feasibility · pdf file · 2012-04-30feasibility study infrastructure support to...

Feasibility Study

Infrastructure Support to the Economic Program of the

Municipality of Sarangani, Davao del Sur

Project Development Assistance Center Regional Development Council XI Davao City

June 2002

A C K N O W L E D G M E N T This pre-investment study was completed with assistance from the Project Development and Monitoring Fund, a facility established pursuant to Republic Act 8182 (ODA Law) in furtherance of the latter’s overall goal of achieving equitable growth and development in the provinces through priority development projects for the improvement of economic and social service facilities.

The local government and constituency of the Municipality of Sarangani, Davao del Sur, led by their municipal mayor, the Honorable Amel B. Amierol, gratefully recognize this assistance, as well as that extended by the Regional Development Council XI’s Project Development Assistance Center (PDAC) in the conduct of this study.

Also collaborating in this work were the following departments of the municipal government: Municipal Agriculture Office, Municipal Budget Office, Municipal Engineering Office, and Municipal Planning and Development Office; as well as the Municipal Local Government Operations Office of the Department of the Interior and Local Government.

Acknowledgment i

PROJECT SUMMARY

Project Title : Establishment/Construction of Multi-Purpose Port Project Cost : P48.88 Million Proponent : Municipal Government of Sarangani Location : Mabila, Municipality of Sarangani, Davao del Sur Project Description : Development of a port complex at Barangay Mabila,

including the reclamation of the foreshore area; extension and improvement of the existing pier and causeway; and construction of auxiliary facilities such as administration building, passenger terminal, food stalls, comfort rooms and guardhouse. The project also provides for the establishment of an ice plant by private sector initiative.

Feasibility Indicators : Multi-Purpose Port Component (public sector) Financial Net Present Value at 12%IR: -P22 million Financial Internal Rate of Return : 0.55% Economic Net Present Value at 15% SDR: P139.2 million Economic Internal Rate of Return: 70% Although the multi-purpose port component may not be

feasible from the financial viewpoint, due mainly to its large initial investment cost, it is still recommended for public sector development, since: (a) it can generate enough cash inflows to sustain its operational requirements over its economic life; (b) it exhibits a very high economic net present value; and (c) it has a very strong potential for opening up livelihood opportunities for the local community, starting with the establishment of a commercial ice plant facility.

Ice Plant Component (private sector) Net Present Value at 16% IR: P7.1 million Financial Internal Rate of Return at 16%IR: 25.06% The ice plant component is financially attractive to private

investment. However, the market analysis indicates that the viability of its operation hinges substantially on the development of the existing Mabila Pier into a multi-purpose port.

Project Summary ii

Page No. CHAPTER 1 THE PROJECT 1.1 Rationale/Background 1-1 1.2 Project Goal and Purpose 1-2 1.3 Project Spatial and Sectoral Context 1-2 1.4 The Project Feasibility Study Undertaking 1.4.1 Study Area 1-3 1.4.2 Objectives of the Study 1-3 1.4.3 Study Approach and Methodology 1-4 CHAPTER 2 PROFILE OF SARANGANI MUNICIPALITY 2.1 Physical Profile 2-1 2.1.1 Geographic Location and Political Subdivision 2-1 2.1.2 Topography 2-1 2.1.3 Coastal Area 2-1 2.1.4 Climate 2-2 2.1.5 Water Resources 2-2 2.1.6 Land and Mineral Resources 2-2 2.2 Demographic Profile 2-2 2.3 Infrastructure Profile 2-3 2.4 Economic Sector Profile 2-4 2.5 Social Sector Profile 2-4 CHAPTER 3 MARKETING ASPECT 3.1 General Market Description 3-1 3.1.1 The Multi-Purpose Port Component 3-1 3.1.2 The Ice Plant Component 3-2 3.1.3 The Warehouse Component 3-2 3.2 Demand for the Project 3-2 3.2.1 Availability of Data and Methods Used in 3-2 Data-Gathering 3.2.2 Results of Data-Gathering Activities 3-3

3.2.3 Analyses of Demand and Demand Projections 3-3 for the Project 3.2.3.1 Multi-Purpose Port Component 3-3 3.2.3.2 Ice Plant Component 3-11 3.2.3.3 Warehouse Component 3-11

3.3 Demand and Supply Gaps 3-13 3.3.1 Passenger and Cargo Traffic Pressure on the 3-13 Existing Mabila Port

CONTENTS

Page No.

3.3.2 Mabila Port’s Attractiveness to Fishing Vessels 3-15 3.3.3 Block Ice Supply Deficiency 3-16 3.3.4 Mabila Port’s Warehouse Capacity Requirement 3-18 3.3.5 Other Economic Opportunities 3-21

3.4 Marketing Plan 3-21 3.4.1 Project Outputs 3-21 3.4.2 Product Pricing & Projected Revenues 3-22 3.4.3 Marketing Strategy 3-24 3.4.3.1 The Need for a Two-Stage Marketing 3-24 Strategy 3.4.3.2 A Suggested Pre-Implementation 3-24 Marketing Strategy 3.4.3.3 A Suggested Post-Implementation 3-25 Marketing Strategy 3.5 Summary of Findings and Conclusions 3-25

CHAPTER 4 TECHNICAL ASPECT 4.1 The Project 4-1 4.2 Project’s Location Natural Attributes 4-1 4.2.1 Geographic Location 4-1 4.2.2 Meteorological Condition 4-1 4.2.2.1 Climate/Rainfall 4-1 4.2.2.2 Wind 4-2 4.2.2.3 Temperature 4-2 4.2.3 Oceanological Conditions 4-2 4.2.3.1 Tides 4-3 4.2.3.2 Current 4-3 4.2.3.3 Tsunamis 4-3 4.2.4 Hydrographic Survey and Water Depths 4-4 4.2.5 Topography 4-4 4.2.6 Soil and Sub-soil Classification 4-5 4.3 Description of Existing Port Facilities 4-5 4.4 Proposed Facilities and Improvement Activities 4-6 4.5 Assessment of Alternatives 4-6 4.5.1 Location 4-6 4.5.1.1 Site of the Port 4-6 4.5.1.2 Site of the Ice Plant 4-7 4.5.1.3 Site of the Warehouse 4-7 4.5.2 Size 4-8 4.5.3 Technology and Services 4-9 4.5.3.1 Port Operations 4-9 4.5.3.2 Ice Plant Technology 4-9

CONTENTS

Page No. 4.6 Description of Preferred Alternative 4-10 4.6.1 Reclamation of the Foreshore Area 4-10 4.6.2 Causeway 4-10 4.6.3 Pier Structure 4-10 4.6.4 Port Stalls 4-10 4.6.5 Administration Building 4-11 4.6.6 Toilet/Bathroom 4-11 4.6.7 Passenger Terminal 4-11 4.6.8 Ice Plant 4-11 4.6.9 Warehouse 4-11 4.6.10 Guardhouse 4-12 4.7 Cost Estimates 4-12 4.7.1 Investment Cost 4-12 4.7.2 Operating Cost 4-12 4.8 Machinery and Equipment 4-12 4.8.1 Port 4-12 4.8.2 Ice Plant 4-12 4.9 Timetable of Implementation 4-13 4.9.1 Pre-Implementation Phase 4-13 4.9.2 Implementation Phase 4-13 4.10 Environmental Impact and Mitigating Measures 4-13 CHAPTER 5 FINANCIAL ASPECT 5.1 Project Cost 5-1 5.2 Source of Funds 5-2 5.2.1 Multi-Purpose Port 5-2 5.2.2 Ice Plant Component 5-3 5.3 Basic Financial Projections 5-3 5.4 Financial Viability Criteria 5-4 5.5 Financial Analysis 5-5 5.5.1 Income Statement 5-5 5.4.2 Cash Flow Statement 5-6 5.6 Financial Viability Indicators 5-6 5.6.1 Multi-Purpose Port 5-7 5.6.2 The Ice Plant 5-7 5.7 Sensitivity Analysis 5-7 5.8 Conclusions and Recommendations 5-10 CHAPTER 6 ECONOMIC ASPECT 6.1 Economic Benefits 6-1 6.1.1 Benefits Accruing from Port and Ice Plant 6-1 Operations Direct Benefits to the Stakeholders 6-1

CONTENTS

Page No. 6.1.1.1 Port Revenues and Ice Plant Revenues 6-1 6.1.1.2 Salvage Value 6-1 6.1.1.3 Working Capital 6-1 6.1.2 Direct Benefits as a Result of the Project 6-1 6.1.2.1 Reduction in Fish Spoilage 6-1 6.1.2.2 Time Saving Benefits 6-2 6.1.2.3 Savings in Fuel Costs 6-2 6.1.2.4 Other Benefits 6-2 6.2 Economic Costs 6-2 6.2.1 Capital Costs 6-2 6.2.2 Operating and Maintenance Cost 6-2 6.3 Valuation of Benefits and Costs 6-3 6.4 Results of Economic Analysis 6-4 6.5 Economic Sensitivity 6-4 6.6 Conclusion 6-5 CHAPTER 7 OPERATION AND MANAGEMENT 7.1 Political and Legal Consideration 7-1 7.2 Project Organization and Management 7-2 7.2.1 Existing Port Management and Operations 7-2 7.2.2 Pre-Operating Phase 7.2.2.1 Management and Organization 7-3 7.2.2.2 Manpower Requirements 7-3 7.2.3 Operating Phase 7-4 7.3 Port Management and Operation 7-5 7.4 Socio-Economic and Cultural Implications 7-6 ANNEXES Chapter 2 Figure.2.1 Map of Davao Region Figure 2.2 Map of Davao del Sur Figure 2.3 Map of Sarangani Municipality Chapter 3 Table 3.1 Berthing Fees Table 3.2 Passenger Terminal Fee Table 3.3 Cargo Handling Fee Table 3.4 Warehouse Storage Fee Table 3.5 Parking Fee Table 3.6 Anchorage Fees Table 3.7 Land Rental-Ice Plant and Stalls Table 3.8 Public Restrooms

CONTENTS

Page No. Chapter 4 Figure 4.1 Map of the Philippines Figure 4.2 Climate Map of the Philippines Figure 4.3 Normal Path of Tropical Cyclones Figure 4.4 Earthquake-Induced Tsunamis and Tsunami- Prone Areas in the Philippines Figure 4.5 Tsunami Risk Areas in the Philippines Figure 4.6 Hydrographic Control Survey Plan of the Existing Port Figure 4.7 Hydrographic Control Survey Plan of the Alternative Port (Cove Area) Figure 4.8 Sketch Plan of Existing and Alternative Ports Figure 4.9 Distribution of Active Faults and Trenches in the Philippines Figure 4.10 Significant Earthquake in the Philippines Figure.4.11 Seismicity Map of Sarangani Island Figure 4.12 Site Development Plan of the Proposed Port Figure 4.13 Master Plan of the Proposed Port Figure 4.14 Perspective of the Proposed Ice Plant Figure 4.15 Floor Plan of the Proposed Ice Plant Table 4.1 Total Investment Cost Table 4.2 Total Operating Cost Table 4.3 Project Implementation Schedule Chapter 5 Table 5.1 Replacement Cost of Depreciated Equipment Table 5.2 Equipment/Facility Depreciation Schedule Table 5.3 Amortization Schedule-Ice Plant Table 5.4 Income Statement –Multi-Purpose Port (Scenario 1) Table 5.5 Income Statement –Multi-Purpose Port (Scenario 2) Table 5.6 Income Statement –Ice Plant Table 5.7 Cash Flow Statement-Multi-Purpose Port (Scenario 1) Table 5.8 Cash Flow Statement-Multi-Purpose Port (Scenario 2) Table 5.9 Cash Flow Statement-Ice Plant Table 5.10 Sensitivity Analysis-Multi-Purpose Port Table 5.11 Sensitivity Analysis-Ice Plant Chapter 6 Table 6.1 Economic Costs-Benefit Flow Statement of Assumptions and Costs Table 6.2 Sensitivity Analysis Philippines

CONTENTS

Chapter 1 THE PROJECT

1.1 Rationale/Background

Sarangani is a fifth class municipality of the province of Davao del Sur located in the southernmost tip of Davao Region. It is composed of two main islands, namely: Sarangani and Balut islands. Sea transportation is the only means of going to and from the island municipality. The municipality is considered a hard-to-reach area because of the lack of convenient sea transport system. Economic activities in the municipality remained stagnant for many years because of inadequate infrastructure that could support the agriculture and fishing industries in the municipality. The local government found it difficult attracting investments because of this deficiency. To become economically progressive the municipality felt the need to have a good port, a warehouse and ice plant. These projects became their investment priority and compose the Infrastructure Support to Economic Program of Sarangani. The conduct of the feasibility study of which was approved for assistance under the Project Development Monitoring Fund (PDMF). The project was started in December 2001 through the technical assistance of the Project Development Assistance Center (PDAC). The project was designed to develop the capability of the Local Government Unit of the Municipality of Sarangani in project development, and at the same time, come up with a feasibility study for the identified proposals of the municipality. The inception activities on the preparation of the FS commenced last February 2002 with an orientation on Project Development Cycle and FS. The succeeding months were devoted to preparation of data gathering instruments, actual data generation, technical surveys, preparation of designs and consultations with line agencies and experts from the private sector. The drafting of the feasibility study was conducted last May 27 to June 7, 2002. The feasibility study for the Infrastructure Support to the Economic Program of Sarangani is hereby presented as an output of the series of activities undertaken by the local government unit of Sarangani and the Project PDAC Team in accordance with the prescribed requirement set forth under the PDMF Project.

1.2 Project Goal and Purpose The project aims to provide infrastructure facilities that would support the

economic program of the municipality of Sarangani. The provision of port facilities, warehouse and ice plant is expected to enhance the economic activities in the area through increased trade, tourism, and livelihood activities. Having a good port system would also encourage the opening of additional sea transport

The Project 1-1

routes and improve the sea transport system plying in the area. Fishing activity is expected to gain more from this project being the major industry in the municipality.

1.3 Project Spatial and Sectoral Context

Since the creation of the municipality in 1978, economic activities remained stagnant because of the remoteness of the area, risk of travel due to unpredictable sea condition, and the poor condition of port and other facilities. Few medium size cargo/passenger boats are providing services to the area on the alternate basis to cater the needs of the people. More often, small fishing boats served as the means of transport especially on emergency basis. In the late nineties, a company based in General Santos City attempted to establish new route in the area using a fast craft passenger vessel. Because of the difficulty in berthing and minimal patronage due to high fare, the operation was withdrawn.

The islands of Sarangani served as a regular path of fishing vessels in going to

the fishing grounds at Celebes Sea and other areas near Indonesia and New Guinea. The Island also served as a haven of fishing boats during typhoons and the nearest place to shelter for repair or light recreation, either before or after the fishing trip. As a common experience, the local government of Sarangani sees this trend as a prospect that could help the municipality improve their economic activity. Improving the municipal port that can cater to both the fishing and cargo/passenger vessels requirements as well as the establishment of other facilities that can produce or supply the basic needs for the fishing trip such as ice, fuel, food supply and other requirements are potential enterprising activities that could spur economic development in the area.

The municipality of Sarangani, as it is position near the Philippine-Indonesian territorial waters and fishing grounds, is a strategic place for emergency relief and anchorage especially in times of bad weather. The area, being located along the regular travel path of fishing vessels in going to and from the fishing grounds could also serve as a station wherein an inventory of fishing supply requirements can be made, filled up or replenished for the final journey.

As an island municipality, fishing activity in the area is a promising industry.

While the municipal and deep-sea fishing activities are flourishing in the area, facilities that are needed to support the industry are not made available. The inability of the municipality to provide enough berthing space on their existing ports and other necessary facilities such as ice plant, fuel depot, etc. have made the local fish operators to station their fishing vessels in General Santos City where these facilities are available. The situation would be different if the facilities are present and could have been a major factor in economic development of the area.

The Project 1-2

Based on initial assessment of the study team, the demand for ice by the fishing operators relying on ice plant facilities in General Santos City, has not been satisfied yet. Because of lack of supply, oftentimes, the fishing operators have to queue for about 2 to 3 days before the commodity can be served to them. Given that there is an unfilled demand for ice, along with other commodities such as fuel, fishing gears, food supply, etc., the local government of Sarangani sees these aspects as market potentials. Thus, the coming up of a study for the improvement of port and establishment of other necessary facilities in the municipality was made as an initial step to develop the infrastructure facilities to support the economic program of the municipality.

In view of the existing conditions of the area, the development and/or improvement of the port facilities in the municipality became imperative to achieve the economic progress envisioned by the municipality in the long-term.

1.4 The Project Feasibility Study Undertaking

1.4.1 Study Area

The feasibility study for the improvement of the municipal port and establishment of an ice plant, warehouse and other infrastructure facilities that would support the economic activities of the municipality of Sarangani is focused at barangay Mabila, the seat of government of the municipality. The study, however, considered other potential areas for development within the municipality such as the existing port at barangay Patuco including the conduct of a fishing industry profile that covered the areas of General Santos City and Glan. A quick assessment of the ice plant industry in General Santos City was also conducted which form part of the basis for the establishment of an ice plant facility in the municipality.

1.4.2 Objectives of the Study

The general objective of the study is to determine the viability of improving the municipal port and establishment of other infrastructure related facilities at barangay Mabila in support to the economic activities of the municipality of Sarangani. Specifically, the study aims to determine the following:

1. To determine the overall viability of improving the municipal port and the

required new infrastructure support facilities to economic program of the municipality;

2. To develop the capability of the local government officials of the municipality

of Sarangani in line with project development and preparation of feasibility study;

The Project 1-3

1.4.3 Study Approach and Methodology

The study was conducted using multi-disciplinary approach in accordance with the agreement forged between the municipal government of Sarangani and Project Development Assistance Center (PDAC). As a joint venture project funded by the Project Development and Monitoring Fund (PDMF), the activity included training on feasibility study preparation for the local officials of the municipality, actual field surveys, conduct of technical studies, project site and agency visits, and packaging of the study. This endeavor approximates all the required multi-disciplinary approach to planning encompassing the various expertise required in the study.

The Project 1-4

Profile of Sarangani Municipality 2-1

Chapter 2 PROFILE OF SARANGANI MUNICIPALITY

2.1 Physical Profile

2.1.1 Geographic Location and Political Subdivision

The municipality of Sarangani was created by virtue of Presidential Decree No. 1550 issued by the late President Ferdinand Marcos on June 11, 1978. It is an island municipality located in southernmost tip of Davao Region below the province of Davao del Sur and mainland Mindanao (Figures 1 & 2). It lies south of the equator from 50 22’ 50” to 50 29’ 50” north latitude; and from 1250 16’ 33” to 1250 29’ 52” east longitude. The municipality is composed of 2 main islands, the Sarangani and Balut Islands separated by Sarangani Straight from Jose Abad Santos. It is approximately 2-3 hours by boat from Glan and 4-5 hours from General Santos City or equivalent to 49.84 nautical miles. The municipality has 12 barangays with a total land area of 106.18 square kilometers (Figure 3).

2.1.2 Topography The municipality of Sarangani is characterized by hilly and mountainous areas

with eleven of its barangay centers are proximately located in coastal area and only one barangay is considered as landlocked. Barangay Gotamco in the island of Balut harbors the summit of Mount Balut, a dormant volcano with a height of 800 meters above sea level. In Sarangani Island, mountain ranges starts at barangay Patuco and ends at sitio Sasapo. It has steep banks and cliffs with edges having heights ranging from 80 to 120 feet above sea level. Approximately 67 percent of the municipality’s land area is suited for agricultural production (0-18% slope) while 33 percent is considered mountainous (18% slope and above). The table below shows the slope classification of the municipality.

Slope Classification Land Area

(In has.) % of Total

0-3% 975 9.18 3-8% 2,450 23.07 8-18% 3,575 33.67 18-30% 2,207 20.79 30% and above 1,411 13.29

2.1.3 Coastal Area Sarangani as, an island municipality, has a vast coastline covering a total of 94.0

kilometers. The length of coastal line of Balut Island is 57.0 kilometers while Sarangani Island has 37 kilometers.


2.1.4 Climate The municipality belonged to type IV Climate with no pronounced dry or wet

season. The rainfall is more or less evenly distributed throughout the year. The average annual rainfall recorded in the municipality was 123 mm. The months of December to May and June usually had fair weather condition with prevailing wind slightly variable and generally coming from northeast to southwest direction. On the other hand, southwest monsoon wind or known as Habagat prevails from July to October of the year. The municipality has rarely experienced typhoons being located outside the typhoon belt. However, the east to west driven wind locally known as Amihan has been found to be dangerous for seafarers because during this period sea condition is at its worse. The average temperature in the municipality ranges from 27 degrees to 29 degrees centigrade. Warm temperature is experienced from February to September while the coldest months start from November up to January.

2.1.5 Water Resources: There are seven known creeks in the municipality. These creeks are

complemented by springs served as tributaries and natural floodway during heavy rain. Three (3) of the creeks, namely: Torang, Tumanao, and Sukor are found in Sarangani Island while six (6) namely: Sabang, Tambulos, Sasapuan, Malambako, Mabila and Tinina are found in Balut Island.

2.1.6 Land and Mineral Resources: Sulfur-filled crater of Mt. Balut offers a clue to the origin and elements that

composed the Island of Balut. Igneous rocks like basalt, granite, even adobe stone litter the surrounding landscape of balut land areas are among the mineral resources abound in the island. San Stone and quartz are abundant in Sarangani Island. Adobe stones can be extracted in Lipol. Pebbles and red clay can be mined in Obas-Manabay area of Patuco. Eighty percent of sulfur elements can be found at the extinct crater of Mount Balut as tested by TEXCAN.

2.2 Demographic Profile Based on the 2000 Census, Sarangani has a population of 18,382 with an average

annual growth rate of 2.28 percent from 1995 to 2000. The municipality’s population density is placed at 146 persons per square kilometer of land area .

The population of Sarangani is generally young with 45.21 percent aged 0-14

years. Economically productive population aged 15-64 years constitutes about 52.97 percent of the municipality’s total population. Total dependency ratio stands at 88 percent for every 100 persons of productive age. The average household population size is 5. Indigenous people living in the municipality are B’la-ans and Sangils, which comprised about 60 percent of the total population.


Population, Land Area and Population Density, CY 2000

Barangay Population

(2000) Land Area

(Sq. Kilometer) Population Density (Person/sq. Km.)

Batuganding 1,783 11.26 158 Camahual 1,911 13.06 136 Camalig 870 9.02 96 Gomtaco 989 11.37 87 Konel 1,602 6.90 232 Lipol 1,532 7.96 192 Mabila 2,869 5.52 520 Patuco 2,498 9.03 277 Laker 1,372 9.03 152 Tinina 1,698 5.73 296 Tagen 1,201 12.21 84 Tucal 1.034 5.07 204 Total 18,832 106.18 173

2.3 Infrastructure Profile The road network connecting the barangays in the two islands of the

municipality has not been establish yet and the fastest means of transportation, aside from riding a horse or walking in going from one barangay to the other, is by means of a boat. The municipality has two semi-permanent ports located at Mabila serving the Balut island and Patuco for the Sarangani Island. These ports have equally important functions that support the economic activities of the municipality.

The power requirement of the municipality is being supplied by a generator set

operated by the National Power Corporation (NPC) and distributed by Davao del Sur Electric Cooperative (DASURECO). As of 2000, however, only 2 barangays, namely: Mabila and Batuganding in Balut Island were energized, with 355 household connections. The means of communication is through a single side band radio owned by the municipal government and a national government telegraph station.

In terms of social infrastructure, the municipality has 8 elementary schools and 2

high schools. Facilities for the elementary schools include 102 classrooms, and 1 multi-purpose building while secondary schools has 23 classrooms and 12 buildings. Likewise, the municipality has 1 Rural Health Unit (RHU), 2 Barangay Health Stations (BHS) and a 10 bed capacity primary hospital serving the entire population. Around 38 percent of the total population has access to Level II and Level III water system while the remaining 62 percent rely on spring water sources, shallow wells and open dug wells. As of 2000, the municipality has the following water system facilities: Level I - 25 units, Level II - 2 units, and Level III - 2 connections.


2.4 Economic Sector Profile The municipality is primarily an agriculture area and has a rich fishing grounds.

Its prime agricultural product is coconut wherein 96 percent of agricultural land is planted to it and only 1.21 percent is planted to corn. Because of mono cropping, 99 percent of its population gets their staple food from General Santos City and other neighboring areas. Copra as the main product of the municipality is sold to General Santos City.

Livestock production is minimal and not sufficient for its population. The

farmers are raising horses, carabaos, cattles for draft purposes while goats, swines and poultry are raised for human consumption. Aside from livestock and poultry, people in the area also rely on fishing as their main and/or alternate source of livelihood. However, majority of the catch are sold to General Santos City because of the lack of storage facilities. Fishpond operations are also present in some areas as a form of livelihood.

2.5 Social Sector Profile In year 1999-2000, the total enrolment in public schools for elementary and

secondary levels reached 3,328 and 1,328, respectively. The classroom-pupil ratio in public elementary schools is recorded at 1:67 while the classroom-student ratio in public secondary schools is placed at 1:74. Participation rates in both levels were pegged at 80.82 percent for the elementary level and 42 percent for secondary level. Basic literacy rate of the municipality is placed at 86.75 percent.

Health situation in the municipality is critical. In 1999, the recorded infant

mortality was 12.28 percent per 1,000 livebirths while maternal mortality rate is reported at 4.84 deaths per 1,000 livebirths. The crude birth rate, on the other hand, stands a 23 livebirths per 1,000 people, while crude death rate was placed at 38 deaths for every 1,000 population. As shown in the table below, the leading causes of morbidity and mortality in the area are mostly preventable diseases:

Malnutrition is also prevalent among children in the municipality. About 3

percent of pre-school children suffered from severe to moderate malnutrition while 16 percent are mildly malnourished. Among school children, 14 percent were severely and moderately malnourished. Ten Leading Causes of Morbidity and Mortality

Leading Causes of Morbidity Leading Causes of Mortality Acute Respiratory Infection Cardio-Vascular Diseases Diarrhea Unknown Pneumonia Accidents Hypertension Pneumonia Bronchitis Cancer Chicken Pox Hypertension PTB Kidney Diseases

Chapter 3 MARKET ASPECT

This chapter presents and examines the demand for the project’s proposed outputs, the possible levels that they ought to be produced, if warranted, the prices at which they may be sold or dispensed to the beneficiaries, and, in general, the distinct characteristics of the project’s identified markets that could represent needs which the project could address.

3.1 General Market Description

The market identified for the project’s three components is broken down into two general groups: (a) the local residents of Sarangani; and (b) the tuna fishing industry that thrives in the rich fishing grounds of the Celebes Sea just off the country’s border with the Republic of Indonesia.

To the residents of Sarangani the project represents the realization of a long-felt need for a port facility that presents less risk to navigation and a hub that would stir the island-municipality’s sleepy economy to action. To Southern Mindanao’s thriving tuna industry, the project represents an opportunity to stretch each fishing venture’s margin of profitability by providing a forward base for provisioning, or emergency re-provisioning, and shelter.

The market presents both distinct and complementary niches for the project’s three components. These niches are more particularly described below.

3.1.1 The Multi-Purpose Port Component

The project’s multi-purpose port component aims to serve the broadest spectrum of the identified market. It will be the basic seaport that will service Sarangani’s commuting public, the inter-island commuter service being the main means of transportation to and from the island municipality. The same importance will be played by the port on the municipality’s agriculture, which is dominated by copra production. At present, the inter-island commuter service doubles as the means out to the market for this industry.

The port will also serve the tuna fishing industry as a provisioning depot and as a rest and recreation haven where fishing vessels may seek refuge in times of bad weather. The establishment of the ice plant component would be a critical incentive factor in drawing this sub-market to the port. Finally, in keeping with the present pier’s utility, the port is expected to continue serving the local residents in terms of providing a landing facility for their bancas and pump-boats, which constitute the main means of transportation within the Sarangani island group.

Marketing Aspect 3-1

3.1.2 The Ice Plant Component

The ice plant component primarily aims to cater to the block ice requirements of tuna fishing ventures, while mostly based at General Santos City, invariably traverse the island municipality’s waters enroute to the common fishing ground in the Celebes Sea. This sector represents a projected 99% of the ice plant’s market. The establishment of the ice plant at Sarangani will bring significantly closer to this sub-market its source for the all-essential ice, the main medium for the preservation of the fish harvest.

The development of the multi-purpose port component is itself vital to the viability of the ice plant. The present piers at Poblacion Mabila in Sarangani present a lot of navigational risks for the fishing vessels. Secondarily because of the meager projected demand, the ice plant facility will also serve the domestic ice requirements of Sarangani’s local community.

3.1.3 The Warehouse Component

Designed to mainly serve the local economy’s copra industry, the municipality’s principal agricultural produce, the project’s warehouse component will also provide transient shelter for the regular bulk procurements of the town’s business and household communities.

3.2 Demand for the Project

3.2.1 Availability of Data and Methods Used in Data-Gathering

The study examines the project’s identified market according to the specific need that each project component aims to address. To achieve this, a separate demand analysis is undertaken for each component.

A check with relevant local government offices revealed that virtually no database exists concerning the municipality’s trade and commerce and agriculture and fishery sectors. Moreover, formal warehousing and ice manufacturing businesses are nonexistent in the municipality. Records on port operations, on the other hand, are limited to the monthly collections generated from the facility. For the study to establish some basis for estimating demand for the project, it was therefore decided that primary surveys, both formal and informal, would be resorted to.

Three sets of formal survey questionnaires were formulated to generate data for the study. The first set targeted fishermen respondents and was designed to generate data and information on the tuna fishing industry that mainly operated out of General Santos City. The survey, however, was able to reach a few respondents based in the Municipalities of Sarangani, Davao del Sur, and Glan, Province of Sarangani.


The second set of questionnaires was developed for fish dealer/vendor respondents in Sarangani, and was intended to generate information on the local fishing industry, particularly on the handling and marketing of the fish catch.

The third set of questionnaires was addressed to ice plant operator respondents and was aimed at generating information on the business.

These questionnaires were administered from March 10 to May 24, 2002. Along with this formal data-gathering activity, informal interviews and consultations were conducted in Sarangani and General Santos City to fill in data gaps that the formal survey questionnaires could not fill.

3.2.2 Results of Data-Gathering Activities

The formal survey among fishermen generated the largest number of respondents at 31. Out of these, 25 represented those based in General Santos City; 4 represented those based in the Municipality of Sarangani; and 2 represented those based in Glan.

The survey for fish dealer/vendor respondents was able to cover nine (9) respondents, all of whom were Sarangani-based. For the ice plant operator-respondents, on the other hand, three (3) out of the total 18 plant operators in General Santos City were interviewed in the survey.

The relevant data, information and findings generated by the foregoing surveys, interviews and consultations will be cited and discussed in the following presentation of the demand analyses for the project’s three components.

3.2.3 Analyses of Demand and Demand Projections for the Project

3.2.3.1 Multi-Purpose Port Component

As already mentioned, the project’s port component looks to address the needs of Sarangani’s commuting public, its agricultural produce which constitutes the bulk cargo market for the commuter services that ply the Sarangani-General Santos City sea route, and the tuna fishing industry whose players operate out of the Municipality of Sarangani, General Santos City, and Glan in the Province of Sarangani. Each of these sub-markets will be examined in the following sections.

(A) Passenger Traffic

Historical data on passenger traffic at the present Mabila Port were available only up to as far back as 1997. These were generated from the manifest records of the two cargo-passenger motor launches providing commuter service to the municipality, and validated by the port docking fee collection records of the Municipal Treasurer’s Office. These data indicated the following passenger traffic levels from 1997 to 2001:


Year Number of Ship

Calls

Passenger Traffic

Annual Growth

1997 292 14,976 - 1998 292 16,416 9.62% 1999 390 22,272 35.67% 2000 342 23,424 5.17% 2001 384 30,720 31.15%

It will be observed that moderate increases in passenger traffic were seen in 1998 and 2000, while substantial jumps were seen in 1999 and 2001, over their respective previous year’s levels. These fluctuations are attributed to the traveling pattern of Sarangani’s local residents, who almost exclusively compose the passenger traffic that move in and out of the existing port. Over the years, this pattern indicates that these residents tend to travel out of Sarangani more when copra prices are high, and less when these prices are low. A recollection of the overall levels of copra prices during the years concerned validates this conclusion.

Given this irregular pattern of passenger traffic and limited availability of historical data, the study decided that projections on passenger traffic based on the given data alone would be unacceptable.

The study thus reexamined the passenger traffic data relative to the municipality’s population count during the corresponding years. Since census data on population were available only for the years 1990 and 2000, interpolation was required to generate the levels for the concerned years, based on the censal annual average growth rate of 2.62%. The results were then compared with the passenger traffic data to determine their relativity, thus:

Year Municipal Population

Annual Growth

Rate

Passenger Traffic

Passenger Traffic-to-Population

Ratio

1990 14,193 1997 17,010 2.62% 14,976 0.88 1998 17,456 2.62% 16,416 0.94 1999 17,913 2.62% 22,272 1.24 2000 18,382 2.62% 23,424 1.27 2001 18,864 2.62% 30,720 1.63

These results indicate a close relationship between the municipality’s passenger traffic and population levels. It was thus decided that this conclusion supports the use of passenger traffic-to-population ratio in projecting Sarangani’s passenger traffic for the duration of the project’s life. For this purpose, the study


used only those years when the ratios were greater than 1. The mean of the resulting ratios was then adopted as the factor that determines passenger traffic based on the applicable projected population, thus:

Year Municipal Population

Passenger Traffic

Passenger Traffic-to-Population

Ratio

1999 17,913 22,272 1.24 2000 18,382 23,424 1.27 2001 18,864 30,720 1.63

Mean 1.38 Applying this to the municipality’s projected population for the life of the project, the following passenger traffic estimates were generated:

Year Projected Population

Passenger Traffic-to-

Population Ratio

Projected Passenger

Traffic

2003 19,865 1.38 27,414 2004 20,385 1.38 28,131 2005 20,920 1.38 28,870 2006 21,468 1.38 29,626 2007 22,030 1.38 30,401 2008 22,607 1.38 31,198 2009 23,199 1.38 32,015 2010 23,807 1.38 32,854 2011 24,431 1.38 33,715 2012 25,071 1.38 34,598 2013 25,728 1.38 35,505 2014 26,402 1.38 36,435 2015 27,094 1.38 37,390 2016 27,804 1.38 38,370 2017 28,532 1.38 39,374 2018 29,280 1.38 40,406 2019 30,047 1.38 41,465 2020 30,834 1.38 42,551 2021 31,642 1.38 43,666 2022 32,471 1.38 44,810

(B) Cargo Traffic

Coming from the same sources as the data for passenger traffic, data on cargoes coming in and going out of Sarangani by commuter service were available only


up to 1997. In terms of metric tons, inward and outward cargoes were at the following levels for the given years:

Cargoes in Metric Tons Year Number of Ship Calls Inward Outward Total Volume

1997 292 40.97 3,223.70 3,264.67 1998 292 45.78 3,233.80 3,279.58 1999 390 49.40 3,284.33 3,333.73 2000 342 54.82 3,250.64 3,305.46 2001 384 52.63 3,326.44 3,383.07

These data show relatively stable and progressively increasing levels, so they were used as basis for projecting cargo traffic in Sarangani for the duration of the project’s life. The rates of increase of inward and outward cargoes were computed separately for the purpose, and then used to project each sector. This revealed that for the period 1997-2002, inward cargoes grew at an average annual rate of 8.48%, while outward cargoes increased at the rate of 0.8%. The projected cargo traffic for Sarangani for the project’s life is thus:

Projected Cargoes in Metric Tons

Year Inward Outward Total

Volume

2003 65.36 3,395.50 3,460.80 2004 70.90 3,422.66 3,493.56 2005 76.91 3,450.04 3,526.95 2006 83.44 3,477.64 3,561.08 2007 90.51 3,505.47 3,595.98 2008 98.19 3,533.51 3,631.70 2009 106.51 3,561.77 3,668.28 2010 115.55 3,590.27 3,705.82 2011 125.34 3,619.00 3,744.34 2012 135.97 3,647.95 3,783.92 2013 147.50 3,677.13 3,824.63 2014 160.01 3,706.55 3,866.56 2015 173.58 3,736.20 3,909.78 2016 188.30 3,766.09 3,954.39 2017 204.27 3,796.22 4,000.49 2018 221.59 3,826.59 4,048.18 2019 240.38 3,857.20 4,097.58 2020 260.77 3,888.06 4,148.83 2021 282.88 3,919.16 4,202.04 2022 306.87 3,950.51 4,257.38


(C) Ship Calls

The project eyes three categories of sea craft as potential users of the port. These are the commuter service boats that ply the Sarangani-General Santos City route; fishing vessels of the “Fuso” type that more substantially make up the fleets engaged in the tuna fishing industry; and the motorized or non-motorized bancas that the local residents use for both their municipal fishing activities and for commuting within the island group.

The commuter service boats have an average length of 17.5 meters and breadth of 4.5 meters, and average about 70 tons of gross capacity. They generally have a draft depth of 1.2 meters and require a spacing factor of about 10% of the length of their hulls.

As in the case of passenger and cargo traffic, historical data on commuter service ship calls at Mabila Port were available only up to as far back as 1997. These indicate that the port had identical 292 ship calls in the years 1997 and 1998, 390 in 1999, 342 in 2000, and 384 in 2001. The fluctuation in the number of commuter ship calls from year to year follows the pattern established by the passenger and cargo traffic in that it is determined by the general price levels of copra during the given year. This is because volume-wise, copra is the single biggest cargo item transported by the commuter service from Sarangani to General Santos City, and demand for ship calls is determined by the amount of copra, waiting to be shipped out of Sarangani.

An analysis of the passenger and cargo traffic patterns discussed above concluded that it will not be necessary for the commuter service to increase its ship calls at the Mabila Port during the life of the project. The projected cargo traffic would be peaking on the last year of the project’s life at about 11 tons per trip; while passenger traffic would peak on the same year at about 59 persons per trip. These load levels could easily be served by the present commuter service.

The commonly known Fuso type fishing vessels are actually motorized, wooden-hulled outriggers that are usually propelled by diesel truck engines with 140- to 170-horsepower rating. They have an average length of 15 meters, a breadth of 2.5 meters, and about 30 tons of gross capacity. Their outriggers span an average of 11 meters from float to float (i.e., katig). They usually have a draft depth of 1 meter and require a spacing factor of about 12% of their outriggers’ wingspan. These vessels are usually denominated as “fishing boats” or “F/Bs” in their registration papers with the MARINA.

The study’s survey and separate informal interviews among fishermen determined that an estimated 2,035 Fuso type fishing vessels were engaged in Southern Mindanao’s tuna fishing industry in 2001. It was also determined that an overwhelming majority of these vessels (i.e., 27 out of 31 respondents or 87%) docked at Sarangani in the course of a fishing trip. The leading reasons given for such dockings were (a) shelter from bad weather (24 of 27); (b) re-provisioning of ice supply (20); (c) re-provisioning of food supply (17); and (d) re-provisioning of


fuel supply (16). Barangay Patuco was the main docking point, with 23 of the 27 docking respondents making the cove-encased barangay their regular stopover.

When asked in the same survey whether an improved Mabila Port represents a strategic importance to their fishing operations, 30 of the 31 respondents replied in the affirmative. The leading uses they saw for the port were (a) for provision/re-provisioning of ice supply (30 of 30); (b) shelter from bad weather (30); (c) for provisioning/re-provisioning of fuel supply (29); and (d) for provisioning/re-provisioning of food supply (25). They also identified vessel repair (17) and rest and recreation (16) as possible roles for the port.

Projecting the growth of the Fuso type fishing vessels was a problem for the study. Historical data on this type of vessel are virtually inexistent because few operators bother to register their units and the MARINA seems to neglect enforcing the registration requirement.

While the rate of growth of the Fuso type vessel could not be determined with certainty, calculations made by the study from observations intimated by industry players indicate that this has been dramatic. From an estimated 267 units in 1992, this popular craft had ballooned to 2,035 in 2001, for an average increase of 177 units annually. Since these figures are all estimates, the study did not use them for projection purposes. It was decided instead that the commercial fishery production levels of South Cotabato, which is almost entirely represented by the tuna fishing industry based at General Santos City, be used as proxy indicator. This assumes that there is direct correspondence between the growth of the commercial fishery sector and that of the Fuso vessels.

The resulting analysis indicated that the Fuso sector may have grown at the geometric rate of 27% from 1995 to 2000. Applied to project the growth of the craft, it was determined that this vessel type would number around 3,007 in 2003 and 8,382 in 2022. Below is the projection for this type of fishing vessel during the project’s life.

The motorized passenger outrigger bancas are usually driven by 16-horsepower in-board, gasoline-fueled engines. They have an average length of 8 meters and breadth of 0.80 meter, and average about 8 gross tons. They usually have a draft depth of 0.45 meter. They do not require a spacing factor because of their relative lightness, which does not expose them as a risk to similar vessels.

Smaller motorized as well as non-motorized bancas are used as regular means of transportation within the island group. They regularly use the present piers at Poblacion Mabila for docking and parking purposes, and are expected to continue to avail of these amenities once the project is implemented.


Target Cients

Year

Projected Number of

Fishing Vessels

Sarangani-Based

GSC-Based Total

2003 3,007 3 2,914 2,917 2004 3,601 4 3,489 3,493 2005 4,312 5 4,178 4,183 2006 5,164 6 5,003 5,009 2007 6,183 7 5,991 5,998 2008 6,307 8 6,110 6,118 2009 6,432 10 6,229 6,239 2010 6,561 12 6,352 6,364 2011 6,693 14 6,478 6,492 2012 6,827 17 6,605 6,622 2013 6,963 20 6,734 6,754 2014 7,102 24 6,865 6,889 2015 7,244 29 6,998 7,027 2016 7,389 35 7,132 7,167 2017 7,539 42 7,271 7,313 2018 7,688 50 7,407 7,457 2019 7,844 60 7,549 7,609 2020 7,998 71 7,687 7,758 2021 8,158 86 7,827 7,913 2022 8,382 103 8,028 8,131

Assumption: 97% potential patronage based on primary survey result.

(D) Past Productivity & Capacity

Berth Gross Productivity of Total Cargo

The following cargo productivity levels were estimated for the Port of Mabila for the period 1997-2001:

Year Cargo

Volume (MT)

Service Time (Hrs)

Productivity (MT/Hr)

1997 3,265 1,008 3.24 1998 3,280 1,008 3.25 1999 3,334 1,344 2.48 2000 3,305 826 4.00 2001 3,383 1,344 2.52


Berth Occupancy & Capacity

From past record, the average lengths of the commuter service plying the Sarangani-General Santos City Route have been 16.25 meters in 1997 and 16.75 meters in 2001. They required a spacing factor of 10% of vessel length. Based on the approximate berth length of 18 meters, the Port of Mabila had a capacity of only one berth from 1997 to 2001, as follows:

Year Average

Length of Vessel

Length per

Berth

Number of Berths

1997 16.25 18 1 1998 16.30 18 1 1999 16.10 17 1 2000 16.75 18 1 2001 16.75 18 1

During the same period, the maximum berth time recorded in the port was 2,880 hours sometime in 1999. This corresponded to a berth occupancy rate of 46.67%. Following is Mabila Port’s highest berth occupancy records for the years 1997 to 2001:

Year Service Time (Hrs)

Maximum Berth Time

(Hrs)

Berth Occupancy

Rate

1997 1,008 2,304 43.75% 1998 1,008 2,160 46.67% 1999 1,344 2,880 46.67% 2000 826 1,770 46.67% 2001 1,344 2,688 50.00%

Port Capacity

The existing Port of Mabila has 2 berth spaces with a total length of 17 meters, but sufficient enough to handle 2 vessels at a time, hence, a longer berth time for another vessel is provided, thus:


Capacity per Berth Total Capacity

Year Allotted Berth

Occupancy

Maximum Time (Hrs)

Allotted Time (Hrs)

Capacity Number of Berths

Total Capacity

1997 0.4375 8,760 3,832.50 12,417.30 1 12,417.30 1998 0.4667 8,760 3,832.50 12,455.63 1 12,455.63 1999 0.4667 8,760 3,832.50 9,504.60 1 9,504.60 2000 0.4667 8,760 3,832.50 15,330.00 1 15,330.00 2001 0.5000 8,760 4,380.00 11,037.60 1 11,037.60

3.2.3.2 Ice Plant Component

Based on results of the survey among fishermen respondents, the typical Fuso type fishing vessel stocks an average of 80 100-kilo (or 8 tons) ice blocks for each fishing trip that lasts all of 21 days. These fishing vessels average one fishing trip per month or 12 fishing trips in a year. As discussed above, there were an estimated 2,035 of these fishing vessels in 2001 that were based in both General Santos City and Sarangani. This meant that the sub-market demanded a total of 162,800 pieces of the 100-kilo ice blocks per month, or 1,953,600 pieces for the year.

When the Municipality of Sarangani drafted its Municipal Comprehensive Development Plan (MCDP) in 1995, its leadership determined that the local economy, which mainly relied on its copra produce and fishing output, could be pump-primed with the infusion of a substantial infrastructure project, preferably one that includes an income-generating or livelihood-enhancing component. This conclusion was affirmed when the local government went into the formulation and eventually adopted its Local Poverty Alleviation Plan (LPAP) in 2000. The enormous demand for ice blocks by the tuna fishing industry, coupled by the strategic location of Sarangani relative to General Santos City, presented Sarangani’s local government with the ideal economic enterprise option that could complement the long-envisioned improvement of its port structure.

3.2.3.3 Warehouse Component

Demand for the project’s warehouse component was estimated based on the present port’s cargo throughput. The above-described cargo turnover, for instance, translates into a five-year annual average of 7,150 cubic meters of demand for storage space between 1997 and 2001. For the rest of the project’s life, the following cargo turnover projections are estimated:


Projected Volume of Cargoes

(Cubic Meters) Year Inward

Cargoes Outward Cargoes

Total Unloaded at

Port

Total Number of Sacks

@ 0.108 cubic meter/sack

2003 141.18 7,334.28 7,475.46 69,217.22 2004 153.14 7,342.95 7,496.09 69,408.24 2005 166.13 7,452.07 7,618.20 70,538.89 2006 180.23 7,511.70 7,691.93 71,221.57 2007 195.50 7,571.82 7,767.32 71,919.63 2008 212.09 7,632.38 7,844.47 72,633.98 2009 230.06 7,693.42 7,923.48 73,365.56 2010 249.59 7,754.98 8,004.57 74,116.39 2011 270.73 7,817.04 8,087.77 74,886.76 2012 345.62 7,879.57 8,225.19 76,159.17 2013 318.60 7,942.60 8,261.20 76,492.59 2014 345.62 8,006.15 8,351.77 77,331.20 2015 374.93 8,070.19 8,445.12 78,195.56 2016 406.73 8,134.75 8,541.48 79,087.78 2017 441.22 8,199.84 8,641.06 80,009.81 2018 478.63 8,265.43 8,744.06 80,963.52 2019 519.22 8,331.55 8,850.77 81,951.57 2020 563.26 8,398.21 8,961.47 82,976.57 2021 611.02 8,465.39 9,076.41 84,040.83 2022 662.83 8,533.10 9,195.93 85,147.50

For purposes of simplification, the standard 50-kilogram copra sack is adopted as an alternative unit of measurement, and is assumed as the project’s fee-chargeable warehouse commodity. Copra is the municipality’s main agricultural output, which it produces at the rate of about 24,500 metric tons annually.

The foregoing figures, however, do not totally reflect the municipality’s demand for warehouse space. Interviews with local officials, copra farmers and businessmen involved in the copra trade, as well as actual observations made by the study team indicate that the bigger bulk of the town’s copra output is not shipped out through the Mabila Port. Some copra farmers use large outrigger pump-boats and similar vessels to ship their copra produce directly to General Santos City. This practice comes naturally for an island municipality, 11 of a total 12 of whose barangays are coastal.

Aside from the straight-out transport of their copra, other farmers or communities enjoy the privilege of special pick-ups for their copra cargo courtesy of the commuter service during the latter’s outward trip to General Santos City. This practice makes the normal 8-hour trip a 12-hour agony for paying passengers in many, many instances. These copra volumes that are


shipped out directly are not accounted for in terms of their demand for warehouse space at Mabila.

3.3 Demand and Supply Gaps

3.3.1 Passenger and Cargo Traffic Pressure on the Existing Mabila Port

Pressure on a port’s capacity to handle client demand mainly tests (a) its ability to accommodate docking boats in its berthing space/s, and (b) its ability to service passenger and cargo movement so that a docking boat’s turnaround time is constantly held to a minimum. Such pressure, however, is exerted on a port depending on its attractiveness or importance in terms of drawing ship calls from client vessels.

For Sarangani without the project, the attractiveness of its port essentially lies in its passenger and cargo markets’ demand for the commuter service to General Santos City. But this is not a significant market, altogether averaging no more than 12 metric tons per ship call during the life of the project, when in fact the vessels servicing the route could take in an estimated maximum load of up to 40 metric tons apiece.

Clearly then, as far as the commuter service to Sarangani is concerned, it is unlikely that the number of ship calls at the present port is going to increase over the life the project, except for seasonal fluctuations attributable to travel and cargo patterns that are dictated by copra prices, as already discussed above. For this reason, no capacity improvement or development would be warranted for the Mabila Port during the life of the project if this were to be based on passenger and cargo pressure alone.

Presented below is the projected combined passenger and cargo load per ship call during the project’s life. The outward loads for both passenger and cargo were used because the more voluminous levels for both factors have been observed in this traffic direction.


Projected Traffic Levels Average Outward Load

per Ship Call (MT)

Year Outward Cargoes

(MT)

Outward Passengers

Ship Calls

Outward Passengers

per Ship Call

Passengers* Cargoes Total

2003 3,395.50 5,536 384 14 1.79 8.84 10.63 2004 3,422.66 13,747 384 36 1.84 8.91 10.75 2005 3,450.04 14,106 384 37 1.88 8.98 10.86 2006 3,477.64 14,477 384 38 1.93 9.06 10.99 2007 3,505.47 14,855 384 39 1.99 9.13 11.12 2008 3,533.51 15,245 384 40 2.04 9.20 11.24 2009 3,561.77 15,644 384 41 2.09 9.28 11.37 2010 3,590.27 16,055 384 42 2.15 9.35 11.50 2011 3,619.00 16,475 384 43 2.20 9.42 11.62 2012 3,647.95 16,907 384 44 2.26 9.50 11.76 2013 3,677.13 17,349 384 45 2.32 9.58 11.90 2014 3,706.55 17,804 384 46 2.38 9.65 12.03 2015 3,736.20 18,271 384 48 2.44 9.73 12.17 2016 3,766.09 18,749 384 49 2.50 9.81 12.31 2017 3,796.22 19,201 384 50 2.57 9.89 12.46 2018 3,826.59 19,745 384 51 2.64 9.97 12.61 2019 3,857.20 20,262 384 53 2.71 10.04 12.75 2020 3,888.06 20,793 384 54 2.78 10.13 12.91 2021 3,919.16 21,337 384 56 2.85 10.21 13.06 2022 3,950.51 21,896 384 57 2.93 10.29 13.22

* Assumed at 50 kgs. average per passenger

Having determined that there will be no need for any increase in the number of ship calls for the commuter service over the project’s life, the study assumes the same constancy in the number of berths that the Mabila Port must be able to provide to the commuter service for the next 20 years. Accordingly, since the present piers at Mabila have been able to provide more than the required number of berths, there will be no need to increase these over the life of the project, as follows:

Ship Calls Number of Berths Years Per Year Per Day

Capacity Per

Berth Required Provided

2001 384 1.33 6 0.22 1

2003 -2022 384 1.33 6 0.22 1


3.3.2 Mabila Port’s Attractiveness to Fishing Vessels

The 2,035 Fuso vessels engaged in the tuna fishing industry represent a huge clientele just waiting to be served by a port facility that is able to satisfy their need for certain amenities. Out of the 31 respondents surveyed by the study, 27 said that they regularly docked at certain places in Sarangani in the course of each fishing trip. These 27 respondents represented operators of 92% of the 242 vessels covered by the survey. Assuming that this proportion is representative of the whole market, then approximately 1,872 of these vessels dock in Sarangani each month.

Twenty-three or 85% of those which docked at Sarangani chose Barangay Patuco as their regular landing point. This barangay’s coastline is located in a deep indention in the island of Sarangani, thus providing substantial protection to the vessels. These vessels generally shun the port at Mabila because its waters do not have favorable draft depth and navigating toward it is therefore a tricky exercise, especially during low tide.

Curiously, when asked about the usual reason or purpose for their docking at Sarangani, 20 of the 27 respondents said that it was for re-provisioning of their ice supply. While nowhere in Sarangani is ice produced, informal interviews revealed that it has become common practice for these vessels to trade or sell their excess ice supply among themselves because General Santos City is a long way back for those vessels short in their ice supply.

Very significantly, 30 or 97% of the aforesaid 31 total respondents indicated their willingness to make Mabila Port their regular docking station if the same is developed or improved to make navigation there safer. These respondents were asked what amenities or functions they preferred this port to play, and the leading responses were:

(a) shelter from bad weather (30 respondents); (b) provisioning/re-provisioning station for their ice supply (30); (c) provisioning/re-provisioning station for their fuel supply (29); (d) provisioning/re-provisioning station for their food supply (25); (e) shelter for vessel repairs (17); (f) haven for rest and recreation (16).

If this market were to be attracted to Mabila Port, parking slots will have to be provided at the rate of 66 vessels per day at present levels.1 In such case, Mabila Port must be expanded or improved to accommodate the influx, granting that the same is also able to provide any or all of the above amenities.

Based on the growth projections for the Fuso type vessel, this sub-market alone would require about 780 thousand metric tons of block ice annually by 2022. The rest of the projection results are presented below.

1 That is, 97% of 2,035 is 1,974 or an average of 66 dockings per day.


Year

Projected Number of

Fishing Vessels

Target Cients

Ice Requirement

(MT)

2003 3,007 2,917 280,012 2004 3,601 3,493 335,325 2005 4,312 4,183 401,533 2006 5,164 5,009 480,872 2007 6,183 5,998 575,761 2008 6,307 6,118 587,308 2009 6,432 6,239 598,948 2010 6,561 6,364 610,960 2011 6,693 6,492 623,252 2012 6,827 6,622 635,730 2013 6,963 6,754 648,395 2014 7,102 6,889 661,338 2015 7,244 7,027 674,561 2016 7,389 7,167 688,064 2017 7,539 7,313 702,032 2018 7,688 7,457 715,907 2019 7,844 7,609 730,433 2020 7,998 7,758 744,774 2021 8,158 7,913 759,673 2022 8,382 8,131 780,532

Assumptions: a) 97% potential patronage based on primary survey

result. b) 96 metric tons average volume of ice required per

fishing vessel annually based on primary survey result.

c) 0.537 kilo per capita ice requirement for domestic uses annually.

3.3.3 Block Ice Supply Deficiency

All Fuso type vessels engaged in the tuna fishing industry that operate out of Sarangani and General Santos City procure their ice supply in the latter because no alternative source caters to this need. This has caused losses among fishermen in terms of ice shrinkage because of the long journey. The distance from General Santos City to the fishing ground ranges from 400 to 600 nautical miles. On the average, travel time to this fishing ground is 168 hours or 7 days. According to the fishermen respondents of the study, approximately 10% of their ice supply is lost during this trip. This is why, as already discussed, the primary strategic role that these fishermen see for Sarangani, aside from serving as their shelter in times of bad weather, is that it could bring their ice source nearer to their fishing ground.


Estimates of current demand and supply of block ice in General Santos City indicate that there is abundant surplus in terms of annual aggregate levels (see below). But interviews with the study’s fishermen respondents revealed that many of the vessels have to queue for about 2-3 days on the average before they can secure their ice requirements. At least two reasons are given to explain this:

(a) Most of the ice plants have a 48-hour freezing cycle for the 100-kilo block ice that the tuna fishing industry requires; and

(b) Majority of the ice plant operators are themselves the fishing industry leaders, and their own vessels, which are considerably larger than the Fuso type, get priority in the ice queue.

Demand for Block Ice Year Fishing

Vessels Domestic

(Sarangani)

Total Demand

Supply of Block

Ice (GSC)

Surplus (Deficit)

1992 2,563 8 2,571 161,280 158,709 1993 3,197 8 3,205 161,280 158,075 1994 3,984 8 3,992 161,280 157,288 1995 4,963 8 4,972 161,280 156,308 1996 6,182 9 6,191 290,304 284,113 1997 7,709 9 7,718 290,304 282,586 1998 9,610 9 9,619 290,304 280,685 1999 11,971 9 11,981 338,688 326,707 2000 14,918 10 14,928 338,688 323,760 2001 18,586 10 18,596 338,688 320,092 2002 19,536 10 19,546 370,944 351,398

Assumptions: a) 10 units of ice plants with an average capacity of 40 tons are

available in General Santos City from 1992 to 1995; 18 units from1996 to 1998; 21 units from 1999 to 2001; and 23 units in 2002.

b) 0.537 kilogram per capita ice requirement for domestic uses annually based on 2002 actual consumption.

Considering the size of the industry, the economic implication of the 2-3-day queuing period could be colossal. This will be quantified and discussed in the Economic Analysis in Chapter 6.

The prolific growth of the Fuso vessel market, however, indicates that a deficiency will be experienced in the block ice supply as far as the General Santos City sources are concerned, starting in the year 2005 and all through the life of the project. This will be the scenario even assuming that one 60-ton ice plant will be constructed in the city every 5 years, as presented below.


Projected Demand for Ice (MT) Year

Sarangani (Domestic)

Fishing Vessels Total

Projected Supply (GSC)

Projected Surplus (Deficit)

2003 11 280,012 280,023 370,944 90,921 2004 11 335,325 335,336 370,944 35,608 2005 11 401,533 401,545 370,944 (30,601) 2006 12 480,872 480,883 370,944 (109,939) 2007 12 575,761 575,773 370,944 (204,829) 2008 12 587,308 587,320 387,072 (200,248) 2009 12 598,948 598,960 387,072 (211,888) 2010 13 610,960 610,973 387,072 (223,901) 2011 13 623,252 623,265 387,072 (236,193) 2012 13 635,730 635,744 387,072 (248,672) 2013 14 648,395 648,408 403,200 (245,208) 2014 14 661,338 661,352 403,200 (258,152) 2015 15 674,561 674,576 403,200 (271,376) 2016 15 688,064 688,078 403,200 (284,878) 2017 15 702,032 702,047 403,200 (298,847) 2018 16 715,907 715,922 419,328 (296,594) 2019 16 730,433 730,449 419,328 (311,121) 2020 17 744,774 744,790 419,328 (325,462) 2021 17 759,673 759,690 419,328 (340,362) 2022 17 780,532 780,549 419,328 (361,221)

Assumptions: a) A total of 23 units 60-ton capacity ice plants will be in place in

General Santos City in 2003. b) An average of one 60-ton capacity ice plant will be constructed in

General Santos City every 5 years.

In view of the fact that block ice is a market-tradable commodity, and its profitability as a business prospect is anticipated to be high, the establishment of the project’s ice plant component should be left to the initiative of the private sector. Moreover, its tendency to compete with similar businesses in General Santos City, which are mostly run by private capital, calls on government to provide for the most level playing field possible, primarily by avoiding direct involvement in such venture.

3.3.4 Mabila Port’s Warehouse Capacity Requirement

The present piers at Mabila do not offer its clients any warehouse facility. This service is only provided de facto by copra traders as a necessary function of the business in which they are engaged. The study had a survey made to account for all such facilities in Mabila, which were usually just extensions of the traders’ own houses, where they usually conduct their copra-buying businesses. This revealed the following number and estimated capacities, including the years when these capacities were established:


Traders’ Warehouses

Year Cumulative Number

Cumulative Capacity (cu.m.)

1993 1 144 1994 1 144 1995 1 144 1996 1 144 1997 4 524 1998 4 524 1999 4 524 2000 4 524 2001 4 524 2002 5 810

Against these warehouse capacities, the study examined the past and present demand satisfaction levels based on the estimated cargo traffic during the given years. Since the cargo traffic data represent annual aggregates for the indicated years, it was assumed that warehouse inventories are cleared out each time the commuter service makes a ship call.

Past & Present Capacity Demand-Supply for Warehouse

Mabila, Municipality of Sarangani, in square meters

Year Warehouse Capacity

Total Cargo Volume

Number of Ship

Calls

Demand for Capacity

Between Ship Calls

Capacity Surplus

1998 524 7,052 292 24 500 1999 524 7,084 390 18 506 2000 524 7,201 342 21 503 2001 524 7,140 384 19 505

From the foregoing numbers the study determined that warehouses at Mabila had always exceeded the warehouse space demanded at any given time in the past, at an average surplus of 504 square meters.

The study then examined the availability of this capacity for the duration of the project’s life, applying the projected cargo volume and ship calls for the period. The capacity was projected this time using the actual capacity observed for 2002, which was 810 square meters.


Year Warehouse Capacity

Total Cargo Volume

Number of Ship

Calls

Demand for Capacity

Between Ship Calls

Capacity Surplus

2003 810 7,475 384 19 791 2004 810 7,496 384 20 790 2005 810 7,618 384 20 790 2006 810 7,692 384 20 790 2007 810 7,767 384 20 790 2008 810 7,844 384 20 790 2009 810 7,923 384 21 789 2010 810 8,005 384 21 789 2011 810 8,088 384 21 789 2012 810 8,225 384 21 789 2013 810 8,261 384 22 788 2014 810 8,352 384 22 788 2015 810 8,445 384 22 788 2016 810 8,541 384 22 788 2017 810 8,641 384 23 787 2018 810 8,744 384 23 787 2019 810 8,851 384 23 787 2020 810 8,961 384 23 787 2021 810 9,076 384 24 786 2022 810 9,196 384 24 786

The same huge margin of surplusage was seen for warehouse capacity during the project’s life. This would normally indicate the local community’s ability to provide for their warehousing needs for the duration of the project’s life. However, local officials and businessmen insist that a substantial portion of the municipality’s copra output that is directly out-shipped to General Santos City from the barangays as discussed in section 3.2.3.3 above, would likely be shipped through Mabila if its port were less tricky to navigate. Because of this disincentive to commercial navigation, copra traders in Mabila cannot offer a high buying price relative to that offered at General Santos City, since they have to pay a high premium for the transport of their copra to the latter.

The strong representation made by local officials and businessmen about a projected need for warehouse capacity once the Mabila Port is improved may have to be heeded. The warehouse is a structure that is essential to any port facility. The structure could be built as an incident of the port development project.


3.3.5 Other Economic Opportunities

The tremendous clamor by the study’s fishermen respondents for a forward source for fuel and food provisions in Sarangani presents the local community with great possibilities for economic and livelihood activities. The average Fuso vessel consumes about 4,000 liters of diesel fuel per fishing trip. The project’s development of Mabila Port, on the other hand, would allow it to accommodate 150 parking vessels per month. If each of these 150 projected callers were to replenish even just 10% of their fuel requirement at Sarangani during each trip, diesel retailing would be a P13 million-per-annum industry in Sarangani at the current selling price of P18 per liter!

Other areas with strong client demand based on the study’s surveys are wholesale and retail of foodstuff, motor parts supply for vessel repairs, and entertainment houses.

3.4 Marketing Plan

3.4.1 Project Outputs

The project’s development interventions include the development of the existing port at Mabila so that navigation toward it is made safer and multiple parking slots are made available for vessels engaged in the tuna fishing industry; and the establishment of an ice plant within the port complex that will provide for the block ice requirements of the same industry. The development of the port will be realized through public appropriation, while the ice plant venture will be offered for undertaking by private capital.

The project’s client-usable outputs may be classified under two general categories, namely, (a) port services and (b) ice blocks. The following shall constitute the port services that will be provided by the project:

(a) passenger terminal facility (b) warehouse services (c) berthing spaces for passenger and cargo ships (d) berthing/parking spaces for fishing vessels (e) offshore anchorage (f) cargo handling services (g) food stall spaces (h) public toilets

The port is proposed to be operated by the Philippine Ports Authority and user charges will be collected for most port services. Only non-profit commuter pump-boats and bancas will be exempt from payment of docking and parking charges.


The block ice outputs of the project shall cater primarily to the requirements of the tuna fishing industry and secondarily to the minimal domestic requirements of Sarangani’s local community.

3.4.2 Product Pricing & Projected Revenues

The project’s proposed revenues come under two classifications, public revenues and private revenues. All revenues generated from port services accrue to the government and constitute the project’s public revenues. Income generated by the ice plant component represents the project’s private revenues and accrue exclusively to the investor in the ice plant venture.

The ice plant component will produce two product lines, namely: (a) the 100-kilogram ice block, which is mainly targeted at the fishing vessel market; and (b) the crushed ice, which will serve the domestic needs of Sarangani’s local community. These will be uniformly sold at P115 per block.

The public fees and charges will conform to current levels and regulations of the Philippine Ports Authority, which is the proposed implementing agency and operator of the multi-purpose port complex facility. The following fee structure is proposed for the indicated port services:

Revenue Source Tariff Assumptions &

Applicability A. Berthing Fee Passenger Vessels Cargo Vessels

P150.00 – first 5 hours P40.00/hour – succeeding hours P130.00 – first 5 hours P35.00/hour – succeeding hours

Commuter service plying the Sarangani- GSC route Average berthing duration – 1 day per ship call All other sea craft that ferry passengers and cargo for profit Average berthing duration – 2 days per ship call

B. Passenger Terminal

Fee

P2.00

All outward passengers

C. Cargo Handling Fee

P0.50/sack

Use of port equipment


Revenue Source Tariff Assumptions &

Applicability D. Warehouse Storage

Fee

P1.00/sack

70% of all cargo unloaded at the port is stored in the warehouse for an average of 1 day The 50-kilogram (0.108 cu m) copra sack is the adopted charging unit

E. Parking Fee

P50.00/day

All vessels engaged in commercial fishing Average parking duration – 2 days per vessel

F. Anchorage Fee Passenger Vessels Cargo Vessels

P50.00/day P40.00/day

All passenger and cargo vessels dropping anchor in the channel between Balut & Sarangani Islands Average anchorage duration – 1 day per vessel

G. Land Rental - Ice

Plant

P27,720.00/month

Rental for the 792 sq. meter land occupied by the ice plant, computed at P35.00 per sq. meter per month

H. Stall Space Rental

P2,000.00/stall/month

Stall spaces measuring 3 m x 3 m each will be available for lease to tenants offering food & other consumer services within the port complex Projected occupancy rates – 40% during the first year of operations; average of 80% for the remainder of the project life

I. Public Restrooms Urinal Toilet Bath

P1.00/person/use P2.00/person/use P5.00/person/use

The project’s projected revenues from each of these sources are presented in Annex 3-A.


3.4.3 Marketing Strategy

3.4.3.1 The Need for a Two-Stage Marketing Strategy

With the project’s emergence as an intervention package that requires private sector participation, its stakeholder acceptability will be tested long before it is even implemented. Finding the capable private sector partner for the project’s ice plant component will be its initial big test. If the project hurdles this and progresses on to be implemented, it has to come up with a client-attraction package so that it is able to reach its intended beneficiaries.

In view of this, the project’s marketing strategy should, at the minimum, provide for distinct action plans for its pre- and post-implementation stages. The pre-implementation strategy should focus on finding a private sector capitalist-partner who will be willing to put up the project’s ice plant component. The post-implementation strategy will center on efforts that will create the environment that will allow the project to realize its benefit potentials as they have been identified in this study.

3.4.3.2 A Suggested Pre-Implementation Marketing Strategy

As pointed out above, the singular objective of the project’s pre-implementation efforts is to identify and attract a private sector investor for its ice plant component. A couple of critical local issues needs to be initially addressed here, namely, the municipality’s need for a steady supply of electricity and its lack of a reliable source for potable water. These utilities happen to be an ice plant’s two main inputs. Because of these concerns, the responsibility for the project’s pre-implementation marketing appears to fall heavily on Sarangani’s local officials.

The suggested strategy, therefore, is for the local government to form a team of local officials, preferably led at the very least by a member of the Sangguniang Bayan. It will be tasked to sell the idea of investing in an ice plant project in Sarangani. A list of candidates will be drawn up for this purpose. This list may give priority to Sarangani locals who have a stake in the fishing industry. Failing in this, the invitation may then be extended to General Santos City-based fishing industry stakeholders, particularly those who are already into the ice plant business, and so on.

The prospects may then be visited by the team of local officials and offered the opportunity to be the LGU’s partner-investor. They will be shown a copy of this feasibility study report and given a presentation that will highlight the project component’s favorable feasibility indicators. Preferably, the local team will also show them a certification from the PPA (or the final implementing agency), to the effect that the other component of the project has been funded and indicating the timetable for its implementation. This personal call approach may be employed until a private investor is finally secured for the project.


3.4.3.3 A Suggested Post-Implementation Marketing Strategy

Once the project is implemented and all of its components are in place, the project will be marketed generally through a word-of-mouth strategy. The demand for the facilities and services that it offers gives good reason for a minimalist approach to marketing the project. The following marketing tools are nonetheless recommended:

(a) Flyers and leaflets – The formal surveys conducted by the study gave the project a database starter especially on its fishing vessel market. This market information (e.g., respondents’ names and addresses) could be used for sending out personal notices, flyers, leaflets and handbills to the ice pant component’s potential customers.

(b) High-frequency radio service – The project’s distance from the bulk of its targeted market requires it to put up and maintain a dependable communication system by which clients can reach the project. At present Sarangani is beyond the reach of the conventional telephone. As the project’s principal draw and provider of a critical industry commodity, the ice plant component should invest in a suitable communication equipment or service. Project site conditions indicate that at the minimum, this should include a high-frequency radio equipment. Most Fuso type fishing vessels are equipped with this type of equipment and through this, clients can place and pre-validate orders without compromising their fishing venture plans.

3.5 Summary of Findings & Conclusions

The foregoing analyses have given the study sufficient basis for the following findings and conclusions:

3.5.1 Most vessels engaged in the tuna fishing industry, especially those operating out of General Santos City and Glan in the Province of Sarangani, traverse the waters of the Sarangani island group on their way to the common fishing grounds in the Celebes Sea just off the country’s border with the Republic of Indonesia.

3.5.2 Passenger and cargo projections for the Mabila Port indicate that there is no need for any capacity development for the port during the proposed life of the project. However, the Fuso vessel sub-market, estimated to number about 2,035 in 2001 and constituting a very substantial portion of all vessels engaged in the tuna fishing industry, has overwhelmingly indicated a willingness to patronize an improved Mabila Port, provided that it is able to cater to their needs for block ice, fuel, food supply, and entertainment. When combined with an ice plant component, therefore, the improvement of the port exhibits bright promise of a multiplier result for the local economy.


3.5.3 Any port improvement project at Mabila should address the vessel operators’ foremost concern for navigational safety. The development should also provide for adequate berthing/parking facilities especially for the Fuso type fishing vessel.

3.5.4 If the Mabila Port is developed, public revenues may be generated from the following sources:

(a) Berthing fee (b) Passenger terminal fee (c) Cargo handling fee (d) Warehouse storage fee (e) Parking fee (f) Anchorage fee (g) Land rental (ice plant site) (h) Stall space rental (i) Public restrooms

3.5.5 If an ice plant is established in Mabila and produces 100-kilogram ice blocks, 97% of the Fuso vessel sub-market is willing to regularly patronize it, even if it sells ice at a 20% premium over the prevailing prices in General Santos City. However, in view of the fact that block ice is a market-tradable commodity, and its profit prospects are bright, the establishment of the project’s ice plant component should be left to the initiative of the private sector. Moreover, its tendency to compete with similar businesses in General Santos City, which are mostly run by private capital, calls on government to provide for the most level playing field possible, primarily by avoiding direct involvement is such venture.

3.5.6 Cargo volume projections indicate that there is a prevailing surplus in warehouse capacity at Mabila which is likely to continue throughout the proposed life of the project. This normally indicates the local community’s ability to provide for their warehousing needs for the duration of the project’s life. However, local officials and businessmen have pointed out that much of the municipality’s copra output that is directly out-shipped to General Santos City from the barangays would likely be shipped through Mabila if its port were less tricky to navigate. Because of this disincentive to commercial navigation, copra traders in Mabila cannot offer a high buying price relative to that offered at General Santos City, since they have to pay a high premium for the transport of their copra to the latter. It is emphasized that this rather huge portion of the municipality’s copra output is unaccounted for in the study’s demand-supply analysis for warehouse capacity.

The strong representation made by local officials and businessmen about a projected need for warehouse capacity once the Mabila Port is improved may have to be heeded. The warehouse is a structure that is essential to any port facility. The structure could be built as an incident of the port development project.


3.5.7 The attractiveness of a developed Mabila Port among fishing vessels would depend on the amenities it can offer or fishermen’s needs it can satisfy. Foremost among these needs are ice, fuel and food supply. On the other hand, the project’s ice plant component may not, by itself, be attractive to the same fishing vessels if the navigational hazards posed by an unimproved Mabila Port are not eliminated or significantly reduced. Within this limited context, it may be concluded that the exclusive pursuit of either the multi-purpose port component alone or the ice plant component alone, would be an untenable proposition.

3.5.8 If the project is realized, the anticipated influx of fishing vessels will bring about a parallel demand for other fishing industry incidentals, such as diesel fuel supply, the wholesale and retail of foodstuff, motor parts for vessel repairs, and entertainment houses that could provide relief to fishermen seeking shelter from bad weather in the island. Some of these economic undertakings have potential as multi-million-peso-per-annum industries for Sarangani. The others, at the minimum, represent continuing livelihood opportunities.


Chapter 4 TECHNICAL ASPECT

4.1 The Project

The proposed infrastructure support to the economic program of Sarangani project has two major components, namely: a) development of the port; and, b) construction of ice plant. The development of the port will include the extension and improvement of the two existing causeways adjoining each other to accommodate more number and bigger cargo and fishing vessels. It will require reclamation of approximately 3,590.5 square meters of the foreshore situated between the two existing causeways. Pier and wharf structures will be constructed to separate the berthing area for cargo/passenger and fishing vessels as shown in the site development plan Figure 4.14 Other port facilities will also be put up to provide full port services to the public such as a warehouse for storing the outgoing and incoming cargoes, stalls, administration building, passenger terminal and toilets. The second component is the construction of 40-ton capacity ice plant to provide ice requirements of the fishermen, which at present buy their ice in Gen. Santos City. The proposed ice plant can produce 320 blocks of ice daily with an average weight of 100 kilograms per block.

4.2 Project’s Location Natural Physical Attributes 4.2.1 Geographic Location

The proposed project will be located in Mabila, Balut Island, Sarangani, Davao del Sur, approximately 4 to 5 hours by boat from General Santos City or an equivalent distance of 49.84 nautical miles. (Figure 4.1)

4.2.2 Meteorological Condition 4.2.2.1 Climate/Rainfall

The municipality of Sarangani belonged to Type IV climate wherein there is no pronounced dry or wet season. Rainfall is evenly distributed throughout the year. The weather is relatively fair from December to June and while good weather prevails in the months of July to October. The average recorded annual rainfall was 123 mm. Figure 4.2 shows the climate map of the Philippines.

Technical Aspect 4-1

4.2.2.2 Wind

The winds in South Cotabato-Sarangani-General Santos and Sarangani Bay areas recorded by PAGASA generally blows from the south with a mean velocity of 2 meters per second occurring from the April to November. Wind direction that blows from the north occurs in the months of December to March, as shown in the table below.

CLIMATOLOGICAL NORMALS

STATION : 851 – GENERAL SANTOS CITY LATITUDE : 06”07’ N LONGITUDE : 125* 11* E PERIOD : 1961-1995

TEMPERATURE DEG. C WIND MONTH RAINFALL (MM) MAX MIN MEAN DIR SPD/MPS

JANUARY 72.4 32.9 21.9 27.4 N 2 FEBRUARY 67.2 33.1 22.1 27.6 N 2 MARCH 43.8 33.9 22.2 28.1 N 2 APRIL 52.4 34.1 22.7 28.4 S 2 MAY 73.6 33.0 23.0 28.0 S 2 JUNE 118.3 31.8 22.5 27.1 S 2 JULY 102.2 31.3 22.2 26.7 S 2 AUGUST 82.1 31.5 22.1 26.8 S 2 SEPTEMBER 89.8 31.8 22.1 27.0 S 2 OCTOBER 104.0 32.2 22.3 27.3 S 2 NOVEMBER 83.8 32.9 22.2 27.5 S 2 DECEMBER 70.0 33.0 22.0 27.5 N 2 ANNUAL 959.6 32.6 22.3 27.4 S 2

Source: PAGASA

While the area is located outside the typhoon belt, it occasionally experienced relatively rough seas due to the east-west driven wind locally known as “Amihan”. The highest recorded wind velocity was 31 meters per second that occurred in 1976. Maximum average wind velocity, however, was recorded at 20 meter per second. The project site being part of Mindanao has a recorded 10 percent probability of typhoon occurrence for every 20 typhoons passing the Philippine territory yearly for the period of 50 years. Figure 4.3 shows the normal path of typhoons in the Philippines.

4.2.3 Temperature

The monthly temperature in Sarangani varies from 22 to 340C with an annual mean of 27-290 C. The mean temperature, however, slightly vary from the lowest of 26.40C in April to 28.10C in March. The lowest recorded temperature in the project area was 16.90C while the highest was 380C.


4.2.3 Oceanological Conditions 4.2.3.1 Tides

The tide condition in the municipality of Sarangani was roughly determined during the conduct of hydrographic survey in the project area last May 14-15, 2002. The result of the survey revealed that the Mean Sea/Tide Level (MS/TL) in the area was 1.86 meters. The Mean High Tide Level (MHTL) recorded was 2.86 meters while the Mean Low Tide Level (MLTL) was 0.86 meter. The highest tide was 2.92 meters while the lowest was 0.82 meters as shown below.

Tide Observation Results: May 14, 2002 Highest Tide Level (HTL) - 2.80 meters Lowest Tide Level (LTL) - 0.82 meters Mean Tide Level (MTL) - 1.81 meters May 15, 2002 Highest Tide Level (HTL) - 2.92 meters Lowest Tide Level (LTL) - 0.90 meters Mean Tide Level (MTL) - 1.91 meters Average Mean High Tide Level - 2.86 meters Average Mean Low Tide Level - 0.86 meters

Average Mean Tide/Sea Level - 1.86 meters 4.2.3.2 Current

Based on records presented in the study made for the expansion of Makar Wharf in General Santos City, the determined current outside Sarangani Bay was clockwise. In a close observation at the project site, the flow of current was also clockwise, originating from north (Sarangani Straight) flowing to the south towards Celebes Sea. As the current flows parallel to East side of Balut Island, is it of little concern to navigation.

4.2.3.3 Tsunamis

The location of islands of the municipality is prone to Tsunamis since tsunamiganic earthquakes often originates under the bottom of Celebes Sea. The project site, at is strategically located at the east side of Balut Island, is being protected by natural geographic barriers such as the Islet of Marorong (Villalobos Island) and the Catingan Point. Figures 4.4 & 4.5 show the distribution of Tsunami hit and risks areas in the Philippines.


4.2.4 Hydrographic Survey and Water Depths

A private survey firm commissioned by the project conducted a hydrographic Survey to determine the water level and depths on the two proposed sites for port development last May 14-15, 2002. As shown in the survey plan (Figures 4.6 & 4.7), Stations A and B (Site 1) has a total area of 4.8 hectares while Stations E, F and G (Site 2) have a total area of 5.44 hectares. The two existing pier/causeway structures are located in Site 1 while Site 2 is an alternative site identified for new construction.

As determined in the survey, the length of causeway in Station A is 56 meters while the length of the causeway located in Station B is 26 meters. Distance between the two piers (Sta. A to Sta. B) is 91.60 meters (Figure 4.8). Shown below are the location and distances of the two sites.

STATION LOCATION DISTANCE (Meters)

Sta. A to Sta. B (Existing Piers) N 5*02 421.40 Sta. A to Sta. D S 11 19 E 222.00 Sta. D to Sta. E S 1 21 W 202.00 Sta. E to Sta. F (Cover) S 82 36 W 220.00 Sta. A to Sta. F S 21 49 W 482.54 Sta. F to Sta. G S 21 32 E 212.00

Source: Hydrographic Survey

There are two sites identified as mangrove areas within the vicinity of Site 1. West side in between Station A and Station B, a total of 445 square meters of mangrove areas exist while 548 square meters of mangrove areas grown in the southern part of Station A.

Water depths at the project site vary because of the irregular coral reef formation. From the mean sea level of 1.86 meters, draft depths at Site 1 fronting the two piers ranges from a highest of –0.5 meters to a lowest of –4.5 meters (Figure 4.6).

4.2.5 Topography

The municipality of Sarangani is characterized by hilly and mountainous areas with its cost line surrounded with coral reefs. In Balut Island, slope abruptly rise by 3 to 5 degrees starting 0.5 to 1.0 kilometers inland from the shoreline. At the project site, elevation immediately rises from the shoreline starting at +0.9 meters in Station A, and +2.3 meters in Station B above the Mean Tide Level of 1.86 meters.


4.2.6 Soil and Subsoil classification

The soil condition in the area is volcanic in nature such that minerals such as igneous rocks like basalt, granite, and adobe stone are abundant. Being rich in volcanic elements, the area is suitable for agricultural purposes.

The subsoil condition at the project site is not yet determined since soil exploration will have to be conducted during the detailed engineering stage of project development.

4.2.6.1 Seismicity

The municipality of Sarangani is situated along the Circum-Pacific Seismic Belt where more than 80 percent of the world’s earthquakes occur. Based on the Seismic Zones (Figures 4.9, 4.10 & 4.11), the municipality of Sarangani falls within Zone IV which is related to the Philippine Trench Subduction Zone, dipping west, wherein most earthquake occurrences recorded ranges from shallow to intermediate focus earthquakes. The project site, however, is located near the boundary of Zones IV and V wherein earthquakes intensities are diffused due to concurrent earthquake occurrences in Cotabato Trench.

4.3 Description of Existing Port facility

There are two (2) existing permanent causeway/pier structures at the project site in Mabila. The old causeway described in hydrographic survey as Station B was constructed in 1986. It has a total length of 26 meters and a width of 3.5 meters. The new causeway marked as Station A was constructed in 1995 at a cost of P 1.0 million. It has a total length of 56 meters and a width of 3 meters. There were no permanent vertical structures exist in the port area, except for the temporary structure owned by the Coast Guard located at rear right side end of the old causeway, as shown in the picture below. The foundation of the old causeway is in deteriorating condition as portions of the riprap already washed out.

Technica

B

l Aspect

Station

4-5

The condition of the new causeway, on the hand, is as bad as the new pier as its frontage already collapsed as shown in the picture below.

Station A

4.4 Proposed Facilities and Improvement Activities The development of the port complex in Mabila will include the improvement of the port and auxiliary facilities including the establishment of an ice plant. The following facilities and major activities of the project are shown below.

1. Reclamation of foreshore Area 2. Extension of the existing causeway 3. Construction of pier structure 4. Construction of Port Stalls 5. Construction of Administration Building 6. Construction of Toilet/Bathroom 7. Construction of Passenger and Cargo Terminal 8. Construction of Ice Plant 9. Construction of Warehouse

4.5 Assessment of Alternatives 4.5.1 Location 4.5.1.1 Site of the Port

Prior to the final selection of the proposed site, an initial investigation was conducted by the project team to determine the appropriateness of each alternative location identified in the study in terms of accessibility, development cost, marketability, and preference of the local populace.


Two possible sites were identified for the project. The first identified area (Site 1) to be developed was the site where the existing port is located. This area is marked as Stations A and B reflected in the hydrographic survey. The second alternative site (Site 2) is an area 422 meters away from Station A. This area is marked as Stations E, F and G in the hydrographic survey. Initial investigation revealed that water current and wave are relatively calm in Site 2 being located in a cove. Variations on the draft depth in different locations surveyed are minimal and relatively ideal for medium size vessels. Total usable water area is 5.44 hectares. Offshore, enough area is available for the development of port facilities. However, the land is privately owned and has no existing access road. The site, using the land contour, is approximately 1.0 kilometer away from the poblacion. Selecting this site will require opening of an all weather road and acquisition of land covering a total area of more or less not less than 5,000 square meters. Site 1, on the other hand is fronting the urban center of the municipality. The people in the area currently use the two existing piers. The development of the site would be possible through reclamation of approximately 3,500 square meters of the shoreline area in between the two piers. However, the draft depth in this site varies due to coral reef formation. Reclamation likewise would affect 445 square meters of mangrove area. In consideration that the local government of Sarangani cannot fund the acquisition of the private land in Site 2 and the immediate construction of access road, it was decided by the Study Team and the local officials of Sarangani to consider Site 1 as preferred site for the project.

4.5.1.2 Site of the Ice Plant

The study identified three alternative sites where the ice plant facility could possibly be located. The first option was to locate the facility within the port area. The second option was to utilize the vacant lot owned by the municipality 400 meters away rear of Station A (New Port). The third option was to situate the facility in a vacant lot also owned by the municipality located on the northwest side of the poblacion, 600 meters away from the port.

Eventually, the first option to locate the ice plant facility within the port area, was selected as the most suitable alternative considering that this type of business could efficiently serve its clients, save handling cost and spoilage when located within the port area.

4.5.1.3 Site of the Warehouse

As an integral component of the port, the site of the warehouse facility will be located within the port complex, as preferred location where the port complex will be developed.


4.5.2 Size The proposed lay out for the development of the port complex has two options

which will include the following components and dimensions:

Option 1 Option 2

Reclaimed Area 3,590.5 sq. m. 10,500 sq.m. Causeway Structure 1,498.4 sq. m. 4,380.0 sq.m. Pier Structure 872.0 sq. m. 872.0 sq.m.

Sub-Total Area 5,960.9 sq. m. 15,752 sq. m. Component Facilities:

Port Stalls 243.00 sq. m. 243.00 sq. m. Administration Bldg. 55.25 sq. m. 55.25 sq. m. Toilet/Bathroom 31.50 sq. m. 31.50 sq. m. Passenger Terminal 22.00 sq. m. 22.00 sq. m. Ice Plant 792.00 sq.m. 580.00 sq. m. Warehouse 100.00 sq.m. 100.00 sq. m.

Sub-Total Area 1,243.75 sq. m. 1,243.75 sq. m. In comparison, the components of Option 1 and Option 2 are the same except for the design and dimensions of the following components:

Component Option 1 Option 2 Reclaimed area = 3,590.5 sq. m. 10,500.0 sq. m. Causeway = 1,498.4 sq. m. 4,380.0 sq. m. Ice Plant = 792.0 sq. m. 580.0 sq. m. Warehouse = 100.0 sq. m. 800.0 sq. m.

Under option 2, the proposed area to be reclaimed is 1.5 hectares. Reclaiming this size of the foreshore area will require the development of 4,380 square meters of causeway. Under this scenario, a total of 17 fishing vessels and 4 cargo vessels can be accommodated at any given time. Based on projections, the berthing capacity of the port still cannot cope with the projected number of fishing boats that will patronize the port. The production level of the ice plant facility using even the 100-ton capacity output per day can still be absorbed by the market. However, investment cost will become prohibitive when applied in Sarangani given that this component will be bidded out for private sector investment. Operating a 30 ton capacity ice plant as proposed in option 2 would be less economical than running a 40 ton capacity. Beyond 40 ton capacity is not recommended because of investment and other considerations such as limitation in water supply and increase in power requirements. For warehouse requirement, the proposed area of 800 square meters proposed under option 2 is large enough compared to the demand requirements for the


incoming and outgoing cargoes. Constructing a structure using a conventional design of a typical warehouse, (enclosed with high ceilings) at this size is found to be uneconomical. Aside from incurring high investment cost, the existing practice of cargo storage in the area does not allow longer period of storage time. Most often, cargoes particularly copra are delivered and stocked at the port site during the day or the day before the departure of the vessel. A 100 square meters floor area for the warehouse was found to be the appropriate size. In general, alternative components presented under option 1 are found to be the most desirable combination as it provides optimum utilization of production inputs, satisfaction of demand variables and provision of desired services.

4.5.3 Technology and Services

4.5.3.1 Port Operations

Two options were considered in handling port operations. Option 1 is for the local government unit (LGU) of Sarangani, who will construct and handle the operations of all the facilities that will be installed within the port area, except for the ice plant facility, which was considered to be a private undertaking. Option 2 would require the construction and management of operations of all the facilities, which is assume to be handled by the Philippine Ports Authority (PPA).

4.5.3.2 Ice Plant Technology The process of ice making adopted in the local industry is generally the same. However, the technology, equipment and system of operations used often vary depending on the size and capacity of the ice plant facility. The conventional method of making ice consists of immersing cans filled with water in a bath of low temperature brine. The brine circulates by means of agitators through an ice generator tank and is cooled by a submersion type evaporator. The temperature of the brine (-10 degrees Centigrade) causes the water in the ice cans to freeze into solid blocks. After the freezing process, the ice cans are lifted from the generator tank by means of a crane and immersed in a thawing tank filled with warm water to release the ice from the ice cans. A tipping device unloads the blocks on to an ice chute or a conveyor for transport to the ice storage room. The cans are refilled with water from a filling device and are carried back to the generator tank to start the freezing cycle again. The technology presented by the leading manufacturer of ice plant equipment and machineries in the country will be adopted by the project. Specifically, the method of using an ammonia as a medium used in processing of ice was recommended by the supplier since it is lower in cost.


4.6 Description of Preferred Alternative

The development of the port complex in Mabila will include the improvement of the port and auxiliary facilities including the establishment of an ice plant. The project layout is shown in Figure 4.14. The description of the basic activities and components of the port complex are as follows:

4.6.1 Reclamation of the Foreshore Area

Since the development of the existing port site was chosen, reclamation of the foreshore area situated between the two existing causeways is necessary. Reclamation activity would involve soil exploration, to determine the stratigraphy and physical properties of the soils underlying the site, particularly their strength and deformation characteristics when subjected to future loads. The soil investigation results shall be the bases for the preliminary foundation design of various port facilities, likewise determine the filling materials needed in the reclamation of the foreshore area. Subsequent activities will follow like the identification of the quarry site, hauling, dumping, compacting and others. The total area to be reclaimed is 3,590.5 square meters as shown in Figure 4.14, the project layout.

4.6.2 Causeway Part of the port improvement is the extension and improvement of the causeway with a total length 187.3 lineal meters. The extension will start from the shoreline of Station A (New Pier) and ends at the shoreline of Station B (Old Pier) covering the north, east and south boundaries of the reclaimed area. The type of structure and the foundation to be used for the causeway will depend on the soil investigation results. The total area that will be covered is 1,498.4 square meters. (Figure 4.15)

4.6.3 Pier Structure Pier structure covering an area of 872.0 square meters will be constructed starting from the end point of new causeway marked as Station A. The construction activities will include pile casting, pile driving, form works, steel works, scaffolding and slab concreting (Figure 4.15).

4.6.4 Port Stalls The construction of port stalls will require an area of 243.0 square meters. This structure will be located at the rear end of the port spanning 81.0 meters parallel from Station A to Station B with a width of 3.0 meters. The stalls will be opened for enterprising ventures such as eatery, general merchandise i.e. selling of fishing gears, among other businesses. The layout of the port stall is shown in Figure 4.14.


4.6.5 Administration Building As a necessary component of a port complex, a permanent administration building will be constructed at the middle of the port area beside the ice plant. The building will occupy an area of 55.25 square meters. The building will house all the port personnel including the office of the port manager. The building was provided with toilet/bathroom for personnel use. The design and layout of the administration building is shown in Figure 4.14.

4.6.6 Toilet/Bathroom A common toilet/bathroom will be constructed at the port site for the use of the passengers and crews of the fishing vessel operators. The structure will be placed at the back of the warehouse near the front gate of Station A. It has an area of 31.5 square meters. The design and layout of the toilet/bathroom is shown in Figure 4.14.

4.6.7 Passenger Terminal The passenger terminal will be located mid front of the lateral causeway. It will cover an area of 22.0 square meters and can accommodate 36 persons at a time. This structure is important since the arrival and departure of cargo and fishing vessels are variable depending on sea condition at Sarangani Straight and Celebes Sea, respectively. The design and layout of the Terminal is shown in Figure 4.14.

4.6.8 Ice Plant The ice plant facility will cover an area of 792 square meters. The structure will be located at the southern portion of the reclaimed area beside Station A. A storage water tank and 2 generators sets will be installed in the vicinity of the plant as a necessary facility/equipment that will be used for production purposes. This venture is open for private investment since its operation is financially and economically viable. The design and lay out of the ice plant is presented in Figure 4.16.

4.6.9 Warehouse

The warehouse will be located at the north side of the port beside Station B. The facility will cover an area of 100.0 square meters. This structure will be used for temporary storage of crops and commodities while waiting for transport. The design of the warehouse is shown in Figure 4.14.


4.6.10 Guard House

At the initial operation of the port, a Guard House will be constructed beside the gate of Station B. The design of the guardhouse is shown in Figure 4.14.

4.7 Cost Estimates 4.7.1 Investment Cost The total investment cost of the proposed project amounts to P 48.88 Million,

broken down as follows:

Multi-Purpose Port */ = P32,028,696.00 Ice Plant = P16,849,779.00

*/ Includes the Warehouse, Administration Building, Passenger Terminal, Toilet/Bathroom and Guard House

Details of the project cost is shown in Table 4.1. 4.7.2 Operating Cost

The total annual cost for the operation of the port and ice plant amounts to P6.515 Million, broken down as follows:

Multi-Purpose Port = P1,246,410.00 Ice Plant = P5,268,524.00

Details of the project cost is shown in Table 4.2. 4.8 Machinery and Equipment

4.8.1 Port

The port will employ labor-intensive operation. Equipments needed are weighing scale, computer, tables, chairs, and other office facilities.

4.8.2 Ice Plant

Equipment needed in the operation of the ice plant are the following: compressor and running crane, crusher, ice tools and gravity conveyor. A delivery boat is also needed by the project to be used in the delivery of ice products to the neighboring barangays. The project will also have a water tank for storage purposes. The water requirement of the ice plant will be provided by a water system that will be constructed purposely for the operation of the plant. Two


units of generator set will also be installed to sustain the power requirement of the ice plant. Office equipment needed by the project are computer, table and cabinets for storing of supplies and materials and records of the office.

4.9 Timetable of Implementation 4.9.1 Pre-Implementation Phase

The pre-implementation stage would require a total of 4 months after the approval of the project. Activities that will be undertaken during this stage include the conduct of detailed engineering, consultations with the community that will be affected by the project, conduct of information campaign and information dissemination, pre-qualification of bids, bidding and awarding of bids and other standard operating procedures required from the government considering that the Philippine Ports Authority (PPA) is identified as the implementing agency of the project. (Table 4.3)

4.9.2 Implementation Phase

A total of 16 months is required to realize the proposed port and its auxiliary facilities including the construction of an ice plant within the port area. The activities to be done are shown in Table 4.3.

4.10 Environmental Impact and Mitigating Measures

The implementation of the project will have both positive and negative effects to environment and community of the entire populace of Sarangani. Effects on the environment would include destruction of the mangrove area and vegetation at the identified quarry sites, noise disturbance during construction stage and operation stage particularly on ice plant operation. At the construction site, a total of 445 square meters of mangrove area will be converted into port area and access road. Although the cost is minimal, cleaning up the area and converting such into port area will still have an impact, although found to be negligible, to the marine ecosystem. Planting of mangroves in the nearby site should be required from the project contractor to replenish the destroyed mangroves.

On the other hand, and an estimated volume of 1,500 cubic meter will be excavated at the quarry site. Vegetation in this area will be destroyed due to extraction of quarry materials. Since the area will become barren after extraction, replanting of trees and other similar vegetation should be done at the quarry site.

Noise disturbance during the construction stage cannot be avoided. However, the contractor must observe the proper working hours to avoid further disturbance especially during nighttime.


During operation stage, the influx of fishing and cargo vessels would contribute to the garbage and water pollution problem in the area. Fuel emission through leakage and spoilage and human feces and indiscriminate dumping of garbage at the sea could be contributing factor to water pollution. To minimize this problem, the municipal government should, from to time, inform and educate the fishermen and vessel crews not to dump their material and human waste to the sea. Garbage receptacles and toilets must be provided at the port area so that there will no reason for these people to dump their garbage anywhere.


Chapter 5 FINANCIAL ASPECT

The alternative scenarios for the three components of the project, which were identified during the course of this study, are verified from a financial point of view to assess its viability. During the process, each scenario with the least viability is eliminated. The focus of discussion in this chapter dwells on the alternative scenario that projects the most viability on the financial point of view. All costs related to the three components of the project such as project development cost, pre-operating and operating cost, acquisition of equipment, provision for depreciation and payment of interest, as well as alternative sources of funds and replacement cost of machines and equipment, are considered in the financial analysis. 5.1 Project Cost

Total project cost is estimated at P48.878 million. The development of the multi-purpose port accounted for P32.028 million or 66%of the total project cost. The remaining P16.849 million or 34% constitute the cost of the ice plant component of the project. The cost of developing the multi-purpose port includes the reclamation cost of some 3,590.50 square meters area within the project site, land development cost for more or less 1,000 square meters allocated to the ice plant and warehouse areas; and, construction cost of warehouse as well as the capital requirements equivalent to one month operation. Details of this are shown in Table 4.1. On the other hand, the cost of the ice plant component covers the investments on building construction and acquisition of equipment as well as the working capital and pre-operating financial requirements for one month. Details of this amount are shown in Table 4.1. Replacement cost is also provided for ice machine and all other equipments after its respective estimated economic lives have lapsed. As mentioned in the foregoing, the multi-purpose port includes the warehouse component. Initially, however, its financial viability was analyzed separately. The main reason behind the integration is the non-viability of the warehouse project to generate substantial revenue when operated independently from the other components of the project. The warehouse component may not also be offered to prospective private investor because such alternative is not financially feasible based on the analysis of its financial statements. Accordingly, this alternative will only result to substantial cash flow problems and losses in operations throughout its project life.

Financial Aspect 5-1

Since the warehouse is recognized as very important services that should be provided along with the port, it was found best to integrate it into the multi-purpose port project because the overall financial effect on such integration will still be favorable as far as profitability and cash flow are concerned.

5.2 Source of Funds

Different financing schemes were evaluated for each component of the project. These schemes are the major consideration in coming up with the following alternative scenarios for the entire project: Scenario 1 The Local Government Unit (LGU) of the Municipality of Sarangani will develop the Multi-Purpose Port and manage its operation including that of the warehouse. The development The Ice Plant component of the project will be developed and operated by a private investor who will pay land rental to the LGU. Scenario 2 The Philippine Port Authority will develop the Multi-Purpose Port and manage its operation including that of the warehouse. The Ice Plant component of the project will be developed and operated by a private investor who will pay land rental to the LGU.

5.2.1 Multi-Purpose Port. The Local Government Unit, under scenario 2, intends to submit the integrated development plan of the proposed multi-purpose port complex to the Philippine Port Authority (PPA) for possible financing. The proposed multi-purpose port qualifies in one of the criteria set forth by PPA for port financing and management operations under its port system. One of the PPA qualifications under the port system requires that there should be no existing major port or proposed major port development project public or private within 100 kilometers in the next five years. This qualification is easily meet by the project considering that there are no other ports or proposed port for that matter within the vicinity of the island. The other alternative source of financing, under scenario 1, is for the LGU is to obtain a long-term loan from a bank equivalent to 70% of the total development cost of the multi-purpose port and provide for the remaining 30% of the cost as its equity contribution. However, this was no longer considered because per evaluation the LGU will not be able to raise the 30% equity portion of the loan which will be required by the creditor bank. In addition, it was determined that it will not generate sufficient income from operation to pay out the required annual amortization.


5.2.2 Ice Plant Component. Given the financial profitability of this component, it is expected that many investors would be willing to invest on this project. The proposed financing scheme for this component is for the private investor to avail of long-term loan from the bank at sixteen percent (16%) interest payable in fifteen years with three years grace period. The possibility of the LGU taking over the development and operation of the ice plant was also considered however, just like in the case of the multi-purpose port complex, the LGU is not capable of raising the equity contribution required in obtaining the proposed loan from the bank. The LGU also acknowledges its lack of technical knowledge and skills to manage its operations.

5.3 BASIC FINANCIAL PROJECTIONS

The project has adopted certain assumptions in its financial projections, as follows:

a) All costs pertaining to construction and acquisition of depreciable assets are

depreciated using the straight-line method. Economic life of these assets varies from five (5) years to twenty (20) years. Schedule of depreciation expense is presented in Table 5.1. Replacement of machines and equipment is also provided for after its respective economic lives have lapsed. Replacement cost for all machines and equipment is assumed to be the same as the original purchase cost at the time of replacement. Salvage value, if any, of the replaced machines and equipment is assumed to be realized at the time of replacement and is deducted to the cost of the replacement. Details for the replacement of these assets are presented in Table 5.2

b) Loanable amount is amortized for fifteen (15) years at sixteen percent (16%)

interest with a 3 years grace period on payment of the principal amount (Please refer to the amortization schedule on Table 5.3).

c) The Multi-purpose Port is projected to derive revenues from the following

sources:

Anchorage fee Berthing fee Passenger terminal fee Public restroom fee Cargo handling fee Parking fee Stall rental Land space rental


Increases in total revenues are due to assumed increases in volume of demand rather than increase in the revenue rates. Revenue rate are assumed to be the same throughout the project life.

d) Revenues and operating cost in the ice plant operations are assumed to remain constant throughout the project life. Likewise, volumes of ice production as well as its selling price are also assumed to remain constant

5.4 Financial Viability Criteria

The financial viability of the components of the project are evaluated based on the following criteria:

a. Net Present Value

The net present value (NPV) is the major criterion at which the financial viability of the project is evaluated to. This criterion requires that each component of the project should have a positive NPV to become financially viable since only at this point (when NPV is at least equal to zero) that the project can expect not only to recover the initial capital investment and to earn a rate of return equal to the discount rate, but also to receive an addition to the real net worth equal to the positive amount of the NPV. The discount rates (or hurdle rate) at which the NPV is computed are 12% and 16% for the multi-purpose port and ice plant, respectively. Basically, different hurdle rates are used because each component of the project will have a separate financing scheme. The 12% is the standard hurdle rate required for government projects while the 16% is based on the assumed interest rate of which the proposed bank loan shall be obtained. b. Financial Internal Rate of Return

The financial internal rate of return (FIRR) criterion is best stated in the form of a decision rule, to wit: “Accept any project when its FIRR is greater than the opportunity cost of capital”. Hence, each component of the project is subjected to FIRR the results of which serve as one of the basis for determining the financial viability of the said components. The FIRR takes into consideration the initial investments, working capital and cash inflows generated throughout the project life. c. Profitability Projected Income Statement serves as the basis for evaluating the profitability of each component of the project. Profitability would mean as the ability of the project to generate revenues in excess of its operating costs including payment of interest and income taxes.


d. Net Cash Flow This criterion pertains to the capacity of the project to generate substantial cash from its operation to defray all the cash operating expenses and to pay for maturing debt obligations and income taxes. A positive cash flow means that total cash inflows exceeded all cash operating costs incurred during the year.

5.5 Financial Analysis

The financial analysis is based on a twenty (20) year period. The Cash Flow and Income statements are prepared for each component of the project to evaluate individually its financial viability. A balance sheet is deemed insignificant for this particular project. The following sections present the summary descriptions of the aforementioned statements:

5.5.1 Income Statement The Income Statement shows the projected revenues and the corresponding expenses necessary to operate the proposed projects. This statement also shows the profitability of the project as well as the ability to sustain its operation and meet maturing debt obligation. Income Statement for the Multi-Purpose Port under scenarios 1 and 2; and Ice Plant is shown on Tables 5.4, 5.5 and 5.6, respectively. The integrated multi-purpose port under the management of the PPA is expected to generate a net income beginning on the fifth year of its operation. The gross revenue is expected to increase only by at least 1% every year. As mentioned in Section 5.3 (c) above, the increase is due to increase in demand rather than increase in the revenue rates. The net effect on the net operating income over the gross revenue is expected to increase steadily from 6.24% in the fifth year to more than 23% in the twentieth year. This scenario will not be duplicated when the multi-purpose port is developed and operated by the LGU. This is mainly because the income from its operation will not be substantial to cover for the interest expenses it will incur for the long-term loan. Therefore, when payment of interest expense is applied to the operating income the same will turn into substantial losses. The ice plant component of the project is expected to generate substantial revenues all throughout the project’s life which are huge enough to defray all the necessary operating expenses including payment of interest and taxes. Projected net income is expected to increase from eleven and a half percent (11.5%) in the first year of operation to twenty-five (25%) in the twentieth year of its operation. These increases are attributed mainly to the declining interest charges.


5.5.2 Cash Flow Statement The Statement of Cash Flows details the annual movements of cash and its allocation to the various disbursements of the project. The cash inflows on this project come mainly from the revenues generated from each component of the project while uses of cash are distributed to operating expenses, replacement cost for machineries and equipment, amortization of loan and payment of taxes. This statement also includes the working capital requirements during the first year of operation as well as any salvage values of all properties and equipment that may be recovered at the end of the project’s life. The Cash Flow Statement for the Multi-Purpose Port under scenarios 1 and 2; and Ice Plant is shown on Tables 5.7, 5.8 and 5.9, respectively. Under scenario 2, the integrated multi-purpose port is projected to generate a net cash inflow right from the start of its operations up to the twentieth year in spite of the losses during the first four years of operations. This is mainly because of the depreciation expense which is a non-cash expense. The net cash inflows mean that the cash receipts realized from its revenues has exceeded the cash operating expenses including replacement cost of some facilities and equipment and payments of taxes. It is expected to increase by at least 6.38% annually. Substantial increase in the net cash flow is likewise expected in the twentieth year due to recovery of salvage value of depreciable assets which is estimated at least ten percent of the acquisition cost of said assets. The port itself is assumed to have a salvage value of sixty percent (60%) since it will be used only for 20 years out of its estimated economic life of 50 years. In comparison with the Statement of Cash Flow under scenario 1, the only major difference is the payment of the annual amortization of the loan. However, such difference will have a very substantial impact on the cash flow since the net cash generated from operations will not be sufficient to cover the payment of the loan amortization. Hence, its cash flow becomes negative. On the other hand, the ice plant operation is expected to generate huge amount of cash inflows throughout the project life except for in the years twelfth and sixteenth, where the project will incur a negative cash flows. This is mainly because of the costs incurred for the projected replacement of major depreciable assets. However, the cash earned in the years prior to the said expenditures ably provides for the cost for such replacements. The net cash inflows are expected to be at least twelve percent (12%) of the revenue receipts throughout the project’s life except during the twelfth and sixteenth years.

5.6 Financial Viability Indicators

The financial viability of the project is ascertained based on the financial viability criteria set forth in Section 5.4 above. The results of the financial analysis show the following observations:


5.6.1 Multi-Purpose Port

Under both scenarios, the multi-purpose port will generate the same net cash inflow from operations when payment of loan amortization and taxes are not considered. The said cash inflows are the basis for computing the NPV; hence, it will have a similar NPV of negative P22.027 million, at an assumed hurdle rate of twelve percent (12%) and a FIRR of 0.55%. The main reason behind the negative NPV is that the discounted value of the total net cash flow of P33.637 million generated from the first year to the twentieth year is not sufficient to recover the investment cost of more than P32 million. Therefore, the initial investment poured on this project cannot be recovered within the project’s life.

5.6.2 The Ice Plant

The ice plant component generates a very high NPV of P7.102 million and a FIRR of 25.06 percent. The hurdle rate used for this component is pegged at 16 percent.

Furthermore, it is also noteworthy to present the results of the break-even analysis applied to the ice plant component. This will further verify the financial soundness of its operation.

Selling Price per Block of Ice

(Base on demand)

No of Ice Blocks

(Per annum) Break Even Sales

P 72.04

20,772

Projected Sales

P 114.00

84,560

Projected Profit Margin

P 41.96

63,788

As presented above, the ice plant operation indicates a very high leverage in terms of achieving break-even in sales as far as the selling price and sales volume are concerned. This means that this component demonstrates high flexibility to changes in the selling price and sales volume. The results of the sensitivity analysis following this section confirmed this observation.

5.7 Sensitivity Analysis The sensitivity analysis is undertaken to determine the effect of changes of important variables in the financial projections. The following hypotheses were considered: a. For Multi-Purpose Port Component


• Projected revenues increased by 30 and 50 percent. • Projected costs decreased by 30 and 50 percent. • Estimated interest rate reduced to 6 percent.

As discussed earlier, the port operation is expected to generate positive cash flows over its project life. However, when such cash inflows are discounted at 12% to obtain its NPV it will result to a negative NPV of P22.027 million. The FIRR for this is 0.55%. Results of the sensitivity analysis are summarized below.

Projected Increase Assumptions NPV FIRR

Peso Value (In million)

% of increase

Rate

% of increase

a. Projected revenues

increased by 30%

P (18.003)

18%

2.87%

522%

b. Projected revenues

increased by 50%

(15.321)

30%

4.34%

789%

c. Projected costs decreased

by 30%.

(19.469)

12%

1.98%

360%

d. Projected costs decreased

by 50%.

(17.763)

19%

2.92%

531%

e. Estimated interest rate

reduced to 6%

(16.401)

26%

0.55%

-

As shown above, the overall results of the sensitivity analysis for this component is still the same. That is, the NPV is still negative and the FIRR is also lower than the estimated hurdle rate. However, at the most optimistic situation, i.e. a 50% increase in revenue with a corresponding 50% decrease in costs, the NPV will significantly increase to positive P1.741 million and its FIRR increased to 6.55%. Results of the sensitivity analysis under both scenarios are all the same. Details of which are presented in Table 5.10. b. For Ice Plant Component

• Projected revenues decreased by 10 and 20 percent. • Projected costs increased by 10 and 20 percent. • Estimated interest rate increased 20 and 30 percent.


Sensitivity Analysis Based on the results of the sensitivity analysis on the ice plant component, it can be observed that its operation is more volatile to reduction in revenue rates rather than increases in cash operating expenses. Results of the sensitivity analysis are summarized below.

Projected Decrease Assumptions NPV FIRR

Peso Value (In million)

% of decrease

Rate

% of decrease

a. Projected revenues

decreased by 10%

P 2.175

69%

18.86%

25%

b. Projected revenues

decreased by 20%

(2.751)

139%

12.22%

51%

c. Projected costs increased

by 10%.

4.318

39%

21.62%

14%

d. Projected costs increased

by 20%.

1.535

78%

18.05%

28%

e. Estimated interest rate

increased to 20%

3.205

55%

25.06%

-

f. Estimated interest rate

increased to 30%

(2.020)

128%

25.06%

-

This mean that at 20% reduction in revenue rates, the NPV will be reduced from P7.102 million to negative P2.751 million and the FIRR will decrease from 25.06% to 12.22% which falls below the hurdle rate of 16%. Likewise, an increase in cash operating expenses by 20% will only reduced the NPV by P5.567 million and the FIRR by 7.01%, respectively. Hence, the NPV is still positive at P1.535 million and the FIRR is 18.05% which remains higher than the assumed hurdle rate of 16%. It is further noted that the NPV is also sensitive to increases in interest rates. A mere increase in the interest rate from 16% to 20% will drastically decrease the NPV to P3.205 or 55% of the estimated NPV of P7.102. Increasing the interest rate further to 30% would result to a negative NPV of P2.020 million. At these assumptions, the FIRR remains unchanged. The NPV and FIRR is also at risk when there is a reduction in the revenue price by 10% coupled with a 10% increase in cash operating expenses. At this point,


the NPV will be reduced to negative P.608 million and the FIRR will fall below the hurdle rate at 15.18%. Break-Even Analysis It can be observed that the Ice Plant component performs very well as far as achieving break-even sales is concerned at all the assumed changes of rates in revenues and operating expenses. Results on this analysis are summarized as follows:

Selling Price per Block of Ice (Base on demand)

No of Ice Blocks (Per annum)

Assumptions Assumptions (a) (b) (c) (d) (a) (b) (c) (d)

Break Even Sales

P72.04

P72.04

P78.27

P84.50

28,677

39,991

25,416

29,452

Projected Sales

102.60

91.20

114.00

114.00

84,560

84,560

84,560

84,560

Projected Profit Margin at Break-Even Sales

P30.56

P19.60

P35.73

P29.50

55,883

44,569

59,144

55,108

Even at worst scenario, i.e. 20% reduction in revenue rates and a corresponding 20% increase in cash operating expenses, it will still achieve a break-even. In fact, at this point break-even in selling price is P84.50; projected selling price based on the volume of demand is P91.20; and break even sales in volume is 70,314 blocks of ice. Hence, projected profit margin at break-even sales will still be positive at P6.70 per block of ice and 14,246 blocks of ice.

5.8 Conclusions and Recommendations

The following conclusions and recommendations are presented based on the foregoing financial analysis: a. The multi-purpose port component of the project is found not viable on a

financial point of view. This is mainly because the streams of project cash flows over twenty-year period are not sufficient enough to recover the initial investment cost. However, under scenario 2, the port can be operated during the twenty-year period because it can generate enough cash inflows to sustain the estimated cash requirements of its operation each year.


b. The ice plant component of the project is found to be highly viable and is financially attractive to private investors. This is mainly attributed to its huge NPV at P7.102 million and high FIRR at 25.06%. It is also expected that the initial investment will be recovered within the projected life.

c. The warehouse is considered not financially viable when operated

independently. However, since it is identified as very important services that should be provided along with the port, it is recommended that its development cost be integrated into the multi-purpose port component of the project. The financial impact on such integration is considered insignificant to the overall financial viability of the latter.


Chapter 6 ECONOMIC ASPECT

An economic analysis was done to determine the project’s desirability in terms of its net economic contribution to the society. Data from the market, technical and financial aspects of the project study were utilized to project the economic costs and benefits of the project. Among the items considered were the resource flows emanating from the project, the externalities and other intangible effects of the project. 6.1 ECONOMIC BENEFITS

The identified economic benefits of the project came from and can be classified according to two major sources, namely: (1) benefits accruing from the operation of the Multi-Purpose Port, such as revenue from the port and ice plant, salvage value of the investments and working capital; and (2) benefits as a result of the project, such as reduction in fish spoilage, reduction in fuel costs, time saving benefits and other intangible benefits. The net present value of these economic benefits over the 20-year operating period of the project is P249,048,376.

6.1.1 Benefits Accruing from Port and Ice Plant Operations

6.1.1.1 Port Revenues and Ice Plant Revenues

All sources of port and ice plant revenues are considered in the economic analysis. Included also are income from land and space rentals.

6.1.1.2 Salvage Value

The assets of the project are expected to be serviceable even after the end of its project life. The port complex is assumed to have a remaining economic value equivalent to sixty percent of its development cost. The ice plant on the other hand is expected to be serviceable even after its economic life of 20 years; hence a 10% salvage value is allocated as its book value after the project has ceased.

6.1.1.3 Working Capital

The amount of 562.6 Thousand Pesos allocated as working capital is assumed to be plowed back to the project at the end of its project life.

6.1.2 Direct Benefits as a Result of the Project 6.1.2.1 Reduction in Fish Spoilage

It is expected that because of the presence of an ice plant in Sarangani, losses of fisherman due to fish spoilage will be significantly reduced.

Economic Aspect 6-1

6.1.2.2 Time Saving Benefits The presence of an ice plant in Sarangani would enable the local fishermen based in Sarangani to save four days which otherwise would have been spent to travel and queue for ice in General Santos City. The study placed value on the four days saved by the Sarangani Fishermen considering them as extra days for fishing.

6.1.2.3 Savings in Fuel Costs

Sarangani fishermen are also expected to save in fuel costs because they no longer have to go to General Santos City to buy their ice requirements.

6.1.2.4 Other Benefits

Secondary benefits are also identified in this study, such as increased comfort and convenience, improved port service, reduced travel time and land improvement, all of which are not easy to quantify but still give intangible benefits to the stakeholders.

6.2 ECONOMIC COSTS

The economic costs identified in this project are those that involve the use of real resources, classified into: Capital Costs, and Operating and Maintenance Costs.

6.2.1 Capital Costs

This includes developmental cost, building and equipment cost, engineering and administrative cost and other pre-operating cost of the project;

6.2.2 Operating and Maintenance Cost

This includes the costs of materials, labor and overhead which are incurred in operating the project. It also includes environmental cost but excludes provisions for depreciation, taxes and interest.

The Environmental Costs identified in the project are:

(1) Cost of the destroyed corals in the project area. A total of 436 square meters are expected to be affected. Per CRMP Guidebook, Vol. 6, 1 square meter of coral can produce 20 tons of fish per year; and

(2) Cost of sea grasses destroyed due to the project. There are also 5,524

square meters of sea grasses that would be destroyed which is valued at P10.00 per square meter.

Economic Aspect 6-2

6.3 VALUATION OF BENEFITS AND COSTS

The financial costs and benefits of the Multi-Purpose Port are adjusted to conform to economic concepts. Conversion factors are applied using as reference the standard set by NEDA as provided for in its Project Development and Evaluation Manual.

A. Conversion Factors for Project Operating Items

PROJECT ITEMS

CONVERSION FACTORS

Revenue Port Operations 0.989 Ice Plant Operations 0.989 Salvage Value 0.953 Costs Salaries 0.865 Supplies and Materials 0.982 Travelling Expenses 1.041 Gasoline, Oil and Lubricants 1.041 Maintenance Costs 1.041 Overhead Expenses 1.041 Pre-operating Expenses 1.041 Utilities 1.041

B. Conversion Factors for Investment Costs (per item)

FACILITIES/WORK ITEMS PROJECT COST

CONVERSION FACTOR

ECONOMIC COST

1) Economic Cost of Investment a) Detailed Engineering & Adm. Cost 876,000 0.922 807,672

b) Civil and Building Works and Basic Port Facilities 4,167,360 0.953 3,971,494

Equipment 10,339,600 1.030 10,649,788 Materials 13,936,540 0.903 12,584,696 Skilled labor 1,606,337 0.865 1,389,482 Unskilled labor 736,163 0.947 697,146 c) Port Functional Facilities Ice Plant 150,735 0.857 129,180 Equipment 10,902,500 1.030 11,229,575 Materials 3,855,500 0.903 3,481,517 Skilled labor 534,113 0.865 462,008 Unskilled labor 947,887 0.947 897,649 d) Freight and Handling 242,828 1.000 242,828 e) Recurrent Costs Materials 322,199 0.982 316,399 Manpower 133,250 0.865 115,261 Other administrative costs 127,462 1.000 127,462 Total Investment Cost 48,878,475 47,102,157

Economic Aspect 6-3

6.4 RESULTS OF ECONOMIC ANALYSIS

The economic costs and benefits of the project as well as its net incremental benefits are shown in the Economic Cost-Benefit Flow (see Table 6.1). The results of the projections show that the project would give economic benefits to the beneficiaries throughout its 20-year project life. The project’s Economic Net Present Value (ENPV), evaluated at 15% economic discount rate, is P139, 178,171. On the other hand, the project’s Economic Internal Rate of Return also showed an impressive result of 70%, which is more than 4 times the Social Discount Rate (SDR) of 15%. This would mean that from the economic point of view the project would provide economic benefit to the beneficiaries especially the fishermen and the fish traders. Likewise, this would also mean that the Municipality of Sarangani, and the Philippine economy stand to gain from the development of the multi-purpose port, as it will spur economic activities in the area.

6.5 ECONOMIC SENSITIVITY

The project was also tested for its responsiveness to changes in the values of certain project variables. Four hypotheses were considered and applied, and the results are as follows:

Result of the Sensitivity Analysis

CASES ENPV (SDR 13%) EIRR No. 1 - Benefits reduced by 25% P 85,130,239 48.97% No. 2 - Benefits reduced by 50% P 30,958,282 27.8% No. 3 – Benefits reduced by 25% and

Costs increased by 25% P 76,023,430 45.50%

No. 4 – Benefits reduced by 50% and Costs increased by 50%

P 12,744,664 20.46%

The different scenarios are applied to allow adjustments to some unforeseen events or circumstances, namely: (1) uncertainty of the rate of collection of the projected revenue; (2) adverse climatic conditions that would result in decrease fishing activities and consequently would have an effect on the income projections; and (3) delays in implementation which would result in cost overruns. Compared with the base scenario in the Cost and Benefit Analysis Flow and taking into consideration all the factors that might have an effect to the projections presented, all cases still posted positive ENPV (see Table 6.2). Likewise, all cases resulted to EIRRs which are much higher than the Social Discount Rate of 15%.

Economic Aspect 6-4

6.6 CONCLUSION

The integrated economic analysis of the two components of the Multi-Purpose Port of Sarangani showed its viability from the economic point of view. It would redound to an incremental benefit to the Philippine society in terms of increased income and to the Philippine Government in the form of revenue from taxes, which in turn would be plowed back to the people by way of other developmental projects.

Economic Aspect 6-5

Chapter 7 OPERATION AND MANAGEMENT

7.1 Political and Legal Considerations

During the formulation of the 1995-2005 Municipal Comprehensive Development Plan (MCDP) of the municipality in 1995, the infrastructure support facilities to the municipality’s economic program was envisioned by the local government as a catalyst for progress in the area. These facilities include the improvement of the existing port, establishment of a warehouse and ice plant within the port area. The municipal leadership again acknowledged this thrust when the Local Poverty Alleviation Plan (LPAP) was prepared in 2000. The formulation of the LPAP is a joint undertaking of the Philippine Government and United Nations Development Program (UNDP) through the National Economic and Development Authority (NEDA). This endeavor is a manifestation that the local leadership is committed to support the development of the municipality.

The provision of infrastructure facilities in Poblacion Mabila will enable the local government to fulfill its tasks as mandated in Rule V of the Local Government Code of 1991 (R.A. 7160), that is, to provide basic services to its constituents. The same provision stipulates that the Local Chief Executive (LCE) must ensure the delivery of basic services and the provision of adequate infrastructure facilities. Moreover, Republic Act 8425 otherwise known as the Social Reform and Poverty Alleviation Act encourages local government units to work and coordinate closely with other lead agencies to ensure the timely delivery of the basic reform commitments, infrastructure among other development concerns.

The necessity of having a good port facility will have a valuable impact to the economy of the area being a fifth class municipality. For the past years, basic services and other infrastructure facilities can hardly reach or implemented in the municipality because of physical difficulty in reaching the area. This time, the provincial government of Davao del Sur and the national government should therefore provide full support to the project to uplift the general welfare of the people in this municipality. The assistance extended to the municipality in the preparation of the Feasibility for the above-cited facilities through the Project Development and Monitoring Fund (PDMF) is an expression of support from the national government as a profound action towards solving the erring problems of the municipality.

The Philippine Ports Authority (PPA) being identified as the implementing agency of the port facility project has the mandate to implement such undertaking in accordance to its Charter, provided however, that the requirements and conditions to qualify for such undertaking area complied with by the proponent-LGU. These requirements and conditions are met based on the results of the market and technical study of the project.

Operation and Management 7-1

Other succeeding development plans such as the Community Resource Management and Tourism programs shall anchor on this project as a basic facility requirement that can pump-prime the social and economic development of municipality.

One of the major considerations of implementing the project is the presence of Indigenous Peoples (IPs) in the area. Majority of the local populace are comprised mainly of B’laans and the Sangils tribes wherein until now are still observing the traditional system of governance. The presence of Chieftains in the ruling tribes influences the decisions of the majority. Taking this aspect for granted could derail the implementation and execution of the project. Therefore, it became an inherent policy of the local government of Sarangani to consult the chieftains of ruling tribes and involved them before and during the implementation of any development projects to ensure full support of the IPs.

The project will likewise assure its compliance to Indigenous People’s Rights Act (IPRA) Law and Environmental Impact Statement (EIS) when required to the project. The Local Project Coordinating Committee (LPCC), in support to the PPA and private entrepreneur who will be engaged in the ice plant venture, will be organized to act as facilitating body to ensure that all the necessary requirements and support needed by the project are provided and complied with.

7.2 Project Organization and Management 7.2.1 Existing Port Management and Operations

The local government of Sarangani currently handles the management and operations of the municipal port. However, no formal structure has been formed to manage the port activities. A personnel from the Municipal Treasurer’s Office (MTO) was assigned to collect berthing fees from cargo vessels that docks at the port and remit the same to the MTO on a daily basis. A fixed berthing fee in the amount of P 150.00 per cargo vessel is collected upon berth in the port area. Fishing boats, on the other hand, are not charged of docking fee for utilizing the pier at any given time. Cargo vessels, however, are given priority upon its arrival to the port. In the past years, a fee was charged for every cargo particularly copra that goes out of the port. However, because of the persistent request of the farmers, the local government removed the cargo fee for humanitarian reasons in consideration to the economic difficulty experienced in the area. At present, the municipal government is experiencing difficulty in maintaining the existing municipal port due to budget constraints. This prompted the local officials to find ways and means to improve the facility to provide better services to the port users, practically the general populace being an island municipality. The project, as envisioned, would provide development opportunities to the


municipality through the improvement of port and establishment of necessary facilities. Improving the port, however, could only become viable if certain fees are collected as payment for the use of such facility.

7.2.2 Pre-Operating Phase 7.2.2.1 Management and Organization

Among the several options considered on who will undertake the project, the study points out that the most possible option was for the Philippine Ports Authority (PPA) to finance and handle the management and operations of the port facility. This is in consideration that the local government unit of Sarangani cannot afford to raise the equity required if the project opts to avail a loan through Official Development Assistance (ODA). Given the option that the PPA will handle the implementation of the project, the agency’s existing standard operating procedures and schemes of implementing projects shall be considered in this operation. In support to the PPA’s effort, the local government of Sarangani will create a Local Project Coordinating Committee (LPCC), a body that will specifically assist the PPA in accomplishing the activities related to port development that will require local intervention. The Municipal Mayor will chair the LPCC with the heads of its local offices, a representative of an NGO operating in the area, representative of the IPs, and a prominent citizen as members of the committee.

Moreover, any private individual who is interested to engage in the ice business shall directly coordinate and negotiate with the PPA for the construction of ice plant facility within the port area to synchronize the activities during the construction stage. The nature of transaction, whether lease or rental, shall be agreed upon by the PPA and the interested private sector. The amount that will be involved in the transaction shall be based on the price suggested in the study.

7.2.2.2 Manpower Requirements

The manpower requirements during the construction phase of the port will be determined on the basis of actual need of the project. Selection for employment, however, will consider the local residents in the municipality as potential source of manpower for unskilled labor particularly the IPs considering that they comprised 60 percent of the population of the municipality, The local government will encourage the PPA to observe a 70 percent unskilled to 30 percent skilled labor ratio giving preference the local populace in hiring for unskilled labor requirements of the project.


7.2.3 Operating Phase The Philippine Ports Authority (PPA) shall be responsible for the overall management and operations of the port and warehouse/shed facility. The ice plant facility, which shall operate within the port compound, shall be governed by standard rules, regulations and operating procedures prescribed by the PPA with regards to the use of common space and other facilities available at the port.

On the basis of usual operations, the PPA allows other port operations such as the warehouse, cargo handling operations to be undertaken by the private firms. On this particular situation, it is suggested that the management of operations of the warehouse/shed will be handled by the agency given the smallness of undertaking. The PPA, upon completion of the project, shall establish a Sub Port Office that will handle the overall management and operations of the port in Sarangani. The Port Manager shall handle four (4) units which shall compose of five (11) permanent personnel as shown in Figure 7.1.

Figure 7.1

PPA Port Sub Office

Municipality of Sarangani

Organizational Structure

A(

P E(

Port Manager (1)

Legend: PM PSU AD ESU

Operation and Man

U 4)

- Port Manager - Port Services Un- Administrative U

- Engineering Serv

agement

SU(4)

it nit ices Unit

SU 2)

7-4

The functions and responsibilities of each personnel of the PPA Sub Port Office shall be as follows:

PM - Oversee the whole operation of the project. AU - Take charge of administrative services of the port. PSU - Take charge all services in the port such as berthing, cargo arrangement, warehouse and other related services. ESU - Take charge of all repairs & maintenance of the port.

Hiring of personnel for the PPA Sub Port Office shall be based on the standard qualification required by the agency. The corresponding qualification standards and salaries for all positions to be filled up in the Sub Office are shown in Table 7.1. Salaries and wages of the casuals and contractuals that will be hired by the project will be derived from the port revenues in the amount corresponding to the minimum wage prescribed by the Regional Tri-Partite, Wage and Productivity Board (RTWPB) in the region.

Table 7.1. Qualification Standards and Salary Requirements of Personnel for the PPA Sub Port Office in Sarangani.

POSITION

QUALIFICATION

SALARY/Annum

Port Manager

BS degree holder, preferably license Civil Engineer with at least 2 yrs experience in port operations

P168,000.00/annum

Port Service Unit In-charge

College level, with at least 1 yr experience in port operations

P 90,000.00/annum

Resource Mgt. Unit In-charge

BS degree holder preferably BS in Public Administration

P102,000.00/annum

Engineering Service In-Charge

At least 3rd yr in college but preferably a graduate of Civil Engineering Course

P 90,000.00/annum

Port Police

At least 2 yrs in the College of Criminology

P 90,000.00/annum

7.3 Port Management and Operation

The Philippine Ports Authority (PPA) as the operator of the project shall have the following responsibilities:


a. Provide all the required services need for berthing, deberthing and mooring of vessels;

b. Provide all service for the handling of the port passenger and cargo traffic; c. Provide other services needed by the port client particularly the ice plant

operating within the port facility; and d. Provide all the required manpower and equipment needed in the provision

of the above-cited services, maintenance of the surrounding environment and port facilities.

7.4 Socio-Economic and Cultural Implications

The social desirability of the project is a more pressing concern of the local government. The local planners insinuate that the political dynamics in the area will not in anyway diminish the primary objective of the project as the establishment of this facility was considered priority in the hierarchy of LGU’s development needs. The project conforms to the land use plan of the municipality considering that it will be placed in the same site where the existing piers are located. The existing site is consistent with the Municipal Comprehensive Development cum Land Use Plan of the municipality. Likewise, residents and property owners in the nearby coastal area will not be affected since the proposed expansion/improvement is confined within the existing port area extending towards the sea. Household income in the municipality is expected to increase with the presence of the port and ice plant facilities. Because of accessibility and convenience the project will provide, people in the area will be motivated to engage in backyard projects such as poultry and livestock raising and even cottage industry type businesses as an offshoot of the increased market activity in the urban center of the municipality and access to agricultural inputs. Other businesses like food stalls and fast food type business, ambulant or vending activities will emerge because of the increasing economic activity in the port area. Income of the fishermen will also be improved since fish spoilage will be reduced to the minimum given that ice will be readily available in the area at a desired price and required volume at any given time. The availability of handling equipment, affordable labor and storage facility in the port area will provide easy loading and handling and elimination of spoilage of the farm produce like copra.

The establishment of a credit-lending facility is necessary to provide the farmers and fishermen opportunity to improve their livelihood should they intend to avail funding support, either from the government or private entity. Absence of


this facility is considered a problem at this point in time. However, the alternative choice is to encourage the Non-Government Organizations (NGOs) and/or the local government to assist the farmers and fishermen in the formation of cooperative/associations to be able for them to become bankable. From the point of view of the NGOs, this endeavor could be an opportunity and a compelling choice as a development partner to encourage the farmers and fishermen to form cooperative or association to attain self sufficiency with the LGUs, hand in hand with the NGOs, to pursue socio-economic, cultural and gender development activities.

The presence of a good port facility will provide safety for the passengers embarking and disembarking in the vessels. It will also save time for loading and unloading of cargoes compared to the existing port condition. Having the safety features and time saving benefits will reduce accidents and risks in spoilage, thereby promoting social and economic efficiency. The project will also enhance the community’s access to food supply with projected regularity of ship calls. Price stability of basic commodities is expected to prevail in the affected area (poblacion) as supply will be readily available.

The project will give utmost consideration to the Indigenous Peoples (IPs) to correct some negative impressions they gained in the implementation of government projects. The involvement and participation of IPs to government-initiated activities such as this project must be encouraged to gain support from them instead of resistance. Making the IPs priority in the employment for this project could be a reasonable and negotiable undertaking.

The spatial uses in Mabila, the capital town of the municipality where the project is located, was already delineated and considered in the MCDP. Therefore, the residents are assured that their properties will not be affected especially the IPs wherein neighborhood misunderstanding often arises because of property conflicts. Nonetheless, it is observed that the IPs and migrants are in harmony because of inter-marriages. Merging the cultural and value differences has resulted to fairly acceptable traits transforming the once-hostile IPs into the mainstream society.

Sanitation and hygiene within the project area and its vicinity will have to be maintained and considered part of the port operations in order not to affect the health conditions of the residents in the nearby area. The project shall ensure that the environmental considerations identified in the study must be observed. Communication and advocacy program must be continuously pursued by the project to raise the level of people’s awareness about the project’s limitations to minimize the advent of resistance and complaints from their own constituents.

As a requirement in port and ice plant operations, water supply could be a problem since the project will compete with the community’s source of water. As


planned, a deep well will be constructed to supply the water requirements of the port and ice plant operations. Given the volume of water requirements of the project, the ground water source might be affected. As inventoried, the residents at the poblacion area rely on 12 deep wells and 2 units level 2 waterworks system. This apprehension, however, could still not be ascertained in the absence of a study on ground water resource and characteristics in the area.

On the other hand, power supply in the municipality will not be affected since NPC’s Diesel Powered Plant has more than enough power generating capacity to provide the electricity requirements of the island and the project’s power requirement on a day-to-day basis. Power consumption could also be minimized since the power requirements of the Ice Plant will be complemented by a standby Generator Set, which will be utilized when the NPC’s power plant is at rest. At present, NAPOCOR operates on a six-hour basis (from 5:30 to 11:00 P.M. daily) since only two barangays were energized. DASURECO, the power distributor of the NPC power plant facility in Sarangani is currently extending its power lines to the other two barangays, namely: Batuganding and Tucal.

Increased competition is expected in the local market. The municipal government, however, is deliberating its fiscal management policy in fairness to all local small and medium size entrepreneurs. However, with a good supply of ice, local fish dealer would opt to sell their catch in General Santos City to earn higher margin of profit.

Employment that will be generated by the project in the construction and operation phases will be a major contributing factor to the increased economic activity in the area. Benefits could be further enhanced if the employment scenario will give favor to local residents. As noted, giving preference to local residents particularly the IPs in employment generation was already practiced in the municipality. As emphasized in the previous discussion, the local government, this time would encourage the PPA to adopt a 70:30 proportion in hiring unskilled and skilled workers, respectively, giving preference to workforce available in the locality for the unskilled labor requirement of the project.


feasibility · pdf file · 2012-04-30feasibility study infrastructure support to...

Documents