Document of
The World Bank                    FILE COPY
FOR OFFICIAL USE ONLY
Report No. P-3085-PH
REPORT AND RECOMMENDATION
OF THE
PRESIDENT OF THE
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED LOAN
TO THE
REPUBLIC OF THE PHILIPPINES
FOR A
SECTOR PROGRAM FOR ELEMENTARY EDUCATION
June 4, 1981
This document has a restricted distribution and may be used by recipients only in the performance of  |
their official duties. Its contents may not otherwise be disclosed without World Bank authorization.



CURRENCY EQUIVALENT
P 7.5    =    US$1.00
p 1.0         US$0.13
ABBREVIATIONS
BEE     -  Bureau of Elementary Education in the Ministry of Education
and Culture
EDPITAF - Educational Development Projects Implementing Task Force
MEC     -  Ministry of Education and Culture
OPS     -  Office of Planning Services in the MEC
GOVERNMENT OF THE PHILIPPINES
FISCAL YEAR
January 1-December 31
GOVERNMENT OF THE PHILIPPINES
SCHOOL YEAR
July-April



FOR OFFICIAL USE ONLY
PHILIPPINES
SECTOR PROGRAM FOR ELEMENTARY EDUCATION
Loan and Program Summary
Borrower:        Republic of the Philippines
Amount:          $100.0 million
Terms:           The loan would be for a term of 20 years, including 5 years
of grace, with interest at 9.6% p.a.
Program
Description:  The Government's development program (1981-90) for elementary
education is designed to strengthen policies, management and
instructional programs in elementary education. It gives
particular emphasis to regions with low rates of student
achievement and participation. Policy changes are being
introduced to reduce disparities in educational opportunity,
to improve quality, and to increase the efficiency of the
school system as follows: a revised procedure is being adopted
to allocate a larger share of development expenditures to
educationally deprived regions; the share of recurrent
expenditure for nonsalary items is being increased to improve
the quality of instruction; the policy for teacher
utilization is being revised to make more efficient use of
subject matter teachers; and policies for student admissions,
evaluation, and progression are being improved to raise the
participation rate of the school-aged group and to reduce the
dropout rate. The organization, functions, and staffing of
the main agencies involved with elementary education are
being modified to strengthen sector management and planning.
Instructional programs and materials and the distribution of
facilities and teachers will also be improved.
The development program involves about 60 subprojects to be
undertaken between 1982 and 1985. These subprojects would
provide instructional materials (an average of 11 million
basic textbooks per year), facilities (11,000 classrooms per
year), and training for managers, planners and school staff.
A revised curriculum, a scheme for monitoring teacher supply,
and systematic evaluation of sector performance would also be
introduced. The cost of the program is estimated at $448
million in 1982-85, with a foreign exchange cost of $129
million. The proposed Bank loan would finance about 22% of
This document has a restricted distribution and may be used by recipients only in the performance of
their official duties. Its contents may not otherwise be disclosed without IFC authorization.



- ii -
the program's total cost and about 77% of its foreign
exchange cost. As a result of improvements in efficiency,
particularly in teacher utilization, the development program
is not expected to increase the real recurrent cost per
student enrolled.
A deliberate effort has been made to rely as much as possible
on the Borrower for program management. The Ministry of
Education and Culture would be responsible for subproject
approval and implementation. Criteria and procedures have
been developed to ensure that subprojects adhere to program
objectives and are feasible.
The sector program is innovative and complex. In addition,
the exact outcome of the revised policies and management
practices cannot be accurately predicted. A risk exists
that delays will be encountered during implementation. To
reduce this risk, experienced staff, responsible for
formulating the sector program, have been recruited for
program management and the assistance of consultants will be
provided. In addition, management and implementation
procedures have been designed to allow for adaptation and
modification as experience is gained.
Estimated Cost:                                           Local  Foreign  Total
----- $ million…
Civil works                             186.5    46.5   233.0
Equipment, materials and paper            1.2    26.2    27.4
Furniture                                 7.5      3.7    11.2
Development, printing and distri-
bution of instructional materials    10.1        8.3    18.4
Staff development                        14.7      1.6    16.3
Evaluation, studies and preparation
of future projects                      1.0      2.0     3.0
Technical assistance                      2.5      2.5     5.0
Total base cost estimate           223.5    90.8   314.3
Physical contingencies                   21.5      8.7    30.2
Price contingencies                      73.7    29.9   103.6
Total cost                         318.7   129.4   448.1



- iii -
Financing Plan:                              Government         IBRD         Total
--------- $ million -----------
Civil works                    330               -         330
Equipment, furniture
and paper                      -             50           50
Instructional materials
(development, printing,
distribution) and
staff development             12             28           40
Technical assistance             -               9            9
Unallocated                      6              13           19
Total                     348            100          448
Estimated
Disbursements:  Bank FY       FY 82   FY 83    FY 84    FY 85    FY 86    FY 87
-----------------------$ million…----------------
Annual         1.5      9.5       14       20        45       10
Cumulative    1.5    11.0        25        45        90      100
Staff Appraisal
Report:         No. 3423(a)-PH dated May 29, 1981






REPORT AND RECOMMENDATION OF THE PRESIDENT
OF THE INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN
TO THE REPUBLIC OF THE PHILIPPINES
FOR A SECTOR PROGRAM FOR ELEMENTARY EDUCATION
1.         I submit the following report and recommendation on a proposed
loan to the Republic of the Philippines for the equivalent of $100.0 million
to help finance a sector program for elementary education. The loan would
have a term of 20 years, including 5 years of grace, with interest at 9.6%
per annum.
PART I - THE ECONOMY
2.         An economic report, entitled "The Philippines:  Domestic and
External Resources for Development" (No. 2674-PH), was distributed to the
Executive Directors under SecM79-822, dated November 16, 1979. A mission
visited the Philippines in 1979 to analyze the extent of poverty and review
policies affecting it. The mission¸s report, "Aspects of Poverty in the
Philippines: A Review and Assessment" (No. 2984-PH) was distributed to the
Executive Directors on December 1, 1980 under SecM80-919. The next economic
mission is planned for September 1981. Country data are given in Annex 1.
Performance in the 1970s
3.         During the 1970s, economic performance improved considerably,
raising the trend GNP growth rate to 6% at the end of the decade. The ratio
of fixed investment to GNP rose from 16% to 24% during this period. Half of
the increase in investment was in the public sector; the ratio of public
investment to GNP rose from 1.5% to 5.5% during the decade, reflecting
substantially expanded revenues and improved implementation capacity. Export
growth was accelerated, particularly in nontraditional manufactures, while
growth in imports of oil and consumer goods was restrained. Overall, expan-
sion in agricultural production was quite rapid, and foodgrain deficits were
eliminated in the second half of the decade. Population growth was also
slowed in the 1970s. However, the economy still has a number of structural
problems. Most importantly, the efficiency of investment has been low,
particularly in manufacturing industry producing for the domestic market;
industrial employment has not expanded rapidly enough; and poverty is still
widespread.
4.         The economy-s structural problems are reflected in its balance of
payments. Improvements achieved in the early 1970s were more than offset
by a sharp deterioration of the Philippines' terms of trade since 1975,
stemming from the oil price increases, accelerated international inflation,



-2-
and depressed prices for major export commodities. Consequently, the
Philippines has had to rely heavily on foreign borrowings to finance the
imports needed to maintain growth and investment levels. To hold the
external deficit at a sustainable level in the coming years, additional
structural adjustments in the balance of payments will have to be achieved
through reduced dependence on imported oil, increased efficiency of
investment, and improved performance of the industrial sector.
Development Strategy
5.        The Government's Development Plan for 1978-82 has as objectives the
rapid expansion of productive employment; improvements in economic, social and
regional equity; and provision for the basic needs of the population. The
agricultural strategy emphasizes food production, crop diversification, and
stronger linkages with processing industries. The industrial strategy calls
for promotion of export industries, development of small- and medium-scale
industries, regional dispersion of industrial growth, increased efficiency
of investment, and selected large-scale projects. The Plan includes social
development targets in education, housing, health, and family planning. In
addition, the Plan outlines development strategies for each of the country's
13 regions. A recently completed Food and Nutrition Plan, which complements
the Development Plan, aims at eliminating malnutrition by 1990 through
increased food production and nutrition programs.
6.        The Development Plan elaborates the policy directions pursued by
the Government in recent years and is broadly in line with the Bank's
assessment of the country's development priorities. In view of changes in
the international economy, the Government has recently revised the Plan,
reducing the target of GNP growth for 1981-82 from 8% to 6%.
Macro Issues for the 1980s
7.        As noted above, the Philippines faces several fundamental long-
standing development problems which will need increased attention during the
1980s. The four most important of these are reduction of population growth,
poverty alleviation, employment generation, and increased efficiency of
investment.
8.        Population Growth.  The Philippines has achieved an impressive
reduction in population growth from 3% in 1970 to about 2.4% in 1980./1
Nevertheless, rapid population growth is still straining available land
resources, aggravating already serious employment and poverty problems, and
burdening the public budget with a high growth in demand for basic public
services. Further reduction of population growth is, therefore, vital for
the country's development. The Philippines has an active family planning
program which has expanded rapidly during the 1970s. Participation in the
family planning program is still low by East Asian standards, and the number
/1 This figure is based on a more recent survey than the Annex I data.



of new acceptors has reached a plateau as the program has faced the
increasingly difficult problem of extending into rural areas.
9.        Poverty Alleviation.  Despite satisfactory economic growth during
the 1970s, the incidence of poverty remains high at 40-45%. Income distri-
bution continues to be very skewed, and there is a small elite which is
conspicuously wealthy. Regional disparities remain pronounced, with the
incidence of poverty reaching 60-70% in the least developed regions. Large
numbers of people, especially in the rural areas, which account for about 80%
of the poor, still suffer from malnutrition and lack safe water, basic
education and health facilities. An increasingly unfavorable man/land ratio,
the resulting expansion of cultivation into marginal lands, limited employment
opportunities in the industrial sector, and the sharp deterioration in the
external terms of trade have put downward pressure on real incomes. Although
the Government instituted several programs during the 1970s that should
directly improve the lives of the poor, most of these were implemented on a
large scale only toward the end of the decade and will require several years
to achieve a marked impact. Key steps needed to alleviate poverty will be the
development of rainfed agriculture, more balanced regional development, rapid
expansion of manufacturing employment, continued improvement in basic public
services, and further reduction of population growth.
10.       Employment Generation.  Growth of productive employment, partic-
ularly in the industrial sector, has lagged behind the rapid expansion of the
labor force, and considerable underemployment exists. During the 1970s, the
agriculture and service sectors had to absorb an excessively high proportion
of new entrants to the labor force. Manufacturing employment stagnated in the
first half of the decade, and picked up only slightly thereafter as
labor-intensive export production grew. Overseas employment, especially in
the Middle East, increased rapidly, providing a temporary income opportunity.
As the absorption capacity of the agricultural sector is limited, employment
generation in manufacturing will have to increase considerably in the 1980s.
11.       Efficiency of Investment.  While private and public investment rose
sharply during the last decade and have reached reasonable levels, the
accompanying expansion of the economy-s real output has been relatively low.
In addition, the low rate of industrial job creation indicates that, on
average, investment has not been labor-intensive enough.  The low efficiency
and labor-intensity of investment have been caused by the distortive effects
of past trade, industrial, and financial policies on the allocation of
capital.  In view of tight resource constraints to be faced in the 1980s, the
efficiency and labor-intensity of investment will be critical determinants of
future growth in output and employment.
Sectoral Issues
12.       The Philippines' macro-economic performance reflects achievements
and problems at the sectoral level. The more important of these are
summarized below for the agricultural, industrial, and energy sectors.



- 4 -
13.       Agriculture and Rural Development.  Although there has been con-
siderable variation among subsectors, the trend growth rate of the
agriculture, fishery, and forestry sector was about 5% during the 1970s,
which is quite high by international standards. The Philippines, once a
chronic importer of rice, began to export modest quantities in 1977, and
rice self-sufficiency appears assured for the 1980s. Production of fish and
nontraditional export crops, such as bananas and coffee, has also expanded
rapidly. However, the development of rainfed agriculture, which is of
critical importance for raising the incomes of the rural poor, has lagged
behind. Technologies to increase yields of corn and feedgrains are still
under development, as are multiple cropping systems. Productivity in the
important coconut export sector is low because of a large number of overage
trees, although a major coconut replanting program is scheduled for the early
1980s. Furthermore, population pressure on the arable land is steadily
increasing, and soil erosion in hilly areas that have been logged over or
settled is a serious problem.
14.       The Government has provided substantial support for rural develop-
ment. Agricultural production has benefitted from the introduction of high-
yielding varieties, improved credit, extension, and irrigation programs.
Rural infrastructure programs in water supply, electrification and health
services have also been expanded significantly. An agrarian reform of rice
and corn land, instituted in 1972, is well advanced.
15.       While these programs have achieved considerable improvements, the
gains have been uneven among regions, crops, and farming systems.  Difficult
issues remain to be addressed if the living conditions of the rural poor are
to be improved. Solutions to the interrelated problems of low incomes and
poor soils in marginal settlements will require the development of tree
cropping and mixed farming technologies, resolution of land tenure questions,
and substantial upgrading of the administrative capability of the agencies
concerned. Steps are also needed to reduce the incidence of poverty among
subsistence fishermen, coconut farmers, and sugar cane workers.
16.       Industry.  Although industrial and trade policies were improved in
the early 1970s, manufacturing industry grew only at about the same rate as
GDP, and its growth pattern remained unsatisfactory during the decade.
Excessive protection and artificially low cost of capital have led to low
efficiency of investment and stagnation of manufacturing employment in
industries producing for the domestic market. The introduction of export
promotion measures in the early 1970s did lead to extremely rapid growth in
exports of nontraditional manufactures, which rose from about $50 million in
1970 to $2.1 billion in 1980. Nontraditional manufactures now account for
one-third of the country's total exports. However, the export expansion has
been concentrated on a few items, and backward linkages with the rest of the
economy have been limited due to the high cost and low quality of domestic
inputs. Consequently, nontraditional manufacturing export industries have
developed as an outward-looking enclave in an otherwise heavily protected
economy.



-5-
17.       The objectives of the Government's industrial policy are to
accelerate growth of output and employment, sustain the high growth of manu-
factured exports, reduce import dependence of domestic industry, improve the
efficiency of investment, and promote industrial development outside the
Manila area. Since industries producing for the domestic market still
account for more than 80% of manufacturing investment, output, and employ-
ment, restructuring of home industries as well as continued export expansion
are needed to achieve these objectives.  In 1979, the Government initiated a
series of fundamental policy reforms designed to improve the performance of
the industrial sector.   The first phase of the reform program, which is
currently being implemented, focuses on strengthening of export incentives
and reduction of protection through tariff reform and liberalization of
import licensing. The Government is preparing a second phase of reforms that
will address shortcomings in the investment incentives and promotion system as
well as restructuring of industries which have to adjust to a more
competitive environment.
18.       Energy.  Another sector critical for the success of the Philippines'
structural adjustment effort is the energy sector. Since the 1973-74 oil
price increase, the Philippines has made a considerable effort to reduce its
dependency on imported oil. Demand restraint - largely through pricing and
taxing measures - held the growth rate of energy consumption one percentage
point below that of GDP.  Steps to increase and diversify domestic energy
supply have included the development of hydroelectric, geothermal, coal, and
nuclear energy. Limited domestic petroleum production also began in 1979.
However, due to the long gestation period of energy projects, domestic
energy production still constituted only 18% of total commercial energy
consumption in 1980. In response to the "second oil crisis", the Government
is accelerating its program for domestic energy production but further
taxing and pricing initiatives will also be needed to restrain demand.
Domestic Resource Mobilization and Allocation
19.       Domestic Savings and the Financial Sector.  During the 1970s, gross
domestic savings expanded considerably, reaching 24% of GNP and financing
about 80% of total investment. However, the savings ratio needs to rise by
another 2-3% of GNP in order to maintain investment levels while simultan-
eously limiting the current account deficit and the country's reliance on
foreign savings.  In addition, interest rates and other financial incentives
affecting the labor-intensity and efficiency of investment, the flexibility
and competitiveness of the financial system, and the maturity of lending all
needed to be increased. Hence, in 1980-81 the Government introduced a
comprehensive set of financial reforms. Interest rates are being substan-
tially decontrolled and revised monetary, fiscal, and rediscount policies are
being introduced. Legislation to encourage multipurpose banking has also
been adopted to reduce the present excessive specialization and fragmentation
of the financial system and to increase competition.
20.       Public Finance.  During the 1970s, the Government has raised the
overall level of public expenditures by 5% of GNP and has increased the shares



- 6 -
going to economic services and investment. Toward the end of the decade,
total government expenditures reached an estimated 17% of GNP, with public
investment equalling about 5.5% of GNP. The expansion of public expenditures
has made possible improvements in basic infrastructure, particularly in
transportation, power and irrigation, as well as expanded programs in urban
development, health and family planning.  At present, the size of the public
investment program is appropriate, and its composition is, with a few
exceptions, broadly consistent with the country's development priorities.
21.       In the last few years, however, public investment has been cons-
trained by the availability of resources, outdated contracting regulations
and rigid budget execution procedures which were introduced in anticipation
of a tight revenue situation. Problems were particularly acute during the
period of high inflation in 1979 and 1980, and they caused the Government
actually to underspend its capital budget.  As resource constraints are likely
to remain tight during the next decade, further strengthening of investment
programming and budgeting procedures will be needed to concentrate resources
on the highest priority projects.
22.       The rapid expansion of public expenditures has been made possible
by a program of systematic tax reform.  The proportion of revenue coming from
domestic taxes has been raised through increases in indirect taxes and
improved collection, thus reducing dependence on cyclically volatile taxes on
international trade. The tax ratio was raised by two percentage points to
13.6% of GNP during the decade but has remained about constant in the last few
years. Continuation of a strong revenue effort, both by the Government and
government corporations, will be necessary to finance further expansion in
infrastructure and social services. Further tax reforms are needed to raise
the elasticity of the revenue system, to improve its equity by increasing
the proportion of revenue coming from direct taxes, and to eliminate
remaining distortions in economic incentives.
Balance of Payments Adjustment and External Capital Requirements
23.       The 1979-80 oil price increase has considerably tightened the long-
term balance of payments constraints for the Philippines. The share of oil
in total merchandise imports increased from under 12% in the early 1970s to
over 25% in 1980. The current account deficit widened to an estimated
$2.2 billion in 1980, equivalent to 6.1% of GNP. If growth and investment
rates are to be maintained, accelerated structural adjustments in the economy
and the balance of payments have become essential to hold the external deficit
at a sustainable level. Considerable reforms have already been introduced
with respect to trade, industrial, and financial policies (see paras. 17 and
19), and improvements are under consideration in energy policy. Additional
policy measures will be needed in these areas as well as resource mobilization
and investment programming. Implementation of necessary adjustment measures
should make it possible to sustain economic growth at 6.0-6.5%, mainly through
improved performance of the industrial sector. However, policy measures will
require a number of years to effect the needed structural improvement in the



- 7 -
balance of payments. The current account deficit, therefore, is expected to
widen further in nominal terms while declining in relative terms to about 4%
of GNP in the mid-1980s.
24.       The Philippines raised its external borrowing sharply to finance the
balance of payments deficits incurred after the 1973-74 oil price increase.
During the second half of the 1970s, net disbursements from medium- and long-
term loans doubled to an estimated $1.1 billion in 1980. Despite substantial
borrowing, the debt service ratio stood at only 17% in 1980, largely because
of the rapid expansion in export earnings. Substantial additional foreign
capital will be needed during the period of adjustment to the 1979-80 oil
price increase, and net disbursements from medium- and long-term loans will
have to double again in the next five years. If the Philippines can sustain
the strong export performance of the recent past, the debt service ratio would
still remain in the range of 18%-20% in the mid-1980s.
25.       Official sources are expected to provide about 40% of the
Philippines' gross external capital in the early 1980s. The last Consultative
Group Meeting, held in January 1981, agreed that it would be reasonable for
the Philippines to seek official development assistance (ODA) of about S1.2
billion during 1981, a slight increase over the ODA commitments it received in
1980.
26.       As noted above, satisfactory progress has been made in domestic
resource mobilization. However, because the deterioration in the terms of
trade has increased the Philippines' external financing requirements, and many
projects planned for ODA have low foreign exchange costs, the necessary
resource transfer can be achieved only through some financing of local costs
of projects and non-project lending.
PART II - WORLD BANK OPERATIONS
27.       As of April 30, 1981, the Philippines had received 74 Bank loans /1
(of which two were on Third Window terms) amounting to $2,665.7 million and
six IDA credits amounting to $122.2 million. IFC investments totalled
$108.6 million. The share of the Bank Group in total debt disbursed and
outstanding is currently about 15%, and its share in total debt service is
about 7%. These ratios are expected to be about 13% and 9%, respectively, by
1985. Annex II contains a summary of IDA credits, Bank loans, and IFC invest-
ments as of April 30, 1981, as well as notes on the execution of ongoing
projects.
/1 Total does not include the $150 million Industrial Finance Loan which was
approved by the Board on May 7, 1981 and which is not yet effective.



- 8 -
28.       The volume of World Bank lending to the Philippines has increased
substantially from an average level of about $90 million in FY71-75 to an
average of $420 million in FY77-81. Although the Bank has financed projects
in virtually all sectors of the economy, particular emphasis has been given to
agriculture, which has accounted for more than one-third of total Bank/IDA
lending. Another fifth of Bank lending has been for the transportation sec-
tor. Lending for power, industry, and social sectors followed in declining
order of size. The sectoral allocation of Bank lending remained fairly stable
throughout the 1970s. Pronounced changes took place only within infrastruc-
ture as lending for transportation and power declined in the second half of
the 1970s, while lending for water supply and urban development was initiated
during this period.
29.       Within sectors, however, considerable changes have taken place in
Bank lending. In agriculture, lending initially focused on expanding the
irrigation system, credit programs, and other services to support rice
production. More recently, efforts have been made to diversify agricultural
production through loans for treecrops, livestock, and fisheries, and to
assist low-income areas through integrated rural development projects.  In the
industrial and financial sectors, the Bank initially concentrated on streng-
thening individual development finance institutions and on providing for the
credit needs of small and medium industries. In the last two years, however,
industrial and financial lending has been to support the implementation of
needed policy reforms. A structural adjustment loan was made in September
1980 in support of trade and industrial reforms. Improvements in financial
sector policies were the basis for the May 1981 Industrial Finance Loan, which
also introduced a new institutional concept to broaden the reach of Bank
lending by channelling loans through an "apex" unit in the Central Bank.
30.       While overall implementation of Bank-financed projects in the
Philippines has been satisfactory, disbursements have been slower than antici-
pated, and implementation problems increased in the late 1970s. These diffi-
culties, in part, reflect administrative problems caused by high inflation and
tight budget constraints (para. 21). They also result from the changes in the
scope of the Bank's lending operations: a substantial increase in the number
of projects, new areas of lending, an emphasis on institution-building, and
efforts to reach specific target groups and deprived regions have all made
implementation a more demanding task than in the past. A project
implementation review was held in May 1980, and steps have subsequently been
taken to correct some of the administrative problems. Another implementation
review is planned for the end of this year.
31.       The Bank-s future lending program has been designed to assist in
achieving the major objectives of the Government's Development Plan (para. 5).
Particular emphasis is being given to supporting poverty alleviation efforts
and to bringing about needed structural adjustments in the economy. Economic
and sector work is being closely integrated with lending operations. Future
project, sector, and structural adjustment loans will be designed to address



the wide variety of technical, institutional, and policy issues facing the
Philippines. Additional structural adjustment loans are planned to support
further reforms in trade, industry, and other key policy areas. In sectoral
terms, agriculture and rural development will continue to account for the
largest share of lending, with emphasis on food production and programs to
increase the incomes of the rural poor. Substantial assistance will be given
to industry through subsector loans aimed at restructuring or developing
specific subsectors; through increased financial and technical assistance to
small and medium industries, particularly outside the Metro-Manila area; and
through continued industrial finance projects utilizing the recently
introduced "apex" concept. Increased effort is also planned over the next
several years to develop domestic energy resources and to strengthen the
institutions responsible for developing and managing energy supplies. The
Bank's support for projects in education, health, family planning, and urban
development will aim at improving basic services and supporting employment
creation, particularly in less advanced areas of the country.
32.       This is the fifth loan to the Philippines to be presented to the
Executive Directors this fiscal year. Loans for agricultural support
services, national fisheries development, and textile sector rehabilitation
have been appraised and are scheduled for Board presentation in the next
fiscal year.
PART III - THE ELEMENTARY EDUCATION SECTOR
The Role of Elementary Education in the Philippines' Development Strategy
33.       Elementary education has several important functions in the
Philippines' development strategy. As a basic service, elementary education
is particularly relevant to poverty alleviation and employment creation
efforts. Literacy, numeracy, and other basic conceptual skills enable the
population to realize more fully the benefits of other basic services and to
adapt to a changing social and economic environment. Effective elementary
education also helps to make the labor force more easily trainable and mobile.
It facilitates skill development during subsequent formal and on-the-job
training as well as through agricultural and industrial extension programs.
The Government's Development Plan for 1978-82 identifies more equal access to
elementary education among income groups and regions, along with improved qua-
lity and relevance of elementary education, as the most important objectives
for the education sector. Improvements in access to elementary education in
less advantaged areas, together with population growth, will lead to further
expansion of enrollments in the 1980s. Because of the tight budget con-
straints faced by the country, the Development Plan also stresses the need for
increasing the efficiency of the elementary education system.



- 10 -
Issues in Elementary Education
34.       Overview.  Enrollments in elementary education expanded rapidly
during the 1960s and early 1970s. In 1979, 7.7 million children were enrolled
in elementary schools. The enrollment ratio of the school-aged population
(age-group 7-12) was 84% and about 95% of those enrolled attended government
schools, which do not charge fees. While the enrollment rate achieved in
elementary education is relatively high, the average quality and cohort
survival rate are low: student scores on standard achievement tests are a
third lower than the designated norm, and 35% of children entering first grade
do not complete the six-year cycle of elementary education. As a result of
the high dropout rate, an average of eight years (rather than the prescribed
six) are required at present to produce a graduate. In addition, significant
differences in student achievement and participation rates exist among the
country's 13 regions. Average scores on standard achievement tests range from
40% to 56% in different regions, enrollment rates for the school-aged popula-
tion range from 54% to 95%, and cohort survival rates range from 50% to 84%.
The regional variations, as well as low average quality and cohort survival
rates, stem mainly from weaknesses in educational policies, management, and
instructional programs.
35.       Policy Issues.  Past financial policies have contributed to the
uneven development of elementary education. Development and recurrent expen-
ditures (amounting to $46 per student in 1980) have been allocated equally to
the regions in accordance with standard guidelines based on the number of
students enrolled. This policy has discriminated against regions with large
numbers of children not in school and does not provide for compensatory finan-
cing for regions where student achievement is low. In addition, recurrent
expenditure has been poorly balanced with 98% allocated for salaries and
administration. The 2% allocated for other items (e.g. staff upgrading,
classroom supervision, materials, and maintenance) has been inadequate.
Revised policies for the allocation and use of funds, by region and by type of
expenditure, are required to reduce disparities in educational opportunity and
to raise average quality.
36.       Adequate recurrent funding for nonsalary items would be available
if teachers were utilized more effectively. The teacher-class ratio is 2:1 in
grades 5 and 6, due to the underutilization of subject matter teachers, who
work on average 50% of the time. As a result, the student-teacher ratio in
grades 5 and 6 is 20:1 in contrast to 40:1 in grades 1-4. Current
requirements for teachers would be reduced by about 14% (35,000 teachers in
1979) if a policy of reducing the teacher-class ratio to 1.2:1 were adopted
for grades 5-6.
37.       Present practices for student admissions and the policy for evalua-
ting and advancing students from grade to grade contribute to poor student
achievement and dropout. The policy for student admissions, which requires
that children enter grade 1 at age seven, is appropriate but is not effec-
tively enforced. In 1979, some 15% of students in elementary schools were
over- or under-aged, while 26% of seven-year-olds were not enrolled at all.



- 11 -
The policy for student evaluation and advancement has based promotion on the
results of a single, year-end examination. The elementary curriculum
(para. 42) includes a relatively large number of subjects to be covered in
detail. Adequate time is not, therefore, available for diagnostic testing and
remedial instruction prior to final examinations; and 8% of enrolled students
repeated grades during the mid-1970s. Research findings suggest that both
teaching and learning are most effective when children are grouped with age
peers. Recent studies further suggest that grade repetition does not
necessarily improve the performance of low achievers and can create morale
problems that lead to the dropout of such students. More effective
enforcement of the admissions policy and revised procedures for student
evaluation and advancement are needed to improve achievement and survival
rates in elementary education.
38.       Management Problems.  The main agencies involved in elementary
education are the Bureau of Elementary Education and the Office of Planning
Services in the Ministry of Education and Culture (MEC), the Regional Offices
of the MEC, and the Government's Textbook Agency. The Regional Offices were
created in 1974, when routine management responsibilities were decentralized
to improve the responsiveness of education to local needs. Control over
policy, curriculum, budget, and the mass production of textbooks was retained
at the national level. However, organizational and functional changes
required to support effective regional management were not undertaken at the
time of the decentralization, and weaknesses have persisted.
39.       The Bureau of Elementary Education (BEE), responsible for guiding
sector management, has lacked both a direct line of communications to the
Regional Offices and a clear mandate for coordinating sector activities. The
BEE has also given minimal attention to improving policies and procedures for
managing elementary education or to providing systematic support to the
regions. Within the Regional Offices of the MEC, divisions for elementary
education are responsible for managing the local school systems. These
divisions have been staffed with subject matter supervisors rather than
administrators. In practice, these staff have conducted minimal classroom
supervision, which is more effectively carried out by supervisors at the sub-
regional level. Moreover, they have not been adequately prepared to carry
out their management responsibilities as regular inservice upgrading has not
been provided for regional staff. Clarification of the responsibilities and
authority of the BEE and of the role of the Regional Offices is required to
improve management. Systematic staff upgrading, more office equipment, and
regional training centers are also needed.
40.       The MEC's Office of Planning Services (OPS) is responsible for
preparing national plans and budgets for education on the basis of plans and
educational statistics submitted by each of the Regional Offices. However,
neither the OPS nor the Regional Offices have been appropriately organized or
staffed to carry out these responsibilities. The OPS has worked mainly on the
compilation of statistics, on special research projects, and on budgeting. It
has not carried out systematic analysis of educational data to monitor sector



- 12 -
performance and has lacked the expertise required to prepare sound plans.
The lack of permanent planning staff in the Regional Offices of the MEC has
contributed to these weaknesses. Data collection and planning have been
carried out mainly by borrowed staff (e.g., teachers and supervisors) often
unfamiliar with planning techniques. As a result, information for planning
and for policy and program formulation has been inadequate. To improve
planning, modifications in the functions and staffing of the OPS are needed;
permanently staffed planning units need to be established in the Regional
Offices; and related staff development programs and office equipment are also
required.
41.       The Government created a Textbook Agency in 1976 to reduce a severe
textbook shortage in elementary and secondary schools. The Textbook Agency,
supported by a Bank Loan (1224T-PH), has made considerable progress in
developing and providing instructional materials. However, the Agency was
established on a temporary basis and has lacked permanent staffing and
financing. In addition, its responsibilities have overlapped with those of
the MEC bureaus and publishers in the private sector. A Textbook Board in the
MEC has been responsible for managing the Textbook Agency and for approving
textbooks published by the private sector. In practice, the Textbook Board
has lacked the resources needed to carry out these tasks effectively. To
ensure a continuing supply of basic textbooks, permanent status and a clarifi-
cation of responsibilities are required for the Textbook Agency. Modifica-
tions in the functions and staffing of the Textbook Board are also needed to
support the development of educational publishing in the private sector.
42.       Problems with Instructional Programs.  Both general and region-
specific shortcomings in student participation and achievement are explained
largely by weaknesses in instructional programs. The elementary curriculum
includes eight subjects per grade on average. Teachers and students are held
accountable for covering the details of each subject syllabus but are often
unable to do so by the end of the school year. Gaps in students knowledge
result since follow-up instruction is not provided in the next grade. This
approach contributes to the relatively high rate of grade repetition
(para. 37). Moreover, results of standard achievement tests indicate that
insufficient emphasis is given to developing basic skills: the average test
score is 48% compared with a designated norm of 75%, and the lowest scores are
in reading and mathematics. A simplified curriculum, focusing on core sub-
jects, is required to raise overall achievement levels and reduce disparities.
43.       Shortcomings in instructional materials parallel the more general
weaknesses in curriculum and teaching methods. The supply of textbooks is
still inadequate although the Textbook Agency (para. 41) has significantly
reduced the shortage. Since 1976, the Agency has provided about 25 million
textbooks for elementary students and has substantially improved the student-
textbook ratio. Evaluation studies confirm the importance of these textbooks
for raising student achievement. They also reveal that some textbooks are too
long or complex and less relevant for rural than for urban students. Related
problems have arisen from the absence of special materials, particularly for



- 13 -
students with different language backgrounds (about 60% of students must work
in three languages - the local language, Pilipino, and English). Both revised
and additional instructional materials are needed to correct these problems.
44.       Facilities and Teachers.  The availability of classrooms and
teachers for elementary education varies substantially from region to region.
In 1978/79, an overall shortage of 16,300 classrooms, based on a design
capacity of 40 students per classroom, was reported. While average class size
varied from 32 to 45 students among the regions, actual class sizes ranged
from about 20 to 70 within the regions, with overcrowding more common.
Further, facilities for grades 5 and 6 are not available in a third (about
10,000) of all elementary schools. While the overall student-teacher ratio is
31:1, average student-teacher ratios also vary from 25:1 to 39:1 among the
regions, with ratios of 50:1 to 70:1 commonly reported for rural schools
(often combined with multigrade teaching). Imbalances in the provision of
facilities and teachers contribute to problems of nonparticipation and poor
achievement through overcrowding and excessive class size. To help correct
shortages of facilities and teachers, systematic criteria for school location
and facilities planning and a scheme to monitor the supply of teachers are
required.
Bank Participation
45.       To date, the Bank has supported six education projects in the
Philippines with loans and credits totalling $108.7 million. Four of these
projects have centered on developing technical and managerial manpower for
agriculture and fisheries. Two projects have focused on improving basic
education through experimentation with educational radio and through the
provision of textbooks (paras. 41 and 43). An Educational Projects Implement-
ing Task Force (EDPITAF) was created by the Government in 1972 to provide
expertise in educational development. It has had overall responsibility for
implementing Bank and other externally assisted projects in education.
Despite some problems, implementation has been generally satisfactory, and
project objectives have been largely achieved. The completion and audit
reports have been prepared for the first project which assisted with
development of higher agricultural education. General lessons relate to: (a)
the importance of providing local financing in a timely manner; and (b) the
need for improved procedures to expedite procurement. Experience gained
from more recent projects has confirmed the importance of sufficiently
advanced preparation prior to project appraisal and implementation.
PART IV - THE SECTOR PROGRAM FOR ELEMENTARY EDUCATION
Background
46.       During 1979, the Government prepared a ten-year (1981-90) develop-
ment program for elementary education. This program was submitted to the Bank
in October 1979 to support a request for a loan. Preappraisal was carried out



- 14 -
in December 1979 and appraisal in September 1980. Negotiations were held in
Washington, D.C. during May 4-5, 1981. The Philippine negotiating team was
led by the Honorable Onofre D. Corpuz, Minister of Education and Culture. The
proposed loan of $100 million would help to finance development expenditures
under the elementary education program during the four-year period 1982-85. A
Staff Appraisal report, dated May 29, 1981 (No. 3423(a)-PH), is being
circulated separately. Supplementary data are provided in Annex III.
Strategy
47.       The Government's ten-year development program directly addresses the
main policy, management, and quality issues in elementary education. It
is designed to raise student participation and achievement, giving particular
emphasis to regions with low performance. To achieve these objectives the
Government is: (a) introducing revised policies for financing and administra-
tion of elementary education to improve quality and reduce disparities; (b)
modifying the structure and functions of key agencies to strengthen sector
management; and (c) preparing revised instructional programs and plans for
improving the distribution of teachers and facilities to strengthen student
performance. During negotiations, the Government presented its policy and
program statement for elementary education (attached as Annex IV) and agreed
that it would consult with the Bank if major changes in policies or other
components of the development program are required (Sections 1.02(a) and (b)
and 3.10 of the draft Loan Agreement).
Policy Changes
48.       Revised policies will be introduced for financing elementary educa-
tion, for teacher utilization, and for student admissions, evaluation and
advancement. These policies will lead to general and region-specific
improvements in the effectiveness of elementary education.
49.       Regional Expenditure Allocations.  A new formula for determining
guidelines for the allocation of development funds /1 will be used to give
priority to regions with below average performance. For 80% of development
funds, annual allocations will be determined on the basis of a population-
weighted indicator of deficiencies in regional enrollment, cohort survival,
and student-achievement test scores. The remaining 20% of development funds
will be allocated in accordance with regional shares of the school-aged
population. On the basis of the new formula, initial guidelines will be as
follows: 32% of total development funds will go to four regions (with 27% of
the relevant age group) that have below-average performance; 35% will go to
five regions (34% of the age group) that have near-average performance; and
33% will go to four regions (39% of the age group) that have above-average
performance. A similar formula will be used to prepare guidelines for alloca-
ting increments to the Government's regular appropriations for elementary
/1 I.e., expenditures for curriculum, materials and staff development;
for facilities; and for monitoring and evaluation.



- 15 -
education. This revised allocation policy will both reduce disparities in the
provision of facilities and teachers and also direct the largest share of
development funds for staff training and supplementary instructional materials
towards regions with poor performance.
50.        Apportionment of Recurrent Expenditures.  To improve the quality of
instruction, allocations for nonsalary items will be raised from 2% to 7% of
recurrent expenditures between 1981 and 1990. Real expenditure for nonsalary
items will thereby be increased from less than $1.00 per student to nearly
$3.00. By 1990, 2%-3% of total recurrent appropriations will be allocated for
instructional materials and supplies; 2%-3% for classroom supervision and in-
service training; and 1% for maintenance of school facilities. These amounts
should be sufficient to support improvements in quality.
51.        Teacher Utilization.  Utilization of subject matter teachers will be
increased to reduce the teacher-class ratio in grades 5 and 6 from 2:1 to
1.2:1. The targeted ratio will be achieved mainly by assigning subject matter
teachers to classes at more than one grade level while keeping them in (or
close to) their subjects of specialization. As a result, the overall
student-teacher ratio will increase from an average of 31:1 at present to 36:1
by 1986, and requirements for teachers will be reduced by about 46,000 (16%)
by 1990. The resulting savings in recurrent expenditure, amounting to about
$60 million (in 1980 prices) per year by 1990, will free resources for planned
nonsalary expenditures without raising the real recurrent cost per student.
52.        Student Admissions, Evaluation, and Advancement.  The policy for
student admissions will be enforced more strictly to raise the proportion of
seven-year-olds entering grade 1 from 74% to 90% by 1990. This increase will
be achieved through the introduction of a national scheme, reinforced by
community and school officials, to encourage parents to enroll children at age
seven. A revised policy for student evaluation will also be introduced to
increase cohort survival from 65% to 86%.  Students' performance will be
assessed through continuous diagnostic testing. About 35% of class hours will
be allocated for remedial instruction for students lagging in achievement of
basic competency levels, and enrichment programs will be provided for others.
Approximately 4% of students will still be unable to achieve appropriate skill
levels at the end of the school year and will be retained in grade. As a
result of expected improvements in cohort survival, the average number of
years required to produce a graduate would decline from 8 at present to 6.7 by
1990.
Management Improvements
53.        The structure and functions of the Bureau of Elementary Education,
the Office of Planning Services, and the Regional Offices of the MEC are being
modified to strengthen sector management and planning, as follows:
(a) Bureau of Elementary Education. The BEE will formulate sector
policies and standards; provide support services to the regions; and
coordinate sector activities. It will assist the regions in making



- 16 -
effective use of the curriculum, materials, and facilities and in
applying revised policies and administrative procedures. It will
also arrange for the regular training of regional administrators and
teachers. For purposes of carrying out these responsibilities, the
BEE has been assigned a limited line authority over the Regional
Offices of the MEC. Key staff have also been designated for
several new positions in the BEE (i.e., in systems management,
educational financing and planning, instructional techniques, and
facilities use and design).
(b) Regional Offices - Divisions for Elementary Education. The Regional
Offices of the MEC will retain direct responsibility for managing
elementary education. The regional divisions for elementary
education are being reorganized to strengthen their management role.
They will be responsible for guiding the implementation of policies
and programs in accordance with national criteria and standards set
by the BEE and for providing related assistance to subregional
authorities.
(c) Office of Planning Services and Regional Planning Units. The OPS
will retain its responsibilities for educational planning and
budgeting at the central level. In addition, it will develop a
comprehensive information system (based on regional data) for
planning and will introduce systematic monitoring of sector
performance. To carry out these expanded functions, new
organizational units are being created in the OPS for facilities
planning and financial analysis. Several experienced staff have
also been designated for new positions in data processing and
planning. Permanent planning units are also being established in
the Regional Offices, with six core staff designated for each. The
OPS will provide advisory services to these units.
The Government plans to formally appoint the key staff for new positions in
the BEE, the OPS and the regional planning units in 1982 (para. 71).
54.       The Instructional Materials Corporation.  The Textbook Agency
(para. 41) will be converted into a permanent government corporation, to be
called the Instructional Materials Corporation. The Corporation will be
charged with implementing programs for the development, production or
procurement, and distribution of instructional materials for students in
public elementary and secondary schools. It will give priority in publishing
to materials for the elementary level. Regular financing for the Corporation
will come from annual orders from the MEC. Among fixed assets to be trans-
ferred from the Textbook Agency to the Corporation are a partially completed
administrative complex and a central warehouse. Completion of these works
has been delayed by change orders and price escalation. During negotiations,
satistactory arrangements were finalized to ensure adequate financing to
complete the works. The Government plans to appoint staff for key positions



- 17 -
in the new Corporation (including the President and Vice-Presidents for
Finance and Publishing) by October 31, 1981. It also plans to complete
medium-term staffing and financing plans for the Corporation, and a plan for
purchasing instructional materials from private publishers, by the same date.
During negotiations the Government agreed that it would establish the
Corporation by October 31, 1981 with authority, responsibilities, staff and
resources satisfactory to the Bank (Section 3.07 of the draft Loan Agreement).
55.        The existing Textbook Board in the MEC (para. 41) will be replaced
by an Instructional Materials Council. The Council will be served by a
secretariat and operate independently of the Corporation. It will approve
materials for use in schools and encourage private sector involvement in
educational publishing. The Council, like the Corporation, will be
established by October 31, 1981 (Section 3.07 of the draft Loan Agreement).
Expenditure Components
56.        The elementary education program will fund development components
to support new sector policies, revised management responsibilities, and
improved instructional programs. Financing will be provided to introduce a
new curriculum and improved instructional materials, provide additional
classrooms and teachers, and introduce systematic staff upgrading and sector
evaluation.
57.        Curriculum and Teaching Methods.  A curriculum working group was
established in October 1980 by the BEE. It has developed a revised curricu-
lum, which will be introduced, grade by grade, during 1983-88. The proposed
curriculum emphasizes basic skills in literacy and numeracy. It reduces the
number of subjects from eight to three in grades 1 and 2 and from eight to
four in grades 3-6. Three subjects (Pilipino, English, and mathematics) will
be taught at all grade levels. Environmental education (comprising units in
the sciences, social sciences, arts and practical arts) will be introduced as
a fourth subject in grades 3-6. New instructional techniques (including
methods for teaching English and Pilipino as second languages) and procedures
for evaluating student performance (para. 52) will be introduced to improve
cohort survival and to raise average achievement scores.
58.        Instructional Materials.  The Government's targeted ratio of one
textbook for every two elementary students (in each subject and grade) is to
be reached by 1985 and maintained thereafter. Approximately 11 million basic
textbooks will be provided annually between 1981 and 1990 by the Instructional
Materials Corporation, including a new series of basic textbooks to support
the revised curriculum. In addition, 6.5 million teachers' editions and
other instructional materials will be printed to supplement the textbooks and
meet particular regional needs. Regional warehouses (26), typesetting
equipment, and a resource center for the Corporation will also be provided.



- 18 -
59.       Facilities.  In order to rationalize the provision of classrooms,
systematic facilities location and planning criteria will be introduced.
Classroom requirements will be determined on the basis of comprehensive plan-
ning information (including school maps, population and enrollment data, the
number of available places per grade, and the status of existing facilities).
Planning criteria will give priority to the expansion or rehabilitation of
existing facilities. The new criteria have been incorporated into a memoran-
dum of agreement among the main agencies involved with school building
(including the MEC and the Ministries of Public Works and Local Governments).
Approximately 11,000 new classrooms will be provided annually during 1981-90
(7,000 to meet enrollment growth and 4,000 to replace dilapidated facilities).
Existing classrooms will also be rehabilitated. The development program will
also provide basic school furniture and equipment for regions most in need;
office equipment for the BEE, OPS, and Regional Offices of the MEC; and 13
regional training centers for MEC staff.
60.       Teachers.  To monitor progress towards more efficient utilization of
teachers and towards reduced disparities in the availability of teachers, a
national scheme for monitoring teacher demand and supply will be established.
The Regional Offices of the MEC will manage the scheme in cooperation with
teacher training institutions in the regions and establish appropriate targets
for enrollments and graduates. The teacher monitoring scheme, which has
already been developed, will be introduced after testing in 1982.
61.       Staff Development.  MEC staff involved in elementary education and
the staff of the Instructional Materials Corporation will receive needed
training through workshops and fellowships. The content of workshops for MEC
planners and managers (9,960 man-months during the first five years of the
development program) has been designed to support the sector strategy general-
ly and to develop particular skills such as organizational management and
program planning. Workshops for principals and teachers (62,500 man-months
during 1981-85) will support the introduction of the revised curriculum,
materials, and instructional techniques. Workshop trainers will be drawn from
the MEC, universities, and other local agencies. Staff of the Instructional
Materials Corporation will participate in workshops (about 125 man-months
during 1981-85) for the development of instructional materials and management
of publishing activities. Fellowships will be provided for specialized
training for about 250 MEC and 30 Corporation staff in 1981-85. Some 600
man-months of fellowships (400 man-months local, 200 foreign) will be provided
for degree programs and 1,360 man-months (1,000 man-months local, 360 foreign)
for shorter, nondegree training. Further staff training would be planned for
1986-90.
62.       Expert services (180 man-months during 1981-85, half local and half
foreign) will also be provided to the MEC in the fields of planning, testing,
management, and data systems. The Instructional Materials Corporation will
receive expert assistance (126 man-months, foreign) to develop workshops and
to provide support for publishing and management between 1981 and 1985. An
additional 200 man-months of local expert services will be provided to assist
directly with implementing the development program during 1982-85.



- 19 -
63.       Performance Evaluation.  To ensure the continuing relevance of
policies and programs for elementary education, systematic evaluation of
sector performance will be introduced. Sector performance will be monitored
annually by the OPS. An in-depth evaluation of school and home effects on
educational participation and achievement will also be undertaken. In
conjunction with this evaluation, standard achievement tests will be improved
and administered periodically during 1981-90. The evaluation will include a
review of baseline survey results (1982), a mid-term evaluation (1985) and a
follow-up evaluation (1990). Research (about 30 studies and experimental
programs during 1981-85) relevant to elementary education will also be carried
out. The Government plans to complete the detailed design for the baseline
survey by October 31, 1981.
Cost and Financing of the Sector Program
64.       Expenditures on the development program for elementary education are
estimated at $767 million (in 1981 prices) for the ten-year period (1981-90).
The proposed Bank loan of $100 million would finance about 22% of development
expenditures during the four-year period 1982-85, estimated at $448 million
including contingencies. The total foreign exchange component of the four-
year program (1982-85) is estimated at $129 million (29% of total), of which
the proposed Bank loan would represent 77%.
65.       The cost of the sector program is reasonable at about $8.2 per
student. Through improvements in efficiency, particularly teacher utiliza-
tion, annual recurrent costs per student would remain constant in real terms
(at $42 in 1980 prices). The annual recurrent expenditure per graduate (i.e.,
per student completing the six-year cycle) would, moreover, decline by about
14% (from $56 to $47) because of improvement in the cohort survival rate.
Recurrent expenditure on elementary education would grow less rapidly than
recurrent expenditures generally and would decline from about 9.5% of total
recurrent expenditures in 1980 to 7.5% by 1985.
66.       The estimated expenditure for the period 1981-85 is based on unit
costs at January 1981. Physical contingencies ($30 million) are estimated at
9.6% of base costs. Price contingencies ($104 million) are estimated at 33%
of base costs in accordance with projected price escalation, which is expected
to decelerate from 14% in 1981 to 8% by 1984. The costs of technical assis-
tance are based on averages of $6,400 per man-month for specialist services
($8,300 foreign, $5,000 local) and $900 per man-month for fellowships ($1,250
abroad, $700 local), and include recruitment, travel, benefits and salary.
67.       The program consists of 60 subprojects during 1982-85, i.e., 52
regional subprojects for the provision of facilities, furniture and equipment
(one per year per region); four staff development subprojects (one per year);
and one subproject each for curriculum development, the provision of instruc-
tional materials, the monitoring of teacher supply, and sector evaluation.



- 20 -
Implementation of the sector program began in January 1981. Subprojects to be
assisted by the Bank loan are expected to be completed by December 1985.
68.       The proposed Bank loan would be allocated as follows:  $35 million
for equipment, materials and paper; $15 million for furniture; $15 million for
textbook development, printing and distribution; $13 million for staff
development; $9 million for technical assistance and evaluation; and $13 mil-
lion for unallocated. An amount of $1.0 million is included in technical
assistance for the preparation of future projects. All civil works under the
development program will be financed by the Government.
Management and Implementation of the Sector Program
69.       Overall responsibility for program management has been assigned to
the MEC. The Minister of Education would have final authority for the
approval of subprojects. Guidelines and criteria have been established to
promote achievement of program objectives. Guidelines for allocating funds
(para. 49) will ensure that the needs of less advantaged regions are met.
These guidelines will be updated annually, and the allocation formula will be
periodically reviewed and revised as experience is gained during
implementation. The Minister will approve subprojects on the basis of four
general criteria: relevance to sector objectives; technical feasibility;
efficiency in the use of resources; and managerial feasibility.  In addition,
facilities requests will be prepared and approved on the basis of systematic
location and planning criteria (para. 59); the content of training requests
for school level staff and supervisors will be assessed in relation to
particular shortcomings in student participation and achievement at the
regional or subregional levels; and proposals for experimental programs and
research will be assessed on the basis of their replicability and potential
policy contributions, respectively.  These criteria could be modified by
mutual agreement in light of implementation experience. During negotiations
the Government agreed that it would select and implement subprojects in
accordance with guidelines, criteria, and procedures satisfactory to the Bank
(Section 3.06(a) and Schedule 5 of the draft Loan Agreement).
70.       A Program Executive Authority, Technical Staff, and Regional
Management Groups were created in November 1979. The Program Executive
Authority is chaired by the Deputy Minister of Education and includes the
heads of the BEE, OPS, EDPITAF, and the Textbook Agency. It is supported by a
Technical Staff, which is headed by the Assistant Director of the BEE, which
would be primarily responsible for appraising subprojects and supervising
implementation. The Regional Management Groups are chaired by the Assistant
Directors of the Regional Offices of the MEC. They are mainly responsible for
preparing and implementing facilities subprojects and for preparing training
requests involving regional staff.
71.       The Government has taken steps to ensure that the MEC has sufficient
qualified staff to manage the program. The Technical Staff includes regular



- 21 -
staff (32 full-time, 20 part-time) of the BEE, OPS, Textbook Agency, and
EDPITAF (para. 45). A pool of local consultants has also been organized to
provide additional expertise as may be required by the Technical Staff. The
Regional Management Groups are supported by about 15 staff drawn from the
divisions for elementary education, the planning units, and subregional staff.
The Regional Offices of the Ministry of Public Works, responsible for school
building, have constructed over 10,000 classrooms per year for the past
several years. They have sufficient experience and staff to supervise
construction. During negotiations, the Government agreed to (a) make use of
the expertise and staff of EDPITAF (or other agencies of the MEC) to provide
assistance in implementing the development program under terms of reference
satisfactory to the Bank; and (b) appoint and retain suitably qualified staff
in adequate numbers in the MEC for implementing the program effectively
(Sections 3.08 and 3.09 of the draft Loan Agreement).
72.       The Government has designed and tested procedures for preparing and
appraising subprojects to ensure that they conform with the objectives of the
program and are feasible. The Government has prepared and appraised half of
the facilities subprojects and four of the other subprojects to be implemented
during 1982 (staff development, curriculum development, monitoring of teacher
supply, and special studies under the sector evaluation subproject). No
further appraisal will be required for the instructional materials or for the
sector monitoring and evaluation subprojects, all of which have been reviewed
in detail by the Bank. The Government plans to finalize appraisal documenta-
tion for all subprojects to be implemented in 1982, in accordance with the
agreed guidelines, criteria and procedures, by September 30, 1981. During
negotiations, the Government agreed to furnish to the Bank for its review and
comments, not less than three months before the scheduled start of implement-
ation, subproject proposals requested by the Bank (Section 3.06(b) of the
draft Loan Agreement). The Bank would also participate in annual reviews of
progress on policy and institutional changes and would review implementation
progress for about 25% of subprojects each year.
Procurement
73.       Contracts for equipment and paper would be grouped to form attrac-
tive bid packages and awarded on the basis of international competitive bid-
ding in accordance with Bank guidelines for procurement. Those which cannot
be grouped to exceed $100,000 equivalent in estimated value (estimated at 25%
of total value) would be awarded on the basis of local competitive bidding
procedures, which are acceptable to the Bank. Locally manufactured equipment
and paper offered in competition with international bids would be accorded
a 15% margin of preference or the existing rate of import duties, whichever is
the lower, over the c.i.f. price of competing imports. Standard bidding
documents have been reviewed and are satisfactory. Prior Bank review of bid
evaluation before contract awards would be required for the procurement of
equipment exceeding $100,000 per contract and for procurement of paper
exceeding $300,000 per contract. Equipment and paper to be procured would be
exempt from import duties.



- 22 -
74.       Contracts for civil works and for printing and distribution of
instructional materials, which would be numerous and relatively small, would
be awarded in accordance with regular government procedures on the basis of
local competitive bidding.  Contracts for furniture would also be awarded on
the basis of local competitive bidding procedures or through negotiations with
nearby trade schools that are able to manufacture furniture of satisfactory
quality at reasonable prices.  Prior review by the Bank of procurement
documents for these items would not be required. Miscellaneous items not
exceeding $25,000 equivalent each, and subject to an aggregate total of
$1,000,000 equivalent, would be purchased on the basis of a minimum of three
price quotations. Reference materials would be procured directly from
suppliers after negotiation for a discount.
75.       Disbursements.  Disbursements under the proposed loan would be made
as follows: (a) 100% of the c.i.f. cost of imported equipment, materials, and
paper; (b) 100% of the ex-factory cost of locally manufactured equipment,
materials, furniture, and paper; (c) 65% of the invoiced cost of locally
procured equipment, materials, furniture, and paper; (d) 100% of expenditures
on experts, fellowships, research, studies, and the printing of instructional
materials; (e) 65% of expenditures on local training (workshops); and (f) 50%
of expenditures for development and distribution of instructional materials.
Disbursements have been estimated on the basis of experience with past
education projects in the Philippines and the region. Disbursements are
expected to be completed by December 31, 1986.
76.       The submission of the numerous supporting documents for furniture,
local training workshops, local fellowships, development and distribution of
instructional materials, and various other small local expenditures would be
unduly costly and burdensome. Statement of Expenditure procedures would,
therefore, be used for these items, for which about 40% of the loan has been
allocated. Supporting documents would, however, be retained in the Philip-
pines and made available for review by visiting Bank missions. Disbursements
for other eligible items would be made against full documentation.  Project
accounts would be maintained in accordance with sound accounting and auditing
procedures acceptable to the Bank, including a separate opinion with regard to
disbursements made on the basis of Statements of Expenditure (Sections 4.02
and 4.03 of the draft Loan Agreement).
77.       Execution of many ongoing projects in the Philippines has been
delayed by late availability of funds (paras. 30 and 45). Due to local
currency constraints (para. 21), budget advances to cover the Bank's share of
local expenditures have often been inadequate to meet project implementation
schedules. To facilitate implementation of the elementary education program,
the Bank would make advance payments into a Special Account to cover the
estimated Bank share of certain local expenditures. The Special Account would
be in Philippine Pesos in the Central Bank of the Philippines and would be
controlled by the Bureau of the Treasury. The Special Account would be used
to finance items for which disbursements would be made on the basis of



- 23 -
statements of expenditure as well as for small local currency payments for
printing and consultant services. Advance deposits would be based on the
estimated quarterly requirements for expenditure on these items but would at
no time exceed $3.0 million equivalent. The Bureau of the Treasury would be
responsible for ensuring the proper use of funds deposited in the Special
Account. Replenishment of the account by the Bank would be subject to review
and approval of withdrawal applications justifying the amounts withdrawn from
the Special Account (Sections 2.02(b)-(f) and 4.03(b) of the draft Loan
Agreement).
Benefits
78.       The sector development program supports the Government's strategy to
provide basic education of appropriate quality to the school-aged population.
The revised policies for allocating expenditures and teacher utilization will
reduce disparities in educational opportunity and raise the efficiency of the
school system. The revised policies for student admissions, evaluation, and
advancement will lead to substantial increases in the participation rate of
the school-aged population and in the cohort survival rate. The new
curriculum, instructional materials, and related staff upgrading will improve
student achievement. Largely as a result of improved survival rates and
population growth, enrollments are expected to increase by about 2.2 million
between 1980 and 1990, exceeding 10 million by 1990. Needed classrooms and
teachers will be provided to meet this increase in enrollments and to reduce
interregional disparities.
79.       The overall impact of the sector program (1981-90) is expected to be
as follows: some 6% more of the relevant age group (600,000 children in 1990)
will be enrolled in elementary schools at the end of the ten-year period; the
cohort survival rate will rise from 65% to 86% with about 20% more of each
entering cohort completing the six-year cycle (amounting to 300,000 graduates
in 1990); and levels of competence in basic skills will be raised, resulting
in a 15% improvement in achievement test scores (from 48% to 63%) between 1981
and 1990 and in declining rates of adult illiteracy towards the late 1990s.
As a result of efficiency gains, these results will be achieved without
increases in the real recurrent cost per student. In addition, institutional
changes and related training inputs will improve the long-term effectiveness
of sector management.
Risks
80.       The proposed sector operation is a complex and innovative approach
to education projects in the Philippines. The program focuses on the intro-
duction of revised policies and management practices. The exact outcome of
these reforms, which may require further modification on the basis of expe-
rience, cannot be accurately predicted. In addition, the program comprises
numerous subprojects. A risk exists that delays will arise in the course of
implementation. Several measures have been undertaken to reduce this risk.
First, the major agencies involved in implementation took responsibility for
preparing the development program. Second, the proposed management framework



- 24 -
and criteria for subproject approval have been designed to allow for
adaptation and modification by mutual agreement. Third, procurement and
financing procedures conform with regular government procedures and are
designed to facilitate program execution. Finally, the program management
organization draws together staff from the participating agencies and
includes officials with extensive experience in the implementation of
development projects. Additional support will be arranged as required
through use of local consultants. On balance, the Borrower's experience,
familiarity with the proposed program, and commitment to its objectives
limit the risk of difficulties in implementation to an acceptable level.
PART V - LEGAL INSTRUMENTS AND AUTHORITY
81.       The draft Loan Agreement between the Republic of the Philippines and
the Bank and the Report of the Committee provided for in Article III, Section
4(iii) of the Articles of Agreement of the Bank are being distributed to the
Executive Directors separately. Special conditions of the project are listed
in Section III of Annex III.
82.       I am satisfied that the proposed loan would comply with the Articles
of Agreement of the Bank.
PART VI - RECOMMENDAtION
83.       I recommend that the Executive Directors approve the proposed loan.
Robert S. McNamara
President
Attachments
June 4, 1981
Washington, D.C.



- 25 -                                           MNEX I
Page 1 of 5 pages
TABLE 3A
PHILIPPINES - SOCIAL INDICATORS DATA SHEET
PHILIPPINES                       REFERENCE GROUPS (WEIGHSTED AVE ES
LAND AREA (THOUSAND SQ. KCM.)                                                         - MOST RECENT ESTIMATE
TOTAL            300. 0
AGRICULTURAL      90. 7                               MOST RECENT          MIDDLE INCOME           MIDDLE INCOME
1960  lb   1970 A ESTIMATE A           ASIA & PACIFIC   LATIN AMERICA 6 CARIBBEAN
GNP PER CAPITA ;"S                   150.0       240.0    500.0                 1114.7                 1562.9
ENERGY CONSUMPTION PER CAPITA
(KILOGRAMS OF COAL EQUIVALENT)     147.0       301.0    339.0                  842.4                 1055.9
POPULATION AND VITAL STATISTICS
POPULATION, MID-YEAR (MILLIONS)     27.4        36.9      45.6
URBAN POPULATION (PERCENT OF TOTAL) 30. 3       32.9      35.4                  39.1                   63.4
POPULATION PROJECTIONS
POPULATION IN YEAR 2000 (MILLIONS)                      75.0
STATIONARY POPULATION (MILLIONS)                       126.0
YEAR STATIONARY POPULATION IS REACHED                 2075
POPULATION DENSITY
PER SQ. EM.                       91.0       123.0     152.0                 376.1                   28. 1
PER SQ. KM. AGRICULTURAL LAND    360.0       472. 0    503. 0               2350. 4                  Al. 7
POPULATION AGE STRUCTURE (PERCENT)
0-14 YRS.                         44.7        45.5      44.8                  40.4                   41.4
15-64 YRS.                        52.3         53.6     52. 1                  56.2                   54.7
65 YRS. AND ABOVE                   3.0         2.9      3. 1                   3.4                    3.9
POPULATION GROWTH RATE (PERCENT)
TOTAL                              2.7         3.0       2.7                   2.4                    2. 7
URBAN                              3.9         3.9       3.7                   4.1                    4.1
CRUDE BIRTH RATE (PER THOUSAND)    45.0         44.0      35.0                  28.7                   34.8
CRUDE DEATH RATE (PER THOUSAND)     15.0        11.0       9.0                   7.9                    S.9
GROSS REPRODUCTION RATE              3. 5jc      3.3       2.4                   1.9                    2. 5
FAMILY PLANNING
ACCEPTORS, ANNUAL (THOUSANDS)      ..        191.7    509.0
USERS (PERCENT OF MARRIED WOMEN)   ..          2.0      22.0                  39.0
FOOD AND NUTRITION
INDEX OF FOOD PRODUCTION
PER CAPITA (1969-71-100)        102.0        101.0     114.0                 116.9                  106.9
PER CAPITA SUPPLY OF
CALORIES (PERCENT OF
REQUIREMENTS)                  88.0         92.0      97.0                 108.9                  107.4
PROTEINS (GRAMS PER DAY)         45.0         50.0      53.0                  60.3                   65.6
OF WBICH ANIMAL AND PULSE       17.0        20.0      21.0                  18.8                   33.7
CHILD (AGES 1-4) MORTALITY RATE     16.0        10.0       7.0                   5.3                    8.4
HEALTH
LIFE EXPECTANCY AT BIRTH (YEARS)   51.0         57.0      60.0                  63.0                   63.1
INFANT tIORTALITY RATE (PER
THOUSAND)                          98.0         80.0      74.0                  52.8                   66.5
ACCESS TO SAFE WATER (PERCENT OF
POPULATION)
TOTAL                              ..          ..       39.0                  42.4                   65.9
URBAN                              ..          ..       51.0                  62.1                   80.4
RURAL                              ..          ..       33.0                  29.7                   44.0
ACCESS TO EXCRETA DISPOSAL. (PERCENT
OF POPULATION)
TOTAL                              ..          ..       56.0                  52.8                   62.3
URBAN                              ..          ..       76.0                  71.1                   79.4
RURAL                              ..          ..       44.0                  42.4                   29.6
POPULATION PER PHYSICIAN              ..         ..    2758.0                 4120.1                 1849.2
POPULATION PER NURSING PERSON        ..       3840.0    3058.0                2213.6                 1227.5
POPULATION PER HOSPITAL BED
TOTAL                           1208.0       850.0    639.0                  819.4                  480.3
URBAN                              ..          ..
RURAL                              ..          ..
ADMISSIONS PER HOSPITAL BED          ..          ..        ..                   28.8
HOUSING
AVERAGE SIZE OF HOUSEHOLD
TOTAL                              5.8         5.9
URBAN                              ..          6.2
RURAL                              ..          5.8
AVERAGE NMMBER OF PERSONS PER ROGM
TOTAL                              ..          2.3
URBAN                              ..          2.1
RURAL                              ..          2.4
ACCESS TO ELECTRICITY (PERCENT
OF DUWELLINGS)
TOTAL                             16.5        22. 9jd    31.0
URBAN                               .         62. 
RURAL                              ..          5.8      10.0 l



ANNEX I
- 26-                                             Page 2 of 5 pages
TABLE 3A
PHILIPPINIES - SOCIAL INDICATORS DATA SHEET
PHILIPPINES                    REMUENCE GROUPS (EICQITED AVE  ES
- MDST RECEltT ESTIMATE)
MOST RECENT          MIDDLE INConE           MIDDLE INCOIE
1960  /b   1970 /b ESTIMATE /h         ASIA & PACIFIC    LATIN ANEICA A CARIBUBEAN
EDUCATION
ADJUSTED ENROLLMENT RATIOS
PRDIARY:    TOTAL                 95.0       114.0     105.0                   98.6                    99.7
fMALE                98.0       115.0     103.0                  99.2                    101.0
FEnALE               93.0       113.0     108.0                  97.7                     99.4
SECONDARY:  TOTAL                 26.0        50.0      56.0                   55.5                    34.4
MALE                 28.0        59.0      65.0                  60. 7                    33.5
FEMALE               25.0        42.0      47.0                  49.9                     34.7
VOCATIONAL CNROL. (2 OF SECONDARY)  15.0         6.0        ..                   13. 7                   38.2
PUPIL-TEACHYR RATIO
PRIMARY                           36.0        29.0      29.0                  34.6                     30.5
SECONDARY                         27.0        33.0      31.0                  28.5                     14.5
ADULT LITERACY RATE (PERCENT)       71.9        82.6      87.0                  85.8                     76.3
CONSUMPTION
PASSENGER CARS PER THOUSAND
POPUIATION                         3. 0        8.0       8.9                   9.0                     43.0
RADIO RECEIVERS PER THOUSAND
POPULATION                        22.0        46.0      41.0                 118.9                    245.3
TV RECEIVERS PER THOUSAND
POPULATION                         1.4        11.0      17.0                  39.4                     84.2
NESSPAPER ("DAILY GENERAL
IIJTEREST") CIRCULATION PER
THOUSAND POPULATION                 17.0        14.0      18.0                    ..                     63.3
CINDiA ANNUAL ATTENDANCE PER CAPITA  0.6          ..       7.6                   4. 9
LABOR FORCE
TOTAL LABOR FORCE (THOUSANDS)    10893.2     13478.1   16310.9
FEMALE (PERCENT)                  34.4        33.1      32.0                  36.8                     22.2
AGRICULTURE (PERCENT)             61.0        53.0      48.0                   51. 9                   37.1
INDUSTRY (PERCENT)                15.2        15.8      16.0                  21.9                     23.5
PARTICIPATION RATE (PERCENT)
TOTAL                               39.8        36.6      35.3                   39.1                    31.5
hALE                                52. 1       48.6      47.1                   48.5                    48.9
FEMALE                              27.4        24.4      23.3                  29.6                     14.0
ECONOMIC DEPENDENCY RATIO              1.2         1.3       1. 2                  1.1                      1.4
INCOME DISTRIBUTION
PERCENT OF PRIVATE INUOME
RECEIVED BY
HIGHEST 5 PERCENT OF HOUSEOWLDS   28.8
HIGHEST 20 PERCENT OF HOUSEHOLDS  56.2        53.9      53.3
LOWEST 20 PERCENT OF HOUSEHOLDS    4.2         3. 7      5.5
LOWEST 40 PERCENT OP HOUSEHOLDS   11.9        11.9      14. 7
POVERTY TARGET GROUPS
EST7MATED ABSOLUTE POVERTY INCOME
LEVEL (USS PER CAPITA)
URBAN                               ..          ..     250.0
RURAL                               ..          ..     190.0                 192.1                   190.8
ESTItATED RELATIVE POVERTY INCOME
LEVEL (USS PER CAPITA)
URBAN                               ..          ..     132.0                    ..                  474.0
RUlRAL                              ..          ..      87.0                 182.5                  332.5
ESTDLATED POPULATION BELOW ABSOLUTE
POVERTY INCOME LEVEL (PERCENT)
URBAN                               ..          .,      39.0
RURAL                               ..          ..      44.0                  33.2
Not available
Not applicable.
NOTES
/a  The group averages for each indicator are population-veighted arithmetic seans.  Coverage of countries
among the indicators depends on availability of data and is not uniform.
7h  Unless other.ise noted, data for 1960 refer to any year betveen 1959 and 1961; for 1970, betwan 1969
and 1971; and for Most Recent Estimate, betieen 1974 and 1978.
/c  I950-55;  /d 1967, housahold.
Moat recent esctiace of GNP per capita is for 1979, all other data are as of April. 1980.
Octoher, 1990



ANNE I
- 27 -                                                                 Page 3of 5pegm
DEFINITIONS OP SOCIAL INDICATORS
Not.: IAlthough the dota are drown fro         ure  generally jdged th. meat eutotitotiv  and reliable, It should alo he sated than they na  met ha jt_r
nationAllycomparable beaseo  the look of eton4doded defintion  ad cocPt  ond by different coutries inL oolletleg the dta.  The data ae, man
tAstes.. oofol tod-the order  of eagnitode. tdicate treed., and oha-t-sioe cetetai melee diffarteeshreooori.
The rfrnegupce           e ()I the Il anel coorygou   f the ebjo.ti cowtr  eed (2) a otoor  grep with esetht higher ave-g   nto.. thee thetmor   ru
of the sohl_rot   . tootr  (et_et for "Ceito  Jol. lifopotter."s' rop otter  '"iddls lot   Worth Aftcl  sod Middle  -teat  is ch..ee beoeee of eteenge
ouoi-coluca  officltoe)   Ittthe  tfeeocegcoP dat  the oetegas  repopoltim  mesighted arithmetic   so  fee  -ah lediseor md ehe-  mly eh-ee  t
leat  alI  o  th  coo _oningru   ba   aafrthtiotr   Sinc  theeeng   forera   mn  teldtnr  degnd   nthe  elnlt  of
dat  ad is Oc-ifocn, coti. to         ba ho . erc.ied  ito relatingtenge   f _o  oiao  it4i       aootthon   Teeeorge  areony usefo  in  mtn   the  -ab.
of one indiotor- ac icee  -ng the  cu...tty and refarents groupa.
LANDS AREA (tho-ad   Vqi.)                                                                    eclatienae PI       etta-loplaio  gived by nea   oe penctaing ph,-
Total - Tote1  -uf.o.are  copriociodcc  endi.loo    aoa                                       icaeqaiid  from    eadioal b- eho   t omienrity leeai.
Agi trl-E tainato  of agniontare  ara  aa  teeporeily or psrmsctiy                  Pofalati-on    ftsr   art2  Peornc- PopuAtion divided by es.eo of pene
to coops, peetree, market eod kituhen gedeoe or to lie folio,; i977 dat.-                 eels  end fo_le graduat   noee , pottoal eares,              aaieaton 
M   PER CAPITA (US$) - GNP P- c.,it. e-i                             fPopulati   es  Boeta  Wa - tonal. erhbe. -d  -A  - Popmltiae (total.
COp Pt CAPTA fii))    lOPpet cpito  uttetee c  curent soke   rie  ca1-           nebs. end rera) dietded by their rpepative  -.6r  of  eapta  bade
oulated hyeo    utvr itmthod oe World ~               tle(1977-79 b.ats); 1960,              gvilobl. io peblie sad private geenl and  sea.lie  hsitel   d os-
1970. and  i979dntn.                                                                         hbelitttioo ocora         -epinela sea antbliats peeetly  nafad.
ENERG  CONSWTIONPER CPITA   A--l--pti.  f   - ci.1    Tsy  1           byat:ti1st one pbyeitisa.  gatslib-nte Pe...idie  prIincip y    a e
fOUS   OftiQTIiPt  CPIT   -Anna  cnempio  o  comaill  ney  oel          ar  er  sot ioniadmd.  heel heepit.el,henr,ice health                      andigal
an   Igie  rtolo.n          Iaa  gee cod lydr-. en1ea  and geothemn  sec-                    c--ar  oct parm mly staffed by a pbyafirts  fbne by A eeilal aaisat,t
tricicy) in tiogran   of coa  eqiaotpeeca .pita; 1960, 1970, and i978                       .nre., .idwife. etc.) which  ffee t-ptnient ecceeadacin   md proid  a
date.                                                                                        limited e.-ge of nediralfiltl             FP, snagiaticl panpem      aan oe, hint-
tale itlode WHOe  prioclpe1 g-enea eed epsialiod haepitai. -d emee
POPU2LATION AND VffAL. STATISTICS                                                              hoptee  Ioe  or tore  hesptae eed -dIca  and antemty canees.
Tote1 P-onlci.o. Mid-Scar (oiin)-A   f loi' 1; i9ES. i97t. and 197W                        Ad=istn  pon-Hsrite1 OWe  -,P Ttal ne-  fC admisson  te -a ditcharges
data.                                                                                      fro   .eapinals divided by the esr ofbade.
br-  orlto   (roet ofota)-Rtit of nehec to tote1 populaton
differon  definition   o  nra   re.my offect comparbility of dato                     ggMSI5G
aecg coootnico; 19601  1970, cnd 1979 dana.                                             Avaas SIceoffoo ltd (etep                  urhwahld    ,total.  ""In.    -     ml
PoenlationPoocin                                                                             A houshol  coseso      ropofniiuassesaeliigqat
Po-oletio  in mar 201  - Crroot poPolato    rjti        ios        bo h..ad on 1940        sd their moto meal.  A b-edero  lodgermao  map oet ha inel,dd in
toa   ouainby ege cod c   and their motality and fertility rctse.              the ho...ehrld for etatieticalpr1       ee
Projctio   pctmste   fo   .'it'lt  rates comprieeof threlees  en-               Aers Iombcn ofges           errom-total, urban. ee  rooa  - A..g M.
io. life enpotny a   irtht Toraigwt   oor'   o  conita  mrs                             bool   rperson Per roo  Coaloha,udnoa o.pa ovetoa
levolcnd  sle if. eenpoctac    thicngc7.5yasre.  The pac-                          dwllingo, roepootiv-ly.  _welligs.   'ad  eo--Pemmt otewtcraa
coers - furfert'ili'ty  rate cIo hoo three leel-    astln   dali-n in                  nooconpid perg..
tach o.o..r te i   h.the%ooi d one  f theoo otncobmtino    _eeaiy                         omstEul  dwelling  wi:th  oflectrii            in'viggurasaneoene
sod. f-rilitp  trodo _f-o  projootton porpece.                                           of tota, urheo, end rural dclliogsre-p-tiv-ly.
Sttnaorrlatloc-I.eetatiaa-y  opiatton ther  ia  -e  roh since
the hbt   ot   eoqa  o  h   oath rte,andals  the9 aget=wtr  re-                     EDCTO
eao_cntot   Ti  i  echiovd only cft-r forcility rttas dee1n  no              Adlasted enrollmettico
tho repiaconotleoof-uit not r-prdnctio  rato, sha  each gonection                       Primay ec Ia  _ oe.ml  n                ae-iostnl   oecdfel
of  -oocplacce icocif onclly.  The cititoory papolenio  sis  n                              mylion  of ajtll ages  at -the -primar   leve 1an  ercetage   of rapti
esimate  on the beete of tho Peneted obarteoetac   of the populaion                      primary etho-oga9populatttah        oral  icocs          ldeneed6I
In ohe pea  20Sf,  od the rtst of deolne of fertility rtst ta tepleo-                      years hat edjotsd f.to differat legtha cfprmay eduction; for
mono  .ec.. Ino-trise slb  nire   dedction anr1lmet may mooned ISO potent
Y- ot.ttoner  rpuPletion Ie reathod - The yea  when e.taiony populatin                       sis  as  pupils are balm  or ahoe  th   ffca  sohel ag..
aice ha. been ~ rccbd.                                                                   Se_noder sethon - total. _a  en  famal  -ff adai              aoc;eoodr
Poruletion D-cite                                                                              cdnotooqaretisW _rfyreo   prve   rmr  i_t_tnei_;
Pot so. ka. -  id-year population pee square kiletac  (ISO hectarce)  f~                     prvdsgnrl-oei                    rtshe.  trainin   itostrniem   f- ofpwpil
Pe.s.  he.  1ciutoe          -ed - Coepated an abv  for  lgrdc-1tfar2l lend7anoladed
only.                                                                                   V .oationcl o-ro1me    (rerent o                    V.sdav      Tntlonal fntitatin
PPoenltto- kge Str-oc.. fPrceti - Childec  (0-14 pesral* waking-age (15-                       inelodo   ohin,idsrn o  ocher progs.   shiob "gerte  nap
h4 year), end ottr-d (65 years and oo) anpcroen-ss of mId-poee  pup-                         dently  ra -dap-eno    f.sco.ndory intitatton.
ation; 1960. 1970. nod 197W  da.                                                        Pt-Tahrrti-rrm r. an                     -"tada    - Tn..el sndoete enrilsd in
Praaion leec   Bats ironen -t tota  - Aeua  grewh eee   f c.etl ~id-                           primory ad s-odary l1-1s divlded by  -"..r af taaaher  in the
yea  popisto   for 1950-6, 1960-70, an  1970-g                                                oeoedo   eoe
Pooainlen    aa(rron   urban-Ana   rwhrtso   r                            P.P0         Adol  itseeprnt          etnl      ieaeaut  (tienol             e   -d -it.)
latioou  f or 1956 1960-TI, 5nd 1970-78.                                                     aneperootage of tonal adult population aged 15 paaro andovr
Crude Biiro   Rats (pe  tha..a.d) - Annuali-o  btr-ho par choosnd of mid-yea
,popo~,:letia;lii. 1970O, and 1978 date.                                                COSMTO
rdsteah  tac   ocr thanandi - Annua  deahs Per thou...d or aid-yea                       Pasenger. Care (per thoweand  ..ceion) - Paeoese. tar              pelsa  meter
pupulatino.;.1960,.1970, and 197W  date,                                                    cans eamtiag lass than eight Peron;  -I."ad.  .uleee, he.esas  -
eoetedotioc  toe- Av-rage. nber of doaghtec  onan will bec tomltayvhil.
her nieal -eprodactivoe porid if  h.eeerecePreco  ano-epoific fer-                       05mWgissfa  hnadenito)-All typs of reci... fr ..dtb
tilio   rats; ouall  fiv-poo    (vtae  ening in 1960, 1970, sod1977               broedats to gonea1 poblic per thosad of popsAtion; anclod   omi-
Ponily Placomg - AutottMrs. Anna  tbnee) - Annua  nmbo  of ..ecaptor                         teemed rooivo.e in co-neim  and Ia years whe  registoeta    of radieo
of bioch-c.oro-1 d-lco.            ..de   apitn ofntiona  faIy pining  proro.-              a  in sff.t,; data forecn.         er   a   o   oonehmsnsma
ramily Plonino - Oser  (rore=to    are   oe)-Poetags  f neriad                              -otuTnrlee abobiehad blionsiag
eos   fchild-hasing age (15-446 yer)  h.o  a  birch-contro  devicas0                 VIssvr tocr th1i      osd I  uwete)- Vteevrefrgeacnt
a7ll - mrid=wme  io .-n  ago g-op,                                                         gonrl pbliper thouaad poplation; ealada  omliceneed TOVeavr
FOOD AND NUTRITION                                                    ~~~~~~~~~~~~~In  -totric.eesdi  yT_r  W-  eagint-tim  of TV sea on  in eff ect.
lode. of Pond Prodnoti  perCcts (169-71-100) - Idco of portrt   ons                           ieo  deA    coa  interes  neeppr'  sfmd n9                       antelP"
prodootiotofal  od ooaiic    rdnoioc  noludee eced and ie                                  licatlon devted primarily to r-ording goneallae.   tistnine
is  n olooar  earbees.Comdcitio torso primary grads (e.g. awatn                    toh   dil'i   t  ps            a   es  four times   week.
instead of cage)  hioh arc edibie and coniat  outriece (e.g. coffee and                  Cinem bdosua.ly Attendace aer iata earteo-aednthnmbrf
coo art oncla,dod).- Aggregato pr-dotioo of onrbc c..oty is base.d- on..                                                Cpt    ~   _t. -. 
usioa  aveag  prdac-r poice nights; 196t1-65, iSI  and 1970 da.ciht  soild duingteya,inldn    disso   odiv-nto
Per noio nrrI ofteloies(renee ofregirento) - Computed fro                       n  mbi uIs
sty euvalent ofnt food splievlblah    io cotry Per .. Pit                         LAW  pog
per day   Availahic sapplies comprise dsstio  prodotino, iprsls                         oa  ao   oc   tosne                 oial    tiepros  nldn
qusatiion uad is fnd prcesoin, and  oaaesin disriuton   Osquire-::           tbiiin       -ovoosontis  r   o   ieo                   ;16.17
mecttreadchmanod  b  PAt  besa  on .phyllgclnA  or teedel acti-                        1970 deta..-                                                         I-d
vityandheath cnelerig eniyoesnolpinaur,bdnihsag                             Fe        f.T(ec.eatf  - PsI    odo  fare  ed1 pero -ne - o   tonaltns eorc.
household level; 191-5  1970, and 17  deto.-                               :              fleting a  pocetge  totalabr. 0t orosp 19.9b6   1970 an  1970 -daa
oae  opyoe       eddeya.Otsplyo   odi   e la   aaee    o                                 anddenetrc,ty  enter7-    codb-n fas. p-ecaogtgu naa taten fbetm  1960,
alownc  oA   ram  of ctutl prutnia Per day end 20 gs-  ofanma aed               P1970 and i97W  deco
Patioeto  Waet  (  _eca) - tonal, eels, and f1     -Patoiatomo
pua  proca  of  bloh 10 gre  hbrld ho animal prtein.  These  ti55d-                   coiltrte    t    ..poa  asttl   an   n   eml  ae     osa
aeds  ee lowe  than thean of 75 goons of ita  procela an  23 `oom  of                    pectLntngs  of.   ..." dA tott,ml      aels   1. pouato  ofmela..es  re  nivly
aon    rtenasn   __orgo for the nr1d,  proposed by FAO in the Third             1960, 1970,. sd 1975 dana.  Theas are 110.   P s per Pitipaio   -Lta  refinotieg
norld Pond Sooey; 1901-65, 1970 ao  1977 data.                                                    srouen  h   wuain   n   a lmtim    re.A  e si
Pe  aita P"oi sorely fro  animal a    us      rtonspply o   odd-                       mosaePrnntolsucs
Po"     omanml   n  posa  tgr peda;161-6, 1970 end 1977 Anna.   tonl   na nSeWatin   Rtal of popultion eder 15 sad 65 and  e
Child (csei-..      oraityWaopeer thousan d)-A__  deaths per thosad in                       na chm.oa   abrfea
agegro   1A par t o  ohild-e  it this ag  getup; for most dersigpn   0
tote. data do-i-d from  life teblee; 1960, 1970 Aod 1977 data.                        isKac DISiicg 'iWiOn
HEALTH                                                                F-c-~~~~~~~~~~~~~~~enetog of Priest tas  hlhincshee   in) - gecdv    by richet
LI!,                                                                      t~~~~~~~~~~~~~~~~~~~ ecat, rlocheet 20pron*peet  iotnt*adsrno0pe c
:1-eisetantY et girth (orate   - Averge  ob-r of peers of lifa remining                   of households.                                            edp-            4   p.
00brh; 1960, 1970 and 197W  dan.t.                                                           -h1
Infant Mc-lity Oats (ret thousad) - A-ua drach  of infants tder one peer                   RTY TAM!? iGROPS
of age per theosne  live hirtho.                                                         Wstiatsd                      I-aae  oatylr    f,nvl (i  n   sma      ea  n 
Smrofprpe(tocel. uban, ondrura) withtrssas-                   arae      eutiio.l  adsqate dief pl-  -setial na-food raqeiacst in met
wae tupl hlnnenW titd  -nrfaoo entos or utractd het omoeaiacd                        euodtgs.-y
oater  ochas  hacfromtprotooted borettelas, spig,sd sntr  col) as                     timetd WslaIvte Povert lesl_na  CUSS co   aetl    .
p_rc_tnagn  of theit  erots  ouein    It an notta  are  a pblt                               ee  raniv- p-rty   oos  leve  in em-thirdo   en    e   f s
fonoaorsttpsticcad so   more .ta  2f  nesfo                        macsea.-. mop           P. perona  Once of the conny.  Snbe  la-s  Is derived f-e the ture
o_=dard an being within re        tnhis  h--t.esa o           ..f thathon   i   ua heons   -ave  with adjteenent f- hdob  osat of living in neho  seea..
re Inbeacescudiply that oh   oswf0o   ob                      romhnned                taunted P_elco   e           hsosPvrylc "_J."               (co_tat)- nb-
do.e  hoes to spee!da disPpr-ti-nte Pout of the day in fetching the,adra   Prat of penmim(ra   e   uaL.-wheean"tteue  ot
Acas to    rot  tao 1P..      oceo   foonaln-tan    ra
dispoasi as p-rcaneges of theit esapeoies populanion.  here.to dis-                                                        eoee  -d Wacl Weos Diviel
Puaal may iolads Otto  o11eetico sod disposal,  it  00 without trsteet,                                             fem gAnalysis  -d Po tjenim             uperett
of homa  enrtat And   t--anc  by water-boo.  spens or cho ee f                                                                           Sothet
pit poivias and similar i-anellatio



- 28 -
ANNEX I
Page 4 of 5
PHILIPPINES - ECONOMIC INDICATORS
Amount
(million US$ at                                 Annual growth rates (%)
current prices)                       Actual                                        Pro1ected
Indicator                            1979            1976    1977    1978    1979    1980/a   1981    1982    1983    1984    1985    1990
NATIONAL ACCOUNTS
Grods domestic product            28,854            7.1      6.2      5.9     5.9      4.7       5.8      6.3      6.3      6.3      7.1     8.3
Agriculture                      6,991           8.6       5.0     4.8      5.3      4.3       5.2      5.2      5.0      5.0     5.0      5.0
Industry                        10,174          10.0      7.7      6.4      6.7      5.8       6.5      7.2      7.5     7.5      8.5    10.0
Services                        11,689           3.7      5.7      6.3      5.5      5.0       5.6      6.2      6.0     6.0      7.0      8.5
Consumption                       21,860            4.3      5.2     4.6      4.8      4.2       5.4      5.2      4.9      5.1      5.8     7.0
Gross investment                   8,576            8.0      0.7    13.3      7.4      4.8       6.3      6.3      6.3      6.3      7.1     8.3
Exports of GNFS /b                 5,528           19.9    17.6       1.6     7.4    11.3       10.2    10.7    11.2    10.6    10.8    10.5
Imports of GNFS                    7,110            1.3      5.3    13.2    10.3       5.2       6.6      6.7      6.5      6.6     6.8      7.2
Gross national savings             6,665          -2.0    11.3       8.3      7.7      3.1       -        -        -       -        _        _
PRICES
GDP deflator (1972 - 100)                        183.6   198.8   210.6   250.8    296.9              -        -            -        -        -
Exchange rate (US$1 -)                            7.45    7.41      7.38    7.39       7.52      -        -       -        -        -        -
Export price index (1978 - 100)                   92.6    95.8   100.0   124.6    140.3   149.9   160.0   170.5   183.3   195.7   258.7
Import price index (1978 - 100)                   91.6    94.2   100.0   117.4    142.2   157.0   170.8   185.2   197.1   210.6   289.3
Terms of trade index (1978 - 100)                101.1   101.7   100.0   106.1         98.7    95.5    93.7    92.6    93.0    92.9    89.4
Share of GDP at market prices (Z)                        Average annual increase (Z)
(at current prices) Ic                                  (at constant prices)
1960    1970    1975    i980    1985    1990          1960-70   1970-75   1975-        1980-85   1985-90
Gross domestic product             100.0   100.0   100.0   100.0   100.0   100.0              5.1        6.1        5.9        6.3        7.6
Agriculture                       28.1    27.8    29.0    26.8    25.0    22.0             4.3        4.3        4.8        5.0        5.0
Industry                          25.8    29.6    33.5    35.5    37.7    40.6             6.0        8.6        7.6        7.5        9.1
Services                          46.1    42.6    37.5    37.7    37.3    37.4             5.2        5.4        5.7        6.1        7.7
Consumption                       85.3    79.2    75.8    74.5    72.4    68.7             4.8        5.5        5.2        5.2        6.5
Gross investment                  16.3    21.5    31.0    30.1    29.2    30.5             8.2       11.5         6.5       6.8        7.6
Exports of GNFS                   10.8    19.4    18.5    19.4    24.7    27.5             5.8        3.2       10.0       10.7       10.0
Imports of GNFS                   10.6    19.7    25.3    24.0    26.2    25.4             6.8        6.8        8.0        6.6        6.9
Gross national savings            16.2    20.5    25.3    23.1    25.4    29.2             7.4        9.7        -          -          -
As Z of CDP
1960       1970       1975       1980         Labor Force in 1978           Millions    (Z)
PUBLIC FINANCE                                                                               Agriculture                   7.4       44.4
Current revenues                            9.8        9.5       13.9       12.8           Industry                      2.7       16.2
Current expenditures                        9.6       10.9       12.3        9.6           Services                      5.6       33.0
Current surplus                             0.2       -1.4        1.6        4.1           Unemployed                    1.1        6.4
Capital expenditure                         2.3        1.9        3,2        3.2
Foreign financing                           -          0.1        0.3        1.5               Total Labor Force        16.8      100.0
1960-70          1970-75           1975-80           1980-85          1985-90
OTHER INDICATORS
Annual GNP growth rate (Z)                                  5.1               5.6               5.9              6.3               7.7
Annual GNP per capita growth rate (Z)                       2.0               2.7               3.2              3.6               5.1
Annual energy consumption growth rate (Z)                   7.4               6.2               4.2              4.7               4.6
ICOR                                                        4.5               4.7               4.6              4.5               4.1
Marginal savings rate                                     0.285             0.330              0.26             0.32              0.35
Import elasticity                                          1.33              1.12              1.20             1.05              0.90
/a  Preliminary estimate.
7Th Historical figures are official estimates based on 1972 weights. In relation to the composition of Philippine exports
in the late 1970s these estimates give undue weight to stable or declining exports of raw commodities such as copra,
sugar, and logs, and insufficient weight to rapidly growing exports such as nontraditional manufactures and coconut oil.
Bank staff estimates of export volume based on 1978 weights are shown on Attachment 3b.
/c Projected years of constant prices.
East Asia & Pacific Regional Office
February 1981



- 29 -
ANNEX I
Page 5 of 5 pages
BALANCE OF PAYMENTS AND EXTERNAL ASSISTANCF.
(US$ million)
Actual                        Est.              Projected
1976      1977       1978       1979          T98T      1981      1982       1985
Summary of Balance of Payments
Exports of goods and services              3,387      4,161     4,838      6,177         8,040    9,450    11,100    18,200
Of which:  exports of goods              2,574     3,151      3,425      4,601         5,940    7,480      8,500    14,300
Imports of goods and services             4,763      5,248      6,323      8,108        10,620   12,540    14,450    21,700
Of which:  imports of goods              3,633     3,915      4,732      6,142         7,870    9,360    10,800    16,200
Transfers (met)                              269        260        313       355           410       450        500       800
Current Account Balance                -1,107       -827    -1,172    -1,576          -2,170   -2,640    -2,850    -2,700
Direct investment (net)                      144        216       171         99           110       200       250        200
MLT loans (net)                            1,040        662       891      1,091         1.050    1,700      2,200      2,600
Official-source loans (net)                282       332        333        449           560       800     1,000        950
Private-source loans (net)                 758       330        501        642           490       900     1,200      1,650
Other capital (net) /a                      -238        113        56       -193           530       370       200        300
Overall Balance /b                        -161       164         54        579          -480     -370       -20D        400
International reserves (end-year) Ic    1,640        1,525      1,883      2,424         3,160    3,000      3,000      3,200
Grants and Loan Commitments
Official grants                              0.0       0.0        0.0        0.0
Total public loans                       1,577.4   1,392.0   2,417.0   2,105.2
IBRD                                    226.0      317.5      533.0     210.5
IDA                                        0.0       0.0       28.0       62.0
Other multilateral                        64.2      226.6     189.2      286.6
Governments                              391.6     182.3      370.4      223.6
Suppliers                                 52.0     194.2       76.7       52.3
Financial institutions                   476.4     341.7   1,000.5   1,224.4
Bonds                                   367.2      129.7      219.2       45.8
Other MLT loans                            603.6      115.0     914.0      278.8
Memorandum Items
Grant element of commitments                 8.8       14.7      16.8       16.5
Average interest (1)                         8.3        7.9       7.4        7.7
Average maturity (years)                    13.1       15.3      15.9       15.9
Medium S Long-Term lebt
Total debt outstanding (disbursed
only, end of period)                  4,383.0   5,554.0   6,839.0   7,920.0
Including undisbursed                   6,817.0   8,155.0  10,856.0  12,225.3
Public debt service                       -239.2    -441.9    -468.1   ??652.5
of which:  Interest                     -97.9    -215.2    -167.1    -300.0
Other MLT debt service                    -283.5    -320.1    -441.9    -375.5
Total debt service                        -522.7    -762.0    -910.0  -1,082.0
Debt Burden
Debt service ratic                          15.4       18.3      18.8       17.4
Debt service ratio /d                       19.4       22.1      21.2       18.2
Debt service/GDP                             2.9        3.9       3.9        3.6
Public debt service/governtent
revenue                                    9.9      12.0       20.1       18.3                                     Outstanding
December 31, 1979
Terms                                                                                                                 Amount    Percent
External Debt              (U8$ mln)
Interest on total DOD/total DOD              4.1       6.4        4.0        6.1
Total debt service/total DOD                10.5       15.8      13.3       13.0        (Disbursed only)
IBRD                         731     14.1
Dependency Ratios                                                                           Bank Group /e                763      14.8
Other sultilateral           397      7.7
Gross disborsements/imports (GFFS)          37.9      28.7       34.3       30.7          Governments                1,094     21.2
Net transfer/imports (GNFS)                 29.6      20.8       16.0       16.7          Suppliers                    250      4.8
Net transfer/gross disbursemnts             78.0      73.0       59.0       52.8          Financial institutions   1,879       36.4
Bonds                        783     15.1
Exposure                                                                                    Total public MLT debt    5,167    100.0
Other MLT debt            2.753      53.3
IBRD disb./groas total disb.                 5.5       7.4        8.3       10.4          Total MLT debt            7,920    153.3
Bank Group disb./grosa total disb./e         6.2        7.5       8.3       10.4
IBRD DOD/total DOD                           7.2        7.3       8.0        9.9        (Including undisbursed)
Bank Group DOD/total DOD /e                  7.8       7.8        8.4       10.3          Public MLT debt         8,971.4    173.6
IBRD debt serviceltotal debt service         6.6        5.6       6.9        7.3          Total MLT debt         12,225.3    237.0
Bank Group debt serv./total debt. serv    6.7           5.6       7.0        7.4
la Short-term capital, monetization of gold, allocation of SDRs, and errors and omissions.
7'S Equals change in net international reserves.
77  Gross reserves of the Central Bank ("International reserves", IFS).
77  Includes net direct investment income.
77 Excludes IFC.
last Asla and Pacific Region
February 1981



- 30 -
ANNEX II
Page 1 of 17 pages
THE STATUS OF BANK GROUP OPERATIONS IN THE PHILIPPINES
A.  STATEMENT OF BANK LOANS AND IDA CREDITS
As of April 30, 1981 /a
Loan or
Credit                                                                    Amount (less cancellations)
Number      FY    Borrower                Purpose                         Bank      IDA  Undisbursed
Twenty-three Loans and three credits fully disbursed                      416.2   32.2
984-PH   1974                           Aurora-Penaranda Irrigation        9.5              0.8
998-PH   1974                           DBP T                             50.0              3.3
1034-PH   1974  National Power Corp.   Power                               61.0              2.0
1035-PH   1974  Rep. of the Philip.    Population                          25.0              9.0
1048-PH   1974          "                Shipping                          20.0              4.2
1052-PH   1974  Philip. National Bank  PDCP IV                             30.0              1.1
1080-PH   1975  Rep. of the Philip.    Tarlac Irrigation                   17.0              4.3
1102-PH   1975                           Rural Development                 25.0              7.3
1154-PH   1976                           Magat Irrigation                  42.0             13.2
1190-PH   1976          '                DBP II                            75.0              4.0
1224-T-PH 1976          "                Education III                     25.0              5.3
1225-PH   1976          "                Livestock II                      20.5              0.1
1227-PH   1976          "                Chico Irrigation                  50.0             31.3
1272-T-PH 1976                           Manila Urban                      10.0              5.0
1282-PH   1976                           Manila Urban                      22.0             11.1
1269-PH   1976                           Second Grain Processing           11.5              7.8
1353-PH   1977          "                Third Highways                    95.0             62.5
1367-PH   1977          "                Jalaur Irrigation                 15.0              7.5
1374-PH   1977          "                Fourth Education                  25.0              9.7
1399-PH   1977 Central Bank of the       Fourth Rural Credit
Philippines                                               36.5             17.1
1414-PH   1977 Rep. of the Philip.       Nat. Irrig. Syst. Improvmt.    50.0                34.1
1415-PH   1977          "                Provincial Cities Water Sup.   23.0                15.3
1421-PH   1977                           Rural Dev. Land Stlmt. II         15.0             10.6
1460-PH   1977 National Power Corp.    Seventh Power                       58.0             38.0
1506-PH   1978 Rep. of the Philip.       Smallholder Tree Farming           8.0              6.7
1514-PH   1978 Philip. National Rank   PDCP V                              30.0             10.6
1526-PH   1978 Rep. of the Philip.       Nat. Irrig. Syst. Improvmt. II 65.0                49.6
790-PH   1978                           Rural Infrastructure                     28.0      24.1
S.8-PH   1978          "                Education                          2.0              1.4
1547-PH   1978 Nat. Electrif. Admin.   Rural Electrification               60.0              9.2
1555-PH   1978 Philip. National Bank   PISO                                15.0              2.3
1567-PH   1978 Rep. of the Philip.       Magat II                         150.0             51.7
1572-PH   1978          "                Industrial Investment III         80.0             35.8
1615-PH   1978                           Manila Water Supply II            88.0             84.1
1626-PH   1979          "                National Extension               35.0              34.1
1639-PH   1979                           Magat River Multipurpose          21.0             17.8
1646-PH   1979                           Small Farmer Dev. (Land Bank)  16.5                11.3
1647-PH   1979           '               Second Urban Development          32.0             26.7
1661-PH   1979                           Highways IV                      102.0             98.7
1710-PH   1979          "                Water Supply II                   16.0             16.0
920-PH   1979          "                Water Supply II                          22.0      21.1
1727-PH   1979          "                Small & Medium Industry II        25.0             11.4
923-PH   1979          "                Population II                            40.0      39.9
1772-PH   1980          "                Samar Island Rural Devel.         27.0             26.6
1786-PH.  1980          "                Fisheries Trng. (Educ. VI)        38.0             37.8
1809-PH   1980          "                Medium-Scale Irrigation           71.0             70.9
1814-PH   1980           '               Manila Sewerage & Sanitation   63.0                62.3
1815-PH   1980                           Rainfed Agric. Dev. (Iloilo)   12.0                11.9
1821-PH   1980          "                Third Urban                       72.0             70.0
1855-PH   1980                           Third Ports                       67.0             67.0
1860-PH   1980          "                Rural Roads Improvement           62.0             60.5
1890-PH   1981           '               Watershed Management              38.0             37.9
1894-PH   1981          "                Third Livestock & Fisheries    45.0                43.6
1903-PH   1981                           Structural Adjustment            200.0            116.2
Total                                                               26       122.2  1,461.8
of which has been repaid
(Bank and third parties)                                           193.5
Total now outstanding                                              2,452.2  122.2
Amount sold                                            24.3
of which has been repaid
(third parties)                                      17.1            7.2    -
Total now held by Bank and IDA
(prior to exchange rate adjustments)                             2,445.0  122.2
Total undisbursed                                                  1,376.7   85.1  1,461.8
/a Includes repayments through March 31, 1981.



- 31 -                  ANNEX II
Page 2 of 17 pages
B. STATEMENT OF IFC INVESTMENTS
As of April 30, 1981
Fiscal                                                      Amounts ($ million)
Year                     Company                          Loan   Equity   Total
1963 & 1973  Private Development Corporation of the        15.0      4.4    19.4
Philippines
1967         Manila Electric Company                        8.0       -      8.0
1967         Meralco Securities Corporation                  -       4.0     4.0
1970         Philippine Long Distance Telephone             4.5       -      4.5
Company
1970 & 1972  Mariwasa Manufacturing, Inc.                   0.8      0.4     1.2
1970         Paper Industries Corporation of the             -       2.2     2.2
Philippines
1971 & 1977  Philippine Petroleum Corporation               6.2      2.1     8.3
1972         Marinduque Mining and Industrial              15.0       -     15.0
Corporation
1973         Victorias Chemical Corporation                 1.9      0.3     2.2
1974         Filipinas Synthetic Fiber Corporation          1.5       -      1.5
1974/1979    Maria Christina Chemical Industries, Inc.   1.5         0.7     2.2
1974         Republic Flour Mills Corporation               1.2       -      1.2
1975         Philippine Polyamide Industrial                7.0       -      7.0
Corporation
1976/1980    Philagro Edible Oils, Inc.                     2.6      0.2     2.8
1977         Acoje Mining Company, Inc.                     2.3      1.2     3.5
1977         Sarmiento Industries, Inc.                     3.5       -      3.5
1978         Cebu Shipyard and Engineering Works, Inc.   2.1          -      2.1
1979         General Milling Corporation                    4.0      1.1     5.1
1980         PISO Leasing Corporation                       5.0     0.1      5.1
1980         Ventures in Industry and Business              -       0.3      0.3
Enterprises, Inc.
1980         Consolidated Industrial Gases, Inc.            4.5      -       4.5
1981         Philippine Assoc. Smelting & Refining Corp. -           5.0     5.0
Total gross commitments                      86.6    22.0   108.6
Less sold, acquired by others,             48.6    12.7    61.3
repaid or cancelled
Total commitments now held by IFC            38.0      9.3    47.3
Total Undisbursed                             5.0      5.0    10.0



- 32 -
ANNEX II
Page 3 of 17
C. PROJECTS IN EXECUTION /1
Agricultural Sector
Credit No. 472 Aurora-Penaranda Irrigation; $9.5 Million Credit and
Loan No. 984    $9.5 Million Loan of May 14, 1974; Date of Effectiveness:
August 22, 1974; Closing Date: December 31, 1981
Overall progress of the project is satisfactory. Work on the dams
and transbasin diversion channels was completed in 1975, about one year ahead
of schedule. There were initial delays in the award of contracts for the
service area improvement works, and further delays were caused by strong
typhoons in 1978 and 1980 which damaged some of the project area.  Completion
is now planned for 1981 - a three-year delay in the original schedule. Due
to increased costs, a reduced cropping intensity and delays in construction,
the internal rate of return is expected to be close to 12% compared with the
appraisal estimate of 17%.
Loan No. 1080   Tarlac Irrigation; $17.0 Million Loan of January 27, 1975;
Date of Effectiveness: April 30, 1975; Closing Date:
June 30, 1982
The project is now about 75% complete. Full completion is expected
by June 1982, a two-year delay in the original schedule, caused mainly by
managerial problems and late preparation of the designs for the drainage
works. The closing date has, therefore, been extended by two years to June
30, 1982. The area developed is likely to be some 20% less than originally
planned mainly because of flooding from the Chico, Camiling and Agno rivers.
Costs are higher, partly due to the delays referred to above, and the economic
rate of return is now likely to be close to 10% compared with an appraisal
estimate of 15%.
Loan No. 1102      Rural Development; $25.0 Million Loan of April 16, 1975;
Date of Effectiveness: July 28, 1975;
Closing Date: June 30, 1981
Overall implementation is about 75% complete. The road subproject
has been delayed by about two years because most of the construction contrac
had to be rebid following the failure of the ongoing contracts.  Contracts
for the construction of the irrigation works are also behind schedule, but
most of these should be successfully completed without rebidding. Recent
efforts by the project management office to improve contract performance
/1 These notes are designed to inform the Executive Directors regarding the
progress of projects in execution, and in particular to report any
problems which are being encountered, and the action being taken to
remedy them. They should be read in this sense, and with the
understanding that they do not purport to present a balanced evaluation
of strengths and weaknesses in project execution.



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ANNEX II
Page 4 of 17
have been successful, and force account works are proceeding well. General
shortages of fuel and construction material have now been overcome.
Disbursements have improved significantly recently and completion is
expected in mid-1982, about two years behind schedule.
Loan No. 1154      Magat Multipurpose Project; $42.0 Million Loan of
August 7, 1975; Date of Effectiveness: November 4, 1975;
Closing Date: June 30, 1982
Civil works by local contract and force acount for rehabilitation
and new construction of canals, drains and access roads are progressing well,
and the project is about 81% complete. All contracts have now been awarded
but some of the work has been postponed until the end of the rainy season.
The water management training is continuing satisfactorily. Problems
experienced due to budgetary constraints in 1980 are expected to be lessened
in 1981 as NIA taps other local financial resources. Due to earlier delays
in contract award, budgetary constraints and typhoon damage in 1980, project
completion is expected to be delayed by about two years over the original
schedule.
Loan No. 1225      Second Livestock; $20.5 Million Loan of April 8, 1976;
Date of Effectiveness: September 13, 1976;
Closing Date: June 30, 1982
The loan is expected to be fully disbursed by June 1981, one year
before the closing date (June 30, 1982) as a result of significant subloan
demand in piggery and poultry subsectors. Further support to livestock
development in the Philippines is being provided under the ongoing Third
Livestock and Fisheries Credit Project (Loan 1894).
Loan No. 1227      Chico River Irrigation Project; $50.0 Million Loan
of April 8, 1976; Date of Effectiveness: July 19, 1976;
Closing Date: June 30, 1981
Although the project was due for completion by June 1980, it
is now only about 40% complete. Work started slowly due to late procurement
of equipment for force account work. Further delays have been caused by
changes in design resulting in rebidding the three major contracts for the
diversion dam, the main canal and the river siphon; severe and repeated
typhoon damage; problems of right-of-way aquisition and the recent suspensio
of work on the diversion dam because of security problems. The project is
not now expected to be completed before June 1984, a four-year delay over
the appraisal estimate.
Loan No. 1269      Second Grain Processing Project; $11.5 Million Loan
of July 2, 1976; Date of Effectiveness: October 4,
1976; Closing Date: June 30, 1983
Due to delays in implementation of the first phase project
(Loan 720-PH) and to the general availability of funds to millers from



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ANNEX II
Page 5 of 17
alternative sources, disbursements have progressed slowly. Recently,
however, due to DBP's promotional efforts, the subloan demand from millers
has been increasing. In addition, DBP is considering financing the grain
warehouse construction program of the National Food Authority under this
project.  In view of these developments, the project funds are expected to
be fully committed by the end of CY1981 and the loan disbursed by June 1983,
two years behind schedule. The closing date has been extended accordingly
to June 30, 1983. The ongoing Grains Losses Study is expected to be
completed by the end of 1981.
Loan No. 1367       Jalaur Irrigation Project; $15.0 Million Loan of
February 14, 1977; Date of Effectiveness:  May 12, 1977;
Closing Date: Dec-ember 31, 1982
Overall progress of the project is about 40% corapared with appraisal
estimates of 55%. Force account work is proceeding satisfactorily. Some of
the 24 civil works contracts failed, due to unsatisfactory procurement
procedures, but the Government has now taken action to improve the situation.
Progress has recently improved, and a timely completion is still expected.
Loan No. 1399       Fourth Rural Credit Project; $36.5 Million Loan of
April 11, 1977; Date of Effectiveness: June 2, 1977;
Closing Date: December 31, 1982
Commitments and disbursements continue to be roughly one-half of
appraisal estimates. The Central Bank has reassessed the project and as a
result new categories of lending (for medium-size trucks, tree crops and
working capital), and a new set of financial intermediaries (private
development banks) have been included in the project. More recently the
Central Bank has reduced the relative advantages of rural banks in short-term
lending vis-a-vis medium- and long-term lending provided under the project,
and has introduced a capital build-up program and conversion scheme to lower
the high levels of arrears of participating rural banks. Although these
initiatives should accelerate implementation, the completion date has been
postponed by two years.
Loan No. 1414       National Irrigation Systems Improvement Project;
$50 Million Loan of May 13, 1977; Date of Effectiveness:
August 9, 1977; Closing Date: December 31, 1982
Progress in project implementation has been slow, initially because
of staffing and design problems, and more recently because of delays in the
review of design and contractual arrangements for the Abulog diversion dam.
Shortages of fuel and construction materials, which have been a major cause of
delay, have now been overcome. The project is now expected to be completed in
1983, two years later than originally estimated. Implementation has improved
during the 1980 construction season, and further improvements are expected in
1981, mainly because of better planning and organization, less complicated
contract procedures, and corapletion of designs.  Final project costs and
benefits are expected to be in line with original estimates.



35 -                        ANNEX II
Page 6 of 17
Loan No. 1421      Second Rural Development (Land Settlement) Project;
$15.0 Million Loan of June 10, 1977; Date of Effectiveness:
October 27, 1977; Closing Date: December 31, 1982
Satisfactory progress is being maintained. The Government has
simplified and accelerated procedures for issue of land allocation certi-
ficates and titles to project area settlers, improving their eligibility for
term credit. Substantial progress has been made in construction of roads,
bridges and related infrastructure. Initial irrigation works, water supply
systems and health stations have been installed. Adaptive research trials
have been completed and pilot extension programs for appropriate agricultural
packages are now under way. Feasibility studies for development of other
settlements are well advanced, but formulation of a long-term land use policy
framework is lagging. Previous bottlenecks in the flow of funds and loan
disbursements have eased since 1980. Implementation plans for 1981/82,
currently being reviewed, show project costs and overall targets in line with
original estimates.
Loan No. 1506      Smallholder Tree Farming and Forestry Project; $8.0 Million
Loan of January 23, 1978; Date of Effectiveness: May 11,
1978; Closing Date: December 31, 1983
Treefarmer enrollment in the DBP treefarming component, which has
been slow in the past, has improved markedly following DBP's liberalization
of application procedures and collateral requirements. However, so far fewer
smallholders and more medium-size land-owners are participating than expected
at appraisal. The other components, all of which involve government agencies,
now have budget appropriations commensurate with project requirements,
although delays in fund releases still occur. The forest research component
is progressing well and the wood industries feasibility study is approaching
completion.  Vehicles and equipment for BFD's Abra plantation component have
still not been acquired due to overly cumbersome local procurement procedures.
The young planted pines have been infested by a shoot borer insect, which will
require immediate control measures.  The pace of implementation of this com-
ponent will, therefore, have to be reduced and its completion date extended
by at least one year.
Loan No. 1526      Second National Irrigation Systems Improvement Project:
$65 Million Loan of March 15, 1978; Date of Effectiveness:
June 20, 1978; Closing Date: December 31, 1984
Topographic surveys, project planning and design have been completed
for most of the systems, and construction is fully under way. No major
contracts have been awarded and those originally scheduled for 1980 were
delayed because of financial constraints and difficulties in completing
designs on schedule. To help with this problem, NIA has agreed to retain
local consultants to assist in design preparation of drainage works and thus
avoid delays in subsequent contract works. Overall progress is satisfactory
and the project is expected to be completed as scheduled.



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ANNEX II
Page 7 of 17
Credit No. 790    Rural Infrastructure; $28 Million Credit of April 21,
1978; Date of Effectiveness:  July 21, 1978; Closing Date:
December 31, 1983
Construction work on communal irrigation systems, village water
supply, health stations and ports is proceeding well. As of December 31,
1980, construction of about 34 km of roads had been completed, 300 km of
roads (about one-third of the program) were under contract or shortly to be
awarded, and 90% of the design work on the remaining roads lhad been completed.
While construction of the irrigation component is behind schedule, overall
progress of the project is satisfactory. About 300 rural water supply units
are completed and 48 barangay health stations have been built and
commissioned. The overall progress on the port component is estimated at
about 50%.  The project is expected to be completed on schedule.
Loan No. 1567-PH  The Magat River Multipurpose Project - Stage II;
$150 Million Loan of May 23, 1978; Date of Effectiveness;
August 24, 1978; Closing Date: December 31, 1983
Progress is good. The first stage of river diversion has been
successfully achieved and excavation is substantially complete. Construc-
tion of the main dam is making excellent progress.  Concrete work for the
spillway started slowly and suffered from interruptions due to breakdown of
the cranes, but the contractor has made up for lost time and is once more
nearly on schedule. Work on resettlement of the population to be displaced
by the reservoir is proceeding very well.
Loan No. 1626-PH National Extension Project; $32.0 Million Loan of
December 21, 1978; Date of Effectiveness: March 26, 1979;
Closing Date: June 30, 1983
The Ministry of Agriculture, through its Bureau of Agricultural
Extension, aims to introduce the training and visit (T and V) system to the
national extension service over a four year period. A Project MIanagement
Committee has been created under the Deputy Minister's Chairmanship, and
appropriate subcommittees and operational units established. Regional
reorganization was effected on March 24, 1980 with the appointment of 12
Regional Directors and 24 Assistant Directors, followed by 75 Provincial
Executive Officers on March 28.  The 1979 incremental staff appointments
have been made and recruitment of the 1980 contingent is proceeding. A
contract has been let for the construction of 167 extension centers. The
first year's motorcycle allotment has been purchased and distributed under
the special vehicle loan fund.  Procurement of the other vehicles, for the
first and second year, together with equipment, is proceeding. Training
was interrupted temporarily during reorganization, hut is continuing in
cooperation with the USAID/KSU program on Agricultural Production and
Marketing. The first consultancy, on extension workers' compensation and
duties, and a second, on monitoring and evaluation procedures for extension



- 37 -
ANNEX II
Page 8 of 17
workers and services, have been let. Pilot areas for introducing the
T and V system of extension lhave been established in all 12 regions of the
country. The first four have been evaluated and a report issued.
Benchmarker agro-economic surveys, on which the selection of the pilot areas
was based, have been completed in the 12 regions.
Loan No. 1639-PH Magat River Multipurpose Project; Stage II Irrigation;
$21.0 Million Loan of January 26, 1979; Date of
Effectiveness: April 25, 1979; Closing Date:
December 31, 1983
Implementation started early in 1980 and progress is satisfactory.
All major contracts have already been awarded and some are ahead of schedule.
All construction equipment has been procured and delivered to site.
Completion is expected by mid-1983 as scheduled at appraisal. The only
problem to be foreseen is an overall financial constraint which is being
carefully considered by the Government.
Loan No. 1646-PTI Small Farmer Development Project through the Land Bank of
the Philippines; $16.5 Miilion Loan of January 26, 1979;
Date of Effectiveness: April 25, 1979;
Closing Date: June 30, 1983
Cumulative loan disbursements of $4.2 million up to December 1980
were lower than the appraisal estimate of $5 million because the subloan
demand from small farmers and rural entrepreneurs for farm mechanization and
backyard livestock investments have been generally weak owing to recent
increases in fuel and feed costs. Further, loan withdrawals against completed
infrastructure works ($3.5 million) have been held up by certain budgetary
regulations. However, the Budget Ministry has recently settled this matter
and disbursements should be made in the near future. The Land Bank has
initiated measures to strengthen its field level organization and streaialine
its lending terms, which are expected to step up subloan disbursements to
small farmers.
Loan No. 1772-PH Samar Island Rural Development Project; $27.0 million
Loan of February 1, 1980; I)ate of Effectiveness:
May 21, 1980; Closing Date: June 30, 1985
Procurement of services, materials and equipment for the project is
now under way, and the first phase of the Catubig valley studies has been
completed.
Loan No. 1809-PH  Medium-Scale Irrigation; $71.0 million Loan of March 28,
1980. Date of Effectiveness: June 25, 1980;
Closing Date: December 31, 1986
The loan became effective in June 1980 and project consultants
started work in August 1980. Procurement of project equipment is under way.
Design and preparation of contract documents for civil works are proceeding on
schedule and construction should start as planned.



- 38 -
ANNEX II
Page 9 of 17
Loan No. 1815-PH Rainfed Agriculture (Iloilo); $12.0 million Loan of
March 28, 1980; Date of Effectiveness: June 25, 1980;
Closing Date: June 30, 1986
Mtanagement of project components implemented through the Ministry
of Agriculture (1140A) is proceeding well, but those activities implemented by
other government agencies are proceeding more slowly.  Efforts are now being
made to channel funds to these agencies through MOA, the lead agency. Pro-
cureinent is six months behind schedule, mainly because all vehicle procurement
has to be reviewed by the Ministry of the Budget.  Nonavailability of credit
has been a problem, and measures are being taken to involve banks other than
the rural banks, including the Land Bank and the Philippine National Bank.
Constructiorl of the training center is delayed because the Provincial Govern-
ment has been unable to provide the 25% counterpart funds for construction
costs.
Loan No. 1890-PH Watershed Management and Erosion Control Project;
$38.0 iMillion Loan of August 4, 1980; Date of
Effectiveness:  October 30, 1980, Closing Date:
December 31, 1986
A good start has been made on implementation of the main components
of the project. Jurisdictional difficulties between the implementing agency
and the Bureau of Forest Development have been sorted out and a Memorandum of
Understanding signed. The National Irrigation Administration is making
vigorous efforts to protect the project as much as possible from the current
shortage of local funds.
Loan No. 1894      Third Livestock and Fisheries Credit Project; $45.0 Million
Loan of August 4, 1980; Date of Effectiveness: November 5,
1980; Closing Date: June 30, 1984
A good start has been made in project implementation. During the
first four months, up to December 1980, DBP's subloan disbursements exceeded
the appraisal estimate. These disbursements were mainly for livestock and
inland fisheries subsectors; the loan demand for marine fisheries is, however,
weak. Under the noncredit component, the Borrower's Bureau of Animal Industry
and Fisheries Industry Development Council are preparing proposals for
research and other support programs. DBP's studies on development of a new
management information system and staff training programs are in progress. A
plan for monitoring and evaluation of future agricultural credit projects is
also being developed by DBP.
Transportation Sector
Loan No. 1048      Inter-Island Shipping; $20 Million Loan of October 29,
1974; Date of Effectiveness: January 15, 1975;
Closing Date: June 30, 1981
The Closing Date was extended to June 30, 1981 to allow for the
completion of training programs and for ship construction guarantee payments.
About 70% of the loan has been disbursed. Loan applications covering the
balance of uncommitted funds are under consideration by DBP.



- 39 -                      ANNEX II
Page 10 of 17
Loan No. 1353      Third Highway Project; $95.0 Million Loan of January 12,
1977; Date of Effectiveress: March 30, 1977;
Closing Date: June 30, 1981
Overall, the project is about 53% completed and two and half years
behind schedule because of slow procurement, poor performance of many
contractors, and inadequate planning for thie use of local funds. The
operations of the Ministry of Public Highways (NPH) have improved but require
further efforts, specifically in road naintenance. In road construction and
inprovement, works on 11 national and 5 minor road contracts are progressing
satisfactorily; however, poorly performing contractors continue to cause
problems on three national and two minor road contracts. MPH has now
undertaken the action necessary to forfeit and retender those five contracts,
and contract award is scheduled by mid-1981. The road maintenance and
restoration programs have been reviewed and are now making some progress. Of
the 28 workshop contracts, 11 are now under construction, 13 are up for rebid
and 4 have been renegotiated. There is a significant cost overrun on the
wcrkshop contract, caused by changes in the design and price escalation.
Procurement of road maintenance equipmaent, tools and other machinery has been
completed. Consultants for supervision of construction of roads and workshops
are in place and the road and ferry feasibility studies have been completed.
The technical assistance advisors to MPH completed their assignment in
November 1979 and training advisors to MPH completed their work in March 1980.
Overall, the project completion is likely to be delayed until mid-1983, and it
will be necessary to extend the present closing date for two and a half years.
Loan No. 1661      Fourth Highway Project; $100 Million Loan of .March 9,
1979 ; Date of Effectiveness: June 15, 1979;
Closing Date:  December 31, 1983
After an initial delay of several months the implementation of this
project has proceeded slowly, mainly because of time-consuming prequalifica-
tion procedures for contractors and slow selection of consultants for
technical assistance. The overall delay now amounts to at least a year, and
the progress in implementing the project continues to be slow. Although MPH
has done a considerable amount of preparatory work and international
competitive bidding is now under way, no construction or improvement works
have yet started. A consulting firm for tlle design and construction
supervision of workshops has started the design work. Land acquisition for
road construction and workshops is under way and preparatory work has begun
for the continuation of the road maintenance and road restoration programs
begun under the Third Highway Project (Loan 1353-PH). Prequalification for
equipment suppliers has begun, but bids will be invited only after completion
of workshop construction.
Loan No. 1855      Third Ports Project; $67 Million Loan of June 13, 1980;
Proposed Date of Effectiveness: September 11, 1980;
Closing Date: June 30, 1984
Detailed engineering and preparation of tender documents are now
complete, and bidding for the four main port contracts is scheduled to take



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Page 11 of 17
place by mid-1981. Other preconstruction activities are under way and are
scheduled to be completed before the main contractors begin work. Consultants
have been selected to provide technical assistance for construction super-
vision, and contract negotiations are under way.
Loan No. 1860      Rural Roads Improvement Project; $62 Million Loan of
June 13, 1980; Proposed Date of Effectiveness: September
11, 1980; Closing Date: December 31, 1984
Initial progress in preparing the 1981 rural roads program has been
slow due mainly to a delay in providing technical assistance services to the
implementing agency. Due to delays in preparing and reviewing detailed
engineering for rural roads, no construction contracts will start in the 1981
dry season, putting the project about nine months behind schedule. Consulting
services are generally on schedule with the exception of the technical
assistance. The Government is aware of the importance of this item and is
taking steps to remedy the problem.
Education Sector
Loan No. 1224T    Third Education Project; $25 Million Loan of April 8,
1976; Date of Effectiveness: July 29, 1976;
Closing Date: June 30, 1981
The central part of the project, which is the development of primary
and secondary textbooks and teachers' manuals in five subject areas, has made
continuous progress since the inception of the project.  Eighteen million
books have been produced and distributed. The project should meet its goal
of producing and distributing to schools 75 titles amounting to 30 million
copies, as well as training about 250,000 teachers, by the middle of 1981.
Civil works are about 28 months behind schedule. Project costs are close
to appraisal estimates and disbursements are about 80% of appraisal estimates.
Loan No. 1374      Fourth Education Project; $25.0 Million Loan of March 25,
1977; Date of Effectiveness: June 9, 1977;
Closing Date: December 31, 1981
Implementation of the project is now some 18 months behind schedule.
Rapid price escalation and high credit costs in the 1978-80 period resulted
in a slow-down in building activity, the rescinding of an important contract
and renegotiation of others, thus delaying implementation of the project's
other physical components and dependent educational objectives. The situation
is being recuperated and in the process EDPITAF has devolved implementation
responsibilities to recipient institutions. An extension of the closing date
is to be sought once a revised financial plan has been elaborated with the
Finance and Budget Ministries. Overall project utilization of Technical
Assistance Specialists is only 20%, while over 80% of Fellowship time has been
committed. Enrolments are about on target and other educational developments
at UPLB and VISCA are proceeding satisfactorily. There is some tendency to
proliferate fields of specialized study and the National Governing Board of
the PTC-RD system has not functioned as planned in reviewing important changes
in policies and programs.



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Page 12 of 17
Loan No. S-8-PH   Educational Radio Technical Assistance:  $2 Million Loan
of April 21, 1978; Date of Effectiveness: August 22, 1978;
Closing Date: December 31, 1981
The project is being implemented by an Educational Communications
Office (ECO), established for this purpose within EDPITAF. ECO is functioning
smoothly and is successfully preparing and distributing radio programs and
printed materials for the two major project subcomponents - Radio Assisted
Teaching in Elementary Schools (RATES), and Continuing Education for Teachers
(CET). These programs have been implemented efficiently. The report on the
project summative evaluation which has been completed by the University of the
Philippines' Institute of Mass Communication, contains informative data on the
use of radio for the improvement of education. The Educational Communications
Office is now formulating follow-up plans incorporating this data into the
forthcoming Elementary Education project. A separate evaluation of the
Communication Technology for Rural Education will be completed towards the end
of 1981.
Loan No. 1786-PH Fisheries Training Project; $38.0 Million Loan
of February 1, 1980; Date of Effectiveness:
May 19, 1980; Closing Date: June 30, 1985
Although the loan became effective in May 1980, funds were released
by the Government only in November, which resulted in some implementation
delays. Physical implementation, however, is on schedule. Contract awards
for the first 13 packages were expected in the first quarter of 1981. By
December 1980, site acquisition was practically completed and equipment lists
were nearing completion. The first of five planned RIFT/RCFT staff training
workshops was conducted in November 1980. EDPITAF's devolution of major
responsibility and funds for implementation to recipient institutions is a
major policy change which will require, among other things, the introduction
of complex accounting practices.  The proposed UPVCF Fellowship program is not
consistent with project objectives and will require rigorous review by UPV,
EDPITAF and the Bank.
Urban Sector
Loan No. 1272T    Manila Urban Development Project; $10.0 Million and
Loan No. 1282      $22.0 Million Loans of June 9, 1976; Date of Effectiveness:
December 9, 1976; Closing Date: September 30, 1981
Overall construction on the Tondo project is about 65% complete. In
spite of implementation delays in two key components - construction of major
roads and the sewer outfall - overall management of the project has improved:
key staff vacancies in the Tondo office have been filled, and NHA's General
Manager is increasingly devoting his personal supervision to the project. All
but two infrastructure contracts have been awarded and are currently in
various stages of mobilization. The Dagat-Dagatan component is 98% complete,
and about 1,317 of the 1,501 completed units have been occupied. The short-
fall of 499 units will be constructed under the Second Urban Project. The
progress of the first package of the road component has been held up due to
price adjustment problems in the contract, and implementation of the sewer
outfall component has been delayed due to design modifications. However, the
contractor has now been selected, and implementation of this component is now
expected to proceed smoothly.



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Page 13 of 17
Loan 1415-PH   Provincial Cities Water Supply Project; $23 Million Loan of
May 13, 1977; Date of Effectiveness: September 9, 1977;
Closing Date: M4arch 31, 1982.
Overall project implementation is about one year behind schedule.
Major contracts have been awarded; however, due to unforeseen delays in well
drilling and late deliveries of pipes, progress is slow. Work has started in
four of the six project cities, and contractors are mobilizing in the
remaining two. The construction cost is expected to be close to appraisal
estimates and project completion is expected to be on target.
Loan 1615-PH   Second Manila Water Supply Project; $88 Million Loan of
July 26, 1978; Date of Effectiveness: December 21, 1978;
Closing Date: December 31, 1983.
Delays in contract approvals in the ADB-financed components of the
project (source and treatment works) have resulted in similar delays in
IBRD-financed parts of the project (distribution system). Nevertheless,
according to rescheduling prepared by consultants, it is expected that the
original target of completing the project by June 1983 will be met with no
further slippage. Water rates were increased by 25 centavos in May 1980 and a
10% water rate surcharge was implemented at the end of 1980. A further water
rate increase is expected to be implemented in June 1981.
Loan No. 1647-PH Second Urban Development Project; $32.0 Million Loan
of January 26, 1979; Date of Effectiveness: April 26,
1979; Closing Date: June 30, 1984
Since the loan became effective in April 1979, implementation has
been in progress on earthworks, sewerage and drainage contracts in Dagat-
Dagatan and on the SIR program in the regional cities. An action program to
remedy the drainage problem of the Dagat-Dagatan area and to provide adequate
fill materials has been initiated through MPW and contracts for major
earthworks and infrastructure are now being let. This should considerably
accelerate disbursements on the Dagat-Dagatan component. Overall loan
disbursement improved during FY80. Due to fill deficiency problems at the
Dagat-Dagatan site and general price escalations, the total project costs have
increased to approximately $95 million, reflecting a 38% increase over the
appraisal estimate. It is likely that the overall project will be completed
on schedule by the end of 1983.
Credit 920-PH Second Provincial Cities Water Supply Project; $22 Million
Loan 1710-PH   Credit and $16 Million Loan of June 27, 1979; Date of
Effectiveness: November 30, 1979; Closing Date: December
31, 1985.
The 50 Water Districts required under the project have been formed.
Detailed designs for 12 of the project cities are nearing completion. Work
has started on the development of a financial planning and control system,
and consultants have started the preparation of a comprehensive management
assistance and training proposal.  A new institution, the Rural Water Supply
Development Corporation, has been created, and is now preparing a list of
materials to be procured for rural water supply.



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Page 14 of 17
Loan 1814-PH Manila Sewerage and Sanitation Project: $63.0 million Loan of
March 28, 1980; Date of Effectiveness: September 10, 1980;
Closing Date: December 31, 1984.
The project is proceeding well, with no major problems. Detailed
designs for the Tondo Pumping Station have been completed, and tenders for
sanitary sewers in Dagupan and Pandacan called. The organization for the
combined sewer program is in place; staffing and training plans are being
prepared; and equipment for the water quality monitoring program has been
approved for procurement. Disbursements are ahead of appraisal estimates,
due mainly to faster improvement in MWSS's management than anticipated.
Loan 1821-PH  Third Urban Development Project; $72 Million Loan of
June 2, 1980; Date of Effectiveness: September 25, 1980;
Closing Date: December 31, 1984.
With satisfactory organizational and staffing arrangements now
established, physical implementation of this project is generally on schedule
in spite of procedural delays in budgetary releases. Second phase programs in
community upgrading, serviced sites, basic municipal infrastructure and
employment promotion are already being identified for inclusion.
Power Sector
Loan No. 1034      Sixth Power; $61.0 Million Loan of July 31, 1974:
Date of Effectiveness: November 15, 1974;
Closing Date: June 30, 1981
The generating plant was commissioned in April 1977, and the
transmission facilities are now expected to be completed by mid-1981, more
than three years behind schedule. The revised cost of the project is
estimated at $124.2 million, an increase of about 35% over the original
estimate ($92 million). The closing date of the loan has been postponed from
December 31, 1978 to June 30, 1981 to allow additional time for completion of
the transmission systems and payment of the retention money.
Loan No. 1460      Seventh Power Project; $58.0 Million Loan of August 9,
1977; Date of Effectiveness: January 6, 1978;
Closing Date: June 30, 1982
Project implementation is behind schedule, and is expected to be
completed one year later than estimated. The foreign exchange component is
now estimated at $57.1 million (including additional works) compared with the
original estimate of $58.0 million; surplus funds will be used to expand
substations to increase the reliability of the system. Due to delays in
procurement and because of additional works authorized by the Bank, the
closing date of the loan will need to be extended to mid-1983. NPC has still
been unable to meet the 8% rate of return target provided in the Loan
Agreement and the Government has yet to provide specific assurances that
appropriate action will be taken to remedy this. This problem is being
followed up by the Bank.



ANNEX II
Page 15 of 17
Loan No. 1547      Rural Electrification; $60.0 Million Loan of May 10,
1978; Date of Effectiveness: August 17, 1978;
Closing Date: December 31, 1981
After earlier improvements in implementation, the project is now
behind schedule. About 300,000 house connections were made in 1980, compared
with NEA's target of 487,000. NEA's financial performance in 1979 was good,
but adjustments to the audited accounts for 1978 resulted in a net loss of
P10.3 million ($1.4 million). The Bank has now made a number of recommenda-
tions to improve the audit reports prepared by the Commission on Audit. NEA
is making efforts to monitor the financial performance of the cooperatives and
for the first time has published the financial results of the cooperatives as
a supplement to its 1979 report.
Industrial Sector
Loan No. 998       Industrial Investment and Smallholder Tree-Farming;
$50.0 Million Loan of June 12, 1974; Date of Effectiveness:
September 9, 1974; Closing Date: December 31, 1981
The industrial portion of the Loan ($48 million) has been almost
fully drawn down by DBP to finance medium and relatively large industrial
projects. DBP is using the balance ($2 million) to finance about 1,300
smallholders in a pilot tree-farming project in Mindanao; this part of the
loan is also substantially disbursed.
Loan No. 1052      Private Development Corporation of the Philippines;
$30 Million Loan of November 12, 1974; Date of
Effectiveness: February 7, 1975; Closing Date: June 30,
1981
After some slowdown in commitments and disbursements experienced in
1976 and 1977 the loan has now been fully committed. Overall progress is
satisfactory.
Loan No. 1190      Industrial Investment; $75.0 Million Loan of January 28,
1976; Date of Effectiveness: April 6, 1976;
Closing Date: September 30, 1981
Commitments of funds, which were initially much slower than expected
due to a slowdown of investment in the industrial sector as a whole, improved
in 1978 and 1979.  The loan has since been fully committed by DBP for
subprojects.  Disbursements are now proceeding satisfactorily.
Loan No. 1514      Private Development Corporation of the Philippines (PDCP);
$30 Million Loan of February 9, 1978; Date of
Effectiveness: June 23, 1978; Closing Date:
September 30, 1982
As of January 31, 1981 commitments under the loan amounted to $25.6
million. The project progress is satisfactory.



- 45 -                        ANNEX II
Page 16 of 17
Loan No. 1555      Philippines Investments Systems Organization (PISO);
$15 Million Loan of May 8, 1978; Date of Effectiveness:
May 12, 1978; Closing Date: December 31, 1982
The loan is now fully committed and disbursements are proceeding
at a satisfactory rate.
Loan No. 1572      Third Industrial Investment Credit Project through the
Development Bank of the Philippines: $80 Million Loan
of June 6, 1978; Date of Effectiveness: September 15,
1978; Closing Date: June 30, 1982
DBP's SMI program is operating satisfactorily and the loan
allocation for this component has been fully committed. However,
cancellation/withdrawal of some subloans earlier committed under the loan
has left an uncommitted balance of $6.5 million under the loan allocation
($50 million) for medium/large industry financing. The overall progress
of loan commitment and disbursement is satisfactory.
Loan No. 1727      Second Small and Medium Industries Development Project;
$25 Million Loan of June 27, 1979; Date of Effectiveness:
November 9, 1979; Closing Date: June 30, 1983
After the introduction of policy changes in IGLF in late 1979,
IGLF's loan commitment rate has accelerated. As a result, disbursements
under the IGLF component ($24.5 million) amounted to $10.4 million as of
January 31, 1981 and are expected to be completed before the loan closing
date. The reorganization within the Ministry of Industry has considerably
slowed down disbursements under the MASICAP component ($500,000). Overall
progress of the project is satisfactory.
Loan No. 1984      Industrial Finance Project; $150 million Loan of May 28,
1981; Proposed Date of Effectiveness: July 28, 1981;
Closing Date: June 30, 1985.
This loan was signed on May 28, 1981, and is not yet effective.
Structural Adjustment Lending
Loan No. 1903      Structural Adjustment Loan; $200.0 million Loan of
September 25, 1980; Date of Effectiveness: November 14,
1980; Closing Date: June 30, 1985
Considerable progress has been made in implementing the Government's
industrial development program in support of which the loan was made. The
first stage of the Government's five year program of tariff reform and trade
liberalization became effective on January 1, 1981; studies are under way to
review and improve the Government's industrial incentives and promotion
system; and subsector development programs are under preparation to assist



- 46 -                        ANNEX II
Page 17 of 17
domestic industries to adjust to the tariff reform and trade liberalization
measures. The first tranche of $100 million has now been fully drawn down and
the Government has entered into commitments to utilize nearly half of the $5
million technical assistance component to help formulate and implement various
industrial policy measures. The availability of the second tranche of $95
million has been temporarily delayed to allow the Government additional time
to finalize and adopt the final phase of the tariff reform and trade
liberalization program.
Population Sector
Loan No. 1035       Population; $25.0 Million Loan of July 31, 1974;
Date of Effectiveness: November 13, 1974; Closing
Date: June 30, 1981
As of November 1980, 198 of the 219 training centers and rural
health units and about 93% of all construction work had been completed.
Procurement of furniture and vehicles has been completed, with some items of
equipment still remaining. Problems associated with the phasing out of the
old Project Management Staff with the resultant loss of continuity and
coordination, and with continuing delays in budget release and austerity
measures have severely restricted project activities, and the closing date of
June 30, 1981 will not be met. Before agreeing to an extension to the closing
date, the Bank is requiring, among other conditions, that the required budget
funds be released to the Ministry of Health and that a suitably qualified
person be hired as a consultant to coordinate project activities. If these
conditions are met, it is expected that the project will close by December
1982, three years behind schedule.
Credit No. 923    Second Population Project; $40.0 Million Credit of
June 27, 1979; Date of Effectiveness: October 15, 1979;
Closing Date: June 30, 1985
All sites for POPCOM's offices, warehouses and vehicle maintenance
workshops and 126 of the 158 sites for the Ministry of Health's health centers
and barangay health stations required for the 1981 construction program have
been acquired and surveyed, and the remaining 32 sites are being obtained.
Operation research and communication production works are on schedule and
procurement documents are being processed for vehicles and equipment. The
National Primary health Care policy paper, implementation guidelines and
primers for health workers have been finalized, and orientation and training
workshops for intersectoral development and health staff have been conducted
in six regions. With the exception of the primary health care component,
overall progress has been slow, and as of December 1980 disbursements had
barely started. The Bank has provided the Government with a list of
recommended actions designed to improve the project management capacity of
POPCOM and MOH; however, initial delays in budget release and recent changes
in project management may cause slippage in the project completion date.



ANNEX III
- 47 -                    Page 1 of 2 pages
PHILIPPINES
SECTOR PROGRAM FOR ELEMENTARY EDUCATION
Supplementary Data Sheet
Section I: Timetable of Key Events
(a)  Time taken to prepare the program   :  9 months
(b)  Agencies which prepared the program : MEC and EDPITAF
(c)  Dates of first presentation to the
Bank and of first Bank mission to
consider the project                   : October 1979, December 1979
(d)  Date of departure of appraisal
mission                                : September 1980
(e)  Date of completion of negotiations  : May 5, 1981
(f)  Planned date of effectiveness          : October 1981
Section II: Special Bank Implementation Actions
A Special Account would be established in the Central Bank of the
Philippines to finance small local currency payments (para. 77).
Section III: Special Conditions
The Government would:
(a)  consult with the Bank if major changes in policies or other
components of the development program are required (para. 47);
(b)  establish the Instructional Materials Corporation and Council with
authority, responsibilities, staff, and resources satisfactory
to the Bank by October 31, 1981 (paras. 54 and 55);
(c)  select and implement subprojects in accordance with criteria,
guidelines and procedures satisfactory to the Bank (para. 68).
(d)  make use of the expertise and staff of EDPITAF or other agencies
of the MEC to provide assistance in implementing the development
program under terms of reference satisfactory to the Bank
(para. 70);



- 48 -                    ANNEX III
Page 2 of 2 pages
(e) appoint and retain suitably qualified staff in adequate numbers
in the MEC for implementing the development program effectively
(para. 70):
(f) furnish to the Bank for review and comment, not less than three
months before the scheduled start of implementation, subproject
proposals requested by the Bank (para. 71).



ANNEX IV
- 49 -                          Page 1 of 4 pages
May 5, 1981
World Bank
1818 H Street, N.W.
Washington, D.C. 20433
U.S.A.
Dear Sirs:
I hereby submit the "Program and Policy Statement for the
Development of Elementary Education in the Philippines."
Very truly yours,
(@4-t "7    .
Onofre D. zorpuz
MIinister of Education and Culture



ANNEX IV
-50-                         Page 2 of 4 pages
PROGRAM AND POLICY STATEMENT FOR THE DEVELOPMENT OF ELEMENTARY
EDUCATION IN THE PHILIPPINES
Introduction
1.        The Government's ten-year development program for elementary
education (1981-90) is integral to the overall objectives for national
development to achieve widespread provision of basic services, to support
rural development and increased productivity. To support this strategy, a
strengthening of basic education, with emphasis on reaching large numbers of
rural and disadvantaged children, is required. Within this context, the
development program for elementary education addresses the major sector
issues, namely: (a) policy constraints, (b) management constraints and
(c) performance problems.
Objective
2.        The main objectives of the program are to raise student partici-
pation and achievement with particular emphasis on the regions with low
performance standings, and to improve the efficiency of the Ministry of Edu-
cation and Culture-s operations. In pursuit of these objectives, the
Government would: (a) introduce revised policies for sector financing and
management to raise quality and reduce disparities, (b) effect institutional
changes to strengthen sector management, and (c) provide revised
instructional programs and improved distribution of teachers and facilities
to strengthen performance at the school level.
Sector Policy Measures Undertaken
3.        Under the sector development program, the following policies will
be introduced to strengthen elementary education in particular and the
entire educational system in general: (a) funds will be allocated in
relation to needs; (b) recurrent expenditure will be apportioned to achieve
an appropriate balance among the educational inputs, (c) teacher utili-
zation will be improved through intensified use of subject matter teachers,
and (d) revised procedures for student intake and progression will be
introduced to increase productivity and participation rates.
4.        Regional Expenditure Allocation.  Guidelines for the allocation of
funds will be adopted to give priority to regions with below average
performance. Special incentives will be provided to ensure continued
improvement in regions with above average performance.
5.        Apportionment of Recurrent Expenditures.  Allocations for recurrent
expenditure will be reapportioned to achieve an appropriate balance between
salary and nonsalary items. To improve quality and efficiency, the share
for nonsalary items will be increased from about 2% to 7% of recurrent
expenditures between 1981 to 1990 subject to increases in teachers salaries.



ANNEX IV
- 51 -                       Page 3 of 4 pages
6.        Teacher Utilization.  Improved utilization of subject teachers
(in Grades V and VI) will be pursued to the end that the class-pupil ratio
will be improved from about 2 to targeted 1.2 per class. To ensure a
related increase in the pupil-teacher ratio, from 31:1 in 1981 to about
36:1 by 1990, enrolment of 40-45 children per class will be pursued.
Whenever enrolment of does not warrant the organization of single classes,
combination and multigrade classes will he used. In cases where subject
teachers are not available, one teacher will be used for each class.
7.        Student Intake and Progression.  To increase Ehe proportion of the
school aged population entcring school from 73% to about 91% over the period
1981-1990, a policy to admit children at age 7, or 6-1/2 for those who will
reach 7 years of age within the first half of school year, will be observed.
An accompanying policy to accelerate overaged children who have the capacity
for work in the next grade will be selectively implemented. To raise cohort
survival rate from 76% to about 82% over the period 1981-1990 innovative
approaches will be utilized to encourage children to remain in school. To
reduce repetition rates, a simplified curriculum with emphasis on achieving
competence in basic skills, will be used to improve quality and to improve
the progression rate.
B. Management Changes
8.        Modifications in structure, functions and staffing will be
introduced in the principal agencies involved in elementary education to
improve sector management and planning.
9.        Bureau of Elementary Education (BEE).  The BEE has been assigned
line authority for technical supervision in the regions to enable it to
guide the development and management of elementary education effectively.
10.       Regional Offices.  The Regional Offices of the Ministry of Edu-
cation and Culture will be held responsible for monitoring the implementation
of sector policies and programs in accordance with BEE criteria and
standards and for providing related assistance to the provincial and
district authorities.
11.       Office of Planning Service (OPS).  The OPS will retain its respon-
sibilities for coordinating regional planning and preparing national plans
and budget requests for education. In order to strengthen its contribution,
the OPS will also maintain a comprehensive information system based on
regional statistics, conduct systematic monitoring of sector performance
and assist the regions in sector planning.
12.       Regional Planning Units.  Permanent planning units will be
organized in every regional office to replace ad hoc units.



ANNEX IV
- 52 -                            Page 4 of 4 pages
13.       The Instructional Materials Corporation (IMC).  The IMC will
replace the Textbook Agency. In consonance with this change, revised
publishing responsibilities and changes in the organization and financing
arrangements for textbook publishing by the Government will be introduced.
This change is consistent with the Government's long term policy of
providing effective textbooks for students in public elementary and
secondary schools. The IMC will thus be charged with the formulation and
implementation of plans and programs for the development, production or
procurement and distribution of sufficient instructional materials in
accordance with this policy.
C. Performance
14.       Improved performance at the school level will be achieved through
the policy and management changes described above and through the intro-
duction of revised learning programs, an improved distribution of facili-
ties and teachers, staff development and systematic evaluation.
15.       Achievement.  Increased achievement scores on standard achievement
tests are targeted. Towards this end, a new curriculum (para. 7) supported
by revised teaching techniques and instructional materials is being
finalized and related staff development packages are being devised to ensure
that objectives are met.
16.       Materials.  The Government s targeted ratio of one textbook for
every two elementary pupils will be reached by 1985/86 and maintained
thereafter. This target will be realized through the ten-year publishing
program of the IMC which plans to produce and distribute approximately 120
million basic textbooks for the elementary level between 1981 and 1990.
17.       Facilities.  School facilities and equipment will be provided in
accordance with needs based on systematic facilities planning criteria. On
the average, 11,000 new classrooms will be provided annually between 1981 and
1990 in order to meet enrolment growth and replacement needs.
18.       Teachers.  In order to reduce disparities in the availability of
teachers, a scheme for monitoring demand and supply will be established at the
regional level.
19.       Staff Development.  Staff upgrading will be a continuing program
for MEC and IMC staff. Systematic upgrading will be provided through
workshops, fellowships and expert services in selected fields.
20.       Evaluation.  To support the regular review and updating of sector
policies and guidelines, systematic evaluation of sector performance has
been built into the development program and includes: (a) monitoring of
regional data or sector performance on an annual basis; (b) an in-depth
evaluation on determinants of student participation and achievement and
regular achievement testing over the ten year development period; and
(c) research on selected topics related to sector performance.



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