number of signatures required for processing disbursement vouchers and insufficient staff capacity in the agencies involved were two major causes. The design of future projects should include a critical review of the entire process of funds flow to screen out government agencies that are not absolutely needed. If the major concern underlying an agencys demand for being involved in the approval or release of funds is a desire to control or monitor, this should be addressed by developing alternative measures without adding that agency into the funds flow process. If an agency is absolutely needed in the process, full-time staff should be assigned to that office to speed up its paper processing. A monitoring mechanism should be established to identify and address the bottlenecks in the funds flow process in a timely manner. 3. Distribution of Project Benefits

68. The Project achieved its objective and reduced poverty by about 15 percent in the project area. Nevertheless, about 50-60 percent of the people in the project area remained poor. They received proportionally fewer project benefits as compared with the nonpoor, as the poor, due to their weak capacity, were in too weak a position to make use of the physical infrastructure invested under the Project. The Project intended to empower the poor through community development under the ADTA. The impact of the TA, however, was limited by its small scale, short implementation period, and lack of continued institutional support. The Projects impact on poverty reduction could have been greater if it had included direct measures to tackle the key causes of poverty in Sorsogon Province, such as control of overfishing and illegal fishing, and income generation activities among the landless and jobless laborers, who accounted for the majority of the poor in the project area. Instead, the Projects agriculture component followed the tradition of supporting irrigation and production; its outputs (irrigation systems, free seedlings, and artificial reefs) benefited more the better-off groups that had access to land and other assets such as motor boats. To maximize the poverty impact of public investment, the design of future projects needs to be guided by an analysis of the likely distribution of project benefits. ADBs mission leaders need to spend a substantial amount of time in the field interviewing the poor to fully understand the root causes of poverty and the key constraints that the poor are facing.23 Project components should be designed to remove those constraints. Social mobilization of the poor such as organizing them into groups and training them on income generating activities should be conducted before the physical investment is made to ensure that they will have the capacity to take advantage of the public investment. ADTAs should be used for the provision of continued institutional support for the poor after project completion.

22

Currently, it is not feasible for ADB to finance project offices before loan effectiveness. Future review of ADBs operational business processes may consider the possibility of providing retroactive financing for project offices. 23 In spite of the substantial amount of sector studies and the PPTA, the design of the agriculture component reflected insufficient understanding of the poverty issues in the project area. PPTAs cannot completely substitute the important fieldwork that should be conducted by ADBs mission leaders. For poverty reduction projects, the current time provision for fieldwork may not be sufficient for mission leaders to fully understand the causes of poverty in a particular project area, since the fact-finding and appraisal missions typically last only two or three weeks each, and a large portion of that time is spent with government officials rather than beneficiaries.

20 4. Farmers Lack of Willingness to Pay for O&M

69. The sustainability of the CISs is poor, primarily due to farmers lack of willingness to pay for O&M and the repair of damage. The weak leadership of the IAs and their lack of ownership of the CISs were the root causes of the problem. To ensure the sustainability of future irrigation projects, consultations with beneficiaries during the design stage need to be intensive. ADBs project designers need to fully understand farmers various constraints and their real demand for the investment if it is not free. An intensive information and education campaign should be launched to raise farmers awareness of their rights, choices, and responsibilities. Policies relating to the repair of future damage should be spelled out clearly in written agreements to avoid unrealistic expectations of continued financial assistance from the government. Investment should start only after securing farmers willingness to pay in the form of written agreements. Realistic measures need to be developed to rule out those who do not want to pay. Agreements with farmers should specify the amount of the water charges, which should be high enough to cover both routine O&M and a reserve fund for the repair of future damages. B. Lessons Identified

70. The approach to reduce poverty through improving infrastructure and promoting economic growth is effective when the majority of the population is poor. If many landless and jobless laborers remain, who lack the capacity to take advantage of poverty reduction investment, then a bottom-up approach focusing on social preparation of the poor, such as beneficiary group organizing, is needed to enhance the poors capacity to maximize a projects poverty reduction impacts. 71. Social preparation requires long-term efforts and is better achieved by project components instead of attached TAs. Continued institutional support for the poor is needed after project completion and is better financed by ADTAs. 72. Demand analysis for irrigation projects should be based on farmers willingness to pay for both routine O&M and future repairs. Their willingness should be secured through written agreements in conjunction with enforcement measures. 73. To minimize delays in project implementation, project design should either provide means to finance the operation of the project offices before loan effectiveness, or schedule sufficient time for the projects start-up phase. It is also necessary to minimize the number of agencies involved in the approval and release of project funds, and increase the number of staff to speed up paper processing in the agencies that are absolutely needed in the flow of funds. C. Follow-Up Actions

74. The provincial government and municipal LGUs concerned, with assistance from NIA, should launch an information and education campaign to raise farmers awareness of their rights and responsibilities, especially relating to the repair of future damage. A target date of May 2001 is suggested. 75. The LGUs should assist the IAs to set up a reserve fund. A target date of June 2001 is suggested. 76. AED should conduct policy dialogue with NIA and the provincial government on the implementation and monitoring of the above actions. A target date of February 2001 is suggested.

21

APPENDIXES Number 1 2 3 4 5 6 7 8 9 Title Project Cost Estimates Summary of Physical Achievements Changes in Classification of Municipalities in Sorsogon Province Status of Irrigators Associations Water Charges and Collection Rates Beneficiary Groups Organized under the ADTA Project Economic Analysis Socioeconomic Impact Rural Poverty in Sorsogon Province Page 20 21 23 24 26 27 28 46 48 Cited on (page, para.) 2, 5 3, 11 6, 22 6, 24 6, 24 11, 43 11, 45 13, 52 13, 54

Table A1: Project Cost Estimates ($'000)

Appraisal Components Foreign Local Total Foreign Local Total Foreign Local Total of total costs at PPAR (%) 59 22 5 5 7 2 PCR PPAR As percentage Varianc PPAR v Apprais (%) 148 136 128 131 114 88

A. Road Development B. Irrigation and Flood Control C. Health Services and Water Supply D. Agricultural and Fisheries Support E. Project Management and Training F. Interest During Construction G. Physical and Price Contingency

5,680 2,130 630 335 380 750 2,455

7,270 3,140 600 815 1,540 0 4,375

12,950 5,270 1,230 1,150 1,920 750 6,830 0

7,708 2,587 774 438 437 659 0

9,811 3,880 805 1,072 1,748 0 0

17,519 6,467 1,579 1,510 2,185 659 0

7,708 2,587 774 438 437 659 0

11,508 4,595 805 1,072 1,748 0 0

19,216 7,182 1,579 1,510 2,185 659 0

Totals

12,360

17,740

30,100

12,603

17,316

29,919

12,603

19,729

32,332

100

107

PCR = project completion report; PPAR = project performance audit report. Sources: Report and Recommendation of the President, Project Completion Report, and Project Management Unit.

Table A2: Summary of Physical Achievements (cont'd.)

Item/Component 4. Agriculture and Fisheries (a) Plant nurseries (i) Provincial nursery rehabilitation (ii) Communal nurseries (iii) Municipal nurseries (iv) Planting material produced (v) Planting material distributed (vi) Nursery shed (b) Abaca rehabilitation and extension support (i) Abaca rehabilitation (ii) Seedlings produced (iii) Seedlings distributed (iv) Tissue culture laboratory (c) Artificial reefs 5. Project management and training (i) Office building (ii) Consulting services (iii) Office and training equipment Unit Targets at Appraisal Actual Month/Year of Completion

no. no. no. no. no. no. ha no. no. no. module

1 50 0 1 million 1 million 2 2,000 na na 1 3,000

1 13 16 413,780 389,750 2 922 182,200 147,582 1 2,445

Dec-96 Jun-94 Jan-95 1996 1996 Nov-91 Dec-96 Dec-96 Dec-96 May-92 Aug-96

no. p-m lot

1 228 1

1 149 1

Aug-96 Aug-96

CIS = communal irrigation sytem; kg = kilogram; km = kilometer; na = not applicable; no. = number; p-m= person-month. Source: Updated by OEM in May 2000.

Appendix 3

Table A3: Changes in Classification of Municipalities in Sorsogon Province Class Level Municipality Bacon Barcelona Bulan Bulusan Casiguran Castilla Donsol Gubat Irosin Juban Magallanes Matnog Pilar Prieto Diaz Sta. Magdalena Sorsogon 1990 5 6 3 5 5 5 5 4 4 5 5 5 4 6 6 3 2000 4 5 2 5 5 4 4 3 4 5 4 5 3 5 5 1

Source: Sorsogon Provincial Planning and Development Office.

Table A4: Status of Irrigators Associations

Name of Communal Irrigation System (CIS) Ariman-Botbot CIS, Gubat Status of Irrigators Associations (IAs) and CISs Strong IA leadership and active IA members. Regular operation and maintenance (O&M) after every harvest. Irrigation canals and other infrastructure in good condition. Provision of incentives (raffle of gifts, free lunch, and snacks during general meeting) to attract IA member participation. Water charge collection rate the highest among all 14 CISs (43 percent). O&M undertaken by hired labor financed by water charges. No O&M for the CIS for the past two years due to a low rate of water charge collection (2 percent for the past two years). CIS dam threatened to collapse due to illegal quarrying (mining of stones and sand near its base) by local quarrying firms for construction materials. Only 15 percent of the IA members active due to weak IA leadership. Irrigation canals and other infrastructure of the CIS in good condition. Regular O&M immediately after every harvest. About 80 percent of the members active. Upstream section of the CIS suffered from high siltation. The lowest rate (1 percent) of water charge collection. Irrigation canals in good condition since 60 percent of them had concrete linings and were relatively new (completed at end November 1996). About 50 percent of the IA members active. Low rate (13 percent) of water charge collection. Upstream section of the CIS suffered from high siltation. The dam threatened to collapse as water from the river eroded the soil near the dam (medium damage). About 50 percent of the IA members active. Upstream section of the CIS was heavily silted. Low rate (14 percent) of water charge collection. About 50 percent of the IA members active. Water charge collection of 27 percent. Insufficient funds for regular O&M. One distribution canal near the river collapsed due to soil erosion, which required a medium level repair. About 50 percent of members active. Very low (2 percent) water charge collection. Upstream section of the CIS and distribution canals suffered from high siltation. Only 20 percent of the IA members active. CIS had problems in water distribution due to depletion of water source. Very low (2 percent) water charge collection. Only 20 percent of the IA members active. About 85 percent of the IA members active. CIS in good condition. Relatively low water charge collection (15 percent), but IA members contributed labor for O&M.

Namuat CIS, Casiguran

Adgao CIS, Sta. Magdalena Rangas CIS, Bacon

Calibag CIS, Matnog

Gimagaan CIS, Donsol Layog CIS, Barcelona

Capuy-Ticol CIS, Sorsogon

Alinao CIS, Sorsogon

Buenavista CIS, Irosin

Table A4: Status of Irrigators Associations

Name of Communal Irrigation System (CIS) Cawayan CIS, Juban Status of Irrigators Associations (IAs) and CISs Relatively low water charge collection (18 percent), but IA members contributed labor for O&M. About 75 percent of the IA members active. IA members undertook efficient canal maintenance despite low water charge collection (10 percent). About 60 percent of IA members active. Poor O&M. Very low rate (2 percent) of water charge collection. Deterioration of CIS distribution canals. Only 30 percent of the IA members active. IA faced problems in water distribution as the typhoon-damaged main canal had not been repaired (required medium-level repair). Very low rate (3 percent) of water charge collection. About 55 percent of the IA members active.

Cawayan CIS, Sorsogon

Gulang-gulang CIS, Irosin

Tagdon CIS, Barcelona

Source: OEM fieldwork, May 2000.

Appendix 5 WATER CHARGES AND COLLECTION RATES Table A5.1: Water Charges as Percentage of Incremental Rice Yield
Water Charges (ha/crop) Paddy Value (P) (kg) 50 90 75 75 75 75 75 75 75 75 50 75 75 75 74 300 540 450 450 450 450 450 450 450 450 300 450 450 450 443 Percentage of Water Charges in Incremental Paddy Yield (%) 3.0 5.0 5.7 4.1 5.1 4.2 4.2 4.8 5.7 4.3 2.8 5.7 4.8 4.2 4.9

Name of Communal Irrigation System (CIS) Adgao CIS, Sta. Magdalena Ariman-Botbot CIS, Gubat Alinao CIS, Sorsogon Buenavista CIS, Irosin Capuy-Ticol CIS, Sorsogon Cawayan CIS, Juban Cawayan CIS, Sorsogon Calibag CIS, Matnog Gimagaan CIS, Donsol Gulang-gulang CIS, Irosin Layog CIS, Barcelona Namuat CIS, Casiguran Rangas, Bacon Tagdon, Barcelona Weighted Average

Actual Paddy Yield (kg/ha/crop) 4,140 4,320 3,825 4,320 3,960 4,275 4,275 4,050 3,825 4,230 4,275 3,825 4,050 4,275 4,153

Incremental Paddy Yield (kg/ha/crop) 1,640 1,820 1,325 1,820 1,460 1,775 1,775 1,550 1,325 1,730 1,775 1,325 1,550 1,775 1,653

ha = hectare; kg = kilogram. Source: National Irrigation Administration-Provincial Irrigation Office, May 2000.

Table A5.2: Water Charge Collection as Percentage of Expected Collection

Name of Communal Irrigation System (CIS) Adgao CIS, Sta. Magdalena Ariman Botbot CIS, Gubat Alinao CIS, Sorsogon Buenavista CIS, Irosin Capuy-Ticol CIS, Sorsogon Cawayan CIS, Juban Cawayan CIS, Sorsogon Calibag CIS, Matnog Gimagaan CIS, Donsol Gulang-gulang CIS, Irosin Layog CIS, Barcelona Namuat CIS, Casiguran Rangas CIS, Bacon Tagdon CIS, Barcelona Total Expected Actual Collection (P) Collection (P) 1997 1998 1999 84,000 9,401 7,853 11,245 332,640 136,639 136,200 144,000 172,800 11,736 2,895 2,650 205,200 8,138 22,275 30,647 156,600 16,123 9,120 3,878 54,000 10,020 9,400 9,875 775,800 50,984 81,492 77,295 78,300 6,250 5,975 10,000 180,000 27,600 11,625 25,835 234,000 15,402 12,438 5,369 156,000 27,780 38,269 42,676 253,800 7,650 4,239 5,375 234,000 41,181 10,046 3,000 279,000 33,743 11,261 8,870 3,196,140 402,646 363,086 380,715 Collection Rate (%) 1997 1998 1999 11 9 13 41 41 43 7 2 2 4 11 15 10 6 2 19 17 18 7 11 10 8 8 13 15 6 14 7 5 2 18 25 27 3 2 2 18 4 1 12 4 3 13 11 12

Source: National Irrigation Administration-Provincial Irrigation Office, May 2000.

Appendix 6 Table A6: Beneficiary Groups Organized under the ADTA (as of November 1990)
(A) Farmer Groups for Plant Nurseries (22 Groups)
Name of Association Buhan Social Action Organization (BUSAO) Samahang Magsasaka ng Manlabong (SAMMA) Siuton Community Organization Social Action (SCOSA) Samahang Magsasaka ng Gogon (SAMAGO) Samahang Gagawa sa Ikauunlad ng Beguin (SAGIB) Bar Upland Farmers Association (BUFAS) San Roque Small Farmers Association (SAROSFA) Samahan sa Ikauunlad ng Polot (SIKAP) Magsasaka Para sa Ikauunlad ng Gimagaan (MAPAGSAKAAN) San Rafael Farmers Organization (SARAFO) Samahang Magsasaka ng Mayon (KAMAGMA) Samahang Magsasaka ng Man-ao (SAMASAMA) Samahan ng Magsasaka sa Abas (SAMASA) Dinapa Agricultural Unity Development Organization (DAUDO) Samahang Magsasaka ng Banuang-Gurang (SAMBA) Samahang Binuklod ng Iisang Mithiin (SBM) Samahang Magbubukid ng Penafrancia (SMP) Kilusang Magsasaka ng Pawa (KMP) Samahang Magsasaka ng San Isidro (SAMASI) Samahang Magsasaka ng Saguian Samahang Magsasaka ng San Roque (SANSRO) Farmers Association Implementing True Unity in Hidhid (FAITH)
SAC = Social Action Center. Source: Project Management Unit.

Location Buhang, Bulusan Manlabong, Prieto Diaz Siuton, Magallanes Gogon, Prieto Diaz Beguin, Bulan Sisigon, Matnog San Roque, Sta. Magdalena San Francisco, Bulan Gimagaan, Donsol San Rafael, Bulusan Mayon, Castilla San Fernando, Prieto Diaz Abas, Pilar Dinapa, Castilla Banuang-Gurang, Donsol Oras, Castilla Penafrancia, Sta. Magdalena Pawa, Matnog San Isidro, Sta. Magdalena Saguian, Donsol San Roque, Bulusan Hidhid, Matnog

Performance Rating SAC PMU Ave. 9 9 9 10 9 9.5 9 8 8 8 9 9 8 8 7 7 8 7 7 6 6 8 6 4 6 3 9 8 8 8 8 8 8 7 7 7 6 6 6 6 6 5 6 4 2 1 9 8 8 8 8.5 8.5 8 7.5 7 7 7 6.5 6.5 6 6 6.5 6 4 4 2

Overall Rating Good Good Good Good Good Good Good Good Good Weak Weak Weak Weak Weak Weak Weak Weak Weak Weak Weak Weak Weak

(B) Fisherfolk Groups for Artificial Reef (8 Groups)

Name of Association Kaboronyogan nin Saradit na Parasira can Ilawod (KASAPI) Patunayan Upang Lalong Umunlad (PULU) Isang Samahan Laging Aasahan (ISLA) Samahang Maliliit na Mangingisda sa Kaunlaran (SAMAMAKA) Tatabangan Makatabang sa Kaunlaran (TAMAKA) Samahan ng Matiyagang Mangingisda ng Ogod Isang Samahang Dapat Asahan (ISDA) Coastal Area Fishermens Association (CAFADS)
SAC = Social Action Center. Source: Project Management Unit.

Location Ilawod (Zone II), Bulan Biga, Magallanes, Prieto Diaz Behia, Magallanes San Antonio (Sapa), Pilar Inapugan, Pilar Ogod, Donsol Rawis, Donsol

Performance Rating SAC PMU Ave. 5 8 6.5 8 4 8 8 4 8 5 8 10 8 8 1 6 7 8 7 8 8 2.5 7 6

Overall Rating Weak Good Weak Good Good Weak Weak Weak

Appendix 7, page 1 PROJECT ECONOMIC ANALYSIS A. Methodology and Assumptions

1. The methodology used in the Project economic analysis follows ADBs Guidelines for the Economic Analysis of Projects. The economic internal rate of return (EIRR) is estimated for the Project as whole and by project component (road rehabilitation and improvement, communal irrigation system [CIS] improvement, plant nursery establishment and improvement, abaca plantation rehabilitation, and artificial reef establishment). Major assumptions underlying the EIRR estimation are given below. (i) The economic analysis covered a period of 25 years (1989-2014), wherein the investment period extended over 8 years (1989-1997). Economic benefits were measured for a period of 23 years (1991-2014), upon the completion of the first CIS in 1991. All calculations on project economic benefits and costs were expressed in constant 2000 prices. Project investments were adjusted using the World Banks January 2000 manufacturers unit value index for foreign exchange items. Local benefits and costs were adjusted to reflect the 2000 prices using gross domestic product deflator. Details are given in Table A7.1. Economic prices of internationally traded commodities such as rice and urea are derived from the World Banks January 2000 commodity prices and price projections. The calculations of farm gate economic prices are given in Table A7.2. The quantifiable benefits for the CISs, plant nurseries, and abaca rehabilitation are derived through farm budget analyses for crops that received direct support from the Project. The calculated net returns for each crop (irrigated rice, black pepper, citrus, coffee, pili nut, mango, and abaca) are presented in Table A7.3. The estimated crop areas, yields, and intensity are given in Table A7.4. All economic values were estimated using world price numeraire. A standard conversion factor of 0.86 was used to adjust locally traded commodities and the local cost components of the Project to economic costs and benefits. The conversion factor for unskilled labor was 0.80. Project investment costs used in the economic analysis include the actual costs of civil works construction of roads and CISs, project facilities, consultant services, and training. The investment costs included in the economic analysis are exclusive of transfer payments such as duties and taxes.

(ii)

(iii)

(iv)

(v)

(vi)

B.

Estimation of Project Benefits

2. Only direct economic benefits were included in estimating the EIRR. These were the net incremental economic benefits derived from a comparison between the with and without project scenarios. Benefits were derived from incremental perennial crops, irrigated rice, fisheries production, abaca rehabilitation, plant nurseries, CISs, artificial reefs, and road development under the Project.

Appendix 7, page 2 1. Road Rehabilitation and Improvement

3. The benefits from road development were derived from normal and generated traffic through vehicle operating costs (VOC) savings, road operation and maintenance (O&M) savings, and incremental traffic, which was estimated at 50 percent of the savings in VOC and road O&M. Due to the limitation of EIRR methodology, the large amount of indirect economic benefits stimulated in the local economy following road improvement was not captured in the EIRR calculation, in spite of the fact that these indirect benefits were the major factor that motivated policymakers investment decisions. As a result, the EIRR estimated for the road component is very low (2.0 percent, Table A7.5), as rural roads by nature do not have traffic as heavy as a major highway in an urban area, and the savings in VOC and road O&M alone are not big enough to justify the large amount of investment on the roads. 2. Communal Irrigation System

4. Most of the benefits of the CIS component were generated from the expansion of irrigated areas, which enabled the increase of cropping intensity and rice yields. The economic benefits estimated at appraisal were based on the target of 2,750 hectares (ha) of irrigated area, an anticipated increase of rice yields from 5 tons/year to 8.6 tons/year, and an intensified cropping index from 1.08 to 1.6. The EIRR reestimated at project performance audit report (PPAR) was based on the actual achievement of 2,049 ha of irrigated area, a reestimated rice yield of 8 tons/year, and a cropping index of 1.7. The PPAR reestimation also considered the need to establish a reserve fund to finance the repair of future damage to the CIS structures due to frequent typhoons in Sorsogon Province. Accordingly, an annual cost of P500,000 was added to the O&M cost for the 14 CISs. In spite of the increased O&M costs, the CIS component has a high EIRR reestimated at 15.2 percent. 3. Plant Nurseries

5. At appraisal and project completion report (PCR), the estimation of incremental benefits from the plant nurseries included the benefits of both perennial crops (abaca, black pepper, citrus, coffee, pili nut, and mango) and annual crops (cassava, corn, mungbean, peanut, sweet potato, and upland rice), which were to be interplanted with the perennial crops. The incremental benefits from perennial crops were derived from the 385,334 seedlings that were distributed under the Project. Assuming a mortality rate of 20 percent and an estimation of 640 seedlings per ha, these seedlings enabled the planting of 485 ha of perennial crops. The reestimation also used a conservative assumption that only 80 percent of the planted crops would reach full development. The annual crops were excluded from the benefit reestimation conducted at PPAR as the Project did not provide either seedlings or extension services for the production of these crops, and the expected increase of these crops was not observed. 4. Abaca Rehabilitation

6. The Project targeted to rehabilitate about 2,000 ha of abaca plantations and accomplished 922 ha. The shortfall was mainly due to widespread bunchy top disease, which has wiped out about 40 percent of the abaca plantations in Sorsogon Province since 1992. For the same reason, the yield increase from 0.5 tons/year to 1.6 tons/year estimated at appraisal was adjusted to an annual yield of 1.0 ton/year at PPAR. The EIRR for this component was very low (3.2 percent, Table A7.5).

Appendix 7, page 3 5. Artificial Reefs

7. It was estimated at appraisal that each artificial reef module would increase fisheries biomass by 66 kilograms within one year of establishment. The Project targeted 3,000 modules but deployed only 2,445 at project completion, mainly due to delays in project implementation. Based on the actual achievement, PPAR estimated an annual increase of fisheries at 161 tons, 16 percent below the appraisal estimation of 192 tons. The high EIRR (30.5 percent) of this component was mainly due to its low investment and maintenance costs. C. Economic Internal Rate of Return for the Entire Project 1. Base Case

8. The results of the EIRR calculation by project component and for the entire Project are presented in Table A7.5. The base case of project EIRR was estimated at 5.2 percent, which was substantially below the EIRR estimated at appraisal (17.6 percent) and PCR (11.5 percent). One major factor underlying the sharp variance was the reduced achievements in the agriculture component, which accounted for 92 percent and 81 percent of the annual incremental economic benefits in the EIRR estimated at appraisal and PCR, respectively (Appraisal Report, Appendix 14, Table 6 and PCR, Appendix 9, page 1). 9. The shortfall of achievement in the agriculture component was due to (i) the less than half achievement in abaca rehabilitation (922 ha vs. the target of 2000 ha)1; (ii) the less than 40 percent achievement in plant seedlings (389,750 vs. the target of 1,000,000); and (iii) the 25 percent shortfall in the CIS achievement (2,049 ha vs. 2,750 ha anticipated at appraisal). Furthermore, the EIRR that was estimated at appraisal and PCR included the incremental benefits from annual crops, with a total area of 3,157 ha, which was excluded in the reestimation at PPAR as the Project did not provide any support for these crops (para 5). 2. Sensitivity Analysis

10. Sensitivity analysis was conducted at PPAR for the entire Project, which was based on two scenarios: a 10 percent decrease in total benefits (which is, however, unlikely) and a 10 percent increase in O&M costs. Due to the diversity of the project components, it was difficult to conduct a sensitivity analysis for the entire Project against risks of individual factors (such as crop yield increase or price changes). The results of the sensitivity analysis are given in Table A7.5, which suggest that a 10 percent decrease in all benefits would reduce the project EIRR from 5.2 to 4.3 percent, while a 10 percent increase in O&M costs would reduce the project EIRR to 5.1 percent. The project EIRR is less sensitive to increases in O&M costs because these costs were relatively small.

The target of 2,000 ha was used in the EIRR recalculation at PCR. In spite of the poor achievement at project completion, the PCR expected that the target of 2,000 ha could be achieved by 2002.

Appendix 7, page 4
Table A7.1: Project Investment Costs
A. Project Cost by Type of Currency (in current prices, $000)
Appraisal Amount 12,360 17,740 30,100 Project Completion Amount 12,603 17,316 29,919 Amount 12,603 19,729 32,332 PPAR As % of total costs 39 61 100 PPAR vs. Appraisal (%) 102 111 107 Type of Currency Foreign Local Total

B.
Item

Project Cost by Component and Type of Currency (in current prices, $000a
1989 Total Cost a. Foreign Exchange b. Local Currency 0 0 0 2 1 1 0 0 0 0 0 0 0 0 0 1990 224 97 127 109 47 62 0 0 0 0 0 0 0 0 0 1991 1,313 571 743 123 54 70 30 13 17 115 50 65 0 0 0 1992 3,868 1,681 2,188 487 212 276 0 0 0 123 53 70 0 0 0 1993 4,503 1,957 2,547 399 173 226 0 0 0 54 23 30 227 99 128 1994 2,245 975 1,270 592 257 335 24 10 14 54 23 30 0 0 0 1995 729 317 412 929 404 526 24 10 14 47 21 27 167 73 95 1996 2,688 1,168 1,520 536 233 303 272 118 154 47 21 27 119 52 67 1997 430 187 243 0 0 0 0 0 0 0 0 0 0 0 0 Total 16,000 6,951 9,049 3,178 1,381 1,797 350 152 198 440 191 249 513 223 290

1. Road Improvement

2. CIS Rehabilitation Total Cost a. Foreign Exchange b. Local Currency 3. Plant Nurseries Total Cost a. Foreign Exchange b. Local Currency 4. Abaca Rehabilitation Total Cost a. Foreign Exchange b. Local Currency 5. Artificial Reefs Total Cost a. Foreign Exchange b. Local Currency

C. Assumptions used in Calculating Project Costs

Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
a b

Official Exchange b Rate 21.10 21.74 24.31 27.48 25.51 27.12 26.42 25.71 26.22 29.47 40.89 39.09 41.00
b

GDP b (in million pesos) 799,182 925,443 1,077,237 1,248,011 1,351,559 1,474,458 1,692,932 1,905,951 2,171,922 2,421,306 2,667,108 2,989,065 3,138,518

GDP Implicit Price Index (2000 = 100) 36.9 40.2 45.4 52.9 57.1 61.0 67.1 72.2 77.7 82.4 91.2 99.0 100.0

MUV Index b (2000 = 100) (1990 = 100) 94.4 88.9 97.2 100.0 100.6 101.2 101.8 102.5 103.1 103.7 104.3 104.2 103.6 106.2 91.6 94.2 94.8 95.4 95.9 96.5 97.1 97.7 98.3 98.2 97.6 100.0

Actual project costs at project completion ($29.9 million) are used in the calculation. As of May 2000. Source: National Statistical Coordination Board (May 2000); World Bank Commodity Price Projection (January 2000).

Appendix 7, page 5
Table A7.2: Derivations of Farm Gate Economic Prices
A.
Item Export price, Thai, white, milled ($/t) 5% broken, FOB Bangkok (P/t) Less: Quality discount of 10% applicable to coarse rice varities from Philippines Export price, milled rice, FOB Tabaco (P/t) Less: Port charges Less: Storage cost Less: Transport and handling to Tabaco Economic price of rice at mill Yield of milled rice % Less: Milling cost Plus: Value of by-products Economic price of rice at mill Less: Transport and handling & administrative cost between grain dealer and mill Less: Transport & handling from farm to dealer Economic price of paddy at farm Per ton Per kilogram
a

Import Parity for Coarse Rice

AR 218.3 4,746 712 4,034 26 52 72 3,884 64 149 143 2,479 29 12 2,438 2.44 PCR 271.7 10,868 1,087 9,781 62 13 120 9,586 6,134 516 514 6,132 23 47 6,578 6.58 PPAR 260.0 10,660 1,066 9,594 65 15 128 9,386 6,110 529 529 6,110 23 51 6,036 6.04

B. Import Parity for Urea

Item Export price, any origin ($/t) Bagged, FOB Europe (P/t) Plus: International freight & insurance (15%) Import price, Urea, CIF, Tabaco Plus: Port charges Plus: Storage costs Plus: Transport and handling to Sorsogon Economic price of urea at dealers store Plus: Transport & handling from farm to dealer Economic price of urea at the farm gate Per ton Per kilogram 3,767 3.77 6,399 6.40 4,503 4.50
a

AR 94.1 3,045 457 3,502 26 52 158 3,737 29

PCR 135.9 5,436 815 6,251 62 13 120 6,446 47

PPAR 90.0 3,690 554 4,244 65 15 128 4,451 51

AR = appraisal report; FOB = free on board; CIF = cost, insurance, freight; t = ton; PCR = project completion report; PPAR = project performance audit report. a At current border price.

Appendix 7, page 6
Table A7.2: Derivations of Farm Gate Economic Prices (contd.)
C. Import Parity for TSP
AR PCR 144.9 5796 869 6665 62 13 120 6860 47 6813 6.81 PPAR 145.0 5945 892 6837 65 15 128 7044 51 7096 7.10 Item a Export price, any origin ($/t) Bagged, FOB Europe (P/t) Plus: International freight and insurance (15%) Import price, TSP, CIF, Tabaco Plus: Port charges Plus: Storage costs Plus: Transport and handling to Sorsogon Economic price of urea at dealers store Plus: Transport & handling from farm to dealer Economic price of urea at the farm gate Per ton Per kilogram

D.

Summary of Financial and Economic Prices of Outputs and Inputs

Unit kg kg kg kg kg kg kg kg Plant Plant Plant Plant Plant Plant kg ton kg kg Person-day Animal-day Tractor-day AR 8.00 120.00 6.00 8.00 50.00 2.65 12.00 1.00 0.25 1.00 4.00 4.00 3.64 200 3.80 4.80 35 50 200 Financial Prices PCR PPAR 17.00 155.00 8.00 8.00 10.00 12.00 8.00 45.00 1.00 3.00 5.00 7.50 10.00 25.00 750 6.61 7.60 100 200 300 17.50 170.00 25.00 20.00 12.50 14.00 8.00 50.00 2.00 5.00 5.50 13.00 15.00 15.00 16.25 775 6.50 8.00 110 200 640 AR 6.88 103.20 5.20 6.88 43.00 2.44 10.00 0.86 0.22 0.86 3.44 3.44 2.62 172 3.77 4.12 23 43 172 Economic Prices PCR PPAR 14.62 133.30 7.57 6.88 8.60 10.32 6.58 38.70 0.86 2.58 4.30 6.45 8.60 21.50 645 6.40 6.81 80 160 240 15.05 146.20 21.50 17.20 10.75 12.04 6.04 43.00 1.72 4.30 4.73 11.18 12.90 12.90 13.98 667 4.50 7.10 88 160 512

Item A. Outputs Abaca Black Pepper Coffee Citrus Mango Pili Paddy Fish B. Inputs Abaca Black Pepper Coffee Citrus Mango Pili Paddy C. Fertilizer Manure Urea Complete (T14) D. Labor Manual Labor Animal Labor Tractor Labor

= not available or not calculated; kg = kilogram. AR = appraisal report; FOB = free on board; CIF = cost, insurance, freight; t = ton; PCR = project completion report; PPAR = project performance audit report. a At current border price.

Appendix 7, page 7
Table A7.3: Costs and Returns of Crop Production Per Hectare (P, in constant 2000 prices)
Quantity Item Irrigated Rice A. With Project 1. Gross returns (yield x price) 2. Cost of material inputs a. Seeds b. Fertilizer 1) Urea (45-0-0) 2) Ammonium phosphate (16-20-0) c. Agrochemicals d. Water fee e. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Land preparation 1) Manual labor 2) Tractor labor b. Fertilizer application c. Pulling of seedlings/transplanting d. Weeding e. Harvesting and threshing 4. Net returns B. Without Project 1. Gross returns (yield x price) 2. Cost of material inputs a. Seeds b. Fertilizer 1) Urea (45-0-0) 2) 16-20-0 c. Agrochemicals d. Water fee e. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Land preparation 1) Manual labor 2) Tractor labor b. Fertilizer application c. Pulling of seedlings/transplanting d. Weeding e. Harvesting and threshing 4. Net returns Person-day Tractor-day Person-day Person-day Person-day Person-day 4 3 3 30 4 30 12,576 6,138 440 1,920 330 3,300 440 3,300 4,731 352 1,536 264 2,640 352 2,640 2,716 Kg kg 150 100 975 780 500 300 2,253 9,730 675 671 430 258 1,938 7,784 kg 45 Person-day Tractor-day Person-day Person-day Person-day Person-day 5 3 5 35 5 40 28,708 15,920 550 1,920 550 3,850 550 4,400 11,722 440 1,536 440 3,080 440 3,520 7,648 kg kg 200 125 1,300 975 800 443 4,127 11,820 900 839 688 381 3,550 9,456 kg 50 Unit PPAR AR Financial PCR PPAR Economic PPAR

kg

4,000

32,000 8,458 813

24,160 7,056 699

kg

2,500

20,000 5,539 731

15,100 4,600 629

= not available; AR = appraisal report; kg = kilogram; PCR = project completion report; PPAR = project performance audit report.

Appendix 7, page 8
Table A7.3: Costs and Returns of Crop Production Per Hectare (contd.)
Quantity Item Abaca A. With Project 1. Gross returns (yield x price) 2. Cost of material inputs a. .Fertilizer 1) Urea (45-0-0) 2) 16-20-0 3) TSP b. Agrochemicals c. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Fertilizer/Agrochemicals application (including disease indexing) b. Harvesting (underbrushing, weeding, removal of dried leafsheets) 4. Net returns B. Without Project 1. Gross returns (yield x price) 2. Cost of material inputs a. Fertilizer 1) Urea (45-0-0) 2) 16-20-0 3) TSP b. Agrochemicals c. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Fertilizer/Agrochemicals application (including disease indexing) b. Harvesting (underbrushing, weeding, removal of dried leafsheets) 4. Net returns Person-day 20 5,886 4,012 2,200 3,656 1,892 3,240 Person-day 8 880 704 kg kg kg 50 50 50 325 390 400 300 599 3,080 225 335 355 258 515 2,596 Person-day 60 28,673 8,670 6,600 5,288 5,676 4,668 Person-day 15 1,650 1,320 kg kg kg 50 100 150 325 780 1,200 400 1,257 8,250 225 671 1,065 344 1,081 6,996 Unit PPAR AR Financial PCR PPAR Economic PPAR

kg

1,000

17,500 3,962

15,050 3,386

kg

500

8,750 2,014

7,525 1,689

= not available; AR = appraisal report; kg = kilogram; PCR = project completion report; PPAR = project performance audit report.

Appendix 7, page 9
Table A7.3: Costs and Returns of Crop Production Per Hectare (contd.)
Quantity Item Black Pepper A. With Project 1. Gross returns (yield x price) 2. Cost of material inputs a. Fertilizer 1) Urea (45-0-0) 2) 16-20-0 3) Manure b. Agrochemicals c. Water fee d. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Cultivation/ring weeding and pruning b. Fertilizer application c. Watering the plants d. Wages for overseer e. Harvesting, drying and hauling 4. Net returns B. Without Project 1. Gross returns (yield x price) 2. Cost of material inputs a. Fertilizer 1) Urea (45-0-0) 2) 16-20-0 3) Manure b. Agrochemicals c. Water fee d. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Cultivation/ring weeding and pruning b. Fertilizer application c. Watering the plants d. Harvesting, drying and hauling 4. Net returns Person-day Person-day Person-day Person-day 50 20 50 10 kg kg ton 200 50 0.5 99,164 40,314 1,300 390 388 1,000 300 2,460 8,800 5,500 2,200 5,500 1,100 36,363 900 335 333 860 258 2,116 7,040 4,400 1,760 4,400 880 32,018 Person-day Person-day Person-day Person-day Person-day 180 40 180 120 20 kg kg ton 300 100 0.5 209,911 112,446 1,950 780 388 5,000 1,000 9,676 39,600 19,800 4,400 19,800 13,200 2,200 52,107 1,350 671 333 4,300 860 8,321 31,680 15,840 3,520 15,840 10,560 1,760 47,515 Unit PPAR AR Financial PCR PPAR Economic PPAR

kg

650

110,500 18,794

95,030 15,835

kg

300

51,000 5,838

43,860 4,802

= not available; AR = appraisal report; kg = kilogram; PCR = project completion report; PPAR = project performance audit report.

Appendix 7, page 10
Table A7.3: Costs and Returns of Crop Production Per Hectare (contd.)
Quantity Item Citrus A. With Project 1. Gross returns (yield x price) 2. Cost of material inputs a. Fertilizer 1) Urea (45-0-0) 2) 16-20-0 3) Manure b. Agrochemicals c. Water fee d. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Cultivation/ring weeding and pruning b. Fertilizer application c. Watering the plants d. Wages of overseer e. Harvesting and hauling 4. Net returns B. Without Project 1. Gross returns (yield x price) 2. Cost of material inputs a. Fertilizer 1) Urea (45-0-0) 2) 16-20-0 3) Manure b. Agrochemicals c. Water fee d. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Cultivation/ring weeding and pruning b. Fertilizer application c. Watering the plants d. Wages of overseer e. Harvesting and hauling 4. Net returns Person-day Person-day Person-day Person-day Person-day 70 25 75 80 25 kg kg ton 200 100 0.5 57,156 16,068 1,300 780 388 1,000 300 3,009 22,550 7,700 2,750 8,250 8,800 2,750 20,674 900 671 333 860 258 2,588 18,040 6,160 2,200 6,600 7,040 2,200 19,350 Person-day Person-day Person-day Person-day Person-day 180 50 180 210 100 kg kg ton 500 300 0.5 107,833 41,454 3,250 2,340 388 5,000 1,000 20,900 59,400 19,800 5,500 19,800 23,100 11,000 32,723 2,250 2,012 333 4,300 860 17,974 47,520 15,840 4,400 15,840 18,480 8,800 32,250 Unit PPAR AR Financial PCR PPAR Economic PPAR

kg

6,250

125,000 32,878

107,500 27,730

kg

2,500

50,000 6,777

43,000 5,610

= not available; AR = appraisal report; kg = kilogram; PCR = project completion report; PPAR = project performance audit report.

Appendix 7, page 11
Table A7.3: Costs and Returns of Crop Production Per Hectare (contd.)
Quantity Item Coffee A. With Project 1. Gross returns (yield x price) 2. Cost of material inputs a. Fertilizer 1) Urea (45-0-0) 2) 16-20-0 3) Manure b. Agrochemicals c. Water fee d. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Cultivation/ring weeding and pruning b. Fertilizer application c. Watering the plants d. Harvesting and hauling 4. Net returns B. Without Project 1. Gross returns (yield x price) 2. Cost of material inputs a. Fertilizer 1) Urea (45-0-0) 2) 16-20-0 3) Manure b. Agrochemicals c. Water fee d. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Cultivation/ring weeding and pruning b. Fertilizer application c. Watering the plants d. Harvesting and hauling 4. Net returns Person-day Person-day Person-day Person-day 50 10 40 10 kg kg ton 100 100 0.5 15,042 1,556 650 780 388 800 500 2,870 6,600 5,500 1,100 4,400 1,100 2,413 450 671 333 688 430 2,468 5,280 4,400 880 3,520 880 2,580 Person-day Person-day Person-day Person-day 90 15 75 15 kg kg ton 200 200 0.5 22,501 5,283 1,300 1,560 388 800 500 7,962 11,550 9,900 1,650 8,250 1,650 4,691 900 1,342 333 688 430 6,847 9,240 7,920 1,320 6,600 1,320 4,945 Unit PPAR AR Financial PCR PPAR Economic PPAR

kg

1,150

28,750 12,510

24,725 10,540

kg

600

15,000 5,988

12,900 5,040

= not available; AR = appraisal report; kg = kilogram; PCR = project completion report; PPAR = project performance audit report.

Appendix 7, page 12
Table A7.3: Costs and Returns of Crop Production Per Hectare (contd.)
Quantity Item Mango A. With Project 1. Gross returns (yield x price) 2. Cost of material inputs a. Fertilizer 1) Urea (45-0-0) 2) 16-20-0 3) TSP b. Agrochemicals c. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Cultivation/ring weeding and pruning b. Fertilizer/Agrochemicals application c. Wages for overseer d. Harvesting and hauling 4. Net returns B. Without Project 1. Gross returns (yield x price) 2. Cost of material inputs a. Fertilizer 1) Urea (45-0-0) 2) 16-20-0 3) TSP b. Agrochemicals c. Others (fuel, oil, food expense, etc.) 3. Cost of labor a. Cultivation/ring weeding and pruning b. Fertilizer/Agrochemicals application c. Harvesting and hauling 4. Net returns Person-day Person-day Person-day 15 10 10 kg kg kg 50 50 50 15,217 325 390 400 2,500 2,035 2,200 1,650 1,100 1,100 17,150 225 335 355 2,150 1,750 1,760 1,320 880 880 14,925 Person-day Person-day Person-day Person-day 60 20 60 25 kg kg kg 200 150 150 45,991 1,300 1,170 1,200 9,250 2,801 11,550 6,600 2,200 6,600 2,750 35,229 900 1,006 1,065 7,955 2,409 9,240 5,280 1,760 5,280 2,200 31,175 Unit PPAR AR Financial PCR PPAR Economic PPAR

kg

5,000

62,500 15,721

53,750 13,335

kg

2,000

25,000 5,650

21,500 4,816

= not available; AR = appraisal report; kg = kilogram; PCR = project completion report; PPAR = project performance audit report.

Appendix 7, page 13
Table A7.3: Costs and Returns of Crop Production Per Hectare (contd.)
Quantity Item Pili A. With Project 1. Gross returns (yield x price) 2. Cost of material input a. Food expense 3. Cost of labor a. Weeding and pruning b. Harvesting 4. Net returns B. Without Project 1. Gross returns (yield x price) 2. Cost of material input a. Food expense 3. Cost of labor a. Weeding and pruning b. Harvesting 4. Net returns Person-day Person-day 8 8 52,699 2,959 113 1,760 880 880 3,027 97 1,408 704 704 2,709 Person-day Person-day 35 20 Unit PPAR AR Financial PCR PPAR Economic PPAR

kg

850

96,457

5,064

11,900 560 560 6,050 3,850 2,200 5,290

10,234 482 482 4,840 3,080 1,760 4,912

kg

350

4,900

4,214

= not available; AR = appraisal report; kg = kilogram; PCR = project completion report; PPAR = project performance audit report.

Table A7.4: Estimates of Crop Yields, Areas, and Cropping Intensity

A. Comparison of Crop Yields (tons/year)
Future without Project AR PCR PPAR 0.5 0.5 0.50 0.3 0.35 0.30 2.5 2.5 2.50 0.60 0.60 0.60 0.35 0.35 0.35 2.0 2.0 5.00 5.00 5.00 AR 1.60 0.65 5.00 1.20 0.70 8.60 Future with Project PCR PPAR 1.50 1.00 0.65 0.65 6.50 6.50 1.20 1.20 0.70 0.70 5.00 5.00 10.50 8.00

Item Abaca Black Pepper Citrus Coffee Pili Mango Irrigated Rice

B.
Item

Comparison of Crop Area (ha)

Crop Area Improved AR 1,820 430 650 850 600 2,475 1,980 4,455 1.6 PCR 2,000 222 1,580 316 948 95 2,049 1,844 3,893 1.9 PPAR 922 64 124 75 71 54 1,871 1,752 3,623 1.7

Abaca Black Pepper Citrus Coffee Pili Mango Irrigated Rice Wet Season Dry Season Total Crop Index

= not available; AR = appraisal report; PCR = project completion report; PPAR = project performance audit report.

Appendix 7, page 14
Table A7.5: Estimates of EIRR at PPAR
A.
Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Road Development (at constant 2000 prices)

Costs (P'000) Benefits (P'000) 0 0 0 53 4,903 13,494 14,777 22,139 24,781 33,846 37,607 37,607 37,607 37,607 37,607 37,607 37,607 37,607 37,607 37,607 37,607 37,607 37,607 37,607 37,607 37,607 Construction & Development 0 7,990 47,401 122,695 144,922 65,943 19,836 71,068 12,292 Maintenance 0 0 0 291 2,793 4,543 4,572 5,723 6,356 6,241 6,000 5,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 Total 0 7,990 47,401 122,985 147,716 70,487 24,408 76,791 18,648 6,241 6,000 5,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 EIRR = Net Benefits (P'000) 0 (7,990) (47,401) (122,932) (142,813) (56,993) (9,631) (54,652) 6,133 27,605 31,607 32,607 33,607 33,607 33,607 33,607 33,607 33,607 33,607 33,607 33,607 33,607 33,607 33,607 33,607 33,607 2.0%

B. Plant Nurseries (at constant 2000 prices)

Costs (P'000) Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Benefits (P'000) 0 0 0 0 0 0 0 0 0 0 453 986 1,971 3,009 3,252 3,730 3,809 3,809 3,809 3,809 3,809 3,809 3,809 3,809 3,809 3,809 Construction & Development 0 1,098 0 0 705 654 7,180 Maintenance 0 0 0 0 0 85 1,367 1,367 1,367 684 500 250 150 150 150 150 150 150 150 150 150 150 150 150 150 Total 0 0 1,098 0 0 705 739 8,547 1,367 1,367 684 500 250 150 150 150 150 150 150 150 150 150 150 150 150 150 Net Benefits (P'000) 0 0 (1,098) 0 0 (705) (739) (8,547) (1,367) (1,367) (231) 486 1,721 2,859 3,102 3,580 3,659 3,659 3,659 3,659 3,659 3,659 3,659 3,659 3,659 3,659 11.5%

EIRR = EIRR = economic internal rate of return; PPAR = project performance audit report.

Appendix 7, page 15
Table A7.5: Estimates of EIRR at PPAR (contd.)
C. Communal Irrigation Systems (at constant 2000 prices)
Costs (P'000) Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Benefits (P'000) 0 0 76 764 2,530 2,833 11,779 15,932 16,274 17,359 21,915 21,698 12,905 12,905 12,905 12,905 12,905 12,905 12,905 12,905 12,905 12,905 12,905 12,905 12,905 12,905 Construction & Development 53 3,896 4,450 15,456 12,846 17,377 25,299 14,185 Maintenance 0 0 48 46 140 225 292 366 230 188 172 172 172 172 172 172 172 172 172 172 172 172 172 172 172 172 Total 53 3,896 4,499 15,502 12,986 17,602 25,590 14,551 230 188 172 172 172 172 172 172 172 172 172 172 172 172 172 172 172 172 EIRR = Net Benefits (P'000) (53) (3,896) (4,423) (14,738) (10,456) (14,769) (13,811) 1,381 16,044 17,171 21,743 21,526 12,733 12,733 12,733 12,733 12,733 12,733 12,733 12,733 12,733 12,733 12,733 12,733 12,733 12,733 15.2%

D.
Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Abaca Rehabilitation (at constant 2000 prices)

Costs (P'000) Benefits (P'000) 0 0 0 0 69 139 185 370 494 658 988 1,317 1,317 1,317 1,317 1,317 1,317 1,317 1,317 1,317 1,,317 1,317 1,317 1,317 1,317 1,317 Construction & Development 0 0 4,136 3,903 1,729 1,578 1,291 1,254 Maintenance 0 0 19 16 56 90 117 146 92 75 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 Total 0 0 4,156 3,919 1,785 1,668 1,408 1,401 92 75 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 Net Benefits (P'000) 0 0 (4,156) (3,919) (1,716) (1,529) (1,223) (1,031) 402 583 918 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 1,247 3.2%

EIRR = EIRR = economic internal rate of return; PPAR = project performance audit report.

Appendix 7, page 16
Table A7.5: Estimates of EIRR at PPAR (contd.)
E. Artificial Reefs (at constant 2000 prices)
Costs (P'000) Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Benefits (P'000) 0 0 0 0 0 0 2,272 4,751 5,029 5,582 5,582 5,582 5,582 5,582 5,582 5,582 5,582 5,582 5,582 5,582 5,582 5,582 5,582 5,582 5,582 5,582 Construction & Development 0 0 0 0 7,305 0 4,551 3,142 Maintenance 0 0 0 0 0 23 29 37 23 19 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 Total 0 0 0 0 7,305 23 4,580 3,178 23 19 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 EIRR = Net Benefits (P'000) 0 0 0 0 (7,305) (23) (2,308) 1,573 5,006 5,563 5,565 5,565 5,565 5,565 5,565 5,565 5,565 5,565 5,565 5,565 5,565 5,565 5,565 5,565 5,565 5,565 30.5%

F.

Entire Project (at constant 2000 prices - base case)

Total 53 11,886 57,153 142,407 169,791 90,485 56,725 104,468 20,360 7,890 6,943 5,759 4,509 4,409 4,409 4,409 4,409 4,409 4,409 4,409 4,409 4,409 4,409 4,409 4,409 4,409 Net Benefit (53) (11,886) (57,077) (141,589) (162,289) (74,020) (27,712) (61,276) 26,217 49,555 59,602 61,430 54,873 56,010 56,254 56,732 56,810 56,810 56,810 56,810 56,810 56,810 56,810 56,810 56,810 56,810 5.2%

Benefits (P000) Costs (P000) Road Plant Abaca Artificial Construction & Development Nurseries CIS Rehabilitation Reefs Total Development Maintenance 1989 0 0 0 0 0 0 53 0 1990 0 0 0 0 0 0 11,886 0 1991 0 0 76 0 0 76 57,085 67 1992 53 0 764 0 0 817 142,054 353 1993 4,903 0 2,530 69 0 7,502 166,802 2,990 1994 13,494 0 2,833 139 0 16,465 85,604 4,881 1995 14,777 0 11,779 185 2,272 29,013 51,630 5,095 1996 22,139 0 15,932 370 4,751 43,193 96,829 7,639 1997 24,781 0 16,274 494 5,029 46,577 12,292 8,068 1998 33,846 0 17,359 658 5,582 57,445 0 7,890 1999 37,607 453 21,915 988 5,582 66,544 0 6,943 2000 37,607 986 21,698 1,317 5,582 67,190 0 5,759 2001 37,607 1,971 12,905 1,317 5,582 59,382 0 4,509 2002 37,607 3,009 12,905 1,317 5,582 60,420 0 4,409 2003 37,607 3,252 12,905 1,317 5,582 60,663 0 4,409 2004 37,607 3,730 12,905 1,317 5,582 61,141 0 4,409 2005 37,607 3,809 12,905 1,317 5,582 61,219 0 4,409 2006 37,607 3,809 12,905 1,317 5,582 61,219 0 4,409 2007 37,607 3,809 12,905 1,317 5,582 61,219 0 4,409 2008 37,607 3,809 12,905 1,317 5,582 61,219 0 4,409 2009 37,607 3,809 12,905 1,317 5,582 61,219 0 4,409 2010 37,607 3,809 12,905 1,317 5,582 61,219 0 4,409 2011 37,607 3,809 12,905 1,317 5,582 61,219 0 4,409 2012 37,607 3,809 12,905 1,317 5,582 61,219 0 4,409 2013 37,607 3,809 12,905 1,317 5,582 61,219 0 4,409 2014 37,607 3,809 12,905 1,317 5,582 61,219 0 4,409 , EIRR = EIRR = economic internal rate of return; PPAR = project performance audit report. Year

Appendix 7, page 17
Table A7.5: Estimates of EIRR at PPAR (contd.)
G. Entire Project (at constant 2000 prices - 10% decrease in benefits)
Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Benefits (P000) Road Plant Abaca Artificial Development Nurseries CIS Rehabilitation Reefs 0 0 0 0 0 0 0 0 0 0 0 0 76 0 0 53 0 764 0 0 4,903 0 2,530 69 0 13,494 0 2,833 139 0 14,777 0 11,779 185 2,272 22,139 0 15,932 370 4,751 24,781 0 16,274 494 5,029 30,178 0 17,359 658 5,582 37,722 453 21,915 988 5,582 33,846 887 19,529 1,185 5,024 33,846 1,774 11,615 1,185 5,024 33,846 2,708 11,615 1,185 5,024 33,846 2,927 11,615 1,185 5,024 33,846 3,357 11,615 1,185 5,024 33,846 3,428 11,615 1,185 5,024 33,846 3,428 11,615 1,185 5,024 33,846 3,428 11,615 1,185 5,024 33,846 3,428 11,615 1,185 5,024 33,846 3,428 11,615 1,185 5,024 33,846 3,428 11,615 1,185 5,024 33,846 3,428 11,615 1,185 5,024 33846 3,428 11,615 1,185 5,024 33,846 3,428 11,615 1,185 5,024 33,846 3,428 11,615 1,185 5,024 Total 0 0 76 817 7,502 16,465 29,013 43,193 46,577 53,777 66,660 60,471 53,444 54,378 54,596 55,027 55,097 55,097 55,097 55,097 55,097 55,097 55,097 55,097 55,097 55,097 Costs (P000) Construction & Development Maintenance 53 0 11,886 0 57,085 67 142,054 353 166,802 2,990 85,604 4,881 51,630 5,095 96,829 7,639 12,292 8,068 0 7,890 0 6,943 0 5,759 0 4,509 0 4,409 0 4,409 0 4,409 0 4,409 0 4,409 0 4,409 0 4,409 0 4,409 0 4,409 0 4,409 0 4,409 0 4,409 0 4,409 EIRR = Net Total Benefit 53 (53) 11,886 (11,886) 57,153 (57,077) 142,407 (141,589) 169,791 (162,289) 90,485 (74,020) 56,725 (27,712) 104,468 (61,276) 20,360 26,217 7,890 45,887 6,943 59,717 5,759 54,711 4,509 48,934 4,409 49,969 4,409 50,187 4,409 50,618 4,409 50,688 4,409 50,688 4,409 50,688 4,409 50,688 4,409 50,688 4,409 50,688 4,409 50,688 4,409 50,688 4,409 50,688 4,409 50,688 4.3%

H. Entire Project (at constant 2000 prices - 10% increase in costs)

Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Benefits Road Plant Abaca Artificial Development Nurseries CIS Rehabilitation Reefs 0 0 0 0 0 0 0 0 0 0 0 0 76 0 0 53 0 764 0 0 4,903 0 2,530 69 0 13,494 0 2,833 139 0 14,777 0 11,779 185 2,272 22,139 0 15,932 370 4,751 24,781 0 16,274 494 5,029 33,846 0 17,359 658 5,582 37,607 453 21,915 988 5,582 37,607 986 21,698 1,317 5,582 37,607 1,971 12,905 1,317 5,582 37,607 3,009 12,905 1,317 5,582 37,607 3,252 12,905 1,317 5,582 37,607 3,730 12,905 1,317 5,582 37,607 3,809 12,905 1,317 5,582 37,607 3,809 12,905 1,317 5,582 37,607 3,809 12,905 1,317 5,582 37,607 3,809 12,905 1,317 5,582 37,607 3,809 12,905 1,317 5,582 37,607 3,809 12,905 1,317 5,582 37,607 3,809 12,905 1,317 5,582 37,607 3,809 12,905 1,317 5,582 37,607 3,809 12,905 1,317 5,582 37,607 3,809 12,905 1,317 5,582 Total 0 0 76 817 7,502 16,465 29,013 43,193 46,577 57,445 66,544 67,190 59,382 60,420 60,663 61,141 61,219 61,219 61,219 61,219 61,219 61,219 61,219 61,219 61,219 61,219 Costs Construction & Development Maintenance 53 0 11,886 0 57,085 67 142,054 353 166,802 2,990 85,604 4,881 51,630 5,095 96,829 7,639 12,292 8,068 0 7,890 0 6,943 0 6,335 0 4,960 0 4,850 0 4,850 0 4,850 0 4,850 0 4,850 0 4,850 0 4,850 0 4,850 0 4,850 0 4,850 0 4,850 0 4,850 0 4,850 EIRR = Net Total Benefit 53 (53) 11,886 (11,886) 57,153 (57,077) 142,407 (141,589) 169,791 (162,289) 90,485 (74,020) 56,725 (27,712) 104,468 (61,276) 20,360 26,217 7,890 49,555 6,943 59,602 6,335 60,854 4,960 54,422 4,850 55,570 4,850 55,813 4,850 56,291 4,850 56,369 4,850 56,369 4,850 56,369 4,850 56,369 4,850 56,369 4,850 56,369 4,850 56,369 4,850 56,369 4,850 56,369 4,850 56,369 5.1%

EIRR = economic internal rate of return; PPAR = project performance audit report.

Appendix 7, page 18
Table A7.5: Estimates of EIRR at PPAR (contd.)
I.
Item Base Case (1) 10% Decrease in Benefits (2) 10% Increase in Project Costs

Results of Sensitivity Anaysis for the Entire Project

EIRR AR 17.6 16.3 16.4 PCR 11.53 10.41 11.46 PPAR 5.2 4.3 5.1 0.80 0.73 1.08 0.06 0.95 0.06 AR Sensitivity Indicator PCR PPAR

AR = appraisal report; EIRR = economic internal rate of return; PCR = project completion report; PPAR = project performance audit report.

Appendix 8, page 1 SOCIOECONOMIC IMPACT Table A8.1: Number of Project Beneficiaries Component Irrigation Rehabilitation and Flood Control - Irrigation - Flood control Health Services - Schistosomiasis control - Domestic water supply Agriculture and Fisheries support - Artificial reefs - Abaca rehabilitation - Plant nurseries Road Development
Source: Estimated at OEM, May 2000.

Unit Farmer Household Person Household Fisherfolk Farmer Farmer Household

Total 2,600 15,000 4,000 2,750 1,000 700 5,500 108,000

Table A8.2: Employment Generated During Project Implementation Labor Component Road Irrigation/Flood Control Health Services Agricultural Support Services Project Management Unit Total
Source: Project Management Unit.

Skilled 661 141 20 15 13 850

Unskilled 2,265 482 104 52 45 2,948

Total 2,926 623 124 67 58 3,798

Appendix 8, page 2 Table A8.3: Socioeconomic Impacts by Project Component

Component
I.

Impacts
Linked farmers to market and provided convenience for traders to buy farm products. Reduced operation and maintenance costs of vehicles. Reduced waiting and travel time of commuters (for example, travel time from Prieto Diaz to Gubat fell from at least two hours to 30-45 minutes after the Project). Improved the mobility of local people and enhanced social interaction among communities. Provided immediate access to medical treatment during emergencies at affordable cost due to increased availability of public utilities such as tricycles. Enhanced the delivery of basic services provided by local government units and nongovernment organizations to remote rural areas.

Road Rehabilitation and Improvement

II.

Irrigation Rehabilitation and Flood control a. Irrigation Increased rice production through increased crop intensity (from 1.08 to 1.77) and rice yields (from 5 t/ha to 8 t/ha per year) thereby increasing the income of 2,625 rice farmers. Enhanced the "bayanihan" spirit and social interaction in the community especially through conducting O&M for the CISs. Contributed to food security of the province. Increased productive farmland by 39 ha in the affected regions due to reduced flood in three villages in Juban and Irosin. Improved mobility of local people during flood season as roads were still passable during rainy seasons. Minimized loss of productive labor and reduced hazard to life due to reduced flooding in project areas (at least one life was lost each time a heavy flood occurred before the Project). Reduced medical expenses of families in 22 endemic villages. Reduced loss in productive labor days used in receiving medical treatments for schistosomiasis. Improved living conditions of families who had increased access to clean potable water (level III system in Irosin Municipality). Provided venue for greater social interaction in the community as families share the water system (in Buenavista, Irosin, 20 households shared water from the level I unit). Reduced medical expenses as water-borne diseases were reduced.

b.

Flood Control

III. Health Services a. Schistosomiasis Control Domestic Water Supply

b.

IV. Agriculture and Fisheries Support a. Artificial Reef Increased fish catch per unit of effort (fisherfolk in Bulan and Magallanes reported an increase of 1-2 kg of fish catch per day). Enabled municipal fisherfolk to fish around the site during inclement weather. Contributed to food security of the province. Rehabilitated 922 ha of typhoon-damaged abaca areas for 700 farmers. Increased abaca production and supported abaca-based handicrafts in the Province. Improved farm income through use of high-yielding strains of abaca. Intensified production of coconut and other upland crops through intercropping. Increased productive areas for 5,502 farmers in upland areas.

b. Abaca Rehabilitation

c. Plant Nurseries

Source: Focus group discussions, May 2000.

Appendix 9, page 1 RURAL POVERTY IN SORSOGON PROVINCE 1. Published data on poverty incidence in the Philippines were available only at the national and regional levels, with the latest data estimated in 1997. Furthermore, the Projects benefit monitoring and evaluation conducted only one social survey (in 1994), which did not include indicators on poverty. To assess the Projects impacts on poverty, a rough estimate of rural poverty was made during the Operations Evaluation Mission (OEM) conducted during 15-31 May 2000 through focus group discussions (FGDs) and household visits with project beneficiaries. The OEM visited 14 out of the 16 municipalities in the Province including 20 project sites, held FGDs in each of the project sites, and visited randomly selected poor families. Due to limited time and information, rural poverty was estimated for only seven villages (see Table A9). Since the methodology used in the estimation was rapid and rough, the estimated results should not be interpreted as an accurate measure of rural poverty in Sorsogon Province. Nevertheless, the consistent views expressed by the beneficiaries interviewed might provide a rough trend of the changes in rural poverty in the project area, as least a trend as perceived by the beneficiaries. 2. The methodology used in the poverty estimation was as follows. Prior to an FGD in a village, former project management unit staff (who were assigned to facilitate the OEMs fieldwork) informed the municipal mayor and village leaders concerned and requested their assistance in organizing a set of project beneficiaries that represented the social groups of the village. To enable active participation of all members in the FGD, participants were organized into homogeneous groups, such as irrigation association (IA) leaders (most of them were nonpoor, including some landlords), IA members (largely tenants and small owners), upland farmers, municipal fisherfolk, and landless laborers. 3. Participants were first asked to introduce themselves so as to determine the sectors they represented and the positions they occupied in their communities or organizations. Then they were informed of the FGD objective. They were asked A question on who they considered poor among their neighbors. Participants were allowed some time to discuss among themselves their definition of poor. 4. To allow for consistent comparison with the national poverty estimation used by the Government, participants agreed to adopt the definition of determining a poor household based on the minimum requirements of basic needs. They were then asked to determine the income level of the poor families in their communities. As they found it difficult to estimate the value to noncash income or in-kind consumption, they were first asked to provide an estimate of the cash income of the households that they considered poor in their communities. The participants also gave their estimate of the average family size of the poor families, and the percentage of landless households in their villages. 5. Their estimates on cash income of the poor ranged from P24,000 ($585) to P50,000 ($1,220) per annum for a family of six. Based on these figures, the per capita income of the poor households would be about P8,500 or below. They were then asked to estimate the percentage of noncash income in the total family income of the poor. The estimates ranged from 15 to 20 percent. Taking into account the noncash income and in-kind consumption, a level of P10,000 per capita income (cash and noncash) was adopted to classify the number of poor families. These poverty lines (P8,500 for cash income and P10,000 including noncash income) were slightly lower than the national level of P10,178 and the regional level of P10,120 in 1997. Since Sorsogon was one of the poorest provinces in the region, the estimate approximated with the conditions elsewhere in the Province.

Appendix 9, page 2 6. The same procedure was followed in all seven project sites where the poverty incidence was estimated. After the participants estimated the poverty incidence in their villages, they were asked to comment whether poverty incidence had been increased or decreased since the project began. Finally, they were asked to provide an estimate of percentage differentials in poverty in their communities between 1990 and 2000. The results are given in Table A9. Table A9: Poverty Estimated in Selected Rural Areas of Sorsogon Province
% of Poor Familiesa (Cash Income Only) % of Landless Families 70 65 70 60 60 80 80 1990 75 70 80 70 75 80 80 2000 65 60 65 60 60 65 60 % of Poor Familiesb (Cash and Noncash Income) 1990 65 60 70 55 65 70 70 2000 50 45 55 40 50 60 55

2000 Name of Village and Municipality No. of Families Bura-buran, Juban Paghaluban, Barcelona Vinisitahan, Donsol Otavi, Bulan Calao, Pto. Diaz Manjumlad, Matnog Buenavista, Irosin
a b

Ave. size of Family 6 5 8 4 5 6 8

250 175 354 454 330 172 225

Proportion of households with an annual per capita cash income equal to or less than P8,500. Proportion of households with a total (cash and noncash) annual per capita income equal to or less than P10,000. Source: Focus group discussion, May 2000.