Document of The World Bank FOR OFFICIAL USE ONLY Report No: 62447-TR RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE RAILWAYS RESTRUCTURING PROJECT LOAN NUMBER 4787 TU TO THE REPUBLIC OF TURKEY JUNE 14, 2011 Sustainable Development Department Turkey Country Unit Europe and Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS APL Adaptable Program Loan EMP Environmental Management Plan RAP Resettlement Action Plan TCDD Turkish State Railways Regional Vice President: Philip H. Le Houerou Country Director: Ulrich Zachau Sector Manager: Henry G. R. Kerali Task Team Leader: Martha B. Lawrence TURKEY RAILWAYS RESTRUCTURING PROJECT P077328 CONTENTS Page A. SUMMARY ........................................................................................................................... 1 B. PROJECT STATUS .............................................................................................................. 1 C. PROPOSED CHANGES ...................................................................................................... 2 D. APPRAISAL SUMMARY.................................................................................................... 3 Restructuring Status: Submitted to SECPO Restructuring Type: Level one Last modified on date : 06/14/2011 1. Basic Information Project ID & Name P077328: RAIL RESTRUCT Country Turkey Task Team Leader Martha B. Lawrence Sector Manager/Director Henry G. R. Kerali Country Director Ulrich Zachau Original Board Approval Date 06/09/2005 Original Closing Date: 09/30/2009 Current Closing Date 06/30/2012 Proposed Closing Date [if applicable] EA Category B-Partial Assessment Revised EA Category B-Partial Assessment-Partial Assessment EA Completion Date 03/01/2005 Revised EA Completion Date 2. Revised Financing Plan (US$m) Source Original Revised BORR 36.30 36.30 IBRD 184.70 184.70 Total 221.00 221.00 3. Borrower Organization Department Location Ministry of treasury Turkey 4. Implementing Agency Organization Department Location TCDD Turkey i 5. Disbursement Estimates (US$m) Actual amount disbursed as of 06/20/2011 86.54 Fiscal Year Annual Cumulative 2010 0.00 86.54 2011 0.00 86.54 Total 86.54 6. Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured projects trigger any new safeguard policies? If yes, please select Y from the checklist below and update ISDS accordingly before submitting the package. Safeguard Policy Last Rating Proposed Environmental Assessment (OD 4.01) X Natural Habitats (OP 4.04) Forestry (OP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP 4.11) X Indigenous Peoples (OD 4.20) Involuntary Resettlement (OP 4.12) X X Safety of Dams (OP 4.37) Projects in International Waters (OP 7.50) Projects in Disputed Areas (OP 7.60) 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes To (a) improve the effectiveness of railway operations on the Mersin-Toprakkale and Yenice-Bogazköprü lines by increasing capacity and improving service quality, and (b) lay the groundwork for restructuring TCDD by developing experience with financially viable contract arrangements for loss making public services and access pricing of infrastructure. 7b. Revised Project Development Objectives/Outcomes [if applicable] ii RAILWAYS RESTRUCTURING PROJECT RESTRUCTURING PAPER A. SUMMARY 1. This Project Paper seeks the approval of the Executive Directors for restructuring of the Turkey Railways Restructuring Project (Loan No. 4787 TU). The restructuring is needed to address land acquisition and building renovation activities that trigger Bank policies on involuntary resettlement (OP/BP 4.12) and physical cultural resources (OP/BP 4.11). 2. Land acquisition and a possible impact on physical cultural resources were not anticipated during preparation of the project. However, when detailed layout designs for rail stations were finalized during implementation, land acquisition was found to be unavoidable. Moreover, as some activities are to be carried out in station buildings that are under the protection of Cultural Heritage Protection Councils, due regard will be necessary for cultural property regulations and procedures. 3. The Borrower is the Republic of Turkey. The executing agency is the Turkish State Railways (TCDD). The proposed restructuring is based on a request from the Republic of Turkey via letter no. 193/784 dated May 25, 2011 from the Deputy Director General of the Undersecretariat of Treasury to the Bank. B. PROJECT STATUS 4. The Turkey Railways Restructuring Project was approved on June 9, 2005 and is scheduled to close on June 30, 2012. The Project was designed to be the first phase of a two-phase Adaptable Program Loan (APL). The objective of the APL is to improve the financial viability, productivity, and effectiveness of railway operations in Turkey. The objective of the project is to (a) improve the effectiveness of railway operations on the Mersin-Toprakkale and Yenice-Bogäzköprü lines by increasing capacity and improving service quality; and (b) lay the groundwork for restructuring TCDD by developing experience with financially viable contract arrangements for loss making public services and access pricing of infrastructure. 5. The project has five components, which remain unchanged:  Component A. Freight Lines Capacity Increase. Signaling/station track extension on the Mersin-Toprakkale and Yenice-Bogäzköprü lines.  Component B. Staff Adjustment and Social Plan (completed).  Component C. Advisory Services to TCDD.  Component D. TCDD Staff Training and Re-training.  Component E. TCDD Public Communications and Periodic Surveys. 1 6. The project was restructured for the first time in 2009. The purpose of that restructuring was to amend the project development objective and results framework to align them more closely with project activities and realistic outcomes. No further adjustments to these aspects are required. 7. As of June 8, 2011, commitments stand at around Euro 140 million (98%) and disbursements at Euro 62.8 million (44%). The project was recently upgraded from “Moderately Unsatisfactory” to “Moderately Satisfactory” because four of five PSO indicators were met or exceeded in 2010, a Resettlement Action Plan (RAP) has been adopted to guide land acquisition and is being implemented, the Environmental Management Plan (EMP) has been revised to cover both the project and the adjancent Yenice Logistics Village and to cover physical cultural heritage, and a project implementation plan for the signaling investment was agreed, provided to the Bank and is being carried out. 8. The Project development objective, the results framework and the indicators for the project are not changed by the proposed restructuring. C. PROPOSED CHANGES 9. Safeguards. When the Project was originally designed, the signaling and station track extension component was envisioned to be carried out solely on TCDD-owned land. When designs were prepared, however, additional land was required for the Project civil works in Yenice station and at several other stations. TCDD further decided to create a Logistics Village and rolling stock maintenance facility adjacent to the Project in Yenice station (“Yenice Logistics Village). The Yenice Logistics Village is not financed by the Project loan. Land acquisition required for the Project-financed activities is 30,000 sq. meters while 224,000 sq. meters is required for the Logistics Village. No households will be relocated for project-financed activities; however, three households will be relocated for the Logistics Village. 10. TCDD has prepared a RAP to guide land acquisition for both the Project and the Logistics Park. Preparation of the RAP included a series of consultations with project- affected persons, the details of which are documented in the RAP. The RAP has been reviewed and agreed with the Bank. It was disclosed locally on April 20, 2011 and in Infoshop on March 25, 2011. 11. Under the project, signaling equipment is being installed in some older railway station buildings (60-70 yrs). These buildings are under the protection of Cultural Heritage Protection Councils, which must approve the renovation plans before construction starts. External appearance of the buildings is not affected, as only internal modifications are proposed and have been approved by the Councils. The existing EMP for the project has been revised to clarify the methodology and requirements for any activities that will be carried out in these stations. The revised EMP was disclosed locally on June 6, 2011 and in Infoshop on June 7, 2011. 2 12. Legal documents. The legal documents for the project have been amended to incorporate covenants related to the RAP and to refer to the revised EMP. 13. Institutional arrangements. The Borrower, through TCDD is responsible for implementation of the RAP and the EMP. D. APPRAISAL SUMMARY 14. Safeguards. The only changes to the project are the need for land acquisition and possible impacts on physical cultural resources. TCDD, using a qualified consultant, has prepared a RAP to cover the land acquisition. Bank social safeguards staff have reviewed the RAP, and the process followed by TCDD in its preparation, including public consultations and disclosure, and found the RAP to be acceptable. The existing EMP has also been revised to clarify the requirements on physical cultural property. 3