Report No. 727a-PH

Philippines FILE COPYAppraisal of theMagat River Multipurpose Project: Stage IJune 5, 1975

East Asia and Pacific Projects DepartmentIrrigation and Area Development Division

Not for Public Use

Document of the International Bank for Reconstruction and DevelopmentInternational Development Association

This report was prepared for onfijial use only by the Bank Group. It may notbe published, quoted or cited without Bank Group authorization. The Bank Group doesnot accept responsibility tor the accuracy or completeness of the report.

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CURRENCY EQUIVALENTS

US$1.00 Pesos (P) 6.90P 1.00 = US$0.145

WEIGHTS AND MEASURES - METRIC SYSTEM

1 hectare (ha) 2.47 acres1 kilometer (kIn) 2 = 0.62 miles1 square kilometer (km ) 0.3886 square miles1 meter (m) 2 39.37 inchesi square meter (m ) = 10.76 square feet1 cubic meter (m 3 ) 3 = 35.31 cubic feeti million cubic meters (Mm ) = 810.7 acre feet1 millimeter (mm) = 0.039 inches1 kilogram (kg) = 2.2 pounds1 cavan (paddy) = 50 kg20 cavans = 1 metric ton

INITIALS AND ACRONYMS

ADB - Asian Development BankAMIADP - Angat-Magat Integrated Agricultural Development ProjectDAR - Department of Agrarian ReformMARIS - Magat River Irrigation SystemNIA - National Irrigation AdministrationSIFRIS - Siffu River Irrigation SystemUPRP - Upper Pampanga River ProjectUSBR - United States Bureau of ReclamationWMT - Water Management Technologist

PHILIPPINES

APPRAISAL OF THE

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Table of Contents

Page No.

SUMMARY AND CONCLUSION . . .................. i -

I. INTRODUCTION ....................... 1

II. BACKGROUND ............. ......................... * ........* 1General . 1The Agricultural Sector ....... ................... 2The Critcial Role of Water Development ........... 2

Project Formulation .... *.... 3

III. THE PROJECT AREA ................... ................... 4

Gneneral ..................... ... ......... *............. 4

Climate ....... *............................... 5Topography, Drainage and Soils .................. . 5Land Tenure and Farm Size .6...................... 6

Existing Irrigation Facilities 7..............* 7

Agricultural Production 7....................... 7

Transportation ....... . ... ........................ 8

IV. THE PROJECT ........................ *............... 8Project Works ....... ................... ..... *.. * 9Water Supply, Demand and Quality ................. 10

Status of Engineering ........... ..................... 11Engineering Studies: Stage II ................... 12

Water Management Training ........................ 13

Technical Assistance to NIA ...................... 13

Cost Estimates . ........................ ........ 14Financing ................ ...... ...... ........ *. 15

Procurement ... o.......... .... o*.... o................ 15Disbursements ......... .......... .-.. .... 16

Accounts and Audit .... ......... ...... . 16Environmental Effects .......... ... ....... 16

This report is based on the findings of an appraisal mission composed

of Messrs. E.G. Giglioli, M.G. Saddington (Bank), S.J. Baker and D.G. Knott

(Consultants).

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Page No.

V. ORGANIZATION AND MANAGEMENT *.......... ....... 17Project Management ....... ......................... 17Supporting Agricultural Services ................. 18Recovery of Cost ,...... ....0 ... .... O... 19

VI. PRODUCTION, MARKET PROSPECTS, PRICES AND FARM INCOMES 21Production ............................................ 21Market Prospects ... ...-.. .... .. .... ...... ...... 21Prices ........................................... 22Farm Incomes .. .... .. ......... ........ 22

VII. BENEFITS AND JUSTIFICATION ............ ................ 23

VIII. AGREEMENTS REACHED AND RECOMMENDATION ................ 25

ANNr;EXES

1. Cagayan Basin Development

2. Climatological Data3. Land Tenure and Reform4. Project Works5. Water Supply, Demand and Quality6. Engineering Studies: Stage II7. Technical Assistance to NIA8. Cost Estimates9. Equipment List10. Estimated Schedule of Expenditures and Disbursements11. Organization and Management12. Supporting Agricultural Services13. Present and Projected Cropping Patterns and Production14. Market Prospects and Prices15. Crop and Farm Budgets16. Farm Labor Analysis17. Economic Analysis

CHARTS

Implementation Schedule No. 9531Critical Work Action Schedule Leading to Award of Contract for

Magat Dam No. 9684NIA Organization for Special Projects No. 9533(R)Proposed Organization for Project Construction No. 9534Proposed Organization for Operation and Maintenance No. 9535Proposed Cropping Calendar No. 9536

MAP

Magat River Multipurpose Project No. 11463R

PHILIPPINES

APPRAISAL OF THE MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

SUMMARY AND CONCLUSION

i. The Government of the Philippines has requested Bank assistance

to carry out Stage I of the Magat River Multipurpose Project, which is

located in the Cagayan Valley of Northern Luzon. Stage I of the project

consists of the rehabilitation and upgrading of two existing national

and several communal irrigation systems now serving a total of 52,000 ha

and the expansion of these systems by construction of new works to serve

an additional 23,000 ha and permit a cropping intensity of 140% on the total

75,000 ha. The Asian Development Bank is assisting with the rehabilitation

of 40,000 ha of Stage I under the Angat-Magat Integrated Agricultural Develop-

ment Project. This is referred to as Stage IA. The part of Stage I proposed

for Bank assistance, Stage IB, includes works for the rehabilitation of 12,000

ha and construction of new facilities on 23,000 ha. Stage II of the project

envisages the construction on the Magat river of a storage dam and power

plant with an installed capacity of 300 MW, the development of irrigation

facilities on an additional 29,000 ha and an increase in cropping intensity

to 200% on the total project area of 104,000 ha. Provision is also made

under the proposed Bank loan for engineering studies which would evaluate

the economic feasibility of Stage II of the project and, if justified,prepare the final designs, specifications and bid documents for construction

of the dam and appurtenant works. Stage I also includes a training program

for water management staff in the project area and technical assistance to

the National Irrigation Administration (NIA) in the fields of construction

management and irrigation systems operation. A total of about 668 man-months

of consultant services and technical assistance would be required under the

project.

ii. A major Government objective in the agricultural sector is to

achieve self-sufficiency in basic foods, especially rice and corn. The

deficit in rice, the main staple food crop, has been a persistent problem

for the Philippines, and annual rice imports have averaged around 300,000

tons in recent years. According to the Bank's Agriculture Sector Survey,

an annual total of 50,000 ha of newly constructed or rehabilitated irri-

gation development on rice lands would have to be carried out over the

remainder of the decade to allow the country to achieve food grain self-

sufficiency. Improved water control is a prerequisite to obtaining optimum

results from the new high yielding rice varieties. The proposed project

would be the fourth Bank-assisted project aimed at improving irrigation

for rice cropping on the island of Luzon. The first was the Upper Pampanga

River Project (Loan 637-PH), the second the Aurora-Penaranda Irrigation

Project (Loan/Credit 984/472-PH) and the third the Tarlac Irrigation Systems

Improvement Project (Loan 1080-PH). All of these are in the Central Luzon

basin, while the proposed project would be the first one in the Cagayan

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Valley of Northern Luzon. The Valley has consistently exported rice toother regions of the Philippines, and has large resources of water andsuitable land which could be developed to increase rice production.

iii. Total cost of Stage IB, Stage II engineering studies, technicalassistance to NIA and training program, all of which would be financed underthe proposed Bank loan, is estimated at P 579.6 million (US$84.0 million) ofwhich US$29.0 million, or approximately 35%, would be in foreign exchange.The Bank would finance the foreign exchange component as well as US$13.0million of local currency requirements. Civil works costing US$6.1 millionand equipment costing US$4.5 million would be put to international competitivebidding. The remaining civil works would not be suitable for internationalcompetitive bidding because of their nature and would be carried out bylocally advertised contract (US$22.7 million) or by force account (US$15.1million). The Government's executing agency, the NIA, would employ consultantsto assist with the Stage II studies, the training program and technical assist-ance in construction management and irrigation systems operation. The projectwould take five years to execute.

iv. The Government of the Philippines would be the borrower and NIAwould be the executing agency for the project, All elements of the projectwould be implemented by NIA's newly established Special Projects Organization.This body is well staffed with competent personnel and with the employment ofconsultants would be able to implement the project successfully. An Agricul-tural Development Coordinating Council (ADCC) would be established in theproject area to ensure coordination of the Government agencies providingagricultural supporting services to the farmers.

v. At full development of Stage I of the project, nine years aftercommencement of work, annual paddy production from the project area is ex-pected to reach 422,000 tons compared with a current level of production of189,000 tons. The increased production would make a contribution to thenational campaign for self-sufficiency by providing enough rice to feedabout one and a half million people per year.

vi. Under the Government's program of agrarian reform, sharecroppinghas been abolished and title to land in holdings over 7 ha is now beingtransferred to the cultivators. When the transfer is completed, tentativelyby the end of 1977, about 75% of the land in the project area will be farmedby owner operators and the rest by leasehold tenants of small landlords.Some 24,000 farm families cultivate the project area, working an averageunit of 3.1 ha. The project would increase the annual per capita income onan average farm size from about US$105 at present to US$220 at full agricul-tural development in 1984. These levels of income would still be low incomparison with the national average which is projected to rise to US$315by 1984, but would lead to a substantial narrowing of the income gap betweenthe project area and the rest of the country.

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vii. The project would require a tighter cropping timetable to allowfor irrigation over a larger area and an increase in dry season cropping,leading to a small rise in farm labor employment opportunities equivalentto about 4,000 additional full time jobs. The economic rate of return ofthe project is expected to be about 18%. The rate of return is sensitiveto increases in costs and delays in benefits, but even if costs should in-crease by 20% and benefits be delayed by two years, the rate of return wouldstill be 12%.

viii. The proposed project is suitable for a Bank Loan of US$42.0 millionfor a period of 25 years, including a seven-year grace period. The borrowerwould be the Republic of the Philippines.

PHILIPPINES

APPRAISAL OF THE MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

I. INTRODUCTION

1.01 The Government of the Philippines has requested assistance fromthe Asian Development Bank (ADB) and IBRD in financing the first stageof the Magat River Multipurpose Project in Northern Luzon. Stage I ofthe project would provide a dependable water supply to irrigate a totalof 75,000 ha of rice in the wet season and 29,000 ha in the dry season. Inmid-1973 the ADB extended a US$6.6 million loan to assist in the rehabilita-tion of 40,000 ha of the existing irrigation system under the provisions ofthe Angat-Magat Integrated Agricultural Development Project (AMIADP). Thepart of the project proposed for Bank assistance would supply irrigation to35,000 ha and set the stage for implementing a second phase, consisting ofthe development of storage for year-round irrigation and power generation.

1.02 The National Irrigation Administration (NIA) prepared the feasibil-ity study for the project with the assistance of the U.S. Bureau of Reclama-tion (USBR). Mr. G. Post (consultant) reviewed the feasibility findings onthe proposed Magat dam in September 1974. This report is based on thefindings of an appraisal mission which visited the Philippines in November/December 1974, composed of Messrs. E.G. Giglioli, M.G. Saddington (Bank),S.J. Baker and D.G. Knott (Consultants).

II. BACKGROUND

General2

2.01 The Philippines covers some 297,000 km scattered over more than7,000 islands between the Pacific Ocean and the China Sea. The 45 largestislands account for 98% of the area. The population is around 40 million(1973), growing at a rate of 3% annually. Real GNP grew at 5% to 6% a yearduring the last decade and by 10% in 1973 and an estimated 6% in 1974 due tobooming export earnings, strong recovery in agricultural and industrial pro-duction for the domestic market and an improved investment climate. Majoreconomic problems are inflation, unequal income distribution and unemployment,particularly in rural areas. Per capita GNP in 1972 was about US$220 1/.

2.02 Out of a total land area of some 30 million ha, more than halfis in forests and about one-third under cultivation or in plantations. About2.0 to 2.5 million ha of fairly level land is still available for growingcrops, though some 1.0 million ha of this is cogon grassland which would

1/ World Bank Atlas, 1974.

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be hard to reclaim. Bringing this additional land under cultivation wouldbe insufficient by itself to meet increasing food needs or to improve ruralincomes significantly. These goals call for increasing production from cur-rently cultivated areas through yield improvements and increased croppingintensity where water is available.

The Agricultural Sector

2.03 Agriculture accounts for about one-third of net domestic product,one-half of total employment and 70% of commodity export earnings. Duringthe 1960s the rate of growth of agricultural output accelerated graduallyand averaged 4.7% per year for the 1965-70 period, stimulated by the spreadof improved rice varieties. Employment in agriculture, on the other hand,leveled off toward the end of the decade. Most of the increase in the laborforce between 1965 and 1970 was in non-agricultural employment, and the un-employment rate in rural areas has remained high.

2.04 With the growth of agricultural output and little change inemployment, productivity per worker in agriculture increased between 1965and 1970, while non-agricultural labor productivity remained much the same.The result has been to narrow the gap in incomes between workers in agricul-ture and in other sectors, although agricultural incomes are still substan-tially lower. Farmers using improved technology, such as the new ricevarieties, have shared in the higher incomes, but those continuing in tra-ditional ways have been largely unaffected.

2.05 There is considerable pressure of people on land in the Philippines,where the population density is 131 people/km2 compared with the Asian aver-age of 86. Lowland areas best suited for rice have been fully occupied forover a decade. Migration is heavy from the overcrowded regions of CentralLuzon and the Visayas to the Cagayan Valley in northeastern Luzon andMindanao in the south.

2.06 Agricultural sector performance will be crucial in determiningwhether the drive towards a more rapid but more equitable income expansionsucceeds. The major goals are self-sufficiency in cereals, particularlyrice and corn; expansion of agricultural exports; intensification of agrarianreform; better conservation of natural resources; and strengthening of insti-tutional support. Self-sufficiency in cereals is important not only tostrengthen the balance of payments, but also to raise incomes for much of therural population.

The Critical Role of Water Development

2.07 The Philippines cannot reach self-sufficiency in rice withoutsubstantial investment in irrigation expansion and improvement. Performanceof irrigation systems in the country falls far short of their potential.

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The Sector Survey 1/ estimates that, out of a total of 960,000 ha which couldbe served by existing irrigation systems, only 630,000 ha are served in therainy season and 254,000 ha in the dry season. Almost all of the irrigatedarea is devoted to rice. The NIA's gravity systems are the main component.In addition, NIA has constructed or rehabilitated a substantial part of thesmall privately operated communal systems, averaging 250-300 ha. The Irri-gation Services Unit, now under NIA's administrative supervision, is respons-ible for pump irrigation schemes. The 104 NIA gravity systems varying insize from 130 ha to 83,000 ha, are usually run-of-the-river schemes withinsufficient control structures in the canals, inadequate drainage and littleprovision for access. Even when the systems are new, water distribution isuneven during the wet season and limited during the dry season. Maintenancehas been minimal due to shortages of staff and funds and the lack of accessroads for maintenance machinery. A vicious circle has developed by whichlack of maintenance discourages farmers from paying operation and maintenancecharges, which in turn precludes further maintenance.

2.08 This unsatisfactory situation began to change in the late 1960s.The NIA was reorganized, more advanced irrigation designs were introducedand much higher levels of water management aimed at. Simultaneously theneed for intensified agricultural supporting services on irrigation projectswas realized. The Bank-assisted Upper Pampanga River Irrigation Projecc(UPRP) and the Angat-Magat Integrated Agricultural Development Project(AMIADP), assisted by the Asian Development Bank (ADB), typify the newapproach. The pattern of rehabilitation, new construction and operationexemplified by these projects is essential for large-scale rice production.Indeed, to meet domestic rice demand in the 1970s, a program of rehabilita-tion and new construction in the rice lands of 50,000 ha per year will beneeded for the remainder of the decade. The proposed project would thusbe entirely compatible with Government objectives for water resourcesdevelopment.

Project Formulation

2.09 The 1973 Magat River Project feasibility report, prepared by NIAwith USBR assistance, proposed a storage dam on the river to provide year-round irrigation to 104,000 ha and installation of a hydroelectric plantwith a capacity of 300 MW. The irrigation component consisted of expansionand upgrading of the existing Magat (MARIS) and Siffu River IrrigationSystems (SIFRIS) operated by NIA. In 1973 NIA, with ADB assistance,initiated work on the Angat-Magat Project (AMIADP), which included pro-visions for the rehabilitation and expansion of the existing MARIS to atotal of 40,000 ha.

1/ IBRD Agricultural Sector Survey, Philippines, May 2, 1973 (Report No.39a-PH).

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2.10 In view of the physical size, large estimated cost and longconstruction period for the Magat project, NIA proposes a 10-year implement-ation schedule (1976-1985) based on the following two stages:

(a) Stage I would consist of the rehabilitation of thepresent systems and construction of new facilitiesto a total of 75,000 ha that could be served byrun-of-the-river diversion in the wet season. Thestage would take five years (1976-1980) and would besubdivided into a Stage IA covering the 40,000 haof MARIS being rehabilitated and upgraded with ADBassistance, and a Stage IB consisting of 35,000 haof rehabilitation and expansion proposed for Bankassistance. The subdivision of Stage I is forreasons of administrative convenience, becauseof the different sources of financial assistance;there are no technical or economic grounds for thesubdivision. During the first three years of Stage Ifurther engineering studies of the storage dam wouldbe carried out to determine its feasibility and, ifwarranted, to prepare final designs, leading to theissue of bid documents.

(b) Stage II would take seven years (1979-1985) and wouldbe divided into two substages. Stage IIA wouldinclude construction of additional irrigation facil-ities to increase the command area to 104,000 ha andconstruction of the storage dam, including all civilworks associated with the power component. Stage IIBwould consist of the provision and installation ofgenerating facilities, power lines and substations.

Details on the development of irrigation in Cagayan Valley, the role of theproject and its phasing are given in Annex 1.

III. THE PROJECT AREA

General

3.01 The project is located in Isabela province in the Cagayan Valleyof Northern Luzon, which accounts for about 11% of the area planted annuallyto rice and 13% of total national production (Map No. 11463). About 30% ofthe province's rice production is exported to Manila and Southern Luzon.The mean rice yield in the region is about 10% above the national average.This is due to the existence of irrigation systems in the area, and theconsequent rapid adoption of high yielding rice varieties. Irrigation is

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concentrated in Isabela province which accounts for about 40% of regionalrice area and some 45% of the production. In the province improved ricevarieties are grown on about 60% of the area and give approximately 75% ofthe production.

3.02 Stage I of the proposed project lies entirely in Isabela province.Even with full development of Stage II, Isabela province would remain theprincipal beneficiary as the irrigated area would barely touch Quirinoprovince, while just under half of the area flooded by the dam would be inNueva Vizcaya province. There are a number of small towns with populationsbetween 5,000 and 10,000 people scattered throughout the area. The largertowns, including the provincial capital of Ilagan which lies just outsidethe project area, provide banking, storage and processing facilities as wellas supplies of inputs to the surrounding agricultural area. The projectarea is connected by national highway to Central Luzon and Manila in thesouth and the port of Aparri on the Babuyan Channel to the north.

Climate

3.03 The climate in the project area is tropical and monsoonal. Warmtemperatures throughout the year allow a twelve-month growing season withirrigation. About 75% of the average annual rainfall of 1,900 mm falls inthe six-month period of July through December, with the heaviest rain inNovember. The Cagayan Valley and Ilocos regions of Northern Luzon showthe highest frequency of passing typhoon centers in the Philippines. Overa 23-year period between 1948 and 1970 the area was hit by an annual averageof 3.2 typhoons, with the highest frequency between July and November. Thesestorms may cause flooding and damage to crops and engineering works. Therainfall, together with river flows in the wet season, is generally adequatefor a single rice crop. Dry season cropping, however, entails considerablymore risk and irrigation is essential for an assured crop. Further cllmaticdetails are presented in Annex 2.

Topography, Drainage and Soils

3.04 The project area is located on alluvial terraces in the floodplains of the Cagayan and Magat rivers and tributary streams. It is boundedon the north by the Mallig river, on the east by the Cagayan river and onthe south and west by the foothills of the Caraballo mountains and theCordillera Central respectively. The slope of the land is from west tonortheast. In general the land is level, although some of the older terracesalong the western edge of the project area have eroded significantly andshow rolling topography. Drainage problems exist in the project area becauseof high rainfall intensities and flat relief. The problem is more seriousIn the existing irrigated areas as the surface drainage facilities cannotdeal with the additional water provided by irrigation. Natural drainagehas also been restricted by constructing highways and roads with inadequateculverts. Low areas along the main rivers are subject to short periods ofinundation from backwaters from overflowing streams. Water velocities arelow and cause little damage to structures or land, but there is some croploss, depending on the stage of growth at the time of flooding.

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3.05 Soils in the project area are predominantly dark grey or brown

clays or clay loams, with angular blocky structures, medium to fine textures,

slightly acidic reactions and slow internal drainage. They are generally

low in organic matter and deficient in available phosphorus. All soilshave good cation holding capacity and can retain appreciable amounts of

nutrients for plant growth. The soils are well suited for rice, which has

been grown in the project area for many years without problems.

Land Tenure and Farm Size

3.06 Since 1972 the Government has pursued a program of agrarian reform

aimed at the transfer of land ownership to tenant farmers on rice and corn

lands. Presidential Decree No. 27 (PD 27), the basic legislation of the new

program, provides for the transfer to the tenant, whether sharecropper or

leaseholder, of the land he tills up to 3 ha in an irrigated area and 5 ha

in a rainfed area. According to PD 27, the landlord may retain up to 7 haif he tills the land himself. Since there are some 2 million rice and corn

farmers on about 4 million ha, of which less than 1 million ha are irrigated,

there is little prospect of achieving the 5 ha rainfed and 3 ha irrigated

family farms nationwide. Furthermore, some 85% of the landlords have holdings

of less than 7 ha. The Government does not want to antagonize small landowners

and is looking for an equitable solution. The Department of Agrarian Reform

(DAR) plans to complete the transfer to tenants of all land in holdings over

24 ha by mid-1975. In November 1974 the Government decided to proceed with

the transfer of land in holdings between 24 and 7 ha.

3.07 DAR surveys show that some 24,000 farm families, averaging six

members for a total of about 144,000 people, live in the project area. The

average farm unit is 3.1 ha with about 80% of the farms, covering 66% of thearea, falling between 1 and 5 ha. The farm size distribution is as follows:

Farm Size Farm Holdings Cultivated Area

(ha) -- X ____…

Less than 1 4 11 - 3 51 303 - 5 32 365 - 10 10 21

More than 10 3 12

100 100

According to DAR data the 75,000 ha in the project area were owned by some

16,600 people, 86% of whom held less than 7 ha. However this group accountedfor only 56% of the land. Some 14% of the owners accounted for 33,000 ha or

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44% of the area. There are about 14,000 tenant farmers on 40,000 ha in the

project area. The transfer of landlord holdings larger than 7 ha will involvesome 7,000 tenants on 20,000 ha. Including about 10,000 present owner-operators

on 35,000 ha, when the land transfer is complete some 17,000 owner-operators

or 70 percent of the farmers in the project area will cultivate 55,000 ha or

75 percent of the land. The remaining 7,000 tenant farmers on holdings under

7 ha would no longer be sharecroppers but would have written lease agreementsproviding for payment of fixed rents (Annex 3).

Existing Irrigation Facilities

3.08 About 50,000 ha of land in the project area fall within the

existing Magat River Irrigation System (MARIS) and the Siffu River IrrigationSystem (SIFRIS) operated by NIA. The two national systems were completedin the 1960s. Although designed to serve an area of 50,000 ha, the two

systems only irrigate 40,000 ha because of a lack of terminal facilities.Irrigation in the dry season is limited to some 19,000 ha, partly because of

lower flows in the Magat and Siffu rivers and partly because of inadequate

irrigation facilities. The systems suffer from poor distribution networks,

severe drainage deficiencies and lack of access roads. In addition to thetwo national systems some 2,000 ha are irrigated by privately owned pumpsand communal irrigation systems built by groups of farmers with or without

financial assistance from the Government.

Agricultural Production

3.09 Rice grown by transplanting is by far the most important cropin the area. Tobacco and corn are grown on a small scale on the coarsertextured and better draining soils immediately adjacent to the river banks.On about 90% of the project area soil and drainage conditions are unsuitablefor crops other than rice. The great majority of farmers in the irrigatedareas uses improved rice varieties, while in the rainfed areas farmers rely

wholly on the lower yielding, but hardier local varieties. In the irrigatedareas the average paddy yield is 2.2 ton/ha in the wet season and 2.3 ton/hain the dry season. The yield of rainfed paddy averages 1.6 ton/ha. Thelow yields are due to unsatisfactory water management, difficulties ingetting the crop out of the fields because of lack of roads, and poor farming

practices such as insufficient use of inputs and untimeliness of operations.

3.10 In rainfed areas most farmers rely entirely on animal power for

land preparation, while in the irrigated areas machinery is used for landpreparation on about 50% of the wet season crop and 70% of the dry seasoncrop. Mechanical cultivation is mostly done by four wheel tractors androtary tillers operated by contractors. Threshing of the rainfed crop ispractically wholly manual while mechanical threshers are used on about60% of the irrigated wet season crop and on 70% of the dry season crop.

Most of the equipment is operated by contractors.

Transportation

3.11 The project area is traversed by National Highway 5 linking itwith the port of Aparri on the Babuyan channel to the north and to CentralLuzon and Manila to the south. There is a limited network of largelyunpaved provincial and municipal roads serving the area. The provincialgovernment is engaged in a program of replacing existing wooden bridgeswith permanent concrete structures. There is no railroad service in thearea. UJnder the project, feeder roads would be rehabilitated and new roadsconstructed to handle the increased production.

IV. THE PROJECT

4.01 The NIA completed construction of the first stage of 'XARIS in1957 and extended the system in 1966 to serve a total of 40,500 ha. The10,000 ha SIFRIS was built in 1960. The NIA is currently rehabilitatingand improving 39,610 ha of the MARIS service area with the assistance ofADB under the Angat-Magat Integrated Agricultural Development Project (AMIADP)and is extending irrigation to an additional 390 ha. This constitutes StageIA of the Magat Project.

4.02 The project proposed for Bank financing would upgrade the remaining890 ha of MARIS, 10,000 ha of SIFRIS and 1,300 ha of small communal irrig-ation systems in the MARIS service area to standards adopted in the TarlacIrrigation Systems Improvement Project (Loan 1080-PH) and would extend theMARIS and SIFRIS to include an additional 22,810 ha of currently rainfedrice land. As Stage IB of the Magat Project, it would include:

(a) Modification of the existing MARIS diversion dam;

(b) Rehabilitation of two existing NIA irrigation and drainagesystems and several local communal systems serving a totalarea of about 12,190 ha;

(c) Extension of the NIA systems to serve an additional area ofabout 22,810 ha;

(d). Upgrading or construction of a total of about 830 km ofproject roads;

(e) Construction of an air strip, access roads and a bridgeacross the Magat river near the MARIS diversion dam; and

(f) Procurement of vehicles and equipment.

The project would also provide for detailed engineering studies of thelagat dam and reservoir, a water management training program and technicalassistance to NIA in systems operation and construction management. Con-sultants would be engaged to assist the NIA with the engineering studiesand the water management training program. A detailed description of theproject works is given in Annex 4.

Project Works

4.03 The MARIS diversion dam would be raised 5 m to command a largerservice area. The existing outlet works on the right abutment of thedam would be enlarged and new outlet works would be constructed on the leftabutment. The modified diversion dam would also provide daily regulationof power releases in Stage II of the project. Access roads and a bridgeover the Magat river below the diversion dam would be built to facilitateconstruction and operation of the MARIS extension. An airstrip would beconstructed near the diversion dam to allow quick access to the projectarea from Manila.

4.04 The remainder of the MARIS not included in the ANIADP, the SIFRISand 1,300 ha of communal irrigation systems would be rehabilitated andupgraded by repairing existing canals and structures and providing additionalcontrol structures and turnouts to manage water deliveries more effectively.New irrigation works would be constructed to serve about 22,810 ha of rainfedlands adjacent to the existing service areas. Adequate control structuresand turnouts would be provided on the canal systems for efficient watercontrol and delivery.

4.05 The project would be brought to the same standards of on-farmwater distribution and drainage as the Tarlac Irrigation Systems ImprovementProject (Annex 4). An assurance was obtained that NIA would take allnecessary measures to ensure complete compatibility of standards and facil-ities between Stages IA and IB of the project. Rice has been grown in theproject area for many years and the land is reasonably level and well laidout with little fragmentation of land holdings. Therefore, no land level-ing, boundary realignment or land consolidation would be provided. Thecanal systems would have a turnout for each 10 ha from which farm ditchesbuilt as part of the project would provide direct delivery to about 80% ofall holdings. Each 10 ha block would also be served by a collector drain.All canals would be unlined. Small buildings would be provided for WaterManagement Technologists operating 500 ha of irrigated land apiece(para 5.04) and rice drying floors of 400 m2 would be provided near oradjacent to the buildings. Some existing access roads would be improved and,where needed, new ones would be built. Roads for operation and maintenancewould be built along the major canals and laterals.

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Water Supply, Demand and Quality

4.06 The MARIS and SIFRIS get their water supplies from separate riversources using separate diversion facilities and conveyance systems. Inaddition to serving 8,400 ha of the MARIS extension area, the North MainCanal would provide a link from the MARIS to the SIFRIS diversion dam,making it possible to provide surplus water from the MARIS to SIFRIS intimes of need. There is no regulatory storage on either system at present,and less than 40% of the area would have water during the dry season. Afull water supply for two crops a year could be provided under Stage II ofthe project (para 2.10).

4.07 The MARIS gets its water supply from the Magat river. Streamflow records are available for a 17-year period, and the record wasextended an additional 7 years using rainfall and by correlating with anupstream river gauge. Stream flow records of the Siffu river at a sitebelow the diversion dam which serves the SIFRIS are available for a 24-yearperiod. The runoff of the river at the diversion dam was estimated fromthe stream flow record by the drainage area proportion method. The dischargerecords of the two rivers are long enough to cover known critical watersupply periods and are considered to be reliable.

4.08 Water requirements for the project were based on two rice cropsper year. Taking into account the higher farm irrigation efficienciesexpected after project development, anticipated conveyance and operationallosses and effective rainfall, annual diversion requirements are estimatedto total 2.41 m, of which 1.64 m would be required in the dry season. Theproposed cropping calendar would maximize the use of rainfall for both wetand dry season crops.

4.09 The size of the project area was determined from simulatedoperation studies using the 20 year period of adjusted discharge recordsat each diversion and the estimated seasonal water requirements for rice.The irrigable areas selected for development in Stage I of the project andthe currently irrigated areas are as follows:

Stage I Service AreaStage IA Stage IBMARIS MARIS SIFRIS Total

Selected Irrigable Area (ha)Wet Season 40,000 23,000 12,000 75,000Dry Season 25,000 - 4,000 29,000

Currently Irrigated Area (ha)Wet Season 32,000 - 8,350 40,350Dry Season 16,000 - 3,400 19,400

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There are no water rights on the Magat and Siffu rivers that would interferewith either Stage I or II of the project. Water abstraction rights upstreamof the diversion dams total less than one m3/sec. The principal water rightsin the two rivers are already vested in the MARIS and SIFRIS. Assuranceswere obtained that the necessary water rights would be granted to NIA and noother water rights which could adversely affect the project's water supplywould be granted, except for domestic use.

4.10 Tests of water samples from the Moagat and Siffu rivers show goodwater quality with total dissolved solids under 200 ppm. The waters are oflow salinity, slightly alkaline and are free of toxic elements. Water inthe Magat river shows an excessively high level of turbidity. However, thisdoes not appear to have had any adverse effects on the soils or crops duringthe 20-odd years of use.

Status of Engineering

4.11 Project planning studies, designs and estimates of the irrigationand drainage systems and associated works were carried out by NIA withassistance from the USBR. Surveys were made of the existing main canalsand larger laterals, and cross sections were taken at 20 to 100 m intervalsto determine excavation quantities. Rehabilitation costs of the remainingcanals and laterals and the drainage system were based on unit cost estimatesobtained for a sample area within MARIS, for which detailed mapping anddesigns were prepared. Surveys were also made of the principal canals inextension areas to determine construction quantities. Existing 1:50,000scale maps were used to determine lateral locations and costs were basedon unit costs for a sample area within the South Low Canal service area.Farm ditch and drain requirements within the rotational areas were alsodetermined by the sample area method. Canal structure requirements in therehabilitation areas were determined in the field by NIA inspectors andcosts were estimated for repair, replacement or additions. Structurerequirements in the extension areas were determined according to basicirrigation design practices. Operation and maintenance roads were based oncanal capacity and needs within the service area, and were checked in thefield to ensure that adequate access to project works would be provided.Needed work on river diversion structures was determined from field inspectionof each structure. Sufficient investigations have been made to assure thatsuitable materials are available for construction of canal embankments andmaintenance roadways.

4.12 Enlarged rectified aerial photographs of the project service areaat a scale of 1:10,000 were completed by contract in 1971 for a total areaof 93,000 ha. These photographs were used in preparing the base maps forland classification use. Detailed topograph c mapping of the Stage IA areawas initiated in November 1973 and is scheduled for completion in June 1975.NIA is extending the mapping to cover the Stage IB area of the project. Finaldesigns and estimates of the irrigation and drainage systems cannot be initiateduntil adequate topographic mapping is available. Topography of tne tARIS

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diversion dam was completed in 1971 at a scale of 1:2,000 with a contourinterval of 2 m.

4.13 Work on the irrigation service areas would begin in 1977, althoughroad construction and improvement work would start in mid-1976. All projectworks are expected to be completed by mid-1980 (Chart No. 9531). Thefirst phase of the Stage II engineering studies and tests would be finishedby January 1977. The second phase covering the final designs, estimatesand preparation of tender documents for the Magat dam and power plant wouldstart in June 1977 and be completed by mid-1978 to allow contract award forconstruction of Magat dam by December 1978 (Chart No. 9684). Water managementtraining would continue through 1980.

Engineering Studies: Stage II

4.14 According to the 1973 NIA/USBR study (para 2.09), Stage II of theproject calls for the construction on the Magat river of a storage dam andpower station about 5.5 km upstream of the MARIS diversion works. The damwould be about 1.74 km long at a crest elevation of 200 m, with a centralconcrete gravity spillway section about 790 m long, with a maximum heightabove foundation of some 115 m, which would be flanked on both sides byrockfill embankments. The reservoir would flood about 4,500 ha of land ofwhich only 600 ha are cropland. A small hamlet of 500 people would have tobe relocated. There would also be a smaller earth and rockfill dam acrossthe Baligatan creek. While preliminary field work has shown that foundationconditions at the site are capable of supporting a dam of the proposedmagnitude, additional, more thorough investigations of the dam and reservoirgeology are needed. Engineering studies are also required to develop moredetailed design and cost data upon which to base a final economic evaluation.Consultants would be engaged to assist NIA with the studies (para 5.05).

4.15 The first phase of the proposed engineering studies would beconcerned with collection of additional geological information on the damsite and reservoir, further hydrological investigations of the river regimeand a review of reservoir sizing to maximize net project benefits. Thecommand area to be served by the dam would be determined, together with thefeasibility of a combined gravity and pump irrigation canal to serve about7,000 ha east of the Siffu South Main Canal. The information gathered wouldallow an assessment of the economic feasibility of constructing the dam andpower station. The second phase of the engineering studies, which would dependon the outcome of the first phase, would consist of the preparation of finaldesigns, cost estimates and tender documents for construction of the damand appurtenant structures. Preliminary estimates indicate that about 136man-months of consultant time would be required for phase one and 448 man-months for phase two. Assurances were obtained that the results of theevaluation phase of the studies would be subject to Bank review, and thatthe second phase would be implemented only if the Government and the Bankagree that the evaluation justifies proceeding with the final designsfor Stage II.

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4.16 The evaluation phase of the studies would be completed by January1977 and the detailed engineering phase by mid-1978. This timetable wouldpermit the contractor to start preliminary work on the dam by mid-1979.The 1973 feasibility study estimated that about 550,000 tons of cement wouldbe required for construction of the Magat dam. NIA, in association withother interested agerncies of the Government, is currently studying the alter-natives of transporting the cement from existing Central Luzon sources andstoring it in silos on the site or developing a new cement factory in CagayanValley. The results of the study, including costs of the various alter-natives, timetables and proposed methods of implementation, would becompleted concurrently with the first phase of the engineering studies(January 1977). The Special Projects Organization of NIA would be primarilyresponsible for the engineering studies with the assistance of consultants.There would be close coordination with the National Power Corporation (NPC)on the power aspects of the studies. Further details of the proposed StageII engineering studies are provided in Annex 6.

Water Management Training

4.17 Irrigation efficiencies on NIA's gravity systems are low due tolack of terminal facilities, poor maintenance and inadequate staff. NIAhas recognized the need for more and better water management staff and isputting a Water Management Technologist (WMT) in charge of every 500 ha ofirrigated land. The newly recruited staff is not well versed in watermanagement, crop production aspects of irrigation or in methods of communi-cation with farmers. To remedy the situation in the Bank-assisted CentralLuzon projects, a water management training program is being establishedunder the Tarlac project (Loan 1080-PH) to turn out about 300 WMTs in fiveyears. A similar training program is proposed for the Magat project. About150 WMTs would be required for Stage I of the project.

4.18 The training program would be based on pilot water managementunits of 500 ha which would be established in each of the project's threeoperational districts (para 5.04). Theoretical training would be reinforcedby putting every trainee through a range of field situations on the pilotunits where he could apply his new knowledge. The training staff would bedrawn mostly from regular NIA personnel with extensive technical knowledgeand field experience. Provision would be made for consultant assistance asrequired. The training facilities centered on the pilot units would continueto provide refresher training after the initial five years and would becomethe regional center for training water management staff.for Northern Luzon,which has different climatic and growing seasons from Central Luzon.

Technical Assistance to NIA

4.19 The newly created Special Projects Organization of NIA is currentlyresponsible for carrying out the rehabilitation and extension of irrigationfacilities on 234,000 ha of projects being assisted by either the ADB or the

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Bark Group. If the irrigation component of the recently financed RuralDevelopment Project in 'Mindoro (Loan 1102-PH) and the present project areincluded, the area would total nearly 300,000 ha. The Organization will alsobe responsible for the eventual operation of all these projects. While NIAhas developed a cadre of engineers with experience in building sizable proj-ects, the accelerated pace of irrigation development and the expansion ofactivities to areas outside of Central Luzon are expected to put a substan-tial strain on NIA's construction management and planning capabilities. NIAhas taken steps through the appointment of WMTs and water management trainingprograms to improve water use efficiency at field level, but there is alack of expertise in systems operation and maintenance, without which thenewly built systems will not give the results expected of them.

4.20 The proposed technical assistance program would provide the servicesof a construction management engineer and a systems operation and maintenanceengineer to the Special Projects Organization for a period of three years.The construction management engineer would provide guidance to NIA staff inscheduling construction activities, setting up monitoring procedures anddeveloping future construction programs. The systems operation engineerwould assist NIA staff in preparation of water delivery schedules and intheir implementation. Both engineers would assist in on-the-job trainingof NIA personnel. Further details are provided in Annex 7.

Cost Estimates

4.21 Total project costs of Stage IB and Stage II engineering studiesare estimated at US$84.0 million, of which US$29.0 million or 35% is foreignexchange. Project costs are based on quantity estimates from feasibilitydesigns and unit prices prevailing in the Central Luzon projects in mid-1975,which the Government team provided during negotiations. Unit prices forequipment, materials and supplies are based on recent quotations received byNIA. NIA's costs for design and construction supervision are included underengineering, while consultants' fees and specialist services are included inthe cost estimates for the engineering studies, the water management trainingand the technical assistance. A physical contingency factor based on thedegree of investigations completed to date was applied. It amounts to 20%for the irrigation and drainage system, 15% for the Stage II engineeringstudies and 10% for the water management training program. Costs due toexpected price increases amount to about 28% of total project costs andassume the following annual inflation rates:

Annual Inflation Rate (%)1975 1976 1977-79 1980

Civil Works 16 14 12 10Equipment & Services 12 10 8 7

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4.22 Details of the project costs are presented in Annex 8 and aresummarized below:

ForeignLocal Foreign Total Local Foreign Total Exchange--- Pesos Million---- ----US$ Million------ ---%----

Irrigation System 213.7 89.7 303.4 30.9 13.0 43.9 30

Operation & MaintenanceEquipment 0.7 10.3 11.0 0.1 1.5 1.6 94

Engineering StudiesStage II 13.4 23.7 37.1 2.0 3.4 5.4 63

Water Management Training 1.3 1.9 3.2 0.2 0.3 0.5 60

Technical Assistance 0.6 2.2 2.8 0.1 0.3 0.4 75

Base Cost Estimate 229.7 127.8 357.5 33.3 18.5 51.8 36

Physical Contingencies 38.5 21.5 60.0 5.5 3.2 8.7 37Expected Price Increases 112.9 49.2 162.1 16.2 7.3 23.5 31

Total Project Cost 381.1 198.5 579.6 55.0 29.0 84.0 35

Financing

4.23 The proposed Bank loan of US$42 million would finance the fullforeign exchange costs and about 24% of the local costs of the project. Itwould cover 50% of total project costs. The Government would provide theremaining P 290 million (US$42 million) to NIA out of annual budgetappropriations. To ensure the continuous and timely flow of funds, anassurance was obtained that the Government would set up a special fundfor the project which would be replenished at monthly intervals to a levelequivalent to the estimated requirements for the next three months. Estab-lishment of the special fund would be a condition of effectiveness of theloan.

Procurement

4.24 Equipment and vehicles for force account construction, operationand maintenance, and for the Stage II studies and the water management training,costing about US$4.5 million would be procured after international compe-titive bidding in accordance with Bank Group Guidelines. A preference limitedto 15% of the cif price of imported goods, r.r the custom duty, whichever islower, would be extended to local manufactuiers in the evaluation of bids.Local shopping is appropriate for off-the-shelf items costing less thanUS$10,000 each because the advantages of itnternational competitive biddingwould be clearly outweighed by the administrative costs involved. The totalcost of such items would not exceed US$300,000. Bank staff have reviewed thelocal procedures and they are acceptable. There is adequate competition andforeign firms can participate. A detailed list of equipment requirements isgiven in Annex 9.

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4.25 Works on the modification of the MARIS diversion dam and intakestructures (US$6.1 million) would be let as one contract, subject to inter-national competitive bidding. Works on the project service area (US$37.8million) would be scattered over a wide area and include a large proportionof rehabilitation works. These would have to be planned and executed onshort notice to avoid the growing season and bad weather and would have tobe phased with irrigation releases. When similar works were advertisedunder the Upper Pampanga River Project (UPRP) (Loan 637-PH) the NIA failedto attract even local contractors. NIA is carrying out all work inStage IA of the project by force account and in the process should build upa substantial construction capability, which would be available for employ-ment in Stage IB. It is unrealistic, however, for NIA to expect to undertakeall work in the project by force account. An assurance was obtained thatNIA would investigate ways of expanding the execution of civil works bycontract, so that the amount of work done by force account would not exceed40% of the total cost of the work. Competitive bidding in accordance withlocal procedures is appropriate for the balance of the work. Bank staffhave reviewed the local procedures and they are acceptable. There ispotentially adequate competition and foreign firms can participate.

Disbursements

4.26 Disbursements would be made at the rate of 100% against the cifcost of directly imported equipment, 100% against the ex-factory cost oflocally manufactured equipment and 65% for imported equipment procuredlocally. For services of consultants and for technical assistance, disburse-ments would cover 100% of foreign exchange cost or 60% of total cost. Dis-bursements for civil works would be at 42% of certified monthly progresspayments or expenditures. For civil works contractors' mobilization andequipment, disbursements would be at 100% of foreign exchange cost. It isexpected that disbursements would be completed by June 30, 1981, approximatelyone year after the end of construction. An estimated schedule of expenditureson the project and a semi-annual disbursement schedule are given in Annex 10.

Accounts and Audit

4.27 The NIA is a Government agency and its accounts are auditedannually by the Government's Commission on Audit. Assurances were obtainedthat NIA would maintain separate accounts for the project. After audit bythe Commission on Audit the project accounts, together with the auditor'scomments, would be sent to the Bank within four months of the close of eachfinancial year.

Environmental Effects

4.28 There is no schistosomiasis in the project area or in NorthernLuzon generally. Malaria is effectively controlled by a Government program

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of house spraying with residual insecticides. The few cases reported arebrought into the project area from the sparsely populated, mountainousforest regions bordering the Cagayan Valley. The principal public healthproblems in the area are protein deficiencies in preschool age children,enteric diseases and tuberculosis. The proposed project would have littleimpact on these.

V. ORGANIZATION AND MANAGEMENT

Project Management

5.01 NIA was created in 1964 and given responsibility for developing,operating and maintaining all national irrigation systems in the Philippines.NIA is also authorized by Government to levy and collect water rates frombeneficiaries of the national irrigation systems to defray operation andmaintenance (O&M) costs. The Covernment finances the NIA through the saleof bonds or from appropriations. A Board of Directors is responsible forthe agency, and the Adninistrator, who is appointed by the President of thePhilippines, handles nanagement.

5.02 NIA is in the process of being reorganized to meet the requirementsof the Government's policy of accelerated irrigation development. The in-tegration of the major foreign-assisted projects under a Special ProjectsOrganization Office headed by an Assistant Administrator is one of the firstresults of the reorganization. The Special Projects Organization (Chart No.9533(R)) would also be responsible for execution and operation of the Magatproject.

5.03 Day-to-day responsibility for construction of Stage IA rests withan Assistant Project Manager (APM) stationed in San Mateo. He reports tothe kMrlADP Project Manager in Quezon City on all matters concerning StageIA. The APM would also be responsible for construction of Stage IB andwou'd report on all matters concerning the Stage to the NIA RegionalEngineer, Cagayan Valley who would be appointed Project Manager of theilagat River Mlultipurpose Project. Both Project Managers would report tothe Assistant Administrator for Special Projects who would be in overallcharge of the A4IADP and Magat projects (Chart No. 9534). NIA wouldprovide all the additional support staff and facilities required to allowthe APM to meet his wider responsibilities. There would be three constructiondivisions under the APM: the first building Stage IA in the existing MARIS;the second buildlng the extension of M4ARIS under Stage IB; and the thirdbuilding the portion of Stage IB centered on the SIFRIS. The establishmentby NIA of a project organization satisfactory to the Bank would be a condi-tion of effectiveness of the proposed loan.

5.04 For O&I purposes the distinction between Stages IA and IB wouldno longer be necessary and the entire project area of 75,000 ha would beadministered by a single Project Manager (Chart No. 9535). NIA would

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establish four support divisions, dealing with administration, equiprnent,agricultural development and operation of the MARIS diversion dam and maincanal. The project area would be divided into three Irrigation Districtsbased on Santiago, San Mateo and Roxas. Each district would be divided into50-ha irrigation units. A ditch tender would supervise two such units (100ha), while a WMT would control five ditch tenders (500 ha). A Supervisorwould be responsible for a water management division which includes fiveWMTs (2,500 ha). Three to four divisions would constitute a zone under aSuperintendent. The proposed Santiago and Roxas Irrigation Districts would bedivided into two zones, while the San Mateo District would have three zones.Details of the organization are given in Annex 11.

5.05 The engineering studies for Stage II would be carried out by NIAstaff under the control of the Project Manager, who would be able to callfor assistance on specialized NIA units and on other Government agencies. Aconsulting firm (para 4.14) would assist NIA with the study and, if warranted,would also prepare detailed drawings, cost estimates and bid documents forconstruction of the Magat dam (Annex 6). In view of the demanding timetableproposed for the studies, the consultants would need to be on the site by theend of March 1976. Assurances were obtained that NIA would engage engineeringconsultants for the Stage II studies, on terms of reference and conditionssatisfactory to the Bank.

5.06 The Director appointed to supervise the Central Luzon watermanagement traning program would also be in charge of the program proposedfor the Magat project. A Field Supervisor would be attached to each of thethree Irrigation Districts to be in day-to-day charge of the program. Train-ing personnel would be drawn mainly from well qualified and experienced O&Mstaff and from specialized NIA units. Provision is made under the loan forconsultant assistance, should it be required.

Supporting Agricultural Services

5.07 An Agricultural Development Coordinating Council (ADCC) wasestablished in the UPRP to coordinate the work of the various agenciesproviding services to the farmers (Annex 12). The arrangement appears tobe working well in UPRP and a similar organization is being established forthe Tarlac project. Assurances were obtained that an ADCC based onIsabela province would be established for the proposed project.

5.08 A total of 152 agricultural graduates from a number of Governmentagencies provide extension services to farmers in the municipalities coveringthe project area. The Bureau of Agricultural Extension and the Departmentof Agrarian Reform supply the majority. The ratio of extension workers tofarmers is about 1:300. Under the project the extension coverage would bestrengthened by addition of the water management staff (para 5.04) and therewould be better coordination through the ADCC (para 5.07).

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5.09 Current fertilizer consumption in the project area amounts toless than 12,000 tons per year, with sulphate of ammonia accounting for abouthalf the total. At full development the project area would require some24,000 tons of fertilizer, on the basis of 60 kg/ha nitrogen and 30 kg/haphosphate per crop season. Existing supply channels would handle theincreased demand without difficulty. The certified rice seed requirementat full development would total 2,100 tons per year and no problems areexpected in obtaining the amount.

5.10 The substantial increase in the irrigated area, higher croppingintensity and better farming practices resulting from the project wouldrequire a large increase in production credit. Under the agrarian reformand Masagana programs the Government has strengthened the credit institutionsand eased credit to small farmers, previously dependent on the landlordsfor their requirements. A system of "supervised credit" is used whichincludes the provision of technical services to the borrower to ensure thatrecommended practices, such as variety, fertilizer and agrochemical inputs,are adopted. Under the system no collateral is required. During 1973/74,agricultural loans granted to farmers in the project area by the Rural Banksand the Philippine National Bank amounted to P 28.0 million (US$4.1 million).At full project development, production credit requirements are estimated tobe about P 81.0 million (US$11.7 million). The existing credit institutionsare expected to be able to meet the requirement.

5.11 In the Bank-assisted Central Luzon projects the UPRP's AgriculturalDevelopment Division is responsible for monitoring the deployment of extensionand water management personnel, pace of land reform, cropping patterns, useof inputs and credits, incidence of pests and diseases, etc. Assuranceswere obtained that NIA would establish within six months of loan signaturean Agricultural Development Division for the Magat project similar to theone in UPRP.

Recovery of Cost

5.12 Republic Act No. 3601 establishing NIA gave it the authorityto "collect from the users of each irrigation system constructed by it suchfees as may be necessary to finance the continuous operation of the systemand reimburse within a period of not less than twenty-five years the costof construction thereof". NIA's record of irrigation fee collection hasshown a steady improvement over the last few years. The total collectionhas risen from P 4.8 million in FY69 to P 9.2 million in FY74. Over thesame period the collection rate as a percentage of fees charged hasimproved from about 50% to about 66%. The better recovery is due toimproved and more timely billing, the use of more collectors, rehabilitationof some of the irrigation systems, withholding of water from delinquents andincentive collection bonuses.

5.13 Although the 66% collection rate is an improvement, it is stilllow. However, sufficient information is currently not available on the costof the facilities or the level of service provided by the NIA systems to

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determine whether the rates charged are appropriate. It is possible that insome cases farmers are charged for water they do not actually receive, andtherefore they might be justified ir, not paying. There are also indicationsthat collection rates are better where NIA is providing a reasonable levelof service. Thus NIA's program of irrigation improvement should result inimproved collections. The first phase of the National Irrigation SystemsImprovement Study (NISIS), financed under the Tarlac project, will inventorythe national irrigation systems and when the results are available, expectedby the end of 1975, it should be possible to make a better judgment as tothe appropriateness of the water charges and whether NIA's collections havebeen adequate. An assurance was obtained that NIA would discuss with theBank ways of improving collection of water charges based on the results ofthe NISIS.

5.14 Irrigation fees on the national irrigation schemes have recentlybeen raised to the equivalent of two cavans of paddy per ha in the wet seasonand three cavans in the dry season, to be applied uniformly to all nationalirrigation systems. At the existing Government support price for paddy thenew fees equal P 100 and P 150/ha respectively. These rates would coverthe anntual project O&M costs, which are estimated at P 100/ha/annum (US$14.5),but would contribute little toward capital recovery.

5.15 As an exception to the uniform rate policy the Government hasagreed to raise rates on the Bank-assisted Central Luzon projects to theequivalent of 3.5 cavans of paddy/ha in the wet season and 4.4 cavans inthe dry season. NIA proposes to apply these rates to Stage I of the Magatproject. This would be equivalent to P 175 and P 220/ha in the wet and dryseasons, respectively, or a weighted average of P 260/ha for a croppingintensity of 139%. Such a rate would be reached gradually over a period offive years from completion of construction. The rates to be introduced wouldvary between 12% and 17% of farmers' incremental net value of production(before water charges) due to the project, depending on present and futurecropping intensities. The new rates would therefore be within the farmers'repayment capacity and yet permit NIA to recover a substantial amount of theinvestment in the project. At a discount rate of 10% the present worth ofsuch a charge over the 50-year life of the project would be P 133 million.The present worth of the project cost 1i plus O&M costs at 10% is P 394million, indicating a recovery ratio of about 34%.

5.16 To ensure sound operation and maintenance practices and anequitable contribution by the beneficiaries toward the recovery of thecapital cost of the project, assurances were obtained that:

(a) the NIA would make annual budgetary provisions to supplythe funds necessary for operation and maintenance of theproject. Total annual expenditure for operation andmaintenance in 1975 constant prices is estimated at P 3.0million beginning in 1980, rising to P 7.5 million (US$1.1million) thereafter;

1/ Cost of investments for the entire Stage I project service area of P 495.7million excluding price contingencies. In this analysis both costs andrevenues are evaluated at constant prices.

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(b) irrigation fees would be levied to provide NIA withsufficient funds to maintain and operate the project andto allow for the recovery of investment cost within notmore than 50 years, taking into account farmers' incentivesand capacity to pay. A gradual increase in irrigation feesover a period of five years from completion of constructionto a level equivalent to about 3.5 cavans of paddy per hain the wet season and 4.4 cavans in the dry season wouldmeet the requirement; and

(c) the NIA would take all necessary actions to ensure fulland prompt collection of the irrigation fees.

VI. PRODUCTION, MARKET PROSPECTS, PRICES AND FARM INCOtES

Production

6.01 Upon completion of Stage I the area of irrigated land wouldincrease to 75,000 ha, of which at present about 40,350 ha are irrigatedand 34,650 ha are rainfed during the wet season. Although Stage I wouldnot provide storage for dry season irrigation water, better water controlwould allow the present dry season irrigated area of 19,400 ha to be expandedto 29,000 ha, increasing cropping intensity from 126% to 139%. Better watercontrol, improved extension services and expanded credit facilities wouldencourage increased plantings of high yielding rice varieties, heavier fer-tilizer applications and greater use of crop protection chemicals. The useof machinery for land preparation and threshing would increase to meet moreexacting crop calendars. It is expected that at full agricultural developmentin 1984 almost all threshing would be mechanical and most farmers would usea combination of machinery and animal-drawn implements for land preparation.

6.02 At full development, paddy yields from the wet and dry seasoncrops are expected to average 4.0 and 4.2 ton/ha respectively. It isestimated that these yield levels would be achieved five years after theintroduction of water control. Total paddy production from the Stage Iproject area would be about 422,000 tons at full development compared with189,000 tons at present. Details of present and future yields and productionare given in Annex 13.

Market Prospects

6.03 A major Government objective in the agricultural sector is toattain self-sufficiency in basic foods, especially rice and corn. Thedeficit in rice, the main staple food crop, has been a persistent problem forthe Philippines, and annual rice imports have averaged around 300,000 tonsin recent years. Based on population forecasts of 50 million in 1980 andassuming no change in the present annual per capita absorption of milledrice of about 100 kg, total demand for rice in the Philippines in 1980 wouldbe around 5.0 million tons, equivalent to 7.2 million tons of paddy. To

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-et the higher demand, local prodauction would have to increase by about4.5% per year between 1975 and 1980. While the Government's recent campaignto increase rice production has met with considerable success, there is

still some doubt about the Philippines' ability to attain self-sufficierncyby the early 1980s. Incremental paddy production from the project areawould mainly go to feed rice deficit areas as well as the increasing CagayanValley population.

Prices

6.04 According to world market price forecasts by the Bank's CommoditiesDivision, the price of average quality Thai rice would fall from US$435 perton fob Bangkok in 1975 to around US$210 per ton (at constant 1975 prices)in 1985. The paddy farm gate equivalent of these prices, which was used inthe economic analysis, is P 1,900 (US$275) per ton and P 930 (US$135) res-pectively (Annex 14). The actual farm gate price of paddy, however, is onlyP 1,000/ton at present. The lower price corresponds to an official supportprice dictated by the Government's policy of ensuring low food prices tourban consumers by selling imported rice below cost. At the same time, theGovernment subsidizes fertilizers used to grow food crops for domesticconsumption. The November 1974 farm gate price of urea for food crops,for example, was P 2,400 per ton, while the world market equivalent farmgate price was P 3,500 per ton. Thus the Government compensates farmersto some extent for the low domestic price of rice. At full development,it is assumed that economic and financial prices for inputs and outputswill coincide at the Bank's lower forecast world market prices (at 1975constant prices). For example, the farm gate price of paddy is forecastto be about P 930 per ton and of urea, P 1,900 per ton.

Farm Incomes

6.05 Farm models have been prepared for three typical farm sizesin both Stages IA and IB. The estimated present incomes and those projectedat full development for all different models are presented in Annex 15, andsummarized for two farm sizes as follows:

- 23 -

Area & Existing Farm Cropping Intensity Farm Inco aFarm Type Size Present Future Present Future

(ha) --- %_______p_____

Stage IA - rainfed 2.0 100 162 2,100 7,300- irrigated 2.0 150 162 4,000 7,300- rainfed 4.0 100 162 3,700 13,500- irrigated 4.0 150 162 6,800 13,500

Stage IB - rainfed 2.0 100 100 2,100 4,500- irrigated 2.0 141 148 3,700 6,600- rainfed 4.0 100 100 3,700 8,200- irrigated 4.0 141 148 6,400 12,600

/a Rounded to nearest P 100.

6.06 Taking the typical 2.0 ha and 4.0 ha farms for Stages IA and IB,present net farm incomes before making land amortization payments varybetween P 2,100 (US$300) on rainfed farms to P 6,800 (US$980) on irrigatedfarms. At full development the limits of the farm income range would riseto P 4,500 (US$650) and P 13,500 (US$1,960). The differences in incomelevels between similar farms in the two Stages are due to assumed croppingintensity, although in the absence of Magat dam there would probably be someredistribution of dry season water supplies between the two parts of theproject area. Following completion of Magat dam, incomes on similar farm sizeswould be equal throughout the project area. There is little information onoff-farm income in the project area, but observations and interviews in thefield indicate that such income is small relative to returns from farm work.Although comparisons of farm incomes based on farm budgets with income databased on national accounts aggregates must be interpreted with caution, theydo present a rough picture of the relative income position of project bene-ficiaries. Assuming a family size of six, present per capita farm incomesin the project area vary from P 350 (US$50) to P 1,130 (US$165), or about20-70% of the current per capita GNP of around US$240. At full projectdevelopment in 1984, the per capita farm income range in the project areawould rise to between P 750 (US$110) and P 2,250 (US$325), or some 35%-105%of the projected per capita GNP for 1984 of US$315. These comparisonsindicate that the project would tend to narrow the income gap between theproject area and other parts of the country.

VII. BENEFITS AND JUSTIFICATION

Stage I

7.01 The proposed Stage I of the project would increase yields onabout 75,000 ha currently dependent on run-of-the-river irrigation andrainfed cultivation by providing better water control, improved drainage and

- 24 -

the necessary agricultural supporting services. Rice would be the onlycrop grown in the area. Assuming a 50-year project life, prices for riceand fertilizer based on the Bank's commodity price projections through 1985and a seasonally variable shadow wage rate for unskilled farm labor, theeconomic rate of return on the project would be about 18% (Annex 17).

7.02 Sensitivity of the rate of return to several basic assumptionsmade in the economic analysis was tested. These factors were chosen totest the project's sensitivity to cost overruns and delays in construction;to failure to achieve the projected cropping intensity; and to a higheropportunity cost of farm labor. In no case did the rate of return fallbelow 12%. On the other hand, if the price of rice turns out to be 25%higher than forecast, the rate of return would be 24%.

7.03 In the economic analysis, Stage I was treated as a unit since itsdivision into sub-stages is purely for administrative convenience due todifferent sources of financial assistance and has no engineering or agri-cultural justification. Nevertheless a hypothetical incremental analysis,conservatively attributing the costs of all facilities common to the wholeproject area to Stage IB and assuming that Stage IA of the existing MARIShas a prior right to valuable dry season irrigation water, shows that therate of return on Stage IB alone would be about 11%.

7.04 Improved water management and scheduling of inputs and supportingservices throughout the project area would introduce a more taxing croppingcalendar and farmers would have to replace some animal draft power bymachinery for timely land preparation. Since Stage I would not provideadditional water for substantially increased double cropping it would giverise to only a small increase in the use of farm labor. However, theincreased rice production from the project would tend to generate additionaljobs in the transport, processing, marketing and service sectors. Theimproved farming practices brought about through the proposed projectwould also make it easier to shift to full double cropping if and when dryseason irrigation water becomes available through construction of Stage II.In that case an additional 8.5 million man-days of farm labor would beneeded.

7.05 At full agricultural development rice import savings due to theproject would amount to US$33 million per year at the projected world marketprice cif Manila (in terms of constant 1975 prices). After deducting theincremental cost of imported fertilizers and chemicals, the net foreignexchange savings as a result of the project would amount to about US$27million per year.

Stage II

7.06 A preliminary analysis of the incremental costs and benefits ofStage II of the project was carried out (Annex 17). The project formulationenvisaged in the NIA/USBR feasibility study was assumed (para 2.10) with the

- 25 -

exception of some 7,000 ha proposed for combined gravity and pump irrigationfor which too little information was available. Costs and quantities werereviewed and updated to mid-1975 levels. Irrigation benefits were assumedon the basis of additional irrigated rice areas of 22,500 ha in the wetseason and 68,500 ha in the dry season with similar yields, production costsand returns as those assumed for Stage I of the project. Power benefits wereassumed on the basis of an installed capacity of 300 MW with a dependablepeaking capability of 250 MW and an average annual energy production of1,170 GWH. Benefits were assessed as the cost of the comparable thermalalternative. Using the foregoing assumptions and discounting benefits andcosts over a 50-year period, the economic rate of return on Stage II ofthe project would be about 12%.

VIII. AGREEMENTS REACHED AND RECOMMENDATION

8.01 During negotiations, agreement with the Government was reached onthe following principal points:

(a) NIA would take all the necessary measures to ensure completecompatibility of standards and facilities between StagesIA and IB of the project (para 4.05);

(b) the necessary water rights would be transferred to the NIAand no private water rights which would adversely affectthe project's water supply would be granted except fordomestic use (para 4.09);

(c) the results of the evaluation phase of the Stage IIengineering studies would be submitted to the Bank forapproval and the second phase of the studies wouldbe implemented only if the Government and the Bank agreethat the work is justified in the light of the resultsof the evaluation (para 4.15);

(d) NIA would discuss with the Bank ways of improving collectionof water charges, based on the results of the NationalIrrigation Systems Improvement Study (para 5.13); and

(e) NIA would make annual budgetary provisions to supply thefunds necessary for operation and maintenance of theproject; would take all necessary action to ensure fulland prompt collection of irrigation fees; and wouldgradually increase irrigation fees over a period offive years from completion of construction to a levelequivalent to about 3.5 cavans of paddy/ha in the wetseason and 4.4 cavans in the dry season (para 5.16).

- 26 -

8.02 Conditions of effectiveness of the loan would be:

(a) the establishment by the Government of a special fund forthe project; the government has agreed to establish thefund and to replenish it at monthly intervals to a levelequivalent to the estimated requirements for the nextthree months (para 4.23); and

(b) the establishment by NIA of a project organizationsatisfactory to the Bank (para 5.03).

8.03 The proposed project would be suitable for a Bank loan of US$42.0million, with a 25 year maturity and a grace period of seven years. Theborrower would be the Republic of the Philippines.

ANNEX 1Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Cagayan Basin Development

General

1. The Cagayan river basin in Northern Luzon is one of the largestof the nine major basins in the Philippines. It covers some 28,000 km2

and is bounded on the north by the Babuyan Channel, on the south by theCaraballo mountains, on the east by the Sierra Madre mountains and on thewest by the Cordillera Central range. The basin encompasses parts of theprovinces of Isabela, Cagayan, Mountain, Kalinga-Apayao, Ifugao, NuevaVizcaya, Quezon and Quirino. The Cagayan river traverses the entire lengthof the valley, from its source near the Nueva Vizcaya - Quezon boundaryto its mouth on the Babuyan Channel. The Magat river, lying in the southwestern portion of the basin, is the largest of all tributaries. It isabout 150 km long from its upper reaches in Nueva Vizcaya to its confluencewith the Cagayan in Isabela.

2. Land is one the of major resources in the basin. Of the totalarea of 2.8 million ha about 1.0 million ha are cultivated, of which 40%are in Isabela, 30% in Cagayan and the balance equally divided between NuevaVizcaya and Mountain provinces. The main problem confronting agriculturein the basin is the lack of dependable water for year round irrigation.Rainfall is usually sufficient to support wet season cropping, but it isnot only erratic as to time and place of occurence but also deficient inthe dry season. In the rainfed areas cropping is limited to the wetseason and the land is unproductive during the dry months. Even on the46,000 ha of land served by national gravity systems in the basin duringthe wet season, only about 30 to 40% are irrigated during the dry season.

3. Mean annual rainfall in the basin varies from 1,000 mm to 3,000mm. The four-month period January through April is dry and accounts forless than 9% of annual rainfall, while some 75% of the precipitation occursduring July through Recember. The estimated annual runoff in the basinamounts to 49,000 MmU.

Magat River Development

4. The Government recognized the importance of irrigation in thebasin and began developing national gravity irrigation projects in themid-1950's. The first stage of the Magat River Irrigation System (MARIS)was completed in 1957 and the Siffu River Irrigation System (SIFRIS) in1960. The MARIS was further extended in 1966. In the same year a Water

ANNEX 1Page 2

Resources Survey Team from the U.S. Bureau of Reclamation (USBR) submitteda report on the potentials of the Cagayan basin in terms of land and waterresources. The report concluded that both the Magat and Chico sub-basinsappeared to have good potential for water resource exploitation and shouldbe given priority for development.

5. As a result of the Basin Report recommendations the Governmentengaged consultants to prepare a provisional planning report on the Magatriver project. The report, submitted in 1967, proposed building a rock-fill dam on the Magat river to provide storage for year-round irrigationof 75,000 ha of land as well as a generation of 100 MW of hydroelectricpower.

6. In line with the declared Government policy of giving priorityin water resources development to multipurpose projects, NIA carried outa feasibility survey on the Magat project with assistance from the USBR.The survey, completed in 1973, concluded that development of a multipurposeproject on the Magat river was technically feasible and economically viable.The project was envisaged to provide storage by building a high dam on theriver to allow year round irrigation on 104,000 ha and installation of ahydroelectric plant with a capacity of 300 MW.

7. In 1972 the Asian Development Bank (ADB) provided NIA withtechnical assistance in the preparation of detailed feasibility studiesfor the Magat Integrated Agricultural Development Project. The aim ofthe project was to expand the area under irrigation in MARIS in both wetand dry seasons through extension and renovation of existing drainageand irrigation facilities, construction of additional roads, better watermanagement and strengthening of agricultural supporting services. TheNIA, with ADB assistance, initiated work in 1973 on the Angat-Magat Inte-grated Agricultural Development Project (AMIADP), which included pro-visions for the rehabilitation and expansion of the existing MARIS toa total of 40,000 ha.

Phasing of the Project

8. It is proposed to implement the Magat multipurpose project overten years (1976-1985) in stages.

9. Stage I. Would consist of the rehabilitation of the presentsystems and the construction of new irrigation facilities on a totalarea of some 75,000 ha, that could be served by river diversion in thewet season. There would be little increase in the dry season irrigationas there would be no storage. Stage I would take five years (1976-1980).During the first three years an economic evaluation of the dam would becarried out to be followed, if warranted, by detailed engineering studiesfor building the storage dam, including the preparation and issue of biddocuments for construction.

ANNEX 1Page 3

10. Stage I of the project would be divided into two parts:

(a) Stage IA consisting of the upgrading and rehabilitationof 40,000 ha of the existing MARIS being implementedunder the ADB-assisted AMIADP; and

(b) Stage IB consisting of the upgrading of 12,200 ha ofexisting systems and their expansion by a further 22,800ha under the project proposed for Bank assistance.

11. Stage II. Would take seven years (1979-1985) and would bedivided into two parts:

(a) Stage IIA would take six years (1979-1984) and wouldinclude construction of the dam and additional irrigationfacilities to service the entire 104,000 ha command area.All civil works associated with the power component ofthe project would be included.

(b) Stage IIB would take five years (1981-1985) and wouldconsist of the provision and installation of generatingfacilities, power lines and substations.

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Climatological Data

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TotalIlagan, Isabela

Rainfall 1/Average (mm) 64 43 44 63 114 150 184 194 232 287 343 175 1,893Maximum (mm) 262 157 147 218 350 359 493 790 486 848 916 508 3,570Minimum (mm) 3 0 2 0 8 34 21 41 55 58 52 43 952

Number of rainy days 2/ 11 7 6 6 10 11 13 13 14 16 17 15 139

TuRuegarao, Cagayan

Relative humidity (%) 3/ 80 76 72 68 70 75 77 79 81 82 84 84

Temperature 41Mean ("C) 23.8 24.6 26.6 27.6 29.3 29.1 28.5 28.1 27.7 27.3 25.4 24.1Mean Maximum (°C) 29.2 31.2 33.4 35.7 36.5 35.7 34.8 33.2 33.6 31.9 30.1 28.9Mean Minimum (tC) 19.3 19.6 21.0 22.7 23.7 24.1 23.6 22.9 23.5 22.6 21.6 20.4

Evaporation (mm) 5/ 148 155 207 233 232 191 180 168 167 163 134 137 2,115

Prevailing wind direction 6/ NNW NNW N N S S S S NNW N NNW N

Wind velocity (km/hr) 6/ 4 3 3 3 3 3 3 3 3 4 3 4

Number of typhoons 7/ 0 0 0 2 2 4 13 12 17 9 11 3 73(Cagayan Valley & Ilocos)

1/ Period of observation 1926-19722/ " " " 1940-1965

aiX3/ " " " ~~1949-19734/ " "I " 1903-1939, 1947-19725/ " " " 1957-19686/ " " ' 1958-19707/ '" " " 1948-1970

ANNEX 3Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Land Tenure & Reform

Background

1. Since 1972 the Government has pursued a program of agrarian reformaimed at the transfer of land ownership to tenant farmers on rice and cornlands. Presidential Decree No. 27 (PD 27), the basic legislation of the newprogram, provides for the transfer to the tenant, whether sharecropper orleaseholder, of the land he tills up to a total of 3 ha in an irrigatedarea and 5 ha in a rainfed area. The landlord is allowed to retain up to7 ha providing he cultivates the land himself. The Decree lays down asystem of valuing the land and provides for the tenant to pay for it in15 equal annual instalments at an interest rate of 6% per annum.

2. It is estimated that the total number of rice and corn tenantsis about 1.0 million on some 1.5 million ha owned by about 430,000 land-lords. Some 85% of these landlords have holdings of less than 7 ha. Inaddition the total number of rice and corn farmers probably exceeds 2million, while the total area of rice and corn lands is not much more than4 million ha, of which less than 1 million ha are irrigated. There istherefore little prospect of achieving the objective of 5 ha rainfed or 3ha irrigated family farms nationwide.

3. A recent survey by the Department of Agrarian Reform (DAR)reports that 55% of the tenants on 45% of the tenanted area are underlandlords with holdings smaller than 7 ha. The Government is anxious notto antagonize the small landowners and is looking for a solution to theproblem which would be equitable to both the tenants and the landlords.For holdings under 7 ha the Government has announced its intention to enforceleasehold with security of tenure. To prevent abuses pending the issue ofrules and regulations under the various decrees, evictions are forbiddenand sharecropping has been declared illegal. DAR is proceeding with thetransfer of land in holdings over 24 ha and by February'1975 had issuedland transfer certificates to 191,000 covering 338,000 ha in 64 provinces.DAR expects to complete the transfer of all land in holdings over 24 haby mid-1975.

4. In November 1974 the Government decided to proceed with thetransfer of land in holdings between 24 and 7 ha. This work began inJanuary 1975 and is targeted to be finished by the end of 1977. To

ANNEX 3Page 2

expedite land transfers and resolve land valuation disputes, beginning inApril 1975 the responsibility for land valuation is being turned over tobarrio (hamlet) land valuation committees. The committees consist of thebarrio captain, four tenant farmers, two owner-cultivators, two landowners,a representative from the DAR and one from the samahang nayon (pre-cooperativeorganization).

Situation in the Project Area

5. All tenants and holdings involved in land reform in the provinceof Isabela have been identified. As of February 1975 land transfercertificates had been issued to some 8,700 tenants on about 15,000 ha outof a total of about 16,000 tenants on holdings over 7 ha. There are approx-imately 20,000 tenants on holdings below 7 ha.

6. Based on data from DAR and the National Economic DevelopmentAuthority, an estimated 16,600 people own the 75,000 ha in the Stage Iproject area. Some 86% of the owners have properties of less than 7 ha.This group of owners accounts for 56% of the area. The remaining 14% ofholdings larger than 7 ha comprise 44% of the area or 33,000 ha, most ofwhich will be transferred to tenant ownership. The land ownership patternin the project area by size of holding as of December 1974 was as follows:

Size of Holding Owners Area Owned(ha) No. % ha %

Less than 7 14,295 86 41,664 567 - 12 1,490 9 14,962 20

12 - 24 713 4 12,196 1624 - 50 66 ) 2,507 350 -100 28 ) 1 2,077 3

More than 100 8 ) 1,594 2

Total 16,600 100 75,000 100

7. The average farm unit in the area is 3.1 ha with about 80% of the24,000 farms, covering 66% of the area, falling between 1 and 5 ha. Thefarm size distribution is as follows:

ANNEX 3Page 3

Farm Size Farms Cultivated Area(ha) No. % ha %

Less than 1 960 4 750 11 - 3 12,240 51 22,500 303 - 5 7,680 32 27,000 365 - 10 2,400 10 15,750 21

More than 10 _ 720 3 9,000 12

Total 24,000 100 75,000 100

8. The tenure situation in the project area at the time of promulga-tion of PD 27 in late 1972 was as follows:

Tenure Farmers AreaNo. % Ha _

Owner-Operator 9,840 41 35,250 47Leaseholder 1,410 6 3,970 5Sharecroppers 12,750 53 35,780 48

Total 24,000 100 75,000 100

Owner-operators accounted for 40% of the farmers and the remainder were alltenants, of whom 90% were sharecroppers. The average owner-operator unitwas some 3.6 ha compared to an average tenant unit of 2.8 ha.

9. The mean farm size in the project area is considerably larger thanthose in the Bank-assisted projects in Central Luzon, where average farmsize ranges from 1.5 to 2 ha. Central Luzon has, however, been developedmore intensively and over a longer period than the relatively newly settledareas of Isabela province. Population density in the Cagayan Valley isamong the lowest in the Philippines despite considerable internal migrationto Isabela during the last decade. Development of the Magat project isexpected to attract more population to the area and farm size will probablydecrease as irrigation allows a greater productivity.

10. The transfer by the DAR of landlord holdings larger than 7 hawould involve an estimated 20,000 ha and 7,100 tenants. The attainmentof this would result in some 55,300 ha or 75% of the project area beingcultivated by around 16,900 owner-operators, the equivalent of 71% of thefarmers. The 7,000 tenant farmers on holdings of less than 7 ha wouldoperate under a leasehold contract.

ANNEX 4Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Project Works

1. Service Area. Stage I of the Magat River Multipurpose Projectwould improve the Magat River and Siffu River Irrigation Systems (MARISand SIFRIS) currently built to serve 41,800 ha and 10,000 ha respectively,and would extend these systems to serve an additional 21,200 ha in the MARISand 2,000 ha in the SIFRIS. The improvements would include modifyingand rehabilitating the existing diversion structures and outlet works,new water regulating and delivery structures, the construction and/orenlargement of canals and drains and access and maintenance service roads.General features of the improved irrigation systems would include addi-tional canal structures such as checks, control structures and turnoutsto more effectively control water deliveries and to provide water moreefficiently to each field as needed. Constant head orifice turnoutsto sub-laterals would be provided for water deliveries to rotationalareas of about 50 ha. Turnouts would be provided for each 10-ha unitfrom which farm ditches, constructed as part of the project, would conveywater directly to most farms. Farm drains would convey excess waterfrom each 10-ha unit to the main project outlet drains. A few farmswould still receive water through their neighbors' fields. Canals wouldbe unlined. Working stations for Water Management Technologists (WMT)would be provided for about each 500 ha of irrigated land, as well as con-crete rice drying floors. The principal works are discussed separatelyfor each irrigation system and are summarized in Table 1.

2. The MARIS was the first irrigation project initiated by theGovernment in the Cagayan Valley, and construction of the original23,500-ha service area was completed in 1957. The east extension ofthe system, serving some 17,000 ha, was completed in 1966, bringing thetotal service area to 40,500 ha. An additional 1,300 ha of communal irri-gation systems is included in the area to be rehabilitated and servedby MARIS, resulting in a total area to be improved of 41,800 ha. TheNational Irrigation Administration (NIA) is currently rehabilitating andimproving 39,610 ha of this area with the assistance of the AsianDevelopment Bank (ADB) under its Angat-Magat Integrated AgriculturalDevelopment Project (AMIADP) and is extending irrigation to an additional390 ha in the area. The ADB-assisted improvement area constitutesStage IA of the Magat Project. Stage IB of the project, proposed for Bankfinancing, would include the remaining rehabilitation and extension areasto be served by MARIS and the rehabilitation and extension areas inSIFRIS.

ANNEX 4Page 2

3. The remaining 2,190 ha of the M1ARIS service area requiringrehabilitation would be improved in Stage IB by repairing canals andstructures and constructing additional sub-laterals, farm ditches,turnouts, measuring devices, drains and associated works. The MARISdiversion dam would be raised 5 m to command a larger service area andto provide daily storage regulation for eventual Stage II power releases(Annex 1). The existing outlet works on the right abutment would be en-larged from 65 m3/sec to 87 m3/sec and new outlet works with a capacity of34.2 m3/sec would be constructed on the left abutment. The MARIS MainCanal, originating from outlet works on the right abutment of the diver-sion dam would be enlarged for a distance of 26.6 km and extended anadditional 10.3 km. The North Main Canal would be constructed to serve8,400 ha of non-irrigated land lying north of the Magat river and wouldextend from the new outlet works on the left abutment of the diversiondam for a distance of 40.7 km to the SIFRIS diversion dam. Water fromthe Magat river would be conveyed by the North Main Canal to the SIFRISservice area Is needed. The South Low Canal, with an initial capacityof about 18 m /sec, would be constructed to serve 9,610 ha of irrigableland on the southern periphery of the MARIS service area. The canalwould extend from the Main Canal near Oscariz for a distance of 55 kmand terminate near Alicia. Several laterals would be enlarged to servesmall extension areas in various sections of the project.

4. The SIFRIS was completed in 1960 and initial irrigation releaseswere made to its 10,0O0-ha service area in December of that year. Thesystem would be impXoved to the same standards proposed for MARIS andwould be extended to serve an additional 2,000 ha of land lying adjacentto and east of the Siffu north service area. The existing outlet worksfor the Siffu North Main Canal at the SIFRIS diversion dam would be en-larged from 2.65 to 6.3 m3 /sec and the canal would be widened for a dis-tance of 17.4 km and extended an additional 13.9 km. A total of 17structures of various types would be constructed in the extension portionof the canal.

5. Roads would be constructed on the canal banks according to thefollowing criteria: for canals and laterals with a design capacitygreater than 5.0 O3/sec, operation and maintenance roadways would beprovided on both banks; for canals with capacities between 2.0 and 5.0m3/sec, a road would be provided on only one bank; and no roadway wouldbe proviaed for waterways with capacities less than 2.0 m3/sec. Inaddition, the existing roads in the irrigated areas would be improvedby widening and gravel surfacing.

6. The proposed level of on-farm water distribution and drainageis similar to what is being implemented on the Tarlac Irrigation SystemsImprovement Project (Loan 1080-PH) (Table 4) and would be a subtantialimprovement over the existing systems which make no provision for access orfor distribution beyond the sub-lateral. Rice has been grown in the projectarea for many years and the land is reasonably level and well laid out with

ANNEX 4Page 3

little fragmentation of land holdings. Therefore no land leveling, boundaryrealignment or land consolidation would be provided at this stage. TheNIA is now building a 1,000-ha pilot scheme on the Upper Pampanga RiverProject to test the feasibility, costs and local acceptability of full on-farm development, including land consolidation, land leveling and indi-vidual farm access to irrigation and drainage. The pilot scheme willdetermine the effects of full on-farm development on yields, ease ofoperations and efficiency of water use and the findings would be applica-ble to the proposed project.

7. Project service facilities which would be provided in Stage Iinclude the following:

(a) access roads and a bridge over the Magat river nearthe MARIS diversion dam; and

(b) an air strip near the MARIS diversion dam.

The facilities would be used to facilitate construction of the irrigationand drainage system in the MARIS service area and the modification of theMARIS diversion dam and to provide access to the project area for opera-tion and maintenance after construction work is completed.

ANNEX 4Table 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECr: STAGE I

Swnary of Irrigation Facilities to be Provided or Rehabilitated

Stage I-A Stage I-BMARM5 MARIS SIFRIS TOTAL

Rehabilitation Area (ha) 39,610 2,190 10,000 51,800Main Canal (kmn)Rehabilitation 4 0 26 30Enlargement 0 27 17 44

Laterals (km)Rehabilitation 393 22 82 497Enlargement 0 13 0 13

Drains (km) 433 24 110 567Farm Ditches (km) 2,L408 133 608 3,149Farm Drains (kIn) 1,584 88 400 2,0720&M Roads w/Project (kin) 436 23 124 583

Extensimn Area (ha) 390 20,810 2,000 23,200Canals & Laterals (km) 5 234 31 270Drains (km) 4 228 22 254Farm Ditches (km) 24 1,265 122 1,411Farm Drains (km) 16 832 80 928O&4 Roads (km) 3 215 31 249

Total Area (ha) 40,000 23,000 12,000 75,000

ANNEX 4Table 2

PHILIPPINES

MA GAT RIVER MULTIPURPOSE PROJECT: STAGE I

Irrigation Facilities-Cost/ha 1/

Stage IAV/ Stage IB SystemMARIS MLRIS SIFRIS Average

(39,610 ha)(2,190 ha)(10,000 ha) 51,800

1. REHABILITATION AREA ---------------(US. $/ha)----------------

(a) Canal system 114 155 119 117(b) Drainage system 62 73 72 64(c) Road system 75 105 106 82(d) On-farm distribution and

drainage 3/ 139 153 159 143

Sub-total 390 486 456 406

2. EXTENSIONO A?REA (ha) 390 20,810 2,000 23,200

(a) Canal srstem 4/ 133 640 690 619(b) Drainage system 62 71 75 71(c) Road system 46 206 300 211(d) On-farm distribution

drainage 3/ 165 189 187 185

Sub-total 406 1,106 1,252 1,086

TOTAL 616

1/ Not including contingencies (20%) and engineering, supervision andamninistration (10%).

2,/ Source NIA. Based on revised quantities and unit prices updated to July 1975.

3/ Incluiwes Water Management Technologist stations.

W Includes canal capacity for Stage II development and/or increased capacityin main canals.

ANNEX 4Table 3

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Estimated Length of New Canals Required in Stages I and II

Name of Canal Stage I Stage II Total---------- (kmn)-----------

North Main 41 - 41

MARIS Main 10 - 10

Siffu North Main 14 - 14

South Low 55 - 55

Cauayan 11 9 20

South High - 48 48

Siffu East - 35 35

Oscariz _ 5 5

Linglingay - 9 9

TOTAL 131 106 237

ANNEX 4Table 4

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Density of Terminal On-Farm Facilities on Central Luzon Projects

Project On-Farm Facility 0 & MIrrigation Drainage Roads--------------(m/ha)--------------

UPRP 57 12 13

Tarlac 55 40 13

ANNEX 5Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Water Supply, Demand and Quality

Water Supply

1. The sources of water for the proposed project are the runoff ofthe Magat river at the MARIS diversion dam and the runoff of Siffu riverat the SIFRIS diversion. In the dry season some use is also made of re-turn flows in natural drainageways and tributary streams within theservice area. There is presently nio regulatory storage in the watershedand none would be provided in Stage I of the project. Stage I would notdevelop new irrigation supplies, but would improve and extend the existingirrigation systems and enable them to serve the expanded area by usingthe available water supply more efficiently. Less than 40% of theproject area would have water during the dry season. However, additionalwater supplies for expanding dry season irrigation would be developedunder an eventual Stage II of the project (Annex 1).

2. Reliable continuous discharge records for the Magat river areavailable from 1948 to 1965. The gauging station was originally locatedsome 2 km upstream of the MARIS diversion dam. After completion of thedam in 1957 the station was relocated to a site about 300m below thedam. Operation of the station was discontinued in 1965 and recommencedin 1971. The record was extended from 1965 to 1972 by developing on anarea basis a discharge rate at the diversion site from rates at a gaugesome 16 km upstream of the diversion dam.

3. Reliable discharge records for the Siffu river at a gaugingstation about 9 km downstream of the SIFRIS diversion dam are availablefrom 1948. The records of the station since 1959 have been adjustedfor diversions to the SIFRIS. Runoff at the diversion point wasestimated by the drainage area proportion method.

Water Demand

4. It was assumed that transplanted rice would be the only cropgrown in the project area in both the wet and dry seasons, using 120-day, non-photosensitive varieties. Water requirements were based onthe following cropping calendar:

ANNEX 5Page 2

DatesOperation Wet Season Dry Season

Land Preparation & Nursery mid-July to mid-Nov. early Mar. to early JuneTransplanting mid-Sept. to mid-Nov. early Apr. to early JuneHarvesting mid-Dec. to mid-Feb. early July to early Sept.

5. Land preparation and nursery were estimated to take 30 days withwater requirements for saturation, evaporation and percolation of 305 mmin the wet season and 325 mm in the dry season. Flooding requirements toprovide a minimum depth of water in the field for cultivation in eachseason were estimated to be 20 mm immediately after transplanting followedby an additional 50 mm about two weeks later. The consumptive use of waterfor rice was estimated by the Class A Pan Evaporation Method, using thepan evaporation record at Tuguegarao, Cagayan dating from 1957 to 1968.Field percolation losses were estimated to be 2 mm per day based on per-meability studies in the project area. The effective rainfall was deter-mined from observed daily rainfall records at Ilagan, between 1953 and 1972,allowing water depths to fluctuate with the growth of the rice plants andlimiting maximum depth to 150 mm.

6. The overall irrigation efficiency was estimated to be 39% inthe wet season and 48% in the dry season at full development, based onfarm irrigation wastes of 42% in the wet season and 30% in the dry season,system operation losses of 15% and canal conveyance losses of 25%. Monthlyproject water requitements, average river flows, and the average flowduring the five most critical months of the 20-year runoff record are shownin Table 1. Seasonal and total annual diversion requirements are developedin Table 2.

7. The area that could be irrigated in Stage I in both the wetand dry seasons was determined from simulated monthly operation studiesusing the 20-year adjusted discharge records at each diversion and theestimated seasonal water requirements for rice. The cropping calendarwas chosen to maximize the use of rainfall without exceeding local man-power constraints. No use of return flow or other localized watersources was assumed in Stage I, although this would be possible inseveral large areas at the lower end of the service area with developmentof Stage II of the project. The studies showed that about 63,000 ha couldbe irrigated in the MARIS service area and 12,000 in the SIFRIS servicearea in the wet season with acceptable irrigation shortages. Theoperation studies indicated that about 25,000 ha could be irrigated inthe dry season in MARIS and about 4,000 ha in SIFRIS. Irrigation shortagesin one month of the wet season (November or December) were limited to lessthan 20% in 17 of 20 years of study, while in the dry season shortages inexcess of 20% were noted in 4 years out of 20, always in the month of May.Project yields have been adjusted to reflect irrigation shortages of theorder experienced in the period of record.

8. The irrigable areas selected for development in Stage I of theproject, the area to be rehabilitated or newly constructed, and thecurrently irrigated areas are as follows:

ANNEX 5Page 3

Stage I Service AreaStage IA Stage IBMARIS MARIS SIFRIS Total

Selected Irrigation Area (ha)Wet Season 40,000 23,000 12,000 75,000Dry Season 25,000 - 4,000 29,000

Breakdown of Area for Construction (ha)Area to be rehabilitated & improved 39,610 2,190 10,000 51,800Extension area (new construction) 390 20,810 2,000 23,200

Total 40,000 23,000 12,000 75,000

Currently Irrigated Area (ha) /aWet Season 32,000 - 8,350 40,350Dry Season 16,000 - 3,400 19,400

/a The discrepancy between the area currently irrigated (40,350 ha) andthe area needing rehabilitation (51,800 ha) is due to the fact thatthe systems were built to serve the larger area, but were notprovided with terminal facilities necessary to achieve the objective.

Water Quality

9. Tests of water samples from the Magat and Siffu rivers indicategood water quality with total dissolved solids under 200 ppm. The watersare of low salinity, slightly alkaline (pH 7-8) and are free of toxicelements. Water in the Magat river showed an exceedingly high level ofturbidity. This does not appear to have agricultural significance as noill effects on crops or soils have been noted after nearly 20 years ofijrrigation with water from the river.

ANNEX 5Table 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Estimated Water Requirement and Supply

iJan Feb Mar Apr May June July Aug Sept Oct=Nv Dec

Wet Season Paddy (75,000 ha) H N _+M_ _

LP + N _ raina

Dry Season Paddy (29,000 ha) I _T M H

Rainfall, Ilagan (mm) 64 43 i 44 ! 63 114 150 184 194 232 287 343 175

LP = Land Preparation, N = Nursery, T = Transplanting, M = Management, H = Harvest

Water Requirement I I I

Land prep. & nursery (mm) 100 125 100 65 120 90 30Flooding for cultivation(mm) 1 30 40 5 35 30Consumptive use (mm) 71 4 75 1 215 218 115 12 15 99 149 147Percolation (mm) 25 1 __ 19 53 57 36; 5 5 36 62 56Field water requirement (mm)' 96 5 100 249 408 275 216 137 115 200 241 203Effective rainfall (mm) 46 5 32 52 94 143 1 124 108 106 150 182 120Net farm irr. reqm't (mm) 50 0 68 197 314 132' 92 29 1 9 50 59 83Overall irr. efficiency (%) 39.4 39.4 47.6 47.6 47.6 47.6 45.1 I 40.4 39.4 39.4 39.4 j 39.4Irr. diversion reqm't (mm) 127 0 ° 143 414 660 277 204 72 23 127 150 212Cropped area (ha) _ __i__

MARIS 25, 00--- - 63,000SIFRIS |> k_ 4,) 0- > 12,000 |

Volume water required (MM3 4 0 1MARIS 80.0 0 35.8 103.5 165.0 69.3 73.4 41.8 14.5 80.0 j 94.5 1133.6SIFRIS 15.2 0 5.7 16.6 26.4 11.1 13.1 7.9 2.8 15.2 1 18.0 25.4

3Water Available (Mm)

20-Year AverageMagat R. (MARIS) 332 240 245 280 376 417 633 781 968 851 692 594Siffu R. (SIFRIS) 37 31 31 31 48 71 78 118 137 104 100 73

5 Critical Month Average 1/ IMagat R. 146 102 97 117 131 191 236 397 492 387 295 195Siffu R. 21 17 19 16 17 29 43 60 76 41 35 22

1/ Mean of 5 lowest monthly discharges in 20 year observation period.

ANNEX 5Table 2

PHILIPPINES

MA7TAT 2IVER MULTIPURPOSE PROJECr: STAGE I

Project Water Requirements(Mm)

Wet Season Dry Season

Land Preparation (30 days)Satu ration 75 40Eva.poration 170 225PercoL ation 60 60

Sub -tot al 35 325

Flooding for Cultiva.tion (field depth) 70 70

Sub-total 375 ArimIally 395

Total 770

Crop Water Requirement (92 days) (84 days)Evapotranspiratoln 485 635Percolation (2Anlm/day) 1(35 170

Sub-total 670 11,475 805

Total Field Water Requirement 1,045 2,245 1 ,200

Less Effective Rainfall ?40 1L20 420

Net Farrn Irrigation TP3quire ment 305 1,085 780

Farm Irrigation Efficiency 58% 70%

Farm Irrigation RIequirement (at turnout) 525 1,640 1,115

Conveya?ice Losses ( 25%) 130 41o 280

.System Operation Losses (15%) 115 360 245

rrt, 1 Ii~ve:,9.sir,n Jea.ireTnerit 770 2,410 1,640

Overall Irrigation Efficiency 391 5%4 8$

ANNEX 6Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Engineering Studies: Stage II

General

1. Stage II of the project would comprise a concrete spillway damand power plant on the Magat river, flanked by rockfill embankments. Arockfill dam would also be built on.the Baligatan creek behind the rightabutment of the Magat dam. The installed capacity of the power plantwould be about 300 MW and annual energy generation would be about 1,200GWh. Irrigation facilities would be built for an additional 29,000 ha, ofwhich about 7,000 ha might require a combination of gravity canals andpumping. Cropping intensity on the entire project area would be raisedto 200%.

2. Additional site investigations, and optimization and designstudies are required to permit a more accurate evaluation of the tech-nical and economic feasibility of Stage II of the project. Should thestudies indicate that proceeding with the project was justified, thefinal designs, construction drawings and tender documents would be pre-pared for the construction and materials contracts for Magat dam andappurtenant works.

Objectives

3. The objectives of the studies would be to:

(a) collect the additional data required for a detailedevaluation of the economic feasibility of implementingStage II of the project based on the construction ofMagat dam; and

(b) to prepare final designs, construction drawings,specifications, bill of quantities, cost estimatesand bid documents for Stage II, assuming the feasibilityof construction of the dam, power plant and appurtenantfacilities to be satisfactorily demonstrated.

Implementation

4. The National Irrigation Administration (NIA) would give primaryresponsibility for carrying out the study to its Special Projects Orga-nization. Assistance would be available from other specialized units ofNIA as required and there would be close coordination on the power aspectsof the study between NIA and the National Power Corporation (NPC).

ANNEX 6Page 2

5. Part A of the study would be concerned with the collection ofadditional geological information on the proposed dam site and reservoir,further investigations on frequencies of peak flood discharges, designflood peak and sedimentation rates, and a review of reservoir sizing tomaximize net project benefits. The additional area to be served by thedam would be determined, together with the feasibility of a combined gravityand pump irrigation canal to service about 7,000 ha east of the Siffu southmain canal. With the additional data collected, more detailed engineeringdesigns and estimates for Stage II of the project would be carried out leadingto its full economic evaluation. Part B of the task, which would be condi-tional on a favorable outcome of the economic evaluation, would consist ofpreparation of the final designs, construction drawings, specifications, costestimates and bid documents for the dam and appurtenant facilities.

6. The engineering studies would take three years to complete. Mostof Part A would be concluded in about ten months and the results would bepresented for review by NIA and the Bank in a Project Design Report. Therewould be a two-to three-month gap between the submission of the reportand initiation of Part B of the studies to allow for the review process.Part B would only be included in the project if NIA and the Bank agreedthat the results of Part A warranted proceeding with Stage II. Part Bof the studies, including bid evaluation for the dam, would take about18 months. Assuming the studies would begin in April 1976, Part A wouldbe completed by the end of January 1977, the results would be reviewedby June and work on Part B would begin in July 1977. On this timetablecontracts would be awarded by the end of 1978. Allowing for mobilization,preliminary work on the dam would only begin in the second quarter of 1979.Critical work actions that would have to be completed prior to award ofthe contract for construction of Magat dam are shown on Chart No. 9684.

7. The NIA/USBR feasibility study estimated a cement requirementfor Magat dam of about 550,000 tons. Existing cement factories in CentralLuzon are between 200 and 300 km from the dam site and the main road linkis subject to interruption in wet weather. NIA and other Governmentagencies are presently investigating possible sources of supply of cement,means and routes of transport, stockpiling requirements, the possibilityof developing a new cement facility in Cagayan valley, and the costs andbenefits of the various alternatives. The results of the investigations,including costs of the various alternatives, methods of implementationand timetables would be completed concurrently with the conclusion ofPart A of the engineering studies (January 1977).

Consultants

8. NIA would employ a firm of consultants under terms of referenceand conditions to be approved by the Bank to assist in the studies. Draftterms of reference are shown in Attachment I. It is estimated that atotal of 584 man-months of consulting services would be required, ofwhich 136 man-months in Part A of the study and 448 man-months in Part B.

ANNEX 6Page 3

A breakdown of the estimated requirements for consulting time for the twophases is shown in Table 1. In view of the magnitude of the proposed Magatdam NIA would appoint a board of consultants to assist NIA in the reviewand approval of the consultants' designs. The board would consist ofexperts in dam design and dam site geology, and an expert in earthquakedesign criteria.

Cost

9. The Stage II engineering studies are estimated to cost a totalof US$6.0 million, including a foreign exchange component of US$3.9million for the purchase of equipment, vehicles and materials and forconsultant services. Details of the cost estimates are given in Annex 8and a list and cost of the proposed equipment to be purchased is shownin Annex 9.

ANNEX 6Table 1

PHILIPPINES

i>T ,'IVLR MULTIPURPOSE PROJECT: STAGE I

ENGINEERING STUDIES: STAGE II

Estimated Consulting Requirements

Evaluation Final Designs & TotalStudies Bid Documents

-(Man-Months)_-__________

Resident Project Manager 12 12 24

Engineering Geologist 18 6 24

Senior Design Ehgineer 6 6 12

Design Engineer 16 4 20

Hydrologist 6 - 6

Hydraulic Ehgineer - 6 6

Contracts Engineer - 4 4

Specifications Engineer - 6 6

Sigineering Cost Estimator - 4 4

Local Consulting Services 16 20 36

Sub-total In-Country Services 74 68 142

Hone Office Design & Ehg.Support 50 340 -/ 390

Sub-total 124 408 532

Contingencies (10%) 12 40 _52

Total Manpower Requirements 136 448 584

1/ Reflects heavy home office requirements for preparation of final designs and

specifications for the dam and power plant.

ANNEX 6Attachment 1Page 1

Stage II Studies

Draft Terms of Reference for Consulting Services

1. Introduction

A feasibility report on the Magat River Multipurpose Projectprepared by NIA with the assistance of USBR, proposed a dam and power planton the Magat river to irrigate 104,000 ha and generate about 1,000 GWh peryear. NIA will shortly begin work on a first stage development, whichwould irrigate 75,000 ha from the unregulated flows of the Magat river.At the same time, further engineering and economic studies will be madefor the second stage, involving construction of the dam and power plant.If the studies show Stage II to be justified, work will proceed on thenecessary pre-construction activities.

2. Stage I of the project would include: rehabilitation and upgradingof the Magat River Irrigation System (MARIS), the Siffu River Irrigation System(SIFRIS), and several communal systems which together serve about 51,800ha; construction of new systems serving 23,200 ha; and remodelling of theMARIS diversion dam. The unregulated river flows are sufficient for anannual cropping intensity of 139%. The MARIS diversion dam would beremodelled to raise the upstream water level by 5m; this would providesufficient storage to regulate daily fluctuations in water releases fromthe Stage II power plant.

3. Stage II of the project would comprise a concrete spillway damand power plant on the Magat river, flanked by rockfill embankments. Arockfill dam would also be required to close a depression formed by theBaligatan creek behind the right abutment. The installed capacity of thepower plant would be about 300 MW and annual energy generation would beabout 1,200 GWh. In addition to power generation, the Stage II projectwould allow the irrigated area to be expanded from 75,000 ha to 104,000 hawith an annual cropping intensity of 200%.

4. Details of the Stage II project as proposed in the USBR reportare summarized below:

ANNEX 6Attachment 1Page 2

Dams

Concrete dam and spillway Crest length 790 mmax. height 115 m

Rockfill dams: Crest length 2400 mmax. height 70 m

Reservoir

Max. water level 197.45 mMax. conservation level 193.00 mGross storage at El. 193 1254 Mm3

Area at El. 193 44.6 km2

Power plant

Installed capacity 6 x 50 MwTurbines: rated head 76.5 m

operating range 87-55 m

Hydrology

Annual Runoff (avg.) 6600 Mm3/secSpillway Design Flood peak 32,000 Mm3/sec

volume 7,600 Mm3

5. The services for Stage II to be performed by the consulting firmemployed by NIA would be in two parts: Part A would cover the engineeringand economic studies required to confirm the technical feasibility of the

project and assess its economic justification; Part B would cover thepreparation of contract documents, and assistance to NIA in prequalificationof bidders, evaluation of bids and recommendations for award of contract.

The services under Part B would be required only if the Government and theBank, decided to proceed on the basis of the Part A studies. There would be

an interval of 60 to 90 days between submission of the report on Part Aand a decision to proceed with Part B of the studies.

6. Data and Studies Available for the Consultants

NIA will make the following studies and data available to theconsultants:

(a) Magat River Project Feasibility Report (5 volumes),June 1973;

(b) Basic data used in preparing the report;

ANNEX 6Attachment 1Page 3

(c) Memorandum prepared in connection with IBRD appraisal ofStage I covering designs and estimates, operation studies,and preliminary economic evaluations; and

(d) Irrigation requirements for Stage I.

7. Services Required Under Part A

Design studies, site investigations and optimization studies wouldbe carried out to develop in more detail the designs proposed in the feasi-bility report. The results of these studies would be prepared in a ProjectDesign Report. Cost estimates would be prepared for the proposed designs.

8. Design Studies. The following studies pertain primarily to thestructural design of the storage works and the safety of the reservoir:

(a) review designs proposed in the 1973 feasibility reportand modify the designs where necessary for safetyor savings in costs;

(b) recommend to NIA a program of site investigationsrequired in connection with (a) and assist NIAin its supervision (the program of site investigationshould be designed to remove all major uncertaintiesregarding the adequacy of the foundation for the damsand their stability under the design loads, and providean adequate basis for final designs);

(c) conduct detailed studies and investigations to establishearthquake design criteria for the major structures, anddetermine the need for special provisions in their design;

(d) investigate sources of construction material and determinequantities available, physical and chemical properties,and processing requirements; and

(e) undertake geological mapping of the reservoir to determineif any leakage would occur and of what magnitude, andassess the potential for landslides.

9. Hydrologic Studies

(a) review the spillway design flood study in the feasibilityreport and conduct additional studies to determine the floodhydrograph to be used as a basis for final designs;

(b) conduct flood routing studies to determine spillway capacity;

ANNEX 6Attachment 1Page 4

(c) review and make additional studies of flood frequencies tobe used in designs for river diversion during construction;

(d) review the reservoir sedimentation studies, conductadditional sediment observations, and estimate the rate ofstorage depletion due to reservoir sedimentation;

(e) review the adequacy of the proposed reservoir outlets todraw down the reservoir in emergencies, and propose modifica-tions where necessary;

(f) assess the feasibility of operating the reservoir outletsto reduce sediment depletion of the reservoir; and

(g) prepare a program for hydraulic model studies of the Magatspillway and the MARIS diversion dam, and assist NIA insupervising the studies.

10. bOptimization Studies. Operation studies carried out in thecourse of the Bank's appraisal of the Stage I project indicated possibleadvantages in (a) raising the reservoir conservation level, and (b) loweringthe rated head for the generating units. The consultants would conductadditional studies to resolve these issues; this would require:

(a) curves of project costs versus maximum conservation level;

(b) operation studies for a range of conservation levels anddifferent turbine/generator characteristics; and

(c) economic analyses to determine optimum values for finaldesigns.

11. Cost Estimates. The procedure used to estimate costs would followthe methods employed by contractors in bid preparation; estimates of thecost of equipment, equipment operation, supervisors and labor, and materialsrequired would be used to derive unit prices for the major work items.

12. Economic Evaluation. The consultant should review the study madeby IECO for the Luzon Grid in 1973, taking into account recent developments inthe National Power Corporation's investment program, demand forecast, costincreases, etc., and assess the economic viability of the Magat project aspart of the overall development of the power system in Luzon. The principalcomponents of the cost and benefit streams would be:

Cost Stream: (a) Construction costs and annual operation,maintenance and replacement costs for theStage I facilities; and

ANNEX 6Attachment 1Page 5

(b) construction and operation, maintenance and replace-ment costs for the expansion of the irrigation systemby about 23,000 ha.

Benefit Stream:

(a) incremental net production value due to increasesin cropped area (higher intensity on 75,000 haand new development on 29,000 ha); and

(b) capital costs and operation, maintenance and replace-ment costs for alternative generating facilitiesequivalent to Magat in dependable peaking and energygeneration.

Equalizing discount rate for the cost and benefit streams will be computed,and sensitivity and probability tests made for variations in the mainparameters (capital costs, farm gate prices, and thermal plant fuel costs).In estimating agricultural benefits, the consultants should draw on data andassumptions made in analyses for the Stage I development.

13. Services Required Under Part B.

Subject to satisfactory completion of the Part A studies, and aGovernment decision to proceed with the Stage II project, the consultantswould prepare contract designs, specifications, bills of quantities andtender documents suitable for international competitive bidding. Theconsultants would assist NIA in prequalification of bidders, invitationsto tender, and in evaluating bids received. Some of the investigationscarried out in Part A such as geology studies, site investigations andhydraulic model studies will be continued where necessary to provideadditional information needed for design purposes. Similarly, the costestimates will be developed in more detail for purposes of an "Engineers'Estimate" to be prepared for NIA prior to receipt of bids.

14. Consulting Experts

NIA intends to secure the services of consulting experts in damdesign, dam site geology, and earthquake design criteria. The experts wouldassist NIA in the review and approval of the consultants' designs, and meet-ings with these experts would take place in the Philippines. The consultantsshall make available to these experts all the information or studies usedin the designs for their review.

15. Administration of the Stage II Studies

NIA's Special Projects Organization will be primarily responsiblefor organization and management of the Stage II studies, and will be theconsultants' main contact within NIA.

ANNEX 6Attachment 1Page 6

16. Services to be Provided by the Government

Services and facilities that will be made available to theconsultant include the following:

(a) Counterpart professional and clerical staff as may be requiredfor the proper execution of the consultant's duties in thePhilippines. Professional staff available within the NIAincludes design engineers, hydrologists, 0 & M engineers anddrillers. Geologists and power engineers may be temporarilyprovided from the National Power Corporation. Hydraulicmodel preparation and testing capability is available atthe University of the Philippines;

(b) Suitably furnished office space in Quezon City, includingadequate office equipment and supplies that may be requiredfor the proper execution of the consultant's work. Officespace will also be provided in Cauayan, about 30 km from thedam site. Temporary office space will be provided at thesite;

(c) Housing at or near the dam site. Reasonably furnished familyliving quarters or compensation therefore will be provided for theconsultant's personnel located in Manila;

(d) Overland transportation facilities, and/or NIA or domesticair transportation between Quezon City and the project area,and service vehicles, including drivers and the cost ofmaintenance and operation required in the conduct of officialwork for the study program;

(e) All available studies, data, photographs, maps, drawings,reports, and other information pertinent to the executionof the consultant's work;

(f) Such laboratory facilities, drilling equipment, testingdevices, apparatus, instruments, etc., that may be requiredby the consultant in relation to the studies and tests; and

(g) Telephone, telegraph, cable and postage expenses and printingand reproductions required by the consultant in the performanceof the work.

17. The Government will exempt or bear the cost of any taxes, duties,fees, levies and other impositions imposed on the consultant and his personnel(other than personnel who are citizens or permanent residents of the Philip-pines) under the laws and regulations of the Philippines or any politicalsubdivision or agency thereof in respect of:

ANNEX 6Attachment 1Page 7

(a) Any payments made to the consultant or to his personnelin connection with carrying out of the agreed to services;

(b) Any equipment, materials and supplies brought into thePhilippines for the purposes of carrying out the servicesand which, after having been brought into the Philippines,will subsequently be withdrawn therefrom. Such importationsshall include the personal and household effects of theconsultant's personnel, but shall be exclusive of foodstuffs,beverages, automobiles, radios, TV's and major householdappliances.

18. The Government will also:

(a) Facilitate prompt clearance through customs of any equipment,materials or supplies required for the services and of thepersonal effects of the consultant's personnel;

(b) Ensure that the consultant's personnel and their dependentsare promptly provided with any necessary entry and exitvisas, residence permits, exchange permits and travel documentsrequired for their stay in the Philippines; and

(c) Issue all necessary permits and authorizations forcarrying out the services.

Procedure for Submitting Proposals

19. Consulting firms invited to submit proposals are requested toprovide in detail the following:

(a) A description of the firm, including its background andexperience in the work described in the terms of reference;list of past and present contracts for work of similarnature with a brief description of each and the scope ofconsultancy services undertaken; and qualifications of keypersonnel;

(b) The composition of the team proposed to be assigned to theproject both in the field and in the home office, indicatingthe positions and detailed job description for each and thenames, qualifications and professional experience of eachexpert to be assigned to the positions. Personnel proposedshould be proficient in spoken and written English;

(c) Terms and conditions under which the duties and responsibilitiesdescribed in paragraphs 7 through 13 of the terms of referencewould be carried out; financial terms are not desired at thisstage;

AN'NEX 6Attachment 1Page 8

(d) The proposed schedule of personnel assignments and an estimateof the total number of man-months;

(e) The category and number of counterpart personnel and otherlocal staff desired to be provided by the Government to assistthe consultant in the execution of his responsibilities;

(f) The policy of the Government is to utilize the services oflocal consultants, both individuals and consulting firms, tothe maximum degree possible in project planning, design andsupervision. The consultants should therefore describe intheir proposal the arrangements they would make to utilizelocal expertise. The degree to which such expertise will beutilized will be a factor in the evaluation of the proposal;and

(g) A list of vehicles and equipment anticipated to be requiredin carrying out the consultant's responsibilities.

ANNEX 7Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Technical Assistance to NIA

General

1. The National Irrigation Administration (NIA), with assistance fromthe Asian Development Bank (ADB), is currently extending and/or rehabilitatingthe Angat-Magat, Davao del Norte and Agusan del Sur projects for a total of90,700 ha. In addition, NIA is engaged, with assistance from the Bank Group,in rehabilitation and extension of the Pampanga, Aurora-Penaranda and Tarlacprojects, covering some 143,300 ha. If the proposed Magat Stage IB and thenational irrigation component in the Rural Development project on Mindoroare included, the NIA program, financed from Bank or ADB sources alone, wouldamount to 281,000 ha. This figure does not include any of the communalprojects, pump projects or domestically financed national projects.

2. Responsibility for the construction and eventual operation of allthese projects has been allocated to the newly created Special ProjectsOrganization within NIA (Annex 11). In the last five years NIA has built upa cadre of engineers with some experience of building sizable projects, how-ever the proposed pace of irrigation development and the expansion ofactivities out of Central Luzon are expected to put a substantial strain onNIA's construction management and planning capabilities.

3. The success of the new generation of irrigation projects is basedon maximization of cropping intensity, high water use efficiencies and demand-ing cropping calendars. Attainment of these objectives will depend on thejoint efforts of the extension staff, the farmers and the NIA's operationspersonnel. The programs for training Water Management Technologists includedin the Tarlac project and proposed for the Magat project are aimed at provid-ing effective coordination between water supply and agricultural requirementwithin the basic project organizational unit of 50 ha. However, these programswill not provide assistance to NIA in systems operation and maintenance, with-out which there is little prospect of effective water management. NIA cur-rently lacks expertise in this field.

4. The proposed technical assistance program would help to meet NIA'srequirements in the fields of construction management and systems operationby providing personnel with expertise in the two fields.

Objectives

5. The objectives of the program would be to provide to the SpecialProjects Organization of NIA:

ANNEX 7Page 2

(a) a construction management engineer to assist and to trainthe construction staff in construction management andscheduling to assure that construction goals and schedulesare met; and

(b) a systems operation and maintenance engineer to provideguidance and training to the operations staff in the operationand management of large irrigation and drainage systems.

Implementation

6. The services of the two engineers would be provided for a period ofthree years, for a total of 72 man-months. The functions of the two specialistswould be as follows:

(a) Construction Management Engineer. Would provide guidance toNIA staff in the scheduling and performance of constructionactivities, would advise on the preparation of critical pathconstruction schedules and assist in setting up day-to-daymonitoring procedures. He would also assist NIA staff indeveloping future construction programs and in evaluatingtheir personnel and equipment requirements. He would assistin on-the-job training of NIA staff in this field of expertise.

(b) Systems Operation and Maintenance Engineer. Would be responsiblefor assisting NIA staff in the preparation of water deliveryschedules and in their implementation. He would provide guidanceand advice on the preparation of maintenance requirements, pro-cedures and control schedules, as well as developing a projectoperation and maintenance monitoring system of all canals,laterals and hydraulic structures. He would also provide inputto the ongoing Water Management Training program as well asassistance to on-the-job training of NIA operations and main-tenance staff.

Costs

7. The proposed technical assistance to NIA is estimated to cost atotal of US$0.40 million, including a foreign exchange component of US$0.32million. Details of the cost estimate are given in Annex 8.

ANNEX 8Table 1

PHILIPPlNES

MACAT RIVER MULTIPURPOSE PROJECT: STAGE I

Cost Estimate

Fox eignLocal Foreisn Total Local Foreign Total Fxchange

(---(Pesos '000) - ---------- (US$ '000) -------1. PROJECT SERVICE AREA

Modification MARIS Diversion Dam 27,150 15,050 42,200 3,940 2,180 6,120 36Access Roads & Magat River Bridge 6,830 3,450 10,280 990 500 1,490 34Air Strip 640 430 1,070 90 60 150 40Rehabilitation - MARIS 5,010 2,270 7,280 720 330 1,050 31Extension Area - MARIS 6,400 2,850 9,250 930 410 1,340 31South Low Canal Area - MARIS 49,360 24,990 74,350 7,150 3,620 10,770 34North Main Canal Area- MARIS 50,170 23,730 73,900 7,270 3,440 10,710 32Rehabilitation - SIFRIS 21,030 9,590 30,620 3,050 1,390 4.440 31Extension Area - SIFRIS 11,490 5,660 17,150 1,670 820 2,490 33Water Management Stations 3,070 1,630 4.700 450 235 685 34

Sub-Total 181,150 89,650 270,800 26,260 12,985 ::9,245 33

Contingencies 20% 36,440 17,720 54,160 5,255 2,595 7,850Engineering Supervision 6 Adm. 107. 32.500 32,500 4.705 - -4,705

Sub-Total 250,090 107,370 357,460 36,220 15,580 i'1,800 i°

2. OPERATION & MAINTENANCE EQUIPMENT 690 10,350 11,040 100 1,500 1,600 94

3. WATER MANAGEMENT TRAINING

Project Personnel 970 410 1,380 140 60 200 30Consulting Services 70 350 420 10 50 60 83Buildings 130 40 170 25 5 30 -7Equipment, Supplies & Materials 140 1,100 1,240 20 160 180 89Contingencies 107 100 240 340 15 35 50 70

Sub-Total 1,410 2,140 3,550 210 310 520 6,0

4. STAGE II ENGINEERING STUDIES

Contractual Services 5,720 19,670 25,390 830 2,850 :,680 i7Project Personnel 2,760 - 2,760 400 - 400 1Equipment, Supplies & Materials 280 2,070 2,350 40 300 340 E8Camp Facilities 4,260 400 4,660 620 60 680 9Power Facilities 340 1,580 1,920 50 230 280 82Contingencies 15, 2'010 3,530 5.540 290 510 800 64

Sub-Total 15,370 27,250 42,620 2,230 3,950 6,180 64

5. TECHNICAL ASSISTANCE TO NIA 600 2,200 7,800 80 320 400 80

SUB-TOTAL PROJECT COST 268,160 149,310 417,470 38,840 21,660 60,500 36

Expected Price Increases 1/ 112.915 49.235 162.150 16,160 7.340 23.500 31

TOTAL PROJECT COST 381,075 198,545 579,620 55,000 29,000 8',,000 35

1/ Based on Annex 8, Table 7.

ANNEX 8PHILIPPINES Table 2

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

PROJECT SERVICE AREA

Cost Estimate

Local Foreig Total-(us$ tooo)-------

1. Modification of MARIS Diversion Dam 3,760 2,360 .6,120

2. Access Road & Magat River Bridge 94o 55o :1,490

3. Air Strip 90 60 150

4. Rehabilitation of MARIS Service Area (2,190 ha)Canal System 230 110 340Drainage System 110 50 160Road System 130 100 230On Farm Distribution & Drainage 220 100 320Water Management Stations 10 5 15

Sub-Total 7 on

5. Extension of MARIS Service Area (2,800 ha)Canal System 270 140 410Drainage System 140 50 190Road System 150 100 250On Farm Distribution & Drainage 330 160 490Water Management Stations 15 10 25

Sub-Total 9 -I i5 T

6. South Low Canal Service Area (includingenlargement of MARIS Main Canal) (9,610 ha)

Canal System 3,690 2,110 5,800Drainage System 470 210 680Road System 1,510 1,060 2,570On Farm Distribution & Drainage 1,160 560 1,720Water Management Stations 30 90

Sub-Total 6,890 3,970 10,860

7. North Main Canal Service Area (8,400 ha)Canal System 4,65o 2,470 7,120Drainage System 4l1 19o 600Road System 870 600 1,470On Farm Distribution & Drainage 1,020 500 1,520Water Management Stations 55 25 80

Sub-Total 7,005 TM- 10,790

8. Rehabilitation of SIFRIS Service Area (10,000 ha)Canal System 800 390 1,190Drainage System 490 230 720Road System 620 44 0 1,060On Farm Distribution & Drainage 1,000 490 1,490Water Management Stations 70 30 100

Sub-Total 2,970 F 7

9. Extension of SIFRIS Service Area (includingenlargement of North Main Canal) (2,000 ha)

Canal System 860 520 1,380Drainage System 100 50 150Road System 400 200 600On Farm Distribution & Drainage 240 120 360Water Management Stations 10 5 5

Sub-Total 1,610 __T55

10. Water Management Stations for Stage IA 230 130 360

Project Area Total 25,080 14,165 32,945

Contingencies 20% 5,015 2,835 7,850Ehgineering, Supervision & Administration 10% -4 705 4,705

TOTAL 34,8oo 17,000 51,800

AM=NE 8Table 3

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

WATER MANAG3MNT TRAINING

Cost Estimate

Local Foreign Total--------- (US$OO --------

1. Project Personnel 140 60 200

2. Consulting Services 10 50 60

3. Buildings 25 5 30

4. Equipment, Supplies & Materials

(a) Office Supplies, Materials & Farniture 15 15 30

(b) Farm Equipment 5 15 20

(c) Vehicles - 43 43

(d) Hydromet Equipment - 15 15

(e) Fuel, Oil, Spares - 25 25

(f) Field Supplies & Materials - 35 35

(g) Sundries - 12 12

Sub-Total Item 4 20 160 180

Sub-Total Items 1-4 175 275 450

Contingencies (10%) 15 35 50

Total 210 310 520

ANNIEX 8Table 4

PHILIPPINMS

NAGAT RIVER MULTIPURPOSE PROJECr: STAGE I

ENGINEERING STUDIES: STAGE II

Oost Estimate

Local Forei Total-------- U-----------

1. Contractual Services:

(a) Advisory Board - 40 40(b) Consulting Services 1/ 240 2,760 3,000(c) Drilling & Exploratory Adits 450 50 500(d) Hydraulic Models 100 _ 100(e) Printing Specifications & Docaments 40 - 40

Sub-Total 830 2,850 3,680

2. Project Personnel 400 - 400

3. &quipment, Supplies & Materials:

(a) Vehicles - 80 80(b) Euipment & Supplies 10 120 130(c) Temporary Quarters & Offices 30 100 130

Sub-Total 40 300 340

4. Camp Facilities: Including

Adm.Building, Laboratory, Guesthouse,Staff & Consultant Quarters (lump Sum) 620 60 680

5. Temporary Power Facilities: Including

Diesel Generators & DistributionFacilities (Lump (Sum) 5o 230 280

Sub-Total Items 1-5 1,940 3,440 5,380

Contingencies (15%) 290 _510 800

Total 2,230 3,950 6_180

1/ Based on <anex 8, Table 5

ANNEX 8Table 5

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECr: STAGE I

ENGINEERING STUDIES: STAGE II

CONTRACTUAL SERVICES

Consulting Services Cost Breakdown

Local Foei Total-------- (US$ )------- ----

1. Engineering Studies, Tests & Prelim.Designs

(a) Consultant In-Country Services 1/ 48 300 348

(b) Local Consulting Services 40 - 4C'

(c) Home Office Services - 200 200

(d) Contingency Staff 10 38 48

(e) Transportation & Per Diem 9 73 82

Sub-Total 107 611 718

Miscellaneous (Bond,Ins.,etc). 3 29 32

Fixed Fee - 120 120

SuLb-Total 110 760 870

2. Final Designs, Spec's. *L B&i-d Documents

(a) Consulting In-Country Services I/ 38 250 288

(b) Local Consulting Services 50 - 5C

(c) Hone Office Services - 1,310 1,310

(d) Continge.ncy Staff 32 128 160

(e) Transportation Rz Per Diem 3 27 30

Sub -Total 123 1,715 1,838

_Miscell:ineous 7 85 02

Fixed Fee - 200 200

Suib-Total 130 2,000 2,13'.

Total 240 2,760 3,000

1/ k. uJes lous-nig. ec2lcat-ionE mc travel costs.

ANNEX 8Table 6T

PHILIPPINES

MACAT RIVER MULTIPUR?POSE PROJECr: STAGE I

TECHNICAL ASSISTANCE TO NIA

Cost Estimate

Local Foreign Total- -- (US7 t'oo) -_______

1. Salaries & Fringe Benefits - 225 225

2. Administration & Technical Backstopping - 45 45

3. Housing & Utilities 35 - 35

4. Education ID _ 10

5. Transportation:

(a) Self & Family - Official 35 30 65

(b) Belongings - 20 20

Total 80 320 ____

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECTr_STAGE I

Expected Price Increases

Calendar Year: 1975 1976 1977 1978 1979 1980 Total

1. Civil Works US$ '000 205 3,385 11,775 18,030 11,950 6,985 52,330

Annual Inflation Rate % 1/ 16 14 12 12 12 10

idxpected Price Increases US$ '000 15 520 3,280 7,320 6,300 4,460 21,895

2. Equipment & Services US$ '000 - 1,545 5,110 1,475 25 15 8,170

Annual Inflation Rate % 12 10 8 8' 8 7

Expected Price Increases UJS$ '000 - 165 1,020 410 5 5 1,605

Total US$ t100 205 4,930 16,885 19,505 11,975 7,000 60,500

e:xpected Price Increases US$ '000 15 685 4,300 7,730 6,305 4,465 23,500

1/ Calculated by compounding the estimated rate of price increase in prior year and one halfthe rate of increase in the year concermed.

-3 co

ANNEX 9Table 1

PHILIPPIN&S

MAGAT RIVER MULTIPUR?0SE P2.0tUZCT: STAQE I

Equipment for Force Account Work

Unit To-talItems Quantity Cost Cost

- -(FUS$ I o-o )- ---

Tractor, crawler 1h0 hp 1 60 60Tractor, crawler 90 hp 6 35 210Crane, crawler, dragline 18T 3 75 225Backhoe, crawler 1 30 30Loader, crawler 1.5 cu. yd. 6 43 258Front End Loader, wheeled 1.5 cu. yd. 6 32 192

Grader, motorized 125 hp 6 40 240Roller, 3 wheel steel 12T 3 20 60Tractor, industrial w/backhoe loader 9 22 198Truck, tractor w/25T trailer 1 40 4oTruck, water 3 17 51Truck, forklift 1 20 20Truck, dump 6-8 cu. yd. 12 14 168Truck, flatbed 6T 6 12 72Truck, pickup 3/4T 4x4 9 8.5 77Jeep, wagon 4x4 9 9 81Jeep, hxh 12 8 96Mixer, concrete 1/2 cu. yd. 6 12 72Misc. Equipment & spare parts (lump sum) 50

Total 2,200

ANNEX 9Table 2Page 1

PHILIPPINES

MYACAT .RIVER MULTIPURPOSE PROJECT: STA3E I

Equipment for Operation and Maintenance

I. Presently Available Equipment-

Quantity Acquisition CostDistrict Unit Total

Items I II III Total Cost CostService Area (ha) 21,600 33,000 2O700 75,000 ---( US$ '00)--

Crane, crawler, dragline 1 1 1 3 68 2o418T

Backhoe, crawler 2/ 1 22 22

Front End Loader, wheeled 2 2 2 6 27 1621.5 cu. yd.

Tractor, crawler w/angle 2 2 2 6 26 156blade, 90 hp

Roller, 3 wheel steel 12T 1 1 1 3 16 48

Roller, vibratory 3T 1 1 1 3 9 27

Truck, dump 6-8 cu. yd. 5 5 5 15 11 165

Truck, stake 6T 2 2 2 6 10 60

Mobile Lub-e Shop 2/ 1 56 56

Total 900

1 / Equipment purchesed for constructing Stage IA area, proposed for CGMM use in thetotal Stage I service area.

2/ Common use.

ANNEX 9Table 2Page 2

PHIrLIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Equipment for Operation and Maintenance

II. New Equipment To Be Purchased-

QuantityDistrict Unit Total

Items I II III Total Cost CostService Area (ha) 21,600 33,000 20,400 75,000 -TUS$ '000)---

Loader, crawler 1.5 cu. yd. 1 1 1 3 43 129Tractor, industrial w/ 4 4 4 12 22 264backhoe-loader

Tractor, crawler 140 hp 2/ 1 60 60Grader, motorized 125 hp 1 1 1 3 40 120Truck, tractor (w/25T 1 4o 4otrailer) 2/

Truck, forkTift 2/ 1 20 20Truck, mobile repair 2/ 1 4o 40Truck, pickup 1T 1 1 1 3 9.5 28.5Truck, pickup 3/4T 4x4 1 1 1 3 8.5 25.5Truck, pickup 1/2T 2 2 2 6 7 42Jeep, wagon 4x4 2 2 2 6 9 54Jeep, 4x4 4 4 4 12 8 96Bus, mini 20-seat 2/ 1 16 16Senior Personnel Carrier 2 12.5 254x4 2/

Motor Bike 52 79 49 180 0.7 126Mixer, concrete 1/2 cu. yd. 1 1 1 3 12 36Compactor, 19x24 in. plate 1 1 1 3 5 15w/generator

Pump, water 2 to 6" 2 2 2 6 1 6Radio Transceiver (single 5 3.4 17

s.b.) 2/Weed Cutter 216 330 204 750 0.3 225Service Shop Equipment 80(lump sum)

Miscellaneous Equipment 60(lump sum)

Sub-Total 1,525

Spare Parts 75

Total New Equipment 1,600

Total O&M Equipment Cost for Stage I Service Area 2,500(IA & IB)

1/ For use in the total Stage I service area.

2/ Common use.

ANNEX 9Table 3Page 1

PHILIPPINES

MAGAT RIVER MULTIFURPOSE PROJECT: STAGE I

WATER MANAGEKENT TRAINING

List of Equipment and Vehicles

Item Estimated Cost_ ~~~~~~~~~--- (US$)--

I. Office and Training Equipment

Typewriter, 3 units 2,000Mimeo machine, 3 units 2,500Desk calculator, 6 units 500Slide projector w/screen, 3 units 500Camera, 3 units 500Movie projector, 1 unit 2,500Public address system, 3 units 41,000Tape recorder w/cassettes, 3 units 1,000Moisture meter, 3 units 1,500

15,000

II. Farm Equipment

Row seeder, 3 units 1,000Transplantor, 3 units 1,000Rotary weeder, 30 units 1,500Hand tractor w/attachments, 3 units 3,500Boom sprayer, 3 units 1,000Thresher, 3 units 7,000

15,000

III. Vehicles

Bicycle, 6 units 500Motorcycle, 6 units 4,000Pickup, half-ton, 3 units 22, 000Bus, 40-seat, 1 unit 16,500

43,000

AhIThX 9Ta>ble 3Page 2

Item Estimated Cost--- (US@)--

IV. Hydromet Equipment

Portable Parshall flumes, waterlevel recorders, raingauges, andevaporation pans (lump sum) 15 ,000

V. hiscellaneous Ecuioment

Provision for unlisted items ofequipment, apparatus andinstruments ( lump sum) 122000

Total: 1_02000

ANIEX 9Table 4

PHILIPPINES

MACjAT -. IVER MULTIPUilPOSE P;tOJECT: STAGE I

STAGE II ENGINEERING STUDIES

Equipment, Materials & Supplies

Estimated Cost--- (US.$)----

1. Vehicles

Jeep Wiagon 4x4, 2 units 10,000Jeep 4x4, 4 units 32,000Pickup 3/4T, 2 units 15,000Sedan, 2 units 15,000

Sub-Total 80,000

2. Equipment & Supplies

In situ rock testing equipment; seismic andelectric survey equipment; skid mounted coredrilling rigs; hydrodynamic pressure recordinginstruments; and miscellaneous materials andsupplies (lump sum) 120,000

3. Temporary Quarters & Offices

Mobile home, 2 bedroom, 3 units 60,000Mobile office, 10x4O feet, 2 units 40,000

Sub-Total 100, 00

4. Temporary Power Facilities

Diesel generators & distribution 210,coCFacilities (lump sum)

TOTAL £ 0)ooo

PHILIPPINES

MAkGAT RIVER. MULTIPliRPOSE PROJEr: STAGE I

Estimnated Schedule of Expenditures

TotalItem Cost FY 761/ FY 77 FY 78 FY 79 FY B0 FY 81

------------------------ (uS$'Ooo) -

Project Service Area 51,800 1,120 10,315 19,035 13,400 7,435 500

0 &1 M Equipment 1,600 - 1,000 6oo - - -

Water Management Training 520 45 185 125 80 60 25

Stage II Jrgineering Studies 6,180 750 2,740 2,000 690 - -

Technical Assistance to MIA 400 90 105 105 100 -

Sub-Total 60,500 2,oo5 14,345 21,860 14,270 7,495 525

lS&pected Price Increases 23,500 _275 32400 7,875 6,970 4,645 _335

Total Project Cost 84o000 2,280 17,745 29,735 21,240 12,140 860

I/ IPID Fiscal Years.

(CD

0 I

ANNEX 1OTable 2

PHILIPPINES

KXGAzAT IJVE-.IKULTIPU.?LPSE PROJECT: STAGE I

?.st.imadted Schedule of ;F hursements

IBRD Fiscel Year Accumulated Disbursementsand Semester US$ '000 Equivalent

Fiscal Year 1576

2nd 400

Fiscal Year 1977

1st 1,9002nd 6,200

Fiscal Year 1978

1st 12,2002nd 18,100

Fiscal Year 1979

lst 24,6002nd 30,000

Fiscal Year 1980

1st 34,2002nd 37,5oo

Fiscal Year 1981

1st 40,2002nd 41,700

Fiscal Year 1982

1st 42,000

ANIEX 10Table 3

PHILIPPINES

MAGAT RIVER MULTIPURP'OSE PROJECT: STAGE I

Proposed AllocatiolL of Proceeds of Loan

Costs ProposedCategory Total Foreign Loan

--------------(US$ million)--------------I. Civil Works:

Project Service Area 1/ 37.04 10.78Water Management Training 2/ 0.23 0.06Stage II Engineering Studies 3/ 1.65 0.11 29.7*Expected Price Increases 4/ 21-89 5..90

Sub-Total 60.81 16.85

* Of which (a) US$ 7.5 million for mDbilization and contractors' equipment, and (b) US$ 22.2 millionfor other civil works. Disbursement for (a) will be 100% of foreign expenditure and for (b) 42%of total expenditure.

II. Equipment 5/ 4.53 4.37Expected Price Increases 0.83 0.80 5.2

Sub-Total 5.36 5.17

Disbursement will be 100% of foreign expenditures for directly imported equipment, 100% ofexpenditure (ex-factory) for locally manufactured equipment and 65% of total expenditure forinported equipment procured locally.

III. Consultants & Technical Assistance 6/ 3.64 3.17Expected Price Increases 0.78 0.67 3.9

Sub-Total 4.42 3.84

Disbursement will be 100% of foreign expenditure or 60% of total expenditure.

IV. Una.located:

Physical Contingencies 7/ 8.70 3.14 3.2

(Adiainistration & Engineering) (4.71) -

TOTAL 84.00 29.00 42.0

1/ Force account equipment (US$2.2 million) excluded and transferred to Cat. II, Annex 9, TablE 1.

2/ Excludes costsof consultants (US$0.06 million) and equipment (US$0.18 million) Annex 8, Table 3.

3/ Exclides costs of consultants (US$3.18 million) and equipment (US$0.55 million) Annex 8, TaEle 4.

4/ Exclades price increases for equipwent and consultants (US$1.61 million) Annex 8, Table 7.

5/ Inclides equipment for force account (US$2.2 million), 0 & M (US$1.6 million), 'Yater ManagementTraining (US$0.18 million)and Stage II Engineering Studies (US$0.55 million).

6/ Includes consulting services for Water Management Training (US$0.06 million), Stage II EngineeringStudLes (US$3.18 million) and Technical Assistance to NIA (US$0.4 million).

7/ See Annex 8, Table 1.

ANNEX 11Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Organization & Management

1. Since 1964 the overall responsibility for the national irrigationsystems in the Philippines has been vested in the National Irrigation Admin-istration (NIA). The NIA was set up under Republic Act No. 3601 to in-vestigate, study, improve, construct and administer all national irrigationsystems. It was given the power to carry out investigations into all avail-able water resources in the country in order to utilize them for irrigationand to collect water rates from the beneficiaries of the national irrigation

*systems. Presidential Decree No. 552 of September 11,. 1974, has -furtherwidened NIA's scope by giving it "broader powers and authority to undertakeconcomitant projects such as flood control, drainage, land reclamation,hydraulic power development, domestic water supply, road or highway construc-tion, reforestation and projects to maintain ecological balance, in coordina-tion with the agencies concerned". The NIA is financed by the Governmentthrough the sale of bonds or from appropriations.

2. The governing body of the NIA is the Board of Directors, composedof a Chairman and five members, who are all ex-officio except for one memberappointed by the President of the Philippines on the recommendation of riceand corn growers. Management of the NIA is vested in an Administratorappointed by the President. The Administrator is also Vice-Chairman of theBoard. Directly below the Administrator there are three Assistant Admin-istrators, respectively responsible for Special Projects, Engineering andOperation, and Finance and Administration. Field services are managed byeight regional and two sub-regional offices, together with a number of specialproject offices.

3. The NIA is in the process of being reorganized and expanded to meetthe wider responsibilities imposed on it by PD No. 552 and by the Government'spolicy of accelerating irrigation development. The integration of the majorforeign assisted projects under a Special Projects Organization office toavoid duplication and to increase transfer of experience between projects isone of the first results of the ongoing reorganization, which is expected tobe completed by the end of 1975. The Special Projects Organization has beengiven responsibility for the Bank-assisted Central Luzon projects and forthe Asian Development Bank (ADB) assisted Angat-Magat and Davao del Norteprojects (Chart No. 9533(R)). The NIA proposes to entrust responsibility forthe execution and operation of the Magat project to the Special ProjectsOrganization.

4. Under the ADB-assisted Angat-Magat Integrated Agricultural Develop-z- nt Project (AMIADP) an Assistant Project Manager stationed in San Mateo,

ANNEX 1 1Page 2

is in charge of implementing the Magat portion of the project (Stage IA). Hereports to the AMIADP Project Manager in Quezon City, who in turn is respons-ible to the Assistant Administrator for Special Projects. Under the proposedStage IB of the project the NIA would appoint the Regional Engineer forCagayan Valley (Region II) as Magat Project Manager. The Assistant ProjectManager for Stage IA would hold the same position for Stage IB and would bein day-to-day charge of the construction phase of the project. NIA wouldprovide all the additional support staff and facilities required to allowhim to carry out his wider responsibilities.. The chain of command forStage IB would be from the Assistant Administrator Special Projects throughthe Magat Project Manager to the Assistant Project Manager on the site(Chart No. 9534). This arrangement would ensure coordination of policy atthe center and integration of execution on the site, without interfering withthe responsibilities of the two Project Managers for other aspects notdirectly connected with the implementation of either portion of Stage I ofthe Magat project. For construction there would be three engineeringdivisions under the Assistant Project Manager: the first building Stage IAin the existing MARIS; the second building the extension of the MARIS underStage IB; and the third building the portion of Stage IB centered on theSIFRIS.

5. The proposed organization for operation and maintenance is shownin Chart No. 9535. For O&M purposes the distinction between Stage IA andStage IB would no longer be necessary and the entire project area of 75,000ha would be administered by a single Project Manager. In addition to anEquipment Division and an Administrative Division, an Agricultural Develop-ment Division (ADD) would be set up. This would have the same training,research and monitoring functions for Cagayan Valley irrigation projectsas its opposite number in the UPRP organization has for the Central Luzonprojects. There would also be a small division responsible for O&M of theMARIS diversion dam and the main canal. In a future development of Stage Ilof the project it would be incorporated into a larger division principallyresponsible for the main reservoir and dam. The project area would bedivided into three Irrigation Districts based on Santiago, San Mateo andRoxas respectively. The smallest physical subdivision in the system wouldbe a 50-ha irrigation unit. Two such units would be the basic organizationalentity and would be supervised by a ditch tender. Five of the latter, or500 ha, would form a water management section under a Water ManagementTechnologist. Five sections, or 2,500 ha, would make up a water managementdivision under a Supervisor. Three to four divisions, 7,500 to 10,000 ha,would constitute a zone, under a Superintendent. The Santiago and RoxasIrrigation Districts would be divided into two zones, while the San MateoIrrigation District would consist of three zones.

ANNEX 11Table 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Cost of Operation and Maintenance

Annual CostP/ha

Salaries and Wages 63

Equipment Costs 34

Materials and Supplies 3

Total 100

ANNEX 12Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Supporting Agricultural Services

Extension

1. A number of Government organizations currently has dealings withthe farmers. The principal agencies are:

(a) The Bureau of Agriculturai Extension (BAE);

(b) The Bureau of Plant Industry (BPI);

(c) The Department of Agrarian Reform (DAR);

(d) The Agricultural Credit Administration (ACA);

(e) The Department of Local Government and CommunityDevelopment (DLGCD);

(f) The National Grains Authority (NGA): and

(g) The National Irrigation Administration (NIA)

In addition there are non-Government Rural Banks (RB).

2. In the Upper Pampanga River Project (UPRP) the need for coordinat-ing the various agencies providing services to the farmers was clearly felt.An Agricultural Development Coordinating Council (ADCC) was established forthe project to provide day-to-day control and coordination of the activitiesof the various agencies within the project area. The ADCC consisted of theProvincial Heads of all the participating agencies. The arrangement isworking well in UPRP and a similar organization is being set up for theTarlac Irrigation Systems Improvement Project and the Rural Developmentproject on Mindoro. An ADCC based on Isabela Province would be establishedfor the proposed project.

3. The BAE is mainly responsible for agricultural extension, withtechnical support provided by the BPI. A total of 152 agricultural tech-nicians services the farmers in the municipalities covering the projectarea. The technicians are all graduates and belong mainly to the BAE andDAR. The ratio of technicians to farmers is about 1:300.

ANNEX 12Page 2

4. The project would be organized on the basis of irrigation unitsof 50 ha in the same manner as the UPRP. The 20-25 farmers in such a unitwould be given every incentive to work together as a group. The NIA wouldschedule irrigation on a rotational basis thus promoting a uniformity ofof operations within each unit at any given time. The rotational area wouldalso be the basic unit for the provision of credit and the building blockfor the eventual organization of irrigation associations and cooperatives.In UPRP the NIA is assigning a Water Management Technologist to every 10 units.The same staffing pattern would be applied to the Magat project (see Annex 11).The water management staff would supplement the existing extension personnelprovided by the various government agencies and would help to increase exten-sion coverage in the project area.

5. New extension work items to be emphasized would include improvedirrigation and drainage practices; the importance of scheduling operations;the use of good quality seed and even planting; proper fertilizer application;weed and pest control; and the use of tillage and threshing machinery.

Research

6. There are two BPI research stations in Isabela province: theCagayan Valley station at San Mateo and the Ilagan station at Ilagan. Theformer deals principally with rice and the latter with upland crops. Thework on rice is focused on varietal screening, foundation seed productionand pure seed certification. In addition to the two BPI stations there isa Bureau of Soils unit, based at Ilagan, working on fertilizers, soilfertility and soil erosion. NIA has good working relations with the CentralLuzon State University, the Agricultural College of the University of thePhilippines and the International Rice Research Institute. The projectwould be able to draw on research backup from all these sources.

Fertilizer

7. Annual consumption of fertilizer in the project area currentlyamounts to less than 12,000 tons, of which a little less than 50% issulphate of ammonia. Application rates for all fertilizers run at a levelof about 100 kg/ha in the wet season and 200 kg/ha in the irrigated dryseason crop. At full development the project area would require some24,000 tons of fertilizer annually, of which about 35% would be urea andthe balance anmonium phosphate. In terms of nutrients the average rate ofapplication per crop season would be of 60 kg/ha nitrogen and 30 kg/haphosphoric acid. There are 20 commercial distributors in the project area.The supply channels are adequate to handle the increased demand.

Seed

8. About 4,800 tons of rice seed per annum are currently used in theproject area. Seed is obtained by retention from the farmers' commercialproduction and from seed-growing cooperatives. The Cagayan Valley stationproduces foundation and registered seed for bulking by seed-growing

ANNEX 12Page 3

cooperatives or selected individual farmers. At full development theproject would use approximately 5,200 tons of rice seed per annum. Therewould be no change in the existing 50 kg/ha seed rate. On the assumptionthat rice seed would be renewed every five crop seasons, the estimatedannual requirement of quality seed for the project area at full developmentwould amount to 2,100 tons. No difficulties are foreseen in supplying thisamount.

Farmers' Organization

9. As part of the Agrarian Reform program the Government through theDLGCD is promoting the formation of pre-cooperative farmers' organizations,based on the barrio or hamlet. The organizations would serve as channelsfor the inflow of technical services, credit and inputs and as assemblypoints for produce intended for market. It is hoped that at a future datethe organizations would grow into full-fledged, formally constitutedcooperatives. This approach to cooperative organization fits in well withthe 50-ha irrigation unit approach adopted by NIA in the existing CentralLuzon projects. The organizations are new and still unproven but theyappear to hold considerable promise and would be set up in the Magatproject.

10. The NIA is committed to the creation of irrigation associationsamongst the farmers which would eventually assume a large part of theresponsibility for the operation and maintenance of the national irrigationsystems. Without losing sight of the ultimate objective, the main thrustof NIA's efforts in UPRP and the other Central Luzon projects has been toorganize the farmers within the 50-ha units primarily for production andwater management. The immediate aim is to demonstrate to the farmers thatworking together and using water efficiently is possible and profitable.Once this has been established a realistic framework for setting up irriga-tion associations would exist. The project area would be expected to followthis example and gain from the experience of the Central Luzon projects.

Credit

11. Some 10-20% of the farmers in the project area finance theirrequirement of farm inputs and hired labor from their own resources. Theremainder use some form of credit. The principal sources are:

(a) banks, notably the Rural Banks (RB), the PhilippineNational Bank (PNB), the Development Bank of thePhilippines (DBP) and private banks;

(b) the Agricultural Credit Administration (ACA);

(c) input dealers, marketing organizations and millers;and

(d) money lenders.

ANNEX 12Page 4

There are 11 RBs in the project area, together with three branch offices ofthe PNB and one of the DBP.

12. To ensure the success of the Agrarian Reform program (Annex 3),the Government has proceeded to strengthen the credit institutions and tofacilitate the granting of production credit to small farmers who previouslydepended on the landlords for their requirements. RBs have been authorizedrediscounting privileges of 100%, Government guarantees of up to 85% of theloans made and low-cost money from the Central Bank. The easier credit thusmade available is employed under a system of "supervised credit", whichincludes the provision of technical services to the borrower to ensure thatrecommended practices, including variety, fertilizer and agrochemical inputs,are adopted. Loans granted under supervised credit are not secured bycollateral, but are covered by a Government guarantee; the interest is at 12%per annum and the loan is for a period of six months. For the 11 months endingon March 31, 1974, a total of P 28.0 million (US$4.1 million) was issued asproduction credit to rice farmers in Isabela province. The PNB accounted forabout 58% of the total, the RBs for 40% and the ACA for the balance. The areacovered by the credit amounted to 35,400 ha.

13. Under the "Masagana 99" program production credit was given atthe rate of up to P 700/ha, made up of P 380 for inputs and P 320 forservices, which included a provision for payment of labor and an element ofsubsistence. The Government has since raised the rate to P 1,200/ha, madeup of P 670 for inputs and P 530 for services. Such an increase would beadequate to meet the greater production costs estimated at full development.Assuming that at full project development about 10% of the farmers in theproject area would find their requirements of inputs and hired labor fromtheir own resources, some 22,000 farmers would need credit from institutionalsources. At a loan level of up to P 1,200/ha the total annual credit require-ment at full development would amount to P 81.0 million (US$11.7 million).The existing credit institutions are expected to be able to meet the require-ment.

ANNEX 13Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Present and Projected Cropping Patterns & Production

Present Cropping Pattern

1. Some 32,000 ha in Stage IA of the project, the existing MARIS, arecurrently cultivated to rice in the wet season. During the dry season some16,000 ha are cropped, giving an overall cropping intensity on the existingsystem of 150%. In Stage IB of the project 8,350 ha of the existing SIFRISare currently cultivated to rice in the wet season and about 3,400 ha in thedry season for a cropping intensity of 141%. In the rainfed areas adjoiningthe MARIS and SIFRIS, that would be developed under Stage IB of the project,only a wet season rice crop is grown on 26,650 ha. The present overallcropping intensity of Stage IA is 140%, of Stage IB 110% and of Stage I asa whole 126%. Rice is by far the most important crop in the area. Thereis some tobacco, corn and vegetable cropping, but most of this is in theMagat river flood plain, outside the boundaries of the proposed project.Annual paddy production from Stage I is estimated at 189,000 tons, with120,000 tons from Stage IA and 69,000 tons from Stage IB. The presentcropping pattern and production estimates and projected future conditionswithout the project are given in Tables 1 and 2.

2. Wet season irrigated rice is grown between July and January.Transplanting is spread over an eight-week period between July and Septemberand harvesting takes place over a similar period between mid-November andmid-January. The dry season crop is grown between November and May, withthe bulk of the transplanting in December-January and the harvest in Apriland May. The rainfed wet season crop generally lags between four and sixweeks behind the irrigated wet season crop. While a majority of farmersadheres to the timetables described above, there is considerable slippage,particularly in the irrigated areas. As a result, all stages of crop growthcan be found in the project area throughout the year. The consequentcontinuous cropping militates against efficient water management and cropsanitation. All rice is transplanted from field nurseries onto previouslypuddled land.

3. The great majority of the farmers in the existing systems growsshort-strawed high yielding varieties, while in the rainfed areas the farmersrely wholly on the lower-yielding, but hardier traditional varieties. Theaverage paddy yield in the rainfed areas is about 1.6 ton/ha, on the irrigatedareas the yield in the wet season is about 2.2 ton/ha and 2.3 ton/ha in thedry season. The low yields are due to unsatisfactory water management,

ANNEX 13Page 2

difficulty in getting the crop out of the field because of lack of roads,and poor farming practices. The latter are exemplified by uneven trans-planting, high weed infestations, insufficient use of fertilizers and agro-chemicals and untimeliness of operations.

Future Cropping Pattern

4. In the absence of the project the rate of increase in yield inthe rainfed areas is estimated at about 1.5% per annum and would most pro-bably be due to an increase in the area under high yielding varieties. Inthe existing systems the yields in both wet and dry season crops areestimated to increase by some 1.7% per annum as a result of gradual improve-ments in crop management. The use of inputs would be expected to increasewith the availability of greater supplies of credit and more extensionefforts as part of the Government's campaign for national self-sufficiencyin rice. Existing cropping intensities would remain unchanged in theabsence of additional water supplies and improvement of the system.

5. The expected changes in the cropping pattern and in crop produc-tion under the project are shown in Table 3. In Stage IA some 40,000 hawould be provided with wet season irrigation, of which 8,000 ha are cur--rently rainfed. Better water management and improved facilities would alsoallow for an increase in dry season cropping of about 9,000 ha. Croppingintensity would rise from the present 140% to 162%. In Stage IB of theproject a total of 35,000 ha would be provided with wet season irrigation,of which 26,650 are currently rainfall dependent. Better management wouldonly allow a small increase in dry season cropping for a cropping intensityof 111% compared to the current 110%. For Stage I as a whole the projectwould provide wet season irrigation on 75,000 ha and dry season irrigationon 29,000 ha for a cropping intensity of 139% compared to the existing 126%.The proposed cropping pattern based solely on rice is consistent with soilsand topography and with the customs of the local people.

Future Yields

6. With good water control, adequate supplies of credit and inputsand a strengthened extension service, future paddy yields are expected tobe 4.0 ton/ha and 4.2 ton/ha for the wet and dry season crops respectively(Table J). The projected yields would be reached five years after theintroduction of water.

7. The improved yields would be obtained from the introduction ofhigh yielding varieties throughout the project area, better land preparationthrough greater use of machinery, certified seed, row planting, heavierfertilizer input and greater expenditure on crop protection and weed control.The improved road network envisaged under the project would allow betteraccess to the farms, thus facilitating the inflow of inputs and outflow ofproduce. The projected yields are already being obtained by some farmersin the irrigated areas who are using good farming practices.

ANNEX 13Page 3

Development Constraints

8. The project would bring a change in the cropping calendar, a 10%increase in labor requirement, a greater degree of mechanization of bothland preparation and harvesting, and a demand for additional drying andstorage facilities. The most important issues are examined briefly.

9. Cropping Calendars. To ensure efficient utilization of resourcesand the avoidance of technical and organizational bottlenecks, croppingcalendars must be prepared as a basis for extension and water managementactivities. Chart No. 9536 shows a provisional calendar. The main differ-ences between the proposed and existing practices are to be found in theshift of the dry season crop from November-May to a shorter period inMarch-August. This would allow a 30-day period for system maintenance inFebruary, which is the driest month of the year. Operations for the wetseason crop would gain momentum in October-November instead of in August-September. The later start would allow for fuller utilization of peakrainfall. The proposed calendar would also permit harvesting of the wetseason crop to take place under drier conditions than at present.

10. Labor Availability. The supply and demand for labor with and with-out the project are examined in detail in Annex 16.

11. Mechanization. At present some 80% of the rainfed area reliesentirely on animal-drawn equipment for land preparation. In the irrigatedareas machinery is' used for land preparation on about 50% of the area inthe wet season crop and 70% in the dry season crop. With improved watermanagement, better access to the fields and the need for tighter schedulingof operations to maximize water use, it is estimated that the use of machin-ery would increase to the point that some 80% of land preparation in thewet season crop and about 90%7 in the dry season crop would be mechanical.It is anticipated that the machinery, mostly four-wheel tractors and rotarytillers, would be operated mainly by contractors, as is currently thepractice.

12. garvesting. The rice is harvested by sickle and the bundles maybe left for a few days in the field to dry, depending on the weather.Threshing is either carried out manually by beating the panicles on aslatted table or by mechanical threshers. The latter are fairly largemachines and need firm ground conditions. At present only some 20% of therainfed area is threshed mechanically, while machinery is used on about 60%of the irrigated area in the wet season crop area and on 70% in the dry seasoncrop. Under project conditions of much better access to the fields andimproved field drainage, it is assumed that some 90% of the cropped areawould be threshed mechanically. This would not present any difficultiesas existing contractors are enterprising and can be expected to meet therequirements.

ANNEX 13Page 4

13. Drying and Storage. The bulk of the threshed paddy is currentlysun-dried on whatever suitable surfaces are available. A few of the ricemills own small artificial driers, but they are seldom used because of thehigh operating cost compared to sun-drying. All mills have sun-drying capa-city and the National Grains Authority (NGA) proposes to supply a number ofmobile driers. The arrangements appear to be adequate for the present paddycrop of 189,000 tons. At full development the annual production from theproject would total 422,000 tons. Production from the wet season crop woulddouble, while the dry season crop would increase by 173%. The wet seasoncrop harvest should not present problems as it would take place in January-February, two of the driest months in the year. Some expansion in dryingfacilities, both solar and mechanical, would be needed to deal with theincreased output of the dry season crop harvest anticipated for thewetter July-August period. The project would provide additional solar dryingfacilities attached to the Water Management Technologist stations. The DLGCDis currently engaged in a program to provide every barrio with a paved areato be used for sport, recreation and drying of crops. The millers are awareof the need for drying and can be expected to provide whatever additionalfacilities are required. Storage capacity within the project area is adequatefor present production, but would need to be expanded to meet the increasedcrop yields. In addition to on-farm storage, there are public and privatesector storage facilities. The NGA is already engaged in building additionalstorage facilities and the private sector is expected to follow suit to meetrising paddy production from the project area.

14. Processing. There are 208 privately owned rice mills and hullersin the project area. Assuming a 12-hour working day and a 200-day millingseason, the mills have an annual capacity of about 320,000 tons of paddycompared to the current project area production of 189,000 tons. No dif-ficulties are anticpated in providing the extra milling capacity needed atfull development as the private sector is enterprising and has access tosources of capital.

Marketing

15. The farmer may sell his surplus paddy to a middleman, store it ina private or Government-owned warehouse in the hope of obtaining a betterprice, have it milled and sell the rice to a trader, or sell the paddy tothe NGA at the Government support price. While the Government is involvedin the marketing sector, there is no authority with specific responsibilityfor marketing. The part played by Government agencies and farmers' market-ing cooperatives is remarkably small. With the emphasis currently beingplaced on the development of cooperatives as an essential support toagrarian reform, it is likely that at full project development, cooperativeswould play a larger role in marketing paddy.

PHILIPPINES

M&GAT RIVER MULTIPURPOSE PROJECT: STAGE I

Present Production from the Project Area 1/

Gross Value Net Value Net ReturnsArea Paddy Farm Gate of Production of from

Yield Price Production Cost Production Project Area

(ha) (ton/ha) (P/ton) -------------- (P/ha)---------------- (P million)

3/Wet Season

Irrigated Rice A 32,000 2.2 1,905 4,190 1,i80 3,010 96.3i f B 8,350 " It it t 25.1if "AB ,50 i " " " o 121.4

Rainfed Rice A 8,000 1.6 1,905 3,050 830 2,220 17.8"I "B 26,650 ", " " " 59.1AB 34,650 t o f " 76.9

Dry Season

Irrigated Rice A 16,000 2.3 1,905 4,380 1,250 3,130 50.1"I "I B 3,400 " " t o "I 106" " AB 19.400 "A " "9"4 60.7

TOTAL A 56,000 164.2

B 38,400 94.8AB 94,400 259.0

Cropping Intensity 4/ A. 140%B = 110%

AB= 126%1/ A = Stage IA

B = Stage IBAB = Stage I Total.

2/ Based on Annex 15, Table 1. Excludes the cost of labor.3/ Without accounting for labor. m X4/ Based on a net irrigable area of: A = 40,000 ha

B = 35,000 "AB = 75,000 W

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Projected Future Production without the Project (1984) 1/

Gross Value Net Value Net ReturnsArea Paddy Farm Gate of Production of from

Yield Price Production Cost Production Project Area

(ha) (ton/ha) (P/tpn) ---------------(P/ha) ------- - (P million)

Wet Season 3! 3/

Irrigated Rice A 32,000 2.5 930 2,325 820 1,505 48.2it "B 8,350 " " " " " 12.5

AB 40 " " " " " 60.7

Rainfed Rice A 8,000 1.8 930 1,675 515 1,160 9.3if to B 26,650 " " 30.9of if AB 34,650 it " 40.2

Dry Season

Irrigated Rice A 16,000 2.6 930 2,420 840 1,580 25.3to "B 3,400 o f o " I 5.4it " AB 1940 " 30.7

TOTAL A 56,000 82.8B 38,400 48.8

AB 94,400 131.6Cropping Intensity 4/ A =140%

B =110%AB =126%

1/ A = Stage IAB = Stage IBAB = State I Total.

2/ Based on Annex 15, Table 1. Excludes the cost of labor.3/ Without accounting for labor.4/ Based on a net irrigable area of: A = 40,000 ha

B = 35,000AB - 75,000 "

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Production from the Project Area at Full Development (1984) 1/

Gross Value Net Value Net ReturnsArea Paddy Farm Gate of Production of from

Yield Price Production Cost Production Project Area

(ha) (ton/ha) (P/ton) ---------------(P/ha)--------- (P million)

Wet Season 2/ 3/

Irrigated Rice A 40,000 4.0 930 3,720 1,190 2,530 101.2If "I B 35,000 "i if t6 it 88.5

I "I AB 75,000 " " 189.7

Rainfed Rice A - - --

it "I B - - -

If "I AB - - --

Dry Season

Irrigated Rice A 25,000 4.2 930 3,905 1,240 2,665 66.6" "6 B 4,000 it "6 " " 10.7

AB 29,000 7 "

TOTAL A 65,000 167.8

B 39,000 99.2AB 104,000 267.0

Cropping Intensity 4/ A =1627.B =111%

AB =139%I/ A = Stage IA

B = Stage IBAse = Stage I Total.

2/ Based on Annex T Table 1. Excludes the cost of labor.ota

3/Without accounting for labor.4/ Based on a net irrigable area of: A = 40,000 ha

B = 35,000 "AB = 75,000 "

ANNEX 13Table 4

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Summary of Cropping Pattern and Production 1/

Cropped Area Paddy Production

Present Future Present Future

-------(ha) ----('COO tons)---

Wet Season

Irrigated Rice A 32,000 40,000 70.4 160.0

it it B 8,350 35,000 18.4 140.0

of Is wAB 40,350 75,000 88.8 300.0

Rainfed Rice A 8,000 - 12.8 -

it "B 26,650 - 42.6

it "AB 34,650 - 55.4 -

Sub-Total A 40,000 40,000 83.2 160.0

B 35,000 35,000 61.0 140.0

AB 75,000 75,000 TT2 W-7

Dry Season

Irrigated Rice A 16,000 25,000 36.8 105.0

it if B 3,400 4,000 7.8 16.8

"1 " AB 19,400 29,000 44.6 T121.8

TOTAL A 56,000 65,000 120.0 265.0

B 38,400 39,000 68.8 156.8

AB 94,400 104,000 188. Z?1TS

Cropping Intensity A 140% 162%B 110% 111%AB 126% 139%

1/ A = Stage IAB = Stage IBAB = Stage I Total.

ANNEX 14Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Market Prospects and Prices

Market Prospects

1. One of the main goals of Government policy is to attain self-sufficiency in basic foods, especially rice and corn. The deficit in rice,the main staple food crop, has been-a persistent problem for the Philippines.Official figures show that for 1963-67 the Philippines imported an averageof about 300,000 tons of rice annually. Although there were no imports ofrice in 1969 or 1970, rice stocks declined in those years. Rice importswere again over 300,000 tons in 1971, rose to 456,000 tons in 1972 due tothe disastrous floods that year and were 307,000 tons in 1973. Rice importsfor the nine months ended September 30, 1974 were about 168,000 tons, con-siderably less than the 232,000 tons imported during the correspondingnine months of 1973.

2. Official paddy production figures for the crop year ending June 30,1974 show that some 5.6 millions tons of paddy were produced from a harvestedarea of 3.4 million ha, averaging around 1.6 ton/ha. This production issome 27% above the poor 1972/73 harvest and 4.5% over the previous high of1970/71. With ppopulation around 40 million, converting paddy to milled riceat the official average recovery rate of 67% and adding 300,000 tons con-sumed out of imports, per capita absorption of milled rice in 1973/74 wasabout 100 kg. Based on the current population forecast of 50 million in1980 and assuming that annual per capita absorption of milled rice remainsat 100 kg, total demand for rice in the Philippines in 1980 would be around5.0 million tons, equivalent at the official average recovery rate to 7.2million tons of paddy. To meet this demand, paddy output would have toincrease by about 4% to 5% per year between 1974 and 1980. This isapproximately the rate achieved during the late 1960s when high yieldingrice varieties were first introduced. While the Government's Masaganacampaign to increase rice production has met with considerable success,there is still some doubt that the Philippines will be self-sufficient inrice by the early 1980s. In any case, no difficulties in marketing theadditional production from the project area are foreseen. The project areahas traditionally supplied rice for consumption in Manila and neighboringCagayan Valley provinces as well as locally, and it is expected that thispattern will continue with the project.

ANNEX 14Page 2

Prices

3. Since 1957 the Government has set an annual farm gate supportprice for paddy to encourage production and to allow some purchases of paddyby Government to build stabilization stocks. Responsibility for operatingthe system rested with an independent body, the Rice and Corn Administration,which operated unsatisfactorily. On September 28, 1972 the responsibilityfor rice and corn price stabilization was transferred to a National GrainsAuthority under the Secretary of Agriculture.

4. During the 1950s and early 1960s the support price remainedvirtually unchanged and was P 9.5 per cavan 1/ (P 216/ton) in 1961. There-after, it was gradually increased and by 1971 it reached P 20.0 per cavan(P 454/ton). Although no precise figures are available to compare theannual average market and support prices for paddy before 1965, the SectorSurvey 2/ shows the market and support price about 10% higher in 1965, andthe support price about 10% higher from 1966 to 1970. Since 1971 the marketprice has tended to exceed the support price.

5. The behavior of market prices in relation to the support price isconsistent with the record of domestic paddy output during the past decade.In the early 1960s, domestic production was unable to meet the growingdemand for rice and this tended to raise market prices above the supportprice. After the mid-1960s, increased production as a result of the spreadof high yielding varieties improved the balance between domestic productionand consumption and tended to depress market prices. During the last threeto four years the trend has reversed and the support price has becomeincreasingly less operative. As a result of continuing inflation and toencourage farmers to increase paddy production, the Government has continuedto raise the official support price for paddy, which at the beginning of1975 was P 50 per cavan (P 1 ,000/ton).

6. Through 1972, the farm gate support price for paddy and thedomestic consumer price for rice kept pace with changes in the world marketprice for rice. Since then, however, in an attempt to keep domestic pricesdown in the face of unprecendentedly high world market prices for rice, theGovernment has decided at least temporarily to subsidize consumers in urbanand rice deficit rural areas. The low official ceiling price for rice andcorrespcijdingly low farm gate price for paddy are maintained by Governmentsales of imported rice on the domestic market below cost. Although officialfigures on the amount of the subsidy are not available, and the transactionis obscured by a large proportion of government-to-government and barterarrangements, a rough calculation indicates the order of magnitude. TheBank's commodity analysts give the 1975 price for Thai 25%-35% broken rice

1/ Before 1974 a "cavan" or sack of paddy was equivalent to 44 kg. Since1974 the official weight of a cavan of paddy is set at 50 kg.

2/ IBRD Agricultural Sector Survey, Philippines, May 2, 1973 (ReportNo. 391-PH). Annex 10 Table 13.

ANNEX 14Page 3

as US$435 per ton. Adding US$45 ocean freight yields a cif Manila price ofUS$480 (P 3,310) per ton. The official domestic consumer price at thebeginning of 1975 was P 1.9 per kg. or P 1,900 per ton, which represents asubsidy of P 1,410 (US$204) per ton. Assuming that 250,000 tons of importedrice are consumed in 1975, the total subsidy would be some US$51 million.

7. The Bank projects the world market price of Thai 25%-30% brokenrice to fall (at constant 1975 prices) from US$435 per ton fob Bangkok toaround US$210 per ton in the 1980-85 period. These projections have beenused to estimate the present and future farm gate prices of paddy in theeconomic analysis. The corresponding farm gate prices fall from P 1,905per ton (P 95 per cavan approximately) in 1975 to P 930 per ton (P 47 percavan approximately) in 1980 and beyond. It is assumed that over thisperiod the Government will maintain the current price ceiling for riceof P 1.90 per kg. but allow the current support price for paddy of P 50 percavan to fall to P 47 at constant 1975 prices. This Implies that by 1980the subsidy to consumers will fall to zero and the market farm gate priceand support price for paddy will be equal. The projected price structurefor rice for 1975 and to 1980 and beyond as used in the economic analysisis presented in Table 1.

PHIIEPPINES

MAGAT RIVER MULTIPURPOSE PROJECP: STAGE I

Price Stracture for Rice, 1975-1980 and Beond(P/ton at Constant Mid-1975 Prices)

1975 1976 1977 1978 1979 1980 & Beyond

Rice

Export price Thai ($ 435) ($ 374) ($ 309) ($ 253) ($ 223) ($ 210)25%-30% brokens fob Bangkok 3,002 2,581 2,132 1,746 1,539 1,449

Ocean Freight & Insurance 310 310 310 310 310 310

Manila Handling Charges 35 35 35 35 35 35

Transport Isabela to Manila -280 -280 -280 -280 -280 -280

Price of Rice ex-Mix, Isabela 3,067 2,646 2,197 1,811 1,604 1,514

Milling Costs (equivalent to valueof by-products) - - - - - -

Paddy

Paddy equivalent price, Isabela(63% recovery) 1,930 1,665 1,385 1,140 1,010 955

Handling & Transport Costs,Farm to Mill -25 -25 -25 -25 -25 -25

Farm-gate Paddy Price 1,905 1,640 1,360 1,115 985 930

(P/cavan approximately) (95) (82) (68) (56) (49) (47)

m XrD 4

ANN 1 5Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Crop and Farm Budgets

1. The existing and proposed cropping patterns are given in Annex 13.This annex shows the following:

(a) Production costs for irrigated and rainfed rice underpresent and future "with" and "without" project conditions(Table 1). Present costs are based on the results of asurvey carried out by NIA and interviews in the area duringappraisal. In the absence of the project little change inthe level of inputs is expected in the rainfed areas. Someimprovement of husbandry is assumed in the irrigated areas.The input levels for future "with project" conditions arebased on recommendations by the Bureau of Soils and theBureau of Plant Industry and the assumption of increasedmechanizatlon of cultivation and threshing.

(b) Monthly labor requirements for the dry and wet season cropsbased on present and proposed cropping calendars (Table 2).It is assumed that under project conditions the laborrequirement for land preparation and harvesting would bereduced by the use of machinery while there would be anincrease in the labor requirement for crop management,including such activities as weeding, fertilizer andpesticide application and irrigation.

(c) Crop budgets under present and future conditions "with"and "without" the project (Table 3).

(d) Farm budgets for typical family farms of 2.0, 3.0 and 4.0 hafor both Stages IA and IB of the project (Tables 4 and 5).The budgets are calculated on a cash flow basis and onlyhired labor has been costed. The monthly requirement forhired labor is calculated by comparing the labor requirementwith the availability per farm of a maximum of 40 man-days/month and a total of 480 man-days/year of family labor.Future water charges are at the level NIA has agreed shouldbe applied to the Pampanga, Penaranda, Tarlac and RuralDevelopment projects at full development, namely 3.5 cavansof paddy/ha in the wet season and 4.4 cavans/ha in the dryseason. Payment for land is calculated in accordance with

ANNEX 15Page 2

Presidential Decree No. 27 on the assumption that the majorityof farmers would be amortizing owners under the Agrarian ReformProgram. In Stage IB separate "future with project" budgets areshown for newly irrigated and rehabilitated land. The "newlyirrigated" area covering the present rainfed area would receiveirrigation only in the wet season and would account for 76%of the total area of Stage IB. The "rehabilitated" area coveringthe existing SIFRIS would get some dry season irrigation.

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

1/Rice Crop Production Costs-

Present Future Without Project Future With ProjectWet Season Dry Season Wet Season Dry Season Wet Season Dry SeasonV

Cash Inputs (P/ha) Rainfed Irrigated Irrigated Rainfed Irrigated Irrigated Irrigated Irrigated

Cultivation 90 125 150 100 140 160 150 170Seed 100 (50) 105 (60) 105 (60) 50 55 60 60 60Fertilizer 65 (45) 400 (245) 470 (290) 55 240 270 410 410Agro-Chemicals 30 40 50 60 80 100 230 240Harvesting 525 (275) 485 (255) 450 (235) 220 270 215 275 290

Other 20 25 25 30 35 35 65 70Interest (40) (60) (65) (40) (65) (70) (100) (100)

Total Cash Inputs 830 (550) 1,180 (810) 1,250 (875) 515 (555) 820 (885) 840 (910) 1,190 (1,290) 1,240 (1,340)

Labor In uts 3(man_daysan y7ha)

Land Preparation 28 28 28 25 25 22 20 20

Planting 32 32 32 32 32 32 32 32

Crop Management 14 15 18 15 18 21 29 30

Harvesting 26 25 22 23 20 20 19 18

Total Labor Inputs 100 100 100 95 95 95 100 100

1/ Economic prices based on world market prices for rice and fertilizer for use in economic analysis. Figures in parentheses are financial prices prevailing at appraisal for

use in farm budgets. Costs at present are higher than in future because world market prices for rice (seed) and fertilizers are projected to fall (at 1975 constant prices)

and because threshing, which is now done mainly by hand on a crop-sharing basis is expected to become more mechanized in the future without the project, and 907 mechanized

at full development with the project.

2/ Based on the following assumptions at full development.

(a) Cultivation - Mechanical 90% @ P180/ha.

Animal 10% @ P701ha.(b) Seed rate 50 kg/ha @ average P1.20/kg.(c) Fertilizer - Urea 80 kg/ha: 16-20-0 150 kg.

Urea @ P1.89/kg; 16-20-0 @ Pl.72/kg.(d) Agro-Chemicals - Lump sum.(e) Harvesting - cutting by hand and 10% manual threshing @ 20% of yield value

- 90% mechanical threshing @ 6% of yield value

(f) Interest @ 12% per year on production credit for 9 months on 90% of cash inputs.

3/ Excluding labor handling farm machinery, the cost of which is included under cash inputs.

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Monthly Labor Requirements for Various Rice Crops (man-days/ha) 1/ 2/

Jan Feb Mar Apr ay Jun Jul Aug Sep Oct Nov Dec TotalWet Season

Irrigated Rice P 2 - - - - - 18 24 20 8 13 15 100

W - - - - - - 17 22 20 11 13 12 95

W 16 8 - - - - 2 5 13 23 21 12 100

Rainfed Rice P 9 13 13 - - - - 12 13 15 12 13 100

W 8 13 10 - - - - 10 12 15 12 15 95

W

Dry Season

Irrigated Rice P 23 9 6 13 10 - - - - 3 18 18 100

W 23 10 8 11 10 - - - - - 15 18 95

W - - 4 25 29 12 17 13 - - - - 100

V/ P = Present.W = Future Without Project.W = Future With Project.

2/ Excluding Labor Handling Farm Machinery.

I XU'

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Rice Crop Budgets 1/

Present Future Without Project Future With Project

Wet Season Dry Season Wet Season Dry Season Wet Season Dry SeasonRainfed Irrigated Irrigated Rainfed Irrigated Irrigated Irrigated Irrigated

Yield (ton/ha) 1.6 2.2 2.3 1.8 2.5 2.6 4.0 4.2

Farm Gate Price (P/ton)1,000 1,000 1,000 930 930 930 930 930

Gross Value of Production (P/ha)1,600 2,200 2,300 1,675 2,325 2,420 3,720 3,905

Production Costs,Excluding Labor (P/ha) 550 810 875 555 885 910 1,290 1,340

Net Value of Production,Excluding Labor (P/ha)1,050 1,390 1,425 1,120 1,440 1,510 2,430 2,565

Labor Requirements(man-days/ha) 100 100 100 95 95 95 100 100

1/ Financial costs and prices are used, based on Table 1.

kn

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Farm Budgets: Stage IA

_____------- 2.0 ha Farm -------------- -------------- 3.0 ha Farm----------_- ------------ 4.0 ha Farm--------------

Present Future w/Project Present Future w/Prolect Present Future w/ProjectRainfed Irrigated Irripated RainfFed rrigated Irrigated Rainfed Irrigated Irrigated

Transplanted Rice (ha) 2.0 3.0 3.2 3.0 4.5 4.8 4.0 6.0 6.4

Total Cropped Area (ha) 2.0 3.0 3.2 3.0 4.5 4.8 4.0 6.0 6.4

Cropping Intensity (7M) 100 150 162 100 150 162 100 150 162

Total Paddy Production 1/ (ton) 3.2 6.7 13.0 4.8 10.1 19.6 6.4 13.4 26.1

Gross Value of Production 11 (P) 3,200 6,700 12,090 4,800 10,100 18,230 6,400 13,400 24,275

Production Costs(Excluding Labor) (P) 1.100 2,495 4,190 1,650 3.740 6,280 2,200 4.990 8.375

Costs of Hired Farm Labor 2/ (P) - 120 50 30 745 460 505 1,475 1,260

Net Value of Production(Before Water Charges) (P) 2,100 4,085 7,850 3,120 5,615 11,490 3,695 6,935 14,640

Water Charges 3/ (P) - 85 575 - 125 865 - 170 1,150

Net Value of Production(After Water Charges) (P) 2,100 4,000 7,275 3,120 5,490 10,625 3,695 6,765 13,490

Annual Payment for Land 4/ (P) 825 1,130 2,060 1,235 1,700 3,090 1,645 2,265 4,120

Net Crop Income (P) 1,275 2,870 5,215 1,885 3,790 7,535 2,050 4,500 9,370

Farm Labor Requirement(men- days) 200 300 320 300 450 480 400 600 640

1/ Based on Tables 1 and 3.2/ Based on maximum of 40 man-days/month and a total of 480 man-days/year of family labor.3/ Based on present charges of P25/ha in the wet season and P35/ha in the dry season and proposed future charges of P165/ha and P205/ha for wet and dry seasons respectively.41 Based on amortizing owner with annual payments over 15 years @ 6% compound interest on the unpaid balance.

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT STAGE I

Farm Budgets: Stage IB

___2.____---------2.0 ha Farm------------ ------- 3.0 ha Farmn-4.--- --- 0 ha Farm------------------

Present Future w/Project 1/ Present Future w/Project 1/ Present Future w/Proiect I/

Rainfed Irrigated Irrigated N Irrigated R Rainfed Irrigated Irrigated N Irrigated R Rainfed Irrigated Irrigated N Irrigated R

Transplanted Rice (ha) 2.0 2.8 2.0 2.9 3.0 4.2 3.0 4.4 4.0 5.6 4.0 5.9

Total Cropped Area (ha) 2.0 2.8 2.0 2.9 3.0 4.2 3.0 4.4 4.0 5.6 4.0 5.9

Cropping Intensity (%) 100 141 100 148 100 141 100 148 100 141 100 148

Total Paddy Production 2/ (ton) 3.2 6.2 8.0 11.8 4.8 9.4 12.0 17.9 6.4 12.5 16.0 24.0

Gross Value of Production 2/ (P) 3,200 6,200 7,440 10,975 4,800 9,400 11,160 16,645 6,400 12,500 14,880 22,320

Production Costs 2/(Excluding Labor) (P) 1,100 2,320 2,580 3,785 1,650 3,480 3,870 5,745 2,200 4,640 5,160 7,705

Cost of Hired Farm Labor 2/ (P) - 70 50 50 30 685 360 365 505 1,340 840 1,010

Net Value of Production(Before Water Charges) (P) 2,100 3,810 4,810 7,140 3,120 5,235 6,930 10,535 3,695 6,520 8,880 13,605

Water Charges 2/ (P) - 80 330 515 - 115 495 780 - 155 660 1,050

Net Value of Production(After Water Charges) (P) 2,100 3,730 4,480 6,625 3,120 5,120 6,435 9,755 3,695 6,365 8,220 12,555

Annual Payment for Land 2/ (P) 825 1,130 2,060 2,060 1,235 1,700 3,090 3,090 1,645 2,265 4,120 4,120

Net Crop Income (P) 1,275 2,600 2,420 4,565 1,885 3,420 3,345 6,665 2,050 4,100 4,100 8,435

Farm Labor Requirement(man-days) 200 280 200 290 300 420 300 440 400 560 400 590

1/ Irrigated N = Previously rainfed land.Irrigated R = Previously irrigated land after rehabilitation.

2/ Same as in footnotes in Table 4.

ANNEX 16Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Farm Labor Analysis

Labor Supply

1. Based on data from the 1970 Census of Population and Housing, the1971 Agricultural Census, the Department of Agrarian Reform and the projectfeasibility report, the rural population of the Stage I project area at thebeginning of 1975 is estimated at around 205,000 1/. This consists of about24,000 farm families and some 9,000 other families occupied principally orentirely in agricultural production. The average farm family size is 6.2,from which two full-time workers are available for farm work, giving a totalfarm family labor supply of 48,000 workers. Assuming each of the other9,000 families also supplies two workers, the total estimated project arearural labor force is 66,000. Assuming each worker is available 240 days peryear, a monthly average of 20 days, the total available annual labor supplyis 15.8 million man-days, or an average of 1.3 million man-days per month.The monthly labor supply is assumed slightly flexible, with the labor forceprepared to work up to an average of 22 days per worker in months of highlabor demand (i.e. transplanting, harvesting), and supplying less labor inslack months. This gives a maximum monthly labor supply of 1.4 millionman-days.

2. From 1960 to 1970, while total population in the Philippines grewby about 3% per year, population in Isabela province grew by nearly 5% peryear due to heavy internal migration. Assuming that migration continuesin future, but at a slower pace, resulting in an annual growth of 4%, arural labor force of some 92,000 would be available at full project develop-ment of Stage I in 1984. This would be equivalent to a total annual laborsupply of 22.1 million man-days, or a monthly average of 1.8 million man-days.

Labor Demand

3. Estimates of average monthly and annual labor requirements per hafor different rice crops are given in Annex 15, Table 2. Mechanization ofland preparation and paddy threshing is already widespread, particularly onland with some existing irrigation. In future without the project, it isassumed that some additional mechanization of land preparation and threshing

1/ The farm labor analysis has been calculated on the 75,000 ha Stage Iproject area.

ANNEX 16Page 2

would take place, thereby slightly reducing per ha labor requirements. Thetiming of cropping operations in the present Magat and Siffu river irrigationservice areas varies widely. This diversity contributes to the difficultiesof water management and of scheduling inputs and supporting services. Withthe project, strict scheduling of operations would be essential to permitadequate irrigation of the whole area. This in turn would require furthermechanization of land preparation, particularly for the dry season crop.At the same time practically all threshing would be done by hired mechanicalthreshers. Notwithstanding this additional mechanization, average laborrequirements per ha at full project development are estimated to be similarto present levels because of higher crop management requirements.

4. Estimates of total monthly labor requirements are given inTable 1. The present annual requirement is about 9.4 million man-days, orabout 60% of the estimated rural labor supply. The demand for labor in theproject area has a pronounced seasonal pattern. Peak monthly demands inAugust and December require more than 20 days per worker, while some two-thirds of total yearly labor is needed in the five months August throughDecember. Demand for available manpower falls from 60% in January to 15%in May, and to near zero in June. In future without the project the totalannual labor requirement would fall slightly to around 9.0 million man-daysdue to increased mechanization, while the seasonal employment pattern wouldremain as at present. The project would increase total yearly labor demandby a small amount, but would considerably affect seasonal labor demand. Atfull development total annual requirements would be 10.4 million man-days,some 16% or 1.4 million man-days greater than under without project conditions.The wet season peak demand would be concentrated and shifted to the periodOctober through January due to a tighter scheduling of cropping operations,and to a later planting to obtain maximum benefit from yearly rainfall andthe avoidance of harvesting during the high rainfall month of November. Thedry season labor requirement would be altered to the period March to Augustto allow system maintenance in the dry conditions of January-February, andto make better use of available rainfall. Total dry season labor require-ments would still be considerably less than those of the wet season asStage I of the project does not provide any dry season water storage.

Economic Cost of Farm Labor

5. Detailed information on wages actually paid in the project areais limited. Most work is done by unpaid family labor and traditional"exchange" labor. Information on off-farm employment is even less reliable.The wage for hired labor in peak agricultural seasons is around P 6 per man-day, which is assumed to reflect the opportunity cost of labor to the economyat such times. In months of high rural unsm.ployment, which characterizemost of the year, the opportunity cost of labor would be much lower. Theeconomic cost of farm labor in the project area was therefore estimated bytaking account of the generally prevailing rural unemployment and extremeseasonal fluctuations in labor demand.

ANNEX 16Page 3

6. It is postulated that the marginal opportunity cost of farm laborin the project area can be approximated by an S-shaped curve (Chart 9537(R)).The marginal opportunity cost is positive at all levels of labor demandand increases as more labor is employed in farm work. The increase is slowinitially, reflecting the scarcity of alternative productive employment, butbecomes more rapid as the labor supply becomes fully used. At full employ-ment in the project area, the opportunity cost is assumed equal to themarket wage of P 6 per man-day. As labor demand increases beyond thispoint, the market wage rate continues to rise until it reaches P 7 per man-day, at which level it remains constant for subsequent demand increases.This reflects the mobility of the Philippines rural labor force, andindicates that large numbers of laborers would be attracted to the projectarea from surrounding areas at that market wage.

7. It is reasonable to approximate the S-shaped curve by threestraight line segments. Three points determine the position of the curve.Point A represents the minimum opportunity cost of farm labor which isestimated to be P 2 per man-day, equal to P 1.5 as the economic value ofalternative employment (casual non-farm labor, fishing, house repairs,etc.) plus P 0.5 to supply the additional food requirements of more strenuousfarm work wi.h the project. Point B indicates that at full employment ofrural labor the opportunity cost would equal the market wage of P 6 per man-day. The horizontal segment to the right of Point C indicates that at P 7per man-day as many laborers as needed would be available for farm work inthe project area.

8. The monthly marginal opportunity cost may be read directly fromthe curve at the corresponding level of labor demand. With the project, itvaries from P 2.1 per man-day in dry season months of high unemployment toP 5.6 per man-day in the peak month of October. The total economic cost offarm labor is then the area under the curve up to the level of employment.Computed this way, the future economic cost of farm labor would be P 28.3million with the project at full development and P 23.3 million without theproject, or an incremental cost of P 5.0 million. This would be equivalentto pricing the incremental employment of 1.43 million man-days per year ata shadow wage rate of P 3.50 per man-day.

PHILIPPINESMAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Estimated Opportunity Cost Curve for Farm Labor

C7.0…;w

0~~~~~~~~~~~~~~~~~0

60

'3 3.0coa

CL4.0

'0

3 .0 __

1.0 _ _ _

0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6

Farm Labor Demand (Million Man-Days/Month)World Bank-9537 (R)

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Total Monthly Labor Requirements ('000 man-days) -

Area Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total(ha)

Wet Season

Irrigated Rice P 40,350 81 - - - - - 726 968 807 323 525 605 4,035W 40,350 - - - - - - 686 888 807 444 525 484 3,834w 75,000 1,200 600 - - - - 150 375 975 1,725 1,575 900 7,500

Rainfed Rice P 34,650 312 450 450 - - - - 416 450 520 416 450 3,464w 34,650 277 450 347 - - - - 347 416 520 416 520 3,293

Dry Season

Irrigated Rice P 19,400 446 175 116 252 194 - - - - 58 349 349 1,939W 19,400 446 194 155 213 194 - - - - - 291 349 1,842w 29,000 - - 116 725 841 348 493 377 - - - - 2,900

Total

P 94,400 839 625 566 252 194 - 726 1,384 1,257 901 1,290 1,404 9,438W 94,400 723 644 502 213 194 - 686 1,235 1,223 964 1,232 1,353 8,969w 104,000 1,200 600 116 725 841 348 643 752 975 1,725 1,575 900 10,400

1/ P - PresentW - Future without ProjectW - Future with Project

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Economic Cost of Farm Labor at Full Project Development

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Labor Requirement W 1.20 0.60 0.12 0.73 0.84 0.35 0.64 0.75 0.98 1.72 1.57 0.90 10.40

(Million man-days) Wy21 0.72 0.64 0.50 0.21 0.20 - 0.69 1.24 1.22 0.96 1.23 1.35 8.96

Marginal Opportunity Cost W 3.9 2.7 2.1 2.8 2.9 2.4 2.7 2.8 3.2 5.6 5.1 3.0

(PAman-day) W 2.8 2.7 2.6 2.2 2.2 - 2.7 4.1 4.0 3.1 4.0 4.4

Average Economic Cost

of Farm.Labor W 2.7 2.3 2.0 2.5 2.5 2.3 2.3 2.4 2.6 3.3 3.1 2.6 2.7

(PI/an-day) W 2.4 2.3 2.4 2.0 2.0 - 2.3 2.7 2.9 2.5 2.8 2.9 12.6

Ecomomic Cost of Farm Labor W 3.3 1.4 0.2 1.8 2.1 0.8 1.5 1.8 2.5 5.7 4.9 2.3 28.3

(P million) W 1.7 1.5 1.2 0.4 0.4 - 1.6 3.4 3.4 2.4 3.4 3.9 23.3

l[cremental Economic Costof Farm Labor

(f aiIIion) W-W 1.6 -0.1 -1.0 1.4 1.7 0.8 -0.1 -1.6 -0.9 3.3 1.5 -1.6 5.0

IW = Future with project.

ii U = Future without project.

ANNEX 17Page 1

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Economic Analysis

I. STAGE I

1. The assumptions made in evaluting the economic rate of return ofStage I were:

(a) Benefits - The expected paddy yields, prices, gross returns,production costs, net returns (without accounting for laborcosts) and labor requirements per ha are as shown in Annexes 13and 15. The cropping calendar as proposed for Stage IB wasassumed to apply for the total Stage I area. Farm gate pricesfor paddy used in the economic analysis are based on the Bank'sworld market price projections for milled rice and are derivedin Annex 14. Table 1 shows the expected project benefits atfull agricultural development of Stage I.

(b) Investment Costs - Investment costs were calculated in mid-1975prices, and the total investment cost included in the economicanalysis was US$74.47 million This consists of the costs forStage IA works (US$22.04 million); Stage IB works (US$51.80million); Water Management Training Program (US$0.52 million);and the estimated difference between an economic price forcement based on world market values and the actual cost to thePhilippine Government of domestically produced cement (US$0.11million). The cost of O&M equipment has been included underannual O&M costs, as have the yearly incremental cost of theWater Management Technologists. Costs due to expected priceincreases (US$23.5 million) have not been included.

(c) Development Period - According to the project implementationschedule, some 7% of the project area would be improved in timefor the 1977 main wet season crop, 33% for the 1978 crop, 66%for the 1979 crop, and 100% for the 1980 wet season crop. Dryseason crop benefits from the improved areas would be lagged ayear, i.e. the first dry season crop from the improved area wouldbe harvested in 1978. It has been assumed that the projectedyield levels would be achieved over five years in equal install-ments, beginning with the first crop grown under upgraded con-ditions. Full Stage I project benefits would be achieved in1984.

ANNEX 17Page 2

(d) Pricing of Labor - Farm labor was evaluated at a shadow wagerate, which varies seasonally and averages some P 2.7 per man-day over the year under "with" project conditions at full devel-opment, compared to a full employment market wage of P 6.0 perman-day. A detailed analysis is presented in Annex 16. Theuse of unskilled labor in construction and development works islimited and all labor employed in such works was valued at themarket wage rate.

2. Using the foregoing assumptions and discounting Stage I benefitsand costs over a 50-year project life, the economic rate of return of Stage Iis estimated to be 18% (Table 4).

Sensitivity Analysis

3. Several of the basic assumptions made in the economic analysishave been varied in order to examine their impact on the rate of return.These factors were chosen to test the project's sensitivity to cost over-runs and delays in construction; to a 25% increase in the world market priceof rice; to failure to achieve the projected cropping intensity; and to ahigher opportunity cost of farm labor. The effects of these changes inassumptions on the rate of return were as follows:

Alternative Rate of Return(x)

(a) A two-year delay in reaching full projectbenefits due to failure to complete constructionon time 14

(b) A 20% increase in construction costs 15

(c) A combination of a two-year delay in reaching fullproject benefits and a 20% cost overrun 12

(d) A 25% increase in the world market price of rice 24

(e) A combination of a 25% cost overrun and a 25%increase in the price of rice 20

(f) A 25% decrease in project benefits due to acombination of decreased yields and area resultingfrom failure of farmers to attain the proposedcropping intensity 14

(g) The valuing of farm labor at the market wage rateof P 6 per man-day throughout the year 17

ANNEX 17Page 3

4. In the economic analysis, Stage I was treated as a unit since itsdivision into sub-stages is purely for administrative convenience due todifferent sources of financial assistance and has no engineering or agri-cultural justification. Nevertheless, a hypothetical incremental analysis,conservatively attributing the costs of all facilities common to the wholeproject area to Stage IB and assuming that Stage IA of the existing MARIShas a prior right to valuable dry season irrigation water, shows that therate of return on Stage IB alone would be about 11%.

STAGE II

5. The proposed engineering studies would determine whether Stage IIof the project would be implemented and what form it would take. However,a preliminary evaluation of Stage II has been made using the followingassumptions:

(a) Project Features. Stage II would consist of constructionof the Magat and Baligatan dams, expansion of the irrigationfacilities by an additional 22,500 ha, and installation ofpower generating facilities, switch yards, transmission linesand substations. Construction of Stage II would commence in1979 and be completed in 1985.

(b) Benefits

(i) Irrigation. The additional rice area irrigated wouldbe 22,500 ha in the wet season and 68,500 ha in the dryseason. The cropping pattern, cropping calendar, expectedpaddy yields, prices, gross returns, production costs,net costs and labor requirements per ha used for Stage IIwere similar to those for Stage I. The areas cropped andthe expected benefits at full agricultural development areshown in Table 2.

(ii) Power. Total installed capacity would be 300 NW, ofwhich 200 MW would be commissioned in 1985 and 100 MWin 1986. The main function of the Magat plant wouldbe peaking. Taking account of the power system, andassuming a reliability level of 95%, the dependablepeaking capability would be 250 MW (i.e., capabilitythat would be available for at least 95% of the time).The average annual energy production would be 1,170 Gwh.

For the purposes of this preliminary evaluation the benefitshave been assessed as the cost of the comparable thermalalternative. A rigorous evaluation of the power benefitsof Magat would require a detailed system analysis includingthe consideration of a mixture of gas turbine and thermal

ANNEX 17Page 4

plants as the alternative power source. The use of gasturbines for peaking would introduce questions regarding thetype and availability of fuel for them, and their O&M costswould be high if diesel oil or Bunker C fuel is used. Asfuture additional thermal capacity is already planned, it canbe considered at this stage as a feasible alternative to theproposed Magat plant. The thermal alternative is assumed tobe an oil fired steam generating plant of 250 M capacity ata capital cost of some US$430 per kwh (estimated July 1975price level). Fuel costs of US$2.0 per million Btu (equivalentto US$11.60 per barrel of crude) have been used and a heat rateof 9,500 Btu per kwh. Operation and maintenance costs for thethermal alternative have been estimated at 2.5% of capital cost.

(c) Investment Costs. The total estimated investment costcalculated at mid-1975 prices included in the analysis wasUS$422.0 million, made up as follows:

Item US$ million

Engineering and Administration 40.0Dam & Service Facilities 294.0Power Facilities 64.0Irrigation Service Area 21.0Additional Economic Cement Costs 3.0

Total 422.0

Some US$32.0 million of hydro-power facilities would be replacedin year 40. The cost of O&M equipment and the incremental costof the Water Management Technologists are included under annualO&M costs, which are estimated at US$0.4 million per year forthe irrigation service area and US$1.0 million per year for thedam and power plant.

(d) Development Period

(i) Irrigation. The additional 22,500 ha of wet seasoncrop would be first irrigated in the ninth year ofconstruction, i.e. during the 1984 wet season, andthe additional 68,500 ha of dry season irrigationwould commence immediately following, and be harvestedin 1985. The projected yield levels would be achievedover five years in equal installments, with wet seasonyields reaching a maximum in 1988, and dry season yieldsin 1989.

ANNEX 17Page 5

(ii) Power. Benefits equivalent to the capital costs of thecomparable thermal alternative plant would be spreadover a five year period beginning in 1981, and the samebenefits would occur again for another five-year periodfrom year 41 to year 45, when the thermal plant wouldhave to be renewed. Benefits equivalent to fuel andO&M costs of the thermal plant would begin in year ten(1985) and would continue for the life of the project.The time stream of power benefits is shown in Table 5.

(e) Pricing of Labor. Farm labor was evaluated at a shadow wagerate, which varies seasonally and averages some P 3.1 per man-day over the year under "with" project conditions at fulldevelopment, compared to a full employment market wage of P 6.0per man-day. This shadow wage rate is slightly larger than thatused for Stage I calculations due to the large increase indemand for dry season labor under Stage II. The use of un-skilled labor in construction and development works is limitedand all labor employed in such works was valued at the marketwage rate.

6. Using the foregoing assumptions and discounting benefits and costsover a 50-year period, the economic rate of return of Stage II is estimatedto be 12% (Table 5).

Sensitivity Analysis

7. The assumptions regarding the year of commencement of irrigationand power benefits, the construction time, investment costs, and price ofrice have been varied in order to examine their impact on the rate of returnand the results are as follows:

Alternative Rate of Return(%)

(a) a two-year delay in reaching full project benefitsbecause of construction difficulties 11

(b) a 20; increase in construction costs 10

(c) a combination of a two-year delay in reaching fullproject benefits and a 20% cost increase in construction 9

(d) a 25,' increase in the world market price of rice 13

ANNEX 17Page 6

Stages I and II

8. Using the assumptions listed for both Stages I and II, and discountingtheir benefits and costs over a 50-year period, the economic rate of returnfor the combined Stages is estimated at 13% (Tables 3 and 6).

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Economic Analysis - Net Value of Production - Stage I

Area PaddT Farm Gate Gross Value Production Net Value Net Returns from________ Yield 1/ Price of Production Costs 2/ of Production Project Area

(ha) (ton/ha) (P/ton) …(--- P(p/ha)----…------- (P million)

Wet Season

Irrigated Rice W 40,350 2.5 930 2,325 820 1,505 60.7W 75,000 4.0 930 3,720 1,190 2,530 189.8

Rainfed Rice W 34,650 1.8 930 1,674 515 1,159 40.2W

Dry Season

Irrigated Rice W 19,400 2.6 930 2,418 840 1,578 30.6W 29,000 4.2 930 3,906 1,240 2,666 77.3

Total

W 94,400W 104,000

_ W WW -with project, W = without project -----(P million)------

1/ From Annex 13, Tables 1 & 2. Total Net Value of ProductionBefore Costing Labor 131.5 267.1

2/ From Annex 15, Table 1.Less Imputed Coat of Labor 3/ 23.3 28.3

3/ From Annex 16, Table 2.

Total Net Value of Production 108.2 238.8

Net Incremental Value ofProduction at Full ProjectDevelopment 130.6 c

(D >C

F X

PHILVPPINE

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Economic Analysis - Net Value of Agricultural Production - Stage II

Area Padcd Yield Farm-Gate Gross Value Production Net Value Net Returns FromPrice of Production Costs of Production Pro.ect Area

(ha) (ton/ha) (P/ton) --------------------P/ha------------------- (P dllion)

Wet Season

Irrigated Rice W - - -

W 22,500 4.0 930 3,720 1,190 2,530 56.9

Rainfed Rice W 22,500 1.8 930 1,674 515 1,159 26.1W _

Dry Season

Iriigated Rice W - - - - - -

W 68,500 4.2 930 3,906 1,240 2,666 182.6

Total

W 22,500W 91,000

W With project - W = Without projectW W

-- 7P.,millionT---Total Net Value of Production

Before Costing Labor 26.1 239.5

Less Imputed Labor Cost 5.1 33.5

Total Net Value of Production 21.0 206.0

Net Incremental Value of Productionat Full Project Development 185.0

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Economic Analysis - Net Value of Agricultural Production on Stages I & II

Area Paddy Yield Farm-Gate Gross Value Production Net Value Net Return fromPrice of Production Costs of Production ProJect Area

(ha) (ton/ha) (P/ton) -------------------------------- _ P million)

Wet Season

Irrigated Rice W 40,350 2.5 930 2,325 820 1,505 60.7w 97,5oo 4.0 930 3,720 1,190 2,530 246.7

Rainfed Rice W 57,150 1.8 930 1,674 515 1,159 66.2W - - _-

Dry Season

Irrigated Rice W 19,400 2.6 930 2,418 840 1,578 30.6w 97,5oo 4.2 930 3,906 1,240 2,666 259.9

Total

w 116,900W 195,000

W = With project - W Without project

W_____(p million3 F

Total Net Value of ProductionBefore Costing Labor 157.5 506.6

Less Imputed Labor Cost 28.7 61.0

Total Net Value of Production 128.8 445.6

Net Incremental Value of Productionat Full Project Development 316.8

-3 F

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE T

Economic Costs and Benefits - Stage I(Us$ million)

Prolect Costs IncrementalYear Capital 0 & M Total Project Benefits

0 (1975) 0.5 0 0.5 0

1 (1976) 6.1 0 6.1 0

2 (1977) 18.0 0.1 18.1 0.2

3 (1978) 23.7 0.3 24.0 1.1

4 (1979) 17.1 0.8 17.9 4.7

5 (1980) 9.1 1.2 10.3 9.1

6 (1981) 0 1.2 1.2 12.5

7 (1982) 0 1.2 1.2 15.9

8 (1983) 0 1.2 1.2 18.2

9_49 (1984-2024) 0 1.2 1.2 18.9

Economic Rate of Return 18%

PHILIPPINES

MAGAT RIVER MVLTIPURPOSE PROJECT: STAGE I

Economic Costs and Benefits - Stage II(US$ million)

Project Costs Incremental Project BenefitsDam & Power O&M O&M Dams

Year Irrigation Facilities Irrigation Power Total Irrigation Power Total

0 (1975) 0 0 0 0 0 0 0 01 (1976) 3.0 0 0 0 3.0 0 0 02 (1977) 3.0 0 0 0 3.0 0 0 03 (1978) 3.0 0 0 0 3.0 0 0 04 (1979) 31.3 0 0 0 31.3 0 0 05 (1980)' 48.9 0 0 0 48.9 0 0 06 (t981) '70.6 3.0 0 0 73.6 0 5.0 5.07 (1982) >7.l 6.0 0 0 77.1 0 20.0 20.08 (1983) 67.7 20.0 0 0 87.7 0 40.0 40.09 (1984) 50.4 20.0 0.2 0 70.6 0.8 38.0 38.8

10 (1985) 4.0 12.0 0.4 1.0 17.4 22.3 30.0 52.311 (1986) 4.0 3.0 0.4 1.0 8.4 23.6 25.0 48.612 (1987) 0 0 0.4 1.0 1.4 24.9 25.0 49.913 (1988) 0 0 0.4 1.0 1.4 26.3 25.0 51.3

14-40 (1989-2015) 0 0 0.4 1.0 1.4 26.8 25.0 51.841 (2016) 0 32.0 0.4 1.0 33.4 26.8 30.0 56.842 (2017) 0 0 0.4 1.0 1.4 26.8 45.0 71.843 (2018) 0 0 0.4 1.0 1.4 26.8 65.0 91.844 (2019) 0 0 0.4 1.0 1.4 26.8 63.0 89.845 (2020) 0 0 0.4 1.0 1.4 26.8 30.0 56.8

46-49 (2021-2024) 0 0 0.4 1.0 1.4 26.8 25.0 51.8

Economic Rate of Return 12%

\JIH

PHILIPPINES

MAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Economic Costs and Benefits - Stage I + Stage II(US$ million)

Project Costs IncrementalYear Capital 0 & M Total Project Benefits

0 (1975) 0.5 0 0.5 01 (1976) 9.1 0 9.1 02 (1977) 21.0 0.1 21.1 0.23 (1978) 26.7 0.3 27.0 1.14 (1979) 48.4 o.8 49.2 4.75 (1980) 58.o 1.2 59.2 9.16 (1981) 73.6 1.2 74.8 17.57 (1982) 77.1 1.2 78.3 35.98 (1983) 88.7 1.2 89.g 58.29 (1984) 70.4 1.4 71.8 57.710 (1985) 16.0 2.6 18.6 71.211 (1986) 7.0 2.6 9.6 67.512 (1987) 0 2.6 2.6 68.813 (1988) 0 2.6 2.6 70.2

14-40 (1989-2015) 0 2.6 2.6 70.741 (2016) 32.0 2.6 34.6 75.742 (2017) 0 2.6 2.6 90.743 (2018) 0 2.6 2.6 110.7144 (2019) 0 2.6 2.6 108.745 (2020) 0 2.6 2.6 75.7

46-49 (2021-2024) 0 2.6 2.6 70.7

Economic Rate of Return 13%

PHILIPPINESMAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Implementation Schedule

WORKITEM1976 1977 1978 1979 1980

WORK ITEM ~~~J F M A M fiJI SO N I J|F|IM|A|M|J|J|AIS|O|N|C J F MIAIM |JL A O|N|D J|F|MIA M JJA S OIN D JIFIM A M J JA S O N D

STAGE IARehabilitation of existing systems (40,000 ha) o m

STAGE lB A 5XMobilizationmmXService facilitiesModification of Magat diversion dam

Magat System (MARIS) Rehabilitation of existing systems (2.190 ha) Construction of new areas (20,810 ha) :1 I

Construction of roadsIrrigation service facilities IE

Siffu System (SIFRISIRehabilitation of existing systems (10,000 ha)Construction of new areas (2,000 ha) *~

Construction of roadsIrrigation service facilities

STAGE 11 ENGINEERING STUDIES

WATER MANAGEMENT TRAINING

TECHNICAL ASSISTANCE TO NIA

NOTE:Shading indicates wet season months

World Bank-9531

PHILIPPINESMAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Critical Work Action Schedule Leading to Award of Contract for Magat Dam

1975 1976 1977 1978 1979CRITICAL WORK ACTIONS _-_-. _

Quarter 2nd 3rd 4th 1 st 2nd 3rd 4th 1 st 2nd 3rd 4th 1 st 2nd 3rd 4th 1 st 2nd 3rd 4th

1 ) Board presentation A2) Short list of consultants3) Consultants' proposal

'4) Selection of consultants & negotiations5) Approval by IBRD & award6) Consultant mobilization7) Investigations & tests:

Reservoir investigations -Dam site investigations - -Materials investigations w

8) Engineering & economic studies:Hydrologic studies - _ -Sedimentation studies - -Design studies _Hydraulic model tests - -Cost estimates

9) Economic evaluation of Stage II10) Preparation & submission of report on studies11) NIA-IBRD review & decision to proceed with Stage II12) Final designs, specifications, bill of quantities -13) Advertising & prequalification of bidders14) Bid document review by IBRD15) Call for bids -0t16) Bid evaluation & contract award

Key Actions

World Bank-9684

PHILIPPINESMAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

NIA Organization for Special Projects

NIA BOARD

--

ADMINISTRATOR

ASSISTANT ADMINISTRATORlSPECIAL PROJECTS

ENGINEERING DEPARTMENT AGRICULTURE DEPARTMENT

LL

I-

O OPERATION AND MAINT. DIVISION EVALUATION AND STATISTICS DIV.u-L

= i ~~~~~~~~~~~~~~~~~BUSINESS MANAGEMENT1 EQUIPMENT DIVISION OFFICE

(i) CENTRAL LUZON PROJECTS GROUNDWATER PUMPCENTRAL LUZON PROJECTS l l IRRIGATION PROJECT

ANGAT-MAGAT INTEGRATEDI AGRICULTURAL DEVELOPMENT PROJECT -_ MAGAT MULTIPURPOSE

iLU (AMIADP) I 1 PROJECT

DAVAO DEL NORTE A NLINTEGRATED IRRIGATION PROJECT AGUSAN DEL SUR

(DNIIP) L IRRIGATION PROJECT

Includes Upper Pampanga, Aurora-Penaranda & Tarlac Projects World Bank-9533(R)

PHILIPPINESMAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Proposed Organization for Project Construction

NIA BOARD

NIAADMINISTRATOR

ASST. ADMINISTRATOR|SPECiAL PROJECTS

PROJECT 1 PROJECT MANAGR STAGE 11MANAGER MAGAT IRRIGATION ENGINEERING

I IAMIADP) PROJC CONSULTANTS

r~~----J---ASSISTANOTHER PROJECSTAT OTHER

RESPONSIBILITIES MANAGER | RESPONSIBILITIES|

& FINAE | ENGINEERING AGRICULTURE EQUIPMENT

------- .--

DIVISION I DIVISION 11 DIVISIONI (MARIS IA) (MARIS IB) (SIFRIS IB)

* _ m AMIADP Responsibilities World Bank-9534

PHILIPPINESMAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Proposed Organization for Operation and Maintenance

NIAADMINISTRATOR

ASST. ADMINISTRATORSPECIAL PROJECTS

MAGAT IRRIGATIONPROJECT

MANAGER

| EQUIPMEN |r AGRICULTURAL | MARIS DAM | DINISTRATIVE DSPVISION DEVELOPMENT DT VISION I VISI ON

DIVISION 1NDIVISION

DITIC| DISTRICT 2 DITRC 3SANTIAGO SAN MATEO ROXAS(21,600 Ha) (33,000 Ha) (20,400 Ha)

ZONE ZON ZO|N-ESUPERINTENDENT-1 SUPERINTENDENT- _ SUPERINTENDENT-

(2) (3) (2)

DIVISION DIVISION | DIVISIONSUPERVISOR SUPERVISOR SUPERVISOR

(9) (13) (8)

WATER MANAGEMENT WATER MANAGEMENT WATER MANAGEMENTTECHNOLOGIST TECHNOLOGIST [ TECHNOLOGIST

(43) _ (66) (41)

(26 f DI (30 [ _. (204

DITCHTENDERS DITCHTENDERS DITCHTENDERS

(216) r s (330) i p World (204)

-Personnel requirements shown in parentheses World BNank-9535

PHILIPPINESMAGAT RIVER MULTIPURPOSE PROJECT: STAGE I

Proposed Cropping Calendar

J F M A M J J A S 0 N D

MaintenanceI I I I INWet Season | TRice I (75,000 Ha.)

M m

H H

| N

Dry Season I TRice T(29,000 Ha.) J

I |I II ~~~~~~H

l _ ~~~~~~~~~~~343Notation: Rainfall MM.28

C: Cultivation 232N: Nursery19T: Transpianting 195M: ManagementH: HarvestM M .ays n. 5 C 64 43 4 63 14

J F M A M J J A S O N D

World Bank-9536

12tt- -!uf.&, Cen)ti

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10 SaMte 1

/, 5t rO TI PROVINCE NAMES

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16 1 SILOCOS SUR z <j-O ~Ga,

- ,---f Rias , I 4 LA MUNON

'24 5 MOUNTAIN PROVINCE

9M CAG AYAAM

aT I MULIPUPOS PROiECT

To B r B o

aP piant

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t a 0 8 t 1 , _

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