Document of -.- The WorldBaLnk

FOR OFFICIAL USE ONLY Public Disclosure Authorized ReportNo. 3679a-YU

STAFF APPRAISAL REIPORT

YUGOSLAVIA Public Disclosure Authorized - AGRICULTURAL DEVELOPMENT PROJEC

April 15, 1982 Public Disclosure Authorized

Regional Projects Department Europe, Middle East and North Africa Agriculture III Public Disclosure Authorized

This documenthas a restricteddistribution and may be used by recipientsonly in the performanceof their official duties. Its contentsmay not otherwisebe ilisclosed without World Bank authorization. CURRENCYEQUIVALENTS*

Calendar 1981 February 15, 1982*

Currency Unit Yugoslav Dinar I US$ 1 Din 41.82 Din 43.678 Din 1 US$ 0.024 US$ 0.022 Din 1,000,000 US$ 23,910 US$ 22,895

WEIGHTS AND MEASURES

1 cubic meter (m3) 0.76 cubic yards 1 hectare (h) 2.5 acres 1 kilogram (kg) 2.2 pounds 1 kilometer (km) 0.6 miles 1 metric ton (ton) 2,200 pounds I square kilometer (km2) = 2.6 square miles

ABBREVIATIONS AND ACRONYMS

AIK = Agro-Industrial Kombinat BCO = Basic Cooperative Organization BOAL = Basic Organization of Associated Labor COAL = Composite Organization of Associated Labor HEPOK= Herzegovina Agricultural Kombinat ICB = International Competitive Bidding LCB = Local Competitive Bidding LDR = Less Developed Region PBS = Privredna Banka Sarajevo SDK Social Accounting Service SFRY Socialist Federal Republic of Yugoslavia SRBH Socialist Republic of Bosnia-Herzegovina WO Work Organization

YUGOSLAV FISCAL YEAR

Janury 1 - December 31

* The Yugoslav Dinar has been floating since July 13, 1973. The currency equivalents effective on February 15, 1982 have been used in this report. FOR OFFICIAL USE ONLY

APPRAISAL OF

BOSNIA-HERZEGOVINAAGRICULTURAL ])EVELOPMENTPROJECT

YUGOSLAVIA

Table of Content:s

Page No.

I. INTRODUCTION ...... 1

II. THE AGRICULTURAL SECTOR ...... 1

A. Contribution to the Economy ...... 1 B. Performance ...... 2 C. Land Resources ...... 3 D. Production Structure ...... 3 E. Food Processing Industry ...... 4 F. Development Strategy ...... 6 G. Bank Strategy in the Agricultural Sector ...... 8 H. Performance Under Previous World Bank Projects ...... 8

III. THE PROJECT ...... , 9

A. Concept and Objectives ...... 9 B. Project Content ...... 10 C. Status of Design and Project Implementation ...... 11 D. Costs ...... 12 E. Financing ...... 14 F. Retroactive Financing ...... 14 G. Environmental Impact ...... 14

IV. PROJECT IMPLEMENTATION ...... 15

A. Organization and Management ...... 15 B. The Borrower (PBS) ...... 15 C. Lending Policies and Procedures ...... 16 D. On-Lending Terms ...... 16 E. Procurement ...... 17 F. Disbursements ...... 18 G. Accounts and Audit ...... 19 H. Monitoring, Reporting and Evaluatioa ...... 19

V. PRODUCTION, MARKETS, PRICES AND FINANCIAL ANALYSIS ...... 20

A. Production and Cost Recovery ...... 20 B. Marketing ...... 21 C. Prices ...... 23 D. Financial Analysis ...... 23

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwlse be disclosec without World Bank authorization. Table of Contents (Con'd) Page No.

VI. PROJECT BENEFITS AND JUSTIFICATION ...... 25

A. Benefits and Distribution ...... 25 B. Employment Effects ...... 25 C. Economic Analysis ...... 26 D. Risks ...... 28

VII. RECOMMENDATIONS ...... 29

ANNEXES

1. Disbursements Table 1; Schedule of Bank Disbursements ...... 31

2. Financial Analysis Table 1: Agroindustries - Subproject Cash Flows and Analyses ...... 32 Table 2: - Cash Flow and Analyses ...... 33 Table 3: Agroindustries - Financial Prices ...... 34 Table 4: Popovo Polje - Financial Prices ...... 36 Table 5: Agroindustries - Detailed Project Costs including Phasing ...... 38 Table 6: Popovo Polje - Detailed Project Costs including Phasing ...... 40

3. Economic Analysis Table 1: Agroindustries - Cash Flow and Analyses .41 Table 2: Popovo Polje - Cash Flow and Analyses .42 Table 3: Overall Project - Cash Flow and Summary Results 43 Table 4: Agroindustries - Economic Prices .44 Table 5: Popovo Polje - Economic Prices .45

4. Popovo Polje Irrigation Component .47

5. The Borrower: Privredna Banka Sarajevo Table 1: Statement of Income and Expense .49 Table 2: Balance Sheet .50

6. Project Implementation File - Table of Contents .51

7. Project Background File - Table of Contents .52

8. Investors and Locations of Project Components .53

MAPS

IBRD No. 16067 - SFRY - Location of Project Investments IBRD No. 16025 - Popovo Polje - Proposed Irrigation System APPRAISAL OF

BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENTPROJECT

YUGOSLAVIA

I. INTRODUCTION

1.01 The Socialist Republic of Bosnia-Herzegovina (SRBH) is located in the south central part of the Socialist Federal Republic of Yugoslavia (SFRY) adjoining the with about 20 km of coast line. Triangular in shape, it comprises 51,129 square kilometers or 20% of the total area of SFRY. It has a population of 4.2 million or 19% of the total population of SFRY. Bosnia-Herzegovina is one of Yugoslavia's least developed regions; 1979 per capita income was $1,695, 68% of the national average.

1.02 The proposed project consists of two separate components; agroindustries, consisting of a number of different food processing plants in Bosnia, and Popovo Polje development, a small somewhat experimental investment in irrigation, drainage and on-farm production in a valley in Herzegovina. Agroindustries comprise about 80% of the estimated investment cost. The project would follow and support three agricultural credit projects (1129-YU, 1477-YU and 1801-YU) in which SRBH is participating and an agricultural and agroindustry project supported by the Bank in the region of SRBH (1616-YU). A three-volume preparation report of the proposed project, dated February 1980, was received in the Bank at the end of March 1980 and a Bank identification mission held discussions in mid-April with officials of the SRBH government and the proposed borrower, Privredna Banka Sarajevo (PBS). The Government indicated that the proposed project included the highest priority investments of the 1981-85 plan period for which IBRD support was sought. Bank missions during October and December 1980 and February/March 1981 advised and guided PBS and the investors in further project preparation. This report is based on the findings of an appraisal mission of Messrs. R. Hunt (Leader/Economist), M. Tirmazi (Irrigation Engineer), S. Ahmed (YP/Economist), F. Wright (Financial Analyst), Bank, and Mrs. E. Garibaldi (Horticulturalist) and Mr. C. Cronberg (Agroindustries Engineer), Consultants.

II. THE AGRICULTURAL SECTOR

A. Contribution to the Economy

2.01 The contribution of agriculture to the overall economies of SFRY and SRBH is summarily quantified in Table 2.1. - 2-

Table 2.1: CONTRIBUTION OF AGRICULTURE IN THE SFRY AND SRBH ECONOMIES

1971 1978 1979 Indicator ------%_------___

Social Product SFRY 17.5 13.8 13.6 SRBH 14.5 15.0 15.1

Economically Active Population SFRY 42.9 38.5 37.2 SRBH n.a. 41.3 39.9

Export SFRY 12.9 5.4 4.6 SRBH 7.01/1 4.2 n.a.

Investments /2 SFRY 7.1 8.0 (5.3) (4.8) SRBH 5.4 6.2 n.a.

/1 1972 figure. /2 In current prices, except for data in parentheses, which are in 1972 prices.

2.02 As expected in an industrializing economy, agriculture's share of total material output is declining. However, in SRBH, agriculture's share of the total output is increasing marginally. This is all the more remarkable in view of agriculture's relatively small share of total investment, which peaked in SRBH at 7.7% in 1973 and declined to around 6% thereafter. This was due to a very large build up of investment in the individual sector, which also peaked in 1973 and declined to more normal levels in the following years. Agriculture's shares in population and exports are, as to be expected, declining in both SFRY and SRBH though still significant.

B. Performance

2.03 Recent performance in agricultural production in both SFRY and SRBH is summarized in Table 2.2 below;

Table 2.2: SFRY AND SRBH - AGRICULTURAL PRODUCTION INDICES (1969-71 = 100)

Total Agricultural Production SFRY Food Production Year SFRY SRBH Total Per Capita

1968 93 94 97 99 1971 103 101 102 101 1975 112 116 117 111 1976 119 120 123 116 1977 125 135 127 119 1978 117 124 122 114 1979 124 131 126 116 1980 120 128 n.a n.a. Growth Rate 1968-79 2.65% 3.1% 2.4% 1.45% 1968-80 2.15% 2.6% - -

Sources; I. Statistical Yearbook of SFRY and SRBH, various issues. II. FAO Production Yearbook, various issues. 2.04 Agricultural production in SRBH grew a little faster than in SFRY as a whole, although in neither case was growth very impressive. The growth rate of 2.65% annually is only slightly better than the world average over the same period, which is not a very good performance for a well advanced developing country with a firm policy of expanding agricultural production. Per capita food supply has grown at an even slower rate due to population growth of almost 1% annually. With the decline in output in 1980 growth performance suffers correspondingly.

C. Land Resources

Table 2.3: SFRY AND SRBH - TOTAL ANI) AGRICULTURAL LAND 1979

Cropping Pattern /1 Grass Indust. Horti- Total Agric. land Arable Cereals Crops Fodder culture ('000 ha) ------%------%------

SFRY 25,580 56 25 28 61 8 13 19 SRBH 5,113 50 27 21 50 1 17 18

71 Percentage of total arable land. Source; SFRY Statistical Yearbook 1980.

2.05 Land use in in Table 2.3 shows SRBH as rather similar to SFRY. The major difference is that its agricultural and arable areas as shares of its total area (50% and 21%) are somewhat less than the average for SFRY (56% and 28%), due to its mountainous terrain. The sum of the cropped areas in SFRY is 1% greater than the area of arable land indicating a small presence of double cropping, most probably in vegetables. In SRBH this sum is actually 14% less than the area of arable land indicating that part of the arable land is either fallowed or abandoned. This situation has prevailed in SRBH at least since 1960. Arable area has been declining by 0.6% annually over that time, thus the slightly superior performance of SRBH agriculture (Table 2.2) is due to productivity growth.

D. Production Structure

2.06 The structure of agricultural production is outlined in Table 2.4 below. Agriculture is the only sector of the economy which is predominantly privately owned; about 84% of the country's arable land belong to nearly 2.2 million individual farmers (average size of holdings, 3.5 ha), who constitute about 89% of the agricultural labor force. The individual sector exists side by side with social sector agro-kombinats, who hold about 16% of the arable land and produce about 28% of the nation's agricultural output; this position reflects the better land, more irrigation, modern technology, and larger capital inputs of the social sector. The relative performance of the social and individual sectors in agriculture can be gauged from the ratios of production, investment and livestock to arable land. - 4 -

Table 2.4: AGRICULTURAL PRODUCTION STRUCTURE

SFRY SRBH Agricultural Individual Individual Organizations Farms Social Sector Sector Indicator 1969 1979 1969 1979 1967 1978 1967 1978

Agric. Social Prod. % 18 27 82 73 n.a. n.a. n.a. n.a. Investment % 44 49/1 56 51/1 42 44/2 58 56/2 Agric. Prod. Index (1969=100) 100 165 100 115 n.a. n.a. n.a. n.a. Tractors % 43 8 57 92 n.a. n.a. n.a. n.a. Livestock % (ave. weight 500 kg) 8 12 92 88 8 18 92 82 2 1 98 99 Arable land 14 16 86 84 6 5 94/3 95 No. of holdings 2,073 2,879 2.6 mil n.a. n.a. n.a. 0.5 mil n.a.

Source: SFRY Statistical Yearbook 1980. SRBH Statistical Yearbook 1979 /I 1978 72 1977 /3 1969 n.a. = not available.

For the country as a whole productivity per arable ha in the social sector is only about twice as great as in the individual sector, while annual investment per ha is about 3 times that of the individual sector. This ratio also holds for tractors. The individual sector has almost 90% of all livestock, but its performance in terms of stocking rate is still 40% better than that of the social sector. In terms of production efficiency, the aggregate performance of the individual sector appears to be superior to that of the social sector. This in part reflects the pattern of output where the emphasis, in the individual sector, is on higher valued animal products. Crop yields per ha and output per animal are greater in the social sector than in the private sector, but this is only to be expected given the quantity and quality of inputs.

E. Food Processing Industry

2.07 Agroindustries in general and food processing in particular have been the focus of investment in SFRY. In 1978 estimated investment in food processing totalled Din 46.5 billion or 4.4% of estimated total investment expenditures. For SRBH this amounted to Din 4.6 billion or 2.7% of SRBH's total investment expenditures. For 1969 these numbers were Din 4.1 billion or 2.8% for SFRY and Din 185.6 billion or 0.8% for SRBH. As indicated by these data, food processing investment in SRBH continues to be well behind the national average. Superficially, this would seem easily amended by increasing investment. However, the spate of investment in the past decade appears to have generated problems of over-capacity in the industry in general in the sense that processing capacity now well exceeds the volume of raw material available for a number of products. Table 2.5 shows current utilization levels for a variety of food processing activities for SFRY, which range from 25% for frozen fruit processing to 80% for fresh milk processing. For meat, utilization is 60% for slaughtering and 75% far processing (cured and smoked meats, sausages and salami, etc.). Table 2.6 shows 1979 utilization figures, by Republic, for food processing industries of interest to the project; namely flour mills, dairy products, vegetable oil and meat.

Table 2.5: SFRY - ACTUAL AND PLANNED AGROINDUSTRY CAPACITIES AND CURRENT UTILIZATION (tons)

Existing Capacity Capacity /1 Planned Type of Product Capacity Utilized Utilized () Production 1985

Dairy Fresh milk 986,000 739,000 80 1,105,000 Other milk prod. 601,866 332,970 55 443,700 Meat Slaughtering 1,000,000 708,000 60 1,000,000 Processing 490,000 383,818 75 545,000 Fruit & Veg. Canned veg. 288,303 134,671 47 187,550 Canned fruit 120,340 42,025 35 53,118 Frozen fruit 40,152 10,135 25 12,800 'Fruitjuice 256,404 120,469 47 152,280 Wine & liquor 654,221 159,685 25 233,790 Livestock feed 'Feedmix & super concentrates 5,000,000 3,500,000 70 6,000,000 Cold stores Storage facili- ties (M3) 3,957,100 1,385,000 35 5,036,500

Source: SFRY Chamber of Economy, June 1981. /1 Single shift basis.

Table 2.6: SFRY AND REPUBLICS - CAPACITY UTILIZATION /1 FOR SELECTED AGROINDUSTRIES 1979

SR SFRY SRBY Mont. Croa. Mac. Slov. Kos. Vojv. Serb. Total …%------…=___------

Flour mills 81 85 44 85 74 89 66 83 76 80 Dairy products 74 75 67 72 78 77 95 74 75 74 Vegetable oil 81 98 71 94 42 89 97 78 94 80 Meat - Slaughter- ring & processing 74 70 74 77 60 76 78 71 74 73

Source; SFRY Federal Institute for Statistics /1 Single shift basis.

2.08 The general implication of Table 2.5 is that substantial underutilization occurs in non milk dairy product plants (mainly cheese) and also in meat slaughtering. The difference in utilization levels for meat slaughtering and processing can be explained by the prevailing output price policy. Fresh meat prices are tightly controlled by the Federal Government at levels well below the equivalent live animal price, whereas processed meat prices are established on a cost-plus basis. Consequently it is most profitable to process as much meat as possible. This does not explain the differences in utilization levels for different types of dairy plants, which appears related to the specialized nature of the individual plants.

2.09 Price policy and the decentralized decision-making process have given rise to significant resource misallocation problems in terms of over-investment in agroindustries facilities relative to primary production. Investment programs appear to be based on an optimistic view of economic conditions rather than pragmatic analysis. Domestic banks are controlled by the social enterprise investors, and so have very little direct influence over the allocation of investments. Finally, bankruptcy is rare due to subsidization either from within the enterprise or by the regional funds established for this purpose. In practice, the use of these funds can slow the rationization and, in some instances, this may compound the resource misallocation problem. However, in view of the decision to restrict the volume of new investment during the current plan and to narrow the number of priority sectors, new investment projects are being given considerably more scrutiny than in the past. Currently, a detailed study of agroindustry capacity is being undertaken by the Federal authorities which should help in improving regional coordination and investment efficiency in this subsector.

2.10 In view of possible over-capacity, the Bank has been emphasizing the need to concentrate on reconstruction/modernization rather than on new construction. By adopting a least-cost solution approach during preparation and appraisal, the present project incorporates this strategy. The project would finance replacement of existing capacity for wheat flour mills and a vegetable oil extraction plant. The existing plants are almost 30 years old and long overdue for replacement. In fact the vegetable oil plant is in danger of exploding, while hexane leakages may be affecting the health of the operators. Also, as seen from Table 2.6, capacity utilization for these in SRBH is 85% for flour mills and 98% for oil mills which is quite high. Poultry slaughtering and vegetable preservation/storage provide examples of investments to relieve bottlenecks; both are specialized investments. In the case of poultry existing capacity utilization in SRBH is 100%, while 40% of the required input is already in production and being processed in an old slaughterhouse. The remainder is already contracted for. With vegetables a seasonal production surplus exists, much of which is lost as the area is far from major markets.

F. Development Strategy

2.11 In the past, Yugoslavia's agricultural development strategy has been to promote growth of social sector agriculture as the principal means to achieve large-scale market production and self sufficiency in food. The agro-kombinats which comprise the social sector are vertically integrated enterprises engaged in production, processing, distribution and marketing of agricultural commodities. They consist of Basic Organizations of Associated Labor (BOALs), which specialize in self-contained production processes or marketing. Two or more BOALs, in similarly linked activities, join to make up a work organization (WO). Two or more WOs join to make a Composite Organization of Associated Labor (COAL); the total organization, in the agricultural sector, is called an Agro-Kombinat (AIK). 2.12 Individual sector development is sought through long-term association of individual farmers into Basic Cooperative Organizations (BCO) 1/ associated with AIKs. The BCOs give farmers a number of advantages including: retention of individual land titles; assured markets and access to AIK technical know-how; access to credit and inputs; participation in social sector health and pension schemes; and participation in the decision making process for AIK development programs which directly affect the individual's welfare. Disadvantages to the individual include some loss of flexibility and, in many cases, lower product prices paid by the BCO. Because they make allowances for BCO operating and overhead costs, which in many cases may be higher than in the private sector, product prices paid to individual producers are in some cases too low to provide adequate incentives to expand production. Prices however are usually announced in advance of the new growing season and individuals are not compelled to contract with BCOs and AIKs. In principle the system appears to be a well reasoned policy response to the need to increase on-farm production. However, in practice it appears to have been less successful than one might expect. The reasons for this are not yet clear. Some indications suggest that at present the scheme does not offer sufficient financial incentives to individual producers while others attribute it to the need to overcome initial inertia due to past stagnation and traditional disinclination to be tied to social sector organizations.

2.13 SFRY's draft agricultural development plan (1981-85) aims at an annual 4% production growth; the social sector is expected to grow at 6%; the individual sector, 4%. Agroindustries, a priority activity, are expected to grow by 7% annually. The plan's strategy is based on continued development of social sector holdings and increased cooperation with the individual farm sector. The slower growth targeted for the individual sector reflects its present limited absorptive capacity and the difficulties in providing large numbers of small farmers with appropriate inputs and markets. It also suggests that the factors inhibiting increased output and modernization in the individual agricultural sector are still to be addressed.

2.14 The draft agricultural development plan of SRBH has a similar overall production growth rate of 4%, of which 8% is pLanned for the social sector and 3.5% for the individual sector. No details of investment targets are yet available, but emphasis appears to be on improving the productivity of agricultural land and increasing the arable area, particularly in the social sector. Stress is also laid on increasing the production of beef and dairy products through increased forage production and improved use of pastures. In both cases it is intended to expand and intens[fy cooperative arrangements between the social and individual sectors to assist in achieving the targeted growth. Agroindustry capacity is also to be expanded where necessary to provide processing outlets for this increased production.

1/ BCO is used to denote different forms of Basic Organizations which cooperate with individual farmers under the Law of Associated Labor. These forms range from BCOs made up entirely of individual farmers, to varying degrees of mix between individual farmers and the social sector and are referred to variously as Basic Cooperative Organizations, Basic Organizations of contract farmers, Basic Organizations of Cooperants, BOAL for cooperation with individual sector, and Zadruga. - 8 -

2.15 Details of how the growth targets are to be achieved were not provided, but, in view of the recent past growth rate in the 2.2% - 2.7% range annually, the planned figure of 4% is ambitious. Total meat production, which since 1967 has grown at about 5.5% annually, is planned to grow at a rate of about 0.6% annually while similar figures for cows' milk production are 5.6% annually since 1967 and 3.3% annually through 1985. In view of the superior past growth rates these planned growth rates should be readily achievable, but hardly contribute to an expanded overall growth rate. However the slightly declining cattle herd will inevitably militate against their achievement. For field crops, wheat production, which has declined at an annual rate of -0.7% since 1967, is planned to increase by 9.2% annually and for maize the comparative growth rates are 2.9% and 5.6% annually. The strategy now appears to concentrate more heavily on field crop production, but the targets appear overly ambitious.

2.16 The development strategy also begins to address the problems of some of SRBH's least developed areas. Popove Polje as a karst-type valley near the Adriatic, flooded in winter and drought prone in summer, is representative of many similar agricultural poverty pockets along the coastal area of SFRY. As part of its social commitment, Government policy in both SFRY and SRBH is to endeavour to alleviate the situation while at the same time expand the area of arable land. Within the Herzegovina area, these valleys are the only agricultural resource base available. The development of this area under the proposed project should serve as a guide to the future development of other such karstic valleys in Bosnia-Herzegovina, and .

G. Bank Strategy in the Agricultural Sector

2.17 The Bank's strategy in SFRY's agricultural sector has been to support the development of primary production in the individual sector in recognition of the fact that the major output increases can be expected to come from the largest resource block. It has also supported agroindustrial expansion in the social sector as the marketing channel for farm production where this has been economically justified from the regional and national point of view. This strategy also recognizes the need to use investment to promote a more equitable income distribution by raising the incomes of the rural poor, and alleviate severe rural-urban migration. The Bank also recognizes that investments in the social sector are both necessary and complementary to its efforts at the farm level. The proposed investment would be the Bank's second direct loan to SRBH and its thirteenth to SFRY for agriculture and agroindustries. It is consistent with the above Bank strategy. Two projects have recently been completed, Macedonia Agroindustries I (894-YU) and Agricultural Credit I (1129-YU); no project completion or performance audit reports have yet been issued. A completion report for the Macedonia Agroindustries I Project is now under preparation.

H. Performance Under Previous World Bank Projects

2.18 The borrower under this project, Privredna Banka Sarajevo-Udruzena Banka (PBS), has been one of the participating banks in all three Agricultural Credit Projects, four Industrial Credit Projects (Loans Nos. 1013-YU, 1277-YU, 1612-YU and 1910-YU), and the borrower for the Bosanska Krajina Agriculture and Agroindustries Project (Loan No. 1621-YU). The first Agricultural Credit - 9 -

Project has been completed, as has the Bosnia-Herzegovina Industrial Credit Project. Implementation of the two other Agricultural Credit projects is progressing, but behind schedule. Overall commitment levels under the Third Agricultural Credit Project are closer to the original appraisal schedule but, due to the lag in the Second Agricultural Credit Project, disbursements as of December 1981 are only 8% of the loan amount vs. a 14.1% appraisal estimate. However, under this loan, performance of PBS has been better than most other participating banks, with commitment of about 95% and disbursements of 7%. The problems are due in large part to the general inflationary situation, past deterioration in the balance of payments and current corrective measures. The Yugoslav authorities are taking these implementation problems seriously and have taken some specific measures (e.g. granting priority status to Bank project related imports, increasing availability of local credit) to reduce the effects of the overall economic corrective measures on implementation of Bank financed projects. The Bosanska Krajina Project is two years behind schedule, which can be attributed to domestic resource constraints fueled by high rate of inflation and organizational shortcomings in PBS. The management has recently taken important measures to supervise sub-projects, monitor implementation and liaise with AIPK (Agroindust:rijskei Prometni Kombinat Bosanska Krajina), the executing agency, more closely. These steps are contributing towards faster project implementation and resolving specific project problems.

2.19 Under the Sixth Industrial Credit Project to be presented to the Executive Directors in FY82 for which PBS is a borrower and as well as for this project, agreements have been reached to strengthen PBS's project supervision and coordination capacity by expanding the staff in its supervision unit for Bank financed projects, and engaging services of consultants where necessary.

III. THE PROJECT

A. Concept and Objectives

3.01 The project was conceived within the context of the general agricultural development strategy of both SFRY and SRBH. Basically this involves expanding primary production to meet ,growingdomestic and export demand as well as provide facilities and services to process and market this production. Within this strategy SRBH gives priority to investments in relatively low income areas. Primary production is now being supported by a series of Bank-financed agricultural projects. The agroindustries component of the proposed project has the specific objective of providing processing and marketing facilities for such output. The specific subprojects are among the priority investments of SRBH. The project strategy emphasizes reconstruction and modernization of existing agroindustrial capacity with replacement only occurring when the efficient life of a plant has passed. New construction is only included where it has been clearly demonstrated that the incremental raw material input is either already present or the necessary on-farm investment is taking place. This is in line with the Bank's investment policy for Yugoslavia as a whole, which is to take a nation-wide pespective on investment decision-making. Raw material availability and marketing prospects are - 10 - analyzed on a national rather than regional basis. In this project, agroindustrial investments have also been considered in the context of the location and capacities of similar facilities throughout Yugoslavia.

3.02 The investments in agroindustries would all be undertaken by social sector kombinats. These are large concerns containing reservoirs of many different technical skills. For replacement plants these skills are already available while for new capacities they should be able to be developed rapidly. The technologies to be introduced in the project are relatively sophisticated but have previously been introduced elsewhere in the country. Consequently, project personnel can be readily familiarized with the new technology. The wheat flour and vegetable oil mills are 25 to 30 years old, quite decrepit and in need of replacement. Operating costs are unnecessarily high in existing plants and throughput is too low due to frequent stoppages for breakdowns. The vegetable processing plants and cold store are all part of a single complex under one investor and are located in a designated under-developed region of SRBH. The investment will serve to reduce seasonal surpluses, shortages and price fluctuations for locally produced vegetables and expand demand for these by providing a means of offseason marketing. The net result will be an increase in on-farm earnings, principally among individual farmers.

3.03 Popovo Polje represents a classical agricultural poverty pocket. In the past, due to extreme seasonal variations in the level of the water table, it had no productive agricultural prospects. Now, as a result of the regulation and drainage of its river, the Trebisnjica, to accommodate a hydroelectric scheme, the agricultural potential has been substantially increased. The objective of this component is, through provision of irrigation facilities, on-farm equipment and buildings, to produce commercially marketable surpluses of fresh fruits (apples and table grapes), wine grapes, vine rootstocks and grains, and to serve as a possible model for the future development of similar karst valleys in the general region.

B. Project Content

3.04 The proposed project would consist of: Agroindustries: - 2 wheat flour mills, to replace exiting mills, and having a combined total annual processing capacity of about 73,000 tons of wheat; - a poultry slaughterhouse processing 10 million broilers annually; - a vegetable oil extraction plant, to replace an existing plant with a higher capacity plant. It will process 77,000 tons of oil seeds annually and will include a 50,000 ton seed storage silo; - a vegetable processing and cold storage complex consisting of: - a vegetable pickling plant which will preserve 2,700 tons of vegetables annually; - a cold store with an effective storage area of 7,200 m3; and - a vegetable freezing plant within the cold store and having an annual intake of 5,320 tons of vegetables. - II -

3.05 Popovo Polje; - underground pressure pipeline of asbestos cement pipes totalling about 22 km in length to serve an area of about 1,170 ha; - 2 pumping stations with capacities of about 0.3 and 0.8 m3/sec and transmission lines and transformers to supply power to the stations; - on-farm irrigation equipment; - on-farm roads and facilities for irrigation O&M; - on-farm buildings, tractors, machinery equipment; - fruit tree and vineyard rootstocks and trellising material; and - installation of an experimental drainage plot of about 10 ha.

3.06 Popovo Polje is located in a karstic valley, 221-225 meters above sea level about 25 km north of Dubrovnik. The land has become suitable for agricultural development following construction of two dams and the concrete lining of the river bed for hydropower generation, eliminating the flooding of Popovo Polje. Climatic conditions are characterized by warm summers (maximum 260 C) and cold winters (mimimum 5 0C); periods of drought are not uncommon. Annual precicipation averages 2,125 mm with the lowest months being June, July and August (89, 67 and 88 mm). Project irrigation works consist of an underground pressure pipeline of asbestos cement, two pumping stations (including power lines and transformers) and sprinkler equipment (typhons). While the soils in the project area have showr consistent improvement in quality and are expected to improve faster after cultivation, some areas with heavy soils may have a drainage problem. Thus a 10 ha experimental plot will be fitted with tile drains to measure their usefulness in relieving high water tables and aid soil amelioration. The investments would irrigate an area of about 1,170 ha, of which about 900 ha is in the social sector and the remainder farmed by individual families. While small in size the area is of importance being the first phase for irrigaticn of the entire valley and more importantly the first of a number of such karstic valleys intended to be so developed. Production in the social sector will emphasize apples, table grapes, vine rootstocks and maize while the irdividual sector will produce wine grapes, maize and vegetables. The typhor irrigation equipment and underground pipeline layout are shown on IBRD map No. 16025 Popovo Polje Proposed Irrigation System. Details of the water requirements and availability are contained in Annex 4.

C. Status of Design and Projezt Implementation

3.07 It is expected that physical implementation of the agroindustry subprojects will begin in year 1 of the project (1982-83). However, initiation of construction on at least some of the agroindustries may be delayed due to the demand for construction capacity by the 1984 Winter Olympics. In order to speed the procurement and design phase and to avoid cost overruns, tendering and bid evaluation were required to be completed prior to negotiations for processing equipment: for all agroindustry subprojects. This will permit equipment contracts to be negotiated and signed shortly and consequently enable civil works design to be completed by September 1982 so that construction can begin thereafter. - 12 -

3.08 The Popovo Polje irrigation system is completely designed. Because construction in the area is only possible in the summer months, construction would take 4 summer periods. Details on costs, content and implementation are contained in Annex 4. D. Costs

3.09 Total project cost, excluding interest during construction and the front-end fee, based on mid-1981 appraisal and revised and updated to mid-1982, is estimated to be about Din 3.6 billion or US$82.2 million. This estimate includes taxes and duties, physical and price contingencies and incremental working capital. An allowance has been made in the base cost for any delays which may be caused due to the demand for the construction capacity by the 1984 Winter Olympics. Taxes and duties, included under local costs, amount to 11% of the foreign exchange cost. Physical contingencies amount to 6% of base costs while price contingencies total 17% of the base investment cost plus physical contingencies. These are based on Bank projected international inflation rates together with estimated inflation rates in the domestic construction industry as follows: 1982 (July-December) - 17.5%, 1983 - 25%, 1984 - 20% and 1985 - 20%. The local price contingencies are based on historical trends and estimates of project authorities and local contractors which suggest that price increases in the domestic construction industry, particularly for cement and labor, are likely to be greater than general price movements. These provisions for local price contingencies are justified by project specific circumstances and uncertainties in price projections in a period of major shifts in macro-economic policy leading to a marked decline in overall inflation with different effects on different sectors.

3.10 The foreign exchange component is estimated to be approximately Din 1.5 billion or US$34.5 million, which amounts to 42% of the total cost. Cost estimates reflect the exchange rate as of February 15, 1982 of Din 43.6784 = US$1. Table 3.1: PROJECT COST

Foreign Foreign Foreign Local Exchange Total Local Exchange Total Exchange (Din million) ------… -(US '000)…)------M

Agroindustries Flour mills (2) 386.5 445.0 831.5 8,848 10,188 19,036 54 Poultry slaughterhouse 204.0 132.5 341.5 4,789 3,033 7,817 39 Vegetable oil extraction plant 262.7 306.1 568.7 6,014 7,007 13,021 54 Vegetable pickling plant 67.0 85.0 152.0 1,534 1,945 3,479 56 Vegetable freezing and cold store plant 192.8 263.9 456.7 4,414 6,041 10,455 58 Net Incremental Working Capital 93.5 18.7 112.2 2,141 427 2,568 17 Subtotal Agroindustries 1,211.5 1,251.2 2,462.7 27,735 28,641 56,376 51

Popovo Polje Irrigation system 69.1 72.2 141.3 1,583 1,653 3,236 51 On-farm buildings 10.5 8.2 18.7 239 188 427 44 On-farm tractors and machinery 23.9 28.2 52.1 548 645 1,193 54 Crop establishment 145.1 55.6 200.7 3,322 1,247 4,596 28 Subtotal Popovo Polje 248.6 164.2 412.8 5,693 3,760 9,453 40

Subtotal Base Investment Cost 1,460.1 1,415.4 2,875.5 33,428 32,401 65,829 49

PLiysicalContingencies 136.7 39.8 176.5 3,129 912 4,041 23 Price Contingencies 465.0 51.0 516.0 10,646 1,169 11,815 10 Subtotal Contingencies 601.7 90.8 692.5 13,775 2,081 15,856 13

TOTAL PROJECT COST 2,061.8 1,506.2 3,568.0 47,203 34,482 81,686 42

Front End Fee on Bank Loan - 22.5 22.5 - 517 517 100

Total Financing Required 2,061.8 1,528.7 3,590.5 47,203 34,999 82,202 43

Exchange Rate Din 43.6784=US$1.

Taxes and duties are estimated at US$3.8 million. - 14 -

E. Financing

3.11 A tentative financing plan for the project is shown in Table 3.2 below. Sub-borrowers are expected to contribute on average 20% of their own funds.

Table 3.2: PROJECT FINANCING

PBS and/or Item Subborrowers IBRD Cofinanciers Total …______---- US$ 000…

Agroindustries 13,193 29,333 23,440 65,966 Working Capital 500 427 1,641 2,568 Popovo Polje 2,630 4,720 5,803 13,152 Total 16,323 34,480 30,884 81,686 Share % 20 43 38 100

The proposed Bank loan of US$35 million would finance 43% of the total project financing requirements equivalent to 100% of the foreign exchange cost including the front end fee of US$517,241 (see Table 3.1).

3.12 The Bank loan would be for a period of 15 years including 3 years grace.

F. Retroactive Financing

3.13 In order to avoid costly delays in implementation, ICB procurement in accordance with Bank Procurement Guidelines for all agroindusty equipment was required as a condition of negotiations. Bid evaluation reports, prepared in accordance with procedures consistent with Bank Procurement Guidelines, have been reviewed by the Bank. At the time of signing these equipment contracts which is expected to be before the date of loan signing, a downpayment would be required. In order not to delay this critical element, retroactive financing of up to US$3.5 million is provided in order to assist in financing the estimated foreign exchange component of these downpayments.

G. Environmental Impact

3.14 The subprojects are generally low level pollution generators and all agroindustries investments would include adequate effluent treatment facilities. Consequently the investments are expected to have no adverse environmental impact on the subproject localities. Earth tremors are quite common in SRBH. It is advisable that all civil works be designed and constructed to withstand such expected disturbances. This is a general practice in the area. - 15 -

IV. PROJECT IMPLEMENTATION

A. Organization and Management

4.01 Privredna Banka Sarajevo (PBS) would be the Borrower under the guarantee of SFRY Government. PBS would undertake to provide all necessary local finance over and above the subborrowers contribution, principally from Federal and Republican investment funds as well as its basic bank's resources. The subprojects would be implement:edby the respective investors. 1/ As is current practice, the provision of inputs in kind to cooperants in the individual sector within the Popovo Polje Irrigation system would be through the Popovo Polje Work Organization, which would be the sub-borrower from PBS. At most only 120 farm families would be involved.

B. The Borrower - Privredna Banka Sarajevo (PBS)

4.02 PBS is one of the participating banks in the First, Second and Third Agricultural Credit Projects (Loans Nos. 1129--YU,1477-YU and 1801-YU), and a borrower from the Bank under Bosanska-Krajina Project (Loan No. 1621-YU) and five Industrial Credit Projects since 1972. The purpose of banking in Yugoslavia is to further social development. The social structure provides that financial resources should be controlled by the workers who use them in the production cycle. The ownership of the banks by social organizations, which are in turn controlled by their workers, is intended to create an acute awareness of the social needs of the society within the banks. Therefore, the banks try to give priority to lesser developed communes in their regions. Appraisal procedures followed by PBS have been generally acceptable. All projects are first examined by member basic banks and those that exceed the basic banks' resources or require foreign exchange or require republic/federal investment funds are transferred to the associated bank for further detailed appraisal. Supervision work by PBS under the Bosanska-Krajina project has not been fully satisfactory. This situation is a result of insufficient staff being assigned full time to coordinate and supervise the project. Steps have been taken to resolve this situation under the Bosanska-Krajina Project (Loan No. 1621-YU). The PBS staff's duties and responsibilities with regard to implementation and supervision under the propcsed project have been fully discussed and agreed upon during negotiations,

1/ A list of subproject locations and Investors is in Annex 6. - 16 -

4.03 The financial condition of PBS must be examined within the context of the Yugoslav economy. The banks in Yugoslavia are not profit maximizers, but rather intend to earn an income which is adequate to cover expenses and to make required allocations to various reserves. In this context, PBS has maintained an adequate level of net income, and has been increasing its asset base. The growth of PBS's long-term lending activity has brought about a 75% increase in long-term deposits and borrowings in 1978 to 1980; consequently its long-term debt equity ratio increased to 15.5 to 1 as of December 31, 1980. The majority of the long-term debts are Federal and Republic Funds (42%) which, while treated as debt, have more the character of managed funds. If these funds are excluded from the calculations, the ratio is reduced to 8.6 to 1. The primary sources of funds for PBS are long-term borrowing (32% of end 1980 assets) and demand deposits (26%). The long-term borrowings are mainly Federal and Republic funds, as well as IBRD loans and foreign loans. PBS has a long-standing relationship with the Bank. Although project implementation has been somewhat less than satisfactory, PBS has shown institutional improvements over this time and is expected to continue to do so. Its overall financial situation is generally satisfactory and PBS continues to be credit worthy. Since all subprojects have been completely appraised by the Bank and since the procurement process is substantially underway, PBS implementation input under the project will be less than usual and well within its capabilities.

C. Lending Policies and Procedures

4.04 As subproject appraisals have been completed by the Bank, no further appraisal would be required of PBS, unless there are changes in the subprojects. Should any such change in subprojects be proposed, or deemed by the Bank to be introduced, then PBS would be required to carry out and send to the Bank for its approval a full technical and economic subproject appraisal report, in accordance with a format to be agreed upon at negotiations, prior to any reimbursement for the subproject concerned. Assurances on this lending procedure were obtained during negotiations.

D. On-Lending Terms

4.05 PBS will charge an interest rate of not less than 15% for domestic bank funds. Interest rates for Governmental development investment funds such as the Federal and Republican Funds shall reflect full charges prevailing for these at the time the sub-loan agreement is concluded. Interest on Bank funds will be 11.6% plus a 1.25% on-lending charge. The presently expected sources and shares of funds together with the interest charges currently prevailing for these are set below.

Source of Contribution Interest Repayment Funds % Rate % Period Years Remarks

Investor 20% - - Average contribution World Bank 43% 11.6 15 Including Front-End Fee On-Lending Margin - 1.25 - On World Bank funds only Republican Fund 10% 4.0 15 Bosanski Samac only Federal Fund 11% 6.0 15 (20% for Popovo Polje 15% to other) Domestic Banks 16% 15.0 10 Local currency only - 17 -

The overall weighted average interest rate is about 11.25%. If domestic inflation increases at the official forecast rate of 13-15 percent during 1983-84, this would not be a real positive rate, but it does represent a significant increase over the 8-10% rate charged in recent Bank agricultural projects in SFRY. Understandings were reached, under a recent industrial credit project, to the effect that the responsible Yugoslav authorities would review with the Bank, at least annually, the interest rate policy in the light of prevailing market conditions. The on-lending rate could thus be adjusted corresponding to any changes in interest rate policy. As with previous Bank financed agricultural projects in SFRY, the foreign exchange risk on all loans to social sector enterprises would be borne by these enterprises. For all subprojects PBS would determine the length of each subloan, including grace and repayment periods from the cash flow analysis for each investment. Unless otherwise agreed the subloan repayment period would be not more than 15 years including not more than 5 years grace. PBS would take adequate steps to protect itself against the exchange risks on its lending and borrowing operations, including these subloan repayments accruing earlier than amortization payments of the Bank loan. Assurances were obtained during negotiations that these on-lending terms would be implemented.

E. Procuremelat

4.06 All agroindustry processing equipment would be procured through ICB in accordance with Bank Procurement Guidelines. This equipment, totalling about US$22.9 million, includes flour milling equipment, vegetable oil extraction equipment, poultry slaughterhouse equipment, vegetable pickling and freezing equipment and cold storage equipment. Domestic manufacturers would receive a 15% margin of preference or the actual level of import duties whichever is less for purposes of bid comparisons. The civil works related to these agroindustrial processing equipment (US$43.1 million) would be procured through local competitive bidding (LCB) procedures acceptable to the Bank. ICB would not be suitable for the construction of these civil works as these contracts are relatively small (about US$5.2 million each) and unlikely to attract foreign bidders. Even on turnkey type agroindustries projects, foreign bidders have always subcontracted civil works to the local construction industry.

4.07 Procurement and installation of equipment for two pumping stations including transformers and transmission line (US$1.28 million) and on-farm sprinkler equipment (US$0.94 million) for Porovo Polje irrigation subproject (area 1,170 ha) would be procured through limited international tendering in accordance with procedures acceptable to the Bank. Quotations from at least three different suppliers would be solicited. In view of the relatively small size of these installations, but involving high degree of technology and skills, this method of procurement has been considered as the most appropriate. The civil works including underground asbestos cement pipeline for this subproject (US$2.26 million) would be procured through LCB procedures acceptable to the Bank. - 18 -

4.08 Popovo Polje irrigation subproject also includes on-farm development and some farm equipment. Farm equipment (US$1.97 million) would be procured following LCB under procedures acceptable to the Bank. These diversified pieces of locally manufactured equipment are required gradually, over the entire period of development of the project and are best suited to this type of procurement. Farm buildings (US$ 0.57 million) and other miscellaneous items of works, principally trellising poles and wire, fertilizers, pesticides and farm yard manure (US$4.09 million) would be procured through local procurement procedures acceptable to the Bank and requiring at least three quotations. These buildings and materials are required over the development phase of the project and would be procured yearly according to requirements. Procurement of fruit trees and vineyard rootstock would be carried out through limited international tendering in view of their high specialization and only a limited number of suitable supply sources. Assurances were obtained during negotiations that all procurement would be carried out as outlined in these sections.

F. Disbursements

4.09 Disbursements are expected to extend over a period of about 4.25 years. Allowance has been made for possible delays in agroindustries civil works as a result of the 1984 Winter Olympics. Construction for Popovo Polje is not expected to be affected by these Winter Olympics, and disbursements here are expected to be completed about a year earlier than for agroindustries (3rd Quarter of FY85). This disbursement profile compares favorably with accelerated historic project disbursement profiles for both Industry and Agriculture in Yugoslavia which have average periods of 4.5 years and 6.0 years respectively. The forecast of Bank quarterly disbursements is shown in Annex 1, Table 1 where the disbursement profiles for both Industry and Agriculture in Yugoslavia are included for comparison. The more rapid implementation forecast is due to two factors: (1) the more advanced stage of procurement expected by the time of loan signature; and (2) the nature of the investments, all of which have been defined and appraised, unlike other projects in agriculture which are generally more credit oriented. - 19 -

% of Expenditures to Category be Financed

1. Agroindustries equipment 100% of foreign expenditures and civil works and 40% of local expenditures

2. Popovo Polje 100% of foreign expenditures and a. Overground irrigation, pumping 100% of local expenditures and power equipment and on-farm ex-factory tractors, machinery and equipment

b. Experimental drainage plot 100%

c. Civil works and materials for 100% of foreign expenditures and underground irrigation system, 35% of local expenditures on-farm buildings and fruit tree and vineyard rootstock and crop establishment material including trellising poles and wire and fertilizer

4.10 Disbursements under Categories 1 anc 2 (a, b, and c) would be supported by full documentation. Disbursements for Crop Establishment Material in Category 2 (c) would be against PBS certified Statements of Expenditure (SOE). Documentation supporting these statements would be retained by PBS and made available to Bank supervision missions. Disbursements under Category I would be subject to retroactive financing for expenditures for equipment, made after December 31, 1981, up to a maximum of US03.5 million for all such expenditures. Assurances that these disbursement procedures would be followed were obtained during negotiations.

G. Accounts and Audit

4.11 PBS would maintain separate project accounts for subloan disbursements and would ensure that the Social Accounting Service of Yugoslavia (SDK) annually audit the accounts according to internationally accepted standards and would submit such audited accounts to the Bank within 6 months of the close of each year. PBS would also undertake to have SDK submit to the Bank, within 6 months of the close of each fiscal year, a separate opinion as to whether or not the SOE supported withdrawals (para 4.10) have been used for the correct purpose. PBS has complied with similar requirements in the past and assurances were obtained during negotiations that these accounting and auditing requirements would be followed and that the separate project accounts would be made available by E'BS to Bank supervision missions.

H. Monitoring, Reporting and Evaluation

4.12 PBS would monitor project implementation through field supervision of all subprojects and through appropriate periodic evaluation of key indicators such as: establishment of qualified subproject implementation teams, - 20 - including those responsible for developing raw material supplies and marketing outlets, procurement progress, physical and financial implementation of construction, installation and start-up, training of required technical personnel and development of full-production capacity, as well as commitments, disbursements and repayments. In order to inform the Bank of overall progress in project implementation in relation to targets, objectives and schedules established for each investment, PBS would submit Semi-Annual Reports to the Bank within 45 days of the close of each six-month period.

4.13 In its initial Semi-Annual Report PBS would include normative schedules for each of these indicators and thereafter include comparative schedules of actual versus expected performance for these indicators in each Semi-Annual Report. In the Semi-Annual Report following the end of each fiscal year PBS would report on the financial status of both the subprojects and the investors and include the Balance Sheets and Income Statements of the preceding year for each investor. PBS would prepare and send to the Bank a Project Completion Report not later than 6 months after the project Closing Date. PBS would prepare this report in accordance with an agreed format and content guidelines. Assurances were obtained during negotiations that PBS would carry out the above monitoring reporting and evaluation requirements. To ensure adequate personnel input for this important task of subproject monitoring and supervision and to assist the subborrowers in all aspects of project implementation and startup, assurances were obtained during negotiations that PBS would provide to the project not less than 4 manmonths per year of supervision time, through personnel whose qualifications are acceptable to the Bank. This may be supplied from suitable staff within PBS or contracted under conditions acceptable to the Bank from a third party as deemed necessary by the Bank.

V. PRODUCTION, MARKETS, PRICES AND FINANCIAL ANALYSIS

A. Production and Cost Recovery

5.01 Production. Due to the emphasis on replacement of existing food processing plants and conservation of existing surplus production in agroindustries and the rather small size (1,170 ha) of the Popovo Polje irrigation component, incremental production from the project is quite small relative to total output. In agroindustries incremental production would be in vegetable oil and poultry only. This would amount to about 18,000 tons of crude vegetable oil and 10 million broilers (1.6 kg/lw) annually. In Popovo Polje annual incremental output would be as follows;

Tons

- Apples 8,640 - Table grapes 2,000 - Rootstock ('000 cuttings) 12,075 - Maize 3,360 - Wheat 413 - Peppers 125 - Tomatoes 150 - Cucumbers 100 - Beans 55 - Wine grapes 1,350 - 21 -

5.02 Cost Recovery. PBS sub-loans for bol:hagroindustries and Popovo Polje would be recovered through standard loan debt servicing. In contrast to the conventional fashion, the irrigation scherne in Popovo Polje is a social sector enterprise scheme rather than one financed from public revenues, thus the O&M costs are internalized and treated in the same fashion as any operating costs of a private firm.

B. Marketing

5.03 Agroindustries. The major outputs o:' the various agroindustries are wheat flour, crude vegetable oil, slaughtered and dressed poultry and pickled and frozen vegetables. The flour mills and oil seed processing plants are largely replacements of existing facilities, wzhile the main impact of the facilities for pickling, freezing and storage of vegetables is to stabilize the seasonal fluctuations in the supply of vegetables rather than to augment total production. Hence, there are no marketing issues for these products. Poultry slaughtering will have significant incremental impact and thus is given more detailed treatment.

5.04 Poultry Meat. Consumption of poultry meat, in both SFRY and SRBH, has grown rapidly in the past decade. This has been the result of a rapid increase in domestic production as trade in poultry meat is virtually non-existent. Between 1975 and 1979 per capita consumption grew by over 10% annually and appears to have been constrained principally by supply alone. Despite this high growth rate, as shown in Table 5.1, consumption is still below many countries in both Eastern and Western Europe.

Table 5.1: PER CAPITA CONSUMPTION OF RED MEAT AND POULTRY MEAT IN MAJOR EUROPEAN COU1NTRIES

Red Meat (kg/per capita per year) Poultry (kg/per capita per year) 1978 1979 1978 1979

U.K. 59.2 59.4 13.6 14.3 France 72.2 74.2 15.8 16.0 W. Germany 72.8 74.2 9.7 9.9 Italy 46.3 46.9 16.1 16.1 Greece 52.7 52.9 11.2 11.6 Aulstria 72.1 73.6 9.6 10.0 Spain 39.5 40.8 20.8 20.7 Germany D.R. 76.7 76.6 9.6 9.3 Hungary 52.4 52.0 18.1 17.2 Yugoslavia 33.9 39.6 11.6 12.7

Source: "Foreign Agriculture Circular", USDA, Aug. 1980.

Production and consumption projections are given in Table 5.2. - 22 -

Table 5.2: SFRY AND SRBH POULTRY MEAT BALANCE SHEET

1975 1980 1985 1990 SRBH SFRY SRBH SFRY SRBH SFRY SRBH SFRY SRBH

Production-'000 mt 188 20.4 273 20.0 350 23.5 n.a. n.a. Imports-'000 mt - n.a. - n.a. n.a. n.a. n.a. n.a. Exports-'000 mt - n.a. - n.a. n.a. n.a. n.a. n.a. Total Consumption-'000 mt 188 25.53 273 24.99 349 34 385 39.2 Per Capita Consumption-kg 8.8 6.42 12.2 6.99 15.1 7.74 16.1 8.6 Balance-'000 mt - (5.1) - (4.99) - (10.5) n.a. n.a.

Between 1975 and 1980 poultry production in SFRY grew at a rate of 7.75% p.a. To meet the 1985 target required annual growth is only 5.1% p.a., thus the target is quite feasible. The consumption projection is also seen as adequate to clear the market. In the case of SRBH, even with constrained consumption, supplies from other republics will have to be incieased in view of the low production target. The target appears realistic and may even be optimistic in view of the stagnation in output growth over the past 5 years. Thus the increased output of poultry meat as a result of this investment is not likely to lead to oversupply either in SFRY or SRBH.

5.05 Popovo Polje. The incremental primary production from the Popovo Polje Irrigation component will be marketed as fresh. The project area is located near the Adriatic tourist resort area of Dubrovnik. The surrounding region is a net importer of agricultural goods, due to the hilly nature and the limited amounts of arable land. The selection of a cropping pattern is based on the market prospects for the various technically feasible crops. The production at full development, and its incremental impact on SFRY and SRBH supply are presented below.

Incremental Production Impact

SFRY SRBH Popovo Produc- P-P Produc- P-P Crop Polje /1 tion Increment tion Increment (tons) (tons) (%) (tons) (%)

Apple 8,640 42,900 /2 2 28,000 /2 30 Table Grapes 2,000 49,800 /4 4 1,122 /4 178 Rootstock('000 cuttings) 12,075 85,000 14 n.a. n.a. Maize 3,360 10,081,762 0 713,093 0 Wheat /5 413 4,511,863 0 336,610 0.5 Vegetables /3 430 490,969 /4 0 49,513 /4 0.8 Wine grapes 1,350 26,120 /4 0.5 7,042 /4 19

/1 lncremental output at full development. 77 Apple production estimate for 1981. /3 Peppers, tomato, cucumber, beans. 74 Sales during 1979. /5 Total production. - 23 -

5.06 Production from this subproject will have a marginal impact on SFRY production except for vine rootstock cuttings. Long-term export contracts for vine graftings have resulted in a shortage of root cuttings. The impact on SRBH is significant for apples and grapes. Apples are currently purchased from outside SRBH to meet processing storage arid marketing needs as are table grapes. The variety of table grapes will be seedless, which is new to SFRY, and is expected to command a marketing premium particularly among tourists. For wine grapes, HEPOK, the parent organization of Popovo Polje W.O., has in their local wineries sufficient capacity to handle all of the incremental production. HEPOK is a large agricultural kombinat and has extensive marketing facilities and will handle the majority of the production. Thus no issues are seen in the distribution and marketing of the incremental production.

C. Prices

5.07 At present, financial prices of basic: goods, which exclude fruit and vegetables, are administered at the Federal Republic level. Basically floor prices are established for farmgate purchases while ceilings are set for products at the consumer level. All are based on a cost-plus formula. Farmgate prices can move above but not below the floor price, while consumer prices can move below but not above the established ceilings. As a result prices tend not to move independently of any moves in the floor and ceiling prices. These latter are changed at irregular intervals based on changes in the supply and demand conditions for the indivLdual products and in response to aggregate (inflationary) demand and cost pressures. Inter-republican price differentials are permitted but are minor, tak:Lng into account regional supply and demand situations and transport costs. Contracted production for basic commodities is done on the basis of a negotiated contract price known as an agreed price. Production in excess of the cont:ractmay be sold on the open market. In practice farmgate prices are increasing faster than retail prices which are closely monitored. This causes financial problems for agroindustries. With respect to the project, this system applies to maize, wheat, flour, oil seeds, vegetable oil and poultry meat. It excludes poultry and fruit and vegetables. Since poultry production is now commercialized and standardized the single administered price for poultry meat at the retail level effectively sets all other poultry related prices. Prices for fruits and vegetables are established entirely by market forces. Current financial prices used in estimation of the financial rate of return are summarized in Annex 2, Tables 3 and 4.

D. Financial Analysis

5.08 The Financial Rates of Return (FRR) :or the aggregated agroindustries component and for Popovo Polje are summarized in Table 5.1 below. Rates of return for the individual components together with extensive sensitivity analyses and the associated cash f'Lows are contained in Annex 2, Tables 1 and 2. When reviewing these it should be borne in mind that, in SFRY, interest rates are assigned a rather minor role in allocation of investment funds, the major role being carried out by the planning mechanism. This permits societal as well as financial considerations to be taken into account. - 24 -

5.09 Agroindustries. In view of the general issue of overcapacity in food processing in SRBH and SFRY and the possibility of delay in construction due to competition for construction capacity with the Winter Olympics, a number of tests were performed to measure the sensitivity of the FRR. The results are presented together with the base FRR, the more conventional sensitivity tests, and also the main switching values. As seen the base rate of return is above either the current blend on-lending rate (11.25%) or the estimated opportunity cost of capital (12%). Effects of delays in construction are tested by lagging the Benefits (B) and Operating Costs (C2) by 1, 2 and 3 years. At most a I-year delay is expected and with this all FRRs remain satisfactory. Capacity utilization is allowed to drop from 100% 1/ to 90% and 80% and at these levels all FRRs remain quite acceptable. However, in the context of both sectoral and project investment planning it should be noted that if capacity utilization declines below 80% the FRR for most sub-project becomes marginal. This is extremely important in SFRY, where capacity utilization for many food processing industries is already low (Tables 2.5 and 2.6). Subproject screening and evaluation during preparation and appraisal ensures that, as a risk, it is not significant for the specific investments included in the project.

5.10 All sub-projects are seen to be very sensitive to changes in benefits and operating costs and the switching values for these are quite low. This is common in the food processing industry where gross margins are characteristically low. In market economies the margins are maintained by passing input or output price changes onto the consumer or back to the producer as appropriate. In SFRY, where this is not always possible in the short run, the authorities cover the shortfall through ad hoc subsidy payments. This is part of a conscious policy of price stabilization by the government.

5.11 Popovo Polje. As seen in Table 5.1 the financial rates of return for the Popovo Polje component for various scenarios are all quite satisfactory. Testing for a delay of 1 year in implementation of the project still leaves an FRR of 19%. The switching values for the cost and revenue streams are also acceptable.

1/ Effective capacity utilization is assumed to be 100%, engineering capacity utilization will probably be above this, giving possibly 90% engineering capacity utilization at full development. - 25 -

Table 5.1: FINANCIAL ANALYSIS - SUMMARY RESULTS

Agro- Popovo FRR industries Polje

Base Case 19 22 Investment Cost + 10% 18 21 Investment Cost - 10% 21. 24 Operating Cost + 10% 3 21 Operating Cost - 10% 3'i 24 Revenues + 10% 3Cl 26 Revenues - 10% 0.6 19 Revenues & Operating Costs 1 year lag 12 19 Switching Values Investment Costs +55' +93 Operating Costs +e +60 Revenues -L. -26 Capacity Utilization - 10% 1J n.a.

VI. PROJECT BENEFITS AND JUSTIFICATION

A. Benefits and Distribution

6.01 The direct project benefits are the incremental output (para 5.01) together with the value added through processing and storage of wheat, poultry and vegetables. In addition, there are some pcsitive effects on employment. The proceeds of the project would be distributed widely in accordance with the universally accepted and legislated norms for remuneration of workers, including payments of bonuses and social security funds. Payments to producers are in accordance with contracted prices which are established prior to signing production contracts. The foreign exchange impact is difficult to assess, the main objective of the production being to maintain and increase domestic consumption in the absense of which imports might or might not take place given current import controls.

B. Employment Effects

6.02 In agroindustries at full development, the project investments would result in 306 additional full-time jobs and continuation of 238 existing full-time jobs. In financial terms the total capital cost per job created or restored comes to about US$83,000. In economic terms the capital cost is US$46,000 per job. These high costs are to be expected in agroindustries. The choice of capital intensive technology is induced by factor prices prevailing in Yugoslavia. Despite reports of presence of unemployment and under-employment, the price of labor ia relatively high compared with capital. In economic analysis factor and product market distortions are corrected by use of shadow prices of labor and use of a more appropriate opportunity cost of capital. This has been done for the present project and results show that the investments are quite satisfactory. A more comprehensive approach requires evaluation of alternative technologies differing in relative factor intensities and selection of the least-cost - 26 -

technology by use of appropriate factor prices. In that case, if labor is the more abundant factor, the efficiency analysis would automatically ensure choice of a more labor intensive technology and employment effects would be built into project analysis. However, for the processing plants involved here the labor content of the available technological variations is not great except at the extreme ends of the technological spectrum. Consequently the more comprehensive analytical approach is not likely to yield a significantly greater job creating solution, i.e. one with at least 5% more jobs created. Thus, the cost per job created would not greatly change.

6.03 In Popovo Polje the incremental employment impact would be relatively greater than in agroindustries. About 200 full-time employees would be required for both on-farm and irrigation operations, while about 55 man-years of seasonal labor would be required principally for harvesting. The cost per job (man-year of employment) created in financial terms is US$43,000 and in economic terms is USt28,000. Again these costs appear high. In this case also factor and product market price distortions were adjusted for through the use of specific and general conversion factors. The project was still viable. The technology incorporated in the analysis is quite labor intensive and it is difficult to conceive of more labor intensive technologies given the prevailing financial prices of labor.

C. Economic Analysis

6.04 With the exception of some construction costs, and all labor and internal transportation costs, all inputs and outputs are priced as tradeables based on their border equivalent values with adjustment for quality differentials and transportation as appropriate. Changes in international input and output prices, as forecast by the Bank's Commodities and Export Projection's Division, are incorporated over time. For Popovo Polje, due to a complete and basic change in design concept during appraisal, construction costs could not be disaggregated. The basic construction, labor and internal transportation costs used are those presently prevailing in SRBH. To convert these financial prices to economic values conversion factors specific to each are used. Construction costs for agroindustries are decomposed into two tradeable components, direct and indirect foreign exchange and two non-tradeable components, domestic materials and labor. The tradeable components were priced at border prices, a standard conversion factor (0.7) was applied to the domestic materials component together with a labor conversion factor (0.4) for the labor component. Actual prices used are presented in Annex 3, Tables 4 and 5.

6.05 All direct economic benefits and costs have been quantified and the resulting internal rates of return for the aggregated agroindustries component, Popovo Polje and the project are summarized in Table 6.1 below. Detailed results and the associated cash flows for all subprojects and for the total project are given in Annex 3, Tables 1, 2 and 3. - 27 -

Table 6.1: ECONOMIC ANALYSIS - SUMMARY RESULTS

Agro- Popovo Total ERR industries Polje Project

Base Case 30 16.4 26.9 Benefits - 10% 9.3 13.2 9.8 Operating Costs + 10% 12.9 15.2 13.1 Investment Costs + 20% 26.0 14.1 23.1 Benefits and Operating Costs Lag 1 year 24.7 13.7 22.3 Lag 2 years 21.2 11.5 19.1 Standard Conversion Factor - 0.93 25.0 12.9 22.1 Standard Conversion Factor - 0.5 34.0 18.7 30.7 Capacity Utilization - 10% 27.8 - - Switching Values (12%) Benefits -8.9 -13.5 -8.9 Investment Costs +159.1 +42., +131.8 Operating Costs +10.1 +34.7 +10.7 Without Project - +84.5 +1,383.8

Net Present Value at 12% (Din '000) 1,468,676 95,507 1,564,183

6.06 The rate of return to the overall project is 27% with a 30% rate of return to the agroindustries component (80% of the investment cost of the project) and 16% to the Popovo Polje irrigation component (20% of the investment cost). The agroindustries component is seen, from the switching values and sensitivity tests, to be very sensitive to changes in revenues and operating costs. As explained in discussing the financial analysis results (para 5.10) this is classical but rarely presents problems. In contrast Popovo Polje is not very sensitive to such changes. The agroindustries component, accounting for 93% of the project's present value, dominates the project; consequently the overall project rate of return is also seen to be sensitive to changes in revenues and operating costs. The base ERRs for the individual agroindustry sub-projects range from 17 to 50%. Overall and individual economic rates of return are substantially higher than financial rates of return for almost all of the agroindustry subprojects. This results from the current domestic pricing system, in which factorygate prices (consumer prices) are relatively highly controlled while raw material prices are permitted more flexibility.

6.07 Tests were also carried out on the ERRs with respect to their sensitivity to delays in implementation, togethlerwith changes in conversion factors (standard or general, labor and transpartation) and to changes in capacity utilization. These tests reflect real risks which might arise in the lifetime of the project. With respect to delays the project and all su'b-projects are quite robust. An extreme delay of 3 years between investment and the start of operations is required to have a serious impact and even then - 28 - only one sub-project ERR falls below 12%. The project and its components remain virtually unaffected by changes in the aggregate conversion factors. Sensitivity tests for the Popovo Polje component with respect to the transportation conversion factor and capacity utilization were omitted; transport is of little or no significance in its cost structure and capacity utilization is not relevant. Tbe agroindustries component and its sub-projects are sensitive to capacity utilization but, for individual sub-projects, this has to drop to 20-50% before the ERRs fall below 12%. While this is of significance to republican and federal investment planners, the specific industries concerned have generally high rates of utilization (Tables 2.5 and 2.6) and consequently this is not seen to be a risk for the project.

D. Risks

6.08 Overall the project appears quite satisfactory. With the sharp focus, during preparation and appraisal, on the question of capacity utilization and the exclusion of sub-projects in food processing activities where such utilization is low, the risk of project failure has been much reduced. The viability of the Popovo Polje irrigation component was enhanced during preparation and appraisal through altering the proposed design of the irrigation system to a substantially lower cost system and redesigning the proposed cropping pattern. The assumptions on full development yields and the time taken to reach these are set out in Table 6.2 below. Build-up is somewhat slower than for similar on-going projects in Yugoslavia. This was deliberate in view of the lack of tradition of growing many of these crops in the project area.

Table 6.2: POPOVO POLJE - PROJECT CROP YIELDS

Yield Year of Full tons/ha) Development

Apples 30 5 Rootstock ('000 cuttings) 161 7 Table grapes 20 9 New wine grapes 18 8 (for 20 ha) and year 9 (40 ha) Existing wine grape 16 7 (Incr = 9 (30 ha)) f if It" without 7 Maize 7 5 Wheat 3.5 5 Peppers 25 5 Tomatoes 30 5 Cucumbers 20 5 Beans 11 5 - 29 -

6.09 Project procurement is at an advanced stage. This has been required by the Bank in order to minimize implementation delays and cost overruns which have been occurring recently in SFRY as a result of high domestic inflation and counter inflationary measures. All technology in the project, although new to some investors, is already in existence within SFRY and so may be viewed in operation. All agroindustries anticipate using coal as the source of plant energy requirements for steam and heat. Consequently the major risk is confined to management of the individual sub-projects and the overall project; particularly the quality and efficiency of management with respect to procurement, construction and start-up. In this respect PBS supervision of the sub-projects (para 4.13) will be of importance.

VII. RECOMMENDAT'[ONS

7.01 During negotiations the following assurances were obtained, that:

(i) in case of significant change in any subproject or new subproject, PBS would carry out and send to the Bank for its approval a full technical and economic subproject appraisal report in accordance with a format agreed upon at negotiations and prior to any reimbursement for the subproject concerned (para 4.04);

(ii) PBS would charge an interest rate of not less than 15% annually for all domestic commercial bank funds. Interest rates for Governmental development investment funds shall reflect the full charges prevailing when the subloan agreement is concluded. Interest on Bank funds will be 11.6% p.a. plus a 1.25% on lending charge. For all subprojects PBS would determine the length of each subloan, including grace and repayment periods, from the cash flow analysis of each investment. Unless otherwise agreed the subloan repayment period would be not more than 15 years including not more than 5 years grace and PBS would take adequate steps to protect itself against the exchange risks on its lending and borrowing operations, including these subloans (para 4.05);

(iii) agroindustries equipment would be procured through ICB, and pumping station and over-ground irrigation equipment, fruit tree and vineyard rootstock material through limited international tendering, both in accordance with Bank Procurement Guidelines. Agroindustries civil works and Popovo Polje on-farm machinery and equipment will be procured through local competitive bidding procedures acceptable to the Bank. On-farm machinery and equipment would be procured in 3 packages. Popovo Polje on-farm buildings and other miscellaneous items would be procured through local shopping procedures acceptable to the Bank (paras 4.06-4.08);

(iv) all disbursements for agroindustries and Popovo Polje components described in para 4.10 would be supported by full documentation, except for miscellaneous items, including trellising poles and wire and fertilizer, which would be against PBS certified Statements of Expenditure. Documentation supporting these statements would be retained by PBS and made available to Bank supervision missions (para 4.11); - 30 -

(v) PBS would maintain separate project accounts for subloan disbursements, which would be audited annually by SDK, and submitted to the Bank within 6 months of the close of each year. PBS would also have SDK submit to the Bank, within 6 months of the close of each fiscal year, a separate opinion as to whether or not disbursements under the Statements of Expenditure have been used for the correct purposes. These project accounts would be made available by PBS to Bank supervision missions (para 4.11); and

(vi) PBS would monitor project implementation and submit Semi-Annual Reports to the Bank within 45 days of the close of each six-month period. In the Semi-Annual Report following the end of each fiscal year, PBS would report on the financial status of the sub-projects and the investor and include audited Balance Sheets and Income Statements of the preceding year for each investor. PBS would send to the Bank a Project Completion Report not later than 6 months after the Closing Date. To ensure adequate personnel input, PBS from its own staff or through consultants, would provide to the project not less than 4 man-months per year of supervision time on conditions and of a quality acceptable to the Bank (paras 4.12 and 4.13).

7.02 With the above assurances and conditions the project constitutes a suitable basis for a Bank loan of US$35 million equivalent to PBS for a term of 15 years including 3 years grace. -31 - ANNEX 1 Table 1 APPRAISAL OF

BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Estimated Schedule of BRnk Disbursements ('000 US$)

Cumulative Outstanding Disbursement Bank Fiscal Year Disbursements Disbursements Balance Profile 71 Proposed and Quarter During Quarter at End of Quarter at end of Quarter Indust. Agr. Project %------

Loan.Amount 35,000

1983 I 3,970 /2 3,970 31,030 II 130 4,100 30,900 .3 .3 11.7 III 300 4,400 36,600 - - - IV 700 5,100 29,900 12.2 2.5 14.6

1984 I 1,200 6,300 28,700 II 1,800 8,100 26,900 30.3 8.6 23.1 III 2,500 10,600 24,400 IV 3,200 13,800 21,200 51.2 19.1 39.4

1985 I 3,500 17,300 17,700 II 4,000 21,300 13,700 70.1 32.2 60.9 III 3,500 24,800 10,200 IV 3,000 27,800 7,200 83.6 46.3 79.4

1986 I 2,500 30,300 4,700 II 1,800 32,100 2,900 92.2 60.0 91.7 III 1,200 33,300 1,700 IV 1,000 34,300 700 97.1 72.2 98.0

1987 I 700 35,000 0 II 100.0 82.2 100.0 III IV 90.0

1988 I 95.9 II III IV 100.0

/1 Yugoslavia Industrial and Agriculture sector profiles constructed using data from historical operations covering the period FY70-80, accelerated to eliminate the "long tails" and, in effect, to create a 5% targeting element. /2 Includes disbursement of capitalized front-end fee and retroactive financing for agroindustry equipment amounting to 0.52 and 3.45 $ million respectively. APPRAILAL OF

BOSNIA-HERZEGOVINAAGRICULTURAL DEVELORtENT PROJECT

YUGOSLAVIA

Agroindustties -Sufsmary Results of Financial Analyses (000 Dinars - 1g81 priees)

Base Switching Sensitivity Sensitivity Sensitivity Sensitivity Sensitivity of Year 3 Year 4 Year 5-19 Year 20 ERR Values Of IR to of er to of eRR to of eRR to ERR to Capacity Items Year 1 Year 2 ______(%) (at 1.2) Benefit Operat. Cost Invest. Cost Delays Utilization

1. Wiheat Mill (Ljubace) (+)10% Cl(+)20% B, C2, LaB 1 CU(-)lOX Capacity utilization (it) - - 80 100 100 100 B.(.)10% C2 FRR-13.i FRR-14.4 Total benefit c - 312,814 391,026 391,026 391,026 16.3 B.(-)2.3% FRR'1.O FRR-l,6 FRR-13.0 Lag 2 CU(-)20% Investment cost 69,500 157,000 71,500 - - - Cl(+)20.8% Cl(+)lO% B, C2, FRR-12.4 Operating cost - - 272,900 336,580 336,580 336,580 Cl(+)2.6% FRP-14.6 MR-11,7 Lag 3 Total cost 69,500 157,000 344,400 336,580 336,580 336,580 B, C2, Net surplus before debt service -69,500 -157,000 -31,586 54,446 54,446 54,446 FRR-10.1 2. Wheat Mill (Modrica) Capacity utilization (5() _ - 80 100 100 100 1 CU(-)1O% Total benefit - - 232,358 290,450 290,450 290,450 15.2 B.(-)3.0% B.(-f))O% C2(+)10% Cl(+)20% B, C2, Lag FRR-13.4 Investmtnt cost 61,800 111,300 49,709 - - - Cl(+)27.8% FRR--l.O FRR-2.2 FRR-12.1 FRR-12.8 Lag 2 CU(-)20% Operating cost - - 204,270 251,650 251,650 251,650 f2(+)3.52 Cl(+)10% B, C2, .6 FRR-ll*5 Total cost 61,800 111,300 253,970 251,650 251,650 251,650 PRR-13 FRR-ll0 Lag surplus before debt service -61,800 -111,300 -21,612 38,800 38,800 38,800 B, C2, 3 Net FRR-9.S 3. Poultry slaughterhouse Capacity utilization (56) - - 60 80 100 100 B, C2, Lag 1 CU(-)10% Total benefit - - 593,600 804,400 1,005,700 1,025,800 16.6 B,(-)1.5% B.(&)10% C2(+)10% Cl(+)20% PRR-14,8 Investment cost 91,300 154,600 33,200 - - - Cl(+)29.5% FRR-none ERR-none FRR-13.2 FRRml4.2 B, C2, Lag 2 CU(-)20% Operating cost - - 573,800 758,100 942,900 942,900 C2(+)2.4% C1(+)10% FRRB15.1 EBRR13,0 Permanent working capital - - 20,100 FRR-12,4 3 Total cost 91,300 154,600 627,100 758,100 942,900 942,900 B, C2, Lag Net surplus before debt service -91,300 -154,600 -33,500 46,3o0 62,800 82,900 FRR-10,8 4. Oil Processing Mill Lag 1 CU(-)1OX Capacity utilization (5) - - 30 80 100 100 B.(,)1O% C2(+)iO% Cl(+)20% B, C2, FRR=22,5 PRR-24.6 ) Total benefit - 357,000 951,700 1,189,700 1,012,550 26.9 B.(-)7.5% FRR-5.4 FRR-9.2 FRR=23.0 L- Lag 2 CU(-)20% Investment coat 101,000 271,800 77,400 - - - C1(+)127.4% C1(+)10% B, C2, FRR-22.1 Operating cost - - 321,300 823,600 1,025,000 1,025,000 C2(+)8.7X FRR-24.8 FRR-l9.3 C2, Lag 3 Permanent incremental working capital/2 - - 22,850 - - - B, 8 Total coat 101,000 271,800 421,550 823,600 1,025,000 1,025,000 FBR-]6 Yet surplus before debt service -101,000 -271,800 -164,550 128,100 164,700 187,550 5. Vegetable Pickling Plant Capacity utilization (55) - - 80 100 100 100 B, C2, Lag 1 CU(-)10% Total benefit /% - - 48,490 60,620 60,620 74,120 13.8 B.(-)3.7X B(--)10% C2(+)10% C1(+)20% FRR-11. P6RR-12.1 Investment cost 43,100 58,400 - C1(+)12.9% FPRR-l0.5 FRR-9.9 RR-11.2 B, C2, Lag 2 CU(-)20% Operating cost - - 34,560 42,005 42,005 42,005 C2(+)4.6% C1(+)10% ERR-12.4 ERR-l0.1 PRR210.3 Permanent working capital - - 13,500 - - - B, 02, Lag 3 Total cost 43,100 58,400 48,o60 42,005 42,005 42,005 Net surplus before debt service -43,100 -58,40o 430 18,615 18,615 32,115 FRO8.8 6. Cold Store and Vegetable Processing Capacity utilization (5) - - 6o 80 100 100 C1(+)20C B, 02, Lag 1 CU(-)10Z Total benefit - - 16,350o 138,900 171,450 206,450 15.8 B,(-)7.7% B.(-)l0% C2(+)10% Investment cost 93,800 175,000 29,400 - - C01+329.2% E5RR10.8 PRR-12.7 ERR-13.0 ERR-13.5 nRR-14.1 Operating coat - - 70,070 89,230 108,4oo io8,4oo C25+312.2% 015+310% B, 02, Lag 2 CU5-320% ERR-l2.2 Permanent working capital - - 35,000 - - RR=14.4 ERR-l1.7 B, 2,iLag 3 Total cost 93,800 175,000 134,470 89,230 108,400 108,400 Net surplus before debt service -93,800 -175,000 -28,120 49,670 63,050 98,0 B,R , Lag 3

Total Agroindustries 9 21,650,6122,637,096 3,108,946 3,200,396 () B(-) C2(+)10% Cl(+)20% B, C2, Lag 1 CU(-)10% . TotalBenefit Cost 460,50 ERR-i?.3 TnvestmentCost ~460,500928,100 261,200 - - C15+)54.5% PRRw-0.6 P5R5-2.9 FRR-16.0 EftR-16.2 B, 02, Lea 2 CU(-)20% Operating Costing -apital '- 1,568,350 2,301,1652% 2,706,535 2,706,535 C1(+)S4 F 9 cRR--lC 0% IncludingWorking Capital B 2 Lg2 C()0 Bl+1% PFRR14 FRR-15.3 5 s Total Cost 460 500 928,100 1,829,550 2,301,165 2,706,535 2,706,535 FFR-17.S 335,931 402,411 493,861 B, C2, Lag3 Ret Surplus Before Debt Service -460,500 -928,100 -178,938 P5RR-12.2 / Benefit in Year 20 includes PermanentW-nhij-R-ul. 2 Incremental because of increase ta tuStUd capacity. Cl - Investment Costs C2 - Operating Costs B - Revenue Exchange Rate: Din 33 - USl1 APPRAISALOF

BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT ------YUGOSLAVIA

POPOVOPOLJE IRRIGATION COMPONENT

FINANCIALANALYSIS SUMMARY

(000DIN)

YEAR 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993994-1995 1996 1997 1998999-2001

TOTALBENEFITS - - 60778104431 177850 190120 212480 221840 228080 228080 228080 228080 228080 228080 228080 228080 228080 INVESTMENTCOSTS 139056114823 64896 51193 - - - 3436 3660 785 620 1730 - 3436 3660 7585 - OPERATINGCOSTS - 1100 46384 43881 74271 77010 81195 83036 84271 84271 84271 84271 84271 84271 84271 84271 84271

NETWITH PROJ -139056-115923 -50502 9357 103579113109 131285 135367 140148 143023 143188 142078 143808 140372 140148 136223 143808

WITHOUTPROJECT 2091 3551 9471 9471 9471 9471 9471 9471 9471 9471 9471 9471 9471 9471 9471 9471 9471 ======-======INCREMENTALBENEFITS -141147-119474 -59973 -114 94108103638 121814 125896 130677 133552 133717 132607 134337 130901 130677 126752 134337

RESULTSFOR INCREMENTAL STREAM NETPRESENT VALUE AT 12.0X= 279387561, INTERNALRATE OF RETURN= 22.3% (DX

Exchange Rate: Din 33 - US$1 - 34 -

APPRAISALOF ANNEX2 Table 3 BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT Page 1

YUGOSLAVIA

AgroindustPes - r3r7ThC,al Prices

Price Item Unit (Dinar/Unit)

A. Commodities

Pickled cabbage (whole) ton 15,000 Pickled cabbage (cut) ton 15,000

Pickled green tomatoes - ton 20,000 Pickled paprika 1/ ton 20,000 Pickled cucumbersi/ ton 36,000 Pickled hot paprikai/ ton 40,600 Fresh cabbage -/ ton 5,500 2/ ton 10,000 Fresh green tomatoes - ton 10,000 Fresh cucumbers 2/ ton 8,000 Fresh hot paprika -ton 12,000 Salt l/ton 9,000 Vinegar l/ ton 18,000 Mixed spices 1/ ton 30,000

Frozen peas - ton 32,500 Wheat Class C 2/ ton -6,300

Chilled whole chicken -/ ton 85,000 Frozen whole chickeni/ ton 85,000 Chicken breasts & legs 1/ ton 116,000 Chicken wings & back parts ton 57,000 Chicken liver I/ ton 52,700 Chicken heart 1/ ton 52,700 Chicken gizzard - ton 15,000 Chicken neckl/ ton 18,700 Chicken blood 1/ ton 4,000 Chicken feather, heads & legs- ton 4,100 Chicken (live weight) -/ ton 45,000 ANNEX 2 Table 3 Page 2 Price Item Unit (Dinar/Unit)

Sunflower crude oill/ ton 28,000 Rape seed crude oil-/ ton 28,000 Soyabean crude oil 1/ ton 28,000

Frozen beans -/ ton 28,500 Frozen paprika ton 26,500 Frozen paprika ton 28,500 Frozen cauliflower L/ ton 32,500 17,000 Cooled apples -l ton 25,000 Cooled pears -/ ton Sunflower seeds 1/ ton 11,500 Soyabean seeds 1/ ton 12,500 Rape seeds ton 11,500 Hexan 1/ ton 16,350 Flour T-500 1/ ton 11,700 Flour T-800 1/ ton 9,700 Flour T-1100 1/ ton 7,750 Bran 1/ ton 3,200 Wheatings 1/ ton 3,950 Organic impurities 1/ ton 1,500 Wheat Class-B 2/ ton 6,500 Sunflower meal l/ ton 7,700

Soyabean meal - ton 15,750 Rape seed meal -/ ton 4,300 Husk 1/ ton 1,200

B. Services Skilled labor (gross) man year 182,160 Skilled labor (net) maan.year 132,000 Unskilled labor (gross) man year 110,880 Unskilled (net) man year 87,000 Transport (bulk/truck) ton/km 1.1 Electric power kwh 3.0 3 Water m 6.0 Steam ton 650 Transport (cooled/truck) ton/km 5.8 Transport (bulk/rail) ton/km 0.4

1/ Ex-factory 2/ Ex-farm gate - 36 -

ANNEX 2 Table 4 Page 1 APPRAISAL OF

BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Model: Popovo Polje Irrigation Financial Prices

Price for Financial Item Units Analysis Dinars US$

Outputs Apples kg 13 0.39 Table grapes (seedless) " 20 0.61 Vineyard root cuttings " 2.2 0.07 Maize (grain) 6.0 0.18 Wine grapes " 14 0.42 Wheat 6.5 0.20 Tomato 12 0.55 Paprika pepper 10 0.30: Cucumber 8 0.24 Green beans 12 0.36

Labor /1

Unskilled per day 270 8.18 Semi-skilled " 300 9.09 Skilled 400 12.12

Mechanization12

Tractor 170 hp 3,364 101.94 160 hp 3,010 91.21 75 hp 2,102 63.70 60 hp " 1,655 50.15 Rototiller 14 hp 710 2.12 Combine 2,500 75.75

/1 Net, without any taxes or contributions. /2 Includes cost of fuel, oil and net wage of operator. - 37 -

ANNEX 2 Table 4 Page 2

Price for Financial Item Units Analysis Dinars US$

Fertilizers /1 KAN (27% N) Kg 4.2 0.13 Urea (46% N) " 7.2 0.22 20,20,20 "i 8.0 0.24 Manure " 0.8 0.02 Seeds Apple seedling piece 45 1.36 Rootstock seedling 12 0.36 Vineyard rootstock 17 0.51 Maize kg 50-80 1.52-2.42 Grass it 15 0.45 Tomato 40,000 1,212.12

Onion 500 15.15 Pepper 2,000 60.60 Wheat 10 0.30 Green beans

Other Insecticides 17-195 0.51-5.91 Herbicides i' 150-282 4.55-8.55 Fungicides " 15-143 0.45-4.33 Posts (vineyard) piece 140 4.24 Posts (orchard) of 50 1.51 Rope Kg 20-40 0.60-1.21 Zinc wire " 17-35 0.51-1.06 Stakes piece 2 0.06 Windbreaks " 5.1 0.15 Diesel litre 18.0 0.55 Electricity kwh 1.8 0.05

/1 Delivered to Popovo Polje. - 38 -

APPRAISAL OF ANNEX 2 Table 5 BOSNIA-HERZEGOVINA AGRICULTURAL DEVELOPMENT PROJECT Page I

YUGOSLAVIA

Agroindustries - Detailed Project Costs

Foreign Base Investment Cost (1982) Base Investment Cost (1982) Exchange Local Foreign Total Local Foreign Total Component Agroindustries ------Din '000 ------USS '000 ------

Flour Mill Ljubace 226,477.4 249,307.4 475,784i.3 5,185.1 5,707.8 10,892.9 52 Physical contingency 1/ 22,647.7 5,628.6 28,276.3 518.5 128.9 674.4 20 Price Contingency 2/ _86,807.8 7,047.3 93,855.6 1,987.4 161.4 2,148.8 8 Subtotal 335,933.0 261,983.7 597,91f.7 7,691.1 5,998.0 13,689.1 44

Flour Mill Modrica 160,008.0 195,708,3 355,716.8 3,663.3 4,480.7 8,144.0 55 Physical contingency 16,000.8 4,058.1 20,058.9 366.3 92,9 459.2 20 Price contingency 56,783.0 4,647.2 61,430.2 1,300.0 106.4 1,406.4 8 Subtotal 232,791.8 204,414.1 437,205.9 5,329.7 4,680.0 10,009,7 47

Poultry Slaughterhouse 208,978.0 132,484.6 341,462.6 4,784,5 3,033.2 7,817.7 40 Physical contingency 20,897.8 2,793,4 23,691,2 478,4 64,0 542.4 12 Price contingency 63,716.0 2,878.3 66,594.3 1,458.8 65.9 1,524.6 4 Subtotal 293,591.8 138,156.4 431,748.1 6,721,7 3,163,0 9,884.7 32

Vegetable Oil Extraction Plant 262,668.0 306,067.1 568,735.1 6,013.7 7,007.3 13,021.0 54 Physical contingency 26,266.8 3,543.9 29,810.7 601.4 81,1 682.5 12 Price contingency 92,377.8 3,778.2 96,156.0 2,115.0 86,5 2,201.5 4 Subtotal 381,312.6 313,389.2 694,701.8 8,730.0 7,174.9 15,904.9 45

Vegetable Pickling Plant 67,024.0 84,961.3 151,985.3 1,534,5 1,945,2 3,479,6 56 Physical contingency 6,702,4 2,612,3 9?315,2 153,4 59,8 213,3 28 Price contingency 15,395.1 2,472,0 17 867.1 352,5 56,6 409,1 14 Subtotal 89,121.5 90,046,1a 179,167.5 2,040,4 2,061,6 4,102.0 50

Veg. Freezing & Cold Store Plant 192,812.0 263,876.0 456,688.0 4,414.4 6,041.3 10,455.7 58 Physical contingency 19,281.2 4,766.9 24,048.1 441.4 109.1 550.6 20 Price contingency 55,078.2 4,735.7 59,813.9 1,261.0 108.4 1,369.4 8 Subtotal 267,171.4 273,7,7 540,550.0 6,116.8 J6,25389 12;375.7 51

Total Base Cost 1,117,967.4 1,232,405,2 2,350,372.6 25,595,4 28,215.4 53,810.9 52 Total Physical Contingency 111,796.7 23,403,7 135,200.4 2,559.5 535,8 3,095,4 17 Total Price Contingency 370,158.0 25,559,1 395,717.1 8,474,6 585,2 9,059.8 7

TOTAL PROJECT COST 1,599,922.1 1,281,368.0 2,881,290.2 36,629.6 29,336.4 65,966.0 45

Interest During Construction 3/ 258,508 238,623 497,13] 5,919 5,463 11,382 48

1/ Physical contingency equal to 10% of base investment costs 27 Price contingency calculated as follows: …% …------_ 82 83 84 85 Domestic: 17.5 25 20 20 Foreign: 4,25 7,5 7,5 7,5 CJuly-Dec,) 3/ Interest during construction based on 80% loan at 13% interest accrued. Exchange Rate: Din 43.6784=US$l. - 39 - ANNEX 2 Table 5 APPRAISAL OF Page 2

BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Agroindustries - Phasing of Investments ('000 Din)

1982/83 1983184 1984/85 Total % FE

Flour Mill Ljubace 104,322.2 248,916A3 122,546.3 475,784.8 52 Physical contingency 6,508.1 14,070,8 7,697.4 28,276.3 20 Price contingency 5,375.4 42,944.5 45,535.7 93,855.6 8 Subtotal 116,205.7 305,931.5 175,779.4 597,916.7 44

Flour Mill Modrica 98,414.1 176,672.1 80,630.6 355,716.8 55 Physical contingency 5,700.7 9,822.6 4,535.7 20,058.9 20 Price contingency 4,674.8 29,982 3 26,773.1 61,430.2 8 Subtotal 108,789.6 216,476.9 111,939.4 437,205.9 47

Poultry Slaughterhouse 109,211.1 192,503.2 39,748.3 341,462.6 40 Physical contingency 8,199.9 12,440.9 3,050.4 23,691.2 12 Price contingency 7,252.3 40,594.1 18,747.8 66,594.3 4 Subtotal 124,663.3 245,538,2 61,546.6 431,748.1 32

Veget. Oil ExtractionPlant 127,291.4 343,344.3 98,099.4 568,735.1 54 Physical contingency 6,863.1 17,937.6 5,010.0 29,810.7 12 Price contingency 5,927.4 58,580.3 31,648.4 96,156.0 4 Subtotal 140,082.0 419,862.1 134,757.8 694,701.8 45

Vegetable Pickling Plant 65,539.5 86,445.8 - 151,985.3 56 Physical contingency 3,789.1 5,526.1 - 9,315.2 28 Price contingency 3,264.8 14,602.2 - 17,867.1 14 Subtotal 72,593.4 106,574.1 - 179,167.5 50

Veget. Freezing & Coldstore 134,174.9 269,642.1 52,871.0 456,688.0 58 Physical contingency 8,113.9 14,162.6 1,771.6 24,048.1 20 Price contingency 7,131.3 41,424.9 11,257.8 59,813.9 8 Subtotal 149,420.1 325,229.6 65,900.3 540,550.0 51

Total Component 638,953.3 1,317,523.8 393,895.6 2,350,372.6 52 Total Physical Contingency 39,174.9 73,960.5 22,065.1 135,200.4 17 Total Price Contingency 33,626.0 228,128.2 133,962.9 395,717.1 7 Total Incl. Contingency 711,754.21,619,612.4 549,923.62a381,290.2 45 Interest During Construction37,011 163,054 297,066 497,131 48

Note: Exchange rate Din. 43.6784=US$1 - 40 -

APPRAISAL OF ANNEX2 Table 6 BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Popovo Polje Irrigation Component

Project Costs - Implementation Schedule

Foreigr 1982/83 1983/84 1984/85 1985/86 Local Foreign Total Local Foreign Total Exchan ------'000 Din------'000 Din------'000 US$ /1---- %

On-Farm Buildings 9,106 3,874 5,688 - 10,458 8,210 18,668 239 188 427 44 Physical contingency 910 387 569 - 1,046 821 1,867 24 19 42 44 Price contingency 601 960 2,743 - 3,401 903 4,304 78 21 99 21 Subtotal 10,618 5,222 8,999 - 14,915 9,944 24,839 341 227 568 40

Farm Equipment 4,014 4,277 8,859 34,975 23,935 28,190 52,125 548 645 1,193 54 Physical contingency 401 428 886 3,497 2,393 2,819 5,212 55 64 119 54 Price contingency 237 956 3,876 23,533 20,211 8,392 28,603 463 192 655 29 Subtotal 4,652 5,661 13,621 62,005 46,539 39,401 85,940 1,065 902 1,967 46

Crop Establishment & Overheads /2 104,747 63,775 19,594 12,629 145,112 55,633 200,745 3,322 1,274 4,596 28 Physical contingency 10,475 6,377 1,959 1,263 14,511 5,563 20,074 332 127 460 28 Price contingency 8,160 18,742 9,582 10,739 41,442 5,781 47,223 949 132 1,081 12 Subtotal 123,382 88,895 31,135 24,631 201,065 66,977 268,043 4,603 1,533 6,137 25

Irrigation 34,420 45,914 61,002 - 69,131 72,204 141,335 1,583 1,653 3,236 51 Physical contingency 3,442 4,591 6,100 - 6,913 7,220 14,133 158 165 323 51 Price contingency 2,104 10,596 27,499 - 29,778 10,421 40,199 682 238 920 26 Subtotal 39,966 61,101 94,601 - 105,823 89,845 195,668 2,422 2,057 4,479 46

Total Base Cost 152,287 117,840 95,143 47,604 248,637 164,237 412,874 5,693 3,760 9,453 40 Physical contingency 15,229 11,784 9,514 4,760 24,863 16,424 41,287 569 376 945 40 Price contingency 11,103 31,255 43,700 34,272 94,848 25,481 120,329 2,171 583 2,754 21 Subtotal 178,619 160,879 148,357 86,636 368,348 206,142 574,490 8,433 4,719 13,152 36

Interest During Construction /3 9,288 28,155 44,235 62,205 80,550 63,333 143,883 1,844 1,450 3,294 44

TOTAL 187,907 189,034 192,592 148,841 448,898 269,475 718,373 10,277 6,169 16,446 38

/1 At Din 43.6784 = US$1. /2 Includes Technical Assistance, management costs and general overheads. /3 80% loan at 13% interest accrued. m6iisat OF

6iNAiUEGVWGICULTURAL DEVXWPIENrTRnOfCT YUCOSTLNVI8 ANOn 3

Asenida.tisie Comonet - S-nsr Re. tainsof Sn5s05AayssSalk

Senstivity BSasltialty Se-stivity Base Cas BitehiaIg Sens.itivity of iRS is of FM5to Cr-itietty Ssssltivlty Senitivity Sesettivity of ivi to lvi (96/ Valve sO 885 to ops-tiog I-rs -t.ns of lvi of tilt to of 15 iv af En8 is Cov-Ioty

5 vie- Mvii Ljoi...

-COrnel C2, Sag SCP 2 itytlinOtiso(23 88 lOP 100 105 lOB ion lvi Cl (- 20% B, 1 (0) 33% SwS (aTI" Coy (e( 39% C(-io -Ttvi1 Sevfit 1/ - - 439,232 544a,o46 344,046 544,046 544,046 544,046 559,666 29Sf S (.38.0% 8 (..(10% CS (e(iCIn ERR 24.8 EREB 23.6 SSS 5 3.6 ESPR 27.8 Bvi 28.6 li.2 7--Tvson 1-eV 59,038 329,B6i 58,88o ------240,177 Cl(s(i26.9% ERR 6.7 ERR io1.6 B, 42, lag 2 COF (-3 29% T2r (-3 29% C -20 o-09 oisg Cost - - 374,256 464,196 464,196 464,196 464,196 464,190 464,196 - C2 (669.3%, -Si ER = 19.9 ERR 34.0 lvi 29.9 Ci=i P--Prret Workieg Capital - 15,620 - - , C2, lag 3 --- C(-35 -Total Cast 98,030 119,460 448,756 464,196 464,t96 464,196 464,196 464,196 464,196 - --- v = 170.2 - -y - -Net Syis(-(58,030 (-(3S9,86o (-(13,519 78,9580 95,470 95,470 95,470 99,470 99,470 -

-CaRsoity Ctill-nttv (do - 0 104 lOP 100 108 100 180 Tomini B-asit j/ - - 323,319 404,149 466,149 404,199) 404,199 404,1959 419,949 27.7/ B ( Bt9(-(196 Cl 10) Inetmn-- Cot 91.860 86,810 241,610 - - - - - 66 - 149f9i U1(0127.3% ER88 6.1 ERR 9.3 Ci 1 (10 2l, C;?, log 1 SCFC( 33% BOBW-. 100% Tv(n 39% o()i% 0- etitn Coat - 79,e087 946,667 340.667 346,967 346,667 3'a6,7 3416,667 - 2 (6-8879 ERR08 23.2 SRRl 29.6 ERRS 22.9 ERR 26.3 118 = 27.0 48 2 Pssvtl-- 0,05 ntn -- 71l,4L,0o ------, CS, lOg ECr (-(296 Tl72 I-) 296 0(-C0 -. PontCot51,960 66,O1o 332,927 346,667 346,667 346,667 346,667 346,667 346,667 -ERR- 55 19.2 ERB 32.6 -ERR5 28.0 CI=9 - lt 20-10,5 (5(,86o (-(66,911 (-9,908 57,402 97,482 97,462 97,692 57,482 66,88B ------0(-38 8, C2 ERR3lv= 13 Poaliry OIa-ghte-hvo- iES 1. C-COaity Oltilieeti-n (2 - - 60 98 1008 100 100 100 100 - bid B-n,ii 9/- 618,315 834,273 1,00I,602 1,000,154 1,0992,697 1,105,462 1,125,112 lt.0/ 8 (-((2.4% 2 (-i9 2S n(0 Cl (-20% 6, C2, leg 1 072 (a) 33% 0W0 ( 10IO TCF / 3321 C(-19 -I. t-osioe Cost 79,880 1.7,970 26,960o ------621,510 Ci(.-(396.4% 100R 21 ERB 26.1 ERR 43.0 iORB 39.8 ERR3 45.9 EF5 49.4 ERB - 51.8 88 4 o-09soig Cost 532,403 709,765 997,077 909,877 919,477 927,477 927,477 - c2(o(16.7% --- B, C2, ing 2 SCF (-( 33% -T10 3-) 29% C(329 o-Poroast Wo-klag Cepiitl - 20,047 ------ERR--2 = 32.14 lOP 57.4 - CC 5 3.2 10-3 - Itel Coca 75,860 127,370 979,432 789,765 897,077 909,877 8i9,477 9271,477 927,477 - , 22, 1ng 3 --- C 350 -BtSorplac (-(75,890 (-(717-,970 38,908 124,946 164,525 1(0,277 179,190 177,989 137,494 -1 ERR-= 27.8 - 51 1

-COPisoiy uilI-te i-n (2)30- J Bo iOP 101 108 lCD 1070 Cl (-(206 2, C2, lag 1 810 0/) 33% OviIs lootX TCF (a) 33% C )i9 08R 22.0 ERn - 254I 88=2 -Total or-fit 9/- - 396,270 1,374,843 1,73",374 4,374,461 1,900,307 1.,403,449 1,45937,17 21.0/ 8 (-5.9% 8 -(9 CO ('(i9% ERR - 22.2 ECR - 22.5 19(0 (109% IC _(-(9 C70)22 - lovosisoat303,938 Con 99,392 62,712 ------07,177 C5(n(146.7% 180 = -2 100 a 1.6 6SooP2 - B, C2, lrg 2 909 (-(296-)29% lvicERR -25.625.667 008RR =2 26.026~ FIR - 191 SF o-Osstiag Cos.t - - 383,743 929,582 1,248,619 1,238,159 1,037,396 1,236,192 1,238,192 - 7 (o26.5% ERR-11- 09.4 lOB 29.3 -- i(-30 F-yoo,at W8sr8,,6 CePitn-l 55,7954 - - - - - B,1C2, 10 3 --- 11 1 -TitCost 89,390 203,930 95o,206 999,992 1,240,669 1,238,159 1,937,599 1,239,192 1,238,192 -- --. 110-70-- - otSa,pl-s (-(59,392 (-(203,930 (-(103,938 7(9:261 112,969 139,922 150.7228 8i27 50a

Vogotatln PsOkllg CaPovity Otile ction (2) - 0 100 100 100 108 lOP 108 TC (-33% C)19 ovil Beo-fit - - 41,14); 91 429 51,407 51,429 4,2 429 29 0 29 27i) 2.% -1% 72 (o(196L Cl 3 20% , 42le 1 8CCI (.CF 33% S'19 ()10702 COP 23.6 08 2 tn25 ERR 18.5 TC9(28 OttP'3% T-Taet-on Cost 39,948 48,1680 C1(n(094.9 00R - 18.9 ERR 21.3 008 19.8 Evi 234 008 (.-)1032 CIR 23. 2 8 1 oonvstlo Cost - - 21,455 29 809 27,809 29,669 25,890 05 ((09 01, 897 B7n(9.%.laog 1 8,CF (-296 EP85 - 77 0 8 Poss-en Worolag CapItal. - 038Ooo - - 108 17If1 ERR 23.9 - Tota cos, 35,940 34,18o 32,395 29 909 25,0~(19 29,969 25,809 25,603 23,890 - - - log 3- MeI trpl,,s (-335,948 (-(49,108 8,889 29,420 27 620 28,620 29,420 25,420 25,2o -ERR 10 14.9

Cold lOreo -nO Osgeble rCeon lootyC- Otoli.aatoaa 2%)Bo - - Cn 100 4", 1000- -- C) 'i 027 8BI 106~l' 1 OCR(0 836 OatR -V" T0 ()o 330, 77(31 Toto1 B-ofit 3/ - - 71~ OCt 93,390 114 223 01S,223 115,227 1170 07 14 '~23 117/ o()(11.8% 3216 CC 2(.lO( 005 13. 3 80 44 2 Rpm l6.4 COP - 5.7 ]; .c Ir.

lo'nk't 'pet - 4 8' 7 (73 -, u1,072 7,41ar 48 67a 4,7(1.2o 0 . 07 P-e -osot Wnv7'k taiti - - "'02 - - - lay? -EOn 8 Tote'05 70,777 140,0(0 01,10 5", 729 r067,7C7, 67,372 - I

'at 'noolts1~~~~~~~(~~ tOt ;-'iLC,t2o 2- ..15i 84,771. 'J 2 - - -~~~~~~~,

'-vol lo F~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(36 -~~~~~~~~~~~~~~~~~~,() 3 ~ ly - <~~~~-:~~~,,9j'' 7,v'. dC22..~~~~~~~~~~~~~~O27 z lto3 -~~~~~~'j

0 0i.d-.6 .2,, .BnCts Con ... kills. lo0o-~ boo-,l0000 .02 OoopeCosoo 2a-o-v lon 5ot Ivn 0.a Iao 0,. 0,(C3 C S 2aoslSn soRvicsma-cl - lo--ocn o- CO C(n-anoo Cos 122CynO 21Calo APPRAISALOF ______BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

POPOVOPOLJE IRRIGATION COMPONENT

ECONOMICANALYSIS SUMMARY

(000DIN)

YEAR 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993994-1995 1996 1997 1998999-2001

TOTALBENEFITS - - 23519 61656101080 130328 142548 153602 159062 161246 161246 161246 161246 161246 161246 161246 161246 INVESTMENTCOSTS 10510477849 47608 46023 - - - 3436 3660 785 372 1038 - 3436 3660 7585 - OPERATINGCOSTS - 1850 32453 30700 49963 50819 51841 52444 52914 52916 52916 52916 52916 52916 52916 52916 52916

NETWITH PROJ -105104-79699 -56542 -1506751117 79509 90707 97722102488 107545 107958 107292 108330 104894 104670 100745 108330

WITHOUTPROJECT 3325 6309 16779 18451 18431 18410 18390 18370 18325 18325 18325 18325 18325 18325 18325 18325 18325 ======a======, ======-======INCREMENTALBENEFITS -108429-86008 -73322 -33518 32686 61098 72317 79352 84163 89220 89633 88967 90005 86569 86345 82420 90005

SensitivityTests ERR Base Case 16.4 Benefits -10% 13.2 Operating Costs +10% 15.2 Investment Costs +20%. 14.1 Benefits and Operating Costs Lag 1 year 13.7 Benefits and Operating Costs Lag 2 years 11.5 Benefits and Operating Costs Lag 3 years 9.6 Standard ConversionFactor = 0.926 12.9 m M Standard ConversionFactor = 0.50 18.7 Switching Values (12%) % Change Benefits -13.5 Investment Costs +42.5 Operating Costs +34.7 Without Project +84.5 Net Present Value at 12.0% = 95507 APPRAISALOF

BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Overall Project - Cash Flow and Summary Results

(000DIN)

YEAR 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993994-1995 1996 1997 1998999-2001

BENEFITS - - 235191949537 3103216 3660351 3711640 3749443 3782400 3784584 3784584 3784584 3784584 3784584 3784584 3784584 3784584 INVESTMENTCOSTS 105104 468729 771428 259273 - - - 3436 3660 785 372 1038 - 3436 3660 7585 - OPERATINGCOSTS - 1850 324531776124 2642711 3085845 3097221 3106863 3115927 3115929 3115929 3115929 3115929 3115929 3115929 3115929 3115929

NETWITH PROJECT -105104-470579 -780362 -85860 460505 574506 614419 639144 662813 667870 668283 667617 668655 665219 664995 661070 668655

WITHOUTPROJECT 3325 6309 16779 18451 18431 18410 18390 18370 18325 18325 18325 18325 18325 18325 18325 18325 18325 4

NETINCREMENTAL STREAM -108429 -476888 -797142 -104311 442074 556095 596029 620774 644488 649545 649958 649292 650330 646894 646670 642745 650330

Sensitivity Tests ERR Base Case,_ 26.9 Benefits -10% 9.8 Operating Costs +10% 13.1 Investment Costs +20% 23.1 Benefits and Operating Costs Lag 1 year 22.3 Benefits and Operating Costs Lag 2 years 19.1 Benefits and Operating Costs Lag 3 years 16.5 Standard Conversion Factor = 0.926 22.1 Standard Conversion Factor = 0.50 30.7 Switching Values (12%) % Change X M Benefits -8.9 Investment Costs +131.8 Operating Costs + 10.7 WithoutProject +1383.8

Net PresentValue at 12.0% = 1564183 APPRAISAL OF

BOSBIA-HBnZPCUVI1IA AGRICULTURAL,DEVELOPMENT PROJECT

YUGOSLAVIA

t,groindeatciee >o- Summmcy Prices For Economic mal 7 sis (81Constan~tfD71

Port International Yugoslav Tnternal HIandlirng Ex-Fac-ory Ex-Farm Special World Price Transport Border Price Transport Charges Price Price Adjustment Ite7:s Unit (sTs$) (us$) (uS$) Source or Basis for the Price (US$)/2 (US$)/3 (US$)/4 (iis$)/4 (us$)

Wheat Tons 190.0 33.0 223.0 Based on World Bank Price Projections/Import Parity. 10.0 2.2 _ 230.5 Flour Tons - - - Economic price derived by applying the ratic of - - 350.4 - financial prices of flour to wheat to the econo- mic price of wheat. Logic explained in Working Paper No. Broilers (carcass) Tons 1,200.0 300.0 1,500.0 Same as in Macedonia III Project,i.e. Chicago iced 53.0 15.0 - 1,647.3 Slaughter cost broiler price of US$1.20/kg based on 21st January less recoveries 1981 closing future price for June 1981 delivery of $15.0 added of 30,000 lbs lots./Import parity, to border price Broilers (liveweight) Tons - Assumed killing out percentage allowing for all - - - 1,153.1 birds is 70%. This is used to derive economic price for liveweight birds. Broilers (meat parts) Tons - - The ratio of weighted average financial price of - - 2,225.5 - parts to liveweight bird is applied to the eco- nomic price of live birds. a Broilers (edible offals) Tons - - - Same as above. - - 714.9 - _ Broilers (inedible offals) Tons - - - Same as above. - - 103.8 - Soyabean oil Tons 615.0 8.0 623.0 Based on World Bank Price Projections/Import Parity. 12.0 6.3 634.6 - Soyabean seed Tons 335.0 8.0 343.0 Same as above. 12.0 3.4 352.6 - Soyabean meal Tons 320.0 8.0 328.0 Same as above. 12.0 3.3 337.6 - Sunflower seed Tons 357.0 8.0 365.0 1981 price obtained by applying ratio of seed to 12.0 4.0 375.0 - oil prices for rape seed for the same year. Logic explained in Working Paper No. /Import Parity. Sunflower oil Tons 728.0 8.o 736.o Based on World Bank Price Projections/Import Parity. 12.0 7.4 748.4 - Sunflower meal Tons 237.0 8.0 245.0 Same as above. 12.0 2.5 254.o - Rape seed oil Tons 588.0 8.0 596.O Same as above. 12.0 5.7 607.2 - Rape seed Tons 290.0 8.0 298.0 Same as above. 12.0 3.0 307.3 - Rape seed meal Tons 233.0 8.0 241.O Same as above. 12.0 2.4 249.9 - - Cut Beans (frozen) Tons - - - - Data obtained from Swedish importers/Export Parity. - - 469.o - - Peas (frozen) Tons - - - Same as above - - 533.0 . - Paprika (green/cut) frozen Tons - - - Same as above. - _ 746.0 - - Paprika (green/whole) frozen Tons - - - Same as above. - - 693.0 - - Sour cabbage (cut) Tons - - - Minimum export prices to Germany. - - 469.0 - - Sour cabbage (whole) Tons - - - Same as above. - - 446.o - - Pickled paprika Tons - - - Same as above. - - 558.0 - - Red hot paprika Tons - - - Same as above. - - 1,004.0

Ll Detailed discussion on derivation of economic prices for project analysis is contained in Working Paper No. . Only 1981 prices are shown here. Future price projections ' and methodology used in deriving those projections are discussed in the Working Paper. / Internal transport cost added to border price for import parity items and deducted from border price for export parity items to derive ex-factory/farm price. Port handling charges are added to border price for import parity items and deducted from border price for export parity items to derive ex-factory/farm price. Port handling charges and internal transport cost are modified by transport conversion factor (0.6) and SF (0.7) respectively prior to derivation of ex-factory/ex-farm price. , BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Popovo Polje - Summary of Prices for Economic Analysis - Tradeable Goods (1981 Constant US$) /1

Interna- Yugoslav Port/2 World tional Border Internal/2 Handling Ex-Factory Price Transport Price Transport Charges Price Ex-Farm Items Unit (US$) (US$) (US$) Source or Basis for the Price (US$) (US$) (US$) Price

Urea (46% N) Tons 230 - 230 Based on WB Price Projections - 1.6 228 /3 Potassium Chloride - export parity (60% K20) Tons 120 12 132 - import parity 13.3 0.9 146.2 /3 TSP (46% P205) Tons 200 20 220 - irpcrt parity 13.3 1.5 234.8 /3 Maize grain Tons 152 16 136 - export parity 10.0 1.4 - 129.0

Wheat Tons 190 33 223 - import parity 10.0 2.2 - 230.5 Cucumber kg 0.36/4 0.11/5 0.25 Based on EC Wholesale Prices 0.09/6 - _ .16 1

Tomato kg 0.47/4 0.13/5 0.34 " it 0.09/6 - .25 4 Green bean kg 0.99/4 0.20/5 0.79 " " 0.09/6 - - .70 Pepper (sweet) kg 0.69/4 0.11/5 0.58 *. 0.09/6 - - .49 Table grapes kg .69l/7 - v 6, d CTF Price Switzerland U.27/6 - - 0.42 Wine grapes kg NA - NA Ratio of table grapes to wine 0.30 grapes (1:0.7) Vine root cuttings pc 0.12 0.03 Italian Market Price Adjusted 0.04 - - 0.05 Apples kg 0.36/8 - Yugoslav FOB Price 0.08 - 0.28

/1 Detailed tables indicating year-by-year prices are given in Working Paper No. . Only 1981 prices are shown here. /2 Added to border price for import parity items and deducted for export parity items. Modified by appropriate conversion factors (transport 0.6, SCF = 0.7). /3 Farm price is only for mixed fettilizers, derived from the ex-factory price, detail is in Working Paper No. /4 Vegetables internationalprices are taken from average main season European wholesale market prices from 1980, adjusted to 1981 prices by 1.066. /5 Vegetable internationaltransport includes appropriate EC tariff, and EC transport cost. e /6 Includes packing, loading and transport by truck or rail. /7 Switzerland 1980 average CIF price from Italy. a x /8 Estimated Yugoslav export price from FAO Trade Yearbook, 1979,updated by 11.7% (1979-80) and 6.6% (1980-81). H w - 46 - ANNEX 3 Table 5 Page 2 APPRAISAL OF

BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Popovo Polje - Summary of Prices for Economic Analysis - Non-Traded Goods and Services

Price Item Units Dinars US$

Labor -/ Unskilled per day 108 3.27 Semi-skilled per day 120 3.64 Skilled per day 160 4.85

Mechanization -/ Tractor 170 hp per day 3,364 101.94 160 hp per day 3,010 91.21 75 hp per day 2,102 63.70 60 hp per day 1,655 50.15 Rototiller 14 hp per day 710 2.12 Combine per day 2,500 75.75 Seeds Apple seedling piece 41.6 1.26 Rootstock seedling piece 11.1 0.34 Vineyard rootstock piece 17 0.51 Maize kg 50 - 80 1.52 - 2.42 Grass kg 15 0.45 Tomato kg 28,000 848.50 Onion kg 350 10.61 Pepper kg 1,400 42.42 Wheat kg 10 0.30 Green beans kg 76 2.3

Other Insecticides kg 15 - 174 0.45 - 5.28 Herbicides kg 134 - 252 4.07 - 7.65 Fungicides kg 13 - 128 0.41 - 3.88 Posts (vineyards) piece 84 2.55 Posts (orchard) piece 30 0.91 Rope kg 12 - 24 0.36 - 0.73 Zinc wire kg 10 - 21 0.31 - 0.64 Stakes piece 1.2 0.04 Windbreaks piece 4.6 0.14 Diesel liter 18.0 0.55 Electricity kwh 1.8 0.05

1/ Net, without any taxes or contributions 2/ Includes cost of fuel, oil and net wage of operator. - 47 - ANNEX 4 Page 1 APPRAISAL OF

BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Popovo Polje Irrigation Component.

A. Status of Des;ign

4.01 In the preliminary design submitted to the Bank, irrigation in the social sector had been proposed by a solid sprinkler system and booms, subsequently replaced by typhoons. The individual sector was proposed to be served by quick-coupling sprinkler pipes. During appraisal, the furrow and basin irrigation was also proposed. The consideration of furrow irrigation was prompted by the high cost of the solid anc other sprinkler systems. Final design of the system is now based on sprinkler irrigation.

B. Water Requirements and Availability

4.02 Water Requirements. Net water requirements for project crops were estimated at 2,904 ma/ha; the highest net demand of 1,191 m3 /ha would occur in July and the next highest 6,763 m3 /ha in June. The overall system efficiency has been computed at 80%. Gross water requirements at source would be 3,600 m3 /ha, which would amount to a total of 4.2 million m3 during the cropping season. The total demand would be met from the Trebisnijca River.

4.03 Water Availability. The flows of the Trebisnijca River, above the proposed irrigation project, are stored in Grancarevo and Gorica reservoirs and are used for power generation in three separate hydropower stations. A fourth hydropower station, namely Caplina, has become recently operative, below the proposed irrigation project. The operation of Caplina power plant is dependent on the canalized flows of the karst estavals in the Popovo Polje flood plain and on the releases of surplus flows (about 19 m3/sec) from the upstream dams. During summer, particularly July and August, the karst estavals and consequently the Trebisnijca River is dry and all supplies have to be released from Gorica dam for production of power at Caplina. Considering the priority given to agriculture in SR Bosnia-Herzegovina, the Government has decided to allocate 2.0 m3 /sec during this phase and 5.0 m3 /sec during a second phase, to the Popovo Polje irrigation project. Assurances would be sought during negotiations that the priority needs of irrigation in the project area would be respected. In calculating the ERR, the net incremental benefits will be reduced by an amount equivalent to the opportunity of cost of power which has been foregone. - 48 - ANNEX 4 C. Cost Estimates Page 2

4.04 The total project cost including physical and price contingencies, but excluding interest during construction, is estimated at Din 195.67 million (US$4.48 million). The foreign exchange component, which includes both direct and indirect foreign costs, is estimated at US$2.06 million or 46% of the total cost. The base cost estimates are based on unit rates of work that are expected to prevail in Yugoslavia by mid 1982. Price contingencies for foreign expenditure have been assumed at 5% in 1982 and 10% thereafter and compounded over 1982, 1983 and 1984. Price contingencies for local expenditure have been assumed at 17.5% (1982), 25% (1983), 20% (1984) and 20% (1985) and compounded. Project cost estimate is summarized in the following table:

Estimated Cost /1

Foreign Local Foreign Total Local Foreign Total Exchange ------Din million------uS$ million---- (%)

Underground Pressure Pipe Network 27.19 28.42 55.61 0.62 0.65 1.27 51 Pumping Stations 9.46 9.88 19.34 0.21 0.23 0.44 51 Sprinkler Equipment 13.00 13.58 26.58 0.29 0.31 0.60 51 Power Transmission Line and Transformers 10.82 11.31 22.13 0.24 0.26 0.50 51 O&M Roads 8.00 8.35 16.35 0.18 0.19 0.37 51 Other O&M Facilities 0.64 0.67 1.31 0.01 0.02 0.03 51 Base Cost 69.11 72.22 141.33 1.59 1.65 3.24 51 Physical contingencies 6.91 7.22 14.13 0.16 0.17 0.32 51 Price contingencies 29.79 10.41 40.20 0.68 0.24 0.92 26 Total 105.82 89.85 195.67 2.43 2.06 4.48 46

/1 Exchange rate: Din 43.6784=US$l.

D. Implementation Schedule

4.05 The project works would be constructed in three years (1982 to 1984). Irrigation would commence in 1982 on 26% of the area and would cover the full area (1,170 ha) in 1984. A summary of the estimated schedule of expenditure is given below:

Calendar Year 1981/82 1982/83 1983/84

Annual Estimated Expenditure (US$ million equivalent) 0.81 1.39 2.28 Cumulative Expenditure (US$ million equivalent) 0.81 2.20 4.48 - 49 - ANNEX 5 Table 1 APPRAISAL OF

BOSNIA-HERZEGOVINAAGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Privredna Banka Sarajevo Statement of Income and Expease (millions of Dinars) Compound 1977 1978 1979 1980 Growth Rate

Income Interest on Loans 3,72.5 4,682 6,634 8,533 32 Interest on Bank Deposits 5.5 251 571 446 101 Fees, Commissions and Charges 227 241 326 499 40 Other 38L 392 501 485 8

Gross Income 4,383 5,566 8,032 9,963 3.1

Expenses Financial Interest on Individuals' Deposits 1,055 1,494 2,251 3,104 43 Interest on Other Deposits and Borrowings 1,148 1,328 2,135 2,812 35 Debts Written off 4,5 20 5 276 83 Other 4516 417 736 872 24 Total Financial Expenses 2,704i 3,259 5,127 7,064 38

Administrative Salaries and Personnel 388 489 618 832 29 Other 34b 315 406 558 17 Total Administrative Expenses 734s 804 1,024 1,390 24

Total Expenses 3,438 4,063 6,151 8,454 35

Income before Statutory Obligations 951) 1,503 1,881 1,509 17 Statutory Oblications (taxes) 321 347 457 475 14

Net Income 629 1,156 1,424 1,034 18

Appropriation of Net Income Property and Equipment Fund 171. - - - N.A. Reserve Fund 195 - - N.A. Joint Liability Fund 178E - - N.A. Fund of the Bank's Working Communities 85i 137 174 164 24 Total Funds Allocated 629 137 174 164 N.A.

Distribution to Members - 251 551 198 N.A. Unappropriated, Income not Collected - 768 699 672 N.A. 629i 1,156 1,424 1,034 18 ANNEX 5 - 50 - Table 2

APPRAISAL OF

BOSNIA-HERZEGOVINA AGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Privredna Banka Sarajevo Balance Sheets Compound 1977 1978 1979 1980 Growth Rate Assets 7 Cash and Due from Banks 2,867 3,899 5,892 9,796 51 Deposits with National Bank 5,597 5,705 5,285 5,297 -2 Short-term Loans and Current Maturities of Long-term Loans 17,815 24,091 34,086 49,553 41 Securities and Discounted Bills 1,689 3,365 4,234 8,705 73 Long-Term Loans and Investments over one Year less Current Maturity 44,310 60,040 79,023 100,893 32 Deferred Foreign Exchange Losses 1,598 1,623 1,748 2,204 11 Property and Equipment 910 1,226 1,860 2,526 41 Accrued Interest and Other Assets 2,753 4,621 7,593 17,428 85 Total Assets 77,539 104,570 139,721 196,402 36 Managed Fund 16,881 19,650 21,205 23,494 12 Liabilities and Funds Employed Demand Deposits 26,949 29,562 35,750 49,260 22 Savings and Short-term Deposits up to One Year 9,723 13,313 17,747 24,933 37 Savings and Long-term Deposits Over One Year 9,326 12,984 20,829 27,254 43 Short-term Borrowings and Current Maturities 3,506 7,204 11,887 23,683 89 Long-term Borrowings less Current Maturit. 22,822 34,366 44,189 60,099 38 Accrued Interests and Other Liabilities 1,297 2,267 3,111 3,408 38 Total Liabilities 73,623 99,696 133,513 188,637 37 Funds Employed Joint Liability and Founders' Funds 1,207 1,257 1,426 1,496 7 Reserve Fund 1,139 1,090 1,198 1,438 8 Property and Equipment Fund 1,280 1,366 1,601 2,063 17 Fund of the Bank's Working Communities 290 393 516 629 29 Total Funds Employed 3,916 4,106 4,741 5,626 13 Unappropriated, Income not Collected - 768 1,467 2,139 N.A. Total Liabilities and Funds Employed 77,539 104,570 139,721 196,402 36 Managed Fund 16,881 19,650 21,205 23,494 12 Guarantees outstanding 71,056 96,279 105,503 130,867 23 - 51 - ANNEX 6

APPRAISAL

BOSNIA-HERZECOVINA AGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Project Implementation File

Table of Contents

Working Papers l. Models for Financial Analysis

2. The Borrower (Privredna Banka Sarajevo)

3. Marketing Analysis

4. Economic Prices and Analysis

5. Agroindustries:

- Design Criteria

- Capacity, Utilization and Least Ccst Considerations

6. Popovo Polje:

- Engineering Design

- On-Farm Development - 52 - ANNEX 7

APPRAISAL OF

BOSNIA-HERZEGOVINA AGRICULTURAL DEVELOPMENT PROJECT

YUGOSLAVIA

Project Background File

Table of Contents

1. Project Preparation Report - 3 Volumes

2. Popovo Polje - General Data on Climate, Soil Characteristics - Land Distribution

3. Development Tendencies in Agriculture, Food and Population in Yugoslavia and Bosnia-Herzegovina, Zak Finci, 1977

4. Utilization of Industrial Facilities in 1976 SFRY Fed Bureau of Statistics, Statistical Bulletin No. 1089, September 1978

5. Distribution of Cattle Stocks in Bosnia-Herzegovina by Country, 1971-1979

6. Draft Note on the Denomination of Commodity Prices in Yugoslavia, S. Ahmed, June 1981

7. Information about possible Implementation of a Furrow Irrigation System within Popovo Polje Project, , July, 1981.

8. Prices, Production, Costs and Marketing Data - Requests and Responses.

9. Background for Ready-to-Eat Meals plant (not part of final project composition). APPRAISAL OF

BOSNIA-HERZEGOVINA AGRICULTURAL DEVELOPMENTPROJECT

YUGOSLAVIA

Investors and Locations of Project Components

COMPONENT INVESTOR LOCATION

Vegetable Oil Extraction Plant WO Bimal L/ Brcko

Vegetable Processing, Freezing and Cold Storage Plant WO Agropomet 2/ Bosanski Samic

Vegetable Pickling Plant WO Agropomet 2/ Bosanski Samic

Flour Mill Modrica MUinsko Petarska Industrija Modrica 2/ Modrica Flour Mill Ljubace Mlinsko Petarska 2/ Industrija Ljubace Tuzla

Poultry Processing Plant WO Bimeks Brcko

Popovo Polje Irrigation WO Popovo Polje Trebinje

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