Philippines: North Luzon Expressway Rehabilitation and Expansion (Loan 7162/1769)
Evaluates the performance of the North Luzon Expressway Rehabilitation and Expansion project, aimed to induce private sector investment in the road transport sector and support the government's national road network programs.
The main objective of ADB's investment in Manila North Tollways Corporation was to improve traffic flow and vehicular efficiency along the North Luzon Expressway through the provision of additional road capacity, as well as improved interchanges and toll plazas to accommodate current and future traffic on the major northern route from Metro Manila. The project aimed to induce private sector investment in the road transport sector and to support the government's policies and programs to develop the national road network. It was designed to accelerate economic development in central and northern Luzon, especially of agriculture and industry, and to better cope with the rapid expansion of urban centers and growth corridors by improving access to and from the region and Metro Manila. It also aimed to promote increased employment opportunities at and around the tollway while encouraging decentralization of economic activities from Metro Manila. The expressway was expected to significantly reduce travel times, achieve savings in vehicle operating costs, and promote tourism. Indirectly, the project was expected to help alleviate poverty through increased employment opportunities in nearby urban centers.
This report provides an assessment of the project, based upon a qualitative combination of the ratings of criteria set forth in ADB's Guidelines for Preparing Performance Evaluation Reports on Nonsovereign Operations. Four main criteria were used: development impact and outcomes, ADB investment profitability, ADB work quality, and ADB additionality.
The overall assessment of the project is successful. The rehabilitated North Luzon Expressway has contributed to the development of central and northern Luzon. There is evidence of new shopping malls, tourist sites, and entertainment complexes developing near toll junctions, especially in and near the Clark Special Economic Zone and the cities of San Fernando and Angeles. New residential subdivisions have sprung up in Bulacan and Pampanga, and tourism has benefited from faster access to Subic Bay, Baguio, and venues further north. Reduced journey times, too, have facilitated provision of fresher fruit, vegetables, and meat to Metro Manila, thereby reducing waste.
- The project was designed to enhance economic development of central and northern Luzon, but the lack of a design and monitoring framework meant there were few measurable objectives or targets.
- The traffic volumes that were much lower than expected have meant fewer revenues and less favorable investment returns. ADB could have done more to test the sensitivity of the traffic forecasts to changes in the basic variables, including tariff price elasticity, lower-than-expected economic growth, and higher gasoline prices.
- The right-of-way issue should have been resolved earlier. Land acquisition by the government in the Philippines has been difficult causing delays.
- The inability of Philippine National Construction Corporation to raise funds for the project should have been anticipated at a time when most government corporations were strapped for cash.
- Regulation of the toll road sector remains weak. The Toll Regulatory Board lacks independence and does not have the staff numbers or appropriate skills to fulfill its mandate.
Recommended follow-up actions
- Due diligence by ADB in future projects should be more exhaustive before financial closure, especially regarding traffic projections and the financial condition of any participating government entities to avoid potential delays.
- ADB needs to ensure that in all future projects, right-of-way issues are cleared up before loan effectiveness.
- ADB should consider assisting the government in strengthening the regulatory environment for the toll road sector. This would involve advising on establishing a truly independent Toll Regulatory Board, financed and staffed from outside the government, and a major capacity development and recruitment program designed to adequately strengthen the agency.
- Basic Data
- Executive Summary
- The Project
- Issues, Lessons, and Recommendations