FILE COPY Document of The World Bank FOR OFFICIAL USE ONLY Report No.P-1838-YU REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO PREDUZECE VODOVOD I KANALIZACIJA SARAJEVO (SARAJEVO WATER SUPPLY AND SEWERAGE ENTERPRISE) WITH THE GUARANTEE OF THE SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA FOR A WATER SUPPLY AND SEWERAGE PROJECT May 12, 1976 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.) US$1 Din. 18.00 Din. 1 US$0.0555 Din. 1,000 US$55.55 Din. 1,000,000 US$55,555.55 * The Yugoslav Dinar has been floating since July 13, 1973. The currency equivalents given above are as of April 30, 1976. FISCAL YEAR January 1 - December 31 GLOSSARY OF ABPBEVIATIONS Vodovod = Preduceze Vodovod i Kanalizacija Sarajevo (Sarajevo Water Supply and Sewerage Enterprise) SAS = 'Social Accounting Service FOR OFFICIAL USE ONLY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO PREDUZECE VODOVOD I KANALIZACIJA SARAJEVO WITH THE GUARANTEE OF THE SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA 1. I submit the following report and recommendation on a proposed loan equivalent to US$45 million to Preduzece Vodovod i Kanalizacija Sarajevo (Sarajevo Water Supply and Sewerage Enterprise, or Vodovod) with the guarantee of the Socialist Federal Republic of Yugoslavia, to help finance a water sup- ply and sewerage project. The loan would have a term of 25 years, including five years of grace. Interest would be 8-1/2 percent per annum. PART I - THE ECONOMY 2. A basic economic mission visited Yugoslavia in November 1972; its report entitled "The Economic Development of Yugoslavia" (194a-YU) was distri- buted to the Executive Directors on January 2, 1974. An updating Economic Memorandum (662a-YU) was distributed to the Executive Directors on June 23, 1975. An economic mission visited Yugoslavia in October 1975 and the find- ings of this mission are incorporated in this report. Basic data on the economy are given in Annex I. Economic Trends and Development Issues 3. The Yugoslav economy has experienced rapid growth during the last two decades, with total GDP at constant prices having increased by an average rate of 6.3 percent, and per capita GDP at 5.2 percent annually. In 1973, per capita ,GNP came to about US$1010 (World Bank Atlas methodology). This impressive record of growth was accompanied by some fundamental structural changes in the economy which has moved towards a modern industry/service oriented urban society. The share of agriculture in GDP declined from 38 to 20 percent while the share of industry and mining increased from 16 to 37 percent. 4. The population growth rate averaged 1 percent per year during the last two decades, but with considerable regional variations ranging from an average rate of 1.6 percent for the less developed Republics and Provinces to 0.7 percent for the developed ones. The structural changes in the economy permitted a sizeable transfer of labor force from agriculture to industry and services. However, by 1974 nearly 45 percent of the resident active labor force was still engaged in agriculture and forestry, mostly on small private farms; industry (including mining) accounted for 21 percent, and other sectors for 34 percent. 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. - 2 - 5. The socio-political framework evolved through several constitution- al amendments which were consolidated in the new constitution of 1974. It strengthens three important features of the socio-political system of Yugoslavia. First, self-management, whereby the use and control of the socially owned means of production is entrusted to the workers' collectives, is the fundamental right and obligation of every "basic organization of as- sociated labor" (the smallest technologically identifiable unit of operation) in every sector and activity. Second, the responsibility for most important social and policy decisions has been shifted from the Federation down to the Republics and Provinces, and on to the communes. And third, the management and financial responsibility for social activities (like health, education, welfare, etc.) is transferred from the realm of the state to "communities of interest" (decision-making bodies which comprise delegates of both suppliers and users of the specific services). Responsibility for certain economic activities affecting large segments of the society (like communal services, power production, highways and water management) can be - and progressively is - similarly organized through communities of interest. 6. The social sector, which includes government, most enterprises and public institutions such as libraries, hospitals, theatres and schools, has the leading role in economic and social development; it accounts for 85 per- cent of GDP and employs over half of the total labor force. The private sector is predominantly comprised of peasant farms (with a 10 hectare limit to land holdings) and small enterprises (with a 5 person limit on the number of non- family workers), mainly in handicrafts, construction, trade, transport and tourism. In the past, the private sector had been relatively neglected by government policy. However, lately more attention is being devoted to pri- vate farmers with a view to accelerating the growth of agricultural produc- tion and reducing the rural/urban income disparity. 7. Regional income disparity - with a gradient of per capita income fall- ing generally from North to South - has emerged as one of the most important development issues of the country. Four distinct regions can be distinguished by stage of development. The Republic of Slovenia is the high income region with almost double the national average. The Republics of Serbia and Croatia and the Autonomous Province of Vojvodina make up the middle income regions, ranging from 100 to 125 percent of the national average; however, even within these regions pockets of underdevelopment persist. The Republics of Bosnia- Herzegovina, Montenegro and Macedonia - with per capita income between 67 to 75 percent constitute the upper group among the officially designated "less developed regions". The Autonomous Province of Kosovo, with an average in- come of only 33 percent of the national average, is at the bottom of the spread. These inter-regional disparities can be traced back further to intra-regional disparities. Within Republics and Provinces the spread between communes can extend over the range of 10 to 1, and it is the prevalence of stagnating poor rural communes within the less developed regions which largely determines the disparity between the regions. The rate of economic growth of the less devel- oped regions as a whole was only slightly below the average for Yugoslavia, but due to the faster population growth (1.6 percent per year versus 0.7 percent in the more developed regions) the income disparity had tended to widen sig- nificantly during the last two decades. In order to reverse this trend Pnd to accelerate economic growth and social development in the less developed re- gions, mechanisms have been instituted for sizeable transfers of financial resources. In 1973, credits on highly favorable terms (containing a grant element of around 50 percent) were made available through the "Federal Fund" to the less developed regions in the amount of almost US$250 million, equiv- alent to more than 20 percent of their total investment in the social sector. An additional US$130 million for social services were transferred as budgetary grants. Both categories of transfers have been growing since in line with the growth in total GDP. 8. Open unemployment has not been a serious problem and is estimated to be only around 3-4 percent of the resident labor force in 1974. However, this low rate conceals three important aspects of the employment problem. First, an estimated one million out of a total labor force of around 9 million (in 1974) has assumed temporary employment abroad. Second, there is some evidence of growing regional and occupational imbalances, due to low inter- regional mobility of labor and to unmatched skill requirements in a fast changing economy. Third, severe underemployment persists in the private agricultural sector. Recent Developments 9. In 1974, Yugoslavia recorded a rapid increase of GDP of 9 percent in real terms as compared to 5 percent and 4 percent in 1973 and 1972 respec- tively. Industry was the leading sector with an estimated growth rate of 11 percent in 1974; however, the growth of agricultural production, enhanced by favorable weather conditions, and of services (with the exception of tourism) also accelerated during the year. This rapid expansion of economic activity permeated the whole economy. Investment outlays grew in nominal terms by almost 40 percent (9 percent in real terms) and total consumption expenditures by about 41 percent (13 percent in real terms). The resulting rapid increase in total demand for goods and services was reflected both in the rise of em- ployment and of imports - both in nominal and real terms - and domestic prices. The gain in total employment amounted to about 5 percent in 1974 and exceeded for the first time the natural increase of the labor force. Industrial pro- ducer prices rose by almost 30 percent while the cost of living rose less rapidly by some 21 percent. Since fiscal policy leaves, for institutional reasons, little room for demand management, the major response to the infla- tionary pressures was in terms of monetary policy and direct controls through prices and income policy, including recent legislation placing greater con- trol on investment expenditures. After an expansionary phase during 1972 and 1973, the money supply increased by only 24 percent as compared to a nominal increase of social product of about 36 percent. The shift to a large deficit in the balance of payments in 1974 also contributed to the increased effec- tiveness of the monetary policy. - 4 - 10. The balance of trade deficit increased from US$1.7 billion in 1973 to almost US$3.7 billion in 1974 both on account of an increase in the volume and the rapid rise in the price of imports and the stagnation of real exports (the terms of trade for the country are estimated to have deteriorated by about 11 percent). The recession in Western Europe has led to a sharp decline in exports to that area. The traditionally large surplus for invisibles (mostly from workers remittances and tourism receipts) failed to compensate for the large trade deficit and the country recorded a current account deficit in excess of US$1 billion in 1974 as compared to a surplus of US$464 million in 1973. In response to the circumstances, the import regime has been grad- ually tightened since August 1974, affecting a large variety of consumer goods and some capital and intermediate goods. In addition, the National Bank raised the intervention point in the foreign exchange market, in effect devaluing the dinar by about 7 percent as against the currencies of Yugoslavia's major trading partners. The large current account deficit has led to some loss of foreign exchange reserves; the official reserves fell by US$345 million in 1974 (com- pared to a gain of US$632 million in 1973). In addition, net foreign borrowing, which averaged US$390 million during 1971-73, increased to around US$650 million in 1974. Commercial import credits from suppliers and credits from financial institutions continued to be the major sources of foreign capital. Long-term funds related to financing of development are being made available mainly by the Bank and some bilateral sources (particularly the US Export-Import Bank and Federal Republic of Germany).. Yugoslavia has also been one of the beneficiaries of the IMF's Special Oil Facility. Yugoslavia's medium- and long-term external debt outstanding as of December 31, 1973 was US$4,319 million (disbursed only) and is expected to have increased to about US$5.0 billion during 1974. Debt service payments amounted to about 15.9 percent of foreign exchange earnings (including workers remittances) in 1973 and 15.3 in 1974. 11. In 1975, the growth rate of the economy is estimated to have receded to 4.5 percent, due mainly to the combined effects of a restrictive monetary policy, stagnating exports and a reduced growth of personal incomes; economic investment and housing construction provided the major growth stimulus during 1975. The inflationary pressure which built up during 1974 and extended into 1975 receded drastically in the second half of the year; the rate of increase of industrial producer prices decreased from 30 percent in 1974 to an annual rate of 12 percent for the first ten months of 1975 and the index of real net personal income remained unchanged for the same period. The good harvest in 1974 has had a favorable impact on the balance of payments, although meat ex- ports were severely affected by the European Community ban on meat imports. Exports to oil producing countries and to the non-convertible currency area have continued to expand rapidly in 1975, but are not expected to compensate for the sharp decline in exports to the convertible currency area. Workers' remittances and receipts from tourism have increased marginally. The current account deficit for 1975 was estimated to approximate the level of 1974 on the basis of preliminary estimates, but there are now indications that it may have dropped by 20 to 25 percent due to a curtailment of imports and an increase in exports during the last third of 1975. -5- Prospects for 1976 12. The balance of payments is expected to remain the central problem in 1976 as well as for the years to come. The current account deficit is ex- pected to decline somewhat as imports are restrained and there is a recovery in the level of economic activity in Western Europe. The inflationary momen- tum will probably be curtailed further through improved investment control, closer alignment of real income changes with improvements of productivity and restrictive monetary policy. The real growth rate of GDP is expected to be constrained to about 4.5 percent in 1976 with a gradual recovery in subsequent years. Medium- and Long-Term Objectives and Prospects 13. The aggravation of major economic problems during 1974, such as rapid inflation and balance of payments pressures, has led to a reappraisal of development objectives. In the light of the recent shift of relative prices in favor of raw materials, more emphasis will be given to the development of Yugoslavia's own natural resources. In this connection, the development of the energy sector is given the highest priority. It focuses on electric power, where the generating capacity is likely to fall critically short of the rapidly rising power requirements of the expanding economy. The development of the power sector will largely be based on the large unutilized hydropower potential and soft-coal reserves of the country. Other priority activities are ferrous metallurgy, some segments of non-ferrous metallurgy (notably lead, zinc, copper, nickel and bauxite/aluminum), technologically advanced production equipment, basic chemicals including petroleum refining, agriculture and food processing, interrepublic transportation, multipurpose works, and housing and basic con- struction material. 14. This emphasis on accelerated development of the raw material basis and the deepening of the economic infrastructure requires a more capital- intensive investment pattern, associated with longer time-lags between invest- ment and output. To sustain this development path, both continued high bor- rowing abroad and an increased savings rate will be essential. Since, with the possible exception of private savings, interest rates do not play a significant role in the determination of the level of aggregate savings, the income policy --i.e. the guidelines governing the distribution of enterprise income between workers' income and accumulation--will have a crucial role. 15. The new Five Year Plan (1976-1980), presently under preparation, will focus on the implementation of these objectives. For growth, an average rate of 7 percent per year is proposed as feasible, comparing with a target growth rate of the previous Plan of 7.5 percent and an expected realized growth rate of 6.5 percent. For employment, the average planned growth rate would come to about 3 percent with annual increments exceeding the natural increase of the labor force by growing margins. This would permit more vigorous pursuit of two major social objectives: the reduction of the number - 6 - of temporary migrants abroad, and an increased absorption of the rural under- employment into the social sector. The economy will continue to be open to the world market although the composition of foreign trade is expected to change with a reduced share for raw material, semifinished products and con- sumer goods on the import side, and an increased share for agricultural pro- ducts and manufactured goods on the export side. Workers' remittances are not expected to increase in real terms, but rising tourism receipts are expected to compensate for the expected declining importance of workers' remittances. 16. The reduction of regional disparities is another priority objective of the new Five Year Plan. To that end, the transfer of financial resources to the less developed regions in the form of loans at concessionary terms for economic investment and budgetary grants for social development will be con- tinued and probably will increase as a proportion of total GDP. Since most of the natural resources of the country, including hydropower, are to be found in the less-developed regions, they will, in addition to the transfers, benefit from the increased emphasis on the development of basic industries and power which will to a considerable degree be financed through direct financial con- tributions from the consuming regions. 17. The new Five Year Plan is being prepared according to the self- management principle as stipulated by the Constitution of 1974. "Self-man- agement planning" is perceived as an iterative process of sequential, converg- ing consensus-finding. In the initial stage, broad priorities (as to sectors and activities) and general quantitative targets and constraints (like growth rates of social product and the volume of savings and investment) are deter- mined by political consensus of the assemblies of the socio-political communi- ties (Communes, Republics and Provinces, Federation). Subsequently, the plan- ning process starts at the bottom with individual enterprises and communities of interest setting out their expectations and targets. The planning process then proeeds through successive and partially overlapping stages of horizontal adjustments within sectors and branches (aimed primarily at eliminating gross duplications), vertical adjustments between closely interdependent sectors and branches (aimed at determining realistic orders of magnitudes of production, conceptually within an input/output framework), and regional adjustments bet- ween Republics and Provinces (aimed at both horizontal and vertical consolida- tion). The socio-political communities participate in this process by ensur- ing observance of the broad priorities, targets and constraints, and by re- solving conflicts which cannot be resolved by the direct participants. The evolving consolidated programs of action, which in their totality constitute the operational portion of the Plan, are codified in the form of "social con- tracts" or "self-management agreements" which are legally binding for the whole Plan period unless renegotiated in the case of major deviations occuring in the course of Plan implementation. The new Plan, which is currently under preparation is, thus, expected to differ from the previous Plan in strengthen- ing and formalizing the commitments for implementation by enterprises, banks and government institutions. -7- Creditworthiness 18. In spite of the present balance of payments problems, the prospects for Yugoslavia's continued economic growth during the next decade are good. The country's endowment of natural and human resources, its relatively low dependence on imported primary energy, its pragmatic approach to economic problems and its readiness to undertake institutional changes, combine to give grounds for a favorable assessment of future prospects. Yugoslavia will need to continue to raise foreign capital on a fairly large scale, mostly from established channels such as the Euro-currency market, suppliers credits and the World Bank. In addition, greater use may be made of credit lines from COMECON countries and the EC, and efforts are being intensified to open up new sources of capital in OPEC countries. Due to the size and structure of external borrowing during 1974 and the years to come, the debt service ratio is expected to increase from 15.3 in 1974 to 18.2 in 1976. Although the debt service ratio may continue to increase gradually, it is expected to peak around 1980 at about 19 percent and decline thereafter. However, taking into account Yugoslavia's debt service record and the measures taken in the past to control balance of payments problems, as well as the prospective growth of production and structural improvement of the balance of trade, Yugoslavia remains creditworthy for a substantial amount of Bank lending. PART II - BANK GROUP OPERATIONS IN YUGOSLAVIA 19. The Bank has made 35 loans totalling about US$1,160 million to Yugoslavia. Of this amount approximately 50 percent (US$571.4 million) has been for 13 loans for the transportation sector - seven for highways totalling US$220 million, four for railways totalling US$248 million, US$108.4 million for natural gas and oil pipelines, and $44 million for a port project. Bank lending has generally concentrated on infrastructure including, in addition to the transportation loans, power (three loans totalling US$135 million), tele- communications (one loan for US$40 million), three multipurpose projects totalling US$103 million and US$6 million for a water supply and sewerage project. Nine loans have also been made for industry and two each for tourism and agriculture. IFC has made investments in nine Yugoslav enterprises total- ling about US$130 million. The Bank disbursed $126 million during FY75, com- pared with $59.4 million in FY74, and about $140 million is projected for FY76. Annex II contains a summary statement of Bank loans and IFC investments as of March 31, 1976, and notes on the execution of on-going projects. 20. The major objectives of current and future Bank lending to Yugoslavia are to accelerate development in the less-developed regions of the country; to promote agricultural development, particularly among the small private farmers by providing basic infrastructure and credit for the financing of farm develop- ment, equipment and processing facilities; to promote structural reforms in major sectors of the economy through improved coordination and the strengthen- ing of institutions; and to provide Yugoslavia with long-term external capital - 8 - and thus help to alleviate critical shortages of convertible foreign exchange, while encouraging and promoting Yugoslavia's efforts to tap other sources of medium- and long-term capital. These objectives are basically the same as those which have guided Bank lending in previous years, but efforts to give special support to the less-developed regions are being strengthened. 21. A proposed loan of US$20 million for the Morava Region development project (water supply, sewerage, and water resources planning) has been re- cently submitted for your consideration. A proposed loan for the Sarajevo air pollution control project (US$38 million) is being submitted concurrently with this loan and a loan of US$50 million for a second industrial credit proj- ect has been negotiated and is expected to be submitted shortly for consid- eration. Over the next two years loans envisaged include a second loan for agricultural credit, two loans for irrigation, and a loan for agricultural industries, all for the less developed regions. Highway, railway and power transmission projects during the same period will both assist the less- developed regions and promote structural reforms in the transport and energy sectors. IFC is currently investigating several new investment opportunities to encourage joint ventures which would provide technical, management and marketing expertise as well as long-term capital. 22. In addition to substantial assistance given in identifying and pre- paring projects for Bank financing, the Bank is providing technical assistance in several areas. A series of regional studies of the four less-developed regions of Yugoslavia was initiated three years ago and three studies, cover- ing Kosovo, Macedonia and Bosnia-Herzegovina, have been completed. The fourth study, of Montenegro, will be completed soon. This series will contribute to better assessment of development programs and will assist both the Governments and the Bank in formulating development strategies for these regions. An energy sector review was undertaken by the Bank in cooperation with the Federal Govern- ment to review the energy sector survey which the Federal Government had been undertaking as well as to review the work being done on energy problems in the individual Republics with the objective of analyzing the main problems, issues and policy options for meeting Yugoslavia's future energy needs. A Bank as- sisted study on the improvement of the financial mechanism has been concluded and its recommendations have been included in draft legislation for a new banking law. Bank cooperation in a training program for auditors of the Social Accounting Service, which audits all enterprises and Government activities, including Bank financed projects, has progressed satisfactorily and further training is underway in cooperation with an international accounting firm. As- sistance from EDI, as well as through Bank operations, has been directed to- wards the improvement of project evaluation. 23. The level of Bank lending has remained constant averaging about US$200 million annually during the period FY74-76. Although this represents only a small proportion of the country's need for external finance, it is equivalent to almost one-third of the annual long-term official capital in- flow in convertible currencies. The outstanding debt to the Bank is expected to gradually decline from its current level of less than 10 percent of Yugos- lavia's total external debt. Service on Bank loans as a proportion of total debt service was 4.0 percent in 1974 and is projected to increase to about 6 percent in 1980. - 9 - PART III - WATER SUPPLY AND SEWERAGE IN SARAJEVO 24. Sarajevo is the capital city and economic center of the Republic of Bosnia-Herzegovina. It is located in a mountain valley in south-central Yugoslavia. Large-scale migration from surrounding underdeveloped areas tripled its population to over 300,000 between 1945 and 1975 and it is ex- pected to grow to 410,000 by 1985. The most densely populated part of the city lies along the Miljacka River. At the western edge of the city the Miljacka River flows into the Bosna River which flows through the most densely populated part of Bosnia-Herzegovina. Because of its rapid growth and special geographic and climatic conditions, Sarajevo has developed severe air and water pollution problems which threaten the health of its population. The city is attempting to solve both of these problems through coordinated water supply and sewerage and air pollution control projects. The Bank is assisting with both projects and my Report and Recommendation to you on a proposed loan for the Sarajevo Air Pollution Control Project (Report No. P-1839-YU dated May 12, 1976) is being submitted simultaneously with this one. Water Supply, Sewerage and Water Pollution 25. The existing water distribution system in Sarajevo is old and in- adequate. Most of the distribution pipes in the old part of the city were installed more than sixty years ago and are badly corroded. Within the distribution network separation of the pressure zones is incomplete, leading to very high pressure in portions of the network. Primarily as a result of this, more than one-third of the water entering the system is lost. In ad- dition, the development of water supply and sewerage infrastructure has not kept pace with the rapid growth in population. The water supply system was operating at design capacity in 1969; between 1969 and December 1974 water was rationed in many areas of the city. Recent minor expansion of the system is expected to meet demand through 1978. Additional water supplies to be provided by this proposed project will meet demand through 1985. 26. The sewerage system is in even worse condition. The main collectors were built between 1902 and 1914 and were designed to serve a population of 60,000. About 40 percent of the sewered area is served by separate sanitary sewers; the remainder is served by combined sanitary and storm sewers. The main collectors empty directly into the Miljacka River as it flows through the city. About 20,000 households outside the sewer system discharge wastes into nearby streams or septic tanks. The city's hospitals empty their wastes, without treatment, into the municipal sewage system. During the summer the sewage flow in the Miljacka River is about three times the minimum river flow. At this time, the Miljacka River has the characteristics of an open sewerage canal, is the source of considerable stench and poses a serious health hazard. 27. Furthermore, because of the deterioration of water supply pipes and sewage pipes (often laid in close proximity to each other), sewage infil- trates the water supply system. In spite of the fact that raw water quality - 10 - at the source is generally good and supplies are regularly chlorinated, bacteriological pollution of distributed water is detected frequently, partic- ularly in the old part of the city. 28. The pollution of the rivers, streams and water supply poses a ser- ious health hazard to the city, its surrounding communities, and the communi- ties along the Bosna River downstream from Sarajevo. Some typical waterborne diseases which could be transmitted to the population are typhoid, cholera, paratyphoid, bacillary dysentery, poliomyelitis and infectious hepatitis. In the recent past, Sarajevo has suffered epidemics of typhoid, hepatitis and diarrhea. Outbreaks of hepatitis occur frequently. Between 1967 and 1973, over 8,500 cases of waterborne diseases were reported and, of those almost 3,000 of the patients required hospitalization. 29. Water supply and sewage disposal are the responsibility of local communities in Yugoslavia. To preserve and enhance the quality of inland and coastal waters, a Federal Commission for Water Management establishes the basic framework for maintaining water quality, and Republic Commissions for Water Management set standards and coordinate programs to improve water quality. Financial assistance for improving water quality is available through Republic Water Funds. However, the ultimate responsibility for pro- viding water services and meeting the established quality standards rests with the communes. The citizens of Sarajevo assign a high priority to solv- ing their water supply and water pollution problems, and in 1972, by refer- endum, voted to tax their incomes to provide financing for improving the water supply and sewerage system. PART IV - THE PROJECT 30. The nature and extent of Sarajevo's water supply and water pollu- tion problems, as well as the extremely severe air pollution problems, were first brought to the Bank's attention by the Sarajevo authorities in mid-1972, followed by a formal request in early 1973 from the Federal Government for as- sistance in financing programs to reduce air and water pollution in Sarajevo. Feasibility studies for adequate water supply and sewerage systems which had been prepared in 1970 were revised in 1974. Bank missions to assist with project preparation began in January 1973. Appraisals of both the water sup- ply and sewerage project and the air pollution control project were substan- tially completed in December 1974. Negotiations were held in July and August 1975 in Washington. The Yugoslav delegation was led by Mr. Dane Maljkovic, President of the Sarajevo City Assembly. Subsequent to negotiations, delays were experienced in ensuring the financing and gas supplies for the air pol- lution control project. Pending resolution of these issues, Sarajevo requested that the further consideration of the water supply and sewerage project be postponed so that both projects could be implemented simultaneously. Those issues were resolved in March 1976. The appraisal of the water supply and sewerage project was updated and revised by a Bank mission in February, 1976. Project Description 31. The proposed loan and project are summarized in Annex TII and des- cribed in detail in the report "Appraisal of Sarajevo Water Supply and Sewer- age Project: Report No. 1167-YI' and dated May 7, 1976 which is being distri- buted separately to the Executive Directors. The project would provide facil- ities to expand and improve the water supply and sewerage systems in the city. 32. The proposed water supply facilities are part of a master plan to expand the city's supply and to rehabilitate and extend the distribution net- work. They are designed to provide Sarajevo with an adequate supply of water through 1985 and to serve an area approximately twice that served by the pre- sent system. This would be achieved by the construction of an infiltration gallery, reservoirs, pumping stations and expansion of existing reservoirs and pumping stations; installation and replacement of water mains and distri- bution pipes; replacement of obsolete service connections; provision of re- lated control systems; construction of offices; and engineering services for designs, supervision, project administration, training and hydrogeological studies to prepare a water resources master plan. Pollution of the city's waters would be reduced by construction of new collectors and main sewers; re- placement of worn-out sewer laterals and service connections; construction of sewage treatment facilities; installation of sludge filters and renovation of the existing landfill; installation of an activated sludge pilot plant for ex- perimentation in sewage treatment processes to attain optimal utilization of the main treatment facilities; and related engineering services. Project Execution 33. The Sarajevo Water Supply and Sewerage Enterprise (Preduzece Vodovod i Kanalizacija Sarajevo, or Vodovod) would implement the project and be the borrower under the loan. Vodovod is an independent Organization of Associated Labor consisting of three Basic Organizations of Associated Labor - Water Sup- ply, Sewerage and Administration. It is operated on the principle of workers' self-management, as are all enterprises in Yugoslavia, but because it provides vital public services the workers share control of certain activities with the Sarajevo city government. The city approves Vodovod's working statutes, work program, functional or organizational changes, appointment of the manager, and tariff rates. Vodovod is well managed by a competent and experienced staff (their water supply engineers have provided consulting services to other towns in Yugoslavia). The sewerage staff have no operational experience in sewage treatment and staff training would therefore be part of the project. Consult- ants are assisting Vodovod with the preparation of final design and tender do- cuments and would also assist with the supervision of construction (Loan Agree- ment Section 3.02). 34. Because sludge from the sewage treatment plant would be discarded on the city landfill, Vodovod would enter into an appropriate agreement with Rad, the Sarajevo enterprise responsible for solid waste disposal, for the joint ownership and operation of the landfill (Loan Agreement Section 3.03). - 12 - 35. Vodovod would begin construction of the water supply and sewerage project in late 1976 and expects to complete it by the end of 1980. Coordination 36. Because the water supply and sewerage and air pollution control projects are being pursued simultaneously by separate entities, the City As- sembly would coordinate project implementation and the Bank would sign a Project Coordination Agreement with the Assembly. Construction coordination is particularly important to ensure that there is a minimum disruption to normal city life and that both projects are completed on schedule. The In- stitute for the Construction of the City, a special unit of the city govern- ment responsible for the physical development of the urban area, would be the coordinating agent on behalf of the City Assembly (Project Coordination Agree- ment Section 2.01). 37. In addition to its construction coordinating role, the city govern- ment would establish protection zones for Sarajevo's groundwater sources (Proj- ect Coordination Agreement Section 2.04). Project Cost Estimates and Financing Plan 38. The total estimated cost of the project is US$95.7 million (exclud- ing interest during construction).- The estimate includes duties and taxes (about 5 percent of project costs) and an allowance of about 36 percent for physical and price contingencies. The estimated foreign exchange component is US$38.5 million. Details of the cost estimates are shown in Annex III. 39. The proposed Bank loan of US$45 million would finance 98 percent of the estimated foreign exchange cost of equipment and materials, civil works, and engineering services of the project, and interest during construction on the Bank loan (US$7.6 million). This would represent about 44 percent of total costs (including interest during construction on the Bank loan). 40. During this period (1976-80), Vodovod would require financing for project costs (US$95.7 million), interest during construction (US$8.8 million), and other capital expenditures 1/ (US$7.8 million), or a total of US$112.3 million. In addition to the Bank loan, funds would be provided from internal cash generation (30 percent), local borrowing (8 percent) and capital contri- butions from the Republic Water Fund and city government (22 percent). The City Assembly has agreed that it would provide additional funds to meet any cost overruns (Project Coordination Agreement Section 2.02 and Loan Agreement Section 5.07). 1/ Routine expansion of the water supply system into new areas and protec- tion of water sources. - 13 - Financial Performance 41. Vodovod is a financially autonomous and viable enterprise. The rate of return on average net fixed assets was 9.2 percent in 1973, 13.1 percent in 1974 and is estimated to be 15.4 percent in 1975. During the construction period it is projected to average over 13 percent, rising to a peak of about 19 percent in 1977. After completion of the project it would fall back to about 6 percent (9 percent for water supply and 3 percent for sewerage) be- cause of the very large increase (threefold for water and thirteenfold for sewerage) in the net value of fixed assets. 42. To generate sufficient resources to expand the water and sewerage system in line with demand Vodovod introduced significant tariff increases in 1971 which, together with funds from a special income tax levied by the city, enabled it to finance the improvements which ended daily water rationing in December 1974. To generate the cash needed for the project Vodovod plans to undertake further tariff increases. The City Assembly has passed a resolu- tion authorizing annual increases totalling 200 percent for water and 400 per- cent for sewerage between 1973 and 1980; however, each annual increase must be approved by the City Assembly before implementation. The increases planned for the period 1973-1976 have been implemented. To ensure that the required financing from internal resources is available, and to maintain its finan- cial strength in the future, it has been agreed that Vodovod would implement whichever is the higher: the presently scheduled tariff increases or a modified schedule of increases which would provide sufficient revenues to finance not less than 30 percent of the cost of investments in water and sewerage facilities during the period of construction (1976 to 1980), and in each year thereafter not less than 35 percent of the average cost of invest- ments during each consecutive three year period comprising one actual and two forecast years (Loan Agreement Section 5.04). The City Assembly has agreed that it would approve Vodovod's requests for tariff increases to meet the above requirements (Project Coordination Agreement, Section 2.03(b)). 43. *Vodovod's debt equity ratio in 1974 was 16:84. With the increase in borrowing for the project, it would rise to 42:58 in 1980. Vodovod has agreed that, except as the Bank shall otherwise agree, they would not incur additional debt unless their net cash generation before depreciation and interest exceeds 1.3 times their debt service in any future year, including debt service on the debt to be incurred (Loan Agreement Section 5.05). Procurement and Disbursement 44. Materials and equipment contracts estimated to cost more than US$200,000 would be let after international competitive bidding in accordance with the Bank Group's "Guidelines for Procurement". For the purpose of bid comparison, qualified domestic manufacturers would be given a margin of pre- ference of 15 percent or customs duties, whichever is the less. Civil works contracts estimated to cost more than US$500,000 would be awarded after inter- national competitive bidding in accordance with the Bank Group's "Guidelines - 14 - for Procurement". The remaining materials and equipment, and civil works con- tracts would be awarded on the basis of competitive bidding advertised locally in accordance with the procedures of the Federal Government which are satis- factory. Vodovod may carry out by force account minor works, such as renova- tions and modifications to the existing water and sewer networks, under ar- rangements acceptable to the Bank (Loan Agreement Schedule 4, Section C). The total value of such minor works is expected to be less than US$10 million. All equipment supply and civil works contracts are expected to be won by Yugoslav enterprises, except those for the supply of equipment for the sewage treatment plant and other specialized equipment, which are expected to be awarded to foreign firms. 45. Expenditures by the City Assembly and Vodovod for the preparation of feasibility studies, final designs and tender documents, amounting to about US$1.5 million, are expected to be incurred prior to loan signature. Retroac- tive Bank financing of such expenditures from January 1974 of not more than US$750,000 is recommended (Loan Agreement, Schedule 1, paragraph 4). 46. The loan would be disbursed as follows: (a) Equipment and Materials - 100 percent of the c.i.f. cost of di- rectly imported materials, equipment and pipe and 50 percent of the total cost of locally supplied materials, equipment and pipe. (b) Civil Works - 30 percent of the cost of construction and installation contracts, including force account work. (c) Engineering Services - 50 percent of the cost of consulting services and training. (d) Interest During Con- - 100 percent of the interest during struction construction on the Bank Loan. Disbursements would begin in the last quarter of 1976 and be completed in March 1981. Audit 47. Vodovod's accounts would be audited' by the Social Accounting Serv- ice (SAS) or another experienced auditing firm acceptable to the Bank (Loan Agreement Section 5.02). With Bank encouragement, the SAS started a program in January 1974 under which its staff are being trained by foreign consult- ants in auditing methods consistent with modern auditing standards. The pro- gram is currently in its second phase in which additional SAS staff are being trained, under the consultants' guidance, by those who participated in the - 15 - first phase. Vodovod gave the Bank informal assurances that the group of spe- cially trained auditors would be asked to conduct their audits beginning with the accounts for the year ending December 31, 1976. In the event the special group cannot be assigned to this audit Vodovod would engage other independent auditors acceptable to the Bank. Justification 48. The pollution of river water in Sarajevo threatens the health and well-being of its population as well as the population residing along the Bosna River downstream from Sarajevo. Without corrective action this threat would increase constantly as the population grows. With the expansion and improvement of the water supply and sewage disposal systems adequate potable water would be available and the threat of waterborne diseases would be sig- nificantly reduced. There would be a variety of benefits, including medical cost savings, increased productivity of workers, savings on future septic tank expenditures, increase in property values along currently polluted waterways and an increase in the recreational potential of these waterways. The danger of potential major epidemics of waterborne diseases would be substantially reduced. Sarajevo would become a better place in which to live and work. 49. The abovementioned benefits are difficult to quantify; however, using the city's authorized 1976 water tariff rates, the internal economic rate of return of the water supply system would be about 15.6 percent. The major just- ification for the sewerage system investment is that the collection and treat- ment of sewage in Sarajevo is necessary for healthful and orderly development of the area and the proposed method of collecting and treating the sewage is the least cost solution. PART V - LEGAL INSTRUMENTS AND AUTHORITY 50. The draft Loan Agreement between the Bank and Preduzece Vodovod i Kanalizacija Sarajevo; the draft Project Coordination Agreement between the Bank and the City Assembly of Sarajevo; the draft Guarantee Agreement between the Socialist Federal Republic of Yugoslavia and the Bank; the report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement; and, the text of a draft resolution approving the above loan, are being distributed to the Executive Directors separately. 51. Provisions of the agreements of special interest were noted in paragraphs 33 through 47 of this report. Special conditions of loan effec- tiveness (Loan Agreement Section 7.01) are: (1) The execution and delivery of the Project Coordination Agree- ment on behalf of the City Assembly of Sarajevo have been duly authorized and ratified; and - 16 - (2) All local financing arrangements have been completed and are in full force and effect. 52. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATIONS 53. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments May 12, 1976 ANNEX I TA&LE 3A Page 1 of 1& Pages YUGOSLAVIA - SOCIAL INDICATORS DATA SHEET LAN) AREA ITMOU tJ121 YUGOSLAVIA REFERENCE COUNTRIES 1t9701 TOTAL 255.8 MOST RECENT AtKtC. 11. 3 1960 1970 ESTIMATE R64NANIA, REP SPAIN GERKANY, FED. REP. GNP PER CAPITA (USS) 360.0 740.0 1010.0 ! .a. /a 1260.0 4210.0 POPULATION AlO VITAL STATISTICS ___ _ _________ POPULATION (MID-YR, MILLION) 18.4 20.4 21.0 20.3 33.6 60./ POPULATION DENSITY PER SQUARE KR. 72.0 80.0 82.0 85.0 66.0 240.u PER SQUARE KM. AGFaC. LANC .. .. 145.0o VITAL STATISTICS CRUDE BIRTH RATE PER THOUSAND 24.0 17.8 18.0 21.1 19.6 13.4 CRUDE DEATH RATE PER THOUSAND 10.0 8.9 8.7 9.5 6.5 12.1 INFANT MORTALITY RATE I/THOU) 88.0 55.5 43.3 49.4 27.9 23.6 LIFE EXPECTANCY AT BIRTH (YRS) 62.0 67.0/a 68.0 68.6 71.0 70.3 GROSS REPROOUCTION RATE 1.3 1.3 1.3 0.9 1.4 1.2 POPULATION GROWTH RATE I1) TOTAL 1.2 1.1 1.0 1.0 1.1 1.0 URBAN 6.0 .6.. 3.4 1.9 1.1 URBAN POPULArION (t OF TOTAL) 27.2 38.7 39.0 41.0 59. 1 B2.b AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 31.0 26.9 26.9 25.9 27.d 23.2 15 rO 64 YEARS 63.0 65.1 65.1 65.5 62.5 63.o 65 YEARS AND OVER 6.0 8.0 8.0 8.6 9.7 13.2 AGE DEPFNDENCY RATIO 0.6 0.5 0.5 0.5 0.6 0.6 ECONOMIC CEPENDENCY RATIO 1.0 .. 0.9 0.?ij 1.1 0.9 FAMILY PLANNING- ACCEPTORS ICUMULATIVE, THOU .. .. ... USERS (IX OF MAPRIED WOMEN) EMPLOYMENT TOTAL LABOR FOPCE tTHOUSAND) 8300.0 *. 8900.0 9900.0 11900.0 Z6500.0 LABOR FORCE IN AGRICULTURE It) 57.0 .. 45.0 49.0 24.8 8.9 UNEMPLOYED tS OF LABOR FORCE) 7.0 /a .. 3.3 /a . . 2.0 /a 0.7 INCOME DISTRIBUTION I OF PRIVATE INCCME REC'u bY- HIGHEST ST OF IDJSdOD 16.4 /b 15.1 .. 6.3 /b HIGHEST 20% OF OuISEHoLG 41.5 7i 41.4 .. LnwSFT 20T OF HDUCtOSI 6.9 7b 6 .6 .. 24.3 /c LOWEST 40% OF HOUSEHOS '9-- il. .. . . DISTRIBUTION OF LAND CWNERSHIP I OWNED OT TOP 101 OF O Rf$S IS4 1.1 /b .. S OWNED NY SMALLEST IDX OWNERS B4.97; .... HEALTH ANo NUTPITION POPULATICN PER PHYSICIAN 1400.0 ta 1010.0 900.0 68o0o 750.0 /b 580.0 POPULATION PER NURSING PERSON 500.0 410.0 380.0 200.0 1430.0 350.0 POPULATION PER HRSPITAL BEn 190.0 Ia 180.0 170.0b 120.0 220.0 90.0 PER CAPITA SUPPLY OF - CALORIES (t OF AEUUIREMENTS) 115.0 124.0 125.0 118.0 107.0 121.0 PROTEIN IGRAMS PER DAY) 91.0 92.0 94.0 92.0 81.0 a8.0 -OF WHICH ANIMAL AND PULSE 27.0 29.0 .. 28.0 40.0 56.0 DEATH RATE I/THOU) AGES 1-4 4.7 /a 2.5 2.5 3.0 0.9 0.9 EDUCAT ION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOnL 96.o 94.0 96.0 122.0 131.0 117.0 /a SECCNDARY SCHOOL 34.0 45.0 4b.0 L6.o 57.0 45.0 7a YFARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL I 12.0 12.0 12.0 14.0 13.0 15.0 VOCATIONAL ENROLLMENT (t OF SECONDAkY) 12.0 72.0 74 a 58.0S /d 20.0 48.0/a ADULT LITERACY RATE (tI 77.0 85.0 *- 99.0 94.0 99.0 HOUS ING PFRSONS PER ROOM IAVERAGE) 1.7 1.3 1.3 /e . 0.7/b OCCUPIEO DWELLINGS WITHOUT PIPED WATER (II .. .. 66.0 /c 88.0 / .. 0.3/c ACCFSS TO ELECTRICITY (I OF ALL DWELLINGS) 55.0 .- 88.0 49.0 / .. 100.0 RURAL DWELLINGS CONNECTED TO ELFCTRICITY (1) 36.0 80.0 27.U /e CONSUMPT ION RADIO RECEIVERS IPER THOU PCP) 84.0 163.0 176.0 152.0 214.0 318.0 PASSENGER CARS tPEP THOU POP) 3.0 35.0 54.0 .. 70.0 223.0 ELECTRICITY (KwH/YR PER CAP) 529.0 1288.0 1570.0 1615.0 1627.0 4128.0 NEWSPRINT (KG/YR PER CAP) 2.3 4.3 3.5 2.6 5.8 17.5 S------E-----NOTES-------------AND------------------IN--------TI----__-NS----__----N--------EVE---------S----- SFE NOTES AND DEFINITIONS ON REVERSE Pap 2 of 4s papes Unlace otherwise noted, date for 1960 refer to any year between 1959 end 1961, for 1970 between 1968 end 1970, end for Most Recent Estimate between 1971 end 1973. -e Selection of Federal Republic of Ninnyq as an objective country is based an the close eoononie ties caintained lo' the two couqntriee, as well as on the ftet that the greater pert of Tuopei04a' e around one sili'on wcrkere teoporarily ahooed beet found amploywant in tbee Pedepal bpphbic of GWaucy. Y-iM5h. iA aI s9j Zk 1963j Lc including eidwivee and widwifeqry, end mar*ħug awtlflltae. mg_ a 196-671 A Agriculture lend held ty SociaLl Sector Koubntoate ac Agriculture Iset bai by private amll- holdera. NMiT MCMMT flTfltfi AL Ratio of reiteterd job ecekers to active populaticn; /b Ooveruaist hospitalm a2lyj a Water piped ineide. ROKLNIA /970 a The calculation of these figure is under diecueeion; bLasd on information eupplied by the Hamnian Government, and usIng a currency cavereoin rate of 20 LtA to the UPM, the per cakpita (ON? would amcont to $810 for 1973, and the preliminary setiaate for i974 would he *910. These figured are, however, not strittly ccmpaable with those for other reference countries, as presented here; ak Percent of salaried workerasearning mere than 2, 500 2.1 /a Percent of ealaried workere earning less than 1,100 Lel; ~4Pl-tias education only; Zl 1966; aL Piped water ineide only; ~A Ratio of population under 15 and 645 andoUver to total labor force. SPAIN ~~1970 /- Regietered unemployed; /b Registered, not all practicing in the cow.trj'. Gk&1LA..ThFD. W.. 1970 /a Includes the relevant data relating to Berlin for whidth separate data have not heen supplied; /b Total, urban antd rural; /v Inside only. R12, Mey 3, 1976 DEFINITIONSB OP SOCIAL IROICATOBS tend Ares (thou kea Psociation peroas er - Population divided by comber of preeti- Tol-Total ouri..faco area comprising land wren sod inland wotror.co,ml n faTes gradate coumes, "trained' or 'certified wArsee, _Antic. -Moot recent .etioste of agricoltturai ores coed tempororily or per- sod a-silia"y Peresonel with training or eaperiemne. us.ntIy for crepe, Pastures, market & kitchen gordene or to lie fallow. frr4tal~i-r.eset 1it! I ba - Population divided by -esbchr of hospital beds swia oPublic and Private generai and opecialieed hoepits1 iMP oar capita (05) - GSP percapits estimates ot -aket pricee, caicoleted aod rehabilitatic c-te-e; emoudee eursIng bows sod eetablishaots by sane -c-nersiso method as World Bank Atlas (1972-74 bosie). for custodial sod prev..otive care. Per capita supplv of calories ft of requairementa) - Computed free, Posulation sod vital tcaticeice energy equivalent of eat food suPPlie available io country par Poonlation (.id-vr. millon)-2 A of July first; if ncr -vilablo. soorage caPita per day; avilable aupptico comPrise d4stic production, cf tw end-year macbares, imports le.. daprta, and changes is stock, set suPpplie se.c lde -eimal teed, seda, qosocitias used in food proceesimg ad lonseo in Ponu1atton density - ear qacuar ho - Mid-yost population per square kilo- distribotion; reqoireemant were estimated by FAO based on physic- me ter (100 hectarsa) of total ares. logical needs for noomal activity sod health considering environ- Posulation density - par ocuar eko of agric. land - Csputed so shove for moentl teoperture, body weights, age sand sew distributiono of 1gistoa -sd only. Popolation, and allowing 10% foe -ste at hsueshold level. Per caPita sueAplv of orocein (armsd per day) - Protein contest of pot vital sattistics caPiton-et supply of fond per day; net eupply of food is defineda Cuebirth rate pear thousand - Annual live births per thousand of mid-year above ; requirements for all countries established by USDA Econoic POPulation; usually five-year soerefes ending in 1960, 1970 sod 1975 for Research Services Provide for a miimo allowace of 60 gram of dselor-ing coutries. total protein per day, and 20 gras of animal ad pulse protein, of Crude det rat stl. th-aund - Annul dosthe per thousond of nid-year whith 10 grs should he animal protein. tbeee standardsam se lwr Population,aecIly five-year averags cending in 1960, 1970 and 1975 for than those of 75 grom of total proteis aed 23 gras of a-ial developing countries,. protein aa an average for the world, Proposed by FAO in the Third Isfatt mortality rac (thou) - Ancest deathn of iefanta ceder one year of age World Food Survey. iper thouadlv . rh. Per tonits erotsio suno ly free animal sod Pulse - Protein supply of feed Lfe 1 em neo t at birth tyrs) - Average nsashr of years of lifo romaining derived from s.mimls sod pulses in gras per day. at bith Iuual five -year averagee coding in 1960, 1970 and 1975 for Smath rate 1/thos) sees 1-4 - Annual deaths per thousand Is age group developing countries. 1-4 y-ear, to children In this age group. suggested as don indicator Gross reoroduction rate -Average nomber of live daughtern a womne will hear of ma1nutrition. to her cosml reproductive period if chs enporiences present age-opctific fertility rates, ..conaly fivs-yearaoorsges ..dieg ic 1960, 1970 and 1971 i for d.v.lopig ftfil~~~~~~~~~~ mte-denrollment retio - primary school - Eorollmoot of all ages a PPoemiattma_gethpateJ. (TI - ota1l - Compoud ..c-I growth rates of nId-year Percentage of primary school-age populotion, Includes children aged pouainfr150-i, 1960-72 d 1960 to mact cr..o.r yost. 6-11 years hut adjusted for different lengths of primary education, ?i'eLatiom gowth 1rate (7) - urban - Computed like growth rate of total for countries with univereal educa.tion, enrolmnet may exceed 100% population; diffrent defi-ntions of urban area. may affect comparability store domes pupile are below or above the official school age. of data doag eoutrtes. AdjuSted enrollment ratio - secondary school - Computed a.shaove; trbantp pon tion tof total) - istio of urhon to total population, diffe- secodary education requires at least four yeerc of ePproved primary rent deInititons of urban ores may affect cosparobility of data seong instruction; provides gene.ral, vocational or reacher training countries. instru.ttioe for pupils of 12 to 17 yearn of age. correspondence ARe troctore fpercent) - Children (0-14 years), working-age (15-64 years), courses are generally excluded. sod retired (65 years nod over) an percentages of mid-year population. Years of schooling provided (first and aecond levels) - Total years of Age dependency rtait - Ratio of Populmtion under 15 and 65 and aver to those schooling; at secondary level, vocacicea instruction may be Pa-- of ages 15 through 64. tially or completely ea.cluded. Economic depnedetys ratio - Ratio of population onder 15 end 65 and over to VoCatiOnal enrollment ft of secondary) - Vocational institutionn the labor fort in age group of i5-b14 years. include techmnicsl, industrial or other pregr-u which operate inde- Fadly Placin - cetr csltv,to) - C,oclativa mocker of pendently or a. departwents of secondary imetitutimu.. occetornof brth-ontrl de ices teder spice of national fasily pla- MolIt literacy rate (7.) - Literate adults (able to read sod write) as clog progras ninc inceptico. Percentage of total odult population sged 15 years and over. Faily pIlaonis - users %fj!f arieYd wse) - Pereataga of married Woeeo of chilid-hearing ag 1-4yan ho one birth-control devices to Rous ing sil married .,c,n in sam ago group. Persons pet room (average) - Average somber of peroono per room in E.pl,ymnt ~~~~~~~~~~~~~~~~~occupied conventional dwellings in urban areas ; dwellings -odcld Totalovomb nenP-petamet struttrsa end unoccupied parts. Toa aor (nnEthuad)-ioomicelly sctrive Persons, including armd Occupied dwellings without piped water 07) - .Ocpied cnetoa force and ,mnlydht-e1cding housewives, students, etc.; defini- dwellings In urban and Mrura areas without inside or outside Piped titon in various countries are not conporable. water fatulities as percentage of all occuPied dwellings. Labo-r force in agriculture (7. - Agricultural labor force (In farming, Access to electricit ft Of all delliom - Conventional dwellings forestry, hunting and fishing) as percentage of total labor forts. wiheecrc ty i living quarter aspret_ fttlwlig Jeenpioyed (7. of labor force) - ilneploy.d are usually defined as peroono in urbsn and rurslst1 s who are able and williog to take a job, out of a Job on a given day, Rural dwellings connected to electricity (7. - ComPuted so above for re-naed out of s Job, ned see king wock for a specified oinin,o period rural d-11lingn only. not .....ediog oe week, may sot ho comparable between coutries due to di fferent definitions of oenploysd and source of data, e.g., employment Consomtion office tacticri, -asPle surveys, conpoloory uncploymmnt insorsnce. Radio receivers (per thou oP-) - All types of receivern for radio brosdca.nts to goendrl IPublic per theuns-d of population; emcludes I.com discribs,tio c- P-r-eeog cf privats ineom (both in c... hsod kind) onli-enud rece Ivers in' cooncri-c aod it yearn uh.. rogiecraclon of received by richest 5%, r-cheet 20%, poorest 20%., sod poorest 40t of radio nets us is effect, data for recent yesrs may not be eompsr- households, ~~~~~~~~~~~~~~able aince mot cosentries abolished licenoIng. Di.t~ib.tim f led ~er.hip - Per.nt.g.. of landPassenger care (net thou pop) - Passe.nger csrs comprise motor cars nistrhutin oflendownenbio Perentaen o lan ownd by w-ltbielt nesting le.n than eight persons; e-loden mua.n hearses and 10% and po-ret 107% of land oueo ilitary vehicle.. H-Ith and N.ttitiM E~~~~~~~~~~~lectricity (bob/yr ea r can) - Annual connomption of industria.1 co-- Re~latbo and pot sition inertal, public end Private electricity in kilowatt hours per Poocarin pr pysiian- Popu1atios divided by ousher of practieieg caPita, generally based on production data, without allowanc.e for phynicians qualified from a medical school at university level, losses in grids hut allowing for imports and eoportn of electricity. Neur t(gy nrcn - Per caPits annual. c-es-ption in kilograus entimted kfro doetic prduction plus net importo of ew;pr,int. 1010 ISI.11. 1. SI to n00 000o o~~~ a o o Co . 0°0 0 % 0 . a w ~ 0 0 1 01 0 0 0 O : : 0o 0 00 ovO w1000 ID 0 . 0G| 0 G G00'J SIW| VO| o .0 01P o oW s' n 00 --. o >> ~ ~ I r.2'YC - < '2lS l 2 ooa oo -O OrO2og>@~> voovo ~ >0-t g ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 0 W, 0 0 0o 00 .W1 .WVtW J l l aO~~~~~~~~~~~~~~~~~~~~~~~~ _O (1 c 01 o n ~ ~ ~ ~ ~ 1 ... |- - Ii W ~ ~ ~ ~ a . SI 0, 0 0a o o 01 (00 0'G0G G V 0. Co. G ' w 01 .1 0' .: . . .I '0 1 00 100 ( ( ( 0o 000 C~_ n. . 10 _~~~ ~ ~ ~ 0 _(3 01 0. 0 I a B - *.-. 0 O01(0I0G1C0O 8 1010100 8w r 8G 01.- 0101oO I, V. II 1 4 W 010,0010 011010 0 O0 0 . 00 0 0 -ID /b O ~ _ R O O , 1 0 .1100 O0 111 00000 0010 00 00 100 0 0000(0 ... 5,. a0_ gO __ B~ ~~~~~~~~ ,0 - .0 0 100 0 10 WG °IGW I , W1000. (0. 010 W3( 00 00 0. W (0 _ J:' N o1I4O.o.oo O 00(00 .0 - ..0 0 01 0 0 1 00 000 1 0 ANNEX I Page 4 of 4 BALANCE OF PAYMENTS AND EXTERNAL ASSISTANCE AND DEBT Average Annual Actual Estimated Projected Growth Rates 1972 = 1974 1975 197& 1972-75 SUMMARY OF BALANCE OF PAYMENTS Exports (incl. NFS) 3425 4407 5694 6088 7319 21.1 Imports (inol. NFSI 3821 5168 8312 8891 9961 32.5 Resource Baloace (X-M) -395 -761 -2618 -2803 -2642 Interest -165 -222 -285 -305 -407 22.7 Workers Remitteamee 889 1310 1511 1700 1926 24.1 Other factor services net 17 50 93 70 - 60.3 Current Transfers (net) 74 87 110 120 132 17.5 Balaxce on Current Account 419 464 -1189 -1218 -991 I/ 1,/ IS'dLT LoansO Disb-rs-nests 943 1170 1426 2101 2449 30.6 -Re.avoext. -570 -686 -814 -1106 -1279 24.7 Net Disburoements 373 484 612 995 1170 38.7 Capital T-aonacti-ss n.e.i./ -117 -285 139 320 Use of Reserve- -675 -663 438 -97 -179 Actual Estimated GRANT AND LOAN COMMITTIIENTS DEBT AND DEBT SERVICE 1972 1973 1974 1975 Official Graots & Grant-like - - - - Public Debt Out. & Disbursed Public MALT Louxo Interest on Public Debt 63.1 96.4 102.6 114.5 iBRD 75.0 104.9 256.5 - Repayments on Public Debt 154.1 208.0 288.1 313.3 IDA - - - - Total Public Debt Service 217.3 304.4 390.7 427.8 Other Multilateral - - - Other Debt Service (net) 634.5 722.6 821.4 975.1 Govetrmext. 182.9 175.0 612.7 _ Total Debt Service (.et) 851.8 1027.0 1212.1 1502.9 Suppliers 82.3 3.1 .6 - 4/ FPsaxcial Instituti.ex 142.0 19.4 367.5 _ Burden on Export Earnings (%) Bonds - - - Public Loans n.ei. - - - - Public Debt Services Ratio 5.0 5.3 5.4 5.5 Total Public M6LT Loaos 482.2 302.4 1237.3 Total Debt Service Rati. 19.7 18.0 16.8 19.3 TDS - Direct Iovestmeot In.. - - - - Actual Debt Outstandine on Dec. 31. 1974 EXTERNAL DEBT Disbursements Only Percent Average Terms of Public Debt World Bank 424.6 19.9 IDA - - Int. as % Prior Year DObD 4.7 5.9 5.4 5.4 Other Multilaterul 6.9 .3 Anort an 7. Prior Year DO&D 11.4 12.8 15.1 14.7 Governmen-t 1149.7 53.8 Suppliers 143.6 6.7 IBRD Debt Outs. b Disbursed Fi-ancial In-titut-ons 392.5 18.4 uas % Public Debt 060 19.5 18.4 19.9 - Bonds 19.0 .9 "a 7. Public Debt Servieeo 14.7 12.6 11.3 11.6 Public Debt .e.. .3 - 2136.6 100.0 Other M< Debts 2833.2 Short-term Debt (disb. only) 1/ Includes direct foreign inve-stent. 2/ Includes errors and mmoision-s, short term loao, net export credits, IMF account, National Bank and Commercial Bank Credits. 3/ Figures on debt service do not correspo-d with balance of paymenta figures due to differences . coverage. 4/ Includes -orkers remittances. Europe, Middle Rast 6 North Africa Region February 12, 1976 ANNEX II Page 1 THE STATUS OF BANK GROUP OPERATIONS IN YUGOSLAVIA A. STATEMENT OF BANK LOANS (as at March 31, 1976) US$ million Amount (less cancellations) Number Year Borrower Purpose Bank Undisbursed Fifteen Loans fully disbursed 434.7 657 1970 Yugoslav Investment Bank Telecommunications 40.0 0.2 751 1971 SFRY Roads 35.0 0.4 752 1971 Hotel "Bernardin", Piran Tourism 10.0 3.6 777 1971 SFRY Multipurpose Water 45.0 34.7 782 1971 "Babin Kuk" Hotelsko Turisticki Centar,Dubrovnik Tourism 20.0 9.9 836 1972 Twelve Electric Power Enterprises in Yugoslavia Power 75.0 23.1 894 1973 Stopanska Banka, Skopje Agricultural Industries 31.0 12.3 916 1973 Naftagas Gas Pipeline 59.4 24.8 947 1973 Kikinda Iron Foundry 14.5 4.3 965 1974 IMT Tractor Factory 18.5 1.5 966 1974 FOB Iron Foundry 15.0 8.5 990 1974 Bosnia-Herzegovina Road Funds Roads 30.0 4.4 1012 1974 Stopanska Banka, Skopje Industrial Credit 28.0 22.2 1013 1974 Privredna Banka Sarajevo Industrial Credit 22.0 18.6 1026 1974 Community of Yugoslav Railways Railways 93.0 76.3 1060 1974 Port of Bar Harbor Expansion 44.0 43.8 1066 1974 Vodovod Dubrovnik Water Supply and Wastewater 6.0 6.0 1129 1975 Vojvodjanska Banka Agricultural Credit 50.0 50.0 1143 1975. Republic Road Organization in Slovenia, Montenegro and Serbia Roads 40.0 40.0 1173/a 1975 Jugoslavenski Naftovod Pipeline 49.0 49.0 Total (less cancellation) 1160.1 433.6 of which has been repaid 136.3 Total now outstanding 1023.8 Amount sold 7.8 of which: Amount repaid 6.2 1.6 Total now held by Bank 1022.2 Total undisbursed 433.6 /a Not yet effective. ANNEX II Page 2 B. STATEMENT OF IFC INVESTMENTS (as at March 31, 1976) Type of Amount in US$ million Year Obligor Business Loan Equity Total 1970 International Investment Corporation Investment for Yugoslavia Corporation - 2.0 2.0 1970 Zavodi Crvena Zastava Fiat S.P.A. Automotive Industry 5.0 8.0 13.0 1971 Tovarna Automobilov in Mororjev Automotive Maribor (TAM)/Klockner-Humboldt Industry 7.5 2.1 9.6 Deutz A.G. (KHD) 1972 FAP-FAMOS Belgrade/Daimler Automotive Benzz A.G. Industry 12.7 2.7 15.3 1972 Sava/Semperit Tires 4.0 1.5 5.5 1973 Belisce/Bell Pulp and Paper 13.3 - 13.2 1974 Zelezarna Jesenice/ARMCO Special Steel 10.0 - 10.0 1974 Salonit Anhovo Cement Plant 10.0 - 10.0 1975 Rudarsko Melaturski Steel 50.0 - 50.0 Total Gross Commitments 112.5 16.3 128.8 less cancellations, terminations, repayment and sales 57.8 2.2 60.0 Total commitments held by IFC 54.9 14.1 68.8 Total Undisbursed 36.6 5.8 39.4 C. PROJECTS IN EXECUTION 1/ Loan 657 Telecommunications: US$40.0 million Loan of February 20, 1970; Effective Date: August 30, 1970; Closing Date: March 31, 1976. After initial delays the Bank-financed part of the project is pro- ceeding satisfactorily and is now nearing completion. The installation of trunk exchanges which are not financed by the Bank, has been delayed and will be fully completed shortly. We are in communication with the borrower with respect to the undisbursed balance of $200,000. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 3 Loan 751 Fifth Highway: US$35.0 million Loan of June 18, 1971; Effective Date: June 2, 1972; Closing Date: December 31, 1977. After an initial delay of about eight months in fulfilling the con- ditions for effectiveness of the loan, construction work on all sections has progressed well. All road sections but one are open for traffic. Completion of the remaining section has been delayed due to lack of funds. While costs have increased, future earmarked revenues from fuel taxes, particularly on purchases of fuel by Italian motorists crossing the border to buy cheaper fuel in Yugoslavia, have decreased. The final section is now expected to be completed by September, 1977. Loan 752 Bernardin Tourism: US$10.0 million Loan of June 18, 1971; Effective Date: May 31, 1972; Closing Date: June 20, 1977. There have been delays in implementation of the project due to delays in making the loan effective, appointing consultants, providing the necessary infrastructure and approvals by local authorities. As a result disbursements are behind schedule. Bids received in July 1974 indicated that the project, if it were to be implemented as originally envisaged (2,500 beds) would cost approximately 100 percent above the originally estimated cost of US$25.6 million. This increase was mainly due to rapid inflation in construc- tion costs. The Bank and the project sponsors have agreed to finance a re- duced complex containing some 1,616 beds (Amendment to Loan 752-YU, December 16, 1974, R74-258). The total cost would be US$39.9 million requiring addi- tional financing of about US$14 million. Financing for the revised project has been agreed upon. The port hotel is scheduled for pre-opening occupancy in April, 1976 and the village hotel complex is scheduled to open in May 1976; however, serious construction problems with regard to the foundations were encountered in the case of the cliff hotel, the completion of which has been delayed until October, 1976. Loan 777 Ibar Multipurpose Water: US$45.0 million Loan of June 20, 1971; Effective Date: May 31, 1972; Closing Date: December 31, 1976. The start of project work was delayed for one year. Construction is now underway with the main dam scheduled for completion by late 1976. A small part of the irrigation network has been completed with the remainder expected to be completed in 1978. Project costs have been above appraisal estimates but the overrun financing is being provided by the Province of Kosovo. Delays have been encountered in the arrangements for boundary adjustment and agricul- tural extension services. Consultants have been recently engaged to help find solutions. ANNEX II Page 4 Loan 782 Babin Kuk Tourism: US$20.0 million Loan of July 21, 1971; Effective Date: June 12, 1972; Closing Date: July 31, 1977. There have been delays in the implementation of the project due to delays in making the loan effective and in mobilizing consultants. Ac- cordingly disbursements are behind schedule. Although these problems have now been largely resolved, the project is almost two years behind schedule. Bids for civil works and estimates for other components indicated that the project would cost at least twice as much as originally estimated (US$49.9 million). This increase is largely due to rapid inflation in construction costs. The Bank and the project sponsors have agreed to finance a reduced complex containing some 2,034 beds (Amendment to Loan 782-YU, December 16, 1974, R74-259). The total cost would be US$51.5 million requiring additional financing of about US$1.6 million. This additional financing for the revised project has been arranged but in light of the increased financial commitments necessary from the local banks and a re-evaluation of the financial capabilities of the sponsor necessary to implement a project of this size, the local banks and the Borrower have proposed and are discussing with the Bank a change in sponsorship. This proposed change in sponsorship will be submitted to the Executive Directors for their consideration after being fully reviewed by the Bank. Meanwhile, construction is proceeding well and all civil works are near completion. The hotels are scheduled to open in June, 1976. Loan 836 Power Transmission: US$75.0 million Loan of June 23, 1972; Effective Date: December 29, 1972; Closing Date: June 30, 1977. Project execution began about one year behind schedule mainly be- cause of coordination difficulties and inherent delays in reaching agreement among 12 borrowers. This is the first attempt at countrywide coordination in the sector. All main contracts have been awarded and construction is proceeding satisfactorily; however, the cost of the project has increased 84 percent from $225 million to $415 million chiefly due to escalation in overall costs, including both civil works and equipment. The cost overrun is expected to be financed from funds from the Federal Republic of Germany and the borrowers' own resources. Action on appointment of management con- sultants to help improve planning operation and management of the inter- connected power system is still pending. Early difficulties with reporting, changes in the organization of the sector, and determination of the financial performance of individual borrowers have largely been resolved. Loan 894 Agricultural Industries (Macedonia): US$31.0 million Loan of May 25, 1973; Effective Date: November 28, 1973; Closing Date: December 31,1978. Sub-projects accounting for all but Din 7.75 million ($430,500 equivalent) of the amount allocated have been approved by the lending insti- tution. Private sector demands for sub-loans have by far been in excess of financing available under the project. Twenty-one sub-projects have been ANNEX II Page 5 completed and eighteen are under construction in the social sector. Of the three studies encompassed by the project the one on irrigation has been completed while the other two on marketing and private farm production are in the final draft stage. Loan 916 Naftagas Pipeline: US$59.4 million Loan of June 25, 1973; Effective Date: March 22, 1974; Closing Date: June 20, 1977. Bids received on pipes and equipment exceeded appraisal estimates and civil works costs have increased so that project costs are now about 71 percent above the appraisal estimate. Accordingly the project has been re- defined. Phase I is a reduced version of the original plan. Phase II would provide for a pipeline extension to link up with the pipeline to be con- structed under the proposed Sarajevo Air Pollution Control Project, for which additional Bank financing will be proposed. Naftagas has obtained additional local currency financing required for Phases I and II. The pro- posed change will be submitted to the Executive Directors for their con- sideration. Loan 947 Kikinda Iron Foundry: US$14.5 million Loan of November 30, 1973; Effective Date: May 28, 1974; Closing Date: March 31, 1978. Effectiveness was delayed about five months due primarily to the extra time required for the ratification of the Guarantee Agreement by the Federal Assembly. Project implementation is about four months ahead of schedule. Total project costs now are about 13 percent (Din. 79.0 million, about US$4.6 million equivalent) above appraisal estimates due to large in- creases in local costs. Financing of this cost overrun has been arranged with a local bank. Loan 965 IMT Tractor Factory Expansion: US$18.5 million Loan of February 22, 1974; Effective Date: June 11, 1974; Closing Date: December 31, 1977. The factory was officially inaugurated on March 7, 1976. Completion work on minor portions of the project, however, is continuing. Loan 966 FOB Iron Foundry: US$15.0 million Loan of February 22, 1974; Effective Date: May 28, 1974; Closing Date: December 31, 1977. There presently is a 3 month delay in project implementation but completion is expected to be on schedule. Local costs are about 27 percent (Din. 173 million, about US$10.0 million equivalent) above appraisal estimates due to design changes and domestic inflation. Financing of this local cost overrun has been arranged with a local bank. Loan 990 Sixth Highway: US$30.0 million Loan of May 31, 1974; Effective Date: December 10, 1974; Closing Date: December 31, 1977. Two out of six road sections are complete and the remainder should be completed by the end of 1976. Two requests for changes in road align- ments have been agreed; both changes were requested to accommodate communi- ties which would be better served by the realignments. ANNEX II Page 6 Loan 1012 Macedonia/Kosovo Industrial Credit: US$28.0 million Loan of June 21, 1974; Effective Date: December 19, 1974; Closing Date: December 31, 1978. It is expected that the loan would be fully committed by September 1976 and disbursed by end-1977, ahead of appraisal estimates. The reasons being: use of Bank funds to finance a greater than anticipated proportion of the foreign exchange requirements of projects financed by the banks; the suitability of Bank funds for investors' projects and the overall scarcity of investment resources in Yugoslavia; and the banks' ability to adapt quickly to the methodology proposed by IBRD for appraisal of projects submitted for Bank financing. Loan 1013 Bosnia Herzegovina/Montenegro Industrial Credit: US$22.0 million Loan of June 21, 1974; Effective Date: December 19, 1974; Closing Date: December 31, 1978. The note under Loan 1012 above applies also to this loan. Loan 1026 Fourth Railway: US$93.0 million Loan of July 10, 1974; Effective Date: February 12, 1975; Closing Date: December 31, 1977. The project consists of the 1974-76 slice of the railways' invest- ment plan. After serious delays in 1974, project execution improved sub- stantially in 1975 but remains somewhat below appraisal forecasts. Delays have been due principally to financial difficulties. Government and the Community of Railways are having difficulties in raising tariffs sufficient to cover inflationary costs and the Bank is currently reviewing this matter with the Government. There has been good progress on investment planning and project management. Loan 1060 Port of Bar: US$44.0 million Loan of December 11, 1974; Effective Date: June 13, 1975; Closing Date: June 30, 1978. In general the Project is progressing well, but settlement of com- pensation to occupiers of expropriated land and construction of alternative housing must be accelerated to enable the construction of the railway mar- shalling yards serving the new port facilities in due time. The Bank con- tacted the Government of the Republic of Montenegro which has intervened in this matter. Loan 1066 Dubrovnik Water Supply and Wastewater: US$6.0 million Loan of December 24, 1974; Effective Date: June 26, 1975; Closing Date: December 31, 1978. Preliminary works are underway, and services to the Bank financed Babin Kuk hotel complex (Loan 782-YU) will be finished in time for the initial operation of the hotel complex. ANNEX II Page 7 Loan 1129 Agricultural Credit: US$50.0 million Loan of June 20, 1975; Effective Date: February 12, 1976; Closing Date: December 31, 1979. Two sub-projects from the autonomous Province of Vojvodina have al- ready been approved and more sub-project applications from the other Republics are presently being reviewed for approval. Loan 1143 Seventh Highway: US$40.0 million Loan of July 18, 1975; Effective Date: March 30, 1976; Closing Date: June 30, 1979. This loan was declared effective on March 30, 1976. Loan 1173 Naftovod Oil Pipeline: US$49.0 million Loan of November 19, 1975; Closing Date: December 31, 1979. Terminal date for declaring effectiveness is June 30, 1976. ANNEX III Page 1 YUGOSLAVIA: Sarajevo Water Supply and Sewerage Project Loan and Project Summary Borrower: Preduzece Vodovod i Kanalizacija Sarajevo (the Sarajevo Water Supply and Sewerage Enterprise, or Vodovod) Guarantor: Socialist Federal Republic of Yugoslavia Amount: US$45.0, equivalent, in various currencies Terms: Amortization in 25 years, including a five-year grace period, with interest at 8-1/2 percent Project Description: The project would provide the facilities needed to improve the water supply system and abate water pollution in the city. The water supply and sewerage systems would be rehabilitated and expanded and a sewage treatment plant would be constructed. Essential features of the project are: (a) Water Supply: (i) Construction of an infiltration gallery, re- servoirs and pumping stations, and expansion of existing reservoirs and pumping stations, (ii) Installation and replacement of water mains and distribution pipes, and replacement of obsolete service connections, (iii) Installation of a control system and master meters, (iv) Hydro-geological studies to prepare a water re- sources master plan, (v) Construction of headquarter's offices and supply of office equipment, and (vi) Engineering services for designs, supervision, project administration and training. (b) Sewerage: (i) Construction of collectors and main sewers and replacement of worn-out sewer laterals and service connections, ANNEX III Page 2 (ii) Construction of sewage treatment facilities (including a pilot plant for experimentation to attain optimal utilization of the main plant), sludge filters and facilities for disposal of sludge, and (iii) Engineering services for designs, supervision, project administration and training. Estimated Cost: Percent (of total Local Foreign Total project cost) -------------(US$ million)--------------- A. Water Supply: Infiltration Gallery 0.4 0.2 0.6 1 Pumping Stations 0.6 0.4 1.0 1 Reservoirs 2.6 1.1 3.7 4 Distribution System 3.0 1.9 4.9 5 Replacement Pipes 4.5 2.6 7.1 7 Telemetry System 0.4 1.1 1.5 2 Headquarters 1.3 0.7 2.0 2 Engineering Services 2.1 0.9 3.0 3 Physical Contingencies 2.2 1.4 3.6 4 Price Contingencies 5.7 3.5 9.2 9 Sub-Total 22.8 13.8 36.6 38 B. Sewerage: Collectors and Sewers 6.5 3.4 9.9 10 Reconstruction Sewers 1.0 0.4 1.4 2 Treatment Facilities 12.0 10.4 22.4 23 Sludge Disposal Site 1.0 0.6 1.6 2 Engineering Services 1.4 1.0 2.4 3 Physical Contingencies 3.3 2.3 5.6 6 Price Contingencies 9.2 6.6 15.8 16 Sub-Total 34.4 24.7 59.1 62 Total Project Cost 57.2 38.5 95.7 100 Interest During Construc- tion 1.2 7.6 8.8 Non-Project Capital Expenditures 7.8 Total Financing Required During thle Project Con- 112.3 struction Period ANNEX III Page 3 Financing Plan: (For the project construction period (1976-1980), includ- ing interest during construction, non-project capital ex- penditures and increases in net working capital). Million US$ Percent of Total IBRD 45.0 40 Internal Cash 34.7 30 Local Loans 8.5 8 Capital Contributions: Republic Water Fund 5.6 5 City Government 18.5 17 Total 112.3 100 Estimated Disbursements. Amount (US$ Million) Calendar Year Annual Cumulative 1976 1.0 1.0 1977 5.0 6.0 1978 14.0 20.0 1979 16.0 36.0 1980 8.0 44.0 1981 1.0 45.0 Procurement Arrangements: Materials and equipment contracts estimated to cost more than US$200,000 would be let after international competi- tive bidding in accordance with the Bank Group's "Guide- lines for Procurement". For the purpose of bid comparison, qualified domestic manufacturers would be given a margin of preference of 15 percent or customs duties, whichever is less. Civil works contracts estimated to cost more than US$500,000 would be awarded after international com- petitive bidding in accordance with the Bank Group's "Guidelines for Procurement". The remaining materials and equipment, and civil works contracts would be awarded on the basis of competitive bidding advertised locally in accordance with the procedures of the Federal Government which are satisfactory. Vodovod will carry out by force account minor works, such as renovations and modifications to the existing water and sewer networks. The total value of such minor works is expected to be about US$10 million. All equipment supply and civil works contracts are expected to be won by Yugoslav firms except those for the supply of equipment for the sewage treatment plant and other special- ized equipment which are expected to be awarded to foreign contractors. Expenditure by the City Assembly and Vodovod for preparation of feasibility studies, final designs and ANNEX III Page 4 tender documents amounting to about US$1.5 million is ex- pected to be incurred prior to loan signature. Retroactive Bank financing of not more than US$750,000 is proposed. Technical As- sistance and Engineering Services: About 100 man-years for engineering services and technical assistance with feasibility studies, final designs, tender documents, supervision of construction and training and initial operation of sewage treatment plant, a substantial portion of which to be carried out by local consultants and design department of the borrower on a contract basis. Rate of Return: Water Supply: Internal economic rate of return based on current water tariff rates is 15.6 percent. Sewerage: Benefits not quantifiable. Estimated Project Completion Date: December 31, 1980 Appraisal Report: Report Number 1167-YU Date: May 7, 1976 EMENA Projects Department HUNGARY 6 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ / ~~~~~~~IBRD 11458R C r N SEPTEROUT 975~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I7 Ii ~~~~~~~~~~~SARAJEVO WATER SUPPLY Y U G 0 S L A V I A ~~~~~~~~~~~~~~AND SEWERAGE PROJECT * ~~~~~~~~~- ~~~~~WATER SUPPLY SYSTEM I ~~~~~~~~~~~~~~~~~~~~~~-' )~~~AES EVDB XITN AE SPL YT paig~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~> ,~~~~~~~~~~~~~~~~~~~~~~~~ (~~~~~~R 4 VHC L ESRE NE I ~~~~~~~~~~~~~~~~~~~~~~~ - ~~~ ~H RPOE RJC ---7~~~~~~~~~~~~~~~~~~~~~~~~~XSIGPOOE /~~~~~-~~~~~ '~~~~~~ o U PIG TTIN I'~~~~~~~~~~~~~~~~~RSROR RIVERSAINLBOJSRE S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 3 EILOMEYERS __________________________________________ IBRD 11455~~~~~~~~~~~~~~~~~~~~~IB D 145 HUNGARY ', ' 7 8 G 8 ;E >-@ '2 < -\2 /t '/ \ t ^ ., YG AI W 0 , =t, j .9 t - -V SARAJEVO WATER SUPPLY _ EITN GRiNCIPACBAND SEWERAGE PROJECT SEWERAGE SYSTEM ,, kb \\ _, / $ --- INTERNATIONAL BDUNDARIES AREAS SERVED BY EXISTING SEWERAGE SYSTEM CLEXITINORNCS ALNCMBE SEWERS -EXISTING PRINCIPAL SANITARY SEWERS - COVERED CREEKS USED AS YRINCIFAL STORM SEWERS _ _ i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~S O M O EFCW