STUDY ON ECONOMIC PARTNERSHIP PROJECTS

IN DEVELOPING COUNTRIES IN FY2011

Study on the Bypass Road Project in Dalton Pass

Republic of the Philippines

SUMMARY

February 2012

Prepared for:

The Ministry of Economy, Trade and Industry

Prepared by:

第1章 Kensetsu Gijyutsu Center,LTD

第2章 Infrastructure Development Institute-Japan

Central Consultant Inc.

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(1) Background and necessity of the project

Dalton Pass is an important arterial road linking Metro Manila to the Central / Northern regions of Luzon. Natural disasters caused by typhoons and earthquakes have frequently brought closures of the Dalton Pass up to now. Among other things, 1990 Baguio earthquake caused damages to the Dalton Pass which led to a closure of the road for a long duration. As surrounding areas it traverses have a high risk of earthquake occurrences, it has long been apprehended that re-occurrence of major earthquake will also cause closures of the road. Major typhoons have attacked the area in these years accompanying many human losses and physical damages, and there are concerns that typhoons will also bring closures of the Dalton Pass road. Thus, alternative roads of the Dalton Pass have been proposed in view of such backgrounds, and many surveys and investigations have been conducted to study the existing Dalton Pass and conceivable alternative roads.

(2) Basic policy of the contents of the project determined

A closure of the Dalton Pass which lasted about 6 months in the wake of the 1990 disaster, resulted in a great deal of damages to the economy and society of the Philippines. Damages caused by typhoons lead a closure of the road every year. In such situations, studies have been conducted for 20 years more or less, but no project has been in progress. As there are no alternative roads existed, the government of the Philippines has high expectations toward the construction of a Dalton Pass By-pass road, which will contribute to the development of the Northern region of Luzon. Thus, the basic policy was determined with the focus on the following matters, upon determining the details of this project.

■To improve efficiency of the road function during normal circumstances

To determine the best measure with the focus on road planning which allows to maximize the road function during disaster as well as normal circumstances.

■To improve durability against the impact of earthquakes and typhoons To determine the best measure with the focus on road planning which allows the road function to be recovered in a short period of time from the impacts caused by a great earthquake and typhoon.

■To reduce operating costs and maintenance costs To determine the best measure with the focus on road planning which allows to reduce total operating costs as well as to reduce maintenance management costs.

■Reduction of cost-benefit As for cost-benefit, to determine the best measure with the focus on road planning which allows to generate the maximum road cost-benefit during normal circumstances.

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■To reduce travel distance and time

To determine the best measure with the focus on road planning which allows to reduce the travel distance and time, in order to improve the above mentioned cost-benefit.

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Figure-1 Project location map

Dalton Bypass Road Target Area

Source:Philippines High-standard Highway Network Master Plan, JICA with additions by the study team July 2010

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(3) Outline of the project 1. Road planning

For this proposed project, the existing local road at the start point of the proposed project shall be improved so that the relevant section of the road is offered earlier for use. In addition to the existing drafts, three new drafts were proposed and a comparative study carried out.

Table-1 Draft of the proposed project

Section

Existing plan Proposal Alternative-0 Alternative-1 Alternative-2 Alternative-3

Tunnel L=1.0km

Tunnel L=5.0km

Tunnel L=3.65km

Tunnel L=2.0km

Road function Function as an alternative of existing road

Road function in normal circumstances

Designed speed 30km/h 50km/h Travel time

(Existing road 80 min） 100 min 60 min 70 min 105 min

Extension （Existing road 53Km） 65 Km 56 Km 58 Km 60 Km

Source: Study Team

Figure-2 Whole project plan

Source: Study Team

Dalton path current road

Section for Improvement of Existing Local Roads

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Figure-3 Profile

Figure -3.47 Whole project cross-section

Source: Study Team

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2. Tunnel planning

Drivability of the entire route has been taken into account, at the same time, construction costs, fire-prevention equipment and maintenance management have been taken into account, and also cost-benefit has been studied. As a result, optimal length of the tunnel to be extended would be about 2,000m. Results of the study are as follows.

・ Width of roadway：3.250m×2 ・ Width of road shoulders：1.000m×2 ・ Architectural limits：4.88m ・ Ventilation：Jet fan 1250mm×20 units ・ Tunnel disaster prevention facilities：A grade（Emergency telephone 10 locations,

fire hydrant 40 locations, and others） ・ Inner-sectional area ：Approximately 62.5m2 ・ Emergency bay：4 locations (see below) ・ Amount of excavated soil：Approximately 150,000m3 ・ Ground being excavated: · Granite, Granodiorite ・ Excavation method：Blast excavation ・ Drilling：Full face excavation method with auxiliary bench

Upper half bench cut method (up/down alternating Tandem)

Figure-4 Tunnel plan and Cross section 670m 750m 580m

Emergency parking bay

590m 660m 750m

Emergency parking bay

Emergency parking bay Emergency parking bay

Source: Study Team

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3. Bridge Planning

Japan’s earthquake proof bridge bearing has been developed based on the experiences suffered by frequented earthquakes, also studied and developed together with public and private sectors. For earthquake proof bridge bearings, there are seismic isolation bearings, horizontal reaction force isolation bearings, and functional separation bearings which have been studied and developed widely, as well as sold in the market. In terms of the safety and the low cost, the procurement of functional separation bearings is recommended.

・Functional separation bearing：This is a safe and low cost bearing, which separates both

super structure vertical reaction forces and seismic horizontal reaction forces, and supports each force. It also has a function to distribute horizontal reaction forces. It distributes optimal load of seismic horizontal reaction forces to each pier.

Figure-5 Cross section of Functional separation bearing

Note) It is also applicable to copper girder bridges.

Source: Study Team

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4. Estimated project cost ■Estimated construction cost

■Estimated maintenance management cost

Table-2 Construction cost Unit:million PHP

Table-3 Maintenance management cost

Source: Study Team

Source: Study Team

Unit:million PHP

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5. Economic evaluation and Financial analysis ■Basic concept

Economic evaluation is conducted to judge the feasibility of the project from the viewpoint of national economy by comparing the inputs (project cost and maintenance cost) and benefits generated by implementation of the project. Benefits which are grasped by comparing with-case and without-case are savings of various cost, merit for road users and residents, and national economic development etc.

Merits derived from implementation of the project will be following 2 types of advantages;

i. Driving comfort on the project road will be superior than that of the existing road

ii. Avoid of loss of vehicle operation cost and travel time cost caused by long distance detour traffic in the traffic suspension by the natural disasters

Regarding i. mentioned above, it will be measured in accumulated saving of vehicle operating cost during 25 years of evaluation period as a benefit of reduction of total vehicle operation cost of all vehicles passing on the project road comparing that on the existing road. As to ii. mentioned above, this benefit which has been treated several times in the past feasibility study for Dalton Pass is to avoid of making a wide detour in emergency time such as natural disaster through the national highways in the east or west side of Luzon (Region-2, Region-3).

■Estimated Benefit

Estimated benefit in the year of 2020, 2030, 2035 calculated by using unit of vehicle operating cost and travel time cost is shown in the following table.

Table-4 Estimated benefit

Case Benefit 2020 2030 2035

Alternative-0 VOC 729 1,072 1,302

TTC 519 836 1,066

Alternative-1 VOC 1,578 2,327 2,832

TTC 868 1,409 1,799

Alternative-2 VOC 1,619 2,387 2,905

TTC 894 1,451 1,854

Alternative-3 VOC 1,660 2,448 2,978

TTC 920 1,494 1,909

Unit:million PHP

Source: Study Team

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■Evaluation result

Economic Internal Rate of Return (EIRR), Benefit cost ratio (B/C) and Net Present value is calculated as indices of economic evaluation through cash-flow analysis for the evaluation period of 25 years, and the result of the calculation is shown in the following table for each alternative. Alternative-1, 2, 3 is judged to be feasible in accordance with the figures of EIRR, 16%, 18%, 21% respectively, on the other hand alternative-0 shows only 13% and it is not feasible. Alternative-1 with EIRR=16%, it will be recommended to deal with the cost reduction considering the fluctuate of the social and economic future situation.

Table-5 Evaluation result Unit:NPV million PHP

case EIRR B/C NPV Alternative-0 13% 0.81 -1,114 Alternative-1 16% 1.07 661 Alternative-2 18% 1.23 2,054 Alternative-3 21% 1.50 3,615

■Avoid of loss in the traffic block on the existing road

According to the DPWH report (Dalton Pass East Alternative Road, Economic Feasibility Re-evaluation, 2011), 9 days of traffic blockage due to typhoon occurred. Based on this fact, regarding 2 cases; ①in case of 6months’ traffic blockage due to the significant earthquake, ②9 days traffic blockage by typhoon in normal year, economic loss has been estimated in this study. Cost/benefit analysis is not conducted here.

・Following 2 routes were treated as detours

Table-6 Detour routes

detour Distance Travel time Western Route-A 674km 10.8 hours Western-route-B 738km 11.8 hours

The difference of travel distance between Detour routes and Dalton pass is calculated as below.

Additional travel distance

Western Route-A : 674km － 400km ＝ 274km Western Route-B : 738km － 150km ＝ 588km

Additional travel time Western Route-A : 274km ÷ 60km/h ＝ 4.6hours Western Route-B : 588km ÷ 60km/h ＝ 9.8hours

Source: Study Team

Source: Study Team

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Total amount of the loss come up to 9,412 million PHP for 6 months traffic blockage. Total amount of the loss by traffic blockage during 6 months (180 days) was estimated

9,412 million PHP as mentioned above. According to this result, loss due to 9days blockage was estimated in 470 million PHP in the normal year. Therefore, planned bypass road can avoid the loss of 470 million PHP every year.

■Financial analysis

An earning against the project cost in the event where tolls are collected for the tunnel section is calculated in here. Upon setting these toll fares to be collected, Philippines’ toll highway fares will be referred to. The current toll fares in the Northern Luzon Expressway are shown in the table below.

Project Cost

It take the minimum rate (proportional at distance) of the expressway of the Philippine country into account, and the pricing in the tunnel section sets it. But the rate resistance does not consider it.

Table-7 Examples of Tunnel toll fare setting for Project Cost Vehicle class Draft-０ Draft-１ Draft-２ Draft-３

Tunnel length proposed 0.90km 5.00km 3.65km 2.00kmClass-1 (Passenger cars, Motorbikes, SUV, Jeepney) 14 77 56 31

Class-2 (Bus, Light truck) 34 188 137 75 Class-3 (Heavy vehicle) 42 233 170 93

Source：Created by the Investigation team

It became the following table calculated FIRR based on this rate, and it followed that It could not lead good rate of return by all routes.

Table-8 FIRR calculation results

Draft-０ Draft-１ Draft-２ Draft-３

FIRR -12% -３% -５% -８% Source：Created by the Investigation team

Maintenance and Operation Cost

Maintenance and Operation expense is expensive in the tunnel section. Consider that the one that covered maintenance administrative expense with a rate income was desirable and calculated rate of return in the maintenance administrative expense. The rate set the following amounts of money in reference to the price of north Luzon expressway of the neighborhood in the Philippine country. In addition, we carried out the calculation with substitute Altenative -3.

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Table-9 Examples of Tunnel toll fare setting for Maintenance and Operation Cost Vehicle class Draft-０ Draft-１ Draft-２ Draft-３

Tunnel length proposed 0.90km 5.00km 3.65km 2.00kmClass-1 (Passenger cars, Motorbikes, SUV, J )

2.14 11.90 13.45 4.76 Class-2 (Bus, Light truck) 5.36 29.75 21.72 11.90 Class-3 (Heavy vehicle) 6.43 35.70 26.06 14.28

Source：Created by the Investigation team

As a result of having calculated rate of return, about until 2018 through 2035 of the in-service start, the maintenance administrative expense is a rate income like the following lists

Table -10 Toll collection and maintenance costs (1,000PHP)

Year Toll income Maintenance and operation

cost

Balance of payments/year

Cumulative balance of payment

2018 19,619 20,800 -1,181 -1,181

2019 20,385 20,800 -415 -1,596

2020 21,194 20,800 394 -1,202

2021 22,031 20,800 1,231 29

2022 22,883 20,800 2,083 2,112

2023 23,787 20,800 2,987 5,099

2024 24,726 20,800 3,926 9,025

2025 25,721 20,800 4,921 13,946

2026 26,730 20,800 5,930 19,876

2027 27,791 20,800 6,991 26,867

2028 28,891 20,800 8,091 34,958

2029 30,036 20,800 9,236 44,194

2030 31,247 20,800 10,447 54,641

2031 32,487 20,800 11,687 66,328

2032 33,784 20,800 12,984 79,312

2033 35,129 20,800 14,329 93,641

2034 36,543 20,800 15,743 109,384

2035 38,016 20,800 17,216 126,600 Source: Created by the investigation team

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In cases where a toll is collected from all the vehicles which use the tunnel, Year balance of payments will turn to be profitable in 2020, which is the third year after launching the service, while Cumulative balance of payment will turn to be profitable in the 4th year of operation. Please note that this study does not take into account of public resistance to the toll collection. Therefore, further analysis considering public resistance to the toll collection is necessary to be carried out in the future.

6. Environmental and Social evaluation

The Dalton Pass Bypass Route project is an ECP (Environmentally Critical Project) in areas classified as ECA (Environmental Critical Area) which have 12 provisions. It is also necessary that DENR will give the license. It is also necessary that consultation about Indigenous People and Local Residents, including the problem of changes of residences, with related organizations shall be held in early stages. A comparison of CO2 emission between with and without the project was carried out as the evaluation of environmental impact. The result is as below.

Table-11 Comparison Chart for CO2 Emission with & without the Project

The estimates above reflect a design that the proposed route length gets longer than the existing road (53km). Concerning Proposals 1 through 3, while the running speed of the vehicles are kept low in the Dalton Pass Section (existing road) where the share of the large vehicle traffic volume is large, if partial traffic diversion is realized by opening the bypass route for which improvement of alignment is considered, we can expect a result that increased vehicle running speed will improve fuel consumption and contribute to restraint of greenhouse gas emission.

※Small:Passenger car, Large:TrailerWithout

Existing RouteExisting Route Present Plan Plan 1. Plan 2. Plan 3.53km 53km 65km 56km 58km 60km

- - 30km/hSmall※ 30km/h 50km/h 40km/hLarge※ 10km/h 30km/h 15km/hSmall※ 5,490 1,830Large※ 7,090 2,363Small※ 31,355.7 8,013.1 21,441.6 16,127.0 16,703.0 17,279.0Large※ 181,550.7 41,729.9 134,952.8 75,231.6 77,918.5 80,605.3Total 212,906.3 49,743.0 156,394.4 91,358.7 94,621.5 97,884.3

CO2 emission amount on bypass plus existing routes: 206,137.5 141,101.7 144,364.5 147,627.3Compared to without case: 6,768.9 71,804.7 68,541.9 65,279.1

With Project

Total LengthDesign Speed 50km/h

CO2 EmissionAmount (ton/year)

60km/h

Traffic VolumeEstimation in 2038

3,6604,727

Speed for TrialCalculation 40km/h

Source: Study Team

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(4) Implementation schedule

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(5) Yen Loan Request and Implementation Feasibility

1. Opinion of Partner Country’s Government on Financing

From discussions with related organizations, the DPWH would like to finance as much as possible using loans from foreign countries.

The DPWH’s thoughts on financing are listed in detail below.

According to discussions with Assistant Secretary Cabral, they are hoping for as much foreign aid as possible when it comes to financing.

However, since this project is fundamentally positioned as disaster prevention, they would like the project to proceed as fast as possible.

For the 2012 budget, the DPWH plans to allocate 500 million pesos to this project. However, it is undecided when this budget will be carried out, and the FS Department would like to carry out the improvement of existing roads and environmental impact assessments that are included as a part of the larger project.

Since this project includes a lot of construction that requires sophisticated techniques, such as building tunnels, slope protection and bridge building, significant hope is being placed on technical transfer from Japan, an earthquake-prone country that has nonetheless managed to build a solid infrastructure.

The DPWH considers supporting this project extremely important, and is thus planning to include designing and carry out surveys for it in the 2012 national budget. However, they are also fully aware it would be difficult to carry out the entire project under their national budget, and would like to use loans to cover a significant portion of the project costs. In particular, they are hoping for quick support, including technical transfer, from Japan with its advanced construction techniques.

2. Actions of Related Institutions Regarding Financing

According to the “Public Investment Program (2011-2016)” that the DPWH submitted to the NEDA, they estimate 963.6 billion pesos are needed for road projects, 162.2 billion pesos for flood prevention, and 65.9 billion pesos for other projects. The breakdown for road projects includes 399.9 billion pesos in aid from foreign countries, 36.6 billion pesos from PPP projects, and 527 billion pesos in national financing. The primary donors for this foreign aid include:

・JIBIC ・JICA ・Saudi Fund ・Korean Economic Development Cooperation Fund ・Asia Development Bank ・World Bank ・Millennium Challenge Corporation

Looking at the projects using foreign aid, they can be split into the following broad categories.

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①Improvement and preventative maintenance of existing roads ②Creating a highway network in the Metro Manila area ③Extending existing highways

3. Financing Outlook and Current State/Possibility of Requesting Yen Loan

Since the proposed project is in the final stages of acquiring 500 million pesos in the Philippine government’s budget for the next year (as of December 2011, the budget has passed in Congress, and is now being explained to Congress members from relevant areas) (according to Assistant Secretary Cabral in December 2011), we can see that the DPWH doesn’t consider this one of many potential projects, but instead a project that should be undertaken as soon as possible. A request has already been made to JICA via the NEDA to help determine the details for requesting a yen loan. As mentioned previously, significant hopes are being placed on Japan regarding tunnel techniques, and although 500 million pesos has been acquired it is hoped a yen loan will cover most of the financing. Based on the results of this study, Assistant Secretary Cabral hopes to have good results from the meeting between both governments planned for April (according to Assistant Secretary Cabral in December 2011), showing a lot of expectations placed on the yen loan.

4. Approach to Acquiring Yen Loan

The Philippine government has already requested aid from the Japanese government for making specific designs for this project. Also, when DPWH Secretary Singson came to Japan in September of 2011, he mentioned this Dalton Pass Project in discussions with related Japanese institutions. Additionally, our contact person Assistant Secretary Cabral also discussed the Dalton Pass Project in meetings during her December 2011 trip to Japan. Therefore, we can assume the DPWH in the Philippines is strongly hoping to proceed with this project on the condition there is a yen loan. Institutions with Japanese connections in the Philippines were also provided with information as part of this study, helping improve sharing of information. In the future, after the NEDA-ICC review and receiving permission for investment, it will be necessary to make a request via the central government for a yen loan.

5. Necessary Measures for Requesting/Receiving Yen Loan

After the DPWH submitted the yen loan application to the NEDA, NEDA will deliberate and permission from the ICC will be obtained, however it is necessary for the Philippines to coordinate with the related Japanese organizations during the deliberation period as they would like early realization of this project. Also, the DPWH is under the assumption the project will be done using alternative plan 3 that the investigating team presented, however since this is a pre-FS, another FS with the alternative route as the focus will be necessary. Therefore, an FS that includes a detailed design with the intention of quickly moving the project forward is vital. Assumed topics in the agenda for a FS that includes this design are below.

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・Settlement of an optimum rate plan ・Philippines-side introduction of technical criteria documents ・Draw up a business plan to work out the tunnel maintenance and operation costs ・Select the scope of the project and yen loan ・Settlement of STEP case (introduction of optimum Japanese technology) The DPWH will be in the main agent in dealing with the care of the aboriginal people, however during the course of the FS, it will be necessary for in-depth information to be shared with a Japan-side consultant and for procedures to be conducted correctly following the FPIC guidelines.

(6) Technological advantages of Japanese firms 1. Advantage of the tunnel (NATM) technology

In Japan, the bullet train railroad and expressway networks have been developed since the 1960s in parallel with the post-war development of social infrastructure, and a lot of tunnels have been constructed. As of 2004, the total length of currently used tunnels is about 4,300 km for railroads and about 2,800 km for roads. The characteristics of the Japanese tunnel technology are as follows:

Plenty of experience of tunnel construction Quality control based on the technical standards for maintenance and

management, etc. Establishment of the technology for coping with complex geological

conditions in a safe manner

They are very advantageous for this tunnel construction.

It was revealed from the survey that the ground around Dalton Path is fragile due to a fault. It was also found that unconsolidated ground and fault fracture are distributed in the tunnel area. Advanced technology is required for constructing a tunnel in such ground. Sloppy construction would cause face collapse and affect the surrounding environments, hindering the project considerably. Accordingly, it is desirable that Japanese firms, which have the technology for overcoming the fragile ground and a lot of experience, will participate. In addition, this tunnel will be the first mountain tunnel in the Philippines, and so it is essential to introduce the Japanese standards for maintenance and management, etc. Therefore, there will emerge a lot of opportunities for Japanese firms in the fields of anti-disaster, safe equipment, maintenance and management measures.

2. Seismic technology for bridges

The national route from San Jose and Aritao runs along Digdig Active Fault, and so this route is often closed because of the risk of an earthquake or a typhoon. The bypass road of the Dalton Path Plan is expected to secure safety of driving in normal

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conditions and function as an anti-disaster road for coping with abnormal weathers and earthquakes. This section promotes the cutting-edge aseismic technology in Japan and enhances Japanese international competitiveness and possibility to receive orders, in order to improve the aseismic performance of bridge structures.

■Planned bridge types and scales

Planned bridge types and scales are shown in the bridge plan list of Table-8. For 9 bridges, it is assumed that the upper structure is constituted by plate girders or PC-T girders and has an average span of S = 30 m; the lower structure is constituted by inverted T abutments and protruded beam-attached wall-type piers; and the base is the cast-in-place pile type (φ = 1,000mm). The cast-in-place pile type is assumed, because the base is sand gravels and hard-packed sands and has not undergone the N-value evaluation, according to the existing column diagram of the pile spring range.

Table-8 Bridge plan list

Source: Study Team

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(7) Concrete schedule for realization of this project and some risks that thwart the project

This project is proceeding under the presumption of the DPWH’s yen loan and coordination of the Philippines. Also, the investigation team explained the project overview, schedule, project cost, and agenda to Mr. Singson, the secretary of the DPWH in January 2012. The DPWH secretary has been notified and understands that this project is going forward under the condition of the yen loan. Therefore, it is reasoned that there is sufficient information sharing on the Philippines-side during the current investigation. Information sharing on the Japanese-side will be necessary going forward. And so, beginning with the JICA, consultation and coordination with Japanese government-sponsored enterprises will be necessary during the NEDA and ICC deliberation period. The below are topics in this consultation and coordination agenda. ■Coordination of other Japanese aid projects to the Philippines ■Consultation with the Philippines regarding the presumed STEP case ■Export of tunnel technology with other technology projects in mind ■Formulation of a scheme with the purpose of bringing a quick realization of the project

(8) Map of places of implementation of Feasibility Study

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