Doweama of The WorldBank

FOROFFICIAL USE ONLY Public Disclosure Authorized

Report No. 6657-TU

Public Disclosure Authorized STAFF APPRAISALREPORT

REPUBLICOF TURKEY

CUKUROVAURBAN DEVELOPMENT PROJECT

April 17, 1987 Public Disclosure Authorized Public Disclosure Authorized

Urban and RegionalDevelopment Projects Division Europe,Middle East and North Africa Region

Thi doument hasa nsftted dWnbuXonand may be u#d by falpints onlyin dw pofonnaucej of tbrofitocil dutis Its contentsmaly not odwtXe bedisclosed without World Bank auwdthoizXn.| REPUBLICOF TURKEY CUKUROVAURBAN DEVELOPMENT PROJECT

CURRENCY EQUIVALETS

US$l = 560 Turkish Lira (TL) (December1985) US$1 = 750 Turkish Lira (TL) (December1986) 100 TL = US$0.179 (December1985) 100 TL = US$0.133 (December1986)

FISCAL YEAR

January I - December 31

MDEASURES AND EQUIVALENTS

1 hectare = 10,000 squaremeters

- 2.47 acres 1 meter = 39.37 inches 1 square meter = 10.76 square feet 1 cubic meter = 264 US gallons

PRINCIPALABBREVIATIONS AND ACRONYM USED

ASKI - Adana Su ve Kanalizasyon Idaresi CMTA - CukurovaMunicipalities Training Association CPA - Cukurova Project Account DSF - Development Support Fund DSI - State Hydraulic Works HUDC - Housing and Urban DevelopmentCompany IB - Iller Bank ICB - International Competitive Bidding ISKI - IstanbulSu ve KanalizasyonIdaresi LCB - Local Competitive Bidding LGD - Local GovernmentDirectorate of MOI MHF - Mass Housing Fund M0I - Ministry of Interior MPWS - Ministryof PublicWorks and Settlement MFA - Municipality Financing Agreement PCR - Project Completion Report PCU - Project CoordinationUnit PPBU - ProgramPlanning and BudgetingUnit PPF - Public Participation Fund PRIMU - ProjectReview, Implementation,and MonitoringUnit PTT - Posts and TelecommunicationsAuthority SPA - Special Provincial Administration SPO - State Planning Organization TEK - Turkish Electricity Authrrity TIU - Training Implementation Unit UEA - Urban Expansion Area WSD - Water and Sanitation Department ol OkmCALUSE ONLY

REPUBLICOF TURKEY CUKUROVAURBAN DEVELOPMENT PROJECT STAFFAPPRAISAL REPORT

Table of Contents

Page No.

LOAN AND PROJECT SUMMARY ...... i - ii

I. SECTOR BACKGROUND ...... 1

A. Introduction ...... 1 B. Urbanization Trends ...... 2 Population Growth and Spatial Distribution ...... 2 Urban Service Delivery ...... 2

C. InstitutionalArrangements for Urban Management...... O..a 3 Municipal ities ...... a . ...a...... 3 Central Government Organizations ...... 4 CentralGovernment Financial Support to Municipalities. 5 D. Government's Urban Policies .6...... 6 o¢verview...... 6 *...... Municipal Strengthening .... 7 CentralGovernment Agencies ...... 7 E. The Cukurova Municipalities 8 F. Bank Goals, Role, and LendingStrategy ...... 9

Past Operations ...... 9...... 9 LendingStrategy ...... 10 ProjectOrigin and Preparation Performance ...... 10

II. THE PROJECT ...... 11

A. Project Objectives ...... 1111...... B. Main Features of the Project ...... 11 C. Detailed Project Description ...... 12 Area-Based Urban Development ...... 12 Municipal Engineering Programs ...... 13 Institutional Development ...... 14 D. ProjectCosts ...... 15 E. FinancingPlan ...... 17 F. ImplementationArrangements ...... 19 Status of Project Preparation ...... 19 ImplementationSchedule ...... 20 Procurement ...... 20 Disbursements...... 22 Financial Reports and Audits ...... 22 Monitoring and Evaluation ...... 23 Supervision Requirements'...... 23

Thisdocument has a retricteddistributon andmay beused by ripients only in thepeffonnance ofthroffoci duties Its contents may not otherwise bedisclosed without World DBank authoiation. Page No.

III. INSTITUTIONAL DEVELOPMENT ...... 24

A. Municipalities ... 24 General 24 Program Planning and Budgeting ...... 25 Urban Planning and Technical Services 25 Manpower Development .... 26 Financial Management ...... 26 B. Water and Sanitation Departments 27 C. Housing and Urban Development Companies ...... 28 D. Cukurova Municipalities Training Association (CMTA) ...... 28 E. The Project Review, Implementation, and Monitoring Unit 29

IV. FINANCIAL ANALYSES ...... 30

A. Cost Recovery and Financial Objectives 30 B. Municipalities ...... 31 InvestmentPrograms and Financing Plans ...... 0... 31 PastFinancial Performance ...... 32 FutturePerformance ...... 33 Creditworthiness ...... 34 C. Water and Sanitation Departments ...... 34 FinancingPlan for Water and SanitationInvestments .... 34 PastPerformance ...... 36 Finat,cialObjectives . ...*...... 37 D. Housing and Urban Development Companies ...... 38 Financial Policies ... 38 MarketingStrategy and Pricing Policy ..... 38 ExpectedFinancial Performance 39

V. PROJECT JUSTIFICATION AND RISKS ...... 40

A. Project Impact ...... 40 General ...... 40 Economic Justification...... 40 Urban Poverty Impact ....* ...... 43 Environmental Imiact ...... 43 B. Project Risks ...... o.*...... 43

VI. ASSURANCES, AGREEMENTS AND RECOMMENDATIONS ...... 45

TEXT TABLES

2.1 Project Cost Table ...... 16 2.2 Project Financing Plan ...... ** -.. 400...... 18 2.3 Procurement Arrangements ...... 21 4.1 Financing Plan for Municipal Investment Programs, 1987-94 ...... 32 4.2 Structureof Municipalities'Recurrent Receipts and Expenditures 33 4.3 Financingof Water and SanitationDepartments Investments, 1987-94 ...... *...*. 35 5.1 EconomicRates of Return of Area-Based Urban DevelopmentComponents ...... 41 5.2 EconomicRates of Return of Water and SanitationComponents .... 42 Page No.

ANNEXES

1. Municipal Engineering Services ...... e...... 49 2. Detailed Cost Estimates ...... 64 3. Summaryof Arraugementsfor Implementation,Finance, and Cost Recovery ...... 72 4. ImplementationSchedule/Action Plan ...... 73 5. Estimated Schedule of Disbursements ...... 89 6. Municipal Organization and Staffing ...... 90 7. Housingand Urban DevelopmentCorporation Policy Statement..o... 105 8. Cukurova Municipalities Training Association Finances ...... 116 9. Project Review, Implementation, and Monitoring Unit ...o...... 117 10. Municipal Finances ...... 128 11. MunicipalWater and SanitationCompanies: Organization and Finance ...... 147 12. Housingand Urban Development Companies Finances ...... 166 13. IncomeDistribution, Affordability and PovertyAnalysis, Economic Analysis ...... o...... , 174 14. Contents of the Project File ...... 182

MAP

IBRD No. 20386- Turkey:Cukurova Urban DevelopmentProject

This report reflectsthe findingsof a mission to Turkey from September28 to November8, 1986, comprising(for varying periods)F. Mitchell (economistand missionleader), M. Armaly (administrativeassistant), B. Assimakopoulos(engineer/planner), G. Graves (trainingspecialist), F. Johnson (urbanplanner), D. Jones (financialadvisor), G. Lee (consultant, municipalfinance specialist), and J. Pettigrew(consultant, engineer). - i -

REPUBLIC OF TURKEY CUKUROVA URBAN DEVELOPMENTPROJECT STAFF APPRAISAL REPORT LOAN AND PROJECT SUMMARY

Borrower: Republic of Turkey

Implementing Municipalities, Housing and Urban Development companies (HUDCs), Agencies: Water and Sanitation departments (WSDs) in Adana, Mersin, Tarsus, Ceyhan, and Iskenderun, Iller Bank (IB), and Cukurova Municipalities Training Association (CMTA)

Amount: US$120.0 million

Terms: Seventeen years, including four years of grace, at the standard variable interest rate

Onlending The Borrower would lend US$119 million to.IB, partly to finance the Terms: Project Review, Implementation, and Monitoring Unit (PRIMU) in IB and technical assistance and equipment for IB, and partly for project municipalities and their subsidiary WSDs and HUDCs. The Borrower would deduct a one time fee of 2.75 percent from disbursements. IB and sub-borrowers would repay on identical Ferms and conditions to the Bank loan, except in the case of funds for HUDOs, which would be repaid to IB, and by IB to the Borrower, approximately pro rata with HUDC land gales. Subborrowers would bear the foreign exchange risk. The remainder of project funds would be passed by Government to the Cukurova Municipalities Training Association (CMTA) on a grant basis.

Project The project would support the Government's policy to strengthen provi- Description: sion of local services through decentralization. It would finance a part of the infrastructure investment programs in five municipalities in southern Turkey to be undertaken from 1987 to 1994. IB would appraise and supervise the programs and monitor the creditworthiness of the municipalities. The project would include: (a) area-based infrastructure programs which would provide serviced land and upgrade services in existing unplanned (gecekondu) areas with about 90,000 households, and would in addition accommodate 86,000 new households, or about one half of household growth forecast for the 1987-94 period in the project cities, (b) trunk infrastructure and citywide engineering programs which would link with the area-based program and help overcome deficiencies in existing main networks for water, sanitation, drainage, roads and solid waste management, (c) support for restructuring the municipalities and strengthening their ability to plan and implement invest.ientprograms, operate and maintain existing facilities, and to manage their finances, (d) development of a regional municipal training institute, (e) assistance to IB with technical assistance (TA) and equipment.

Benefits and The principal benefits of the project would be the improved Risks: services in the Cukurova municipalities and the development of policies and practices which could be renlicated in other Turkish municipalities. Over half of project expenditures would benefit households with incomes below the Bank-defined urban poverty level. The main risk is that it may be difficult to secure the staff needed to initiate many-of these activities. TA by Turkish and foreign consultants in the initial years has been designed to help with implementation and training local staff. A future reversal of the Government's decentralization policy would call the project's viability into question, and possibly require its restructuring. - ii -

Projet C Summat.

Local Foreign Total ------US$ million---- MunicipalLevel Programs Area-BasedInfrastructures Urban ExpansionAreas 47.9 13.5 61.4 GecekonduUpgrading Areas 62.7 19.0 81.6 HousingManagement Areas 15.1 4.6 19.7 Subtotal 125.7 37.0 162.8 CitywideInfrastructures Water and Sanitation 80.6 50.7 131.3 Drainage,Solid Waste & Roads 69.3 25.7 95.0 Subtotal 149.9 76.4 226.2 MunicipalFinance & Management 3.7 2.7 6.4 Subtotal,Municipal 279.3 116.1 395.4

Regionaland NationalComponents Trainingof MunicipalStaff 1.2 0.9 2.1 Iller Bank TechnicalAssistance and Equipment 0.5 2.7 3.2 ProjectManagement 4.8 1.1 5.9 Subtotal 6.5 4.7 11.2

Total BaselineCost 205.8 120.8 406.6 PhysicalContingencies 24.5 9.2 33.6 Price Contingencies 19.5 7.6 27.1

Total ProjectCost "t/

a/ of which taxes are US$36.8million vinaneiAK Plan:

Municipalities 74.7 0.0 74.7 InternalCash Generation(WSD, HUDC) 11.2 0.0 11.2 Beneficiaries 47.8 0.0 47.8 Iller Bank 104.6 0.0 104.6 DevelopmentSupport Fund 11.5 0.0 11.5 Government 37.4 9.6 47.0 Electricityand Telecommunications Authorities 42.5 8.0 50.5 IBRD 0.0 120.0 120.0 Total 329.8 467.4 Estimated Disbursements:

~~~--in US$ million--

Bank Fiscal Year 1988 1989 1990 1991 1992 1993 1994 1995

Annual 14.0 19.5 22.0 22.5 18.5 13.0 8.5 2.0 Cumulative 14.0 33.5 55.5 78.0 96.5 109.5 118.0 120.0

Economicrate of return is 30 percenton the 53 percentof costs for which benefitscould be quantified. TURKEY

CUKUROVAURBAN DEVELOPMENTPROJECT STAFF APPRAISAL REPORT

I. SECTOR BACKGROUND

A. Introduction

1.01 Half of Turkey'spopulation now lives in cities and towns,and the number of urban dwellersis growingat around 4.5 percentper year. Urban areas produceabout three quartersof GNP and are the country'smain hope of providingemployment and incomesto a rapidly growingwork force. Turkey's citiessuffer from inadequateurban infrastructurewhich constrainseconomic growthand imposesheavy socialcosts. In the past, infrastructure investmentshave been limitedand policiesdetermining design standards, pricing,and cost recoveryhave not been adequate. Imbalanceshave resulted from'responsibilities divided between Central Governmentagencies, which have undertakenmost of the infrastructureinvestments, and local authorities, which have been responsibleprimarily for operationand maintenance. Heavy overprogrammingand poor coordinationamong these agencieshave only aggravatedthe problemof adequateinfrastructure provision.

1.02 In its recentpolicy reforms, the Governmentof Turkey has taken a numberof initiativesaimed at meeting the urban servicedelivery challenge. It has decentralizedresponsibilities for key municipalservices to local governments. It is also steppingup the resourceflows to municipalities while givitigthem greaterfreedom to raise their own resources. In addition, the roles and responsibilitiesof CentralGovernment agencies are being reviewedand revised.

1.03 The proposedproject is designed to help the Governmentto refineand implementits decentralizationstrategy through selective interventions in five cities in the Cukurova region in southernTurkey. Rather than covering the whole range of municipalactivities, the projectwould have a narrower focus and finance their infrastructureinvestment program over a six-year period. The projectwould strengthenthe five municipalities'ability to plan, implement,operate, and maintainthese servicesand improvetheir resourcemobilization and financialmanagement. In parallel,it would take a first step towardsreorienting Iller Bank by establishingits capabilityto appraiseand supervisemunicipal investment programs. During preparationof the proposedproject, a blueprintfor municipalreforms has been developed; during implementation,selected policies and programswould be tested for wider replicationin Turkey. -2-

B. Urbaization Trends

Population Growthand SpatialDistribution

1.04 In 1985, 25 million or 49 percent of the Turkishpopulation (51 million) lived in cities and towns of 10,000 or more people. This represents an almost sevenfoldincrease from 3.8 million (19 percentof total)in 1950 and a currentannual rate of in^reaseof about 4.5 percent. The rate of urbanizationshows few signs of slackeningin the years ahead. In the medium term, about half the anticipatedurban populationgrowth - currentlysome 1.2 millionpeople a year -- will be due to natural increaseand the other half will be due to rural-urbanmigration. Betyeen 1962 and 1985, agriculture's share of GDP fell from 38 percent to 20 percent,agricultural employment fell from 9.7 million to 9.4 million,and the rural populationgrew at a modest rate of about 0.6 percent. This structuraltransformation of the economy, typicalfor countriesat Turkey'sincome level, is expectedto continuewith the urban areas attractingrural migrants in search of employment opportunitiesin industryand services.

1.05 The urban populationis well distributedamong a network of major citiesand smallertowns. Slightlyover one third lives in the three largest cities:Istanbul (5.5 million),Ankara (2.3 million),and Izmir (1.5 million), which togetheraccount for about 75 percentof the total number of manufacturingplants (Istanbulincluding Marmara region 57 percent,Izmir 10 percent,and Ankara 8 percent). The three major metropolitanareas will probablycontinue to grow at a slower rate than the medium-sizedcities (althoughabsolute number of migrantswill continueto be large). The cities of Adana, Bursa, Gaziantep,and Konya -- all with populationsin excess of 400,000- are emergingas poles of regionalgrowth, absorbing peripheral areas into the urban fabric as they expand. Som't27 other cities have populationsin excess of 100,000.

1.06 Regionalinequalities are of great concernto the Government,and its regionaldevelopment pollcy is centeredaround the objectiveof reducingthe disparitiesbetween provinces. The main explicitinstruments in place for this purposeare disincentivesfor industriallocation in the three main metropolitanareas, substantialincentives for locatingfactories and other facilitiesin the less developedregions, and instructionsto all ministries to accord priorityto these regions,particularly in their investments. Nevertheless,it is not clear that these policieshave significantly influencedthe locationof private industryor employmentgrowth. The main de facto thrust in providingurban servicesis, rightly,to meet demandswhere they exist.

Urban ServiceDelivery

1.07 Public sector investmentallocations for urban infrastructurehave failed to meet the demandsof a growingurban population. Furthermore, planningand administrativetools have been inadequateto manage the growth of the cities. The resulthas been the gecekonduphenomenon: unplanned urbanizationwith insufficientwater supply,sewerage facilities, and solid waste collection,poor road surfacing,overcrowded public transport,few parks and open spaces,and inadequateschools and health centers. These settlements -- erected without permits and usually without individual titles -- represent - 3 - a market responseto the scarcityof servicedland. They also reflectthe preferenceof recentmigrants for single family homes rather than the apartmentsthat predominatein plannedareas. Gecekonduareas have grown fro.m 50,000dwelling units in 1955 to an estimated1,000,000 in 1980. These setttlementsnow form a dense maze of suburbsringing Turkey's major cities and account for an estimatedtwo thirds of all housingin Ankara and half in Istanbul.

1.08 Some progresshas been made in extendingthe coverageof urban servicesta gecekondusettlements. About 75 percentof all urban households have water and over 80 percentelectricity. On the sanitationside, the situationis more problematic:only 20 percentof the urban dwellingsare connectedto public seweragesystems, and few citieshave sewagetreatment facilities. Nevertheless,the backlog in urban servicesremains large in absolutenumbers.

1.09 Public transportis providedin most areas by publicor privatebus companiesor shared taxi cabs (dolmus). Road access in the low-income, peripheralareas is usually poor becauseof inappropriatedesign, lack of maintenance,and inadequatedrainage. At the presenttime, only the three major metropolitancenters suffer major trafficcongestion; high-cost solutions(arterial roads, rail transit)are under study for these cities. Trafficand transportwill become increasinglyimportant issues in other centers as incomes -- and car ownership rates -- increase.

1.10 Even where infrastructureis available,the qualityof serviceis poor, particularlyfor water, sewerage,and solid waste disposal. In many towns,for example,more than half the water is unaccountedfor and interruptionsin water supplyare frequent. These conditionsare the result of inadequatefinances of municipalities(in part due to low cost recoveryfor services),the difficultyin hiring competenttechnical and administrative staff,and a focus by Governmenton investingin new plant rather than maintainingand improvingexisting facilities.

C. nstitutional Arrangements for Urban Management

Municipalities

1.11 Local services in Turkey are provided by a variety of centraland local authoritieR, with considerable overlap of responsibilities.The most importantlocal governmentinstitutions in urban areas are the 1,719 municipalities(serving 63 percentof the nationalpopulation). Under the MunicipalitiesLaw 1580 of 1930, they are responsiblefor a wide variety of regulatoryfunctions (including control of consumerprices, planning and building licenses,business permits, health inspections,etc.), as well as provisionof local services (includingslaughterhouses, gas works, bakeries, markets,public transport,water and sanitation,roads, drainage, solid waste collectionand disposal,and electricity). The actual functionsof municipa- litieshave evolvedover time in responseto technologicalchange, relative access to resourcesand skilledmanpower by centralversu£ local institutions, and Governmentpolicy (para.1.13 below). Electricitysupply and distribution have by now been largelytransferred to the TurkishElectricity Authority (TEK). Until recentpolicy changes,the Ille- Bank and the State Hydraulic - 4 -

Works (DSI) were responsiblefor planning,financing, and implementingthe main water and sewerageinfrastructure. Thus, of the major municipal engineeringservices involving substantial investments, the municipalities were left with road investmentsas their only responsibility.The abilityof municipalitiesto guide growth was also limitedsince the Ministryof Reconstructionand Settlementwas chargedwith preparingurban master plans.

1.12 Municipalauthority resides in the electedassembly which approves all budgetsand major policies. Day-to-dayadministration is the responsibilityof the electedmayor, assistedby a councilwith statutory membershipof representativesof the assemblyand specificmunicipal staff. Municipaldepartments are grouped under up to four deputy mayors. Municipal departmentalstructures vary tremendouslyas do staffingratios for specific functions. Low payscales -- regulated by the Central Government-- make the hiringof experiencedprofessional staff difficult. The presentaccounting system,dating from 1930, providesno guidanceon the cost of various services. In additionto normal departments,municipalities typically include one or more subsidiaryorganizations or departments(isletmes) to manage revenue-earningservices (water supply, public transport,gas works, etc.). Their budgets,acounts, organizationalstructures, and personnelare authorizedseparately from those of the municipalityas a whole, although their operationscome under the authorityof the mayor, council,and assembly. The metropolitanmunicipalities (Istanbul, Ankara, Izmir,and, as of September1986, Adana) are requiredby law to establishautonomous organizationswith their own boards (appointedby the municipalitie)8to handlewater and sanitation. The Adana Water Authority,Adana Su .% KanalizasyonIdaresi (ASKI) was establishedby decree No. 87/11594of March 11, 1987.

CentralGovernment Organizations

1.13 Overallcontrol of local governmentis exercisedby the Ministryof Interior(MOI), to which the governorsof the 67 provinces,subgovernors of the 576 districts,and directorsof the 887 communesreport. Governorsare chargedwith coordinatingall CentralGovernment activities within their provinces,including security. They reviewmunicipal budgets and exercisede facto controlover the SpecialProvincial Administrations (SPAs, which invest in various local servicesbeyond municipal boundaries, and executeworks for centralministries, especially education and health). MOI tutelageover municipalitiesis vested in its Local GovernmentDirectorate (LGD). This Directoratemonitors municipal budgets and staffing,and providestraining for the staff of local government. It also superviseslocal government controllerswho are responsiblefor ensuringthat expendituresare made in conformitywith budgetsand laws.

1.14 Severalother centralagencies carry out urban services. The Ministryof PublicWorks and Settlement(MPWS) provides advice and trainingin urban planning;it also definesmass transitpolicies and physicalplanning standardsto be followedby municipalitiesif they are to qualify for central assistanceor MPWS funds for land developmentunder the ReconstructionAct. It is the ministryto which the Iller Bank reports (para.1.15 below). The State HydraulicWorks (DSI) is responsiblefor investmentsin headworksand water treatmentworks for centerswith a populationof 100,000or more (being increasedin 1987 to 500,000or more),which it then hands over to municipalitiesfor operation. -5-

1.15 Iller Bank. From the point of view of urtan investments,the most significantcentral organization is the Iller Bank (Bank of Provinces). Establishe:by Law No. 4759 of 1945, the Iller Bank had total assets of TL 330 billion (aboutUS$590 million),"' and a staff of 3,250 at the end of 1985. It currentlyfills three major roles:

(a) the channelfor the share of total tax revenuestransferred to municipalitiesas a recurrentgrant on the basis of population(see para. 1.18 below);

(b) as a major publicworks agency, it carriesout mapping,planning, wiaterand sewerageinvestments, miscellaneous buildings for local governments,and electricitydistribution investments for TEK. Heavy overprogrammingis indicatedby the fact that investmentscame to TL 101.0 billion (US$194million) in 1985, in 1,018 projectswith a total value of TL 1,204 billion (implyingan averageproject implementationperiod of at least 12 years). In 1986, Iller Bank's investmentprogram was set at TL 191.6 billion (US$286million).

(c) as a bank, it makes loans from its own resourcesfor projectsit executesas well as for works carriedout by municipalities. It also guaranteesloans and equipmentpurchases by municipalities.Total Iller Bank loans disbursedin 1985 came to TL 67.5 billion (US$129 million),and it had guaranteesoutstanding at the end of the year amountingto TL 44.1 billion (US$76million). At present, Iller Bank does not appraiseprojects for which fundingis sought,relying on its controlover recurrenttransfers to ensure its loans are repaid.

1.16 The State PlanningOrganization (SPO) approvesall municipal investmentsover a certainamount (expendituresof TL 100 million (US$130,000] or more in 1987),as well as any new municipalproject with an estimatedcost of TL 1 billion (US$1.3million) or more. SPO is also responsiblefor approvingthe Iller Bank programand for monitoringimplementation of projects. BecauseSPO lacks sufficientstaff, adequate techniques for updatingcost estimatesto reflectinflation, and regularand reliablereports on physical progressand expenditures,it has been unable to preventsystematic overprogrammingby Iller Bank and other agencies.

CentralGovernment Financial Support to Municipalities

1.17 Municipalitieshave far-rangingduties, yet their ability to levy taxes and imposecharges is severelycircumscribed. For example,until 1986, the CentralGovernment levied and collectedthe propertytax. In 1985, municipalitiesgenerated TL 157 billion (US$300million) in taxes and fees and raisedanother TL 250 billion (US$480million) through their publicutility entities. Becauseof the rapidlygrowing ser ice needs of the urban population,a numberof instrumentshave been createdfor the financingof urban infrastructureand for supportof the municipalities'day-to-day operations. However,until recently,the municipalities'own resourcesand the transfersfrom the Central Governmenthave failed to keep pace with

1/ Assumingyear end exchangerate of TL 560/dollar. Average 1984 exchange rate is assumedat TL 380/dollar,1985 at TL 522/dollar,and the 1986 rate at TL 670/dollar. demand. Between1950 and 1980, years in which the urban populationgrew rapidly.revenues of municipalitieswere relativelyconstant at 9 percentof the state budget. The resultwas that between1960 and 1980 per capita municipalrevenues declined by 25 percentin real terms. This patternhas now been reversedby the Government'sdecentralization policies.

1.18 Two revenue-sharingprograms are the main vehiclesfor recurrent transfersto municipalities:(a) 6 percentof total Governrenttax revenues are transferredto all municipalitieson the basis of their population(TL 226 billionor about US$430 millionin 1985),and (b) 5 percentof all Central Governmenttaxes collectedwithin the metropolitanareas are returnedto the metropolitanmunicipalities in these areas (TL 109 billion or about US$210 millionin 1985).

1.19 Additionalfinancial support to municipalitiesis providedthrough the investmentprograms of Iller Bank and DSI. One third of Iller Bank's works are financedthrough loans from the MunicipalFund (which is itself fundedby 2 percentof all Governmenttaxes and 5 percentof petrol consumptiontaxes): these loans have maturitiesof up to 30 years and carry no interestcharge. Somewhatover one quarterof Iller Bank's works are financedthrough regular long-term loans (15-25years) from Iller Bank that carry a 16 percent interestrate. The remainderof its works is financed throughadvances (with variousmaturities and interestrates ranging from 16 to 70 percent)and contributionsfrom TEK. Normally,the major water supply works constructedby DSI -- and financedthrough the Governmentinvestment budget- are handed over to the municipalitieswho will repay the cost over 30 years at zero percent interest.

1.20 All three funds of the tax-financedPublic Participation and Mass HousingFund Administration,which was establishedin 1984, work in urban areas. The PublicParticipation Fund (PPF),which is parily financedby revenuebonds, recentlyhas providedfinance to the DSI for water supply works in Ankaraand Istanbul;the DevelopmentSupport Fund (DSF),among its other activities,lends to municipalitiesfor land acquisition(land purchaseloans are repaidwith a premiumof 10 percentwhen the land is sold); and the Mass HousingFund (MHF) is the principalsource of mortgagecredit to low-income faMilies(below TL 1.7 millionannual income). MHF receivedabout TL 268 billion(about US$566 million) in 1984 and 1985, and is expectedto have receivedabout TL 293 billion (US$437million) in 1986. From its establishmentin 1984 throughthe end of September1986, it providedfinance for some 360,000housing units (this compareswith an increasein urban householdsover the same periodon the order of 580,000).

D. Government's Urban Policies

Overview

1.21 The preceding sectionsdemonstrate that urban growth during the post-war period has largelybeen an unmanagedprocess in which the centralized systemfor urban planningand infrastructureproyisions has failed to respond adequatelyto rapid populationand industrialgrowth.

1.22 In the early and mid-1980s,in order to overcomepast service deficienciesand acommodatefuture growth the Government:(a) decentralized - 7 -

responsibilitiesfor planning,design, financing, and implementationof key urban servicesto municipalitiesand (b) increasedthe resourceflows to municipalitiesand giving them greaterfreedom to raise their own resources. The Governmentrecognizes that for these policiesto succeed,local governmentsneed to be significantlystrengthened, and the roles and capabilitiesof CentralGovernment institutions need to be reshaped.

MunicipalStrengthening

1.23 Finances: The strengtheningprocess began with increasesin revenues allocatedto municipalities.Increases since 1980 in revenuesharing, devolutionof the propertytax (in 1986),and increasesin tax rates and tariffsfor services,conservatively estimated,. are likely to double the resourcesgoing to municipalitiesin the five-yearplan period covering 1985-89compared with the last. Accordingto availableinformation, total municipalreceipts in 1986 (paras.1.17-1.18) were about TL 742 billion (about US$1,420millioa), or about 16 percentof Central Governmentconsolidated budget revenuescompared to about 9 percentas recentlyas 1982. In addition, they were beneficiariesof stepped-upinvestments on their behalf by Iller Bank and DSI. Additionalloan funds were also made availablethrough the PublicParticipation and Mass HousingFund Administration(para. 1.20).

1.24 Notwithstandingthe presentbuoyancy of municipalrevenues, local resourcegeneration remains a criticalissue. Among the significantsteps taken by the CentralGovernment to expand the municipaltax base are: devolvingthe propertytax and increasingits rate (in 1987, this will be 0.4 percentof the value of residentialbuildings, 0.5 percent of other buildings, and 0.6 percentof land),granting permission to charge for sewerageservices, and doubling (to 2 percentof propertyvalue) the allowablecharges to recover costs of municipalimprovements (in roads and sidewalks,and water and sewerage). The 1985 abolitionof outrightGovernment grants for municipal capitalworks was also intendedto increasethe efficiencyof resource allocationby ensuringgreater cost recovery(these grants came to TL 18.5 billion,or US$49 million,in 1984).

1.25 InstitutionalStrengthening. The mux)icipalitiesrequire institutionalstrengthening to perform their traditionalas well as their new functions. The key areas for improvementare: (a) investmentplanning, design,and implementation;(b) accountingand financialmanagement; and (c) operationand maintenanceof municipalengineering services. A systematic programfor staff developmentand trainingwill be needed and, in many cases, the use of contractemployment for key technicaland managerialpersonnel. Furthermore,to permitmore effectivedischarge of responsibilities,a rationalizationof municipalorganizational structure is required,including in some cases,establishment of new entities(isletmes or sirketswhich are companiesestablished under the commercialcode) to handle certain functions (for example,water, sewerage,and land development). Draft municipal legislation,expected to go before the nationalassembly in the near future, is designedto facilitatethese improvements.

CentralGovernment Agencies

1.26 Decentralizationmeans redefiningthe role of CentralGovernment institutionsnow active in municipalaffairs. Rather than executinglocal works, CentralGovernment agencies will increasinglysupport municipalities by (a) definingoverall financing frameworks and investmentpriorities, (b) establishingguidelines for local agencies to follow in designingand operatingservices, (c) providingadvisory and technicalservices, (d) appraisingand approvingprojects for which CentralGovernment funding is sought,and (e) gatheringdata on the performanceof municipalitiesin deliveringservices with a view to feeding this back into decisionson resourceallocation, appraisal criteria, and advice to municipalities. Abolitionof the Ministry of Reconstructionand Resettlement,aliocation of its planningresponsibilities to municipalities,and incorporationof its training,advisory, and standardssetting functions in the Ministryof Public Works and Settlement(MPWS), was a first and major step in this direction.

1.27 The role of the Iller Bank is presentlyunder review. The last two years have seen severalchanges in legislationdesigned to facilitatethe servicingof gecekondusettlements, including simplification of the procedures for regularizingtheir planningand cadastralstatus (therebymaking them eligiblefor public servicesand susceptibleto cost recoverymechanisms), and adoptionby the MPWS of planningand infrastructuredesign standardswhich are likelyto be more afrordableto beneficiarycommunities than previous standards.

E. The Cukuova Municipalities

1.28 The Cukurovaregion was selectedfor the projectbecause it exemplifiesthe problemsof rapid urban growth and servicedeficiencies, and becausefuture growth in this importantarea will be jeopardizedif services are not providedmore efficiently. The region comprisesthe agriculturally rich CukurovaPlain within the provincesof Icel, Adana, and Hatay (see Map IBRD No. 20386). These provincesrecorded a populationof 3.8 millionat the time of the 1985 census, havinggrown at a rate of 3.5 percent per annum since 1945 (comparedwith the nationalgrowth rate of 2.5 percent). The five cities includedin the proposedproject had a 1985 populationof 1.5 million,or about 6 percentof the country'surban total. Since 1945, they have grown at 5.3 percentper annum (comparedwith about 4.5 percent for all centerswith 10,000or more population). This growthhas recentlyaccelerated, reaching 6.2 percentfrom 1980 to 1985, and currentlyadds about 90,000-100,000persons per annum. Adana, with a populationof 776,000,is the fourth largestcity in Turkey. The other four cities that would be includedin the proposedproject are: Mersin (314,000),Iskenderun (174,000), Tarsus (160,000),and Ceyhan (77,000).

1.29 Populationgrowth in this region has eespondedto economicgrowth, and both are expected to continueabove the nationalaverages in the future. Migrantsfrom the surroundingagricultural areas make up more than half of the urban populationincrease. Many new urban dwellerswere enticed from Eastern Turkeyby prospectsof seasonalemployment in Cukurovaagriculture and have remainedin the region and joinedthe industriallabor force. Economicgrowth in Cukuro a was initiallybased exclusivelyon agriculture(irrigated cotton and a varietyof food crops)and agriculture-linkedindustries and services. In the last two decades,heavy industries(the largeststeel plant in Turkey, fertilizers,and a refinery),light industriesto serve the region, its hinterland,and export markets,and transshipment(especially to the Middle East) have become importanteconomic activities. The region is anchoredat eitherend by the ports of Mersin and Iskenderun,with additionalports at - 9 -

Yumurtalik(fertilizers), Dortyol (pipelineterminus), and Isdemir(steel mill). A new free zone has been establishedat Mersin,and another is being planned for Yumurtalik,the terminusof the new Iraq-Turkeynatural gas pipeline. Althoughexports to Middle Easternexport marketsare not, for the moment, a major source of growth,other developmentsin the hinterland,such as the AtaturkDam and southeastAnatolia project, promise to cre.te substantial futuredemands for the region'stransport, industrial, and servicesectors.

1.30 Urban service deficienciesstunt welfareand growthprospects. Almost half of the populationsof the five largestCukurova cities live in gecekondus, with higher proportions in the larger centers (Adana - 58 percent, Mersin - 47 percent, Tarsus - 40 percent, Iskenderun - 30 percent). Some gecekondus are built on squattedpublic land (mainlyin Iskenderun). Unoccupiedpublic lands have largelydisappeared and most buildingis now on privateland subdivided and sold without planningapprovals. The majorityof these settlementsare served (formallyor informally)with water and electricity,some with roads, but few with sewers (92 percentof householdsare connectedwith public water systems,of which 15 percentare illegal,and 18 percentwith sewer systems). The low-lyingareas with high water tableswhere most gecekondusare located and where water is drawn from irlividualwells, face particularlyhigh health risks from poor sanitation. Drainage is also a problem in large parts of these cities,and malaria,after being eradicatedin the 1960s$ has reemergedas a major health threat in recent years. Unmanagedurban garbagedumps also pose a hazard. Lack of basic infrastructures- water, electricity,and telecommunications- increasinglyconstrain development of light industry(in particular),although major increasesin power and telecommunicationsare planned or underway. With growth in the number of motor vehiclesat over 11 percentper annum in the Cukurovaprovinces, traffic will requireincreasing attentionin the near term if costs of transportingpeople and goods are to be restrained. Disposalof industrialeffluents has not yet become a major issue, althoughit is likely to emerge as one, in responseto greaterdensity of industry,use of more chemicals,and rising consciousnessof environmental matters in Turkey.

F. Bank Goals, Role, and LendinEStrategy

Past Operations

1.31 The Bank's urban-relatedsector work and lendingoperations in Turkey have been limiteduntil recently. Sectorwork to date comprisesan urban sector review (ReportNo. 4631-TU,1983), a review of the housingfinance system,and a water subsectorstrategy paper. Urban policiesand programswere reviewedas part of a recent public investmentreview. Urban-relatedlending operationshave includedthe IstanbulUrban DevelopmentProject (Credit324-TU, $2.3 million,1972, closed 1980)which financedstudies to preparean integratedurban developmentprogram for Istanbul,the IstanbulWater Supply Project (Loan844-TU, $37 million, 1972, closed 1981),and the Istanbul Sewerageproject (Loan 2159-TU,1982, $88.1 million). Credit 324-TUwas unsuccessfulin its main objective,largely because of overoptimismabout the ease with which institutionalchanges could be achievedto strengthen investmentplanning at the Istanbulmetropolitan level. The water and sewer operationshave been fairlywell implementedand have largelyachieved their institutionbuilding objectives, in part due to changesin CentralGovernment policies. Lessonsdrawn from the IstanbulWater Supply Projectincluded the - 10 - need to address the problemof unaccountedfor water and institutional strengtheningand training. These lessonshave been incorporatedin the proposedCukurova Urban DevelopmentProject. The CukurovaRegion Urban EngineeringLoan (Loan 2537-TU,$9.2 million, 1985)financed preparation of the proposedproject, as well as studieson Iller Bank managementand equipmentfor the CadastralOffice to acceleratecompletion of the cadastrein Cukurova region (see also para. 1.27).

LendingStrategy

1.32 The basic objectiveof the Bank's lendingstrategy is to assist the Governmentin its decentralizationpolicy and help build up the capabilitiesof municipalitiesand their subsidiaryorganizations such as ISKI. At the same time, the lendingoperations are designed to extend the coverageof basic municipalservices and to strengthenresource mobilization at the local level to ensure replicabilityand improvedself-financing.

ProjectOrigin and PreparationPerformance

1.33 The Governmentstated its interestin the proposedproject during the March 1984 discussionsof the Urban SectorReview. A ProjectCoordination Unit (PCU) to manage projectpreparation was establishedin late 1984 under the State PlanningOrganization. It was headedby a UNDP-financedproject director and staffedby Turkish consultants. Separateconsultants prepared feasibility studiesbetween April 1985 and August 1986 in time for appraisalin October/November,1986.

1.34 Importantachievements towards developing and implementingthe new urban policiesand programswere made during projectpreparation. One innovation for the managementof urban growth was the creationof Housingand Urban DevelopmentCorporations (HUDCs) that will, on a self-financingbasis, developinfrastructure for urban expansionareas. Similarly,systematic approacheswere developedfor guiding the growth of spontaneoussettlements and for providingthem with basic servicesin a coordinatedmanner. These innovationsset the stage for the three area-basedprograms under the project: (a) urban expansion,(b) housingmanagement, and (c) gecekonduupgrading. Lower cost planningand designstandards were adopted for on-site infrastructuresin the area-basedprograms and for the designof citywidewater and seweragesystems. Major steps have been taken by the municipalitiesto restructuretheir organizations.Legislation has been changedto facilitate upgradingof informalhousing areas and to allow a doublingof the amount which can be recoveredfrom beneficiariesof municipalimprovements. Government awarenesshas increasedabout the need to improvemunicipal accounting and financialmanagement practices (new systemshave so far been introducedon a pilot basis in four municipalities),and to revise the role of the Iller Bank (assistedby a study financedunder the engineeringloan). The Iller Bank has createda ProjectReview, Implementation,and MonitoringUnit that will assess the viabilityof individualsubprojects and the continuedcreditworthiness of projectmunicipalities. The PCU has been closelyinvolved in draftingnew municipallegislation which would modernizelocal governmentorganization and operationsalong the lines supportedby the project. Seweragecharges have been introduced,progressive water tariffsbegun and, in four out of the five projectmunicipalities, water tariffshave been increasedsignificantly. Key steps have beer taken to establishthe institutionswhich will be responsible for differentproject components. - 11 -

H. THE PROJECT A. Proiect Obiectives

2.01 The proposedproject is formulatedwithin the frameworkof the Government'sdecentralization policy. Its main objectivesare to:

(a) assist the municipalitiesof Adana,Mersin, Tarsus,Iskenderun, and Ceyhan to overcomeservice deficiencies and manageurban growth throughthe financingof urban infrastructure;

(b) introducein the five projectmunicipalities policies and institutionalarrangements for investmentplanning and implementation,cost recovery,financial management, and staff developmentwhich would be suitablefor replicationin other Turkish cities;and

(c) build up in Iller Bank a capacityfor appraisaland monitcringof municipalinfrastructure projects and investmentprograms.

B. Main Features of the Project

2.02. The projectwould financepart of the 1987-94segment of the project muaicipalities'investment programs in basic engineeringservices. These investmentprograms were originallydeveloped during projectpreparation and would be updated and revisedannually to respondto changingdemands and resources. The investmentprograms were designedto addressservice needs in a systematic,coordinated manner with specialemphasis given to presentand futureresource constraints. This involved,inter alia, analysesand projectionsof local revenuecollection, Central Government revenue sharing and lending,recurrent expenditures, and investmentneeds in sectorsnot coveredby the proposedproject.

2.03 Iller Bank would review the investmentprograms on an annual basis, assess the municipalities'continued creditworthiness, appraise subprojects submittedfor CentralGovernment funding, and monitor implementation,through its ProjectReview and MonitoringUnit (PRIMU)(see paras. 3.14-3.17below).

2.04 The municipalinvestments to be financedunder the projectwould help direct urban growthand catch up on servicedeficiencies through coordinated area-basedprograms for constructionof secondaryand tertiaryinfrastructure and throughextension of major trunk (i.e.,primary) infrastructure and improvementsin engineeringservices on a city scale. The main componentsare:

(a) The area-basedinfrastructure programs, which would deal with three differentsituations: (i) in the urban expansionareas, large tracts of unbuilt land would be developedfor subsequentsale for constructionof houses (in parallel,the Governmentwould provide the necessarysocial facilities);(ii) in the housingmanagement areas, spontaneousprivate development would be guidedand regularized,and the basic infrastructureand socialfacilities provided; and (iii) in the geCekonduupgrading areas, land tenurewould be regularizedand infrastructuredeficiencies corrected. In the urban expansionareas, the cost would be recoveredthrough the price of developedland; in - 12 -

the privatelyowned areas, throughbetterment and connection charges. The area-basedprograms would help tQ arrest the establishmentof new gecekonduareas while at the same time upgrading the infrastructurefor about 90,000existing gecekondu households and providingservices for some 86,000new householdsor about 50 percent of the new householdsin these cities from 1986 to 1994.

(b) The trunk infrastructureand citywideengineering programs, which would provide linkagesto the area-basedprograms and help overcome deficienciesin the existingmain networksfor water, sanitation, drainage,roads, and solid waste management. They would include works, equipment,design, and supervisionservices.

(c) The institutionaldevelopment program, which would supporta restructuringof the municipalitiesand strengthentheir ability to plan and implementinvestment programs, to operateand maintain existingfacilities, and to manage their finances. This component would includeequipment and selectedtechnical assistance to the five municipalitiesand to the PRIMU,and the establishmentof a regional trainingcenter for municipalstaff. Chapter III, on institutional development,describes the new institutionalstructure which would be supportedby the project.

C. DetailedProject Descrption

2.05 The PRIMUof the Iller Bank would be responsible for appraising all subprojects. Since,however, it would take time for the PRIMUto build up its capacity,the World Bank has assessedthe initialcreditworthiness of the municipalitiesand appraisedthe overallmunicipal development programs, most major subprojectsand, especially,the subprojectsfor which contractswould be issuedduring the first two years of implementation.Because urban growth in the projectmunicipalities is highlydynamic it is likelythat priorities and resourceconstraints will changeover time, necessitatingchanges in municipalinvestment programs. Thus, the quantitativedescriptions below indicatethe size and compositionof the projectas presentlyenvisaged.

Area-BasedUrban Development

2.06 Urban ExpansionAreas (1987 base cost US$61.4million). The newly createdHousing and Urban DevelopmentCorporations (paras. 3.11-3.12 below) would developlarge tractsof land locatedat the presenturban fringes coveringsome 491 hectares(Mersin 248 ha, Tarsus 98 ha, Iskenderun107 ha, and Ceyhan38 ha) in the first phase, 1987-93. The projectwould provide for the purchase,planning, subdivision, and servicingof plots for about 25,000 householdsor 125,500inhabitants at priceswhich are affordableto all income groups,with at least one half of the land pricedfor familiesin the lower half of the incomedistribution.- Sites for the Urban ExpansionAreas (UEAs)were selectedon the basis of land availability,proximity to employmentopportunities, and costs for site preparationand off-site infrastructuredevelopment. The UEAs would also includeland for community facilitiesand commercial/lightindustrial uses. In parallel,the Government

1/ Adana HUDC is developingabout 285 ha with about 16,900households without Bank finance. Costs of off-siteroads, and water providedby the municipality,would be financedunder the project,and are includedin the projectcosts in Table 2.1. - 13 - would constructcommunity and emergencycenters, schools, and health facilities. The TurkishElectricity Authority (TEK) and Posts and Telecommunicationsoffice (PTT) would installelectricity and telephones. To achievethe goals of affordabilityand replicability,the UEAs would adopt less costly land use planningand engineeringdesign standardsthan previously applied in Turkey. The average cost of this programwould be about US$118,000 per ha.

2.07 HousingManagement Areas (US$19.7million). The projectwould supportnew planning,management, and financialprocedures to ensure that tenureis regularizedand infrastructureis installedaccording to appropriate planningstandards in privatelyowned and informallysubdivided areas which would otherwisebecome gecekondus. About 36,000new householdswould be locatedin these areas. They are locatednear infrastructureswhich would be providedthrough the area-basedinfrastructure and the gecekonduupgrading programs. Averagecost would be about US$22,000per ha.

2.08 GecekonduUpgrading Areas (US$81.6million). The e:distinginformal housingin the Cukurovaregion amounts to some 145,000dwellings, of which about 90,000would benefitfrom the project. The Adana, Mersin, Tarsus,and Iskenderunmunicipalities would developand implementa rolling programof upgradingthrough the grantingof land titles,revision of zoning regulations. and provisionof access and circulationroads, water supplyand sanitation, drainage,and refusecollection. In parallel,the Governmentwould build additionalcommunity facilities (i.e., schools, health, and community centers),and TEK and PTT would supplyelectricity and telephoneservice. This programwould be closelycoordinated with primary infrastructure improvements.The upgradingprogram would encouragedensification in existing neighborhoodsby developinginfill plots and vacant sites which would accommodateabout 25,000new householdsor some 14 percentof new households up to 1994. It is anticipatedthat during the project periodall gecekondus would be upgradedin Iskenderun,and that continuationof the programwould have the same result in Mersinand Tarsus by 1995 and Adana by 2000. The averagecost of this programwould be about US$38,000per ha.

MunicipalEngineering Programs '

2.09 Water SupPly (US$72.5 million). This componentwould provide: (a) water sourcedevelopment through renovation of some 22 existingmunicipal tubewellsin Adana, constructionof about 48 new wells in Adana (36) and Iskenderun(12), chlorinationand pumpingfacilities, and hydrogeological investigations;(b) distributionnetworks comprising some 125 km of primary transmissionand feedermains, about 560 km of secondaryand tertiary distributionmains togetherwith some 146,000m 3 of storagecapacity; (c) tools and equipment,vehicles, and professionalservices for improved operationand maintenance,metering, leak detection,and reductionof illegal connections. In total,it is estimatedthat some 190,000households would be connectedto the water supplynetworks under the various programs.

2.10 Sanitation(US$58.8 million). The proposedproject would finance: (a) first phase sewage treatmentplants (anaerobicponds) in Adana, Tarsus, and Ceyhan (the developmentof completetreatment facilities would follow in the mid-1990s);(b) new or modifieddischarge facilities in Adana, Mersin,

1/ These componentsare presentedin more detail in Annex 1. - 14 - and Ceyhan; (c) some 115 km of trunk sewerswith associatedoutfalls and lift/pumpingfacilities; (d) about 540 km of secondaryand tertiarynetworks; and (e) oceanographicinvestigations for sea outfallsand professionalservices for wastewatermanagement (including management of industrialeffluents and seweragetreatment). Complementedby ongoingIller Bank works, the various projectfinanced programs would extend municipalsewerage services to about 320,000households.

2.11 Drainage(US$15.6 million). All the project cities have combined sewerageand drainagesystems. The proposedproject would continueto use suitablesections of the existingsystem and provide separatestormwater drainageworks only in areas where local topographicalconditions create major drainageproblems. The works would include:(i) rehabilitationof existing systemsby providinggullies, catch basins,gratings etc. and, where necessary, removingsilt and other blockages;and (ii) constructionof some 150 km of drains.

2.12 Solid Waste Management(US$11.5 million). The projectaims to improve the efficiencyof the existingservice throughorganizational restructuring (see paras. 3.04-3.05below), improvementsin collection,and establishmentof sanitarymeans of waste disposal. Disposalis in open dumps in all towns exceptMersin, which uses a compostingplant. The proposedproject includes funds for acquiringand equippingthe necessarydisposal sites in all towns (Ceyhan'sdisposal site is acquired). Improvementsin sortingwould be made at the existingcompost plant in Mersin. In Mersin, Tarsus,Ceyhan, and Iskenderun,the projectwould financea total of over 50 vehiclesand sweepers, and about 10,000containers. (Adanahas contractedout most collection, retainingsome municipalcapacity in the centralareas.)

2.13 Transportation(US$67.9 million). The roads and transport subcomponentswould consistof two major elements: (a) a program for road maintenancein all towns,and (b) the upgradingor constructionof about 40 km of roads,together with junction improvements,and pedestrianoverpasses in Adana,Mersin, Tarsus,and Iskenderun. The road maintenanceelement would span two years of work to correctmajor existingdeficiencies, develop a routineand periodicmaintenance regime includingthe reshapingof road profiles, restorationof pavementstrength, and provisionof appropriateroad drainage systems,and provideprofessional services to assist with designand implementation.

InstitutionalDevelopment

2.14 MunicipalFinance and Management(US$6.4 million)., Most componentsof the projectwould includemeasures to strengthenthe capacityof the municipalitiesto plan, implement,operate, and maintain engineeringservices. Althoughreorganization and staffingplans were developedduring project preparationand implementationis now underway (paras.3.01-3.09 below), the projectwould includea small provisionfor technicalassistance (expected to be carriedout primarilyby Turkishconsultants) to the municipalitiesin variousmanagement tasks. The municipalfinance components of the project would aim to upgradethe financialmanagement of the projectmunicipalities and their water supplydepartments as requiredby the increasedresponsibility devolvedto these agenciesunder the decentralizationpolicy. In addition,the componentwould provide technicalassistance, on-the-job and in-service training,and some computerequipment and software,to supportstrengthened municipalfinance departments to introducenew financialand accounting - 15 - procedures. The computersto be ptrchasedunder the projectwould extend the computerizationprogram initiatedduring the EngineeringLoan (2537-TU).

2.15 MunicipalStaff Training (US$2.1million). A major difficultyin the implementationof the Government'sdecentralization policy is the lack of trainedand experiencedstaff in the municipalities. The projectwould adopt a comprehensiveapproach to manpowerdevelopment and trainingincluding the establishmentof a traininginstitute operated by the CukurovaMunicipalities TrainingAssociation (CMTA) (para. 3.13 below) and the creationof manpower developmentdepartments in each municipality(para. 3.07 below). The institute would be housed in rented facilitiesduring the projectperiod. A Training ImplementationUnit (TIU) would help establishthe institute,prepare courses and teachingmaterials, ar.d train its staff (includingmanaging the initial trainingcycles). Between1987 and 1992, the CMTA would developand provide courseson a continuingbasis to about 4,800 trainees,3,500 of whom would participatein courses lastingone or more weeks. The criticalskills gaps tend to be managerialrather than technical. Therefore,the initialemphasis of the trainingwill be on management,the programmingof projectand maintenancework in differentdepartments, and staff supervision,as well as on skillsneeded to reinforcemanagement and planningactivities, namely accountingand stock control. The TIU would be allocatedapproximately 285 manmonthsof professionalservices (aboutone quarterby foreignexperts) in trainertraining, course and materialsdevelopment, evaluation and testing, educationaltechnology, and civil engineering. Twenty-threemanmonths of overseasfellowships (for seven trainees)would also be providedto train full-timestaff of the CMTA and of the Turkish TIU team. About 70 manmonthsof fellowshipsin Turkey on the subjectsof programplanning and budgeting,and manpowerplanning and developmentwould also be undertaken.

2.16 Iller Bank (US$9.1million). The projectwould supportthe staffing of the PRIMU with contractemployees, including short-term technical assistance inputs in financeand certainengineering specialties. Provisionwould also be made for technicalassistance to Iller Bank to assist with implementingchanges in its operations. Iller Bank intendsto computerizeits accounts,and a provisionfor this is includedin the loan. The finalizationof the computer systemwould await decisionon Iller Bank's future role and functions. Proposalson this were made by consultantsfinanced under the EngineeringLoan, and discussionswithin the Governmentare continuingon which option to adopt. Under the action plan agreedat negotiations(Annex 4), a decisionon this matter is expectedby December31, 1987.

D. Project Costs

2.17 Table 2.1 below shows a breakdown of cost estimates by major component and by town. Further detailsare containedin Annex 2. Projectcost estimates are based mainly on detailedengineering designs for the first phase urban expansionschemes and for pilot schemesof gecekonduupgrading. Costs for the remainingcomponents are based on preliminarylayout plans and engineering designs. The base line costs are end-1986price levels. Physicalcontingencies are estimatedat 5 to 15 percentbased on the level of design and site specific information. The price contingencieshave been estimatedas follows: for local expenditures,25 percent in 1987, 20 percent in 1988 and 1989,.18 percent in 1990 and 1991, and 16 percent thereafter;for foreignexpenditures, 3 percentin 1987, 1 percent in 1988-90,and 3.5 percent thereafter. - 16 -

Table 2.1: PROJECTCOST TABLE

I total I toitl I oO m Io fot.tgn Osat, twoaI foreign, total Esolafig Costs tocal Foreign total E.ohaeig Costs

oun" EXPANSIONANA 1,515.4 896. 2,t112. 36 * 2, 153.8 I. I35.6 3.349,5 36 GECERONOUoUP loRoI 21.94.1.I SO.606 28,149.9 23 9 M. 260.1I IlOi..I IL 061.2 23 9 1189111SEIVLOPREUT mn*NONIUT 5.648I 1.896.2 7.36.0 2s 2 1,531.6 2,208.3 9 140.0 23 2 RUNicipIE SERVICESMAIER a S*N1T*TIONI 25,708.9 19,607.2 41.316. I 43 IS 34,361.5S 2. 145.3 60,130.8 43 Is 07111111646813136 SERvicES 21,520.4 7. 728. 33,216.5 23 It 34,02? 2 10.311.5 44,344.7 23 II NUNICIP*LFI11NA1 M1111*1*031 W1.$ 130.0 1,641.6 44 I 1,211.6 613.4 2. 18.2 44 Sub-Total *0*MU 81.432.3 3122.g2 I1866l.95 31 39 108171L.4 49.6IL".@11S2 15. 4 3t is &. TARSU Una*1 EXPANSION*3* S.98S. 1 1,641.2 7,626.3 22 3 7,960.1 2. I66. 2 10,1I68.,4 22 3 GECENON1OUP0MA3I11 4.511.0 1.90I.?I &044.?1 21 2 6,043.4 2, 010.3 6.016.?7 25 2 11045111oEvItolO'EN NOAN*GENET 1.e12.3 406.1 16881.4 25 I 1583. 0 121.5S 2.508.) 25 I UNOICIPA.SERvicES MAIER3 a SANITATION 17420.4 3,681.6 1I. 102.2 33 4 9,863.9 4.109. I 14.603.0 33 4 OTNEREIGIGNCEEING SEAVICES 7,745.0 3.286.3 11,014.4 30 4 10,328.0 4,311.80 14.66.68 30 4 IUNICIP*l FINANCEAge0 NOA11ENEN 461.1 319.9 I7I.0 44 0 614.9 10".3 1, 16C.3 44 0 ShTb-otaI TARSUS 27,192.0 10,648.0 3*140.0 28 13 3678.`1.3 14.510.3 St. 3816 26 13 C. 1111513 Una*1 LIPANSIONAREA 17,0612.9 5,144.0 22,200.9 23 1 22,750.6 6,6858.7 29,609.3 23 7 6ACERONDOUPGRADING11 15,329.3 4,401.2 19,730. S 22 6 20,439.0 1,868.3 26,307.3 22' 6 HWSINSOEVELOPNEOT N*NAGENEIN 2,124.1 798.4 3,282.5 i3 I 3,3895, 1,011.2 4.3761.? 23 I NUNICIP*tSERVICES (WATER 8 ;AuITATlION 13,945.6 8,7I.15. 20,681.1 33 7 Is8,194.3 L 914.3 21.548.? 33 7 0OTHERINOMINEEII1 SERVICES 10,8M. 3 4,391.4 15,276. 7 21 S 14,513.17 9811.3S 20,369.0 21 5 NlINICIP*t'FIN*NCE810 11AN1*1681T 133.1 376.9 910.0, 41 0 110.7 502.6 1,213.3 41 0 SubI-total 1113111 60204 21,87.7 62,0661.2 27 2? 800,313.9 2.0,00.3 I0.,424. 3 27 21 0. CEYNAN Una*1 EXPANSIONAREA 1,6.0.2 559.4 2,421.5 23 1 2, 486.3 741,8 3,234.1 23 I NUNICIPALSERVICES (11*71 8 S81117TINI" 2,610.4 1. 480.? 4. "I. 1 31 I 3,747.2 1,974.3 1.721.1 35 OTHERE11OI11EEIN6 sERVICEs 2,460.6 1,064.1 3.2,125. 30 I 3,260.81 1,41.9 4.700.? 30 NIJ1ICIP*LFINANCE A110 1811411511 301.3 112.3 139.5S 32 0 489.? 229.? lit93 32 0 Sub-Totel CEIHAN 7, 904.5 3,277.2 I1..781.?1 30 4 Is,006,0 4, 366.1 14,3715,6 30 4 1. 151E30(1II 111*1 EZP*1l5101ARIA 9,417.5 1,811.9 II.,289.5 l 4 12.5S&188 2,495.9 IS. 012.?I ? 4 UCECEROhIUPORADINI S.,198.I 1.O,705.7 9.94.?1 25 2 6.931.9 2,574.3 9,206.2 25 2 HOUSING11OEVELOPIIEN II*N*OINT 1,164.4 5682 2,330.6 24 I 2, 312.5 M1.0 3, 107.5 24 IWNICIPALSERVICES (mAtERl a S*NIT*TIUOI 10,463.8 6.137.7 17.001. S 38 6 13.911.8 6.716. 22.666.7 38 6 OTHERENGIN1EERING SERVICES 9,351.1 2,187.6 6. 130.9 34 3 1. 134.6. 3,7117.0 10,8951.9 34 3 NUNICIPALFINANCE MD NAN*6IIEt 468. I 316.2 641.3 41 0 624.1 S"10.3 I. I28.4 41 0 S~~OA*aI6 ISRENOEIUN 32.643,9 13,8$47.5 46,11t1.59 30 IS 43.351.9 18,463.5 62,015.4 30 is F. N*110118*110 REGIONAL TRAINING 560.2 706.4 1,168.5 45 I 1,173.6 944.5 2,118. I 45 itILE G ?A15AND10 ZUIPIIEII 393.0 2,013.3 2,408.3 64 I 524.0 2,664,4 3,208.4 84 Sub-fatal NA1IONALaMD 3t6104*1 1,273.2 2,721. 1.3994.9 Go I 1,7.2.6 3,9828.9 5,326.9 Of a. PROJCTNANAGERNIIT PRJECTREVISE INPtEN. NOWTORI11GUNIT 3.600.1I 23.8 4, 423.9 Is I 4.4800.1 1,0OI8.4 5,898.5 19 I Sub-total PROJECTNA*11A5611 3.60 I 823.8 4,423.9 t9 I 4.600. I 1,098.4 5,698.5 19 1 Total 91S1L111COSTS 214.346. 5 90.639. 3 304."I. 7 30 100 285,199.3 120,647.0 406.642.3 30 100 Physical Contlfgncmi" 18,344.3 6,876.3 25.220. S 27 8 24,419.0 6. I66,3 33.621,4 27 6 Price Conti go ci. 212. 194.3 81,821.3 294,015.6 28 O6 19,543.3 1,569.5 27. 113.0 26 7

Total PRJECTCOSTS 444.885.0 119.332.9 624.211. 29 205 329.707.6 137,85. 0 467.382. 7 29 III 2*2?:?:S2 ***222it 2318::::: ::3222:32 23:32:: a2232::2 :ssts:ttsza :2:8:2123 ztt: T:222:,;::: - 17 -

2.18 Design and constructionsupervision have been estimatedat 6 percent of works and equipmentcosts (8 percentof upgradingand housingmanagement components);together with surveysand special investigations(hydrogeology etc.), they are estimatedat about US$28.3qillion (includingcontingencies). Technicalassistance and trainingare estimatedat aboutUS$11.3 million (includingcontingencies).

2.19 The foreignexchange component for the total projectis estimatedat US$137.6million. This reflectsassumptions made about goods to be imported and works contractsto be awarded to foreignand local contractorsand the average foreigncost componentof locallymanufactured goods and equipment. Costs includeexcise and sales taxes,which come to about 7.9 percentof project cost.

E. FinaneingPlan

2.20 The financingplan is summarizedin table 2.2, which shows the sourcesof financeby agency. Agreementwas confirmedat negotiations regardingthe arrangementsset out in this section(paras. 2.20 to 2.24 below). World Bank funds for Iller Bank, municipal,HUDC, and water and sanitationdepartment (WSD) componentswould be relentby the Treasury,on paymentof a 2.75 percentservice fee, under a subsidiaryloan agreement(SLA) to the Iller Bank which would establisha specialCukurova Project Account (CPA). Iller Bank would be responsiblefor repaymentof funds to financeits components(about US$3.6 million for technicalassistance and computerization).It would relend US$115.4million to projectmunicipalities under MunicipalityFinancing Agreements (MFAs) on terms which would ensure that the municipalitiesbear all costs of commitmentfees, interest,and principalincluding foreign exchange risk; they would repay the loans on the same scheduleas they are to be repaidby the Government. The partial exceptionconcerns the US$6.1 milliondestined for HUDCs; these funds would be relentby municipalitiesto HUDCs and would be repaidby HUDCs as the serviced land is sold; the proceedswould be passedback to Iller Bank and then the Treasury,which would thereafterbe responsiblefor servicingthat part of the Bank loan.- Conclusionof the SLA and MFAs, togetherwith ratificationof the ProjectAgreements with each municipality,would be conditionsof effectiveness.Government would pass about US$1.0 millionfrom the Bank loan to the CukurovaMunicipalities Training Association (CMTA) on a grant basis. Annex 3 summarizesarrangements for implementation,finance, and cost recGvery.

1/ This arrangementwas adoptedbecause it would be undesirablefor HUDCs to hold financeafter the works are sold, and because the municipalitiesare not in need of additionalbalances. It would be inappropriatefor the Iller Bank to hold these funds because it does not have the right to hedge foreignexchange risks by holdingforeign denominated balances. - 18 -

2.21 The Governmentwould provide financingfor schools,health facilities,police and fire stations,and would cause finance to be made availableto or by TEK and PTT for the electricityand telecommunications subcomponentsof the area-basedshelter components. Appropriatefunding amountshave been includedin the 1987 budget for subcomponentsto be executed during that year.

Table 2.2: PROJECTFINANCING PLAN (US$ millions)

Implementing mu_ici- Internal Beneficiary iller Development Govern-ITEK and r Agencies palities Generation Contributions Bank SupportFund ment PTT IORD Total

WSDs 28.2 2.6 35.0 49.6 58.3 173.8 Municipalities 44.5 12.3 47.8 51.1 155.6 NUOCs 2.0 8.4 0.5 11.5 6.1 28.5 CMTA 0.2 1.0 1.0 2.2 IllerBank . 6.2 _3.fi 9.8 Sub-Total 74.7 11.2 47.8 104.6 11.S 0.0 0.0 120.0 369.8

SocialMinistries 47.0 47.0 TEK and PTT _ 50.

Sub-Total 0. Q0.0 .0 . °P 4L5 50.5 .0 9.797,S GRAND TOTAL 74.7 11.2 47.8 104.6 11.5 47.0 50.5 120.0 467.4

JU.g: Same totalsmay not add exactly due to rounding.

2.22 The DevelopmentSupport Fund (DSF) would lend to municipalitiesfor acquisitionof land for UEAs on terms which requirethe municipalityto repay the loan, plus a premiumof 10 percent,when the land is sold to the ultimate beneficiary.Municipalities, at a minimum,would recover from HUDCs the cost of the land, revaluedby the rate of inflation(as measuredby the wholesale price index)from the time of acquisitionby the municipalityuntil final sale, plus a positivereal rate of interestof 2 percentper annum (calculated on the revaluedvalue of the land). DSF, throughIller Bank, would also advancean estimatedUS$1.5 million to municipalitiesfor HUDCs at an interest rate of 24 percent to cover financeneeds not met by the Bank loan, advance payments,or retainedearnings. This rate is expected to be positivein real terms from 1988 onwards.

2.23 Iller Bank would be responsiblefor financingdomestic costs of its own components,for financingthe domesticcomponent of municipal,WSD, and CMTA investments,and channellingDSF funds for HUDC investments. IllerBank fundinghas been based upon the amountsnecessary to financethe investment program(including nonproject elements) after takingaccount of financefrom the World Bank loan, internallygenerated funds, beneficiarycontributions, and equity contributionsby municipalities.These funds would be drawn from the MunicipalFur.d for some WSD investments(which is repaid over 20 years at - 19 -

0 percentinterest) and Iller Bank's own resources(to be repaid in equal annual installmentsof principaland interestat 16 percent interestover 15 years for municipalcomponents and 20 years for WSD components). Agreement was confirmedat negotiationsthat these funds would be made availableto projectmunicipalities on terms no less costly than those on which funds are being lent to nonprojectmunicipalities. The municipalitieswould guarantee the CMTA'sborrowings for the project.

2.24 Municipalitieswould finencepart of the costs of municipal componentsdirectly; they would also pay equity to HUDCs and contributionsto WSDs. The contributionshave been estimatedto ensure the financial objectivesby HUDCs (para.4.16 below) and WSDs (para.4.13 below). Although the fractionof own finance,at 28.6 percentof the municipalcomponents, may seem small, it shouldbe borne in mind that the municipalitieswould also be financinga number of nonprojectinvestments worth about US$175million, using own financealmost exclusively. Internalgeneration comprises operating earningsless debt serviceof WSDs and retainedearnings in the case of HUDCs. Beneficiaries'contributions would come from improvementand connectioncharges in the case of municipalitiesand WSDs, and presales depositsfrom purchasersof land from HUDCs.

F. Inplementation Aruangements

Statusof Project Preparation

2.25 The World Bank appraisalmission reviewed those subcomponentson which work would be contractedduring the first two years on the basis of final parcellationplans, engineeringdesigns at 1:1,000scale, and draft biddingdocuments for all on-siteworks for the urban expansionschemes in Mersinand Tarsus;preliminary parcellation plans and designsat 1:2,500scale for the Ceyhan and Iskenderunurban expansionschemes; and pilot schemesfor gecekonduupgrading and housingmanagement areas in all towns which have these components. The economicanalysis of the preliminaryscheme for Ceyhan (para. 5.04 below) indicatesthe need for some design modificationbefore approvalby PRIMU. In the case of the citywideinfrastructure works (munici1 al and other engineeringservices), the mission reviewedstructure plans (showingnetwork layoutsfor water and sanitationand phased expansionsto the years 2000-2010, dependingon the town), togetherwith preliminarydesigns for works for which constructionwill be contractedduring the first two years. Final designs and biddingdocuments for these works will start becomingavailable in April 1987, and bid packageswill start to be tenderedin June. Designsand feasibility studiesof subcomponentsto be implementedin later years will be preparedby the responsibleimplementing agencies and their consultants. The design for gecekonduupgrading and housingmanagement areas is a continuousprocess which will be carriedout by municipalitiesand their consultantsand appraisedby the PRIMU. Acquisitionprocedures for all lands requiredunder the project have commenced. Land acquisitionshould not cause implementationdelays, since the initialtwo years of constructionwould take place on Governmentand municipalland, and proceduresare well underway to acquire the balance. Outlinedraft terms of referencefor most professionalservices and technical assistanceto be carriedout under the projectwere reviewedduring appraisal. A timetablefor procurementof serviceswas agreed during loan negotiations(Annex 4). - 20 -

ImplementationSchedule

2.26 The last subcomponentsto be financedunder the project would be approvedby the end of 1992 with completion,including the maintenanceand guaranteeperiod, expected by June 30, 1994 (Annex4).

Procurement

2.27 About 17 major civil works contractpackages of US$2.5 million or more (with an aggregatevalue of about US$51 million),related to on-siteand off-siteinfrastructure works in urban expansionschemes and for municipal servicescomponents, would be awarded through InternationalCompetitive Bidding(ICB) (table2.3). With the exceptionof the first two contacts, which are expectedto be issued in June 1987, they would be subject to prequalification.Contracts for gecekonduupgrading, housing management, and other engineeringservices components will be smaller,in dispersedlocations, and carriedout at differenttimes. It would, therefore,not be feasibleto group them into packageslarge enough for ICB. About 143 contractsfor these components,with an aggregatevalue of about US$200million, would be procured throughLocal CompetitiveBidding (LCB) procedures. Turkey'sLCB procedures are generallyconsistent with the need for economyand efficiencyin project execution. To make these proceduresfully consistentwith the Bank's procurementguidelines, however, assurances were obtainedd4ring negotiations that:

(a) prospectivebidders would be allowedat least 30 days in which to submitbids;

(b) bids would not be rejectedon the grounds that they exceededthe estimatedprice;

(c) bidderswould be allowed to challengebidding procedures irrespective of whetherthey were presentat the bid opening;

(d) nationalfirms would receiveno preferenceon Bank-financeditems;

(e) nonpricefactors to be taken into account in evaluationwould be specifiedin the bid documentsand contractswould be awarded to the lowestevaluated bidder who met tests of capabilityand financial resources;and

(f) contractswouild provide for equitableadjustments to reflect changes in the originallyanticipated scope of work.

2.28 Goods, includingequipment, vehicles, and tools,aggregating US$23 million,and groupedinto 40 bidding packagesvalued at US$300,000or more, would be procuredthrough ICB. A margin of preferenceequal to 15 percent of the c.i.f.value of importedgoods or the custom dutiesand import taxes, whicheveris lower,would be allowed for domesticmanufactures. It would not be feasible,due to the diverseagencies, types of equipmentinvolved, and differencesin timing,-togroup contractsworth about US$23 million for miscellaneoustools, machinery, fixtures, ara furnitureinto packages large enoughfor ICB. Therefore,packages valuei at less than US$300,000and aggregatingabout US$19 millionwould be procuredthrough LCB while items of less than US$75,000,with an aggregateof no more than US$4 million, would be procuredby obtainingprice quotationsfrom at least three suppliers. - 21 -

Iab]e2-1 : PROCUREMENTARRANGEMENTS (US$ million)

(Esti1ated) Number of Prog reentfH haod__ Total Cant^s*-*& L_ LC8 Othgr Cost.

N/A __ __ 27.9 27.9

Civil Works____ Urban Expansion Areas 6 17.0 _ __ 17.0 (5.4) (--) (--) (5.4)

Gecekondu Upgrading 45 54.0 __ S4.0 & Housing Kngt. C--) (17.3) (--) (17.3)

Water and Sanitation 49 33.7 46.5 7.7 87.9 (10.8) (14.9) (--) (25.7)

Other Eng. Services 66 __ 101.2 __ 101.2 (--) (32.4) (--) (32.4)

Subtotal Civil Works 160 50.7 201.7 7.7 260.1 (16.2) (64.6) (--) (80.8)

EquIpment 215 22.9 19.0 4.0 45.9 (12.7) (10.6) (2.2) (25.5)

Power. Telecommuni- cations. Social N/A __ __ 97.5 97.5 Facilities (--) (--) (--) (--)

Prof. Services and TechnicalAssist. 100 __ __ 34.1 34.1 _(--) (--) (13.6) (13.6)

Overhr.bad N/A __ __ 1.7 1.7 . . (__~~~~~~C-)(--) (--) C--)

FellngshiRs N/A __ __ 0.2 0.2 _ __ _ l~~~--) (--) (0.1) (0.1) .

TOTAL 475 73.6 220.7 173.1 467.4 (28.9) (75.2) (15.9) (120.0)

*: Not all totals add exactly due to rounding.

2.29 ProfessionalServices and TechnicalAssistance would be procuredfrom firms and individualsaccording to terms of referenceand with qualifications satisfactoryto the Bank. Servicesfor design and supervisionto be financed with proceedsof the loan would be procuredaccording to Bank "Guidelineson the Use of Consultantsby World Bank Borrowers." - 22 -

2.30 The PRIMU would reviewall tenderdocuments and contractawards of municipalitiesand their subsidiaryentities to ensure their consistencywith Bank procurementguidelines. PRIMN would forwardto the World Bank the resultsof its reviewtogether with the tenderdocuments and award information for all contractssubject to ICB and for the first contractof each type subject to LCB. PRIMU would, in its regularreports, provide the Bank with the resultsof its reviewof all other contracts,which would be subject to post-reviewby the Bank after contractaward.

Disbursements

2.31 Based on the implementationschedule in Annex 4, disbursementswould be made over eight years, which is consistentwith previousBank loans to Turkey (see Annex 5 on disbureements).There would be a provisionfor US$6.0 millionretroactive finance for expendituresmade betweenNovember 1986 and the date of loan signatureon civil works contracts(UEAs, upgrading, and municipaland other engineeringservices) and consultancyservices (final designsand supervision).The loan closingdate would be one year after completionof the project,i.e., by June 30, 1995.

2.32 The proposedloan would be disbursedon the followingbasis:

(a) 32 percentof total expendituresfor civil works contracts;

(b) 100 percentof foreignexpenditures, 100 percentof ex-factorycosts of locallymanufactured, and 65 percentof expenditureson off-the-shelfpurchases of equipment,tools, and vehicles;

(c) 40 percentof total expendituresfor professionalservices and technicalassistance; and

(d) 100 percentof foreignexpenditures ou fellowships.

2.33 The Governmentintends to establisha specialaccount in foreign currencyfor items which the Bank would disbursein order to avoid future fundingdifficulties. The specialaccount would be in an amount of US$10 million (aboutsix months' expecteddisbursements in the early years of projectimplementation), and would be replenishedon the basis of withdrawal applications. These applicationswould be supportedby documentation acceptableto the Bank on expendituresfrom the account. The documentation would includestatements of expendituresfor contractswith a value of US$20,000or less.

FinancialReports and Audits

2.34 Each municipality,HUDC, and WSD would separately:

(a) during the year, keep and provide,as requested,adequate records of:

(i) the use of the proceedsof the loan, togetherwith all other relatedfinancing, in the implementationof the project,in detail and in total as well as the operationand maintenanceof facilitiesconstructed or providedunder the project;and - 23 -

(ii) the amountsof all loans and other financingprovided for the project,including repayments (or provisionsfor repayment), interest,commitment and other financingcharges, and outstanding loan balances. Such recordswould specifyall changesin receipt,payment, and balancesof loans, resultingfrom changes 'inrates of exchangebetween Turkishcurrency and the various foreigncurrencies borrowed to finance the project;

(b) prepareannuaily (quarterly in the case of the HUDCs) financial statementsof the projectand its operationsas a whole, for submission,through the Iller Bank to the Governmentof Turkey and to the World Bank, all in accordancewith appropriateaccounting standardsand practicesacceptable to the World Bank. HTIDCswould also issue quarterlystatements of income and expenditure,sources and applicationsof funds,and balance sheets.

2.35 The Iller Bank would keep accountsof its own componentsand those of the CPA.

2.36 All annual financialstatements including those of the special accountwould be auditedby independent,qualified, and experiencedauditors acceptableto the Governmentor Turkeyand to the World Bank. These statementswould be submitted,through the Iller Bank, to the World Bank withinsix months of the end of each fiscal year and within three months of the end of the fiscalyear for HUDCs.

Monitoringand Evaluation

2.37 Each projectentity would preparea semi-annualreport, to be submittedto the PRIMU, on implementationof all aspectsof the componentsfor which it is responsible(quarterly in the case of HUDCs). These reportswould cover achievements,plans, problemsencountered, and actions taken or proposed to solve them, and would includea regularset of monitoringindicators on projectoutputs, costs, and implementation.They would also include the resultsof the surveysof HUDC land purchasersand residentsof UEAs (para.4.19). PRIMU, in additionto reportingon its own operations,would summarizeoverall project progress (including its own commentson the reports of the other projectentities in the light of desk review and field supervisionvisits), and forwardthem to the World Bank. Reportsby the PRIMU to the Bank would be in English.

2.38 On completionof the project,each municipalitywould preparea ProjectCompletion Report (PCR) on the componen,tswithin its jurisdictionand that of its WSD and HUDC. The PRIMU would preparefor submissionto the Bank an overallPCR, in English,which would summarizethe total implementation experience,indicate the extent to which projectobjectives were achieved,and assessthose factorswhich were responsiblefor favorableand unfavorable outcomes.

SupervisionRequirements

2.39 Bank supervisionof the projectwould requireup to 145 man-weeks over the eight-yearperiod of implementation.Supervision efforts by Bank staff and consultantswould be concentratedin the first three years to ensure a good start and set the pace for timely implementatioaof project - 24 - components. Specialemphasis would be placed on assistingthe PRIMU to developits capacityto appraisesubcomponents, supervise procurement, and monitor the performanceof municipalitiesin implementationand financial management. Supervisionteams would includea financialanalyst, an economist,and engineerswith relevantspecialties. Thirty man-weeksare estimatedin FY88, twenty five man-weeksin FY89 and FY90, twentyman-weeks in FY91, fifteenman-weeks in FY92, FY93, and FY94 includingten man-weeksfor preparationof the projectcompletion report. A comprehensivemid-term review would be undertakenin 1990.

m. INSTUTIONAL DEVELOPMENT A. Municipalities

General

3.01 Under the Government'sdecentralization policies, the municipalities are givennew and expandedtasks. During project preparation,the five Cukurovamunicipalities - rith the assistanceof PCU and consultants- undertooka thoroughreview of tbeir staff and organizationalstructure. Annex 6 providesdetails on existingstaff, proposedstaff, and the new organizationalarrangements. They put specialemphasis on arrangementsfor investmentplanning and coordination,and the performanceof engineeringand financialfunctions. The reorganizationplans aim at establishingmore reasonablespans of control,grouping functions more logically(to economize on specificskills and to ensu.eadequate coordination within as well as outsidethe municipality),and institutinga higher degree of accountability at all levelsof the municipaladministration. The main innovationssupported as part of this projectare:

(a) establishingHousing and Urban DevelopmentCompanies (HUDCs) as companies("sirkets") under the commercialcode to developand market the urbaL,expansion areas on a profit-makingcommercial basis;

(b) bringing water and sanitationactivities into new Water and Sanitationdepartments ("isletmes") in four of the municipalities(in the case of Adana, into a water authority,ASKI) to manage all aspectsof water and sanitationservices (whichwere previouslysplit among differentdepartments);

(c) rationalizingmunicipal departmental structures through the establishmentof separatedepartments or units for, inter alia, (i) investmentplanning, programming, and budgeting;(ii) urban planningand licensing;(iii) gecekonduupgrading and housing management;(iv) solidwaste management;and (v) personnelmanagement and staff training.

3.02 The HUDCs have been establishedin all towns exceptCeyhan. The other parts of the reorganizationplans have been approvedby the municipal councils. All municipalitieshave presentedtheir organizationalproposals, togetherwith the associatedstaffing plans (para.3.07 below), to MOI and the Departmentof Personnelin the Prime Minister'sOffice, and approvalis expectedshortly. All five municipalitiesare currentlyactively engaged in recruitingrequired staff. - 25 -

ProgramPlanning and Budgeting

3.03 The municipalitiesare establishinga corporateplanning function, to be exercisedby a ManagementGroup comprisingthe Mayor, DeputyMayors, GeneralDirectors of the HUDCs and WSDs, the FinanceDirector (in citieswhere he is not a Deputy Mayor),and the new post of Coordinatorof ProgramPlanning and Budgeting(PPB). The DeputyMayor for TechnicalServices would act as coordinatorir t1eyhan.The ManagementGroup will be chargedwith developing and analyzingmunicipal policies and plans in the light of serviceneeds and financialmeans, and reviewinginvestment projects and annualbudget proposals. The PPB unit will have a staff of two to six personsassisting the Coordinator. The latterwould be responsiblealso for coordinatingall project-relatedworks in the municipalityand for liaisonwith Iller Bank and the World Bank. The appointmentof the coordinatorwould be a conditionfor approvalby PRIMU of any project investmentsin that municipality.

Urban Planningand TechnicalServices

3.04 Becauseof the differentsizes of the municipalities,their organizationalstructures have been and will continueto be quite different. The basic organizationalprinciples are the same: by mergingand/or splitting existingunits, separatedepartments would be createdfor:

o Water and sanitation(see para. 3.10 below).

O Urban plan3ningt,including zoning, licensing, and issuanceof building permits,etc.

o Coordinationof design, implementation,and cost recoveryin gecekonduupgrading and housingmanagement areas.

o Solid Waste management,including collection and disposal.

o Road constructionand maintenance.

Establishmentof these entitiesor units, and appointmentof their directors, would be a conditionfor approvalby PRIMU of investmentsin the specific componentsunder their control.

3.05 The Urban Planningand Upgradingdepartments will generallyreport to the DeputyMayor for PlanningServices. The UpgradingDepartment will initiallyrely on consultantsfor the detailedplanning, design, and supervisionof the physicalworks, while the department'sown staff will focus on the legal and administrativeaspects. As experienceis gained,the departmentwill assume more direct responsibilityfor designand contracting of works. The new Solid Waste and Roads departmentswill, togetherwith a number of existingdepartments, report to the DeputyMayor for Technical Services. The Roads Departmentwill also be responsiblefor drainageworks except in the case of combinedstormwater and seweragesystems that come under the WSD. - 26 -

3.06 Initial contracts for major works under the project would be handled by the existing contracting department under the Deputy Mayor for Technical Services, since it would be more feasible to build up procurement capabilities in one existing department rather than in several new departments at once. Functional departments will, over time, be strengthened to handle contracting for their own works, starting with the WSDs. The technical departments will also ultimately take responsibility for design and supervision of works in their functional areas, using an appropriate mix of in-house and consulting staff. In the initial period, however, each municipality intends to appoint one consulting firm for design and supervision of major works. The consultants will report on technical matters to the department(s) concerned with specific works. Appointment of supervision consultants would be a condition for approval of contract award for any civil works contract under the project to the concerned municipality.

Manpower Development

3.07 The Cukurova municipalities currently employ about 7,400 persons, three quarters of whom have only an elementary school education and about half of whom have less than six years of service. Staff motivation is low due to inappropriate grading and promotion procedures, lack of leadership, and insecurity of tenure; staffing levels are excessive in labor-intensive activities.'' The consultants, after reviewing the existing staff profile, recommended that the municipalities recruit about 200 high level professional and managerial employees over the first three years (one quarter classified as first priority). Other staffing needs, with appropriate leadership and training, could be filled by existing employees. The municipalities have accepted these recommendations in principle and have started recruitment of department directors. They have also established high level committees to refine the staffing planls. Each municipality is now setting up a manpower development and training department which will recruit staff for the technical and financial departments and establish a training program (including making use of the CMTAinstitute for training municipal staff).

Financial Management

3.08 Substantial upgrading of accounting and financial management functions is required to accomplish project objectives. A list of improvements to be sought over the first four years of the project was prepared during appraisal and was agreed during negotiations (section C of Annex 4). Foremost among the initial improvements, to be implemented by the end of 1988, are: strengthening revenue collection, separation of accounts for the WSDsversus other municipal departments, separation of capital and recurrent transactions, maintaining capital accounts by scheme, maintaining accounts for loans and debt service, reporting on status of actual performance versus budget, cash flow forecasting, and preparation of three-year rolling capital and finance plans. These measures would be followed by cost accounting, accrual accounting, formal pricing policy review mechanisms, program-based annual budgets, etc. During the project preparation period, new

1/ During project preparation, selected actities such as water meter repairs, solid waste collection, vehicle workshop operations -- were analyzed in depth for one or more towns, and opportunities for productivity increases ranging from 25 to 300 percent were identified. - 27 - accountingsystems that reflectedmost of the initial improvementswere run in parallelwith the existingsystems in Mersin, Tarsus,and Iskenderun. At first,these were run by separatestaff. Since appraisalthey have been integratedinto the regularfinance departments, and pilot operationshave commencedin Ceyhan. The new systems can replace the existingones only after a changein CentralGovernment financial regulations governing municipal accounts,however. Agreementwas securedat negotiationsthat these regulationswould be modifiedto permit and require implementationof the new systemsin the projectmunicipalities by September30, 1987.

3.09 The key organizationalimprovement in municipalfinances will be the appointmentof chief financialofficers, with the right and responsibilityto adviseand to be consultedon all matters of financialpolicy, performance, and management. In addition,they will be chargedwith the managementof all municipalsystems for accounts,budgeting, revenue collection, expenditure, financialcontrol, and financialreporting. Municipalitiesare attemptingto appointpersons with strong financialbackgrounds as Deputy Mayors for Finance and Administrationto play the role of chief financialofficers. Althoughthe WSDs will have their own financialdepartments, the chief financialofficer of the municipalitywill have a specialresponsibility, as a member of the mnicipal counciland the chairmanof the specializedfinance management reviewcommittee, to assess the WSD's financialand accountingperformance. An essentialcomponent in achievingthese changesin financialmanagement would be technicalassistance (comprising two foreignTA staff for each of the first two years,and six months in each of the followingtwo years; one local TA staff per smallermunicipality from 1987 to 1992 with three in Adana from 1987 to 1989 and two in 1990-92),which would assist with implementationof financialand accountingsystems and, in cooperationwith the CMTA institute and manpowerdevelopment departments, organize specialized training in the municipalitiesand the WSDs.

B. Water and Sanitation Departments

3.10 In the past, most major water and sanitation investments in source works and primary and secondarynetworks have been carried out by Iller Bank or DSI, with municipalitiesmaking investmentsin tertiarynetworks and minor wells,and in operationsand maintenance. Organizationof municipalservice provisionhas differed. In Adana, water serVicewas spread among departments under four differentdeputy mayors. In Tarsus,Ceyhan, and Iskenderun,water was handledby joint water and bus isletmes(para. 1.12); Mersin had a separatewater isletme. In all municipalities,sanitation was overseenby the unit of the technicaldepartment which also dealt with roads and drainage. Separatewater and sdnitationdepartments (WSDs) will be set up as isletmesin Mersin,Tarsus, Ceyhan, and Iskenderunto invest in and manage these services, when Governmentapprovals have been received(para. 3.02). Adana's ASKI is now established(para. 1.12). WSD directorswill have the status of Deputy Mayor (DeputySecretary General, in the case of Adana). The WSDs will generallyhave four sections:capital projects,operations and maintenance, financialservices, and managementservices, plus a director in charge of an interdepartmentaltask force and the contractorsassisting with the water loss reductionprogram under the project. About 38 section heads and senior technicalofficers would need to be hired in the first two years; other staffingneeds will be handledby transferringto the WSDs the approximately 875 staff now engagedin water and sanitationfunctions in other municipal - 28 - departments. The rate at which the WSDs take responsibilityfor the full range of their operationswill depend upon their successin staffingthe differentpositions, and the exact functionsto be performedby WSDs will vary over time and by municipality. WSDs will carry out all accountingfunctions, and networkoperations and maintenanceactivities from the beginning. Their role in contractingwill increaseas they add relevantstaff.

C. Housin and Urban Development Companies

3.11 With the exceptionof Ceyhan, the Cukurovamunicipalities have establishedHousing and Urban DevelopmentCompanies (HUDCs) as companies (limitedsirkets) under the Turkish commercialcode to undertakethe developmentof the urban expansionareas. The municipalitieshold over 90 percentof the shares,with the remainderbeing held by the relevantSPA (in the cases of Adana and Tarsus)or the Village Unicn (Iskenderun).The exceptionis Mersin, where the municipalityholds only 52 percent of the shares,with the other 48 percentbeing held by the neighboringmunicipalities of Erdemli,Tomuk, and Cesmeliand the SPA of Icel province. During appraisal,each municipalityagreed in principleto severalmajor points regardingthe operationand managementof its HUDC, and relationshipsbetween the HUDC and the parentmunicipality; these are reflectedin the HUDC policy statements(Annex 7). It was confirmedduring negotiationsthat formal approvalof the policy statementswould be requiredfor PRIMU approvalof investmentsin these componentsunder the project,and that Bank concurrence would be obtainedfor any substantivechange in the policy statementor capitalstructure of the HUDC.

3.12 The municipalitieswill appointboards of five to seven directorsto manage their HUDCs in accordancewith the policy statement. The HUDC staff will comprisethe Chief Executive(these have now been appointed),directors for marketing,engineering, planning and finance,together with a small supportstaff. HUDCs intend to rely upon consultantsto performmost design and supervisiontasks; they are also using consultingservices to assistwith establishingmarketing procedures and accountingsystems. It was confirmedat negotiationsthat the UEA in Ceyhan will be implementedby the Directorof Urban Land Managementunder the Deputy Mayor for Planningand Technical Services,in accordwith policiesfor marketingand cost recoverysimilar to those followedby HUDCs in the other cities.

D. Cukurova Municipalities Training Association (CMTA)

3.13 The CMTAwas established by Decree No. 87/11597of March 3, 1987. The policymaking b-dy of the CMTA will be an assemblymade up of mayors of membermunicipalities and one other member designatedby each municipal assembly. A council composedof the Presidentof the Association(elected by the membermunicipalities), the Director,and four members of the assembly will be responsiblefor CMTA operations. Managementwill be delegatedto a Directorappointed by MOI on the basis of a recommendationfrom the President of the CMTA. The Directorwill be supportedby eight training/technical staff,and five support staff. The staff will organizeand deliverworkshops, round tables,and seminarswhile outside specialistswill be used as instructorsfor some courses. The projectmunicipalities and their WSDs will contribute0.5 percentof their previousyear's revisedbudget expendituresto - 29 - supportthe CMTA. Accordingto the base forecast,these receiptsare insufficientto cover operatingcosts includingdebt service. Becausethis institutionwill help developa capacityto replicatemunicipal training elsewherein Turkey, and will provide trainingfor some staff from other than projectmunicipalities, the Governmentintends to provide the Bank loan funds to CMTA on a grant basis.

E. The Project Review,Implementation, and Monitoring Unit

3.14 Iller Bank would coordinateall financialaspects of the project, monitor the municipal investmentprograms, appraise and supervise subcomponentsof the project. For this purpose,Iller Bank has created the ProjectReview, Implementation,and MonitoringUnit (PRIMU)and will establish a separateCukurova Project Account (CPA). All World Bank funds would pass throughthe CPA, as would Iller Bank and MunicipalFund loans to the project municipalities.L'The PRIMU would allocateproceeds of the World Bank loan, Iller Bank loans,Municipal Fund contributions,and DevelopmentSupport Fund loans destinedfor the projectmunicipalities, including funds used for ongoingIller Bank works in the projectmunicipalities, as describedfurther in paras.3.15 and 3.16 and in Annex 9. The PRIMU would also help organize joint technicalassistanee contracts for municipalitieswhere appropriate.

3.15 The PRIMU's resourceallocation function would be based on an assessmentof the creditworthinessof projectmunicipalities, and of the viabilityof specificprojects for which funds would be sought. The creditworthinessassessments would depend on a reviewof medium-termplans (coveringat least three years, and initiallyincluding 1991, which is the ye#arin which the World Bank loan repaymentscommence). Those plans would be preparedannually by municipalitiesat least three monthsbefore the commencementof the financialyear. The plans would cover annual capital expendituresfor each major schemeand programof small projects,forecasts of recurrentreceipts, expenditures (including debt service,by sourceof loan) and hence internalfunding, and proposalson the amountsand sourcesof financerequired from outsidethe municipality. They would be accompaniedby informationon actual financialand physicalperformance of items includedin past plans,as well as on overallmunicipal receipts and expenditurecosts, togetherwith explanationsof deviationsbetween past proposalsand actual outcomes.

3.16 The PRIMU would also appraiseproject subcomponents which are designedin the course of projectexecution according to criteriawhich would be agreed in advance with the Bank. In brief, those criteriawould include: for UEAs, achievingagreed affordabilityand cost recoverytargets; for WSDs, meetingfinancial performance standards and implementingleast-cost solutions; for upgradingand housing managementcomponents, conforming to cost recovery principles;and for roads, generatingan estimatedrate of return of 10 percentor more for investmentsof more than US$1 million equivalent. PRIMU

1/ For simplicityof exposition,unless specificallynoted to the contrary, the word municipalityin the remainderof this sectionincludes subsidiary entitiessuch as WSDs and HUDCs. - 30 - would also review the technicaltmplementation of specificsubcomponents in order to assess the technicalviability of future investmentsin similar components. Althoughall proceedsof the World Bank loan would be initially earmarkedto specificmunicipalities or CentralGovernment organizations, resourcereallocations are likely to be requiredduring project executionto respond to differentialsuccess in project implementation,and unexpected circumstances. a.17 The PRIMU would have offices in Adana and in Ankara. The Director reportsdirectly to the Chairmanand ManagingDirector of Iller Bank. It would have about 15 professionalstaff, of whom about 10 would be seniorstaff with at least 10-15 years of relevantprofessional experience. The others would have three to five years of experience. The professionsrepresented would includeplanning, financial analysis, economics, accounting and engineering(with specializationin water and sanitation,roads, transportand procurement). There would be about ten support staff. The deputy directorof the PRIMU would have responsibilityfor and expertisein managementof technicalassistance, and design and supervisionservices, to ensure that the PRIMU would be in a positionto assist the municipalitieswith these aspects of the project. Because of low public sector payscales,most professional staff would be engagedon contractterms. PRIMU would also make use of technicalassistance in engineeringspecialties and financialanalysis. Given the importanceof the PRIMU, it was agreed that appointmentof its principalstaff and engagementof its main TA staff would occur by September 30, 1987. The roles, responsibilities,and operatingprocedures of the PRIMU as outlinedabove and describedin more detail in Annex 9 were confirmed duringnegotiations.

IV.FINANCIAL ANALYSES

A. Cost Recovery and Financid Obiectives

4.01 Over the last few years, Central Government assistance to municipalitieshas been steppedup significantlyto allow an appropriatematch between municipalresponsibilities and resources. A fundamentalobjective, however,of the decentralizationpolicy is to make the municipalitiesmore self-reliantand to encouragethem to strengthentheir own resource mobilization. Given the nature of most municipalrevenue sources, this can best be achievedby relyingon direct cost recoveryfrom the beneficiariesof variousmunicipal services and programsas long as the resultingtariffs and chargesare affordablealso to low-incomegroups.

4.02 Consequently,the project is based on the followingcost recovery principles:

(a) Urban ExpansionAreas: the costs of on-site infrastructureand at least one third of off-siteinfrastructure would be recoveredthrough the sales price for developedland. The HUDCs would in turn pay the contributionfor off-site infrastructureto the municipalitiesand WSDs. - 31 -

(b) GecekonduUPgrading and Housing ManagementAreas: In additionto normal chargesfor public utilities,households benefitting from improvementsin water, sewerage,or roads would pay improvement chargesamounting to the lesser of either 2 percent of the property value or cost for each type of improvement;and fees aggregating about TL 150,000(about US$200) for regularizationof tenureand planning/buildingpermits.

4.03 In order to ensure that this project can be replicatedon a national scale within the Government'sbudgetary and macroeconomicconstraints, the municipalinvestment programs have been based on the followingkey assumptions:

(a) The municipalitieswould, within the existing legislativeframework, be able to mobilizesufficient resources to defray all operating expenditures,service their debt, and financesubstantial share of their investmentsthrough surpluses on the recurrentbudget.

(b) Existingrevenue-sharing programs (para.1.18) would remain in effect at theirpresent level and no new revenaesources would be handed over to municipalitiesduring the projectperiod.

(c) The projectmunicipalities, taken together,would not be permittedto borrow more than their "fair" share (basedon population)from .iler Bank and the MunicipalFund, or about TL 5,800 per capita per annum (at December1985 prices)averaged over the periodas a whole. In fact, the forecastsindicate that they would only absorb about TL 4,500 per capitaper annum of domesticresources in the 1987-94 period.

B. MAunioAitits

InvestmentPrograms and FinancingPlans

4.04 The project-relatedmunicipal investments (in roads,drainage, solid waote management,technical assistance, and equipmentfor improvedmunicipal management)would accountfor about 41 percentof their capitalexpenditures over the 1987-94period (see table 4.1). Municipalinvestments not financed under the projectwould come to about 46 percent of the total. About 12 percentof the capitalexpenditures would take the form of contributionsto the HUDCsand WSDs. Surpluseson recurrentaccount would financeas much as 66 percentof the investmentprograms. Capitalreceipts (from HUDCs and beneficiariesof upgradingand housingmanagement programs) would contribute about 6 percent. Loans from Iller Bank (includingthe MunicipalFund) and the World Bank would financeabout 28 percentof the program. The financial forecastsare set out in detail in Annex 10 and are summarizedbelow. - 32 -

Table 4.1: FINANCINGPLAN FOR MUNICIPALINVESTMENT PROGRAMS, 1987-94

Percentageof Investments,in ConstantPrices Adana Mersin Tarsus Ceyhan Iskenderun Total Investments

Project 35 46 55 49 39 41 Land for HUDC * I * 0 6 1 Non-Project 54 43 35 51 26 46 Contributionto HUDC/WSD 11 10 9 0 29 12 Total 100 100 100 100 100 100

Financedby:

RecurrentSurplus 72 54 68 60 55 66 CapitalReceipts 5 6 4 16 12 6 Loans from: - IBRD 12 15 18 16 13 14 - IllerBank 12 23 10 8 14 14 - DSF * 1 * 0 6 * Total 100 100 100 100 100 100

US$ millionequivalent 200 83 39 14 45 380

NB: Some totalsdo not add due to rounding. Shareswere estimatedin real terms by deflatingflows in currentprices by factorsreflecting forecasts of domesticinflation. *: less than 0.5%

Past FinancialPerformance

4.05 The past recordof the municipalitiesprovides a sound basis to expect that the project'sfinancial targets can be met. After running deficitsfrom 1982, four of the projectmunicipalities shifted to surplusesin 1984-85 (Ceyhanran surplusesthroughout the period). The improvementwas based on three main factors. First, Mersin, Tarsus,Ceyhan, and Iskenderun mobilizedadditional revenues by levyinghigher tariffsand chargesfor services,increasing local tax rates,and improvingrevenue collection. Adana, however,experienced a slightdecline in its real per capita revenues. As of 1986, the municipalitieswere mobilizing,through taxes and charges under their control,between TL 10,500/head(Adana) and TL 15,300/head (Mersin),or about 5 percentto 8 percentof averageper capita income in the Cukurovacities. Of this, TL 1,900 (Adana)to TL 3,500 (Mersin)was in the form of water and sanitationcharges. Second, the Government's decentralizationpolicy increasedreal per capita recurrenttransfers (to betweenTL 8,400 in Mersinand TL 12,300in Adana in 1986). A third factor which improvedthe financesof Mersin, Tarsus,and Iskenderunwas a reduction in real per capitaoperating costs of municipalservices. - 33 -

FuturePerformance

4.06 Surpluseson the recurrentaccount would be the most importantsingle sourceof finance for the investmentprogram. Table 4.2 summarizesthe structureof operatingreceipts and expenses. The basic assumptionis that revenueswould increaseless in the future than in the recent past. Specifically,after their rise from 1982 to 1986, the real per capita revenues from taxes and locallygenerated service fees (excludingwater and sanitation tariffs)and taxes would either decline slightly (Adanaand Tarsus) or rise slightly(Mersin and Ceyhan by 1 percent,and Iskenderunby 4 percent)between 1986 and 1994. Achievementof this target shouldbe feasible,especially since it includesrevenue from the propertytax, which was assignedto municipalitiesonly in 1986. It now accountsfor about 10 percent of local taxes and service revenuesand promisesadditional revenues from improved collectionand rate increases(the rate was increasedin the 1987 finance act). RecurrentGovernment transfers are forecastconservatively to rise by 3 percentper annum (as comparedto an expectedGNP growth rate of about 5 percent);they would fall in per capita terms by 1 percent to 6 percent, exceptin Adana where they would rise by 18 percentdue to the special metropolitanpayment (para.1.18) which Adana began to receiveduring the last quarterof 1986. Real per capita recurrentexpenditures (before debt service) are expectedto behave differentlyin the differentproject towns: they are forecastto fall (by 9 percentin Tarsus, 12 percent in Adana, and 16 percent in Mersin),remain constantin Iskenderun,and to rise (by 14 percent in Ceyhan)between 1986 and 1994.1' Recurrentsurpluses (after debt service)

Tabl 4.2: STRUCTtQ£OrF RCM UST UCEZTXS AND EXP rOITUMS (percentof recurrentreceipts)

Total Total Averave Total Averaag: 19B7-94 2g ~1986 19&-9 AdanaPersinM9 Iaasus Cevhan Iskelderuo Recurrent Receipts CentralTransfers 38.9 51.4 54.6 52.2 63.6 41.3 46.1 45.4 48.0 LocalTaxes 47.9 40.7 37.4 39.5 30.2 52.2 44.1 38.0 36.4 ServiceIncomeA,h 13.2 ...2.9.2 JM -A4 6.1 6.S -.± 16.6A 1 TotalRecurrent Receipts 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

RecurrentExpenditures OperatingCosts 64.4 43.7 41.0 39.7 36.0 49.7 42.0 48.5 44.3 ContingencyReserve 0.0 5.3 5.4 5.3 10.0 0.0 0.0 0.0 0.0 DebtService Ili 12. 1 10. IlW 14.2 18 ILA TotalRecurrent Expenditures 78.3 49.5 58.7 5t.2 56.0 65.8 56.2 60.3 58.7 RecurrentSurplus 21.7 50.5 41.3 44.8 44.0 34.2 43.8 39.7 41.3 TotalRecurrent Receipts in US$ MillionEquivalent 34 55 76 107 41 17 8 3 8

aV Feesfrom services, mainly bus fares.

1/ The "contingencyreserve" applies only to the case of Adana, represents10 percentof income,and is includedto providefor any additionalcosts when the submunicipalitiesof Seyhan and Yuregir take over certain functionsfrom the metropolitanmunicipality in 1989. - 34 - would allow the municipalitiesto self-financefrom 85 percent (Iskenderun)to 120 percentof forecastannual investment(Adana) by 1994, as contrastedwith the 54 percentto 72 percent expectedduring the projectperiod.

4.07 Capital receiptswould compriseproceeds of UEA land sales in Ceyhan (whichwould not establishan HUDC), contributionsby HUDCs in other towns to at least one third of off-siteinfrastructure costs of UEAs, legalization chargesin upgradingareas, and improvementlevies on propertyowners (para.4.02). These collections,together with paymentof planningfees, would be the major source of direct cost recoveryin gecekonduupgrading and housingmanagement areas. Agreementwas reachedthat PRIMU would only approve financingfor servicesin those areas when these fees, togetherwith connectioncharges, would cover the costs of installingthem. (At current rates and costs, this criterionwould trigger installationof all infrastructureswhen about 75 percent of plots have buildingson them.) Agreementwas reached that municipalitieswould collectthe above chargesfrom all beneficiariesof municipalimprovements and from the HUDCs. In the case of Ceyhan,agreement was confirmedWhat the price of the serviced land sold in the UEA would includecosts of all on-sitemunicipal and WSD infrastructure.

Creditworthiness

4.08 The investmentprogram would involverapid increasesin municipal debt service. The ratio of debt serviceto receiptsfor municipalities(WSDs and HUDCs taken togetherwith municipalities)would never exceed 35 percent. (whichis judged to be a sustainableratio), nor would it exceed recurrent transferspaid throughIller Bank except in Tarsuswhere it would reacha maximumof 105 percent in 1991. The ratios for municipalities alone, excludingWSDs and HUDCs, are not forecastto exceed 21 percentand 50 percent,respect.vely (these maxima are for Mersin in 1991). Sensitivity analysesindicate that the risk due to foreignexchange moveuuts on the World Bank loan would be manageableto the municipalities. given the conservative nature of the resourcemobilization forecast, the municipalities- with prudentmanagement -- should remain creditworthy,and they should be able to respondto adverseeventualities without serious reductionsin their investmentprograms or service levels.

C. Water and SanitationDepartments

Financing Plan for Water and Sanitation Investments

4.09 The total capital requirementsfor the WSDsduring the 1987-94 period would be about US$247million. Project relatedexpenditures would account for about 70 percentof the total (see table 4.3 and Annex 11 for furtherdetails on organizationand finance for municipalwater and sanitationcompanies). Investmentsnot financedunder the projectwould amount to about 13 percentof the total. These investmentswould includeongoing Iller Bank works (in Adana, Mersin,and Tarsus),water and sewer connectionsoutside projectareas, and new major supply,distribution, and treatmentfacilities in 1993 and 1994 as the proposedproject is completed. The large increasesin workingcapital - 35 -

(17 percentof total capital requirements)are due largelyto the conservative assumptionthat each year's internalfunds generationis used to finance investmentexpenditure only in the followingyear, with the accumulated internalfinance in the year being recordedas working capital.

Table 4.3: FINANCINGOF WATER AND SANITATIONDEPARTMENTS INVESTMENTS, 1987-94

Percentage Adana Mersin Tarsus Ce Iskenderun Total Investment

Project 67.1 71.1 65.9 76.0 81.8 70.3 Non-Project 13.1 15.5 13.4 14.4 9.2 13.1 WorkingCapital 19.8 13.3 20.7 9.6 9.0 16.6 Total 100.0 100.0 100.0 100.0 100.0 100.0

Financedby:

Incomebefore interest 33.7 10.5 32.9 16.9 9.0 24.6 Depreciation 20.4 26.8 18.4 29.0 23.6 22.3 Less Debt Service (36.0) (27.8) (28.7) (31.3) (24.0) (31.5) Net Internal Generation 18.1 9.5 22.6 14.6 8.6 14.3 CustomerContri- bution 16.8 31.9 20.8 12.4 16.7 20.2 InternalGeneration 34.9 41.4 43.4 27.0 25.5 35.5 Loans from: World Bank 22.3 21.9 21.2 24.9 27.4 22.9 MunicipalFund 0.0 7.8 10.8 38.5 6.6 5.4 Iller Bank 26.4 15.5 16.3 9.6 9.9 20.0 Subtotal 48.1 45.2 48.6 73.0 43.9 48.3 MunicipalContri- bution 16.4 13.4 8.0 0.0 30.8 16.3 Total lam.QLl 1QQDQ Total US$ million equivalent 122 49 30 10 36 247

NB: - The shares were estimatedin real terms by deflatingflows in current pricesby factorsreflecting forecasts of domesticinflation.

- Some totalsmay not add due to rounding.

4.10 Accordingto the base projections,internal cash generationfrom normal operationswould be sufficientto meet about 14 percentof the capital requirementsduring the project period. Customercontributions in terms of connectionand improvementcharges and paymentsfrom HUDCs would contribute about 20 percent (see para. 4.02). Some of the municipalitieswould also make significantcontributions to the WSDs. The large contributionshown for - 36 -

Iskenderunwould be requireddue to high operatingcosts and heavy investment. expendituresin that city, which would prevent its WSD from making as large operatingsurpluses as the other WSDs, despitecharging the secondhighest real tariffsamong the projectmunicipalities. The high contributionin Adana would result from the legislationon metropolitanmunicipalities which requiresthem to pay 10 percentof their regularrecurrent transfers from the CentralGovernment to their water and sanitationoperations. Loans would financeabout 48 percent of the investmentprogram. The split between Iller Bank and MunicipalFund financingis based on the existingpractice under which metropolitanmunicipalities are ineligiblefor MunicipalFund financing, and small towns,such as Ceyhan, receivelarger sharesof this lower cost money.

Past Performance

4.11 Becauseof inadequaciesof accountingsystems and fragmented responsibilities,past financialperformance of the water and sanitation operationsof the municipalitiescan be known only in part. The consultants' estimatesindicate, however, that these servicesincurred operating losses, beforedepreciation or debt charges,in Adana from 1982-86,and from 1982 to 1985 in Mersin and Iskenderun. As of 1986, only Ceyhan,Tarsus, and Iskenderuncovered their debt servicefrom revenues. This poor performance resultedfrom revenueand operationalfactors: low tariffs(depending on the city, average water chargesamounted to 1 percent to 2.8 percentof average householdincome in 1986), lack of seweragecharges (they were not permitted until 1986),substantial numbers of illegalconnections (estimated at 5 percent in Ceyhan to 15 percentin Iskenderun)$and mediocrerevenue collectionperformance (estimated at 65 percent to 85 percent of billings).

4.12 Over the last few years, the municipalitieshave strengthenedtheir revenueperformance. Between 1982 and 1986, tariffsfor consumptionby commercialand officialbodies were sharplyincreased in all municipalities, as were domestictariffs in Iskenderun. Real domestictariffs remained more or less constantin the other towns althoughthey fell in Adana. All municipalitieshave nov introducedprogressive block tariffsfor domestic consumers(Adana and Mersin as of 1986, the others in 1987),under which the lifelinesupply of about 7.5 m3 per householdper month (equivalentto about 50 1/c/d for the averagehousehold) is sold at a low price, a secondblock (the next 10 m 3 per month)at a higher price, and a third block at a price approximatingthe average incrementalcost of water. In general,official tariffsare similar to the second domesticblock tariffand commercialtariffs to the third block. A major innovationhas been the introductionof sewerage surcharges,initially at 25 percentof the water tariff,and rising to 50 percentby 1994 (seweragesurcharges have been introducedin Adana, Mersin, and Ceyhan,,and will be introducedin the other towns when formal sewerage systemsbegin to operate). In addition,all five towns introducedcharges in 1986 or 1987 on grotndwaterextracted directly by commercialfirms, and Adana also plans to charge apartmentbuildings for water they extract. Following the precedentof a court case in Adana in mid-1986which affirmed the right of the municipalityto chargesuch extractionfees, this is expectedto be a substantialrevenue source in the coming years for some towns. - 37 -

FinancialObjectives

4.13 .As was discussedwith each municipalityduring appraisaland confirmedat negotiations,municipalities would set water and sanitation chargesat levels which would ensure that (a) the revenuesfrom these services,taken together,would cover all expensesof operation,maintenance, administration,interest, and the greaterof depreciationor repaymentof loan principal,and all necessaryincreases in workingcapital, and (b) internal generationwould contributeat least 20 percentof the cost of new capital investmentby 1992. Agreementwas also securedthat Iller Bank would approve specificmunicipal water or sanitationinvestments in projectmunicipalities only when the water and sanitationoperations are achievingthe above objectives. In addition,the municipalitiesintend that all internally generatedfunds, as well as capitalreceipts of water and sanitation departments,would be used exclusivelyfor witer and sanitationinvestment as long as any finance is needed for such facilities;that is, municipalities would not draw funds from WSD8unless the WSDs are able to achievefinancing of all viable investmentsfrom internalresources.

4.14 There shouldbe no undue difficultyin meeting the financial performancecriteria. Increasesin real water and seweragetariffs by 1992 over 1987 levels,on the order of over 170 percent,would be requiredin Adana, 90 percent in Tarsus, 73 in Mersin, 33 percent in Iskenderun,and only 1 percentin Ceyhan. Averagewater and sewage tariffsare affordable. Given estimatedconsumption, domestic water and seweragecharges are estimatedat between 1.3 and 2.9 percentof averagehousehold income in 1987, dependingon the city, and would never rise to more than 2.4 to 3.3 percent(in 1991-92). The maximu chargesfor the lifeline(first block) supplywould come to only 2 to 3 percentof the incomenf householdsat the 20th percentileduring the projectperiod. It shouldbe underlinedthat these ratherlow percentages(as comparedwith those in other countriesand largercities in Turkey)are due to the low cost of these utilitiesin Cukurova,the successof the consultantsin identifyinglow-cost solutions, careful attention to arrivingat realistic demand forecastsin the light of sharp tariff increases- and thus, limiting investmentsin additionalsource works - and to the opportunitiesto increase consumpticnthrough reducing wastage. The base projectionsalso assume some improvementin revenuecollection performance and cost reducingmeasures.

4.15 The forecastsindicate that the 20 percentinternal financing criterionwould be met by 1991 at the latest,and that ASKI will be financing one hundredpercent of its investmentrequirements internally by 1993. The WSD would achieve one hundred percentself-financing in Mersinby 1994, in Tarsusby 1995, and in Ceyhanby 1996. Self-sufficiencywould come later to Iskenderunbecause of the higher operatingcosts in that city, and the extensiveimprovements to be carriedout there. These dates would be deferred of course$if experienceshows that loss reductionoccurs more slowly,at higher cost, or if it proves necessaryto investin major sourceworks before the late 1990s,or if operatingcosts are higher than anticipated. Sensitivityanalyses indicate that if the rate of foreignexchange were 20 percenthigher than the base forecastby 1991, revenueincreases on the order of 4 to 6.5 percent,depending on the toia, would be requiredto ensure debt service coveragein 1991, which is the most difficultyear financially(due to the commencementof principalrepayments of the World Bank loan). - 38 -

D. Housing and Urban Development Companies

Financial Policies

4.16 The objectives of the HUDCs are to develop and sell serviced residential land on a commercial basis with specific attention to providing land affordable to families in the lower half of the income distribution. They would not construct housing speculatively (i.e., buiid houses which are not presold). They may, however, arrange housing construction for low-income households on a power-of-attorney basis. As described below (para. 4.20), they are expected to be highly profitable even under adverse market assumptions. There is a serious risk, however, that they would encounter financial difficulties if they are overextended or mismanaged. Since the HUDCs are the first enterprises of their type in Turkey, the policy statements (Annex 7) set out a conservative financial management approach: paid-in cash equity including retained earnings and reserves would at least equal two thirds of debt; the acid test ratio would exceed 0.66; development loans from the World Bank or DSF would at a minimum be repaid in proportion to sales; with the exception of trunk infrastructure, the amount of on-site infrastructureunder construction at any one time would not exceed what is needed for the next year's sales program; construction of housing on a power-of-attorneybasis would be undertaken only if down payment and agreed housing loans at least equal the construction cost for the house and the sales price for the land.

Marketing Strategy and Pricing Policy

4.17 The UUDCs would develop land for sale to individual households, local small builders, and cooperatives as well as large regional and national building developers. The land would be zoned and subdivided for owner-occupiedapartments, row houses, and free-standing units. Due at least in part to the shortage of serviced land - which the HUDCs would start to correct - most recent formal sector housing in Turkey has taken the form of apartment blocks. The growth of gecekondu areas with single family houses demonstrates the high demand for individual units, however. Since a major part of the potential demand for HUDC land would come from recent migrants from rural areas who prefer to live on their own plot of land rather than in apartments, at least one half of the land targeted for sales to low-income households would be sold as plots for single family units. '

4.18 The sales prices for land would be set sufficiently high to recover - at a minimum and in real terms - all the costs of raw land, on-site infrastructure,and one third of off-site infrastructure plus all finance charges and overhead costs. Current market prices for serviced land near the proposed HUDC sites are well above the levels required for full cost recovery. At least half of the land would be sold at prices that are affordable to households with below median incomes. The results of a

1/ In Iskenderun where suitable building land is more scarce and, thus, expensive, a smaller percentage of the land would be zoned for single family units. - 39 - householdsurvey carriedout in Adana indicatethis objectivewould be achievedif the land price per housingunit would be no more than TL 640,000 in December1985 prices.'' This would imply a price of TL 5,500-8,000per squaremeter which is somewhathigher than land prices in most gecekondu areas. Nevertheless,the HUDC plots are likely to be highly competitivesince they would be fully servicedwith infrastructureand social facilities. Designsreviewed indicate that singledwelling plots in Adana, Mersin, and Tarsuswould be producedat these prices without cross subsidy. In Iskenderun,a cross subsidyfrom the sale of high-incomeplots at market priceswould be required.

4.19 The proposedHUDC programswould accommodatebetween 16 percent (in Iskenderun)to 35 percent (in Tarsus)of the projectedincrease in households duringthe projectperiod. Given the high servicestandards in the HUDC areas and the competitiveprices, the proposedprograms are consideredas feasible and realistic. HUDCs will carry out householdsurveys (at the latest,within three yearsof the first familiesmoving onto the site, i.e., in 1990) to gatherinformation on beneficiaries'views on servicesprovided, to establish the characteristicsof actual beneficiariesin terms of incomegroup, occupationalcategories, etc., and to update informationon financing mechanisms. These surveyswill assist the HUDCs to modify the product mix in responseto changingmarket conditionsand to verify whether they are indeed reachingthe low-incomegroups.

ExpectedFinancial Performance

4.20 The financialprojections for the HUDCs have been based on the assumptionsthat plots for high and middle-incomegroups would be sold at prevailingmarket pricesnear the projectsites and that low-incomeplots are pricedaccording to the principlesdescribed in para. 4.18. The HUDCs are expectedto be highly profitableunder these assumptions. The details for the HUDC in Mersinare presentedin Annex 12. They show that no furtherequity contributionswould be requiredafter 1987 and that debt repaymentswould exceednew debt from 1988. Financingof the ongoingprogram after that year would come essentiallyfrom down paymentsand retainedearnings. The debt equityratio would fall from 0.8 in 1987 to less than 0.1 in 1989. The net profitafter taxes would range between 13 percentand 16 percent of sales duringthe 1988-92period. Sensitivityanalyses indicate that, with proper management,the HUDC would remain profitableunder a reasonablerange of pessimisticassumptions about the rate of sales and the price for market plots. Large lossescould accumulaterapidly if managementwere not active and businesslike,however. In these circumstances,it would be est.entialto retainsufficient liquidity during the early period when expensesof operation and developmentaccrue in advanceof sales revenues. This need for caution is reflectedin the policy statements(see para. 4.16). For this reason also, HUDCs wouldbe requiredto submit quarterlyaccounts to PRIMU to assist with monitoringtheir financialperformance (para. 2.34),and auditedaccounts would be producedwithin three months of the financialyear end (versussix months for other entities).

1/ Annex 13 containsthe rationalefor this affordableprice estimate. - 40 - V. PROJECT JUSTIFICATIONAND RISKS A. Project Imat

General

5.01 The projectwould help refineand implementthe Government's decentralizationpolicy. It would help build up Iller Bank's capacityto appraiseand supervisemunicipal investmentprograms and prepare it for an expandedrole as a financialintermediary. The projectwould demonstrate-- in the Cukurovacities - the viabilityof the new urban developmentpolicies and municipalmanagement practices.

EconomicJustification

5.02 The economicrate of return on componentscomprising 53 percentof projectcost for which benefitscould be quantifiedis estimatedat 30 percent. The quantifiablecosts and benefitsof the projecthave been evaluatedbased on market prices (expressedin constantDecember 1985 terms)."' The time horizon for discountingbenefits and costs was 2014 (20 years after projectcompletion). The detailsof the economicanalyses are presentedin Annex 13 and summarizedbelow; Annex 14 lists the projectfiles which containfurther details on the financialand economicanalyses.

5.03 The key economicbenefits of upgradingand housingmanagement componentsconsist of: (a) the increasein rental values of housingunits due to improvementsin servicesand (b) the incrementin propertyvalues, over and above what is reflectedin rental values,from legalizationand increased securityof tenure. Results of regressionsof rentalson housing characteristics,estimated from the householdsurveys carried out during projectpreparation in the gecekonduareas, yieldedestimates of increasesin rentalvalues from upgradingexisting areas of about TL 3,800 to 4,400 per month (in December1985 prices,depending on the town),and benefitsof servicingnew areas (comparedwith installingno services1") of about TL 4,800 to 7,900 per housing unit per month. Regressionsof housingvalue on housingcharacteristics indicated that the value of dwellingunits with legal individualtenure was 23 percent higher than the value of units without legal tenure,other thingsequal. Adjustingfor the 4 percentpremium in rental values of legal units, this impliesthat legalizationitself resultsin a propertyvalue increaseof 19 percent. The economicrates of return (ERRs) have been calculatedincluding as well as excludingthis "title" benefit.3- They have been estimatedon a program rather than a site basis,

1/ An analysisof the compositionof costs indicatedthat most conversion factorsare very close to the standardconversion factor, which would be applied to all benefitssince they are domestic. Thus, the use of market prices introducesno bias in the economicrate of returncalculation. 2/ Excludingelectricity, which is widespreadand was assumed to be provided whetheror not specificprograms were undertaken. 3/ Title benefitswere assumed to accrue in the year that upgradingtakes place, or, in the case of infill,when houses are built,while rental benefitsaccrue startingafter completionof the upgrading. - 41 -

Table 5.1: ECONOMICRATES OF RETURN OF AREA-BASEDURBAN DEVELOPMENTCOMPONENTS

Adana Mersin Tarsus Cerhan Iskenderun (------percent------) Upgrading

Base Case: IncludingTitle Benefits 96.0 61.4 34.4 - 73.3 Excludingtitle benefits 19.0 17.8 12.1 - 17.4

HousingManagement

Base Case: IncludingTitle Benefits 133.2 73.0 32.9 - 118.1 Excludingtitle benefits 37.5 30.0 14.8 - 30.2

Urban ExpansionAreas

Base Case: ExcludingTitle Benefits 17.1' > 15.6 9.4 6.4 17.3

(a) Althoughthe Adana HUDC is not being financedunder the project,this ERR was calculatedfor purposesof comparison.

that is, calculatingidentical benefits for all households,and including costs of all roads,water, sanitation,and drainageworks in the upgradingand housingmanagement program for that town. Operatingand maintenancecosts were not taken into accountsince they would be recoveredfrom tariffsand taxes not includedin the benefit forecast.

5.04 Benefitsof the urban expansionarea programswere estimatedas the rentalvalue of land sold for residentialpurposes, and the price of land sold for commercialand workshopuse. Analysis of the householdand gecekondu surveysindicated that the average ratio of rental to propertyvalue was about Se5percent, and this ratio was applied to land for familiesin the upper half of the incomedistribution who, it was assumed,would - in the absenceof the project-- find servicedland in other formalareas. For lower income people, however,the alternativewithout the projectwould be an unservicedplot on the urban periphery;for them the rental value of the land sold includesan explicitadjustment to reflectthe value of the servicesbeing providedby the project. Their rentalvalues were thereforeestimated as the average rental value of unservicedland derived from the gecekondusurveys plus an increment in rentalvalues applicableto housingunits in housingmanagement areas (para.5.03). A conservativebias was impartedto the estimatedbenefits by excludingany title benefits or benefitsfrom householdssettling on the site in futureyears. Costs were estimatedas the rentalvalue of the land without the project (5.5 percentof capitalvalue), investment costs of site preparation,and on-siteand off-sitewater, sanitation,drainage, and roads. Future costs of operationand maintenancewere not estimatedas they would be defrayedfrom tariffs,charges, and taxes not includedin rentalvalues. Costs of electricityand telephoneswere excludedsince the benefitsof those serviceswere not estimated. Similarly,costs of educationaland health facilitieswere excludedas being justifiedon the basis of nonquantified - 42 - benefits. It should be noted, however,that all costs of land, water, sanitation,roads and civil works connectedwith electricityand telecomunications,including those used by social facilities,were included in costs,which impartsa conservativebias to the ERRs4 The lower rates of return in Ceyhan and Tarsus than the other citiesare due to the higherprice of land in Ceyhan,and lower estimatedrentals of low-incomehousing based on the gecekondusurvey results for Tarsus. Additionof title benefitsin these two towns would generateERRs of 8.4 percentin Ceyhan and 12.4 percentin Tarsus.

5.05 Benefitsof water and sanitationinvestments were estimatedas the marginalvalue of incrementalwater consumed,,plusaccess benefitspaid in the form of connectionfees. Marginalvalue for each group of consumersis the marginaltariff, including water price, seweragesurcharges, and VAT (at a rate of 12 percent). Incrementalwater consumedwas estimatedas forecast water consumption,less estimatedconsumption without investmentsto upgrade and expandwater and sanitationservices, which w.s assumed to decreaseat 2.5 percentper annum until the horizon. Health benefitslikely to arise from improvedwater and sanitationservices were not quantified. The investments to be undertakenrepresent least cost solutions. Costs includedall forecast investmentcosts in water and sanitationduring the period 1987 to 1994 (includingcosts of ongoing Iller Bank works, and nonprojectinvestments in connectionsoutside projectareas and network investmentswhich commencein 1993 and 1994 when the project is finishing). Operatingcosts allocableto the projectwere estimatedas the share of incrementalwater consumptionto total water consumption.

Table 5.2: ECONOMICRATES OF RETURNOF WATER AND SANITATIONCOMPONENTS

Adana Mersin Tarsus Ceyhan Iskenderun

Water Supply Decrease "Withoutthe Project" . 2.5X per annum (Base) 16.8 8.9 8.9 11.2 12.8 0% per annum 11.2 6.0 -2.8 3.9 7.6

5.06 The drainagecomponents would have a substantialimpact on health in areas subjectto flooding,particularly in reducingincidence of malaria, hepatitis,dysentery, and gastro-enteritis.They would also lead to some increasein propertyvalues (the gecekondusurvey found that, other things equal, housingunits subject to floodingearned rentalsabout 11 percentlower than other houses). The solid waste componentswould producetwo major benefits:improved efficiency of collection,resulting in a better standardof serviceto customers,and reducedenvironmental and health threatswhen existingunsystematic dumps are replacedwith properlymanaged landfills. The benefitsof the road maintenar.cecomponent would be a better standardof roads,and, over time, lower maintenancecosts as routineand periodic maintenanceactivities reduce the costs of emergencyrepairs and reconstructingheavily damaged roads. Due to the importanceof intangible benefits,and inherentdifficulties of estimatingthose benefitswhich are quantifiable,ERRs have not been estimatedfor these components,which togetheraccount for about 17 percentof projectcost. - 43 -

5.07 First year rates of returnwere estimatedfor the main road segments to be upgradedin Adana, Mersin,and Tarsus. Benefitswere estimatedon the basis of savingsin vehicle operatingcosts and passengertime savings. No estimateswere made of savingsfrom accidentreduction or reducedmaintenance expenditures.Time savingswere estimatedon the basis of estimatesof the speed and volume,of trafficwith and withoutthe project in 1992, in turn based on forecastvolume/capacity ratios for 1992. Passengertime savings were valued at one third of estimatedwages (TL 87 per hour for bus passengers,and TL 174 per hour for car passengersin December1985 prices). Operatingcost savingswere estimatedfor automobiles,trucks, and buses. The weightedaverage ERR was 28.6 percenton road components,which accountfor about 5 percentof total projectcost.

Urban Poverty Impact

5.08 The citywideengineering and institution-buildingcomponents of the projectwould benefitall residentsof the Cukurovacities. Accordingto the householdsurvey of Adana residentscarried out during projectpreparation (Annex13), at least 57 percentof the populationin that town had incomes below the Bank-definedurban poverty level (37.5 percentof per capita GNP). Generalhousehold surveys were not carriedout in the other towns. However, partialgecekondu household surveys in these towns reportincomes that were somewhathigher than in Adana. On this basis it is estimatedthat about half of their populationbelong to the povertygroup. The beneficiariesof the upgradingand housingmanagement components are likely to correspondto inhabitantsof gecekonduareas. The surveysindicated that about 65 percent of gecekonduinhabitants in Adana were in the povertygroup, 61 percentin Mersin, 58 percentin Tarsus,and 73 percentin Iskenderun. Somewhatover 50 percentof the beneficiariesof the Urban ExpansionAreas would belong to the povertygroup. Takinga ratio of 60 percentfor gecekonduand housing mAnagementareas, and 50 percentfor other components,implies that about 52 percentof costs would benefitmembers of the Bank-definedpoverty group.

EnvironmentalImpact

5.09 The sanitation,drainage, and solid waste managementcomponents would have a significantimpact on improvingenvironmental sanitation in the project cities. The projectwould introducesewage treatmentand sanitarylandfills to the region. Sewagedisposal to the sea is likelyto remainthe only affordablesolution for Mersinand Iskenderunfor the next coupleof decades, and the projectaims to ensure that sea outfallsare locatedand designedso as to limit any environmentaldamage. By organizingspecific entities with responsibilityfor water and sanitationmanagement, and throughtechnical assistanceon wastewatermanagement, the projectwoild help to establisha local capacityto deal effectivelywith industrialeffluents which will pose an increasingthreat as the area continuesto develop.

B. ProqectRisks

5.10 This projectfaces four main sourcesof risk. In increasingorder of significancefor projectsuccess they are: financialrisks associatedwith changes in the Turkisheconomy, risks that some componentswould not be satisfactorilyimplemented due to the difficultyof making simultaneous improvementsin severalfields in five cities,risks that the PRIMN would not - 44 - be able to play its key role, and risks tied to changes in local and national policies. The "macro"risk comprisesthe possibleimpact of future interest, inflation,and exchangerates on the creditworthinessof the municipalities and their subsidiaryentities. As describedin Chapter IV, the financial policiesto be implementedunder the project,taken with the conservative natureof the base forecasts,provide assurance that the project entities shouldbe able to respondto adversecircumstances without seriouseffects on the investmentprogram.

5.11 There is no doubt that some projectcomponents will not be implementedas presentlyplanned. By the same token, other componentsare likelyto be implementedin betterways than expected. These variationsin performanceand other factorsinfluencing resource availability and investment prioritieswould createa need to wodifymunicipal investment programs. Municipalplanning, programming, and budgetingcapabilities are being establishedto deal with this. Furthermore,the PRIMU would annuallyreview the municipalinvestment programs and financingplans, and reallocatethe loan funds between componentsand municipalitiesas needed. The PRIMU would also appraisenew subprojects. It shouldalso be noted that in order to providea fair model for futurereplication throughout Turkey, it would be essentialfor the projectto cover severalmunicipalities of varying sizes. Althoughthe upgradingof all municipalfunctions would be desirable,this would lead to excessivecomplexity of the project. Thus, it was agreedwith the Government and the municipalitiesthat the projectshould focus more narrowlyon engineeringservices (which is the area in which most of the increasein municipalresponsibilities has occurred),financial management, and staff training(in which the deficienciesare presentlymost conspicuous). This packageis believedto be of sufficientscale and importanceto make a substantialimpact on the managementof urban growth in the project municipalitiesand to provide lessonsthat are representativeenough to be appliedmore generallyin Turkishmunicipalities.

5.12 Projectsuccess would depend criticallyon the PRIMU and its practicalcapacity to allocateCentral Government resources to project municipalitiesaccording to agreedcriteria, the performanceof project municipalities,and changingcircumstances. In order to ensure that the Iller Bank would be able to engage staff of sufficientcaliber to exercise the PRIMU functionsadequately, Iller Bank would supplementits own staff with professionalsengaged on contractterms. Carefulmonitoring of PRIMU, and substantialassistance during supervision missions to PRIMU during the early years,are intendedto mitigate the risk of poor performance.

5.13 Two levelsof politicalrisk are associatedwith this project: commitmentto projectgoals and policiesat the local level in the light of electoralpolitics, and the depth and continuityof the CentralGovernment's commitmentto decentralization.On the first, the exigenciesof electoral politicsmay lead to uneven performanceon cost recovery. The continuous monitoringof municipalperformance and creditworthinessthrough PRIMU providesan importantsafeguard in this respect. In the longer term, project successdepends on continuationof the Government'sdecentralization policy, includingexisting financial arrangements among differentlevels of government. Decentralizationmarks a basic policy departurein Turkey,and futureadministrations may shift back towardsa more centralizedsystem by lesseningresources allocated to local governments,by reducingthe predictabilityo; resourceflows, and by placingmore bureaucraticcontrols - 45 - ovir specificlocal decisionson finance,investments, procurement, and staffing. Such changeswould diminishthe incentivesoi local governmentsto plan and manage their programsalong the lines being supportedby this project. Since the basic projectobjective is to assist implementationof decentralization,reversal of that policywould compromisethe institution buildingand, with delay, the physicalobjectives of the project. Such an event would signal the need for a thoroughreview, and perhapsa restructuring of the project.

VI.ASSURANCES, AGREEMENTS, AND RECOMMENDATIONS

6.01 AgreementsReached at Negotiations:

(a) Treasurywould relend funds to Iller Bank on identicalterms to Bank loan (afterdeduction of administrationfee of 2.75 percent)and Iller Bank would relend funds to projectentities on same terms, with exceptionof loans for HUDCs which would be repaidpro rata with HUDC land sales,and funds for CMTA which would be passed on a grant basis (para.2.20).

(b) Governmentwould financesocial facilitiesand cause financeto be made availablefor implementationof electricityand telecommunica- tions subcomponents(para. 2.21).

(c) Municipalitieswould recoverfrom HUDCs,at a minimum,the cost of the land revaluedby the rate of inflationfrom date of purchaseby the municipality,plus 2 percent interest(para. 2.22) plus at least one third of off-siteinfrastructure costs (para.4.07).

(d) Iller Bank would make funds availableto projectmunicipalities for the projectfrom its own resourcesand the MunicipalFund on terms no more favorablethan those applicableto other municipalities(para. 2.23).

(e) Municipalitieswould contributeto WSDs and HUDCs (to the latter in the form of equity finance)in the amountsneeded for these entities to achieve their financialobjectives (para. 2.24).

(f) Action plan for initialperiod, including timetable for procurement of professionalservices and technicalassistance included in the project (para.2.25 and Annex 4).

(g) Projectentities would keep accountsof the projectand their operations(paras. 2.34-2.35) and submitaccounts and audit reports to the Bank within six months of the year end (para.2.36).

(h) Projectentities would submitsemi-annual progress reports to PRIMU (quarterlyfor HUDCs),and PRIMU would report semi-annuallyto the Bank (para.2.37) and PRIMU would preparea PCR (para.2.38).

(i) Municipalitieswould strengthenfinancial staff and implement accountingimprovements (para. 3.08 and Annex 4). - 46 -

(j) Governmentwould, by September30, 1987, take regulatoryaction to permitand requiremunicipalities to upgrade their accountingsystems (para.3.08).

(k) Municipalitypolicy statementsregarding operation, financing, and managementof HUDCs would be agreeableto the Bank and would only be changedwith Bank concurrence(para. 3.11).

(1) Ceyhan UEA would be implementedby its Departmentof Urban Land Managementin accordwith policiesfor marketingand cost recovery similar to those followedby the HUDCs (paras.3.12 and 4.07).

(m) Recruitmentof the principalPRIMU staff, includingits principal technicalassistance staff by September30, 1987 (para.3.17).

(n) PRIMU'srole, responsibilities,and operatingprocedures (para. 3.17) including,inter alia, that:

(i) PRIMU would not approveany investmentsto a municipalityuntil the projectcoordinator of that municipalitywas appointed (para.3.03);

(ii) PRIMU would approve investmentsfor any componentonly after the formal establishmentand appointmentof the directorof the responsibleauthority/department/unit [WSD or ASKI in the case of water and sanitation,units chargedwith upgradingand housingmanagement, solid waste managementdepartment, and roads departmentin the case of those components](para. 3.04);

(iii) PRIMU would not approve award of civil works contractsbefore supervisionconsultants were appointedby the municipalityfor the relevantcomponent (para. 3.06);

(iv) PRIMU would not approve investmentsby an HUDC before formal approvalby its parent municipalityof the policystatement on HUDCs (para.3.11); and

(v) PRIMU would not approve investmentsin water and sanitation componentsunless the WSD (ASKI)was estimatedto be achieving its financialtargets in the currentyear (para.4.13).

(o) Municipalitieswould recover costs from beneficiaries(para. 4.07).

(p) Municipalitieswould maintainwater and sanitationtariffs sufficient to recovercosts and make a contributionto water and sanitation investments[at least 20 percentof the water and sanitation investmentsby 1992] (para. 4.13). -47-

6.02 Conditionsof Effectiveness:

Executionof the Project Agreementsby the Iller Bank and project municipalities,of the SLA between Governmentand the Iller Bank, and of the MunicipalityFinancing Agreements (MFAs) between ID and the municipalities (para.1.20);

6.03 Subjectto agreementon the above points, the projectwould be suitablefor US$120million lank financeon standardterms (17 years with 4 years of grace),of which US$6 millionwould be retroactive. aOVd-15- v 1d511 IH

-j4- - 49 -

ANNEX1 Page 1 of 15 TURKEY CUKUROVAURBAN DEVELOPMENT PROJECT

MUNICIPAL ENGINEERING SERVICES

This annex presentsin detail the water supply,sanitation, transportation,and solid waste managementfacilities in each of the five projectmunicipalities and plans for their upgrading.

Adana

1. Water Supply. The city is now entirelydependent on groundwaterfor its supplies. Although futureuse may be made of surfacewater sources,this is not expectedfor many years and certainlynot within the projectperiod. At present,about 70 unmeteredmunicipal wells producean estimated190,000 m3/d. (In addition,there are over 400 privatewells, many of them used by industry.) Municipaltubewells are scatteredwidely, but there are also a few clearlydefined wellfields. Some, but not all, of the wells have chlorinators althoughdisinfection is generallyunsatisfactory. Storage capacityin the system is lackingwith the water from the wells pumpeddirectly into supply. The distributionnetwork has not kept pace with the city's expansion,and many pipes have insufficientcapacity to carry the flows needed to satisfydemand. A large percentageof pipes are old and in deterioratingcondition; bursts are frequent.

2. The projectwould improvewater supplyas follows:

(a) The means of productionwill be rationalized. Two existingwell fieldswill be renovatedand two new ones will be developed. A hydrogeologicalstudy has been includedin the project to determine the most suitable locationsfor the new wells. Some of the scattered wells will be abandonedbut a few which are in good order will be retainedas a reserve. Altogethersome 36 new wells will be developedand 20 existingwells will be re-equipped. The four well fieldswill each have ground level collectionreservoirs with pumping stationsto deliverchlorinated water either to storagereservoirs or directlyinto supply.

(b) The area of supplywill be divided into zones with storage in each. A new primary distributionnetwork will be laid in the slopingarea between the 13 m and 150 m contours. Three zones will be created; Zone 1 from 15 m to 50 m; Zone 2 from 50 m to 90 m; and Zone 3 from 90 m to 150 m. Zone I is by far the greatestin area and population and will be served by a 60,000m3 reservoirwhich will be built in 3 two modules of 30,000 m . Zone 2 will be servedby a reservoirof - 50 -

ANNEX 1 Page 2 of 15

9,000 m 3 . Each will have associated pumping stations for staging water to higher levels. (Zone3 will be servedby a temporary arrangementfor the projectperiod). About 66 km of primarymains, transmissionmains, and feedermains will be laid rangingfrom 250 mm to 1,400 mm in diameter. About 265 km of secondaryand tertiary distributionmains (50 mm to 200 mm in diameter)will also be laid. The projectalso providesfor about 13,000house connections,all of which will be metered.

3. Sanitation. The existingsewerage networks in Adana operateas combinedsystems which dischargeinto the SeyhanRiver or to other water coursesand drainagechannels. In some areas septic tanks are in use. The sewersare generallyin poor conditiondue to low standardsof design, construction,and maintenance. Insufficientcapacity, poor gradients,and bad pipe jointingresult in blockages,leakages, and overflows. During storms floodingoccurs with floodwatercontamined by sewage.

4. In 1976, a feasibilitystudy proposeda new trunk seweragesystem drainingto a treatmentplant which was to be locatedin the southwestsector of the city. Considerablelengths of the trunk sewershave been constructed but until now they have not been connectedtogether and so remain unused. The treatmentplant site would have involveddischarging to a drainagechannel offeringno dilutionand thereforerequiring a high degreeof treatment. To obtain the benefit of the dilutionoffered by the SeyhanRiver the project would insteadprovide for two sewage treatmentplants, one on each side of the river. Each side of the river would also have its own systemof trunk sewers. On the east side of the river the sewershave been about 85 percent completedand on the west about 50 percent.

5. The Adana Water and SanitationCorporation, through its consultants and contractors,as part of the project,will constructthe outfallcollector on the east side of the Seyhan River together,withthe sewagepumping station and sewage treatmentplant at Bucak; constructthe outfallcollector, the sewagepumping station,and the sewagetreatment plant at Dutlu on the west side of Seyhan;construct the outfallsewer from the UEA which will connectto the Iller Bank networknorth of E-5. The project includesabout 22 km of trunk sewers (300 mm - 1,600 mm diameter),two sewage pumpingstation, and two sewage treatmentplants (anaerobicponds) with effluentoutfalls discharging into the Seyhan River. In addition,under activitiesclosely coordinated with trunk sewer constructionabout 175 km of branch sewers (mostly150-250 mm diameter)with about 7,400 propertyconnections would be laid. Emphasiswould be placed on maximizingthe benefitsto be obtainedby connectingsecondary and tertiarybranch sewers to the trunk sewers and completinghouse connections.

6. Stormwaterdrainage would be providedin those mahallesmost affected by flooding:Doseme, Hurmali,Cinarli, Koprulu, and Kisla. In those areas existingcombined sewers, where suitable,would become fully separatedfoul sewers and new surfacewater drains would be laid. In all, about 115 km (300 mm - 1,200 mm diameterplus box culvertsup to 4.5 m x 2.25 m) would be providedunder the project. - 51 -

ANNEX1 Page 3 of 15

7. Transportation.The projectcomponent addresses maintenance and new works. Urgentdeficiencies will be remediedby an immediateaction plan to correct the effectsof poor routinemaintenance. Primaryand secondaryroads would be repairedduring the first two years of the projectand tertiaryroads in the ensuingyears.

8. A programwould be introducedto bring the overallcondition of the pavementstructure to a level so that subsequent,continuing annual expenditureon routinemaintenance will preventfurther deterioration. This will includeprovision of adequateroad drainagesystems, the shapingof road profiles,and the provisionof overlaysto restorepavement strength. This work will be completedfor primaryand secondaryroads within the project period. An ongoingprogram of routinemaintenance will be introducedthat includesprovision of plant and equipmentas well as a substantialinput of technicalassistance.

9. The project'snew road works includeproposals for wideningand improvingexisting roads, for the constructionof new roads, and for improvementof road junctions. In order of prioritythese are:

(a) Wideningof the 5.3 km of the Karaisaliroad betweenE5 and the proposedtrans-European motorway.

(b) Constructionof about 2.3 km of a new sectionof the EasternDistrict Road between the Sag IsaleKanali and the smallercanal at the boundaryof the Urban ExpansionArea.

(c) Upgradingof about 11.7 km of the inner ring road along the irrigationchannel (Sag Isale Kanali)which will connectwith the existinghighway on the west bank of the SeyhanRiver.

(d) Wideningof some 1.9 km of the Karatas road south of the Roman Bridge.

(e) Redesignand reconstructionof six major intersections(four on E5; one on Karatas Road, one at west end of Roman Bridge).

(f) Constructionof two pedestrianoverpasses on ES.

10. Solid Waste Management. Adana'swaste disposalis carriedout under contractarrangements of which threecontracts are-current. The effectiveness of-this method of disposal will be evaluated some six months before the first expiry of a contract to determinewhether Adana should continueemploying contractorsto do this work or to revert to the old systemof employingtheir own manpowerand other resources.

11. The projectwill improvethe effectivenessof the arrangementsby creatingthree cleansingdistricts and by exercisingstricter control over contractors'activities. The projectincludes the acquisitionof a site for sanitarylandfill with provisionfor design and supervisionof construction and an element of technicalassistance aimed at improvingmanagement capacity and the use of sanitarylandfill methods. - 52 -

ANNEX1 Page 4 of 15

Ceyhan

12. Water Supply. Ceyhan'spresent dependence on groundwatersources is expectedto end by mid-1987when a pipe line from TatarliSprings is completed and commnissioned.Because these works will assure Ceyhanof an adequate supply the projectdoes not includea componentfor major water supply hardwareinvestments. Insteadthe componentaims at helping the Water and SanitationCorporation to dischargeits functionsefficiently, particularly reductionof unmeasuredwater. The projectwill includetechnical assistance to provide,inter alia, trainingin the use of equipmentand techniquesfor locatingwater supply apparatusin the groundand for the detectionof leaks. Provisionis made for the introductionof zoningwith zonal meteringand for developinga data base and establishinga record system. The project componentwould also includethe constructionof a workshopand administration building.

13. Sanitation. Ceyhan is partiallyserved by a combined sewerage/stormwaterdrainage system. About 50 percentof the populationis believed to be servedby this system,which dischargesuntreated sewage by a number of outfallsto the CeyhanRiver. About 40 percentof the population are servedby septic tanks and about 10 percentuse pit latrines. In Ceyhan, a service for emptyingseptic tanks is operatedby the Fire Service. As the arrangementappears to be effective,there are no proposalsfor change. In contrast,the seweragesystem is unsatisfactory:many lines have been laid with open joints,falls are slight,manholes are almostnonexistent, and recordsscarce. The developmentof the town on the flat terrain,comb 4ned- with the inadequacyof the drainagesystem and a high water table,has lead to seriouswater-logging and ponding followingrainfall. Continuedexpansion on the town is aggravatingthe situation.

14. The projectwill make a start in developingeffective sanitary arrangementsfor Ceyhan. Becauseof the wide differencebetween stormwater flow and sewage flow the adoptionof a combinedsystem would result in pipe sizes much too large for the dry weather sewage flow. The town therefore proposesto develop separatesystems of sewers and drains, incorporatingas much of the eAistingsystem into the new arrangementas is feasible. The town lies wholly on the left bank of the river,and the seweragearrangement will eventuallybe based on an interceptorsewer laid alongsidethe river discharginginto the well of a pumping stationon the south (downstream)side of the town. The pumping stationwould deliver sewage to a plant for treatmentthrough anaerobic, facultative, and maturationponds. The project would provideonly a limitedpart of the overallscheme. The interceptor sewer, for example,would not be constructedunder the projectand only a limitedprovision for sewage treatmentwould be made.

15. A new, separatesystem of sewerswould be constructedin the southern part of the town to serve the mahallesof Gaziosmanpasaand Mithatpasa. Sewerswould also be constructedto serve the developmentarea at the north end of Ceyban (underthe urban expansioncomponent). The work would be constructedin two phases. In phase one, the pumpingstation would be constructedwith a short (temporary)discharge to the river. The sewers in - 53 -

ANNEX 1 Page 5 of 15

GaziosmanpasaMahalle would be constructedand connectedto the pumping station. Also. in the first phase an anaerobicpond would be constructedon the sewage treatmentplant site which is situatedbetween the villagesof Yilankaleand Buyukmangit. In the second phase,a sewage lift stationwould be constructedto receive flows from sewerswhich would be laid in Mithatpasa Mahalle. The lift stationwould dischargeinto a sewer connectingto the phase one works.

16. About 10 km of trunk sewers (300-900mm) and 24 km of branch sewers (150-200mm) with about 2,400 propertyconnections would also be constructed. Within the mahallesnew surfacewater drainswould be laid althoughexisting pipes would be used for surfacewater drainagewhere their locationand conditionpermits. The projectalso providesfor disconnectinghouse drains and reconnectingthem to the new sewers,installirg road gulleys,and connectingthem to the surfacewater drains. From the main pumpingstation a force main (600 mm) would be laid to the sewage treatmentplant site and 1.7 km distant;and the temporarydischarge to the river would be disconnected. About 4.2 km (300-1,600mm) surfacewater drainswould be laid. This length dependson how much use can be made of existingsewers as part of the new surfacewater drainagesystem.

17. Solid Waste Management. Methodsof waste collectionand disposalin Ceyhan are excessivelylabor intensivewith collectionsaveraging less than 1 ton/man/day. In most mahallescurbside collection is practiced. Containers used by householdersare small, and vehicleshave small capacityresulting in frequenttrips to disposeof the waste. The refuse is simply dumped.

18. The projectaims to improvethe efficiencyof the existing organizationby restructuring,introducing collection districts, and providing new refuse vehiclesand containers. Insteadof dumping,sanitary landfill methodsof disposalwill be introduced. Trainingof all staff engaged in solid waste managementactivities will be providedthrough the project,and part of the trainingwill be concernedwith the introductionof preventive maintenanceschedules for all vehiclesand equipment. Technicalassistance will also provideguidance on routing;and in preparingmaster schedulesfor each collectionroute. Ceyhan is in possessionof a suitablesite (about8 ha) for sanitarylandfill and the projectproposals envisage its continueduse.

19. The projectwould providefor acquiringthe followingitems of equipment:

Vehicles No

3 12 m Refu4e Vehicles 5 ContainerCleaning Vehicle I MechanicalStreet Sweeper 1 StreetWashing Vehicle 1

Containers(Wheeled)

0.24 m' 1,250 1.1 m3 70 5 m 3 4

WorkshopTools and Equipment -54 -

ANNEX 1 Page 6 of 15

20. Administration,workshop, and stores would be centralizedand new premiseswould be constructedto serve the purpose. A weighbridgewould be installedat the disposalsite.

Iskenderun

21. Water SUPPlY. The city's supplyof water is already insufficientto meet demand. The supply comes from a number of wells and springs. These are:

Rated Estimated No. of Flow Flow Source Pumps 1/8 1/s

Pinarbasi Well-spring 6 440 240 BoreholeWell 2 160 120 Airport Boreholes 3 137 70 Narduzu.Boreholes 2 70 50 Ackay Boreholes 2 80 50 AskarbeyliSpring - _ 20 gravityflow 540

540 1/s is equivalentto 46,660 m3 /day but this flow is never achievedand actualmaximum supply estimatedat no more than 450 1/s (38,880m 3/day) comparedwith a 1990 demand of 55,000 m3/day. In addition to the above sourcesthere are about 70 privateboreholes/wells used mainly by industryor the militaryor for irrigation. The city needs both new sourcesand a program to reducehigh levels of unaccountedfor water.

22. The project includesas a first prioritya hydrogeologicalstudy to:

(a) delineatethe major acquifersand their rechargeareas;

(b) determinethe characteristicsof each acquifer;

(c) establishthe safe yield of existing sources;and

(d) determinethe locationsof sew sources,their rechargearea(s) and safe yield(s).

The secondpriority will be the introductionof a leak detectionand waste preventionprogram. In this connection,an early part of the work will includea detailedexamination of all sources. A source of water at Zufur spring,at presentused for irrigation,would be a useful supply for Iskenderun. The possibilityof providingfarmers with water from the aluvium in exchangefor the Zufur supply is to be examined. - 55 -

ANNE 1 Page 7 of 15

23. Becauseof the nature of the terrainthe supply systemwill be arrangedin zones as follows:

Zone Elevation(m)

1i n - 40 ) about 85 percent of the popixlationlive 2 450 - 100) in these zones

3 100 - 130) 4 130 - 165) not in projectperiod 5 165 - 200)

The projectwill providestorage reservoirsto command the pressurezones, transmission,and distributionmains with connectionsto properties. Rehabilitationwork would be carriedout at PinarbasiWell, Ackay boreholeand on a break pressuretank at Maslak where a chlorinatorwill also be installed. New wells (boreholes)will be developedat Pinarbasi(2), Ackay (1), MilitaryMarsh (7), and DugunyrduBolge (2). Collectionreservoirs will be constructedat Pinarbasi(2,500 m3), MilitaryMarsh (500 m 3 ) and DugunyurduBolge (100 M 3 ); at the last two sites pumping and chlorinating equipmentwill be provided. Eight storagereservoirs will be constructedas follows.

ReservoirCode Capacity (m')

RlA 4,500 RlC 9,000 R2A 2,500 R2B 6,000 R4A 1,000 RlB 24,000 R3 3,000 RN2 1,250

Total Storage 48,250 m3

About 50 km of transmissionand primarymains (100 mm to 800 mm diameter)and 68 km of secondaryand tertiarydistribution mains will be laid, and some 18,000connections will be provided.

24. A technicalassistance component will be includedin the project to support the Water and SanitationCorporation in developingits management capacityand in promotingits leak detectionand waste preventionprogram.

25. Sanitation. The pipe lines of the originalcombined sewerage system and its extensionshave been laid flat or nearly so. This has resultedin accumulationsof solidsand, as manholesare nearly absent,maintenance is a seriousand continuousproblem. The sewers are mostly of concretepipes but these are open jointedand, as the water table in Iskenderunis high, there is steady infiltrationof groundwaterinto the system. There are few recordsof the locationof sewers. The network is inadequateand there is localized floodingafter rain. Outside the seweredareas septic tanks are used, but - 56 -

ANNEX1 Page 8 of 15 becauseof the incidenceof rock near the surface,the tanks tend to be small. With a high water table,effluent disposal from the tanks is difficult and much of the effluentfinds its way to the surface.

26. It is proposedto constructa completelynew seweragesystem and to providea part of the proposedsystem as a projectcomponent. As the project progresses,existing sewers will, where suitable,be used as surfacewater drains. Ultimatedisposal of the sewagewill be to the sea, as the only affordablesolution for the next decade. However,the locationof the outfall is unknownand under the projectan oceanographicstudy will be made to determinea suitablesite for a sea outfall. Meanwhile,the project activitieswill be limitedto works in the central part of town. The sewers constructedwill drain to a pumpingstation to be built at the main jetty along which a temporarydischarge pipe will be laid. Becausepart of the south/southwestpart of the town will not drain by gravity into the CBD sewers,a lift stationwill be provided.

27. In addition to the pumpingstation and the lift station the project will provideabout 19 km of trunk sewers (200 to 1,000 mm diameter)and the temporaryoutfall mentioned above. When the locationof the sea outfall becomesknown the pumpingstation discharge arrangements will be suitably alteredso that the only redundantwork will be the temporarydischarge pipe. Secondaryand tertiarysewers of about 118 km will be laid in those central areas which will be served by the new trunk seweragesystem. About 14,000 connectionswill be providedunder thQ project.

28. The projectwill also providestormwater drainage works in the centralarea which is the only part of the town that suffersmajor difficultiesin times of heavy rain, especiallywhen this coincideswith a high tide. Where practical,existing sewers will be used as drains when the new sewers have been laid; where necessarynew drains will be laid and road gulleyswill be installedand connected. In all about 330 ha of the central area will benefit.

29. Transportation.Although the projectwill provide for some new works, the principalobjective will be to improvemaintenance capability throughorganizational and managerialimprovements as well as the provisionof equipmentand vehicles. The maintenancecomponent has three parts:

(a) An immediateaction program to correct the effects of substandard routinemaintenance in the past. Primaryand secondaryroads will be completedwithin the first two years of the projectperiod. The tertiaryroad networkwould receiveattention during the remainderof the project period.

(b) A program to improvethe overallcondition of the networkpavement will includeprovision of road drainage,shaping of road profiles, cambersand cross-falls,and the provisionof overlaysto restore pavementstrength. This work will be completed,for the primaryand secondaryroad network,over the project implementationperiod. - 57 -

ANNEX1 Page 9 of 15

(c) An ongoingprogram of routinemaintenance designed to minimize periodicmaintenance requirements and to improvethe standardof transportservice.

The capitalworks includedin the projectare for wideningand improving existingroads as follows:

Ozman Gazi Road (0.6 km) Canal Road (1.25 km) Eyup Caddesi (1.25 km) Road to expansionarea No. 7 (0.8 km)

In addition,provision will be made for redesignand reconstructionof two major junctionson Route E5 where it passes throughthe centralbusiness district,and signalizationof major intersectionon E5.

30. Solid Waste Management. Iskenderunruns its own solid waste collectionand disposalservice. Refuse is collecteddaily (50 percentof premises),every 2 days (30 percent),or twice weekly (20 percent). The refusevehicles are maintainedoy the municipalcentral workshops. Collection within the 24 mahallesof the town is made either from the curbsideor from communalcontainers, the latterbeing in generaluse in the area of medium to high rise buildings. Disposalis by simpledumping. The projectaims to improveoperational efficiency, namely labor inefficienciesand high expenditurelevels as follows:

(a) Throughtechnical assistance, training will be providedto both managementand staff. An officerwill be trainedin methods of dealingwith hazardouswastes.

(b) The town will be divided into three cleansingdistricts. Collection routeswill be developedand master scheduleswill be preparedfor each collectionroute.

(c) Wheeledbins will be procuredwhich will become the principalmethod employedfor refuse collection.

(d) Sanitarylandfill will be introducedin place of the present method of dumping.

(e) The Solid Waste ManagementDepartment will have workshop,storage, parking,and administrationoffices centralized on one site.

Vehiclesand equipmentto be procuredthrough the project are as follows:

Vehicles No

8 m3 RefuseVehicles 5 12 m3 Refuse Vehicle 5 3 16 m RefuseVehicle 4 ContainerCleaning Vehicle 1 MechanicalStreet Sweeper 1 StreetWashing Vehicle 1 - 58 -

ANNEX1 Page 10 of 15

Containers(Wheeled)

0.12 m3 360 0.24 m3 2,260 3 1.1 m 160 3 5 m 75

Mersin

31. Water Supply. Mersin has had a distributionnetwork (mostlyof 100 mm pipe) since 1938 with subsequentad hoc additions. Until recently groundwaterhas been the source of supply but under a plan prepared in 1976 and carriedout firstby D.S.I. and then by Iller Bank the Berdan River has become the principalsource; use of groundwateris being phased out. A dam on the Berdan provideswater for irrigationbut D.S.I. also made an allocationof 95 millionm 3tyr dividedbetween Mersin (66.6million m 3 /yr) and Tarsus (28.4million m3/yr). This supply is treatedat the BerdanTreatment Plant (BTP). The Mersin supply flowsby gravity from BTP to a storagereservoir Dl througha 1,400mm main. The plan also dividedMersin into seven supply zones each commandedby a servicereservoir as follows:

Zone Contour(m) Reservoir Status

1 0 7 DI Functioning 2 7 28 D2 Functioning 3 28 70 D3 Under Construction 4 70 110 D4 Under Construction 5 110 140 D5 Proposed

The above reservoirsall lie or will lie east of Muftu Creek

6 40 100 D6 Proposed 7 100 160 D7 Proposed

32. Agreementhas been reached that by end 1987, Iller Bank's contractors will completethese works on which they are currentlyengaged including primaryand secondarydistribution maina, in particularreservoirs D3 and D4 includingthe pumpingstation at D4.. The existingtransmission main from Berdan,under presentconditions governing flow, does not have sufficient carryingcapacity to meet Mersin'sgrowing needs. To overcomethis difficulty the projectwill includeprovision of a pumpingstation at BTP, a pumpingmain (300 m of 1400 m D.I. pipe) deliveringto a balancingreservoir connecting to the existingtransmission main which terminatesat reservoirDl in Mersin. The elevationof the balancingreservoir will allow an increasein the velocityin the transmissionmain and thus achieve the desireddelivery requirements.Storage at DI will be increasedby 9,000 m3. Storageat D2 will be increasedby 20,000M 3. About 9 km of primarydistribution main (200 mm - 300 mm diameter)will be laid. In addition 132 km of secondaryand tertiarydistribution reticulation would be constructedwith about 16,000 propertyconnections. The projectwill also provide for procurementof vehicles,equipment, and handtools,and for the establishmentof a depot and workshopfor the Mersin Water and SanitationCorporation. - 59 -

ANNEX1 Page 11 of 15

33. Under the projecta program to reduce unaccountedfor water by leak detectionand waste preventionwould be introduced. A data base would be developedand record drawingscompiled. Production,bulk, and zonal metering would be introduced. The currentpolicy of universalconsumption metering would be continued. All of these activitieswill be supportedby proposed managementstructure reorganization and the procurementof operationand maintenanceequipment.

34. Industrymakes considerableuse of groundwaterin the Mersin area. The municipalitywill obtain revenuefrom these abstractions. The groundwater resourceswill be used while the Berdanworks are proceedingand may, intermittently,be needed in the future. The projectwill thereforeprovide for a hydrogeologicalstudy in the Mersin/Taisusarea.

35. Sanitation. The existingsewerage system is a gravitycollection networkdischarging through a number of outfall sewersdirectly into the sea. The networkfunctions as a combinedsystem and coversabout 55-60 percentof the city. The principaloutfall sewer dischargesat the end of a long breakwater. This sewer serves the major part of the city east of Muftu Creek. On the landwardend of the breakwatersewage passes throughscreens and grit removalchannels before enteringa pumpingstation from which it is dischargedthrough the outfall. The existing trunk sewersare of insufficient capacityto carry the combinedfoul and storm water flows, and there is frequentflooding after rain. Part of the branch sewersare in need of replacementor rehabilitation.

36. A seweragescheme was preparedon behalf of Mersin and Iller Bank but until recentlyno action had been taken to execute the proposedworks. Under the Cukurovaproject, the proposalsto constructan interceptorsewer along the shore road to interceptall the sewers leadingto the sea were reviewed and incorporated.The interceptorwould carry sewage to a centralpoint near the existingtreatment plant for a sea discharge(after screening and grit removal). In this connection,an oceanographicstudy will be includedin the projectto determinethe locationof the outfallsewer which will not be constructedduring the projectperiod. However, Iller Banks contractorshave startedwork on the easternend of town and the proposalsfor the projecthave been modified to accommodatethese activities. It has been agreed that Iller Bank's contractorswill, by end 1987, completethe work they have commencedat the east end of town, the westwardlimit being Tirmil Tepe. The contractors will also constructthe interceptoralong the shore road at the west end of Mersin.

37. The Mersin Water and SanitationCorporation, through its consultants and contractors,will constructthe trunk seweragesystem togetherwith secondaryand tertiarysewers east of Muftu Creek and west of Tirmil Tepe; will constructsecondary and tertiarysewers west of Muftu Creek;will modify the existingoutfall arrangementsat the breakwaternear the harbor,by increasingpumping capacityand renovatingthe existingoutfall pipe; and will installtemporary discharge arrangements at the downstreamends of the eastern and westernsystems being constructedby Iller Bank's contractors. In the centralpart of the town, the projectwill reinforceexisting combined sewers in the centralbusiness district. North of the E24 existingcombined sewers - 60 -

ANNEX1 Page 12 of 15 will become foul sewers and separatearrangements will be made for dealing with surfacewater. Trunk sewer constructionwill serve the whole central area as far north as the Urban ExpansionArea. There will be about 42 km of trunk sewers (300 mm -2,200mm diameter)and some 106 km of secondaryand tertiarybranch collectors. Over the project period,some 13,000new connectionswill be made.

38. Surfacewater will be dealt with a number of ways. In the eastern and westernparts of the city, existingcombined sewers will become surface water drainsafter completionof new seweragenetworks there. North of Route E24, new surfacewater drains will be constructedto convey rainfall-runoffto naturalwater courses. In the centralbusiness area, existingcombined sewers will be reinforcedso that both foul sewage and rainfallrun-off can be dealt with adequately. About 22 km of surfacewater drains (300 mm to 1600 mm in diameter)will be laid and about 600 road gulleyswill be built and connected to the sewersand surfacewater drains. The principalareas to receive attentionwill be IhsaniyeMahalle and DemirtasMahalle.

39. Transportation.The projectcomponent places emphasison improved maintenance. To this end, a three-partroad maintenanceprogram will be introduced:

(a) An immediateaction plan to remedy the effectsof poor routine maintenance. For primaryand secondaryroads, this will be completed by 1988; thereaftertertiary roads will be repairedfor the remainder of the projectperiod.

(b) A program to upgrade the conditionof the networkpavement structure to a level wherebysubsequent annual expenditureon routine maintenancewill prevent furtherdeterioration. This involves provisionof road drainagesystems, shaping of road profiles,and restorationof pavementstrength. This programwill be completedfor primaryand secondaryroads within the project implementationperiod.

(c) An ongoingprogram of routinemaintenance designed to minimize periodicmaintenance requirements.

The project includesproposals for improvementsto two existingroads, both of which, inter alia, will-servethe Urban ExpansionArea north of the center: Camili road (about3 km) and Gozne Road (about3.75 km). In addition the projectprovides for the redesigningand reconstructionof eight major intersections,all on Route E24.

40. Solid Waste Management. Mersin Municipalityemploys its own staff on refusecollection, including street sweepingand disposal. Refuse is treated at a compostingplant locatedabout 8 km north of the town centeron a 60 ha site and which has been operatingsince January 1985. The workforcenumbers about 325 with 46 collectionvehicles. Vehicles are maintainedat the central municipalworkshop. Both curbsideand communalcollection methods are used. The compostingplant has been extensivelymodified since it was first introducedand is now operatingsatisfactory. There is adequatespace availablefor sanitarylandfill should the compostingplant fail or be taken out of servicefor maintenancepurposes. - 61 -

ANNEX 1 Page 13 of 15

41. The projectsets out to improveefficiency by establishinga separate SolidWaste ManagementDepartment and by providingadequate technical assistanceto developsolid waste managementmethods and techniquesand to introduceimproved collection and disposalmethods. Trainingwould be providedfor all staff and labor. The city would be dividedinto six collectiondistricts and routingsdefined for all collectionvehicles. The coveredwheeled container storage and collectionarrangements would be expandedand new collectionvehicles and satellitevehicles procured. A plannedpreventive maintenance program would be introduced,and the department' would establishits own vehiclepark and workshopsarea. The Municipality will employ an officer in chargeof hazardouswaste and identifysuch wastes and arrangefor their safe handlingand disposal. Specialattention will be given to hospitalwaste treatmentand disposal.

The projectwould includeprocurement of the following:

Vehicles No.

1.5 m3.Stellite Vehicles 2 12 m3 Refuse Vehicles 8 16 m3 RefuseVehicles 5 ContainerCleaning Vehicles 1 MechanicalStreet Sweeper 2 StreetWashing Vehicle I

Containers(Wheeled)

0.12 m3 415 0.24m 3 29850 1.1 m3 340 5 m3 45

Tarsus

42. Water Supply. At present,groundwater is the only source of supply. However,works will shortlybe completedwhich will enable Tarsus to draw its supplyfrom BerdanWater TreatmentPlant.- This plant was built.byDSI but is now the propertyof Mersin Municipality..In early 1987, Mersinwill become a bulk supplierof water to Tarsus. :Inanticipation of the arrivalof this new supply, IllerBank, throughits contractors,has been layiniprimary distributionnetworks in two pressurezones within the town and constructing two servicereservoirs (DYI and DY2). At DY1, a pumpingstation will be constructedunder the Iller Bank works to pump water to DY2. It has been agreedwith TarsusMunicipality that Iller Bank's contractorswill complete theiractivities on the constructionof DY1 and DY2 togetherwith the primary distributionsystem. The servicereservoirs will be completedby end 1987 and the primarysystem by mid-1988. The TarsusWater and SanitationCorporation will lay secondaryand tertiarywater mains, with house connections,in variousparts of the town. This involvesabout 93 km of 65-150mm diameter pipes and about 12,000connections. - 62 -

ANNEX1 Page 14 of 15

43. In addition to these capitalworks, the projectwill introducetwo programsof work which will be supportedby managementstr'lcture reorganizationand procurementof operationand maintenanceequipment: (a) data base preparationfollowed by a program for the reductionof unaccounted for water and (b) identificationand registrationof illegalconnections, rationalizationof shared servicedconnections, and replacementof defective consumptionmeters. The projectwould also includethe provisionof a depot and workshopand the procurementof vehicles,plant, portableequipment, and handtools. Technicalassistance components will be includedin the project to supportthe corporationin its leak detectionand waste preventionprogram and in its overallmanagement efficiency.

44. Sanitation. The seweragesystem in Tarsus,dating from 1979, is limitedto about 10 percentof the city area and serves about 15 percentof the population. Dischargeof sewage is made directlyto the BerdanRiver or to drainagechannels that ultimatelydischarge to the river. Tarsus is dividedinto two naturaldrainage districts, the easterndistrict and the largerwestern district. A scheme for the trunk sewerageof Tarsuswas preparedby Iller Bank. This schemehas been modifiedto create two sewerage districtsinstead of the one originallyproposed with each districtsystem providedwith its own sewage treatmentplant.

45. During the projectperiod, only the western seweragesystem will be constructed. Becausethe westerndistrict includes an area which cannot effectivelybe drainedby gravity,the project includesa lift stationto dischargethe sewage flow from this area into the western districttrunk seweragesystem. In all about 21 km of trunk sewerswill be laid from 300 mm to 1,200 mm in diameter. Treatmentwill be providedat a plant which will eventuallyinclude anaerobic, facultative, and maturationponds but during the projectperiod only the first of these will be constructed. A sewage pumping stationwill be providedunder the project to raise the influentto the treatmentplant. Secondaryand tertiarybranch sewersof about 167 km will be laid togetherwith some 17,000connections.

46. There are a numberof mahallesin the town which suffer from flooding (Barbaros,Girne and Fevzi Cackmak). Surfacewater drainagefor these problem ares will be includedin the project. Becauseof local terrain characteristics,surface channels will be used in some areas in preferenceto pipes. There will be about 6 km of channellingand about 1 km of trunk surfacewater drains serving,in all, an area of about 137 ha. The system will dischargeinto naturalwater courses.

47. Transportation.Although the projectwill provide for new works the main thrustwill be towardsimproved maintenance capability through organizationaland managerialmeasures and procurementof vehiclesand equipment. The maintenancecomponent is in three parts:

(a) An immediateaction program to correct the effects of substandard routinemaintenance in the past. Primaryand secondaryroads will be completedwithin the first two years of the project period. The tertiaryroad networkwould receiveattention for the remainderof the projectperiod. - 63 -

ANNEX 1 Page 15 of 15

(b) A programto improvethe overallcondition of the network pavementto a level whereby subsequentcontinuing annual expenditureon routine maintenancewill offset deteriorationof the network. The program will includeprovision of road drainage,shaping of road profiles, cambersand crossfalls,and the restorationof pavementstrength. This work would be completed,for the primaryand secondaryroad network,over the project implementationperiod.

(c) An ongoingprogram of routinemaintenance designed to minimize periodicrequirements and improvethe transportservice. Canal Road, about 1.6 km, will also be improved. In addition,there would be a major junctionimprovement about 0.2 km west of the railway.

48. Solid Waste Management. Tarsus has its own solid waste collection and disposalorganization. Collectionwith the 47 mahalles is made from the curbsideor from communalcontainers, the latterbeing in generaluse in medium to high rise dwellingarea. Disposalis by simple dumping. Vehicle maintenanceis carriedout at the municipalworkshops. Labor inefficiencies aboundand expenditurelevels are high.

49. The projectaims to improveoperational efficiency in a number of ways:

(a) By providingtechnical assistance, training will be provided to both managementand staff. A hazardouswaste officerwill be trained.

(b) Tarsuswill be divided into three collectiondistricts and collection routeswill be developedleading to the preparationof master schedulesfor each collectionroute.

(c) The wheeledbin will become the principalmethod employed for refuse collection. In areas of difficultaccess, small satellitevehicles will be used in the operationof a short range transfersystem.

(d) Sanitarylandfill will be introducedinstead of the presentmethod of dumping.

(e) Workshops,storage parking, and administrativeoffices of the Solid Waste ManagementDepartment will be centralizedat one site.

50. The vehiclesand equipmentto be procuredthrough the projectare as follows:

Vehicles No.

1.5 m3 SatelliteVehicles 3 1.2 m3 Refuse Vehicles 5 1.6 ma Refuse Vehicles .1 ContainerCleaning Vehicles 1 MechanicalStreet Sweeper 1

Containers(Wheeled)

0.12 m3 170 0.24 m3 1,815 1.1 X3 125 - 64 -

AN'NEX2 Page 1 of 8 TURKEY

CUKUROVAURBAN DEVELOPMENTPROJECT

DETAILEDCOST ESTIMATES

Detailedcost tablesby city and subcomponentare in the project file. This annex contains:

Table 1: ProjectComponents by Year iv Base Prices Table 2: ProjectComponents by Year in Current Prict; Table 3: SummaryAccount by Project Component Table 4: SummaryAccounts Cost Summary Table 5: SummaryAccounts by ExecutingEntity Table 6: ProjectComponents by ExecutingEntity Table 7: ForeignExchange/Local/Taxes by ExecutingEntity - 65 - ANNEX2 Page 2 of 8 TURKEY CUKUROVAURBAN DEVELOPMENTPROJECT Table 1: PROJECTCOMPONENTS BY YEAR (TL millon)

Projet CIenntbby Iger

8ao Costs total In? low ige Is"0 71)1291 i 1293 19001 71 lUss '000)

NI IP8USIUNmu1 3)1.4 S08.1 731.1 342.1 2'?.? 2.912.1 3.3490,S SECUSSIP08311 983.4 4.10I .?1,91.6 S.31108 .? 685.2 3.51774 1,320.2 07.4 IL54.541 38,011.2 MU1110OVIWLOPNT UIAUJUUI 46.3 401.8 1.4)0.4 1,9O10.61.283. 3 862.1S 791.0 410.0 7,301.0 9,70. 0 miulIuaP ssvIcUS mari a sumuram S 31,1.01 44,33.0 a, I33.I6.76O.2 4,031.064.414.3 1 202.1 10. 1 41.328.k 60,130.8 0111013iU1i3tl11 SEVICIs 250.a 1.720.? 6. 370.4 8. 100.1 S.1SOL.) 2.8M..9 2, 163.7 14.4 33.218.1 44.344. 7 U)11C1P81FlomIC 811 auII*61 488.8a 441.1 400.4 103.4 it. I 767 1,641.3 2,180.2 SmA-Total80011 71011.7 K8,18.3 2211.1Sl 23.529I. 18392.A11.8M2.4 S.82".,4 720.0 1It,681.15 18&21S.4

11381100115808MA 1.020.4 1.$14. 3 1,241.2 1.12 OK3808. 291.1 227.1S 234.0 1.0629.3 1*. 118.4 o1CffUS 13wP61S1 I23.8 1,124.8 1,177.0 1.15483 1.142.0 66.2I 20.7I6.044.? S.0M.?I N15513 K1V1L0U31t301861113 - 366.4 441.) 112.8 2730.7 120,.4 I. 661.4 2,108.1I 16MICIP8L5111161 WO613 517871T11) 1.4)3.0 3,8658.0 1.628.I 1.711.? 1,206.4 1,0232. 31609 22.0 ItI. 102.2 14,693.0 07111 56101131115113165 7194.3 2,632.4 2.0)3.6 1,972.7 1,040.6 1,216.7 014.6 100.2 11,014.4 14.6M.8 1816C1381FINIUC M4 )461114 214.8 23. 0 184.6 14.0 30.0 33.0 - 6V1.40 1,161.3 M,-TeteI 78430 4.1). S .5)8.3 L6248.8 IL840.0 4.803, 3,0082 2,129.4 4"1.8 38,540.0 51,360.6

Ulm81tiPUISW MA1 3,7M.01 4,88.0 X3,2.7I 2.7I)1.8 3,302.2 2,014.2 1.112, I - 22,200.3 23.600.3 eICswiiuu WoSSIN. 3.433.1 4.07ff,1S 2,838.0 4,720.4 3.1280 1,1324.0 t.130.7305 25,307.3 110115010661411030637 r 914T - 170.0 6302 lot 0 742.7 317.3 221.3 3,282.0 4,318.? NUUIC)P*1SIIVICIS (1)87138 561T811) 1,0$27.8 1,403.0S 4,664.0 3,900.4 2,788. I, 0.47.1 321.2 - 20,".S61.1 2,148.7 07N30138101103 KUVICS 870.2 2,018.,8 3,841.0 2,3.9.2 2,030.8 1,611.35 108.444 11,27T87 so.36. 0 11133C138t7)3636 M3N101*01T Ill.$ 308.) 201.2 01.1 39.0 33.0 9)0.0 1,21&33 Mt-Total 1113S1 613.)I 17,681L3 1720."1 13,0011.8 13M.S2 10,112.0 4,124.8 82,0062 100,424.3 S. CIISA lUAU130015108,1A 33L60 737.8a 810.3 Si.0 414.8 2o.7I 2,421.6 3,234.) I33CIP41SWIUVCS ONTO8 138567*7109 181.9 1,667.3 740.0 640.7 367.8I 01. 364.3 4.23).)t S1721.19 07111311161111131 SOIAYCES a3.2 148.8 616.7OL 4"0.1 324.0 2So.?I SW) J.39. 5 4,700.7 NINICIPAIFlm$001118100K464111101 101.4 204.10 107.3 40.4 31.7 3I.0 U.5335 7)3i

sub-Total 61118 70. ,0.0 2.37.8 1,131.2 23,1S 6).I 635.) - 10,781.7 14,311.5

11311101110MA1 4,023.0 1,622.8 1,333.1 685.6 1,131.1 1,2)0.0 812.0 - 11260.1S 13,012.7 8110W040843 222.)I 1.009.) 1,310.8. 1,201.4 1,071.3 62n.6 2)3.4 11.0 6.904.1 0L200.2 NIMSINGOIvII.311 383811137 273.4 344.0 1)8.) 134.0 312.1 IS6.0 1,43.2 2,330.5 3,107.5 11113C1p81SEIICEI 018710I513110710 671.2 4,733.0 2,23.1. 3. 921. 8 2,410.4 1, 306.0 4967I 0W.8 17,001.1S 22,6618.7I 071N11111613113111 StVICES 007.2 2,283.4 I. 754.I 770.1 044.71 O808. 048.7 20.2 8. 136.3O 10,801.0 #013161381FINM we0113616614 21. 2 2614.7 170.3 82.4 33.0 37.7 - 6483 1. 128.4 Sub-total 15111U3II 107.2 11,322.5 6247.8 7,427.4 Lill.7 4,668. 2,5.7. 3)162 4&51)1.1 82,).t 4

MINING13 178.0 US628 266. 38.2 1.3 SOL1,6862. II& I 11111am8 78 M)36619113 1.244. 1 1,0Q2&1) 133.1 - - 2,400.3 3,208.4

Su-Vote) Oflo011t 8M 11Gl118I 1,m62. 1.64n.? 420.) 06 2 1.3 - -2,094.3 1,S.326.5 6. PROOdT110)81113 POOdCT11V113 £113113 6041T03111 04)7 781.3 801.1 620.1 603.2 553.8 1)2.1 IM27.1 221.0 4,423.3 5.6398,5 Mt-Total POOdICT361181111T 781.2 661. I. 80.2 10.8 1)3.1 211.9 221.0 4,423.3 1,0.5. total 605tl13 C01TS 2721.7l 72,823.2 57.131.4 12,703.3 44.314.1 32,003.6 1,267.6 1,762.7 304.08).? 406,642.3 ""yelal Conti n -PIG 1,178.0 1,3)2.3 4,866.6 4,976.)1 4,384.3 2,881.8 1,431.) 161.0 21,220.1S 33,627.4 price Conti etpmiss 3. S47.1 20,666.7 40,0170.6011.162,7 04,097.3IS 1354.8 JS,7. IL135.3. ) 204,0)1.8 27. 113.0 tota) PIWItI cotS 31,10.S8 100,803.2 103,270.1 1)3.334.0 lit 2, 28 4. 435. 2 S2,3.SL4 .0Olt8 624,217.0 487.382.I ISt$$&*8 3W32S3S23 32122**522:33* 233ss**** 33228*32ssuss23383 23*9*e 21333:281 SS*233223 lows,s 2,02. 80217.) 8,662.0 8M,62. 8,020. 7,201.8 3,741.1 864.) 43,162.1SSI38.843 Forolp (sches 8,370.2 $8,7712.1 32,320 3.1 W.10. 31,601.4 2L3,80.212,251.0 1,10M.2 173,332.091317,181.0 ...... Iarch 20. 100 13:07 -6- ANNEX2 Page 3 of 8 TURKEY

CUJKUROVAURBAN, DEVELOPMEN PROJEC TabWe2: PROJECTCOMPONENTS BY YEARIN CURRENTPRICES

Totaft IftlcluIin Con.ti. is$s

107 o"8 logo 190 10 1992 1993 1024 lots I lolal

URBANEXPANSION AREA 387.4 1. 388.2 1,337.8 752.0 555.0 - 4,420. 4 3. 875.8 GECEIIONDUUP6RtAOING 8o8.1 8,021. I 90,24.2 13.757. 7 IS, 818.0 10.622. 2 5,507.6 267.5 63.715I,04 44.735.5 HOUSINGDEVEIOPNENT MOANAGMNT 56.7 751.7 2,5S64.5 4, 111.4 3.480.3 2.5*7. 8 2.763.1 1 684.2 17. ooo. 11.626. 1 MUNICIPALSERVICES (WATER 8 SANITATION) 6.408.O0 20.731. 7 14,404.0 14.324.3 12,220.? 12.84W.3 4,314.? 711.4 86,031.2 GS.131.5S OTHERENGINEERING SERVICES 410.51111, In. 9 11,367.8 17,501.2 14453.2 a, 603. 1 7, 362.6 2031. 71,276. 1 St.,438. 8 MUNICIPAtFINANCE AND PANAGANENT 540.8 613.0 860.5 300.0 177.6a 207.6 - 2.500 4 2.276. I Suab-TcotaIASANA 6,6020.6 41."S. 7 40,258. 80.013.5 46.703.4 34.867,0 20,@38. I 2.0"8. 7 245. 53. 7 182,088.09 9. TARSUS URBA EXPANSIONAREA 2.207. 7 2.443.1I 2.248,3 2,438.6 2. 228,4 1. I8. 0 185.8 037.5S 14.547. 3 11,694.5 GECEIIONDUUPGRADING 155.4 1.693.I 2. 137.6 3, 326.0 2. 018.0 1. 080.7 80So.I IS1.112.? 9,430. S NOUSINIGDEVELOPMENT RANIAGENENT 707.3 1,152.1I 1.734.7 1.308.5 524.1 5,514.8 3. IIS.1 MIIICIPAI, SERVICES(MATER & SANITATION) 1,727.8 5,482.6 2,013.0 3,173.5 3,103.0 3,022.2 1,016.5 886.4 21.255.9 16.051.2 OTHERENGINEERING SERVICES 803.8 4. 138.0 3,6$18.2 4. 152.5 2,604.0 3,038.6 3,343.0 455.0 23,232.0 160593.59 NIIICIPAL FINANCEAMD MAN1AGEMENT 280.6 411.1 304.5 107.1 00.3 105.6 1.305.? t1208.2

Sub-total TARSUS 5,362.2 14,147.0 11I-2"1.? 14,505.0 12,277.7 11,356.8 7,403.7 2,002.0 76.067.0 50,351.0 C. NERSIN URBA EXPANSIONAREA 4.345.3 7,240.8 6.713.6 5,871.9 8,&624.8 7 711.5S 4,102.1 44.62?.0 34,025.2 GECEKONOUUPGRADING 5,200.2 7. 389.0 S. 720.6 12,070.6 10,475.0 4.556. 0 45. 431 It.1 00. 0 HOUSINGDEVELOPMENT RANAGENENT 884.5 1,200.2 1,600.8 1,942.1I . 38.6 615.6 - 7,480.8 5,268.8 WMUICIPAtSERVICES (WATER S SANITATIONI 1,854.1 8,150.7 8,260.5 8,350.0 7,035.6 5,712.4 1,1.fi.5 40,542.8 31,504.68 OTHERENGINEERING SERVICES 763.5 4. 503.1 661.S. 0 6.388. I 5,257.3 4,882.0 3,600.2 -32,245.6 23,544.5 MUNICIPALFINANCE AND RANGENENI 193.0 423.6 4810.3 110.09 00.3 100.6 1.412.7 1,263.0

Sub-total RNRSIN 7,165.09 26,421.4 31,013.6 28,060.2 35,020.6 20,854.8 14,194.5 - 171,749.0 128,704.1 0. CEYHAN URBANEXPANSION AREA 380.3 1, 113.0 1,552.0 100.8a 1,247.1 It7.4 4, 414.5S 3,688.0 MUNICIPAL.SERVICES (ATER 8 SANITATIONI 200.I 2.707.1 1,376.1 1,300.3 940.0 285.7 1,228.8 - 8.,146.7 6,482.4 OTHERENGINEERING SERVICES 93.6 2.212. S 1. 101.3 085. I 854.0 764.2 863.6 6, 073. 3 5.428.2 MUNICIPALFINANCE AND NANAGENET 114.1 280,6 178.0 06.0 87.3 10.5. 802.4 751.4 S5*-Total CETHA 707.0 6,313.3 4,308.0 2.562. 2 1,1.2.2 2,422.5 2,163.68 20, 457.0 16.350.0 E. ISRENOERUN

URBANEIPANSION MIA 4,6$40.7 2,807.2 2,462.1 1,826.09 2,875.2 3,645.2 2,814.7 - 21,083.0 16,084.6 GECEKONIIUUPGRADING 282.7 2,883.0 2,452. 0 2, 707.6 2. 738.8 2.460.1 132, 1 208.7 14,464. 2 10,750. 6 HOUSINGDEVELOPMNT IIANAGNE.T - 420.8 623.4 1. 117.4 1,364.5S 930.4 604,7 582.6 5,742.5 3, 713.5 MUNICIPALSERVICES (WATERI 8 SAniTIaTION 798,0 6,9013.2 5.,761.0 8,&363.7 6, 101.4 4. 122.5 1.65M.7 387.4 34,275.8 25,0"8.0 OTHERENGINEERING SERVICES I. 021.2 3,358,0 3, 142.4 1,054.5 2,257.5 2,643.8 1,808.5 104.31I. 179.1I 12,342. 6 MUNICIPALFINANCE AND PMANAGEENT 288.1 38. 1 280.9 122.4 00.3 102.1 1,281.02 1,164.0 Sub-Total ISNENDRNO 7,03?.17 16,850.8 14,722.1 71. 704.6 15,617. 6 13,013.1I 7,7092.61, 281. I 03,028.3 70.042.4 F. NATIONALAND REGIONAL

TRAINING 658.6 a6l.5S 471.8 188.7 3.0 - 2,183.6 2.103.6 ItLERtB=A TA ANDEOUIPMENT 1,3M..2 1,408.5 220.4 . - 3,035.0 3,282.6 Subtotal NATIONALAND REGIONAL 2,057.86 2,267.0 701.2I 1le. 7 3. 0 5.218.6 5, 483.4 C. PRO.JECTMANAGEMENT PROJECTREVIEW IMPLEM. MONITORING UNIT 2000.5 1, 107. 2 1,046.0 1,210,7 1,314.3 1,420.0 008.6 8381.I 8,645.4 6. 462.09 Sub-total PROJECTNAAGEHENT 2000.5S 1, 107.2 1,040.0 1,210.7 1,314.3 1,420.9 98.8 838S.I 86445.4 6, 462 ~ total PROJECTCOSTS 31,0. 8 108,803. 2 103,270.7 113.334.0 112.835 8 94. 435.2 52,508.4 7, 078.8 624.211 0 407.: 7 ,snz.*xs sgz:zzzR* asts::::: :2:2:521* 2.tguts,2 S182: E*8*23zS3 28832 238*tS*s4 lxtz::S.:

3: 0------.t987------I - - - - 67- ANNEX2 Page 4 of 8 TURKEY CUKUROVA URBAN DEVELOPNMT PROJECT

Table 3: SUMMARY ACCOUNT BY PROJECT COMPONENT (TL million)

......

on"683 IMOSING $1914111Is Ottef1 lUlCIP3*1 Ono63 NaUst" SI3lCS OI4R tl4CIPI.l t7PNSl it Ctt"tum Dtt_t M TEt a EttU ElttEU fltm _ gavais5cif ZBOu t DE%tttml mile It ttUlttititi *ltfttC£ as Utt1I463 6*1130449 839*38448610234 9209*0436/tM t31 58341441094S1i4t4*1E0 1 SIUVICIS )M114 *U84...S4 440PGRADINSS1* .v883 uah. v .. nwiUlt SS.**S3t tU1003409.. SS 1E11St1V3CES IcS.....*11344 t0 tl ,ftt#*e.. *****s*s .u*se@satsst *s..,sS.,*s *S*S*S$s*5S *st**ttt*S# W*h*SlWh **SSSSSSS **tSS*hSt*t *$S)$%s-X ztttStt*Tt,*S ttt**t trt 1. 4INf31151 coSts ...... A. 1830t*8I0I4* 1. si6.4 * 422L . 3.2)2.3 - t.8 t49.¢0 It9 1.2)68a 8. Cl4lt 0RK5 t. I111.4 21.681. S.9 41.0 13.Ofl.9 22.02.0 - s.i).t 4.28.8 2.679.t068.2 7I389. I C. Pins No 1)T44I4 143.0 1. 32, 431.6 S&6.21.S 1,41.I - 483.0 218.6 39. 2.22.6 ?-7.2 o. 1E01putl4t t.0.S 2,)?) * 394 3 D.C92.4 t7t29.1 149.1 683.8 421.4 33.6 2.210.0 t 50t 5 Is0 I . P9U41SS1Ilt Stt1lCts 144.2 2.015.S 24).) 3.08. 4 1 9140 281.2 422.2 tn. 4 864.6 643.0 t104ICM assII t 1*339 I. 2.2 - *8.4 2)2 6 6se.3 IL 012831*0- ...... I). 11U03tS3t491 - - '. - -

total I3t154t41t3COSTS 2.t12.1 2t8,.41 .9 202. a 45.2t.U 31 5.5 1 1*641.9 t. 1.t S 044.? I1.U88 4 It. 102.2 11,014.4 71. 0 total6811t1l) COStS 2.12.) 28,141.9 *.e"S.0 45.38a.4 3 t2 . S .84).9 7.626.2 6,044.1 .884.4 44,102.2 11,014.4 St e 9.hcaI CnI.et_gt 278.0 2. 84tf,i 143.9 o.04. 2,9". e.0 100.6 1 94 223.5 92t.9 901.7 PvtceCont i..4o. 4,632.3 32,322.6 S.s9s.I 1.5191.3 n1.ot7.s s1.s1 6220.4 6,41.4 3.409.9 9.494.8 11.310.0 434.2 ...... I...... total P86tt1C COStS 4.4 4 63,7i1. 4 aI909.680. I2t1 2t109.4 14,47.2 4I, 112. S.1514.8 I4.255.9 23.232.0 4,305.2 0...... ! * .ls S .. *s*SS*a t%** S$ % 41 s eaS%t Sttst.tttst *t4t$$s"t St**....$$w$stl-$S. *.*#ttt ...... I7t I,n" 38.8 1S.S22.0 14I.,0 6,438. 3 3,42. 2 300.4 4,406.9 14,I. S Mt. I .028, 4,422.7 IS? 2 lore)p Incho"" 1S723.5 14.871t 3,98t1.0 238,?it I46283.3 t e019.1 21,25.9I 2. M.2 I 15.5316.1S as.9. 46t.5 s39.6

......

44gr.h~~ ~ ~ ~ 28498~ ~ ~ " t42 - -* -0*1 * ...... I......

dWtm 1011tsila s tnlCtS oltit llifttlC Lowt tSIIIC 41418PALS)182S OftEtl EXPANSION0t1103t 9t111OttEIII MAV438419 8 4Na436t 4t)3lf Il 8 *AND Elt8450# OtCtt_ OIViOPt)13T UUttiEI E1304UEtRIIGI fiNSCE A ARIA, WOWING "lut4etiEf S Iit4tll SERVICES IlI_ttt AREA u"UDING lAUttt soliAlitile SERVtICES MAMMAwt

=......

A. 1too8ls mi4 2,'4144 68. - 491.0 271. 6 3.0 126.7 61.4 R. ,Itn Ne 0Vso I.s On. 1,88.7.2 2.229.1 I0.821.0 t1.08.8 - 4. * .s6. I 2. 22.: e. o 1.521 44144. 407.9 4,114. 8n6 483.8 413.4 491 L. 98 5SSI4 t 2t2e. S 1,32.1 70t2.0 4. V1.2 2 ,t1160 4. 0 41-- 1.40219.S 946.4 439. 7. 4184i9o)8 8u9149s 841.2 1.4)0.9 243.2 4t439.S1 8l.O 14 . 3249 1 26.0 O alu Ila 442.4 2)s1.8 141.0 31.41 6t.4 4004A tt ttttelpsl 3, flttO45uIPI ...... total$Mill5 tCOlStS St 20a.9 49,139.1S 33. 0 20,.864.1 t.15 t I n0.0 2,421.8 4.29) 3,-2211.s19 ° s#14toatir."CW 22.20e9 9 19. 2. 3.282,8 2,8t8. S1 IS. i e.1 9400 2,421.8 * 4.2*91. 31.1S".S s S 13.y,Ital 5 :741. 1 4.992.)1 444.2 1.474t8.4 ,3 8 20.? 343.8 320.0 *Pite Com _ ut 20 ,41. 3 23.701 2,793. I 8, Ift.4 t89.2193 102.7 1.81L3 3,1S4.0 S22.8.22.9 ...... total 90l t sts 44821.0 41.43).1 7,40. A,142.6S 32.241.s 1.442.1 4.414. - 4, 446L? 6.9q73.3 88 4 finn. ,*.Ss.i..t .. t.,fl.t.i f.l$tn.iiSSfttSSSSSt-*98tS.4 SiSSSS*S *.*fl,9*3 t tS *tf.lWtt flSSSttfl *SSt...S*.t *tStS...S.W fee ,348.0 ,1 1". 0 6814 s.289.? t. Stf46A 487.4 497.4 * 87.0 419 7 m722 7w. p1est4.p I0,8M 0 40, 429.3 ,104.2 42,118.4 8.88a8 119.2 I4.003. 2, 02t 45. 49 4 714 0

......

...... _ TOU we _aa PIOICttM_

154tt cEtB ...... ica

_n lattlSlC SRVIClES cttlft NUItlClSt lItzl $M UtYtEIL cantI .. '1 EXAlmSsfs ctetlo oEntepFtl (tiet a EatlelFtl tlllllllt No 101111 NONttll K ...... Itto UttOIIIG *ttUMttl.3843.3881 salttionle StTtctES IlmUlSE*l lWtatleso 636teiiFtsttsEt 0,2640 3*Ista 0lNitti totalF I a a a

...... SS S*.... I. S .% .. .

II) tnit NM S. - I5S. Xt. S 1. So. * 1 4 a 01 1 4119 M- 4t1. 11. - M.8a Coa,. 20. oS t motst anD #$Itll 1118.41 Its.$ Its.s 1 .18t.1 7 -4S1 *S.1 * 36 3410430 8. 1839 884 ns110 283. 2. I2. 48tI8.2. 1. .i o s S.20420.0S 0.0 0 0 e. tQpqw 813.§8 4V683846 9 L8e9.1on, t415 33 6in3 s 144.3 1It4.290.8 41 4tl.1, *.) I .81 t4w71 SS1141ttS 33145 ea a 1.43.4 3 - 2. I 19on2 o.e oo 4t. notsS4g nf2t-81. Ist u . .n e2 too. 1e.15. to.e o e it CittI30w s - * .8 84 -* -* * .o o o0 1. 4069S436a i9v45 233.9 2864 412.6 4,434.4 284.4 . 2,268.IM 4992.2a 0.0 0.0

ttl9. $11I1IlIVI?1Mt$ 108.6 1 246.9 9 3.4. 1 41, 4ea QS. 33 4 . 8.8 S3, n 35 tot. Matsui COST 872.6 8488 4.18 2.809 ,96.2M 411.3 144t4. 24,4 80.428.940,4 .t 8.36 ,872203

1.ce C110181 eSl *."8 8. .e . It.S. III& t411."2 480 4 .). 802.4 4. 10.8 02.2t . 0.0 2 0.014.9

101411 0M*VO-TS 21.e1t.0 4t40t.t at42n 34.2M 16. 179. 1- 111.9 2.Itlt on o-. ,4w M211.9 0.09 0. 4 7o4*444,282.1 )s3W14 1004.?coiii 3.3)0.6 41,804.1 e.431 848.3 4.5818 2,466.3t ; t 4,423.9, 304.98).? 6.2 .1Ss 4 0 01 6017 24,083.024 44,484.31,22 4 1,42.1.1sk*S 79.8 4.8n49.. 2,482.6 M.. 184.OKt 49.I427.9 7. 9 .911 . ?wo)p U*410p 4T40.2 3.6 4,284.4 42.83.4 1 9.04.6 44 2 88K8 2,931.? 4.2. 14479.32.9 1 43.2915. 9 ...... fTf a Om93t l:O TURKEY CUKUROVA URBAN DEVELOPMENTPROJECT Table 4: SUMMIARYACCOUNTS COST SUMMARY

it i I I i fuss ' 001 8 Total 2 total 2 Foreign Base I Foreign Base tocRl Foreign lot# tchang. Costs local foreign totol Exchange Costs 1. INVESIWNICOSTS

A. IAND aCQIISItIOn 20. I50. - 20 150. 0 - 7 26.866.7 B. Clltl ImS - 26.6C6.7 - 7 I338443.2 40.210.6 116t.6S3.8 23 59 C. PIPES AND Fl11i3GS 16,966.8 184.598.9 53.614.2 236.20s. 1 23 59 19.S24.7 36.49 1.5 54 12 22.622.4 26.032.9 0 t[IPIIEUT 19. 400. 3 21. 48.655. 4 54 12 041. 4 40.441. ? S2 3 25. 861. 0 E. PROIESSIOI* SERVICES 14. 28. OSS. 3 S3.922. 3 52 13 tif.7 S. S. S 19.382.2 29 I f. ItCINNICAt ASSISIAICE 16.31S. .6827.4 26.643. 0 ' 7 4 98. S 3. 729.0 8. 027. 5 46 J G. OVERHEADS 5.731.3 4,972.0 10.703. 3 4b 3 SS9.3 147.0 1. 106.3 13 0 N. FtIIoSIPS 1.279.@0 198. 0 1.415. 1 13 0 16. 7 112.0 38. I 87 0 22.3 141.3 171.6 St 0 Total B5SMl at COSIS 214. 346 903. 5. 3 304,981.7 30 100 285. 5. Physical Continsc log 10.344.3 3 120. 4. 0 406. 642. 3 30 0OO S. B?S 3 25. 220. S 2? 6 24. Price Coetiimencies 212.194.3 4S. 0 9.316.3 33.627.4 27 S 81.821.3 2".0IS.S 20 96 - - - ,- --- 19.S43.3 ?7.5.6 27. 113.0 ------28 *t ------Total PROEWCT ------COStS 444. 86S. 0 39. 332. 9 624. 217.9 29 205 329. 797. 6 133. SS6. 0 467. 382. 7 tS::S:tS5~~~~~~2:::::. :::S: ::_ 29 IIS ::S: 2--: :_:: :5:: :::: ::: Norch26. 1987 13:08

OQ[z DJt X 0: oh

Co TURKEY

CUKUROVA URBAN DEVELOPMfENTPROJECT Table 5: SUMMAARYACCOUNTS BY EXECUTING ENTITY (US$ million)

uwi un,rn6mi* sm,wslsuO tasasa ~~~~~~~~~~~~Cens taeOo cm octc nss wil @34n346? aug flo

I ~~~in9U ~~~~3 ~~~~~uu U S U ~~~rn ~~~~u. ~~~~ I ~~~...... s...... ~ ...... 9...... I04* 5s *5~0 l5.CS-t5 *c441511S001.0094216 3326211 ttteS*Wt Sat 1.8,4*5 *8*.1.I1 *01 51261 )~~~~~~~~~~~~~~~~~~~~~~~~*- 41.13, - MD11431 -a :I,98in1 w.,gis~~~~~~~~~~~~$112*.6e.' sso it. - . ,G. . - 10 as,e as .30 9 i4,S 233 1 6.044 . IS 6 464M2 I 202. 17.4092'9.01 2.00 1 4 6.9540I ML4 .1 at0 2.45 1I 431U1 OSUSO S 500.490 1.204 0 40*43.5 . --. 144618 930t 2,.21-t 22'.we 020~~~~~~~~~11Sits" 4a11 I nll,3 1 *2) 43) 2 013. 292a 0 so #9 1.6)4 4 4 4,20324 2.009I MISSION venal1 402 I 2 J. 31m021 an4 3.,3)9 I62 6 9000 I."$49020 00,2 of1 326i 2&830 S. no It114.4321 8 .24111)$s in I 0 4 1. to4 1 1 I.%91 I S 00on0 3 i 014 on 1124 erncaca"slim"u - - 6.mIs0 mu ISt 1a.10ai Sl 8.ai* 20 91,3600061146so an4aI692Stw 341 0933. . .- - 9 so 0 2 4 S. on a 4.10Sf 9.0020 2330. 916 0 *993439% - . - 0019400~~~~~~~~~~~~~~~~~~~~~~~~~~d 4350 5.3509 Om0 . .9100 01140 411 *2, 9.9W04 1.9 10.416.... G 4 0 3 1.69 146 3 A023.1 3.1 2S.2.6 0 6 M1.3 25I 7 11210G 9? 2&.434 2) 24.1S 2.. *....6...4...... 62 1~ of9S 0 4 99.030 S2a4 402.241 MS t .. 1 ... I...... I.....-..... MI.2 0.01 046 ...... †......

2. ...2- 0. 1...... - -- - ......

9-99 Go

. . .*n *a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~...... 4.

...... - ...... a.nw a ecu .me cc cm~~~ . -- .-...... ! ~~iil...... -...... u. "aa' IuM uc mceI c .. tce cIc & e s c r- cuesTois .. . *~- :-.....e-s *ue g5,, ...... u.....

emi" Sm1 Sm. 7- -. - - m cirn- I "*aw" M M %MSm" *W *ct *s*t*p . -- - 15*5 iIimSila,hSnl

Se cI.It1tT on,- cc ewe's cc ue i 55 SS 8Ct SUaS r.* xeacmsZmmm * 0*. S, ***nm ,**, * .s* t soev-su-. - -. - 54 ~ V * ~ * 51 * c "amm8

cuescusp *te.i~~s ci Mc,e Ia4.0 * C IW i OVW 6i cIte * S W 0-c su - - soa cue.1 ci. GM"eec ~~, .~~~..~~ .-. **~ ~...... min......

Cm ~~~~icccues cc .~~In a -a atIi I*8 mS*- dui I'm ova 4mucaM suinmacueta $am11 %M%mt Su 5 S #V0~ 8 u- cc cv . cc o ;.-c 'Ocomic c ,vsm'r t# cm so gal em ses i-awn ccsin O

s ...... e-...... r y ...... mas--m *SS&csmltal a la's ccS e mWS'ne - .. wm.umee.

gal cu 18ai I su% s' SiR . - * iccM a SKIac ;MM., -soOVImm mu. innsof iSolaSAem M'cs acc Sea-cc ITem eisa cM cSc 5V aec.- . - -at ue 0*pccW ue-Mwl les- e ca' sem in

* .MT cussi cle a. cs .com.up'"omIc-c`0cssel a* 815. is cain~ewac us *5 . m- c

ccc.% Msue sin AcaS aimsVs O .V' e .. a w . Mt 9 I0t U. o t.u O .u M laws ccin si aWe.a. casm - . ---.------...... ------... . cuesiam . - S...... h------c....m...... c..m.... cmt cm'scues cc scum~~~...... a.-.... :10 mcs"noorn" M Swma me SamS .4114'6 W-a, c oa,*- ctin c ne s a "ISems-m-a $"$ m*ma ma" ga's am- cusM'S Ic us sem cce t we C 1i a 'sI so's . . -ftsIN-Sm VW ca cm-c sit"HeSimn ncsina

cu teit's NOTs ow 6 **vu O 5 ' - Si5 5 W' i: aeii Ss el-ia. - sa sta-sp M'sm -i ct 6f9 11 5SIo$ 0" g R0V' VI 01IM.10 nV iw M cm cue sect cc imac -. om,m.', - . . auinueineme~~~~~~~~~~~~~~~~~~~~~~sn4 .mecm-as s~~ea-ta, cue"-ic 4w 40 t llaOs 4V U0611 S.up0em-se . 4"nmi7.4 cuessins~. C..t...... ---- ...... ---- tue.s a...... w ClU .01n 's7 sues cc c -tI "" : ~ces .sacms c.as.. .MOM" WsmUM em.= cues 4M- Iuesn'" 58$ 5U00asicess e u' siom - . a s m..

in-c SS i ~gt j S11,"0WMesma S4m .$0te s a a c a a 0$11 M -4,8 Wm- eactAI uSi "mum twcam au intat I. P*tUW? a IwA a n 55 a 5s mntimS Ia a "low smaWm" a WA, SVm% pss o USAumst m411 n$Q -W"304 umastm mom m a"m

AUBSLM2OdwOO LO33O'ad -9 GwiqL 103MI'd J1UWdO'JA3G MVm1VAUIXl :; D

Sz fd

W:s .9 g q3aq

38:3t:8:: :::::2::: :z::::::5 :::23::s: JS:as:::::: gas.:::: :s:.::t:S.8::t ::2:::g :::::::g::t ug:.:::::: 3:tins:a :::::85:::: 3::3:::

£ *swsiss "Nasc s ;""a ass vuzn'ssxs *SgSaS**Svxa*ss sualsaxsosgsxvs zvz,vs,1 *s.Rwes 2*2uacsia *ases8*b . w3Ss' oli 5SWS *,uIH-I £ -ms *116-t ts1t*s O **I. £15 tuil t-*IrsKt t1.* - "a, 111 t ' *'C 9C"9 OW-§ 11 W gStO'i g G'MIg 9 l "-St 9'S1 ' O'i CIn 9 ut 0 "a's t 0,9 1141 (atel 131 11 0 WSWS's MI 6 6 015 lawI 006DIO*I3 3 ut-CC It l-ts 6n9U 19 19S1 81t C K'S - , *J I :::::z : :2::s::_ c h:::: :: 28:8:8:: r 3s28s::3 8:ss :3:3:s: 3:: : :22S3s8 :::ss::: 332s 3ss 3ss 2s33382: 3ss3as

10101 S111512 M8IND32 flm (311311 S_S SiW in hI1111IIlWSAVSSy vSollUi lUdIl3IU AdND3 WSm nNMAU #3LU sIlill 411231J3313 ur_= 1 smleasm IugwiIwiS IUIUdilAU IUSUK 01w *5W SflltWI3I ll1WN _fW 1*11

ssn) XIII ~ ~ ~ (UTI! $NIf1l) Ksd: -SvDn AJUN3H9NI1f1O3 AUlS3VJJ'V307M/3NVH3X3 N!OI"IOa :1 a'"'J 13O3MVd INWOrI3AG N UVAOwfnXfDn A3Xldfll - 72 - ANNEX 2 Page 1 of I

CUKUROVA URBAN DEVELOPMENT PRQJECT

SUMMARY OF ARRANGEMENTS FOR IMPLEMENTING FINANCE AND COST RECOVERY

Implementing Cost Recovery QTDnent Agency Finance Sourceg _-t4an ilsL_

1. KJNICIPAL

A. Urban Expansion Areas

1. Lad M DSF Land Price

2. On-Site Facilities (1) Site preparation HUDC IB, We. 1 Land Price (0i) Water & Sanitation HUoC Is. We. M Land Price (iii) Roads, footpaths HUDC I8, We, M Land Price drainage (iv) Fire stations. M "I Is M. Taxes community bldgs.

3. Off-Site Infrastrutture (a) Water and Sanitation WSD I8, WB, M Land Price. T/C (b) Roads M TB, Wh, M Land Price. M. Taxes

4. Government Facilities (Schools, health, police) SPA G G. Budget

S. National Utilities (a) Telecommmunications PTT PTT, G T/C (b) Electricity TEK TEK, G T/C

B. Ungrading and Nousing Management

1. Water. Sanitation - Networks WSO ", I,. WB T/C - Tertiaries WSD , I8. WeB I. Levy, L.C. 2. Roads, Sidewalks - Networks H "I Ie. We M. Tax - Tertiaries H "I IB, We I. Levy. L.C., M. Tax 3. Government Facilities, National Utilities as for Urban Expansion Areas

C. Municipal Enaineering

1. Water and Sanitation WSD M, IB, WB T/C. I. Levy 2. Solid Waste H M, IS, WB M. Taxes, 3. Drainage M M, I, WBeM. Taxes 4. Roads M M. I8, Ws M. Taxes, I. Levy

D. Municipal Finance and Management IB, M M, Ie. W8 B. M. Taxes

II. NATIQNAL AND REGIgNAL

1. Training CMTA M4.l. W1 M. Taxes/G. Budget 2. Iller Bank to I8, WB IB Income

1I1. PROJECT MANAGEMENI

1. PRIMU Is Ie. WB IB Incone

Legenj: CMTA - Cukurova Municipalities Training Association. DSF - Development Support Fund, G - Government, HUOC - Housing and Urban Oevelopment Corporations, IB - tllerBank. I. Levy - Improvement Levy, L.C. - Legalization Charges, M - Municipalities,1. Taxes - Municipal taxes, PTT - Posts and TelecommunicationsAuthority. SAP - Special Provincial Administration,TEK.- Turkey Electricity Authority, T/C - Tariffs and Charges. WSO - Municipal Water and Sanitation Department. ANNEX 4 -73 - Page 1 of 16

TURKEY

CUKUROVA URBAN DEVELOPMENT PROJECT

IMPLEMENTATIONSCHEDULE/ACTION PLAN

A. PfoJect Launch Workshop June 15-19, 1987

Municipal Actions

B. Intitutina Compoents

1. Appointment of Project Coordinators

Adana May 31, 1987 Mersin May 31, 1987 Tarsus May 31, 1987 Ceyhan May 31, 1987 Iskenderun Done

2. Finalization of draft RFPs (Requestsfor Pro- posals,inwluding Terms of Reference,Shortlists, and proposedBudgets) for institutionaltechnical assistance June 15, 1987

3. Approvalof HUDC Policy Statements (Mersin,Tarsus, Iskenderun) June 15, 1987

4. Establishmentof projectentities and appointment (Beforeaward of of directors any contractsfor those entities)

C. Financial Manement Improvement for Municipalities and Water and Sanitation Co!rporiOD8

1. ImmediateActions

(a) Establishmentof financialmanagement committeein each municipality June 1987

(b) Appointmentof TechnicalAssistance Finalizationof Draft Request for Proposals(RFP) (incl.decision on joint procurementif desired) April 30, 1987 PRIMU/Bank review, Issue RFPs May 21, 1987 Proposals received June 30, 1987 Evaluation completed & negotiationof draft contract July 31, 1987 PRIMU/Bankreview of draft contract August 21, 1987 Award of contract August 31, 1987 ANNEX 4 - 74 - Page 2 of 16

(c) Submissionby each WSD, Municipality and HUDC to PRIMU of its Three Year Financeand InvestmentPlan 1988-1991, includingrecord of actual receipts and expendituresfor 1986 and revised estimatesfor 1987, and draft annual action plan September30, 1987

2. During project implementation,a programto improvefinancial management,supported by technicalassistance shall be undertaken. The processof improvementwill be managedby a small managementcommittee to be establishedwithin each municipalitywith the followingattributes:

- chairmanto be the Chief FinancialOfficer (or an individualwith equivalentqualifications pending appointment of the Chief Financial Officer);

- powers of the committeeto include the right to requiredepartments to providesuch additionalinformation as is needed by the new accountingsystems; and to take any necessaryactions to avoid a delay in implementingthe new systems;

- dutiec of the committeeto includesetting priorities within the work program to achieveeach year's output as definedbelow, identifying resourcerequirements to achieve each year's outputand obtainingthe agreementof the Mayor (and the Assembly)to the provisionof these resources,and regular reportingof implementationprogress compared with plans.

3. The improvementsto be soughthave been divided into two phases, respectively1987 and 1988, and 1989-90.

(a) PHASE I

Improvementsby end 1987

- separateaccounts for municipalityand water and sanitation departments(WSDs) (ASKI in Adana); - separationof capitaland revenue transactions; - capitalaccounts, in detail and in total (includingallocation from force account); - preparationof first three year rollingcapital plan, by programand scheme,and an outlinemultiyear financial plan (by September30, 1987); - accountingstatements and reportingas requiredby the World Bank; - accountingfor all loans and debt service; - cash flow forecasting,monitoring and managementprocedures; - basic servicecosting by cost centre; - allocationof service income to cost centres; - a budget reflectingthe form of the accounts; ANNEX 4 - 75 - Page 3 of 16

- an action plan for improved"own revenues"income generationto be executedin 1988; - incomecollection systems improvements and monitoringprocedures (WSD essential,other servicesimportant); - a formal pricingpolicy reviewmechanism (WSD essential,other servicesimportant); - managementreporting/budgetary control (on an exceptionbasis); - full year-endfinancial statements (WSD only) (i.e., income statement,balance sheet,and sourcesand'applications of funds); - partialyear-end financial statements (municipality) (i.e., capital and currentaccount, loans account, limitedbalance sheet items); - operationalmanuals for enhancedfinancial systems; - on-the-job training program; - an amended and approved work program.

Improvementsby End 1988

- costingsystems including,as appropriate,stores accounting, vehicle costing,force account costing; - allocationof debt serviceto cost centres (WSD in 1987);

- job costing systems; -- accrual accounting; - incomecollection system improvementsand monitoringprocedures (all other services); 4 - formalpricing policyreview mechan sm (all other services); - revisedand more detailedmultiyear financial plan; = development,trial testingand implementationof simplifiedfinancial administrationprocedures; = policyand performancebased annual budget; = project appraisal techniques;

- monitoringof capitalschemes (pre and post contractaward);

- introductionof codifiedfinancial regulations; = preparationof a computerdevelopment strategy; - full year-endbalarce sheets (municipalities); - operationalmanuals for all financialsystems; - formalinservice training staff upgradingprogram; and - revised and approved work program.

(b) PHASE II

The municipalauthorities of Adana and Mersin will be expected to adopt the improvementsas described. Other municipalitiesmay choose to do so, or may choose insteadto consolidatePhase I improvements.

Improvementsby End 1989

- full costingsystem includingcost allocationof central departments; - accountingfor asset use (depreciation/renewalsfunds) (WSD 1987); - developmentof renewalsfund and other-fundaccounting techniques as appropriate; - developmentof internalaudit (or, in the case of Tarsus and Ceyhan, access to internalaudit services)including: ANNEX 4 - 76 - Page 4 of 16

. audit program, . audit manuals, . internalcontrol questionnaires, . complianceaudit, systemsaudit and value for money audit techniques. - developmentof performanceindicators (by service); - definitionof user requirementsand systemsspecifications for implementationof prioritycomputer systems; - developmentof financialmodelling techniques, and - revisedand approvedwork program.

Improvementsby End 1990

- allowancefor the effectsof inflationupon assets and depreciation; - developmentof contractaudit and computeraudit capabilities(in at least one authority); - implementationof prioritycomputerized financial systemR; and - revisedand approvedwork program.

D. EngineerhM and Physical Components

The major initialsteps to be undertakenfor these components comprise:

(a) the appointmentof principaldesign and supervisionconsultants to handle detaildesigns of those works for which only preliminary investigationsare available,to assistwith preparationof bidding documents,bid evaluation,and to undertakesupervision of contractors:see Tables I (a) to (e.)

(b) tenderingof InitialContracts for which detaildesigns are underway: see Tables 2 (a) to (e).

Tables 3 (a) to (e) set out the forecastimplementation timetables for physicalcomponents in each projectcity.

E. National and Regional Actions

1. CukurovaMunicipalities Training Association

FormalEstablishment of CMTA Done Appointmentof CMTA Director June 30, 1987 Issue RFP for TrainingImplementation Unit September30, 1987 Appointmentof TIU March 31, 1988 Review of Scale and Scope of PermanentTraining Center December 31, 1992

2. ProjectReview, Implementation,and MonitoringUnit

(a) Staffing AppointDirector Done AppointDeputy Director,senior engineer, senior financialanalyst, senior accountant September30, 1987 Appointremainder of professionalstaff December31, 1987 ANNEX4 - 77 - Page 5 of 16

(b) Technical Assistance Draft RFP for Bank review May 1, 1987 Bank review and RFP issued May 22, 1987 Proposals received June 30, 1987 Evaluation and negotiation of draft contract July 31, 1987 Bank review August 20, 1987 Award (& appointment of TA) September 30, 1987 Financial Analyst and Senior Engineer in post September 30, 1987 Other Technical Assistance personnel in post December 31, 1987

3. Technical Assistance to Iller Bank

Decision on Iller Bank's future role and functions December 31, 1987 Iller Bank to prepare draft REP December 31, 1987 Bank review & Request for proposals issued January 31, 1988 Proposals Received March 15, 1988 Evaluation and draft contract negotiated April 15, 1988 Bank Review May 5, 1988 Award May 31, 1988

4. Mid-Term Review of Project Mid-1990 9JIUBLIC OF TURKEY cliKUbOVA tdam DEULOPHMENTPEROJECT

Table 1: ENMIWEERIKGCOMPOMENTS: DESIGN AN4 SUPEPVISlO) (a) ADANA

Evaluation Review Completed & Review ADANA Submit Completed by Receipt of Neg. of araft Completed by Contract .D.raft RFP* PRIU/wB PrQosal ContrACt IS. AwardL.

A. Hydrogeological Studies 05/22/87 06/12/87 07/10/87 07/31/87 08/21/87 09/01/87

B. Drainage for Storm Drainage Problem Areas 04/17/87 05/08/87 06/12/87 07/03/87 07/24/87 08/03/87

C. Upgrading and H. Mgt./S & T** 04/15/87 05/06/87 06/17/87 07/08/87 07/29/87 08/03/87

O. Karaisali Road & Drainage and Other Roads 04/30/87 O5/22/87 07/17/87 08/14/87 09/04/87 09/18/87

E. Consultants for Mapping Loss Reduction and Rehabilitation 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87

F. Road Maintenance 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87

G. Wastewater Management 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 o09/8/87

N. Supervision Consultancy 05/01/87 05/22/87 06/19/87 07/10/87 07/31/87 08/07/87

RFP: Request for Proposals. including Letter of invitation. Terms of Reference. Proposed Shortlist. and Budget for Study. t H. Mgt: Housing Management S&T: Secondary and Tertiary Infrastructure

I-h REPUBLICOF TURKEY CUKUROVAURBAN DEVELOPMENT PROJECT

Table 1: ENGINEERING COMPONENTS: DESIGN AND SUPERVISION (b) MERSIN

Evaluation Peview Completed & Review MERSIN Submit Completed by Receipt of Neg. of Draft Completed by Contract Draft RfP* PRIMU/WB Proosal Contract PRIMU/WB Award

A. Sumnit Reservoir and Dumping at Berdan Dam/Reservoir for Mersin 05/22/87 06/12/87 07/10/87 07/31/87 08/21/87 09/01/87

S. Upgrading & H. Management/S & T (Phased TOR) 04/15/87 OS/08/87 06/12/87 07/03/87 07/21/87 08/03/87 C. Trunk Sewers. Interceptors, Sewage Disposal, Outfalls, Stormwater Drainage Problem Areas 04/15/87 05/08/87 06/05/87 06/26/87 07/10/87 07/17/87

0. Camili Road and Drainage and Other Roads 05/01/87 05/22/87 06/19/87 07/10/87 07/31/87 08/07/87

E. Supervision Consultancy 05/01/87 05/22/87 06/19/87 07/10/87 07/31/87 08/07/87

F. Consultants for Mapping, Loss Reduction and Rehabilitation 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87 4

G. Road Maintenance 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87

H. Solid Waste Management and _ (Upgrading of Compost Plant and Wastewater Management) 05/29/87 06/19/87 07/31/87 08/21/87 09/11/87 09/13/87

I. Wastewater Management and Water Quality Monitoring 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87

.Q

0v.4/ m r r Eu uLl CUKUROVAURBAN DEVELOPMENT PRDJECT Table t: ENGINEERINGCOMPOMENTS: DESIGN AND SUPERVISION (c) TARSUS

Evaluation Review Completed & Review TARSUS Submit ComPleted by Receipt of Neg. of Draft Completed by Contract °_p_ft__ PRIHU1lUW Proposal Contract PRIMUJWB Award A. StormwaterDrainage Problem Areas 04/15/87 05/08/87 06/12/87 07/03/87 07/21/87 08/03/87 B. Upgrading& H. Management/S& T 04/15/87 05/08/87 06/12/87 07/03/87 07/21/87 08/03/87 C. Planning& Engineeringfor UEA (local Al & A3)* 04/15/87 05,'08/87 06/12/87 07/03/87 07/21/87 06/03/87 0. Road to East UEA and Other Roads 05/01/87 C5/22/87 06/19/87 07/10/87 07/31/87 08/07/87 E. SupervisionConsultancy 05O/01/87 05/22/87 06/19/87 07/10/87 07/31/87 08/07/87 F. Consultantsfor Mapping,Loss Reductionand Rehabilitation 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87 G. Road Maintenance 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87 M. Solid Waste Managementand Sanitary Landfill 05/29/87 06/19/87 07/31/87 08/21/87 09/11/87 09/18/87 I. Wastewater Managementand o Water Quality Monitoring 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87 0

* U.E.A. - Urban Expansion Area

Table 1: ENGINEERINGCOMPONENTS: DESIGN AND SUPERVISION(d) CEYHAN

Evaluation Review Completed& Review CEYHAN Submit Completedby Receiptof Neg. of Draft Completedby Contract Draft-REP* PRIMU/WB Pr.ouaal Contract PRIMUWB Award

A. Engineeringfor UEA S. SupervisionConsultancy 05/01/87 05/22/87 06/19/87 07/10/87 07/31/87 08/07/87 C. Consultantsfor Mapping,Loss Reductionand Rehabilitation 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87 0. Road Maintenance 04/30/87 O5/22/87 07/17/87 08/14/87 09/04/87 09/18/87 E. Solid Waste Management 05/29/87 06/19/87 07/31/87 08/21/87 09/11/87 09/18/87

F. WastewaterManagement and 0 Water Quality Monitoring 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87 . . a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 REPUBLIC OF TLIRKEY

CUKUROVAURBAN DEVELOPMENT PROJECT

Table 1: ENGINEERINGCOMPONENTS: DESIGN AND SUPERVISION le) ISKENDERUN

Evaluation Review Completed & Review ISKENDERUN Submit Completed by Receipt of Reg. of Draft Completed by Contract ______Draft RFP* PRIMUIWB ProposaL Contract PRIMUN/W _ Award

A. Hydrogeological Studies 05/22/87 06/12/87 07/10/87 07/31/87 08/21/87 09/01/87

S. Oceanographic Study

C. Upgrading & H. Management/S & T 04/15/87 OS/08/87 06/12/87 07/03/87 07/21/87 08/03/87

0. Planning & Engineering for UEA (Sites 11 & 12)

E. Road Around Canal and Osmangazi and Other Roads 05/01/87 05/22/87 06/19/87 07/10/87 07/31/87 08/07/87 F. Supervision Consultancy 05/01/87 05/22/87 06/19/87 07/10/87 07/31/87 08/07/87

6. Consultants for Mapping. Loss co Reduction and Rehabilitation 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87

H. Road Maintenance 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87

I. Solid Waste Management 05/29/87 06/19/87 07/31/87 08/21/87 09/11/87 09/18/87

J. Wastewater Management and Water Monitoring 04/30/87 05/22/87 07/17/87 08/14/87 09/04/87 09/18/87

IoQz tDh a- 0'o > REPUBLICOF TURKEY CUKUROVAURBAN DEVELOPMENT PROJECT

Table 2: ENGINEERINGCOMPONENTS: WORKS (a) ADANA

Preparation Review Receipt Review ADANA FinalDesign PRIMU/ Finalize Issue of Evaluation PRIMU Contract Mobilization Construction TenderDocs. Ws Documents Tenders Tenders WB Award

Rehabilitationat ZilltdedeWellfield 04/30/87 05/22/87 05/29/87 06/01/87 06/30/87 07/17/87 07/31/87 08/07/87 StorageReservoirs 05/30/87 06/19/87 06/26/87 07/01/87 07/31/87 08/21/87 09/11/87 09/21/87 PrimaryWater Distribution 05/30/87 06/19/87 06/30/87 07/01/87 08/31/87 09/18/87 10/09/87 10/19/87 Trunk Sewersand SewageTreatment 05/30/87 06/19/87 06/30/87 07/01/87 08/31/87 09/18/87 10/09/87 10/19/87

Iabtl2: ENGINEERINGCOMPONENTS: WORKS (b) MERSIN

Preparation Review Receipt Review MERSIN Final Design PRIMU/ Finalize Issue of Evaluation PRIMU Contract Mobilization Tender Docs. Construction WB Documents Tenders Tenders we Award C

Urban Expansion Area 04/30/87 05/22/87 O5/29/87 05/01/87 07/17/87 08/07/87 08/21/87 09/01/87

Table 2: ENGINEERINGCOMPONENTS: WORKS (c) TARSUS

Preparation Review Receipt TARSUS Review Final Design PRIMUJ Finalize Issue of Evaluation PRIMU Contract Tender Mobilization Construction Does. WB Documents Tenders Tenders WsAward | trunkSewers 05/30/87 06/22/87 06/29/87 07/01/87 08/31/87 09/18/87 10/02/87 10/09/87 SewerageTreatment 05/30/87 06/22/87 06/29/87 07/01/87 08/31/87 09/18/87 10/02/87 10/09/87 Secondaryand Tertiary Sewers 05/30/87 06/22/87 06/29/87 07/01/87 07/31/87 08/21/87 09/04/87 09/11/87 IrbanExpansion Area 04/30/87 05/22/87 05/29/87 06/01/87 07/31/87 08/21/87 09/11/87 09/18/87

0 6%9 REPUBLIC OF TURKEY. CUKUROVAURBAN DEVELOPMENT PROJECT

Table2: ENGINEERINGCOMPONENTS: WORKS (d) CEYHAN

iPreparatein Review F lRecespt Review . CEYHAN PnalFi tesign PRIMUe FRnaleze Issue of Evaluation PRIMU Contract MobilizationConstruction Tender Docs. sB Documents Tenders Tenders Ws Award swerageand Drainage 05/30/87 06/19/87 06/26/87 07/01/87 07/31/87 08/21/87 09/04/87 09/11/87 initary Landfill 04/30/87 05/21/87 05/29/87 06/01/87 07/07/87 07/27/87 08/10/87 08/14/87

Table2: ENGINEERINGCOMPONENTS: WORKS (e) ISKENDERUN

Preparation Review Receipt IReview. ISKENDERUN Final Design PRIMU/ Finalize Issue of Evaluation PRIMU Contract MobilizationConstruction Tender Docs. WB Documents Tenders Tenders WB Award M

)novationat Pinarbasi OS/15/87 06/05/87 06/12/87 06/15/87 07/17/87 08/07/87 08/28/87 09/01/87 1 tservoirStorage OS/30/87 06/19/87 06/26/87 07/01/87 07/31/87 08/21/87 09/04/87 09/15/87 ivelopmentat Akcay 04/15/87 06/05/87 06/12/87 06/15/87 07/17/87 08/07/87 08/28/87 09/01/87 imaryWater Oistribution 05/30/87 06/19/87 06/26/87 07/01/87 08/28/87 09/18/87 10/02/87 10/09/87 -unks,Pumping and renporaryOutfall O5/30/87 06/19/87 06/26/87 07/01/87 08/14/87 09/04/87 09/18/87 09/25/87 icondariesand Tertiaries Savas and NumaneMah.) 05/30/87 06/19/87 06/26/87 07/01/87 07/31/87 08/21/87 09/04/87 09/11/87 mnitaryLandfill 04/30/87 05/21/87 05/29/87 06/01/87 06/30/87 07/17/87 07/31/87 08/03/87

I0

0'I- - 84 - ANNEX4 OAWUWAUUo tiwWPOOR" Page 12 of 16 STAFFAPO*tSAL TabG1o3: (a) ProJect Zelinttten Progr bl .~~~~~~~~~ia_timi I IUllamJU11|1MM AS I 911Am 1mufi aa 1405]111Imi 3s 1 A19 I

Kirinintiiene1 000sCU 00 SO CC CC CCCCCC CCC CC C ui s.f Aka2 ISSSSDO OCUO IIIWCIICCU ce CCC CC CCCCCC C

Ogalbalteosi Akke9t t# 55 K _ ta tteeaCttC aCC a c tecICC ae 'Ma CCCe

arica. witaterasa,i

KOpri,.lud o tCCS> CCCCCCSOSC St S DCCC

wolltiolds" m on# ONI " c ct ctcc tCtCCactctcCCCC Olrvsn-ial, s so SoDoI t' CC CCC s tc cCCac t e e a LV

Distrubi aSm*e on c cc ecc ecc c I"CC MCacIM MC CC CM =

Di1stribution CewttrwCt 2 0 O0 m m( eWtC a e eaactcac CCC acM CCC a

|Secodry ane Twtiory Conotact I SSSSOC t we cec c CCCccC ccc CCCMc ea S L C

(Contract 2 #= DW_= M Ceccecc cCCCCCCC CCCtCCCCCCC 0 eation VWtnta

ot tfttin and ftr 10°° EI mlBecC CCC cce ccC CCCcCC ae ecc ecM c CCC ccCMecc ee CCC ac ec ce = CCC|ce

btildinp otr SE l I tt Storsatnton Oni*CC ln C CCC |Secondarysal twsTeotiaroseycc e e'ecaecCCa ProblemsNApngLsk |Contrat I,, and 1K ICCCCCCCCN CCC cee ccCCCC cc CCC ccC CCCCM Cntriact 2 00I)MMinC*US CCOC CCC CCCCCCaCCCCCCC

ContractSytore 3 w i I0c PPnDmew= = = = = O8MI= ==S=CCCC CCCC= CC ==CCCCCCCCCCC CCcCcctcCC CCCCCC Ou'ldingDtoisaterbtnra foi£rw orkSh p I S I I I I oe and floi tCCC Mtecin CCCCCC CCC CCC CCC CCC CCC CC CCC

|Prourmt et quitmnt |0 1001 K1ff£ tt seo ttt t W C t 8CmCs

trunkewes nd ra

DispoTsal AXIIII I (SlA1ty LatWill Site 1 °°° m ame CCCCCC CC coo aeCCCC |Procetof OuSt, I 8 tttt . |0 $BeCa ut I I

Kontratl 1 000 CU CU SOSC CC CCCCCC CCC CCC CCC CCC CCC CCC CCC

cntm stct odP lM Ccc CCC aC M CoMC CCCCCC CCc

tsectionl Pn eoo eonseso CCcM a c Cc acM CCCCCC CCC Conrata Id rasn lsi'r f Mn CM Ce = CC CCc c c Stoster rna |DINd1Gtt Action Pit" 00" an MM CCC CCC tccC ccC Pest41c CUr C CU "ccCCC CCC CCC CCC CCC CCC CCCCCc CCc SoutineNtlantS d maCa 000il l PCCC"cc CC C 5CCC 0: CCCCCCe CCCeCe MC CCMC e CC CC CCCCCC iProcurwot of Plant SN. C E

5 PlanniollStudlot Of* lWlib1tatin P ntruct1io ry nn n C x ttruct1t O - Final O0sin t= t I t Delivery fr * rtdditn nttr 'Cnoad in fCurth of Sl otnei IrI Cnmnnc 1intI .uer"c, of 1586 - 85 - nmy ~~~~~~ANNEX4 CWUb0VAUSTAFF JSWLMAPPRASAL MJCT Page 13 of 16

Table 3 (b) Prject XlCUntation Pr0avr

infrastructure; On-site amdOff-site contract I Localities 65/6 and C S SSOM O IICCCCCC CCCCCC CCCCCC Contract I Lo .lities AS, SSSPPO CUOSM IIIISCcCCC CCC CCC CCC CCC CCC CCC

Contract S LoClitis A. 8I. CI ONdDI Ssspep IID mDI C CCCCCC CCC CCC CCC CCC CCC

oteirtas aSS So anH*c we CC CCCCC C CCC CCC

Portagal/Ostyr. as soCco a CCCCCC CCC CCCCCC Toskoawran.Satlik Akbolan, 2ua*lar. OSo 00 SS on weCCCC ccC CCC . CCC CC|CCM &uiiOgdia Teniestar

Priuary ilktor Suply S S Wydrogelogical Study S4i"t ReServOir. PiMing Station atern E loa t and|nt R|eervoir 2 P SM S EC CCCCCC C CC Zone I Reservoir Prinary Distribution and addition of E/ Euin in PuiA onat station at ferdan Plant -1P1JJ.L11.X.X CCCX CCC CCC PriareyDistribution as m mm CCCMCC Secondary/Tertiary I |1 me ON m a c CC U CCC= CCCCCC CCC CCC|CCC| CCC MC MC CI I operations Nid mimntsnce Systemdapping. Leek Detection and Rpair AL AL so. =X Cm. X Cm. CC U CM..5. CCC.5CM. Pr|curc,ent of Equirt | MWDmie Kg tEEo on NCII'It to ODII - atutC Buildins for Wbrkshops | stores |C PC9C SM SM c C CCCCCC SANITAYION*5 DRtlAiSC Trk SOWerS,intterceptors. pretre5trnt at Karaduvan and PosCo Contract I P99 n SM C CCCCCCCCC CCC CCCCCC

Contract 2 tCU U a o NC CCC CC CCCC CCC CCC CC CCC

Rehabilitation of Existing uutfall Facilities P99USe an CCCCCC CCC CCC Secondary/Tertiary ad we BK CM CCC CCC CCCCCCC CCC:= CCC CCC|CCCi CCC CC C CCCC Storamater Drainage Proles Areas: IP*aniye CU SM SEECCC CCC CCC CCC operationsf an winten*nce syste Naping aNWRepair SMMm Wi CCCC CCC meCC CCCCCC CCC CCC CCC CCC Procursaimt Of £iwigmnt C MR 5E M01LELD ME E

Collection: buildings for Warkshopsl Store PPP99 055 SM cCCCC CCC

RefuseCollection System0onEEUt08o sC Procurwmt or tquiommnt B an OK 15 CM 5 MECLE SS IG Disposal:. UpgradingCosMt Plant CU SM NC =C cc Sanitary Landfill DoS"a so= CCC cc Procurnmt Of Iqulemnt B M LE LE ROADSAND 1MUMIM Cotnstution: Contract I wovenats to Camilt Road r~~~Po1 ont tUS (Cm =~ c0. ta ContractI torovemntsto Beau Dead .9.Ot00 J XL MCLt XL CX

taudite Actisi Plan ElISmm S = CU PeriodicUpintuerncs, =s515iCCC UU =E CC MC U: c ~ CM ' CM BoatingeMaintenance SI EPSCC . IS ; ISX 'U U :U SI ' I : Proturltn of plantad Equipmnt SM SMII5 MIMlE11CUS E E Legend; S aPlanniinDfStudies N IbMliStioIi P PreliminaryDesign Ca Construction B sfinal Design I a toiquiRt Selivery a Bidding * CncedW In ffourth uarfterof 1946 - 86 - ANNEX4 ,,,v Page 14 of 16 CWCUOVAUna OEWLOr PRJXCT STAFFAPRASAL

Table 3 (c) Project pl_entat1en Pregr_

- _ ~~19L - _ l _L 9i__"i__S

U IXSPASION- CASTSIDE infrastructure On-site OmdOff-site Contract IA Loality A?" = CCCCCC Contract Balance OF co DB w C CC CCCCCC C Locality A2Z1 Localities Al/A3 SSSPPP PMD OD BBB IMCCCC CCCCCC CCC CCC CCC C

UOIl'ZAiLIdISIGUMA3 Casiler OOD ageCCC CCC CCC CCC CCC afhce/Barharosard r1irne Ilincluding stometer drainage works)t eSSS SSSWO Df IoC CCCCCC CCC CCC CCC CCC CCC CCC CCI Yeninehalle SSSSSS OOD OBa B C CCCCCC CCC CCC CCC CCC CCC CCC CCC CCC CCC

WATERSIMPLY Primry Water Supply Hydropeological Study SSS SSS For 1987-1992Develont DOD.0OOD MI.CCCC CCCCCC CCC CCC CCC CCC CCC CCC CCC=CC CCC CCC CC. CCCCCC C Operations and Nsntenmnce SystemNaping. teak Detection and Repair NOoDtu tCC CCCCCC CCC CCC CCC CCC CCC CCC CCC CCC CCC CCC CCC CCC CCC CCC CCC CCC CCC Pracurmnt of toui1nt NO B ttE at. 0Doo O B Ett m Building for wDrkshopsAd storage mP ooi U U "CCCCCC CCC=

SANITATI MOADU AXIMACI Trunx Swers and Treatant Contract 1 DODOSUS _eC CCCCCC CCC CCoe Coe CCC CCCC Contract 2 D DDDDll tUB ICwe CCC CCC|CCCC CCC

Storter Drainae prolm Areas Centract I Eevzi Cakauk O DD OmB CC CCCCCC CCC CCC t & CC CC Secondary/Tertiary xetworks I"?7 Prgm am US NC =C CC ce C= 198SProgram 0 DweUS 3CCCCC CCC CCC 1989Program 0 0DI S tSCCCCC CCC CCC 1998 Progm 15i WCCCIM 1991 Progrem NILEBO "cc Uo 1992 Progrm D aD ICC l |CCC CCC Operations and Mainternae SystemIapping and Repair DO OB am MCC CC CCCCCC CCC CCC Procuraemntof tquipau NO NB fJt ttits Do as onE L a

Collection Buildings for Workshopsand Storage so Do CCC C efuseCollection SysteS Procurent of tquipaDnt C NB6BB EOKttt ina San t Do as mE m Disposal Sanita Landfill NODUS C CCCCC |DSO NM CCC Procurearnt of Equ1i t fBUS tEt Ug Bat Dtt IU S|_|ttt, US

WIADS,AND q,RM ll |* Construction Roadto East txpanion Area P B Bl IC CCCCCCc CCCCCC CCC CCC Caal Road P PDDS a ICCCCC CCCCCCCCCCC| Maintenance Ir_diate Action Plan NO Um Dt7 KCCCCC CCC C CCC

Periodic Maintenncoe DDD f mCI CC CCICC CCCC CC CCCCCC|CC :o CC CCCCCE CCC CCC C Routine Neintanac W S fI CC CC CC CCCC CE ICCC C CCCCC C CC CCE CCCCC C CC CCC Procurementof Plant and (ai_Erit BOBUS In ltO NB EELLEau s_ l _L_ L E_

S Plann1inetudies . *= bilisBt1n P * Pelitairy Oesimn C * cotErutimon O * final asigon t * Iqoint alivry s Uidding * Cnend in oe*e qrwr of 1936 117Usm Conced in third 4atr of 19t6 - 87 - Tnn ANNEX4 OU8A VAUMLO mT POJCCt Page 15 of 16 STAFFAWPAUAZA Table 3 (d) Projet tglmntati@n Progra

. IS [7 L ISit 1 __ take191I1IOU I 11o 1 1412 1 IS4 1 lo" I

infrastructure on-site aVd Off-site Contract I amCAU AL BSe mC CCCCCC CC CCCCCC CCC CCC = CCCCCCCC. SaMITATtNAND ODAIIM Collection lletwr and TeIorary Oispesal Cntract 1^* D tD ols sCC CC CCCCCC CCC CCC CCC Contract 2 SD0we 1 we NC cc CCCCCC CCC coc CCCCCC CCC Seage Treatment Plant" 000 BO3Mla MCCCCC CCC CCC CCC Operations nd Maintenance SystemNaing nd air 000 Illse IC CCCCCCC CCCCCC CCC CCC CCC CCC CCC CCC CCC Procurementof Iquipmt 0 0 881 ESt t 00PD Du tU a Buildins for Nakhops/ stores pon t C C C

Collection Building fo UOI*IO00/ Stores P JD001 1 nw CCCCCC CCC RfuseoCollection Systam Procurmentt of quit 00 018 au tE a 0 Ws81 m mL| Oisposal Sanitary Laindfill" 00 3M 80 CCCCCC CCC S - CCCCCC

Procurement of Equipent" S 555lI tSu I e aII

|RADS ANO TRMSPOT

Imeediate Action Plan MD 8 so ICC CCC CCC CCC CCC

Periodic Maintenaeo am U t "CCC CC CCCCC CCC= CCC CCC CCCCCC CCC CC CCCCC CCCCCC ccCccc CCC

Routin Mainte1nane On O am CCI CE CC CC CC CCC CCC CC tCC CC CC CC CCC 0 C|C

Procurent of Plant ndW tquiipnt _011 A tt m _ _O _ _ ___t U

S - Planning/Studies 1N Nob1iliatin P Prelimnary Oesign C Conction o -final Design £ * qihit Salivary O Bidding ncef1 in fOurth qarter oat I9N 357W ' Conced in thiird qarter of 1906 - 88 - ANNEX4 ,,WD Page 16 of 16 Ciiuva hAlMm WLW00U PRUIXT STAFFAPPOAIALA. Table 3 (e) Proect naleistatien Pr"tin Isekndernm

1|_a_~~~~~~~~~~~~~~~~~~~~~~o I UMM&LSIU=

Infrastructr on-sitsi

Contract I Of-st ODd 1111MONIMCCCCX CCC CCCCCC CC=CCC acml

contract Ia ss Omjzo oo m m MCCcec CMt c c CCCcceceII

^ IaJsiXEC ffl .EIL GUlt"e and YildIrietCpe 000 NC =C C CMM CCC Koeatepeand BariStop PP m o De SO ece tc cc cc t tce leat., . re4PO ^ rs aC ct ncr CCC ctc eCCCCCC CCC

Priasry water Supply n"ydrogoloegcl Studifs SSSSSS S5 SourceWwrt StudY 5 SsSas Construction Extraction. Collection aN Paaping Contract1i 00U 0 wcNCc Cm = =c Cm MCc Contract a ODO CCCC 800 eeeCCCCCC CCC Reservoirs aNdPrim ry Network Contract 1, U B iC CC CC ecMSC : CCCCCC CCC Contract a PPPPOO we B CCCCCC CC = CCC eCCCCMC Operations nd Maintenance Systam"Maine, Leek hietectioneSndRepir im - DC = CDCCm CM CCC'CM = CM = UCM U CM CCCm

Procura_ t of cquignt au £0t D00003D tff t£t Ouildings for Wdorksho/ Stores APP 0000O0s eCCCC CCC CCC cAAITATIlOhANDi OrNA?M

Oceanographic Survey SSS SSS 555 SSS tfui* Sewerage

Contract I 00 0 OtlCOBB WC0CCCCcIMCCCC CCC CCC eee eee eee loerations and Maintenance SystemMaing oNW Repair BOBBXC CCCCCC CCCcm = CCCCCC CCC C CCcCcC e CCC CCCCCC CCC CI I ProcuremntOf Equipmen iSalo VA=II Collection Building for workshops/

lXus Collection SysteS 00ai- CCc I I I Procurewet of |t£tu£itt 0 m m at t " £ E m ut £1 on I Ui Disposal Sanitary Landfill" 00U iS. XCC'XL X( 0003t CCCCCC Prcuretat of Equi1_ | Im E tu aBt eamASMOTUilmIUO Construction Roadalon Cal ad Ona sGai le_nt PPO003 n ICCiCCCCCC CCC cCC Maintenance ldiate Action Plan 000008 8CC eCMCCC CCC CCC Periodic1 ie^ntence Ut000S am WLCc ecCM MC CCC= e XL iU c XL :o: CC cc c CCC XCCM CCM C CCC Routinemaintace 000 e CC UM'Ue 'C e U CDCCcC Coeece ee IC Procurementof Plant ed

S a Planninr/Studi1s N a ebilintin P * PrelinarJy Oneion C a Construction o * Final Design t * EqusiwpntOSlivary a IBidding* * C nce in fourth quarter of 19t lush Conned In third quarter of 1965 - 89 -

ANNEX5 Page 1 of 1 TURKEY CUKUROVAURBAN DEVELOPMENTPROJECT

ESTIMATEDSCHEDULE OF DISBURSEMENTS

Turkey Project Year Disbursements Cumulative Profilee.' (USs million) (US$ million) X S

Year 1 Dec. 31, 1987 6.0 6.0 5 1 June 30, 1988 8.0 14.0 12 5

Year 2 Dec. 31, 1988 9.0 23.0 19 11 J-me 30, 1989 10.5 33.5 28 18

Year 3 Dec. 31, 1989 10.5 44.0 37 27 June 30, 1990 11.5 55.5 46 36

Year 4 Dec. 31, 1990 11.5 67.0 56 46 June 30, 1991 11.0 78.0 65 55

Year 5 Dec. 31, 1991 9.5 87.5 73 64 June 30, 1992 9.0 96.5 80 72

Year 6 Dec. 31, 1992 7.5 104.0 87 80 June 30, 1993 5.5 109.5 91 86

Year 7 Dec. 31, 1993 5.0 115.0 96 91 June 30, 1994 3.0 118.0 98 95

Year 8 Dec. 31, 1994 1.5 119.5 99 98 June 30, 1995 0.5 120.0 100 100

I/ Combined for all loan types. - 90 -

ANNEX 6 Page 1 of 15

TURKEY CUKUROVAURBAN DEVELOPMENTPROJECT

MUNICIPALORGANIZATION AND STAFFING

1. The existingstaff of the projectmunicipalities for the existing organizationstructures are summarizedir tables 1 to 5.

2. The municipalityassemblies have adopted the revisedorganization chartsset out in charts1 to 5. These charts are currentlybeing reviewedby the MOI and State Personneloffice.

3. Membersof the organizationaltask forces in each municipalityare formulatingthe detailedstaff requirements.Tables 6 to 10 show the senior staff proposalsas of February1987 for the prioritydepartments now being reorganizedas part of the project. Reorganizationof other departmentswill take place in the courseof projectexecution. REPUBUC OF TURKEY

CUKUROVA URBAN DEVELOPMENT PROJECT

Table 1: ADANAMUNICIPALITY STAFF NUMBERSBY JOB CATEGORYAND DEPARTMENT

Job Catogory Dept Protfes. Cler- Super- Oper.& Departueut Deputy Mayor Nasoger & Tech. Admin. ical visory Craft Drivers unskilled Total Ui0mrn2 u4 AduiUailIESiRU

Mayor's Office 5 - 3 - 7 1 - 6 7 29 Accounting 1 - 2 2 - - - - 5 Revenues 1 1 23 161 5 - - 3 199 Expeaditure 1 3 1 24 5 2 6 - 42 Waterlevy 1 1 16 1S a 19 3 25 88 Tenders and Final Act. - 1 3 - - 1 - - - 5 Audit - 1 3 - 4 - - 2 10 Correspondence - 2 - - 9 1 - - - 9 Personnel - 2 - - 9 1 - - - 12 Legal Affairs - 1 3 - 2 1 - - - 7 Supply - 2 1 8 4 1 - 1 2 18 ______TOTAL 5 11 17 SO 237 23 21 1s 42 424

Road, Water. Sewerage - 2 32 13 16 a 136 163 282 657 Scavenging - 1 1 29 11 - 6 100 446 594 Municipal Works - 1 35 2 9 3 1 2 4 57 Vehicle Naint. - 3 5 4 4 2 173 8 1t 217

TOTAL 7 73 48 40 13 316 278 750 1525 …______-…--______

K-U' REPUBLIC OF TURKEY

CUKUROVA URBAN DEVELOPME PROJECT

Table 1: ADANAMUNICIPALITY STAFF NUMBERSBY JOB CATEGORYAND DEPARTMENT (Cont'd.)

Job Category Dept. Profets. Cler- Super- Oper Department Deputy Mayor Manager & & Tech. Admin. ical visory Craft &rivers Unskilled Total gguuuu!itzlIUica

Police - - 139 fire - 34 19 16 1 209 Brigade - I 1 1 1 Veterinary 25 1 41 72 142 - - I 1 4 - 4 lealth - 45 46 1 - 1 - 1 1 - 3 6 conomices - 4 - 1 20 ParkesandGerdens 2 - 1 2 30 - I 5 4 1 1 7 7 90 116 Cemeteri e - - 4 4 1 Admin Aftairs - 2 40 53 - - 1 - - 1 - newolv1t IF'ud - 41 43 lakery - 15 10 6T 18 61 181 * 1 - 3 3 5 22 12 Market - 2 36 82 Culture/Theatre 1 9 9 2 - 4 35 62 - 1 - - 3 - 3 - 2 Slaughterhouse - 9 1 1 1 7 1 35 a 65 119 fusservicos - 1 1 9 3 3 Dus Terainal - 1 181 25 224 1 - 4 3 - - 1 1 10 TOTAL 16 9 188 70 89 is1 295 519 1342

Urban Pluiag - I 18 - ltealEstate 14 7 3 t 7 55 1 4 - T 1 2 1 16 TOTAL - 2 22 - 21 8 3 ------7 8 71 ------GUARD TOTAL 5 36 ------121 286 368 133 496 598 1319 3362

0 z w KLYULSLALLk' TURKEY

CUKUROVA URBAN DEVELOPbMEN PROJECT

Table 2: MERSINMUNICIPALITY STAFF NMBERS BY JOB CATEGORYANI) DEPARTMENT

Job Category Det . £rofess. Clar- Super- tuoUt Deputy Oper.& Mayer Nemager & T8eb. AdAia. ieal visory CruAt Drivers Unskilled Total U2622g and AdviaLaSru1La Mayor' Office 2 2 4 1 - General Adis. - 1 - - 10 - - 6 12 14 - 6 16 47 100 Finance - 2 - 2 16 Personael 2 - - 22 - - - 28 2 - - 2 Corresponda*ce - 34 I - - 19 - - 20 TOTAL 2 7 9 ______1s 77 4 7 16 49 186

Project Constructiom - - - 3 1 9 68 100 133 314 Deig - - 13 9 4 - 8 6 vehicleplaint. 9 48 - - 2 6 - 1 112 7 7 135 Water Corp. 1 16 10 38 8 Scavengiag 73 26 46 218 I - - 1 - 53 Copost rectory 249 3"0 - - - I - - 7 4 7 19 TOTAL 2 31 29 43 19 268 195 451 1038 A"izfisrTIeSS Poalie 4 - 65 - - - - - 69 Fire Brigade - Veterinary - 1 8 _ 34 61 105 - 2 - - - - - 1 3 Pel.ol.le 2 1 Cenetry 1 - _ 4 60 68 - -- - 1 2 11 Bs Service 8 - 1 _ 1 11 86 9 115 Economic 1 - - 6 lelth - - - - - _ _. I - 1 - - 2 Abbetor r - - 1 1 3 33 13 Parke d Gardens 6 59 - - - - 5 8 t08 122 OTAL 7 2 70 10 12 58 149 253 561

Urbba Planig - 4 37 4 19 1 - - _ 65 TOTAL 4 37 4 19 1 - 65Gs GAND TOTAL 2 20 79 118 149 ______,,______--- 36 332 360 753 1850 REPUBLIC OF TURKEY

CUKUROVA URBAN DEVELOPMENT PROJECT

Table 3: TARSUSMUNiCIPALITY STAFF NUMBERSBY JOB CATEGORYAND DEPARTMPT

_-…- …______------…-…-_-_ ------Job Category Dept. Profess. Cler- Super- Departoent Deputr Mayor Manager Oper.& --- -- & Techn. Adain. ical viisry Craft ------__------_------_------__------Drivers Unskilled Total -- -- _ --_ _-- _ _ _ _-- __------______!iunuRs224 446W~uR&ESIL2 ______Mayor'sOffice 1 - - - _ _ General Adai. 1 _ I Finance 1 - - - - - 2 1 1 - 9 _ _ _ _ Personnel - _ 11 1 8 - 1 - - - Correspondence 2 - 1? ------3 - - - _ _ __--__------4 TOTAL 3 1 2 21 - 1 - - 7 35

Project Construction - 3 6 - Vebicle Maintenane 18 4 12 3? 99 179 ------Vmtur Corp 1 1 23 - 1 7 3 11 47 Scavenging - 1 195 - 3 2 83 33 242 TOTAL 4 8 218 18 8 21 48 143 468 2£or-mitz fstri¢ss Police - 1 - 33 Fire - - - - 1 35 Brigade - - 16 - - - 3 1 21 Veterinary - - 1 Wholesale - - - - 1 7 - I - 6 - Cesmetry - - - 4 11 - - - 2 Bus Service - - - - 8 10 - - 11 BconomiC - - 2 43 2 59 - - 18 2 2 Parks and - - - 22 Gardens ------2 - 20 22 TOTAL 4 1 91 2 2 4 46 37 18?

Urban Planning

TOTAL ______GRANDTOTAL 3 9 11 330 20 11 25 94 18T 690

_-n REPUBLC OF 7KY

CUKUROVA URBAN DEVELOPMENT PROJECT

Table 4: CEYHANMUNICIPALII'Y STAFF NUMBERSBY JOB CATEGORYAND DEPARTMENT

------…------…------Job Category ------… seot. Prof.ss. Cler- super- Oer.& Department Deputy Mayor sarigers ______-______b Toch. Aduin. ical visory Craft Drivers Unskil1ed ___-_____----______Total Pare and ardess - - 1 1 - - 1 1 36 40 Price R*.ulatio - - Scavenging - 1 - I - 2 - 5 - 9 Police - 8 75 2 - 26 - 4 - Wbolesele - - 32 - - - 1 1 - - - 2 Correspoodence - 1 - 1 2 - - - I 5 eelth - 1 - 1 - Conatruction - - - 2 - 3 4 13 1 - Water and 20 17 52 100 Due Services - - - 6 6 1 Fire Department 32 15 20 80 - 1 - 1 - 5 - 14 Abbatoir& teterinary - - 32 53 - - - - 16 1 - 31 Accountiig' - 1 2 ------9 23 2 - - 2 __---__------39 TOTAL 9 8 60 33 18 69 71 191 460

oa 0 REPUBLIC OF TURKEY

CUKUROVA URBAN DEVELOPMENT PROJECT

Table 5: ISKENDERUNMUNICIPALITY STAFF NUMBERSBY JOB CATEGORYAND DEPARTMENT

Dept. Profess. Cler- Super- Oper.& Job Category Total Department Dejluty Meyor Manager & Tech. Ad-in. ical visory Craft Drivers Unskilled t2LalvstRed fiftdis%tEatiea 2 Mayor's Office 2 ------4 38 Finance - 1 - S 22 6 - 1 1 1 2 14 Correspondence - 4 2 1 2 2 5 2 6 24 7 1 1 6 54 TOTAL __---__------T1^g!Ue91 flL!ic9 7 208 269 Project Construction - 22 2 2 5 23 Vehicle maintenance 6 118 (includilg garage) - 1 2 3 2 1 21 82 Water Corp. 153 bus serv.) - 2 2 3 31 7 29 3 76 (including 4 147 155 Scavenging - 1 2 - - _ 1 437 695 TOTAL 4 28 8 35 13 74 96 gwoffsa tz SSE9vices 69 I - 65 - 3 _- - Police 29 48 Fire Brigade - 2 - - - - - 17 - Veterinary - - - - - 2 9 Wholesale 1 - 5 I - - 3 2 13 35 sconomic - - - 2 8 7 3 2 32 39 leslth _ - - I - 1 - 10 35 Abbatoir - 1 1 - 1 - 22 9 - 23 33 Parks and Gardens - - -- - 1 268 TOTAL 5 1 73 10 8 41 21 109 ______YAWt 2923E19posa Urban Planning

TOTAL ------31 87 69 28 116 118 652 1017 GRA"D TOTAL 2 14 oN ------CUKUROI

ADANA ME CHART 1 PRO

ME

BOARDOF AUDiT

DEPUTYSKLYRY GENERAL DEPUTYSECRJCAY GENERAL PIANNINOSERVICES TECENICASEVICES

UBNOPLANNING INPOOW.HOUSING IMPLEHCE6TATIIN PROTECTIONSERVII

M PROGRWUWG ENTANO AND~~~~~~~~CONTROL. oEpARiNEN OIRfC OEPARThENTDIRECTOR $GBNG PROGRtMS OtPARTMNTDIREOR tDPARMNDICTOII

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LITAN iMUNICIPALITY ANNE 6 Page 8 of 15 tGANIZATIONCHART

LITAEI MAYOR - AYKOMI - uxo. I - PPB C0rTMs 1 DIRECTOROF PL4X=G, - ERTS METAR( GENERAL PROGRAAMIDGAND BUDGETING - PUtLICATIN (PROJECT COORDINATOR) - LIBRARY,

'SECRETARYG DEPUTYSECREARY GCI3A WAT AD SAITATION 2CIAL SERVICES ADMNIJISTRATIVEAUD AMISTIATION FUWINCtALSERVICES GENERALDIRECTOR

SOCIALAMO PUBLIC KpUTy FME ULTU A AFFAtRS TRSPORTAON T C 5 PAUThXWTaIRnCTl OICth* u O£PARThNT A

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CHART 2

BOARDOF AUDIT

MtNICIPAI

DMAYOR IPM nuefl MAYO& DEPUTYMAYOR YO FOR FOR PL GUGSEVICES TECMCA ARVICU35

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c~ 11*8664 - 98 - PUBLIC OF TURKEY WBAN DEVELOPEN PROJC A 65fE a Wb~~~~EVEfOPMNNTPROjEGT ~~~~~~~~~Page 9 of 15 N MUNICIPALITY

D ORGANIZATIONCHART

MAYOR I PSSAAPURLCDIRECTORD- REEARCR AND PIANNING SERVICES MANAGER _ * PRESS AND PUBLIC DDRECTOR OF - ARCHIVE, LIBRARY AND DOCUMENTATION RELATIONSDIRECTOR PROGRAMME PLANNDIG SERVCES MANAGER AND BUDGETING - DATAPROCESSING SERVICES MANAGER -- LEGALAFFAIRS (PROJECT COORDINATOL) - PUBLICATIONMANA6ER DlgECTOR (COUNSELOR) lRECTOR-

DEPUTY WAYORt DEPUT MAYORt GENERLALDIRECTOR FOR FOR FOR WATERAND SEWERAGE SOCIALSE itVICES mCSALSE arcEs ~~~~~~~~~~~ANDADMINISTRATMVFIANCIAL SERVICES CO}¢PRATION

CUL A eSS stwvzcEs VtIANCIA PERSOaMtLAO PtOCUUEt CtISC :Es CULTURAL OlRCTOC SERVICES MANPOKId DIRCTOR ANOANCILLAY frttISR OIRtCIOR OMLOMETHtl EINE DIRECTOR DIMCTO ODIRO

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REPUBLICOF TURKEY URBAN DEVELOPMENTPROJECT SUS MUNICIPALITY PageANIt io-6 of 15

MSEDORGANIZATION CHART

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CHART4 PRO

BOA"R OF AUDiT

DEPUTYMAYOR DEPUTYMAYOR FOR FOR PLANNINGSERVICES TECD1CALSERVICES

URn PA INI IfOWL NOUSINGA ENT AI Ol_ DIRECTOR UKhUDISt; "PAeRS DIEtO AO ANCILLAR SERVICES

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t44~~~~~~~~~~~o. cbc zal. .t - mow - 100 - ANNEX-6 Page 11 of 15 PUBLIC OF TURKEY RBANDEVELOPNMET PROJECT RUN MUNICIPALITY

MDORGANIZATION CHART

MAY O

- RESEARCEAND PLA N SERVICESmANA DIRECTOR OF - DATAPROCESSIM SERVICES MANAE flOGRAMM1 PLANNING - - ARHM LIBUMY, AMD AND BUDGETIG DOCUMENTATIONSERVICES MANAGER (PROJECTCOORDINATOR) PUICATION MAXAGER

DEPUTY MAYOR GEERAL DRECTOR SOCIALAND ADM IS'TR.ATE SERVCES WATE AND SANirATION CORPORATION

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CEYHAN MUNICIPALITY

PROPOSED ORGANIZATIONCHART

MA 'OR BOA"DOF AUDfr I

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Tabl-g6: AOANA: PROPOSEO MANNING FOR REORGANIZED DEPARTMENTS

Area ceputy Secretary Department Section Professional" Support Total General 01Drector Manager

PlanninfiServicesa -- 1 Urban Planningo 4 4 98 107 Gecekondu 431 4 46 S1 Implementationand Control 1 3 4 8 20 33 Sub-TOtal 1 1 1716

TechnicalServicei - 1 SolidWaste 3 3 40 47 Road Services - 1 4 12 137 354 FireFighting -1- - 141 142 Parks. Gardens and Cemeteries 1 - 268 269 Construetionand Maintenance -1 3 4 266 274 5ulb-Total I 1 tln 1o 2vs2 0o7a

Social Services 1 - I1 consumerProtect ion I 5 - 57 563 social and Cultural Affairs 1 - 108 109 Public Transportation 1 - 283 284 Sub-Total _ 1 957

Admin and F1nance Services l - - 427 Financial Services. Procurement 1 2 3 421 427 AdminServices I 5 3 202 211 SuS-TtAlrv1s 2 7 A 623 639

Water and Sewerage 1 2 S 1S 465 491

PPB l1 6 1S 10 32

GRAND TOTAL | 6 15 44 7S 3262 3402

(^) Including Water and Sanitation General Director and PPS DirectOr. No. of existing staff: 3362 No. of recruitnments: -- 0 ('^) Minimunmand only for reorganizeddepartments. 3402

REPUBLICOF TURKEY CUKUROVAURBAN DEVELONfENT PROJECT

Table 7: MERSIN: PROPOSEOMANNENG FOR REORGANIZEDDEPARTMENTS

Area Deputy Secretary Department Section Professional" Support Total General* Director Manager

ilann1no Services I- - - 1 Urban Planning _ 1 4 13 57 75 Gecekondu 1 6 - 20 27 Sub-Total _2 _ _ _ 10 13._ 7__7____ 103..

Technical Services 1 _ - _ Slid Waste _ 1 4 S 343 353 Road Services _ 1 S 8 108 122 Fire Fighting - 104 IOS Parks.Gardens and Cemeteries - 152 153 Building Const. & Maintenance 1 2 2 S1 56 Vehicles Maintenance _ 1 2 2 150 1ss Sub-Total 1 S 13J._ 17 ._ sea 94.

Social Services 1 _ I Police - 1- - 68 69 Consumer Protection - 4 - 164 159 Social and Cultural Affairs - 1 - - 24 25 Bus Services - - - 124 125 Sub-Total 1 4 4 _370 1 37Z

Admip and FinanceServices I - - I1 Financial Services - 1 3 4 92 100 Personnel & Manpower Devt. - 1 2 4 27 34 Prc-urement - 1 2 4 S 12 Cor.espondence - 1 - - 23 24 Public Relations - 1 S 6 Sub-Total 1 5 7 l2 1.2. . .

water and Sewerage l 5 16 238 . 260

pp8 l 4 10 4 19

GRAND TOTAL 6 17 43 68 1749 1883

(') Including Water and Sanitat1in General Director and PPa Director. Ne. of ex1s'1r staff: 1850 (1") Minimum and only for reorganized departments. No. of recruitments: lase -103 - ANNEX6 Page 14 of 15

REPUBLIC Of TURKEY CUKUROVAURBAN ODEVLOPMEMTPROdECT

Tkbla : TARSUS: PROPOSDOMANING FOR REORGANt2ED DEPARTMENTS

Area Oeputy Secretary Oepartment Section Professional- I Support Total General* Director Manager.

Planntng sarvies 1-- Urban Planning 1 4 10 16 31 GeCekondu 1 2 S 3 11 Sub-Total _ 1 2 is _ 19 .-. 4.

TechniCal Services 1 1 Solid Waste 1 4 4 231 240 Road Services 1 4 8 62 76 FireFighting 1 _ 20 21 Parks. Gardens and Cemteries - 31 32 Building Const. & 1aintenance 1 2 2 a 13 Vehicles Maintenance 1 2 2 40 45 Sub-Tptal 1 6 13 16 192 _ {"

Social and Admin SarvIseg 1 - _ 1 Correspondence - 3 4 Public Relations - 1 l 2 I Police _ 342 35 ConsumerProtection 1 4 35 40 Social and Cultural Affairs Il 2 Financial Services - l 3 4 3 11 Personnel and Manpower Oev. 1 2 2 12 17 Public Transportation - I Procurement l 2 4 2 9 Sub-Total _1 l l lI I I 182

Water and Sanitation 4 12 30 47 | PPB 1l 4 J 8 2 151

GRUNDTOTAL 5 18 38 | 61 593 715

(V) Including Water and Sanitation General Oirector and PPB Director. No. of existing staff: 690 C") Minimum and only for reorganized departments, No. of recruitments: __a 71s

REPUBLSCOF TURkEY rUKOVA UnnM DOVIELOPNT PROdECT

Table9: CEYMAN: PROPOSEOMAtNIG FOR REORGANIZEDDEPARTMENTS

Area Oeputy Secretary Department Section Professional' Support Total f General, Director Manager

Planning and Technical Servieet 1 1 Urban Planning l S _ 4 Solid Waste 1 4 - 70 7s Municipal Works 4 6 67 78 Fire Fighting _- - 52 53 Parks, Gardens and Cemeteries 1 _ 39 40 Sub-Total _ 13 6 232 257 I Social and Ain Services Correspondance 1 I 4 S Public Relations 1 2; Police _ l - 31 32 ConsumerProtection _ 4 _ 28 33 Social and Cultural Affairs l1 - l 2 Financial Services 4 31 39 Personnel and Manpower Oev. 1 2 2 e 10 Public Transportation l- - 39 40 Procurement 1 2 4 3 10 1 Sub-Total 1 a 11 L 143 174 Water and Sanitation I _ 3 10 24 38

|GRAND TOTAL2 14 27 26 399 | 4691

I') Including Water and Sanitation General Director and PP8Director. No. of existing staff: 460 (") Minimumand only for reorganized departments. No. of recruitments: 9 469 - 104 -

REPUBLICOE TURKEY ANNEX6 CUKUROVA URBAN DEVELOPMENT PROJECT Page 15 of 1

table lO: ISVENOERUN: PROPOSED MANNING FOR REORGANIZED DEPARTMENTS

Area Deputy Secretary Department Section Professional" Support Total General* Director Manager

planninaServices 1 _ _ _ 1| Urban Planning _ 1 4 10 25 40 Gecekondu _ 1 2 S a 16 Sub-Total 1 2 i iS 33 57

Techvical Services I - - -_ - Solid Waste _ 1 4 4 156 165 Road Services - 1 S 8 91 105 Fire Fighting - 1 _ - 47 48 Parks. Gardens and Cemeteries - 1 - - 42 43 Construction and Maintenance - 1 2 2 24 29 Sub-Total | 1 _ 6 13 16 473 ... il

Social and Admin Services 1 _ _ _ - 1

Correspon4ence - 1 _ - 13 14 Public Relations _ 1 _ _ 3 4 Police I _- 68 69 Consumer Protection _ 1 4 _ 113 118 Social and Cultural Affairs - 1 - - 8 9 Financial Services - 1 3 4 40 48 Personnel and Manpower Dev. - 1 2 2 10 15 Public Transportation - 1 - - 99 100 Procurement - 1 2 4 7 14 Sub-Total _1 I_la1I ll In 363-O 3.5

Water and Sanitation 1 _ 4 12 48 65

PP8 1 - 4 8 3 16

GRAND TOTAL S 18 38 61 920 1042

C') Including Water and Sanitation General Director and PPB Director. No. of existing staff: 10 (") Minimumand only for reorganizeddepartments. No. of recruitments: - 10 - 105 -

ANNEX7 Page 1 of 11

TURKEY

CUKUROVAURBAN DEVELOPMENTPROJECT

HOUSINGAND URBAN DEVELOPMENTCORPORATIONS POLICY STATEMENT

Contents

Foreword

1. Preface

2. Objectives

3. Activitiesand Functions

4. Legal Status

5. Board of Directors

6. Organizationof the LimitedSirket

7. Relationshipwith the Municipality

8. CapitalStructure

9, FinancialManagement

10. HUDC Activitieson Behalfof Land Buyers

11. MarketingStrategy - 106 -

ANNEX 7 Page 2 of 11

FOREWORD

Housingand Urban DevelopmentCorporations (HUDCs) are newly establishedentities which will manage the developmentof the Urban Expansion Areas in Adana, Iskenderun,Mersin, and Tarsus. As new agencies,they do not yet have policiesand operatingprocedures.

The purposeof this statementis to set down the policieswhich will guide the HUDC activities. The municipality,by action of its Assembly,shall acknowledgeand endorse the policiesset forth in this document.

HUDC POLICY STATEMENT

1. Preface. In recognitionof:

- the pressureon the municipalityto manage the growth in demand for servicedland resultingfrom a rapidlyexpanding population;

- the presentuncontrolled growth of housingpatterns in unserviced areas and the need to providemore servicedland as a solution;

- the need to adopt housingpolicies and developnew growthmanagement strategiesand programs;

- the opportunitycreated by mass housingprograms which have allowed the municipalityto acquire land for futuredevelopment and plan and constructthe requiredinfrastructure in anticipationof future growth;

- the extra financialpossibilities created by the Government'srecent activitieson the solutionof housingand urban developmentproblems throughthe Mass HousingFund and the Public Participation Administrationand the enhancedmunicipal financial base;

- the need to acquireland developmentmanagement skills and expertise.

The municipality of has acquired land, in a designated Urban Expansionarea, for primarilyhousing development with supporting commercialand employmentgenerating activities. This is expectedto provide for housingdemand for the next ten years or so, after which time, further Urban Expansionareas may, or may not, be acquiredfor development.

The municipality of has formed, as a separate operatingentity, a Housingand Urban DevelopmentCorporation, henceforth referredto as the HUDC. - 107 -

ANNEX 7 Page 3 of 11

2. Objectivesof the HUDC:

(a) to developspecified urban expansionsites which the municipality acquires.

(b) to provideserviced land for residentialdevelopment at priceswhich are competitiveand affordable,so that a reasonableproportion of servicedplots are suited to the needs and financialabilities of lower-incomefamilies.

(c) to make urban expansiondevelopment financially viable and economicallyfeasible by the achievementof full cost recovery.

3. Activitiesand Functions

3.1 In general,the functionsof HUDC involvethe selection,planning, servicingand subdivisionof land in order to place legal servicedbuilding plots on the marketat competitiveand affordableprices.

3.2 In more specificterms the activitiesof the HUDC are as follows:

(a) to assessdemand for housingand deviseappropriate development strategies;

(b) to acquireland for residentialdevelopment in specifiedurban expansionareas;

(c) to plan the developmentof sites in the contextof the adjoining areas and the town as a whole;

(d) to plan the installationof roads,water supplyand distribution,and sanitationon a site, and coordinatethe planningof power distributionand telecommunications;

(e) to plan .heallocation of land to non-housinguses (including schools,health centers,other CentralGovernment requirements and social facilities,commercial, retail, and other employment generatingactivities) and to work in liaisonwith the appropriate CentralGovernment agencies on the financing,design, construction, and operationof the facilities;

(f) to help arrangefinancial sources to fund developmentcosts;

(g) t, acquireand manage the necessaryfunds and to operateappropriate financialplanning, budgeting, accounting, auditing and cost recovery systems;

(h) to formulatedevelopment briefs and award contractsfor the design and constructionof on-site infrastructure;

(i) to supervisethe constructionand installationof on-site infrastructure; - 108 -

ANNEX 7 Page 4 of 11

(j) to arrange coordinationof off-siteinfrastructure construction to the site, in conjunctionwith the municipalityand other infrastructureagencies, and ensure that it is providedin line with the site developmentprogram;

(k) to market and sell developedland to housingdevelopers, housing cooperativesand individualhouse builders,as well as to commercial businessand industrialusers;

(1) to advise and assist land purchasersin findingcredit facilities externalto HUDC;

(m) to support land buyersby providingadvice on the design of low-cost houses,building materials and improvedbuilding techniques, includingthrough maintaining a registerof contractorswho can constructhouses economically and accordingto approvedstandards and to whom land purchaserscan be referred.

(n) to promoteconstruction of houses by privatedevelopers.

3.3 The functionsshall not include,among other activitiesinconsistent with the above operationsand functions:

(a) buildingspeculative (i.e, not presold)housing; 1'

(b) making long-termreal estate investmentsand/or leasingof housesor commercialbuilding on a long-terminvestment basis;

(c) operatingor investingin other businessesor commercialenterprises; if the municipalitydecides to establisha firm to build houses, this will be a separatesirket;

(d) enteringinto developmentof land on other sites, until World Bank funded Urban ExpansionArea developmentloans are repaidby HUDC, except as may be approvedby the lendersand the World Bank;

(e) extensionof credit for house or land purchase. The HWUDCmay accept advancepayments, but sales will only be accountedfor and title transferredwhen the full purchaseprice is paid.

4. Legal Status.

4.1 The LimitedSirket form has been selectedas the legal entityunder which the HUDC will operate.

1/ The HUDC will not build housesfor sale later. It may undertakehousing constructionon a power of attorneybasis for certain familiesif the

Printoutcancelled by operator. - 109 -

ANNEX 7 Page 5 of 11

4.2 As a sirket, the HUDC will operate under the TurkishCommercial Code. All powers and rightsunder the code will be recognized. The Board of Directorswill operate the sirket as providedin the by-lawsof the Sirket.

4.3 The amount of capitalmay be expandedby acceptanceof all of other shareholders.

4.4 Any change in legal form shall be approvedby two thirdsof the shareholdersor as prescribedin the commercialcode.

4.5 The voluntarydisposition in whole or in part of the sirketmay take place eitherby liquidationof the corporationor by sale of the capital sharesas may be appropriateat the time. In the latter event, it is assumed that it will continueas an operatingentity. In either event, such disposition,in whole or in part, shall not take place withoutapproval of the Iller Bank and the World Bank while any amount of the of the proceedsof the World Bank loan to the municipalityis still to be repaid.

5. Board of Directors

5.1 The Board of Directorswill be chargedwith the authorityand responsibilityof managingthe sirket. The board and a chairmanwill be electedat an annual meetingby the shareholders. The board will establish the strategiesand operatingpolicies of the sirket. It will delegateto a chief executiveofficer the authorityand responsibilityto manage the company.

5.2 The shareholdersat each annual meeting shall elect between five and seven directorsto serve for one year or until successorsare elected. A directoris not requiredto be a shareholderand may be electedbased on businessexpertise and managementexpertise.

5.3 The board shall appoint the chief executiveofficer and clearly specifyhis authorityand responsibility.The other managementstaff will be appointedby the board upon the recommendationof the chief executiveofficer.

6. Organizationof the LimitedSirket

6.1 A chief executiveofficer will manage the sirket. He will appoint such other core managementstaff as may be agreed upon by the board. The chief executivewill have the authorityto operate the companywithin the policiesand fiscal controlof the board.

6.2 Core managementposts will consistof a MarketingManager, EngineeringManager, Planning/Architecture Manager, and a Finance AdministrationManager. The IIUDCshall operatewith the smallestnumber practicalof permanentstaff. Technicalassistance and consultancywill be used to supplementor providethe planning,engineering, marketing, and financeskills required. - 110 -

ANNEX 7 Page 6 of 11

7. Relationshipwith the Municipality

7.1 The municipalityhas a role as shareholderand providerof land, planningapprovals, off-site infrastructure and loans. This relationship between the HUDC and the municipalitywill be based on a protocolwhich establishesa contractualagreement between the two parties for each p.^oject or development. The protocolfor the project in which the World Bank is participatingshall includethe followingprovisions:

(a) The municipalitywill purchaseand hold the land under the terms of the loan with the DevelopmentSupport Fund. The land will be developedby the HUDC in amountsneeded for each developmentphase.

(b) Under a sales agreementwith the HUDC, the land will be transferred to a designeeof the HUDC when it sells the plots or tracts.

(c) The price of land paid to the municipalityupon the transferof the land to the designeewill recognizethe replacementvalue of the land or at least the cost of the land at the time of purchaseinflated by the wholesaleprice index to the date of transferplus at least a 2 percentannual returnon the inflatedamount.

(d) Title will remain in the municipalityuntil paymentin full is made by HUDC.

(e) Only the developableland will be sold and the remainderwill be held and maintainedby the municipality.

(f) The municipality,in considerationof an agreed land contributionto off-siteinfrastructure costs, which may be includedin the land price over and above the inflationadjustment mentioned in (c) above, will agree to bring the necessaryinfrastructure to the site. A bindingcontract relating to the timely provisionof the off-site infrastructureshall be concludedbetween the HUDC and the municipalityfor each site, prior to the HUDC commencingany on-site developmentfor that site. The off-site infrastructureservices will be providedby the municipalityas requiredby the site development program(s). All municipalservices will be initiatedto correspond to developmenttimetable.

(g) The municipalitywill take over, operateand maintainon-site infrastructureand publicopen space which elsewhereis normallya municipalityresponsibility;

(h) The municipalitywill approvethe context,structure and parcellation plans,design standards,preliminary and final designs;

(i) The municipalitywill approve constructionand occupationpermits as required;

(j) The municipalitywill be acting as an intermediaryin the development loan to the HUDC, and the municipalityand the HUDC shall be jointly and severallyresponsible for the repaymentof the developmentloan; and - Ill -

ANNEX 7 Page 7 of 11

(k) The developmentloan shall be repaidby the HUDC at least proportionateto sales, so that the loan is fully repaidonce the sales programis complete.

8. CapitalStructure

8.1 The shareholdersshall provide the HUDC with sufficientpaid-in equity so that paid-inequity, includingretained earnings and reserves,is at least equal to two thirdsof the total of all HUDC debt.

8.2 Sufficientfully paid-incapital shall be providedto cover sums requiredfor workingcapital needs (at least the first half-year'soperating expenses)and to maintainan average ratio of specifiedcurrent assets to current liabilitiesof at least 0.66. For this purpose,

(a) specifiedcurrent assets shall comprisecash, receivablesexpected to be realizedwithin one year or less, and investmentscapable of being liquidatedwithin one year or less. (Stocksof materials,land, or unused plots,work in progress,and subscribedbut unpaidcapital shall be excludedfrom the above as will be any receivablesin respectof sales or deposit arrangements.)

(b) Currentliabilities shall be all liabilitiesof the HUDC expecteddue within one year or less, includingterm loan repaymentsfalling due within that period and all prepaymentsor depositson sales.

9. FinancialManagement

9.1 The followingfinancial policies will be adoptedby the HUDC:

9.2 Land Development:

(a) Every effort shall be made to ensure that the amount of infrastructureunder constructionat onietime shallnot normally exceed that necessaryfor a one-yearforward program of sales except for investmentin primaryinfrastructure.

(b) All investmentsin infrastructureshall be the subjectof approvalof the board.

(c) Prior to each new phase of development,the HUDC shall undertakean appraisalto ensure the feasibilityof its proposedinvestment plan. This feasibilitystudy shall, inter alia, incorporatean assessment of the sensitivityof the sales program to the provisionto off-site infrastructureand on-site socialfacilities and shall indicateall the necessaryactivities and assign responsibilitiesto ensure their timelyprovision. It shall be presentedto the board and to lenders. - 112 -

ANNEX 7 Page 8 of 11

9.3 Loan Arrangements:

(a) The HUDC may pledge any assets which it owns as collateralfor loans.

(b) All loan creditarrangements will requireapproval of the board; and by the municipalitywhere it is a lender,guarantor, or its assets are pledged.

(c) No loan arrangementthat would requirean addition to fully paid-in equity shall be enteredwithout first increasingthe paid-inequity.

(d) The HUDC may seek credit from the municipality,Iller Bank, Emlak Kredi Bank, or any other banking or commerciallending source both foreignand local. In seeking loans for capital investment,it shall demonstratethe reasonableviability of all such investmentincluding the ability to servicedebt on all such loans.

(e) The municipalitymay act as guarantorfor liabilitiescontracted by the HTJDC.

9.4 Pricing:

The pricingof HUDC productsshall be set so as to achieve on average,at least full cost recoverywhich means, to recover,at the time of sale:

(a) the cost of the land sold includingthe cost of land requiredfor common facilities,based upon the replacementcost of the land at the time of sale, or at least the originalcost of the land to the municipalityplus revaluationby the wholesaleprice index plus 2 percentannually on the revaluedprice from the date of purchaseto the date of sale.

(b) the onsite infrastructurecosts requiredto service fully the site includingthe share of costs of infrastructurefor social or public facilitieswhich are not paid for by the public entities responsible plus revaluationby the wholesaleprice index from the date of payment for the infrastructureto the date of sale.

(c) the agreed proportionof the off-siteinfrastructure costs, plus revaluationby the wholesale'price index from the date of payment for the infrastructureto the date of sale; and

(d) all overheadcosts includinginterest payments, any losses on loans held in foreignexchange, and any other expenses.

9.5 Dividends

The paymentof dividendsshall only be paid out of profitsas authorizedby the board. - 113 -

ANNEX 7 Page 9 of 11

9.6 FinancialReports, Accounting, and Audit

9.6.1 Each year, the board shall receivea three to five year financial plan in the form of income and expenditurestatements, flow of funds statementsand balance sheets three months prior to the beginningof the financialyear with the first-yearbudget which it will approve. The annual profitplan shall includethe developmentprogram based upon an integrated programof land acquisitionby the municipality,on-site investmentby the HUDC, completionof assets for sale and a programof sales supportedby market analyses.

9.6.2 At least quarterly,the board shall receive financialreports which will includeincome and expenditurestatement, a flow of funds statement,and a balancesheet.

9.6.3 Accountsfor the HUDC will be maintainedon a consistentbasis and in accordancewith the requirementsof Turkish legislation,and will provide,as necessary,further information of the type and in the form requiredto meet internationallyaccepted accounting standards for commercialundertakings. The accountingstatements to be preparedwill includean incomeand expenditurestatement, a sourcesand applicationsof funds statement,and a balancesheet, each of which will allow for the effectsof inflationupon asset usage and replacement.

9.6.4 The accountswill adopt the conventionthat profits on disposalsare not recognizeduntil completionof the servicingof the land and its sale. Depositsand presaleswill only be recognizedto the extent that cash has been depositedwith HUDC. The financialstatements will includein detail and in total informationabout capitalexpenditure.

9.6.5 Memorandumrecords will be maintainedin order to establishwhether the HUDC is meeting the requirementsrelating to limitingits invo vement in housingconstruction, in neeting its cost recovery,financial and marketing targetsand such other monitoringinformation as is required.

9.6.6 The accountsand memorandumrecords of the HUDC will be audited annuallyby an independent,qualified, and well-establishedaudit firm appointedby the shareholdersat the annual generalmeeting of the HUDC. The audit shall apply auditingstandards as prescribedby Turkish laws and, as necessary,further audit shall be undertakento enable the auditor to express an opinionas to whetheror not the accountingstatements show a true and fair view of the financialperformance and statusof the HUDC.

9.6.7 Auditedaccounts, including an audit certificateshall be prepared for the HUDC shareholdersand a copy shall be providedto all lenderswithin three months of the HUDC financialyear end. An audit managementletter shall be prepared,commenting, inter alia, upon the efficiencyand effectivenessof the HUDC's financialsystems and financialmanagement. This report shall be sent to the board of the HUDC and a copy forwardedto the shareholdersand lesiders.

9.6.8 The HUDC will prepareand maintaina set of financialregulations governingall aspectsof its financialdealings. - 114 -

ANNEX 7 Page 10 of 11

10. HUDC Activitieson Behalf of Land Buyers

10.1 The HUDC may act with power of attorneyon behalf of low-income familiesto arrangemortgage finance for housing construction.

10.2 If requestedby them, the HUDC may also act with power of attorneyon the behalfof low-incomefamilies to coordinatesuperstructure development.

10.3 Beforeacting under a power of attorney,as describedabove, the HUDC shall give writtennotice to the individualsand to any contractorreceiving funds that the HUDC is acting only in an administrativerole on behalf of the individualsand is not liable in any way to failureof the individualsto make paymentto the contractoror fai4ureof any lender to make payment to the individualsunder a loan commitmentnor is the HUDC liableto the individual for any failureof the contractor.

10.4 To minimizerisks to the HUDC, the HUDC shall not enter any building agreementon behalf of its clientsunless the total value of such agreementis less than or equal to the value of funds providedby the clients (plus the value of confirmedmortgages arranged in their name). The HUDC will make no paymentsbefore it has collectedthe funds and may not assume any liabilities on behalfof the home purchaser.

10.5 On each occasionthe HUDC takes powersof attorney to coordinate housingconstruction the HUDC shall open and operatea separateaccount to recordall financialtransactions associated with that business.

11. Marketing Strategy

11.1 The marketingstrategy will be based on sufficientanalysis and market tests to estimateas realisticallyas possible the demand for housing from which the demand for land is derived.

11.2 The supplyof servicedland will be based on the population distributionpreferences and demand. The supply will be geared to the sales absorptionrate and close controlwill be maintainedto preventan oversupply of plots and infrastructuredevelopment.

11.3 The HUDC shall arrange the supply of plots of a suitablesize and with suitableinfrastructure to achieveits objectiveof making at least 50 percentof the land availableto, and affordableby, familiesin the lower half of the incomedistribution. (Householdincome of TL 65,000 per month in pricesof December,1985). This objectiveis achievedif individualplots of land are providedat cost of TL 640,000per unit or less in December 1985 prices). At least one half of the land aimed at low-incomefamilies under the above aefinitionwill be sold as servicedplots to individualfamilies on which they may arrangefor constructionof a dwelling(by themselvesor by contractors,with or withoutthe HUDC). - 115 -

ANNEX 7 Page 11 of 11

11.4 The sale of servicedDuilding land will be directed to individual home builders,local small builders,and cooperativesas well as large regionaland nationalbuilding developers.

11.5 Sales to low-incomegroups will excludepurchase of more than one unit by each family.

11.6 HUDC will carry out periodicsurveys of householdswhich have settled in an area to 3asess the successcf the HUDC in reachingthe low-income groups. It will revise its marketingand its productas required to achieve its targetsin the light of experience. - 116 - ANNEX 8 Page 1 of 1

TURKEY CUKUROVAURBAN DEVELOPMENTPROJECT

CUKUROVAMUNICIPALITIES TRAWING ASSOCIATIONFINANCES

Table 1 shows the financialsituation of CMTA. Receiptsfrom municipalitiesand WSDs are calculatedas 0.5 percentof their previousyears' budgets. Cash expensesinclude costs of operations,including rents, and salariesof full time instructors. Technicalassistance and equipmentto be financedunder the projectare includedin investmentexpenditures. The proceedsof the World Bank loan are furnishedon a grant basis. These grants would come to about TL ..0 billionover the projectperiod, compared with municipalities'contributions of TL 5.7 billion. Loans from the Iller Bank (16% interest,repayable over 15 years) cover any shortfallof project investmentexpenditures not financedby operatingsystems or the World Bank Loan. The overall surplusesshown for 1991 and followingyears will not be realizedif the CMTA decides,as expected,to constructpermanent facilities in the early 1990's.

Table 1: CMTA FINANCIALSITUATION (in TL million)

1987 1988 .1989 1990 I91 192l 1li t9I9 195 987-21

R-eceipts-fraQm: municipalities 141 221 392 450 531 613 680 789 947 3,817 WSDs _22 306 Z7 313 Iii 22 278 33784 L.903 Total Receipts 183 320 697 718 844 918 973 1,067 1,284 5,720

OperatinaExoenditures: Cash Expenses 144 288 401 526 626 737 855 992 1,151 4,569 DebtService (Iller Bank) 12 69 59 5 _U ..2 _5 _§2 -5 59 4-5 Total 175 356 460 585 604 796 914 1,051 1,210 5,021

InvestmentExpenditures 659 862 472 189 3 1 2 2 2 2,189

Financedby: 12 5 6 7 9 RecurrentBalance 8 36 237 133 160 122 59 16 74 698 IBRO Loan 299 391 214 86 1 991 IS Loan 352 507 21 0 1,147 BalanceC/F 0 0 0 30 188 309 366 380 453

NB - Some totalsdo not add due to rounding. - 117 -

ANNEX 9 Page 1 of 11

TURKEY

CUKUROVA URBAN DEVELOPMENT PROJECT

PROJECT REVIEW, IMPLEMENTATION, AND MONrIORING UNIT

1. Project components to be executed by the municipalities and their subsidiary agencies will be financed through the Cukurova Project Account (CPA) in the IllerBank. The CPA will be the channel for all project loan funds, including the appropriate proportion of the World Bank loan and loans from Iller Bank, Government,Development Support Fund, and other official sources. The CPA will also be the channel for loan funds for projectsoutside the scope of the World Bank projectwhich are being executedby or for project municipalitiesor their subsidiaryentities during the Bank projectperiod, includingfunds for ongoing Iller Bank works.

2. The CPA will be administeredby the ProjectReview Implementationand MonitoringUnit (PRIMU)in Iller Bank which will b. responsiblefor allocating resources,monitoring project implementation,ensuring that procurementof all items financedby World Bank funds is in accordancewith World Bank procurementguidelires, and reportingon the projectto the Governmentand the Bankt.

Resource Allocation

3. PRIIJ's major function is to allocateresources Lz' municipalities based on an assessment of their creditworthiness, the viabilityof the particular schemes for which the funds would be lent, and adequateperformance of borrowersin achievingproject objectives.

4. The reviewof creditworthinesswill be based upon review-of three-year financial plans to be preparedand submittedannually, at least three months before the beginning of the financial year, by each project municipalityand its subsidiaryentities (WSDs, ASKI, HUDCs)for which loan financewill be sought or for which loansare outstanding. In general,these plans will show intendedinvestments by project,forecasts of revenuesand operatingexpenses (hence finance from internalsources), and proposedfinance from other sources. The plans will include:

(a) informationon past years' performance,and revisedestimates for the currentyear, the budget year, and two futureyears; full-year effectswill be shown for items on which only past year data are available;variations from previouslyagreed plans will be shown,and reasonsgiven, includingreference to physicalmeasures (such as changesin number of staff),together with an indicationof the consequencesof these variations; - 118 -

ANNEX9 Page 2 of 11

(b) detailsof incomeand expenditureby major source or program,showing separatelyrecurrent and capital transactions;these analyseswill show the recurrentconsequences of each scheme,separating operating expensesfrom debt service;

(c) informationrequired to illustrateachievement of key objectives (e.g.,cost recovery)and to identifyclearly those actionsrequired and intendedto achieve the forecasts(e.g., timing and amount of changesin tariffsor tax rates underliningincome forecasts), includiagprogress on implementationof the improvementsin financial management;

(d) separateinformation on actual and forecastperformance as measured by agreed performanceindicators (e.g., level of recurrent expenditures,recurrent surplus as a proportionof incomeand as a proportionof capitalexpenditures, debt serviceforecast separately for subsidiaryentities, including service to Iller Bank and to other lenders,per capita receiptsand expenditures);and

(e) actualsand forecastsof balance sheet items, including(i) required increasesin workingcapital, (ii) debtors,arrears in income collection,creditors, (iii) informationon subsidiaryentities which may affect the municipalities'financial situation.

5. In reviewingthe financialplans, PRIMU will pay specialattention to:

(a) successof the municipalityor entity in meeting previouslyagreed objectives;

(b) the relationbetween proposedchanges in receiptsand costs and indicatorssuch as (i) past changesin analogousmagnitudes in this city and cop,arablecities, (ii) current rates of inflation,growth of population,and growth of tax bases;

(c) balance in planning(avoiding excessive resources to particular activities);

(d) in the case of the HUDCs, restrictingthe debt equity ratio to a level less than 1.5, and the acid test ratio to more than 0.66; and

(e) the implicationsof the plans for continuedcreditworthiness of the municipality,as judgedby debt serviceof the municipalityand its subsidiaryentities not risingabove 35 percent of recurrent receipts,or above the amount of the recurrentGovernment grant to the municipality(now set at 6 percentof Governmenttaxes, allocated on the basis of population).

6. The plan review shall be concludedin time to enable municipalities to finalizetheir budgets for the followingfinancial year. The PRIMU will assist municipalitiesand municipalentities by providingthem with guidelines for the preparationof financialplans and by reviewingearlier drafts when these are provided. - 119 -

ANNEX 9 Page 3 of 11

7. Followingthe reviewof the financialplan, PRIMU will agree lending targetswith each municipality(and its subsidiaryentities) for the coming financialyear for schemescontained within the financialplan. Funding prioritywill be: (a) project components/schemesthat are already under way and that are be-ag implementedaccording to agreed timingand cost schedules; (b) project components/schemesthat are under way but that cannot be completed to minimumsatisfactory standards without additionalfunds, whether due to volume or price variations;and (c) starts on new projectcomponents/schemes which meet appraisalcriteria (paras. 8 to 10 below), rankedaccording to the extent they contributeto overallproject objectives. (When municipalities are competingfor loan sanctionswithin the total loan financeavailable for Cukurova,PRIMU will reflect in its allocationthe past performanceof municipalitiesin implementingproject components, and favor those municipalitieswhich can demonstratethe best performancein accordancewith approvedplans and agreed performancecriteria.)

8. PRIMU'sappraisal of subprojectson which disbursementswill be made under the projectwill be based on criteria to be agreed with the World Bank. In general, these criteriawill incorporatean analysisof the schemes' technical,financial, and economicviability. For those componentswhich have been appraisedin detail by the Bank, appraisalwill consist largelyof ensuringthat the schemesas presentedare consistentwith the plans appraised by the Bank.

9. PRIMU/IllerBank will only approve investmentsunder the project after:

(a) appointmentof the ProjectCoordinator in the municipalityconcerned;

(b) formal establishment,and appointmentof the directorsof the WSDs (ASKI)and of the units chargedwith upgradingand housing management,solid waste management,and roads (in respectof approvalsof investmentsfor those components);

(c) formalapproval by municipalitiesof the policy statementon HUDCs and of the agreementbetween the municipalityand the HUDC (in respectof HUDC investments);and

(d) financialperformance by the WSD (ASKI)consistent with its financial objectives(as describedin the ProjectAgreement with the World Bank) during the currentyear (in respectof water and sanitation investments).

10. In all cases, PRIMU will appraiseonly on the basis of designswhich are at least at the preliminarydesign stage (costswithin 20 percentof final estimates). Municipalitieswill be responsiblefor submittingall necessary informationon schemes to enablePRIMU appraisal. In addition,the PRIMU will take accountof the followingspecific criteria for differentcomponents.

(a) Urban ExpansionAreas. The main criterionin appraisingfuture tranchesof UEAs will be consistencyof the proposalwith the financialand socialobjectives set out in the HUDC policy statement, and judgmentswill take account of experienceof HUDCs in achieving those criteriain earlier investments. - 120 -

ANNEX 9 Page 4 of 11

(b) Upgradingand HousingManagement. The principalappraisal criteria are that the municipalitywill be able to recover costs of investmentsproposed, from improvementcharges, connection fees, receiptsfrom legalizationof planningstatus of the plots concerned, and any other charges which may be introducedin the future,and that these chargesare affordableto residentsof the areas concerned. Based on estimatesavailable to the World Bank appraisalmission, this criterionwill be met in most instancesif 75 percentof the plots have buildingson them, and if the distancesfrom serviced areas to trunk networksdo not exceed 1 km. This criterionmay be used in lieu of an explicitanalysis pending availability of better information.

(c) Water and SanitationComponents. The principalwater and sanitation componentsrequiring appraisal are extensionsof secondaryand tertiarynetworks in specificneighborhoods. The main criterionis to ensure that least cost solutionshave been adopted,and that there is a reasonabledensity of householdsto be served (for tertiary networks,in particular).

(d) Road Components. All schemesshould be accompaniedby traffic forecasts,and schemes estimatedto cost more than US$1 million equivalentshould be shown to yield a first-yeareconomic rate of returnof 10 percent or more.

11. PRIMU will not approveaward of contractsfor civil works before supervisionconsultants have been appointedby the entity concerned.

Staffing

12. The overall controland directionof the PRIMNUis in the hands of the projectdirector. Proposedstaffing is set out in table 1. Becauseof the difficultyin securingappropriate qualified and experiencedstaff on regular terms,the Iller Bank will engage most PRIMU staff on consultancyterms. Responsibilitiesof staff are summarizedin attachment1.

PRIMU Cost Recovery

13. On the assumptionthat CPA receivesall interestreceipts associated with Iller Bank lendingto the projectmunicipalities during the project period,its overheadcosts will be comfortablycovered from this source from 1988 onwards(table 2). This calculationassumes zero cost of funds, in accordancewith the existingsituation in which Iller Bank operationsare financedalmost entirelyby capitaland noninterestearning deposits. - 121 - ANNEX9

REPUBLIC OF TURKEY Page 5 of 11

CUKUROVAURBAN DEVELOPMENT PROJECT

Table 1: FORECASTS OF PROFESSIONAL STAFF AND TECHNICAL ASSISTANCE FOR PRIMU ProfessionalStaff Years 1987 1988 1989 1990 1991 1992 1993 1994

A. ProfessionalStaff Director 3/4 1 1 1 1 1 1/2 1/2 Deputy 1/2 1 1 1 1 1 1 1 EngineersA/ 11/2 4 4 4 4 4 2 2 Planner 1/2 1 1 1 1 1 1/2 -- FinancialAnalyst 1 3 3 3 3 3 2 2 Economist 1/2 1 1 1 1 1 1/4 1/4 ComputerAnalyst 1 1 1/2 1 1/2 1 1/2 1 1/2 1 1/2 1 1 Accountant 2 2 2 2 2 2 -_ 2 Subtotal 7 4 14 1/2 14 1/2 14 l/2 9 114 8 7/5 B. TechnicalAssistance

EngineeringA/ 2 2 1/2 1/6 1/12 1/12 FinancialAnalysis 1 1 1/6 1/12 1/12 Economics 1/2 - _ Subtotal 3L1/2 3 1/2 1LI J6l 1/Li C. FinancialTA to Municipalities B Foreign 1/2 1/2 Local I I I-- Subtotal I 1 1JJl 1 1 2 1 1 0. GRANOTOTAL L2_Jz ____1, lfiJ.L. 1I&2Ls=1.l SlLi" LZ5

A/ Includesengineers qualified and experiencedin municipal,water and sanitaryengineering, roads, traffic and transport,and procurement.

k/ To assistwith and coordinatethe programfor upgradingmunicipal accountingand financialmanagement.

Tablg2: PRITUEXPENDITURES AND INTEREST RECEIPTS

Total 1928 12M 1989 1990 1991 1m 1993 I99 1987-M ------…(TL million)…------

InterestReceipts on IB Loans A- to projectmunicipalities 787 4,720 10,045 13,995 17.005 18,669 19,054 19,247 103,521 PRIMUExpenses 91O 1197 1.046 1.211 1314 4U 2122 8.845 Net Incomefrom Project -123 3.523 8,999 12,784 15,691 17,248 18,145 18,409 94,676 Loans Outstandings/ 9,833 49,264 76,884 99,386 115.235 120.912 120.748 124,007

A/ Assumesthat interestpayments commnence during year loan is made. k/ Includesloans for "non-project"investments in futureyears, but excludesexisting loans to prfiOat mun1cn1Din t1es- - 122 -

ANNEX9 Attachment Page 6 of 11

The responsibilitiesof various PRIMU staff will be as follows:

A. PROJECT DIRECTOR

1. Managementof PRIMU staff, includingrecruitment and training.

2. Selectionand recruitmentof necessaryconsultants.

3. Executionand authorizationof project-relateddocuments where this functioncannot be delegated,including those relatingto contracting and funds disbursement.

4. Liaisonwith IB, DevelopmentSupport Fund, Governmentdepartments, WB and Municipalities.

B. DEPUTY PROJECTDIRECTOR

(a) deputizefor and assist ProjectDirector, as appropriate.

(b) have specificresponsibility for recruitmentand managementof technicalassistance personnel for PRIMU and for suppnrtof projectexecuting entities.

C. PLANNERSAND ENGINEERS

1. TechnicalStudies:

(a) draft or reviewTORs preparedby municipalproject entities.

(b) review: (i) inceptionreports; (ii) interimreports; (iii) final reports;and (iv) the suitabilityof plans, layoutsand designs.

(c) monitorand superviseprogress of the studiesand (as appropriate)implementation of recommendations.

2. ProjectPhysical Components

(a) review the overallmagnitude and spatialcontext within which componentis intended;

(b) review: (i) feasibilityreports; (ii) final designs;and (iii) contractand procurementdocuments. - 123 -

ANNEX9 Attachment Page 7 of 11

(c) ensure that satisfactoryarrangements exist for reviewand approvalof interimand final certificates,authorizing payment on civil works,mechanical and electricaland buildingcontracts.

(d) ensure satisfactoryadministrative arrangements exist for procurementof works, goods and services.

(e) ensure that proposedproject and/or componentsare technically feasibleand representaffordable standards at the least economic cost solutionto problems.

(f) review the timing,phasing and general realismof implementation schedules,including reference to timely budgetaryprovision.

(g) ensure that projectand/or projectcomponent is of appropriate priorityin the spatialcontext of the town or communitybeing served.

(h). ensure that adequateprovision is made for the executionof complementaryworks, includingcoordination with other executing entities.

(i) ensure that the executingentity has or will have adequate technicaland administrativeimplementation capacity, including the reliabilityof the processes,materials, equipment and technicalsystems to be used.

(j) ensure that adequatearrangements have been made regardingland acquisition,planning approval and environmentalsafeguards.

(k) visit projectsites and facilitiesbefore, duringand after implementationto expediteand authenticateproject.

(1) prepareand update various computermodels in cooperationwith projectimplementing entities to monitor projectprogress and costs.

(m) provideand/or arrange appropriateadvice, technicalassistance and trainingto personneland consultantsof project implementing entities.

(n) assist projectentities to recruitand manage consultantsfor the design, implementationand supervisionof project components. - 124-

ANNEX 9 Attachment Page 8 of 11

D. FINANCIALANALYSTS

1. Financialand ManagementStudies:

(a) draft or reviewTORs for municipalproject entities.

(b) review: (i) inceptionreports; (ii) interimreports; and (iii) final reports.

(c) monitorand superviseprogress of the studiesand (as appropriate)implementation of recommendations.

2. ProjectPhysical Components:

(a) ensure that adequatefinancial plan exists to financethe project componentand complementarycomponents.

(b) ensure that the financingplan providesfor the financingof interestduring construction/implementation and necessary increasesin working capital.

(c) reviewfinancial forecasts for the implementingentity, to examinethe expectedincremental effects of the projectand complementarycomponents upon the financialperformance and positionof the entity as a whole with particularreference to incrementaldebt service (includingforeign exchange adjustments) and operatingcosts.

(d) based upon the examinationin (c), exercisejudgement as to whether the projectis affordableto the implementingentity and/orwhether feasiblechanges in operational,charging and taxingpractices can ensureaffordability.

(e) based upon the examinationin (c) and irrespectiveof the effects of the project,exercise judgement as to whether the entity is followingsound financialmanagement and performancepractices, consistentwith reasonableexpectations for entitiesof similar size and type.

(f) in general,make recommendationsand judgementsfor improved financialmanagement and performance. - 125 -

ANNEX9 Attachment Page 9 of 11

(g) examinepricing and taxationpolicies and practicesand make recommendationsfor appropriatechanges.

(h) review,in particular,and make recommendationsfor improvements in: (i) accountingsystems; (ii) billingand collection; (iii) managementinformation systems; (iv) budgetingand budgetarycontrol; (v) audit arrangements;and (vi) financialreporting.

(i) provideor arrangeappropriate advice, technical assistance and trainingto personneland consultantsof projectimplementing entities.

(j) assistproject entitiesin the recruitmentof financialand managementconsultants, as appropriate.

E. ECONOMIST

1. Overalleconomic planning strategy:

(a) work with plannersand/or engineers in their reviewof spacial/sectoralcontext of projectpreparation to ensure adeqt.ateattention is given to: (i) economicplanning; (ii) socialcost/benefit analysis; and (iii) demographicconsiderations.

(b) assistwith prioritizationof projectcomponents, within overall investmentprograms of municipalproject entities.

2. ProjectPhysical Components:

(a) review and/or carry out economicanalysis dependent upon project componenttype, e.g.: (i) economicrate of returnanalysis; (ii) cost/benefitanalysis; (iii) average incremertalcost analysis;and (iv) least cost feasiblesolution a,alysis. - 126 -

ANNEX 9 Attachment Page 10 of 11

(b) work with financialanalyst to reviewor proposechanges in pricingand/or taxationpolicies and practices.

(c) assist definitionand analysisof surveys to monitorproject impacts,including assessment of beneficiarygroups, and size of benefitsachieved.

(d) reviewmarketing strategies of HUDCs.

F. ACCOUNTANTS

(a) design and establishaccounting system for CPA.

(b) arrange for disbursementand reimbursementfor projectfunds, includingthose from World Bank.

(c) closelymonitor the effectsof changes in rates of exchange betweenTL and foreigncurrencies, to ensure that these are (as appropriate)passed on to projectentities.

(d) preparereimbursement requests and other documentsrequired by WB and/or any other foreignlenders.

(e) generallymanage the debt and investmentof the CPF, including (to the extentauthorized by law) provisionof cover for exposed foreignexchange risks.

(f) review the financialaspects of civil works and procurement contractsand forwardcopies, as appropriate,to WB.

(g) prepareand submit to government,WB and projectentities, periodic(quarterly) financial statements.

(h) arrangefor the annualaudit of financialstatements and for the periodicaudit of statementsof expenditure.

(i) prepareloan amortizationtables for projectentities - updating these as requiredfor foreignexchange adjustments.

(j) promptlycollect periodic principal and interestpayments from projectentities and pay (as appropriate)principal and interest paymentsto lenders. - 127 -

ANNEX9 Attachment Page 11 of 11

G. COMPUTERSPECIALIST

1. ProjectPhysical Components

(a) prepare,improve, maintain and update variouscomputer models for financialanalysis - in cooperationwith financialanalysts.

2. CPA Accounting

(a) assist with design and implementationof computerizedaccounting systemfor CPA.

(b) prepare,maintain and updatevarious computer models to monitor, e.g.: (i) sroject/fundcash flows; (ii) debL amortizationtables; and (iii) foreignexchange adjustments.

3. ProjectEntities

(a) monitor performanceof projectentities in their use of computers and recommendnecessary assistance.

4. PRIMU

(a) providegeneral computersupport on: (i) personneland administration; (ii) office equipmentand materials;and (iii) purchasing,billing and generalbookkeeping.

H. SUPPORTSTAFF

In additionto the above specialists,a small number of supportstaff will be necessaryfor secretarialand other officeduties. This staff will include:

(a) secretaryftelephonist; (b) typists; (c) drivers- to facilitatevisits to projectentities; and (d) generaloffice assistantand messenger. - 128 -

ANNEX10 Page 1 of 19

TURKEY

CUKUROVA URBAN DEVELOPMENT PROJECT

MUNICIPAL FINANCES

1. This annex deals with general points arising from the financial forecasts for municipalities and their recurrent and capital receipts and expenditures up to 1995. Particular emphasis is placed upon the financing of investment programs, 1987-94, which include the municipal components of the project. The section is introduced by a summary of municipal investments and their financing, paying attention to whether or not municipalities will require more than their fair share of national loan finance. The forecasts are affected by two general considerations: the conservative assumptions made when projecting future income from local revenues, and the basis of judgements on muhicipalities' ability to afford the proposed work program. After reviewing these factors and the issues which arise on a town by town basis, the forecasts are shown, town by town, and detailed assumptions underlying the forecasts are given.

Summary of Municipal Investment

2. Table 1 illustrates the impact of the project on the overall investment programs of the municipalities. The project represents 41 percent of direct municipal investment during the 1987-94 period. When project-related equity investments in WSDand HUDCare taken into consideration, however, the project accounts for the majority of the medium-term investment program in Cukurova municipalities. Table I also illustrates that, on the basis of the town financial forecasts, almost two thirds of the overall investment program is financed by contributions from current account operating surplus. Table 2 summarizes recurrent accounts for 1982, 1986, and 1995 and for the municipalities during the 1987-94 period. Loan finance funds approximately 30 percent of the overall program, and approximately 50 percent IBRD and 50 percent national loans.

Fair Shares Analysis

3. Table 3 compares the national loan finance required by the program of investment in Cukurova with the allocation due to the area on the basis of receiving its "fair share" of Iller Bank and Municipal Fund investment resources. Fair shares are set equal to 6 percent of the national total, which is the share of project municipalities in the national total urban population. Based upon a real growth of national loan funds of 5 percent p.a. - 129 - ANNEX 10 Page 2 of 19

TURKEY

CUKUROVAURBAN OEVELOPMENT PROJECT

IahJr_J.:FINANCING PLAN FOR MUNICIPALITIES.1987-94

Percentaaeof Investments,in ConstantPrices Ada Merstn Tars CgyhaI Iskgnderun Total

Project 35 46 55 49 39 41 Land for HUDC * 1 0 6 1 Non-Project 54 43 35 51 26 46 Equityin HUDC/WSD _U10 .20 _22 _AZ Total 100 100 100 100 100 100 Finanted,byu

RecurrentSurplus 72 54 68 60 55 66 CapitalReceipts 5 6 4 16 12 6 Loansfrom: -I8RO 12 15 18 16 13 14 - Iller Bank 12 23 10 8 14 14 -OSF -. ! - t 0-f Total 100 loo 100 100 100 100 US$ millionequivalent 200 83 39 14 45 380

NB: Some totalsdo not add due to rounding. *: less than 0.05%

TUmRKEX CUKUROVAURBAN DEVELOPMENT PROJECT

Table2: STRUCTUREOF RECURRENTRECEIPTS AND EXPENDITURES (percent of recurrentreceipts)

Total Total Averaqe1987-94 Total 1982 1986 Adna Mersin Tarsus Cgyhan IskenderunIToal Si9 RecurrentReceiots

CentralTransfers 38.9 51.4 63.6 41.3 46.1 45.4 48.0 64.6 52.2 LocalTaxes 47.9 40.7 30.2 52.2 44.1 38.0 36.4 37.4 39.5 ServiceIncomeA/ 13.2 L2 6.1 6.5 a 16.6 1,i6 8.4 4,4 TotalRecurrent Receipts 100.0 100.0 loo.o 100.0 100.0 100.0 100.0 100.0 100.0

RecurrentExDenditures

OperatingCosts 64.4 43.7 36.0 49.7 42.0 48.5 44.3 41.0 39.7 ContingencyReserve 0.0 5.3 10.0 0.0 0.0 0.0 0.0 5.4 5.3 DebtService 13.9 0.5 10.0 16.1 14.2 11.8 14.4 12.3 10.2 TotalRecurrent Expenditures 78.3 49.5 56.0 65.8 56.2 60.3 58.7 58.7 55.2 OperatingSurplus/Deficit 21.7 50.5 44.0 34.2 43.8 39.7 41.3 41.3 44.8 TotalReceipts in US$ millionequivalent 34 55 41 17 8 31 8 76 107 TUEY CtKUROVAURBAN DEVELOPMENT PROJECT

Table 3: FAIR SHARESANALYSIS: FORECASTOF IS AND MF RESOURCES. fAIR SHARESTO PROJECTCITIES. AND ESTIMATEDUSE BY PROJECTCITIES

____…mi------in TL Billion…------in TL Million------Central 1nvestm Resourcesto inicipalities(El Fair Shares of Cukurova (DI _ Estimated Fint e Rejired Percent Year Water S atian -alWfr Otherra eL& San tat1in Othe Act1v ties wate 8 .n tantat1onOther of Fair MF(C) 18 Total MF IS Total MF IS Total HF IS Total MF Is Total Total Is HF Total (F) Total Share

1986(A) 56 76 132 21 16 37 77 92 169 3.360 4.560 7.920 1.260 0.960 2.220 10.140 1986(B) 51 69 121 19 15 34 70 84 154 3.068 4.163 7.231 1.150 0.877 2.027 9.258 1987 54 73 127 20 15 35 74 88 162 3.221 4.372 7.593 1.208 0.920 2.128 9.721 1935 1283 3218 4831 8049 82.8% 1988 56 77 133 21 16 37 78 93 170 3.382 4.590 7.973 1.268 0.966 2.235 10.207 11276 2379 13655 10928 24583 240.8% 1989 59 80 140 22 17 39 81 97 179 S.551 4.820 8.371 1.332 1.015 2.346 10.718 5693 980 6673 7624 14297 133.4% 1 1990 62 84 146 23 18 41 85 102 188 3.729 5.061 8.790 1.398 1.065 2.464 11.253 4872 1264 6136 4666 10802 96.4% o

1991 65 89 154 24 19 43 90 107 197 3.915 5.314 9.229 1.468 1.119 2.587 11.816 2415 511 2926 3708 6634 56.1% 1992 69 93 162 26 20 45 94 113 207 4.111 5.579 9.691 1.542 1.175 2.716 12.407 1820 560 2380 675 3055 24.6% 1993 72 98 170 27 21 48 99 118 217 4.317 5.858 10.175 1.619 1.233 2.852 13.027 404 489 893 441 1334 10.2%

1994 76 103 178 28 22 SO 104 124 228 6.S336 i.S 2 64 1J700 1.29S 2.995 13.679 429 345 774 1197 1971 14.4X 1995 79 108 187 30 23 52 109 130 239 4.75*9 6.459 11.218 1.785 1.360 3.144 14.363 370 277 647 683 1330 9.3% Total (87-94) 513 696 1208 192 146. 339 705 842 1547 30.760 41.745 72.505 11.535 8.789 20.323 92.829 28844 7811 36655 34070 70725 76.2% Percent of Fair Share Receivedby Cukurya Municipalities1987 to 1994 inclusive _ 2S.4X s0 6t 167L.60 76.2A

HF = Municipal Fund; 1B = Iller Bank A - 1986 prices. Data from SPOprogram B - December 1985 prices, derived by adjusting 1986 figures by I5% (one half of 1986 inflation) C - Breakdownbetween HF and other central finance between Water and Sanitationand Other Activitiesas in 1985 D - Six percent of total E - Excluding Housing and Urban Development Companies F - No Municipal Fund Resources are disbursed on non-water and sanitation components.

I0 g~o - 131 -

ANNEX 10 Page 4 of 19

(the expectedincrease in GNP in Turkey,with no allowancefor an increasein tax revenuesas a share of GNP), the table shows that, as a region,the programrequires only 76 percentof its fair share during the period 1987-94. Almost 2.5 times its fair share is requiredin 1988, the year of peak investment,but by the end of the period the requirementhas fallento only 14 percent. Requirementscontinue to decline in 1995. The forecastsalso assume that projectmunicipalities would receive less than 20 percentof their fair sharesof MunicipalFund resources.

Affordabilityand CreditworthinessCriteria

4. The programhas been judgedas affordableto each municipalityif debt chargesarising from strictlymunicipal operations, WSD operations,and HUDCs are less than: (i) 35 percentof total recurrentrevenues from grants, fees, taxes, and service income;or (ii) the amount of GovernmentSupport Grant (6 percentshare of nationaltax collection). The lattercriterion relatesas much to creditworthinessas affordability.The GovernmentSupport Grant is paid via Iller Bank and can be withheldin the event of defaultof repaymentof debt service. The criterionmay be consideredoverly severe becauseit includesthe contingentliabilities of the WSDs and HUDCs. On the other hand, practicalitydemands that an effort be made to identifycriteria which can be clearlydefined and measured.

FinancialForecasts

5. Municipalfinances are summarizedfor each town in tables4 to 8, which draw togetherproject and nonprojectmunicipal activities and also recordthrough flows via the municipalitiesto their HUDCs and WSDs. The financialtable is separatedinto two: currentaccount and capitalaccount. The currentaccount providesdetails of recurrentincomes and expenditures, includingdebt charges. It shows how the surpluson currentaccount, which is used to financecapital expenditures,is generated. The capitalaccount shows detailsof municipalcapital expenditure (project and nonproject)and equity investments,and it records the throughflow of loans to the WSD and HUDC. (Loansare made to the municipalityto finance the capitalexpenditures of these two agencies.) The capitalaccount shows how the capitalprogram is financed:by loans (IBRD and nationalgovernment), by capitalreceipts (cost recoveriesand land sales)and by applicationof contributionsfrom current account. Detailsare providedfor each municipalityfrom 1982-85(actual income/expenditures),1986-87 (estimate/revisedestimate data), and 1988-95 (forecastdata).

MunicipalForecasts

Assumptions

6. GovernmentSupport: RecurrentGrant. The forecastsassume that municipalauthorities continue to receive,a year in arrears,6 percentof the Government'scollection of taxes,distributed on the basis of each town's proportionof nationalmunicipal population as shown in censusdata. In order to ensure conservativeforecasts, overall real growth in Governmenttax collectionsof only 3 percentp.a. is assumed,from the base of 1986 actual allocations(as comparedwith expectedGNP growth of 5 percent). - 132 -

ANNEX10 Page 5 of 19

7. Share of Central GovernmentTaxes CollectedLocally (Adanaonly). As a metropolitanmunicipality, Adana receives5 percentof total Central Governmenttaxes collectedin its boundaries. The forecastis based upon zevisedestimated 1986 receiptsand 1987 budget data. Future growthis assumedat 3 percentin real terms.

Own Currentand Service Income- General

8. Locallyadministered current and serviceincomes include municipal fees, municipaltaxes, property tax, and chargesfor services. Taken together,these revenuesare referredto as "own" revenues. (Theirrates are, however,almost all subject to CentralGovernment prescription.) The most significantreceipts for which local discretionexists are the chargesmade for water and for sewerageservices.

9. Conservativeassumptions have been made concerningthe growth of the municipalities'own revenuesduring the projectperiod. Despite the transfer of propertytax to municipalitiesfrom 1986, overall the growthof municipal incomefrom own revenues,excluding water and sanitationrevenues, is forecast to increaseby only 0.5 percentp.a. on a real per capita basis from 1985 to 1995. Substantialincreases are assumed in water and sanitationtariffs (Annex12), and if these are includedthe annual increasebecomes 5.8 percent. Details are given below.

PropertyTax

10. FeaturesCommon to All Towns. The forecastsare based upon revised estimatesof actual collectionsin 1986. Allowanceis made for increasesin collectionefficiency of 10 percent to be achievedby 1988. Revaluationof propertyvalues are assumedevery three years and propertyvalues are assumed to increasein line with inflation.

11. Town SpecificFeatures. The forecastsincorporate a factorto reflectthe growth in the tax base in each town. The range of annualgrowth rates are given below by town:

- Adana: 4 - 6 percentp.a. - Ceyhan: 3 - 4 percentp.a. - Iskenderun:6 - 7.5 percentp.a. - Mersin: 6 - 8 percentp.a. - Tarsus: 4 - 6 percentp.a.

Other Fees and Taxes

12. Common Features. Forecastswere made for each of some 60 fees and taxes collectedby municipalities,mainly based upon 1985 actual receiptsand checkedagainst 1986 rates and revisedbudgets. Forecastgrowth variously includesan allowancefor generalreal growth of 3 percentp.a., for annual growth in populationand for nominal 10 percentp.a. increasesin fees as well as consolidatedincreases every five years to bring them back in line with inflation. The outcomeof these adjustmentsis that other fees and taxes per capita in real terms,after increasingfrom 1982 to 1985, would decreaseover the projectperiod. - 133 -

ANNEX 10 Page 6 of 19

Service Income

13. CommonFeatures. The major item of serviceincome is bus fares, forecastseparately for each town. Forecastsof other serviceincome are based on 1985 actual receipts,together with revisedbudgets for 1986 and 1987 budget forecast. Forecastgrowth includesan allowancefor changes in rates of chargeof 10 percentp.a., consolidatedin line with inflationevery five years.

14. Town SpecificFeatures. Bus incomeforecasts have been adjusted to reflectactual changes in fares in 1986 and approvedchanges in 1987. In additionto annual increasesin line with inflation,real increasesin income are forecasttown by town, as shown below:

- Adana: 10 percentin 1988, thereafter5 percentp.a. to 1991, followingconstant real fares in 1986, a decreaseof 15 percent in 1987.

- Ceyhan:0 percentp.a., followinga 49 percentincrease in 1987.

- Iskenderun:10 percentp.a. until 19?2 after an increaseof 44 percentin 1987.

- Mersin:0 percent throughoutthe period followinga 45 percent decreasein 1986.

- Tarsus:0 percentfollowing a 40 percentincrease in 1986.

Dividendfrom HUDC

15. A nominaldividend of 10 percentof the net after-taxprofit of the HUDC is assumedto be paid to the municipalityin the followingyear.

Surplusfrom WSD

16. Any surplusremaining within the WSD after allowingfor internal financingof capitaland working capitalrequirements is assumedto be paid to the municipality.

RecurrentExpenditures

17. Staff. After recruitmentof an initialincrease in high level staff in 1987 and 1988, real staff costs are assumed to remainconstant until 1991 when they would increaseto maintaina constantreal per capitaexpenditure.

18. Goods and Services. It is assumed that expenditureon goods and servicesoutside the scope of the projectis sufficientto absorb growth until 1990. Thereafter,expenditure is maintainedconstant in real terms per capita. Additionally,allowance is made for incrementalcosts which arise from the project;these costs amount to 3 to 13 percent,depending on the town, of total expenditureson staff, goods,and servicesby 1994. - 134 -

ANNEX 10 Page 7 of 19

Nonproiect Capital Expenditure

19. The estimateof nonprojectcapital expenditure assumes that 1987 expenditurewill be as budgeted,with the additionof IllerBank works being carriedout (e.g.,town hall in Ceyhan)and certainmaintenance functions reallocatedto recurrentexpenditure. From 1988-92,the basic nonproject expenditureforecast is equal in per capitaexpenditure terms to the average for the period 1982-85. This base estimatewas then modifiedto ensure affordabilitycriteria were met. This modificationresulted in reduced programsin Iskenderun(1987-91), Mersin (1988-90),and Tarsus (1987-90). (Detailsare providedin para. 26 below.) (In the case of Ceyhan where there was no capitalexpenditures prior to 1986, estimatesare based upon 1986 and 1987 data.) Post-1992,an additionalallowance is made for a continuationof project-typeexpenditures. The result is that post-projectinvestment expendituresare about twice the per capita real levelsexperienced in 1982-86 (1986-87in the case of Ceyhan).

Loan Finances

20. IBRD loans are assumed to be repaidover a 17-yearperiod, with 4 years of grace, at an interestrate of 8.25 percent. An annual commitment chargeof 0.75 percentof the undrawnbalance is made, and an administration fee of 2.75 percentof the amountborrowed is chargedwhen a borrowing is made. Foreignexchange risks are borne by municipalities.The amount of IBRD borrowingis based on proposedloan disbursementpercentages.

21. Iller Bank loans)via the CPF, are assumed to be repaid over a 15-yearperiod at an interestrate of 16 percent. The amount of Iller Bank loan requiredis calculatedas a residual,after takingaccount of the proceedsof the World Bank loan, recurrentsurpluses, capital receipts, and loans from DSF for land purchasein UEAs.

CapitalReceipts

22. Cost Recovery. Two main sourcesof cost recoveryfrom municipal works are estimated:

(i) Direct recoveryof capitalexpenditures. Neighborhood road and sidewalk improvementsare subjectto cost recoveryby the levy of a charge equivalentto the minimumof a direct allocationof costs to beneficiaries'properties (typically on a frontagebasis), or 2 percentof the propertyvalue as assessedfor propertytax.

(ii) Legalizationfee. Within upgradingand housing managementareas, it is estimatedthat a range of charges,fees, and penaltiestotaling TL 150,000will be leviedfor regularizingplanning status (whichis a requirementfor securingindividual legal title). - 135 -

ANNEX10 Page 8 of 19

23. Cash Surpluson HUDC Land Sale. At the time of sale of land to developersor individuals,the HUDC is assumedto repay to the municipality the purchaseprice of land plus subsequentchanges arising from inflation. At the same time, the municipalityis requiredto repay any loan on land taken from DSF, plus a 10 percentfee, and the difference(a cash surplus)is treatedas a generalmunicipal capital receipt.

24. Contributionto to Off-SiteInfrastructure. The HUDC is assumed to contributean amount equivalentto some 33 percentof the real cost of off-siteinfrastructure provided by the WSD and the municipality. The total contributionis proratedbetween the WSD apd the municipalityaccording to the investmentof each, and the share due to the WSD is shown as a capital transferin the municipalsummary tables.

Town SpecificIssues

25. Adana. The financialforecasts for Adana reflectits metropolitan statusconferred during 1986. Althoughthe costs are expected to be met from reallocatingexisting staff and facilitiesof Adana municipality,a contingencyreserve, equivalent to 10 percentof recurrentincome, is retained to allow for costs arising from the de facto establishmentof the municipalitiesof Yuregirand Seyhanfollowing the municipalelections of 1989. Until that date, servicesare expectedto continueto be providedby Adana metropolitanmunicipality. The programof projectand nonproject capitalexpenditures in Adana is forecastto be comfortablyaffordable with surplusfunds becomingavailable from 1992.

26. Mersin. Mersin has a relativelyhigh level of recurrentexpenditures and revenuegeneration from its own sources,which is retainedin the forecastsas a characteristicof this local touristand transportcenter. The forecastcapital expenditure program is not quite affordable,with the constraintof debt chargesnot exceedingthe recurrentGovernment Support Grant implyinga reductionof nonprojectcapital expenditure to some 85 percentof lc82-85average real per capita levelsduring 1988, 1989, and 1990 in order to satisfyboth criteria. The full programbecomes comfortably affordableif the underlyinggrowth of the GovernmentSupport Grant is assumed to be 5 percentinstead of the conservativelylow estimateof 3 percent.

27. Tarsus. Due partly to its patternof borrowing,the forecastfor Tarsus cannotbe made to satisfyboth affordabilitycriteria even with virtuallyno nonprojectcapital expenditure in 1988 and 1989, and with no loan-fundednonproject capital expenditure in 1989 and 1990. In 1991, debt chargesexceed Government Support Grant (6 percentshare) by some 5 percent. If, however,the underlyinggrowth in this Grant is assumedto be 5 percent insteadof 3 percentp.a., the programbecomes affordable if nonproject capitalexpenditure is restrictedto 85 percentof budgetedlevels in 1987 and limitedto one third of average 1982-85real per capita levelsduring the years 1988-90. Alternativephasing of HUDC debt repayment,or greateruse of MunicipalFund finance,would enable the overallprogram to meet both affordabilitycriteria. - 136 -

ANNEX10 Page 9 of 19

28. Ceyhan. The financialforecasts for Ceyhar indicatethe programof project and nonprojectcapital expenditureis affordable,and the surpluses forecastto arise from 1990 onwardssuggest that the municipalitycould make a contributionto investmentin water and sanitation,so reducingthe requirementfor Central Governmentloan finance.

29. Iskenderun. Own currentand servicemunicipal income of Iskenderun is forecastto increaseduring the projectperiod in real per capitaterms. Despite tha relativelylow existingincome collection, by 1995 real per capita income from these sources is forecastto reach average levels for the project towns. The capital programmeets the affordabilityconstraints on the base forecastsonly by severelyrestricting nonproject capital expenditures, by undertakingno nonprojectinvestment in 1988 to 1990 and, in 1991, spendingat only 30 percentof average 1982-85per capita levels. Becauseof this situation,the municipalityhas alreadydeferred construction of its new municipalbuilding which had been plannedto start in 1987. Less severe restrictionscould be allowed if more generousaffordability and creditworthinesscriteria were adopted,or if debt chargesrelating to the HUDC were rephased. If, however,the GovernmentSupport Grant were to grow in real terms at 5 percentp.a. insteadof the conservativeassumption of only 3 percent p.a., the nonprojectcapital expenditures could be fully financedin 1987 as well as two thirds of their average 1982-85real per capita levels during the period 1988-91. Smallermunicipal contributions to the WSD (which might arise from charginghigher tariffs,or achievingoperating cost savings) would also enable a larger municipalprogram. - 137 - ANNEX 10 Page 10 of 19

CSUomvA UMaM ELOPHUT POJWCT

laMES 1: ADAMA MUNICIPALITY FINANCIAL FORECAST

l992 lim jiM nuailiii jiM 115 jjfl 1310 im im 12 1310 Jim …------inMillion IL…------…------,----_---_---- CURRENT ACCOUNT . GovenmentSupport (6Z Share) "5 1,s595 2.288 4,834 6,084 11,001 12.87" 17,152 21,023 27,602 33.262 39,741 47,483 56,731 . Shareof Central Taxes Collected Locally 0 0 0 0 3,394 6.788 8,563 IO.S8U12,97n 15,76 18,999 22,700 27.122 32,406 . Property Tax 0 0 0 0 1,850 2,030 2,223 4,148 4,311 4.502 7,907 8,182 8,504 13,965 . Other Municipal fees and Taxes 1.n 111L.t8 LZ2 1.1 ,22Z it.5 Lii LII 12,A ls.415 1lU n nM.91 27.268 2LI4 TotalCurrent Income 2.468 2,826 4,070 8,235 18,25526,150 32,23640,877 50,952 63,285 78,17991,574 110,377 138,642

. Expenditureon Staff. Goods& Services 1,520 2,253 3,628 6,414 6,091 10.27713,927 16,50719,385 22,822 28.92734,7S7 41,77150,164 SSubscription to CtA 69 113 195 229 296 317 322 295 472 . unicipal Debt Charges 4OS ....Ja __22S..UA 1 4 _3,07M 4-632 _Li24 10.766 11.404It, 12.561 GrossCurrent Municipal Expenditure 1.987 2,696 4,2e0 6,639 8,093 10,53416,614 19.77924,247 33,36840,010 46,493 4,.04562,998 . LessMunicipal Service Income (44014697i 1 .fiiX2(1,4121 £1.24511-44C'1 11.4514 (2421211 f,S131 i4.27m1 aS.65SI a i 0 1,2SM1 NetMunicipal Current Expenditure 1,547 1,999 3,591 5,627 6,837 9,094 13,769 17.48720,734 29,091 34,95540,555 46,16s53,745 * Dividendsfrom HUOC 0 0 0 0 0 0 (111) (218) (249) (331) (420) (227) (162) (179) SSurplus from bSh 0 0 0 0 0 0 0 0 0 0 0 (3,541)(4,823) (9,216) OperatingSurplus/ (Deficit) 921 827 479 2,608 11,418 17.05618.578 23,608 30.46734,526 43,64554,788 69,19891,292 OperatingOalance (prev.year) 0 0 0 0 0 0 0 a 0 (0) (0) 2,304 3,759 4,713 Contributionto Capital1,089 1,379 1,976 2.837 5,745 14.297 15,170 19.29125.021 27.770 33201743,582 56,41667,770 . ContingencyReserve 0 0 0 0 1,951 2,759 3.408 4,317 5,447 6,756 8,323 9,751 11,82814,489 Net Surplus/(Doeficit) (168) (552) (1.497) (229) 3,722 0 0 0 (0) (0) 2,304 3,759 4,713 13,746

CAPITAL ACCOUNT EXPENOITUR . Project 0 0 0 0 0 1,577 14,57216,098 23,343 19,34812,822 9,395 466 0 .Land (HUDC) 0 0 0 0 1,654 30 0 0 0 0 0 0 0 0 maon-Project 1.1 11.71 lii 2i i 10i7ag 1S24 1.243 I1Si.45 20,2l 24-648 34.94552.249 6L2ui Capital Expenditure on Goods& Services 1,089 1,379 1,976 2,837 7,274 12,216 25,096 29,341 39,800 39,631 37,470 44,340 52,715 62,689 Transfer Payments . Equity Investments - HUDC 0 0 0 0 25 1.020 0 0 0 0 0 0 0 0 - uSO 0 0 0 0 0 7,061 1,388 1,715 2,102 2,760 3,326 3,974 4,748 5,673 LLoans Via Municipality to - HUOC 0 0 0 0 0 543 77." 1,346 874 1,594 896 636 0 0 - WSO 0 0 0 0 0 1,385 23,009 15,72913,799 10.274 8,706 1,957 273 0 .Contributionto Off-Site Infrastructure- WSO 0 0 0 O Qa 21. 360 342 404 4 Is1S8 o .o Total CapitalExpenditure & Transfers 1,089 1,379 1,976 2,837 7,299 22,38550,480 48,491 54,91754,643 50,864S1,065 57,73668.362

. Loans - IM81 0 0 0 0 0 2,099 13,26012,460 14.484 13,121 10,260 5,542 419 0 - CPF 0 0 0 0 0 5,642 21,213 14,425 15,050 9,239 3,367 0 0 0 - oSr 0 0 0 0 1,554 348 0 0 0 0 a 0 0 0 .Capital Receipts 0 0 0 0 0 0 827 2,314 0 0 0 0 0 0 Contributions from Current Account l.OS 1.37 1422 2.. 1M 14.297ZlL.LZ 192911 20I 27iZ0Q 33.0174&L5a2 S6141662.770 Total Financing A*JQ L42L 1.12 LA32 LIII 2 5II5M&. 5LAI 1 5lLILA U. LAUA.5i ALLM l 60.52 - 138 - ANNEX10 Page 11 of 19 Table 4 (Cont'd)

i9U 1a i2U Ia 1inn mx Ia iIa IaIM mi In IM

Total Debt Chareesas a X of Municipal Total Current & Service, & NSDIncome 16% 11% 1X 2% 0% 5% 13% 21% 19% 26% 22% 20% 16% 14% Municipal DebtCharges as a I of Municipal Total Current a ServiceIncoz 16% 13% 12X 2% 0% 1% 4% 7X 9% 14% 13% 12% 10% 9% Municipal Debt Chargesas a X of GrossMunicipal Current,Expenditure 31% 20% 15% 4% 0% 2X 11% 19% 24% 39% 37% 33% 28% 25% TotalDebt Charges as a % of GeverimnrtSupport (6%) 47% 28% 25% 5% OX 15% 40% 68% 67% 86% 79% 69% 58% 61% MunicipalDebt Charges as a S of GoversuantSupport (6%) 47% 28% 25% 5% 0% 2% 11% 18% 22% 34% 32% 29% 25% 22% MunicipalNet Current Expendit. as a X of TotalMunicipal CurrentIncama 63% 71% S8U 60% 37% 35% 43% 43% 41% 46% 45% 44% 42% 40% Municipal Net CurrentExpendit. as a X of Municipal Net Current 6 Capital Expenditure 59% 59% 65% 66% 48% 42% 38% 37% 34% 42% 48% 48% 47% 46% unicipal Operating Surplus as a X of Municipal Capital Expenditure& Transfers 85% 60% 24% 92% 156% 76% 37X 49% 54% 63% 86S 107% 120% 134% OwnRevenues as a %of Total Revenues(including WSO)69% 60% 57% 55% 46S 43% 46X 50% 52% 52X 54% 54% 55% 56% OwnRevenues as a X of Total Revenues(excludirtsn 1S) 66X% 5% 51% 48% 41% 36X 34% 36% 38% 36X 37% 36% 37% 38% Kon-Project Capital Expenditure as a % of TotalCapital Expenditure(including WSO) 100% 100% 100% 100% 7M% 70% 22% 28X 29% 36S 46% 73% 98% 100% Mon-Project Capital Expenditure as a X of Total Capital Expenditure (excluding WSO) 100% 100% 100% 100X 79% 87% 42% 45S% 41% t1% 66X 79% 99% 100% ExpenditurePer Mtillion Pop.-Base Prices Miun1ioal Aetivities: CurrentExpenditure 7,691 8,249 8,610 9,923 8,664 8,212 8,698 8,151 7,703 7,689 7,675 7,658 7,646 7,632 Current Expenditure IncludingObt Charges 10,054 9,871 9,9" 10,271 6.667 8,418 9,703 9,767 9,633 10,769 10,616 10,243 9,896 9,584 CapitalExpenditure (Proj..ion-Pro3e.ct) 5.510 5,049 4,677 4,3J9 6,126 9,866 15,595 14,U49 15,816 12,791 9,942 9,769 9,649 9,537 CapitalExpend. (ncl. WSO) (Proj.+Non-Project) 5.510 5,049 4,677 4,389 6,126 15,918 30,093 24,228 23,770 18,726 14,602 12,772 12,924 12,769 OwnCurrent & ServiceIneom 9.679 7,059 5,659 6,827 8,602 7,832 7,234 7,621 8,134 7,809 8,218 7,727 7,994 8,483 OmnCurrent, Service & SOImcam 11,096 8,699 7,107 9,107 10,475 11,510 12,827 14,327 15,521 15,822 17,187 16,970 17,578 18,155 TotalCurrent & ServiceInema 14,714 12,898 11,074 14,305 20,894 22,047 21,179 21,318 21,643 21,805 22,085 21,484 21,649 22,044 TotalCurrent, Service & WSOIncome 16,130 14,539 12,523 16,586 22,767 26,604 27,634 28,61l 29,86s 30,710 31,936 31,603 32,103 32,579 -139- ANNEX10 Page 12 of 19

TURKEY

UXUIAEVAURBAN OEVELOPMSMT PaJEC?

Uahl s: MERSIN MUICIPALITY FINANCIAL FORECAST

1Ma2 liii JM6 JiM JIM .ID JI J992 .I J 122 .....1 112! 111 ------i aionTL ------CURREN T ACCOUNT . GovernmentSupport (6% Share) 513 655 1.081 1,861 3,229 4,455 5,620 6.944 8,514 12,114 14,598 17,441 20,839 24.898 . Shareof CentralTaxes CollectedLocally . PropertyTax 0 0 0 0 85O 944 1,050 1,981 2,094 2,219 3,949 4,160 4,413 7.312 .OtherMunicipal Fees andTaxes __M1JM LZ ZJ. 14hZ LiZI4.57 . 2 42 2.122 ll.D7514.A 17.6922IL=1 1.122 TotalCurrent Income 1.1S4 1,649 2.866 4.704 7,826 9,980 12,49116,284 20.18026,208 33.04139,293 47,33559,108 EXPE"Dht .Expenditure on Staff. Goodsa Services 1,026 1.484 2.364 3,691 4,127 6.693 7,484 9,051 10,771 13,55716,490 20,161 24,64330,130 . Subscriptionto CMTA 35 5S3 91 120 124 163 175 182 222 . MunicipalDebt Charges 1J3 _11 LJ.M _98 1B_ 131 4_ .L.Z1712 3.661.J.L_5. 7I9Z _L-,2Qfi 8.459A GrossCurrent Municipal Expenditure (162) (29S) (427) (607) (623) (649) (771) (912)(1,584) (1,862) (2,185) (2,559) (3,753) (4,386) .LessMunicipal Service Income JJi2l 29SI 1427L.(62hf t6071 hli t i t7711 J21,62L(J12A il.5.L4I I 241 121.-1 12,75311 h4ail NetMunicipal Current Expenditure "92 1,299 3,037 3.306 3,574 6,211 7,234 9,942 12,974 17,748 21,714 25,718 29,298 34,426 Ouividends from HUDC 0 0 0 0 0 0 (81) (101) (94) (128) (140) (149) (72) (7.) . Surplusfrom WSD 0 0 0 0 0 0 0 0 0 0 0 (296) (758)(2,17k2 OperatingSurplus/ (Deficit) 192 350 (171) 1,398 3,952 3,769 5,338 6,443 7,300 8.588 11,46714,020 18,84726.932 * OperatingBalance (prev.year) 0 0 0 0 0 0 0 0 0 0 0 (296) (758)(2,172) .Contributionto Capital469 546 881 1,417 2,921 3,769 5,338 6,443 7,300 8,588 11,46713,444 19,26727,086 .ContingencyReserve 0 0 0 0 0 0 0 0 0 0 0 0 0 0 NetSurplus/(Deficit) (277) (196)(1,052) (19) 1,031 0 0 0 0 0 554 154 (0)

C A P I T A L A C C O U N T EXPEXOttCIA L C . Project 0 0 0 0 0 956 7,539 10,957 8,721 11,588 9.132 4,796 0 0 .Land (HUDC) 0 0 0 0 2,029 551 0 0 0 0 0 0 0 0 NNon-Project Mi MfiA 1AU L2-2 L2I 3t91 J21 5-221 7-54645L21 11-456119-41 ILM226 CapitalExpenditure on Goods& Services 469 546 881 1.417 4,950 4,458 10,736 14,932 13,95219,134 18,48516,251 19,85430,226 TransferPayments .EquityInvestments - HUoC 0 0 0 0 0 1,300 0 0 0 0 0 0 0 0 -WSo 0 0 0 0 0 0 2,75 4,831 0 0 0 0 0 0 . LoansVia Municipality to - HUDC 0 0 0 0 0 987 830 951 668 1,483 955 321 0 0 - WSD 0 0 0 0 0 2,284 6,130 4,230 7,382 5,218 3,861 471 0 0 .Contributionto Off-Site Infrastructure- WSO __Q * Q O O 0 358 406 308 355 406 219 0 a TotalCapital Expenditure &-Transfers 469 546 881 1,417 4,950 9,029 20,82925,350 22,310 26,19023,677 17,26219,854 30,226 FINANCEDBY . Loans- 180 0 0 0 0 0 1,029 5,934 7,559 6,447 7,972 6,037 2,297 0 0 - UPF 0 0 0 0 0 3,313 8,663 10,160 6,997 7,265 3,551 0 0 2,850 - DSF 0 0 0 0 2,029 917 0 0 0 0 0 0 0 0 .Capital Receipts 0 0 0 0 0 0 837 2,314 0 0 0 0 0 0 . Contributions from Current Account Mi Ml 1.417 29I ).M1 3 II L I 64BA Lss8 II-" 13.466 19-267 2LQIL Total FinancAng £ i" ML6 J. & 1 I2' 2*3 2241 22.911 2MOM 2=2 122 112 AL - 140- ANNEX10 Page 13 of 19 Table 5 (Cont'd)

In& 195 19A JIM It" 195 Jim mI m I J mZ Jim i itma STATISTICS

Total Debt Charses as a 2 of Municipal Total Current & Service, & I bSD ncome 9 sX 20% 4X tX 5 ln 29M 25R 33* 29 24X 20* 17*

Municipal Debt Charges as Da of Municipal Total Current & Service locome 10X 6X l3X 4* is 1X 4* 16* 17 21X 21X 19" 16X 13

Municipal Debt Charges as a X of Gross Municipal Current Expenditure 12* 7t 46X 6X 2X 2X 43 19ox 324 44 44 39* 2s2 28t

Total Debt Charges as a * of Government Support (6X) 25X 17 102* 12X 2* 12* 34* 89* 8si 9"i 92* 79* 66X 58%

Municipal Debt Charges as a * of Goverutent Support (6%) 25* 17* 102* 12X 2* St 8S 25* 43X 49* 50g 44* 39X 34*

Municipal Net Current Expendit. as a X of Total municipal Current Income 84* t9X 106% 7M* 47% 623 50S 61X 64B 648 G6U 6o 62* 58*

Municipal Net Current Expendit. as a I of Municipal Net Current & Capital Expenditure 68t 70t 78X 70t 42X 58* 40X 40* 48Z 48* 54* 61X 60% 53*

Municipal Operating Surplus as a X of Municipal Capital Expenditure & Transfers 41X 64t -19* 99* 80a 42Z 26t 2lb 33* 33* 4JX 81* 95* 89B

Omn Revenues as a S of Total Revenues (including WSO) 65* 70* 70* 68* 65* 64 65t 648 69O 67% 69s 609 70X 71*

Own Revenues as a * of Total Revenues (excluding WSO) 62X 66* 67* 65* 60* 58 U8s 61X 61 57X 5* '8t 69X 61*

Mon-Project Capital Expenditure as a X of Total Capital Expenditure (including WSO) 100* *OOX 100* I00 59* 67* 20S 17X 23* 27* 37t 69* 100l 100*

Non-Project Capital Expenditure as a X of Total Capital Expenditure (excluding WSD) 100* 100l 100l IOOX 59* 64* 38* 27* 37* 31* 51X 70X 100* 10ox

Expenditure Per Million Pop.-Base Prices

Munitcial Activities: Current Expenditure 13,192 13,692 13,971 14,111 10,774 12.8C2 10,97 10,351 9,763 9,741 9.590 9.543 9.469 9,451 Current Expenditure Including Debt Charges 15,085 14,597 20,030 14,490 10,957 13,146 11.741 12.454 13.19f 14,096 13,899 12,384 12,726 12,175 Capital Expenditure (Proj.+Non-Project) 6,131 5.000 5,096 5,247 7,624 7,487 15.746 17.133 12,427 13,748 10,733 7,692 7,645 9,482 Capital Expend. (nel. WSO) (ProJ..Non-Project) 6,131 5.000 5,096 5,247 7.624 12,909 0,200 29,291 21,.06 21,290 11S286 .,949 V,.a 11,4I 8 Own Current & Service Income 10,889 11.804 12,796 12,776 12,843 11.832 11,209 11,761 12.011 11,465 11,996 11,555 11,647 12,107

Own Current. Service b WSO Income 12,693 13,810 14,820 14,650 15,338 15,380 15,559 1,705 17,359 17,147 18,673 18,501 t8.802 19,342

Total Current & Service Income 17,595 17,802 19,049 19,667 21,271 20.,70 19,452 19,731 19,7 20,169 20.406 19,$10 19,671 19,917

Total Current, Service a WSO Income 19,399 19,808 21,074 21,541 22.767 23,918 23,802 24,675 25.077 26,451 27.163 26.756 26,826 27,152 - 141 - ANNEX 10 Page 14 of 19

UhlI : TAS eaICIPAALtY VIOCIAL FORECASt

------^------in Nil n'L-- - __ ___-- _ __-_---_-_ C U RR EN1 T A C C O U N T

. Goverrunt Support (48 Share) 278 371 476 1.0o 1,672 2,270 2,866 541 4,342 S,622 6,775 5.091 9.672 l1,SS6 Share of Central Taxes Collected Locally . Property Tax 0 0 0 458 339 424 925 968 1,011 1,776 1,-S 1,940 3,201 . Other municipalFees andTaxes in * L la" 121 LaiI L I L LIII Ia I LIL 4 LIIU Total Currant Income 461 667 926 2,081 3,435. 4,303 1,371 7,020 8,681 10,767 13,515 15,879 18,9M6 23,638

EXPH D"US . Expenditure on Staff, Goods a Services 378 553 72s 1,326 1,58 2,090 2,898 3,475 4,091 6,001 6,050 7,196 8,572 11t,2 . Subscription to CMTA 69 113 19S 229 29 317 332 396 472 . Mnicipal Debt Charges 119 73 101 82 56 169 335 1,095 1,279 2,208 2,498 2,748 2,908 3,096 Gross Current municipal Expeniture 497 626 826 1,408 1,644 2,276 3,276 4,610 5,410 7.262 8,609 10,019 11,568 14,466 . Less MunicipalService Inee (73) (141) (187) (266) (370) (469) (S60) (677) (994) 01.184) 1,407)(1,664) (2,235) (2,636) Net Municipal Current Expenditure 424 485 639 1,142 1,274 1,817 2,716 3,933 4,416 6,078 7,202 8,358 9,333 11,830 Dividendsfrom IWOC 0 0 0 0 0 0 (16) (14) (22) (42) (58) (49) (40) (44) sSurplus from WSO (1,616) (1,914) (2,800) OperatingSurplus/ (Deficit) 37 182 287 939 2,161 2,486 2,671 3,101 4.287 4,731 6,381 9,189 11,607 14,652 operating Salane (prev. year) a 0 0 0 0 0 0 0 . Contribution to Capital 142 403 462 680 1,726 2,486 2,671 3,101 4,287 4,731 6,381 9,189 11,607 14,450 .Contiagency feserve 0 0 8 0 0 0 a 0 a 0 0 0 0 a Net Surplus/(Deficit) (105) (221) (175) (259) 436 0 0 0 0 0 0 0 0 202

CAPI TAL ACCOUNT

* ProJect o0 a o 0 l,IS6 5,208 4.516 5,715 3.785 4,889 3,671 455 0 Land (MUOC) 0 0 0 815 0 0 0 0 0 0 0 0 *on-Project 142 403 462 6O8 1,700 1,206 1 53 784 3,314 4,060 6,635 11,753 14,478 Capital Expenditure on Goods 6 Services 142 403 462 60 2,515 2,402 5,209 4,569 6,499 7,099 8,949 10,306 12,208 14,478 Transfer Payments . Equity Investments - IUOC 0 0 8 0 25 700 150 150 0 0 0 0 0 0 - wso 0 e 0 o0 0 2,336 0 0 0 0 0 0 0 . Loans Via municipality to - 4uC a 0 0 0 0 311 464 48. 275 174 27 51 0 0 - WSo 0 0 0 0 0 1,806 3,828 3,415 4,410 2,292 1,451 466 29 0 . Contribution to Off-Site Infrastructure - WSO a O . . a 121 17 2*1 Sol1 . a 0 Total Capital Expenditure a Transfers 142 403 462 680 2,540 5,219 12,159 8,777 11,397 9,823 10,728 10,660 12,237 14,478 FINCEDa * Loans - IWD 0 0 0 0 0 830 4,015 3,081 3,799 2,694 2,797 1,669 172 0 - CPF 0 0 0 0 150 1,981 5,221 2,239 2,681 1,613 601 0 252 0 - oSF 0 0 0 0 815 122 0 0 0 0 0 0 0 0 . Capital Receipts 0 0 0 0 0 0 252 356 630 785 950 350 206 28 CContributions from Current Account 1i2 61Ul ii2 LA L5 1 2 44 .Z12 L it6.2f1 ?1J1. I9.18 lU 1410 l4500 Total Financing Iii Ml AM Z.=LiS LIJ "-1 Li U. L3 AL= J&a AL=2 &za - 142 - ANNEX10 Page 15 of 19 Table 6 (Cont'd)

Il l J IM1 IIM 112A IS 8IM lI 1211 1113 Jill JIM 122C STATISICSQ Total Debt Chargesas a X of municipalTotal Current& Service, a Uso Income 20X 8X 82 32 12 7X 152 242 322 342 25% 22X 19% 162 MunicipalOebt Chargesas a X of MunicipalTotal Current & ServiceIncome 222 92 9X 32 12 42 62 14% 132 182 172 16X 14% 12X MunicipalDebt Chargesas a % of GrossMunicipal CurrentExpenditure 312 13X 14X 62 42 82 1n 312 312 442 412 382 342 272 Total Debt Chargesas a 2 of GovernmmntSupport (6%) 432 202 212 8X 3n 17X 372 652 952 1052 812 732 632 56% MunicipalDebt Chargesas a X of GovernmentSupport (62) 432 202 21t 8X 32 72 122 312 292 392 37X 342 302 272 MunicipalNet CurrentExpendit. as a 2 of Total unmicipal Current Income 922 72U 692 552 37X 42X 512 SG6 512i S6 532 532 49X SO0 Municipal Not Current Expendit. as a 2 of Municipal Net Current & Capital Expenditure 75% S6 582 632 342 432 342 4U 402 462 452 452 432 452 Municipal Operating Surplus as a 2 of Municipal Capital Expenditure& Transfers 262 45X 622 3382 852 482 222 35% 382 48X S9 852 952 1012 Own Revenuesas a 2 of Total Revenues (including WSD)s52 59X 622 602X 59 582 602 642 672 672 69X 692 702 722 Own Revenuesas a X of Total Revenues (excluding wSD) 482 54% 572 57% 562 62X 522 542 552 532X 55 542 S42 562 Non-Project Capital Expenditure as a X of Total Capital Expenditure (including USO) 1002 1002 100X 1OOX 682 51% 4X 12 72 302 33X 622 972 1002 Non-Project Capital Expenditure as a X of Total Capital Expenditure(excluding WSD) lO0X 1OOX 1OOX 1o00 682 SOX 0 12 122 47% 45S 64% 96X 1002 ExpenditurePer MillionPop.-Base Prices MWnicicalActivities: CurrentExpenditure 9.180 9,741 8,307 9,949 8,292 8,171 8,849 8,430 8,007 7,902 7,801 7,653 7,533 8,162 CurrentExpenditure IncludingDebt Charges 12.070 11,017 9,464 10,564 8,S84 8,897 10.001 11,183 10,589 11,475 11,100 10,655 10,16S 10.480 CapitalExpenditure (ProJ.+Non-Project) 3,449 7,099 5,293 5,102 8,874 9,390 15.903 11,081 12.720 11,216 11,540 10,960 10,728 10,489 CapitalExpend. (incl. WSD1 Proj3.4Non-Project) 3,449 7.099 5,293 5.102 8.874 16,966 36,319 20,937 23,389 17,794 16,330 13,994 13,991 13,739 Own Current& ServiceIncome 6,217 7,698 7.299 10.069 11,136 9,742 9,358 10,076 10,438 10.000 10,505 10,048 10,149 10,663 Own Current.Service a WS1 Income 7,359 9,459 8,914 11.450 12,399 12.138 13.055 15,170 16,928 18,198 19,516 19,590 20,146 21.147 TotalCurrent & ServiceIncome 12,969 14.233 12,752 17,610 19,864 18,616 18.108 18,670 18,926 18,884 19,241 18,656 18.648 19,035 Total Current.Service & W150Income 14,11115.994 14,368 18,990 21,128 21,012 21,805 23,764 25,42727,081 28,25126,199 26,64529,519 -143- ANNEXio Page 16 of 19

umv Umn" OEWLO9U PAO4IuT

Jobln 7: CEYMAN MUNICIPALITY FINANCIAL FORCCAST

1982 lim 110 12m Jim Jll JIM 3m 1Q2Q liii 122 Jill Jll 1225 _------in Million TL------…------

CURRENT ACCOUNT

GSovernment Support (6t Share) 116 182 212 473 799 1.089 1,374 1,699 2,082 2,387 2.876 3,437 4,106 4,906 . Share of Central Taxes Collected Locally . Property Tax a 0 0 0 191 205 222 403 414 428 745 769 793 1,293 . Other Municipal fees 2I2 2 and Taxes 1Q lii5 12 1 __2 -AU __wS1 __q1 121 1.2 JUA3 Lin LAUS

Total Current income 224 297 410 901 1,519 1,963 2.411 3,083 3,70 4,358 5,450 6,365 7,591 9,421

. Expenoiture on Staff, Goods & Services 150 228 305 458 746 1.150 1,619 1,853 2,151 2,561 3,067 3,619 4,3? 5,228 . Subscription to CHTA 7 10 25 21 21 24 29 36 42 MMunicipal Debt Charses 0 0 0 0 34 127 226 447 657 866 671 898 954 1,019 Gross Current Municipal Expenditure 1SO 228 305 458 780 1,284 1865 2,326 2,7)0 3,449 3,963 4,546 5327 6,299 . Less Municipal Service Income (14) (45) (112) (235) (279) (377) (443) (519) (780) (905) (1,049) (1,216) (1,656) (1,920) Net municipalCurrent Expenditure 136 183 193 223 501 907 1,412 1,807 1,950 2,654 3,914 3,330 3,671 4,379 ODividendsfrom HUOC 0 0 0 0 0 0 0 0 0 0 0 0 0 0 .Surplus framWSO 0 0 0 0 0 0 0 0 0 0 0 a 0 0

Operating Surplus/ (Deficit) 88 114 217 678 1,018 1,056 999 1,276 1,820 1,814 2,536 3,035 3,920 8,042 . Operating 8alance (prev. year) 501 (0) (0) 553 1,152 2,241 2,982 2,808 . Contribution to Capital 0 0 0 0 635 5655 1.500 1,276 1,268 1,215 1,447 2,294 4,094 4,854 0 .Continency Reserve 0 0 0 0 0 0 0 0 0 0 0 0 0

Net Surplus/(Oeficit) 88 114 217 678 383 501 (0) (0) 553 1,lS2 2,241 2.982 2,808 2.996

.XPEtTUR CAPITAL ACCOUNT PProject o 0 0 0 0 208 2.694 1,551 1,089 942 1,298 897 0 0 .Land (HUOC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 NNon-Project 0 0 0 0 635 560 693 852 1,038 1,254 1,517 2,585 4,094 4,854 Capital Expenditure on Goods & Services 0 0 0 0 635 768 3,387 2,403 2,127 2.196 2,815 3,482 4,094 4,864 Transfer Payments . Equity Investments -HUOC 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -wsD 0 0 0 0 0 0 0 0 0 0 0 0 0 0 LLoans Via Municipality to -NUC 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -USO 0 0 0 0 0 375 2,993 1,413 1,300 724 527 1,724 405 241 . Contribution to Off-Site Infrpstructure - WSD it # A o o 672 . 14S . O O Total Capital Expenditure & Transfers 0 0 0 0 635 1,143 6,447 3,841 3,441 2,920 3.342 5,206 4,499 5,o09

fINAIICED BY . Loans - TM80 0 0 0 0 0 91 1,899 1,004 841 617 618 711 0 0 406 - CPF 0 0 0 0 146 499 2,856 1,216 801 403 316 1,295 241 -DSF 0 0 0 0 0 148 192 345 532 685 960 907 0 0 . Capital Receipts 0 0 0 0 0 0 252 356 630 788 950 355 206 28 . Contributions from Current Account A A Q Q k35 .111 1.5Q L.2 1J26a I.&1 1.447 22.. 4LAM 4.86 TotalFinancing Q Q 4 a a L22 LuZ 1,01 L^M LIa2 LI9 sLZ 2L s se - 144- ANNEX10 - V~~~~~~~~a-ge17 of 19 Table 7 (Cont'd)

Total Debt Chargesas a X of Municipal Total Current & Service. & WSDincome 02 02 OX 0o 22 72 122 182 lox 525 212 192 172 162 Municipal Debt Charges as a X of Municipal Total Current & Service ncome 0t OX 02 02 22 5S ax 122 122 162 1S2 1*2 102 92 Municipal Debt Charges as a X of Gross Municipal Current Expenditure OX 02 O0 OX 52 112 142 242 262 34X 282 268 222 191 Total Debt Charges as a t of Governwnt Support 6X) 02 02 0 02 42 191 232 SOX 522 752 66 89S 542 468 Municipal Debt Charges as a X of Gover,m nt Support 62) Ox OX O 0x 42 122 162 262 272 362 302 262 222 212 Municipal Net Current Expendit. as a X of Total Municipal Current Income 612 622 47X 252 332 46X 592 59 52S 58a 5s 52X 482 48tU Municipal Net Current Expendit. as a X of Municipal net Current a Capital Expenditure 100l 1OX 1002 100X 442 54X 292 422 48X 542 812 492 471 472 Municipal Operating Surplus as a X of Municipal Capital Expenditure & Transfers N/A N/A N/A NIA 1602 922 161 33X2 SX 6lll621 76X 8a 99X OwnRevenues as a X of Total Revenues (including USO) S1X 532 662 652 612 62X 62 642 652 672 68S 672 68X 692 OwnRevenues as a X of Total Revenues (excluding WSD) 512 47X 89X 582 562 522 522 53X 542 56X 56X 582 56 57* Non-Project Capital Expwenditure as a 2 of Total Capital Expenditure (including USO) N/A N/A N/A N/A 100X 7SX 11X 222 sox 412 42X 625 100% 1002 Non-Project Capital Expenditure as a S of Total Capital Exponditure (excluding WSC) N/A N/A N/A N/A 1OOX 73X 202 36X 49X 57X "5 74S 1002 1002 ExpenditurePer 1illionPop.-Base Prices MimiclnalActivities: CurrentExpenditure 7.684 8,446 7,229 7,141 8,393 9.892 11,094 10,328 9*842 9,703 9.606 9,560 9,567 9,564 CurrentExpenditure 0 IncludingDebt Charges 7,684 8,446 7,229 7,141 8,7m 11,046 12,706 12,961 12,487 13,066 12,409 12,009 11,751 11.499 Cad tal Exowndit,iar (ProJ.+1on-Project) 0 0 0 0 7,140 6,604 22,206 13,394 9,732 8,319 8,815 9,198 9,032 8,561 CapitalExpend. (inmd. WSC) (Proj.11on-Project) 0 0 0 0 7,140 9,829 46*225 22,545 16,918 12,225 11,974 15,202 11,624 11,372 OwnCurrent & ServiceIncome 6,250 5,927 7,347 10,337 11,233 10,739 10,139 10,606 11,290 10,896 11,345 10,946 11,341 11,748 Own Current,Service & WSOIncome 6,250 7,520 9.907 13,502 14,235 15.9" 15,716 16,585 17,74917,981 18,.99 18*723 19,32719,762 Total Current& ServiceIncome 12,19312,669 12,37117,711 20,217 20.125 19.55220,074 20,814 19,939 20,351 20,025 20,39820.705 Total Current.Service & USD Income 12,19314,261 14,931 20,876 23,22025,345 25,12926,054 27,272327,024 27,945 27,802 28,38428,719 - 145 - ANNEX 10 Page 18 of 19

TURKEY

CEIVA UBSR EVELOPMET PRoatC

Table: IID tRU II CItIPALITY FINIANIAL FORECAST

12 il Jim iIf Jim 1hz I987 199 1 1I11 9m 1i9 liii --- in MillionTL.------_-_-___-_-_-___-_-__-____.-_-___

C U R R EN T A C C O U N T IN= 0GoverentSupport (6X Share) 221 342 491 1,038 1,789 2,461 3,106 2,838 4,704 6,119 7,314 8,811 10,527 12.577 . Share of Central Taxes Collected Locally . Property Tax 0 0 0 0 5O0 857 622 1,165 1,217 1,276 2,249 2,373 2,497 4,126 . Other bmicipal Fees and Taxes hI 11 411l .JZ L I k1l8l 2466Z Lt L&U ILhZ 5.s08 LQ6 Total Current Incm 397 655 902 1,7'5 3.259 4,241 5,22S 6,822 8,3u 10,430 13,266 15,146 18,632 23,508 EXPEIIOITURE . Expenditure on Staff, Goods 6 Services 437 631 762 1,304 1,587 2,091 3,062 3,678 4,380 5,413 6,638 8,140 9,937 12,128 . Subscription to CMTA 14 2$ 40 40 37 49 69 88 106 Municipal Debt Charges 45 77 140 52 a 120 276 1,092 1,581 2,571 2,700 2,814 2,"9 3,113 Gross Current Municipal Expenditure 482 708 902 1,356 1,595 2,226 3,361 4,810 6,001 8,021 9,386 11,204 li,964 15,347 LLess Municipal Service Incana (33) (168) (237) (280) (387) (5t8) (771) (1,006) (1,496) (1,933) (2,502) (3,024) (3,930) (4,735) Net Municipal Current Expenditure 449 140 665 1,076 1,208 1,638 2,890 3,804 4,505 6,088 6,884 8,000 9,034 10,612 . Dividendsfrom HUOC 0 0 0 0 0 0 0 (7) (1) (54) (98) (17) (19) .Surplus fromWSO 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Operating Surplus/ (Deficit) (52) 115 237 681 2,051 2,605 2,635 3,018 3,890 4,343 6,436 7,644 9,615 12,915 . Operating alance (prev. year) 0 0 0 0 0 1,230 993 (0) . Contribution to Capital 199 225 456 636 1,325 2,605 2,635 3,018 3,890 4,343 5,206 7,8l 10,608 12,915 .Contingency Reserve 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Net Surplus/(Deficit) (251) (110) (219) 45 727 0 0 0 0 0 1,230 993 (0) (0)

CAPITAL ACCOUNT EXPENtM Project 0 0 0 0 0 1,395 4,858 4,262 2,951 3,451 3,498 2,244 272 0 *Land (HUDC) 0 0 0 0 880 1,897 0 135 365 0 0 0 0 0 Non-Project 199 225 456 636 1,300 1,199 1 1 1 840 3,757 7,259 10,924 13,373 CapitalExpenditure on Goods & Services 199 225 456 636 2,188 4,491 4,8U9 4,398 3,217 4,291 7,255 9,503 11,196 13,373 Transfer Payuents . Equity Investments - HUOC 0 0 0 0 25 450 620 0 0 0 0 0 0 0 - USO 0 0 0 0 0 0 2,951 ,605 5,06S 2,959 0 0 0 0 . Loans Via Muncipaility to mUOC 0 0 0 0 0 468 315 236 203 489 336 162 0 0 - USO 0 0 0 0 0 883 4,613 2,457 3,190 2,433 4,164 2,855 3,317 3,185 Contribution to Off-Site Infrastructure - NSD a O a t*O a O e 9 7 43 as 118 o Total Capital Expenditure 8 Transfers 199 225 456 636 2,205 6,292 13,358 10,786 11,844 10,215 11,840 12,638 14,513 16,558

Loans - i3R 0 0 0 0 0 712 4,324 3,759 4,319 4,005 3,068 1,503 273 0 - CPF 0 0 0 0 0 614 5,738 2,250 1,240 1 2,530 2,218 3,455 3,422 -DSF 0 0 0 0 U0 2,361 162 135 365 0 0 0 0 0 . CapitalReceipts 0 0 0 0 0 0 499 1,624 2,029 1,8t6 1,037 1,036 177 221 . Contributions from Current Account IM& fin L.Z&12 LhOi. 2635 3.018 l.InQ 4.14s S.206 7.SE1 10.608 12.91S Total Financing 12 M Am UA 2L LZhm JM .38.212iAml JLJM 18.21 1.m l9L=LLaM.1 A". - 146- ANNEX 10 Page 19 of 19 Table 8 (Cont'd)

nuq 121 984 12| 12| P§82 li^ H98 19S 19 lm2 nu9 nu9 lI= STATISTCS,

Total Debt Charges as a S of zftmicipal Total Current & Service, WSDIncm 91 8o 10l 2X 0 6X 131 201 221 32 321 27X 21X l81 unicipal Debt Charges as a X of Municipal Total Current & Service Income 101 91 121 31 01 21 SX 141 16X 211 171 15S 131 11l Municipal Debt Chargs as a S of Gross Municipal Current Expoenditure 101 122 181 41 11 6X 9X 301 36 47X 411 351 301 261 Total Debt Charges as a X of Gover,uent Support (61) 20X 231 291 SX 01 161 341 57X 641 931 100 851 671 621 Municipal Debt Charges as a X of Goverretnt Support (61) 201 231 e91 5s ox 5s 9X 285 341 42X 37% 321 28X 25S MunicipalNet Current Expendit. as a X of Total Municipal Current Income 61X 621 471 251 331 461 59 59X 521 58o 531 521 481 451 MunicipalNet CurrentExpendit. as a I of Municipal Net Current & CapitalExpenditure 691 711 591 631 361 27X 351 461 58X 591 491 46X 45 44X MunicipalOperating Surplus as a x of municipal Capital Expenditure & Transfers -261 511 52 1071 93X 411 201 281 331 431 S41 601 66 78X OwnRevnues as a X of Total Revenues (including WSO) 581 641 41 561 581 591 611 641 661 66X 68X 68X 691 701 Own Revenues as a X of Total Revenues (excluding WSO)49X 58X157X 49X 511 49X 48 511 521 51X 531 531 531 551 Non-ProjectCapital Expenditure as a X of Total Capital Expenditure (includins WSO) 1001 1001 1001 1001 601 241 OX OX O 71 30e 69n 95X 100 Non-ProjectCapital Expenditure as a X of Total Capital Expenditure (excluding WSO) 1OX 1001 1001 1001 601 271 OX 0s 01 201 521 761 981 1001 ExpenditurePer MillionPop. -ase Prices ourici 41iActivities: wCarent Expenditure 10,090 10,457 8,088 8,997 7,688 7,572 8,687 8,238 7,868 7,813 7,753 CurrentExpenditure 7,751 7,708 7,662 IncludingDebt Charges 11,129 11,733 9,574 9,355 7.727 8,060 9,537 10,773 10,779 11,576 10,962 10,497 CapitalExpenditure 10,057 9,695 (Proj.+Non-Project) 4,595 3,729 4,840 4,388 6,298 9,393 13,785 9,549 5,302 6,193 8,473 Capital Expend. (nel. WSO) 9,049 8,685 8,448 (Proj.eNon-Project) 4,595 3.729 4,840 4,388 6,298 12,586 36,610 24,755 22,822 17,497 14,622 13,358 13,432 13,137 Own Current& ServiceIncome 4,826 7,971 6,878 6,892 8,998 8,582 8,202 8,937 9,305 9,012 9,803 9,292 9,336 9.896 OwnCurrent, Service & WSOIncome 7,019 10,076 9,404 9,293 12,133 12,652 13,624 15,160 16,354 16,963 18,272 17,987 18,265 18.877 TotalCurrent & ServiceIncome 9,928 13,638 12,089 14,054 17,667 17,494 17,012 17,534 17,755 17,843 18,415 17,682 17,502 17,841 TotalCurrent, Service & WSO Income 12,122 15,743 14,616 16,455 20,802 21,564 22,434 23,756 24,804 25,794 26,U84 26,377 26,432 26,823 - 147 -

ANNEX 11 Page 1 of 19 TURKEY

CUKUROVAURBAN DEVELOPMENTPROJECT MUNICIPALWATER AND SANITATIONCOMPANIES: ORGANIZATIONAND FINANCE I. PRESENT SITUATION

A. Operational Problems

1. Althoughthe municipalitieshave providedwater and sanitation servicesto an increasingproportion of their populationsin recentyears, their water and sanitationsystems suffer importantcommon shortcomings:

(i) lack of technicalinformation and recordson existingsources, pumping capacity,networks, and usage;

(ii) inadequatedistribution systems, large amountsof leakagesand unaccountedfor water, and substantialnumbers of illegal connections;

(iii) absence of both formal instructionsfor operationsand maintenance,and preventivemaintenance (i.e., maintenance is equatedwith repair);

(iv) low standardof design and executionof new works,and inadequate technicalcapacity to designand implementnetworks. Works carriedout by Iller Bank have been characterizedby excessive costs and executionperiods; and

(v) want of useful financialinformation for management,i.e., absence of accountinginformation on servicecosts due to a dispersionof responsibilitiesamong differentdepartments, cash rather than accrualaccounting, failure to separaterecurrent from capital expenditures.

B. Organization

2. In the past, each municipalityprovided water and sanitationservices in a somewhatdifferent manner. In Adana, water and seweragefell under the responsibilityof four deputymayors. In Mersin,a Water Operations Isletme- carriedout w.ter-relatedworks, while seweragewas managedby a

1/ Isletmesare separatemunicipal corporations, statutorily obliged to keep separateaccounts and with a staff establishmentseparate from that of the municipality. They act as agents of the municipalityand thus their policies,tariffs, and contractsmust be approvedby the municipal assembly. - 148 -

ANNEX 11 Page 2 of 19

separatetechnical department. Ceyhan and Iskenderunhad similar organizationsin which the Water and Bus Isletmeshandled water, while the sanitationsystem maintenance was undertakenby the TechnicalDepartment. In Tarsuswater was managedby the Water and IntercityTransport Isletme and sewerageby the ConstructionServices Department.

3. In an effort to overcomepast servicedeficiencies, the municipalitieshave decidedto establishautonomous Water and Sanitation Departments(WSDs) as isletmes. In the case of Adana, the Adana Water and SanitationAuthority (ASKI)is being establishedin compliancewith Law 3036 of June 5, 1986 on metropolitanmunicipalities under DecreeNo. 87/11594of 11 March 1987. Because the ASKI will operateunder the authorityof a Board of Directors,it will have more autonomyin its dealingwith the municipality-- namely staffing,procurement, and accounting-- than the WSDs in other towns. The chief aims of the WSDs (and ASKI) will be to:

(i) improveextent, quality,and standardsof water supplyand sanitationprovision;

(ii) increasethe qualityof managementand the effectivenessof labor utilization;

(iii) provideadequate planning of, and investmentin, water and sanitationservices;

(iv) implementcost recoverymechanisms, proper budgetary procedures, and financialcontrols in the provisionof these services;and

(v) recoverall costs of operations,and generatefinance from internalresources for future investments.

4. The WSDs will be headed by directorswith the rank of deputymayor who will report to and be responsibleto the mayor. (The GeneralDirector of ASKI reportsto the Board of ASKI and has the rank of a deputy secretary general). The internalmanagement team will comprisethe managersof four fuinctionaldivisions:

(i) capitalprojects and planningdivision will identifythe need for new investments,prepare design briefs,and superviseinstallation;

(ii) operationsand maintenancedivision will operateand maintain water supplysources, treatment,transmission, distribution, seweragenetworks, and disposalfacilities;

(iii) financialservices division will conductnecessary appraisal of investmentproposals, identify funding sources, formulate cost recoverystrategies, process revenues and expenditures,be responsiblefor billing and collection,operate a management accountingsystem, maintain necessary accounts as a unit within the municipality,and providethe operationsand maintenance divisionwith adequatefinancial performance indicators; - 149 -

ANNEX11 Page 3 of 19

(iv) managementservices division will supportthe above divisions. Among its essentialservices are: inventorydatabase, and purchasingand office services. Later servicesto be added are quality control,legal services,and work procedures.

(v) A loss reductionsu9port group will comprisea directorand interdepartmentaltask force, and will supervisethe consultants and contractorsworking on the water loss reductionprogram and the networkdata base. Its activitieswill includecollection and analysisof informationon water production,transmission, distribution,metering and consumption,identification of major causes of losses,location and repair of faultyequipment, developmentof a rollingprogram for loss reduction,and training of staff to implementthe program. This functionis temporaryand will be absorbedby the ManagementServices Division upon completionof works.

5. During the transitionperiod and until new systemsare developed, some services,such as purchasing,financial services, and personnelrecords will be providedby the municipality. Some functions,such as vehicle maintenance,will continueto be providedby municipalworkshops with sufficientequipment. The WSDs will be charged for these services,however.

Staffing

6. The numbe-rof staff involvedin water and sewerageservices as of 1986 is estimatedin table 1. With the early additionof about 38 managerial and technicalstaff, and with improvedmanagement and training,the existing complementshould be able to handle increasesin operational,maintenance, and force account investmentactivities until the 1990s. Allowancesare made for additional staff to man the new sewerage systems in Tarsus and Iskenderun.

TbliltI: STAFF OF WATER & SANITATIONSERVICES

Adana Mersin Tarsus Ceyhan Iskeflderun Existina _bL _S_ 1i.T . T IL_wo _ T S T wL s T

Mgt./Professional 16 4 20 9 - 9 2 - 2 2 0 2 2 - 2

Skilled/Unskilled 354 1OS 459 209 40 a, 249 38 5 c/ 43 30 S 35 45 10 SS

0 Total 30 1n in7 Zu 40 ;i Qf I 4i I IE' 37 o i2L

Initial Recruitment (Prof./mgt) 12 5 2 l

Total Proposed (ultimate) 491 260 47 38 6S

a/ Includes 152 from water charges levying directorate. h/ Allocated to sanitation from the technical Departmnt. A/ Allocated to sanitation from Construction Services Directorate. d/ Allocated from Water & Intercity TransportDirectorate. 1/ Allocated to sanitation from the Technical Affairs Directorate. - 150 -

ANNEX 11 Page 4 of 19

FinancialPosition

7. Past Performance. The municipalitiesuse the cash basis of accountingfor their operations. Becauseaccounts are not kept by serviceand debt serviceis not allocatedto the functionsfor which the debt was incurred,the regularaccounts now kept by the municipalitiesprovide little usefulinformation on water and sanitationoperations. The consultantshave developedincome statements for the period 1982-85and openingbalance sheets for 1985 and 1986 (table2) on the basis of specialanalyses separating operationalincome and expenses,valuing existing assets (at replacement cost),and identifyingexisting loans for water and sanitationoperations of each municipality.

8. Adana failed to cover its operationalcosts in 1985 and 1986 (working ratio of 1.27 and 1.39) for the water and sanitationoperation. Ceyhan and Tarsus ran cash surplusesin both years. Only Ceyhanmade a profit (after depreciation)in 1986. AlthoughIskenderun and Mersin recordedoperational deficitsin 1985 and operationalsurpluses in 1986, they were still in deficit in 1986 if depreciationwas accountedfor. These differencesin performance are relatedto substantialvariations in costs,revenues (due to differences in tariffs,composition of demand,and collectionefficiencies). For example, many commercialconsumers (who pay high tariffs)in Adana and Mersin extracted their own water, unlike Ceyhanwhere most commercialestablishments were connectedto the public supply. Table 3 also shows that Adana's tariffshave declinedin real terms since 1980, wher3as they rose or remainedconstant elsewhere. Collectionrates in 1986 were estimatedat 65 to 85 percent dependingon the municipality.

9. Future Performance. Forecastshave been preparedfor the WSDs (ASKI) which indicatethat it will be feasibleto achieve the financialobjectives of ensuringthat all consumerswill pay for water and sanitationservices, and that pricesat the margin approximateaverage incrementalcost. Revenuesfrom services,taken together,will cover (a) cash expensesfor operation, maintenance,and administration,(b) necessaryincreases in workingcapital, (c) interest,(d) the largerof depreciationor amortizationof debt, and (e) a reasonablecontribution to the costs of new capitalinvestments.

10. Summariesof the forecastsare given in tables 4 to 8. Critical parametersare given in the indicatorsand ratiossections of the tablesfor each WSD. The followingparagraphs describe the estimatesand summarizethe main outcomes. The project file containsmore detailedfinancial forecasts and assumptionsfor each town. Althoughthese analysesare based on extensive investigationsby engineersand financialanalysts, the data availablewere extremelyrough and specificestimates are subject to substantialmargins of error. Nevertheless,it is believedthat they are sufficientlyrobust to supportthe conclusionsdrawn from them, namely, that the WSDs can indeed improvewater supply and meet financialtargets with feasibletariff levels and financingalong the lines proposed. - 151 - ANNEX 11 Page 5 of 19 REPUBLICOF TURKEY CUKUROVAURBAN DEVELOPMENTPROJECT Table 2: INCOME STATEMENTAND BALANCE SHEET 1985-86

-----Adana------Ceyhan------Iskenderun------Mersin------Tarsus--- 19I8 i2fi 12li 12M i2BS 12A6 lilS 1986 12U 1286 TotalRevenues 1,474 1,748 203 401 348 647 506 056 183 287 Total Expenses 1,867 2,437 169 220 380 495 698 905 179 234

Gross Income (393) (689) 34 180 (32) 152 (192) 51 4 53 Depreciation 14431 14841 £861 (91) (2161 (2l17 fAi A4142 (60). L£.1 Net Income before Interest (836) (1.137) (54) 90 (248) (65) (600) (373) (S6) (13) Interest t6M63. 71 £61 £111 L1 £l2. £24. L21 L21 Net Income (899) (1,249) L6U$ 86 12661 1Z11 (6191 1 ISA)8 L1U. Working Ratio 1.27 1.39 .83 .55 1.09 .76 1.38 0.95 .98 .815 OperatingRatio 1.57 1.67 1.27 .78 1.71 1.10 2.19 1.39 1.31 1.05

BALANCE SHEET AAsets

TotalCurrent Assets 386 476 20 166 84 226 135 220 44 64

Gross Fixed Assets 11,063 12,111 2,206 2.267 5.429 5.437 10,196 10.594 1,504 1.640 Less: Accuwulated Depreciation (5.0891 (S.Z721 (2271 LL.0181 (2.2aQ. (2497Z1(4L282) (4.706S 163&.1 1626 Net fixed Assets 5.974 7.589 1.279 1,249 3.149 2.940 S.914 5.888 872 942 Assets under Construction 1-048 61..32Z a... - 15 Total Fixed Assets s794 Li75 1,279 l 0llt L.1 L2 948 S.914 6.28S AZ& 1.QZZ

TOTAL ASSETS 6.360 8.062 1,299 1.476 3.233 3.174 6.049 6.50S 916 1,141 Liabilities AccountsPayable 8a6Z 42 6 25 11 1.S V26 is 6a Long-TermLiabilities IllerBank 476 2.458 37 54 87 73 153 592 12 167 MunicipalFund 421 42 6612 2 1. L3 2. 1L171 6in 65AM Total Liabilities 1.414 3Sk52 Z4. 841 M2A 341 1.27Z2 4.99 e2l6Z2 Eguit.

Paid In Capital S,845 6,708 612 612 3.176 3,176 5.389 S5.56 331 335 RetainedEarnings (899) (2,148) 1611 31 £261 (345. 1612. (1040L .5) 1731 Total Equity 4.946 4.560 5l. fin 2 909 2.4. 4 7764.6771 2Z1 361 TOTAL LIABILITIES & EQUITY 6.360 8.2 1299 t.476 3 233 3L174 60&41 6i 11141 Debt/Service Ratio -393/224=-1.8 34/49=.7 -32/S1=-0.6 -192/140=-1.4 4/46.1 -689/224=-3.1 181/50=3.6 152/S1=3.0 Sl/lS9=.3 53/49=1.08 - 152 - ANNEX 11 Page 6 of 19

REPUBLICOF TURKEY

CUKUROVAURBAN DEVELOPMENTPROJECT

Table 3: HISTORICALWATER TARIFFS IN DECEM°R 1985 PRICES

1980 1981 1982 198J 1984 1985 1986 ADANA

Domestic 41.25 34.96 39.39 40.26 36.20 40.00 33.15 2nd Block 52.51 Commercial 82.50 69.92 65.64 2nd Block 78.77 60.40 43.44 90.00 83.24 Official 82.50 69.92 52.51 40.26 36.20 40.00 33.15 2nd Block 90.00 83.24

MERSIN

Domestic 41.25 52.44 65.64 60.40 57.92 60.00 58.93 2nd Block 73.66 3rd Block 88.39

Commercial 103.13 104.87 196.93 181.19 152.03 120.00 125.22 2nd Block 132.59 3rd Block 147.32

Official 123.75 174.79 157.54 140.92 115.83 80.00 58.93 2nd Block 73.66 3rd Block 88.39

TARSUS

Domestic 28.88 34.96 39.39 44.29 46.33 45.00 40.51 Commercial 61.88 52.44 52.51 100.66 115.83 110.00 95.76 Official 41.25 34.96 26.26 100.66 86.87 75.00 58.93

CEYHAN

Domestic 60.40 57.92 62.00 58.93 Commercial 120.79 144.79 185.00 147.32 2nd Block 184.15 Official 115.83 150.00 220.98

ISKENDERUN

Domestic 33.00 45.44 47.26 44.29 52.12 66.00 106.81 Commercial 49.50 69.92 91.90 80.53 89.77 92.00 153.95 Official 49.50 69.92 65.64 60.40 62.26 67.00 134.06 EIPUBLICOf tUR.i

CUKUROVA URBAN QEYELOPMENT PROJEC

Table4f ADANA WATER SUPPLY & SEWERAGE FORECASTS AND INDICATORS

A. SUMKARY FINANCIAL STATEMENTS

In==lmjStafrJZWt.0M4l1 1987 1281 1212 1999 199 I " 923 ml29 1925 1926 1997 Water Charges Oomestic 1,092 2,817 4,289 6,144 8.421 11,819 14,55s 18.291 22.238 26,972 33.044 Coummercial & Industrial 449 969 1,62Y 2,329 3.145 4,355 S,429 6.756 8,39S 10,073 12.087 Official 255 361 511 699 943 1,337 1,610 1,938 2,331 2,798 3,359 Extraction Tariff 1.247 1,835 2.625 3.166 3,818 4,527 5,366 6,362 7.542 8.942 10.600 Sewerage Charge Over Well Use 935 1,376 1,969 2,375 2,864 3,395 4.025 4.772 5.657 6.706 7.950 Maintenance Charge 175 210 252 297 384 489 603 753 931 1,145 1.387 Sewerage 449 1.369 2.312 3.577 5.254 7.880 10.365 13.492 16,482 19.922 24.245 Total Revenues 4,603 8,937 13,580 18,587 24,830 33,801 41,953 52,363 63,576 76.559 92.672

Employees Salaries 1,798 2,079 2.479 4.700 5,440 6,429 7.634 8.981 10,462 12.382 14,666 Other Expenses 1.i1 2.087 2.791 4,013 4.846 5.69 661_ 7.635 .83s 10.271 11929 Total Expenses 3,388 4,166 S.270 8,713 10.286 12,117 14.253 16,616 19,298 22,653 26.596

Gross Income 1,215 4.771 8,310 9,875 14,545 21,683 27,700 35.747 44,278 53,906 66,077 Depreciation (823) (16.96) (3,011) (4±420) (6.052) L7Z797) (9.719) (1L.295) (14,713) (18.059)

Income Befjre Interest 391 3,075 5.299 5.455 8.492 13.886 17,981 23,792 29,566 35,847 43,984 1 Interest Expense 606 3.219 5.431 7,313 8.808 9,759 10,063 10,094 9.991 9.804 9,530 Treasury Fee 38 218 167 173 150 147 54 a 0 0 0 sJ Expense due to Exchange Variation _ o 2Z75_ 1 .8Q.LL 302L .22 . 4._290 4.709 lau i 5.084 5.065 4.962 Net Income (253) (637) (2,099) (5.123) (4,S94) (310) 3.155 8.680 14.491 20.978 29.488

Balance Sheet tjTLj

Assets Total Current Assets 1,827 4,350 7,897 10,138 12,629 20,793 32,710 47,175 67,146 94.699 132.480 Fixed Assets Project 2,430 18,591 46,184 75,542 109,319 145.324 180,931 213,766 248.490 288,249 334.368 Non-Project 18,148 23,816 29,100 34,949 41.993 49,613 62,041 85,102 119.328 163,225 217,946 Less: Accumulated Oepreciation (7.7902ft 11.044) (16.2641 1236t2)J L3L2A1) 147.13) L6±.39) (86.657) (115.235) (151.732) (198,101) Net Fixed Assets 12,788 31,363 59,019 86,880 117,397 147,799 178,573 212,211 252.583 299,742 354.212 Assets Under Construction 3.7A87 1L231 9.861 lP.008 9.195 8.783 6.81 8.945 10.621 12.347 14.139 Total Assets 18,403 48,029 76,778 107,026 139,221 177.375 218.097 268.331 330,350 406.787 500,832

Liabilitie Total Current Liabilities 787 988 1,306 5,012 5,822 6,662 7,606 8.673 9,914 10,962 12.483 Total Long Term Liabilities 3,551 26,464 43,624 59.986 70.504 79.070 80,731 80,377 79.111 77,020 74.253 Less Current Maturities t3711 (423) _547) 13.8961) L44441 l(,qjj 5.637) (6.350) (7.155) 1.7734) 1.7q#) Total Liabilities 3,966 27,029 44,384 61,102 71,882 80,727 82,700 82.700 81.870 80.248 78.029

QJ1LtY CQ Z Paid-In Capital 4,894 4,894 4,894 4,894 4,894 4,894 4,894 4,894 4,894 4,894 4,894 Municipal Contribution 7,061 8.449 10,164 12,266 15,026 18,352 22.327 27,075 32.748 38,619 44.694 m > Contributed Capital Works (UEAS) 229 1,131 2,766 3.870 5,541 6,557 7.123 8,086 9.203 10.499 12.003 ., Connection Charges & Improvement Fees 267 1,010 2,661 5,697 9,907 14,963 21,122 27,131 33,180 40,843 49,963 o Retained Earnings (253) (889) (2,988) (8,111) (12.705) (13,01S) (9,860) (1,180) 13,311 34,289 63,777 t-tF M4etRevaluation Account 64Z 1,9 730 1,7 487 12298,9 11,2 12421 3197395 5124742 18S.631 248 44 395 22 80 Total Equity 14-23 2400 14 45.9 67.33 96.64 t3S.39

Total Liabilities & Equity 18,403 48,029 76.778 107,026 139,221 177,375 218.097 268,331 330.350 406,787 500.832 Table 4 (Cont'd) Sources and ArolicatIonl of ftuds

sources Gross Internal Fund Generation 1,215 4,771 8,310 9,875 14.54S 21.683 27.700 3S,747 44.278 53,986 66.077 Total Contributions (A) 7.581 3.065 5,043 6.287 8.701 9.466 10.779 11.818 12,984 14.948 16.840 Borrowings: 1B0 1.385 7,912 6,062 6,283 5.447 5.339 1,957 273 0 0 0 Municipal Fund 0 0 0 0 0 0 0 0 a 0 Iller Bank t1) tS.097 9.72 7L534 4aJa JL38t aO. B aQ Total Borrowings 1dMas MLGM 16.782 1L3A8t 1Q.285 a.7h0 1.st7 2.n-2 OO a Total Sources 10.180 30,846 29.136 29,979 33.S31 39.869 40.436 47,838 57,262 68,854 82.917

Applications tnvestments: Project 4,321 24,180 19,228 19,387 17,638 16.648 6.231 966 0 0- 0 Non-Project 2.2SI 453 494 628 752 . .. 1. 3.I 16925 21.241 24.693 28.27 Total Investmnts 7,574 24,632 19,723 20,015 18,390 17,566 13.629 17,891 21.241 24.693 28,278 Administrative fee 38 218 167 173 150 147 54 8 0 0 0 Debt Service 1.335 3.590 5,853 7.860 12.704 14.203 15,068 15.731 16,341 16.959 17,264 Changes in Working Capital 1.233 2.406 3.394 1 2.9287 .1254 tl.685 14.29 19ZI 27.201 37.37S Total Applications 10,160 30,846 29,136 29,979 33.531 3n,869 40,436 47.838 57,262 68.854 82.917

B. I.NDCAIIIU Rate of Return 4.05S 13.93X 11.731 7.4U 8.31n 10.471 11.032 12.181 12.721 12.98X 13.45S Operating Ratio 91.50X 65.59 60.981 70.65 65.80S 58.92X 57.14X 54.562 S3.508 53.18X 52.541 Eebt/Debt+Equity Ratio 19.741 S5.761 57.394 56.64S 51.15X 45.001 37.35 30.22X 24.15S 19.091 14.941 Debt Service Ratio 0.9 1.3 1.4 1.3 1.1 .S 1.8 2.3 2.7 3.2 3.8 Debt Service Ratio Including Deposits anW Fees 1.1 1.s 1.7 1.5 1.4 1.8 2.1 2.5 3.0 3.5 4.2 Net Internal Generation as X of Investwent (B)-12S 1% 1I% 201 291 311 56 728 731 76 791 NICG As X of 3-year Average Investment -5 11 111 22X 32% 341 441 601 631 IC NC Z of Population Connected to Water 968 96X 961 961 96 961 961 971 971 971 971 Z Households Connected to Sewers 60X 621 671 71% 771 821 851 871 88a 91 931 Water Consued (mM) - Domestic 28.56 29.44 31.22 32.61 34.02 Z5.37 36.73 38.92 40.79 42.65 45.04 - Official 1.95 2.22 2.35 2.46 2.56 2.67 2.77 2.87 2.98 3.08 3.19 - Comercial & Industrial 3.32 3.94 4.35 4.72 5.11 5.50 5.91 6.34 6.79 7.03 7.27 Average Household Charge 17,690 40,265 54,S02 71.064 90,863 119,2" 139.726 164,155 188,487 219,949 259,176 Average tncremental Cost (Financial) 222.15 Block 1 Charge as Z of HM Income Q 20th Percentile 0.21 1.61 1.71 1.8% 1.91 2.01 2.01 2.01 1.91 1.81 1.81 Average Charge as Z of HN Average Income 1.11 2.11 2.31 2.41 2.51 2.81 2.71 2.71 2.61 2.51 2.5S

C. IPITS Population 81,000 904,000 9"8,000 990,000 1,033,000 1,074,000 1.11a.000 1,157,000 1.200,000 1.241.800 1.2850ooo lSo.of Housdil 166U860 176.908 187,352 197,211 207,547 218,293 228,953 240,041 254.237 264.213 274.573 Water Souros (I611ion I' p.a.) 89.0 89.0 89.0 89.0 89.0 89.0 89.0 89.0 89.0 B9.0 89.0 Water Potentiplly Beaching Consumer 381 401 431 461 SO 641 581 621 661 721 751 Population Connected 826,560 867,840 910.080 950,400 991,680 1.031.040 1,070.400 1.122,290 1,164,000 1,204,546 1.246.450 S Illeoal Water Connections 151 141 131 11 101 81 71 61 61 6a 61 Block 1 Donmestic Tariff in Constant Prices 0 60 65 70 75 80 80 80 80 80 80 Block 2 * SS 100 110 120 130 150 150 150 150 SO 150 Block 3 109 160 200 220 230 250 250 250 250 250 250 Collection Efficiency Factor - Domestic 701 751 80t 83X 851 861 871 881 881 88X 681 Official Tariff in Constant Prtces 55 100 110 120 130 150 150 150 150 150 1SO Commercial Tariff In Constant Prices 109 160 200 220 230 2S0 250 250 250 250 250 1 Block 1 ConsuiPtionof Domestic 251 501 501 501 501 501 501 501 501 501 501 'rdt % Block 2 Consu%ption of Domestic 701 451 45 45X 451 45S 4SX 451 45X 45X 451 01 Z X Block 3 Consumption of Domestic S5 5Z S 51 St 5 51 5X St 58 St (D Sewer Charge as % of Water Charge 251 33 3a4 391 42t 451 48 50t 50 SOx 501 a

(A) Total Contributions Include: Deposits, Connection Charges, Itrovwmnt Fees, UEA Works, 8 Municipal Contributions a- (6) Net Internal Cash Generation (NICG) Includes: Charges, fees, & UFA Works donated by HUOCwhen land is sold REPUBLICOF TURKEY CUKUROVAURBAN DEVELOPMENTPROJECT

Table : MERSIN WATERSUPPLY 8 SEWERAGEFORECASTS AND INtICATORS

A. SUMMARYFINANCIAL STATEMENTS

LnOmN.Statement (MTL) 198 7 A 198 12Q 190 1922 121 1994 19i 1 1997 Water Charges Domestic 974 1,354 1,954 2,643 3.895 5,046 6,335 8.0s0 10.110 12.S21 15.513 Comnercial & Industrial 226 285 359 447 629 780 957 1,174 1.438 1,757 2.147 Official 213 48s 664 868 1,224 1.534 1.8U4 2.316 2,843 3,479 4,260 Extraction Tariff 92 173 291 393 580 809 1.095 1.272 1,477 1.715 1.991 Sewerage 353 01L 1.072 1.544 iL 3.312U 4,404 S.770 7J.96 8.879 10.960 Total Revenues 1.858 2,998 4,340 5.895 0.743 11,481 14,675 18,5U 23,064 28,351 34,870

EgnployeesSalaries 745 1,118 1,576 1,797 1,946 2,590 3.076 3.652 4,356 5,123 6,029 Other Expenses -24 893 1.272 L573 L2.38 2.48 2.840 3.23z 3711 4.239 4.834 Total Expenses 1.369 2,011 2,848 3.369 3,983 5.077 5.915 6.883 8.067 9.362 10.863 Gross Income 489 987 1,492 2,526 4,759 6.403 8.760 11.699 14,997 18.989 24.007 Depreciation Expense t6111 (1012 (1665) L2L4AI6 i3.308) 1.4227) ( 180) (6.241 L7516) (9.036 { 10.8531 Met Income Before Interest (122) (26) (173) 110 1.460 2.176 3.581 s.4s8 7,480 9,9S3 13.154 Interest Expense 189 802 1.232 1,999 2.604 2,987 3.121 3.136 3.112 3,062 2,979 Treasury Fee 3 7s 87 84 78 61 13 0 0 0 0 Expense due to Exchange Variation O 21 539 *.&66 1.662 1.807 1.984 2.073 22091 2.0a3 2.043 Net Income (314) (925) (2,032) (3.138) (2.883) (2,679) (1,S37) 249 2.277 4.808 8.132

BalanceSheet (14TL1 Assets Total Current Assets 5E1 1,237 2.862 4.77s 4,805 S.912 9,204 12.821 18.879 29,139 43.740 Fixed Assets ProJect 48s 5.938 17,683 31,819 48,396 6s,687 81,225 95.172 110.399 128,063 148.553 Non-project 14.795 19,373 23,936 28,571 34.095 39.997 48,264 60.842 77.s02 97.833 122,769 Less: Accuulated Depreciation 0L 004L (9L417. it2.965) (17 714 .24202 (32 302) LS2,6h0) I55.71SZ (72 14J5 (92 7241 X178.4131 Net Fixed Assets 8,276 15,894 28.655 42,676 58,288 73,382 86,839 100.29 1157,56 133,171 152.909 Assets Under Construction _1.414 4.922 &.2S 5.50 5.25 4 4e000 234 2.992 3421 3.922 4.673 Total Assets 10,261 22,0s8 36,815 S2,500 68.347 83,294 98.427 116,111 138.055 166.233 201.322

Total Current Liabilities 321 477 637 2,197 2,596 2,991 3.372 3.811 4,308 4,762 5.395 Total Long Term Liabilities 3.899 9,894 14.430 22,662 27,795 31,469 31.694 31.296 30,646 29,683 28.447 Less Current Maturities (153. (228) .281) 1L741) t1.9891 t2.230) t2.4711 t2i741f 13.046) 13,280.

Total Liabiltties 4,067 10,143 14,785 23,118 28,402 32,229 32,595 32,366 31,908 31,165 30.192

Paid-in Capital 4,189 4,189 4.189 4.189 4.189 4.189 4.189 4,189 4,189 4,189 4,189 Municipal Contribution 0 2.772 7,s80 7,580 7.580 7.580 7.580 7.580 7,580 7.s80 7.580 ' f ContributedCapital Works (UCA) 545 1.356 2,348 3,207 4,954 5s979 6.845 7.439 8,125 8,922 9,E46 0 Connection Charges & Improvement fees 178 950 3,094 6,638 9,728 12.436 15.622 18.368 21.246 25.452 30.464 x I Retained Earnings (314) (1,239) (3.271) (6,409) (9,292) (11,971) (13,508) (13,259) (10,982) (6.174) 1,958 Net Revaluation Account 1.49 142 8.087 14.176 22i785 324a52 4s.10 S9442 7.98.9 95.099 117092 Total Equity 6.,13 11.914 22,029 2913.2 39.945 5l.06s 65832 83.745 106J4 135.06 121.3130 ° Total Liabilities & Equity 10,261 22,057 36,814 52,500 68.347 83,294 98.426 116,110 138,055 166,232 201,322 to. Table S (Cont'd) SOURCES& APPLICATIONSOF FUNDS

Gross Internal Fund Generation 489 987 1,492 2.526 4.759 6.403 8.760 11.699 14.997 18.989 24,007 Total Contributions (A) 736 4,373 7,966 4.430 4.871 3.775 4.103 3,407 3.639 S.o4 Borrowings: 6.053 IBRD 108 2,738 3.169 3,041 2,8U2 2.215 471 0 0 0 0 Municipal Fund 725 1,129 S52 1.436 787 547 0 0 0 0 0 Iller Bank 1.451S 2.259 74 2.872 1.574 1.094 Q Q Q Q Total Borrowings 2-z24 6.J2. 4.J22S 7.348 S.214 3.856 471 0 o _ Q Total Sources 3,509 11,486 13.682 14.303 14.845 14,034 13,335 15.106 18.636 24,084 30.061 AficaRtions Investments: Project 86, 8,876 10,320 9.777 10.129 7.551 1,760 0 0 0 0 Non-Project 1,i66 978 2?s 322 .341378 450 3.00. 5.983 7L85 i 9.3L Total Investments 2.828 9.8s3 10.596 10,099 10.508 8.001 4,769 5.983 6,841 7,845 9.346 Administration Fee 3 75 87 84 78 61 13 0 0 Debt 0 0 Service 337 955 1.460 2,280 4,345 4.976 s.351 S.607 s,853 6,108 Changes in 6.259 Working Capital 311 602 1.54p 1.840 _..86 9 3.202 3.516 5.41I 10.131 14.455 Total Applications 3.509 11.486 13.682 14,303 14.845 14,034 13,335 1S,106 10.636 24.084 30.061

B. NDZICATO

Rate of Return -1.781 -0.21S -0.781 0.31S 2.89X 3.30% 4.471 5.83S 6.92X 8.001 9.201 Operating Ratio 106.57X 100.86X 103.98S 98.131 83.301 81.05S 7s.601 70.631 67.571 64.891 62.281 Debt/Equity Ratio 38.631 45.37X 39.581 43.541 41.031 38.131 32.50X 27.20S 22.401 18.021 14.25S Debt Service Ratio 1.5 1.0 1.0 1.1 1.1 1.3 1.6 2.1 2.6- 3.1 3.8 Debt Service ratio including Deposits & Connection 2.0 1.9 1.9 1.8 1.4 1.6 2.0 2.5 3.0 3.5 Net Internal 4.3 U' Generation as S of Investment (B) 19% 101 151 271 S0% 521 901 lo0 1001 1001 lOO100 SICG as % of 3-year Average Investment 7X 91 151 291 681 661 73X 871 85S NC MC I X of Population Connected To Water 821 88S 91X 931 951 961 97X 98X 981 98t S Households 98X Connected to Sewers 341 S1 631 691 751 801 831 851 871 881 901 Water Consumed (m3) - ODmestic 9.75 .10.58 11.40 12.21 14.74 15.80 16.91 18.32 19.62 20.94 22.37 Official 2.38 2.48 2.59 2.71 3.20 3.40 3.60 3.81 4.04 4.26 4.49 Commercial & Industrial 0.99 1.03 1.07 1.12 1.32 1.40 1.48 1.56 1.65 1.74 !.83 Average Household Cahrge 21.771 41.789 52.553 64.044 85.049 100.722 118.290 139.016 162.182 188.805 219.319 Average Incremental Cost (Financial) 164.42 Block I Charge as X of HH Income * 20th Percentile 1.28X 1.681 1.67t 1,661 1.651 1.63X 1.62X 1.591 1.541 1.50. 1.461 Average Charge as X of fHiAverage Income 1.41% 2.15S 2.19X 2.18X 2.J8% 2.34X 2.30X 2.261 2.21X 2.15X 2.09X

C. SUMMARY ASSlIMPTUONS

Population 359.000 383.000 408,000 434.000 462.000 490.000 S19.000 550,000 582.000 614.000 648.000 No. of Households 69,981 75,246 80.632 86.454 92,771 99.190 105,918 113,636 120,Z"8 128,721 137,288 Water Sources (wm3) 32 32 32 32 41 41 41 41 41 40 40 Water Potentially REaching Consumers 411 43X 461 49S 511 541 581 621 671 711 751 S Illegal Water Connections 141 101 7S 61 S 41 41 41 41 41 41 I Block Domestic Tariff in Constant Prices 55 70 70 70 70 70 70 70 70 70 70 Block 2 Domestic Tariff in Constant Prices 68 120 130 135 135 135 135 135 135 135 135 Block 3 Domestic Tariff in Constant Prices 89 185 200 210 210 210 210 210 210 210 210 Collection Efficiency Factor - omestic 80s 811 831 851 87X 89t 901 911 921 921 921 Official 0 Tariff in Constant Prices 68 120 130 135 135 135 135 135 135 135 135 0o Com ercial Tariff in Constant Prices 173 173 173 173 173 173 173 173 173 1 173 % Block 1 Copsutmtion of Domestic SO5 501 SO% SO5 501 S01 501 SO SO 501 50SOo Block 2 Consumption VSBlock 3 of Domestic 45X 45 451 451 451 451 45 451 4SX 45S 45X 0 Consumption of Domestic St 5X 5X SX 51 5S 5X 51 Sewer Charge as X of Water Charge 251 33S 36t 39S 42X 45S 481 S0 SOX so5 SOX% Notes: (A) Total Contributions Include: Deposits. Connection Charges, Imrovement Fees. UEA Works. Municipal Contributions (B) Met Internal Cash Generation (NICG) includes: charges, Fees, & UEA Works donated by HUOC REPU8LIC OF TURKEY CUIKUROVAURBAN DEVELOPMENT PROJECT

Table 6: TARSUSWATER SUPPLY & SEWERAGEFORECASTS AND INDICATORS

A. SUMARY FINANCIAL STATEMENTS

Income Statement 4TL`I 1988 1989 1990 199? t992 1993 1994 1995 t996 1992 Water Charges Domestic 390 664 1.037 1,497 2,152 2,719 3.333 4.082 5,190 6,358 7.805 Official 67 101 137 199 288 381 466 564 691 836 1.013 Comercial & Industrial 16 34 51 67 91 111 136 164 202 244 296 Extraction Tariff 32 53 83 120 171 204 244 291 348 416 497 Maintenance Cahrge 40 SS 76 102 136 172 215 263 324 394 479 Sewerage _ _ 304 712 1.330 2351 3402 _4.5RC 6.013 7.718 9.674 12.161 Total Revenues 613 1,211 2,100 3.316 5.188 6.988 8,973 11.377 14,472 17,922 22,250

Employees Salaries 166 307 362 435 538 648 800 1,172 1.372 1.621 1,921 Other Expenses lii 129 462 sg n77 918 1.076 !.287 i.9 1.746 2.031 Total Operating Expenses 376 637 831 1l015 1.315 1,566 1,876 2,459 2,871 3.367 3.952

Gross Income 237 575 1.270 2,300 3,873 5.422 7.097 8.919 11,601 14.555 18.298 Oepreciation Expense l2 km 979 1.36 1.7S3 2.176 2.665 3.269 4.302 4.888 Net Income Before Interest 105 227 616 1,321 2,508 3.669 4,921 6.2S3 8.332 10,SS3 13,410 Interest Expense 125 468 857 1.276 1.SS7 1,684 1,756 1,776 1.765 1.738 1.694 Treasury Fee 7 53 32 48 37 34 13 1 0 0 0 Expense Due to Exchange Variation O S3 420 680 961 1.007 1.103 1.1 1.188 l.lk4 1.161 Net Income (26) (347) (694) (682) (47) 944 2,049 3,301 5,378 7,630 10,555

Balance Sheet INTL)

Total Current Assets 158 343 1.132 2.288 3.161 4.977 8,479 12.454 18.427 26.894 38.612 Fixed Assets Project 516 4,510 11.010 18,133 26,584 35,027 43,346 51,071 59.288 68.774 79.778 Non-Project 2.775 4,184 5,335 6,338 7,S32 8,802 11.043 15,566 22,438 31,285 42,413 Less: Accumulated Depreciation 11.0711 LLii2U !2.624) i4.07S) 16L1731 I8.9141 Ll2iS61 ()Z.184) 2l.3202)Z 00917 (40,7S2) Net Fixed Assets 2.213 7,052 13.721 20.397 27.943 34,915 41,873 49,453 58.524 69.142 81,440 Assets Under Construction 969 3.344 2.031 2.725 2.082 1.8Z8 1.426 1.857 2.243 2.623 3.0 Total Assets 3.339 10,738 16,884 25.410 33,186 41,750 51,778 63,763 79.195 98.659 123,098

Liabilities Total Current Liabilities 158 247 349 1,229 1,422 1.S99 1.792 2,019 2.270 2.524 2,847 Total Long Term Liabilities 2.569 6,348 10,028 14,896 17,088 18.352 18.602 18.353 17.936 17.343 16.568 Less Current Maturities JloJl .1S61 (2221 (I.0Cll (11941.123111.19) (1,44A 1.606) LL7771 L1.936

Total Liabilities 2,626 6.439 10.15S 15.063 17,316 18,632 18,941 18.767 18.430 17,931 17,267

Eau Paid-In Capital 215 215 215 215 215 215 215 215 215 215 215 Manicipal Contribution 0 2,336 2,336 2,336 2,336 2,336 2,336 2,336 2.336 2,336 2.336 Contributed Capital Works (UEA) 131 627 1,187 1.505 1.687 1.693 1,909 2.166 2,465 2.811 3,213 Connection Charges. ImProvement Fees 36 262 878 1.962 3,246 4.758 6,363 8,002 9.853 12.086 14.715 Retained Earnings (26) (373) (1,067) (1.749) (1,796) (852) 1,196 4,498 9,876 17.507 28,062 Net Revaluation Account 39 1.232 3.180 6.078 10.182 14.968 20.817 27.779 36.029 45.773 S.7289 0Q S Total Equity 713 4.299 6.7Z9 10.347 1S.870 23.114 32.837 44.997 60.765 80.728 105.830 j Total Liabilities & Equity 3,339 10,738 16,884 25.410 33.186 41.750 51.778 63,763 79,195 98,659 123.098

0 Table 6 Cont d) SOURCES& APPLICATIONS OF FUNDS 16,298 5.422 7,097 8,919 11.601 14,555 Sources 237 575 1.270 2,300 3,873 2.614 3,072 Gross Internal Fund Generation 1,479 1,534 1,840 1,917 2,178 171 3,065 1,684 1,411 29 0 0 0 Total Contributions (A) 1,730 1,332 1,235 466 266 1,916 1,177 0 0 0 0 0 Borrowings: 18R0 895 1,072 384 86 Q Municipal Fund 616 765 o O o 1.147 1.343 1.608 57 is O Iller Bank 924 1AS1 4 29 a a 1.801 3.82? 3.415 4.419 2.Z21 17.169 21,370 Borrowings 7.644 8,407 9.403 10.865 13.779 Total 2.215 7,467 5,869 8.122 Total Sources 0 1,376 86 0 0 ADD1icat1ons 4,024 5,410 4,108 3,650 6.092 Project 918 6,155 1.477 3.12. 4&487 S.24? Investments: S32 39 .. 41 BS 65 6,092 Ron-Project 1.9020 3,715 2,853 3,713 4,487 5,247 6,688 4,063 5,451 4,163 0 0 Investments 1,937 34 13 1 0 Total 7 53 32 48 37 3,630 Fee 2,879 3,075 3,229 3,371 3,515 Administration 569 1,013 1,498 2,619 8.407 11U64a Service 184 n.i 3,462 3.922 5.922 Debt 8t6 157 261 1281.12 177 21.370 Changes In Working Capital 8,407 9.403 10.865 13.779 17,169 2.215 7.467 5,869 8,122 7,644 Total Applications

13.69% 15.43% 16.53% 17.81% B. fX!IC&AIDI 5.93% 7.75% 10.38% 11.67% 12.82X 6.81% 4.90X 45.16% 45.04% 42.43% 41.12% 39.73% Rate of Return 81.27% 70.68% 60.15% 51.66% 47.50% 13.54% Ratio 82.80% 36.16% 28.97% 22.79% 17.68% Operating 59.62% 59.84% 59.01% 51.85% 44.25% 5.0 Ratio 78.27% 1.9 2.3 2.8 3.4 4.1 Debt/Equity 1.3 1.0 1.3 1.5 1.5 Debt Service Ratio 2.6 3.1 3.8 4.5 5.4 Debt Service Ratio 1.4 1.7 2.0 1.8 2.2 Oeposits & Connection 1.5 83.7% 99.2% 100.0% 100.0% 100.0% Including 7.8% S5.9% 19.1% 44.9% 60.9% NC Cash Generation as % of Investments (B) 6.7% 69.2% 69.6% 87.9% 90.9% NC Net 3.4% 10.6% 15.3% 24.3% 54.2% 96% NICG as % of 3-year Average Investment 96% 96% 96% 96% 96% 90% 91% 92% 93% 95% 8s5 87% 89% % of Population Connected to Water 65% 73% 79% 83% 14% 29% 43% S4% 8.23 8.69 9.20 oo % of Households Connected to Sewers 6.66 7.05 7.37 7.78 S.67 S.56 5.90 6.21 0.25 0.26 0.27 0.28 1 Water Consumed (m3): Domestic 0.20 0.21 0.22 0.23 0.24 Official 0.18 0.19 0.49 0.51 0.53 0.55 0.58 0.39 0.41 0.42 0.44 0.47 273.095 Commercial & Industrial 0.37 121,626 142,495 .68.051 201,996 234.641 21,611 42,687 59,649 78,735 102,500 Averae Nousehold CahrVe Cost (Financial) 306.83 Average Incremental 2.2% as X of HH income 2.5% 2.5% 2.4% 2.3% Block 1 Cahrge 1.9% 2.1% 2.3% 2.5% 2.5% 2.6% * 20th Percentile 1.2% 2.8% 2.8X 2.7% 2.8% 2.7% 1.4% 2.2% 2.5% 2.7% 2.9% Average Charge as % of HH11Aveiage Income

252,000 263.000 275,000 C. SUJMARYASSUPONS 201,000 211,000 221.000 231,000 241,000 176,000 184,000 193,000 49,793 52.610 55.485 58,5l1 Population 38,067 40,040 42,369 44.828 47.336 18 34,043 35,938 18 18 18 18 18 No. of Households 16 16 16 16 18 75% (wuS) .. 73% 75% 75% Water Sources SS% S8% 61% 64% 67% 4.0% Potentially Reaching Consumer (X) 53% 4.0% 4.0% 4.0% 4.0% 4.0% Water 9.0% 7.0% 6.0% 5.0% 100 100 Ille2al Water Connections 10.0% 100 100 100 100 % 55 70 80 90 100 1SO 1 Domestic Tariff in Constant Prices 150 150 150 150 150 Block 69 110 130 140 150 250 2 Domestic Tariff in Constant Prices 250 250 250 250 250 Block 137 160 170 200 230 92% 92% Block 3 Domestic Tariff in Constant Prices 90% 91% 92% 92% 92% Domestic 80% 82% 85% 88% 150 5so 15O Collection Efficiency Factor - 140 150 150 15o I5o Prices 69 110 130 250 2SO 250 Official Tariff in Constant 200 230 250 250 2SO Prices 137 160 170 55% SO% 50% 50% Commercial Tariff in Constant 55% 55% 55% SS% of Domestic 50% 55% 55% 42% 42% 45% 45S% 45% X Block 1 Conswtption 42% 42% 42% 42% 42% 2 Consumption of Domestic 45% 3X 3X 5% S X Block 3% 3% 3% 3 50% 3 Consumption of Domestic 5% 45X 48% 50% 50% 50% % Block 0X 33% 36% 39% 42% Sewer Charge as % of Water Cahrge Deposits. Connection Charges, (A) Total Contributions Include: & Municipal Contributions ° Improvement Fees, UEA Works, by HUDC Includes: Charges, Fees. & UEA Works donated (8) Met Internal Cash Generation (NICG) R£PuEtlC OF TURKEY

CUKUROVA URIAN DOEELOPMENT PROJECT

ITle 7: CEYHANWATER SUPPLY & SEWERAGEFORECASTS AND INDICATORS

A. SUMWARYFINANCIAL STATEMENTS

Incame Stateaent KnTL) 121_ Ji1 1989 122Q1 1922 1293 1994 199S 122! 1927 water Charges Domestic 300 410 540 712 916 1,190 1.426 1,748 2,137 2,609 3.181 Commercial 8 Industrial 135 177 231 286 355 434 516 617 741 889 1.066 Official 94 116 145 177 216 262 311 372 450 543 654 Extraction Tariff 13 18 25 30 35 41 47 SS 64 74 85 Sewerage 66 94 132 206 348 498 644 827 998 1.z21 1.490 Total Revenues 607 814 1,073 1.412 1.870 2,425 2,944 3.620 4.390 5,336 6.476

Employees Salaries 198 271 324 405 499 613 741 878 1.056 1,266 1.516 Other Expenses 12_ 17S 2m1 361ii 421 498 S87 672n76 __M Total Expenses 322 446 572 703 860 1,034 1,238 1,466 1,728 2,042 2,412

Gross Income 285 368 SO1 709 1,010 1.390 1.706 2,154 2.661 3.294 4,064 Depreciation 12n Z3 131 52_ fin 12 1Q37 1.227 1.53 1.847 2.21t Income Before Interest 161 136 113 181 330 S55 669 877 1.12S 1,448 1,847 Interest Expense 26 13S 241 330 407 443 491 533 546 548 536 Treasury Fee 1 29 14 14 9 6 12 0 0 0 0 Expense due to Exchange Variation Q3 . 204 320 404 39S 401 456 MRl 31 449 Net Income 134 (33) (346) (483) (489) (286) (234) (112) 120 442 862 Balance Sheet tNTLI

Assets Total Current Assets 269 318 442 56S 5;2 913 1,252 1.727 2,345 3,144 4,497 Fixed Assets Project 43 1.926 5,025 7,630 10,359 13.045 16.340 19.656 22.801 26.450 30.682 Non-Project * 3,071 3,865 4.676 S,567 6,632 7,766 9.574 12.265 1S.605 19.714 24.755 Less: Accumulated Depreciation II.So?) (2.040i t2.8361i 3,iZ4i tS.251 (6.9240 1 .021 (11.796) lS.2L9) LI.9II11

Net Fixed Assets 1.607 3,751 6,865 9,323 11,740 13.888 16,846 20.126 23.187 26.663 30,599 Assets Under Construction 1is 1.680 821 785 515 __ SOS.136 S87 6x8 aos 943 Total Assets 2.063 5.750 8,128 10.674 12,787 15.305 19.235 22,440 26.220 30.612 36.038 L1abilities Total Current Liabilities 99 190 246 592 666 743 868 967 1,074 1.175 1,294 Total Long Term Liabilities 1,111 4.042 5.514 6,9So 7,567 7.922 9,422 9,558 9,462 9,051 8,567 Less Current Naturities 162) i144) tl83) tII2) JS67) l624) tr2i) (Zt7) J86S) J933) ( * .010) Total Liabilities 1.142 4.088 5,577 7.030 7,66S 8,041 9,565 9,728 9,667 9.293 8,851 Ecuitx Paid-In Capital 455 4SS 455 4SS 455 455 4554s 455 45S 455 mnmicipal Contribution 0 0 0 0 0 0 0 0 0 0 0 Contributed Capital Works (UEA) 0 221 364 433 466 778 876 9S1 1,038 1.138 1,256 Connection Charges & Inprovement Fees 10 SS 148 273 413 569 758 1,004 1,315 1,709 2,192 Retained Earnings 134 101 (245) (728) (1.218) (1,504) (1.738) (1,850) (1.730) (1,288) t426)> (et Revaluation Account .38302 1.83Q 3.210 5.006 6s6 9.319 12.1S2 1S.474 19.304 23.721 oQ 5 Total Equity 921 1.662 Z.SS1 3.644 S.122 72.26 9.67D 12.712 16.SS3 21.31 27.187 w j

0I I:- t'h Table (Cont d) Sources and AD1lications of Funds Sam= Gross Internal Fund Generation 285 368 51 709 1.010 1.390 1.706 2.154 2.661 3.294 4.064 Total Contributions (A) 12 268 237 198 175 474 291 328 411 506 613 Borrowings: IM31 26 1,053 517 499 321 211 429 0 0 0 0 MiunicipalFund 279 1.552 717 641 322 253 1,036 324 193 0 0 Iller Sank ?Q 38a 179 160M 1 _3 259 _1 48 I I Total Borrowings 21_299n 141i 1. Z992n 52? 1.72 405 242 1 o Total Sources 671 3,628 2.151 2,206 1,909 2,391 3.720 2.887 3.314 3.800 4.677 AD1li catin Investments: Project 76 3,332 1.603 I,S18 969 936 1.300 0 0 .0 0 Non-Project 222 28 39 53 62 73 973 1.17S 1.37$ 1.610 1,IIS Total Investments 375 3.360 1,642 1,571 1,031 1,010 2,273 1,175 1.375 1.610 1,885 Administrative Fee 1 29 14 14 9 6 12 0 0 0 0 Debt Service 76 202 365 514 919 1,010 1.15S 1,259 1.343 1.417 1,469 Changes In Working Capital nfl 37 llO 108 f491 366 321 4S4 596 774 1323 Total Applications 671 3.628 2.151 2,206 1,909 2.391 3,720 2,687 3,314 3.800 4.677

8. INIZ CATORS Rate Of Return 11.60% 6.08% 2.13% 2.24% 3.13% 4.35% 4.36% 4.75% 5.20% 5.81% 6.45% Operating Ratio 73.54% 83.27% 89.46% 87.17% 82.36% 77.00% 77.26% 75.76% 74.37% 72.87% 71.49% Debt/Equity Ratio 54.67% 70.86X 68.37% 65.60% 59.63% S2.17% 49.35% 42.92% 36.37% 29.80% 23.96% Debt Service Ratio 3.8 1.8 1.3 1.4 1.1 1.4 1.5 1.7 2.0 2.3 2.8 Debt Service Ratio including Deposits 8 Connection 3.9 2.1 I.S 1.6 1.3 1.S 1.7 1.9 2.2 2.6 3.1 1 Net Internal Cash Generation as % of Investment 0X llX 14% 17% 30X 48% 24% 66% 82% 100% 100% NICI as X of 3-year Average Investment OX 17% 16% 23% 21% 32% 34% 56% 70% NC NC O 8 of Population Connected to Water 95% 96% 96% 97% 97% 98% 98% 98% 98% 98% 98% % of Households Connected to Sewers S0% 54X 58% 59% 58X 59% 60% 60% 60% 60X 61% Water Consumed (KM3) - Domestic 2.50 2.64 2.71 2.80 2.87 2.99 3.06 3.20 3.37 3.55 . 3.73 - Official 0.19 0.19 0.20 0.20 0.21 0.22 0.22 0.23 0.24 0.25 0.26 - Commercial & Industrial 0.31 0.32 0.32 0.33 0.34 0.35 0.36 0.37 0.39 0.40 0.41 Average Household Charge 46,125 SS,"91 66,532 82,115 103,546 124,692 146.135 174,104 200,144 233,957 273.478 Average IncrementalCost (Financial) 266.71 Block 1 Charge As X of NH Income Q 20th Percentile 2.7% 2.6X 2.5% 2.5% 2.7% 2.7% 2.7% 2.6% 2.5% 2.5% 2.4% Average Charge as X of tH Average Income 3.0% 2.9% 2.8% 2.8% 2.9% 2.9% 2.8% 2.8% 2.7% 2.7% 2.6%

C. SUMMARY ASSU"PTTS

Population 80o000 82.000 84.000 86.000 88,000 91.000 93,000 96.000 100.000 104,000 108.000 No. of HousehelOs 15,504 16,047 16.601 17,131 17,706 18.496 19,097 19,917 21,186 22,128 23.077 Water Sources (mm) 20 20 20 20 20 20 20 20 20 20 20 Water Potentially Reaching Consumers (%)46.00% 48.00% 51.00% 54.00% 57.00% 59.00% 62.00% 65.00% 69.00% 73.00% 75.00% X Illegal Water Connections 5X St 5% t % 4X 44% 4X Block I Domestic Tariff in Constant Prices 11S 115 11S 15 11 1 115 115 115 115 115 Block 2 146 146 146 146 146 146 146 146 146 146 146 Block 3 ' ^ * * * 194 194 194 220 230 250 250 250 250 250 250 Collection Efficiency Factor - Dometic 65% 70% 75% 80% 85% 90% 90% 90% 90% 90% 90% Official Tariff in Constant Prices 376 376 376 376 376 376 376 376 376 376 376 Commercial Tariff in Constant Prices 376 376 376 376 376 376 376 376 376 376 376 X Block 1 Consumption of Domestic 50% SS% 55% 55% SS% 55% 55% 50X 50% 50% 50X % Block 2 Consumption of Domestic 45% 42% 42% 42% 42% 42% 42% 47% 47% 47% 47% X Block 3 Consumption of Domestic St 3% 3S 3% 3% 3% 3X 3% 3% 3% 3 z Sewer Charge as X of Water chargE 25% 25% 25% 30% 40S 45X 48%XSot 50% SO% sox

(A) Total Contributions Include: Deposits, Connection Charges, Keprovement Fees, UEA Wafrs. & un1icipal Contributions o - (8) N. 'nternal Cash Generation Includes, Chargs, fees, UEA Watrs paid for in price of land sold REPUBLIC OF TURKE CUKUROVAUIMAN DEVELOPMENTPROJECT

Table 8: ISKENDERUNWATER SUPPLY & SEWERAGE

A. SUMMARYFINANCIAL STATEMENTS

Income Statement (HTL1 18 18 18 19 1991 12 1226t9 JI 1 1i Water Charges Oomestic 573 965 1,466 1,996 2,711 3,518 4.409 S,538 6,883 8,527 10.535 Cormercial a Industrial 160 203 262 327 409 503 614 750 916 1,115 1.356 Official 203 263 350 442 572 708 a69 1,067 1.310 1.603 1,957 Extraction Tariff 122 188 283 488 796 937 1,103 1,299 1,530 1,801 2.120 Maintenance Charge 23 36 53 73 96 125 157 197 244 301 368 Sewerage 79 224 _4 98 924 1.458 1.979 2.Li 3.335 4.149 5.226 Total Revenues 1,159 1.880 2,778 3,924 5,509 7.251 9,132 11,511 14,217 17,496 21,563

Employees Salaries 339 690 821 1,205 1,803 2,235 2,764 3,309 3.946 4,650 5.494 Other Expenses 2Q2 420 612 80 1071so. .2?4 1.40 1.719 2011 235' 2,746 Total Expenses 628 1.111 1,433 2,014 2,876 3,510 4,244 5,028 5,957 7.007 8.240

Gross Income 531 769 1,345 1.910 2,633 3.742 4,888 6,483 8,260 10.489 13.323 Depreciation Expense 292 547 982 1.520 2,177 2.808 3,469 4.254 S,227 6,410 7,840 Income Before Interest 239 223 363 390 456 934 1,419 2,229 3,033 4,079 5,483 Interest Expense 133 440 698 984 1,325 1,753 1,943 2.150 2,441 2.726 3.018 Treasury Fee 7 73 60 88 67 45 18 5 0 0 0 Expense due to Exchange Variation Q 54 5S8 1.013 1.527 1.640 1.755 1.8S7 1.893 1.886 1.8SL Net Income 99 (344) (954) (1.695) (2.463) (2,504) (2.297) (1.783) (1,301) (533) 615

Balance Sheet (MTLI

Assets Total Current Assets 525 770 1.728 2.590 1,771 2.762 4,319 6,105 7.376 9.925 13,128 fixed Assets Project 448 5,395 14,618 26,246 40.530 54.055 66654 78,744 91,643 106,306 123,315 Mon-Project 6.851 8.275 9,945 11,752 13,892 16,148 20,067 27,600 39,029 53.936 72,687 Less: Accumulated Depreciation (3.685) (4.96) 6,94) (9.716) (13.6i ) (18,632) (25.08) (.33.349 (43.912) (57,348) S?4.363) Net Fixed Assets 3.614 8,700 17,617 28.283 40,781 51.570 61.639 72,995 86,760 102.894 121.639 Assets Under Construction 441 4.023 3.394 4 877 3.916 2,632 _226.3 3 059 3 711 4.310 5 062 Total Assets 4,581 13,493 22,739 35,749 46.468 56,964 68,221 82,159 97,847 117,129 139,829

Liabilities Total Current Liabilities 145 198 250 1.543 1.796 2,096 2,424 2,814 3.255 3.757 4.282 Total Long Term Liabilities 1.048 5,635 8,569 12,684 15.325 19,632 22.517 25,717 28.522 31.354 33.262 Less Current Maturities (68) __J8) .8) 1l319) (1.495) (1.72) L1973) 12 272) 12.603) 12.975) L3.352) Total Liabilities 1,125 5,750 8.731 12,908 15,626 20.005 22.969 26.259 29,174 V.135 34,192

Eui Paid-In Capital 2,575 2,575 2,575 2,575 2.575 2.575 2,575 2,575 2,575 2,575 2,575 Municipal Contribution 0 2,933 6.556 11,624 14,582 14,582 14,582 14,582 14.582 14,582 14.582 Contributed Capital Works (UEA) 0 216 537 853 1,475 1,909 2,231 2,459 2,7S1 3,099 3,504 Connection Charges & Improvement Fees 44 358 1,151 2,379 3,381 4.519 6,143 8,OS9 9,620 11,602 14,013 Retained Earnings 99 (244) (1.198) (2.893) (5.356) (7.860) (10,156) (11,940) (13.241) (13,773) (13,158) ,.f Net Revaluation Account 736 1.906 4.387 8303 14. 21.23L 29.8 40,165 52.386 66.909 84.122 Total Equity 3.455 7.743 14.008 22.841 308.42 36.95 4S.252 SS,900 68.672 84.994 li105.638

Total Liabilities 8 Equity 4,581 13,493 22,739 35,749 46.468 56,964 68.221 82,159 97,847 117,129 139,629 I - 0 o0 Tablei (Cont'd) .ouCg1_and ApDlications of Funds

Gross Internal Fund Generation 531 769 1,345 1,910 2,633 3,742 4.888 6.483 8.260 10.489 13,323 Total Contributions (A) 50 3.469 4,74S 6,624 4.597 1,592 1,972 2,175 1.892 2,377 2.870 Borrowings: IBRO 270 2,646 2,185 3.190 2.433 1,634 637 188 0 0 0 Municipal Fund 245 782 109 0 0 1,012 887 1,251 1.274 1.419 1.213 tIler Bank 367 1.173 164 _ O O .5I7 1.330 1.876 1.910 2.129 1.820 Total Borrowings _882 S01 2.458 3.t90 2.433 4.163 2.L53 3.31S 3.184 3.548 3.033 Total Sources 1,462 d,839 8,549 11,725 9.663 9.496 9,713 11.973 13,336 16,414 19.226

ApOlications Investments: Project 797 8,033 6.774 9,735 7,804 5,232 2,085 555 0 0 0 Non-Project _5 12 _1Si 18 28 33 2.441 5.564 7.423 8.6t 10.12 Total Investments 882 8,046 6.78B 9,753 7,832 5.265 4,526 6.119 7,423 8,619 10.125 Administration Fee 7 73 60 88 67 45 18 S 0 0 0 Debt Service 172 508 781 1,072 2,644 3.248 3.666 4.123 4,712 5,329 5,993 Changes in Working Capital 402 213 919 all (880Z 939 I.503 I.72J 1.201 2.466 3.108 Total Applications 1,462 8.839 8,549 11,725 9.663 9,496 9,713 11.973 13,336 16,414 19,226

B. I_CAIDRSQ Rate Of Return 7.55% 3.62% 2.76% 1.70% 1.32% 2.02% 2.51% 3.31% 3.80% 4.30% 4.88% Operating Ratio 79.36% 88.15% 86.94% 90.06% 91.72% 87.13% 84.46% 80.64% 78.66% 76.68% 74.57% Debt/Equity Ratio 23.27% 42.12% 37.95% 35.70% 33.19% 34.69% 33.23% 31.51% 29.35% 26.95% 23.95% Debt/Service Ratio 3.1 1.5 1.7 1.8 1.0 1.2 1.3 1.6 1.8 2.0 2.2 Debt Service Ratio including Deposits & Connection 3.4 2.1 2.3 2.4 1.2 1.4 1.6 1.8 2.0 2.2 2.5 Net Internal Generation as % of Investments (8) 0.0% 6.4% 10.4% 15.3% 31.2% 20.9% 37.0% 45.8% 57.1% 58.8% 70.0% NICG as % of 3-year Average Investment 0.0% 6.2% 8.7% 19.6X 41.6% 20.8% 27.8% 38.0% 48.6% 0.0% 0.0% 0n S of- Population Connected to Water 98% 99% 99% 99% 99% 99% 99% 99% 99% m 99% % Households Connected to Sewers 34% 48% 49% SS% 60% 69% 70% 72% 73% 74% 75% Water Consumed (=m3): Domestic 6.38 6.60 6.84 7.20 7.60 8.02 8.48 9.0S 9.73 10.39 11.07 Official 0.56 0.60 0.66 0.70 0.76 0.80 0.85 0.90 0.9S 1.00 1.0s Comnercial & Industrial 0.45 0.46 0.49 0.52 0.54 0.57 0.60 0.63 0.66 0.7t 0.73 Average Household Charge 12,350 18,426 19,928 24,096 27,591 33,770 36,845 40.632 44,003 47,176 51,220 Average Incremental Cost (FFinancial) 306.41 Block I Charge as % of hh Income @ 20th Percentile 2.5% 2.8% 2.9% 2.9% 3.0% 2.9% 2.9% 2.9% 2.8% , 2.7% 2.6% Average Charge as % of NH Average Income 2.6% 3.2% 3.2% 3.2% 3.3% 3.2% 3.2% 3.1% 3.0% 3.0% 2.9%

C. SMHLARY ASSUMPTIONS Population 190,000 199,000 208,000 219,000 231,000 244.000 258,000 273.000 289.000 305,000 321,000 No. of Households 36,750 38,791 40,945 43,452 46,293 49,293 52,653 56,173 60,083 63.941 67,86S Water Sourcts (mm3) 14 14 14 16 16 16 16 16 16 18 18 Water Potentially Reaching Consumer 52% 54S 57% 60% 63% 66% 70% 73% 7S% 75% 75% X Illegal Water Connections 19% 18% 8% 6% 5% 2% 1% 1% 1% 1% 1% Block 1 Domestic Tariff in Constant Prices 99 110 115 115 120 120 120 120 120 120 120 Block 2 Domestic Tariff in Constant Prices 114 1SO 1SO 150 160 160 160 160 160 160 160 Block 3 Domestic Tariff in Constant Prices 1SO 210 215 220 230 250 250 250 250 250 250 Collection Efficiency Factor - Domestic 70% 75% 80% 85S 87% 88% 89% 90% 90% 90% 90% Official Tariff in Constant Prices 274 274 274 274 274 274 274 274 274 274 274 ConunercialTariff in Constant Prices 274 274 274 274 274 274 274 274 274 274 274 d % Block I Consumption of Domestic 50% SO% SOX so% s0% S0% 50X SOX SOX% 50% 50% lb % Block 2 Consumption of Domestic 4S% 45% 45% 45% 45% 45% 45% 45X 45X 45SZ X Block 3 Consumption of Domestic SX S% 5% S% St 5% SX- St St SX 5% Sewer Charge as % of Water Charge 2S% 33% 36% 39% 42% 45% 48% Set SOX% S0% O (A) Total Contributions Include: Deposits. Connection Charges, Improvement Fees. UEA Works, & Municipal Contributions (8) Net Internal Cash Generation (NICG) Includes Charges, Fees & UEA Works donated by HUDC - 163 -

ANNEX 11 Page 17 of 19

11. IncomeStatement. Operatingrevenues were derived from estimatesof consumption,tariffs, proportion of populationconnected (legally versus illegally),andcollection efficiency factors (percentageof bills paid). Consumptionestimates were based on forecastsof demand and supply. Demand forecastswere based on existingconsumption (which ranged from about 60 l/c/d to 115 1/c/d),corrected for estimatedsuppressed demand, assuming real income growthof 3 percentper capita, the forecasttariffs, and using price and incomeelasticities of -.2 and +.4, respectively. Domesticdemand comes to 90 l/c/d to 100 l/c/d during the projectperiod with, in general,price increases more or less counterbalancingincome increases,keeping per capita consumption more or less constant. Officialand commercialdemand were forecastat existingper capita rates. Supply was forecaston the basis of estimated production,times the percentagepotential reaching the customer,which would be increasedfrom 38-52 percent in 1987 to 62-73 percent in 1994 by the project. In years in which forecastdemand exceededforecast supply, consumptionof all categories(including illegal consumption) was reducedby the same percentageas total demand exceededsupply. Collectionefficiency is expectedto rise from between .65 and .85 in 1987 to .92 in 1994, due to bettermanagement, the introductionof monthly billing (in place of quarterly or two monthly billing),and a -metermaintenance program. Forecasttariffs were revisedannually to reflect inflationand real increasesas requiredto attain financialtargets. Seweragecharges are being introducedin all municipalitiesas a surchargeover all water bills (Mersin,Adana) or over water bills of customersserved by the seweragesystem (in the other towns). Cukurovamunicipalities started to collectextraction fees from firms which extractwater from their own wells only in 1986. Followinga July court decisionin Adana which declaredthat this was legal,collection rates are expectedto rise from this source,and it is forecastto yield from 2 percent of total water and seweragerevenues in Ceyhan in 1994 to 12 percentin Adana in the same year.

12. Operatingcosts before depreciationand interestinclude: (a) forecastsof staff remunerationbased on personnelcurrently engaged in water and sanitationoperations, plus new hires and additionalstaff to handle new sewer systems in Tarsus and Iskenderun;after 1992, these expensesare forecastto rise in real terms at the same rate as population;(b) maintenance at 1 percentof fixed assets; (c) power and chemicalsestimated on the basis of cost per cubic meter of watrirproduced; (d) transport,office expenses,and miscellaneousgoods and servicesrising rapidlyin real terms during the initialproject years, and then risingapproximately in line with population, and (e) the contributionfor trainingto the CMTA at 0.5 percentof total capitaland cash recurrentexpenses.

13. Depreciationis estimatedat 4 percentof total fixed assets (revaluedto reflectinflation). Interestis forecastat 8.25 percenton the IBRD loan plus a .75 percentcommitment charged on the undisbursedbalance. Lossesdue to exchangerate variationand the Treasuryfee of 2.75 percenton disbursementsof the World Bank loan are charged to income. The Bank's loan periodis seventeenyears includinga grace period of four years. Iller Bank's loans are paid in equal annual installmentsover 20 years at'l6 percent interest. The MunicipalFund is reimbursedat 0 percent interestover a 20 year period. - 164 -

ANNEX 11 Page 18 of 19

14. BalanceSheet and Sourcesand Applicationof Funds Statements. An operationalcash requirementis asstmedat one month operatingexpenses. Surpluscash generatedin one year Ls used to financeinvestments the next year. Receivablesare 15 percentof revenueand inventoryis 16 percentof chemicalsand other expenses. Accountspayable are 25 percentof operating expenses. Fifty percentof work in progress is transferredto fixed assets; the remainderis assets under construction. Assets are revaluedannually accordingto inflation. Existingassets are revaluedat the full rate while new commissionirgsare revaluedat half the inflationrate on the assumption that they are commissionedevenly during the year. An asset revaluation reserveis includedin the balancesheet. Accumulateddepreciation is also revalued,and a reserve is set up in the same manner.

15. Investmentsin 1993-97,based on an assessmentof the major infrastructuresand networksjudged necessary to meet growth,were smoothedto a constant(real) annual amount. The differencebetween these estimatesand projectexpenditures in 1993 and 1994 is classifiedas nonprojectinvestment.

16. Long-termdebt consistsof loans outstandingfrom IBRD, Iller Bank, and the MunicipalFund excludingcurrent maturities. World Bank loans have been based on disbursementpercentages. Local loan finance from Iller Bank and the MunicipalFund (MF) are assumed to handleall requirementsover and above contributionsfrom the Bank loan and internalgeneration (surplus cash from the previousyear), providedthat the resultingdebt serviceratios remain satisfactoryin future years. Adana, as a metropolitanmunicipality, is not eligiblefor MF financing;MF financesare forecastat one third of local loan finance in Mersin, 40 percent in Tarsusand Iskenderun,and 80 percentin Ceyhan, in accordwith the past practicein which smaller municipalitiesreceive a higherproportion of centralfinance in the form of MF contributions.These percentagesare lower than the past percentages receivedby these municipalities.

17. Paid-in capitalis the differencebetween existingassets and existingloans in 1987. Municipalcontributions have been estimatedat levels requiredto ensure debt servicecoverage, except in the case of Adana,which is statutorilyobliged to contribute10 percentof its (6 percen-)recurrent Governmenttransfer to ASKI. This paymenthas been treatedas municipal contribution. Customercontributions comprise the connectionfees (TL 60,000 for each of water and sewerage,and collectedin equal annual installmentsin three years followinginstallation) and improvementcharges (the lesserof the cost of improvementsor 2 percentof propertyvalue, assessedseparately for water and sewerage,and payablein equal installmentsover the two years followingcompletion of construction).

18. Results. Based on the above estimates,all projectmunicipalities would achieve the main financialtargets during the projectperiod, with the exceptionof Adana where debt servicecoverage is forecastat only 0.9 in 1987. This results from (a) a zero tariffwhich is to be charged in .thatyear to householdswhich consumeless than 7.5 cubic meters of water, and (b) the need to repay a one year TL 580 million loan taken from Iller Bank in 1986 to financesewerage works. In the other towns,debt serviceis tightestin - 165 -

ANNEX 11 Page 19 of 19

Mersinin 1988 and 1989, in Tarsus in 1988, and in Iskenderunin 1991, when repaymentsbegin on the World Bank loan. As a result,equity contributions are requiredin Mersin in 1988 and 1989, in Tarsus in 1988, and in Iskenderun from 1988 to 1991 inclusive. Iskenderun'ssituation is particularlydifficult because,like Tarsus,it is buildingan essentiallynew seweragenetwork under the project. This is also reflectedin averageincremental costs 1' (includingcosts of water as well as sewerage)in Iskenderunof TL 306 per cubic meter of water billed and paid for, and TL 307 in Tarsus,as contrasted with TL 164 in Mersin,TL 222 in Adana and TL 267 in Ceyhan. In addition, Iskenderunhas significantlyhigher operatingcosts than the other towns. Since Iskenderun,with Ceyhan,has the highest tariffs in the projectcities, opportunitiesto raise substantialadditlonal amounts from this sourcemay be limited,and so a very large municipalcontribution is forecastfor the water and sanitationinvestment program. Nevertheless,Iskenderun's water and seweragecharges are forecastto peak at only 3.3 percentof averagehousehold incomein 1991, so that somewhathigher tariffsmight be acceptedby the public. WSDs are forecastto generatemore than 20 percentof their investmentsfrom internalfunds by 1991 (Adanaand Mersin by 1990),and rates of returnof over 5 percentare expectedfor all WSDs by 1995 (except Iskenderun,where the furecastis 3.8 percentin that year). Debt equity ratiosrise initially,but start fallingafter two or three years due to the increasingproportion of future investmentsfinanced by internallygenerated funds,and the revaluationof assets.

1/ Average incrementalcost calculationsare calculatedon the basis of additionalpaid consumption(i.e., excluding illegal consumption, and consumptionfor which bills are not collected,so as to be comparablewith tariffrates). - 166 -

ANNEX12 Page 1 of 8

TURKEY

CUKUROVAURBAN DEVELOPMENTPROJECT

HOUSINGAND URBAN DEVELOPMENTCOMPANIES FINANCES

1. The policy statement for HUDCs in Annex 7 contains a description of the organization, staffing and marketing and financial objectives of the HUDCs. This annex contains information on their financial viability and the rationale for the financial covenants in that statement, namely, that equity should be kept to at least two thirds of debt, and that the acid test ratio should be kept above two thirds (.667).

2. In brief, the HUDCs are expected to be very profitable, even under adverse market assumptions. The more serious risks from the municipalities' point of view are that the HUDCs will have financial difficulties if they are overextended or mismanaged. The HUDCs are new ventures, with untested management. Their commercial status provides them with greater operational flexibility than they would have under public service regulations regarding staffing, procurement or sales of assets. That status also implies challenges on management to deal with the political pressures that are an unavoidable consequence of ownership by, and financial relationships with, the municipalities.

Base Assumptions Underlying Financial Analysis

3. The financial analysis carried out for the HUDCs is exemplified by the projections for Mersin in tables 1 to 3. The estimates and assumptions are explained in the order in which they appear in the accounts.

Income and Expenditure Statement (Table 1)

4. Sale of Plots. Plots are sold in accordance with a sales program, by type of property, with separate categories of residential plots, and plots for commercial use. The base assumption is that residential sales proceed in advance of production of serviced land. This is in accord with the Turkish practice of persons who want houses paying deposits to developers in hopes of being included in schemes which are largely financed by such deposits. Deposits on presales are assumed to be paid each year that the presale remains unsatisfied, based upon 20 percent of the initial price. (On completion, the current sale price is charged, less deposits made and accrued interest on deposits at 20 percent annual interest). Commercial sales coincide with production. The base sales and production program are set out in table 4. - 167 - ANNEX 12 Page 2 of 8

IURKEY CUKUROVAURBAN DEVELOPMENT PROJECT

ITkab]e: INCOME AND EXPENDITURE STATEMENT

PROJECT-RELATED

Sales of Comoleted Plots . Comercial/Industrial 0 0 405 485 578 682 295 0 . Residential Q Q 6Ia8 6.0329 L622 5-04M4 29-33 42ZI Total of Sale 0 0 6.488 6.879 3,269 5,726 9,634 4,271

Less Cost of Sale Land Acquisition (at cost) 0 0 649 590 236 369 564 173 Interest 0 0 65 69 24 37 56 17 Revaluation 0 0 506 670 364 737 1,416 532 Infrastructure Contribution to offsite infrastructure 0 0 358 390 186 343 614 219 Onsite infrastructure cost Q. Qt LAl L=25B 1.520 L161 S.JQ0 1Z782

Total Cost of Sale A Q 4J.626 4.i267 Z122 4J34 L-6U 2-724

Surplus/Deficiton Sale 0 0 1.862 1,912 870 1,378 1,981 1.547

ogeratingExpenditures Staff Costs 9 122 179 224 281 347 429 518 Operation & maint. 1 31 44 50 63 78 96 116 Sales & Promotions 3 57 84 108 132 160 192 217 Depreciation of oper. assets 0 23 28 39 46 46 54 52 Technical Assistance 0 151 Al Al Q Q A t Subtotal 14 387 423 475 522 631 770 902

Less Capitalized Expenditure Project-Related 0 (24) (58) (70) (43) (94) (84) (27) Nonproject-Related Lnj Iil MI LZS(5 L1271 (2461 (IAI (05Ik

Total Operating Expenditures Before Interest Z 2A1 13f 15Z 221 ZZS 212

Operating Surplus/(Deficit) Before Interest (7) (284) 1,581 1,582 519 1,086 1,706 1,328

Interest Receivable (from short-term inv.) 0 37 141 313 467 544 718 1.187

Interest Payable IBRO/NationalLoans 0 80 172 120 97 109 68 24 Less Interest During Construction 0 0 (170) (120) (97) (109) (68) (24) Deposits Q Q 112 6A 10 i 1Q9 Q Net Interest 0 80 119 64 10 86 109 (0)

Gain/(Loss) on Foreign Exchange Q LQ 1100. I a LO.1 1.1 a

Surplus/(Def.)Before Tax (7) (327) 1,502 1,831 976 1,544 2,315 2.515

Corporation Tax a QQ4 621 M2 Qf 1.06S 1.15Z Surplus/(Def.)After Tax LZ, La2Z L amA J.9= i_2a5a

AoRroRriationAccount

Net Surplus/(Deficit) (7) (327) 811 989 527 834 1,250 1,358 Less Cash Dividends 0 0 (81) (99) (53) (83) (125) (136) Transfer to Gen. Reserve (7) (327) 730 890 474 751 1,125 1,222 - 168 - ANNEX12 Page 3 of 8 CIJKUROVAURDAN BEVELOP#4CNT PROJECT Table 2: SOURCESAND APPLICATION OF FUNDS STATEMENT

Sourcas of Funds

Equity 25 1.025 0 0 0 0 0 0 Borrowings: Project Related: Loans: CPF - IORD 0 502 749 947 644 1,435 917 353 CPF - NATIONAL 0 308 Total Borrowings 0 810 749 947 644 1,436 917 353

Internal Sources: Project Related Sales of Plots Cash & Downpayment 0 0 5.771 6,495 3,208 5,212 8,978 4,271 Deposits - Adv. Sales 0 597 440 11S 438 632 109 0 Interest Receivable Short-Term Investment 37 141 313 467 544 718 1,187 Items Not InvolvAng Movement of Funds Depreciation on Fixed Assets 0 23 28 39 46 46 54 S2 Total Internal Sources 0 657 6,379 6.962 4.160 6,434 9.860 5.509

TotalSources of Funds 25 Z.3Z LZLaA L5.L LJ83 ZLUis AI&=UZ LiM Application of Funds

Investment in Fixed Assets 0 349 0 21 0 0 0 0

Contrib. to Off-Site Infrastructure 0 0 358 390 186 343 614 219 Land 0 0 1.219 1.318 623 1.142 2,037 723 On-Site Infrastructure (W.I.P.) 46 1,362 2,273 2,775 1.902 4,131 2,641 1.015 Total Capital Expenditure 46 1.710 3,850 4.SOS 2,711 5,616 S,292 1,957

Operating Expenditure 7 284 281 330 362 291 27S 219 Interest on Deposits 0 0 119 64 10 86 109 0 Corporation Taxes 0 0 691 842 449 710 1.065 1.1S7 Dividends 0 0 81 99 53 83 125 136

Debt Service: CPF - IIRO Principal - Standard 518 58S 353 Accelerated 1,350 947 644 917 332 0 Interest 0 21 80 39 27 S9 38 1S Commitment Charges 22 21 18 16 8 2 0

CPF - NATIONAL Principal 0 14 31 39 48 60 74 41 Interest 0 37 71 63 54 42 28 10

Total Debt Service 0 94 1,554 1,106 789 1.604 1.060 419

Less: Int. during Const. 0 0 (172) (120) (97) (109) (68) (24)

Net Debt Service 0 94 1,382 986 692 1,495 992 394

Total Application of Funds 53 Z.LS 6LA LJLZ6 A.MLZM ziM ai3

Movement in Working Capital Increase/(Decrease) (28) 403 724 1.082 537 (413) 2,919 1,99

Being Movements in: Creditors (Increase)/Oecrease (6) (114) (972) (237) 572 (446) (440) 110 Oebtors Increase/(Decrease) 0 0 289 36 (164) 100 188 (23S) Cash Increase/(Decrease) (22) 517 1,407 1,284 130 (68) 3,170 2.12S

Total Movemnts Increa*e/(0arease) (32) 403 724 1.082 537 (413) 2.919 1.9s - 169 - ANNEX12 Page 4 of 8

CUKUROVA URBAN DEVELOPMENT PROJECT

Tablg 3: BALANCE SHEET

196 19878 198 . 22f2 1290 1991 1993 CurrentAssets

Cash & Short Term Investments 0 496 1.903 3,187 3,316 3,249 6,419 8,544 Debtors 0 0 289 325 160 261 449 214

Total Current Assets 0 496 2,192 3,511 3,477 3,509 6,868 8,757 QneratingAssets

Work in Progress 52 1,588 1,056 738 1,210 2,806 468 0 Stock of DevelopmentAssets 0 0 0 0 0 0 244 0

Total Operating Assets 52 1,588 1.056 738 1,210 2,806 712 0

Etxed Assets

Major Public Assets Fixed Operating Assets 0 390 468 585 690 782 907 1,008 Depreciation 0 (23) (56) (106) (171) (216) (304) (361)

Total Fixed Assets 0 367 412 479 519 566 603 648

TotalAssets 52 2inA1 3.hAQ LZ22 5_2n6 68 a L4Q

Current Liabilities

Creditors Falling Due in One Year Term Loans 0 31 39 48 60 74 41 0 Corporation Tax Payable 0 0 691 842 449 710 1.065 1,157 Dividends Payable 0 0 81 99 53 83 125 136 Accounts Payable 6 121 321 389 257 410 454 241 Bank Overdraft 22 0 0 0 0 0 0 0 Deposits Received 0 597 320 51 428 546 0 0

Total Current Liabilities 28 749 1,452 1.430 1.246 1,825 1,685 1,534

Loans: (+) CPF - IBRO 0 502 0 0 0 0 0 0 - NATIONAL 0 263 224 176 116 41 (0) (0) Total Long-Term Liabilities 0 764 224 176 116 41 (0) (0)

Eouitt & Retained Earnings

Equity 25 1,050 1,OS0 1,050 1,050 1,050 1,050 1,OSO General Reserve Opening Balance (7) (334) 396 1,286 1,760 2,511 3.636 Surplus/(Deficit)in Year (7) (327) 730 890 474 751 1,125 1,222 Closing Balance (7) (334) 396 1,286 1,760 2,511 3,636 4,858

kevaluationReserve Fixed Assets 0 41 115 199 285 379 469 566 Current Assets 6 180 424 589 749 1,076 1,343 1,398

rotal Equity and Reserves 25 937 1,984 3,124 3,844 5,015 6,498 7,872

ratalLiabilities ZA 3d.w A-= - 170 -

ANNEX 12 Page 5 of 8

Table 4: LAND SALES AND COMPLETIONPROGRAM

Land (HA) 1987 1988 1989 1990 1991 1992 1993

ResidentialLand Sold 25.3 29.4 28.9 25.5 24.9 24.9 11.8 Cumulative 54.7 83.6 109.1 134.0 158.9 170.7 Land for CommercialUse Sold 1 1 1 1 0.4 Land Completed 44 40 16 25 40 10 Cumulative 84 100 125 165 175

5. Sales Pricesat December1985 Levels.-I Sales pricesvary accordingto the level of infrastructureprovided - tertiaryinfrastructure is excludedfrom land sold to contractors. In Mersin, base sales prices range from TL 5,600/mr2 for land for low-incomeproperty to TL 16,000m/M2 for land for high-incomeproperty. Sales pricesfor low-incomeproperty reflect the policyof ensuringhalf the number of residentialunits are affordableto individualsin the lower half of the incomedistribution, which criterionis met if land price per unit is TL 640,000or less. (The subsidy implicitin these pricesranges from TL 2,100/m2 to TL 2,400/mi2 comparedwith estimated"market prices.") It is believed the base pricesare conservative; some sourcesbelieve that the HUDCs may realize rices for fully servicedland from TL 23,000/m2 (mediumincome) to TL 30,000/m (high income), especiallyonce some familieshave moved in and a comamunityhas started to develop.

6. Cost of Sales. The costs of land are calculatedat the time of sale, based upon acquisitioncosts, plus 10 percentand plus revaluationto current prices. Thirty-threepercent of the real cost of offsite infrastructureis chargedprorata to area sold. Onsite infrastructureis charged, in real terms,prorata to area sold. Costs of infrastructuresand land for social facilities(schools, health centers,emergency centers) are also charged to land sold and recoveredin prices to home buyers. Cost of sales also includes 2 percentof onsite cost to cover projectmanagement, and interestduring construction.The latter is calculatedat 20 percentof developmentcost chargedto sales,and subjectto a maximumof the interestpayable in the year.

7. Net OperatingExpenses are forecastto grow until 1989, with sales and promotioncosts increasingfaster during the early stages of the program. Technicalassistance is estimatedat 2 man-years(1 foreign,1 local) in 1987 reducedby 50 percent in each of 1988 and 1989. Straightline depreciationis chargedon revaluedfixed assetsover 25 years for buildings,8 years for plant and equipment,and 4 years for vehicles.

1/ Exceptas otherwisestated, all pricesand cost assumptionsare at December1985 levelsand inflatedby forecastnational inflationrates. - 171 -

ANNEX 12 Page 6 of 8

8. Profitson Sales are assumed to be taken only on sales of fully developedland. Presalesare not brought to the income and expenditure account.

9. InterestReceivable from Short-termInvestments is estimatedat 20 percentper annum on initialbalances plus half the movementduring the year.

10. InterestPayable: Intereston IBRD loans is estimatedat 8.25 percentp.a. plus 0.75 percentcommitment charge, plus foreignexchange movement,on nationalloans from DevelopmentSupport Fund (DSF) at 24 percent p.a., and on presalesdeposits at 20 percent'p.a.

11. Gain/Losson ForeignExchange is the change in debt repayments requiredas a resultof US$/TL paritychange during the year, assuming IBRD loans are held for a minimumof 364 days, even when acceleratedrepayments are made (para.14).

12. Profits: Corporationtax is calculatedat 46 percentof profit in the year, dividendsat 10 percentof after-taxprofit in the year, and the balanceremaining is transferredto the GeneralReserve in the balancesheet.

Sourcesand ApplicationsAccount (Table2)

13. Equity Investmentis assumedat TL 25 million in 1986, and just over TL I billionin 1987,or approximatelyone half of funds requiredin each year.

14. Loans. IBRD loans are disbursedagainst investments in infrastructure,design and supervisioncosts. IBRD standardrepayment is 17 years, including4 years of grace. Acceleratedrepayment by the HUDC is made if cash balancesexceed 25 percentof the followingyear's investment program. (This patternis an approximationto the requirementon the HUDC to repay loans at least proportionateto sales.) Nationalloans are providedin amountsneeded to ensure that at least 15 percentof the followingyear's investmentprc-'ram is availablein liquidassets at the end of the financial year. Repa)-ents are based upon annuity to repay the loan fully by the end of 1993. (This approximatesrepayment proportionate to sales.)

15. Investmentin Fixed Assets. Investmentis estimatedin buildings (TL 200 million),plant (TL 30 million),and vehicles(TL 10 million) in 1987 and a furtherTL 10 millionvehicles in 1989 (all December1985 prices).

16. DevelopmentWork-in-Progess incluides costs of works and equipment, design,and supervision,a two percentcharge for projectmanagement, and estimatedinterest during construction. Based upon the completionschedule, costs are transferredto the developedassets account,using average real costs of investmentprorated to area. Balancesof work in progressand in the developedassets accountsare revaluedarnually and a corresponding revaluationreserve made. Stocksare transferredfrom the DevelopedAssets Accountto the Incomeand Expenditureaccount pro rata to areas sold. - 172 -

ANNEX 12 Page 7 of 8

BalanceSheet (Table3)

17. Debtors (Receivables)are assumedat 5 percent of cash sales and installmentson deposits,and accountspayable are assumedequal to one twelfthof the year'sonsite infrastructureinvestment.

Results

18. The HUDC is highly profitableon the base assumptions. Table 5 containsa list of indicatorsof financialperformance. The ratio of average sale price to cost (in currentprices) rises due to the fact that the propertiesfor low-incomehouseholds are expectedto sell more rapidlythan those for higher incomehouseholds. No furtherequity contributionsare requiredafter 1987,and debt repaymentsexceed new debt from 1988. Financing of the ongoingprogram is essentiallyfrom depositsand retainedearnings. The debt equity ratio falls from 0.8 in 1989 to 0.1 in the followingtwo years. Debt serviceis comfortablycovered. If no cash equity were employed, about TL 2.3 billion in loans would be requiredin the first year (compared with TL 0.75 billionin the base run). Given the large cash generation,no additionalborrowing would be required,and the debt equity ratio would go to 2.4 in 1988 and 0.8 in 1989.

Table5: STATISTICSAND INDICATORS

Statistics 198 198 198 199 1991 192 93 GrossProfit Ratio 0.00% 28.70% 27.80% 26.62% 24.06% 20.56% 36.22% Net ProfitRatio 0.00% 12.50% 14.38% 16.12% 14.57% 12.98% 31.80% Rateof Return -16.69% 71.59% 47.96% 13.10% 21.48% 26.25% 16.87% AverageSale Pricem 2 0 14,744 17,198 20,433 22,902 25.161 36,320 AverageCost per 0o 10,513 12,417 14,994 17,391 19,987 23.163 Acid Test Ratio 0.66 1.51 2.46 2.79 1.92 4.08 5.71 Current+ OperatingAssets to CurrentLiabilities 2.8 2.2 3.0 3.8 3.5 4.5 5.7 TotalDebt:Equity Ratio 0.8 0.1 0.1 0.0 0.0 0.0 -0.0 Oebt ServiceCoverage (beforecapitalization) 4.0 3.4 5.1 4.2 3.3 7.8 9.5 InternalContribution toca$ptal *7 Y.O% 100.0% 100.0% 77.5% 71.3% 100.0% 100.0%

19. A seriesof sensitivitytests indicatethat the HUDCs are likely to be profitableunder a rangeof pessimisticassumptions about sales which are believedto be the most uncertainelement of the forecasts. The major implicationsof theseadverse forecasts are for the amount of financing required. If sales of "marketpriced" property (para. 5) slippedone year, an additionalTL 0.6 millionof loan would be required,(keeping equity constant). The implicationsof the very much higher prices for market priced - 173 -

ANNEX 12 Page 8 of 8 land suggestedby some officialswere also tested,on the furtherassumption that sales at those priceswould only be consummatedtwo years later than the base (keepingthe investmentprogram constant). This would requirevery substantialincreases in financingon the order of an additionalTL 1.4 billion from base, but even in this case, net loan repaymentswould commence in 1989. Changesin financingon this order would probablyprove affordable to Mersinmunicipality, but only at the expenseof reducingother capital expenditures.The consequenceswould be much more serious in the cases of Tarsusor Iskenderun,where municipalfinances are much tighterand shortfalls of these magnitudes(relative to the size of the HUDC program in those towns) would threatenthe rest of the municipality'scapital program. An additional sourceof risk to the municipality,if not the HUDC, in Iskenderunis that the price of land there is much higher than in the other towns,which argues for extremecare there in finalizingthe investment. An additionalsource of risk in Tarsus is that the HUDC sales programthere is a largerproportion of the total land market than in the case in the other towns.

20. The HUDCs are engagedin a businesswhich promiseslarge and quick profits. By the same token,large losseswill accumulaterapidly if managementis not active and businesslike. In these circumstances,it is essentialto establishfinancial arrangements which will provide room for maneuver,and specifically,to retain sufficientliquidity during the early periodwhen expensesof operationand developmentaccrue in advance of sales. These risks are particularlyhigh for new companiesoperating in an untested market. A close monitoringby the PRIMU of HUDCs' performancewill also be importantto provide timelyguidance. The two criticalfinancial criteria proposedto facilitatesound HUDC managementare: (a) that equity contributionsshould be in cash, and sufficientlylarge to maintaindebt equityratio of less than 1.5, and (b) the HUDCs should retain acid test ratiosof at least two thirds. Use of this ratio, insteadof the current ratio,is proposedsince currentassets are dominatedby work in progressand the inventoryof unsold land, which constitutethe major threat to liquidity if they become excessive. A ratio of less than unity should be acceptable becausedepositors (who typicallyreceive less than the market rate of intereston deposits,if they receiveany interestat all) tend not to withdrawthem so long as there is a prospectof acquiringa house.

21. Althoughsome HUDCs have expressedan interestin entering into creditsales, the draft policy statementindicates that the HUDCs will not sell land on credit. Given all of the uncertaintiesconnected with these enterprises,it is felt that administrationof cre#it may involveexcessive difficulties(as well as additionalfinancial requirements and risks), in returnfor uncertainadvantages (given the strongmarket interestin the UEA sites). - 174 -

ANNEX 13 Page 1 of 8

TURKEY CUKTJROVAURBAN DEVELOPMENTPROJECT

INCOME DISTRIBUTION.AFFORDABILITY AND POVERTYANALYSIS, AND ECONOMICANALYSIS

IncomeDistribution

1. Table 1 summarizesthe informationon income distributionfrom the Adana householdsurvey and from the surveysof householdsin a sampleof ge.ekonduareas to be upgradedduring the project in Adana, Tarsus,Mersin, and Iskenderun. The figuresare for end December,1985. They have been increasedby about 7.1 percent to reflect inflation(at 44.5 percent), economicgrowth (at 7 percent in 1985-86),and populationgrowth (at 2.5 percent)on the assumptionthat per capita incomesin Cukurovarose at the nationalaverage from the date of the surveys.

Table 1: HOUSING (DISPOSABLE)INCOME DISTRIBUTION (TL '000/month)

Percentile Group Adana GecekonduAreas (Households) Households Adana Tarsus Mersin Iskenderun

0 - 10 32.1 32.1 32.1 32.1 32.1 0 - 20 42.8 36.4 42.8 42.8 42.8 0 - 30 48.2 42.8 53.2 48.2 48.2 0 - 40 55.7 48.2 56.8 53.6 53.6 0 - 50 65.3 56.8 64.3 64.3 58.9 0 - 60 75.0 66.4 75.0 76.9 64.3 0 - 70 88.9 77.1 85.7 80.3 71.8 0 - 80 107.1 91.0 101.7 101.7 85.7 0 - 90 140.3 113.5 122.8 133.9 107.1

Arithmeticmean 83.5 66.4 73.9 73.9 67.5 (Sample) Valid Interviews 963 587 362 189 181

Source:Household Income Surveyscarried out October/November1985 by Cukurova Study Team. - 175 -

AMNEX 13 Page 2 of 8

Affordability

2. Water and Sanitation. Averagewater and sanitationtariffs, at under 3 percentof incomesin most cities in most years, and somewhatless for familiesat the 20th percentileif they consumeonly the "lifeline"supply of 7.5 m3 per month, are affordable. Connectionfees, at TL 60,000 for water and sewerage,each come to a littleunder one month's incomeat the 50th percentile. They are, however,payable over three years and so shouldbe affordable.

3. Upgradingand HousingManagement Areas. The combinedcost recovery chargeof about TL 390,000 (TL 150,000for legalization,TL 120,000for water and sewerageconnections, and TL 120,000for improvementfees, on the assumptionthat the propertyhas an assessedvaluation of TL 2 millionand that two percent is levied for each of roads,water and sewer) comes to a littlemore than one half of annual incomeat the 50th percentile. Since the water fees are payableover three years, and the improvementcharge over two years,payments come to TL 250,000in the first year (about35 percentof income,less than 13 percent in the secondyear, and under 6 percent in the third,after takingaccount of increasesdue to inflation). Given the strong interestin Turkey in securinglegal tenure (so as to be eligiblefor services,access to credit,etc.), it is believedthat these chargesshould be affordableand collectible. Through the institutionof muktars (village headmen),also, there is a mechanismfor identifyingthose indigenthouseholds who are unable to pay.

4. Urban ExpansionAreas. Affordabilityof plots in the urban expansion areas has been examinedfrom two pointsof view: (a) informalsector practice, and (b) affordabilitygiven creditarrangements now in place in Turkey. In the informalmarket, most familieseither seek opportunitiesto pay developers during the courseof construction(for apartments),or, in the case of most rural-urbanmigrants and many others in the projectcities, they buy land and then constructhouses as their means permit. The sourcesof funds include proceedsof sale of farms,borrowing from other familymembers, and, during construction,from buildingmaterials suppliers. Land sellersalso sometimes providecredit over brief periods. Nevertheless,the bulk of housing finance in cases interviewedin depth was either cash savingsor transferswithin families. The householdsurveys indicated that the medianvalue of house (in December1985 prices)was about TL 3.2 millionsfor familieswith incomesup to the 70th percentile,above which house valuesescalated rapidly. Surveys of the market indicatedthat land came to 15 percentto 25 percentof house value. Using a 20 percentratio, it was assumedfor designand pricing purposesthat at least half the units in the UEAs shouldhave a land cost of no more than TL 640,000. Pricesof ge9ekonduplots are reportedin the range of TL 0.3 - 0.7 million. A price near the upper end of this range, for a plot which has all services,is expectedto prove attractiveto personswhose only other alternativewould be geqekonduliving. .TheMass HousingFund is the only substantialsource of formalhousing creditin Turkey. Purchasersof land on UEAs, who have incomesbelow TL 1.7 million per annum,are eligible for financefrom MHF for housingand, as of early 1987, the cost of infrastructure,at 15 percentinterest (on units up to 60 squaremeters) over 15 years in a maxisnmamount (February1987) of TL 3 million. Deflatedto - 176 -

ANNEX 13 Page 3 of 8

December19E5 prices,this comes to TL 2.2 million,or about 70 percentof the valhe of the median unit found in the householdsurveys. (Housesof 50-60 m2were built by contractorson Tarsus and Adana UEAs for about TL 2.5 millionduring 1986.) Although the initialmonthly paymentson such a loan would be a littleunder half the median income, given expectedrates of inflation,monthly payments would be below 30 percentof income in the third year of repayments. These figures imply that familieswho can find from TL 0.6 to TL 1.1 million in cash shouldbe able to afford housing on the project sites. This is not expectedto create a major obstacleto sales to members of the lower-incomegroups.

PovertyAnalysis

5. On the assumptionof GNP growthat 7 percentbetween 1985 and 1986, populationgrowth at 2.5 percent,GNP per capita in December 1985 was TL 666,800. With an averagefive-person household, this comes to TL 3.3 million per household,or TL 277,850per month. The Bank's definitionof the urban povertylevel is 25 percenthigher than the rural povertylevel, which is set at thirtypercent of nationalper capita income;it would come to TL 104,200 per householdper month. Deducting30 percentin taxes yields a level of monthlyhousehold disposable income of about TL 72,900,which would be at the 58th percentilein Adana households,the 66th percentilein surveyedAdana gegekondus,the 57th in Mersin, the 58th in Tarsus,and the 71st in Iskenderun.

EconomicRates of Return (ERRs)

6. All benefitsand costs have been estimatedin constantprices. Analysisof costs in border prices indicatedlittle variation among different componentsfrom the standardconversion factor of about 0.8. Since the statementof benefitsin border pricesalso involvedapplying the standard conversionfactor, no bias was introducedinto ERRs by using market prices to representeconomic values. The time horizonfor discountingall costs and benefitswas 2014 (20 years after projectcompletion). Cost and benefit flows for all componentsare presentedin the ProjectFiles.

7. RentalBenefits. The economicbenefits of upgradingand housing managementcomponents were estimatedas: (a) the increasein rentalvalues of housingunits due to improvementsin servicesand (b) the incrementin propertyvalues, over and above what is reflectedin rental values, from legalizationand increasedsecurity of tenure. Regressionanalyses of rentals on housingcharacteristics from the getekondusurveys, with some adjustments based on the analysisof the Adana survey,and adjustmentsto remove effects of collinearitybetween provision of sewerageand town coefficients,yielded the followingexpression (superscripts are either 1 or the proportionof houseswhich have that characteristicin the town concerned).

Rentalvalue = 1.283 Mersin * 0.787 Tarsus * 0.975 Iskenderun * No. of rooms 0'768 * 0.887 (Subject to flooding) * 0.867 (temporary construction) * 1.177 (piped water) * 1.183 (electriCity Installed) * 1.106 (sewerage connection) * 1.2 (average road) * 1.041 (individual title) - 177 -

ANNEX 13 Page 4 of 8

For example,rentals for Mersinwere calculatedusing a value of 1 for the Mersinsuperscript, 0 for the other town superscripts,4 for number of rooms, 0.76 for temporaryconstruction materials, since that was the percentageof gegekonduhomes in that town with temporarymaterials and so on. Average road meant neighborhoodswith up to 50 percentof roads paved (and are compared with neighborhoodswith bad roads,which have under 11 percent of roads paved.) Given the characteristicsof the gecekondussurveyed in each town, the followingrental values were derivedfor (a) a new dwelling in a ge9ekondu withoutfacilities (except for electricity,which seems to be installedvery rapidlyin most areas); (b) existinggecekondu areas; and (c) upgradedareas.

Table 2: ESTIMATEDRENTAL VALUES (TL/month)

Adana Mersin Tarsus Iskenderun

(a) new dwelling 9,388 12,469 8,571 9,604 (b) existinggegekondu 11,695 15,941 9,533 11,288 (c) upgradeddwelling 15,506 20,325 13,389 15,712

8. Taking the differencebetween rentals on upgradedand existing,and betweenupgraded and new dwellings,yields the estimateof rental benefitsfor upgradingand housingmanagement components , respectively.

Table 3: RENTAL BENEFITSOF UPGRADINGAND HOUSINGMANAGEMENT (TL/month)

Adana Mersin Tarsus Iskenderun

Upgrading 3,811 4,383 3,856 4,424 HousingManagement 6,118 7,856 4,818 6,108

Althoughthese values were used in the analysis,it shouldbe emphasizedthat the gecekondusurveys were not designedto providevalid comparisonsamong the towns so much as to gain data on a varietyof upgradingsituations.

9. Title Benefits. Regressionsof housingvalue on housing characteristicsindicated that the value of dwellingunits with legal individualtenure was 23 percenthigher than the value of units without legal tenure,other thingsequal. Adjustingfor the 4 percentpremium in rental values of legal units, this impliesthat legalizationitself resultsin a propertyvalue increaseof 19 percent. ERRs.havebeen calculatedexcluding as well as includingthis "title"benefit. Title benefitswere assumed to accrue in the year that upgradingtakes place,or, in the case of infill,when houses are built, while rentalbenefits accrue startingafter completionof the upgrading. - 178 -

ANNEX 13 Page 5 of 8

10. The numbers of housingunits are forecastto increaselinearly to the capacityof the areas over the ten years followingthe installationof infrastructures.ERRs have been estimatedon a programrather than a site basis, that is, calculatingidentical benefits for all householdsin each town, and deductingcosts of all roads,water, sanitation,and drainageworks in the upgradingand housingmanagement program for that towr..Operating and maintenancecosts were not estimatedsince they would be recoveredfrom tariffsand taxes not includedin the benefit forecast.

Table 4: ERRS OF UPGRADINGAND HOUSINGMANAVEMENT COMPONENTS

Adana Mersin Tarsus Iskenderun Upgrading

Base 96.0 61.4 34.4 73.3 Excludingtitle benefits 19.0 17.8 12.1 17.4 Benefits+ 20% 128.1 86.3 47.3 100.1 Benefits- 20% 65.6 41.7 23.4 48.5 Costs + 201 70.5 44.8 25.1 52.4 Costs- 20X 136.3 89.0 50.8 NC Delay benefits1 year 48.2 36.0 23.8 39.3

HousingManagement

Base 133.2 73.0 32.9 118.1 Excludingtitle benefits 37.5 30.0 14.8 30.2 Benefits+ 20% 169.3 94.7 45.9 154.5 Benefits- 20% 98.4 53.0 24.2 83.1 Costs + 20% 104.1 56.2 25.6 38.1 Costs - 20% 178.5 100.2 45.1 163.8 Delay benefits1 year 66.3 43.5 24.3 56.8

11. Urban ExpansionAreas. Benefitsof the UEAs were estimatedas the rentalvalue of land sold for residentialpurposes, and the price of land sold for commercialand workshopuse. Analysisof the householdand gecekondu surveysindicated that the average ratio of rentalto propertyvalue was about 5.5 percent,and this ratio was applied to land for familiesin the upper half of the incomedistribution who, it was assumed,would in the absenceof the projectfind servicedland in other formalareas. For lower incomepeople, however,the alternativewithout the projectwould be an unservicedplot on the urban peripheryand for them the rentalvalue of the land sold includesan explicitadjustment to reflectthe value of the servicesbeing providedby the project. Their rentalvalues were thereforeestimated as the average rental value of unservicedland derivedfrom the gegekondusurveys plus the increment in rentalvalues applicable to housingunits in housingmanagement areas (table3 above). The rentalvalues for Ceyhanwere based on averagesfor the other towns. These adjustmentsimply a rent to value ratio of 10.5 percent to 16.7 percentfor low incomehouseholds, depending on the town, as compared with the 5.5 percentfor the higher incomehouseholds. A conservativebias was impartedto the estimatedbenefits by excludingtitle benefitsand any benefitsfrom householdswhich - 179 -

ANNEX 13 Page 6 of 8 would settleon the site in futureyears. Inclusionof titlebenefits on low incomehouseholds would increaseERRs for Tarsusand Ceyhan to 12.4 percent and 8.4 percent. Costs were estimatedas the annual rentalvalue of the land withoutthe project (5.5 percentof capitalvalue), investmentcosts of site preparation,and on-siteand off-sitewater, sanitation,drainage, and roads, and operatingcosts of the HUDC. Futurecosts of operationand maintenance were not estimatedas they would be defrayedfrom tariffs,charges, and taxes not includedin rentalvalues. Costs of electricityand telephonesequipment and installationwere excludedsince the benefitsof those serviceswere not estimated. Similarly,costs of educational,health, and emergencyfacilities were excludedas their benefitswere not quantified. All costs of land, water, sanitation,roads and civil works connectedwith electricityand telecommunications,including those used by social facilities,were included in costs,however, and this impartsa furtherconservative bias to the estimatedERRs.

Table 5: RATESOF RETURNON URBANEXPANSION AREA COMPONENTS

Adana _L Mersin Tarsus Ceyhan Iskenderun

Base 17.1 15.6 9.4 6.4 17.3 One-yeardelay benefits 13.6 13.3 8.3 5.7 13.7 Costs + 20% 12.3 12.3 7.0 4.3 12.3 Costs - 20% 25.7 20.6 12.8 9.2 26.3 Benefits+ 20% 23.8 19.6 12.2 8.6 24.3 Benefits - 20% 11.5 11.6 6.5 3.8 11.3 Includingtitle benefits NC NC 12.4 8.4 NC

1/ Althoughthe Adana HUDC is not being financedunder the project, ERRs were calculatedfor purposeof comparison.

12. As noted in para. 11, the ERRs for urban expansionareas are conservativelyestimated. The low value for Tarsus is closelyassociated with the low estimateof rentalbenefits in that town, which may arise from nonrepresentativenessof the sample. In the case of Iskenderun,high land costs are an importantfactor, as they are in Ceyhan (in both towns, land costs are expected to be a higher proportionof the cost of servicedland than in the other towns).

13. Water and Sanitation. Benefitsof water and sanitationinvestments were estimatedas the marginalvalue of incrementalwater consumed,plus accessbenefits paid in the form of connectionfees. Marginalvalue for each group of consumerswas estimatedas the marginal tariff,including water price,sewerage surcharge and VAT (at a rate of 12 percent). Incremental water consumedwas estimatedas forecastwater consumption,less estimated consumptionwithout investmentsto upgrade and expand water and sanitation services. The "withoutinvestment" consumption was assumed to decreaseat 2.5 percentper annum until the horizon. The sensitivityof the ERR to consumptiondecreases without the projectof 5 percentand zero percentper - 180 -

ANNEX 13 Page 7 of 8 annum were also tested. Health benefitslikely to arise from improvedwater and sanitationservices were not quantified. Costs includedall forecast investmentcosts in water and sanitationduring the period 1987 to 1994 (includingcosts of ongoing Iller Bank works, and nonprojectinvestments in connectionsoutside project areas and network investmentswhich commencein 1993 and 1994 when the projectis finishing). Operatingcosts allocableto the projectwere estimatedas the share of incrementalwater consumptionto total -aterconsumption.

Table 6: ERRS OF WATER AND SANITATIONCOMPONENTS

Adana Mersin Tarsus Ceyhan Iskenderun

Base 16.8 8.9 8.9 11.2 12.8 Withoutproject water supplydecrease: 5* per annum 20.4 10.9 13.4 15.1 16.0 0n per annum 11.2 6.0 -2.8 3.9 7.6 Demand4 202 24.1 13.0 13.6 lf,.2 19.5 Demand- 20% 9.6 4.5 0.3 4.2 6.4 CapitalCosts + 20% 12.8 6.6 6.0 8.4 9.5 CapitalCosts - 20% 23.4 12.3 13.5 15.3 17.8

14. Drainage,Road Maintenance,and Solid Waste. The drainagecomponents would have a substantialimpact on health in areas subject to flooding, particularlyin reducingincidence of malaria,hepatitis, dysentery, and gastro-enteritis.It would also lead to some increasein propertyvalues (the gegekondusurvey found that,other thingsequal, housingunits subject to floodingearned rentalsabout 11 percentlower than other houses). The solid waste componentswould produce two major benefits:improved efficiency of collection,resulting in a better standardof service to customers,and reducedenvironmental and health threatswhen existingunsystematic dumps are replacedwith properlymanaged landfills. The benefitsof the road maintenancecomponent would be a better standardof roads,and, over time, lowermaintenance costs as routineand periodicmaintenance activities reduce the costs of emergencyrepairs and reconstructingheavily damaged roads. Due to the importanceof intangiblebenefits, and inherentdifficulties of estimatingthose benefits which are quantifiable,ERRs have not been estimated for these components,which togetheraccount for about 17 percent of project cost.

15. Roads. First year rates of returnwere estimatedfor the main road segmentsto be upgradedin Adana,Mersin, and Tarsus. Benefitswere estimated on the basis of savings in vehicle operatingcosts and passengertime savings. No estimateswere made of savingsfroul accident reductionor reduced maintenanceexpenditures. Time savingswere estimatedon the basis of estimatesof the speed of trafficwith and without the project in 1992, in turn based on forecastvolume/capacity ratios for 1992 and speed/flow - 181 -

ANNEX 13 Page 8 of 8 relationshipsderived from studiesin Istanbuland abroad. Traffic growth forecastsin Adana were based upon trafficcounts made in 1986 weightedby forecastedpopulation increases in those mahalles(districts) served by the roads, togetherwith increasesin travel,associatedwith income changes. Less elaboratesurvey data were availablein the other towns,and trafficforecasts were based primarilyupon forecastsof populationplus a factor to reflect increasingtraffic flows, togetherwith adjustmentsfor specificsegments where trafficincreases due to specialcircumstances are anticipated(e.g., developmentof the expansionarea in Tarsus). Existingmodal splits among cars, motorcycles,trucks, buses, and animal-drawncarriages were assumed to remain in 1992. Passengertime savingswere valuedat one third of estimated wages (TL 87 for bus passengers,and TL 174 for car passengersin December 1985 prices). Operatingcost savingswere estimatedfor automobiles,trucks, and buses. Rates of return are presentedin table 7.

Table 7: FIRST-YEARRATES OF RETURN (FYROR)ON ROAD COMPONENTS

FYROR

Adana

KaraissliRoad 105 Inner Ri.g Road 8' 13 EasternDistrict Road 25 KaratasRoad 76

Mersin

Camili Road 3b/ Gozni Road 20

Tarsus

Demirkapi-EastUEA 15 West ConnectorRoad NC E5-WestArea 15

Iskenderun NC

Five roads, totalling4.8 km. a/ First phase to be constructedin project. _/ This low ERR resultsfrom the facts that (i) the benefitmeasure does not reflect the reduced road and vehiclemaintenance costs from paving this road, and (ii) the costs includepurchase of a wider right of way which will only be used after the projectperiod. - 182 -

ANNEX 14 Page 1 of 1

TURKEY CUKUROVAURBAN DEVELOPMENTPROJECT

CONTENTS OF THE PROJECT FILE

A. Documents

14 Draft feasibilityStudies (one report on each town and project report togetherwith list of 70 supportingvolumes in the Emena Information Center)

2. TransportStudy for Adana, Mersin, Tarsus,and Iskenderun,Final Report (8 volumes)

3. Iller Bank ManagementStudy, Draft Final Report (2 volumes)

4. MunicipalTraining Centre: The Approach

B. WorkingPapers (includingdiskettes with financialand economicanalyses)

1. DetailedImplementation Forecasts

2. DetailedCost Tables (COSTAB)

3. MunicipalFinance Analysis

4. Housingand Urban DevelopmentCompanies Financial Analysis

5. Water and SanitationDepartment Financial Analysis

6. EconomicAnalysis ROMANIA 30' 40

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