Turkey - Northern Forestry Project

Document of C11 The World Bank FOR OFFICIAL USE ONLY Report No. P-2333-TU REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TURKEY FOR A NORTHERN FORESTRY PROJECT May 12, 1978 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 Calendar 1977 March 1978 Currency Unit = Lira (TL) TL US$1 = TL 18.00 25,00 TL 1 US$0.05 0.04 Note: The Staff Appraisal Report uses an exchange rate of US$1 TL 19.25 FISCAL YEAR March 1 to February 28 ABBREVIATIONS AGM - General Directorate of Afforestation and Erosion Control CLA - Convertible Lira Account FPMU - Forestry Planning and Project Monitoring Unit MOF - Ministry of Forestry MPG - General Directorate of National Parks and Environmental Protection OGM - General Directorate of Logging Production and Forest Management ORKOY - General Directorate of Forest Village Affairs ORUS - General Directorate of Forest Industries SEE - State Economic Enterprise SEKA - The State Economic Enterprise for Pnlp and Paper  101 OFCIXL USE ONLY TURKEY NIORTHERN FORESTRY PROJECT Loan and Project Summary Borrower: RepubLic of Turkey Beneficiary: Minisltry of Forests (MOF) Amount: US$86 million equivalent in various currencies Terms: Seventeen years including four years grace, at 7-1/2 percent per annum. Project Description: (a) The project is a seven-year 1979-85 time-slice of a long-term 1975-95 forestry development program for the northern forest region of Turkey, which accounts for about 60 percent of national forest resources. The project seeks to improve forest management plan- ning and operations, increase industrial roundwood production from an estimated 6.5 million m3 in 1978 to 10.0 million m3 at full development in 1985, thereby helping to meet market demand in the project area and elsewhere in the country, and create addi- tional employment for forest villagers. (b) It provides for (i) construction of 26,000 km of logging-extraction, forest, and village-access roads, and stabilization of 25,000 km of existing forest roads; (ii) procurement of specialized logging equip- ment for inaccessible forests, vehicles and equipment for road construction and log extraction, and instal- lation of maintenance workshops; (iii) establishment of an intensified forest management program, includ- ing reforestration, afforestation, forest protection, expansion of forest nurseries, erosion control, range improvement, and wildlife and environmental protec- tion; and (iv) technical assistance and training. (c) At full development it is expected to generate over TL 4.0 billion in incremental income, contribute about TL 2.3 billion in net revenue to the national Treasury, save over US$500 million equivalent in Iforeign-exchange, and iyield additional benefits to most of the 5 million forest villagers, who are among the lowest income groups in Turkey. |Tis documnt has a mtricted distribution and may be ued by recipients only in the performance |of rti offical dutio. Its content may iot otherwise be disclosed without Word lank authorization.  - ii - (d) The project faces no special risks. The basic man- agement structure already exists. The Ministry of Forestry Planning Unit will be restructured and strengthened to enable it to coordinate the prepara- tion of annual work programs for each of the 16 forest conservancies and monitor the implementation of all project activities. Estimated Cost: Local Foreign Total --------(TUS$M7--------- Road construction 170 91 261 Erosion control 25 7 32 Range improvement 13 4 17 Forest protection 16 4 20 Buildings 41 20 61 Equipment and machinery 32 92 124 Technical assistance, training and research 7 6 13 Physical contingencies 15 11 26 Price contingencies 273 88 361 Total 592 323 915 Financing Plan: Local Foreign Total --- (US $M)-------- IBRD - 86 86 Suppliers' Credits - 6.5 6.5 Government 592 230.5 822.5 Total 592 323 915 Estimated Disbursement: IBRD FY 1979 1980 1981 1982 1983 1984 1985 Annual 27.0 10.9 9.2 7.9 11.7 7.8 11.5 Cumulative 27.0 37.9 47.1 55.0 66.7 74.5 86.0 Rate of Return: 76 percent Appraisal Report: Report No. 1870-TU dated Regional Projects Department, EMENA  REPORT' AND RECOMMENDATION OF THE PRESIDENT OF T'HE IBRD TO THE EXECUTIVE DIRECTORS ON A PRtOPOSED LOAN TO THE REPUBLIC OF TURKEY FOR A NORTHERN FORESTRY PROJECT 1. I submit the following report and recommendation on a proposed loan to the Republic of Turkey for the equivalent of US$86 million to help finance the foreign exchange cost of a Northern Forestry Project. The loan would have a term of 17 years, including 4 years of grace, with interest at 7-1/2 percent per annum. Part I - THE ECONOMY 1/ 2. An economic resport (No. 1272-TU) entitled "Country Economic Memo- randum - Turkey" dated October 21, 1976, was circulated to the Executive Directors on November 2, 1976. Since then, the economic situation dete- riorated rapidly and cuLminated in a serious balance-of-payments crisis and high levels of inflation. This section analyzes the situation in 1977 against the background of more permanent structural problems; it also outlines the short-term stabilization package implemented by the new Ecevit Government shortly after receiving its vote of confidence in mid-January 1978, and prospects for the short-term. This package, formed the basis of a Standby Arrangement with the IMF, which was finalized in late March and approved by the Board of Executive 'Directors of the IMF in late April. The determination and sense of purpose with which the new Government has faced up to the severe economic problems confronting Turkey, holds the promise that medium-term economic and debt management policies needed to build on the stabilization package, will soon be evolved with equal seriousness. The expanded Annex I attached to this Report provides insights into those developments which precipitated the present economic crisis, and analyzes them in detail in the context of trends and the structural problems of the economy. An economic mission planned in the Fall, will further review these trends and prospects. 3. In most respects, the record of Turkish economic development over the last two decades has been good. As the result of a strong commitment to rapid growth and modernisation, re\al output has grown, on average, by more than 6 percent per annum. Great strides have also been made towards meeting the basic needs of the population in;such areas as education, health care, water supply, and rural roads. However, employment has never been at the fore of the objectives of successive Governments. Overall, this impressive economic progress has been punctuated (in 1958, 1970 and 1977) by severe balance of payments crises, which have been the product partly of extraneous factors and partly of T'urkish development strategy itself, which has paid insufficient attention to the structural weaknesses of the economy, and has perhaps exacerbated somie of them. 1/ Part I is identicail to Part I in the Report and Recommendation of the President on the Livestock IV Project, dated May 12, 1978.  -2- Structural Problems and the Situation in 1977 4. The emphasis which successive governments have laid on industrial- ization has been reflected in a doubling of the share of the industrial sector in total output between 1955 and 1977. It also resulted in comparative neglect of agricultural development, which has also been hampered by inappro- priate subsidy and pricing policies. Moreover, although some parts of Turkish industry are efficient, and more have the potential to become so, a strong emphasis on sophisticated capital-intensive technology has resulted in high- cost production in certain sectors; and unselective protection against com- petition from imports, has inhibited the development of an industrial structure well-suited to Turkey's comparative advantages in terms of loca- tion, natural resources and labor availability. One important consequence of this, as well as of a foreign trade strategy which has emphasized import- substitution, has been that Turkey has so far been unable to develop a strong industrial export base, and has relied instead on its traditional agricultural exports (supplemented by workers' remittances) to finance the imports of materials and capital goods needed for its ambitious modernization effort. This pattern of trade has been a fundamental cause of the difficulty, which Turkey has periodically experienced, in reconciling rapid growth with a viable external payments position. 5. The rate of growth of production in Turkey, unlike almost every other country, accelerated during the recent world recession. The average annual real rate of GDP growth in the period 1970-73 was under 7 percent; in the period 1973-77, it rose to nearly 8 percent. This was made possible by a rising public sector deficit, which provided a stimulus to aggregate demand and offset the depressing effect of sluggish exports and the increased outflow of payments for oil. As a result, the growth of output was con- strained not by demand, but by supply. Favorable weather and good harvests caused the average annual rate of growth of agricultural output to increase from about 2 percent in the period 1970-73 to about 7 percent in the period 1973-77, while industrial output grew at about 10 percent in both periods - principally as a result of the sustained high level of industrial investment. The pace of investment in Turkey, moreover, did not slacken during the world recession; on the contrary, largely as the result of an intensified public investment drive from 1975 onwards, the share of fixed investment in GDP increased from under 19 percent in the period of the Second Plan (1968-72) to over 20 percent in the period of the Third Plan (1973-77). 6. The favorable performance of Turkish production during the 1970's, was not matched by that of employment. Unemployment and underemployment were relatively high (12 percent of the labor force) in 1970, and have since risen to over 13 percent in 1977. This has been the result of a sharp reduction in the ra,:e of emigration since 1973, a high rate (2.5 percent per annum) of popu' -( 7in growth, and the adoption of relatively capital-intensive methods of produ rion in both agriculture and industry. 7. There was a gradual deterioration in the external trading position of Turkey since 1973, which culminated in the serious balance of payments  -3- crisis in 1977. The resource gap increased from $623 million in 1973 or 3 percent of GDP, to about $4.0 billion in 1977 or more than 9 percent of GDP. Imports of goods and non-factor services increased from $2.3 billion in 1973 to about $6.5 billion in 1977, or by about 30 percent per year, as a result of: (a) significant increases in import prices since 1973, especially the price of oil; (b) rapid increase in the demand for imported capital goods due to high levels of investment and emphasis on industrial development; and (c) a general liberalization of import restrictions. The remainder of the deterioration is attributable to a decline in the rate of growth of exports, both absolutely and in relation to the rate of growth of GDP. In dollar terms, Turkish exports of goods and non-factor services grew during 1970-73 at an average annual rate of 31 percent; during 1973-77, the average annual growth rate was only 10 percent. This decline in export performance had its roots in ineffective administration of agricultural export sales, the world recession, an uncompetitive exchange rate, and excess aggregate demand in the domestic economy. 8. The widening of the resource gap was amplified in the current account deficit, which rose from $0.7 billion in 1973 to $3.4 billion in 1977 as the result of a decline in workers' remittances, which was a consequence of the overvaluation of the lira, as well as of changes in the composition of the Turkish emigrant population, including a decline in the proportion of relatively recent migrants. 9. The rapidly rising current account deficit was not matched by an increased inflow of medium and long-term external capital. Turkey has deliberately kept foreign private investment to a minimum. Borrowing from long-term official sources has also stagnated since 1970, and recourse to long-term market sources has been minimal, for lack of a dynamic and coherent external borrowing policy. In consequence, the overall balance of payments moved from a surplus of $0.9 billion in 1973 to a deficit of $2.7 billion in 1977. The cumulative deficit from 1974 to 1977 amounted to $6.6 billion. Of this, $1.3 billion was financed by running down the foreign exchange reserves which by the end of 1977 stood at $770 million, equivalent to only one and a half month's imports. The remainder, amounting to some $5.3 billion, was financed mainly by various forms of short-term borrowing. 10. An important source of short-term borrowing was the Convertible Lira Accounts (CLAs), which provided nearly $2 billion, in 1975 and 1976. These are deposits placed with Turkish banks by non-residents and commercial banks, offering a spectrum of interest rates according to maturity, and until recently were guaranteed against exchange rate risk. Various other types of short-term loans were also obtained. During 1977, however, foreign lenders became reluctant to roll over the outstanding stock of short-term debt, and even more reluctant to make further substantial loans. The Central Bank was thus driven to delaying piayments for imports on a large scale. This action made it even harder to obtain credit by conventional means. Financing of the current account deficit in 1975-77 through recourse to CLAs and other short- term borrowings is the main cause of the sharp increase in the debt burden.  - 4 - II. This deterioration in the balance of payments position can be .-ewed partly as a reflection of inadequate efforts at domestic resource mobilization, especially in the public sector. The public sector deficit inczeased from TL 6.2 billion in 1973 to TL 77.0 billion in 1977. This increased deficit was mainly due to a deterioration in the financial position of the State Economic Enterprises (SEEs), and in particular of the operational SEEs, which dominate the transport and energy sectors and account for half the output of mining and manufacturing. Successive governments, in an effort to slow inflation, held SEE price increases below the rate at which SEE costs were rising. In addition, the scale of SEE investment was greatly escalated. The net effect has been a very rapid widening of the gap between SEE savings and investment, which has caused the overall public sector deficit to rise from 2 percent of GDP in 1972-73 to 9 percent of GDP in 1976-77. Most of this increased deficit has been financed by borrowing from the Central Bank, since administered ceilings on interest rates made it hard to attract purchasers for government bonds. As a result, the money supply increased rapidly at an aver- age annual rate of about 30 percent between 1974 and 1977. This was paralleled by a high rate of credit expansion to the private sector. 12. The rate of inflation (as measured by the wholesale price index), which had declined between 1974 and 1975, rose to about 35 percent in 1977 and accelerated in early 1978. There are important cost-push influences on the price level in Turkey, including a powerful labor union movement and a farmer- oriented agricultural price support policy. But the recent acceleration of inflation has been the result principally of excess demand. The rise in the public sector deficit caused an increase in aggregate demand well beyond the amount needed to offset the damping effect of reduced exports and an increased import propensity. The consequent upward pressure on the price level was aggravated in 1977 by ad hoc import restrictions, which reduced the avail- ability of goods requiring imported inputs, and contributed to the development of a substantial idle capacity. 13. The crisis of 1977 was thus a result of a combination of external and internal forces. The rise in the price of oil and the world recession, by increasing the cost of imports and reducing exports and workers' remittances, adversely affected Turkey's trading position which was already structurally weak. The effect of these elements on the balance of payments deficit was amplified by the increase in the growth rate after 1973, which was a reflec- tion of the basic Turkish commitment to rapid growth, manifested in an escala- tion of public sector investment without a commensurate increase in public sector savings. In addition, the seriousness of the crisis was aggravated by inadequate management of agricultural exports, an inappropriate exchange rate policy, and lack of a coherent policy to develop and tap fresh sources of medium and long-term external finance. Recent Stabilization Measures 14. The previous coalition government had initiated in mid-1977, nego- tiations with the IMF for a Standby Agreement. In the fall of 1977, it announced drastic price increases for a number of goods and services of the  SEEs (ranging from 50 to' nearly 300 percent), devalued the Turkish Lira by 10 percent in September with a further adjustment of 5 percent in early December. In the midst of the IMF negotiations, the new Ecevit Government came into power, with a slim majority in the National Assembly. It decided to first prepare its own stabilization package, before resuming negotiations with the IMF. Within weeks of receiving its vote of confidence, it finalized its Annual Program for 1978 and the 1978 Budget. As soon as the budget was approved on February 28, it presented its stabilization package to the IMF. The main features of the Annual Program for 1978, the 1978 Budget and the short-term economic stabilization package, which formed the basis of the IMF Standby Arrangements, included: devaluation of the Turkish Lira by a further 30 percent in March, remloval of the exchange rate guarantees for new CLAs in an effort to minimize new inflows of these short-term deposits, increased interest rates on deposits of Turkish workers abroad to encourage increased remittances, increased interest/deposit rates to stimulate better resource mobilization and allocation within Turkey, introduction of new tax legislation (including a substantial increase in stamp duties on imports) which will inter alia increase public revenues by about TL 20 billion per annum (equal to about 2 percent of GDP), substantial adjustments in the prices of key SEEs products and services (with further increases expected in the near future) in an effort to improve resource mobilization, plans to limit the growth of consolidated public sector expenditures (including those of SEEs) within available resources to thus sharply reduce recourse to Central Bank financing of public sector deficits, reduction in the level of imports in 1978 to $5 billion from the peak of $5.8 billion reaLched in 1977, and a projected reduction in the current account deficit in 1978 to $1.45 billion. Although much remains to be done, these steps should help bring some order in the chaotic economic house which the new government inherited. 15. The Standby Agreement was finalized on the basis of the above pack- age and was approved by the IMF Board in late April. It provides for the withdrawal of about $89 million equivalent in Compensatory Drawings, within two weeks of the signing of the Agreement. In addition, since the Witteveen Facility is not in operation, Turkey would be eligible to draw up to 150 per- cent of its quota, whichi amounts to about $360 million under the Exceptional Circumstances Clause. Ihis would entitle Turkey to withdraw about $174 million in the first two, tranches as follows: $60 million in May 1978; $48 million in August 1978; $36 million in November 1978 and $30 million in February 1979. IMF will review economic developments and the progress of the stabilization measures in January 1979. Following that, Turkey will be entitled to withdraw a further $186 million over a one year period. In other words, in calendar 1978, Turkey can withdraw a maximum of $233 million. 16. With the signing of the Standby Agreement, it is expected that Turkey would now be in a much better position to cope with its large short- term debt currently estimated at $5.8 billion (excluding $409 million owed to IMF), much of it due in 1978. This is its most critical immediate problem. To tackle this problem, Turkey will immediately need to roll-over about $1.3 billion of CLAs falling due in 1978, but for which no major problem is expected. It has begun negotiations with leading European and US commercial banks to restructure the CLAs due in 1978 as well as an additional $1.2 billion of  6- short-term debt into medium- and long-term debts. These banks, in principle, have already agreed to present viable proposals shortly. The Government has also sought the reactivation of the OECD consortium, in order to restructure trade debt guaranteed by bilateral export financing agencies and public bilateral debt. The Government is also actively pursuing other available financial sources of external medium- and long-term capital aid, including the tapping of possible new ones in the Middle East. 17. If the current account deficit in 1978 is to be brought down to $1.45 billion it will be necessary to bring about improvements in performance of Turkish exports, both agricultural and industrial. This will require the maintenance of a competitive exchange rate and an increase in the proportion of investments devoted to export-oriented industries. It will also require greater emphasis on agricultural development, together with revision of price support policies and reform of agriculture export procedures. In addition, other sources of foreign exchange earnings which have been neglected so far, such as tourism, would need to be tapped in a systematic and effective fashion. At the same time, the growth of imports will have to be kept down by much greater care in the selection of investment projects and continued restriction of nonessential imports. The 1978 Annual Program is considered by the new government to be an interim one, which will constitute the first year of Turkey's Fourth Five-Year Plan (1978-82) to be finalized by late 1978. The new government seems determined to approach the formulation of future planned targets and some of the key immediate and medium-term economic and debt management policies, on a sound and realistic basis, and not on that of ineffectual compromises which plagued the previous coalition governments. 18. In 1978 and 1979, the measures necessary to recover from the present crisis will probably cause the annual growth rate of real GDP to fall to 3 or 4 percent, but for the remainder of the Fourth Plan period (1978-82), higher growth should be possible. To achieve this, it will be indispensable to increase domestic savings, primarily by raising the rate of growth of budgetary revenues, and improving the financial equilibrium and low productivity of State Economic Enterprises. The consequent reduction in the public sector deficit should help both to maintain external equilibrium and to moderate the pace of inflation. 19. A major medium and long-term problem is the high and rising level of unemployment and underemployment. To alleviate this, will require a high growth rate to be resumed in the long run, with more emphasis than hitherto on comparatively labor-intensive commodities and techniques of production. Moreover, increased attention to agricultural development, by reducing the disparities of income both between the agricultural and non-agricultural sectors and between rich and poor farmers, should further improve Turkey's income distribution. Similarly, the tax system needs to be restructured in such a way as to make it more progressive (as proposed in the new tax law which is before Parliament), while the government continues its already rather successful policy of reducing the inequality of living standards by providing for basic needs through public expenditure. In the longer run, Turkey will have to formulate policies which would help curb the population increase which has, to a large extent, dampened the benefits of growth so far.  20. The extensive shiort-term borrowing of the past three years has greatly increased Turkey's external debt, giving it an unattractive maturity structure, and causing a sharp rise in debt service payments. At the end of 1977, the country's total external indebtedness amounted to approximately $10.0 billion, of which about $5.8 billion (excluding $409 million owed to IMF from both figures) was short-term, most of which is likely to be rerolled or restructured into medium-term borrowings as mentioned in paragraph 16. The remaining $4.2 billion was mainly public and publicly guaranteed medium and long-term debt. Of this, about one third was owed to international organi- zations, mainly the Bank ($0.8 billion, plus $0.6 billion in committed but undisbursed loans) and the European Investment Bank; and about one half to foreign governments and government agencies, notably those of the United States, West Germany, Canada, and the USSR. In 1977, debt service payments (including interest on short-term debt) amounted to 15.0 percent of exports of goods and non-factor services plus workers' remittances. 21. The first objective of a prudent debt management policy should be an adequate restructuring of the short term liabilities. A determined medium- and long-term borrowing effort during the next few years should restore a satisfactory balance between short and longer-term debt. But despite the Government's current restructuring efforts, a substantial increase in debt service payments is inevitable. The debt service ratio can be expected to rise to about 23 percent in 1978 and peak at anywhere between 30 to 40 percent in the early eighties, depending on the rerolling and restructuring terms ultimately agreed to by commercial banks and other bilateral creditors and export financing agencies. In these circumstances and until the outcome of the restructuring negotiaitions as well as the strategy of the Government in its Fourth (1978-82) Development Plan becomes available, it does not appear meaningful to venture firm projections on growth, balance of payments or debt service. However, if as the new Government intends, Turkey pursues sound medium-term and debt management policies and shows the same seriousness as it has shown in its short-term policies since assuming office, and as the financial consequences of the recent crisis are gradually remedied, the debt service ratio should decline after reaching a peak in the early eighties. Although a tight balance of payments situation is likely to remain a medium- term feature of the economy, Turkey would continue to have a substantial borrowing capacity for medium- and long-term funds provided the present short-term debt is restructured on adequate terms and future short-term borrowing is strictly contained. However the situation will need to be carefully watched and evaLluated as soon as a more concrete basis for doing so becomes available. PART II - BANK GROUP OPERATIONS IN TURKEY 1/ 22. The 1970 economic stabilization program and devaluation of the Turkish lira, which improved the balance of payments, enabled Bank Group 1/ Part II is substantially the same as Part II in the Report and Recom- mendation of the President on the Livestock IV project, dated May 12, 1978.  - 8 - lending, which had previously been intermittent, to be established on a continuing basis at a high level. As of April 30, 1978, the Bank Group had lent $1,456 million to Turkey through 49 lending operations (or 43 projects, since both loans and credits were provided for some projects), including 14 IDA credits totalling $178 million. Fourteen of these operations have been in agriculture and rural development (including multipurpose projects), eighteen in industry (including DFCs), ten in power, and the rest in urban development, transportation, education and tourism. Agriculture and rural development account for 24 percent of the funds lent, industry and DFCs for about 42 percent and power for about 24 percent. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of April 30, 1978, with notes on the execution of ongoing projects. 23. Implementation of projects has been satisfactory in the private sector, but much less so in the public sector where significant delays resulted from political uncertainty, limited coordination among agencies, staffing problems and related administrative delays. Disbursements have consequently been slower than expected. To improve this situation, the Government and the Bank in June 1975 initiated joint reviews to identify and resolve key bottlenecks impeding satisfactory project implementation. So far, six such reviews have taken place, the most recent one in March 1978. The results have been mixed, with improvements having occurred in adminis- trative areas, e.g training programs and speeding-up of disbursement actions, but with so far only modest impact on key policy problems, whose resolution has been considerably delayed or prevented up to now by frequent changes in coalition governments. Loan disbursements as of December 31, 1977, amounted to 70 percent of appraisal estimates and 83 percent of revised estimates. A comprehensive analysis of the main sector policy constraints which lay at the root of inadequate project implementation was carried out with the new Government in March 1978, and further discussed during the President's meetings with the Prime Minister and other key ministers in April 1978. It is antici- pated that as a follow-up on these discussions, the new coordination mechanism being established in Turkey, will be able to take effective steps to improve implementation of on-going projects, and accelerate disbursements further, to provide a sound basis for expanding the Bank's future contribution to Turkey's development. The sector policy perspectives outlined by the new Government, and actions it has already initiated since coming into power, if followed by sustained efforts on the part of the administration and by Cabinet decisions to remove bottlenecks, should enable project performance to take a turn for the better and strengthen the Bank's activities in Turkey. 24. Bank lending has so far been mainly directed at supporting Turkish efforts to improve: (a) income distribution and the level of living stand- ards, through rural development efforts, urban planning, and increased employ- ment and income opportunities; (b) the long-term capacity to earn or save foreign exchange, through promotion of industrial and agro-industrial exports and tourism; (c) lagging public sector saving, through the encouragement of improved management and financing of the investments and operations of the SEEs; and (d) institution-building in key public services, through selective assistance for infrastructure. In light of the new Government's program,  - 9 - which will be progressively refined and specified as the draft 5-year Plan for 1978-82 takes shape by the end of this year, it will be necessary for the Bank to review jointly with the Turkish authorities, how best its lending and technical assistance can meet the above objectives, without facing the policy and institutional obstacles encountered in the past. Pending the outcome of this review, which should be carried out in the coming months, it is proposed to continue to devote the Bank's development efforts to certain key sectors, of which agriculture and industry are the most important. In agriculture, emphasis is being put on rural development, the strengthening of agricultural credit mechanisms, livestock, forestry, and fruit and vegetables. Industry (including DFCs), where promotion of exports and employment, together with the gradual strengthening of the SEEs are the key tasks, will also receive sig- nificant support. This program is supplemented by projects in power, urban development and transportation. 25. Two projects, besides the proposed one, are being processed for presentation to the Executive Directors in the current fiscal year. They are the Fourth Livestock Development project and the Erdemir Stage II Steel project. Projects under preparation for FY79 and future fiscal years include: in agriculture, rural development in Erzurum, a second fruit and vegetable project, seed production, grain storage; in industry, a second IGSAS fertilizer project in Central Anatolia, modernization of public and private sector textile production, and a third i-orest industries project in northern Turkey; in power, a hydroelectric project; in transportation, port rehabilitation; and in urban development, a possible sites and services project. 26. At the end of 1977, the Bank Group's share of Turkey's medium and long-term external debt (outstanding and disbursed) was 18 percent; its share of Turkey's estimated total external debt (including short-term obli- gations) was about 8 percent. The expected conversion of a large part of this short-term debt into medium and long-term debt will cause the Bank's share of medium and long--term debt to fall sharply, to around 10 percent by 1980. Thereafter, assumiing the currently projected increase in Bank lending, the share would increase. The Bank's share of service payments on medium and long-term debt is expected to follow a similar path, dropping from 20 percent in 1977 to about 8 percent in 1980, but rising thereafter. 27. IFC has invested in the production of synthetic yarns, pulp and paper, glass, aluminum, ilron and steel products, and tourism, and has an investment in the largest: private development finance company, TSKB. As of April 30, 1978, gross IFC commitments totalled $157 million, of which $76 million were still held by IFC. The Corporation is currently investigating additional investment opportunities in the industrial sector, including motor bicycle engines, piston rings and cylinder liners, and possibly aluminium products.  - 10 - PART III - THE FORESTRY SECTOR Background 28. Turkey, with about 20 million hectares of forests, located mainly in the mountain ranges near the Black, Aegean, and Mediterranean Seas, has the fifth largest forestry resource in Europe and the Middle East. However, these forests, entirely owned by the Government, are of low productivity, currently yielding less than half their potential sustainable annual allowable cut. As a consequence, many of the country's sawmills and other forest industries operate well below capacity, despite substantial unfulfilled domestic demand for forest industry products. Forest product imports in 1976 were valued at about $50 million; import demand for both roundwood and finished products will increase rapidly if domestic production does not maintain its recent growth trend. The limited domestic exploitation of forestry resources is largely the result of past traditional and overly conservative attitudes toward forest management and to insufficient road access in many forest areas. These twin problems of forest management and access, have been studied in great depth by the Government with the assistance of UNDP and FAO, and long-term modern development programs introduced (paras. 29-31 below), of which the proposed project is a major component. 29. The Ministry of Forestry (MOF) carries out all forest management and production operations through five General Directorates: the General Director- ate of Logging Production and Forest Management (OGM), which controls forest management, production (cutting and hauling are done primarily by villagers and small private contractors in accordance with OGM cutting plans and schedules), sales and infrastructure operations; the General Directorate of Afforestation and Erosion Control (AGM), which handles artificial reforestation, afforesta- tion and erosion control activities; the General Directorate of Forestry Village Affairs (ORKOY); the General Directorate of National Parks and Envi- ronmental Protection (MPG); and the General Directorate of Forest Industries (ORUS), which operates sawmills and particle board mills. Forest-based indus- tries are divided between the public and private sectors, with the public sector playing a major role. About one-third of sawnwood production is pro- vided by ORUS, with the remainder being produced principally in over 5,000 essentially village-based small private sawmills. Eighty percent of paper products are produced by the State Economic Enterprise for Pulp and Paper (SEKA). Forest output is distributed first by OGM to "priority users" which include SEKA, ORUS, government agencies and forest villagers, with prices based on average auction prices, on production costs for SEKA and other governmrint agencies, and on a stumpage fee for villagers. The rest of the output is sold at public auction, with a minimum reserve price set by OGM sufficient to cover production and overhead costs. Governm&nt Policies and Programs in the Forestry Sector 30. Government efforts to develop the forestry sector have been directed towards: (i) carrying out of a series of forest resource and exploitation ,tudies, with UNDP/FAO assistance; (ii) encouraging development of integrated  - 11 - forest industries to maximize use of forest resources; and (iii) raising living standards of forest villagers. With the completion of three major forest studies carried out with the help of international specialists and UNDP financial assistance, about eighty percent of Turkey's forest areas have now been surveyed and feasibility studies for integrated forestry and forest industry development prepared for about two-thirds of the surveyed areas. Survey results indicate that the 1976 industrial roundwood output of about 6.6 million m3, could be more than tripled by 1995, with the introduction of an integrated forest management system involving: stabilization of the existing forest-road systems to lengthen the logging season; construction of new forest access roads; reforestation; and more intensified management of forest areas. In addition, conversion of natural forest to fast-growing industrial forest plantations could ensure future self-sufficiency in industrial roundwood by the end of this century. The Government's first forest resource study covered the southern forests and formed the basis for the Akdeniz (Mediterranean) Forest Utilization Project (Loan 957-TU), Turkey's first large-scale inte- grated wood products project, for which the Bank provided a loan of $40 mil- lion in 1974 and the European Investment Bank, $31 million equivalent. Under this project, the Bank is assisting the Government in developing a pulp and paper complex on the Mediterranean coast and in introducing an improved forestry management system, based on modern technology, into the forest conservancies of southern Turkey. Although the Akdeniz pulp and paper mill is behind schedule as a result of foreign exchange stringency and consequent construction delays over the past year, this situation is expected to improve as a result of the economic program adopted by the Government this year. The Akdeniz forestry component is progressing well, providing useful experience to MOF for the implementation of the proposed Northern Forestry Project. 31. The second study, which surveyed the northern forests, resulted in preparation of a long-term integrated forestry and forest industries develop- ment program which aimed at bringing these forests into full production in the period 1975-1995. Preliminary findings from the study provided the basis for Balikesir Newsprint Project, an integrated sawmill and newsprint manufac- turing complex in western Turkey for which the Bank provided a loan of $70 million in 1976 (Loan 1258-TU). The detailed forest development program resulting from the study, which the Government has accepted in full and requested Bank assistance in implementing, forms the basis for the proposed Northern Forestry Project, which would extend modern systems of forest manage- ment, initiated under the Akdeniz and UNDP/FAO technical assistance projects, to Turkey's major forest areas. 32. The third and follow-up study explored the development of forest industries in Northern Turkey, including detailed analyses of existing indus- tries and recommendations for improving efficiency, which have begun to be adopted. Full-scale market studies have also been completed and investment feasibility studies for new processing capacity are underway, including the proposed establishment of a pulp and paper mill complex on the Black Sea coast in the early 1980s.  - 12 - Forest Village Development 33. A major constraint on the rational exploitation and development of Turkey's forest resources has stemmed from the extensive damage to forests caused by abuse by forest villagers, of historical firewood, grazing, and cropping rights. While some forest villages are located within uninterrupted high forest areas, most are located in areas of mixed forest and open crop or grazing land. To help provide better protection to the forests and at the same time help meet the developmental needs of forest villagers in an integ- rated forest and agricultural ecology, Government forestry policy has become increasingly concerned with: (i) improving the income and quality of life of Turkey's 8 million relatively poor forest villagers, who comprise about one- third of the rural population; (ii) developing programs to integrate use of forest land for village agriculture activities with its use for forestry; and (iii) encouraging the maintenance of forest village population, at least in the medium-term, at a level sufficient to provide the work force needed to carry out its forest development and log extraction activities. Labor avail- ability for forest operations is expected to remain adequate in most forest areas through 1995 when the forest village population is expected to have declined to about 5 million, but further out-migration thereafter is expected to lead to increased subsequent mechanization of logging operations. 34. To achieve these objectives, the Ministry of Forestry established ORKOY in 1971 and a forest village,development fund in 1974, which is financed by a 3 percent earmarked tax on MOF wood sales and is administered by ORKOY. Working closely with the Ministry of Village Affairs and other concerned Gov- ernment agencies, particularly at the local level, ORKOY prepares integrated village development plans, which it assists in financing, which include infra- structure development such as roads and electrification and provision of supervised credit for productive on-farm investments including poultry and livestock development. While ORKOY's program is effective, it is relatively new and still needs to evolve a sounder technical basis for crop and livestock development. The proposed project includes pilot schemes for range improve- ment as an important first step in this direction. The proposed project also includes financing for village access roads, and ensures substantial increased funding for the ORKOY program through increases in MOF sales resulting from the project. PART IV - THE PROJECT Project History 35. The project is based on a "Forestry Survey of the North Aegean, Marmara and Black Sea Region of Turkey", carried out by consultants under the UNDP/FAO assisted series of forestry studies (paras 30-32), and was prepared with the direct involvement of MOF's Planning Unit. A Bank Reconnaissance Mission visited Turkey in November 1976, followed by an Identification mission in April 1977, and an FAO/CP and Bank Preparation/Preappraisal Mission in June 1977. The project was appraised in October/November 1977. Negotiations were  - 13 - held in Washington in May 1978. Turkey's delegation was headed by Mr. Asaf Guven, Chief Economic and Financial Counselor of the Turkish Embassy, and included representatives of the MOF and the Treasury. Project Object--.es and Area 36. The proposed project is a seven-year 1979-85 time-slice of the long- term (1975-95) forestry development program for Turkey's northern forest region. A seven-year period for the project was chosen as the minimum time span within which a realistic evaluation can be made of the proposed refores- tation and industrial plantation programs, since two years are needed to develop nurseries and five years to obtain a reliable estimate of potential yields and survival rates. The main objectives are to: (i) increase indus- trial roundwood production in the currently underutilized northern forests from the estimated level of 6.5 million m3 in 1978 to 10 million m3 in 1985, thereby providing additional raw material to help meet market demand elsewhere in the country as well as in the project area, where some 3,500 mainly small village sawmills and about 25 major forest industries are located and where several large-scale forest: industries are currently in the planning stage, including the pulpmill complex planned for the Black Sea coast; (ii) create additional employment for forest villagers; and (iii) strengthen an ongoing Government program for development of forest villages. 37. The proposed project area, incorporating 16 of the country's 26 forest conservancies, is Located in the western and northern part of Turkey. It stretches from the Aegeaan Sea to the Russian border. It contains 50,000 sq km of productive high forest, of mixed coniferous and deciduous trees, including commercial species of fir, pines, beech and oak. The area repre- sents about 60 percent of the country's forest resources. In recent years, the area's contribution to national industrial wood production has been about 70 percent or about 5 milLion m3. About 5 million people live in some 9,000 forest villages in the areaa; this constitutes about 12 percent of the national population. The estimated per capita income in these villages in 1976 was only $155, compared with the national per capita income of $990 in that year. These are therefore amongst the poorest people in Turkey. Project Description 38. The proposed project would provide for: (a) implementation of an intensified forest production and management program, including reforestation; (b) the construction of about 26,000 km of forest and logging extraction roads, including about 400 km of village access roads; (c) stabilization of 25,000 km of existing and newly constructed roads, including about 2,000 km of village access roads; (d) fixed and mobile mechanical workshops for equipment maintenance; (e) logging equipment needed for extraction of logs from steep inaccessible areas which cannot be harvested by manual methods (comprising about 10 to 15% of the project area); (f) establishment and planting of indus- trial plantations on about 76,000 ha of currently non-productive lands with fast-growing tree species and of 86,000 ha of conventional afforestation; (g) erosion control works in about 57,000 ha of forests which form part of critical water catchment areas; (h) range improvement in about 64,000 ha of  - 14 - potential grazing areas, with special emphasis on pasture improvement and the initiation of pilot rotational grazing schemes for forest villages; (i) con- struction of seven new forest nurseries for seedling production with an aggre- gate capacity of about 25 million plants; (j) intensification of forestry research and revision of current management plans; (k) forest protection and conservation works including construction of additional fire towers; (1) fencing of forest regeneration areas to prevent browsing by livestock; (m) pilot wild life and environmental protection programs in forest areas and national parks; (n) training of MOF personnel in forestry management and log extraction techniques through 144 man-months of training fellowships abroad; and (o) on-the-job training of MOF personnel in the fields of manage- ment planning, machinery operation, and industrial plantations, and training of villagers in forestry operations. Details are provided in the Loan and Project Summary and in a Staff Appraisal Report entitled "Northern Forestry Project" (No. 1870-TU) dated May 12, 1978 which is being distributed to the Executive Directors separately. 39. The project will introduce modern technology to extend the currently short logging season, thus easing the conflict between labor requirements for agriculture and forestry operations during the peak planting and harvesting seasons, and thus enable forest villagers to increase the proportion of their annual income deriving from forest work. It will extend log harvesting into inaccessible areas by use of skyline logging systems; intensify forest manage- ment, including establishment of fast-growing industrial plantations with selected indigenous and exotic species which can produce up to ten times more industrial wood per hectare than slower-growing natural forests; introduce erosion control measures in steep catchment areas, including a monitoring system for checking sediment load in streams flowing from forest areas and determining the effects of upstream logging operations and graziers; introduce planning methods based on shorter cropping rotations; concentrate forestry management and extraction operations to reduce log production costs; and, as summarized in items (b), (c), (h) and (o) of para. 37, directly support key aspects of ORKOY's program to assist the economic and social development of forest villagers, through construction and stabilization of village access roads, improvement of range management, and provision of training. Project Cost and Financing 40. Total project cost, including contingencies, is estimated at $915 million equivalent, of which $92.5 million is direct foreign exchange, and $230.5 million is in indirect foreign exchange. The latter represents in large part the imported components of Turkish-manufactured equipment reserved for procurement in Turkey, and imported fuel needed for road building and other project operations. 41. The proposed loan of $86 million will finance 93 percent of total direct foreign expenditures, or 9 percent of total project costs. The remaining direct foreign exchange costs of $6.5 million are being covered with supplier credit financing obtained from Brazil. Local currency requirements, including indirect foreign exchange costs, will be fully financed by the Government,  - 15 - through OGM, which, as a revenue-generating agency, enjoys almost full fi- nancial autonomy. OGM has substantial accumulated equity (about TL 3.7 million in 1976) and will operate on an entirely cash budget. Written assurance has been obtained that, to the extent practicable, the overall pricing of MOF's roundwood will fully cover the cost of wood production, including overhead costs. In practice, based on the experience with MOF's ongoing wood auction policies, all operating and investment costs of the project are expected to be fully covered by wood sales revenue. However, written assurance has also been obtained that in the event the funds accruing to the Revolving Budget of the OGM should prove to be insufficient, the Government would allocate funds from other budgetary sources to complete the project. Project Implementation 42. Project implementation will be carried out by MOF through four of its General Directorate as follows: OGM will implement the project road construction and log extraction programs and those reforestation operations relating to regeneration of natural forest in logged-over areas; AGM will implement the project forestry works related to establishment of industrial plantations, afforestation of degraded forest, erosion control, forest mainte- nance, protection and range improvement; ORKOY will be responsible for plan- ning the project village road component and range improvement works, and will be consulted on all matters relating to the project's involvement of forest villagers in forestry and extraction operations; and MPG will imple- ment environmental protection and wildlife breeding programs in the project area. 43. Project coordination will be carried out by a Forestry Planning and Project Monitoring Unit (FPMU) to be formed by strengthening MOF's existing Planning Unit. FPMU will coordinate the preparation of annual work programs for each forestry conservancy, assess physical progress, prepare quarterly reports for submission to the Bank on project status, and identify and help resolve project bottlenecks in consultation with the implementing general directorates. The annual work programs will be submitted to the Bank for its review and comment by mid-August of the year preceding implementation of the annual program (Loan Agreement, Section 3.05). To carry out this function FPMU's staff will be increased to at least 12 full-time professional staff by December 31, 1978. It is expected that these positions will be filled mainly by experienced forest engineers to be assigned from the existing Planning Unit and the four implementing general directorates. Written assurance has been obtained that FPMU will also be provided with five vehicles by September 30, 1979, to facilitate its monitoring work in the field. 44. To ensure achievement of project production targets, current man- agement plans for Project Area forests will be revised to introduce intensive forestry management techniques, including shorter rotations and reforestation with fast-growing species. This revision, which will cover all of the high productive forest in the Project Area, totalling about 5 million ha, will be carried out through the establishment of at least 30 management planning teams in the project area by no later than September 30, 1980 (Loan Agreement, Section 3.06).  - 16 - 45. To assist MOF to intensify forestry management and improve techniques, project provides for 144 man-months of overseas training fellowships for MOF personnel in various aspects of forestry management and extraction and 12 man years of expatriate technical consultant assistance, particularly in the fields of management planning, organization, administration of workshop opera- tions and industrial plantations, and conservation and environmental protec- tion, at an estimated cost of about $5,600 per man-month. The Government has also agreed to employ internationally recruited technical specialists to assist in carrying out the project (Loan Agreement, Section 3.01(c)), and written assurance has been obtained that these specialists will be hired by December 31, 1978. Markets 46. At project completion in 1985, Turkey's annual consumption of indus- trial roundwood is projected at 14 million m3 on the basis of detailed market analyses contained in the FAO/UNDP feasibility studies. The entire project output of industrial roundwood at full development, totaling 10 million m3, is expected to be consumed domestically by existing industries, or by new indus- tries under construction or in the planning stage, for which some 40 private and public feasibility studies have been completed and have received prelimi- nary approval of the Government. ORUS sawmills are expected to provide a major market, and ORUS and OGM periodically consult each other to ensure effective planning of wood production targets to meet ORUS raw material requirements. Close OGM liaison is also maintained with SEKA concerning pulpwood require- ments for existing and planned pulp and paper mills, and written assurance was obtained that the annual work programs submitted to the Bank (para. 43 above) will include a forecast of requirements for wood supply for each of the major user categories, including ORUS and SEKA. Procurement and Disbursement 47. Equipment and machinery totalling about $85 million will be bulked and tendered subject to international competitive bidding in accordance with the Bank Group's "Guidelines for Procurement." As an exception to this, items estimated to cost less than $50,000 may be procured on the basis of quota- tions from three suppliers, up to a total limit of $500,000. Goods manufac- tured in Turkey will be granted a margin of preference in accordance with Bank procedures. The Government will issue import licenses promptly to all suc- cessful bidders for goods put to international competitive bidding (Loan Agreement, Section 3.02(c)). As mentioned above (paras. 40-41), $230.5 million equivalent in indirect foreign exchange costs, largely representing the cost of imported components of Turkish-manufactured equipment reserved for procure- ment in Turkey, will be financed from the Government's own resources in line with the project schedule, and written assurances to this effect have been obtained. 48. The Bank loan would be disbursed against 100 percent of the foreign exchange expenditures on imported machinery and equipment and foreign consul- tants and overseas training of Turkish staff as well as 100 percent of the  - 17 - ex-factory cost of locally manufactured equipment if awarded after inter- national competitive bidding. To achieve the proposed implementation schedule it will be essential to acquire a substantial amount of road construction and other equipment in the first year of the project. Arrangements were therefore made with the VAO/IBRD Cooperative Program and the MOF to prepare equipment specifications and bidding documents during February, 1978, with a view to expediting preparations for award of procurement contracts. Benefits and Risks 49. The economic rate of return, based on a 20-year life, and not taking into account the full benefits of industrial plantations, protection against fire, disease, illegal exploitation, nor the benefits which are difficult to quantify, including land conservation, village roads and range improvements, is estimated to be 76 percent. The unusually high estimated return reflects the project's large sunk costs. Not only has much of the infrastructure been developed in the form of major roads, depots, administrative buildings, and forestry extraction and management techniques, but the standing forest can be immediately exploited under sound management without depleting the national stock. Therefore, this is one of those unusual projects which will start providing a financial return in its very first year of operation. Sensitivity analyses indicate that, with either a reduction in roundwood prices or in incremental production by 20 percent or an increase in all costs by 20 percent, the economic rate of return would fall to 43-49 percent. If implementation is prolonged by four years, the rate of return is reduced to 70 percent. 50. The proposed project would help increase industrial roundwood pro- duction in the project area from 6.0 to 10 million m3. Gross revenue is expected to rise from about TL 9.6 million to TL 11.4 million, and MOF's net income from TL 1.4 million to TL 2.1 million in the second year after full development. Based on incremental output attributed to the project, the financial rate of return is about 70 percent. At full development, total incremental benefits are estimated at about TL 4.0 billion. In addition, industrial roundwood is expected to substitute for potential imports of both roundwood and forest manufactures estimated at more than $500 million per annum. Other benefits, which cannot be quantified, would result from range improvement, erosion contWrol and forest protection activities. The project would also extend to Turkey's most important forest region the development of MOF's forest management capabilities commenced under the Akdeniz project. 51. The proposed project may also be expected to yield additional bene- fits by 1985 to most of the 5 million low-income forest villagers who live in the Project Area, by providing an estimated TL 340 million annually in addi- tional wood sales tax revenues allocated to the ORKOY Forest Village Develop- ment Program. It will aLso decrease isolation from markets and employment by the construction of village roads. The logging season, at present limited by the lack of all-weather roads to the dry summer perind .-f S0-160 days, will be extended to 175-225 days into otherwise slack seasons, thus increasing forest employment by about 75 percent, or at least 165,000 forest workers,  - 18 - which is about 8 percent of the labor force in the Project Area. In addition, road construction would provide an average of 65,800 man-years of employment annually during implementation. 52. The project faces no special risks, although given the large size of the Project Area and the very large road construction targets, some slip- page in project implementation and achievement of production targets could result. However, all four implementing general directorates have satisfactory records in implementing large-scale forestry extraction and management pro- grams, and no major problems are anticipated. PART V - LEGAL INSTRUMENTS AND AUTHORITY 53. The draft Loan Agreement between the Republic of Turkey and the Bank, and the report of the Committee provided for in Article II, Section 4(iii) of the Articles of Agreement, are being distributed separately to the Executive Directors. Features of special interest are referred to in appropriate para- graphs of this report and summarized in Annex III. 54. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATIONS 55. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments May 12, 1978 Washington, D.C.  TABLE 3A ANNEX I TURKEY - SOCIAL INDICATORS DATA SHEET Page lof 21 LAND '-EA (THOU KM2) TURKEY REFERENCE COUNTRIES (1970) TOTAL 780.6 MOST RECENT AGRIC. 55z).4 1960 1970 ESTIMATE COLOMBIA IRAN ITALY** GNP PER CAPITA (USS) 270.0* 500.0* 990.0* 350.0* 670.0* 1910.0* POPULATION AND VITAL STATISTICS _______________________________ POPULATION (MID-YR. MILLION) 27.8 35.6 41.2 20.6 29.0 53.7 POPULATION DENSITY PER SQUARE KM. 35.0 46.0 53.0 18.0 18.0 178.0 PER So. KM. AGRICULTURAL LAND 52.0 65.0 74.0 93.0 107.0 266.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 44.8 40.6 39.4 44.3/a 45.9 18.6 CRUDE DEATH RATE (/THOU.AV) 16.9 14.4 12.5 11.0 18.5 9.7 INFANT MORTALITY RATE (/THOU) 187.0/a,b153.0/a 70-0/b 140.0 29.6 LIFE EXPECTANCY AT BIRTH (YRS) 49.3 54.4 56.9 58.5 48.8 71.9 GROSS REPRODUCTION RATE 2.9 2.6/b,c 2.3 3.2 3.4 1.3 POPULATION GROWTH RATE (%) TOTAL 3.0 2.5 2.5 2.9 3.1 0.8 URBAN 5.1 /a 4.9/d 4.2 5.5/c 4.8 0.8 URBAN POPULATION (% OF TOTAL) 31.9 38.7 42.6 60.3 41.0 51.5 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 41.3 41'7 41.7 46.6 46.0/a 24.4 15 TO 64 YEARS 55.2 54.0 53.9 50.4 50.071 65.2 65 YEARS AND OVER 3.5 4.3 4.4 3.0 4.0Th 10.4 AGE DEPENDENCY RATIO 0.8 0.9 0.8 1.0 1.o/a 0.5 ECONOMIC DEPENDENCY RATIO 1.0 1.1le 1.2 /a 1.6/d 1-9/a -.9/a FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) .. .. 306.9 662.4 USERS (% OF MARRIED WOMEN) 5.3 8.2 .. .. 10.0 EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 13000.0/c14000.0/f16400.0/b 6200.0 8700.0 19600.0 LABOR FORCE IN AGRICULTURE tX) 71.7 63.4 52.5/c 39.0 43.0 19.0 UNEMPLOYED (x OF LABOR FORCE) 9.7/d 11.9/& 13.37w 7.0 2.1 3.1 INCOME DISTRIBUTION X OF PRIVATE INCOME RECOD BY- HIGHEST 5X OF HOUSEHOLDS 33.o/e f 32.8 28.0/e 3'.9 /e 29.7 /b HIGHEST 20% OF HOUSEHOLDS 61. o7te 60.61k 56. e 60.1 7e 54.47. LOWEST 20% OF HOUSEHOLDS 4.2 e 2.97V 3 5 40T LOWEST 40% OF HOUSEIJLDS 10 5 35 10.1 12.7 1 10.b.5,t ".~~ 10.111 127 7e DISTRIBUTION OF LAND OWNERSHIP ______________________________ % OWNED BY TOP 10% OF OWNERS .. 39.0 /l .. % OWNED BY SMALLEST 10% OWNERS 0.7 T/ HEALTH AND NUTRITION POPULATION PER PHYSICIAN 3220.0!& 2250.0 1880.0 2110.0 3300.0 550.0 POPULATION PER NURSING PERSON 3260.0/hi 1770.0 1 1140.0 /f *- 3230.0 470.0/b POPULATION PER HOSPITAL BED 650.0 500.0 470.0 430.0 780.0 90.0- PER CAPITA SUPPLY OF - CALORIES I% OF REQUIREMENTS) 110.0 112.0 113.0 92.0 90.0 126.0 PROTEIN (GRAMS PER DAY) 753 78.0 76.0 51.0 53.0 100.0 -OF WHICH ANIMAL AND PULSE .. 22.0/k 24.7 29.0/f 14.0/c 42.0 DEATH RATE (/THOU) AGES 1-4 16.0/e 14.7/1 .. 8.4 *- 1.0 EDUCATION ADUUSTED ENROLLMENT RATIO PRIMARY SCHOOL 75.0 109.0 108.0 100.0 83.0 110.0 SECONDARY SCHOOL 14.0 28.0 30.0 23.0 26.0 60.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 11.0 11.0 11.0 11.0 12.0 13.0 VOCATIONAL ENROLLMENT (% OF SECONDARY) 18.0 14.0 15.0 20.0 3.0 26.0 ADULT LITERACY RATE IX) 40.0/i 55.0/m .. 73.0 .. 97.0 HOUSING PERSONS PER POOM (URBAN) 2.0 1.9 .. .. 2.2/a,d OCCUPIED DWELLINGS WITHOUT PIPED WATER (IX 81.0 66.0 52.0 .. 87.0/a,e ACCESS TO ELECTRICITY (% OF ALL DWELLINGS) 29.0 40.0 57.0 .. 25.0/a RURAL DWELLINGS CONNECTED TO ELECTRICITY IX) 2.0 18.0 *- *- 4.0/a CONSUMPTION RADIO RECEIVERS (PER THOU POP) 49.0 89.0 107.0 105.0 93.0 218.0 PASSENGER CARS (PER THOU POP) 2.0 4.0 8.0 11.0 10.0 190.0 ELECTRICITY (KWH/YR PER CAP) 102.0 247.0 400.0 414.0 246.0 2262.0 NEWSPRINT (KG/YR PER CAP) 0.8 0.7 2.3 2.7 0.4 5.3 SEE NOTES AND DEFINITIONS ON REVERSE  Paes 2 of 2 1 t;olo- otttnr,ato .totd, data for 1960 refer to any year between 1959 and 1961, for 19-70 between 1969 end 1971, end for Most Recent Estinats between ZP pen capita date eve hose.d on the fonld Bank Atlas methodology (1974-76 basis). Thtln- rrantegy of Torkieb plannIng corrently give. tha 1970 level of Italy as its objective. lIhEEl m