Closed Compact Report: Philippines Compact | April 2018

Secondary National Roads Development Project

  • $214,440,000Original Compact Project Amount
  • $199,849,932Total Disbursed

Estimated Benefits

Estimated benefits correspond to $199.8 million of project funds, where cost-benefit analysis was conducted.

Estimated Benefits for the Secondary National Roads Development Project
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
At the time of signing 13.7 percent 282,000 $25,000,000
At compact closure 8.9 percent 282,000 $-12,400,000

The closeout ERR reflects a best estimate of the economic rate of return using the information available at the time of compact closure. Some parameters in the project’s closeout ERR were updated according to data collected by the end of the compact such as traffic counts and vehicle maintenance costs. Other data typically collected after a road is completed, such as road roughness and deflection measurements, were either conflicting or unavailable.  The closeout ERR was also calculated following reports received in March 2017 that identified some defects in the newly constructed road during the Defect Notification Period (DNP).  The lower closeout ERR reflects higher costs at closeout than anticipated at compact signing and an assumption that the observed defects signaled that the road was likely to deteriorate faster than originally forecast if the defects were not corrected by the end of the DNP. However, the detailed quantitative data that is needed to precisely calculate the impact the defects in the road would have on its longevity was not yet available at the time of closeout.  This data will be collected during the independent evaluation of the Roads Project and the ERR will be updated in late 2020 when the evaluation report is finalized.

Project Description

Inter- and intra-island transport systems play a crucial role in supporting the economic development of the widely dispersed regions of the Philippine archipelago. However, the poor condition of infrastructure facilities and lack of reliable, safe, and efficient transport services have significantly hampered the movement of passengers and cargo throughout the country, limiting direct internal and external trade links and tourism, and constituting a major constraint to regional economic growth. This is particularly true in many poor areas of the Philippines, where improved accessibility has the potential to lower marketing costs for local agricultural products, improve access to social services and economic opportunities, and catalyze investments to develop local resources. Secondary national roads are important contributors to economic growth, especially in rural areas.  Roads are the dominant mode of transport in the Philippines, accounting for 53 percent of freight and 89 percent of passenger traffic in the country. The Philippines has a total road network of approximately 200,000 km, including some 29,000 km of national roads.  Approximately 79 percent of the national arterial roads are paved, and 48 percent of these require rehabilitation. 1

The Secondary National Roads Development Project was designed to reduce transportation costs and provide additional economic opportunities to rural residents in one of the poorest and most typhoon-prone regions of the country.  The project was originally designed to reconstruct and rehabilitate 222 km of the Samar road crossing the provinces of Samar and Eastern Samar.  The project also provided an opportunity for MCC to partner with other principal donors active in road maintenance so a singular policy framework could be pursued.

The Philippines is susceptible to natural disasters; in particular, typhoons, flooding and landslides present an ever-present threat to road construction.  In recent years, the cost of road construction in the Philippines has escalated because of the impact of increasingly frequent severe weather events.  Due to the significantly high cost, infrastructure investments are often insufficiently designed and evaluated, resulting in long-term failure.  The Secondary National Roads Development Project considered the adverse effects of heavy rainfall, flooding, and typhoons in its design using climate models to examine how changes in storm intensity, numbers and frequency could impact the road, particularly drainage.  Drains were changed from a previous standard of withstanding 1 in 20 year events to 1 in 50 year events. Bridges were raised to allow for more clearance during flood events.

The project also faced particularly challenging conditions for implementation due to weather on the island.  Recognizing the need to begin construction on the road project as soon as possible, the Government and MCC jointly developed a mechanism for MCC to procure and contract the road design while instituting a management system of the design that was Philippines-led with the Department of Public Works and Highways at the forefront of decision-making and design reviews.  This allowed for efficient and effective development of the road design and the procurement of civil works contracts in impressively quick fashion. This creative approach to road design also allowed for an early and proper evaluation of the budget requirement for the project.

As a result, the climate-resilient road ultimately withstood Super Typhoon Yolanda (internationally termed Haiyan) in 2013 and Typhoon Ruby in 2014, providing invaluable connectivity to the 14 municipalities along the road and immediate employment opportunities to more than 2,000 local residents in the aftermath of the storms. Shortly after Typhoon Yolanda struck, the Samar Road was a major conduit for relief supplies on the island of Samar.  Compact contractors were able to mobilize equipment quickly to help clear the road and debris in coordination with local governments, and joined the larger relief effort in many communities along the road as well as in the city of Tacloban, Leyte.  Protective measures taken by MCA-Philippines, contractors and consultants leading up to the storm, as well as the incorporation of more climate-resilient standards in the road’s design, limited damage to newly constructed road segments.  The teams identified practical and helpful solutions to address many cross-cutting issues in the aftermath of the storm, such as ensuring continued resettlement assistance to project affected entities, countering trafficking in persons, and coordinating an expansive tree re-planting program.

MCC and MCA-Philippines collaborated to accelerate the project schedule to ensure the road’s timely completion as a way to directly support and facilitate other ongoing aid and reconstruction efforts in Eastern Samar. Compact-funded contractors voluntarily made their equipment and materials available to clear the roads in Samar so that food, water and medicine were brought to people in need quickly to prevent further devastation and loss of lives. Compact partners also collaborated with local organizations and international donors to reinforce vigilance against human trafficking; historically, a large percentage of victims of human trafficking in the Philippines have come from Samar, and with the typhoon remnants, that population was even more vulnerable as many social safety nets were washed away by the storm.

In addition, the project included efforts to empower communities to address the threat of trafficking in persons (TIP) through education and awareness of this threat. The project utilized innovative tools to address common pitfalls of infrastructure projects which included:

  • piloting a ground-breaking community-managed road maintenance program, a joint initiative of the Department of Social Welfare and Development and Department of Public Works and Highways, to ensure effective, sustainable routine maintenance of the newly rehabilitated road;
  • implementing a gender toolkit in the design and construction phases to help ensure the project included all beneficiaries, regardless of gender; support for women’s economic opportunities arising from road construction activities;
  • utilizing an International Road Assessment Programme (iRAP 2 ) to improve safety characteristics for road users along the road; and
  • employing advanced technology to incorporate in-situ materials in the newly constructed road (i.e. recycling existing pavement and using existing pavement as a base layer), thereby minimizing the need to quarry and transport new materials.

With northern sections of the road passing through Samar Natural Island Park, home to several protected species, including the critically endangered Philippines Eagle, MCC and the Government took particular care to build safeguards into the road design. The environmental and social impact assessments were highly detailed, and observations on protection of flora and fauna were built into contractors’ environmental and social management plans. Also noteworthy was the continuing collaboration, guided and encouraged by MCC, between the Department of Natural Resources and Environment and the Department of Public Works and Highways on reforestation of 100 trees for each one removed.  The Tree Reforestation Program employed local residents along the road who were trained in establishing nurseries and tree replanting.  The replanting program, which included mangrove reforestation – especially relevant for the eastern seaboard as both a natural barrier to storm surges and a source of fisheries-based community livelihoods – will provide a source of future income for residents while ensuring environmental sustainability.

By the end of the compact, the Secondary National Roads Development Project completed rehabilitation of 175 km of road, including 59 bridges, to new climate-resilient standards on a key national road on Samar Island, connecting some 14 municipalities, a city, and 134 barangays. Additionally, the project led the Department of Public Works and Highways to adopt gender-inclusive initiatives in their standard operating procedures. 

While nearly all of the originally planned sections of road were completed at the end of compact, conditions exacerbated by climate events on parts of the road, including new landslide remediation and enhanced bridge repair, required a time extension beyond the compact to complete the work.  The Government committed its own resources to successfully finish the remaining work, mainly focusing on rehabilitation works on two bridges and land remediation, as well as assurance to commit necessary funds and resources for the operations and maintenance of all project roads.  All 222 km are now open to traffic, and the roadway is functioning safely for its intended purpose.

Evaluation Findings

Road improvement is expected to reduce vehicle operating costs, reduce travel time, decrease maintenance costs, and increase the value of goods moved and the frequency of travel.  MCC’s independent evaluation of this project will: (i) determine the post-compact ERR using HDM-4 analysis 3 ; (ii) assess the road maintenance system; (iii) analyze the composition of road users; and (iv) assess the transportation market structure.

Status of the evaluation
Component Status
Baseline Report N/A
Midline Report N/A
Endline Report The evaluation is scheduled to be completed in fall 2019, after a three-year exposure period, with a final report to be submitted in 2020.

Key performance indicators and outputs at compact end date

Key performance indicators and outputs at compact end date
Activity/Outcome Key Performance Indicator Baseline End of Compact Target Quarter 1 through Quarter 20 Actuals (as of Dec 2012) Percent Compact Target Satisfied (as of Dec 2012)
Samar Road Activity Average annual daily traffic 1,179 1,450 2,030 140%
Kilometers of roads vehicle-passable (lanes) 0 444 444 100%
Road traffic accidents 59 N/A $55 N/A
Roughness 7.1 3.5 1.83 191%

Explanation of Results

At compact end, although all 222 kilometers of the road were vehicle-passable, i.e. drivable, certain sections of the road were not complete. The contractor issued turn-over certificates for 175 kilometers of road to the Department of Public Works and Highways of the Philippines, indicating that these kilometers were completed.  For the other 47 kilometers, the main carriageway was finished but drainage and shoulders remained incomplete.

Footnotes
  • 1. “Philippines: Critical Development Constraints,” Asian Development Bank, December 2007.
  • 2. The International Road Assessment Programme (iRAP) assesses roads all over the world and aims to significantly reduce road casualties by improving the safety of road infrastructure.
  • 3. MCC is funding the evaluation of the road using HDM-4. HDM-4 is a road investment appraisal method that monetizes time savings and vehicle wear and tear based on road conditions. It calculates reduced vehicle operating costs, reduced travel time, and changes in road maintenance costs.