Colombia - Highway Sector Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. P-3241-CO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS. ON A PROPOSED LOAN TO THE FONDO VIAL NACIONAL WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA FOR THE HIGHWAY SECTOR PROJECT March 15, 1982 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 = Peso(Col$) Average Calendar 1980 Average Calendar 1981 US$1 = Col$47.280 US$1 - Col$54.414 Col$l = US$0.02115 Col$1 - US$0.01838 WEIGHTS AND MEASURES Metric System GLOSSARY OF ABBREVIATIONS CNR Colombian National Railways COLPUERTOS Colombian Port Authority DNP National Planning Department DRI Integrated Rural Development Program FNCV National Rural Roads Fund FVN National Highway Fund IDB Inter-American Development Bank INTRA National Transport Institute MOPT Ministry of Public Works and Transportation OED Operations Evaluation Department PAN National Nutrition Program PIN National Integration Plan SENA National Apprenticeship Training Service UNDP United Nations Development Program FISCAL YEAR January 1 to December 31  FOR OFFICIAL USE ONLY COLOMBIA HIGHWAY SECTOR PROJECT LOAN AND PROJECT SUMMARY Borrower: Fondo Vial Nacional Guarantor: Republic of Colombia Amount: US$152.3 million equivalent Terms: Repayment in 17 years, including four years of grace at 11.6% interest per annum. Project Description: The project is a highway sector operation, supporting the Government's 1982-86 Highway Development Program, which fos- ters economic growth and regional decentralization of produc- tive activity, the adoption of minimum cost transport solu- tions over the medium term, complemented by a cohesive trans- port policy and regulatory framework as well as adequate financing. The project would also assist in strengthening the local contracting industry, particularly in its efforts to recover from the prolonged slump in construction activity du- ring the 1970s. The proposed Bank loan would finance about 7% equivalent of the cost of the program, which in turn, would correspond to 15.6% of the estimated foreign exchange cost. The items that would be financed under the loan include: (a) rehabilitation, paving and new construction contracts; (b) maintenance equipment; (c) studies; and (d) technical assistance. The project faces no unusual risks from an economic or financial viewpoint. The Government's commitment to the project, together with the strengthening of the Ministry of Public Works and Transport/FVN and the safeguards incorporated into the project make it reasonable to expect that the project will be carried out as proposed. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Estimated Cost 1982-1986 Program Local Foreign Total --(US$ million equivalent)-- Project Costs: Highway Capital Costs Rehabilitation and Paving 403.1 403.2 806.3 New Construction 149.5 149.6 299.1 Equipment - 63.9 63.9 Road Safety Program 9.7 16.7 26.4 Training 2.2 1.0 3.2 Studies 23.4 7.8 31.2 Total Project Costs 587.9 642.2 1,230.1 Other Program Costs: Recurrent Costs: Maintenance 539.7 123.1 662.8 Administration 145.3 - 145.3 Other (Inland Waterways, Bridges) 81.1 99.0 180.1 Debt Service - 110.9 110.9 Total 1982-86 Program 1,354.0 975.2 2,329.2 Front End Fee on Bank Loan - 2.3 2.3 Total 1,354.0 977.5 2,331.5 Total Financing Requirements: Fondo Vial Nacional Gasoline Tax Revenues 1,180.2 502.8 1,683.0 Cofinancing - 216.5 216.5 Government Appropriations, Transfers and Tolls 173.8 105.9 279.7 Sub-Total 1,354.0 825.2 2,179.2 Proposed Bank Loan - 152.3 152.3 Total 1,354.0 977.5 2,331.5 Estimated Disbursements: FY83 FY84 FY85 FY86 ------(US$ million equivalent)---- Annual 28.3 42.0 52.0 30.0 Cumulative 28.3 70.3 122.3 152.3 Rate of Return: Minimum of 12% but in practice higher. Appraisal Report: Report No. 3656b-CO, March 10, 1982  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE FONDO VIAL NACIONAL WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA FOR THE HIGHWAY SECTOR PROJECT 1. I submit the following report and recommendation on a proposed loan to the Fondo Vial Nacional, with the guarantee of the Republic of Colombia, for the equivalent of US$152.3 million to help finance the Highway Sector Project. The Bank will finance the front end fee of US$2.3 million. The loan would have a term of 17 years, including four years of grace, with interest at 11.6% per annum. PART I - THE ECONOMY _i 2. An Economic Report on Colombia (3556-CO) was distributed to the Executive Directors in September 1981. This section on the 3conomy reflects the major findings of this report. Country data sheets are presented in Annex 1. Background 3. The Colombian economy has become more resilient to external shocks as a result of the structural changes that have occurred over the past 30 years. Rapid economic growth has resulted in a substantial structural trans- formation of the country from a predominantly rural and self-contained eco- nomy to a more diversified urban, industrial, services and open economy. Colombia has reached a point where population pressure on land no longer increases much, if at all. Public sector investment and output now play a greater role, primarily as a result of increased activity on the part of decentralized agencies and public enterprises. Also, greater emphasis on foreign trade has allowed the external sector to grow with non-coffee exports, particularly exports of manufactured goods, expanding rapidly and the range of products sold abroad widening considerably. The growing urban- industrial-services oriented economic activity and a rapid expansion of sur- plus labor in rural areas attracted by higher wages and better services in the cities have given rise to rapid rural-urban migration. This phenomenon, together with the increased participation of women in the labor force, has been instrumental in reducing poverty and improving income and distribution over time. Financial and capital markets have evolved pari-passu with the growing needs of the economy, and Colombia has become an active participant in international capital markets. 4. Real GDP per capita rose by 2.4% p.a. on average during the 1950-80 period, with each succeeding decade registering greater gains in per capita income. This was the result of lower population growth, combined with more 1/ Substantially unchanged from report for the Seventh Railway Project (No. P-3192-CO, January 27, 1982).  -2- rapid GDP growth. Population growth, which had remained in the 3.0% to 3.5% range during the 1950s and early 1960s, declined dramatically after 1965 as a consequence of a sharp fall in the fertility rate. Greater economic and edu- cational opportunities for women, rapid rural-urban migration, rising per capita income and increased effectiveness of family planning programs contri- buted to the decline in fertility. Colombia's population is currently grow- ing at an annual rate of 2.1%. As a result of the high proportion of women now entering childbearing years, this rate of population growth is likely to continue until the early 1990s. 5. The combination of rising per capita income and expanded public services has brought about a significant improvement in the welfare of the poorest, in both absolute and relative terms. As a result of increased sani- tation control, improved diets and better health care, the crude death rate fell by about 50% and life expectancy rose from 48 years in the early 1950s to 63 years currently. The child mortality rate declined from 20 per thou- sand in the early 1960s to 8 per thousand in the late 1970s. Infant morta- lity, one of the best indicators of welfare, fell to 65 per thousand in the later 1970s, from about 124 per thousand in the early 1950s. School enroll- ment ratios have increased substantially at all grade levels since 1960s, and by the late 1970s, 91% of urban children aged 7 to 14 were enrolled in school. The poorest income groups have experienced the greatest increases in electricity and water services in recent years and have benefitted more than the average of the population from services of the national health system. In spite of this progress, Colombia remains largely under-developed, with a relatively small modern sector superimposed on a broad, traditional and eco- nomically poor base. Development has been concentrated in relatively few areas of the country, public services are still not available to many of the rural and urban populations and unemployment and underemployment are rela- tively high. The coverage of health care and water supply requires conti- nuous improvement and adequate housing is not available to a substantial pro- portion of the population. Rapid migration to the large and medium-sized cities has created urban development problems, with attendant social diffi- culties. Moreover, in spite of the steady increase in per capita income over the past 30 years, substantial efforts are still required to improve and ext- end the benefits of development to the poorest income groups. 6. In large part, the achievements of the past thirty years were the results of government efforts to stimulate the productive sectors, provide the required economic and social infrastructure and establish an effective institutional base in the economy. In the 1950s and early 1960s, development policy favored import substitution supported by high tariff protection and the provision of economic infrastructure by the public sector. It was during this period that the country's major communication and transportation net- works were developed and the transformation to a semi-industrial economic structure began in earnest. By the mid-1960s, the prospects for further import substitution were substantially diminished and the country was confronted with great economic uncertainty, arising from the fact that economic activity and the balance of payments were heavily influenced by developments in the world coffee market. In order to ease this constraint, during 1967 the authorities adopted an outward-looking development strategy, expanding and diversifying exports and, among the export markets, increas- ingly tapping the Andean Group countries. Export promotion policies, includ- ing frequent exchange rate devaluations, export tax rebates and other export  incentives were introduced and the authorities began lowering tariffs some- what and freeing capital markets from controls as means of raising efficiency and increasing the competitiveness of Colombian goods in external markets. These measures were highly successful in relieving the foreign exchange con- straint and stimulating growth and employment. However, by mid-1970s the economy was once again experiencing difficulties caused primarily by the world recession and by excessive Central Bank financing of domestic budget deficits. Recent Economic Development 7. In late 1974, the Government introduced a wide range of fiscal and monetary policies designed to correct the structural and policy weaknesses prevailing in the economy at that time. Before these reforms were fully effective, the economy was subjected to strong inflationary pressures arising from a sharp increase in world coffee prices. The increased receipts from coffee exports, together with some official surrender of foreign exchange from illegal exports, caused a turnabout in the balance of payments. Incomes rose rapidly and stimulated aggregate demand; inflation accelerated. Econo- mic growth also accelerated and unemployment fell substantially, both in rural and urban areas. Largely as a consequence of increased coffee tax revenues, the public finances generated surpluses averaging about 7% of GDP during the 1976-79 period, and by the end of 1979, net official international reserves had risen to about US$4.1 billion, equivalent to nearly 12 months imports of goods and non-factor services. 8. While beneficial in many respects, the foreign exchange boom has had a somewhat negative impact on the evolution of the Colombian economy, largely as a consequence of the need for measures to stabilize the economy. Public investment was curbed, thereby delaying some badly needed additions to economic and social infrastructure. The rate of currency devaluation was slowed and the conversion of export receipts into pesos was delayed to mode- rate the growth of domestic demand, with adverse effects on export expansion and diversification. Also, the Government was compelled to maintain high reserve requirements and expand controls over credit thereby reducing, in real terms, the financing available to the private sector via the official capital market. 9. The stabilization measures were virtually unchanged from early 1977 through 1979 but were partially successful in restraining aggregate demand growth; thus relatively high inflation persisted. In response to the increasing stabilizing effects on aggregate demand and the troublesome finan- cial market distortions caused by inflation and the extended period of mone- tary restraint, the authorities began in late 1979 to adjust the stabiliza- tion program. The rate of peso devaluation was advanced to increase export incentives and reduce borrowing abroad, and in early 1980, credit restraints were relaxed by lowering reserve requirements. At the same time, interest rates on time deposits captured by commercial banks and development finance companies -- and on the lending therefrom -- were freed from controls. To offset the inflationary effects of these measures the authorities further liberalized import payments and adopted the policy, supported by the emission of new short-term certificates, of not expanding the subsidized selective credit operations of the Central Bank in excess of the resources captured from private savings for this purpose. The authorities also increased the  -4- surveillance and control of the illegal export trade. The effects of the above measures were not immediately noticeable. Real GDP growth declined to 4% in 1980, unemployment started to creep up, and inflationary pressures con- tinued. 10. In 1981, manufacturing activity has remained sluggish, hemmed in by the slow growth in aggregate consumer demand, and limited by power shortages during most of the year. Coffee exports have fallen as a result of reduced world demand and declining prices while non-coffee export growth has weaken- ed. On a more positive note, construction activity, which had fallen sharply in 1979-80, began to recuperate toward the end of the year. In response to favorable price incentives, petroleum production is estimated to have increased by over 5% in 1981. Agricultural output has registered some gains despite decreases in the area planted resulting from a prolonged drought. Both public and private investment have expanded rapidly. Real GDP growth is estimated to have reached 3-4% in 1981. Inflation continued to be a problem in 1981, however, with consumer prices increasing by about 27% for the year. Despite world coffee prices at relatively low levels for most of the year, Colombia's balance of payments continued to remain strong, with net official reserves maintained at about one year of imports of goods and non-factor services. Development Strategy 11. Achievement in this decade of the Government's objectives of increased productivity and maximum economic growth, increased employment, improved distribution of income and greater welfare for all Colombians will require a major effort to remove from the economy the constraints of inade- quate economic and social infrastructure and insufficient demand. Infras- tructure needs are most pressing in the energy, transportation, and agricul- ture sector. 12. The Government's strategy for accomplishing its development objec- tives are set forth in the recently formulated Plan de Integracion Nacional (PIN). This strategy continues the previous emphasis on export promotion as a means of supplementing domestic demand and assuring balance of payments stability, and on policy measures, including further import liberalization, designed to increase economic efficiency and raise institutional capacity. It proposes a large increase in public investment, giving high priority to energy projects and to the provision of transport infrastructure. Economic decentralization, regional autonomy and the uniting of regional growth centers through improved transport, communication and financial links are directed towards creating an integrated national market, a strategic goal of the PIN. The Plan also places emphasis on the promotion of both small scale and commercial agriculture as a means of diversifying and increasing exports, assuring adequate domestic food supplies, holding down inflation and contrib- uting to the Government's nutrition and welfare goals. Industrial policy objectives are to provide an environment of certainty, along with adequate credit and infrastructure, so that entrepreneurs are encouraged to invest and expand output. Because of its benefits in opening foreign markets, creating employment and bringing in new technology, private foreign investment is to be encouraged. The Government's approach to helping the poor takes on a new orientation in the PIN. Its efforts are focussed upon improving efficiency in the use of resources and strengthening the social service institutions.  -5- Programs in the health and education sectors are to be better focussed and integrated, and selected low income and disadvantaged groups, such as workers in the informal sector, children and unemployed youth, are singled out for special attention. Combined with extensions of the Integrated Rural Develop- ment (DRI) and National Nutrition (PAN) programs, the new directions given to social programs are expected to raise significantly the welfare of low income groups in Colombia. 13. While the PIN provides a good analysis of the development issues facing the country and sets forth the general guidelines for policies and programs to resolve these issues, there are two important aspects of bringing off the development strategy that are expected to receive increasing atten- tion from the authorities in coming months. The first involves a required deepening of the sector analyses in order to improve coordination in planning and execution sector strategies, and the second has to do with matters rela- ted to financing the PIN. Given the large investment required to carry out the PIN strategy, inadequate planning and coordination among sectors or insufficient domestic resource mobilization would be likely to result in sub- stantial resource misallocation and to delay execution of the strategy. The two most important sectors where additional work is urgently required are energy and transportation. 14. Colombia became a net oil importer in 1976 and by 1985 petroleum imports are projected to absorb about 20% of total merchandise exports. In the absence of rapid energy development, energy shortages will become a major constraint on growth later in this decade. Resolution of the energy problem depends on the country's success in developing its abundant domestic energy resources -- hydroelectricity, coal and natural gas -- and also upon increas- ing petroleum exploration and development. The strategy for doing this will require energy pricing policies that rationalize consumption with energy resource availabilities, a least cost program of investments, sufficient domestic and external financing for these investments, strengthened sector institutions, improved program execution capability and rapid carrying out of investments. Although planning and policy making have improved substantially in many energy sector institutions in recent years, overall planning and coordination in the sector is still weak. A study about to be completed by the National Planning Department is expected to provide the basis for improvements in sector-wide planning and policy-making, and recent pricing decisions have gone a considerable way towards providing the correct signals for regulating consumption and encouraging production. The prices paid to producers (primarily foreign companies) for "incremental" and "new" crude have been raised to levels which provide adequate production incentives, and the retail prices of petroleum products have been increased substantially in recent years, which on the whole reflect international levels. 15. Colombia's high transportation costs and inadequate services could become a constraint on economic growth, affecting particularly the develop- ment of the country's vast coal reserves and agriculture. The State Railway is in poor condition and the road network needs maintenance and rehabilita- tion. The authorities have begun to take steps to improve the country's infrastructure and PIN assigns an important share of future investments to the sector. An important part of this effort is the recently approved Rural Roads, and Railway Rehabilitation Projects. The proposed Highway Sector Project addresses the need for more efficient planning to insure that only  least-cost investments are carried out and that a sound policy framework for the sector is established to deal effectively with the problems of intermodal coordination and energy conservation in line with the Government's objec- tives. Investment and Its Financing 16. A substantial increase and redirection of public sector investment will be required in the next several years to carry out the development stra- tegy outlined in the PIN . Over the 1981-85 period, such investment is expected to increase by about 15% p.a. in real terms. The energy and trans- portation sectors are expected to account for the bulk (59.5%) of this investment; however, sizeable real increases in investment are also expected in the nutrition and health, small scale agriculture and industry (including mining), water and sewerage, and education sectors. Overall, public fixed investment is projected to average 8.4% of GDP during the 1981-85 period, and is expected to total Col$1,603 billion (about US$20.5 billion). Private investment will have to increase also during this period to provide the goods and services required by the expanding economy. 17. This increase in investment will demand a major resource mobiliza- tion effort on the part of Colombia's public sector. The buoyancy of the tax system (excluding coffee tax revenues and receipts from earnings on foreign exchange holdings), which has declined in recent years, will have to be increased through new taxes and better tax administration, resources will have to be used more efficiently, and the charges levied for public services will have to be raised substantially in real terms. Since this effort is expected to coincide with increased private sector demand for investment resources, the importance of measures to expand domestic savings cannot be over-stressed. The recent capital market liberalization should encourage savings. A significant increase in voluntary private savings is not likely, however, as long as inflation remains high. Consequently, stabilization remains a sine qua non for the country's future growth and development. Growth and Balance of Payments Prospects 18. Given the country's strong resource base and sound economic manage- ment, Colombia's growth prospects for this decade are good and significant advances in economic welfare are expected. The urgent need to relieve the pressure on aggregate demand arising from the growth of foreign exchange earnings and the necessity to increase rapidly imports to develop the coun- try's resource potential and restore higher economic growth requires a shift in the balance of payments from a small current account deficit of US$195 million registered in 1980 to a current account deficit projected to average US$1,865 million, over the 1981-85 period. By the end of this period, net official international reserves would have fallen to a level slightly over four months of imports of goods and non-factor services (a level which is adequate for Colombia) without prejudice to the country's creditworthiness. This should be sufficient to support an average growth of real GDP of 5.5% during this period. Beyond 1985, the current account deficit should improve as a result of increasing export proceeds (particularly from coal) and a levelling-off of imports. The current account deficit would fall to about 2% of GDP in 1987 and turn into a surplus of less than 1% by 1990. To achieve real GDP growth of 5.5% per annum, gross domestic investment will have to  - 7 - expand to about 25% of GDP, up from 18% in the early 1970s and 20% in recent years, and to avoid too large an increase in foreign indebtedness, gross national savings would need to average about 22% of GDP. 19. Gross external capital requirements (net of reserve drawdown) are projected to total US$10.3 billion in current prices for the 1981-85 period, for an annual average requirement of US$2,057 million. About 26% of this amount will be required annually for debt amortization and the rest to cover current account deficits. Multilateral and bilateral agencies are expected to provide 33% of these requirements, 50% is expected to come from foreign suppliers and financial institutions and the balance should come from private foreign investment. At the end of 1980, Colombia's public and publicly gua- ranteed external debt disbursed and outstanding amounted to US$4.3 billion, equivalent to 13% of GDP. The Bank/IDA share of this external debt was 25%. Reflecting the recently increased lending by the Bank and the decline by bilateral sources, this share is expected to increase to about 29% in 1983, before falling to about 25% in 1986. The debt service ratio at the end of 1980 was 10% and is expected to climb to 17% by 1985, peak at about 20% in 1988 and then decline gradually. The World Bank's share in public debt ser- vice is expected to rise to about 26% in 1985 from about 25% in 1980. With continued sound economic and financial management, Colombia is expected to maintain its creditworthiness through and beyond the 1981-1990 period. PART II - BANK GROUP OPERATIONS IN COLOMBIA 20. The proposed loan, the 96th to be made to Colombia, would bring the total amount of Bank loans to Colombia to US$3,490.9 million (net of cancel- lations). Of this amount the Bank held, as of September 30, 1981, US$2,687.5 million: IDA made one credit of US$19.5 million for highways in 1961. Dis- bursements have been completed on 57 loans and the IDA credit. During 1972- 77 disbursements averaged US$86 million equivalent per year, then declined slightly to US$82 million in 1978 but increased sharply to US$215 million in 1980 and US$249 million in 1981. The gradually improving performance of social sector institutions in the execution of Bank-financed projects, the gradual containment of inflationary pressures, which should allow relaxation of fiscal restraint, and increased Bank lending for infrastructure projects, all point to higher level of disbursements in the future. IFC has made investments and underwriting commitments of US$78.7 million in 26 enterprises and, as of September 30, 1981, it held US$23.2 million. Annex II contains a summary statement of Bank loans, the IDA credit and IFC investments as of September 30, 1981 and a brief report on the status of the 36 ongoing projects. 21. During the past 16 years, Bank lending to Colombia has become more diversified. While before 1966, 22 loans out of a total of 25 loans made to Colombia were for power and transport projects, only 19 have been made to these sectors since then from a total of 67 loans. In addition, all three loans for education, 12 of the 14 loans for industry, 13 of the 15 agricul- tural loans, one loan for nutrition, two loans for urban development and all nine loans for water supply and sewerage, were made after 1966. The diversi- fication was indeed a desirable aim as it provided closer contact with Colombia's development problems. The experience gained has served to iden-  - 8 - tify areas in which the Bank's role can only be a marginal one and, thus, to enable lending to be focussed upon sectors in which the Bank's presence can have a meaningful impact. 22. Bank lending to Colombia in FY81 consisted of two loans for power generation and distribution projects, and one each for rural roads, irriga- tion rehabilitation and village electrification totalling US$550 million equivalent. In addition to the loan presented in this report and the ones recently approved for railways and watershed management, the FY82 program includes proposed loans for integrated rural development and rural educa- tion. Work is also under way on projects for petroleum development, mining, oil refining, electric power, agricultural credit, agro-industries, ferti- lizers, water supply and sewerage, ports and small-scale industry for pos- sible consideration by the Executive Directors during the next two years. 23. The proposed Bank lending conforms closely with the Government's development strategy as outlined in the PIN (paragraph 12 through 15). To help Colombia develop renewable sources of energy, a sizeable part of the proposed lending would be for hydropower. The Bank intends to assist in the development of coal mines which hold potential to help Colombia meet part of its energy requirements and in diversifying exports. In support of the Government's objective to increase the supply of domestic petroleum, the Bank plans to finance further petroleum projects as a complement to investments of private firms and, for the first time, become involved in projects which pro- mote the efficient processing of hydrocarbons. Bank financing in the energy sector would also assist in strengthening major institutions and in mobi- lizing external finance as most of the projects would require substantial co-financing. Other future loans would finance agriculture and industry to support the Government in its efforts to raise overall productivity, income and employment, and to increase and diversify exports. Closely related to these objectives would be Bank lending for infrastructure, including the pro- posed Highway Sector Project that would facilitate the increasing inter- regional flows of goods and services. A port project under preparation is aimed at enabling Colombia to handle larger volumes of non-traditional exports and the imported inputs on which the modern sector of its economy relies for expansion. To permit efficient movement between inland points and the ports of bulk cargo, particularly coal and agricultural exports, a Seventh Railway Project to reshape and modernize railway infrastructure was recently approved by the Board. Finally, several loans are being prepared in support of the Government's efforts to help the lowest 50% of the Colombian population. Lending for rural electrification, rural development, agricul- tural credit, water supply and sewerage, irrigation and rural education proj- ects is principally designed to improve the standard of living of the poor. 24. The operations of external lenders in Colombia are shown in Annex I. While IBRD, IDB, and bilateral sources provided about 75% of total exter- nal financing to Colombia in the 1961-72 period, their share has decreased since then to approximately 63% for the 1975-80 period and is expected to decline further to about 30% of external capital requirements during 1981- 86. Like the Bank, IDB has given increased emphasis to energy-related proj- ects in addition to those for low-cost housing, urban and rural development, agrarian reform, university education, water supply, rural electrification and land erosion control. In the future, it proposes to assist Colombia in  - 9 - developing sources of domestic energy and in expanding productive sector activities to help generate increased employment. USAID has supported programs in education, urban development and small farm development, but is phasing out its program in Colombia. The Governments of Canada, the Federal Republic of Germany and the Netherlands have also provided concessional financing for basic needs and regional integration projects. PART III - THE TRANSPORT SECTOR Characteristics and Investment 25. Colombia's advantage of having coastlines on both the Pacific Ocean and the Caribbean Sea is offset by the difficulty of movement between the coasts and the interior. The three massive ranges of the Andes Mountains, running the length of two-thirds of the country, present formidable barriers to communication between the main areas of population which, until recently, developed as separate and isolated communities. In fact, the Magdalena River provided the only overland route between the Central Region and the Caribbean coast until the early 1960s and, even so, presented serious navigational problems during the dry season. At this time, the Atlantic Railroad, con- necting Bogota (the capital) and Medellin (the third largest city and one of the country's most important industrial and agricultural centers) with the Caribbean port of Santa Marta, the Eastern Road connecting Santa Marta, Bucaramanga, Bogota and Neiva, and the Western Road connecting Cartagena, Medellin, Cali and Pasto were completed. Although the development of road and rail transport has lessened the importance of inland waterway shipping, both the Magdalena and Cauca Rivers are navigable and account for almost all inland shipping. 26. The work to complete the basic transport infrastructure has required a considerable proportion of the country's total investment. Transport represented about half of Central Government investment in the late 1950s. When the trunk highway system and the Atlantic Railroad were being completed, it exceeded 60% of Central Government investment. More recently, however, transport's share has declined and since 1976 it has been about 12%. In 1980, Col$19,195 million (US$430 million equivalent) were invested in the transport sector of which 86% was allocated to roads, 7% to ports and inland navigation, 5% to airports and 2% to railways. Also in that year, the transport sector contributed 9.4% of GDP. About 22.5 billion ton-km of freight was transported; four-fifths by road, and the balance by other modes. More than two-thirds of passenger traffic is carried by road. 27. The Colombian National Railways (CNR), a semi-autonomous agency, has a network of lines totalling 3,403 km (2,822 km currently in use) all single track and narrow gauge. Colombia's difficult terrain has proven a formidable foe of railway construction and maintenance. In recent years, CNR's plant capacity and operation have deteriorated and its traffic has declined, resulting in the need for increasing support from the National Treasury. In view of the energy crisis and the development of mining in Colombia, the Government is giving priority to the rehabilitation of CNR; the already mentioned Seventh Railway Project is supporting the first phase of this effort.  - 10 - 28. Aviation transport developed at an early date (1920) and has become a major mode of domestic and foreign travel. There are three national and eleven foreign airlines providing international service, and 10 additional, regularly-scheduled domestic carriers. Colombia has 70 airports, eight of which are equipped for international flights. 29. The country's principal seaports are Cartagena, Barranquilla and Santa Marta on the Atlantic Coast, and Buenaventura and Tumaco on the Pacific Coast. The ports move about 3 million tons of cargo per year, about half through Buenaventura. However, goods are not evacuated from the docks in a timely way because of unsatisfactory cargo-handling operations, labor diffi- culties, lack of inland storage facilities and deficient transport services. A faulty system of port charges also contributes to congestion, with unen- forced demurrage levies that, in any event, are too low to discourage unne- cessary storage. With UNDP financing and the Bank as executing agency, con- sultants and the Colombian Port Authority, COLPUERTOS, have studied port operations and containerization, and are considering possible corrective mea- sures. Highway Development and the Sector Approach 30. The Network. In the early 1950s, Colombia's highway system was an incomplete, skeletal one, with existing roads characterized by poor alignment and deterioration. Little more than a decade later, a trunk highway system had been virtually put into place. The country succeeded in this enormous endeavor, despite physical problems posed by unstable terrain and the strain on national budgetary resources and institutional capability, largely because of its determination to integrate isolated regions and to provide an overland route for foreign trade. Thereafter, feeder and penetration road construc- tion was accelerated to increase local community access to regional markets and to services. Together with national and regional programs to increase the coverage of water supply and electricity, small-scale industrial and ag- ricultural credit, and telecommunications, an important start was thus made toward the goal of national integration. 31. The priority accorded to road building during the 1950s and 1960s was not, however, accompanied by a lasting commitment to maintain the network because, during the 1970s, the authorities embarked upon an ambitious public expenditure program oriented toward the social sectors, partly at the expense of the infrastructure sectors. By 1976, for example, maintenance ex- penditures per kilometer had fallen to about half of the 1971 level in real terms. Although this trend has been reversed in recent years (paragraph 48), the effects of prior neglect are reflected in the highway authorities' having had to devote more than a third of its funds during 1978-80 to road rehabili- tation. At present, Colombia's 77,200 km network includes 23,100 km of na- tional highways (one-third of which is paved) under the jurisdiction of the Ministry of Public Works and Transport (MOPT), 40,400 km (2% paved) entrusted to autonomous departmental public works agencies and 11,400 km under the res- ponsibility of the National Feeder Roads Fund (FNCV), with the remaining 2,300 km private or municipal roads. 32. In addition to sustaining the priority now assigned to maintenance and rehabilitation works, Colombia is faced with the complex task of reshap- ing and upgrading the highway network to take account of a pronounced demo-  - 11 - graphic shift over the past 20 years and to support the coming leap in ex- port-oriented activities, particularly mining. With 70% of the population now residing in urban areas, reliable links among secondary and medium-size cities are needed to support the growth and distributive objectives in the national effort to decentralize economic activity away from the Bogota- Medellin-Cali axis. Moreover, the transport sector has not kept pace with the country's rapid structural transformation from an inward to an outward- looking economy, a change which will intensify even more in the coming years (paragraph 15). Deficiencies in the sector could impinge excessively upon export performance which, in turn, could affect the country's creditworthi- ness. To provide the infrastructure and transport services corresponding to the above considerations requires careful sectoral planning, coordination of services, and preservation of investments already made. While the Government has made progress on these fronts, it has been uneven. The proposed Sector Project would provide a medium for the comprehensive approach necessary to deal effectively with many of the complex, inter-dependent factors involved. Road Transport, Regulation and Traffic 33. The Colombian economy has become highly dependent upon the availa- bility of inter-city highways and road transport services and, as mentioned above, will become even more so in future. Over 18 billion ton-km of freight was moved by road in 1980, compared to 10 billion ton-km in 1970, represent- ing an average annual growth of about 7% which exceeds average GNP growth du- ring the period. 34. Of the estimated 655,000 motor vehicles in Colombia, roughly three-quarters are passenger vehicles, mainly automobiles. About 9% of Colombian families own cars today, twice more than in 1960. The rest of the vehicle fleet is trucks, which since 1973 have been increasing by 12% per annum compared with 7% for automobilies. Some years ago, only smaller trucks could negotiate the mountainous terrain on then-existing roads and, reflect- ing the age of the fleet as well as regulatory mechanisms (paragraph 35), this type of single-axle, gasoline powered vehicle still predominates. Nevertheless, the number of trucks with payloads over 12 tons has been in- creasing rapidly since 1976 and now accounts for one-third of total carrying capacity. Fleet capacity appears adequate for present demand but it will have to expand rapidly and services will have to be improved to keep pace with expected growth of productive activity in the coming years. 35. There are about 405 freight companies, representing about 60,000 trucks, licensed to provide services, and 617 passenger service companies, with an estimated 89,000 vehicles. The complex regulatory system governing these services has evolved over time in an effort to improve the industry's operations and enhance cargo security. Although in the past the system worked well, it now impinges unnecessarily upon industry growth and effi- ciency of services. In the context of the proposed project, the Colombian authorities will seek to improve it through a study of transport regulation and modal alternatives (paragraph 59d). 36. Traffic volumes on most paved roads are in the 1,200 to 2,400 vehicles-per-day range, except around the major urban centers of Bogota, Cali, and Medellin, where they may reach 7,000 vehicles per day. The average  - 12 - composition of traffic is about 35% automobiles, 15% buses and 50% trucks. The approximately 7,000 km of national highways upon which about 80% of traf- fic movements are concentrated have received priority in the Government's 1982-86 program of rehabilitation and upgrading. In addition, improvements in traffic management and road safety have also been planned, including more careful licensing of drivers, vehicle inspection and enforcement of traffic laws, as well as physical improvements in roads and signalling equipment, and training of traffic safety personnel (paragraph 56). Vehicle weighing sta- tions financed under the Seventh Highway Project (Loan 1471-CO) are to be placed in operation by December 31, 1983 and the Loan Agreement has been amended accordingly in the documentation for the proposed Highway Sector Pro- ject (Section 4.01 of the draft Guarantee Agreement). Financing of Highways and User Charges 37. Consistent with Government policy, most of the cost of constructing and maintaining the road network is recovered from road users. This is done primarily through a tax levied on gasoline and diesel fuels, which covers al- most 69% of the expenditures of the Ministry of Public Works and Transport (MOPT). 1/ The balance derives from Government transfers (11%), MOPT's own resources (6%) and external loans (14%). Contributions from the national budget to MOPT are essentially equivalent to road user charges collected directly by the Government (paragraph 38). Funds from all sources are channelled to MOPT through the National Highway Fund (FVN). FVN was created in 1966 for this purpose, is administered by MOPT and also provides funds from the fuel tax to FNCV and CNR for their operations. The Fund, together with the fuel tax legislation, has been instrumental in supporting recent efforts by MOPT to plan and carry out its programs in an orderly manner and in freeing the Ministry from costly delays in receiving funds to pay its contractors. This last-mentioned factor has been of considerable benefit to the local construction industry. 38. In addition to the fuel tax, there are several other taxes on road users, but the proceeds accrue to the national treasury and/or local govern- ments. The most important of these is the import duty on vehicles and spare parts. For automobiles, the duty varies from about 200% to 450% of c.i.f. value, depending on the type of vehicle. Import duties on trucks and pickups range between 70% and 200%. Annual license fees are collected by the munici- palities, who also levy a 20% surcharge on all vehicles weighing more than 1,400 kilograms (about 3,086 lbs). During negotiations, the Government con- firmed that road user charges would continue to be adjusted to produce sufficient funds to cover the cost of use by each category of user (Section 3.08 of the draft Guarantee Agreement). Transport Policy, Coordination and Planning 39. In addition to highways, MOPT is responsible for planning and coor- dinating all modes except air transport. The National Planning Department (DNP) supervises overall sector developments, must endorse investments pro- posed by MOPT before they can be carried out, and participates in the coordi- nation effort. 1/ The current price of gasoline and diesel fuels is about 95% of the international price.  - 13 - 40. In Colombia, past efforts to strengthen coordination of transport investments and services have had mixed results, in part because the sharp deterioration in railway services after 1974 (paragraph 27) precluded a se- rious effort. Over the last six years, however, there have been several im- provements. In 1976 modal coordination was centralized under MOPT's aegis, and in 1980 the Ministry's organizational set-up was modified to facilitate exercising its increasingly complex functions. Most notably, highway and sector planning were separated, with the establishment of a Sectoral Planning Office attached to the Minister's office and a Highway Planning Unit. Addi- tionally, a National Transport Council has recently been created to consider and advise MOPT on investment proposals and operational issues. The Council is chaired by the Vice-Minister of MOPT and includes representatives from the transport-related private sector and officials from each public sector mode. Further, in response to high energy costs and mining development plans, re- newed Government interest in the national railways, accompanied by a recently-initiated program to improve its infrastructure, services and finan- ces, is expected to open up more economical options for bulk commodity flows. For example, there are cost savings possibilities for long distance freight movements by combining road, rail and water transport services, in some cases entailing the setting up of intermediate storage facilities. Un- der the proposed project, means of developing complementary inter-modal ser- vices will be explored through a study (paragraph 59c) and its conclusions will be incorporated into the National Transport Plan (Sections 3.01(f) and 3.02(b) of the draft Loan Agreement). 41. In order for transport infrastructure and services to better serve the Colombian economy, sector policy would require firming up. Needed are overall sector development guidelines, explicit consideration of the energy implications of transport development options, improved pricing relative to costs and efficiency of services, sufficient and timely financing for operations and investments (paragraphs 27 and 37), and clarification of sector responsibilities at the various Governmental levels (paragraph 43). As stated, an important initial step towards this goal has been taken in PIN and in the different studies being carried out on ports, railways and domestic energy balance. Further, two years ago Colombia completed its first "in house" sector-wide planning exercise. The resulting National Transport Plan is a technically sound document which will provide a valuable blueprint for sector development once its focus is sharpened. In particular, the Government's commitment to adopting least-cost investment solutions, taking account of energy aspects and planned developments in other sectors, is not yet fully reflected in the Plan. This is expected to be achieved through further work and more regular updating of the document than has been the case in the past, with the first review to be completed by December 31, 1983 (Section 3.06 of the draft Guarantee Agreement). 42. With respect to pricing of transport services, trucking industry charges appear to be understated relative to costs. This is because road user charges applicable to trucks correspond to only 70% of the cost attribu- table to their use of the road network, thus giving road freight services a pricing advantage over railways on many routes. The Government is aware of the economic distortion this represents, particularly the effect on liquid hydrocarbon consumption, and will address it in a study of transport regula- tion (paragraphs 35 and 59d). Moreover, as mentioned, the Government has confirmed its commitment to maintain charges in line with costs (paragraph 38).  - 14 - Institutional Capability 43. As a result of careful reshaping of MOPT, its organization is well-suited to exercise its responsibilities. The Fondo Vial Nacional (FVN), an autonomous public entity, has been established as the financial and executing agency for MOPT's policies and programs. The Minister of MOPT is the legal representative of FVN and in its day to day operations, FVN shares the same staff and organizational structure as MOPT. The Ministry/FVN's senior personnel are experienced and capable. Middle managers have benefited from a recent road maintenance-oriented training program and the technical skills of field personnel have been strengthened, both activities financed under the Seventh Highway Project (1471-CO). Under the Program, these will be expanded to reach all remaining staff whose skills need reinforcement. At the same time, MOPT's own training capability is to be strengthened so that, in future, the Ministry will be able to attend to continuing staff training needs on its own (paragraph 56). In line with national policy, under its 1982-86 Highway Development Program the Ministry is to begin decentralizing road administration to departmental and municipal levels. It will establish a task force including representatives of MOPT, DNP, FNCV and the Departmen- tal public works agencies by March 1, 1983 to study the redistribution and provide the Bank with an opportunity to comment on the recommendations (Section 3.04a-c of the draft Guarantee Agreement). To be successful, it is essential that this be done with clear assignment of responsibilities, ade- quate financing arrangements, coordination of equipment and spare parts and sufficient skilled manpower, and these matters are being duly taken into account (paragraphs 54 and 59). Overall, MOPT has the capability needed to execute successfully the proposed Sector Project, as well as the disposition to take advantage of planned assistance. Engineering, Construction and Maintenance 44. Colombia's geometric design standards are well adapted to the coun- try's varied and difficult terrain. In addition to the standard range of geometric design, special standards have been developed under the Seventh Highway Project for handling the specific problem of upgrading roads. Fur- ther research on matching construction specifications to local conditions will be done (paragraph 57). MOPT has limited design capacity and uses con- sultants for this purpose. While the recent reorganization has increased the Ministry's engineering capability, it will continue to depend on consultants for most design work. The consulting profession is well established in Colombia. There are a number of capable Colombian engineering firms, most of which have benefitted greatly from their participation in foreign-financed projects in highways, power and other fields. 45. Modern methods of highway construction were first introduced to Colombia in the early 1950s, when experienced foreign contractors were em- ployed on the First Highway Project. There are now about 86 local firms, each capable of handling over US$1.5 million worth of road construction per year. Few foreign civil contractors are presently working in Colombia. A permanent register of firms, showing their technical and financing capacity, is maintained and updated annually by MOPT. Each firm's capability to under- take a particular contract is reviewed after presentation of bids. As a re- sult of several improvements introduced during 1977, MOPT has a strict and equitable basis for contracting. The Colombian construction industry, how-  - 15 - ever, has been affected by the sharp decline in road-building activity during most of the 1970s. With a view toward buttressing its efforts to cope with the faster rhythm of projects that lies ahead, management and professional training would be provided to the local construction industry in conjunction with the training of MOPT personnel, and the possibilities for improved access to financing would be explored (Section 4.01(e) and (d) of the draft Guarantee Agreement). 46. In connection with the Seventh Highway Project, MOPT has improved and expanded road rehabilitation and maintenance. Toward this end, Pavement and Equipment Management Systems have been developed to standardize these ac- tivities throughout the country (paragraph 54). A support team of four engi- neers will assist the Ministry's regional subdivisions in getting the Pave- ment System underway and monitoring progress. A similar team to help with the Equipment System, will be set up and by January 1, 1984, both systems would be initiated in all the subdivisions (Section 3.01 of the draft Guaran- tee Agreement). In addition, maintenance targets have been set and periodic maintenance of the paved network is to be increased through the use of con- tractors. It is expected that these measures will help to increase the an- nual length of paved roads resealed from 400 km in 1982 to 600 km by 1986 (Section 3.07(b) of the draft Guarantee Agreement). Past Bank Involvement in the Transport Sector and Lessons Learned 47. Since 1950, the Bank has lent a total of over US$400 million equiv- alent to Colombia's transport sector. Eight loans and one IDA credit total- ling US$258.6 million have assisted in the construction, upgrading and main- tenance of the trunk highway network, which connects the main population cen- ters of the country as well as the expansion of the rural road network. Two loans for US$40.9 million financed the construction of the Atlantic Railroad, from La Dorada, near Bogota, to Fundacion, near Santa Marta, a distance of 672 km. Four loans totalling US$78.7 million supported railway rehabilitation, including the acquisition of rolling stock for the Atlantic Railroad. A loan for US$77 million for the Seventh Railway Project will assist in rehabilitating the main line and strengthening the railway institution, CNR. A loan for US$61 million is helping finance the construction of a modern airport at Rio Negro, near Medellin, and improvements in the Cartagena and Bogota airports. Through the Rural Integrated Development Program (DRI), the Bank is financing the construction of additional rural roads and would enlarge the scope of this support under the proposed DRI II project to be considered by the Executive Directors during this fiscal year. 48. Five of the above-mentioned highway projects have been audited by the Operations Evaluation Department (OED) and the Sixth Highway Project (Loan 680-CO of June 1970) will be reviewed shortly. 1/ Overall these pro- jects were executed successfully, although with delays and cost overruns, and have contributed substantially to the integration and economic expansion of the country (24 road sections of the first three projects which were analyzed 1] "Bank Operations in Colombia: An Evaluation," Report No. Z-18, 1972 and "Project Performance Audit Report, Colombia: Fifth Highway Project (Loan 550-CO)," SecM78-152 of 1978.  - 16 - had an average rate of return in excess of 25%). Major difficulties under the earlier projects derived from the need to redesign some road sections and higher than estimated costs, as final engineering was not completed at appraisal. Subsequent projects have encountered problems in the slow avail- ability of counterpart funds, inadequate attention to maintenance, poor contract management and insufficient supervision. Substantial progress has been made in taking corrective measures, particularly with respect to funding and maintenance. Under the Seventh Highway Project (Loan 1471-CO of June 1977), important advances are being made in promoting adequate allocation of resources to highway maintenance and in making efficient use of those resources. 49. Overall Bank involvement in Colombia's highways falls into three time periods. The first covers the years 1951 to 1961, in which three sector loans and a credit supported the country's first Highway Plan. The second period, from 1961 to 1970, comprised three loans for specific projects. After a hiatus of seven years, while awaiting absorptive capacity improve- ments in MOPT and, in particular, the establishment of a sound pricing policy for gasoline and diesel fuel, the Bank resumed lending for highways in 1977 (1471-CO). At this time, the Bank returned in part to the sector approach since, in addition to financing the improvement of specific road sections, it tackled the country's deficient highway maintenance efforts by financing a program of works selected annually by MOPT and agreed by the Bank, which is working well so far. Also, the recent loan for the Rural Roads Project (Loan 1966-CO of 1981) follows a sector approach in that the Bank finances a portion of the Government's rural roads program and future works are decided upon on a regular basis as the project advances. 50. It has been clear for some time that the Bank can have its most meaningful role in supporting sound transport policy and development by focusing at the sector level. This focus has thus characterized the Bank/ Government dialogue and has permitted a comprehensive approach to the work in progress on ports and railways and the ongoing efforts mentioned above. Furthermore, the sector approach will expand the discipline normally asso- ciated with project lending to the whole MOPT program. PART IV - THE PROJECT The Program and Project Description 51. The project, prepared by MOPT, comprises the Ministry's 1982-86 Highway Development Program. It was appraised in August 1981 and January 1982. Negotiations were held in Washington, D.C. during the week of March 1, 1982 with a Colombian delegation led by Dr. Pablo Bocarejo, Assistant to the Minister, MOPT and Dra. Leonor Montoya, Director of Public Credit, Ministry of Finance and Public Credit. The Staff Appraisal Report (No. 3656b of March 10, 1982) is being distributed separately to the Executive Directors. 52. The project would support preservation and upgrading the national highway network, consonant with the requirements implied by the Government's ongoing strategy to foster economic growth and decentralization of productive activity. In line with this, the project is also aimed at encouraging adoption of minimum cost transport solutions over the medium term,  - 17 - complemented by a cohesive transport policy and regulatory framework as well as an adequate financing plan. Finally, the project seeks to facilitate the local construction industry's efforts to recover from a prolonged slump in construction activity during the 1970s to assist it in coping effectively with the larger volume of work available now and in future years. MOPT's 1982-86 Program 53. MOPT's budgeted program of works consists of road rehabilitation and paving (35%), maintenance (28%) and new construction (13%), with the ba- lance divided among equipment, inland waterway maintenance, training, traffic safety and studies. A recent survey indicates that at least half of the road network would require rehabilitation and/or paving during the next 10 years. Under the Program, this has been translated into annual targets that encompass 7,140 km of roads requiring urgent attention. Average daily traffic on these roads averages upwards of 700 vehicles, 35%-70% of which is trucks. The decision on the specific roads to be rehabilitated or paved would be based upon, for each such subproject, in the first stage, a basic data sheet including a summary of the economic feasibility analysis using the Highway Design Model developed by the Bank and adopted by MOPT, and in the second stage a second basic data sheet including detailed engineering data (Section 3.01(b)(i) of the draft Loan Agreement). All sub-projects would have a minimum economic return of 12%, the opportunity cost of capital in Colombia (Section 3.01(d) of the draft Loan Agreement). In view of the high return normally associated with maintenance and rehabilitation works, average actual returns are expected to be much higher. The portfolio of subprojects already evaluated and ready for tender amounts to 1,150 km (virtually all rehabilitation and paving subprojects), with a further 1,100 km at the engineering stage (paragraph 59). 54. The maintenance portion of the Program calls for setting up, throughout the Ministry's regional subdivisions, the Pavement and Equipment Management Systems already introduced successfully on a pilot basis in con- junction with the Seventh Highway Project. The entire road network is to be classified according to four categories of required maintenance, from emer- gency to preventive. Using this and other pertinent data, the pavement sys- tem provides uniform criteria for identifying the most cost effective actions and their timing. Although it will take about 10 years to reach the target of bringing the entire network to the preventive maintenance stage, a large share of this effort will be concentrated on the five-year Program period, as reflected in the planned doubling, in real terms, of maintenance expenditures per kilometer by 1986 compared to 1980. Suitable road selection criteria is built into the Pavement System. Covering an estimated 3,250 km by 1986, these works would be performed by contract on the more heavily used roads and by force account on the remaining ones (Section 3.07(b) of the draft Guaran- tee Agreement). MOPT is fully aware that the success of this endeavor rests upon provision of adequate guidance to the responsible subdivisions and upon close monitoring of the system and has developed suitable programs in this regard. Recently, the Ministry has put into effect an equipment renewal po- licy developed under the Seventh Highway Project. About half of its 4,200 units are either obsolete or beyond repair. In line with the new policy, vehicles would be replaced after seven years or 250,000 km; equipment after seven years or 12,000 hours; and machinery after 15 years of 12,000 hours. The acquisition program to replace aged and obsolete units includes about  - 18 - 1,590 units to be delivered in 1982/83 which would result in a fleet that would broadly match maintenance requirements. Further purchases during the 1982-86 would be in accordance with the Equipment Management System and would take account of the policy of contracting out periodic maintenance activi- ties, in particular overlays and sealing (Section 3.02 of the draft Guarantee Agreement). 55. New construction planned over the period anticipates some 750 km, including urban by-passes, and safety and capacity-increasing works; however, because of the focus on preserving the existing network, new construction would be reduced first if the overall Program is cut. All such sub-projects would be subject to feasibility studies and detailed engineering before in- clusion in MOPT's work program (Section 3.01(b)(ii) and (e) of the draft Loan Agreement. 56. The road safety portion of the Program includes provision of traf- fic signs, road markings and guard rails for 5,400 km of high density roads, construction of four experimental rest areas along major highways and 10 ve- hicle diagnostic centers, and establishment of a safety training facility and instructional program. Forty scholarships would be given to enable training abroad of relevant staff for about three months each, strengthening of INTRA's traffic regulatory capacity, creation of a National Traffic Education Committee and promotion of Traffic Safety Clubs and School Traffic Brigades. Safety criteria are to be introduced into all new highway engineering, con- trol over vehicles and drivers increased, and accident statistics improved. In addition, MOPT's overall staff training program is intended to enlarge upon and diversify the training activities initiated under the Seventh High- way Project. Specifically, a policy on staff training would be formalized, the training division would be augmented by additional specialized staff, a mobile training unit would be established to assist field foremen, equipment operators and drivers, a program initiated to improve the skills of mechani- cal personnel, seminars would be held for the benefit of professional main- tenance staff and selected senior personnel would receive management training abroad. 57. The Program provides for a study of trucking regulations and modal alternatives. Furthermore, MOPT will sponsor a steering committee to enhance the capacity of the local construction industry through management and professional training seminars and by investigating a financing system for the industry. Finally certain high priority research would be contracted with universities concerning alternative construction materials and asphalt emulsion technology. The details of this research are to be firmed up by July 1, 1983 (Section 3.01(g) of the draft Loan Agreement). Project Description and Financing 58. The proposed project would finance items included in MOPT's 1982-86 Program (estimated to cost about US$2.3 billion equivalent and to have a for- eign exchange component of US$977.5 million equivalent) which, in fact, re- presents a time-slice of a continuous program. The Bank loan represents about 7% of the cost of the Program and 15.6% of the foreign element. The balance of financing needed would be provided by FVN from fuel taxes, about US$1.7 billion, or 72% of the total; MOPT's own resources and Government transfers, US$279.7 million, or 12%; and existing and new external loans,  - 19 - including the Seventh Highway Project, US$216.5 million or 9%. FVN, which is MOPT's executing agency and which carries out the policies and programs defined by MOPT, will be the Borrower for the proposed loan and will carry out the project (paragraph 61). 59. The elements included for Bank financing are: a) rehabilitation, paving and new construction sub- projects which will be defined annually based upon the agreed criteria and procedures mentioned above, with annual work targets monitored closely to ensure that only realistic volumes of works are initiated (Sections 3.01 and 3.05 of the draft Loan Agree- ment). The forecast annual targets appear well within MOPT's capability. About 25 subprojects, valued at US$113 million, have been reviewed and contracts for US$55 million have already been awarded. To assist MOPT in establishing the analytic and selection criteria as a permanent feature, all subprojects would be subject to prior Bank review and agreement to establish eligibility. An estimated 87% of the proceeds of the proposed loan apply to rehabilitation and paving; new construction subprojects would be financed only if demonstrated to be of high priority on the basis of feasibility studies; b) civil works for road safety and training including construction of safety devices, 4 rest areas, 10 vehicle diagnostic centers and 3 training facilities. This component would represent approximately 3% of the proposed loan. c) equipment including maintenance-support equipment, tools, machinery, laboratory equipment, and mate- rials and equipment related to the safety and train- ing components of the Program, which would not nor- mally be financed by suppliers' credits. Specific equipment requirements and their justification would be presented annually for Bank review and approval (Section 3.01(b)(iv) of the draft Loan Agreement). This component would represent approximately 52 of the proposed loan; d) studies, which have been fully defined and for which terms of reference have been agreed will investigate trucking regulations and modal alternatives, road construction technology and highway administration (Sections 3.01(f) and (g) and 3.02(b) of the draft Loan Agreement); technical assistance to assist MOPT in strengthening its capacity to deal with aspects of planning, modal coordination, decentralization, methods, research, supervision, safety and staff training. Because of the specialized expertise  - 20 - needed, it is expected that about 30% of the servi- ces needed would be performed by foreign consultants at an average cost of US$10,000 per man-month. All such services would be provided by consultants with qualifications and experience, and under terms and conditions, acceptable to the Bank (Section 3.02 of the draft Loan Agreement). Five percent of the pro- posed loan pertains to studies and technical assist- ance. Monitoring 60. Special attention has been devoted to devising close monitoring procedures that will permit problems to be detected and remedied at an early stage and allow experience obtained to be put to practical use as the project unfolds. The ultimate objective is for MOPT to develop suitable monitoring capacity and procedures; technical assistance to be provided will assist in this. In addition to presenting to the Bank quarterly progress reports, semi-annual meetings to review the Program in detail will be held with the Bank (Section 3.05 of the draft Loan Agreement). Finally, Bank review of each proposed subproject would provide MOPT with continuous feedback on the use of evaluation criteria and help ensure sound use of resources. The Executing Agency, MOPT/FVN 61. FVN, which is an autonomous public entity, is the executing and financial agency for MOPT and will directly undertake the loan and the proj- ect. FVN, which is represented by the Minister of MOPT, shares MOPT's staff and structure. MOPT is headed by a Minister appointed by the President of the Republic. The Ministry is subdivided into a General and a Technical Secretariat. The General Secretariat comprises three Directorates: Bidding and Contracting, Commercial and Financial, and Industrial Relations. The Computing Activities Services, the Treasury, the Budget and Accounting System and the Personnel Division also form part of the General Secretariat. The Technical Secretariat includes the Directorates of National Properties, Navi- gation and Harbors, and Highways. Four subdirectorates operate under the Highways Directorate: Projects, Supervision, Equipment and Assessment. In addition, the Highways Directorate is responsible for MOPT's 26 regional districts which carry out the road maintenance. MOPT's total personnel of about 13,000 employees, which includes 11,100 staff in the Districts, remains somewhat high because of staff seniority status and labor union pressures. MOPT's total professional staff is about 780, divided between the Headquar- ters in Bogota and the Districts. Officers in the Districts are almost entirely engineers. In Bogota, some 10% of the staff are engineers and the rest are lawyers, economists, accountants and administrators. MOPT intends to continue recently adopted policy to contain payroll expenditures (Section 5.04 of the draft Loan Agreement). 62. MOPT/FVN's accounting and financial functions are the responsi- bility of its Commercial and Financial Directorate. Its accounting system meets standard requirements and reflects MOPT's and FVN's activities sepa- rately. Good control is provided for all expenditures for projects in execu- tion. Monthly and annual balance sheets are submitted to the General Comp- troller of the Republic. Cost accounting for maintenance is being introduced  - 21 - gradually in an effort to increase efficiency. The Government's annual budget, once approved by the Congress, is the means by which annual appropriations are made for MOPT through the FVN. Budget execution is verified by the Accounts Section, as well as by the Internal Auditing and by a delegate of the General Comptroller of the Republic. The Minister of Finance assigns a monthly quota of expenditures based on an "Agreement of Payment" and the corresponding amount is deposited in a special account. In order to meet contractual obligations, Directors of the Executing Units request from the Financial Director the allocation of corresponding funds. Disbursements are handled in an appropriate way. The Office of the General Comptroller of the Republic annually audits programs financed with external funds, and they are satisfactory. In conjunction with the proposed project, they will be presented each year to the Bank. Furthermore, separate accounts for the Program and FVN's other undertakings will be maintained (Section 5.02 of the draft Loan Agreement). Procurement and Disbursement 63. The contracts for civil works (construction, rehabilitation, paving and safety structures) and the purchase of equipment financed by the loan would follow international competitive bidding procedures and the Bank's guidelines for procurement. The contracts for studies and technical assis- tance would also be awarded following satisfactory guidelines. Contracts for training facilities (two training centers) estimated to cost US$0.2 million equivalent would be awarded under local competitive bidding procedures which are acceptable to the Bank. 64. Disbursements would be made against (a) 50% of civil works and related supervision services; (b) 100% of foreign expenditures for imported vehicles and equipment; (c) 90% of local expenditures for locally-procured equipment, tools or machinery; (d) 100% of foreign expenditures for training, technical assistance or consulting services carried out by foreign consultant firms or individuals; and (e) 50% of total expenditures for technical assis- tance or consulting services if contracted locally. However, no withdrawals would be made from the Loan Account for civil works whose estimated completion cost exceeded by more than 50% the estimated detailed engineering cost on which the confirmation of eligibility for Bank financing was based (Schedule 1 of the draft Loan Agreement). Expenditures incurred after loan signature for rehabilitation and paving works related to subprojects contracted after September 1, 1981, would be eligible for financing under the loan. It is anticipated that the loan will be fully disbursed by June 30, 1986. Benefits and Risks 65. Adequate transport infrastructure is essential to support growth objectives. The Colombian highway network is deteriorated and does not serve this purpose in its present condition and the proposed project aims at making substantial inroads to remedy this situation, as well as to foster the domestic capability to overcome it permanently. The policy improvements anticipated are designed to encourage economically sound transport investment decisions and operations in the interest of efficient allocation of scarce resources. There is no sensible way of quantifying project benefits at this stage, but procedures incorporated into the project will ensure that only  - 22 - subprojects with an economic return in excess of the estimated 12% oppor- tunity cost of capital will be undertaken and, among these, those with the highest returns will be selected first. 66. The risk that project objectives may not be fully realized cannot be dismissed lightly, given their scope and complexity. The decision of the Bank to go forward, is based upon the firmness of the Government's commitment to the undertaking, careful assessment of MOPT's ability to perform as plan- ned, and the incorporation of appropriate safeguards into the project itself. Further, the flexibility afforded in the commitment of loan funds would enable MOPT to respond quickly to urgently needed works as they are identified, thus assuring execution of a priority program. Given these ele- ments, the risk is judged to fall within acceptable margins and the project is expected to be carried out substantially as envisaged. PART V. LEGAL INSTRUMENTS AND AUTHORITY 67. The draft Loan Agreement between the Bank and the Fondo Vial Nacio- nal, the draft Guarantee Agreement between the Republic of Colombia and the Bank and the report of the Committee provided for in Article III, Section 4(iii) of the Bank's Articles of Agreement are being distributed to the Exe- cutive Directors separately. 68. Special conditions of the loan are listed in Section III of Annex III. 69. I am satisfied that the proposed loan would comply with the Articles of Agreement of tle Bank. PART VI. RECOMMENDATION 70. I recommend that the Executive Directors approve the proposed loan. A. W. Clausen President Attachments March 15, 1982 Washington, D.C.  Annex I - 23 - Page I of 5 COLUMBIA - SUCIAL IHDICATO0S DATA SHlT CULonE7A REFEUZCE GROUPS (WIGIHTE0 AYE AGS LAND9 ARLA (THOUSAND *Q. KM.) - MDST EECENT ESrIMATE)' TUTAL 1138.9 hOST RUCEIT MIDDLE IHC01tC KIDDLE INCOME ACKlCULTURAL 132.0 1960 b 1910 A ESTImATE b LATIN AMEEICA 6 CUBBEAL EUROPE GNP PER CAPITA (USS) 250.0 400.0 1010.0* 1616.2 2609.1 EN EGY CONSUlPTIQH PER CAPIA (LILOGR.AMS OF CUAL UEUIVALENT) 510.2 659.7 937.9 1324.1 2368.4 POPULATION AhW VITAL STATISTICS eQPULATION. nlD-YEAR (TIOUSANDS) 15754.0 21266.0 26122.0 UYYAN POPULATION (PERCENT OF TOTAL) 48.2 59.8 69.1 64.2 53.2 PULATION PRUJECTIUNS PUPULATION IN YEAK 2000 (MILLIONS) 39.9 STATIUbARY PUPULATION (MILLIONS) 61.0 YEAIK STATINARY PUPULATION IS REACHED 2070 PQPULAION DENSITY PER Sq. KMt. 13.8 18.7 22.9 34.3 80.6 PEK SQ. KP. AGRICULTURAL LAND 72.5 95.7 110.2 94.5 133.9 POPULATION AGE STRUCTIUE (PERCENT) U-14 YRb. 46.8 46.2 38.2 40.7 30.1 15-64 YKS. 50.3 51.0 58.6 55.3 61.5 65 YKR. AND ASBVE 2.9 2.8 3.2 4.0 8.3 PUPULAIION GCAWTH YATE (PEYCENT) TOTAL 3.1 3.0 2.3 2.4 1.5 URbAN 5.7 5.2 3.9 3.7 3.1 L.UDE BIRTH RA7E (PER TIKJUSAND) 45.5 36.3 30.1 31.4 22.9 CKUDE DEATH RATE (PER HuOUSAND) 14.0 9.5 7.9 8.4 9.1 GCUSS REPRODUCTION RATE 3.3 2.6 1.9 2.3 1.6 FAMILY PLANNINC ILLEPTUtS. ANNUAL (THOUSANDS) . 115.4 142.1 USEMS (PERCENT OF HARRIED WOKEN) .. .. 46.1 FUUD AND NUTRITIUN INDEX OF FUUU PRODUCTIWN PEK LAPITA (1969-71-100) 100.0 99.0 124.0 108.3 119.8 PEK. CAPITA SUPPLY UF CALORIES (PERCENT OF kAl)UlaIIENTS) 97.0 88.0 102.0 107.6 125.7 PRUTEINS (GRAMS PER DAY) 54.0 48.0 52.0 65.8 92.5 UF WHlCH ANIMAL AND PULSE 28.0 24.0 26.0 34.0 39.7 CHILD (AGES 1-4) 9URTALITY RATE 19.d 12.0 8.3 7.6 3.4 aEALIH LIFE EXPELIANCY AT BIRTH (YEARS) 53.3 59.1 62.7 64.1 68.9 INFANT MURIALITY RATE (PER THUUSAND) 77.0 .. 65.0 70.9 25.2 ACCESS TU SAFE WArER (PERCENT OF PUPULATIUN) TOTAL 30.0d .. 64.0 65.7 URBAN 54.9d .. 73.0 79.7 RURAL 6.8]d .. 46.0 43.9 ACCESS TU EiCKETA DISPUSAL (PERCENT UF POPULATION) TOIAL 47.0 44.4 59.9 UIlAN .. 75.0 60.0 75.7 YUYAL 8.0 14.0 30.4 PUPULATIUN PER PHYSICIAN 2638.9 2189.5 1966.7 1728.2 973.3 POPULAIWN PER NURSING PERSON 3740.0 1923.4 1250.0 1288.2 896.6 POPULATION PER HOSPITAL BED TUTAL 362.9 449.4 619.1 471.2 262.3 UR8Ab .. 377.5 540.3 558.0 191.8 AURAL .. .. AULSSIONb PER HOSPITAL BED .. 22.9 29.8 .. 18.2 H4IUSI94C AVERAGE SIZE OF KOUSEHoLD TOTAL .. 5.7 ** URXAN .. 5.5 . AURAL .. 5.9 . AVERAGE NUMBER UF PEWSONS PER ROOM TOTAL .. 1.8 * URBN .. 1.6& .... AURAL .. 2.4 . ACCESS TU ELECTRICITY (PERCENT UF UWELLINGS) TUTAL 47.0" 58.14 . URJUN 83.OLd 87.54 . RURAL S.0l 13.2 ..  - 24 - Annex 1 Page 2 of 5 COLOMBIA - SOCIAL INDICATORS DATA SHEET COLOMBIA REFEUNCE GOUPS (WEIGHTED AVERAB - MOST UtCtlT EtMATE1 - NDST RICCZNrMIDLE iEEEm KDULE IMEE 1960 lb 1970 /b ESTIMATE /b LATIN AH RICA & CARIBBAN EURP EDUCATVON ADJUFSTE ENiOLLMENT RATIOS PRIMARY: TOTAL 77.0 103.0 124.0 101.7 105.9 MALE 77.0 101.0 122.0 103.0 109.6 FINALE 77.0 105.0 127.0 101.5 102.2 SECONDARY: TOTAL 12.0 24.0 43.0 35.3 66.3 MALE 13.0 24.0 43.0 34.9 73.2 FEMALE '11.0 24.0 44.0 35.6 59.5 VOCATIONAL ENROL. (T OF SECONDARY) 31.0/a 20.0 22.0 30.1 28.4 PUPIL-TEACHER RATIO PRIMARY 38.0 36.0 33.0 29.6 26.8 SECONDARY 11.0 17.0 21.0 15.7 23.6 ADULT LITERACY RATE (PERCENT) 63.0 80.8 .. 80.0 75.4 CONSUMPTION PASSEHCtl CARS PER THOUSAND POPULATION 7.0 11.2 I8.1 42.6 83.9 RADIO RECEIVERS PER THOUSAND POPULATION 125.1 104.3 117.1 215.0 181.6 TV RECEIVERS PER THOUSAND POPULATION 9.5 38.1 74.0 89.0 131.1 NEWSPAPER (DAILY GENERAL INTEREST') CIRCULATION PER THOUSAND POPULATION 56.0 .. 54.4 62.8 123.8 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. 4.1 3.2 5.7 LABOR FORCE 'OT= -LA8OR FORCE (THOUSANDS) 4726.5 6353.4 8652.7 FEMALE (PERCENT) 19.2 24.8 24.7 22.6 32.9 AGRICULTURE (PERCENT) 51.4 37.9 27.1 35.0 34.0 INDUSTRY (PERCENT) 19.2 21.0 21.1 23.2 28.7 PARTICIPATION RATE (PERCENT) TOTAL 30.0 29.9 33.1 31.8 42.3 MIALE 48.8 45.1 49.8 49.0 56.5 FElALE 11.5 14.8 16.4 14.6 28.5 ECONOMIC DEPENDENCY RATIO 1.7 1.6 1.2 1.4 0.9 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 41.2/d f 31.9/f HIGHEST 20 PERCENT OF HOUSEHOLDS 67 .7/8i 60.1/f LOWEST 20 PERCENT OF HOUSEHOLDS 21/df 3.57.f LOWEST 40 PERCENT OF HOUSEHOLDS 6i8si 10i.17 .. POVERTY TARGET GROUPS ESTIMATED ARSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 214.0 RURAL .. .. 197.0 187.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 267.0 513.9 RURAL .. .. 1Z2.0 362.2 385.1 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 34.0 RURAL .. .. Not available Noc applicable. NOTES /a The droup averages for each indicator are populationv eightd aritlhetic macns. Coverage of countries among the indicators depeods on availability of data and to not uniform. /b Unless otherwise noted, data for 1960 refer to any year betveen 1959 and 1961; for 1970, betvae 1969 and 1971; and for Most Recent Estimta, between 1976 and 1979. /c 1973; /d 1964; /a Including teacher training at the third level; /f Economically active populadton. * The updated 1980 GNP per capita and population estimates to be shown in the 1981 World Bank Atlas are $1180 (at 1978-80 prices) and 26.7 million. May, 1981  -25- Annex 1 Page 3 of 5 IEPI9ITIINS IF SOC11 I901CALTORS 4ocos aIchoogh abs d.cc ore doao too. scoo.s. g....rally judged ths sst achorloatots And ra1lablo. Ia should also ha aIsa chat than may ccc bs Inter- -oso-olycopooa..blo b.o.us. of ohs lack of oondardtood dslci.irns aud Ico.copos aasd by ditffopor .ou.t-tna 10 oula .o h data. Th. daca nton. coos- rhsl...a.. afful. odsa...thb ordoon of naatucud., hadI luac trude, nod, u-rJ.,a orau na dirforonass botnnscouac--s.. Th onfornoco 1 go . III cho a uobc-y scop of ts suojact country sAd (2) a uostry troop oldh somonhoc highar cosr-gi aome taco cbs Icinar troop ofab Icb =c anr (-aust for "CaPicul Surplec Oil oporteos," trooep h.ce. "Pliddls I-cm Mooh Aric. and iddls feast" Is chosen hatnas of tnrongo oAci-olora Jaf -)cla. I . roe fs-u group d.c. the. enoa- oreIpopslacco ishlged ncthenlc le ras o ec lada.Cado sed hoo- only we eaJority of cb onoo I co eedt u u odcatr. acs.. th Ianog f cIrrosaae h Jlcoodopcc 00ca anilahullcy of do.. on e In Icto Ac aLtee onan chs loc eycd nf-rnoes groups. LAND ARI (thousadfsqade.) Pouoi;co,opclhd- total.rbe anId rua- -PplaIn(ncl Toall - Total naruc 000ceoenludon n ece aonero.adrrl Ilddb ha opoisn.ro hooptcel bade AejulatoiliOs - ottoano of croluu acm eun .o-slly or poenofoetly a-e1lbla In publIc And poteca gonerl cad enenIllo-d h-splcalandfOs- l'efoo poouee., sarkon and kdcbo orh-Io n 1. fal1ooc till data. hcblllcaclonooeesrs.. oPltaLaarnssohIhlleet pomenaly sea fa by ct Isoo one physfiotn. footbllahosonca P-oidiog Poisa.lpeli . aue- GIRI ron CAPTAt (US#) - GMP par carlas ctoo oc c-conn oah.oo ptac... I.- dtaI..lor ace non inaladd. minI hop.iclaI. bawenen, inclodo hacLth anlatodV by oa roonrno sthod ae Worl SagA AnIse (1971-79 habeli; 19h0, and nsdt.cl osocors ca pnronnly soffad by a phynlolan (hoe hya lit,an 11 dcc., nedla scitaa nursl ndnu, ceo.) ouch ofc n-o. etats datioc cad prontdoa.llatd an o alulfcOlla.Prstne ENE1RG CINSi9TION PfR CAPITA - Ancool ocemtoi_cfola toy'cloal po-Posoc utha honoltale inclada WHcO. oolalnn lhosptal.1 and llgnlan penrlno, naco..al gee Anid hydo-. oula doetcra ls-uuuo )uoettoa(uItonl optl and ' nedca and 'acorl rality In All mao col1q960n opcpta i, 1970, and 1979 cetr."olc odhsIasac olddol Irder tonal. dta. Adolseot -n Ho.ieal ted T. Totli number of adlcitta. to or disoheegos oon Jeplala ololdod by h anonubs uf hen.. POPULtATtIO AND0 VITAL STATISTICS Total PopoLtilco.. ftid-_o.. Ic_..ande) - As If July 1: 19h0, 2970,. ad 1979 _______ dana. AVeco l..f.. csH.d(cnot. pr..shod -... tol. uraInd rurl. ohaai.. Pooltlo- (P- ...tI of totl)- ed on thnnooalpoualt Atocaodosseofanupfl.dldaohae.hor "Ict.g quota dlfferucdetucoco If urban ara na. y farc ucparohlly of dccc -Id choirn: t osal,lo. A hoader orI.g lodnrny or nay non he noodad it aeo .gc ..cntea; ha,1977,. ea 1979 data. . thocseod fo occatulpryo PJoairOnictn Acrn coo of ooso_a c- noo-total. urhan. and rural - Anoaoc Parulnalon o nar lilt - Crewnt population projeotoce r lhaaod; ot 299 hoP of Peecut nor noon to all urhot. and rura occupied toenencoona noonac for carnality let. alec cans ohms. Ita-oco dan1ioc Lt of noce. orhoc. and cor doolil.coponney f_irntlltyaotodtcg toIntn eo n atfaly Plan.... phe onnne.. tuoh _oo_r ia coso asEDdcaoUtselccbocos fnnolc CICATION ond conillly leoods too c10tioccos.4I'otd toln ntto itetotan rcolaton-oaatctoary onuP tio thereJ PIn ooot clt onr ool-ttl aocdtal-ns aa.ot nd fmob tic hlcti cats 1 squat on ohs d.eth rus,cd alec ohs age etrutc ..orlao fal nsa priaay 7 tona us yoetgoo of rso nalc teoco. Tht Jc achlsod otIy at.on fertility reteo declita cc picarycbo-gappatne normlly inLudco chil1dren god h-1l ,hc ropilatoa len1 of uIt c nrduto ae - ohan a-h aIarocy-tears but adlusand_fr lr es lif ongoha1111 of tpriear aY -aton I o of' _o-a spLa..s -Isef o-Ity. Tha ocotiotary Pupolalo L a.. a : , Iouonto nIhed.ttoerSll sd _ocionoolp,eotny, en:sd 0ii rernt Iotgo n absheoucll of tho ppo(tnd% ocr-d Iaio f ohs PoPolaio JabcsI noe7pnil ore1 bI-o or aboe the offiola1 sobool cgt _Ia he ey 2000, an d tse rota of dLine off t...talcyrellntona.Ia.a- qetnday shol -totl. nt eojoej Caqnpoed a abov; aeoo&e'dy slehsheo sahbd. ua.aly of .21o 1. ynr fsn;coa odooooa ace ganoralp Fon co. n. - HOld-y-I apltlnpoP aqous ulea (lIt hoa-onaa ofIaaoa noleo nreaf sicduo .. I oateoallaeunon total arc; 1960, 1970 and 1979 dana. uielude torlnal-, ltunra,oohr praran which oprtaLdapo-W fno so. We. aroltrllanid - Conp-td ec alon for- gatltra Ad "o ra opaonao eoooytcinieaoJ. otI; 1960, li7t an 1970 dean. yi-LI~-tsahe atlio - urnay and. cnodrn-tta ed-seeoda fooltocM iSt_a_ (P .....' - Chi.ldas (0-14 yoacc) -, nring-.$. 71)- priaycooonoylnl Iie ynaono ocseh b 64 ysar), an. aue (iyanaad1onno) uspranoo f ai-erPopo-= ooospcdl -Idisoebls.- ftet.. . h aco;1960. li7t, and 1919 doc.' Adult sa nt (P.r.-,) -Lilleat adults Labia to read end wrinef Poroal-tu ioa G.- Raee 9crno e)-9octal- Monet gorhctos of tota sad- coapretg f total odolt ycpinlato agod 05 years and P-n-- yer papulacior E.o 190-hf., hit-nt. ad 1970-79. Iotos u 195_0-h.10-0. ad 00-9 ida,..aaeeo Cars (oarchcaan ..on.ci. n P eomo ae ptcna Condolot ae per tho-sa) - Aunua1 lIon birahe P.,ohc...aad of idyocre encn Inn tenight esn;caodssnacs hearsos end "oplatn;uhf 17, ad1979 data, sill nary hale Codo at Ras co tho....a.) - ounncl dnaths pa ano-uads of sad-yn- tala4i hac!ZEto (ocr obhNoad onltBnj All typos of -noins for radio pouala; 9hO it and 1979 data broad uat no essnL p..io. anIhouan of popalacton; snaidee a0 Rr.a.ordono n -unorga cube of daisheers a nm 1ul boar i cILc.....d ooioah onr'ssdO.er bo sloccno di. her o-ro P rerducnc yert..od !:If ohs annienoa pnuaott ag.-. o.ta . f ensasnatrfsnda ffur acea ynJe mynanbecearbl alas :_lnrae;uu ,i flv_ysar rnogne ondi.g in 1960, 1970. and 1979. son otnresaobohd IL .os.slog. TV.i fullyV PI,nlne-uoosr.. rs acul(hcedo aulnmbro oocrs 0 oerr (nor,oaoa-n onoo.lachtf raeano for hnoedcaa t of brthconroldencee ndo au paseIf onclusi amol plnto anrm geea oA e thco and PoPolaion.; -lunoai-etnd TV rnlon familn Pl-innl- L.ara roreaen of anried .-oan) - Pr Intae. of noantad JuoIoun.pleaaa d Ic years ohsa o0ict-nc Ioof T ..c..en Iin effete. -men of child-barong ago (15-4A4cs Y. o use ctyt-tot-ri dcmi... no boeco inlninlo booo noaun hw i _nora. tIn- alleared Oos Jn lemn aguou..c.n, f diyanrs caoc eoac" defined aaapeeildifa1 uhlioatlac deotd primarily no recodin gnoe caon I I. oenidn...d FOOD AND0 YiiTlIONf In be "daily" If in,P""ole at ..oa for. Inaa iuanoad~ ~ ~~~~~~~P ofcMn bc aeeil n onIannt da e.ctfa lend h .f - tea a eeoclud= )."A Anoreat PoIduottn of sah co-noy is booed on.1B10R 0.C0 _aIoa Saarg proun pl1cc onga. 191h,lit n 17Iaa Tota Labo Ounce (thouands - fonmel.ly sutto oon. nld pan doy. Ao.llaAl enppllnn compris d 1970l crduclco 1o979t dlens natnourpine190 190 nd197Idc onpoco. ad uonoa In touk notnapplso aclua anmal end scadd e, Pae(o.... -Omealao oroa poonntags at- total labor. foyto qnacnltlaauend ~ ~ ~ " InfoTHonalg n DunsI laOain ono-Arcloebooa(-lbrrrsi faring. fooc-t-y hotign hooaodoyd l-ivel: li-pl, 1970, end 197 data, --i,ilpl. 1 970an 1919bl. dean. 91 19 no upl oI odL porday. netsopy f od L. dafltndacaJ. ._ M kn- coalyaneoopTod I..tona. mal.; .endtl lhrtorts end allunecae of hOgrm of tota prti d popdayl and20 arena of sonm-Ilei ailndg96 . 11. an-..I .11Ib1E-;90 90ld 1979 dan.Tooa ando .sprtopt . ss ruIns proein.,b of. oh.iob10gra shoold b. animal protei. b; iTheos anan- rdstbooyo ag-san p feeotir of abs .onaln and. long, o lee-orod. arda r oo hunoao 70 g-a- a I of ton-aLO proneland 13gr- ao fas en lcan yn arefro naloa oP-esa.gI - b,f.. 90 abed fueaimalsI11ad pu19 ngun a dy096-) 1910and 977 eco. Icc d 9IS 9OdOlT19 Chl (ps -1 oall,tac os hcuod - Aa-nno dneath per thousandin Pspoenaeo laeIcme(thi oAh 1Aned kn)-C indb ihs ortesdata orlnd fro luf aahne; 100. 17f ad 197 dataed . of bo-asbotdes.b. f. at birth 190 190 andTT 1979 data, hP,d, e 0S-If.- 412 and should 1979nenotndoiThooeidsohbleed InanrLOn. eli. hunat: . J_ Oetct htrhn of7 -IfoulOa- Iol .. rhItPt and rural- a-f otnin.b..al.y adqse- dItpu-es; hlcnfodrqlnmneI a caarupl (cl yo treae ear- faed .J..r or ucatinated , bu fuoo dcletd- teradtlnn con oaIol(S e uco rsadoa coto ouh cc then2, toW poonae brI oec iraa,d; and 1 eanicary naIls 001 iunel,Om 5relaTOlNo oet noe lI o-hr fnnoaprtpt pChi oagld fI heit npono pnlendotc Ine A oha d pna a pohdlJi P-ersnal.I Itlico orobnoennoy I.. the iol~,, 1d in nRod. from obsy canah..rod as4 being nahcldscosain cotas of tgea bup a I ruol nsc enmon orltoon "e'nObaoP.. ro tong .0 (ed cc 0apt - -rht Llfao hcrl Ilerose lyacr1-oant II 1 oou la Ifn-tuna uron aif a octal -. ull.l e fP e fbi_of poople (canal,d utbon oTd runald booiod b enhr-ta alapsal e the- no icln n dl,epel oaorath,- )- Aut. -thntn. ofLf ... Icco Y eEtota asndiaAbd ooll t.oInt a VAn- and Pansno by. caOnhotsact obcsuoofra rtne and almL.roanama Mi-si and rtoortoh Opao Ian. l iEnlfutaW._ oar tl...it-itIL lyleq ldt l .epil-en .- to, or Pb lohan OonslaIthon d -nde -b tubnr of poanludb pys uhase ooll ed frm a mdical ched n utloosPt "IcI--oat.$ e ee - . P':.co ariren rmn Popoclntl , dIvided- by cuohor of pruonloine P pit P....o sod fmJaln rIdntta.nunce, .rao. =al tnocenLand aentaanothereno  - 26 - ANU I COMC ItDICATWI Page 4 of S Population: 26,67tQOOO (mid-19S0) GNP Per Capita:, US$1180 aI Aut Avracg Annal Increase (%) Share of GDP at Market Prices (%) Indicator (iili.n 93* (ct constant 1970 price) (at current orices) at curret prices) 1950 k/ 1960-70 1970-75 1975-80 1960 1970 1975 1980 NATIONAL ACCOUNTS Gross domstic product c/ 32.686 5.3 6.1 5o8 100.0 100.0 100.0 100.0 Agriculture 8197 3.5 5.2 4.0 34.1 28.6 29.3 25.2 Industry 8.799 6.2 6.1 4.4 25.7 26.6 28.3 29.2 Services 12,559 5.9 7.3 6.4 40.2 44.8 42.4 45.6 Consumption 24,435 5.9 6.6 5.6 79.4 69.6 81.6 74.7 Gros Inveetmat 7.994 5.1 0.6 8.5 20.5 22.0 17.8 24.4 Exports of goods end IFS 5.648 3.1 5.9 10.0 15.6 14.2 15.1 17.4 Imports of goods and NrS 5.391 4.3 1.1 12.7 1.5 15.8 14.5 16.5 Gross national savings 8.103 5.2 5.3 10.8 19.4 18.0 16.8 24.8 Composition of Merchandise Trade (at crrent prices) 1960 1970 1975 1980 HIRCHAITDISZ 1142 Merchandise Exports (PO) 4.428 3.3 1.4 10.8 100.0 100.0 100.0 100.0 Major pri_sry 2,571 2.8 -4.6 12.8 72.5 69.4 51.2 64.8 Major nufsctures 686 - 23.8 6.5 - 9.0 24.5 15.5 Other 871 - 3.8 5.4 - 21.6 24.3 19.7 Merchandise Exports (CIF) 4.533 3.5 -2.3 9.0 100.0 100.0 100.0 100.0 Food 36 10.0 -0.1 13.4 2.4 4.5 4.8 8.0 Petroleum 750 -21.4 70.6 43.5 2.0 - 2.0 16.5 Machinery end equipmsnt 1.750 5.2 -8.5 11.0 42.7 50.6 36.4 38.6 Other 1.669 1.8 2.4 5.4 52.9 44.9 56.8 36.9 1974 1975 1976 1977 1978 1979 1980 b/ PRICES AND IZ1ltS o0 TIAE GDP deflator 27.6 20.8 23.6 28.3 17.1 23.9 24.5 Exchange rate . 27.1 31.2 35.0 36.9 39.3 42.6 47.3 Export price index 155.4 159.7 214.5 303.6 260.2 262.2 294.9 Import price Index 210.3 217.3 233.5 254.3 202.0 220.6 252.2 Tere of trade index 73.9 73.5 91.9 119.4 128.8 118.8 117.0 An % of CDP (st currant crics.) 1970 1975 1980 f/ PimtIC FINANCE d/i Currant revene 10.6 11.1 12.1 Current expenditure 5.7 6.6 8.2 Surplun (+) or deficit (-) 4.9 4.5 3.9 capital expenditur, 1.8 4.6 4.6 Foreign financing !/ 3.3 2.9 3.2 1960-70 1970-75 1975-80 E INDICATORS GYP growth rate () 5.10 6.30 6.00 ONP per capita growth rate (1) 2.00 3.90 3.70 Energy consumption growth rate (1) 5.00 4.00 4.00 ICCR JL 3.54 3.43 4.00 Marginal savings rate h/ 0.13 0.13 0.16 Import elasticLty 1.17 0.16 2.20 a/ World Baek Atlas VAthod. b/ Estimted. c/ At mrket prices: Come_nts are expressed at factor cost aed will not ndd because of exclusion of not indirect taxes sad subsidies. d/ Central Govsr,nt. e/ Cross disbursements of sxtsual leoes to the entire public sector. f/ Includes Social Security and Fondo Vial. j/ Lagged one year. h/ Incromnt to gross domstic saevgs/ticrnot to gross domestic product. November 11, 1981  Annex 1 ' Page 5 of 5 SALAIDE OF 2A151. LZ6L CAPITAL AND DENT Popoletlot 26.67. OCO(id-1960) Gn Par C l, s p S$1180 a/ (.diYo( USY at cOrront prit..) 1974 1975 1976 1977 1978 1979 1990 7b 1981 1982 '9 t 1984 1965 po o . gd..d no-ftetor sary.- 1000 2165 2782 340 4059 4910 5327 4932 5660 6367 7323 81' Iortt of *oods and aon-factor a*,rtL.. 1149 2030 2302 2730 3722 4191 5378 6361 7369 8401 9444 10415 leaoarce Nalatee -149 .J3 480 674 337 719 -49 -1429 -1709 -2034 -2123 -2222 Ibt faot~ ca t ry7 _nt -265 180 fl~_-47 -127 -172 31r 143 -75 } 1ii Nat 4n qo1rad tfatwtr. 27 48 21 16 7 4 26 35 40 45 50 45 Corrtat Acc04totl latIm -302 -80 222 455 97 596 -195 -1063 -1526 -1990 -26 -24M9 fet dfraet foreign Invt_nt 39 32 14 43 56 124 234 150 175 300 450 600 Had I. *ad lonsg tor Io. (not) 202 308 131 192 72 703 838 713 951 120 1448 1396 to poblie ector (160) (234) (109) (195) (92) (603) (781) (691) (912) (1168) (1335) (1883) to pri ate *ator (42) (54) (22) (-3) (-20) (100) (57) (22) (39) (76) (11) L Othor capit l 55 -121 195 162 391 -158 264 - - - - _- Cailtal A-coat 3la3Lc 296 219 340 397 519 669 1336 863 1126 1540 -tm 21" Cho. La . Itrvo (- - increase) 6 -139 -562 -852 -616 -1265 -1141 200 400 450 .J0 3eo International lar"et (offit.ta) 152 547 1168 1830 2482 4106 5416 5216 4816 4368 4016 3716 Reserves as oth. of Iports 1.6 3.2 6.1 8.0 8.0 11.8 12.1 9.8 7.8 6.2 5.1 4.3 C1086 DI880IiS681 r/ OfftcYIa arantt _ - _ _ _ Groa diYbu-rats of IILT loon 235 390 262 371 319 1036 1131 Corc doa l 102 39 47 27 60 36 53 Bit:rl (100) (37) (44) (21) (53) (28) (16) Other Ml3til.t-r.1 (2) (2) (3) (6) (7) (8) (37) llocIl tc oreon tl 133 351 215 345 260 1000 1078 Official waort credits (26) (14) (0) (14) (19) (47) (113) UD8 (58) (106) (76) (85) (62) (138) (218) Other -Ittlat.r.l (14) (19) (27) (31) (33) (31) (82) Privete (35) (212) (112) (216) (125) (783) (665) E[ BDENT (tnd of period) / Dabt .1t.1adilpg tnd di.bread 1249 2348 2453 2670 2803 3426 4295 Official 1074 1716 1785 1862 1999 2151 2444 IfYD (354) (634) (672) (716) (751) (838) (1035) IY0 (20) (22) (22) (22) (22) (22) (21) Other (700) (1060) (1019) (1124) (1225) (1291) (1390) Prl,t 174 632 668 806 804 1275 1849 Ildt.bwraed Debt 602 463 906 1040 1516 1993 2409 Totaldabt orY- . peyeot of ahich 119 249 278. 313 398 664 568 lItara.t 44 114 1" 137 171 231 268 pow,to a. * % porta of goods and *11 S-tic. 11.6 11 1 9 5 8.9 9 5 12 5 9 9 Yft ae S GNP 1 7 1.9 1.9 1.6 1.8 2.4 1.7 Average iot.r..t rata on aw lo. (7.) 5.8 7.4 6.5 7.4 7.9 10.3 10.2 Official (5.1) (6.1) (5.8) (7.3) (7.6) (7.8) (-5 rlvt"te (6.9) (6.2) (7.5) (7.6) (8.6) (12.0) (12.3) A'varag eat-rty of .8 lotans (year.) 22.4 15.1 14.8 (6.0 14.1 12.6 13.7 Offittl (30.1) (26.1) (20.0) (17.9) (16.2) (16.8) (-) Private (9.7) (8.2) (7.4) (7.6) (9.1) (10.0) (10.2) 1T M 9,01 DOD/to DOD28 4 27.0 27.4 26.8 26.8 24.5 24.1 IUID d.bcront./total froe diab.r.. to 24.6 27.1 28.9 22.9 25.7 13 3 19 3 188 debt er ie./tot.1 debt serYice 34.4 28.9 13.7 14.3 8.8 13.1 25.4 ID4 DOD/total DOD 1.6 1.0 0.9 0.8 0.8 0.6 0.5 IDA dsb4r.at./tottl &roas di.bwr-to - rll da rv" c hotal debt rlce - 0.1 0.1 0.1 0.1 0.0 0.0 / Vlorld Neek Atlt lItheod it Pra-liaory c/ Pblio nd p.bl.11l goar.t.ad debt Cooamber 11o 1981 Colo bi- Divl.ion  - 28 ANNEX II Page 1 of 11 THE STATUS OF BANK GROUP OPERATIONS IN COLOMBIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of September 30, 1981) (US$ million) Loan Amount (less Cancellation) Number Year Borrower Purpose Bank IDA Undisbursed 57 fully disbursed loans and one IDA credit 1,070.6 23.5 /I 849 1972 Instituto Colombiano de la Reforma Agraria Irrigation 2.2 .6 920 1973 Colombia Education 21.2 7.6 1072 1975 Instituto Nacional de Fomento Municipal Water Supply 27.0 6.3 1118 1975 Colombia Rural Settlement 19.5 4.1 1163 1975 Colombia Agriculture 21.0 10.8 1223 1976 Banco de la Republica Industrial Cr. 80.0 2.0 1352 1977 Colombia Rural Dev. 52.0 16.5 1357 1977 Banco de la Republica Agricultural Cr. 64.0 14.9 1450 1977 Empresa Nacional de Communications 58.3 50.1 Telecomunicaciones 1451 1977 Banco de la Republica Industrial Cr. 15.0 1.0 1471 1977 Colombia Highways 90.0 39.6 1487 1978 Colombia Nutrition 25.0 18.2 1523 1978 Empresas Municipales de Cali Water Supply 13.8 11.6 1558 1978 Colombia Urban Develop- ment 24.8 22.3 1582 1978 Interconexion Electrica, S.A. Power 126.0 87.3 1583 1978 Colombia Power 50.0 15.9 1593 1978 Zona Franca Industrial Industrial y Comercial de Cartagena Export 15.0 9.8 1598 1978 Banco de la Republica Industrial Cr. 100.0 14.4 1624 1979 Colombia Airports 61.0 32.9 1628 1979 Empresa de Energia Electrica de Bogota Power 84.0 41.3 1694 1979 Colombia Urban Develop- ment 13.5 12.6 1697 1979 Empresa de Acueducto y Alcantarillado de Bogota Water Supply 30.0 27.9 /1 Includes exchange adjustment of US$4.0 million,  29 ANNEX II Page 2 of 11 A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of September 30,1981) (Continued) Number Year Borrower Purpose Bank IDA Undisbursed 1725 1979 Interconexion Electrica, S.A. Power 72.0 72.0 1726 1979 Instituto Nacional de Fomento Municipal Water Supply 31.0 31.0 1737 1979 Instituto Colombiano de la Reforma Agraria Agriculture Cr. 20.0 18.6 1762 1979 Cerro Matoso, S.A. Mining-Nickel 80.0 18.3 1807 1980 Empresa de Energia Electrica Power 87.0 87.0 de Bogota 1825 /1 1980 Empresas Publicas de Communications 44.0 44.0 Medellin 1834 1980 Banco de la Republica Industrial Cr. 32.0 29.6 1857 1980 Banco de la Republica Industrial Cr. 150.0 150.0 1868 1980 Empresas Publicas de Medellin Power 125.0 125.0 1953 /2 1981 Empresas Publicas de Medellin Power 85.0 85.0 1966 1 1981 Colombia Rural Roads 33.0 33.0 1996 /2 1981 Instituto Colombiano de IrrigLtion 37.0 37.0 Ridrologia 1999 /2 1981 Corporacion Electrica de la Power 36.0 36.0 Costa Atlantica 2008 /2 1981 Empresa de Energia Power 359.0 359.0 Electrica de Bogota TOTAL 3,254.9 23.5 Of which has been repaid 561.5 2.3 Total now outstanding 2,693.4 21.2 Amount sold 51.0 Of which has been repaid 45.1 5.9 Total now held by Bank and IDA 2,687.5 21.2 Total undisbursed 1,573.2 /1 Not yet effective. /2 Not yet signed.  -30 ANNEX II Page 3 of 11 B. STATEMENT OF IFC INVESTMENTS (as of September 30, 1981) Type of Amount in US$ million Year Obligor Business Loan Equity Total 1959 Laminas del Caribe, S.A. Fiber-board .50 - .50 1960-1965 Industrias Alimenticias Noel, S.A. Food products 1.99 .08 2.07 1961 Envases Colombianos, S.A. Metal cans .70 - .70 1961-1968 Morfeo-Productos para el Hogar, S.A. Rome furniture .08 .09 .17 1961 Electromanufacturas, S.A. Electrical equipment .50 - .50 1962 Corporacion Financiera Development Colombiana financing - 2.02 2.02 1962-1963 Corporacion Financiera Development - 2.04 2.04 Nacional financing 1963-1967 Compania Colombiana de Textiles 1.98 .15 2.13 1968-1969 Tejidos, S.A. 1964-1970 Corporacion Financiera de Development Caldas financing - .81 .81 1964-1968 Forjas de Colombia, S.A. Steel forging - 1.27 1.27 1966 Almacenes Generales de Warehousing 1.00 - 1.00 Deposito Santa Fe, S.A. 1966 Industria Ganadera Livestock 1.00 .58 1.58 Colombiana, S.A. 1967-70-74 ENKA de Colombia, S.A. Textiles 5.00 2.60 7.60 1969 Compania de Desarrollo de Tourism - .01 .01 Hoteles y Turismo, Ltda. (ROTURISMO) 1969-1973 Corporacion Financiera del Development - .45 .45 Norte financing 1969 Corporacion Financiera del Development - .43 .43 Valle financing 1970 Promotora de Hoteles de Tourism .23 .11 .34 Turismo Medellin, S.A. 1970-1977 Pro-Hoteles, S.A. Tourism .80 .25 1.05 1973-1975 Corporacion Colombiana de Housing - .46 .46 Ahorro y Vivienda 1974 Cementos Boyaca, S.A. Cement 1.50 - 1.50 1975 Cementos del Caribe, S.A. Cement 3.60 - 3.60 1976 Las Brisas Mining 6.00 - 6.00 1977 Promotora de la Interconexion de los Gasoductos de la Costa Atlantica S.A. Utilities 13.00 2.00 15.00 1977 Compania Colombiana de Clinker, Cement and S.A. Construction Material 2.43 .30 2.73 1980 Leasing Bolivar Leasing 9.00 .19 9.19 1981 Petroleos Colombianos Ltd. Chemicals and Petrochemicals 12.15 3.42 15.57 Total Gross Commitments 61.46 17.26 78.72 Less cancellations, terminations, repayments and sales 46.65 8.91 55.56 Total commitments now held by IFC 14.81 8.35 23.16 Total undisbursed 8.54 .42 8.96  - 31 - ANNEX II Page 4 of 11 C. STATUS OF PROJECTS IN EXECUTION As of September 30, 1981 1/ 1. Ln. No. 849 Second Atlantico Development; US$2.2 million, June 30, 1972. Effective date: November 14, 1972 Closing Date: original - March 31, 1978 current - September 30, 1981 The project is the second phase of a scheme to develop about 17,000 ha of seasonally inundated land for agricultural production. At the request of the Government, US$2.8 million of the loan of US$5.0 million was cancelled in February 1977 and as of September 30, 1981, US$0.6 million remained undis- bursed. Settlement of farmers within the project areas was only partially carried out and the provision of technical assistance/farm credit needs improvement. Because heavy seasonal rainfall in 1979 resulted in severe flooding in the project area, a study is being carried out to reassess the flood protection and drainage requirements of the area. The project comple- tion mission will take place in March 1982, once the report by the hydrologic consultants has been completed. 2. Ln. No. 920 Education III; US$21.2 million, July 19, 1973. Effective date: January 9, 1974 Closing Date: original - June 30, 1977 current - December 31, 1981 Project execution was suspended in mid-1975 pending redefinition of sector priorities by the Government. It resumed in 1977 after the Bank agreed to redimension of the project to give greater emphasis to primary education, but suffered continuous delays. In June 1978, the Government proposed to the Bank to reduce the scope of the project and to cancel a large portion of the loan. However, the new administration, which came to office in August 1978, retracted the proposal and decided to proceed with the project as modified in 1977. Since reactivating the project, the Borrower has made progress in planning, construction, educational programming and personnel training, and project execution is proceeding normally. Nevertheless, because of the delay and higher costs, the scope of the project has been reduced. The closing date of the loan will be extended by an additional three months. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  - 32 - ANNEX II Page 5 of 11 3. Ln. No. 1072 Second Multi-City Water Supply and Sewerage Project; US$27 million, January 16, 1975. Effective date: April 14, 1975 Closing Date: December 31, 1981 Project implementation slower during the first semester of 1981 because of managerial problems and the ground water component and subprojects in Bananquilla, Cartagena and Villavicencio are now expected to be completed by the end of 1982. Despite the delays, works on the other four subprojects are expected to be completed before December 31, 1981. INSFOPAL's management has been urged to strengthen project supervision and to accelerate project execution and disbursements. As of September 30, 1981, US$20.7 million or 77% of the loan has been disbursed. 4. Ln. No. 1118 Caqueta Rural Settlement Project; US$19.5 million, June 2, 1975. Effective date: April 1, 1976 Closing Date: Original - October 31, 1979 Current - December 31, 1981 Project implementation is behind schedule and the closing date will need to be extended by one year to December 31, 1982 in order to complete project targets. A recurring problem, which imposes serious operational constraints, is the slow transfer of counterpart funds to the project. As of September 30, 1981, US$4.1 million or 21% of the loan remained undisbursed. To facilitate the completion of the project, the closing date of the loan will be extended for one year. 5. Ln. No. 1163 Cordoba 2 Agricultural Development Project; US$21 mil- lion, September 12, 1975. Effective Date: March 30, 1976 Closing Date: June 30, 1983 A few months after effectiveness, the Government decided to give responsibility for project civil works to another agency. This decision delayed the initiation of the project and implementation is still behind schedule. One of the project's main problems continues to be inadequate budget allocations to carry out project works and to provide sub-loans to farmers. Maintenance of roads and drains constructed under the loan, technical assistance to farmers and rate of land transfer to beneficiaries are inadequate; the executing agencies are taking corrective measures. The project's social component, schools, domestic water supply and health, is progressing satisfactorily. As of September 30, 1981, US$10.2 million or about 49% of the loan amount had been disbursed.  - 33 - ANNEX II Page 6 of 11 6. Ln. No. 1223 Sixth Development Finance Companies Project; US$80.0 mil- lion, March 31, 1976. Effective Date: September 1, 1976 Closing Date: June 30, 1981 The project is proceeding satisfactorily and virtually all loan funds are committed. As of September 30, 1981, about 98% of the loan had been disbursed. 7. Ln. No, 1352 Integrated Rural Development Project; US$52.0 million, January 7, 1977. Effective Date: August 26, 1977 Closing Date: December 31, 1982 The project is now in its fifth year of implementation and proceed- ing satisfactorily in spite of its complexity. The project's components of credit, technical assistance and training are proceeding satisfactorily, and institutional coordination continues to be effective. The forestry and water supply components have suffered some delays. Administrative procedures, such as procurement and disbursement, continue to present some difficulties, but they are much less serious than initially. Control and monitoring of project execution is comprehensive, and first stage evaluation is currently underway. As of September 30, 1981, US$35.5 million, or 68% of the loan had been disbursed. 8. Ln. No. 1357 Second Agricultural Credit Project; US$64.0 million, February 4, 1977. Effective Date: September 6, 1977 Closing Date: December 31, 1981. The US$25 million assigned to medium and large farmers has been fully committed and disburged. However, only 39% of subloans allocated to small farmers have been committed, and no satisfactory arrangement has yet been found to speed up commitments. Concern over possible diversion and substitu- tion of subloan funds led the Borrower to increase substantially its end-use supervision. About 85% of loan funds for credit to agroindustries have been committed for 160 subprojects. As of September 30, 1981, US$49.1 million, or 77% of the loan had been disbursed. 9. Ln. No. 1450 Telecommunications IV; US$58.3 million, July 7, 1977. Effective Date: October 3, 1977. Closing Date: June 30, 1982. The project had been delayed as a result of several key personnel changes in the Borrower. Current activities are concentrated on the procure- ment of project goods, the planning of cable networks, trunk exchange expan- sion, and design of buildings to house equipment. Satisfactory progress is being made in the acquisition program of smaller local telephone companies. As of September 30, 1981, US$50.1 million, or 86% of the loan, remained undisbursed.  -34 - ANNEX II Page 7 of 11 10. Ln. No. 1451 Second Small-Scale Industry Project; US$15 million, September 27, 1977. Effective Date: February 14, 1978. Closing Date: September 30,1981 After initial delays in loan effectiveness mainly due to management changeover, project implementation is proceeding well and loan funds are fully committed. As of September 30, 1981, 93% of the loan had been disbursed. 11. Ln. No. 1471 Highways VII; US$90 million, July 5, 1977. Effective Date: November 28, 1977. Closing Date: December 31, 1982 The Project comprises three main programs: rehabilitation, main- tenance, and vehicle weight control. After initial delays, the project is now developing satisfactorily. All rehabilitation works have been contracted and 25% of the roads completed. The maintenance program began in March 1980; consultants to assist MOPT in carrying out the program have been retained and the bulk of the maintenance equipment has been purchased. The vehicle weight control program is about to begin after a 28-month delay. As of September 30, 1981, about US$50.4 million had been disbursed. 12. Ln. No. 1487 Integrated Nutrition Improvement Project; US$25 million, November 10, 1977. Effective Date: March 9, 1978 Closing Date: June 30, 1982 Progress has been achieved in the major components of health, nutrition education and water supply but execution is running about a year behind schedule. Initial delays occurred in two subsidiary components--home food production and food quality control--but activities are now underway. Project management and coordination have been sound, flexible and effective. Project monitoring and evaluation systems are operating effectively. 13. Ln. No. 1523 Second Cali Water Supply and Sewerage Project; US$13.8 million, June 20, 1978. Effective Date: January 31, 1979 Closing Date: June 30, 1982 Because of EMCALI's failure to comply with some of its obligations under the Loan Agreement dealing with the finances of its Water and Sewerage Division, on January 29, 1981, the Bank suspended disbursements under this loan. Disbursements were resumed on September 4, 1981 once EMCALI has taken corrective measures. As of September 30, 1981, US$11.6 million or 84% of the loan remained undisbursed.  - 35 - ANNEX II Page 8 of 11 14. Ln. 1558 Urban Development Project; US$24.8 million, July 21, 1978. Effective Date: December 1, 1978 Closing Date: June 30, 1982 While project execution and coordination has recently improved, overall progress is still running behind schedule. Project implementation plans in 16 of the 23 cities have been approved by the Bank. The new General Manager of SIP intends to accelerate project implementation and has established a working unit to monitor progress and evaluate the project. For some time, the Bank has been recommending a review of the project scope to ensure its completion on time and recently SIP has presented a proposal which, while not changing the basic concept of the project, involves design modifications in most components. This proposal is currently being reviewed by the Bank. 15. Ln. No. 1582 San Carlos I Hydro Power Project; US$126 million, July 14, .1978. Effective Date: April 5, 1979 Closing Date: June 30, 1984 Project works are proceeding on schedule and main contracts for equipment have been signed. As of September 30, 1981, US$38.7 million or 31% of the loan had been disbursed. 16. Ln. No. 1583 500 kV Interconnection Project; US$50 million, July 14, 1978. Effective Date: October 17, 1978 Closing Date: June 30, 1982 Project works have recently been initiated. The Bank-financed component (transmission line) is proceeding on schedule, at lower-than- anticipated cost. However, project completion is likely to be delayed by about two years as a result of KfW's objection to the contract award for substations (KfW was originally to finance this component). The Government is obtaining other sources of finance. The line is to be energized temporarily at 220 kV in 1982, pending full completion of the works. 17. Ln. No. 1593 Cartagena Industrial Export Processing Zone; US$15 million, August 1, 1978. Effective Date: January 30, 1979 Closing Date: December 31, 1983 After an initial delay due to procurement problems, project implemen- tation is now running smoothly. Construction and the promotional campaign are both well under way, but there have been delays in contracting the water supply works and in construction of a portion of the access road. Difficult soil conditions encountered at the site require that substantial soil investigations be carried out before site preparation is initiated.  - 36 - ANNEX II Page 9 of 11 18. Ln. No. 1598 Seventh Development Finance Companies Project; US$100 million, July 27, 1978. Effective Date: November 28, 1978 Closing Date: December 31, 1982 The project is proceeding satisfactorily and loan funds are virtually fully committed. As of September 30, 1981, 87% of the loan, or about US$85.6 million, had been disbursed. 19. Ln. No. 1624 Airports Project; US$61 million, December 29, 1978. Effective Date: July 24, 1979 Closing Date: December 31, 1984 Project works are well under way. Because of poor soils, there is a construction delay at the future Rio Negro airport and instrumentation has been installed in order to estimate amount of camber necessary to compensate for future settlement. As of September 30, 1981, about 54% of the loan had been disbursed. 20. Ln. No. 1628 Mesitas Hydroelectric Power Project; US$84 million, April 9, 1979. Effective Date: August 21, 1979 Closing Date: December 31, 1982 Project works are well advanced, although with a 3-6 month delay. Higher-than-anticipated costs (estimated at US$62 million) are expected as a result of higher bids than forecast at appraisal. As of September 30, 1981, 49% of the loan had been disbursed. 21. Ln. No. 1694 Second (Cartagena) Urban Development; US$13.5 million, August 31, 1979. Effective Date: June 20, 1980 Closing Date: December 31, 1984 The project is about 18 months behind schedule, with cost overruns, which are mainly due to inflation, of about 39%. As of September 30, 1981, US$12.6 million, or 97% of loan funds remained undisbursed. 22. Ln. No. 1697 Third Bogota Water Supply; US$30 million, November 30, 1979. Effective Date: April 22, 1980 Closing Date: June 30, 1983 Significant progress has been made on the Bogota River sewage treatment and rectification study, the construction of water and sewerage systems in low- income barrios, the purchase of meters and of maintenance equipment. Implementa- tion of major civil works, however, has been slow. Loan disbursements are only  - 37 - ANNEX II Page 10 of 11 8% of appraisal projections and project completion is now scheduled for December 31, 1983, one year later than the scheduled appraisal completion date. EAAB is presently taking adequate measures to implement all project components and further delays are not anticipated. 23. Ln. No. 1725 San Carlos II Hydro Power; US$72 million, November 30, 1979. Effective Date: June 19, 1981 Closing Date: June 30, 1985 Project works are proceeding well, with good performance by the Borrower. 24. Ln. No. 1726 Third Water and Sewerage; US$31 million, November 30, 1979. Effective Date: February 28, 1980 Closing Date: June 30, 1984 Project implementation is under way with the final designs for 21 of the 23 subprojects approved and with designs for the remaining subprojects in final stages of preparation. INSFOPAL has agreed on a master contract amendment for subsidiary loan agreements which, when executed, will allow accelerated construction and loan disbursements. The general performance of the Borrower (INSFOPAL) is not yet fully satisfactory. Corrective measures will need to be taken and a supervision mission is scheduled to review the problem. As of September 30, 1981, the loan remained undisbursed. 25. Ln. No. 1737 Third Agricultural Credit; US$20 million, November 30, 1979. Effective Date: October 1, 1980 Closing Date: June 30, 1985 Disbursements are lagging, even taking into account the one year delay in effectiveness, mostly because of slow on-lending commitments. The revolving fund for credit is working well, but overall financial management of INCORA needs strengthening. As of September 30, 1981, 9% of the loan had been disbursed. 26. Ln. No. 1762-CO Cerro Matoso Nickel; US$80 million, December 20, 1979. Effective Date: July 3, 1980 Closing Date: June 30, 1983 The project is expected to be completed by April 1982. Cost overruns will require a revision of the financing plan and, possibly, additional commitments from the sponsors. 27. Ln. No. 1807-CO Bogota Power Distribution; US$87 million, February 6, 1981. Effective Date: September 25, 1981 Closing Date: December 31, 1983 This loan became effective on September 25, 1981 and project imple- mentation is underway.  -38 ANNEX II Page 11 of 11 28. Ln. No. 1825-CO Fifth Telecommunications; US$44 million, December 19, 1980. Effective Date: October 30, 1981 Closing Date: June 30, 1985 This loan became effective on October 30, 1981 and is proceeding satisfactorily. 29. Ln. No. 1834-CO Third Small-Scale Industry; US$32 million, December 10, 1980. Effective Date: July 9, 1981. Closing Date: June 30, 1981. This loan became effective on July 9, 1981, and project implementa- tion is underway. 30. Ln. No. 1857-CO Eighth DFC; US$150 million, December 10, 1980. Effective Date: July 9, 1981. Closing Date: December 31, 1984. ) This loan became effective on July 9, 1981 and is proceeding satis- factorily. As of September 30, 1981 US$8.9 million had been committed to sub-projects. 31. Ln. No. 1868-CO Guadalupe IV Hydro Power; US$125 million, December 19, 1980. Affective Date: June 29, 1981. Closing Date: June 30, 1985. The project is proceeding satisfactorily. 32. Ln. No. 1953-CO Playas Hydro Power; US$85 million, November 6, 1981. This loan -is not yet effective. 33. Ln. No. 1966-CO Rural Roads; US$33 million, September 24, 1981. This loan is not yet effective. 34. Ln. No. 1996-CO Irrigation Rehabilitationl US$37 million. This loan was approved on May 19, 1981 but is not yet signed. 35. Ln. No. 1999-CO Village Electrification; US$36 million. This loan was approved on May 21, 1981 but is not yet signed. 36. Ln. No. 2008-CO Guavio Power; US$359 million. This loan was approved on May 28, 1981 but is not yet signed.  - 39 - ANNEX III Page 1 COLOMBIA HIGHWAY SECTOR PROJECT SUPPLEMENTARY DATA SHEET Section I: Timetable of Key Events (a) Time taken to prepare project: 14 months (b) Agency which prepared project: MOPT (c) First presentation to Bank: April 1978 (d) First mission to review project: May 1980 (e) Departure of Appraisal Mission: July 1981 (f) Completion of negotiations: February 1982 (g) Planned date of effectiveness: September 1982 Section II: Special Bank Implementation Actions Close Bank supervision will be required to ensure that the Program is implemented and that sectoral objectives are monitored and implemented. Section III: Special Conditions 1. During negotiations, the following assurances were obtained: (a) Maintenance equipment to be procured in accordance with the Equipment Management System (paragraphs 46 and 54); (b) Rehabilitated roads to be maintained by contractors (paragraphs 46 and 54); (c) Adopt and implement the Pavement and Equipment Management Systems in all Districts by January 1, 1983 (paragraph 46); (d) FVN to maintain separate accounts for the project (paragraph 62); (e) If it becomes necessary to reduce the Program, new construction works will be cut first (paragraph 55); (f) The National Transport Plan will be updated in cooperation with relevant public agencies (e.g., CNR, COLPUERTOS' etc.) by December 31, 1983 (paragraph 41); (g) Subprojects to be selected and evaluated in line with accepted criteria (paragraph 53); (h) A training program for skilled labor and managers of the local construction industry to be completed by August 1983 (paragraph 45);  - 40 - ANNEX III Page 2 (i) Establish, review and implement a program to decentralize main- tenance and construction activities by transferring them to local and regional authorities by June 30, 1983 (paragraph 43); (j) Establish details of research in road construction technology and highway administration by December 31, 1982 (paragraph 57); (k) Review the Highway Development Program with the Bank each September and March (paragraph 60); (1) MOPT to adjust road users charges as required, to produce sufficient funds to cover the cost of road infrastructure by each category of user (paragraphs 38 and 42); and (m) Vehicle weighing stations would be installed and in operation by December 31, 1983 (paragraph 36).  i B RD 125
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