RESTRICTED Report No. TO-429a Public Disclosure Authorized
This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized
APPRAISAL OF A ROAD PROJECT
FINLAND Public Disclosure Authorized
June 25, 1964 Public Disclosure Authorized
Department of Technical Operations CURRENCY EQUIVALENTS
U.S. $ = F. Mk. 3,22 F. Mk. 1 million = U. S. $310,000 FINLAND - ROAD PROJECT
Table of Contents
Page
Summary i - ii
I. I1TRODUCTION 1
II. BACKGROUITD 1
A. General 1 B. Transport 1 a) Present Situation 1 b) Shipping, Ports and Waterways 2 c) Air Transport 3 d) Railways 3 e) Road Transport 4 f) Transport Coordination 6 C. National Board of Roads and Waterways 6 a) Organization 6 b) Operation 7 c) Past Activity 8 d) Future Activity 9 e) Maintenance 9 f) Design Standards 10
III. THE PP.OJECT 10
A. Description 10 B. Cost Estimates 12 C. Execution of the Project 13 D. Financing of the Project 1l
IV. ECONOMIC JUSTIEFI-ATION 15
A. Freeway Gumbole-Veikkola 15 B. Asphalt Pavement Program 16
V. CONCLUSIONS 16
TABLES
1. Estimated. Domeistic Transport 2. Number o0Aveh -les 1950-1962 3. Organiz -7hh --t, National Board of Roads and Waterways 4. Maintenan- -=oblicRoads 5. Design Standards for Roads Table of Contents
(Cont'd.)
6. Paving Program and Total Costs 1964 and 1965 7. Parchase Plan of Ilaintenance Equipment in Years 1965 - 1966 8. Estimated Operating Cost for an 11 Ton Semi-Trailer Line Service Under Different Road Conditions in 1968
HAP
Finland - Road Project FINLAND - ROAD PROJECT
Summary
The Government of Finland has asked the Bank for a loan of US$28.5 W;>Iilon equivalent to help finance a road' prbject consisting of:
a) The construction of a 14.3 km four-lane freeway section west of Helsinki between Gumbole and Veikkola.
b) The pavement of about 2,400 km of various road sections over a two-year period. (1964-1965).
c) The procurement of additional maintenance equipment, required by the transfer of responsibility for local roads to the National Board of Roads and Waterways.
d) The cost of outside experts needed to assist in carrying out a long-range transportation study.
ii. Total cost of the road project is estimated at F. Mk. 175.3 million, or US$55 million equivalent.
iii. Road construction and road maintenance are the responsibility of the National Board of Roads and Watenrays (N.B.R.), an organization within the Ministry of Communications and Public Works. The N.B.R. has its head office in Helsinki with 13 district offices in the country, including repair shops and facilities for maintaining the equipment. N.B.R. is well organized and operates very efficiently.
iv. The 14 km freeway Gumbole-Veikkola is the continuation of the section Helsinki-Gumbole, which was opened for traffic last year. For the new section final survey and design have been undertaken by N.B.R.'s own forces, assisted by experts; its construction will be undertaken by prequalified contractors on the basis of international competitive bidding. The works should be completed within 3 years and will be supervised by consultants. v. The pavement program for 196h-1965 is a continuation of the yearly programs of upgrading or reconstructing existing roads necessary to keep pace with increasing traffic. Foreign and local contractors will be invited to participate in tendering. Works will be supervised by N.B.R.'s own forces. vi. Additional maintenance equipment is required to enable the N.B.R. to maintain 33,800 km of local roads, which are being transferred to the N.B.R. during the period 1960-1966, in addition to the present road network of 39,000 km for which it is already responsible. vii. An overall integrated transportation study will be undertaken with the assistance of foreign experts in order to help the Government formulate a long-range transportation investment program. - ii -
viii. Road traffic has increased recently at an annual rate of 16 percent which has necessitated the upgrading and improvement of the main road network from gravel-surfaced roads with poor alignment, to paved roads designed to modern standards. ix. The construction of the proposed freeway and the execution of the pavement program would yield satisfactory returns on investment on the basis of savings in vehicle operating cost and maintenance cost alone. x. During loan negotiations agreement has been reached on the items outlined in paragraph 98 of this report. The Project is suitable for a loan of US$28.5 million equivalent. A 15-year term, including a 4-year period of grace would be appropriate. APPRAISAL OF A ROAD PROJECT: FINLAND
I. INTRODUCTION
1. The Government of Finland has asked the Bank for a loan of US$28.5 million equivalent to help finance a road project consisting of (a) the con- struction of 14.3 km of a freeway section (4-lane) west of Helsinki; (b) an asphalt pavement program for 1964 and 1965; (c) the procurement of additional maintenance equipment, and (d) a long-range transportation study. The pro- posed road project forms part of the Government's road investment program for the coming years and is estimated to cost F. MEk. 175.3 million, or US$55 million equivalent.
2. The appraisal of the project is based on final survey and design of the freeway and the pavement program by the National Board of Roads and Waterways, and on the findings of a Bank Mission that visited Finland in April 1964.
II. BACKGROUND
A. General
3. Finland is one of the most northern countries in the world. It covers 337,000 square kilometers, which makes it the fifth largest country of Europe. It is about 1,150 km long and 550 km wide. Of the land surface, 70 percent is covered with forests - the country's principal economic resource - and some 55,000 lakes cover about 10 percent. Host of the country is flat at 200 meters above sea level. Only the eastern and northern parts of the country are mountainous with the highest point at 1,324 meters. Winters are cold, but in the southern part of the country temperatures remain moderate under the influence of the warm Gulf Stream.
4. With 4.5 million inhabitants - growing at a rate of 1 percent per annum - Finland is thinly populated. Seventy-five percent of the population is concentrated in the southern and southwestern part of the country, which covers only one-third of the total area.
5. The labor force is about equally divided between agriculture including forestry, industry and services. GNP per capita was $1,200 in 1962, and has grown at a rate of 41 percent per annum during the years 1960 to 1963. B. Transport
a) Present Situation
6. Originally the transport situation in Finland was largely determined by two major factors: the relatively large volume of international trade, and the difference in ice conditions during the winter between the ports in the south and those along the west coast. 7. The iiaportance of foreign trade has directed the main inland trans- port routes to and from the ports. The country's primary source of economic growth and the basis for its exports has been forestry. At first timber was mainly floated across the lakes and via the rivers of the southern part of the country. These water routes are in the direction northwest-southeast, and consequently transport routes developed towards the south coast. As a result, port development and manufacturing started in an area along the south coast from Helsinki on eastward.
8. The difference in ice conditions also caused development of north- south transport routes and concentration of port activity in the south, since the less severe climatic conditions in winter compared with the north made it possible, with the help of ice-breakers, to keep the southern ports open almost during the entire winter.
9. Partly contrary to these natural transport routes, the railways were constructed with the object of connecting inland areas not only with the southern ports, but also with ports on the west coast. This has stimulated the development of activities in parts of the country other than the south, and in particular of manufacturing along the west coast. Longer accessibility of west coast ports during winter through the use of more powerful ice-breakers has further stimulated this development.
10. Until a decade ago roads served mainly local needs. Major highways radiated from Helsinki to the west, north, and east, and they formed the basis for the recent layout of a nationwide network. Roads in the middle of the country follow the same northwest-southeast direction as the lakes, and connect the northern part of the lake district with ports on the west coast, inter- secting the railway lines which run northeast-southwest.
11. All means of transportation in Finland are well organized. Between 1950 and 1962 domestic transport of goods increased at an annual rate of 4 percent; passenger transport increased 7½ percent annually. Table 1 shows that the share of road transport increased considerably between 1950 and 1962, from 16 percent to 41 percent in public goods transport (private transport excluded), and from 57 percent to 79 percent in transport of passengers.
12. National account figures show that the role of transportation in terms of contribution to national income is quite significant. The share in the net domestic product of public transport only (excluding private transport) was 5.7 percent in 1950 and 8.0 percent in 1962. This compares with a primary contribution by the transport industry to the net national income of 8.4 percent in the Netherlands in 1957. Such figures indicate that commercial transport plays a significant role in the national economy of Finland.
b) Shipping, Ports and W4aterways
13. The lakes provide good possibilities for cheap water transportation in summertime, especially for floating timber. Floating channels have a total length of 40,000 km. Nevertheless, timber is increasingly being transported - 3 -
by road, because road transport provides, through all year round services, a continuous supply to the paper mills, while lakes and rivers are frozen in winter. Moreover, road transport is cheaper on short distances since it makes transshipment unnecessary, and it keeps the timber in better condition for the requirements of high-quality paper.
14. Domestic coastal shipping is hampered by the freezing of ports like Kokkola, Oulu, and Kemi during at least 3 months of the year. In 1962 coastal shipping made up 8 percent of total port traffic, the major part being oil products from the refinery at Naantali.
15. The largest port is Helsinki with a turnover of 4.7 million tons in 1962. It is the main port for line services and handles 30 percent of all imports, but only 6 percent of the country's exports. The main export port is Kotka, the principal outlet for the lake district.
c) Air Transport
16. The long distances between centers of activity and the severe weather conditions during winter have stimulated the development of passenger transport by air. Regular services are being provided between the major cities, often with several flights a day. Table 1 shows that pa6senger traffic in 1962 was ten times as large as in 1950. In freight traffic only transport of mail and newspapers is significant.
d) Railways
17. The Finnish State Railways operated in 1962 a number of lines with a total length of 5,300 km, of which 420 km were double track. Private railway operations are on a very small scale.
18. Tracks have wide gauge and facilities to exchange axles do not existu There are no direct services with Western Europe and goods to and from Sweden have to be transshipped.
19. As can be seen from Table 1 the Railways' share in freight transport dropped between 1950 and 1962 from 48 percent to 42 percent. The decrease in passenger traffic was larger; from 38 percent in 1950 to 18 percent in 1962.
20. The Railways have tried to avoid loss of freight traffic to road transport by making special price agreements with large suppliers. At present 60 percent of its operations are covered by these arrangements. Other arrange- ments aim to shorten transport time by operating express freight trains, and to reorganize the system of collecting and distributing freight. For this purpose a number of group stations have been established which are inter- connected by railroad and truck services. Freight to and from places located between 2 group stations is hauled, by truck, and also in cases where the dis- tance between 2 group stations is too short to make efficient use of rail transport or wqhere the distance over the road is shorter than via the rail, the Railways haul their freight by truck in line services. These road services are partly operated by the Railways itself and partly by a separate company owned by the Railways. Pick-up and delivery services are mostly carried out by Railway-owned trucks, but use is also made of private truck operators.
21. The inter-city road traffic operated by the Railways is increasing as a result of the Railways' policy to rationalize its operations, as described above. Rates on these lines are different from the Railway rates. They are made public, but special agreements are widely applied. Although these services are now operated at lower cost than before, the operating results are still unsatisfactory.
22. Competition from private road transport is strongly felt, especially for piece goods, and also for wagon loads over distances up to about 300 km. In terms of ton-kilometer performance the loss of freight transport to private road transport was limited over the past decade (see paragraph 19), but it is likely that a considerable shift from water transport to the Railways has taken place for low-value bulk goods, as a partial compensation for the loss of high- value goods to private trucking.
e) Road Transport
23. Between 1957 and 1962 road traffic in terms of vehicle-kilometers doubled, which represents an annual growth of 16 percent. Until 1962 the import of passenger cars was limited and the maximum axle load of trucks was only 6.4 tons. Since then the lmport of private cars was liberalized, but a surtax of 100 percent was installed to avoid a too sudden growth. This tax is to be gradually reduced between 1963 and 1967. Maximum axle load for trucks was raised to 8 tons, and light trucks were replaced by more efficient heavy trucks which decreased the number of registered trucks by 21¼ percent, but raised the loading capacity considerably. In 1962 there were about 350,000 motor vehicles, excluding motorcycles, tractors, and trailers (Table 2). Since 1959 the annual growth rate has been 16 percent, which is equal to the traffic growth on the main roads.
24. Based on the expected growth in GNP, and the relationship between GNP and vehicle density which is normally found, it is expected that in 1973 the number of motor vehicles will be about 1 million, corresponding with 5 inhabitants per motor vehicle, compared with 13 by the end of 1962. The volume of traffic on the main roads over the same period would be 2.8 times that of 1963, as is further explained in paragraph 92.
25. Taxation on motor vehicles includes 14 percent import duty, 35 to 65 percent temporary surtax on cars, and a sales tax of 11.2 percent. Import duty on trucks from member countries of the European Free Trade Association and the USSR is at present 7 percent instead of 14 percent. These taxes expressed in CIF Helsinki value would average 31 percent for trucks, and between 75 and 115 percent for carg. Other taxes are the annual registration fee and a special annual tax on diesel-powered vehicles. Taxes on gasoline amount to 62 percent of the pump price, which is similar to many other European countries. Diesel fuel taxes add up to 30 percent of the retail price. 26. Only part of these taxes, however, can be regarded as specific taxes on road users, since products other than motor vehicles and fuel are also - 5 -
charged with import duties and sales taxes. It has been found that 60 percent of total revenues from road users in 1962, or about F. Mk. 320 million, could be considered specific. This amount compares with total road expenditures in 1962 of F. Mk. h15 million, so that 77 percent of the expenditures on road construction and maintenance may be regarded as covered by specific taxes from road transport.
27. Road transport is regulated by Law of 1957, and by several decrees of later years. Legislation of public road transport goes as far back as 1919.
28. A license issued by the Ministry of Communications and Public Works is required for public goods transport. Licenses for non-scheduled services are given per truck, without limitation of loading capacity and operating distance. Less than full truck loads may be grouped together as long as it is incidental. Licenses for regular services are issued for a specific line without limitation of the number of trucks operated on that line. In many cases a license is given for a minimum of two trucks. The Ministry allows more than one operator on a specific line.
29. Rates for non-scheduled services are subject to a legal maximum, while rates for line services are free. The Ministry's main concern, however, is to prevent rates from falling below the long-run cost level. The Finnish Association of Truck Operators has published model rates for application in line services, which were agreed upon by the Association and large shippers.
30. In 1963 there were more than 4h,000 trucks, of which 53 percent were operated in public transport by 17,000-18,000 operators. Between 80 and 90 percent of the operators providing non-scheduled services own one truck only. The number of trucks operated in line services varies from 5 to 50 per company.
31. Truck operators are well organized and there is a surprising coopera- tion between them on a voluntary basis. About half of the operators providing non-scheduled services exploit more than a hundred district and local offices in order to make more effective use of their trucks. Line operators are for the greater part organized in four terminal organizations, which operate an increasing number of freight terminals all over the country.
32. The line services are of great importance to the economy. In 1963 some 2 million tons of high-value goods were transported over 155 km as an average by about 250 companies. Most lines radiate from Helsinki to inland areas. The greater part of those services are daily, and according to one of the terminal organizations, traffic has almost tripled during the last 5 years.
33. International road transport is of recent date, because the low axle load prevented economic exploitation. Transport to Italy, Austria and Western European countries is provided principally by four Finnish companies. They make use of the ferry to Travemunde in lWestern Germany. The situation will be further improved when a 7,000 ton ferry-boat will be put into operation next year. Truck services to Sweden and Norway go partly by ferry, but also around the Gulf of Bothnia. Road transport with Russia started only two years ago, and although it is increasing, the volume is small.
34. Eighty-one percent of public bus transportation is in private hands. The rest is provided by municipalities, railways, and mail services. A license issued by the Ministry of Communications and Public Works is required for inter- city services, In 1963 there were 550 private companies owning an average of eight buses each. There were 60 one-bus operators and 7 large companies, the largest of which operated 100 buses. The total network of bus lines is about 66,000 kIn, more than 12 times the railway network.
35. Despite the competition of private cars, bus traffic has been increas- ing at 2½-6 percent per year since 1960. There are 50 bus terminals and 500 ticket offices in the country, which are owned by the organization of private bus operators. There are several lines parallel to the Railways. Rates are uniform all over the country. They are slightly lower than the railway rates, especially on long distances.
f) Transport Coordination
36. A coordinated transport policy does not exist. There is an advisory committee to the Minister of Communications and Public Works which is consulted before major decisions on transportation matters are taken. Although on these occasions certain views on policy principles are expressed, a sound background for a consistent coordination policy is lacking. Aviation, waterways, railways, and road transport are under the control of the Minister of Communications and Public Works. Ports are under the responsibility of the municipalities and dealt with by the Navigation Board of the Ministry of Cormerce. The Government recognizes the need for a coordinated transportation policy and has asked the Bank to assist in organizing a study (para. 70).
37. A special department within the Cabinet of the Minister of Communi- cations is in charge of issuing licenses to truck and bus operators. Through the licensing system the Government has some control over the development of the road transport industry and the rate level. It is this department's ob- jective to promote an increase in the average size of firms, so that there would be a sufficient number of medium and large companies run by competent managers. This would be an important step to avoid destructive competition between operators, the department's major concern.
C. National Board of Roads and Waterways
a) Organization
38. Construction and maintenance of all public roads in Finland are under the juirisdiction and responsibility of the National Board of Roads and Tlater_ ways (N.B.R.), an organization within the Ministry of Communications and Public Works. The N.B.R. participates in general policy matters and in budgetary al- locations related to roads, inland waterways and airports with the Ministry. - 7 -
39. An organization chart of the N.B.R.'s main office in Helsinki is shown in Table 3. Within the road section there are divisions, for planning, construction and maintenance, equipment and spare parts. The Helsinki main office is being operated very efficiently with a total staff of 180 employees in the road section only, of which 75 are engineers.
4o. The country's road and waterway administration is divided into 13 districts, each with a district engineer and his staff. The district engineer is in charge of all works related to roads, inland waterways and airports within his district, but with special chief engineers in charge of road con- struction and road maintenance.
41. The number of employees in the districts varies between 160 and 480 depending on the size of the district. The district offices are well organized. They are controlled and directed in their main tasks by the head office in Helsinki. Road planning and design is primarily undertaken by the districts.
42. Total number of employees in the N.B.R.'s whole organization is around 3,500. During the last few years N.B.R. has lost a number of engineers and technicians because private industry has been able to offer better con- ditions. The loss of technical staff members has created problems for the N.B.R. The departure of engineers from the Planning Division has delayed the completion of the survey and design of some projected roads,
b) Operation
43. Improvement, reconstruction and new construction of roads have so far been undertaken by N.B.R.'s own forces. However, local contractors have been used for the laying of asphalt pavements, or as subcontractors for crushing of materials, transport and in some instances, also for earthworks.
44. The reason for force-account work is mainly the obligation imposed on the N.B.R. by the State to occupy seasonal unemployed laborers during the winter. Contrary to the situation in the other Scandinavian countries, Finland has still a serious problem in farmers and fishermen being unemployed in wintertime. Their summer activity does not produce sufficient income to carry them through the whole year. Special funds are made available by the Government each year to combat the unemployment.
45. To work on road sections during the winter, the unemployed laborers are gathered from all over the country and given housing and food in camps near the work site. Work is done by hand to some extent, but essential equip- ment such as dump trucks, graders, rollers are also operated.
46. Obviously, the effectiveness of such winter operations is very low. Work might sometimes be interrupted for months. The part of the relief work for unemployed used in road construction compared with the regular mechanized operation was in 1961 50 percent of total expenditures, but dropped in 1962 to 25 percent. The need for continuing road operation during the winter as relief work has raised the cost of road construction above normal. - 8 -
47. Because of a great shortage of their own construction equipment, the N.BQR. is compelled each year to rent from private companies most of the equip- ment needed such as trucks, graders, tractors, loaders, etc. Out of the total amount of F. Mk. 332.0 million spent on road construction in 1963, 13 percent was for rent of equipment. Of the 5,400 pieces of different equipment used on roads and waterways construction in 1963, only 130 pieces were owned by N.B.R. The rest of the equipment was hired from private contractors or firms speciali- zed in such activity.
48. Because of the high cost of the mixed operation as described above, at least for the more important roads NoBeR. should be encouraged to switch gradually to the use of contractors. This would also help local contractors to gain experience in modern road construction and last, but not least, more competition between contractors would decrease the present cost of construction. c) Past Activity
49. The yearly allocations for road improvements and new construction have increased from F. Mk. 140.0 million in 1953 to F. Mk. 332.0 million in 1963, reaching a peak of F. Mk. 36o.o million in 1959. These allocations reflect the expanded need for improvement of the road network to keep pace with the sharp increase in road traffic.
50. The construction of roads built to modern design standards, capable of carrying today's motorized traffic started around 1958. Before, nearly all public roads in Finland were earth roads of the clay-gravel type; they were narrow, winding and with a poor alignment. As the traffic increased they could not be improved but had to be rebuilt and in most cases relocated. Sweden had at that time developed a cheap but effective method of producing an oil-gravel pavement, using a special oil as a binder instead of the more expensive bitumen. The method was successfully adopted in Finland. The country has today 8,300 km of oil-gravel roads, or 20 percent of the total road network. Every year about 800 to 1,200 km of roads receive an oil-grawrel pavement.
51. An oil-gravel pavement will last from 2 to 5 years according to traffic, and are comparatively easy to repair. A two-lane oil-gravel paved road is normally designed for a traffic load of 200 to 500 vehicles per day and the cost amounts to only one-fourth of the cost of a bituminous pavement.
52. N.B.R.'s main problem in the past has been to follow up on the rapid increase in traffic by upgrading existing roads, including partly reconstruct±on, As already mentioned, the execution of such works has been in principal by N.B.R.'s own forces, using to some extent local contractors as subcontractors, and hiring equipment for their owm use.
53. As of December 31, 1963, works were underway on 4,900 km of different road sections within the country. During the last three years about 3,500 km of reconstruction and new construction of roads have been completed. Today, out of a total of about 39,000 km of public roads, 8,300 km have oil-gravel pavement and about 2,700 km bituminous pavement. The remaining roads, 28,000 km are of the usual clay-gravel type. - 9 -
54. Because of the sharp increase in road traffic during the last years around the larger cities, the planning and construction of 4-lane freeways have become a necessity. The first attempt was made some years ago by constructing the first 15 km of freeway out of Helsinki towards Turku. Plans are underway for other freeways and beltways in urban areas. d) Future Activity
55. N.B.R. will have the difficult task in the following years to meet the needs of the increasing traffic, and to adjust the planning and execution of road construction and improvement accordingly. This increase in work should lead the Planning Division to make more extensive use of consultants for survey and design work. The use of foreign contractors independently or in joint venture with local contractors should be encouraged until local contractors have gained sufficient experience. There will be a constant need for roads to be improved, and upgraded to final standard of Class I. The upgrading of existing gravel roads will in most cases involve a complete relocation and reconstruction of the road in order to comply with modern standards. e) Maintenance
56. All roads under the jurisdiction of the N.B.R. are well maintained. At the end of 1963, 59,600 km of roads were under maintenance, of which 39,000 km are national roads and 20,600 km local roads. The local roads, generally community, village and housing-estate roads, are gradually being taken over by the N.B.R. since 1960, in accordance with a new regulation transferring local roads to N,B.R. for maintenance. The taking-over of local roads will continue until 1966, at which time the total length of roads under maintenance will have reached 72,800 km.
57. The maintenance division within N.B.R.'s headquarters in Helsinki and the district maintenance divisions are adequately staffed and very efficiently operated. Each district has a well organized repair shop in which the mainben- ance equipment is properly maintained. In the sub-districts there are facili- ties for greasing and lubricating and for smaller repair jobs. The total nunber of maintenance equipment today in operation is about 1,400. Because of the gradual increase in length of roads to be maintained, as explained above, the amount of maintenance equipment is insufficient and the NOB.R. plans substantial purchases of additional equipment over the next years. Meanwhile, the mainten.- ance division is renting equipment, especially trucks, from private owners.
58. A special feature of the Maintenance Division's task is snow clearance in winter to keep the traffic moving. A great number of snow plows are re- quired, pushed by high-powered, high-speed trucks.
59. Table 4 shows the allocations for routine and. periodic maintenance during the last 4 years and the average cost per km per annum to maintain the different types of roads. The average cost of US$720 per km per annum is regarded as adequate. About 30 percent of the maintenance cost is for the snow-clearing in winter which not only requires snow plows for removing the new-fallen snow, but also light graders to sweep the pavement clean. - 10 -
f) Design Standards
60. The design standards as applied to new road construction are shown in Table 5. They are idential with German and other European standards in use for modern road design, and are acceptable to the Bank.
III. THE PROJECT
A. Description
61. The present Project under consideration consists of:
a) Road Construction: Construction of a 14.3 km freeway (4-lane) between Gumbole and Veikkola west of Helsinki;
b) Pavement of about 2,400 km of various road sections on existing roads over a two-year period (1964-65) consisting of two types of asphalt-concrete pavement, using crushed stone or gravel.
c) Equipment: Procurement of additional maintenance equipment for the general use of the N.B.R.
d) A long range transportation study supervised by outside experts.
62. The freeway Gumbole-Veikkola is a continuation of the 15 km freeway Helsinki-Gumbole, which was opened for traffic last year. It will be the second stretch of the 4-lane freeway planned between Helsinki and Lohjanharju, 39 km from Helsinki. The freeway, when completed, will be an important improvement in the road, from Helsinki to Turku, the two largest towns in Finland.
63. The new section will be built to the same standard as the first one, with two lanes of 7.0 m. separated by a middle strip of 6 m. and with shoulders of 1.0 and 2.5 m. Total width of the road from edge to edge is 27 m. The road has 6 interchanges permitting no level-crossing of traffic. The terrain is rolling, without special obstacles for road construction. Final plans and designs have nearly been completed by N.B.R.'s own Planning Division.
64. The N.B.R.'s asphalt pavement program for 1964 and 1965 has been included as part of the Project. Table 6 summarizes the different types of pavement to be laid during 1964 and 1965, showting a total of 665 km to be paved in 1964 and 1,740 lniLin 1965. The difference in length of pavement each year reflects the increase in reconstruction of existing roads which require pavement and the need for more upgrading of existing road surfaces due to increased traffic. The pavement consists of the bituminous pavement type, but excludes oil-gravel pavement. The rule adopted by the N.B.R. has been to replace an oil-gravel pavement by an asphalt carpet using natural gravel as aggregate where the traffic is between 500 and 1,000 vehicles a day. For more than 1,000 vehicles, asphalt-concrete pavement using granulated crushed stone is adopted.
65. In the case of construction of an entirely new road, the base course has been designed as a stabilized bituminous gravel base which will carry the traffic for a year or two before a final bituminous wearing course is applied. Such stage-wise construction allows a good settling and compaction of the new base before the final surfacing is executed. The individual sections to be paved during 1964 and 1965 are scattered all over the country, reflecting the completion of new road sections to receive a pavement and the need for rapid upgrading of existing types of surfacing in many other places.
66. The need for additional maintenance equipment, as a result of the transfer of 'ocal roads to the N.B.R. for maintenance, has already been men- tioned. The transfer of such roads started in 1960 and will continue through 1966, adding a total of 33,800 km to the present 39,000 km of roads to be maintained by N.B.R., including the increased length of the national roads during the same period.
67. The cost of the additional maintenance equipment has been estimated by the N.B.R. at F. I4k. 110.0 million. Arrangements have been made with Finnish manufacturers for the procurement of equipment for F. Mk. 57 million, consisting mainly of graders and crushers, all manufactured locally.
68. The remainder, amounting to F. Ilk. 53 million (US$16.5 million equivalent) is included in the Project and would be procured on the basis of international competitive bidding.
69. The proposed equipment and its estimated cost is shown in Table 7. The list was established on the assumption that 65 percent of the equipment needed to meet the peak demand in 1966 should be owned by N.B.R. The extra equipment needed for the peak periods will be rented from private owners on an hourly or daily basis.
70. The Government feels strongly the need for a long-term coordinated transportation program wJhich could serve as a basis for Government decisions with respect to transportation investments and policy. It has asked the Bank to include such a study in the Project and to finance the foreign exchange cost of a small group of highly qualified foreign experts. Such a study should make recommendations not only for a ten-year investment program to meet present and future transport needs, but also for a permanent coordinating machinery within the administration. Because the staff within the Finnish administration is perfectly capable of doing most of the studies and the routine work involved, the task of the foreign experts would mainly be to guide the study and to provide the benefits of foreign experience and an independent outside judgment. Broad terms of reference and arrangements for providing the outside expertise have already been discussed and agreed upon between Bank staff and the Government. B1. Cost Estimates
71. Total cost of the Project is as follows:
Total cost in Bankta Participation Cost Estimate Million F, Mk. in % in Million F. Mk.
1. Construction of a 14.3 kin, 4-lane freeway Gumbole- Veikkola 36.0 34 12,2 2. Pavement Program 1964 26.3) 85.8 30 25.8 Pavement Program 1965 59.5)
3. Procurement of maintenance equipmert 53.0 100 53.0
4. Transportation Study 0.5 100 0.5
Total 175e3 91.5
In U.S. $ 55.0 million 28,5 mill.
72. The cost estimate for the freeway is based on quantities derived from final design and survey now nearly completed by the NOB.R. t s Planning Division. The unit prices applied are prices paid to local contractors by N.B.R. lately and compared and adjusted to similar prices paid recently in Sweden and Norway. The cost of US$800,000 per km is in line with the cost paid for the first free- way section opened for traffic last year. Because of the magnitude of the future road contracts (each between $3 and $5 million equivalent) and the possibility that a group of foreign and local contractors might bid on more than one section, bid prices below those applied in the cost estimate may be obtained.
73. The cost estimate for the pavement program is based on actual unit prices paid to local contractors last year. The aggregates required for the pavement are produced by N.B.R. in advance and delivered to the contractors free of charge. The cost of such aggregates, which comes on top of the amount paid to the contractors, is included in the above estimate.
74. The cost of the maintenance equipment as indicated in Table 7 is based on the expected price in Finland.
75. The foreign exchange cost for the construction of the freeway Gumbole.- Veikkola may range from 30 percent to 40 percent of total cost, depending on the extent to which local contractors will participate in the execution of the works, At present this is difficult to forecast.
76. When estimating the foreign exchange cost of the asphalt program, it has been considered that Finland is producing its own bitumen, but has to import the crude oil. In this case, the foreign exchange component might range between 25 percent and 35 percent, according to the actual participation of foreign contractors. - 13 -
77. As a basis for establishing the amount of the loan, an average per- centage of 34 percent for the freeway and 30 percent for the pavement works has been taken. The disbursement on construction and pavement works would be made on the basis of these percentages.
78. For the procurement of the maintenance equipment, it is assumed that the Bank will finance 100 percent of the cost, irrespective of the equipment being purchased locally or abroad.
79. The cost of outside experts needed for the transportation study is estimated at an amount not to exceed F. Mk. 500,000 (equivalent to $160,000).
80. In the cost estimates no contingencies have been included. The estimates are based on quantities from final design and survey, but variations in the unit prices might be expected. As mentioned above, roads have been constructed in the past at high cost by N.B.R.'s ownm forces with the help of local contractors. The unit prices used in estimating the total cost of the construction and pavement works are based on the N.B.R.'s past experience, though slightly adjusted to prices recently paid in Norway and Sweden. There- fore, the present cost estimates may be considered conservative and it may reasonably be expected that the increased competition between contractors as a result of international competitive bidding may cause prices lower than those used in the present cost estimates.
C. Execution of the Project
81. The final design and drawings of the Freeway (Gumbole-Veikkola) are 95 percent completed. To relieve the Planning Division of its heavy work load, the finalizing of the designs and the preparation of tender documents will be undertaken by consultants. On a basic contract already negotiated, several firms have been appointed general consultants to N.B.R. for road planning.
82. For the Freeway Gumbole-Veikkola the consultants will present the tender documents before December 1, 1964 and also supervise the construction. The works will be divided into 3 sections. Each section is estimated to cost between $3 million and $5 million and contractors will be subject to prequali- fication. Awards will be made on the basis of international competitive bidding. This has been confirmed during the loan negotiations.
83. Offers for the three sections of the freeway are expected in February/ M4arch 1965, and contractors to start work in early spring 1965. The expected construction time will be 2 or 3 years, depending on weather conditions during the winter.
84. The asphalt program included in the Project is a continuation of the yearly pavement program executed since 1960, excluding, however, oil-gravel pavement. In the past, pavement work (except for oil-gravel pavements) was executed by local contractors after competitive bidding, and the work was effectively controlled by N.B.R.'s own forces. Contracts for the 1964 and 1965 - 14 -
pavement pregram included in the Project are awarded on the basis of inter- national competitive bidding. Because work had to start around May 1, the N.B.R. had previously informed foreign legations and embassies in Helsinki about the tendering, in order to comply with the Bankts requirement for inter- national bidding. A few Swedish and French firms have shown their interest.
85. The different sections to be paved in 1964 are grouped into six con- tracts, containing all sections within a certain area. The first bids were received on April 20, the others before May 15A 1964. The procedure used is acceptable to the Bank. It is recommended that the Bank disburse funds for all expenses incurred from May 1, 1964, on,
86. The maintenance equipment will be procured on the basis of interna- tional competitive bidding. As a member of EFTA, Finland has only a 6 per- cent import duty on road construction equipment imported from EFTA countries, compared with 12-15 percent duty for imports from other countries.
D. Financing of the Project
87. The funds needed for the construction of the freeway section, the pavement programs, the procurement of equipment and the transportation study will be part of the overall yearly budgetary allocation to the N.B.R.
88. The yearly disbursement is projected in the Table below. Funds for the asphalt program for the years 1964 and 1965 will be disbursed during the respective years. The placing of orders and delivery of equipment might requ- ire 7 to 9 months, with actual disbursement taking place not before the begin- ning of 1965; delivery will be over a 2-year period. Road work would start in spring 1965, and should be completed in 1967: Total cost Bank's par- In Million F. Mk. in Million ticipation 1964 1965 1966 1967 F. Mk, in F. Mk. rotal Bank Total Bank Total Bank Total Bank
Construction of the Freeway 36.0 12,2 - 15.0 5.2 15.0 5.1 6.0 1.9
Pavement Program 85.8 25.8 26.3 7.9 59.5 17.9 _- - -
Maintenance Equipment 53.0 53.0 - - 35.0 35.0 18.0 18.0 - - Transporta- tion Study 0.5 o.5 0.5 O.5 ------
Total 175.3 91.5 26,8 8.4 109.5 58.1 33.0 23.1 6.0 1.9
U.S.$ equivalent million (28.5) (2.6) (18.1) (7.2) (0.6) - 15 -
IV. ECONOMIC JUSTIFICATION
A. Freeway Gumbole-Veikkola
89. The construction of a 14 km long 4-lane freeway section would be a continuation of the newly constructed 15 km long freeway running from Helsinki westward. These sections form part of the 115 km road from Helsinki to Turku. Turku is an important industrial center with a population of 130,000 and one of the country's main ports with a turnover in 1962 of 1.9 million tons. Des- pite the importance of Turku's harbor Helsinki is the main port for general cargo, so that there is a considerable volume of freight traffic between the two cities.
90. The proposed section would also serve the traffic between Helsinki and the areas of Lohja and Nummela. In both areas manufacturing is rapidly developing. Plants and manufacturers are located on a ridge of solid soil, which contains the basic material for cement and building products. Present basic industry near Lohja produces cement, cellulose (44,000 tons), and paper (36,000 tons). In addition, manufacturing industries in Nummela produce pre., fabricated houses, plastic products, furniture, and oil heaters and boilers. Factories for the production of refrigerating equipment and building parts are being constructed. The area is well suited for industrial development, with laborers available in the agricultural hinterland, and. well located near ports and near Helsinki as consumption center.
91. The present road section traverses a rolling area. It was recon- structed and paved after the war. The alignment is below modern standards for the volume of traffic. In 1963 traffic varied over the year between 4,000 and 7,000 vehicles per day, 38 percent of which were trucks and buses.
92. It is expected that traffic on the main roads will grow at a rate close to the growth rate of registered vehicles. This relation has been found in the past in countries like Sweden, England, and Western Germany, and it has also applied to Finland since 1959, with an annual rate of growth of 16 percent. This rate should normally decrease in the future. However, due to the graduai! reduction of the surtax on private cars - which is to be completely eliminated in 1967 - it is estimated that the present traffic growJth will continue at least at the same rate of 16 percent until 1967, and that it will gradually level off thereafter to 10 percent after 1967, 5 percent after 1970, and 2.5 percent after 1973. As a result, traffic in 1973 on the proposed freeway sec-tic is expected to be 2.8 times the 1963 volume and to amount to 15,300 car units per day.
93. On the basis of studies on transport conditions on existing roads and new highways, it can be expected that the new freeway section would reduce vehicle operating cost (net of taxes) in 1968 - one year after completion - by 26 percent as an average. Comparative operating costs for an 11 ton semi- trailer are given in Table 8.
94. Considering the severe weather conditions in Finland and based on indications given by the N.B.R., comparison with other road sections in the country, which are used beyond their capacity and where base conditions are similar, shows that maintenance cost for the existing road in 1968 could be as - 16 - high as F. Mk. 10,000 per km/year (US$3,000 equivalent). This compares with average annual maintenance cost of F. Mk. 6,40o per km (US$2,000 equivalent) anticipated for the new 4-lane freeway section.
95. The economic life of the Project road can be estimated at 25 years as a minimum. Net benefits from savings in vehicle operating cost and main- tenance cost, discounted over the life of the Project would represent an 18 percent return on investment.
B. Asphalt Pavement Prooram
96. As explained in paragraph 64, the pavement program comprises mainly the carpeting of newly constructed roads, most of which will replace old roads of too low standards. Most of the existing roads included in the pavement program have now oil-gravel pavement, or even a lower standard surfacing (clay- gravel surfacing). The present traffic volume and the traffic forecast for 1965 are such that the sections proposed in the pavement program will carry the minimum amount of traffic requiring asphalt pavement. Beyond this traffic, maintenance of an oil-gravel road becomes a continuous operation. Despite theze efforts the pavement breaks up and traffic is only possible at low speeds and at high operating costs. A quantification of the benefits from asphalt pavement as compared with oil-gravel pavement at a traffic volume of 1,000 vehicles per day has been attempted, disregarding the benefits due to better alignment of the newly constructed roads. It shows that vehicle operating costs - net of taxes - would be reduced by about 36 percent as an average. In addition, maintenance cost per km can be expected to decrease from F. Mk. 10,000 to F. Mk. 3,200 per year. On these bases, total minimum annual savings would amount to F. Mk. 70,000 per km. The annual cost of the pavement over a 5-year period would amount to F. Mk. 10,000 per km, so that the investment would result in a benefit/cost ratio of 7.0. This can be considered very satisfactory and fully justifies the execution of the program.
V. CONCLUSIONS
97. The National Board of Roads and Waterways (N.B.R.) in charge of roads is well organized and operates very efficiently. The engineering of the Project has been satisfactorily carried out. The cost estimates are reliable and the Project is economically justified.
98. During loan negotiations agreement has been obtained from the Govern- ment that consultants will be used for the preparation of tender documents arid for supervision of the work on the freeway Gumbole-Veikkola (see paragraph 82).
99. The Project provides a suitable basis for a loan of US$28.5 million equivalent to the Finnish Government. A 15-year term including a 4-year period of grace would be appropriate.
June 25, 1964 Table 1
FIMLhND - ROAD PROJECT
Estimated Domestic Transport 1/
1950 1955 1960 1962
(billion ton-kilometers)
Freight Transport
Rail 3.5 4.5 4e9 4h9
Road 1.2 2.6 4.2 14.8
Water 2.6 2.2 2.0 2.O
Total 7.3 9.3 11.1 11.7
(million passenger-kilometers)
Passenger Transport
Rail 2,190 2 ,260 213145 2,355
Tram 265 245 220 235
Road 3,260 5,815 8,610 10,600
Bus (2,200) (3,355) (4,260) (4,500) Car (980) (2,150) (3,700) (5,300) Motorcycle (80) (310) (650) (800) Water 35 40 40 40
Air 10 60 100 115 Total 5,760 8, 420 11,315 13,345
1/ International transport not included,
Source: Aarno Soivio, Transport in Finland 1950-1962 Table 2
FINilAND - ROAD PROJECT
Number of' Vehicles 1950-1962
(In Thousands)
Vans and Sub- MIotor- Other 1/ Yoar Cars Truckls Buses total cycles Vehicles Total
1950 26.8 29.8 3.5 60.1 8.0 1.3 69.4
1951 36.2 35.2 3.6 75.0 13.5 1.4 939.0
1952 52.6 43.2 4.1 99.9 28.9 1.8 130.6
1953 59.2 43.7 4.1 107.0 40.8 1.9 14907
1954 70.8 44.3 4.2 119.3 49.3 2.1 170,7
1955 85.4 50.1 4.5 llho.o 57.2 2.4j. 199,
1956 103.0 57.8 4.5 165.3 69..5 2,7 237.5
1957 122.1 54.8 4.9 181.8 86.3 2.9 271,T0
1958 139.7 53.3 5.1 198.1 89.1 33.9 321.1
1959 163.0 56.9 5.4. 225.3 95.8 76.4 397.5
1960 183.3 66.7 5.9 255.9 103.5 89.7 449.1
1961 216.9 76.6 6.3 299.8 109.5 100.9 510.2
1962 259.2 81.0 6.6 346.3 108.6 113.4 568.8
1/ liainly agricultural tractors, widely used in forests for transport of wood.
Source: Diinistry of Communications and Public Zorks FINLAND THE ORGANIZATION PATTERN OF THE NATIONAL BOARD OF ROADS AND WATERWAYS, 1963 (N B R) (MAIN OFFICE - HELSINKI)
COUNCIL
DIRECTOR-IN-CHIEF GENERAL DIRECTOR
I_ l ISEPARATE OFFICES ROAD WATERWAYS WATER SYSTEM SALARY AND ROAD PLANNING CONSTRUCTION BRIDGE AIRPORT ADMINISTRATIVE EQUIPMENT DIVISION IVISION CONTROL OFFICE DIVISION --AND DIVISION AND STORAGE MAINTENANCE DIVISIONDIIINDVSOADSTRE DIVISION DVSO
ADMINISTRATIVE OFFICE
SOIL RESEARCH OFFICE
HOUSE-BUILDING OFFICE
HYDROLOGICAL OFFICE
w-
(R)IBRD-2339 nTi FINIAND - ROAD PROJECT Maintenance of Public Roads
Average Cost
Appropriations Y'Km to be Average cost per Km and year Year granted in F.mk. maintained in F. mk. in US$
1960 82,6co0ooo 37,970 2,180 690 1961 92,670,000 41h500 2,230 700 1962 115,,OCO,COO 47,410 2,h30 760 1963 128,000,000 54,683 2,340 730
1/ Part of these funds is allocated annually for procurement of maintencance equipment.
Source: N.B.R. Table 5
FINLAND - ROAD PROJECT
Design standards for roads
Motorway (double Class I Class II Class III carriage way)
1. Design speed 80-'0o km/h 60-100 km/h 40-80 km/h 100-120 km/h
2. Minimum curves 350-600 m. 180-600 m. 70-350 m. 800-1,000 m.
3. WeJidth of carriageway 7.00 m. 6.50 m. 6.00 m. 7.00 m.
4. Width of shoulders 2Q50 m. 2.00 m. 2.00 m. 2.50 m.
5. Maximumi grade 5% 6% 7% 4%
6. Sight distance 200 m. 180 m. 150 m. 200 m.
Pavement
Traffic density 0 - 200 vehicles per day = clay-gravel surface Traffic density 200-500 vehicles per day = oil-gravel pavement Traffic density 500-1,000 vehicles per day = bituminous gravel pavement Traffic density 1,000 and more vehicles per day = asphalt concrete pavement
Source: National Board of Roads and Waterways, Helsinki. FINLAND - RQAD PROJECT
Paving program and total costs 1964 and 1965
1964 Type of Total length Average width Total area Unit price Total cost pavement of pavement of pavement of pavement of pavement
Ab 20/100 195 km 8.0 m 1,560,000 m2 5.90 mk/m 2 9,204,000 mk
SAb 20/120 308 km 8.0 m 2,464,ooo m 4.40 mk/m 10,841,600 mk
Bsk 30/150 162 km 8.5 m 1,377,000 m 4.55 mk/mr2 6,265,350 mk
665 km 26,310,950 mk
1965
Ab 20/100 290 km 8.0 m 2,320,000 m2 5.90 mk/mr2 13,688,000 mk
SAb 20/120 803 km 8.0 m 6,424,000 mi2 4.40 mk/m2 28,265,600 mk
Bls 20/100 400 km 7.0 m 2,800,000 mi2 2.85 mk/mi2 7,980,000 mk
Bsk 30/150 247 km 8.5 m 2,099,500 m2 4 .55 mk/mr2 9,552,725 mk
1,740 km 59,486,325 mk
Total 85,797,275 mk
Abbreviation:
Ab 20/100 = asphalt concrete pavement, max2 aggregate size 20 mm. amount of mixture 100 kg per m SAb 20/120 = bituminous gravel pavement Bsk 30/150 = bituminous gravel base course Bls 20/-100 ---bituminous gravel pavement with cut-back asphalt Table 7
FINLAND - ROAD PROJECT
Purchase Plan of Maintenance Equipment in Years 1965 - 1966
Estimated Cost
Unit price Number of Total cost in Unit of equipment F. Mk. Units F. Mk.
Snow plow trucks 4 x 2 42,000 646 27,132,000 4 x 4 55,000 37 2,035,000
One-way plows 4,000 400 1,600,000
V-plows 3,000 277 831,000
Wheel tractors More than 2600 kg 18,000 300 5,400,000 Less than 2600 kg 10,000 148 1,480,000
Tractor mounted attach- ments Front end loaders 9,000 150 1,350,000 Hoes 20,000 200 4,000,000 Rotary brooms 5,000 150 750,000
Crawler tractors 240,000 13 3,120,000
Mobile cranes 30 ton.m 130,000 10 1,300,000 50 ton.m 200,000 3 600,000
Diesel generating sets 65,000 15 975,000
Asphalt plant 700,000 1 700,000
Rotary snow blowers 200,000 11 2,200,000
Total sum 53,473,000 F. Mk. Table 8
FINLAND - ROAD PROJECT
Estimated Operating Cost for an 11 Tons Semi-trailer in Short-Haul Line Service Under Different Road Conditions in 1968 1/
Existing Projected Savings 2-lane 4-lane iNJet of Road Freeway Taxes (incl. taxes) (incl. taxes) - (F. pennies per km) - - - -
Fuel and lubricants 9.7 8.4 0.9
Tires 10.0 7.7 1.8
Repairs 9.2 7.7
Depreciation 17.3 12.1 4,6
I!ages 27.3 19.1 8,2
Interest, insurance, taxes and overhead 23.5 16.4 4h9
97.0 71.4 21e9
Per capacity ton-km 8.8 6.5
'l "1 If in US/ 2.8 210
1/ 1964 prices. Figures based on conditions on existing roads. N ~~~~~~Ij 3Esitt\' / gvgFINLAND --/s' - 'ROADPROJECT 4-l1ne epres-say
2-I-ar r-ods. -oph.lt
8aa |2oi ! -fare txreas, sw-
X2 0r0 e0 p 0 elo gravels, >~~~~~~~~~~~~~~~~~~~~~~~~~~2lv )/) reds
4raa ruee stray t~~~~~~~~~~~~~~~~~~~~~~~~~______S
gr,- ,N,(F~~saoasaa r
~~~~~~~~~~~~~~~~~~~~~~~~/ t Ecasafa
R..h
k.tIE o90 0 80 00
JUNE 1964 IBRO-1348R~ROO.