Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 4335-YUI Public Disclosure Authorized STAFF APPRAISAL REPORT YUGOSLAVIA OF A SIXTH RAILWAY PROJECT Public Disclosure Authorized June 29, 1983 Public Disclosure Authorized Projects Department Europe, Middle East and North Africa Regional Office 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 Bsank authorization. CURRENCYEQUIVALENTS Currency Unit = Yugoslav Dinar (Din) US$l = Din 63.51/ Din 1 = US40.016 Din I million = US$15,748 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES m - Metre (3.28 feet) km - Kilometre (0.62 miles) kg - Kilogramme (2.20 pounds) ton - Metric tonne (2,205 pounds) PRINCIPAL ABBREVIATIONS AND ACRONYMS USED BOAL - Basic Organization of Associated Labor CIF - Cost, Insurance and Freight COI - Community of Interest CRO - Council of Republican and Provincial Roads Organization CTC - Centralized Traffic Control CYR - Community of Yugoslav Railways LIB European investment Bank GMP - Gross Material Product GTKM - Gross Tonne - Kilometre ICB - International Competitive Bidding NTKM - Net Tonne - Kilom,etre PKM - Passenger - Kilometre RTO - Railway Transport Organization SDK - Social Accounting Service SFRY - Socialist Federal Republic of Yugoslavia SR - Socialist Republic SS & Ti - Signalling and Telecommunications TU - Traffic Units (millions of NTKM + millions of PKM) TYH - Trans-Yugoslav Highway 1/ As of October 1982. FOROFFICIAL USE ONLY YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Table of Contents Page No. I. THE TRANSPORT SECTOR A. The Transport System . 1 B. Transport Policy, Planning, and Implementation . 4 C. Previous Bank Projects . 6 II. THE RAILWAYS A. General . 6 B. Community of Yugoslav.Railways.7 C. Communities of Interest . 7 D. Rail Tariffss and Compensation . 8 E. Organization, Management and Staff . 11 F. Railway Facilities ................. 12 G. Uneconomic Lines .... 14 H. On-Going Railway-Related Studies ... 14 I. Accounts and Audit . 15 J. Previous Railway Projects . 15 III. THE INVESTMENT PLANS AND THE PROJECT A. The Investment Plans . 17 B. The Project .... 19 C. Cost Estimate .... 23 D. Financing Plan . 23 E. Lending Arrangements .24 F. Implementation .24 G. Procurement .25 H. Disbursements .25 I. Employment .26 J. Action Plans . 26 IV. ECONOMIC EVALUATION A. The Proposed Project and the National Development Plan 27 B. Traffic Projections . 28 C. Economic Appraisal of Proposed Investments . 32 This report has been prepared by Messrs. J.C. McCombie (Financial Analyst), R. Knighton and T. Pankaj (Transport Economists), U. Marggraf (Railway Engineer) and W. Reck (Consultant). 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. Table of Contents (Contd.) Page No. V. FINANCIAL EVALUATION A. Introduction . 35 B. Past Financial Performance . 35 C. Forecast Financial Performance . 41 D. Cash Flow . 43 E. Balance Sheet ... 45 F. Assumptions Used in Projections . 45 G. Sensitivity . 46 VI. RECOMMENDATIONS .47 ANNEXES 1. Action Plans and Operational Plans . 49 Table 1: Selected Operational Statistics for 1979, 1980 and 1981 . 52 Table 2: Traction and Rolling Stock Fleet at the end of 1980 and Planned Withdrawal and Procurement in 1981-1986 . 54 Table 3: Operational Data and Targets . 55 2. Transportation Projects Previously Financed by the Bank . 57 3. Tariffs and Compensation .63 4. Financial Details and Targets . 69 SUPPORTING TABLES Table l(a): Investment Plans, 1981-1986 & Project 1983-86, RTO Belgrade . 85 Taole 1(b): Investment Plans, 1981-1986 & Project 1983-86, RTO Novi Sad .... 87 Table l(c); Investment Plans, 1981-1986 & Project 1983-86, RTO Sarajevo . 89 Table l(d): Investment Plans, 1981-1986 & Project 1983-86, RTO Skopje . 90 Table 2: Items on which the Loan will be Disbursed . 91 Table 3: Estimated Schedule of Disbursements . 92 Table 4: Staff 1976, 1980, 1981 and Forecast for 1982-86 * 93 Table 5: Productivity in 1981 and Targets for 1983, 1985 and 1986 . 94 Table 6: Freight and Passenger Traffic, Actual and Projected, 1976-85, CYR . 95 Table 7: Freight and Passenger Traffic, Actual and Projected, 1978-85, for the Four RTOs under the Project ... 96 Table 8: Economic Rates of Return from Major Investment Components . 97 Table 9: Related Documents and Data Available in Project File .... 99 Table of Contents (Contd.) Page No. CHARTS 1. Organization of RTO Novi Sad . 102 2. Organization of RTO Novi Sad, Headquarters . 103 3. Procurement Schedule ... 104 4. Project Implementation & Payment Schedule . 105 MAPS 1. IBRD 13126R - Yugoslavia - Transportation Infrastructure 2. IBRD 16460 - Yugoslavia - Railway Infrastructure YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT I. THE TRANSPORT SECTOR A. Tli. Transport System 1.01 Yugoslavia has an extensive and diversified transport system, of which roads and railways are the backbone, carrying respectively, about 70% and 20% of the total traffic. The transport network comprises about 110,000 km of roads, 9,400 km of rail lines, 7 main ports, 15 airports (of which 10 handle international flights) and a sizable network of inland (the main one being the Danube) and coastal waterways. Pipelines have come into increasing use in recent years. Yugoslavia borders seven countries (see Map IBRD 13136R) and has extensive access to the Adriatic; it is thus an impor- tant crossroads for European traffic, including traffic to the Middle East. Its transport system has traditionally provided sea access for central European countries and has become of major importance for international tourism. 1.02 Over the past two decades, Yugoslavia has enjoyed an impressive record of economic development on a par with other southern European market economies, though it has also experienced economic difficulties from time to time, as at present. During the seventies, the growth rate in gross mate- rial product I/ rose to nearly 7% per annum. Per capita incomes have more than tripled since the mid-1950s, and absolute poverty has been eradicated. A major force behind this rapid economic development has been the signifi- cant growth of industry and services. Increasing economic activity and personal incomes led to a rapid growth in transport demand. Between 1960 and 1980, total freight traffic grew in the public transport system at about 5% per annum and total passenger traffic (including private car transport) by about 6% per annum as indicated below. However, since 1980, GMP growth has only been at about 1.5% per year and overall freight and passenger traf- fic growth has slackened to about 3% and 1%, respectively. 1/ Gross Material Product (GMP) or Social Product excludes 'non- productive' (in Yugoslav terminology) services such as education, health, administration, defense and other public services. Gross Domestic Product is approximately 14% higher than GMP. - 2 - Table 1.1: Growth of Freight and Passenger Traffic 1960-81 Freight Traffic Passenger Traffic (billion ton-kin) (billion passenger len) Maritine Road I Road Air Inland Trucking Total Public Bus Donestic Total Year Rail Waterway Coastal Enterprises Freight Rail Transport Air)ines Others Passenger 1960 15.2 2.0 0.4 1.0 18.6 10.4 2.8 0.1 0.4 13.7 1965 18.0 3.3 0.4 3.1 24.8 12.8 6.0 0.5 0.2 19.5 1970 19.3 4.4 0.3 6.7 30.7 10.9 14.1 1.3 0.2 26.5 1976 21.0 5.6 0.4 11.1 38.1 9.9 27.7 3.8 0.1 41.5 1979 25.9 5.7 - 17.7 49.3 10.1 29.2 5.2 0.2 44.7 1980 2/ 25.0 5.0 0.4 20.8 51.2 10.4 29.9 5.1 0.2 45.6 1981 25.7 4.6 0.8 21.4 52.5 10.5 30.0 5.2 0.2 45.9 Average Annual Growth Rate (%) Period 1960-70 2.4 8.2 -2.8 21.0 5.1 0.5 17.6 29.2 -6.7 6.8 1970-80 2.6 1.3 2.9 12.0 5.3 -0.5 7.8 14.7 - 5.6 1980-81 2.8 -8.0 100.0 2.9 2.5 1.0 0.3 2.0 - 0.7 1/ This refers to traffic by public transport caipanies; data on traffic carried by non-transport capanies on their own account are not available since 1978; such traffic amounted to a sizable 24.2 billion ton-kn in 1978, as against 2.0 billion ton-kn in 1960 and 11.1 billion ton-kn in 1970 2/ Includes also international traffic by Yugoslav Airlines; darestic traffic ws 1.05 billion PKMin 1980 and 0.97 billion PKMin 1981. Source: Federal Bureau of Statistics and Mission Estimates. -3- 1.03 During the 1970s, freight traffic (ton-km) on railways increased by about 2.6% per annum compared to an increase of about 12% per annum on high- ways, while passenger traffic on railways remained practically unchanged in contrast with an increase of about 8% per annum on highways. As a result, road transport has replaced rail transport as the doninant carrier. The railways, however, continue to play a crucial role as ae main carrier of bulk materials needed by key industries, as well as the carrier of just under one-half of total freight in the public transport sector, and an esti- mated 35% of all domestic freight transport (including own-account trucking ¾w non-transport companies). River transport has retained an important and competitive place, carrying about 9% of total freight traffic. The ports have more than doubled their cargo handling since the early 1960s and cur- rently handle more than 25 million tons per annum.