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The World Bank Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 4154a-YU Public Disclosure Authorized STAFF APPRAISALREPORT YUGOSLAVIA KOSOVO REGIONAL DEVELOPMENTPROJECT Public Disclosure Authorized March 30, 1983 Public Disclosure Authorized Agriculture III Division Europe, Middle East and North Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENT* usl Dinars (Din) 63.51 Din 1 US$0.0157 WEIGHTS AND MEASURES 1 kilogram (kg) 2.20 pounds 1 metric ton (m ton) 1,000 kilograms 1 centimeter (cm) 0.39 inches 1 meter (m) 1.09 yards 1 kilometer (km) 0.62 miles 1 hectare (ha) 2.47 acres 1 square meter (m2 ) 10.76 square feet 1 square kilometer (km 2) 0.384 square mile 1 liter (1) 0.264 gallons 1 hectoliter (hl) 100 liters I cubic meter (m 3 ) 1.31 cubic yards ABBREVIATIONS ACO - Agricultural Credit Officer AEA - Agricultural Extension Advisor Al - Artificial Insemination AIK - Agro-Industrial Kombinat B - Billion BB - Basic Bank BCO - Basic Cooperative Organization BOAL - Basic Organization of Associated Labor CCC - Commune Coordinating Committee COAL - Composite Organization of Associated Labor EA - Extension Agent ERR - Economic Rate of Return FA - Faculty of Agriculture FAO/WB - Food and Agricultural Organization of the United Nations/ World Batik FC - Federation of Cooperatives PCC - Project Coordinating Committee FNP - Federal Fund for the Development of Less Developed Regions FRR - Financial Rate of Return GMP - Gross Material Product GNP - Gross National Product ICB - International Competitive Bidding IED - Institute of Economic Development IS - Individual Sector KBP - Kosovska Banka, Pristina M - Million * The currency equivalents given above are those effective in October 1982. FOR OFFICIALUSE ONLY MSC - Media Strategy Committee NPV - Net Present Value OA - Organization of Agriculturalists OCC - Opportunity Cost of Capital PCC - Project Coordinating Committee SAPK - Socialist Autonomous Province of Kosovo RCS - Rural Communications Specialist RTV - Radio Television SDK - Social Accounting Service SFRY - Socialist Federal Republic of Yugoslavia SMA - Self-Management Agreement SMS - Subject Matter Specialist SV - Switching Value WO - Work Organization FISCAL YEAR January 1 - December 31 | This document has a restricteddistribution and may be used by recipientsonly in the performanceof their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. APPRAISAL OF KOSOVO REGIONAL DEVELOPMENT PROJECT YUGOSLAVIA Table of Contents Page No. AGRICULTURE SECTOR 1 A. Project Background 1 B. Agriculture in Yugoslavia 1 C. Bank Strategy in Yugoslavia's Agricultural Sector 3 D. The Agricultural Sector and Development Issues in Kosovo 4 E. Constraints to Increasing Agricultural Production 4 F. Kosovo 1981-1985 Development Plan 5 G. Performance under Previous World Bank Financed Agricultural Credit and Irrigation Projects 5 II. THE PROJECT AREA 6 III. KOSOVSKA BANKA (KBP) - The Borrower 10 A. Resource Mobilization 10 B. Financial Performance 11 C. Arrears 12 IV. THE PROJECT 12 A. Objectives 12 B. Description 13 C. Status of Design and Project Implementation 19 D. Cost Estimates 19 E. Financing 21 F. Retroactive Financing 21 G. Disbursements 22 H. Procurement 23 I. Environmental Effect 24 J. Role of Women 24 This report is based on the findings of an Appraisal Mission to Yugoslavia during June/July 1982, consisting of consisting of Messrs. V. Ashworth (Mission Leader), E. Hunting, J.K. Ingram, A. Schumacher, V. Wickrema and Ms. K. Gavrilovic (Bank), and Messrs. C. Konteatis, T. Stockley and R. Noronha (Consultants). Mr. F. Wright (Bank) assisted with appraisal analysis. A post-appraisal mission comprising Mr. Schumacher, Mr. Carapetis and Ms. Lichtenstein (Bank) took place in October 1982. Table of Contents (Cont'd) Page No. V. PROJECT ORGANIZATION AND MANAGEMENT 24 A. Institutional Arrangements 24 B. Project Coordinating Committee (PCC) 25 C. Federation of Cooperatives (FC) 26 D. Kosovska Banka Pristina (KBP) 26 E. Commune Governments 30 F. Organizations of Agriculturalists (OA's) 30 G. Other Participating Organizations ana Supporting Services 31 H. Training and Supervision 33 I. Accounts and Audit 34 J. Reporting, Monitoring and Evaluation 34 K. Cost Recovery 34 VI. PRODUCTION, PRICES, MARKETS AND FINANCIAL ANALYSIS 35 A. Production 35 B. Market Prospects and Channels 35 C. Prices 39 D. Financial Analysis 40 VII. BENEFITS AND JUSTIFICATION 40 A. Benefits 40 B. Economic Evaluation 42 C. Risk and Uncertainty 45 D. Fiscal Impact 46 VIII. RECOMMENDATIONS 46 TABLES I Project Area Cultivated Land Use 8 2 Project Cost Summary 20 3 Project Financing Plan 21 ANNEXES Annex la Glossary of Terms 49 Annex lb Project Cost and Phasing Table 1 Project Costs and Phasing - US$ Million (International Price Contingencies) 53 2 Project Costs and Phasing - Din. Million (International Price Contingencies) 54 3 Project Cost and Phasing - Dinar Million (Local Price Contingency) 55 4 Project Cost Summary - Dinar Million (Local Price Contingency) 56 5 Project Phasing 57 Table of Contents (Cont'd) Page No. Annex 2 Schedule of Disbursements 58 Annex 3 Financial and Economic Data Table 1 Summary Physical Quantities - Main Production 59 2 Yugoslavia Trade in Major Agricultural Commodities 60 3 SAPK Estimated Increase in Requirements for Agricultural Products 61 4 Farmgate Prices for the Financial and Economic Analyses 62 5 Investment Models - Yield and Production Coefficient Assumptions 66 6 Summary Results of the Financial Analyses 67 7 Projected Economic Border Price Structure for Tradeable Input and Output Commodities 68 8 World Market Indicator Prices for the Economic Analyses 69 9 Summary Economic Results 70 10 Summary Results of the Economic Sensitivity Analyses 71 11 Socio-Economic Indicators 72 12 Agricultural Production Indicators 73 13 Land Use 74 14 Agricultural Sector Performance 1970-1980 75 Annex 4 KBP Data Table I Balance Sheets 76 2 Key Financial Ratios 77 3 Statement of Income and Expenses 78 4 Loan Portfolio Analysis 79 5 Sources and Uses of Funds 80 6 Analysis of Loan Approvals 81 Chart 1 KBP Organization Chart 82 Annex 5 Chart 1 Project Organization 83 Chart 2 Kosovo Water Economy Organization 84 Charts 3 and 4 Typical Road Construction Cross Sections 85/86 Annex 6 Key Indicators 87 Annex 7 Selected Documents and Data Available in the Project File 88 Map: IBRD 16606 STAFF APPRAISAL REPORT KOSOVO REGIONAL DEVELOPMENT PROJECT YUGOSLAVIA I. THE AGRICULTURE SECTOR A. Project Background 1.01 The Socialist Autonomous Province of Kosovo (SAPK) is located in southern Yugoslavia. It is bordered in the west by Albania; in the south by Macedonia, in the East by Serbia, and in the northwest by Montenegro (IBRD Map 16606). The total land surface is 10.9 million ha (4% of Yugoslavia) and the population 1.6 million (7% of Yugoslavia). Kosovo is Yugoslavia's least developed region; with 1979 per capita income about US$780 in 1982 prices. The proposed Project would follow an earlier project for agricultural and agro-inaustrial development: the Kosovo Agricultural Development Project (Loan 1993-YU, 1981). It would also support investments made under the Second (Loan 1477-YU) and Third (Loan 1801-YU) Agricultural Credit Projects, in which Kosovo has participated along with other Republics and Provinces. 1.02 The project was identified in February 1980 by a Bank mission and prepared by the Institute of Economic Development (a Basic Organization of Associated Labor (BOAL) of AgroKosovo) with the assistance of the FAO/WB Cooperative Program. Bank follow-up missions visited Kosovo July 1980, October 1981 and March 1982. The appraisal mission followed in June 1982 consisting of Messrs. V. Ashworth (Mission Leader), E. Hunting, J.K. Ingram, A. Schumacher, V. Wickrema and Ms. K. Gavrilovic (Bank), and Messrs. C. Konteatis, T. Stockley and R. Noronha (Consultants). F. Wright (Bank) assisted with appraisal analysis. A post-appraisal mission comprising Mr. Schumacher, Mr. Carapetis and Ms. Lichtenstein (Bank) took place in October 1982. B. Agriculture in Yugoslavia 1.03 In Yugoslavia, the share of agriculture in social product and employment has declined steadily in the post-war period. However, the agri- cultural sector remains important in the overall development of the economy, contributing about 14% of social product, and engaging about 30% of the country's active population. The agricultural sector accounts for the income of one-third of the population--a group which is largely rural, under- employed, and in the relative poverty target group with per capita income under US$850 per annum. In addition, the agricultural sector makes an important contribution to reducing Yugoslavia's trade deficit. The country has a large agricultural resource base, and its favorable climatic conditions have fostered the growth of a well-diversified agricultural sector with a significant potential for future development. 1.04 Yugoslavia has a unique framework of economic management and decision-making based on a system of workers' self-management, a system characterized by social ownership and workers' control of the means of production. In agriculture this has led to the co-existence of social and individual (private) sectors. About 83% of agricultural land is owned and -2- operated by nearly 2.6 million individual farmers making it the only predominantly
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