Document of The World Bank FOR OFFICIAL USE ONLY E Public Disclosure Authorized Report No. 231Oa-YU YUGOSLAVIA STAFF AP'PRAISAL REPORT Public Disclosure Authorized THE TENTH HIGHWAY PROJECT FOR A HIGHWAY SECTOR LOAN Public Disclosure Authorized March 15, 1979 Public Disclosure Authorized Projects Department Europe, Middle East and North Africa Regional Office 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 EQUIVALENTS Currency Unit = Yugoslav Dinar (Din.) Din. 1 = US$0.0555 Din. 1,000 = US$55.5 Din. 1,000,000 = US$55,555 WEIGHTS AND MEASURES Metric System British/US System 1 meter (m) = 3.808 feet (ft) 1 kilometer (km) = 0.214 mile (mi) 1 square kilometer (km2) = 0.3861 sq. mile (mi2) 1 metric ton (m ton) = 0.9842 long ton (lg ton) ACRONYMS AND ABBREVIATIONS AADT - Average Annual Daily Traffic COI - Communities of Interest CRO - Council of Republican and Provincial Roads Organization CYR - Community of Yugoslav Railways EDI - Economic Development Institute ER - Economic Return FYBR - First Year Benefit Ratio GNP - Gross National Product MEU - Monitoring and Evaluation Unit O-D - Origin and Destination RTE - Railway Transport Enterprise RUC - Road Users Charges SAP - Socialist Autonomous Province SR - Socialist Republic TYH - Trans-Yugoslav Highway SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA FISCAL YEAR January 1 to December 31 YUGOSLAVIA FOR OFFICiAL uat O>LY APPRAISAL OF A TENTH HIGHWAY PROJECT Page No. I. THE TRANSPORT SECTOR ............................ 1 A. The Transport System ........................ 1 B. Transport Policy, Planning and Coordination . 3 C. Institutional Framework ..................... 4 D. Previous Projects ........................... 6 II. THE ROAD SUBSECTOR ............................... 7 A. Road Transport ..... .................. 7 - Traffic ................................... 7 - Trucking Industry ......................... 7 - Vehicle Regulations ...................... 8 - Road User Charges ........................ 8 B. Infrastructure ..... ................. 9 - Administration ..... ............... 9 - Planning ................................. 11 - Investment and Financing .... ............. 11 - Engineering .............................. 11 - Construction ............................. 12 - Maintenance .............................. 12 - Training ................................. 12 III. THE ROAD PROGRAM AND THE PROJECT .... ............ 13 A. General ..................................... 13 B. Objectives .................................. 14 C. Project Preparation and Methodology ......... 14 D. The Project Regions - K:osovo, Montenegro, Vojvodina, Macedonia and Bosnia- Herzegovina ................ .. ............. 15 - The Projects - An Overview ........ ....... 15 - Characteristics of the Program .... ....... 18 - Characteristics of Each Region including assessment of its Institutional Capacity, Financial Capability and Economic Viability ........ 21 (i) SAP Kosovo ........ ................... 21 (ii) SR Montenegro . ....................... 27 (iii) SAP Vojvodina ...... ................. 34 (iv) SR Macedonia .... ............... 41 (v) SR Bosnia-Herziegovina .... ........... 48 This report was prepared by Messrs. M. Ganguli (Economist), R. Mulligan and B. J. Sisson (Highway Engineers) on the basis of an appraisal mission to Yugoslavia during September 1978. This document has a restricteddistribution ancl may be used by recipients only in the performance of their official duties. Its contents may not othierwisebe disclosed without World Bank authorization. Table of Contents (Continued) Page No. E. The Loan .................................... 56 F. General Sector Conditions .... ............... 58 G. Conditions for Subprojects .... .............. 59 H. Implementation .............................. 59 I. Disbursements ............................... 61 J. Project Risks and the Environment ........... 62 IV. RECOMMENDATIONS ................................. 63 ANNEXES 1. Transportation Projects Previously Financed by the Bank 2. Study of Road User Charges - Terms of Reference 3. Outlines of Terms of Reference for Highway Master Plan Study 4. Economic Analysis of Road Program 5. Progress Reporting Requirements 6. Monitoring and Evaluation Unit 7. Project Implementation Schedule 8. Selected Documents and Data Available in the Project File 9. Equipment to be Procured from the Loan 10. Proposed Training Program MAPS 1. IBRD 13850 - Yugoslavia Highway Sector Project, Yugoslavia Project Area 2. IBRD 13878 - Yugoslavia Highway Sector Project, Kosovo - Traffic Flows 3. IBRD 13882 - Yugoslavia Highway Sector Project, Kosovo - Surface Type and Proposed Subprojects 4. IBRD 13851 - Yugoslavia Highway Sector Project, Montenegro - Traffic Flows 5. IBRD 13879R - Yugoslavia Higwhay Sector Project, Montenegro - Surface Type and Proposed Subprojects 6. IBRD 13852 - Yugoslavia Highway Sector Project, Vojvodiria - Traffic Flows 7. IBRD 13880 - Yugoslavia Highway Sector Project, Vojvodina - Surface Type and Proposed Subprojects 8. IBRD 13853 - Yugoslavia Highway Sector Project, Macedonia - Traffic Flows 9. IBRD 13881R - Yugoslavia Highway Sector Project, Macedonia - Surface Type and Proposed Subprojects 10. IBRD 13854 - Yugoslavia Highway Sector Project, Bosnia-Herzegovina - Traffic Flows 11. IBRD 13883 - Yugoslavia Highway Sector Project, Bosnia-Herzegovina - Surface Type and Proposed Subprojects YUGOSLAVIA STAFF APPRAISAL REPORT OF A TENTH HIGHWAY PROJECT I. THE TRANSPORT SECTOR A. The Transport System General 1.01 Yugoslavia is a socialist federal republic consisting of six Repub- lics 1/ and two Autonomous Provinces. 2/ During the past decade, governmental authority and administration, previousLy concentrated in the Federal Center, was decentralized to the Republics and Provinces, which have gained consider- able autonomy over their affairs, including decisions on transport infrastruc- ture investments. 1.02 Two main factors have influenced the development pattern of Yugos- lavia's transport network. First, topography has dictated the use of the broad river valleys as transportation corridors, with the result that the country's principal road/rail links follow the fertile Sava/Danube flood plains on an approximate northwest to southeast alignment. The southern and coastal mountains have proved formidable and costly obstacles to transport development in the transverse direction and it is the misfortune of some of the less-developed regions of Yugoslavia that they have the added burden of expensive access routes either to the coast or to the hinterland. 1.03 Secondly, for historical reasons, the northwestern and central regions of the country achieved levels of development in some sectors, trans- port included, on a par with western Europe. On the other hand, in the poorer regions to the south the pace of development was much slower. 1.04 Moreover, Yugoslavia's geographical location is such that it is an important crossroads in the European transport system. It provides access to the sea for many of its northern neighbors, and is as well an important link in the east/west route between Europe and the Middle East. 1.05 Small wonder, then, that transport is a dynamic sector of the Yugoslav economy. The system is well diversified (Map 1); there are 7 major ports, nearly 10,000 km of rail lines, 100,000 km of roads, 15 airports (10 catering for international flights) and a sizeable network of inland water- ways. Pipelines, also have come into increasing use in recent years. Govern- ment's broad aim is to ensure the balanced development of all modes of trans- port to meet the needs not only of Yugoslavia's own market-oriented economy, 1/ Bosnia-Herzegovina, Croatia, Macedonia, Montenegro, Serbia and Slovenia. 2/ Kosovo and Vojvodina. - 2 - but to improve the country's integration with the world economy. The attain- ment of regional balance in economic development has also been an explicit objective of the Government. Increasingly emphasized is the improvement o. transport links between the economically-advanced and the less-developed Republics and Provinces and within the less-developed areas. 1.06 Roads and railways are the backbone of the transport system but traffic growth for these and other modes has been rather uneven. During the last 10 years the freight traffic (ton-km) on railways increased by about 3% per annum compared to an increase of about 12% per annum on highways. The passenger traffic on railways remained practically unchanged during the same period, in contrast with an increase of about 20% per annum on highways. As a result, road transport has gained in relative importance and has replaced rail transport as the dominant carrier. The railways, however, continue to be the main carrier of bulk commodities over relatively long distances for key industries. River transport has retained an important place, carrying about 10% of total freight traffic. Ports have more than doubled their cargo handl- ing since the early 1960s and currently move about 20 million tons per annum. 1.07 However, improvements to the highway network have not kept pace with the growth of road traffic. Many roads are by modern standards inadequately designed both in geometry and pavement capability. With high traffic volumes, unacceptable levels of traffic congestion often result. In general, most of the roads are inadequate for the traffic they are now carrying. Special