Proposed Multitranche Financing Facility and Administration of Grant Philippines: Malolos Clark Railway Project, Phase 1

Transcription

1 Concept Paper Project Number: August 2018 Proposed Multitranche Financing Facility and Administration of Grant Philippines: Malolos Clark Railway Project, Phase 1

2 CURRENCY EQUIVALENTS (as of 1 August 2018) Currency unit Philippine Peso (P) P1.00 = $ $1.00 = P53.01 ABBREVIATIONS ADB Asian Development Bank CIA Clark International Airport DOTr Department of Transportation JICA Japan International Cooperation Agency km kilometers MFF multitranche financing facility NAIA Ninoy Aquino International Airport NCR National Capital Region NSS National spatial strategy PDP Philippine Development Plan PNR Philippine National Railways NOTES (i) (ii) The fiscal year of the Government of the Republic of the Philippines and its agencies ends on 31 December. In this report, "$" refers to United States dollars.

3 Vice-President Stephen Groff, Operations 2 Director General Ramesh Subramaniam, Southeast Asia Department (SERD) Directors Hiroaki Yamaguchi, Transport and Communication Division, SERD Kelly Bird, Philippines Country Office, SERD Team leader Team members Peer reviewer Markus Roesner, Principal Transport Specialist, SERD Meenakshi Ajmera, Principal Safeguards Specialist, SERD Alely Bernardo, Financing Partnerships Specialist, SERD Rebecca Canoy, Financing Partnerships Analyst, Office of Cofinancing Operations (OCO) Aekapol Chongvilaivan, Country Economist, SERD Angelica Fernando, Operations Officer, SERD Takeshi Fukayama, Transport Specialist, SERD Shuji Kimura, Transport Specialist, SERD Kang Hang Leung, Senior Financial Specialist, SERD Laurence Levaque, Social Development Specialist (Gender and Development), SERD Toshimasa Mae, Financing Partnerships Specialist, OCO Lila Mallory, Senior Procurement Specialist, Procurement, Portfolio and Financial Management Department (PPFD) Arleen Mabale, Associate Project Office, SERD Takako Morita, Senior Counsel, Office of the General Counsel Jesper Pedersen, Principal Procurement Specialist, PPFD Jason Rush, Principal Operations Communications Specialist, SERD Michiko Suga, Senior Social Development Specialist, SERD Astra Velasquez, Safeguards Specialist (Environment), SERD Adrien Veron-Okamoto, Transport Specialist, SERD Franzella Pinky Villanueva, Senior Operations Assistant, SERD Ruediger Zander, Senior Railway Specialist, Sustainable Development and Climate Change Department In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

4 CONTENTS INVESTMENT PROGRAM AT A GLANCE PROBLEM TREE Page I. THE INVESTMENT PROGRAM 1 A. Rationale 1 B. Proposed Solutions 3 C. Proposed Financing Plans 4 D. Implementation Arrangements 4 II. PROJECT PREPARATION AND READINESS 5 III. DELIBERATIVE AND DECISION-MAKING ITEMS 5 A. Risk Categorization 5 B. Project Procurement Classification 5 C. Scope of Due Diligence 5 D. Processing Schedule and Sector Group s Participation 6 E. Key Processing Issues and Mitigation Measures 6 APPENDIXES 1. Initial Design and Monitoring Framework 7 2. Comparison of Financing Modality 9 3. Project Procurement Classification Initial Poverty and Social Analysis 11 SUPPLEMENTARY APPENDIX 1. Project Maps 14

5 INVESTMENT PROGRAM a AT A GLANCE Project Classification Information Status: Complete 1. Basic Data Project Number: Project Name Malolos-Clark Railway Project, Phase 1 Department SERD/SETC /Division Country Philippines Executing Agency Department of Borrower Government of the Philippines Transportation 2. Sector Subsector(s) ADB Financing ($ million) Transport Rail transport (non-urban) 2, Total 2, Strategic Agenda Subcomponents Climate Change Information Inclusive economic growth Pillar 2: Access to economic Climate Change impact on the (IEG) opportunities, including jobs, made more Project Environmentally sustainable growth (ESG) inclusive Disaster risk management 4. Drivers of Change Components Gender Equity and Mainstreaming Governance and capacity Client relations, network, and partnership Effective gender mainstreaming development (GCD) development to partnership driver of change (EGM) Partnerships (PAR) Bilateral institutions (not client government) Official cofinancing Private sector development (PSD) Public sector goods and services essential for private sector development 5. Poverty and SDG Targeting Location Impact Geographic Targeting Household Targeting SDG Targeting Yes No Yes Nation-wide SDG Goals SDG9 Medium High.. 6. Risk Categorization: Complex 7. Safeguards Categorization [Tranche 1] Environment: A Involuntary Resettlement: A Indigenous Peoples: B 8. Financing Modality and Sources Indicative Tranches ($million) Amount I II III ($million) ADB 2, Sovereign MFF-Tranche 1, , (Regular Loan): Ordinary capital resources Cofinancing 1, Japan International Cooperation Agency - MFF-Tranche (Loan) (Not ADB Administered) 1, , To be determined - Project grant (Full ADB Administration) Counterpart Government Total 2, , Source: Asian Development Bank This document must only be generated in eops. Generated Date: 16-Aug :50:57 AM

6 INVESTMENT PROGRAM a AT A GLANCE 9. Country Operations Business Plan CPS COBP B8E00305B2E/%24File/SecM55-11.pdf /cobp-phi pdf 10. Investment Program Summary The project will support the construction of the 51-kilometer (km) section of a new railway line connecting Metro Manila and the regional center in Clark and the Clark International Airport, located in the Central Luzon Region around 100 km north of Manila. The new railway line will provide affordable, reliable and safe public transport, reduce greenhouse gas emissions and cut the journey time by half to less than one hour. The project will be cofinanced by Japan International Cooperation Agency (JICA). The government is also constructing the 37 km Tutuban-Malolos section with financial support from JICA. It is also planned to further extend the project towards the north by 18 km to connect the New Clark City to Clark as Phase 2 in the future. Impact: Improved local, national, and international connectivity Outcome: Transport system in the Manila-Clark corridor improved by railway connection Outputs: (i) New railway line commissioned, (ii) Livelihood skills development program implemented, and (iii) Institutional capacity strengthened. Implementation Arrangements: Department of Transportation will be the executing agency. Project Readiness: Detailed engineering design and tender documents will be prepared by a consulting firm financed by JICA, which was mobilized in September An Employer's project management consultant service will be provided to DOTr and financed from ADB's Infrastructure Preparation and Innovation Facility. The consultants were mobilized in April Advance contracting and retroactive financing will be undertaken for all civil works contracts proposed to be financed by ADB. Start of bidding process for civil works is scheduled in October Therefore, high project readiness will be met with the civil works contracts financed by ADB ready for award by May 2019, before loan effectiveness. 11. Milestones Modality Estimated Approval Estimated Completion b Multitranche financing facility 15 April December 2023 Tranche I 1 April December 2021 Tranche II 30 September December 2022 Tranche III 30 September December Project Data Sheet (PDS) PDS c Not posted yet a Multitranche Financing Facility (MFF). b For MFF, this refers to the end of the availability period; for tranches, this refers to the tranche closing date. c Safeguard documents can be viewed by clicking the Document's hyperlink in the Project Data Sheet (PDS) page. Source: Asian Development Bank This document must only be generated in eops. Generated Date: 16-Aug :50:57 AM

7 PROBLEM TREE Constrained economic development of Metro Manila, the Central Luzon Region, and the Philippines. Effect s Road congestion in Metro Manila Less reliable transport service Core problem Transportation within Central Luzon and Metro Manila is slow and unreliable. Causes Most existing suburban rail network is no longer functioning No airport access by high-capacity public transport Delayed provision of transport infrastructure Root causes Constrained funding resource for infrastructure development Rapid increase in the traffic demand Weak capacity for sector and project management, no separation of regulatory and operator functions

8 I. THE INVESTMENT PROGRAM A. Rationale 1. The Government of the Philippines has requested the Asian Development Bank (ADB) to help finance the Malolos Clark Railway Project, Phase 1 (the project). 1 The project will support the construction of the 51-kilometer (km) section of a new railway line connecting Metro Manila and the regional center in Clark and the Clark International Airport (CIA), located in the Central Luzon Region around 100 km north of Manila. The new railway line will provide affordable, reliable and safe public transport, reduce greenhouse gas emissions and cut the journey time by half to less than one hour. The project will be cofinanced by Japan International Cooperation Agency (JICA). The government is also constructing the 37 km Tutuban Malolos section with financial support from JICA. It is also planned to further extend the project towards the north by 18 km to connect the New Clark City to Clark as Phase 2 in the future. 2. Sector Context. In the Philippines, 98% of passenger transport and 55% of freight transport are handled by the road sector. Railways are in operated only in Metro Manila, where currently three urban rail lines with a total length of 44 km are transporting 350 million passengers annually (2016). In addition, the Philippine National Railway (PNR) operates a suburban railway from Tutuban to Alabang (28 km), transporting 21 million passengers annually (2016). The PNR ceased operation of the railway service to the north in the 1980 s; the rails have been removed but right-of-way is available for the project. Considering the population size and density of Metro Manila, the railway network is sparse, and the lack of high capacity public transport is one of the main reasons for the road congestion in Metro Manila, which impacts productivity and slows the economic growth. The air transport sector in the national Capital Region (NCR) has limited capacity to satisfy the growing demand. The Ninoy Aquino International Airport (NAIA) and the CIA are the two major airports serving the NCR. Air passenger traffic has increased at about 10% in recent years. NAIA was handling around 42 million passengers in 2017, which is beyond the 35 million maximum designed capacity of the airport. As a result, NAIA has been increasingly congested and expanding NAIA is constrained by its location within Metro Manila with no space available for major additional infrastructure required. Development of the CIA, which was handling around 1.5 million passengers in 2017, may help to ease capacity constraints in the air transport sector and the capacity of CIA will therefore be increased to 12 million passengers per annum by To fully utilize the enhanced capacity of CIA, the connection to Manila needs to be improved, including rail based public transport. 3. Alignment with a national strategy. It aims to materialize ambitious goals of $158 billion infrastructure investment or 7.3% of gross domestic product (GDP) by The government intends to achieve the status of an upper middle-income country by The PDP therefore aims to accelerate GDP growth from 6.2% annually in to 7% 8% from Metro Manila, officially referred to as the National Capital Region (NCR), the largest urban aggregation in the Philippines with a population of 12.8 million (2017), is facing a rapid increase in population (1.58% annual increase in ). It also has a high population density of 21,000 per square km. Although NCR accounts for 38% of GDP, the potential for economic development has deteriorated due to heavy traffic congestion and limited space to expand the city. While GDP growth of 6.5% in the NCR exceeded the national average, the potential for further growth is limited. The Central Luzon Region, which includes the project area 1 The Project is included in ADB s Country Operations Business Plan. ADB Country Operations and Business Plan Manila. 2 Clark International Airport Annual Report 2015.

9 2 and is located immediately north of NCR, accounts for 9% of the national GDP and the GDP growth rate was on average 7.2% annually in , the highest in the Philippines. 5. The NSS therefore aims to develop hierarchical regional centers and clusters outside the country s metropolitan regions to enhance economic development with improved infrastructure such as housing, health care, education, employment opportunities and connectivity between the hierarchical regional centers. The Central Luzon Region, where the project area with Clark and CIA as well as the New Clark City is located, is one of the growth areas. The New Clark City is under development to accommodate 1.2 million residents and 800,000 jobs in 2045 to become an administrative center for the country. The connection is supposed to be provided by a suburban rail and an expressway. 3 The North Luzon Expressway has been developed with 4 8 lanes, there is however no suburban rail service in this section and the only mode of public transfer to commute between NCR and Clark City, CIA and New Clark City is by bus. 6. Strategic Context. The NSS builds on integration of leading and lagging areas and urbanrural linkages through transportation networks. Regional center development will be supported with suitable physical and human infrastructure including affordable housing, quality education, and healthcare, other social and economic services, and efficient urban management. The Government therefore develops New Clark City in Central Luzon as one of these regional centers with the CIA as a regional gateway. The railway network will be the backbone public transport system to New Clark City and CIA. Extending the railway network within Manila will help to decongest roads and reduce the high transport and logistics cost. 7. Road Map. Development of Clark as regional centers is in line with the NSS and will help to achieve the targets for accelerated economic growth at 7% to 8% of GDP during the implementation period of the PDP from 2017 to To provide access to Clark and CIA, the railway network will be established. The Malolos Clark Railway is part of larger railway network connecting New Clark City with Manila and Calamba. An extension for long-haul services to Southern Luzon is planned. To improve public transport in Manila, the government is extending two metro lines, constructing two additional lines and improving interchanges between the different lines and improve intermodal integration with buses and other modes of transport. The institutional capacity in the railway sector will be strengthened for efficient and timely planning, implementation, operation and maintenance of the expanded railway network. 8. Policy Framework. Today, the Department of Transportation (DOTr) is responsible for policies, planning, operations, regulations, and investments in the public transport sector. These multiple roles of DOTr have caused delays in project definition and implementation in the past. To overcome this, the PDP aims to (i) adopt the National Transport Policy; (ii) create an independent regulatory body; and (iii) create an independent body for transport safety. Under this framework, a private sector entity will operate and maintain the Malolos Clark Railway under a public-private partnership scheme. All assets financed by ADB will be owned by DOTr. Under the proposed multitranche financing facility (MFF), DOTr s capacity for operation and maintenance as well as for management of the public-private partnership scheme will be strengthened and establishing of a regulator for railway safety will be supported. 9. Past assistance. ADB s past involvement in the Philippine rail transport sector is limited. In 1976 ADB approved $24.2 million loan to rehabilitate track and bridges on the South Line of 3 Japan International Cooperation Agency and National Economic Development Authority Roadmap Study for Transport Infrastructure Development of Metro Manila and its Surrounding Areas (Region III and Region IV-A). Manila.

10 3 the PNR. Despite an extension of six years, the project was only 75% complete. The project completion report diagnosed that PNR had fundamental, technical, organizational and operational weakness. 4 ADB resumed support to the rail transport sector in 2017 with the Infrastructure Preparation and Innovation Facility (IPIF), which aims to support capacity development and preparation of detailed design for transport projects. 5 Therefore, a consulting team was recruited under the IPIF to support DOTr in the preparation and implementation of this project. In addition, DOTr has experience with foreign aid assisted projects from projects financed by JICA. 10. Value added by ADB assistance. Financing the project by ADB with cofinancing from JICA will ensure that the series of railway projects planned can be delivered within a short time. Providing support to DOTr by a consulting team to strengthen the institutional capacity will ensure that international best practice will be applied to the project design and construction process. The consulting firm will also ensure that design parameter for all three railway systems under preparation will be harmonized to ensure interoperability of the lines as one integrated system. ADB support will help implementing the policy framework for institutional development in the transport sector including regulatory body. The ADB trust fund grant will support the livelihood skills development program for project affected persons relocated for the project. B. Proposed Solutions 11. Output 1. The project will help to finance the construction of a 51 km new double-track railway line with a depot for maintenance of rolling stock and fixed assets. The project comprises seven stations, integrating design features that are friendly to and safe for elderly people, women, children, and people with disabilities. The new railway line will be fully grade-separated, i.e. it will be elevated on a viaduct, to ensure safety of railway operations and the public living along the line without risk for unintended access to the railway tracks. The depot will also include an operations control center and a training center for railway staff to ensure safety of operations. 12. Output 2. The project will help to improve the livelihood of project affected persons by a skills development program targeting particularly vulnerable people including female-headed households and women. 13. Output 3. The project will support establishing a regulatory framework for the railway sector in the Philippines, strengthening the institutional capacity of DOTr for project and contract management and establishing the operation and maintenance service contract under the regulatory framework for the railway sector. 14. Outcome and impact. The impact of the proposed project is aligned with the target in the PDP to improve local, national, and international connectivity. The outcome will be an improved efficiency and capacity of transportation along the Manila Clark corridor. The impact, outcome, and outputs are summarized in the preliminary design and monitoring framework for the MFF (Appendix 1). 15. Use of multitranche financing facility. The Malolos Clark Railway Project will be financed by an MFF adopting the time-slicing approach for large-scale stand-alone projects. The design, procurement and safeguards will be appraised for the entire MFF. Once a tranche is 4 Asian Development Bank Project Completion Report. Philippine National Railways (Loan No.257-PHI). Manila. 5 ADB Report and Recommendation of the President to the Board of Directors: Proposed Infrastructure Preparation and Innovation Facility to the Republic of the Philippines. Manila.

11 4 disbursed, the government will submit a periodic financing request for a subsequent tranche, which will continue to finance the contracts awarded under tranche 1. This reduces ADB resource allocation and commitment charges to be paid by the government and ensures project completion and benefits from the project in the shortest possible time. The MFF enables ADB to support implementation of the road map and policy framework by a long-term partnership with the Government and combine infrastructure investments with policy dialogue and sector reforms. A comparison of financing modalities is in Appendix Indicative scope of project 1. Tranche 1 will finance the first slice of the project cost to support construction of the Malolos Clark Railway Project. The indicative financing plan is presented in Table 1. C. Proposed Financing Plans 17. The project is estimated to cost $3,203 million, including taxes and duties, physical and price contingencies, interest, and other charges during implementation (Table 1). The first tranche of the MFF will comprise a regular loan of $1,000 million to help finance the first slice of civil works for the railway construction, institutional strengthening and administration of a grant from an ADB trust fund for livelihood skills development of project affected persons. Climate mitigation is estimated to cost $2,000 million, which is 100% of ADB financing amount. Table 1: Indicative Financing Plan MFF amount ($ million) Tranche 1 amount Source ($ million) Asian Development Bank Ordinary capital resources (regular loan) 2, , ADB trust fund (grant) a Japan International Cooperation Agency (loan) b 1, Government Total 3, , a Administered by ADB. b Cofinancing on collaborative basis. Source: Asian Development Bank estimates. Share of Total (%) 18. Cofinancing arrangements. The project will be cofinanced by JICA and ADB on a collaborative basis. ADB will finance the civil works i.e. viaduct, stations, tunnels and depot buildings. The core system, i.e. track, depot equipment, power supply and electrification, signaling and telecommunication systems, and procurement of rolling stock will be financed under parallel collaborative cofinancing by JICA. JICA will also finance the general consultant and construction supervision consulting services, which will cover components financed by JICA and ADB. D. Implementation Arrangements Table 2: Indicative Implementation Arrangements Aspects Arrangements Indicative MFF availability period April 2019 December 2023 (5 years) Management (i) Executing agency Department of Transportation a a Appendix 3 provides information related to procurement capacity. Source: Asian Development Bank estimates.

12 5 II. PROJECT PREPARATION AND READINESS 19. The feasibility study, detailed design and tender documents will be prepared by a consulting firm financed by JICA, which was mobilized in September The consulting firm will prepare design for all components of the project and the outputs will be reviewed by DOTr, JICA and ADB. Consultant support is provided to DOTr and financed from ADB s Infrastructure Preparation and Innovation Facility (footnote 6). The consultants were mobilized in April Advance contracting and retroactive financing will be undertaken for civil works contracts proposed to be financed by ADB. Therefore, high project readiness will be achieved with the civil works contracts financed by ADB ready for award before loan effectiveness. III. DELIBERATIVE AND DECISION-MAKING ITEMS A. Risk Categorization 21. All MFF proposals are categorized complex. B. Project Procurement Classification 22. The procurement classification for the project is A (Appendix 3). C. Scope of Due Diligence 23. The MFF takes the time-slice approach and tranche 1 will finance the first slice of the project. The project will be fully appraised, and all due diligence will be carried out during processing of the MFF. Table 3: Due Diligence Outputs Due Diligence Outputs To be undertaken by For multitranche financing facility and first tranche Sector assessment Staff and design consultant Road map, policy framework, and strategic context Staff and design consultant Assessment on choice of MFF Staff Project readiness Staff Facility Administration Manual Staff and design consultant Development coordination Staff and design consultant Economic and Financial Analysis Staff and design consultant Financial Management Assessment Staff and design consultant Integrity due diligence Staff and design consultant Procurement Risk Assessment Staff and design consultant Risk Assessment and Management Plan Staff and design consultant Safeguards frameworks and safeguards documents Staff and design consultant Poverty and social assessment Staff and design consultant Gender analysis and Gender Action Plan Staff and design consultant Contribution to ADB s result framework Staff ADB = Asian Development Bank; MFF = multitranche facility. Source: Asian Development Bank estimates.

13 6 D. Processing Schedule and Sector Group s Participation Table 4: Processing Schedule by Milestone Expected Completion Milestones Date Start of bidding process for civil works October 2018 Fact-Finding Mission October 2018 Interdepartmental Review and Peer Review by Transport Sector Group November 2018 Management Review Meeting December 2018 FFA and loan negotiations January 2019 MFF and Tranche 1 approval April 2019 Contract award for civil works April 2019 Loan signing May 2019 Loan effectiveness July 2019 FFA = Framework Financing Agreement; MFF = multitranche financing facility. Source: Asian Development Bank estimates. E. Key Processing Issues and Mitigation Measures Table 5: Issues, Approaches and Mitigation Measures Key Processing Issues Proposed Approaches and/or Mitigation Measures 1. Lack of staffing and experience A consulting firm to support DOTr during project preparation, of DOTr to prepare, review and bidding and preparation of project implementation has been approve project design timely. mobilized under the Infrastructure Preparation and Innovation Short timeline and governance Facility (footnote 6). The consulting firm works closely with DOTr in the procurement of large and supplement expertise where required to prepare the project contracts for civil works. in accordance with the implementation schedule. 2. Timely availability of counterpart funds for preconstruction activities and expenditure such as land acquisition, resettlement and utility shifting. 3. Availability of land, process for land acquisition and resettlement. 4. Large size of project, which exceeds projects previously designed, implemented and managed by DOTr. A design consultant has been mobilized (financed by JICA) to prepare the project design including safeguards documents for land acquisition and resettlement to enable the government to budget adequate counterpart funds to complete land acquisition and resettlement timely prior to commencement of civil works. Initial budget has been allocated for pre-construction activities. Surveys of project affected persons and land for relocation started early in the design process to ensure timely completion prior to commencement of civil works. Resettlement Plan will be completed by July 2018 as bases for resettlement activities. DOTr will be supported by a design consultant, an advisory consultant (see item 1 above, a general consultant, which will also be responsible for construction supervision, program management and interface coordination during construction. Output 3 will support institutional capacity building in DOTr. DOTr = Department of Transport; JICA = Japan International Cooperation Agency. Source: Asian Development Bank estimates.

14 Appendix 1 7 PRELIMINARY DESIGN AND MONITORING FRAMEWORK FOR THE INVESTMENT PROGRAM Impacts the Project is Aligned with Local, national, and international connectivity improved (Philippine Development Plan, ) a Performance Indicators with Results Chain Targets and Baselines Outcome By 2025 Efficiency and a. Public transport journey capacity of time from Tutuban to Clark transportation along below one hour (2019 the Manila Clark baseline: not available) corridor improved Outputs By New railway line commissioned b. XXX million annual passengers transported by rail between Metro Manila and Clark (2019 baseline: 0) 1a. 51 km of railway line between Malolos and Clark commissioned (baseline: 0 km) 1b. 7 stations constructed, integrating design features that make them friendly to and safe b for elderly people, women, children, and people with disabilities (2019 baseline: 0). Data Sources and Reporting a. Malolos Clark Railway s passenger timetable b. Malolos Clark Railway s passenger records 1a 3c. Malolos Clark Railway s progress reports Risks Tutuban Malolos railway project completion delayed. Capacity expansion of Clark International Airport delayed. Development of New Clark City delayed. Increase in cost of building materials beyond projections leads to construction delays. 2. Livelihood skills development program implemented 3. Institutional capacity strengthened 2. XXX project affected persons (including women and vulnerable groups equipped with livelihood skills (baseline: 0). 3a. XXX DOTr staff with increased knowledge in project and contract management (2019 baseline: 0) 3b. Service contract for operation and maintenance signed by the Government (2019 baseline: 0) 3c. Regulator for railway safety established (2019 baseline: 0)

15 8 Appendix 1 Key Activities with Milestones 1. New railway line commissioned 1.1 Float bid documents (October 2018) 1.2 Award contracts (April 2019) 1.3 Mobilize contractor (May 2019) 2. Livelihood skills development program implemented 2.1 Select service provider for livelihood skills development program (May Institutional capacity strengthened 3.1 Select consultants to support capacity strengthening (July 2019) Project Management Activities 1. Establish project implementation unit and appoint project director (Q3 2018) 2. Mobilize construction supervision and project management consultants (Q2 2019) Inputs Asian Development Bank: $2,000,000,000 (loan) Government: $200,000,000 Japan International Cooperation Agency: $1,000,000,000 (loan) ADB Trust Fund: $3,000,000 (grant) Assumptions for Partner Financing Outputs not administered by ADB that are necessary to reach the outcome include: Output 1c (JICA) JICA, 37 km of railway line built and commissioned between Tutuban Malolos. ADB = Asian Development Bank; DOTr = Department of Transportation; JICA = Japan International Cooperation Agency; km kilometer; Q= quarter. a Government of Philippines, National Economic and Development Authority Philippine Development Plan, 2018 FY2022. Pasig City. b Train stations design features that are friendly to and safe for elderly people, women, children, and persons with disabilities include for example: accessibility features complying with the Philippine Accessibility Law and its Implementing Rules and Regulations; escalators and ramps with sturdy handlebars; toilet facilities complying with the ASEAN Public Toilet Standard (2016); sufficient lighting, CCTV cameras and alarm buttons; TV monitors showing ads on anti-sexual harassment, rights of the elderly, and other relevant themes and avoiding hypersexualized commercial advertisements. The specific features to be integrated in this particular project will be determined at the time of due diligence. Source: Asian Development Bank.

16 Appendix 2 9 Key Consideration Points 1. Lending resources. ADB does not have sufficient resource to lend the entire investment amount under one loan agreement. 2. Loan size. The project requires a large size of ADB financing. 3. Financing predictability. There will be a few largescale contracts which are mutually dependent, constituting one system and shall be completed at the same time to allow operation of the entire railway system. COMPARISON OF FINANCING MODALITY Financing Modality Multitranche Financing Facility Series of Project Loans Single Project Loan ADB does not need to provide the The outcome of the project can It is not possible to provide a loan amount for the entire only be achieved with the project or sector loan for the investment in one go, but each completion of the entire project. entire investment program, as the tranche can be sized to fit in the Financing the project by a series loan amount would exceed the available resources in each year. of project loans would delay country allocation for lending achieving the outcome resources in significantly. Conclusion: Preferable Conclusion: Not preferable Conclusion: Not feasible ADB does not need to provide the The advantage is similar to that of As ADB provides the loan amount loan amount for the entire project the MFF. However, the project for the entire project in one go, it in one go, but only the first implementation will be delayed is likely that a large portion of the tranche amount upon approval of significantly and the outcome will loan amount will not be used the MFF. This frees up the be achieved much later. immediately in the initial years of lending resources which are not implementation. Other projects in immediately needed, and also other sectors get delayed, as help reduce the borrower s more than the entire country financial changes. allocation will be used for one project only. Conclusion: Preferable Conclusion: Less preferable Conclusion: Less preferable A few large-scale contracts will be financed by two or more tranches. Board approval of the entire MFF amount gives confidence to the borrower and contractors that ADB is highly likely to provide subsequent loans. The project will need to be divided into different geographical sections, which only can be implemented in sequence. Hence the completion of the project will be delayed. The individual sections have limited benefit and will not achieve the expected outcome individually. The loan agreement covering the entire project gives assurance to the contractors that entire value of the contracts will be financed by ADB. Conclusion: Preferable Conclusion: Less preferable Conclusion: Preferable

17 10 Appendix 2 Key Consideration Points 4. Longer-term engagement. Improvements in the policy framework require a long-term plan on the government s actions and nonphysical investments. 5. Overall conclusion An MFF is more advantageous in all the aspects above. ADB = the Asian Development Bank; MFF = multitranche financing facility. Financing Modality Multitranche Financing Facility Series of Project Loans Single Project Loan The undertakings section of the The covenants of each loan The covenants of the loan framework financing agreement agreement may provide the short- agreement may provide the longterm provide the long-term plan for to medium-term plan for policy plan for policy improvements policy framework improvements improvements. However, the throughout the duration of the throughout the duration of the coverage is limited to the period loan period. However, the loan MFF implementation period. ADB of each loan agreement. ADB may be disbursed as per loan may take the progress of each may take the achievement of agreement without linking to the undertaking item into previous loan covenants into progress in policy framework consideration when deciding the consideration when deciding the improvements. second and subsequent tranches. second and subsequent loans. Conclusion: More preferable Conclusion: Less preferable Conclusion: Less preferable A series of project loans is less A single loan is not feasible due advantageous in terms of longerterm to the limited availability of predictability and causes a lending resource longer implementation period.

18 Appendix 3 11 PROJECT PROCUREMENT CLASSIFICATION Characteristic Is the procurement environment risk for this project assessed to be high based on the country and sector and/or agency risk assessments? Are multiple (typically more than three) and/or diverse executing agencies and/or implementing agencies envisaged during project implementation? Do they lack prior experience in implementation under an ADBfinanced project? Are multiple contract packages and/or complex and high-value contracts (compared with recent externally financed projects in the DMC) expected? Does the project plan to use innovative contracts (public private partnership, performance-based, design and build, operation and maintenance, etc.)? Assessor s Rating: Yes No Yes No Unknown DOTr will be the executing agency and lacks prior project experience with ADB. The project will require close coordination with other government agencies. Yes No Unknown Yes No Unknown At O&M phase, a PPP will be applied for procuring private O&M provider(s). Yes No Unknown Are contracts distributed in more than three geographical locations? Are there significant ongoing contractual and/or Yes No Unknown procurement issues under ADB (or other externally) financed projects? Has mis-procurement been declared in the DMC? Does the DMC have prolonged procurement lead times, Yes No Unknown experience implementation delays, or otherwise Advance action is proposed on procurement consistently fail to meet procurement time frames? activities to reduce lead times. Do executing and/or implementing agencies lack Yes No Unknown capacity to manage new and ongoing procurement? The IPIF and TA are supporting the DOTr Have executing and/or implementing agencies for its procurement for transport requested ADB for procurement support under previous infrastructure projects. projects? Regional department s overall recommendation (Markus Roesner) Overall project categorization recommended Category A Category B Procurement risk is high given the size of the project and limited experience of DOTr staff with ADB procurement procedures. Further procurement is on a critical path in the accelerated project schedule, hence more oversight and support from ADB is required. PPFD s recommendation (Jesper Pedersen) PPFD confirms the classification during interdepartmental circulation of the project concept paper. ADB = Asian Development Bank; DMC = developing member countries; DOTr = Department of Transportation; DPWH = Department of Public Works and Highways; IPIF= Infrastructure Preparation and Innovation Facility; O&M = operations and maintenance; PPP = public-private partnership; TA = technical assistance.

19 12 Appendix 4 INITIAL POVERTY AND SOCIAL ANALYSIS Country: PHILIPPINES Project Title: Malolos Clark Railway Project Lending/Financing Project Department/ SETC/SERD Modality: Division: I. POVERTY IMPACT AND SOCIAL DIMENSIONS A. Links to the National Poverty Reduction Strategy and Country Partnership Strategy The Philippines Development Plan aims to lay a stronger foundation for inclusive growth including through increasing the country s growth potential and accelerate strategic infrastructure development. Under ADB s Country Partnership Strategy, infrastructure operations will be the main channel of contribution to the strategy s three strategic agendas of inclusive economic growth, environmentally sustainable growth, and regional integration. The Government s roadmap for infrastructure development in Greater Capital Region (GCR) illustrates the need for enhanced connection between Metro Manila and regional growth centers in GCR. 1 The project will support inclusive growth by providing improved mobility through the provision of an affordable modern public transport system. The proposed program is listed in the ADB Country Operations Business Plan for the Philippines ( ). This priority program for the government will be considered in 2019 and will increase coverage of public transportation services and mobility of people in the northern part of the GCR. B. Poverty Targeting General intervention Individual or household (TI-H) Geographic (TI-G) Non-income MDGs (TI-M1, M2, etc.) The Project will extend railway services and have an indirect poverty reduction impact of reducing transport costs and improve mobility for the local population in the project areas. C. Poverty and Social Analysis 1. Key issues and potential beneficiaries. The public transport users will be the direct beneficiaries. It will improve the capacity of the public transport, the transport mode of the poor. 2. Impact channels and expected systemic changes. Improved mobility and access to social services, social activities and livelihood opportunities. Improvements in public transport will also have an indirect benefit of contributing to reduction in traffic congestion. 3. Focus of (and resources allocated in) the transaction TA or due diligence. Assessment of impacts associated with involuntary resettlement as well as on indigenous peoples. Special attention will need to be paid to the needs of vulnerable affected persons, such as informal settlers. Social assessment will need to consider the scope of risks associated with the project such as safety considerations during construction and operation phases. II. GENDER AND DEVELOPMENT 1. What are the key gender issues in the sector and/or subsector that are likely to be relevant to this project or program? Key gender issues are: (i) Women s time poverty. Long hours spent waiting for buses, jeepneys and other public vehicles, and actual time spent in traffic on the road exacerbates women s lack of time for rest and leisure after working outside the home as part of the labor market and doing domestic work. This takes a toll on their health and well-being. (ii) Violence against women. Women are subjected to physical and sexual violence, and other forms of harassment when using public transport services. Violence and fear of violence are real barriers to women s mobility and public transport access. (iii) Lack of gender perspective in design, implementation and management of public transport system renders gender issues invisible, and therefore, unaddressed. This perpetuates inefficient, inaccessible and unsafe public transport services for women and vulnerable groups such as girls, persons with disabilities, and the elderly. 2. Does the proposed project or program have the potential to contribute to the promotion of gender equity and/or empowerment of women by providing women s access to and use of opportunities, services, resources, assets, and participation in decision making? Yes No Key gender actions to address the above issues and promote gender equality and women s 1 ADB Country Operations and Business Plan. Manila.

20 Appendix 4 13 empowerment that should be explored during due diligence include: (a) integration of design features in the construction of the 7 stations to make them friendly and safe for women, children, elderly and persons with disabilities; (b) specific measures targeted at women and female-headed households in the skills development programs intended for the communities in the project areas as well as project affected persons; and (c) setting targets for women in capacity building in project and contract management. 3. Could the proposed project have an adverse impact on women and/or girls or widen gender inequality? Yes No Displacement associated with land clearance has the potential to disrupt social networks and livelihoods that are invaluable to women. Participation of women in consultation activities to finalize detailed engineering designs, and during resettlement plan preparation and implementation will be emphasized. Compensation will be paid to both spouses. 4. Indicate the intended gender mainstreaming category: GEN (gender equity) EGM (effective gender mainstreaming) SGE (some gender elements) NGE (no gender elements) III. PARTICIPATION AND EMPOWERMENT 1. Who are the main stakeholders of the project, including beneficiaries and negatively affected people? Identify how they will participate in the project design. Main institutional stakeholders include Department of Transportation, Philippine National Railway (PNR) and National Housing Authority (NHA) and Social Housing Finance Corporation (SHFC). PNR will participate in project design, including mitigation measures and social actions plans. NHA and SHFC are involved in resettlement of informal settler for the rail projects and will be closely involved in resettlement planning. People affected by land acquisition (and land clearance), communities along the alignment and their community-based organizations will be involved in assessing impacts, needs and mitigation measures. 2. How can the project contribute (in a systemic way) to engaging and empowering stakeholders and beneficiaries, particularly, the poor, vulnerable, and excluded groups? What issues in the project design require participation of the poor and excluded? The project will meet with local governments, nongovernment organizations (NGOs) and/or community-based organizations, and local communities and affected people. It will supplement information gained from these meetings with surveys. Issues to be discussed include, but are not limited to, (i) resettlement of affected persons; (ii) protection of communities from construction and environmental disturbances; (iii) identification and management of safety hazards to workers and the public during construction; (iv) temporary employment opportunities; and (v) how communities along and off the railway can benefit from the project. 3. What are the key, active, and relevant civil society organizations (CSOs) in the project area? What is the level of civil society organization participation in the project design? (M) Information generation and sharing (M) Consultation (N) Collaboration (N) Partnership Key relevant civil society organizations (CSOs) will be identified early in project preparation through a stakeholder analysis. It is understood that there are key CSOs with an active interest in informal settler issues and rights that will need to be incorporated in the consultation process. 4. Are there issues during project design for which participation of the poor and excluded is important? What are they and how should they be addressed? Yes No People affected by involuntary resettlement, including informal settlers to be displaced, will need to be consulted on mitigation measures and implementation arrangements. People residing near the train line will need to be thoroughly informed about safety considerations during the construction phase as well as for subsequent operation of the train services. Project preparation will need to identify appropriate local institutions or community-based organizations that can be trained and strengthen to provide safety awareness information as a constant presence in the communities. IV. SOCIAL SAFEGUARDS A. Involuntary Resettlement Category A B C FI 1. Does the project have the potential to involve involuntary land acquisition resulting in physical and economic displacement? Yes No Involuntary resettlement impacts are mostly associated with clearance of informal settlers on existing alignment areas and land acquisition for new alignment sections. Land for the project will be a mix of

21 14 Appendix 4 land currently belong to PNR and some new land acquisition. The final alignment and land acquisition requirements will be assessed during project preparation. There are informal settlers, especially in the Calumpit to Apalit section, and around several of the existing station sites. During project preparation, resettlement surveys (inventory of losses and census) and consultations with affected people will be undertaken to assess the nature of the impacts and prepare appropriate mitigation measures as required in the ADBs Safeguards Policy Statement. 2. What action plan is required to address involuntary resettlement as part of the transaction TA or due diligence process? Resettlement plan Resettlement framework Social impact matrix Environmental and social management system arrangement None B. Indigenous Peoples Category A B C FI 1. Does the proposed project have the potential to directly or indirectly affect the dignity, human rights, livelihood systems, or culture of indigenous peoples? Yes No 2. Does it affect the territories or natural and cultural resources indigenous peoples own, use, occupy, or claim, as their ancestral domain? Yes No The project does not impact indigenous peoples. Only the depot site which is close to an ancestral domain land requires NCIP certification but does not directly affect IPs or ancestral domain land. 3. Will the project require broad community support of affected indigenous communities? Yes No The project investment in the vicinity to ancestral domain land will require clearance of National Commission for Indigenous Peoples (NCIP) as per the Philippines Indigenous Peoples Rights Act (IPRA). The project is not directly located in ancestral domain territory and does not require Free Prior Informed Consent. 4. What action plan is required to address risks to indigenous peoples as part of the transaction TA or due diligence process? Indigenous peoples plan Indigenous peoples planning framework Social impact matrix Environmental and social management system arrangement None V. OTHER SOCIAL ISSUES AND RISKS 1. What other social issues and risks should be considered in the project design? Creating decent jobs and employment (H) Adhering to core labor standards Labor retrenchment (M) Spread of communicable diseases, including HIV/AIDS Increase in human trafficking Affordability Increase in unplanned migration Increase in vulnerability to natural disasters Creating political instability Creating internal social conflicts (H) Others, please specify: community safety considerations for those residing along the rail alignment during construction and operation. 2. How are these additional social issues and risks going to be addressed in the project design? Preparation of bidding documents will include provisions for adherence to Core Labor Standards. Project preparation will need to ensure that HIV/STI awareness and prevention measures are adequately provided during construction phase. VI. TRANSACTION TA OR DUE DILIGENCE RESOURCE REQUIREMENT 1. Do the terms of reference for the transaction TA (or other due diligence) contain key information needed to be gathered during transaction TA or due diligence process to better analyze (i) poverty and social impact, (ii) gender impact, (iii) participation dimensions, (iv) social safeguards, and (v) other social risks. Are the relevant specialists identified? Yes No 2. What resources (e.g., consultants, survey budget, and workshop) are allocated for conducting poverty, social, and/or gender analysis, and participation plan during the transaction TA or due diligence? Social safeguards specialists, social development specialist along with resources to conduct poverty and social assessment, resettlement surveys and consultations.

22 CIA = Clark International Airport; NCC = New Clark City. Source: Department of Transportation and Japan International Cooperation Agency design team Supplementary Appendix 1

23 2 Supplementary Appendix CIA = Clark International Airport; NCC = New Clark City. Source: Department of Transportation and Japan International Cooperation Agency design team