/-V rZ5 .) -- TheWorld Baik WR OmcuL uSE ONLY .dl II' j)f3 C ' ,;E (Wit,.Y Ai i fc-G: Rc)hN, Hi1 Repoit No. P-5888.POL ii =MAJl AND COMENDATflON OF ToE PRESIDENT OF THE 11 TA B§AMNK POR RECOISTRICTON Al DEVELOPNE TO TM EXEUTI DIRECTORS ON A PROPOSED LO I1 AN A1 ) EQUIVALET TO US$150 UmaIol To TIl REBLIC oF POLA) FOR k ROADS PROJECT FEBRuAtY 11, 1993 Tnis document has a restricted distribution and may be used by recipients only in the performnce of ie;r offieCil duties. its contentsi may not otise be disclosed ithout World Bank authorizatio CUkRENCY EQUIVALENT Currency Unit - Zlotys (ZL) (average rates) 1988 i2B2 1222 1991 1922 US$1 = ZL 503 6500 9500 11458 13500 (July) WEIGHTS AND MEASURES Xekic SLvstenUS t m 1 meter (m) 3.2808 feet (ft) 1 kIlometer (km) 0.6214 mile (mi) 1 square Idlometer (kim) 0.3861 square mile (mi2) I metric ton (m ton) 0.9842 long ton (Ig ton) 1 Idlogram (kg) 2.2046 pounds abs) ABBREVIATIONS AADT = Annual Average Daily Traffic BPRSD = Road Network Planning Bureau cOCOM = Coordinating Committee for Multilateral Exports CTC = Centralized Traffic Control DODP = Regional Administration of GDDP ERR = Economic Rate of Retumn FYR = First Year Rate of Return GDDP = General Directorate of Public Roads GNP = Gross National Product GOP = Government of Poland IBDM = Institute of Road and Bridge Research LOT Polish Airlines MIS = Management Information System MT(E = Ministry of Transport, and Maritime Economy NBP = National Bank of Poland PEKAES = International Road Freight Company PKP = Polish State Railways PKS = National Road Transport Enterpnse PMS = Pavement Management System PMU = Project Monitoring Unit (MTME) POL = Polish Ocean Lines PSK = Polish Domestic Freight Fowarders SHRP = Strategic Highway Research Program TA = Technical Assistance TM = Traffic Management TMIS = Transport Management Information System POLAND - FISCAL YEAR January 1 - December 31 FOR OMCIL USE ONLY POLAND ROADS PROJECT Loan and Prect Summary X LQoZ Republic of Poland :zmdng AgcWMinistry of Transport and Maritime Economy, and General Directorate of Public Roads AmounD US$150 million equivalent Terms 17 years maturity with 5 years grace at the Bank's standard variable interest rate. Einang Plan: EoMiLza LOWI2 __________US$ million _ m_ _ _ 146.8 146.8 l IBRD 150.0 0.0 150.0 Total 150.0 146.8 296.8l EcQnomi, Rate of lletum: About 20% Staff Appresal Report No. 11226-POL MpU No- IBRD 23783 I 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. REIOT AND RECOMMENDATIO OF THE PRESIDENT OF THE INI RNATIONAL BANK FOR RECONSTU(;ICON AND DEVELOPMEN TO TH EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EOUIVALENT TO US$150 MILLI TO THE REPUBLIC OF POLAND FOR A ROADS PROJECT 1. I submit for your approval the following report and recommendation on a proposed loan to the Republic of Poland for th_ equivalent of US$150 million, in support of a Roads Project. The loan would have a term of 17 years, including a grace period of 5 years at the standard variable interest rate. 2. &agkg=rDjd: Poland's transport sector is in the midst of a complete restructuring which aims at the breakup of the old monopolistic organizations and the implementation of a new tansport policy aimed at more efficient transport based on increased competition. To this end many of the former monopolistic enterprises have been broken up into smaller part, restrictions on access to the markets have been removed, tariffs have been freed from Government controls and subsidies have been reduced. Substantial progress has been achieved; operating subsidies to transport enterprises have been reduced to a thfid of their 1989 level, tariffs have been raised to better reflect costs and private trucking companies have developed rapidly. Half of all trucks are now privately owned, which provides real competition both within the trucking industry and also to the railways. 3. Road traffic has shown a spectacular increase during the past 20 years. Since 1970 the number of cars has increased more than 10 times, although car ownership, now at a level of 124 cars/1O00 inhabitants, is still only one third of Western European levels. During the past 5 years the annual growth rate has been 7-8% and the average growth in traffic on the national road network was 4% per year. On the main network, traffic increased at a rate of 7% per year. Due to Poland's difficult budget situation, funding for roads has decreased steeply over the last few years, with the total GDDP budget of 1991 being a thrd of what it was in 1987. This has created a significant backlog of maintenance and rehabilitadon. With the continuing increases in traffic, road accidents have increased and Poland now has one of the highest per capita rates of highway fatalities in Europe. There is also an urgent need to plan for the future construction of urban by-passes and motorways. The present project addresses priority needs of the national road network and its administration. 4. Previous Bank Involvement in the Sector: The Bank has been involved in the sector since the late 80's. The ongoing First Transport Project (Loans 3193-PO and 3194-PO, US$4.8 and US$145.0 millions respectively, Staff Appraisal Report 8431-POL of April 5, 1990) aims to support the restructuring of the sector through developing more efficient -2 - internal management systems and maintenance procedures, together with the financing necessary to support this. The project has concentrated heavily on the Polish Railways, with a smaller component going to the Highway Administration for the establishment of a Pavement Management System which includes the supply of field measurement equipment and computers as well as the supply of laboratory equipment for better on-site quality control of works. The project is progressing well, with policy reform and restructuring being implemented faster than foreseen and with disbursements well ahead of schedule. The steady progress of the ongoing project has demonstrated that it is possible to achieve meaningful and reasonable results in the sector, based on a clear understanding between the parties on the necessity of the measures proposed. 5. Rationale for Bank Involvement: Poland's economic reform program both raquires and drives the restructuring and modernization of the transport sector. As the necessary public and private actions are complex and time-consuming, they need to be viewed as a long-term process, which will be constantly modified and needs to be supported over the long run. The Bank'_. strategy of assistance to Poland focusses on the redefinition of the role of the state in the economy, including establishment of a Government role and capacities appropriate to a more i-arket-oriented economy, and privatization. Through this proposed project, the Bank will help put this stategy into practical operaion in the roads sector. Through sector and project work, the Bank is also helping to mobilize additional sources of finance for the sector, in the context of sound sectoral and fiscal policies. 6. :Mect gbiwdves: The main objective of the project is to support and speed up the modernization and transformation of the sector along the lines described above, with sp xial emphasis on the national road network and the administration responsible for it, GDDP. In particular the project would: (i) help impro,ve the road network; (ii) continue the Bank's support started in the first Tmn'port Proje3t for the development of modern management tools in GDDP; (i help develop a privaze construction industry and introduce competitive bidding for road works; (iv) improve the road safety situation; (v) and initiate e development of modern combined transport systems. In order to achieve these objectives, the project wil address questions like GDDP's budget, evaluation and selection of investments, and road safety. 7. PoEact Description: (a) Poicy. The Government will develop and implement policies covering: adequate maintenance and strengthening of high-priority roads, including bridges; road safety; planning, project evaluation and investment selection techniques and competitive bidding procedures for carrying out of works. (b) Investments and Institutions. A portion of GDDP's 1993-95 investment program in the following areas would be financed from the loan: rehabilitation, upgrading, realignment or resurfacing of priority road sections, emergency bridge reconstruction and repair, road safety measures; TA, studies and training of GDDP and contractors' staff; TA and equipment for a road safety program; and a pilot project for the development of combined transports through the estabLishment of a - 3 - company, comprised of existing transport enterprises, which would operate a number of terminals and assume responsibility for door to door transport. S. Aoject Smplemenatim: The project would be implemented through MTME and GDDP. The Bank's first transport project has already developed some implementation and procurement capacity in GDDP. Further development of this capacity is part of the project. Sample bidding documents for works are being prepared, and it is intended to prequalify contractors for bidding before loan negotiations. The Road Safety and the Combined Transport Pilot Projects will be administered through MTME. 9. Prect Sustanability The project is considered to be sustainable. The institutional development is wel underway, in part through the ongoing project and in part through actions started during the preparation of the proposed project. The risks associated with institutional development are terefore small. With respect to financial constraints, see para. 13, Risks, below. 10. ABions Agneed; During loan negotiations, confirmation/agreement were reached on the following: (I) Government to have prepared a restructuring/privatization plan for former GDDP road and bridge construction enterprises and for the former PKS road transport enterprises to be discussed with the Bank not later than December 31, 1993; i) MTME to prepare a policy statement on axle load policy by June 30, 1994; (iii) all major GDDP investments (US$5 million or more) regardless of financing source, to show an ERR of not less than 12%; (iv) first year's road/bridge works program; (v) methodology for bridge reconstruction/rehabilitation economic evaluation; (vi) Terms of Reference for Technical Assistance and Training; (vii) Road Safety Action Plan and administrative arrangements for road safety; (viii) cost estimates; (ix) financing arrangements and availability of sufficient and timely * counterpart funds and that Government will: (a) make best efforts to gradually incrase, in accordance with budgetary capabilities, expenditures for national road maintenance in a manner and to levels that are technically and economically justified; and (b) ensure that budgetary expenditures for national road maintenance in 1993 and thereafter, will be given the highest priority within GDDP's budget, and that investments, except in emergencies and other specially justified circumstances, will be undertaken after the above mentioned priority is satisfied; (x) Road Sector Development Statement and Annual Consultations; (xi) arrangements and format of quarterly and audit reports; (xii) fMrmat of contracts and ICB documentation; and (Xiii) Special Account and disbursement conditions. 11. Environmental Consideradons: The project has been classified as a "B" under OD 4.00, Annex A, for the road modernization component, meaning that limited environmental review will be required. The civil works are generally improvements to existing roads on their existing alignments; in most cases they will bring improvements to drainage, less dust and noise, and increased traffic safety. The Polish Ministry of the Environment has stablished strict procdures for reviewing the environmental impact of highway projects which are administred by the environmental departments of the voivodships. The legislation esta0lishes levels of review appropriate to the class of works proposed, ranging from a review of the design report and drawings through to a full EA, which is required in the case, for example, of bypasses on new alignments. The appraisal mission has determined that these procedures are similar to the Bank's and that EAs will be (and in some cases already have been) prepared in aU the circumstances in which the Bank would require one. Thus the Bank can have confidence that compliance with these procedures will also bring compliance with the Bank's. There is already considerable environmental awareness in Poland, and the power of the voivodship (provincial) administrations to exercise control over central government agencies is used. For this reason it has been agreed that an environmental clearance with a copy of the EA, if so required, will be a condition of the Bank's No Objection to invitations for bids. 12. pEWtk Benefits: The project will: (i) reduce vehicle operating costs; (ii) reduce future costly reconstruction by timely and adequate maintenance; (iii) reduce road accidents; (iv) contribute to reduced road construction costs by exposing the local construction industry to competitive bidding procedures; and (v) make a start to developing combined transports in Poland. Based on experience from similar projects elsewhere, an ERR of about 20% can be expected for the type of works included in the project. 13. Riakj: The main risk is the availability of adequate local funds, which are presently insufficient. The fiscal pressures in Poland are likely to remain such that careful evaluation of priorities and ongoing discussions on inter and intrasectoral budgetary trade-offs will continue to be an essential element of Poland's cooperation with the World Bank. More specifically in the transport sector it is recommended that GDDP's budget be annually reviewed and agreed with the Bank. This sanme agreement would also address another potential risk, viz. the sometimes expressed opinion that Poland should initiate a crash program of motorway construction, even at the expense of maintaining the existing network. 14. Recommendations: I am satisfied that this loan would comply with the Articles of Agreement of the Bank, and I recommend that the Executive Directors approve the proposed operation. Lewis T. Preston President February 11, 1993 Washington, D.C. . SCHED)ULE 4 PgLAND ROADS PRQJECI Estimated Costs and Fiancing (US$ million) Esdmated Ct: Component Foreign Local Total Road & Bridge Works 140.9 143.9 284.8 PrQject Management 0.6 0.2 0.8 Institutional Development 1.5 0.1 1.6 Road SafetyProgram 5.0 2.6 7.6 Combined Transports 2.0 0.0 2.0 Grand Total 150.0 146.8 296.8 (of which contingencies) (13.9) (13.5) (27.4) Financing lan: l___________ Foreign Local Total Government 0.0 146.8 146.8 IBRD 150.0 0.0 150.0 TOTAL 150.0 146.8 296.8 SCRED-ULE a Page 1 of 2 ROADS PRQJE= (US$ milliony COMONEN ICB (loan)b/ OTHER tloan) NBF e/ TOAL (loan) Civil Works 266.9 133.4 10.4 277.3 133.4 Consultant Serv. 8.0 d/ 8.0 - 8.0 8.0 Equipment mad 4.5 4.5 0.8 cl 0.8 - 5.3 5.3 Matea ___ IDTA 2.6 c/ 2.6 2.9 5.5 2.6 Thining 0.7 d/ 0.7 . 0.7 0.7 TOTALS , 271.4 137.9 12.1 12.1 13.3 296.8 150.0 a/ includirg contingencies and taxes b/figur in (loan) column are amounts to be financed from loan. ci natwonal shopping d/ in accordance with Consultants' guidelines el Not Bak financed SCHEDUIE B1 Page 2 of 2 DISBURSEMENT BY CATEGORIES Category Amount of the Loan % of Expenditures to Allocated (Expressed in be Financed Dollar Equivalent) __ C:vil Works 119,150,000 50% Equipment and Materials 4,850,000 100% of foreign expenditues, 100% of local expenditures (ex-factory cost) and 50% of local expenditures for other items procured locally Consulting sevices and 10,000,000 100% technical assistance Training 800,000 100% Unallocated 15,200,000 TOTAL 150,000,000 ESTIMATE 1;2ISMMSEMhENTa_HEDL (US$ million) IBRD FY 94 9_ 96 97 98 | 99 Annual 15 30 36 30 24 15 Cumulative 15 45 81 iso 135 150 SCHM=L C POLAND ROADS PROJECT Timetable of Key Prcessing Stes (a) Time taken to prepare: 8 months (b) Prepared by: MTME/GDDP with Bank assistance (c) Bank Idendficadon Mission: November 1991 (d) Appraisal Mission departed: June 28, 1992 (e) Negotiadons: January 13, 1993 (f) Planned date of effectiveness April 1993 (g) Relevant PCR and PPAR None to date in this sector . Us I of 2 STATUS OF 31 GROUP OP 8ATOE A. STAT E! OF DAM L0*I8 i/ (As of December 31, 109S) U MifLion Loan Fiscal (Lese CancellatioUn) Fo. Yar Nrroer PaorLat toan Undised Oe Leoan (SAL) Full Disbursed: 3247 m1 Repubic of Poland StCuctural Adjustent Loan IDLA ot"l Puhy Disbused I., SWM and Poam Loaa 300.0 * ~~Loans Under -D&IkgIL20g S3SS 1000 ation al lank of Poland Industry Export Dewt. 260.0 220.17 3167 199.0 National Bank of Poland AgroindustrY Export Devt. 100.0 43.03 3190 10SO Republic of Poland Environment Maagement 18.0 10.55 3193 100 Repubiic of Poland Transport 4.8 3.19 3194 1990 Polish State Railways Transport 145.0 110.80 3215 l000 Polish 0i1 und Gba Co. Enez&y Resourtes Dvt. 250.0 171.19 3310 1901 PoLish Post, Telephone and TeLegraph Telecommunications 120.0 95.70 3338 1001 RepubLic of Poland Employment Promotion Services 104.0 U4.87 3341 1991 k/ Republic of Poland Financial Institutions Daft. 200.0 124.86 3342 1991 k/ RepubLic of Poland Privatization and Restruct. 280.0 205.31 3343 1001 Republic of Poland AgriculturaL Devt. 100.0 09.00 3377 1991 g/ Republic of Poland seat Supply Restrueturing 75.0 30.82 3378 1001 8/ Du-Gdensk Heat Supply Restructuring 40.0 3M.52 3379 1901 / DUE-Gdyata Beat Supply Restructuring A3.0 21.61 3380 101 I/ Voivodship DEZ Heat Supply Restructuring 5S.0 55.00 3381 1901 g/ Municipal UM-Krakow Beat Supply Restructuring 25.0 22.26 3382 1991 M/ Capital Region 2iE seat Supply Restruc^turing 100.0 95.45 3383 1091 q/ Wielkopolski Bank Credytowy Heat Supply Restructuring 20.0 20.00 3468 1902 A/ Republic of Poland 8ealth 130.0 130.00 3487 1992 Polish Developoent Bank Private Enterprise Devt. 80.0 60.00 3409 1902 Af Republic of PoLand Housing .20L0 0 _200L00 Total 2,607.8 Of which: Repaid - Total now held by the bank 07 Total Amount Sold 0.0 Of which Repaid: 0.0 Total undisbursed 1 eel.f0 A/ The status of these projects is described in a separate report on alL Bank/IDA financed projects iu execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31. k/ Hybrid loan. c/ DOE - District Heating Enterprise. Soven loans made for one project; one o- !be loans is not yet effective. n lot yet effective. Pue 2 of 2 PMND STATUS OF BAlK GROUP OMPEAONS D. STATMEN or ZYC !MVESIHHT (As of December 31, 1192) Gross Cossiitments Fiscal Type et ----~lSS 1 ATp-- Year Obliger _Business Loom mdtM Total 1989 Hostex Agricoultur* a Livestock 17.20 17.20 1900 DO-AL A/ Sales J Expot Pinanc Losasg 28.94 - 28.94 100 1B-Dornet Sales 6 Export Finance Leasing 0.1 - 0.12 1990 MEburoCsmon Sales & Ezport Finance Leoaing 0.06 - 0.0 199S ED=-"i Sales 6 Export Finance Leasing 0.10 0.10 1060 1DB-Ital-Pol Sales 6 Ecport Fiusnce Leasing 0.30 - 0.30 1990 ZVO-Machelewski Sales & Expert Finance Leasing 0.38 - 0.38 19S0 1DU-Hslkiewioa Sales a Export Finance LeasinS 0.06 - 0.06 1990 EDB-Manzeak Sales a Export Finance Leasing 0.14 - 0.14 1900 Z3B-MJA Sales a Export Finanee Leasing 0.48 - 0.48 1990 IDB-Piott Ostrow Sales & Export Finance Leasing 0.19 - 0.19 1900 EDB-Rottes Sales a& Export Finance Leasing 0.09 0.09 1990 EDB-Rybka Iron Work Sales & Export Finance Leasing 0.39 - 0.39 1930 EDB-Seer Papies sales a Export Finance Leasing 0.21 - 0.21 1990 EnI-Sawena Sales & Exyort Finance Leasing 0.82 - 0.82 190 1DB-TworTosos Sales & Export Finance Leasing 0.61 - 0.61 1991 BUistae Hotel Hotel Developunt 10.68 - 10.38 1991 International Bank of Poland Commercial Banks - 3.20 3.20 1992 Cbenaegv Real Estate 6 Business Service 10.55 1.06 11.64 1992 Philips Poland Electrical Apparatus 15.00 - 15.00 1993 Pilkington - Glass & Glass Products - 22.63 22J63 Total Gross Comnitments 84.37 26.69 111.20 Less: Cancellations, Tenminations, Exchange Adjustments, Repayments, Write-offs and Sales .12iJL 0 0 L6 Total Coamitments Held by IFC 71.TS M5 29 864 Total Undisbursed 2.LJZ Z2 MM53S Total Outstanding 40.48 4.28 44.74 N:\SCcEDD\POLAD. DEC Februar 1, 1993 g/ EDB - Export Development Bank. rIRD2378 ^F ' EDERAic. ' O & tX > v v ' LITHU MIA POLAND ROADS PROJECT T.K- PROPOSED CONSTRUCIlON PROJECT: 12 JOBNUMBERS(seeAnnex4) a 0 CONSRUCTONOFCYPASSES PL TY - D~~~~~~~~~~~~~~~~~~~~tUAWNGANDUPGRADINGOF ROADS N ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~RECONSTRUJCTON OFMOTOR WAY W111,1 GODDPDISTRICrHEADQUARTERS GO- GDPDTRCTBOUNDARIES - MAIN ROADS 4 MAJOR PORTS RAILROADS RIVERS To ,, WLKCtAWV NA ARSA NATIONAL CAPITAL ST P AN ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~E~~~( VOIVOIDSHIP CAPITALS ~~~~' GORA ,pJ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 CITIRS AND TOWNS INTERNATIONAL BOUNDARIES UKRAINE fel~ ~ svONIA~4 USA FEDRRATION I c~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I c BELAM~~~~~~~~~~~\ P LA D b taLOMETEtS Jj ~~~~~~~~~~~~~~~~~~~~GERMANY TI 5 199 10 20099KRN TI TALES TR i \ ) UKRAIN le i l,ZAIIR A K / AUST -A IA. ~~~~~~~~~~~~~~~~~~~~ A~~~~~~~~~~~~ J ~ ~ ~ ~ ~ ~~~~~~~~~~~ ROA~~~~~~~~OEME "