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Document of The World Bank Public Disclosure Authorized ReportNo. 13412-RU STAFF APPRAISAL REPORT Public Disclosure Authorized RUSSIAN FEDERATION URBAN TRANSPORT PROJECT APRIL 26, 1995 Public Disclosure Authorized Public Disclosure Authorized Infrastructure, Energy and Environment Division Country Department III Europe and Central Asia Region CURRENCy EQUIVALENTS (Figures are as of end of month) CURRENCYUNrI = RUBLE (RB) RUBLESPER US$ December 1991 170 December 1992 415 December 1993 1,247 December 1994 3,550 March 1995 4,899 BORROWER'S FlISCAL YEAR January 1 - December 31 WEIGIITS AND MEASURms METRIcSyS'im US SYSTEM 1 meter (m) = 3.2808 feet 1 kilometer (km) - 0.6214 mile 1 square meter (m2) = 1.196 square yards 1 metric ton (ton) = 1.102 short tons ACRONYMS, ABBREVIATIONS AND GLOSSARY ask available seat kilometers GAZ Gorkiy [Nizhniy Novgorod] AvtoUAZ Uralsk Automobile Plant Automobile Plant (Russia) (Russia) GKI State Committee for the bvk billion vehicle kilometers Management of State Property CAS Country Assistance Strategy GNP gross national product CBR Central Bank of Russia HC hydrocarbons CEE Central and Eastern Europe ICB International Competitive CHMK Cherepovets Metallurgical Bidding Company (Russia) ICR Implementation Completion CIF Cost-Insurance-Freight Report CIS Commonwealth of Independent IFC I n t e r n a t i o n a I F i n a n c e States Corporation CO carbon monoxide IS International Shopping CV curriculum vitae KamAZ Kama Large-Truck Production DSC Directed State Credits Association EBRD E u r o p e a n B a n k f o r KAvZ Kurgan Bus Plant (Russia) Reconstruction and Development krai administrative region EU European Union LCB Local Competitive Bidding ECE Economic Commission for LAZ Lvov Bus Plant (Ukraine) Europe LiAZ Likino Bus Plant (Russia) EIS Environmental Impact Statement MAZ Minsk Automobile Plant ERR economic rate of return (Belarus) FOB Free-On-Board MOF Ministry of Finance FSU former Soviet Union MOT Ministry of Transport NGO non-governmental organization ton-km ton-kilometer NIIAT Research and Development TOR Terms of Reference Institute of Automobile UN United Nations Transport USTDA U.S. Trade and Development NO2 nitrous dioxide Agency oblast region - a Russian state-level UTP Urban Transportation Project territorial administrative unit ZIL Likhachev Automobile Plant okrug administrative district (Russia) pass-km passenger kilometer ZIU Uritskiy Trolleybus Plant PAZ Pavlovo Bus Plant (Russia) (Russia) PD Project Director PID Project Implementation Directorate PLW Project Launch Workshop PMA Project Management Adviser PPAR Project Performance Audit Review PPF Project Preparation Facility rayon district - a Russian county-level territorial administrative unit RF Russian Federation SA Special Account SAR Staff Appraisal Report SO2 sulphur dioxide SOE Statement of Expenditure TA Technical Assistance I STAFF APPRAISAL REPORT RUSSIAN FEDERATION URBAN TRANSPORT PROJECT CONTENTS Page No. Loan and Project Summary ...................................... i I. Transport Sector Background.................................... 1 II. Urban Transport Sector ...................................... 3 A. Urban Sector Background ................................. 3 B. Urban Transport Characteristics ....... 4 C. InstitutionalFramework .................................. 5 D. Financing the Sector .................................... 6 E. Urban Passenger Transport ManufacturingIndustry ..... 7 F. Urban Transport and the Environment ...... 8 G. GovernmentUrban Passenger Transport Strategy ..... 9 III. Urban Transport in the Project Cities and SelectionProcess for the Project .... 11 A. Urban Transport in the CandidateCities ....................... 11 B. Financial Situation in the Project Cities ....................... 18 C. Level of Subsidies ..................................... 29 D. Reform Program for the Project Cities........................ 30 E. Reform Program Progress................................. 31 F. Financial Situation of the Oblasts and Municipalities ..... 35 IV. World Bank Experiencein Urban Transport, and in Russia ..... 41 A. Bank Experience in Urban Transport .......................... 41 B. Lessons from Other Bank Operationsin Russia .................... 43 The project was prepared and appraised by the following-Jane E.M. Holt (Task Maniager),Melody Mason (Deputy Task Manager), Iriria Kichigina, Andrey Kushliu and Thomas Till. Additional work was provided Richard Podolske, Maurice Dickerson, Richard Tarkir and Jacqueline Jamsheed. The team was also assisted by consultants financed- by USAID, including a local Russian Institute (NIIAT), the Government of the Netherlands, the Govermnent of Canada and the Government of the U.K. Claude Blanchi (ECAVP), John Kendall (ECAVP) and Marc Blanc (EC3DR) provided :operational and policy guidance. Peer reviewers are Messrs. Richard Scurfield (EA2T.P), Slbodan Mitic(T ), and Richard Barrett (ESDVP). Jonathan C. Brown is Division Chief, and the Department Director is Yukon H*uang.Karin Skeldon desktop published the report. V. The Project . ............................................. 45 A. Project Origin and Preparation............................. 45 B. Project Rationale ...................................... 46 C. Project Objectives ..................................... 46 D. Project Description ..................................... 47 E. Cost Estimates and Financing .............................. 54 F. Implementation....................................... 55 G. Procurement ......................................... 58 H. Disbursements...................... ............... 62 I. Reporting, Accounting, Auditingand Project Supervision ..... 64 J. EnvironmentalImpact .................................. 65 VI. Financial Evaluation of Project Cities and Their Urban Transport Companies . .. 69 A. Urban Transport Companiesin the Project Cities ...... 70 B. SensitivityAnalyses of Urban Transport Company Financial Forecasts .... 72 C. Municipal Budgetsand Ability to Repay Loan ...... 73 VII. Economic Analysis and Project Risks ........ 77 A. Economic Analysis .......... .. .. .. .. .. .. .. .. .. .. 77 B. Project Risks ......................................... 80 VIII. Agreementsand Recommendation......... .. .. 83 ANNEXES Page No. 3.1 Traffic and Other OperationalData . ............. ....... .................... 87 3.2 Vehicle OperationalStatistics.. ........................... 89 3.3 Transit Fares in 1991 to 1994.. ........................... 91 5.1 Project City Fleet Requirements. ........................... 93 5.2 Details of Vehicle Rehabilitation. ........................... 95 5.3 Terms of Reference: Services to Assist in the Developmentof the Transit Equipment ManufacturingIndustry.. ...................... 99 5.4 Terms of Reference: Assistanceto the Ministry of Transport ..... 109 5.5 Terms of Reference Assistancefor Urban Transport Vehicle Rehabilitation .... 115 5.6 Technical Assistanceto the Cities ......... .......... .. 119 Terms of Reference A: Assistanceto Project Cities' Transport Regulatory Authoritiesand Urban Transport Companies ..... 119 Terms of Reference B: Assistanceto Project Cities to Improve the Planning of Urban Transport ........ 127 Terms of Reference C: Assistanceto Project Cities for the Regulation, Financing and Privatizationof Urban Transport ...... 133 5.7 Project Cost Estimates ........... .. ............... .. .. .. 141 5.8 The Project ImplementationDirectorate ........ ........... 143 5.9 Technical Assistancefor the Project ImplementationDirectorate . ........ 151 Terms of Reference A: Project Adviser to the Project Implementation Directorate . 151 Terms of Reference B: Principal ProcurementServices, Phase A ..... 157 Terms of Reference C: ProcurementServices, Phase B ...... 163 5.10 OrganizationalChart for Project Management ...... .......... 169 5.11 Project ImplementationSchedule ............ .. ................. 171 5.12 Project Performance Indicators ................................ 173 5.13 Procurement Plans and Schedules ........ .......... 175 5.14 Estimated DisbursementsSchedule ........ ......... 193 5.15 SupervisionPlan .................. ...................... 195 5.16 Details of EnvironmentalAnalysis ........... .. ................ 197 7.1 Details of the Economic Analysis ........ .......... 205 8.1 SelectedDocuments and Data Available in the Project Files . ........ 208 Maps: IBRD 26294 - Public Transport Supply in Project Cities (1993) IBRD 26295 - Public Transport Demandin Project Cities (1993) TABLESIN THE TEXr 2.1 Urban Passenger Transport Operational Losses (Rb billions) 2.2 Atmospheric Emissions, 1980-1990 (million tons) 2.3 Bus Emissions in Russia and Western Europe/USA (grams/km) 3.1 Project City Characteristics 3.2 Candidate City Key Operational Statistics (1993) 3.3 Candidate City Average Fleet Characteristics (1993) 3.4 Financial Performance of Transit Companies (1993) and (First and Second Quarters 1994) 3.5 Affordability of Urban Public Transport in Project Cities (as of March 1994) 3.6 Status of Reform Program in Project Cities: Cost Recovery Level and Measures to Reduce Losses from Exemptions and Fare Evasions 3.7 Status of Reform Program in Project Cities: Governance and Autonomy of Public Transportation Enterprises 3.8 Status of Reform Program in Project Cities to Improve the Efficiency of Operations and Investment Planning 3.9 Status of Reform Program in Project Cities: Restructuring and Privatizing the Urban Transport Sector 3.10 Relationship of Municipal Budgets to Transit Company Performance 5.1