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December 29, 1996

Philippines: Fifth Highway Project (Loan 2418-PH)

The Implementation Completion Report (ICR) on the Philippines Fifth Highway project (Loan 2418-PH, approved in FY85) was prepared by the East Asia Regional Office with Appendix B provided by the Borrower. The Loan for US$102 million was approved on May 17, 1984, amended twice and closed on December 31, 1993, three years behind schedule. US$11.05 million was canceled.

The project objectives were to: (i) improve the existing network of national highways and bridges; (ii) raise maintenance to adequate levels; (iii) improve general highway management, particularly maintenance; and, (iv) further develop the local construction industry. The project components were: (a) a reconstruction program for bridges and culverts; (b) improvement of one segment and restoring several segments of national highways; (c) consulting services for engineering and studies; and (d) technical assistance (TA) and training for highway maintenance and local construction industry.

The project's civil works and studies, as amended, were completed. The project experienced delays due to a shortage of counterpart funds, a devaluation, and natural events. The Bank's supervision and ability to be flexible were commendable in the face of natural and manmade disturbances—an earthquake, a typhoon, and civil unrest. The economic rate of return (ERR) of projects ranged from 15 to 100 percent at appraisal vs. 21 to 39 percent at completion. Due to numerous contracts, over 800, the ERR was re-estimated only for 25 percent of total project costs. The success of TA and training is unclear because of time lags for observing success and because of their imprecision in the Staff Appraisal Report (SAR) and the ICR. Both the SAR and the ICR give indications that there is a lack of management skills and tools in the road administration, this should have been addressed in the TA program.

The ICR rates the project outcome as satisfactory, its sustainability as likely, and the Bank performance as satisfactory, but considers a rating on institutional development as not applicable. The Operations Evaluation Department concurs with the first three ratings and, in addition, rates institutional development as negligible.

The key lesson learned is that at a time of economic stabilization, donors should help finance projects only when they are part of a sound program of high priority public expenditures, thus assuring that they will receive the necessary counterpart funds.

The ICR is adequate. It examines most issues thoroughly, except institutional development. Future operation and monitoring are discussed but plans are weak or missing.

No audit is planned.

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