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DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION

Public Disclosure Authorized Not For PubliuUse

ReportNo. 158 a- IRN Public Disclosure Authorized

IRAN

APPRAISAL OF THE TEHRAN URBAN TRANSPORT PROJECT Public Disclosure Authorized

July 18, 1973 Public Disclosure Authorized

Urban Projects Department

This report was prepared for official use only by the Bank Group. It may not be puL or cited without Bank Group authorization. The Bank Group does not accept responsibuiyT6y accuracy or completeness of the report. CURRENCY EQUIVALENTS

(As of February 13, 1973)

Currency unit = Rials (Rls) US$ 1.00 - Rials 68.2 Rials 1 = US$ 0.01h7 US$ 1 million = Ri71s 68.2 million Rials 1 million = US$ 1h,651

MEASURESEQUIVALENITS

1 kilometer (km) = 0.621 statute mile 1 square kilometer (km2) 0.386 square miles

EISCAL YEAR

Ends M4arch 20th

LIST OF ABBREVIATIONS,ACRONYMS AND DEFINITIONSUSED a' THF.REPORT

CIF - Cost, lnsurance and Jieight Dioub _ Ditch along a street, used for limited drainage and once used to provide poor house- holds, water for domestic needs Doxiadis - Doxiadis AssociatesInternational - Consultantson Developmentand Ekistics FY - Fiscal Year PO - Plan Organization SOFRETU - Societe Francaise d'Etude et du Realisationde TransportUrbajn IRAN

APPRAISAL OF THE TEHRANURBAN TRANSPORT PROJECT

TABLE OF CONTENTS

Pa e No.

SUMMARY AND CONCLUSIONS...... *...... i ... - iv

I. INTRODUCTION...... ***..**..**..o*.**ee.***e 1

Ao The Economy ...... *..... 2 B. Urbanization in Iran and Tehran ...... 3 C. Urban Transport - Present Situation ...... 5

III. URBAN GROWTHAND TRANSPORTPOLICY IN TEHRAN- MAIN ISSUES 8 A. Past Approaches and Present Conflicts ...... 8 B. Alternatives and Growth Options ...... 9 C. The Tehran Development Council .-.. -... 10 D. Towards a Transport Policy for Tehran 12

IV. THEPROJECT r .to...... 14

-Bo Main Features ... 14 C. Cost Estimates ...... 18 D. ProjectFinancing Plan ...... 20 E. Organizationand Management ...... 20 F. Procurement ...... -...... 22 G. Disbursement . 22 R. Training ..... 23 I. Ecology ...... 23

V. FINANCIAL ASPECTS OF THE UNITED BUS COMPANY ..o..... 24

A. Past FinancialPerformance ...... c 24 B. Present Financial Position ...... 25 C. FinancingPlan ...... 26 D. FutureOperating Results ...... o...... 28 E. FutureFinancial Position ...... 29 F. Monitoring - Financial and Operating Targets .. 29

The report is based on the findingsand reconmendationsmade by the consult- ants SOFRETUand on the findingsof a Bank appraisalmission which visited Tehran from February16 - March 3, 1973,and was composedof Messrs.R. A. Sison,P. Ljung (UrbanProjects) and Messrs.K. Hansen,G. Hughes,K. Strong and Ms. M. 0. Smith (Consultants).Messrs. R. Venkateswaran(Urban Projects) and M. G. S. Aiyer (EMEMA,Programs I) assistedin the missionduring appraisal, and Ms. I. Ozusta (Consultant)assisted in the preparationof the final report. TABLE OF CONEZTS - Continued

Page No.

Vi. PROJECTJUSTIFICATION ...... 32

A. General...... 32 B. Objectives ..... 33 C. Rate of Return ...... 33 D. Other Benefits -..... 34

VII. AGREMEENTS REACHED AND.RECOMYENDATIONS .. 36

ANNEXES

1 - Factors'-GuidingUrban- Growth in Tebran (Present Trends and Basic Data) 2 - The United Bus, Company of Tebran- 3 - Notes and Assumptlons on Financial Statements . 4 - United Bus Company - Income Statement 5 - United Bus Company - Balance Sheet 6 - United F:;usCompany.- Source and .Appolication of Funds- 7 - Advisory Services to-the Tehran Development Council - Suggested Terms- of Reference, 8 - Long Term:Transport Studies - Suggested: Terms of Reference 9 -; The Economic and Technical Advisory Group - Suggesited Terms of Reference 10 - Traffic Circulation and-Egineering Improvements8 11 - Work Program for Traf-ficCirculation and-Engineerng -Improvements 12 - Estimated.Cost of Proposed Depot: 13 - TraPublic Transport q

CYARTS

7658 - City of Telran. 7667 - Organization of the United Bus Company

MAPS

10355 - Present Land Use

- 10389 - Major Street System 10361 - Traffic ImprovementProposals 10362R - Detailed Traffic Improvement Proposal - ---- L~~~~~~~~...... ___ IRAN

APPRAISALOF THE TEHRANURBAN TRANSPORT PROJECT

SUMMARYAND CONCLUSIONS i. For the lower income segment of Tehran's population, the infra- structure shortages that have arisen as a result of heavy concentrations of people and economic activities within Tehran are approaching critical pro- portions. Nowhere is this more evident than for transport. The transport system is only adequate although increasingly overloaded for the 15% who ac- tually own a car; the system is seriously inadequate for all others. They must choose between a very poor bus service or a taxi service that is too expensive for daily use. The net result of such a choice has been the diver- sion of probablyas many as 400,000lower incomepassengers a day over the last three years. Loss of mobilityand access to the occupational,cultural, recreational and educationalaspects of Tehran'slife are a disproportionate hardship on the low income worker. ii. Tehran is a large city, not only measured by its population of 1.8 million,but in physicalsize. The urbanizedarea has sprawledto 350 kmh and the center city, where modern and traditional zones of commerce, finance and business, as well as goversment administration are clustered, is concen- trated in an area 5 km east-west by 6 km north-south. Industrial zones have developedalong the access roads outside the centercity. The scale of the city and its haphazardlydeveloped physical layout mean that commutingis a necessityfor the bulk of the labor force. Inadequatepublic transportation imposesnot merelyphysical constraints and loss of time but also a financial burden to the commutingurban poor on a day-to-daybasis. In the long run inadequatetransport impairs labor market flexibilityand reinforcesoccupa- tional, income and residential stratification that already exists to a marked extent. iii. Falteringpublic transitservice is the most obvioustransportation defectresulting from rapid and unplannedurbanization. Another problem is the road systemwhich is basicallyrelatively adequate in structurebut de- ficientfor the presentheavy flows of predominantlyautomobile traffic. Poorly interconnected radial roads into Tehran and an incomplete orthogonal road grid within Tehran cause almost constant congestion in the city. The projected net addition of some 275,000 passenger cars within the next ten years to the present level of 140,000 will, if unconstrained undoubtedly produce chaotic traffic conditions. Structural changes are necessary in the street network to decongest certain particularly poor areas. In the long run, major transport policies are required to halt the cycle of increased conges- tion, poorer public transit services and increased auto usage. The opportunity for positivepolicy on privateauto restraint,however, is dependenton in- creasedefficiency in and price competitivenessby public transport. - ii - iv. Orderly and equitable growth of the transport system, in the long run, involves determination about the social, economic and physical future of Tehran. Decisions to be taken on transport development, as on sewage, storm water drainage, housing and water supply recuire an adequate urban planning framework beyond that contained in the Master Plan of 1966. The Plan was predicated on arbitrary and artificial limitations on population growth, city size and new industrial investments - limitations which were difficult to enforce and which have been eroded by ad hoc decisions taken to relieve critical conditions in the short run and a continuing population growth well above that foreseen. Decisions taken in the absence of an ade- que.teurban planning framework have had only temporary results in meeting serious urban infrastructuraldeficiencies, and have prompted ever heavier concentrationsof people and economic activity in the centra-.area of Tehran. The city has grown concentricallyintensifying central area pressure, and conflicting with the westward growth of the city by stages envisaged in the 1966 Master Plan. Such a fundamental conflict between actual and intended growth points up the need to assess in depth alternative growth strategies for the Tehran urban region, and to plan future urban investments on a sys- tematic basis within t'aeframework of new urban guidelines. v. The Government of Iran's commitment to the positive development o' Tehran and to the formulation of an urban strategy that can tie together and rationalize development efforts is articulated in the Fifth Five Year Develop- ment Plan's proposed Tehran Development Council. The establishment of the Council is of immediate and overriding importance to t1he Government as a result of-the pressure of forthcoming critical infrastructural developments, of which transport development is one. Accordingly, in June 1973, a bill establishing the Tehran Development Council was presented to Parliament for enactment. Because of the urgent need to establish a comprehensive planning capability the Government has requested that assistance to the Council and developmentof an urban strategy be a part of a short term program of urban transport development. vi. The Government of Iran has requested the Bank's assistance in remedying serious immediate deficiencies of the transport system in Tehran while itself introducing complementary measures to control private automobile use in the highly congested city center area. This assistance would be closely coordinated with longer term plans for development of transport services and the establishmentof long term urban and regional planning capability required to guide and integrate basic infrastructural developments in the Tehran region. The project would cost an estimated US$65.9 million of which $42.0 million would be financed by a Bank loan. The project would consist of the following elements:

(a) Improvementsin public transport through the procure- ment of an initial order of 250 single-deckerbuses and 115 double-decker buses and a second order which will be based on further studies on bus fleet composition; repair and rehabilitationof the existing fleet; and the construc- tion and equipment of two bus depots; - iii -

(b) Implementation of traffic circulation improvements in the central area where bus traffic is particularly impeded, including the introduction of a system of one-way streets, construction of five underpasses, surface construction in two squares, and street improvements in the southern half of Tehran;

(c) Assistance to the United Bus Company in management and training and in determining operational and financial targets to be achieved through the provision of consult- ency services to an Economic and Technical Advisory Group;

(d) Assistance to the City of Tebran for the introduction of traffic improvements, design and supervision of works;

(e) Comprehensive long-tenm urban and regional planning for the Tehran area through the provision of consultancy services to the Tehran Development Council; and

(f) Review of existing transport studies and supplementary studies of the long-term transport system, and possible detailed design of a first phase of construction. vii. The proposed loan of US$42.0 million would cover the foreign ex- change costs or 64% of the total project costs. The local currency costs would be provided by the Government of Iran to the City of Tehran and the United Bus Company of Tehran as a grant. The proceeds of the Bank loan would be onlent by the Government to the City of Tehran for traffic circulation improvements and to the United Bus Company of Tehran, wholly owned by the City, for bus Improvements. Review of the long-term transport studies and supplementary feasibility work would be conducted under the Tehran Devel- opment Council. The Council's long-term urban and regional planning capability would be established progressively through the provision of advisory services and the deployment of a competent Iranian staff group. viii. A Traffic Planning Manager attached to the Mayor's Office and assisted by qualified staff from the City and qualified consultants would be responsible for implementation of traffic improvements. The General Manager of the United Bus Company, assisted by an Economic and Technical Ad- visory Group of senior Bus Company officers and foreign consultants, would be responsible for Implementation of bus improvements. ix. Contract3 for construction and for supply of equipment including buses, would be awarded on the basis of international competitive bidding carried out in accordance with the Bank's guidelines. A preference of up to 15% or the applicable customs duties, whichever is lower, would be applied to bids from local manufacturers of equipment. Iran has no preferential tariff agreements *vith other countries. - iv -

x. The Bank loan would be disbursedagainst the CIP costs of imported equipmentand the foreignexchange costs of equipment installationand consult- ancy services, the ex-factor.y costs of any contracts awarded to local manufac- turers on the basis of international competitive bidding, and 50% of the costs of civil works contracts(representing the estimatedforeign exchange component).

xi. The short-termurban projectis a necessaryand logicalstepp towardsameliorating critical problems of public transportation.andmobility within the centercity. Improvedbus and trafficcir.culation will provide criticaltime savingsto existingand potentialbus passengersand to auto- mobileusers (as a resultof decongestion).With the projectit is estimated that the average number of bus passenger trips will increase by 50% during the next five years,, restoring the long-term growth trend in bus ridership that preceded the recent three-year serious decline. The overall rate of return on the quantifiable elements of the project (traffic circulation and Bus Company improvements), based on time and operating cost savings is 28%.

xii. The project will also provide much needed unquantifiablebenefits in the form of institutional support to planned short-term transport improve- ments and to improvements in Iranis urban planning and policy-making cap- ability required for long-term transport and related infrastructural develop- ment.

xiii. The project is suitablefor a Bank loan of US$42.0million to the Government of Iran for a term of 15 years, including four years of grace. IRAN

APPRAISAL OF THE TEHRANNURBAN TRANSPORT PROJECT

I. INTRODUCTION

1.01 The Government of Iran has requested the Bank's assistance in fi- nancing an urban project in Tehran designed to meet the urgent need of the bulk of the population for improved public transport and related improve- ments in traffic and circulation, and in providing advisory services for long-term comprehensive urban and regional planning for the Tehran reqion. The short-term objectives of the project are remedial and aimed at restoring public bus service adequate for the mass of population and at arresting any worsening of traffic congestion. The long-term objectives are directed towards laying the institutional and planning groundwork for long-term urban and related transport solutions. The project provides for review and supple- mentary feasibility studies on long-term transport needs, and for the very important institution of comprehensive studies by the Tehran Development Council (TDC) legislation for which has been presented to Parliment in June 1973. The project is envisaged as a first step in long-term transport and related infrastructural development.

1.02 In June 1970, a loan of S42.0 million (Loan 697-IRE: Fifth Roads Project) was made to the Government of Iran, which included funds for a transport study for the metropolitan area of Tehran. In Mlarch1971, the transport study was initiated by contract between the French consulting firm, SOFRETU, and the Government of Iran. The terms of reference for the study specified that the consultants first focus on the immediate needs of the Tehran transport system. In April 1972, SOFRETU submitted its short-term transport recommendations and will be submitting preliminary proposals for the long-term transport system shortly.

1.03 The three-year project proposed for Bank financing consists of public transport improvements, including the procurement of buses and reor- ganization of the operations of the United Bus Company (UBC); traffic circula- tion and engineering improvements; assistance to the long-term planning and policy-making body for urban and regional development in the Tehran area. This would be the Bank's first urban transport project in Iran and should lead to other urban development projects resulting from the long-term trans- port studies of consultants and the much broader assistance for urban and regional planning. The project cost is estimated at US$65.9 million with a foreign exchange component of US$42.0 million. The proposed loan would cover the foreign exchange costs, or 64% of the total projlectcosts.

1.04 The report is based on the findings and short-term recommendations made by the consultants SOFRETU and on the findings of a Bank appraisal mis- sion which visited Tehran from February 16 - March 3, 1973, and was composed of M!essrs.R.A. Sison, P. Ljung (Urban Projects) and Messrs. K. Xansen, C. H}ughes, K. Strong and Ms. '1.O.Smith (Consultants). uIessrs. R. Venkateswaran (IJrbanProjects) and M.G.S. Aiver (EMENA. Programs I) assis'tedthe mission duiringappraisal, and Ms. I. Ozusta (Consultant)assisted in the preparation of the final report. -2-

II. BACKGROUND

A. The Economy

2.01 The last decade has been a period of exceptionally rapid growth in !ran. Total population estimated at 31 million in 1972, has increased at an average of 3% a year, while the urban population has increased at an average of 5% a year. Forty percent of the population now lives in urban areas. Half of the urban population is in just seven large cities (over 200,000 inhabitants) and half in some 250 or more small towns.

2.02 Iran's economic growth has been strong throughout the 1950's and 60's, with GNP.rising at the rate of 11% annually during the period 1967-71. In 1972, it is expected to increase by about 13%. Industry is one of the fastest growing economic sectors, particularly production of chemicals, basic metals, electrical machinery and motor vehicles. Production is con- centrated in Tehran, Shiraz and Esfahan irnthe south, Tabriz in the northwest and Mashhad in the northeast. The oil industry, providing a high proportion (77% in 1971) of total current foreign exchnange earnings, is centered mainly in the southwest. Agriculture is concentrated along the Caspian shores, and while this sector continues to grow, its share of non-oil MP has declined from 28% in 1962 to 16% in 1971. Carpet manufacture, the second largest export earner, is a widely dispersed cottage industry.

2.03 Average per capita rincome ir.Iran is estimated at $480 a year. The figure conceals, however, unevenness in distribution of income and wealth between urban and rural inhabitants as well as between urban inhabitants themselves. Expenditures per capita for'urban households are on the average twice as great as those for rural households; but, expenditures per capita for one-fifth of urban households is *our times as great as the rest of the urban households. Heavy immigration to the cities, and particularly to Tehran, Esfahan and Mashhad, has accentuated inequalities in distribution in income and expenditure. Acute problems of housing shortages, underemployment, transport inadequacies and water shortages are arising, and undermining the gains of a strong and growing economy.

2.04 The Government is now adapting its policies to overcome these prob- lems. In the Fifth Five-Year Plan the allocation for urban development is $495 million, compared to a corresponding allocation in the Fourth Plan of $130 million. Roughly half of the allocation for urban development during the Fifth Plan is for the construction of water supply, sewage disposal and storm drainage systems, one-third for the improvement of traffic and trans- port system, and the remainder for the provision of public facilities and limited urban renewal. The Government further supports a policy of regional decentralization of industry and employment through tax incentives, a re- striction of new indust-rial investment in the vicinity of Tehran, and limited fi.nancialand technical assistance to provincial municipalities for infra- structural facilities kAnnex1). -3-

B. Urbanization in Iran and Tehran

,2.05 The growth of Tehran has been swift and unstructured. The population of the greater metropolitan area, which includes Rey to the south and Tairish to the north (Map 10355),has more than doubled from 1.7 million in 1956 to 3.S millionin 1972, and the urbanizedarea has sprawledto encompassabout _J 350 km7. Tehran's population constitutes 12% of Iran's total population (31 million)and 29% of Iran'surban population(13.2 million). It is now more than five times the size of the next largestcity and there are only six ot'ner citiesthat have over 200,000inhabitants. At the current6% annualrate of populationincrease, Tehran will gain about 230,000people in 1973 alone, and a conservativeestimate places Tehran' s populationat eight millionby 1991 1/.

2.06 The Tehranregion 2/, which includesboth metropolitanTehran and adjacenttowns, accounts for 55% of the total value added in Iran in trade and commerce,60% in constructionand 64% in governmentservices. Tehran is the major banking center in the country, and leads in cultural and educa- tional opportunities. Within the city itself are 69% of all higher education students, 54% of all doctorsand 28% of all civil servants in Iran. The concentration of skills, the varied activity of the city and the expectation of higher incomesdraw an annual averageof 110,000migrants, most of whom are low-incomefarm workers.

2.07 The physical'character and socialstructure of the city have been stronglyaffected by its rapid development;the centercity is a clusterof important distric.s and the patternless industrial suburbs follow the access roads. Withinthe center.city(Map 10389),an area 5 km east-westby 6 km north-south,the demandfor space is heavy. Modern commercialand financialdistricts have sprungup in close proximityto one anotherand to the older parts of the city, creatingintense varied activityin very limited space (seeAnnex 1 for details). New industrialzones have grown up along the major transportarteries - to the northwestand west along the new road to Karaj, to the south along the road to Qum, and to the east along the road to Mazandaran. Older industrial districts to the west and southwestof the city developed along the old Karaj road betweenthe railwayline and the airport. The transport arteries have never been plannedas bases for urban development. Residentialgrowth has taken place to the north and south,bringing Rey and Tajrish into a continuous system with Tehran which, together with industrial and residential developments to the east and west, constitutes a deep ring of urban sprawl.

1/ This estimate is based on an average natural increase in population of 2.8% (1971-81) and of 2.9% (1981-91) and a resultant annual volume of immigration of 50,000 (Annex 1).

2/ The Tehran region as defined includes the small towns of Semnan and Zanjan. Total population is six million. -4-

2.08 The pressure of population and the uncontrolled physical development in the cenzer city and the suburbs have given rise to critical shortages of oasic urban infrastructure and essential services in the city. These short- ages fall very heavily upon the low-income groups, accentuating the tremendous disparties in income and wealth within the city. Average per capita income in 1972 was $820 - much higher than the national average ($480); but average per capita -ncome for 62% of the city population was $305 or less and fot 33% of the city population was $185 or less. According to the 1966 Census there V is a marked degree of residential stratification: 72% of the professional workers live in the northern half of the city and in the northern town of Tajrish, 60% of all white collar office workers live in the middle part of the city, and 77% of all blue collar workers live in the south and east where a large proportion of factory employment is located.

2.09 Tn the south, where land is relatively inexpensive,population densities are extremely high, and living conditions particularly poor. In some areas of the south the residential density is as high as 900 persons per ha. As one moves northwards, residential densities improve from 200 persons per ha to below 50 persons per ha in the far north area of Tajrish. The brunt of a. current housing shortage is borne by low-income families in the south. In three southern districts over 50% of the population live in one room dwellings (or one room of shared dwellings), with 4.5 - 5.2 persons per room; and in the remaining two southern districts, over 33% live under similar conditions. In the least populous district of northern Tehran, only 7% of the pojulation occupy a one room dwelling and the average n=ber of persons per room for the district is 1.27 (against the ovetall average of 2.07 for Tehran). Despite government proposals for the constructionof 221,000 public and private housing units over the next five year period, an.d limited ongoing urban renewal efforts by the City, the distinct residential stratifica- tion and inequities in housing that exist cannot be changed without an improved urban land use policy.

2.10 A 'nazardousby-product of unplanned rapid urbanization is the elementary sewage disposal network and drainage system. Although the system once adequately served a smaller Tehran, sewage piped into cesspools and pits excavated in the porous subsoils now overflows in the south, contaminates subsoil water and creates health hazards in irrigation. Surface water drain- age by the old systeni of dioubs is ecually defective. Flooding of the bazaar area and of areas in the north is a commn phenomenon. ?reinvestment surveys financed by the UNDP are now being made of ooth storm water drainage needs and sewerage needs for domestic and industrial waste water in Tehran for the next 40 year period. While Tehran's water supply system is generally adequate, 17% of all house-ho-d dwellings lack water supply connection. The increased supply of water required by this population, and by the incremental population to 1990, cannot be provided except at high economic cost. -5-

C. Urban Transport - Present Situation

1) Roadsand Traffic

2.11 The transportproblems for the bulk of the population- the 75% with no access to privately owned automobiles - are first revealedby the composition of Tehran traffic. The once adequate street network is con- tinouslyovertaxed and cloggedby 175,000vehicles (1971), 80% of which are cars, 10.4% trucks,6.8% taxis and 2.5% buses. There are, in addition, over 100,000bicycles and some 40,000 two-wheeled motor vehicles. The "level of motorization"estimated as .029 (one vehicleper 35 inhabitants) in 1966, is now estimated to be .045 (one vehicle per 22 inhabitants) and is projected to be .077 (one vehicle per 13 inhabitants) in 1981. Private car ownership will increase to an estimated 415,000 in the decade between 1971 and 1981 - an increasewhich appearsdirectly related to risingper capitaincomes and in- directlyto increasingannual automobile production which reached33,000 vehiclesin 1971. The numberof vehiclesis highestin the more affluent northernmetropolitan area; the greatestrate of increase,however, is ex- pectedin the west and to a lesserextent in the east which are predominantly middle incomeareas. The growth in level of motorization, coupled with the expected growth in population to the west and east of the city, could lead to a doubling of traffic in five or six years in these zones and a substantial increase in commuting to the center city. The SOFRETUcordon traffic survey indicated that traffic movements towards the center city already number 710,000per day.

2.12 Althoughtraffic distribution over the day is fairlyeven, the relatively steady flow and markedly prolonged peak hours (7-9 a.m. and 2-8 p.m.) are indicative of the low travelling speeds and delaysalready being ex- perienced. Duringthe peak hours, trafficvolumes on many streetsreach 2,500-4,000vehicles/hour in each directionand averagespeeds east to west drop to 13-10 km/h. From Sepah Square, the heart of Tehran's modern commer- cial center, to the point that can be reached over a 15 minute period, the averagespeed is 19 km/h. Around the square itself speeds do not exceed 15 km/h. The net additionof some 275,000passenger cars over the next ten years will be catastrophic, if not an impossibility given the city street network.

2.13 AlthoughTehran's road systemis in relativelygood condition,it was not designedfor the presenttraffic. The system is made up of a radial network emanating from the periphery of the city center towards and beyond the suburbsto form part of the nationalhighway, and an orthogonalgrid of seven major roads running north-south and nine major roads running east-west within the center city. It labors under discontinuities in the central grid (particularly in the east-west direction), poor connections between radials (which force inter-radial traffic through the center city) poor interface between radials and primary grid networks, and an insufficient secondary and (to a lesser extent) tertiary road network within the center city, and partic- ularly, to the south. Indeed, virtual absence of a secondary network in the south forces a direct connection between the tertiary and primary networks causing congestion on the latter due to the high number of intersections (Annex 1). -6-

2) Public Transport

2.14 Tnere is no coordinated public transport system in Tehran, although certain elements function well. Tne service of the United Bus Company is gradually being supplanted by other availaole means of public transport - principally the 2,300 service taxis which charge higher fares - because the Com.panyhas failed to achieve minimally convenient and regular operations. Tnere is no planning designed to make city bus operations and taxi operations complementary. Service taxis, which operate on routes parallel to certain bus lines, airport taxis, "orange taxis," which follow no prearranged routes, and radio taxis fill the gap in public service. The Bus Company also fails to integrate with the inter-city bus companies that connect Tehran with ad- joining towns. Restoring c-heap, efficient bus service is the natural key- stone of any short term solution of Tehran's transport problems.

- Bus Operations

2.15 The United Bus Company (UBC) was chartered to have both private and public ownership. The City of Tehran is the sole shareholder and the UJBCis responsible to the City Council, although it possesses a certain degree of financial autonomy. UBC operates 2,351 buses (1,890 single-deckersand 461 double-deckers) over 152 bus lines with a combined length of 1,380 km (an average 9 km per line). Its operations and finances have been poorly managed. (See Annex 2 for details of UBC operations.)

^:. l(;~ Tho nulmber of buses in ser.? ce has heen reduco6 bv the lacl of- prev-nLive -mainter.ance, adecuate maintenance renair and qualified raintenance s;t;:ff. F>et cutIiA.zarion 'as fallen 2S3 (fron .39 to .Al) between 1966 and 1Q77. Oult of a tostil fleet of 2,351 buses in 1P72, an average of only 1,445 could be put inLo diaily oieration. In additnon, such vehicles as can be mustereL do not necessarily serve demand. Data on oatterns of daily passenger usage is sketchy: the number of passengers are estimated by weighing the conductor's ticlketbags at the end of a shift and as many as 20% of the riders are thought to have evaded buying a ticket. Bus movements along a given line are un- scneduled, and the headway between buses and waiting time for passengers varies considerably. 1/

2.17 The financial position of UBC is unsatisfactory as is shown in detail in Chapter' V and Annexes 3-6.

l/ On the evidence collected by SOFRETU, 50% of bus passengers waited for more than 10 minutes, 25% for more than 15 minutes and 10% for more than 25 minutes. Average bus loads during peak hours exceeded more than 100% capacity on the main routes and 125% on those routes serving the near suburbs and the city center. -7-

- Taxis

2.18 Undependable bus operations and general lack of bus capacity have caused the number of daily passengers to decline by some 400,000 passengers a day since 1969. Taxi service, used predominantly by higher income groups, has maintained a long term upward trend in ridership. The business, particu- larly of the city's 2,300 service taxis which follow fixed itineraries and charge a set tariff of from Rls 5-10 has increased spectacularly. Over the last three years, the number of service taxis has increased by 65% while the bus fleet has decreased by 10%.

2.19 Other types of taxis in Tehran include the more numerous ordinary or "orange" taxis which provide service on request at a minimum fare of Rls 10 for one or two persons and Rls 5 for each additional passenger, the airport taxis which have three tariff zones at Rls 80, 120 and 180, and the radio taxis which charge additional amounts for "on call" service with a minimum of Rls 50. A taxi cooperative closely controls the operation of all taxis, but no effort is made to integrate taxi service with bus transit. If properly operated and coordinated, taxis and buses could provide complementary public transport service. Taxis carried 21.3% of public transit passengers in 1966, 28.2% in 1970, and an estimated 29.5% during 1971.

- Suburban Buses

2.20 In addition to the taxis and the buses operated by UBC, there is an association of 64 private bus operators who provide service between Tehran and the outlying suburbs and other towns that are not served by UBC. The private bus operators are regulated by the Ministry of the Interior, but are otherwise totally independent of government administration. They have a tacit agreement that effectively prevents any damaging competition amongst themselves or UBC over any of its routes. But they coordinate only to a limited extent with UBC, by agreeing to provide additional buses along certain inter-urban lines where needed, to meet surplus demand. The private bus operators are trying to establish a common center city terminus for the various bus lines that now terminate at several different points and take up valuable parking space. Between 1960 and 1970 the number of passengers using inter-urban buses increased by 400%, due primarily to an absence of competing modes of transport between outlying towns and Tehran. For the last two years, the growth in traffic has slowed to about 6% a year. III. -URBAN -GROWTH-A-ND TRANSPORT POLICY IN ThHR-HT- kAI.NISSUES

A. Past Approaches and Present Conflicts

3.01 The physical expansion trend of the last two decades in Tehran has been a concentric one, accentuating development towards the north, east and south. The growth of road infrastructurehas reinforced this trend. The 1966 Master Plan for Tehran proposed a growth strategy that stressed a sequential development pattern concentratingon specific areas in five year stages. The Plan emphasized a staged westward exparsion. However, because of dif- ficulties in providing the area west of Tehran with electricity and water, the Govetnment decided on a "five year development limit" that was, in prin- ciple, a continuation and reinforcement oJf the concentric trend. In 1973, the existing limit was extended another five years.

3.02 The continued development of the present center presents conflicts in action - both short and long term - on relieving a great many of the serious infrastructural and social deficiencies. Present shortages are being inten- sified by pressures of increased concentrations of population and economic activity. 1f present trends continue, employment in the heavily congested city center would more than do-uble (from 256,000 in 1971 to 553,000 in 1991) in twenty years; the volume of person-trips to and from the central area would at the same time increase more than threefold. Prelirinary studies of long- term transport options indicate that under continuation of such trends, the infrastructurerequirements for personal and public transport.would far out- weigh available resources, with severe repercussions on investment needs in other priority sectors.

3.03 The elements of these conflicts in governmental action at the national and municip,allevel relate in the first instance, to the present status of the 1966 Master Plan; seccndly, to the ad hoc nature of policies aimed at stemming the growth of Tehran; and third, to the potential conflict between actions taken now to ameliorate the situation, and possible long range solutions and options. The 1966 Master Plan is seriously outdated - in concepts of urban growth - and in the growing divergence between assumptions in key growth parameters upon which the Plan was originally formulated and realities of present day growth. Thus the "solutions" which the Plan proposed are addressed to problems which have far exceeded in magnitude and complexity the design to cope with them.

3.04 Notwithstanding, the Plan has the force of law upon which numerous decisions are made and actions taken and constraints imposed. At the same time, it is readily superseded by the necessary and expedient actions which must De taken to cope with problems arising from, circumstances not envisaged or anticipated in the original planning efforts. The result is that the Plan provides less and less coherent and relevant guidance to present efforts, and the rapid erosion and inappropriatenessof the strategic premises upon which the Master Plan was constructed could lead to gross errors in decision-making. -9

3.05 The overallresult of these circumstancescan be interpreted as constitutinga presentstrategy of urban growthof Tehranwhich has the followinggeneral characteristics:

(a) A policyof concentrationand ameliorationof the core city and contiguoussouthern sector;

(b) An ad ho.c approach to critical locational decisions regarding central functions of the city, location and relocation of industry, housing and urban transport systems;

(c) A partial and uncoordinated approach to the provision of major elements of the basic infrastructure (water, power, road networks, rapid transit)and relatedadministrative and controlfunctions (trafficcontrol, building, permits, constructionstandards, etc.); and

(d) Continued reliance on planning, administrative and decision- making structures which inadequately reconcile national re- quirements and municipal needs.

B. Alternatives and. Growth Options

3.06 A deliberate and coordinated attempt to assess in-depth alternative strategies of growth for the Tehran urban region in the face of unexpectedly severe pressures of population growth, burgeoning use of the automobile, and a steadily worsening environmental situation is conspiciously lacking at the present time. There are several possible alternative strategies which can be hypothecated:

1. Continuation of present policy: Further concentration of new growth of population, government and commercial functions within the arbitrary boundaries of Tehran which are scaled to accommodating a population of 5.5 million; continuation of the policy of exclusion of new industrial undertakings from the greater Tehran area (with exceptions); intensive develop- ment of infrastructure to inprove public transport, sanitation and drainage, road traffic and parking in the central core area, "fillingin!' and more dense settlementpatterns of housingin north Tehran,and some expansionof communityserv- ices, particularlyin south Tehran.

2. Westwardextension of metropolitangrowth on an incremental basis (implicit in the original1966 MasterPlan): liftingof the moratoriumconsonant with the 5.5 millionpopulation limit on westwardextension of municipaldevelopment; some reloca- tion and developmentof industryon the Tehran-Ghazvinaxis; developmentof new communities (growthcenters) on the same axis; significantimprovement of Tehran's centralfunctions area, infrastructure, etc. along the line of present efforts. - 10 -

3. Deliberate development of a major urban center in west Tehran: advance acquisition of land and a "supply leading" development of community and industrial infrastructure for a major new growth center west of. Tehran; deliberate relocation and new development of goverrment offices, commercial and industrial park areas; extensive develorment of government supported housing; an accoVpanying (flexible) moratorium on new develop- ment in the central and southern sector of Tehran;-and con- tinued amelioration and improvement of this area by currently conceived methods, i.e. public transport, water and drainage, etc.

4. Other combinations of the above: varicus combinations of all of these strategies are possible, and consideration of more extreme strategies might even be entertained, e.g. a new capital city, drastic dispersal of government agencies to regional urban centers, etc.

3.07 Clearly, these alternative growth strategies would be tempered and adjusted by decentralizationefforts called for in the Fifth Plan, the con- straints of financial resources, political considerations, and the pressures and problems arising from the individual behavior, motivations and incentives of the existing urban population. More importantly,however, there does not now exist the data, evaluation, mechanism, nor urban planning capability to adequately articulate the costs and benefits of either approach -- including the probable future costs and bene'its of continuing the present strategy.

3.08 The implications of this need are profound when related to the Tmmediate Action Program of Urban Transport, and actions to be taken following completion of the preliminary studies of the long-term transport system, the Sewage/Drainage Mastetr Plan Studies, and the Water Supply Master Plan Studies currently underway. The approach to urban development of Tehran will be seriously incomplete and inadequate unless the capability for decision-making on the broad urban development problems is enhanced, and an urgent effort at longer range planning is undertaken concurrent with the major sectoral studies cited above. At the outset, this calls for a substantial new planning and coordination effort on a scale and at a level in the Government commensurate with the difficulty and importance of this task. This can then be followed by a comprehensive, controlled, and anticipatory effort to effect a structural change in Tehran's pattern of human settlements, industry and commerce.

C. The Tehran Development Council

3.09 The Tehran Dcvelopment Council (TDC) recommended initially in the Fifth Five Year Plan has been incorporatedin a legislative proposal introduced in Parliament in June 1973. The general purpose metropolitan planning, coor- dinating and policv body - by supplementing the various functions and authori- ties of the City with a new inter-goverinmental coordinatin? body, a comtprehen- sive planningr capability, and an integrated structure of regional authorities (water and power, transport, housing, cormaunitydevelopment, etc.) -- will increase the prospects for a more orderly and balanced growth of the metro- politan co=nunity. - 11 -

3.10 The-legislation provides for:

(1) a High Council under the direct supervision of the Prime Minister, chaired by the Deputy Prime Minister for Economic Development, and consisting of the Minister of State in charge of Plan and Budget Organization, the Mayor of Tehran, and the Ministers of Housing and Devel- opment, Water and Power, Economy, Labor and Social Affairs, and Agriculture and Natural Resources;

(2) a Secretariat with a Secretary General to be appointed by the Prime.Minister, and adequate supporting staff.

The High Council and Secretariat will have the following three principal functions:

- establishment of government-wide policies regarding the development of the greater Tehran area designed to control and guide metropolitan growth;

-=. coordination and control of the actions of national, munici- pal and private entities affecting Tehran's growth and devel- opment through the exercise of directive, approval and super- visory powers conferred by the Law; and

= planning, studies and reviews of urban development activities by the Secretariat with a view to making recommendations to the Prime-Minister and supporting the policy-making, coordina- tion and control functions of the Council.

3.11 The establishment of TDC is considered of such importance to long- term development efforts that assistance towards its full operation and particularly its policy development has been made a part of the project.

3.12 During appraisal, preliminary exchanges took place on the terms of reference and suggested functions of TDC along the broad lines set forth above. A subsequent mission which visited Tehran in May held further discus- sions on this matter. A bill drafted on this basis, and approved by the High Economic Council of Ministers and the entire Council of Ministers was presented to Parliament in June 1973. The proposed legislation,which is general in scope, is expected to be supplemented by decrees in particular areas of TDC's responsibility, and the Government has requested Bank assist- ance in the further definition of the tasks, scope of functions and organiza- tion of TDC and in recruiting staff and preparing a pro-ran of studies to be undertaken by the Secretariat.

3.13 It is envisaged that the Secretariat will be composed of a competent multi-disciplinarystaff group capable of professional work in functional areas, in policy and planning studies and evaluations, and in financial plan- ning and analysis. It is the opinion of both the Government and the Bank that - 12 -

the high level of competence required can be achieved with the initial assist- ance of a comprehensive advisory organizationwhich has institutional support abroad, and includes both urban planners and advisers who have had extensive experience in decision-making in urban administration of comparable scale and complexity as Tehran.

3.14 The izmediate mission of the Secretariat would be to coordinate steps to be taken under the Urban Transport Immediate Action Program with respect to trafficcirculation and public transport improvementsand knclud- ing the review and supplemenrtarystudy of long-term transDort system proposals, to provide staff services to the High Council for impendingurban decisions and required coordination activities, to help establish the full operational and procedural functions of the Secretariat and the High Council, and to define a comprehensi-ve and coordinated program of studies to be conducted under the Secretariat.

D. Towards a Transport Policy for Tehran

3.15 The improvement of public transport quality is only one of several aspects of public transport policy and would be accompanied by complementary measures on pricing, incentives, and restraint of private car use. In view of the important role of public transport, the Government has accepted the immediate Action Program proposed by the French consulting firm SOFRETU who has been studying Tehran's transport system in detail since April 1971, and is already taking steps in support of the consuitant's recommendations. Prior to and during appraisal, the Action Program proposals were discussed with Bank staff and consultants and the proposed project is a direct outcome of these discussions. Besides the bus service and traffic improvements, the recommended action includes the continuation and expansion of urban renewal efforts in the south of Tehran involving the construction of housing, roads, sports centers and other public facilities, and a commitment to the gradual and selective acquisition and'control of land as required by transport and other infra- structuralneeds. In addition, the Government, and particularly the City and Traffic Police are taking measures to reduce the use of the private auto- mobile in favor of public transport in the highly congested city center. The City is restricting car parking, by installing 10,000 parking meters, by pro- hibiting free parking on vacant murncipal lots, and by doubling parking fines (and fines for other traffic violations). The City is also planning to in- crease parking charges and abolish free street parking altogether. Traffic Police are cooperating in enforcing traffic and parking regulations more strictly and in fining violators. The development of a positive policy on reduced auto use, however, can only take place as bus services become more efficient and competitive.

3.16 The focus on public transport for the long-term stems from the initial results of the SOFRETU studies which show that the increased trans- port needs that are likely to occur over the next two decades would call for increasingly costly investment in road infrastructure to support existing trends of motorization, and would so strain total government resources that - 13 - a major shift in government policy would be required. The studies point out that nearly 40Z of trips that would otherwise be undertaken by private automobiles could be transferred to public modes if improved public transport is emphasized and if pricing policy is so regulated as to encourage public transport usage. In addition to the usage restrictions now being planned and implemented by the City, a number of curbs on automobile ownership exist, including duties and taxation on imported cars which range between 2007 and 500%, and on locally produced cars which average about 40%. At present, car production in Iran is expected to increase from a level of about 33,000 in 1971 to about 150,000 by 1980. The main component of this increase is repre- sented by a major expansion of the automobile industry for which the IFC is providing financial support.. However, in a vast country such as Iran, con- siderable amounts of inter-city transport take place by car and the demand for automobiles in areas outside Tehran is increasing as road infrastructure improvements (also financed by the Bank) are effected. Indeed, new car pur- chases in the countryas a whole now reflectthis trend,and the degreeof concentraticnof new car sales in Tehran is decreasingrapidly. Even with- in Tehran,cnly 15% of the householdpopulation possess a car, and this propor- tion is likelyto increaseto about 30% within the next two decades. Thus, even with growiingincomes, the cost of automobileownership and usage would still remainbeyond the reach of a large proportionof the population. 3.17 A lon8-termtransport policy for Tehranwould focus on effective measuresto dampenthis trend by (a) providingimproved higher qualitypublic transportservices, (b) by reducing,through adequate urban growthpolicies, the demand for transportmovements, and (c) by emphasizingpricing and invest- ment policies to discourage pri vate automobile usage. The short-term trans- port programis a necessaryfirst phase to long-termtransport improvements which have been proposedby the consultants SOFRETUin three alternative schemes. The first provides for a better use of cars by improving the urban road network and improving urban public transport; the second favors mass transport by focusing on surface and underground modes, and to a lesser extent on road improvement; the third is a mixed solution of mass transit (surface and underground transport) and road improvement. Preliminary pro- posals for a long-term transport system are currently being elaborated by the consultants and will be completed by June 1973. These proposals will provide the framework for follow-up studies on long-term transport pricing and investment policy for Tehran. The project provides for consultant serv- ices to undertake these studies (Annex 8). The follow-up studies would focus on detailed design and economic feasibility of the first stage of the long- term transportsystem as well as on pricingpolicy that would complement long-termtransport investments. _ 14-

IV. THE PROJECT

A. Description

4.01 The short-term transport project is based on SOFRETU's recommenda- tions for immediate action; the specific items included for financing were. selected with regard to their immediate and remedial impact on the weakest aspects of the transport svstem. Thne project is designed to retain long- term transport options while laying the institutional groundwork for large scale transport and urban development. It is a.first and necessary part of a long-term program of transport development for Tehran.

4.02 The project consists of:

(a) improvements in public transport through the procurement of an initial order of 250 single decker buses and 115 double decker buses and a second order which will be based on further studies of bus fleet composition; repair and rehabilitation of the existing fleet; construction and equipment of two bus depots; assistance to the United Bus Company in management and operations through the provision of consultancy services for an Economic and Technical Advisory Group;

(b) implementation of traffic circulation improvements, including the introduction o' a system of one-xway streets, construction of five und-erpasses, surface construction in two squares and street improvements in the southern part of the City, with the assistance of consultants to be provided to the City of Tehran; and

(c) (i) long-term urban and regional planning for the Tehran area;

(ii) review of existing transport studies and sunplementary feasibility studies and detailed design of the long-term public transport system for Tehran.

B. Main Features

4.03 The short-term urban transport project is a necessary and logical step to ameliorate critical problems of public transportation and mobility within the central city of Tehran. Its effectiveness depends on the coordi- nated action in three interrelated activities; public transport, traffic circulation and long-term planning. The long-term planning is concerned with policies and raeasures encompassed in a comprehensive urban development plan- ning process, including policies for restraint of private automobile use, coordination of ail modes of transport and appropriate land-use guidance re- garding comnerce, industry and housing. - 15 --

(i) Improvement in Bus Operation

4.04 UBC plans for rehabilitationand renewal of fleet covers a period of five years (1973-78) for which immediateassistance from the Bank has been requested for the purchase of bus requirements in the first two years and financial assistance for other aspects of bus operation for a three-year period. During negotiations, assurances were obtained that the second order of buses under the project will be based on the recommendations of the Economic and Technical Advisory Group on bus fleet composition. Following review and analysis of the present fleet and anticipated future needs it is proposed to purchase single-decker buses with a seating capacity ranging -from 35 to 40 and double-decker buses with a seating capacity of about 65. In the next two years it is proposed to procure 250 single-deckers or an equivalent number (in cost terms) of double-deckers or such mix as is deemed to be most effective. More buses will be required beyond those two purchases but future requirements of the fleet would be.reviewed before June 30, 1975, after studies by consultants.

4.05 Within the next three years it is proposed to rehabilitate 635 buses, and to put the remainder of the fleet into good order. A further 235 buses will be repaired in the two years following the project period. Spare parts which would cover the requirement for three years are provided for in the project. The purchase of new buses and rehabilitation of 870 buses over a five-year period, would enable UBC to increase its carrying capacity by about 50%. It is anticipated that fleet utilization (actual number of buses in operation on a given day) would increase from 61% in 1972 to about 85% bv 1978. Likewise, the programming of maintenance and the adoption of systems which involve replacement before failure, together with better operational control of vehicles such as the reduction of overloading, should contribute to lower cost of maintenance and increased availability for service. Flow-line methods of work could be introduced with advantage.

4.06 The Economic and Technical Advisory Group, recuested by UBC would have, as part of its terms of reference (Annex 9), improvement of operational and management procedures including the training of workers essential to an efficient maintenance program. The Group would specifically be responsible for initiating actions such as systems analysis, method study, revision of routing and oneration, recommendations on service frequency and its financial implication, budgetary control systems, Job costing procedures, and devolution of responsibility to the depots. It would also prepare for management a working procedure for a reliable time interval system of opera- tion in anticipation of future passenger demand and economic operation. During negotiations, it was confirmed that UBC would.undertake promntly formation of a suitably qualified staff grouo for this purpose as advisors. Assurance was also obtained that the UBC will by a date not later than December 31, 1974 prepare a plan acceptable to the Bank, consisting of a revised schedule of tariffs which will provide for such increases in the levels of tariffs as should result in an overall increase of not less than 25% in the annual orerating revenues of UBC and will implement the plan not later than March 21, 1975. Assurance was obtained that the GrouD would - 16 - also assist in preparing a set of operating and financial performance targets for monitoring and control purposes along the lines included in paras 5.17 - 5.18. The proposal on performance targets would be prepared not later than June 30, 1974, and UBC would review the proposals with the Bank by not later than August 31, 1974. Based on the results of the review, UBC would adopt by not later than December 31, 1974, a plan of measures to be taken to improve the operations and financial position of UBC according to a timetable accentable to the Bank, and thereafter adhere to the timetable in implementing the measures.

4.07 Under the project, two new depots would be established each serving about 250 vehicles. The depots would provide routine maintenance workshops and would be suitable as pilot areas for the introduction of management de- centralization schemes.

(ii) Traffic Circulation Lmprovement

4.08 Improvements in traffic circulation in the central city area would be phased over.a three-year period (Map 10361). In viewT of street patterns in Tehran, specifically the inadequacy of secondary and tertiary streets, it is proposed to undertake improvementsdesigned to facilitate traffic flow and pedestrian mobility in stages (details are provided in Map 10362R). For the area north of Sepah Square, proposed recommendations include:

(a) adoption of a one-way street system in the city center north of Sepah and involving the main streets bounded to the east and west roughly by Saadi-Roosevelt and Pahlavi;

(b) redesign of intersectionswith the introductionof surface rearrangements and underpasses;

(c) resignaling and signposting of the area with some addi- tional public lighting in underpasses, at intersections and on traffic signs.

4.09 South of Sepah there exists no similar street network which lends itself as a basis for a circulatory pattern. The problem of the southern part of Tehran is to develop a secondary street system to permit vehicular movement into and out of the area and to relieve the conditions on the main roads. As part of the project, the City would carry out street improvements on about 43-60 km in the next three years in conjunction with its normal capital improvementsprogram. During negotiations,assurances were obtained that prior to March 21, 1974, the City would review with the Bank an overall plan for street improvements to be implemented in the area south of Sepah.

4.10 A one-way street system and redesign of two squares would be under- taken as set out below: - 17 -

(a) on Saadi-Roosevelt (northbound) and Ferdowsi (south- bound) with return flows on secondary streets. This includes construction of Ferdowsi and Saadi underpasses at intersections with Shahreza together with the Karim Khan Zand underpass between Ferdowsi and Saadi-Roosevelt;

(b) On Shah-Naderi-Istanbul (westbound) aud Sepah (eastbound) with return flows on secondary streets;

(c) on Pahlavi (southbound) and Hafez (northbound) with return flows on secondary streets. This includes Pahlavi and Eafez underpasses at intersections with Shahreza;

(d) surface improvements.in.the squares at Sepah and 25 Shahrivar.

4.11 The proposed ph ashb works is shown in Annex 11. For the traffic lights, the proposal is to introduce a "green wa _nigstem_on each main route. Coordination of lights along Perdowsi and_Saadi-Rooseveit. would initially be established. As the road improvements are completed the cables and control equipment for zonal coordination will be installed. As the second and third phases of the one-way system are introduced, the lights on the multiple road intersections will be coordinated.

4.12 Concurrently, the City is considering the introduction of priority bus lanes on one-way streets and expects to implement these measures when experience gained from the introduction of the first pair of one-way streets has been adequately assessed. To this end, the. terms of reference of the consultants to the City.will call for detailed studies on traffic engineering, parking regulation, apecial bus lanes, and traffic signal control, and the project provides for consultant services to assist in the implementation of these additional measures. During negotiations, assurances were obtained that the City will employ traffic engineering consultants on terms and conditions satisfactory to the Bank for execution of traffic circulation improvements, and that the City will consult with the Bank on the implementa- tion of the recommendations of the consultant studies to be carried out under direction of the Traffic Planning Manager (see para 4.21).

(iii) Long-Term Policy and Planning Studies

a) Transport

4.13 Follow-up studies arising out of the SOFRETU preliminary long-term transport proposals (presented to the Government in July 1973) will include a detailed review of the transport proposals and supplementary feasibility work as necessary. Supplementary studies would include evaluation of the proposals in light of the potential land use conflicts and alternatives, a comparison of different modes of transport, the impact of private cars and taxis of - 18 - various kinds, and consideration of an appropriate long-term pricing strategy for transport. If a rapid transit system is found economically feasible, funds are provided in the project for detailed design of a first stage of construction (see Annex 8 for details). During negotiations, assurances were obtained that the Government or TDC shall by a date not later than December 31, 1973, employ qualified and experienced consultants on terms and conditions satisfactory to the Bank to carry out the review and supplemen- tary studies of the long-term transport system, and assurances were also obcained that the Government will adopt, in consultationwith the Bank, and by a date not later than December 31, 1974, a long-term transport system plan on the basis of the consultants' recommendations;that the Government or TDC shall then employ qualified and experienced engineering consultants acceptable to the Bank on terms and conditions satisfactory to the Bank to prepare-a detailed design of the long-term transport system; and that upon their completion these designs will be reviewed with the Bank.

b) Urban Development

4.14 Under the project, TDC will provide inter-ministerialcoordination, conduct a long-term planning effort and propose a medium-term action program for guiding urban growth in Tehran. The consultants would help set up invest- ment policy guidelines within which all decisions affecting the city includ- ing major infrastructure investments in the Tehran region would be undertaken. They would help define TDC s scope of concern and plan of action through preliminary outline of a coordinated program of studies, and review and analysis of Tehran's urban planning needs. Assurances were obtained during negotiations that consultants to TDC would be employed on terms and conditions satisfactory to the Bank by not later than December 31, 1973; that the consultants' recommendationswill be reviewed with the Bank; and, that the Government or TDC will consult with the Bank on the implementation of the recommendationsresulting from these studies.

C. Cost Estimates

4.15 The total cost of the project is estimated at US$65.9 million equiv- alent, of which US$42.0 million represents the foreign exchange component to be financed under the proposed loan. A summary of the project cost follows: _ 19 -

-- -X1S llLuon ------US$ "4____Ot---- Local Foreign Total Local o"reig Total

I. Public Tranporthm Short-tem needs (ite Bus C )

1. Repair and rehabilitation of thei existing fleet 102.3 341,.o 4i 3 . 3 1.5 5.0 6-5 2. Constructicn and equipent of twodepots / 81.9 122.8 20X47 1.2 1.8 3.0 3. Procurementof buses 2 272.8 13,677.6 1,650o.4 4.0 20.2 24.2

4. Cosultant Services - Economic and technical Advisory seep 75;O 3411 1.09.1 1.1 0.5 1.6 5. Contingencies a 68.2 245.5 313e7 1.0 3.6 4.6

Total 600.2 2,121.0 2,721.2 8.8 31.1 39.9

II. TrafMc bgineering wovremsat (City of Tebran) 1. Immediate construction, &uM Traffic control equipmnt 361.5 395.5 757.0 5-3 5.8 11.1

2. Technical Assistance 88.7 34.1 1?228 1.3 0-5 1.8 3. Street inprovements in Sotth & 300.1 300.1 4.4 ° 4.4

/ Contingencies /7 95.5 61.4 156.9 1.4 0.9 2.3

Total 845.8 49L.o 1,336.8 12.4 7.2 19.6

7 er«DelopneatCounciLl) 1. Transport A 102.3 136.14 238.7 1.5 2.0 3.5 2. Urban Developnent /9 61.4 88.6 150.0 0.9 1.3 2.2 3. Contingencies AO 20.5 27,3 47.8 0,3 0.4 0.7

Maui t184.2 252.3 436.5 2.7 3.7 6.4

Grand Total 1636.2 2864.3 4.435 3.9 142.0 65-9

4 Not including land acquisition for one of the two depots /2 This provides for an imediate order of 250 singlde and 135 double-decker buses (and attendant initial stock of spare parts) to be folloved by another order of up to 250 single- and 115 double-decker busesto be determined after further study by the ecoDnic and technical advisory group. I c1 etablaskeAt of econiom and technical groupto inplemnmt fleet optinisation, specific route casting, depot oentrol and ascamsotabil1ty, cost accmting, asset evaluation, preparation of depot censtructian spec±CicatiSms. operational timetables and working mthodas. k Ph71eielcontingencies 5%. Price contingiuciag-5% a. year. L Includes construction of five underpasses, surface improvemrents in two squares, institution of two one-way street systems north/south and one one-way system east/west, and traffic control equipment. /6 Reconstructton/rebabilitation of scme 45/60 Ia of streets in area south of Sepah Square.

12 Ptysical contingencies 5%. Price contingencies 5% a year. A Review of hase I Transport Study being cqmpleted by SOFRETU,supplementary feasibility work required, and including detailed design of first stagse ci a mass rapid transit system if found economically justified. ZI Consultant services to the Tehran Development Council. /10 Physical contingency 5%. Price escalation 5% a year.

June 15, 1973 - 20 -

4.16 Costs of procurement and rehabilitation of buses are based on fig- ures provided by the consultants' detailed studies adjusted for a two-year and three-year program and are based on post-1973 dollar devaluation costs. A provision of 10% is made for new spare parts to be provided with the buses purchased. Construction and equipment of depots are based on SOFRETU esti- mates (Annex 12) with allowances to reflect increases in costs since the estimates were made in 1972.

4.17 The costs of constructionof the underpasses, the surface works, civil works for road improvements and lights involved in the traffic engineer- ing are based on the consultants' preliminary estimates of unit costs at cur- rent prices. Contingencies - price, 5% a year and physical, 5% a year - have been included.

D. Project Financing Plan

4.18 The proposed Bank loan of US$42.0 million would cover the foreign currency costs which are 64% of the total project costs of US$65.9 million. The local currency costs of US$23.9 million would be provided by the Govern- ment. A summary of the financing required is as follows:

Rls US$ Millions Millions %

Requirements of Funds

Proposed project expenditures 4,494.4 65.9 100 nurces of Funds

Proposed IBRD loan 2,864.4 42.0 64 Government contributions 1,630.0 23.9 36

4,494.4 65.9 100

E. Organization and Management

4.19 The Borrower: The loan would be to the Government of Iran. During negotiations, assurances were obtained from the Government that it will promptly provide local currency funds as a grant to the City and UBC to cover capital expenditures under the project through a fund to be replenished each quarter. - 21 -

4.20 Project Execution and Finance: Funds for traffic circulation im- provements would be onlent by the Government to the City. It was agreed during negotiations that the project funds required for the purchase and installation of traffic control equipment would be handled as a separate item and would be provided to the City under the Subsidiary Loan Agreement between the Government and the City of Tehran contingent upon the transfer of responsibility for installation of traffic control equipment from the Traffic Police to the City. Such a transfer of responsibility requires legislative action. If the transfer does not take place by June 30, 1974, the Government will promptly request that the Schedules to the Loan Agreement be amended so as to ensure that this element of the project becomes the responsibility of the Government. The portion of the Bank loan for Bus Company improvements would be onlent by the Government to UBC which is wholly-owned by the City.

4.21 A Traffic Planning Manager, to be appointed by the Mayor and attached to the Mayor's Office, will have sole responsibilityfor implement- ing the traffic circulation portion of the project (see Annex 13 for sug- gested terms of reference). During negotiations, assurances were obtained that the City will, prior to effectiveness, appoint a suitably qualified and experienced Traffic Planning Manager the scope of whose functions would be satisfactory to the Bank. He will be assisted by competent and qualified staff drawn from various technical and planning departments of the City. Assurances were also obtained that suitably qualified consultants to assist the Traffic Planning Manager would be hired on terms and conditions satis- factory to the Bank. 1

4.22 The execution of elements concerned with the rehabilitation of UBC will be the responsibility of the General Manager assisted by the Economic and Techncial Advisory Group (para 4.06).

4.23 Policy and planning studies relating to urban and transport develop- ment will be carried out by the Secretariat of the TDC.

4.24 Organization of the City: The City is an independent government agency governed by the Laws of Municipalities. The Mayor, its chief executive, is appointed by a City Council for a term of two years. The City Council itself is elected. Chart 7658 shows the functional organization of the City. Three of the four major departments are directly involved in urban development projects: the Technical Department, the City Planning Department, and the Finance and Administration Department. Of the three departments, the Tech- nical Department with about 300 employees is primarily responsible for the design and implementation of municipal projects. Proposals for traffic circulation improvements would normally have to be reviewed and evaluated in this department. A section in the department is responsible for traffic planning, the design of intersections, bus stops, location of traffic lights and installation of parking meters. The section is also responsible for coordinating its traffic engineering activities with that of the Traffic Police who are responsible for the enforcement of traffic regulations. How- ever, little or no coordination takes place either because the traffic section - 22 -

in the City is under-staffed or because the Traffic Police already perform similar functions. During negotiations, the Government indicated that it would take action to transfer the responsibility for traffic control equip- ment installation from the Traffic Police to the City (see para 4.20), and ensure proper coordination between the City and Traffic Police in the im- plementation of the traffic improvement program.

4.25 Bus Company: UBC is controlled by a General Assembly, most members of which are members of.the City Council (Chart 7667). The Assembly meets annually but may hold extraordinary meetings which in the past have dealt with matters of change of UBC status or capital. The power to approve tariff changes is vested in the City Council. UBC is managed by its own Council and a General Manager. The UBC Council consists of the General Manager as chairman, a member responsible for personnel matters and administrationand another member responsible for financial affairs, all appointed by the General Assembly. There is an Inspector appointed by the General Assembly from the staff of the Ministry of Finance with responsibility for the satisfactory financial conduct of UBC.

F. Procurement

4.26 Contracts for constructionand for supply of equipment including buses, would be awarded on the basis of international competitive bidding carried out in accordance with the Bank's guidelines. A preference of up to 15% or the applicable customs duties, whichever is lower. would be applied to bids from local manufacturers of equipment. Iran has no agree- ments giving preferential tariffs to other countries. There are two bus assembly plants in Iran, one manufactures double-deckerbuses and the other, single-deckerbuses. The local value added of buses manufactured in Iran is over 40%.

G. Disbursements

4.27 Disbursements from the Bank loan would be made as follows:

(a) 50% of total expendituresunder civil works contracts;

(b) 100% of foreign expenditures for directly imported buses, and spare parts; or 100% of the ex-factory cost, if awarded to local manufacturers under the international bidding;

(c) 100% of foreign expenditures under equipment installation contracts awarded to foreign suppliers;

(d) 100% of foreign expendituresfor consultant services; and,

(e) 100% of imported equipment for depots. 23 -

4.28 A scheduleof estimateddisbursements is given in Annex 14. As the project forms part of a five-year program, any unused balance of the loan could, after consultation with the Bank, be used for the purchase of additional equipment.

H. Training

4.29 Provisionfor trainingis includedin the projectelements con- cernedwith improvementsof UBC, trafficengineering and circulation,and .Long-termpolicy and planningstudies. Consultants'terms of referencewill be so designedto afford Iraniancounterparts the benefitsof on-the-job trainingand experienceof professionalconsultants.

I. Ecology

4.30 The Governmentand particularlythe City are beginningto take measures in reducingthe amountof pollutioncaused by vehicles. Because of atmosphericinversion and lack of verticalcirculation, Tehran acts as a basin for air pollutiongenerated by motor vehicles, industry and natural causes,i.e. dust. In the course of project implementation,the Government plans to monitor emissionlevels from buses and taxis and intends to propose more comprehensivepollution controlregulations. - 24 -

V. FINANCIAL ASPECTS OF THE UNITED BUS COMPANY

5.01 UBC's financial position has been precarious up to this date. However, with improved management and operational procedures to be instituted under the reorganization to be carried out through the project it could be turned into a financially viable institution to provide adequate transport services to the general public. An analysis of UBC's past performance and future prospects is given below.

A. Past Financial Performance

5.02 Over the last three years both the service offered by UBC and its financial position have rapidly deteriorated. UBC has been suffering from a lack of working capital which has resulted in its buses not being properly maintained and an inadequate supply of spare parts. Because of this, the number of buses in operation each day has declined from 1,820 or 72% of the total fleet in 1970 to 1,445 or 61% of the total fleet in 1972.

5.03 The declining number of buses in service has resulted in declining ridership and declining revenue for UBC. Adding to problems is the fact that fares have not been increased since 1965 although operating costs have been increasing every year. A summary of the operation over the last three years (ending Mar-ch20, 1972) is given below:

1970 1971 1972

Average number of buses in operation each day 1,820 1,665 1,445

Total number of passengers (millions) 747 692 632 ------in millions of rls--

Revenue 1,727 1,591 1,454

Operating Expenses S 2,274 2,443 2,525

Net Operating Loss (547) (852) Q_,071)

5.04 The Government and City have made contributions to UBC in the past in the form of operating grants and purchase of shares. These contributions have not been made on a regular basis or in regular amounts, however, and thus have been of limited help in ameliorating the situation in UBC's opera- tions. The contributions in the last three years were: - 25 -

1970 1971 1972 -in millions of rl-

Operating grants. 713 187 - Purchase of shares 472 158 1,023

1,t 185 345 1,023

.3 Present Financial Position

5.05 The March 20, 1972 balance sheet of UBC (Annex 5) shows a large accumulated deficit and Gaverment advances which UBChas no prospects of repaying. Although the balance sheet shows UBC with Rls 577_million in working capital, accordig- to the mmagament of UBC the Inventory contains approximately Rls 200 million in obsolete part's and prepaid expenses include a claim against a supplier for RIs 214 million which is not collectible. The working capital of UBC, therefore, is actually Rls 163 milliou.

5.06 The Government advances to the Bus Company as of March 20, 1972, were:

RIs Millions National Iranian Oil Company 109 Customs - 13 Ministry of Finance - 77 Social Security (A.O.S.) 1,159 City of Tebrai 166 Housing Organization 8 Construction Bank 1 2.033

5.07 In order not to unduly burden UBC at this initial stage of its reorganization and to assure UBC's future financial viability, following appraisal of this project the Government has cancelled its long-term loans and advances to UBC.. It hts also taken over payment of UBC's two outstand- ing suppliers notes as of the year beginning March 21, 1973 under which UBC is acquiring 400 new buses in the context of the five year rehabilitation prngram. These arrangements were confirmed during negotiations. 5.08 In order that UBC has proper cost informatiou with which to introduce proper cost accounting systems it was agreed during negotiations that by not later than tarch 20, 1974, the Econo0mic and Technical Advisory Group will revalue UBC assets so that the balance sheet for the year beginning March 21, 1974, gives a true reflection of the value of the assets. It was also agreed - 26 -

that by not later than March 20, 1975, the Economic and Technical Advisory Group would introduce a system of cost accounting acceptable to the Bank to determine the true costs of the various services and facilities provided by UBC.

5.09 Furthermore, it was agreed during negotiations that accounts and fInancial statements will be audited in accordance with sound auditing prac- tices by an independent auditor acceptable to the Bank and that the statements will be submitted to the Bank within six months of the end of each fiscal year.

5.10 The effect of the cancellation of long term debt and a partial reval- uation of assets (using the assumptions set out in Annex 3 and from discussion with management) have been applied retroactively to the March 20, 1972 balance sheet. A summary of the effect is given below:

1972 Actual ------=1972 Revalued--- Rls US$ Rls US$ Millions Millions % Millions Millions %

Current assets 852 13 29 438 6 16 Net fixed assets 2,128 31 71 2,266 33 84

Total Assets 2,980 44 100 2,704 39 100

Current liabilities 275 4 9 275 4 10 Long-termdebt 2,033 30 68 - - - Equity 672 10 23 2,429 35 90

Total Liabilities 2,980 44 100 2 704 39 100

C. Financing Plan

5.11 The financing plan is based on UBC's forecast of source and applica- tion of funds during 1973/74-1977/78. Details of these forecasts are given in Annex 6 and summarized below: 27

Rls US$ Millions Millions X

Requirements of Funds

Proposed capital expenditures 4,796 70.3 85 Operating cash requirements 815 12.0 1S

Total Requirements 82.3 100

Sources of Funds

Borrowings: ProposedIBRD loan 2,121 31.1 38 Other loans (requiredfor these purchasesin 1976/77 and 1977/78) 1,050 15.5 19 Total Borrowings 3,171 46.6 57

Govermnent contributions 3,120 45.7 55 Less: debt service 680 10.0 12

Net Government Contributions 2,440 35.7 43

5.611 82.3 100

,:0.1X The net Goverment contributionswould cover the operatingcash re,t4*eents of UBC over this period as well as local currency costs of fleet rehabilitation and land purchasesfor depots. The operating cash require- ents are projectedto declineas fares are increased in 1975/76(see explana- tion and assumptions in para 5.14). Details of the borrowings required are as follows:

(a) The proposed Bank loan of US$31 million is assumed to be made for a term of 15 years including a grace period of four years with interestat 7.25% p.a. (b) The other loans of US$15.5million are the amountsnecessary to cover the remaining capital expenditures for the five-year program to fully rehabilitate TJBC. They are assumed to be made for a term of eight years with interest at 9Z p.a.

During negotiations, assurances were obtained that until March 20, 1979 UBC will not incur any new debts other than those under the proposedproject withoutprior approvalof the Bank, and that commencingwith the fiscal year beginningMarch 21, 1979 no debt may be incurredby UBC unless internalcash generationof the preceding12 months or most recentcompleted fiscal jear was more than 1.25 times the maximumdebt servicefor any succeedingfiscal year. - 28 -

D. Future Operating Results

5.13 Forecast operating results during the period 1972/73-1978/79are shown in Annex 4, using assumptions listed in Annex 3. A summary of the results is given below:

1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 …-----in millions of rls------

Revenues 1,624 1,867 2,293 2,849 3,212 3,338 4,020 Expenses 2,937 2,813 3,057 3,209 3,422 3,558 3,746

Operating Income (Loss) (1,313) ( 946) (770) (360) (210) (220) 274

Interest 16 11 60 112 162 206 225

Government Operating Grants 1,000 1,000 600 300 200 100

Net income (Loss) after interest and Government grants (329) (43) (230) (172) (172) (326) .49

5.14 The forecast results show declining operating losses and declining Government operating grants, so that in 1978/79 a Government subsidy is not required. The improving results occur largely because of assumed fare increases in 1975/76 and 1978/79 which would raise average fare levels from Rls 2 to Rls 3 to Ris 4 bj the end of the decade. The proposed fare increases are within acceptable limits in Tehran and will not discourage public tran- soort ridership (see Annex 16). The present average fares of Rls 2.0 have prevailed since 1965. The proposed Economic and Technical Advisory Group will review the fare policy of UBC, and will make recommendationson fare increases and on changes in fare structure based on the revalued assets and the cost accounting information. During negotiations, assurances were obtained that a revised schedule of tariffs will be proposed by UBC not later than December 31, 1974 and implemented not later than March 21, 1975 which will provide for such increases in the level of tariffs as should result in an overall increase of not less than 25% in the annual operaitingrevenues of UBC beginning with the year commencing March 21, 1975. Agreement was also obtained that UBC will use the new buses to be financed under the project to provide improved or new services according to a plan, satisfactory to the Bank, adopted and implemented by not later than June 30, 1974, and that in accordance with this plan the fares on the new buses will be introduced at the highest prevailing fare, presently Rls 5. - 29 -

5.15 Duringnegotiations, assurances were also obtainedthat until March 21, 1977 the Governmentwill provideto UBC on a quarterlybasis any additional subsidypayment required to ensure that net operatingrevenue will cover cash operating expenses,including adequate maintenance and estimatedfuture debt service. The subsidypayments will be relatedto performancetargets as discussedin paras 5.17 and 5.18. As of March 21, 1973 the Governmenthas begun to make regular transfers of up to Rls 100 millionper month reqiAred to cover UBC's deficit on a monthly basis so that UBC management is not preoccupied with cash shortages, considered to be one of the basic problems affecting all UBC's operations.

E. Future Financial Position

5.16 Forecastbalance sheets for the years endingin 1972 through 1979 (Annex5) indicate that the UCw's financial position, on a revalued basis, is expectedto remainsatisfactory. With the Governmentproviding the necessarycontributions, the currentratio is never below 1, which is adequate. buring the periodof reformof UBC the debt/equityratio in- creases to a maximum of 56:44 in 1978 and then begins to decline.

F. Monitoring - Financial and Operating Targets

5.17 During the five-year period of rehabilitation, UBC financial dependenceon the Governmentand the extraordinarycircumstances of its currentposition make it difficultto rely on conventionalfinancial ratios as indicatorsof improvedoperating performance and as controltargets for monitoring and feedbackpurposes. The consultants in the Immediate Action Program have recommended that a more realistic set of operating targets, based on the detailed study of UBC's operations and implicit in the projected improvements be used for monitoringand controlpurposes. These targets would measure the effectivenessof capitalinjection and rehabilitation, serve as incentives to better management and provide guidelines for determ- ining any additional operating subsidies needed during the five-year period of rehabilitation. The type and general range of improvements in operations and maintenance that will be established as performance targets by the Economic and Technical Advisory Group are set forth below. These targets cannot presently be more than indicative, in view of the current uncertainties- regarding the linkages between operating targets and financial performance indicators, and the lack of reliable estimates regarding future ridership. -30-

1973 Target Improve- Figure ment by 1978

Operations

- Passenger trips (million) 700 950 - Percentage of overload 20 - - Average waiting time (minutes) (during peak hour) 15 5 - Maximum waiting time (minutes) (95% percentile) 30+ 10+

Maintenance

- Fleet availability (%) 72 85 - Fleet utilization (%) 64 85 - Diesel consumption liters/100 vehicles/km 62 35 = No. of breakdowns/10,000vehicles/km 20 1

5.18 All the indicated targets have a direct impact on UBC revenues and operating and maintenance ^osts. Although the consultants' studies indicate the nature of the cost functions, the limited data on which the estimates of cost functions are based, and the worsening of financial condition that has occurred since the completion of the consultants'work nearly a year ago, point out the need for additional study before the operating targets can be reliably linked to financial performance indicators. The Economic and Technical Advisory Group to UBC will perform this detailed study which is expected to take some six months to complete. A set of monitoring guidelines will then be proposed by UBC and will encompass the principal targets set out above and will include, in addition, manpower targets, indices of labor productivity, targets for budget control and any other meaningful indicators that emerge as a result of the consultants' studies.

5.19 During negotiations, assurances were obtained that the Government will consult with the Bank, the UBC, the City and TDC and take necessary action to implement, in accordance with a timetable acceptable to the Bank, the recommendationsof the Economic and Technical Advisory Group on the management and operations of the bus fleet and on the operational and financial targets to be achieved by the Bus Company (see para 4.06). The UBC will after consultationwith the Bank, implement the recommended follow-up action which should provide for semi-annual reporting by UBC on the progress in implementing the agreed targets and for annual review by the Government. During the project period, the advisers to UBC would assist in this task. Any operat'ng subsidies that may be required during the period of rehabilita- tion would be linked through a management incentive scheme to the performance targets. The annual reviews would also attempt to relate UBC's performance to success of the Government's complementary efforts at easing traffic problems in the city and would include a review of such restraint measures as parking regulations, and provision of bus priority schemes. Some form of indemnity 31 scheme could then be included as part of the subsidy system to reflect more accurately loss of performance on bus operations as a result of the Government's (or the city's) inability to effect the agreed improvements in traffic control and management. - 32 -

VI. PROJECT JUSTIFICATION

A. General

6.01 The lack of cheap, convenient and dependable transit servAces is a burden on the mass of people in Tehran. Public bus transport is so poor that it has lost 10% of its passengers each year for the past several years. The result is that the public transport system fails to provide services that travelers want and are prepared to pay for; it restricts access by lower income group to community amenities, recreational areas, educational and cultural facilities and those government services (health clinics, day care centers) that affect individual welfare; in addition, it restricts mobility of the labor force and diminishes flexibility in the labor market. In the absence of an adequate public transport service, the enforcement of even a limited policy of restraining automobile use is difficult. Likewise the long-term institutional measures designed to engender rational urban strategy would be jeopardizad.

6.02 In the short-run, the project remedies the most extreme of transport disadvantages to the population, and provides an acceptable alternative to auto travel for potential automobile users. The restoration of good bus service prevents the continued diversion of bus passengers and allows the long term trend in bus ridership to be reestablished. Such action permits long-term transport options to be retained, while long-term transport-studies are considered in depth and in relation to other urban developments. The necessity of such considerations,and the absence of organizational or planning arrangements to act as a guide, has prompted the Government to introduce the concept of the Tehran Development Council and to look to the immediate tran- sport program for assistance in establishing the TDC and in advising on a comprehensive long-term urban development strategy.

6.03 The institutional element of the project fulfills the primary need cited by SOFRETU and others regarding improved coordination and direction among the different institutions concerned with transport and urban development in Tehran. Without a coordinated urban program developed within explicit urban guidelines, the impact of individual project activity can often be diffused and counterproductive. In the long-term the institutional assistance envisaged in this project will provide a base for rational and concerted urban decision-making. - 33 -

B. Objectives

6.04 The objectives of the project are both short- and long-term, since the project is a vital first phase of a longer term transport program. The short-term objectives are remedial and aimed at:

(a) immediate restoration of a public bus service adequate for the mass of population;

(b) improvement in traffic circulation in the heavily pressed centercity primarilyto facilitatepublic transportand improvementto the inadequatestreet network within the southernpart of the city. 6.05 The long-term objectives are key to large scale urban infrastructural development, and provide for:

(a) institution of a needed policy-making and planning governmental body that can formulate and integrate developmentefforts, including long-term transport plans, in the Tehranregion, on the basis of a long-termurban developmentstrategy; (b) furtherreview and feasibilitystudy of longer term needs and engineeringresponse to such needs for developmentof an efficienttransport svstem.

C. Rate of Return

6.06 The long-range elements of the project do not lend themselves to quantification despite their major benefits. The establishment of an urban and regional planning body is of ultimate importance to effectuating the changes in the existing pattern of urban growth through rational and conscious decision-making.The potentialcosts of inadequateand wrong decisionson transportand other urban sector designs,and the correspondingbenefits of timelyand correctones, are inestimable.

6.07 Since this institutionaland other non-quantifiablebut important elementsof the projectare excludedfrom benefit-costevaluation, the internal rate of return reflectsonly partialproject benefits arising from short-term transportobjectives, yet indicatedquantitative benefits are impressive. The overall rate of returnfor these quantifiableparts of the projectis about 28% (Annex 15). - 34 -

6.08 An important quantifiable benefit is the savings in operating costs and the increased net revenues to UBC as a result of operational and main- tenance improvements, partial fleet rehabilitationand new bus purchases. With the project, there will be a greater availability of buses, operating at greater frequency and at improved travel speeds. Under conditions of improved bus service, the average number of passenger trips is projected to increase about 50% during the next five years. (see Annex 16 for details of tne demand forecast). UBC would be recovering about half of its diverted ridership, and incrementally adding about 75,000 new riders annually. By 1977, there would be a net gain of 330 million trips or approximately 1,700 million passengers/km. The rate of return on this element of the project is 10%. If time savings based on improved levels of service to existing passengers and to new bus passengers are taken into account, the rate of return on this element of the project increases to 36%.

6.09 The major quantifiablebenefits from improvements in street and traffic management reinforce those arising directly from improved bus service. The improvement in traffic circulation will improve travel speeds for cars and buses and facilitate bus scheduled operations. It will also provide for an increased road capacity, thus preventing a worsening of the congestion level. The benefits accruing from traffic circulation improvements can be measured in user time savings and lower operating costs for all vehicles. T.e rate of return attributabUe to th's element iS about 14%.

6.10 The economic benefits of bus improvements can also be shown in terms of the level of subsidy per bus passenger km. Without the project, the sub- sidy can be expected to remain at its present level of about Rls 0.3 passenger km. With the improvements, the level of subsidization would fall to zero.

D. Other Benefits

6.11 As noted earlier, the quantifiablebenefits are a small part of the overall project benefits. Strengthened urban decision-makingwill give rise to real social benefit, particularly, the positive effect of improved mobility for the population at large. The project's impact on directing new patterns of urban settlement and on infrastructuraldevelopment through the establishment of the TDC is of major consequence to Tehran's future and to future urban investments in the Tehran region. Establishment of a comprehensive decision- making process and resolution of an urban strategy is of immediate importance, for almost all current decisions regarding Tehran's development are resulting in further concentrationsof people and urban functions in the central core of the city. The project will alleviate the immediate transport problems in the central core area, whi'Lelaying the institutional groundwork for long-term urban and related transport solutions. Finally, non-quantifiable but essential to future transport plans is the basis this project provides for positive policy on restraint of private automobile use through increased efficiency and price competition of public transportation. - 35

6.12 Account is not taken in this 4nalysis of benefits from other direct measures to restrain the growth of private vehicle use since this could, theoretically, be introduced without the project. It is nonetheless relevant that such measures as the reinforcement of pking restrictions are being introduced to accompany the project and that further measures are in prepara- tion. Without the improvement of public transport these would, politically, be significantly harder to gain acceptance. - 36 -

VII. AGREEMENTSREACHED AND RECOMMENDATIONS

7.01 During negotiations, assurances and agreements were obtained which can be regarded in three categories:

A. General Agreements

1) The Government or Tehran Development Council will employ, by a date not later than December31, 1973, qualified and experienced consultants acceptable to the Bank upon terms and conditions satisfactory to the Bank to advise TDC (para 4.14).

2) The Government or TDC will reviewwith the Bank the consultants' recommendations arising from the urban planning studies carried out under TDC and will consult with the Bank on implementation of the recommendations(para 4.14).

3) The Governmentor TDC will consultwith the Bank on the terms of referenceof the supplementaryfeasibility studies of the long-termtransport system (para 4.13).

4) The Governmentor TDC will employconsultants for the follow-up long-term transport studies by a date not later than December 31, 1973 on terms and conditions satisfactory to the Bank (para 4.13).

5) The Government will adopt after consultation with the Bank, a long-term transport system plan based on the recommendations arising from the transport studies by a date not later than December31, 1974 (para 4.13).

6) The Governmentor TDC shall employqualified and experienced engineeringconsultants acceptable to the Bank on terms and conditionssatisfactory to the Bank to preparea detailed designof the long-termtransport system, and upon completion of the final designs,review the designswith the Bank (4.13).

7) The Government will provide localcurrency funds by way of a grant to the Citty and UBC to cover capital expenditures under the project through a fund to be replenished quarterly (para 4.19).

8) The Government, until March 21, 1977, w.ll provide, by way of a grant on a quarterlv basis, any additional subsidy payment to UBC td ensure that new operating revenue would cover cash expenses 'includingmaintenance and estimated future debt service (para 5.15). - 37 -

9) The Government will consult with the Bank, the UBC, the City and TDC, and take necessary action to implement, in accordance with a timetable acceptable to the Bank, the recommendations of the Economic and Technical Advisory Group on the management and operations of the bus fleet and on the operational and financial targets to be achieved by UBC (para 5.19).

10) The Government will on-lend to the City project funds required for the purchase and installation of traffic control equipment uader the Subsidiary Loan Agreement between the Government and the City of Tehran contingent upon the transfer of responsibility for installation of traffic control equipment from the Traffic Police to the City; and, in the event such a transfer does not occur by June 30, 1974, the Government will promptly request that the Schedules to the Loan Agreement be amended so as to ensure that this element of the project becomes the responsibility of the Government (para 4.20). B. Agreements related to the City

1) The City will employ traffic engineering consultants on terms and conditions satisfactory to the Bank for execution of traffic circulation isprovements (para 4.12).

2) The City will consult with the Bank on the implementation of traffic engineering consultant recomuuedations on traffic engineering, car use regulation, bus priority schemes and traffic signalling (para 4.12).

3) The City will employ a full-time, qualified and experienced Traffic Planning Manager with such powers and responsibilities as shall be mutually satisfactory to the Bank and to the City, and shall provide him with the assistance of qualified consultants and supporting staff and facilities as are necessary for the supervision of the implementation of traffic circulation Improvements (para 4.21). 4) The City will prepare and review with the Bank, by not later than March 21, 1974, an overallplan for streetimprovements to be implemented in the southern half of Tehran.(para 4.09).

C. Agreement related to the United Bus Company

1) UBC will establish an Economic and Technical Advisory Group under terms acceptable to the Bank, and will employ manage- ment and accounting consultants acceptable to the Bank upon terms and conditions satisfactory to the Bank (para 4.06). - 38 -

2) UBC will, by a date not later than March 20, 1974, complete a revaluation of its assets and bring its fixed assets record_ fully up-to-date (para 5.08).

3) UBC will, by a date not later than March 20, 1975, develop and, after review with the Bank introduce a cost accounting system acceptable to the Bank to determine the true cost of the various services and facilities provided by USC (para 5.08).

4) UBC will not incur any debt until March 20, 1979 other than that under the proposed project without the prior approval of the Bank (para 5.12).

5) UBC will not incur any debt after March 20, 1979 without prior approval of the Bank unless UBC's net operating revenue in the most recent completed fiscal year or pre- ceding 12 mounth period is at least 1.25 times the maximum debt service for any succeeding fiscal year (para 5.12).

6) UBC's financial statements will be audited by independent auditors sat 4 sfactory to the Bank and will furnished to the Bank not later than six months after the end of each fiscal year (para 5.09).

7) The Economic and Technical Advisory Group will be required by a date not later than June 30, 1974 to make recommendations on operational and financial targets to be achieved by UBC and that UBC will review the recommendations with the Govern- ment, the City, and with the Bank by not later than August 31, 1974 and adopt a plan of follow-up action in accordance with a timetable acceptable to the Bank by not later than December 31, 1974 and thereafter adhere to the timetable in implementing the plan (paras 4.06 and 5.14).

8) UBC will adopt and implement a plan satisfactory to the Bank by not later than June 30, 1974, ensuring that new buses financed out of the proceeds of the loan are used to provide improved or new services,and that UBC will ievy the highest of the prevailing tariffs in the case of these services (para 5.14).

9) UBC will by a date not later than December 31, 1974, prepare a plan acceptable to the Bank, consisting of a revised schedule of tariffs which will provide for such increases in the levels of tariffs as should result in an overall increase of not less than 25Z in the nnual operating revenues o'fUBC and shall thereafter implement the said plan by a date not-later than the fiscal year commencing March 21, 1975 (paras 4.06 and 5.14). 39

10) UBCwill procure out of tbe proeseds of the loan an initial order of 250 single-ecker buses and 115 double-decker buses and a second order which willi be based on the reconmendations of the Economic and Technical Advisory Group an bus fleet composition (pars 4.04), 7.02 The follwing In a condition of effectiveness: The City shall have designated a Traffic Planning Nanager (para 4.21).

7eO3 On the basis of the above assurances, the proposed project is suitable for a Bank loan of U0$42.0 million equivalent at the Government of Iran for a term of 15 years, including a grace period of four years.

A N N E I E S

ANNEX1 Page 1

_ ~

TEHRAN URBANTRANSPORT-PROJECT

FACTORS GUIDING URBAN GROWT INi TEHR (PR3=NT 7A)a BAj a

National Policies and Programs

Because of Tehran's position as both the capital city and as a city which contains about 60% of the nation's industrial, cormnercial and higher-level educational activities, its growth must be viewed within the natfona.l context.

Urban Deve:lopment

Iran's present 13.2 million urban population is projected to grow by an additional 4 million during the Fifth Plan period of 1973-1978 to total 17.2 million by 1978. Daring the same period, Tehran metropolitan area is projected to grow from its present level of 3.8 d.llion in 1972 to aboutU48 mjllion-in-1978. --In other wiads, Tebran will maintain its share of the national urban population at the end of the Fifth Plan.

URBANPOPULATICN - Millions

Date Iran Tehran

1972 13.2 3.8 1978 17.2 4.8 A decentralization policy as envisioned in the Fifth Plan is consequently not expected to give a substantially different regional growth pattern within the next five years. It will start bearing fruit only during the Sixth Plan.

Nevertheless, with an eye to the future a general theme of the Fifth Plan (1973-1978) is "decentralization" of such national activities as administrativeservices, industry and higher-education from Tehran. Proposed are creation of regional development pbles which will absorb the transferred or newly created functions and a communications network which will facilitate the undertaking of such a program.

Industrial location policies and the highway development programs of the next five years are important tools in the realization of the Plan. Provisions of these two sectors regarding the development of Tehran metropolitan area are as follows: ANNEX1 Page 2

(a) Industrial Location Policy: The Fifth Plan as a continuation of the Fourth Plan policies places certain restrictions on industrial growth within the Tehran metropolitan area. These are:

(i) all new industriesare to locate120 km away from the Tehran city center;

(ii) any industrialgrowth within the metropolitan area will be in the form of eitherexpansion of existing establishments such as the auto- motive industry or new establishments that have close inter-industrial relations with existing firms; (iii) no industries within the 120 km limit will be extended any of the economic and social concessions,i.e. tax reductions, that are granted industries locating elsewhere in the country.

(b) Highway Development Program: Presently, one-third of the total highway development program investments of the Fifth Plan are allocated to ,Tehran region., One hundredkilometers of accessroads to Tehranare programmedto be completedby 1978. Regional relations are to be strengthenedwithin an immediate range of 100-150 km with Qum in the south, Ab-Ali and Damavand in the east and Karaj in the west. All three directionsare almostequally programmed for investment with Karaj being tied to Qazvin further in the west and Ch'allus near the Caspian Sea. Qazvin and Saveh are also to be united via Boin in the southwest.

Physical and Climatological Limitatiors to Urban Growth

The Albcrz mountain chain will set strict limitations for northward and, to a lesser degree, for eastward ezpansion of the urban area. The hot and unpleasantmicroclimate in the south makes expansion in this direction not unfeasible but uncomfortable and difficult. The area west of Tehrar is therefore regarded as having the best possibilities for future urban growthn. ANNEX1 Page 3

PresentLand Use Characteristics

Rapid concentrical expansion with a light bias towards the north and northeast has resulted in reduced communication between the distinct and already spatially separated socioeconomic groups of the urban area. For the present, land-use patternand the distributionof employmentand residentialzones of the urban area favor the promotion of this situation. So in 1972,we find the Tehranmetropolitan area settlementpattern quite rigidlystructured with respectto distribution of its varioussocioeconomic groups and extension of its urban services.

The main center of TehranCity, a zone of 30 km2 extending 5 kmn east-west and 6 km north-south, is delimited by avenues of Shoosh in the south, Si M8tri in the west, Shahnaz and Shahbaz in the east, and Elizabeth I: and Karim Khan Zand in the north. This area containsthe administrative,com- mercialand businessactivitie sof the urban complexand harborsa residential populationof about 0.5 million.

The commercialactivities are mainly locatedin the southernsec- tions of the center. The urban qualitygets betteras one approachesthe northernsections. Specializedareas in the south are as follows:

(a) BazaarArea: the traditionalcenter of wholesaleand retailtrade and services,it is locatedsouth of Bouzar- jomehri;

(b) MinisterialSection: this is the administrativecenter locatedjust north of the Bazaar area;

(c) CommercialDistrict: modern commercialestablishments have locatedUalong the imainavenues north of Sepah;

(d) Business District: the new business district is located mainly in the northwestern part of the center. Major industrialdistricts have developedin responseto trans- port developmentsin west and southwestof TehranCity and the relatively new ones have also locatedall along the major accessroads to the city. These areas extend along the Old Karaj Road, between Mehrabad Airport and the railroad, along old settlements on Qazvin Road, around the new Karaj Road to the west and northwest, and along the roads to Qum to the south and to Mazanderanto the east. There is also a zone along the road to Khorassoncomprising cement factories,brickworks and construction materialsindustry. The automotiveindustry presently located on the ANNEX1 Pageg e

Karaj Expressway and the new Karaj Road, about 20 km west of Tehran is locating new production facilities further south between the new and old Karaj roads. As noted, there are no industrial settlements in the north which remains totally residential.

The Transport Network

The Tehran urban agglomeration is served by a primary network with du&l characteristics:

(a) The orthogonal grid in the center with wide street network but also having discontinuities; and

(b) The radial network in the periphery with bad linkages both with the central orthogonal gridA and between its own lines.

The radial network in the periphery hap the primary function of providing access between the urban complex and the outlying areas. It extends beyond the periphery of the arban complex to eventually form part of the national highway system. Residential and industrial districts have developed along and around the principal access roads into Tehran City.

The radial peripheral network has inadequate direct linkages between its own lines. The situation is especially acute in the south. There is no direct linkage connecting the areas between northeast and east to the south. The east-west conrection are also lacking with respect to linkages between Farahabad - Khorassan roads in the east, Tarasht - Old Karaj Road, and the dense settlements in the west. Connecting Karaj Freeway and Darius in the north is also important. In these areas movements of commercial vehicles are reported to be quite difficult.

The orthogonal.grid of the city center is composed of seven primary roads running in the north-south direction and nine running in the east-west direction. The roads in the north-south direction are over 5 km in length and run about 800 m apart from each other, and the roads in the east-west direction are about 7.5 km in length and run about 900 m apart from each other.

There are discontinuities in the orthogonal grid itself and in linkages with the radial net of the periphery. The dis- continuities in the grid are most acute in the east-west direction where there are only two roads which- traverse the central -zone without--interruption - Shah Reza and Shoosh. The absence of radial connections between the radial net of the periphery and the incomplete grid of the center makes zonal tran- sitions difficult. The inadequacy of both key intersections in the transition zones and the distributors in the grid further this situation. ANNEX1 Pagee

Furthermore, the southern and northern sections of the city center delimited by Sepah differ with respect to their transport land- use patterns:

(a) The transport space occupies about 14%of total urban land in the south cominig down to 10% in certain sections; in the north the transport space is about 28% of the urban area and in some sectionsruns up to 33%. The situation in the northernsection compares very well with the conditionsin the westerncities, whereas the situation in the south is typical of most eastern cities.

(b) The linear density of the network is below 0.07 km/ha in the south,whereas it averages 0.17 km/ha in the north between a range of 0.10 - 0.30 km/ha. This situationis quite inadequatewhen comparedwith the western Europeancities where the road densityvalues average about 0.21 - 0.22 km/ha.

(c) The secondary roads lack in general both in the south and the north,but the south further suffers from an inadequate tertiary road system.

This brings us to the major characteristicsof the hierarchyof the streetnetwork in Tehran. Again, the northernpart of the city has quite wide primary and secondary street systems in the width of 20-24 m and 12-20 m respectitiey. Howvert, the inadequacy of the secondary system in the north, and the virtual absence of the -stesecondary in the south force a direct connectionbetween the primary and tertiary system8 and thus forces the primary network, especially in the south, to assuma functions other than its oWn. This situation, increasing the number of intersections involved, causes congestion.

Prospects for the Future As indicated earlier, there is no prospect of a substantially reducedpopulation growth within the next decade. roastingland use policieslead to a concentricgrowth of the urban area. Tehranwill, therefore,continue to be a compactcity with high populationdensities and a concentrationof employmentopportunities in the center. The streetsystem is inadequatefor a substantially increased use of private cars, but on the other hand, the present and the futureland use pattern is very suitable for an efficient bus system. Consequently, the Government'sand the Municipality'sintention to reduce the use of private cars in the centerhas a high probability of success. But this requires a concentratedinvestment effort in the public transport system. -

ANNEX 1

Appendix

BASIC DATAAND FORECASTSFOR THE MM MET1POLITAI AREA

1. Population

Source\Year 956 1966 1971 1972 1976 1977 1981 .1990 1991

Census 1.512 2.719 Master Plan 3.6 i.3 4.8 5.5 SOFRETU 1 3.6 3.75 4.27 _5.5 . SOFRETU2 3.6 - . - - 8.0 Doxiadis 3.80 4.74 6.96 6% growth 3.80 4.7 6.4 11.5

Bank estimate 3.80 4.5 5.4 8.0

2. Employment by Sector

1966/1 1990/2

Agriculture 7.9 4.1 Mining 0.4 1.6 Manufacturing 199.0 745.7 Construction 67.3 201.1 Electrical 16.8 54.7 Commerce 137.4 432.0 Transport 59.3 197.4 Services 267.1 7?2.3 Total 755.2 2,388.9

Ll Source: Census /2 Forecast: Dloxdadis

Page 7 Appendix 3. Occupational Status 19661

Professionals 11% White collar 12 Commercial & service employees 33% Blue collar 44%

8. Monthly Family Income 1971 2

us$ 0 - 44 4.9% uSs 41 - *88 27.8% US$ 88 - 1J7 29.0% US$ 147 - 220 11.7% US$ 220 - 293 5.5% US$ 293 - 367 5.2% US$ 513 - 5.1% Note: Average family size is 5.2 persons. 5. Car Ownership in Tehran

Assumed Growth Rate Source\Year 1962 1966 1971 1981 1971-81

Master Plan 43 78L3 176 - 456 10.0% per capita 0.020 0.0285 0.049 0.098 7.2% SOFRETU 119 381 12.3% per capita 0.033 0.071 8.0% Bank Estimate 140 415 11.5% per capita 0.039 0.077 7.0%

LI Source: Census /2 Source: SOFRETU /3 Source: Census

ANNEX2 Page I IRAN...... TEHRAN -U1N-TRAIPCRT PROJECT

TH MUNITE)BUS COMPANYOF T HN

Preasent Situation: The United Bus CompanrUC provides the regular bus services in Tebran and most of the bus contract services.

The bus network may be divided into four categories of routes:

(a) the lines running within the center city and which are limited to the zone bounded by the Avenues Shahas, Shoosh, Simetri and Chehel- Metri/Xarim Khan;

(b) radial lines coming from the nearer suburbs and Which terminate in the center;

(c) radial lines serving the suburbs further away and which terminate at the periphery of the central area;

(d) a small number of lines which provide local comnections between certain outlying suburbs.

There are 152 bus routes and the route distance totals 1,380 km., an average distance of 9 km/route.

The bus fleet consists of 2 ,3.51vehicles of which there are:

(a) 1,690 single-deckers,

(b) 200 newly purchased single-deckers (Mercedes Benz type 302 in green livery),

(c) 461 double-deckers (including 10 new Shahsavar).

At the end of the current financial year (March 20, 1973) it is expected that the greater part of the minibuses will have been scrapped. Five hundred minibuses were introduced in 1966 to compete with taxis on routes thought to be without sufficient traffic for larger vehicles and to link services over roads unsatisfactory for bigger buses. They soon were ANNEX 2 Page 2 used on main routeswhere they were overloadedand thereforewore out quickly. With a seatingcapacity of only 13, they are uneconomical to run in such circumstances.The first ten of a new seriesof 200 LeylandIran double-deckerbuses speciallydesigned for use in Tehran and known as the 'Shahsavar'were deliveredon March 19. It is promisedthat the delivery rate will continueat 25 buses per month.

The buses are usually crewed by a driver and a conductor. Tickets are sold at some 900 booths and terminals along the routes. This is, of course, wasteful in manpower. The consultants estimated that of a total of about 13,000 employeesof UBC, nearly 10,000 were driversand conductors,ticket sellers,cdntrolleers-tc., directly concerned in the running of the services and issue of tickets. Efforts are already being made by UBCto reduce staff. About 1,150 employees have already been dismissed. These were mainly ticket sellers an conductors, many of whomwere involved in the fraudelent practice L which in aggregate led to a loss of revenue to UBC of more than 20% per annum.

A review of UBC's operations is shown in the following table.

No. of . _ _ Population aseaat Average No. of of Tehran 3eginning Buses in opera- Coefficient of No. of paying (millions) of Year tion Each Day Utilization passengers ('000)

1965/66 2.82 1507 1340 0.89 549,299 1966/67 2.98 1632 1h30 0.87 584,445 1967/68 3.10 2136 182C 0.85 655,975 1968/69 3.23 2443 1830 0.75 728,059 1969/70 3.36 2530 1820 0.72 747,054 1970/71 3.50 2522 1665 0.66 692,386 1971/72 3.63 2351 1445 0.61 631,989 1972/73 - 2351 1500 0.64 622,80oa

La Twelvemonths estimatedon the basis of ten months.

1/ These practices are made easy becausethe ticketshave no serialnumber and are availablefor the day of purchaseor for any subsequentday. ANNE 2 Page 3

As can be seen from this table, there has been a serious decline in the availability of buses for operation which is only now leveling off. This has been due to the lack of a system of pre- ventive maintenance and the unavailability of spare parts. The only regular maintenance carried out appeared to be oil checks, the topping off of batteries, an occasional mechanical inspection in inadequate maintenance facilities, and correction of minor defects as the result of driver complaint. Al-most all other work appeared to resuilt from failure or accident. Ordering of new spare parts was inadequately geared to the inventory and to stock movements. Attempts to repair failed items in order to expedite the return of buses to operations do not appear to have been successful. Welding of worn shafts, rear axle shafts and pistons (which also need to be oval ground) destroys the advantages of initial use of special steels and heat treatment.

Traffic: It is clear that from 19?0 to 1972 here was a fall im Thae number of passengers carried Passengers forced to wait at bus stops for a long time have tur.ed to taxis. On the evidence collected by the consultants, 50% of bus passengers waited for more than ten minutes for a bu. 25% waited more than 15 minutes and 10% waited more than 25 minutes. Average bus loads during the peak hours exceeded more than 100% capacityon the main routesand 125% on those routes servingthe near suburbsand the city center. There are no publishedtimetables for the bus system. Operations are timed according to arrivalsat the terminiby the 00 so-called "controllers"whose primary activityseems to consist of stamping the trip sheetsof each driverin order to attest to his.presenceat work. An importantconsequence of thislack of timetablesand systematicoperating procedures means that on almostall the important bus routesthere are large variationsin the headwaybet-ween buses, no matterwhat period of day is considered, and thus large variationsin waitingtimes, particularly at intermediate points on the route.

Tariff: A single system of tariffsis appliedon 145 of the 152 bus routes. On 104 routesthe tariffis Rls 2 and on another22 bus routes the tariffsrange from als 3 to 5. On formerminibus routesWhe uniform tariff is Rls 5. On the other seven lines, which run over distancesof between38 and 63 km, tariffsrange from Rls 6 to 30. As mentioned earlier,the ticketsare sold at specialbooths which are set up at some 900 points along the route system. As each passenger boards the bus, the conductortakes the ticket away and, after tearing it in two, places the pieces in a plasticbag which is by his side. Each morning the conductorreceives such a bag with a tag specifying the number of the line, the date, the name of the conductorand the number of the vehicle. At the end of the day, the bags filledwith torn ticketsare handed over to UBC where, by a singleprocess of weighing,the number-ofpaying passengersis determined. This systemof tickethandling makes it impossibleat the end of the day to obtainproper statisticsof AN3NEX2 Page h passengers transported on each route or the direction of movements. It also makes it practically impossible to control the rather extuensive cheating that takes place. According to UBC, as many as 20% of the passengers do not pay a fare. Among these are passengers who know the conductor, those who 'alsify tickets, those entitled to free rides (such as policemen) who add their families as well to the privilege,and otherswho escapethe attentionof the conductor. Organizationand Manageient: UBC is controlledby a GeneralAssembly, most membersof whic,aare members of the City Council. The Assemblymeets arnuallybut may hold extraor inaryjmetingswhich in the past have dealt -with matters of change of UBOstatus or capital.

The management of UBC is by a Council and a General Manager. Members ara appointed by the General Assembly. At the momentthere is Mr. Ebrahim Zohdl who is chairman and general manager, Mr. Rasoul Dadgari responsible for persornel matters and administration and Mr. Hadi Hashemi responsible for financial affairs. This council has been meeting three and four times alweek recently.

There is an Inspector appointed by the General Assembly from the staff of the Ministry of Finance. The Inspector's responsibilit is to ensure the satisfactory financial conduct of UBC. (As discussed elsewhere the right to a subsidy is not eplicit and the financial assistance produced by the City and on occasion directly by Goverrnment is not orderly and makes proper budgeting and financialdirection and planning more difficult than it would otherwise be.)

Under the General Manager are two staff groups:

a) the Office of the Council b) the InspDectorate

and ten departments for:

a) operating b) workshopsand repairs c) administration d) finance e) legal matters f) public relations g) researchand projects h) discipline i) security and j) admirdistrationof the Inspectors. This is set out in Chart 2. ANNEX2 Page 5

Two principal criticisms are made of the organization of IJBC. They are firstly that the existence of the Inspectorate tends to remove the feeling of responsibility among department chiefs by providing a higher level of operation surveillance. The second adverse criticism is that the total separation of control of bus opera- tions from the repair and maintenance of buses tends to give both departments excuses for their own failures. Because UBCis_big,_ decentralization of management is desirable. This is especially so in an enterprise geared towards providing low-cost t ranport services to satisfy a½pub)litieed. Management units (of about 250 vehicles each) are therefore recoimmiendedand the responsibility of the "divisional and depot" manager should encompass both operations and routine maintenance and repairs. In this way, by reducing fleet and staff and by operating in one sector of the city only, success or failure of the services can be judged and a manager held responsible.

The management is excessively centralized. Decentralization of fleet operation and bus maintenance appears desirable and "divisional" control in operations and routine tlight' maintenance of a fleet of about 250 buses, based in a depot, is favored by the consultants. The need for management costing, statistical measures of efficiency and operational controls are evident. The need for effective management is recognized and it is clear that method study and job specification will lead to the identification of areas where there is excessive manning. There is an existing ratio of nearly eight employees per vehicle in service (in Paris the ratio is about half this). Finance: The financial position of UBCis unsatisfactoxy as is shown in Anex 5. UBC's losses have been met in part by payments from the Government and the YMunicipality which gave Rls 713 million in 1970 and Rls 187 million in 1971 and in part bY borrowing. Payments are made when a cash crisis develops. To sum gp a number of interrelated ailments affect the operations of UBC. They are: (a) poor organization of vehicle maintenance, i.e. no preventive maintenance, inadequate maintenance facilities and, with some exceptions, incompetent maintenance staff, ANNEX.2 Page 6

(b) 'the age and general condition of the vehicle fleet,

(c) expensive operations such as excess of operating personnel, absence of proper operating procedures, wasteful use of the bus fleet during slack hours, etc. On the other hand, the authorities oblige UBC to operate routes which are not economicallyjustified. The taitffis too'low ' in relation to both the income level of the passengerstraveling and to the level of service that should be provided. UBC aIso'1aed0is witfh~-ihcreasing p'ioblems in the Sity due td the-]i o-r'regul&tion and control of traffic and to major bottlenecks in the street network. Resultant low speeds of operation increase the number of bus" that must be put in service during the peak hours in order to satisfy the demand.

These poor service conditions have created a growing disenchantment with the service among the traveling public. Passengers who aze faced with interminable delays at bus stops and with heavily overladen buses take taxis, which pick up and discharge passengers indiscriminately. Increased numbers of taxis only adds to the general traffic congestic. in the city. This congestion particularly during the peak hours and near bus stops, produces lower operating speeds for the buses and reinforces the cycle of increased congestion and poorerpublic service.

Proposed Program: UBO's plans for rehabilitation and renewal of fleet covers a period of five years (1973-1978) for i4hich eimmed-iate assistance from the Bank has been requested for the purchase of bus;es in the first two years and financial assistance for other aspects of bus operation for a three year period.

The proposed program consists of:

(a) repair and rehabilitation of the existing fleet; (b) construction and equipment of depots; (c) procurement of new buses; (d) formation of an Economic and Technical Advisory Group; (e) provision of working capital. The present carrying capacltfb -MUBCis inadequat-e to meet peak-hour demands. The consultants calculated that by 1976 - based on an acceptable level of service expressed in terms of waiting time varying from 1 to 4 minutes with waits of over 10 minutes being excep- tional - a vehicle fleet of 2,379 would be required. Currently, the daily 'averagenumber of buses on the road is only 1,500, out of a total fleet of 2,351, The policy6of UBC, therefore, is to have an Opera+tngfleet of at least 2,400 vehicleswithin the next five ANNEX2 Page 7

years. The low fleet utilizationrate (64%) shows the need for rehabili- tation of those buses which can be repaired and for the purchase of new vehicles. After a review of the present fleet and anticipated future needs, the consultants recom=ended the purchase of two types of buses: (a) double-deckers with 64 seats and 46 standing places,

(b) single-deckers with 28 seats and 32 standing places.

Leyland !ran assembles double-deckers in Iran, while Iran National assembles single-decker buses.

Under the project, two depots would be established each serving about 250 vehicles. These depots would provide routine maintenance workshops and would be suitable as pilot areas for the introduction of management decentralization schemes.

The proposed Economic and Technical Advisory Group would have, as part of its terms of reference, improvement of operational and manage- ment procedures including the training of workers essential to the further maintenance program. The Group would specifically be responsible for initiating systems analysis, method study, revision of routing and operation, recommendations on service frequency and its financial implica- tions, budgetary control systems, job costing procedures, devolution responsibility within the depot and so on.

For successful management there must be an adequate cash flow, and the Government during negotiations agreed to provide UBC until March 20, 1977 with local currency grants on a quarterly basis to cover the difference between UBC's operating income and operating expendit>ures, including adequate maintenance and estimated future debt service. For the year just ended and the next two years, the estimated operating grant needed is Rls 1,200 million (US$17.6 million) per year. In accordance with the consultants' recommendations, the Government has begun as of March 21, 1973 to make regular transfers of up to Rls 100 million required to cover UBC's deficit on a monthly basis so that !JBCmanagement is not preoccupied with cash shortages, considered to be one of the basic problems affecting all 1JBC's operations. Forecast operating results indicating that a government subsidy is not requiredin 1978/79occur largelybecause of assumedfare increases - in 1975/76and in 1978/79- raising average fare levelsfrom Rls 2 to Rls 3 to Rls 4 by the end of the decade. Without such average fare increases, the Government should provide an amount equivalent to the loss to UBC to increase passenger-carrying at an economic cost. This subsidy for non-raising of fares might be calculated per passenger carried. During negotiations, the Government agreed to selective tariff increases which will provide for at least a 25% net increase in UBC revenues by mid-1975.

A determined effort to reduce avoidance of payment of fares should increase revenues by some 15% per annum. This is not possible before 1975/76 oecause this would need support of the police, the dating of tickets and a proper inspection system, together with considerablepublicity to gain public support. As the fleet becomes appreciably newer and the service improves, it would be possible to institute new procedures, and this should occur no later than 1975/76.

ANNEX3 Page .

IRAN

TEHRANURBAN TRANSPORT PROJECT

NOTES AND ASSUMPTIONSON FINANCIAL STATEMENTS

1. Income Statements

(a) Revenue - Ticket Sales

Forecastrevenue increases are based largelyon the five year bus reformprogram recommended by the consultants. It has been assumed that the bus fleet at the end of each year will be as follows: 1976/77to 1972/73 1973/74 1974/75 1975/76 1978/79

New buses 200 400 765 1,130 1,515 Rehabilitated buses - 120 399 634 864 Old buses 2,151 1,611 967 480 - 2,351 2,131 2,131 2,244 2,379

The averagenumber of vehiclesduring the year in each category was then used to calculatethe revenue. The followingfactors were applied to this base:

(i) The averagenumber of buses availablefor serviceat any time has been calculatedby using the followingutilization factors that the consultantssay are possibleor are now being achieved (in case of old buses):

- New buses - 90% in the first two years and then 85% - Rehabilitated buses - 85% - Old buses - 64%

(ii) It has been assumedthat roughlyhalf of the new buses will be introduced at a fixed tariffof Rls 5 on new and existingroutes. It has also been assumedthat averagefares on the total system will rise from Rls 2.2 in 1972/73to at least Rls 3.0 in 1975/76 and to Rls 4.0 at the beginningof 1978/79.

(iii) It is assumedthat the number of passengersriding the buses withoutpaying will be sharplyreduced in 1974/75. This has been projectedto increaserevenue by about 12.5% in 1974/75 and subsequentyears. ANNEX 3 Page 2

(b) Other Revenue

This category includes contract busing, advertising, sale of parts, and other miscellaneous revenue. It has been projected to increase by S0% over five years.

(c) Salaries and Benefits

The projections for this category have been based upon a decrease of 1,100 operating personnel in 1972/73 and a labor contract that was entered into during 1972/73. The contract calls for immediate salary increases of 20% and further increases of 6% every two years thereafter. It has been assumed that social benefits will increase at one-half the rate of salary increases. As a result of additional buses being utilized and new depots being added, the operating staff has been projected to increase by 15% by 1975/76 and by an additional 2% over the next two years. No increase in administrativepersonnel has been provided.

(d) Fuel and Oil

Projected as a percentage of yearly passengers carried, based upon the average of the previous three years, and allowing for a yearly price level increase of 5%.

(e) Repair and Maintenance Parts

It is assumed that expendituresfor parts would increase as a regular maintenance program is introduced, but that this increase should be offset by a reduction of major repair work as new and rehabilitated buses are added to the fleet. An inflation factor of 5% on the price of parts has also been assumed.

(f) Depreciation

Calculated using the same rates as the Bus Company has used in the past.

(g) Contributions

Government operating contributions represent the required amounts necessary to meet the projected net operating cash requirements, the debt service payments and the local currency costs for fleet rehabilitation.

2. 1972 Revalued Balance Sheet

In order to provide a better basis for financial forecasts for the Bus Company, the 1972 balance sheet has been partially revalued and the recommended cancelling of Government advances has been shown. Specifically, this balance sheet reflects the following adjustments: ANNEX 3 Page 3

(a) the write-offof Rls 200 millionin obsoleteparts inventory,

(b) the write-off of Rls 214 million claim against a supplier that is probably not collectible,

(c) a revaluation to market value of Rls 138 million for the land owned by the Bus Company,

(d) the write-off of Rls 2,033 million in past advances from the Government and the City.

3. Forecast Balarce Sheets

(a) Fixed Assets (i) As buses are scrapped under the bus reform program, they have been removedfrom fixed assets. All of these buses were fully depreciated.

(ii) The costs of rehabilitatingbuses and technicalassist- ance to be providedto the Bus Companyhave been inclu- ded in the 'othercategory' and have been depreciated over 12 years.

(b) AccountsReceivable Representsmiscellaneous receivables and are expectedto remain fairly static.

(c) Inventory In order to provideadequate parts for propermaintenance of new and rehabilitatedbuses as they are added to the fleet, inventoryhas been projectedto doublein the first two years,and then to doubleagain the next four years.

(d) Deposits and PrepaidExpenses The 1972 figure,which representsprepayments to suppliers,is expectedto drop by Rls 65 millionin '973 and then to graduallydecrease as maintenancework is rationalized. (e) AccountsPayable and Notes Payable

Expectedto graduallyincrease as operatingexpenses increase and inventoryis built up. In 1978 and 1979 these payablesdrop as an excessof cash is generated. ANNDEX3 Page 4

(f) OutstandingSupplier's Notes

For the purchaseof buses which have been orderedand which will be deliveredin 1973 and 1974. The repaymentsand interesthave been calculatedusing the terms given by the suppliers.

(g) Other Loans

It has been assumedthat the capitalexpenditures not included in the proposedIBRD loan, but includedin the five year programto reform the Bus Company,are financedwith eight year loans bearinginterest at 9%. nIAN

TEHRANURBAN TRANSPORT POJECT

United Bus Company - Income Statements

(In millions of Rials)

Year Ending March 20 Actual Forecast 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979

Revenue

Sale of tickets 1,654 1.547 1,410 1,572 1,813 2,236 2,790 3,152 3,272 3,950 Other 73 44 44 52 54 57 59 60 66 70

Total Revenue 1,727 1,591 1,454 1,624 1,867 2,293 2,849 3,212 3,338 4,020

OperatingExpenses

Salaries and benefits 1,375 1,535 1,654 1,820 1,886 2,055 2,122 2,237 2,251 2,370 Fuel and oil 174 176 164 162 189 223 255 283 305 320 Repair and maintenance parts 349 370 315 570 341 358 378 395 415 436 Bank charges and other costs 106 91 122 100 102 103 104 106 108 110 Depreciation 270 271 270 285 295 318 350 401 479 510

Total OperatingExpenses 2,274 2,443 2,525 2,937 2,813 3,057 3,209 3,422 3,558 3,746

Operating Income (Loss) (547) (852) (1,071) (1,313) (946) (770) (360) (210) (220) 274

Interest - - - 16 11 60 112 162 206 225

GovernmentGrants (547) (852) (1,071) (1,329) (957) (830) (472) (372) (426) 49

Government grants 713 187 - 1,000 1,000 600 300 200 100 -

Net Income (Loss) 166 (665) (1,071) (329) 43 (230) (172) (172) (326) 49 = .= - -_ _, - -

June 28, 1973 I IRAN

TEHRANURBu TRANSPORTPROJECT

United 8ue Co-many - Balance Sheets

(In millions of Rials)

Year Ended Harch 20 Actual Revalued forecast 1970 1971 1972 1972 1973 1974 1975 1976 1977 1978 1979

Current Assets Cash nod bank 32 25 57 57 60 338 155 122 166 163 472 Accounts receivable 3 6 11 11 11 11 11 11 11 11 11 Inventory 287 246 259 59 90 120 150 180 210 240 240 Deposits and prepaid expanses 46 329 525 311 247 241 235 231 226 191 137

Total Current Assets 368 606 852 438 408 710 551 544 613 605 860

_ixed Assets lused 3,636 3,635 3,535 3.535 3,772 4,567 4,970 5,203 5,456 6,1"6 6.186 Buildinga 412 414 418 418 418 418 523 633 733 758 758 Land 39 332 332 470 470 470 470 620 620 620 620 Other 124 116 124 124 124 180 425 645 750 750 750

4,211 4,497 4,409 4,547 4,784 5,635 6,388 7,101 7,559 8,314 8.314 Accumulated depreciation 1,836 2,101 2,281 2,281 2,454 2,574 2,455 2,478. 2,552 3,031 3,541

Total Fixed Assets 2,375 2,396 2,128 2,266 2,330 3,061 3,933 4,623 5,007 5,283 4,773 Total Assets 2,743 3,002 2,980 2,704 2,738 3,771 4,484 5,167 5,620 5,888 5,633 _a _ __ - _ _ ___

Liabilities

Current Liabilities Accounts payable 173 237 175 175 184 193 202 213 223 200 170 Notes payable 89 113 100 100 105 110 116 122 128 134 100

Total Current Liabilities 262 350 275 275 289 303 318 335 351 334 270

Lox-tr b-t Goverimiant advaacea 1,756 1,933 2,033 Proposed IBID loan 206 1,134 1,822 2,121 2,056 1,916 Other loans 310 986 886

Total Loug-Tern Debt 1,756 1,933 2,033 206 1,134 1,822 2,431 3,042 2,802

Equity Shara capital 1,070 1,521 2,544 2,544 2,693 3,663 3,663 3,813 3,813 3,813 3,813 Capital and other reserves 31 25 26 26 26 26 26 26 26 26 26 Deficit (376) (827) (1,898) (141) (470) (427) (657) (829) (1,001) (1,327) (1,278) Total Equity 725 719 672 2,429 2,449 3,262 3,032 3,010 2,838 2,512 2,561

Total Liabilities 2,743 3,002 2,980 2,704 2,738 3,771 4,464 5,167 5,620 5,888 5,633 r a - _, 19 7* --

Jur~ 28, 1973 IRAN

TEIu.ANURBAN TRANSPORT PRWBt:f

Uaited Bus Company - Source and Application of Funds

(In millions of Rtals)

Year Ending M4arch 20 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979

Source of Funds

Froa 2par~ations Net operating income (loss) - before interest t547) (852) (1,062) (1,313) (946) (770) (360) (210) (220) 274 Add depreciation 270 271 270 285 295 318 350 401 479 510 (277) (581) (792) (1,028) (651) (452) (10) 191 259 784

Govet,et,nt Coanribut ions OperUtiug gSants 713 187 1,000 1,000 600 300 200 100 Purchlase of shares 472 158 1,023 349 770 - 150 - -

1,185 345 1,023 1,349 1,770 600 450 200 100 -

Increase in goverrnant advances 149 177 100 - - - - Increnee in reserves 8 (6) 1 ------BorroViU3S Proposed IBRD loan - - - - 206 928 688 299 - Other borrowings ------320 730

157 171 103 - 206 928 688 619 730 -

Total Source of Funds 1,065 65 332 321 1,325 1,076 1,128 1,010 1,089 784

Application of Funds

Cnpital Expenlditures Proposed 1BRD project - - - - 256 1,190 1,040 385 - Other 165 (1) 11 349 770 - - 400 755 165 (1) 11 349 1,026 1,190 1,040 785 755 -

Repayneut of Loans Froposed IDRD loa------65 140 Other loans 1,225 - - - - _ - 10 54 100

1,225 ------10 119 240

InterestPa t - 16 11 60 112 162 206 225

Variation in non-cash working capital (310) (57) 289 (47) 10 9 9 9 12 10

Total Application of Funds 1,080 (58) 300 318 1,041 1,259 1,161 966 1,092 475

Increase (Decrease) in cash (15) (7) 32 3 278 (183) (33) 44 (3) .309 Cash balance (begituning of year) 47 32 25 57 60 338 155 122 166 163

Cash balance (end of year) 32 25 57 60 338 155 122 166 163 472

June 28, 1973 ANNEX7 Page 1

IRA.N

THEA UA I PROJECT

ADVISORYSEZVIgCS TO THE TEKRANDEVEBLPMENT COUNCIL SUGGESTEDTE OF R,EFERENCE

A. Background The physical expansion trend of the last two decades in Tehran has been a concentric one, accentuating development towards the north, east and south. The Master Plan proposed a sequential growth westwards. Because of difficulties in providing the area west of Tehran with public utilities, the Government decided to impose a "five year development limit" that was, in principles a continuation and reinforceement of the concentric trend. In 1973, the existing limit.was extended for another five years. The powers of investment planning and project execution in Tehran are presently spread anmng individual ministries, public corporations and the City. Coordination of decision-making is often incidental. On the whole, projects tend to be prepared and executed on a sectoral basis without the benefit of sound investment programmi . This has led to inherent inconsistencies at both local and national levels. The Government has reacted to these problems and taken strong measures in the Fifth Five-Year Plan. one of the main con- cepts in the plan is a conscious effort to decentralize the economic activities and to slow down the growth of Tehran.

On the same line, the Fifth Plan calls for creation of a Tehran Development Council, and in July 1973 Parliament passed a law establishing the Council. the legislation provides for:

(a) a High Council under the direct supervision of the Prime Minister, chaired by the Deputy Prime Minister for EconomicDevelopment, and consisting of the minister of State in charge of Plan and Budget Organization, the Mayor of Tehran, and the Mlnisters of Housing and

* Development, Water and Power, NoonoxzW,Labor and Social Affairs, and Agriculture and Natural Resources; and

(b) a Secretariat with a Secretary General to be appointed by the Prime Minister, and adequate supporting staff.

Essentially, the Tehran Development Council has three principal functions: policy determination, coordination of government-wide activities affecting Tehran's development, and the development of strategies, plans and programs to guide and promote the urban development of the Tehran urban region. It is envisaged that the Council will be principally engaged in formulating a long- term strategy of development of the greater Tebran region and that it will translate this strategy into plans and program of land use, infrastructure AN±NE 7 Page. 2

development and social services. It will be concerned with developing mechanisas and policies of control and restraint, as well as incentives to attack short-term and long-term threats to the efficient and equitable functioning of Tehran with regard to environmental pollution, congestion and inefficient transportation, land speculation, inordinate segregation of population groups and other related problems. FinaUy , it will provide policy guidance and coordination to effect other national objectives per- taining to Tehran. Specifically this includes decentralization policies; income distribution and employment and productivity measures inherent in government programs; and enhancement of the physical, aesthetic and socialv characteristics of Tehran.

To perform these functions, the Tehran Development Council should have a xmulti-disciplinary and high-level staff capable of assisting in day- to-day policy decisions and coordination as well as engaging in concrete long-term planning.

To this end, the Secretariat will be assisted by a foreign advisory group with institutional support from abroad. This advisory group will include senior economists, urban planners, transport specialists, social scientists and others who have had extensive experience in decision-making in urban administration of comparable scale and complexity as Tehran.

The Secretariat, as envisaged presently and subject tioreview, will have the following components:

(a) office of the Secretary General

A small staff of aides including the senior advisor who will directly assist the Secretary General in coordinating the work of the Secretariat, provide staff services to the High Council (preparation of agendas and schedules, assembling materials for presentation to the High Council, preparing minutes, communicating High Council decisions and directives to relevant agencies, coordinating with the staff of all Council members in bringing matters before the High Council, and effecting follow-up of High Council directives as requested by the High Council). The Senior Advisor would additionally advise and assist the Secretary C-eneral (i) in the deployment of advisory staff efforts

(ii) in the traLning of staff members

(iii) in the planning of the Secretariat work program, and

(iv) ir advising in his own right on substantive matters of policy and urban planning arising from the work program of the Secretariat. ANNEX7 Page 3

(b) Functional (Program) Areas Staff

Six staff units comprised of staff mnebers selected for their professional competence in the areas of:

(i) Transortation

(ii) Land use planning

(iii) Infrastructure Development

(iv) Social Services and Commnity Development

(v) Industry. Commerce and Government

(vi) avironment, and Aesthetics

As appropriate., key subject area groups would be assisted by advisors and outside consultants. (Iranian and foreign) as well as by personnel seconded by other idnistries for special assignments.

(c) Plans and Research Sf

The three more staff units in this group would undertakce the preparation of major policy studies and evaluations encompassing:

(i) Long-term Urban Development Strategies (ii) Demegraphic Research

(iii) Other comprehensive Eonomic and Urban Development Studies

Working in conjunction-with the functional area stafs, this unit would be substantially concerned with the urban development aspects of the Fifth Five-Year Plan, the overall Master Plan of Greater Tehran, growth policies, decentralization measures and various across-the-board programs analysing the scope, nature and possible approaches to key problems of coordination and implementation of Council policies. (d) Finance and Budget

TNo staff units would be engaged Di financial planning and analysis in support of functional areas and general studies, fiscal policies, and evaluation of the budgetary implications of ongoing governmental activities and proposed w programs of public and private investment -- working with the budget offices of the Plan and Budget Organization and the Mi=cipality. ALNX 7 Page 4,

B. Advisory Services Immediate Advisory Services

These will consistof ad hoc assistance to the Deputy Prime Minister in the organization and ceted planning of the functions and staff requirements of thr-e Tehran Development Counci]l over a six-week period. Dirng this time the main ef0fort should be to find and prepare a seven-men team of consultants with institutional bac'cing which could provide the experienced training capabil;ity in urban development planning and decision- malcLng that is needed to assist a core Iranian staff. To the extent that time and staff perrLtt, the ad hoc staff should conduct a preliminary review of major issues aad prepare a draft prospectus of a coordinated programXof studies wo be carried out by the Secretariat staff. The imediate advisory services shal include preparation of the detailed terms of reference for the consultants for the Secretariat.

Advisory Services to the Secretariat

Advisory assistance to the Secretariat will be composed of a conpetent multi-disciplinary staff' capable of professional work and of decision-influencing stature.

Within the functional and organizational framework of the Secretariat the consultants i,All specifically:

(a) Analyze the C-overmnent's present economic and urban policies and from these derive a consistent set of objectives for the development of the Tebran Metropolitan Area;

(b) Review present planning efforts with relation to land use, water and sewerage, transportation, power, housing and indueirial location and analyze potential conflicts between these plans;

(c) AnaJlyze -the present physicalgrowth trends in Tehran and relate them to existing plans; (d) Based on these analyses, by June 30, 1974 suggest an imwdiate action program for the Tehran Development Council; ANNEX7 page5

(e) Analyze future options for the growth of Tehran region and possible means for directing this growth, especially with reference to: * fiscal policy - organizational changes - land use regulations - public investments (f) Review the existing data base and develop a set of urban indicators that can be used for a continuous mnitoring of social and econowic changes in different parts of the region; (g) Advise the Secretariat on the use of benefit cost and other project evaluation methodologLes and assist in the development of a mdel for investant programndng, (h) TrainJig of the Iranian staff through daily cooperation on specific tasks.

C. CoMposition of the Consultants' Team The consultants' team is proposed to consist of up to seven menbers. Their specific tasks are (with the numbers referring to the services under paragraph B above): Task Position 'Mnths 1 2 3 4 5 6 7 8

Senior Planner 36 x x x x x x x x Development E:ononist 18 x x x x x RegLonal Economist 36 x x x x x x Financial Analyst 18 x x Physical Planner 36 x x x x x x x Sociologist 18 x x x x Transport Systems Planner 36 x x x x ANNe 7

D. Cost Estimates Nan Cost in- 11$ Months Local FOreiga TQtal.

The Consultants' team 2/ 200 1/ - 1,Q00,000 1,000,000 Special Studies (Foreign Consultaats) 2/60 300X0 3002000 Special Studies (Local Consultants) 2/ 120 360,000 _ 360,000 Local staff (Secretarial, semi-professional) 3/ 360 215,000 - 215,000 Local support of consultants 4/ 325,000 . 325,000 900,000 1,300,000 2,200,000

Basis for Calculation

1/ Includes 2 man-months for the im$diate advisory servicesi. 2/ us$5,000/man-month for Foreign consultants. US$3,000/man-month for Local Consultants. 3/ US$600/man-month including social overheads.

4/ Local support cost of consultants, local transports supplies, office overheads. ANNEX8 Page 1

IRN

TRAN URBANTRANSPORT PROJECT

STUDYOF THELONG TERM TRANSPORT SYSTEM SUGGEST) TERMSOF RERCE

A. Objective

The puzpose of the long term transport study is to assist the Government in the formulation of a transportation program and policies which will efficientl;y serve present and future needs and wil complement overall plans for long range development in Tehran.

Preliminary proposals for a long term transport system are currently being elaborated by SOFRETU and will be completed by July 1973. Preliminary studies indicate that in some parts of the central city future traffic densities would require a rapid transit system. These studies and proposals are based on the present Master Plan. The purpose of the creation of the Tehran Development Council is to change the present policies guiding the growth of Tehran. Consequently, it is necessary to review these recommendations in light of the changed policies. In addition to this, more detailed considerations need to be given to com- parison of different modes of public mass transit and the impact of different pricing policies on the use of private cars and taxis.

The consultants' work consists of three parts, which are to be carried out in two phases.

In Phase I, the forthcoming recommendations for a long term transport system should be reviewed in light of the changing policies and necessary adjustments be made. Subsequent studies of transport pricing and investment policy should result in a recommendation of a first stage of construction of the long term system.

Phase II consists of detailed design work for the first stage of construction.

B. Edisting Data and Studies

SOFRETU has made an analysis of the existing situation in relation to the canposition and spatial distribution of population, employment and land use. In relation to transportation, it consists mainly of amounts and patterns of peak period and daily traffic flows, modal composition, quality of service, public transport organization and services, pricing and regulations, automobile ownership, parking provisions and policies, transport deficiencies and present problems.

Their work also includes projecticns of population income, employment and traffic flows between major zones, based on the present Master Plan. ANNEX 8 Page 2

For the long term transport system, SOFRETUhas so far studied three alternative schemes. The first provides for a better use of cars by improving the urban road network and improving urban public transport; the secondfavors mass transportby focusingon surface and underground modes, and, to a lesser extent,on road improvement; the third is a mixed solution of mass transit (surface and undergroundtransport) and road improvement.

C. Phase I Daring this first phase the consultants shall:

(1) Review the present proposals for the long term transport system in light of the changing policies for the Tehran nstropolitan region. This shall be carried out under the Secretariat of the Tehran Development Council.

(2) Make necessary adjustments in the basic assumptions and projections.

(3) Based on these adjustments,formulate at least four alternativetransport system proposals, if appropriate based on the three alternativesanalyzed by SOFRETU. (h) Analyzethe sensitivityof traveldemand forecasts to pricingpolicies witlh respectto transitfares, parking changes, gasoline and license taxes, vehicle import dutiesand other charges. The consultantsshall also considerthe effectsof pricingpolicies on efficiency in economicresource allocation, vehicle ownershipand use of differenttransport modes.

(5) Develop a methodology for a social and economic evaluation of the systems alternatives in order to provide a basis for their recommendations and for the Government's selection of one system. The evaluation shall include estimates of the investments and operating costs for each alternative and estimates of economic and social benefits. (6) Based on alternativefuture options by the end of 1974, suggesta first stage of construction.

D. Phase II

Shouldmass transitfacilities on their own rights-of-waybe found to be desirable,Phase II will consistof detaileddesign work for the first stage of construction.Terms of referencefor Phase II of the long term transport study can, however, not be drafted untll a definite choice of the long term system has been made. E. Cost Estimates About 400 man-months of foreign consultants' time are budgeted for the above studies. About 170 man-months are allocated for Phase I which ANNEX8 Page 3 includes a review of the preliminary proposals on alternative transport systems and studies on pricing policy and detailed economic and financial analysis of the preliinary long term system. Another 230 man-months of engineering services are required for detailed design of the first stage of a rapid transit system, if this is found to be economically justified in the Phase I work. Local costS include locally procured engineering services, includng field surveys and investigations, staff of the Secretariat, and local subsistence costs of foreign consultants. I ANNE 9. Page 1

MIRAN URBANTRAN?gORT PROJECT

TH ECONOMICAS TECHNICALADVISORY GROUP FOR BuS COMPANY

SUGGESTEDTqM OF R3NEMCE

A. Objective

Do provide econoric and technical advice to the United Bus Comparn (tlBC), a group is required to work directly with the General Mnager and his chief officers. The group should be formed as quickly as possible to ensure that decisions of UBC are based on adequate econonic and technical information. It is preferable that the consultanta in the group be associated with those irplewiting the traffic engineering. O1ce establiabed it is proposed that the group will continue and will provide an opportuaity for younger talented officers in TUBCto work in it for two or three years in order to receive such training and experience as will fit them for responsible senior posts. Initially an appropriate number would be four. There should be an accountant, transport- system anal;*st, an enginer and a bus "operator" already fad.liar with tiitabling and local practices.

To support the group it is necessary to provide the services of a firm of consultants experienced in public transport matters and commercial bus operations and if possible, with experience in the formation and operation of such a group. It is essential that direction be given by a senior experienced consultant who must make regular extensive visits to Tebran and that the principles and practices established are effectively implemented by two resident consultants who should be capable of working both with the management and with UBC staff and workers at junior levels There must also be a back up of technical expertise including civil and mechanical engineers to advise on the construction of new depots and on the purchase of equip- ment. The engineers involved should stay in Tehran for at least two to three months at a time in order to ensure familiarity with the projects and people involved. B. Scope

Advice will be required initially on the following subjects: ANNEX 9 Page 2 evaluation of alternative types of buses which could be supplied based on tender terms, operating costs, serviceability, availability of spares (based on analysis of failures), configuration, load limits and operational characteristicsfor the routes on which they are likely to be employed and bearing in mind both the financial return to operation and the social benefits in the city's transport policy; preparation of specifications and letting bids for the construction of depots, evaluation of bids, preparation of contracts and advice on appointment of supervising engineers and contractors with general supervision of the projects; establishment of systems analysis and revision of routing and operating procedures, bearing in mind the financial implications on routine maintenance and repair on buses allocated to the proposed new depots; compilation of a preventive maintenance schedule of buses; introduction of management accounting systems based on budgets, route and unit costing and job costing; study and evaluation of the impact of the new depots on the management structure of the Bus Company as a whole and making such recommendations as seem appropriate; preparation of a working bus schedule eliminating excessive delays between buses in anticipation of future passenger demand and economic operation; study and recommendations on the Company's route structure and fare policy bearing in mind the growing competition from the taxi services; study and recommendations on the means to reduce fare-avoidance; revig.tion of the assets of the Company to form the basis of the revised balance sheet; provision of illustrated lectures to senior officers and staff of tha Company indicating objectives, problems, possible solutions and techniques employed; and development of specific operation=l efficiency measures (e.g. vehicle utilization, employees per million passenger miles, revenue per million passenger mile). Page 3

guidance on traini.ng courses for artisans and technicians and on pr.ovidingscholarships for the training and education of qualified candidates. Considering its objectives and scope, the studyis expectedto take about36 months and to require aboutnine man-yearsof consultant time.

ANNEX 10 Page 1

IRAN

TEHRANURBAN TRANSPORT PROJECT

TRAFFIC CIRCULATIONAND ENGINEERINGIMPROVEMEXTS

1. Efficiencyof the Bus Companydepends in part on the improvement of trafficmovement. The consultantswere requiredto make proposalsfor the improvementof circulationwithout resorting to major constructionand withoutadopting solutions which might foreclosetransport options in the longerrun. The proposalswere to be realizablewithin the next few years.

2. Briefly,the recommendationsmade for the area north of Sepah -fall into three categories:

(a) adoptionof a systemof one-waystreets in the city center north of Sepah and involvingthe main streetsbounded on the east and west roughlyby Saadi-Rooseveltand Pahlavi;

(b) redesignof intersectionswith the introductionof an overpass, surfacerearrangements and underpasses;

(c) re-signaling and signposting of the area with some additional public lightingin tunnels,at intersectionsand on trafficsigns. 3. South of Sepah there existsno similarstreet network which lends itself as a basis for a circulatorypattern. The problemof the south of the centerpart of the city is to developa secondarystreet system to per- mit vehicularmovement into and out of the area and to relievethe main roads which exist there.

4. The acquisitionof land at key points is recommendedby the con- sultantsas early as possible. Eighteen separate points are identified where land may either have to be acquired or where construction may have to be controlled to avoid confliction with proposed improvements.

5. North of the whole area a bypass is recommendedlinking the Karaj limitedaccess road with Darius and a southernbypass is recommendedalong the existingroad of Shoosh. 6. Throughoutthe whole of the city center there is a need for improve- ment of the road surfaces,djoubs and sidewalks. In some parts,and especi- ally so in the south, there is grossly inadequate drainage which leads to floodingduring and after heavy rain. The break up of road pavementshas led to increasingdeterioration of the bases. Obstructionswhich are left in the way of movementby workmenand the local populationadd to the impedances alreadyresulting from poor road designand stationaryvehicles. The need is for a standardof constructionwhich will enablesegregation of passengers from vehicles. At presentas a resultof the state of the sidewalksand ANNEX 10 Page 2 and the tendency to park vehicles well out from the djoubs to avoid vehicles falling into them, pedestrians stand in the traffic lanes to-board buses and taxis. With the introduction of the one-way system of vehicle movement pedestrian barriers are recommended but these will not be effective if there are poor surfaces for pedestrians or obstructions to their separate movement. Effective road space will be increased if the djoubs are covered. Because of the hot desert climate in summer the trees which line the streets of the city are an essential feature of the environment.

7. The one-way street system proposed for implementationunder the three year project is the following:

(a) on Saadi-Roosevelt (northbound)and Ferdowsi (southbound)with associated return flow operations in Iranshahr, Bahar and Lalehzar. This includes constructionof underpasses at the intersectionsof Ferdowsi and Saadi with Shahreza, the construc- tion of an underpass on Karim Khan Zand between Ferdowsi and Saadi, and surface improvements in the squares of Sepah and 25 Sharivar;

(b) on Shah - Naderi - Istanbul (westbound) and Sepah (eastbound) with return flows on secondary streets;

(c) on Pahlavi (southbound)and Hafez (northbound)with return flows on secondary streets. This includes constructionof underpasses at the intersections of Pahlavi and Hafez with Shahreza.

8. Already the principles of traffic movement to be adopted have been agreed upon in principle with the Mayor and in some detail with traffic police. Nevertheless, to achieve satisfactorymovement it is felt that the police, who are to ensure the cooperation of drivers and pedestrians,must participate fully. Apart from police support there needs to be publicity, demonstrationsand practical evidence of the improvementsas each phase is planned, worked on and put into operation. This educational and training program is considered to be important. The proposed timing of construction may therefore need to be reconsidered after completion of the first works and the introductionof the one-way system on Ferdowsi and Saadi Avenues.

9. The work south of Sepah will be less spectacular,initially,than that proposed for the north of the city center but is considered to have an important impact on the standards of the growing population of the area. Road improvementsare interrelatedwith re-housing schemes already under con- sideration by the City and with drainage schemes already being planned by other consultants. Unless surplus water can be drained off from the Bazaar areas and surrounding streets the risk of flooding of houses and streets is great. ANNE 10 Page 3

10. The underpassesat intersectionswith Shahrezaare proposedwith narrowerlane widths (2.7 m) and steeperslopes to reduceexcavation and undergroundsections. The undergroundportion will be two lanes and about 100 meters long. These will only be availablefor use by cars and light vehiclesbecause of the limitedoverhead clearance. In all cases they have been designed so that the direction of travel may be reversed if necessary. The Karim Khan Zand tunnel and the later building of a tunnel where Pahlavi cuts Iran Novine and Takht-e-Tavoos w411 be to normal standards.

11. For the trafficlights the proposalis to introducea 'greenwave' systemon each main route. Initially,the coordinationof lightsalong Ferdowsi and Saadi/Roosevel2tseparately is proposedunder independenttraffic light control. As soon as the new trafficlights which are considerednecessary are re-sitedand installedand road improvementson acceptablegeometrics are in hand, the cablesand controlequipment for zonal coordinationwill be installed. Existingtraffic counts at intersectionsand such additionalcounts as are thoughtnecessary will be used to establishthe operationalcycles. (These will later be computedto give basic cyclesfor varioustraffic conditions and the phasingwill be worked out.) Lights along each route will then be co- ordinatedwith each other and independentcontrol will be abandoned.

12. As the secondand third phases of the introductionof the one-way streetsystem are introduced,lightson the multipleroad intersectionswill be coordinated.Finally all the lightswill be coordinatedon a zonalbasis and controlledby a centralcontrol computer. The graduallinking of the lightswill allow verificationof the cyclesunder changingtraffic and weather conditions,and demonstrationsof the appropriatenessof the cyclesand system to the conditionsof Tehran. Gradualintroduction of a coordi-ntedlight systemwill facilitatepolice effortsto enforcecompliance with the traffic light and one-waystreet system.

13. Parkingcontrols are alreadybeing introducedby the City. Meters have been installed. Restrictedparking in the main avenuesis proposed and enforcementof existingregulations is being emphasized. Such activities are complementaryto the trafficengineering proposals. No definitiveproposals are made for off-streetparking places during the work of the first three years. It is consideredthat the provisionof bus lanes will facilitatethe public transportservices and that presentparking policies proposed by the City are adequateto meet short term needs. A plan for off-streetparking will be consideredas part of the long term plAnning.

14. The counter directional bus lanes designed to allow buses to move north and south without being too far from the passenger catchment areas are consideredundesirable by the police. The consultantspoint out the advantages of the system,that there is multi-directionalmovement on roads at presentand that the counterflowwould be for one easilyidentifiable class of vehicle. Abandonmentof this proposalwould be a minor concession,particularly in light of the importance of police support. ANNEX 10 Page 4

15. Improved lighting and relocation of traffic lights away from trees is necessary. Intersections need to be signposted clearly and adequately lighted. This is provided for in the project. All signs both horizontal and vertical should be to internationallyacceptable standards.

16. While the Karim Khan Zand underpass is not justifiable at this stage of traffic development, because work has already started on the Imperial road from the north and proposed development of Abassad would feed traffic southward and because a feed-in of traffic from Darius is also likely with proposed development, it is appropriate to do this work con- currently with the three year program outlined. IRAN

TEHRANURBAN TRANSPORT PROJECT

WORKPROGRAM FOR TRAFFIC CIRCULATION & ENGINEERINGIMPROVEMENT

1973 1974 1976 1976

DETAILS OF PROGRAM . 1361 - 1352 36- 4 13-36 i

dNE WAY FERDOWSI/SAADI 1-0. DECISION OF STARTING OF OPERATION . I 1-1 -PRELIMINARY AND EXECUTION PLANS o a 1-2 -PROPOSALS AND SELECTION OF COMPANY _ a I . 1-3- ACIi1EVEMENT OF FEADOWSI UNDERPASS 1-4 . ACHIEVEMENT OF KARIM KHAN UNDERPASS 1-6 - ACHIEVEMENT OF SAADI UNDERPASS . 1-6 - MAIDAN & SEPAH - I PEDESTRIAN UNDERGROUND PASSAGE bi ROADS a_ b)Ue 1- - MAIDAN & 25 SHARIVAR - ROADS - IPARKING OUT OF BOUNDARIES) 1-8- OVERHAULING OF DJOUBS 1 1-9 -ROADS: a) HEAVY WORKS iblOTHER WORKS I b1m I . . . 1-10- TRAFFIC LIGHTS I __ 1-l i OTHER SIGNS * _ _ .

ONE WAY SHAH/SEPAH I| 2-1- PRELIMINARY AND EXECUTION PLANS | _ P | 2 -2 * PROPOSALSAND SELECTION OF COMPANY I 2 -3 - WORKS | .

ONE WAY PAHLAVI/HAFEZ ISOUTHERN SECTION) -o

3-1 - PRELIMINARY AND EXECUTION PLANS | I 3-2 - PROPOSALSAND SELECTION OF COMPANY 3-3 - PAHLAVI UNDERPASS 3-4 - HAFEZ UNDERPASS 3-6 - ROADS AND OTHER WORKS l

ONE WAY PAHLAVI/HAFEZ INORTHERN SECTION) I I

4-1 -STUDIES *I.4 4-2 -WORKS I ______D PI

World Bonk -766 IRAN ANNEX12

TEHRAN URBAN TRANSPORTPROJECT .

ESTIATED COST OF THE PROPOSEDDEPOTS

('COO rials)

Workshops 5,700 m2 34h,46 Vehicle entrance lobby 2,700 " 9,821 Admin. aQd social block 1,900 it 9,570 Tard 14,700 If 5,8&7 Garage area, 13,600 "8135 Fuel tanks (2) 400 Fencing 855

loes discotmts 10322 5bP492

Water and electricity 60ooo

Options and lining of tanks, ventilati±a and central heating etc. 2,335 * ~~~~~~~66,627.

contingencies 10% 6 68 i s~~~~~~~~3,10

saw fle 7h million + 10% to present prices Fas 81.s millicn

Furniture industrial -. cupboards, desks, racking counters etc. 2,961 office furniture 2,368

tools general - air compressors, jacks, hydraulic equipment, air puspa, lifts, presses, grinders, cutters, drills, riveters, velding equipment, forge, electrical test apparatus, trucks, racks, fire- fighting equipment, test benders * 4,68

lubricating equipment 892 washer for vehicles 1,232 hoist/lift 613 de-greaser 100 oil tanks (5) 300 fuel supply system and installation. 2,154

Installation cost of special equipment 1,500 contingencies 10% 1. la,245

say Ris 19 million + 10% to present prices R1J 21 mllion GRAND TOTAL Rls 102.5mill4on

APril 9, 1973 ANNEX 13

IRAN

TEHERANURBAN TRANSPORT PROJECT

TRAFFIC PLANNINGMANAGER SUGGESTEDTERMS OF REFERENCE

A. Objective

In order to guaranteean efficientimplementation of the traffic circulationportion of the project(see Annex 10) a TrafficPlanning Manager will be appointedby the Mayor. The TrafficPlanning Manager will have sole responsibilityfor the implementationof this part of the projectand he will serve on a full time basis to undertakethese and other tasks relatedto trafficcirculation. He will have no other responsibilitiesthat might detract from or conflictwith his responsibilitiesas TrafficPlanning Manager. He will be assistedby competentand qualifiedstaff drawn from varioustechnical and planningdepartments of the City and qualifiedconsultants. B. Scope

The TrafficPlanning Manager will be responsiblefor supervision of consultantshired by the City and supervisionof the implementationof consultants'studies on trafficcirculation.

In particularhis responsibilitiesare to include,inter al,ia the following:

- Review of trafficpatterns, flows, regulations and othercomputer informationbased on consultants'studies.

- Analysisof presentroad conditionsand proposedtraffic route diversions.

- Detailedanalysis of sites for proposedlocation of underpasses and squareswith specialreference to publicutility lines, preservationof existingvegetation, soil conditions,drainage, trafficdiversion and pedestrianaccess.

- Choice of design standards. - Choice of materials,technology and estimationof costs.

- Time schedulingand phasingof construction.

- Preparationof bid documents,including computations, design drawings,description of materials,quantities, construction methodsfor works, generalbidding conditions, and standard specifications. - Bid evaluationand recommendationsfor award of contracts.

- Timing of land acquisition. ANNEX14

MAN

TEHRANURBAN TRANSPORT PROJECT

ESTIMATEDSCHEDUIE OF DISBURSEMENTS

IBRD Fiscal Year Cumulative Disbursements and Quarter at end of Quarter (in US} thousand)

1973/74

December31, 1973 1,250 March 31, 1974 6,500 June 30, 1974 10,500

1974/75

September 30, 1974 16,100 December 31, 1974 21,800 March 31, 1975 28,400 June 30, 1975 34,100

1975/76 September30, 1975 35,300 December31, 1975 39,100 March 31, 1976 41.,600 June 30, 1976 42,000

Source: Mission Estimates ANXEX1' Page 1

I_&

TEHRANURBAN TRANSPORT PROJECT

METHODLOGFOR ESTIMATINGECNO1wC RATE OF RETURN

Introduction

- Included_i its several objectives, the transport project intends to guide the future development of the Tehran region andto- provLde an efficient public 388 transport systi in order to make urban activities more accessible to the population. Since the project consists of many diverse elments that often are non-quantifiable, it is not possible to get one ingle easure of the project's benefits. However, in order to get a measure of the project's worth, the benefits and costs associated with the bus and street improvments have been defined in eco.m ic tome as followa:

(a) Time savings to existing bus passengers; (b) Time savings to uev bus passengersV;

(c) Savings in bus operating costs due to better maintenance and more efficient utilization of the bus fleet;

(d) Savings to buses and other vehicles due to increased street capacities and traffic speeds.

Present Traffic Situation

The general traffic situation in Tehran has been analyzed by SOFRETU. Some indicative figures are:

Average speed

Bus 9 km/h Private car 19 km/h Taxi 17 km/h Blue taxi 15 km/h Walking 5.5 km/h

Average waiting time

Bus 13 mnm.

]/ "Exsting bus passengers" are those who would go by bus even it the project vere not implemented. They do not necessarily imply those presently riding the bus. "Nowbus passegersZ are those additional passengers attracted by the project. AN=B lS Page 2

Average number of passengers

Bus 55 persons Cars and taxis 2.35 persons

Median trip length

Both public and private modes of transport 5.2 km

Basic Assumptions

In these calculations no major changes in land use are assumed. Likewise, questions on subsidies and monopolistic conditions existing in bus operations are not dealt with. All prices are assumed to be constant during the project period.

Major Benefits and Costs

The quantified benefits of the bus improvements consist mainly of consumerst surpluses calculated on the basis of time savings and producers' surpluses calculated on the basis of cost savings:

(a) The consumerst surpluses for existing bus passengers ae measured by their total time savings. Tnese are mainly due to decreased average waiting time.

(b) The consumers' surplus for new bus passengers is estimated as half of the time savings for existing passengers.

(c) Producers' surplus to the Bus Company is measured by savings in operating costs and increases in net revenue.

The bus improvements will also result in other costs and benefits that have not been quantified because of a lack of data:

The costs of increased congestion because of more buses in the streets and the benefits of de- creased congestion because some potential car and taxi users go by bus. If more than about 15% of the induced bus passengers otherwise would have gone by car or taxi the total level of congestion would decrease and the total benefits of the project would increase.

The quantified benefits and costs of the street improvements are:

(a) Consumerst surplus to new and existing bus passengers because of higher speed. AMEX )A Page 3

(b) Consumerst surplus to existing car and taxi passengers because of time savings and lower operating costs.

(c) The consumers' surplus for new car passengers is estimated as half of that for existing car users.

(d) Prodmcerst surplus to the Bus Company because of lower operating costs due to higher speed.

Certain costs and benefits of the traffic circulation improvements have not been quantified because of lack of data, for example, the benefits and costs associated with a re-distribution of traffic between different streets. The marginal social cost of a car in a cogested street is bigher than the marginal cost in a baa congested street. A re-distribution of traffic would presumably be from more to less congested streets, which would increase the benefits of the project.

Travel Time Values

The valuation of travel time is critical to the analysis. Unfortunately there is no studybased on revealed preferences that shows the Tehrancitizens'time value. Since it is assumed that the value of traveltime variesfrom one socioeconomicgroup to another,different time values have been calculatetfor differentcategories of passengers. The hhourly wages for bus riders who are generally from the lower 85% of the populationand for car and taxi passengerswho are generallyfrom the upper 40% of the population,are:

Car and taxi passengers 120 Rls/h Bus passengers 4o Rlslh

The value of traveltime is conservativelyestimated to be 25% of the hourlywage.

BenefitCost Analysis

A. Bas Improvements

SOFRETUhas calculatedthat the increased number of buses would reducethe averagewaiting time to less than four minutes. This would mean that the averagewaiting time would be reduced by more than nine minutesfrom the present13. We chose a more conservative estimate that the waitingtime would be reduced by two-thirdsof what SQFRETUhas cal- culated. Since some improvements in the scheduling are likely even without the project, it is assumed that the project would reduce the waiting time by four minmteg. ANNEX 15 Page 4

The producers' surplus that accrua to the Bus Company is based on an average fare of Rls 2.24 and an operating cost for additional traffic of Ris 1.50 per passenger trip.

The improved maintenance and the higher utilization of the bus fleet is calculated to decrease the operating cost by about 8.7% by 1978.

With these assumptions the benefit and cost flows (in US$ million) for the period 1973-1978 are calculated in the table below:

Type of Benefit 1973 1974 1975 1976 1977 1978

Consumerst surplus . Time savings to existing bus passengers 0 1.76 3.33 4.52 5.78 5.39 Time savingsto new bus passengers 0 O.09 0.44 1.03 1.62 1.91

Producers' surplus

Savingsto the Bus Company 0 0.75 1.36 1.63 2.05 2.32 Increasednet revenues for additionaltraffic 0 0.76 1.95 3.03 3.69 4.24

The benefitsare discountedover a 12-year period because the average life- time of a bus is 12 years. This gives an internalrate of returnfor the bus improvements of 36%. However, if the time savings are excluded, the internalrate of returnis 10%. B. StreetImprovements

SOFRETUhas calculatedthat one-way streets and coordinatedtraffic control would reducethe traveltime on certainstreets by 40-60%if the traffic volume was kept constant. This estimate is based on vehicle travel over long distances, excluding accelerations, retardations, or any major disturbances which are likely to occur in Tehran traffic. Taking these factors into account we have estimated a more conservative 20% time savings on the improved streets if no new traffic was induced.

It is also assumed that when the traffic volume increases 1% the speed of traffic decreases 1.5% 1/ (in the speed range 15-25 km/h). The

j/ ~SCFRETU has made some calculations of the relationship between volume and speed, for a couple of streets in Tehranand their results indicate an elasticity of about2.5. Studies from Paris, London, Bapgkok and a groupof Englishtowns all give elasticities in the range 1-1.5, which is why 1.5 seemsto be a more realisticfigure than 2.5. Pa -

changes in operating Coot8 for cars are based on the assuption that when the speed increases 1% the operating cost falls 0.25%. The operating cost for a car at 20 bm/h is asomed to be REs 3 p.r hour.

When the overall transport cost decreases 1% the traffic volume normally increases 1-1.5%. If the elasticity is assumed to be -1.2, the effects of the street improvement would be a 12% increase in speed and a 14% increase in traffic volume. Since just a saall part of the street system is improved the elasticity for these streets would be lower and the time savings larger than 12%. Consequently, the assumed elasticity (-1.2) underestimates the benefits of the street improvements. /

With these assumptions the benefit and cost flows (in US$ million) for the period 1973-1978 are calculated in the table below:

e of Benefits 13 1974 1975 1976 1977 1978

Consumers' surplus Time savingsto bus passengers o 0.08 0.16 0.23 0.31 0.31 Time and cost savings to the car passengers 0 0.35 0.70 1.05 1.40 1.40

Producerststrplus

Cost savingsto the Bas Company and track owners,etc. 0 0.02 0o04 o.o6 0.o8 o.08

If the benefitsand costs are calculatedover a 20-yearperiod the internalrate of returnis 14%. This is a lower limit since the yearly benefits as a remslt of atreet ixprov=entM dl sloWly grow une the dmand for transportation and the congestion increases over time. C. Both Trafficand Bas Improvements If the effectsof these two parts of the projectare assumedto be additive,the overallrate of returnwill be about 28%.

Distributionof the Project'sBenefits

Based on the calculationsdescribed in the sectionabove, it is estimatedthat about 90% of all the benefitswill go to the bus riders and about 10% will go to car and taxi passengers.

j/ The traffic improvements might also lead- to a redistribution of traffic from other streets, why the traffic volume might increase more than indicated above. As mentioned earlier, this would however increasethe benefits of the project. ANNEX 15 Pqe 6

SensitivityAnaZlsis Two basic assumptions in the benefit cost analysis are that: (i) the value of travel time is 25% of the average wage for bus and car passengers and (ii) 15% of the new bus riders otherwise would have gone by car or taxi.

If these assumptions are changed the internal rate of return will change as shown in the table below:

Percentage of the new bus riders that without the project would have gone by car or taxi.

I _ .10 15 20

Time value as 20 15% 22% 29% a percentage 25 21% 28% 35% of the hourly 33 27% 33% 40% wage ANNEX16 Page 1

IRAN

TEMAN URBANTRANSPORT PROJECT

DIEANDFORECAST FOR PUBLICTRANSPORT

A. Basic Assumptions

When per capitaincome rises the demandfor publictransport is affectedin two ways. The total mobilityof the populationincreases and a larger proportion of the trips is undertaken by privatecars. A cross sectional analysis of the total number of trips per capita in large cities in deeloping countriesindicates an incomeelasticity of about 0.6. The same type of analysis indicates that income elasticity for the public transport system's proportion of the total number of trips is -0.4. The same elasticity for bus transport is -0.5.

With the present modal split in Tehran this would give the following income elasticities for per capita demand:

Private car triDs C 1.0 T-axitrips ct = °-5

Bus trips Cb = 0.1 These elasticitiesbased on internationalcross sectionaldata can be checkedagainst the presentdevelopment in Tehran. From 1966 to 1971 the number of cars per capitaincreased by 6.5% a year. During the same periodthe per capitaincome rose about 7% a year, which givesan incomeelasticity for car ownership of 0.9O-0.95. The mileageper car shows an income elasticity of 0.10-0.15. If the trip length is assumed to be independent of the incame this gives an income elasticity for car trips of 1.0-1.1 which is well in accordance with the cross sectional results.

The per capita number of bus trips has for the last fifteen years had an averageannual increase of 0.4%. The per capita income in Tehran has during the same time increased 4-5% per annum. This gives an income elasticity for bus trips of 0.08_0.10. This value is well in accordance with the results that were obtained from the cross sectional analysis above. Consequently, it seems reasonable to assume that this trend, ceteris paribus, would continue in the future.

During the last coupleof years bus ridershipin Tehran has fallen drastically. It is argued below that this is a resultof the very rapidly deteriorating bus service. If the service,however, had been maintainedat its former level it is probable that the actual demand would have followed the long term trend described above. Potential demand, then, is defined by the long term trend. ANNEX16 Page 2

B. Potential Imand

90FRETUhas made a projection of the fuitare demand for bus transport in Tehran. This has the form:

N = 836.5 + 32.6 (n - 1972)

where N = the total number of trips by bus (in millions/years)

n = the year

Their projection .is.,however, independent of both the population increase and the per capita incoame. If these factors are takenizi7to account the projectedpotential demand would have the form:

N = \ x Pn x (1 + Cb 1 )(n - 1968)

where N = the total number of trips by bus Pn - the population in year n

n = the year Gb = income elasticity for bus trips X = the rate of growth in per capita income X = the numberof trips by bus per capita in 1968.

The reasonwhy 1968 is chosenas base year is that the demandfor bus transportreached its peak in that year.

The per capitaincome in Tehranis projectedto increaseabout 8%/year during the next five years. The income elasticity for bus transp.rt is approximately0.1 and in 1968 the number of trips per capitawas 225. This gives: (n-1968) N Pnx 1,008 x 225 This indicatesthat the potentialdemand for bus transportwill have risen to 242 trips per capitaand year by 1977.

The resultsof the different projections are showrn in Figure 1. ANNEX16 Page 3

C. Cmetition Between Different Modes of Traffic

In Just three years, between 1969 and 1972, the number of trips per capita fell by 30% from 222 to 163. There are several reasons for this development. The maintenance of the buses was very poor and, thus, the fleet utilization rate was extremely low, breakdowns were, frequent and delays were often great. Rapidly increasing congestion made the buses very slow and it often became faster to walk than wait for a bus. Under these circumstances, buses became vez' much less competitive with other modes of travel. The sharp decrease in number of operating buses and i lievel of bus services resulted in the follosing annula decrease in the number of bus trips per capita:

196S 1966 L967 1968 19701 1971 1972

Number of bus trips 171 196 212 225 222 198 174 163 per capita and year Number of passengers * * 360 398 l411 416 436 455 per bus and year Number of taxi trips 53 58 65 68 74 80 - per capita and year

* Not comparable since the composition of the bus fleet changed drastically ii 1967 when minibuses were introduced. - Not available.

The number of trips by taxi has been cnstantly growing but has not, to a substantial ectent, included the passengers diverted from bus travel. In fact, in the last years before the declinein bus ridership started, the number of taxi trips per capita grew 10.7% a year compared to 9.2% in the two years after the decline started.

Unfortunately, there is no data on how the use of private cars has developed during the same time. It is, however, evident that the number of cars per capita grew much faster up to 1966 rather than after that year in spite of a much faster growth of per capita income in later years. There is, consequently, no evidence that the diverted bus passengers are travelling by cars or taxis. It appears that most of the diverted passengers are walking or not traveling at all.

D. Bus Passenger Forecast The gap between potential and actual demand that has developed during the last few years is due to the deterioration of bus services in Tehran. If the level of services can be raised, much of the diverted demand can be recovered, and the earlier long-term trend that is based on socio- economic relationships can be re-establilhed. The Bank's forecast (see the following diagram) is that under conditions of improved service the number of bus passengers will increase by about 50%during the next five years. The forecast is coanervative since it assumes that less than half of the ANNEX 16 Page 4 potential demand that has been lost during the last three years, will be recovered. The shape of the demand curve is based on the rate,that the bus service can be improved.

E. Effects of Fare Increases

The forecast is based on the assumption that fares will not increase faster than per capita income. Because the fares are very low at the present time (about US$0.03 per trip) and the buses are very slow and infrequent, the fares constitute only a minor part of the costs for a trip. This means that the price elasticity probably is low and that minor price increases hardly affect the overall demand.

F. Conclusions

Because of the deterioration of service, UBC has during the last three years lost to bus ridershipabout one-fourthof its potential passengers. A large part of these divertedpassengers are walkingor not travelingat all. Only a minor number of the divertedbus passengersare travelingby privatecars or taxis. The rehabilitationof the bus fleet,the improvementsin bus operationsand the improvements in trafficcirculation patterns will increase UBCt s possibilitiesto competewith other modes of traveland to attractnew riders; and the buses ar- expected to recover about half of the potential demand that they have lost during the last three years. The number of trips per capita is expected to grow to 200-210. This is, however, substantially lower than the peak value, 225 trips per capita, that was reached in 1968. Consequentlythere are great possibilitiesto increasethe numberof bus passengerseven more. T-HE UNlITED6 B;jS3 CCOVIPANY ACTUAL AlJD FORECASTED NUMBER OF PASSENGERS MILLION PASS[I'IGERS 1.20 r-

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ORGANIZATIONOF THE UNITED BUS COMPANY

tiE GENERALMANAGER THE COUNCIL

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