Document of The World Bank
FOR OFFICIAL USE ONLY CA/ 3&32-AHU
Report No. i90-HU Public Disclosure Authorized 7390
STAFF APPRAISAL REPORT
HIUNGARY Public Disclosure Authorized
SECOND TRANSPORT PROJECT
MARCH 1, 1989 Public Disclosure Authorized
Country Operations Department IV Europe, Middle East and North Africa Region Public Disclosure Authorized
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCYIEDIVALENTS (as of Deceuber 31, 1988)
Currency Unit - Forints (Ft.) Forint I - US$0.0192 Forints 52.0 a US$1.00
WEIGHTSAND MEASURES
Metric System US System
1 meter (s) * 3.2808 feet (ft) I kilometer (km) - 0.6214 dile (mi) I square kilometer (km2) a 0.3861 square mile (mi') I metric ton (m ton) a 0.98e2 long ton (ig ton) 1 kilogram (kg) = 2.2046 pounds (lbs)
ABBREVIATIONS
BKV - Budapest Transport Company BPI - Bit per inch CHEA - Council for Mutual Economic Assistance COCOM - Coordinating Committee for Multilateral Exports CPU - Central Processing Unit ECE - Economic Commission for Europe EDP - Electronic Data Processing ER - Economic Return FYR - First Year Return GDP - Gross Domestic Product GTKm - Gross Ton Kilometer HC - Hungarocamion International Freight Company INS/KIN - Lines per minute IBRD - International Bank for Reconstruction and Development ICB - International Competitive Bidding ICIS - Integrated computerized information system KTI - Hungarian Institute of Transport Science LCB - Local Competition Bidding LIB - Limited International Bidding MA8ART - Hungarian Shipping Company tMAV - Hungarian State Railways KALEV - Hungarian Airways Company MBYTE - Mega Byte YIPS - Mega Instructions per second HIS - Marketing Information System MCC - Maintenance Coordination Centers tOF - Ministry of Finance
MTCC - Ministry of Transport, Communication and Construction MSC - Maintenance Sub-centre M-O - Budapest by-pass (motorway) NEN - National Bank of Hungary NPO - National Planning Office NtKm - Net Ton Kilometer PKim - Passenger Kilometer Pd Km - Productive kilometers PRD - Public Roads Department of MTCC PRMC - Public Road Management Centers PTT - Post and Telegraph Co. RF - Revolving Fund SCD - Supervision and Control Department SDB - State Development Bank SOE - Statement of Expenditures TDD - Technical Development Department of MTCC TEM - Trans-European Motorway TMIS - Transport Management Information System TU - Traffic Units UIC - International Railway Union UTITORM - Government Mechanical Branch UNDP - United Nations Development Program VOLAN - Domestic and International Freight Company
FISCAL YEAR
January I to December 31 FOROMCAL USE ONLY
MUNGARY STAFF APPRAISAL REPORT SECOND TRANSPORTPROJECT
Table of Contents Page No.
I. THE TRANSPORTSECTOR 1
A. The Transport System I B. Transport Planning, Policy and Coordination 2 C. Sectoral Adjustment in Progress, Major Issues and Action Plan 3 D. Bank Group Transport Sector Operations in Hungary 8
II. TRANSPORT SUBSECTORS I
A. Railways (MAV)
1. General 9 2. Traffic 9 3. Organization 10 4. Railway Property 11 5. Operations 12 6. Track Maintenance 13 7. Staff and Productivity 13 8. Development Strategy 13 9. Tariffs, Accounts and Audit 14 10. Investment Plan 15
B. Highways 17
1. The network 17 2. Road Transport and Traffic 18 3. Traffic Regulation and Safety 19 4. Organization 20 5. Planning 20 6. Engineering 21 7. Construction 21 8. Expropriation and Environmental Protection 22 9. Maintenance 22 10. Equipment and Workshops 23 11. Highway Investment Plan 24 12. Accounts and Audit 26
This report is based on the findings of missions to Hungary in November 1986, May and November 1987 and May/June 1988 composed of S.B. Orlic (Senior Railway Engineer), W.S. Matthey (Senior Highway Engineer), M.K. Ganguli (Consultant, Transport Economist), J. Creasor (Financial Analyst), Slobodan Mitric (Senior Urban Transport Specialist) and N. Skorc (Consultant, Computer Specialist). N. C. Yucel (Principal Transport Economist), Michel Ray (Highway Engineer) and Friedrich Konigshofer (Senior System Analyst) assisted in the preparation of the report. Ms. N. Muhoho (Research Assistant) assisted in the preparation of cost tables.
This document has a restricted distribution and may be used by recipients only In the performance of their officialduties. Itg contents may not otherwise be disclosedwithout World Bank authoriation. - ii -
Table of Contents (cont.)
Page No.
C. HUNGAROCAMION (HC) 26
1. Organizaticn 26 2- Operation and Fleet 27 3. Investment Plan and Development Strategy 27 4. Pricing ar.d Finance 29
D. BUDAPEST TRANSPORT COMPANY (BKV) 30 1. General 30 2. Institutional Relations 30 3. Operational Characteristics 30 4. Fricing, Development Strategy and Investment Plan 31
III. THE PROJECT
A. Background 34 E. Objectives 34 C. Description 35 D. Engineering 41 E. Cost Estimate 41 F. Financing 44 G. The Loan, The Borrower and Beneficiaries 44 H. Implementation 45 I. Procurement 46 J. Disbursements 50 K. Reporting, Accounts and Audit 50 L. Environmental Impact 51
IV. ECONOMIC EVALUATION 52
A. General 52 B. Project Costs and Benefits 52 C. Economic Return (ER) 53 D. Project Riskts 59
V. FINANCIAL EVALUATION 60
A. General 60 B. Hungarian State Railways (MAV) 60 C. Hungarocamion International Freight Company 67 D. Budapest Transport Company (BKV) 72 * 4 i.-iii -
Table of Contents (cont.)
Page No. VI. AGREEMENTSREACHED AND RECOMMENDATIONS 79
ANNEXES 82
1. FinancialAnalysis 82 2. Salient Details of Ecunomic Evaluation 94 3. TransportManagement InformationSystem (TMIS), Railway Component 102 4. Integratedand ComputerizedInformation System (ICIS) for Hungarocamion 113 5. BKV'S Traffic Control System 117 6. Railway Costing Study 124 7. River Transportand Pcrt Study 127 8. BKV's Managementand OrganizationImprovement 134 study 9. Related Documentsand Data Available in the Project File 137
TABLES 139
1. Freight Traffic by Itodeof Transport. 139 2. Public PassengerTransport, 140 3. Number of DifferentTypes of Motor Vehicles, 141 4. 1986-90Transport InvestmentPlan 142 5. Railway'sFreight and PassengerTraffic Plan 1988-93 143 6. Goods Transportedby Containersby MAV 145 7. Selected OperatingStatistics for HungarianState Railways 146 8. Railway Staff and Productivity 147 9. Comparisonwith Selected other Railways 148 10. MAV CommodityAnalysis 149 11. Railway InvestmentPlan 1986-90 and 1991-93 estimate 152 12. Length of Road Network 153 13. Length of Public Roads by TYPE 154 14. Ownershipof the Truck Fleet 155 15. Axle Overload Fee Scale 156 16. Maximum AcceptableTraffic Volumes 157 17. PrincipalHighway Design Standards 158 18. Past and ProjectedRoad Expenditures 159 -19.Vehicle Fleet of Hungarocamion 160 20. Main Types in the Truck Fleet (HC) lSl 21. Average Annual Utilizatioutof Vehicles (HC) 162 22. SelectedOperational and FinancialStatistics of Vehicles (HC) 163 - iv -
Table of Contents (Cont.)
Page _.-
23. BKV's Vehicles Fleet, Traffic and Employees 164 24. BKV's Operational Performances 165 25. Planned Investments of BKV 166 26. Outline Training Program Proposed by MTCC 167 27. Estimated Schedule of Disbursements 170 28. Operational and Financial Data (1987) and Targets 1988-1993 period (MAV, HC and BKV) 173 29. Procurement Plan 174 30. Railway Component - Implementation schedule 177 31. Hungarocamion Component - Implementation Schedule 177 32. Highway Component - Impleme.tation Schedule 179 33. BKV component - Implementation Schedule 180
CHARTS
Chart 1 - Organization of Ministry of Transport, Communication and Construction (MTCC) 181 Chart 2 - Organization of Hungarian State Railways (MAV) 182 Chart 3 - Organization of Hungarocamion (HC) 183 Chart 4 - Organization of BKV 184
MAP - IBRD 20795; Hungary - Second Transport Project 185 IBRD 20796; Hungary - Network of BKV 186
4076V/I1-1o UUNGARY
SECOND TRANSPORTPROJECT
Loan and Project Summary
Borrower: Hungarian People's Republic
Beneficiaries: Hua.gariai:State Railways (MAV), HungarocamionInternational Freight Company (HC), and BudapestTransport Company (BKV).
Amount: US$95.0 million equivalent.
Relending Terms: US$28.1 million would be onlent to MAV, US$6.8 million to HC and US$3.5 million to BKV all for a period of 15 years *ncludingfive years of grace, and at a rate equal to at least the Bank rate plus a 20% markup which includes a fee for the foreign exchange risk to be borne by the Borrower, or the NBH's refinancingrate whichever is higher. The remainingof US$56.6 million equivalentwould be expanded by the MTTC for highwayworks and equipment.
Project Objectives and Description: The proposed project is designed to reduce transportcosts, increase system-wideoperational efficiency and increase foreignexchange earnings,through providing important infrastructure,increasing competition in transportmarkets and upgrading transporttechnology (mainly in the areas of management systemsand equipmentfor both maintenanceand cargo handling). The project is also designed to improve the environmentin Budapest city due to diversionof heavy commercialvehicles from the city to the M-O by-pass and in the next 2 years halt further accumulationof a backlog of needed periodic maintenance.The project would include high priority investmentscovering railways (transport management informationsystem (TMIS),recycling plant for used rails and modernizationof track maintenance); highways (constructionof the next priority section of the Budapest bypass (M-O motor-!ay),part of which is under constructionwith assistance from the first transport project, as well as a program of periodicmaintenance comprisingpavement strengtheningand surface treatmentand provisionof road maintenanceand testing equipment); integratedcomputerized information system (ICIS) and freighthandling equipment for Hungarocamion;traffic control system for BKV and related technicalassistance and training. The project consists of high priority items in the approved Seventh Five vear plan and is economically sound. Justification and Risks: The Governmentintends to continue a policy of encouraging free market competition,while fosteringenergy conservation. The main policy instrumentsare to be pricing measures. Its main investmentpriority is to remove bottlenecks,especially where this would promotc internationaland transit trade and to reduce the backlog in road maintenance. The transportindustry is a major foreignexchange earner in Hungary and, as such, should continue to receive support particularlyin view of the criticalbalance of payment problems. The Government 45 now favoring a structuralchange in transportundertakings from the point of view of both ownershipand size of undertakingsto achieve efficiencygains and increased competition.
Based on the most probable estimates,the pronosed investmentson differentproject componentsproduce economic returns (ERs) ranging from 151 to more than 30X, with an overall weighted ER of 201. Even under unfavorable assumptions(151 higher construction/equipmentcosts combined with a 15 reduction in benefits), the ERs remain acceptablewithin the range of 14X to 191.
Risks from inadequateproject implementationare minimal as the physical componentsof the project are essentiallya complementto the ongoing transportproject on which implementationperformance has been excellent. The project is relativelyinsensitive to trafficgrowth and focuszs on cost reductionmeasures. There remains the possibilityof a change in the present politicalenvironment leading to a reversal of the ongoing reform process which could be a potentialrisk for implementationof the policy reform measures associatedwith the project. However, since the Governmentis firmly committedto reform, these risks are minimal and acceptable. EstimatedCosts: Local Foreign Total US$millioDs
Railway Component 35 25 60 Highway Component 86 S0 136 Hungarocamion(EC) 10 6 16 BKV 8 3 11 Total Base Cost 139 84 223
PhysicalContingencies 6 4 10 Price Contingencies 10 7 17 Total Project Cost 155 95 250
FinancingPlan: Local Foreign Total US$ millions----
World Bank _ 95 95 Government 96 - 96 Railways 39 - 39 Hungarocamion 11 - 11 BKV 9 - 9 Total 155 95 250
EstimatedDisbursements: IBRD FY 1990 1991 1992 1993 1994 Annual 21.2 25.5 20.6 17.2 10.5 Cumulative 21.2 46.7 67.3 84.5 95.0
EconomicRate of Return: about 20X
Appraisal Report: No. 7390-HU,dated March 1, 1989
Map No. 20795 and 20796 HUNGARY
STAFF APPRAISALREPORT
SECOND TRANSPORTPROJECT
I. THE TRANSPORTSECTOR
A. The TransportSystcm
1.01 Hungary has a diversifiedtransport network to integrateits 93,000 sq. km of territoryand to serve the needs of its populationof about 10.7 million. As a landlockedcountry, trunk routes and inte:-nationalconnections are of special concern because Hungary has borders with five countries (see IBRD Map 20795) and aims to improve its integrat-oninto the world economy.
1.02 The transportsystem in Hungary consists of about 8,000 km of rail, 30,000 km of nato.onalroads, 1,300 km of regularlynavigable rivers and canals, one internationalairport and a fairly large oil and gas pipeline network. Railways and roads are the backbone of the transportsystem and togethercarry about 70% of total freight trafficand more than L5% of passenger traffic (Tables 1 and 2). The railway network has the crucial responsibilityfor moving traffic over relativelylong distances. Road traffic,which is 'ncreasingfairly rapid'y, functionsmainly as a short-haul mover. Whereas in 1960 the railways carr'.ed80Z of total freight (in ton-km), in 1987 its share had declined to about 45% (Table 1) with all other modes registeringan increase. Water transport,mainly on the Danube, has retained an importantand competitiveplace as a carrier of bulk materials over long distances (Table 1). The railway'sformer dominancein public passenger traffic passed to roads in the early 1970s and the current rail/roadshare is about 271 and 69% respectively(Table 2). The railwaysalso carry a sizeable volume of commuter traffic, to and from large cities. Public transportation within cities is provided by bus, tramway and trolleybus networks. Budapest is the hub of the country'srail, road and air systems. The number of passengersper tram in Budapest ranks among the highest in the world and the capital is served also by an undergroundrailway system. One of the most conspicuoustransport de-elopments during the last fifteen years has been the rapid gr3wth of private transport. The number of passenger cars has increased about six-fold during this period reachingabout 1.5 million level in 1985 (Table 3), and is expected to reach the 2 million level in the early 1990's.
1.03 The slackeningof world economic growth, includingthat of Hungary, caused traffic to decline in the early eighties kTables1 and 2); however, growth has now resumed. Foreign trade activitiesare of vital importance for the Hungarianeconomy and in the 1980's,of the total transportedtonnage of about 350 million per annum1-', export/importtrade accounted for more than 30 million tons per annum (excludingpipeline traffic)
1/ In public sector transport. and was carried predominantlyby rail. Furthermore,the country'slocation results in considerableadditional east-west and north-southtransit movements (more thai 20 million tons per annum). The Hmngarian railways rank among the leading transitenterprises in Europe. Road transit traffic is sizeable also with about 170,000 foreign trucks crossingHungary annually. The transport sector contributesa significantshare to the foreignexchange earnings of the national economy . Out of the gross foreignexchange currency revenue in the transportsector of about Ft 10 billion (about US$ 200 to 250 million) per annum in the 1980's about 66-68% is generatedby transportationof goods, about 17-192 from passengersand the balance due to other activities,such as train car rent fee, foreign tourism, etc. Approximately70X of the total foreign exchange earningsof transportenterprises is in non-roublecurrency. At present, the principaltask for the seLtor is to develop transport primarilyon the trunk routes and remove crucial bottlenecksincluding arrears in road and track maintenance,particularly those which affect international and transit trade to which the Governmentattaches high priority.
1.04 Transportinvestments in the public sector accounted for about 14% of Hungary's total investmentsin the last two decades, and are expected to remain At about the same level during the Seventh Plan period (1986-90). Investmentsin the road and rail sub-sectorsaccounted for about 85-90% of the sector total during 1980-84, the balance being made up of river port, shipping,aviation and pipeline investments,and the same pattern is expected to cou,tinuethrough the 1986-90 plan period. Investmentsin the transport sector, if well directed,would contributeto three major objectivesof developmentstrategy: (a) improvementof foreign exchange earnings, (b) increasetoperational efficiency and reductionof unit costs and (c) energy conservation. A continuousreview of sector investmentswill be part of the on-going dialoguebetween the Governmentand the Bank. B. TransportPlanning, Pblicy and Coordination
1.05 A governmentalreorganization in 1988 merged three former Ministries into a single Ministry of Transportation,Communication and Construction (MTTC) which no has overall responsibilityfor transportregulation, and exercisescontrol of public transportthrough its approval of the annual investmentand operatingplans of self-dependenttransport companies, which are also required to submit annual performanceand financial reports. The HungarianState Railways (MAV) is responsiblefor all rail transport operations(internal and international). Similarly the Hungarian Shipping Company (MAHART) is in charge of all river ports and of the Hungarian river fleets on the Tisza and Danube rivers. The HungarianAirline (MALEV) flies solely on internationalroutes. Freight and passengersare carriedby both public road transportcompanies and by "own-account"trucks and buses of industriesand cooperatives. About half of the annual ton-kilometersmoved by road are carried by public transportcompanies, namely, Hungarocamion(HC), specializingin internationaltrucking, the Volan trucking group, handling about 251 of domestic road transportand six smaller, specializedcarriers, togetherperforming about half of Volan's volume. Most of the remainingroad transportis divided almost eqwil.lybetween the "own-account" fleets of enterprises(both public and private)and the fleets owned by agricultural cooperativesand state farms (para. 2.29). About 802 of bus passengers-kilometersa :e carried by state-ownedcompanies operating in urban centersand between towns and cities with the balance carried out by "own-account"bus fleets (para. 2.32). 1.06 The transport planning structure conslcts of tne National Planning Office (NPO), the planning units of Ministries, loca' governments/ municipalities,and enterprises. Transportationprojects included in the Five-Yeer Plans originate both at the micro-level through the industrial enterprises and county authorities (especially for o.anicipaland local roads) and at the macro-level through NPO. The demands for transport by the economic enterprises and sectors are reconciled by NPO with the existing capacities and expansion plans of the transport enterprises and with the Government's policy objectives.
1.07 Hungary's principal transport policy objectives, approved by Parliament and most recently updated in 1988 are the efficient provision of services with the complementarydevelopment of different modes. Specifically, they are to:
(i) develop freight transport facilities in a harmonized maaner, in full cooperationwith the producing, warehousing, and forwarding units and the users, which implies that the transport technology of bulky goods, as well as the other goods suited for the formation of unit-loads such as palletization,pre-slinging, and containerization, should be modernized;
(ii) encourage the developmentof private transport enterprises and competitive market conditions in the sector;
(iii) encourage the use of mass public transportationprimarily in urban areas and also for inter-city travel;
(iv) in the next two years halt further accumulation of the backlog in aeeded pavement strengtheningand perio.ic maintenance and increase resource allocation thereafterwith the objective of eliminating any backlog during the next decade;
(v) emphasize the development of internationaltransport, principally transit traffic by rail, exploiting the advane'agesinherent in the country's geo-politicalsituation;
(vi) allocate traffic among different transport modes mainly by economic criteria (e.g. tariff policy, energy efficiency, manpower needs, (vii) etc.) and in case of necessity, by administrativemeasures; and
I(vii) promote and strengthen the transport companies' self-financing I . ~~~~~.spabilities.
1.08 Tansport policy goals .:e implemented through innual and five-year plans whi4n are enacted by Parliament. The cornerstonesof transport policy will continue to be conservationof energy and improving efficiency through increased competitionbetween transport agencies with the main policy instrumentsbeing transport investments in different modes including foreign exchange allocations and promotion of market oriented pricing.
C. Sectoral Adiustments in Progress, Major Issues and Action Plan
1.09 Innovationsand adjustments, mainly through increased competition, to keep the transport industry dynamic and cost-effective,are considered urgent -4- in Hungary. The Governmentis now favoringa structuralchange in transport undertakingsfrom the poilt of view of both ownershipand size of undertakings. The number of small and medium sized undertakingshas been increased,large monopolisticorganizations are being split into smaller vigorous units to make them more cost-effective.The direct involvementof MTCC in the managementof transportenterprises and services is being gradually reduced. Three big organizations (Trusts-Auto Maintenance Industrial Trust, the Volan Trust and the Road Construction Trust) which formerly managed the activities of nearly 60 enterprises in the fields of repair of road vehicles,road passengerand goods transportand road construction,have been dissolved recently. Enterprisesare now free to choose and diversifytheir activities. The overwhelmingmajority of transport enterprisesnow elect a Company Counciland a Director (formerlyappointed by the Ministry),who are authorized to determinethe strategiesof the enterpriseand play a decisive part in all measures related to management.
1.10 A relativelynew developmentis that, within the frameworkof the Governmentdecision to legalize the second economy, private taxis and private haulers are increasinglybeing licensed (about 8.000 private taxis and about 20,000 privatelyowned trucks licensedso far representingabout 102 of the total truck fleet). The former monopolisticsituation'' in international freight forwardinghas also been removed, with the rights of a fully licensed forwardingagency being given to severalcompanies.
1.11 The railwaymanagers have now increasedfreedom to implement innovationsin marketingand traffic operations. The railway operations are, in consequence,increasingly being concentratedon those services in which they have inherent advantages. In keeping with this aim, about 1,500 km of railway lines have been closed dusing the last 15 years and the handling of freight transportat about 300 railway stations has been redirectedand concentratedat about 60 suitably equippedmain and district rail stations during the same period. A total saving of about Ft 1 billion (US$ 20-25 million) has been effected so far on account of these changes. As the structuralchanges of the MAV have proceededon a step-by-stepbasis, the number of railway personnelhas been reduced from about 150,000 in 1970 to about 133,700 in 1986 and about to 128,400 in 1987.
1.12 With the recent introductionof a two-tierbanking system, access to credit, includingthat for the transportsector, will be improved. Also, the Governmentis waiting to see and review the reaction of the transportindustry to recent changes in the legal framework (includinga bankruptcy law).
1.13 The Hungarianprice system (and the transportpricing system operatingwithin this) is aimed at stimulatingthe producersand crnsumers to nake sound economic decisionsin conformitywith the targetsof the national economic plan (para. 1.08). In the transportsector a mixed price mechanism prevailswhere in certainareas the right of pricing (e.g. official prices)
l/ Internationalfreight forwardingwas previouslyin the hands of a single company, namely MASPED. Now similar rights have been given to RAABBERSPED,INTER LIGHTER, HUNGAROSPED,VOLAN, MAHART, etc. -5 - belongs to state organs such as the National Office of Materials and Prices and the authorizedministries and in other areas (e.g. free prices) this right belongs to the enterprises. Official prices can be fixed, maximizedor limited. In the case of the latter the lower limit appears as a measure to protect producers. Within the transportationsystem, fixed prices are used in the majority of passenger transportationservices. The Governmentalso prescribestariff ceilings to protect customers in outlying areas. The maximizedprices form includes domestic railwayand public road transportation of goods. Prices for internationaltransportation of goods (railways,public road, water and air), taxi transportationand the tariffs of port and loading activitiesare determinedby free functioningof market forces. While 90 percent of the prices changed by MAV and Volan are regulated (the majority is !maximized),a significant part of prices charged by enterprisessuch as MAHART, MALEV and Hungarocamioninvolve "free" enterpriseprices. Today in the commodityproducing sectors, less than one-thirdof the prices are !"official",while about two-thirdsof the prices in transportationare still "official"and the Government is exploringthe possibilityto allow greater freedom to the transportenterprises for evolving effective tariff policies.
1.14 During the first transportproject at the Bank's suggestion,the country introducedInternational Competitive Bidding (ICB) for major highway civil works (Budapestbypass with two major bridges on the river Danube). This was an importantbreakthrough, the prequalificationand bidding process serving as a learning process. For the first time, a comprehensiveset of Hungarianspecifications for road and bridge constructionwere assembled. This is expected to influencefavorably the national practice and also facilitatelocal competitivebidding on pavement strengtheningand maintenance sealingcontracts financed under the proposed loan.
1.15 There are several major issues in the transportsector. While considerableprogress has been achieved towards introducingcompetition for road freight transport,the same cannot be said for public passenger transport (exceptingtaxis). Furthermore,while goods transportationin all modes is self-financing,that is revenues from freight trafficcover all related costs,1' as a matter of socio-economicpolicy, the Government has not set urban/suburbanpassenger fares at the level which would recover all costs. Consequently,the Governmentpays an enormous subsidy (about US$ 200-250 million per annum)1' to the public transportagencies to cover the difference,mainly to safeguardthe standard of living of poorer sections of the communityand to avoid urlan congestion. A reductionof subsidiesby 50S
1/ Costs includeoperating and maintenancecosts, overheadsand debt service or depreciation,whichever is greater.
21 The approximatedistribution of subsidy amongst the differentmodes of transportis currentlyestimated as: (i) metro about 30X; (ii) city buses about 35%. (iii) trams and trolleybuses about 10-15X; and (iv) suburban railway passengerabout 20-25X. At present,on the average 4-5 Fts of subsidyare granted per 1 Ft earned by metropolitansurface (above ground) transportation,while 20 Fts per 1 Ft are given from the budget as a metro subsidy. -6- over the next five years would be a sound objective,since at that point the full marginal costs would be recoveredand the level of subsidy would be no greater than that prevalent in most European countries. In addition, transport technology and demand have changed so much that, in some areas where railways exist, they should in fact be closed and/or services appropriately reduced. Furthermore, the study on road user charges, initiatedat the instance of the Bank, has highlighted that heavy commercial vehicles do significantdamage to the road infrastructure,but do not pay adequately in proportionto the damage caused by them. A reform package covering all road users has been recommendedin this study. Implementationof appropriate recommendationscontained in the study report will form an importantpart of the proposedaction plan of the Government.
1.16 The Governmentis keen to follow-upits efforts in the transport sector to tackle these major issues with the assistanceof the Bank so as to improve competitionand operationalefficiency and to increase market responsiveness. Clearly, Hungary'spassenger transportsubsidies will need to be maintainedfor some time though the Governmentcommitted to reduce the subsidiesprogressively. Followingdiscussions between the Governmentand Bank missions, it has been agreed that this matter will have to be tackled on several fronts simultaneouslyas no single action will be adequate to mitigate the problem. Possible steps include introducingcompetition and complementarityin this sub-sectorthrough the enlistmentof skills and resourcesof the private sector. Privatemini-buses and shared taxis may offer a quality of service which is not availableat present and might result in considerablerelief to the continuouslyincreasing demand for Government subsidizedservices. Furthermore,instead of a blanket subsidy to run a large bus network, the Governmentmay choose to explore, on a pilot scale, how to obtain best value for money and may require local authoritiesto invite prospectiveoperators (includingdifferent Volan enterprises)to tender for contractsto run specializedpassenger services. Subsidy can be used more efficientlyif there has been a competitivebid for it and the purpose for which it is paid and amount provided are made clear. Ways and means to better direct subsidies to target groups, rather than to all users of public passengertransport, will also be investigated. Given acute fiscal pressures, the Governmentanticipates approaching the problem from several angles such as selectivefare increases,improvement of efficiencyand reductionof costs througheffective competition.
1.17 The Governmentis also keen to continue reducing MAV's uneconomir activitiesand is taking specificactions, line-wise,based on the recent study recommendationson uneconomicrailway lines (about 600 km). Freight chargeshave been increasedby 222 on January 1, 1987 on six low density railway lines and serviceson some other lines are being reduced to industrial sidings with restructuredtariffs. For the remaininguneconomic lines, negotiationsregarding cost recoveryare in progresswith the municipalities served. The total loss on account of these uneconomicrailway lines is now estimatedto be only Ft 40 million (less than US $1 million) which is a relativelysmall amount compared to MAV's total anauoal revenue of about Ft 40 billion (about USS 900 million). During appraisalassurance was obtained that MAV would continue to carry out and monitor effectivenessof the measures already introducedunder its program and make such adjustmentsas necessary to prevent losses from uneconomiclines from increasing. These assuranceswere confirmedat negotiations. - 7 -
1.18 Policy improvementswould be an essentialelement of Bank activities in the transportsector. In this context a transportsector action plan was prepared jointlywith the Govermnentduring May 1987 as part of the definition of the transportsector strategy. The key policy measures for the Government, MAV, RC, and BKV were agreed at negotiationsand are listed below:
(a) MAV should eliminatesteam traction by 1990.
(b) Combined tariffs for multi-modalservices should be introduced in 1990;
(c) MAV and HC should establishand introducecost-based pricing systems by 1991;
(d) Governmentshould implementa program for the private enterprisesand transportationcompanies to provide specialized transportservices (minibuses,shared taxis, etc.) on a pilot basis by 1989;
(e) Reductionof transportsubsidies, by about 50% during the years 1988 to 1993 compared to 1988 at constant prices;
(f) Governmentwould take further measures,based on the recommendationof the road user charges study, to ensure that by 1993 the heavy vehicles contributionreflects the damage they cause to the roads;
(g) Investmentson railwayelectrification, new lines and track doubling should not exceed 10% of MAV's total investment expenditurein the 1989-95plan. The proposed investmentsby BKV in the extensionof the Budapest metro blue line, to replace in the early l990's the rapid tramway system should be deferred until completionof the Project after March 31, 1994;
(h) The funds availablefor highway maintenancewould be increased compared to 1988 by 102 in 1989, 10% in 1990 and by 502 or more in real terms in the followingyears to eliminate the accumulatedbacklog of maintenancewithin a decade; a long-term road maintenancepolicy, determiningoptimum funding levels, financing strategies,and technicalspecifications will be formulatedby December,1990;
(i) MAV should reduce the total of staff, fuel and material costs- by 5X (in real terms) per unit of output during 1989-9';
(j) MAV woild increasetariffs and control operatingcosts to achic-,;a maximum operatingratio of 95% in 1990, reducing it by I% each year thereafterup to and including1994;
1/ In 1987 staff, fuel and material costs per transportunit (pass. km and ton km) were estimatedas 0.43 Ft, 0.17 Ft, and 0.26 Ft respectively. -8-
(k) HC would maintain freight rates and other charges at a sufficient level and control operating costs to ensure a rate at return of not less than 222 on average net fixed assets in operation of the years from 1989 to 1993;
(1) BKV would maintain tariffs and control operating costs at levels sufficient to achieve a maximum operating ratios of 98% in each of the years 1989 to 1993; and
(m) The Governmentwould annually review with Lhe Bank the progress made on policy and institutionalmatters and in investmentand expenditureand take steps to meet the agreed targets.
1.19 At the beginningof 1987 heavy commercialvehicles in Hungary particularlydiesel driven ones were paying only 15 to 20% of the road use costs attibutableto them. The increase in July 1987 and again in July 1988 of diesel tax from Ft 2.55 to 5.85 per liter I' will go a long way to mitigate the previous shortfallof contributionsby heavy commercialvehicles towards the costs of the damage they do to the roads. The appropriatelevels of cost recovery from heavy vehicles, in the light of the findings of the study report were further discussedat Loan Negotiationsand assurancewas received that further measures would be taken in the coming years to ensure that the road user charges imposedon heavy vehicles reflect the damage they cause to the infrastructureby 1993.
D. Bank Group Transport Sector Operations in Hungary
1.20 The Bank has so far participatedin one multi-modal(rail/road) transportproject (Loan 2557-HU),scheduled for completion in December 1990. Project implementationis satisfactoryand is even ahead of schedule in respect of some major components. The arrangementsfor project management and co-ordinationare functioningwell and disbursementsare also ahead of appraisal schedule.
1/ Fuel price (HungarianFt per liter) as in July 1987: gasoline regular 20.50, out of which tax is 15.30; diesel oil 9.75, out of which tax is 4.55. In July 1988 gasoline and diesel fuel tax was further increasedby Ft 2 and Ft 1.3 per liter respectively.
507SO/9-2 1 -9-
II. TRANSPORTSUBSECTORS
A. Railways
General
2.01 Hungary has a centralizedrailway system. Trunk routes and internationalconnections are of special concern, because of the considerablerailway transitmovement of about 16 million tons ?er annum (in average). About 402 of the railway network handles the entLre (transit,export and import) internationaltraffic. Out of the total foreign exchange earnings of the transportsector, the railways contribute 452. Besides carrying the bulk of freight traffic and a considerable amount of passenger trafficover relativelylong distances, the railways also deal with a sizeable volume of commuter traffic,around large cities.
Traffic a. Freight Traffic
2.02 Total freight traffic,which had been steady up to 1980 fell from 129.1 million tons and 24.0 billion ton-kms in 1980 to 114.7 million tons and 21.4 hillion ton-kms in 1987, representinga total decrease,during this period, of 92 in ton-kms,while average hauls remained unchangedat about 186 km. Internationaltraffic, slightly larger than domestic traffic (about 552 in Nt Km), during the same period dropped about 9.02 (Table 5).
2.03 Traffic declined as a result of the slackenedeconomic growth of the country and its trading partners. However, MAV's share of the total traffic compared to road traffic remainedstable, at about 462 and 252 respectively. Internationaltransit traffic fell, because of the downturn of the Middle East trade. However, import-exporttraffic increasedby 102 during the same period and this trend is forecast to continue through the duration of the project. MAV's containertraffic showed a satisfactory yearly increaseof about 10X, carryingabout 2.6 million net tons in 1987 (Table 6) mostly high rated goods. Traffic is presentlyrestricted by inadequateborder facilities,which result in an inabilityto schedule trains to carry all the offered traffic. It is, in consequence,either delayed or transferredto other modes. However, completionof ttteYugoslav border stationat Subotica in the near future is expected to greatly facilitate import/exportand transit trafficby rail, with and thruugh Yugoslavia.
2.04 The most importantgroup of commodities,in terms of tons, carried by MAV consistsof mineral products,which represented37.42 of total volume in 1987 as compared to 39.72 in 1980. The second importantgroup of commoditiesis intermediateindustrial products (cement,fertilizers, sugar, petrochemicals,steel and etc.) which represented26.52 of the total domestic freight traffic in 1987 as compared to 27.82 in 1980. - 10 -
Agriculturalproducts represented7.52 and other commodities28.61 in 1987, an increase compared to 5.8% and 26.71 in 1980, respectively. The main commoditiescarried in 1987, in terms of the tonnage,were coal (14%), petro chemicals (5%), iron ore (51), steel products (5%), fertilizers(5X), wood (5X), stone (42). Petroleumproducts, increasinglycarried by pipelines,have declined in terms of the total tonnageof MAV's traffic (8.2 million tonnes in 1980 to 6.2 million tones in 1987). However, coal carried by railwaysduring the same period has increasedfrom 14.9 to 15.7 million tons, or about 5% (Table 10). Freight traffic is forecast by MAV to increase by 1.12 per annum in volume (NTKM) over the 1988-93period. b. PassengerTraffic
2.05 In the last eight years, passengertraffic has declined by about 3% p.a., from 282.4 million passengersin 1980 to 226.9 million in 1987. The decline in terms of passenger-kmhas been proportionalalso averaging 3% p.a. during this period (Table 5). The decline in passenger traffic can be attributed in part to the expansionof public road transportand of private automobile ownership.
Traffic Forecast
2.06 MAV is determined to make marketing efforts to increase its internationalpassenger traffic (about 101 of total PKms last year) with the formationof MAVTOURS which is establishingoffices in foreign centers, working closely with hotels and other tourist centers. Passenger traffic over tne 1988-93 period is forecastby MAV to show no variation from those of 1987.
2.07 MAV will conti.'ueto devote its marketingefforts to retaining the commoditiesit presentlycarries while attractingirternational containerizedfreight and trying to regain some transit trafficwhich has been lost to rail. However, taking into account recent trends in rail trafficvolumes it is more realisticthat the project should be based on figures which do not assume any trafficgrowth.
Organization
2.08 During 1986 and 1987 MAV has revised its organization(Chart 2) to better achieve major objectivesof railway operationsand productivity. MAV has the legal status of a "self-dependententerprise", headed by a general manager, who is appointedby the Minister of Transport Communicationand Construction% It is divided into six regions. The general manager, assisted by four deputies, is responsiblefor the efficientmanagement of the railways,for planning its developmentand is the chairman of the ManagementCouncil, consisting of the deputy managers,regional directors,division chiefs and trade union representatives. This council is responsiblefor determinIngrailway policy, for establishingrailway's development plans within the framework of the state plan and for control of operations. Governmentapproval of the ManagementCouncil's proposals is required for major matters such as large investments(infrastructure), tariff changes, or foreign resource requirementsfor MAV's development. The Councilmeets one or two times each month. e 11 -
Railway Propertv
2.09 Track - MAV operates 7,619 km of line (IBRD Map No. 20795) of which 97% is standard gauge, 15% double tracked,and 26% electrified (Table 7). Rail traffic density in the country is relativelyhigh but is concentratedon about 30% of the network which carries about 70% of freight traffic, with the heaviest traffic in the northern industrialpart of the country. The track is mainly 48-54 kg/m rail with welded joints, laid on monoblock, reinforcedconcrete sleepers (68%) or wooden sleepers (32%), all with crushed stone ballast. About 67% of the network (standardgauge) is suitable for axle loads of above 20 and 22 tons per axle, about 40% is suitable for speeds of 100 km/hr and more. Average rail life is about 22 years. Track is generally in good condition,although the very high traffic density limits the time availablefor maintenanceand track overhaul; shortage of heavy duty track mainteranceequipment compounds the problem.
2.10 Signallingand Telecommunications- About 30% of the open lines are equipped with automatic-line-blocksignalling, although only 5% of the lines have centralizedtraffic control. The telecommunicationssystem on main lines is modern and adequate for present needs. There are also radio communicationwith most main line locomotivesand automatic train stops on many main lines.
2.11 Traction and Rolling Stock - The proportionof traffichauled by electric traction rose from 51% of gross-ton-km(GTKm) in 1980, to 63% in 1987, while diesel traction decreasedfrom 42% to 34% during the same period. Steam traction will be phased out completelyby 1990. The main types of traction are presentlyabout 470 electric and 1,100 mainline diesel electric locomotivesof whic'iabout 65% and 70% respectivelyare about 15 years or older. Locomotivemaintenance facilities are relatively good and the standard of repairs is high. Total capacityof the freight wagon fleet is about 2.5 million net-tons with averagewagon capacity of 36 tons. More than 53% of the fleet is less than 20 years old, 46% is between 20 and 40 years old and only 1% of the fleet is over 40 years old. The fleet is in relativelygood condition. The passengerfleet, with total capacity of about 235,000 seats, of which about 90% consists of four-axle coaches, has an average age of about 16 years.
2.12 MarshallingYards - There are 17 marshallingyatds, four of which are major mechanizedyards but with obsolete equipment. Even in the three large yards which comprise the Budapest junction and handle 80% of the total traffic volume, or about 5,000 wagons a day, skids are still used instead of secondaryretarders. The brake systems in the yards have frequentlybeen defective leading to damage from runawaywagons and accidents. The marshallingyard Budapest-Ferencvaros,a part of this junction,has a key role in the Hungarianrailway transportsystem and is being improvedand modernizedas part of the on-going project financed by the Bank. This will substantiallyincrease its capacity and reduce the usage of the other yards. MAV has prepareda master plan study for the further concentrationof marshallingactivities, by reducing the number of yards and throughmodernization, and reconstructionof the remain marshalliag - 12 - yards. The program for implementingthis plan is expected to be started during the 1991-1995investment plan.
Ope ations
2.13 The level of the Hungarianstate railwaysoperationai performance in 1987 remained relativelyhigh inspiteof a slight deteriorationwhen compared to recent years mainly due to dropping traffic. Performanceand productivityratios are reasonableco.mlpared to other railways. Utilization of electric locomotives(measured by engine-km per engine day) has increasedduring the 1980-87 period from 495 km/day to 500 km/day for passenger trafficand from 324 km/day to 332 km/day for freight :raffic, while utilizationof diesel locomotivesdropped slightly for frelght traffic only. The lower diesel utilizatirnis due to the eliminationof diesel traction on long haul main trunk routes,while it continues to be used on shorter and lower density secondary lines and for stand-by purposes (Tables 7, 8 and 9).
2.14 Availabilityof tractionand rolling stock, which gives an indicationof maintenanceefficiency, declined sin:e 1980 to unsatisfactory levels. This is influencedby the comparativelylow availibilityof the diesel fleet. The main reasons for the decline were: (a) shortage of spare parts (especiallythose requiringforeign exchange);(b) the shortage of qualifiedstaff and modern workshop equipment;and (c) an inefficient system of spare parts stock control. MAV is presently initiatinga study involvingin depth analysis of the above problems. Based on the study recommendations,MAV will take appropriateactions to resolve the problems.
2.15 Utilizationof wagon capacityduring 1980-87 remained stagnant (about 9,900 NTKM per ton of capacity). Turnaroundtime for wagons has increasedfrom 3.89 days in 1980 to 4.49 days in 1987. Analysis shows that while this increase stemmed in part from longer times in marshallingyards due to inadequateyard capacity,the principalcause was longer terminal times. Increasedwagon holding times at terminals(for loading and unloadingoperations) resulti-d both from legislationshortening the working week in Hungary, which reduced weekenidloading and unloading,and from a lack of adequate equipmentand facilitiesin major stations and terminals. The governmenthas started to implementmeasures to remedy this situation by authorizingbonus payments for weekend loadingand unloading,also heavier penaltiesfor wagons which are held over for more than permissible periods. This is expected to improvewagon turnaroundtime during the project period. The proposed project supports the installationof a managementinformation system that will help improveyard handling time, and the introductionof a computer based monitoringsystem for traffic, operationaland maintenanceactivities, to help improveutilization of its tractionand rolling stock.
2.16 ContainerTraffic. Developmentof railway container traffic started in 1969. To date, MAV has 39 railway stations suitable for receivingand loading containers,among which 12 are suitable for handling large conLa ers used in internationaltraffic. In 1987 MAV transported 2.6 millior!aet tons in containers(Table 6) mostly of expensivelyrated - 13 -
goods. MAV places a great emphasis .- the expansion of its container traffic in conjunctionwith other transportmodes: and plans to increase trafficvolumes carriedby container to about four million tons by 1990. Modernizationof containertransport was assisted by the Bank, through the ongoing (Rail/Road)Transport Project.
Track MaitLitenance
2.17 Track is generallywell maintained,but a lack of sufficient modern track maintenanceand renewal equipmentmakes it increasingly difficultto keep up this standard. Most of MAV's track machineryhas outlived its normal useful life. The ongoing project financed the acquisitionof 17 track rehabilitationmachines and the proposed project would provide additionalequipment (para. 3.03), as well as staff training by the manufacturers,to help overcome the problem.
Staff and Productivity
2.18 The managementand staff of MAV are technicallywell-qualified and competent,but there is a shortage of qualifiedskilled staff and technicians,particularly where new skills are required. The total number of staff was reducedby about 4% from 133,718 in 1986 to 128,450 in 1987 during the last reorganization. Productivitymeasured by traffic units per employee increasedduring the same period by about 3.5Z, principally because of the staff reduction. The figure of 338,700 traffic units per operationalemployee in 1987 compares favorablywith most other railways. Planned staff reductiontogether with the projectedflat traffic forecast, should give an additional increaseof about 12% in productivityby 1993 (Tables8 and 9).
DevelopmentStrategy
2.19 MAV's developmentstrategy for .he 1991-95 period takes into considerationthe aims of the country economic policy which require MAV to raise its operationalperformance and efficiency so that it can carry all the trafficbeing offered at an economic cost in competitionwith other modes. These includeorganizational, planning, financial and marketing obje:tives,as well as improvementsin technicaland operational performance.
The measures and activities,which would be required to achieve the planned targetsare as follows:
(i) reorganizationto further its decentralization,staff reductionand employee incentivesincrease;
(ii) improvementof the utilizationof the tractionand rolling stock (by the introducingof TMIS);
(iii) operationalcost reductionby means of improvingthe organizationof traffic operationand quality of service; - 14 -
(iv) increasingflexibility in responding to transportdemands by emphasizingthe commercialapproach with particularreference to developing integratedtrans 'ortat an acceleratedpace;
(v) review and rationalizethe existing marshallingYard System and containerterminal network;
(vi) investmentsshould be properly oriented to meet national requirementsand be economicallyand operationallysound.
MAV will carry out a critical review of its operationalefficiency and take medium term measures to reverse the deteriorationtrend in operationalperformance. The medium term measures for 1991-95 and 1989-93 targets (Table 28) were discussedwith and confirmedby tne Borrower during loan negotiations. MAV and MTCC will annually keep the Bank informed of progress in achieving planned improvements.
Tariffs, Accounts and Audit
Tariffs
2.20 MAV as a public enterpriseis expected to sustain itself by cost recovery through tariffs. The tariffsare subject to approval by the Government Board of Pricing. Presently,revenue from freight traffic covers all related costs, while revenuefrom pas;engertraffic does not. In 1987 passenger trafficrevenues covered only some 352 of the related costs. The Governmentcompensates the railway for specific cases where the under-recoveryof costs is on account of Government regulationsand social policies,such as concessionaryfares for the military,students, senior citizens,etc. and high-volume,low-tariff commuter services wh ch are maintained specificallyat Gove.nmentrequest. In 198i such subsidies covered only 28% of the total passengerservice costs, leaving an unrecoveredbalance of some 38X. The total revenuesfor both freight and passengercosts covered some 96% of the costs which when aggregated with the passengerservice subsidy, has resulted in a surplusof some 3X. The Government'spolicy is to move towards reductionof the passengerservice losses and to decrease the subsidiesstarting by a combinationof increasingoperational efficiency (paras.2.15 and 2.19) and progressively increasingfares (para. 1.18). As part of this policy, long distance passenger railway fares were increasedin January 1989 by about 301 local by 67% and freightby 20Z.
Accounts
2.21 All enterprisesmaintain their accounts in accordancewith a standard chart of accounts classifications,which facilitatesthe national consolidatia of accounts while allowing for appropriatevariations for each business sector. Under this system the railwayshave their own chart of accounts. MAV's accountingsystem, apart from recording transactions, also aims at the establishmentof net income as a tax base and appropriationsto three basic funds: (a) the Reserve Fund for covering losses, (b) the IncentiveFund for rewardingstaff for high performance, - 15 - and (c) the DevelopmentFund for financingworking capital and investments. The accountingsystem is generallysatisfactory, but it does not adequatelyprovide data for the analyticalmethods and procedures required for the effective operationof a cost accountingsystem. This deficiencyis expicted to be correctedunder the technicalassistance componentof the proposed projectwhich includesa traffic costing study for the railways. A recent edict has clarifiedthe concept of cost and cost calculations,as well as the developmentof balance sheet and a balance sheet reportingsystem.
Audit
2.22 Financialstatements under the Hungarianaccounting system are based mainly on tax requiremexitswhich means they are voluminousand sometimesdifficult to interpret. In this circumstance,the Governmenthas agi 2ed with the Bank to submit annual financialstatements (income statement.cash flow and balance sheet) in a format which is easily understoodand capable of reflectinginternational accounting standardsand formats for financialstatements and operatingfinancial ratios. The General Banking and Trust Company which had been responsiblefor auditing financialstatements was reorganizedin January 1989 and its auditing departmentwas separatedfrom the company to form a new company,Audit Rt. Under the new arrangementsauditing functionswill be carried out by Audit Rt. which is acceptableto the Bank. Under the ongoing project, the audited financialstatements are due at the Bank within four months after year end; but because of translat:n and mail delays, the submissionwill be extended to six months after 3_ar end under the proposed project.
The Railway's InvestmentPlan (1986-90)
2.23 The principalcomponents of MAV's 1986-90 InvestmentPlan are given in summary in Table 2.1 below, with greater detail provided in Tatle II. It is primarilya rehabilitationplan which concentrateson operating cost reductionand on safety oriented investments,rather than on investmentsin capacity expansion,traction and rolling stock. Of the total planned railway investment(US$ 934 million equivalent)about 62Z (US$ 581 million equivalent)is allocatedto renewal and rehabilitationof the existing networkand 382 (US$353million equivalent)for modernization, procurementof maintenanceequipment and rollingstock replacement. Railway investmentsare expected to acrount for about 45% of tthetotal investmentsin the transportsector during the plan period (Table 4). Emphasis is initiallyon early completionof ongoing projects,while only later in the plan period will new projects be undertaken,mostly track renewal, signallingwith telecommunicationsand electrificationof high-traffic-density main lines. Investmentcost estimatesare based on prices of manufacturedgoods in Hungary and border prices (1987) for imports. Estimatesinclude a physical contingencyallowance of about 52 for infrastructureitems and price contingenciesbased on official escalationfactors of 52 per annum. Unit prices for infrastructureitems are generallyin line with internationalprices but prices for rolling stock, all of which will be procured from eastern European countries,are lower than world prices, by 30% or more. - 16 -
2.24 Track rehabilitationand junwtionreconstruction represents about 38S of the total planned investments. Track to be rehabilitatedincludes ten high priority lines. These have kts averageage of superstructureof about 21 years and have carrieda cumulativetotal gross-tonnage(since the last track overhaul)of 100 to 370 million gross tons. This work is essential for the efficientutilizati4tn of traction and rolling stock. Proposed investmentsfor the modernizktionof signallingand telecommunications,which representabout 102 of the InvestmentPlan, will eliminateserious bottlenecksby rept4cingequipment which is obsolete and inadequatefor the efficientoperation of importantstations and junctions. Proposed investmentsin rdilway electrificationcomprise about 6S of the investmentplan and includea significantportion of the main line from Budapest to Gyekenes (near the Yugoslav border) where traffic density is about 30 million gross tonr per year. Other short sections proposed for electrificationhave beeh selected to improve the integrity and continuityof the electrifiednetwork, thus avoiding uneconomicchanges of traction. Less than 201 of the total investmentcosts are for traction and rolling stock. Capacity expansion investments,consisting of line doubling on short stretches (9 km) and by-passand cut-offs (about 2 km), representless than 12 of the propose4 investmentsand will relieve congestionon main lines. The propos1e;are economicallyand operationally sound.
Table 2.1: SUMMARY OF RAIL4AY INVESTMENTPLAN (1986-90)
Ft. mill. US$ mill. 2 of Total (1) Rehabilitationof Existing Network -Track rehabilitation(1,015 km) 10,674 224.2 24.0 -Electrificationof lines (372 k0) 2,836 59.6 6.4 -Signallingand Telecommunicatioh (430 km) 4,549 95.6 10.2 -Reconstructionof junctionsand stations 6,212 130.5 14.0 -Computerfacilities 1,338 28.1 3.0 -Bridges,sidings, substructures and other 2.041 42.9 4.6 27,650 580.9 62.2 (2) New lines (2 km) and line doubling (9 km) 105 2.2 0.2 (3) Traction and rolling stock 8,679 182.3 19.5 (4) Containerhandling equipment 480 10.1 1.1 (5) Other capacitymodernization (workshops,loco-depots, maintenanceequipment, etc.) 7.537 158.3 17.0 Total 44,451 933.8 100.0
Source: MAV and MTCC - 17 -
2.25 The railway investmentprogram based on the annual average amount of about US$187 millions is responsiveto the country'sneeds. MAV is currentlycompleting a thorough study of its future needs (including consolidationsof marshallingyards, signallingand telecommunications, electrificationand further containerization,etc) particularlyin the light of emerging patterns of freight traffic and coupledwith a study of requirementsin terminal facilities. The study, once it has been reviewed and acceptedby MTCC, is intended to serve as the basis of future investmentplan design. Full implementationof all study recommendations, however, are likely to be constrainedby the Government'sand MAV's financialresources. The focus of ths next plan is expected to continue to be further operatingcost reductionswith annual investmentsduring the 1991-1993period expected to be about $165 millions per year. The Bank, MTCC .indMAV have agreed to continue to maintain a dialogue on the subject so that the Bank's views may be taken into considerationwhen plans for implementing the study recommendations are presented to the Government for approval.
FinancingPlan
2.26 Except for a small Governmentloan (about 12) and the proposed Bank loan (about 2X), funds for MAV's .nvestmentsthrough the period 1988-93about 20% will be providedby suppliers'credits and about 77X from MAV's internal resources,entirely generated from depreciationprovisions (para. 5.14).
B. Highways
The Network
2.27 The total Hungarianroad network in 1985 (Table 12) is divided into: (i) National Roads (about 30,000 km, mostly paved), which are the responsibilityof the MTCC's Public Roads Department(PRD); (ii) Local Public Roads (about65,000 km and 321 paved), which are the responsibility of county councils;and (iii) Agriculturaland ForestryRoads (about 50,000 km and 30X paved), which are the responsibilityof state farms, agriculturalcooperatives and forestryorganizations. The length of paved roads (excludingurban streets) has increasedonly slightly between 1980 and 1985 (Table 13). Priority has been given to widening narrow pavements, geometricbetterments, pavement reinforcementand similar modernization works on the existing road network. Even so the rate of modernizationand, in particular,pavement strength4ningand sealinghas not kept pace with the usage demands of the growingvehicle fleet. The main roads of the national road network radiatefrom Budapest (IBRD Map 20795),where six of the eight highway brWdges across the Danube in Hungaryare to be found. The steady growth of in-city trafficand transit trafficacross the river has led to rapidlygrowing congestionin the city. Constructionof the M-0 motorway ringroad (IBRD Map 20795), the first 14 km of which is currently under constructionwith Bank financingunder the (Rail/Road)Transport Project (Loan 2557-HU),is expected to help alleviatethis problem. The M-0 will connect the motorwaysM-1, M-5 and M-7, bypassing south of - 18 -
Budapestand providingan additionalhighway bridge across the Danube river. All these motorwaysare importan'links in the IEM system, which wi'l eventuallyconnect western and northern European countrieswith the Balkansand Middle East. The Bank is providingfinancial assistance for constructionof other sections of the Trans European Motorways (TEM) network in Yugoslavia,Turkey and Romania. For internationaltraffic using the network, passage through Budapest is consideredto be one of the most criticalbottlenecks.
Road Transportand Traffic
2.28 Since 1970 the importanceof road transport(public and private) has grown rapidly in Hungary. Freight trafficmoving on roads more than doubledby 1985, while public passengertransport (passenger-kilometers) rose about 60Z in the same period. The rapid growth of individual motorization,however, has been the most conspicuoustransport development of the 1970's (para. 1.02).
2.29 Freight (13,580million ton-kilometersin 1987) is carriedboth by public transportcompanies and the "own-account"fleets of industries, cooperatives(both business and agricultural)and state farms. Table 14 gives data on the ownership of the truck fleet which shows that in 1986 the state owned transportcompanies, specifically: Hungarocamionhandling internationaltrucking; Volan group hauling general freight;and six specializedcarriers (ore, cement,agricultural products, etc.) accounted together for about 52Z of the annual ton-kilometersmoved by road. "Own-account"fleets of state and privatelyowned industriescarried about 221-241 of the road freightmoved, while agriculturalcooperatives and state farm fleets carried another 181-201 of the total. Privatelyowned transporterscarried about 61 of total traffic. The role assigned to the private trucks has been that of filling "gaps" to meet all transport demands.
2.30 Over the past fifteenyears, there has been an effort to encourage increasedefficiency (first through improved load-factors,more recently by increasedcompetition) in the road-transportsector. Private trucks, although registeredin a county for purposes of taxation,are free to operate anywhere in the country. "Own-account"fleets are also authorized to haul for others once they meet the demand of the parent organization,so as to reduce empty backhauls. Recent, deregulatorymeasures aimed at further increasingcompetition and efficiencyhave split up the Volan group's branches into separate transportcompanies free to compete against each other, against the private truckerand "own-account"backhauling truckers. Volan is also authorizedto compete with Hungarocamionand foreign truckers for international cargos, while Hungarocamion is planning to start competingfor in-countrytraffic. Freight tariffs,which are cost based and competitive,are negotiatedand favor clients who can assure return loads. Special agencies help locate and assemble loads in order to minimize empty trips and conserve energy. The Governmentprescribes tariff ceilings to protect customersin outlying areas, but there is no freight allocationin the transportsector. Shippersmake their own choice between modes and exportersor importersmay choose between domesticor foreign carriers. -19 -
2.31 Truck sizes were also subject to some indirect control, through control of imports and of national manufacture. Volan's fleets typically were in the 8 to 9 ton range, privately owned trucks in the 5 to 6 ton range, while "own-account" trucks are smaller, roughly 3 ton size. The present truck sizes, and a possible slight skewing of the rate structure to make short-haul road movement more profitable, have served to intensify road competition with rail within a range of about 50 miles. With Hungarocamion entering the internal haulage market with larger trucks, those no longer considered competitive for international routes, this area of competition is likely to expand in the near future.
2.32 Road passenger transport is handled by 25,900 buses of which about 402 are state-owned. These operate in Budapest, other urban centers and between towns and cities and carry 82% of all bus passenger kilometers. The other 182 of bus passenger kilometers are carried by 60% of the bus fleet (generally smaller busses) belonging to state companies and cooperatives. In addition, there are about 1,540,000 cars, of which about 1,500,000 are privately owned, while the balance belongs to Government organizations or commercial authorities. Among the latter are 3,610 state owned taxis. In addition about 8,700 privately owned taxis are also licensed. 572 of the total passenger-kilometers in Hungary are travelled in automobiles and taxis.
j2.33 There is no government subsidy of the bus service provided by the approximately 14,000 "own-fleet" buses nor of intercity bus services. only .he urban portions of the services provided by four major municipal authorities (Budapest, Miskolc, Szeged and Pecs) and by Volan companies in ! ~~thesmaller towns, receive an indirect subsidy, mostly through subsidized season tickets issued to old people and students. The urban buses must meet the total passenger demand which is expressed by centrally established timetables and routes, but have the flexibility to decide on the type and size of vehicles to use.
2.34 Private taxis are regulated through licensing requirements governing type of vehicle, driver's record and psychological testing. Each city can set its own rates and larger taxis are permitted to charge more. They are also permitted to carry passengers between cities.
Traffic, Traffic Regulation and Safety
2.35 Traffic data for planning and design is collected by annual programs of volume counts and periodic origin-destination censuses. Traffic censuses were started in Hungary in the 1950's with about 100 census stations manned and operated on a regularly basis, complemented, each five years, by a larger census (4,600 stations) to cover all roads. Since 1980, more modern equipment has been introduced and a rotation system of counting on a third of the network each year has been adopted. On new motorways, loop-counting equipment is being built into the pavement to provide added data on vehicle speeds and spacing.
2.36 MTCCoperectes weight control stations at points of entry into Hungary and on motorways as well as operating mobile weight control teams within the country. Allowable axle loads and maximum truck weight conform to the TEMCouncil requirements, while maximum vehicle dimensions conform - 20 - to European cotuicilstandards. Trucks operatingwith higher axle loads pay a fee (Table 15) and are restrictedto assigned routes. MTCC is currently reviewingthe level and structureof surchargesimposed on trucks exceeding the legal axle-loadlimit to discourageoverloading. MTCC collects and analyses accident statistics. Hungarianaccident rates are at about the halfway mark for a group of European comparatorcountries (close to the United Kingdom figures)but with total accidentssubstantially above the best road safety records. Under the ongoing transportproject, Hungarian specialistsare reviewingmeasures being taken by other countries to reduce accident rates.
Organization
2.37 MTCC has both oversightresponsibility for all transportmodes and sole responsibilityfor road standards,road transportregulation (apart from police enforcementresponsibility) while also managing the design, construction,maintenance and operationof the National Road Network. Its branch offices assist lnval authoritiesin the construction,improvement and maintenanceof ruraL, municipal,agricultural and forestry roads. The newly consolidatedMTCC's headquartersinternal organizationof the new ministry is still being defined. However, the main departmentsresponsible for roads and their relationshipto the decentralizedexternal organizationsresponsible for managing and executingroadwork (shown in Chart 1 in relation to the former Ministry of Transport) are expected to remain largelyunchanged. Three departments,Public Roads (PRD), Technical Development(TDD) and Supervisionand Control (SCD) share responsibility for national infrastructure. The PRD oversees inter alia national road maintenanceand operationactivities which are directly managed by nine Public Road ManagementCenters (PRMC) and nineteen subordinateMaintenance CoordinationCenters (MCC) throughoutHungary. The TDD reviews all investmentproposals, contracts detailed engineeringservices and engages an investmentmanagement firm or a PRMC to contract the works and supervise execution. The SCD ensures quality control,of both maintenanceand constructionwork, throughseven regionallaboratories.
2.38 The PRD is also chargedwith motor-vehicletraffic regulation,the TDD with road design standards(materials specifications and drainage standardsare controlledby other organizations)and coordinationwith local councils,while the SCD also acts as an internal control, reporting directly to the minister in this capacity. The TransportationDepartment (TD) oversees the state-ownedpassenger and goods transportenterprises and the regulationof transport. There traditionallyhave been no accounting or cashier organizationswithin line ministries,their functionsbeing carried out by the Banks throughwhich their budgets were coursed.
Planning
2.39 Highway planning respondsto both the road transportdemands expected to be generatedby the Government'sfive year plans and the road improvementsneeded to achieve and/or maintain desired levels of services to adequatelyhandle the growing trafficvolumes. Traffic forecastingand assignment is performedon a computermodel which is multi-modal,using growth assumptionswhich are realistic. A road inventoryand sufficiency survey, which was first taken in 1979 and which has since been updated and - 21 - improved,serves as the basis of a programof maintainingroad sufficiency includingwidening and pavement-strengthening,which togetherwith road maintenance,accounts for the greater part of road expenditures. Nonetheless,recent surveys indicate that arrears have been accumulatingin this program,and reversingthis trend has become a leading priority in the road sector (para. 2.45). Other road improvementsare part of the fourth long-termdevelopment program, whose underlying rationaleis to support energy conservationby (i) upgrading capacity on existing roads (addingnew traffic lanes and constructingbypasses at larger villages and towns), (ii) constructinghigh speed motorwayson routes carrying internationaltraffic (once trafficvolumes justifysuch construction),and (iii) constructing some "short-cuts"where there is sufficienttraffic demand. The latter has assumed increasingimportance in cases where traffic can be diverted from overcowdedhighways, to ease the maintenancework requirementsand costs, given the current financialconstraints (para. 2.45 and 2.48). Capacity is calculatedin terms of passengercar units (pcu) with heavy vehicles assigned a weight of 2.5 pcu's. Maximum acceptable trafficvolumes are given in Table 16. Design traffic is taken as the 50th or 100th highest hour of forecastweekday traffic,depending on the importanceof the road.-" More frequentweekend traffic congestiongenerally is considered acceptable,however, the proposed interchangeat the M-0 and M-7 junction would have ramps designed for heavy weekend traffic. Completionof the M-0 motorway (Budapestring road) is a high priority improvementin this latest long-termplan.
Engineering
2.40 For over 20 years, all motorway and highway bridge engineeringin Hungary has been performedby a major engineeringenterprise under contract to MTCC. The quality of its highway engineeringwork is up to internationalstandards and the companyhas considerableexperience, both in Hungary and abroad. A number of smallerhighway design offices throughoutthe country deal with local roads. Table 17 presents main geometricstandards in use. Those for motorwaysconform to or surpass requirementsestablished by the TEM council for the TransEuropean Motorways. Pavement design methods are up to date and bridge design loadings conform to European practice. Interchangesfor limited access highwaysare conventionallydesigned in accordancewith western European practice to minimize land acquisition. Technicalspecifications for constructionand materialswere extractedfrom a 17 volume set of national standardsand assembledas a single et of specificationsfor road works and bridge constructionfor the first time, under the ongoing transport project and are satisfactory.
Construction
2.41 Four major state-ownedconstruction firms have built most of the major roads and bridges in Hungary and a fifth major firm (specializedin metro construction)is consideredto have the capabilityfor large
1/ Design hourly traffic representsa number of vehicles per hour which is expected to occur (statistically)during a certainnumber of hours each year. The 50th highest hours trafficvolume is expected to be exceeded during 49 hours each year. - 22 - projects. About 12 smaller contractorshandle local, rural and urban road projects. Operationalcontrol of these companiesis fully detached from MTCC. The work quality is good (contractorsare held to a three-year guaranteeperiod on motorway construction)and prices are competitive,as evidencedin ICB against foreign firms under the ongo:ng transport (rail/road)project. The Hungariancompanies also compete for jobs outside the countryagainst internationalcompetition.
2.42 MTCC contractsmanagement and supervisionof large construction projects to UTIBER, an investmentmanagement company which specializesin transportationprojects. UTIBER's responsibilitiesinclude all fieldwork in connectionwith expropriationand land acquisition,control of zonformitywith plans, specifications,measurement of work quantitiesand approval of contractorsinvoices for payments. UTIBER also provides financialmanagement md is responsiblefor keeping project cost under a stipulatedlimit (102 contingency). Within this limit, it is authorizedto make minor design adjustments.
Expropriationand EnvironmentalProtection
2.43 Obtaininglocal views as a part of land acquisitionfor new roads is a lengthy procedureir. Hungary. Approval is required from local councils,who consult their constituency,and also from a special branch of the Ministry of Agriculture,if agriculturallands are affected. Expropriationcannot start unless these conditionshave been met. Payment must be made to the Ministry of Agricultureand in case of building demolitionto comhunitycouncils as well as to owners. Displacedowners have the choice of having the authoritiesfind new land and/or housing or receivingmoney to find new property for themselves. After land is expropriatedthere remainsa period of five months for the former owner to complete his use of the land (crops to harvest, etc...).
2.44 Hungary'senvironmental protection requirements have been even further strengthenedrecently. The requirementscover the aspects of sound control, protectionof agriculturalcrops from vehicle fumes and aesthetic considerations. In matters of drainage there has long been strict controls tied into flood control policy and reclaimed(flood protected)land. In addition,when groundwateris tapped for water supply purposes, restrictionsare imposed on land use and waste disposal in areas surroundingthe wells. Constructionspecifications, in addition,have stringentrequirements for daily cleaning of haul roads and dust protection during constructionoperations.
Maintenance
2.45 Maintenanceof National Roads is effectivelyorganized and well managed. Maintenanceof local roads is dependenton the allocationof resourcesby each local authorityand is less standardized. The traditionalroad maintenancepractices have depended heavily on preventativemeasures, particularly timely overlaying,sealing, and strengtheningof surfaceswhich is performedmostly by contractors. On the motorways,providing for safe vehicle operationis also highly stressed and patrollinginspection vehicles keep constant radio contact with a motorway - 23 - maintenancecenter. One inspectiontrip per day is used to note urgent, unscheduledtasks which then become part of daily work programs of crews and equipmentassigned for minor repairs. Other crews work on pre-planned preventivemaintenance or major repair works. The-e is a similarbut less intensiveprogram of regular inspectionsof other national roads. Since 1983, however, there has been a decline, particularlyin real terms, in the level of funds provided for road maintenanceand pavementstrengthening. In face.Gf continuouslygrowing trafficand steadily rising costs of maintenanceoperations, PRD's maintenancemanagers are concentrating resourceson the most heavily travelledroads and seeking lower cost, but possibly less durable, solutionsas stop gap measures,until more resources can be provided. Four test sections of thin overlays using differentnew techniqueshave recently been constructedin Hungary, in search of overlay cost reductions. Also, as part of the training programunder the ongoing transportproject, PRD technicalstaff are making visits abroad to familiarizethemselves with state-of-the-artprogress in pavement managementand recent developmentof improvedmaintenance techniques. From the updated road sufficiencysurvey results (1987) sufficientinformation is available to determinepolicy options and costs to counteractthe accumulatedeffects of the insufficientbudgets. A special study and analysis of estimated road maintenanceneeds, in the medium term, was undertakenfor MTCC by the Hungarian Instituteof TransportStudies (KTI) based on the 1987 survey results. Those showed that for about 40% of the road networks,the pavementbearing capacity or strengthcould be at the end or beyond its theoreticaldesign life. Of this about 5,500 km, or about 20X, has a pavement surface state which has become unacceptabledue to cracking and rutting, above the level at which researchhas shown pavement strengtheningto be required. In addition about 4,000 km of national roads are subject to load restrictionduring the spring thaw. The proposed projectwould supr?ortan acceleratedpavement strengtheningand sealing program in paralleiwith analyses on possible improvementsin optimizingthe use of road maintenanceresources.
Equipmentand Workshops
2.46 MTCC's equipment inventorylists about 9000 units of equipment, plant, vehicles,attachments and tools of which about a third are road vehicles and another third are equipmentand attachmentsused mostly for routine road maintenanceand winter operations. There is a heavy dependenceon machines from western European countriesto deal with disruptionscaused by winter weather conditions,particularly on the more densely travelledroads and motorways. Because of serious winter conditionsin recent years, PRD has acquired higher-poweredmachines, with Bank financing,to serve at strategiclocations from which they are capable of moving quickly to provideemergency ice and snow removal assistance. There is a good system of record keeping concerningequipment age and usage upon which a program of regularrenewal of aged equipment is based. However, as maintenancerequirements and costs are rising due to both increasedtraffic volumes and more kilometersof aging pavements,MTCC is also giving priority to obtainingmore efficientequipment. In addition attentionis being given to replacingold axle-loadweighing equipment due to their significantrole in extendingpavement life. - 24 -
Highway InvestmentPlan (1986-90)
2.47 Proposed developmentinvestments (excluding maintenance and pavement reinforcement) on roads in Hungary during 1986-90 are summarized in Table 2.2 below and given in more detailed in Table 18. The average total investmentsfor roads is about 4.18 billion Forints (US$85 million) per year during the 1986-90 period with funds divided in a 45:55 proportion,between National Roads (30,000km) and local council roads (65,000km) respectively. The plan's investmentsare all need based but about 30% below the original 5-year plan figures. The proportionof allocationbetween national and local roads appears reasonable,based on HUngary'spast experience.
Table 2.2: PROJECTEDROAD EXPENDITURES (CurrentPrices)
1986-1990 Plan Totals X of total Description Fts. m. US$ m.
National Highways
(1) Road Constructionor 9.630 193.8 14.1 Improvement - Motorways- new construction 6,950 139.9 - OtherRoads of which: 2.680 53.9 nnew construction 1,450 29.2 modernization (betterments) 1,230 24.7
(2) Pavement Reinforcement 11,890 239.3 17.5
(3) Maintenance 15.710 316.1 23.0 Total (1+2+3) 37,230 749.2 54.6
Local Roads
(4) Construction/Improvements 11,280 227.8 16.6
(5) Maintenance/Modernization 19.530 394.5 28.8 Total 30,810 622.3 45.4 Grand Total 68,040 1,371.5 100.0
2.48 The proportionof funds allocated to new constructionand improvementof national roads, compared to road maintenance and pavement reinforcement (Table 18) stands at about 25:75 during the plan period. The average annual maintenanceand pavement reinforcementallocation during the 1986-90 period provides about Ft 184,000 (US$3,700)per kilometereach year for these operations,which the KTI study (para. 2.45) estimates to be - 25 - about 63f of the requirementto effectivelymeet both road deterioration and traffic (capacity)- suiJiciencyneeds. Even without any pavement widening the sum would only Reet78% of che requirementfor maintenanceand pavement strengthening. Pavement strengthening,a key element in Hungary's strategy both for progressiveroad improvementand maintenance,suffered the least funding reductionduring the 1984-85period and has continuedat much the same level (in nominal terms) during the 1986-88period. This, however, has not kept up with rising costs of maintenanceoperations and increased road traffic needs. The KTI study estimated that keeping abreast of annual road deteriorationand the needed capacity increaseson the existing national road network, which eliminatingthe accumulatedbacklog of deferred work, in a five year period, would requireannual budgets of 8,700 million HUF (1987 prices), compared to about 5,200 million HUF allocated in 1988. Faced with general decreasesin public expenditures, which is being pursued as part of Hungary'sstructural adjustment effosts, MTCC has nonethelessobtained the Government'ssupport for the first phase of a two-phasestrategy namely: (i) halting the accumulationof deferred maintenancebacklog in the 1989-1990period, and (ii) eliminatingthe backlog entirely over the next decade. With the Bank's proposed assistance under the project,MTCC obtained a 102 increase in the pavement strengtheningand maintenancebudget for 1989 and has been guaranteedat least 8X-12X increase for 1990. Thereaftersubstantial increases in real terms would be sought to carry out phase (ii) of the strategy. Concurrently,a synthesisand further analysisof existing and amplified maintenancestudies would be undertakenwith a view to optimizingresource utilization. In addition, the effect of proposed improvementin competive bidding of strengtheningand maintenanceworks on costs would be closely monitored. The policy and objectivesare well thought-out,responsive to the needs of the national road-networkand deserve support.
2.49 Financialconstraints during the second half of the Sixth Plan Period (1981-85)obliged the Governmentto sharply reduce the investmentin new road construction,including motorways. In the 1986-90period the Governmentresumed investmentin the motorway system (Table 18) while still keeping other road improvementsat a rather low level. Planned increase in budgets for road modernizationin the latter years of the plan period will not actually take place. The motorway programnow comprisesonly completingthe M-0 motorway between the M-1 and Rte No. 6. The first portion of the M-0 (Rte 6 to M-5) includingthe major bridges across the Danube river's two channels,is currentlyunder constructionwith financing provided under the ongoing project from Loan 2557-HU. The constructionof the next 13.9 km of the M-0 bypass would immediatelyincrease the traffic volume on the first sectionby about 50X. Bank missions emphasized,and the Governmentappreciated, the urgency to speed up the constructionof the next stage, on sound economic grounds, however, the additionalinvestment funds which would have been needed during 1988-90 for this purpose, cannot be allocated.
2.50 Constructionof the complete Budapest ringroadwill take a long time. However, the M-1 to M-5 link, on which work would be complete under the proposed project, is the section most importantto east-west - 26 - internationaltraffic (TEM route). Also the Danube river bridges, whieh were included in the first phase, are the most complex and costly works of the proposed system which will serve to eliminate the most critical bottleneck in road transport in Hungary.
2.51 The road modernizationprogram, which includes constructionof bypasses around towns, improvement of at-grade road junctions, construction of grade separationsat railway crossingsas well as improvingroad alignmentsand adding lanes to urban and rural sections of the national roadnet, was substantiallycut back in 1984 and would continue at reduced levels until towards the end of the 1991-95period (i.e., until work on M-J' motorway is terminated).
2.52 The rtt3tive priority of this type of work has not been assessed by an overall economic study but, viewed pragmatically.the strategy would appear sound, particularlywhen consideredjointly with the allocations proposed for pavement strengthening. The motorway program is aimed at diverting long distance traffic from the most crowded main roads and will benefit the traffic which will not divert to the motorwaysas well as the diverting traffic. Constrvctionof bypasses and grade separations,which will continue at a reduced rate in the coming years, both further help decongestion.
Accounts and Audit
2.53 Accounts are maintained for MTCC by the Banks throughwhich funds are channelled. Separate accounts are maintained for each project. For the proposedproject, accounts will be kept cumulativelyand by year showing the receipts and expendituresfor the project c 'ponents,as well as showing separatelyfunds from Bank loans and other financingfrom the Governmentwith details of expendituresby categoriesand sub-categories. The foregoingreceipts and expendituresaccounts would be audited annually by the Audit Rt (para. 2.22) and a statement --"bmitted to the Bank. Under the ongoing project the audited project accounts are due in the Bank within four months after year end; but because of translationand mail delays the submissionwill be extended to six months after year end under the proposed project.
C. Hungarocamion
Organization
2.54 Hungarocamion(HC) was establishedon January 1, 1966, to provide domestic and foreign customerswith quick, efficientand reliable internationalroad transportation. The company is headed by a Generai Manager who oversees four line departments(operations, technical, financialand personnel)as well personally controllingthe operations of the InternationalRelations and Legal departments(Chart 3). The company has two affiliates in Europe, namely, the Pelkar TransportGmbH in Austria, and Eurocar Spa in Italy, nine offices at differentHungarian border crossing points and has representativesin 20 big cities of 16 countries. - 27 -
It is currentlyexpanding the number of foreign offices, has strengthened the staffing of these offices and is seeking additionalaffiliates in other European countries.
Operationand Fleet
2.55 HC has gone through a dynamic developmentperiod during its 21 year life. At the time of its establishmentHC possessedonly 357 small capacity vehicles (Skoda,Csepel, Saurer). Today, the truck fleet has more than quadrupled (Table 19) and its capacity has increasedsix times during this period by adding to the fleet higher capacity modern units (Table 20) suited for internationalfreighting. . The average annual vehicle utilizationis high and has shown a gradual improvementover the years (Table 21 & 22). In recent years, due to Europe's economic stagnationand decreased middle east demand, there has been a marked falling off in HC's traditionalmarkets as well as increasingcompetition, which resulted, in 1986, with a loss of about 50% of traditionaltrade. HC has had to restructuretheir operations by increasingtheir volume of haulage to and from European sources. They have been able to do so successfully,in spite of a substantialloss of agriculturalexports in early 1986 due to the Chernobyldisaster, with new, larger capacity, lighterweight trucks purchasedwith financingprovided under the ongoing transportproject. However, fleet replacement,particularly of Raba-Man models has not kept up to original plans. HC has detached about 100 vehicles,which are no longer considered competitiveon internationalruns, to form an in-country trucking service which would, inter alia provide pick-up and delivery services to their customers.
2.56 RC establisheda computer center in 1980 to start introducing computerizedcontrol of movements of cargo and vehicles but mainly utilized the computer for accountingand payroll purposes. Under the ongoing transportproject, HC has engaged consultantsto review their computerized operationsin the light of providingmanagement information,assistance to marketing as well as possible operationalimprovements. Based on their consultants'recommendations, HC now intends to expand their computerizationas part of an Integratedand ComputerizedInformation System (ICIS)which would include both a marketingand various management sub-systems,for all managementneeds, from a single data bank. Expected advantages includemore efficientprocedures, more rapid invoicingand a reductionin office staff. The consultantsalso recommendedthat HC intensifyits efforts to form additionalaffiliates and joint ventures.
InvestmentPlan and DevelopmentStrategy
2.57 Investmentpolicy of HC in recent times has been primarily aimed at achieving two main objectiveswhich are to increase foreign exchange earnings throughthe developmentand modernizationof its vehicle fleet and to increaseoperational efficiency by making fleet and infrastructure improvements,including electronic informationand control systems, maintenanceshop modernization,inventory control system and additional containerhandling equipment. The HC's investmentplan (Table 2.3) for augmenting the vehicle fleet and infrastructurefacilities took into - 28 - account market structure, likely growth of Hungarian exports (especially food stuffs, live animals, clothesand furniture),unfavorably road conditions,especially in the Middle East, fuel efficiencyand optimum utilizationof loading capacity. It has been prudently revised and updated annually to reflect the effects of changing demands and markets.
Table 2.3: HC'S INVESTMENTPLAN (1986-90)
Replacement Development Total Total No. of Costs No. of Costs No. of Costs Costs units tm units _im units $m Ft.m. Items (approx) (approx) (approx) Vehicles of which: Refrigerated 750 41.0 550 38.5 1,300 79.5 3,785 Specialized - - 190 16.2 190 16.2 770 Normal Tilted 750 41.0 275 15.7 1,025 56.7 2,700 Equipment - 2.9 - 0.9 - 3.8 180 Others - 0.4 - 15.0 - 15.4 735 Total 85.3 86.3 171.6 8,170
Source: Hungarocamion,July 1987 - 29 -
2.58 RC's draft investmentplan for 1990-1992forsees continuedfleet developmentbut stresses technologicalimprovement of the fleet during renewal in addition to growth. In particular,HC anticipatesincreasing the units suitable for intermodaloperations, and stressing interchangeabilityof body superstructuresto be able to meet changing demands. About 400 of nationallymanufactured trucks would be replaced (out of a total 695) and about 440 western European models would also be replaced while about 200 new units would be added. The plan is responsive to the critical need for improvinginier-modal balance and competitive strength in internationaltrade.
Pricing and Finance
2.59 RC is an enterprisewhich is free to fix its rates according to market forces in order to compete successfullyin t.e internationalfreight haulage market. 1985/1986traffic figures show thaL the most important tr8afsportactivities of HC consistof export, import and transit traffic from the Federal Republic of Germany and transit trtffic to Iraq and Turkey. Lately, the West European trade is showing an increasingtrend whereas Near/MiddleEast activitiesof HC are declining. Actual costs of most regular journeysof HC are calculatedat least quarterly,by the Financialand Costing Department,taking into account weight and distance, the type of load, standard of roads traversed,frontiers crossed (with consequentwaiting time), internationalcharges to be met, terminal times, etc. Rates are determinedby the CommercialDepartment and are varied by back-haulpossibilities or agreements,while back-haulrates themselvesare carefullycalculated to keep empty-runringto a minimum and to take ad-Aazageof any suitable trafficwhich may be available. Much of the transit traffic carriedby HC from Western Europe to the Middle East originatesas back-haul. HC attachesgreat importancein having Bank assistance in implementingthe ICIS which is currentlybeing proposed and introducingany complementaryinstitutional changes.
2.60 HC, formerly responsibleto MTCC for safety and the operationof its business is now independenton operationaland financialmatters. Safety is still overseen by MTCC. HC's internalresources are adequate for the f:nancingof their replacementvehicles and for most other capital expendlitureneeds. However, to retain and expand their market share in the highly competitiveinternational freight business, HC borrowed their convertiblecurrency needs to purchasemore fuel efficient, lighter and larger trucks (para. 2.35) from NBH, who received financingunder the ongoing transportproject and a complementarlB-loan. In accordancewith arrangementsmade under the ongoing project,HC is repayingon-lent funds from the NBH over a seven year period. NBH is committed to relendingany portion of these funds not needed to service debt, under Ln 2557-HU to HC, During the proposed project period there would only be a limitedneed for furthervehicle financing,which should be obtainable throughsupplier credits. HC is a profitablecompany which during recent years has maintaineda pre-tax profit of about 202 and an operating ratio of about 802 (para. 5.19). It also has a keen interest in Bank assistance to improve inter-modaloperations both at home and abroad. - 30 -
D. Budapest TransportComPanY (BKV)
General
2.61 Public transportservices in Budapestare provided by a multi-modal municipal company, The Budapest TransportCompany (BKV). This company was establishedon January 1, 1968 by the merger of then exsiting seven transport enterprisesdealing with bus, tram trolleybus, local railway and passenger boat, to operate an integratedpublic transportservice for Budapest. BKV operates under the joint oversightof the City Council and the MTCC. The BKV's 1,000 Km service network (Map IBRD - 20796) features street buses, metro, tramways,trolley buses and suburban trains. Services are extensive both in time and space and reasonablyfast with an average operating speed of about 18 km/hr. The Company employs a staff of about 24,6G0 and has a fleet of aobut 3,800 vehicles and carries in excess of 5 million passengersper day (Table 23).
InstitutionalRelations
2.62 Budapest is governed by a 151-strongMunicipal Council, drawn from its 22 districts,headed by a 15-man ExecutiveCommittee of the Council. Concerningurban transportmatters, staff functionsfor the Committeeare performedby Budapest TransportAdministration (BTA). The BTA has the administrativeauthority over the BKV and its 40 staff concern themselveswith matters such as transit routes and stops, trafficand parking management, vehicle and driver licensingand longer term developmentof transportservices and the road networks. The functionalauthority over the BKV belongs to MTCC, whose transportationDepartment oversees operationsof all public transport enterprises.
2.63 BKV went through several cycles of development,from greater independence of modally defined units (metro, tramway,bus, trolley bus, local train etc) to a highly centralizedsystem and now again moving towards decentralization. The current organizaitonis shown in Chart 4.
OperationalCharacteristics
2.64 According to the traffic census of 1980, about 4.5 million (origin-destination)motorized trips are made in Budapest on an average vork day, of which about 83X are internal to the area, the balance being external and through trips. Modal split for motorized trips is about 80% by public transportand about 20% by car; this is as much a result of an extensiveand low-fare public transport system (paras 1.07 and 1.15) as of a low car-ownership(about 170 cars/1000population in Budapest compared to similar sized western European cities such as Berlin or Stockholmwith about 315 and 250 cars/1000population respectively). Two-thirdsof all trips are work related. In 95% of the city area the maximum t'-atpeople have to walk to the nearest bljs,tram or metro stop is 400 metres. BKV's traffic is expected to remain more or less at the same level over the next decade.
2.65 Crowding is common in peak hours. The operationalcapacity of BKV is estimatedas about 28.7 billion space-km (seats and standing places) wherein different types of vehicles contributeapproximately as follows: 42Z bus, 3% -31 - trolley bus, 202 tramway, 20% metro, 152 suburban railway. The fleet availabilityfor service is about 811 and the average operatingspeeds (25.8 km/hr for metro, 18.3 km/hr for buses, 15.3 km/hr for the tramway) are reasonable (Table 24). As for staffing,aggregate staff of BKV per equivalent bus is 3.9, which is reasonable,taking into considerationlong hours (14-16 hours a day) of operationand frequent services,although the number of non-operationalstaff (about 5,500) appears to be relativelyon the high side. The managementand staff of BKV are technicallywell qualifiedand competentand have been quick to grasp Bank-stylecost-benefit analysis.
Pricing, DevelopmentStrategy and InvestmentPlan
2.66 BKV's fares are low vis-a-visoperating costs (paras 1.15 arc 1.21) and at present cover only about 28% of total costs of BKV o eracions. The fare system is simple: a single blue bus ticket costs Ft 3 and the yellow ticket (for tram, trolleybus and metro) costs Ft 2; these are valid for given lines only, independentof its length. Besides there are concessionalmonthly tickets widely us d by the public. What BKV revenues do not cover is made up from two sources, in accordancewith orescribedformulae, designed as incentive to performance;a "supply" subsidy from BudapestCity Council, Ft 160 for each space-km put into service, and a "demand" subsidy from the State, amounting to over 2 Ft for each Ft of trafficrevenue earned. In the years 1986 and 1987 the range of Governmentsubsidy per annum stood at Ft 7-8 billion (or US$ 165-170 million).
2.67 Modernizingtraffic operationsand organizationof the in'egratedBKV network are the critical tasks of BKV. In the face of stagnant traffic, BKV attac'.esa special emphasis on improvingthe quality of service. One of the most importanttasks is to maintain the speed of the commercialvehicles at least at the same current level, inspite of continuouslyincreasing motorization(including private transport)in the urban area. BKV's main focus is therefore,on cost-reducingand increasedproductivity-oriented investments. Towards this objective, trafficmanagement has been pursued actively in Budapest. Some 470 intersectionsare inter-connectedand controlledby a central computer. Limited stops and express bus services are being introducedto make the system more cost-effective. Introductionof one-personoperation (eliminatingconductors altogether) for bus and tram traffic has been of great significanceas it releasedabout 7,500 operational staff from the system. BKV intends to introducethe one-personoperation (discontinuingthe serviceof guards) on the metro and on the suburban railway also, in a phased manner over a longer time period dependingon the availabilitvrof resourcesneeded for the high-priceequipment for operation of such systems.
2.68 The BKV's own investmentsin the Sixth Plan (1980-85)period were about Ft 7.3 billion (about US $150 mill). In addition,the Governmentgave capital grants for all metro and tramway construction. In the Seventh Plan (1986-90),BKV's own investmentsare expected to increaseto about Ft 9.8 billion (about US $200 million - Table 24). Track rehabilitationand workshop facilitiesacccunt for a major share of the investments,which are need-based. The followingtable 2.4 gives annual investmentfigures for the ten-year period 1983-1993for BKV indicating,in addition,the capital expenditures(actual and planned) for all metro in the Budapest region during the same period. - 32 -
Table 2.4: BKV's Investments actual and planned) 1983-1993 (in current prices)
in FT mi'l aL Total o f w h I c h State Investments Vehicles Construction Workshops/ Depots Grants Year of 0KV deeIln"taaint/total develD/ maint/ total devela/ maint / total Metro 1983 2045.0 - 593.2 593.2 190.0 760.1 950.1 105.8 45.3 151.1 1581.0 1984 1822.2 - 453.3 453.3 123.8 701.3 825.1 87.4 58.3 145.7 1688.0 1985 1798.6 - 586.0 586.0 35.4 671.8 707.2 45.8 183.1 228.9 1648.0 1986 2009.9 - 476.2 476.2 148.0 779.1 927.1 147.5 98.3 245.8 1373.0 1987 2259.5 - 571.6 571.6 226.9 907.9 1134.8 100.6 100.6 201.2 1584.0 1988 2264.9 - 504.1 504.1 84.5 973.8 1058.3 165.8 165.7 331.5 1188.0 1989 2378.1 - 866.2 866.2 86.5 995.5 1082.0 115.1 172.7 287.8 1500.0 1990 2497.0 - 795.4 795.4 115.0 1034.8 1149.8 89.0 200.7 289.7 1600.0 1991 2746.7 - 944.9 944.9 99.9 1149.9 1249.8 103.0 229.3 332.3 1800.02/ 1992 2801.6 - 963.8 963.8 140.2 1134.5 1274.7 98.3 240.7 339.0 2500.02 1993 2857.7 - 983.0 983.0 130.0 1070.2 1300.2 103.7 242.1 345.8 3500.02 il Indicatesnegligible 2/ Includes1200, 2500 and 3.500 nill.Ft investmentson the extensionof blue line H3 metro to replace the existingrapid tramway system. - 33 -
2.69 On the whole the transportsector investmentplan is need-based,and economicallyand technicallysound. While a substantialportion of the investmentsis for efficientmaintenance of the system, it is also evident that a considerablesum is being planned for investmentin the early 1990's for the extensionof the metro's blue line to replace the existing rapid transit tramway. In view of severe resourceconstraints, the priority of that investmentneeds to be carefullyevaluated. At negotiationsan agreement were reached that a detailed feasibilitystudy will be carried out to assess the economic viabilityof the extensionof the metro'sblue line and that the project will be undertakenonly if it is found to be economicallyjustified.
5076UV/ 1-43 - 34 -
III. THE PROJECT
A. Background
3.01 Given the present trend of Hungary'seconomic adjustment programs, which emphasize increasedexports and liberalizedimports to promote competition,a higher premium is being placed by the country on the more efficientoperi,tion of those existing transportassets carrying significant volumes of foreign trade and on investmentsdesigned to remove critical bottlenecksin internationaland transit transport. Hungary'stransport sector provides significantexport services, earning substantialforeign exchange (para. 1.03). More than one-fourth of the gross productionvalue of transportationenterprises as a whole is generatedfrom international activity. The proposed transportproject, as a follow-upof the first transportproject, would address the major problem areas in ongoing operationsas well as many of the transportsector policy issues (paras. 1.14-1.20).
B. Objectives
3.02 The proposed project is designed to reduce transportcost, increasesystem-wide operational and maintenanceefficiency, increase foreignexchange earnings,increase competitionin transportmarkets, improve the environmentin Budapest and upgrade transporttechnology. It includesappropriate action plan, highlightingpolicy improvements necessaryto mitigate the present deficiencies,with a time phased implementationschedule.
3.03 To achieve these objectives,the proposed project would specificallyseek to:
(a) increase economic and operationalefficiency as well as increasingforeign exchange earnings, in the transport sector, through selectiveinvestments on transit facilities, managementinformation reform and technologytransfer;
(b) accelerateand expand the national program of pavement strengtheningand sealing;
(c) increasemaintenance cost effectivenessand efficiency through selectiveinvestments on plant and equipment;
(d) ease critical transportbottlenecks by constructionof an importantmissing link on the Budapestbypass and upgrading the service level of railway track, both of which inhibit transitand internationaltransportation; and
(e) improve sector policies througha constructivedialogue between Bank and responsibletransport authorities on transportpricing, users' contributions,transport regulation,and transportinvestment, including treatment of uneconomicrailway lines. - 35 -
C. Description
3.04 The project componentsare suimmarizedbelow and described subsequentlyin more detail. All are high priority items included in the on-going InvestmentPlan. They comprise:
(1) Railway Components MAV
(a) computer-aidedwagon and locomotivecontrol systems, as well as freightand financialmanagement systems;
(b) recyclingplant for used rails; and
(c) track maintenanceand constructionmachines.
(2) Hungarocamion Components - HC
(a) integratedand computerizedinformation system; and
(b) handling equipmentfor transitdistribution stores.
(3) Highway Components
(a) constructionof the second segment (13.8 km) of the new, four-laneBudapest bypass (M-O motorway)between highway No. 6 and the M-1 motorway;
(b) engineeringsupervision and project management;
(c) M-O motorway emergencycall system;
(d) a program of periodicmaintenance of national roads, to acceleratepavement strengtheningand surface treatment;
(e) road maintenanceequipment and axle-weighingscales; and
(f) field and laboratorytesting equipment.
(4) BudapestTransport Company - BKV
(a) traffic informationand control system.
(5) Training Programand TechnicalAssistance
(a) training of personnel to familiarizethem with recent developmentsand trends in organization,network management, planning,marketing, engineering, operations, traffic safety, maintenanceand environmentalprotection; and
(b) trainingof staff in operationand maintenanceof computerizedmanagement information systems.
(6) Studies
(a) railwaycosting study; - 36 -
(b) river transportand port study;
(c) a study of managementand organizationimprovements for BKV; and
(d) a synthesisof road maintenancestudy findings.
Railway Components
3.05 Transport Management InformationSystem (TMIS) (Annex 3), would optimize MAV's existing capacity through improved: (i) wagon and locomotive utilization;(ii) operationalplanning; and (iii) terminaland marshalling yard management. The TMIS would concentrateparticularly on:
- locomotiveand wagon control; - managementof marshallingyards; - distributionof empty wagons; - customer information,including freight loading and unloading information; - data collectionfrom stations (using the intermediatepoint system); - containerand piggy-backtraffic; and - border station informationsystem (existingsystem would be adapted to MIS principles).
A passengertraffic control system and independentworkshop system will be inter-connectedlater and eventuallyTMIS will be connected to the InternationaiRailway Unions (UIC) informationsystem HERMES.
3.06 The proposed TMIS will be a hierarchicalsystem developed in accordancewith the organizationalstructure of MAV and is based otntwo identicalmain frame computers. One of them will control and manage all the teleprocessingsystem and store informationfrom the regional computers and the other one will perform back-groundand batch processing including MAV's existing batch applicationswith the possibility,in case of a failure, that either computer could quickly replace the other. The regional computerswill run as independentsystems, and will be interconnectedthrough a central main frame computer. MAV has developed it's own applicationsoftware for central main-framecomputer, which should be adapted, but for regional computersthey are going to buy an application package,which should meet their regionaldemands. MAV's existing data trensfer network will have to be extended to meet TMIS needs. The proposed loan would finance the direct foreign exchange cost of the computer hardware,software and related communicationequipment. The bidding documentswill emphasizethe performancespecifications needed from the proposed systems ano the bidders will have the flexibilityto submit alternativecost-effective solutions for the relatedequipment and will be fully responsiblefor obtainingthe required export licence (COCOM)". This arrangementwas discussedand agreed during the loan negotiations.
1/ The coordinatingcommittee for MultilateralExport. (This is a Paris-basedbody which controls the transfer of sensitive technology from the Western countries to the Eastern Block). - 37 -
3.07 Recycling Plant for Used Rails (Tables29 and 30). The proposed plant would expand and upgrade a small existing plant, which is limited to butt-weldingselected short rail sections, so as to efficientlyrecycle used rails and switches,salvaged from track renewal and during routine maintenanceof main lines, sidings and station track. The re-profiled rails (long-welded120 m) would be suitable for the heavier loaded and higher speed secondarylines. The plant would reduce the required supply of new rails, would increase the quantity of rails for track maintenance while reducing foreign exchange costs (importedenergy and iron-ore). The plant constructionwould consist of: (i) extensionof the track network sarving the existing plant; (ii) improvingand extending the rail handling system; (iii) providingnew machines for the rail re-profilingprocess; (iv) providing other related equipment;and (v) extendingthe existing plant building itself. Bank financingwould cover the direct foreign exchange costs of rail handling system and machines for the rail re-cycling process.
3.08 Track Maintenanceand ConstructionMachines (Tables29 and 30). MAV's fleet of track maintenancemachines is becoming obsolete (more than 50% have out-lived their normal useful life). Further replacementand modernizationof old, low-efficiency,limited capacity, track equipment is a high priority item in the on-going five-yearplan. MAV needs sufficient capacity to annually reconstructabout 150-200km of mainline, check anid correct track alignmentand profile on about 4,800 km of track and replace about 450 switches. During the proposed projectMAV intends to continue its modernizationprogram of track mechanizationthrough: (i) increasing capacity of the switch changing fleet; (ii) replacingobs!lete, medium capacity tampingmachines; (iii) installingwork-site and local radio networks;and (iv) acquiringadditional tools for track maintenanceas well as automatic welding equipment. The Bank would finance the direct foreign exchange costs of equipment importedfrom eligible countries.
3.09 Training Program (Table 26). To ensure that the objectivesof the project are attained, complementarytraining and assistance will be needed, in particular for both TMIS use and for the rail recyclingprocess. Assistance,which would be financed by the Bank under the proposed project, provides for about 62 man-monthsof railwaymiddle managementand specialisttraining estimatedto cost about US$420,000.
3.10 Railway Costing Study (Annex 6). The purpose of the study is to formulate an efficientcosting system for MAV, so as to make available to MAV's managementthe data needed for the continuousanalysis, comparison and control of costs. The system would also provide the basis for determiningfreight rates and passengerfares and for comparingcosts with thosc of other transportmodes. Outline terms of referencefor the study (Annex 6) were discussedand agreed during the negotiations. Agreementwas reached with the Government,during negotiations,that the study would be carried out by competent consultantsand would be initiatednot later than December 31, 1989 and completedby the end of 1990. The study is estimated to require about 25 man-months. The recommendationsof the study will be discussed with the Governmenttogether with a time-tableto implement the agreed recommendationsof the study. - 38 -
Hunsarocamion Components
3.11 Integratedand ComputerixedInformation System (ICIS)(Annex 4) would allow Hungarocamionto improveits performanceand operational efficiency,maintain and try to enlargeits shareof the international transportmarket and therebyimprove the country'sconvertible currency earningsfor transportservices. The ICIS systemof interrelatedhardware devicesand softwareprograms would supportRC through:(i) changingmanual proceduresand reducingthe numberof processes(ii) reductionof staff involvedin the inform-tionflow and (iii) improvingthe administrative informationflow. The hardwaresolution proposed by HC's consultantsis based on using computerswhich wouldbe installedat fourmain HC's branches,and will be connectedby PTT's telephonelines. The proposed loan would financethe directforeign exchange cost of the computer hardwareand relatedcommunication equipment. The biddingdocuments will emphasizethe performancespecifications needed from the proposedsystems and the bidderswill have the flexibilityto submitalternative cost-effectivesolutions for the hardwareand relatedsystem, within the COCOM constraints,making bidders fully responsiblefor obtainingthe requiredexport licence. This arrangementwas discussedand agreedduring loan negotiations. 3.12 HandlinsEquipment for TransitDistribution Store (Tables29 and 31). Equipmentto facilitaterapid loadingand unloading,to weigh packagesand to speed up relatedoperations in the exis:ingtransit distributionfacility. The rapidtransit distribution of packagesand high-valuedfreight to the customer'sdoor producesincreased foreign exchangeearnings and HC plans to substantiallyincrease the volume handled. The Bank loan would financethe direct foreignexchange cost of importedequipment. 3.13 TrainingProgram (Table 26). HC has prepareda trainingprogram of about 7 mall-monthswhich is estimatedto cost about US$80,000. This programwill includethe familiarizationwith recentdevelopment in strategicalplanning, marketing and the use of managementinformation systems,including training of staff for operationand maintenanceof the ICIS.
gighwayComponents
3.14 M-0 Motorway(Tables 29 and 32). Constructionand related engineeringservices for the 13.8km extensionof the M-0 motorway,between route 6 and both the M-7 and M-1 motorways,including four major interchangesand a number of overpasseshas very high priorityin the highwayinvestment plan. Completionof thismotorway section would serve to substantiallydecrease through traffic and congestionin the centerof Budapest,and would also permitgreatly increased use of the new Danube river bridgesand 14.2 km M-0 motorwaysection presently under construction,resulting in substantialadditional savings to road users. The proposedloan would financethe estimateddirect foreignexchange componentof the constructioncontracts and of relatedengineering supervision.
3.15 M-0 - EmergencxCall System(Tables 29 and 32). Roadside telephoneequipment connected to a centralemergency station in the motorwaymaintenance center (presentlyunder construction)would complement motorway - 39 - constructionand would be includedwider the proposed project, with the loan financingthe direct foreign exchange cost of these items.
3.16 Pavement Strengtheningand Surface TreatmentPrograms (Tables 29 and 32). Constructionand relatedengiieering for annual programs of pavement st;engtheningand surface treatment,to complementand accelerate the PRD's 1989-1991periodic maintenanceprogram for all national roads, is a high-priorityproject sub-comiponentwhich would support the first phase of the Government'seffort to eliminate the deferred maintenancebacklog. The proposed loan would finance the estimateddirect foreignexchange componentof agreed programsof maintenanceccntracts.
3.17 Road M intenanceEquipE2.it (Tables 29 and 32). Systematicrenewal of worn-out and sometimestechnically obsolete equipment is basic to effectivemaintenance of the road network. The project would include, for financingunder the loan, that portion of MTCCs' 1989-1992renewal program which requires convertiblecurrency expenditures. Included in the renewal program would be axle-loadweighing devices while the added capability category would includefield testing and laboratoryequipment destined to improve the presentpavement management system and to expand maintenance quality control to the entire public road network.
3.18 Training Program (Table 26). The proposed trainingwould provide technicalstaff with visits outside of Hungary, for familiarizatiornwith recent developmentsand equipment in the fields of trafficsafety, pavement maintenancetechniques, pavement managementand environmentalprotection problems. The Bank loan would finance direct foreign exchange costs (about US$400,000)of sending Hungarian techniciansabroad (about 19 man-months) for short programs of study.
3.19 Synthesisof Road MaintenanceStudy Findings. MTCC will have the PRD prepare a synthesisof the findings of existing studies on road maintenancein Hungary, complementingthese with percinentinternational experience,including that gathered in the course of overseas visits financedunder the ongoing project, with the objectiveof formulating longer term maintenanceand financingstrategies. In parallel,ano in part as input for strategy formulation,it will closelymonitor the effect of expandedcompetitive bidding for maintenancecontracts on maintenancecosts and efficiency. During negotiations,the Governmentagreed that it will review with the Bank, from time to time, the progressmade in these evaluationsso as to agree with the Bank by December 1990 on appropriate policies,including funding levels, to rehabilitateand thereafter adequatelymaintain the national road network.
Budapest TransportCompany (BKV) Component
3.20 The Traffic Control System of the Budapest TransportCompany (BKV) (Annex5), would optimize BKV's existing capacityand influenceon operationalcost reduction. BKV's operationswill be improvedby:
- improvementin keeping time-tables; - reducedwaiting time at traffic-lights; - reduced fleetsize; - 40 -
- reduced energy consumptionin Budapest generally;and - better service to passengers.
3.21 The Traffic Control Stystem will consist of three interrelated sub-systems:
Sub-system1 will improvevehicle dispatchingand control by automaticvehicle mo:itoring. A modern radio conmunications network (about 300 radio stations)will be installedto enable communicationsbetween vehicles and dispatchingcenter.
Sub-system2 is a computer aided traffic-lightcontrol system based on informationcoming from the sub-system1.
Sub-system3 will be a computer aided power control system. This system will control proper operationsof electric supply network and it will influenceelectric consumptionbased on data coming from sub-system1.
The p--curementof hardware and related system will be carried out on similar lines as TMIS of MAV and ICIS of HC.
3.22 Training Program (Table 26). The proposed training program woild familiarizedBKV's staff with recent developmentsin the fields of the managementand organizationimw)rovement and results of the computerized traffic controlsystem applications. The Bank assistanceprovides about 9 man-monthsof BKV's managementand specialisttraining estimated to cost about US$50,000.
3.23 BKV's Organizationand ManagementImprovement Study. The objectiveof the study is to identifynon-investment and/or low cost methods, particularlythe institutionalchanges throughwhich the BKV would increase effectivenessand efficiencyand become more competitiveand market responsive. The study, which would be carried out by consultants acceptableto the Bank, is estimated to require about 30 man-months,and the Bank assistancewould be about US$200,000to meet all direct foreign exchange costs. The study would be initiatedno later than December 31, 1989 and completedby the end of 1990. Outline of terms of reference for the study (Annex 8) were discussedand during loan negotiationsit was agreed that they would be finalizedafter consultationwith the Bank. The recommendationsof the study will be discussedwith the Governmenttogether with a time-tableto implement the agreed recommendationsof the study.
River Transportand Port Study
3.24 The economic role of river transportand river ports in Hungary and their future developmentneed to be assessed in the light of various factors: completionof the Danube-BlackSea Canal, completionin 1991 or 1992 of the canal linkingRhine and Danube, the policy of the European Community to protect river transportoperators in member countriesof the communityagainst outside competition,the aging of existing river port facilitiesin Hungary (in particularCsepel Port). The study would in a first phase collectand review existing informationand studies in the - 41 - above areas, both inside and outside Hungary, and would on this basis outlinealternative scenarios for river transportdevelopment in Hungary. Environmentalconsiderations would be addressedby the study. A detailed work program comprisingfeasibility studies and detailed engineeringwould be drawn up on the basis of the findings of this first phase. The study would be carried out by a joint venture of expatriateand national consultants,would be started by December 31, 1989 and completedby June 30, 1991. The study will be supervisedby the Bank and its findings will be discussedwith the Government. Outline terms of referencesfor the study (Annex 7) were discussedand agreed with the Governmentduring the negotiations. The recommendationsof the study will be discussedwith the Government togetherwith a time-tableto implementthe agreed recommendationsof the study. The study is estimated to require about 30 man-months,at an estimated cost of about US$300,000of which all direct foreign exchange costs (about $US200,000)would be financed from the loan.
TransportSector DevelopmentStrategy
3.25 The proposedproject will continue the Bank's efforts initiated under the first transportproject to further improve the efficiency in the Sector. Specific policy reforms (para 1.18) will be an integralpart of the proposed project. Assurances satisfactoryto the Bank were obtained from the Governmentduring negotiationson the key elements,such as reductionin passengertransport subsidies, introduction of cost-based pricing, rationalizationof road user charges etc. (para. 1.18 (a) through (h)).
D. Engineering
3.26 Detailed engineeringfor railway works and detailed preliminary engineeringfor highway works is substantiallycomplete and is satisfactory for establishingproject costs. Designs for the recyclingplant (for used rails) were preparedby MAV's planning institute,which preparesall detailed engineeringand studies for MAV. Detailed engineeringfor the motorway and overpasses is substantiallycompleted (para 2.40). The timetablesfor finalizingall engineeringswere discussedand agreed during loan negotiations. Both organizationsare well staffedby competent professionals.
E. Cost Estimate
3.27 The total project cost (includingcontingencies, taxes and duties) is estimatedto be about US$250.0 million with a foreign exchange component of US$95.0 million or 38% of the total project cost suitable for Bank financing. Cost estimateswere preparedby the agencies concernedand consultantsto NTCC, on the basis of engineeringquantity estimatesand unit prices for similarworks, updated to end 1988 prices. The direct and indirect foreignexchange component for civil works was estimatedat 452 of the contractcost while the cost of direct imports alone at international prices was estimatedat about 35% of total cost. This is consistentwith the values for similar civil works on the on-going M-0 motorway project. Project costs by componentsare summarizedin Table 3.1. The project cost per component(with training,technical assistance and contingencies included) is estimatedfor the railway componentat US$66.8, road transport - 4 - at US$17.9 million (HC), highway componentat US$152.8 million, and urban transport(BKV) at US$12.5 million. Physical contingenciesof 15% of the costs have been calculatedfor civil works, 2% for the rail recycling plant, 5% for TMIS and BKV traffic control system and lOS for ICIS. Taxes and duties were estimated to amount to about2OS and are consisting principallyof duties on importedequipment. VAT ranging between 10X and 20X have been calculatedand showr in local costs in the table attached. Price contingenciesare based on cost escalationas shown in footnote to Table 3.1.
3.28 The proposed Bank loan of US$95.0 million would finance: the MAV's direct foreign exchange cost of the railway equipmentand training (US$28.1 million); 35X of the highway civil works and road strengtheningand surface treatmentcosts, and the full direct foreignexchange cost of the hignway maintenance,telephones, exle load control, quality control, pavement managementand laboratoryequipment, training and technicalassistance (US$56.6million); the full direct foreign exchange cost of the Hungarocamionsub-components including training (US$6.8million); and BudapestTransport Company (BKV) component includingtraining and technical assistance(US$3.5 million). During negotiationsthe project cost estimatesand the Bank financed project componentswere confirmedwith the Government. - 43 - Table 3.1: HUNGARYX PROPOSED SECOND TRANSPORT PROJECT PROJECT COST ESTIMATE (End 1988 prices)" Suitable FEC X for Bank Forints millions USS mtillions of Financing Proaect Comnmcnents Lgan*1 Foretan Total Local foregtn Total T,otal IUStiiljonn A. Railway Comonent 1. Transport management information system (THIS) 1.040 S1S 1.SSS 20.0 9.9 29.9 33.1 9.9 2. Recycling plants for used rails and switches 603 427 1,030 11.6 8.2 19.8 41.4 8.2 3. Track maintenan'e and constructionmachines 125 338 463 2.4 6.S 8.9 73.0 6.5 4. T-aintng and TA 21 .1 42 0.4 0.4 0.8 50.0 0.4 Base Cost 1.789 1,301 3.090 34.4 25.0 59.4 42.1 25.0
Physical contingencies 67 35 102 1.3 0.7 2.0 35.0 0.7 Price contingenctes 0A5 296 701 -3 0 2.4 _Z5A 44.4 2.4 Sub Total (A) 2.261 1.632 3.893 38.7 28.1 66.8 42.0 28.1
3. Hunuarocamitn 1. Dev. of Integrated computerized informationsystem (ICIS) 260 260 520 S.0 S.0 10.0 SO.0 S.0 2. Handling equip. for transit dist. stores 239 52 291 4.6 1.0 5.6 17.8 1.0 3. Training S S lo 0.1 o 1 0.2 50.0 0.1 Base Cost 504 317 821 9.7 6.1 15.8 38.6 6.1
Physical contingencies 36 16 52 0.7 0.3 1.0 30.0 0.3 Price contingencies __2 60 162 0.7 0.4 I,1 3fi.4 0.4 Sub Total (8) 642 393 1.035 11.1 6.8 17.9 38.0 6.8 C. Highwav Comoonent 1. Civil works 1.737 936 2.673 33.7 17.7 51.4 35.0 17.7 2. Engineering and project 203 26 229 3.9 OS 4.4 11.3 0.5 management 3. M-0 Emergency call system 21 31 52 0.4 0.6 1.0 60.0 0.6 4. Road Maintenance Equipment. 47 213 260 0.9 4.1 S.0 80.4 4.1 S. Field and Lab. testing Equip. 10 94 104 0.2 1.8 2.0 90.0 1.8 6. Road Strengtheningand surface 2.418 1.302 3.720 46.4 25.0 71.4 35.0 25.0 treatment 7. Training and TA 26 32 58 0.5 0.6 1.1 _54.5 0.6 Base Cost 4.462 2.634 7.096 86.0 50.3 136.3 36.9 50.3
Physical contingencies 208 140 348 4.0 2.7 6.7 40.0 2.7 Price contingencies 765 470 1235 6.0 3.6 9.6 37...5 3.62 Sub Total (C) 5.435 3.244 8.679 96.2 56.6 152.8 37.0 56.6
0. BKV Cooonent 1. Traffic control system 405 140 545 7.8 2.7 10.5 26.0 2.7 2. Training and TA o0 I6 __26 0.2 0.3 0.5 60.0 .3 Base Cost 415 156 571 8.0 3.0 11.0 27.3 3.0
Physical contingencies. 16 1Q 26 0.3 0.2 0.5 40.0 0.2 Price contingencies. 92 33 12S 0.7 _.3 1.0 30.0 0.3 Sub Total (D) 523 199 722 9.0 3.5 12.5 28.0 3.5
Total Base Cost 7.170 4.408 11.578 138.1 84.4 222.5 37.9 84.4 Physical contingencies 327 201 528 6.3 3.9 10.2 38.2 3.9 Price contingencies3' 1364 __859 2223 10.6 6.7 17.3 29.2 6.7 TOTAL 8tjj6 S-468 14 329 15i.0 95.0 250.0 3a.0 9S.0
J/ Exchange rate of US$1.(= Forints 52.00.
2J Custom duties and taxes were included; 3 Based on the following annual inflation rates (in % terms) of: 1a 1Ma 199-93 Local costs 10.0 8.5 7.0 Foreign costs 3.0 3.0 4.0 507U.P.53 - 44 -
F. Financing
3.29 The estimated costs of the project together with proposals for the Bank financingare summarizedin the table below:
Table 3.2: ProjectFinancing
Proiect Cost Source of Financing Prolect Component Local Foreien Total Bank Loan Balance of Funds Required Own Gov't. Resources -- US$ Million…------Railways 38.7 28.1 66.8 28.1 -- 38.7 Highways 96.2 56.6 152.8 56.6 96.2 Hungarocamion 11.1 6.8 17.9 6.8 -- 11.1 BKV 9.0 3.5 12.5 3.5 -- 9.0 Total: 155.0 95.0 250.0 95.0 96.2 58.8
3.30 The balance of US$38.7 million (local costs) required for the railway componentof the project will be met from railway'sown internally generated resources. No financinggap exists for the railway component. For the highway componentthe Bank will finance the direct foreignexchange componentof the total costs. The Governmentwill finance the local cost componentof the highway program (US$96.2million equivalent). For the HC and BKV componentsof the project, the Bank would finance the direct foreignexchange costs, while the remaininggap of US$11.1 and US$9.0 millions (local costs) would be financed,either entirely by their own resources,or by a combinationof own resourcesand domesticbank credits. During negotiations,the above project financingdetails were reviewed and confirmedwith the Government.
G. The Loan, the Borrowerand the Beneficiaries
3.31 The Borrower for the proposed loan would be the People's Republic of Hungary. The beneficiariesof the projectwould be MAV (railway component),HC (internationaltrucking company component)MTCC (highway componentincluding River transportand port study) and BKV (Budapest TransportCompany component). MTCC, as a governm-entministry, would receive project funds throughnormal channels. The Bank would enter into Project Agreementswith MAV, HC, and BKV to whom the Governmentwould on-lend loan funds. Onlendingterms would be for a 15 year period which woLld include a grace period of 5 years. The onlendingrate of interest will be at the Bank's rate plus a premiumof 20% or in accordancewith the Monetary Credit Policy Guidelines,adopted each year by resolutionof the Government'sCouncil of Ministers,whichever is higher. The foreign exchange risk would be borne by the Government. These arrangementswere confirmedwith the Governmentduring negotiations. Signingof subsidiary loan agreementsbetween the Governmentand MAV, HC and BKV, satisfactoryto the Bank, would be a special conditionof loan effectiveness. - 45 -
H. Implementation
3.32 Qualifiedconsultants would be engaged by MTCC to provide overall coordinationof all project related activities,to monitor progress and ensure that the various executingagencies comply with reporting requirementand schedules. Such coordination,on the first transport project, is generallyfunctioning well but the consultant'srole would be slightly strengthenedto permit them to exercise quality control of bid document,reports, etc., on behalf of MTCC. During negotiations confirmationof this arrangementwas obtained from the Governmentas well as confirmationthat each executingagency (MAV, HC, BKV and MTCC) would appoint an officer to be responsiblefor all project relatedmatters of their componentand to serve as counterpartto consultant'sstaff. This would be a special contditionof loan effectiveness.
3.33 Railway Component. MAV would be responsiblefor implementationof all railway related activities. Its Material Supply Organizationwould procure the track renewal and maintenancemachinery, material and equipment for the rail recyclingplant and TMIS's equipment,eligible for financing under the loan. The constructionworks for the rail recyclingplant would be carried out, by MELUEPITO,an independentlymanaged enterprisewhich customarilyexecutes all railway constructionworks. The supervisionand acceptanceof the work would be the responsibilityof MAV'S Investment Institute(MAV BERUUAZASI-IRODA)which is well staffedwith experienced graduateengineers and technicians.
3.34 Road Trucking Component. HC's TechnicalDirectorate would be responsiblefor preparationof technicalspecifications and for arranging for procurementof equipment,including manufacturer's assistance in installationthereof. Constructionof the additionalnew transit distributionstore would be undertakenby local contractors.
3.35 Highway Components. The Ministry of Transport,Commnication and Constructionwould be responsiblefor managing implementationof the highway components. The investmentmanagement company UTIBER--'would be engaged by MTCC to directly manage civil works constructionof the M-O motorway, includingpreparation of bid documents,providing assistance to MTTC in contractorprequalification and bid evaluationin addition to normal site supervision. PRD, with assistance f consultantswhen necessary,would oversee and coordinatethe PRMC's in engineeringand prioritizingthe road sections to be strengthenedor sealed as a part of annual programs of contractswhich would be eligible for financingunder the proposed loan. The 1989 programwill be prepared for review by the Bank by March 31, 1989. For subsequentyears the proposed programs would be sent to the Bank not later than December 31st of the precedingyear. The arrangements(in paras. 3.32-3.35)were confirmedduring loan negotiations.
I/ UTIBER is customarily employed by MTCCto manage and supervise major civil works contracts (para. 2.42). It is staffed by competent professionals who have satisfactory experience in all aspects of contractmanagement, and has fulfilledthis role well on the ongoing project. - 46 -
3.36 Road maintenanceequipment would be procured by an agency specializingin heavy equipmentpurchase, which would prepare the bid documents and generallymanage the bidding procedureson behalf of MTCC. The equipment service (UTINFORM)of MTCC would be responsiblefor preparing equipmentspecifications and evaluatingbids. A similar arrangementwould app'y in connectionwith procurementof instrumentsand testing equipment. These arrangements,which provide a satisfactoryblend of procurementand technicalexpertise, were confirmedat the time of negotiations.
3.37 Budapest TransportCompany (BKV) Component. BKV's Technical Departmentwould be responsiblefor implementationof all project related activities,including engineering, bidding process with procurementand installation,with testing.
3.38 Draft bidding documents, includingoutline technical specificationsfor items to be procuredwere discussed in general terms with the Governnientduring loan negotiations.
Project ImplementationSchedules
3.39 Most project componentsare scheduled to be com'leted by 1992, except the M-0 motorway civil works sub-componentwhich will not be finished until 1994. The project completiondate would be December 31, 1994 and the loan closing date would be June 30, 1995. Allowing for some slippage, this would allow sufficienttime (over six months) for the release of securitydeposits on supply contractswhere performance guaranteesare specified,and for effectingfinal payments for civil works. Project implementationschedules, shown in Tatles 30, 31, 32 and 33, were confirmedduring negotiations.
3.40 Land acquisitionis a lengthyprocess in Hungary, and has been started in early 1989. The Governmenthas stated that every effort would be made to ensure that all land has been acquired by the time that constructioncontracts are let and we do not expect any problem. During negotiationsassurances were obtained from the Government,that all land needed for the projectworks would be acquired not later than mid 1991.
3.41 Progress made in implementationof the policy and institutional reforms incorporatedin the proposed project will be monitoredthrough the Bank's usual supervisionactivities and annual reports to be prepared by the Government. These reportswhich will cover all policy and institutionalreforms included in the Action Plan will be reviewed by the Bank. The format of these reportswere discussedand agreed during negotiations.
I. Procurement
3.42 The M-0 motorway constructioncontract and paverant strengthening contractsestimated to cost more than the equivalentof US$3 million "
1/ The same thresholdas is used on similar projects in neighbouring Yugoaslavia - 47 - would be awarded to prequal.ifiedcontractors after International CompetitiveBidding (ICB) in accordancewith the Bank's Guidelines. Pavement strengtheningand surface treatmentconstruction contracts, estimated to cost less than the above threshold,would be awarded to qualified contractorsusing locallyAdvertised Competitive Bidding (LCB) procedures,also in accordancewith the Bank's Guidelines. The geographicalscattering and small size of such contractswould make them uninterestingto foreign firms who, nonetheless,would not be excluded from competingin accordance with HungarLanprocedure should they wish to. Hungary has previousexperience with ICB for civil works which was used to contractsroad and bridge constructionunder the ongoing Transport Project. Hungary has also been evolving the use of LCB for some of the larger Governmentfinanced road works. During negotiationsthe Government agreed that the proposed annual programs of pavement strengtheningand sealing contract,which would be reviewed by the Bank, would include the estimatedcontract costs as well as the proposed schedulesand organization for invitingand evaluatingbids.
3.43 Procurementof high-technologycomputer hardware for MAV's proposed TMIS and HC's proposed ICIS and BKV's trafficcontrol system requires particularattention, on the part of these agencies, to obtain up-to-date technologythrough ICB which nonethelessconforms to COCOM restrictions. For this reason bidding procedures,in accordancewith the Bank's guidelines,have already been initiated. Since all agencies are deeply interestedin having their systems installedas soon as possible,no substantialdelay to the project is anticipated.
3.44 All railwayequipment will be procured through ICB. The list of equipmentand materialsagreed between Governmentand Bark for financing under the Loan, which are shown in Table 29, are almost entirely unavailabiefrom local manufacturers. However, should domestic manufacturersparticipate in the bidding they wouli be accorded a preferenceof 15%, or the applicablecustoms duties, whiciteveris lower.
3.45 Highway maintenanceequipment, (Table 29) axle load scales, roadside telephonesystem and traffic countingequipment would also be procured through ICB. Laboratoryand field testingequipment, not exceedinga cost of US$ 150 thousandper contract,would be procured through InternationalShopping due to the limitednumber of suppliersof the required items, with at least three suppliersfrom three different countriesinvited to bid, or throughdirecc contracting,if the equipment is proprietaryin nature. Internationalshopping is expected to be limited to an aggregateof about US$ 2 million, however, in keepingwith a broad agreementbetween the Bank and the Governmentto standardizeloan conditions,an aggregate limit of about 152 of project cost would be reflected in the loan agreement.
3.46 Hungarocamion'sequipment would also be procured through ICB. The list of equipmentagreed between the Governmentand the Bank for financing under the loan (Table 29) are consideredunavailable from local manufacturers. However, any domestic manufacturerswho might participate in the bidding, would be accorded a preferenceof 152, or the applicable customs duties, whichever is lower. - 48 -
3.47 All ICB for procurementof goods or works would be in accordance with the Bank's Guidelines. The M-0 motorway constructioncontract, the first three contracts for pavement strengtheningor sealing and all contracts for bidding lots of goods of US$1.0 million equivalent or more would be subject to prior review by the Bank. This would include an estimated40 contracts for goods, amounting to 90 2 of the total cost of equipmentand materials financed by the proposed loan. Contracts for lesser amounts and the subsequent road maintenancecontracts would be subject to ex-post review. Procurementof consultingservices includingtraining would also be in accordancewith the Bank's guidelines.
3.48 The procurementarrangements described above (paras. 3.42 through 3.47) were agreed with the Governmentduring negotiations. Table 3.3 provides a summary of the type of procurementwhich would apply to goods, works and services included under the project. - 49 -
table 3.3: PROCUREMENTMETHOD" (US$ Million) a, I/ Not V. A. Railway THIS 11.2 - - 19.6 3.2 34.0 (11.2) - -- )- (11.2) -Rail recycling plant 9.4 - - 11.0 1.6 22.0 (9.4) - - - ( 9.4) -Track maint.machines 7.0 - - 1.8 1.2 10.0 i7.01 _7.01 (-_ Sub Total (A) 27.6 - - 32.4 6.0 66.0 (27.6) - - C-) (-) (27.6) B. Hunnar.ocami.en ICis 5.6 - - 4.3 1.2 11.1 (S.6) - - (-) (-) (M.O) Transit distribution stores 1.1 - - 4.9 0.6 6.6 LID) _ L_i L1 (LLU Sub Total (a) 6.7 - - 9.2 1.8 17.7 C. HjahwaXs (6.7) ) (-)6.?) C. linwx -Civil works 53.0 - - 13.5 66.5 (23.0) (-) - (-) (-) (23.0) -Engineering and project managt. 0.5 - - 4.0 0.2 4.7 (0.5) - - t-) (-) (0.5) -Road strengthening and surface treatment5 - - 71.4 - - 71.4 C-) (-) (25.0) (-) (-) (25.0) -H-0 emergency call system 0.8 - - 0.3 0.1 1.2 (0.8) - - (-) (-) (0.8) -Road maint. equipt. 4.7 - - 0.4 0.2 5.3 (4.7) - - (-) (-) (4.7) -Field & lab test. equipt. - 2.2 - - 0.2 2.4 -- I If2.0) l- I (2,01 Sub Total (C) 59.0 2.2 71.4 4.7 14.2 151.5 (29.0) (2.0) (25.0) (-) (-) (56.0)
Traffic control 3.1 - - 8.1 0.9 12.1 (3.1) (-) - (-) (-) (3.1) E. Services3 -Railway(Training) - - - 0.8 -- 0.8 (-) (-) - (0.6) (-) (0.6) -Hungarocamion (training) - - - 0.2 (-) 0.2 (-) (-) - (0.1) (-) (0.1) -HTCC (for highway training and river transp. study). - - - 1.3 (-) 1.3 # ;( ) - ~~(0.6)(-) (0.6) -BKV (study & training) - - 0.4 (-) 0.4
Sub Total (E) - - 2.7 (-) 2.7 LW LI iiI6. I6 96.4 2.2 71.4 57.1 22.9 250.0
GRAND TOTAL I6.41 L2.D0 L2L.0J (L1.E Li= 192L1
1/ Costs include: contingencies, taxes and duties; 2/ Either international shopping or direct contracting. 3/ Training. TA. and other local costs; 4/ Taxes and duties; 5/ A portion of these contracts may be let through ICS (para 3.42) Mote: Figures in parentheses are respective amounts financed by the Bank Loan.
S07osu,s - 50 -
J. Disbursements
3.49 Disbursements will be made to cover:
(a) 35Z of total expendituresfor civil works, road strengtheningand surface treatment contracts; and
(b) 100% of foreign expenditures (C.I.F.) and 100l of local expenditures (ex-factory cost) for railway equipnent and materials, road maintenance equipment, laboratory and testing equipment, HC's and BKV's equipment;
(c) 100% of foreign expenditures for technical licenses, consultants' services, and training.
With the exception of contracts valued at the equivalent of US$300,000or less all withdrawal applications will be fully documented. Disbursements against contracts valued at $300,000 or less would be made on the basis of statements of expenditures (SOE). Documentation to support expenditures financed under SOE would be maintained by the Borrower in one location and made available for review by Bank representativesupon request in addition to being audited by auditors acceptable to the Bank (para. 3.52). During loan negotiations confirmationwere obtained of the foregoingarrangements.
3.50 To maintain an adequate flow of funds available to the beneficiaries to finance eligible project expenditures(para. 3.28) with a minimum of administrativedelay, the Borrower will establisha Special Account (revolving fund) at the NBH sufficient to cover up to 4 months of project expenditures (i.e. about US$6.0 million). Records of the Special Account proceeds and outlays would be available for review by Bank supervisionmissions and subject to annual audit (para.3.52). During negotiationsconfirmation was obtained of the foregoingarrangements.
3.51 Based on the loan becoming effective in 1989, a schedule of estimated disbursementshas been prepared and is shown in Table 27. This schedule, which is based on the same assumptionsas were used on the ongoing First Transport project, indicatesa 5 years disbursementperiod which is close to average disbursementprofile for projects in Hungary. The schedule was discussedand confirmedduring loan negotiations.
K. Reporting.Accounts and Audit
3.52 The methodologyfor the preparationof progress and financiaireports and the need for a completionreport within six mnnths of the loan closing date were discussedand agreed with the Governmentduring the negotiationsand reflected in the agreed minutes. It was agreed that separate accounts would be used to record all project funds and expendituresand that the accounts relating to the highway componentof the project, as for MAV, RC, BKV and the Special Account would be audited each year by Audit Rt (para. 2.22). The accounts and the auditors report thereon would be provided to the Bank within - 51 - six months from the end of the fiscal year. These arrangementswere discussed and confirmedduring negotiations.
L. EnvironmentalImpacts
3.53 The project, as a whole, is expected to have a beneficial environmentalimpact, reducingair pollutionand accidents particularlyin Budapest. Road and rail improvementswill significantlyreduce fuel usage and air pollution through reductionin vehicle waiting times. The motorway design providesadequate sound barriers to protect residentialareas. The regulationsconcerning land acquisitionand compensationfor expropriated propertyowners were reviewed and are satisfactory. The design of the rail recyclingplant is in accordancewith the country'senvironmental protection Law and provides: (i) protectionof the occupationalhealth and safety of the workers and (ii) air pollutioncontrol, as well as treatmentand disposal of the plant's wastes. In addition the river transportstudy would include an assessmentof environmentaleffects. Assuranceon these points were obtained during negotiations.
50?7SV44-6 1 - 52 -
IV. ECONOMIC EVALUATIONS
A. General
4.01 An efficientand effective transportsystem is vital for Hungary which attaches a very high priority to the improvementof the external trade routes carrying about 50 million tons of freight traffic (import, export and transit) per year (para. 1.03). The Government is keen to make all transportoperations competitive, cost-effective and energy efficient. Many important links in the transportnetwork are at times overloaded, creating bottleneckswhose eliminationis urgent for the Government. Because of the high volume operationson a limited portionof the railway network, railway investmentsin Hungary are focused primarilyon those main lines with particular potentialfor improved internationalservices, so as to avoid dispersal of effort over a large national network. Within the highway system, radial roads spanning the country from Budapest to its borders are principal trafficarteries and are of international significance. At present mat-gement informationsystems in transport operations are particularlvweak.
4.02 The proposed project componentsare expected to address all these importantaspects: provide better informationfor managementthrough computerizedwagon and locomotivecontrol systems, divert heavy through road traffic away from Budapest city, enhance internationalcompetiLivet!ass of HC's foreign trade services through the developmentand implementation of an efficientmarketing and incentivesystem, facilitatetechnology transfer to MAV for recycling salvaged material (used rail) and improve BKV's transportservice quality with the introductionof a computerized traffic control system, which is in keeping with the Bank's country assistancestrategy. The pritcipalbeneficiaries of the propoF,d project would be users of railwayand highway freight services and Budapest public passenger transportservices, who due to the diversityof trafficusing the transportnetwork, come from a wide range of sectorsand income groups. The importantcommodities that would be particularlyaffected by the proposedmodernization and improvementsare raw and processedindustrial materialsas well as agriculturaland animal husbandryproducts. By reducing costs and improvingefficiency of transport,the projectwill also help to make Hungariangoods more competitivein the world market with beneficial effects on the balance of payments. The Budapestby-pass, in particular,would reduce congestion costs significantlyand support Hungary's efforts for energy conservation.
B. Project Costs and Benefits
4.03 The economic evaluationof the differentsubprojects is based on the feasibilitystudies undertakenby MAV, UVATERV, RC and BKV, which are in the project file (Annex 9). These studies were reviewedand discussed with the concernedagencies and a number of marginal subprojectswere reformulatedor postponedwhile more economicallyviable componentswere includedas a result of the review. - 53 -
4.04 The traffic projectionsfor the differentsubprojects are based on past traffic trends, origin-destinationstudies and planned increasesin productionand consumptionin the zones of influence. Accordingly,in case of MAV and BKV the traffic has been assumed to remain at the same level during project life. The traffic forecastsfor M-0 by-pass take into account normal traffic growth and, wherever appropriate,the additional traffic generatedby the proposed project over the normal project life.
4.05 For calculatingthe economic benefits and costs, international prices were used for imported equipment,materials and other tradeable commodities. As regards the latter, prices of mainline locomotivesand shunters produced in Hungary are significantlybelow the international price and have been adjusted accordingly. Land and other non-tradeable items like unskilled constructionlabor have been valued at local prices. Economic costs net of taxes were estimated for all investmentcosts, maintenancecosts and operating costs.
4.06 The quantitativeeconomic analysis for the improvementof MAV and HC's management informationsystem and BKV's traffic controlsystem takes into considerationthe major benefits from the better utilizationof the existing assets, reductionof empty haulage, improvementof loading of MAV's freight trains and turn around time and better load factor for BKV transportservices, so that the system will be consumingless and producing more. Expected benefits from the railway recyclingplants include reductionof expenses on new rails due to the use of salvagedmaterial (used rail). The economic benefits from the project road sections take into account savings in vehicle operating costs due to reduced congestion, improved road surfaces and reduced travel times. Expectedbenefits from the track and road maintenanceequipment include reductionin maintenance expenses of track, rollingstock and vehicles due to reducedwear, savings in manpower, i operatingexpenses (due to improved infrastructure facilities)and increasedproductivity. Benefits from improvedenvironment in Budapest city, due to diversionof heavy commercialvehicles from the city have not been quantified. Similarlybenefits due to enhanced quality of service and customer satisfactiondue to improvedmanagement information system have not been taken into account.
4.07 In selecting the proposed project components,several alternative solutionswere evaluatedsuch as constructionof roads on different alignmentsor by stages and developmentof management informationsystem for priority tasks in stages. For each project alternative,the most economic solution has been adopted. Salient details of economic evaluation are given in Annex 2 and detailed cash flows, trafficconfigurations around Budapest by-pass and other related details are available in the project file (Annex 9).
C. Economic Return (ER)
4.08 Based on the most probable estimatesof constructionand equipment costs, operatingand maintenancecosts, the proposed investmentson different project componentsproduce economic returns (ERs) ranging from 15-22% (Table 4.1). All investmentswould yield first year benefit - 54 - ratio (FYR) of 102 or more, indicatingthat they should be made as soon as possible. The weighted ave:age ER of all civil works and equipment components,which account for about 98% of total project cost is 20%. The above ERs understate the full benefits of the project by excluding environmentalimprovements, quality of service and customer satisfaction, comfort and convenienceof travellerson the improved facilities. Sensitivityanalyses were carried out to test the effect of variation in constructionand equipment costs and users' benefits on the above estimates. Even under the unfavorableassumptions of 15% higher construction/equipmentcosts combinedwith a 15% reduction in users' benefits, the ERs remain acceptablewithin the range of 12% to 22% with an overall weighted ER of 16%.
Railway Components
4.09 TransportManagement InformationSystem (TMIS). MAV's proposed TMIS covers primarilythree areas, namely, wagon management,locomotive management,and marshallingyard operationand inventorycontrol. The TMIS will be an online, real-timesystem that will record movement and status data about all railwaywagons and locomotiveson MAV's network by 1993. The system will be graduallyde-eloped and by 1990 about 2/3 of the MAV's trafficwill be coveredby the system concentratingmainly in the three railwayregions Budapest,Miskolc and Debrecen. Improvingthe availability and utilizationof wagons and locomotivesby knowing their locationsand status of loading/unloadingof wagons with the aid of computers is the principalfocus of the system. The computerassisted control system would help reduce wagon turn around cycle and improve load of rail wagons and utilizationof locomotives. Productivityimprovements through TMIS would enable MAY to avoid heavy investmentsin the purchase of new rolling stock because it could better use its existingfleet. In particular,the proposed system is expected to reduce significantlyt'ie detention of foreign rail cars in the MAV's network and thereby resultingin substantial foreign exchange savings (Annex 3). The proposed program is of special significancefor MAV's enhanced competitivenessand cost reductionefforts and the proposed investmentsare conservativelyestimated to yield a high ER of about 22% (Table 4.1 with footnote4). - 55 -
Table 4.1 ECONOMICRETURNS (ERsl AND FIRST YEARR&TURNS (FYRs
Project Proportion of Expected Sensitivity Expected Cgg=onent total investment ..ER ana.lvg1s FYR Lower I/ ..igher V RaiIwmv Railways ~~~~~~~~~estimateestimate (i) TransportManagement 14 22 3/ 16 2/ 28 1/ 14 2/ InformationSystem (TIAIS) 0ii) Recyclingplants for 9 16 13 19 10 used rails/switches (iii)Track maint. & const. -A 1 1A 22 tU equipment Sub-total 27 19 0/ 15 / 23 4/ 12 1/ Hihways
(t) Civil Works 23 1S 12 18 10 NO By-Pass (1i) Road Strengtheningand 32 30 22 38 20 Surface Treatment (i1i)Maintenance and 5 Ii1i 12 axle load control equipment Sub-total 60 23 4/ 17 4J 23 1/ 1iS Hungarncmiorn
*1) Devt. of Information s 22 17 27 14 and MarketingSystem (ICIS) (ii) HandlingEquipment for 3 Ii t2 U U transit dist. stores Sub-total 8 20 4/ 16 9/ 25 1/ 13 A/ Budan1st Transport Comnan LBKVI
TrafficControl System S 16 12 20 10 Grand total 100 20 41 16 9J 24 4/ 14 9)
lJ Assumes IS% increasein constructioncosts combinedwith IS% decreasein benefits. 2V Assumes 1S% decreasein constructioncosts combinedwith 15X increasein benefits. 3J Relates to the situationwhen COCO0Irestriction is expectedto be reduced. In case COCOM restrictionis not reducedthe rates of returnwill drop by about 2X in each case due to higher capital costs to provide the same level of services. 4/ Weighted averagefor respectivesub-total and grand total. Source: Feasibilityst "as and Mission Estimates(June 1988)
sO7BU/GS - 56 -
4.10 Railway Recycling Plant. The recyclintrail plant facilitiesare required for productionof re-profiledlong-welded rai 1s, free from material and geometricaldefects, which are suitable for heavie axle load and higher speed main line tracks. MAV intends to increase the provisionof rail for continuouswelded tracks by reusing the salvagedmaterial and red ce the need for new rail supply and thereby reduce the overall costs of essenitialrail replacementby less than half. Based on the demand for rails for track maintenanceand modernizations,the rail recy:lingplant is expected to produce about 180 km of reprofiledrails by 1996 with an annual savings of about Fs 92 million (US$ 2 million). Annex 2 gives the basic details. The proposed facilitieswould obviate the necessityof importinglarge quantities of rails or of iron ore, coke and the additionalenergy for -'teelproduction, all of which Hungary has to import,and are, therefore,of s -cial significanceto MAV and would yield a satisfactoryER of abc - 16%. The ER understatesthe full benefit of the subprojectas it only tak2s into account the benefits of recyclingused rails at this stage and excludes the benefits due to reclaimedswitches planned in the future.
4.11 Track Maintenanceand ConstructionEquipment. Hungarian railways are characterizec.by high volume operatio.ion a limited railway network (para. &.01). Considerablewear of outer rails on curves and wear and flatteningof the rail table pose continuousmaintenance problems In addition,track maintenanceat grade crossingsand in switchingareas pose particularlydifficult problems which MAV is currentlypoorly equipped to deal with. Replacementand modernizationof low efficiencylimited-capacity track machinerywill upgrade MAV'S maintenancecapacity and reduce track maintenaitlce costs. The Bank's first loatn(Ln. 2557-HU) in the transportsector in Hungary included this item as an importantcomponent of the project and this additionalequip-lent would help to maintain continuityand reinforceprevious efforts. The proposed investmentswould help alleviatea serious impediment to smooth traffic flow and would yield ER of about 18%.
4.12 The weighted average ER of all the railway subprojectsis about 19%. The economic benefits for all these comp'ientsare not very sensitive to traffic increasesand are related more to the avoided costs of new rolling stock, new rails, stepped-uptrack maintenancewhich would all be needed even if the trafficwere to remain stationery.
Righway Components
4.13 Budapest By-pass (M-0 Motorway). The proposed section (about 13.8 km between Route 6 and both the M-7 and M-1 motorways) is the second section of the constructionof a ring road (about 90 km) designed to providea by-pass around Budapestcity. The fi,st section from km 13.8 to km 28.1 including two major bridges and five importantinterchanges were include in the B; Ik's first transportproject (Ln 2557-HU). In absence of the by-pass, the existing streetsand bridges in the city are badly congestedand inadequateto handle the present and future trafficvoluwes. With the constructionof the second section, the trafficvolume on the first section of the motorway under constructionis expected to increaseby about 501 and woild greatly reduce the congestionon the city streets of Budapest. About 7,000 to 12,000 vehicles - 57 - per day would have used the first two sections of the motorway in 1987, had they been constructed. About 202 of this trafficwould consist of heavy trucks, trucks,trailers, vans and buses. Traffic is expected to grow initiallyat 102 per annum and then by 3-5X per annum during the next 20-years. Quantifiedbenefits due to the proposed project would result mainly from savings in congestioncosts, consistingof both vehicle operating costs and passenger time savings on business trips. Savings in vehicle operaLing costs, excluding passengertime savings account for about 402 of the tctal benefits. The proposed investmentsare conservativelyestimated to yield an ER of about 152.
4.14 Road Strengtheningand Surface Treatment. The Governmentwithin its broad strategy for the sector is placing a high importanceto the maintenance of the road network, both the national and local. Accordinglythe Government has, in 1989, started an acceleratedmaintenance program consistingof two phases. The first phase vaich will be supportedunder the proposed project includes of a program designed to halt further increases in the backlog of road maintenance%orks durin- 1989-1991. In addition, as part of the proposed project and based on the exp rie.iceto be gained during project implementation,road maintenancemanagement sy.tem will be developedand a long term strategy will be formulatedto eliminate the backlog of road maintenancerequirements within about a decade, the second phase. Due primarily to the inadequacyof funds for road mainteneiceduring the recent years much of the network is in dire need of maintenance,particularly for road strengtheningand surface treatment. It is estimated that about 13,000 km of national roads require strengtheningduring the next decade to avert the collapse of substantialportion of the system. The Government'sexpanded program fc-- periodicmaintenance, therefore, is economicallyjustified and would yield a very high ERR. The principalbenefits of the maintenance program are reductionsin operatingcosts, reducin the cost of pavement reconstructionwhich would be needed in the absen- of the maintenance program. Moreover,the maintenancecomponent of t E, project will help halt the further decrease in the value of the network which is estimated at F200 billion with the value decreasing,in he absence of adequa e maintenanceby about 3.52 per year. In addition, the proposed mair:enanceproCra.i will reduce the risk of a minchmore extensive collapse of the network during a severe winter Inc'.udingonly the first two types of benefits, the imainteianceprograi would yield, on the average, an ERR of about 30% and thereforeis economnicallyjustified.
4.15 Road Maintenanceand Axle load Control Equipment. The need to susLain an efficientand adequate highway maintenanceprogram based on suitable organizationand equipment,and responsiveto growing traffic and seasonal conditionsis the basis of UTINFORM's 1989-9aequipment renewal program which is based on sound economic criteria . Many of the national roads al6o require pavement strengtheningir maintenanceoverlays. To reduce the cost of the latter UTINFORM is introducingnewly developed (in Western Europe) thin layer asphalt surfacingtechniques, to prolong pavement life. Considerabletraffic hold-ups are also experiencedin winters in different parts of Hungary due to road icing, snow falls and blizzards resulting in increasedvehicle operationand time costs. The proposed investmentsin high capacity sand/saltspreading machines, rotary snow plows, bridge inspection vehicle, and technicallyadvanced field testingand laboratoryequipment are primarilydesigned to improve tra-ficoperetions, pavement management and - 58 - quality control on maintenanceoperations of the e.tire public road network includingDanube bridges. In addition, Hungarianauthorities have successfullyreduced overloading aud related pavement damage by enforcing axle load control. The proposed equipmentwould replace aging scales so as to sustain this effort. The entire program would yield satisfactoryER of about 20%.
Road Transport
4.16 Hungarocamion- Developmentof Informationand Marketing System. To compete in the competitiveinternational transport market Hungarocamionis seeking to improve the enterprise'sperformance through better informed decisionsand market analysis. The present informationsystem is far from integrated. HC at presentoperates 6 different computer-technologieswith 7 differentsystems and the programmingis carried out in 5 computer languages. The general cost transparencyof differentactivities of HC is inadequateand opportunityexists for significantimprovement of company's incentivesystem. The proposed investmentsbased on a Bank-assistedcomprehensive information/marketingstudy preparedby internationalconsultants would cover both hardware and software contents and are expected to have a beneficial influenceon HC's operationalefficiency and improved productivity(Annex 2) yielding a conservativelyestimated ER of about 22%.
4.17 HC's HandlingEquipment for Transit DistributionStores. HC attaches a great significanceto the developmentof internationalgroupage operations (lees than carload (LCL) traffic). In order to improve market penetration,HC has planned to establishexpress groupage services by adding a new transit warehouse to increase capacity. HC also plans to improve the existing facilitywith equipmentsuch as fork lifts and ramp level adjuster to facilitatefaster loadingand unloadingof vehicles. Also planned is a pneumaticpost system for internal informationflow. The proposed investments on expansionand modernizationof the existing facilitiesas opposed to leasing/hiringof equipmentand buildings,are more cost-effectiveand would yield satisfactoryER of about 16%.
4.18 BKV's Traffic Control System. The proposed system introduces (i) automatic real-timemonitoring and control of BKV vehicles operating on city streets; (ii) central control of about 80 signalized intersectionswith a view to giving priority of passage to BKV vehicles and (ili) central control of power supply lines and substationsfor electricallypowered BKV vehicles. The costs of the sub-projectwould includedata supply sensors, passenger informationpanels, etc. The bentits expected from the above investments would be a better adherenceof BKV vehicles to schedulesand shorter round trip time and consequentreduction in fleet size, vehicle operationalcost savingsand energy conservation(Annex 2). The entire program would yield a satisfactoryER of about 16%.
4.19 Other Proiect Elements. Benefits could not be quantifiedfor other project elements,namely, technicalassistance, studies, research equipment and training about (2% of total project costs) which are necessary for the projectas a whole and whote benefits would permeate the entire system. - 59 -
D. Project Risks
4.20 The proposed project supportshigh priority investmentsbased on mid-term assessmentsof 1986-90 InvestmentPlan of Hungary. The economic justificationof the proposed project componentshas been well established even under unfavorablehypothesis coticerningproject costs and users' benefits (para. 4.08). The technicalsolutions adopted are based on adequate engineeringand technicalstudies. The possibilityof some delay due to difficultiesin obtainingadequate computer har dare, conformingto COCOM restrictionsis being minimized. The preparationof bidding documentsand specificationsis well advanced and the staff of the concernedtransport agenc es now are conversantwith the Bank's procurementprocedures based on their experience in the ongoing transportproject (Ln 2557HU). The Government is aware of Bank's concern that the start of civil works not be delayed due to problems of land acquisitionand is devoting particular attentionto this matter. Risks from inadequateproiect implementationare, therefore,minimal as the physical componentsof the project are essentiallya complement to the ongoing project, on which implementationperformance has been excellent. There remains the possibilityof a change in the present politicalenvironment, leading to a reversalof the on-going reform process which could be a potentialrisk for implementationof the policy reform measures associatedwith the project (para. 1.18).
5076U/62-69 -60-
V. FinancialEvaluation
A. General
5.01 The financialanalyses presentedin this section relate to MAV, HC, and BKV, the three revenue -arning entitieswhich are included in the project, and deal with their financialperformance through the years 1984-87and forecastsfor the years up to 1993. Both MAV, HC and BKV maintain their accounting records in accordancewith a National AccountingCode which has been reviewedand found acceptable.
5.02 A major reform of the Hungarian taxationsystem, which has been implementedduring 1988, will affect all industrialand commercialenterprises includingMAV, HC, and BK-J. The reform is comprisedof the introductionof a value added tax and of progressiveincome tax on individuals. Wages will be increasedto compensateworkers for the new income tax. Employer's contributionson wages, which are similar to social security taxes, remain at the previous 402 level. While, taxes on its income were concessionally reduced to 15% for MAV since 1984, the government'sintention is to increase MAV's tax rate to the presently prevailing50% applicable to other enterprises. The value-added tax on capital expenditurewill, by 1992, be fully refunded to enterprisesproviding goods or services. In the interim years, however, the non-refundedportion of 952 in 1988, 602 in 1989, 40% in 1990, and 20% in 1991 must be absorbed by the enterprises. For the Proposed Project, this will add about 16% to project cost.
5.03 Owing to the uncertaintyof the inflationaryeffects of Hungary's recent tax and economic reforms,all financialforecasts for MAV, HC, and BKV have been made in terms of constant 1987 prices.
5.04 During negotiationsthe Hungariandelegation informed the Bank that, duringBebruary January and 1989, the Governmenthad implementedincreases in MAV's freight tariffs by 20f, long distance passengerfares by 301 and inner city fares by an average of 64r, and had increasedBKV's passenger fares in Budapest by 87r. The financialprojections are based on data available during 1988 owing to the unavailabilityof actual operatingfigures for 1988, and data sufficientto determine the effect of the tariff increaseson the traffic volume, revenue,and operatingexpenses for the 1989 year. This action of the Governmentshould, however. largelyoffset the inflationarycost increasesof 1988, and possibly result in a better financialperformance than anticipated in the MAV and BKV 1989 projections.
B. HungarianState Railweys (MAy)
5.05 MAV is requiredby Governmentpolicy to recover its operating costs and to financo the major part of its capital investmentfrom internal resources,in addition to paying taxes on income and making payments to national and local developmentfunds. Its freedom to raise fares and freight tariffs is restrictedby a GovernmentBoard of Pricing and, as a matter of urban policy, the Governmenthas not set suburban fares at levels which would recoverall costs, although freight rates produce revenueswhich exceed the - 61 - attributablecosts. The shortfall in passengerrevenues is compensatedby Governmentsubsidies which cover losses on concessionalfares (i.e., pensionersand students)as well as for suburban passengerservices.
Past FinancialPerformance 5.06 MAV's intome statementsfor the years 1984 to 1987 are set forth in Table 1 of Annex 1, while suimmaryincome statementsfor those years are provided below in Table 5.1:
TABLE 5.1
UNGMARIANSTATERAILWAYS INVESTPENTPRC6RAN &FINANCIN6 PlAN 1988TO 1993 (FORINTSPILLION) 1998-93At Constant1987 Prices FISCALYEAR ENDING DECENBER 31st * 1988-93 1988 1969 1990 1991 1992 1993
INVESTWENTPROSRAN:
FIRSTTRAYSPORT PROJECT 0.6t 334 334 GECINDTRANSPORT PROJECT 1/ 5.11 3,093 31 Eol 995 633 553 NRRALREPLACENENTS A R}ENEALS 80.01 48,217 7,199 7,391 7,783 8,193 8,613 9,038 OTHERCAPITAL EIPENDITURE 12 14.318,639 1,790 1,529 1,436 1,442 1,298 1,154
TOTALINVESTIENT PROGRAN 100.060,283 9,344 9,90110,214 10,268 10,464 10,192
FIKANCINIPLAN:
WORLDDONK SECOND TRANSPORT PROJECT LOAN 1/ 2.01 1,212 9 336 401 261 205 LOASFRON 60YERNKENT 1.11 644 644 0 0 0 SUPPLIER'CREDITS 20.0112,079 1,849 1,791 2,062 2,110 X2,28 1,982 NAVINTERNAL RESOURCES 76.91 46,348 6,842 7,674 7,751 7,897 7,974 8,210
TOTALFINANCING PLAN 100.0160,283 9,344 9,801 10,214 10,268 10,464 10,192
SOURCEOFINTERIWTLL GENERATED FIDS
NETINCONE FtER TAI 10.7n 6,432 874 929 1,002 1,128 1,207 1,392 DEREIATION 80.01 48217 7199 7391 7783 9193 8,61 9,039 LEStSLOAPRINCIPAL PAYNT -8 11 I 88(4 1 I61161 116) 3184 1964(1 !46) (1 720) MORIMCAPITAL CAE(INCEAI -5.n (43,5) (1,115 (430) (450 (460 1480)1500 NETINTERNULLY GENERATED FUNDSAVAILA IE 76. 46,341 6,842 7,74 ,751 7,W97 7,74 8,210 ._USM ...... eeag san *ato n= m"u ...... Me I OFINVESTME"T PmumRAR .Ygj 76.91 n7.21 78.1 n5.9 76.n 71.21 80.6: -3 YEARAVERAE - 74.32 78.41 76.82 76.61 71.41 119.21
...... _._...... _.. 1/It torIs of 1987Constant urict thernforolousr thanfigure rtf lKtd in Projnct CostEstiutu A Dhnk Loan Disbursmnt Schodulo. 21Elnctrification,lnd dwselopmnt ofstations. Sourest RAY& Bank mission estieabts. - 62 -
5.07 MAV's operating ratio, includingpassenger subsidies, has increased from about 902 in 1984 to about 982 in 1987, while its operating ratio, excluding subsidies,has increasedfrom 1002 to 107X. Until 1984, despite having to carry commuter passenger traffic at below-cost fares, MAV covered all operatingcosts through tariff revenues. The subsidy did not therefore finance an overall operating deficit but contributedto funds from which debt service, working capital increases,and most of MAV's capital expenditures were financed. This is no longer the case (althoughfreight traffic still covers its costs and provides a surplus). Reductionsin unit costs must be achieved in order to ensure that all MAV's operatingcosts are again covered by tariff revenues. MAV's rate of return on net fixed assets also reflects i the inadequacyof tariffs,dropping from a low 4.91 in 1984 to a lower 1.21 in 1987. This is also confirmedby the operatingexpense per trafficunit, which has year by year steadily increasedfrom forints 1.07 per trafficunit to 1.36 per unit in 1987, an increase of 8.31 per year compared to average inflation rates during the same period of 7.31. The operatingexpense item described as "other operatingcosts" representedabout 281 of total operating costs before depreciationin 1987. Rental of wagons accountedfor 351 of this item, while repair work contractedout accounted for 291. The remaining431 consistedof transportcosts, commissions,rent expense, and other overhead expenses.
5.08 A statementof source and applicationof funds for the years 1985 to 1993 is provided in Table 3 of Annex 1. Internallygenerated funds for the three-yearperiod 1985-87 covered 961 of MAV's capital investmentwhile the yearly provisionfor depreciationprovided 941 of these internallygenerated resources.
5.09 MAV's balance sheets are set forth in Annex 1, Table 2 providing the actual financialposition for 1985 to 1987 and forecastsfor the years 1988 to 1993. These reflecta healthy financialposition for 1985-87. The current ratio indicatesthat MAV's current assets averaged 4.4 times its current liabilitiesfor this period. The ratio of long-termdebt to debt plus equity. was under 11 for the three years due to MAV's low level of borrowing. - 63 -
Future Financial Performance
5.10 The financial forecastsfor MAV take into account the changes resulting from the taxation reforms implementedduring 1988 (para 5.02). Projected income statementsfor the years 1988-93are provided in Table 1 of Annex 1, and are summarizedin Table 5.2 below:
Table 5.2 NUNSARIN STATE RAILWAYS INCONESTATERENT 1987TO 1993 (FORINTSNIULION) 1988-93At Constant1987 Prices : #3s2:::::233322833388:3332332328322322S8823333328228L3333833tta tttXS ;: ::3:323_s3:3_523:3223 ACTUAL ------FORECAST------FISCALYEAR ENDING DECEMBER 31st 1987 1988 1999 1990 1991 1992 1993
OPERATINGREVENUE: PASSENGERTRAFFIC 4,955 4,895 6,34 6,799 7,453 7,359 9,612 FREIGHTTRAFFIC 29,031 29,310 29,350 29,586 29,592 30,311 30,732 OTHERSALES & SERVICES 1/ 6,183 6,285 6,295 6,435 6,480 6,530 6,575 OTHEROPERATIN6 REVENUE 1,055 1,025 1,025 1,025 1,065 1,045 1,120 OPERATINGREVENUE 41,224 41,515 43,024 43,845 44,590 45,764 47,039 GOVERNMENTSUBSIDIES 3,935 3,910 2,796 2,351 1,977 1,662 1,398 TOTALSUBSIDIZED OPERATINS REVENUE 45,159 45,425 45,820 46,196 46,567 47,426 48,437 CZ_" asuu .. na ..... m stas = . . az TOTALOPERATING EIPS.EFORE DEPR'N 37,086 36,955 36,271 35,687 35,114 35,114 35,088 PROVISIONFORWDRECIATION 7,107 7,199 7,391 7,783 8,193 8,613 9,035 TOTALOPERATING EIPENSES 44,193 4,154 43,642 43,470 43,307 43,727 44,126 2323= 33383g8333 2333 3*3 233333283322 3*3 332322 NETOPERATING INCOME 966 1,271 2,158 2,726 3,260 3,699 4,311 NETINCOME BEFORE TAXES 613 971 1,658 2,003 2,256 2,413 2,794 232233338=2"83233833 * 3 23as 3333 3 3 - 3 3 3 NETINCOME AFTER TAIES 493 874 929 1,002 1,129 1,207 1,392 Bassas-s-s3a833222. 33133 283 3a23223 38822 32323" 3232a8 OPERATINGRATIO I -INCL.SUDSIDIES 97.92 97.22 95.32 94.11 93.02 92.21 91.12 OPERATINGRATIO I -EICL.SUBSIDIES 107.21 104.42 101.52 99.12 97.11 95.52 93.82 RATEOF RET'N ON NET FIlED ASSEtS 2/ 1.22 1.72 3.01 3.72 4.32 4.7S 5.42 OPERATINGEXPENSES PERTRAFFIC UNIT 1.36 1.35 1.34 1.33 1.33 1.34 1.;3 1/Construction,land uls I services to industrialI commercialenterprizes. 2/ Notoperating incoe as a I ofnet fixed ausetsin operation. SourcetRAY and link sission nstitestn - 64 -
5.11 In view of the decline in traffic of 32 from 1984 to 1987, the financial projectionsfor MAV have been based on the assumption that passenger and freight traffic will remain constant at the 1987 level through to 1993. Further assumptions,on which the projectionsfrom 1998 to 1993 are based, are as follows:
(a) decrease in passengersubsidies of 15.92 per year from 1990 to 1993, in real terms, which will result in a reductionof subsidiesof 502 of rhe 1989 level by 1993;
(b) increase in passengerfares by 30% in 1989 (as planned by Government),and increases,in real terms, by an average of about 82 in the years 1990, 1991, 1992, and 1993 respectively, which would offset the subsidy reductions.in (a) above, in each of these years;
(c) decrease in materials,fuel and electricity,salaries and related costs, and other operating costs by 1.72 per year, in real terms, from 1989 to 1991 which producesa 52 reduction in operatingexpenses, before depreciation,over this three-year period;
(d) increase in average freight tariffs, in real terms. by an amount sufficient (after a, b, and c above) to reduce the operating ratio to about 952 in 1989, and by a further 12 per year from 1990 to 1993; and
(e) depreciationat the rate of 4.12 per year on assets in operation at historical cost, as prescribedby Government.
Throughapplying the above assumption,the forecast income statements,between 1987 and 1993, reflect a reductionin subsidiesand an increase in passenger revenuesof 6'2 and 742 respectively,an increase in freight revenue of about 62, and a decrease in operatingexpenses before depreciationof about 5.42. From 1987 to 1993, the operatingratio including subsidiesdrops from about 982 to 912, the operatingratio excluding subsidies decreasesfrom 1071 to 94X, the rate of return on average net fixed assets in operation increasesfrom 1.21 to 5.41, and net income after taxes increases from forines 493 million to forints 1,392 million, an increaseof 1822. The assumptionsare achievableand considerablyimprove the financialperformance of MAV. - 65 -
Invesi.entProgram and FinancingPlan 5.12 MAV's investmentprogram and financingplan. for the period of implementationof the Proposed Project, from 1988 to 1993 is set forth in Table 5.3 below:
TABLE 5.3 HUNGAIANSTATE RAILVAYS INVESTNENTPROGRAN I FINANCIN6 PLAN 1988TO 1993 (FORINTSNILLION) 19-93 At Canstant1987 Prices FISCALYEAR ENDING DECENDER 31st 1 1988-93 1986 19 1990 1991 1992 1993
tINvSTMENTPROGRAM
FIRSTTRANSPORT PROJECT 0.41 334 334 SECONDTRANSPORT PROJECT 1/ 5.12 3,093 31 881 995 633 55S N03114REPLACEMENTS i RENEWALS 80.01 48,217 7,19 7,391 7,783 8,193 8,613 9,038 OTHERCAPITAL EXPENDITURE /2 14.32 8,639 1,780 1,529 1,436 1,442 1,296 1,154
_e_ . _ ea. *n.. e in _ e ._ TOTALINVESTNT PROAR 100.0160,283 9,344 9,601 10,214 10,28 10,46410,192 FINANINOPLAN: sftlU111
MO01LBANK SECOND TRANSPORT PROJECT LOAN l 2.02 1,212 9 336 401 261 205 LONGSFROMSOVER N 1011 644 644 0 0 0 SUPIERSCREDITS 20.01 12,079 1,949 1,791 2,062 2,110 2,295 1,982 IAV INTEUALRESOIURCES 76.9244,348 6,842 7,674 7,751 7,897 7,974 6,210
TOTALFINANCIS PLAN 100.02 0,23 9,34 9,01 10,214 10,26 10, 10,192 __...... *2 *8___ . ._
OM O INTEIILG REEDO ME
NETI11 AFTERTAX 17 6,432 874 829 1,002 1,128 1,207 1,392 DERECIATIU 60.02 48,217 7 199 7 391 7783 6,193 6,613 9,038 LESSiLOANIM11IKIL FAINIITS -8.1t 14,84*1 11161 l11} 1581 19N) I13Fl ll 720) INI CTALP DECEASE/(INCREAK)s -_ 3.n3 11,1It (430 I40 14j0) 1480) (13) NETINTER1ALLY 6ENEItE FI AVAILAILE 76.924,34 6,42 7,674 7,751 7,897 7,974 8,210 2 O INVHESMElNT"P M -YEAR 76.92 73.22 78.32 75.92 76.91 76.2 80.6 -3 YERAVERIUE - 74.31 78.41 76.82 76.61 77.42119.22
11In torusof 197 constat grices therefore lour thanfigures refleted in ProJectCost EstiUtt A BankLoan Disburssnt SchdWul. 21El utrificatloa,anddeulornt of stations. Surce: Ia ank sission stiots. - 66 -
5.13 Of the total investmentprogram of forints 60,283 million from 1988 to 1993, the proposed project is projected to representabout 51 while other capital expenditurefor electrificationand developmentof stations accounts for about 141, and the completionof the First Transport Project under 1S. Normal replacementand renewals is equal to the annual provision for depreciationand representsabout 801 of the total investmentfor the period.
5.14 The sources of financingof the total investmentprogram from 1988-93 will be 22 from the proposed loan. 12 from Governmentloans, 201 from suppliers' credits, and about 771 from KAV's internallygenerated resources. Of the internallygenerated resources,the depreciationprovision represents 80X. The projected improvementin financial performancecontributes significantlyto the MAV's high level of self-financing.
5.15 A statement of source and applicationof funds is provided on Table 6 of Annex 1, includingprojections for the period 1988 to 1993, and reflects a satisfactorylevel of liquidity. The self-financingratio, reflectingMAVs internal generationof resourcesas a percentageof capital expenditure,is consistentlyclose each year to the average of about 771 for the 1988-93 period of the projections. The debt service ratio, which representsthe number of times loan principal and interest payments are covered by internally generated resources, is projected to be 201 and 14% for 1988 and 1989 respectively,and for 1990-1993averages about 5.
5.16 MAV's balance sheets are set forth in Table 2 of Annex 1. which include projectionsfor the period 1988 to 1993. Summary balance sheets for this period are provided in Table 5.4, as follows:
TABLE 5,4 HUNSARIANSTATERAILWAYS DALANCESHEET 9m TOIN3 (FORINTSNILLIOIN 1988-93At Constant1987 Prices .... a.UflUuuU3Ufl2 UU.. m- . US- SU. 3 .. ACTUAL --- fORECAST ------1967 19N 1989 1990 1991 1992 1993 ASSETS
FIXEDASSETS INOPERATION 175,565173,58 184,929194,730 204,94 215,212223,674 PROVISIONFOR EPECIATION 97,210104,409 111,800 119,583 127,776 134,369 145,427 NETFIED ASSETS INOPERA1TON 78,375 71,176 73,129 75,147 77,16878,823 80,249 AwS UNOERCONSTRUCTIWN 5,622 15,116 15,62316,036 16,090 16,2861,014 TOTALNET FINED ASSUS 84,197 86,34288,752 91,183 93,25695,109 96,263 OTHERNON-CUT ASSETS 2,309 2,360 2,410 2,460 2,510 2,560 2,610 C_UT ASSE 16,953 16,043 20,739 23,600 26,391 29,210 32,063 TOTALASSETS 103,459106,745 111,901 117,243 122,1" 126,8! 130,956
LIABIWLlESAEOUITY TOTALLO1 TERN LIABILITIES 1,352 3 5378m15 6,897 7,922 ,722 6,534 CURRITLIASILITIES 4,538 3,016 3,624 4,104 4,616 5,080 5,680 TOTALLIABILITIES 5,8"0 6,671 9,002 11,001 12,538 13,602 14,214 EGUlTy 97,56 99,674102,69 106,242109,628 113,077 116,742 TOTALLIABILITIES A EWITY 103,459106,145 111,901 117,243 122,11 126,879130,956
RATIOW DOTTO DOET4I1Y S o.9 3.32 4.62 5.n *6.3: 6.n 6.42 CURRENThiiu 3.7 5.9 5.7 5.6 5.7 5.6 5.6 ACCTS.RECEIVADLEzNO.NTTN.OPVI6.FEV.1.4 1.4 1.3 1.3 1.3 1.3 1.3 Source:WAY I& Bank issiim sti"ts. - 67 -
5.17 The forecast financialposition of MAV for the period 1988-93 as reflected in the above table, is satisfactory. The ratio of long-termdebt to debt plus equity is consistantlyat a low level, averaging about 5.5% for the period. The current ratio, averaging 5.52, is at a favorablyhigh level. Accounts receivable,measured in terms of each year's average month's revenue, is projectedat a satisfactorylevel of 1.3 months' revenue. During negotiationsagreement was reached that MAV maintain tariffsand control operating costs at levels sufficientto achieve an operating ratio (including passenger subsidies)of not greater than 95% in 1990, and reducing it by 12 in each of the subsequentyears up to and including1994.
C. HungarocamionInternational Freight Company
Past FinancialPerformance
5.18 The HungarocamionInternational Freight Company (HC) is an internal:ionaltrucking enterprise,operating in the competitiveEuropean market for import,export and transit traffic,having the freedom to set freight rates according to the competitivemarket. As about one third of its transportrevenues are denominatedin Western European currencies,HC is a significantcontributor of foreign exchange to the economy of Hungary. This enterprise is efficient and profitable. Its financialperformance for the years 1984-1987are reflected in detail in Table 4 of Annex 1, while a suimmary is provided in Table 5.5 as follows: Table 5.5: HC-INCOME STATEMENTSUMMARY 1984-87
1984 1985 1986 1987 Actual Actual Actual Actual FT Million -______
OperatingRevenue 4.854 4,698 5,280 6,200 OperatingExpenses 3,933 3.782 4.197 4,852 Net Operating Income 921 916 1,083 1,348 Intereston Loans 84 100 106 136 Net Income Before Taxes 837 816 977 1,212 OperatingRatio AppraisalForecast X 842 832 852 832 Actual 812 812 802 782 Rate of Return on net Fixed Assets '
AppraisalForecast 2 262 262 222 262 Actual 322 302 331 401
L' Net operating income as 2 of average net fixed assets in operation. - 68 -
5.19 In each of the years 1984 to 1987, RC achieved a better financial performance,as reflectedin both the operating ratio (average 80X) and the rate of return on net fixed assets (average 342), than those forecast at appraisal (averaging842 and 25% respectively). Traffic, measured in productivekilometers, (paid kms.), rose by 18X (1984-87),while transport revenue increasedby 261 during the same period. HC's commendablefinancial performanceduring the 1984-87 period was achieved by effectivecontrol of operating costs which increasedby 232 compared to revenues which rose by 28%. The introductionto the fleet of more fuel efficientvehicles (purchased under the previous Bank loan) has contributedto a reduction in unit operating costs, as has also the new central maintenancedepot installed in 1985. Other factors contributingto cost reductionshave been a special bonus scheme rewarding speedy and successfulcompletion of round trips (resultingin an increase of the overall round trip speed from 15 Kph to 18 Kph), while significantfuel reductionshave been achieved througha system of surcharges on drivers where fuel consumptionexceeds an establishednorm. Future FinancialPerformance
5.20 The financialforecasts for HC for the years 1988 to 1993 take into account the changes resultingfrom taxation reforms implementedduring 1988.
5.21 ProjectedIncome Statementsfor the years 1988-93 are provided in Table 4 of Annex 1, and are summarizedin Table 5.6 below:
Table 5.6: HC - Summary Income Statements1987 to 1993
ACTUAL ------PROJECTED-- 1987 1988 1989 1990 1991 1992 1993
Operating Revenue 6,200 6,346 6,601 6,942 7,249 7,566 7,904 OperatingExpenses 4.852 5,267 5.442 5,653 5,874 6.053 6,298 Net Operating Income 1,348 1,079 1,159 1,289 1,375 1,483 1,606 Intereston Loans 136 148 231 274 315 334 277 Net Income Before Taxes 1,212 931 928 1,015 1,060 1,149 1,329 Taxes on Income 892 465 464 507 530 574 664 Net Income After Taxes 320 466 464 508 530 575 665
OperatingRatio 781 832 82% 812 811 801 802 Rate of Return on Net Fixed Assets in Operation 40% 311 31% 281 28% 27% 292
5.22 An effect of the introductionof the personal taxation system is immediatelyapparent in the income statement summary indicatingan increase in the operating ratio from 781 to 831 between 1987 and 1988, and the fall in the rate of return on net fixed assets from 401 to 311. A main contributing factor is the increasein wages by an average of 30% to compensatestaff for the personal taxes they bear, commencingin 1988. The effect is thus to - 69 - increase operatingexpenses, raise operating ratios and reduce net income and return on net fixed assets. Compensationfor the increases,in the form of lower transfersto the state budget, is charged to equity, and consequentlyis not reflectedin the net income after taxes. As the changes are planned, the final effect upon an enterprise'scash flow should be small.
5.23 HC's revenue forecast is based on growth of productivekilometers (paid Kms) averaging 3.92 per year from 1987 to 1993. This increase is planned to come from an increasedvehicle fleet (1.91average increase per year in vehicle numbers) and from better utilizationof the modernizedfleet (averagingan increaseof 2.0% Pd kms per vehicle per year). Revenue increase between 1988 and 1993 is forecast to average 4.5% per year compared to an increase in operatingcosts of 2.9% per year. Interestcharges shown are realisticand the forecast financialperformance shows a satisfactory picture. Forecast cost and revenue figuresare discussed further in Annex 1.
3.24 HC's Statementof source and Applicationof Funds for 1985 to 1987, togetherwith forecasisfor the years 1988 to 1993, are provided in Table 6 of Annex 1. HC is projectedto finance from internal resourcesa relativelyhigh level of capital expenditure,averaging about 631, as indicatedby the self-financingratio from 1988 to 1993. Debt service coverage is satisfactory,averaging about 2.7 (1988-93),which representsthe number of times that debt service is covered by internallygenerated resources. - 70 -
Fifnncin3Plan
5.25 NC's InvestmentProgram and FinancingPlan are provided in Table5.7
TMAIIS.
t193TO 1993 .eu._.- (PORInTORIUBLLZOA1911193 At Conetent1917 Prieto ICALYgA WI DECINER39193 1909 199 1991 1992 1993
INVEITNENTP'A1t
FlOnTTRANRT POECT 1.31 559 315 244 EcoNTAMMr M c 12.7n UO 4 271 34 193 15 1O
OTHRCPITAL IPEITU 79ot 341 4 11 l,210 1,419 III l,00
TOTALtIETUIT W O10.01 4o74 %5 4% 1,5t7 1,4l2 "02 1,015 uu1HISmaaa111" 1111111anam1mu1mauaanum "mowmga maswe"a"gguam PISIIIN hutN "BumanU-. VW VA Fill?R3TRAIU T PROJCT"Al kWA 0.41 42 a OELDPA I PITTRAIPS PMROJE 'll, LOAU 7.41 517 315 20 WU PUAKM CTRAPITM! JCT LOAN11 4.41 29 01 1230 101 29
mEICLO.TE LOWNS IU low 100 700 20 lN*O NIIN l#M_ RUl2 4,227 NO 404 1,073 49 734 15$
__e_s ._em e_ . __1 . Sue..._mes" u. 'seesat. _.. es . TOTALINAINS KMl 1o.014,7 t9 494 1,57" 1,412 902 1,011 ainuuin _mn _nmu meam mam.. *aene auam H_aa mau
Ie Il tt d t1 ussltustb,fe 1 tMIl lrntolrt UW1mneJh%Wm na qnkU"It1rw4umkL.bfuhri"'eftk1.atst Uto Istcll - 71 -
the 5.26 The overall financingposition shown above is good. During the proposed project, 4.4S of RC's investmentswill be financed from period of a the proposed Bank loan, 8.22 from loans for the first project (repaidover other period of 6 years, but in part, relent to NC by NBR), and 24.9% frrsi loans including loans from HungarianBanks. The proposed Bank loan would be on-lent to RC by the Government. The Governmentwould assume the foreign a exchange risk. HC would repay the loan over a period oC 15 years including grace period of 5 years. up to 5.27 HC's balance sheets for 1985 and 1987 together with forecasts below: 1993 are provided in Table 5 of Annex I and are summarized in Table 5.8
TABLE 5.8 NUCMOCAI01INTWTOAL FREIWTCANY
1987TO 193 ¶FORIRtSNLLtIlON) 1918-~At Constant117 Pricn
19 It 19 19 i9 19 19 atmIREIlOu-aI AMSU 2,452 TOTALCOW AST 2,807 2,111 2,10 2,233 2,300 2,2 8,181 TOTALASSETt 6,23 3,84 5,W 6,80 7,728 7,12
LIA8ILITIES 413 52 5 614 1,2 3 130 LOS-TERNLOS 91 Be 88 8 8 0 8 OM 1ERS-CUILIAItLITIES 1,14 TOTALCWi LIILITIESt 1,1t 1,033 1,104 9 1,010 1,319 L,353 TOTALLIAILITIES I,m 1,4 1,7t0 1,43 2, !,M ***o inmmom eesmn asmm amm -nux TOTAL1OUl 4,33 4,19 4,187 5,152 5,421 5,93 6,8
7,728 l,181 TOTALLtILITtII [El&lO 6,22 5,84 5,3W7 ,805 7,912 12.3 11t12 10.92 10.42 11.32 8.12 1.92 KIT (M tPlO O 2.1 2.0 2.3 2.3 181 2.1 cU1N RatIO 2.4 2.2 A^CltA19lI|.U.NTlS.OP1iS.B.2.3 2.2 2.2 2.2 2.2 2.2 arcra mrucailm &M Ik iA utiutun - 72 -
5.28 HC's current assets are well in excess of current liabilities and are forecast to remain in this satisfact-iryposition throughout the project period, as indicated by the current ratio above. The current ratio for 1987 was 2.4 and is projected to remain close to this level through 1993, while the ratio of long-term debt to debt plus equity is currently 121 and is projected to decrease by 1993 to about 2X.
5.29 During negotiationsagreement was reached that HC maintain freight rates and other charges at a sufficient level to ensure a rate of return on average net fixed assets in operation of not less than 221 during each of the years from 1989 to 1993.
D. Budapest transport company (BKV)
5.30 As a result of the Government'ssocio-economic policy, BKV does not recover full costs for urban/suburbanpassengers using its services. BKV's financial performance is reviewed below.
Past Financial Performance
5.31 BKV's income statements for the years 1983 to 1987 are set forth in Table 7 of Annex 1, while summary income statements for this period are provided below in Table 5.9: TABLE5.9
IJDAPESTTRSPORT COMANY INMUIESTATEMEN 1913TO 1917 (FORINTSILLION) ACTUAL FISULYEA END!NS Eom 31st 193 1964 195 1 1967
HiPERTl5SNVIKUS PA511 SOlE 1,497 1,504 2,007 2,048 2 040 cmTHER1RAT!NSIOiE 444 551 607 93 1,153 ORIRATIMREKY EICLUD'SSU8SIDIES 2,141 2,093 2,814 3,031 3,193 SUUIDIASSENBERTRWFIC 4,743 7,312 3 370 3,921 4,387 IIIIDIES-NA!TEANCOF SYSTOMS 0 0 4,005 4,95 4,993 LMESVWlE TAX 0 (1) (2) (II (1) TOTALWTI IINEIE 8,904 9,404 10,19711,144 12,572
P9*11K EZPS.KFOKEPIEC!ATION 16 7 387 6,50 9,114 10 232 PUVISI,FOR DEPRCIAT!lu ,4 ,4I,1:14317 tOtALWUtS EEIKN9 ,20 9,000 10,240 10,65712,077 _- - -- _-_- Illt WMTlS 11K 694 404 (73) 29 49 NE[TIICIE KMS TAIE *79 391 (91) 274 460 NETINCOIE AFTER TAlES 301 194 1911 245 427
OPERTINSRATIO 1 -INCL.SlINSUEO 92.21 95.71 100. 97.41 94.11 0PERTINSRATIO I -1L.USII0E1/ 383.42 430.01 344.41 358.21 378.21 pATEOF icrN ONNT FIXDASSET 1/ 2.41 1.41 -0.21 1.021.7 11Ooirti bn a * . avrw Mt fisd isiiti. $icus UK.udSub isdiumNiWtt1 - 73 -
5.32 BKV's operating ratio, includingpassenger subsidies, increasedfrom 922 in 1983 to 96% in 1987, while its operatingratio, excluding subsidies, improved slightly from 383S to 3781. Passengertariff revenueper passenger Km from 1983-87 increased from Ft 0.18 to Ft 0.24, or 372, compared to operatingexpenses which increasedfrom Ft 1.05 to Ft 1.42 per passenger Km, or 161. During this same period passengersubsidies, as a percentageof tariff revenue plus subsidies,decreased slightly from 761 to 75Z. This reduction in stubsidieswas offset by the passengertariff increases,resulting in the small improvementin the operatingratio (includingsubsidies) mentionedabove. From 1985 to 1987, passengerKms decreased by less than 1Z, the number of employee decreasedby about 21, but wage costs, however, increasedby about 121.
5.33 A statementof source and applicatonof funds for the years 1983 to 1993 is provided in Table 9 of Annex 1. Internallygenerated funds more than covered capital expenditurefor the 1983-87 period,while the yearly depreciationprovision provided about 901 of these internallygenerated funds. Internallygenerated funds covered debt service by an average of about 1.3 times for the 1983-87 period. The self-financingand debt service coveragewere satisfactoryfor this period.
5.34 BKV's balance sheets are set forth in Table 8 of Annex 1, providing the actual financialposition for 1983-87and forecostsfor the period 1988-83. The financialposition was satisfactory. There were no long-term loans during this period, consequentlythe debt to debt plus equity ratio was zero. The current ratio indicatesthat current liabilitieswere covered by an average of 8 times during the period, and accounts receivablerepresented about 0.5 months' average sales for each year of the 1983-87 period. - 74 -
Future FinancialPerformance
* 5.35 Projectedincome statementsfor the years 1988 to 1993 are provided in Table 7 of Annex 1, and are summarizedin Table 5.10 below:
Table 5.10 BUDAPESTTRANSPORT COMPANY INCOMESTATEMENT 1997TO 1993 (FORINTSMILLION) 1989-93At Constant197 Prices ACTUAL2 FO_CAST- FISCALYEAR ENDING DECEER 31st 1907 1996 -lS 199 199E11992 199 :2:11 -gs s 22a2sa s t __| OPERATIN6REVENUES PASSENGERSALES 2,040 2,053 4,123 4,204 5,442 5,334 6,66 OTHEROPERATINS INCONE 1,153 1,100 1,100 1,100 1,100 1,100 1,100 OPERATINGREVENUE EXCLUDG6 SU0SIDtES 3,193 3,153 5,223 5,306 6,162 4,634 7,60 SUBSIDIES-PASSEN1ERTRAFFIC 4,397 4,595 2,529 2,449 1,33 1,305 329 SUBSIDIES-AINTENAICWEOFSYSTEMS 4,993 5,150 5,155 5,15S 5,150 5,140 5,140 LESS:SALES TAI (1) (1) (1) (1) (1) (1) (1) TOTALOPERATING REVENUE 12,5n2 12,897 12,906 12,909 13,047 13,078 13,136 8= ax333383333 3888333 3333833 333n333 *333333 333333 333333 3333 OPERATINGEIPS.DEFORE DEPRECIATION 10,232 10,164 10,542 10,521 10,549 10,59310,t44 PROVISIONFORDEPRECIATION 1,945 1,900 1,925 1,949 2,03 2,040 2,045 TOTALOPERATING EXPENSES 12,07 12,U44 12,467 12,470 12,43 12,63 12,6 NETOPERATIN6 INCOME 5 433 439 439 444 445 A47 NETINCOE GEfORE TAIES 460 419 36 368 55 427 432 NETINCOE AfTER TAIES 427 376 361 366 30 420 425
OPERATINBRATIO I -INCL.SUtlSIDIES 94.11 9.61 %.61 96.61 9. 9.62 96.6 OPERATINGRAtIOI -EICL.SUDSIDIES370.22 395.32238.n 235.01 192.11 190.42 165.51 RATEOF RET'N ON NET FIXED ASSEtM 1/ 1.7 1.41 1.41 1.32 1.21 1.22 1.21 1/ Operatingince asI of averegnot fixed assets. SourcesWaV.and Iank aisin utilates - 75 -
5.36 The financialprojections take into account the changes resulting from the taxation reforms implementedduring 1988 (para. 5.02). Passenger kms, are expected to increase slightly by about 1.62 over the next 6 years. Further assumptions,on which the projectionsare based, applied to revenue and costs at cong-ant 1987 prices,are as follows:
(a) passengersubsidies to decrease by about 932 to Ft 329 million from 1987 to 1993;
(b) passenger fares (passengerrevenue per passengerln) to increase by about 2171 from 1988 to 1993;
(c) number of employees to remain constantat 25,000 up to 1992;
(d) operatingexpenses, includingdepreciation, to increase by about 5.11 up to 1994; and
(e) depreciationprovisior. to remain constantat about 4% on historical cost of assets.
5.37 Based on the above assumptions,whi! k.re consideredachievable by both BKV and the Bank mission, the 1988 to l193 projectionsreflect a reductionin passengersubsidies from Ft 4,400 to rt 330 million, an increase in passengertariff revenue from Ft 2,000 to Ft 6,600 million, and an increase in operatingexpenses from Ft 12,000 to Ft 12,500million. As a consequence of the above. the operating ratio, includingpassenger subsidies would remain constant at about 96.6S, while the operatingratio, excludingpassenger subsidies,would be reduced from about 3781 in 1987 to about 1651 in 1993. - 76 -
InvestmentProgram and FinancingPIn
5.38 BKV's investmentprogram and financingplan, for the period of implementationof the Proposed Project from 1988 to 1993, is provided in Table 5.11 below:
Table 5.11
BUDAPESTTRANSRRT CONY INVESTMENTPROGRAR & FINANCING PLMN 1968TO 193 (FORINTSILLION) 1958-93At Constant1997 Prices FISCALYEAR ENDIN6 DECEN1ER 31st K 190-93 196 1989 IM 1991 192 1993
INVESTMENTPROGRAMt XuX8=uZu::s:gZ:z=: SECONDTRANSPORT PROJECT 4.41 552 122 14 291 OTHERCAPITAL EIPENDITURE 95.41 11,38 1,680 1,978 1,941 1,749 2,000 2,000
TOTALINVESTMENT PROGRAN 100.0K11,920 1,60 2,000 2,010 2,030 2,000 2,000 auuuuuuuanaaaaummuana .8m.. .aa.e aas msig sasmaga..... gasa mam.. " __ FINANCINSPLANi
WORLDDANK SECOND TRANSPORT PROJECT LOAN 1/ 1.21 143 0 361 6 73 0 SKYINTERNAL RESOURCES 114.9113,700 2,169 2,349 2,117 2,400 2,140 2,495 FINANCIN8SHORT-FALL/(SUIRPLUS) -16.11(1,9231 130T) (3) 11143)(441 (11) (485)
__be . _n -_ _ _ ee_ obe_ .e.@ TOTALFINANCING PLAN 100.0K11,920 1,680 2,000 2,010 2,030 2,000 2,000 .. ~~~~~~~~~~uamma .. _sam smaas _gum ugmaum ... s .. . .. _. __., SOURCEOFINTERNALLY NE1RATED FUNDS ...... __.. NETINCOE AFTER TAX 19.2K 2,290 379 341 34 340 420 425 DEPRECIATION 9C.K 11,993 1,900 1,925 1,949 2034 2,040 2,045 LESSMLOANPRINCIPAL PAYMENTS O.4? 170) 0 0 0 ( (101 WORKINBCAPITAL DECREASE/(INCREASE)i -3.51 (413) IN 3 (193) 26, 25 .. e _e __ _. fe_. _e.__ ebe _.. NETINTERNALLY GENERATED FUW AVAILAILE 14.59113,700 2,19 2,349 2,117 2,400 2,140 2,40 K OflNVMt PROGRAM-YEAR 114.9 114.41117.5 105.3111t.2 102.0K 124.3 -3YEAR AVERAW 113.1?119.42 105.11 119.21 107.5K 124.31
1/ In toresof 1W constant prie therefore loor than f igurn rf lected In Project CostEstisal & ankLoan Diskrusmnt Schd91. SourcesBKV &I nk missionostimato. - 77 -
5.39 Of the total investmentprogram of Ft 11,920 million, the Proposal Project representsFt 552 million, or about 52. The Bank is the only external source of financingproviding Ft 143 million or 1.2% of the funds required. The balance of Ft 11,777 million, or 98.8% will be covered by BKV's internal resources generation,of which the depreciationprovision covers the total financing requirement.
5.40 A statementof source and applicationof funds is set forth in Table 9 of Annex 1, which includes projectionsfor the period 1988 to 1993, and reflectsa satisfactorylevel of liquidity. The self-financingratio, which reflects the percentageof capital expenditureavailable from internal resources,exceeds 100% in each of the 6 years from 1988 to 1989. Depreciationrepresents about 87% of the internallygenerated resources over this period.
5.41 BKV's balance sheets for the period 1987 to 1993 are set forth in Table 8 of Annex 1. Summary balance sheets for this period are provided in Table 5.12 as follows:
Table 5.12 BUDAPESTTRANSPORT C0RW'ANY BALANCESHEET 1917TO 1993 1988-93At Constant19" Prices (FORINTSNILLI0NI 1988-93At Constant1967 Prices ACTUAL FRECAST 96 198 199m 199O 1991 1992 1993 ASSETS FIXEDASSEtS IN OPERATION 43,5424,522 45,62252,672 53,700 54,750 55,800 PROvISIEFOR DEPRECIATION 13,422 14,300 15,200 16,300 17,100 19,000 10,950 NETFINED ASS&~IN OPERTION 30, 1 30,p 30,42 36,M 36, 0 36,73036,650 ASSWMWIER lTRIO -~~~~,...... 7Ol2.... tO22 -. 70IO4ts .me..t*o02N ....-.-...... 7500775 70 TOTALNET FIRED ASSETS 30,856 30,972 31,172 37,122 37,350 37,500 37,600 OTE NON-CURRENTASSETS 621 650 670 680 680 690 690 TOTALCur ASSES 3,940 3,836 3,773 3,921 3,900 4,090 4,165 TOTALASSEtS 35,426 35,456 35,615 41,723 41,930 42,290 42,455 *ua U a a_ma_. _. a.,.... am.. a... xaa" ...... LIAILITIES&ESITY TOTALLO TE LIA3ILIIES 152' 160 206 242 363 293 2e9 TOTALCUlIT LIADILITII, 923 7n0 730 690 695 645 759 TOTALLIUILITIlES 1,07S 690 936 922 1,056 938 1,028 TOTALEMITI 34,351 34,566 34,6 ,01 40,372 41,342 41,427 TOTALLIABILITIES A FOUITY 35,426 35,458 35,6l1 41,723 41,930 42,280 42,4'S
DT EfUlTYRATIO I 0.0 0.0 0.1 0.2 0.4 0.3 0.2 CURREWTRATIO 4.3 5.3 5.2 5.3 5.6 6.3 5.5 ACCTS.RECEIVAULEO.NOTNS.OER6.REV.0.5 0.4 0.6 0.6 0.6 0.7 0.7 SourceoDKV and Bankistion netiuate - 78 -
5.42 The forecast financialposition of BKV for the period 1988-93, as reflectedin the above table, is satisfactory. The ratio of long-termloans to debt plus equity is 0.4Z, or lower, for each year 1988-93. The current ratio, averaging 5.6S, is at a favorablyhigh level. Accounts receivable, measured in terms of each year's average months' revenue, is projectedat a very low level of 0.6 months revenue, in line with past experience.
5.43 During negotiationsagreement was reached that BKV maintain tariffs and control operating costs at levels sufficientto achieve an operating ratio (includingpassenger subsidies) of not greater than 98Z in each of the years 1989 to 1993.
OV077U/1-1 9 - 79 -
VI. AGREEMENTS REACHED AND RECOMMENDATIONS
6.01 During loan negotiationsconfirmation were obtained from the Government and the beneficiariesregarding the followingprincipal matters:
(i) the operationaland financialtargets of MAV for 1990-93 (Table 28 and para. 2.19);
(ii) the project cost estimatesand the Bank financed project components (paras.3.27, 3.28 and Table 3.1);
(iii) project financingdetails (paras. 3.29, 3.31 and Table 3.2);
(iv) the appointmentof consultantsas Project Coordinators(pare. 3.32);
(v) the appointmentof UTIBER to manage the M-O motorway civil works constructionon behalf of MTCC (para. 3.35);
(vi) the arrangementsfor engaging specializedforeign trade companies to assist UTINFORM in procurementof road maintenance equipmentas well as laboratoryand field testingequipment and instruments(para. 3.36);
(vii) the project implementationscheddles (para. 3.39 and Tables 30, 31, 32 and 33);
(viii) the disbursementarrangemet;ts including a $300,000 ceiling on contractsto be treatedby SOE's (para. 3.49);
(ix) establishmentof a Special Account and annual audit thereof (para. 3.50);
(x) the estimateddisbursement schedule (para. 3.51 and Table 27);
(xi) the projects quarterly reportingand financialreporting requirementsand arrangementsfor annual audits of accounts by Audit Rt (para. 3.52); and
(xii) that the plans for the rail recyclingplant would provide adequately for the health and safety of the workers, and pollution control and treatmentand disposal of the plants waste (para. 3.53).
6.02 During loan negotiations,agreements were reachedwith Governmentand the beneficiaries on the following:
(i) That MAV would continue to carry out and keep the uneconomic railway services under control, monitoringeffectiveness of the measures already introduced,and making such adjustmentsas necessary to prevent losses from such services from increasing (para. 1.17); - 80 -
(ii) that policy improvementswould be carried out and specific actions taken on a time-boundprogram. Government would annually review with the Bank progress made on various policy and institutionalissues and take steps to meet the agreed targets (para. 1.18);
(iii) that funds availablefor highway maintenancewould be increased compared to 1988 by 10% in 1989, 10% in 1990 and by 50% or more in real terms in the followingyears to eliminate the accumulatedback log of maintenancewithin a decade (paras. 1.18 and 2.48); furthermoreMTCC agreed to increasesurcharges imposedon trucks exceeding the legal exle-load limit to discourageoverloading of heavy commercialvehicles (para. 2.36);
(iv) -hat the recommendationof the road user charges study would be implementedto ensure that heavy commercialvehicles pay amounts reflectingthe damage they cause to the infrastructure(para 1.18);
(v) that bidding documents for TMIS of MAV would emphasize the performancespecifications and that the bidders would have the flexibilityto submit alternativecost-effective solutions for the hardware and related system and be fully responsiblefor providingexport licences (para 3.06);
(vi) that the Railway Costing Study would be carried out by local consultant (supportedby foreign specialist)and would be initiatednot later than D!cember 1, 1989 and completedby the end of 1990 (para. 3.10);
(vii) that the bidding documents for ICIS of HC would emphasize the performancespecifications and that the bidders would have the flexibilityto submit alternativecost-effective solutions for the hardware and related system within COCOM constraints (para. 3.11);
(viii) that the BKV's organizationand management improvementstudy would be carried out by consultantsacceptable to the Bank and would be initiatednot later than December 31, 1989 and completedby end of 1990 (para. 3.23);
(ix) that the River transportand Port Study would be carried out by a joint venture of local and foreign consultantsand would be started not later than December 31, 1989 and completedby June 30, 1991 (para. 3.24);
(x) that detailedengineering for the motorway and overpasses to be completedby UVATERVwere discussedduring negotiations(para. 3.26);
(xi) that all land needed for the highway componentwould be acquired not later than mid 1991 (para. 3.40); - 81 -
(xii) That procurement of goods services and works to be financed by the Loan would be carried out in accordancewith the principles laid out in para. 3.48 and Table 3.3;
(xiii) That MAV would increase tariffs and control operating costs at levels sufficient to achieve an operatingratio (including passengersubsidies) of not greater than 95% in 1990 and reducing it by 1X in each of the subsequentyears up to and including 1994 (para. 5.17);
(xiv) That RC would maintain freight rates and other chargesat sufficient level to ensure a rate of return on average net fixed assets in operation of not less than 221 during each of the years from 1989 to 1993 (para. 5.29); and
(xv) That BKV would maintain tariffs and controloperating costs at levels sufficient to achieve an operatingratio (including passenger subsidies)of not greater than 98% in each of the years 1989 to 1993 (para. 5.43).
6.03 During loan negotiations,the followingconditions of loan effectivenesswere discussedand agreed:
(i) That MTCC, MAV, HC and BKV would each have designatedan officer of their respectiveagencies to act as counterpartto staff of the Project Coordinators(para. 3.32); and
(ii) that subsidiaryloan agreementsbe executed,by the Government and beneficiaries,to relend the loan proceeds to MAV RC, and BKV on the terms and conditionsacceptable to the Bank (para. 3.31).
6.04 With the understandingsindicated above, in paras 6.01 to v.03, the project would be suitable for a Bank loan of US $95 million to the Hungarian People's Republic for a 15-year term includinga five-yeargrace period.
S077U/20-Z2 - 82 -
ANNEX 1 Page 1 of 12
HUNGARY
SECOND TRANSPORTPROJECT
STAFF APPRAISALREPORT
FinancialAnalysis
A. General
1. MAV, HC, and BKV prepare financialstatements in the standard formats required by MOF. There have in the past been severalvariations in Hungarian accounting practicesfrom generallyaccepted internationalaccounting standards. However, accountingand auditing practicesare in the process of modificationas part of measures to encouragethe growth of the capital market in the country followingthe introductionof the two-tierbanking system during 1987.
2. A major reform in the system of taxation,which has been implemented during 1988, has resulted in the introductionof value-added-taxand personal income tax. In the case of HC, income tax which previouslyaveraged 55X on profits will be lowered to 50%. Contributionto the state budget based on wages (previouslya fixed 102 levy on basic wages, plus a levy on a sliding scale which could bring the total close to 20% of the wage bill) will be considerablyreduced (to about 5% in total),while wages will rise by an average of about 20% to compensateworkers for the tax burden which will now fall upon them. Income statementforecasts, for MAV, HC, and BKV, reflect the effects of these changes.
B. HungarianState Railways (MAV)
Past Performance
3. Income statementsfor the period 1984 to 1987 are provided in Table 1 of this Annex. The operating ratio has increasedfrom 90% to 982 during this period. Compared to 1984, 1987 reflectsan increase in operatingexpenses of 221 but an increaseof oniy 14% in operatingrevenue excluding subsidies, although traffic units decreasedby about 3M.. The expense category "Other OperatingCosts," amountingto 162 of total operatingexpenses before depreciation,increased by 68% from 1984 to 1987. The principalconstituents of this item are rental of wagons and contract maintenance,which increasedby 331 and 76% respectively. It is expected that wagon rental cost will be reduced through better utilizationof rolling stock, which will follow as a - 93 -
ANNEX 1 Page 2 of 12
result of implementationof the managementinformation system componentof the Proposed Project. The largest componentof operatingexpenses is salaries and related costs, representing392 (1987) of operatingexpenses before depreciation. This cost category increasedby 21X between 1984 and 1987. There has been very little variation in numbers employed since 1982, but determinedefforts are now being made to substantiallyreduce the staff numbers. The projectionsfrom 1988 to 1993 are based on the assumption that staff numbers decrease by 5.8% by 1993 and wage costs decrease by 5% from 1988 to 1991. Materialsas a proportionof operatingexpenses (24X) appear high for a railway but includemaintenance materials, spare parts for rolling stock, and some constructionmaterials. Depreciationhas been determinedat the rates prescribedby Government. Hungarianaccounting regulations do not at present permit depreciationbased on revaluedassets, however, the Government is now consideringthe applicationof asset revaluationfor depreciationpurposes. While operating revenuehas not kept pace with the iucrease in operatingexpenses, freight rates have broady kept pace with inflation in past years. Freight tariff increasesfrom 1985 to 1987 were as follows: Domestic Import/Export Transit
1985 11% 6.8X 1.13% 1986 72 10.0X 0.50% 1987 92 11.5% 5.75X
4. A statementof source and applicationof funds is provided in Table 3 of this Annex. The depreciationprovision is by far the largest source of funds and provided about 84X of the capital investmentin 1987 derived from MAV's internal resources. Under the heading "TransactionsDirect to Equity," the category "Other Equity Transactions"is largely comprisedof contributions from other enterprisesfor joint investmentscarried out by the railways for industrialsidings and terminal facilities. In this item are also contributionsfrom local councils towardsvarious passengerfacilities. "IncentiveFund Payments"consist of bonus payments to employeeswhich include a steeply progressivetax borne by the railway.
C. Hungarocamion
5. HC's actual financialperformance for the years 1984 to 1987 are provided in Table 4 of this Annex. The financialperformance in each year was better than indicated in the appraisalforecasts. About 93% of HC's revenues are from their internationaltrucking operationswhile the balance is from agency activities,workshop services,sales and other services to outside parties, and clearing and forwardingservices, etc. Revenue from trucking operations increasedby 26X from 1984 to 1987 while operatingexpenses increasedby only 23%, chiefly due to the ongoing modernizationof vehicles. - 84 -
ANNEX 1 Page 3 of 12
SC undertook, in the terms of First TransportProject, to endeavor to reduce the operating ratio to 80 by the year 1988. In fact HC reduced the operating ratio to 79 in 1986 and to 78% in 1987.
6. Forecast income statements,also presentedin Table 4 of this Annex, have taken into account the changes resulting from the tax reforms implemented in Hungary during 1988 (para. 5.02). The increase of 342 in salaries and related costs between 1987 and 1988 is due mainly to the 20X addition to basic salaries to compensate for the new personal income tax. Average prices paid by HC trucks for fuel in West European countries,measured in forints, is now about 501 higher than that paid for domestic fuel.
7. The operating ratios shown in Table 4, although not lower than those of past years, are satisfactoryin view of the effects of the new taxation system.
8. HC's forecast statementof source and applicationof funds for the years up to 1993 is provided in Table 6 of this Annex. Depreciationis the main source of funds. Depreciationrates, appLoved by the Government,allow vehicles to be written off on the basis of kms. travelled,equivalent to about six years on the average. HC's financingof capitalexpenditure from internallygenerated funds, representedby the self-financingratio reflected in Table 6, is high ranging between about 47% and 70% between 1989 and 1993.
S0779 - 85.-
HUNGARY b6 SECONDTRANSPORT PROJECT ------TABLEI HUN6ARIANSTATE RAILWAYS Page4 ot 12 INCOMESTATEMENT 1;84 TO1993 ------.. 1984-97At CurrentPrices (FORINTSMULLION) 1998-93At Constant1997 Prices
ACTUAL------FORECAST ------FISCALYEAR ENDING DECEMBER 31st 1984 1985 1986 1987 1989 1989 1990 1991 1992 1993
OPERATINGREVENUEt BASICOPERATIONS-PASSENGER TRAFFIC 4,722 4,695 4,919 4,955 4,895 6,364 6,799 7,453 7,858 9,612 -FREIGHTTRAFFIC 25,455 25,766 28,164 29,031 29,310 29,350 29,586 29,592 30,311 30,732 -OTHER 690 970 1,091 1,055 1,025 1,025 1,025 1,065 1,065 1,120 TOTALBASIC OPERATING REVENUE 30,967 31,431 34,073 35,041 35,230 36,739 37,410 39,110 39,234 40,464 GOVERNMENTSUBSIDIES 3,891 3,038 3,247 3,933 3,910 2,796 2,351 1,977 1,662 1,398 TOTALSUBSIDIZED OPERATING REVENUE 34,758 34,469 37,320 38,976 39,140 39,535 39,7S1 40,097 40,896 41,962 :.:::sSt3St:S:::3::,,u:,:,* X:3 :2,, u:3:88 :.:::: :,,:: 3:33:3 :3:::3:3:: ::::5 ::3::55 SALES-INDUSTRY 1,065 1,184 1,221 1,471 1,500 1,500 1,500 1,500 1,500 1,500 -BUILDINGINDUSTRY 2,745 2,625 3,049 2,948 3,020 3,020 3,020 3,020 3,020 3,020 -COMMERCIAL 831 969 1,012 1,C49 1,043 1,040 1,165 1,200 1,235 1,275 -OTHER 598 611 635 715 720 725 750 760 775 790 TOTALSALES: NON-BASIC ACTIVITIES 5,249 3,289 5,917 6,183 6,289 6,285 6,435 6,480 6,530 6,575 TOTALOPERATING REVENUE 40,007 39,758 43,237 45,159 45,425 45,820 46,196 46,567 47,426 48,437
OPERATINGEXPENSESt MATERIALS 7,241 1,784 8,338 9,914 8,845 89695 8,547 80403 403 8,403 FUEL&ELECTRICITY 4,985 5,188 4,883 5,694 5,755 3,657 5,562 5,467 5,467 5,4S5 SALARIESI RELATED COSTS 11,80612,901 13,794 14 462 14,33014,087 13,848 13,614 13,614 13,600 COSTOf RESALE GOODS 847 958 994 1,070 1,075 983 985 985 995 995 PROVISIONS 862 961 1,479 847 850 850 850 830 950 850 OTHEROPERATING COSTS 3,640 4,250 5,231 6,099 6,100 5,997 5,895 5,795 5,795 5,795 TOTALOPERATIN EIPS.BEfORE DEPR'N 29,381 32,042 34,927 37,086 36,955 36,27135,687 35,114 35,114 35,088 PROVISIONFORDEPRECIATION 6,765 6,783 6,923 7,107 7,199 7,391 7,783 8,193 8,613 9,038 tOTALOPERATING EXPENSESE 36,14638,823 41,830 44,193 44,154 43t662 13.470 43,307 43,727 44,126 :2227asxass--assssaw2222222=21 saz ZUszzssa sssasassa gazzvz 88 a8s*t NETOPERATGS INCOME 3,861 933 1,397 966 1,271 2,158 2,726 3,260 3,699 4,311 sxxzm Mtoomrs3a33 on"3 uais mma az:::,: 33 INTERESTONLOANS 700 749 487 333 300 500 723 1,004 1,286 1,527 NETINCOME BEFORE TAXES 3,161 184 900 613 971 1,658 2,003 4,256 2,413 2,784 2U&llSX282222 82*MSS#A t ==*Y anatn YaV2 8282M -&284 l828SA2 UZ1228sts WSStg
TAIESON INCONE 1,794 0 11o 120 97 829 1,001 1, 28 1,206 1,392 NETINCOME AFTER TAIES 1,367 184 790 493 974 829 1,002 1,L29 1,207 1,392
OPERATINGRATIO 2 -INCL.SUISIDIES 90.31 97.72 96.82 97.92 97.21 95.32 94.11 93.02 92.22 91.12 OPERATINGRATIO I -EICL.SUIDIES 100.11 05.7N0.7n 107.22106.41 101.32 99.11 97.11 9.52. 93.92 RATEOF RETN ON NET FNt= ASSEtS 1I/ 4.9 1.22 1.8S 1.22 .n 3.01 3.7N 4.32 4.72 5.42 OPERATINGEXPENSES PERTRAFFIC UNIT 1.07 1.18 1.26 1.36 1.33 1.34 1.33 1.33 1.34 1.35 I/ Operatingincome as %of avrsgonot fixed assetsin operation. Source:Nav S Bankmission etimate. - 86 -
SECONTRANSPOT PROJECT ''iU '' STATERAILWAYS Req.S BALA NCEMET of 12 19fl tO 1993 .....T ______MILLION) ( N1931-93 At Cu"rrnt Prices FO_I_t_MILLION) ____-9_ At Constant 197 Pric.,
.- ... ACTUAL--.A L - - -.-.------.-..---.-----...... --- F.AST.--..----- i195 193 19i? 1963 1939 1990 1991 1992 1993 AWS
FtIEDASSETS IN OPERAtION 167,306170,619 175,565 175,515 184,929 194,730 204,944 215,212 225,676 PROVISIONFORDEPRECIATION 69,715 92,524 97,210 104,09 111,800 119,563 127,776 134,369145,427 NETF110 ASSETSINOPERATION 77,591 73,0957t.375 71,174 73,129 75,147 77,161 73,623 60,249 ASSETSUNDER CONSTRUCTION 4,635 4,430 5,822 15,166 13,62316,036 16,09016,2S6 16,014 TOTALNET FtlE ASSETS 82,244 2,325 84,197 86,342 83,752 91,163 93,258 95,109 96,265 ...... f efl ...... OTHERNON-CURRENT ASSETS 2,130 2.312 2,309 2,360 2,410 2,460 2,510 2,560 2,610 CURRENTASSETS:
CASH4 DAIS 703 987 1,053 1,100 1,120 1,140 1,160 1,180 1,200 SNOT-TOERNODEPSITS 0 0 0 1,3U3 3,509 5,800 8,00 10,210 12,443 ACCOUNtSRECEIVAILE 3b,a1 3,767 3,f91 4,000 4,010 4,1N0 ,240 4,320 4,410 INWElTORIES 10,61511,034 11,37911,000 11,440 11,900 12,360 12,100 13,400 OTHNRCURRENT ASSETS 260 357 565 50 59 60 0 620 64 TOTALCURENT ASSEtS 15,3 16,145 16,95518,043 20,739 23,60 26,59129,210 32,06
TOTALASSETS ",75 100,2 103,459106,745 1l1,9l 117,243122,!U 126,879130,956
LIABILITIES& EQUITY LOI TErNLIABILIlTisE LOII-TERNLOAN 651 11 927 3,J65 4,906 ,407 7,412 3,112 7,964 OTHRNON-CRT LIMILITIES 396 307 425 450 470 490 510 $40 570 TOTALLOS TERNLIAIILITIES 1,247 1,116 1,332 3,315 5,573 6,897 7,922 0,722 6,534 CURRENTLIAIILITIEIS ACCOUNTSPAYAtU 1,193 740 1,402 1,440 1,40 1,520 1,570 1,620 1,670 CU12.PO1TIONOFLON-TERN I T 5dt 64 1id 116 584 94 1,56 1,720 2,200 SNORT- LOANI CE( 2,4 850 1,75 IONCUINEa1I (021 (60O 0 0 0 0 0 0 cNCUE UNILr LuTA RISI 0 I2 105 110 110 110 110 110 110 ACCUEDE: 1,113 1,17 1,l6 1390 1450 1510 170 160 1t7O TOTALCWURET LIILITIU 4,09? 2,U11 4,38 3,5 3,U62 4,104 4,U11 5,080 5,660 ~~~~~~~~~~~.nm....ef. _ .... . n n n f l l fff lbf m...... TOTALLIA8ILITI3 *,344 3,929 5,90 6,071 9,002 11,001 12,533 13,102 14,214
EiVE FUNID 0 7 12 0 0 0 0 0 0 OTHERFUTN 94,227 96,256 9,914 ",000 102,070109,240 108,500 111,670 115,350 NETINCOIE CIURElT-YEAR 114 79 493 674 09 1,002 1,12 1,207 1,39 TOTALUITY 94,411 97,055 97,369 9,374 102,69 106,242109,2 113,07 116,742
TOTALLIAIILITIES I EOUltY 99,75510,92 103,45 106,74 l1,90l 117,243 122,166 126,679 130,95
AfDfTTO DE4TJUUITY I 0.93 0.a 0M 3,1 4.6a 5.73 6.51 6.72 .4 i?EcIVAIL14.ND.NTHLOPtRRv. LI 1.3 1. 14 1 I . 1 3 1. huc,YandImnk lission ietiuat" LI - 87 - I4IJ6ARY :*"ct: SECONDTRAMSPORT PROJECT ...- TAKLEI HUNGARIANSTATERAILWAYS Page6 of12 REVISIONOF AYVS F16URES STATEENTOf SOURcE a APPLICAtION OFFUNDS 1985to 1993 -958-7 At CurrentPrices (FORINTSMILLION) 1988-93At Constant1987 Prices FISCALYEAR EJODIN DECEBER 31st 1985 1986 1987 1988 1989 1990 1991 1992 1993
SOURCEOFFUNIDS AFTER tAI INCONE 184 790 493 874 829 1002 1128 1207 1392
QPERATIN8INCONE 933 1,387 966 1,271 2,158 2,724 3,240 3,699 4,311 ADDtDEPRECIATION 6,793 4 923 7 107 7,199 7 391 7,783 8,193 8,413 9,038 LESS:TAXES ON INMCOE 0 11101 11201 (971 18291(1,0011 (1,120) (1,206 (L,:392) TOTALINTERNAL FUNDS GEEATION 7,714 8,200 7,953 9,373 8,720 9,50810,325 11,104 11,957 ...... LONG-TERNLOANS 469 307 444 2,502 2,127 2,443 2,371 2,490 1,992 OTHERSOURCES TOTALEXTERNAL SOURCE OFFUNDS 689 307 464 2,502 2,127 2,U43 2,371 2,49 1,982
TOTALSOURCE OFFUDIS 8,403 8,507 8,41710,875 10,84711,971 12,49413,594 13,939 gaaaazauauauauuuugu auuuua .. saa auu asausa...... _ssa uaaauu a..... nsa a...... _# APLICATIONOFFUNDS:
CPITALEPENDITURE 7,141 7,517 8,94 9,344 9,80110,214 10,248 10,464lO,192
LOANINTEREST CMARGED TOINCO1 749 487 353 300 500 723 1,004 1,284 1,527 REPAYNTOF L.T. LON PRINCIPAL 240 531 341 116 114 384 944 1,4 1,720 DEBTSERVICE 989 1,018 494 414 614 1,307 1,948 2,652 3,247
CASHNIAOK (143) 284 71 42 20 20 20 20 20 SHORT-TERNDEPOITS 0 0 0 1 363 2,146 2,291 2,208 2,202 2,233 OTHOCURRENT ASSETS (100l 482 738 1315) 530 550 570 590 420 SHRT-TNRLOANS A CREDITS 1226)2 02 (932)1 754 0 0 0 0 0 OTHERCURRENt LIA8ILITIES 1,483 1182I)(901 12841 (60) (40) (40) (60) (70) ORNINGCAPITAL IKR/(DECR) 11 26 2,676 (1,063)2,50 2,43 2,801 2,738 7,732 2,803
TRANSACTIONSDIRECTTO EQUITY TRANSfERSTOSTATE IUD6Et 1,001 663 525 1,190 800 450 200 0 0 INCENIYEFUNDPAYIINTS 635 6 63047 0 0 0 0 0 0 STATERNTOShERIVE3 0 (50) (44) 0 0 0 0 0 0 TEOC.DEVELIPNOTRN PAYI8 149 0 0 0 0 0 0 0 0 OTHEREQUITY'TAU*CTI (Lo5) (3947) (02) (2,3) (3,0041(2,801) (2,470) (2,272) (2,303) TOTALTRANWIICT n 7 EUITY 249 (2,7041 m (1,443)(2,20) (2,31) (2,278) (2,272) (2,3031
TOTALAPLICATIt OFFN 86,4058,507 8,41710,875 10,847 11,971 12,*96 13,594 13,939
OEMTSERVICE COVERAM E (TIlES) 7.8 8.1 11.5 20.1 14.2 7.. 5.2 4.2 3.7 SELFFINANCItN RATIO 1-3 URAMER. 127.1 42.12 99.52n.n 78.02 76.42 74.12 76.92 79.02 1/ Excludasshort-to portionof long tire debt. SourcesMY ad Bak issoo estiutes - 88 -
HUNGARY SECOND!RANSPCRT PROJECT A------...... _ HUNGAROCANIOINTRNATIONAL FRE16Ht CONPANY Paqp7~ALE4 ot 12 INCMESTATEIST
190419040TO 1o993 M 1984-87At CurrentPrices (VORINTSNILLION) 1988-93At Constant19S7 Prices --- - ACTUAL------FORECAST------FISCALYEAR ENWING DECINSER 31st 1984 1985 1986 19 19988 1989 1990 1991 1992 1993
OPERATIN REVENUEs INTERATIONALTRNSPORT 4,647 4,555 5,112 5,63 5,974 6,121 6,451 6,747 7,053 7,376 OTEROPERATING INOE 207 143 16l 347 472 460 491 502 513 526 TOTALOP TINGREVENWE 4,854 4,6" 5,260 6, 6,346 6,601 6,942 7,249 7,566 7,904 28 e .sa _* . u a 88 8 a .usm. 88888 3838383 OPETINSEIPESES M T1.IALS 647 711 709 910 1,009 1,126 1,179 1,230 1,265 1,344 780 720 914 1,003 940 901 1,025 .,070 1,118 1,169 1 iRELATOCOSTS606 660 750 63 1,119 1,1539 1,19 1.227 1,242 1,246 LOWMACES 261 276 305 446 447 463 404 505 528 552 S 95 181 142 159 159 165 172 160 196 197 a* TAAES 400 325 311 S 53 557 582 600 63 664 __eCOSTS 425 250 253 295 298 296 297 29 297 299 PRTINE!PS.SEFOR DRIATION 3,314 3,131 3,454 4,005 4,597 4,749 4,929 5,116 5,293 5,472 PRVISIONFOR DPRECIATION 619 651 743 767 670 693 724 75 7I0 926 ==-- - - . . ------TOTALOPERATIN ERPES 3,933 3,7M2 4,197 4,652 5,267 5,442 $,653 5,074 6,03 6,29 NE OPERINtGlINICOE 921 916 1,03 1,34 1,0 1,159 1,239 1,375 1,463 1,606
I UTRTONLOW 64 10 106 136 1o 231 274 315 334 277 RETIIICOIE dEtS tAIES 637 616 977 1,212 931 928 1,013 1,060 1,14 1,329
TASESON INCOIE 325 402 416 92 465 464 507 530 574 664 NETINCONE AFTER TAXES 512 414 561 320 466 464 506 530 575 665 uumummmam.uummmmmmmuamamoman.ammm2 msemma ammmi aassa guMmma.mam.m ensmm wwamma ma. 388
OtEATINGRATIO I 81.01 80.51 79.5 la.31 83.02 62.41 61.41 81.01 90.41 79.7X RATEOf RET'NON VET FIIEO ASE 1/ 31.61 29.92 32.18 39.52 30.51 31.31 31. 27.61 27.1 26.61 1/ Oeratingincus asI ot averagenot fied asets in oWration, SourcetHungrKciO and anakission etimatn - 89 -
HUNSARCAMIONINTERNATIONAL FREIGHTCONPANY Pagoa of 12 BLAUNESHEET
1965701993- 1Q95.97At CurrentPfices IFORINTSNtLLION) i968-93 At Constant1937 Prices
FISCALYEAR ENDIN6 DCEMEI 31st 11 196597 16 99 1990 1991 1992 199
ASSETS
FIXEDASSETS INOPERATION 5,435 5,966 5,976 6,251 6 140 6,950 7,711 7,565 7,905 PROVISIONFORDEPRECIATION 2,292 2,519 2,599 2,554 2.'i0 2,397 2,302 2,044 2,195 NETFIXED ASSETS IN OMEATION 3,153 3,447 3,377 3,697 3,700 4,553 5,409 5,521 5,710 ASSETSUNDER CONSTRUICTION 14 24 23 0 0 0 0 0 0 TOTALNET FIXED ASSES 317 ,41 ,02 3,697 3,700 4,553 5,409 5,521 5,710
OTHERNON-CURRENT ASSETS 20 19 19 19 19 19 19 19 i9 CURRENTASSETS: CASH& BANK 115 363 607 364 364 364 364 36 364 DRAFTS 0 65 50 51 53 55 St 61 63 ACCOUNTSRECEIVABLE-TRADE 650 679 1,165 1,170 1,211 1,266 1,321 1,381 1,444 EMPLOYEELOANS 130 126 138 18 168 168 168 1id 168 RECEIYALEFROM STATE RUMI 243 284 381 0 0 0 0 0 0 INVENTORIES 279 291 3S6 315 327 340 354 366 38 OTHERCURRENT ASSETS 152 353 110 50 45 40 35 30 a TOTALCURRENT ASSETS 1,769 2,330 2,607 2,118 2,168 2,233 2,300 2,372 2,412 TOTALASSETS 4,956 5,970 6,229 5,634 5,637 6,605 7,721 7,912 6,131 szzuazassuas UU *UUUUUUUUnoUUs"" USUUU3U~UU.U *BUSUStUU LIABILITIESA EQUItY LIABILITIES LONGTERN LIABILITIES: ---- …------LOMB-TERNLOAW ISO 749 613 52? 514 614 1,217 530 130 OTHERNON-CURREN LIABILITIES 167 246 91 g0 go g0 s0 60 60 TOTALLONG TERN LIABILITIES 355 99 704 -602 _ 594 ' 694 1,297 610 210
CURRENTLIABILITIES: ACOUNTSPAYABLE 304 543 920 543 543 343 543 543 543 CURR.PORTIONOFLOlltTERN EBOT 152 29 208 490 563 416 467 776 600 SHORT-TERNLOWN & CUBDITS 113 - 3 - - - TOTALCURREN LIABIUT113 571 635 1,161 1,033 1,106 959 1,010 1,319 1,143 TOTALLIABILITICI 926 1,330 1,965 1,635 1,700 1,653 2,307 1,92! 1,353
EQUITY: RESERVEFWND 405 427 626 0 0 0 0 0 0 OTHERFUNDS 3,211 3,052 3,417 3,733 3,723 4,644 4,691 5,4*186,163 NETINCONE CURRET-YEAR 414 561 320 466 464 506 53 575 665 TOTALEQUITY 4,030 4,040 4,363 4,1I9 4,167 5,152 5,421 5,983 6,921 muauuzuuwomuain" Buanos sa,iaa ua.asa ons*"aa sagauaa uassaau aaaaaa Beuseug TOTALLIABILITIES I EIUIIY 4,956 5,870 6,22 5,634 3,8U7 6,605 7,726 7,912 6,161
RA?I0FDEBT TO DEBT.UUITY 1 4.35 15.6a 12.32 11.11 10,91 10.61 16.M 6.1l 1.92 CURRENTRATIO 3.1 2,9 2.4 2.1 2.0 2.3 2.3 1.6 2.1 ACCTS.RECE IVA8LENS. NTNS.OIRI.IAP. 2.2 2,0 2,3 2.2 2,2 2,2 2.2 2.2 2,2 Sourco:Iunqaroain and BAank esinion estieatn - 90- 40NGARY SECONDTRANSPORT PROJECT---- TABLE6 HUNWAOCANIONINTERNATINAL FREIGHT CONPAY'~f Page9 of 12 STATEMENTOFSOURCE I APPLICATION OFFU?IOS 1905TO 1993 - ~~~~~~~~1993-97At CurrentPrices (FORINTSFILLION) 1IM-93 At Constant 1987 Prices FCALYER ENOINSDECENu 31tI 1995 196 1997 1909 1999 199 199 192 1993
SOURCEOFFUNDS: :ua:2zz::2axsgua OPERATINGINCOME 916 1,083 1,349 1,079 1,159 1,299 1,375 1,4e3 1,606 ADD:DEPRECIATION 651 743 767 670 493 724 756 790 8216 LESS:TAES ON INCURS (402) (416) (892) (465) (4641 (307) (530) (514) (664) TOTALINTERNAL FUNDS GENERATION --- 6 1,410 1,223 1T,2841,89 1,506 1,601 1,699 1,768
LONO-TERNLOANS 68 953 19 399 555 516 1,070 69 200 OTHERSOURCES TOTALEXTERNAL SOURCE OFFUNDS 60 953 19 99 5 516 1,070 89 200
TOTALSOURCE OFFUNDS 1,233 2,263 1,242 1,603 1,Y43 2,022 2,671 1,789 1,968
APPLICATIONOFFUNDS:
CAPITALEIPENDITURE 374 965 265 965 696 1,577 1,612 902 1,015
LOANINTEREST CHARSE TOINCOIE 100 106 136 146 231 274 315 334 277 REPAYIIENTOFL.T. LOANPRINCIPAL 112 152 360 208 490 563 416 467 776 DEBTSERVICE 2T72 250 496 354 721 83 731 901 1,095S
CASHA BANK (66) 20 22 W(43 0 0 0 0 0 OTHE!CURRET ASSES 418 34 23 (446) 50 65 67 72 so ACCOtINTIPAVADLE 4 (239) (37 7 0 0 0 0 0 SNORT-TERNLOANSCREDITS 71 115 (3) 33 0 0 0 0 0 MORINSCAPITAL INCRIiiECRI 11 4227 46 17 (279) 5o 65 67 72 60
OTHERAPPICATION TRANSFESTOSTATE IUIST 110 222 305 274 131 257 154 59 142 INCENTIVEFUNDPAYNINTS SG 39 36 44 45 46 49 49 49 OThERAPPLICATIONS/(SOUCS) 0 2M 121 323 300 (760) 59 (94) (370) 160 553 464 641 476 (457) 261 13 (180)
TOTALAPPLICATION OWFINN 1,233 2,263 1,242 1,683 1,943 2,022 2,671 1,799 1,948 am Moo~~~~minuamm geum= 828u easmam suammaus mag assesua aasu*uu DOlTSERICE COYWE (TIMD 4.3 5.5 2.5 3.6 1.9 1.9 2.2 2.1 1.7 SWLFILINCII RATIO1-3 WIAVER 3?.41 174.51 1A.n 15m2 57.21 46.61 59.92 70.2166.22 I/ ExcludessMat-twoe partios of longterm debt. Soure:oHungaocniez nd& Danksissicm estimates - 91 - HUNARY NE SECONOTRANS T POJECT ------TABLE7 UAPS tRANSOTCPAN Page10 ot 12 ----- ATEKT-- 1983-07At CurrentPrices (fORINTSIIILLSONII 198-93At Canstant1967 Prices ------ACTUAL------FORECAST------FISCALYEAR ENDING DECE11ER Slit 1913 1994 1985 1986 1987 1996 1969 1990 1991 1992 19S
OPERATIN6REVENUE: PASSENGERSALES 1,497 1,504 2,007 2,048 2,40 2 053 4 123 4,204 5 442 5 534 6,5b8 OTHEROFERATIN6 INCOME 644 589 807 963 1l153 1,100 1,100 1,100 1,100 1,100 1,100 ---- ...... ------. -- ....-----... ------.. . ._...... OPERATINGREVENUE EICLUDO6 SUBSIDIES 2,141 2,093 2,814 3,031 3,193 3,153 5,223 5,304 6,542 6,634 7,68
SuS8ESNAI ElUR:fSTEla eI l 01ot 34!91 'Al 'I'lls 2YH 2'11|9 'ifi0 'I04 511MO LESS:SALES TAX 0 (1) (2) Mi) (1) (1) (1) (1) (1) (1) (1) TOTALOPERATIN6 REVENUE 6,904 9,404 10,167 11,144 12,572 12,897 12,904 12,909 13,04713,078 13,134 gaggguouauuauasz uaau .auaaa. , amaugag ZUU_UU *amsmw aM ma,,. 2aaa m aa "..,.v, a.aaa OPERATINGEXPENSESt MATERIALS 2,77 2,991 3,00 3,036 3,713 3,710 3,49 3,47 3,674 33 3,705 ENERGY 1,070 1,085 1,198 1,204 1,343 1,353 1,350 1,340 1,35 1,30 1,346 WAGES& RELATEDCOSTS 2,449 2,723 2,969 3,11 3,330 3,641 3,842 3,842 3,87 3,60 3,900 COSTOF SULES OF RESALE OOUCTS 221 235 432 592 438 437 437 639 637 63 38 OTHEROPERATING EXPENSES 322 353 905 1,129 1,206 1,023 1,023 1,033 1,03 1,03 1,03 OFERATIN6EIPS.BEFORE WRECIATION 4,636 7,387 9,560 9,114 10,232 10,54410,542 10,$21 10,54910,593 10,64 PROISIONFOROEPRECIATION 1,370 1,413 1,700 1,743 1,845 1,900 1,925 1,949 2,034 2,040 2,045 TOTALOPERATIN6 EIPENSES 6,206 9,000 10,260 10,65712,077 12,44412,447 12,470 12,60312,43 12,469 suomsa.auaa"xagaqa.aaa mauseu *mas%MS U2383U3 48UUUtS amsUUU 88*8306 sauxaMU mama.. 800840flb smama. NETOPERATING INCOME 694 404 (731 2 495 433 439 439 444 445 447 s.aa,aaaaa.aaaaaa.aaa uamUaue uaaua _maso.. . _mass. _ *a"masma88.a.68 mamamammauga. " s.auama Gauss .NTERESTONLONS 1 13 18 13 15 15 51 51 89 12 15 NETINCOME WEFORE TAlES 479 391 (91 274 460 418 3 3 3555 427 432 R.aSsauaau"oss ga.auxaauua Sasso"a SusaaaMM.88mm USM UuaUSSg .a 8 nauus* 880:amagas.um agasam TAIESON INCONE 37 195 0 31 53 0 27 22 15 I 7 NETINCOME AFTER TAXES 301 194 (911 245 427 376 U1 34 340 420 425 *aasu.uaauaaamaaaa.,aua aammaa mama ass..,Jsa__m _ua _umm_gg, as " _ usagm ass am a_ OPERATINSRATIOI -INMCL.SUUIDIES 92.23 95.73 10.n 97.41 94.1I 96.U1 96.61 96.43 9.41 9.61 9U.6t OPERATINGRATIOt -EICL.SU5UIDIES 36.43 430.03 34. 35.23 33576.2t 395.3 236.n 235.0o 19.13 190.4 145i.53 RATEF RETlNON NET FIXD ASSETS 1/ 2.U3 1.4t -0.2S l.Ot 1.7 1.41 1.43 1.3 1.2t 1.21 1.2t I/ Operatingincmn as I f awraepnet fie isats in eperatlom. Sources81N and Bank eistie utlatee - 92-
SECONDTRANSPOT PRJECT---- TABLE BUDAPESTTRANSPORT CMPANY Pageit ot 12 BALANCESHEET ...... ~~~~1986347AtCurrent pri.c. (FORINTSKILLION) 19811-93At Constant ±987 PrlcIs
----- ~~~ACTUAL------FORECAST ------FIVAL YEARENDING DECENBI 31st 193 184 1m 1986 1987 1988 1989 1990 1991 1992 U(9
ASSETS FIXEDASSETS IN OPERATION 36,68740,384 41,442 42,452 43,542 44,522 45,622 52,672 53,700 54,750 55,90o PROVISIONFORDEPRECIATION 10,15910,870 11,718 12,632 13,422 14,300 15,200 16,300 17,100 18,000 1e,95o NEfFIXED ASSETS IN OPEATION 26,32029,514 29,744 29,820 30,120 30,242 30,422 36,372 36,600 36,750 36,800 ASSETSUNDER CONSTRUICTION 1,479 933 7'?1 679 738 7i0 750 750 750 750 750 TOTALNET FIXED ASSETS 3.,00730,447 30,321 30,499 30,858 30,972 31,172 37,122 37,350 37,500 37,600
OTHERNON-CURENT ASSES 511 475 733 677 628 650 670 680 ABh 690 b90 CURRENTASSETS, CASHI BANK 663 126 128 660 728 600 450 320 420 450 520 SHORT-TERNDEPOSITS 0 0 0 0 0 le oh 144 191 344 351 ACCOUTSRECEIVABLE 263 275 285 361 398 400 405 405 405 410 410 INVETORIES 2,177 2,278 2,440 2,534 2,644 2,650 2,660 2,680 2,710 2,710 2,710 OTHERCURRNTASSETS 0 128 126 12 16d 1id 172 172 174 174 174 TOTALCURREN ASSETS 3,103 2,807 2,979 3,684 3,940 3,83 3,M7 3,921 3,900 4,090 4,165
TOTALASSETS 31,62133,729 34,233 34,860 35,426 35,439 35,615 41,723 41,910 42,280 42,455 *aaaaaat aa, aunauaaaaauu na uun maaaaaa"auan uus m LIABILITIESI EWUITY LONGTER LIABILITIS LOSTULoAN 0 0 0 0 0 0 36 72 183 123 99 PROVISINS& OTHER NON-CURAJDUT 159 164 175 494 152 160 170 170 180 170 170 TOTALLONG TERN LIABILITIES 159 164 175 484 152 160 -A4 242 363 293 249
CLURETLIABILITIES: ACCOUNTSPAYABLE 173 435 32 342 66 500 500 450 450 400 500 CURR.PURTIGNOFLDNTEIMDEUT 0 0 0 0 0 0 0 0 10 10 24 SORT-TERNLOWN & CREITS PROVISIONFORTAIES ON INCONE (107) (21531(228) (1423 (98) (110) (110) (110) (1103 W10) (110) OTHERCURRET LIABILITIES 4 4 0 a 123 100 100 100 100 .; 100 ACCRuEDEZPINS 184 196 216 225 236 240 240 240 245 . 245 TOTALCURRENT LIABILITIES 254 42') 314 405 923 730 730 680 695 645 759 TOTALLIAUILITIU 413 584 489 889 1,075 890 936 922 1,058 936 1,029 .a.ma.annauum SIONSNmsmaa. sowm ga.mmna saumag RX14*08 snaamn* 4=*Rasua, angaana.
REKIVEFUM 333 43 91 0 0 0 0 0 0 0 0 OTHERFUNDS 30,574 32,906 33,744 33,726 33,924 34,190 34,318 40,435 40,532 40,922 41,002 NETINCII CUREN-VE 301 196 (91) 245 427 378 341 366 340 420 425 TOTALEQUITY 31,20833,145 33,744 33,971 34,351 34,568 34,679 44,801 40,872 41,342 41,427 soanesouauan *n.am exams"naaau=" uamns" uuunuuu unuuuun ..nuun uanna 80210811 *mann. umanant TOTALLIABILITIES I EQUITY 31,621 33,729 34,233 34,060 35,426 35,43835,615 41,723 41,930 42,290 42,455 susmmmna uaassu.agemn Lsa~ aaan amnuu auua annum unnnnunauanamn1 uannaau unanna mass-ou DETEQUITY RATIO I 0.0 0.0 0.0 0.0 0.0 0.0 Olt 0.2 0.4 0.3 0.2 CUREN RATIO 12.2 6.7 9.5 9.1 4.3 5.3 5.2 5.8 5.6 6.3 5.5 AMBT.RCEIVABLEuIU.NTMAOG.W18.. 0.4 0.4 0.0 0.5 0.5 0.4 0.6 0.6 0.6 0.7 0.7 Sauce:SKY and lank sission "tiut" - 93- SECONDTR844SORT PROJECT ...... ~~~~~~~~TABLE4 IUDPST TRANSPORt COMPANYPae1of2 STATEMENTOFSOURCE I APPLICATION OFFUNDSPae102 ...... ------~~1993-67At CuArrent Prices (FORINTSMILLION) 1996-93At Constant.997 Pvlces
ACTUAL------FORECAST-.------FISCALvEAR ENDIN6 DECEMBER 31St 1963 1994 1985 1994 1967 1966 1969 1990 199i 1.9 1993
SOU'RCEOFPihos:
OPERVTINGINCOME 496 404 113) 269 495 433 439 439 444 445 447 401:DEPRECIATION 1 370 1 413 1,700 1,743 1,645 1,900 1,925 1,949 2,034 2,040 2,345 LESS!TAXES ON INCOME !378) h19S) 0 (31) (53) (40) (271 (22) (15) (7) 1~' TOTALINTERNAL FUNDS 6ENERAfION 1,688 1,822 1,4 2001 228 2,9 2,3 236 243 248 2,5
WORLDBANK LOAN 0 0 0 0 0 0 36 36 71 0 0 LONG-!ERMLOANS-DOMESTIC CURR'CY 0 0 0 0 0 0 0 0 50 0 0 OTHERSOURCES 1,041 2,862 1,330 570 557 440 772 6,273 1,179 706 729~ TOTALEXTERNAL SOURCE OFFUNDS 1,041 2,842 1,33 570 557 440 60 64,309 1,300 706 729 ------. C...-.-. TOTALSOURCE OF FUNDS 2,729 4,684 2,957 2,571 2,844 2,953 3,145 8,675 t,743 3,164 3,213 autumw s gaaa= **=a8s mamamax88332 mg aug8 anna,.. 88in33 *massn a.. mi,nu muanan APPLICATIONOFFUNDS: =VV882 2X2~3S232XV CAPITALEXPENDITURE 1,704 1,449 1,513 1,421 1,925 1,660 2,000 2,010 2,030 2,000 2,000
LOANINTEFrEST CRARME TO IKNCOE 17 13 le 13 15 15 51 51 69 1o I5 REPAYENEITOFL.T.LOUNPRINCIPAL 0 0 0 0 0 0 0 0 0 40 10 DEBThERV)CE 17 13 18 13 is 15 51 51 89 78 25
CASH& BAL( (5371 2 532 &I (128) (150) 70 (100) 30 70 SHORT-TERADEPOSITS 0 0 0 0 1e 48 58 47 155 5 OTHERCURRENT ASSETS 241 170 173 inI 4 19 20 32 £0 SHORtT-TERPLOANSACREDITS 0 0 0 0 0 0 0 a 0 0 OTHERCURRENT LIABILITIES (144) 104 (91) (116) 193 0 so (5) s0 (100) ------.n a- _ F' NORKINSCAPITAL KNCAMMCR (5 (462) 276 6~14- (242) 69 (431 L96 (24) 240 25)
OTHERAPPLICATIONS TRANSFERSTOSTATE BUDGET 134 305 0 113 72 330 250 170 103 30 30 INCETIVEFUND PAYMENTS 113 99 87 U 9 0 0 0 0 0 0 OTHERAPPLICATION 742 3,26 1,041 122 995 439 907 4,244 1,545 836 1,183 1e141 3,614 1,146 323 1,M,' 949 1,157 4,416 1,470 64M 1,213
TOTALAPPLICATION WOFMPE 2,729 4,484 2,957 2,571 2,844 2,953 3,145 3,675 3,743 3,184 3,213 ml3sns2asueus8aZ8nmna masN maaa am. eumm ammm=8 ma==Ro=*4 . uammaammaa esmm saamuna mutant,
iEOT_S_E_RVYIC,ECO_V_E_RAGE(TINES) 99.3 140.2 90.4 153.9 152.5 152.9 45.3 46.4 27.7 31.8 99.4 SELFFIWANCINS RATIO 2-3 YR.AVER104.21 146.01 67.11 61.51 140.12113.11 119.42 105.12 119.22 107.52 124.32 Source:9KV and sank fission estidatus - 94 -
ANNEX2 Page 1 of 8
HUNGARY
SECOND TRANSPORTPROJECT
STAFF APPRAISALREPORT
SalientDetails of Economic Evaluation
A. Railway Components
TransportManagement InformationSystem (TMIS)
1. Although the nature of economic benefits to be expected from this project element is relativelysimple to establish,the precise magnitude of such benefits is considerablymore difficult to estimate. The concept of a central computerizedmanagement information system has been gradually introduced,on a modest scale so far, in MAV's network, helping some local area or network managementactivities, but the scale of activities is too modest to have reliablebenefit estimates. Consequently,these benefit estimatesare based on the experienceof other countrieswhere similar managementinformat.on system has been establishedand its impact has been evaluatedover a reasonableperiod of time. In the present analysis when a transportmanagement system for wagon and locomotivecontrol is envisaged for the entire network by 1993, substantialsavings are expected in investmentssn rolling stock and locomotivesprimarily due to (i) better utilizationof the existingassets due to quicker turn-around;(ii) reductionof empty haulage and better loadability;(iii) reduction of waste-timefor train preparationin busy marshallingyards and (iv) reductionof waiting time for wagons at border stations. The capital costs for TMIS (Table 3.1) excludingtaxes and duties are estimated at Ft. 1,140 million (about US$25 million) and these investmentexpenditures are likely to be concentratedduring the four years between 1989 and 1992 accounting for about 50% of the total investments,while the balance of the investmentswill spread over the entire period 1988-1994. The operation and maintenancecost of the TMIS is expected to increase from about Ft. 65 million (about US$1.3 million) in 1988/89 to about Ft. 165 million (about US$3.3 million) in 1993/94and thereafterwill remain at the same level. The expected benefits due to the four factors enumeratedabove would result in an average overall improvementin utilizationof wagons of about 8 to 10% and of motive power 2 to 3%. Further, it was assumed that benefits due to TMIS would reach about 50% level, in early 1990s gradually increasingto total realizationof benefits by 2000.
2. In 1987, the detentioncharges for foreign rail cars (wagons) on the MAV's network amounted to Ft. 1.0 billion (about US$20 mil"ion equivalent)for convertiblecurrency countriesand about Ft. 1.1 billion (aboutUS$22 million equivalent)for non-con-ertiblecurrency countries. - 95 -
ANNEX 2 Page 2 of 8
Benefits due to reduction in foreign car detentionalone on account of implementationof TMIS are expected to be of the order of US$2-3 million per year, both convertibleand non-convertiblecurrency countriesbeing taken together. Estimat4d cash flow tables and ER calculationsare in the project file.
RecyclingPlants for Used Rails
3. The economic cost of the recyclingplant for used rails and switches is estimatedas Ft. 715 million (about US$15 million). The main benefits for tie proposed investmentare avoided "new rail" costs and their viability is not affected by changes in trafficgrowth. If recyclingplant is not established"new rails" will be necessary to avoid disruptionof trafficat higher costs. The price of new rail as compared to re-profiled used rail have been estimatedat about US$20 and US$9 per meter respectivelytaking into considerationcosts of investmentof recycling plant and its operationas shown below:
Price of Price of Types New Rails Used Rails of Rails Ft/Meter Ft/Meter
54 kg/meter 1058 211 48 kg/meter 787 157
Average 922 184
The price of re-profiledrail has been taken as the sum of stock price of used rail (184 F/meter) and the cost of re-profiling(223 Ft/meter),that is Ft. 407 per meter. At the productionof 180 rail km per year the annual savingsare estimatedas approximatelyFt. 92 million (about US$2 million). The details of re-prof_.ingcost estimatescovering investment and operationof recyclingplant are given in the feasibilitystddy preparedby MAV and are in the project file. Since Hungary imports a considerablequantity of iron ore every year, the proposed recyclingplant of used rails would reduce the quantum of iron ore import needs as well as that of coke and energy needed to produce steel and to that extent would offer foreign exchange relief.
Track Maintenanceand ConstructionMachines
4. The use of high efficiencytrack maintenanceand construction machineryis becoming more and more urgent to carry out the required job on high volume main-line tracks within the limitedtime available for maintenanceand overhaul on such routes. Track maintenanceand constructionwould normally include replacementof rails, track fastenings - 96 -
ANNEX 2 Page 3 of 8
and sleepers,ballasting and minor substructureimprovements. The benefits for such works are (a) reducticnin track maintenancecosts; (b) decrease of maintenancecosts of locomotivesand rolling stock; (c) increased permissibleaxle load in some cases, therebyenabling operationof high-capacitymodern cars with lIwer freightcosts; (d) increaseof speed resulting in better utilizationof locomotiveand rolling stock; and (e) increasedsafety. Without these ir,vestments,continued deterioration of the main line tracks would increasemaintenance costs of the track, locomotiveand rolling stock and increasingspeed restrictionswould decrease utilizationof staff and assets and limit line capacity. The MAV has included in its calculations,benefits due to (a)-(d) and the benefits due to (e) are excludedbecause little empiricalinformation is at present available,resulting in a conservativeER.
B. HigphwayComponents
Budapest By-pass (M-0 Motorway)
S. The Trans-EuropeanMotorway connectingWestern Europe with the Middle East passes throughHungary and touchestue cities of Gyor, Tatabanya,Budapest, Kecskemet and Szeged. For internationaland national tr_ffic, passage through Budapest is consideredto be one of the most criticalbottlenecks. In the absence of a Budapestby-pass, the existing streets and Danube bridges in the city are increasinglycongested. The total length of the ring road required to by-pass Budapest city would be about 90 km and is consideredto be a formidabletask because of critical resource position. The Governmentis keen to constructthe Budapest by-pass (M-0) in stages based on trafficand economic priorities. Out of 90 km, the most importantfrom trafficand economic considerationsis the section (about 30 km) between motorwaysM-1 and M-5 running at the capital'ssouthern edge (see IBRD map No. 20795),which connects three motorwaysand four highways and which, with the constructionof new Danube bridges, would establisha much needed, additionalinterchange capability between the country'swestern and eastern regions. This 30km section deserves special attentionbecause the constructionof this section would particularlypromote (i) country'sforeign trade; (ii) movement of transit traffic; (iii) energy conservation(estimated at about 350 mill. litres of gasolineand diesel oil during project life); and (iv) highway safety. The incrementalcostibenefit analysis was carriedout on the assumption that the by-passwill be constructedin stages. Detailed origin-destination analysiswas made and traffic configurationson the entire road network in the influencearea of the by-pass were establishefdfor "with" and "without" cases. The trafficflow diagrams and vehicle compositionfor different years are shown in the feasibilitystudy and are in the project file. The economic cost (at 1987 price) oi this p oject componenthas been estimated at approximatelyFt. 2890 million (abouitUS$62 million) includingcosts for compensationof land, design, constructionsupervision and project - 97 -
ANNEX Z Page 4 of 8
management. The vehicle operatingcosts (economiccosts) under free flow conditionsfor cars and medium trucks have been estimated as Ft. 3.00 ar.d Ft. 7.5 per km respectively. The economic analysis for different alternativestaged constructionprograms for the by-pass (M-0) cl.a!ly establishedthe priority of constructionof this 30 km all at once, with a high ER of about 18%. However, because of severe resource constraintsthe Governmentwas obliged to construct,as the first stage, only about 14 km (km 13.9 to km 28.1) of this motorway with tb.eBank's assistance (Ln. 2557-HU). Because of the two major bridges over the river Danube and five importantinterchanges, the cost of constructionof this first portion was relativelyhigh but still produced an acceptableER of about 142. 'The completionof the remainingstretch of this section is now consideredas an imp3rtantmissing link and is urgent since it would facilitatebetter utilizationof the entire stretch of 30 km high priority sectionof the by-pass. Savings in vehicle operating costs due to reduced congestion would account for about 402 of the benefits (para. 4.13). For time savings, only business trips made within the influencearea of the project road were consideredand time savingswere valued at 1.1 times average hourly wage rate to take some account of overhead costs. Benefits due to increasedcomfort, convenienceand safety were not considered.
Road Strengtheningand Surface Treatment
6. The government'saccelerated pavement strengtheningand periodic maintenanceprogram for the period 1989-1991is designed to halt further increasesin the backlog of road maintenanceworks. The program is an essentialcomponent of the Government'sstrategy in the Sector to: (i) reduce transportcosts; (ii) utilize more effectivelythe existing transportfacilities; and (iii) minimize investmentsin new transport infrastructure. The acceleratedmaintenance activities will generate substantialbenefits for the economy. The principalbenefits of the program will be: (i) arresting the decrease in the net value of the road network; (ii) reducingvehicle operating costs; (iii) reducing damage to the network resultingfrom severe winters; and (iv) reducing the cost of overlayworks:
(i) ArrestinR the decrease in the net value of the road network: An in-deF.h study carried out in 1987 estimated that the gross value of the national road network was about F280 billion of which 42% representedthe value of the pavements. Similar figures for the local roads are F303 billion and 30X respectively. The study also concludesthat due to the inadequencyof the maintenanceof the network, the rate of deteriorationof the roads has greatly acceleratedduring the 1980s. It estimatesthat the net value of the road network is decreasingat an average annual rate of about 3.5X; - 98 -
ANNEX 2 Page 5 of 8
(ii) Reductions in vehicle operatingcosts (VOC):Another study carried out for MTCC in 1987 shows that deteriorationof road surfaces,as measured by surface une'reness,has accelerated greatly during the l980s leading to much higher VOCs. Further neglect of requiredmodernization of the network will worsen the situation. Moreover,about 45% of the network now has reduced bearing capacity,due to insufficiencyof pavement strengtheningduring the recent years. The estimates indicate that without the acceleratedprogram initiatedunder the proposed project, the proportionof roads with inadequatebearing capacity would increase to about 75% within the next few years. Such a developmentwill further increaseVOCs. Given that since 1970 both the trafficvolume and motor vehicles increasedat a very high rate (220% and 650% respectively)the economic losses resultingfrom inadequatemaintenance are extremelylarge. Therefore, the first phase of acceleratedmaintenance activities initiated by the Governmr-'and supportedby the proposed project is much needed and will yield very high rates of return;
(iii) Reducing the extent o? the damage to roads resultingfrom severe winters: At present about 5,000 km of national roads require restrictivevehicle weight limitationduring the thawing periods followingan 'average"winter. The risk of very severe damage and even total collapse of substantial portions of the network during an exceptionallysevere winter is very real. The losses which would result from severe darage of a substantialpart of the network could reach as high as F50 billion. With a probabilityof one exceptionally severe winter in about 30 years the expected value of annual losses would therefore,be substantial. The accelerated maintenanceprogram initiatedunder the project together with the complementarystudies of optimizedlong term strategies for maintenanceand strengtheningare to help reduce such risks which in due course can be expected to generate substantialadditional benefits. It must be noted, however, that in the estimatedrate of return calculationsthese benefits have not been quantified;
(iv) Reductions in the cost of overlayworks: The accelerated maintenanceprogram will significantlyreduce the cost of the overlay requirements. The studies indicatedthat the deferra of timely maintenanceduring the last decade has led to the need for increasingthe thicknessof pavement overlays. The resultingcost increasesreach as much as 200 to 300% of the costs of the preventingwork which was differed. The - 99 -
ANNEX 2 Page 6 of 8
acceleratedmaintenance and strengtheningcomponent of the project will help reduce such cost increasesin the future and as a result will contribute significantlyto the benetits expected from such investmentexpenditures.
Road Maintenanceand Axle Load Control Equipment
7. The principaleffects are:
(a) arresting road deterioraticnat lower unit-costsfrom better mechanizationand reOd.ctionin road maintenancecosts from improved technology (e.g. thin overlays);
(.J) reduced hold-up (from about ;-4 hrs. to abour 1-2 hrs.) of vehicles during severe inclementweather in winter and savings in congestioncosts includingtime savings;and
(c) deterrentto overloadingof heavy goods vehicles (reduction of about 15-20% of overloadingexpected) on arterial routes thereby resultingin reduced pavement deterioration.
No datailed economic analysis was carried out for bridge inspectionvehicle and field testing laboratoryequipment which are consideredas essential adjuncts for project and maintenancesupervision, so as to ensure durabilityand maximum useful life of other investments.
C. Road Transport
Huntarocamion- Developmentof Informationand Marketingsystem
8. An integratedcomputerized information system (ICIS) is being introducedin the HC to cover the company'sentire informationneeds, namely, cargo operction, truck allocation,trip accounting,workshop and repairs, costing, invoicing,etc. ICIS would support the company objectivesprimarily in three main areas: (a) changing the manual proceduresto electronicdata processingoperations and reducing the number of processes; (b) reducing the number of personnelinvolved in the informationflow; and (c) improvingthe admi-iistrativeand cost management functions. The main benefits of the ICIS will be cost reduction. The economic cost of the system has been estimatedat about Ft. 380; (about US$8.4 million). Forty percent of the investmentexpenditures will be incurred in 1989 and the balance in 1990/1991. It has been estimated, based on the experienceof similar facilitiesfor other comparable transportagencies, that ICIS would reduce: (a) the required manpower working on office tasks at a yearly rate of 102 until 1991, starting in 1989; (b) vehicle fleet by 8 to 10% for the existing level of work load; LUU
ANNEX 2 Page 7 of S
and (c) the delay in paymentby clients due to more efficient invoicing speed (invoicingspeed would be quicker by about 18 days after round trip completion)and improvementin the payment reminder system. A substantial portion of the benefits would accrue in convertiblecurrency. Cash flow estimateskept in the project file clearly indicate that the speed at which the productivityof HCs trucks is improved with the introductionof ICIS is very sensitivefor the estimatesof ER. To be on the conservativeside it has been assumed that it will take at least 10 years to reach the full range of benefits due to productivity.
HC's Handling Equipmentfor Transit DistributionStores
9. HC at present operates one warehouse for the handling of groupage (importand export) consignments. The warehousehas a covered floor space of about 5,000 sq. meters. It has 3 ramps and 17 gates. On an average 30-40 trucks aie loaded and unloaded daily. The monthly average cargo volume varies from about 3,000 to 3,500 tons in low season to about 4,500 to 6,000 tons in high season. Dependingon the traffic demand HC intends to expand the capacity of groupage service facilitiesby at least 502 during the next five years. This is intended to be achieved by imuproving the efficiencyof loading/unloadingand handling in the existingwarehouse by the addition of suitableequipment such as ramp level adjusters,hand fork lifts with improved liftingcapacity, scales for weighing packaged cargo, and fire protectionequipment. These additionsare expected to increase the speed of handling of groupage cargo by about 252. In addition,in order to accommodatethe larger valume of business HC intends to establisha new 2-story warehouseon its property at a site already available. HC considered severalalternatives for an optimum investment decision such as expansionof the present warehouse and/or leasing a second warehouse. The most cost effectivesolution has been adopted.
BKV's Traffic Control Systems
10. The economic cost of the system is estimatedat Ft 395 millio-m (about US$ 8.4 million) at 1988 prices. The investmentswill be spread over three years 1989-1991and the percentagedistribution is estimatedat 20S in 1989, and 25X in 1990 and the balance of 552 in 1991. The proposed system would enable the BKV drivers to maintain an optimal speed profile and quicker passage due to flexible lighting time at intersections. In the first phase 300 vehicles (bus, trolley bus and trams) will be covered by the system. It is estimatedthat vehicle utilizationwould be improved by about 8 to 101 on introductionof the system and this would enable BKV to reduce its fleet size by about 30 vehicles (3 solo-bus,10 articulatedbus, 3 articulatedtrolley bus and about 14 trams) over the three year period 1990-1992. The additionalcost of running the new system (computers, terminalsetc) has been estimatedat aobut Ft 15 ti'-lionper year from 1991 ANNEX 2 Page 8 of 8
onwards. Operationalcost savings of the -:4niclesin the entire system due to improved conditionsare estimatedat about Ft 50 million per year. Benefitsdue to saving in parking places and better energy management have not been taken into account to err on the ssfe side.
S077U. 35-42 - 102 -
ANNEX 3 Page 1 of 7
HUNGARY
SECOND TRANSPORT PROJECT
STAFF APPRAISAL REPORT
TransportManagement InformationSystem (TMIS)
Railway Component
General
1. The Hungarian State Railways (MAV) startedalmost ten years ago on the developmentof a central, computerizedTransportation Management InformationSystem. Certain elements of this system have already been developed and these computerizedoperative systems have been fitted into the railways technologicalprocess, at presentactively servicingseveral stations, the Zahony trans-shipmentdistrict and border traffic. However, the full effectivenessof the TMIS can only be realized if a computerized system is installedwhich covers the whole of MAV's network.
2. MAV's developmentplan starts with the present situationof computer applicationsfor railway managementard calls for implementation in two phases.
Transport Management InformationSystem (Tmis)
Tarnets
3. TMIS provides the means to optimize resource utilizationand to improve MAV's operationalproductivity levels with existing resources through: (i) improvedwagon and locomotiveutilization; (ii) operational planning;and (iii) terminaland marshallingyard management. TMIS concentratesparticularly on the following:
- locomotive and wagon control;
- management of marshalling yards;
- distribution of empty wagons;
- customer information,including loading and unloading information;
- data collectionfrom stations (using the intermediatepoint system); - 103 -
AWNEX 3 Page 2 of 7
- containerand piggy-back tra;fic;and
- border station informationsystem (existingsystem should be adapted to TMIS principles).
A passengertraffic control system and independentworkshop system will be inter-connectedlater, and by the end, TMIS will be included in the European InternationalRailway Union (UIC) informationsystem (HERMES).
Hardware,Software, Communications and Principlesof TMIS Operations
4. The TMIS will be a hierarchicalsystem, developed in accordance with the organizationalstructure of MAV. It will control and collect primarydata about railway'soperations and then forward informationto stations,district managementand central operationaland management levels for actual execution.
5. TMIS will be based on two identicalmainframe computers. One of them will controland manage all the teleprocessingsystem and store recent informationcoming from the regional computers,to keep an up-to-date databaseof railway'soperations for the whole of Hungary. The other will perform back-groundand batch processing,including MAV's existing batch applications(payroll, different railway'sstatistics, ... ) as well as new TMIS operations (empty cars dispatchingsubsystem, freight bill accounting, managementinformation system, .. ). The TMIS wiiLlbe fully developed and implementedby MAV, and MAV's existing mainframecomputers will be replaced with new equipment. In case of a failure of the system controlling teleprocessing,the back-groundcomputer must be able to replace it in 10 minutes.
6. The data teleprocessingcomputer will have to receive, process and forwardabout 10 million charactersper day, which means a capacity of 1-2 transactions/sec.in peak hours.
7. Tentativehardware and software parametersof a central computer:
Central unit Operationsspeed 1-3 MIPS Operativememory .3-6MByte Consol display Disc subsystem Disc capacity 3-6 GByte Cottrol unit 2 or more (with dual channel) - 104 -
ANNEX 3 Page 3 of 7
Tape subsystem Tape units 4 or more Control unit - 800/1600 bpi 2 (with dual channel) Local display subsystem about 15 terminals Printer 1000-2000Ins/min Communicationcontroller 1 No. of lines 16-64 line speed 4800-9600bauds
Basic software elements of the central mainframe:
Modern operating system Compilers 4th generationapplications developmenttool, C)BOL, PL/l, Fortran,Assembler, database managementsystem and communicationssoftware;
Utility programs Teleprocessing software Testing programs for: - CPU - peripherals - teleprocessingnetwork - elements of teleprocessing network
(Testing programsmust be able to run under operating system and independently.)
8. For real time controland data collectionon marshallingyards, large stations, intermediatestations, border stations and railway junctions,14 regional computerswill be installed,one for each directorate. Every regional cumputer must be a fault tolerant system with high reliability,which will consist of two or more processorsand two or more other computer components. Such a configurationshould virtually ensure that the terminalswill not be out of operation in case of failure of any componentof a regional computer. A regional computer has to be able to receive, process and forward about 2 million charactersper day, which means a capabilityto process: 0,2-0,4 transactions/sec.in peak hours.
9. Each of the regional systems will run as a unique and independent system. They will be connectedwith one another only through central mainframe. This principlewill enable MAV to develop and implementits informationsystem gradually. - 105 -
ANNEX 3 Page 4 of 7
10. Hardware and software parametersof a minimum regional system configuration:
Central unit Operational speed 0,5 - 1 MIPS Operative memory 0,5 - 4 MByte Magnetic disc capacity at least 100 MByte
Communicationsubsystem Terminal connection No. of lines 16-32 Min. speed 1200-2400bauds No. of terminals 80 or more Type of terminals CRT terminals,PC, with printers Connection to central mainframe No. of lines 2 Printer 300-600 Ins/min
11. System software should includea modern operating system, compilersfor high level program languagesand assembler,utility programs, possibilityof effective interactiveprogram development,a modern database management,4th generationapplications development tool system and up-to-dateand easy to use communicationsoftware.
12. With regional computersMAV intendsalso to purchase an applicationpackage which should meet MAV's regional requirements(i.e., data collectionand control on : trains,cars' location,car loading, unloading, freightbills, ... ). The bidders will have to guarantee to MAV to adapt the applicationpackage within 6 months from contract signature, which will enable MAV to install it at the time of the first regional computer installation. Adaptation,testing and installationof the purchasedapplication package will be done togetherwith MAV's specialists. Due to low qualityof the local data transmissionfacilities between regional computersand terminals,MAV intends to install only PC's for data collectionin the railway stations,which will enable the minimum data collectionand control even when the telephonenetwork is out of operation. PC's will be connectedvia local area networks. In principle every local area network (LAN) will cover one railway station. Applicationsfor PC's will be developedand implementedby MAV. Bidders will also heve to provide for incorporatingMAV's existing system for the real time 1nvrderoperations control, which is runningon the hungarian border with U.S.S.R. (Fig. 2) on a separate computer. the logical structureand informationflow is presentedin Fig. 1, and the physical structure in Fig.2.
MAV's Special Demands
13. Biddersmust address the posibilityof includingMAV's existing hardware and applicationsin TMIS. - 106 -
ANNEX 3 Page 5 of 7
14. Since the COCOM restrictionsare expected to be reduced in 1939, MAV is declaring the describedhardware solution only as one of possible solution. One of the alternativehardware solutionsacceptable by MAV would be one or more powerful computersinstalled in Budapestwith communicationconcentrators at directorates. (At the time of appraisal such a solution was under cocom restrictions). The afforesaidsolution would result in lower price for a hardware and MAV would not have to build computer rooms at directorates. MAV will allow the bidders in the tender documentationto propose also alternativetechnical solutions. Bidders, however, will be fully responsiblefor obtainingthe required export licence. MAV will not accept any hardware solutionwhich might result in considerablelower benefits, furtherbidders will not be allowed to propose other principlesof operationsof TMIS than requiredby MAV in the tender documentation.
Gradual Developmentand Implementationof TMIS
15. TMIS will be developedand implementedin two phases. The first phase will be realized progressivelyby 1992, covering over 90Z of TMIS targets. It will include applicationsoftware developmentfor the control mainframe computers,regional computersand station PC's.
16. For Phase I (up to 1992) it will be necessary to provide the followingequipment:
- mainframe computersfor central part of TMIS and to run MAV's exist..vgbatch applications;
- data transmissionnetwork control computers;
- equipmentfor data transmissionnetwork extension to enable connectionof regional systems to central mainframe;and
- regional computers (for operationsand for developmentand testing),including PC's for terminalsfor the stations.
17. In the second phase MAV intends to finalize TMIS, to join the internationalrailway informationsystem - HERMES, to connect to the HungarianNational InformationSystem and also to connect customersby terminalsto TMIS. For Phase II it will be necessaryto providea data transmissioninterface at the central computer for connectionto HERMES.
18. The cost table and implementationschedule of TMIS installation and commissioningare presentedin Table 1 and Figure 3. - 107 -
ANNEX 3 Page 6 of 7
TransportMangement InformationSystem (TMIS) - Benefits
19. Advantagesof the TMIS are that it optimizesexisting railway resourcesand improvesoperational efficiency, by enabling: (i) better planning and control; (ii) organizationand management improvement;and (iii) improvementof the transporttechnology.
20. The areas benefittingfrom TMIS are shown belo%4
(a) a reduction in wagon turn around time which will permit an increasedvolume of tonnage to utilize the same amount of rolling stock; or a reductionin fleet size, togetherwith a reduced requirementsfor future procurementand maintenance and better yard management,by improved information concerningtraffic en-route and on-hand;
(b) disciplinedcontrol of empty wagons, leading to improved wagon utilization;and
(c) improved locomotivecontrol throughconstant monitoringof locomotiveutilization.
TechnicalAssistance and Training Program
21. For technicalassistance and training program (for TMIS) MAV needs about 60 man-months,of which about 32 man-monthswould be needed in early 1989. The Bank will finance the foreignexchange of this training component,or 22 man-months.
TMIS Targets Realization
22. The mission estimatedthe followingTMIS realizationtargets for Phase I:
a. Locomotiveand wagon control l00S,
b. Managementof marshallingyards 502, All the bigest marshallingyards will be controlledand included into TMIS, which means over 902 of technicalwagon operations in MAV. Therefore the reductionof marshalling yards inclusioninto the TMIS will not have any influenceon wagons throughput; - 108 -
ANNEX 3 Page 7 of 7
c. Distributionof empty wagons: -Requirementsfor empty wagons; 100X, -Dispatchingof empty wagons; 702, Due to lack of terminals,about502 of freight bill data wil be captured and about 702 of loading and .iloadingoperations will be registeredin real time;
d. Customer information,including loading and unloading information; 1002, Customerswill not be connectedto the TMIS by terminals,but they will get all the relevant informationby the TMIS from railway stations timely.
e. Data collectionfrom stations (using interme- diate point system) 701, It will influenceon empty wagon dispatching efficiency;
f. Containerand piggy-backtraffic 100X,
g. Border station subsystem 1001,
Remarks: In Phase I all hardware componentswill be purchased,except hardware and software for TMIS joining to HERMES, which will be realized in Phase II. About 352 of terminalswill be purchasedon the Hungarianmarket.
s0779u/P .43-49 Feb.28, 89 EX 3
Tablet1: HUNGARY SECOND TRANSPORTPROJECT STAFF APPRAISAL REPORT
mAy' TRANSPORTHANAGEMENT INFORMATION SYSTEM (THIS) SCHEDULEAND COST ESTIMATE (MID 1988 PRICES)
______PHAS I ______PASEU II_I_A GRANI Description 1-I _ T. 19F L FTF I, 191 Gra nd To tal ______l LE.1J. I I.TI IL I I I I F IL T I T F L T F L I 1I.Central,regionalI and networkcomPu- ters.including systemsoftware, datamanagement software,regional system applications and up-dats.w and 1.3 0.8 2.1 1.0 1.22.2 1.6 1.0 2.6 2.1 1.3 3.4 6.0 4.3 10.3 6.0 4.3 10.3 2.Workstations (terminalsand PC's) and theirconnection with thecomputer systems (800 pieces) 1.0 1.0 0.5 O.S 1.0 0.5 0.5 1.0 0.5 1.1 1.6 1.53.1 4.6 1.4 1.4 1.3 1.3 2.72.7 1.5 5.8 7.3 3.Connectingcustomers by terminals to the systemfor freight forecasting and Z2. 2 2 2 2.1 tracing services 2.1 2.1 , 2.1 2.1 2.1 37. 4Cconnectionto the European Railways^ _ _ _ 83 0.008 1 0.7 5.3 info.system (HERMES)1.0.2.1.0723160723 5.Oata commiunication equipment (modems, 4142310326 line testers..) 0.5 0.5 0.6 3.2 3.8 1.712.4 4.1 1.4 11.4 1.4 1.4 2.3 8.9 11.2 1.4 1.4 1.142310326
6.Engineering,22222222 building,other 2.2 2.22. 222222 7.Consultingand . .020.0102 training 0.1 0.10.20. 0102010. 02
Total base cost 0.5 0.5 2.0 7.3 19.313.2 14.1 7.3 2.1 2.9 5.0 2.6 3.8 6.419.9118.6 28.5 1.6 3.5 5.1 3.4 3.4 1.6 6.9 8.5 11.5 25.5 37.0 Special Financial contingenCy 1.7 1.7 2.05 2.05 2.05 2.5 5.8 5.8 5.8 5.8
TOTAL 0.5 O.S 2.0 7.3 9.3 3.2 5.8 9.0 2.1 4.9S 7.05 2.6 5.85 8.45 9.9 24.4 34.3 1.63.5 5.1 3.4 3.4 1.6 6.9 8.5 11.5 31.3 42.8
In case the centralized mainframe solution could not be realized; additional $5.1 million would be needed for computer rooms adaptation at MAV,s directorates to accomodate comparably larger regional computers and USS 0.7 million for computer installations. (local funds). 5077U/P .s HUNGARY Annex: 3 SECONDTRANSPORT PROJEC Fig. ; 1 ShfflAppraisal Repoui TMISLogical Shucture & Intownoon Connection
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USRt*tFCrtetSJ V }p'- - I I 3I I Ii S I I - 113 - ANNEX 4 Page 1 of 3 HUNGARY SECOND TRANSPORTPROJECT STAFF APPRAISALREPORT Integratedand Computerized InformationSystem (ICIS) For HUNGAROCAMION General 1. Hungarocamionalready has a traditionin computer data processing and it's ElectronicData Processingstaff is a group of experts which up to now developedand implementedan InformationSystem which is covering about 35% of all HC's needs. But all parts of HC's existing data processing facilitiesare quite old and obsolete,coming from many differentsources and are not compatiblewith one ar-other.Because of this, it is not possible to build further on the existing facilitiesso as to establish one integratedsystem. For this reason Hungarocamionproposes tu replace it's existing computer facilitieswith a modern standardizedcomputer system and thus to provide basis for a IntegratedComputerised Information System (ICIS). To define a faster,better and appropriateICIS, Hungarocamion engaged UNICONSULT (UnitedTransport Consulting Gmbh, Hamburg) to prepare a study on the Organizationand InformationSystem requirementsof Huu.arocam_on. Targets 2. ICIS will provide improvementsin resource utilizationin the operatingsector as well as additionalearnings by speeding the work of the finance and accountingdepartments of the company. The main applicationsof the ICIS are listed below: 1. Acquisition 2. Cargo operation 3. Transport organizing 4. Truck allocation 5. Workshop 6. Material 7. Vehicles 8. Personnel 9. Central invoicing 10. Accounts receivable 11. Petty cash management 12. Accounts management 13. Costing 14. Trip accounting 15. Accounts payable 16. Fixed assets 17. General ledger - 114 - ANNEX 4 Page 2 of 3 Hardware, Software,Communications and Principiesof ICIS operating 3. The ICIS solutionproposed by HC's consultantUNICONSULT, is based on using four computerswhich would be installedat four main branches of Hungarocamionin Budapest. The followingfunctions would be allocatedto each' system: Balcan Street Commercialand financialoperations Cincotai: Technicalterminal A Nagykorosy: Technicalterminal B Nepstadion Headquartersand general mana&ement. 4. The four systems,while fully compatible,would operate quite separatelyand independently of one another. Only a few times per day, data packets would be exchangedbetween the systems. Local terminalswould be connected to each of the computers,without the possibilityof their being connected into the overall computernetwork due to lack of communicationsFront End Processors. Informationexchange with HC's representativesin Hungary and abroad would be establishedby 5 telex lines connected to each computer. The reason to base ICIS on four computers instead of one larger computer is lack of data transmissionfacilities in Budapest and, existing COCOM restriction. It is not possible now and in foreseeablefuture, to provi1e enough telephonelines to connect terminals to one single site in Budapest. 5. Necessary software for each of four systems are: (a) operating system with communicationsoftware; (b) relationaldatabase managementsystem; and (c) COBOL compiler,and (d) utility programs. IntegratedComputerized Information System - Benefits 6. The benefits resultingfrom the implementationof ICIS will accrue mostly from improvementsin the operatingsector and also in the finance and accounting sectors of the company. The expected benefits are listed below: (a) Savings ir-truck capacity resultingfrom the higher kilometer performanceper truck unit, as shorter durationsper round-tripcan be expected and that can lead to an increased number of possible round-tripsper cruck unit per years and better response to short term requestsby customers; (b) Additionalearnings due to reduced empty back-hauls to Hungary. Better informationabout truck locations, informationabout departureand arrival times, and about routes of trucks availableto RC representativesin Hungary and abroad, will enable Hungarocamionto obtain better coordinationof truck utilizationand of marketing activities; - 115 - ANNEX 4 Page 3 of 3 (c) Savingsdue to improved invoicingspeed. Presentlythe invoicingspeed is around 21 days after completionof round trips. With implementationif ICIS this period can be reduced to 5 days after delivery of goods; (d) Savings due to reducedmanpower levels of office staff. Cout Review and ImplementationSchedule of ICIS 7. ICIS is going to be implementedprogressively in two phases with about 330 terminalsin the first phase (out of a total of about 700 in the final stage). In the first phase (up to end of 1991) the finance and accountingsector, as a main bottle-neckof HC's operations,should be computerized. This will be achievedby implementationof tte following applications: - Cargo Operations - Central Invoicing - Accounts Payable - General Ledger - Costing During the second phase (applicationsoftware implementationonly, up to end of 1993) the entire ICIS will come into operation. 8. The cost estimate is presented in Table 1 attached. Hunxarocamion'sSpecial Damands 9. Since in the future Hungarocamionintends to expand their terminal network to improve ICIS efficiencythey will require the bidders to provide for hardware which can be upgraded or extended to run about 2,5 times as much terminalsas initiallyrequested. 10. Hungarocamionplans to connect their mainframes in an up-to-date computer network, dependingon data transfernetwork availability. Hungacamionwill thereforerequire hardwarewhich will be able to meet these requirements,with relevant extensions. 13. The proposed ICIS in its present form is not an ideal solution but is the most suitable for Aungarocamionin the given circumstances particularlybecause of resource constraintsand low quality PTT facilities. The system will become increasinglyefficient iA the near future by exprndingterminal network and connectingHungarocamion's mainframes in an up-to-datecomputer network. (paras 9 and 10 above). SO77USp. 54-56 Table 1 SECDICDTRANSPORT PROJECT STAFFAPPRAISAL REPORT INTEGRATEDCDHPUTERISED INFORNMTION SYSTH SCHEDULEAND COSTESTIMATE (MID 1988 ICIEST iMSPUNNLrD1 iI -ii . 12 191 . 90_.1.92 TOTL _ _ _ _ _L F T L P TIFI _ FI L T If T F IL I F I T 1. Computer Systems 0.70 0.70 1.50 1.50 0.30 0.30 2.50 2.50 2. Basic Software 0.50 0.50 1.00 1.00 0.15 0.15 1.65 1.6i 3. Application 0.10 0.10 0.30 0.30 0.30 0.30 0.30 0.30 0.20 0.20 1.20 1.20 Software I 4. Comuting Center 0.04 0.04 1.61 0.1S 1.76 1.20 0.30 1.So 1.25 0.10 0.35 3.10 0.55 3.65 S. Telecen1ications 0.13 0.13 0.13 0.13 0.06 0.06 0.32 0.32 6. EDP Staff Traintng 0.1S 0.1S 0.10 0.10 0.0S 0.OS 0.30 0.30 TOTAL 0.04 0.04 1.84 1.50 3.34 1.63 2.90 4.53 0.61 0.60 1.21 0.30 0.30 0.20 0.20 4.62 5.00 9.62 5077U/S8 - 117 - ANNEX 5 Page 1 of 5 HUNGARY SECOND TRANSPORTPROJECT STAFF APPRIISALREPORT BKV'S Traffic Control System General 1. The TransportOrganization of Budapest (BKV) is attachinga great importanceto maintain and improvethe quality and efficiencyof public mass transportin Budapest. Accordingly,BKV decided to establisha Traffic Control System which will improveexisting BKV's facilitiesand significantly reduce the cost of operations. BKV's experts prepared a solutionbased on a complex computer aided informationand control system, using an up-to-date radiocommunicationsnetwork. The traffic control system of BKV will consist of three interrelatedsubsystems namely, - Automatic VehicleMonitoring Subsystem; - Traffic Light Control Subsystem;and - Power Supply and ConsumptiveControl Subsystem. Targets 2. The main core of these Systems is the AutomaticVehicle Monitoring Subsystem,which should result in maintainingequal distance and time between vehicles and would result in: - improvementin keeping the time-table; - reduced waste time; - reduced waiting time at traffic lights; - reduced number of lines that are out of service; - reduced energy consumption; - better service to passengers,and a reduced fleet size. Hardware,Software and OperatingPrinciples of the System 3. The AutomaticVehicle Monitoring Subsystem will be the core and most importantpart of the Traffic Control System. Efficiencyof the other two subsystemswill depend on informationcoming from this subsystem. Therefore the BKV will develop and implementit first. - 118 - ANNEX 5 Page 2 of 5 4. Hardware and Principlesof Operation. A modern radiocommunications network will be constructedto enable communicationsbetween vehicles and vehicle dispatchingcenter. About 300 radio stationsattached to a micro computer will be installedon board of the vehicles to transmit short informationabout: - vehicle identification; - direction; and - number of passengerson board; when startingfrom the initial or main stationson its way. Also informationsuch as: - being in a traffic jam; or - being involved in an accident, will be transmittedfrom vehicles to the dispatchingcenter. There will also be equipment installedat main check ponts in Budapest to identifypublic transportvehicles passing by, and to transmit such informationto the dispatchingcenter. The BKV will install radio receiverswith speakers in the stations to inform passengersin case of any special traffic situationon one particular line, i.e., in case of a trafficaccident BKV would put the informationout to the passengerson that line and suggest that they take an alternate line. One computer,possibly a microprocessorsystem with special communicationsFront End Processorwill collectand process all this informationin a real time. It will providevehicle dispatcherswith detailed informationabout trafficsituation and enable them to transmit informationto drivers and passengers. In addition,the same computer will provide informationto the other two subsystems. From midnight to early morning hours when the mass transportpractically stops, the same computer will produce daily reports,statistical reports, etc. - 119 - ANNEX 5 Page 3 of 5 5. Software Due to the specific situationof mass transportin Budapest (80% of passengersare using mass transportfacilities, which is not the case in any of Western European cities),none of the existing similar systems running in Western Europe could be directly transferredto Budapest. Therefore, the BKV's experts decided to develop and implement their own softwarewith assistanceof equipmentsuppliers. Traffic Light Control Subsystem 6. Hardware and Principlesof Operation To operate the Traffic Light Control subsystemBKV will use its existing computer. This computer is now being used to control and program the traffic light network in Buidapest.BKV is not planning any upgradingor extensionof this computer. To improve utilizationof their existing Traffic Light Control Subsystemthe BKV intends to provide it with informationabout detailed traffic situation in real time, by connecting it with the AutomaticVehicle MonitoringSubsystem. 7. Software Existing applicationsoftware in BKV's Traffic Light Control computer will have to be extended to modify the traffic light network programmingaccording to informationcoming from the AutomaticVehicle MonitoringSubsystem. A special communicativesoftware will have to be developedand implementedto connect the two subsystems. All the necessaryapplications and communicationssoftware developmentwill be done by BKV. Power Control Subbvstem 8. Hardware and Principlesof Operation The Power Control Subsystemwill permanentlycontrol operatingof the electricitysupply network and will inform the vehicle dispatchersand electricitysupply network maintenancecontrol about any problem in real time. --120 - ANNEX 5 Page 4 of 5 In addition to that, the Power Control Subsystemwill achieve savings in electricity,according to informationcoming from the Automatic Vehicle Monitoring Subsystem. To achieve the above-describedtargets it will be necessary to install special equipmentat main points in Budapest for automatic detection of any problem in the electricitysupply network, and one computer possibly a microprocessorsystem, to collect and process informationcoming from the electricitysupply network and from the AutomaticVehicle Monitoring Subsystem. 9. Software All the necessaryapplications and communicationsoftware will be fully developedaad implementedby BKV. Gradual Developmentand Implementationof the Traffic Control System 10. BKV intends to put the complete system in operationby the end of 1991 in the critical trafficareas in the northern part of Budapest. Later on BKV plans to expand the system over the entire Budapest area. Benefits 11. The benefits listed below are based on keeping equal distance and time between vehicles,which will be achieved through implementationof AutomaticVehicle Monitoringand Traffic Light Control Subsystemsand an electricitysavings due to the Power Control System. The expected benefits of the complete system are: - fleet and operating staff reductiondue to fewer necessary reserves; - vehicle maintenancereduction due to reduced stop-and-go intersections; - better passenger service; and - energy conservation. Project Cost Estimate and ImplementationSchedule 12. Project cost is shown in Tables 1 and the dynamics of implementationschedule in Table 2. - 121 - ANNEX 5 Page 5 of 5 TechnicalAssistance and Training Program 13. BKV programmedthirty man months for technicalassistance and 9 man-monthsfor training programs. 14. This proposed Traffic Control System for BKV is based on similar systems which have been in use for sometime in Western European cities (Frankfurt,West Germany and Clermont-Ferrand,France). These systems therefore.are proven to be technicallysound and economicallybeneficial. 5077U/P. 58-62 ANNEX 5 Table 1 HUNGARY SECOND TRANSPORTPROJECT STAFF APPRAISALREPORT BKV'S TrafficControl SYSTEM Scheduleand proiectCost Estimate(Mid 1988 prices - in million Ft.) 1989 1990 1991 IOTAL Description L F T L F T L IF T IL F IT . 1. AutomaticVehicle 49.20 20.15 69.35 43.72 21.14 64.86 125.35 25.75 151.10218.27 67.04 285.31 Monitri;n Subsvstem - _ 2. CentralizedTraffici 4.55 4.55 14.46 13.02 27.48 24.84 10.30 35.14 4J.85 23.32 67.17 L1kht Control Subsystet I I _ I I 3. AutomaticPower 22.99 22.99 12.15 18.54 30.69 41.32 16.48 57.80 76.46 35.02 111.48 SupplY Subsystem I I I TOTAL 76.74 20.15 96.89 70.33 52.70 123.03 191.5152.53 244.04 338.58 125.38463.96 US DOLLARHILL. 1.63 0.43 2.06 1.50 1.12 2.62 4.07 1.12 5.19 7.20 2.67 9.87 5077U/63 - .L23- ANNEX 5 Table 2 HL'NGARY SECOND TRANSPORTPROJECT STAFF APPRAISALREPORT BKV'S Traffic Control SYSTEM IMPLEMENTATIONSCHEDULE . 1989 1990 1991 Descriptionof Subsystems I III IIIII IV I III !III IV I IIllII IV AUTOMATICVEHICLE MONITORING 1. Central Computer Purchase and Installation 2. VHF Radio Centre Implementation 3. Board Equipment Installation 4. Modificationof vehicles _ _ -_ 5. AutomaticVehicle Monitoring ApplicationImplementation 6. Passenger Information Applicationand Equipment Implementation CENTRALIZEDTRAFFIC LIGHT CONTROL 1. Purchasingand Installation of equipmentto connect AutomaticVehicle Monitoring System with Centralized Traffic Light Control System 2. Implementationof the software to connect the two systems and modify the software on these systems AUTOMATICPOWER SUPPLY 1. Central Computer Purchase and Installation 2. Automatic Power Supply 3. Purchasingand Installation of Equipmentfor Connection of Automatic Power Supply System to the complete system 4. Implementationof Software to connect the Automatic Power Supply System to the Computer System 5. Renovationof Power Supply Substations _ Feb. 28, 89 - 124 - ANNEX 6 Page 1 of 3 HUNGARY SECOND TRANSPORTPROJECT STAFF APPRAISALREPORT Railway Costing Study - Outline Terms of Reference General 1. It is axiomatic that accurate knowledgeof operatingand related costs is essentialfor the success of any enterprise that is trying to reduce its costs. In the face of growing competition,a railway lacking such knowledgewill find it extremelydifficult to maintain its market share, and even more so, to improve its operationalefficiency, quality of service, and to meet competitionfor traffic demand. 2. The objectiveof costing is to provide data essential for a wide field of managementdecision and for the formulationof national policy in the transportfield. Purposeof the Study 3. In summaryform, the principalpurposes of the study, and subsequent implementationof a NAV cost accountingsystems aiz: (a) to set realisticprices (rate-making); (b) to provide data for profit.inalysis of existing and potential business,which in the case of a railway will include not only rates and fares but also line, station, and service profitability; (c) to control costs; (d) to permit evaluationof economiesto be secured from operating and technologicalchanges; (e) to provide data needed for comparisonof costs between the different transportmodes required in the cc;isiderationof alternatives; (f) to provide data for evaluationof further capital investment to better serve traffic demand; and (g) to enable the evaluationof net revenue which may accrue from operationaland technologicalchanges and capital investments. - 125 - ANNEX 6 Page 2 of 3 The Scope of the Study 4. The study would be carried out in two phases by local experts supported by foreign consultants. The scope of Phase I would include: - a survey of basic cost data already availableand of costing methods in use; - preparing recommendationson the steps necessary for the determinationof the costs of all railwayservices, broken down by principalcommodity flows and inter-cityand commuter passenger services; - summarizingand reviewing the existing system of rates and fares; - detailing the methodologyfor the evaluationof staff requirements; - making an assessment of computer hardwarecapacity and software requirementsso as to evaluate the need, if any, of supplementarycapacity in the TMIS; - defining costing principlesand methodology;and - making preliminaryrecommendations for discussionwith MAV and governmentofficials, includingthe proposed implementation schedule,as a basis for continuedwork in Phase II. 5. During Phase If, implementationof the comprehensivesystem for cost comparisonand cor..colwould be started. The consultantswould concurrently: - assist MAV in intreducingand running the proposed system on, at least, a pilot basis (even using estimatedvalues when actual cost data are lacking)so as to establishthat the system works effectively; - fully document all informationneeded to expand the system applicationto cover all MAV's regions and operations; - identify,and assist MAV in planning the collectionof lacking data, using the TMIS generateddata bank; and - identifyMAVs training requirementsfor the above implementation and its expansion. Also to assist MAV in planning a correspondingtraining program and to train (or arrange for the training)of MAV training staff and managers (including preparationof training materials). - 126 - ANNEX 6 Page ' of 3 Timing 6. Terms of referencefor the study were discussedduring the negotiationsand agreementwas reachedwith the Governmentthat Phase I of the study would be initiatednot later than the end 1989 and completedby the mid 1990, and Phase II would be completedby the end of 1990. The rtudy is estimatedto requireabout 25 man-monthsand will be carried entirely by Httngarianexperts. SO78I/p. 1-3 - 127 - ANNEX 7 Page 1 of 6 HUNGARY SECOND TRANSPORTPROJECT River Port and River TransportDevelopment Study Cutline Terms of Reference Background 1. MAHART, the Hungarianagency in charge of river ports, river navigationand shippinghad originallysougl:t to have some grain holding and port access improvements,for the Csepel Port near Budapest, included for financirg in the 1985-19895-year plan. In the context of current austerity planning, the Government decided to defer any such improvementsto a later date, probably in the next 5-year plan (1990-1995). 2. During sector strategy discussionsbetween Governmentand the Bank it became apparent that any proposalsfor improvementsof Csepel port would need to be framed in the light of a better defined role for the port and in the context of a national strategy with respect to inland waterway transportand developmentof supportinginfrastructure in a manner which would not adversely affect the environment. The constructionof a Rhine-Danubecanal connection and the Danube-BlackSea canal (short cut) are apt to have long term implicationsfor internationalriver traffic. Severalstudies (scope unknown) related to the River and its ports are known to have been made. These studies could be used to reformulatethe strategy in the sector. It is known that other riparian countriesare already preparingfacilities to handle increased waterway traffic arising from the Rhine-Danubeconnection. It is also known that the European Community (EC) will protect river transportoperators of member countriesagainst third country competition,and Hungary will have to give due considerationto the EC's policy. 3. MAHART has a double role, participatingboth in port management and shipping. Investmentsin pushers and barges may produce larger, short term returns, particularlyin convertiblecurrencies, than investingin port infrastructure. Also, the potentialfor water-bornecompetition for internationalcontainer and bulk traffic,with the national railroad (MAV), a substantial source of foreign currency earnings, may serve to diminish political support for any vigorous and competitive water-borne system, be the vessels Hungarianor of foreign flag Objectivesof the Study 4. The purpose of this Study is to assist the Governmentin defining a program for developmentand modernizationof Hungary'sriver transportsystem in the years 1990-2000,consistent with the developmentof all transport modes, and to determine the technical,economic and financialfeasibility of investmentsto be implementedduring the 1990-19945-year plan. To this end the Study shall include: - 128 - ANNEX 7 Page 2 of 6 (a) an assessmentof the adequacy of the capacity and service provided by the existing facilitiesand equipment in the river transportsystem, includingwaterways, ports, inter-modaltransfer operations and land access for port traffic; (b) an estimationof the level and compositionof future traffic, through the rivers, canals and ports, includingtransit traffic, for various developmentscenarios, consistent with the developmentof other modes; (c) a review of the existing organizationalstructure and efficiency of the inland waterways, river transportand river port operations to formulate,if appropriate,recommendations on means to improve managementand operationalefficiency; (d) an analysis and approximate rankingof alternativesfor development of the river transportsystem that would complementexisting land transportservices ii1 Hungary; Ce) feasibilitystudies for the recommendedinvestment program for the period 1990-1994,including preliminary engineering, cost estimates, economicanalysis and financingplan; (f) an assessmentof environmentaleffects of barge transportand river transportrelated to civil works. Scope of ConsultingServices 5. General. The Consultantsshall perform all engineeringwork, physical surveys, the collectionand analysisof operational,economic and financialdata and other work herein described,as required to attain the objectivesstated above. The consultantsshall conduct these studies in cooperationwith the Ministry of Transport,Communication and Construction, MAHART, and other governmentagencies iavoived,which will provide data and services outlined in the followingpara-aphs. The consultantshall, however, be solely responsiblefor the analysis and interpretationof all data received and for the conclusionsand recommendationscontained in their reports. The services shall be carried out in three phases. The consultant services shall include, but not necessarily be limited to, the following: 6. Phase I: (a) collect and review all available and relevant studies related to river navigation and other transport modes which have been prepared in Hungary, and in so far as possible, other studies of the Danube river and shipping which might bear on the future development of the river'swater-borne traffic. (b) analyze availablestudies of the existing system of inland waterways in Hungary and the related transportenterprises, in order to assess the factors which are critical in limiting the capacity and level of - 129 - ANM'EX7 Page 3 of 6 serviceof the river transportsystem, and the future role of inland water transportationin the internal distributionsystem as well as in the internationaltransit system; the consultantsshall identify the limitationson vessel type, size and draft, length of tows, night navigation,etc., impopsed by the characteristicsof the rivers in the differentsections and as affected by winter conditionsand seasonalvariations in the level of the rivers; (c) review the existingorganizational structure and efficiencyof the inland water transportand river port operations,including the operationoE the river fleets in the light of current trends in river shipping,vessel designs and operatingprocedures; identify existing problems and derive short-termproposals for their solution and to meet near-term traffic projections; (d) aggregatedata on traffic/passengermovements by main commoditiesand directionalmovements through Hungary's river systems (Danube and Tisaa), includingrelated traffic/operatingcost data: (e) determinethe market share of each commodity that the river will carry at the least economic cost, taking into account the effects of any planned and justifiedexpansion or improvementof railways, highways,air and pipeline transporton the cost and quality of the transportservice; (f) for the period 1990-2000,project river transportdemand and/or change scenariosrelacing these to major potentialor changing trafficgenerators, policy and/or regulatoryinfluences, constraints (includinginvestment requirements in shipping/infrastructure)and identifyand interrelatedinter-modal impacts; (g) estimate order-of-magnitudeinfrastructure/shipping investments related to the differentscenarios developed above (alone and in combinations);potential benefits; environmental effects, financing timing and foreignexchage implications,then rate the scenarios in economicand financialterms a6 well as probability(including identificationof policy change requirements); (h) identifythe sensitivityof the solutions to external effects and/or assumptionsmade, as well as furtherdata requirements(including field investigations,market analyses and/or efficiencyestimates). The scenariosabove would be the subject of Bank comments and review by MAHART managementand the Government to designate the scenariosmeriting more detailedanalysis. During review by the Government,the consultants shall initiatework on parts (a) through (d) of Phase II, below. 8. Phase 11: (a) assist MAHART, and particularlyofficials managing Csepel port, in drawing up and initiatingan action plan for developmentof the port's industrial/commercialzone; - 130 - ANNEX 7 Page 4 of 6 (b) survey foreign shippers tradingwith, or transitingthrough Hungary in regards of equipment and facilitiesor services which might be of interest to them; (c) review MAHART's arrangementswith freightforwarding agents both internationallyand within Hungery; (d) consultwith domestic producersof commoditiesusing, or likely to use, river transportas to their growth or change projections; (e) identifymore preciselyany site of potentialinfrastructure development,under the developmentscenarios selected after review of Phase I, with particularattention to related port access requirements,and environmentalimpacts; (f) specify the improvementsand additionalrequirements of dredging, berths, transit sheds, open storage and parking areas, warehouses, access by road and rail, cargo-handlingequipment, signalling systems,beacons and buoys, all requiredservices (water,oil, electric power, etc.) and auxiliaryfacilities such as offices and maintenanceshops; (g) review environmentaleffects of the proposalsurder considerationand any restrictionimposed by environmentalconsiderations and legislation,including also any cost consequences(such as effect on adjacent land and water uses, compatibilitywith existing historic or scenic assets and plans for urban development,effect on river flows, siltation,water or air pollution); (h) prepare and evaluate alternativelayouts for the improvementof existing and/or the developmentof new port facilitiesby stages, taking into account site conditicns,road and rail connectionsand the land and water areas required for functionaland jurisdictional purposes. The plans shall indicatethe general dimensionsand locationsfor all major facilities,the proposed sequence of constructionby stages,estimated construction, operation and maintenancecosts, and operationalimplications analyzed in sufficientdetail to enable the consultantsto present the schemes to Governmentand MAHART for review and discussion; (i) prepare recommendationsto Governmenton overall strategy in river transport,related policy implicationsand institutionalimprovement, timing of investmentswith particularattention to the port of Csepel and other investmentswhich should be started in the 1990-1994plan period. 9. Phase III. After review by the Governmentand acceptanceor revision of the recommendedproposals, the consultantsshall: (a) produce a master plan setting the long-termstrategy up to the year 2000 for river transportand ports within the frameworkof the - 131 - ANNEX 7 Page 5 of 6 national transportplan and consistentwith the Government'sindustrial policy; the master plan shall indicate likely investmentsequences, earmark land areas required for developmentof river and port facilities,and propose a zoning of the ports areas and means of access; (b) for the investmentsselected in Phase II for the 1990-1994plan period, prepare preliminaryengineering designs based on an analysis of alternativeconstruction methods, taking into account the specific site conditions;preliminary designs shall be carried out in sufficientdetail to calculateand compute the construction quantitiesand cost estimates,and to define to calculateand compute the constructionquantities and cost estimates,and to define a program and budget of additionalsurveys, field investigationsand testing which might be required for detailed engineering;the consultantsshall prepare an appropriateschedule for such engineeringand identifyany operationalproblem which would need to be consideredduring design, tenderingor construction; (d) prepare estimatesof the cost of final engineering,construction, equipmentacquisition, operation and maintenancefor each recommended investmentproposal, with breakdownsof foreign exchange and local currency requirements;the estimates shall include adequate provisionsfor physical and price contingenciesand the consultants shall indicate the basis on which these have been calculated; (e) evaluate the economic feasibilityof improvementsof the inland waterway transportsystem and river ports by a comparisonof the economic benefits to be expected from such improvementsin the context of the overall transportsystem with the capital,maintenance and operationcosts involved;the benefits to be consideredwill include: savings in cargo handling costs, ship operatingcosts, and truck and train operating costs related to inter-modaloperations; in the case of diverted or generatedtraffic, the benefits will include overall transportsavings in comparisonwith the alternativesmodes of transport,taking into account the differencesin transit time costs among modes; the cost to be consideredshould include the costs of improvement,equipment purchase and maintenanceof the river systems and of the river ports; the economic evaluationshall include sensitivityanalysis with respect to the most relevant parameters; (f) produce a feasibilityreport covering each investmentproposal, suitable for obtaining financingfor infrastructure;prepare a time-basedprogram of improvementsprojects by order of priority, taking into account the optimum timing for the recommendedworks; (g) produce a status report on progress made with MAHART in carrying out the industrial/comercialzone master plan; (h) prepare and outline of all actions requiredby the Government and MAHARTto implement and support the proposed services and facility - 132 - ANNEX 7 Page 6 of 6 improvements,identifying the agencies to be involved,together with budget estimatesof costs for each proposed action; and (i) define the scope of detailed engineering,the preparationof contract documents,services for bid solicitation,bid evaluationand contract award, and constructionsupervision; describe this scope in detailed draft terms of referencefor all engineeringservices required, accompaniedby detailed staffing schedules,manpower estimates,and a budget, all in a form that would be suitable as the basis or contract negotiationsfor the requiredadditional services. Time Schedule and Reporting Requirements 10. The consultantsshall prepare and submit the follow_zagreports to the Government,MAHART, and the Bank, within the time periods and in quantities indicated: Number of Copies Timing (in months To Gov't. To MAHART To Bank from Starting Date) English English HungarianEnglish Hungarian only InceptionReport 2 3 Progress Reports 1 every 2 months InterimReport 3 7 Draft Final Report 2 11 Final Report 3 (*) (*) Within 30 calendar days of receiptof comments on the Draft Final Report form the Government,MAHART, and the Bank. 11. The InceptionReport shall summarizethe consultantanalyses and recommendationspertaining to Phase I of the scope of services. The Progress Reports shall give a statementof all work performedduring the reporting period, a summaryof interim findingsand an outline of work expected to be completedduring the next reportingperiod. The Interim Report shall contain a summary of the findingsand recommendationsof the consultantson overall strategy in river transport,related policy implicationsand institutional improvements,and timing of investments. The Draft Final Report shall cover the consultantsfindings and recommendationson all work done under this contract. It shall have a conciseexecutive summary and contain the full text, graphics,charts and tables to be p-esentedin the consultants'Final Report, in edited form and suitablefor final reproduction. The Final Report shall reflect all revisionsthe consultantsdeem appropriateafter receipt of commuentson the Draft Final Report. In addition to the Final Report, the consultantsshall prepare a concisedocument presentingthe agreed developmentsand improvementsin a form suitable for marketing the services of the river transportsystem. - 133 - 12. The study is estimatedto require about 30 man-months,at an estimated cost at about US$ 300,000of which all direct foreign exchange costs (about US$ 200,000)would be financed from a World Bank loan. 13. Terms of referencefor the study were discussedand agreed during the negotiations,and the study would be initiatedby December 31, 1989 and completedby June 30, 1991. S9O8U/4-9 - 134 - ANNEX 8 Page 1 of 3 HUNGARY SECOND TRANSPORTPROJECT STAFF APPRAISALREPORT Budapest Transport Company Component Organizationand ManagementStudy Outline Terms of Reference Background 1. The Budapest TransportCompany (BKV) employs about 24,600 staff and operatorsa fleet of about 3,800 vehicles, includingbuses, trolleybuses, tramways,metro and suburban trains; it serves in excess of 5 million passengersdaily, which is about 802 of all motorized trips in Budapest,a city of 2 million people. Study Objectives 2. The objectiveof the study is to identify non-investmentand/or low cost methods, particularlyinstitutional changes throughwhich the BKV would increaseeffectiveness and efficiencyof its operations,increase its revenues,and become more competitiveand market-responsive. Scope of Work 3. The study would be carried out in two phases, first carrying out a diagnosticsurvey of the company, and then developingan action program. The diagnosticphase would consist of three parts: (i) a rapid overall assessment of the BKV, includinghuman and material resources;performance; market and operating environment;administrative and financialrelationships; and developmentplans in the perspectiveof urban developmentof Budapest,and economic/socialdevelopment of Hungary. (ii) special topics, includingbut not limited to the following: - regulatorysystem under which the company operates, imposed by the City Council or the State; (focus on such aspects as the regulationof: line and service characteristics;staff hiring, firing and salaries;purchasing and outside contracting;BKV monopoly position;relation to MAV and VOLAN); - 135 - ANNEX 8 Page 2 of 3 - ornanization: basic company missions/functions,division into directorates,departments and beyond; match between groups and missions/functions;inter-group linkages; - management: scope, methods style, reportingprocedures; - staffing: numbers, qualifications,assignment to functions, participationin decision-making,salary and benefits, career development; - management information: performanceindicators (those internal to the BKV and those externallydeveloped) from three differentpoints of view: the passengers,the Governmentand the company management; - managementinformation: accountingand budgeting systems and their use for short- or longer-termmanagement and planning; spncial emphasis on costing and cost control; - financialprocedures and policies; - marketingand innovation: methods, orientationand perspectiveswith special emphasis on approachesto setting up new services; - fares system: fare categories,market segmentation, evidence of elasticities,links to household consumption patterns;and - informationprocessing and analytic methods: use and diffusion of computerhardware and software. (iii) the developmentof a simulationmodel of the BKV: a modular, coarse-grainedtool, initiallymeant for strategicplanning, but capable of further development;would link factor inputs, services offered, and passengerattraction at given fares, calculatingstandard, integrated financial reports as key output. 4. The recommendationsphase would consist of a series of 5-year action programs related to the special topics above, individuallyor in packages, using the simulationmodel to the degree possible to evaluate expected costs and benefits. Though some of the above topics may be related to the strengtheningof central management,the key idea is to create, within the BKV and in its relation to the outside, market-typethinking and processes. At the same time, the company would remain in public ownershipand be available as a means for implementingselected social policies. - 136 - ANNEX 8 Page 3 of 3 5. The study would be initiatedno later than the end of 1989 and completedby the end of 1990. It would have a budget of about 30 professional mman-month,be carriedout by outside consultantsin about 8-10 months, and report directly to the BKV Director-General. 6. Terms and referencefor the study were discussedand agreed in general with the governmen;during the negotiationsand terms of refereivewould be finalizedafter further consultationwith the Bank. 5078U.pil-13 - 137 - ANNEX 9 Page 1 of 2 HUNGARY SECOND TRANSPORT PROJECT STAFF APPRAISALREPORT Related Documentsand Data Available in Project File A. General Reports and Studies on the TransportSector 1. HUNGARY: TransportSector Strategy Paper (Green Cover, June 18, 1987) 2. HUNGARY: FinancialMarket Study (YellowCover) 3. Hungary StatisticalBooks - 1984 4. Magyar Allamvagutak- Statisztikaizsebkonyve,1985, 1986 5. Public Finance in Hungary - Ministry of Finance, 1986 6. Uber Die Simulation.desVerkehrsverlaufs - 1985 7. Developmentof the National Highway Network - MTCC, 1985 8. TransportSector Memorandum- 1986 9. PracticalMethodology to Investigateand Assess the National Economic Efficiencyof Highway Investments(On Hungary) - 1986 10. UVATERV; "Consultingand Engineeringfor Communicationand Transport 11. TransportationPolicy - TransportationEcc.aomics, by Dr. Arpad Ivany, Jozsef Pal and Dr. Laszlo Toth (EnglishTranslation of selected chapters). B. General Reports and Studies Relating to the Proiect 1. Feasibilitystudies on: a) TransportManagement InformationSystem (TMIS) - MAV; b) Track Maintenanceand ConstructionMachines - MAV; c) RecyclingPlant (for Used Rails) - MAVM; - 138 - ANNEX 9 Page 2 of 2 d) Traffic and Economic Analysis of Budapest Bypass - MO Motorway 13.8 km by UVATERV; e) Road MaintenanceEquipment - by CooeditrationOffice for Public Road Management; f) Csepel Port - Modernizationof Grain Storage and Handling Equiprent- by Agrober - EGTI; g) Csepel Port - Modernizationincluding Railway and Road ConnectionNetwork - by UVATERV; h) Hungarocamion- Handling Equipment for Transit Distributia Stores - by Hungarocamion: (2) Road user's contributionstudy - Institutefor Transport Science - Budapest; (3) HungarocamionOrganization and InformationSystem Requirements- Uniconsult (West Germany) - Report on Phase I; and (4) HungarocamionDevelopment of InternationalMarketing - Uniconsult ;West Germany)- Report on Phase 1U. i) Volan - InterfaceFacilities for Freight Operations- by Volan; J) The preparatorystudy on the complex system of urban Transport control; k) MAVs Traction Ooerationalplan; 1) Details of: traffic forecasts,economic analysis and cost estimates; m) Informationon BKV;. n) Budapest and its Transport1987; o) PerformanceEvaluation and Standardsof Service - Public TransportCompany BKV, March 19£8; and p) Draft Biddingdocuments for TMIS and BKV's traffic control system. S07SU/14- IS - 139 - TABLE 1: HUNGARV STAFFAPPRAISAL REPORT SECONORANSPORT PROJECT Freiaht Traftic by made of Trinsoort 1960 86 ' (in Million ton-km and in percent of total) Yer Railway RQ. Water r Pigeltnes rotl 1960 13.346 1.890 "' 1.3S3 1 97 16.687 (80.00)Z (11.3) (8.1) (0.0) (0.6) (100.0) 1970 19.821 S.820 2.866 11 1.043 29,561 (67.1) (19.7) (9.7) (0.0) (3.5) (100.0) 1975 23.541 a8731 4.245 12 3.092 39.621 (59.4) (22.1) (10.7) (0.0) (7.8) (100.0) 1976 23.156 9.441 4.445 19 3.595 40.656 (57.0) (23.2) (10.9) (0.0) (8.9) (100.0) 1977 24.181 10.439 6.167 22 3-737 44,546 (54.3) (23.4) (13.8) (0.1) (8.4) (100.0) 1978 24.500 11.462 6.793 27 3.886 46.668 (52.5) (24.6) (14.5) (0.1) (8.3) (100.0) 1979 24.661 11.773 7.013 32 4.291 47.770 (51.6) (24.6) (14.7) (0.1) (9.0) (100-0) 1980 24.399 11.403 7.875 28 4.623 48.328 (SO.S3 (23.6) (16.3) (0.1) (9.S) (100.0) 1981 24.342 11.7S9 8.507 25 4.387 49.020 (49.6) (24.0) (17.4) (0.1) (8.9) (100.0) 1982 23.273 11.883 8.201 29 4.473 47.459 (48.6) (24.8) (17.1) (0.1) (9.4) (100.0) 1983 23.079 tl.951 8.376 23 4.33S 47.763 (48.3) (25.0) (17.S) (0.1) (9.1) (100.0) 1984 22.847 11.94S 9.549 22 4.788 49.152 (46.5) (24.3) (19.4) (0.1) (9.7) (100.0) 198S 22.309 11.927 9.003 26 4.850 48,115 (46.4) (24.8) (18.7) (0.1) (10.0) (100.0) 1986 22.600 12.475 8.644 24 4.954 48.397 (46.7) (2S.1) (17.9) (0.1) (10.2) (100.0) Average Oistance (km) 1960 137.4 14.0 246.0 750.0 74.6 69.8 1970 168.2 14.3 286.6 1750.0 113.4 54.3 1975 178.2 17.4 339.6 1728.6 167.1 59.6 1976 17S.6 18.1 35S.6 242S.0 173.7 S9.1 19"7 179.4 18.5 48S.6 2036.3 191.6 61.0 1978 181.2 19.4 503.2 2076.9 186.8 61.3 1979 183.6 19.S 547.9 2012.5 193.3 61.7 1980 187.4 19.5 645.5 2021.4 208.2 64.6 1981 18S.S 19.6 630.1 1700.0 182.8 63.9 1982 183.1 20.6 621.3 1843.0 173.4 64.3 1983 186.1 21.3 e39.4 1761.0 170.7 65.9 1984 187.3 21.5 734.5 1676.9 177.3 68.6 1985 189.9 21.6 818.4 1618.7 176.4 68.0 1)86 189.7 21.3 837.6 1481;2 167.3 66.4 Tonnade (Millionsl 1960 97.1 135.1 S.S I/ 1.3 239.0 1970 117.8 407.0 10.0 3J 9.2 544.0 1975 132.1 501.3 12.5 I/ 18.5 664.4 1976 131.9 522.7 12.5 I/ 20.7 687.8 19" 134.8 563.S 12.7 I/ 19.S 730.5 1978 135.2 591.3 13.S I/ 20.8 760.8 1979 134.3 604.4 12.8 1/ 22.2 773.7 1980 130.2 584.0 12.2 I 22.2 748.6 1981 131.2 598.3 13.S I/ 24.0 766.9 1982 127.1 S77.9 13.2 1/ 25.8 744.0 1983 124.0 561.8 13.1 1/ 25.4 724.2 1984 122.0 554.5 12.5 I/ 26.9 71S.7 198S 117.5 551.4 10.8 I/ 27.5 707.3 1986 119.1 571.8 10.3 1/ 27.5 728.7 I/ Both for publiC and private use. J/ Figures within parentheses denote percentages. 3/ Less than twenty thousand tons. Source: Hungary - Statistical Year BOok. 1980-1986. February 1989 -140- TABLE 2: nUhCARY STAFF APPRAISAL REPORT SECOND 2ANSPORT PROJECr A. Puolic Pissencer 'rinslart 1960-36 Passenaers 'Arrtcd (Millions) Pissenaer Kilometer, (Millions Long Lical Long Local '1rC Oitance IrC.fic :2LI Oistance Traffic Total 196 ,25.' !. 2.28S.8 18.128.6 9,404.1 27.532.1 !970 1.003.3 2.142.3 3.145.6 24.029.7 10.043.4 34.073.1 1975 1.17.a 2.384.a 3.492.6 26.93S.9 11,374.7 38.310.6 1976 1.127.6 2.429.9 .SS7,S 27.197.7 11.646.0 38.843.? 1977 1.146.5 2.498.2 3.,44.7 27,987.7 11.922.6 39,910.3 1978 1.165.7 2.546.1 3.711.8 28.583.2 12.14S.7 40.728.9 1979 1.183.S 2.08.1 3,791.6 29.055.4 12.4S1.8 41,SO7.2 1980 1,187.1 2.6S6.2 3.843.3 29.361.3 12.648.1 42,009.4 1981 988.3 2,976.9 3.965.2 29.044.2 14.068.7 43,112.9 1982 980.0 3.013.9 3.993.9 28.522.6 14.222.1 42.744.7 1983 914.3 3.065.1 3.97S.4 2S.727.3 14,425.4 40.1S2.7 1984 906.7 3.138.3 4.045.0 26.111.6 14.696.8 40.808.4 1985 889.5 3.221.3 4,110.9 26.007.3 14,914.7 40.922.0 1986 882.0 3.S86.2 4.473.2 25.863.3 14,671.2 40.S34.5 S. Public Passenaer Transport by Mode of Transnort 1960-R6 Passencer-Km (Milllonsl ar Rail Roadf Urban Water &L= law 1960 14.323.8 l3lOSl.l 82.6 7S.2 27.S32.7 (52.0)" (47.4) (0.3) (0.3) (100.0) 1970 16,339.1 17,2SO.7 59.1 424.2 34,073.1 (48.0) (S0.6) (0.2) (1.2) (100.0) 197S 15,823.S 21.854.1 77.4 SSS.6 38.310.6 (41.3) (S7.0) (0.2) (1.S) (100.0) 1976 IS,569.9 22.649.4 71.7 552.7 38.843.7 (40.1) (58.3) (0.2) (1.4) (000.0) 1977 I5.396.2 23,732.3 75.8 706.0 39.910.3 (38.6) (S9.4) (0.2) (1.8) (100.0) 1078 '4.928.7 24,907.2 83.2 809.8 40,728.9 (36.7) (61.1) (0.2) (2.0) (100.0) 1979 14,611.7 25.791.1 78.0 1.026.4 41,S07.2 (35.2) (62.1) (0.2) (2.5) (100.0) 1980 14.65S.8 26.200.9 76.3 1,076.4 42.009.4 (34.9) (62.4) (0.2) (2.5) (100.0) 1981 13,544.6 28.243.7 79.0 1,245.6 43.112.9 (31.4) (65.5) (0.2) (2.9) (100.0) 1982 13.070.5 28.321.1 86.5 1.266.6 42.744.7 (0.S) (66.3) (0.2) (3.0) (100.0) 1983 11.104.5 27.793.1 '4.2 1,180.9 40,152.7 (27.7) (69.2) (0.2) (2-9) (100.0) 1984 11,274.4 28.229.3 72.9 1,238.8 40.308.4 (27.6) (69.2) (0.2) (3.0) (100.0) 1985 11,209.4 28.310.6 69.0 1,333.0 40,922.0 (27.4) (69.2) (0.2) (3.2) (100.0) 1986 11.223.7 28,093.7 74.1 1,143.0 40.S34.5 (27.7) (69.3) (0.2) (2.8) (100.0) 1/ Figures within parentheses denote percentages. Source: Hungary - Statistical Year Back, 1980-1986. February 1989 5olsUP. 1 - '.41 - r48LE I WUUGARY c-":FFAPPRAISAL REPORT sEC00 rRQANSPORTPROJECT Number of 3ifferent ',,'esof maotor Veicles (in '000) Passenger Trucks YearCars ' Buses VAnVans 19,0 238.6 9.5 74.5 197S 568.3 12.5 94.1 1980 1.013.4 22.2 111.1 1981 1,105.4 23.4 116.5 1982 1.181.7 24.7 119.4 1983 12sa8.s '4.4 129.6 1984 1,344.1 -4.9 142.3 1985 1.43S.9 U4.8 151.3 1986 1.538.9 25.9 163.2 1/ At the end of the year. Source: Hungary StatisticalYear Book 1980-1986. February 1989 SO?UP .1 J Table 4: HUNGARY STAFF APPRAISAL 2EPORT SECONDTRANSPORT PROJECT 1986-90 Transoort 1nvestinnt Plan 1980 1981 1982 i983 1984 1985 1986-902. Planned Transoort Hod ------(in FT Hilliton)------1. Railways 9.644 7.451 6.672 6.495 5.767 6.765 47.400 (46.1)3 (36.4) (34.8) 35.2) (35.7) (36.9) 145.3 2. (a) highways 8.649 9.590 9.726 9.229 7.7ID 8.501 43.350 (41.3) (47.0) S0.81) (50.0) (47.7) (46.3) (41.4) - National & State goads 3.247 3.094 2,810 1.853 1.397 1,520 12.950 015.5) (1S.2) (14.7) 010.0) (8.6) (8.3) (12.41 - Village. Comaaunty 6 Country Roads 1.201 2.314 2.407 2.701 2.613 2.257 11.200 5.7) (11.3) (12.6) (14.6) (16.2) (12.3) 010.7) 4 (b) Road Motor Vehicles ' 4.201 4.182 4.509 4.675 3,700 4.724 19.200 420.1) (20.5) (23.5) (25.41 (22.9) (25.7) 16.3) 3. River Port & Shipping 526 186 249 196 1S 12S 2.800 (2.5) (0.9 (1.2) (0.1) (1.21 (0.7) (2.37 4. Aviation 1.265 _1.712 1.195 1.677 1.660 1." 3.550 (6.0) (8.4) (6.2) (9.0) (10.3) (10-3) (3.4) (a) Aircraf; 84 S01 346 321 265 471 (0.41 (2.5) (1.8) (1.7) (0.6) (2.6) lb) Airports 1.181 1.211 849 1.356 1.395 1.417 (5.6) (5.9) (4.4) (7.3) (6.7) (3.7) S. Pipehlles 836 1.507 1.329 850 817 1.075 7.600 UA)1 (L2.) U4.) 4±J2l {5.I JS.) -A17 Total (excludin4 Urban Transport) 20.920 20.446 19,172 18.447 16.139 111.b0 104.700 1100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.03 1/ At currec.t prices Z/ Figures rounded off. 3/ Figures within parenthesis indicate percentage. 9/ Included only public sector. Source: The Nualistry of Tragisport, Coamunicatton and Conistruction February 19898 sEu Pgu*I PageI of 2 Table 5: HUGR .TAfFAPPRAA. KwORI SECO TRANSPRTPROJECT Railway Caonentgo Frej ht and Pas.senerTraffc Actual1980-22 and tisstons roAection1918-91 Alactual------ed forecast------1981 1212 1198 1~2 1222 122~ JIM§ 1281 1982 1911 12li 1211 1211 1912 I. freightTraffic a) Tonnage(mil. netJLo5) 78.5 50.8 79.7 76.2 73.2 68.5 69.2 68.1 Domestic 15.9 IS.1 14.5 13.0 InternationalTransit 19.8 lS.1 16.8 16.2 $ 31 _.2".4 30-9 31. 3-I2 ILl lLfk Export-import 116.8 118.5 114.7 Total 129.1 130.3 126.4 123.3 121.2 bI Volimu(mil, . netLk 9,861 9.863 9.788 Domestic 11.020 11,337 11,331 10.844 10.464 1L,21 1261 11.596 1L1222 J2.040 1201 12.350 11422 International 21,929 22.213 21,387 Total 24,041 23.951 22.927 22,777 22,504 ------As 1987 ------II. PassengerTraffic a) Oomestic , 228.2 225.6 222.2. Passengers(m.l.) 278.3 265.7 259.2 231.1 231.8 --L l -.3.. 1.1 _._ -la __4. International 4.1 232.4 229.9 226.9 Total 282.4 269.9 262.4 234.4 235.5 b) Pass.km (ma.L) 10.200 10.261 10.278 Domestic 12.765 .: 592 12,271 10,312 10,414 n .512 _IJ .4. 1 70. A45 9.2 International Isfl 11.106 11.206 Total 13.S50 13.389 12.9)3 10.981 )l.S! 11.093 III. TrafficUnits 22.11 222 ail .NTKCins.iPKs) ILIIA 14. III 32112-fi&) 32022 forecastfor yearsup to 1993showing average I/ HNV had supplieda traffic In the annualincreases. 1918-93, for passengerof 0.0%and 1.lSfreight. lightof traffietrends In recentyears. the mission considers projection on trafficfisures. which show no variationfrom those of 1987. Source:NAV and HissionEstimates. February1989 507SUP 20 Page 2 of 2 Table S: HUNGARY STAFF APPRAISAL REPORT SECONDTRANSPORT PROJECT Railway Comonent Frelaht and Passenaer TraffiC Actual 1980-87 and MAV's Proiectton 1988-93 ------Actual------Planned forecast------Estimated- MiM lili 1im 1i98 JIm JIm 1im Jill JI9 Jim IMfi 199i 1im JI21 I. Freight Traffic a) Tonnage (mil.net tons) Donestic 78.8 80.8 79.7 76.2 73.2 66.8 69.2 68.1 69.2 69.2 69.9 70.3 70.6 70.9 International Transit 19.8 18.1 16.8 16.2 15.9 1S.1 14.5 13.0 12.9 14.3 14.4 14.5 14.6 14.7 Export-iaport _ij _J1.A 29. 30.9 31.9 3I 11. 33-6i 33.4 _}. 34.8 35. 2 Total 129.1 130.3 126.4 123.3 121.2 116.8 118.5 114.7 115.5 118.0 119.0 119.6 120.2 120.8 b) Volume (mil. net tkm) Donestic 11.020 11.337 11.331 10,844 10.464 9.861 9.863 9.788 9.990 9.722 9.846 9.903 9.960 10.050 International 13.021 12.614 1S96 11,933 128.40 12.068 12.350 11.592 11520L2ILUA 12.444 12.540 12.636 1 D 4 Total 24.041 23,951 22.927 22,777 22.504 21.929 22.213 21.387 21.510 21.510 22.290 22.443 22.596 22,800 4 II. Passenger Traffic (mill.) a) Domestic Passengers 278.3 265.7 259.2 231.1 231.8 228.2 225.6 222.2 218.0 220.6 219.5 220.0 220.5 221.2 International 4-1 __,Z -L ii3-3 3-7 4- 4.3 _..47 5 4.4 4.A 4.A -. 7 9A. Total 282.4 269.9 262.4 234.4 235.5 232.4 229.9 226.9 223.0 225.0 224.0 224.6 225.2 226.0 b) Pass. km (mil) Domestic 12.765 12.592 12.271 10,312 10.414 10.200 10,261 10.278 10.099 10.141 10.092 10.130 10,168 10.215 International 785 797 6 42 662 711 708 _84S_ 9281 87? 9 92_94 __A 2_5i Total 13,550 13.389 12.913 10,981 11.155 11.093 11.106 11.206 11.080 11.018 11.990 11.050 11,110 11,180 III. TraFfic Units (mil.NTtm1l.PKasm) 37 S91 327340 3S4 23 758 33.659 33,022 32.J1J 32.593 32590 33.068 33.280 33.493137 33,9 Source: IAV estimate. February 1989 S071UP .21 IaUAA.: Mama STAfF APPRAISALREPORT SEC011DTRANISPORT PRO.IECT flnerAting Result& Ra iway Component Goods Transportedin Containers hr MAv. 1970-a7 1/ (in 000 tons) of Kind of Type 3.1n3 Iq1 11qZ L 21 12IM lso 1212 CgagAter TrafftJ s2 121 1922 11 23 1 121 111 11221nu 12 1121 11.3 12.1 14.1 12 4 IS a 27.9 1.5 3.1 4.7 4.8 6.5 8.9 12.6 11.d 15.4 12.7 12.0 12.6 eq EEport 24.6 25.9 24.1 17.3 1M.1 17.6 20.1 9.0 12.2 10.1 19.5 18.4 20.1 30.d 27.2 26.3 25.3 22.5 E Import 3.1 1.5 1.9 1.9 1.6 1.6 1.7 1.7 Transit 0.3 0.8 1.0 1.6 2.9 3.2 4.1 5.2 3.7 4.4 0 2794 5aIL SALl 111 bil 11 M4 bIia bg2.t I Inland IL A ULl 1011-5 j11 206-1 33U 9124 I" 'U 563.1 597.2 629.1 622.4 445.3 651.3 614.2 640.7 659.3 n Subtotal 24.2 50.9 61.9 134.7 184.6 239.0 331.1 456.2 496.2 VI 272.6 334.6 608.9 632.7 655.4 675.7 796.1 Export 9.8 16.4 17.3 24.4 31.4 44.1 66.3 97.3 89.8 132.0 172.8 L 145.3 303.2 368.4 537.9 669.1 691.9 "1.3 023.0 A Import 1.3 5.1 17.B 18.5 37.7 33.0 39.5 54.5 69.5 105.5 130.1 156.8 136.5 137.1 163.4 172.1 16b.0 16o.2 142.7 R Transit 2.0 4.2 17.6 35.6 74.6 86.3 95.0 99.1 210.4 MILl2 ilSS 13L.5 1lla 11 119.9. MA 2.4 2Z. 221, C Inland _ L2 i LLO IkA I24 I3l5 610.4 892.9 1001.0 1510.1 IeaS.3 1746.7 1967.1 I.9v2.a Subtotal 13.1 27.5 56.8 89.7 160.5 188.8 236.5 305.2 449.9 483.1 120 1S22.0 113. 3.Li"4 21ULl zLf 2QQ7WA2.01. I Total )24 t8.4 13 ZIiJ 3ILA IlL) SIL2 261 296 lL46.28 ft. and the large Containers are 40 ft. V Excluding small containers of 5 tons or lebs. The medlun containers are 20 Source: "AV June 1988 $1O?u'P 22 Page I of 3 Ible 7: HUNGAR STAFF APPRAISAL REPORT SECONDTRANSPORT PROJECT DoeratinaResults Railway Comonent SeleetedOperating Statistics for NunqarianRailways 11980-871 lUit i lO 1982 12U 19n4 12A590 192 716.8 7.616.1 7.618.6 I. LENGTH OF LINE. TOTAL km 7.,fi.L) 7,fi17,L 7.611.1 7.i12.2 L7fiifi L 7,405.4 7,407.9 gauge km 7.402.8 7.406.3 7,400.4 7,401.5 7,405.3 7,406.0 Standard 171.7 171.7 Narrow gauge km 175.7 175.7 175.0 175.7 17S.7 17S.7 35.0 35.0 gauge km 35.0 35.0 35.0 35.0 35.0 35.0 Broad 1.919.6 1.99b.6 Electrified km 1,509.5 1,516.3 1,603.7 1.703.9 1.o00.s 1.917.4 II. TRAFFIC 11,093 11,106 11,20b Passenger-km oil 13.550 13,389 12,913 10,981 11.155 21.929 22.213 21.367 Net ton-km mil 24,041 23,951 22,927 22,277 22,504 17,936 17,580 17,784 Passenger gross-ton km mil 18,459 17,780 16,391 17.813 18,144 47.492 45,375 § Freight gross-ton km mil 50.381 51,394 49,702 48.137 48,486 48,836 65.372 13,359 .. Total gross-ton km mil 68.840 69,514 68,093 65,950 66.630 64,772 0' gross ton km per km mil Total 8.55 8.29 of line gt km/km 9.04 9.13 8.95 8.66 8.75 8.50 III. TRACTION AND RQLLING STOCK 452 461 n.a. Electric locomotives number 375 405 431 436 441 cookw 779.4 856.8 914.0 916.0 936.0 979.2 992.0 n.a 1.09S n.a. Oiesel locomotives number 1101 1118 1122 1.529 1128 1096 000kw 897.1 911.4 919.2 918.6 929.8 906.7 906.6 n.a. 61 nI.a. Steam locomotives number 502 393 296 185 113 75 oookw 379.1 297.5 227.8 143.0 91.1 56.3 43.9 n.a. 86 75 n.a. Raulbuses sets 101 95 96 95 92 cookw 15.6 14.7 14.5 14.7 14.4 13.8 12.6 n.a. oOo seats 4.6 4.4 4.4 4.3 4.0 3.7 3.4 n.a. sets 175 184 184 194 214 230 247 it.a. 51.1 53.5 n.a. Diesel Motor trains oookw 43.4 44.6 44.6 46.0 48.8 ooo seats 35.4 37.0 37.0 38.8 42.3 45.2 41.1 n.a. 4131 4,129 n.a. Coaches nuamber 4338 4369 4303 4226 4158 cooseats 319.9 320.2 316.4 310.4 305.3 303.1 286.5 n.a. 66.672 n.a. Wagons number 68.336 68.325 68,345 68,224 67,836 67.485 ooo tons 2,434.9 2,462.5 2,480.1 2,480.6 2,475.1 2.466.6 2,443.2 n.a. TableZ Page2 of J IV. tiROUS T0=M BY TYPE OF TRACTION Electric - Quantity m11 35,259 36,754 37,766 37.651 39,212 37.490 38,611 39,705 - Z of total X 51.2 53.1 55.5 57.1 Diesel - Quantity mtl S8.9 57.9 59.1 62.9 29,218 28,421 27,147 25,780 25,162 25,255 24,729 21,562 - I of total 1 42.5 41.1 39.8 39.0 37.8 Steam - Quantity ull 39.1 37.8 34.1 2,408 1,876 1,149 612 307 97 16 - - I of total X 3.5 2.? 6 Self-propelled 1.7 1.0 O.S 0.1 0.0 0.0 - Quantity at' 1,955 2,123 2,031 1,907 1,949 - X of total X 1,890 2,016 1,887 2.8 3.1 3.0 2.9 2.8 2.9 3.1 3.0 V. UTILIZATIONOF TRACtIONAND ROLLINSSTOCK Averaaedaily aerfonnance of availableenalne A. Eassengertraffic I Electriclocomotives km/day 495 462 475 480 S00 510 514 508 Diesellocomotives 322 307 321 Steamlocomotives 332 333 338 337 335 185 187 190 173 159 1S0 307 Dieselmotor trains 292 286 376 342' Coaches 368 302 311 307 308 * 308 295 298 316 315 313 320 337 B. Freiahttraffic Electriclocomotives km/day 324 304 345 Diesellocomotives 353 329 339 342 332 '4 222 218 221 219 207 199 192 190 Steamlocomotives 135 82.6 104 Freightwagons 100 99 100 282 --- 2/ 85 81 74 73 77 72 79 77 C. AvatlAbilit Electriclocomotives 84.1 82.1 80.0 81.8 81.2 74.6 74.1 80.0 Oiesellocomotives u 79.2 75.7 Coaches 74.5 76.6 76.7 76.2 77.1 77.6 91.8 90.2 89.1 90.4 87.3 77.8 87.9 87.5 Fretghtwagons * 94.2 94.1 92.6 82.7 Averagespeed of 77.3 - 89.6 88.4 passengertrains km/h 41.2 40.3 41.2 42.9 Averageloading of 44.2 44.6 44.8 44.9 freight trains tons 1,171 1,156 1,162 1,190 1,186 Averase loadper loaded tons/wag 1,191 1,166 1,132 freight wagon 28.3 27.8 27.9 28.5 28.4 28.5 Turnaroundtime of days 28.9 25.2 freightwagons 3.89 3.94 4.26 4.35 4.36 4.76 4.47 4.49 Passengerkm Per seat OOpkm/seat 36.6 37.0 36.2 31.1 Net-tonkm per 1 tone 31.7 31.5 32.9 33.0 of capacity ODOntkm/t 9.9 9.7 9.2 9.1 9.1 8.9 9.1 8.8 Page 3 of 3 Un1t ]ISn 18 181 1983 1984 198 1986 1287 VI. STAFF 136,247 134,493 132,255 132,229 131,923 133,083 133,718 128,450 Employees no. 17.56 16.86 km of line no./km 17.89 17.65 17.37 17.37 17.32 17.46 Employeesper 2. 2S5.20 261.0 Traffic units per employee lemp 281.90 285.50 276.10 259.70 263.30 (total) tus/ per employee Traffic untts 329.60 327.30 338.7 (trafficoperation staff) tus/emp. 366.00 370.20 357.50 335.10 339.10 1/ Tus=NTKN+PKN I/ Steam tractionwas used for shuntingoperations mostly; Source: Statisticbooks of the MAV 1980-1987and Tractionand RollinoStock OperationalPlans. February1989 507SU/P.23-2S la 1: yUW STAff APPRAISALREPORT TRANSPORTSEnOND PROJECT PAilwbaysStarr aid Productivit 3/ t1ia1hlLUtUmate Total Traffic TUs per EmIlavee -- MAY's Estimate - Tus per _rifrfic units iTUsi- I/ Number of Operation Traffic Traffic Operational R*Ug..LUL2" Emplouees Staff _ mi W Operatlon.. UniLt ELMn1ru IYr Chiaraeablg million-- thousand - -million ------thousand---- - 356.2 38,725 356.2 1978 37.938 38,725 1.02 141.719 108,579 273.3 37.996 354.8 1979 37.800 37.996 1.01 139.243 107,115 272.9 354.n 366.0 38.394 366.0 1980 37,591 38.394 1.02 136.247 104.963 281.9 370.2 38.394 370.2 1981 37.340 38.394 1.03 134.493 103,677 285.5 357.5 36,533 357.5 1982 35,840 36,533 1.02 132,255 102.184 276.1 335.1 34.334 335.1 1983 33,758 34.334 1.02 132.229 102,441 259.7 339.0 34,739 339.0 1984 33.659 34.739 1.03 131.923 102,472 263.3 329.6 34.140 329.b 4D 1985 33.022 34.140 1.03 133.083 103.580 256.5 34.125 327.3 1986 33,319 34.125 1.02 133,718 104.273 255.2 327.3 338.7 33.532 338.7 1987 32,5932' 33,532 1.03 128,450 99.000 261.0 341.8 33.568 342.2 1988 32.593 33,532 1.03 127.450 98.100 263.0 346.0 34.060 351.5 1989 32.593 33.532 1.03 125,950 96.900 266.2 352.1 34.278 360.0 1990 32,593 33.532 1.03 124.450 95.200 269.4 357.5 34,498 367.8 1991 32,593 33.532 1.03 122.950 93.800 272.7 360.6 34,717 373.3 1992 32,593 33.532 1.03 121,950 93,000 275.0 364.0 35.000 380.0 1993 32,593' 33,5322' 1.03 120.950 92.100 277.2 (pkm). I/ Traffic Unlts (TUs) are the sum of net metric ton kms (Ntkm) and passenger-kms Ntkm chargeable are based on the tariff (shortest)distance between origin and circuitously destination. Htkm operationalmay be greater because some traffic is routed to avoid saturated lines or to utilize better facilities. shows no 2/ Mission's esttimatebased on the actual figures in 1987, and the projection variationfrom those at 1987. I/ Lxcluding constructionand industrialstaff. Souwce: hungartan Railways and Mission's estimate. February 1989 su i- .X Table 9: fUNGARY STAFF APPRAISALREPORT SECOND TRANSPORTPROJECT Comparison with SelectedOther Railways (1986) I/ 2/ West German unit Hungary Yuoslava1 Aleria Greece Poland Portumal Turkey UAL 3,603 8.176 16.670 27,490 1. Total line length km 7,616 9.246 3,700 2,461 24.333 2. Length of electrified 11,433 1.920 3,531 300 0 9,452 458 291 4.1U4 lines km 24.9 41.6 25.2 38.2 8.1 0.0 38.8 12.7 3.6 3. Length of line per 18.1 32.1 45.7 inhabitants km/'000 73 40.8 18.6 25.8 64.4 35.4 5.802 6.052 30,819 41.397 4. Passenger-km mill. 11,106 12.399 2.156 1,933 48.526 5. Passenger-kmper 1.611 740 1.849 1.S06 km of line '000 1,458 1,341 583 785 1.994 65 28 SO 6. Passenger-kmper seat O00O 33 48 56 34 - - 1.448 7,219 17.640 59.581 7. Net ton km mill. 22.213 27,573 3.100 814 ;20,043 per km o 8. Net ton km 883 1,006 2,169 1 of line *000 2,917 2,982 84 331 4.933 402 km per 000 ntkm/ 9. Net ton 329 125 202 wagon capacity wagon 333 390 235 75 744 265 lO.Pass.km/NTkm as X of total traffic 46/54 64/36 41/59 units % 33/67 31/69 41/59 70/30 29/71 80/20 21.749 59,860 1S9,754 261,507 ll.Staff (average) number 104,273 126,018 18,000 11.897 373.639 of staff per No. staff/ 12.Number 7.3 9.6 9.S km of line km. 13.6 13.6 4.9 4.8 15.4 6.0 13.Traffic Censity per mill. gross 2.8 3.1 8.00 9.32 km of line tkm/km 8.58 7.64 2.3 4.60 12.7 14.Trafficunits per 335 222 193 386 employee '000 327 317 272 231 451 I/ 1985 2/ 1984 5078/P 27 TABLE to: WUNGARY STAFFAPPRAISAL REPORT SECONDTmIASPORT PROJECT HAV: CommoditvAnalysis Average Annual KniQz tCm1omLmties 1982 19f3 jig 198 198 1987 Growth Rate ------000 Tones------t ---- I Coal 14.920 15.480 15,683 15,327 14.617 15,603 16.172 15.742 0.8 2 Iron Ore 6.926 7.348 7,420 7,406 7.161 5,315 6.072 5,566 (3.1) 3 Box1te 1,703 1.634 1,503 1,569 1,553 1,501 1.711 1,611 (0.8) 4 Stone 8,473 a.25s 8,181 7,321 6,697 6,046 4,981 4.791 (7.8) S Gravel 6,319 6.824 6.596 5,849 5,90 4,595 5.264 5,041 (3.1) 6 Cruide 01 and Products 8.148 7.603 6.947 6,652 6,658 6.422 6,118 6,187 (3.9) 7 Steel Plate 5.329 5.099 5,010 5,055 5.082 5,103 5,186 5.282 (0.1) 8 Fertilizer 4,319 4.784 4,332 4,897 5,100 4,795 5,059 5,452 3.4 9 Coke 1.975 1.777 1,689 1,777 1,595 1,820 1.611 1,424 (4.b) 10 Brick and Tile 990 957 804 637 642 470 148 155 (23.0) 11 Nortar 657 662 561 560 512 483 1,243 1.003 6.2 12 Cement 3,167 2.953 2,706 2,788 2,666 2,304 2.314 2.179 (5.31 13 Cement'sProducts 1.615 1,570 1,429 1.292 1,347 1,128 1.100 1,022 (6.1) _ 14 Ground Products 460 449 467 476 609 608 721 1.124 13.e 15 Sugar 521 494 482 377 362 404 388 408 (3.5) 16 Cereals 1,011 1.243 1,138 1,427 1,553 1,943 1.874 1,388 4.6 17 Cattle Feed 243 319 268 155 249 265 259 244 0.0 18 Corn 764 778 1,053 1,003 845 920 1,094 654 (2.2) 19 Potato 106 147 242 118 99 102 71 87 (2.8) 20 Sugar Beet 2,889 3,552 3,755 3,301 3,148 3,372 2,877 3.244 1.7 21 Fire Wood 636 650 665 590 538 639 605 438 (5.2) 22 Timbers 4,512 4,566 4,023 4,182 4,498 4,739 4,941 4.888 1.2 23 Top Soil and Clinker 1,408 1,261 1,159 1,232 1,214 1,088 1.551 1.266 11.6) 24 Other Comnodities 27,896 29.210 28,971 28.689 28,215 27,992 28,507 28,657 0.4 25 SpecialCommodities 137 135 129 123 121 119 117 111 (3.0) 26 International(Tran!it) 19,794 18,107 16.796 16,201 15,970 15.120 14.459 13,040 (5.8) 27 Railwayhaterials 4.239 4 4.315 4.17 _ 4.259 3.945 4.064 3.762 L7 TOTAL 129,157 130,303 126,334 123,274 121,212 116,859 118,507 114,766 (1.7) .'ource: MAV's Statistical Year Book, 1980-1987. February 1989 S071OuP 28 TABLE 1: MNA SECOND TRANSPORTPROJECT STAFF APPDAISALREPORT Railway 19860-90Investment Plan and 1991-93Estimto ' Ouantit . Actual ---- P L A N N E D ------TOTAL --Breakdown 1987-90-- 1/ - 1991-93 Estimate- -Total 1991 93- unit MAY l9B7-9Ow 1fim 12622/ IM8 12Z IM9 1987-2 LosaI Forsdei Icta () l2 1..9 12 ------Ft Millions------US$ Millions------Ft millioas -- Ft M111 US$NIll A. IntrAzulLuIM l.Const. of new lines Km --- 1.7 --- 5.6 1.9 ------7.5 0.1 0.1 0.2 ( 0.0) 5 10 I5 30 0.6 2.Doubling of lines Km --- 9 --- .0.6 0.4 17.8 79.2 98.0 1.6 0.5 2.1 ( 0.31 60 55 55 170 3.o 3.Elect. of lines Km 32 340 456.3 405.0 655.4 529.3 790.2 2.379.9 29.0 21.0 50.0 S 6.3) 600 600 650 I,8SO 38.9 4.Track rehab. of lines Km 280 735 2.300.0 1,682.4 2,027.9 2,000.0 2,663.2 8,373.5 60.9 115.0 175.9 (22.5) 1.840 1.850 1,900 5.590 117.4 S.Dridges Pcs 93 82 267.4 282.7 206.7 278.7 453.2 1.2?1.3 19.2 6.4 25.6 l 3.31 160 150 145 455 9.b 6.1ndust. track a sidings Km 4 98 22.6 77.7 34.6 50.8 42.3 205.4 3.8 0.5 4.3 ( 0.5) 30 25 25 80 137 7.Substructure (reconstruction) - 45.6 79.4 62.7 75.3 61.1 278.5 5.2 0.7 5.9 A 0.7) 55 bO 60 175 3.7 8.Reconst. of main 1,260 2b.9 marshalling yards No - - I30.1 1,016.6 666.8 1.058.0 820.1 3.561.5 49.9 24.9 74.8 ( 9.6) 520 440 320 9.Junctions & stations (Reconstructurel No 560.4 477.4 415.7 530.8 336.5 1.760.4 30.0 7.0 37.0 S 4.7) 380.0 310 230 920 19.3 1O.Signalling of lines Km 61 369 414.7 62s.0 779.3 715.5 946.8 3.066.6 35.0 29.4 64.4 S 8.2) 890 930 1,020 2,840 59.7 ll.TelecowAunications ------122.2 163.0 150.0 268.8 363.2 945.0 7.9 i2.0 19.9 4 2.51 210 220 230 660 13.9 12.Computer facilitles 9 9 I .lVA L4530 A0R *7- 14-4Q ZI (Incl. ofc hardware) -- _ _ - 1Q-7 IfiLb-AZ9,0 .Z.Z Ji2 Sub-total (A) 4,534.2 4,887.0 5,302.0 6,054.0 6,978.0 23,221.0 256.6 231.3 487.9 (62.3) 5.150 S.l00 5.200 I5.450 324.7 3. glty.LL PowerL R-llinD Stgck 13.Electric locomotives (Main lines) Pcs 7 44 765.9 582.0 584.0 1,861.0 1,932.0 4.905.0 31.2 71.8 103.0 (13.2) 1,090. 1,220 1,350 3,660 76.9 14.Electric locomotives (shunters) Pcs -- 55 -- 118.3 220.0 -- -- 338.3 2.4 4.7 7.1 ( 0.93 - -^ ^^ 15.Coaches PCs 50 20 102.7 4.7 600.0 126.0 -- 730.0 1.7 13.6 15.3 S 2.0) 160 380 190 53a 31.1 16.WagonS fts 276 1,486 AI" _ 721-4 __160Q 213.2 353.1 1-5189 Ij^ _IQj 21J J_4_U _In _0Q 50 61.11 .)117 Subtotal (B) 1.187.4 1,441.7 1,564.3 2,200.2 2,285.1 7,491.3 37.1 120.2 157.3 (20.2) 1.700 1.900 2,100 5.700 119.7 Other facii JiBj 17.Track Maint. (mach.) 333.8 252.0 214.5 263.5 284.7 1,014.7 6.9 14.4 21.3 C 2.7) 250 250 270 770 lb.2 18.Track Workshop 2.1 (modernization) ------90.5 60.6 60.5 74.1 77.5 272.7 4.4 1.3 5.7 ( 0.7) 30 30 40 100 19.LocoMotive Depots (modernization) ------261.4 263.5 226.0 222.0 245.0 956.5 15.1 5.0 20.1 ( 2.6) 390 190 200 580 12.2 !O.Traction a Rolling Stock (wkshops) - Il.J )". S AIiJ 4.1 SZ.1&.i 543.2A - Subtotal (C) ------819.0 736.6 585.1 611.7 873.7 2.807.1 35.8 23.1 58.9 C 7.6) 470 470 510 1.450 30 5 !1 .Container 4.7 handling equipment ------104.3 166.7 100.0 49.8 59.7 376.2 4.2 3.7 7.9 ( 1.0) 70 75 80 225 hI flS ll.3 !2.Niscellaneous -- -- *- 5S3 1J Q.0.I OZJ f A 21. XII1AU IJ1 2.b LA.9] 2Q ..241 Subtotal (0) 703.6 1,217.0 975.7 724.1 771.2 3,688.0 55.8 21.7 77.5 ( 9.9) 330 330 390 I.050 22.0 iRAND TOTAL 7.244.: 8.282.3 8,427.1 9,590.0 10,908.0 37,Z07.4 385.3 396.3 781.6 30o..0 7.650 7,8uo 8,30u 23,,50 49%.9 / Piices at the esnd 1987 (eAchange sate IUS$ - Ft 47.6) Piice contingencies of 5T per year included for 1987 1990). / 1987 actual cloit.Iy follows the ilerned'sv-tifi1te%.- ./ Figis.os wtihin parentibtu, es devote po't ioii of plaln Ii (A). - 153 - TABLE 12: HUNGARY SECOND TRANSPORTPROJECT Length of Road Network (km)'' National Road Network Road Categories 1980 1985 Motorways 130 (1001) 200 (100L) Half Motorways 79 (100%) 97 (1001) Main Trunk Roads 1,925 (1001) 1,938 (1001) Main Roads 4,438 (1001) 4,433 (1001) SecondaryRoads 23,160 ( 951) 23,089 ( 981) Total NationalRoads 29,732 ( 961) 29,757 ( 981) Local Public Roads Road Type Budapest Streets 3,650 (721) 4,092 (661) Town Streets 9,460 (55%) 17,747 (551)2' Village Streets 24,700 (341) )43,408 (191) Rural Roads 20,120 ( 6%) ) Total Local Public Roads 57,930 (301) 65,247 (32%) Agriculturaland Forestry Roads Road Type State Farm and Agricultrual CooperativeRoads 46,669 (28%) 46,669 (281) Forestry Roads 3,908 (50%) 4,346 (521) Total 50,577 (301) 51,015 (301) Grand Total 146,019 1/ Figures in parenthesesgive percentageof paved road length. 2/ Since 1980 many village roads have been reclassifiedas town roads because of growth of towns. Source: Facts and figures about public road transport in Hungary. February 1989 S078U/30 TABELE 13: HtUNGARY .TAFF APPRAISALREPORT SECONDTRANSPORT PROJECT A. Lenath Qf Ej2lic RQads by Tvye (at the end of the year - km) Of Which Total First Class Full Half Second Class Connecting Approach Public Year min.JRoads UoLoroan 1Jourmar Main Roads Road5 _ Roads Others 1/ Roads 1970 2,033 8 126 4,078 17.312 5,408 71S 29.S46 1975 2.074 86 95 4,339 17,368 5,447 687 29.915 1976 2,095 86 9S 4.344 17,367 5,406 683 29.895 1977 2.104 86 80 4,397 17.376 5,344 691 29.912 1978 2.127 112 79 4,471 17,335 5,274 668 29,875 1979 2.119 112 79 4,455 17,383 5,197 651 29,805 1980 2,136 130 79 4,449 17,426 5,099 649 29,759 1981 2.135 130 79 4,444 17,374 S,067 646 29.666 1982 2,164 152 78 4,438 17,380 5.050 652 29.684 1983 2.178 167 79 4,434 17J382 5,035 659 29.688 1984 2.178 167 79 4,437 17.42) 4,942 655 29,633 1985 2.235 200 97 4,433 17,524 4,908 657 29,757 1986 2,222 218 94 4.462 17.463 4.889 663 29,699 1987 2,197 218 94 4,481 17.484 4.869 669 29.700 8. Len9th of Puhltc Roads by Pavement (kik Stone. Asphalt Road Brick, and Surface Public Roads leia.c orConcrete Oresina Umetalled Tota1 1970 1682 26.651 1,213 29,546 1975 615 28,353 937 29,915 1976 483 28.508 904 29.895 1977 412 28,627 873 29.912 1978 373 28.743 759 29,875 1979 339 28.764 702 29.885 1980 277 28,824 658 29.759 1981 259 28,813 594 29.666 1982 242 28,893 549 29,684 1983 230 26,941 519 29.690 1984 227 28.895 511 29,633 1985 n.a. n.a. 498 29,757 1986 208 29,038 453 29.699 1987 202 29,070 428 29.700 I/ Includes roads to stations and single lane ramps. Source: Hungary - StaLtitical Year Book, 1983. FActs and Figures about Public Road Transport 1985 and InLstitute for Tranispor-t Sciences Report. 19s7. Febtuiay 1989 - 155 - TABLE 14: HUNGARY STAFF APPRAISAL REPORT SECOND TRANSPORT PRQJECT ownershio of the Truck Fleet in 1986 Approximate Vehicles Share o Total Freiaht aershia Approx. NO. 1/ 2/ . kM (x 16 State Transoort Firms - Volan group (25 Branches) 16,000 8-9 ton 2s52t - Six special purpose haulers 9.400 n.a. Ints - Hungarocamion 1.800 Variable lSst SUB-TOTAL 27.200 S2 6,604 State Owned Comoanies - Enterprise a Co-ops (own acet) 22.300 2-8 ton 2-24X 2.794. - Agric'l. Co-op & State Farms 100.000± 5-6 ton 18-202' 2.540±t SUB-TOTAL 122,300± Privately Owned - Transporters 14,000 S ton 6%2/ 762 TOTAL hl5 nn J.12Z700 2/ 1. Slightly inderstates the fleet size (c. 170,000 in 1983) probably due to rounding, especially in Agriculture. 1/ Figures given verbally by Transportation Department. february 1989 507u/P .32 - 156 - TABLE 15: HUNGARY STAFF A"PRAISAL REPORT SECOND TRANSPORT PROJECT Axle Overload Fee Scale Single Axle Dual Axles Axle Weight Fee Axle Weight Fee (Tons) (Ft/km) (Tons) (Ft/km) 10.0 0 16 0 10.1 - 10.5 20 16.1 - 17.0 25 10.51 - 11.0 25 17.1 - 18.0 35 11.01 - 11.5 35 18.1 - 19.0 45 11.51 - 12.0 50 19.1 - 20.0 55 12.01 - 12.5 70 20.1 - 21.0 70 12.51 - 13.0 95 21.1 - 22.0 90 13.01 - 13.5 125 22.1 - 23.0 120 13.51 - 14.0 160 23.1 - 24.0 160 24.1 - 25.0 200 25.1 - 26.0 250 February 1989 507$U833 - 157 - TABLE 16: HUNGARY STAFF APPRAISALREPORT SECOND TRANSPORTPROJECT Maximum AcceptableTraffic Volumes (Passengercar units' per hour) Road Type kural Sections Urban Sections Motorways Two Lanes: one-way traffic 3,000 3,600 Three Lanes: one-way traffic 4,500 5,400 Four Lanes: one-way traffic 6,000 7,200 Other Main Roads Two Lanes for two-waytraffic 900-1,400 1,200-1,600 Two lanes for one-way traffic 1,800-2,800 2,200-3,000 Three lanes for one-way traffic 2,700-4,200 3,300-4,500 1/ Light vehicles are one passengercar unit, heavy vehicles are calculatedas 2.5 passengercar units. Source: Roads of Hungary; issued by Public Roads Department,1988. September 1988 SO?U/34 - 158 - TABLE 17: HUNGARY STAFF APPRAISALREPORT SECOND TRANSPORTPROJECT PrincipalHighway Design Standards Design Lane Minimum Maximum Road Type Terrain Speed Width Horiz.Radius Grade (km/hr) (m)(m(2 F 120 3.75 750 4.0 Motorways R 120 3.75 750 4.0 M 100 3.50 500 5.0 BR 80 300 6.0 F 100 3.50 500 5.0 Main Trunk Roads R 100-80 3.50 500-300 6.0 M 80-60 3.50-3.25 300-150 7.0 BR 80-50 3.50-3.25 300-100 8.0 F 80-60 3.50-3.00 300-150 6.0-7.0 Second..ryRoads R 60-40 3.50-3.00 50-60 7.0-9.0 M 40-30 3.25-3.00 60-30 9.0-10.0 BR 70-40 3.50-3.00 200-60 6.0-9.0 Legend: F . Flat R = Rolling M = Mountainous BR- Broken or ResidentialAreas Source: Roads of Hungary: issued by Public Roads Department (1988). February1989 5076U/35 abie I: HUNGAR STAFF APPRAISALREPORT SECONDTRANSPORT PROJECT Past and ProjectedRoad Expenditures (millionHungarian Forints-Current) S-Year Plan VI S-Year Plan - VII Next Plan Period Description Total Total 1' Total ZI 1981-1985 1986 1987 1988 1989 1990 _9_6jflj__ j_ LJ2 _ 1993 1994 1991-1994 National Higways Road 10.230 1.729 105 L2096 1.660. L 6 LA.626 1.6ZO 1,680 L.4 1.79 6.94 sCQtructiLgnandnIrmprovements 3.103-75 Hotorways I/ 4.336 1.280 L55 1.542 1.100 1.476 6,950 1.005 1.000 "I n.a. 660 406 144 - - 1,210 - - - - H 5 n.a 430 492 482 - - 1404 - - - - "-0 (Ongoing) 190 654 916 900 740 3.400 125 - 12S 3,650 "-o (Proposed) - - - 200 736 936 880 1.000 1.100 670 Qtter-FQD4 anLDrJdses 5.849 553 554 S60 .16560 2 615 680 745 1.125 L_in New construction 629 85 319 346 350 3So 1.450 385 425 465 715 1,990 Nodernizationlletterments) 5.265 364 234 208 210 210 1,226 230 25S 280 410 1,175 e Iig1_ 1Q .. 21] 2.219 _2.19 2.470 2.800 11893 4.072 5.060 6.150 7.36022.6402 PaeR 16.05 RCi*d Wa3nLenanIe IL.6 1221 2.953 2.980 3.220 3.460'iO 5-"' 367. 0 3.890 41204 4.372 national Road Totals 33.907 7,041 7,277 7.266 7.350 8.296 37.230 9.360 10,630 12.115 13.525 45,630 Local Roads Road Constructionand Imoravements 12.668 2,337 2.802 2,243 2,000 1,900 11,282 2.100 2.300 2,500 2,800 9.700 'ladernizatton 8.039 1,077 1.087 1,180 1,100 1,100 5,544 1,200 1,350 1,450 1,600 5.600 Road Maintenance 4/ 61.k10 _2AU62 2.672 2J02 2.!900 3.00 13984 3,0 4.050 4.6S0 .,300 17.500 local Road Totals 27,317 6,017 6,561 6.232 6.000 6.000 30.810 6,800 7.700 8.600 9.700 32.800 23.225 78.430 GRAND TOTAL b1,224 13.058 133 13.498 13-C 14.296 68.04 16.16 Based on NPO estimate of reduced Plan VII investmentexpenditures. Mission estimate based on indicativetrends provided MPG/MOT. No plan figures are yet available. Based on actual expenditurefor n 1 .nd M S motorways and scheduiedand projectedexpenditure for H 0 motorway. Includesmaintenance of Budapeststreets, about HUF 1.500 million annually. 'ebruarl 1989 - 160 - TABLE 19: HUNGARY STAFF APPRAISAL REPORT SECOND TRANSPORT PROJECT Vehicle Fleet of Hung rocamion Refrigerator Specialized Other Years Vehicles Vehicles Vehicles Total 1970 153 31 239 423 1975 278 91 435 804 1980 330 118 799 1,247 1981 329 123 890 1,342 1982 311 126 969 1,406 1983 328 154 987 1,469 1984 331 155 1,115 1,601 1985 346 164 1,205 1,715 1986 414 180 1,200 1,794 1987 455 181 1,234 1,870 Source: Hungarocamion Februar' 1989 S074U/3 - 161 - Table 20: HUNGARY SECOND TRANSPORT PROJECT Huna rocamion Main Types in the Truck Fleet I/ Years Raba-Man Mercedes Volvo Renault IVECO Others Total 1970 28 86 154 - - 155 423 1975 345 48 298 -- 113 804 1980 676 312 221 - -- 38 1,247 1981 732 426 153 - - 31 1,342 1982 738 498 130 - - 40 1,406 1983 715 562 130 7 - 55 1,469 1984 771 624 128 - - 78 1,601 1985 853 638 128 28 - 68 1,715 1986 846 693 126 56 -- 73 1,794 1987 786 725 123 92 53 91 1,870 1988 695 712 105 142 197 100 1,951 1/ - in 1970 "Skoda" was the most significanttype (102 units) from the "other"trucks. - in 19?5 it was "Scania" (82 units). Source: uiungarocamion February 1989 507 0V38 - 162 - TABLE 21: HUNGARY SECOND TRANSPORTPROJECT 'dungarocamion Average Annual Utilizationof Vehicles (in 1,000 km/unit) Refrigerator Specialized Normal tilt Years Vehicles Vehicles Vehicles Total 1975 66.7 38.8 82.6 72.2 1980 67.5 72.6 74.5 72.5 1981 70.1 80.3 73.3 73.2 1982 79.7 97.4 78.9 80.7 1983 80.4 84.0 83.4 82J. 1984 86.8 78.9 84.7 83.8 1985 82.7 74.9 81.4 31.0 1986 80.9 76.6 88.5 83.9 1987 79.9 86.5 89.4 86.8 Source: Hungarocamion September1988 4s3SU'S5 IABLLZ: HUNGAI SECOND TRANSPORTPJECT STAFFAPPRAISAL REPORT Hunaarocamion Selested Operational and Financial Statistic of Vehicles 1. Total Fleet Vehicles 1,247 1.342 1,406 1.469 1,601 1,715 1,794 1,870 2. Total Ton-kis Hill. tkm 1,013 1.077 1.215 1.396 1,582 1,536 1.808 1.960 3. Productive kms per vehicle coverage 000 km/unit 72.5 73.2 80.7 82.8 83.8 81.0 83.9 86.8 4. Ton-km per vehicle OOOtkm/unit 812.3 800.8 860.0 950.0 990.0 900.0 1,010.0 1,060.0 5. Ave. transport distance km 1.396 1.548 1.490 1.458 1,465 1,334 1.341 1.409 u 6. Average time needed for average track distance days 4.8 5.2 4.6 4.5 4.5 4.1 3.9 3.9 7. Staff productivity OOOtkm/employee 251.2 275.4 274.9 314.8 306.2 314.5 348.2 378.5 8. Revenue per productive km Ft/km n.a n.a n.a 30.0 30.7 31.2 32.5 35.9 Source: Hungarocamion February 1959 SO0*U/40 - 164 - Table: 23: HUNGARY STAFF APPRAISALREPORT SECOND TRANSPORTPROJECT Budapest TransportCompany (BKV) a) Average Vehicle Fleet and Traffic Type of Fleet PassengersKm's (mill) Vehicles 1983 1985 1987 1983 1985 1987 1. Tram and cog-wheel 957 973 953 1,354.9 1,336.8 1,349.4 2. Trolley buses 249 240 238 314.6 308.2 309.4 3. Buses 1,763 1,795 1,840 4,593.7 4,412.7 4,444.9 4. Suburban trains 384 390 390 944.6 941.0 937.4 5. Underground 288 332 345 1,275.2 1,413.9 1,424.9 6. Ship 19 19 19 8.2 7.3 10.1 TOTAL 3,660 3,749 3,785 8,491.0 8,419.9 8,476.1 b) Directorate Passengerss/ Staff.' No. carried Number Percent Vehicles 3/ Mill General Directorate 164 0.7 - Technical 1,236 5.0 - Transportand Commerce 1,970 8.0 - Economicsand Fiance 551 2.2 - Personnel 1,596 6.5 - Metro/SuburbanRailway 5,482 22.3 7344' 454 Tramway 3,144 12.8 952 478 Bus/Trolleybus 7,332 29.7 2,118 992 Ships 160 0.7 19 2 Constructionand Maintenance 2,973 12.1 - - TOTAL 24,608 2' 100.0 3,823 1,926 1/ As of February 1988 2. Of which 200 part-time(4-6 hours). 3. As of end December 1986 4. 344 metro vehicles and 390 suburban train cars. 5. During the year 1986. Source: BKV June 1988 S078/41 - 165 - Table:24: HUNGARY STAFF APPRAISAL REPORT Second Transport Proiect BudapestTransport Company (BKV) OperationalPerformances Average Space-Km Commercial Percentageof length of Mode of available speed vehir'es in journey Transport in billion Km/hr operation (km) Tramway and cogwheel railway 5.9 15.3 78.7 2.8 Trolley bus 0.9 13.4 72.8 2.6 Motor bus 11.9 18.3 86.1 5.1 Suburban railway 4.3 23.8 76.2 9.1 Metro and Old undergroundline 5.7 25.8 76.0 4.0 River boats -_' 5.0 26.3 4.9 28.7 18.5 81.1 4.4 Source - BKV, May 1988 -- Indicatesnegligible; S078U/42 - 166 - Table:25: HUNGARY Second TransportProject Planned Investmentsof BudapestTransport Company (BKV) (Actual) (Estimated) Sixth Plan Seventh Plan (1980-1985)Period (1986-1990)Period Construction Depots, shops 1,827.1 1,268.7 Transformerstations 11.1 80.0 Traffic facilities 53.8 24.0 Other facilities 400.4 655.8 Track 1,222.1 2,104.3 Cable construction 171.0 245.8 Trolley-wireconstruction 230.4 250.8 Other 37.3 58.3 Subtotalconstruction 3,953.2 4,686.9 Machinery Power machines, transformers 216.2 227.1 Signallingand safety 182.7 252.0 Communicationsystems 44.0 233.7 Office machines,computers 35.5 147.0 Vehicles 123.6 170.0 Other 203.5 440.0 Subtotalmacninery 805.5 1,469.8 Fleet Replacement 2,563.5 3,524.5 TechnicalDevelopment Funds 27.5 100.0 Grand Total 7,349.7 9,781.3 Source: BKV May, 1988 SO? SU'4 Page I of 3 Table 26: HUNGARY SECOND TRANSPQRT PROJECT STAFF APPRAISAL REPDRT nutline of Trainino Proaram ProDosed by H.O.T. 1989 1990 1991 1992 Totl Proposed Total Estim. Proposed Total Estim. Proposed Total Estim. Proposed Total Estim. Total Estim. Topic Country Han- Cost Country Han- Cost Country Man- Cost Country Han- Cost Man- Cost Honths 000 USO Months 000 USD Months 000 USO Months 000 USO Months 000 US A. Railways 1. THIS training I. GB, 6.0 30.0 1. GB 6.0 30.0 1. G8, 4.0 20.0 - 16.0 H0.0 B. CH. S B. CH. S B, CH. S 2. THIS-Foreign -- 4.0 88.0 -- 1.0 72.0 -- 1.0 22.0 - 6.0 132.0 consultnats In country 3. Rail recycling FRG. GB. 4.0 20.0 4.0 20.0 training F 10.0 , 4. Rail recycling. - 0.2 5.0 0.2 5.0 _ _ 0.4 Foreign o. consultants in country 5. Track manage- FRG. F 3.0 15.0 GB 3.0 15.0 6.0 30.0 nent, computer- ized organiza- tion of track maintenance and construction 6. Marketing A. I 3.0 1S.0 FRG 3.0 15.0 A. 1. 3.0 15.0 9.0 45.0 FRG.GB 7. Organization A, FRG 2.0 10.0 F. GB 2.0 10.0 4.0 20.0 of railway operation 8. Development - - FRG, A 3.0 15.0 GO 2.0 10.0 5.0 25.0 Planning 9. Improvementof FRG 2.0 10.0 NL 2.0 10.0 _ 4.0 20.0 traction and rolling stock maintenance. utilization and operation Tabli 26 Page 2 of 3 10. Traffic - 2.0 10.0 - 2.00 10.0 - 4.0 18.0 - - - 8.0 38.0 operational improvement Subtotal (A) - 18.2 163.0 - 19.2 117.0 - 18.0 105.0 - 7.0 35.0 62.4 420.0 S. Hfahways 1. Pavement - - - B 1.0 15.0 F 1.0 18.0 - - - 2.0 30.0 mangement 2. Pavement - - - UK 1.0 1S.0 - - I 1.0 15.0 2.0 33.0 renewal 3. Methods of - - - F 0.5 9.0 - - - - - 0.5 9.0 Energy Conservat ton 4. Road Traffic - - - S 1.0 17.0 B 5.0 18.0 - - 2.0 35.0 Safety S. ProJect management _ 3.0 54.0 - 1.0 18.0 - - 4.0 72.0 Sa. Project Prepa- - 1.0 18.0 - - - - 1.0 18.0 ration and Economic Justificaton Sb. Competetive - - - 1.0 18.0 _ 1.0 18.0 Bidding 5c. Construction - - - 1.0 18.0 OK 1.0 18.0 _ 2.0 36.0 Supervision 6. Consulting - - - NL 1.0 18.0 S 1.0 18.0 a 1.0 18.0 3.0 54.0 Engineering Activities 7. Special - - - CH. NL, S 2.0 36.0 FRG, OK 1.0 18.0 F, B 2.0 30.0 5.0 84.0 problems. e.g. environmental protection. etc 8. Topics to be 43.0 - - 24.0 _ 16.0 - 83.0 spertified later: Study tours, confs. Subtotal (B) - 9.5 207.0 - 5.0 114.0 4.0 79.0 18.5 400.0 _ ~ ~ _ ILCble26 Page 3 of 3 .C. C. HU"ACWTl 1. Manager training - 0.5 11.0 - 0.5 11.0 - _ _ _ _ _ 1.0 22.0 2. Marketing - 0.5 11.0 - 0.5 11.0 - - _- 1.0 22.0 Educaton 3. Trainingfor _ 0.3 8.0 - - - - 0.3 8.0 _ 0.6 16.0 managerson strategical planning 4. Managerment 2.0 10.0 - 1.0 5.0 - 1.0 5.0 _ 4.0 20.0 information systems- tours Subtotal(C) 3.3 40.0 - 2.0 27.0 _ 1.3 13.0 _ 6.6 80.0 0. f~ 1. Study tours _ 3.0 14.5 - - - - - 3.0 14.5 0' for computer- ized traffic control system 2. Study of refer- - 2.0 10.0 - - - - 2.0 10.0 ence systems 3. Software _- - - 2.5 12.5 - 1.0 ;.0 3.5 17.5 application training 4. General aspects - - - 0.5 8.0 - - - 0.5 8.0 of traffic organization Subtotal(0) _ 5.0 24.5 _ _ _ - 3.0 20.5 - 1.0 5.0 9.0 50.0 GRAND TOTAL - 26.5 227.5 _ 30.7 351.0 - 27.3 252.5 - 12.0 119.0 96.5 950.0 507$U/44-46 Table 27: HUNGARY STAFF APPRAISAL REPORT SECiON TRANSPORTPROJECT Estimated Schejule of Disbursements (US$ Million) 1ROR Fiscal Year Railways HAihways Hunaarocanmon BKV Total_ and Ouarter Quarterly Cumulative Quarterly Cumulatiave Quarterly Cumulative Quarerly Cumulative Quarterly Cumulative 1990 I. Sept. 30. 1989 1.3 1.3 2.3 2.3 0.5 0.5 0.1 0.1 4.2 4.2 II. Dec. 31. 1909 1.4 2.7 3.5 5.8 0.6 1.1 0.2 0.3 5.7 9.9 11I. Mar. 31, 1990 1.7 4.4 3.1 8.9 0.6 1.7 0.2 0.5 5.6 1S IV. June 30. 1990 1.8 6.2 3.1 12.0 0.6 2.3 0.2 0.7 S.7 21.2 jim I. Sept. 30. 1990 2.0 a.2 3.2 15.2 0.7 3.0 0.2 0.9 6.1 27.3 II. Dec. 31. 1990 2.0 10.2 3.2 18.4 0.8 3.8 0.2 1.1 6.2 33.5 III. Mar. 31. 1991 1.9 12.1 3.8 22.2 0.6 4.4 0.3 1.4 6.6 40.1 .IV. June 30. 1991 1.9 14.0 3.9 26.1 0.5 4.9 0.3 1.7 6.6 46.7 I. Sept. 30. 1991 1.8 15.8 3.9 30.0 0.4 5.3 0.3 2.0 6.4 53.1 1 II. Dec. 11. 9991 1.8 17.6 4.1 34.1 0.3 5.6 0.3 2.) 6.5 59.6 , III. Marc. 31. 1992. 1.5 19.1 1.7 35.8 0.3 5.9 0.2 2.5 3.? 63.3 - IV. June 30. 1992 1.5 20.6 2.0 37.8 0.3 6.2 0.2 2.7 4.0 67.3 0 122X I. Sept. 30, 1992 1.4 22.0 2.4 40.2 0.2 6.4 0.2 2.9 4.2 71.5 II. Dec. 31, 1992 1.4 23.4 2.7 42.9 0.1 6.5 0.2 3.1 4.4 75.9 III. Mar. 31. 1993 1.3 24.7 2.7 45.6 0.1 6.6 0.2 3.3 4.3 80.2 IV. June 30. 1993 1.0 2S.7 3.1 48.7 0.1 6.7 0.1 3.4 4.3 54.5 1994 I. Sept. 30. 1993 0.8 26.5 3.1 51.8 0.1 6.8 0.1 3.5 4.1 88.6 II. Dec. 31. 1993 0.6 27.1 2.6 54.4 - - - - 3.2 91.8 II. Mar. 31. 1994 0.5 27.6 1.5 55.9 - 2.0 93.8 IV. June 30. 1994 0.5 28.1 0.7 56.6 - - - 1.2 95.0 Source: Mission Estimates february 1989 5078/47 3 Table: 28. Page 1 of page1 of 3 Table 2 : HUNGARY STAFFAPPRAISAL REPORTS SECONDTRANSPORT PROJECT Onerationaland FinancialData Year 1987 and Taraets 1989 - 1992 Period A. HunaarlanState Railways- HAY Unit ]982 JflA ma2 12i2 (Actual) (Estimate) -----P L A N N E 0---- I. OperationalTargets 1. HaulingPower Oistribution in Gross-tonkms ElectricTraction 62.9 65.0 68.0 69.0 70.0 DieselTraction X 37.1 35.0 32.0 31.0 30.0 Utili2ationof Traction 2. AverageDaily Perfonmance of AvailableEngine km/day a) PassenaerTraffic Electriclocomotives 508 520 530 s40 55 Diesel locomotives"/ 335 333 327 320 315 b) FraiahtTraffic Electriclocowotives 332 345 360 364 367 Diesel locomotives'" ' 190 195 197 200 200 3. Availabilityof t Electriclocomotives 80.0 80.7 82.0 83.0 84.0 Diesel locomotives 77.6 78.0 80.0 81.0 82.0 4. Utili2ationof Rollina Stock Passenger- KM per seat ooopkm/seat 33.0 34.0 36.0 38.0 40.0 Availability(coaches) 887.S 88.0 89.0 90.0 91.0 Net - ton km per it of ooo ntkm/t 8.8 9.2 9.6 9.7 9.8 capacity Availability(wagons) X 87.5 89.0 89.5 98.0 91.1 Turn around time of wagons days 4.49 4.39 4.20 4.15 4.00 5. Staff Productivity Trafficunits per employee2 ' Tuslempl. 338.7 340 342 348 350 II Financial Tarnaets 1. OperatingRatio 4 ' X 98 97 95 93 92 1/ Decreaseis due to relocationof diesel locomotiveson low-densitylines. v Traffic operationalstaff only. I/ Based on fixed prices (1987). 9/ Operatingexpenditure including depreciations; divided by operationrevenue. So7auU48 Page 2 of 3 Table 28: HUNGARY STAFF APPRAISALREPORTS SECOND TRANSPORTPROJECT Operationaland FinancialData Year 1987 and Taraets 1989 - 1993 Periad B. Hinarocam0in Unit 198l 1im 199 1919 (Actual) (Estimate) ------P L A N N E 0- I. ORerationalTaroets 1. Vehicle annualutilization ooohm 90.9 92.8 94.6 99.5 103.0 (internationaltransport) unit 2. Dead mileaoe" t 4 3 2 2 2 3. Average transport km 1,409 1,410 1,450 1,470 1,480 distance 4. Time neededto complete days 3.9 3.9 3.9 3.8 3.8 averageTransport distance 5. Revenue per productiveknm 2 ft/km 35.0 35.7 37.0 39.0 40.0 6. Staff productivityper NIRl/empl.378.5 380 385 395 405 empoyee II. Financialtarcets 1. OperatingRatio 2 78.3 83.0 81.0 80.0 80.0 2. Rate an return on net t 39.5 30.5 31.0 27.0 29.0 fixedassets in operation3' 1/ Oead mileage is equivalentto lOOX minus percentageof revenueearning mileage to total mileage. BBased on fixedprices (1987). I/ Decreasefrom 1987due to introductionV.A.T. and incometaxes introduced in 1988,and furtherdecrease in 1992and 1993 due to largeincrease in capitalexpenditure compared to 1990. S@78U/4* Page 3 of 3 laIle_fi: HUNGARY STAFFAPPRAISAL REPORT Onarationaland Financial data Year 1987 and Targets 1989-93 C- Budapest Transport Cmanman(jaiv L A N N E 0---- (Actual) (Estimate) ---- P Taraets I. Operational pkm/veh l.Average numnber of passenger-km per day 1,770 1,770 km per operatingvehicles 1,770 1.770 1,770 a) Tram 1,520 1,530 1,535 1,540 l,515 3.760 3,800 b) bus 3,715 3,735 3,750 c) underground I 6.3 2. Non availabitityof vehicles: 7.0 7.0 6.5 6.3 a) '.ram 9.4 8.7 8.5 8.5 9.4 1.5 b) bus 1.5 .51 1.5 1.5 c) underground pkm/ 340 337 338 3. Staff Productivity"' employee 378 340 2 II. FinancialTaraets ' 1.47 1.47 1.42 1.46 1.46 Operatingcosts Ft/pkm 97 97 97 1. Total 3 % 96.1 97 2. Operatingratio ' overtimeshould be reducedup to 22 Accordingto the ILO's recomnendations have had 40-50 hrs of overtimeper months. the staff productivityin the short run. I/ 1987 drivers in number of staff and will will also affect per month, and this will need increase hours prices. Financialtargets are based on constant1987 2/ V.A.T. and incometaxes introduced in 1988. I/ Increasefrom 1987 fue to February1989 5078U/P .S0 Page I of 2 Table: 22,2 HUNGARY STAFF APPRAISAL REPORT SECONDTRANSPORT PROJCT Procurement Plan for Items Eliaible for Loan financina A- RAILWAY CONPNELOT Loan Allocation% EL, YDisbursement mllQ--- S I OunkiLr --- I. Transport Management Information System (THIS): Hardware, application of software, and communicationis; II. Recycling Plant for 10Q4 usedsraIx h-And-m Lo=25 fUlmKa 2.1.0 Rail handUns 2.1.1 Driving station with power supply and control devices;" 10 2.1.2 Gantry cranes;" 2 2.2.0 EieLnlton of bLjuldtn 2.2.1 Gantry Cranes' 2 2.2.2 Rail welding. reprofiling Vertically strengthening machines;m 2 - Rail brush cleaning machines;" 2 - Rail brush cleaning machines (greater output);" 2 stka,ghtening machines (4 way); * 2 - Rail triming machines;' 2 - Rail ultrasonic detecting devices;" 2 - Rail reprofiling machines;" 1 Railfoot grinder machines;O 2 - Rail welding machines;" 2 - Rail head trimming machines;" 2 - Horizontally straightening machine;" I II. Track construction and mMntLenance incahiE 3s 3.1 Caterpillar switch ballast cleaning machine; 2 3.2 Switch changing machines; 2 3.3 Track cranes (on and off); 4 3.4 Track regulating machines; 4 3.5 Radio receiver and transmitter units; 200 3.6 Small machines and tools; -- 3.7 Welding and workshop equipment; 1 8 :pare partl. Table* 29 Page 2 of 3 Loan Allocations El US$ Disbursement Qu|ti ---- millinns----- I Subtotal (A) - Excluding contingencies L.28 24.6 - Physical contingencies 35 0.7 - Price contingencies __6 2.4A1 Total (A) 1,611 27.7 100.0 B - HUNGAlBClIO COMP4T IV. Integrated computerized information system (ltis). Hardware, software, kalecnification. and consultina casts. 260 5.0 100.0 V. Handling equipment for transit distribution stores 52 1.0 100.0 6.1 Ramp-Level-compensator 48 5.2 Hydraulic lifting elevator 4 (4 tones lifting capacity); 5.3 Electric hand-cars (4 meter lifting and I u tone loading capacity): 38 5.4 seales (1 tone capacity); a 5.5 Fire protection equipment; 1 5.6 Waste-gas rPiping system; 1 C.7 Pnesitic wost system. 2 312 6.0 Subtotal (B) - Excluding contf 1trencies - Physical contingencies 16 0.3 - Prize Contingencies -a LA Total (8) 388 6.7 100.0 C HiaIWAY CllWEtIlT VI Civil works 13.8bm 936 17.7 100.0 (35.0X of total cost) VII. m-0 Emrgency Call Systems 30 stations 31 0.5 100.0 VIZ. load aintenance equipment 213 4.1 100.0 IX. Field and lab testing equipment 94 1.8 100.0 X. Engineering and project management 26 0.5 100.0 XI. Road strengthening and surface treatment 1.302 25.0 100.0 (35.0t of total costs) Table 29 Page 3 Of 3 LaAlloCatiOns Et USS CisburSegWnt OuantitL --- min1ons-- 1. Subtotal(C) - Excludingcontingency 2,16402 429.7 - Physical Contingency 470 -2. - Price contingencies Total (C) 3.212 56.0 100.0 (a) INVComonent 1. Traffic Control System 140 2.7 100.0 Physicalcontingency 10 0.2 Price contingency ....2U TOTAL(0) i 21 (El TechnicalAssistance and Training 74 1.6 100.0 Total: base costs 4.408 84.4 PhysicalContingencies 201 3.9 Price Contingencies GRAND TOTAL 5,468 95.0 100.0 Source: MAV, MTCC, NC, BKV and mission; February1989 0o7sU/6o-s3 TAble 30: HUkGARY STAFFAFPRAISAL REPORT SECO TRANSPORTPROJECT RailwayComonent - Inmlementation Schedule _9s9 1989 199o - 991 1992 1993 ACTIVITY I II III IV I II III IV I ..J.Z. IVZit.III III III IIV 2I III _IV I. Transport ManaenmentInformation System(THIS) 1.1 Bid Preparation - DocumentPreparation - Bank Review - Bidding Period - Evaluation - Bank Review - Contract Award 1.2 SystemDesign 1.3 Software Development 1.4 SystemInstallation 1.5 Gradual Adaptation, Programuing& Testing 1.6 Joiningto the Internationl Railway InforamationSystem *HERMES" 1.7 Education of Users II. Recyclina Plant - for UsedRails 2.1 Bid Preparation - Oocuuent Preparation - Bank Review - Bidding Period - Evaluation - Bank Review - Contract Award 2.2 Preparatory Works 2.3 Track Network Extention _ 2.4 RailHandling System 2.5 BuildingsConstruction 2.6 Delivery Period 2.7 Installation 2.8 Testingand put into Operation III. Track Construction& Maintenance Machines 3.1 Bid Preparation - DocumentPreparation - Bank Review - Bidding Period - Evaluation - Bank Review - Contract Award 3.2 Caterpillar Switch-Balast Cleaning Machines 3.3 Switch ChangingUnits 3.4 Track Cranes 3.5 Regulators 3.6 RadioTransmission Equipment 3.7 Welding Equipment .Workshop Machines 3.8 SmallMachinery and Tools IV. Technical Assistant and Trala_ing Source: MAV,HTCC and Missionestimate. February 1989 Tahle 11: KUh3X STAFF APPRAISAL QtPORN SECIhD TRANSPORTPRDJ.ECT Nunaarocamion Conwonent - Imlemntati0n Sctedule 1911 ~~1989 1990 Is91 1992 1993 ACTIVITY 1 IV I 1989III IIIV I II I!IIV I I III IV I IIII IV I II III IV I. Inteeratad Hanaeemnt InfaonmatinSvstm (ICISI 1.1 lid Preparation - Docummnt Preparation - Qank Review - BiddingPeriod - Evaluation - SankReview - Contract Award 1.2 Computer Center PreparatoryWorks 1.3 Application SoftwareDevelopment & Purchase 1.4 Computer Centers-(Delivery& Installation) __ _ 1.5 Installationof the data comm. lines 1.6 EOT Staff Training 1.7 Testing and put into Operation II. Handlina Etulomentfor Transit Distr. Stores 2.1 lid Preparation - OocmtentPreparation - Bank Review - Bidding Period - Evaluation - lankReview - Contract Award 2.2 Store Construction 2.3 Deliveries 2.4 EquipmentInstallation Works 2.5 Put into Operation III. Trainina Source: Hungarocamion, MTCCand Mission estimate. Fgbruary 1989 Table 32: HUAGARY SECOhI TRANSPORTPRJECT Highway ComDonent - Imlementation Schedule 1989 1990 1991 1992 1993 1994 No. DESCRIPTION I II III xI I xi IMN x I rIr IV IIi fixI v x x IzZ IV I II III IN 1.0 M. Civil Works - Biddina - Prequa'lification - DocumentPreparation _ - Bank Review - Bidding Period - Evaluation - Bank Review - Contract Award 1.1 NO. Civil Works - Construction - Land Acquisition - - - _-___ - Preparatory Works - Structures - Drainage - Earthwork - Pavement - Finishing 2.0 EaioUhent - Oocu ent Preparation - Bank Review - Bidding Period - Evaluation - Bank Review - Contract (c) and Delivery (d) 3.0 Strenathenino and Surface Oepartment - Oocuent Preparation - Bank Review I/ - Bidding Period - Contract -. 0 . . ._. 1/ Priorreview for saple biddingdocuments (891 and priorreview of the worksprogram (89-90-91) Source: HTCCand Mission estimate. Februarg1989 07OU/S Table 33: HUNGARY STAFF APPRAISALPEPOR? SMUGNO TRANSPORT -JECT CKVComonent - ImplementationSchedule 1989 1990 I99I 1992 1993 19ft8 ! I ITI lY No. DESCRIPTION IIX_I ! IyV I III IV I II TIT IVjI r xiirr iv xi Ir xv 1.0 Traffic Contral Svstem - Document Preparation - Bank leview - BiddingPeriod - Evaluation - Bank Review - Contract Award 1.1 Automutic Monitorina System (Purchaseand installatin) 1.2 Centralized Traffic Liaht Control Subsvstem (purchaseand installation) 1.3 Automtic Power supplv subsvsteu (purchaseand installation) - Contract (c) and Delivery id) 3.0 Technical assistance and Trainina Source. MTCC and BKV Mission estimate. FsOeruu 1989 ii, it'llit §i | | te~~~~~~~o * 1e~~~~~iaca'~OMSsoclIo I_ _ _ _ _D_ _ I- - _ f_ A~~~faPft" Ooto 5s8__ToolS_am %U h DWrODlcclO0nft splf* ~~~bMIrUSBftlCS- - ~ ~~~~~~~~~~~ctft I 1~1Q&P'~e FF & RfV & i I BdoMctotEQu~~In1a~ftS&Oi aS 4c.b}t .~ ~~~~~~~~_ MqCers _ W & W~~~~eog ' ' 41 t~~~~~~~~Rm ow , | ~adk Mo .I I, u I- I l; I S;of I I a r > ) I I ' ' . of 81 5 « s r |~~~~~~~~OWUD-W r I~ ~~~woID..leh I&_I L] so m t~ ~~~VNI;ocl ;od C~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t I I ISe*9 1_ § sSWA I I 11 . . FI H * b_; ho Chart: 3 HUNGARY SECONDTRANSPORT PROJECT SafApproaia Rpoid Oionlzon of the HunWrocamln (HC) TInspWinw RnancWI . _Depotent Iqm* D_t ftIc_Itv_ _ lo Policyd Moniont nosf | n-¢|-t&,on- STl"- - onon| Book*eepXng NCTKnS soia weols 4 O T ts| f I I I qV l~~~~~~~~~tmtw Border WorodBoar* - 425M4 Chart: 4 .Mft and HUNGARY Marla" Adn**ha" ~~~~~~SECONDTRANSPORTPROJECT SktffApprais Repo. Orgonoim of sheBudopedTronsport Company (sic) _ D qprrind I~~~~~~~SAevlo I T|chncl CGTIf Cold Econoic St afnK _ Managm_t _ Markt _ SociWaMagm;ent Depatmlentfor QuaV Control DOlr o Hted _ StalfRecsAl DePrtdmbntd W n _ T lICOetko .llSPt - tenof Eldotaon Dep- tmentd Satey d Operation SocialDeparment _ EO Mnagenvk:n Health - DarM t dSatea lg nth restofdWoleA -Depawrtnt of Co-m r Depatmet d ftrPrtoincEoecatlon _ Deprtent of Deeoprrwrt d Operotion -Departrent dTraff Acco-AV DEepartm d Ec aoni" - Departrent d O"rgAzation - Departen 1TaErneert -Conto d M il5 Deparrent d Dafa Procelinr Depoftlnt of n OeratIo n -Deptnt EcO cs De_W itnt d Ecoanic, d Opeotion Deamet od Eonom ClW Tedlft aldAonofdAcSm,i Madnagermed Mana nt o tRoad M g t o M of -,TarmavOpevato' I nCwaton r r lTraet Maoni Chlefte'Vehicles -Chle(Enhfrrftl CseT oVehiCtes Q.Ja Control Depatment of Opealon D|p-Onwst d Opertion d ODeprntO ation -Grouf tolr ttng Enrgiwn Org-rbat iond Opeaton and Work OAzation odOperation ad Walk IDe t d Deepm G.oup doPlic Paces -Dap odEc nics Departmentd Eonrrc Depmnof TechiCa Rdection - Dep1tment d Eco DePtnt d Ecnmi c ChIstEtr;eteer of Outigs chef Einer dCnt upply* Chc l MacharSol -n Toffc Opwaton Tmft Operation TraffcOpenran o L|Ift Un1 - Lts0 W*kilcopwt'waoldopqttWrstpo Molntenonoso_ .e M Vehicle VehiclesVice World Bar* - 425092 SECO RA O r RO..C'i ANSORT PROJECT Eltd XISTINGRAILWAY NETWORK - ON-GOItG MOTORWAY CONSTRUCTIONFIRST PHASEI ,I R 4 DOUBLeTRACKS - PROPOSEDCONSTRUCTION (SECOND PHASIF) -t--- SINGLETRACKS PLANNED EVENTLUALCONSTRUCTION PRIVATETRACK (GUSEv) C Z E C H 0 S L 0 V A K I A TMS TRANSPORTAAANAGEMENT INFORMATfO,I SYSTEM(MAVS *IRK + MARSHALLINGYARDS POWERFULMAINFRAME COMPUTER INSTALLED IN BUDAPEST CONrAIPIR TERMINALS t COMMUNICATION CONCENTRATORS 250- 40 TONS TELEPHONELINES * 5 TONS * USED RAILRECYCLING PLANT EIN MOTRWA. § H-C HUNGARO CAMION S EOP CENTERS ICIS - XISTINMOTORWAYS C T J r r b ' S. R. RKV RKV'S TRAFFICCONTROL SYSTEM _fa6ihely i986 1990RAILWAY INVESTM^ENT PLAN MAIN NATIONAL ROA05TDS r iJ V $-_, 1I DOUBLEThACK ELECTRIFICATION NATIONAL ROADS L o /co F6nys DOUBLINGOF EXISTINGTRACKS -1---I-TRACK REHABILITATIONTRACK REHABlLlTATlON --- ~~~~INTERN4,TIONALBOUNDARIES<4j\>i/ A U S T R I A td l 0 Regerozeg- ~- ~ ~ ~ ~ ~ ~ ~ ~ ~ . .- Z.k 0~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~T 40 00lLMEER So0 S -. M-MILES: HUNGARY SECONDTRANSPORT PROJECT THE NETWORKOF THE BUDAPEST TRANSPORTCOMPANY (BKV) UNDERGROUNDLINE LOCAL TRAIN LINE TRAMWAYLINE - BUS LINE TROLLEYBUSLINE / ig EDP CENTER INTERNATIONALBOUNDARIES 0 1 2 3 4 5 6 7 8 9 10 KILOMETERS I I I I I I , I, ,I -_ ,l:ZE HOSLOVAKIA . 0 1 2 3 4 5 MILES U.S.S.R. 2 S;~~~~~~~~~~~~~~~~~~~~~~~~~~~Bdpesr ** t At HUt ,/ROMANIA . ,~ .1 0 50 100 KILOMETERS YUGOSLAVIA 50' MOILES 0 50100 JULY1988