World Bank Document

No. P-35 RESTRICTED Public Disclosure Authorized This report is restricted to use within the Bank. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE Public Disclosure Authorized EXECUTIVE DIRECTORS ON THE PROPOSED LOAN TO THE REPUBLIC OF TURKEY Public Disclosure Authorized June 6, 1952 Ii'ITE2a^;:TI0NAL BANK FOR RECOSTRUCTIvOT ANID DEVELOP. L1'T REPORT AND RCOlS;.EDDATIO1,1S OF TIfEl PRL'SIDENT TO TIE EXECUTIVE DIRECTORS CONCEMUIiMG PROPOSED L0A,T TO TKL REPUBLIC OF TURI2Y 1. T submit the folloM:lin- retiport and recommendations with regard to a proposed loan to the .e-oublic of Wurkey in the amount of ..r25,200,.000 .or the .,eyh.an Proiect. PART I - IIISTORIQaL 2. This Project rwas ori,-inall,, presented to the 3an!: as one of several. proiects for :i:hich loins were recuested b- the Turkish ^overn- ment on LiarO 5, l2.2. 'etailed tecluahcal e.:zamination of the Project was ma6e by a Bank consultanit in urkey; in l9.{, On the basis of the report of the .3ankL' surve,,- mission, .wihich visited Turkey in 1950 to study its ecaonom and to make recommend-tions for a develQ'ment nrogr.nm. thae Banl: recomelended that consideration of the _eybhan Project be postponed. 3. In the summer of 1951, the Turk.ish Government iformallv aslked the Bank to conlsidel' financnJ a portion o' the Proj,ect, iiicluding the dam and most of the pow.-er facilities but excludin' the flood control and irriration wlorks and the remainder of the pow.ter f2cilities. A Bank missioin visited Turkey in Jec?mber 1951 avd. Janvarzy 19,52, and after ezerL-.in,n, Turke-t s econornic situation, its invetmaent pro-ara, and the relation of the Seyhan P'roject to that proramn, concluded that ne;otiations could be oDened for a loan for a portion of the revised .-roiect. For this purpose the 2anlc, on J nuary, 28, 1952, invited the aovernment to send a delegation to ..ashin-ton. k. .e~;otlations concernin, the pro-:osed loan wiere condLucted in ..ashin:toi during !iarch and i.pril 195.2. '.uthorized ne;otiators for the Re- Pu'blic of Tur-:1oy -were Tis Excellenc;y: 1eridun C,. rlkin, Turkish *mbassador in z;shin,ton; i,r. IUelih 2.,seiibel, CoLisellor of EmbassY; ,'i.r. Hahit .X1ar. 2ineancial Counsellor of ;nmbessy; Uir. iHunir i.ostpr, Deputyr Director Ceneral of the Treasurr; and Lir. .Enin Yumer, director General of the 2:lectricaj Studies Institute. 5. The .an:: has -reviously made two loans to the Republic of Turkey, one of -12, 00OO0 for port develo-.rnent and consoruction -rojects, and another of .3,900,000 for a _rain stora,,e p-roject. I_oth rwere si lned on .u_ly 7, 1950. Turlkey has also -,uaranteed a loain of .9,000,000 which the Baii.. made on Octobor 2$, 1950 to the Industrial .. evelopment Bank of Turkey. PI.RT II - PURPOSE AIM DE.~CRIPTIT.i' 01' PROPOSED LOVUT -orrower 6. The Borrowver would be the Republic of Turkey, a member of the Bank. - 2 - Amount 7. The loan vould be in the amount of 25,200,000, or the equivalent thereof in other currencies. Purpose 8. The proceeds of the loan would be used to acquire from abroad equip- rent, supplies and services for constructing a dam on the Seyhan River, installing tvwo 18,000 kw electrical generators and building a power trans- mission system. The dam and its related installations would supply power, assist in controlling floods and store 'rater for irrigation. 9. These wiorks are the rajor part of the Seyhan Project, w'hich also includes construction of levees to control floods on three rivers and expansiQn of the existing irrigation system. The whole Project is esti- mated to cost the equivalelet of about I,67 riillion, of which about 1,10.5 million has been spent to date for levees and the beginning of the irrigation systemi 10, According to present estimates, about .10,700,000 of the proceeds of the loani would be used for purchases in the United.States, and the re- maining v1U,500,000 for purchases in various European countries. Terms 11. The loan rrould bear initerest at the rate of 4-3/45 per annum, in- cluding the statutory commission of J$. 12. The commitment charge rrould be 3/4 of 1% per annum and vwould accrue from the effective date of the loan or fromu September 10, 1952, whichever was the earlier. 13, The loan wlould be for a term of-25 years and would be amortized by semi-annual payments commencing April 1, 1957, ancl calculated fto retire the loan oy maturity, as set out in Schedule 1 to the draft loan agreement. 14. I consider that the proposed schedule for the repaymenit of principal and the rate of interest and other charges in connection with the proposed loan are reasonable and appropriate to the Project. PART III - IEGhL :LSTRtFLviTh:_S iiTD MIGAW AUTJORITY 15. A draft loan agreement betrreen the Republic of Turkey and the Bank is attached as Appendix I. Except for the provisions aescribed below, it follows the customary form. In accordance with the constitutional practice of the Borrower, the Grand :ational Assembly of Turkey would ratify the loan agreement. 16. (a) Because the w,orks for which a Banlk loan would be made are only a part of the entire Seyhan Project, provision has been made throughout the draft loan agreement for distinction betr!een the obligations of the Borrow,rer regarding the entire Project and the Banl-financed portion. It should be noted that, in accordance with Section 5.01, the Borrower wrould be obliged to carry out the entire Seyhan 2roject. (b) Oection 2.02 of the draft loan agreement provides that no withdrawals can be made until consulting engineers have been appointed by the Borro%,er and until the Culkurova Porrer Utility Company (see paragraph 27 belov) has been formed and T.L. 4,000,000 of its subscribed capital has been paid in. However, provision is made in a separate letter for -w.ith- draw-al rights writh respect to a maximum of .300,000 for engineering fees, (c) Section 5.11 provides that, if the Borrower transfers the ovmership of any substantial property included in the Project, the Borrower shall malce adequate provision for compliance w-rith the obligations imposed by Section 5,02 (records, inspection and information) and Section 5.10 (operation and maintenance)., (d) Section 9.03 of Loan Reaulations Yo. 3 (Elffective Date) has been amended so as to provide that the loan agreement rould become effective 15 days after the Borrower has furnished the Bank satisfactory evidence that the events set forth in Section 9.01 of the Loan Regulations have occurred, In a sup?lemental agreement, the Borrower would undertalce to submit the required evidence informally in advance so as to give the Bank an opportunity to determine whether, and to advise the BQrrow-er thiat, the evidence is satisfactory to the Baic., These arrangements, made at the request of the Borrower in order to comply with constitutional practice in onneection with the ratifi- cation of the loan, are the same as those made with respect to previous loans to Turkey. 17. A supplemental letter to be signed in conjuncti 6 n with the loan agreement would provide that, if a portionlof the loan remains undisbursed after completion of tlhe works *shich it is intended to finance, the Bank would be prepared to amend the loan agreement to perrmiit use of the remain- ing sum for expansion of the irrigation networ-'* which wrould distribute water stored by the da>i. 18. On June 5, 1952, there were distributed to the Executive Directors (R-601): a. A technical report oh "The Seyhan River Multipurpose ProJect in Turkey," which sumzr6izes and appraises the Seyhan Project, and b. A report oni the "Economic Positioni and Prospects of Turkey)" which provides the economic background against which the proposed loan should be considered and Turkeyts ability to finance the Project and to service the proposed loan should be evaluated. 19. The report of the Committee provided for in Article III, Section X (iii) of the Articles of Agreement of the 3ank is attached as Appendix II.- Justification for the Project 20. The Seyhan Project provides for the development of the fertile Adana Plain in South Central Turkey, which juts Into the northeast corner of the Mediterranean Sea. The development is based on the control and utilization of the Seyhan River, 21. The Adana Plain is a delta formed by three rivers, of which the Seyhan is the largest and most important. It contains some of Turkeyts best agricultural land and is particularly well-suited for groving cotton, oilseeds and citrus fruits. Its main urban centers, Adana, Tarsus and Mersin, are important industrial centers. Mersin i9 Turkeyts second largest Mediter-. ranean port. The area has some mineral resources and there is reason to believe it may contain petroleum deposits* The development of this region has thus far been retarded by floods and by an insufficiency of electric power and of water for irrigation. 22. The purpose of the Seyhan Project is to prevent flood damage on the Adana Plain; to increase agricultural production (part of which can be exported) by providing for irrigation; and to assist in expanding industries and public facilities by raising power production. The Project includes construction of a system of levees along the Seyhan River south of Adana, and along the Ceyhan anid Berdan Rivers; collection canals at the foothills of the Taurus Mountains to catch the run-off of small streams; a multi-purpose earth dam vwhich wi4.

Load more