Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 2676a-RO Public Disclosure Authorized STAFF APPRAISALREPORT DANUBE-BLACKSEA CANALPROJECT ROMANIA Public Disclosure Authorized December 20, 1979 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. CURRENCYEQUIVALENTS Currency Unit: Leu (plural lei) 1. Official Rate Lei 4.47 = US$1.00 Leu 1.00 = US$0.22 2. Tourist Rate Lei 12.00 = US$1.00 Leu 1.00 = US$0.08 3. Conversion Rate for Traded Goods Lei 18.00 - US$1.00 Leu 1.00 = US$0.06 The Official Exchange Rate of lei 4.47 per US$1 is used only for accounting purposes. The rate used for tourist transactions is lei 12 per US$1, having been revalued from a rate of lei 14.38 per US$1 in October 1974. Beginning in March 1978 a trading rate of lei 18 per US$1 has been used to convert the priceq of all traded goods; this rate is considered representative of the average cost of convertible foreign exchange. WEIGHTS AND MEASURES 1 meter (m) = 3.2808 feet (ft) 1 kilometer (km) 0.6214 mile (mi) 1 square kilometer (km2) = 0.3861 square mile (mi2) 1 hectare (ha) = 2.47105 acres (ac) 1 liter (1) = 0.2642 gallon (gal) 1 liter per second (1/sec) = 0.0353 cubic foot per second (ft3/sec) 1 cubic meter per second (m3/sec) (m3/sec) = 35.3147 cubic feet per second (ft3/sec) 1 kilowatt (kw) = 1.3410 horsepower (hp) 1 kilogram (kg) = 2.2046 pounds (lb) 1 metric ton (ton) = 2,204.6225 pounds (lb) ACRONYMS AND ABBREVIATIONS bt Barge tons DBSCC Danube-Black Sea Canal Central cmt Cargo metric tons CONTRANSIMEX State Company for Foreign Trade DWT Department of Water Transport dwt Deadweight tons IB Romanian Investment Bank ICH Hydrotechnical Research Institute IPTANA Road, Water and Aerian Design Institute ISP,IF Land Reclamation Design and Research Institute ITFG Enterprise for River Navigation LDN Lower Danube Navigation mlTc Ministry of Transport and Telecommunications SPC State Planning Committee The Administration Danube-Black Sea Canal Administration (the canal operating enterprise) ROMANIAN FISCAL YEAR January 1 to December 31 FOR OFFICIALUSE ONLY STAFF APPRAISAL REPORT DANUBE-BLACK SEA CANAL PROJECT ROMANIA Table of Contents Page No. I. THE TRANSPORT SECTOR .......................... 1 A. The Transport System ................................ 1 B. Transportation Policy, Planning and Coordination .... 2 C. The Subsector ....................................... 3 D. The River Danube Navigation System .... .............. 4 E. Bank Group Transport Sector Operations in Romania ... 5 Annex 1.1 Freight and Passenger Movements - Growth and Modal Breakdown .... ........... 6 II. THE DANUBE-BLACK SEA CANAL ADMINISTRATION AND THE BORROWER ................................................ 7 A. Organization and Management of the Canal .... ........ 7 B. The Borrower ........................................ 8 C. International Traffic ............................... 8 Annex 2.1 Translation of the Decree Creating the Administration ........................... 9 Annex 2.2 Provisional Organization Chart, Canal Administration ........................... 11 III. THE INVESTMENT PLAN AND THE PROJECT ..................... 12 A. Inland Waterway Subsector Investment Program ... ..... 12 B. Project Objectives, Dimensions and Timing .... ....... 12 C. Project Description ................................. 13 D. Project Design ...................................... 15 E. Soil Conditions ..................................... 15 F. Project Construction ................................ 16 G. Supervision and Technical Assistance .... ............16 H. Construction Schedule ............................... 16 I. Project Cost ........................................ 17 J. Project Financing ................................... 18 This report is based on the findings of appraisal missions to Romania in February, March and July 1979 consisting of Mr. N.C. Yucel (Economist) and Messrs. A.H. Clark, A.A. Fateen and Y. Latizeau (Consultants). This documenthas a restricteddistribution and maybe usedby recipientsonly in the performance of theiromcial duties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. Table of Contents (Cont'd) Page No. K. Procurement and Bank Involvement .................... 19 L. Project Monitoring and Reporting .................... 21 M. Employment, Ecology and Regional Development ... ..... 22 Annex 3.1 Other Essential Investments .... .......... 23 Annex 3.2 Project Description - Further Details and Information .......................... 25 Annex 3.3 Summary of Studies and Design Work for the Canal ............................ 27 Annex 3.4 Implementation Schedule and Critical Path. 28 Annex 3.5 Project Cost Estimate .................... 29 Annex 3.6 Foreign Exchange Component .... ...........30 Annex 3.7 Equipment to be Incorporated in the Project and Suitable for Bank Financing 31 Annex 3.8 Construction Equipment Recommended for Bank Financing ........................... 32 Annex 3.9 Estimated Schedule of Loan Disbursement 33 IV. ECONOMIC EVALUATION ..................................... 34 A. General ............................................. 34 B. Traffic Analysis and Forecast ....................... 35 C. Least-cost Analysis ................................. 37 D. Project Benefits .................................... 39 E. Economic Costs of the Project ....................... 43 F. Economic Return and Sensitivity Analysis .... ........ 44 Annex 4.1 Information on Traffic Forecasts .... ..... 46 V. FINANCIAL AND TARIFF ANALYSIS - DANUBE-BLACK SEA CANAL ADMINISTRATION .......................................... 49 A. General Principles .................................. 49 B. Canal Dues .......................................... 50 C. Costs to be Covered by Dues ......................... 51 D. Financial Forecasts and Tariff Analysis .... ......... 53 E. Cash Flow Statements and Balance Sheets .... ......... 55 F. Accounts and Audit .................................. 55 Annex 5.1 Danube-Black Sea Canal Administration - Capitalization of Canal Operations ....... 56 Annex 5.2 Danube-Black Sea Canal Administration - Pro Forma Financial Statement, Analysis of Canal Barge Transit Dues and Cash Flow Statement ........................... 57 Annex 5.3 Cash Flow Statement - Ministry of Trans- port and Telecommunications .... .......... 58 VI. AGREEMENTS REACHED AND RECOMMENDATIONS .... ..............59 Annex - Documents in Project File ............................ 60 Maps - IBRD 14312, IBRD 14313R STAFF APPRAISAL REPORT DANUBE-BLACK SEA CANAL PROJECT ROMANIA I. THE TRANSPORT SECTOR A. The Transport System (Map IBRD 14312) 1.01 The Socialist Republic of Romania has an area of 237,500 square kilometers. It is bordered by Bulgaria to the south, Hungary and Yugoslavia to the west, and to the north and northeast by the USSR. The Black Sea lies to the east providing Romania with a 245 kilometer-long coastline. Along much of its southern border flows the Danube, the most important navigable river in southeast Europe. 1.02 Romania's topography consists of three principal relief zones of approximately equal size. In the middle of the country lie the Carpathian mountains rising to over 2500 meters. Around this mountain range there are hills and tablelands ranging in height from 500 to 200 meters. The third relief zone consists of the lowlands located in the western and southern regions of the country. 1.03 Despite the existence of extensive mountainous areas, Romania has a fairly well developed and evenly distributed transport network. The principal mode of the system is railways with 11,000 route-km. The rail network is evenly distributed throughout the country and has stations in 1441 locations providing easy access to rail transport from almost all production and population centers. The road system is 78,000 km long, about two-thirds of which is gravel and earth surfaced. There is only one expressway of 100 km and 264 km of four-lane highways. 1.04 The Danube River flows through and along the borders of Romania over a distance of 1075 km. It offers great potential for complementing the country's transport network by providing energy-efficient transportation for low value bulk commodities. The deep-sea port of Constanta on the Black Sea is the country's main outlet for its seagoing trade, handling about 90% of the total. It is an important element in the transportation system since, with rapid industrialization and economic development, foreign trade has become a vital element in sustaining the growth of the economy. 1.05 No data have been available on "own transport" services (owned only by State enterprises) to determine their extent although they are relatively minor. Ignoring these services and movement by private cars, rail is the most important mode of inland transport in Romania. In 1977 it accounted for 81% of the total ton-km. Road transport is the next important mode--12% of the total ton-km--and during recent years it has been slowly increasing its share. Inland waterways and pipelines account for 3% and 5% of ton-km respectively. Air transport is relatively unimportant for freight transport. In passenger - 2 - transportation railways are again the dominant mode, accounting for about 53.4% of passenger-km. Public buses are the next important mode for intercity passenger