Document of The World Bank L:
FOR OFFICIAL USE ONLY Public Disclosure Authorized
Report No. P-3308-YU
REPORT AND RECOMMENDATION
OF THE
PRESIDENT OF THE
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED LOAN
TO
PRIVREDNA BANKA SARAJEVO - UDRUZENA BANKA
Public Disclosure Authorized WITH THE GUARANTEE OF
THE SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA
FOR A
SEMBERIJA DRAINAGE PROJECT
May 10, 1982 Public Disclosure Authorized
This document has a restricted distribution and may be used by recipients only in the perfprmance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS*
Calendar 1981 February 15, 1982
Currency Unit Yugoslav Dinar
US$ 1 Din. 41.82 Din. 43.678 Din 1 US$ 0.024 US$ 0.022 Din 1,000,000 US$ 23.910 US$ 22,895
FISCAL YEAR
January 1 - December 31
GLOSSARY OF ABBREVIATIONS
GDP = Gross Domestic Product GMP = Gross Material Product BOAL = Basic Organization of Associated Labor BOCF Basic Organization of Cooperative Farmers COAL UPI = Complex Organization of Associated Labor of the United Agriculture, Marketing and Industry ICB International Competitive Bidding IWRD = Institute of Water Resources Development LCB = Local Competitive Bidding PAC = Project Advisory Committee PBS = Privredna Banka Sarajevo - Udruzena Banka SDK = Social Accounting Service SFRY = Socialist Federal Republic of Yugoslavia SIZ = Self-Managed Water Management Community of Interest for Water Economy SRBH = Socialist Republic of Bosnia-Herzegovina W.O. = Work Organization W.O.A.E. = Work Organization Agricultural Estate Semberija Semberija
* The Yugoslav Dinar has been floating since July 13, 1973. The currency equivalents effective on February 15, 1982 have been used in this report.
.p FOR OFFICIAL USE ONLY
YUGOSLAVIA
SEMBERIJA DRAINAGE PROJECT
Loan and Project Summary
Borrower: Privredna Banka Sarajevo - Udruzena Banka (PBS).
Guarantor: Socialist Federal Republic of Yugoslavia.
Beneficiary: Work Organization Agricultural Estate Semberija (W. 0. A. E. Semberija).
Amount: US$34.6 million, equivalent in various currencies, including capitalized front end fee of US$511,330-
Terms: Amortization in 15 years, including three years grace, with interest at 11.60%.
Re-Lending Terms The proceeds of the Bank's loan (except for US$2.7 million for feasibility studies) would be on-lent to the beneficiary (who would bear the foreign exchange risk) at 11.60%, plus an 0.5% fee to cover PBS's administration costs.
Project Description: The main objectives of the project are: (a) increasing and stabilizing crop production; (b) supplying raw materials for agro-based industries; (c) raising labor and land productivity; (d) helping reverse decline in agricultural trade balance; (e) improving agricultural services; and (f) reversing the trend of declining arable land. These would be achieved by providing land improvement and drainage facilities in an area of about 15,600 hectares, and land improvement without drainage over an additional area of about 3,500 hectares. The project would include: (a) extension of Seliste interceptor by about 8 kms; (b) reconstruction of about 14.5 kms of Sava river dike; (c) construction of sub-surface and surface drainage systems; (d) construction of one new pumping station, increasing capacity of an existing pumping station and repair of two pumping stations; (e) construction of about 170 kms of paved and unpaved roads; (f) land consolidation and on-farm development; (g) provision of equipment for project operation and maintenance; (h) provision of farm equipment to intensify agriculture; (i) provision of equipment for agricultural extension and research ; and (j) feasibility studies for future land and water development projects in Socialist Republic of Bosnia-Herzegovina (SRBH).
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. - 11 -
Beneficiaries of the project would be some 4,700 farm families, all of which belong to the target group, with average per capita income of $440. Employment opportunities would increase by 25% in individual sector agriculture (about 650 new jobs). Direct employment from actual project works and future maintenance would create about 65 additional highly skilled and skilled jobs. The annual estimated gross value of production at full development would increase by about 200% (US$20.0 million) for the project as a whole. An estimated 15,000 tons of incremental wheat, 6,400 tons of maize and 170,800 tons of sugar beet, as well as increased production of various vegetables and fodder crops would result from the project. Foreign exchange earnings would result from increased production of maize and foreign exchange savings are expected from an increased self-sufficiency in wheat and industrial crops. The project faces no special risks.
------(US$ Million)----- Estimated Cost: Local Foreign Total
Seliste interceptor 0.3 0.3 0.6 Surface drainage 5.2 5.9 11.1 Sub-surface drainage 0.7 1.2 1.9 Pumping stations 1.5 2.3 3.8 Flood control works 2.3 3.0 5.3 Roads 2.5 2.6 5.1 On-farm development and miscellaneous works 3.4 4.1 7.5 Equipment for O&M 0.1 0.2 0.3 Farm Equipment 1.0 2.1 3.1 Land consolidation 2.3 - 2.3 Extension and research services 0.2 0.5 0.7 Engineering 0.5 1.6 2.1 Organization and management 0.4 - 0.4 Training of personnel - 0.2 0.2 Miscellaneous feasibility studies 0.3 1.7 2.0
20.7 25.7 46.4 - iii1 -
- (US$ Million) ------Estimated Cost (cont.) Local Foreign Total
Base Cost 20.7 25.7 46.4 Physical contingencies 3.2 3.9 7.1 Price contingencies 15.0 4.5 19.5
Total Contingencies 18.2 8.4 26.6
Total Project Cost 1/ 38.9 34.1 73.0
Front end fee on Bank loan - 0.5 0.5
Total Financing Required 38.9 34.6 73.5
Financing Plan -- (US$ Million)------% of Total Sources Local Foreign Total Financing
IBRD (Loan and front-end fee) - 34.6 34.6 47 Federal Fund 10.4 10.4 14 Republic Fund 2.7 2.7 4 PBS - Basic Bank Bijeljina 2.9 2.9 4 PBS - Udruzena Banka 9.5 9.5 13 Social Sector equity contributions 13.4 13.4 18
Total Project Financial Requirements 38.9 34.6 73.5 100.0
Estimated Disbursements: ------(US$ Million)------
IBRD Fiscal Year FY83 FY84 FY85 FY86 FY87 FY88 Annual 2.4 4.4 8.9 8.6 7.2 3.1 Cumulative 2.4 6.8 15.7 24.3 31.5 34.6
Rate of Return: About 21%
Appraisal Report: Report No. 3841-YU, dated May 6, 1982.
1/ Including import duties and taxes estimated at US$1.8 million I INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO PRIVREDNA BANKA SARAJEVO - UDRUZENA BANKA WITH THE GUARANTEE OF THE SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA FOR A SEMBERIJA DRAINAGE PROJECT
1. I submit the following report and recommendation on a proposed loan to Privredna Banka Sarajevo - Udruzena Banfka (PBS) for the equivalent of $US34.6 million , with the guarantee of the Socialist Federal Republic of Yugoslavia, to help finance a Semberija Drainage Project in the Socialist Republic of Bosnia-Herzegovina (SRBH). The loan would have a term of 15 years, including three years of grace, with interest at 11.60% per annum.
PART I - THE ECONOMY 1/
2. A Basic Economic Mission visited Yugoslavia in October and November 1976. Its report entitled, "Yugoslavia: Self-Management Socialism and the Challenges of Development", 1615a-YU, was distributed to the Executive Directors on April 5, 1978. An economic mission visited Yugoslavia in November, 1979; its report entitled "Yugoslavia: Export Performance and Policies", 2972-YU, was distributed to the Executive Directors on November 5, 1980. In November 1980 an economic mission visited Yugoslavia and its report entitled "Raising Productivity in Yugoslav Industry: Some Issues", 3383a-YU was distributed to the Executive Directors on August 3, 1981. Basic data on the economy are given in Annex I.
Institutional Setting
3. The social sector in Yugoslavia, which includes government, enterprises and public institutions plays the leading role in economic and social development. It accounts for 85% of GDP and employs over half the total labor force. The private sector consists predominantly of peasant farms and small enterprises, mainly engaged in handicrafts, construction, trade, transport and tourism. Decision making at all levels is governed by the principle of workers' self-management, involving a unique set of institutions and instruments of economic policy. The current system has evolved over the years with major changes introduced through the constitution of 1974. Responsibility for important social and economic decisions has been shifted from the Federation to the Republics, autonomous provinces and Communes. Concurrently, the control of workers' collectives over the socially-owned means of production has been increased by a
1/ Part I of this report is substantially unchanged from Part I of the Report and Recommendation of the President for the Sixth Industrial Credit Project (Report No. P-3188-YU) of April 2, 1982. -2- restructuring of all economic organizations into legally autonomous Basic Organizations of Associated Labor (BOALs) which are the smallest production units producing a marketable output.
4. In addition to this strengthening of workers' participation at the microeconomic level, the concept of workers' management has been extended to encompass macroeconomic decisions. A set of instruments called social compacts and self-management agreements have gradually become a part of the system of macroeconomic management. These measures enable the participation of all economic agents in the formulation of macroeconomic policy while maintaining decentralized responsibility for policy implementation. Beginning with the last medium-term plan (1976-80) these instruments have been used to augment more conventional monetary and fiscal policy measures, particularly in the areas of prices, incomes, and employment.
5. The 1974 Constitution also introduced a new framework for economic and social planning, designed to reconcile decentralized-decision making with consistent and coordinated action. The system of planning first seeks to establish a national consensus on the major medium-term goals for the economy. Thereafter, plan formulation is based on participation of all economic and social units, including government bodies, on a non-hierarchical basis. An exhaustive interchange of information and several iterations are required to achieve consistency among the plans of economic units concurrent with broader social objectives. Once consistency is achieved, economic units enter into legally binding medium-term agreements on supply, demand and investment intentions. In case agreements cannot be reached by the prescribed date, the state is permitted to intervene, but only on a temporary basis.
Economic Trends and Development Issues
6. The economic development of Yugoslavia over the past two decades has been impressive, characterized by rapid economic growth and structural transformation. Between 1960 and 1980, GDP grew at an average annual rate of about 6% in real terms. The share of investment in GDP has been high throughout the period, above 30% in recent years. As population growth has been only 1% per annum, real per capita income has more than doubled during the period. Per capita GNP in 1980 is estimated to be US$2,620 at 1980 market prices. 1/ The social sector, in particular industry, has been the driving force of the economy between 1960 and 1980 with the share of industry in GDP increasing to around 45% while agriculture has declined to about 12%. The past two decades have also been associated with the growing integration of Yugoslavia into the world economy. Between 1960 and 1980 merchandise exports and imports grew by around 6% and 8% per annum in real terms, respectively; much of this was with markets in the convertible currency areas.
1/ According to World Bank Atlas methodology. - 3 -
7. While overall growth performance has been impressive, large regional income disparities persist. The Republics of Bosnia-Herzegovina, Macedonia and Montenegro, each with two-thirds of the national average per capita income, and the Autonomous Province of Kosovo, with one-third, are officially designated as less developed regions (LDR). The difference between the most developed region, Slovenia, and the least developed, Kosovo, is 6 to 1. In addition to these interregional disparities there are large intraregional disparities with differences in per capita income between communes as high as 10 to 1 . These disparities reflect several factors, notably the greater incidence of low productivity agriculture in the LDR and their higher dependency ratios and population growth rates. Since 1971 sizeable concessionary credits (with about 50% grant element), equal to about 10% of the social product of the LDR, have been transferred to the LDR through the Federal Fund for the Accelerated Development of the Less Developed Regions, which is financed through a tax on all social sector enterprises in the economy.
8. Linked to the issue of regional income disparities has been the problem of providing adequate employment opportunities in the modern sector. Since 1954 employment in the modern social sector has increased by around 4% per annum, facilitating rapid outflows from the agricultural sector. Despite this impressive record, substantial productivity and income differentials remain between the modern (mainly social) and the traditional (private or individual agricultural) sectors. The persistence of these differentials has resulted in high demand for modern sector employment on the part of the rural labor force. The increase of the working age population caused by relatively high population growth in the LDR has further added to employment demand. Large numbers of Yugoslavs have sought temporary employment abroad since the late 1960s. At its peak in 1973 Yugoslavia had about 1.1 million external migrants. However, since 1973, with changes in policy and the slower growth in the host countries, this trend has been reversed, accentuating domestic imbalances and placing added pressure on the social sector to create new work places. Unemployment rates have risen rapidly from about 7% in 1971 to over 12% in 1980. 1/ The incidence of unemployment is highly regionalized, because population and labor force growth rates, as well as the proportion of agricultural employment, are all much higher in the LDR. In 1980 unemployment rates ranged from 28.0% in Kosovo to 1.4% in Slovenia.
Recent Developments
9. Yugoslavia was successful in maintaining a relatively high growth rate over much of its recent (1976-80) economic plan. Over the first four years of the plan GDP growth exceeded 5% per year. The pattern of growth
1/ These rates are not strictly comparable to those in other countries. They represent the ratio of registered job-seekers (including some currently employed) to social sector labor force. The ratio of registered job seekers to total resident labor force would have been about 9.0% in 1980. -4- was, however, markedly cyclical and heavily influenced by policy responses to balance of payments difficulties and to inflation. Following slow growth in 1976, macroeconomic policy became more expansionary in 1977, which resulted in three years of rapid growth. This revival at a time when the world economy was relatively sluggish put pressure on Yugoslavia's balance of payments. These strains were considerably worsened by special developments in 1979 including sharp increases in the price of imported oil, poor agricultural conditions and an earthquake in Montenegro. As a consequence the deficit in the current account of the balance of payments reached $3.7 billion in 1979, or about 5.4% of GDP. Faster growth and renewed international inflation also led to significant worsening in domestic inflation. In response to these developments, the tone of macro-policy became sharply contractionary since late 1979, and economic management has been dominated by the goal of improving the balance of payments. As a result of the determined application of a stabilization program, the current account deficit was reduced to less than $0.8 billion in 1981 compared with a target level for that year of $1.8 billion largely reflecting an improvement in the trade deficit. The elements of the program (which is being supported by a standby arrangement with the IMF) included a cumulative 57% devaluation of the dinar between June 1980 and December 1981, tight monetary and fiscal policy, reductions in real personal incomes and cutbacks in investment, particularly for non-economic purposes. As a result of these measures output growth was reduced from previous years, and gross domestic product is estimated to have grown by about 2% both in 1980 and 1981.
10. The main source of Yugoslavia's economic growth in the 1976-80 plan was industry. While industrial production rose by only 4% in 1980, this followed growth of almost 7% per year in the preceding four years. The plan placed particular emphasis on production of energy, raw materials and intermediate goods to increase import substitution. These priority sectors performed well during the first three years of the plan although production fell slightly short of planned targets, while non-priority sectors, particularly consumer goods, grew at a rate faster than projected. Climatic factors have resulted in marked annual fluctuations in agricultural output, which rose between 1976 and 1980 at an average annual rate of 1.6% (compared to a target of 4%).
11. Fixed investment grew at an average rate of almost 9.5% between 1976 and 1979, exceeding the 8.0% plan target. This investment drive was successful in raising the overall share of the priority sectors in total investment; however, within the industrial sector investment in non-priority branches grew at a faster rate than planned. The share of gross fixed investment in GDP rose from 28% in 1975 to almost 32% in 1979. In 1980 and 1981, real investment is estimated to have declined by 1.6% and 4.5% respectively, as a result of increasing restrictions placed on investment activity, particularly in non-priority fields. Overall social sector employment growth in the plan has been rapid, at about 4% per annum (compared to a plan target of 3.5%) and has been even faster in the LDR where the bulk of the structural unemployment is located. Despite these achievements, the combined impact of net immigration, demographic factors and the contraction in the rural labor force increased the ratio of job-seekers to social sector labor force. -5-
12. Inflation rates have varied widely over the course of the 1976-80 plan period. Stabilization measures introduced in 1975 and 1976 reduced the inflation rate (as measured by the retail price index) from 26% in 1975 to 9% in 1976. The subsequent revival in economic activity was accompanied by a resurgence of inflation. In both 1977 and 1978 inflation was 13%; in 1979, in part due to increases in indirect taxes and fuel prices it increased to 22%. The sharp reduction in economic activity in 1980 affected the inflation rate much less than had been hoped, and the rate of inflation was 30%, in contrast to the 17% that had been projected. Part of the deterioration in price performance can be attributed to the higher prices of imported goods, resulting from both a higher rate of international inflation and the effects of the devaluation of the dinar. There has also been some dismantling of domestic price controls in order to promote efficient resource allocation in manufacturing as well as price increase-sadministered to stimulate agricultural production and to rationalize energy use. As a result of effective incomes policies, wage pressures were muted in 1980, with real personal income in the social sector falling by 7%. Although real personal incomes declined by a further 6% in 1981, prices increased by 39%. Most of the inflationary pressure occurred in the first six months of 1981, however, when the retail price index increased at an annual rate of 56%. Stricter price controls were introduced during June 1981. These together with the austere stabilization program, had a significant effect on the rate of inflation and it is estimated that the rate of inflation slowed to about 25% during the last half of the year. The Government has announced its intention to curb inflation further with an official target of 15% for 1982.
13. As noted above, Yugoslavia's balance of payments has remained an issue of concern to policymakers throughout the plan. The plan itself proposed substantial import substitution while maintaining an export growth rate of 8%. While import growth fluctuated widely between 1976 and 1980 overall it remained below the 4.5% annual rate targeted in the plan, primarily by the imposition of deep import cuts in 1976 and 1980. Export performance however was disappointing; despite a recovery in 1980, when merchandise exports grew by an estimated 11%, export growth over the plan was about 4.6% per year instead of the 8% targeted. The consequences of this export shortfall were exacerbated by the deterioration in the terms of trade and other special factors referred to earlier. Even though workers' remittances were more buoyant than nhd been anticipated, the cumulative current account deficit over the plan period was 60% higher than had been planned. The Government's program to put the balance of payments on a more secure footing was supported by a two-year standby arrangement concluded with the IMF in June 1980 in the amount of SDR 339 million per year. This standby was replaced in January 1981 by a three year program for a total amount of SDR 1662 million. The Government's annual plan for 1982 continues to stress stabilization of the economy in pursuit of balance of payments adjustment. The current account deficit for 1982 is targeted at $0.5 billion; this is to be achieved through export growth of 8.5% coupled with a 0.5% limit on the growth of overall import volume, and a reduction in imports of capital goods. Social product is expected to grow by 2.5%; this slow growth will be reconciled with the export target by further cuts in fixed capital formation. 6
Medium Term Prospects
14. The Federal Five Year Plan for 1981-85 was adopted in March 1981, but in view of the external constraints on the economic growth- and the authorities' decision to limit its external borrowing the plan has been substantially revised. Although the detailed targets for production and investment have still to be finalized, the main strategic elements of the plan have already been enunciated. The revised plan projects continued slow growth in social product and even slower growth in domestic expenditure to allow resources to be released for exports; this strategy also implies continued reductions in the rate of fixed capital formation. As before, the plan projects simultaneous import substitution and export promotion. It aims to achieve a current account surplus before the end of the plan period. The priorities stressed are the development of domestic energy sources and raw materials, production of basic metals, basic chemicals and capital goods. The plan also stresses agricultural development in order to reduce food imports and to expand food exports.
15. Slower growth will make it more difficult for the social sector to generate additional employment at the pace of the past plan while the demand for new work places will remain high. Given these difficulties, more emphasis is being laid on the development of labor intensive activities including small-scale enterprises.
16. Finally, the reduction of regional disparities remains a major objective of Yugoslavia's economic planning. Financial transfers between Republics will play an important role in this process, and the transfer mechanisms for the plan lay particular stress on encouraging social sector enterprises in the more developed regions (MDR) to make direct investments in the LDR. As experience is gained, these joint ventures could make a significant contribution to the overall efficiency of production within the LDR by facilitating the transfer of technological and managerial know-how within Yugoslavia. Regional disparities, however, are expected to remain significant over the medium-term.
Creditworthiness
17. Gross medium- and long-term capital inflows declined from $4.2 billion in 1980 to an estimated $3.2 billion in 1981. Total medium- and long-term debt, outstanding and disbursed, is estimated at about $16.6 billion at the end of 1981 while short-term debt at the end of September 1981 stood at about $1.8 billion. Total foreign exchange reserves at the end of 1981 stood at $3.4 billion. There was some restocking of official foreign exchange reserves in 1981, and at the end of the year these amounted to $1.6 billion, or roughly one month of imports of goods and services from the convertible currency area. It is expected that the resources provided by the IMF will permit Yugoslavia to retire some of its short-term debt, and to build up official foreign exchange reserves further in 1982. - 7 -
18. About three-quarters of the debt contracted by Yugoslavia in recent years has been provided in convertible currencies through commer- cial sources. The bulk of this commercial credit has been in the form of suppliers' credits. Nevertheless, financial credits obtained in the eurocurrency market have become increasingly important for financing the economy's foreign exchange requirements. The World Bank is the principal source of non-commercial long-term credit to Yugoslavia. Yugoslavia will continue to require a substantial inflow of foreign lending if it is to achieve its medium-term objectives. Taking account of workers' remittances the debt service ratio on aggregate medium- and long-term debt averaged 15% between 1976 and 1980, while the debt service ratio in convertible curren- cies averaged 18% over the same period. The aggregate debt service ratio is not expected to increase substantially during the next medium term plan (1981-85). Given Yugoslavia's past debt service record, pragmatism and its demonstrated capacity to implement firm stabilization policies when these are called for, it remains creditworthy for a substantial level of Bank lending.
PART II - BANK GROUP OPERATIONS IN YUGOSLAVIA _/
19. The proposed project would be the 73rd operation by the Bank in Yugoslavia totalling about $3,261.7 million. 2/ Of this, approximately 38% ($1,248.4 million) has been for 23 operations in the transportation sector -- 12 for highways, 7 for railways, and one each for a natural gas pipeline and an oil pipeline, and two for a port project. Historically, Bank lend- ing has concentrated on infrastructure including, in addition to the trans- portation loans, five power loans, one telecommunications loan, three water supply and sewerage and three multipurpose loans (two of which include substantial irrigation components). In recent years, Bank lending has increasingly focussed on the agriculture sector for which thirteen operations totalling $772 million (about 24% of the total) have been made. Twenty-one loans amounting to $475 million (about 15% of the total) have also been made for industry. Two loans have been made for tourism and the first Bank loan for air pollution control was approved in 1976. In addi- tion, IFC has made fifteen investments in Yugoslavia totalling about $302 million.
20. Yugoslavia's disbursement performance (disbursements as a per- centage of total commitments) deteriorated somewhat in 1981 largely due to a shortage of local funds arising from financial constraints. Following an implementation review of the whole loan portfolio with Borrowers in the
1/ Part II of this report is substantially unchanged from Part II of the Report and Recommendation of the President for the Sixth Industrial Credit Project (Report No. P-3188-YU) of April 2, 1982.
2/ The 71st and 72nd operations, namely the Sixth Industrial Credit (US$66 million loan) and the Bosnia-Herzegovina Agricultural Development Project (US$35 million loan) were approved by the Executive Directors on April 27 and May 4, 1982 respectively. Fall of 1981, performance has markedly improved in the first quarter of 1982. Yugoslavia's performance now, as traditionally, compares most favor- ably with Bank- 7ide and regional averages and with most other countries of a sirnilar per capita income. Annex II contains a summary statement of Bank loans and IFC investments as of March 31, 1982, and notes on the execti on of ongoing projects.
21. Ihe interrelated objectives which the Bank has pursued in its lending to Yugoslavia remain essentially unchanged. These objectives are to; (i) to increase exports and improve the efficiency of import substitution; (ii) increase the efficiency of domestic investment with a view to increasing production with the more limited investment resources available; (iii) improve access to capital markets; and (iv) reduce unemployment, particularly in the LDR. It is obvious that not every Bank operation can address all these objectives nor be entirely oriented towards the LDR, but the basic thrust of the Bank's activities in Yugoslavia has increasingly been towards the development of the LDR and the agricultural sector in particular. Reinforcing this strategy are the economic surveys of the four LDR undertaken by the Bank and intensified Bank assistance in project formulation and ongoing economic and sector analysis.
22. The Bank's emphasis on assuring the accelerated development of the LDR is fully in accord with the Federal Government's policies embodied in the 1981-85 Development Plan. As in the last plan period, the Federal Government agreed with its constituents on the level of domestic resources to be channeled to the LDR through the Federal Fund mechanism (para. 7) as well as the distribution of external resources including Bank lending. The distribution of Bank lending was determined broadly on the basis of income levels and population size of particular regions. Over the past five years, almost two-thirds of Bank lending has been to the LDR through operations for transportation, power, agricultural development and lndustrial credit. In the next few years significant Bank lending to the LDR through similar operations is expected to continue.
23. Decentralized management, the cornerstone of Yugoslavia's socio-economic philosophy, adds to the inherent difficulties involved in formulating coherent sector plans. One of the principal features of the 1974 Constitutional changes and subsequent legislation, however, has been to revamp the institutional framework and to introduce mechanisms for coordination. Given the complexity of the Yugoslav system (para. 5), the process of evolving acceptable solutions to problems is cumbersome. The Bank has therefore put increased emphasis on having an impact on the shaping of the policy framework and fostering coordination, particularly in the transport and energy sectors where significant progress has been achieved. Through its future operations the Bank will seek to consolidate past successes in institutional reform. Further development of the project preparation, appraisal and supervisory capabilities of the regional banks through which a large amount of Bank funds are channelled will remain a major objectiVe. In transport, intermodal coordination will be sought through the implementation of the results of the rail costs and road user -9- studies undertaken under the Eighth Highway Project (Loan No. 1377-YU approved March 15, 1977). The Bank will concentrate its lending operations in areas where its incremental institutional and/or policy coordination impact has most potential.
24. A persistent foreign resource gap looms as the major impediment to Yugoslavia's ability to maintain its growth momentum and to address the critical issues of unemployment and regional disparities. The Bank has helped to attract additional sources of credit through co-financing arrangements and forge banking relationships for Yugoslavia. The Bank, however, is the major source of long-term external capital and will remain so in the near future. Its significant level of operations in Yugoslavia is regarded by foreign financiers as evidence of confidence in Yugoslavia's economic performance, policies and prospects. In its future lending to Yugoslavia, the Bank intends to put increased emphasis on co-financing. However, in view of the present commercial market constraints that Yugoslavia is facing and because of the country's complex banking and foreign exchange allocation system, the extent and form of co-financing related to Bank projects will have to be handled flexibly.
25. Yugoslavia's debt to the Bank in 1981 amounted to about 9.0% of its total debt outstanding and disbursed and this ratio is expected to remain fairly stable. Service on Bank loans as a proportion of total debt service was 5.4% in 1981 and is projected to be about 6% by 1986.
26. IFC started its involvement in Yugoslavia in 1970; since then, IFC has made 19 investments in the country and, as of January 31, 1982, IFC's portfolio amounted to $317 million gross and $154 million net of participation and repayments. The basic objectives of IFC in Yugoslavia are to: (a) assist priority subsectors in industry and natural resources development; (b) encourage foreign investment on a joint venture basis; (c) foster technological transfers; and (d) mobilize other financial resources in addition to IFC's own funds. Also, IFC continues to give special, although not exclusive, emphasis to the less developed regions of the country.
PART III - THE AGRICULTURE SECTOR
Agriculture in Yugoslavia
27. The agriculture sector, which occupied about 30% of the population and accounted for about 14% of the GMP 1/ in 1980, has grown at an average annual rate of about 1.6% over the last plan period (1976-80). Agricultural
1/ GMP (Gross Material Product) corresponds to GDP (Gross Domestic Product) less output of certain services, such as public administration, defense, education, health and social insurance. - 10 - development in Yugoslavia is of crucial importance to (a) 7ctet en estimated 4% annual increase in domestic consumption requirements; (b) provide for increases in exports and reductions in imports; (c) meet the raw material requirements for the agro-industries subsector; and (d) achieve employment and income objectives primarily through development of the individual sector. For these reasons, Yugoslavia's 1981-85 Five Year Plan stresses agricultural development as one of the country's highest priorities.
28. An important feature of Yugoslav agriculture is the co-existence of social and individual farm sectors. The social sector, which grew out of postwar collectivization, is made up of a number of institutions, including kombinats (large scale integrated factory farms), cooperatives and research institutions. This sector accounts for about 28% of total agricultural output, controls 16% of agricultural land, and employs about 5% of agricultural manpower. In contrast, the individual farm sector, which consists essentially of privately held family plots not exceeding 10 hectares of arable land, controls 84% of the cultivated land and employs about 95% of agricultural manpower and has been relatively neglected in terms of provision of basic infrastructure, financing and technology. For the most part, these two sectors are intricately linked through marketing and other complementary activities.
29. Yugoslavia's principal strategy in agricultural development has been to emphasize growth of the social sector as the principal means to achieve large-scale production, marketing and self-sufficiency in food. As a result, agricultural production in the social sector grew at an average annual rate of 5.2% during 1969-79. In contrast, during the same period agricultural production in the individual sector grew at an annual rate of 1.2%. While the objective of self-sufficiency in food had been substantially achieved through this emphasis on social sector growth, during the past several years growth has stagnated at less than 2.0% and the balance of agricultural trade has turned more sharply negative. Moreover, there remain large income differentials, with average incomes among individual farmers ranging from less than a third to less than half of those of workers in the social sector. There has been a rapid deple- tion of the labor force in the agriculture sector which has contributed to rural-urban migration and increased overall unemployment in the economy.
30. The strategy of Yugoslavia's 1981-85 Agricultural Development Plan is based on continued development of social sector holdings as the main vehicle for growth, and increased organization of the individual farm sector into cooperatives or associations with social sector enterprises. The Plan stresses the importance of agricultural development and outlines measures to develop the individual sector as a means of addressing the problems of unemployment, rural poverty, regional income disparities and low productivity. The Plan aims at growth in agricultural production of 4.5% per annum, based on annual growth in the social sector of 6% and in the individual sector of 4%. Agro-industries are to expand annually by 7% - 11 - to meet consumer demand and agricultural exports by 10%. The proposed strategy relies on improved land use and the development of social sectow holdings. On the basis of past performance these growth rates seem optimistic, although they represent somewhat more realistic targets than in the previous plan period.
31. Yugoslavia has experienced a net decline in arable land since 1959 of an estimated 600,000 hectares, primarily due to the encroachment of expanding urban centers and industrial development. According to the present plan, this situation is to turn around over the next five years through land amelioration and reclamation works. Total arable land is assumed to increase from the present 7.08 million hectares to 7.30 million by 1985 -- with the entire additional 220,000 hectares accruing to the social sector. Total arable land in the individual sector is expected to remain constant at 5.83 million hectares, because expansion due to reclamation will be offset by sales of land to the social sector. Agricultural planners recognize the need to develop the individual sector and feel this will best be achieved through increased cooperation with the social sector. They further maintain that the slower growth rate targeted for that sector reflects institutional deficiencies leading to the difficulties in providing large numbers of small farmers with adequate inputs and markets.
32. Responsibility for formulating agricultural policy and plans rests with the six Republics and two Autonomous Provinces, all of which are represented on the Federal Committee for Agriculture, the President of which is a member of the Federal Executive Council with the rank of Minister. Due to decentralized decision-making, all functions associated with policy and plan implementation rest with autonomous self-governing organizations, such as agrokombinats and cooperatives.
33. The challenge in the 1980s for Yugoslav agriculture is to increase production in and incomes of the large individual sector and increase productivity in the social sector, while at the same time expanding the export base of agricultural products. This challenge is being recognized by the Government, as evidenced by the reorientation toward primary production in the 1981-85 Plan. Despite the Government's granting of priority status to agriculture and recognition of the need to make changes in its policies and invest-.nentprograms, the sector still tends to suffer from major problems. These problems are: (a) inadequate investment; (b) imbalance toward agricultural processing; (c) inadequate agricultural credit facilities and extension services; and (d) inadequate institutional arrangements and services for the large individual sector. The Bank is continuing a dialogue with the Government to redress these problems in the context of the projects financed by the Bank and, as part of its sector operations, the Bank is discussing the possibility of conducting an agricultural sector survey in the near future. - 12 -
Agriculture in Bosnia-Herzegovina
34. The Socialist Republic of Bosnia-Herzegovina (SRBH) is located in the south central part of the Socialist Federal Republic of Yugoslavia (SFRY), and comprises 5.11 million hectares or 20% of the total area of Yugoslavia. As of 1980, average per capita income was US$1,737 or approximately two-thirds of the national average, making SRBH one of the lower income regions. Presently farm families account for 30% of the Republic's total estimated population of 4.2 million and have an average per capita income of US$454. The depressed incomes in agriculture, which employs 48% of the active labor force (compared to 30% of the labor force in SFRY), are one of the main reasons for such wide income differentials between SRBH and SFRY.
35. From 1971 to 1980 rural population in SRBH decreased annually by 1.8%. Shortages in non-agricultural employment point out the importance of creating better living conditions and increased employment in rural areas. The Government plans to create the conditions for faster growth in agricultural production by addressing the following problems within the economy: (i) rural poverty and the disparity of incomes between agricultural and non-agricultural sectors; (ii) urban population's growing demand for more and higher quality food products; (iii) raw material requirements for growing industrial production; and (iv) the savings of foreign exchange through reduced food imports and expanded exports. To attain these goals for the agricultural sector, at least two areas will be critical: the optimum use of low land areas and extensive cooperation between the social sector organizations and the individual farmers who own 95% of arable land.
36. Presently the private sector land is subdivided into tiny plots located in disparate areas, with a total average holding per family of 3.5 hectares. The Government is encouraging private farmers to pool their labor and capital to form cooperative organizations through which they can gain access to facilities like credit, rental of expensive farm equipment, price assurances and market guarantees, extension advice, as well as medical/pension plan arrangements. The disadvantages to the individual farmers are loss of flexibility and in some cases lower product prices paid by the Basic Cooperative Organizations. Although the policy appears to be a well-reasoned solution to the need to increase on-farm production, in practice it seems to have been less successful. This may in part be due to insufficient financial incentives, as well as the traditional disinclination of individual farmers to become part of organized labor groups or cooperatives.
37. Due to its mountainous terrain, only 21% (1.61 million hectares) of SRBH's total area is arable land (compared to 28% for SFRY). Of this amount, about 0.5 million hectares are flatlands in the Sava River Basin, which are among the most productive and fertile lands in all of SFRY. Within this Basin, about 150,000 hectares are in need of drainage, of which 15,700 hectares are included in this project. The effect of - 13 - periodic flooding has been a 25% under-utilization of arable land. In the past, SRBH has relied more heavily on livestock which can utilize the hilly mountainous area while the production of cereals and industrial crops has remained limited. SRBH plans to alter this situation by increasing planted areas by 20% by 1985, through the successful implementation of land reclamation and improvement programs primarily in lowland areas.
38. Agricultural performance in SRBH has been sporadic over the last five years as production increased on average by only 2.65%, and its share in total production fell from 14% in 1975 to 11% in 1980. Output is expected to increase by an annual rate of 4% over the next five years (8% for the social sector, 3.5% for the individual sector). Production of grains alone is to be expanded by 70%, and an even larger increase in other industrial crops is anticipated which would contribute to import substitution for wheat and barley and increased export potential for other cereals. To achieve these objectives, the 1981-85 plan allocates US$390 million to the agricultural sector, which represents 5.5% of total outlays compared to 2.1% in the 1976-1980 Plan. Most of this has been allocated for primary production. The plan's projected 4% growth target is ambi- tious, particularly in view of the last plan's performance. Nevertheless, the prerequisites for attaining these growth rates have been recognized by the Government, namely: the improvement and enlargement of cultivated land; redirection of investment toward raw material production; and more extensive cooperation among individual farmers.
Bank Involvement in Yugoslavia's Agriculture Sector
39. The proposed Semberija Drainage Project would represent the fourteenth Bank loan for agriculture and agro-industries in Yugoslavia. Since 1971, when it first became involved in the agriculture sector in Yugoslavia, the Bank has financed three nationwide agricultural credit projects (Loan Nos. 1129-YU, 1477-YU and 1801-YU), seven agriculture and agro-industry projects in Macedonia, Montenegro, Bosnia-Herzegovina, Serbia and Kosovo (Loan Nos. 894-YU, 1370-YU, 1371-YU, 1621-YU, 1951-YU, 1993-YU and 2039-YU), one drainage project in Croatia (Loan No. 1756-YU), and a large scale irrigation project in Macedonia (Loan No. 1616-YU). In addition, financing was provided for two multipurpose projects in Kosovo with significant irrigation components (Loan Nos. 777-YU and 1360-YU). Another project, the Bosnia Agriculture Development, was presented to the Executive Directors on May 4, 1982. The Bank's involvement in these projects has been both in the social and individual sectors. As summarized in Annex II, these projects are generally proceeding satisfactorily. Two projects have recently been completed, Macedonia Agro-Industries I (894-YU) and Agricultural Credit I (1129-YU); no project completion or performance audit reports have yet been issued.
40. Within the framework of Yugoslavia's Agricultural Development Plan and the Governments's objectives, substantial Bank lending for agriculture is an essential element of the Bank's strategy to support - 14 - the less developed regions, improve income distribution, ; pocket- of rural poverty, increase rural productivity and productive employment opportunities, reversing the trend of declining arable laid, assst ins tutional development for credit, extension and research, and contribute to a reduction of imports and an expansion of exports. The Bank emphasizes the development of primary agricultural production (irrigated and rainfed) in the individual sector and agricultural processing facilities in the social sector to provide the outlet for this production. In recent years both Yugoslavia and the Bank have increased their commitment to the development of the individual sector. The mix between involvement in the social and individual agricultural sectors in Bank projects in Yugoslavia is determined in each particular case, taking into account factors, such as the Federal and Republican/Provincial Government's own efforts for the social and individual farm sectors and the relative investment require- ments in each Republic or Province needed to bring about a balanced agricultural development between primary production, drainage and land improvement, and processing capability.
Performance Under Previous Agricultural and Agro-Industrial Projects in Bosnia-Herzegovina
41. The borrower under this project, Privredna Banka Sarajevo-Udruzena Banka (PBS), has been one of the participating banks in all three Agricultural Credit Projects, four Industrial Credit Projects (Loans Nos. 1013-YU, 1277-YU, 1612-YU and 1910-YU), and the borrower for the Bosanska-Krajina Agriculture and Agro-industries Project (Loan No. 1621-YU). The First Agricultural Credit project has been completed, as has the Bosnia-Herzegovina Industrial Credit Project. Implementation of the two other Agricultural Credit projects is progressing, but behind schedule. Overall commitment levels under the Third Agricultural Credit Project are close to the original appraisal schedule but, disbursements as of March 31, 1982 are 13% of the loan amount vs. a 21% appraisal estimate. Under this loan, PBS has committed about 95%, with disbursements amounting to 9%. The problems are due in large part to the general inflationary situation, deteriorating balance of payments and resultant corrective measures. The Yugoslav authorities are taking these implementation problems seriously and have taken some specific measures (e.g., granting priority status to Bank project related imports, increasing availability of local credit) to reduce the effects of the overall economic corrective measures on implementation of Bank financed projects. The Bosanska- Krajina Project is two years behind schedule, which can be attributed to domestic resource constraints fueled by high rate of inflation and organizational shortcomings in PBS. The management has recently taken important measures to supervise sub-projects, monitor implementation and liaise with AIPK (Agroindustrijske i Prometni Kombinat Bosanska Krajina), the executing agency, more closely. These steps are contributing towards faster project implementation and resolving specific project problems. - 15 -
42. Under two projects presented to the Executive Directors in FY82, (the Bosnia-Herzegovina Agricultural Development Project and the Sixth Industrial Credit Project) for which PBS is a borrower, agreements have been reached to strengthen PBS's project supervision and coordination capacity by expanding the staff in its supervision unit for Bank-financed projects, and engaging services of consultants where necessary. However, the role of PBS in this project (Semberija Drainage) would be confined to that of an on-lending channel.
PART IV - THE PROJECT
43. The proposed project is the first drainage project financed by the Bank in the Socialist Republic of Bosnia-Herzegovina (SRBH), and is in line with the SRBH's and the Bank's strategy to increase agricultural production and income, to contribute to foreign exchange earnings through exports and to increase self-sufficiency in food stuffs and industrial crops. The project was prepared by the Complex Organization of Associated Labor of the United Agriculture, Marketing and Industry (COALUPI) with the assistance of the FAO Cooperative Program. The project was appraised in October-November 1981. Negotiations were held on April 1-7, 1982 in Washington. The Yugoslav delegation was led by Mr. Obrad Piljak, Secretary for Finance, Executive Council for S.R.B.H. Annex III summarizes key events leading to the presentation to the Executive Directors and special conditions provided for in the Loan Agreement.
Project Objectives and Description
44. The proposed loan and project are summarized in the Loan and Project Summary at the beginning of this report and described in detail in the report "Staff Appraisal Report on the Semberija Drainage Project," Report No. 3841-YU, dated May 6, 1982. This report is being distributed separately to the Executive Directors.
45. The project's main objectives are: (a) increasing and stabiliz- ing crop production; (b) increasing supply of raw materials to agro-based industries; (c) raising labor and land productivity; (d) helping reverse decline in agricultural trade balance; (e) improving agricultural services; and (f) reversing the trend of declining arable land. These would be achieved by providing land improvement and drainage facilities in an area of about 15,600 hectares, land improvement without drainage over an additional area of about 3,500 hectares, on-farm development and research and extension services to intensify agriculture. While continuing with the emphasis of previous Bank projects on improving income and employment levels in less developed regions, the present project emphasizes development of the northern flatlands of S.R.B.H. which are among the most productive in Yugoslavia, and institutional and policy issues retarding agricultural growth. The project, therefore, begins to address some of the structural problems affecting the Yugoslav economy, external adjustment, inadequate growth and the lagging contribution of the agricultural sector. - 16 -
46. The project would include: (a) extension of Seliste interceptor by about 8 km long to intercept flood run-off descending from the southern uplands; (b) reconstruction of Sava river dike in a length of about 14.5 km to provide protection from Sava river floods; (c) construction of a surface drainage network, including the construction of new channels and remodelling of existing channels, over an area of about 15,600 hectares for facilitating timely evacuation of excess internal waters; (d) instal- lation of a sub-surface drainage system, including mole drains in a pilot area of about 1,900 hectares for draining heavy clay soils and field experiments in relation thereto on performance of alternative designs; (e) construction of wide bedding on about 4,500 hectares for removal of excess surface water; (f) construction of one new pumping station with a discharge of about 15.5 m3/sec., increasing capacity of an existing pumping station by about 6.0 m3 /sec. and repair of two pumping stations; (g) construction of about 80 km. of paved and about 90 km. of unpaved access roads for operation and maintenance of project works; (h) land consolidation and on-farm development in an area of about 19,000 hectares consisting of land clearance and levelling, deep plowing, construction of workshops and machinery and storage sheds, including the installation of power lines therefor; (i) provision of equipment for operation and maintenance of drainage and flood protection works; (j) provision of farm equipment to intensify agriculture in the area; (k) provision of vehicles and equipment for extension and research services; (1) training of agri- cultural extension personnel; and (m) feasibility studies for future land and water development projects in S.R.B.H.
Project Organization and Implementation
47. Institutional Arrangements. The borrower of the proposed loan would be Privredna Banka Sarajevo - Udruzena Banka (PBS). It would undertake to provide all necessary local finance, from the Federal and Republican funds, from the social sector participants, as well from its own resources and that of its Basic Bank in Bijeljina.
48. PBS, an associated bank, is the major bank in SRBH which, together with its constituent basic banks (formerly branch offices), plays a prominent role in mobilizing investment resources in SRBH and obtaining foreign credits. PBS has maintained an adequate level of net income, and has been increasing its asset base. PBS has a-long-standing relationship with the Bank. Though project implementation has been somewhat less than fully satisfactory, PBS has shown institutional improvements recently (e.g. expanding staff in its supervision unit for Bank financed pro- jects). This trend is expected to continue. PBS's overall financial situation is generally satisfactory and it continues to be creditworthy.
Implementation Procedures
49. Work Organization Agricultural Estate (WOAE Semberija) which is part of a large agricultural-kombinat COAL UPI, would be solely responsi- ble for carrying out the project except for the feasibility studies. It has been vested with this authority by the other project financiers in - 17 - accordance with the self-management agreement entered into between the financiers, the Commune Assembly of Bijeljina and WOAE Semberija. It has also been authorized to be the recipient of all financing for the project and will sign a subsidiary loan agreement with PBS for the re-lending and lending of the Bank loan and the funds provided by PBS and its Basic Bank in Bijeljina. The execution and authorization of this Agreement would be a condition of loan effectiveness (Loan Agreement, Sec. 3.01(b) and 7.01). WOAE Semberija is the largest social sector organization in the project area which operates mainly in the fields of crops and livestock production. It employs 353 people and is considered to be a suitable organization to act as the implementing agency for the project.
50. W.O.A.E. Semberija has established and will maintain in operation within its organization, a Basic Organization of Associated Labor (BOAL Hydromelioration Semberija) which shall be responsible for implementation of the entire project. This BOAL would be headed on a full-time basis by an engineer, assisted by a financial director and an agricultural director whose qualifications and 2xperience shall be acceptable to the Bank (Project Agreement, Sec. 2.01 (b)). Following the completion of construc- tion of civil works, W.O.A.E. Semberija shall entrust BOAL Water Manage- ment Semberija with the responsibility for operation and maintenance of the facilities constructed under the project (Project Agreement, Sec. 3.05(a)). Assurances have been received that, except as the Bank shall otherwise agree, SRBH shall not take or concur in any action which would result in the dissolution of BOAL Hydromelioration Semberija or in the suspension of its operations (SRBH Agreement, Sec. 2.01(b)). Field experiments would be carried out under this project to provide the basis for economic designs for future sub-surface drainage works in the Sava River Basin (Project Agreement, Sec. 2.09).
51. W.O.A.E. Semberija, in cooperation with WO Podrinje, will ensure on-farm agricultural development in accordance with annual agricultural production plans. These plans would be submitted to the Bank by October 31 of each year, commencing 1983. W.O.A.E. Semberija would engage an agricultural economic institute by July 31, 1983, to prepare and then annually monitor and evaluate the plans (Project Agreement, Section 2.03). W. 0. Podrinje is an agricultural cooperative which organizes individual farmers in cooperation with the social sector. It is associ- ated with COALUPI and was founded in 1977. Agricultural extension would be provided to all individual farmers by W. 0. Podrinje through its Basic Organizations of Cooperative Farmers (BOCF), six of which are in the project area. These BOCFs would be suitably strengthened to carry out this function. Funds would be provided by SRBH for the recruitment of additional extension agents to provide services to individual farmers who are not members of the BOCFs (SRBH Agreement, Sec. 2.03).
52. The Commune Assembly of Bijeljina would be responsible for land consolidation in the project area. The procedures, which take about three years, were started through a referendum in April 1981. A majority of the farmers (84%) favored land consolidation and, therefore, no difficulties are anticipated in this regard. Assurances have been received, however, - 18 - that should delays arise, land required for land consolidat --n ,-"l1dbe acquired by the commune in accordance with Yugoslav laws (Project Agreement, Sec. 5.01(b)).
53. A Project Advisory Committee (PAC) would be established by October 31, 1983 in Bijeljina, headquarters of the local commune, composed of representatives of the commune, various enterprises concerned with the project execution, and PBS for coordination of project activities and guidance to W.O.A.E. Semberija and W. 0. Podrinje for the implementation of the annual agricultural production plans (Project Agreement, Sec. 5.04).
54. Eleven priority drainage and irrigation projects have been identified in Bosnia-Herzegovina for which preparatory work is still required. PBS, in cooperation with the Committee for Agriculture, Fores- try and Water Power Engineering of Bosnia-Herzegovina, would carry out the required preliminary engineering studies to be followed by feasibility studies for projects selected after an exchange of views with the Bank by September 30, 1983. PBS would employ engineering consultants acceptable to the Bank and supported by specialized consultants with terms and conditions of employment satisfactory to the Bank by December 31, 1982. The studies would be completed by December 31, 1985, for which assurances have been obtained during negotiations (Loan Agreement, Sec. 3.02).
55. Project Monitoring. PBS, with the assistance of W.O.A.E. Semberija, would be responsible, in cooperation with Semberija, for fur- nishing, through periodic reports to the Bank, the information necessary to measure systematically project execution against the proposed implemen- tation schedule. Agricultural data indicating the areas reclaimed and drained, cropping patterns applied, crop yields and output, and informa- tion on the operation and maintenance costs of irrigation and drainage works would be furnished annually. Promptly after completion of the project, PBS, in cooperation with Semberija, would prepare and furnish to the Bank a report on the execution and initial operation of the project, its costs and the benefits derived and to be derived from it, the per- formance by the Bank, PBS, W.O.A.E. Semberija, Commune Assembly of Semberija, and SRBH of their respective obligations under the proposed loan agreement, project agreement, and SRBH agreement, and the accomplish- ment of the purposes of the proposed loan (Loan Agreement, Sec. 3.03).
Project Cost and Financing Plan.
56. The total project financing requirement, including physical and price contingencies and front end fee of 1.5% of the loan amount, is estimated at US$73.5 million. The foreign exchange component, which includes both direct and indirect foreign costs, is estimated at US$34.6 million. The cost estimates include import duties and taxes estimated at US$1.8 million. Since final designs are under preparation, physical contingencies at 15% of the base cost have been added, except for sub-surface drainage where, due to the need for detailed field-by-field design, 25% contingencies have been added. Price contingencies on - 19 -
local costs have been compounded at 17.5% for July-December 1982, 25% for 1983, and at 20% for 1984, 1985 and 1986. On foreign costs, these are compounded at 4.25% for July-December 1982, at 7.5% for 1983, 1984 and 1985, and at 6% for 1986. The provisions for local contingencies are somewhat higher than the projected trend in retail price movements in Yugoslavia. This is justified both by project specific circumstances and uncertainties in price projections in a period of major shifts in macro-economic policy leading to a marked decline in overall inflation with different effects on different sectors (see para. 58).
57. The proposed Bank loan of US$34.6 million, including the front end fee, would finance the entire foreign exchange component of the project or 47% of the total cost. The balance of the project costs, US$38.9 million, would be financed as follows: PBS and its basic bank in Bijeljina would provide US$12.4 million, the Federal and Republic Funds US$13.1 million, and the social sector participants (SIZ and W.O.A.E. Semberija) US$13.4 million (equity contribution). Assurances have been obtained that PBS would ensure that these funds and any cost overrun would be made available in accordance with the schedule of expenditures of the project based on annual revisions of the projects financing plan (Loan Agreement, Sec. 3.01(a) and 5.01). The Bank loan would be made to PBS for 15 years, including three years of grace. Funds of PBS and its basic bank in Bejeljina would be lent to W.O.A.E. Semberija at a minimum rate of 15%. Bank funds would be on-lent at 11.60%. An 0.5% lending margin on World Bank funds would be added to cover PBS's adminis- tration costs. The execution of a subsidary loan agreement for lending and on-lending these funds, on terms and conditions satisfactory to the Bank, would be a condition of effectiveness of the loan (Loan Agreement, Sec. 7.01). As this is not a credit project involving sub-loan apprai- sals, and PBS's role would be to act as an on-lending channel, the 0.5% on-lending margin would be sufficient to cover PBS's costs. The Federal and Republic Funds would be provided at current rates for these funds (about 4-6%). These funds allocated to SRBH are only administered by PBS and the interest rates are determined by the Federal and Republican Governments. W.O.A.E. Semberija would bear the foreign exchange risk on World Bank funds.
Interest Rates
58. Nominal interest rates on domestic currency loans in Yugoslavia have been traditionally negative in real terms. In order to gradually correct this situation, understandings have been reached under Industrial Credit V Project (IC V) (Loans 1909-1912 YU), approved in November 1980, that banks would increase the lending rate in Bank financed subprojects on loans from their own local currency sources from a minimum of 7% to 10%. The banks have complied with the above agreement. The inflation rate in Yugoslavia increased from an annual average of 16.8% during 1970-79 to 30% - 20 - in 1980 and 56%, on an annual basis, in the first half of 1981. However, it declined substantially to 25% on an annual basis in the second-half of 1981 due to the Government's anti-inflationary measures resulting in an increase in prices of 39% for 1981 as a whole. The official target is to limit the inflation rate to 15% in 1982 and the intention is to keep the rate in the range of 13-15% during the remainder of the current five-year social plan (1981-85). Given the monetary and fiscal policies which are to be implemented in 1982, in accordance with the agreements reached with the IMF, these targets for lowering inflation should be achievable in the short-term. Further improvements over the medium-term can also be expected as a result of the Government's commitment to continued anti- inflationary measures which have already proven to be effective in the recent past.
59. While there appears to be an increasing recognition within Yugoslavia for the need to use interest rates as a more meaningful instrument in the mobilization and allocation of resources, policy makers point to the need for a gradual adjustment. In accordance with this strategy, and following consultations with the IMF (end January 1982) the Yugoslav Government has recently decided to increase interest rates on sight and time deposits and on lending by the National Bank of Yugoslavia, and the commercial banks. The requirement under this project for PBS to charge a minimum interest rate of 15% on long-term local currency loans provided from its own resources would ensure a marginally positive rate in real terms over the life of the loan if the inflation rate in the next three years in Yugoslavia is in the range of 13-15% and remains at this level beyond 1985. Apart from the specific agreements on interest rates obtained under Industrial Credit VI and this project, the policy dialogue, as provided under IC V, will continue and interest rates in Yugoslavia will be reviewed on an annual basis.
60. There will be no floor rates on long-term local currency loans from the Federal and Regional funds. These funds are obligatory contri- butions imposed on enterprises to meet specific social objectives and, therefore, their mobilization and allocation are inelastic to interest rate changes.
61. Since the proposed Bank loan would be on-lent by the borrower after adding a spread of 0.5% on the Bank's interest rate and W.O.A.E. Semberija will carry the foreign exchange risk, the real cost of the Bank's funds to W.O.A.E. Semberija would be very close to that of international commercial sources taking into account the currency pooling system and current international lending rates.
Cost Recovery
62. The capital costs would be financed by 18% equity contribution, 18% by grant, and 64% by borrowed funds. In 1982 constant prices, 41% of capital costs (other than equity, grant and land consolidation costs) would be recovered through an annual per hectare project levy commencing two years after completion of construction. If the grant element is added - 21 - to the recoverable capital cost, the recovery rate would be 29%. Fifty percent of the cost of land consolidation would be paid by the farmers and the remaining 50% would be borne by the budget of the local commune. The operation and maintenance costs would be fully recovered from the social sector beneficiaries. Collection from the individual sector farmers would be based on their "ability to pay" in order to provide an incentive to participate in the project (Project Agreement, Sec. 5.06). The incre- mental incomes of the individual farmers are expected to be sufficient to pay full costs of operation and maintenance except during the first two years of development of their land. Assurances have been obtained tnat any operation and maintenance deficits during the period of con- struction would be subsidized by the Commune Assembly of Bijeljina or PBS (Project Agreement, Sec. 5.06).
Productions and Markets
63. Investments under the project would induce about 200% increase in gross value of production of agricultural products at full development (estimated at an annual value of US$20.0 million). An estimated 15,000 tons of incremental wheat, 6,400 tons of maize and 170,800 tons of sugar beet, as well as increased production of various vegetables and fodder crops will result from the project. The main marketing channels for project output would be those prevailing in and close to the city of Bijeljina and the project area. There are four existing major processing plants which are operating much below capacity. They consist of a sugar factory, flour mill, animal feed mill and vegetable canning factory. Fresh produce would reach the local and regional markets or supply the retail outlets and supermarkets associated with UPI's food distribution system. In addition, there is a vegetable dehydration plant with a 12,000 cOI raw mate4.Lai capacity, which is one vf the BOALs of UPI, located in Janja, 25 km. from the project area. Raw material requirements are now supplied from the region around Janja; however, in the future, the project area also may provide vegetables. The entire sugar beet crop would be processed for consumption within Yugoslavia having a per capita consump- tion among the lowest of the East European countries. All forage and fodder would be used for farm needs. The sugar factory (400,000 tons input capacity), which began pilot production in 1979, has operated at less than 30% of its capacity because of raw material shortage. The vegetable canning factory, which currently processes 8,000 tons of raw material operating at 90% capacity, plans to double its capacity by 1985.
64. The flour mill, which includes an industrial bakery and concentrate animal feed mill currently operating at 90% capacity, handles 36,000 tons of cereal grains with a 35% increase planned for 1985, along with grain and flour silos currently under construction with capacities of 15,000 and 2,000 tons, respectively. W.O.A.E. Semberija has its own facilities for handling cereals, mixing animal feed and for treating seeds. Even after full project development, the requirements of the processing facilities in the area would only be partially met (wheat 62%, maize 65%, sugar beet 72%, and vegetables 41%). Additional primary production would be supplied from other areas in Bijeljina and adjacent communes. W.O. Podrinje and the six Basic Organizations of Cooperative Farmers (BOCF) in the project area serve an important role in marketing - 22 - of produce through crop contracts with the individual farmers. No problems are therefore anticipated with the disposal of the incremental production from the project area.
Accounts and Audits
65. PBS, W.O.A.E. Semberija, and BOAL Hydromelioration Semberija would maintain separate accounts for the project. As required by Yugoslav law, all banks and enterprises are audited annually by the Social Accounting Service (SDK), whose methods are acceptable to the Bank. Audited accounts would be submitted to the Bank within six to eight months of the close of each fiscal year (Loan Agreement, Sec. 5.03(b) and Project Agreement, Sec. 4.02(b)).
Procurement and Disbursement.
66. Contracts for construction of project works costing about US$48.8 million and for purchase of equipment for operation and maintenance, farm machinery, and agricultural extension research equipment for about US$6.0 million would be awarded in accordance with Bank guidelines on the basis of international competitive bidding (ICB). Domestic manufacturers would receive a 15% margin of preference or the actual level of import duty, whichever is less in bid comparisons. However, contracts for the pumping stations costing about US$4.9 million which are on the critical path, and for mole drains, wide bedding and deep plowing costing about US$2.5 million, would be procured on the basis of competitive bidding advertised locally and in accordance with local procedures which have been found acceptable to the Bank. Construction and repairs of these pumping stations should be started during the current year's construction season, beginning May 1982, so that these would be ready in time to service the first and second year's development areas. Retroactive financing totalling US$1.9 million is recommended on the following items: (a) pumping stations - US$0.4 million; and (b) engineering services for final designs and preparation of bidding documents - US$1.5 million (Loan Agreement, Schedule 1, para. 4).
67. Bank disbursements would take about six years. The expected annual disbursement of the proposed loan is given in the Loan and Project Summary. Disbursements of the Bank loan would be made as follows: (a) civil works 45%; (b) equipment, 100% of foreign expenditure and 100% of local expenditures (ex-factory); (c) engineering services and experts' services for preparation and evaluation of the annual agricultural produc- tion plans, training of personnel and feasibility studies for future proj- ects, 100%.
Benefits and Risks.
68. Production and Foreign Exchange. The beneficial effects of the proposed project derive from the development of under-utilized land resources in the Sava river basin by draining the water-logged land. No detrimental effects on the chemical or biological regime of the water are expected. The drainage works, land consolidation and amelioration under the project would permit more productive cropping patterns and result in improved and stable yields on some 19,000 hectares. Arable land will - 23 - increase by a total of 4,290 hectares -- 2,940 hectares for the individual sector and 1,350 hectares for the social sector. In total, the project at full development would generate annually, as its principal economic bene- fit, an estimated 15,000 tons of incremental wheat, 6,400 tons of maize, 170,000 tons of sugar beet, as well as increased production of various vegetables and an assortment of fodder crops primarily for on-farm consumption. Much of the output of major crops is intended for domestic use and for the supply of sugar beet to the new sugar factory in the project area, presently operating at very low capacity utilization. In addition, the production of maize will contribute to foreign exchange earnings, while increased self-sufficiency in wheat, barley, cats .r-d industrial crops will help to save foreign exchange. The indirect effects on livestock production and its increased export potential are also an important consideration in view of the incremental production of fodder crops (14,300 tons).
69. Employment and Income Effects. As a result of the project, employment opportunities directly involved in private sector agriculture would increase by about 25%, with the largest increase in crop production, which accounts for 50% of total employment in agriculture. Secondary and tertiary industries, such as food processing, expanded sales of produce in local markets, transportation services and equipment maintenance and operation, etc., would also develop thereby increasing further opportunities for economic growth and employment. These activities would help to alleviate the high unemployment in agriculture (28%) that is expected to remain even after full implementation of the project. Finally, direct employment from the actual construction and future maintenance of the drainage system, including land improvement and civil works, will also create about 65 additional highly skilled and skilled Jobs. In agriculture, women, comprising 35% of the active =r:ri population, would benefit from the increased employment opportunities in both the individual and social sector components of the project. The gross value of production (at constant 1981 dollars) at full development would increase by about 200%, creating a more viable financial base for some 4,700 farm families which are presently subsisting on an average per capita income of US$440.
70. Institution Building Effects. Because crop performance is vital to the success of this project, explicit provisions have been made to ensure intensive on-farm development and adequate extension service to the individual sector through existing institutions. Most of this work is to be carried out through the farm cooperative, W.O. Podrinje, thereby enhancing the importance of organized cooperation both among the individual farmers themselves and with the social sector organizations. The agricultural part of the project will give various institutions in the area greater responsibilities for the promotion of increased crop production. These include the Agricultural Research and Training Centers, the BOCFs in charge of extension in the project area, W.O.A.E. Semberija, and the Commune Assembly of Bijeljina. An independent agricultural economic institute will also be selected to help prepare, monitor and evaluate the annual agricultural production plans. - 24 -
71. Economic Rate of Return. The economic rate of return of the project is about 21%. With 95.5% increase in investment costs, the rate of return would be reduced to 12%; with a 22% reduction in crop benefits, a 12% rate of return would be obtained. If benefits go down by 10% and investment costs rise by 10%, the economic rate of return still remains attractive at about 16%.
72. Risks. Full realization of estimated benefits is dependent upon successful implementation of the drainage program with complementary strong institutional support and effective agricultural extension for the individual sector. As stated in paragraph 70, institution building would receive high priority under the project. In view of the technology which already exists in Yugoslavia, together with the provisions that would be made for farm machinery, training, annual review of agricultural plans and imputs, scheduling of procurement to minimize delays and the exemption of Bank financed imports from licensing restrictions, no significant risks are anticipated in project execution and realization of benefits.
PART V - LEGAL INSTRUMENTS AND AUTHORITY
73. The draft Loan Agreement between the Bank and Privredna Banka Sarajevo - Udruzena Banka, the draft Guarantee Agreement between the Socialist Federal Republic of Yugoslavia and the Bank, the draft Project Agreement between the Bank, the W.O.A.E. Semberija and the Commune Assembly of Bijeljina, the draft Agreement for Obligations of the Socialist Republic of Bosnia-Herzegovina in connection with the project between the Bank and the Socialist Republic of Bosnia-Herzegovina, and the Report of the Committee provided for in Article III, Section 4 (iii), of the Articles of Agreement of the Bank, are being distributed to the Executive Directors separately.
74. In addition to the features of interest of the loan which are referred to in the text and listed in Section III of Annex III, special conditions of effectiveness are:
(i) the execution and authorization of the Subsidiary Loan Agreement between the borrower and W.O.A.E. Semberija (Loan Agreement, Sec. 7.01(a));
(ii) the entering into an agreement in form and substance satisfactory to the Bank between the Commune Assembly of Bijeljina, W.O.A.E. Semberija, W.O. Podrinje, W.O. Sava and SIZV BiH for determining their respective shares for the financing of the Project, including the provision of cost overruns, and their respective responsibilities for assisting W.O.A.E Semberija in the debt-service obligation undertaken for the carrying out of the Project (Loan Agreement, Sec. 7.01(b)); and
(iii) the authorization of the Project and Bosnia-Herzegovina Agreements (Loan Agreement, Sec. 7.02). - 25 -
75. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank.
PART VI - RECOMMENDATIONS
76. I recommend that the Executive Directors approve the proposed loan.
A. W. Clausen President
by Ernest Stern
Attachments May 10, 1982 Washington, D.C. - 26 - ANNX I TABLE 3A YUGOSLAVIA - SOCIAL INDICATORS DATA SHEET Page 1 of &
YUGOSLAVIA REFERENCE GROUPS (WEIGHTED AVERAGES LAND AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE)- TOTAL 255.8 MOST RECENT MIDDLE INCOME INDUSTRIALIZED AGRICULTURAL 142.8 1960 lb 1970 /b ESTIMATE /b EUROPE MARKETECONOMIES
GNP PER CAPITA (US$) 370.0 830.0 2430.0 2609.1 9444.0
ENERGY CONSUMPTIONPER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 875.1 1554.3 2440.3 2368.4 7896.6
PoPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 18402.0 20371.0 22139.0 URBAN POPULATION (PERCENT OF TOTAL) 27.9 34.8 41.5 53.2 76.4
PUPLATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 25.8 STATIONARY POPULATION (MILLIONS) 29.0 YEAR STATIONARY POPULATION IS REACHED 2065
POPULATION DENSITY PER SQ. KM. 71.9 79.6 86.5 80.6 142.7 PER SQ. KM. AGRICULTURAL LAND 124.0 139.0 153.7 133.9 523.3
POPULAiTIONAGE STRUCTURE (PERCENT) 0-14 YRS. 30.5 27.4 24.8 30.1 22.8 15-b4 YRS. 63.2 64.8 66.3 61.5 65.6 65 YRS. AND ABOVE 6.3 7.8 8.8 8.3 11.6
POPULATION GROWTHRATE (PERCENT) TOTAL 1.2 1.0 0.9 1.5 0.8 URBAN 3.6 3.2 2.9 3.1 1.3
CRUDE BIRTH RATE (PER THOUSAND) 23.2 18.8 17.5 22.9 14.5 CRUDE DEATH RATE (PER THOUSAND) 9.8 9.0 8.5 9.1 9.5 GROSS REPRODUCTION RATE 1.4 1.3 1.1 1.6 0.9 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) USERS (PERCENT OF MARRIED WOMEN) .. 59.0
FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71=100) 85.0 93.0 117.0 119.8 112.7
PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREilENTS) 125.0 130.0 136.0 125.7 131.4 PROTEINS (GRAMS PER DAY) 93.0 93.0 101.0 92.5 98.1 OF WHICH ANIMAL AND PULSE 28.0 32.0 39.0 39.7 62.2
CHILD (AGES 1-4) MORTALITY RATE 5.0 2.6 1.5 3.4 0.6
HEALTH. LIFE EXPECTANCYAT BIRTH (YEARS) 63.2 66.9 70.3 68.9 73.8 INFANT MORTALITY RATE (PER THOUSAND) 87.7 55.5 33.6 25.2 12.9
ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 33.6 URBAN 42.4 62.0 RURAL .. 12.3
ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. URBAN .. .. RURAL .. ..
POPULATION PER PHYSICIAN 1616.0 1000.0 762.4 973.3 621.2 3 POPULATION PER NURSING PERSON 1 50.0/c 410.0 409.0 896.6 217.4 POPULATION PER HOSPITAL BED TOTAL 200.0 179.0 166.0 262.3 119.4 URBAN .. 70.0 101.6 191.8 120.9 RURAL .. 1610.0 1836.9
ADMISSIUNS PER HOSPITAL BED .. 17.0 18.2 18.2 17.9
hOUS liG AVERAGE SIZE OF HOUSEIIOLD TOTAL 4.0 3.8 3.8 URBAN 3.3 3.2 3.3 RUIAL 4.4 4.3 4.1
AVERAGE NU,iBER OF PERSONS PER ROOM TOTAL 1.6 1.4 URBAN 1.7 1.3 RURAL 1.5 1.5
ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 54.5 87.9 URBAN 92.7 98.4 RURAL 36.1 80.1 - 27 -
TABLE 3A ANNEXI YUGOSLAVIA - SOCIAL INDICATORS DATA SHEET Page 2 of 6
YUGOSLAVIA REFERENCE GROUPS (WEIGHTED AVlAGES - IMOSTRECENT ESTIMATE)- MOST RECENT MIDDLE INCOME INDUSTRIALIZED 1960 /b 1970 /b ESTIMATE /b EUROPE MARKFTECONOMIES
EDUCATION ADJUSTED ENROLLMENTRATIOS PRIMARY: TOTAL 111.0 106.0 99.0 105.9 99.6 MALE 113.0 108.0 100.0 109.6 102.1 FEMALE 108.0 103.0 98.0 102.2 101.8
SECONDARY: TOTAL 58.0 69.0 82.0 66.3 89.3 MALE 63.0 78.0 86.0 73.2 83.3 FEMALE 53.0 58.0 78.0 59.5 85.0
VOCATIONAL ENROL. (D OF SECONDARY) .. 26.0 21.0 28.4 18.1
PUPIL-TEACHER RATIO PRIMARY 33.0 27.0 25.0 26.8 21.2 SECONDARY 13.0 22.0 19.0 23.6 16.4
ADULT LITERACY RATE (PERCENT) 77.0 83.5 85.0 75.4 98.9
CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 3.0 35.4 88.5 83.9 349.7 RADIO RECEIVERS PER THOUSAND POPULATION 84.9 165.5 209.1 181.6 1018.0 TV RECEIVERS PER THOUSAND POPULATION 1.4 88.2 170.2 131.1 400.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSANDPOPULATION 69.0 85.3 95.9 123.8 336.7 CINEMA ANNUALATTENDANCE PER CAPITA 7.0 4.0 3.4 5.7 4.3
LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 8302.0 8837.6/d 9381.7/d FEMALE (PERCENT) 35.0 35.9 36.0 32.9 36.6 AGRICULTURE (PERCENT) 63.0 51.0 30.9 34.0 6.1 INDUSTRY (PERCENT) 18.0 23.0 32.9 28.7 37.7
PARTICIPATION RATE (PERCENT) TOTAL 45.1 43.4 42.4 42.3 45.7 -ALE 60.0 56.6 55.0 56.5 58.9 FEMALE 30.9 30.6 30.1 28.5 33.0
ECONOMIC DEPENDENCYRATIO 0.8 0.8 0.8 0.9 0.8
INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 16.4/e 15.1/f 13.1 HIGHEST 20 PERCENT OF HOUSEHOLDS 41.57i 41.47T 38.7 LOWEST 20 PERCENT OF HOUSEHOLDS 6.9/e 6.6/f 6.6 LOWEST 40 PERCENT OF HOUSEHOLDS 19.07o 18.4/f 18.7
POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN - .. RURAL ..
ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. RURAL .. .. 430.0 385.1
ESTDIATED POPULATION BELOWABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. RURAL ..
Not available Not applicable.
NOTES
Ia The group averages for each indicator are population-weigheted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform.
lb Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1976 and 1979.
/c 1962; /d Including migrants workers abroad; /e 1963; /f 1968.
May, 1981 -28 - ANNEX I Page 3 of 6
ttF~iTlIObtOF Sh0aL ONDICATORt
Notes: ALeOhra9h the date are draet frt stret generally judged the t-s -th-t-a-V and -e2.bahi, it shrub ajar it rted that they eay tehbt Lnte- ratinaly ttyaabd .beaus ofrhI jc of anardruined dflietets and -tretege usd by doff-ster erreente OrJ. ent ttdt,tedaase re themes,usefultedesribe teeet tOnagettde, uidileeetn...ds and he-tatejt tetetie s_jon ffentrees betae- en Iehe
rfhe subject ton (-,ene I r Cyesiloelot01Oprte rpeee toddle lo-ne teeth ufc-co ad niddle tEo' is ehene beta- no enreger eret-totrel sttnteel .It the tfo-tee- gnrp danatheuete.r puetornsethoed accati etsFtne td itatt s tre -oyhoe. ..
dwiLsing (t-resetd eq.kd.).- pulut TIt t- -- ttna -n -1 Ioa. pric i.6ant hooo-ruohce icel -Ftita at-Free urtite area urhtee-y led area ara enOtdAtr.uenanrcrldjdebyhneetehn toeecItytelhu
fat I..rFe .. Fastues. serket etd kttehe nadens to lie tai1re; 1979 jets. htaill nt-i- tennees tFisaeeebI I.. Orh--r ye.n...n. y1 stafed
1sFAFiO F0 (lIlj - 00 -r -ayi-e eatsenc e -tre.ake,t eru. -si- d-a ar r tr tOded . jRei hnar., Oti te c,Itldensh tuisied byts..re.etoo eetotrdaa4or.Iu9neIr ae-jll.197O-79b-ssj;i19t0. and edital ennerer yeee.-tnetyunf- ttpyscir1 b 0970.end :979 jets editaiat1 te , ur,elef,tnt) -bi h lto a in-thi-etetar dantre and erteide ii.ec ltrtredlee fartiutie.F-etesee- ENtoIl iNtltfyTO9FF1 iytId - unusi n ..e.tt .. .to t-.nc- rt-gy (.e:e- total .. u..ae urbar hrtyieals include dOlt rica,eeonlOtitaI end Ogteretss eers ssadt _I-,ueornsenss ltOee atdr-rI sett-- -1 rrrre-cet1 -itrayt-siee1 enessdsaely let gny On I rg .. .an to trel E..tlntFecatd .. 96.. 097d and1979 teees. -Foltied hreyinais art t-tjoic r-1rutdetac dat. Admosiuee yet MtKt- te d - Itel tanbon cfsiOetc tocdcat Fesbelasd.inded by n onbe nO.b.bnds.- FOPLLIATIINANl VITAL STATISTICS Frea I Miete.Nd-Y-eanjeaurda . - Ae rf July 1: 1960j, 1970. aed 1979 NOOSING
mA_gErune.i. c 1960, 0970,.,td 1979 data het hros-hld fr. ,F ttlno ce
Feaant lnerl0l- Ciue-je-Irtlnrtoettesebuoedrnlogt btonoopeeerns cttricitr1 .ban ,,tc dtu-elutriod I'll,tot ett1 F-ralatto by age en enad thot .. rninyen..r.. y rte.oei ns,n -ye -tey~ -eeiiigo etc ltd en ecee Aeututeo FenJenelt o- psoetr..etnsitetntsyie-- .1,- ofth...let-ln aste- urtrindat ilgl llfennyecntayef 'birth - ig i -netlrtttoterrs yenos-ueaoerr-o Aet-etto l-ttntnmtre Oeein)ttluh se-.deeal-- in_a, adFemaleIt n..tt .. Atatoltotogan 77.0 yeats. The Para- Canteen..ot. bdeeliteont eanttn tiole str so ytr-nrr05
bot __otr it th_n ass.e. eeoLhatie rhratn f ntotohncco
tSta-nresr terPIlatlt Ins ta tay -. -rla -n 1het- emn bnhs"n,entcon - t2tal, male end femal - Core nto-1 sale end tentle ttebtnnhesettsoort1eutbedetttranesrd ol_n hesssnateee tIllsnfalS_ent prisaye_ a etoattnseer
Otheys-pl nl-o nod1 ithIon..neorFdninc-feelfnyotnrdyisn-te-rdrrhhnl-eou laleedeeye-oay -etetro ;sttndar
sOne hueteatbodLed. been usrsllynFlo lnn=1111~l7 beant f lage; teetFredert enresst innat _onltlo tlee t-tlue.l I..- L- .l f p.d i i
etol1 ae:1960, 1970 and 1979 datall. Osue -ehetel1, tdaea,r te arn rhnth ne-ran tedo,.d- yetIns a. agreulnaa l-d - Crsputnd es bene lee agri-1-tona land _rey atsodpaiensfsendar- nttu oa rely: 91.'l 070 re 1970 dana. Fyu-ereret rse .sd soena -Fra etudentaenrrlled to ituaeoastnrcsChren)-itdtidr (0-ic y-at). -rektg-agc (it- Fein-e and ecnedany tenets dtitdod ty nu. ehs nO tofsth en Inthe 64 Festl, end -tenord 965 ynars and -oo) to y-erntngee of id-yno FF- -eretFrdlrg -Lel.. ltn;1960. 1970, sod 1979 dana. Me.lt lneten can Lesres---I - 'iten.... Adultsabi ,en rea-d end antote Porelo rnoebRae een tj- ttl - Annual geo-tt ese f otel1 nid- asegnteg f tota edult p-ti- ion gcd it yersed tree. yea pOFtltttrnt for 19.0-h.. 1960-70. n 1970-79. Pnua -tlnth Rate joeneent) -ur-a-jnAo.. g-eth ret f urban pnot- CONSUMPTIfON isinn OneII 1950-61. 1960-70 end 1970-79. Aess`ee Ceee je- thousan.d ropolationt - resgetr tnes oe itoojenhnsed)- trb ot nnallue tehspe touAnd of sOd-yost eAtstene lecs than tight --ton; Aoldsablns,hasean spiop ttnoI,; 1960, 1970, and 1979 data. olnetbet trde Soetsnelnntoad -nnadctaynbtadanet-eeidosenee Iep- thoo...d.ndroai-o L-hIl tre rF:~ enetce netei FooCtt 1960, 29Ff1, and .1909 dora. tn-deaeerge--l nubile 9cr th-usrd nf reyrltoI; _onledn an_ GrossR.,iterotfo s-nrge number of darshteasonn ol ea Oitneeedrceceeinesu...srie sod Ln yeers sheregtrtinonet hsr,rn-rIt-dc-1n :enlItf,I oeees peeesnnss--A;eiFhnFer- sente t.. Fe;dnFnoieeyet o tnrhenstehist ntl e ee:o lyfInyos neae cedin tEL 1960. 1979. sod 1979. maat toeies. abolishd ln ig
rFi' btnbnnnolI d_nles sdr FIne n... na,.tioa.. FsOLiy leog nna.general Fblin pee thousIand popnIetiro to lde omlinr.e. Ia eseetn-r Fatily FInInon -bests (nerteer OF maried -oete - Ptteeot... ef -aenld Looaerostd On, yeses thn egerei f h sets sag On effete. masonf hlld-beaetg ego (1510- Acrl.ot oat- ie h-oel denlt.ta en_enne uelaoeIe Lhoutse errolse otttloeaefrl Ae oil atred __se Lt same ose g toF. n s fst daIly gees neeteeFrt.deoOo e e ot Fot!,,,liten decred pi,naniily t.r....t. d,tienets:none It is eeidered FOOD AND1NUTITIFON tohb ol Fi Ppee sbo ou ieask Ildos of Food Fnodun-too ret Cayina 719h91-71-i007 - Irdes of FOt eata anulBnA.una tedne o aio e.tsd onthe r shoe of Fdoto,oti nf oil food lnosndtoe. Fenod_eintslu 1d-ecd-ud Fee:d sd nieleets sold d-inin th yeon, ineledtngadtse oandr On-tioso iseo Ie-d-r year haste. C_soIetsetrpimay grad (.g.ll susseese eud mabitases troted of...gerlohith one edible and conotei nutients lo. toffee and tea are seclded. Agsg-eao ytodneeon of .. nt t....try fe he-e 00 las FORCE eallieeoeFodonee pliett egt;1961-95, 1970. end 1979 lst.. Tonl1 Lohb F-ne ltho....edsj - Enn...eteaIly -elee ee...a. tee-lodieg
yen day. Aesilahle soyy'i-taeaes donetu y-d-tni-n, Itpoelot nt t arble; 1960, 0970 and 1979 dens. e... t.Iand tihnge- in -enen tee au,yliassla,d,o aimalineed, seed., Fol nnct Feenie Istee f-tt on peree..g..o .total .eo f qusntiltioeutd Ls Food yooso,ad lse On d_ttoibo. eur-htnutr rren Laborf FoteL InFnneeg for--tey - Lrotgso tent ote melsed by FAO hsn d on phytin,g,0taintds fo t.. sel set fishing ne peeotenge nF t-Ie 1ahb- fonn,o!960, 1971 and 1979 det,. nity and h-1nh ton.Idoims mitaeal :tFrtue boysighte,d, ogo aey rree - jho frtee On Lonts. _roaeto... sA.Ifaal_II
hor,ehold it..el; 1961-h5, 1970, and 1977 does. 197 sod 1979 ded Fe n roi PLY of rPs (re rede P-rennet .... e. of yet ate Frtnroo FateI...... nt) - otl ml, end famale - Feltsie net ppFly of ford rer day. Ne eFplyofyfond Is doOme es shon,l t- -neinityn--eeere .nuneda tetl,1 mat and fest laor ent Lorsetor al Iteatit_ esAbtloehed by U.i _rnde ten so.ont pe tt-tg- of tonsi, male ted femle FpOFritniOtfof allIages eeeet'treiY; alire..e..o 60 gram ef tntl penti yendoy end 2f g-em of animal end 1960, 1970. end 1979 des._th..se .besdo t.l eet geino oIe,ofLaeeF oileh 10 drama ehecodb beoaIml y Telnh...esssd- g-t eaer osletof the yoyLaenn ad long Itse gred, A
animal ye_tsi as In AnesE fehe maedIypF.ed yFAO On tho Third Ino-ir Dere-dene Retee - RatI.onOFoFlto unnItsd 65 end oe Oneld Food l..ney; 1961-65, 1970 and 1977 dote. en the ete-I lb-e free. Ete_tn rernee setol.yo1 FEes oniesi and pal. a- Protein erpply of food do- riced fEe- .itol end Fle LIn geam- pet day; 196i-65 , 1970 aed 1977 daIs. mNCOMEDomIBtaooN Child Oases 1-4) M.totlitey none (ncrtho e)-AMorel deaths tee thoosd LIt Fere-not of Fel-te loonne Iboth in cas sed kindj - Reutleod by ehrts ssgieR...i-G_ year.nntohilldte LInth0e Sgog-oo;:f_ -aeden-rlsroe-i.oroorth-sn20 pnt-e-.yp--i 20 Fere--n.ady..nrst tO p_ereen -ete dens deeied Ers- life tables; 1960, 1970 and 1979 dan. o hnootl
HEALTH P~~~~~~~~~~~~~~~~~~~~OVFRTFTARGETGCIOtIF LIfe Eptertan-e- airett ese A-gue e .. eh.botf ces- of ILE. rosaatg The fo11-ingtento sea sproimanm.... sourc of gro-ee leneic, abln;1960, I190 and 1979 data. sod ehold be ttt-rptntdeenhlt-nslde-e1is-tti.. Ilefe-on ffetit none jee tho...stdj Moral deonhe of infasnes under t.t OC tEnisand Abenlote F-enel Ineos tee.. 010(U$ret tpins) -unbha sod -ac1 ofe e thousan IntA births. Absolte p....tny Inee leol IsIbt na ee.. 1bals str a.1eimh
her of peopl etl, un-'be, and .. e.l sith .e...a... ee t efe effotlable. matsFl _nLades . Iese unfteneneeo..n..tetstd h t Enon.eeeolieeted leIteiceFeteeP ... nsa tend Iblt rer o pIne) - -b-t and t-el sene haneahet fete peo,tettd bor-holes, preis.. and ... nt-ey eselle as tRsO1 -tiatn poo-rty Inoas eeL_ us oc-tled oF..n.tes Fete gets feeaee o hI epe ptnFnFulatln- On en urban -netoA blie pesna.nes -fhootry. Unban 1one Isde dFee beut g_esooeodeaireodrsaebnjIeneeFeebaeaye neolehtdjs Iooef-ehthe,ra - n Flngoohs
do o honoynd A disytooepi...sL e pert nf the day LIn Ostnhlg the o' Fa-oly' 5st needs. Aceesa no fat,ten DiatpelleeeenIO -aalsto.-entl.t. obat, sod anl- - Nabe- of P.peoti (e-sl,onat te -rtlcond by ...... diptt.asI As Ienentga oF their reageoIrepgbtos ot dieFsa say_ in-lde t1he nol ti-o and dlsFoaa.t aith o oith-s --ees..o, of h-.s entree.Frentic ad Soela1 Dlan Dtioiton anod nss-ee serbes ynmaothe oat of Fit petis end snt-tetnl aslseoad rnjetoe -ateenet
Ponsiellos p-r Physteien- Pryulstire dtnlded by ebte of gpsetieleg pEpsi- nlsss.....l1fi;ddf-oaeoedinlse1 or Itnnniyea. FoeLatio ter _unin_Fer Fnrols.o dt....d by ee fpston sale end f-moi -td-tee I-- -e -1s...e ...- -29-
ANNEXI Page 4 f 6
Population: 22.3 million (mid-1980) GNP Per Capita: US$2,620 (1980)
YUGOSLAVIA- ECONOMICINDICATORS
Amount Annual Growth Rates (2) (million US$ at (at constant 1972 prices) IndLicator current prices) Actual Projected 1980 c/ 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985
NATIONALACCOUNTS- Gross domestic product a/ 69,232 0.9 5.2 8.4 8.5 4.2 2.2 2.2 2.5 3.6 3.6 3.6 Agriculture 8,516 -2.6 6.4 5.7 -5.4 5.4 0.0 1.0 3.2 3.2 3.2 3.1 lsdustry 28,801 7.4 4.1 9.5 9.3 8.5 3.6 1.4 2.3 4.0 4.2 4.2 Serv-ces 24,993 1.4 5.3 7.1 13.1 -2.0 -2.2 3.4 2.5 3.3 3.1 3.1
Consumption 48,760 -3.3 0.0 9.8 13.0 3.8 0.6 -1.1 2.8 3.5 2.7 2.8 brous Investment 23,218 10.1 3.6 17.4 -3.2 12.0 -3.2 -1.2 -2.5 1.3 4.2 4.6 hxports of GNFS 14,053 1.1 10.4 -2.0 4.8 2.6 12.6 9.3 7.0 6.6 6.6 6.6 Imports of GNFS 16,799 -1.3 -8.6 16.1 2.5 12.0 -9.7 -2.6 2.6 4.3 5.2 5.7
Gross national sav-ngs 19,619 14.7 20.6 5.6 -3.1 3.4 5.8 - - - - -
PRICES GDP deflator (1972 =100) 411 170 204 232 260 313 411 - Exchange rate 24.9 17.4 18.2 18.3 18.6 19.0 24.9 -
Share of GDP at Market Prices (7) Average Annual Increase (7) (at current prices) h/____ (at constant 1972 Prices) 1960 1970 1975 1980 1985 1960-70 1970-75 1975-80 1980-85
Gross Domestic Product a/ 100.5 100.0 100.0 100.0 100.0 5.9 6.5 5.7 3.1 A6r-culture 22.5 16.1 13.8 12.3 12.1 3.3 2.9 2.4 2.7 Industry 42.2 37.4 44.3 41.6 41.8 6.3 8.3 7.0 -3.2 Services 29.0 38.1 33.1 36.1 36.1 6.9 4.7 4.3 3.1
Consumption 67.2 72.8 74.3 70.4 69.8 6.5 6.9 5.4 2.1 Gross investment 36.5 32.3 33.5 30.5 27.8 4.7 5.5 5.3 1.3 E.xports GNFS 13.9 18.5 20.2 27.7 33.7 10.2 6.7 5.7 7.2 Imports GNFS 17.5 23.5 28.0 31.4 31.3 9.8 6.7 2.5 3.1
Gross national savings 32.6 29.6 25.6 28.3 28.4 5.3. 6.2 6.5 -
As 2 of GDP 1960 1970 1975 1980 PUBLIC FINANCE Total revenues 27.9 33.1 36.8 37.6 total expenditures 24.1 33.2 37.2 38.2 Surplus (s) or deficit (-) 3.3 0.1 -0.4 0.6 Foreign financing 0.0 0.0 -0.4 0.0
1960-70 1970-75 1975-80 1980-85
OTHER INDICATORS GNP growth rate (Z) 6.1 6.7 5.7 2.8 GNP per capita growth rate 5.0 6.6 4.7 1.9
IGOR 5.4 4.6 5.8 9.1 Import elasticity 1.6 1.0 0.5 1.0 a/ At market prices; components are e-pressed at factor cost and will not add due to exclusion of net indirect taxes and subsidies. b/ Projected years at constant 1972 prices. c/ Estimate.
EMENA IC March 19, 1982 - 30 -
Population: 22.3 million (1980) ANNEXI GNP Per Capita: US$2,620 (1980) Page 5 of 6
YUGOSLAVIA- EXTERNALTRADE
Amount Annual Growth Rates (Z) (million US$ at (at constant 1972 prices) Indicator current prices) Actual e/ Projected (1980) 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985
EXTERNALTRADE Merchandise exports 8,978 0.0 14.5 -5.3 1.0 4.4 11.2 10.6 7.0 6.4 6.4 6.4 Primary a/ 1,940 -3.1 16.6 3.9 1.5 5.6 2.5 -10.7 5.0 5.0 5.0 5.0 Manufactures b/ 7,038 0.4 13.9 -8.8 0.8 4.0 14.1 16.4 7.4 6.7 6.7 6.7
Merchandise Imports 15,065 -2.8 -6.5 18.5 3.8 18.8 -13.9 -4.9 2.5 4.3 5.4 6.0 Food 1,087 -40.9 45.8 4.3 -24.2 51.9 -3.1 -5.5 1.0 1.0 3.5 4.0 Petroleum c/ 3,549 -5.0 10.1 12.0 11.6 10.6 -8.2 0.0 3.0 5.0 5.0 5.0 Machinery and equipment 4,216 22.3 -8.8 17.8 7.1 22.4 -23.1 -19.8 -5.0 3.0 3.0 5.0 Others 6,213 -11.9 -12.7 22.1 4.4 12.8 -9.3 4.3 6.5 5.4 6.9 6.9
PRICES (1972 = 100) Export price index 172 180 202 220 253 301 331 364 393 423 453 Import price index 184 189 216 226 269 319 351 385 419 452 486 Terms of trade index 93.5 95.2 93.5 97.3 94.0 94.4 94.4 94.7 94.0 93.5 93.1
Composition of Merchandise Trade (X) Average Annual Increase (2) (at current prices) d/ (at constant 1972 prices) 1960 1970 1975 1980 1985 1960-70 1970-75 1975-80 1980-85
Exports 100.0 100.0 100.0 100.0 100,0 8.1 5.7 5.1 7.4 Primary a! 49.6 29.4 19.5 22.0 16.0 - -1.3 6.0 1.9 ManuTactures b! 50.4 70.6 80.5 78.0 84.0 - 8.1 4.7 8.8
Imports 100.0 100.0 100.0 100.0 100.0 9.0 7.4 4.1 2.7 Food 9.1 7.2 5.5 7.2 8.6 - 5.0 14.9 0.8 Petroleum c/ 5.4 4.8 12.3 23.6 7.9 - 8.2 7.2 3.6 Machinery and equipment 36.8 33.2 33.9 28.0 24.6 - 9.4 3.1 -2.8 Others 48.7 54.8 48.3 41.2 58.8 - 6.0 3.5 6.0
Share of Trade with Share of Trade with Share of Trade with Capital Share of Trade with Industrial Countries (Z) Developing Countries (X) Surplus Oil Exporters (X) Centrally Planned Ecommmies (I) 1965 1970 1975 1979 1965 1970 1975 1979 1965 1970 1975 1979 1965 1970 1975 1979
DIRECTION OF TRADE Exports 40.1 53.3 34.0 40.5 17.4 13.6 16.8 19.3 0.4 0.7 2.1 11.5 42.1 32.4 47.1 40.3 Primary 61.0 70.2 54.0 55.0 9.1 8.2 8.9 14.2 0.2 0.2 1.9 5.8 29.7 21.4 35.2 30.7 Mansfactures 24.0 41.9 26.0 33.5 23.8 17.2 20.0 21.6 0.6 1.0 2.1 14.2 51.6 39.9 51.9 44.9
Imports 55.3 66.1 59.1 60.8 16.0 12.7 15.7 n.a. 0.1 0.1 0.6 n.a. 28.6 21.1 24.6 25.3
a/ SITC 0-4 b/ SITC 5-8 c/ SITC 3; includes lubricants, coal and electricity. d/ Projected years at constant 1972 prices. eJ Estimates. Owing to changes in the valuation of trade, components do not add up to totals, nor do aggregate price and volume indices equal value growth between 1978 and 1979 shown in next table.
EMENAIC March 19, 1982 -31 - ANNE],I Pags- 64
YUGOSLAVIA- BALANCEOF PAYMENTS,EXTERNAL CAPITAL AND DEBT (US$ millions)
Population: 22.3 million (mid-1980) GNP Per Capita: US$2,620 (1980)
Indicator Actual Proiected 1970 1975 1976 1977 1978 1979 1980 1981 a/ 1982 1983 1984 1>.85
BALANCEOF PAYMENTS Exports of goods and nervices 3,037 8,012 9,142 10,586 12,069 14,276 18,300 22,207 25,325 28,482 32,023 .n,921 - of unuch: Merchandise f.o.b. 1,679 4,073 4,893 5,191 5,809 6,794 8,978 10,939 12,860 14,779 16,905 19.248 lmpurts of goods and services 3,385 9,013 8,977 11,932 13,352 17,937 20,592 22,957 25,862 28,828 32,221 .,972 of which: Merchandise c.i.f. 2,874 7,697 7,367 9,789 10,439 14,019 15,065 15,758 17,709 20,114 22,915 2f4,122 Net transfers ------
Current account balance -348 -1,001 165 -1,346 -1,283 -3,661 -2,292 -750 -537 -346 -198 --5S
Private direct investnent ------NLT loans (net) 196 951 1,094 1,432 1,394 1,009 2,410 762 662 241 865 1,G01 Official 18 246 213 61 128 131 59 1,097 1,280 451 654 S42 Private 178 705 881 1,371 1,266 878 2,351 -335 -618 -210 211 368 other capital II/ 38 135 119 45 541 1,487 657 143 360 600 -100 -333 clonge mn unnerves 114 85 -1,378 -131 -652 1,165 -775 -155 -485 Z495 -567 -4126
lnternational reserves c/ 276 1,502 2,880 3,011 3,663 2,498 3,273 3,428 3,913 4,408 4,975 5,601 Of which; Gold (official valuation) 51 62 62 64 69 73 78 78 78 78 78 78 Reserves as montho imports 1.0 2.0 3.8 3.0 3.3 1.7 1.9 1.8 1.8 1.8 1.9 1.9
EXTERNALCAPITAL AND DEBT Gross disbursements 611 1,647 2,096 2,665 2,800 2,438 4,156 3,223 3,282 2,660 3,642 4,423 Official grants ------Concesnional loans 67 134 134 159 29 13 20 12 DAC 0 71 62 66 11 11 15 8 - - - OPEC ------IDA ------Other 675 63 72 93 18 2 5 4 - - - Non-concessional loans - 573 2,037 1,962 2,506 2,671 2,425 4,136 3,211 3,282 2,660 3,642 4,423 Otticial export credits do 39 203 283 75 74 60 85 1,375 1,534 723 931 1,145 IBRo 37 154 119 133 180 294 258 240 285 341 330 337 Other multilsteral - - - - 8 24 36 16 - - - - Private 497 1,680 1,560 2,298 2,409 2,047 3,757 1,578 1,463 1,623 2,381 2,941 Yagoslav export credit (net) (-37) (-82) (-100) (-183) (-106) (-125) (-300) (-250) (-230) (-220) (-240) (-156)
Enternal debt Debt outstanding and 6usbur-ed ci 2,053 5,820 7,172 8,956 11,117 13,608 15,446 16,458 17,350 17,811 18,916 20,11. Official 854 2,327 2,792 3,085 3,410 3,662 4,552 4,982 6,492 7,163 8,057 8,455 Private 1,199 3,493 4,380 5,871 7,707 9,946 10,894 11,476 10,858 10,648 10,859 11,226 Undaubursed debt 948 2,971 2,525 4,438 3,713 3,817 2,542 3,666 4,705 5,627 6,247 6,747
Debt service f/ Total service payments 503 1,441 1,440 1,595 1,886 2,125 2,441 3,961 4,456 4,320 4,720 5,483 Interest R/ 128 289 302 367 578 821 995 1,750 2,066 2,121 2,183 2,225 Paynents as X exports 16.6 18.0 15.8 15.6 14.9 14.9 13.3 17.8 17.6 15.2 14.7 15.3
Average interest rate on new loans (2) 7.1 8.1 7.1 7.4 7.7 8.0 8.4 9.2 9.1 8.2 8.5 8.6 Official 7.0 8.3 7.0 7.3 7.7 ------Private 7.5 7.5 8.6 9.3 8.7 9.5 ------Average maturity of sew loana (years) 16.5 15.2 18.3 15.4 15.1 10.8 10.1 10.2 10.3 10.7 10.5 10.3 Official 18.5 16.5 10.0 15.9 15.1 - - Private 10.9 10.9 5.7 7.5 -
a/ Estimates. i/ Includes net use of IMF credit (drawings less repurchases), net use of ahort-term credit and changes in bilateral balanes . w cf Including gross foreign assets of commercial banks. d/ After 1980, includes borrowings g-aranteed by National Bank of Yugoslavia. EMENA1C e/ External borrowing reported in the histosical balance of payments is not consistent with e-tereal debt data. March 19, 1982 f Debt service excludes amortization and interest on export credit extended by Yugoslavia. After 1981, includes interest payments on use of IMF resources. - 32 - ANNEX II Page 1 of 12
THE STATUS OF BANK GROUP OPERATIONS IN YUGOSLAVIA
A. STATEMENT OF BANK LOANS (as of March 31, 1982)
US$ million Amount (less cancellations) Number Year Borrower(s) Purpose Bank Undisbursed
Thirty-two Loans fully disbursed 1,065.5
894 1973 Stopanska Bank Skopje Agricultural Industries 31.0 .1 916 1973 Naftagas Gas Pipeline 59.4 14.5 1060 1974 Port of Bar Harbor Expansion 44.0 2.0 1066 1974 Vodovod Dubrovnik Water Supply and Wastewater 6.0 .1 1262 1976 Republicki Fond Voda Water Supply, Sewerage & Water Resources 20.0 3.0 1263 1976 Sarajevo Water Supply & Water Supply & Sewerage Enterprise Sewerage 45.0 3.7 1264 1976 Sarajevo Gas Enterprise Air Pollution & Naftagas Gas Unit Control 38.0 3.3 1360 1977 Management Organization Multipurpose "Metohija" Water 54.0 41.2 1370 1977 Investiciona Banka Agriculture Titograd Industries 26.0 4.5 1371 1977 Stopanska Banka Skopje Agriculture Industries 24.0 11.0 1377 1977 Road Organizations in Bosnia-Herzegovina, Serbia, Macedonia, and Kosovo Roads 56.0 0.1 1469 1977 JUGEL and six Electric Power Organizations in Second Power each Republic Transmission 80.0 24.8 1477 1977 Vojvodjanska Banka Second-Agricul- tural Credit 75.0 34.9 1534 1978 Community of Yugoslav Railways Railways 100.0 10.5
1535 1978 Road Organizations of Slovenia, Croatia and Serbia Roads 80.0 1.1 - 33 -
ANNEX II Page 2 of 12
US$ million Amount (less cancellations) Number Year Borrower(s) Purpose Bank Undisbursed
1561 1978 Elektroprivreda Bosnia Herzegovina Hydro Power 73.0 22.8 1611 1978 Kosovska Banka Pristina Third Industrial Credit 40.0 10.2 1612 1978 Privredna Banka Sarajevo Fourth Industrial Credit 20.0 3.2 1613 1978 Stopanska Banka Skopje Fourth Industrial Credit 20.0 7.9 1614 1978 Investiciona Banka Fourth Industrial Titograd Credit 20.0 1.9 1616 1978 Stopanska Banka Skopje Macedonia Strezevo Irrigation 82.0 17.5 1621 1978 Privredna Banka Bosanska Krajina Sarajevo Agriculture and Agro-Industries 55.0 43.4 1678 1979 Roads Organizations of Kosovo, Montenegro, Vojvodina and Heze- govina and Macedonia Roads 148.0 60.0 1756 1979 Zagrebacka Banka Croatia Sava Drainage 51.0 46.3 1759 1979 Road Organization of Earthquake Rehab- Montenegro ilitation- Highways 21.0 12.9 1768 1979 Port of Bar Earthquake Rehab- ilitation-Port of Bar 50.0 45.3 1769 1979 Railway Organization Earthquake Rehab- of Montenegro ilitation- Railways 14.0 10.6 1801 1980 Vojvodjanska Banka Third Agricultural Credit 86.0 75.1 1819 1980 Road Organizations of Slovenia, Croatia, Serbia and Vojvodina Roads 125.0 107.0 1909 1980 Kosovska Banka Pristina Fifth Industrial Credit 50.0 50.0 - 34 - ANNEX II Page 3 of 12
US$ million Amount (less cancellations) Number Year Borrower(s) Purpose Bank Undisbursed
1910 1980 Privredna Banka Sarajevo Fifth Industrial Credit 30.0 27.7
1911 1980 Investiciona Banka Fifth Industrial Titograd Credit 20.0 20.0
1912 1980 Stopanska Banka Fifth Industrial Skopje Credit 10.0 8.6
1951 1980 Investbanka Agriculture & Agro-Industries 87.0 87.0
1977 1980 Pristina Railway Transport Organization Railways 34.0 34.0
1993 1980 Kosovska Banka Pristina Agriculture & Agro-Industries 90.0 90.0
2039 1981 Stopanska Banka Skopje Agriculture 80.0 71.8
2055 1/ 1981 Radna Org. Regional Vodovod Kosovo Water Supply 41.0 41.0
Total (less cancellation) 3,050.9 1,049.0 of which has been repaid 454.3 Total now outstanding 2,596.6 Amount sold 9.2 of which: Amount repaid 9.2 Total now held by Bank 2,596.6 Total undisbursed 1,049.0
1/ Declared effective on April 14, 1982. - 35 -
ANNEX II Page 4 of 12
B. STATEMENT OF IFC INVESTMENTS (as of March 31, 1982)
Fiscal Type of Amount in US$ million Year Obligor Business Loan Equity Total
1970 International Investment Investment Corporation for Yugoslavia Corporation - 2.0 2.0 1970/ Zavodi Crvena Zastava Fiat S.p.A. Automotive 1972/ Industry 12.4 0.6 13.0 1980 1971/ Tovarna Automobilov in Motoriev Automotive 1980 Maribor (TAM)/Klockner-Humboldt Industry 9.2 0.9 10.1 Deutz A.G. (KHD) 1972/ FAP-FAMOS Belgrade/Daimler- Automotive 1980 Benz A.G. Industry 16.3 0.8 17.1 1972/ Sava Semperit Tires 12.5 2.5 15 i 1978/ 1980 1973 Belisce-Bel Tvornica Papira Pulp and Paper 70.9 - 70.9 1974 Zelezarna Jesenice/ARMCO Special Steel 10.0 - 10.0 1974 Salonit Anhovo Cement Plant 10.0 - 10.0 1975 RMK Zenica Steel 50.0 - 50.0 1977 Frikom RO Industrija Smrznute Food and Food Hrane/Unilever Processing 4.0 2.4 6.4 1977 Tvornica Kartona i Ambalaze Cazin Pulp and Paper Products 15.6 2.6 18.2 1978 Soko-Mostar Hermetic Compressors 7.0 - 7.0 1980 Investiciona Banka Titograd- Udruzena Banka Tourism 21.0 - 21.0 1980 Radoje Dakic Machinery 18.7 - 18.7 1980 Eight Republican/Provincial Small-Scale Banks Enterprises 30.3 - 30.3 1982 Igalo Physical Medicine Center 16.6 - 16.6
Total Gross Commitments 304.5 11.8 316.3 less cancellations, terminations, exchange adjustment, repayment and sales 160.6 5.2 165.8
Total commitments held by IFC 143.9 6.6 150.5 Total Undisbursed held by IFC 57.4 0.8 58.2 - 36 - ANNEX II Page 5 of 12
C. PROJECTS IN EXECUTION 1/ (As of March 31, 1982)
Loan 894 Agricultural Industries (Macedonia): US$31.0 million Loan of May 25, 1973: Effective Date: November 28, 1973; Closing Date: June 30, 1981.
The loan has been closed and the small residual balance is being cancelled.
Loan 916 Naftagas Pipeline: US$59.4 Million Loan of June 25, 1973; Effective Date: March 22, 1974; Closing Date: June 30, 1983.
For a variety of reasons substantial delays occurred during the implementation of this project (cost overruns, administrative hurdles, poor management, etc.). In December 1979, the Government requested and the Bank eventually agreed to entrust implementation of the pipeline in Serbia to a different borrower. The loan was divided into two tranches, Naftagas Gas Unit (NGU) being in charge of the pipeline in Vojvodina, and Butangas of the pipeline in Serbia. The amendment of the loan was approved by the Bank in November 1980, and became effective in May 1981. The pipelines in Serbia are now under construction. Practically all the bid evaluation reports for Butangas have been approved by the Bank and contracts have been awarded. The main component of the project left to be implemented by NGU is telemetry and control equipment for both loans 916-YU and 1264-YU.
Loan 1060 Port of Bar: US$44.0 Million Loan of December 11, 1974; Effective Date: June 13, 1975; Closing Date: December 31, 1981.
All major port civil works are completed. Loan closed as of December 31, 1981, and final applications for disbursement are being processed.
1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. - 37 - ANNEX II Page 6 of 12
Loan 1066 Dubrovnik Water Supply and Wastewater; US$6.0 Million Loan of December 24, 1974; Effective Date: June 26, 1975; Closing Date: December 31, 1981.
Construction is about 92 percent complete. Remaining work will be finished by mid-year 1982. All funds have been committed and final with- drawal applications are being processed.
Loan 1262 Morava Regional Development Project - Water Supply, Sewerage and Water Resources: US$20.0 Million Loan of June 14, 1976; Effective Date: November 3, 1976; Closing Date: December 31, 1982.
The regional development study undertaken under this project provided the basis for the preparation of the Second Morava Regional Devel- opment Project (Loan No. 1951-YU). The flood control and water quality studies are completed. Construction of the Vrutci Dam is about 2 years behind schedule due to foundation, design and construction problems which, however, are being overcome by intensified efforts of the borrower in the supervision of the contractor and consultation with the panel of experts. Construction is completed on the principal parts of the Cacak and Titovo Uzice components, the remainder are well advanced. Feasibility studies on sewage treatment plants in Cacak and Titovo Uzice have been completed. The pilot irrigation components are in place and the evaluation of the first year's operation has been sent to the Bank. The creation of the Republic Water Community of Interest was delayed due to the longer than anticipated process of seeking agreement among all the Yugoslav parties concerned on the structure of the organization. Staffing has been strengthened in the water authorities in Cacak and Titovo Uzice and in the Republic Water Community of Interest. About 85% of the loan has already been disbursed. Closing date has been extended to December 31, 1982 for completion of outstanding project works.
Loan 1263 Sarajevo Water Supply and Sewerage: US$45.0 Million Loan of June 8, 1976; Effective Date: November 9, 1976; Closing Date: June 30, 1982.
Construction of the water distribution system and sewage collec- tion is progressing satisfactorily and should be completed by mid 1982. Construction of the sewerage treatment plant is underway and is also expected to be completed by about mid 1982. - 38 - ANNEX II Page 7 of 12
Loan 1264 Sarajevo Air Pollution Control: US$38.0 Million Loan of June 8, 1976; Effective Date: May 31, 1977; Closing Date: June 30, 195"
The gas transmission line has been completed and initital deliveries of gas began in December 1979, one year later than originally planned. Difficulties in finalizing contracts for the supply of gas were the major cause of delay. Construction of the gas distribution network and high presssure loop-line around the city of Sarajevo is proceeding satisfactorily. The project is expected to be completed in early 1982.
Loan 1360 Metohija Multipurpose Water: US$54.0 Million Loan of February 3, 1977; Effective Date: July 27, 1977; Closing Date: December 31, 1982.
Radovic Dam, intake weir and feeder canal to the reservoir are completed. Overall project progress is about three years behind schedule. Procurement contracts for pipes larger than lm, automatic control system and construction equipment are underway and it is expected that by end 1982 all major contracts would have been awarded. While demonstration farm of 32 ha involving 28 farmers has been highly successful, on-farm development is slower than expected due to time consuming adjustment procedures.
Loan 1370 Montenegro Agriculture and Agro-Industries: US$26.0 Million Loan of March 10, 1977; Effective Date: July 27, 1977; Closing Date: June 30, 1983.
Progress expected to be completed on schedule by December 31, 1982. Winery completed and operational. Winery administration building and cold store 80% completed. Farm center construction underway and farm roads design and cost estimate still pending. Completed irrigation system supplied 1,960 ha under vineyards and orchards in 1981. Only 80 ha of vineyards remain to be planted in 1982. Loan is 73% disbursed: 15% below appraisal estimate.
Loan 1371 Macedonia Agriculture and Second Agro-Industries: US$24.0 Million Loan of March 10, 1977; Effective Date: July 27, 1977; Closing Date June 30, 1982.
Sub-loans for all seven agro-industrial sub-projects have been approved by the Borrower and loan proceeds for the individual sector have also been fully committed and disbursed. Recently, progress in project implementation has shown improvement as all contracts for construction of agro-industry facilities have now come into force. - 39 - ANNEX II Page 8 of 12
Loan 1377 Eighth Highway: US$56.0 Million Loan of April 13, 1977; Effective Date: September 7, 1977; Closing Date: March 31, 1981.
The loan has been closed and the small residual balance is being cancelled.
Loan 1469 Second Power Transmission: US$80.0 Million Loan of July 11, 1977; Effective Date: January 31, 1978; Closing Date: December 31, 1982.
The loan is practically fully committed; however, work has progressed rather slowly. Because of reduced load requirements and delays in completion of certain generating plants, the borrowers intend to postpone beyond the current closing date the construction of certain transmission lines and a substation. Before agreeing to this modification of the project scope, the Bank has requested the borrowers to prepare a load flow study to ascertain whether the transmission lines in question can, in fact, be postponed. Various studies included under the project have either been completed or are in progress.
Loan 1477 Second Agricultural Credit: US$75.0 Million Loan of July 29, 1977- Effective Date: January 30, 1978; Closing Date: December 31, 1982.
The loan is fully committed. All agroindustry investments are in the implementation phase. The project is about one and a half years behind appraisal estimates. About 53% of IBRD funds are disbursed and the closing date has been postponed to December 1982. Measures to speed-up disbursements and overall project implementation have been discussed with the participating banks. The project monitoring and evaluation system is working satisfactorily.
Loan 1534 Fifth Railway: US$100 Million Loan of April 13, 1978; Effective Date: September 28, 1978; Closing Date: June 30, 1982.
Bank financed investments have progressed well and disbursements total US$89.5 million. The level of compensation payments has however increased and substantial tariff increases have failed to keep pace with inflation. Processing of the proposed loan for a Sixth Yugoslav Railway Project has been made dependent on an agreed program of actions to resolve this problem.
Loan 1535 Ninth Highway: US$80 Million Loan of April 13, 1978; Effective Date: August 10, 1978; Closing Date: June 30, 1982.
All sections open to traffic. Loan closing date extended to June 30, 1982 to facilitate procurement of equipment. - 40 - ANNEX II Page 9 of 12
Loan 1561 Middle Neretva Hydro Power: US$73 Million Loan of May 31, 1978; Effective Date: November 15, 1978; Closing Date: June 30, 1982.
Part A of the project (construction of the Grabovica and Salakovac Dams and power plants) has been completed and both Grabovica and Salakovac have been commissioned. Part B, which is not financed by the Bank (Mostar Dam), however, has been delayed due to additional studies needed on account of problems of site geology. Construction of this dam and power plant is now planned to start in September 1982, and completion is expected by end 1986. A substantial amount of loan funds (US$5.0 million) remains uncommitted at this date.
Loan 1611 Third Industrial Credit: $40.0 Million Loan of July 26, 1978; Effective Date: November 16, 1978; Closing Date: December 31, 1982.
The loan is fully committed. Disbursements are slightly behind appraisal estimates mainly because of changes in the originally approved equipment lists and often incomplete withdrawal applications. The Indus- trial Credit Department of the borrower Kosovska Banka Pristina (KBP) continues to be weak, especially in terms of proper project appraisal and supervision. This matter is being focussed upon through frequent super- vision. Also, institutional improvements will be a major component of possible new loan to KBP.
Loans 1612, 1613 and 1614 Fourth Industrial Credit: $20.0 Million each Loans of July 26, 1978; Effective Date: November 16, 1978; Closing Dates: December 31, 1982.
The loans are fully committed. Disbursements for Loans 1612 and 1614 are well ahead of the disbursements expected at appraisal, while Loan 1613 is somewhat behind appraisal estimate. However, disbursements for all three loans are expected to be completed within closing date.
Loan 1616 Macedonia Strezevo Irrigation: US$82 Million Loan of August 23, 1978; Effective Date: February 14, 1979; Closing Date: September 30, 1982.
Construction of the alimentation canal, main canal and irrigation network are underway. The dam and thermal pipeline have been completed. The project is proceeding almost on schedule with completion of the remain- ing components scheduled for September 1982. -41 - ANNEX II Page 10 of 12
Loan 1621 Bosanska-Krajina Agriculture and Agro-Industries: US$55 Million Loan of November 6, 1978; Effective Date: March 28, 1979; Closing Date: June 30, 1983.
Project implementation has been delayed by about two years and an extension of closing date will be necessary. Cost overruns have neces- sitated a reduction in scope of the project. Recently, the implementing agencies have taken actions which have resulted in improvement in imple- mentation. Main problems are being resolved and specific action programs are being worked out with the borrower.
Loan 1678 Tenth Highway: US$148 Million Loan of April 9, 1979; Effective Date: August 14, 1979; Closing Date: June 30, 1983.
Due to shortage of local funds, three of the borrowers (Macedonia, Kosovo and Bosnia-Herzegovina) have requested changes in their programs. Vojvodina may be delayed in the completion of their program unless additional local funds are found.
Loan 1756 Croatia Sava Drainage: US$51 Million Loan of October 11, 1979; Effective Date: April 17, 1980; Closing Date: June 30, 1985.
Decisions to award contracts for supply of equipment and construc- tion of civil works have been finalized. Only a few contracts remain to be signed. Studies on subsurface drainage in experimental plots are in progress. Progress on civil works, although somewhat behind schedule, is satisfactory. Land consolidation is progressing on schedule. Farm develop- ment works are about to start. Disbursements are behind appraisal estimates but are expected to improve when supply of equipment begins against the contracts awarded.
Loan 1759 Montenegro Earthquake Rehabilitation - Highways: US$21 Million Loan of September 21, 1979; Effective Date: December 19, 1979; Closing Date: December 31, 1982.
Shortage of local funds has delayed this project to a point that may critically affect the capability of Montenegro to completely disburse this loan.
Loan 1768 Montenegro Earthquake Rehabilitation - Port of Bar: US$50 Million Loan of November 30, 1979; Effective Date: April 29, 1980; Closing Date: December 31, 1982.
Project implementation has shown significant improvement through additional contracted assistance. All civil works contracts now awarded and bids for cargo handling equipment expected shortly. Report awaited from borrower on tugboat procurement. Borrower is optimistic that, barring unforeseen problems, all works and procurement should be completed by closing date. However, disbursements are still well behind schedule, but should improve shortly. - 42 - ANNEX II Page 11 of 12
Loan 1769 Montenegro Earthquake Rehabilitation - Railways: US$14 Million loan
of November 30, 1979; Effective Date: April 29, 1980; Closing -'e^- June 30, 1983.
Disbursements of about $3.4 million for urgent reconstruction, works have been made. Contracting procedures for remaining works have been slower than expected largely as result of complicated engineering design for repairs to badly damaged tunnel.
Loan 1801 Third Agricultural Credit: US$86 Million Loan of February 29, 1980 Effective Date: August 25, 1980; Closing Date: March 31, 1985.
About 65% of the loan has been committed. With few exceptions, most agroindustries sub-projects have been identified in the various republics and are in the procurement phase. Some agroindustries in Macedonia, Serbia and Kosovo are being implemented. The agroindustries study is being finalized. The loan is about 13% disbursed.
Loan 1819 Eleventh Highway: US$125 Million Loan of April 23, 1980; Effective Date: August 7, 1980; Closing Date: June 30, 1983.
Slovenia and Serbia have requested changes in their programs due to the shortage of local funds. Croatia and Vojvodina contracts have been approved by the Bank. Toll Study Interim Report has been reviewed. The Highway Safety Conference held in Yugoslavia in October 1981 was very successful with over 500 participants from more than 70 countries. Cofinanc'. g was obtained for an amount rwf TU li1 million in 0ctoh-r 1980.
Loans 1909, 1910, 1911 and 1912 Fifth Industrial Credit: $50.0, $30.0, $20.0 and $10.0 Million, respectively, Loans of February 9, 1981; Effective Date: August 17, 1981; Closing Dates: October 31, 1984.
Loans 1910 and 1912 are being committed rapidly while commitments under Loans 1909 and 1911 are behind schedule. Frequent supervision of the latter two loans are likely to result in more rapid loan commitment.
Loan 1951 Morava Regional Development II: $87 Million loan of April 13, 1981; Effective Date: August 28, 1981; Closing Date: December 31, 1986.
59% of loan proceeds committed. Withdrawals have commenced. Construction has started on 260 livestock farms in individual sector, 621 ha of orchards and vineyards and four out of the 14 agroindustries in the project. Procurement actions for another eight agroindustries have been completed and bids for one remaining agroindustry have been invited. Project is proceeding fairly well on schedule. - 43 - ANNEX II Page 12 of 12
Loan 1977 Kosovo Railway; $34.0 Million loan of May 15, 1981; Effective Date: November 16, 1981; Closing Date: December 31, 1984.
The loan became effective on November 16, 1981. A contract has been placed for the provision and installation of signalling and tele- communication equipment on which over 80% of the loan funds will be spent.
Loan 1993 Kosovo Agricultural Development: $90 Million loan of June 15, 1981; Effective Date: December 23, 1981; Closing Date: June 30, 1987.
Bids, as a result of ICB, have been received for 10 of the 12 agro-industries sub-projects and investors are finalizing contracts for seven bids of the subprojects. The two remaining agro-industries sub- projects are being reviewed, taking into consideration changes in market potential of inputs and output. Individual sector sub-borrowers have committed to make investments in 200 ha of hazel nut plantations.
Loan 2039 Macedonia III Agricultural Development: $80 Million of July 23, 1981; Effective Date: January 6, 1982; Closing Date: June 30, 1987.
Project implementation is ahead of schedule. Disbursements (8.2 million) are about one year ahead of schedule; and by end April 1982, the social sector vineyard (1,400 ha) and orchard (2,500 ha) components and the cold store component (15,000 tons) will be fully committed. Feasibility studies for all 7 small scale irrigation subprojects have been completed. SBS appraisal, of at least 2, and possibly 3, are expected to be completed to allow construction to commence towards the end of 1982. Individual sector investments are also ahead of schedule but the biogas feasibility study and the thermal water study are slightly behind schedule.
Loan 2055 Kosovo Water Supply: $41 Million loan of December 14, 1981; Effective Date: April 14, 1982; Closing Date; June 30, 1985.
Loan declared effective on April 14, 1982. Construction is in progress, considerably ahead of schedule. - 44 - ANNEX III Page 1 of 2
YUGOSLAVIA: SEMBERIJA DRAINAGE PROJECT
Supplementary Project Data Sheet
Section I: Timetable of Key Events
(a) Time taken by the Country to prepare 10 months the Project: (October 1980 to July 1981)
(b) Agencies which prepared Project: FAO/Cooperative Program with assistance from Yugoslav consultants.
(c) Project first presented to Bank: April 1980
(d) First Bank mission to review Project: October 1980
(e) Departure of appraisal mission: October 1981
(f) Completion of negotiations: April 1982
(g) Planned date of effectiveness: September 1982
Section II: Special Bank Implementation Actions
Retroactive financing of expenditures of up to US$1.9 million is recommended to ensure employment of engineering services for final designs and bidding documents before signature of the Loan Agreement and early construction of two pumping stations which are on the critical path (para. 66).
Section III. Special Conditions
A. Effectiveness conditions:
(i) execution of the Subsidiary Loan Agreement between the borrower and W.O.A.E. Semberija (para. 74);
(ii) agreement between the Commune Assembly of Bijeljina, W.O.A.E. Semberija, W.O. Sava, SIZV BiH and W.O. Podrinje for apportioning their respective financing and debt-service obligations (para. 74); and
(iii) authorization of the Project and Bosnia-Herzegovina Agreements (para. 74). - 45 - ANNEX III Page 2 of 2
B. Other conditions:
(i) financing for the project from sources other than the Bank would be made available in accordance with the schedule o' expenditures of the project based on annual revisions of the project's financing plan (para. 57);
(ii) funds would be made available by SR Bosnia-Herzegovina for employing additional extension agents to provide services to individual farmers (para. 51);
(iii) annual plans of agricultural production would be furnished to the Bank by October 31, commencing 1983, and W.O.A.E. Semberija would employ a suitable agricultural economic institute to help prepare the plans and carry out the monitoring and evaluation functions. A Project Advisory Committee would also be established (paras. 51 and 53);
(iv) the drainage levy shall be set at levels and in a manner which shall provide farmers in the individual sector incentives to participate in the project and will take into consideration the farmers' ability to pay. Operation and maintenance deficits during the period of construction of the project would be covered by provision of additional funds by the Commune Assembly of Bijeljina or PBS (para. 62);
(v) upon completion of drainage facilities, BOAL Water Management Semberija will be responsible for operation and maintenance of the project facilities (para. 50);
(vi) SRBH will not take any action which would result in the dissolution of BOAL Hydromelioration Semberija or in the suspension of its operations (para. 50);
(vii) consultants for feasibility studies to be employed by December 31, 1982; the studies would be completed by December 31, 1985 (para. 54);
(viii) field experiments would be carried out to provide the basis for economic designs for future sub-surface drainage works (para. 50). I ______IBRD 16222 FEBRUARY 1982
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