Mid-Term Review

JBIC ODA Loan Project Mid-Term Review 2006

Evaluator: Asahi Ltd. (Teruo Kawakami)Time of Mid-Term Review Field Survey: January–February 2007
Project Title：The Republic of the Philippines “The Subic-Clark-Tarlac Expressway Project” (PH-P226)[Loan Outline]
Loan Amount / Contract Approved Amount / Disbursed Amount: 41,931 million yen / 41,857 million yen / 13,656 million yen (as of the end of September 2006)
Loan Agreement: September 2001 (5 years after L/A signing）
Original Project Completion Date: December 2006
Revised Project Completion Date: November 2007
Loan Expiry Date: December 2009
Executing Agency: Bases Conversion Development Authority
Operation and Maintenance Agency: To be commissioned to Private Operator
Selection Criteria for Mid-Term Review: Special Yen loan
[Project Objective]
The objective of this project is to increase transport efficiency, reduce costs, and increase safety by building an approx. 90-km long toll expressway connecting Subic, Clark
and Tarlac and thereby contributing to the development and revitalization of the regional economy in the Central Luzon region through promotion of human exchanges andgoods distribution.
Consultant: JV comprised of Pacific Consultants International (J), Nihon Koei Co., Ltd. (J), Katahira & Engineering International (J)Contractor: Package I (Subic-Clark section): JV comprised of Obayashi Corporation, JFE Engineering Corporation (J), Mitsubishi Heavy Industries, Ltd. (J), Kajima
Corporation (J); Package II (Clark-Tarlac section): JV comprised of Hazama Corporation (J), Nippon Steel Corporation (J), Taisei Corporation (J)1Mid-Term Review[Mid-Term Review Result]
Item
Relevance

Ex-ante Evaluation (at the time of appraisal)(December 2000)(1) National policy level· In the Mid-term Development Plan (1999–2004), the transport sector
adopted “the provision of safe and reliable transport services”, as adevelopment goal to support the development of the Philippine society
and economy. Further, the sector pursued a strategy to reach this goal,
which was “improving the quality of existing infrastructure throughappropriate rehabilitation, operation and maintenance.” The priority
items were (1) setting high standards for main national roads andregional dispersion for improvement of road networks; (2) introducing
the principle requiring drivers to share the costs of road improvement.
Thus the construction of the toll expressway was consistent with thePhilippines’ national policy. In the New Mid-term Development Plan
(2001–2004) established under the Arroyo government, provision ofsafe and reliable transport services was considered a key policy. In
addition, privatization of the operation of transport infrastructure wasdeemed one of the development strategies to be adopted in the transport
service division. Thus the construction of an expressway included inthis project and the privatization of operation and maintenanceconformed with state planning.

Result of mid-term review and ex-post evaluation results asestimated at time of mid-term review(1) National policy level·In the Mid-term Development Plan (2004–2010), the development of
the Subic-Clark district as an Asian distribution center is considered
to be one of the Philippine government’s important development
policies, and the infrastructure building undertaken in the project isregarded as a transport infrastructure that supports distribution of
goods.
·The Mid-term Development Plan adopted a policy of further
encouraging drivers to at least share the operation and maintenancecost of road improvement so as to reduce the financial burden on thecentral government. The Plan also adopted the goal of promoting theparticipation of the private sector in the road improvement project by,among other things, legislating a law related to BOT. The present
project planned to use the fare receipts to pay the cost of operationand maintenance as well as to service its debts. In addition, since theproject plans to commission the private sector to be responsible for
operation and maintenance, it is consistent with the policy of the
Mid-term Development Plan.

(2) Policy level· In the business plan (2000–2004) adopted by the Base Conversion
Development Authority (BCDA), which was established in 1993 withthe objective of achieving social and economic development in theCentral Luzon region as a strategy for expanding investments fromabroad, it was deemed important to coordinate strategically between the
Subic Bay Special Economic and Free Port Zone and the Clark Special
2(2) Policy level· The two main goals of the 2005–2010 strategic plan adopted by theBase Conversion Development Authority (BCDA) are building the
Subic-Clark international distribution center in Central Luzon, andconstructing the Central Luzon Expressway.

Mid-Term Review

Economic Zone. The road being built in the project will connect thetwo economic zones.
(3) Planning level· As the building of the two special economic zones in Subic and Clark
advanced, traffic between the two special economic zones was expected
to increase dramatically. Consequently, there was an urgent need tobuild an expressway linking the two zones not only for streamlining the
distribution of goods but also for securing smooth and safe road traffic.
· Since the North Luzon Expressway ends in a suburb of Clark, there wasan urgent need to build an expressway between Clark and Tarlac. Suchan expressway would alleviate the traffic congestion on MacArthur
Road where the traffic flowing from the northern part of Luzon Island
to Tarlac – the newly industrialized area and the distributing center for
agricultural products – and from Tarlac to Manila is concentrated.

(3) Planning level· There is a strong need to build an expressway in the Central Luzon
region linking the special economic zones in Subic and Clark, which
are being developed as an international distribution center. In both
special economic zones, economic activities are increasing.
Number of newcompanies in Clark
Special Economic
Zone
Number of newcompanies in Subic
Bay Free Port Zone
Number of jobs in
Clark
SpecialEconomic Zone
Number of jobs in
Subic Bay Free Port
Zone

2001
45

2002
66

2003
66

2004
85

2005
93

80

85

94

10

49

22,04626,30628,40933,50436,83345,742

48,87451,87555,87559,764

Number of companies as of October 2006: 389 in Clark, 693
in Subic Bay· As of January 2007, there were 9 companies operating in the Luisita
industrial complex in Tarlac (4 are Japanese firms). The construction of
the Central Techno Park located near the industrial complex was started
in the latter half of 1990 and is suspended and still unfinished.
· On the other hand, as of 2002, traffic volume between Clark andTarlac (AADT: Annual Average Daily Traffic) was 11,491 vehicles;
since then, it has increased annually by 4–5%. Consequently, there is anurgent need for an expressway in the Central Luzon region to alleviate
3Mid-Term Review

Effectiveness (Impact)

the congestion on MacArthur Road, the only arterial road between
Tarlac and Clark.
(1) Operation and effect indicators
1. Quantitative effects(1) Operation and effect indicators
1. Quantitative effects

Operation Indicators (when the toll is 2 pesos/km)

Operation Indicators (when the toll is 2 pesos/km)
Indicator

Annual traffic(PCU)(unit: 1,000)
Annual traffic bytype of vehicle
Fare receipts(unit: million pesos)

SectionActualSubic-Clark (56 km)
Clark-Tarlac (34 km)
Weighted average (annual
conversion)
Subic-Clark
Car and jeep /bus and truck
Clark-Tarlac
Car and jeep,
Bus and truck
Total (annualized)

TargetFirst FY ofBusiness(2006)

-

1,430
2,076
3,348

Indicator

SectionAnnual traffic(PCU)(unit: 1,000)(Data by section
unavailable)

-

33
124

66
71
588

-

Note: The first fiscal year of business is based on the appraisal data, but
only for six months.

Annual fare receipts(unit: million pesos)

Ditto

TargetFirst FY of Business(2008)
5,555(Annual traffic
equivalent to 1,319
million pesos of farereceipts for 2008 in the
projected cash flow tableprepared by BCDA)
1,319

Note: The projected traffic volume was revised based on the measured
traffic volume for 2002.
There were delays in the progress of the project, so the projected traffic
volume for 2008 is presented here provisionally as the target value for2008 when the detailed design is implemented. However, at the
beginning, the target was set for three years after the establishment ofbusiness. Consequently, there is fear that it may be vastly exaggerated
and require BCDA to revise the number based on the traffic census
scheduled in June 2007.
Effect Indicators

Effect Indicators
Indicator

SectionRate of vehicle

Subic-Clark

Actual (atappraisal time)Target(2006)
42.63%

4

Indicator
Rate of vehicle
operation cost saving(%)

Section(Data by section
unavailable)

Target (2008)
Car: 17%
Bus, truck/lorry: 21%

Mid-Term Review
operation costsaving (%)
Traveling timesavingsectionClark-Tarlac
sectionSubic-Clark
sectionClark-Tarlac
sectionTraveling time saving
17.87%
2 hrs (existing
national road)
1.5 hrs (existing
national road)(Data by section
unavailable)

63%

1 hr reduction(50%)
1 hr reduction(67%)

Internal earning rates at the time of appraisal· FIRR=5.69%
Cost: Cost of construction and cost of operation and maintenance
Benefit: Fare receipts

The internal earning rates recalculated in this review are as follows:· FIRR: 7.32%
Cost: Cost of construction and cost of operation and maintenance
Benefit: Fare receipts

EIRR=20.43%
Cost: Cost of construction and cost of operation and maintenance
Benefits: Vehicle operation cost saving, traveling time saving and tourism
revenue, cutting back on cargo transport charge at Subic Bay.

EIRR=15.02%
Cost: Cost of construction and cost of operation and maintenance
Benefit: Economize on vehicle operation cost, reduce traveling time
EIRR was lower at the time of the mid-term review than at the time ofappraisal. This is because the following items were not included in therecalculation: (i) the rise in the peso-based construction cost; (ii)tourism revenue that was included as a benefit at the time of appraisal;and (iii) the cut back on cargo transport charge at Subic Bay. (Benefits
that accrue when EIRR is calculated are, in accordance with the policyof the National Economic Development Agency (NEDA), limited tovehicle operation cost saving and traveling time saving. The
recalculation also conforms to the NEDA policy.)
On the other hand, the FIRR was higher at the time of the mid-term
review than at the time of appraisal. This is because, although at thetime of appraisal, the toll was kept constant during the entire project
period, in the recalculation, it was decided that, in accordance with theformula adopted in the detailed design, the toll should be raised by 10%
every three years.

5Mid-Term Review

2. Qualitative effects
The project will contribute to the development of the local economy byincreasing road convenience and safety, promoting human and material
distribution as well as by streamlining, reducing cost, and enhancing
safety transport (JICA’s “Central Luzon Regional Development” MasterPlan).

2. Qualitative effects· Revitalization of economic activities
The completion of the project may make possible the streamlining of
distribution in the Central Luzon region and help revitalize theattraction of investments to various industrial complexes in Subic,
Clark and Tarlac. However, for example, at present only simple
assembly plants of such as wire harness and food processing industries
have moved into the industrial complex in Tarlac, and so in order toattract large-scale investments, it will be necessary to improve suchinfrastructure as electrical power, develop industrial bases including
supporting industries, and build higher education facilities.
Population and GRDP Projection

Population and GRDP Projection
Population (1,000)
GRDP (million pesos)
Per capita GRDP (pesos)

1990 Actual
6,199
94,000(1990 annual price)
15,1632010 Projection
10,499458,000(1990 annual price)
43,623(JICA “Central Luzon Comprehensive Development Plan”)(2) Factors which may influence the effectiveness and impact
1) EIA (Environmental Impact Assessment) is implemented in thisproject. In January 2000, the Philippines’ Department of Environment andNatural Resources released the Environment Compliance Certificate(ECC). Monitoring the project’s impact on the environment is required asa collateral condition of ECC, and the executing agency is supposed totake adequate measures at the execution stage as it obtains support from a
consultant.

Population(1,000)GRDP(million pesos)
1985
price
base
Per
capitaGRDP (peso)

2005(Actual)
9,195

2010
(Projection)
10,1592015(Projection)
10,8252020(Projection)
11,394102,456

128,967

154,062

179,120

11,142

12,695

14,232

15,720(2) Factors which may influence the effectiveness and impact
1) Environment management was implemented on the basis of EMP(Environment Management Plan) and CMP (Construction
Management Plan) as prescribed in ECC.

2) Land acquisition and resident relocation

2) Land acquisition and resident relocation
6

Mid-Term Review· The target of land acquisition covers the area of 627 has.: 348 has. in the
Subic-Clark section and 279 has. in the Clark-Tarlac section. Most of theplanned site for road construction is on state-owned land. Since noparticular complaint has been lodged in hearings against theimplementation of the project, the affected residents were given
appropriate monetary compensation at market price during the landacquisition phase. Thus, it is highly unlikely that a serious problem would
arise in land acquisition.
· Fifty nine (59) households were targeted for relocation (all involving
legal citizens). Carefully-thought out measures are adopted for relocating
residents. Toward this end, the executing agency formulates a program forcompensating and relocating affected residents. At the road execution
stage, it implements this together with the monitoring program.

Land Acquisition Area
Subic-Clark
Clark-Tarlac(unit: hectares)

Required land area
349
358

Acquired321
354

Not Yet Acquired
28
4

Reasons for the delay:
Additional acquisition of land became necessary because of designchange, consultation with landlords concerning disputed land in
Dinalupihan, Bataan, etc. and land acquisition procedure.
(According to an explanation provided by a person in charge of landacquisition, while executing the work to remove a hillside, it was
discovered that the area would not be wide enough to build the
proposed road. Thus, additional land had to be acquired by widening thewidth of the hillside targeted for removal.)(Reference)State of Land Acquisition Payment and Resident Relocation
Section
CP-1
CP-2
CP-2
CP-2

BataanPampanga
Clark-Tarlac
Spur roadNo. ofpayment
targets
130
209
153
53
545

Home, etc.
compensation(1,000 pesos)
8,123
13,686
5,737
265
27,812

Trees,
etc.
compensation(1,000 pesos)
8,513
28,451
12,90149,865

According to the social survey report concerning the resident relocation
carried out in June 2003, since the residents who were relocated were
mostly farmers with limited income, some of them expressed anxiety
over being able to find a new source of livelihood where they wererelocated. Thus, in addition to compensating for the price of the landacquisition, the report called for adoption of measures to alleviate thenegative social and economic impact on the residents being forced torelocate. On the basis of this recommendation, BCDA is supporting theefforts of residents who have relocated to secure new sources of income7Mid-Term Review

by implementing aid projects such as pig farming and other forms ofraising stock. However, some of the inhabitants have complained thatthey received no explanation about expressway construction or that they
had no chance to negotiate the amount of compensation they would
receive.
(3) Factors which may influence the sustainability
Bids are being tendered for selecting a private operator to manage theexpressway when it is completed，A ten-year contract is being planned.
The private operator who wins the bid will be contracted to carry out
the usual maintenance. Resurfacing, which is expected to be required
once every 10 years, and any emergency repair work that may berequired will be carried under the responsibility of the BCDA. The
tender conducted in April 2007 ended in failure. Thus, in order tocommence operation immediately after the project is completed, it isnecessary to carry out the re-bidding procedure without delay.
Informationreference[Efficiency](1) Outputs

for(1) Outputs
Package 1:
Subic-Clark section: Construction of a round-trip 4 lane expressway,bridges, etc (55.80 km [of which, 3.34 km are for bridges])
Package 2:
Clark-Tarlac section: Construction of a round-trip 4 lane expressway,bridges, etc (33.50 km [of which, 0.82 km are for bridges])
Total distance: 89.30 km(1) Outputs
Package 1:
Subic-Clark section: Construction of a round-trip 4 lane expressway,bridges, etc (50.40 km [of which, 4.20 km are for bridges])
Package 2:
Clark-Tarlac section: Construction of a round-trip 4 lane expressway,bridges, etc (43.37 km [of which,1.62 km are for bridges])
Total distance: 93.77 km
The total distance increased by 4.47 km because the original plan ofusing the northernmost part of the North Luzon Expressway as one partof the Central Luzon Expressway made it necessary to build a sui
generis road in parallel with the North Luzon Expressway.
・Amount of consulting services necessary for completion as estimatedas of the time of the mid-term review: 2,032 M/M (compared with theplanned consulting time: 159%).

・Amount of consulting services: 1,275 M/M
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Mid-Term Review

Details of the additional 757 M/M of consulting services are theadditional work of detailed design (271 M/M), reexamination of thetender subsidiary, the project, and the detailed design (147 M/M), andthe additional work of monitoring and supervising (339 M/M).
(2) Project period(2) Project period September 2001 – December 2006 (64 months)(2) Project period
September 2001 – November 2007 (planned) (75 months) (plan ratio:
117%)
The price tended greatly exceeded the predetermined price in theselection of the construction contractor. Consequently, the scope of the
project had to be reconsidered, and a change had to be made in thecontract price based on deliberation with the lowest bidder. The
nine-month delay was due to the long time it took to coordinate with thegovernment agency over these issues.

(3) Project cost(3)Project cost: 66,350 million yen (41,931 million yen for ODA loan
portionThe difference between planned and actual cost was 17,020 million yen.
The breakdown of this difference is, among other things: (i) 6,502
million peso increase in the peso-based project cost due to the steep risein the cost of steel products and oil since 2004 (construction cost
increased by 4,013 million pesos, consulting cost by 220 million pesos,
management cost by 843 million pesos, tax by 1,602 million pesos,
reduction in land acquisition cost by 176 million pesos); and (ii)increase in peso-based caused by the deterioration of the peso to the yenfrom 2003 to 2005.
A. Initial expectations and current opinions of the executing agency, etc. concerning the objectives of the special ODA loan (economic stimulus, job
creation, private sector investment environment, productivity improvement)
1. Initial expectations of the executing agency, etc.:· Project to promote economic growth in economically stagnant areas· High expectation as a project that provides funds for areas that have difficulty procuring funds from the private sector· Catalyst for growth in the areas that substantially need government assistance and infrastructure· Great expectation for transfer of outstanding, state-of-the-art technology from Japan (NEDA)(3) Project cost: 49,330 million yen (41,931 million yen for ODA loan
portion)(3) Results of Special
Yen Loan
Satisfaction Survey

9Mid-Term Review

2.
3.

Current views of the executing agency, etc.: Views held during the project implementation
Views of the executing agency, etc. on STEP loan: High expectations for STEP loan, which places importance on support for infrastructure
projects

B. Views on the special ODA loan procedures (originating in Japan, simplifying the procedure, enhancing competitiveness, evaluation of bidding
companies)· Desire easing of the rigid application of the Japan origin provisions.
· Desire application of Japan’s origin standards to different projects with different degrees of rigidity. Also, with the view to transferring Japan’s
outstanding technologies to the borrowing countries, is it possible to develop a pilot project where corporate bidders are limited to JV or Japanesecompanies and local companies?
· Desire expansion of the opportunity for the local companies/consultants to participate in as main contractors, for the purpose of promoting
economic activities between donor countries and borrowing countries.
· The profile as well as of the Japanese companies that participated in the PQ and bidding were extremely impressive. It is expected that they will beable to effectively apply their skills in their actual work.
C. Evaluation of the consultants and contractors by the executing agency· Other than the high degree of satisfaction expressed regarding the technical aspects of the implementation and the quality of the outputs, noparticular evaluation was made which is due to the special yen loan was made.
D. Evaluation of the executing agency by the consultants and contractors· No particular evaluation was made which is due to the special yen loan.
E. General overview of the special yen loan system· From the time it was inaugurated to the present, expectations were high for the special Yen loan system, which provides loans extended mainly tosupport infrastructure development on highly concessional terms. In addition, while the transfer of Japan’s cutting-edge road and bridge
construction technologies to the Philippines under the project has received high praises, some confusion developed in the implementation of the
project regarding the restriction on Japan origin (triggered by a difference of interpretation between the contractors and the executing agency overthe issue of bringing construction machinery from Japan). Although application of Japan origin terms was partially eased in STEP loan, it willprobably be necessary to reconsider the guidelines for interpretation and application of Japan origin terms (e.g., to reconsider to what extent andunder what conditions construction machinery from Japan should be allowed).
10

Mid-Term Review

Lessons Learned andRecommendations

Social Consideration and Land Acquisition· Before the implementation of the project, there was no particular opposition to the acquisition of land, and the consensus was that all of theacquisition would be completed before the construction was undertaken. However, 4.5% of the acquisition was not completed at the time of the
mid-term review, and there was possibility that the road construction would be delayed. Since the delay in land acquisition leads to delays inconstruction, it is necessary to confirm with the executing agency, and follow up on whether sufficient social considerations – including providing
adequate explanation, etc. to landowners and residents – were given not only prior to providing ODA loans but also before and during the project
implementation.
Monitoring· At the time of appraisal, operation and effect indictors were used to monitor two sections of the expressway: (i) between Subic and Clark and (ii)between Clark and Tarlac, but after the detailed design, revised numerical values were shown only for the entire expressway. For the sake ofconsistency with monitoring at the time of appraisal, the numerical values for the operation and effect indicators should be presented for each ofthese two sections, not only for the entire expressway.

Indicators set for use attime of ex-post
evaluation

Operation indicators:· Annual traffic volume· Annual fare receipts by type of vehicle
Effect indicators:· Rate of vehicle operation cost saving· Traveling time saving

With regard to operation and effect indicators, BCDA continues to use
the numerical values obtained in the 2002 traffic census, which wereused at the time the detailed design was made. BCDA’s responses in thefield survey use the same numeric values. In June 2007, BCDA
implemented the traffic census, on the basis of which it plans to revise
the projections of traffic volume on the expressway and fare receipts.
Operation indicators· Annual traffic volume (Subic-Clark, Clark-Tarlac)· Annual fare receipts by type of vehicle (Subic-Clark, Clark-Tarlac)
Effect indicators· Rate of vehicle operation cost saving (Subic-Clark, Clark-Tarlac)· Traveling time saving (Subic-Clark, Clark-Tarlac)

11