- ,r1TU>TtS .l ' I '; ,^;; t $; ; A;J* N1R', T P I C r E r0

Public Disclosure Authorized TFiS repoat was orepared for use vithin the Ban. and its cffiliaited orqanizrjtions. The;' do not accept responsibility for its accuracy or completeness. 'iic report mno,' tnot be puobliih;d nor niay it be quoted as represent,ng their views.

JNTPWIZ.N'ATION.AL BANK FOR RECONSTRUTTIONC ANiD DECVELOP-MENTL

LINTERNATIONAL DEVELOPMEENT AS)SOCIATIONT Public Disclosure Authorized

APPRAISAL OF

A SECOND RA.ILWWA' PROJECT

YUGOST AVIA Public Disclosure Authorized

N4oer'niThr 30, 1964 Public Disclosure Authorized

T.'partmrern ot Technic-zl ,-)eratiox1s CURRCENCY EQUIVALENTS

I U.S. Dollar = Dinars 750 1,000 Dinars = U.S. $1.33

Yuffoslov Fiscal Year

January 1 - December 31 YUCGOSLAVIA

APPRAISAT, OF A SECOND RIUTJAY PROJECT

Table of Contents

Page

SU;i'AARY

I. BITRODUCTION 1

II. BACKGROUND 1-4

A. General 1 B. Transport in Yugoslavia 1-3 C. Transport Coordination 3-4

III. THE RAILWAY SYSTE1 4-17

A. Organization, Ilanagement and Staff 4-6 B. The Network 6 C. Physical Properties 6-8 D. Traffic 8 E. Operations 9-1,) F. Finances and Earnings 10-16 G. The 1964-70 Railway Investment Plan 16-17~

TV. THEE PROJECT 18-22

A. Description 18-19 B. Estimated Cost of the Project 19-20 C. Administration and Execution 20-21

V. FITURE EAPdJINGS AND FINANCES 22-24

A. Earnings 22-23 B. Finances 23-24

VI. ECONOMIC JUSTIFICATION 24-27

A. Introduction 24 B. Traffic Growth 2-4-25 C. The Marshalling Yards 25 D. Electrification and Signalling Equipment 26-27

VII. CONCLUSIONS ANDM RECOMI-ENDATIONS 27 -2-

Table of Contents

TABLES

1. Freight Traffic by Mode of Transport, 1952-1963

2. Passenger Traffic by Mode of Transport, 1952-1963

3. Investment in Transport, 1954-1963

4. Summary of Selected Operating Statistics, 1958-1963

5. Railway Network and Traffic Density, 1925-1963

6. Motive Power and Rolling Stock, Yearly Averages, 1958-1963

7. Freight Traffic by Major Commodities, 1950-1970

8. Revenue, Expenses and Net Income Data. Actual 1959-1963, Estimated 1964-1970

9. Balance Sheet Data. Actual 1962-1963 and Estimated 1964-1970

10. Seven-Year Investment Plan, 1964-1970

11. Estimated Cost and Schedule of Expenditure of the Project, 1964-1968

12. Schedule of Project Works to be Completed,1965-1968

13. Projected Cash Flow Data, 1964-1970

CHART

Organization of Yugoslav Railways

MAP

Yugoslavia, Railway System YUGOSLAVIA

Appraisal of a Second Railway Project

SMIOMARY

i. The Government of Yugoslavia, through its Investment Bank, has asked the Bank to help finance the Reconstruction,a'nd Modernization Program of Mainlines, 1964-1968, wqhich is a vital part of'the Railways' Seven-Year In- vastment Plahn1964-1970-and.-which forms the Project for the proposed Loan. The Yugoslav Investment Bank would relend the proceeds of the loan to the Rail- ways on the same terms as those of the loan from the Bank.

ii. The estimated cost of the project is US$185 million equivalent. It includes installations for electric traction and signalling on three mainlines and the construction and modernization of six main marshalling yards. This would be the third transportation loan to Yugoslavia, a high- way loan and a :railway loan having been made in 1963.

iii. The Project is well conceived and is technically, economically, and financially sound. The cost estimates are realistic. The procurement procedures proposed are satisfactory. Whereever priacticable, the various parts of the Project would be subject to international competitive bidding.

iv. The Federal Government and the Railways would be responsible for the execution of the Project. The preparation of plans, the awqard of con- tracts, and the supervision of construction would be delegated to the Com- munities of Railway Enterprises in Belgrade, Zagreb, Ljublana, and Sarajevo and to the Railway Transport Enterprise at Skopje.

v. Internal organization of the Railways is satisfactory, and their operation and management is good. Their operating efficiency compares favorably with other European railways despite the lack of capacity and deficiencies in equipment which are to be elininated by the Project and the Seven-Year Investment Plan in general. vi. The Railwsays' earnings have generally been satisfactory taking into consideration existing accounting procedures and other circumstances. The average operating ratio was 88 during the last three years. Based upon acceptable estimates of future traffic, future earnings and finances are expected to be satisfactory. vii. The Project provides a suitable basis for a Bank loan of US$70 million equivalent to the Yugoslav Investment Bank for a term of 25 years including a 5-year period of grace. YUGOSLAVIA

Memorandum on the Economic Situation Introduction

1. Early in 1961, the Yugoslav Government took important measures to carry the decentralization of the economy one step further, to make it more competitive and to integrate it more closely with the rest of the wTorld. These reforms required serious adjustments by Yugoslav industry and met writh unexpected difficulties. As a result, and also because of lower- than-average crops, the growth rate declined in 1961 and 1962 to about b%, which was much less than the 114.% foreseen in the Social Plan for 1961- 1965. The Government has abandoned this plan and is preparing a new one for the seven years 1964-1970. These events were described in more detail in a report entitled "Current Economic Position and Prospects of Yugoslavia", dated June 12, 1963. Current Economic Situation

2. The economic situation reached a turning point in the middle of 1962, when exports began to increase rapidly and provided the impetus for a general upturn of economic activity. The upturn was encouraged by a relaxation of credit policy, which helped to boost both consumer and invest- ment spending, and by a fair harvest in 1963. As a result, total output increased by approximately 12% in 1963; agricultural production rose by 6-7% and industrial production by 16%. The prospects for 1964 are for another substantial increase in total production. Although the wheat har- vest was poor, agricultural production as a whole may not decline and in- dustrial production is expected to be about 15% higher. During the first five months industrial production showed an *increase of 17.5%, in compari- son with the same period last year, but the pace of industrial growth is likely to slow down during the rest of the year. There are indications that the economy has overextended itself. Bottlenecks have developed in transport, electric power and in the supply of some raw materials. Early in the year, there were signs of inflation and the Government took measures to curb both consumer credit and investment spending.

3. The upturn was accompanied by high investment. Total expenditure on fixed assets rose by about 19% in 1963. Its percentage share in the gross material product rose from 30.5% in 1960 to 320l% in 1963 as a result of an increase in the rate of social investment such as housing, water supply sewers and the like, from 7.6% to 10.3%. These investments had lagged be- hind the big inflow of the rural population into the cities and the new demands for better living conditions, even in the villages. Expenditure on economic investment rose 16% in 1963 and represented 218% of the gross material product. Economic investment went increasingly into projects already under construction or into those which would yield quick returns and improve the balance of payments, and less into new projects with a long construction. - 2 -

4. The increase in agricultural production in 1963, i4hich greatly facilitated the further growth of other sectors, was due partly to the weather, but also to a significant shift in policy. After another poor crop in 1962, the Government gave higher priority to agriculture. Agri- cultural prices wrere raised. State farms and cooperatives increased their acreage under cultivation and efforts wiere made to run them more efficiently. The most important change was the increased use of ferti- lizers, which is expected to reach about 3.0 million tons this year, i.e. some three times as much as in 1961. This policy is likely to be con- tinued if not strengthened. The low wheat yields in 1964 illustrate, however, how greatly production depends upon the weather and how difficult it will be for Yugoslavia to become self-sufficient in cereals.

5. Industry has made considerable progress since 1961. Enterprises have become much more dependent on successful competition in the market and have been forced to improve the quality of their products and to keep pro- duction costs in check. Recent increases in production were achieved wTith a smaller expansion of employment than before. The structure of industry is also changing. Since 1961 the output of consumer goods and raw materials has expanded faster than that of investment goods, whereas previously the opposite was the case. Durable consumer goods and chemicals have showyed the greatest advance.

6. To take up the slack in the economy in 1962, the Government relaxed its credit policy, and in 1963 it made extra credit available for the victims of the Skopje earthquake and for rebuilding the city. As a result bank credits rose by 29/5 in 1963 and continued to expand during the early part of 196h4 The expansion in 1963 was partly offset by an increase in deposits of government authorities, whose budgets taken as a whole closed wjith a con- siderable surplus. As a result, the money supply in the hands of the public increased by 19% and it was clear that inflationary pressures were emerging, The Government, therefore, took measures in recent months to curb consumer credit and investment spending and declared its intention to take further measures, if necessary.

7. Prices and living costs increased mainly because of higher prices for agricultural products and raw materials. In recent months the increase has also been affected by the greater pressure of demand. Prices of agri- cultural products rose by 18% in each of the past two years and even faster during the first months of 1964. At the same time, the prices of manufac- tured products remained practically constant at least until October 1963, after which they increased slightly. With such an increase in agricultural prices, living costs were bound to follow; they rose by 10.V%in 1962 and by 5.2% in 1963, and showed an increase of 7% between September 1963 and April 1964. The rise in wages, wThich occurred in response to the rising cost of living, exceeded the increase in productivity.

8. After a poor year in 1961, foreign trade improved considerably in 1962 and 1963. Exports grew faster than total production and imports, and Yugoslavia's trade with Western Europe, which accounts for almost 45% of total trade, moved towards greater balance. During these two years, ex- ports rose by 36.4% and imports by 14,3%. During the first five months of -3-

1964, however, exports rose by 17%4 and imports by 26% in comparison rith the same period of the previous year. The recent increase in imports is partly due to the fact that in 1964, foreign exchange allocations were made earlier than usual but it also reflects the additional imports for the re- building of Skopje and the greater pressure of demand.

9. The trade deficit declined from $348 million in 1961 to $201 million in 1962, but rose again to $263 million in 1963, mainly on account of greater food and fertilizer imports. However, Yugoslavia derives substantial net receipts from tourism, transit trade, and emigrant labor. Gross receipts from foreign tourism rose from $20 million in 1961 to $53 million in 1963 and are expected to continue increasing rapidly during the next few years, As a result, the deficit on the current account of the balarce of pay ments was $243 million in 1961 and only $66 million in 1962 and $86 million in 1963. Foreign capital inflow wras more than sufficient to cover these defi- cits and Yugoslavia was able to increase its gold and convertible currencyr reserves from $410 9 raillion at the end of 1961 to $107.2 million at the end of 1963. However, at the end of April 1964, these reserves had declined to $71.6 million, an amount equivalent to only three weeks imports. Prospects

10. Under the new Constitution, the Federal Assembly is playing a greater role in the formulation of economic policy and of the development plan. This is one of the main reasons why the Plan for 1964-1970 wiill not be completed before the end of this year. Previously the Plan was presented to Parliament as the Government's proposal in its final form, consisting of one set of interdependent objectives, to be accepted or rejected as a whole. This time, a preliminary Outline of the Plan, i-rhich included a number of alternative sets of targets, was submitted to Parliament. The alternative chosen by Parliament will be the basis for finalizing the Plan. The inten- tion is to obtain a wide consensus on development objectives and to gain general Parliamentary support for the implementation of the Plan.

11. The Plan for 1964-1970 is likely to put less emphasis on the rate of growth and to give higher priorityr to an increase in living standards. The Outline of the Plan now before Parliament offers two alternatives. The first provides for an overall growth rate of 8.8% per annum with a correspond- ing yearly increase of 7.3% in investment, while the second provides for an overall growTth rate of 9.5% per annum and a 9% annual increase in investment. Personal consumption is expected to growJ at a yearly rate of 9% under the first alternative and by 8.Vs under the second. These overall growth rates are modest in comparison with the 11% annual growth rate in the previous Five-Year Plan.

12. One of the Plan's objectives is to integrate the economy more closely vwith the rest of the world by developing specialized production for export, and hence to eliminate the deficit on the balance of payments. Exports are scheduled to grow by 10.% yearly under the first alternative and by 11.1% per annum under the second, i.e. faster than total production in both cases. The Plan is likely to stress the development of tourism and of exports of the non-ferrous metal industry, i.e. copper, lead, zinc, and aluminum. The Government intends to apply for full membership in GATT,'and hopes to bene- fit from the Kennedy-Roimd of tariff negotiations. The threat to Yugoslav exports to the U.S0 from the withdrawal of the most favored nation clause has disappeared and new possibilities are being explpred for greater trade with the Eastern Bloc and the less developed countries~

13, In addition to the achievement of the specific objectives contained in the Plan, Yugoslav economic policy can be expected to continue its empha- sis on iworkers' self-management and its attempt to rationalize the process of making economic decisions. It is hoped to reduce the degree of administra- tive intervention in the affairs of enterprises and to give both banks and enterprises more autonomy and greater responsibility for investment decisions, It is too early to appraise the feasibility of the new Plan or to judge the effect of the process of decentralization and relaxation of government con- trol on the prospects of economic growrth The economy has, however, amply demonstrated its ability to grot.T and it should continue to do so even if at a less rapid pace than in the past.

Creditiorthiness

140 Yugoslavia's external debt amounts to $1,109 million0 Of this amount $41 rnillion is repayable to the Eastern bloc in eastern European currencies or in commodities, and $1,068 million is repayable in gold or western currencies. These amounts include practically all external indebted- ness since almost all foreign debts are guaranteed by the government and there is no direct foreign investment0 Of this debt, $350 million has not yet been disbursed, so that the disbursed debt amounts to $759 million0 Yugoslavia's total debt is not unusually high; if it consisted only of long term debt, the annual debt service would amount to around 10% of foreign exchange earnings, However, almost half the debt consists of suppliers' credits so that debt service is high in relation to total debt0 An amount almost equal to the total debt now disbursed has to be repaid in five years, In 1964 debt service is $204 million which represents 18.5% of foreign ex- change earnings0

150 A reduction of the balance of payments deficit and an increase in foreign exchange reserves are important objectives of Government policyo To improve the balance of payments is, in fact, a necessity in view of the decline in the amount of U0So aid in the form of surplus agricultural com- modities0 However, the Yugoslav economy still needs to import capital and hence the external debt must be expected to increase in the future0 Since over the period 196h-1970 Yugoslavia must repay some $820 million, gross borrowing wrill have to be substantialo As long as Yugoslavia is able to continue borrowring the new credits serve, in effect, to roll over the exist- ing ones0 Difficulties would of course arise if the volume of credit Yugoslavia. could obtain were to diminish sharply0 It is however unlikely that the availability of external credit to Yugoslavia would be suddenly cut off, It is more probable that as the rate of growth becomes less rapid and the internal availability of resources increases, the volume of suppliers' credits wfill cease to grow and will eventually decline0 16. In the past the Yugoslav Government has show-n itself able and willing to take strong measures to maintain its balance of payments if necessary, The Government is also well awyare of the importance of maintaining its credit in wfestern countries; it has recently reached an agreement to extend for four years the settlement of pre-war Yugoslav dollar bonds and has also made the first payment on accorat of the Danube-Save-Adriatic rai'lway debt. It is reasonable to expect that the Government will continue in the future to give a high priority to the fulfilment of its external obligations0 In these circumstances Yugoslavia can be regarded as cred-itworthy for the proposed loan from the Bank.

Department of Operations Europe

November 30, 1964 I. INTRODUCTION

1. The Yugoslav Government, through its Investment Bank, has requested a loan to help finance (a) the electrification of three main railway lines, (b) the provision of modern signalling and co,mmunication equipment for these lines, and (c) the modernization and construction of six marshalling yards The Investment Bank is a Goverrment agency responsible for finanlcing a large share of imajor investments, and is authorized to contract foreign loans for this purpose.

2. This would be the second railway loan from the Bank to Yugoslavia and the third lo&n in the transport field. The previous loans made in 1963 are: N-o. 344-YU of US;"35 million equivalent for the Central and Adriatic High- ways and NTo. 361-YU of US$35 inillion equivelent for the Sarajevo-Ploce Railway Line. This report is based on the findings of an appraisal mission which vis- ited Yugoslavia in June 1964 and on documents prepared by various government agencies.

II. BACIKGROUND

A. General

3. Yugoslavia, -ith an area of 257,000 sq. km, is about as large as the United Kingdom or the Federal Republic of Germany. Its population of about 19 million is, however, only one-third of these countries. Population growth has been slowing down and is now about 1.3 percent annually.

4. Yug.oslavi2's national income was about Dinars 4,200 billion in 1963 (US$?5.7 billion equivalent), with 2 -er capita income of nearly US,300 equiv- alent. The real growth rate since 1954 has averaged a high 8 percent annually. TJith the progress of industrialization, the proportion of population in agriculture has dropped from the prewar three-quarters to less than one- half. The transport sector has accounted for about 6 percent of Yugoslavia s national product in recent years.

5. Yugoslavia is a Federation of six Republics and can be divided rougl- ly into three rmain geographic regions: (p) the northeast, the granary of Yugc-. slavia, (b) a narrowT coastal strip along the Adriatic Sea, and (c) the re- maining two-thirds of thie country which are mountainous. Communication between these areas is difficult even today.

B. Transport in Yugoslavria

6. Yugoslavia's main transportation system consists of railways (see Nap), and to a lesser extent, of highways. Freight traffic on the inland waterwa-.rs is of some significance, though most of it is international transit traffic. Air transport is limited.

7. The country's main routes of communications have been conditioned by its topography; they have follow;ed the easy paths and have avoided the mountain barriers along the coast and in the south. As a result, the main routes run northwest to southeast along the Sava-Danube Valley. Thev serve the rich agricultural areas in these valleys and in the north. They also - 2 -

provide easy access to Hungary and the Balken countries east of Y'ugoslavia and some comnections to Austria, ltaly, and Greece. But the mountain barrier blocks access to the coast, except at a few gaps.

8. This serious geographical nandicap was aggravated by the different historical development of the western and northern part under Austro-Hungaripn rule, and of the southeastern part under Ottoman-Turkish rule. The transport system of the former Austro-Hungarian area, i.e., Slovenia, Kroatia and Voj- vodina was developed to Western European standards, but directed toward Vieina and Budaoestt an-d oriented towards political and;military needs. Bosnia and Hercegovina wsere opened up by a system of narrow-gauge (2-1/2') railwjays and a few roads. In the south, development of the transport system in Serbia, iiacedonia. and liontenegro did not really begin until the establishment of the Yugoslav State in 1919.

9. One aim of postwjar transport policy has been to open up these less developed regions and to provide direct access from the hinterland (around Sarajevo and Belgrade) to the sea by means of modern railaoys and roads. Anotlher has been to open Yugoslavia to Wlest European motor traffic by means of the modern Central Highway from Italy and Austria to Greece via Belgrade and another highway along the Adriatic coast from Rije'ka to Bar and then inland to Skopje, where it will joinl the Central Highway. I 10. The railway is still the backbone of Yugoslavia's transportation system, accounting for more then 70 percent of freight ton-Ion in 1963 (see Table 1). Highways account for about 17 percent and shipping for 11 percent in ton-km. As in most countries, the proportion carried on highways has increased rapidly - from about 7 percent in 1957 to 17 percent in 1963. As for passenger traffic, the railwisy accounted for about 63 percent in 1963, interurban buses for about 23 percent, and passenger cars for 10 percent (see Table 2). But here, too, the proportion carried on highlways has grown sharply in recent years - from about 17 percent in 1957 to 33 percent by 1963. As for the future, it can be expected that the railway will continue to be the largest carrier, especially for freight; but while the absolLte amount of railway traffic will grow, its relative'share of traffic will continue to decline. This is borne out by the traffic forecast made by the Government in conrnection TwJith the preparation of the nef 12964-1970 Investment Plan: the Government expects railway traffic to increase by slightly less than 6 percent annually during this period, compared to 16 percent for highway traffic. ll. Yugoslavia has invested heavily in transportation and connunica- tions in recent years. This sector accounted for about 20 percent of gross capital expenditures in the eight-year period from 1956 to 1963, compared to less then 15 percent in the preceding seven years. These amountsare not unreasonable for a country like Yugoslavia. While total investments for transport have been increasing rapidly during most of the period (see Table 3), -3- the proportion spent for railway.s has declined from more than one-half in the 1954-56 neriod to about one-quarter in 1963; the proportion spent on shipping has declined slightly. However, the percentage spent for highway transport (including vehicles) has doubled from alout 22 to more than 50 per- cent durin- this period.

12. Yugoslavia is currently preparing a new Investmenlt Plan for 1964- 1970. The plan in the transport sector is not yet final, but no major changes in the tentative plan, examined by the mission, are anticipated. Under the tentative plan, public investments in transport during the seven-year period will be about Dinars 1,870 billion; on an average annual basis this is about 70 percent abolre the 1963 level. However, the recent trend away from railways toward highways would be reversed; annual investments in the railways wuld be nearly tripled over the 1963 level, while investments in highway transport wqould increase only about 10 percent. As a result, the proportion of total transport investments going to the railways would increase from a 1963 low of 25 percent to mrore than lh0 percent. The plan thus recognizes the irmportalit contributions of the railway to the economic deielopment of Yugoslavia and reflects both the urgent need to modernize the railways and the fact that the basic national highway network is being completed.

C. Transport Coordination

13. Since the Banlc is financing both railways and highways in Yugoslavia the appraisal Mission p4id special attention to the problems of transport coordination. The need for such coordination is relatively new in Yugoslavia since racdern highways are of recent origin and since some areas of the country have only limited railway service. The main problem exists on the Central Highway iThich for most of its length runs parallel to a railway.

14. The general policy of the Government is to make each form of trans- port co:mmuercially viable and competitive writh the other on fair terms. The implementation of this policy is impeded by two major weaknesses. First, railway rates are based on the traditionol system of classification related to the value of commodity but unrelated to the particular costs of carrying the particular commodity. As a result, over-simplified criteria as to which t-ypes of traffic are best suited to railways and roads tend to be used in con- sidering future investment. These over-simplified criteria, which may be justifiable when there are few trucks and a general overloading of the trans- port system, will become more and more unreliable in the future.

15. Secondly, it would aDpear that both railways and highways are sub- sidized. Road operators pay little directly toward the cost of the roads, but have been makinlg high profits. On the other hand, the interest paid by the railway on its capitel involves. a subsidy rate. It is difficult to say which has benefited most; officials of the Secretariat for Transport and Communica- tions believe that highways have received relatively more subsidies. - 4 -

1.6. The Federel Government is, however, in a particularly good nosition to assure adequate coordination in the future and avoid the dilermas confronting many other countries in the area. Firstly, it is fully aware of the problem and seems to have adequate authority. Secondly, the Secretariat for Transport is ably staffed and well organized, not by mode of transport, but by function, such as invest- ment, tariffs, etc. Thirdly, the relatively large scale of the trucking enterprises hlelps to avoid some of the problems of excess competition which arise when one-truck entrepreneurs charge rates below their real costs. Fourthly, a relatively large proportion of railway freight is of the bulk type and therefore less subject to highway competition. Finally, the Government has already initiated some important steps, such as relating railway rates more closely to transport costs, and increasing charges on the users of highways so that they w,ill in time pay for highway costs. It is the Government's intention to continue to follow the problem closely to achieve the most econcmic distribution of traffic among the various modes of transport.

III. THE RAILWAY SYSTEM

A. Organization, Management and Staff

17. The organization of the Yugoslav Railways is based on the Yugoslav concept in which the workers participate in the management. The organization has changed several times in recent years and is currently undergoing further changes in accordance with the Law on Organization of the Yu-oslav Railways of Miarch 27, 1963. The Orga- nization is shown on the attached chart.

18. The Railways are subdivided at present into 22 regional Railway Transport Enterprises and 39 auxiliary enterprises. However, the number of Transport Enterprises, which was 29 early in 1963, will be consolidated further to about 12-15. The number and scope of the auxiliary enterprises is adapted from time to time to the local needs of the Railways and will be consolidated also.

19. T'he Railway Transport Enterprises operate the fixed assets in their area, and the motive power and rolling stock allocated to them. Their revonues arise from comercial traffic, services rendered to other Railway Transport Enterprises, and from rents, leases, etc. In general, the Enterprises have to finance replacements, betterments and additions from their own funds.

20. Each of the Railway Transport Enterprises is managed by a Workerst Council, a Management Board and a Director. The Workers' Council consists of 40 to 70 elected representatives of the workers, and meets every two months. The Management Board consists of 10 representatives of the Workers' Council and the Director, who cannot be the Chairman. The Director is appointed by the Executive Council of the Republic on the basis of merit. He is responsible for the railway operation to the Director of the Community of Railway Enter- prises (see para 22).

21. The auxiliary enterprises are responsible for maintenance and repair of tracks, for repair of locomotives and rolling stock, for design and supervision of new.construction, etc. They receive payments for their services to the Transport Enterprises. There are also a few enterprises which receive outside earnings, such as the Railway Institute which serves as an engineering consultant for enterprises other than the Railways, and some repair shops which carry out orders for enterprises outside the Railways.

22. The Railway Enterprises with two exceptions are organized into four Commalnities of Railway Enterprises for areas roughly cor- responding to the four major Republics, Serbia, Kroatia, Slovenia and Bosnia-Hercegovina. The Railway Enterprises in Skopje and Tito- grad are represented directly on the Community of Yugoslav Railways (see para 2b) because after the consolidation, only one Enterprise each remained in the areas of ilacedonia.and lNontenegro. The Com- munities of Railway Enterprises supervise and coordinate operations in their region, distribute the freight car stock among the Enter- prises for day-to-day operation, act as a link with Republican authorities, and are responsible for projects including more than one Enterprise.

23. Each Community of Railway Enterprises is managed by a Man- agement Board and a Director. The Managemrent Board conaists of 30--h0 representatives of the Railway Enterprises in the area. The Director who i9 a member but not Chairman of the Board is appointed for no more than two sears by the Execut:ive Council of the Republic on the recommen- dation of the Management Board and on the basis of merit; he may be re- appointed but cannot serve more than two terms.

24. All Railway Enterprises together and the four Communities of Railway Enterprises form the Community of Yugoslav Railways. It has the same supervising and coordinating functions for Yugoslavia as a whole, as the four Communities of Railway Enterprises have within their region. In addition, it is responsible for general policy matters such as rates and tariffs, technical standards, over-all planning, inter- national traffic and timetables, and construction of new lines affecting more than one Republic. Some matters of national importance are sub- ject to Government approval, but the Government does not interfere in day-to-day operations.

25. Ihe Community of Yugoslav Railways is managed by a Railway Assembly, the Management Board and the General Director. The Railway Assetnbly consists of 60 representatives of the Railway Enterprises and the Communities. It meets at least twice a year. The Management Board consists of 15 members, of which 14 are elected by the Assembly - 6 -

from among its members. The General Director is a member, but not chairman, of the Assembly and the Board. He has the right to veto decisions of the Assembly and the Board, but his veto is subject to review by the Federal Executive Council. The present General Direc- tor was formerly Governor of the Yugoslav National Bank.

26. The Railways' staff is competent. The Management is capable and the handling of traffic, operations and technical matters is good.

27. The number or staff has fluctuated during the last ten years, because some maintenance and workshop enterprises at one time separated themselves from the Railways, but some of these recently merged again. The performance of the staff, in terms of traffic-units and gross ton- kilometers per employee, and the number of employees per kilometer of line has remained relatively constant in recent years (see Table 4). The fi;ures compare reasonably well with railways in other European countries which have similar traffic and operating conditions. There is, however, room for improvements in the course of the Railwayst modernization program.

B. The Network

28. The railway system in Yugoslavia consists of the originally Serbian system and the parts taken over :trom the Austrian, Hungarian and later from the Italian Railways. Each of these left its own type of equipment and particular technical features.

29. By the end of 1963, the Yugoslav Railways operated 9,276 route-km of standard-gauge lines and 2,580 km of narrow-gauge mainly 2'6" lines. Of the standard-gauge lines, 724 route-km were double track and 310 route-km were electrified (see map and Table 5).

30. About 2,500 route-km of standard-gauge and 500 km of nar- row-gauge were constructed after World War I in order to open up the less dereloped oarts of the country. However, the modernization of station yards and signalling installations, and the procurement of motipre ower and rolling stock did not keep pace with the construction of new lines. This fact limits seriously the capacity of the system.

31. One of the bottlenecks of the Yugoslav Railways is the nar- row-gauge line from Sarajevo to Ploce (see map). This line is being converted into standard-gauge and will be electrified; part of the cost is financed from Loan No. 361-YU. Progress is on schedule and com- pletion is expected by the end of 1966.

C. Physical Properties

32. Track, struietures and buildings are well maintained. About 30 percent of the standard-gauge tracks are laid with rails heavier than 45 kg per m. The main line Jesenice-Ljubljana-Belgrade-Skopje is being relaid with 49 kg rails; this is almost completed. Ballast - 7 -

is good. Prestressed concrete ties have recently been used. Sixty percent of the main lines are suitable for 20 tons maximum axle load; the remainder, permits only 17 tons.

33. Most of the station yards in the system have not been modernized for 40 years. Only the marshalling yard at Vinkovci has a hump and satisfactory installations; all others are flat yards with inefficient push-off shunting.

34. The signalling system used on most of the lines and stations is also as it was 40 years ago. It consists mainly of mechanical inter- locking installations. On many stations, even on mainlines, points are hand-operated locally. Electric line block exists only on double- track lines. On the other hand, a very modern all-relay signal tower was comnleted recently at Ljubljana. Automatic line block with color li-ht si 'nals was -ecently com leted on two single-track sections of the otherwise double-track line from Zagreb to Belgrade and on one section of the single-track line from Belgrade via Vrpolje to Sara- jero. The deficiencies of the signalling system caused several acci- dents in recent years, two of which were serious, causing many deaths.

The composition of the motive power and rolling stock is summarized in the following table:

Average number of units in 1963 Standard Gauge Narrow Gauge

Locomotives, Steam 1,596 506 Diesel 154 - Electric 41 Railcar sets,Diesel 193 5 Electric 4 - Passenger cars 5,226 991 Freight cars 63,796 8,741

Details are shown in Table 6.

35. The motive power and rolling stock is generally well main- tained but a substantial portion is far beyond its useful economic life of 35 years. The percentage of steam locomotives and rolling stock in excess of 35 years is shown below:

Standard Gauge Narrow Gauge

Steam Locomotives 65% 77% Passenger cars 68% 86% Freight cars 60% 96%

372 standard gauge steam locomotives or 23 percent of the total were built before 1916. The problem is aggravated by the fact that the stock consists of manyj different types, wlhich ma6kes maintenance and repair expensive; for examiple, there are 46 types of standard- gauge steam locomotives still in operation. Diesel locomotives are not older than 15 years.

36. The Railways have already started th6 urgent modernization of their motive power by purchasing 98 heavy,'mainline diesel locO- motives from the USA through the U.S. AID Program, and 36 medium size dieseL locomotivres and 80 diesel shunters built by Yugoslav manufacturers under licenses from a French and an Austrian firm. They purchased also about 160 sets of light two-axle railcars (so called railbuses) manufactured in Yugoslavia under a license from a German firm, and 26 heavy electric locomotives from Italy.

37. The capacity of the passenger car stock is generally ade- quate, but that of freight cars is insufficient. Procurement of ad- ditional rolling stock mainly for replacement is planned in the next few years.

38. Miaintenance and repair facilities for' diesel locomotives and railcars and for electric locomotives are adequate, but most of the facilities of the railway enterprises for maintenance and medium repairs are not modern and some are obsolete. The number of railway enterprises for locomotive and car repairs appears more than necessary and these are activities on which cost savings could be made by reorganizing these enterprises and reducing their number. In general, heavy repairs and general overhaul of steam locomotives and rolling stock are carried out on a contract basis by outside enterprises.

D. Traffic

39. The Railways' freight traffic (in ton-Ikn) nearly doubled in the last ten years (see Table 1). It remained relatively stable between 1960 and 1962, largely due to a slow-down in economic activity generally and especia'.ly to poor agricultural crops which in turn adversely affected the nrocessing industries. However, these appear to have been temporary factors and the indications since mid-1962 are that the earlier growth is now continuing; in 1963, traf'ic increased 15 percent above the 1962 level. The bullc of the railway traffic consists of minerals and heavy materials (see Table 7). Coal accounts f'or nearly 30 percent of total traffic, and building materials, ore and lumber for an additional 30 percent.

40. Passenger traffic (in passenger-km) increased by about 75 per- cent in the last ten years. As in the case of freight traffic, growth ceased temporarily in 1960-1962; but in 1963, it was about 7 percent above the 1962 level. Passenger traffic accounts for about a quarter of the Railways' transport revenues. -9-

E. Operations

41. The Railways are well operated in general. However, they have difficulty, particularly during peak traffic in meeting the demands of the considerably increasing traffic, because of the following deficiencies in the installations and equipment:

(i) The lack of motive power in general and the obso- lescence of most of the steam locomotives. One special factor hampering the efficiency of steam traction in Yugoslavia is the poor quality of the domestic lignite and the absence of hard coal, so that several types of lignite have to be mixed with imported hard coal on the locomotive tender in order to maintain sufficient steam generation.

(ii) Limitations of line capacities in terms of gross tons per train and number of trains per day from the still predominant steam traction and from outmoded mechanical signalling and interlocking installations.

(iii) The obsolescence and insufficient capacity of the marshalling yards at the major traffic centers and junctions, such as Belgrade, Zagreb and Ljubljana, causing repeated classifications and delay in the turn-around of freight cars.

(iv) The insufficient capacity of the narrow-gauge lines.

42. In spite of these conditions the Railways were able to handle traffic increases since 1950 of 25% for passengers and of 70% for freight (see Table 5).

43. The Railwayst operating record is good and compares favor- ably with that of other railways in Europe. It has remained at about the same level since 1958 (see Table 4), which is satisfactory, con- sidering the condition of the facilities.

44. The average availability of locomotives and rolling stock in 1963 is satisfactory, especially considering their old age:

Average Availability 1963 (in percent) Standard-Gauge Narrow-Gauge

Locomotives, Steam 76 73 Diesel 92 - Electric 85 - Diesel Railcars 74 80 Passenger Cars 90 90 1reight Cars 95 95 - 10 -

15. The utilization of diesel and electric lo/omotives in 1963 was IbOB km and 41!7 km resoectively per engine day/available, which is hi-h. The utili7ation of steam locomotives was 200 km per engine day available; it has declined slightly since 1960 because of the shift to diesel and electric traction which is the usual experience of rail- ways >eing dieselized and/or electrified. In 1963, about 29 percent of the rross ton-km on standard- auge lines was hauled by diesel tracti:)n and a-out 6 percent by electric traction. The Railways have substituted rail buses for several passenger steam trains on standard- gauge branch lines with good economic results and are going to expand this. On the narrow-gauge lines, only steam; locomotives are operated. besides a few prewar diesel railcar sets on the Sarajevo-Ploce line.

46. Utilization and turn-around time of the freight cars are also satisfactory, considering the present conditions of lines and marshal- ling yards.

47. The maximum speed on standard-gauge lines is 120 Ian per hour; on narrow-gauge lines it is only 40 km. The fastest average speeds, including stops, are 77 Ion per hour on the standard-gauge Belgrade- Ljubljana section, and 27 km on the narrow-gauge Sarajevo-Ploce section., which is satisfactory under the present operating conditions. The average speed of freight trains is 17 Im per hour on the standard-gauge system and 13 kn per hour on narrow-gauge system. M4aximum and average speeds on the standard-gauge lines can and will be substantially increased by execution of the Railway Investment Plan (see paragraphs 74

to 81 below). -

F. Finances and Earnings

48. In this report, the subject of finances and earnings concerns only the financial e-,nerience of the 22 transport enterprises, to the exclusion of the 39 auxiliary enterprises. This avoids laborious analyt- ical procedures the value of which would be meager. While the auxiliary enterorises were established nrimarily to serve the transport enter- prises, wherever capacity pernits, c.g. quarry, locomotive and car factories, and orinting, they also serve industry generally. In ad- dition to the problem of separation of railway and non-railway finances, inclusion of the 39 auxiliary enterprises would involve elimination of double accounting between the 39 auxiliary enterprises as well as between these 39 and the 22 transport enterprises. The result of em- ploying only the data of the 22 transport enterprises is that the con- clusions are somewhat conservative inasmuch as the profits of the auxiliary enterprises (about Din 2.3 billion in 1963) are not included, The proportion of this profit attributable to purely railway operations cannot be determined fromi available data. However, a fair estimate would be about Din 2.0 billion.

1. Budgets, Accounting and Auditing h9. Each railway enterprise and the related Community of Railway Enterprises jointly prepare in advance an annual working plan which consists of an estimeate of the voliume of traffic demand and the finan- cial means necessary to meet it in terms of operating and capital budget require;ients. These individual draft budgets are prepared within the framework of (a) the Government's over-all economic plan, (b) the expected volume of demand on a global basis and (c) the general plan of inter-republic and foreign traffic and of car supply laid down by the Commnunity of Yugoslav Railways in Belgrade. The budget is coordinated, after discussion by the Management Board of the Community of Yugoslav Railways and after further joint discussion by the Board writh the Transport Committee of the Federal Assembly. The Railway's total budget must be approved by the Community of Yugoslav Railways and the Federal Secretariat, but the approval of the Federal Assembly is not required.

50. The Federal Government prescribes a uniform system of account- ing for all commercial enterorises in Yugoslavia. Of the ten classes of accounts so orescribed, eight are applicable to the Railwiays and correspond generally to prooerty, current asset, current liability, in- ventory, expenses, revenues, surplus and business-fund accounts. Special uniform subdivisions to these accounts are required by the Community of Yugoslav Railways in the light of the special needs of the railwaYs.

51. Property was first recorded at original cost, and was re- valued in 1954, in 1957 and in 1962, in accordance with government requirements applicable to all com,mercial enterprises. The effect of the latest revaluaticn was to increase the value of fixed assets after depreciation by about 18 percent on average. Each enterprise has its own stores and related accounts. Actual prices are recorded. With- drawals are based on average prices. Inventory is generally taken annually. Expenses include ordinary maintenance on a cash basis and investment maintenance, which is equivalent to major rehabilitation or renewals, on an accrual or annual-estimate basis according to a time schedule fixed in advance.

52. Accounting procedures customary in the West are not always followed in Yugoslavia. The principal deviations are the effect of: (a) the decentralized organization and the resulting multiplicity of transport and auxiliary railway enterprises; (b) the initial pooling of income and later distribution among the enterprises; and (c) the allocation of net income to supplemental wages and salaries, welfare projects and the enterprises' business funds.

53. The many transactions between the 22 Railway Transport aterorises operating trajins n 1963 result in some double accounting in the income accounts, inasmuch as in some instances the revenues of one enterprise are the expenses of another. Additionally, trans- actions '-etween the 22 transioort enterprises and the 39 auxiliary enter- prises reduce co~noosite net revenues of the former, since in many cases rolling stock rer)air, track maintenance and other expenses would be lower by the amount oi profit gained by these auxiliary enterprises which in 1963 employed almost 14,000 people and earned revenues of Dinars 46.7 billion (U3$66.7 million equivalent). _ 12 -

54. The receiots of the 22 transport enterprises initially are common to all 22 enterprises. A division of the Community of Yugo- slav Railwiays, Control of Receiots, periodically assigns all revenues directly to each enterprise on the basis of a formula designed to permit each to cover its terminal costs and to distribute the remainder on the basis of (i) work performed; and (ii) train-operating conditions such as narrow-gauge and light traffic density equated for each enter- prise in accordance with agreed factors calculated to afford equal opportunity to achieve reasonable financial results. The assignment of total receipts has no effect on net income when considering only the aggregate results of all enterprises.

55. Wages and salaries include basic monthly wages, as well as periodic supplemental wages which depend on the financial results of operations, paid within 15 to 90 days after the related payroll period. Wages and salaries, as recorded in expenses, include these supplemental payments, basic social insurance which is generally 22 percent of net salary, income taxes, 15 percent, contribution to a fund for housing construction, 4 percent, reduced vacation fares, 1.5 percent, and con- tribution to a fund for the reconstruction of the City of Skopje, 1 percent.

56. Auditing is performed at least once a year, by the Service of Social Accounting, a department of the National Bank, which receives quarterly reports from all economic enterprises in Yugoslavia, includ- ing each railway enterprise. It issues a certificate that the accounts are properly kept.

2. Rates and Fares

57. The rate policy of the Railways stems from the Constitution of 1963 which states generally that every economic enterprise, after renewing the "value o' resources expended in work, and after allocating a part of the created value of the product for equalization of working cDnditions and acquisition of income, shall apportion the income of the working organizatlon into a fund to expand the material basis of work and a fund to satisfy the personal and common needs of the working people".

58. Rates and fares up to the present time have been established by the Government on uniform bases for all enterprises. The establish- ment of rates by the Government may be changed in accordance with a proposed law now before the Federal Assembly which would give the Com- munity of Yugoslav Railways general freedom in rate making. Rates are now in a few instances like some other prices, under the supervision of the Office of Price Control. If the aforesaid legislation is enacted all rates will be subject to the control of O.P.C. which would then have the power to suspend railway-initiated rate increases, pro- vided an over-all railway deficit would not result, This suspension would on complaint of the Railways be subject to review by the Federal Assembly. - 13 -

Freight Rates

59. Freight rates consist of: (i) carload class rates related to ten classes; and (ii) less-than-carload rates. Specific carload rates which are lower than the otherwise applicable class rates apply to such commodities as lignite, fertilizer, bauxite ore, coal, firewood, fruits, vegetables and seafoods. About 95 percent of"freight traffic moves at carload rates. Rates have borne a closer relationship to average costs since 1961 when the spread between the lowest and highest class was reduced to 1 to 2.7. Rates, however, should be brought into even closer relation to the specific costs of transporting individual com- modities or groun)s o collmodities. The railways propose to do this gradually; and as a first step to reduce the higher rates on manu- factured and rniscellaneous articles, which the trucks are able to take away from the railways, and to compensate by increasing the rates on low-rated, bulk high-density commodities.

60. Carload rates vary, also, with the quantity shipped. The 10-ton rate is basic; the 15-ton rates per unit are 10 percent lower, and the 5-ton rates are higher by from 5 to 501percent depending on the class and distance. This aspect of-the tariff should be brought into line with costs as a starting point and the differential, when properly adjusted, should be such as to promote the full utilization of freight-car space.

61. The Railways receive from the Government 2 Dinars per net ton-kilometer for losses incurred from the transport of lignite, for which a special low rate is charged.

Passenger Fares

62. A two-fare system, first and second class, is in effect witl a relationship of 1.5 to 1. For journeys up to 100 kilometers, they increase by Dinars 5.2 per km; from 101 to 500 lkns, they increase less rapidly at rates gradually declining from 5.2;to 4.0 Dinars per kilo- meter; and they become linear at 4.0 Dinars per kilometer for distances over 500 kilometers. An addlitional charge of Dinars 300 is made for transnortation on fast trpins; and Dinars 600, on express trains.

63. Substantially reduced fares are in effect for transportation of children, the blind, invalids, students, groups of at least 5 adults, excursions, season tickets and the like, with reductions ranging from 10 to as high as 92 percent. The federal budget provides for payments to the Railways in these cases where the fares are below a compensatory level, and in 1963 this amounted to about Dinars 18 billion (US$24 million).

64. Including Government allowances, the freight rates appear somewhat high but this is due in part to the relatively short average length of haul, about 250 lms; and the passenger fares are on the low side. Howiever, the Government and the Railways are re-examining the rate and fare structures, with the object of bringing them more in line with costs. 3, Earninags

65. Tne earnings position of the transport entcrprises as a system is shoxm in detail in Table 8 and summ,arized below, for the years 1959 to 1963 inclusive:

( Billions of Dinars ) Operating j Operating 2/ Net Operat-ing Year Revenues ExEenses Revenues Net Income 3/

1959 144 138 6 20OS 1960 191 160 31 26 1961 195 170 25 17 1962 194 173 21 11 1963 225 198 26 12

Note 1: Operating revenues are net of inter-enterprise items, except for the years 1959 and 1960 for which necessary data were not available; Note 2: Operating Expenses include depreciation; Note 3: Net Income is Net Operating Revenue less interest and deductions from income plus miscellaenous revenue; Note 4: Net Income 1959 includes Dinars 17 billion extraordinary revenues.

66. For the years 1959 and 1960, the above data are for the six transport enterprises comprising the railways in those years. In 1961 and 1962 thlere were 29 transport enterprises and in 1962, their number was reduced to 22. The two groups of years 1959/60 and 1961/63 are not strictly comparable because inter-enterprise items have been eliminated only in the latter years, for which selected ratios are shown below: 1961 1962 1963

Operating ra-tios 87 89 88 Times interest earned 30 19 20 Return on net fixed assets 5.2 3.7 4.4

67. The operating ratios are adversely affecued by the necessary exclu- sion of the profits made by the 39 auxiliary railway enterpr.ses whose rail- way revenues are incl]uded in the expenses of the transport enterprises (see para 53). In addition, expenses include not only basic wages, but also Slb- sequent additional wage payments which might in western countries be considered a distribution of profits. The operating ratios would otherwise be material- ly better. - 15 -

68. Reburn on net fixed assets which imp:oved in 1963 is also affected by these special circumstances and in addition is materially affected by the revaluation of fixed assets in 1954, 1957 and 1962. Were net fixed assets representative of the actual flow of capital into fixed assets less depreciation, the rates of return would be substan- tially higher.

4. Depreciation

69. Straight line depreciation is related to reasonably estimated service li7es of depreciable property. Non-depreciable property includes land, and permanent way substructures which are earthworks, formation, culverts and everything below the ballast including supporting walls. From January 1, 1964., depreciation has been assessed on track super- structure, including ballast, ties, track and track fittings on a func- tional basis as an alternative method so that about 67 percent of resultin- deoreciation charges are now based on density of traffic. The use of this alternative increases depreciation expenses and reduces investment maintenance or renewals expense. In addition, func- tional depreciation rates have also been introduced on rolling stock where hig>h use factors warrant higher rates than the rates prescribed for ordinary use. While the assets of the railways have been revalued several times, the depreciation base remains at original cost. In 1963, depreciation expense was 13 percent Or total operating expense and 11.6 percent of operating revenues. It is expected to rise sharply in 1964 to more than 25 percent of total operating expenses and to 21.5 percent of gross revenues. The railways' depreciation allowances are adequate.

Deductions from Income

70. The railways like all economic enterprises pay the Government for the use of its fixed assets. For industry generally, a six percent annual charge on net fixed assets is made. The railways, however, like many other public enterprises have been granted a concession whereby they pay 2 percent on railway property excluding land, permanent way and road structures such as tunnels. The normal 6 percent is paid on non- operating property such as social housing.

71. Payments to the social investment fund are amounts contributed to the republics and cities amounting to 30 percent of that part of net profit which is allocated to special funds.

72. A modernization fund was established by the Government in 1963. All railway enterprises contribute 5 percent of total income after deduct- ing those e;menses which are. not salaries or wages. The fund, which is not formally esta'lished as a fund but kept in a special bank account, is used "or investments on the basis of jointly determined allocations to individual enterprises. A small interest charge is assessed against amounts wTithdrawn by an enterprise in excess of its contributions. - 16 -

6. Finances 73. Balance sheet data as of December 31, 1962 and 1963 are shown as a part of Table 9. (i) Current Assets and Liabilities. The ratios of current assets to current liabilities were 1.5 to 1 in each year. The liquid ratios in 1962 and 1963 were 1.A and 1.3 to 1, respectively. Certain double ac- counting between enterrrises has not been eliminated. The elimination of duplicate amounts from each total would have somewhat improved the ratios. These ratios are satisfactory. (ii) Fixed Assets. Revaluation of assets is referred to above under the ge neral heading of accounting. The accumulated depreciation shown on the balance sheet applies only to operating fixed assets. Social standard assets, such as housing, are shown as net of depreciati-on. (iii) Debt. Long-term debt has been incurred to provide working capi- tal, operating fixed assets and social standard property. About one- half the relatively little outstanding debt on December 31, 1963 has been borrowed from the Government's General Fund for Investments (Dinars 25.6 billion), with maturities ranging from 5 to 25 years and interest from 1 to 7 percent; about Dinars 5.7 billion from commercial banks averaging a term of about 10 years, with interest ranging from 1 to 7 percent; and the balance, Dinars 21.2 billion from a miscellany of sources principally for housing, for terms ranging from 10 to 30 years at interest ranging from 1 to 3 percent. The debt-equity ratios were favorable in 1962 and 1963, 8/92 and 7/93, respectively. Debt service coverage has been good. The finances of the Railways are gen- erally satisfactory.

0. The 1964-1970 Railway Investmrent Plan

74. The seven-year Investment Plan 1964-1970 of the Yugoslav Railways is oart of the General Social Plan of the Socialist Federal Republic of Yugoslavia for the same period. This plan was still under consideration by the Federal Executive Council and not yet finally approved at the time of the appraisal mission. This report assumes that no major changes wlill be mnade in the Railway Investments Plan.

75. The Plan provides for canital investments in the railways of Dinars 705.7 billion (US$941 million equivalent) and of Dinars 38.7 billion (US$52 million equivalent) for so-called social standard, i.e., staff housing, welfare institutions, recreation facilities, etc. See Table 10.

76. The Plan aims at increasing the Railway's carrying capacity and at modernizing operations and equipment in order to meet demands of the increasing traffic. -Main items of the Plan are: - 17 -

(i) electrification of 1,578 route-km of three mainlines (see map);

(ii) new signalling installations on 1,509 route-km of three mainlines (see map);

(iii) construction of four new marshalling yards and modern- ization of two existing marshalling yards, including connecting lines and facilities for locomotive main- tenance and repair;

(iv) renewal of the permanent way, bridges and structures in the entire system;

(v) purchase of electric and diesel locomotives;

(vi) purchase of railcars, rail buses and passenger cars;

(vli) purchase of freight cars; and

(viii) remodeling of station facilities, construction of freight yards and sheds, and conversion of narrow- gauge lines into standard-gauge.

77. The above first three items of the seven-year Investment Plan are embodied in the Reconstruction and iModernization Program of Mainlines, which forms the proposed loan project as described in the folloiring chapter. The Project is scheduled for completion during the first five years 1964-1968 of the seven-year period for the entire Investment Plan, which extends until 1970.

78. With respect to the rest of the Program the Railways intend to fi- nance (a) purchases of locomotives and of rolling stock as far as possible from suppliers' credits and (b) the improvement of line and staticn capacities from loans from interested cities and republics. The remainder will be fi- nanced from the Railways's own funds.

79. The RailwJays intend to import the electric locomotives, electric and diesel railcars. Diesel locornotives and rail buses will be produced by the domestic industry on licenses from foreign manufacturers. Passenger and freight cars and other equipment will be manufactured in Yugoslavia. Some components for locomotives, cars, signalling and switches have to be imported.

80. Funds for new line construction are generally made available by the Government and are given as a grant to the Railways, which have to pay in return a charge to the Government after the lines are taken into operation.

81. Because of this method of financing, the Railways' Investment Plan does not inclu(ie the construction of new lines such as: (i) the Sarajevo-Ploce line, of which part is financed from the previous Bank loan 361-YU; (ii) the Belgrade-Bar line, of which two sections of about 50 km each are in operation and about 3i40 km still have to be con- structed; (iii) the Zadar-Knin line, of which 60 km are in operation and 40 km are almost complete. Iv.. THE PROJECT

A. Description

82. The Project as indicated auove is the Reconstruction and Moderni- zation Program o-f M4ainlines 1964-1968, which is shown in detail in Table 11.

83. The three lines included in the Project are the most important lines for both domestic and international freight and passenger traffic in Yugoslovia. They are: (i) Jesenice (the frontier station to Austria)- Ljubljana-Za,-reb-Belgrade-Nis-Slcopje-Titov Veles (towards Greece); (ii) Rijeka- Zagreb; and (iii) Vrpolje-Sarajevo (see Zap). The extension of the third line from Sarajevo to Ploce forms the Project financed by Loan 361-YU and is due to be completed by end of 1966,

84. The aims of the present Project are to eliminate deficiencies in the Railw..ays? present carrying capacity and to increase operating efficiency. The Project consists of (i) installations for electric traction on the above mainlines, of which the Rijeka-Zargreb line is already electrified up to Karlovac; (ii) the installation of modern signalling and telecommunication systems over the lines and of automatic block systems on those sections with the heaviest traffic loads; and (iii) construction of four new marshalling yards at Belgrade, Zagreb, Ljubljana and Skopje with humps, car retarders, modern signalling equipment and facilities for the repair and maintenance of locomotives and cars; and extension and modernization of the existing yards at Nis and Doboj. The locomotive maintenance and repair facilities related to the Doboj yard will be constructed at Sarajevo, from where motive power for the Vrpolje-Saravejo line will be provided.

85. The Project is well conceived and includes only items of highest priority. It is necessary because the Lmilways would not be able to carry the increased traffic forecast for 1970 (see Tahle 7) unless all limitations on the three mainlines have been eliminated.

86. Electrific.ation of the mainlines is the appropriate solution both for alleviating the lack of motive power and increasing the line capacity. The lines Jesenice-Ljubljana-Dobova and Karlovac-Zaoreb will be electrified with 3,000 Volts D.C., because the adjacent lines to Rijeka are equipped with the sar,le system. All other lines east of Dobova will be electrified with the more economical system of 25,000 Volts A.C., 50 cycles.

87. Electrification of the lines is justified, as compared with diese'l traction in view of: - 19 -

a) the traffic density, which will reach an'average of 63,000 gross ton-km per kn of line per day in 1970, and

b) powver consumption, which would be about 620,000 kwh per km/year.

88. These figures substantially exceed the,'breakeven pojits of 30,OCO gross ton-km and 300,000 kwh above which electric traction according to the experience of Euronean railways genierally costs less than diesel traction. The availabilit-, of cheap electric power from nearby hydroe'ectric plants, higher speed on gradients and quicker acceleration are additional factors favoring electrification.

89. The installation of modern signalling, telecommunication and auto- matic block systems aims at both increasing line capacities and improving the sarety of' operations. The construction and modernization of main marshal- ling yards is indispensable for the handling of the increasing freignt traffic.

90. Work has started already on the marshalling yards and on the elec- trification between Jesenice and Ljubljana; the other works are expected to begin within the next months. Completion of the entire Project is scheduled for the end of 1968. A schedule of Project wiorks to be completed from 1965 to 1968 is given in Table 12.

B. Estimated Cost of the Project

91. The estimated costs of the Project as detailed in Table 11 are summarized below. Expenditures before January 1, 1964 are not included. Ten percent contingencies are added to the estimated expenditure for each year from 1965 to 1968. Customs duties, which are included average 29 percent.

Minimum value of US$ materials to be Dinars million imported - US$ billion equivalent million equivalent including custom duties excluding custom dutes I. Installations for Electric Traction 39.0 51.9 1L.0 II. Installations for Signalling and Telecommunication 35.8 47.8 12.7 III. Construction and Modernization of Marshalling Yards 53.0 70.6 6.o

Total allocated 127.8 170.3 32.7 Contingencies 11.0 14.7 3.3

Grand Total 138.8 185.0 36.0 - 20 -

92, The estiniates appear reliable, because the quantities involved are based on final plans prepared from detailed surveys and unit prices used are based on the experience from recent bids.

93. The minimum value of materials to be imported excluding custom duties is about 20 percent of the total cost of the Project and includes only materials not manufactured in Yugoslavia, such as special steel castings, equipment for remote control of substations, relays and other components for signalling installation, car retarders in marshalling yards, etc. which would have to be imported in any case. The actual foreign exchange cost could be higher if foreign firms were successful in obtaining orders of other materials and equipment which can be produced in Yugoslavia (see para 99 to 100).

94. The proposed loan of US$70 million would finance about 38 percent of the total cost of the Project.

C. Administration and Execution

95e The co;nmunities of Railway Enterprises at Belgrade, Zagreb, Ljubljana and Sarajevo and the Railway Transport Enterprise Skopje are acting as "Investor", i.e. they are responsible for the execution of the Project. The organization and staff of the "Investors" are competent from both the adminis- trative and technical point of view.

96. Final plans and specifications are about 80 percent complete for trackage, earthwork and structures of thie marshalling yards. Principal plans and specifications for electric traction and signalling installations for the sections on which work has to be started first are sufficiently advanced to call tenders.

97. Work on lines connecting with the Belgrade marshalling yard started in 1951 but has been interrupted because of the lack of funds. One major bridge across the Sava River and about 10 km of embankments of lines have been completed. Works restarted in 1963 are progressing satisfactorily. Work on the other marshalling yards and the electrification from Jesenice to Ljubljana has also started. Contracts were awarded on the basis of competi- tive bidding among domestic contractors.

98. All electrification and signalling equipment will be purchasedafter international competitive bidding among an adequate number of qualified manufacturers. Most of the work of installation will also be put to inter- national tender. Bids wqill be evaluated with the cost including customs duties on equipment and materials. This is the same pf6cedure-which has been followed in previous loans to Yugoslavia.. Judging from the experience of the bidding for the Sarajovo-Ploce project it appears likely that the contracts for equipment and installation will be won by' foreign manufacturer and' a Yugoslav-firm vorking in cooperation. Such cooperation enables the bidders to reduce the import component of the bid and hence the:customs duty. For example, in the signalling equipment contract for the Sarajevo-Ploce line the duty payable on the lowkist bid was 16 percent of the equipment cost ox duty - 21 -

whereas on the second lowest bid it was 31 percent. Cooperation of this kind also has the practical advantage of enabling the Yugoslav firm to benefit from the technical knowledge of the foreign firm; it becomes fa- miliar with the equipment and is thus better able to handle maintenance and repair.

99. Most of the remaining parts of the project are not suitable for international competitive bidding either because the quantities are too small or because of interference with train operations. All structures and track work, and most of the earthworks, for the marshalling yards fall into this category. They will be carried out by local contractors or by the railways' owFn forces. Onl,y the earthworks at the Belgrade marshalling yard, where a large area has to be filled hydraulically with sand from the Sava River, would be likely to interest a foreign contractor or a joint venture of foreign and domestic con-tractors and the Railways have agreed to put this work to international tender. Some special equipment for mar- shalling yards, such as car retarders and control equipment-,would also be purchased after international competitive bidding.

100. The estimated cost of works that could be subject to international competitive bidding is:

US$ million equivalont Estimated cost of Mlinimum value of works subject to imported material international com- included in colum2 petitive bidding (1) excluding custom duties (1) (2)

Installations for Electric Traction 34.7 14.0 Installations for Signalling and Telecommunication 32.0 12.7 Major earthworks of the Belgrade iviarshalling Yard 2.4 - Materials ancl Equipment for MTarshalling Yards 6.o 6.o

Subtotal 75 .1 32.7 Contingencies 7.5 3.3

Total 82.6 36.0 Percent of the total cost of the Project (i.e. $185 million) 46 20 - 22 -

V. FUTURE EARi'IINGS AND FINANCES

A. Earnings

101. Future earnings of the 22 transport enterprises for the period 1964 to 1970, as estimated by the Railways, are shown in Table 8. The fore- cast of earnings assumes the present level of rates, which would be adjusted upward by as much as 10 percent in 1965 and 10 percent in 1966, if necessary, to offset higher costs of labor and supplies. The earnings projections are based also on the Railways' traffic forecast discussed in Chapter VI, Section B, and assume no increased wage rates not offset by increases in productivity or tariffs. The forecast expenses give effect to same increases in staff, upgrading in the structure of labor, normalized working hours based on a 42-hour work week, and the improved efficiency and the lower costs inherent in the modernization program. The seven-year forecast of the income accoints is summarized below:

(Billions of Dinars)

Operating Operating 1/ Net Operating Year Revenues Expenses Revenues Net Income

1964 232 208 24 9

1965 243 215 28 12

1966 253 223 30 13

1967 269 231 38 17

1968 279 239 40 17 1969 292 248 44 17

1970 306 258 48 19

1/ Operating expenses include depreciation.

102. The operating ratios would gradually improve from 90 in 1964 to 8)4 in 1970. During the period of 7 years, times interest earned would be no lower than 7 as shown for 1969. Debt service coverage is good, never falling below 5 times, and the return on net operating fixed assets will range upward from 4.0 percent in 1964 to 5.8 percent in 1970. As a result of the economic benefits of the project (see (hapter VI), further improvement of the earnings position may be expected after 1970. - 23 -

B. Finances

103. The future f-inances of the Railways are disclosed by the forecast of balance-shieet and cash--flow data, Tables 9 and 13. The current and liquid positions would appear to be marginal in r.cst of the future years and some recourrse to borrowing for working-capital would become necessary in the near future. The Railways are in the course of arranging for additional funds to be made available by the '.arger industrial firns in Yugoslavia and in foreign countr--es, in the form of suppliers' credits. Of the 92e9 billion dir.ars of suppliers' credits show-n in Table 13, 82 billion dinars are firm and their average term is over 8 years at interest of 6 percent or less. Arrangements for the remairder will be completed in the near future.

lo4. The Railways' cash needs and sources of funds in 1964-1970 as fore- cast by the Railways are set forth in Table 13, and are sumn,arized below; Dinars Cash Requirements (billions)

Capital investments 744 Debt service 95 Working capital adjustment - 2

Total cash requirements 837

Cash Available

Railways 6!J4 Bank loan 52 Other loans 170 Grants 7

Total cash available 843 Increase in cash position 6

105. In-ternal Cash gerneration of Dinars 614 billion would exceed debt service requirements of Dinars 95 billion by the substantial amount of Dinars 519 b:illion but would be insufficient to cover the proposed capital investments of Dinars 744 billion. The deficiency of about Dinars 225 billion which is a rounded figure would be met in part by loans from republic and municipal governments in Yugoslavia and from domestic ccmmercial banks; by credits extended by domestic and foreign suppliers; and by a small grant already committed by major freight car users. These items would provide Dinars 177 billion; and would leave Dinars 48 billion to be obtained from other borrowings. The Bank loan of Dinars 52.5 billion equivalent (US$70 million) would provide the deficiency and Dinars 3.5 billion for working capital. In adclition, working capital requirements other than cash would be reduced by about D.nars 2 billion, improving the cash position by about Dinars 6 billion on the aggregate. During the period, some 73 percent of all cash requirements would be met from internally generated funds. - 24 -

106. The proposed Bank loan would be made to the Yugoslav Investment Bank which would re-lend the proceeds of the loan to the Railways on the same terms.

107. Debt equity ratios will remain favorable, ranging from 10/90 in 1964, to 19/81 in 1968 and 1969 and improving slightly in 1970 to 18/82.

VI. ECONOMIC JUSTIFICATION

A. Introduction

108. The essence of the economic justification for the project is that it irrill approximately double the Railways' line capacity to carry the increa- sing traffic and make it possible to carry the traffic more efficiently and improve the quality of service. Unless the Railways' capacity is increased, it will become a serious bottleneck to the economic development of Yugoslavia and seriously interfere with the country's ability to carry out the 1964-1970 Investment Plan. The economic rate of return on the project as a whole is about 14 percent, which is satisfactory.

109. The three lines included in the project form the backbone of Yugoslavia's railway network. They connect the seven largest cities - Belgrade, Zagreb, Sarajevo, Skopje, Ljubljana and Rijeka. The area of influ- ence of the three lines encompasses about two-thirds of the countryts economy and about one-half of its population.

110. In close proximity to these lines are located one-third of Yugosla- via's industrial enterprises producing about 60 percent of its industrial output. The most important industrial centers include coal mines, accounting for more than ha'lf of total production, nearly all major steel works and oil refineries, majo2 cement and fertilizer producers, and lumber and agricultural products. In 1963, the three lines accounted for one-half of the railways' total freight traffic. They carried about 5 million tons of imports and exports, as well as 3.5 million tons of transit traffic, and are thus of great importance for Yugoslavia's foreign trade and balance of payments.

B. Traffic Growth

111. The Government and the Railways have made separate estimates of traffic growth in 1964-1970. The Government's estimate, prepared in connec- tion with the 1964-1970 Investment Plan, is based on analysis of the growth in national production, the total quantity of traffic and its distribution by mode of transport; it indicates a growth of railway freight traffic of 5.8 percent annually in the next 7 years. The Railways' own estimate is based on an analysis of the major commodities carried, their future production and consumption, and the probable location of new industries; it indicates a growth of railway freight traffic from 17.6 to 24.5 billion ton/km during this period, or about 5.1 percent annually, which is somewhat less than the Government's forecast (see Table 7). Passenger traffic is estimated by the the Railways to increase from 10.7 billion passenger/km in 1963 to 13.7 billion in 1970, an annual increase of 3.5 percent. These estimates appear reasonable when compared with past trends (see paragraph 40) and the probable growth in Yugoslavia's economic development, and they are consistent writh the declining proportion of traffic carried by railway.' The Railways' more con- servative traffic forecast has been used in this report to calculate the economic beniefits of the Project.

C. The Marshalling Yards

112. The new marshalling yards will increase the Railways' capacity to carry its growing freight traffic and at the same time sharply reduce the costs of classification. The rate of return from these benefits during the useful life of the investment of about 30 years averages about 9 percent; it ranges from 8 percent for the marshalling yards at Zagreb and Ljubljana to 14 percent for that at Nis. These are satisfactory returns in Yugoslavia, especially since the calculation of benefits does not take into account the time savings for the freight itself, nor does it allow for the fact that with- out the investments the operating efficiency of the present yards would dete- riorate seriously; the railway estimates that about one-half of the invesments are needed merely to prevent such deterioration.

113. The increased efficiency will be reflected in a speedier dispatch of freight cars, savings in personnel and sharp reduiction in the need for shunting locomotives. These savings are explained below for the Belgrade marshalling yards; they are analogous for the other yards.

a. Freight Cars. The average stay of freight cars in the Belgrade yards is now more than 15 hours; the modernization program is expected to cut this time in half to about 8 hours, for a saving of about 7 hours. With about 3,500 freight cars handled per day, the annual saving would be the equivalent of about 1,000 freight cars. The annual capital and operating costs of a freight car are nearly Dinars 850,000 (US$1,100 equivalent or about US$3 per day), for a saving in 1970 of Dinars 850 million. The saving for all marshalling yards would be more than Dinars 2 billion.

b. Personnel. In 1960, about 970 workers were employed for class- ification work in Belgrade; for the 1970 traffic level (and assuming the 1960 level of productivity), this would have to be increased to about 1,150. The modernization, how]ever, wJill permit the 1970 traffic to be handled with only about 360 workers, a saving of nearly 800. The cost per worker is about Dinars 700,000 annually (US$930 equivalent), for a saving in 1970 of Dinars 550 million. The saving for all marshalling yards amounts to about Dinars 1.5 billion.,

c. Locomotives. In 1960, 135,000 shunting locomotive hours were required in the Belgrade yards; at the 1970 traffic level, this would amount to nearly 190,000 hours. It is estimated, however, that the modernized and consolidated yard will reduce this drastically to about 40,000 hours, a sav- ing of 150,000 hours. The capital and operating costs of a shunting loco- motive amount to about Dinars 3,400 per hour (about US$4.50 equivalent), for a saving in 1970 of about Dinars 500 million. The saving for all marshalling yards amounts to about Dinars 1 billion. - 26 -

D. Electrification and Signalling Equipment

114. Electrification of the three main lines and their provision with modern signalling and communication equipment are from an economic point of view closely interrelated. It is estimated that they will more than double the capacity of these lines and at the sarne time sharply reduce operating costs. The rate of return from these benefits during the useful life of the investmients of about 30 years is estimated at 17 percent. In addition, there will be major benefits in time savings both for passengers and freight, which are not included in the above calculation.

115. The cost reductions include a reduction in traction costs (Dinars 11 billion in 1970 or nearly US$15 million equivalent), savings in capital and operating costs of freight and passenger cars (Dinars 2.5 billion or US$3.3 million), reduction in personnel (Dinars 5 billion or US$6.6 million) and reduced accidents (Dinars 2 billion or US$2.7 million), for a total sav- ing of about Dinars 20 billion (US$27 million).

a. Traction Costs. Traction costs include fuel, lubrication of locomotives, their maintenance and repair, locomotive personnel, deprecia- tion and interest of locomotives, and the capital and operating costs of related flxed installations. W^lith the present mixture of steam and diesel locomotives, the traction costs per gross ton/km range from Dinars 0.75 to 1.1 on different sections of line; electrification will cut these costs nearly in half to a range estimated at Dinars 0.40 to 0.55. At the exist- ing level of costs, the traction costs for moving the 1970 traffic on the three lines would be about Dinars 26 billion; electrification is estimated to reduce this to about Dinars 15 billion, for a saving of Dinars 11 billion.

b. Passenger and Freight Cars. Electrification and the installa- tion of signalling equipment will increase train speeds greatly; it is expected that the average speeds of passenger trains will increase from about 35 to 40-45 km per hour, of express trains from 70 to about 80 km per hour, and for freight trains frcm 20 to 30-35 km per hour. This means that the same amount of traffic can be carried with fewer cars. At the 1970 traffic level, this involves a saving of about 2,000 freight cars and 150 passenger cars. The value of cars is approximately Dinars 3.5 million for freight cars, Dinars 25 million for 2-axle and Dinars 45 million for 4-axle passenger cars; the capital saving is thus about Dinars 14 billion or, expressed on an annual basis in terms of depreciation and interest, about Dinars 1 billion. The maintenance and repair of these cars would have cost about Dinars 1.5 billion annually, for a total saving of Dinars 2.5.

c. Personnel Reduction. The number of workers involved in signalling and communication work in 1963 was about 6,250; without improve- ments, about 8,500 would be required to handle the estimated traffic in 1970. With the new equipment, however, it will be possible to handle the 1970 traffic with only about 2,700 workers, allowing a reduction of 5,800. The annual costs per worker are about Dinars 900,000 making for a total saving of about Dinars 5 billion in 1970. - 27 -

d. Accident fleduction. On the basis of the 1963 accident rate for accidents caused by inadequate signalling equipment, the Railway estimates that at the 1970 traffic level the daanage to railway property - primarily due to collisions and derailments - will be about Di'nars 1.4 billion. Pay- ments for damages to freight are estimated at about Dinars 1 billion. Of the total property damage of Dinars 2.4 billion, the modern signalling equip- ment will eliminate about three-fourths, or about Dinars 1.8 billion. It will also reduce personal injuries, of which about 150 deaths and 80 serious injuries in 1963 could have been prevented by better signalling equipment; the Railway paid for these more than Dinars 200 million in damages.

VII. CONCLUSIONS AND RECOMNTENDATIONS

116. The Railways' Seven-Year Investment Program 196h-1970 as made available to the mission appears to be sound. The Project, which is an essential part of the Program and which is to be executed from 1964 to 1968, the first five years of the program, is technically and financially sound. It is also economically justified, will provide the increase in capacity needed to meet increasing traffic dsmands and improve efficiency. The cost estimates are realistic. The procurement procedures proposed are acceptable.

117. The Railways are well organized, managed and operated despite the lack of capacity and other technical deficiencies in the system. Operations have been profitable but operating ratios have been adversely affected by existing conditions (para 67). Future financial position will be satis- factory.

118. The Project provides a suitable basis for a Bank loan of US$70 million equivalent, which would cover about 38 percent of the cost of the Project. A term of 25 years including a 5-year period of grace would be suitable.

November 25, 1964 Table 1 YUGOISLVIA

FREIGIGHT TRIFF'ILC, BY IS1DE, rVcF TRUiMOPOTRT, 1952-1963

(Nillion5 of ton/km)

YEAR 1oTAL RAILWAYS I4RITI.1E HIGH.WIAYS Inland Coastal Trucking Ofn vlaterways Traffic Enterprises Account

1952 n.a. 8)383 716 173 115 n.a,

1953 n.a9 8,817 533 143 133 n0 a

1954 n.a. 9,571 764 166 145 n.a

1955 n.a, 11,577 816 230 180 n,a,

1956 n.a. 11P869 9L8 208 2C6 n,a,

1957 15,567 12,984 1,318 226 349 690

19C8 16,284 13,031 1,1491 257 560 945

1959 17,946 13,974 1,636 499 816 1,021 1960 19,6914 15,191 29010 390 l,o16 1,087

1961 19,998 1i4,911 2,085 370 10382 1;220

1962 20,922 15,033 2,212 358 1,611 1,708

1963 214,345 17,345 2,1499 376 2,025 2,100

Average distances of freight haulage (kmn) 240 390 285 95 15

Source: Secretariat for Transport and Communications. Table 2

YUGOSLAVIA

PASSENGCER TRAFFIC, BY iMCDE OF TRANSPORT, 1952-1963

(Millions of passenger/kn)

YE1AR TOTAL RAILWAYS 1/ HIGHWAYS AIR MARITILE Buses 2/ Passenger Coastal Inland Cars 3/ Traffic Waterways

1.952 5,561 4,815 417 130 24 151 2h

1953 6,961 6,015 549 150 29 191 27

1954 7,676 6,536 692 170 33 206 39

1955 8,g909 7,533 86h 190 50 230 42

1956 8,816 7,314 966 220 47 2h8 21

1957 10,095 8,o59 143h6 325 53 285 27

1958 11,492 8,877 1,760 h25 60 340 30

1959 12,502 9,250 2,231 580 82 333 26

1960 1L,574 10,8h9 2,826 310 114 348 27

1961 14,894 10,089 3,139 1, 180 137 326 23

1962 15,173 9,908 3,330 1,425 164 325 21

1963 16,780 10,673 3,876 1,655 267 293 16

Average distances pei, trip (km) 50 27 - 532 4IL6 30

1/ Beginning in 1955 includes passengers coming from other countries or in transit.

Inter-urban public services only. j Estimate based on the reasonably conservative assumption that each passenger car travelled about 6,000 km annually in inter-city traffic, with an occupancy rate of about 2.5 persons per car.

4/ Includes international traffic; without international traffic average distance would be about 300 kn.

Source: Secretariat for Transport and Communications. Table 3

YUIGOS LkVIA

INVESTIIENT IN TRANS PORT, 1954-1963

(Billions of Dinars) /

YLAR TOTAL RAILWAY HIGHWAY OCEAN PCRTS INLkND (incl. vehicles) AND SHIPPING WATEPX.A'.YS AVIATION

1954 67.9 36.6 15.8 12.6 1.5 1.3

1955 73.5 141.6 15.0 l.h4 1.9 008

1956 90e2 51.2 18.1 18.3 2.2 0.4

1957 104.0 55.3 26.0 17.9 3.3 1.7

1958 102.5 Li442 37.5 15.5 4.2 1.1

1959 124.0 18.7 44.0 24.4 5.4 1.5

1960 143.3 50.8 59.8 23.7 5.8 3.2

1961 162.6 50.4 71.6 26.9 6.4 7.3

1962 162.2 47.2 78.3 25.3 6.2 5e2

1963 j 160.0 40.0 83.0 18.0 6.0 13.0

/ At current prices. The index for producers prices increased about 2 percent annually during this period.

2/' Estimate. YUGOSLAVIA fl0~~~~~LA2LRAIIi4AIS T~~~~~~~~~~~~hbl,_4

Su,aory of Selectd OeairStniC.1958 - 1963

1 5 a/ 99611962 1960 1963 I. TRAFFIC St,,,, N.G. St.G N1G St. G, N.G, S. .. St.G N,G St.G. N.0.

Poassengers carried (million) 162.5 21.5 169.7 21.1 189.5 22.7 175.5 19.5 n... n.e. n.a. n.e. Posonengro carried, tot,] St.G.+ N.G. (million) 184.0 190.7 2.12.2 195.0 192.9 201.3 r'ase.e.gro-yn (million) 8,048 829 8,397 853 9,502 947 9,224 865 n..- n.e. n... n.e. Pessenger-Ke, tot3i St.G.+ N.G. (million) 8,877 9,250 10,449 10,0)89 9,908 10,673

Freight-Tone carried h/ (million) 49.7 7.6 53.1 7.6 57.4 7.9 57.0 7.2 56.1 7.5 63.9 7.9 Freight-Tne car,ild, total St.G.+ N.G. (0111mm) 57.2 60.7 65.2 64.2 63.6 71.5 Freight-Ton-IOn b/ (miliie)11,610 .1,421. 12,535 1,440 13,757 1,434 .13,664 1,2Z77 13,663 1,370 15,290 1,455 T Froitht_ o_EmK, totel St.G.+ H.G. (nillion) 33,031 13,974 15,191 14,941 15,033 17,345

Traffic Unit. g/ (mt1lion).19,658 2,250 20,932 2,293 23,259 2,381 22,888 2,142 n.e. n.e. n.e. n.e. Tr.ffic Unit~, total St.G.+ N.0. (million) 21,908 23,224 25,640 25,030 24,941 28,018 22. 0FERATICU

Trein-K,n, Total (000) 73,938 15,135 80,24 15,085 09,210 15,551 93,152 14,883 95,330 2.4,374 100,621 14,694 Passenger(0) 35,265 4,708 38,912 4,852 45,174 5,130 47,970 4,971 51,01-1 4,774 53,032 4,681 Freight (00000) 38,673 10,427 41,230 10,353 44,036 10,421 45,182 9,912 44, 319 9,600 47,589 10,013 Tr-ain-IOn by mode of traction, Steon (000) 71,088 14,748 74,879 14,808 78,989 15,147 70,151 14,519 61,499 14,0.13 61,711 14,311 * a ~~~~~Diesel(000) - - - - 1,354 - 00,221 - 16,661 - 18,112 - * Elec~~~~Mtric (020) 1,587 - 1,623 - 2,101 - 2,805 - 3,431 - 4,967 - Railoar-eet-kam, Diesel (000) 1,211 387 3,512 377 6,671 404 9,767 364 13,536 361 15,085 383 Electric (000) 52 - 128 - 95 - 208 - 203 - 346 -

Total Trein-Nie, St.G. + N.G. (00) 89,073 95,6917 104,761 108,035 109,7014 115,315 Gross-Ton-Km, Steem (million )33,799 2,456 35,956 2,497 38,304 2,603 33,217 2,558 28,008 2,487 29,485 2,611 0 Diesel (million) 47 29 130 28 706 31 6,298 27 11,.361 28 12,830 30 Electric kmillion) 654 - 715 - 843 - 1,271 - 1,593 - 2,628 -

Tot.,! Green-To-Xe (millimn)34,503 2,485 36,801 2,525 39,853 2,634 40,786 2,5835 40,962 2,515 44,943 2,641

Total Groso-Ton-Fon, St.G. + N.0. (million) 36,988 39,326 42,487 43,371 4.2,477 47,5814

Loconotive-Nn d/ (0, 9,1 177 12842,9 7772,1 7442,6 7992,1 924 2,2 Steam0 8252,5 02842,9 0,7 2,1 7442,6 ?91 112 8,5 36v Diesel (00) 164 - 190o - 1,746 - 11,953 - 19,032 - 21,089 - laectric (000) 2,0(66 - 2,151 - 2,714 - 3,430 - 4,112 - 5,717 - Railcar-Yin, Diesel (000) 1,357 387 3,683 377 7,169 404 00,850 364 16,571 361 20,587 383 Electric (000) 66 - 180 - 116 - 231 - 216 - 346 -

Total Motive Power-Unit-IOn i(! (000) 101,86 22,144 109,068 22,07r?5 .19,522 22,523 123,898 22,125 117,850 21,473 136,993 212,017

Total Motive Fewer-Unit-INn, St.G.4 8.G. dJ(000) 124,012 131,143 142,045 146,023 149,323 159,010 Ill. OPERATINGERFICOIONY EOngine-lOnper engine-doy oneiliable dI/ steenm loccomotives (Ikn) 194 154 198 152 219 155 207 159, 200 157 200 160 Dioeld ()kooetve 92 -363 ./ - 3948 - 408/ - Electric looeeotive'e (ka,) 353 - 368 - 414 -408 - 433 - 447 - Diesel railcare (l3e) 74 354 260 207 304 370 356 334 404 24.4 397 349 Trelflic-Uniteper trein-]on, St.G. + 8.0. 246 243 245 232 228 243

Freight-Ton-Y. por freight-tr-in km 300 .136 303 139 3.11 138 302 13 308 14 332 146 Fr-eight--To-n-N per freight-c.r in fleet (000) 191 147 202 1.49 219 158 215 142 214 156 249 166

Average tur-n-round tine cr fraeight care LI (days) 5.3 4.8 5.5 5,0 5.3 4.4 5.8 4.7 5.6 4.5 5.2 4.3

Averege 10.2d per cr(twon) 14.0 11.1 14.2 11.2 1.4.2 11.1 25.4 11.1 i4.6 11.1 .14.9 11.1 Ratio of loaded to total freight car-kmn 0.74 0.70 0.74 0.70 0.75 0.70 0.73 0.70 0.72 0.69 0.73 0.71 IV. STAFF FFFICIE2ICY

oN=borof jbpioyeee 129,84.5 138,945 145,016 1.4,174 145,231 149,774

Traffic tUeite per Mnployee (000) 160 167 177 168 170 107

Grose-ToXn- per Bnplaoye (DION 285 282 3?292 .. 92 1 Reployeee Per kmnof line 11.2 11.9 12.2 3.2.5 [ 12.4 .12.6

Nota, a g/ St.G.= Standard Gouge; H. 0. = Narrow Gouge. 8/Including depaortmnntal traffic. 8/Traffic units ror mode up by adding paasenge.-kmn and tee-km. 8/Including ehinting, double beading, etc. &/Rcoluding15 dienel electric loconotivee on deed line eince 1901. LITur-around tine of freight caret member of aneilable cardays per year divided by total of core loaded In the eyeton plus earn entered londed into the 1- Source, Years 1958-1961 Statistice of International Union of Rail.eym (U00) Yeer, 1962 and 1963 Reports of the Community of Yugoslav Rni1weya A 0 FA 1- . g g

. oS a' ------°------r---

_ .0 ------N ° In~~~~~~~~~~~~~~~~~~~~~~~~~~~I

10 ~~~~~~~~~~~~~~C

H .0~~~~~~~~~~~~~~~~

F^ 0 H D '0i - 0

10 ~~~~~0 8 ' , * 0 $a o

C) °oJ F' o.0 ? s

V0 ' H k

, F' F 0A C^ F'),

_ H'______- _HJ- _ - _ _ [ Hg_

H -3------

g a0 900 'A

o H~~~~~~~~~~c

H ' "' 'P

3-i '3 ,-3S '' _ _ 3 0 YUGOSLAVIA

YUGOSJAV RAIlWAYS

Motive Power and Rolling Stock, Yearly Averages 1958 - 1963

1958 f/ 1959 1960 1961 1962 1963 St. G. N. G. St. G. N. G. St. G. N. G. St. G. N. G. St. G. N. G. St. G. N. G. I. I CTIVE POWER

Steam locomotives

In fleet (nos.) 1,713 542 1,711 538 1,704 533 1,691 524 1,64.1 520 1,596 506 Available (nos.) 1,374 387 1,426 391 1,349 394 1,285 373 1,204 367 1,220 370 Available () 80 71 83 73 79 74 76 71 73 71 76 73

Diesel locomotives /

In fleet (nos.) 9 - 9 - 66 - 95 - 136 - 154 Available (nos.) - - - - 52 - 90 - 132 - 142 - Available(%) - - - - 79 - 95 - 97 - 92 -

Electric locomotives S/

In fleet (nos.) 18 - 18 - 22 - 27 - 29 41 - Available (nos.) 16 - 16 - 18 - 23 - 25 - 35 - Available () 89 - 89 - 82 - 85 - 86 - 85 -

Diesel railcar sets dM

In fleet (nos.) 50 5 60 5 107 5 109 5 160 5 193 5 Available (nos.) 45 3 37 5 60 3 75 3 112 4 142 3 Available (%) 90 60 62 100 56 60 69 60 70 80 74 80

E2ectric railcar sets e/

In fleet (nos.) 4 - 4 - 4 - 4 - 4 - 4 Available (nos.) 3 - 3 - 3 - 2 - 2 - 2 - Available(%) 75 - 75 - 75 - 50 - 50 - 50 -

Total H.P. of Motive Power Units

Steam (000) 1,266 151 1,347 181 1,375 196 1,314 167 1,235 160 1,239 165 Diesel (000) 17 2 24 2 99 2 240 2 262 2 280 2 mectric (000) 47 - 47 - 61 - 96 - 313 - 141 -

II. ROLLING STOCK

Passenger cars

In fleet 4,967 905 4,983 927 5,089 998 5,254 1,007 5,355 995 5,226 991 Available (%) 88 88 91 90 90 91 92 90 90 90 90 90 Total seating capacity (OCO) 207 18 210 19 221 21 231 24 240 26 242 23

Freight cars

In fleet 61,007 9,679 62,335 9,582 62,938 9,059 63,480 9,0214 63,580 8,796 63,796 8,741 Available (%) 85 93 91 95 92 94 92 94 93 94 95 95 Total carrying capacity(0WOtm 1,133 113 1,180 114 1,225 106 1,275 109 1,294 106 1,342 105 Average capacity per car itonb) 18.6 11.7 18.9 11.9 19.5 11.7 20.1 12.1 20.3 12.1 21.5 12.0

Notes: a St. G. = Standard Gauge; N. G. = Narrow Gauge. i Excluding 15 diesel electric locomotives on dend line since 1961. S/ Lncludes 17 locomotives built in 1934 sad before. S Units of powered cars and trailers. Figures include 12 sets built in 1939 and before. £/ Units of rowered cars and trailers bullt in 1937. Without railc4r trailers, but including rertaur nt, sleeping and service c. rsand baggage and mail vans. YdGOSLAVIA

YUGOSLAV RAILLAYS

FreiFht Traffic by Ma1or Commoditiea. 1050-1970*

(Billions of t,on-kn)

Copmodits l9S 1962 1963 1Q64 1965 1966 1967 1968 196 1970 Coal 2.3 4.1 4.8 5.9S.2 5.;4 5 8 6.0 6.3 6.6 Ores and Concenrrbtes 0.4 1.7 1.8 2.1 2.2 2.3 2.5 2.6 2.7 2.8 Building Material 0.8 1.3 1.5 1.6 1.7 1.8 1.9 2.0 2.] 2.2 tAber 1.7 1.3 1.5 3.5 1.6 1.7 l.g 1.9 2.0 2.1 Mel.allurgic Products 0.3 1.1 1.3 1.4 1.4 1.5 1.6 1.7 1.7 1.8 Cereals 0.1 0.7 1.0 0.9 0.9 0.9 1.0 1.0 1.1 1.1 Fertilizers n.a. 0.7 0.9 0.9 0.9 0.9 1.0 1.0 1.1 1.1 Petroleum end derivatives 0.3 0.5 o.6 0.7 0.7 0.7 0.8 0.8 o.8 0.9 Non metals 0.1 0.4 0.5 0.5 0.5 0.5 0.6 o.6 o.6 0.7 Cement 0.3 0.2 .0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.4 Other 2.7 2.5 2.8 _3e0 1.2 _3 7_.1 .o:al C.rload 9.0 14.5 -17.1 17.8 18.6 1''.4 20.8 21.7 22.6 23.8 Less tihan Carload n.a. 00. 6 0.6 0 6 -70.7 0.7- Grand Total 9.0 15.0 17.6 18.3 19.2 20.0 21.5 22.4 23.3 ,24.c

* 19-0-1963 actual; 196'-1,70 forecast by Railway. Figures may not add because of rounding. Canio-dity statistics r!a difi-er slit,: tly from oneretional st istUcs beccuse of difierent collection -,ethod.

1,ova.aber 25, 1964 YUGu.,LAVIA

YUGCSIAV RAILWAY TRAR!SPORT E3:TE2.PRISES

Revenuo.Sxpenses ana Nct Income Data

Actual 1959 to 1963 Estimated 1964 to 1970

(Bil)io1s of Diiars)

1929 1960 1961 1962 1963 1964 1965 Operating i.evenues 1966 1967 1968 1969 1970

FassCnrZ.r 25 33 49 52 60 Freight 61 63 65 638 70 73 76 105 132 155 156 177 184 Yail 193 201 216 225 235 247 - - 2 2 2 2 3 3 2 3 2 Other 14 3 21 37 49 66 _6 _6 70 70 70 71 71 Gross Opes-tifng Revenues 144 191 243 259 305 316 328 339 356 368 381 397 Less Inter-entUrprise items .a, n.a. 47 66 80 .84 SS 8S 87 89 S9 91 Total Operating Revenues 144 191 195 194 225 232 243 253 269 279 292 306 2reri"a_-ExLenses (i:et o. Inter-enttrprise Items)

"a e- !. d salaries n.a. n.a. 56 55 67 68 71 74 76 78 cl Fuel and electric Power 22 84 25 28 29 32 33 34 34 32 j2 30 31 Hate:ials and Supplies' n.a. n.a. 4 5 8 8 8 9 9 9 9 10 Purchase taxes - - 1 1 Management fees 2 2 2 2 2 2 2 2 3 3 5 7 8 7 Desrecietion 7 7 7 7 8 8 21 21 20 21 26 50 53 57 64 69 Mtiscellaneous - Renewals 74 78 22 28 5 5 55 _-40 40 . 4 42 44 45 Total Operating Expenses 138 160 170 173 198 208 215 223 231 239 248 258 let Oxprati-_ Reve-.ues 6 31 25 21 26 24 28 30 A8 40 44 48 Kiscellaneous Re -nue 17 1 5 3 2 1 2 2 2 2 2 2 Net :e.eenue before interest 23 32 30 24 28 25 30 32 40 42 46 50 Lnterezt - - I 1 1 1 2 2 3 7 7 Incone b2forc ded-ajctio s 23 32 29 23 27 24 28 30 37 39 59 43 Deductions frc: I.come:

9ay:ents to Gover.ament for use of fixed ussets 1 i 10 10 6 7 7 7 8 10 10 10 !dymnnts to social investment funds n.a. n.a. 2 4 4 5 6 6 6 8 Ap,rop-iai.d Lo 1odernizetion Fund e. -. . 5 5 5 6 6 6. Total Deductions 3 12 12 15 15 16 17 20 22 22 24

Net Income 20 26 17 11 12 9 12 1a 17 17 17 19

Opera i>r Ratios 9 84 87 89 88 90 89 88 86 86 85 84 Times Intoroct rned _ Tines Inter,...-t _ 30 19 20 17 17 Del:tSe- %icc ~~rnc- - - 143., 15 14 7 Co.cra.ge _ _ _18 5. ::eturn o, .;v:-r.;:7 FLxed Aznstz 1.4. 6.5 .,2 .i4 ! .0 *;.7 2 - 5 5.8 YUrC.C'dL',-7lA

YUCOSLAVRAIUII.AY TRANSPORT ENJTERFN1ISS

Balance Sh.et Data

Acetual J062 - 96 ndE tmae)d 1964 - -1970 (Billionr of L'inors)

1962 9 1 1965 19b6 1967 6 1969 1970 A s9s e t s

Current Assets

Cash - operating 21 22 ------investment 17 25 Total cash - - 38 47 44 32 25 28 Accounts receivable 31 33 52 14 4 4 4 5 5 Other current items 5 5 5 36 40 32 33 33 33 Materials a-d Supplies 33 34 34 22 27 28 28 29 29 30 30 31 Total current assets 110 118 108 97 92 95 99 102 122 Fixed Assets

Land - rail-way 7 7 7 7 Pernanent vay and structures 7 7 7 7 7 726 765 768 796 823 Rolling 963 998 1,078 1,132 Stock 397 407 427 Buildings 449 485 520 561 594 620 60 64 64 65 65 Cther operatinE property 72 73 73 74 424 47 62 78 97 -10 124 135 Cross operating fixed assets 1,252 1,287 1,313 1,378 1,458 1,659 1,748 1,876 1 Accumulated depreciatio. on ope:ating fixed assets 654 682 7 1 74 - 906 1.0L9 Net Operating fixed assets 975 1,.26 598 -60-5 4 '*ork in progress 5 616 7S3 773 828 842 33 36 99 149 2G2 156 Social standard net assets 170 146 132 28 33 38 4_. 47 52 57 Totcl net fixed assets 62 66 659 674 719 785 865 961 1,000 1,036 1,040 Total Assets 769 792 827 882 957 1,056 1,099 1,138 1,162

L i a b i 1 i t i e s

Current Liabilities

Accounts payable 11 14 14 14 14 14 15 14 Cur, ent accounts - wages a .d other 15 items 50 50 50 50 51 51 51 Accrued debt service 52 52 1 3 1 1 1 1 1 -_1 1 Total current liabilities 62 67 65 65 66 66 67 67 68 'Lne-Term Debt

'Working capital 9 4 5 6 6 7 7 8 Operating fixed assets 8 36 37 55 83 124 154 172 Social standaid property 174 172 11 12 14 1S 17 19 20 21 22 Total long-Term Debt 56 53 74 104 147 180 199 203 202 Total Liabilities 118 120 139 169 213 246 266 270 270 Enuitv 651 672 688 713 713t Plo 833 868 891 Total Liabilities and Equity 769 792 827 882 o57 1,056 1,079 1,138 3,162

Ratios:

1. Current Ass-ts to Current Liabilit.es 1.8 to 1 1.8 to 1 1.7 to 1 1.5 to 1 1.4 Lo 1 1.h to 1 1.5 to 1 1.5 Lo 1 1.8 to 1 2. Current Assets, less ht,rlals and Supilies to Current Liabilities 1.4 to 1 1.3 to 1 1.2 to 1 1.1 tl' 1 1.0 Lo 1 1.0 to 1 1.0 3. Debt to Eujity to 1 1.1 to 1 1.3 to 1 8/92 7/07 10/?O 1,/87 c/8E4 18/p- 1')/Fl 19/pI1 18/82

. ov:nmbr 25, 196/. Table 10 YUGOSLAVIA

YICOSLAV RAILWAYS

Seven-Year Investment Plan 1964 - 1970

Dinar llS$million million equivalent

I. Capital Investments - Railways

A. Reconstruction and Modernization Program of Mainlines, 19 6 4 - 1968 1. Installations for Electric Traction on 1,578 route-kon 38,960 51.9 2. Installations for Signalling and Telecommtnication on 1,509 route-km 35,825 h7.8 3. Construction of new marshalling yards at Belgrade, Zagreb, Ljubljana and Skopje, and modernization and extension of the existing marshalling yards at Nis and Doboj 52,975 70.6 Subtotal 127,760 170.3 4. Contingencies (10% of the estimated expenditure 1965-1968) 11,013 li .7 Subtotal A 138,773 185.0 B. Other Investments, 1964 - 1970

1. Relaying of tracks and reconstruction of the substructure of lima 149,000 198.8 2. Contribution of Railway Enterprises to the cost of elimination of level crossings 6,370 8.5 3. Reconstruction of bridges 7,983 10.7 4. Construction of a local freight yard at Belgrade-Zemun and of a freight shed at Zagreb 7,877 10.5 5. Remodeling of the railway junctions at Sarajevo and SkopJe, and of the railway installations at the Port of Rijeka 21,hh3 28.6 6. Purchase of 250 electric locomotives, 201 mainline diesel locomotives and of 127 diesel shunters 103,665 138.2 7. Purchase of about 22,000 freight cars 86,980 116.0 8. Purchase of 45 diesel railcar sets, 29 electric railcar sets, 66 rail- buses and about 1,600 passenger cars 77,60L 103.6 9. Reconstruction of other stations and junctions 37,013 49.4 10. Conversion of about 80 km of narrow-gauge lines into standard gauge 13,455 17.9 11. Replacement of signalling installations and other reconstruction 29,632 39.5 Replacement 12. of equipment and miscellaneous 25,930 3h.6 Subtotal B 566,954 756.3

Total Capital Investments Railways 705,727 9b1.3 IL Capital Investments - Social Standard

Staff housing, welfare and recreation facilities 38,738 51.7

Total Investment Plan 744,465 993.0

Note: 1) Section IA of the above Investment Plan represents the Project. Execution is scheduled for the first five years - 1964-1968 of the Seven-Year Plan period, 1964-1970. Contingencies are included only in the estimated expenditure 1965-1968.

2) Sections IB and II are scheduled for execution during the entire seven-year period. (Schedule of expenditure, see. Table 13). Contingencies are not included in this part of the Program which is to be financed from sources other than the proposed Bank loan.

3) The estimated value of imports is about US$35 million equivalent for the Project and about US$73 million equivalent for the other investments as per Section IB. November 25, 1964 Table 14

YUGOSLAVI

YUGCf8LkV RAILWIA'

Estimated Cost and Schedule of Ebcpendituro of the ProJoet. 1964 - 1968

I Minimum I Ttal Cost Va-lue of n5Eti,na,t(d xnenad iture_lnD r xi: o limpnrted I I ~~~~~materials us$ US" mill3 icn 'Dinar Eu equivalent lin lion yk-- ' l96 aq-,s j662 ~ C 1. Intatlletiono for J-2ect2Ic Traction

A. in-ies wxith 25,0C0 volts, 50 cycles altoriaLing currunt (ACG.) II

I..Dobova - llngreb - Belgrade - Ilis -I26,031 I 34.7 I I 2,746 5,909 8,63D (,i3 2,143 Shcopje 1,113 kcm' I 2. Vroolje - Sz-rajevo .2/23 ' 5.103 t 6.8 I I 0 902 2,3/,3 1 C)"1

Subtotal A.C. lines 1, 356 ian 1 31,134 I 41.5 I 2,796 6,811 11,1734 2,0)-232)

S. Lines w~ithi 3,000 volts, direct current (D.C.)

I. Je.senice-I.jubljnan-Dobova 177 kem' 6,432 8.5 1 3,840 2,174 412 2. larlovac - Zagreb 45 ": 4,394 1.9 794 600--

S,.zbLotal D.C. lines 222 ]ail 7,826 1 104 I ?22 .J?-

Subtotal 1,2LEI go' 38.960 I 51. I 7.43Q .9- 11.591 '2 ,2

11. Insta-llations for Signalling sand I Teloccemaum:ieation 8

A. Jesenice -Zegreb, and Novska - Belgraee- Lapovo - His - Skopje-Titov \'eles 1,115 Ice' 27,768 I37.0 ' 2,660 5,917 6,29)9 7,Y,,1 5, 550

B. Rijeka - Zegrreb 229 4,4.12 5.9 I 870 1,800 1,742-

C. Vrpolje - Doboj and Zenica - Sarajevo 165 "I 3,4I t I I 92 iL/ I I±L0

Subtotal 1L59. km ' 58 47.8 12.7 I 3.58 8.64-1 2.L2 I2 L L

111. Con!tituction and Mlodernizaotion of I rlshnl:Ln~ Yins

A. Cone truction of neit marshalling ynrds ' vith the needed connecting lines sand facilit.ies for the neintentocee and repair of locanotives end cars I I

1. Belgrade 17,200 I 22.9 I 2,200 4,150 5,118 3,76'1 1,,-22 2. Za~greb 1 2,630 116.8 1 I 1,220 2,690 3,180 3,62") 1,2 3. Ljub]jana 8/ 7,200 1 9.6 1 S60 1,620 1,150 1,270 1.7C0 4. Skopje I 9,040 22.1 1 2,300 3,768 2,926 4,6- B. Moderni?.ation and Extension of existing m:rsohalling yards

1. Nis d/ ' 3,1-10 1 4.1 I 50 595 824 956 68 5 2. Doboj e/ 3,75 5. 1 - ,620 1.655 -*520

Subtotal I 5297 0. I 6.0 1 6.6~30 144 14 8 53 10.772 6-22.2

Total Allocated I 127,760 t 170.3 a 32.7 I 17,640 32,669 35,956 27,339 14, 156

Contingzencies 111.013 4. 1I 3.267 4596 2.,734 i,iM

GRAND TOTAL 1 38,773 1185.0 I 36.0 I 17,640 35,936 39,552 30.-0`73 15,572

a/ Amteonts include only materials not manufactured in Yugoslavia which are to be imported. Oustam duties are not included. The total foreign exchiange cost of the Project would be highier than the above minimum value of imported materials if foreig;n fires would be succesefu-l bidders.

8/Installation of eutcssatic block on both branchies of the section Zagreb-Ncovska and on the section Doboj-Zenica is already cemplete. 8/ Works have started in 1962. dJ/ No mainitenance and repair facilities for locamotives are included. e/ fliesrelated maintenaince and repair facilities will, be constructed at Sar-ajevo. They are included in this estimate.

llcvtiber25, 1.96/4 YUGOSLAVIA

YUGOSLAV RAILWAYS

Schedule of Project Works to be ccmnpleted 1965 - 1968

Beginning of operation by E e c t r i f i c a t i o n Signalling a n d Teleconmunication Marshalling Y a r d s end of year

1965 Jesenice - Ljubljana - Zidn-i Mozt (D.C.) Jesenice - Ljubljana

Karlovac - Zagreb (D.C.) ' about 65 km I Zagreb - Sisak - Hlovska (A.C.)

Belgrade - lapovo, via Southern Branch (A.C.) I

Total about 350 Im of lines I

1966 ' Zidani rost - Dobova (D.C.) I Ljubljana - Zidani Most I Ljubljana, Zagreb and Skopje with about 140% of their final capacity; mn-acting Zagreb - Dugo Selo - Navska (A.C.) ' Belgrade - Lapovo - Nis I lines of the Belgrade Yard for by-passing I I ~~~~~~~~~~~~~thepassenger terminal. '3elgrade - Velika Plana, via Northern Branch (A.C.) t Skopje - Titov Veles

LIapcvo - Nis (A.C.) ' Vrpolje - Doboj and Zenica - Sarajevo Total about 400 km Rijeka- Zagreb Total about 700 kmlo

1967 Dobova - Zagreb (A.C.) Skopje and Doboi with full capacity

I Novska - Slavonski Brod (A.C.) Nis with 75% capacity Vrpolje - Sarajevo (A.C.) t Total about 400 kmI

1068 1 Slavonski: Brod - Belgrade (A.C.) t Zidani Most - Zagreb and Novska - Belgrade ' Belgrade, Ljub2jana, Zagreb and Nis I ~~~~~~~~~~~~~~withfull capacity Nis - Skopje (A.C.)I Nis - Skopie IA I) Total about 400 km ' Total about 750 kmo I I I a/ InstaLlation of autonatic block systems on the sectimns Zagreb-Novska, both branches, and Doboj-Zenica were started in 1963 and will oe completed by end of 1965. These works are not included in the Project.

November 25, 1964 YTJGOSLAV RAILWAY TR4NSPORT ENTFRPRISES

Projected Cash Flow Data, 1961h - 1970 (Millions of Dinars)

Totals 19641 1965 1966 1967 1968 1969 1970 196L- 1970 I. Cash Reqairements % Capital investments - railways 83,073 Capital investments 106,989 122,h156 113,002 107,201t 92,855 B0,1118 - social standard 5,L61 5 81111 705,727 Total capital investments 6 o60 5,677 5 701 5,089 11906 88,2 128,3516 38 738 118,679 1 97,91,4 89.0 Debt Service: Interest 1,336 1,800 Repayments 2,077 2,9141 3,4131 6,679 6,5Lt2 3 765 5 039 6 761 21,,779 Total Debt Service 9 730 12 163 15 399 17.831 70,668 5,101 6,839 8,838 12,6441 15,594 22,078 24,353 95,447 11.2 Charge in working capital _L86o 773 535 321 21,6 1179 335 - 2,171 - 0.2 Total cash requireinents 88,775 120,145 137,889 131,6LtLI 128,7L,5 120,501 109,742 837,741 100.0 E. Cash Available

Net income before interest 10,774 13,332 Depreciation 111,990 19,L186 20,133 23,836 26,153 119,795 53,137 57,371 128,70L, Contribution to Modernization Fund 63,811 69,012 7,0o59 78,002 4ht5,187 118113 51L65 5.,109 Total internally-generated 5 f01 5 967 6 186 6,56L. 39 funds 65,1t12 7,615 77,770 89,098 916 95,2 104,081 110,719 6807 73.4 Lois:

Proposed IEBD 16m - 17,358 12,817 From republics 13,494 8,831 - and cities 5,858 7,999 - 52,500 Domestic corumercial 8,521t 6,8411 5,328 2,916 2,237 banks 3,576 11,7!17 5,0olt 39,703 Domestic supplier credits 5,601t 6,632 6,371t h1,8911 6,900 6,101 13,130 36,867 Foreign supplier credits 8,065 7,880 7,770 6,991 56,837 It28 11188 9 11o6 10 8311 Total Loans 6 116 3 158 1 966 36 096 1 Io3 118 917 -t 33 3Lt,787 20 21d 1T13O 26.5 Grants- major users of freight cars - - 11,328 1,130 1,750 - - 7,208 0.9 Cash surplus beginning of year: Operating funds 21,732 CaDital investment funds 211,896 Total cash surmlus. beginninc of year 16,628 40,027 31,590 21,716 28,138 31,h02 31.,8110 _ __ Total cash available 128,802 152,035 162,605 159,782 159,787 155,31,1 161,6l,7 8113,018 100.8 Cash position, end of year . 10,027 31,590 211,716 28,138 31,f112 3),,81,0 51,905 Increase in cash position - 196-1 - 1970

Nnu m 9c, 'bA,I a Y UGOSLAVIA RAILWAY SYSTEM TO SAtZSURG~ 10T. VlN:- < _ I A u S T R I A ._., _ J -\ l t ~~~~~~~~~~~~~HU N G A R Y r

FTR,Ep~ ~ ~ ~~ ~ ~ ~~~~t I R UC Mel A N iirsr A

I ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ NOEAIN5\k AIE B e ooso1 (._s

' Lines withgutotai blC 5,X / ! 6 _

III SAAV-WC PROEM AO, No.31-A

OCTNIAc e96e 1000-14026 DC~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Eiecvot l!IRrnt3 I A lotvr t o 7~~ ~ 20 ~40 60 ~ 05 n0 *

III LOan sARAJEvo-pLO(RNo 361-Yu PkDJeCT .i \ pW \~RAJEVO

IV. OTEER O 20 40 60 EO 2 under ~~~Cbonstrctonji lOO ,. e 3 } / 4°~Wad.

IV.~~~ ~ OTHE 0' 20 OzqMotr40 0 60 0

OCTOBEK~~~~~~~~~~~~~~~~~~~~~~~ i96% I BD14