The World Bank

Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No. 1632 Public Disclosure Authorized

PROJECT PERFORMANCE AUDIT REPORT

YUGOSLAVIA FOURTH HIGHWAY PROJECT (LOAN 678-YU) Public Disclosure Authorized

June 15, 1977 Public Disclosure Authorized

Operations Evaluation Department

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

FOR OFFICIAL USE ONLY

PROJECT PERFORMANCE AUDIT REPORT

YUGOSLAVIA FOURTH HIGHWAY PROJECT (LOAN 678-YU)

TABLE OF CONTENTS

Page No.

PREFACE

PROJECT PERFORMANCE AUDIT BASIC DATA SHEET

HIGHLIGHTS

PROJECT PERFORMANCE AUDIT MEMORANDUM

I. Background ...... t II. Project Results ...... I III Main Issues ...... 3 IV. Conclusions ...... 5

ATTACHMENT: PROJECT COMPLETION REPORT

I. INTRODUCTION ...... A.1 II. SECTOR BACKGROUND ...... A. 1 III. PROJECT PREPARATION AND APPRAISAL ...... A.2 IV. PROJECT IMPLEMENTATION AND COST ...... A.3

A. General ...... A.3 B. Project Execution ...... A.3 C. Time Schedule ...... A.6 D. Costs ...... A.6 E. Quality of Completed Work ...... A.6 F. Loan Covenants ...... A.7

V. INSTITUTIONAL DEVELOPMENT ...... A.8 VI. ECONOMIC JUSTIFICATION ...... A.9

A. General ...... A.9 B. Traffic ...... A.9 C. Economic Benefits/Costs ...... A.10 D. Economic Return ...... A.10

VII. THE ROLE OF IBRD ...... A. VTII. CONCLUSIONS ...... A.12

This document has a restricted distribution and may be used by recipients only in the perfonmnce of their official duties. Its contents may not otherwise be disclosed without World Manik aethofiztion. -2-

TABLE OF CONTENTS (Cont'd)

ANNEXES

1. Actual and Expected Project Execution 2. Comparison of Actual and Appraisal Estimates of Project Costs 3. Average Annual Daily Traffic Volumeso n Project Roads, 1969-1991 4. Vehicle Operating Costs 5. Ex-Post and Appraisal Estimates of Economic Rates of Return

MAPS

Map I Yugoslavia - Highway System Map 2 Belgrade-Novisad Road Sections Map 3 Pec-Pristina-Nis Road Sections PROJECT PERFORMANCE AUDIT REPORT

YUGOSLAVIA FOURTH HIGHWAY PROJECT (LOAN 678-YU)

Preface

This is a Project Performance Audit Report on the Yugoslavia Fourth Highway Project for which Loan 678-YU in the amount of US$40 million was closed in January 1976. The report consists of a Project Performance Audit Memorandum prepared by Operations Evaluation Department (OED) and a Project Completion Report (PCR) prepared by the Bank's Europe, Middle East and North Africa Regional Office. The memorandum is based primarily on the PCR, in which certain revisions have been incorporated after discussions with OED. Also discussions have been held with Bank staff, the Minutes of the Board of Executive Directors meeting which considered the project has been read and other documents briefly reviewed.

On that basis, under OED's abbreviated review process, the audit accepts most of the conclusions of the PCR. However, it also expands upon the impact of international competitive bidding, the difficulties encountered in securing right-of-way and in locating roads in densely-populated areas, and the importance for decision making of adequate origin-destination traffic forecasts.

No mission by OED staff was made in connection with this performance audit report.

PROJECT PERFORMANCE AUDIT BASIC DATA SHEET

YUGOSLAVIA FOURTH HIGHWAY PROJECT (LOAN 678-YU)

KEY DATA

Item Original Plan Actual

Total Project Cost (US$ Million) 97.5 106.8 Overrun % _ 10 Loan Amount (US$ Million) 30.0 40.0 Amount Disbursed - 40.0 Amount Cancelled - - Amount Repaid as of 03/31/77 0.505 2,0 Amount Outstanding as of 03/31/77 - 38.0 Date Physical Components completed 12/31/73 9/30/76 Proportion completed by above Date (%) about 75 100 Economic Rate of Return (% range) 14X-29% 12%-22%/a

OTHER PROJECT DATA

Original Plan Actual

First Mention in Files - 06/30/69 Negotiations - 04/02-15/70 Board Approval - 05/19/70 Loan Agreement - 05/28/70 Effectiveness 08/31/70 02/08/71 Closing Date 06/30/74 01/08/76 Borrower Socialist Federal Republic of Yugoslavia Executing Agency Road Councils of the Republics and Autonomous Provinces Fiscal Year of Borrower January 1 - December 31 Follow-on Project Name Fifth Highway Project Loan Number 751-YU Amount (US$ Million) 35 Loan Agreement 06/18/71

Mission Data

Month No. of No. of Date of Item Year Weeks Persons Manweeks Report

Identification Preparation ) Not separately identifiable Preappraisal ) Appraisal 09/69 4.5 3 13.5 10/30/69 Subtotal 4.5 13.5

Supervision I 05/70 1.5 1 1.5 08/31/70 Supervision II 05/71 1.0 1 1.0 07/27/71 Supervision III 06/72 2.0 2 4.0 07/20/72 Supervision IV 11/72 2.0 2 4.0 01/11/73 Supervision V 05/74 1.0 2 2.0 - Supervision VI 07/75 1.0 1 1.0 09/05/75 Subtotal 6.5 9.5

Completion 03/76 0.5 2 1.0 11/76

Country Exchange Rates

Name of Currency Dinar Appraisal Year (1969) US$1 = D12.5 1970 1971 = D15.0-D17.0 1972 = D17.0-D16.65 1973 = D16.62-D15.22 1974 = D15.17-D17.15 1975 = D16.97-D17.87 Completion Year 1976 = D18.00

/a Re-estimate at audit.

PROJECT PERFORMANCE AUDIT REPORT

YUGOSLAVIA FOURTH HIGHWAY PROJECT (LOAN 678-YU)

Highlights

Loan 678-YU was intended to help finance the construction of 6 two-lane highway sections (218 km) on four main trunk roads. The project was completed about three years later than expected with a cost overrun in local currency of 39% attributable largely to rapid inflation. The major sources of delay were disagreement over access road alignments, difficulties in securing the right-of-way, unfavorable geological conditions and postponement of the asphalt wearing course to allow a smoother riding surface on one road. The rates of return at audit on the highway sections of between 12% and 22% compare favorably with the appraisal expectations. Most of the loan covenants of the project were successfully fulfilled.

The following might be of special interest:

Efforts of the Bank to improve international competitive bidding procedures, which helped ensure more effective competition between local and foreign contractors (paras. 8-9, 16 and PCR, paras. 4.04-4.05, 4.07 and 4.15)

Difficulties in securing right-of-way and of locating roads particularly in densely-populated areas (paras. 10-11, 17 and PCR, paras. 4.20, 4.26-4.27)

Importance of reliable traffic data in selecting road alignment (paras. 12-14, 17 and PCR, paras. 6.04, 6.10 and 8.03).

PROJECT PERFORMANCE AUDIT MEMORANDUM

YUGOSLAVIA FOURTH HIGHWAY PROJECT (LOAN 678-YU)

I. Background

1. The project supported by Loan 678-YU of May 19, 1970, for US$40 million was the Bank's fourth investment in Yugoslavia's highway sector. The first three projects, Loan 344-YU of 1963 for US$35 million, Loan 485-YU of 1967 for US$10 million, and Loan 608-YU of 1969 for US$30 million assisted the construction of various highway sections (PCR, paras. 1.01-1.02). Prog- ress under the First and Third Highway Projects has been assessed in OED's "Comparative Evaluation of Selected Highway Projects" (Report No. 349) and "Project Performance Audit Report on Yugoslavia Third Highway Project, Loan 608&YU" (Report No. 1385).

2. The Fourth Highway Project financed construction of 6 two-lane highway sections on the following principal trunk roads:

(a) Bar-Ulcinj (25 km);

(b) Belgrade-Novisad (59 km);

(d) 'Sarajevo-Zenica (65 km) (see PCR, Map 1).

These sections formed part of a larger program of major highway improvements submitted to the Bank in September 1968 during the appraisal of the Third Highway Project. Because final engineering at that time was not sufficiently advanced, their inclusion was postponed to the Fourth Highway Project (PCR, paras. 3.01-3.04). The remaining sections of the program of highway improvements were financed by the subsequent Fifth Highway Project supported by Loan 751-YU of 1971 for US$35 million.

II. Project Results

3. The project was completed in September 1976, about three years after the appraisal forecast of December 1973. The completion of all four roads was delayed. The Bar-Ulcinj Road was completed about six months later than expected because of inclement weather and unfavorable geological conditions (PCR, para. 4.05). The Belgrade-Novisad Road and the Sarajevo-Zenica Road were completed about two years after the appraisal forecast because of disagreement over access road alignments and difficulties in securing the right- of-way. Finally, although the Pec-Pristina-Nis Road was opened to traffic, completion of works was delayed by nearly three years because laying the wearing course was postponed to allow for a smoother riding surface. -2-

4. The total project cost of Din 1,696.3 million US$106.8 million) represents an overrun in local currency of 39% above the appraisal forecast of Din 1,217.9 million (US$97.5 million). The overrun expressed in foreign currency of 10% is smaller because of exchange rate fluctuations occurring since the time of appraisal. Final costs of the Bar-Ulcinj, Belgrade-Novisad, Pec-Pristina-Nis and Zenica-Sarajevo roads were overrun by 18%, 58%, 31% and 32%, respectively. Most of the overrun is explained by the rapid rate of inflation in Yugoslavia since 1970. In addition, extra work was required on the Belgrade-Novisad Road, particularly with respect to the bridge crossing the Danube, and technical difficulties made some redesign necessary on the Pec-Pristina-Nis Road.

5. The economic justification of the roads at appraisal was based on expected vehicle operating cost savings. A reassessment of the justification is made in the attached PCR based on actual construction costs and traffic data and on new estimates of vehicle operating cost savings. The audit rates of return are equal to or higher than expected for three of the roads, while the rate of return for the fourth road is lower than expected but still above 10%.

Rates of Return

Road Section Audit Appraisal …------(%)…___------

Bar-Ulcinj 22 14

Belgrade-Novisad 14 14

Sarajevo-Zenica 15 14

Pec-Pristina-Nis

Section I 12 18

Section II 18 29

6. All of the roads have benefitted from higher than expected vehicle operating cost savings resulting from the increase in oil prices. In addition, traffic has been greater than expected on two of the roads, Bar-Ulcinj and Sarajevo-Zenica, explaining the higher than expected rates of return of 22% and 15%. In the case of the other two roads, there have been substantial traffic shortfalls. This overestimation of traffic was particularly important in the northern section of the Belgrade-Novisad Road (PCR, paras. 6.02- 6.06) and is analyzed in Section III below.

7. For the most part, the loan covenants of the project vere complied with. The Government's undertaking to complete and maintain roads which provided access to the project roads however was delayed in the case of the Belgrade-Novisad Road. The new access from the Belgrade-Zagreb Road in fact will not be completed until mid-1977. Performance with respect to the loan covenants is discussed fully in the PCR (paras. 4.24-4.29). -3 -

III. Main Issues

International Competitive Bidding

8. From the First through the Seventh Highway Projects, the Bank has required international competitive bidding and has tried to remove any difficulties presented by Yugoslavia's own practices. For instance, under the Third Hligiway Project the Bank noted that foreign firms which had prequalified had not submitted bids. It discussed this situation with the foreign firms involved and found that they considered the bidding period too short (60 days) and that the bidding documents were prepared in a language not com- monly spoken abroad, Serbo-Croatian. Under the Fourth Highway Project, the Bank recommended that the bidding period be extended and that documents be prepared in English as well. Furthermore, the Bank suggested that an annex be affixed to the bidding documents with information on foreign currency transfers, exchange risk and price escalation to give prospective bidders more infor-ation in areas which might be of concern to them. In spite of these efforts, however, awards have consistently been made to local contractors; an exception is the award of a subcontract to an Italian firm under the Fifth Highway Project, Loan 751-YU of 1971 for US$35 million.

9. The award of practically all contracts to local firms in the Bank- financed projects reflects the competitiveness of the contracting industry in Yugoslavia. Nonetheless, the Bank's efforts have served to clarify aspects of competitive bidding in Yugoslavia which might have inhibited foreign contractors and these efforts continue to ensure competitiveness among local and foreign contractors.

Securing Right-of-Way and Road Location

10. Difficulty in acquirinc the right-of-way and in reaching agreement on the location of portions of the Sarajevo-Zenica and Belgrade-Novisad roads, particularly those portions in densely populated areas, delayed construction. In the case of the former, obtaining the right-of-way delayed the beginning of construction by about a year and even after the necessary land was obtained, relocation of people whose homes were in the path of the road continued to cause-delays. In the case of the Novisad-Belgrade Road, although the location of an access road (into Novisad) and an interchange (near Belgrade) had been approved by authorities, the decision was overturned after the loan/credit was signed, substantially delaying work. Bank experience in other countries such as JiJaica and Finland, also illustrates the difficulties and delays which can occur when roads pass through densely populated areas. In the case of the Kingston-Spanish Town Road in Jamaica,, right-of-way and relocation difficulties in the urban portion of the road were underestimated at appraisal, while in the instance of the Tattariharju-Jarvenpaa Expressway in Finland, the alignment near an urban area was modified when local communities lobbied to -4 - alter it after appraisal. 1/ These experiences indicate the need for better communication between the parties involved and the desirability of reaching decisions on alignment and right-of-way acquisition before the loan is made.

11. The Yugoslav case however is somewhat different in that assurances were made to the Bank that right-of-way and location had been settled before negotiations. Similar situations have also occurred in the Fifth, Sixth and Seventh Highway Projects and stem from the decentralization of authority in Yugoslavia which enables bodies such as communities and interest groups to appeal and overturn decisions on location and right-of-way after they have been taken. There seems to be no easy solution to this problem but more communication between all groups concerned earlier might be beneficial.

Importance of Traffic Studies in Selecting Alignments

12. The experience on the Belgrade-Novisad Road illustrates the impor- Lance of adequate traffic data when determining road alignment. At appraisal, the alignment of the Belgrade-Novisad Road was the subject of contention by groups which wanted the route to pass through Novisad. Three possible alignments were studied:

(a) a route located to the east of Novisad which crossed a relatively sparsely populated region with flat, rolling terrain;

(b) a route to the west of Novisad which crossed a mountainous region entailing high costs; and

(c) a route through Novisad along an existing road which passed the densely populated regions around the city where right-of- way acquisition would have proven difficult (see Map 2).

The first alternative (a) was selected because its cost was lower and construction would be easier.

13. During project implementation, the Bank discovered that the city of Novisad was proceeding with plans to construct a route which would branch off and parallel the Belgrade-Novisad Road between Indija and Novisad, a distance of about 30 km. This new route, now about 25% completed, will pass through Novisad and serve the populated region south of the city. Actual traffic on the Belgrade-Novisad Road in 1975 was only 78% of the appraisal forecast and traffic on the northern half between Indija and Novisad is likely to decrease even more when the parallel route is completed. By 1980, traffic on the northern section of the Bank-financed route will decline to

1/ Project Performance Audit Reports on the: Jamaica First Highway Proj- ect, Loan 408-aN (Report No. 807, para. 6.01) and Finland Third Highway Project, Loan 723-FI (Report No. 1197, para. 4). -5 -

3,035 vehicles per day whereas traffic on the parallel route is expected to reach 8,416 according to a 1975 feasibility study of the transport corridor between Belgrade, Novisad. and Feketic. The PCR expects that the rate of return on the northern half of the Bank-financed road, comprising over half of the cost of the Belgrade-Novisad Road of US$40 million, will be 6%. In view of this, construction of the second carriageway of the Belgrade-Novisad Road, which was planned at appraisal, is no longer justified.

14. Based on the information available at appraisal, the decision to construct the Bank-financed route appears to have been the correct one. How- ever, in retrospect the information upon which this decision was based was apparently insufficient. The present level of traffic on the Bank-financed road between Indija and Novisad and the expectation that much of this traffic will divert to the new route when it is completed, suggests that the origin- destination studies undertaken at appraisal did not consider the needs of the communities around Novisad. Another instance where origin-destination studies may not have given adequate attention to local traffic needs is the Zagreb-Karlovac Road reviewed by the Project Performance Audit Report of the Third Highway Project (Report No. 1385, para. 12). Traffic on the Zagreb- Karlovac Road was 64% less than the appraisal forecast mainly because in- vestments to expand the Port of Rijeka did not materialize. However, as Report No. 1385 points out, a substantial amount of traffic continues to use an old, unimproved route which passes through many communities. Since the Zagreb-Karlovac Road is a limited-access highway, this seems to indicate that the needs of the communities between Zagreb and Karlovac were not thoroughly explored.

IV. Conclusions

15. Construction of the project roads was successfully completed in spite of delays caused by postponement of paving and dispute over right-of-way and location. The quality of construction which was undertaken by local contractors is generally good. Cost overruns for the roads are largely attributable to rapid inflation since the time of appraisal. The economic rates of return for the project roads range between 12%-22% and compare favorably with the appraisal estimates. The loan covenants were substantially complied with although an undertaking to construct access roads was considerably delayed in execution.

16. The audit notes that construction awards under virtually all of the seven Bank-financed highway projects have gone to local contractors. The Bank took an active role in promoting effective international competitive bidding. The fact that awards continue to be made to local contractors reflects the competitiveness of the local construction industry.

17. The difficulty in securing right-of-way and agreeing on road location, as in the case of Sarajevo-Zenica and Belgrade-Novisad roads, is a problem affecting a number of Bank-financed highway projects in Yugoslavia. -6-

The Bank has tried to ensure that location and right-of-way are agreed upon before negotiations; however, the appelate procedure is such that apparently, firm decisions can be overturned. While there is no ready panacea for the problem, more communication between the communes and republics involved at an earlier stage might be beneficial. In the case of the Belgrade-Novisad Road, information suggests that reliable origin-destination traffic studies before appraisal might have resulted in a different decision on the road's alignment. ATTACHMENT

PROJECT COMPLETION REPORT

YUGOSLAVIA: FOURTH HIGHWAY PROJECT (LOAN 678-YU)

I. INTRODUCTION

1.01 In 1968 to meet the urgent need for better facilities, the Federal Government of Yugoslavia drew up an extensive program for highway improvements and submitted it to the Bank for consideration. In June 1969 the Bank approved a loan for $30 million under the Third Highway Project, Loan 608-YU, to help finance three high priority sections included in the program. The Fourth Highway Project, involving construction of six sections of four major highways, was also a part of the same program, for which Loan 678-YU of May 28, 1970, in the amount of $40.0 million, closed in January 1976.

1.02 The Bank had earlier financed two other highway projects in Yugoslavia - Loan Nos. 344-YU in 1963 and 485-YU in 1967. The First Highway Project (US$35 million) was financed for the completion of the coastal section of the Adriatic highway and parts of the Belgrade-Nis road. The Second Highway Project (US$10 million) was for the improvement of 367 km of roads connecting the Zagreb-Belgrade highway via Sarajevo and Tuzla with the Adriatic highway. All these projects were satisfactorily completed.

1.03 The Project Completion Report is based on information contained in the Project Appraisal Report (No. PTR-41a, May 5, 1970) and a review of Bank files, including supervision and progress reports of the project.

II. SECTOR BACKGROUND

2.01 Transport is a dynamic sector of the Yugoslav economy. Govern- ment's broad aim is to ensure that all modes of transport are developed to meet the needs of a market-oriented economy. The railways are important carriers of goods and passengers, but since the mid'60s road transport has gained in relative importance and has replaced railways as the dominant carrier. River transport has retained an important' and competitive place, and pipelines have come into increasing use in recent years.

2.02 Yugoslavia aims to improve its integration with the world economy. The trunk routes and international connections are therefore of special concern because Yugoslavia has borders with seven countries. Several international land connections, particularly in the northwest, have also acquired special significance for tourism.

2.03 The attainment of regional balance in economic developmev hlas always been an explicit objective of Yugoslavia. Increasing emph is is now laid on the development of transport between developed and less developed Republics and Provinces and within less developed areas. - A.2 -

2.04 Development of the highway network has, however, not kept pace with the growth of road traffic. On many of the main routes the combina- tion of substandard geometric and pavement conditions with high traffic volumes has resulted in heavy traffic congestion, while on many other routes driving conditions are poor and deteriorating. In general, most of the roads are inadequate for the traffic they are now carrying.

III. PROJECT PREPARATION AND APPRAISAL

3.01 In October 1968 Government submitted to a Bank mission, appraising a Third Highway Project, a list of 13 major roads totalling about 630 km, then estimated to cost about US$275 million. Planning for most of them was well advanced and it was anticipated that final designs for all would be ready early in 1970. All proposals appeared of high priority. The Third Highway Project (US$30 million) financed construction of only three of the 13 road sections. At the Bank's request, therefore, Government selected from the program a number of highway sections which might be considered for the Fourth Project. The basis of selection was to be high economic priority and an advanced status of project preparation. Government, however, deferred consideration of projects in Macedonia and Slovenia as those Republics were receiving assistance under the Third Loan and would be sufficiently occupied with the administration and execution of that project.

3.02 Preparation of the project road studies was undertaken by the highway organizations of the Republic and Provinces assisted by the Design Insti- tutes of Belgrade and Sarajevo and the Materials Testing Institute of Belgrade. Ad hoc assistance and advice in the execution of this work was also given by Bank missions.

3.03 The project identified was the project appraised and built; there were no changes in composition.

3.04 The project was processed efficiently and without unnecessary delay. The decision within the Bank to increase the loan amount from US$30 million to US$40 million was taken speedily, when prior to project appraisal it was seen that the original allocation would be inadequate to finance a balanced project. In less than two years from the July 1968 initial request by Government, two loans had been signed supporting its road construction program: the Third Road Loan for US$30 million on June 5, 1969 and the Fourth for US$40 million on May 28, 1970. From completion of the project's appraisal to its presentation to the Board, less than seven months elapsed. Given that loan negotiations were not completed until mid-April, it would have been difficult to advance the date of Board presentation of the project. - A.3

IV. PROJECT IMPLEMENTATION AND COST

A. General

4.01 The project consisted of the construction of six two-lane sections (218 km) of four principal highways in five of the Republics and Autonomous Provinces of Yugoslavia (Map IBRD-2770R). They are:

Project Highway Republic/Province Executing Agency

Bar-Ulcinj 25 km Montenegro Road Maintenance Enterprise of Montenegro

Belgrade-Novisad 59 km Serbia/Vojvodina Road Council of the Province of Vojvodina

Pec-Pristina-Nis 69 km Serbia/Kosovo Road Maintenance Enterprise of the Province of Kosovo

Sarajevo-Zenica 65 km Bosnia-Herzegovina Road Fund of Bosnia-Herzegovina

4.02 All six sections are part of important trunk highways. The sections Belgrade-Novisad and Sarajevo-Zenica constitute the first stages (two lanes) of subsequent four-lane divided highways and were designed to relieve congestion on the original roads whose geometric standards were inadequate to the needs of modern traffic. The section Bar-Ulcinj extends the Adriatic highway along the coast and opens up an area important for tourism, replacing a low- standard gravel/earth road which suffers severe congestion during the summer months.

4;.03 The three sections of the Pec-Pristina-Nis highway would complete the improvement of this important route, construction of which has been in progress for the past several years.

B. Project Execution

4.04 The loan became effective on February 8, 1971, more than five months later than the August 31 anticipated date. Delays in obtaining valid legal opinion concerning the Subsidiary Loan Agreement as well as the Decision on Financing was the cause of repeated postponements of the loan effectiveness deadline. In the meantime, prequalification of contractors who would wish to bid for the project contracts was in hand, the deadline for which was set at August 25, 1970. Twenty-five firms responded; four were foreign (two German, two Italian) and the remainder was Yugoslav. None of the four prequalified foreign contractors participated in bidding for any of the project contracts. Annex 1 gives details of project execution. - A.4 -

Bar-Ulcinj Section

4.05 Bids closed for the two contracts of the Bar-Ulcinj road on January 5, 1971. Seven Yugoslav firms participated and the contracts were awarded to the lowest evaluated bidders. The Bank cabled its concurrence with the awards on March 4, 1971.

4.06 The first road to be finished, Bar-Ulcinj, over-ran the 23 month contract period by 4 1/2 months. The main causes of delay were:

(a) unfavorable and unanticipated geological conditions resulting in unstable side-slopes in cuttings. To prevent slides, side-slopes had to be flattened and in some cases retaining walls built; and

(b) extended periods of abnormally wet weather which slowed the pace of construction and aggravated the slide problems.

Belgrade-Novisad Section

4.07 Five Yugoslav contractors participated in the bidding for the three contracts of the Novisad-Batajnica section of the Novisad-Belgrade highway. In a May 20, 1971 letter, the Bank agreed contract awards to the lowest evaluated bidders. Because of delays in finalizing the Belgrade intersection design, award of the contract for the section of this highway within Serbia (Batajnica-Belgrade), was not made until December 1971. Local contractors only participated in the bidding although bidding was open to all prequalified contractors.

4.08 The Novi Sad-Belgrade road was completed in November 1975. This road was originally proposed for inclusion in the earlier Third Highway Project but could not be appraised at that time because a decision on its northern alignment, and in particular the location of the access from it to Novi Sad--issues which had been hotly debated in Vojvodina for several years--could not be reached in time. The road was included in Government's proposals for the Fourth Highway Project on the understanding that these problems would be resolved before the appraisal mission's visit. The mission reviewed the proposals and reached an understanding with the Road Fund and the Executive Council on the best economic alternative for the access road. However, during loan negotiations the Vojvodina delegation informed the Bank that the city of Novi Sad had rejected this alternative, but that the Road Fund had prepared a slightly different alternative, which would lie outside the city's jurisdiction. This alternative was acceptable, and was included in the subsidiary loan agreement.

4.09 A condition precedent to loan effectivenebs was the submission to the Bank of an acceptable Financing Decision by the Autonoi_ous Province of Vojvodina. This Decision is the Act passed by the AssemL;ly appi pri- ng funds for construction of the project. During the Bank's scrutin- L tihis Act, it was found that not only had the agreed access to the city b2on - A.5 - provided for, but the city had also obtained about US$10.0 million for the construction of an additional access route. Subsequent discussions and correspondence with Vojvodina clarifying these matters delayed the Bank's agreement to contract awards until May 20, 1971.

4.10 There were also considerable delays in the contract award for the approximately 6 km section of this road in Serbia. These delays were mainly due to problems of designing the Belgrade intersection; construction did not start, therefore, until June 1972.

4.11 The road throughout had been designed and built as the first stage of a limited access four-lane highway. Only the first two-lane carriageway has been built but on some sections earthworks have been partially completed for the future second two-lane carriageway. Because of difficulties of extending them at a later date, all crossing structures have been btiilt spanning both carriageways.

4.12 Vojvodina, in a July 9, 1973 letter, informed the Bank that its Executive Council had decided to build another highway to Novi Sad from the project road. The result of this construction, now in progress, will be to provide an alternative route to Novi Sad and reduce benefits on the northern 30 km of the project road. Construction of the second carriageway for this section of the project road, therefore, is not presently foreseeable.

4.13 In view of.the investment already made to provide for a future second carriageway, the question of an entirely new alignment to provide for second-stage traffic is one that should have been discussed very much earlier with the Bank-so that the optimal least total cost solution could have been mutually agreed.

4.14 It is-of interest to record that the bridge spanning the Danube river, built as part of this project road, is 2,475 m long with a main span of 450 m, and is reportedly.the longest in Europe. Pec-Pristina-Nis Section

4.15 Bids for the five contracts of the Pec-Pristina-Nis road were opened on March 10, 1971. Six

4.16 The first contract of the Pec-Pristina-Pepeljevac road to be completed was that for the Komorane-Velika Slatina section. Work finished about three months late, the delay being mainly due to lost time through wet weather.

4.17 Wet weather and design changes because of unfavorable soil conditions found after construction had started, delayed completion of the Pec-Zaimovo section. - A.6 -

4.18 The Podujevo-Merdare section was opened to traffic one month after the original contract period expired-. The final contract for the road, that for Merdare-Pepeljevac, was incomplete at'the loan closing date, although the road was open to traffic on the asphalt binder course. The laying of the asphalt wearing course was postponed beyond the loan closing date to allow a reasonable period for settlements to occur.. It was completed by September 1976. However, on'the'basis of work actually completed, the full provision of funds under Category III of the loan was disbursed and the Bank's financial commitment to the project completed.

Sarajevo-Zenica Section

4.19 The principal cause of delay in completing the Sarajevo-Zenica road in Bosnia-Hlerzegovina was the problem-of land expropriation and the relocation of people and utilities from the right-of-way. Although work was about to start in June 1972, a year af'ter contract award, relocation problems persisted and slowed progress so that the project was not completed until lat-e December 1975.

C. Time Schedule

4.20 AllP'construction contracts took longer than anticipated to complete. Building the project roads consumed about 560 contract months compared with the 365 contract months allocated for the work, a total time over-run of more than 50%. While the causes of some delays were unforeseeable--prolonged periods of abnormally wet weather, pockets of unsuitable material encountered on the alignment--others could have been anticipated and dealt with in advance. In particular the progress of the Sarajevo-Zenica road could have been held to schedule had land expropriation action been taken earlier. Simiarly, the Batajnica-Belgrade section of the Novisad road could have been completed at the same time as the rest of the road if urban planning problems in Belgrade had been taken into account in the initial intersection design. Nevertheless, it is clear that more generouis contract construction periods would have been appropriate.

D. Costs

4.21 Despite the effects of the devaluation of the dinar and the high rate of inflation rate after 1970, the project costs increased only marginally from the US$97.5 million estimated to US$106.8 million (Annex 2).

E. Quality of Completed Work

4.22 Generally, quality of workmanship throughout was good. However, supervision missions reported that the standard of finish of structures was lower in Kosovo than elsewhere, but was still acceptable. No obvious defects have developed since project completion.

4.23 Supervision by the highway authorities concerned assisted by the design institutes was satisfactory. - A.7 -

F. Loan Covenants

4.24 One major loan covenant (5.01) obliged the Borrower to enter into subsidiary loan agreements with the Subsidiary Borrower for the purpose of relending loan funds.

4.25 Because highway administration had been decentralized in 1967 and the responsibility for public roads transferred from the Federal Govern- ment to the Republics and Autonomous Provinces, there was no central highways agency to exercise supervising and coordinating functions for the project. Rather than have the Bank enter into four separate loan agreements with the individual Republics and Autonomous Provinces concerned, which would have entailed a detailed appraisal of each, the Yugoslav Investment Bank again agreed to act as the Borrower's representative and as coordinator in matters relating to project execution. Government then entered into subsidiary loan agreements with each concerned Republic and Autonomous Province. This procedure, used successfully in the execution of the Third Project, was effective for the Fourth Project.

4.26 In order that the optimum use be made by the roads to be built under the project as soon as possible after their completion, Government agreed to include in each subsidiary agreement the requirement that other roads providing access to the project roads should be constructed and/or improved and maintained as reasonably required.

4.27 The requirements of this covenant were met satisfactorily although in the case of Serbia, construction of the 6 km section of the Belgrade-Novi sad highway was delayed because of problems in the intersection design at the Belgrade terminus and difficulties in acquiring the right-of-way and there were also delays in constructing a new access from the Belgrade-Zagreb road. Although not completed by the loan closing date, work on the 6 km highway section was then well advanced, but the new access from the Belgrade- Zagreb Road will not be opened until mid-1977. The operation therefore of the main highway has been adversely affected because of this access difficulty, and full benefits of the construction will be not be realized until this junction has been completed, diverting more traffic from the old road.

4.28 The subsidiary loan agreement with the Autonomous Province of Vojvodina contained an obligation concerning the level of tolls which the PLovince might wish to levy on traffic using the project road. It was agreed that if they were to be imposed, tolls would be applied flexibly and at such levels as not to divert an unduly large portion of through traffic to the alternative toll free facilities or means of transportation. To date no tolls have been levied and there are no indications that the authorities intend levying tolls.

4.29 The subsidiary agreement with the Autonomous Province of Kosovo obliged the Province to build a two-lane highway between Zaimovo and Komoran on the project road to agreed design standards and to be completed - 'Later than the project road. This requirement was satisfactorily met. - A.8 -

V. INSTITUTIONAL DEVELOPMENT

5.01 The Bank has been heavily involved in institutional development in Government agencies dealing with transport. A principal issue was the fundamental change in highway administration which occurred in 1967. As part of a larger national effort to decentralize economic decision making, most of the responsibilities of the Federal Government in the highway subsector (and in the transport sector generally) devolved to the Republics and Autonomous Provinces whose authority was thereby increased. Unfortunately, having a larger number of decision makers, as a result of this decentralization, has increased the problems of coordination. However, the Bank has attempted to address this problem by promoting the establishment of:

(i) the Council of Republican and Provincial Roads Organization (CRO);

(ii) Lhe Federal Committee for Transport and Communications; and

(iii) the Secretariats or Committees for Transport in the Republics and Provinces.

5.02 The CRO, established by the Road Funds, Councils and Enterprises in 1971, has been active in the standardization of engineering design criteria, data collection and other technical matters between the Republics and Autonomous Provinces. It has also been instrumental in the preparation of uniform guidelines for feasibility studies.

5.03 The Bank also played a useful role in promoting coordination in highway planning, project preparation, research and administration. Under the Third and Fourth Highway Loans, the Federal Government and the Republics ahd Provinces agreed to:

(i) revise existing laws and regulations, in particular to ensure that earmarked funds will be used for highway maintenance;

(ii) improve coordination in the highway sector; and

(iii) collect and analyze data for highway planning purposes.

5.04 The authorities have made considerable progress in implementing these undertakings. For example, all laws and decrees related to the highway sector have been reviewed as part of a national review of all existing legislation; the standard and organization of highway maintenance improved considerably; traffic counting, which had been rudimentary in the past, is now being carried out on a more systematic and planned basis: the Federal Government has issued the first uniform guidelines for estimating vehicle operating costs; and notable progress has also been made in improving project preparation. Much of the progress in these fields has becn due mainly to the Bank's efforts and active involvement. - A.9 -

5.05 Further improvements are still needed, and the Government has yet to define its transport policies more precisely and delineate clearly the responsibilities of the Federal, Republican and Provincial Governments in the transport sector. At present, the CRO does not have the legal status or authority to play a fully effective role in overall highway planning and coordination between the Republics and Provinces. Further, to promote transport coordination, the need is becoming increasingly urgent for studies on road user charges and on railway costs, with a view to eliminating the overt, hidden and cross-subsidies in and between these modes. The studies of road user charges and rail costs have been included as an important component of the proposed Eighth Highway Project. Both these studies are expected to assist in the optimum utilization of the existing assets, and lay a sound foundation for formulating transport policies relating to rail/road coordination. The Bank has maintained a close dialogue with the Yugoslav authorities concerning the institutional problems and the goal of achieving improved transport coordination continues to guide Bank lending for future highway projects.

VI. ECONOMIC JUSTIFICATION

A. General

6.01 The main objective of the project was to reduce the cost of transport and relieve congestion on four main highway sections: Bar-Ulcinj, Belgrade-Novisad, Nis-Pristina-Pec and Sarajevo-Zenica by replacing or improving the existing inadequate road sections. The first two lanes (first stage) of four-lane divided highways in Sarajevo-Zenica and Belgrade-Novisad are the two principal components of the project and together they account for about 75% of the total construction costs.

B. Traffic

6.02 The average daily traffic volumes on the project road sections as estimated at appraisal and from actual counts and latest estimates are shown in Annex 3.

Saralevo-Zenica Section

6.03 Average actual traffic (1975) on the Sarajevo-Zenica section in S.R. Bosnia-Herzegovina compared favorably with the appraisal estimate.

Belgrade-Novisad Section

6.04 In the case of Belgrade-Novisad route the average daily traffic on the northern half and southern half of the sections varied significantly. This was mainly because of the rapid development of commerce anl ind-stry between Indjija and Belgrade. This traffic trend is likely to con inue and - A.10 - may become more pronounced with the completion of the new additional access road to Novisad from the project road near Indjija. At present only a portion of this new access road is ready. But it appears that in due course this new access road will be the main connection between the project expressway and Novisad and will form part of the European network roads (E5). This is likely to result in substantial shortfall of anticipated traffic in the future on the project section between Indjija and Novisad in S.A.P. Vojvodina.

Bar-Ulcinj Section

6.05 On the Bar-Ulcinj section in Montenegro, the average actual traffic is about 20% higher than the anticipated volume mainly due to the favorable development of tourist traffic on the Adriatic highway along the coast.

Nis-Pristina-Pec Sections

6.06 The actual traffic on Nis-Pristina and Pristina-Pec sections is lower than "he estimated volumes by about 63% and 70% respectively. Apparently, the apprai6al assessment of the prospect for growth of traffic on Nis-Pristina section int Kosovo was somewhat optimistic. Reduction of traffic on Pristina- Pec section (from 650 in 1969 to 524 in 1975) indicates the margin of uncer- tainity of the origin-destination data provided during appraisal.

C. Economic Benefits/Costs

6.07 The principal benefits derived from the project are savings in vehicle operating costs. Vehicle operating costs by road section are shown in Annex 4, as estimated at appraisal and as revised on the basis of updated operating cost, information available for the year 1974-75. The figures show that average vehicle operating costs, and therefore savings, have increased by about 105% from 1970 to 1974 and by another 15% from 1974 to 1975. This ipcrease is partly due to inflation and pErtly to the marked producer price increases in petroleum products. The economic costs of construction of the project roads have generally increased by about 15% to 35% as compared to appraisal estimates. In the ex-post economic justification, actual project costs and estimated benefits in current prices of each year have been adjusted to eliminate the likely effect of inflation.

D. Economic Return

6.08 The rates of return of the project road sections are shown in Annex 5, as estimated at appraisal and as revised on the basis of updated traffic and vehicle operating cost information. The Annex shows that the revised economic return (ER), excluding benefits due to savings of passenger time, is varying between 12% and 22% for different road sections. If the benefits due to savings of passenger time are included, the ER increases by about 2% in all cases, confirming that on the whole, the different sub- projects are economically justified. - A.11 -

6.09 In spite of considerable reduction in traffic level on the Pristina-Pec and Pristina-Nis sections, the sub-projects remain economically viable mainly on account of increased operational cost savings at current prices (1974-75) and substantial distance reduction (about 78 km) for through traffic in the case of Pristina-Pec section. The revised ERs for these sections are, however, lower and stand at about 2/3 of the appraisal estimates.

6.10 A careful scrutiny further reveals that due to likely diversion of traffic from the Novisad-Indjija section discussed earlier, the economic return for the northern half (from Novisad to Indjija) of the Novisad- Belgrade highway section is as low as 6%. The extra large benefits (about 24%) of the southern half from Indjija-Belgrade is really hiding the insufficient benefits of the northern stretch. In retrospect, a simple two-lane construction of Novisad-Indjija section (including the major bridge over the Danube) instead of a staged two-lane construction might have been a better proposition.

VII. THE ROLE OF IBRD

7.01 In preparation and appraisal of the project the Bank was instrumental in ensuring the participation of the Yugoslav Investment Bank as project coordinator and the channel of funds to the four Republics and Provinces participating in the project. Further, to ensure that the realization of full project benefits would not be frustrated or needlessly deferred, the Bank insisted the Borrowers should also build or improve the additional roads needed to give access to the project roads.

7.02 The project did encounter unforeseen difficulties such as un- expectedly adverse soil conditions on some sections of the Bar-Ulcinj road, unexpected land expropriation and relocation problems through a highly industrialized region in Bosnia-Herzegovina, and complex urban intersection designs at Belgrade. In these situations, the Bank staff maintained a frank and close relationship with the staff of the Borrower and provided technical assistance and advice to minimize the adverse effect on the project.

7.03 The Bank played a particularly useful role in stressing the need to revise the price escalation clause in highway construction contracts. The clause then in force did not cater adequately for all the main types of cost increases, and as prices rose sharply from about 1970, compensation under the ,clause was less than adequate, and created a financial squeeze on the construction industry. At Bank's suggestion the authorities agreed to include a revised clause in all the Bank-financed contracts.

7.04 The Bank's insistence on coordination has been the most important factor in the establishment of a consultative mechanism for the various Republican and Provincial Road Funds in the form of tha Council of Road Organizations. Noticeable attention was given by this body to i7)roving the collection and analysis of country-wide traffic statistics and better project preparation. - A.12 -

VIII. CONCLUSIONS

8.01 The project has been successfully completed and with one minor exception all within the loan closing date. Most of the overruns in project costs can be explained by the devaluation of the Dinar in January 1971 by 20% and by price escalation.

8.027 The main benefits from the newly constructed roads are savings in transport costs. The E.R.s of the project roads, excluding benefits due to savings of passenger time, range between 12% and 22%. If the benefits due to passenger time savings are included, the E.R.s increase by about 2% in all cases, confirming that on the whole, the different sub-projects are economically justified.

8.03 However, when the new access road to Novisad from Indjija is finished (there is no firm date yet) there will be a substantial diversion to it of anticipated traffic from the northern half of the project Novisad- Belgrade ection. The E.R. for the northern half might fall to as low as 6%. This project road has been designed and built as the first stage (two- lane carriageway) of a limited access four-lane highway. There is now little prospect and justification of the construction of the second carriageway. in view of the investment already made to provide for a future second carriageway, the question of an entirely new alignment to Novisad from the project road is one that should have been discussed very much earlier with the Bank so that the optimal least total cost solution could have been mutually agreed. PRCaCT C0M1?LETION REPQORT

YUGOSLAVIA: FO'JF2TH VIGS! AY PROJECT (LoAN 678-YL)

Actual ane Exp_ec Proleet Execution

X Completion Contract Work Contract Actual Contract ComPletion by Expected Project Component Contractor Bid Receipt Award Started Period Period Expected Actual 1/ Dare Montenegrc

A. Bar-4Ulcinj

I. Bar*-Belvedere G.B. Put (Sarajevo) 01/C5/71 03/16/71 04/16/71 23 26 01/16/73 06/01/73 92 II. Belvedere-Ulcinj Mavrovo CSkopje) 01/05/71 03/16/71 04/16/71 23 26 01/16/73 06/C1/73 77 B. Vojvodina and Serbia

I. Kac-D

I. *Fec-ZaJmovo Granit (Skopje) 03/10/71 07/02/71 07/15/71 20 35 12/31/72 12/26f73 65 II. Yo-.orar.e-Velika Slatina Partizanski Put (Beograd) 03/10/71 06/23/71 07/05/71 20 30 08/31/72 11/29/72 98 iTl. Poddaevo-Merdare Ramiz Sadik/Vijadukt 03/10/71 05/11/71 07/01/71 20 42 10/30/73 11/29/173 98 IV, Merdare-Pepeljevac Partizanski Put (Beograd) 03/10/71 06/25/71 09/01/71 32 54 11/25/73 9/76 - D. Bcsnia and Hercegovina

T. Zenica-Lasva Bosnaputevi (Saraj evo) 03/12/71 06/16/71 06/02/72 33 54 03/16/74 12/21/75 37 II. Lasva-Visoko Partizanski Put/Plamum 03/12/71 06/16/71 06/02/72 33 54 03/16/74 12/21175 34 II. Visoko-Josanica Autoput/Granit 03/12/71 06/16/71 06/02/72 33 54 03/16/74 12/21/75 57

1/ Dates given aTc for "practical completion", i.e. when roads have been opened to traffic and the contractua] maintenance period begins. Some minor works such as signalization, clearing of right-of-way, may remain to be ccmpleted. YUGOSLMVIA: FOLl'RTH *FtCTWAY P'OJEECT (LOAtI 6-&-YV')

Cotarison of Actual end tnpraisal EsBtIrears of jecVCost

Apo-srAca2 rstIcte cn-~racf- -~i.~n ~ Lcc3.. Fc~r±SnfTot-1 (tt1 Price l-ocal Cest _ (k) .in. L'S ForIegn 2/ ot2 Finad l Do4 V'$ Dn .. - ---- $~ S iS Estite A. Vontenegro: (in Million) ------sLmt 3/d_ i llion)- - rat-BelvedEre 15.0 Be-vadcro-Ulcinj 9.4 81,41 24.4 49,5a 111.00 2.10 137.32 11.02 130.99 92.23 4.32 162.50 B. Vosvcdena 10.72 108.b 3 a.-nd SerbSa: 124.06 139.94 FaZ-!DanLbC'19.2 Dcnur,e Zrr-,La 2.5 94.53 31.2 160.56 5.7 146.72 44.37 5S.6 33-155 6.41 409,9 32.86 4-46.18 429.54 13.60 649,90 40-'4 123.60 C. Ze:bfc grd-Yoovo: 145.46 158.44 Pec-Ztr.j:_vo 22.8 Komcran0Velika S'atina 10.4 34.18 Pc6u 4;evo-YOerdrct 7.2 20.47 rtrde c-7c,.014evac 29.2 19.98 86.46 69.6 134.05 2.56 165.86 13.26 161.09 132.08 5.40 218.20 14.49 110.36 1;5.45 131.56

z :-Lsisv 9.5 38.2 86.72 _s - sic 17.7 2S4.99 177.45 65./' 406.60 7.93 504.53 40.39 549.16 1-.2119 394.70 16.68 665.70 41.45 TOTALS 123.63 lZl.22 983.20 19.00 1,217.90 l31.94 97.50 1,287.42 1,C48.55 40.00 1,696.30 106.80 120.12 1J1.76 139.25 1- St :ih coaltir.gencles '/ r.jt ,co erl4S loan proceedr, about SO%cf which is estimaated to cover .; U'~t I contingencies forcisn cxchan£e component PROJECT COMPLETION REPORT

YUGOSLAVIA: FOLRTH HIG9WAY PROJECT (LOAN 678-YU)

Average Annual Daily Traffic (AADT) Volumes !/ on Project Roads 1969-1991

Highway Sections Appraisal Estimate Rcvised Estimate 1969Z 1922 1977 1982 1991 1969Y/ 1972 1975 _/ 1977 19S2 1991

Bar-Ulcini l4 1,200 1,600 2,800 4,000 7,000 1,200 1,800 3,012 3,500 5,000 8,000

Belgrade-'~cVisad 4/ 5,500 7.700 21 13.500 22,200 45,000 5.500 7,OnO 5/ 8,500 8,90o 1,n5nn 51 17,500 5

Nis-Pristina 4/ 890 2,300 4,300 5,900 8,500 890 1,300 1,40h 1,600 2,200 4.500

Fec-Pristinp 4/ 650 1! 1,300 2,200 3,000 4,800 650 400 524 600 900 1,500

SaraJevo-Zenica 4/ 1,900 3/ 2,900 .1 5,700 9,000 18,500 1,900 3,000 5,324 6,000 8,000 15,000

1/ Cars. trucks and buses 21 Actuals 3! Thro'gh traffic only 4/ Percentage of commercial vehicles (trucks and buses) on Bar-Uleinj, Belgrade-Novisad, Nis-Pristina, Pec-Pr4stina and Saravevo- Zenica worked out as 30, 25, 25, 25 and 30 percent, respectively. 5/ Estimated AADT on the northern half and southern half of the road varies significantly as shown below:

1972 1977 1982 1991 (AADT) Novisad-Indjija (30 km) 5,000 4,800 5,500 11,000 Indjija-Belgrade (30 km) 5,000 12.800 15,500 24,000

Source: Appraisal Report Feasibility Study of Subotica-Beograd Highway Section, 1975 Feasibility Study of Sarajevo-Konjic H4ghwny Section - Book No. 3, 1975 FeasibilIty Study of Pristina-Leskovac Rightway Section, 1976 w Tatest traffic survey data ANNEX 4

PROJECT COMPLETION REPORT

Y1GOSLA .IA: _i11URTl_ 1Ci..AY F!:)_JCT (LOA', 678-Yli)

Vehicleyei..tir (ostsll

(Dillarsjp_r k < Net of Taxes

T of______9EPraiad1 Estlate -/ Revi.sed EstirRte Bar- Belgrade- Nes- Pec- Zenics- Tar- _ 4 iP - 2cl.ica- _ Ilcini Novised Pristina PristIra Saralevo Ulcini NovisPd Fristina Pristini Srajevo Pa5sscr.er C_r

ExistinS read 0.603 0.594 0.665 0.54S 0.624 1.236 1.402 1.363 1.123 1.473 New road 0.524 0.501 0.496 0.496 0.510 1.074 1.182 1.017 1.017 1.204 Savings 0.079 0.093 0.169 0.052 0.114 0.162 0.220 0.346 0.106 0.269 S Savings 13 16 25 10 1S 13 16 25 10 18

Light Truck

Existing road 1.807 1.720 1.862 1.584 1.807 3.704 4.059 3.817 3.247 4.265 New road 1.484 1.378 1.383 1.383 1.422 3.042 3.252 2.835 2.835 3.356 Savings 0.323 0.342 0.479 0.201 0.385 0.662 0.807 0.982 0.412 0.909 X Savings 18 20 26 13 21 18 20 26 13 21

Heav.O l'ruc,.

Existing road 2.934 2.794 3.194 2.495 2.934 6.015 6.594 6.548 5.115 6.924 New road 2.355 2.236 2.196 2.196 2.295 4.826 5.277 4.502 4.502 5.416 Savings 0.579 0.558 0.998 0.299 0.639 1.187 1.317 2.046 0.613 1.508 %Savings 20 20 31 12 22 20 20 31 12 22

Truck w/Tr iler

Existing road 3.701 3.525 4.054 3.148 3.701 7.587 8.319 8.311 6.453 8.734 New road 2.971 2.820 2.770 2.770 2.896 6.091 6.655 5.679 5.679 6.835 Savings 0.730 0.705 1.284 0.378 0.805 1.496 1.664 2.632 0.774 1.899 X Savings 20 20 32 12 22 20 20 32 12 22

Autobus

Existing road 2.976 2.834 3.016 2.510 2.976 6.101 6.6e8 6.183 5.146 7.023 New road 2.388 2.226 2.206 2.206 2.308 4.895 5.253 4.522 4.522 5.447 Savings 0.5P8 0.608 0.810 0.304 0.668 1.206 1.435 1.661 0.624 1.576 2 Savings 20 21 27 12 22 20 21 27 12 22

Average Vehicle Operating Cost Increase 1970-74: 105% 1970-75: 136%

Comparison of Selected Vehicle Operatinig Co&t Comnonents

New Information at Appraisal at ltems 1975 rrice 1970 PrJ~e (Econc,jic Cost in ND) Gasoline - per liter 2.50 0.60 Dlesal - per liter 2.23 0.45 Tire (car) - per tire 271.01 146.62 Tire (medlum truck) - per tire 2873.19 3330.00

I/ excludes passenger time i/ at 1970 price level 3/ at 1974 price level 4/ at 1975 price level

Source: (1) Statistical POCrct lock of Ytupor1;vfa (ij) Cuidelinies for ITigYuay YeaniAllty Studies Vol 1 1'r!,c1/Brger0- (iiJ) Annex II - Additiouial doctcmeutattion TraffJc end 1 .lc -. Studica - y..jsovopr,.c-rriPtfist Road 1970 ANNEX 5

PROJECT COMPLETION REPORT

YUGOSLAVIA

Fourth Highway Project (Loan 678-YU) Ex-Post and Appraisal Estimates of Economic Rates of Return

Proportion of Rate of Return 1/ Road Section Total investment Ex-Post Estimate Appraisal Estimate

Bar-Ulcinj 10.2 22 14

Belgrade-Novisad 34.6 14 14

Nis-Pristina 7.7 12 18

Pec-Pristina 5.7 18 29

Sarajevo-Zenica 41.8 15 14

1/ Excluding passenger time savings; with passenger time savings the Rates of Return would be about 2% higher 2/ Estimated Rates of Return for northern half (from Novisad to Indjija) and southern half (from Indjija to Belgrade) worked out as 6% and 24% respectively.

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