Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4335-YU STAFF APPRAISAL REPORT YUGOSLAVIA OF A SIXTH RAILWAY PROJECT June 29, 1983 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 Iank authorization. CURRENCY EQUIVALENTS Currency Unit = Yugoslav Dinar (Din) US$l = Din 63.51/ Din 1 = US40.016 Din I million = US$15,748 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES m - Metre (3.28 feet) km - Kilometre (0.62 miles) kg - Kilogramme (2.20 pounds) ton - Metric tonne (2,205 pounds) PRINCIPAL ABBREVIATIONS AND ACRONYMS USED BOAL - Basic Organization of Associated Labor CIF - Cost, Insurance and Freight COI - Community of Interest CRO - Council of Republican and Provincial Roads Organization CTC - Centralized Traffic Control CYR - Community of Yugoslav Railways EIB European investment Bank GMP - Gross Material Product GTKM - Gross Tonne - Kilometre ICB - International Competitive Bidding NTKM - Net Tonne - Kilometre PKM - Passenger - Kilometre RTO - Railway Transport Organization SDK - Social Accounting Service SFRY - Socialist Federal Republic of Yugoslavia SR - Socialist Republic SS & TT - Signalling and Telecommunications TU - Traffic Units (millions of NTKM + millions of PKM) TYR - Trans-Yugoslav Highway 1/ As of October 1982. FOR OFFICIAL USE ONLY YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Table of Contents Page No. I. THE TRANSPORT SECTOR A. The Transport System. . .......... . . . . 1 B. Transport Policy, Planning, and Implementation . . . 4 C. Previous Bank Projects. ......... . . . . . . 6 II. THE RAILWAYS A. General . . . . . . . . . . . . . . 6 B. Community of Yugoslav. Railways.. . . . . . . . . . . 7 C. Communities of Interest . . . . . . . . . . . . . . . 7 D. Rail Tariffss and Compensation . . . . . . . . . . . . 8 E. Organization, Management and Staff . . . . . . . . . . 11 F. Railway Facilities . . . . . . . . . . . . . . . . . . 12 G. Uneconomic Lines . . . . . . . . . . . . . . . . . . . 14 H. On-Going Railway-Related Studies . . . . . . . . . . 14 I. Accounts and Audit . . . . . . . . . . . . . . . . . . 15 J. Previous Railway Projects . . . . . . . . . . . . . . 15 III. THE INVESTMENT PLANS AND THE PROJECT A. The Investment Plans . . . . . . . . . . . . . . . . . 17 B. The Project . . . . . . . . . . . . . . . . . . . . . 19 C. Cost Estimate . . . . . . . . . . . . . . . . . . . . 23 D. Financing Plan . . . . . . . . . . . . . . . . . . . . 23 E. Lending Arrangements . . . . . . . . . . . . . . . . . 24 F. Implementation . . . . . . . . . . . . . . . . . . . . 24 G. Procurement . . . . . . . . . . . . . . . . . . . . . 25 H. Disbursements . . . . . . . . . . . . . . . . . . . . 25 I. Employment . . . . . . . . . . . . . . . . . . . . . . 26 J. Action Plans . . . . . . . . . . . . . . . . . . . . . 26 IV. ECONOMIC EVALUATION A. The Proposed Project and the National Development Plan 27 B. Traffic Projections......... . . . . . . .28 C. Economic Appraisal of Proposed Investments . . . . . . 32 This report has been prepared by Messrs. J.C. McCombie (Financial Analyst), R. Knighton and T. Pankaj (Transport Economists), U. Marggraf (Railway Engineer) and W. Reck (Consultant). This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Table of Contents (Contd.) - ii - Page No. V. FINANCIAL EVALUATION A. Introduction . . . . . . . . . . . . . . . . . . . . 35 B. Past Financial Performance . . . . . . . . . . . . . 35 C. Forecast Financial Performance . . . . . . . . . . . 41 D. Cash Flow . . . . . . . . . . . . . . . . . . . . . 43 E. Balance Sheet . . . . . . . . . . . . . . . . . . . 45 F. Assumptions Used in Projections . . . . . . . . . . 45 G. Sensitivity . . . . . . . . . . . . . . . . . . . . 46 VI. RECOMMENDATIONS............ ..... . . . .47 ANNEXES 1. Action Plans and Operational Plans. ........ . . .49 Table 1: Selected Operational Statistics for 1979, 1980 and 1981... . . . . . . .52 Table 2: Traction and Rolling Stock Fleet at the end of 1980 and Planned Withdrawal and Procurement in 1981-1986...... . . . .54 Table 3: Operational Data and Targets.... . . . . .55 2. Transportation Projects Previously Financed by the Bank . 57 3. Tariffs and Compensation. ........ . . . . . . . .63 4. Financial Details and Targets........ . . . . . . .69 SUPPORTING TABLES Table 1(a): Investment Plans, 1981-1986 & Project 1983-86, RTO Belgrade . . . . . . . . . . . . . . . . . . 85 Table 1(b): Investment Plans, 1981-1986 & Project 1983-86, RTO Novi Sad . . . . . . . . . . . . . . . . . . 87 Table 1(c): Investment Plans, 1981-1986 & Project 1983-86, RTO Sarajevo . . . . . . . . . . . . . . . . . . 89 Table 1(d): Investment Plans, 1981-1986 & Project 1983-86, RTO Skopje . . . . . . . . . . . . . . . . . . . 90 Table 2: Items on which the Loan will be Disbursed . . . . . 91 Table 3: Estimated Schedule of Disbursements..... . . . .92 Table 4: Staff 1976, 1980, 1981 and Forecast for 1982-86 * 93 Table 5: Productivity in 1981 and Targets for 1983, 1985 and 1986 . ............. ........94 Table 6: Freight and Passenger Traffic, Actual and Projected, 1976-85, CYR .............95 Table 7: Freight and Passenger Traffic, Actual and Projected, 1978-85, for the Four RTOs under the Project . ........ ........96 Table 8: Economic Rates of Return from Major Investment Components . .............97 Table 9: Related Documents and Data Available in Project File. . .......... . . . . . .99 Table of Contents (Contd.) - iii - Page No. CHARTS 1. Organization of RTO Novi Sad..... . . . &.. . . . . . 102 2. Organization of RTO Novi Sad, Headquarters . . . . . . . 103 3. Procurement 6chedule. . .......... . . . . . .104 4. Project Implementation & Payment Schedule..... . . .105 MAPS 1. IBRD 13126R - Yugoslavia - Transportation Infrastructure 2. IBRD 16460 - Yugoslavia - Railway Infrastructure  YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT I. THE TRANSPORT SECTOR A. The Transport System 1.01 Yugoslavia has an extensive and diversified transport system, of which roads and railways are the backbone, carrying respectively, about 70% and 20% of the total traffic. The transport network comprises about 110,000 km of roads, 9,400 km of rail lines, 7 main ports, 15 airports (of which 10 handle international flights) and a sizable network of inland (the main one being the Danube) and coastal waterways. Pipelines have come into increasing use in recent years. Yugoslavia borders seven countries (see Map IBRD 13136R) and has extensive access to the Adriatic; it is thus an impor- tant crossroads for European traffic, including traffic to the Middle East. Its transport system has traditionally provided sea access for central European countries and has become of major importance for international tourism. 1.02 Over the past two decades, Yugoslavia has enjoyed an impressive record of economic development on a par with other southern European market economies, though it has also experienced economic difficulties from time to time, as at present. During the seventies, the growth rate in gross mate- rial product 1/ rose to nearly 7% per annum. Per capita incomes have more than tripled since the mid-1950s, and absolute poverty has been eradicated. A major force behind this rapid economic development has been the signifi- cant growth of industry and services. Increasing economic activity and personal incomes led to a rapid growth in transport demand. Between 1960 and 1980, total freight traffic grew in the public transport system at about 5% per annum and total passenger traffic (including private car transport) by about 6% per annum as indicated below. However, since 1980, GMP growth has only been at about 1.5% per year and overall freight and passenger traf- fic growth has slackened to about 3% and 1%, respectively. 1/ Gross Material Product (GMP) or Social Product excludes $non- productive' (in Yugoslav terminology) services such as education, health, administration, defense and other public services. Gross Domestic Product is approximately 14% higher than GMP. - 2 - Table 1.1: Growth of Freight and Passenger Traffic 1960-81 Freight Traffic Passenger Traffic (billion ton-ka) (billion passenger kn) Maritime Road . Road Air 2/ Inland Trucking Total Public Bus Domestic Total Year Rail Waterway Coastal Enterprises Freight Rail Transport Airlines Others Passenger 1960 15.2 2.0 0.4 1.0 18.6 10.4 2.8 0.1 0.4 13.7 1965 18.0 3.3 0.4 3.1 24.8 12.8 6.0 0.5 0.2 19.5 1970 19.3 4.4 0.3 6.7 30.7 10.9 14.1 1.3 0.2 26.5 1976 21.0 5.6 0.4 11.1 38.1 9.9 27.7 3.8 0.1 41.5 1979 25.9 5.7 - 17.7 49.3 10.1 29.2 5.2 0.2 44.7 1980 2/ 25.0 5.0 0.4 20.8 51.2 10.4 29.9 5.1 0.2 45.6 1981 25.7 4.6 0.8 21.4 52.5 10.5 30.0 5.2 0.2 45.9 Average Annual Growth Rate (%) Period 1960-70 2.4 8.2 -2.8 21.0 5.1 0.5 17.6 29.2 -6.7 6.8 1970-80 2.6 1.3 2.9 12.0 5.3 -0.5 7.8 14.7 - 5.6 1980-81 2.8 -8.0 100.0 2.9 2.5 1.0 0.3 2.0 - 0.7 1/ This refers to traffic by public transport companies; data on traffic carried by non-transport conpanies on their own account are not available since 1978; such traffic amounted to a sizable 24.2 billion ton-km in 1978, as against 2.0 billion ton-km in 1960 and 11.1 billion ton-kn in 1970 2/ Includes also international traffic by Yugoslav Airlines; domestic traffic was 1.05 billion PKM in 1980 and 0.97 billion PR in 1981. Source: Federal Bureau of Statistics and Mission Estimates. -3- 1.03 During the 1970s, freight traffic (ton-km) on railways increased by about 2.6% per annum compared to an increase of about 12% per annum on high- ways, while passenger traffic on railways remained practically unchanged in contrast with an increase of about 8% per annum on highways. As a result, road transport has replaced rail transport as the dominant carrier. The railways, however, continue to play a crucial role as -e main carrier of bulk materials needed by key industries, as well as the carrier of just under one-half of total freight in the public transport sector, and an esti- mated 35% of all domestic freight transport (including own-account trucking y non-transport companies). River transport has retained an important and competitive place, carrying about 9% of total freight traffic. The ports have more than doubled their cargo handling since the early 1960s and cur- rently handle more than 25 million tons per annum. 1.04 Although continuing to carry a declining share of traffic, the position of the railways has improved somewhat in recent years. During the period 1976-80, railway freight traffic grew at 4.5% per year compared to only 1.4% during the period 1970-76. This upward trend reflected the Government emphasis since the beginning of the 1976-80 plan on the develop- ment of a more efficient and competitive railway system, a policy which followed from the energy crisis and the railways' lesser reliance than road transport on imported fuel. During the same period, the competitive posi- tion of the railway was enhanced by steep increases in oil prices, the lat- ter generally reflecting world market prices, and by physical shortages of gasoline and diesel fuel for road transport. 1.05 Total freight traffic growth has slackened substantially in the past two years as a result of the recent slump in the economy. However, the slump has been felt mainly by road transport where freight traffic growth has come down from an average 12% per year during the period 1970-80 to less than 3% between 1980 and 1981. Current indications are that the economy can only be expected to improve very slowly through the remainder of the current mid-term plan (1981-85). The latest forecasts indicate an average growth rate of 1.5% per year for industrial output through 1985 which implies a 2% per year increase for the commodities carried by rail. This would result in a somewhat higher rate of increase for rail freight which is made up essen- tially of long distance bulk traffic. In addition, further impetus is now likely due to the introduction in October 1982 of fuel rationing for road transport. These restrictions have confirmed the physical shortage of fuel felt throughout 1982 by Government measures aiming at a 20% reduction in gasoline consumption, a 15% reduction in diesel fuel allocations for own- account road transport and a 10% reduction for public transport companies. However, the restrictions are expected to be lifted when the foreign exchange position eases and the Bank is urging their removal at the earliest opportunity. On balance, therefore, the Government expects that rail freight traffic will increase during the current mid-term plan (1981-85) at about 3% per year, followed by a slightly lower rate of between 2% and 3% per year in the longer term. 1.06 Although rail passenger traffic has stagnated over the past decade, it increased at 1% in 1981 compared to only 0.3% for road transport. More- over, provisional figures for 1982 show that rail passenger traffic has been -4- boosted by some 6 to 7% due to fuel shortages for road transport. The Government expects rail passenger traffic to continue increasing at at least 2% per year through 1985, with the rate of increase returning to a more nor- mal level of around 1% in the longer term. 1.07 Despite lower growth forecasts for transport demand, increases in capacity are still required to meet existing demand over many parts of the primary transport system. Modernization and strengthening of the railway system is a major priority in the transport sector. Emphasis is also being given to improvements of key links in the primary road network, including many sections of the Trans-Yugoslav Highway (TYH), the country's principal road artery and a major transit route between Europe and the Middle East. The corridor shared by TYH and the main railway route, spanning Yugoslavia from the Italian and Austrian borders in the northwest to Bulgaria and Greece in the southeast, provides the backbone to the Yugoslav economy and directly serves the main centers of population and economic activity. Pre- sent traffic volumes in this corridor range from 80 to 100 trains per day on the railway and some 12,000 to 20,000 vehicles per day on the road. Although high priority is given to TYH, attention is also being paid to completing the primary highway network in the less developed regions of the country. The Bank is preparing, in addition to the proposed railway project, a pro- ject which supports these basic needs in the highway sector. B. Transport Policy, Planning and Implementation 1.08 Since the mid-1960s, the Yugoslav economic system has been increas- ingly characterized by decentralization of decision-making with enterprises operating under workers' management in a market-oriented economy. Principal governmental responsibility for transport was transferred during the late 1960s from Federal to Republican and Provincial authorities. The Federal Secretariat for Transport was replaced in 1975 by a Federal Committee, whose President and Vice-President are Federal officials, and whose other members are the Republican and Provincial officials responsible for transport. This committee has a largely coordinating function. Much of governmental respon- sibility has been transferred to Communities of Interest (COls), which consist of representatives of one or more transport enterprises and their users; normally, a COI covers only one Republic or Province. Transport enterprises, including the railways, are generally constituted as associa- tions of Basic Organizations of Associated Labor (BOALs), each consisting typically of a few hundred workers. The BOALs are the prime sources of authority in the enterprise and enjoy a large measure of autonomy. 1.09 The transfer of authority to the grass roots agencies and transport organizations has increased the number of decision-making bodies, and has made country wide transport planning and coordination more difficult. In supporting transport infrastructure development, the Bank has emphasized the need for improving coordination between sub-sectors at regional and national levels as well as the need for developing adequate institutions and an appro- priate policy framework. At the national level, the Bank encouraged and supported the establishment and strengthening of important planning and coordinating institutions. Notable among these are the Federal Committee -5- for Transport and Communications, which oversees the total transport picture in Yugoslavia, the Council of Republican and Provincial Roads Organizations (CRO), which deals with nationwide standardization of engineering and design criteria in the highway sub-sector, as well as other matters such as highway safety, and the Community of Yugoslav Railways (CYR) which deals with over- all issues of the railways. 1.10 The Government has long recognized the importance of the transport sector in the growth of the economy and in achieving balanced regional development. Tne sector has, therefore, been an area of major investment, not only to meet domestic market needs, but to improve the country's own integration and its integration with the rest of Europe. The main objec- tives in the sector, as formalized in the Social Agreement on Transport Policy, are: (a) to provide appropriate transport infrastructure to support the development of the economy; (b) to integrate the various modes of trans- port in such proportions and combinations as to meet total demand at minimum economic costs; (c) to open up less-developed regions and foster regional and economic integration; (d) to provide adequate connections with neighbor- ing countries; and (e) to rationalize the use of energy in transport and to reduce the negative effects of transport on the environment. The Bank Group has generally supported the Government's objectives in the sector through its active role in strengthening the transport system with loans for high- ways, railways and ports. .Bank-financed transport projects have provided support for growth in industry and agriculture, for regional development and for export expansion. 1.11 There is relatively free entry into the transport market which functions without any significant problems. The current rationing of fuel for road transport is considered to be a temporary measure and will be lifted as soon as possible. In addition, two issues are currently being addressed in order to permit full competition based on cost-based pricing: (a) the railway compensation system, by which part of the railway cost is met indirectly by COIs (though predominantly railway users) instead of full cost recovery by tariffs, and (b) the adequacy of road-user charges, particu- larly those imposed on heavy trucks which compete with the railways. Railway compensation and the introduction of a rail costing system are discussed in more detail in Chapter II. Regarding user charges on road transport, a recent study undertaken under Section 3.04(b) of the Guarantee Agreement for the Eighth Highway Project (Loan 1377-YU) shows that for 1980, overall road user revenues covered all maintenance expenditures and contributed 20% towards investments. However, as expenditures on roads in 1980 were rela- tively high, it can be considered that in a normal year user revenues would adequately cover expenditures on the road network. The study also shows that for a realistic level of road expenditures, there is no evidence that heavy trucks are not paying their full share of road costs. The main issue in the financing of road expenditures is that only about one-half of total road user revenues are earmarked for roads, a situation which has contri- buted to recent funding difficulties for on-going projects. This issue is being discussed with the Government with a view to firming up a realistic program of expenditures on road infrastructure as well as identifying sources of finance. -6- C. Previous Bank Projects 1.12 So far, the Bank has made 23 loans for the Yugoslav transport sector, totalling US$1,248 million equivalent. These include six loans totalling US$382 million for the railway sub-sector; five of these were for investments on modernization and one loan was for the construction of the Belgrade-Bar line. An additional loan for US$14 million was made for recon- struction following the 1979 earthquake in Montenegro. The proposed project which focuses on modernization investments in four of the eight Railway Transport Organizations (RTOs) (Novi Sad, Belgrade, Sarajevo, Skopje) would in fact be the eighth railway project (see also paras. 2.33 to 2.37). 1.13 In the highway sub-sector, eleven loans have been made totalling US$629 million. An additional loan of US$21 million was made for rehabili- tation following the 1979 earthquake in Montenegro. The main emphasis in highways has been on improvements of key links in the primary road network, including many sections of the TYH, the country's principal transport artery. The Draft Completion Report for the Seventh and Eighth Highway Projects has indicated that Bank lending has also enabled the Yugoslav authorities to introduce and establish on a systematic basis the major administrative func- tions such as planning, project preparation and evaluation as well as pro- grams for improving highway safety. Recently, highway lending in the less developed regions has been within a broader sector type of lending, an approach which has provided greater flexibility in adjusting to the current lower level of expenditures on roads. The thrust of future Bank lending will be to continue to focus on eliminating bottlenecks on TYR while at the same time providing assistance to some less developed areas for improvements in their primary highway networks. 1.14 In the ports sub-sector, a loan of US$44 million was made for the Port of Bar in Montenegro. This project was nearing completion in 1979 when the port was severely damaged by the 1979 earthquake. Rehabilitation is now underway with a loan of US$50 million. A ports sub-sector survey has been carried out with the Bank's encouragement. The study was conducted by local consultants financed by the Yugoslav Association of Seaports and has indi- cated priorities for future port development in the country. 1.15 The Bank has also made two loans for pipeline projects (US$108 million). After some delays due to procedural and other implementation difficulties, one of these projects has been completed successfully and the other is expected to complete early in 1984. II. THE RAILWAYS A. General 2.01 The railways in Yugoslavia are organized along the basic pattern of the economic system, with eight separate and independent RTOs each serving a republic or province, each named after its capital city, and together forming a rail network of 9,393 km. The four RTOs participating in the proposed pro- ject are Belgrade, Novi Sad, Sarajevo and Skopje serving respectively Serbia, -7- Vojvodina, Bosnia-Herzogovina and Macedonia, the last two of which are less developed republics. These four RTOs together have a route length of 5,058 km and, in 1981, carried 51% in volume of the country's rail traffic. They vary considerably in size, the largest of the four being RTO Belgrade with a route length of 1,889 km and carrying 21% of total railway traffic, the smallest being RTO Skopje, with a route length of 673 km carrying only 3% of total traffic (Annex 1, Table 1.1). About 80% by volume of freight traffic is in bulk commodities, traffic density being highest in RTO Sarajevo serving heavy industries centered round the Zenica Mining and Metallurgical Combine (Table 7). Traffic growth for the railway system as a whole over the period 1976-80, has averaged 4.5% per year for freight traffic and 1.2% per year for passenger traffic (Table 6). B. Community of Yugoslav Railways (CYR) 2.02 Three-quarters of rail freight traffic in Yugoslavia is inter- enterprise so that operations are highly interdependent. RTOs have, by federal law, established the CYR, in effect an agency of the RTOs, which serves as a forum for common decisions and as an executing agency for joint operations (e.g. timetables, wagon utilization, revenue distribution). It is directly responsible to the Federal Government for safety on the railways as well as for overall investment planning and for all international aspects of railway operation--including international timetables, joint planning and international financial settlements. It has a well-qualified professional staff and represents RTOs at federal and international levels. It also pro- vides technical aid and advice, particularly to the smaller and less- developed RTOs, including assistance with technical and economic studies and preparation of investment plans. 2.03 CYR fulfills a very useful planning and coordinating function and was the borrower for the Bank's Fourth and Fifth Railway loans, with respon- sibility for reporting on the projects and coordinating technical assistance. CYR will have an important role in the present project in rendering technical assistance to the RTOs, coordinating procurement, loan administration and reporting, and will be a signatory to the Loan Agreement. C. Communities of Interest (COI) 2.04 Many areas of economic and social activity in Yugoslavia have orga- nizations known as COT comprising the users and suppliers of particular ser- vices. Thus, each republic and province has a COI for railway transport in which actual or potential freight user groups are represented. Membership is usually obligatory unless it can be shown that railway transport is of no or marginal significance. The interests of passengers are represented by the Republican government. The COI's role is to link the RTO and its manage- ment with the wider economy and society that the railway serves. This is done, among other ways, by monitoring the operating and financial perfor- mance of the RTO and the quality of service provided to the public. This oversight function derives from the fact that in the Yugoslav system the COI are above both the market mechanism and the state as regulators of economic activities. Thus, the COI make rail policy, planning and financing deci- sions of a type that in most other countries would be taken by the central -8- government as the owner of the railways. The COI, for example, make recom- mendations for tariff levels, examine and agree on rail investment programs, on what the financing arrangements for them will be, and how the RTOs operat- ing deficits are to be covered. The law is for the members of the COI to raise a levy on themselves to fill the gap between tariff-generated revenues and operating expenses caused by the federal/republic governments denying or partially approving RTO tariff increase requests, or to finance particular investment projects or to service outstanding debts. The proceeds of this levy are paid by the COI directly and monthly to the RTO and are called com- pensation payments. In 1981 compensation payments reached a total of about U.S.3450 million equivalent (Annex 3). 2.05 The COI involvement in investment and financing decisions leads them also into considering productivity, service quality, and traffic fore- casting aspects of RTO operations. Thus, in some ways, they both complement and, in other ways, substitute for commercial judgments and decisions by railway managers. The COI are also important in easing problems associated with structural change in the railway system. In Bosnia-Herzegovina, for example, the COI played a major -part in the process of closing uneconomic lines and passenger services, and in retraining and facilitating the employ- ment elsewhere of staff made redundant. D. Rail Tariffs and Compensation 2.06 Freight tariffs in Yugoslavia are approved by the Federal Government and are uniform for the whole railway system 1/. Passenger fares, which are approved for each RTO by Republican and Provincial authorities, tend also to be maintained at uniform levels. Rail tariff and compensation (or sub- sidy) policies in Yugoslavia have changed significantly since the 1970s. Previously, average tariff levels were usually at or about average operating costs. Operating deficits were generally small and confined to the marginal rail enterprises, although capital investment was subsidized in various ways. From the mid-70s onwards, rail costs rose rapidly as a result of higher oil prices, growing inflation, more expensive imported equipment as the exchange rate declined, and wage/labor poli.cies that had objectives other than rail- way efficiency and viability. The Federal price control authorities, how- ever, as part of the Government's anti-inflation policy, did not permit rail tariffs to be increased in line with the higher costs or general price level. As a consequence, rail freight tariffs declined between 1974-81 in real terms by 27% and passenger fares by 17% and operating deficits, which in earlier years were only a few percent of total rail revenues, reached about 28% or the equivalent of US$450 million in 1981. (See also Annex 3 with Table.) 2.07 These deficits have to be covered by subsidies or compensation pay- ments from the Republican/Provincial COIs which have evolved different sys- tems. In some cases, it is a standard percentage levy on the incomes of all 1/ A system of coefficients used for revenue apportionment between the RTOs recompenses the smaller RTOs partially for higher costs while still enabling a common tariff book to be presented to customers. -9- enterprises. In others (e.g. Croatia), a highly differentiated system is used that reflects the nature and value of the output or services produced by the enterprises making up the COI. The previous system of ex-post pay- ments has been abandoned in favor of one where agreement is reached with the particular railway in advance of the operating year. Under this process the COI, Republic and Provincial governments and the railway enterprises agree about various operating assumptions, proposed investments, expected output and service levels and so on. This is a more rational process and avoids some of the difficulties found in railway subsidization schemes used in other countries. The actual and potential users of railway services have to face the issues of how much and in what way to compensate the railways mainly for revenues foregone as a result of policy decisions. The railways are, there- fore, under direct pressure to reduce cost, improve service and avoid exce.L capacity. Advance knowledge of the compensation payments (i.e. non-operating revenues) they can expect assists the railways to plan and start projects. 2.08 An important factor in the total amount of compensation payments is that enterprises in the Yugoslav socio-economic system are expected to retain surplus workers until alternative. work becomes available and to pay them at least a minimum wage. As a result, programs for railway staff redeployment and/or reductions have generally been based on natural attrition, early retirement schemes, and staff retraining. Major staff reductions would not be possible, especially at the present time, since unemployment has been rising and is widespread following the slow-down in economic growth and the return of many Yugoslav workers from Western Europe. Under these circum- stances, at least part of the compensation payments could be considered as a form of unemployment compensation being funded by the rest of society although this is not an explicitly stated objective. 2.09 However, the conclusions of recent reviews and investigations by the authorities into railway tariff and compensation payment systems are that: (i) rail tariffs, in accordance with the basic principle for deter- mining all other prices, should be based on cost; (ii) compensation payment is inconsistent with this general pricing principle; (iii) compensation payment levels are becoming onerous burdens on the other enterprises which themselves are having to adjust to dif- ficult economic conditions; and (iv) compensation payment involves hidden cross-subsidies among commodi- ties, routes and enterprises with demand distorting consequences. 2.10 Following these re-examinations the authorities have taken the fol- lowing steps: -10- (i) preparation of a new Compact on Tariffs between the various Republican-Provincial authorities and railways which is shortly expected to be finalized and which provides that, as a general principle, railway tariffs should reflect costs; (ii) approval of tariff increases of 17% for freight and 15% for pas- senger traffic in March 1982 at a time when inflation for the year was expected to be 15%, implying the intention to increase tariffs in real terms; (iii) approval of further tariff increases for both freight and revenue of 17% from December 25, 1982 and 15% from February 5, 1983 to com- pensate for higher than anticipated inflation; and (iv) given a commitment in the draft Letter of Development Policy for the proposed Structural Adjustment Loan (SAL) to increase railway tariffs in real terms with the aim of eliminating compensation payments. 2.11 A number of measures have been taken by the Federal and/or Repub- lican authorities that should benefit the financial position of the railways and lessen the demands for compensation. These include: (i) the mandatory loading and unloading of freight wagons on Saturdays and Sundays--a measure which should reduce wagon turn-around time considerably and allow the railways to reduce their foreign exchange payments to neighboring country railways for wagon rentals; (ii) the adoption of a nationwide incomes policy under which labor costs (including those on the railway) will not increase as fast as the inflation expected in 1983; and (iii) strong pressures on the railways to rationalize operations, reduce cost, time and size investments better, and improve service quality and marketing efforts so as to attract traffic from other modes. The authorities have taken two other steps which, while they might benefit railway finances, risk misallocating transport sector resources through failing to set correct price signals. These are: (a) gasoline rationing and the restricting of bus services on some long-distance routes; and (b) heavy pressure on production enterprises to use rail in preference to road trans- port either by the enterprise's own vehicles or public road carriers. These are short-term measures forced by physical shortages of fuel, tires and spare parts resulting from the limited allocation of foreign exchange for these purposes and are expected to be lifted when the foreign exchange situation eases. The Bank is urging that these restrictions should be ended at an early date (para. 1.05) 2.12 The Bank, while recognizing that the system of compensation pay- ments avoids certain of the disadvantages of subsidies, considers that, since the amouunt of an organization's contribution does not vary with its use of the railway system, the inherent cross-subsidizations distort pricing -11- policies. The Bank has, therefore, strongly supported the early introduc- tion of better railway costing (para. 2.28), and cost-based tariffs. The Government has now agreed a program of rail price increases that is aimed at eliminating compensation payments at all RTOs in a phased approach which recognizes the different economic and social circumstances of the different RTOs (see para. 5.06 and Annex 3). E. Organization, Management and Staff (a) Organization 2.13 Each RTO is a working organization consisting of a number of Basic Organizations of Associated Labor (BOALs) and a Working Community. BOALs engaged purely on railway transport functions must by law join together in the RTO and include, for example, those responsible for traffic, operations, current maintenance of fixed installations, maintenance of traction and roll- ing stock and track overhaul of lines. Other BOALs covering activities only partly related to the railways have a looser form of association with the RTO. The number of BOALs varies between the RTOs. As an example, the struc- ture of the RTO Novi Sad is shown in Chart Cl. The Working Community func- tions as the headquarters of the RTO. In particular, it is responsible for coordinating the work of the BOALs as well as for overall direction and management, planning, finance, marketing, personnel and administration. Chart C2 shows the structure of the Working Community at RTO Novi Sad. (b) Management 2.14 Each RTO is headed by a Director General, who is assisted by one or more deputies. Directors of departments report through Assistant Directors General (Chart C2). Each RTO and each of the BOALs has a workers' council, which decides on matters of policy and development as well as the appoint- ments of senior management. Management is ultimately responsible to the councils, which may meet once or twice a month or more frequently where necessary. Management and decision-making are complex processes with exten- sive interactions between management and workers' councils. Management, which has always been technically competent in traditional railway disci- plines, has been strengthened in planning and marketing during recent years. CYR, with its responsibility to the Federal Government for overall railway planning, assists RTOs in this respect. 2.15 Traditionally, responsibility for executing investments was dis- persed among specialized BOALs, whose activities were coordinated by central service departments. However, the concept of project management was intro-- duced to the railways under the Fourth Railway Project and extended under the Fifth. Under this concept, certain interdependent works such as electri- fication, signalling and telecommunications and track overhaul on a section of line were grouped into projects, with an appointed officer for each project responsible for its execution in accordance with agreed specifica- tions, budget and time schedules. Although the RTOs were initially short of suitable staff, a satisfactory number of staff is now available. Since this type of project management has given satisfactory results, an assurance has been obtained that the RTOs: (a) will continue the system of project manage- ment; and (b) will appoint project managers as needed to implement the list of works, as agreed from time to time between the RTOs and the Bank. -12- (c) Staff 2.16 Between 1976 and 1981 the- four RTOs reduced staff by 9,415 to 58,105, mainly due to re-organization and to closure of 553 km of uneconomic lines. Despite the increase in traffic which is forecast, requiring more staff in certain sections, the RTOs intend to achieve a further overall net reduction of 1,016 staff by 1986. Reductions will come chiefly as a result of the installation of modern signalling equipment and also from track over- haul where new long-welded rails and mechanical equipment will give rise to manpower savings. The staffing and targeted savings are shown in manpower plans for each RTO, which are subject to annual review. Productivity, mea- sured as traffic units per employee, is forecast to increase by 18% over the period 1981-86. Staff numbers and productivity forecasts are shown in Tables 4 and 5. Assurance was obtained at negotiations that, as part of their Action Plans, the RTOs will undertake to achieve their agreed manpower targets. F. Railway Facilities (a) Network 2.17 In 1981 there were 9,393 km of railway in Yugoslavia (See Map IBRD 16460), 100% standard gauge, of which 891 km or 9.5% were double track and with 3,320 km or 35.4% of the network electrified. The networks of the four RTOs comprised: Of which were electrified: Kmn Km RTO Belgrade 1889 897 or 47% RTO Novi Sad 1463 223 or 15% RTO Sarajevo 1033 640 or 62% RTO Skopje 673 60 or 9% TOTAL 5058 1820 2.18 Despite considerable progress in improving track conditions on main lines- the four RTOs, during 1978-81, rehabilitated about 540 km of track- many sections on these lines are in need of overhaul and subject to severe speed limits. These restrictions cause high operating costs; the proposed project would improve track conditions to reduce these costs. 2.19 Most of Yugoslav railways' main trunk lines, carrying over 60% of total gross ton kilometres, are now electrified and have been equipped with modern signalling and telecommunications. Many of the secondary lines have no modern signalling system however and are equipped with old and obsolete mechanical systems which are difficult to repair. To improve safety and operational efficiency, the proposed project provides for installation of modern equipment on some of these lines. -13- (b) Traction and Rolling Stock 2.20 At the end of 1980, the four RTOs: Belgrade, Novi Sad, Sarajevo and Skopje, had together 248 electric, 335 diesel and 137 steam locomotives, about one-half of the diesels being shunting locomotives. All electric loco- motives have been procured in the previous 15 years, but availability should be improved and this problem is being addressed by means of a consultants' study carried out under the Fifth Project (para. 2.30). About one-third of the diesel locomotives are more than 15 years old. It is planned that the steam locomotives will be withdrawn before the end of the planning period, 1981-86. 2.21 One of the main operational problems of Yugoslav railways in recea years has been that procurement of new freight wagons has been insufficient to keep up with rapidly growing traffic. As a result, the RTOs have been forced to hire foreign wagons to meet their operational needs and have been unable to carry all offered traffic. The freight wagon fleet of the four RTOs at the beginning of 1981 comprised about 24,500 wagons, about 10,500 of them being of four-axle type. About a third of this fleet was procured before 1950. The withdrawal of about 3,350 wagons within the planning period will allow the on-going modernization of the freight wagon fleet to continue. 2.22 An analysis of the traction and rolling stock fleet of all four RTOs is given in Annex 1, Table 1.2. (c) Operations 2.23 Since most of the main lines have already been electrified, the share of total traffic (gross/ton km) hauled by electric traction is already high for RTO Belgrade (72% in 1981) and Sarajevo (71% in 1981) and growing in all four RTO regions (Annex 1, Table 1.1). It will rise considerably in RTO Skopje after completion of the electrification of the Skopje-Gevgelija main line before the end of the planning period. 2.24 Inadequate maintenance facilities and operational difficulties due to construction works on lines and junctions cause efficiency figures to be lower than desirable. These should improve as a result of the proposed pro- ject. The productivity of passenger and freight rolling stock in RTO Skopje is lower than in the other RTOs because of the marginal market in this region due to the low density of its population and industry and the uneven balance of traffic flow. In general, actual figures on rolling stock use as well as the targets are satisfactory and show a clear tendency towards further improvement. (d) Procurement of New Stock, Withdrawal and Efficiency 2.25 The procurement of new traction and rolling stock under the Invest- ment Plans is justified by comprehensive and detailed Operational Plans, covering forecast traffic growth, productivity targets, and proper with- drawal plans of old uneconomic units. These Plans emphasize the necessity to improve operational efficiency by making better use of the existing trac- tion and wagon fleet as opposed to investment in new equipment. -14- G. Uneconomic Lines 2.26 Tie four RTOs have closed 2,075 km of uneconomic lines since 1965, including 553 km in the last four years. The economic assessment of lines is now an annual process and is carried out according to a methodology for- mulated by CYR with advice from the Bank. The assessment is subject to review by the CO. At present, 267 km of track are closed to public service, but still receive minimum maintenance; a decision regarding eventual closure and recovery of the rails will be made next year. A further 202 km of track are used only during harvest time and as shunting tracks, pending a further review of their use later this year. The closure of uneconomic lines will be reviewed annually as part of the annual review of the RTOs Action Plans. H. On-going Railway Related Studies 2.27 The status of three on-going studies from previous projects is out- lined in the following paragraphs. (a) Railway Costing Study 2.28 The purpose of the study, which formed part of the Eighth Highway Project (Loan 1377-YU), was to formulate a uniform costing system for all RTOs and to make available to railway management the data needed for the continuous analysis, comparison and control of costs and to provide the basis for determining freight rates and passenger fares and for a comparison of costs with different transport modes. The study was carried out by Yugoslav consultants and was completed in 1979, but a consensus by all RTOs on this complex and critical matter was only reached in 1982. A contract was signed in May 1982 between the CYR and the consultants to introduce and test the system at RTO Belgrade. The system is to be tested and installed in RTO Belgrade during 1983 to be followed, if satisfactory, by implementation at the other RTOs in 1984. (b) Study of Economic and Technical Criteria for Signalling on Secondary Lines 2.29 The contract for the study, which formed part of the Fifth Railway Project (Loan 1534-YU), was awarded in June 1981 to Yugoslav consultants. The study has been carried out and, after consideration by the CYR commis- sion, certain sections are presently being reworked and supplemented. The final report is due in the first half of 1983. (c) Electric Locomotive Maintenance Study 2.30 The study formed part of the Fifth Railway Project (Loan 1534-YU) and is being carried out by Deutsche Eisenbahn Consulting GmbH (DECONSULT) in association with Jugoslaviaprojekt. DECONSULT started work in Yugoslavia in June 1981 but difficulties arose, particularly in gaining access to work- shops and depots. These difficulties have now been resolved and a final report is expected in the second half of 1983. -15- I. Accounts and Audit 2.31 Railway Accounts are kept separately by each RTO on a uniform Government prescribed basis. The accounts are kept to a good standard with extensive use of computers. As a result of the Bank's requirements, cash flow analysis has come to play an important role in the -TOs accounting pro- cesses. Fixed assets are subject to an annual revaluation, based on replace- ment costs, using coefficients obtained from price indices of the Federal Institute of Statistics. Book values of fixed assets are thus maintained at realistic levels and depreciation plays a proper role in funds generation. The Government's awareness of the importance of depreciation in ensuring an adequate generation of internal funds is evidenced by a Federal law of December 1981 which increased depreciation rates for the various categories of railway fixed assets. 2.32 The accounts of each RTO and of each BOAL are subject to audit by the Social Accounting Service (SDK) which verifies their accuracy in consid- erable detail and ensures that they are properly kept in accordance with the prescribed accounting code. Since SDK has not so far had the capacity to perform an audit of the type normally required by the Bank, for an organiza- tion as large as the railways, it has reported in respect of each RTO with a more limited annual audit certificate. However, SDK's capacity has been strengthened through a Bank sponsored training scheme and it is expanding the scope of its audit of the RTOs. An assurance was obtained at negotia- tions that the RTOs will continue to have their accounts audited in accor- dance with sound auditing principles consistently applied by SDK, or another competent and experienced independent auditing organization, and that the certified accounts together with the auditors' reports will be submitted to the Bank within eight months of the end of each year. J. Previous Railway Projects 2.33 The Bank has made seven loans to Yugoslav Railways totalling US$396 million during 1963-81 (Annex 2). The Fourth Project (Loan 1026-YU; July 1974; US$93 million) financed the completion of investments from an earlier modernization program as well as related investments needed to maxi- mize benefits. The investments, which were complex, were delayed for a while by anti-inflationary measures taken by the central government which limited investment funds, but works were successfully completed and the loan was fully disbursed and closed in June 1981. 2.34 The Fifth Project (Loan 1534-YU; April 1978; US$100 million) included works in all RTOs and assisted track overhaul and electrification as part of the railways 1976-80 investment plans as well as technical assis- tance and training. Physical progress with the project has been satisfac- tory, the loan is 98% disbursed and is expected to close with all works completed, after a one-year extension, in June 1983. Works have included: 1,285 km of track overhaul or reconstruction, 93 km of route converted from single to double track, 314 km of route electrified, 53 km equipped with modern electric signalling and 434 km equipped with automatic block equip- ment. These improvements have been reflected in operational results as follows: -16- 1976 1980 Variations Traffic Net ton km (million) 21,017 25,018 + 19.0% Passenger km (million) 9,941 10,392 + 4.5% Productivity Traffic units per employee 259 293 + 13% Costs Operating costs per traffic unit (Din) 0.659 0.5571/ - 15% 1/ 1980 average cost reduced to 1976 prices by means of the Retail Price Index. 2.35 Institution building features under the project included the exten- sion of action plans for all RTOs and the extension of the system of project management introduced under the Fourth Project. While physical progress under the Fifth Project has .been satisfactory and operational efficiency has improved, difficulties have arisen in relation to the financial covenants which required the railways to reduce compensation payments and increase the proportion of tariff revenues. Under the proposed project, a revised plan for reducing compensation payments has been agreed with the Yugoslav authori- ties (para. 5.06). 2.36 A further on-going project is the Kosovo Railway Project (Loan 1977-YU; May 1981; US$34 million) which assists in the rehabilitation of the railway network of RTO Pristina through the reconstruction of the main Kosovo Railway Junction, the provision of modern signalling and of rolling stock and equipment. 2.37 The last OED Project Evaluation Report available for a rehabilita- tion railway project in Yugoslavia is that for the Second Railway Project and is dated October 1974. This was a very ambitious project, including electri- fication of main lines, signalling and telecommunications, and construction or modernization of six major marshalling yards. The OED report criticized the project for its size and complexity and for a lack of adequate project preparation. A main recommendation was that future projects should include a well defined action plan covering technical financial and institutional aspects. Although the Third and Fourth Projects also experienced delays and financing problems, performance has been much better with the Fifth Project and there has been good progress in improving investment planning and execu- tion and in strengthening the coordinating role of CYR (paras. 2.02 and 2.03). A comprehensive action plan for each RTO and a detailed implementa- tion schedule will be an important part of the proposed project (see paras. 3.25 and 3.26). -17- III. THE INVESTMENT PLANS AND THE PROJECT A. The Investment Plans 3.01 The four RTO's Investment Plans (Tables 1(a) to 1(d)) cover the period 1981-1986 and amount in total to Din 116.7 billion (US$1,331 million) with a foreign exchange component of Din 55.3 billion (US$621 million). Price base is December 1982. Included in 1981 to 1983 is the completion of the 1976-1980 Investment Plan (balance remaining Din 5.1 billion-US$76 million), which formed part of the Fifth Railway Project. The four-year Bank project (Tables 1(a) to 1(d)) will cover Part A of the Investment Plans during the period 1983-86 totalling Din 76.3 billion (US$866.6 million) with a foreign exchange component of US$405 million. The. Bank's US$110 million loan will be allocated to specific items in the project (Table 2), with a total cost of Din 27.1 billion (US$291 million) and a foreign exchange component of (US$150 million). The loan represents about 27% of the estimated foreign exchange cost of the Bank project. 3.02 The principal objective of the RTO's Investment Plans is to con- tinue the process of modernization of the railways to enable them to effi- ciently fulfill their role of principal carrier of bulk materials in a competitive transport environment. The agreed Investment Plan amounts to about 30% less than the railways original proposals, which were reduced to bring them more into line with expected financing resources, and to focus on the most pressing needs and investments, taking into account possible improvements in productivity. On the recommendation of the Bank, the Plans have been divided into two parts: Part A consisting of investments which are to proceed as scheduled, and Part B, containing items which will be proceeded with only after appropriate vtechnical/economic studies and when financing is secure and upon agreement between the Borrower and the Bank. Part B investments comprise about 25% of the 1981-86 Investment Plans and 27% of the investments which were proposed for the project period. -18- 3.03 The principal components of the Plan are; Table 3.1: Total Plan (A+B) Part A Onl A Dinar US$ % of Dinar US A+B billion million Total billion million % Completion Previous Project 4.51 71 6.5 4.51 71 100 Track Overhaul and Line Reconstruction 18.88 297 27.1 14.94 233 79 Reconstruction of Stations 1.96 31 2.8 1.96 31 100 Electrification 5.15 81 7.4 2.55 40 50 Signalling and Tele- communications 4.49 71 6.4 2.83 44 63 Traction & Rolling Stock 27.23 429 39.1 19.33 304 71 Integrated Transport 1.87 29 2.7 1.87 29 100 Miscellaneous 5.55 87 8.0 5.50 90 100 Subtotal 69.64 1,096 100 53.49 842 77 Contingencies: Physicall/ 3.61 57 2.79 44 77 Price2/ 43.49 178 28.74 118 66 Total 116.74 1,331 85.02 1,004 73 1/ Physical contingencies of 10% have been included for all items, except for traction and rolling stock. 2/ Price contingencies, when basic costs are expressed in US$ equivalent, have been estimated assuming annual price increases of 8% for 1983, 7.5% for 1984 and 7% for 1985 and 1986; and when expressed in Dinars, 30% for 1983, 25% for 1984 and 20% for 1985 and 15% for 1986. 3.04 About 65% of all expenditures on investments in Part A of the Plan will be on track overhaul and on traction and rolling stock. Investments will include 775 km of track overhaul and reconstruction, purchase of 53 locomotives, 20 motor trains, 86 passenger coaches and 5,632 freight wagons. Also planned is modernization of signalling and telecommunications on 421 km of line and electrification of 437 km of line as well as investments in inte- grated transport, workshops and depots and some reconstruction of stations and junctions. -19- 3.05 The Investment Plans as now proposed are adequate to achieve the objective outlined above (para. 3.02) and the components are economically justified. The results and benefits of these investments will be measured by means of agreed operational and financial targets to be included in an Action Plan (paras. 3.25 and 3.26). Feasibility studies for the components of the plans were prepared by the RTOs and CYR, and also by Transport Facul- ties. The formal approval by the appropriate authority (Assembly or Workers Council) of the investment plans as submitted to the Bank will be a condi- tion of loan effectiveness. Assurance was obtained at negotiations that, except as the Bank otherwise agrees, the RTOs will: (a) implement their Part A Investment Plans; (b) will review their Investment and Financing Plans annually with the Bank, taking into account traffic results and trends and propose any necessary revisions; and (c) will not in any year, undertake investments not included in Part A of their investment plans in excess of 5% of the investments included in Part A of their investment plans in that year, without having demonstrated their technical and economic justification to the satisfaction of the Borrower and the Bank. B. The Project 3.06 Project objectives are as follows: (i) to strengthen the four participating RTOs so as to enable them to compete effectively in a competitive market, by improving produc- tivity and the quality of their services; (ii) to further strengthen project management and the preparation and implementation of sound Operational and Action Plans; and (iii) to put the railways back on the road towards financial viability. 3.07 The proposed project comprises the 1983-1986 slice of Part A of the Investment Plans. The four-year project is summarized below: Table 3.2: Investment Plans A + B 1983-86 Project, Part A of Investment Plan 1983-86 Foreign Din US$ Local Foreign Total Local Foren Total as % of % of Total billion million ---- Din billion ---- ---- US -million ---- Total Base Costs Investments to which Loan will be Allocated: Track Overhaul 9.99 157.2 5.36 4.63 9.99 84.3 72.9 157.2 46.4 22.3 Electrification 1.55 24.4 0.73 0.82 1.55 11.5 12.9 24.4 53.0 3.5 SS & TT Equipment 1.77 27.8 0.64 1.13 1.77 10.0 17.8 27.8 64.0 3.9 Locomotive Spare Parts 0.86 13.6 0.12 0.74 0.86 2.1 11.5 13.6 84.6 1.9 Subtotal 14.17 223.0 6.85 7.32 14.17 107.9 115.1 223.0 51.6 31.6 Physical Contingenciesil 1.33 21.0 0.67 0.66 1.33 10.6 10.4 21.0 49.5 Price Contingencies!/ 11.59 47.2 5.62 5.97 11.59 22.9 24.3 47.2 51.5 Total 27.09 291.2 13.14 13.95 27.09 141.4 149.8 291.2 51.5 Other Items of the Investment Plan Completion of 1976-80 Investment Plan 2.17 34.1 1.21 0.96 2.17 19.0 15.1 34.1 44.3 4.8 N Track Overhaul and : Line Reconstruction 8.23 129.6 2.50 1.79 4.29 39.1 28.3 67.4 41.8 9.6 Reconstruction of Stations and Junctions 1.59 25.1 0.92 0.67 1.59 14.5 10.6 25.1 42.2 3.6 Electrification 3.34 52.6 0.40 0.35 0.75 6.3 5.6 11.9 47.1 1.7 Signalling and Telecommunications 2.60 40.9 0.35 0.58 0.93 5.5 9.2 14.7 62.6 2.1 Traction and Rolling Stock 22.91 360.9 7.69 7.33 15.02 121.1 115.5 236.6 48.8 33.5 Integrated Transport 1.71 27.0 0.94 0.77 1.71 14.8 12.2 27.0 45.2 3.8 Miscellaneous 4.22 66.4 2.99 1.17 4.16 47.2 18.4 65.6 28.0 9.3 Subtotal 46.77 736.6 17.00 13.62 30.62 267.5 214.9 482.4 44.5 68.4 Physical Contingenciesi/ 2.28 35.8 0.86 0.55 1.41 13.8 8.8 22.6 38.9 Price Contingencies/ 31.90 130.5 9.36 7.79 17.15 38.4 32.0 70.4 45.4 Total 80.95 902.9 27.22 21.96 49.18 319.7 255.7 575.4 44.6 Technical Assistance and Training 0.03 0.5 0 0.03 0.03 0.1 0.4 0.5 80.0 GRAND TOTAL 108.07 _111946 40.36 35.94 76.30 461.2 405.9 867.1 46.8 1/ Physical contingencies of 10% have been included for all items, except for traction and rolling stock and locomotive spare parts. 2/ Price contingencies, when basic costs are expressed in US$ equivalent, have been estimated assuming annual price increases of 8% for 1983, 7.5% for 1984 and 7% for 1985 and 1986; and when expressed in Dinars, 30% for 1983, 25% for 1984, 20% for 1985 and 15% for 1986. -21- (a) Capital Overhaul of Track 3.08 About 32% of the project expenditures is for about 700 km of track overhaul and 34 km of line reconstruction. Worn-out track -in some cases about 40 years old and subject to severe speed restrictions (para. 2.18)- will be renewed with new UIC 60 rails, type 49 rails and on other than main lines with used rails to increase the axle load to 22 and 20 tons and speeds to 120 km/h. These improvements will be major factors contributing to bet- ter utilization of traction and rolling stock which in turn will result in reduced investment and increased productivity. The use of UIC 60 rails on the main Trans-Yugoslav line from Austria to Greece will allow higher speeds of up to 160 km/h for passenger trains but its main benefit will be in reducing high track maintenance cost, due mainly to heavy freight traffic. (b) Signalling and Telecommunications 3.09 New installations of signalling and telecommunications account for 6% of the project total. Obsolete mechanical signalling systems with tech- nical characteristics below modern safety standards will be replaced on 143 km of lines by modern equipment, including automatic block and auto- matic train stopping. This will improve line capacity and rolling stock utilization. Other works on SS and TT are improvements of existing systems in conjunction with the electrification of lines. To increase capacity by allowing faster and more punctual operation of trains, a centralized traf- fic control system (CTC) will be installed on the line Skopje-Gevgelija. In total, 393 km of lines will benefit from the above works. (c) Electrification 3.10 About 5% of project expenditures are provided for the electrifi- cation of about 374 km of line, which would close two remaining gaps in the electrified network of main lines. The works will complete the electrifica- tion of the basic network of RTO Sarajevo and the last link from Skopje to Gevgelija, on the main Trans-Yugoslav line from Italy and Austria in the north to Greece and Turkey in the south. Electrification will improve the capacity and reduce operating costs on these lines and will also yield additional network wide benefits by allowing a higher degree of standardi- zation of equipment and rationalization of operations than is at present possible with mixed traction. (d) Reconstruction of Stations and Junctions 3.11 About 3% of project costs is allocated for reconstruction works at stations and junctions with the objective of increasing capacity. Plans for all major reconstructions are phased and were reviewed by the mission. Major expenditures will be on renewal and extension of tracks, points and platforms. -22- (e) Traction and Rolling Stock 3.12 Planned procurement of traction and rolling stock is based on operational plans which take into account forecast traffic, the scrapping of old and obsolete stock, and also planned increases in operational effi- ciency through comprehensive action plans (paras. 2.25, 3.25 and 3.26). The planned acquisitions represent 34% of the project cost total and include about 4,272 freight wagons, 2 diesel locomotives, 13 electric loco- motives 38 diesel shunters, 6 electric and 8 diesel motor trains, 67 pas- senger coaches, 4 sleepers and spare parts for locomotives.l/ This further modernization of the transport fleet, together with improvements in track conditions and terminal facilities, will enable better rolling stock utili- sation and considerable improvements in turnaround times and other effi- ciency indicators. (f) Integrated Transport 3.13 Investment in integrated transport is coordinated through national and regional planning committees. About 4% of project expenditures will be on works and equipment for integrated transport, including container han- dling equipment, cranes, forklifts and pallets. Civil works will be mainly for track and access roads in integrated transport centers in Belgrade, Sarajevo, and Senta. (g) Training and Technical Assistance 3.14 A study for the improvement of electric locomotive maintenance and operation formed part of the Fifth Railway Project (Loan 1534-YU). This study is presently being carried out and it is expected that the final report will be available in October 1983. Provision will be made under the proposed loan for the results of this study to be followed up and for con- sultancy assistance in the implementation of its recommendations. This would include a staff training scheme for technical and operating staff in a country where recommendations from the consultants have already been successfully applied. 3.15 The project will also provide for a study of methods adopted by railways in other European countries for the increase of mainline speeds by improvements in fixed installations, in traction and rolling stock, and in timetabling. The two studies in total are expected to require about 22 months of consultancy assistance. 3.16 Provision is made for assistance in staff training for senior and middle management of technical and financial departments and also for train- ing staff, including acquisition of equipment, in the maintenance of modern signalling and telecommunications installations. 1/ Figures here relate to the project period 1983-86. An analysis of the rolling stock fleet at December 31, 1980 together with planned with- drawals and procurement during the planning period 1981-86 is given at Annex 1, Table 1.2. -23- C. Cost Estimate 3.17 The cost estimates (Tables 1(a) to 1(d)) which have been prepared by the RTOs and Transport Faculties (para. 3.05) are based on recent experi- ence with similar works, acquisitions of traction and rolling stock, and feasibility studies. The estimates include import duties and local taxes. In calculating the foreign exchange components, items have been assumed to be imported only where there is a high probability that contracts will be placed abroad. Examples are signalling and data processing equipment, com- ponents for rolling stock and track maintenance machines. Where the source of supply is uncertain it has been taken as domestic and an estimate of foreign content made, based on similar previous projects. Base costs are at December 1982 price levels and physical contingencies of 10% have been included for all items except for traction and rolling stock. Price contin- gencies when calculated in U.S.dollars have been estimated assuming annual price increases of 8.0% for 1983, 7.5% for 1984 and 7.0% for 1985 and 1986, and when calculated in Dinars, 30% for 1983, 25% for 1984 and 20% for 1985 and 15% for 1986. For consultancy services and assistance in the general training programs, a lump sum of US$12,000 per man-month (on an average) per foreign consultant has been allowed to include salary, costs, fees, international travel and subsistence, and US$6,000 equivalent per month on an average for local consultants for equivalent expenses. It is expected that some of these services would be provided by Yugoslav experts. Depend- ing upon the proportion of Yugoslav experts that might be provided, this lump sum would allow between 30 and 40 man-months of consultancy services together with subsistence abroad for management staff estimated at about USt50,OOO. D. Financing Plan 3.18 A financing plan for each RTO's investment plan has been drawn up and agreed with the COI and Republican or Provincial Government. Sources of funds have been identified for all planned project expenditures. Grants from Republican and Provincial Governments will contribute about 9% of the total. Of the US$405 million foreign exchange component of the project, about 53% is expected to be met from: (a) the proposed Bank loan of US$110 million; (b) a loan from the European Investment Bank of about US$20.0 million equivalent which will be utilized for works on the main Trans-Yugoslav trunk line; and (c) by credits of about US$83 million from Eurofima, the European rolling stock financing cooperative. The balance of the foreign exchange component will be largely financed by suppliers' cre- dits from foreign and domestic rolling stock and equipment suppliers. About 38% of project expenditures will be financed from internal resources. The formal approval by the appropriate authority (Assembly or Workers Council) of the financing plans as submitted to the Bank for each RTO will be a con- dition of effectiveness of the loan. Financing for the project is summa- rized on the following page. -24- RTOs Table 3.3i Belgr. Novi Sad Sarajevo Skopje Total % -------------Din Million ----------------- USM Total Internal Fundsaf 10,555 8,140 8,578 2,024 29,297 335.0 38.4 Grants 975 3,699 1,500 653 6,827 78.1 9.0 Loans 8,904 1,948 2,128 1,820 14,800 169.2 19.4 Suppliers Credits 10,176 1,613 2,152 1,352 15,293 174.8 20.0 World Bank 2,809 2,279 3,267 1,750 10,105 110.0 13.2 33,419 17,679 17,625 7,599 76,322 867.1 100.0 USt million 379.7 200.9 200.2 86.3 867.1 a/ Less debt service, working capital and other requirements. E. Lending Arrangements 3.19 The proposed loan would be guaranteed by the Federal Government and would be made jointly to the four RTOs for a 15-year period including three years of grace. The Loan Agreement will contain a separate amortization schedule for each RTO in accordance with its share of the loan. CYR will also be a party to the Loan Agreement as it will retain certain responsibi- lities for project execution and coordination. The allocation of the loan is summarized below: RTO US$ million Belgrade 30.5 Novi Sad 24.3 Sarajevo 36.5 Skopje 18.2 Subtotal 109.5 Technical Assistance & Training 0.5 Total 110.0 F. Implementation 3.20 Each RTO will be responsible for executing its part of the project with CYR acting as a coordinating agency for procurement, technical assist- ance and staff training, the annual revisions of Investment, Financing, Action and Operational Plans and for all communications and reporting with the Bank. Agreement was reached at negotiations on maintaining the capacity of the CYR panel set up for the administration of the Fourth and the Fifth Project. A schedule for implementation of project items which has been pre- pared with CYR and the RTOs is shown at Chart C4. -25- G. Procurement 3.21 The contracts for track materials, equipment for electrification, signalling, telecommunications and CTC, and spare parts for locomotives would be placed by ICB in accordance with the Bank's procurement guidelines. Domestic firms would be permitted to participate in biddings and would be accorded a preference of 15%, or the customs duties, whichever is lower. The whole of the loan other than the portion for technical assistance and training would be disbursed against these contracts. An assurance was obtained that consultants for technical assistance and staff training will be employed in accordance with the Bank guidelines and that qualified coun- terparts will be appointed. 3.22 About 59% of the loan would be disbursed on the purchase of steel materials and timber sleepers for track overhaul of permanent way (para. 3.08). Particularly in view of world market conditions which cur- rently reflect substantial over-capacity for steel products, it is not possible to assess the extent to which Yugoslav manufacturers are likely to be successful under ICB procedures. However, whatever proportion of con- tracts for steel materials are won by domestic suppliers, the loan will still represent only about 27% of the total foreign exchange cost of the project and would be less than the foreign exchange component of the invest- ments to which it is allocated. To achieve the full benefits of ICB, CYR and the RTOs should undertake to give bidders the opportunity of quoting for part of the quantities of track materials. The procurement timetable is contained in the implementation schedule at Chart C4. H. Disbursements 3.23 Agreement was reached between the RTOs as to the allocation between them of the Bank loan (para. 3.19). Disbursements would be made against contracts for materials and equipment for track overhaul, for electrifica- tion and signalling and telecommunications for respective lines and for spare parts for locomotives. The categories would be as follows: RTO Belgrade 100% of foreign expenditure on directly imported or ex-factory prices of locally manufactured track materials; 100% of foreign expenditure on spare parts for locomotives; RTO Novi Sad 100% of foreign expenditure on directly imported or ex-factory prices of locally manufactured track materials; 100% of foreign expenditure on spare parts for locomotives; -26- RTO Sarajevo 100% of foreign expenditure on directly imported or ex-factory prices of locally manufactured track materials; and 100% of foreign expenditure on directly imported or ex-factory prices of locally manufactured equipment for fixed installa- tions for electrification and for signalling and telecommuni- cations; 100% of foreign expenditure on spare parts for locomotives; RTO Skopje 100% of foreign expenditure on directly imported or ex-factory prices of locally manufactured equipment for fixed installa- tions for signalling, telecommunications and CTC; 100% of foreign expenditure on spare parts for locomotives. Technical Assistance and Staff Training 100% of foreign expenditures on consulting services. A schedule of estimated disbursements is shown at Table 3. The estimated disbursement period is about two years less than disbursement profiles for Bank-wide and regional transportation projects but is similar to that achieved for the Fifth Yugoslav Railway Project where, together with tech- nical assistance, disbursement was similarly against purchase of track materials and equipment. I. Employment 3.24 The anticipated results of the project in terms of eventual staff savings are discussed at para. 2.16. It is estimated that about 9,000 man- years of work, mainly civil works and installation of equipment, will be provided in carrying out the project. In facilitating planned industrial expansion in Yugoslavia, the indirect effects of the project upon employment will be positive. J. Action Plans 3.25 Besides each RTO, its BOALs and CO, railway decisions may involve the Federal Government (SFRY), Governments of Republics and Autonomous Provinces as well as organizations such as the Chambers of Economy. This led, under the Fourth and Fifth Railway Projects, to the establishment by CYR and each RTO of comprehensive Action Plans which are an important instru- ment for reaching a common understanding by all concerned on objectives and responsibilities, and on the measures and time required for their achieve- ment. The Action Plans are an important means of extending the RTOs' plan- ning process. Their overall objectives are to reduce cost, improve the quality of service and improve the market position. They address themselves to organization, planning, investments, marketing, productivity, information -27- systems, finance, government support and staff training. The RTO specify actions to be taken to achieve agreed productivity, operational and finan- cial targets. Appropriately updated, these Action Plans have a continuing role to play in the development of the RTOs. Assurance was obtained at negotiations that the RTOs will: (a) implement their Action Plans as agreed during negotiations, including their manpower plans, (b) undertake to achieve the operational targets, included therein, and (c) review and update their Action Plans annually with the Bank under the present monitoring sys- tem (Annex 1). The approval by each of the Borrowers of the agreed Action Plans will be a condition of loan effectiveness. 3.26 As part of their Action Plans, the RTOs have prepared Operational Plans to improve the utilization of their traction and rolling stock and to serve as a basis for procurement, renewal and scrapping of traction and rolling stock. CYR has prepared general plans for the whole network cover- ing signalling, telecommunications, data processing and integrated trans- port. The RTOs will continue to update annually and implement their Operational Plans in collaboration with CYR (Annex 1), in order to adjust them to actual and forecast traffic requirements. IV. ECONOMIC EVALUATION A. The Proposed Project and the National Development Plan 4.01 While the 1976-80 Development Plan achieved an impressive annual growth rate of 5.6% in gross material product (GMP) and 6.8% in industrial production, the Yugoslav economy has been facing, from about the last year of the Plan, a serious economic crisis, partly arising from external shocks such as a further increase in oil prices in 1979 and a slump in the world economy affecting Yugoslavia's export performance, and partly from domestic shocks such as the high inflation rate, reaching 38% in 1981. As a result of these economic difficulties and the restrictive economic policies adopted to restore the economy, GMP grew only 2.5% in 1980 and 1.5% in 1981, with a 1.4% increase expected for 1982. 4.02 The 1981-85 Development Plan presents both short-term and medium- term strategies in coping with the country's recent economic difficulties and in charting a course of continued development for the economy. A series of economic stabilization measures are already bearing fruit in controlling inflation and in reducing external deficits. Despite these measures, the macroeconomic forecasts have been revised downwards substantially at the end of 1982. The current tentative forecasts show GMP expected to decline by some 2% in 1983 followed by moderate increases of 1 to 2% per year through the end of the plan. Overall growth in GMP during the current plan is expected to average about 1% per year. 4.03 The revised 1981-85 Plan envisages an overall annual growth rate of only 1.5% in industrial production compared with the 6.8% annual rate achieved under the 1976-80 Plan. However, as will be discussed below (see para. 4.09), the 1981-85 Plan gives higher priority and aims at higher -28- growth targets for coal and lignite mining, needed for domestic energy production, non-ferrous mining, metals and basic chemicals. These pro- duction commodities, which generate long distance bulk traffic for the railways, are expected to continue increasing at moderate rates through the end of the current plan. 4.04 The 1981-85 Plan also emphasizes continued development of the country's rail system since it is the optimal and economic mode to move bulk, long-distance commodity traffic both for exports and domestic needs. In addition, the railways dependence on imported fuel is minimal. Studies in Yugoslavia have shown that where loading is done directly from an indus- trial siding to railway wagons, traffic in full wagon loads is more economi- cally carried by railway than by road, for distances beyond 100 km. About 54% of rail traffic in Yugoslavia is loaded from industrial sidings; 99% of the rail traffic is in full wagons loads, 80% of which is in bulk form; and the average haul has been increasing in recent years and is now about 300 km per ton. Expected increases in the production and transport of commodities involving such long-distance and bulk traffic would require that rail capa- city be adequately strengthened to cope with such higher demand. Since the railway operates in a competitive market, it is also necessary that the rail system be made more efficient and competitive to attract and retain the traf- fic to which it is best suited. The 1981-85 Plan stresses these objectives for strengthening the railway system. B. Traffic Projections 4.05 Following two major downward readjustments in the macroeconomic forecasts between September and December 1982, the freight traffic forecasts were revised. However, these revisions were made solely on the basis of an overall estimate of growth in industrial production as revised projections for individual commodities and data on regional growth patterns were not available. The detailed forecasts for each segment of the network will therefore need to be updated as part of the annual review of the investment programs and financing plans (para. 3.05). A summary of the traffic projec- tions for the Yugoslav railways and for the four RTOs covered under the pro- ject is presented below, and additional details are given in Tables 6 and 7. The figures also show the actual traffic growth during the 1976-80 period for the CYR; corresponding data for 1976-80 for the four RTOs sepa- rately are not available since some RTOs came into existence only in 1978. -29- Table 4.1: Summary of Recent Traffic and of Traffic Projections, 1976-85 Projected Actual Traffic for Annual Growth Rate 1976 1980 1981 1985 1976-80 1980-85 A. CYR Freight Traffic 21,017 25,018 25,721 29,000 4.5 3.0 (in million ton-km) Passenger Traffic 9,941 10,392 10,510 11,792 1.2 2.6 (in million PKM) Total Traffic Units 30,958 35,410 3.6,231 40,792 3.5 2.9 (NTKM+PKM) in millions B. For The 4 RTOs Under the Project Freight Traffic - 13,083 13,613 15,270 - 3.1 (in million ton-kn) Passenger Traffic - 5,000 5,027 5,670 - 2.6 (in million PKM) Total Traffic Units - 18,083 18,640 20,940 - 3.0 (NTKM+PKM) in millions 4.06 As the above figures indicate, the average traffic growth rate is expected to be somewhat lower during 1980-85, compared to 1976-80. A 2.9% growth rate in total traffic units is expected for CYR during 1980-85, com- pared with a 4.6% growth projected for 1976-80 under the Fifth Railway Pro- ject and a 3.5% growth actually achieved. The four RTOs under the project are projected to have growth rate of 3% during 1980-86. This growth rate is in line with the overall results achieved for rail traffic since 1976. The basis for the projections is discussed in the following sections. 4.07 The four RTOs under the project (Novi Sad, Belgrade, Sarajevo and Skopje) carry at present about half of the total traffic units in CYR. In freight traffic, more than half is from these four RTOs. This is because most of the ore and coal mining is done in the Republics comprising these RTOs; Bosnia-Herzegovina (comprising RTO Sarajevo) is, after Kosovo, the largest producer of coal, iron ore and non-ferrous minerals in the country; Belgrade and Skopje are both producers and consumers of these items, while Vojvodina (RTO Novi Sad) is a major consumer of coal from Sarajevo as also of other bulk raw materials. (a) Freight Traffic 4.08 The growth of freight traffic in 1981, of 2.8% for the CYR, and 4.0% for the four RTOs, has to be seen against a low growth in GMP of 1.5% in 1981, and an increase of only 3% in the ton-km carried by road transport which had grown by 17% in 1980 and by an annual 12.5% during 1976-80. These figures, in a sense, underline the resilience of the railway traffic base -30- against the current restrictive economic policies, and suggest that these policies have affected, only to a lesser extent, the priority sectors of the economy which generate most of the railway traffic. 4.09 Although detailed regional and line-by-line forecasts had been pre- pared at appraisal based on an assessment of development plans and prospects for each main commodity, the traffic projections have now been revised in the light of the recent downward revision in the overall growth rate. The freight traffic forecasts have been prepared by deriving individual commo- dity growth rates within a projected overall annual increase in industrial output of 1.5% during 1981-85. It has been assumed that the 1981-85 Plan continues to assign a high rate of growth for mining, raw materials and basic chemicals, at the expense of consumer and capital goods. For coal and lig- nite, which is the single largest element in rail traffic, production is expected to increase by at least 6% per year compared to a 4% growth rate during 1976-80. Most of the new capacity in these basic industries comes from delayed completion of on-going projects started under the 1976-80 Plan and therefore provides a firmer basis for realization. Table 4.2: Comparison of Railway Traffic Growth (CYR) and Domestic Production Growth for Major Commodities (% annual increase) 1/2/ Traffic in ----- 1976-80 ------- ------ 1980-85----- Million NTKM Domestic Railway Domestic Railway Commodity 1981 Production Traffic Production Traffic Coal 3,966 4.0 4.3 6.0 8.0 Petroleum 1,196 5.5 -- -- -- Ores and Concentrates 3,627 -1.0 3.9 2.0 3.0 Non-Metal Mining 803 -0.3 4.6 1.5 2.5 Metals and Products 2,638 4.8 -- 1.0 2.0 Wood 1,394 5.9 4.2 1.0 1.0 Building Materials 1,321 6.7 5.6 0.2 0.2 Cement 650 5.1 10.9 0.2 0.2 Fertilizers 1,090 4.6 6.6 5.0 8.0 Cereals 803 -0.8 5.4 2.5 5.0 Others 8,232 6.5 7.9 1.0 1.5 Total/Average 25,721 4.3 4.5 2.0 3.0 Annual Growth Rate Average Annual Growth Rate for Total Industrial Output 6.8 1.5 1/ Preliminary estimates based on December 1982 revisions to macroeconomic forecasts. 2/ Comparable to 1981-85 Plan growth rate as both use growth rate from 1980 base. Source: CYR and mission estimates January 1983 -31- 4.10 Based on the revised commodity forecasts, the average annual increase in output for those commodities generating rail traffic is expected to be about 2% during 1981-86. Much of this increased production, such as coal, is meant for long distance transport rather than for local use, which implies an even higher increase for rail traffic. Moreover, other factors such as the Government's emphasis on developing a more efficient railway system as well as the high cost and physical shortages of petroleum pro- ducts, are now encouraging greater use of rail transport. In addition, public policy is now stressing improved multi-modal transport through the creation of freight terminals for container traffic while many major rail users are making joint investments with the RTOs in new or additional rail sidings. These developments indicate a firm commitment to continued growth in rail traffic. The slackening of growth in road transport freight ton-km from an annual average growth rate of 12% during the 1970s to 3% in 1981, while rail transport maintained its growth rate at about 3%, is an indica- tion of a marginal shift in the relative shares in the transport market. In the case of the four RTOs and Republics covered by the project, rail traffic in 1981 increased by 4% while road traffic increased only by 1%. As a result, it can be expected that rail freight traffic will increase at a slightly higher rate than the forecast 2% annual increase in output for com- modities entering into rail traffic. On balance, a 3% annual increase in freight traffic during 1980-86, in line with trends during the past decade, would represent a realistic forecast for the four RTOs covered by the pro- posed project. The longer term trends would indicate a growth rate of between 2 and 3% per year for freight traffic as the restrictions on road transport gradually ease. (b) Passenger Traffic 4.11 The achieved growth rate for rail passenger traffic on CYR during 1976-80 was only 1.2% followed by a similar low rate in 1981. However, the low growth in traffic in 1981 has in fact been due mainly to a 13% drop in international passenger traffic, domestic traffic having gone up by 3%. The reduced international traffic is understood to reflect the economic slump in Europe, depressing tourist and other traffic to Yugoslavia. The low growth rate in rail passsenger traffic during 1976-80 was a reflection of the con- tinued inefficiency of rail passenger services in attracting passenger traf- fic; this was in turn partly the result of the low priority given to passen- ger services in rail investments in the recent past and the consequent poor quality of passenger services. However, recent emphasis on improved rail services, as well as shifts in traffic demand, are changing the picture. On the one hand, due to the steep increase in petroleum prices and the shortages of gasoline and diesel supplies, road passenger transport, particularly in passenger cars, has considerably slackened, thus creating demand for alterna- tive modes of transport. Domestic air traffic has also declined by about 9% in 1981, due to frequent service interruptions caused by a shortage of jet fuel. On the other hand, CYR's recent experience shows that wherever they have introduced, since 1980, special high-quality passenger services (for example, the business and express services on routes like Belgrade-Sarajevo, Belgrade-Zagreb, Belgrade-Novi Sad) with comfortable cars, greater speed and punctuality, the demand for rail services has far outstripped supply, with long passenger waiting lists being common for such services. -32- 4.12 The railway's strategy is to provide more high-quality passenger services during the 1981-86 Plan so as to meet the growing demand of traffic diverted primarily from road transport and to some extent from domestic air services. Many elements in the proposed railway investment plan will assist in increasing rail capacity and efficiency to attract and retain the expected traffic increases; for instance, the proposed new motor trains and passenger cars will provide more comfortable travel, the proposed track overhaul will ensure better riding qualities, and the proposed signalling and telecommuni- cations will ensure faster and more punctual services. Preliminary figures for 1982 indicate that passenger traffic has already jumped by 6 to 7% due to the restrictions on road transport. A growth rate of about 2% per year is expected during the remaining years of the Plan, providing an overall average annual increase in passenger traffic of 2.6% during the period 1980-86. In view of the various factors discussed above, particularly the upsurge in demand for good quality services and the railway's efforts to provide such services, the projected rates seem reasonable and realistic. However, in the longer term it is expected that rail passenger traffic growth will slacken to around 1% per year in line with a gradual improvement in the competitive position of road transport. C. Economic Appraisal of Proposed Investment (a) The Planning Process 4.13 The proposed Railway Investment Plan for the four RTOs (see para. 3.03) is the result of a long iterative process involving economic and financial analyses, as well as discussions between the railway agencies (RTOs and CYR), Republican authorities, professional institutes, which have pre- pared individual feasibility studies, and Bank staff. Due to the successful institution-building efforts in railway' planning initiated through previous Bank projects, the RTOs and CYR now prepare operational plans and technical and economic feasibility studies for all investment proposals, sometimes with -the assistance of transport planning institutes. These studies, which are critically reviewed by the COIs for the railways, are a necessary prere- quisite for including projects in the Republican and Federal Investment Plans. 4.14 The proposed Railway Investment Plan forms part of the Republican and Federal Development Plan (1981-85). Owing to the critical review by related agencies and also by the Bank, the original railway plan has been scaled down by over 30% to form the present plan. As noted earlier (para. 3.02), the present plan has been further scaled down to a core program of high priority investments in Part A of the plan, with Part B (about 25% of the plan) including other items of lower priority. It has been agreed (para. 3.05) that items in Part B will be implemented only after their technical and economic justification has been demonstrated to the satisfaction of the Borrower and the Bank. Part A, therefore, represents the basis of the railway investment programs during the remainder of the 1981-85 Plan and extending into 1986. -33- (b) Economic Return for the Project 4.15 The main benefits of the Investment Plan will be felt in improved operational efficiency and the ability of the railway to perform its role in the transport market. As a major component of the project, the track over- haul of about 700 km of main lines will provide substantial savings in stepped-up track maintenance costs, which would otherwise be necessary, as well as savings in equipment and rolling stock through higher operating speeds. Other benefits, such as increased axle loadings, have not been included in the evaluation of the track overhaul items. Moreover, as the main savings from these items are in avoided track maintenance costs, their viability is not affected by changes in traffic growth. Proposed invest- ments in traction and rolling stock are based on detailed operational plans. The bulk of the equipment component covers replacement and is therefore a fundamental part of the investment program. If equipment was not replaced in a timely manner, the bottlenecks in the railway system would disrupt economic activity and it would be necessary to move traffic at higher cost by road transport. Improved signalling and telecommunications which will be introduced on about 400 km of line will provide direct operating cost savings through higher operating speeds as well as savings in system operating costs through the automation and centralization of signalling functions. Electri- fication items cover about 375 km of single-track main line routes located in difficult or mountainous terrain; benefits from these electrification projects include operating cost savings as well as increased capacity due to higher speeds and increases in net payloads. 4.16 Of total project expenditures, about 5% is on-going investment started under previous Bank projects, and for which the economic viability has been previously established. A further 75% is supported by new feasibi- lity studies, most of which have been reviewed in detail by the Bank staff; these studies indicate high economic returns from the proposed investments (see para. 4.17 below for a discussion of these studies). The remaining 20% of the plan has not been covered by economic feasibility studies, as this includes a number of miscellaneous items for which it is difficult to quan- tify benefits. These items include workshops, computer equipment and installations, technical studies and designs, and miscellaneous investments to be undertaken by BOALs, the self-managed service organizations serving the railways. Technical studies have been prepared for most of these items which are considered essential for improved operations. 4.17 Table 8 presents a list of the major investment projects subjected to new feasibility studies, along with estimated costs and estimated ERS. The feasibility studies were reviewed by Bank staff and adjusted where neces- sary to reflect the revised traffic forecasts. The feasibility studies included detailed line-by-line traffic forecasts which were reviewed by Bank staff and adjusted to reflect the revised overall traffic forecasts. Gen- erally, the revised individual forecasts are based on annual growth rates of 3% for freight and 2% for passenger traffic through 1986, followed by slightly lower rates in the longer term. In some cases, no further growth in traffic is assumed after 1990. Several studies, particularly those for -34- plan components in RTO Novi Sad, had adopted conservative annual traffic growth rates of 2 to 3% through 1986, followed by rates of 1.5 to 2.5% in the longer term; no revisions were necessary to the traffic forecasts in these studies. Adjustments were made for border prices applicable to both cost and benefit streams. The costs and benefits are expressed in constant prices as of January 1982. The exchange rate applicable in January 1982 was used for the analysis, with costs and benefits converted to world price equi- valents using border-price conversion factors. The results of the calcula- tions remain valid, therefore, in spite of the subsequent devaluation of the dinar. In many cases, unquantified benefits exist and, therefore, the esti- mated ERs are often conservative. Individual ERs from projects were found to range from 12% to 34%. The overall economic return from all the projects studied (comprising 75% of the project) amounts to about 22%. Assuming conservatively a minimum ER of 12% on the parts of the investment plan for which no separate ER was computed (see para. 4.16), the composite ER for the whole project would amount to about 19%. (c) Economic Return for Bank-Financed Items 4.18 The ER for the Bank-financed items has been separately estimated; the total cost of these items amounts to 27.1 billion dinars, and the over- all ER is estimated at 19% (Table 8). All project items show acceptable First Year Benefits (FYB) and are therefore justified on the basis of exist- ing traffic. (d) Sensitivity Analysis and Project Risks 4.19 A sensitivity analysis of individual project items, involving an increase in costs by 10% or a decline in benefits by 10%, indicates that the ERs would not fall below 12%, except for the Skopje signalling and telecom- munications project, which would show an ER of about 10%. However, this item is an integral part of the electrification of the last section of the main line to Greece and has broader indirect benefits which are not included in the analysis. 4.20 Considering the major categories of projects in the investment plan, a large part is for procurement of rolling stock for which the ER (26%) is estimated on a unit basis. The actual procurement of rolling stock is related closely to traffic demand and adjustments can be made to the opera- tional plans should traffic growth fall below expectations. Another major part of the program is for track overhaul where benefits are not very sensi- tive to traffic increases and are related more to the avoided costs of stepped-up track maintenance and ultimate rail replacement, which would be needed even if the traffic were to remain stationary. For the only major electrification project (Bosanski-Novi-Knin), the analysis shows that even if traffic were to grow at 20% less than the modest rates assumed, the ER would still be about 13%. 4.21 As project costs were computed on the basis of the recent experi- ence of the CYR and as the traffic projections used are conservative, there is little risk that the ERs will fall outside the range indicated. More- over, in view of the rolling annual plan mechanism followed by the Yugoslav -35- railways, there is flexibility in adjusting projects on an on-going basis to changes in traffic levels. Given the generally high ERs obtained for indi- vidual project items and in view of the considerable experience of Yugoslav railways in implementing similar projects, the proposed investments are free from any significant risk. V. FINANCIAL EVALUATION A. Introduction 5.01 During the Fourth and Fifth Railway Projects, railway tariff increases failed to match inflation with the result that compensation pay- ments have contributed an increasing share of railway revenues (paras. 2.06 to 2.12). The railways and the Government have stated that tariffs will in future play a bigger role in revenues and that tariff policy is to be defined in a compact on railway pricing which should very shortly be available. The railways are also required in the context of the Fifth Loan agreement to produce a plan for a phased reduction and eventual elimination of compensa- tion payments at all RTOs. 5.02 In an effort to halt the rise in compensation payments the Government approved increases in freight tariffs of 17% and in passenger fares of 15% in March 1982, and of 17% for both freight and passengers in December 1982. These were followed by further increases of 15% for freight and passengers in February 1983. As a result, compensation payments in 1983 in real terms are expected to be marginally lower than in 1982, although still running at a very high level. In the context of its stringent anti- inflation policy, the Government has said that it does not intend to make further tariff adjustments this year. However, it has given assurances that it will make substantial tariff increases in real terms in 1984 and subse- quent years (para. 5.06) which will have the effect of reducing and ulti- mately eliminating compensation payments at all RTOs. The financial fore- casts which are shown and discussed in this chapter have as their basis the increasing tariff revenues which would arise from such tariff increases. B. Past Financial Performance 5.03 Financial performance of Yugoslav Railways in recent years has been marked by tariff increases which have been insufficient to counter growing inflation and as a consequence, compensation payments, which were intended to reduce as a proportion of revenues, have increased (see Table 1 to Annex 3). The proportion of operating expenditures covered by tariff revenues at each of the RTOs in 1981 compared to 19781 is shown below together with targets for 1980 agreed under Loan 1534-YU. 1/ 1978 was the first full year of operation of RTOs Belgrade and Novi Sad. Prior to that time RTOs Belgrade, Novi Sad and Titograd were combined as one enterprise. -36- Table 5.1: Proportion of Operating Expenditure Covered by Tariff Revenues Year Belgrade Novi Sad Sarajevo Skopje Total 1978 Actual 80.6 81.9 94.1 92.0 85.9 1981 Actual 76.1 79.0 99.8 72.2 a2.5 1980 Target 91.6 85.6 94.0 95.0 91.0 During the period 1978-81 all four RTOs reduced unit operating expenditures in real terms but tariff revenues covered .3.4% less of operating expendi- tures in 1981 than in 1978. As well as showing the inadequacy of tariff increases to cover inflation during this period, the figures give a measure of the relative efficiency of operating performance of the different RTOs. 5.04 Only at RTO Sarajevo have tariff revenues covered a bigger propor- tion of operating expenditures in 1981 than in 1980 and has the 1980 target been achieved. This resulted from a reduction in operating unit costs in real terms of 19% over the period, which in turn resulted from stringent cost control, staff reductions, and cost efficiency benefits arising from a largely electrified system with few small branch lines. At RTO Novi Sad, staff reductions were also achieved and with the help of a 10% increase in traffic, unit costs were reduced by 13%, but the proportion of costs covered by tariff revenues was smaller in 1981 and the 1980 target was not achieved. At RTO Belgrade, staff numbers went up by 1% and although unit costs were reduced by 5%, tariffs covered a smaller portion of costs and the RTO was far short of its 1980 target. RTO Skopje shows the poorest performance of all. Traffic stagnated in the period under review so that no new revenue generated and despite a reduction of 4% in unit costs, only 72% of costs were covered by tariffs in 1981. 5.05 Financial performance of the four RTOs from 1978 to 1981, with fore- casts for 1984 and 1986, is shown in summary tables on the following pages. Compensation payments filled the gap in 1981 between tariff revenues and operating expenditures at all RTOs except Skopje. At RTO Skopje, where the CO is newly organized, a token sum only was paid as compensation and a large deficit resulted which had to be recovered from the Republican Fund for Losses1. With the aid of compensation payments the other three RTOs showed returns on net fixed assets of 2.1%, 2.6% and 1.3%. 1/ Compensation payments were made from Republican Funds in 1978 and 1979. In 1982, the newly organized COI commenced quarterly advance payments of compensation to the RTO on a regular basis. - 37 - Table 5.2: Financial Summary - RTO Belgrade (See Detailed Tables in Annex 4) Years Ending 1978 through 1986 (in Million of Current Dinars) Actual Forecast 1978 1979 1980 1981 1984 1986 Income Statement Items Unit Volume (T.U. millions)!l 6,891 7,313 7,337 7,548 8,323 8,734 Tariff Revenues 4,052 4,606 5,890 8,744 19,918 32,660 Compensation 1,371 1,669 2,209 3,400 5,892 5,824 Operating Revenue 5,423 6,275 8,099 12,144 25,810 38,484 Net Operating Revenue 396 (36) 191 650 1,854 2,520 Net Surplus (Deficit) - (522) (405 (75) 580 498 Funds Statement Items Internal Sources 2,032 1,297 1,756 2,534 7,258 11,566 Borrowings 899 1,227 1,418 734 5,832 5,988 Equity Investments 49 174 431 47 279 138 Total Sources 2,980 2,698 3,605 3,315 13,369 17,692 Capital Expenditures 1,357 1,975 2,603 1,270 8,128 10,428 Working Capital Increase (Decrease)./ 642 (463) 33 42 1,854 2,630 Debt Service 981 1,186 1,509 2,003 3,387 4,634 Total Applications 2,980 2,698 3,605 3,315 13,369 17,692 Balance Sheet Items Current Assets 8,427 4,659 6,858 7,843 13,455 21,055 Less Current Liabilities 6,908 4,966 7,566 7,435 10,200 14,000 Subtotal 1,159 (307) (708) 408 3,255 7,055 Other Assets3/ 5,809 7,101 7,183 5,141 7,212 12,030 Net Fixed Assets 19,291 21,884 25,893 34,943 65,700 90,000 Total Assets 26,619 28,678 32,368 40,492 76,167 109,085 Debt 6,800 6,085 6,587 8,085 13,341 24,689 Equity 19,819 22,593 25,781 32,497 62,826 84,396 Total Liabilities and Equity 26,619 28,678 32,368 40,492 76,167 109,085 Ratios Compensation Payments as Percentage 25 27 27 28 23 15 of Total Revenues Operating Ratio % A" 93 101 98 95 93 93 Working Ratio% -5 72 79 78 79 72 70 Operating Ratio without Compensation % 124 137 134 131 120 110 Working Ratio without Compensation % 97 108 108 110 93 82 Return on Net Fixed Assets l/ 2.1 - 0.8 2.1 3.2 2.9 Debt Service Coverage (Times) 2.1 1.1 1.2 1.3 2.1 2.5 Percent of Capital Expenditures 30 29 10 39 25 39 Financed by Internal Sources % Debt/Equity Ratio 26/74 21/79 20/80 20/80 18/82 23/78 1/ Traffic Units (Net Ton-Kms + Passenger Kms). 2/ Includes also contributions to and drawings from reserve and joint consumption funds. 3/ Includes reserve funds jointly held with Government. 4/ Operating Expenditure/Operating Revenue. 5/ Working Expenditure (Operating Expenditure less Depreciation)/Operating Revenue. 6/ Without compensation payments, return on NFA would be negative and no contribution would be made from internal sources to investments. 21640/55 - 38 - Table 5.3: Financial Summary - RTO Novi Sad (See Detailed Tables in Annex 4) Years Ending 1978 through 1986 (in Million of Current Dinars) Actual Forecast 1978 1979 1980 1981 1984 1986 Income Statement Items Unit Volume (T.U. millions).Y 3,717 3,874 3,905 4,081 4,339 4,585 Tariff Revenues 2,126 2,605 3,156 4,307 11,093 18,349 Compensation 585 587 827 1,269 2,580 2,085 Total Revenues 2,711 3,192 3,983 5,576 13,673 20,434 Net Operating Revenue 114 97 68 123 1,114 1,885 Net Surplus (Deficit) 54 29 13 34 625 1,265 Funds Statement Items Internal Sources 655 742 815 1,026 2,930 5,013 Borrowings 964 304 372 163 882 2,250 Equity Investments - - 100 36 1,064 330 Total Sources 1,619 1,046 1,287 1,225 4,876 7,593 Capital Expenditures 550 915 1,211 1,187 3,243 5,910 Working Capital Increase (Decrease)!/ 831 (72) (120) (296) 409 349 Debt Service 238 203 196 334 1,224 1,334 Total Applications 1,619 1,046 1,287 1,225 4,876 7,593 Balance Sheet Items Current Assets 2,249 2,268 1,948 1,920 2,859 3,738 Less Current Liabilities 576 916 580 659 905 1,195 Subtotal 1,673 1,352 1,368 1,261 1,954 2,543 Other Assets-/ 1,038 1,951 3,094 3,402 4,350 6,050 Net Fixed Assets 3,849 4,059 4,357 5,228 11,300 18,400 Total Assets 6,560 7,362 8,819 9,891 17,604 26,993 Debt 1,090 1,318 1,877 1,794 1,980 4,740 Equity 5,470 6,044 6,942 8,097 15,264 22,253 Total Liabilities and Equity 6,560 7,362 8,819 9,891 17,604 26,993 Ratios Compensation Payments as Percentage 22 18 21 23 19 10 of Total Revenues Operating Ratio % 96 97 98 98 92 91 Working Ratio% 76 77 80 82 79 76 Operating Ratio without Compensation % 122 119 124 127 113 101 Working Ratio without Compensation % 97 94 101 107 97 84 Return on Net Fixed Assets X y 3.0 2.5 1.6 2.6 11.4 11.4 Debt Service Coverage (Times) 2.8 3.7 4.2 3.1 2.4 3.8 Percent of Capital Expenditures - 66 61 83 40 56 Financed by Internal Sources %. / Debt/Equity Ratio 17/83 18/82 21/79 18/82 11/89 18/82 1/ Traffic Units (Net Ton-Kms + Passenger Kms). 2/ Includes also contributions to and drawings from reserve and joint consumption funds. 3/ Includes reserve funds jointly held with Government. 4/ Without compensation payments, return on NFA would be negative, but 21% contribution to Capital Expenditures would be made in 1986. 2164/5b - 39 - Table 5.4: Financial Summary - RTO Sarajevo (See Detailed Tables in Annex 4) Years Ending 1978 through 1986 (in Million of Current Dinars) Actual Forecast 1978 1979 1980 1981 1984 1986 Income Statement Items Unit Volume (T.U. millions)l/ 5,636 6,069 5,771 5,914 6,450 6,810 Tariff Revenues 3,459 4,490 5,026 6,814 17,068 27,815 Compensation 193 308 305 375 1,243 1,247 Total Revenues 3,652 4,798 5,331 7,189 18,211 29,062 Net Operating Revenue 58 305 (59) 365 1,628 4,157 Net Surplus (Deficit) (108) 92 (268) 80 790 2,547 Funds Statement Items Internal Sources 1,071 1,317 1,047 2,287 5,571 10,413 Borrowings 1,516 562 819 663 2,005 174 Equity Investments 658 - - 167 500 150 Total Sources 3,245 1,879 1,866 3,117 8,076 10,737 Capital Expenditures 2,861 1,891 1,712 1,086 4,308 3,321 Working Capital Increase (Decrease)!/ (83) (687) (258) 1,472 2,144 3,741 Debt Service 467 675 412 559 1,624 3,675 Total Applications 3,245 1,879 1,866 3,117 8,076 10,737 Balance Sheet Items Current Assets 2,333 3,023 4,484 5,022 6,430 10,147 Less Current Liabilities 1,789 2,400 4,412 3,860 4,250 4,800 Subtotal 544 623 72 1,162 2,180 5,347 Other Assetsl/ 3,956 2,339 6,426 3,264 10,920 8,820 Net Fixed Assets 18,676 19,999 23,712 34,587 61,500 91,000 Total Assets 23,176 22,961 30,210 39,013 74,600 105,167 Debt 3,450 2,469 4,675 5,064 8,000 12,000 Equity 19,726 20,492 25,535 33,949 66,600 93,167 Total Liabilities and Equity 23,176 22,961 30,210 39,013 74,600 105,167 Ratios Compensation Payments as Percentage 5 6 6 5 7 4 of Total Revenues Operating Ratio % 101 94 101 95 91 86 Working Ratio% 77 73 80 78 70 64 Operating Ratio without Compensation % 106 100 107 100 98 90 Working Ratio without Compensation % 81 78 85 82 75 67 Return on Net Fixed Assets % 0.3 1.6 - 1.3 2.9 4.9 Debt Service Coverage (Times) 2.3 2.0 2.5 4.1 2.6 2.8 Percent of Capital Expenditures 24 70 52 24 42 90 Financed by Internal Sources %4/ Debt/Equity Ratio 15/85 11/89 15/85 13/87 11/89 11/89 1/ Traffic Units (Net Ton-Kms + Passenger Kms). 2/ Includes also contributions to and drawings from reserve and joint consumption funds. 31 Includes reserve funds jointly held with Government. 4/ Return on NFA without compensation payments would be negative until 1983, 0.7% in 1984 and 3.5% in 1986. Contributions to investments from internal sources would be nil until 1983, 13% in 1984 and 53% in 1986. 2164/57 - 40 - Table 5.5: Financial Summary - RTO Skopje (See Detailed Tables in Annex 4) Years Ending 1978 through 1986 (in Million of Current Dinars) Actual Forecast 1978 1979 1980 1981 1984 1986 Income Statement Items Unit Volume (1.U. millions)1l 1,099 1,218 1,070 1,097 1,283 1,379 Tariff Revenues 1,054 1,127 1,347 1,700 4,587 7,722 Compensation 100 230 30 10 1,343 962 Total Revenues 1,154 1,357 1,377 1,710 5,930 8,684 Net Operating Revenue 8 30 (407) (646) 577 743 Net Surplus (Deficit) (51) (27) (510) (821) 94 157 Funds Statement Items Internal Sources 234 317 (41) (198) 1,914 2,815 Borrowings 425 353 774 908 1,145 1,572 Equity Investments 67 20 7 4 150 163 Total Sources 726 690 740 714 3,209 4,550 Capital Expenditures 356 603 402 586 1,893 2,289 Working Capital Increase (Decrease)!/ 200 (106) 38 (308) 74 486 Debt Service 170 193 300 436 1,242 1,775 Total Applications 726 690 740 714 3,209 4,550 Balance Sheet Items Current Assets 788 800 1,047 1,208 1,277 1,949 Less Current Liabilities 252 440 551 1,019 860 950 Subtotal 536 360 496 189 417 999 Other Assets3/ 1,169 1,479 1,791 2,133 3,880 7,840 Net Fixed Assets 4,380 5,311 6,271 8,185 19,400 25,700 Total Assets 6,085 7,150 8,558 10,507 23,697 34,539 Debt 1,118 1,335 1,968 2,834 4,055 4,922 Equity 4,967 5,815 6,590 7,673 19,642 29,617 Total Liabilities and Equity 6,085 7,150 8,558 10,507 23,697 34,539 Ratios Compensation Payments as Percentage 9 17 2 1 23 11 of Total Revenues 7/ Operating Ratio % 4/ 99 98 130 137 90 91 Working Ratio% 5/ 76 77 103 112 68 68 Operating Ratio without Compensation % 109 118 132 139 117 103 Working Ratio without Compensation % 83 92 105 112 88 76 Return on Net Fixed Assets %-y 0.2 6.2 - - 3.4 3.0 Debt Service Coverage (Times) 1.4 1.6 - - 1.5 1.6 Percent of Capital Expenditures - 38 - - 31 24 Financed by Internal Sources 16/ Debt/Equity Ratio 18/82 19/81 23/77 27/73 17/83 14/86 1/ Traffic Units (Net Ton-Kms + Passenger Kms). 2/ Includes also contributions to and drawings from reserve and joint consumption funds. 3/ Includes reserve funds jointly held with Government. 4/ Operating Expenditure/Operating Revenue. 5/ Wcrking Expenditure (Operating Expenditure less Depreciation)/Operating Revenue. 6/ Without compensation payments, return on NFA would be negative and no contribution would be made from internal sources to investments. 7/ If deficit is added to compensation then percentages become 1978: 13, 1979: 19, 1980: 22 and 1981: 33. 2164/58 -41- C. Forecast Financial Performance 5.06 The Government has given an assurance that tariff increases will be made early in 1984 (expected to be in January 1984) of 10% over the increase in cost levels as measured by the Producer Price Index between January 1983 and the date the tariff increase takes effect. This will be follwed at the beginning of each subsequent year through 1990 by annual tariff increases of 6% over the rise in the Producer Price Index during the immediately preced- ing twelve month period. These tariff increases form the basis for a pro- gram agreed with CYR and the RTOs for the achievement of viability through tariff revenues which will result in the reduction and eventual elimination of compensation payments. The completion of measures necessary for the tariff increase at the beginning of 1984 will be a copdition of effective- ness of the proposed loan. Annual operating ratiosl , based on operating revenues not including compensation payments, have been agreed with the RTOs as financial targets for monitoring this program and are included in the Action Plans of the RTOs. An assurance has been obtained from the RTOs that they will use their best efforts to achieve these financial targets. The table below shows forecasts of reductions in compensation payments together with operating ratios through the project period. If the forecasts are pro- jected further.on the basis of continuing real increases in tariffs, traffic increases at the same rate as forecast for 1982-86, and further increases in productivity as forecast for this period, then compensation should be elimi- nated in 1987 at RTO Sarajevo, in 1988 at RTO Novi Sad, and in 1990 at RTOs Belgrade and Skopje. 1/ Operating Expenditure X 100 Operating Ratio Operating Revenue -42- Table 5.6: Compensation Payments Actual Forecasts 1981 1982 1983 1984 1985 1986 RTO Belgrade Compensation Payments: (Din mil)l/ 3,475 4,810 6,372 5,892 6,468 5,824 (US$ mil)-2-/ 99 96 91 71 68 56 Percentage Total Revenues 28 32 31 23 20 15 Operating Ratio 132 136 131 120 115 110 RTO Novi Sad Compensation Payments: (Din mil) 1,269 2,230 2,945 2,580 2,459 2,085 (US$ mil)2/ 36 44 42 31 26 20 Percentage Total Revenues 23 28 27 19 15 10 Operating Ratio 127 135 126 113 108 101 RTO Sarajevo Compensation Payments: (Din mil) 375 978 1,511 1,343 1,243 1.348 (US$ mil)V. 11 20 22 15 14 12 Percentage Total Revenues 5 10 11 7 6 4 Operating Ratio 100 106 105 98 94 90 RTO Skopje Compensation Payments: (Din mil)!' 831 1,053 1,274 1,343 1,182 962 (USt mil)V 24 21 18 16 12 9 Percentage Total Revenues 33 31 28 23 16 11 Operating Ratio 139 135 125 117 108 103 Total Four RTOs Compensation Payments: (Din mil) 5,950 9,071 12,102 11,058 11,457 10,118 (US$ mil) 170 181 173 133 120 97 Percentage Total Revenues 22 25 24 17 14 10 Operating Ratio 121 126 121 111 106 101 1/ Including reimbursement of deficit in 1981. 2/ At exchange rates US$1.0=Din 35.5 in 1981, Din 50.0 in 1982 and rates thereafter reflecting difference in forecast domestic and international rates of inflation. -43- 5.07 The principal criteria used in preparing the financial forecasts for 1981-86 are summarized below. The main assumptions on which they are based are given in para. 5.12. Revenues reflect 1982 tariffs, increases in subsequent years as stated in para. 5.06 above, and forecast traffic levels. Working expenses are based on 1982 fiures and are adjusted for inflation at rates forecast for the country1 Depreciation charges assume an annual revaluation of assets on the basis of indices published by the Federal Institute of Statistics. The following table summarizes the fore- cast income account results for the four RTOs by years to 1986. Actual Forecast Table 5.7: 1981 1982 1983 1984 1985 1986 ------------------Din million------------------ Operating Revenues 26,619 36,170 49,719 63,724 80,348 96,664 (including Compensation) Operating Expenses 26,127 34,191 45,507 58,552 73,013 87,360 Net Operating Revenues 492 1,979 4,212 5,172 7,335 9,304 Interest 1,274 1,685 2,320 3,084 3,900 4,836 Met Surplus (Deficit) (782) 294 1,892 2,088 3,435 4,468 Operating Ratios 98 95 92 92 91 90 Return on Net Fixed Assets % 0.7 2.2 3.8 3.7 4.1 4.4 Income Accounts and forecasts for each RTO are -shown at Tables 1 to 4 in Annex 4. D. Cash Flow 5.08 For purposes of cash flow forecasting, financial contingencies have been added to the estimated base costs of investments (plus physical contin- gencies) at inflation rates forecast for the country. In converting the Bank loan into local currency, allowance has been made for forecast diver- gence between local and international rates of inflation. Cash flow esti- mates for the project are satisfactory and sources of finance have been identified. A combined Internal Resources and Financing Plan for the project is shown below while cash flow figures for each of the RTOs for the years 1980-86 are shown at Tables 5 to 8 of Annex 4. Gross internal resources comprise 64% of total cash availability for the project period while net internal resources should finance about 38% of project invest- ments. Depreciation provisions are forecast to provide 69% of the internal funds while the remaining 31% which is to be met from net revenues is con- sidered to be within the earning capacity of the RTOs. 1/ 1983: 30%, 1984: 25%, 1985: 20%, 1986: 15%. -44- 5.09 Average debt service coverage from internal funds was 1.5% in 1980 and 1.7% in 1981. This should improve to 1.8% by 1983 and 2.5% by 1986 as internal fund generation improves. An understanding was obtained at negoti- ations that the RTOs will not incur debt beyond agreed debt limitation ratios without consulting the Bank (Annex 4). Table 5,8: Internal Resources and Financing Plan - Four RTOs Project Period: 1983-86 Din.Mill. Cash Availability Internal Resources 84,902 64 External Resources 47,025 36 131,927 100 Internal Resources Depreciation 58,758 69 Operating Revenue 26,024 31 Other Own Funds 120 - 84,902 100 Application Interest on Debt 14,139 17 Debt Repayment 21,924 26 Working Capital 12,175 14 Other Expenditures2/ 7,367 9 55,605 -66 Net Available for Investments 29,297 34 Financing of Investments Net Internal Resources 29,297 38 External Resources Grants 6,827 9 Loans 14,800 20 Suppliers Credits 15,293 20 Sixth Bank Loan 10,105 13 Sub-Total 47,025 62 Total Investments3/ 76,322 100 1/ Including compensation payments 2 Including requirements for non current assets and BOALs investments 3/ Total for Part A investments only and excludes investments in Part B of the Investment Plan which would be proceeded with in agreement with the Bank, only when their technical/economic justification has been proven and funds available. Source: Yugoslav Railways and Bank Mission -45- E. Balance Sheet 5.10 Combined figures for 1981 and forecasts for 1982, 1984 and 1986 for the four RTOs are summarized below while detailed figures for each of the RTOs from 1978 to 1986 are shown in Tables 9 to 12 at Annex 4. Table 5.9: Summary Balance Sheet - Four RTOs Actual Forecasts 1981 1982 1984 1986 Fixed Assets (Net) 82.9 99.7 157.9 225.1 Other Assets (Net) 17.0 17.8 34.2 50.7 Total 99.9 117.3- 192.1 275.8 Debt 17.8 16.4 27.4 46.4 Equity 82.1 100.9 164.7 229.4 Total 99.9 117.3 192.1 275.8 The increase in fixed asset values reflects the effect of annual asset revaluations as well as of the investment program. The highest debt equity ratio is 23/77 forecast for.RTO Belgrade in 1986 which is satisfactory. 5.11 Improvements in the working capital position are forecast by all the RTOs, although these are limited by the forecast progressive reduction in compensation payments. Nevertheless, cash as a proportion of cash work- ing expenses is expected to average 6.5% in 1983 and to improve to 8.7% by 1986 while the proportion of other working capital to cash working expenses is expected to average 8.5% in 1983 and to rise to 15.0% by 1986. Rate of return on net fixed assets which averaged 0.7% in 1981 is forecast to rise to 3.8% in 1983 and to 4.4% by 1986. Details for RTOs are shown in Annex 4 together with targets as agreed at negotiations. F. Assumptions Used in the Projections 5.12 The financial forecasts are based on the following principal assumptions: (a) Freight and passenger revenues are based on the traffic forecasts discussed in Chapter IV and shown in detail in Table 7. Tariffs have been assumed to increase by 37% for both freight and passen- gers from January 1984 followed by increases of 28% in January 1985 and 23% in January 1984, these increases being respectively 10%, 6% and 6% over the forecast increase in the Producer Price Index (Industrial) for Yugoslavia for the twelve months preceding the date of each increase. (b) Salaries reflect forecast small adjustments in staff numbers and increases to compensate for inflation. -46- (c) Fuel costs are based on forecast increases in gross ton-km. Increases in other expenses are based on apportionment of expenses to fixed and variable and forecast traffic volumes. (d) Depreciation figures assume an annual revaluation of assets as required by Yugoslav law. (e) The basis for all of the working expense figures are the forecasts for 1982 based on ten months actual results. Adjustment has been made for inflation each year at rates forecast for Yugoslavia. G. Sensitivity 5.13 The forecasts are sensitive to tariff increases and to traffic growth. The table below shows the effect upon compensation payments (assum- ing that compensation payments are increased to cover the difference between operating revenues and operating expenditure plus loan interest) of: (a) only half the forecast real increases in tariffs being made from 1984 to 1986 and, (b) only half the forecast growth in traffic being achieved. Table 5.10: Compensation as % of Total Revenue Belgrade Novi Sad 1983 1985 1986 1983 1985 1986 % % % %. % % (1) Forecast as at present 30.9 19.9 15.1 27.2 14.5 10.2 (2) If half forecast real tariff increases 30.9 24.1 21.5 27.2 19.2 17.2 (3) If half forecast traffic increases 32.1 22.4 18.6 28.0 17.3 14.2 Sarajevo Skopje 1983 1985 1986 1983 1985 1986 % % % %. % % (1) Forecast as at present 11.0 5.7 4.3 28.3 16.3 11.1 (2) If half forecast real tariff increases 11.0 10.1 10.6 28.3 20.8 17.9 (3) If half forecast traffic increases 11.9 8.8 8.5 29.4 20.1 16.4 -47- 5.14 The fact that the projected traffic increase is in line with past long-term trends and, as indicated in para. 4.03, the emphasis on mining and raw material production in the current medium-term plan, supports the view that the traffic forecast is realistic. Real increases in tariffs are essen- tial to eliminate compensation payments, which the Government has stated to be its aim under its long-term price policy for transport. Assurances have been received (para. 5.06) regarding real increases in tariffs to be made in 1984 and subsequent years. VI. RECOMMENDATIONS 6.01 During negotiations agreement was reached with SFRY, CYR and the four RTOs on the following main issues: (i) Tariff increases of 10% over the increase in the Producer Price Index during the previous twelve months will be made at the begin- ning of 1984 and of 6% over the increase in the Producer Price Index at the beginning of subsequent years in order to reduce and ultimately eliminate compensation payments at each RTO according to an agreed program (para 5.06); (ii) the RTOs will implement Part A of their investment plans as the project and will review their investment plans and financing plans annually and prepare necessary revisions. During any year, they will not, without prior approval of the Bank, undertake investments beyond those included in the project, in excess of 5% of the value of investments to be carried out under the project during the same year (para 3.05); (iii) the RTOs will implement their action plans, including their opera- tional plans, and will use their best efforts to achieve their annual operational targets, including their manpower targets, and their annual financial targets (paras 3.25 and 5.06); and (iv) the RTOs will appoint project managers to be responsible for an agreed list of works at each RTO (para 2.15). 6.02 The following will be conditions of effectiveness of the proposed loan: (i) The completion of all measures necessary for the required tariff increases to become effective at the beginning of 1984 (para 5.06); (ii) the approval by the appropriate authority (Assembly or Workers Council) of the investment plans and financing plans as transmitted to the Bank (para 3.05); (iii) the approval by the borrowers of the action plans, including opera- tional plans, as transmitted to the Bank (para 3.25); and -48- (iv) assurances from each of the Republics and Provinces of funds as required to enable its respective RTO to complete the investments on which the Bank Loan is to be disbursed (para 3.18). 6.03 Based on the above agreements, the project is suitable for a Bank loan of USllO million for a period of 15 years including three years of grace. -49- ANNEX 1 Page 1 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Action Plans and Operational Plans Action Plans 1. The Action Plans for the Fifth Project covered the following matters for all RTOs for the period up to 1980: (a) measures needed to attain financial targets; (b) measures necessary to achieve annual operational and productivity targets; (c) manpower plans covering departmental and section requirements, re-training needs, planned reductions and recruitment and retirement; (d) studies for actions on uneconomic lines; (e) execution of a study for electric locomotive maintenance; (f) operational plans for signalling and for telecommunications, for traction and rolling stock, for track overhaul of track, for data processing and for integrated transport; and (g) rail costing study. The four RTOs' updated Action Plans, dated April 1983, are structured as those for the Fifth Project. Based on actual figures for 1982 they determine agreed financial, operational and productivity targets for 1984, 1985 and 1986. The Action Plans will be reviewed annually. Operational Plans General 2. As part of their Action Plans, the RTOs in collaboration with CYR have prepared Operational Plans, which require updating as follows: (a) the plans for traction and rolling stock should be updated annually; (b) the data processing plan should be updated by the end of 1983; and (c) the plan for integrated transport should be updated by the end of 1983. -50- ANNEX 1 Page 2 Operational Plans for Traction and Rolling Stock 3. Each Operational Plan estimates equipment requirements based on an analysis of the traction and vehicle fleet, the proposed withdrawals during the planning period, planned improvements in the quality of service, and forecasts of traffic and vehicle utilization, the latter represented by agreed productivity ratios and targets. These estimates are shown for all four RTOs and all types of vehicles in Table 3.1. They also take into account that, in some cases, actual productivity figures are particularly low because of special temporary conditions, e.g. delays in spare part procurement from abroad, as well as fundamental differences between the RTOs in maintenance capabilities and operational conditions, which cannot be completely eliminated during the planning period. 4. One example illustrates the analysis on which the procurement of additional traction stock is based. It compares the estimated operational production volumes in gross ton kilometres per year with the gross ton kilometres expected to be performed by the existing traction fleet. The method of calculation is shown below in detail for RTO Sarajevo. 5. The targets for availability of locomotives and their average performance have been agreed with the RTOs. Availability depends on the age and quality of the fleet and on maintenance facilities and procedures. Average performance depends on scheduling constraints and seasonal and other traffic variations. Improvements in availability and average performance are planned for all RTOs during the project period. Based on the uncovered GTKM/year, the required increase of stock is calculated. In order to meet all traffic demands, traction and rolling stock should be available at end of the year preceding the demand. 6. The procedure used for rolling stock is illustrated by the table below, which relates to RTO Sarajevo's freight wagons. The method is based on the comparison of the required capacity for carrying the forecast freight traffic and of the total capacity of the existing fleet. The required capacity was calculated by means of the productivity ratio of freight wagons in NTKM per ton capacity per year, which includes improvements in turnaround time. The targets derived from the actual figures for 1980 and 1981 are satisfactory both in level and increasing tendency. The total capacity of the fleet was derived from the freight wagon fleet analysis which form parts of the Operational Plan. The figure is amended from year to year by deduction of the capacity withdrawn and by addition of the capacity procured in the previous year. The age structure review and the withdrawal plan form also part of the Operational Plans. The result of the comparison is the required additional capacity. This figure was divided by the average capa- city of one new wagon. This average value was obtained by a calculation based on the detailed procurement plan for the whole planning period which form parts of the Operational Plans. 7. The procurement of traction and rolling stock included in Part A of the Investment Plans for all four RTOs was based on analyses similar to those given above. Procurement, which requires further review, has been included in Part B of the Investment Plans. -~ ANNEX 1 YUOSSIAVIA STAFF APPPAISAL REPOET OF A SIZ'GH RAILAY PROJEC7 RIO SARAjEVO Saumary of Operational Plan for Electric comotives and Freight Wagons 1981 1982 1983 84 1985 1986 ELECTRIC "UHFIVES A. Passenger Traffic UIKM4 (million) A 2230.50 2322.60 2256.80 2301.60 2347.80 2396.80 B. Freignt Traffic 9IM (million) B 8182.60 8297.20 a- 5.80 8746.90 8906.40 9176.40 C. Total Traffic GMfI (million) C-A+3 10419.10 10619.80 10752.60 11048.50 11254.20 11573.20 D. Existing Fleet Capacity GTI (million) D 12321.56 13503.72 13113.78 12435.00 12988.40 12472.90 E. Locomotives Availability E 0.85 0.78 0.82 0.86 0.87 0.88 F. Operating Fleet Capacity GI4 (million) All types of Locowotives F=DKE 10473.33 10532.90 10753.30 10694.10 11299.91 10976.15 G. No, New Locxmotives Purchased Previous Year G 0.00 0.00 0.00 6.00 0.00 0.00 H. Locomotives Kma per Day H 417.00 475.00 450.00 455.00 458.00 464.00 1. Average Train Weight 1 746.00 720.00 728.00 737.00 747.00 759.00 J. Annual GTNA, New Loccmotives GM (10x6) J-(hdirlx365 :1,000,000 0.00 0.00 0.00 734.38 0.00 0.00 K. Total New Operating Locoaotives Capacity GIKA (million) K=F+J 10473.33 10532.90 10753.30 11428.48 11299.91 10976.15 L. Urcovered GTM (million) L=C-K -54.23 86.90 90.70 -379.98 -45.71 597.05 M. Uncorered Operating GIM (million) L: --63.80 111.41 -0.85 -441.84 -52.54 678.46 N. Required No. of Locomotivs N=M:H:i365 xl,000,00 .-056 0.89 -0.01 -3.61 -0.42 5.28 FREIGHT WAGONS A. Traffic Volune NTKM (10x6) A 4423.00 4534.00 4668.00 4806.00 4948.00 5098.00 B. Prodxtivity of Wagpos N11K*/t Capacity B 13338.00 13754.00 14169.00 14585.00 15000.00 15100.00 C. Required Capacity Available Fleet C=A:8 331608.94 329649.56 329451.62 329516.63 329866.67 337615.89 0. Availability of Wagons D 0.87 0.89 0.90 0.91 0.92 0.93 E. Required Capacity Total Fleet E-C.D 381159.70 370392.76 366057.36 362106.18 358550.72 363027.84 F. Capaity of Fleet End Previous Year F 0.00 332351.00 345241.00 349731.00 350525.00 350395.00 G. Witndrawals G 0.00 3910.00 3910.00 3910.00 3910.00 3910.00 H. Capacity of Fleet after Withdrawals -=F-- 332351.00 328441.00 341331.00 345821.00 346615.00 346485.00 1. No. New Wagons Previous Year 1 0.00 400.00 200.00 750.00 0.00 0.00 J. Average Capaity of New Wagxs J 42.00 42.00 42.00 42.00 42.00 42.00 K. Capacity of New Wagons Kz=ixi 0.00 16800.00 8400.00 31500.00 0.00 0.00 L. Capacity Existing Fleet Including Withdrawals and New Wagons L=H+K 332351.00 345241.00 349731.00 377321.00 346615.00 346485.00 M. Required Capacity of Fleet +E-L 48808,70 25151.76 16326.36 -15214.82 11935.72 16542.84 N. Required No. of New Wagons N-4J 1162.11 598.85 388.72 -362.26 284.18 393.88 -52- ANNEX 1 Table 1 Page 1 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Selected Operating Statistics for 1979, 1980 and 1981 Belgrade Novi Sad 1979 1980 1981 1979 1980 1981 1. Lengn of Line, Total km 1,889 1,889 1,889 1,579 1,463 1,463 II. Traffic Passenger km mil 2,165 2,264 2,215 931 957 972 Net ton-km mil 4,591 5,073 5,333 2,943 2,948 3,109 Passenger gross ton-km mil 3,594 3,624 3,649 1,550 1,486 1,484 Freight gross ton-kmn mil 9,693 10,604 10,609 6,105 5,896 6,018 Total gross ton-km M'il 13,287 14,228 14,258 7,655 7,382 7,502 Total gross con-km per km of line nil gt 7.03 7.53 7.54 4.85 5.04 5.10 Gross tonne km by type of traction Electric - Quantity Mil 9,268 10,418 10,219 2,892 3,022 3,234 - Percentage of Total x 69.7 73.2 71.7 37.8 40.9 43.1 Diesel - Quantity mil 3,031 2,985 3,389 3,786 3,581 3,570 - Percentage of total % 22.8 21.0 23.7 49.5 48.5 47.6 Steam - Quantity mil 635 529 240 708 518 437 - Percentage of Total 2% 4.8 3.7 1.7 9.2 7.0 5.8 Self-propelled - Quantity mIl 353 296 410 269 262 261 - Percentage of Total % 2.7 2.1 2.9 3.5 3.6 3.5 III.Traction Stock Electric locomotives - Number 126 130 128 26 32 36 - Availacility % 84 86 86 80 79 80 Diesel locomotives - Number 105 111 111 77 80 84 - Availability % 78 80 81 82 77 74 Steam locomotives - Number 68 65 61 73 72 70 - Availability % 65 55 46 67 61 60 Elecrric motor trains - Number of sets 2 5 9 - - - - Availability % 50 60 68 - - - Diesel motor trains - Number of sets 6 6 6 - - - - Availability % 70 70 70 - - - Diesel railbuses - Number of sets 43 42 42 67 66 66 - Availability % 78 75 75 80 82 80 Sarajevo Skopje 1979 1980 1981 1979 1980 1981 I. Lengtn of Line, Total km 1,033 1,033 1,033 673 673 673 11. Traffic Passenger km mil 1,332 1,421 1,491 369 358 349 Net ron-km mil 4,737 4,350 4,423 849 742 748 Passenger gross ton-km mil 1,661 2,152 2,146 557 584 555 Freight gross ton-km mil 8,856 8,010 7,474 1,872 1,492 1,538 Total gross ton-km mil 10,517 10,162 9,620 2,429 2,076 2,093 Total gross ton-km per km of line Mit gt 10.18 9.84 9.30 3,61 3.09 3.10 Gross tou:ie Km by type of traction Electric - Quantity mil 6,542 6,496 7,374 586 508 446 - Percentage of Total % 62.2 63.9 70.7 24.1 24.5 21.3 Diesel - Quantity mil 3,647 3,196 2,505 1,694 1,381 1441 - Percentage of total % 34.7 31.5 24.0 69.7 66.4 689 Steam - Quantity mil - - - - - - - Percentage of Total % - - - - - Self-propelled - Quantity mil 328 470 547 149 190 206 - Percentage of Total % 3.1 4.6 5.3 6.2 9.1 9.8 III.Traction Stock Electric locomotives - Number 69 77 77 11 10 9 - Availability % 79 78 85 81 84 82 Diesel locomotives - Number 118 98 89 28 28 28 - Availability % 87 89 88 64 75 67 Steam locomotives - Number 4 4 1 - - - - Availability % - - - - - Electric motor trains - Number of sets 20 22 22 - - - - Availability % 80 72 59 - - - Diesel motor trains - Number of sets - - 18 18 18 - Availability % - - 52 77 87 Diesel railbuses - Number of sets 24 20 12 15 13 13 - Availability % 86 84 83 71 80 62 Source: RTOs' Investment Plans -53- ANNEX I Table 1 Page 2 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Selected Operating Statistics for 1979, 1980 and 1981 Belgrade ovi Sad 1979 1980 1981 1979 1980 1981 IV. Rolling Stock Passenger coaches, including Self-propelled coaches 831 673 699 295 292 272 Seating capacity of fleet 000 44.0 43,0 44,4 9.0 10,0 9,6 Availability Z 72 75 75 75 75 78 Freight wagons 8366 8240 8311 5,922 5,852 5,894 Carrying capacity of fleet 000 t 311.8 31,.0 313.6 213.2 214.5 216.3 Average wagon capacity t 37.3 37.8 37.7 36.0 36.6 36.7 Availability % 84 86 87 90 90 91 V. Utilization of traction and rolling stock Av. daily performance of available engine, Passenger Electric locomotives km/day 532 535 535 611 521 530 Diesel locomotives km/day 436 450 450 449 426 435 Steam locomotives km/day 212 214 214 122 121 159 Electric mocor trains kn/day 450 487 487 - - - Diesel motor trains km/day 415 410 410 - - - Diesel railbuses km/day 415 410 410 356 359 360 Av. daily performance of available engine, Freight Electric locomotives kn/day 280 284 284 389 328 309 Diesel locomotives km/day 228 235 242 2"^ 745 230 Steam locomotives km/day 102 94 94 128 94 116 Passenger kilometers per coach mil km/year 3.21 3.36 3.16 5.8 6.0 6.4 Passenger ilonmeters per seat 000 km/year 49.2 51.9 50.7 103.4 95.7 101.2 Net ton-om per freight wagon 000 ntkm/year 416 478 470 451.9 503.8 528.9 Net ton-ln per ton capacity of - fleet 000 ntkn/t yr 13.9 14.2 14.3 13.6 13.8 14.4 Average load per loaded freight wagon t 22.3 22.3 22.7 22.0 22.1 22.6 Turnaround time of freight wagons days 3.3 3.3 3.4 2.3 2.3 2.2 VI. Staff RTO's staff without BOALs with separate accounting 24,835 25,236 25,163 12,841 12,387 12,378 Employees per km of line 13.1 13.4 13.3 8.1 8.5 8.5 Traffic units per employee 272.0 290.7 300.2 301.7 315.2 317.5 Sarajevo Skopje 1479 1980 1981 1979 1980 1981 IV. Polling Stock Passenger coaches, including Self-propelled coaches 445 448 424 177 170 168 Seating capacity of fleet 000 26,7 28,2 28.1 11,3 10,9 10,7 Availability % 75 76 75 78 90 88 Freight wagons 5,925 8,137 8,337 2,406 2,280 2,262 Carrying capacity of fleet 000 t 324.9 336.6 343.2 106.0 104.0 103.2 Average wagon capacity t 40.9 41.4 41.6 44.1 45.6 45.6 Availability % 78 90 87 90 93 90 V. Utilization of traction and rolling stock Av. daily performance of available engine, Passenger Electric locomotives km/day 490 1/ 498 1/ 507 379 536 484 Diesel locomotives km/day 347 1/ 376 1/ 298 323 413 415 Steam locomotives am/day - - - - - Electric motor trains km/day 308 310 683 - - - Diesel motor trains km/day - - - 370 392 400 Diesel railboses km/day 335 483 438 396 320 280 Av. daily performance of available engine, Freight Electric loconoives km/day - - 376 357 314 313 Diesel locomotives km/day - - 247 319 298 300 Steam locomotives km/day - - - - - Passenger kilometers per coach mil km/year 3.0 3.2 3.5 2.1 2.1 2.1 Passenger kilometers per seat 000 km/year 49.9 50.4 53.1 32.7 32.8 32.6 Net ton-am per freight wagon 000 ntkm/year 597.7 534.6 530.5 352.9 325.4 330.6 Net ton-km per ton capacity of fleet 000 ntkm/t yr 14.6 12.9 12.9 8,0 7.1 7.2 Average load per loaded freight wagon t 27.8 27.9 30.5 23.9 23.0 23.0 Turnaround time at freight wagons days 2.9 3.0 2.9 2.3 2.7 2.8 VI. Staff RTOs staff without BOALs with separate accounting 15,873 15,230 15,306 5,131 5,151 5,258 Employees per km of line 15.4 14.7 14.8 7.6 7.7 8.3 Traffic units per employee 382.3 378,9 386.4 237.5 207.7 208.6 1/ Km per day for passenger and freignt service Source. RTOs' Investment Plans YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Traction and Rolling Stock Fleet at the End of 1980 and Planned Withdrawal and Procurement in 1981-1986 RTO BELGRADE NOVI SAD SARAJEVO SKOPJE Stock With- Stock With- Stock With- Stock With- at draw. Procurement at draw. Procurement at draw. Procurement at draw. Procurement December 1981- 1981-1986 December 1981- 1981-1986 December 1981- 1981-1986 December 1981- 1981-1986 31, 1980 1986 PlanAjPlanB 31, 1980 1986 PlanA PlanB 31, 1980 1986 PlanA PlanB 31, 1981 1986 PlanA PlanB Electric locomotives 130 - - - 10 32 -/1 - 5 - 77 - /1 - 6 14 9 - /1 1 /2 2 4 Diesel line locomotives 62 (37) - - - 27 (10) 10 2 2 52 - 18 - - 28 (4) 13 - - Diesel snunting locomotives 49 (5) - 35 - 53 (22) 22 - - 46 (5) - - 18 (6) - 3 - Steam locomotives 65 (65) 65 - - 72 (72) 72 - - Electric motor trains (sets) 5 - - 12 - - - - - - 22 - - - - - - - - - /3 Diesel motor trains (sets) 6 - - - - - - - 5 5 - - - - - 18 - 3+2 7 Diesel railbuses (sets) 42 (29) 42 - - 66 (59) 46 - - 20 (17) 20 - - 14 (11) 7 - - TOTAL 559 (357) 223 23 47 159 (59) 55 28 - 330 (90) 20 20+4 30 88 (32) 35 15 - Passenger - ------ coaches 4-axle 435 (261) 128 83 (13) 9 180 (48) 1 72 (26) 18 2-axle 124 (96) 96 76 (46) 46 150 (42) 19 16 (6) 16 Freight wagons TOTAL 8240 (4395) 1317 3000 - 5852 (3749) 1052 1090 30 8142 (3608) 865 1350 1050 2280 (841) 115 192 228 4-axle 3178 2238 - 2025 620 30 3914 330 580 1346 177 214 2-axle 5062 762 - 3827 458 - 4228 1020 470 934 15 14 covered 3242 (1020) 432 2567 (1409) 685 1100 (593) 45 860 (218) 35 31 open 4615 (3090) 536 2683 (1852) 286 5676 (2808) 676 1130 (590) 70 37 other 383 (285) 349 602 (488) 81 1366 (207) 314 290 (33) 10 124 /1 The figures in brackets are the locomotives, coaches and wagons built before 1965 (older than half of an average lifetime of 32 years). T2 Total loss by accident. 73 2 diesel motor trains ordered in previous Investment Plan period, delivery in 1982. 7T Sleepers. Source: RTOs' Operational Plans -55- ANNEX 1 Table 3 Page 1 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Operational Data for 1981 and Targets for 1984, 1985 and 1986 RTO; Belgrade Novi Sad Year. 1981 1984 1985 1986 1981 1984 1985 1986 Gross/net ratio gtkm 1.65 1.56 1.50 1.46 1.52 1.46 1.40 1.38 Passenger service per pkm Gross/net ratio gtkm 1.99 1.93 1.92 1.90 1.93 1.86 1.80 1.78 Freight service per ntkm Electric locomotives Availability % 86 80 85 88 80 92 93 93 Passenger service Performance km/day 535 558 563 569 530 590 610 615 Train load t 430 430 430 430 480 484 488 490 Electric locomotives Availability % 86 80 85 88 80 92 93 93 Freight service Performance km/day 284 329 332 336 309 340 360 370 Train load t 940 960 1,000 1,000 1,000 1,031 1,050 1,055 Diesel locomotives Availability % 81 79 82 85 74 88 90 90 Passenger service Performance km/day 450 497 502 507 435 446 450 460 Train load t 240 235 235 235 335 342 350 355 Diesel locomotives Availability % 81 79 82 85 74 88 90 90 Freight service Performance km/day 240 255 260 265 230 276 315 340 Train load t 870 870 870 870 825 850 907 910 RTO: Sarajevo Skopje Year: 1981 1984 1985 1986 1981 1984 1985 1986 Gross/net ratio gtkm 1.50 1.40 1.40 1.38 1.59 1.51 1.47 1.44 Passenger service per pkm Gross/net ratio gtkm 1.85 1.82 1.80 1.78 2.06 1.80 1.78 1.78 Freight service per ntkm Electric locomotives Availability % 85 86 87 88 82 85 86 90 Passenger service Performance km/day 507 544 547 554 484 490 510 515 Train load t 386 364 370 378 423 428 430 430 Electric locomotives Availability % 85 86 87 88 82 85 86 90 Freight service Performance km/day 376 410 415 420 313 390 390 400 Train load t 990 985 990 1,005 904 944 949 951 Diesel locomotives Availability % 88 88 89 89 67 82 85 88 Passenger service Performance km/day 289 229 /1 229 208 415 420 425 430 Train load t 183 145 /1 145 145 364 213 /1 213 213 Diesel locomotives Availability % 88 88 89 89 67 82 85 88 Freight service Performance km/day 247 200 195 195 300 320 325 330 Train load t 932 920 915 915 888 782 /1 786 790 /1 Low figure and decrease are due to the replacement of diesels by electric locomotives. Source: RTOs ANNEX 1 -56- Table 3 Page 2 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Operational Data for 1981 and Targets for 1984, 1985 and 1986 RTO: Belgrade Novi Sad Year: 1981 1984 1985 1986 1981 1984 1985 1986 Availability % 68 80 90 93 - 95 95 95 Electric motor Performance km/day 487 487 600 610 - 405 410 415 trains Seat occupation % 52 55 60 60 - 60 60 60 rate Availability % 70 76 81 85 /3 95 95 95 Diesel motor Performance km/day 410 415 420 420 T 405 410 415 trains Seat occupation % 52 56 60 60 73 55 60 60 rate Availability % 75 79 81 83 78 87 90 92 Pass. coaches Performance km/day 360 377 381 385 396 406 410 414 (classical) Seat occupation % 54 58 58 58 62 66 66 66 rate Freight wagons Availability % 87 90 91 92 91 94 95 95 Productivity/1 ntkl/year per t 14.3 14.9 15.1 15.2 15.3 15.8 15.9 16.0 capacity (000) Turnaround time/2 days 3.31 3.1 3.1 3.0 2.2 2.2 2.15 2.1 RTO: Sarajevo Skopje Year: 1981 1984 1985 1986 1981 1984 1985 1986 Electric motor Availability % 59 72 73 75 - - - - trains Performance km/day 683 615 625 625 - - - - Seat occupation % 52 60 60 60 - - - - rate Diesel motor Availability % - - - - 87 90 90 90 trains Performance km/day - - - - 400 418 418 418 Seat occupation % - - - - 49 52 53 54 rate Pass. coaches Availability % 75 85 90 92 88 91 91 92 (classical) Performance km/day 360 380 390 400 297 310 315 315 Seat occupation % 55 59 60 60 63 61 59 59 rate Freight wagons Availability % 87 91 92 93 90 90 91 92 ProductivityLl ntkm/year per t 12.9 14.4 15.0 15.1 6.8 7.8 8.2 8.4 capacity (000) Turnaround time/2 days 2.9 2.8 2.8 2.8 2.8 2.8 2.8 2.8 /1 Productivity per t capacity of all wagons in operation in the RTOs. /2 Calculated figure for the RTOs /3 Trains planned for procurement. Source: RTOs -57- ANNEX 2 Page 1 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Transportation Projects Previously Financed by the Bank Previous Projects 1. So far, the Bank has lent US$1,248 million in total to the trano- port sector, including US$629 million for eleven highway projects, US$108 million for two pipeline projects, US$382 million for six railway projects, US$44 million for the Bar Port Project, and US$85 million for earthquake rehabilitation assistance for restoring damaged roads, railways, and a port in SR Montenegro. Highway Projects 2. The First Highway Project (Loan 344-YU), US$35 million) in 1963 financed the completion of the coastal section of the Adriatic Highway (422 km) and parts of the Belgrade-Nis road (174 km). The Second Highway Project (Loan 485-YU, US$10 million), financed in 1967, was for the improvement of 367 km of roads connecting the Zagreb-Belgrade highway via Sarajevo and Tuzla with the Adriatic highway. Both projects were completed within the original cost estimates and agreed time schedules. The Third Highway Project (Loan 608-YU, US$30 million), financed in 1969, comprised about 120 km of roads in Croatia, Macedonia and Slovenia, and was completed in August 1974 with a 20-month delay, primarily due to delays in completing an access road, but which did not impede the operation of the main highway. This' project had an 8% cost overrun because of inflation and foreign exchange adjustments. The Fourth Highway Project (Loan 678-YU, US$40 million) was financed in 1970 for the construction of about 220 km of roads in Bosnia Herzegovina, Kosovo, Montenegro, Serbia and Vojvodina. Because of expropriation problems in the section of Bosnia-Herzegovina, the project was completed in December 1975 with an 18-month delay. There was a 12% cost overrun due to inflation and foreign exchange adjustments. The Fifth Highway Proejct (Loan 751-YU, US$35 million) became effective 8 months late due to Government administrative delays. The project comprises 153 km of roads in Kosovo, Macedonia and Slovenia, procurement of US$1.7 million worth of engineering equipment, consultant's services and a staff training compo- nent to improve highway planning and project preparation. All roads are open for traffic. The engineering equipment has been delivered and the consultant's services were completed satisfactorily. The staff training component was delayed because of difficulties encountered in securing training of candidates in the head office of foreign consultants and in foreign institutes and because of language problems (insufficient candidates proficient in English). Consequently, a restricted program was adopted. -58- ANNEX 2 Page 2 Because of the delay in training, the project was completed by the end of 1977, involving a delay of about 15 months. This project had an 8% cost overrun because of the combined effect of inflation and foreign adjust- ments. The loan for the Sixth Highway Project (Loan 990-YU, US$30 million) was made in May 1974 and became effective six weeks later than estimated in December 1974. The project finances six road sections in Bosnia-Herzegovina, totalling 150 km, the training of transportation economists and road engineers and US$1.1 million worth of engineering and laboratory equipment. The loan for the Seventh Highway Project (Loan 1143-YU, US$40 million) was made in July 1975 and became effective in March 1976. The project comprised about 90 km of road construction in Slovenia, Serbia and Montenegro, and US$0.1 million worth of technical assistance to improve preparation of highway feasibility studies and to provide a related training program. The project was completed by the end of 1979. The Eighth Highway Project (Loan 1377-YU, US$56 million) was made in April 1977 and became effective in September 1977. The project comprised about 130 km of roads in Serbia, Bosnia-Herzegovina, Macedonia and Kosovo, studies by consultants of road user charges and rail costs and technical assistance for the preparation of a highway master plan for Kosovo. All road work is completed and the loan closed March 1981. Both the Seventh and Eighth Highway Projects focused on improving section of the Trans-Yugoslav Highway (TYH), which was to become the primary objec- tive of later projects, while at the same time promoting regional development by improving selected regional roads in lesser developed areas. The Ninth Highway Project (Loan 1535-YU, US$80 million) was made in April 1978 and became effective in August 1978. The project comprises construction of four highly congested sections of TYH in Slovenia, Croatia and Serbia, totalling about 86 km, and the procurement of equip- ment for maintenance and for monitoring loadings of vehicles using the primary highway network, including TYH. All road work was completed by January 1982 and the final delivery of highway maintenance equipment and weighing scales was made in December 1982. The loan for the Tenth Highway Project (Loan 1678-YU, US$148 million) was made in April 1979 and became effective in August 1979. It comprises the first phase (a three- year tranche from mid-1979 to mid-1982) of the 1979-85 highway sector programs of five participating Republics and Provinces. The monitoring and evaluation units have been established. Although all road contracts have now been awarded, construction is suffering from delays of about one year due to a shortage of local funds. A request for a postponement of the loan closing date to September 30, 1984, has been submitted to the Bank. The loan for the Eleventh Highway project (Loan 1819-YU, US$125 million) was made in April 1980 and became effective in August 1980. It comprises construction of six sections of the TransYugoslav Highway (TYH) with controlled access facility in four Republics and Provinces, total- ling about 164 km, and the procurement of highway maintenance and road monitoring equipment, technical assistance and a highway safety program. Although execution is facing delays of up to 18 months because of a shortage of local funds, progress varies -59- ANNEX 2 Page 3 according to the individual participants, Slovenia having only just started their component while Serbia is 75% complete A request for a postponement of the closing date to June 30, 1985, has been submitted to the Bank. Construction work for nine highway projects has been satis- factorily carried out. Delays in execution of works on the two on-going projects reflect constraints in the overall financial situation in Yugoslavia since 1981. Naftagas and Oil Pipeline Projects 3. The loan for the Naftagas Project (Loan 916-YU, US$59.4 million) was made in June 1973, but, due to organizational reform within the Enterprise, became effective only in March 1974 after six months' delay. The project is for the expansion of the gas transmission and distribution systems in Serbia and Vojvodina by provision of gas field compressors, pipelines, treatment plants and distribution rings. The supply of natural gas will come from gas fields in Vojvodina and from Hungarian imports. Because of a substantial increase in the project costs and a reallocation of priorities in the use of natural gas which caused the elimination of some consumers, who withdrew their finances from the project, the imple- mentation of the project will be implemented in 3 phases, only the first 2 being taken up at this stage. The additional funds required were to be provided by agencies in Yugoslavia and by a supplementary loan of US$11 million from the Bank under the Sarajevo Air Pollution Control Project, Loan 1264-YU. Construction restarted in the latter half of 1976, but progress has been slow. Phase I was scheduled for completion by December 1978 and Phase II by June 1979. However, because of procedural and political difficulties Phase I is in operation now and Phase II is likely to be delayed until the middle of 1983. The loan for the Oil Pipeline Project (Loan 1173-YU, US$49.0 million subsequently revised to US$48.5 million) was made in November 1975 and became effective in July 1976 after four months' delay. The project comprises the construc- tion of an oil port on the Adriatic coast at Omisalj, near Rijeka, as well as oil storage tank farms, pumping stations, and the pipelines running from the port through Croatia and Vojvodina and to the Hungarian border to transport crude oil to the refineries in Yugoslavia, and to Hungary and Czechoslovakia. The project was to be completed in two stages: Stage I to provide a yearly capacity of 16 million tons; and Stage II, 20 million. Stage I was completed with a delay of 18 months and the project as a whole in December 1979 with a delay of 7 months due to problems of design and procurement. The loan was closed in March 1981. Port of Bar Project 4. The loan (Loan 1060-YU, US$44 million) was made in November 1974 to finance port development and related railway facilities. The loan became effective on June 13, 1975. All works have been completed and the loan was closed in Decemmber 1981. -60- ANNEX 2 Page 4 Earthquake Rehabilitations (Transportation Facilities) 5. The Montenegro Rehabilitation Project for Earthquake Damage, Roads (Loan 1759-YU, US$21 million) was made in September 1979 and became effective in December 1979. The project was completed on schedule at the end of 1982 and the loan has been fully disbursed. The Montenegro Rehabilitation Project for Earthquake Damage, Ports (Loan 1768-YU, US$50 million) was made in November 1979 and became effective in April 1980. Civil works are in progress and should be completed early in 1983. Pro- curement of equipment has been delayed and delivery is expected to be completed by mid-1984. Since the present closing date is December 31, 1982 the Borrower is requesting an appropriate extension of the closing date. The Montenegro Rehabilitation Project for Earthquake Damage, Railways (Loan 1769-YU, US$ 14 million) was made in November 1979 and became effective in April 1980. It comprises repair and restoration of railway facilities damaged by the earthquake and the expansion of railway yards at Bar and Titograd. Most of the works are on schedule. Delay on some parts have been due to the fact that much more time than anticipated has been necessary for design and geological works, while the need for work under traffic has also hampered progress. The project is expected to be completed in October 1983. Railways 6. The First Railway Loan was made in 1963 (Loan 316-YU, US$35 million) to finance the conversion of the 195 km Sarajevo-Ploce line to standard gauge, with electric traction' and modern signaling and telecommu- nications. The project was substantially completed and put into operation in 1970, with a delay of four years. 7. The Second Railway Loan (Loan 395-YU, US$70 million) was made in 1964 to help finance the modernization of 1,509 km of main lines traversing Yugoslavia from the Austrian and Italian borders to the Greek border. It includes electrification, signaling, telecommunications, and six key marshalling yards. This project ran into major difficulties because after the 1965 political and economic reforms the railways' internal funds fell substantially below expectations, but also because of deficiencies in project planning and preparation which resulted in an underestimate of quantities and of time needed for completion of such an extensive project. With hindsight, this was much too ambitious a project in relation to the railways' resources. The Bank loan was fully disbursed in 1972; the project was refinanced from the fourth railway loan (para. 9 of this annex) and was completed in 1981 at a total cost of about US$410 million, over twice the original cost estimate in US dollar terms. 8. The Third Railway Loan made in 1968 (Loan 531-YU, US$50 million) helped to finance construction of 370 km of the Belgrade-Bar line, with electrification, signaling and telecommunications for the entire 475-km -61- ANNEX 2 Page 5 line. This was a project of great technical complexity involving the construction of over 300 tunnels and several major bridges; these civil works were undertaken satisfactorily by local contractors. Completion was originally scheduled for 1973 but geotechnical and other construction difficulties delayed the opening of the line till 1976, and the project was completed in December 1978. Technical problems and inflation aggrava- ted by delays raised the cost of the project in US dollar terms to US$422 million. 9. Because of problems on the second project, the Bank, in agreement with the Yugoslav authorities, undertook .a comprehensive study of the railways with the assistance of consultants. This prepared the ground for the Fourth Railway Project (Loan 1026-YU, US$93 million), agreed in 1974, under which the Bank's loan was allocated to the completion of the 1964 Modernization Program and to "Related Investments" needed to maximize its benefits, all to be completed by the end of 1976. However, in contrast with earlier projects which consisted only of investments to which the Bank loan had been allocated, the fourth project was defined as the totality of the railways' investments in 1974-76, whose cost was estimated at US$1,138 million; the Bank loan thus amounted to about 12% of project cost. Agreement was reached on measures to resolve the railways' financial problems, principally by tariff increases. An important feature of the project was the preparation of comprehensive Action Plans which, given Yugoslavia's decentralized system, were designed to contribute to a common understanding of objectives and responsibility by all concerned. 10. Only about two-thirds of project investments were executed by the end of 1976; however, they were reasonably balanced to maximize system effects, and the remainder were included in the 1976-80 Investment Plan. Execution of Bank-financed "Related Investments" was substantially better (about three quarters), and the electrification of the main line traver- sing Yugoslavia from the Austrian and Italian borders to the Greek border was completed under the 1964 Modernization Program. Works were completed satisfactorily in mid-1981 and the loan was closed on June 30, 1981. 11. The Fifth Railway Loan (Loan 1534-YU, US$100 million) was made in April 1978; it became effective in September 1978. The project consists of a three-year (1978-80) portion of the eight railways' investment plans 1976-80. Its principal objective was to improve further the efficiency and the competitive position of the railways by 1,285 km of track overhaul or, reconstruction of 93 km of route conversion from single to double track, electrification of 314 kIn, equipping of 53 km with modern signaling, installation of automatic block on 434 km, technical assistance and staff training. Execution of the project was on schedule for about 90 percent. Track overhaul and especially reconstruction of some line sections were delayed due to administrative and financial difficulties, the latter beginning in 1980. -62- ANNEX 2 Page 6 The Bank-financed items of the investment plans 1976-80 were completed in mid-1982, while the non-Bank financed projects are scheduled to be completed by the end of 1982. Track maintenance machines will be delivered within the next six months. The project period was extended by one year. The closing date is now June 30, 1983. 12. The Kosovo Railways Loan (Loan 1977-YU, US$34 million) was made in May 1981 and became effective in November 1981. The project comprises the 1981-83 slice of the railways investment plan 1981-85. Its principal objective is helping improve the operating capacity and efficiency of the rail network in Kosovo, which is the weakest part in the Yugoslav railway system. The main components are reconstruction of Kosovo Junction, signaling and telecommunication on the line Lesak-Djeneral Jankovic, procurement of rolling stock and training and technical assistance to improve management and freight operations. Progress of works on the major parts of the project suffered delays of seven to nine months for various reasons. The obstacles have been resolved and final preparations for execution are completed. Works were to commence in September 1982 and are scheduled to be completed by the end of 1984. The closing date is December 31, 1984. -63- ANNEX 3 Page 1 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Tariffs and Compensation 1. The "enterprise income" (i.e. revenues earned from freight tariffs and passenger fares) of every RTO is less than "operatinf/ expenses" (i.e. materials cost and depreciation) and interest payments.. For the four RTOs in this project taken together, tariff revenues in 1981 covered 83% of operating expenses, or 79% when interest charges are included. The operating deficits, as with many railways elsewhere, result partly from governmental decisions as to the level and structure of ralway prices, the imposition of certain public service obligations on the railway, and the retention of excess staff. Railway freight rates are approved by the Federal Institute for Prices and passenger fares by the Republic governments. Decisions are, in the final analysis, made on the basis of macroeconomic and social judgments and not solely on factual information about the costs of providing services. The Federal Committee for Transport and Communications and the CYR play an important advisory role in preparing the Social Compacts or agree- ments which set railway prices. These administered prices adjust standard rail tariffs to serve a number of purposes, e.g. (i) by lowering rates to aid certain regions, industries or classes of travellers; (ii) converting actual kilometre distances into "commercial kilometres" for charging purposes in order to give more average revenue per ton-km or passenger-km to the smaller, less efficient RTOs and to reflect their different cost and traffic condi- tions; (iii) reducing rates on exports that have a high local labor, materials and technology content and to encourage transit traffic (forms of export subsidy). 2. The RTOs are compensated for revenues foregone as a result of such pricing decisions and provided with funds to meet part of their infra- structure maintenance and renewal costs by a self-determined levy on the incomes of those who are members of the COI.1/ The so-called compensation payments form a contracted obligation and are forecasted for three to five years ahead, subject to annual review in the light of cost and traffic experience. The rate of levy adopted varies from Republic to Republic. In Serbia, for example, it is a flat 1.75% on the 'enterprise income' of the BOALs and other working communities making up the COI; in Skopje it is 1/ The income statements of the RTOs and other enterprises in Yugoslavia are constructed in ways that differ from those in non-Socialist societies. -64- ANNEX 3 Page 2 0.7%; in Slovenia it is 3.6% on 'small' railway user enterprises and 1.5% on 'big' railway user enterprises--this may not necessarily be a subsidy because of differences in the costs involved. In Croatia, by contrast, there is a multitude of rates ranging from around 0.6% to 5.8% on the industrial and other economic activites in the Republic, including on the RTO itself as well as other transport modes since they may also use rail transport as part of their activities. 3. The compensation payments are an effort to devise a formula that will serve three purposes. First, to avoid protracted annual disputes between the railways, users and Government authorities about the level of subsidy to be paid--as happens in some countries--by having a simple, agreed formula. Second, to facilitate financial planning by the railway and COI members by giving railway management some degree of certainty about future income and the members about future commitments. And, third, to induce some sense of efficiency and service. to the public in railway mangement. In return for the compensation subsidy, the railways are expected to meet agreed productivity and service level standards (e.g. on-time running of trains or the numbers of wagons available daily) and if these are not achieved or traffic is below expected, compensation is reduced. If a financial deficit exists after payment of compensation, the RTO has to borrow from the banks or the Republic's Reserve Fund. In this latter case, the RTO has to show that it has tried to curb internal expenditures by, for example, saving on materials and, in the final analysis, on the personal incomes of the staff. 4. The existing arrangements have some financial discipline and efficiency stimulating effects that distinguish them from, and make them somewhat superior to, many railway subsidy financing schemes found elsewhere, but they have many weaknesses. Also, their high level and rate of growth from a system-wide total of 6.9 billion dinars in 1978 to 16.1 billion dinars in 1981 is of great national economic management concern 1/ This concept and rationale of railway compensation payment is similar to that in Articles 5 and 6 of a 1965 Decision by the Council of European Communities and in Regulations 1191/1192 of 1969 passed in pursuance of this Decision. Article 2 of a later (1975) EEC Council Decision states clearly "railway undertakings are to be managed accordance with economic principles." This is the same objective set out in the Bank's 'Railway Problem Paper' (1982) and towards which this project is aimed. -65- ANNEX 3 Page 3 to the Federal and Republic authorities.!' Payments are based on the 'enterprise incomest of COI members and not the actual costs incurred by the particular RTO for carrying traffic on their behalf. They do not relate to the costs of moving traffic on specific routes within and amG.g the RTOs and they do not separate out those lines or traffics which are or, with proper pricing, could be commercially viable from those that are being subsidized to carry traffic that might otherwise move by more economic modes. The existing system is probably full of cross-subsidies within and between the COI. Sufficient firm information on these judgments is not available, however, because the recommendations of the Rail Costing Study carried out under the Fifth Railway Project are still to be implemented nationv1de (para. 2.27). This must be done as early as possible since the pres:o compensation arrangements are attempting to maximize two separate objec- tives: Internal operating efficiency in the railways by their management, and socially optimum levels of railway prices, outputs and subsidies on the basis of decisions by other authorities. The existing arrangements attempt to relate these two objectives, but in doins so they dilute the financial decision powers and responsibility implied in selfmanagement of the railways and are not achieving the low cost-efficient railway system that is expected to serve the national economic and social objectives. 5. The Federal authorities, acutely aware and concerned about such problems, are seeking to develop and have the railways implement a more rational railway pricing policy. Furthermore, current pricing policies and compensation levels are recognized to be a contributory factor in current inflation and put pressure on public borrowing and lending ceilings. The aim of the Federal authorities is that the RTOs should cover the cost of 'simple reproduction' (i.e. operations, maintenance and renewal) and an agreed portion of resources needed for modernization and capacity expansion investments from their revenues. To this end, rail tariff classes were reduced in number from five to three and freight weight limits adjusted. The revisions made possible an increase in rail prices in 1981 of 13.8%--to which was added another 'across-the-board' 3.7%--but the total increase was still below the 25.2% asked for by the railways. A program envisaging increases in rail prices of 20% in 1982, 30% p.a. in 1983 and 1984, and 20% in 1985 was prepared in 1981. These were expected to be sufficient to cover general price level increases and to reduce significantly the compensation payment gap which was widening because in previous years rail prices had increased at a slower rate than inflation. The size of tariff increases needed to attain these aims has been overtaken by events. This is particu- larly so because inflation has been at a higher rate than expected. Federal authorities have stated that "problems in the area of transport prices, both as regards their level and the system of setting such prices, 1/ Table 3.1 presents past and projected compensation payments. -66- ANNEX 3 Page 4 are the chief cause of the socio-economic position of various railway transport organizations and of the majority of difficulties with which railways must contend."!/ The tariff increase of 17% in December 1982 followed by a further 15% in February 1983 are an earnest of their intent to deal with this problem. Accordingly, the Bank is strongly supporting the early introduction of better railway costing and cost based tariffs, and, in discussions, will agree to a program of rail price increases that is aimed at eliminating compensation payments in a phased approach which allows for different treatment by each RTO to reflect its particular economic and social circumstances. 1/ Action Program of CYR for Implementation of Resolutions of the Chamber of Republics and Provinces of the Federal Assembly, Belgrade, November 23, 1981. -67- ANNEX 3 Table 1 Page 1 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Compensation Paymentsll, Total Revenuesb/, and Percentage (current Dinars Million) c/ c/ RTO ITEM 1978 1979 1980 1981 1984 1986 - --- Actual -------- Forecast -- Belgrade Compensation 1,371 2,190 2,614 3,474 5,892 5,824 Total Revenue 5,423 6,796 8,503 12,218 25,810 38,484 % 25 32 31 28 23 15 Novi Sad Compensation 585 587 827 1,269 2,580 2,085 Total Revenue 2,711 3,192 3,983 5,576 13,673 20,434 % 22 18 21 23 19 10 Sarajevo Compensation 381 308 573 375 1,243 1,247 Total Revenue 3,840 4,798 5,599 7,188 18,311 29,062 10 6 10 5 7 4 Skopie Compensation 151 257 540 831 1,343 962 Total Revenue 1,205 1,384 1,887 2,530 5,930 8,683 % 13 19 29 33 23 11 Subtotal Compensation 2,488 3,342 4,554 5,949 11,058 10,118 Four RTOs Total Revenue 13,179 16,170 19,972 27,512 63,724 96,663 % 19 21. 23 22 17 10 a/ Compensation payments plus any residual deficit after interest charges. b/ Total revenue including compensation payments and reimbursement of any residual deficit. c/ Forecasts assume December to December inflation in Yugoslavia as 1983: 30%, 1984: 25%, 1985: 20%, 1986: 15%. Also assumed are tariff increases in January 1980 of 10%, and in January 1985 and 1986 of 6%, over the forecast increase in the Producer Price Index (Industrial) in the immediately preceding twelve months period. -68- ANNEX 3 Table 1 Page 2 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT a/ b/ Compensation Payments, Total Revenues, and Percentage (current Dinars Million) RTO ITEM 1978 1979 1980 1981 - - - - - - - - Actual - - - - - - - - Pristina Compensation 350 299 447 623 Total Revenue 603 670 841 1,162 58 45 53 54 Titograd Compensation 286 264 302 613 Total Revenue 537 666 874 1,222 % 55 40 35 50 Ljubljana Compensation 1,548 2,217 3,148 3,900 Total Revenue 5,330 6,712 8,939 11,484 % 29 33 35 34 Zagreb Compensation 2,273 2,832 3,696 5,066 Total Revenue 8,156 9,873 12,769 17,340 % 28 29 29 29 Total CYR Compensation 6,945 8,954 12,147 16,151 Total Revenue 27,805 34,091 43,395 58,720 % 25 26 28 28 a/ Compensation payments plus any residual deficit after interest charges. b/ Total revenue including compensation payments and reimbursement of any residual deficit. -69- ANNEX 4 Page 1 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Financial Details and Targets 1. Tables 1 to 12 of this annex show, for each of the RTOs, Income Accounts and Forecasts for years 1981 to 1986, Cash Flow, Balance Sheets and Forecasts for years 1980 to 1986. 2. Forecast working and operating ratios before compensation payments are as follows: Actual Forecast RTO 1981 1982 1983 1984 1985 1986 --- --- --- ------ --% ------------------- Operating Ratios Belgrade 132 137 131 120 115 109 Novi Sad 127 135 126 113 108 101 Sarajevo 100 106 105 98 94 90 Skopje 139 135 125 117 108 103 Working Ratios Belgrade 110 107 102 93 88 82 Novi Sad 107 114 107 97 91 84 Sarajevo 82 84 81 75 71 67 Skopje 112 103 97 88 82 76 3. Despite tariff increases in 1982 which were less than inflation, RTOs Belgrade and Skopje both forecast reductions in working ratios in that year. At Novi Sad, where rail traffic was affected most by the heavy import restrictions imposed by the Government during the year, working ratio is forecast to rise from 107 to 114 and operating ratio from 127 to 135 while RTO Sarajevo also forecasts a small rise in working ratio. Operating ratio at RTO Belgrade is forecast to rise in 1982 despite the forecast reduction in working ratio because of a new law increasing minimum depreciation rates on fixed assets. Forecast ratios at all four RTOs show a steady improvement in years from 1983 reflecting programs for stringent control of costs as well as real increases in tariffs each year. This is calculated to bring about a reduction in the level of compensation payments at all RTOs in accordance with an agreed program. -70- ANNEX 4 Page 2 4. This program for the progressive reduction and eventual elimination of compensation payments is in the form of annual targets for operating ratiosi/ based on operating revenues without compensation payments. The operating ratios forecast above have been adopted as targets for 1983 to 1986 with targets for subsequent years showing ratios reducing to 90 at all RTOs. 5. Forecast Rates of Return on Net Fixed Assets are shown below: Actual Forecast RTO 1981 1982 1983 1984 1985 1986 Belgrade 2.1 2.8 4.2 3.2 3.5 2.9 Novi Sad 2.6 4.0 12.2 11.4 10.0 11.4 Sarajevo 1.3 1.1 2.0 2.9 4.0 4.9 Skopje - 2.7 3.7 3.4 3.3 3.0 6. High rates of return at Novi Sad reflect the low net value of the generally old fixed assets in that RTO. Rates of return at all RTOs depend upon compensation payments. Without compensation payments the rates of return in the table above would be negative for all RTOs except Sarajevo. In the circumstances of Yugoslav Railways where the main financial objective is to eliminate compensation payments and achieve viability through tariffs, it is considered that operating ratios as shown above should be the main target and measure of financial improvement and that separate targets for rate of return on net fixed assets should not be given. 7. Debt/Equity ratios are forecast as follows; Actual Forecast RTO 1981 1982 1983 1984 1985 1986 ---------------------- %----------- Belgrade 20/80 16/84 15/85 18/82 20/80 23/77 Novi Sad 18/82 15/85 14/86 11/89 14/86 18/82 Sarajevo 13/87 10/90 10/90 11/89 11/89 11/89 Skopje 27/73 20/80 19/81 17/83 15/85 14/86 8. Debt equity ratios are generally low reflecting minimum borrowings and equity values increased by asset revaluations during a period of high inflation. The low ratios for Sarajevo reflect the considerable amount of grant capital which the RTO received for line doubling and track improve- ments during the last plan period. 1/ Operating Expenditure X 100 = Operating Ratio Operating Revenue -71- ANNEX 4 Page 3 9. Debt service coverage is shown below: 1981 1983 1985 1986 RTO Actual Forecast Forecast Forecast ----------------- Times------------------ Belgrade 1.3 1.5 2.3 2.3 Novi Sad 3.1 2.7 3.2 3.8 Sarajevo 4.1 2.3 3.0 2.8 Skopje 0.5 1.5 1.4 1.6 10. Agreement was reached during negotiations on debt limitation to ensure that RTOs do not incur debt to an extent where it might materially and adversely affect their ability to carry out their obligations under the loan. The following debt limitation ratios were considered appropriate to the circumstances of each RTO. RTO 1984 1985 1986 Belgrade Times 1.2 1.4 1.5 Novi Sad " 1.2 1.4 1.5 Sarajevo 1.2 1.4 1.5 Skopje 1.2 1.4 1.5 11. Cash and Other Working Capital as a percentage of Working Expenses are shown below: 1981 1983 1985 1986 Actual Forecast Forecast Forecast RTO Cash OWC Cash OWC Cash OWC Cash OWC ------- ------ ---------% ---------------------------- Belgrade 5.8 - 7.4 6.4 7.6 13.5 8.5 17.7 Novi Sad 10.7 16.8 7.8 11.3 8.1 9.1 8.0 18.5 Sarajevo 6.4 14.3 4.0 10.9 8.3 15.1 9.7 19.0 Skopje 14.3 - 6.5 4.7 5.6 5.1 8.7 8.3 Current Ratios and (Liquid Ratios) are as follows: 1981 1983 1985 1986 RTO Actual Forecast Forecast Forecast Belgrade 1.1 (0.9) 1.2 (1.1) 1.4 (1.2) 1.5 (1.3) Novi Sad 2.9 (2.4) 3.0 (2.5) 3.2 (2.6) 3.1 (2.6) Sarajevo 1.3 (1.2) 1.3 (1.2) 1.9 (1.6) 2.1 (1.8) Skopje 1.2 (1.0) 1.4 (1.2) 1.6 (1.4) 2.1 (1.8) -72- ANNEX 4 Page 4 12. Compensation payments have generally had the effect of maintaining reasonable levels of cash and working capital. Agreement should be reached at negotiations that each RTO will do its best to ensure that cash levels will not fall below 8% and other working capital below 15% of cash working expenses. High levels of outstanding creditors reflect in part, amounts owing for services by associated BOALs. It was agreed at negotiations that target ratios of 3.0 (current) and 2.5 (liquid) would be aimed at by all RTOs for 1986. -73- STAFF APPRAISAL REPORT Annex 4 YUGOSLAVIA SIXTH RAILWAY PROJECT Table 1 RTO BELGRADE INCOME ACCOUNT IN CURRENT PRICES (DIN-MILLIONS) 1981 1982 1983 1984 1985 1986 ACTUAL FORECAST FORECAST FORECAST FORECAST FORECAST OPERATING REVENUE FREIGHT REVENUE 5289.0 o595.0 9238.3 13153.7 17367.7 22045.5 PASSENGER REVENUE 1394.0 1870.0 2576.3 3607.6 468/48 5848.4 SUBTOTAL 6683.0 8465.0 11814.5 16761.3 22052.5 27893.9 OTHER REVENUE 2061.0 1799.0 2415.6 3156.4 3971.5 4765.8 SUBTOTAL 8744.0 10264.0 14230.1 19917.7 26024.0 32659.7 COMPENSATION 3400.0 4810.0 6372.1 5892.0 6467.7 5824.3 TOTAL OPERATING REVENUE 12144.0 15074.0 20602.2 25809.7 32491.7 38484.0 OPERATING EXPENSES SALARIES AND WAGES 3750.0 4593.0 5985.9 7591.3 9271.0 10797.9 FUEL AND ELECTRICITY 733.0 975.0 1302.8 1694.0 2121.1 2532.9 OTHER MATERIALS 503.0 583.0 775.2 1003.0 1249.7 1485.1 OTHER WORKING EXPENSES 4639.0 4856.0 6421.5 8263.7 10240.2 12102.5 SUBTOTAL WORKING EXPENSES 9625.0 11007.0 14485.3 18552.1 22882.0 26918.4 DEPRECIATION 1869.0 2994.0 4152.0 5404.0 7052.0 9046.0 OPERATING EXPENSES 11494.0 14001.0 18637.3 23956.1 29934.0 35964.4 NET OPERATING REVENUE b50.0 1073.0 1964.9 1853.6 2557.6 2519.6 INTEREST ON LOANS 725.0 884.0 1047.5 1273.3 1638.5 2021.3 NET SURPLUS (DEFICIT) -75.0 189.0 917.4 580.3 919.1 498.2 COMPENSATION AS A PROPORTION 28.0 31.9 30.9 22.8 19.9 15.1 OF OPERATING REVENUE OPERATING RATIO 94.6 92.9 90.5 92.8 92.1 93.5 (INCLUDING COMPENSATION) WORKING RATIO 79.3 73.0 70.3 71.9 70.4 69.9 (INCLUDING COMPENSATION) OPERATING RATIO 131.5 136.4 131.0 120.3 115.0 110.1 (EXCLUDING COMPENSATION) WORKING RATIO 110.1 107.2 101.8 93.1 87.9 82.4 (EXCLUDING COMPENSATION) Note: Based on RTO's forecasts amended in the Bank for revised forecasts of traffic and tariffs. -74- STAFF APPRAISAL REPORT ANNEX 4 YUGOSLAVIA SIXTH RAILWAY PROJECT Table 2 RTO NOVI SAD INCOME ACCOUNT IN CURRENT PRICES (DIN-MILLIONS) 1981 1982 1983 1984 1985 1986 ACTUAL FORECAST FORECAST FORECAST FORECAST FORECAST OPERATING REVENUE FREiGHT REVENUE 2975.0 4198.0 5880.6 8372.9 11055.3 14032.9 PASSENGER REVENUE 671.0 720.0 1000.7 1413.8 1852.3 2332.9 SUBTOTAL 3646.0 4918.0 6881.3 9786.7 12907.6 16365.8 OTHER REVENUE 061.0 740.0 996.5 1306.0 1648.0 1983.4 SUBTOTAL 4307.0 5658.0 7877.8 11092.7 14555.6 18349.2 COMPENSATION 1269.0 2230.0 2945.1 2580.4 2458.7 2085.0 TOTAL OPERATING REVENUE 5576.0 7888.0 10822.9 13673.0 17014.3 20434.2 OPERATING EXPENSES SALARIES AND WAGES 1894.0 2950.0 3805.6 4777.6 5772.0 6621.1 FUEL AND ELECTRICITY 489.0 558.0 747.4 974.1 1222.5 1463.3 OTHER MATERIALS 244.0 310.0 412.9 535.2 668.1 795.3 OTHER WORKING EXPENSES 1961.0 2612.0 3458.3 4455.8 5528.4 6541.7 SUBTOTAL WORKING EXPENSES 4588.0 6430.0 8424.2 10742.7 13191.0 15421.3 DEPRECIATION 865.0 1228.0 1513.0 1816.6 2520.0 3128.0 OPERATING EXPENSES 5453.0 7b58.0 9937.2 12559.3 15711.0 18549.3 NET OPERATING REVENUE 123.0 230.0 885.8 1113.8 1303.3 1884.9 INTEREST ON LOANS 89.0 209.0 278.1 489.2 487.0 619.5 NET SURPLUS (DEFICIT) 34.0 21.0 607.7 624.5 816.3 1265.4 COMPENSATION AS A PROPORTION 22.8 28.3 27.2 18.9 14.5 10.2 OF OPERATING REVENUE OPERATING RATIO 97.8 97.1 91.8 91.9 92.3 90.8 (INCLUDING COMPENSATION) WORKING RATIO 82.3 81.5 77.8 78.6 77.5 75.5 (INCLUDING COMPENSATION) OPERATING RATIO 126.6 135.3 126.1 113.2 107.9 101.1 (EXCLUDING COMPENSATION) WORKING RATIO 106.5 113.6 106.9 96.8 90.6 84.0 (EXCLUDING COMPENSATION) Note: Based on RTO's forecasts amended in the Bank for revised forecasts of traffic and tariffs. STAFF APPRAISAL REPORT ANNEX 4 YUGOSLAVIA SIXTH RAILWAY PROJECT Table 3 RTO SARAJEVO INCOME ACCOUNT IN CURRENT PRICES (DIN-MILLIONS) 1981 1982 1983 1984 1985 1986 ACTUAL FORECAST FORECAST FORECAST FORECAST FORECAST OPERATING REVENUE FREIGHT REVENUE 4139.0 5132.0 7188.9 10235.7 13515.0 17155.1 PASSENGER REVENUE 955.0 1219.0 1691.0 2384.3 3117.6 3918.9 SUBTOTAL 5094.0 6351.0 8879.9 12620.0 16632.6 21073.9 OTHER REVENUE 1720.0 2525.0 3397.1 4447.5 5606.9 6741.5 SUBTOTAL 6814.0 8876.0 12277.0 17067.6 22239.5 27815.4 COMPENSATION 375.0 978.0 1511.4 1243.1 1348.2 1247.2 TOTAL OPERATING REVENUE 7189.0 9854.0 13788.4 18310.7 23587.8 29062.6 OPERATING EXPENSES SALARIES AND WAGES 2037.0 2799.0 3680.5 4709.9 5803.2 6818.9 FUEL AND ELECTRICITY 594.0 703.0 940.8 1225.3 1536.6 1837.8 OTHER MATERIALS 494.0 721.0 959.8 1243.4 1551.1 1845.3 OTHER WORKING EXPENSES 2488.0 3266.0 4319.9 5560.6 6892.3 8147.7 SUBTOTAL WORKING EXPENSES 5613.0 7489.0 9901.1 12739.2 15783.2 18649.6 DEPRECIATION 1211.0 1944.0 2996.0 3944.0 5040.0 6256.0 OPERATING EXPENSES 6824.0 9433.0 12897.1 16683.2 20823.2 24905.6 NET OPERATING REVENUE 365.0 421.0 891.3 1627.5 2764.6 4157.0 INTEREST ON LOANS 285.0 340.0 593.3 838.1 1195.5 1609.5 NET SURPLUS (DEFICIT) 80.0 81.0 298.0 789.5 1569.1 2547.4 COMPENSATION AS A PROPORTION 5.2 9.9 11.0 6.8 5.7 4.3 OF OPERATING REVENUE OPERATING RATIO 94.9 95.7 93.5 91.1 88.3 85.7 (INCLUDING COMPENSATION) WORKING RATIO 78.1 76.0 71.8 69.6 66.9 64.2 (INCLUDING COMPENSATION) OPERATING RATIO 100.1 106.3 105.1 97.7 93.6 89.5 (EXCLUDING COMPENSATION) WORKING RATIO 82.4 84.4 80.6 74.6 71.0 67.0 (EXCLUDING COMPENSATION) Note: Based on RTO's forecasts amended in the Bank for revised forecasts of traffic and tariffs. -76- STAFF APPRAISAL REPORT ANNEX 4 YUGOSLAVIA SIXTH RAILWAY PROJECT Table 4 RTO SKOPJE INCOME ACCOUNT IN CURRENT PRICES (DIN-MILL IONS) 1981 1982 1983 1984 1985 1986 ACTUAL FORECAST FORECAST FORECAST FORECAST FORECAST OPERATING REVENUE FREIGHT REVENUE 1080.0 1575.0 2234.1 3221.1 4306.8 5535.7 PASSENGER REVENUE 255.0 389.0 539.6 760.9 994.9 1250.6 SUBTOTAL 1335.0 1964.0 2773.7 3982.0 5301.6 6786.3 OTHER REVENUE 365.0 337.0 457.8 605.2 770.4 935.3 SUBIOTA.L 1700.0 2301.0 3231.5 4587.2 6072.0 7721.6 COMPENSAIIN 10.0 1053.0 1274.2 1343.1 1182.4 961.7 TOIAL OPERATING REVENUE 1710.0 3354.0 4505.7 5930.3 7254.4 8683.3 OPERATING EXPENSES SALA7RiE AND dAGES 743.0 930.0 1211.5 1537.1 1882.5 2192.3 FUEL AND ELECTRICITY 183.0 272,0 366.9 481.5 608.6 733.6 OTHSR MATERIALS 102.0 130.0 174.1 226.8 284.6 340.6 OTHER WORKING EXPENSES 880.0 1037.0 1373.5 1770.4 2197.5 2601.5 SUBTOTAL WORKING EXPENSES 1908.0 2369.0 3126.0 4015.9 4973.2 5868.1 LEPRECIATION 448.0 730.0 909.5 1337.5 1571.2 2072.6 OPERATING EXPENSES 2356.0 3099.0 4035.5 5353.4 6544.5 7940.7 NET OPERATING REVENUE -646.0 255.0 470.2 576.9 709.9 742.6 INTEREST ON LOANS 175.0 252.0 400.7 482.8 579.7 585.3 NET SURPLUS (DEFICIT) -821.0 3.0 69.5 94.1 130.2 157.3 COMPENSATION AS A PROPORTION 0.6 31.4 28.3 22.6 16.3 11.1 OF OPERATING REVENUE OPERATING RATIO 137.8 92.4 89.6 90.3 90.2 91.4 ('NC.UDING COMPENSATION) WORKING RATIO i11.6 70.6 69.4 67.7 68.6 67.6 (INCLUDING COMPENSATION) CPERAI'NG RATIO 138.6 134.7 124.9 116.7 107.8 102.8 (EXCL UDING COMPENSATION) 4ORKING RATIO 112.2 103.0 96.7 87.5 81.9 76.0 (EXCLUDING COMPENSATION) Note: Based on RTO's forecasts amended in the Bank for revised forecasts of traffic and tariffs. STAFF APPRAISAL REPORT -77- ANNEX 4 YUGOSLAVIA SIXTH RAILWAY PROJECT Table 5 RTO BELGRADE CASHFLOW (DIN-MILLIONS) 1980 1981 1982 1983 1984 1985 1986 1983-86 1981-86 ACTUAL ACTUAL FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST APPLICATIONS INVESTMENTS 2063.0 1270.0 1995.0 4714.0 8128.0 10149.0 10428.0 33419.0 36684.0 DEBT SERVICE INTEREST 594.0 725.0 884.0 1047.5 1273.3 1638.5 2021.3 5980.7 7589.7 REPAYMENTS 915.0 1278.0 1571.0 2720.0 2114.0 2297.0 2613.0 9744.0 12593.0 SUBTOTAL 1509.0 2003 0 2455.0 3767.5 3387.3 3935.5 4634.3 15724.7 20182.7 INCR/DECR IN WORKING CAP -504.0 1002.0 271.0 804.0 931.0 1234.0 1667.0 4636.0 5909.0 (OTHER THAN CASH) OTHER CASH REQUIREMENTS 434.0 1074.0 1043.0 -214.0 593.0 1400.0 413.0 2192.0 2161.0 TOTAL CASH REQUIREMENTS 3502.0 3201.0 5764.0 9071.5- 13039.3 16718.5 17142.3 55971.7 6493 7 SOURCES OWN FUNDS OPERATING REVENUE 191.0 650.0 1073.0 1964.9 1853.6 2557.6 2519.6 8895.7 10618.7 DEPRECIATION 1565.0 1869.0 2994.0 4152.0 5404.0 7052.0 9046.0 25654.0 30517.0 OTHER OWN FUNDS 15.0 15.0 SUBTOTAL 1756.0 2534.0 4067.0 6116.9 7257.6 9609.6 11565.6 34549.7 41150.7 EXTERNAL FINANCE GRANTS 431.0 47.0 572.0 279.0 279.0 279.0 138.0 975.0 1594.0 BANK LOAN i6TH PROJECT) 1126.0 956.0 727.0 2809.0 2809.0 OTHER LOANS 911.0 546.0 1057.0 1329.0 2354.0 2940.0 2281.0 8904.0 10507.0 SUPPLIERS CREDIT 507.0 188.0 366.0 1560.0 2352.0 3284.0 2980.0 10176.0 10730.0 SUBTOTAL 1849.0 781.0 1995.0 3168.0 6111.0 7459.0 6126.0 22864.0 25640.0 TOTAL CASH AVAILABILITY 3605.0 3315.0 6062.0 9284.9 13368.6 17068.6 17691.6 57413.7 66790.7 CASH SURP/DEFI FOR YEAR 103.0 114.0 298.0 213.4 329.3 350.1 549.2 1442.1 1854.1 CASH AT BEGINNING OF YEAR 341.0 444.0 558.0 856.0 1069.4 1398.7 1748.8 856.0 444.0 CASH AT END OF YEAR 444.0 558.0 85b-0 1069.4 1398.7 1748.8 2298.1 2298.1 2298.1 DEBT SERVICE COVERAGE 1.2 1.3 1.7 1.6 2.1 2.4 2.5 2.2 2.0 (OWN FUNDS/DEBT SERVICE) Note: Based on RTO's forecasts amended in tne Bank for revised forecasts of traffic and tariffs. -78- STAFF APPRAISAL REPORT ANNEK 4 YUGOSLAVIA SIXTH RAILWAY PROJECT RTO NOVI SAD CASHFLOW (DIN-KILLIONS) 1980 1981 1982 1983 1984 1985 1986 1983-86 1981-86 ACTUAL ACTUAL FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST APPLICATIONS INVESTMENTS 1211.0 1190.0 1061.0 3095.0 3243.0 5431.0 5910.0 17679.0 19930.0 DEBT SERVICE INTEREST 55.0 89.0 209.0 278.1 489.2 487.0 619.5 1873.9 2171.9 REPAYMENTS 141.0 245.0 627.0 671.0 735.0 703.0 714.0 2823.0 3695.0 SUBTOTAL 196.0 334.0 836.0 949.1 1224.2 1190.0 1333.5 4696.9 5866.9 INCR/DECR IN WORKING CAP -166.0 13.0 76.0 110.0 120.0 120.0 110.0 460.0 549.0 (OTHER THAN CASH) OTHER CASH REQUIREMENTS -135.0 -189.0 62.0 60.0 70.0 100.0 70.0 300.0 173.0 TOTAL CASH REQUIREMENTS 1106.0 1348.0 2035.0 4214.1 4657.2 6841.0 7423.5 23135.9 26518.9 SOURCES OWN FUNDS OPERATING REVENUE 68.0 123.0 230.0 885.8 1113.8 1303.3 1884.9 5187.7 5540.7 DEPRECIATION 727.0 865.0 1228.0 1513.0 1816.6 2520.0 3128.0 8977.5 11070.5 OTHER OWN FUNDS 20.0 38.0 150.0 120.0 120.0 308.0 SUBTOTAL 815.0 1026.0 1608.0 2518.7 2930.3 3823.3 5012.9 14285.3 16919.3 EXTERNAL FINANCE GRANTS 100.0 36.0 124.0 788.0 1064.0 1517.0 330.0 3699.0 3859.0 BANK LOAN (6TH PROJECT) 720.0 866.0 693.0 2279.0 2279.0 OTHER LOANS 120.0 25.0 1.0 560.0 68.0 460.0 860.0 1948.0 1974.0 SUPPLIERS CREDIT 252.0 141.0 360.0 457.0 94.0 365.0 697.0 1613.0 2114.0 SUBTOTAL 472.0 202.0 485.0 1805.0 1946.0 3208.0 2580.0 9539.0 10226.0 TOTAL CASH AVAILABILITY 1287.0 1228.0 2093.0 4323.7 4876.3 7031.3 7592.9 23824.3 27145.3 = -===m-as - --m=m mam- -=m ..ama ..m...am.m ma..m.. a = ms ams ....aas ma.. ...m.... .m...... CASH SURP/DEFI FOR YEAR 181.0 -120.0 58.0 109.6 219.1 190.3 169.4 688.4 626.4 CASH AT BEGINNING OF YEAR 431.0 612.0 492.0 550.0 659.6 878.7 1069.0 550.0 612.0 CASH AT END OF YEAR 612.0 492.0 550.0 659.6 878.7 1069.0 1238.4 1238.4 1238.4 DEBT SERVICE COVERAGE 4.2 3.1 1.9 2.7 2.4 3.2 3.8 3.0 2.9 (OWN FUNDS/DEBT SERVICE) Note: Based on RTO's forecasts amended in the Bank for revised forecasts of traffic and tariffs. -79- STAFF APPRAISAL REPORT ANNEX 4 YUGOSLAVIA SIXTH RAILWAY PROJECT Table 7 RTO SARAJEVO INCOME CASHFLOW (DIN-MILLIONS) 1980 1981 1982 1983 1984 1985 1986 1983-86 1981-86 ACTUAL ACTUAL FORECAST FORECAST FORECASI FORECAST FORECAST FORECAST FORECAST APPLICATIONS INVESTMENTS 1712.0 1086.0 966.0 5067.0 4308.0 4929.0 3321.0 17625.0 19677.0 DEBT SERVICE INTEREST 209.0 285.0 340.0 593.3 838.1 1195.5 1609.5 4236.4 4861.4 REPAYMENTS 203.0 274.0 869.0 1125.0 1306.0 1380.0 2065.0 5876.0 7019.0 SUBTOTAL 412.0 559.0 1209.0 1718.3 2144.1 2575.5 3674.5 10112.4 11880.4 INCR/DECR IN WORKING CAP -507.0 1055.0 31.0 246.0 452.0 857.0 1150.0 2705.0 3791.0 (OTHER THAN CASH) OTAER CASH REQUIREMENTS 171.0 382.0 386.0 670.0 922.0 1150.0 2090.0 4832.0 5600.0 TOTAL CASH REQUIREMENTS 1788.0 3082.0 2592.0 7701.3 7826.1 9511.5 10235.5 35274.4 40948.4 SOURCES OWN FUNDS OPERATING REVENUE -59.0 365.0 421.0 891.3 1627.5 2764.6 4157.0 9440.4 10226.4 DEPRECIATION 1106.0 1211.0 1944.0 2996.0 3944.0 5040.0 6256.0 18236.0 21391.0 OTHER OWN FUNDS 711.0 711.0 SUBTOTAL 1047.0 2287.0 2365.0 3887.3 5571.5 7804.6 10413.0 27676.4 32328.4 EXTERNAL FINANCE GRANTS 167.0 119.0 400.0 500.0 450.0 150.0 1500.0 1786.0 BANK LOAN (6TH PROJECT) 1594.0 1569.0 104.0 3267.0 3267.0 OTHER LOANS 509.0 395.0 54.0 1630.0 252.0 196.0 50.0 2128.0 2577.0 SUPPLIERS CREDIT 310.0 268.0 54.0 1822.0 159.0 151.0 20.0 2152.0 2474.0 SUBTOTAL 819.0 830.0 227.0 3852.0 2505.0 2366.0 324.0 9047.0 10104.0 TOTAL CASH AVAILABILITY 1866.0 3117.0 2592.0 7739.3 8076.5 10170.6 10737.0 36723.4 42432.4 CASH SURP/DEFI FOR YEAR 78.0 35.0 38.0 250.5 659.1 501.4 1449.0 1484.0 CASH AT BEGINNING OF YEAR 244.0 322.0 357.0 357.0 395.0 645.5 1304.6 357.0 322.0 CASH AT END OF YEAR 322.0 357.0 357.0 395.0 645.5 1304.6 1806.0 1806.0 1806.0 DEBT SERVICE COVERAGE 2.5 4.1 2.0 2.3 2.6 3.0 2.8 2.7 2.7 (OWN FUNDS/DEBT SERVICE) Note: Based on RTO's forecasts amended in the Bank for revised forecasts of traffic and tariffs. -80- STAFF APPRAISAL REPORT ANNEX 4 YUGOSLAVIA SIXTH RAILWAY PROJECT Table 8 RTO SKOPJE CASHFLOW (DIN-MILLIONS) 1980 1981 1982 1983 1984 1985 1986 1983-86 1981-86 ACTUAL ACTUAL FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST APPLICATIONS INVESTMENTS 402.0 586.0 546.0 1659.0 1893.0 1758.0 2289.0 7599.0 8731.0 DEBT SERVICE INTEREST 103.0 175.0 252.0 400.7 482.8 579.7 585.3 2048.4 2475.4 REPAYMENTS 197.0 261.0 375.0 524.0 759.0 1008.0 1190.0 3481.0 4117.0 SUBTOTAL 300.0 436.0 627.0 924.7 1241.8 1587.7 1775.3 5529.4 6592.4 INCR/DECR IN WORKING CAP 56.0 -330.0 4.0 227.0 37.0 71.0 231.0 566.0 240.0 (OTHER THAN CASH) OTHER CASH REQUIREMENTS -100.0 -1.0 3.0 8.0 12.0 20.0 43.0 42.0 TOTAL CASH REQUIREMENTS 658.0 691.0 1177.0 2813.7 3179.8 3428.7 4315.3 13737.4 15605.4 SOURCES OWN FUNDS OPERATING REVENUE -407.0 -646.0 255.0 470.2 576.9 709.9 742.6 2499.6 2108.6 DEPRECIATION 366.0 448.0 730.0 909.5 1337.5 1571.2 2072.6 5890.8 7068.8 OTHER OWN FUNDS SUBTOTAL -41.0 -198.0 985.0 1379.7 1914.4 2281.2 2815.2 8390.5 9177.5 EXTERNAL FINANCE GRANTS 7.0 4.0 194.0 150.0 146.0 163.0 653.0 657.0 BANK LOAN (6TH PROJECT) 451.0 515.0 784.0 1750.0 1750.0 OTHER LOANS 703.0 878.0 199.0 640.0 450.0 300.0 430.0 1820.0 2897.0 SUPPLIERS CREDIT 71.0 30.0 5.0 518.0 244.0 232.0 358.0 1352.0 1387.0 SUBTOTAL 781.0 912.0 204.0 1352.0 1295.0 1193.0 1735.0 5575.0 6691.0 TOTAL CASH AVAILABILITY 740.0 714.0 1189.0 2731.7 3209.4 3474.2 4550.2 13965.5 15868.5 CASH SURP/DEFI FOR YEAR 82.0 23.0 12.0 -82.0 29.6 45.5 234.9 228.1 263.1 CASH AT BEGINNING OF YEAR 167.0 249.0 272.0 284.0 202.0 231.7 277.1 284.0 249.0 CASH AT END OF YEAR 249.0 272.0 284.0 202.0 231.7 277.1 512.1 512.1 512.1 DEBT SERVICE COVERAGE -0.1 -0.5 1.6 1.5 1.5 1.4 11.6 1.5 1.4 (OWN FUNDS/DEBT SERVICE) Note: Based on RTO's forecasts amended in the Bank for revised forecasts of traffic and tariffs. -81- STAFF APPRAISAL REPORT ANNEX 4 YUGOSLAVIA SIXTH RAILWAY PROJECT Table 9 RTO BELGRADE BALANCE SHEET (DIN-MILLIONS) 1980 1981 1982 1983 1984 1985 1986 ACTUAL ACTUAL FORECAST FORECAST FORECAST FORECAST FORECAST FIXED ASSETS GROSS FIXED ASSETS 58453.0 80666.0 103462.0 138000.0 177000.0 225000.0 240000.0 LESS- ACCUMULATED DEPRECIATION 32560.0 45723.0 60748.0 87100.0 111300.0 144000.0 150000.0 NET FIXED ASSETS 25893.0 34943.0 42714.0 50900.0 65700.0 81000.0 90000.0 WORK IN PROGRESS 2226.0 1585.0 1396.0 2600.0 3800.0 5800.0 7000.0 SOCIAL STANDARD ASSETS 6.0 -2.0 9.0 10.0 12.0 20.0 30.0 TOEAL FIXED ASSETS 28125.0 36526.0 44119.0 53510.0 69512.0 86820.0 97030.0 OTHER NON-CURRENT ASSETS 4951.0 3558.0 3946.0 3168.0 3400.0 4200.0 5000.0 NET CURRENT ASSETS CASH 444.0 558.0 856.0 1069.4 1398.7 1748.8 2298.1 INVENfORIES 681.0 1037.0 1160.0 1400.0 1700.0 2100.0 2600.0 DEBTORS & OTHER CURRENT ITEMS 5733.0 6248.0 7216.0 8880.0 10356.0 13490.0 16157.0 SUBTOTAL CURRENT ASSETS 6858.0 7843.0 9232.0 11349.4 13454.7 17338.8 21055.1 LESS- CREDITORS & OTHER CURRENT LIABILITIES 75b6.0 7435.0 8255.0 9355.0 10200.0 12500.0 14000.0 TOTAL NET CURRENT ASSETS -708.0 408.0 977.0 1994.4 3254.7 4838.8 7055.1 TOTAL ASSETS 32368.0 40492.0 49042.0 58672.4 76166.7 95858.8 109085.1 FINANLED BY DEBT 6587.0 8085.0 7937.0 8666.0 13341.0 19260.0 24689.0 EQUITY 25781.0 32407.0 41105.0 50006.4 62825.7 76598.8 84396.1 32368.0 40492.0 49042.0 58672.4 76166.7 95858.8 109085.1 CURRENT ASSETS TO 0.9 1.1 1.1 1.2 1.3 1.4 1.5 CURRENT LIABILITIES (TIMES) CURRENT ASSETS (LESS INVENTORIES) 0.8 0.9 1.0 1.1 1.2 1.2 1.3 TO CURRENT LIABILITIES (TIMES) DEBT TO EQUITY 20.4 20.0 16.2 14.8 17.5 20.1 22.6 CASH TO CASH OPERATING EXPENSES (%) 7.0 5.8 7.8 7.4 7.5 7.6 8.5 NET CURRENT ASSETS (LESS CASH) -18.2 -1.6 1.1 6.4 10.0 13.5 17.7 TO CASH OPERATING EXPENSES (%) Note: Based on RTO's forecasts amended in tfe Bank for revised forecasts of traffic and tariffs. -82- STAFF APPRAISAL REPORT ANNEX 4 YUGOSLAVIA SIXTH RAILWAY PROJECT Table 10 RTO NOVI SAD BALANCE SHEET (DIN-MILLIONS) 1980 1981 1982 1983 1984 1985 1986 ACTUAL ACTUAL FORECAST FORECAST FORECAST FORECAST FORECAST FIXED ASSETS GROSS FIXED ASSETS 22255.0 29671.0 36401.0 44300.0 52900.0 62100.0 71400.0 LESS- ACCUMULATED DEPRECIATION 17898.0 24440.0 30200.0 36000.0 41600.0 47300.0 53000.0 NET FIXED ASSETS 4357.0 5231.0 6201.0 8300.0 11300.0 14800.0 18400.0 WORK IN PROGRESS 2037.0 2277.0 1100.0 2300.0 3000.0 3400.0 4500.0 SOCIAL STANDARD ASSETS 420.0 677.0 700.0 700.0 750.0 800.0 800.0 TOTAL FIXED ASSETS 6814.0 8185.0 8001.0 11300.0 15050.0 19000.0 23700.0 OTHER NON-CURRENT ASSETS 637.0 448.0 500.0 550.0 600.0 700.0 750.0 NET CURRENT ASSETS CASH 612.0 492.0 550.0 659.6 878.7 1069.0 1238.4 INVENTORIES 259.0 357.0 390.0 430.0 480.0 540.0 600.0 DEBTORS & OTHER CURRENT ITEMS 1077.0 1071.0 1180.0 1340.0 1500.0 1700.0 1900.0 SUBTOTAL CURRENT ASSETS 1948.0 1920.0 2120.0 2429.6 2858.7 3309.0 3738.4 LESS- CREDITORS & OTHER CURRENT LIABILITIES 580.0 659.0 725.0 815.0 905.0 1045.0 1195.0 TOTAL NET CURRENT ASSETS 1368.0 1261.0 1395.0 1614.6 1953.7 2264.0 2543.4 TOTAL ASSETS 8819.0 9894.0 9896.0 13464.6 17603.7 21964.0 26993.4 FINANCED BY DEBT 1877.0 1794.0 1528.0 1920.0 1980.0 3070.0 4740.0 EQUITY 6942.0 8100.0 8368.0 11544.6 15623.7 18894.0 22253.4 8819.0 9894.0 9896.0 13464.6 17603.7 21964.0 26993.4 GURRENT ASSETS TO 3.4 2.9 2.9 3.0 3.2 3.2 3.1 CURRENT LIABILITIES (TIMES) CURRENT ASSETS (LESS INVENTORIES) 2.9 2.4 2.4 2.5 2.6 2.6 2.6 TO CURRENT LIABILITIES (TIMES) DEBT TO EQUITY 21/79 18/82 15/85 14/86 11/89 14/86 18/82 CASH TO CASH OPERATING EXPENSES (%) 19.2 10.7 8.6 7.8 8.2 8.1 8.0 NET CURRENT ASSETS (LESS CASH) 23.7 16.8 13.1 11.3 10.0 9.1 8.5 TO CASH OPERATING EXPENSES (%) Note. Based on RTO's forecasts amended in the Bank for revised forecasts of traffic and tariffs. -83- STAFF APPRAISAL REPORT ANNEX 4 YUGOSLAVIA SIXTH RAILWAY PROJECT Table 11 RTO SARAJEVO 6ALANCE SHEET (DIN-MILLIONS) 1980 1981 1982 1983 1984 1985 1986 ACTUAL ACTUAL FORECAST FORECAST FORECAST FORECAST FORECAST FIXED ASSETS GROSS FIXED ASSETS 44967.0 62445.0 75954.0 101000.0 133000.0 165000.0 185000.0 LESS- ACCUMULATED DEPRECIATION 21255.0 27858.0 36000.0 51500.0 71500.0 87500.0 94000.0 NET FIXED ASSETS 23712.0 34587.0 39954.0 49500.0 61500.0 77500.0 91000.0 WORK IN PROGRESS 5452.0 2060.0 2700.0 6000.0 9300.0 9800.0 7200.0 SOCIAL STANDARD ASSETS 120.0 19.0 20.0 20.0 20.0 20.0 20.0 TOTAL FIXED ASSETS 29284.0 36666.0 42674.0 55520.0 70820.0 87320.0 98220.0 OTHER NON-CURRENT ASSETS 854.0 1185.0 1200.0 1400.0 1600.0 1800.0 1600.0 NEr CURRENT ASSETS CASH 322.0 357.0 357.0 395.0 645.5 1304.6 1806.0 INVENTORIES 398.0 513.0 544.0 800.0 900.0 1100.0 1300.0 DEBTORS & OTHER CURRENT ITEMS 3764.0 4152.0 4152.0 4682.0 4884.0 5591.0 7041.0 SUBTOTAL CURRENT ASSETS 4484.0 5022.0 5053.0 5877.0 6429.5 7995.6 10147.0 LESS- CREDITORS & OTHER CURRENT LIABILITIES 4412.0 3860.0 3860.0 4400.0 4250.0 4300.0 4800.0 TOTAL NET CURRENT ASSETS 72.0 1162.0 1193.0 1477.0 2179.5 3695.6 5347.0 TOTAL ASSETS 30210.0 39013.0 45067.0 58397.0 74599.5 92815.6 105167.0 FINANCED BY DEBT 4675.0 5064.0 4303.0 6000.0 8000.0 10000.0 12000.0 EQUITY 25535.0 33949.0 40764.0 52397.0 66599.5 82815.6 93167.0 30210.0 39013.0 45067.0 58397.0 74599.5 92815.6 105167.0 CURRENT ASSETS TO 1.0 1.3 1.3 1.3 1.5 1.9 2.1 CURRENT LIABILITIES (TIMES) CURRENT ASSETS (LESS INVENTORIES) 0.9 1.2 1.2 1.2 1.3 1.6 1.8 TO CURRENT LIABILITIES (TIMES) DEBT TO EQUITY 16/84 13/87 10/90 10/90 11/89 11/89 11/89 CASH TO CASH OPERATING EXPENSES (%) 7.5 6.4 4.8 4.0 5.1 8.3 9.7 NET CURRENT ASSETS (LESS CASH) -5.8 14.3 11.2 10.9 12.0 15.1 19.0 TO CASH OPERATING EXPENSES (%) Note. Based on RTO's forecasts amended in the Bank for revised forecasts of traffic and tariffs. -84- STAFF APPRAISAL REPORT ANNEX 4 YUGOSLAVIA SIXTH RAILWAY PROJECT Table 12 RTO SKOPJE BALANCE SHEET (DIN-MILLIONS) 1980 1981 1982 1983 1984 1985 1986 ACTUAL ACTUAL FORECAST FORECAST FORECAST FORECAST FORECAST FIXED ASSETS GROSS FIXED ASSETS 14736.0 19682.0 22912.0 34500.0 40500.0 53300.0 61000.0 LESS- ACCUMULATED DEPRECIATION 8465.0 11497.0 12125.0 19740.0 21100.0 30100.0 35300.0 NET FIXED ASSETS 6271.0 8185.0 10787.0 14760.0 19400.0 23200.0 25700.0 WORK IN PROGRESS 1627.0 1984.0 2187.0 3000.0 3700.0 4800.0 7600.0 SOCIAL STANDARD ASSETS 47.0 34.0 34.0 40.0 40.0 40.0 40.0 TOTAL FIXED ASSETS 7945.0 10203.0 13008.0 17800.0 23140.0 28040.0 33340.0 OTHER NON-CURRENT ASSETS 117.0 115.0 -115.0 120.0 140.0 160.0 200.0 NET CURRENT ASSETS CASH 249.0 272.0 284.0 202.0 231.7 277.1 512.1 INVENTORIES 121.0 226.0 280.0 190.0 160.0 180.0 240.0 DEBTORS & OTHER CURRENT ITEMS 677.0 710.0 741.0 820.0 885.0 980.0 1197.0 SUBTOTAL CURRENT ASSETS 1047.0 1208.0 1305.0 1212.0 1276.7 1437.1 1949.1 LESS- CREDITORS & OTHER CURRENT LIABILITIES 551.0 1019.0 1100.0 862.0 860.0 904.0 950.0 TOTAL NET CURRENT ASSETS 496.0 189.0 205.0 350.0 416.7 533.1 999.1 TOTAL ASSETS 8558.0 10507.0 13328.0 18270.0 23696.7 28733.1 34539.1 FINANCED BY DEBT 1968.0 2834.0 2663.0 3404.0 4055.0 4351.0 4922.0 EQUITY 6590.0 7673.0 10665.0 14866.0 19641.7 24382.1 29617.1 8558.0 10507.0' 13328.0 18270.0 23696.7 28733.1 34539.1 CURRENT ASSETS TO 1.9 1.2 1.2 1.4 1.5 1.6 2.1 CURRENT LIABILITIES (TIMES) CURRENT ASSETS (LESS INVENTORIES) 1.7 1.0 0.9 1.2 1.3 1.4 1.8 TO CURRENT LIABILITIES (TIMES) DEBT TO EQUITY 23/77 27/73 20/80 18/82 17/83 15/85 14/86 CASH 10 CASH OPERATING EXPENSES (%) 17.6 14.3 12.0 6.5 5.8 5.6 8.7 NET CURRENT ASSETS (LESS CASH) 17.4 -4.4 -3.3 4.7 4.6 5.1 8.3 TO CASH OPERATING EXPENSES (%) Note: Based on RTO's forecasts amended in the Bank for revised forecasts of traffic and tariffs. -85- YUL0SIAVIA Table 1 (a) STAFF APPRAISAL REORT ( Page i A SIXH RAILWAY PRJT invesument IKperdiitures 1981 Actual, 1982 Estiate, and Forecast for Project Period 1983-86 IM1 Belgrade Foreign Exhange -1983-6--- Total Total Arunt 1981 1982 1983 1984 1985 1986 1983-86 1981 1982 1983 1984 1985 1986 1983-86 % TS Million Din Million US$ illion IlWESDNT PLAN - PART A A. OMITIN OF 1976-80 PLAN TRACK OVERHAIL 45.0 3.0 64.0 64.0 0.7 - 1.0 - - - 1.0 78 0.8 OTHER INMESDENU 231.0 154.0 3.0 3.0 3.6 2.4 - Sub-Total COM4I3lEM OF 1976-80 PLAN 276.0 157.0 67.0 - - - 67.0 4.3 2.5 1.1 - - - 1.1 0.4 Physical ontingencies - - 0.3 - - - 0.3 - - 0.0 - - - - Price Contiencjes - - 10.1 - - - 10.1 - - 0.0 - - - - - Sub-Total iaJDIM (DNIGERIES 276.0 157.0 77.4 - - - 77.4 4.3 2.5 1.1 - - - 1.1 0.9 B. PIFEOSED IUR SIXI B4NK IL%N 1. 237W TRAC OVERHAJL - - 184.0 1,070.0 1,642.0 1,259.0 4,155.0 - - 2.9 16.8 25.9 19.8 65.4 46 30.1 2. IOMWIVE SPARE PARTS - - - 206.0 129.0 - 335.0 - - - 3.2 2.0 - 5.3 82 4.3 Su-Total SIWH ILOAN - - 184.0 1,276.0 1,771.0 1,259.0 4,490.0 - - 2.9 20.1 27.9 19.8 70.7 34.4 Physical Contingenzies - - 18.4 107.0 164.2 125.9 415.5 - - 0.3 1.7 2.6 2.0 6.5 3.0 Price Contingencies - - 30.4 639.6 1,524.0 1,518.2 3,712.2 - - 0.1 2.6 6.1 6.2 15.1 7.2 Sub-Total WMIINI OONMINM2CIES - - 232.8 2,022.6 3,459.2 2,903.1 8,617.7 - - 3.3 24.4 36.6 28.0 92.4 44.7 C. PROPOSAL lOR EIB IAN 1. 344 C2NSTRUCTION OF LINES - - 135.0 358.0 350.0 350.0 1,193.0 - - 2.1 5.6 5.5 5.5 18.8 37 7.0 Physical Contingencies - - 13.5 35.8 35.0 35.0 119.3 - - 0.2 0.6 0.6 0.6 1.9 0.7 Price Contingencies - - 22.3 182.1 303.2 422.1 929.7 - - 0.1 0.7 1.2 1.7 3.8 1.4 Sub-Total MIXDIE G9fDENCIES - - 170.8 575.9 688.2 807.1 2,242.0 - - 2.4 6.9 7.3 7.8 24.5 9.0 D. 01ER ITEMS IN PART A 1. I 301 ELECEIFICATIN - - 29.0 26.0 - 71.0 126.0 - - 0.5 0.4 - 1.1 2.0 53 1.1 49ift SS&TT FQUPIMET - - 113.0 291.0 255.0 198.0' 857.0 - - 1.8 4.6 4.0 3.1 13.5 63 8.5 61M THMC OVEBIWAl 81.0 228.0 505.0 366.0 - - 871.0 1.3 3.6 8.0 5.8 - - 13.8 42 5.8 REOXCeIlCON IF LIRES 55.0 135.0 16.0 - - - 16.0 0.9 2.1 0.3 - - - 0.3 16 - Sub-1btal INERAST9UCIMUE 136.0 363.0 663.0 683.0 255.0 269.0 1,870.0 2.1 5.7 10.4 10.8 4.0 4.2 29.5 15.4 2. ROLIMIG STOCK EIRTIC IDGCK)TlVES 61.0 13.0 30.0 - - - 30.0 1.0 0.2 0.5 - - - 0.5 61 0.3 35 DIES71 SIMES - - 77.0 426.0 464.0 388.0 1,355.0 - - 1.2 6.7 7.3 6.1 21.3 68 14.5 12 ELETRIC OTOR TAINS 105.0 195.0 282.0 148.0 - - 430.0 1.7 3.1 4.4 2.3 - - 6.7 88 5.9 23 STANDRD PASSEIGER COAHES - 75.0 104.0 149.0 130.0 - 383.0 - 1.2 1.6 2.3 2.0 - 6.0 54 3.2 3000 FRElIGT WAGOS 264.0 488.0 1,387.0 1,387.0 1,387.0 1,387.0 5,348.0 4.2 7.7 21.8 21.8 21.8 21.8 87.3 46 40.2 REUSWTRJlBON IF ROLLING SIODC 7.0 103.0 186.0 186.0 186.0 186.0 744.0 0.1 1.6 2.9 2.9 2.9 2.9 11.7 11 1.3 ILY DEPRECIAD RLLMI. STOCK 216.0 367.0 195.0 - - - 195.0 3.4 5.8 3.1 - - - 3.1 4 0.1 AlflOmTIC SPPINBx2mQUIPwEr - - 12.0 24.0 - - 36.0 - - 0.2 0.4 - - 0.6 60 0.3 Sub-Total ROLLIM SlOC 653.0 1,241.0 2,273.0 2,320.0 2,167.0 1,961.0 8,721.0 10.3 19.5 35.8 36.5 34.1 30.9 137.3 65.9 3. MISCELLAMDUS INVESDIENT IIEMAL TRA14SPORT 9.0 11.0 102.0 112.0 271.0 271.0 756.0 0.1 0.2 1.6 1.8 4.3 4.3 11.9 49 5.8 WOEKSHPS&EPOIS - - 43.0 64.0 64.0 - 171.0 - - 0.7 1.0 1.0 - 2.7 33 0.9 ECC swuIPmEm2 18.0 8.0 135.0 120.0 90.0 66.0 411.0 0.3 0.1 2.1 1.9 1.4 1.0 6.5 78 5.1 SMDIES&DESI(M 3.0 14.0 37.0 38.0 37.0 38.0 150.0 0.0 0.2 0.6 0.6 0.6 0.6 2.4 7 0.2 INVRSDE00M OF BCAIS 175.0 201.0 300.0 311.0 311.0 312.0 1,234.0 2.8 3.2 4.7 4.9 4.9 4.9 19.4 13 2.5 TRAC MAINIEANX EQUIPkET - - - - 60.0 192.0 252.0 - - - - 0.9 3.0 4.0 82 3.3 Sub-Ibtal MIS(ElUANEDUS INVSDR 205.0 234.0 617.0 645.0 833.0 879.0 2,974.0 3.2 3.7 9.7 10.2 13.1 13.8 46.8 17.8 Sib-Total 01ER TIDM IN PART A 994.0 1,838.0 3,553.0 3,648.0 3,255.0 3,109.0 13,565.0 15.7 28.9 55.9 57.4 51.3 49.0 213.6 99.1 IPhysical Contirngeies - - 128.0 132.8 102.8 95.6 459.2 - - 2.0 2.1 1.6 1.5 7.2 3-0 Price Contincies - - 552.1 1,748.6 2,644.3 3,513.0 8,458.1 - - 2.3 7.2 10.7 14.4 34.6 .1 Sub-Total INCUDII CONTIGCIES 994.0 1,838.0 4,233.2 5,529.4 6,002.1 6,717.6 22,482.3 15.7 28.9 60.3 66.7 63.5 64.9 255.4 118.1 Sub-Total PART A - INVESTMT PIAN 1,270.0 1,995.0 3,939.0 5,282.0 5,376.0 4,718.0 19,315.0 20.0 31.4 62.0 83.2 84.7 74.3 304.2 141.3 Physical Contingecies - - 160.2 275.6 302.0 256.5 994.3 - - 2.6 4.4 4.8 4.0 15.6 6.7 Price Contingeies - - 614.9 2,570.4 4,471.4 5,453.3 13,110.0 - - 2.6 10.5 18.0 22.4 53.5 24.8 TOTAL PART A - INV ENET PlAN 1,270.0 1,995.0 4,714.1 8,128.0 10,149.4 10,427.8 33,419.3 20.0 31.4 67.1 98.0 107.5 100.7 373.3 172.8 -86- YLDAVIA T*le 1 (a) Pa 2 SAF APPRAISAL EO C A SIXl RAIIAY P~EUECr Investmnt EUperditures 1981 Actual, 1982 Estimate. and Forecast for Project Period 1983-86 R10 Belgrade Fomeilp Erchng -1?83-66- Total Ibtalkun 1981 1982 1983 1984 1985 1986 1983-66 1981 1982 1983 1984 1985 1986 19836 1 US Million Din Million -US$ Millin II. INVFSMN PlAN - PAr B A. INRASTLCIUREMISC. 1571M E14IFICA=TIN - - 44.0 130.0 234.0 374.0 782.0 - - 0.7 2.0 3.7 5.9 12.3 52 6.4 1571M ss&Tr Ew~QUIPM! - - 107.0 237.0 447.0 708.0 1,499.0 - - 1.7 3.7 7.0 11.1 23.6 65 15.3 1151*4 ~'IAC @ERHADL - - - - 716.0 1,346.0 2,062.0 - - - - 11.3 21.2 32.5 46 14.9 RECS11CrIN IF LINE - - - 105.0 326.0 565.0 996.0 - - - 1.7 5.1 8.9 15.7 22 3.5 kDRKSIP& 7 - - - - - 50.0 50.0 - - - - - 0.8 0.8 25 0.2 Sub-Total INERASTWiCIUERE~MSC. - - 151.0 472.0 1,723.0 3,043.0 5.389.0 - - 2.4 7.4 27.1 47.9 84.9 40.3 B. RCILIC SMON 10 ELE=RIC [D~ YrSVES - - - - 162.0 600.0 762.0 - - - - 2.6 9.4 12.0 63 7.6 47 PASSE~E AHES - - - - 370.0 491.0 861.0 - - - - 5.8 7.7 13.6 53 7.2 Sub-Total RaLINm G103 - - - - 532.0 1,091.0 1,623.0 - - - - 8.4 17.2 25.6 14.7 Sub-Total PART B - 2SDENT PI - - - 151.0 472.0 2,255.0 4,134.0 7,012.0 - - 2.4 7.4 35.5 65.1 110.4 55.1 Physical Cotingencies - - 15.1 47.2 172.3 304.3 538.9 - - 0.2 0.7 2.7 4.8 8.5 4.0 Price Continties - - 24.9 240.1 1,911.5 4,865.5 7,042.0 - - 0.1 1.0 7.7 20.0 28.8 14.2 1 PrAL PARI B - INqESDENI PIA - - 191.0 759.3 4,338.8 9,303.8 14,592.9 - - 2.7 9.2 45.9 9.9 147.7 73.3 1UmAL BASELINE D STS 1,270.0 1,995.0 4,090.0 5,754.0 7,631.0 8,852.0 26,327.0 20.0 31.4 64.4 90.6 120.2 139.4 414.6 196.4 Physical contingencies - - 175.3 322.8 474.3 560.8 1,533.2 - - 2.8 5.1 7.5 8.8 24.1 10.7 Price Cantingncies - - 639.8 2,810.5 6,382.9 10,318.8 20,152.0 - - 2.7 11.5 25.7 42.4 82.3 39.0 Total INC=DIM CerI~IES 1,270 1,995 4,905 8,887 14,488 19,732 48,012 20.0 31.4 69.8 107.2 153.4 190.6 521.0 246.1 -87- YUGOSLAVIA Table I (b) Page 1 STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Investnent Expnditures 1981 Actual, 1982 Estimate, arn Forecast for Project Period 1983-86 E1 Novi Sad Foreign EIchange - 1983-86 - Total Total Aftnt 1981 1982 1983 1984 1985 1986 1983-% 1981 1982 1983 1984 1985 1986 1983-86 % US$ Million Din Million LIS$ Million NVESIET PLAN - PART A COMPLETION OF 1976-80 PIAN TRACK OVERHAUL 205.3 285.8 496.0 - - - 496.0 3.3 4.5 7.8 - - - 7.8 52 4.1 OTHER INVESMENIS 511.7 204.5 490.0 200.0 - - 690.0 8.0 3.2 7.7 3.1 - - 10.8 36 3.9 ub-Thtal C LIlN OF 76-80 PLAN 717.0 490.3 986.0 200.0 - - 1,186.0 11.3 7.7 15.5 3.1 - - 18.6 8.0 Physical Contingencies - - 76.0 20.0 - - 96.0 - - 1.2 0.3 - - 1.5 0.5 Price Contingencies - - 159.3 101.8 - - 261.0 - - 0.7 0.4 - - 1.1 0.4 ob-Tocal INCE1DIM CUUTNNCIES 717.0 490.3 1,221.3 321.8 - - 1,543.0 11.3 7.7 17.4 3.9 - - 21.3 8.9 PRCOSED FOR SIXTH 3ANK ILAN 1. 177.5KO4 TRACK OVERHAUL - - - 889.0 1,199.0 963.0 3,051.0 - - - 14.0 18.9 15.2 48.0 48 23.1 2. IDLCO4IVE SPARE PARTS - - 126.0 126.0--- - - - 2.0 2.0 90 1.7 ib-Total SIXH IDAN - - - 889.0 1,199.0 1,089.0 3,177.0 - - - 14.0 18.9 17.1 50.0 24.8 Physical Contingencies - - - 88.9 119.9 96.3 305.1 - - - 1.4 1.9 1.5 4.8 2.3 Price Contingencies - - - 452.3 1,038.6 1,299.4 2,790.3 - - 1.9 4.2 5.3 11.4 5.7 -ib-Total INCIO aUTIN:ECIES - - - 1,430.2 2,357.5 2,484.7 6,272.4 - - - 17.3 25.0 24.0 66.2 32.8 PROPOSAL FOR EIB IAN 1. 49IM TRACK OVERHAUL - - 597.0 412.0 - - 1,009.0 - - 9.4 6.5 - - 15.9 48 7.6 Physical Contingencies - - 59.7 41.2 - - 100.9 - - 0.9 0.6 - - 1.6 0.8 Price Contingencies - - 98.5 209.6 - - 308.1 - - 0.4 0.9 - - 1.3 0.6 b-Total INCilDIl= CCUflIlIES - - 755.2 662.8 - - 1,418.0 - - 10.8 8.0 - - 18.7 9.0 . 01ER ITEMS IN PART A 1. INFBAS-IWJCTlRE 18M TRACK OVERHAUL - - - - - 222.0 222.0 - - - - - 3.5 3.5 45 1.6 RICONSTUCION OF SATIOS 2.0 - 100.0 232.0 270.0 280.0 882.0 - - 1.6 3.7 4.3 4.4 13.9 41 5.7 Sub-Total INFRASIUCTURE 2.0 - 100.0 232.0 270.0 502.0 1,104.0 - - 1.6 3.7 4.3 7.9 17.4 7.3 2. ROILIWI STOCK 5 ELECIRIC 10MDTOIVES - - - - 152.0 228.0 380.0 - - - - 2.4 3.6 6.0 61 3.7 2 DIESEL LOCOIVrIVES - - - - - 124.0 124.0 - - - - - 2.0 2.0 68 1.4 5 DIESEL MDIOR IRAINS - - - - 382.0 - 382.0 - - - - 6.0 - 6.0 92 5.5 28 STANOARD PASSEIER OACHES 105.0 37.0 - 98.8 115.2 - 214.0 1.7 0.6 - 1.6 1.8 - 3.4 54 1.8 1090 FREIGHT AAGIS 206.0 387.5 679.0 19.4 543.2 562.7 1,804.3 3.2 6.1 10.7 0.3 8.6 8.9 28.5 37 10.5 Sub-Total RILLI, ST11C 311.0 424.5 679.0 118.2 1,192.4 914.7 2,904.3 4.9 6.7 10.7 1.9 18.8 14.4 45.9 22.9 3. MISCELIANI U INVESMENT INIFQATED TRANIORT - - 39.0 47.0 44.0 44.0 174.0 - - 0.6 0.7 0.7 0.7 2.7 26 0.7 SIJDIES&DESIGNS 15.0 19.3 28.0 28.0 28.0 28.0 112.0 0.2 0.3 0.4 0.4 0.4 0.4 1.8 - - INVESDIENS OF BOAIS 145.0 127.0 100.0 100.0 80.0 80.0 360.0 2.3 2.0 1.6 1.6 1.3 1.3 5.7 - - EMERGENY&TRACK MAINT. EUIP. - - - - 63.0 - 63.0 - - - - 1.0 - 1.0 90 0.9 Sub-Total MISCEUANEDUS INVESDMENT 160.0 146.3 167.0 175.0 215.0 152.0 709.0 2.5 2.3 2.6 2.8 3.4 2.4 11.2 1.6 Sub-Total OTHER ITEMS IN PART A 473.0 570.8 946.0 525.2 1,677.4 1,568.7 4,717.3 7.4 9.0 14.9 8.3 26.4 24.7 74.3 31.8 Physical Contingencies - - 26.7 40.7 42.2 65.4 175.0 - - 0.4 0.6 0.7 1.0 2.8 0.8 Price Contingenies - - 145.9 261.7 1,354.2 1,791.4 3,553.2 - - 0.6 1.1 5.5 7.4 14.5 6.4 Sub-Total INCUDIWt (XTINGENCIES 473.0 570.8 1,118.6 827.6 3,073.8 3,425.5 8,445.5 7.4 9.0 15.9 10.0 32.5 33.1 91.6 39.0 Sub-Total PART A - INVESDENT PIAN 1,190.0 1,061.1 2,529.0 2,026.2 2,876.4 2,657.7 10,089.3 18.7 16.7 39.8 31.9 45.3 41.9 158.9 72.2 Physical Coatingencies - - 162.4 190.8 162.1 161.7 677.0 - - 2.5 2.9 2.6 2.5 10.5 4.4 Price Contingencies - - 403.7 1,025.4 2,392.8 3,090.8 6,912.6 - - 1.7 4.3 9.7 12.7 28.4 13.1 al PART A - INVESRE PLAN 1,190.0 1,061.1 3,095.1 3,242.4 5,431.3 5,910.2 17,678.9 18.7 16.7 44.0 39.1 57.6 57.1 197.8 89.7 -88- YUGOSLAVIA Table 1 (b) STAFF APPRAISAL REPORT OF Page 2 A SIXTH RAILWAY PROJECT Investment EKierxitures 1981 Actual, 1982 Estimate, and Forecast for Project Period 1983-86 RID Novi Sad Forei8a Exchange - 198386 - Total Total AmDnt 1981 1982 1983 1984 1985 1986 1983-86 1981 1982 1983 1984 1985 1986 1983-86 % US$ Million Din Million US$ Million II. PA?J B-INVES11NI PLAN A. INIASRUCIURE&MESC. 93.5kM ELCIRIFICATION - - - - 188.0 484.0 672.0 - - - - 3.0 7.6 10.6 48 5.1 41.5M TRA" OVEHAUL - - - - - 455.0 455.0 - - - - - 7.2 7.2 48 3.5 RE)NSTRXIlN OF LMIS - - - - 140.0 150.0 290.0 - - - - 2.2 2.4 4.6 48 2.2 Sub-Total INRATURCIT&MISC. - - - - 328.0 1,089.0 1,417.0 - - - - 5.2 17.1 22.3 10.8 B. ROLLING STOCK 2 DIESEL LOCMIVES - - - - - 124.0 124.0 - - - - - 2.0 2.0 68 1.4 5 DISEL MIUR IAM - - - - - 382.0 382.0 - - - - - 6.0 6.0 92 5.5 30 FREIGHf WAANS - - - 120.7 - - 120.7 - - - 1.9 - 1.9 37 0.7 Suo-Total ROLLIN STCK - - - 120.7 - 506.0 626.7 - - -1.9 - 8.0 9.9 7.6 Sub-Total PART B-INVES2IENI PLAN - - - 120.7 328.0 1,595.0 2,043.7 - - - 1.9 5.2 25.1 32.2 18.3 Physical Contingencies - - - - 32.8 108.9 141.7 - - - - 0.5 1.7 2.2 1.1 Price Contingenries - - - 55.8 284.1 1,867.9 2,207.9 - - - 0.2 1.1 7.7 9.0 5.2 Total PART B - INVESMMENT PLAN - - - 176.5 644.9 3,571.8 4,393.3 - - - 2.1 6.8 34.5 43.5 24.5 Total BASELINE ODSTS 1,190.0 1,061.1 2,529.0 2,146.9 3,204.4 4,252.7 12,133.0 18.7 16.7 39.8 33.8 50.5 67.0 191.1 90.4 Physical Cotingencies - - 162.4 190.8 194.9 270.6 818.7 - - 2.6 3.0 3.1 4.3 12.9 5.5 Price Contingencies - - 403.7 1,081.2 2,676.9 4,958.7 9,120.5 - - 1.7 4.4 10.8 20.4 37.3 18.4 Total PRaJECT CSTS 1,190.0 1,061.1 3,095.1 3,418.9 6,076.2 9,482.0 22,072.2 18.7 16.7 44.1 41.2 64.3 91.6 241.2 114.2 5< 5 10 fl 0 0> ) I «0 0 1 l l Il << I I . . »1 1. *~ ia 0 co 0 0100 0000< . 0 00000 llo~$o 0010 00000<0010 -90- Y9X613AA Tabte 1 (d) STAFF APPRAISAL REPR 2F A SIX RAI~y PROJFL Inesrt Expenditures 1981 Actal, 1982 Eti:cate, and Forecast for Prole-: Period 1983-86 RTO Skopie Foreign Fxchanige 1983-86 -- Total Total Anaun 1981 1982 1983 1984 1985 1986 1983-86 1981 1982 1983 1984 1985 1986 1983-86 % US$ Million Di. Million uss Million 1. INVESTMENr PLAN -PART A A. CMPLETION OF 1976-06 PI TRR OVER1AUL 176.0 70.0 2.8 - Sub-fota 2M9T108N OF 7-8C P-AN 176.0 70.0 - 2.8 B. P]4PGSED FUR SIXZH B~ 10NN 1. ,43KM S&IT0EQJ0l8Nr - - - 239.0 401.5 581.0 1,241.0 - - - 4,1 6.3 9.1 19.5 65 12.7 2. L~X110VE SPARE PRS - - - 140.0 70.0 - 210.0 - - - 2.2 1.1 - 3.3 85 2.8 Sub-Total SIXLH.2WI - - - 399.0 471.0 581.0 1,451.0 - - - 6.3 7.4 9.1 22.8 15.5 Physical Coatigencins - - - 25.9 40.1 58.1 124.1 - - ~ 0.4 0.6 0.9 2.0 1.3 Pnce Cntmgcines - - - 196.5 402.5 700.6 1,299.6 - - - 0.8 1.6 2.9 5.3 3.5 Sno-Total 31C8 ING 1N8INGENCIES - - - 621.4 913.6 1,339.7 2,874.7 - - - 7.5 9.7 12.9 30.1 20.3 -. E314AL ,- EI1 .AN 1. 12KM k V - - 170.0 - - - 170.0 - 2.7 - - - 2.7 42 1.1 2. 143K11 E,,CIR=FIT10N - - 400.0 150.3 - - 550.0 - 6.3 2.4 - - 8.7 45 3.9 Suo-Tonal PtDkSAL FR EB 4DA - - 570.0 150.0 - - 720.0 - - 9.0 2.4 - - 11.3 5.0 Physical Ctngen - - 57.0 15.0 - - 72.0 - -- .9 C.2 - - 1.1 0.5 P,n GOt,ge-ies - - 94.0 76.3 - - 070.4 - - 0.4 50 - - 0.7 0.3 Sub-Total I1CDING1 c00IN 1CIE - - 721.1 241.3 - - 962.4 - - 10.3 2.9 - - 13.2 5.8 1. I71T 110 PART A 1.WNRASIRUCrR 63,1C ELEC]IFICATON 171.0 n5.- - -- - - 2.7 1.3 - - - 45 - 1151k4X WERHALL - - 45.0 - 90.0 - 135.0 - - 0.7 - 1.4 - 2.1 42 0.9 RE.SRCION OF LNE 44.0 38.0 40.0 45.0 45.0 50.0 180.1 0.7 0.6 0.6 0.7 0.7 0.8 2.8 30 0.8 REONSTRUCION OF 5TATNS 76.3 60.0 165.0 80.0 - - 245.0 1.2 0.9 2.6 1.3 - - 3.9 30 1.2 Sb-Total 2NERASIRCURE 291.U 183.0 250.0 125.0 135.0 50.0 560.0 4.6 2.9 3.9 2.0 2.1 0.8 8.8 2.9 2. Rpu0 G b141 I ELT.Ric LIC v0Es- - - 152.0 - - 152.0 - - - 2.4 - - 2.4 55 1.3 3 DIESEL Shl 114.0 - - 114.0 - - 1.8 - - 1.8 60 1.1 I ULESEL MulR IRAINS - - 192.0 192.0 - - - - 3.0 3.0 90 2.7 li STAA PASS~ CaC0ES 92.0 110.0 - 202.0 - - 1.4 1.7 - 3.2 45 1.4 192 FREIGE WAG~NS1- 69.3 277.0 24.0 68.0 369.0 - 1.1 4.4 0.4 - 1.1 5.8 60 3.5 Sub-Total =L S00CK - 69.0 277.0 382.0 110.0 260.0 1,029.0 - 1.1 4.4 6.0 1.7 4.1 16.2 10.0 3. 4lSŒL.ANED=s INVESNI 1NIMATED TRASPRW - - - 72.0 78.3 - 150.0 - - - 1.1 1.2 - 2.4 50 1.2 0NVES1TIS OF BOALS 13.0 40.0 53.0 63.0 80.0 80,0 273.0 0.2 0.6 0.8 0.9 1.3 1.3 4.3 20 0.9 OTHER 106.0 184.0 205.0 40.0 40.0 50.0 335.J 1.7 2.9 3.2 0.6 0.6 0.8 5.2 20 1.0 SO--Ital MISŒÆLLAFNJ INVESZMC1 E 119.0 224.0 258.0 172.0 198.0 130.0 758.0 1.9 3.5 4.1 2.7 3.1 2.0 11.9 3.1 Sab-Total 0157E IMS LN PAR A 410.0 476.0 785.0 679.0 443.0 440.5 2,347.0 6.5 7.5 12.4 10.7 7.0 6.9 36.9 16.0 Ptysical Concige-ies - - 30,3 25.7 29.3 13.0 98.3 - - 0.5 0.4 0.5 0.2 1.5 0.5 Price 2nontaenie - - 122.3 325.9 371.9 496.6 1,316.8 - - 0.5 1.3 1.5 2.0 5.4 2.5 Sub-Total INCWDIfU C08ILW8IES 410.0 476.0 937.6 1,030.6 944.2 949.6 3,762.0 6.5 7.5 13.4 12.4 8.9 9.2 43.9 19.0 Sub-Total PART A - INVE0MENT5P1AN 586.3 546.0 1,355.0 1,228.0 914.0 1,021.3 4,518.0 9.2 8.6 21.3 19.4 14.4 16.1 71.2 36.6 Pysical Contingen - - 87.3 66.6 69.4 71.1 294.4 - - 1.4 1.0 1.1 1.1 4.6 2.2 Price Co-tingeies - - 216.3 598.7 774.5 1,197.2 2,786.8 - - 0.9 2.4 3.1 4.9 11.4 6.4 Tonal PAR A - INVES NT PLAN 586.0 546.0 1,658.6 1,893.3 1,757.9 2,289.3 7,599.2 9.2 8.6 23.6 22.8 18.6 22.1 87.2 45.2 II. PAE B-INVFSl0 P1AN A. 1WRAS3TUlURE&ISC. l9~ E0CMFICATION - - - 110.0 210.0 350.0 670.0 - - - 1.7 3.3 5.5 13.5 45 4.7 10KM1T9AK 8VRHAL - - - 140.0 - - 140.0 - - -2.2 - - 2.2 42 0.9 ouo-Total NFASRU SC. - - - 250.0 21U.O 350.0 810.0 - - - 3.9 3.3 5.5 12.8 5.6 b. ROLLIC ST.C1 4 EllCIRIC 3X11FV - - 152.0 - - 152.0 3(4.0 - - 2.4 - - 2.4 4.8 55 2.6 7 DIESEL CIDR1Il2lNS - - - - 320.0 128.0 448.0 - - - - 5.0 2.0 7.1 90 6.4 4 ST R PASSE2R CQACHES -- - 74.0 - - - 74.0 - - 1.2 - - - 1.2 45 0.5 228FREIWI1WAGONS - - - 190.0 270.0 20.0 480.0 - - - 3.0 4.3 0.3 7.6 60 4.6 Sub-Total HDLLING S540 - - 226.0 190.0 590.0 300.0 1,306.0 - - 3.6 3.0 9.3 4.7 20.6 14.1 Su-Total PART B-LNVES=NI P7AN - - 226.0 440.0 80.0 650.0 2,116.0 - - 3.6 6.9 12.6 10.2 33.3 19.7 Physical Contgncg-ies - - - 25.0 21.0 35.0 81.0 - - - 0.4 0.3 0.6 1.3 0.6 Price Coingerncoe - - 33.9 215.1 646.5 750.9 1,646.4 - - 0.1 0.9 2.6 3.1 6.7 4.0 Toal PART B - INWN5114PA - - 259.9 680.1 1,467.5 1,435.9 3,843.4 - - 3.7 8.2 15.5 13.9 41.3 24.3 Total BA22INE SIS 586.0 546.0 1,581.0 1,668.0 1,714.0 1,671.0 6,634.0 9.2 8.6 24.9 26.3 27.0 26.3 104.5 56.3 Pnysical Contge-res - - 87.3 91.6 90.4 106.1 375.4 - - 1.4 1.4 1.4 1.7 5.9 2.8 Price Coingemies - - 250.2 813.8 1,421.0 1,948.1 4,433.2 - - 1.1 3.3 5.7 8.0 18.1 10.4 31tal PCJECT COSIS 586.0 546.3 1,918.5 2,573.4 3,225.4 3,725.2 11,442.6 9.2 8.6 27.3 31.0 34.1 36.0 128.5 69.5 -91- TABLE 2 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Items on which the Loan will be Disbursed Line Track Loan Allocation Length Rails Fastenings Points Sleepers Dinar 0S$ Disburse- RIO Line km tonnes tonnes Number Number million million ent z TRACK MATERIALS Belgrade Lapovo-Stalac 47 5,672 2,230 20 - Stalac-Trupale 57 6,878 2,704 44 - Nis-Dimitrovgrad 24 2,373 1,015 32 - Mala Krsna-Majdanpek 109 10,741 4,602 113 - Subtotal 237 25,664 10,551 209 - 1,280 20.2 Paysical contingencies 1.8 Price contingencies 5.7 Subtotal 27.7 100 Non Sad Border station-Kikinda-Pancevo 62 6,663 2,770 57 Non Sad-Bogojevo 72.5 7,481 3,108 77 Ruma-Sabac 33 3,855 1,608 36 Satajnica-Tovarnik 10 1,50 625 52 Subtotal 177.5 19,507 8,111 222 /1 1,069 16.8 Physical contingencies 1.4 Price contingencies 3.8 Subtotal 22.0 100 Sarajevo Grwsa-Knin 130 12,851 5,603 88 /1 13,515 /2 749 11.8 Physical contingencies 1.1 Price contingencies 2.3 Subtotal 15.2 100 Track materials - Subtotal 544.5 58,022 24,265 519 13,515 3,098 48.8 Physical contingencies 4.3 Price contingencies 11.8 Track materials - Total 64.9 100 ELECTRIFICATiON Sarajevo Equipment for fixed installations for electrification of the 178 km Bosanski Novi-Knin line 648 10.2 Physical contingencies 1.0 Price contingencies 1.9 Subtotal 13.1 100 SIGNALLING AND TELECOMMUNICATIONS Sarajevo Equipment for fixed installation for signalling and telecommunications of the 178 km Bosanski Novi-Knin line 240 3.9 Physical contingencies 0.4 Price contingencies 0.6 Subtotal 4.9 100 Skop3e Equipment for fixed installation for signalling and telecommunications for 143 km of the Titov Veles-Gevgetija line 624 9.8 Physical contingencies 1.0 Price contingencies 2.4 Subtotal 13.2 100 Equipment for fixed installation for CTC for 29 stations on the Tabanovci-Gevgelija line 159 2.5 Physical contingencies 0.2 Price contingencies 0.7 Subtotal 3.4 100 SS + TT + CTC materials - Subtotal 1,023 16.2 Physical contingencies 1.6 Price contingencies 3.7 SS + TT + CTC materials - Total 21.5 100 All four SPARE PARTS RfOs Spare parts for locomotives 527 8.3 Physical contingencies 1.7 10.0 100 All four TECHNICAL ASSISTANCE AND RTOs STAFF TRAINING 32 0.5 100 TOTAL - excluding contingencies 5,328 84.0 physical contingencies 6.9 price contingencies 19.1 GRAND TOTAL 6,986 110.0 100 /i Include sets of wooden sleepers for all points. /2 Steel sleepers for 8.5 km in tunnels Source : RTOs -92- TABLE 3 YU(DSLAVIA STAFF APPRASAL REPORT OF A SIXI RAIIAY PROJECr Estinmated Schadule of Disbursanents (Us$ million) IBRD Fiscal Year Ri RiO RTO RmO TEC=NICAL ALL RTOs ari Quarter BEL~ NVI SAD SARAJEVO KKPJE ASSISTAEN TAL % Quarter Cuulative FY84 4arcn 31, 1984 0.6 2.0 3.0 1.0 - 6.6 6 June 30, 1984 1.2 3.3 5.6 2.0 - 12.1 11 FY85 Septeaber 30, 1984 2.5 5.0 9.6 3.3 - 20.4 19 Deceber 31, 1984 5.5 7.1 11.6 4.3 0.1 28.6 26 March 31, 1985 9.2 7.1 11.9 5.0 0.1 33.3 30 June 30, 1985 12.8 8.2 17.3 6.4 0.1 44.8 41 FY86 Septe&ber 30, 1985 16.5 10.3 193 7.4 0.2 53.7 49 Decerer 31, 1985 17.6 13.3 21.7 7.7 0.2 60.5 55 nch 31, 1986 17.6 13.3 22.0 8.4 0.2 61.5 56 June 30, 1986 20.8 15.8 25.1 9.7 0.3 71.7 65 FY87 Septe:tber 30, 1986 24.0 19.6 27.3 10.9 0.3 82.1 75 Deceaber 31, 1986 25,8 21.3 30.3 12.5 0.3 90.2 82 March 31, 1987 26.4 21.9 30.9 13.1 0.4 92.7 84 Jine 30, 1987 27.9 22.9 33.0 15.2 0.4 99.4 90 FY88 Septeaber 30, 1987 29.5 23.9 35,0 17.3 0.4 106.1 96 Deceaber 31, 1987 30.5 24.3 36.5 18.2 0.5 110.0 100 Source: Bank Mission -93- TABLE 4 YUJDSLAVIA STAFF APPRAISAL REPORT OF A SIXH RAIUAY PROJECr Staff 1976, 1980, 1981 and Forecasts for 1982-86/ Increase (+) Actual Forecast Decrease (-) RIO 1976 1980 1981 1982 1983 1984 1985 1986 1981-86 Belgrade 24,738 25,236 25,163 25,250 25,120 24,990 24,862 24,734 - 429 Navi Sad 13,070 12,387 12,378 12,404 12,215 12,029 11,839 11,600 - 778 Sarajevo 23,716 15,230-2/ 15,306 15,383 15,441 15,500 15,558 15,615 + 309 Skopje 5,996 5,151 5,258 5,233 5,204 5,179 5,167 5,140 - 118 TUAL 67,520 58,004 58,105 58,270 57,980 57,698 57,426 57,089 -1,016 1/ At year-end 2/ Reduction due to reorganization and to closure of 427 1as of uneconomic lines between 1976 and 1980. Source: RIOs -94- TABLE 5 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Productivity in 1981 and Targets for 1983, 1985 and 1986 (Thousands of Traffic Units.! per Employee.V) 1981 1983 1985 1986 Belgrade 300 323 343 353 Novi Sad 330 346 377 395 Sarajevo 386 407 426 436 Skopje 209 238 257 268 Average 320 343 365 377 1/ A traffic unit is a net ton km and a passenger km. 2/ Including only BOALs of basic RTOs. Source: RTOs -95- TABLE 6 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Freight and Passenger Traffic Actual and Projected (1976-85) for CYR Actual Forecast Average Annual Growth Rate 1976 1977 1978 1979 1980 1981 1982 1985 1976-80 1980-85 I. FREIGHT TRAFFIC (a) Tonnage (thous.ton) Domestic 53,186 57,191 60,053 64,395 62,101 63,281 64,200 69,850 4.0 2.4 International 20,540 20,241 20,710 23,383 22,769 22,701 22,800 23,050 2.6 0.3 Total 73,726 77,432 80,763 87,778 84,870 85,982 87,000 92,900 3.6 1.8 (b) Average Haul (km) Domestic 255.0 258.9 262.5 271.7 271.7 271.3 275.0 280.0 1.3 0.7 International 363.0 371.9 367.6 360.3 357.9 376.7 375.0 410.0 (0.4) 2.8 Total 285.1 288.5 289.5 295.3 294.8 299.1 300.7 312.5 0.8 1.2 (c) Voiume(mil.net ton-km) Domestic 13,560 14,679 15,766 17,499 16,870 17,170 17,650 19,550 5.6 3.0 International 7,457 7,410 7,613 8,426 8,148 8,551 8,550 9,450 2.3 3.0 Commodity Analysis Coal 3,165 3,232 3,192 3,564 3,746 3,966 4,100 5,500 4.3 8.0 Petroleum & deriv. 1,708 1,898 2,098 2,546 1,511 1,196 1,400 1,500 - --- Ores & concentrates 2,511 2,404 2,532 2,796 2,926 3,627 3,300 3,400 3.9 3.0 Non-metals 747 727 797 891 896 803 900 1,000 4.6 2.5 Metals & products 2,399 2,811 3,046 3,209 2,110 2,638 3,000 2,300 - 2.0 Wood 1,261 1,472 1,344 1,482 1,486 1,394 1,500 1,550 4.2 1.0 Building materials 872 1,016 1,145 1,092 1,085 1,321 1,200 1,100 5.6 0.2 Cement 395 495 547 718 598 650 600 600 10.9 0.2 Fertilizers 591 732 741 681 763 1,091 800 1,150 6.6 8.0 Cereals 883 717 635 1,000 1,088 803 1,100 1,400 5.4 5.0 Other Commodities 6,259 6,308 6,966 7,683 8,549 7,977 8,030 9,200 6.4 1.5 Total car loads 20,791 21,812 23,043 25,662 24,758 25,466 25,970 28,700 4.5 3.0 Less than car loads 226 277 336 263 260 255 270 300 3.6 3.0 Total 21,017 22,089 23,379 25,925 25,018 25,721 26,200 29.000 4.5 3.0 11. PASSENGER TRAFFIC (a) Passengers (thou.) Domestic 123,678 120,888 109,964 105,462 104,458 102,629 110,394 117,014 (3.7) 2.3 International 1,815 2,658 2,815 2,587 2,563 2,277 2.611 2.933 (2.2) 2.7 Total 126,493 123,546 112,779 108,049 107,021 104,906 113,005 119,947 (3.6) 2.3 (o) Average journey (km) Domestic 69.1 73.5 82.8 85.0 88.1 92.4 88.8 90.1 6.2 0.5 International 495.6 498.9 474.6 452.6 462.1 452.3 446.2 425.9 (1.6) (1.5) Total 78.6 82.7 92.6 93.8 97.1 100.2 97.0 98.2 5.4 0.2 (c) Volume (mil.pass-km) Domestic 8,546 9,128 9,109 8,963 9,208 9,480 9,803 10,543 1.9 2.8 International 1,395 1,277 1,336 1,171 1,184 1,030 1,165 1,249 (3.6) 1.1 Total 9,941 10,405 10,445 10,134 10,392 10,510 10,968 11,792 1.2 2.6 III. TRAFFIC UNITS Million net ton-km+ 30,958 32,494 33,824 36,059 35,410 36,231 37,168 40,792 3.5 2.9 million pass-km I/ Freight traffic forecasts were revised in January 1983 to reflect December 1982 revisions to macroeconomic forecasts. Source: Yugoslav Railways and mission estimates -96- TABLE 7 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Freight and Passenger Traffic, Actual and Projected 1/ For Four RTOs Under the Project, 1978-85 Average Annual Actual Forecast Growth Rate 1978 ! 1979 1980 1981 1982 1985 1978-80 1980-85 1. FREIGHT TRAFFIC (million NTKM)1 3/ 4/ (a) Domestic 8,786 9,864 9,567 9,691 10,000 11,170 4.3 3.1 Enternational 3,501 3,813 3,516 3,922 3,960 4,100 0.2 3.1 (o) Commodity Analysis Coal 2,033 2,216 2,287 2,375 2,600 3,220 6.0 7.0 Petroleum & deriv. 1,095 1,450 859 607 630 870 -- -- Ores & concentrates 1,333 1,458 1,567 1,809 1,920 1,910 8.4 4.0 Non-metals 527 584 574 478 540 670 4.4 3.0 Retals & products 1,707 1,739 1,521 1,546 1,530 1,680 - 2.0 Wood 450 488 503 527 550 530 5.7 1.0 Building materials 544 493 491 667 560 500 - -- Cement 305 430 348 349 420 360 6.8 0.5 Fertilizers 408 407 486 636 560 680 9.1 7.0 Cereal 291 494 520 382 420 580 33.5 2.0 Other commodities 3,431 3,783 3,768 4,103 4,030 4,100 4.8 1.7 Total car loads 12,124 13,542 12,924 13,479 13,760 15,100 3.2 3.1 Less than car loads 163 135 159 135 140 170 - 1.2 Total 12,287 13,677 13,083 13,614 13,960 15,270 3.2 3.1 II. PASSENGER TRAFFIC (million pass.km) (a) Domestic 4,531 4,347 4,532 4,634 4,900 5,180 - 2.7 International 535 450 468 393 485 490 - 0.9 Total 5,066 4,797 5,000 5,027 5,385 5,670 - 2.6 III. TRAFFIC UNITS (NTKM + pass.km) 17,353 18,474 18,083 18,641 19,345 20,940 2.1 3.0 (millions) 1/ Novisad, Belgrade, Sarajevo, Skopje. 2/ 1978 is the earliest year for which separate RTE data is available. 3/ Tonnage figures for the 4 RTEs together are not given since such figures would be misleading as the traffic may be counted in more than one RTE through which the traffic passes. 4/ Freight forecasts revised in January 1983 to reflect December 1982 revisions to macroeconomic forecasts. Source: Yugoslav Railways and mission estimates -97- TABLE 8 Page 1 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Economic Rates of Return from Major Investment Components Project Costs Economic Rate Jan.82 Prices of Return (Million Din) 1. Track Overhaul of the Line Stalac- 652** 16 Lapovo (RTO Belgrade)* 2. Track Overhaul of the Line Stalac- 797** 20 Trupale (RTO Belgrade) 3. Track Overhaul of the Line Mali 916 17 Pozarevac-Velika Plana (RTO Belgrade) 4. Track Overhaul of the Line Mala 1,197** 17 Krsna-Majdanpek (RTO Belgrade) 5. Track Overhaul of the Line Nis- 312** 18 Dimitrovgrad (RTO Belgrade) 6. Construction of Double Track on the line 869 30 Ostruznica-Batajnica-Novalatova (RTO Belgrade) 7. Extension of Electric Traction on Three 87 20 .Sections, Radinac-Smederevo, Malakrsna- Pozarevac and Nis-Celekula (Total 30 km) (RTO Belgrade) 8. Investments on Radio-Dispatching 250 19 System on Main Lines (RTO Belgrade) 9. Track Overhaul of the Line Pancevo 699** 34 Airport-Kikinda-Romanian Frontier (RTO Novi Sad) 10. Track Overhaul of the Line Novi Sad- 915** 18 Bogojevo (RTO Novi Sad) * Shows the RTO where the project is located. ** Shows the projects proposed for Bank-financing. -98- TABLE 8 Page 2 Project Costs Economic Rate Jan.82 Prices of Return 11. Track Overhaul of the Line Bogojevo- 157 16 Prigrevica (RTO Novi Sad) 12. Track Overhaul of the Line Ruma-Sabac 399 22 (RTO Novi Sad) 13. Track Overhaul of the Line Bosanski- 1,494** 18 Novi-Knin (RTO Sarajevo) 14. Modernization of the Line Bosanski- 831** 15 Nov-Knin (Electrification and SSTT) (RTO Sarajevo) 15. Reconstruction of Stations (RTO Sarajevo) 564 15 16. Track Overhaul of the Line Titov 226 17 Veles-Gevgelija (RTO Skopje) 17. Track Overhaul of the Line Titov 468 18 Veles-Kocani (RTO Skopje) 18. Installation of Modern Signalling and 692** 12 Telecommunications Equipment on the Line Titov Veles-Gevgelija and CTC on the Line Tabanovci-Gevgelija (RTO Skopje) 19. Feasibility Study on Integrated 1,541 21 Transport (for all the 4 RTOs under the project) 20. Acquisition of Rolling Stock (for all 14,308 26 4 RTOs, as under Part A of Investment Plan) Total of Projects Covered by Studies 27,374 22 as above and Weighted Average Rate of Return Base Costs and Weighted Average Economic 7,589 19 Return from Projects Proposed for Bank-financing. ** Shows the projects proposed for Bank-financing. Source: CYR, Bank mission estimates. -99- TABLE 9 Page 1 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Related-Documents and Data Available on Project File 1. Feasibility Study for Track Overhaul of the lines: (a) Stalac - Lapovo (b) Stalac - Trupale (c) Mali Pozarevac - Velika Plana (d) Mala Krsna - Majdanpek (e) Sabac - Zvornik (f) Nis - Dimitrovgrad (RTO Belgrade); 2. Feasibility Study on Construction of Double Track on the Line Ostruznica - Batajnica (RTO Belgrade); 3. Analysis of Benefits Resulting from Electrification of the Line Lapovo-Kraljevo-Pozega (RTO Belgrade); 4. Assessment of the Rate of Return of Extension of Electric Traction on the Sections: (a) Radinac-Smederevo (b) Mala Krsna-Pozarevac (c) Nis-Cele Kula (RTO Belgrade) 5. Summary of the Feasibility Study on Installation of SS and TT Equipment on the Line Lapovo-Kraljevo-Pozega (RTO Belgrade); 6. Description and Calculation of Profitability of a Radio-Dispatching System on Main Lines (RTO Belgrade); 7. Feasibility Study for Track Overhaul of the Line Pancevo Airport-Kikinda-Romanian Frontier (Design Institute of CYR); 8. Feasibility Study for Track Overhaul of the Line Novi Sad-Bogojevo (Institute of Faculty of Transport, Belgrade); 9. Feasibility Study for Track Overhaul of the Line Ruma-Sabac (Institute of Faculty of Transport, Belgrade); -100- TABLE 9 Page 2 i0. Aasibility Study for Track Overhaul of the Line Coka-Senta-Subotica Insaicun of Fnalty of Transport, Belgrade); 11. YeaniolliEv Svudy for Track Overhaul of the Line Bogojevo-Prigrevica (InsoQun of Faculty of Transport, Belgrade); 12. Feasibility Stud on Electrification of the Line Vinkovci-Subotica (Institute of Faculty of Transport, Belgrade); 13. Fesibility Study for Track Overhaul of the Line Bosanski Novi-Knin Mraffic institute, RTO Sarajevo); - 14. Feasibilirv Study on Modernization of the Line Bosanski-Novi-Knin (TrafFic Nnitute, RTO Sarajevo); 15. reasibility Study on Modernization of the Line Podlugovi-Droskovac fTraffic institute, RTC Sarajevo); 16. Feasibility Study on Modernization of the Line Doboj-Tuzla (Traffic Institute, RTO Sarajevo); 17. simatron on Profitability of Purchasing Transport and Traction Vehicles based on the 1981-1985 Program (Traffic Institute, RTO sarajevo), 18, Feasibility Study for Track Overhaul of the Line Titov Veles - Gevgelia RTO Skopje); 19. "easibiliy Study for Track Overhaul of the Line Titov Veles-Bitola ARTO Skopje); 20. Flasibilit Study for Track Overhaul of the Line Titov Veles-Kocani (R7O Skopje); 21. 7easibility Study for Installation of Modern Signalling and Telecommunications Equipment on the Line Titov Veles-Gevgelija and for CTC cn the Line Tabanovci-Gevgelija (RTO Skopje); 22. Feasibility Study on Integrated Transport (CYR); 23. Investment Plan and Financing Plans 1981-1986, RTC Belgrade; 24 Investment Plan and Financing Plans 1981-1986, RTC Novi Sad; 25. Investment Plan and Financing Plans 1981-1986, RTO Sarajevo; 26. Investment Plan and Financing Plans 1981-1986, RTO Skopje; -101- TABLE 9 Page 3 27. Operational Plans for Traction and Rolling Stock, RTO Belgrade (April 1982); 28. Operational Plans for Traction and Rolling Stock, RTO Novi Sad (April 1982); 29. Operational Plans for Traction and Rolling Stock, RTO Sarajevo, (March 1982); 30. Operational Plans for Traction and Rolling Stock, RTO Skopje (March 1982); 31. Action Plan, RTO Belgrade (April 1982); 32. Action Plan, RTO Novi Sad (April 1982); 33. Action Plan, RTO Sarajevo (April 1982); 34. Action Plan, RTO Skopje (March 1982). 35. Sixth Railway Project, Revisions to Economic Analysis, January 27, 1983 (Bank Working Paper). -102- CHART Cl YUGOSLAVIA SIXTH RAILWAY PROJECT Organizational Chart of RTO Novi Sad RTO NOVI SAD Working Community 20 BOALs for Basic Activities 4 BOALs Passenger & for Other Activities Freight Traffic 4 BOALs 1 BOAL 1 80AL Current Maintenance 7 BOALs Civil Engineering Maintenance Traction & Operations Capital Overhaul Freight Cars Rolling Stock 9BOALs 1BOAL 1BOAL Current Maintenance Catering Rtr Infrastructure Tourism Source: RTO Novi Sad January 1983 World Bank-24705 CHART C2 -103- YUGOSLAVIA SIXTH RAILWAY PROJECT Organizational Chart of RTO Novi Sad Working Community Director General II" Deputy Director General A Assistant Assistant Assistant Assistant it a Director General Director General Director General Director General ec nal Commercial & Investments & Personnel & Legal & Financial Development General Regulations OperaionsAnalysis Operations Planning - Investments - General Legal Traction & Income rllin & o Dit on- Development - Personnel Regulations Rolling Stock Distribution Civil Engineering Commercial SS & TT Electrification Accounting Finance Source: RTO Novi Sad May 1982 World Bank-24706 YUGOSLAVIA STAFF APPRAISAL REPORT OF A SIXTH RAILWAY PROJECT Procurement Schedule 1982 4983 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Prep. Bid Draft Docs 12/15 2/28 3/28 Contracts 7/23 Mail 8/25 9/10 10/1 11/5 Lettersof Credit 1/5 * RTOs -- aBegin of Final : . tSign. of Delivery of Prp & q I Contra-: Materials aPrep. & 5 ct Print of s Bid Docs. CR 17 (Max. 75 Days)7/23 Mail 1 11/5 AdvEvaluation 3/28 Condition for IS SI I Contract Signing Review Final Discussions with IBRD RTOs & Approval 1/7 2/15 2/28 8/25 9/10 7/5 11/5 Board Loan Presentation Effective Source: CYR & Bank Mission February 1983 World Bank-249D jo o o g u E- o - 0--2 Elo irr Så :o 40o l a a o la.la - a. 41 E E - -~,~f f 8 ¼ - 8 2 E -Elifl:Ef g 9 00 o 2 8& 8 8 E 0È o 0 "L pärl  円RD 13口心R …… - ■뜨: ■“· . --■■----」:---:--· : 식_. &/」·. .· l - . ■L. _ . - ------&‘그 ---- --- --- - ---- _ __ ___ __ _ & ___ -- - -- _ --__ __ ___  - c i V pI .1A1. IIc r<"ø~ C - --i -jv >~ 7l -1 i ~ rT CX