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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 4216a-YU STAFF APPRAISALREPORT Public Disclosure Authorized YUGOSLAVIA SERBIA REGIONAL DEVELOPMENTPROJECT Public Disclosure Authorized March 2, 1983 Public Disclosure Authorized Projects Department 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** June 30, 1982 October 22, 1982 US$1 Dinars (Din) 46.0 Dinars (Din) 63.51 Din 1 US$0.0217 US$0.0157 WEIGHTS AND MEASURES 1 meter (m) 1.09 yards l,square meter (m2) 10.76 square feet i kilometer (km) 0.62 miles I square kilometer (km2) 0.384 square miles '1 hectare (ha) 2.47 acres 1 liter (1) 0.264 US gallons 1 hecto liter (hl) 100 liter I cubic meter (m 3 ) 1.31 cubic yards 1 kilogram (kg) 2.20 pounds 1 metric ton (m ton)= 1,000 kg = 0.98 long tons ABBREVIATIONS AND ACRONYMS Agrobanka = Specialized Agricultural Bank AIK Agro-industrial Kombinat ATK = Agro-trading Kombinat BCO = Basic Cooperative Organization BOCF = Basic Organization of Cooperative Farms BOAL - Basic Organization of Associated Labor COAL Composite Organization of Associated Labor FC = Farmers Cooperative ICB = International Competitive Bidding IRC = Intercommunal Regional Community LCB = Local Competitive Bidding SDK = Social Accounting Service SFRY = Socialist Federal Republic of Yugoslavia SFUR = Serbian Fund for Underdeveloped Regions of Serbia Proper SIZ = Self vanaged Water Management Community of Interest for Water Economy SMA = Self Management Agreement among Participants in the Project SR SERBIA Socialist Republic of Serbia :JBB = Udruzena Beogradska Banka (Associated Belgrade Bank) WO = Work Organization YUGOSLAV FISCAL YEAR January 1 - December 31 ** The Yugoslav Dinar has been floating since July 13, 1973. It was devalued by 20% against the U.S. Dollar effective October 22, 1982. The currency equivalents effective on June 30, 1982 have been used for project analysis. For cost estimates, unit costs are based on June 1982 Dinar estimates and have been updated to December 1982, reflecting the effects of the October 1982 devaluation and international price escalation. FOR OFFICIAL USE ONLY APPRAISAL OF SERBIA REGIONAL DEVELOPMENT PROJECT YUGOSLAVIA Table of Contents Page No. I. THE AGRICULTURAL SECTOR ........................................ 1 A. Agriculture in Yugoslavia .................................. I B. Bank Strategy in Yugoslavia's Agricultural Sector .......... 3 C. Agricultural Development Issues in Serbia .................. 3 D. Performance Under Previous Agricultural Projects in Serbia. 4 E. Project Background ......................................... 5 II. THE PROJECT AREA ........................... 5 A. Sectoral Context ......................... 5 B. Topography, Climate, Land Use and Soils. 6 C. Present Land Use. 7 D. Agricultural Input and Support Services. 8 E. The Banking Institutions. 9 III. THE PROJECT .................................................... 12 A. Objectives ........................ 12 B. Project Description ........................ 13 C. Status of Design and Project Implementation ................ 14 D. Cost Estimates ............................................. 15 E. Financing .................................................. 16 F. Retroactive Financing ...................................... 17 G. Procurement ................................................ 17 H. Disbursement ............................................... 18 I. Environment and Health ..................................... 19 J. Role of Women .............................................. 19 IV. PROJECT ORGANIZATION AND MANAGEMENT ............................ 19 A. Institutional Arrangements ................................. 19 B. Project Coordination ....................................... 20 C. Project Organization and Implementation .................... 20 D. The Borrower ............................................... 21 E. The Implementing Agency - Agrobanka ........................ 21 F. On-lending Procedures ........................ 23 G. On-lending Terms and Conditions ........................ 23 H. Other Participating Organizations ........................ 24 I. Technical Assistance and Training ........................ 26 J. Accounts and Audit ........................ 26 K. Reporting, Monitoring and Evaluation ....................... 27 L. Cost Recovery ........................ 28 This report is based on the findings of an Appraisal Mission to Yugoslavia during June/July 1982, consisting of Messrs. H. von Pogrell, M. Tirmazi, R. Buller, M. Walshe, F. Wright and Ms. Ganguly (Bank) and Messrs. H. Huehne, C. Cronberg and V. Patankar (Consultants). 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. Table of Contents (Cont'u) Page No. V. PRODUCTION, PRICES, MARKETS AND FINANCIAL ANALYSIS ........... 29 A. Production ............................................... 29 B. Marketing and Market Prospects ........................... 30 C. Prices................................................... 31 D. Financial Analysis ........................ .. .. 31 VI. PROJECT BENEFITS AND JUSTIFICATION ........................... 32 A. Benefit and Employment Effect ............................ 32 B. Economic Evaluation ...................................... 33 C. Risks and Uncertainties .................................. 34 VII. RECOvMMENDATIONS.............................................. 35 ANNEXES Annex 1 Project Cost and Phasing Table 1 Detailed Project Cost ................................ 38 Table 2 Summary Project Cost ................................. 39 Annex 2 Estimated Disbursement Schedule .............................. 40 Annex 3 Financial and Economic Data Table 1 Financial Prices for Major Inputs and Outputs........ 41 Table 2 Summary Results of Financial Analyses ................ 42 Table 3 Economic Prices for Major Inputs and Outputs......... 43 Table 4 Summary Results of Economic Analyses ................. 44 Table 5 Socio-Economic Data and Agricultural Indicators...... 45 Annex 4 On-farm Production Investment................................ 46 Annex 5 Description of Support Service Facilities .................... 57 Annex 6 Agriculture Extension, Technical Services and Applied Research 61 Annex 7 Description of Agroindustry Facilities ........................ 65 Annex 8 Description of Drainage Component ............................. 71 Annex 9 The Borrower: Udruzena Beogradska Banka. Table 1 Consolidated Income Statement ......................... 77 Table 2 Consolidated Balance Sheet ............................ 78 Table 3 Project Financing Plan................................ Annex 10 Agrobanka - The Implementing Agency........................... Table 1 Statement of Income and Expenses...................... 80 Table 2 Balance Sheet ......................................... 81 Table 3 Project Financing Plan ................................ 82 Annex 11 Description of Implementing Organizations .83 Annex 12 Main Provisions of Project Agreements among Participants in the Project ......... 85 Annex 13 Guidelines for Appraisal of the Project by Agrobanka ... 88 Annex 14 Selected Documents and Working Papers Available in the Project File ... 90 Charts Chart No.: WB 24323: Project Organization Chart No.: WB 24324: Implementation Schedule Chart No.: WB 24325: Institutional Arrangements Maps IBRD Map 16607 : Danube Region and Location of Proposed Investments IBRD Map 16608 : Kolubara Region and Location of Proposed Investments APPRAISAL OF SERBIA REGIONAL DEVELOPMENT PROJECT YUGOSLAVIA I. ThE AGRICULTURAL SECTOR A. Agriculture in Yugoslavia 1.01 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-thiro 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. 1.02 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 productLion. In agriculture this has led to the co-existence of social and individual (private) sectors. About 83% of agricultural land is owned and operated by nearly 2.6 million individual farmers making it the only predominantly privately-owned sector of the economy. With an average family holding of around 3.2 ha and possessing about 95% of the total agricultural labor force, the individual sector accounts for about 85% of maize production, 60% of wheat, 75% of vegetables, and owns between 85% and 95/. of all livestock. A considerable portion of production in the