Report No. 1547a-GR r- 'A LE Appraisal of EVROS Development Pc Project Greece May 20, 1977 Projects Department Europe, Middle East and North Africa Region FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit drachma (Dr) US$0.027 5 Dr 1.00 US$1.00 = Dr 36.50 US$27,400 Dr 1 million WEIGHTS AND MEASURES (Metric System) 1 millimeter (mm) = 0.039 inches 1 meter (m) 2 3.28 feet 1 square meter (m2) = 10.76 square feet 1 cubic meter (m3) - 1.31 cubic yards 1 million cubic meters (Mm32 = 810.7 acre feet 1 cubic meter per second (m /sec) = 35.35 cubic feet per second 1 liter per second (1/sec) = 0.035 cubic feet per second 1 kilometer (km) = 0.62 miles 1 square kilometer (km2) = 0.386 square miles 1 hectare (ha) = 2.47 acres 1 strepma (str) = 0.247 acres 1 kilogram (kg) - 2.205 pounds 1 metric ton (ton) = 2,205 pounds 1 kilovolt (kV) 1,000 volts 1 kilovolt-ampere (kVa) = 1,000 volt-amperas 1 kilowatt (kW) = 1,000 watts 1 kilowatt hour (kWh) = 1,000 watt hours 1 megawatt (MW) = 1,000 kilowatts GLOSSARY OF ABBREVIATIONS ABG - Agricultural Bank of Greece ECCC - Evros Central Coordination Committee EEC - European Economic Community EPO - Evros Project Office ERCC - Evros Regional Coordination Committee ETVA - Hellenic Industrial Development Bank Fund - Evros Special Development Fund GOEV - General Farmer's Water Users Association HSI - Hellenic Sugar Industry LRS - Land Reclamation Service MPW - Ministry of Public Works NIBID - National Investment Bank for Industrial Development PM - Project Manager PPC - Public Power Corporation TBD - Tons of sugarbeets per day TOEV - Local Farmer's Water Users Association GOVERNMENT OF GREECE FISCAL YEAR JANUARY 1 to DECEMBER 31 FOR OFFICIAL USE ONLY APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Table of Contents Page No. SUMMARY AND CONCLUSIONS .............. .............. I. INTRODUCTION ................. ................ . * 1 II. COUNTRY BACKGROUND . . .. . . . . . ...... ..................... 2 III. THE PROJECT AREA . ........... ... . .o ..... .......... . 4 A. Area Features ............... .. . . ............. . 4 B. Water Resources and Hydrology ................. 5 C. Population, Land Tenure and Farm Size 5 D. Agriculture and Livestock .... ................. 6 E. Irrigation ........... ........................................ 6 F. Agricultural Credit, Extension and Research ... 6 G. Forestry ..o. .......................... .. ........ 7 H. Industry ..... .............. .................... 7 I. Roads ......................................... 8 J. Market Places ....................................... . 8 K. Education and Social Infrastructure 8....... o.. 8 L. Incomes and Levels of Living . .............. 8 IV. THE PROJECT....o . .......... . ...... . ...o..o ...... 9 A. Objectives ...o ......9o .............o ....... 9 B. Description ..o.. .. ... ... .. ...... .. 9 C. Details of Project Components ... ........ o...... 10 D. Water Requirements Supply and Quality ... 12 E. Water Rights - Riparian Issues ..o..o ........ 12 F. Status of Engineering o.o...o ....... 13 G. Construction Schedule .....o ............... 14 H. Cost Estimates ........ ... o-o- . ... .... 14 Io Financing ............................ 00000-0.... 0 .0... 0. 16 J. Procurement ....o ............ 16 K. Disbursement .......... . .. . .... .... ...*......... 17 L. Accounts and Audit ....oo.oooo ............. .. 18 M. Environmental Effects . ....... 18 Ths. dtmm. ba a rmtricted distribution and may be uswe by recipients only in the performame of their odaicul dute. Ie contnts may not otherwise be diclosed witbout World lank authofiatlo. Table of Contents (Continued) PaRe No. V. PROJECT IMPLEMENTATION ............................. 18 A. Organization and Management ................... 18 B. Sugar Industry ............. ................... 21 C. Operation and Maintenance ........... .......... 22 D. Supporting Services ................. .. ......... 23 E. Land Consolidation and Acquisition ............ 23 F. Recovery of Project Costs ..................... 24 VI. BENEFITS AND JUSTIFICATION ......................... 25 A. Production .................................... 25 B. Market Prospects .............................. 26 C. Prices ..................................... ... 26 D. Farmers Incomes .................. ... .......... 27 E. Main Benefits and Beneficiaries ............... 27 VII. AGREEMENTS REACHED AND RECOMMENDATIONS .. ........... 28 ANNEXES 1. Project Description 2. The Sugar Industry 3. Water Requirements, Supply and Quality 4. Hydrology and Riparian Aspects 5. Construction Schedule (IBRD Chart No. 17207) 6. Cost Estimates 7. Schedule of Expenditure 8. Equipment Lists 9. Procurement Procedures 10. Estimated Schedule of Disbursements 11. Organization Chart (IBRD Chart No. 17236) 12. Operation and Maintenance Costs 13. Farm Budgets and Incomes 14. Economic Rate of Return and Sensitivity Analysis CHARTS IBRD No. 17236 Organization Chart 17207 Construction Schedule 16475(R) Sugar: World Production Consumption, Prices and Proportion of Carryover Stocks (1951-1975) MAPS IBRD No. 12749 APPRAISAL OF THE EVROS DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS i. The Evros Development Project is a part of the overall development program of the relatively less prosperous prefecture (nomos) of Evros which has an area of 4,240 km2 and a population of 138,000. About half of the popu- lation falls in the target group, having less than one-third of the national average income. Evros is the most easterly of the three prefectures that make up the region of Thrace. The project is multisectoral and is designed to com- plement and coordinate the Government's on-going development activity in the nomos and provide a model for integrated development which can be replicated elsewhere in Greece. The Bank's participation would provide an organization and a Fund to ensure continuity of speedy and inLpgrated development of the resource potential of the whole nomos. It is broadly focused on improving the quality of life, raising the incomes of beneficiaries to reduce regional in- come disparities, and upgrading the institutional framework. The project would finance extension of a sugar beet processing factory, irrigation, flood control, roads, support for extension and research, forest exploitation and reforestation, technical schools and social infrastructure. ii. Estimated project cost including physical contingencies and expected price increases would be US$81.1 million equivalent with a foreign exchange component of US$35.0 million or about 43%. The proposed US$35 million Bank loan would finance 100% foreign exchange component of the project. Civil works and equipment costing about US$57.2 million will be procured through international competitive bidding. iii. Project contracting, except for the Orestias sugar factory com- ponent, would be done locally for all civil works and for urgently needed equipment. All major equipment items will be procured through the Ministry of Commerce. Planning, design and execution will be done by the respective existing departments at Alexandroupolis. The Orestias sugar factory will be handled by the Hellenic Sugar Industry (HSI) assisted by international consultants. iv. At full development in 1986 (except reforestation component), the net value of annual incremental production to the economy would be about US$7.3 million. The investment per beneficiary would be US$590. The economic rate of return to the project, including all investment costs, would be 120. It would rise to 16% if costs of components for which benefits have not been quantified are excluded. These components include social infrastructure investments and some very small components which together account for 22% of total project costs. Per capita incremental income of a typical farm family of four in the Erythropotamos valley, with four hectares, after pay- ment of water charges would be US$340 which would raise the present income by about 60%. The expansion of the sugar factory would enable growing of high value sugar beet on 4,000 additional ha, thereby increasing farm incomes. Individual benefits of social infrastructure, though difficult to quantify, would be substantial. - ii - v. The project is suitable for a Bank loan of US$35.0 million for a period of 15 years including a grace period of 3 years on country grounds. The borrower will be the Hellenic State which will on-lend US$14.0 million to the Hellenic Sugar Industry at 11% interest for 12 years including a 3 years grace period. APPRAISAL OF THE EVROS DEVELOPMENT PROJECT GREECE I. INTRODUCTION 1.01 The Government of the Hellenic State has requested a Bank loan of US$35.0 million to partly Linance the multisectoral Evros Development Project. While complementing ongoing development projects, this project will be the Government's initial effort at development of a relatively less prosperous region of Greece through institutional reforms within the existing legal framework for decentralization of decision making, coordination and monitor- ing of public investments. The Government hopes that this project would pro- vide a model for integrated investment in Greece. The main project objectives are to: (a) improve the quality of life of beneficiaries about one-half of whom are in the target group, (b) raise incomes and reduce regional income disparities that currently characterize the Greek economy and that lead to depopulation and disaffection and (c) test an organization capable of not only implementing the project, but also monitoring its progress and preparing further development programs. 1.02 Bank lending to Greece began in 1968 and to-date it has made 13 loans totalling US$339.9 million (net of cancellations), besides IFC invest- ments totalling US$16.1 million in six companies. The Bank loans include five loans (US$96.6 million) to the National Investment Bank for Industrial Development (NIBID), three loans for education (US$82.3 million), three loans for irrigation (US$95.0 million), one loan for highways (US$30.0 million) and one loan for sewerage (US$36.0 million). The execution of Bank financed projects has generally been satisfactory, although slow and subject to cost overruns due to both domestic and international inflation. Bank lending experience in education, irrigation and highways would be directly relevant to the successful execution of the Evros Project. 1.03 This project was identified and prepared by Government officials and the Bank staff assisted by the FAO/IBRD Cooperative program. Irrigation and flood work, which involved possible riparian issues, were further studied by consultants to ensure that the project would not adversely affect riparian rights. 1.04 The project appraisal was completed in March 1977 by the mission consisting of Messrs. M. Altaf Hussain, Masud Mian, D. Powrie, I. Porter, Mrs. S. Fukuda-Parr (Bank Staff) and Messrs. W. Allan, J.C. Jones, and J. Storms (Consultants). Messrs. B. Kanchanalach, G. Schumacher, and U. Kiermayr also assisted in appraising respectively the hydrological, organizational and financial aspects of the project. II. COUNTRY BACKGROUND 2.01 General. Greece has a population of about 9.1 million (mid-1976) which is growing at 0.6% per annum; more than 30% of the population is concen- trated in the Greater Athens area. The size of the rural population has been falling both absolutely and relatively due to emigration which has recently declined as a result of economic conditions in Europe. In 1976, GDP per capita at current prices was approximately US$2,100 but this masks sectoral and regional disparities. Real GDP during 1975 (at market prices) increased by 5.6% compared with a decline of 2.7% during 1974 which was caused by the Cyprus crisis. Agricultural growth at 3% during 1975 was about average for recent years. 2.02 Agriculture. The contribution of agriculture to total GDP has been declining to less than 20% in 1976, but the sector remains important. It em- ploys about 35% of the active working population, accounts for about 37% of export earnings and provides raw materials for local manufacturing and pro- cessing. At present about 3.9 million ha or 30% of the total 13.2 million ha of Greece are devoted to farm land, 5.3 million ha to pasture and a further 3.0 million ha to forestry. 2.03 Through land reclamation, irrigation and subsidies, government policy aims at the promotion of feedgrains, fodder crops, sugar beet and live- stock production and of products such as fruit and vegetables which have good processing and export possibilities. Progress has been hampered, however, by small and fragmented farm holdings, the average land holding being 3.5 ha, divided into 5 to 6 parcels. Land consolidation is a legal prerequisite for public irrigation. The labor situation also poses a problem as emigration, because of underemployment and low wages, causes labor shortages at peak times of the year. 2.04 The Agricultural Bank of Greece (ABG) with nearly 200 branches throughout Greece provides credit to 90% of farmers. The bank also provides an extension service, which is supplementary to the Government's own extension work. Agricultural cooperatives are responsible for supplying many of the domestic and farm needs of rural families and also for the handling, process- ing and sale of some farm produce. 2.05 Of all crops in Greece, sugar beet has shown the most rapid expan- sion in recent years, as the country aims at self-sufficiency in sugar. Greece has comparative advantage in terms of sugar beet yield which averages 55 tons/ha for Greece and exceeds 65 tons/ha on well-managed farms in Evros, and processing season which exceeds 110 days compared with less than 90 days in most European countries. Sugar production is in the hands of a public corporation, the Hellenic Sugar Industry (HSI), and five factories are cur- rently in operation. Self-sufficiency, aided by favorable weather and a crash program, was reached for the first time in 1975, but an expansion in capacity is still required to meet expected future increases in demand under normal weather and campaign periods. - 3 - 2.06 In forestry, the emphasis of Government policy is on import substi- tution. Production of construction and industrial wood has been increasing since 1950 but Greece still remains a net importer. In 1975, imports of industrial wood, pulp and paper were valued at Dr 7.6 billion. To rectify this situation, the forest road network is being expanded to exploit existing inaccessible Government owned forests and new plantations are being estab- lished. 2.07 In the future, structural changes in Greek agriculture can be ex- pected if the country becomes a member of the European Economic Community (EEC). Greece has been working towards this goal and support prices for products such as cereals and sugar beet are close to Common Market levels. 2.08 Transport. Due to the mountainous nature of the country and the substantial proportion of people still living in small villages, highways are the predominant mode of transport on the mainland. Overall, the extent of the road network is adequate in relation to Greece's present state of development but the physical condition of many provincial and rural roads is poor and rehabilitation and upgrading are necessary. 2.09 Education and Social Infrastructure. In general, the education system is quantitatively well developed and primary education is universal. However, the strong emphasis on classical education in the past has resulted in relatively fewer resources being devoted to technical and vocational education. As a result, the economy is finding it difficult to meet its growing skilled manpower requirements. Further, the levels of education vary sharply from region to region and in some of the rural areas illiteracy is nearly twice the national average of 14%. Similarly, the degree of access to social infrastructure varies from area to area with Greater Athens being the best and Thrace (of which Evros is part) among the worst supplied. 2.10 Regional Development. Most of the development of the Greek economy has taken place in the Greater Athens area (and to a lesser extent in Salonica) which have availability of finance, personnel, service industries, market and other administrative facilities. Such a concentration of development has resulted in an underutilization of resources in other parts of the country and in social and economic problems for Athens itself. Regional disparities in incomes and living standards have increased with per capita GDP in Athens being about thrice that of Evros prefecture; the population has continued to migrate to the urban centers; and the concentration of almost all new industry in Athens or Salonica has prevented any significant resource development in the rest of the country. At present a major obstacle to regional development emerges from the centralized decision making in Athens. 2.11 To reduce emigration and improve income and its distribution, the Government, besides currently practised price and income supports, establish- ment of industrial estates and tax, tariff and interest incentives, is now em- phasizing the need for decentralization of decision making and for coordinated investment programs in the less prosperous regions. This would be reflected in the next development plan now under preparation. A Regional Development - 4 - Service has been established whose major functions are administering the incentives programs and requests for budgetary allocations. Its efforts are now being directed to the major task of preparing integrated investment pro- grams for these neglected areas. The emphasis of these programs would, among other things, be on job creation for the young and for those returning from abroad, on the setting up of satisfactory social infrastructure and on the need to regionalize development according to the comparative advantage of each area. 2.12 It is in this context of regional development that this small scale project has been formulated. It aims at improving incomes in one of the poorer areas with good resource potential and at encouraging people to remain in the region. In addition to productive investments in agriculture, forestry and industry (sugar factory), and improvements in the physical and social infrastructure of the region an organization would be established to better coordinate planning and investments. A fund would also be set up to facil- itate the development of projects. The project fund (Chapter IV) and organiza- tion (Chapter V) are intended to be replicated in other areas of Greece as a model of regional development. III. THE PROJECT AREA A. Area Features 3.01 Location. Evros is the most easterly of the three prefectures that make up the region of Thrace. It covers 420,000 ha and lies in the extreme northeast of Greece, bounded to the east by Turkey, to the north by Bulgaria and to the south by the Aegean Sea (see Map). 3.02 Climate. In the south of Evros, the climate can be classified as eastern Mediterranean with warm, dry summers and cool to cold, moist winters. In the north and west the climate is more continental with precipitation frequently occurring as snow in the late autumn and winter. The mean annual precipitation for the entire area of Evros amounts to about 690 mm but only 30% to 40% falls in the period from April to September, the six crucial months for agriculture. 3.03 Topography and Soils. The nomos is divided into two flat and gently rolling plains by a large, central, mountainous range which reaches a height of about 1,000 m. The northern plain around Orestias is crossed by the Ardas and Erythropotamos rivers while in the south the Alexandroupolis coastal plain merges with the Evros delta. The 3,000 ha proposed for irrigation under the Bank financed project have deep, rich, well drained, alluvial soils. There are no salinity problems and the land is suitable for irrigation. B. Water Resources and Hydrology 3.04 The surface water resources of Evros are the river Evros and its main tributaries, Ardas and Erythropotamos. The irrigation component of this project would be located in the Erythropotamos valley. The Erythropotamos has a catchment area of 1,560 km2, 40% being in Bulgaria and the remainder in Greece. No hydrographs or regular records of the discharge measurements of the river are available. Nevertheless, the available rainfall data of the catchment area shows that the river runs substantial discharges during high winter rains in its catchment whereas during the drier summer months of July- September it runs low discharges. As a result, it inundates the fertile cultivated lands of the valley in winter and does not carry surface supplies for irrigation in summer. Investigations recently made by the Greek Govern- ment have proven a substantial aquifer (350 Mm3) for supplying sustained irrigation to about 3,000 hectares in the valley. C. Population, Land Tenure and Farm Size 3.05 The population of Evros in 1961 was 158,000. Many young people migrated during 1960s either to the major towns within Greece or to western Europe. Since 1971 emigration has slowed and the population has stabilized at about 138,000. 3.06 Agricultural land is divided into about 29,000 holdings averaging 4.6 ha each and fragmented into 8 separate plots. Holdings are somewhat larger than for Greece as a whole and are generally owner operated. Land ownership is not excessively skewed as indicated in the table below: Distribution of Land Holdings: Evros Parcels Area of Holding Holdings Average ha Number Total Area Number '000 '000 ha Area ha per holding Less than 1 2.1 1.08 0.27 1.86 1.0 - 5.0 16.0 41.20 0.48 5.33 5.0 - 10.0 8.6 57.99 0.61 11.12 10.0 - 50.0 2.3 34.55 0.87 17.22 29.0 134.82 0.60 7.73 Source: National Statistical Service of Greece (1971 census). - 6 - D. Agriculture and Livestock 3.07 Agriculture and livestock are the main economic activities in the nomos and about 70% of the population are still active in agriculture. Of the total 420,000 ha in Evros, about 160,000 ha including community lands or 38% are devoted to crops and a further 80,000 ha to pasture. Most of the remainder is occupied by forests. Less than 10% is accounted for by roads, rivers, residences and other uses. 3.08 The cropping pattern is oriented largely towards subsistence pro- duction, food crops and supplementary feed for livestock, mainly alfalfa. Production of maize and other summer crops is inhibited by the lack of irriga- tion. Consequently, about 120,000 ha or 75% of the crop land is in winter cereals and alfalfa. Industrial crops contribute little, except for sugar beet recently introduced with the erection of the Orestias factory. 3.09 Under rainfed conditions yields are currently averaging 6 tons/ha for alfalfa, 3.5 tons/ha for maize while inadequately irrigated sugar beet averages 55 tons/ha. Improved seed varieties and better husbandry, aided by extension and credit services, would result in increases in crop yields in the whole nomos. Such increases would be substantial in areas to be irrigated either by this project or by ongoing Government projects in Evros. 3.10 Livestock are also important in Evros which is generally regarded as a meat producing area. Expansion of livestock production is inhibited, however, by the low carrying capacity of the grazing land, lack of irrigation for fodder crops, absence of young men for livestock care and small size of holdings. E. Irrigation 3.11 The present irrigated area of the nomos is about 16,000 ha consist- ing mainly of public schemes and partly of small private wells. This area is due to be increased to at least 40,000 ha by 1983 and to 50,000 ha if all current plans are carried out in full. Major irrigation programs, current or scheduled, include North and South Ardas, Neochorion, Orestias and, as part of Bank financed project, the Erythropotamos valley. This expansion is important for crop production and more so for the sugar industry because, at present, irrigation limits sugar beet production. F. Agricultural Credit, Extension and Research 3.12 The ABG handles almost all the credit requirements of farmers. It also channels subsidies to farmers and assists in the distribution of seeds, fertilizers and chemicals. There are seven branches of the Bank in Evros, all - 7 - adeqpizely staffed and efficiently run. In 1976, 24,500 loans of Dr 940 mil- lion were made. The Bank has no restrictions on the size of holdings and has a 95% repayment record. Short-term, mainly production, loans are issued at an interest rate of 7-1/2% per annum to individual farmers and 6-1/2% to coopera- tives while medium and long term loans are issued at 6-1/2% to individuals and 6% to cooperatives. 3.13 The Directorate of Agriculture in Evros has four divisions respon- sible for extension, data collection and planning, development of production and finance. There are six branches of the extension service covering the nomos and these are presently staffed by 26 field extension agents who are all agricultural graduates. The service is adequate as regards numbers and quality but the main limitations are the rapid turnover of personnel and transport. Transport shortages also pose problems for the veterinary service which protects not only Greece but the whole of Europe against the spread of epizootics from the east. 3.14 Within the nomos, provision for agricultural research is inadequate due to the lack of local facilities and the distance from the main institutes and centers of research: the Fodder Crops Institute in Larissa and the Live- stock, Industrial Crops and Cereals Institutes near Salonica. These insti- tutes and the nearest research centers in Xanthi and Komotini do assist the extension staff with experiments, mainly on farmers' lands, but the need for a local field research station is strongly felt. G. Forestry 3.15 The forest resources of Evros are substantial. The fully forested area covers 88,700 ha while the partially forested area, with good potential, covers 56,000 ha. The potential yield from the fully forested areas is pre- sently 94,000 m3, but many areas are inaccessible and current production is only 75,000 m3. The most productive forest areas are the Derion/Dadia/Esime area and the Dadia/Levkimi/Souffli area, covering 51,000 ha. 3.16 To increase and ensure sustained production, the Forestry Service is engaged in reforestation in some of the bare and partially forested areas of the nomos and also in building access roads into those areas already forested. Harvesting of the wood is contracted to 15 Forest Workers' Cooperatives who are currently underemployed. The Forest Service auctions the produce and buyers are responsible for transportation. H. Industry 3.17 Within the nomos the most important industry is the Orestias sugar factory, which is now equipped with a slicing capacity of 3,000 TBD in a 100- day campaign. Expansion of this capacity is dependent on an increase in ir- rigation without which sugar beet cannot be grown. Other important industries -8- include a new meat complex at Ferrai, a milk plant in Alexandroupolis, a silk mill at Souffli and various feed mills and cold stores. 3.18 Most manufacturing in Evros is carried out by small scale enter- prises organized on a family or partnership basis. There are about 1,300 establishments providing employment to more than 3,000 persons. Only one third of them employ 10 persons or more. Important among them are agricul- tural implements, wood processing, engineering, electrical works and clothing. Their expansion is constrained by limited access to capital. I. Roads 3.19 The major centers of the nomos are adequately connected by paved roads but subsidiary centers are presently dependent on gra-el or earth roads. The condition of many of these roads is unsatisfactory and increasing traffic loads require upgrading to bitumen standard. Improvements to the rural roads would also be desirable for many are impassable during the winter and agricul- tural operations are consequently hindered. J. Market Places 3.20 Most fruit and vegetables are sold by farmers themselves at local markets. Existing market places are traditional with minimal or no facilities and are usually located on the main street causing congestion and hygiene problems or trespass on waste land on the edge of communities. Improvements are needed particularly in the larger towns where markets are held on a weekly or more frequent basis. K. Education and Social Infrastructure 3.21 The level of social services in Evros does not compare well with the national average. Illiteracy is higher, health facilities are lower and less than half of the houses have running water. The coverage of education has improved in recent years but some schools use rented premises. In the health sector, the problem has been aggravated by the poor quality of community water supplies. Most communities are poorly served with recreational facilities and municipal buildings. There are few community centers, even fewer libraries and little other entertainment. Such sharp contrasts with the more developed areas of Greece only encourage emigration. L. Incomes and Levels of Living 3.22 There are wide income disparities between major urban centers and elsewhere. Evros is typical of isolated predominantly agricultural areas. - 9 - Rural parts of the nomos account for 70% of its population which is about twice the national average. The average rural per capita income is estimated between US$750 and US$800 which compares to the national average agriculture income (GAP) of US$980 but is only about a third of the overall national average (GDP) of US$2,100. More than half of the rural population is esti- mated to have incomes less than one-third of the national average. Farmers in the Erythropotamos valley are poorer than in Evros as a whole but there is little evidence of absolute poverty. IV. THE PROJECT A. Objectives 4.01 The Government has chosen to accelerate regional development to raise incomes, reduce interregional income disparities, reduce emigration and improve the quality of life. An initial small scale effort will be made in Evros, which besides being one of the poorer areas, has a good agricultural resource potential. To develop these resources, the Government is financing projects costing Dr 1 billion (US$27.0 million equivalent) annually, in agri- culture, irrigation, flood control, transport and education. This project would complement the on-going interrelated components in different sectors with a view to providing a model for integrated development in other areas of Greece. To achieve this the project would provide, besides complementary in- vestment funds, an organization capable not only of efficiently coordinating the public investment program (including those not financed by the Bank) but also of monitoring its progress, implementing the project and, through delega- tion of financial authority, of producing new projects and programs for fi- nancing by the private and public sectors. B. Description 4.02 The project's complementary components would include: (a) flood protection works on the Erythropotamos and installation of about 75 tubewells; (b) development of forestry; (c) doubling the processing capacity of the Orestias sugar factory; (d) construction of paved connection roads and rural roads, and supply of maintenance equipment; (e) supply of vehicles and equipment for the extension, research and veterinary services; - 10 - (f) construction of a technical secondary school and pur- chase of school equipment; (g) paving of community streets and improvement of drainage and street lighting, construction of community centers, construction of retail markets, and replacement of water supply sources for 10 villages; and (h) establishment of an Evros Special Development Fund to finance feasibility studies and pilot projects. C. Details of Project Components 4.03 Flood Protection (Annex 1). Protection of 3,500 ha (gross) for irrigation against a 50-year flood would be provided through the remodelling of about 30 km of the central channels of the Erythropotamos river and its tributaries and their confinement within levees. The levees would have a free board of 1 meter above the water elevation reached in a 50 year flood. Drains would be constructed in the protected area discharging into the river by gravity during normal river flow and through pumping during high stage flow. 4.04 Irrigation (Annex 1). About 3,000 ha (net) of irrigable land pro- tected by flood works would be divided into 40-ha plots to be irrigated by tubewell water distributed through cement asbestos pipes leading to hydrants and mobile sprinkler systems in the field. Field roads, electric lines and drains would also be constructed. 4.05 Forestry. About 120 km of main access roads and about 165 km of feeder roads would be constructed in two productive forest areas. Three per- manent residences for forest workers would be built in the same area, and three buses would be provided for transporting forest workers to logging areas. Reforestation would also be carried out with 3,000 ha under three varieties of pine. Agreement was reached during negotiations on the sched- ule, location and design standards of the roads and the program of reforesta- tion. 4.06 Sugar Factory. The processing capacity of the Orestias sugar factory would be extended from the present 3,000 TBD to 6,000 TBD to take advantage of the excellent conditions for sugar beet production and process- ing in Evros. This expansion would be part of the national plan to increase the present capacity of 21,000 TBD to 29,000 TBD by 1982. The capacity of Orestias factory would be increased to 4000 TBD with only minor modifications and small additions of equipment. The subsequent expansion would be coor- dinated with sugarbeet availability and completed by 1982. Government offi- cials revealed that irrigation schemes, most of which are under construction, would irrigate about 50,000 ha by 1984. The phasing of the factory expansion is dependent on the progress of irrigation and assurances were, therefore, obtained during negotiations that at least 40,000 ha in Evros will be irri- gated by May 1983 (Annexes 2 and 8). - 11 - 4.07 Connection and Rural Roads. About 50 km of paved connection roads would be constructed to link 13 villages to the existing paved road network and about 250 km of gravel roads would be built in areas with good agricul- tural potential. Road maintenance equipment would also be provided. Agree- ment was reached during negotiations on the location and design standards of the roads (Annex 1). 4.08 Extension and Veterinary Services. Both the extension and the veterinary services would be provided with additional transport to serve the needs of the whole nomos, 8 vehicles going to extension and 11 to the veterinary service. Field and laboratory equipment would be provided to the field research station at Orestias and laboratory equipment would be supplied to the Veterinary Research Center at Komotini (located out of the project area) which serves the three prefectures of Thrace (Annexes 1 and 8). An assurance was obtained during negotiations that these services will be adequately equipped and staffed. 4.09 Technical Education (Annexes 1 and 8). A technical lycee and voca- tional secondary school would be constructed at Didimotichon and equipment provided for this school and a similar school, designed for 900 students, now under construction at Orestias. The gross area of the school at Didimotichon would be 3,800 m2 and it would cater for 540 students. The Bank has suggested changes in the curricula to meet the differing requirements of technicians and craft training in a single institution in the morning and evening sessions. The government accepted these in principle, but in-depth review is still in- complete. An assurance was obtained during negotiations that suitable cur- ricula for these schools would be adopted by March 31, 1978. 4.10 Social Infrastructure. Community streets would be paved and drain- age and lighting provided in 18 towns and villages. The total length of the street paving would be about 55 km. Community centers would be constructed in 12 towns and villages, the plinth area of the centers ranging from 380 m2 to 1,520 m2 depending on the size of the town. In 3 of the major towns of the nomos, retail markets would be constructed and new water supply sources would be developed for 10 villages, using either tubewells or springs, to replace the existing wells which have been polluted by septic tanks. Agreement was reached during negotiations on the location of proposed infrastructural facil- ities (Annex 1). 4.11 Evros Special Development Fund (Fund). A fund of about US$2.0 mil- lion equivalent would be established by the Government by October 1, 1977, to undertake studies and pilot projects such as on storing, grading and marketing facilities, promoting small scale processing and manufacturing industry, and developing pastures and forestry. The Government will contribute at least Dr 37 million (US$1 million) and the Bank loan the remaining US$1 million. The Government would place its initial contribution of Dr 10 million (US$0.27 mil- lion) in an account with the local branch of the Bank of Greece or any other bank acceptable to the Bank. The drachma contribution by the Government would be replenished every 6 months to bring the amount in the account to Dr 10 mil- lion until the whole contribution of Dr 37 million has been made. The Bank - 12 - contribution would be paid into the same account through 50% reimbursement against expenditure statements. This fund would finance studies and pilot projects, including those in the private sector, aimed at advancing the devel- opment of Evros. The cost of pilot projects leading to private investment would be recovered from the beneficiaries. The Evros Regional Coordination Committee (ERCC) will authorize studies costing up to US$200,000 each, without reference to the Evros Central Coordination Committee (ECCC) but will inform the ECCC and the Bank of such commitments. In cases where the cost of studies exceed US$200,000 approval of both the ECCC and the Bank would be required. All pilot projects will require approval of both the ECCC and the Bank. The total cost of a pilot project will not exceed US$500,000 and its financing arrangements would require Bank concurrence to be eligible for financing under this Fund. The Fund will be operated by the Project Manager (PM). Applica- tions for reimbursement would provide a description of the study or the pilot project, its justification, cost and such other information as the Bank may request. Assurances were obtained during negotiations that these arrangements will be followed. D. Water Requirements, Supply and Quality 4.12 Irrigation requirements would vary with crop, amount of rainfall, temperature and wind velocity. The weighted average net crop irrigation demand would be about 4,890 m3/ha or a total of 18.43 Mm3/year and the gross project irrigation requirement allowing for losses would be 23.04 Mm3/year. To supply this requirement, tubewells will withdraw from the alluvium under- lying the project area and the aquifer will be recharged each winter. The quantity and quality of the groundwater as determined by LRS through aquifer tests and water analysis are adequate (Annex 3). E. Water Rights-Riparian Issues 4.13 The proposed flood dikes of Erythropotamos and the groundwater ex- traction for irrigating the protected lands (para 4.03) posed the following riparian questions: (i) would the flood dikes have a detrimental erosion effect on the Turkish bank of the Evros river or cause a backwater effect in Bulgaria?; (ii) would the groundwater irrigation in Erythropotamos valley adversely affect the Turkish riparian interests?; and (iii) is the project technically protected from possible future extractions from Erythropotamos river in Bulgaria? 4.14 After construction of dikes, the peak of a 50-year frequency flood (design flood) in the Erythropotamos river would increase from its present 965 m3/sec to 1040 m3/sec at the end of dikes which terminate about 3.5 km upstream of the confluence with the Evros river. The incremental velocities would range between 2 cm/sec to 4 cm/sec depending on the stage of flow in Evros river and would not change the regime of Evros river or increase erosion of the Turkish bank. Nor would the flood stage of the Erythropotamos river - 13 - cause backwater effect in Bulgaria, because of higher elevation and the dikes commencing some 4 km downstream from the border. Greece informed the Turkish Government in November 1976 that it intended to construct the project, that it was seeking Bank financing, and that the project was unlikely to have any adverse effect on the Turkish bank of the Evros river. In March 1977, the Bank sent further information to Turkey on this matter, asking for comments, if any, by April 30, 1977. No comments were received from Turkey. 4.15 The impact of the project groundwater extraction upon the Evros runoff would be insignificant. The total yearly extraction from the aquifer would be about 23 Mm3 or 1.50 m3/sec for 6 months. Compared with the Evros dry season flow of about 150 m3/sec the extraction would be negligible. The total withdrawal would be less than 1% of the average annual runoff of 7,500 Mm3 of the Evros river. 4.16 Erythropotamos has two major tributaries upstream of project area. One, draining about 40% of the catchment area, flows entirely in Bulgaria. The other, draining about 30% of the river catchment area, mainly flows through Greece, cuts across southeast corner of Bulgaria for about 5 km, then runs along the border and back into Greece. The nature of terrain through which it traverses in Bulgaria preempts diversion. Besides, before this tributary enters Bulgaria it can be dammed by Greece at the Mikro Derion dam site. The risk of Bulgarian diversion of their tributary is therefore negligible. The Greek Government has informed Bulgaria of the project on Brythropotamos during a meeting of the Joint Greek-Bulgarian Commission on hydroeconomic matters in November 1976. Even if Bulgaria diverts the water the Project would not be adversely affected as sufficient recharge would be still available (Annex 4). F. Status of Engineering 4.17 Preliminary designs based on 200 m apart cross sections of the flood protection works have been prepared by Greek consultants (Th. GOFAS) in colla- boration with SOGREAH engineers. Detailed designs are being made and are to be completed by October 1977. The LRS has completed 14 trial boreholes and assessed the physical works involved in their development. Planning of the network of field roads and drains has begun and the design of these works and the design and specifications of the sprinkler systems, for which adequate local experience under Bank-financed irrigation projects is available, are expected to be completed by January 1978. 4.18 Detailed engineering has been carried out by Ministry of Public Works (MPW) consultants on the two connection roads where realignments are necessary. On the other eight roads which only require upgrading, sample sec- tion designs have been completed by the Ministry's own design offices and quarry utilization plans have been drawn up for pavement materials. On the rural roads, preliminary engineering has also been carried out by the LRS and, on the forest roads, engineering is substantially complete on roads in one area and preliminary engineering has been carried out on the other roads. For - 14 - the community streets, a relatively minor component, preliminary engineering is being carried out by the MPW through the design offices in Evros of the Technical Services Division of the nomos. 4.19 Technical studies and final list of equipment for the expansion of the sugar factory have been completed by HSI, who will also prepare the detailed designs assisted by 12 man-months of international consultants pro- vided by the project under terms and conditions acceptable to the Bank. Plinth area sketches of the community centers and retail markets have been prepared by the Ministry of Coordination and the ABG while the Ministry of Education is currently studying the laboratory and workshop requirements of the technical schools. G. Construction Schedule 4.20 Project construction would start in the fall of 1977 and be completed by June 1982. The disbursement would be completed by December 1982. The con- struction schedule is shown in Annex 5. H. Cost Estimates 4.21 The project cost, based on December 1976 prices, is estimated to be US$81.1 million, including physical and price contingencies, with a foreign exchange component of US$35.0 million or about 43%. These estimates for civil works are based on analysis of unit costs maintained and biannually updated by the MPW at Alexandroupolis and on the actual construction of 14 trial boreholes in the project irrigation area. Unit costs of equipment other than that of sugar factory are based upon price quotations in Greece at the time of appraisal. Sugar factory equipment and civil works were costed by an expe- rienced consultant at preparation stage and reviewed and updated at appraisal by another consultant from a specialized European firm of consultants. Phys- ical contingencies are assessed at 5% of the cost of equipment and 10% of the cost of civil works, which would be adequate because cost estimates reflect local experience in similar works, major civil works have been adequately prepared and the smaller ones would be mostly done on force account by depart- ments with experience in such works. Price contingencies cater for annual increases of 7.5% for years 1977-1979 and 7% for 1980-1982 on equipment costs, and 9% for years 1977-1979 and 8% for 1980-1982 on the cost of works. The cost estimates are summarized below and shown in detail on Annex 6. APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Cost Estimateo1' Forei5n Total Local FiB. Total Percent percent _Dr Million -------- ------USMe o Percen. CofiWnentl 1. Flood Protection and Irrigation a. Flood protection and irrigation 299.24 236.71 535.95 8.20 6.49 14.69 44 b. Expropriation and land consolidation 80.00 - 80.00 2.18 - 2.18 - Sub-Total 379.24 236.71 615.95 10.38 6.49 16.87 28 2. Forestry a., Forest roads construction and pine reforestation 114.87 - 114.87 3.15 - 3.15 b. Equipment for roads, labor transport, and pine reforestation - 40.93 40.93 - 1.12 1.12 10 c. Residential accoamodation 1.05 0.45 1.50 0.03 0.01 0.04 30 Sub-Total 115.92 41.38 157.30 3. 18 1.13 4.31 7 3. Sugar Factory a. Civil works and installation 3 236.73 76.70 313.43 6.49 2.10 8.59 24 b. Equipment 79.95 311.82 391.77 2.19 8.54 10.73 80 c. Working capital 25.00 - 25.00 0.68 - 0.68 Sub-Total 341.68 388.52 730.20 9 36 10.64 20.00 34 4. Connection Roads 53.86 27.74 81.60 1.47 0.76 2.23 34 5. Rural Roads a. Construction 55.80 - 55.80 1.53 - 1.53 - b. Equipment - 57.10 57.10 - 1.56 1.56 100 6. Roads Maintenance Equipment - 7.72 7.72 _ 0 0.21 100 Sub-Total (items 4-6) 109.66 2 2 202.2 3.00 2.53 5.53 9 7. Equipment for Extension. Research and Veterinary Services 1.04 9.33 10.37 0.03 0.26 0.29 90 8. Technical Education a. Building construction 35.58 15.25 50.83 0.97 0.42 1.39 30 b. Equipment and furniture 9.00 65.02 74.02 0.25 1.78 2.03 88 9. Comssunity Street, Centers and Markets 147.57 67.97 215.54 4.04 1.87 5.91 30 10. Water Supply 11.95 11.95 23.90 0.33 0.33 0.66 50 11. Project Establishment 24.82 4.38 29.20 0.68 0.12 0.80 15 12. Nomarchy 36.50 36.50 73.0° 1.0 1 0 2. 00 50 Sub-fotal (items 7-12) 266.46 210.40 476.86 7.30 5.78 13.08 22 Base Cost 1,212,95 969.57 2,182.52 33.22 26.57 59.79 13. Contingencies a. Physical (8% of base cost) 107.68 63.83 171.51 2.95 1.75 4.70 b. Price (267%) 362.17 242.44 604.61 9.92 6.64 16.56 Total2/ 1,682 80 127 84 2 958 64 46.1 35.0 81.1 43 1/ Net of taxes and duties which public sector entities do not pay. 2/ Figures rounded. 3! Includes Dr 3.65 million foreign exchange costs for consultants. March 1977 - 16 - I. Financing 4.22 The Bank loan of US$35.00 million equivalent or about 43% of the total ($81.1 million) costs will finance the estimated project foreign ex- change component. The Bank loan will be for 15 years including 3 years of grace period. Estimated annual financial requirements are in Annex 7. The financing plan would be as under: Other Components Sugar Factory (HSI) Total /1 ----------------------US$ m -------------------- IBRD 21.0 14.0 35.0 Government 33.0 - 33.0 HSI - .7 .7 ABG (debt & equity) 11.5 11.5 ETVA - .6 .6 Private enterprises /2 .3 - _.3 54.3 26.8 81.1 /1 In addition, HSI would provide about US$7.0 million and the Government about US$4.8 million interest and commitment charges during construc- tion of which US$8.0 million would be for the Bank loan. /2 Para 4.11. 4.23 In the case of the Orestias sugar factory, the financing arrange- ments for US$26.8 million will involve the on-lending of US$14.00 million to HSI out of loan funds at interest rate of not less than the current commercial rates of 11% for a period not exceeding 12 years including a grace period of 3 years. These terms are comparable to those of private industrial borrowers in Greece. This period is 2 years longer than the normal 10 years in Greece and is required for reasonable debt service. The difference between 11% and Bank's lending rate will be retained by the Government for guaranteeing the loan and assuming the foreign exchange risk. A further US$5.5 million equiva- lent would be provided by the ABG and ETVA to double the equity of IISI and the remaining requirements would be financed through an ABG loan of $6.6 million and HSI's own resources of $0.7 million during 1978-82. An assurance was obtained during negotiations that these arrangemnts would be made, and the ratification of the subsidiary loan agreement between the Government and HSI, the subscription of the increase in share capital of HSI, and the finalization of the loan agreement between HSI and ABG would be conditions of loan effec- tiveness. J. Procurement 4.24. The procurement for the Orestias sugar factory would be done by HSI. For all other civil works and for equipment items costing less than $20,000 each and up to a total of $1.0 million, the Nomarch will appoint ad-hoc local - 17 - committees for procurement. Equipment costing beyond this limit will be pro- cured through the Ministry of Commerce. Civil works and equipment involving a total cost of US$57.2 million would be procured through ICB, and small equip- ment items costing less than US$20,000 each up to US$1.0 million and civil works, which are spread over time and locations, costing US$8 million (Annex 9) would be procured following Government procurement procedures of local com- petitive bidding which are satisfactory. In addition, a number of equipment items for the sugar factory such as molasses tanks, silos, pans, hoppers, etc. involving an aggregate cost of US$2.0 million equivalent, needed over 3 to 4 years, and to be tailored to the specific needs of the expansion program will be fabricated in the existing underutilized HSI workshops. Items costing less than $10,000 each and up to an aggregate of $250,000 will be procured by HSI following its own procedures of local competitive bidding. Work relating to forest and rural roads, and reforestation would be done on force account. Lists of equipment are included in Annex 8. All equipment contracts would allow local manufacturers a 15% preference margin or the applicable customs duty, whichever is less. Specifications of pumping units and portable sprinkler equipment would provide sufficient flexibility to permit a choice between equally suitable alternative systems. The electric transmission lines required for the project would be constructed by PPC through local contract or their own task force. Assurances were obtained during negotiations that the Government will follow these procurement procedures for Bank financed compo- nents, and would cause the transmission lines to be constructed simultaneously with the irrigation development schedule. An agreement was reached during negotiations on the list of road equipment. 4.25 The specification and bidding documents of all the equipment exceed- ing US$200,000 in value and the designs, specifications and bidding documents of all the construction works exceeding US$500,000 would be cleared with the Bank before tendering. The documents would be submitted by the project execu- tion agencies, through the PM, except HSI who will send the documents to the Bank under intimation to the Project Office. To ensure wide competition the equipment and works be grouped as suggested in Annex 9. The Borrower will pre- qualify bidders for sugar factory civil works following Bank Guidelines (para 1.3 and Annex 1 of the Guidelines). If the Borrower decides to prequalify bidders for any other project related works, it would follow the same proce- dures. An assurance was obtained during negotiations that the aforementioned arrangements will be followed. K. Disbursement 4.26 The Bank loan would be disbursed in 5 years as follows: (i) 32% of the costs of civil works contracts awarded following the Bank Guidelines for the flood control and irrigation works, the forestry residences, the sugar factory, the paved roads, and the community facilities; - 18 - (ii) 100% of foreign exchange cost of imported equipment and 90% of ex-factory costs if locally purchased in accordance with Bait procedures except (iii) below; (iii) 50% of expenditure incurred against the Fund; (iv) 100% of foreign exchange of consultants' services for the design of expansion of the Orestias sugar factory. 4.27 If the electric transmission lines are erected under contract, dis- bursement against the work would be on the basis of (i) above, but if under- taken by PPC forces, disbursement would be made only for materials and equipment under item (ii) above. 4.28 Savings, if any, at the completion of the project would be cancelled. An estimated quarterly disbursement schedule is presented in Annex 10. L. Accounts and Audit 4.29 The borrower would cause the departments and agencies responsible for carrying out the project, to maintain separate accounts for each sub- project, following current accounting and auditing procedures which are satis- factory. An assurance was obtained during negotiations that the project ac- counts maintained by TOEVs and the accounts of HSI would be audited annually by independent auditors acceptable to the Government and the Bank, and that the auditors' report would be sent to the Bank within six months after the close of each fiscal year. M. Environmental Effects 4.30 The project would have a beneficial effect on the environment of Evros. Protection against floods and improvement of drainage would reduce the damage to cultivable land and crops. Pine reforestation would help to prevent soil erosion. Provision of social infrastructure in the form of paved streets, community centers, markets and schools would all help to improve the social environment for the population of Evros and encourage people to remain in the area. Provision for replacing the polluted sources of water with clean water would improve the health of the population. V. PROJECT IMPLEMENTATION A. Organization and Management 5.01 The multisectoral project composition would require an organization that could function with speed, economy and above all, efficiency (Annex 11). - 19 - Several alternatives were considered by the Government of Greece and the Bank missions. The one unanimously found most attractive was a three tier coordina- tion and management system with a clearly defined delegation of administrative and financial authority for which among other things, a fund of US$2.0 million equivalent would be established. The alternative of creating a public corpora- tion was not pursued because of project scale and non-revenue generating com- ponents such as flood works, infrastructure and social provisions. The cor- poration would also have required, what is time consuming, parliamentary ap- proval. In addition, besides major reorganization in existing services, there was danger of wasteful duplication of effort between the corporation and the Government departments. The proposed organization would avoid these defects and provide the desired efficiency, coordination and decentralization and would monitor the project impact particularly on income improvement, emigration and the effectiveness of the new organization and the Fund. 5.02 Evros Central Coordination Committee (ECCC). The top tier would be ECCC chaired by a general director of the Ministry of Coordination in Athens. This Ministry has national responsibility for three functions that are critical to the success of the regional Evros Project. These are (i) approval of the .Public Investment budget, (ii) review of private investment under the new Re- gional Development Incentives Law, and (iii) approval of all regional develop- ment plans. 1/ The membership of this committee would include senior offi- cials from inter alia the Ministries of Coordination, Agriculture, Public Works, Interior and ABG. The Chief of the Ministry's Regional Development Service would be its member-secretary. The staff of the Regional Development Service would be strengthened to serve as its secretariat. 5.03 The main functions of the committee would be to: (a) follow-up the project implementation and coordination of the overall development program of the nomos; (b) review the development program and the annual investment budget proposals of the ERCC and make recommendations on them to the Government; (c) review and evaluate the results of the monitoring to be carried out by the Evros Project Office (EPO) with respect to the effec- tiveness of the new organization, the procurement procedures, the Fund and its impact on income improvement and distribution and on emigration; and review the annual project progress reports for submission to the Bank; and (d) review and approve proposed studies and pilot projects to be financed out of the Fund that exceed the specified limits (para 4.11). 1/ This function would be more important if Greece's EEC membership is approved. - 20 - 5.04 Evros Regional Coordination Committee (ERCC). The second tier would be ERCC at Alexandroupolis. The membership of the Committee would include, inter alia, the PM, the chief of the Komotini office of the Regional Develop- ment Service, the directors of the Evros Departments of Agriculture, Public Works and Forestry, the Director of the Orestias sugar factory and a represen- tative manager of the local branches of ABG. The head of the nomos, the Nomarch, would be its chairman. The PM would be the member-secretary of the committee. The directors of departments dealing with the development program at the nomos level shall report on the progress of the program to the ERCC. 5.05 The functions of the ERCC would be to: (a) implement the project (except the sugar factory); (b) coordinate and review the development program for Evros and the annual investment budget proposals of the dif- ferent departments for all department schemes in the nomos of Evros and make recommendations to the ECCC; (c) supervise the implementation of the Evros development pro- gram, and recruitment of staff, with incentives if necesary; (d) advise the Nomarch on the composition and functions of the local committees which will be appointed by the Nomarch on an ad hoc basis for the purpose of (i) evaluating and award- ing of civil works contracts under the project (except the sugar factory), and (ii) evaluating and awarding of at least the equipment contracts which are within the specified limits (para 4.11); (e) review the project progress including the Orestias sugar factory and the public investment plans for the nomos of Evros; and (d) review and approve the studies and pilot projects to be fi- nanced by the Fund to investigate private and public invest- ment proposals with a view to advancing regional development. 5.06 Evros Project Office (EPO). The third tier would be the Evros Proj- ect Office headed by the PM. It would be adequately staffed and include at least an economist, an engineer and an accountant. The PM and his staff would be members of the Ministry of Coordination and functionally responsible to the Nomarch. The PM would have relevant qualifications and experience and his office would perform the following functions: (a) with respect to the implementation of the project, to review and revise the parts related to the implementation of the project in the annual investment budget proposals of the various technical departments in Evros; and - 21 - (b) with respect to the overall development program of Evros (including the project): (i) to coordinate the preparation of the Evros development program and the annual investment budget proposals under the supervision of the ERCC, (ii) to oversee, monitor, and coordinate the implementation of the Evros development program by the development departments in Evros, (iii) to provide secretariat services to the ERCC, (iv) to initiate proposals for investigations, studies and pilot projects, (v) to administer the Fund, and (vi) to col- lect annually information required for the monitoring of the project in accordance with criteria agreed between the Bor- rower and the Bank, and to prepare annual Project progress reports with the assistance of the different directors on the project for submission to the ERCC, the ECCC and the Bank. 5.07 To ensure timely and effective functioning of the organization, an assurance was obtained during negotiations that the EPO would be adequately staffed at all times and PM would have qualifications acceptable to the Bank. The establishment by the Government of the ECCC, ERCC and the EPO with the membership and responsibilities as agreed between the Government and the Bank, and the appointment of PM and at least two of his staff would be conditions of loan effectiveness. B. Sugar Industry 5.08 Organization. HSI, with its headquarters at Salonica, is managed by a Board of Directors under a president and a vice president. With the excep- tion of the managing director, all are part-time. The Central Organization consists of five departments - agricultural, technical, financial, commercial and administration - each with a university graduate head and assistant head. The agricultural department has some 50 agronomists and their assistants, the technical department has 5 engineers, the finance department has 12 persons and administration 20 - 25 staff. Each of the 5 existing factories has a man- ager and administration, finance, agricultural, engineering and other support staff. Each factory is charged with a proportion of central staff (Annex 2). 5.09 Both central and factory staff are well qualified, given training on the job and promoted on merit. HSI has its own pay scales unrelated to, and better than, those of the Government. The industry as a whole and the Orestias factory as a unit, are well managed, and no basic organizational change is foreseen except that the manager of the Orestias factory would be represented on the ERCC to be established under the project. This would ensure liaison and coordination between the factory and other local departments. 5.10 Financial Position. HSI, a public corporation, has a share capital of Dr 200 million held by two public sector banks, ABG (90%) and ETVA (10%), which has remained unchanged since 1960. Rapid expansion of the Corporation's activities over the past decade has been mainly financed by long-term loans from 3 sources: the Greek Government (Dr 710 million), ABG (Dr 2.05 billion), - 22 - and 3 suppliers' credits of Dr 680 million. Its outstanding long-term finan- cial obligations currently stand at Dr 2.53 billion. The Government sugar price policy allows HSI only a 6% profit margin on its net cost of production. Therefore, accumulation of its retained earnings has been low compared to in- vestment requirements, a cause for a weak equity capitalization. HSI's long- term debt-equity ratio was 80:20 in 1973 and 74:26 in 1975. This high finan- cial leverage resulted in a profitability of 32.2% on the share capital which was counterbalanced by a tight debt service coverage: 1.2 times in 1973 rising to 1.7 times in 1975. HSI's liquidity was, however, satisfactory as its current position did not drop below 1.5. 5.11 In the past HSI has financed its expansion with loans. It would, however, be financially unsound to continue financing its investments exclu- sively with loan funds. HSI's management and the Government recognize this situation and will increasc HSI's share capital b'! Dr 200 million during the next five years (1978-82). 5.12 Financial projections for HSI and the Orestias plant, based on the financing plan (Annex 2) indicate that HSI's debt equity ratio would be 70:30 in 1977 and 68:32 in 1982 and the current ratio will not drop below 1.7 during project implementation when HSI will generate a cash flow sufficient to meet its debt obligations. The debt service coverage would not go below 1.3 times. Assurances were obtained during negotiations that HSI will not incur any debt unless a debt service coverage is maintained above 1.3, and that the dividend policy of paying 10% on its share capital will not be increased during project implementation. 5.13 HSI's overall financial position is tight, measured against commer- cial standards. Its exposure to commercial risk requiring a better financial protection is, however, practically nil as it is the sole producer of sugar in Greece where sugar consumption is far below that of countries with comparable incomes. An investment in HSI's expansion of up to 29,000 TBD by 1982 is, therefore, financially sound. The expansion of the Orestias plant shows a financial rate of return of 16%. C. Operation and Maintenance 5.14 At the existing prefecture level the departments responsible for the operation and maintenance of various public sector facilities include Public Works, Land Reclamation, Forestry, Agricultural Extension, Veterinary, Health, Education and Transport. Each of these departments is adequately staffed, and is headed by an officer - usually titled Director. The departments belong to different central ministries in Athens for technical and financial control. Administratively, however, they have been reporting to the Nomarch and in the future they would report to the ERCC. These departments would continue to operate and maintain services for the project. Some of them, however, would need additional equipment to cater for expanded project facilities. The departments to be provided with such equipment include Public Works, which - 23 - would be responsible for flood protection works and services for construction and maintenance of paved roads; LRS which is responsible for rural roads and local farmers cooperatives, called TOEVs, 1/ which are responsible for irriga- tion; Forestry Department for roads, reforestation and buildings; and Local Services (Mayors) for buildings and other smaller structures. The sugar factory at Orestias and Technical Schools, however, have sufficient facilities for operation and maintenance. During negotiations assurances were obtained that the Government would make satisfactory arrangements with various depart- ments for the repair, replacement and renewal of all equipment and for the maintenance of all project facilties. D. Supporting Services 5.15 The Bank financed project is small in relation to the total develop- ment activities current or foreseen in Evros. The present needs together with those generated by the project would be met by existing services. Agricultural extension, veterinary and research services and technical schools are adequate in numbers and staff quality. Their current constraint of lack of equipment, vehicles and buildings would be removed by the project. For sugarbeet produc- tion, government extension services are supplemented by the 5 extension staff of the Orestias factory backed by research agronomists at HSI headquarters. In addition, the ABG has field agents for extension. Agricultural credit for crop and livestock related activities is provided by the seven local branches of the ABG and lending policies are satisfactory to meet the project needs at the same terms as elsewhere in Greece. However small industry is impeded for lack of easy access to credit (para 3.18). Assurances were obtained during negotiations that the Government would ensure, through provision of refinancing facilities if necessary, that the incremental needs of the project would be fully met. E. Land Consolidation and Acquisition 5.16 Land holdings in the project area are small and fragmented. Con- solidation would be necessary for economy and efficiency in the irrigation system. The existing government laws require consolidation of holdings in all public irrigation schemes. The area requiring consolidation in this project is only 3,000 ha out of a total of 40,000 to 50,000 ha to be irrig- ated by 1984. Nevertheless, the Government plans provide for its consolida- tion through the existing adequately staffed department, and, to ensure that these plans would be carried into practice, an assurance was obtained during 1/ Major irrigation and drainage facilities serving more than one TOEV, are operated and maintained by GOEVs, which would emerge when pro- posed irrigation schemes in the nomos are completed. - 24 - negotiations that consolidation of 3,000 ha will be completed by May 1982. An assurance was also obtained that land required for project works will be acquired as and when needed. F. Recovery of Project Costs 5.17 Cost recovery of each project component would be differently treated. The Bank loan for the Orestias sugar plant, accounting for about one third of the total project investment costs, will be on-lent to HSI at commercial in- terest rates. Financial projections indicate that the Orestias sugar factory under the preseL-'.- pricing system would generate sufficient funds to service the loans for its expansion (Annex 2). 5.18 Forestry including roads, equipment and reforestation would consume about 7% of total costs which would be fully recovered through auction of public forest products within 15 years. 5.19 Irrigation would account for about 14% of total project costs. Its cost recovery would follow the formula which was agreed between Greece and the Bank for the Nestos and Yannitsa Irrigation Project (Loan 991-GR). This formula would permit the recovery of full Operations and Maintenance costs and a small contribution towards depreciation (Annex 12). In current values this would involve a charge of Dr 572 (US$16) per stremma and would result in recovery of nearly 30% of project costs for irrigation in 40 years discounted at 10%. This would represent 31% of the annual incremental farm income and a rent recovery index of 43% (Annex 13). This is comparable to the 32% re- covery of total cost under the East Vermion Project (Loan 1165-Gr) and higher than the 23% for Nestos and Yannitsa Irrigation Project. Any higher charge would reduce incentives to use irrigation and would be politically difficult to impose. Moreover, some subsidy would be justified by the low median income of the beneficiaries in the Erythropotamos valley which is about Dr 19,770 (US$540) per capita at present against the national per capita average income of Dr 76,650 (US$2,100). Even at full development in 1984 the income of a typical farmer would be Dr 32,140 (US$880), well below the current national average income. Any lower level of recovery would be undesirable since the total area to be irrigated by the early 1980s could be as much as 50,000 ha. An assurance was obtained during negotiations that irrigation charges would be collected by TOEVs annually, and paid into a central account. The charges would be levied on a per stremma basis and would be sufficient to cover aggre- gate costs of operating and maintaining the irrigation system including elec- tricity and an additional amount equivalent to no less than 27% of such aggre- gate costs representing a provision towards depreciation. 5.20 The drinking water supply component involves the replacement of existing wells which have been polluted by septic tanks. Beneficiaries of the existing water system pay a small water charge which is designed to cover Operation and Maintenance costs. The same system of recovery would continue as the project does not provide additional services and also because the in- vestment in this component would not furnish sufficient leverage to apply a - 25 - water charge in a few villages that would differ from that in numerous other villages in the area receiving similar water supplies. Market places would be rented so that at least Operation and Maintenance costs are recovered as is the present practice in Greece. An assurance was obtained during negotia- tions that charges for potable water and rent/tax for market places would be at least adequate to operate and maintain these facilities. 5.21 No direct recoveries are proposed for flood works, roads, technical schools, community centers and paved streets as it is one of the objectives of the project to improve incomes and the quality of life in this less prosperous area where about half of the population is in the target group. VI. BENEFITS AND JUSTIFICATION A. Production 6.01 The Bank financed project would result in increased production of a variety of commodities (Annex 14). This would be enabled by irrigation, supporting services (for the whole nomos), forestry exploitation, reforesta- tion and extension of the sugar factory. This is summarized below. 6.02 Crop production would increase as follows: Erythropotamos Valley Future Future Incremental Crop Without Project With Project Production ----------------thousand tons--------------- Sugar beet 5.3 48.3 43.0 Alfalfa 15.8 16.5 0.7 Maize (grain) 2.1 9.4 7.3 Winter cereals 4.8 4.9 0.1 Legumes 1.7 2.1 0.4 Melons and Watermelons 6.6 10.5 3.9 Vegetables 1.2 3.6 2.4 Maize silage 0 13.5 13.5 Poplars 0 3,000 m3 3,000 m3 6.03 The proposed extension of the sugar factory at Orestias would lead to an annual incremental production of about 31,000 tons of white sugar repre- senting about 10% of total present national sugar production. In addition, the extension of this factory would enable production of sugar beet, which is remunerative, in some 16,000 ha in a four-years rotation. 6.04 The provision of forest roads and other facilities would permit the annual exploitation of an additional 17,000 m3 of various types of wood products. The productive impact of pine reforestation would be more long- term, reaching a maximum annual total of 94,000 m3 only after 40 years. - 26 - B. Market Prospects 6.05 Tihe increased production of sugar beet would supply the Orestias factory. The expansion of the Orestias factory is part of the national pro- gram of capacity expansion to maintain self-sufficiency, and the incremental production of about 31,000 tons from Orestias would contribute to meeting the increase in domestic demand which is estimated to reach 360,000 tons by 1982. This would, assuming historical average campaign periods and sugar yields, require an increase in the national sugar processing capacity from the present 21,000 TBD to 29,000 TBD by 1982 (Annex 2). The possible EEC membership, cur- rently under negotiations, would have important implications for the Greek sugar market as sugar production in the EEC is strictly controlled by a system of quotas and intervention prices. If Greece does not obtain a quota equal to its domestic consumption, any excess above the quota would have to be exported. Although the Orestias factory's production costs are competitive with the Bank EPD projected world market price, fluctuations around this price can be ex- pected. However, Greece's membership and its terms and conditions are unknown at present. While the risks are recognized, they do not invalidate the Gov- ernment's policy to maintain self-sufficiency in sugar. To ensure project implementation and to avoid overproduction, assurances were obtained during negotiations that (a) the present 3,000 TBD capacity of the Orestias sugar factory will be increased to 6,000 TBD by 1982, and (b) that total capacity of Greek sugar factories will not exceed 29,000 TBD by 1982 unless justified by market demand and discussed with the Bank. 6.06 No difficulties are anticipated in the disposal of other commodities, part of which would be consumed within Evros. Increased production of maize and of forest products would reduce imports, which in 1975 totaled 960,000 tons for maize and 526,000 m3 for wood. Forestry products would also supply the existing and planned small-scale industries. Feed and fodder crops would find ready marekts in the Islands which currently depend on imported supplies. C. Prices 6.07 Prices of major commodities including those of wheat, barley and sugarbeet, are set by the Government, while prices of fertilizers and some chemicals, seeds and machinery are subsidized, fuel is taxed and labor is guaranteed a minimum wage. Prices used in the financial evaluation are based on local prices prevailing at the time of appraisal. For the economic anal- ysis, projected world market prices for internationally traded goods were adjusted to those provided by the Bank's Economic Analysis and Projections Department. Prices of non-traded goods were based on financial prices, but adjusted for taxes and subsidies. A shadow wage rate of Dr 19/hr was used for off-season family farm labor and of Dr 75/hr for wood harvesting. For- eign exchange was not shadow priced for want of data; however, sensitivity tests were made on the basis of total costs (Annex 14). - 27 - 6.08 The price of sugarbeet was derived from the projected world price of sugar which was considered to be appropriate for economic analysis because it reflects both the estimated marginal cost of production from new capacity as well as the long-term average price. All prices used are shown in Annex 14. D. Farmers' Incomes 6.09 A significant increase in incomes would result from the provision of irrigation and flood protection works in the Erythropotamos Valley. The Valley, together with the hillsides, make up the farmland of 12 villages, and most farmers have both hillside and valley land. At present, net returns from a typical I ha partial holding situated in the valley is estimated at Dr 12,080 ($331). While this would increase in 1976 prices to Dr 16,780 ($460) without the project, it would more than double to Dr 35,000 ($959) with the project. The present ret farm income of a typical family operating a 4 ha holding is estimated at Dr 79,070 ($2,170), rising to Dr 116,060 ($3,180) in the future without the project and to Dr 128,565 ($3,520) at full development with the project (Annex 13). E. Main Benefits and Beneficiaries 6.10 The economic rate of return on the project as a whole, including all investment costs, would be 12%. This would increase to 16% if the costs of components without quantified benefits are excluded. Sensitivity analyses show that an increase in costs or decrease in benefits of any one component would not be serious except for the sugar factory where a 15% increase in costs or a 15% decrease in benefits would reduce the overall rate of return to the whole project from 16% to 11%. Separate analysis for each component showed the following results. Sugar plant 15% Flood control and irrigation 14% Rural roads 33% Connection roads 22% Forest roads, associated facilities and pine reforestation 14% The risk presented by sensitivity tests on sugar component should be weighed against the benefit of an assured supply at a stable price of a basic food commodity. 6.11 While the rate of return analysis shows each of the separable in- vestments to be viable, equal, if not greater, importance should be attached to the impact of the project as a whole on the economy of Evros and its con- tribution as an initial effort at regional development in Greece. These proposed investments have been designed to complement the Government's special programs of public investments and incentives to encourage private enterprise. - 28 - This total development effort would increase the level of economic activity. Specifically, the Orestias sugar factory extension would complement the entire public irrigation program and permit the agricultural potential of the region to be exploited, providing an assured high income to the farmers from beet cultivation. Forestry development would feed processing industries, many of which are underutilized mainly for lack of raw material. Provision for infrastructure would not only reduce the disparity in living standards between Evros and elsewhere but would also serve productive activities. The project's contribution to the regional development experiment in Greece would come not only from the complementary nature of the investments, but from the introduc- tion of reforms in the organization which have been designed to increase the efficiency in utilization of funds. The replicability of such reforms would be possible as the complementary investment would be only about $2,400 per beneficiary family. 6.12 Almost all the people of Evros (34,500 families) would benefit directly from this project, from major income-raising investments and/or from social services provided. The largest benefits however would be felt by the 3,500 farm families in the Erythropotamos Valley, the 400 member families of forestry cooperatives, more than 5,000 farm families that would be served by rural roads and the construction workers who would find employment during project implementation. About 1,000 workers in existing small sawmills and about 5,000 beet farmers in addition to those in the Erythropotamos Valley would improve their incomes. VII. AGREEMENTS REACHED AND RECOMMENDATIONS 7.01 During negotiations, agreements were reached and assurances were obtained on the principal issues referred to in Chapters 4, 5 and 6. Subject to the conditions of loan effectiveness concerning the finalization of the financing arrangements for the Orestias sugar factory expansion (para 4.23) and the establishment of the project organization including the appointment of the PM (para 5.07), the project is suitable for a Bank loan of US$35.0 million for 15 years including a grace period of 3 years. The Borrower would be the Hellenic State. ANNEX 1 Page 1 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Project Description A. General 1. The Greek Government has chosen to accelerate its efforts at regional development by formulating and implementing a coordinated investment program in the nomos of Evros. Evros was chosen as a suitable area for this initial program because it is not only one of the poorer areas of Greece but also an area of considerable agricultural potential. 2. In formulating the program the resource base of the nomos has been studied, the agricultural and industrial development possibilities have been assessed and an attempt has been made to determine the major structural bottlenecks to future growth. The program is designed both to increase incomes throughout the nomos and also provide the necessary facilities and improvements in the quality of life which will encourage people to remain in the region. Particular attention has been paid to the institutional question and an organization is to be established in Evros which should enhance the decentralization of decision making and ensure that the program is imple- mented satisfactorily. 3. The program is designed as the first of a series to reduce regional income disparities within Greece. The actual components of the program are unique to Evros, based on the specific resources and needs of the nomos; but the process of establishing the resource base, identifying the infrastructure needs and the setting up of appropriate institutions are all exercises that can be replicated in other less developed areas of the country. The desire for replicability has also meant that close attention has been paid to the cost per beneficiary of the program. 4. The present project is only part of the Evros development effort and is designed to complement the Government's own investments which at present are running at an annual total of about Dr 1,000 million (US$27 million) or Dr 7,250 per capita, nearly three times the national average (Dr 2,500). The project does, however, affect the whole population of Evros and particularly the 70% who live in rural areas where median incomes are less than one-third of the national average. ANNEX I Page 2 B. Project Works Flood Protection and Irrigation 5. (a) Remodelling of the central channel of the Erythropotamos river and its confinement within levees to protect about 3,500 ha (gross) of the valley lands from floods. (b) Reshaping the central channels of the tributaries of the Erythropotamos river and confining them within levees to prevent them from spilling into the protected area. (c) Land consolidation and farm improvement works in the protected area. (d) Installation of 75 tubewells and sprinkler system to irrigate about 3,000 ha net in the protected area. 6. The central channel of the Erythropotamos river would be remodelled to contain the annually recurring floods within its banks. It would be bounded by about 50 to 60 meter-wide berms on either side contained within levees or the high river banks. The levees would have a free board of 1.0 meter above the water elevations attained with a fifty year frequency flood flowing in the river. The existing slope of the river channel would be re- tained as far as possible and its width and depth increased to meet the above stated criteria. Apart from the main river channel, the river tributaries joining the river between Metaxades and Didimotichon bridges in the irrigation project area would also be remodelled to contain 50-year frequency floods. Drains would be constructed in the protected area, discharging into the river by gravity during normal river flows and through pumping during high stage flows. 7. Land consolidation, which is required by law in the reclaimed areas, would be done by LRS staff. Field roads and field drains would be constructed for proper access to and drainage of the farm areas. The project area would be divided into 40-hectare plots and each plot would be irrigated by tubewell water through buried cement asbestos pipes leading to hydrants and mobile sprinkler systems. 8. This program of flood control and irrigation would directly af- fect the incomes and living standards of the 3,500 rural families in the ANNEX 1 Page 3 Erythropotamos Valley, most of whom have per capita incomes less than one third of the national average. 1/ Forestry 9. (a) Construction of 285 km of forest roads in the Derion/Dadia/ Esime (DDE) and Dadia/Lefkimi/Souffli (DLS) areas. (b) Purchase of road equipment to assist in the construction of forest roads in these areas. (c) Construction of 3 residences for forest workers and purchase of 3 buses. (d) Planting of 390 ha of Pinus radiata, 980 ha of Pinus maritima and 1,630 ha of Pinus nigra in the Kirki/Sykorrachi, Drymos/ Esime and Derion/Dadia plantation areas. (e) Purchase of equipment to assist in the reforestation opera- tions in these areas. 10. Construction of the forest roads, details below, would increase the present road densities of 10.7 m/ha in the DDE area and 8.7 m/ha in the DLS area to 16.5 m/ha and 14.2 m/ha respectively thereby enabling full exploita- tion of these forest areas. 1/ All data on population in this Annex is taken from the 1971 population census and is a reasonable estimate of the present population. ANNEX 1 Page 4 Area No. Name of Road Type A Type B Feeder Served (ha) -____-----Km----------- A. Derion/Dadia/Esime (DDE) Complex 1 Petrolofos-Silo 2.0 1.0 280 2 Ayia Eleni-Tsynga 5.0 8.0 520 3 Ammouda-Ahlada - 5.0 8.0 700 4 Mega Derion-Diavolorema (Samari) 10.0 - 11.0 570 5 Spinos-Kakorhema (Samari- Diavolopetra) - 10.0 7.0 1,020 6 Profitis Elias-Samari - 5.0 2.0 240 7 Myulos-Afhin Prof. Elia - 2.0 - 210 8 Anthos-Lofos (Kerasies) - 4.0 6.0 430 9 Karfitsa-Fountoukia - 3.5 3.0 225 10 Kakorema-Karfitsa - 2.0 2.0 125 11 Kakorema-Lakorema - 5.5 2.0 490 Feeders to Existing Types A & B - - 35.0 1,335 Subtotals 10.0 44.0 85.0 6,145 B. Dadia/Levkimi/Souffli (DLS) Complex 1 Kotronia-Matsaggou Bridge - 7.0 5.0 930 2 Dadia-Zoyia Kalyvia - 13.0 20.0 980 3 Megas Vrahos-Compt. 13 - 4.0 6.0 200 4 Moni Dadias-Lykotrypa - 6.0 5.0 590 5 Isomata-Gypaetoi 10.0 - 15.0 1,540 6 Gipraina-Gouva 7.0 - 7.0 730 7 Gouvra-Provaton 5.5 - 10.0 465 8 Kitrinopetra-Mavri Korifi 5.5 - 7.5 715 9 Kitrinopetra-Pesani 8.0 - 5.0 1,500 Subtotals 36.0 30.0 80.5 7,650 Totals DDE and DLS 46.0 74.0 165.5 13,795 11. Standards for forest roads in Greece allow for three types of road. A and B roads are chosen for the main access into and through forest areas depending upon the size of the area and the through service provided by the road. Feeder roads lead off both A and B roads into logging areas. Details of the design standards, which are satisfactory, are given below: ANNEX 1 Page 5 Depth from Road Crown to Pavement Formation Maximum Minimum Side Drain Road Type Type Width (m) Width (m) Gradient (%) Radius (m) Invert (cm) Class A Gravel 6 8 8 20 30 Class B Gravel 4 6 8 20 30 Class C Earth - 4 15 - 30 (Feeders) 12. To increase the productivity of forest workers, the construction of three permanent residences and the purchase of three buses are also included in the project. The permanent structures would be built in the middle of the DDE/DLS forest complex and would be used by forest workers logging in nearby areas. The buses would be based at Esime, Dadia and Souffli and would be used for transporting forest workers to outlying logging areas. 13. Pine reforestation is proposed for three plantation areas located in mountainous countryside in the center and south of the nomos. Plantation work has already been carried out in all three areas and the proposed reforestation program is merely a continuation of past operations. In each area, the work would consist of shrub removal, cross ripping, ploughing, seedling production, planting and maintenance one year after planting. Details of the proposed hectarage are provided below. Area already Area proposed for Plantation Area forested (ha) reforestation (ha) Pinus Pinus Pinus Radiata Maritima Nigra Total Kirki/Sykorrachi 2,500 280 210 210 700 Drymos/Esime 1,700 110 770 220 1,100 Derion/Dadia 1,500 - - 1,200 1,200 Total 5,700 390 980 1,630 3,000 14. The forestry component would directly affect the personnel of forestry service and the ten forest cooperatives in the area with 400 regis- tered members, 40% of whom are currently inactive due to lack of sufficient work. In addition, the program would have a significant effect on the wood processing industry in Evros and the 1,000 workers in this industry many of whom work in the more than 100 small sawmills that are presently operating at only 12% of installed capacity. Some of these industries are located in or near Alexandroupolis, but many others are in the small mountainous villages where conditions of living are very difficult. ANNEX 1 Page 6 Sugar Facti:--r 15. (a) Extension of the processing capacity of the Orestias sugar factory from 3,000 TBD to 6,000 TBD. 16. A detailed description of the proposed extension is contained in Annex 2. No additional employment in the factory is expected as a result of the expansion but the project would directly affect some 8,000 farms that would supply the additional beet. About 3,500 of these farms are located in the Erythropotamos Valley. Connection Roads and Paved Road Maintenance 17. (a) Construction of 50 km of paved connection roads to villages in Evros. (b) Purchase of road maintenance equipment to carry out routine maintenance of all paved roads in Evros except those for which equipment is provided under the national road main- tenance program. 18. The connection roads component of the project consists of the con- struction of ten paved accesses linking 13 villages to the existing paved road network. One of the roads also connects four villages to each other and pro- vides a through route from Orestias up the broad ridge of agricultural land between the Ardas and Erythropotamos rivers. The villages are at present served with gravel-surfaced access roads, generally on satisfactory alignments, and in such cases the construction work covers only the paving of the existing alignments and improvement of drainage. On the Sterna-Kavili and Valtos- Chandra roads, realignment is also included in the construction works, and right-of-way acquisition would be carried out by the Government in advance of construction. The paved width on all the access roads would be 6 m. The details of the roads are tabulated below: Route Design Shortng. Item Village Length km Km Population 1 Doriscos 2.0 Nil 500 2 Kavissou 3.5 Nil 510 3 Gemisti 3.0 Nil 500 4 Filakton 2.5 Nil 630 5 Lagina 2.5 Nil 1,000 6 Aspronerion 3.0 Nil 720 7 Alepochorion 5.0 Nil 510 8 Doxis 6.0 Nil 670 9 Sterna-Kavili 5.3 0.3 1,510 10(a) Chandra-Valtos 5.6 0.2 980 10(b) Chandra-Vergi 11.3 Nil 1,370 ANNEX I Page 7 19. The designs allow for a 60 km/hr speed except in the villages them- selves. Details of the standards which are satisfactory are shown below. Depth from Pavement Formation Maximum Minimum Road Crown to Type Width(m) Width(m) Gradient(%) Radius(m) Side drain Invert (cm) Surface 6 8 8 30 50 Dressing 20. Construction of these roads would help to improve communications for the 9,000 people living in the various villages served. Rural Roads 21. (a) Construction of 253 km of rural roads in 25 locations throughout Evros. (b) Purchase of road equipment to assist in the construction and maintenance of rural roads. 22. The proposed roads supplement the existing network in-Evros which include 215 km of rural roads already built by the Land Reclamation Service. Twenty-five areas have been selected where agriculture can be advanced if roads are constructed. From one to five contiguous rural roads are proposed for each area to give an overall density of 12.4 m/ha. Agricultural traffic would be operated by private farmers and cooperatives. 23. The standards for rural roads allow for 2 types, major and minor roads, which have 5 m and 4 m wide gravelled surfaces. The selection of road type is based upon the expected use of the road. In the 25 areas to be served with rural roads, 152 km of major and 101 km of minor roads are proposed (IBRD Map 12749) as tabulated below: ANNEX 1 Page 8 General Area to be Road Length (km) Item Location Served (ha) Major Minor 1 Kastane 400 2 4 2 Dikia 1,200 15 - 3 Marasia 800 12 4 Kiprinos 900 11 - 5 Neochorion 1,800 7 5 6 Karoti 600 5 - 7 Elafochorion 800 7 - 8 Ellenochorion 1,100 - 12 9 Thourion 600 4 - 10 Metaxades 700 8 - 11 Mandra 1,100 6 4 12 Lavara 1,200 10 3 13 Souffli 1,000 10 - 14 Kiriaki 1,000 8 6 15 Lefkimi 1,900 17 - 16 Ferrai 1,900 6 10 17 Esime 700 6 - 18 Tiheron 700 - 10 19 Lijra 300 6 - 20 Ledis 600 - 9 21 Andeias 700 8 5 22 Abantos 200 4 - 23 Filaki 800 - 15 24 Pentolofi 400 - 8 25 Petroton 500 - 10 Totals 21.900 152 101 24. Details of the design standards, which are satisfactory, are shown below: Depth from Road Crown to Road Pavement Formation Maximum Minimum Side drain Type Type Width(m) Width(m) Gradient(%) Radius(m) Invert (cm) Major Gravel 5 7 10 20 50 Minor Gravel 4 6 10 20 50 25. Construction of these roads would help to reduce transport costs and increase the production of wheat, barley, maize and alfalfa by ensuring that fertilizer and other inputs are applied at the optimum time and that harvesting can be carried out satisfactorily. More than 5,000 farms would be directly affected. ANNEX 1 Page 9 Equipment for Extension and Research 26. (a) Purchase of eight vehicles for the extension service. (b) Purchase of field equipment, laboratory equipment and vehicles for the research farm at Orestias. 27. One vehicle would be provided to each of the eight centers and sub- centers which would alleviate the present transport constraint. The field and laboratory equipment and the other vehicles would be used by the Orestias farm which is due to be converted from its present status as a "prototype" farm serving little useful purpose to a field research station. Both components should make a substantial contribution to development and in time affect most of the rural population. Equipment for Veterinary Service 28. (a) Purchase of 11 vehicles for the veterinary service. (b) Purchase of equipment for the veterinary diagnostic laboratory. 29. At present the service suffers from a shortage of transport (which limits the effectiveness of inoculation campaigns against foot and mouth disease) and also has inadequate facilities for accurate and rapid diagnosis. Such constraints are particularly serious as Evros forms part of the defense barrier that protects not only Greece but the whole of Europe against the spread of epizootics from the east, in particular the Asiatic and other forms of foot and mouth disease. Provision of additional transport and laboratory equipment would relieve these constraints and help to save livestock. Technical Education 30 (a) Construction of a technical lycee (3-year course after 9 years schooling) and vocational (2-year course after 18 years schooling) secondary school at Didimotichon and purchase of equipment for the school. (b) Purchase of equipment for a similar school now under construction at Orestias. 31. At present both schools are operating a restricted program in temporary accommodation. The provision of equipment and the construction of a new school at Didimotichon would ease these restrictions and enable the schools to offer instruction at technician and craft levels (the schools would operate as technical lycees from 8.00 a.m. to 2.00 p.m. and as voca- tional secondary schools from 2.30 p.m. to 8.00 p.m.). Projected enroll- ments at the two schools have been adjusted to give maximum efficiency in the usage of workshops and equipment and are detailed below. ANNEX 1 Page 10 Prolected Enrollments Orestias Didimotichon Subject 3 year 2 year 3 year 2 year General mechanical engineering 180 60 90 60 Electrical engineering 180 60 90 60 Electronics engineering - - 90 - Construction engineering 90 - - - Auto engineering 90 60 90 60 Secretarial work 90 - - - Accountancy 90 - - Totals 720 180 360 180 32. The gross area of the school at Didimotichon would be 3,802 m2 (Table 1) and the gross area of the school at Orestias 5,759 m2. Suitable sites for the two schools have already been selected, service facilities are available and construction of the school at Orestias has already begun. The schools would serve not only the 9,000 people of Didimotichon and the 12,500 people of Orestias but also neighboring villages. Graduates of the three-year courses are likely to enter industry or commerce at middle-technician level, with a few going to higher technical or commercial institutes (KATE's). Graduates of the two-year courses would rise to positions at lower supervisory level. Community Streets 33. Paving of community streets in 18 towns and villages throughout the nomos and improvement of drainage and street lighting. 34. The towns and villages and individual streets were selected by the Ministry of Public Works on the basis of community size, traffic volumes, improved street standards and the effect these have upon users and nearby residents. The existing roadways are generally of uneven stone or gravel surface with very poor drainage and no street lighting. Details of the proposed roads are provided below. ANNEX 1 Page 11 Item No. Town or Village Length km Population I Alexandroupolis 8.0 25,530 2 Orestias 7.0 12,500 3 Didimotichon 4.0 8,890 4 Souffli 4.0 6,210 5 Ferrai 5.0 4,430 6 Nea Vissa 5.0 3,860 7 Makri 2.5 1,380 8 Kiprinos 2.5 2,110 9 Rizia 2.5 1,610 10 Kastane 2.5 1,830 11 Lavara 2.5 2,250 12 Tiheron 2.5 2,340 13 Dikia 1.5 2,070 14 Valtos 1.5 590 15 Neochorion 1.5 850 16 Pythion 1.0 1,530 17 Metaxades 1.0 1,270 18 Kamariotissa 1.0 340 Totals 55.5 79,590 35. Design standards for the roads are variable but acceptable: Depth from Pavement Formation Road Crown to Ty1pe Width(m) Width (m) Side Drain Invert(cm) /1 Asphalt 4-10 4-10 30 or Concrete with curbs ]2 /1 Alternatively subsurface drainage may be provided. /2 Curbs may be either raised or flush. 36. Construction of the paved roads would help reduce vehicle operating costs and improve the quality of living for the 80,000 people in these towns and villages. Community Centers 37. Construction of community centers in the following twelve towns and villages in the nomos. These centers would provide reading rooms, meeting places and offices. ANNEX I Page 12 Towns Plinth Area (m2) Population Alexandroupolis 1,520 25,530 Ferrai 720 4,430 Souffli 720 6,210 Orestias 1,040 12,500 Villages Metaxades 380 1,270 Kastane 380 1,830 Dikia 380 2,070 Kiprinos 380 2,110 Lavara 380 2,250 Tiheron 380 2,340 Chora 530 1,250 Nea Vissa 530 3,860 38. Blueprints have been prepared for all the centers and sites reserved. At present the towns and villages are inadequately served with social facili- ties and municipal buildings and the new centers would be of benefit to some 66,000 people. Markets 39. Constructing retail markets in three of the larger towns in Evros: Town Market Area (m2) Population Covered Open 6,210 Souffli 1,000 500 8,890 Didimotichon 1,000 500 12,500 Orestias 2,000 500 40. The new markets would replace the present street markets and make for a better presentation and conservation of fruit and vegetables and avoid congestion of traffic and pedestrians. They should benefit not only the farmers and other retailers but also the consumers. Blueprints have been prepared for all three markets and sites have been reserved. Water Supplies 41. Developing new water supply sources to replace the polluted water supplies of ten villages. ANNEX I Page 13 Length of distribution Village Source line (m) Population Ferrai Tubewell 7,000 4,430 Kiprinos " 3,000 2,110 Kastane " 1,500 1,830 Chora/Alonia Spring 7,000 1,750 Souffli " 7,000 6,210 Spileon Tubewell 3,000 610 Plati " 2,000 570 Ormenion 2,000 820 Lagina 2,000 1,000 Mandra " 3,000 390 42. In general, the work would consist of construction of tubewells or development of springs, construction of pump houses, provision of pumping equipment and electrification and the laying of water pipes. In all the villages and towns, present sources of water are polluted and development of new sources would lead to improvements in the health of the whole population. Project Establishment/Evros Special Development Fund 43. (a) Establishment of a three-tier coordination and management system for the project, including the provision of per- sonnel, furniture, equipment and three vehicles for the Project Office. (b) Creation of a fund to finance further investigations, feasibility studies and pilot projects in Evros. 44. To oversee the implementation of the Evros Development Project and also to monitor its progress, a three-tier organization would be established consisting of a Central Coordination Committee in Athens, a Regional Coordina- tion Committee in Alexandroupolis and a Project Office based also in Alex- androupolis. Details of the proposed organization are provided in Chapter V. The organization would be charged not merely with implementing the present project but also with assessing further the resource potential of the area, coordinating the preparation of the regional development plan and producing new development projects. A fund would be established to finance feasibility studies and other investigations of possible investments in both the private and public sectors. ANNEX 1 Table I APPRAISAL OF EVRO6 DEVELOPMENT PROJECT GR_CE Didimotichon - Technical Lycee and Vocational Secondary School Student Unit net No. of Area m2 Open-sided Gross area places area/m2 units (net) area (m2) 2 Classrooms 36 54 7 378 - 491 Drawing office 36 108 1 108 - 140 General science lab 36 126 1 126 - 164 Engineering science lab 18 63 1) 126 - 164 Thermodynamics lab 18 63 1 Metrology lab 18 54 1 54 - 70 Electrical eng.S lab 18 72 1 72 - 94 Electronics lab 18 63 1 63 - 82 Electronics w/shop 18 108 1 108 - 119 Fitting & sheet metal v/shop 36 216 1 216 - 238 Machine shop 36 324 1 324 - 356 Elect. installation v/shop 18 108 1 108 - 119 Elect. power v/shop 18 108 1 108 - 119 Auto-engine shop 18 126 1 Auto-electrical shop 18 90 1 216 - 238 Auto-body shop& garage 18 324 1 216 108 238 Administration - 180 180 - 234 Multi-purpose hall 180 240 1 240 - 312 Library & audio-visual aids - 180 1 180 - 234 Canteen & kitchen 360/180 180 1 180 - 234 General storage - - - 120 - 156 Covered ways - - - - 312 - Totels 3,123 420 3,802 Notes: a) Circulation & walls in block buildings taken at 35Z of net area. b) " " " " workshops " " 10% of net area. c) it" i open-sided areas & covered ways nil. March 1977 ANNEX 2 Page 1 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE The Sugar Industry A. General 1. The policy of the Greek Government is to maintain self-sufficiency in sugar, a basic necessity. To implement this policy the Hellenic Sugar Industry (HSI) was established in 1960 to process the entire sugar beet crop and to organize the cultivation of sugar beet by small holder farmers in cooperation with the Ministry of Agriculture (para 18). 2. Production. Sugar production began in 1961 with the establishment of the first factory. Since then, four more plants have been added and the total installed capacity today is about 21,000 TBD. Sugar production per unit of installed capacity has varied from year to year due largely to variations in sucrose content and yield of beet. On average, the recovery rate has been 11.5% and the duration of the campaign 113 days. Thus, production from the present installed capacity would be 273,000 tons white sugar under normal conditions. However, 330,000 tons were produced in 1976 due to a campaign lasting 153 days. The recovery rate was 10.8%, longer harvesting season resulting in beet of lower sugar content. 3. Greece reached self-sufficiency in 1975. Although the surplus pro- duction from 1976 would have to be exported, this is a result of abnormal production conditions and capacity expansion would still be required to meet future increases in domestic demand estimated to reach 360,000 tons by 1982. This would require a capacity of 29,000 TBD, assuming a recovery rate of 11.5% and a campaign of 110 days. The average length of the campaign is expected to be lower than in the past with the expansion of the factory at Orestias where the climate curtails the harvesting period to 100 days and with the older factories requiring increased maintenance. Table 1 shows details of the growth of production. 4. Consumption. Sugar consumption more than doubled in the last decade, growing at an annual rate of over 6%. In 1976 it was 260,000 tons (white sugar) or 28.5 kg per capita. Most of the increase has been due to a tripling in industrial demand which now represents about 60% of total consumption. HSI anticipates these general trends to continue in the coming years. Assuming a 5% annual growth rate, consumption would reach about 360,000 tons (or 38.3 kg per capita) by 1982. Based on a regression of per capita consumption on per capita GDP, consumption in 1982 would be 39.2 kg per capita, or 368,900 tons (Table 2). ANNEX 2 Page 2 5. These projections, which assume past trends to continue, would not be unrealistic when one considers that per capita consumption is still at a level where significant increases could be expected. In absolute terms it is well below the "saturation" level reached in most developed countries of 40-60 kg per capita. Compared to countries with similar incomes, Greek con- sumption both at present and projected levels would be relatively low as shown below: Sugar Consumption Country GNP per capita /_ Per Capita /2 (US$) (kg) Greece 2090 3210 /3 26.5 38.3 /4 Venezuela 1960 - 39.6 - Bulgaria 1780 54.1 - Hungary 2180 - 46.0 - Czechoslovakia - 3330 - 41.9 Israel - 3460 - 55.8 U.K. - 3590 - 46.7 /1 1974 World Bank Atlas. /2 1974 in white sugar, converted from data for raw sugar (92% sucrose content) in Licht, World Sugar Statistics. /3 Projected 1982 GDP per capita in 1974 prices. /4 Projected demand in 1982. 6. Organization. While HSI is an autonomous corporation it is owned by public banks and is subject to state influence in matters of policy such as pricing of sugar and sugar beets, levels of capacity expansion, etc. The Ministry of Coordination is represented on the Board of Directors. In all other respects, HSI is organized as an autonomous profit-making corpora- tion. The appraisal mission was satisfied with the managerial efficiency of the corporation and with the operational efficiency of the Orestias factory (paras 5.08, 5.09 and 16). 7. Financial Position. A summary of HSI's historical financial data is shown in the table below: ANNEX 2 Page 3 Fiscal Year Ending December 31 1972 1973 1974 1975 Balance Sheet Accounts (Dr Million) Working capital 451.6 757.4 750.1 834.9 Net fixed assets 1,295.6 1,347.7 1,385.4 2,070.4 Total long-term debt 1,374.6 1,675.4 1,597.1 2,149.6 Share capital 200.0 200.0 200.0 200.0 Retained earnings 172.6 229.7 338.4 564.6 Financing Ratios Current ratio 3.1 4.3 2.0 1.5 Long-term debt/equity ratio 79:21 80:20 75:25 74:26 Long-term debt service coverage - 1.17 1.68 1.72 Net income/shareholders' equity (%) 14.2 17.4 23.9 32.2 HSI's share capital which is held by two public sector financial institutions, ABG (90%) and ETVA (10%), has remained unchanged at Dr 200 million since its inception in 1960. The sugar industry's rapid expansion has been mainly financed by long-term loans which were provided by three sources. Between 1960 and 1964 the Greek Government made six loans totaling Dr 710 million. These loans were made at 4% interest and have maturities of 19 years includ- ing 4 years of grace. ABG between 1969 and 1975 provided 8 loans totaling Dr 2.05 billion. Interest on ABG's loans have recently been raised to 6%. Maturities of these loans vary from 9 to 18 years, with grace periods ranging from 4 to 8 years. Three suppliers of equipment from Poland and the CSSR have arranged financing at 7% and 6% for 7 and 4 years, respectively. For these three loans totaling US$18.7 million HSI carries the foreign exchange risk. HSI's outstanding long-term financial obligations presently stand at Dr 2.53 billion. 1977 1978 1979 1980 1981 1982 1983 Balance Sheet Accounts (Dr million) Working capital 1,790 1,740 1,800 1,830 2,000 2,045 Net fixed assets 2,120 2,220 2,390 2,470 2,480 2,540 Total long-term debt 2,720 2,740 2,910 3,020 3,095 3,125 Share capital 200 240 280 320 360 400 Retained earnings 970 980 1,000 1,020 1,025 1,060 Financing Ratios Current Ratio 1.75 1.68 1.69 1.69 1.78 1.78 Long-term debt/equity ratio 70:30 69:31 69:31 69:31 69:31 68:32 Long-term debt service coverage 1.74 1.83 1.44 1.71 1.44 1.56 Net income/shareholders equity (%) 19.0 20.4 22.9 22.5 21.4 21.0 ANNEX 2 Page 4 Given the i ial restrictions under which HSI has to operate as a public sector enterprise the financial projections are satisfactory. HSI has access to sufficient short-term capital to finance an increased level of receivables and inventories. Its current position will vary around a satisfactory 1.7 during project implementation. Debt service coverage would not drop below 1.4 for HSI as a whole and would remain above 1.18 for the Orestias plant. Because of HSI's slow generation of retained earnings, an assurance was ob- tained during negotiations that as a dividend policy a ceiling of 10% would be set for the period of project implementation. On this assumption, HSI's pay out ratio will increase from presently 9% to 13% in 1982. 8. Because of the government regulated sugar price policy which allows HSI only a 6% profit margin on its net cost of production, HSI's accumulation of retained earnings was slow compared to its investment requirements. HSI's capitalization is characterized by a weak equity position; its long-term debt/ equity ratio stood at 80:20 in 1973 from which it has improved to 74:26 in 1975. Part of HSI's working capital was financed out of its long-term borrow- ing, resulting in high current ratios in 1972 and 1973. This situation was reversed during 1974 and 1975 when its current position dropped to 2 and 1.5 respectively. HSI's high financial leverage has led to increasing profit- ability which reached 32% in 1975. On the other hand HSI's debt service coverage was tight. Based on its annual cash flow, the debt service ratio stood at 1.2 in 1973, but has improved to 1.7 in 1975. For the last few years HSI has paid a 10% cash dividend. HSI's accounts are audited by the Institute of Certified Public Accountants of Greece, ICPAG, which is satis- factory to the Bank. 9. In the past HSI has not encountered any difficulties in securing long-term loans from government-owned banks and suppliers whose loans were guaranteed by the Government. Taking into consideration HSI's slow internal equity accumulation, it would, however, be financially unsound to further expand its capacity without an increase in its share capital. HSI's manage- ment and the Government have realized this situation, and during appraisal it was agreed that HSI's share capital would be increased by 100%. Payments in that respect would be spread over five years and the proceeds would be used together with a loan from ABG to finance the local cost part of the Orestias expansion. 10. Financial projections for HSI and the Orestias plant reflecting the expansion program are shown in Tables 4 to 9. A summary of HSI's pro- jected financial data is shown in the table below: 11. Costs of Production. HSI's average cost of production for 1975 was Dr 14.8 per kg or 18.4 d per lb., comprised as follows: ANNEX 2 Page 5 Dr per ton White Sugar % Raw material 9,940 62.0 Transport 1,050 6.0 Fuel and electricity 1,090 7.0 Bagging 180 1.0 Salaries and factory overhead 1,510 9.5 Consumables /1 880 5.0 Administration /2 60 0.5 14,710 Minus byproducts 1,170 13,540 Depreciation /3 670 4.0 Interest 590 4.0 Total 14,800 100 /1 Limestone, chemicals, maintenance. /2 Proportion of Head Office costs. /3 15% on equipment and 8% on civil engineering works. The price of beet is set by the Ministry of Agriculture. The 1976 price was Dr 1,180 per ton for 16% sucrose content adjusted by quality of beet, ranging from Dr 550 (10% sucrose) to Dr 1,580 (20% sucrose). This compares with the EEC support price of approximately Dr 1,030 (22.75 U.C.) for 16% sucrose content. Considering that production is from relatively recent capital investment, this cost level compares favorably with the long-term interna- tional average marginal cost of production from new capacity, estimated at 20-22 J per lb. (14.9 J raw value). 1/ Present costs of production in the US are estimated to be about 19 i per lb., while in the EEC the average ex-factory price was 18.9 0 in 1976 and the minimum price of imported sugar is set at 20 i per lb. However, costs of production in more efficient developing ex- porting countries can be much lower. 2/ 12. Pricing Policy. The Ministry of Commerce sets the official ex- factory wholesale price of sugar and HSI is entitled to sell at a price which is defined as the operating costs plus 6% profit plus interest plus statutory depreciation of 8% on buildings and 15% on equipment. In 1976 the official wholesale price was Dr 18.2, while HSI's selling price was 15.7 Dr per kg. The retail price is controlled by limiting profits to the wholesaler and the retailer and was about Dr 22.4 per kg (28 J per lb) in 1976. Thus in Greece sugar is effectively taxed in contrast to many countries where sugar is 1/ Draft Board Paper, "The World Sugar Market", December 16, 1976. 2/ Commodity Paper No. 10, March 1976. ANNEX 2 Page 6 subsidized. The retail price is correspondingly high, at about 28 i per lb. in 1976 compared to 24 d per lb. in USA. 1/ 13. Marketing and Distribution Channels. The responsibility for market- ing and distribution of sugar was in the hands of the Ministry of Commerce until March 1, 1977 when it was transferred to HSI. The arrangements for stor- age of sugar at HSI plants and the pricing system have not changed. Sales would be on cash-and-carry terms with financial arrangements made through the ABG. However, the Ministry of Commerce would retain the responsibility for exports which might occasionally be necessary in years of exceptionally good weather conditions. 14. EEC Membership. Within the scope of negotiations for Greece's membership in the EEC, formal discussions on sugar began in November 1976. Sugar, being a proxy for beet and cane, is subject to the Common Agricultural Policy (CAP) of the EEC and is one of the most strictly controlled commodi- ties. Each member state is allocated a quota of sugar which can be sold on the common market at the target price of 3.49 U.C. per kg or Dr 15.8 in 1976. In addition, a percentage (45% for 1975/76) of the basic quota can be sold in the common market at the same price, but this is subject to levy of not more than 30% to finance the support price. Production above this maximum quota (145% basic quota) must be exported. 15. The terms of Greek membership are unknown at present. However, the objectives of the Government are consistent with the present policies of the EEC to maintain self-sufficiency and to protect the interest of beet growers, although this is subject to change. The Government is confident that they would obtain a quota which would cover their domestic consumption at the time of its entry. Both financial and economic analysis considered these implica- tions (para 22 and Annex 14). 16. Within the EEC, Greece would not be an inefficient sugar producer, the beet yield being significantly higher, at 55 tons (with sucrose content of 14.6%) ha compared to the EEC average of 42 tons (with sucrose content of 16.2%) per ha. The ex-factory price of sugar is comparable to the EEC average, although the latter is from older factories. B. Extension of the Orestias Plant 17. The Existing Plant. The Orestias plant is a straight 3-bailings sugar factory of 3000 TBD capacity producing white sugar, molasses and pelleted dried pulp using a conventional European processing technology. It was con- structed under a turn-key contract with Polimex-Cekop Ltd. Poland. Installa- tion was completed in October 1975, and operation trials were carried out for a period of 33 days of actual beet slicing. The guarantee test-runs were suc- cessfully carried out in 1976 during the first full campaign. The results of the first campaign were exceptionally good with a recovery rate of 13.7% sugar. 1/ USDA, Sugar and Sweetener Report Vol. 2, No., February 1977. ANNEX 2 Page 7 For the future, the average recovery rate is expected to be 13%, and the operating capacity could reach 3,600 TBD without additional investment and without significant increase in maintenance costs. The duration of the cam- paign would be limited to 100 days by the cold climate which restricts the harvesting period and output of sugar at about 46,800 tons. 18. Organization. Orestias plant's organization is standard for HSI and there are four departments directly responsible to the Manager: produc- tion, maintenance, agriculture and administration. There is also a laboratory which is part of the Manager's office. Contacts are held daily with the Head Office in Salonica. Purchase service is concentrated in the Head Office where a permanent inventory is held, which has, among others, the advantage of reducing the stock of spare parts. The efficient operation and team work of the Orestias staff are evident from the high standard of cleanliness and order, the effective delegation of authority, a staff conscious of its responsibility for operation and development of the factory, and the free flow of information. The staffing is, if anything, more than adequate and includes 16 university graduates. 19. The Extension. Technical studies for the proposed extension to 6000 TBD nominal capacity were carried out by the services of the HSI. Final designs will be made with the assistance of international consultants. The detailed list of equipment and cost estimates were reviewed and found satis- factory. The proposed extension would be carried out in two phases. In the first phase, capacity would be extended to 4,000 TBD. This would only require an addition of minor equipment and modifications and can be carried out in 1979. The second phase of the extension to 6000 TBD would be implemented over the next two years, the major work being carried out during the first year. The yearly progress of capacity expansion and corresponding production levels would be: Year Capacity Total Production Incremental Production (TBD) (tons sugar) (tons sugar) 1979 4000 52,000 5,200 1980 4400 57,200 10,400 1981 5600 72,800 26,000 1982 6000 78,000 31,200 Details of equipment lists and construction schedules are shown in Annex 1 and Annex 5. Although this is a Polish-built factory, the processing technology used is of a Danish patent and a number of countries would be able to supply the equipment required for the extension under ICB procedures. 20. Supply of Beet. Sugar beet is supplied by small holder farmers who contract to cultivate a given area of beet and to follow certain agricultural practices. The agricultural services of the factory, which include six agro- nomists, implement the mandatory 4-year rotation, carry out some of the pest control, and, with the cooperation of the ABG, ensure that the farmers are supplied with all inputs including credit. The price of sugar beet is highly ANNEX 2 Page 8 competitive with other crops in general, and throughout Northern Greece the demand for HSI contracts by farmers has far exceeded the requirement of the factories. Sugar beet also has the added attraction of an assured market at a predetermined price. In Evros, as there are almost no alternative activi- ties with high returns, almost all the irrigated land would be put under a 4-year beet rotation. The Orestias factory would require 40,000 ha of irri- gated land to operate at 6,000 TBD. While only 16,000 ha are presently irri- gated, there are a number of public and private irrigation schemes under con- struction and at least 40,000 ha would be irrigated in Evros by 1982 (Table 3). Delays in the progress of irrigation would result in delays in the con- struction or underutilized capacity in the early 1980's, but the project shows satisfactory financial and economic returns even in these eventualities. Financial Viability 21. Based on the ex-factory price of sugar calculated according to the statutory formula (para 12), the financial rate of return to HSI would be 16% (Table 10). Details of sensitivity tests are shown below: Assumption Rate of Return Sugar price at official level (Dr 18.2/kg) (rate of return to the Government) 26% Sugar price at EEC target price level (Dr 15.8/kg) 14% Sugar price at projected export price (Dr 17/kg) 22% Underutilized capacity 14% 22. It should be noted that the financial rate of return to HSI is largely predetermined by the pricing policy (para 12) and would be affected only by marketing problems or changes in pricing policies. As long as Greece were not fully integrated into the EEC, marketing problems would be temporary, arising only if demand did not grow as rapidly as anticipated. With EEC membership, as long as Greece obtains a quota which covers her total produc- tion, financial viability would not be jeopardized. Even if the Orestias factory's production were not covered by the EEC quota, the rate of return would be sound given the high projected world sugar price. The world market fluctuations coupled with fluctuations in weather pose considerable risks, but these are borne by the Ministry of Commerce who would still buy from HSI at the guaranteed price. Even if HSI exported directly, the international price would have to fall to 11 i per lb. before the financial rate of return falls below 11%. 23. Financial projections for the expansion of the Orestias plant are shown in Tables 8 and 9. They indicate that throughout project implementation the liquidity position will be somewhat tight. Minimum debt service coverage (1.18x) occurs in 1978, when debt repayments more than double compared to pre- vious years; coverage is nevertheless satisfactory throughout project imple- mentation. APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE HSI Planned Expansion of Processing Capacity 4! Year: 1976 1977 1978 1979 1980 1981 1982 1983 1984 Processing Capacity (TBD) 20,500 21,200 23,100 26,000 26,000 27,800 28,300 28,300 29,300 Projected Consumption (tons/sugar) 260,000 278,000 292,000 310,000 328,000 345,000 360,000 378,000 399,000 Bank Estimate Required Capa- city (TBD) 2/ 20,500 22,000 23,100 24,500 25,900 27,300 28,500 29,900 31,500 1/ Source: Hellenic Sugar Industry, December 1976, revised February 1977. 2/ Assuming 11.5% recovery rate and 110 days campaign as average for all plants. February 1977 D >4 S i" ANNEX 2 Table 2 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Regression of Consumption on GDP as;4t±ioi, /1 GDP /2 Total Per Capita Total Per Capita Year (tonq (kg) (billion Dr) (Dr) Population /3 1963 97,400 11.5 156.8 18,490 8.48 1964 100,200 11.8 167.5 19,680 8.51 1965 106,000 12.4 186.4 21,800 8.55 1966 97,800 11.4 191.7 22,260 8.61 1967 107,000 12.3 204.8 23,500 8.72 1968 124,800 14.3 218.7 25,020 8.74 1969 141,700 16.2 237.5 27,070 8.77 1970 152,900 17.4 257.9 29,330 8.79 1971 190,300 21.6 278.1 31,490 8.83 1972 215,900 24.3 303.1 34,100 8.89 1973 224,800 25.2 327.4 36,670 8.93 1974 237,700 26.5 324.2 36,180 8.96 Projected 1982 368,900 39.2 489.2 52,030 9.41 C per cap. = 7.109 + 0.00089 GDP per cap R2 = 0.9512 t = 13.98 Per capita consumption 1982 39.2 kg. Total consumption 1982 = 368,900 tons. /1 Source: HSI - 5 year running averages. /2 Source: Country Economic Memorandum 1976. GDP at factor cost in constant 1970 prices projected at 5.5% p.a. growth rate. /3 Source: Statistical Year Book of Greece. Projected at 0.6% p.a. growth rate. February 1977 APPRAISAL OF EVROS DEVELOPMENT PPOJECT GREECE Irrigation Development, Supply of Beet and Exansion of Sugar Processing Capacity in Evros Region Private A Cumulative Slicing Irrigated Area N.Ardas S. Ardas Neochorion Erythropotomos Orestias and Small Total Public Capacity Required Year (ha) (ha) (ha) (ha) (ha) Public Schemes Irrigation (ha) (TBD) (ha) 1976 2,700 3,400 0 0 9,000 400 15,500 1977 4,200 4,500 0 0 9,000 1,900 19,600 1978 5,000 6,500 0 0 9,000 3,900 24,400 3,600 24,ooo 1979 5,000 8,400 1,500 500 9,000 6,400 30,800 4,000 26,700 1980 5,000 8,400 3,500 1,500 9,000 6,400 33,800 4,4oo 29,300 1981 5,000 8,4oo 5,500 2,400 9,000 6,400 36,200 5,600 37,300 1982 5,000 8,4oo 8,000 3,000 9,000 6,400 39,800 6,ooo 40,000 1983 5,000 8,400 9,800 3,000 9,000 6,4oo 41,600 6,ooo 40,000 1984 5,000 8,400 9,800 3,000 9,000 6,400 41,600 6,ooo 40,000 A Includes irrigation schemes of Souff'li (500 ha), Korneofolias (400 ha), groundwater along Evros River (5,500 ha: 1,500 in 1977, 3,500 ha in 1978 and 5,500 ha in 1979.) The schedules of development of other public schemes are not available, but according to Government sources, these would irrigate about 10,000 ha. March 1977 ANNEX 2 Table 4 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Hellenic Sugar Industry Historical Consolidated Balance Sheets (Fiscal Year Ending December 31) 1972 1973 1974 1975 --------------- (Dr million) -------------- ASSETS I. Current Assets Cash 2.95 4.32 3.45 5.66 Banks 220.68 256.26 344.73 561.68 Receivables 291.86 318.06 703.41 1,693.25 Inventory 147.25 405.78 416.31 434.78 Sub-total 662.74 984.42 1,467.90 2,695.37 II. Fixed Assets Gross fixed assets 2,068.03 2,257.51 2,347.14 3,218.84 Less depreciation 822.59 994.80 1,115.64 1,253.26 Net fixed assets 1,245.44 1,262.71 1,231.50 1,965.58 Installations under construction 50.16 85.02 153.92 104.78 Sub-total 1,295.60 1,347.73 1,385.42 2,070.36 TOTAL ASSETS 1,958.34 2,332.15 2,853.32 4,765.73 LIABILITIES I. Current Liabilities Payables 116.66 129.83 611.54 140.53 Short-term debt 94.50 97.23 106.26 1,710.97 Sub-total 211.16 227.06 717.80 1,851.50 II. Long-term debt 1,374.60 1,675.35 1,597.10 2,149.63 III. Capital Equity 200.00 200.00 200.00 200.00 Statutory reserves 14.13 17.94 24.54 37.25 Special reserves 158.45 211.80 313.88 527.35 Sub-total 372.58 429.74 538.42 764.60 TOTAL LIABILITIES 1,958.34 2,332.15 2,853.32 4,765.73 Current ratio 3.1 4.3 2.0 1.5 Long-term debt/equity ratio 79:21 80:20 75:25 74:26 Long-term debt service coverage - 1.17 1.68 1.72 March 1977 ANNEX 2 Table 5 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Hellenic Sugar Industry Projected Consolidated Balance Sheets (Dr million) 1977 1978 1979 1980 1981 1982 ASSETS I. Current Assets Cash and Banks 250.0 255.0 270.0 275.0 285.0 290.0 Receivables 700.0 750.0 820.0 870.0 900.0 930.0 Inventories 3,180.0 3,300.0 3,330.0 3,350.0 3,390.0 3,440.0 Sub-total 4,180.0 4,305.0 4,420.0 4,495.0 4,575.0 4,660.0 II. Fixed Assets Gross fixed assets 4,030.0 4,530.0 5,160.0 5,730.0 5,980.0 6,250.0 Less accumulated depreciation 1,910.0 2,310.0 2,770.0 3,260.0 3,500.0 3,710.0 Net fixed assets 2,120.0 2,220.0 2,390.0 2,470.0 2,480.0 2,540.0 TOTAL ASSETS 6,300.0 6,525.0 6,810.0 6,965.0 7,055.0 7,200.0 LIABILITIES I. Current Liabilities Payables 2,390.0 2,565.0 2,620.0 2,665.0 2,575.0 2,615.0 II. Long-term debt 2,720.0 2,740.0 2,910.0 3,020.0 3,095.0 3,125.0 III. Capital Equity 200.0 240.0 280.0 320.0 360.0 400.0 Reserves and retained earnings 990.0 980.0 1,000.0 1,020.0 1,025.0 1,060.0 Sub-total 1,190.0 1,220.0 1,280.0 1,340.0 1,385.0 1,460.0 TOTAL LIABILITIES AND EQUITY 6,300.0 6,525.0 6,810.0 70025.0 70055.0 Current ratio 1.75 1.68 1.69 1.69 1.78 1.78 Long-term debt/equity ratio 70:30 69:31 69:31 69:31 69:31 68:32 March 1977 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Hellenic Sugar Industry Projected Consolidated Funds Flow Statement (Dr million) 1977 1978 1979 1980 1981 1982 1983 Source of funds Net income 225.98 248.50 293.17 298.84 296.09 307.18 314.18 Depreciation 348.71 398.50 461.55 518.55 533.25 524.45 395.00 Long-term loans - 20.00 170.00 110.00 75.00 30.00 - New equity - 40.00 40.00 40.00 40.00 40.00 - Total sources 574.69 707.00 964.72 967.39 944.34 901.63 709.18 Application of funds Net addition to plant and equipment 195.00 400.00 460.00 490.00 240.00 210.00 - Payments on long-term debt 239.95 257.25 400.10 385.90 498.13 454.35 422.00 Dividends 20.00 24.00 28.00 32.00 36.00 40.00 40.00 Increase in working capital 119.74 25.75 76.62 59.49 170.21 197.28 247.18 Total applications 574.69 707.00 964.72 967.39 944.34 901.63 709.18 Coverage ratios (times) Financial charges 2.06 2.15 2.34 2.34 2.13 2.37 2.60 Debt service 1.74 1.83 1.44 1.71 1.44 1.56 1.47 March 1977 m X APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Hellenic Sugar Industry Projected Consolidated Profit and Loss Statements (Dr million) 1977 1978 1979 1980 1981 1982 1983 Revenues White sugar 4,530.908 4,835.752 5,386.316 5,698.795 6,079.715 6,248.151 6,194.284 By-products 398.335 422.944 468.061 494.143 528.284 550.004 559.520 Total revenues 4,929.243 5,258.696 5,854.377 6,192.938 6,607.999 6,798.155 6,753.804 Cost of goods sold 4,099.753 4,353.191 4,834.725 5,103.074 5,463.106 5,686.729 5,793.323 Depreciation 348.705 398.505 461.555 518.555 533.255 524.450 395.000 Total 4,448.458 4,751.696 5,296.280 5,621.629 5,996.361 6,211.179 6,188.323 Gross income 480.785 507.000 558.097 571.309 611.638 586.976 565.481 Administrative expenses 30.800 32.704 36.322 38.337 41.042 42.722 43.523 Operating income 449.985 474.296 521.775 532.972 570.596 544.254 521.958 Financial charges 218.951 220.432 222.639 227.838 267.772 230.060 200.638 Net profit before taxes 231.034 253.864 299.136 305.134 302.824 314.194 321.320 Income taxes 5.054 5.367 5.961 6.291 6.735 7.011 7.142 Net income 225.980 248.497 293.175 298.843 296.089 307.183 314.178 Operating ratios as a % of sales revenues Gross income 9.75 9.64 9.53 9.23 9.26 8.63 8.37 Operating income 9.13 9.02 8.91 8.61 8.63 8.01 7.73 Net income 4.58 4.72 5.00 4.82 4.48 4.52 4.65 Cash flow 11.66 12.30 12.89 13.20 12.55 12.23 10.50 March 1977 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Orestias Sugar Plant Expansion Projected Profit and Loss Statement (Dr Million) 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1967 Sugar Production (tons) 41,600 46,800 52,000 57,200 72,800 78,000 78,000 78,000 78,000 78 000 78,000 Average Ex-factory Price 15.78 15.50 15.5 16.2t 15.81. 5.67 '15.61 15.47 15.35 11.21 15.08 (Dr per ton) Revenue White Sugar 656.45 725.40 824.20 931.22 1150.97 i222.26 1217.58 1206.66 1197.30 1187.i6 1176.24 By Products 79.83 89.81 99.79 109.77 139.70 149.68 149.68 149.68 149.68 149.6 .i&1-68 Total 736.28 815.21 923.99 1040.99 1290.67 1371.94 1367.26 1356.34 1346.98 1336.864 l .92 Cost of Goods Sold 573.27 636.72 700.13 763.62 988.06 1039.38 1039.38 1039.38 1039.38 1039.36 1039.38 Depreciation 64.02 64.02 82.68 116.51 125.73 155.54 158.95 158.95 158.95 94.93 94-93 Total 637.29 700.74 782.81 880.13 1113.79 1194.92 1198.33 1198.33 1198.33 1134.31 1134*31 Gross Income 98.99 114.47 141.18 160.86 176.88 177.02 168.93 158.01 148.65 202.53 191.61 Administrative Expenses 9.80 10.10 10.40 10.70 13.60 14.40 14.40 14.40 14.40 14.40 14.40 Operating Income 89.19 104.37 130.78 150.16 163.28 162.62 154.53 143.61 134.25 186.13 177.21 Financial Charges 59.13 70.98 94.15 110.22 111.64 108.56 100.20 89.15 79.94 69.73 58.62 Net Profit Before Taxes 30.06 33.39 36.63 39.94 51.64 54.06 54.33 54.46 54.31 118.40 118.59 Income Taxes 0.75 0.83 0.92 1.00 1.29 1.35 1.36 1.36 1.36 2.96 2.9S ,. lNet Income 29.31 32.56 35.71 38.94 50.35 52.71 52.97 53.10 52.95 115.1A 115.63 - Operating Ratios As Percent of Sales Revenues Gross Income 13.44 14.04 15.28 15.45 13.70 12.90 12.36 11.65 11.04 15.15 14.45 Operating Income 12.11 12.80 14.15 14.42 12.65 11.85 11.30 10.59 9.97 14.07 13.37 Net Income 3.98 3.99 3.86 3.74 3.90 3.84 3.87 .3.91 3.93 S.64 8.72 Cash Flow 12.68 11.85 12.81 14.93 13.64 15.18 15.50 15.63 15.73 15.74 15.88 March 18, 1977 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Orestias Sugar Plant Expansion Projected Funds Flow Statement Item 1977 1978 1979 1980 1981 1982 19834 1 1987 --------------------------------------------------Dr million---------------------_________________ Source of Funds Net income 29.31 32.56 35.71 38.94 50.35 52.71 52.97 53.10 52.95 115.44 115.63 Depreciation 64.02 64.02 82.68 116.51 125.73 155.54 158.95 158.95 158.95 94.93 94-93 Long-term loans - IBRD - 112.70 196.60 1314.30 43.90 20.40 - - - - - ABG - 23.90 91.70 92.70 19.40 13.70 - _ Equity (new) / -00 5OO O 50.00 50.00 - - - - Total 93-33 3 328.5 M938 242.35 2117.92 212.05 211.90 210.37 5 Application of Funds Net addition to plant & equipment - 186.61 338.28 276.94 113.31 34.13 -- - - Payments on long-term debt 30.27 71.55 76.17 81.08 96.35 124.79 151.38 118.83 130.67 140.88 85.83 Dividends 3.00 8.00 13.00 18.00 24.oo 24.oo 24.00 24.00 24.00 24.00 24.0c Increase in working capital 60.o6 17.02 29.24 56.43 5572 4 36.54 69.22 57.23 100.73 Total 93.33 2M3.18 456.69 432.45 22891.38 i 723 211.92 212.05 211.90 210.37 210.J6 Coverage Ratios Financial charges 1.51 1.47 1.39 1.36 1.46 1.50 1.54 1.61 1.68 2.70 3.02 Debt service 1.71 1.18 1.25 1.39 1.39 1.36 1.25 1.45 1.39 1.34 1.88 The equity funds may be provided in five installments (1978-82) rather than in four. This would not significantly affect the financial situation. ANNEX 2 Table 10 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Orestias Sugar Plant Expansion Financial Rate of Return Investment Operating Gross Net Year Costs Costs Benefits Benefits ------------------------ Dr million ------------------- 1977 0.0 0.0 0.0 0.0 1978 166.2 0.0 0.0 (166.20) 1979 282.46 53.73 82.42 (253.77) 1980 214.06 107.54 169.32 (752.28) 1981 91.61 304.84 411.06 14.61 1982 26.76 347.08 488.90 115.6 1983 0.0 347.08 487.03 139.95 1984 - 2001 0.0 347.08 482.66 135.58 Assumptions Ex-factory Cost of Year Sugar Price Production/i …-----------Dr/ton----------- Sugar Without project 15,780 11,900 With project - 1979 15,850 11,745 1980 16,280 11,620 1981 15,810 11,840 1982 15,610 11,590 1983 15,610 11,590 1984 - 2001 15,470 11,590 Molasses 1,800 Dried Pulp 2,800 Recovery Rates Sugar 13.0% Molasses 5.3% Dried pulp 5.5% Duration of Campaign - 100 days /1 See Annex 14, Table 3, for detailed composition. March 1977 ANNEX 3 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Water Requirements, Supply and Quality A. Water Requirement 1. Rainfall in the project area is inadequate during the summer months necessitating supplemental irrigation. Irrigation requirements during the dry season would vary with crop, amount of effective rainfall, temperature and wind velocity. The weighted average net crop irrigation demand, using the Blaney-Criddle method, would be about 4,890 m3/ha or a total of 18.43 Mm3/year. The gross project irrigation requirement, assuming 80% overall efficiency of the sprinkler system would be 23.04 Mm3 (Table 1). The peak delivery re- quirement would be about 0.75 1/sec/ha on a 24-hour delivery basis. Project facilities would, however, be designed to cater for 18 hours' operation or about 1 1/sec/ha. B. Water Supply and Quality 2. About 75 tubewells (average depth 40 meters) equipped with turbine pumps of capacity around 150 m3/hr each would be installed for the project, each serving about 40 hectares. LRS had drilled 14 boreholes in the project area to assess the aquifer. Six of these boreholes were converted into test wells and water level recovery data used to determine the aquifer potential. The quantity and quality of groundwater is found adequate. The volume of aquifer was assessed as 350 Mm3 and the safe yield of tubewells as 150 m3/hr. The aquifer material was sandy gravel with good specific capacity. The water quality tests showed that the total dissolved salts in the water ranged between 270 parts per million and 590 parts per million. Chemical analysis showed that its sodium absorption ratio was about 1.2 only. The aquifer would be recharged annually by the Erythropotamos river and its tributaries during winter, which is their normal high-flow season. The project area being some- what undulated would be better served by a sprinkler system with fixed supply mains and mobile irrigation lines which is being used in Greece. APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Estimated Water Requirements 1. Climate data Jan. Feb. March April MaY June July Aug. Sep. Oct. Nov. Dec. Average temp (C) 2.0 4.1 7.5 13.1 18.1 23.3 24.5 25.0 2.4 14.2 9.8 4.5 Percent daytime hours 6.51 6.72 8.37 9.00 9.90 10.20 10.23 9.61 8.4 7.75 6.6 6.51 Rainfall (i) 73 59 72 54 43 55 31 15 42 68 67 96 Effective rainfall (mm) 55 42 54 40 32 41 23 11 31 51 50 72 2. Reference crop evapotranspiration ETO (daily) 0.80 1.10 2.20 3.40 5.10 6.10 6.10 5.80 4.20 3.00 1.60 1.00 ETO (monthly) 25 31 66 102 158 183 189 180 126 93 48 31 3. Crops water requirements Area ETC (m) Total Cropped April M June July Aug. Sep. Total DemAnd num ha/ha M3 Sugar beets 750 - 94 156 195 181 95 721 5.40 Alfalfa 700 - 94 142 195 169 70 670 4.69 Maize 550 - 108 133 195 169 45 650 3.58 Beans 100 - - 43 186 115 - 344 0.34 Melons 50 - 79 142 129 - _ 350 0.18 Potatoes 100 - 79 169 141 61 - 450 0.45 Maize (2nd crop) 750 - - - 73 151 114 338 2.54 Barley 750 100 67 - - - 167 1.25 18.43 Field and distribution losses @ 25% 4.61 Gross requirement 23.04 February 1977 c| ANNEX 4 Page 1 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Hydrology and Riparian Aspects Background 1. The Evros is an international river with its total catchment area of about 53,000 km2. Greece has about 6%; Turkey, 28% and Bulgaria, 66%. It empties into the Mediterranean Sea with an average annual peak flow gauged above the confluence with the Erythropotamos of about 1,500 m3/sec. 2. The Erythropotamos, which is one of the Evros' tributaries, drains a catchment area of about 1,560 km2, of which about 40% is located in Bulgaria in the headwater to the north, and the remainder in Greece to the south. It carries an average annual peak flow estimated at about 300 m3/sec. Almost every year it floods the lower valley in Greece before emptying into the Evros that borders with Turkey. 3. The project dikes would be built along the Erythropotamos banks in the flooded valley to reclaim the flooded area (3,500 ha gross). The existing river channel between the proposed dikes would be rectified and im- proved to be capable of discharging up to 50-year flood (about 1,100 m3/sec). Design Flood Approaches 4. Two methods were used in determining the design flood for the pro- posed project dike construction: (a) The basic regional empirical formula, which involves rainfall intensity and the catchment area; and (b) The synthetic unit hydrograph, which involves catchment area, lag time and design storm. The inherent weakness in these two approaches is rainfall data which are from only one station (Mikro Derion). An alternative study using the dimensionless unit graph and flood frequency based on the Evros flow data gauged at Pithion has been made in thLe appraisal review. This approach precludes the use of available rainfall data which might not be reliable. However, the results obtained by the alternative are comparable with those derived by the two previous methods. They are: ANNEX 4 Page 2 Total Flood Magnitude in m3/sec (at Didimotichon Bridge - Catchment 1,560 km2) Approach Mean Annual 10-Year 50-Year 100-Year Basic Empirical 260 675 1,030 Synthetic Unit Hydrograph 250 690 1,075 Dimensionless Unit Graph 300 630 1,100 1,500 Adopted Design Flood (1,075 m3/sec) 5. Since the project flood protected area is relatively small (esti- mated only 3,000 ha net), it is considered justified to adopt the flood having its return period of about 50 years as the project design flood for dike con- struction. Larger design floods would necessitate wider river channel between the dikes bringing more of the fertile cultivated land inside and under the dikes and reducing the project benefits. In fact, the dikes, as proposed, could theoretically resist flood having the return period up to about 100 years (1,500 m3/sec), should the dike free-board space (1.00 m in depth) also be considered to be occupied by the flood. Therefore, the adopted 1,075 m3/sec as the project design peak flood is adequate. According to the unit hydrograph and the prevailing baseflow of the Erythropotamos, the design flood volume was estimated at about 117 Mm3. Flood Routing 6. The 50-year flood routing through the river channel that is proposed to be diked has been computerized through a mathematical model (by consul- tants - SOGREAH, France), also taking into account the existing flood storage (from 1:5,000 scale maps) in the case of the "without project" conditions, and the diked channel storage in the case of "with project" conditions. The tribu- tary flows along the diked section were included in both cases. In the case of 100-year flood, the approximate routing has been done by the appraisal review based on the SOGREAH data. The results are given: Without Dikes With Dikes -----------m3/sec---------- 50-year Outflow at Didimotichon 965 1,040 100-year Outflow at Didimotichon 1,370 1,500 Design Channel Capacity After Diking 7. Based on the design flood (1,075 m3/sec), the total river channel capacity between the proposed dikes was set at 1,100 m3/sec at the maximum flood level. It was also proposed that the major section (central) would be capable of carrying 250 m3/sec within its banks. At the point of overtopping the dikes (with 1.00-m freeboard provided) the channel would carry about 1,500 m3/sec, which is equivalent to about 100-year flood. ANNEX 4 Page 3 Maximum Tailwater Level 8. The maximum tailwater level at the confluence with the Evros was set at Elevation + 22.75 m which corresponds to the maximum ever recorded level gauged at Pythion (13.5 km above the confluence) since 1897. The correspond- ing flow of the Evros at Pythion was estimated at about 8,000 m3/sec, which is equivalent to the 200-year flood. Therefore, the adopted tailwater at Elevation + 22.75 appears to be adequately conservative. Effect of Future Derion Dam Upstream 9. There is development potential of a storage dam at Derion in the headwater area. The dam, if built, would control about 30% of the Erythropotamos catchment, and would help reduce the project flood magnitude. However, the reduction would be limited to the flood surcharge space to be provided at the dam. Even on the conservative basis, the flood reduction, if any, would be of the order of only 10% of the project design flood. Since the implementation appears to be in the distant future if made, and the impact, if any, would be relatively small, it is not taken into account in the project design. Drainage Design Criteria 10. The design discharge for the main drainage channels and drainage pumping stations was determined on the basis of 10-year one-day storm rain- fall. As a result, the specific discharge for drains was found to be 6 1/sec/ha. This was used as the basis for designing drainage in the areas behind the project dikes. Channel Regime 11. According to the mathematical model, the 50-year flow velocity in the central channel of the diked river would be about 3 m/sec. During high flows, therefore, the scour and erosion of the central channel would be ex- pected. Provision has been made in the estimate for protection along the banks in critical reaches. This aspect would be given a special considera- tion during the detailed design of the protection works. 12. As additional protection to the flood dikes, strips of poplar would be planted adjacent to the dikes on the riverside, to tame the river current along the dikes. The roughness reflecting this protection would be taken into account in design. 13. The existing river slope would be maintained as far as possible in the final design so that the river regime is disturbed as little as possible. 14. Due to vagaries of flow in the river, erosion and siltation would occur in the river channel depending upon the stages of flow as in any natural channel. The agency responsible for maintenance of the works would ensure that maintenance actions are taken in time to avoid progressive degradation of the works. ANNEX 4 Page 4 Impact of Diki ng upon Turkey 15. The computerized mathematical model study by the project consultant also shows that under the design flood conditions the increase in stream current velocity due to construction of dikes would be about 4 cm/sec (from 0.48 m/sec to 0.52 m/sec) in the main channel of the Erythropotamos at the confluence, for the conservative condition of low flows in the Evros. Such a small increment in velocity would cause no discernible changes in existing river regimes, and hence no adverse effects to Greece or Turkey. Even under the extreme case when the Erythropotamos flood would be in excess of the design level (50-year flood) and rise into the provided dike freeboard space (1.0 m in depth) to the point of overtopping the dikes, the impact in terms of increase in flow velocity from the "without project" conditions would be about 7 cm/sec (from 0.68 m/sec to 0.75 m/sec) in the main channel of the Erythropotamos at the confluence, for the conservative condition of low flows in the Evros. This incremental velocity is again insignificant and would not cause any discernible change in existing river regime. Besides, the long-term historical data show that with about 95% probability the Evros high-flow stages would coincide with the Erythropotamos floods. The retarding effects by the backwater from the prevailing high flow in the Evros would further reduce the velocity impact. Should a more severe flood than the 100-year frequency flood occur, it would overtop the dikes and produce no more impact than the 100-year flood. Impact of Project Groundwater Extraction upon Turkey 16. The impact of the project groundwater extraction upon the Evros runoff would not be significant. The total yearly extraction from the aquifer would be about 23 Mm3 which is equivalent to a withdrawal rate of 1.50 m3/sec over a period of six months. Compared with the Evros dry season flow of about 150 m3/sec the extraction would be negligible. In fact, the total withdrawal would be a small fraction of 1% of the average estimated annual runoff of 7,500 Mm3 of the Evros river. Impact of Diking upon Bulgaria 17. Bulgaria's border is located about 4 km upstream of Metaxades, the starting point of the project dikes. The river slope in this reach is quite steep (2 m/km) and therefore the backwater effect arising from diking cannot extend to the border. Impact of any Possible Extractions from Erythropotamos in Bulgaria 18. Erythropotamos has two major tributaries upstream of project area. One, draining about 40% of the catchment area of the river, flows entirely in Bulgaria before meeting the other tributary at the Bulgaria-Greece border. The other, draining about 30% of the river catchment area, mainly flows through Greece, cuts across the southeast corner of Bulgaria for a length of about five kilometers, then runs along the border and back into Greece. The nature of terrain through which it traverses in Bulgaria preempts diversion of its t-ater ANNEX 4 Page 5 for use in Bulgaria. Besides, before this tributary enters Bulgaria, it can be dammed by Greece at Mikro Derion dam site if they so wished. The risk of Bulgaria doing any work on this tributary is therefore negligible. The Greek Government has informed Bulgaria of the project component on Erythropotamos during a meeting of the Joint Greek-Bulgarian Commission on hydroeconomic matters in November 1976. According to the Greek Government, Bulgaria has no plans for any work on the river tributaries in their catchment. Even if Bulgaria interferes with the tributary running entirely in their territory the project would not be adversely affected as sufficient recharge would be available from the catchment and other tributaries of the river. ANNE.X 5 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE CONSTRUCTION SCHEDULE FISCAL YEARt 1977 1978 1979 1990 1991 1992 CALENDAR 1977 19719 7 979 1990 19981 1 - 1 FLOOD PROTECTION WORKft"---- - - Land Aooilitl- --------------------------------- Design end Tender, Document ------ --------------f--j--j--- Bid, a-d Assrd --------------------------------- LndConstruc ntion - ---------- ---- ----- -------------- -- -- Design -nd Tender Docurnens Bid, and A -nad -- - - - - - - - - - - -- - - - - - - - - - - - -------- EPld aind Award 0f Tubesnefl -~hnt ----------------- Os1lin,t of Meohiner [-- - - - - - - -- - - - - - - - -- - - - - - -- Bid, and A-ad of Driffing ConStant -------------- - --- ---- -- - F -- ()rillinig, in InseCIhIB ----------------------[---- a Blids and Award of Transmission Lin- M ---ter-----als--- Eetiiuonof Tib-snlls ----------------------- ------ - -- - _ - - Sorink-r -Sytm, Design, ann Tendnt Do-uent tr Supplying andl In-taling --------- FORESTRY Bids end A-adl of EquiFione ------ ~------------------------ D.lmue-y of Eq.ip.ment--- ------------------ ---- Construcion of Fores Roads end Building - ------- ------------------- Pi-t Ri,tor-ssi.n---------------------------- ----~ - ----- SUGAR FACTORY P fnoeen Io 4000 TED Unit ------------------ .... Cid1 W.,kli and Instal.le i n --- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Pro-uremnt ton 6000 TOO Unti ----------------------- ---- CM1, W., cc and In..11.lon --------------------- -- -- -------_____ 4 - - ------------ - Oan-egy an -d Tne numns. Bidsi on Awad fur Equipm-nt---------------------- -- DOniiuny ot E,uip-en and Coneroionfw--4--------------- t ------ Fucyd Roedt Maintna.Ino Eqiip..ten Pius ydl Award of Equipment ---------- -y---------------- EX.TENSION ANsO RESEARCH IH Pidn and Awad---------------------------4-------- Deiionry of Equip- ---men-------------------- VE~TERINARY ERIC Bid, and A-nad DnIii-c of Egu,ip - - - -- - - - -- - - - -- - - - -- - --t- - - - - TECHNICAL_EUATO Optign -od Tendir D--umnt of Sonuor Siiding - Pius urd Am-ndl of Coctru- -1iiiitad lnOdlIPli-on 01Eiii- ,i to -mit und [tidio-nti,,lo. -m- COMIrIIEIIY STPE-li. ..M- nIfy i BiC I4A ----riio -- - Con<.inn -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.l Bjar120 ANNEX6 APPRAISAL OF EVROS DEVELOPMENT PROJECT Cost Estimates Local Foreign Total Local Foreign Total --------Dr Million--------- --------US$ Milion…-------- 1. Flood Protection & Irrigation a. Remodelling river channel. con- structing flood dikes, tributary embankments and main drains 165.80 78.90 244.70 4.54 2.16 6.70 b. Expropriation 72.00 - 72.00 1.97 - 1.97 c. Land Consolidatiorn 8.00 - 8.00 0.22 - 0.22 d. Land improvement works, field roads and drains 56.00 24.00 80.00 1.53 0.66 2.19 e. Tubevells drilling and installation 19.44 12.96 32.40 0.53 0.36 0.89 f. Tubewells equipment 2.55 23.00 25.55 0.07 0.63 0.70 g. Sprinklers water supply mains 48.15 32.10 80.25 1.32 0.88 2.20 h. Sprinklers other equipment 7.30 65.75 73.05 0.20 1.80 2.00 Sub-Total 379.24 236.71 615.95 1 T79 v 2. Forestry a. Forest roads construction 72.10 - 72.10 1.98 - 1.98 b. Road construction and maintenance equipment - 20.10 20.10 - 0.55 0.55 c. Residential accommodation 1.05 0.45 1.50 0.03 0.01 0.04 d. Transport for labor - 3.60 3.60 - 0.10 0.10 a. Pine reforestation 42.77 - 42.77 1.17 - 1.17 f. Pine reforestation equipment _ 17.9. 17.23 - 7 0.47 Sub-Total 115.92 41.38 157.30 .1r 3 4.31 3. Sugar Factory a. Civil works and installation 236.73 76.70 313.43 6.49 2.10 8.59 b. Equipment _79,95 311.82 391.77 2.19 8.54 10.73 c. Working capital 25.00 - 25.00 0.68 - 0.68 Sub-Total 341.68 388.52 730.20 9.36 10.64 20.00 4. Connection Roads 53.86 27.74 81.60 1.47 0.76 2.23 5. Rural Roads a. Construction 55.80 - 55.80 1.53 - 1.53 b. Equipment - 57.10 57.10 - 1.56 1.56 6. Roads Maintenance Equipment - 7.72 7.72 - 0.21 0.21 Sub-Total 109.66 92.56 202.22 3.00 2.53 5.53 7. Equipment for Extension & Research 0.57 5.13 5.70 0.02 0.14 0.16 8. Equipment for Veterinary Services 0.47 4.20 4.67 0.01 0.12 0.13 9. Technical Education a. Building construction 35.58 15.25 50.83 0.97 0.42 1.39 b. Equipment and furniture 9.00 65.02 74.02 0.25 1.78 2.03 Sub -Total 10. Community Streets 55.00 28.30 83.30 1.50 0.78 2.28 11. Community Centers 67.37 28.87 96.2 1.85 0.79 2.64 12. Markets 25.20 10.80 36.00 0.69 0.30 0.99 13. Water Supply 11.95 11.95 23.90 0.33 0.33 0.66 14. Project Establishment 24.82 4.38 29.20 0.68 0.12 0.80 15. Nomarchy Fund 36.50 36.50 73.00 1.00 1.00 2.00 Sub-Total 266.46 210.40 476.86 7.30 5.78 13.08 Base Cost 1,212.95 969.57 2,182.52 33.22 26.57 59.79 16. Contingencies a. Physical (8% of base cost) 107.68 63.83 171.51 2.95 1.75 4.70 b. Price (26%) 362.17 242.44 604.61 9.92 6.64 16.56 Total 1,682.80 1,275.84 2,958.64 46.09 34.96 81.05 1 Includes Dr 3.65 million ($0.1 million) foreign exchange costs for consultants. APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Schedule of Expenditure 1977 1978 1979 1980 1981 1982 Total Foreign Total Foreign Total FLre Total Foreign Total Foreigtn Total Foreign ------------------------------D r Million------------------------------ 1. Flood Protection and Irrigation a. Remodelling river channel, constructing flood dikes, tributory embankmoents and main draians - 73.41 23.67 97.88 31.56 73.41 23.67- -- b. Expropriation - - 12.00 - 24.00 - 36.00 - - -- c. Land conaolidation - - i.]l4 - 1.72 - 1.72 - 1.71 - 1.71- d. Field roads and drains - - 16.00 4.80 24.00 7.20 24.00 7.20 16.00 4.80 -- e. Tubewella drilling and installation - - 6.48 2.60 9.72 3.90 9.72 3.90 6.48 2.56 -- f. Tubevella -equipment - - 5.11 4.60 7.66 6.90 7.67 6.90 5.11 4.60 -- g. Sprinklers -water supply mains - 16.05 6.42 24.07 9.63 24.08 9.63 16.05 6.42 -- h. SprinklerB -other equipment - - 14.61 13.15 21.91 19.72 21.92 19.73 14.61 13.15 2. Forestry a. Roads construction 7.21 - 14.42 - 14.42 - 14.42 - 14.42 7.21 b. Construction and maintenance equipment - - 20.10 20.10 - - - -- - -- c. Residential accommodation - - 0.75 0.22 0.75 0.23------ d. Transport for labor - - 3.60 3.60 - - - -- - -- e. Pine reforestation - -- - 10.70 -10.69 -10.69 -10.69- f. Pine reforestation equipment- - 17.23 17.23 - - - ---- - 3. Sug!EAr atory a. Civil works and installation - -51.90 12.70 96.40 23.59 105.50 25.82 52.50 12.85 1.13 1.14 b. Equipment - - 1033.6 B 8 2.66 164.12 130.62 89.40 71.15 20.29 16.15 14.10 11.24 a3. uxwing oaplts.1 - 4.20 - 4.20 - 122-50 - 4. Coninection Roads --- - 20.40 6.94 28.56 9.71. 24.48 8.32 8.16 2.77 5. Rural Roads a. Construction - -5.58 - 16.74 - 22.32 - 11.16 - - - b. Equipment- - 57.10 57.10 - - ------ 6. Roads Maintenance Equipment - -7.72 7.72------ - 7 . Equipment for Extension and Research - -5.70 5.13-------- 8. Equipment for Veterinary Service - -4.67 4.20 - - - ----- 9. Technical Education a. Building construction - -12.71 3.81 17.79 5.34 20.33 6.10 --- b. Equipment and furniture - -- - - - 44.41 39.01 29.61 26.01 - - I0. CmniySrta- --- 20.82 7.08 29.16 9.90 24.99 8.49 8.33 2.83 I.Community Centers - -19.25 5.77 28.87 8.66 28.87 8.67 19.24 5.77 - - 12. Market! 7.20 2.16 10.80 3.24 10.80 3.24 7.20 2.16-- 13. Water Supply - -5.98 2.99 5.98 2.99 5.97 2.99 5.97 2.98 - 14. Prolect Establishment and Equipment 1.52 -6.85 2.19 5.76 1.10 5.75 1.09 4.66 - 4.66- 15. N4omarchy Funds - 14.60 7.30 14.60 7.30 14.60 7.30 14.60 7.30 14.60 7.30 Subtotal. 8.73 - 5016.02 290.12 6463.31 276.00 633.50 256.01 312.27 121.56 80.69 25.88 Contingenciesa Ph -ia (8% Qf base cost) 0.75 - 36.40 17.28 52.26 18.90 52.80 17.92 246.42 8.464 4.88 1.29 Price (2(4) 0.37 66.3 36.05 15.9 62.18 219.19 8-3 120 50.79 10.19 Creod Total 9.85 - 606.74 3163.165 9169~16 357.O 905.49 357.16 468.746 11____6 __6 March 1977 ANNEX 8 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Equipment Lists (For Procurement Under International Competive Bidding) Item Number Unit Price Total Cost ____D___---Dr '000 -- …_________ IRRIGATION Pumping sets 75 220 16,500 Transformers 75 60 4,500 Conductor poles and pole fittings L.S - 4,550 Sprinkler equipment L.S 73,050 98,600 FORESTRY Road Construction Crawler tractor (300 hp) with dozer 1 5,500 5,500 Crawler tractor (200 hp) with dozer 1 3,900 3,900 Grader (130 hp) 1 1,700 1,700 Pneumatic roller (10 ton) 1 970 970 Compressors (50 hp 4000 1/min) 5 300 1,500 Dump trucks (6 ton) 3 650 1,950 Double cab 4x4 pick ups (60 hp) 2 300 600 Single cab 4x4 universal loader/excavator 1 750 750 (60 hp with multi-purpose take-offs) Mini-bus (20 seater) 1 600 600 Transport for Labor Buses 3 1,020 3,060 Pine Reforestation Crawler tractor (200 hp) with dozer 1 3,900 3,900 Crawler tractor (140 hp) with dozer 1 2,920 2,920 Crawler tractor (100 hp) with dozer 2 2,300 4,600 Trucks (6-7 ton) 4 650 2,600 Transport vehicles (4WD) 4 240 960 Spares for above equipment @ 15% 5,327 40,837 ANNEX 8 Page 2 Item Number Unit Price Total Cost …_______-----…Dr '000…------------ RURAL ROADS Crawler tractors with dozer (300 hp) 3 5,500 16,500 Crawler tractor with dozer (200 hp) 2 3,900 7,800 Scrapers (10 cu.m. struck) 3 2,000 6,000 Wheeled tractor loader (1-1/2 m3) 3 1,300 3,900 Dump trucks (6 ton) 11 650 7,150 Graders (130 hp) 3 1,700 5,100 Pneumatic rollers (10 ton) 2 970 1,940 Double cab 4x4 pick-up vehicles 2 370 740 Concrete mixers (300/400 liters) 2 250 500 Spare parts @ 15% 7,444 57,074 ROADS MAINTENANCE EQUIPMENT Road patching truck with equipment 1 1,500 1,500 Dump trucks (6 ton) 3 650 1,950 Grader (130 hp) 1 1,700 1,700 Wheeled loader with backhoe (0.5 m3) 1 860 860 Vibrating hand compactors (5 hp with 1600 cm2 plate) 2 55 110 Vibrating tandem roller (0.6 m width 5 hp) 1 210 210 Drawn grass mower (1.2 m rotary) 1 30 30 Double cab pick-up vehicle 1 350 350 Spare parts @ 15% 1,006 7,716 EXTENSION AND RESEARCH Field tractor (65 hp) 1 660 660 Walking type tractor for inter row cultivation 1 92.50 92 Trailer, sprayer, dusters with tools L.S - 555 Laboratory equipment L.S - 740 Long wheel base (4 W.D.) transport vehicles 10 365 3,650 5,697 ANNEX 8 Page 3 Number Unit Price Total Cost --------------…Dr '000-------------- VETERINARY SERVICE Long wheel base (4 W.D.) transport vehicles 11 365 4,015 Stereoscopic research microscopes equipped for microphotography 2 90 180 Electric centrifuge 1 120 120 Electric deepfreeze 1 150 150 Filtration equipment 1 100 100 Homogenization apparatus 1 20 20 Magnetic mixers for liquids 2 10 20 Apparatus for measuring somatic cells in milk 1 60 60 4,665 TECHNICAL EDUCATION Workshop and laboratory equipment L.S 74,000 ANNEX 8 Page 4 ORESTIAS SUGAR PLANT EXTENSION Item Cost Extension up to (T.B.D.) 4,000 5,000 6,000 Beet unloading unit - 3,000 - Beet washing unit - 3,500 - Beet slicers 2,200 2,200 - Beet diffuser - 36,000 - Pulp presses 5,800 11,600 5,800 Lime kiln - 28,000 - Filters 2,000 14,500 2,000 Evaporation stations 4,300 10,300 - Vacuum pump - 4,000 _ Mixers CMC 2,000 3,000 2,000 Centrifugals 1,000 10,000 - Sugar drier - 32,000 Pump drier - 30,000 Pellet presses 1,500 5,000 Cooling tower - 8,000 Power transformer - 5,000 - Steam boiler - - 40,000 Other miscellaneous /i 29,000 74,500 13,600 Subtotal 47,800 280,600 63,400 391,800 /1 Also includes items to be procured locally. March 1977 ANNEX 9 Page 1 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Procurement Procedures Civil Works 1. All civil works, except those relating to school building, community centers and markets, water supply, forest residences, forest and rural roads and pine reforestation costing about US$36 million would be tendered on the basis of ICB in accordance with the Bank Guidelines for Procurement. 2. Civil works of school buildings, community centers and markets, water supply and forest residences costing about US$8 million, which would be scattered in time and locations, would be tendered on the basis of local competitive bidding following the Government's procurement procedures, which are satisfactory. 3. Civil works of forest and rural roads and pine reforestation would be done through force account and would not be eligible for reimbursement. Equipment 4. Project equipment costing about US$21.2 million would be procured on the basis of ICB in accordance with Bank Guidelines for Procurement. 5. Equipment items costing less than US$20,000 each and up to a total cost of US$1.0 million required for immediate use, would be procured on the basis of local competitive bidding following the Government's procurement procedures. 6. Equipment items for the Orestias sugar factory such as molasses tanks, silos, pans and hoppers costing about US$2.0 million needed over 3-4 years would either be manufactured by HSI or procured locally following HSI's procedures of competitive bidding when the items cost less than $10,000 each and an aggregate of $250,000. 7. To attract wide competition, the works and equipment for tendering would be grouped, as under. ANNEX 9 Page 2 (a) Civil Works Cost ($ million) Flood protection works including main drains and their pumping stations 6.70 Irrigation land improvement works 2.19 Tubewell drilling and installing underground water supply mains 3.09 Sugar factory extension /1 8.59 School building 1.39 Community centers and markets 3.63 Water supply 0.66 Forestry residential accommodations 0.04 Subtotal 26.29 Contingencies Physical 3.08 Price 10.16 Total 39.53 /1 Civil works for the sugar factory can be divided into two contracts depending on their schedule of construction. (b) Equipment Cost ($ million) Pumping sets 0.45 Transformers, conductors, poles 0.25 Mobile sprinkler equipment 2.00 Forest roads, rural roads, labor transport, pine reforestation and roads maintenance equipment 2.89 Extension, research and veterinary equipment 0.29 including vehicles Schools equipment 2.03 Sugar factory equipment /1 10.73 Subtotal 18.64 Contingencies Physical 0.93 Price 4.11 Total 23.68 /1 Includes items to be procured locally. ANNEX 9 Page 3 8. The specifications and bidding documents of all equipment exceeding US$50,000 in value and the specifications and bidding documents of construc- tion contracts exceeding US$500,000 in value would be cleared with the Bank before tendering. The documents would be submitted by the project execution agencies, through the Project Office, except HSI who would send the documents directly to the Bank under intimation to the Project Office. ANNEX 10 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Estimated Schedule of Disbursement (US$ million) Bank Fiscal Year Cumulative Disbursement and Quarter at End of Quarter (US$ million) 1978 September 1977 December 1977 March 1978 1.20 June 1978 2.50 1979 September 1978 45 December 1978 55 March 1979 8.5 June 1979 11.1 1980 September 1979 13.7 December 1979 16.1 March 1980 18.5 June 1980 21.0 1981 September 1980 23.5 December 1980 25.5 March 1981 27.0 June 1981 28.5 1982 September 1981 30.0 December 1981 31.5 March 1982 32.5 June 1982 33.5 1983 September 1982 34.5 December 1982 35.0 /5 /1 Figures rounded. March 1977 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE ORGANIZATION CHART MINISTRY OF COORDINATION CHAIRMAN: DIRECTOR GENERAL. CENTRAL COORDINATION COMMITTEE m _ _ - M - MINISTRY OF COORDINATION. MEMBER SECRETARY: HEAD OF REGIONAL DEVELOPMENT SER- VICE, MINISTRY OF COORDINATI- SECRETARIAT - STAFF MINISTRY OF MINISTRY OF MINISTRY OF AGRICULTURAL MINISTRY OF OF REGIONAL DEVELOPMENT AGRICULTURE PUBLIC WORKS COORDINATION BANK OF GREECE INTERIOR SERVICE OF MINISTRY OF COORDINATION p REGIONAL COORDINATION COMMITTEE MEW BE- 723ETl ARY: [t1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~RJC MANAGER>..W;]W < MEMBERSHIP~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~oldBn-73 ANNEX 12 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Irrigation Component Operation and Maintenance Costs 1. Annual maintenance costs at full development have been estimated as percentages of the corresponding investments, i.e. 2% for field improvement works, 3% for tubewells and mobile sprinklers equipment and 1% for under- ground water supply mains. The annual maintenance cost would be Dr 2,120 per hectare. 2. The operating staff would consist of one waterman and one techni- cian for every 400 ha. Other supervision would be provided by the farmers' water users' associations (TOEVs). The average cost of the maintenance staff would be Dr 220 per ha. 3. Electric consumption for an average delivery of 6,100 cubic meters per hectare would be about 1,800 kwh. Based on the Public Power Corporation's tariff of Dr 1.20 per kwh, the annual cost of electricity used would be Dr 2,160 per ha. 4. Total annual Operation and Maintenance charges would therefore be Dr 4,500 ($123) per ha. ANNEX 13 Table 1 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Erythropotamos Valley - Farm Budget for a Typical Farm /7 (4 ha including 1 ha in the valley and 3 ha elsewhere) Area Gross Variable Net per crop Yield /A Value of Production Value Crop (ha) (tons/ha) Production Costs /1/2 Production Future With Project (at full development)/_( In Valley(l ha including .56 ha irrigated, 0.34 ha rainfed and 0.06 ha partially irrigated) Alfalfa 0.24 13.1 9,120 2,915 6,205 Maize 0.18 6.2 6,490 2,445 4,050 Beans 0.11 3.1 6,350 825 5,525 Sugarbeet 0.14 65.0 11,270 3,090 8,180 Melons & Watermelons 0.03 40.0 3,840 285 3,555 Wheat 0.06 4.5 1,710 690 1,020 Barley 0.15 3.9 3,330 1,425 1,905 Chickpeas 0.02 2.0 785 215 570 Vegetables /3 0.01 17.0 765 95 670 Potatoes 0.02 25.0 2,400 660 1,740 Catch crop - Maize (grain) (0.14)/i 4.0 3,320 1,740 1,580 Lost for Works 0.04 49,380 14,385 35,000 Subtotal 1.00 Elsewhere (3 ha) Winter Cereals /4 2.54 4.6 68,480 29,015 39,465 Alfalfa 0.29 9.0 7,570 3,240 4,330 Maize 0.07 4.5 1,835 865 970 Food legumes /5 0.02 2.8 1,050 160 890 Vegetables /3 0.07 17.6 5,545 790 4,755 Melons & Watermelons 0.01 30.0 960 90 870 Subtotal 3.00 84 51,80 Net Return 134,820 48,542 86,280 Future Without Project (1 ha, including 0.9 ha rainfed, 0.1 partially irrigated and 0.46 ha flooded) In Valley Alfalfa 0.34 7.7 7,590 3,050 4,540 Maize 0.12 3.1 2,210 695 1,515 Beans 0.12 1.5 3,365 720 2,645 Sugarbeet 0.02 60.0 1,490 330 1,160 Watermeadow /6 0.08 - - - - Melons & Watermelons 0.05 21.1 3,375 400 2,975 Wheat 0.16 3.6 3,735 1,840 1,893 Barley 0.05 3.0 840 465 375 Chickpeas 0.05 2.0 1,900 110 1,095 Vegetables 0.01 17.0 _765 95 580 Subtotal 1.00 25,270 7,705 T6777 Elsewhere Same as in future with project Subtotal 51,278 Net Return 68,058 /_ Weighted averages for irrigated rainfed, flood affected and flood-free areas. /2 Includes costs of operating private irrigation only. All labor costs with exception of machinery operators and drivers are excluded. Hired labor assumed to be concentrated on larger farms. /3 Mainly onions. /4 Wheat and barley, mainly former. 75 micv,ea-, n. /6 Sometimes cut for hay, particularly on the smallest farms, and included as meadow hay in economic analysis. /7 Only one farm model was prepared as the Erythropotamos Valley is a fairly homogeneous area both in the size of holdings and in the cropping pattern. /8 Five years after completion of works (see Annex 14, para 7). March, 1977 ANNZX 13 Table 2 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Farm Incomes and Project Rent Erythropotamos Valley Irrigation & Flood Control Component Net Farm Income for Typical Farm (4 ha at Full Development) (Dr) Present Future Without Project With Project In Valley 12,080 16,780 35,000 Elsewhere 26,990 51,280 51,280 Livestock 40,000 48,000 48,000 Sub-total 79,070 116,060 134,280 Incremental Water Charges - - 5,715 Net Farm Income 79,070 ($2,166) 116,060 ($3,180) 128,565 ($3,520) Income per Capita 19,770 ($ 540) 29,020 ($ 795) 32,140 ($ 880) Project Rent per Ha (At full development) (Dr) Incremental Gross Value of Production 24,895 Less Incremental Costs of Production 1/ 6,675 Incremental Net Farm Income 18,220 Less Incremental Imputed Value Family Labor 2,175 Less Incremental Taxes 300 Less Incremental Imputed Value of Management Services 3,150 Net Project Rent 12,595 Present Value of Incremental Net Farm Income over 40 years Discounted at 10% 120,390 Present Value of Project Rent 83,220 Rent as Percentage of Net Income 69% Present Value of Water Charges 4/ 36,000 Rent Recovery Index 43% Present Value of Public Sector Outlays 122,510 Cost Reco-ery Index 29% Farmers' Income Per Capita With Project, 1986 2/ 32,140 Estimated National Per Capita Income, 1986 3/ 123,670 1/ Includes rental charges of all farm machinery 2/ Includes estimated income from livestock 3/ Based on 1976 GDP per capita of $2,100. This figure is used rather than :he GNP per capita in the Atlas ($2,360, 1975) as it provides a bet <,r basis -f comparison. 4/ Collected from the second year of irrigation March 1977 ANNEX 14 Page 1 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Economic Rate of Return and Sensitivity Analysis A. Aggregate Rate of Return 1. The aggregate rate of return is estimated at 16% based on costs and benefits of major productive components. Including all project costs, the rate of return would be 12%, but this excludes benefits from smaller invest- ments which are dispersed throughout Evros and only marginally affect the Bank financed components. To illustrate: (a) technical education would provide skilled manpower essential to production; (b) water supply would improve health and productivity; (c) support of agricultural and veterinary services would improve their effectiveness to increase crop yields and reduce loss of livestock, particularly as Evros forms a defense barrier for western Europe against the Asiatic strain of foot and mouth disease; (d) provision of paved road maintenance equipment would help to reduce the costs of maintenance by allowing the work to be carried out by force account instead of by contract; (e) project establishment and the Nomarchy Fund would ensure effective allocation of investments; and (f) community centers, streets, and markets would have some produc- tive impact, and would contribute to reducing the disparity in standard of living between Evros and other regions of Greece, thereby reducing emigration. 2. Sensitivity of the overall rate of return would be as shown below: (a) 15% increase in costs 10% (b) 15% decrease in costs 25% (c) 15% increase in benefits 24% (d) 15% decrease in benefits 9% Details of this computation are shown in Table 1, while the analysis of each component is discussed below. ANNEX 14 Pags 2 B. Extension of Orestias Sugar Plant 3. The economic rate of return on extension of the Orestias sugar plant is estimated at 15%, based on 20-year life which takes account of possible changes in technology rather than the expected productive life of the installa- tions which may exceed 50 years. The rate of return is sensitive to changes in the price of sugar and operating costs as shown below: (a) 10% decrease in gross benefits 5% (b) 10% increase in gross benefits 25% (c) 10% increase in investment costs 13% (d) 10% increase in operating costs 7% (e) 10% decrease in operating costs 23% (f) underutilized capacity (1981-83) 12% (g) 2-year delay in construction schedule 13% This sensitivity does not reflect a particular weakness of this project which has a low capital cost, as it is an expansion. As regards operating costs, some economies are expected with the increase in the size of operations and HSI's management is making efforts to minimize costs. 4. Any investment in sugar processing involves some risks given the notoriously volatile world market price of sugar. However, these fluctuations do not reflect changes in long-term demand or in the costs of production. In the past, supply and demand have grown steadily but prices have fluctuated due to temporary changes in stock, climatic conditions, and lags in supply response influenced by low prices in preceding periods (Chart 1). In the coming years, competition from high-fructose corn syrup (HFCS) mi-ht reduce the world demand for sugar. However, recent Bank studies conclude that, while its effect would be to slow down the rate of growth of demand, particularly in the United States in the next few years, the absolute level of demand would increase and that this demand must be met by investment in new capacity. 1/ The Bank's projected world price for 1980-1985 reflects the cost of production to meet this demand, estimated at 14.91 per lb. raw (960 Pol) or 20 to 221 per lb. refined. 1/ Using a conservative estimate of the refining margin and allowing for transport costs, the ex-factory price of imported white sugar was estimated for this analysis at 21.21 per lb. 5. In considering the risks involved, it must be kept in mind that domestic production has the advantage of an assured supply at a stable price and that the rate of return is based on the long-term average price, i.e., the expected value of sugar in a risk-ridden situation. A sensitivity test for underutilized capacity in the first few years also shows that low prices in some years would not affect project viability significantly. Moreover, the low production cost of the expanded Orestias factory (about 1/ Commodity Paper No. 20 and draft Board Paper on Sugar, "The World Sugar Market: Review and Outlook for Bank Group Lending". ANNEX 14 Page 3 17.34 per lb). relative to the projected price reflects its relaLive effi- ciency (Annex 2). Details of the rate of return calculation are given in Tables 2 and 3. C. Erythropotamos Valley Flood Control and Irrigation 6. The estimated rate of return on flood protection and irrigation in the Erythropotamos Valley and the results of sensitivity tests are as follows: Basic Estimate: 14% Sensitivity Tests: (a) 15% increase in capital costs 12% (b) 15% decrease in capital costs 16% (c) 15% decrease in benefits 11% (d) 15% increase in benefits 16% 15% increase in all costs and 15% decrease in all benefits 8% 7. Irrigation would increase yields by enabling greater use of fer- tilizers, adoption of improved varieties and an intensified cropping pattern (Table 4). The assumptions of improved yields are based on missions' observa- tions of well-managed local farms, study of research stations in Northern Greece and discussions with local technical staff of the Ministry of Agricul- ture. Such improvements would develop over five years following completion of works, 50% in the first year, 20% in the second, and 10% more in each of the next 3 years, reaching 100% in the fifth year. 8. Benefits from flood protection include flood damages saved (Table 5). To compute the expected value of annual loss, estimates made by the local LRS of areas flooded and their frequency were used in the absence of more precise data. In view of the steep-sided profile of the valley, less frequent floods would not affect significantly larger areas and could be ignored. Damage to crops and infrastructure by floods against which protection has not been provided were also taken into account. The progress of irrigation flood protection would be as follows: Area Area Protected from Year Irrigated (ha) Flood (ha) 1979 500 900 1980 1,500 2,100 _ 1981 2,400 3,000 1982 3,000 9. Details of costs of production and prices used are shown on Tables 6 and 7 respectively. ANNEX 14 Page 4 D. Rural Roads 10. With adequate maintenance, the rural roads have effectively an indefinite economic life. For the purposes of the present analysis, an economic life of 40 years has been assumed; and, on this basis, the return to the rural roads component as a whole is estimated at 33%. Returns have been computed separately for each of the 25 areas, and all roads show a return of 10% or more. Details of the sensitivity of the overall return are given below: Rate of Return (a) Construction costs increased by 15% 29% (b) Construction costs decreased by 15% 38% (c) Total benefits increased by 15% 40% (d) Total benefits decreased by 15% 26% (e) Combination of (a) and (d) 23% 1I. Benefits considered in this analysis include increased crop produc- tion due to timely application of inputs and satisfactory harvesting. Given the level of support services provided to farmers in Evros, the lack of all- weather roads could constrain attainment of maximum yields, as experienced in other parts of Evros. 12. Provision of gravel roads would have a significant impact on trans- port costs. Based on information from the area, the transport costs would be at least 70% higher if the gravel roads are not built. The following are the future expected costs: Transport Costs Crop (Dr per ha) Wheat 1,540 Barley 1,440 Maize 1,380 Alfalfa 1,960 Sugar beet 2,090 Beans 550 Vegetables 1,160 Other crops 1,400 13. Costs of road construction, administration and maintenance are shown in Table 10. A rate of return of 10% would accrue even if there is no increase in crop production. ANNEX 14 Page 5 E. Conr-ction Roads 14. Based on a construction period of four years for the whole project and an economic life of 20 years, the overall return to road construction is estimated at 22%. Details of the sensitivity of the project to changes in construction costs and benefits and returns for individual roads are provided below: Road Rate of Return All ___ Assumptions Roads 1 2 3 4 5 6 7 8 9 lOa lOb Best estimates 22% 37% 38% 27% 27% 28% 16% 23% 22% 26% 18% 14% Construction costs +15% 20% -15% 25% Benefits +15% 25% -15% 19% Benefits -15% and Construction costs +15% 17% 15. The benefits from road construction have been quantified as the savings in operating costs resulting from an improved road surface. In the case of roads 9 and 10a, account has also been taken of the savings in operating costs resulting from the reduced length of the roads. Benefits not taken into account include the time savings of vehicle occupants other than professional drivers and the improved comfort and safety for road users that will result from Lhe construction of bitumen roads. 16. Based on information received from the Government and on previous studies by Ingeroute, the characteristics and operating costs of these vehi- cles on a level, tangent, paved road in good condition are: ANNEX 14 Page 6 Typical Vehicles 1.5-Ton 3.5-Ton 10-ton 30-Passenger Item Car Taxi Pickup Truck Truck Bus Average Characteristics Price of vehicles (Dr '000) 167 167 147 474 1160 2015 Price of one tire (Dr) 1320 1320 2050 4610 6090 7430 Number of tires 4 4 4 6 6 6 Vehicle Life (years) 12 10 10 9 9 9 Tire Life ('000 km) 40 40 40 50 50 50 Annual vehicle Kilometerage ('000) 20 60 32 45 77 65 Vehicle load capacity (passenger or tons) 4 4 1.5 3.5 10.0 30 Operating Costs (Dr/1000 km) Depreciation and interest 1230 450 750 1830 2620 5380 Fuel 440 440 670 460 780 780 Maintenance 280 280 320 1540 3790 6320 Tires 130 130 210 550 730 890 Oil and lubrication 20 20 30 130 150 150 Wages and Salaries - 3770 2830 2950 3430 5890 Insurance 210 70 260 290 240 550 Overheads - - 610 800 840 1070 Total 2310 5160 5680 8550 12,580 21,030 17. The effect on these costs of a design speed of 60 km/hour, which is lower than the average for paved roads, would not be significant. From mission inspection, operating costs on the proposed bitumen roads have been assessed at 20% less than the costs on existing gravel surfaces. 18. Details of the volume and composition of traffic on the ten connec- tion roads are given in Table 9. Vehicle distribution was as follows: Percentage Distribution Pick-ups/Agric. Light Heavy Road Numbers Cars Vehicles Trucks Trucks Buses I to 8 25 30 22 23 0 9 20 20 32 28 0 10 31 19 30 19 1 ANNEX 14 Page 7 19. Nationwide traffic surveys conducted in Greece in 1965 and 1972 gave an annual traffic growth rate of about 12%. Traffic growth in the region has been conservatively estimated at 6% per annum for the period 1977 to 1987, and 5% thereafter, taking into account a slower rate of growth of GDP and the anticipated expansion in agricultural production in Evros. 20. The economic costs of road construction and maintenance are shown on Table 9. 21. The benefits of the road maintenance equipment component have not been separately quantified, but experience from similar projects in other parts of Greece suggests that the return would be very high. F. Forest Roads, Housing and Transport 22. Based on an economic life for the roads of 40 years, the return to investments in forest roads, housing and transport is estimated at 55%, the high return being primarily a result of the exploitation of an accumulated as well as a sustained yield (Table 12). Due to a low ratio of net to total benefits, the return is very sensitive to changes in the cost and benefit streams, but a decrease in benefits of 15% would still result in a return of 22%. Results of the sensitivity analysis are as follows: Rate of Return (a) 15% increase in road construction costs 39% (b) 15% decrease in road construction costs 77% (c) 15% increase in benefits 92% (d) 15% decrease in benefits 22% 23. The benefits included in the analysis are the increased production of forest products (Table 10). 24. The estimated percentage breakdown of the incremental production by type of wood product is as follows: Pine Oak Beech Total Sawlogs A 3.2 3.3 0.2 6.7 B 3.2 4.9 0.6 8.7 Boxshooks 8.0 - - 8.0 Industrial Wood 13.0 - 4.3 17.3 Parquet - 15.2 - 15.2 Fuelwood 4.6 38.6 0.9 44.1 Total 32.0 62.0 6.0 100.0 Prices and costs of production used in the analysis are shown in Table 11. ANNEX 14 Page 8 24. Excluded from the analysis are the benefits of the new housing and transport to existing forest production and the savings in operating costs that would accrue to the non-forest traffic using the new roads. G. Pine Reforestation 25. The economic return to pine reforestation has been estimated at 8% (Table 10). However, the analysis only takes account of incremental produc- tion based on a rotation period of from 20 to 40 years (see below) and ignores other economic benefits such as protection against soil erosion and the in- creased allowable cut effect through shortening of rotation and more intensive production. When these other benefits are also considered, the project would seem well justified. As yet, no reliable local data is available on growth rates of Pinus radiata, maritima and nigra; but, based on studies carried under similar soil and climatic conditions, the following estimates of yields and rotations have been made: Proposed Hectarage Yield per Ha (m3) % Sawlogs Rotation (yrs) Pinus radiata 390 300 85 20 Pinus maritima 980 250 65 35 Pinus nigra 1,630 400 85 40 26. Economic prices and market prospects for pine products have already been detailed as have the likely economic costs of harvesting. These are shown on Table 11. 27. An allowance has also been made for annual routine maintenance over the life of the project and for the costs of an additional 30 km of forest roads which will be needed at the end of the rotation time. APPRAISAL OF EVROS DEVELI!gNT PROJECT GREECE Aggregate Rater of Return Net Benefits (Dr Million) 1 2 3 4 5 6 7 8 9 10 11 12 13 Community Streets, Forest Extension Centers, Project Erythro- Roads, Pine Connec- Roads & Research Markets & Establish- Net Net potasmos Sugar Housing & Refor- Rural tion Equip- & Vet. Water ment and Technical Benefits Benefits Year Valley Plant Transport estation Roads Roads ment Service Supply Fund Education 1-6 1-11 1977 (1.3) 0 (8.20) 0 0 0 0 0 0 0 0 (9.50) (9.50) 1978 (147.63) 0 (4.10) (11.2) (10.3) (0.25) (8.1) (6) (35.7) (21.8) (14.0) (173.48) (259.o8) 1979 (195.17) ( 73.46) 7.70 (13.2) (25.7) (16.75) 0 0 (73.1) (20.6) (19.8) (316.58) (430.08 1980 (143.80) (350.18) 9.70 (13.3) (21.9) (25.13) 0 0 (82.3) (20.6) (71.0) (5N14.64) (78.154 1981 (2.41) (205.9'7) 12.20 (13.4) 7.0 (17.02) 0 0 (63-1) (19.5) (32.6) (2i9.6o) (334.80) 1982 76.03 108.83 19.60 (13.5) 26.7 (0.77) 0 0 (9.2) (19.5) 0 236.89 1838.19 1983 85.12 113.03 4.99 (2.5) 30.1 15.77 0 0 0 0 0 246.51 246.51 1984 91.46 113.03 4.99 (o.6) 31.6 16.74 0 0 0 0 0 257.22 257.22 1985 95.87 113.03 4.99 (o.6) 32.0 17.76 0 0 0 0 0 263.05 263.05 1986 97.40 113.03 4.99 (o.6) 32.0 18.85 0 0 0 0 0 265.67 265.67 1987 96.95 113.03 4.99 (0.6) 32.0 20.00 0 0 0 0 0 266.37 266.37 1988 97.40 113.03 4.99 (o.6) 32.0 21.02 0 0 0 0 0 267.84 267.6h 1989 97.40 113.03 4.99 (0.6) 32.0 22.09 0 0 0 0 0 268.91 268.91 1999 17.0o4 113.03 4.99 (o.6) 32.0 23.21 0 0 0 0 0 189.67 189.67 1991 99.89 113.03 4.99 (o.6) 32.0 24.39 0 0 0 0 0 273.70 273.70 1992 99.89 113.03 4.99 (o.6) 32.0 25.64 0 0 0 0 0 274.95 274.95 1993 99.89 113.03 4.99 2.2 32.0 26.93 0 0 0 0 0 279.o4 279.64 1994 99.89 113.03 4.99 2.2 32.0 28.29 0 0 0 0 0 280.40 280.40 1995 99.89 113.03 4.99 2.2 32.0 29.73 0 0 0 0 0 281.84 281.84 1996 99.89 113.03 4.99 2.2 32.0 31.23 0 0 0 0 0 283.34 283.34 1997 99.89 113.03 4.99 2.2 32.0 32.81 0 0 0 0 0 284.92 284.92 1998 99.89 113.03 4.99 16.9 32.0 34.47 0 0 0 0 0 301.28 301.28 1999 99.89 113.03 4.99 16.9 32.0 36.21 0 0 0 0 0 303.02 303.02 2000 (54-.9) 113.03 4.99 16.9 32.0 38.04 0 0 0 0 0 150.87 150:87 2001 99.89 113.03 4.99 16.9 32.0 39.96 0 0 0 0 0 3P36.77 306.17 2002 99.89 0 4.99 16.9 32.0 0 0 0 0 0 0 153.78 153.78 2003 99.89 0 4.99 15.5 32.0 0 0 0 0 0 0 152.38 152.38 2004 99.89 0 4.99 15.5 32.0 0 0 0 0 0 0 152.38 152.38 2005 ilL.61 0 4.99 15.5 32.0 0 0 0 0 0 0 64.10 64.10 2006 99.89 0 4.99 15.5 32.0 0 0 0 0 0 0 152.38 152.38 2007 99.89 0 4.99 15.5 32.0 0 0 0 0 0 0 152.38 152.38 2008 99.89 0 4.99 18.4 32.0 0 0 0 0 0 0 155.28 155.28 2009 99.89 0 4.99 18.4 32.0 0 0 0 0 0 0 155.28 155.28 2010 19.53 0 4.99 18.4 32.0 0 0 0 0 0 0 74.92 74.92 2011 99.89 0 4.99 18.4 32.0 0 0 0 0 0 0 155.28 155.28 2012 99.89 0 4.99 18.4 32.0 0 0 0 0 0 0 155.28 155.28 2013 99.89 0 4.99 33.1 32.0 0 0 0 0 0 0 1j".98 169.98 2014 99.89 0 4.99 33.1 32.0 0 0 0 0 0 0 1o .,8 169.98 2015 99.89 0 4.99 33.1 32.0 0 0 0 0 0 0 169.98 169.98 2016 99.89 0 4.99 33.1 32.0 0 0 0 0 0 0 169.98 169.98 2017 0 0 4.99 33.1 32.0 0 0 0 0 0 0 70.09 70.09 2018 0 0 4.99 84.4 32.0 0 0 0 0 0 0 121.39 121.39 2019 0 0 4.99 84.4 32.0 0 0 0 0 0 0 121.39 121.39 2020 0 0 4.99 84.4 32.0 0 0 0 0 0 I 2] .3Q 121.39 VA 2021 0 0 4.99 84.4 32.0 0 0 0 0 0 o 121.3), 121.39 2022 0 0 0 84.4 0 0 0 0 0 0 84.4o 84.40o March 1977 ANNEX 14 Table 2 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Orestias Sugar Plant Expansion Economic Rate of Return Investment Operating Gross Net Year Costs Costs Benefits Benefits ------------------------million Dr----------------------- 1 0.0 0.0 0.0 0.0 2 0.0 0.0 0.0 0.0 3 96.4 65.5 88.4 (73.5) 4 396.0 131.0 176.8 (350.2) 5 284.5 363.5 442.0 (206.0) 6 4.2 417.4 530.0 108.8 7-25 0.0 417.4 530.0 113.0 Assumptions Ex-factory price (Dr/ton) Cost of Production/L' (Dr/ton) Sugar 17,000 Without project 14,190 Molasses 2,230 With project Dried pulp 2,800 Year 3 14,030 Year 4 13,900 Year 5 14,115 Year 6-25 13,865 Recovery Rates Sugar 13.0% Molasses 5.3% Dried pulp 5.5% Duration of Campaign - 100 days /1 See Table 3 for detailed composition. March 1977 ANNEX 14 Table 3 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Orestias Sugar Plant Expansion - Operating Costs" Economic Financial Cost Cost …Dr million--------- Fixed Ccsts Salaries and factory overheads 97.5 97.5 Administrative overheads/2 2.5 4.6 Total 100.0 102.1 ----Dr/ton white sugar------ Fixed Costs 1,286 1,309 Variable Costs Beets 13,000 9,385 Transport-L/ 630 769 Electricity and fuel'4 387 969 Bagging 195 198 Consumables/5 377 567 Maintenance 313 313 Miscellaneous taxes (230) - Subtotal 14,672 12,201 Total Operating Costs 15,958 13,510 Less molasses!.6 909 734 Less dried pulp pellets/7 1,185 1,185 Net Operating Costs 13,864 11,591 /1 Mission estimate for operating capacity of 6,000 TBD. Costs of other capacities adjusted for variation in fixed costs. See Annex 2, Table 9, and Annex 14, Table 2. /2 Portion of head office expenses. /3 Transport of beet from farm to factory, economic price reflects adjustment for diesel tax. 4 Economic price reflects adjustment for tax on fuel. /5 Limestone, coke, chemicals, miscellaneous. /6 Economic price: 2,230 per ton, based on international prices. Financial price: Dr 1,800 per ton. /7 Financial and economic price: Dr 2,800. March 1977 APPRAISAL OF E'VOS DEVE,OPN~MT PR0WRCT Cultivated Areas, Yields and Production in Erythropotemos valley (Without Flood Dam'ages) I Future crop Present Without Project Wt rjc Cultivated Areas Yields Production Cultivated Areas Yields Production Cultivated Are"a yield.5 ProdusctiLoa (ha) (tons/ha) ('000 tons) ......J3.......... (tons/haS ('000 tons) .-. alL' Irrigated Sugarbeet 750 65.0 48.0 Alfalfa 700 15.0 10.5 Maize 550 7.5 4.1 Barley 750 4.0 Beans 100 3.5 O Melons and Watermelons 50 40.0 2.* Potatoes 100 25.0 2.5 Catch Crops: Maize Grain C 450) v 4.0 1.0 Maize Silage ( 300) 45.0 15.5 By-Products: Sugarbeet Tops ( 750) 75.0 3.4v, Maize Residue (1,000) 2.5 2.5 Barley Straw ( .750) 2.0 1.5 Bean Straw c 100) 1.0 0.1 TOTALS; 3,000 Rainfed Alfalfa 1,766 6.5 11.5 1,766 9.0 15.9 291 9.0 2.6 M4aize 518 3.0 1.6 518 4.5 2.3 608' 4.5 2.7 Beans 769 2.0 1.5 769 3.0 2.3 493 3.0 1.5 Melons and Watermelons 3- 238 20.0 4.8 238 35.0 8.3 63 38.0 2.2 -- -- -- -- -- -- ~~~~~~~~~~~~~~~~~~~~~~~100 1'40.0 4.6 Wheat 925 3.0 2.8 925 4.5 4.2 330 4.5 LS5 Barley 309 3.0 0.9 309 3.5 1.1 109 3.5 0.4 vegetables 69 15.0 1.0 6917.0 1.2661.- Chick-pSa 273 1.2 0.3 273 2.0 0.5 93 *2.0 . Sugerbheb" 44 35.0 1.5 44 35.0 1.5 --.- 73 Meadow Ray 462 2.0 0.9 462 2.0 0.910 .u Poplars --oo- ---0 -3 0 By-Products: 24ieze_B.esdqe (518) ~ 0.8 0.4 URSl) 1.7 0.9 .LO)1.? IS6 Bean Strew (769) 0.1 0.1 769) 0.4 0.3 -(Y)0.4 0.2 Wheat Straw (925) 2.0 0.9 (925) 2.8 2.6 (330) 2.8 0.9 Barley Strew (309) 1.0 0.3 C309) 1.2 0.4 (109) 1.2 0.1 Chick-pea Straw (273) 0.7 0.2 (273) 1.2 0.3 C 66) 1.2 . .1 sugarbeet Tops e )5.0 0.2 5.0 0.2 -- - - TOTAIS: ~~~~5,373 5,373 2,253 Partially Irrigated Alfalfa 267 13.0 3.5 267 13.0 3.5 267 13.0 3.5 Maize 149 5.3 0.8 149 5.5 0.8 149 5.5 0.0 Melons end Watermelons 58 40.0 2.3 58 40.0 2.3 Ss 48.0 2.3 Sugarbeets 90 55.0 5.0 90 60.0 . - -- By-Products: Maize Residue ( 149) 0.8 0.1( 149) 1.7- 0.3( 147) 1.7 0.3 Sugarbeet Tops ( 90) 5.0 0.5 ")5.0 0.5____ TOTALS: ~~~~~~564 564 474 j/This table shows yields and production assusming no floods. Expected value of flood damages are shown on Table 2. 2/Figures in brackets are not included in totals. F 3/ I ludee cropping between dikes:- 300 ha maize, 100 ha watermelon and 100 ha poplars grown on residual soisture folloving floods. _/ w. ied ftr1 yas March 1977 APPRAISAL OF EVROS DEVE14PMENT PROJECT GREECE Flood Damage to Crops in Erythropotamos Valley Crop Areas Affected Loss in Yields Loss in Production Present & Future Future With Present Future Present Future Without Project Project/4 Without With Without With Project Project Project Project -ha…-------------- -…---------tons/ha- - --------- - ----------- Alfalfa, rainfed 657 - 2.5 5.0 - 1,640 3,285 irrigated 70 7 5.0 5.0 7.0 350 350 50 Maize, main crop, rainfed 303 - 1.5 3.0 - 455 910 irrigated 43 5 2.3 2.5 4.5 100 110 25 catch crop, grain - (5)/1 - - 2.5 - 13 silage - (3)/1 - - 30.0 - 90 Beans 517 1 1.2 2.2 2.5 620 1,135 3 Sugar beet, rainfed 22 - 15.0 20.0 - 330 440 - irrigated 22 7 25.0 30.0 35.0 550 660 250 Melons and Watermelons, rainfed 162 10.0 25.0 1,620 4,050 - irrigated 22 1 15.0 15.0 20.0 330 330 20 Barley 111 8 1.0 1.5 2.0 110 165 16 Wheat 314 - 1.3 2.8 - 410 880 Potatoes - 1 - - 10.0 - - 10 Totals 2,245 30 ----------million Dr.-------- Expected Value Flood Damage to Crops /2 23.4 45.4 0.8 Expected Value of Flood Damage to Infrastructure /3 0 0 1 /1 Not included in total /2 Without the project, floods cover approximately 3,650 ha damaging crops over 3,190 ha with a frequency of 1 year in 2; and approximately 1,750 ha damaging crops over 1,300 ha with a frequency of 1 year in 2. Additional areas affected by larger floods are insignificant due to the steep-sided profile of the valley. Differences in costs of production with and costs without floods have also been taken into account; these are estimated to be Dr 3,300 present, Dr 6,200 future without project and 11,100 future with project. /3 15% capital cost of irrigation and flood control dikes with probability 0.01. Damages on existing infrastructure have not been included as they are insignificant. /4 The project effectively provides protection against "100-year" floods although the works are designed for "50-year" floods. February 1977 ANU4 APPRAISAL 01W 1830 D3VOE WT P}WICT Mu= Colts of CropnProduction Irythroyotsmos Vll'e (Dr per ha) /1 Present A2 Future Without Proiect /2 With Project Financial /3 Economic A Financial J3 Economic A Financial L3 Economic A Average 8,105 11,195 8,965 13,190 11,730 - i~rrigae 11,625 18,360 irrinfted 11,175 15,610 rainfed 12,605 18,810 partially irrigated Maize (main crop) 5,250 12,165 5,810 13,410 13,575 - average13952,0 irrigated1395290 irri8ated ~~~~~ ~ ~ ~~~~~~~~~~~~~~~~~~~12,370 15,350 rainfed 14,645 20,380 partially irrigated 1 Beans 5,390 11,845 6,005 13,325 7,520 - average 7,885 19.755 irrigated 7,445 17,185 rainfed Sugarbeet 15 345 27 625 16,455 30,780 22,070 - averaged 20,390 33,590 rainfed partially irrigated Meadowhay 2,200 4,940 2,200 4,940 - rainfed Melons and Watermelons 7,495 21,550 8.025 21,940 9.555 - average irrigated 9,920 29,510 partially irrigated 10,645 32,575 rainfed 10,455 13,565 11,495 14,950 11,845 15,470 Barl1ey average 8,755 11,055 9,280 11,775 10,040 - irrigated 10,115 12,955 rainfed 9,510 12,025 Chickpeas - rainfed 6,930 12,800 10,735 15,730 10,735 15,730 Vegetables /5 - rainfed 8,315 18,105 9,540 20,535 9,540 20,535 Potatoes - irrigated - - 31,385 36,370 Maize - catch crop grain 12,420 18,075 Maize - catch crop silage 13,440 25,490 Maize - between dikes /6 - - 8,070 14,120 Melons & Watermelons - - 8,740 28,745 between dikes /6 Poplars - between dikes /7 Yr 1 15,400 15,400 Yr 2 5,100 5,100 Yr 3/4 5,900 5,900 Yr 7 4,500 4,500 From Yr 10 8,100 8,100 /1 Costs of production for future with project also apply to other areas of the region /2 Weighted averages for flood-affected and flood-free areas /3 Includes seeds, machinery and transport, interest and Costa of operating private irrigation pumps in "partially irrigated" crops. 06& costs for irrigation are not included for crops to be irrigated under the project. No labor costs are included except the cost of machine operators and drivers. Hired labor is assumed to be required only on larger farms. /4 Based on financial costs adjusted for following: real increase in world market price of fertilizers, subsidies on seeds and fertilizers; tax on fuael; excludes inte- ; includes labor costed at Dr 150/man day and Dr 125/woman day in the slack season and Dr 300/man day and Dr 250 woman day for the real ,.e year. Mainly onions Grown on residual moisture followirng floods S Years 1-7 for establishment; from year 10, annual harvesting cost March 1977 ANNEX 14 Table 7 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Farmgate Prices for Crops Crop Farmgate Prices /1 Financial Economic Dr/Kg. Dr/Kg. Alfalfa 2.9 2.9 Maize - grain 5.6 4.5 -12. Beans 18.5 18.5 Sugar beet 1.2 1.7 /3 Melons and Watermelons 3.2 3.2 Wheat 5.7 6.5 /2 Barley 5.2 6.0 /2 Chick peas 19.0 19.0 Vegetables /5 4.5 4.5 Potatoes 4.8 4.8 Poplars 1,100 /4 1,100 L4 Meadow hay 1.2 1.2 Maize residue 0.6 0.6 Bean straw 0.7 0.7 Sugar beet tops 0.5 0.5 Wheat straw 1.0 1.0 Barley straw 1.0 1.0 Chick pea straw 1.1 1.1 /1 In 1976 constant terms. /2 Based on 1980/1985 projected international price. /3 Based on 1980/1985 projected international price of sugar, taking account of processing, transport and insurance costs. /4 Per m3 road side price. /5 Onions. February 1977 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Rural Roads: Economic Costs and Benefits (Dr million) Project Costs Project Benefits Change in road Overhead Road Road Incremental operating Administration Construction Maintenance Total Output /1 costs Total 1977 0 0 0 0 0 0 0 1978 0.3 10.0 0 10.3 0 0 0 1979 0.8 26.8 1.9 29.5 1.2 2.6 3.8 1980 0.9 30.8 6.9 38.( 5.9 10.8 16.7 1981 0.4 14.0 12.7 27.) 12.9 21.2 34.1 1982 0 0 15.4 15.4 18.1 24.0 42.1 1983 0 0 15.4 15.4 21.5 24.0 45.5 1984 0 0 15.4 15.4 23.0 24.0 47.0 1985 - 2121 0 0 15.4 .15.4 23.4 24.0 47.4 /1 This expansion in output results mainly from the application of inputs at the optimum time and is not a reflection of any increase in the quantity of inputs. Any additional transport costs are taken into account in the change in road operating costs. Average increments in yields of 0.2 tons/ha have been assumed for wheat, barley and alfalfa and 0.1 tons/ha for maize. February 1977 ANNEX 14 Tab!-. APPRAISAL OF EVROS DETELOPMNT PROJECT GREECE Conn oaeLa RD Co&Rolaent Estimates of Daily Traffic and Economie Coats j Daily Right of Mainten- Maintek- Increeetal Traffic Constr- Super- Way Acqui- ance with anc- with- Mainten- Road vpd /1 uction vision sition Project out Project ance …__- … --__________--- Dr '000 - ~- -- --- 1 480 2172 130 - 140 124 16 2 486 3832 228 - 245 217 28 3 310 3259 196 - 210 186 24 4 314 2716 163 - 175 155 20 5 327 2716 163 - 175 155 20 6 171 3259 196 - 210 186 24 7 253 5431 326 - 350 310 40 8 250 6518 391 - 420 372 48 9 459 /2 12384 743 190 371 347 24 10(a) 404 /2 14846 891 55 392 360 32 10(b) 156 /2 12275 737 - 791 701 90 TOTAL 69378 4164 245 3479 3113 366 /1 17 hour counts on November 27, 1976, adjusted for seasonal variation factor 0.8 to give Average Annual Daily Traffic. /2 17 hour counts on October 26, 1976, adjusted for seasonal variation factor 0.8 to give Average Annual Daily Traffic. t Source: 17 hour counts by Technical Services Division of the Nomarchy March 1977 APPRAISAL OF EVROS DEVELOPMENT PROJECT GREECE Forestry Compnent fEcounomticnalseinst a) Forest Roads, Tousing and 'I'ransport PrOject Costs (Dr million) Yields (000 m3) Incremental R 7ad 1 Supervision Housing/2 Road/3 Harvesting Total With Project Without Incremental Project Construction Administration Transport Maintenance Costs /j Costs Sustained Accumulated Total Project Yield Benefits /5 1977 '/7 0.5 0 0 0 8.2 45.0 0 45.0 45.0 0 0 1978 15.2 0.9 4.5 o.6 7.6 28.8 54.0 20.0 74.0 47.0 27.0 24.3 1979 15.2 0.9 o.6 1.7 11.8 30.2 59.0 30.0 89.0 47.0 42.0 37.8 1980 15.2 0°9 0.6 2.8 13.2 32.7 64.2 30.0 94.2 47.2 47.0 42.3 1981 15.2 0.9 0 3.9 14.6 34.6 64.2 35.0 99.2 47.2 52.0 46.8 1982 7.7 0.5 0 5.0 15.0 28.2 64.2 36.1 100.3 47.2 53.1 47.8 1983 onwards 0 0 0 5.5 4.8 10.3 64.2 0 64.2 47.2 17.0 15.3 /1 Economic costs of construction 75 The full cost of' hooising and transport has been included although these f'acilities will also be of benef'it to existing forest production 77 Average annual maintenance costs. A and B rDads will require frequent maintenance but feeder roads will need maintenance only twice in any ten year period. The costs are based on estimates of annual costs of 40,000 Dr/km for gravel roads and 4,000 Dr/km for earth roads. /4 These are the economic harvesting costs based on a shadow wage for f'orest workers of 750 Dr per day 75 Based on an average sales price otf 900 Dr per n3. b) Pine Reforestation ProJect Costs (Dr million) Project Benefits Plantation Routine Road Total Yields (000 min) Total Establishment Maintenance Construction/ Costs Pirius Radiata Pinus Maritima Pinus Nigra Total Benefits /2 Mmintenance/l (Dr million) 1977 0 0 0 0 0 0 0 0 0 1978 11.2 0 0 11.2 0 0 0 0 0 1979 13.2 0 0 13.2 C 0 0 0 0 1980 13.2 0.1 0 13.3 0 0 0 0 0 1981 13.2 0.2 0 13. 0 0 0 0 0 1982 13.2 0.3 0 13.5 0 0 0 0 0 1983 2.0 0.5 0 2.5 0 0 0 0 0 1i84-199? 0 0.6 0 o.6 o o 0 1993-1992 0 o.6 0.7 1.3 3.9 0 0 3 9 3.5 1998-200? 0 0.6 0.1 0.7 19.' 0 0 19.5 17.6 2003-200' 0 0.6 0.1 D.7 0 9.8 9.8 19 6 16.2 2008-2012 0 o.6 0.1 0.7 0 9.8 13.0 29.8 19 1 2013-0017 0 0.6 o. 1 0.7 0 29. 4; 13.0 2.4 33.P 201 T-2022 0 0.6 0.1 0.7 0 0 94. S4l /1 Estimated cost of construction and maintenance of' an additional 30 -m of' roads requiired for ultimate forest ex0loitation. 7? Based on average st-mpage prices of 900 Dr per m3 for pirous radlata and pious nigra and 750 Dr per m3 for pious mariStica. Mar( c AIINEY. 14 APPRAISAL OF Table 11 EVROS DEVELOPMENT PROJECT GREECE Forestry Component Roadside Prices and Harvesting Costs /1 (Dr/m3) Roadside/2 Harvesting Costsl3 Category Price Felling Hauling Overheads Total Pine Sawlogs A 1,600 242 207 45 494 Sawlogs B 1,200 242 207 45 494 Boxshooks 1,200 160 167 33 360 Industrial Wood 500 121 115 24 260 Fuelwood 400 121 115 24 260 Oak Sawlogs A 2,200 242 207 45 494 Sawlogs B 1,200 242 207 45 494 Parquet 1,200 160 167 33 360 Fuelwood 750 121 115 24 260 Beech Sawlogs A 1,500 242 207 45 494 Sawlogs B 1,000 242 207 45 494 Industrial Wood 700 121 115 24 260 Fuelwood 500 121 115 24 260 Average (weighted) 900 149 141 30 320 Stumpage Price Pine sawlogs A 1,200 Pine sawlogs B 800 Pine industrial wood/ fuelwood 250 Pine Establishment Costs (Dr '000/ha) Unit Cost Total Costs Shrub vegetation removal 5.0 15,000 Cross ripping 1.6 4,800 Ploughing 1.0 3,000 Seedling production 2.5 7,500 Planting 4.0 12,000 Initial maintenance 3.0 9,000 Administration and other expenses 2.9 8,700 Tot."1 20.0 60,000 /1 I'nancial /2 Based on local auction prices. These are reasonable in relation to international prices for wood products. /3 Economic costs are 12% less, using a shadow wage of Dr750 per day to take account of the very large discrepancy between the return to forest labour (Drl,000 per day) and to agricultural labour (Dr375 per day) and keeping in mind the nature of the work involved. March 1977 ANNEX 14 Chart I tL cAI SAL OF EVROS DEVELOPMENT PROJECT GREEl, SUGAR: WORLD PRODUCTION, CONSUMPTiON, PRICES AND PROPORTION OF CARRYOVER STOCKS (1951-1975) -45 90m so T Z- 0 7 - 3 { ! ~PODUCTION CONSUM 1ONSUPTIO (LEFT SCALE) SCALE} m 40 c z 30~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 '1 '~WORLD" PRICE lo ?Q~~~I.-- GTr SCALE)% 0 - - 52SO6 5 6 2 6 6 8 7 2 7 40~~~~~~~~~~~~~~~~~~~~~~oi ak145R 26' BULGARIA ' 0 n~n(TURKEY GREECE EVROS DEVELOPMENT PROJECT Proposed project operations: [7Irrigation and flood control Forest exploitation; roads ~II§lPine reforestotion Connection roads i ® -Rural roads K A Expansion ot sugar tactory O Markets * Water supply * Street paving * Community centers O Schools -- Dikes and pumping stations National, provincial ond forestry roads ------RailwaysA.p -V Rivers 0 --rErythropotamos water divide Mtudn- *-----Boundary ot Evros prefecture Internatianal boundaries N..~~~~~~~~~~~kDr. -41-~~~~~~~~~ Kirki~ ~ ~ ~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~tr 0 1 4 4 ipIF ~ G ~~ 5 ~ ru A.4nd,terr LOMETER D-, s-s,u b r eaCrt fly.r'JuuankanzhuxOsute,~MILE