Romania - Pig Production and Processing Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 5282 PROJECT PERFORMANCE AUDIT REPORT ROMANIA - PIG PRODUCTION AND PROCESSING PROJECT (LOAN 1479-RO) October 9, 1984 Operations Evaluation Department This document has a restricted distributiom and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authoriEtion. ABBREVIATIONS BAFI - Bank for Agriculture and Food Industry CAP - Agricultural Production Cooperative EEC - European Economic Community IAS - State Agricultural Enterprise ICB - International Competitive Bidding IPSCAIA - Institute for Projects and Studies for Construction in Agriculture and Food Industry MAFI - Ministry of Agriculture and Food Industry MIC - Meat Industrialization Center MIT - Meat Industrialization Trust ROMAGRIMEX - Romanian Foreign Trade Company for Agriculture FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT ROMANIA - PIG PRODUCTION AND PROCESSING PROJECT (LOAN 1479-RO) TABLE OF CONTENTS Page No. Preface ........................................... i Basic Data Sheet ... .................................................. ii Highlights ......................................................... iii PROJECT PERFORMANCE AUDIT MEMORANDUM I. PROJECT SUMMARY ................................ ..... 1 II. AUDIT FINDINGS ...... .............. o ..................... 3 A. General .................... ............. .............. 3 B. Problems and Constraints *************.* *** 4 C. Main Issue ............ #............................ 8 Annex I - Comments received from the Borrower ...................... 13 PROJECT COMPLETION REPORT I. Introduction ............... ..................................... 17 II. Project Formulation ........ ........ .............. 20 III. Project Implementation .... ...... ............................... 26 IV. Institutional Performance ..... .................. ............ 32 V. Operating Performance and Project Impact ..................... 34 VI. Operating Results ........................................ 45 VII. Bank's Performance ................................... 52 VIII. Conclusions ................ o.......................... 54 Tables 1-13 Annexes 1-4 Map - IBRD 12669 PCR This document has a restricted distribution and may be used by recipients only in the performance of their ofria duties. Its contents may not otherwise be disclosed without World Bank authorization. PROJECT PERFORMANCE AUDIT REPORT ROMANIA - PIG PRODUCTION AND PROCESSING PROJECT (LOAD 1479-RO) PREFACE This is a performance audit of the Pig Production and Processing Project in Romania, for which Loan 1479-RO in the amount of US$71.0 million was approved in July 1977. The loan was closed as scheduled on June 30, 1982. It was fully disbursed; final disbursement took place on Septem- ber 13, 1982. The audit report consists of an audit memorandum prepared by the Operations Evaluation Department (OED) and a project completion report (PCR) dated February 10, 1984. The PCR was prepared by the Bank's Europe, Middle East and North Africa Regional Office. An OED mission visited Romania in May 1984. The mission held dis- cussions with officials of the Ministry of Agriculture and Food Industry, the Bank for Agriculture and Food Industry, and with staff in the field. The information obtained during the mission was used to test the validity of the analysis and conclusions of the PCR. The audit memorandum is based on these discussions, on interviews with Bank staff associated with the project, and on a review of the PCR, the Staff Appraisal Report (No. 1500-RO) dated June 27, 1977, the President's Report (No. P-2121-RO) dated June 28, 1977, the Loan Agreement of July 15, 1977, correspondence with the Borrower, and internal Bank memoranda on proj- ect issues as contained in relevant Bank files. A copy of the draft report was sent to the Borrower on July 17, 1984. Comments received from the Bank for Agriculture and Food Industry are in Annex I and have been taken into account in preparing the final report. The audit finds the PCR comprehensive and accurate with respect to the project's principal achievements and shortcomings and has no reason to question its conclusions. The audit memorandum primarily deals with the country's protein feed deficiency; other topics covered include civil works construction, monitoring and evaluation, pig production management, price formation, waste heat recovery and environmental effects. The valuable assistance provided by the Government of Romania and by local officials and staff is gratefully acknowledged. PDOJECT PERFOMANCE AUDIT REORT ROKAnIA - PIG PRODUCTION AND PROCESSING PROJECT (LOAN 1479-O) BASIC DAA SHECT KE PROJECT DATA Appraisal Actual or Actual as Z of Estimate Estimated Actual Appraisal Estimate Total Project Costs (USs million) 322.5 464.6 144 Loan Amount (US$ aillion) 71.0 71.0 100 Date Board Approval - 07/12/77 Loan Agreement Date - 0711/S77 - Date Effectiveness 10/15/77 09/28/77 83 /a Date Pbysical Components Completed 12/80 06/83 173 Ta Proportion Than Completed (Z) 100 10D Closing Date 06/30/82 06/30/82 10D /a Economic Rate of Return (Z) 17 11 65 Financial Rates of Return (1) - Pig Production 5-8 3 46 - Pig Slaughtering and Processing 11-12 11-20 135 Institutional Performance - Good - Technical Performance - Good - Number of Jobs Created 9,000 11.400 127 CUNULAtIVE DISBURSENTS FY78 FY79 FYSO FY81 FY82 FYB3 Appraisal Estimace (tSS million) 7.5 28.3 54.6 67.6 71.0 - Actual (USS million) 8.3 19.9 37.8 54.5 69.3 71.0 Actual as X of Estimate 111 70 69 81 98 100 Date of final disbursement: September 13, 1982 MISSION DATA Date No. of Mandays Specializations Performance types of (ndoyr.) P4rsons in Field Represented/b sating/c Tread/d Problems Identification 06/75 2 4 C,D Identification 04/76 2 4 B,D Follow-up Preparation 06/76 1 2 D Appraisal 11/76 A 84 B.C.2D Sub-total 94 Supervision 1 06/77 4 8 A..2D 1 2 - Supervision 2 03/78 3 6 B,C,D 1 2 - Supervision 3 12/78 1 7 D, 1 2 - Supervision 4 05/79 2 6 B.D 1 2 - Supervision 5 12/79 6 12 2B,2D 1 2 - Supervision 6 10/80 2 10 2D 1 2 - Supervision 7 04/81 2 4 C,D 1 1 - Supervision 8 12/61 3 6 B.C,D 1 2 - Supervision 9 11/82 1 2 D 1 1 - Sub-total 61 Total 155 OTHER PROJECT DATA Borrower: Bank for Agriculture and Food Industry (BAPI) Guarantor The Socialist Republic of Romania 'Executing Agency: Bank for Agriculture and Food Industry (BAFT) Fiscal Year of Borrover January 1 to December 31 Rame of Currency (Abbreviation) Lei (Lei) Currency Exchange Rate: Appraisal Year Average: US$1.00 - Lei 20.00 Intervening Years Average: U5S1.00 - Lei 17.03 Completion Year Average: US31.00 - Iii 17.20 Follow-on Projects: Name Livestock II (Pigs) Livestock III (Poultry) Livestock IV (Cattle) Loan Number 1669-RO 1766-D0 1937-30 Loan Amount (US$ million) 75.0 85.0 80.0 Date of Board Approval 03/20/79 10/30/79 12/23/80 /a Calculated in terms of mouths from date of Board approval. Tb A - Agriculturist; I - Agricultural Economist; C - Tinancial Analyst; D - Technical Specialist; E - General. T-1 Problem-free or minor problems; 2 - Moderate problems; and 3 - Major problems. Td I Improving; 2 - Stationary; and 3 - Deteriorating. - iii - PROJECT PERFORMANCE AUDIT REPORT ROMANIA - PIG PRODUCTION AND PROCESSING PROJECT (LOAN 1479-RO) HIGHLIGHTS The project was the first Bank-financed nationwide agricultural projecz in Romania, and the first exclusively for livestock production. As part of the 1976-80 National Development Plan, it made credit available through the Bank for Agriculture and Food Industry (BAFI) to State Enter- prises and Agricultural Production Cooperatives for investments in pig pro- duction and processing facilities. Its objective was to increase the supply of meat and meat products for domestic consumption and export, and to increase efficiency and productivity in Romania's pig industry. These objec- tives were generally achieved. Primarily due to overcommitment of Romania's construction industry, the project took considerably longer to implement than originally expected. Investment was phased over six years starting in 1978, rather than over four years starting in 1977, as expected at project appraisal. In particular, construction of new pig production and processing facilities was signifi- cantly delayed, while modernization of existing pig farms and processing facilities progressed ahead of schedule. The project cost was some 44% higher than projected at appraisal, partly due to an expansion in scope. This expansion, together with increased emphasis on modernization of existing pig production and processing facili- ties, is the main reason that the project goals for pig production were surpassed by 47%, those for slaughtering and meat processing capacity by respectively 13% and 91%, and that for jobs created by 27%. However, lack of foreign exchange to import protein feed, and Romania's inability to signifi- cantly increase domestic protein feed production to satisfy the needs of its rapidly increasing livestock industry, have seriously affected the financial and economic viability of an otherwise physically well-implemented and ade- quately managed project. Despite this, the project's re-estimated economic rate of return remains satisfactory at about 11% compared to 17% estimated at appraisal. The following points may be of particular interest: - overcommitment of the construction industry caused delays in civil works construction (PPAM, paras. 14-15; PCR, paras. 5.10 and 5.18); - the importance of monitoring project impact as early as possible was not fully appreciated by Borrower agencies (PPAM, paras. 16-18; PCR, paras. 3.19, 3.21 and 8.03); -iv - - more emphasis should be given to improving managerial and husbandry skills to allow pigs to perform to their genetic performance poten- tial (PPAM, paras. 19-20; PCR, paras. 5.25, 5.32 and 8.08); - environmental aspects, though currently reported to be dealt with satisfactorily, need to be carefully assessed and monitored (PPAM, para. 21; PCR, paras. 5.13, 5.21 and 5.36); - the relatively good financial performance of the project's slaugh- tering and meat processing facilities, as opposed to the poor fi- nancial performance of its pig units, is the result of controlled interface pricing (PPAM, paras. 23-25; PCR, paras. 6.08 and 8.14); - if additional protein feed were provided to raise feed quality, the bio-economic production parameters of the project would be substan- tially improved, pig production would increase without any addi- tional feed costs (PCR, para. 5.31), and financial and economic performance would improve significantly (PPAM, paras. 26-33; PCR, paras. 6.01, 6.02, 6.13, and 6.17); and - the problem of protein deficiency is not a technical one, but a major policy and planning issue (PCR, paras. 7.03, 8.02, and 8.06). - 1 - PROJECT PERFORMANCE AUDIT MEMORANDUM ROMANIA - PIG PRODUCTION AND PROCESSING PROJECT (LOAN 1479-RO) I. PROJECT SUMMARY1/ 1. Pig production traditionally has been important in Romania. Over the past three decades, there has been a production shift from individual units to the social sector, which consists of State (IAS) and cooperative (CAP) enterprises. The country's livestock slaughtering and meat processing industry is well established. Major improvement and expansion of pork pro- duction and processing was an important objective in Romania's 1976-80 National Development Plan. 2. This was the seventh agricultural project receiving Bank support in Romania. It was the first Bank-supported project exclusively for livestock and the first in the agriculture sector to be undertaken on a nationwide basis. Identification was initiated by the Bank's 1975 agricultural sector mission, and the project concept evolved through various stages from an ori- ginally more complex credit/agro-industrial project. Preparation, assigned to specialized institutions in Romania under the auspices of the Bank for Agriculture and Food Industry (BAPI), was slow on account of a shortage of experienced staff and uncertainties arising in connection with the prepara- tion of the country's five-year plan. Interaction with World Bank staff at the preparation and appraisal stage was greatly hampered by the Romanians' reluctance to release unpublished information pertaining to the economic evaluation of the project. Appraisal took place in late 1976, and a Loan (1479-RO) in the amount of US$71.0 million was approved in July 1977. The estimated project cost was US$322.5 million, with a foreign exchange cow- ponent of 22%. The loan became effective in September 1977 and was closed in June 1982, as expected. Final disbursement took place on September 13, 1982. 3. The objective of the project was to increase the efficiency and productivity of Romania's pork industry and thereby to increase the supply of meat available either for domestic consumption or for export. This goal was to be accomplished by financing the 1977-78 timeslice of relevant investments in the 1976-80 National Development Plan. Specifically, the project included support for (a) facilities and livestock for new pig breeding/fattening units; (b) facilities and livestock for breeding farms; (c) a modernization program for existing pig farms; (d) a pig improvement and selection program; (e) construction of modern slaughtering and meat processing facilities; and (f) a modernization program for existing slaughterhouses. Construction was expected to be completed by 1981, and full production to be achieved by 1983. 4. Implementation of the project was successful. While implementation of new facilities proceeded slower than expected, modernization of existing facilities, which required less extensive civil works construction, progress- ed well ahead of schedule. Under the project, 70 pig breeding/fattening or 1/ Adapted from the PCR. - 2 - pure breeding units were established, compared with 100 expected at apprai- sal. These shortfalls in the number of units - not capacity - were entirely attributable to CAP units, while State complexes met or exceeded their tar- gets. None of the ten planned pig selection farms was established. In contrast to these changes, the 42 pig farm modernizations undertaken were more than double the anticipated number. The completed slaughterhouse/meat processing facilities numbered 18, compared with 19 expected at appraisal. Additionally, 47 slaughterhouses were modernized; no target for this com- ponent was originally specified. There was a considerable increase in over- all project scope, as individual units constructed or improved tended to be larger than expected. The total established capacity increase for housing sows and their progeny reached 195,000 animals, or 50% more than the 130,000 estimated at appraisal; annual slaughter capacity increased by 285,300 t and the combined annual meat processing capacity by 85,800 t, exceeding the tar- gets by 13% and 91%, respectively. 5. Project start-up posed no problems as BAFI, the executing agency, had started committing funds well ahead of Board approval of the loan. This led to accelerated disbursement during the first year, but disbursements began to lag thereafter on account of an overcommitment of the local con- struction industry since the 1976 earthquake and consequent delays in civil works construction, and an overambitious Plan. Project completion was thus delayed by over two years. Actual project cost was US$464 million, or 44% higher than expected. The cost overrun, which was smaller in local currency terms (22%), was partly due to construction delays, but also to the expanded project scope.2/ Procurement under the project was satisfactory. 6. The production impact at full development is expected to be very favorable. The output of weaner pigs is projected to reach about 467,000 per year at full development in 1985. Total annual net production will be about 265,000 t of pigs liveweight, or 47% above appraisal estimates. The travel distance of the fattened pigs to slaughter has been reduced significantly as a result of the new facilities established under the project. Most of the incremental production is to be sold domestically. Average per capita annual consumption of pig meat has already increased from 23 kg in 1975 to about 29 kg in 1980, as expected; the 1985 Plan target is 36 kg. 7. The main disappointing feature of this project has been the unavailability of adequate livestock feed. Romania's feed protein deficit was expected to be met through increased domestic production, primarily of soybeans, and imports. However, domestic production has not responded sufficiently to the growing requirements, and imports have been reduced as a result of the worsened overall economic situation. Performance of the pig industry, as measured by feed conversion rates, has been suboptimal, and protein deficiency has been a major factor leading to this result.3/ The 2/ See Borrower comments with respect to the inclusion of working capital in project cost (Annex I, point (II)). The composition of project cost has been clarified in the PCR, paras. 3.08 and 3.11, and Table 1. 3/ Borrower comments re-emphasize the view that difficulties related to protein supply are considered temporary (Annex I, point (IV)). The audit's view is presented in paras. 26-33. - 3- genetic quality of pigs being good, the other critical explanatory perf or- mance factor is management. An aggravating aspect concerning performance deficiencies has been that because of inadequate monitoring the feed and management problems, although known, could not be quantified in an adequate and timely fashion. Preliminary indications are that provision of additional protein, either domestically or through import, would have a high economic pay-off. 8. The project had no major institution-building objectives. Existing institutions involved in the project generally performed satisfactorily, one exception being reporting activities. Some upgrading of managerial expertise was accomplished through seminars and demonstrations. 9. The financial performance of the pig production enterprises has been depressed by two major factors: controlled prices and shortage of pro- tein feed. Assuming continuation of current pricing policies and inadequate feeding levels, the average financial rate of return in pig production has been re-estimated at 3%; with improved feed quality from 1985 onwards, this rate would rise to 7%. Operating under a more favorable price structure, related secondary industries show a better performance. Hence, the financial rate of return for slaughterhouses has been recalculated at 11%, and for specialized meat processing facilities at 20%. Compared with appraisal, the re-estimated financial return levels represent about a 50% shortfall for pig production, full target achievement for slaughterhouses, and a substantial overachievement for meat processing facilities. The project's economic rate of return has been re-estimated at 11%, compared with 17% estimated at appraisal. However, with adequate feed quality, the economic performance would most likely surpass appraisal expectations. 10. The project's environmental impact, while currently acceptable, poses continuous future risks. Although general conditions and available facilities are adequate from the standpoint of environmental concerns, inappropriate operation and maintenance of effluent treatment and slurry removal systems potentially could damage the environment. II. AUDIT FINDINGS A. General 11. In view of the long history of pig production in the country and the intensive pre-project efforts to improve this subsector, there existed a good basis for implementing this project. Improvement of pig production was given high priority in the National Development Plan of 1976-80, and Govern- ment strongly supported physical implementation of the project as an integral part of the Plan. Overall development up to the date of project completion progressed rapidly. Romania's pig population, which had expanded at an aver- age annual rate of 5.5% during the period 1950-76, grew at the even faster pace of 6.0% per year between 1976 and 1982. Average annual per capita con- sumption of pig meat rose from 23 kg in 1975 to about 29 kg in 1981, or at an average annual rate of about 4%. 12. Aside from the uninterrupted herd build-up, the development of Romania's pig industry has been characterized by a major restructuring of production. The predominantly smallholder system that existed some 30 years ago has been replaced to a large extent by specialized production units of very large size - possibly the largest in the world. This transition, with its enormous challenges in terms of construction, management and especially veterinary care, has been accomplished relatively smoothly. 13. Two Bank-supported projects (Loans 1479-RO and 1669-RO) were intended to accelerate the transition and growth of the pig industry, and to promote technological improvements. The first of these - the subject of this report - has on the whole been successfully completed. Although there were some difficulties, most of these had origins external to the project. In the sections below the audit highlights selected concerns which are generally well covered in the PCR. B. Problems and Constraints 14. Civil Works Construction. The main shortcomings during implementa- tion of this project relate to construction. These include construction delays (PCR, paras. 5.10 and 5.18) and quality deficiencies (PCR, paras. 5.11 and 5.23, and PCR, Annex 3, para. 27).4/ Construction delays are primarily attributed by Romanian authorities to overcommitment of the construction industry, especially after the 1976 earthquake, but over-ambitious overall Investment Plan targets for 1976-80 are also likely to have contributed to strains in the industry. The exact nature of this overcommitment is diffi- cult to pinpoint, especially in light of the fact that established construc- tion industries generally tend to be rather flexible and can adjust capaci- ties within a fairly wide margin, and there was sufficient lead time to gear up to meet the task ahead. It is recognized, of course, that the earthquake could not have been anticipated as a major disruptive factor. But in view of the lagging performance under this project and the reported shortage of skilled construction workers, it is clear that project requirements exceeded the actual capacity of the construction industry. This conclusion implies that the projected pace of investments was overoptimistic on technical grounds. Further evidence to this effect are the difficulties encountered by various domestic suppliers in delivering on time construction materials and equipment for project facilities. 15. The experience with construction under this project underlines the importance of phasing in investment planning. It has shown that a greatly accelerated program of specialized investments such as in pig production facilities, slaughterhouses and processing facilities has substantial draw- backs. Romania erected/rehabilitated a much larger number of these facili- ties during the period 1977-83 than during any comparable preceding period, and programmed additional investments have fallen off sharply for subsequent periods. Besides overcommitting the construction industry and local 41 The Borrower does not consider implementation delays for this project as a major problem, given the project's large size and high level of tech- nology (Annex I, point (I)). - 5 - suppliers of various project inputs, the bunching of such investments reduces the opportunities for identifying and incorporating improvements. The PCR indicates that design planning had been flexible (para. 5.09), but clearly it takes time to gain experience with new design features and only limited changes could be incorporated during the project period. There are indications, for example, that buildings could be designed more lightly and cheaply, and that Improvements in layout, detailed design and materials use are not only possible but desirable. The audit mission noted changes in some pig houses that already had been made on an ad hoc basis since completion by industrious managers. For example, steel has been replaced by concrete or plastic in a number of places because of the rapid rate of corrosion, pen divisions have been rearranged for pregnant sows, and ventilation systems have been modified. Modifications such as these could not be incorporated at the design or construction stage of other units because these were already too far advanced or even completed by the time the need for these modifica- tions became apparent. On some of these, such as pen divisions, there is disagreement among unit managers as to the effectiveness of alternative designs and still more time is needed for observing the respective merits.9/ 16. Monitoring and Evaluation. The PCR points out that the importance of monitoring project impact as early as possible is not fully appreciated by Romanian agencies involved in the project (para. 3.21), and recommends that a monitoring mechanism should be developed (para. 8.03). Audit discussions with BAFI officials indicate that, at the very least, their opinion on this subject differs from that of Bank staff. In their view, BAFI is well inform- ed of the progress of investment activities of the borrowing entities, and effective accounting allows enterprise managers to keep track of developments in unit costs and physical output; BAFI has access to these accounts. Furthermore, BAFI, being responsible for agricultural investments nationwide, is reluctant to undertake more in-depth impact monitoring for these invest- ments on the one hand, and to give excessively differentiated treatment to Bank-supported investments compared with others. 17. In the audit's view, there are particular connotations of impact monitoring within the Romanian context. The main purpose of impact monitor- ing normally is to detect as early as possible changes in the financial/ economic viability of investments in order to allow corrective action to be taken if necessary. In Romania, physical target achievement is an overriding criterion, and monitoring focuses on that aspect. Since the targets as vell as input and output prices are either pre-set or controlled, there is little room to maneuver at the subproject level with respect to the financial/econo- mic outcome. Incentive systems in State enterprises also are geared towards 5/ Bank staff comment that these observations need to be kept in perspec- tive since Romanian authorities have adopted to a large extent the Bank's recommendations on housing and layouts under this and the follow-on project and have responded to Bank queries about massive designs that these were less costly under Romanian conditions than less massive ones. Furthermore, the design of pig houses in Romania is con- sidered to be good by any standard even though the quality of construc- tion Is sometimes deficient. - 6 - physical output. This does not mean that financial performance is not impor- tant in Romania. But the implications are that financial performance is less a function of enterprise management performance than in other economic sys- tems, among other reasons because relative production targets cannot be changed readily in response to financial performance indicators or to emerg- ing opportunities. Impact monitoring in this context thus becomes relevant primarily for policy makers and only secondarily for enterprise managers or a financial intermediary. This raises the question as to who is the appro- priate authority in Romania for the monitoring of such crucial aspects as feed conversion ratios and input/output price relationships under a project like this one. 18. Specific monitoring provisions are included in some of the ongoing agricultural projects in Romania; similar provisions in this project were poorly complied with (para. 3.19). These provisions have been considered burdensome by the Borrower. This experience suggests that there is a need for clarification of the whole subject of monitoring and evaluation. Renewed discussions between the Bank and the Borrower, held outside any specific project framework, have a fair potential of yielding increased mutual under- standing and of narrowing differing viewpoints. 19. Management of Pig Production. The PCR paints a favorable picture of the development of the pigs subsector over the past several decades. In this context it specifically refers to impressive management performance at the major IAS complexes (para. 5.16). However, the quality of management in general is also identified as a performance constraint in the PCR (paras. 5.32 and 8.08). Scope for improvement is seen in managing the existing herd and operating the physical infrastructure, and in the assimilation of new developments. 20. Stress is placed in Romania on technical management. This is reflected in the appointment of a majority of well qualified veterinarians to management positions in the pig production. complexes. The control of diseases has thus received the utmost attention, and the record in disease control has been very good. While the need for vigilance in this respect continues, a stage has been reached in the development of the industry where further gains are likely to be primarily achieved through contributions of non-veterinary disciplines. Promoting husbandry and accounting skills, as the PCR suggests, should prove effective for upgrading enterprises' manage- ment capability; records and accounts are not designed and used as a manage- ment aid at present. But, additionally, trained managers, working as a team with technicians, could provide a valuable input in optimizing resource use. 21. Environmental Effects. The audit mission paid special attention to this aspect in a general sense but could not evaluate the highly technical aspects of effluent disposal. In the project facilities visited, effluent disposal was accomplished either under an independent system, or with pre- treatment at the facility site and subsequent discharge into a municipal sewage treatment system. Some repair work to treatment facilities and con- veyance systems was evident at the time of the mission's visit. Borrower officials maintained that the PCR mission overstated deficiencies in effluent disposal systems and stated that adequate attention is being given to the -7- environmental effects of this project, and that compliance with the require- ments under the country's environmental laws is being monitored. To allevi- ate the legitimate concerns raised in the PCR (paras. 5.13, 5.21, 5.36, and Annex 3, paras. 34-36) it would be necessary to conduct an environmental sur- vey, including relevant chemical analyses, and to repeat the survey on a sample basis periodically to see whether future operation and maintenance of the systems remain adequate.6/ 22. Waste Heat Recovery. The PCR raises the question of waste heat recovery in processing facilities, and the audit agrees that this area should be further investigated by the Borrower (para. 5.35). While no further information on this topic could be obtained by the audit mission, it was able to touch on the Borrower's concerns related to energy during a visit to a new biogas plant at the State Enterprise Roman-Neazt. The plant, of Romanian manufacture and operating satisfactorily, makes the whole pig production com- plex energy self-sufficient during the months April-October and meets a significant share of winter energy requirements. Several such plants are currently in the planning stage or under construction in other locations. No information was available concerning the economics of biogas production based on pig production waste. 23. Price Formation. In Romania prices are set by the State Committee for Prices. Inputs are allocated administratively and outputs of the large enterprises are disposed of on a quasi-administrative contract basis. Com- petition plays no role in the resource allocation and pricing process, hence scarcities tend not to be reflected in prices. The PCR observes that price adjustments in recent years have worsened the terms of trade for pig pro- ducers, and also that at the prevailing 1983 prices the financial viability was marginal for pig producers but relatively good for processors. It there- fore concludes that interface pricing may be wrongly set (para. 6.08). 24. Within the framework of making price policy decisions, the pricing of a single commodity, i.e. live pigs in this case, cannot be dealt with in isolation. The various motivating objectives of the policy decision makers would have to be known in addition to relative prices of inputs, other com- modities and end products of the pigs industry to permit a comprehensive assessment. However, some arguments can be made for higher producer prices than were in effect in late 1983. On the other hand, there are well-managed pig enterprises which reportedly achieve satisfactory returns under the existing price structure, and it would not be advisable to set producer prices with a view to make even the least efficient units financially viable. Furthermore, any increases that might be granted certainly would be tempered by the country' s overall economic situation. 25. The pricing question has two dimensions, one relating to the low returns of pig producers and the other - the interface dimension - relating 6/ This suggestion has been endorsed by OPS's Office for Environment, Science and Technology. - 8 - to the disparity in profitability of the various stages in the pigs subsec- tor. The PCR has correctly flagged this aspect. However, the question of low returns at the primary producer level needs to be addressed first, and any remedy applied should be efficiency-oriented. There is large scope for improvement in production efficiency through the alleviation of the protein feed deficiency (para. 26). The ideal line of action would thus be to raise profitability at the producer level by reducing this deficiency and only then to correct residual shortfalls in financial returns resulting from unfavor- able terms of trade, if any, by increasing producer prices. C. Main Issue 26. The Shortage of Protein Feed Within the Larger Policy and Planning Perspective. Generally, feeding practices are among the prime determinants of animal production efficiency and profitability. Most important among these practices is to provide nutritionally balanced rations, i.e., energy, protein and fibers in proportions appropriate for a particular species and stage of physiological development. The main commercial high energy feeds available in Romania are maize and barley. The main commercial high quality protein feeds are soybean meal, fish meal, meat meal and dried skim milk. Other edible oil crop meals, such as sunflower, are of lower quality, but these can be upgraded and made suitable for pigs through the addition of the essential amino acid lysine. The latter can be commercially manufactured on a synthetic basis. If feed rations are imbalanced, the feed conversion effi- ciency is adversely affected. 27. Borrower and Bank staff are in agreement that as of 1983/84 there has been a serioua shortage of protein livestock feed in Romania. Actually, a national shortage to some degree has existed throughout the implementation period for this project. The key effect of this shortage, i.e., depressed feed conversion efficiency, has been aggravated in recent years proportionate to the worsening supply situation of protein feed materials. As a result, performance in all livestock categories has been adversely affected. For this project, average feed conversion has been estimated at 5.3 kg feed per kilogram liveweight, compared with the 4.2 kg assumed at appraisal, due to an average feed protein content of only 11% instead of a reasonably adequate target level of 14.5-15.0% (para. 5.30). The country's overall average is even lower than the achievements under this project. The economic profitabi- lity consequently is sharply reduced, in the case of this project by about one-third- 28. What is the source of Romania's protein feed problem? The country's traditional livestock feed cropping pattern included primarily car- bohydrate feeds such as corn, barley, unamillable wheat, potatoes and beets in addition to fodder crops. To provide improved rations for the rapidly grow- ing livestock population it has been necessary for many years to import pro- tein feed stuffs, primarily soybean meal. The potentially rapid growth in import requirements was expected to be contained, and eventually to be reversed, through promotion of local production, again chiefly soybeans. Production of soybeans was projected to grow from a very low level in the aid 1970s to over 700,000 tons in the mid 1980s. However, with the very inter- sive livestock development program under implementation since the mid-1970s -9- (with the support of four World Bank loans) this target level, had it been achieved, would have been far short of requirements in the 1980s.7/ As actual achievements in protein feed production have been disappointing, the development of the country's feed base and of its feed requirements have grown grossly out of phase. Romanian soybean production has remained at around 50% of the target, largely for agronomic reasons, i.e., lack of suitable, disease-resistant varieties and shortages of agrochemicals, and competing claims for suitable land. Some shift in emphasis to sunflower production has taken place, therefore. The only technically viable short-term alternative, i.e., importation of soybean meal, has never been adequately utilized and came further under jeopardy when the country's economic situation deteriorated in the wake of the world economic recession after 1980. In fact, imports declined sharply between 1980 and 1983. Under the prevailing circumstances, the country has experienced annual shortages of protein feed in the range of 800,000 to one million tons of soybean meal equivalent in recent years. 29. An analysis of protein shortages within the project context is most revealing. One key aspect is the effect of the protein shortage on aggregate feed balances. Generally, the feed conversion efficiency increases when an imbalance in rations is alleviated. Increased feed conversion efficiency implies that a given production target can be achieved with a lower quantity of feed.8/ The PCR estimates that annual protein feed imports would have to increase from 140,000 t to 257,000 t, or by 117,000 t in order to provide reasonably balanced rations (table following para. 5.30). With the projected economic prices (PCR, Annex 2, Table 4) the economic value of the incremental soybean imports would, by coincidence, equal the economic value of the replaced 254,000 t (117,000 t times replacement ratio of 2.17) of maize, as shown below: 117,000 t soybean meal at 15,340/t - L624.8 million 254,000 t maize at L2,460/t - L624.8 million This result demonstrates that a the total economic cost of feeds does not increase as a result of increased soybean imports because of the technical substitution effect in the rations. 7/ Iu the early 1980s World Bank staff estimated Romania's total requirements of soybean meal for 1985 to be about 1.5 million tons. 8/ As a rough estimate, in pig rations each 100 t of maize feed without protein supplement is the equivalent of about 75 t of balanced feed consisting of 15 t soybean meal and 60 t of maize. The 15 t soybean meal thus replace 40 t ^f maize, or one ton soybean meal replaces 2.7 t maize. On this efficiency scale, the project ranks at about 82 t of feed consisting of 73 t maize and 9 t soybean meal. Hence, 6 t additional soybean meal would replace 13 t maize (to reach the 75 t total feed target), or one ton soybean meal would replace 2.17 t maize. - 10 - The foreign exchange value at the assumed external trade prices would be as follows: 117,000 t soybean*meal at US$292/t = US$34.2 million 254,000 t maize at US$151/t = US$38.3 million This *result shows that 0 the foreign exchange cost of importing soybean meal could be more than compensated through exports of the maize saved in the pig rations, and any additional exports of pig meat resulting from the increased pig production would further contribute to the net gain in the foreign exchange balance. 30. Another important effect of protein shortages is reduced profit- ability. The PCR clearly demonstrates this effect, as the following summary shows: Increase Effect per Effect per Current Poor Peasonmble Reasonable over One Ton of One Dllar of Feed Situatioula Feed Scenaro/a Poor Scenario Feed Import Feed Iaport Crude protein in feed 11% 14.5Z 3.5% points - Protein feed imports 140,000 t 257,000 t 117,000 t 1.00 t Cost of protein imports US$34 million US$W aillim US$35 million - US$1.00 EcAncmic value of output/b L 5,875 million L 7,172 million L 1,297 million L 11,085 L 37 Econmic cost/b L 4,678 mllion L 4,678 millim 0 0 0 Econaic trading margin L 1,197 cUlinL2,494million L 1,297 million L 11,085 L 37 (US$68 million) (US$142 million) (US$74 millim) (US$632) (US$2.11) /a Consistent with InM table following para. 5.30, and Tables 12 and 13. /b Rpresents 1992 production, prices and costs. Under the above assumptions, imports of soybean meal would be increased above the current project use level of about 140,000 t in order to improve the average crude protein content of pig feed from the currently estimated 11% to 14.5%. As a result, estimated feed conversion efficiency would rise so that 4.0 kg feed would produce 1 kg of pig liveweight instead of the present 5.3 kg, the tonnage of liveweight pigs produced would increase by 21%, while the total tonnage of feed consumed would drop by about 8% and the cost of feed would remain largely unchanged. The annual economic trading margin (or net economic benefit) after 1992 would increase by Lei 1.30 billion, i.e., more than double compared with the margins achievable with protein levels - 11 - currently available. The latter surge in profitability implies that for every one ton of additional soybean meal imported the project would produce a net gain for the Romanian economy of US$632, or that for every one US dollar spent on soybean meal imports the project would generate economic net value added of US$2.11. While those results are based on a complex set of assumptions, they nevertheless demonstrate with a reasonable degree of confidence that a the importation of protein materials would greatly enhance resource productivity in pig production in Romania, and as such be an economically extremely attractive proposition. 31. The reasons for Government's refusal to import adequate quantities of soybean meal have never been adequately explained, although various analysts have attributed past policy to the country's shortage of foreign ex- change. Since it is not possible to analyze the country's competing claims on the available foreign exchange resources within the context of the audit, Government's decision to reduce imports in recent years on this account must be considered as unarguable. However, within the narrow context of pig production the audit finds no technical, foreign exchange or economic grounds for a policy that does not redress the serious protein feed deficit. The topic has been brought to Government's attention by Bank staff, first in the course of appraisal of the project and later, particularly from 1980 onwards, by project supervision missions and as part of the cattle and sheep subsector survey discussions. There is reason for the Bank to be concerned as to the reasons why this dialogue, especially regarding reconsideration of a policy which adversely affects returns on Bank-financed investments, has been so ineffective. 32. Because of the protracted feed scarcity situation, the audit takes the view that there exists excess livestock production capacity in Romania, and that a major element in creating this excess capacity has been the expansion in the pigs subsector. With hindsight, the appraisal assessment that the risks associated with this project were minimal proved incorrect since the implicit assumptions concerning the effectiveness of Government actions to provide adequate feed supplies turned out to be wrong in the course of events. 9/ Nevertheless, this outcome can hardly be construed as an appraisal deficiency, especially since this was the first Bank-financed project in the subsector and in light of the Bank's minimal input in project design and its exclusion from national plan and policy formulation, and because global economic events and Government's reaction thereto could not be foreseen. It is reflective of the general optimism prevailing at the time when one considers that three additional livestock loans were approved by the Bank during 1979/80 based on similar feed supply assumptions, albeit with the inclusion of a performance covenant in the Livestock III Project (Loan 1764-RO). No direct intervention has been financed in support of augmenting protein feed, nor has any such financing been requested by Government. However, a favorable production effect is to be expected from some of the Bank-financed irrigation projects. 9/ Appraisal of Pig Production and Processing Project, World Bank Report No. 1500-RO, 1977, para. 5.09. - 12 - 33. The audit concludes that, while implementation has been satisfac- tory for this project, the adverse wider economic and policy environment has prevented it from making its full contribution to the optimal growth of and from achieving the potential overall returns on investment in the agriculture sector. In retrospect, the expansion of livestock production infrastructure and of the herds has been too rapid. Spreading pig production and processing investments over a considerably longer period than originally planned would have been more in line with the capacity of local construction and supplier industries (paras. 15-16). It also would have had the advantages of experi- ence gained during the project period and of emerging technology to be incor- porated, of allowing better synchronization with the development of the feed industry, and of providing greater flexibility to adjust to changing macro economic circumstances. As for the measures currently available for correct- ing the imbalance and thus enhancing the prospects for sustainability of project benefits, the importation of protein materials would be the quickest to implement and produce results. However, if for technical (domestic pro- duction) or policy reasons the protein feed deficit is expected to continue, then measures to affect the size of the livestock population would need to be considered. Depending on the extent and durability of the deficit, the appropriate options would range from a mere slow-down in the growth rate of the herds to a reversal of the growth trend. Earlier action in this regard would have been advantageous. - 13 - Commute Received from the Borr Annex I ZCZC. DIST1738 JUS0256 GEDD2 EMPA3 EMiDA REF : TCP HC JUS0256 JGJI20 IN 30/03:01 OUT 30/03:09 11622C BANAO REEDDDDNAG R MR OTTO MAI8S ACTING DIRCTOR OPERATZIONS EVALUATIONS DEPARTMENT MR RANDOLPH HARRIS CHIEF DIUISIION AGRICULTURAL III E"ENA REOXON vIRD RE! COMPLETZION REPORT FOR PIG I POPROJECT ' LOAN 1479 RO C1) ME CONSIDER THAT THE REPORT SHOULD HAVE EMPHASIZED MORE THE FACT THAT THE PROJECT IS BASED ON TOP TFCHNOLOGY WHICH HAS BEEN PREVIOUSLY EXPERIMENTE D IN ROMANIA. DURING PROJECT IMPLEMENTATION SOME IMPROVEMENTS MERE MADE WHICH CONTRIBUTED TO INCREASE THE ECONOMIC EFFICIENCY - THIS IS WHHY THIS PROJECT IS ONE OF THE YEARS IN THE WORLD. IN THE CASE OF A PROJECT OF THIS SIZE WE THINK THAT DELAYS OF ONE OR TWO YEARS DURING THE IMPLENENTATZION PERIOD ARE NOT A MAJOR PROBLEM SINCE ONLY FEW INVESTMENT PROJECTS REMAINED TO BE FINISHED AFTER THE INITZIAL COMPLETION TERM t(II) BY COMPARING THE ESTTMATED COST OF THE THE PROJECT AT APPRAISAL AND THE ACTUAL COST OF THE PROJECT IT RESULTS THAT THEY ARE NEARLY THE SAME. THE EXPLENATZION FOR THE COST OVERRUN NENTIONED IN THE FINAL REPORT IS THAT THE MISSION INCLUDED IN ITS CALCUIATTON THF WORKING CAPITAL WHICH WAS EXCLUDED AT APPRAISAL TIMEP (III) SOME CHANGES OCCURED IN THE PROJECT STRUCTURF AS COMPAREDTO APPRAISAL TIME S THUS, THERE WERE CREATED LARGE CAPACITIES OF COPEXEs AND SLAUGHER HOUSES AND SMALLER CAPACITIES FOR THE BREEDING FARMS. DURING PROJECT IMPLEMENTATZION TWO RESEARCH INSTITUTES MERE ESTABLISHED WHICH CREATED THEIR OWN SELECTZION FARMS DELIVERING THE NECESSARY CROSS BREEDS TO THE PROJECTCIv) AS WF PREVIOUSLY NENTZIONED TO THE MISSION FOR THE COMPLETZION REPORT THE DIFFICULTIES ENCOUNTERED BY US RELATED TP THE SUPPLY OF PROTEIN ARE ONLY TEMPORARY , HAVING IN VIEW THE PROGRAM FOR INCREASING THE SOYAv SUN-FLOWER AND LEGUME PRODUCTZION 9 PROTFIN FEED DEFICIENCY MILL N BE SOLVED OUT. WE FEEL IT IS INADEQUATE TO CONSIDER THIS TEMPORARY PRODBLEM WHICH MILL BF SOON OVERCOMEr A MATTER OF OUR ECONOMIC AND PLANNING POLICY, CV) PLEASE REVIEW AGAIN YOUR RECOMMENDATIONS FOR THE RESEARCH SECTOR AS PROPOSED SUBJECTS ARE INCLUDED IN THE PLAN OF THE TWO RESEARCH INSTITUTESPCYI WF SUGGEST REVIFWING THE ACCOUNTING AND REPORTING CHAPTER SINCE THERE IS A MISUNDERSTANDING. THE FUND FOR INVESTMENTS ARE KEPT IN PAFI ACCOUNTS AND ENTERPRISES CANNOT USE LARGER FUND THAD PREVIOUSLY APPROVED7 REGARDS ION RUSINARU PRESIDETT 11622C DANAG R =08300606 ALT RTD FROM:0E2M NNNN N . - 15- ROMANIA PIG PRODUCTION AND PROCESSING PROJECT Loan 1479-RO PROJECT COMPLETION REPORT Main Text February 10, 1984 Regional Projects Department Europe, Middle East and North Africa Region Agriculture Division III - c . a a - 17 - ROMANIA PIG PRODUCTION AND PROCESSING PROJECT Loan 1479-RO PROJECT COMPLETION REPORT I. Introduction 1.01 Pig rearing and fattening have been traditionally important activities in Romania and, over the past three decades, the size of the national pig herd increased rapidly from about 2.2 million in 1950 to 8.8 million in 1976 and about 12.5 million in 1982, including 1.09 million sows in 1982. Over the past 30 years, Romania has developed impressive pig production units in the social sector, which are amongst the largest in the world. Most of the State (LAS), cooperative (CAP) and inter-cooperative pig complexes (ISCIPs), owned by two or more cooperatives, are extremely large. Many of these farms are breeding/fattening units with 10,000 to 20,000 sows and followers, and the smaller ones have about 500 sows and followers. By contrast, large pig farms in Western Europe have only 500 to 2,000 sows and followers. One large State farm complex, CONTIM, produces over one million pigs per year and another, COMIAL, over 650,000; and ISCIP Ulmeni, the country's largest single pig farm, produces about 240,000 finished pigs and 120,000 weaners per year. While these large scale farms in 1981 owned about 722 of all pigs and produced 65% of all pig liveweight, the individual sector, including members of cooperatives and individual producers, owned 281 of all pigs and produced about 35% of pig liveweight. A typical individual sector producer owns one or two sows and sells piglets or, alternatively, buys a few piglets for fattening. On average, he produces four to five pigs per year, but there are also larger individually owned units which may produce up to about 200 pigs per year. The table below gives a breakdown of pig ownership and production in 1981. Production Number of Pigs (Tons Liveweight) Sector Number % of Total Tons Z of Total ('000) ('000) IAS 4,737 41.0 508 44.4 CAP 3,602 31.2 237 20.8 CAP Members 2,291 19.9 291 25.5 Individual Producers 912 7.9 106 9.3 11,542 100.0 1.142 100.0 Source: Romanian Statistical Yearbook 1982 1.02 Over the period 1950 to 1975, pork has represented an increasing share of total meat produced in Romania, rising from 36% of the total to almost 50%. Only poultry production rivaled the pig sector in rate of - 18 - expansion. While poultry production rose by 4 times during that period, pig production rose by about 3.8 times. In contrast, cattle and sheep production grew by only about 33% and 36% respectively. During these years of rapid expansion of pig production, the sector underwent significant changes. In 1950, for example, 96% of all pigs were produced on individual farms and only 4% by the State and cooperative sectors. By 1975, this proportion had changed to about 301 for the individual and 701 for the social sectors, and the country had established large commercial pig production systems for both IAS's and CAP's. Central breeding units are usually responsible for producing weaner pigs to be fattened on satellite fattening farms and/or at the central breeding unit. Breeding gilts and boars are bred on State selection farms, and most of the feed is provided by State-owned feed mills. Compared to traditional pig production, these specialized, industrial-type systems of pig production introduced in Romania are more capital intensive, but have the obvious advantages of (a) better utilization of managerial and technological skills; (b) cost efficient mechanization; (c) more regular production flows and supplies to domestic and export markets; (d) more rapid genetic progress; and (e) more efficient disease control. At the time of project appraisal, the level of Romania's pig production technology was already of high standards. 1.03 Romania has a well established livestock slaughtering and meat processing industry, including both rural and municipal abattoirs for local consumption requirements, and large, modern meat packing plants. In 1975, existing facilities ranged from small, inefficient operations to large, modern plants operated in conformity with international sanitary standards. In that year, 86% of total nationwide slaughtering capacity existed in large industrial-type units. Although some of these facilities were designed to slaughter and process only pigs, most were equipped to slaughter cattle and sheep as well, and to manufacture a variety of meat products such as sausages, smoked and canned meat, and by-products for livestock feed. 1.04 Romania's 1976-80 National Development Plan for the livestock subsector emphasized increased pork production which accounted for half of all meat consumption during the period 1965-75. The Government thus committed itself to a major investment program in agro-industrial pig production which was expected to increase the pig population from 8.8 million at the beginning of 1976 to 13 million by 1983. As a result, per capita pork consumption was to increase from 23 kilograms in 1975 to 29 kg in 1980 and 32.4 kg in 1983. Overall meat consumption was planned to increase to 66.6 kilograms by 1983 or about 20% less than average per capita meat consumption for the EEC in 1974. Significant export balances of fresh and frozen pork and pork products were also expected to result from Plan investments. To support such increased livestock production, Romania had taken a policy decision in 1970 to forego exports of feedgrains, whenever necessary, to ensure adequate supplies of feed for the livestock sector. In addition, the 1976-80 Plan placed emphasis on investments to increase feedgrain production, mainly maize and barley, and to speed up substitution of imported soybean meal and fishmeal by domestically produced protein feed stuffs, such as rendering meals, oilseed cake, single cell proteins, and synthetic aminoacids. 1.05 Simultaneously with increased pig production, the 1976-80 Plan envisaged an expansion of pig slaughtering capacity from 474,000 to 862,000 tons, sufficient for handling incremental pig production to be generated by Plan investments; and processed meat production capacity was to be expanded from 170,000 tons to 281,000 tons. - 19 - 1.06 The project was fully in compliance with Plan objectives. It earmarked US$322.5 million, including a Bank loan of US$71 million, to finance the 2-year tranche 1977 and 1978 of the 1976-80 National Development Program for pig production and processing by extending credit for financing 60 pig breeding/fattening farms, 40 pig breeding farms, pig farm modernization, pig selection farms, construction of slaughtering and meat processing facilities, and modernization of slaughterhouses and meat processing plants. Project constructions were expected to be completed by the end of 1981, and full production was to be reached in 1983. 1.07 The project was the first one exclusively for livestock to be supported by the Bank in Romania and the first agricultural Bank-financed project in that country to be undertaken on a nationwide basis. It was to be administered by the Bank for Agriculture and Food Industry (BAFI), which had been the Borrower for six previous Bank loans for agricultural projects. BAFI's branch offices would be responsible for direct supervision of subproject implementation to be carried out by cooperatives and State enterprises. Technical assistance was to be provided by the Ministry of Agriculture and Food Industry (KAFI). Project implementation was delayed by about 2 years, mainly due to overcommitment of the construction industry resulting to some extent from the effects of the 1976 earthquake, which seriously affected large parts of Romania. 1.08 Project risks were considered to be minimal. Technology to be employed in project facilities was well established in Romania. Levels of performance and efficiency observed at appraisal were acceptable and the Government had well coordinated plans to supply the necessary manpower, materials, technical exp6rtise, and a satisfactory grain/protein feed base to implement the project successfully. However, lack of foreign exchange to import protein feed, namely soybeans, and Romania's inability to significantly increase domestic protein feed production to satisfy the needs of a rapidly increasing pig, poultry and dairy industry, have seriously affected the economic viability of an otherwise physically well-implemented and adequately managed project. 1.09 The PCR is based upon the findings of a Bank mission which visited Romania in November 1983. A representative sample of subprojects was examined in the field. Investors and relevant technical staff, as well as officials concerned-both in the Bank and in Romania--were interviewed. Project related Bank files dating back to 1975 were reviewed and a draft project completion report in tabular form, prepared by BAFI, provided the Borrower's assessment of the project's implementation and impact. - 20 - II. PROJECT FORMULATION AND PROCESSING A. Origin 2.01 Romania's interest in obtaining Bank financing for livestock development was first mentioned in the Back-to-Office report of an Agricultural Sector mission, dated July 2, 1975. A list of ten possible projects for Bank consideratior, mostly irrigation projects, was given to that mission, one of which was entitled "Livestock Breed Improvement Project". The draft Agricultural Sector Survey, dated October 28, 1975, recommended pasture-livestock development for possible Bank financing in view of Romania's large potential for expanding cattle and sheep production by more intensively utilizing the country's 4.4 million ha of pastures and meadows. The report also recommended improvement of existing breeds and use of more cropland for forage production, namely lucerne and clovers, to reduce dependency on imports of feed grains, particularly soybeans, which in turn required the expansion of exports of livestock products 1/. However, the final Agricultural Sector Survey Report, issued on October 29, 1976, departed from this recommendation and instead proposed large-scale poultry and pig production and processing projects for Bank financing during the 1976-80 Plan period, besides Bank support for five irrigation and one greenhouse/vegetable production project. Although the Sector Survey still recommended a pasture-livestock development project, it did not make an adequate case that such a project deserved higher priority than poultry and pig production/processing projects 2/. 2.02. The project actually emerged from the recommendation of a Bank mission which supervised the Sadova Corabia Agricultural Credit Project (Loan 1083-RO) in May 1975. That mission proposed financing of a nationwide Agricultural Credit and Agro-industrial Project consisting of integrated seed production, sugar mills, fruit and vegetable processing facilities, feed mills and, in line with the Back-to-Office report recommendation of the Agricultural Sector Survey (para. 2.01), a pasture and livestock breed development program. The Bank's follow-up letter to BAFI of August 4, 1975, was not answered and the attached project preparation questionnaire not completed. But, at the time of a December 1975 Bank mission, the President of BAFI made an "official" (but verbal) request for Bank assistance for financing (in addition to a US$1,050 million investment program for irrigation) 800 ha of greenhouses, egg and poultry development. pork production, cattle and lamb fattening, establishment of dairy farms, and a livestock breed improvement program. With the exception of the livestock breed improvement program, this new investment list had omitted all the other subproject components recommended by the May 1975 mission. The Bank accepted this request and sent a questionnaire to BAFI to obtain sufficiently detailed information on the investment proposals for an identification mission proposed to visit Romania in February 1976. I/ Romania Agricultural Sector Survey (Report No. 953a-RO), para. 4.32, page 68. 2/ The Bank appraised a cattle project in 1977, but a decision was taken to defer it until a Cattle and Sheep Subsector Survey was undertaken, because design of an acceptable cattle project presented many difficulties at that stage and needed considerable additional preparation efforts. The ongoing Livestock IV (Cattle) Project (Loan 1937-RO), which became effective in July 1981, emerged from this Survey. - 21 - 2.03 The identification mission actually visited Romania in April 1976 and recommended the inclusion of 3 of the proposed 5 subprojects in the project, which was now called Agricultural Credit II Project, namely greenhouse vegetable production (US$230 million), egg and poultry development (US$200 million) and industrial pork production and processing (US$255 million). All the other originally proposed subprojects were excluded either because effective Bank involvement in their implementation was considered by the Romanians to be too late or Government bad decided to finance these with their own funds and, in the case of sugar mills, to cover import requirements from Eastern Block countries. 2.04 As the identified project represented a large investment p:.jram covering a five year implementation pericd, the Bank proposed that it should provide assistance in financing only a two-year investment period, while a subsequent follow-up project would finance the balance of investments during the remaining years. The final project preparation report was received by the Bank in September 1976, proposing only the pig production and processing component for Bank financing. The exclusion of the originally proposed greenhouse and poultry components from the report was due mainly to delays in preparation of these two components. B. Preparation 2.05 The attempt to get this project ready for appraisal was a disappointing 17-month experience (June 1975 to November 1976) for both BAFI, in charge of project preparation, and the Bank. OAFI had however only a limited role in project design since, within the Romanian system, responsibility for project preparation is assigned to specialized institutions and institutes. On the eve of passage of the 1976-80 National Development Plan, BAFI's preparation efforts were slowed down to a large extent by conflicting signals of Romanian planners as to what projects and subprojects should actually be submitted for Bank consideration and what of the comprehensive macro-economic and technical data and information, including detailed investment models, requested by the Bank's identification/preparation missions could be released. It is difficult to assess to what extent the Romanians were hesitant to provide this data or to what extent this data was actually at their disposal. The basic problem, however, stemmed from the fact that Romanian law prohibits the dissemination of unpublished information and an inherent difference in perception on the part of the Romanians about the need to probe economic viability of projects. The Romanians advocated the point of view that their repayment obligations vis-a-vis the Bank would be fulfilled regardless of whether or not project goals were reached and, consequently, had little understanding for Bank requirements to carry out detailed economic analyses based on a set of reliable data. 2.06 It is certain, however, that the limited information available to the Bank made it difficult for its missions to actively participate in project preparation. At the time when project preparation was nearing completion, the Bank felt that Romania could have received a Bank loan for this project probably about one year earlier than was actually the case, had information on the project been provided when originally requested. - 22 - 2.07 Project preparation capacity was certainly overextended by this project. BAFI staff allocated for formulating this first, nationwide livestock project was limited in both numbers and experience, and BAFI supervisory staff was overburdened with preparation and appraisal of another two Bank-financed irrigation projects (Rasova-Vederoasa and Ialosita-Calmatui - Loans 1247-RO and 1368-RO) as well as with implementation of the Giurgiu-Razmiresti irrigation project (Loan 1082-RO), the Sadova-Corabia agricultural credit project (Loan 1083-RO), and the flood recovery project (Loan 1169-RO). Support obtained from MAFI's technical staff, the design institute IPSCAIA, and relevant research institutions was lagging behind BAFI's expectations and investment models prepared needed to be considerably revised and expanded to comply with Bank standards. 2.08 Compared to project preparation inputs made normally in other Bank member countries, a minimum of Bank staff time was invested to help prepare this project (see Basic Data Sheet). Eager, however, to appraise it for FY77, BAFI was urged by both Projects and Programs Departments to speed up project preparation. Finally, after many delays, the main text of the preparation report was received at HQs on September 16, 1976, and its Annexes on September 27, 1976. The report was disappointing to the Bank as it only consisted of the pig production and processing component and did not include proposals for financing the greenhouses and poultry components as had been expected. Three telexes (Sept. 17 and 27, and October 6, 1976) were thus sent to BAFI on that subject. No response was obtained. Dedpite this, and the fact that the part on pig production and processing was skimpy on subsector data and information, on livestock and pork marketing, and on some technical information, the Bank proposed a mission to assemble in Bucharest on October 28, 1976 to finalize project preparation and to appraise the project. Should the inclusion of additional components be proposed by the Romanians during appraisal, the mission was to review these while in the field and, if required, to request that additional Bank staff join the mission in the field. No requests to appraise additional project components were however submitted to the appraisal mission. C. Appraisal 2.09 Appraisal of the project and preparation of the appraisal report were hampered--despite the Bank's repeated representations to the Romanians-by the Romanian's refusal and/or inability to provide data which would have been useful in justifying the project. This data concerned mainly historical and forecast exports (which would have been useful in analyzing export market potential for the project) and details of domestic meat consumption (which would have been useful in assessing the substitutability of pork for other meats in the Romanian market). Initially, this lack of data seemed to pose a greater problem than proved to be the case after analysis of available data by the appraisal mission. The appraisal report demonstrated that, although the project was designed to meet domestic and export demand, it could be justified without exports under reasonable assumptions regarding increases in domestic consumption. Moreover, despite the fact that the substitutability among meats by domestic consumers could not be analyzed, the Bank felt that the project was amply justified and that it could be processed without requesting additional data from the Romanians. - 23 - 2.10 The draft appraisal report was issued on February 10, 1977, the Yellow Cover Report in early March 1977 and, on April 15, 1977, the Loan Committee cleared the loan package. The proposed project consisted of a 2-year (1977-78) time slice of the Romanian 5-year Plan investment program in pork production and meat processing. The estimated cost of the project was US$307.7 million with a foreign exchange component of US$68 million. The proposed IBRD loan of US$68 million would finance the full direct ($9 million) and indirect ($59 million) foreign exchange cost of the project; and loan proceeds would be onlent to cooperative units at 3Z per annum and to State enterprises at 2% during construction and 4% thereafter. The project had an estimated economic rate of return of 18%. D. Negotiations 2.11 Negotiations, held from May 12 to 24, 1977, were smooth and effective. There were no changes of substance in project design or operation vis-a-vis the draft Loan Documents. Other changes of significance were: (a) The IBRD loan size was increased from US$68 to 71 million based on information presented by the Romanian delegation on recent price increases; these price increases also caused an increase in total project cost estimates from US$307.7 to 322.5 million. (b) The free limit of US$1 million was not increased, as had been requested by the Romanians. Instead, the US$1 million free limit was retained, but an agreement was reached to selectively review 10 representative subprojects estimated to cost US$1-2 million each. (c) Agreement was reached on recroactive financing of up to US$2.5 million for disbursements on subloans concluded after April 1, 1977. E. Board Presentation 2.12 Preceded by lengthy and unusually active discussion, the loan was approved by the Executive Directors on July 12, 1977. Major questions raised during Board presentation were: (a) whether according priority to this project was justified because its output was intended entirely for domestic consumption and thus did not add to the country's foreign exchange earning potential; (b) the appropriateness to improve Romania's dietary standards which were already relatively high compared to other developing countries; and (c) whether a nutrition problem existed in Romania and Bank funds should be given rather to dietary projects in countries where malnutrition was endemic. Several speakers also expressed concern about the Romanian Government's reluctance to disclose relevant data for project appraisal and suggested that the Bank impress on Romanian authorities that Bank/IMF membership implied a minimum of disclosure of information. The loan was signed on July 15, 1975, three days after Board presentation. F. Effectiveness 2.13 The original target date of loan effectiveness was September 15, 1977, but delays in completing legal formalities caused slippage of the effective date to September 28, 1977. - 24 - G. Project Description and Objectives 2.14 The project was the first exclusively for livestock production supported by the Bank in Romania and the first agricultural Bank-financed project in that country to be undertaken on a nationwide basis. As part of the 1976-80 National Development Plan for livestock development, its overall objective was to increase the supply of meat available either for domestic consumption or for export, and to increase efficiency and productivity of Romania's pork industry. The objectives of individual subprojects to be financed under the project were to (a) develop a sufficiently large breeding herd to cover the needs of the country's pig production industry; (b) maintain and generate animals of high genetic value; (c) continue with the reorganization of pig production activities into specialized agro-industrial complexes to take advantage of managerial and technical economies of scale; (d) broaden the geographic distribution of pig production capacity throughout the country; (e) provide adequate slaughtering and meat processing capacity for anticipated increased production levels; and (f) install new meat processing units and modernize existing facilities in accordance with international sanitary standards and high operational efficiency. 2.15 The project was to finance investments to be undertaken in 1977 and 1978, including: (a) facilities and livestock for about 60 pig breeding/fattening units with an aggregate annual capacity to produce about 1,500,000 slaughter pigs; (b) facilities and initial livestock for about 40 breeding farms; (c) a pig farm modernization program to increase and renovate the production capacities of existing facilities; (d) a pig improvement and selection program; (e) construction of modern livestock slaughtering and meat processing facilities and specialized sausage processing plants; and (f) a modernization program for existing slaughterhouses. Construction was expected to be completed by December 1981, and the project was to reach full production in 1983. 2.16 Total project costs were estimated at US$322.5 million (Lei 6,449 million) with an estimated foreign exchange cost of US$71.3 million. Table 1 gives a breakdown of appraisal and actual allocation of project funds between the different project components, and Table 2 demonstrates the actually achieved project financing plan compared to the appraisal financing plan. The Bank loan of US$71 million was for a term of 15 years, including 3 years grace, at an 8.2% interest rate per annum and was to finance the total foreign exchange costs of the project. CAPs and State enterprises were to carry out project investments under agricultural credit subprojects administered by BAFI. BAFI's branch offices were to be responsible for direct supervision of subproject implementation, and technical assistance was to be provided by MAFI, the General Directorates of Agriculture at Judet 1/ level, Veterinary and Meat Inspection Services, and research stations. 2.17 Annual incremental pork production resulting from the project was projected to reach about 208,000 tons at full development in 1983 and slaughtering and meat processing capacities would be increased by 148,000 tons of pork, 32,400 tons beef, and 71,800 tons baby beef. It was also anticipated that incremental pork supplies would make a major contribution toward fulfillment of planned increases in per capita meat consumption from 46 kg in 1/ Romania has 41 Judets or Districts. - 25 - 1975 to up to 66 kg by 1983. In addition, the project was expected to produce protein livestock feed meals and pig manure, which would replace chemical fertilizers, and create an estimated 9,000 full-time jobs in project facilities located throughout the country. Due to an increase in total project cost estimates (para. 2.11(a)), the project's economic rate of return was re-estimated at 17%. - 26 - III. PROJECT IMPLEMENTATION A. Start-up 3.01 The project's start-up was immediate. By mid-August 1977, BAFI had already committed about US$7.4 million for investment subprojects which began implementation after April 1, 1977 and, according to the Loan Agreement, qualified for retroactive financing up to a maximum of US$2.5 million (para. 2.11(c)). On December 29, 1977, the Bank gave its no objection for issuing all 3 ICB bidding documents for construction materials; and as of December 31, 1977, BAFI had already committed with the Bank's approval 46% of total planned project investments, including subloans for the construction of 43 pig breeding/fattening complexes, establishment of 9 pig breeding farms, modernization of 36 pig farms, and construction and modernization of respectively 7 new and 44 existing slaughterhouses and meat processing facilities. Actual BAFI disbursements at December 31, 1977, amounted only to 0.9% of total planned investments, as compared to 23.3% estimated at appraisal (Table 3) and were used to finance pig farm modernizations. No Bank Loan disbursements had been made by that date (Table 4). Despite the slow progress in both BAFI and Bank disbursements, project implementation progress in 1977 was considered satisfactory by 2 Bank supervision missions. It is thus apparent that the significant discrepancy between actual and projected disbursements must have been an overestimation by the appraisal mission of Romania's absorptive capacity regarding this project. B. Physical Progress 3.02 Project implementation continued to proceed satisfactorily, although much slower than projected at appraisal (Table 3). In 1978, it became obvious that overcommitment of the construction industry was in many Judets the main reason for delays in establishing the new facilities. In particular, implementation of new project facilities fell far behind appraisal expectations, while modernization of pig farms and in particular of slaughterhouses and meat processing facilities, which require less extensive civil work programs, progressed well ahead of schedule. Thus, by the end of 1978, actual project investments reached about one third that expected at appraisal, while IBRD disbursements were about in line with appraisal forecasts. Tables 3 and 4 indicate the discrepancy between the pace of projected and actual total project investments and IBRD disbursements, the former being too optimistic, the latter being relatively well in line with actual IBRD disbursements. 3.03 The project took considerably longer to implement than originally expected. Investment was mainly phased over 6 years starting in 1978, rather than over 4 years starting in 1977, as foreseen at appraisal. In particular, construction of slaughterhouses and meat processing facilities was significantly delayed with almost 50% of earmarked investments being undertaken only in 1982 and 1983 (Table 3). - 27 - C. Procurement and Construction 3.04 A list of goods, agreed upon in Supplemental Letter No. 2, to cost an estimated US$71 million (equivalent to the Loan amount) was to be procured by ROMAGRIMEX under ICB. The table below gives a comparison of that list with actual procurement results: Apraisal Actual - - - (US$ million) - - Structural Steel 23.0 29.9 Electric Cables 14.0 2.1 Asbestos Cement Sheets 4.0 6.5 Slaughterhouse and Meat Processing Equipment 30.0 35.5 Total 71.0 74.0 3.05 Procurement under the project was handled efficiently. Contracts for structural steel, electric cables, and asbestos cement sheets were approved by the Bank in May/June 1978, roughly 7 months after project effectiveness and, as anticipated, were all awarded to Romanian firms. ICB participation for these items was disappointing. In fact, the Romanian firm was the sole bidder for structural steel, the largest of the 3 contracts, and only 2 foreign enterprises submitted bids for electric cables and 2 for asbestos cement sheets. The lower actual contract value for electric cables was due to changes in subproject designs. 3.06 By contrast, bidding interest for slaughterhouse and meat processing equipment was better than expected. Forty-nine enterprises bought the bidding documents, 37 registered as bidders, and 30 actually submitted bids at the bid opening date of December 15, 1978. This active bid participation was largely the result of several technical revisions by the Bank to encourage the widest possible participation by international suppliers. Because of the large volume of bids to be evaluated and shortage of Bank staff to review the bid evaluation report, contract awards were delayed by over one month. But between May 17 and 25, the Bank gave its no objection for awarding of contracts to 6 foreign suppliers from 4 countries, amounting to US$5,082,892, and to the Romanian firm Uzinexportimport, amounting to US$30,448,393. 3.07 With the exception of delays in actual delivery of certain imported machinery and equipment for slaughterhouse and meat processing modernization, ICB procurement time requirements did not influence the pace of project implementation as BAFI disbursements under the project were extended against subloans only and not against suppliers' contracts. D. Project Cost 3.08 Estimated total project cost, including working capital, is Lei 7.9 billion compared with an appraisal estimate of Lei 6.45 billion, an increase .over the appraisal level of 22% (Table 1). In US dollar terms, the cost was substartially greater. Actual project costs are estimated at US$464 million, or 44% above the appraisal estimate of US322.5 million. The reason for the - 28 - greater cost overrun in US dollars than in Lei is that the Lei : US dollar exchange rate hardened from 20:1 at appraisal to a weighted average of 17:1 during project implementation. Sixty-three percent of project cost was for pig production and 37% for processing compared with appraisal estimated breakdowns of 64% and 36% respectively. 3.09 The increase in total cost for pig production by 20% (in Lei terms) was mainly due to larger project size. The largest project component, investment in pig breeding and fattening complexes, which amounted to 50% of total project cost, had a Lei cost overrun of 53% compared with appraisal projections. However, the actual capacity increase under the project provides for 161,000 breeding sows and the fattening of their progeny, compared with the appraisal estimate of 97,500 sows, an increase of 65%. Thus fixed investment per sow space was Lei 17,900, 7% lower than the Lei 19,300 projected at appraisal. Investment in pig breeding farms amounted to only 37% of the appraisal estimate yet the capacity was 17% larger. The cost per sow space for breeding farms at Lei 14,300 was in line with that for breeding/fattening complexes. The large difference between appraisal and PCR estimates is accounted for by the fact that at appraisal, breeding farms were costed as highly specialized new units with a full range of new services. In practice, they have been developed less expensively and often new investments have been made in existing breeding/fattening complexes, thus permitting utilization of existing services, such as electricity, water, sewerage, office facilities, etc. 3.10 Within the slaughterhouse subcomponent, it is more difficult to analyze the reasons for the 26% cost overrun (in Lei terms) as the type of facilities differed markedly from those proposed at appraisal and include a greater amount of meat processing facilities than originally envisaged. A major reason, however, appears to have been price inflation due to delays in construction (paras. 5.17 and 5.18). On the basis of cost per job created, investment is only slightly above the appraisal estimate, at Lei 461,000 compared with Lei 452,000. E. Financing 3.11 Data recorded in detail by BAFI covers only financing for fixed investment in the project and does not indicate the sources of financing for breeding livestock or other working capital. Assuming that these latter items were funded 80% by BAFI and 20% by sub-borrowers own resources, project financing was as shown below: - 29 - Project Financing 1/ Appraisal Estimate Project Completion Report Difference Total % Total Z PCR;Appraisal (M Lei) (V Lei) BAFI 4,251 66 6,063 76.8 +43% IBRD 1,420 22 1,230 15.6 -13% Sub-borrowers 779 12 598 7.6 -23% Totals 6,449 2/ 100 7,891 3/ 100.0 +22% 1/ See Table 2 for more detail. 2/ Includes working capital. 1 Includes working capital estimated by the PCR mission on the basis of appraisal projections. 3.12 It is clear that the proportion of total project funding provided by BAFI was substantially higher than that planned at appraisal. This occurred for 3 reasons. Firstly, the project size was some 22% larger than planned in Lei terms, but the World Bank's loan contribution was fixed. Secondly, revaluation of the Lei caused the US$71 million IBRD loan to be worth in Lei terms only about 87% of the estimated appraisal figure. Thirdly, the contribution by sub-borrowers (7.6%) was substantially below that planned at appraisal (12%). 3.13 In line with Supplemental Letter No. 1, financing for subprojects, including both the BAFI and Bank contributions, had been onlent to cooperative sub-borrowers at 3% and to IASs at 2% during construction and 4% thereafter. In early 1983, however, interest rates were raised in Romania, and the interest rate on all loans not in arrears is now 5% per annum. When this is compared with the historical producer price inflation index for Romania, it is clear that real interest rates have been substantially negative since 1982. However, the World Bank's projection of future producer price inflation in Romania indicates that real interest costs will approximate zero over the next few years. F. Disbursements 3.14 Project implementation delays (para. 3.03) adversely affected the estimated disbursement rate of the IBRD loan (Table 4). However, actual disbursements never fell below two-thirds of appraisal expectations. Otherwise, disbursement was smooth and uneventful. The final disbursement was made on September 13, 1982, and the loan was closed on September 30, 1982, as scheduled. - 30 - G. Marketing 3.15 Incremental slaughter pigs produced under the project (projected to peak at about 265,000 tons) are being marketed mainly through the Meat Trust (Table 5). As a result of the new slaughterhouses constructed under this project as well as under the Livestock II (Pigs) Project (Loan 1669-RO), physical marketing has become simpler and the average distance that pigs travel from production units to slaughterhouses has been reduced from about 90 km in 1977 to about 50 km, thus reducing the transport costs of marketing. Of the 181,000 crossbred gilts (Table 5) to be produced under the project, about 68,000 will be required to maintain the project herd, leaving 113,000 to be sold to other pig units. This amounts to about 30% of national requirements, and these extra gilts will be readily absorbed into the system. 3.16 As Romania is still in a meat shortage situation, no problems exist or are expected to occur in the sale of pigmeat and pigmeat products on the domestic market. Export sales 11, which are running at about 60,000 tons per year, have not increased significantly since the mid-1970s. This is the result of the lack of availability of supplies rather than of demand. On the domestic market, the excess demand for pigmeat is greater for fresh meat than for processed products. As a result of the cost plus pricing systems applied in Romania, processed products are expensive relative to fresh meat, but are available when fresh meat is not. The relative expensiveness of pigmeat and pigmeat products compared to world prices is indicated as follows: in 1982, the domestic price of fresh pig meat carcasses was 3% below the unit export price while the domestic price of canned hams was 19% above export prices and that of Sibiu salami 87% above the export price. 3.17 The incremental processing capacity for meat products constructed under this project will be equivalent to about 23% of 1981 social sector processed meat production. Production from this increased capacity should be readily absorbed on the market, although it is expected that the imbalance between fresh and processed meat supplies will continue. This imbalanced situation was seen during the Livestock II (Pigs) Project (Loan 1669-RO) appraisal, and processing investments under that project expressly excluded investment in canning. 3.18 Per capita consumption of all meat in Romania was 61 kg in 1981 (it will probably be not higher in 1983), of which pigmeat was 29 kg. This compares with a 1985 Plan target of 72 kg (pigmeat 36 kg), which is about one-third below that of several other Eastern Block countries, including East Germany and Czechoslovakia and about 45% below the EEC-9 average. 1/ Main importing countries include USA (canned hams only), Federal Republic of Germany, Greece, Italy, Portugal, Spain, Sweden, Eastern European countries, and Russia. - 31 - H. Covenants 3.19 All the covenants agreed in the Loan Agreement and the 7 Supplemental Letters were complied with. However delays, poor quality, and the reluctance to annually submit information agreed upon in Supplemental Letter No. 7 was marked. This applies in particular to the following Annexes of this Supplemental Letter: Annex A. Table 3: Statement of Representative Sub-borrower Income and Expenses - only received for 1982 and at occasion of PCR mission; Annex C: Assessment of Technical Efficiency Performance of 6 representative Pig Production and Fattening Sub-borrowers Complexes - only received for 1982 and at occasion of PCR mission; and Annex D: Summary of Planned and Realized Meat Exports and Domestic Consumption - obtained for 1981 and 1982 only. 3.20 BAFI, in discussing this issue with the PCR mission, felt that providing this information created a heavy, additional burden on them. Concerning Annex A, Table 3, and Annex C, they stated that they were able to collect meaningful data only upon subproject completion. As regards Annex D, they were not able to provide data on meat export and consumption up to 1980 in addition to that contained in the Annual Statistical Yearbooks. More importantly, they questioned the usefulness of these reports and argued that Bank supervision missions visited Romania twice a year and collected sufficiently detailed data on the project to inform the Bank on project implementation status. They strongly felt that such reporting should be reduced as it represented a duplication of efforts to a large extent. 3.21 It is most unfortunate that BAFI and its back-up institutions, agencies, and institutes do not yet fully appreciate the importance of monitoring project impact as early as possible. Had, for example, the disastrous effect of protein feed deficiency on feed conversion ratios surfaced earlier (para. 8.03), in the view of the PCR mission, Bank assistance to Romania could have been designed more effectively (para. 8.03). Moreover, efficient project monitoring could have alerted the Government that the financial input/output price relationships had increasingly moved against pig production since project appraisal (para. 8.14), thereby allowing corrective measures to be taken in time. - 32 - IV. INSTITUTIONAL PERFORMANCE A. Inatitutional Design 4.01 BAFI, the Borrower, was responsible for Project administration while individual subprojects were implemented by State enterprises and CAPs, most of which were already experienced in either pig production or slaughtering and meat processing. BAFI Leadquarters was in charge of (a) coordinating project related activities with the different Ministries (primarily with MAFI's Livestock Department), the design institute IPSCAIA, MIC and MIT, the Feed Mill Trust, ROMAGRIMEX, and research stations; (b) approving all subproject investments above Lei 10 million; (c) centralizing reimbursement requests; and (c) project monitoring, including the collection of information and reporting to the Bank. BAFI branch offices were responsible for appraising all subprojects and authorized to approve subloans below Lei 10 million. They also supervised the financial and administrative execution of subprojects and were, either together with specialized engineers from other agencies or with the help of their own engineers, responsible for supervising the physical progress of project implementation. BAFI's performance in coordinating project implementation was fully satisfactory. Actual project implementation and work supervision, however, was the responsibility of the relevant agencies in charge of project design and/or of sub-borrowers who hired their own work supervision engineers. B. Support Services 4.02 MAFI's Livestock Department, the General Directorates of Livestock at Judet Level, MIC and MIT, relevant research institutes, and veterinary and meat inspection services provided very valuable assistance to both pig production and processing units. Technical competence of managers was efficiently upgraded through seminars and demonstrations. Romania's veterinary establishment, including the Pasteur Institute (which produces virtually all required vaccines for pig production), the Center for Veterinary Materials (which supplies drugs, vaccines, antibiotics, and medicines), Judet veterinary services, and full-time veterinary staff of large production and processing complexes, deserves high praise as they were able to satisfactorily prevent and control all the common diseases that affect pigs in Romania through hygiene, vaccination, and appropriate medication. C. Credit Extension, Supervision, and Recovery 4.03 BAFI supervision of project investments was satisfactory. Each subproject is controlled from the branch or sub-branch level, and BAFI loan officers, often supported by BAFI engineers, control progress at each site at least quarterly and prepare supervision reports. In specialized projects, e.g. slaughterhouses, appropriately qualified engineers from other BAFI branches, if required, are used to supervise ongoing work. The financial situation of sub-borrowers is examined monthly and reported to BAFI headquarters. Disbursements are made against documentary evidence, and physical progress is reconciled with payments claimed. After the end of the construction period, the quality of BAFI monitoring appears to fall off, and on several of the sites visited by the PCR mission, the BAFI documentation on - 33 - performance was out of line with what was actually happening. Generally, BAFI does not have problema with cost recovery. However, in view of the moderate financial performance projected for pig production units under this project (which assumes that present price relativities continue)(para. 6.04), recovery may in some cases become a problem in that project generated cash flows on the poorer performing units may be insufficient to meet debt servicing requirements. D. Staffing and Trainins 4.04 BAFI staff involved in project implementation are well qualified and effective, provided they obtain adequate support from specialized agencies and institutions. Personnel at farm and processing levels are technically well trained. On all facilities visited, there was sufficient staff with university degrees or their equivalent in veterinary or animal science. This staff, as well as stockmen and workers, have the opportunity to improve and update their professional knowledge at seminars and with the help of on-the-spot demonstrations. Within pig production and processing units there is good communication between managers and staff. Production targets are basically confined to output, and where targets are exceeded, a bonus system will allow up to a 50% increase in wages. E. Accounting and Reporting 4.05 Detailed and well controlled financial accounts for each enterprise are maintained at the BAFI branches. In some cases, however, subprojects funded have not precisely corresponded to the production or processing unit for which accounts are being kept. This is mainly the case when project financed subprojects are part of an ongoing operation which, in many cases also received additional non-project financed investment funds dur4ng the project implementation period. In these cases it is difficult to use the accounts for monitoring performance of project investments. 4.06 Reporting under the project was weak. Quarterly Progress Reports, although always received on time, restricted themselves to a mere r.numeration of the status of BAFI commitments and disbursements per subproject. The quality of appraisal of 10 representative summary analyses of subpr-jects (Supplemental Letter No. 6) was poor and dubious, and most of the information agreed upon in Supplemental Letter No. 7 was received by the Bank with much delay and only after the Bank had made several representations (para. 3.19 to 3.20). - 34 - V. OPERATING PERFORMANCE AND PROJECT IMPACT A. Number, Kind, and Size of Subprojects 5.01 Pig Production Under the project, total capacity to house 195,000 incremental sows and their progeny has been established (Table 6). This is about 50% above the appraisal estimate of about 130,000 sows 1/. The number of new pig breeding/fattening farms constructed under the project (Table 6) is 13% below appraisal expectations (52 farms as compared to about 60 at appraisal), while pig production capacities actually provided increased by 64% (from 98,000 sows plus progeny projected at appraisal to 161,000 sows plus progeny). The number of pig breeding farms financed is well below appraisal expectations (18 farms as compared to 40 at appraisal), although installed capacity is similar (25,000 sows plus progeny versus an appraisal estimate of 21,400). Under the pig farm modernization category, more than twice the original expected number of pig farms were modernized, while none of the projected 10 pig selection !arms was actually implemented (para. 5.02). Out of the total of 112 farms constructed or modernized under the project in 34 Judets, 61 were CAP and 51 State farms, compared to 84 CAP and 46 State farms expected at appraisal. Typical new breeding/fattening farms have the capacity to produce about 22,000 or 44,000 finished pigs per year, but some farms have capacities of up to 72,000 pigs. Typical breeding farms obtained either 900, 1,425, or 2,850 sows, but there are several farms with over 3,000 sows and one farm, Rast in the Judet of Dolj, has an installed capacity for 17,000 sows. 5.02 The change in emphasis on pig production subprojects does not detract from project effectiveness. This applies in particular to pig farm modernizations. Although the financial rates of return on investment in modernization have not been calculated for this project by the appraisal and PCR missions, they have been estimated at 15% and 11.5% respectively for State and CAP pig farms for the Livestock II (Pigs) Project (Loan 1669-RO), which is approximately double the rates estimated for the pig breedingifattening models of that project as well as for the Pigs I Project. Concerning the decreased emphasis on pig breeding investments actually experienced under the project, the Romanian policy at appraisal was to establish specialized farms to produce crossbred gilts to be used as breeding stock for breeding/fattening farms in and outside the project. It was argued at that time that this approach would maximize genetic gain. The appraical mission had no solid basis for refuting this argument but, nevertheless, pointed out that it might not be the most cost effective solution because large breeding/fattening farms could establish their own breeding programs, and there was a chance that gilts introduced into large commercial units would be less immune to disease and/or could introduce disease to the existing herd. During project implementation, pig farms obviously became aware of this matter and, consequently switched to "closed circuit" operations. Moreover, they apparently were not prepared to pay the high price requested for crossbred gilts, which is about double the cost of replacement gilts produced on the own farm. In view of this, the Bank agreed to the reduction of pig breeding farms and the elimination of pig selection farms from the project during a December 1979 supervision mission. Another 1/ Precise appraisal figures are not available because the estimated number of incremental sow spaces resulting from pig farm modernization was not given in the SAR. - 35 - reason for the Bank's agreement was that BAFI, since 1978, had financed several pig selection farms with its own funds and that five pig selection farms were scheduled for implementation under the Livestock II (Pigs) Project (Loan 1669-RO). 5.03 At full development by 1985, the project is expected to have an annual net production 1/ of about 265,000 tons pigs liveweight. This total is made up of 2.4 million fat pigs, 72,000 cull sows and boars, and 181,000 breeding gilts, of which 68,000 would be retained on project farms for herd maintenance (Table 5). In addition, production of weaner pigs is estimated to amount to about 467,000 per year, including net sales to non-project farms and individual producers of about 47,000. A detailed comparison between PCR and appraisal production estimates is difficult, as the only production figure given in the appraisal report is 208,100 tons liveweight. Given the coefficients used in the appraisal models, this figure appears to be a gross figure, and is therefore not comparable with the 265,000 tons of annual net production mentioned above. On the basis of the individual appraisal report models, it appears that net incremental production resulting from the project was estimated at about 180,000 tons. Thus, the PCR mission estimate of net project production is 47% above that made at appraisal. 5.04 Slaughterhouses and Meat Processing Facilities Under the project, 10 new slaughterhouses and meat processing facilities and 8 new meat processing facilities were constructed and 47 existing slaughterhouses and meat processing plants were modernized (Table 7). The number of plants constructed and their location differed markedly from that planned at appraisal (Annex 3, para. 1) when it was proposed to construct 15 slaughterhouses and meat processing facilities and 4 meat processing plants. Only half of the facilities were actually constructed in the locations planned at the time of appraisal, at which time the final number of plants and their locations had not been finally decided. While the SAR does not indicate a definite number of slaughtering and meat processing facilities to be modernized under the project, modernization was actually carried out on 47 plants, and in 3 cases resulted in an increase in slaughtering and processing capacity. 5.06 The total slaughtering capacity, on a single shift basis, built under the project is 285,300 tons liveweight per year compared with 252,220 tons planned at appraisal, an increase of about 13%. Meat processing capacity has increased, however, by 91% from 44,920 tons expected at appraisal to actually 85,800 tons per year. A more detailed comparison of planned and actual capacity at full development by major products is given in Table 7. B. Adequacy of Project Facilities 5.07 Pig Production Facilities The pig production facilities built under the project are of gnod standard and well suited for large scale pig production. Housing designs are modern and cost-effective and comparable with the best standards anywhere. Space-saving internal designs permit optimal utilization of pig houses. Efficient mechanical dry-feeding systems are standard. Slatted floors are used for all categories of stock, and efficient drinking and heating systems are available. 1/ Equivalent to weight gain from project production less liveweight bought in, such as weaner pigs and breeding stock. - 36 - 5.08 The project's pig farm modernization program incorporated the above design standards in existing, old fashioned pig houses thereby increasing production capacities and labor productivity by up to 66% and 40% respectively. In addition, modernization of pig farms improved production, efficiency and hygiene, and provided more attractive working conditions. It enabled, for example, highly desirable individual feeding of gestating sows and should facilitate recruitment and retention of motivated workers. 5.09 Design planning of pig production facilities has been flexible enough to permit design changes to be made in light of the experience gained from facilities built earlier in the project. For instance, the width of the second generation of pig houses constructed under the project had been reduced significantly and overshot roofs were provided to improve natural ventilation, thereby probably decreasing the negative effect of high summer temperatures on the reproductive performance of sows in summer and reducing reliance on costly electrical ventilation systems. 5.10 Serious construction delays in completion of particularly new pig farms materialized as a result of the reasons described in para. 5.18. At appraisal, phasing of investment for pig breeding/fattening farms was expected to take place over a 3-year period, and for pig breeding farms over an approximate 2-year period. However, an average delay of about one year for both farm types occurred. 5.11 Structures are generally of precast concrete frame elements with double skin asbestos cement roofs with insulation in between and with masonry infill panel walls and usually timber window frames. Floors are concrete, with precast concrete slatted floors over effluent trenches. Feeding and watering systems are automatic. Pen divisions are usually of metal construction. Overall, the quality of construction is disappointing. This may have been due in part to lack of skilled workers and the overcommitment of the construction industry. However, quality of construction varies significantly from location to location. Some of the facilities have excellent construction quality, inditating that pig houses of high construction standards can be realized in Romania with the construction materials available. 5.12 Maintenance of facilities can be improved. For example, most of the nipples of drinking water supply systems of the facilities visited by the PCR mission were leaking, adding to high water consumption and the quantity of waste water to be treated. Designers of future facilities could assist greatly in reducing maintenance problems by using more simple and robust mechanical equipment and services for ventilator openings, drinking systems, and plumbing. 5.13 Effluent disposal is handled either by irrigation where climate, available area, and soil types are suitable, or by activated sludge systems. The latter system involves high investment and operation costs. Adequate maintenance, particularly of mechanical equipment, is vital to avoid deterioration of effluent standards. One plant visited by the PCR mission had 7 of its 22 aerators out of operation. As a result, the quality of the effluent being discharged was, in the view of the PCR mission, not satisfactory. - 37 - 5.14 Size of Pig Production Units From a technological viewpoint, changes in pig production systems are not required once a unit has reached a herd size of about 500 saws. This size is sufficiently large to justify specialized pig houses and specialized laborers for different stock categories. Technical and husbandry problems of a 500 sow unit are similar to those of larger units, which are common in Romania (para. 5.15). Above the 500 sow level, there are no worthwhile economies of scale for labor, with the exception of managerial and administrative staff, however (para. 5.16). 5.15 The size of pig production units is limited to a large extent by manure disposal and environmental aspects. Several large units in Romania have about 200,000 pigs on one location, which produce sewage equivalent to that of a city of about one million inhabitants. Large pig units require major engineering operations for water and.electricity supply, heating, and manure storage and disposal systems. Romanian expertise in designing, establishing, and managing these large units is impressive, and the country is probably the world leader in this respect. Despite this impressive performance, there is no clear consensus in Romania on optimum unit size and diversity of production activities on one location, which should be placed under one management. Discussions held by the PCR mission on this subject suggested, however, that the optimum unit size under Romanian conditions for IASs is considered to be about 100,000 pigs produced per year with 6,500 sows and for CAPs about 60,00 pigs per year with about 4,500 sows. 5.16 The main justification for the establishment of large pig units is maximun use of top class managers, which are considered by the Romanians a scarce resource. Experience to date supports this justification, because the quality and performance of management of Romania's major large IAS complexes is impressive. 5.17 Slaughterhouse and Meat Processing Facilities A disappointing feature of the project was the long construction periods required to complete the new slaughterhouses and meat processing facilities. The appraisal phasing of investments allowed liberal construction periods for both types of subprojects: 3 years for slaughterhouses and 2 years for meat processing facilities. Actual construction periods were however much longer. Some of the larger subprojects, e.g. Slobozia, had investment expenditures over 6 calendar years, while even small subprojects, e.g. Tirgoviste needed 4 years for completion. Of significance is the sudden increase in construction activity in 1982 and 1983 (Table 3). Again taking the Slobozia subproject as an example, about 1/3 of its investment was expended in the period 1978 to 1981, while 2/3 was spent in 1982 and 1983. The burst in construction activity in 1982 and 1983 added substantially to the cost of works still to be done as it occurred after the promulgation of decrees permitting significant increases in fuel and construction material prices. 5.18 It is quite apparent that during the first 4 years of project implementation, the construction industry was overcommitted, partly due to the aftereffects of the 1976 earthquake. Other reasons contributing to extended construction periods included (a) a shortage of enterprises experienced in food industry constructions; (b) a shortage of skilled laborers; (c) shortages of materials and equipment, often due to inadequate construction planning and management; (d) changes in design in some instances; (e) administrative delays - 38 - on the part of the client enterprise as regards signing of contracts, making construction sites available, actioning of progress payments, and the like; and (f) additional revivals of construction sites after long and damaging winters, required as a result of extended construction periods. 5.19 Facilities built or modernized under the project appear to be of adequate standards, and technologies applied are reasonable. Overall, designs and process flows appear to be good, taking into account the constraints resulting from the necessity to use existing facilities and services. Buildings usually are precast concrete frames with masonry infill panels and walls. This construction method leads to rather massive structures which are difficult to adapt when required by changing process needs and revised process flows. In process rooms, walls are usually tiled to a height of 2 or 3 meters and floors are also tiled. Tiled walls and particularly corners have, in many cases, already suffered considerable damage, mainly from product trucks and trolleys due to lack of protection, e.g. by bumper bars. Non-tiled walls often have rough surfaces and can only be cleaned with great difficulty. Painted hard cement plastered or precast element ceilings show many examples of peeling paint; and with the unnecessary high studs used in many areas, consideration should be given to the use of false ceilings of sandwich panel construction with the ceiling space used for service mains to keep these out of process areas. Condensation is a problem in a number of chillers and process areas, and in most of the chillers a drainage system is not provided. This leads to inadequate sanitation and cleaning. More attention needs to be paid to these problems at the design stage. More use could also be made of good quality concrete floor finishes instead of the commonly used ceramic floor tiles in process areas, which already show considerable damage due to poor bedding techniques and/or impact damage. 5.20 Slaughtering facilities built under the project utilize modern concepts of "on the rail" dressing for pigs and cattle with powered conveyor systems, evisceration onto moving top viscera tables, and hide and skin strippers. This technology is appropriate and equipment appears to be robust. 5.21 Processing facilities financed under the project either as part of slaughterhouses or as separate plants also have equipment, plant, and technology of adequate standards. Some of the grinding, chopping, mixing, and stuffing equipment in these facilities is of an older design and is being reused. This is entirely appropriate as these items still retain a useful life. It needs to be recognized, however, that maintenance, cleaning, and sterilizing of this equipment is more difficult than with modern equipment. 5.22 Services, including utilities, appear to be adequate for both slaughter and meat processing facilities built under the project. Refrigeration plants are of conventional ammonia-type manufactured in Romania. Ammonia leakage was apparent in the few plants visited by the PCR mission. Waste water is discharged into the city sewerage system after screening and fat removal. Screening systems are crude, do not produce a valuable product, and hence the screenings are dumped. Fat removal systems are also crude. Efforts should be made to recover trimmings, fats, etc. from process waste waters before they become contaminated with foul sewage. Various types of rotary screens or sieves are available for this purpose, and the technology is simple and well known. The use of aeration systems to remove fats should also be evaluated. Such treatment systems should produce - 39 - products suitable for producing rendering meals. Annex 3, (paras. 14 to 27, 35, 36, 44 to 46, and 50) describe improvements for both slaughter and processing facilities suggested by the PCR mission based on plant visit observations. 5.23 Taken overall, the standard of workmanship evidenced on dll Ihe slaughtering and processing facilities visited by the PCR mission is disappointing. With a little more care and attention during design and construction, standards could be significantly improved. Examples of poor workmanship observed were poor finishes to precast concrete elements resulting from grout leakage; segregation and poor reinforcing steel placement; poor fit-up of precast concrete elements; poor or dusting concrete floors due to high water/cement ratios and inadequate curing; poor fit-up of doors and windows; poorly fitting freezer and chiller doors with inadequate gaskets resulting in air leakage; poor welding of structural stael and mechanical components; inadequate surface preparation and poor priming and paint systems to steel components in process areas; and the use of uncoated steel fixings to ducts in process and other wet areas. It was stated on a number of occasions that most of these problems resulted from a lack of skilled laborers. However, good management and supervision could have balanced this lack. This is evidenced, for example, by the good results obtained at the Tomesti slaughterhouse near lasi. 5.24 A wide range of products are produced in project financed slaughterhouses and meat processing facilities. They include pork, beef, and sheep carcass meats, high value processed products, fresh and smoked sausages, dry salami, and smoked and smoked-cured products. The quality of these products is good, but carcass dressing standards are generally only fair to poor (Annex 3, paras. 28 and 29). C. Technological Change 5.25 At the time of appraisal, Romania had already well established industrial-type pig production systems as well as an established livestock slaughtering and meat processing industry. Despite this, technological changes as a result of discussions held with the Bank's technical staff during project appraisal and supervision and experience gained during project implementation were, according to relevant MAFI and IPSCAIA specialists, quite significant. For pig production units, they mainly included: (a) considerable investment cost savings resulting from reduced heights of structures and abandonment of erection of double story pig houses; (b) reduction in operating costs by constructing narrower pig houses (12 m wide only instead of 18 m and above), which allows natural ventilation; (c) discontinuation of double level batteries for weaner pigs; and (d) as a result of the Bank's continued insistence, significant attention and investment to improved effluent treatment. For slaughterhouses, technological changes included the introduction of mechanical meat transport and a whole range of hygienic measures such as separation from clean and dirty process areas, use of easier to clean equipment and constructions, and better working conditions, including better lighting. - 40 - D. Bio-economic and Production Efficiency Parameters 5.26 Stock The genetic quality of pigs used under the project is good. The pig breeding program used in Romania was devised by MAFI based on research efforts made throughout the 1970's. It is now in its final stage of implementation on both IASs and CAPs, and results obtained confirm the good maternal characteristics of the Large White and Landrace breeds, the good meat quality and growth performance of the Duroc and Hampshire breeds together with the beneficial heterosis effects of crossbreeding. Best performances are being obtained by having Large White x Landrace crossbred sows mated to Duroc or Duroc x Hampshire crossbred boars. To operate this breeding program efficiently and to obtain adequate genetic progress, purebred, multiplier, and commercial stock is maintained in the proportions of about 4%:16%:80% respectively. Pure bred and multiplier herds are usually kept on separate farms, and purebreds have been established mainly from fairly recent imports of Duroc and Hampshire from North America and Large White and Landrace from the United Kingdom, Sweden, the Federal Republic of Germany, Norway, and Belgium. (a) Pig Production 5.27 Feed Conversion Rates Pig production performance has been at variance with that projected at appraisal. The major underlying problem has been the unavailability of adequate livestock feed. Romania suffers from a substantial protein deficit. At appraisal it had been assumed that domestic production of soybeans would increase to around 600,000 tons per year by 1981 and that incremental protein required for the project would be imported. Domestic production of soybeans in 1981 was in fact only 268,000 tons, and imports have been far below necessary levels. Since the late 1970s, effects of protein deficiency have become more and more pronounced due to Romania's rapidly increasing livestock industry and reduced imports of soybeans which declined from probably 400-500,000 tons in 1980 to less than 300,000 tons in 1983. Overall the present protein deficit in Romania amounts to the equivalent of at least 800,000 tons of soybean meal per year, and pig feed, instead of averaging 14-15% crude protein, only averages about 11%. This has had a disastrous effect on feed conversion efficiencies. The PCR mission estimates that overall, project-financed units require about 5.3 kg of concentrate feed per kg of liveweight gain. This compares with the estimate of 4.2 kg concentrate per kg of liveweight gain made at appraisal and 3.2 to 3.5 kg of concentrate actually reached in Western countries. Should reasonable quality concentrate feeds be made available (averaging about 14.5% crude protein) the PCR mission estimates that the feed conversion ratio would improve to 3.5 to 3.8 kg feed per kg liveweight gain on well managed pig production units and to about 4.0 on national average. 5.28 Reproductive performance under the project appears to be doing slightly better than was projected at appraisal, almost entirely due to greater fertility. Fecundity now amounts to about 1.8 litters per sow per year in established herds compared with 1.6 estimated at appraisal. Numbers born per litter appear slightly below appraisal estimates while mortality in young stock is very similar to that expected at appraisal. The net effect of the parameters is that the PCR estimate of pigs sold per sow per year is 13.4 compared with the appraisal estimate of 12.5. - 41 - 5.29 Labor Productivity presently achieved varies significantly among pig farms. CAPs usually employ about twice the number of staff expected at appraisal, while IAS farm staffing is about in line with appraisal expectations. The number of pigs produced per employee per year on project farms ranges between 200 and 500 (see table below) as compared to 800 to 1,500 on well managed farms in Western Europe. Managerial and technical staff of project farms account for 10% to 15% of the total work force. Auxiliary workers, including mechanics, electricians, plumbers, stokers, and those working on slurry removal systems, account for 35% to 40%; and only about 50% of total farm employees work directly with pigs. The Romanian practice of expressing labor productivity in terms of pigs attended or produced per stockman is misleading. A better criterion of measuring improved labor productivity resulting from project investments would be assessing output per employee. 5.30 The table below compares the PCR estimates of bio-economic and production efficiency parameters under two different feed scenarios (poor quality feed and if adequate quality feed was available) with appraisal estimates. - 42 - Bio-economic and Production Efficiency Parameters PCR Estimates Reasonable Appraisal Poor Feed 1/ Feed 2/ Assumption Crude protein in feed (Average) 11% 14.5% 15% Economic price 1/ of feed 1990 $163/ton $177/ton NA Pigs born/litter 9 9.25 9.4 Litters/year 1.8 1.95 1.6 Average slaughter weight 101 kg 106 kg 110 kg Age at weaning 42 days 33 days 33 days Age at slaughter 255 days 220 days NA Daily weight gain (fattening) 400 gm/day 500 gm/day NA Young pig mortality 17% 14% 16.7% Pigs sold/sow/year 13.4 15.5 12.5 Total sales from system (No.) 2,627,000 3,031,000 NA Net weight of pigs sold ('000 tons 1.w.)3/ 265 321 180 Economic value 1/ of output $330 M $402 M NA Overall feed conversion (kg feed/kg l.w.g.)4/ 5.3 4.0 4.2 Total feed use ('000 tons) 1,397 1,284 882 Feed cost 1/ (Economic - 1990 prices) $228 M $228 M NA Feed cost 1/ (Financial) Lei 2429 Lei 2794 NA Protein feed imports 51/ required/year ('000 tons) 140 257 NA Cost of protein imports 1/ (1990 prices) $34 M $69 M NA Subproject ERR 11% 19% NA Labor Productivity: - Fattening pigs attended per stockman 2000-4000 2000-4000 2500 - Sows attended per stockman 100-200 100-200 100-200 - Sows attended per employee 6/ 25-35 25-35 50 - Pig produced per employee per year 6/ 200-500 200-500 360 - Slaughtering and processing 7/ 42 42 44 - Meat Processing 7/ 33 33 NA - Dry Salami Production 71 22 22 17 1/ Financial cost figures are in constant October 1983 currency terms. 2/ Assumes same management level as poor feed situation. 3/ See para. 5.03. 4/ Estimated on basis of weighted average of breeding/fattening complexes and breeding farms. 5/ Assuming that at the margin, all protein feed is imported. 6/ Includes auxiliary workers and supervisory staff. 7/ Tons per worker per year. - 43 - 5.31 The table clearly demonstrates that if additional protein were provided to raise the feed quality from the present average of about 11% crude protein to 14.5% crude protein, the technical parameters of the project would be substantially better. The PCR mission thus estimates that from the same number of sows, increased fertility, faster weight gain, and higher slaughterweights would result in incremental production of about 21% without any increase in aggregate feed costs. The clear economic advantage of importing more protein and producing more meat is discussed in para. 6.17. At this stage it is unclear what policy the Government will follow. If protein imports continue to be restricted, project technical performance will continue to be poor. 5.32 Despite overall shortages of protein feed, bio-economic performance parameters vary significantly from pig farm to pig farm. Some of the best farms, particularly those with access to somewhat above average quality feed (e.g. Ulmeni), wean 20 and more piglets per sow per year and have acceptable feed conversion ratios while poorly performing farms may have mortality rates in young pigs of up to 25% and correspondingly poor, other performance parameters (namely feed conversion ratios of above 6.0). In some cases however, farms getting poor quality feed are obtaining weaning rates of 16 piglets per sow per year, and feed conversion ratios of around 4.5 are being achieved, which is quite satisfactory. Thus, considerable room exists in Romania to improve pig production profitability. Poor quality feed is only part of the reason for low performance. Equally important is the impact of managerial constraints which could be balanced by improving managerial, husbandry, and accounting skills at the farm level (para. 8.07). Moreover, as subproject implementation is now completed, the disruptive effect of the major construction/modernization programs under the project on management and performance of pig units has ceased. This, in turn, is expected to improve production coefficients of pig units as their managers and staff will be able to devote more time and effort in the future to improving managerial and husbandry skills. (W) Slaughterhouses and Processing Facilities 5.33 Efficiency of slaughtering and processing is generally good. Reception of livestock, slaughter, chilling dispatch, deboning, curing, and processing appear to be carried out in an efficient manner overall. Unsatisfactory aspects of process flows are discussed in more detail in Annex 3, paras. 23, 23, and 44 to 46. Capital intensity and productivity in terms of investment per worker and kilograms of output per 1,000 Lei invested are in line with appraisal expectations for new facilities; but for meat processing facilities, they are over 50% higher for investment per worker and almost 3 times higher for output per 1,000 Lei invested than estimated at appraisal (Annex 3, para. 41). Actually achieved labor productivity for slaughtering and meat processing facilities is in line with appraisal expectations, while that for meat processing is significantly above the one projected at appraisal (see table following para. 5.30). However, compared to Western countries, labor productivity of slaughtering and meat processing facilities financed under the project is some 20% to 30% lower. 5.34 By Western standards, energy costs are low (Annex 3, paras. 47 and 48). The effect of saving energy, particularly electricity, was apparent in all the plants visited by the PCR mission. Alternate light fittings did not operate or tubes were removed, resulting in substandard lighting levels. - 44 - Actual electricity consumption per unit of output is less than one-third the one estimated at appraisal for slaughterhouses, but is about in line with appraisal expectations for meat processing. 5.35 Because of the high cost and scarcity of fuels, attention should be given to savings in steam and hot water consumption (Annex 3, paras. 49 and 50). No information could be given to the PCR mission on the use of waste heat recovery systems, but experience in Western countries suggests that more than 30% of hot water requirements of slaughterhouses can be produced by such systems. Their use should thus be evaluated under prevailing Romanian conditions. E. Environmental Effects 5.36 Location, management, and housekeeping of both pig production facilities and processing units are of adequate standards to ensure that they do not present a nuisance from the viewpoint of appearance and emission of smell, noise, and dust, although a number of slaughtering and processing facilities are located in towns and cities and even adjacent to houses. Effluent disposal appears to be adequately cared for (paras. 5.13 and 5.21), but poor operation and maintenance of slurry removal systems of pig farms, including the attempt to save relatively high energy costs, has the potential of causing severe environmental damage. Effluent treatment efficiency must therefore be closely monitored by relevant Government agencies. - 45 - VI. OPERATING RESULTS A. Financial Results 6.01 Pig Production The financial performance of this part of the project will depend to a large extent on the quality of concentrate feed that the units are able to buy in the future. Under the scenario that feed quality remains at the present low level, the likely financial rate ol return of the whole pig production part of the project is estimated at about 3% when calculated in constant currency terms (Table 8). In current terms, but assuming no inflation from 1984 onwards, the financial rate of return would be 6% (Annex 1, Table 1). With 5% inflation of all costs and benefits from 1983 (Annex 1, Table 2), it would be 112. This compares with domestic interest rates which were 2% during the early period of the project but now have risen to 5%. Under these circumstances, the pig production part of the project would perform moderately in financial terms and some doubts are cast on the ability of poorer performing units to meet debt service requirements unless relative prices become more favorable. Since the time of appraisal, the relationship between input and output prices has moved against pig production as may be seen from the local inflators given in Table 9. The project is a net producer of pigs for meat, breeding stock, and weaners. Between 1977 and 1983, prices of these items have increased by 212, 0%, and 20% respectively, while prices of the major inputs, labor, concentrate feed, and other items, have increased by 60%, 28%, and 54%. 6.02 Under the assumption of an improvement in feed quality from 1985 onwards, the PCR mission estimates that the financial rate of return of the project would be about 72 (Table 10). 6.03 A comparison between key financial parameters estimated at appraisal, by BAFI in preparation of its draft PCR report and by the PCR mission, is given in Table 11. BAFI estimates (Annex 1, Tables 3 to 9) indicate better financial performance than the PCR mission largely because BAFI (i) did not take full account of the lag between costs and sales for specific pig categories produced; (ii) completely neglected mortality in adult livestock; and (iii) assumed all pigs were sold within the weight range which has the highest unit price. 6.04 A summary of estimated financial results of the project's pig production component is as follows: Appraisal BAFI's Draft PCR PCR Mission Weighted Weighted Average Average for Whole Project for 4 Main for 4 Main Whole Adequate Models Models Project Poor Feed Feed Fixed Investment/ Sow Space (Lei) 24,000 17,500 19,000 19,000 19,000 Feed Costs as % of Net Output 1/ 59.9 62.9 60.0 63.0 59.4 Margin over Annual Costs as % of Net Output 2/ 16.7 15.4 19.6 15.8 23.3 FRR at constant prices (%) 6 5 8 3 7 1/ Sales of pigs less purchases of pigs adjusted for changes in livestock numbers. 2/ Excludes livestock purchases, capital investment, and depreciation. - 46 - 6.05 BAFI made estimates of cash flows for each of the individual models funded under the project. The PCR mission did not nake detailed model by model estimates itself, but did adjust the BAFI models by converting them into constant currency terms. Their financial rates of return compare with appraisal estimates as follows: BAFI PCR Appraisal CAP breeding/fattening complex 2% 5% State farm breeding/fattening complex 5% 8% CAP breeding farm 8% 6% State breeding farm 9% 8% CAP modernization 22% NA State modernization 21% NA 6.06 The reason for the substantially higher financial rates of return estimated to be achieved from the modernization units compared with the new units is that in modernization not only are incremental pigs produced but also improvements are expected to take place in the production parameters of the existing herds. The main reason for the substantial difference in projected profitability between CAP breeding/fattening units and State breeding/ fattening units is that feed and labor costs are different. State units are estimated by BAFI to have feed costs of 60.3 Lei per 100 Lei livestock output while for CAP breeding/fattening units the figure is 65.9 Lei. This reflects an assumption of better technical performance by the State units. Moreover, on State units, labor costs per 100 Lei output are estimated at 6.4 Lei while on CAP units, they are almost 50% higher at 9.5 Lei. Besides higher staffing ratios of CAP pig farms (para. 5.29), most of this substantial difference in labor costs is due to the system of taxation. CAPs contribute to pension funds 3.5% of sales, which is normally a considerably higher figure than the 16% of wages which are added to State farm labor bills for the same purpose. BAFI's draft PCR estimates of FRRs for breeding units are slightly above the appraisal estimates because the lower actual unit investment cost per sow achieved has more than compensated for the shortfall in margin over annual costs which have been lower than the appraisal estimate. The PCR mission's projections of financial returns for individual investments would be in proportion to but substantially lower than BAFI's estimate in the case that the poor quality feed would continue, but would be similar to the BAFI estimates assuming that adequate feed were available from 1985 onwards. 6.07 Slaughterhouse and Processing Facilities The PCR estimates of financial performance of this part of the project are based on BAFI's figures but assume that production at the facilities peaks at 80% of capacity rather than 100% as estimated by BAFI. On this basis, the slaughterhouses show a financial rate of return at constant prices of 11% and the specialized meat processing facilities one of 20% (Annex 1, Tables 10 and 11). The rates of return expressed in current currency terms would be substantially higher. Clearly within the present price structure, slaughterhouses and processing facilities are profitable enterprises provided that raw material supply can be obtained and a reasonable percentage of potential throughput capacity achieved. Even with substantially lower levels of operation, these units would still be financially viable. The sensitivity analysis given in Tables 10 and 11 of Annex 1 shows that at 60% capacity, the FRR would be 7% for slaughterhouses and 15Z for meat processing facilities. - 47 - 6.08 The relatively good financial performance of the slaughtering and meat processing facilities, yet the poor performance expected of pig production units, indicates that interface pricing (sales of pigs from production units to meat processing units) may be wrongly set. Under the fixed price system which exists in Romania, relatively too much of the total benefit from meat sales is currently going to processing units and too little to pig production units. B. Economic Impact 6.09 Although originally considered as a 2-year tranche of the Romaniap investment program in pig production and processing, project implementation lasted substantially longer than planned and accordingly, represented a smaller proportion of total investment in any one year than originally intended. However, over the main implementing years 1978-1982, the two Bank assisted Pigs I and Pigs II (Loan 1669-RO) projects combined contributed 95% of total investment in pig production alone, with Pigs I's share being 49% as shown below. Pig Production Investment 1978-1982 Million Lei Percentage Pigs I 3,657 49 Pigs II 3,460 46 Other 391 5 Total 7,508 100 Over the main period of investment in slaughterhouses and processing facilities (the 6 years 1978-1983) in Romania, total investment is reported as follows: Million Lei Percentage Pigs I 2,609 45 Pigs II 2,137 36 Others 1,098 19 Total 5,844 100 6.10 Not only have the World Bank assisted Pigs I and Pigs II projects comprised the vast majority of all investments in pig production and processing facilities during their project implementation period, but the level of investment in these items was also much higher during these years than it had been previously. For pig production, the average investment during 1975-1977 was about Lei 540 million per year compared with Lei 1.5 billion per year during the following 5 years, while for the processing facilities the average investment prior to the project period had been about Lei 750 million per year compared with about Lei 1 billion per year during the project period. Thus, the Pigs I and Pigs II projects were clearly the major source of finance for investment in pig production and processing during their period of implementation. - 48 - 6.11 Jobs Created: At appraisal it had been envisaged that the Pigs I Project would create about 9,000 new jobs. The table below indicates the number of jobs now estimated to have been created as a result of the project. Management & Technical Staff Workers (No.) (No.) Pig production 562 4,869 Slaughterhouses 207 4,831 Processing facilities 45 950 Total 814 10,650 6.12 In all, the estimated 11,464 jobs created as a result of the project are 27% higher than the number envisaged at appraisal. In that project cost was 22% higher than envisaged at appraisal, the cost per new job created at 690,000 Lei per job ($40,000 per job) is close to appraisal expectations. C. Economic Performance 6.13 Pig Production The economic performance of this project component is considered against two possible scenarios; firstly, that the average quality of concentrate feed available for feeding to pigs does not change markedly from the present level; and secondly, that Romania makes the decision to import or grow adequate vegetable protein to enable pig feed to be of the quality necessary for good levels of performance, i.e. an average of about 14.5% crude protein. Details of the basis of the calculation of the economic rate of return and the derivation of prices are given in Tables 12 and 13 and in Annex 2. Under both feed scenarios, the project shows an acceptable economic rate of return when viewed in isolation. The ERRs are also reasonably robust as may be seen from the following table. Summary of Sensitivity Analysis Poor Feed Quality Adequate Feed Quality (%) (%) Base ERR 11 19 1. Investment +10% 10 18 2. Feed Costs +10% 6 16 3. Total Benefits -10% 4 13 4. Total Benefits +2% (Manure Value) 12 20 6.14 Within the base analysis, no account has been taken of the benefits from fertilizer savings due to manure produced. After allowing for the economic cost of manure handling and spreading, these would be likely to add about 2% to gross benefits and would raise the ERR of the project by one percentage point (see Sensitivity Analysis, Tables 12 and 13, Case 5). - 49 - 6.15 The impact of possible under-recording of investment is minor. This can be seen from the Sensitivity Analysis which indicates that the effect of investment being 10% higher than recorded would be that the ERR would fall from 11% to 10% in the case of poor quality feed or from 19% to 18% in the adequate quality feed case. As would be expected, however, the project is sensitive to relative changes in output prices or feed prices. A 10% increase in livestock feed price reduces the rate of return from 11% to 6% in the poor quality feed scenario and from 19% to 16% in the good quality feed scenario. A ten percent reduction in benefits would have a more dramatic impact, causing the ERR to fall from 11% to 4% with poor feed and from 19% to 13% with good feed. D. Additionality 6.16 From the analysis set out above, even under the assumption of a continuation of poor quality feed, the pig production component of the project, when viewed in isolation, shows an acceptable economic rate of return, i.e. under the assumption that it has no impact on non-project pig and other livestock production in Romania. However, as Romania is following a policy of restricted protein imports, it may be that wichout the project, better performance would have been achieved on other units than with the project case, as protein used by Pigs I units might have been made available to other pig, poultry, and dairy farms had the Pigs I investment not been made, and as a consequence, the performance of these farms would have been better. If Romania continues limiting protein supplies and this limitation restricts availability to a fixed aggregate tonnage, the net contribution of the project to aggregate meat production will be substantially below the sum of pigmeat output from Pigs I subprojects. 6.17 Estimates of project performance with "adequate quality feed" compared to "poor quality feed" (see Table following para. 5.30) indicate that as a result of 117,000 tons incremental protein feed (soybean equivalent), economic trading margins would increase from Lei 1,197 million (US$68 million) to Lei 2,494 million (US$142 million), i.e. by Lei 1,297 million (US$74 million). Thus, the average economic value of soybean meal used by the Pigs I project over this range of increased use would be US$632/ton over and above its border price (economic price assuming free trade). Assuming this protein were equally valuable on other pig and poultry units in Romania, the opportunity cost of using the total 140,000 tons of protein for Pigs I (in the poor quality feed situation) rather than in the rest of the economy would be about US$88 million/year. If this is considered as the "without project" opportunity cost of allocating scarce protein resources to Pigs I, then clearly Pigs I would show a negative Economic Rate of Return (US$88 million is greater than the Pigs I economic margin of US$68 million in the "poor quality food" scenario). 6.18 Had it been clear at appraisal that protein would have been a limiting factor and that imports and other supplies of proteins would be restricted to the same aggregate level whether or not there was a project, then the project would have been estimated to show unacceptable economic results and would not have justified IBRD financing. However, provided it is clear that this project does not cause reduction of protein supplies to other users, (i.e. aggregate imports or other supplies are at least 140,000 tons soybean equivalent per year higher "with project" than they would have been in the "without project" case), then pig production under this project is economically viable even under its present, far from optimum feed conditions. - 50 - 6.19 Processing This project component is essentially a service facility to enable pigs produced under the project to be marketed. Economic rates of return for simple slaughterhouses are not meaningful on a national level (Annex 1, Table 12) as the normal methodology for evaluating individual slaughterhouse investments is to consider benefits in the form of transport and other costs saved by processing through a new facility rather than using existing distant facilities at overcapacity. This methodology is, however, not appropriate when examining a whole program of new slaughterhouse investment. Thus, no attempt has been made to evaluate the economic rate of return of the slaughterhouse subcomponent itself. (An implicit rate of return of 10% on the investment in slaughterhouses has been made when calculating the border price of live pigs.) 6.20 The economic rate of return on separate processing facilities in which pig products are manufactured from fresh meat is capable of economic analysis. The critical factors in this evaluation are the estimates of the Economic Conversion Factors for the various products produced and for inputs. This analysis is made under the assumption that chilled carcass meat purchased by processing units is tradeable and the canned hams and Sibiu sausages produced by them are also tradeables, but that other meat products sold are not tradeable. The Conversion Factor used on these other products is the critical parameter in estimating the ERR of the project component. If their Conversion Factor is taken as unity, then the economic rate of return on the processing plants is negative. Alternatively, if the Conversion Factor for meat products is taken to be the same as the Conversion Factor for carcass meat, then the rate of return from the processing subcomponent of the project is estimated at 21% (Annex 1, Table 13). 6.21 In Romania where prices are not set by the interplay of market forces and where disequilibrium between supply and demand is met by rationing rather than price movement, the normal methodology of applying Economic Conversion Factors to financial prices is difficult to employ with any degree of accuracy as estimation of the potential "equilibrium price" for non-traded items is conjectural. 6.22 A priori, it is unreasonable to assume that the Conversion Factor for other meat products should be as high as that for carcass meat. Within the country there appears to be a shortage of fresh meat rather than processed products. In consequence, in an equilibrium situation the price of fresh meat would be expected to increase relative to that of processed products. The degree to which this would happen is difficult to estimate. Because of the high turnover/low unit margin nature of the processing units, the rate of return is extremely volatile and is caused to move substantially by only small changes in the inect underlying assumptions. The value judgment of the PCR mission is that the economic rate of return from the processing units is nearer to the lower of the two estimates. This is consistent with the Bank's assessment and policy at the time of Pigs II appraisal which was to minimize investment in further processing except where it was necessary to make use of otherwise unmarketable raw materials. As the investment in processing facilities amounted to only about 5% of the total project investment, the probable low economic rate of return for this subcomponent does not have a significant effect on the viability of the project as a whole. - 51 - 6.23 The economic rate of return on modernization of slaughterhouses is likely to be high. For the reasons outlined in para. 6.19, no attempt has been made to quantify it. Economic benefits stem from being able to continue operating slaughterhouses which would otherwise become hygienically inacceptable. Moreover, in three cases, modernization provided for additional processing capacity also. - 52 - VII. BANK'S PERFORMANCE 7.01 Project Formulation and Objectives Compared to Bank-financed projects in other countries, the Bank's role and input in selecting and designing this project was marginal for 3 major reasons: (a) limited information and data released to the Bank and indecisiveness of Romanian planners as to what projects and subprojects should be submitted for Bank appraisal made it virtually impossible for the Bank's identification and preparation missions to actively participate in project preparation; (b) BAFI's project preparation capability was overrated by the Bank; BAFI's unfamiliarity with Bank requirements and its difficulties in carrying out detailed macro- and micro-economic analyses might have been overcome had the Bank been able to become more actively involved in project selection and preparation; and (c) the pressure by both Romania and the Bank to finance agricultural projects at the earliest time possible left little scope for selectivity. As a result, the decision to appraise the project was based on its advanced status of preparation compared to several other potential investment proposals (para. 2.04). 7.02 Project Processing Project processing was competent and efficient. Project design was realistic and innovative for Romania. It attempted to integrate pig production and processing on a nationwide basis and to further improve production technology which, at the time of appraisal, had already reached high standards. Significant technological changes proposed by the appraisal mission for both pig production and processing proved to be valuable and cost-effective (para. 5.25). Bio-economic production parameters used in project evaluation were well researched and realistic, particularly in view of the fact that the Bank had no firsthand experience with large scale pig production and processing either in Romania or anywhere else in the world. 7.03 During the project appraisal process, it was not possible to foresee the severity of the economic difficulties which Romania has experienced within the context of the world economic recession since 1980, and as a result, the disastrous effect on feed conversion efficiencies stemming from grossly inadequate supply of livestock feed. At appraisal it was reasonable to assume that Romania, a major producer of feedgrains (maize, barley, etc.) would import protein feeds like many other countries, including Eastern European countries. Moreover, during negotiations the Bank was reassured that the Government (a) had allocated sufficient grain to support the project; (b) stood ready to forgo grain exports, if necessary, to support livestock activities; (c) was actively pursuing programs to expand domestic production of high grade proteins for feed manufacture; and (d) supported the importation of protein materials to supplement domestic supplies 1/. Although the Bank was aware of the tight feed supply situation at the time of project appraisal 2/ and stressed the importance of feed conversion efficiency from the start of the project, the full extent of protein feed shortages and their impact on livestock performance has emerged only since 1980 3/, as a result of the combined effect of Romania's ever increasing intensive livestock 1/ SAR No. 1500-RO, page 23, para. 5.09. 2/ SAR No. 1500-RO, Annex 4, para. 12 and Project Implementation File, para. 13. 3/ Cattle and Sheep Subsector Survey (No. 3174-RO), paras. 6.31-6.34 and Annex II. - 53 - production activities, its failure to increase domestic production of protein feeds significantly, and the country's foreign exchange constraints which, in 1983, probably permitted the import of not more than one-fifth of minimum protein feed import requirements. 7.04 Implementation and Supervision Supervision of the project was adequate. Between 1977 and 1982, 9 missions were made. With 2 exceptions, each mission consisted of at least 2 specialists and spent about 8 man-days in the field. Since 1980, supervision intensity of the project was reduced as it was co-supervised with the Livestock II (Pigs) Project (Loan 1669-RO), which became effective on July 16, 1979. The composition of supervision staff was well balanced. While there was continuity of staff, the inclusion of new Bank staff and 5 consultants proved effective and was appreciated by the Romanians. The supervision missions' contributions were noteworthy in assisting ROMAGRIMEX in the preparation of tender documents, namely for procurement of slaughterhouse equipment; improving technical designs of subprojects; alerting Government on protein feed, construction, and effluent treatment deficiencies; proposing a whole range of operational and maintenance improvements at subproject level; and, most importantly, identifying together with the National Pig Research Station at Peris and the Animal Nutrition Institute at Balotesti research requirements for pig nutrition and management 1/, which subsequently were included for financing under the Pigs II project. It should also be stressed, that most of the PCR conclusions (paras. 8.05 to 8.14) have been repeatedly brought to the Borrower's attention by the different supervision missions. 1/ Supervision Report of April 10, 1978. - 54 - VIII. CONCLUSIONS 8.01 The PCR exercise provides a number of useful lessons and raises a few basic issues which require follow-up and further examination. These are discussed below. A. Lessons Learned 8.02 Both Romania and the Bank have been aware of the grossly inadequate supply of protein feeds for a considerable amount of time, and its full magnitude on the reduction of Romania's livestock production efficiency was identified and quantified by the Bank as early as 1980. The problem of protein deficiency is thus not a technical one arising out of inadequate information or diagnosis, but a major policy and planning issue. It can be technically solved at short notice by importing soybean meal, but will continue to severely affect livestock productivity until rectified by the Government through corrective policy and planning measures. 8.03 Although comprehensive project monitoring and evaluation was not required by the Bank for this project, experience gained indicates that a detailed mechanism must be developed by the Borrower, assisted by the Bank if required, to monitor as early as possible project impact and its progress in achieving stated objectives. Sufficient and well-trained staff should be provided by the Borrower for this important function. Concerning this project, as a result of inefficient and delayed monitoring, the extent of the disastrous effect of protein feed deficiency on feed conversion ratios and pig production profitability (para. 8.14) was only fully recognized in the early 1980s. Good project monitoring would have alerted both Romania and the Bank to this issue at a much earlier stage. As a consequence, the Livestock III (Poultry) Project (Loan 1764-RO) might not have been financed by the Bank, and the Bank might have opted to support domestic production of protein feed and grain storage facilities and/or to extend an Import Program Loan for soybeans rather than to finance further irrigation or regional agricultural credit projects. 8.04 In the future, the Bank should process agricultural sector projects in Romania only if adequate information and data is available to carry out detailed and meaningful technical and economic analyses. B. Issues 8.05 Pig production facilities financed under the project are substantially underutilized causing high fixed and variable costs for pig production. For example, if the efficiency of feed conversion (feed required to produce 1 kg liveweight) was improved from 5.3 to 4.0, the economic benefits would be substantial. The number of pigs sold per sow per year would increase by an estimated 15%, average pig slaughterweights would rise from 101 kg to 106 kg, and age at slaughter would decrease by about 16%, giving rise to 21% more pigmeat production. Because of the estimated 162 reduction in age at slaughter, the 15% extra pigs could be reared or fattened without adding to existing pig production facilities. Consequently, costs per unit for livestock housing, labor, feed manufacturing, transport, storage, and handling would be reduced at both farm and feed mill level as would the cost of effluent disposal. The latter is quite significant in that 1 kg of feed gives - 55 - approximately 3 kg of effluent. Moreover, if adequate feeds were available, an estimated 1.2 to 1.5 million tons of feed per annum (mainly maize) could be saved in Romania's pig sector alone at present output levels. 8.06 The deficiency in protein supplies should not be accepted as a permanent condition which cannot be remedied in an economic way. Given its foreign exchange constraints to import adequate protein supplies, Romania should thus reassess the feasibility and economics of significant expansion of domestic production of protein feeds, and review possibilities for trade compensation (bartering) arrangements with major soybean producing countries and for obtaining external financing for soybean imports. 8.07 The present low feed conversion ratio is not entirely due to low protein levels. In the scientific literature, there are reports of pigs fed very low levels of crude protein, yet performance decreases by no more than 20%. Hence, stated shortages, particularly of lysine, fat, soluble vitamins, and antibiotics are also affecting feed conversion efficiency. Romania is reportedly becoming self-sufficient in lysine production which would be of significance for improving feed conversion ratios, as would be the addition of increased levels of fat, vitamins, and antibiotics to feed rations. 8.08 Poor quality feed is only part of the reason for the low performance of Romania's pig industry. Equally important is the impact of managerial ability. Most pig farms should give more emphasis to improving managerial and husbandry skills to allow pigs to perform to their genetical potential, including aspects of improved heat detection in sows, effective replacement of breeding stock, intensive monitoring during the farrowing and weaning process, better heating and ventilation, reduced feed and water wastage, prevention of overfeeding, maintenance and repair of slatted floors and watering systems, stock handling, hygiene, and health control. Development of improved accounting skills at farm level would facilitate control of the large production units financed under the project and would be an important management tool to obtain essential up-to-date information on efficiency criteria such as fertility, mortality, culling, feed conversion ratios, etc. A simple recording system should thus be designed to show a weekly summary of physical performance in each unit, and data obtained should be analyzed to take corrective action if necessary. A possible recording system is outlined in Annex 4. 8.09 Although pig production technology is well developed in Romania, keeping abreast of new developments and the potential for their adaptation to local conditions is another tool to improve pig production efficiency. Research and laboratory skills of the pig research institutes at Balotesti and Peris together with experience made in large-scale production units should continue to follow up, for example, on interesting development in the handling of grain at harvest and inclusion of corn silage in pig feeds, with a view to saving energy and improving nutritional values. For example, it is necersary to dry grain to 15% moisture in the Romanian situation where mixed feed is consumed so quickly? Has corn silage a place in pig nutrition? Both these questions need to be further researched, including problems associated with the handling of moist grain in feed mills, storage problems with moist feeds in feed bins, nutritional values, and corresponding economics. The development of alfalfa as a protein source might also be researched from the milling viewpoint. The question will arise whether pelleting will be - 56 - required. A small investment in research, including well organized study tours abroad, might prevent uneconomic developments or reduce the cost of developments considered important at present. 8.10 PCR mission estimates show that, provided feed quality would be improved from the present average of about 11% to 14.5% crude protein (para. 5.31), increased fertility, faster weight gains, and higher slaughterweights would result in incremental production of about 21% from the same number of sows, without any increase in aggregate feed costs. The clear economic (and potential balance of trade) advantage of importing more protein feed and producing more meat can be seen from para. 6.17. The effect of allocating an incremental 117,000 tons of protein feed worth US$35 million annually to Pigs I costs would be to raise overall production by almost US$74 million, most of which would be exportable pigmeat. It is thus clearly in the interest of Romania to correct existing protein deficits. Without solving this problem, Romania will be unable to utilize its impressive feed grain base (maize, barley, etc.) effectively. However, at this stage is it unclear what policy Romania will follow. If protein imports continue to be restricted, project technical and economic performance will continue to be sub-optimal. 8.11 Despite the fact that sow fertility is depressed by high summer temperatures in Romania, there is considerable potential for improving reproductive performance on project farms from 13.4 pigs sold per sow per year to at least 17 pigs. Some of the better units have already reached or surpassed this target. If achieved, this improvement alone would improve feed conversion efficiency by about 10%. Experience made in several Western European countries, including Denmark and Ireland, shows that by using crossbred sows and improving management such as mating practices, gilt replacement, and culling of uneconomic sows, the number of pigs slaughtered per sow per year was increased by 30% and more at the national level over the past decade. In addition, in the context of Romania, earlier weaning (33 to 36 days instead of 42 practiced at present) would enhance reproductive performance. 8.12 Labor productivity achieved under the project is low by international standards. While good progress has been made to reduce the number of employees directly working with pia production (mainly due to pig farm modernization), staff employed in management and administration, maintenance, services and manure disposal present as much as about 50% of the total work force (para. 5.29). This ratio is high and offers room for substantial reduction of staff. 8.13 The standard of workmanship on many facilities built or modernized under the project is generally disappointing. With a little more care and attention during design and construction, standards could have been improved significantly (paras. 5.11 and 5.23). Maintenance of most facilities, in particular of pig farms (paras. 5.12), could also be improved and designers of future facilities could assist greatly in reducing maintenance problems. Effluent treatment efficiency of both pig production and processing units must be closely monitored to avoid environmental damage (paras. 5.13 and 5.22). 8.14 Slaughterhouses and meat processing facilities show financial rates of return at constant prices of respectively 11% and 20% compared to about 3% for pig production units. The relatively good financial performance of the - 57 - slaughtering and meat processing facilities, as opposed to the poor performance expected of pig production units, indicates that interface pricing (sales of pigs from production units to meat processing unkits) is wrongly set. This means that under the fixed price system which exists in Romania, relatively too much benefit from meat sales is currently going to processing units and too little to pig production units (para. 6.08). In addition, the relationship between input and output prices for pig production has significantly moved against it since project appraisal. While output prices have been kept low, major input prices have increased substantially (para. 6.01). These phenomena need to be quantified and solved by suitable adjustments to counteract likely production inefficiencies and to allow poorer performing pig farms to meet debt service requirements. ROMAN1A Pig Production and Processing Project - Loan 1479-RO Project Completion Peport Appraisal and Actual Allocation of Project Funds between Project Components (A) (B) (C) Actual Project Cost Actual Project Cost Component Appraisal Projection Excluding Working Capital B/A Including Working Capital 2/ C/A (Lei Million) (Z) (Lei Million) (2) (Z) (Lei Million) (2) (Z) 1. Pig Breeding/Fattening Complexes 2,584 40 2.883 46 111.6 396 50 153 - CAP 1,602 25 1,589 25 99.2 2,180 28 136 - State 982 15 1,294 21 131.8 1,776 22 181 2. Pig Breeding Farms 12131 18 358 6 31.7 418 5 37 - CAP 930 15 1T 4 23.2 252 S T7 - State 201 3 142 2 70.6 166 2 83 3. Pig Farm Modernizations 356 6 470 7 132.0 645 8 181 1 - CAP - - 68 1 - 93 1 - - State - - 402 6 - 552 7 - 4. Pig Selection Farms - State 105 2 - - - - - - Subtotal Pig Production 4,176 65 3 711 59 - 5.019 64 120 5. Slaughterhouses and Meat Processing Facilities 2,106 33 2L143 34 101.8 2j359 30 112 6. Slaughterhouse Modernizations 167 3 466 7 279.0 513 6 307 Subtotal Processing 2j273 35 2p609 41 115.0 2,872 36 126 TOTAL 6,449 1/ 100 6,320 100 98.0 7.891 100 122 I/ Including working capital. 2/ Includes working capital estimated at appraisal at 37.232 for pig breeding/fattening complexes and pig farm modernizations; 16.66Z for pig breeding farms; and 10.09% for slaughterhouses, meat processing facilities, and slaughterhouse modernizations. ROMANIA Pig Production and Processini Project - Loan 1479-RO Project Completion Report Actual Project Financing Compared to Appraisal Financing Plan/(Lei Million) BAFI IBRU Sub-borrowers Total (A) (B) B/A (A) (B) BA AB B/A (A) (B) B/A Component Appraisal Actual TU Appraisal Actual ( ) ppraisal Actual (U Appraisal Actual TRY 1. Pig Breeding/Fattening Complexes - CAP 759,231 1,596,100 210 362.467 244,800 68 480,371 339,900 71 1,602,069 2,180,800 136 - State 763,271 1,369,900 179 218,649 309,500 142 - 96,300 - 981,920 1,775,700 181 2. Pig Breeding Farms - CAP 451,629 177,400 39 199,779 24,500 12 279,066 50,300 18 930,474 252,200 27 - State 159,633 128,200 80 40,893 32,700 80 - 4,700 - 200,526 165,600 83 3. Pig Farm Modernizations 263,572 483,200 183 73,565 106,800 145 18,863 54,000 286 356,000 644,000 181 4. Pig Selection Farms - State 83,006 - - 21,994 - - - - 105,000 - - 'o 5. Slaughterhouses and Meat Processing Facilities 1,640,147 1,899,800 116 466,033 416,200 89 - 43,200 - 2,106,180 2,359,200 112 6. Slaughterhouse Moderniations 1301380 408,400 313 36,620 95,700 261 - 9400 167,000 513,500 307 TOTAL 4,250,869 6,063,000 143 1,420,000 12230,200 87 778,300 597,800 77 6,449M169 7,891,000 122 Percentage of Total Project Cost 66 76.8 - 22 15.6 - 12 7.6 - 100 100.0 1l Assumes that 80 of incremental working capital was financed by BAFI and 202 by sub-borrovers. ,&’〕‘:&&&&‘〕〕！--,& ::,,,，。．,,,,！〕〔洹 _！〕！0&，〕！〕〕〕〕〕！〕薑‘ - 61 TABLE 4 ROMANIA PIG PRODUCTION AM PROCESSING PROJECT Loan 1479-RO Completion Report Schedule of Disbursements (As of September 30, 1982) Cumulative Disbursements Actual va (US$ Million3) Appraisal Eforimate Ff and ACUM1 Apprzdsal Last Re-Asid z Quarter Estimate Estimate .(1.2/31181) PY 78 97-3o/;47 - - 12/31/77 - 0.5 - 3/31/78 4.7 3.5 - 134 6/30/78 6.3 7.5 - FY 79 9 /30 T7 C 11.3 11.6 - A. 12131/76 17.5 16.0 - 84 3/31/79 17.0 22.0 - 77 6/30179 19.5. 28.3 - 70 FY DO WSuh-2 23.3 35.1 66 12/31/79 14).G 42.; 65 V31170 49.5 64 54.0 Fy 81 ME / 00 43.0 55.3 73 12/31/80 41.i 62.8 65 3131/83 51.G 65.3 78 6130M 54.5 67.6 81 FY 82 9/110/81 56.9 69.6 82 12/31/tll 62.1- 71.b 87 3/31/82 67.1 71.0 95 6/30/82 69.3 - 90% FY 8 3 9/30/82 71.0 ..OC fO- 3-: Fr 1 T 1'To, Frz - 62 - TABLE 5 Liwetock I (Pgs) Project - Laaa 1479-M c~ietion pot Incraental Beeding Red Projectian and Feed Coneption Estiatces fr Project ti 1977 1978 1979 1980 1981 198 1983 198 1965 1.ire.cock a.er so.: Incremnatal ~ at yer end 1/ - 0.7 4.4 23.5 76.0 166.9 195.4 195.4 195.4 GUts purchsed 2/ - 0.7 3.9 20.6 69.7 117.5 86.3 68.4 68.4 sous culled 3/ - - 0.2 1.4 7.7 25.1 54.5 64.5 64.5 Sou yotalic. 1 - - 0.1 0.5 1.5 3.3. 3.9 3.9 Baars: Increetal boars at year and - 0.05 1.05 3.54 8.31 13.86 15.35 15.35 15.35 Boers prda.wed - 0.05 1.03 3.03 6.54 9.70 8.42 7.67 7.67 Boats culle4 - - 0.03 0.52 1.70 3.96 6.65 7.37 7.37 ?brtality - - - 0.02 0.07 0.17 0.28 0.31 0.31 Births 5/: Fr=m increwntal gilts - 5.6 29.6 152.8 420.0 727.2 228.0 - - Fræ stable herd - - 11.3 71.3 380.7 1231.2 2703.8 3165.5 3165.5 Total airtha 5 .6 W~.9 2W W 195-I 293L-8 3165.5 3165.5 Net Weener Purhad - - 21.0 84.9 243.7 197.0 67.3 - - Hobabred Pigs Produced (b sommue): Fr in=remnral gilcs 6/ - L9 2.7 24.6 126.8 348.6 60.6 189.2 - ) ~table herd 7/ 3.3 41.8 149 562.6 14.0 2378.0 2627.4 Total Pra~ed - 1.9 6.0 66.4 275.7 911.2 352.6 2567.2 2627.4 Total Pig Sales HoeBred PrOdXUin Beedirg gilt - - 0.5 9.0 45.9 65.5 95.4 153.9 180.9 Finished pigs - - 5.5 57.4 229.8 845.7 1957.2 2368.0 299.8 I rs - 1.9 - - - - - 45.3 46.7 Culled Smws and B~ars - - 0.2 1.9 9.4 29.1 61.1 71.9 71.9 Finished ig. fran Bouabt in skaners 11/ - - 111 5.4 167.4 2214. 12.3 30.3 - Total Gros Sales - 1.9 17.3 122.7 452.5 1154.4 2238.0 2669.4 2699.3 - - - - - - - - - - - - - - - - - - - '00t- - - - - - - - - - - - - - - - - Coentrate Feed C4m~tion Solds 8/ - OA 2.8 15.3 54.7 133.6 199.3 214.0 214.0 awrs~9/ - - 0.6 2.7 7.1 9.7 17.5 18.4 18.4 Young stock 10/ - 0.8 9.5 53.4 195.6 538.4 981.6 1144.3 l1,".1 Fattenel uners 12/ - 8.8 30.5 69.1 76.1 40.8 9.3 - 1.2 21.7 101.9 325.5 757.8 2f- 1386.0 13M.5 i/ mF1 figures. I/ Replacement rate 35% of mber in herd at begiir of yeer. =/ 33 f am=ber in herd at beinirg af year. 4/ 2% of n in herd at begimng af year. 51 Incrm.a1 gilts assu~d to have 1 litter of 8 pige in yesr of parchase. Stable herd hau 1.8 littern/yar of 9 pigs, i.e. 16.2 pig per sov per year. 61 After allovis for crtality (17%), all *re sold in yesr followirg yr af birth. 71 fter allaig for m~tality of 17%, 35% sold in year af birth, and 65% in folliMr ye~r. 8/ 1.1 con/souyear for stable herd, 0.5/ton for increa1 wu (.hich n average join hird mi~hay thron~ the year). / 1.2 tons/baar/ye.r. 'k/ Fed irp= for fat pig and gits (450 kg/pig c=s an veroge 3 aath prior to sale. /M Pip sold an aver~8e 5 1/2 mnhs after prchane (2% sortaliry). 12/ Feed cm~d an aerage 2 1/2 zædh prior to sale. - 63 - TABE 6 Pig Production and Processing Project - Loan 1479-RO Project Campletion Report Number and Kind of Subprojects Sows and Boars at Full Developent - - - - - Subprojects - - - - Appraisal Component Projection Actual B/A SMIs Boars (A) (B) 1. Pig Breeding/Fattening Cbplexes 60 52 87 160,763 706 - CAP 40 32 80 102,104 6,805 - State M3 20 100 58,659 3,901 2. Pig Breeding Fazms 40 18 45 24,975 2,628 - CAP 31+ 9 26 14,475 1,522 - State 6 9 150 10,500 1,106 3. Pig Farm Mbdernization 20 42 210 9 2, - CAP - 20 - 3,857 1,146 - State - 22 - 5,825 873 4. Pig Selection Farms 10 - - Subtotal Pig Farms DO 112 86 195,420 1 5. Slaughterhouse and Neat Processing Facilities 15 10 67 6. Meat Processing Facilities 4 8 200 7. Slaugiterhouse Modernizations I/ - 47 - 1/ SAR does not indicate expected rnmber of stb-prqjects. TABLE 7 ROMANIA Pig Production and Processing Project - Loan 1479-RO Project Completion Report Slaughterhouses and Meat Processing Facilities Comparison of Planned and Actual Capacity at Full Production Actual/ Planned Actual Planned A. Slaughterhouse and Processing Facilities 1. Number of plants 15 10 0.67 2. Annual slaughter capacity (tons LW) (single shift basis) 252,220 256,742 1.02 3. Annual production capacity Heat 1/ (tons) 133,632 129,420 0.97 Meat products 2/ (tons) ) 22,890 ) Canned meat products 3/ (tons) ) 37,341 9,000 ) 51,790 1.39 Semi-canned meat 4/ (tons) ) 19,900) Other products 5/ (tons) 18,027 22,320 1.24 Total (tons) 189,000 203,530 1.08 4. Total staff employed 4,581 5,038 1.10 B. Meat Processing Facilities 1. Number of plants 4 8 2.0 2. Annual production capacity Dry salami (tons) 3,675 1,200 0.33 Meat products 2/ (tons) 2,863 14,000 4.89 Canned meat products 3/ (tons) - 455 - Semi-canned meat 4/ (tons) - 2,000 Catering products 6/ (tons) - 4,000 - Byproducts 7/ (tons) 1,043 9,800 9.4 Total 7,581 31,455 4.15 3. Total staff employed 452 995 2.20 1/ Carcass meat and edible fats 2/ Sausages, smoked meats, special meat products, and smoked cured meats 3/ Canned meat products 4/ Pasturized canned hams and picnics 5/ Meat, bone and blood meal, industrial fats, skins, hides, and casings not used in processing 61 Prepared packs for catering purposes containing prepared meat vegetable products, etc. 7/ Edible fats, boned out meats and cuts, trimmings and bones - 65 - ROANIA TABLE 8 PIG PRODUCTION I PROCESSING PROJECT FINACIAL CASH FLOm PIG PRODCTIoN - POOR FEED QUALITY NILLIONS CONSTANT LEI (OCT 1983 PRICES) YEAR 77 78 79 80 81 82 83 84 85 86 87 88-95 96 PIG SALES - 1.5 31.2 227.1 772.8 1929.8 3393.1 3967.0 4031.0 4031.0 4031.0 4031.0 4031.0 RESIDUAL VALUE - - - 1731.0 GROSS BENEFITS - 1.5 31.2 227.1 772.8 1929.8 3393.1 3967.0 4031.0 4031.0 4031.0 4031.0 5762.0 LESS PIG PIRC SES - 3.0 31.2 147.0 76.0 445.9 260.7 177.0 177.0 177.0 177.0 177.0 177.0 NET LIVESTOCK SALES - -1.5 - 80.1 396.9 1483.98 3132.4 3790.0 3854.0 3954.0 3954.0 3854.0 5595.0 CONCENTRATE FEED - 2.4 42.8 197.1 566.4 1463.2 219598 2380.2 2429.9 2429.9 2429.9 2429.9 2429.9 LAWOR COSTS - -3.2 1.7 77.9 182.1 308.3 289.4 288.0 290.0 290.0 290.0 290.0 290.0 OTHER COSTS - 0.9 9.1 91.0 275.8 537.3 530.2 524.1 524.1 524.1 524.1 524.1 524.1 TOTAL AJIA. COSTS - 0.2 53.7 366.0 1024.3 2308.8 3015.4 3192.3 3244.0 3244.0 3244.0 3244.0 3244.0 ANIAL TRADING CASH FLOU - -1.7 -53.7 -285.9 -627.4 -825.0 117.0 597.7 610.0 610.0 610.0 610.0 2341.0 FID CAPITAL INVESTIENT 83.3 1218.2 1117.4 998.5 752.0 937.6 - - - 2.1 161.2 - - NET CASN FLil -9.3 -1219.9 -1171.1 -1284.5 -1379.4 -1762.6 117.0 597.7 610.0 607.9 448.8 610.0 2341.0 SENSITIVITY TESTS il AS A z PRESENT OF PRESENT INTEMIAL UALUE AT OCC COSTS AT OCC RATE OF TEST CASES TEST CASE VARIATIONS OF 10.0% OF 10.02 RETURN BASE CASE -2214.8 -11.5142 3.1452 TEST CASE I C.INVEST IP 102 -2590.5 -13.1652 2.421Z TEST CASE 2 C.FEED IP 10% -3345.5 -16.4271 -1.141Z TEST CASE 3 C.FEED 80lN 10 -1084.1 -5.988E 6.840Z TEST CASE 4 B.NETSAE 80Itfl0 -3916.8 -20.3631 -4.1842 TEST CASE 5 B.NETSALE UP 2E -1874.4 -9.744C 4.3412 ROMANIA Livestock I (PigpT Project - Loan 1479-RO Completion Report Deflators. Inflators and Exchange Rate Deflators Domestic (Lei) international (s) Exchange Rate (LeiJ) 1983 (Oct/Nov) 100.0 100.0 17.6 1983 (overage) 98.2 96.9 17.2 1982 89.7 94.0 15.0 1981 76.6 96.0 15.0 1980 68.7 100.8 18.0 979 67.3 93.1 18.0 1978 66.0 83.4 18.0 1977 64.8 70.7 18.0 I Appraisal NA A 20.0, Domestic Financial Inflator. I/ High Quality Lov Quality Pigs for General 2/ Labor 3/ Cone. Peed Cone. Peed Reat Breeding Stock Weaners 1977 (before project) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1978 101.9 106.7 96.3 97.9 100.0 100.0 100.0 1979 103.9 110.3 96.3 97.9 100.0 100.0 100.0 1980 106.0 116.4 96.3 97.9 100.0 100.0 120.0 1981 118.2 123.0 96.3 97.9 100.0 100.0 120.0 1982 138.4 144.0 123.5 127.1 121.1 100.0 120.0 1983 (average) 151.5 157.6 124.4 128.2 121.1 100.0 120.0 1983 (Oct/Nov) 154.3 160.5 124.4 128.2 121.1 100.0 120.0 1/ Used to convert "before project" situation in current Let into "without project situation" in current Let i. / Based on producer prices. Sourcea EMENA Programs. 3/ Speckfic indices for agricultural labor 1977-1981. Figures from 1982 onvards taken to increase in line with the Genural Index. - 67 -. TABLE 10 ROMNIA PIB PRODUCTION I PROCESSINB PROJECT FINANCIAL CASH FLOM PIG PRODUCTION - GDDD FEED AMLITY NILLIONS CONSTANT LEI (OCT 1983 PRICES) YEAR 77 78 79 80 81 82 83 84 85 86 87 88-95 96 PI6 SALES - 1.5 31.2 227.1 772.8 1929.8 3393.1 3967.0 4881.5 4881.5 4881.5 4881.5 4881.5 RESIOM VALUE - - - - - - - - - - - - 2096.2 GROSS SENEFITS - 1.5 31.2 227.1 772.8 1929.8 3393.1 3967.0 4881.5 4881.5 4881.5 4881.5 6977.8 LESS PIG PURCASES - 3.0 31.2 147.0 376.0 445.9 260.7 177.0 177.0 177.0 177.0 177.0 177.0 NET LMESTOCK SAMES - -1.5 - 980.1 396.9 1483.8 3132.4 3790.0 4704.5 4704.5 4704.5 4704.5 6900.8 CONIMTE FEED - 2.7 47.7 219.5 630.8 1629.7 2445.6 2651.0 2794.4 2794.4 2794.4 2794.4 2794.4 LAM COSTS - -3.2 1.7 77.9 182.1 308.3 289.4 289.0 290.0 290.0 290.0 290.0 290.0 OTIER COSTS - 0.9 9.1 91.0 275.8 537.3 530.2 524.1 524.1 524.1 524.1 524.1 524.1 TOTAL ANUAL COSTS - 0.5 58.5 388.4 1088.7 2475.3 3265.2 3463.1 3608.5 3608.5 3608.5 3608.5 3609.5 AINAL TADIN CASH FLOU - -2.0 -58.5 -308.3 -691.9 -991.5 -132.8 326.9 1096.0 1096.0 1096.0 1096.0 3192.3 FIXED CAPITAL INVESIENT 83.3 1218.2 1117.4 998.5 752.0 937.6 - - - 2.1 161.2 - - NET CASH FLON -83.3 -1220.2 -1175.9 -1306.9 -1443.8 -1929.1 -132.8 326.9 1096.0 1093.9 934.8 1096.0 3192.3 SENSITIVITY TESTS NPY AS A Z PRESENT OF PRESENT INTERNAL VALE AT OCC COSTS AT OCC RATE OF TEST CASES TEST CASE VARIATIONS OF 10.02 OF 10.02 RETURN MSE CASE -1023.2 -4.919% 7.4252 TEST CASE I C.IWMEST UP 10% -1389.0 -6.562 6.667% TEST CASE 2 C.FEED IP 102 -2310.6 -10.4602 3.88M TEST CASE 3 C.FEED M 102 264.2 1.3542 10.6372 TEST CASE 4 B.NETSA.E DMW 10 -3001.1 -14.4272 1.4562 TEST CASE 5 R.NETSALE IP 22 -627.6 -3.0172 8.4522 ID#NIA Livestock I (Pig) Projest - Loan 1479-M Cowletion Report Ilicators of Financial Peronmnce - Selected Models Appaia MFI I PCR MFI Total Coop IAB tihted Coop IAS Maital including areedim/ Bredfg/ Coop IAS Average BreadisW BreadiW/ Coop TAS Average loderni- Poor Adequate Fattenis Fatteimw Breedina4 Nodels Fatteus attenire SresLm Breaft 4 uodels satian Feed Feed - - - - - Z of Livestock Output - - - - -- Tradirg Perfoaence at Itul Developmnt cras Sales 105.1 105.9 106.9 107.3 105.7 104.6 104.5 105.2 105.1 104.6 A 104.6 103.8 Livestock Purdames 5.1 5.9 6.9 7.3 5.7 4.6 4.5 5.2 5.1 4.6 Mt 4.6 3.8 IAvestock Otput 100.0 100.0 100.0 100.0 100.0 too.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Feed 66.9 61.0 37.6 32.0 59.9 65.9 60.3 57.0 57.1 62.9 60.0 63.0 59.4 Labor 9.6 7.4 IA 18.3 10.6 0.8 6.4 8.0 4.0 6.2 (20.4 7.6 6.2 Others 11.4 13.1 16.4 16.3 12.8 13.9 14.7 9.2 9.1 13.5 ( 13.6 11.1 Total Aanet Costo 87.9 81.5 72.4 66.6 83.3 89.6 81.4 74.2 70.2 84.6 BA.4 84.2 76.7 Cash Flow MmwgIn 12.1 18.5 27.6 33.4 16.7 10.4 18.6 25.8 29.8 15.4 19.6 15.8 23.3 ------------------------------- --------------------- Fixed Iweetait per Sow Space 18,000 22,000 43,800 53,500 24,000 15,600 22,100 14,900 13,500 17,500 19,000 19,000 19,000 ------------------------------------- x---- ---------------------------- Financial Rate of Raturn 5 a G I M 22 53 a 92 52 8 32 7% (in constant prices) I** P16 MK0ECIO t MCESSIMS MOICI ECONIC CASH FLOM PIS RM IN - MM FfD GMIT HILLINS CMSTMT LII (OCT 1983 MICES' EAR 77 78 79 80 SL 82 83 84 85 86 87 ee 59 90 91 92-5 96 P18 SALIS - 1.9 47.2 30,4 1106.91 230495 4413.0 5943 4145.1 6130.9 6116.7 6102.5 6084.8 6067.0 6116.7 &145,1 6145.1 MSIML muL - - - - - - - - - - - - . - - - - 2L38.9 mS KEFITS - 1.? 47.2 360.4 1106s1 2304,5 4413,0 5904,3 6145.1 4130., 6116.7 6102.5 084.1 4067.0 6116.7 6145.1 8784.0 LES$ PIC PacNASES - 3.7 47.2 233.3 538.1 532.5 339,1 263.4 269.8 269.2 268.6 261.0 247.2 2"..' 218,6 269s6 269s9 MT LIVESIOU SAL - -1.9 - 127.0 5610 1772,0 4074.0 5640.? 5875,3 5861.7 5848,1 5834,6 5817.6 5800. 5848.1 5875.3 8514.1 CONCENTRATE FEE - 3.7 76,0 373,0 930.3 1588.6 3091.2 3719.7 356,7 3710.1 3763,6 1831.3 3912.9 39M.2 3973.5 3945.5 3965.5 LAMR COSIS - -2,1 1.1 50.7 111,4 200.4 I1N.1 197.2 108.5 18.5 I1N.5 11N.5 1115 188.5 18N.5 1N.5 IN.5 O1HR Cosis - 0. 9 9.1 91.0 275,1 537.3 534,2 524,1 524.1 524.1 524,1 524.1 524.1 524.1 524.1 524.1 524.1 TOT. A AL COSITS - 2.6 86,2 514.6 1324.5 232å,3 3809,5 4430.0 4U9.3 4422.9 4476.2 4550.9 425.6 4700,9 48.l 478.1 4679.1 AIIL 1RAIN CAS ROM - -4#4 -86,2 -387.5 -7565 -554.4 264.5 1210,9 1506.0 1438.9 1371.9 1293,6 1192.0 I099.8 1162.0 1197s2 3836.0 FIXE§ C1PITL IMSNTY 83,3 1218.2 1117.4 S99.5 752.0 937.6 - - - 2.1 t1.2 - - - - - - ET CASH FLM -83,3 -1222.6 -1203.6 -1386.1 -1508,4 -1491,9 24,. 1210,9 1506.0 142,8 1210.7 123.6 1192.0 1099.8 1162.0 1197.2 3836.0 SEHS191 II TESTS IU8I Al A Z Pm511T Ø PRESET INTEIWAL KLE Al OC 0TS AT CC UATE F TEST CASES TEST CASE MIAT10NS [ 50.0 w 10,02 ÆTM LASE CSE 40213 l.2 11.0069 TEST CASE l C.IIUST UP 10 36,6 0.146! 10.087% 1EST CASE 2 CFEE8 U 10 -1334.4 -5.037 6.403% TEST CASE 3 CiFEEØ 0M 10% 2139.0 9.293X 15.032 TEST CASE 4 I.MEALE øm 102 -2113.4 -9.537! 3.8752 TE1 CASE 5 m.ETSALE & 2 905.5 3.658! 12.211 蠶I幼，必ltf編，儲‘,l神l認司n階l劉．口輪為闖』屆肚 州膩lllt弱rf矗”寥他I寫•言開網n州忽劉．•申東閣二騙肚 州神，1化寫驢唱．勰：斗討究01網開叩口」，】t潤闖驢魷 一1 11&,51啊”，參I唱，I&g討寫．&u”讓必馴閣l叨 吋―馴甲g寫寫憫，，露右，跚I計幼I織魚t嫻1，才奮萬閣呈視 坏唱劉辭．•I寫露19•t！必，馴觔賽神】瀾啊 口開口個個個哺勵纏h由口廖口闔口口．口綱口闖口國．口申．■．&．網闕申口鬥間j口一個網暱編必織d•．■悶r．•開■目■•．口細物■•■國細口唱口•．．■．■響月卜細目唱，,.．•口•口 頗恥劉討．●1．念…官0馴】I邊甲I網曲寥閑l•颳擊瀾啊l唱肚 曰肚網讓萬lv點開】1萬l’劉下閉 闖卹國1膩論綢d磚川劉劉d ！•馴六劇 口日自口口口口網口目騙州頗網口開 51騙社All矗I二I馴萬 口口目開口口個禺口日口富口口日口口自口口啊口•口唱細徊口自口口口寫口口日口亂奮細口目口個啊啊目•喘目目口日口口口口口間•馴馴開開團勵口曰口購臘口口口悶目啊日口口口口口口日呂日目日讓日細口口口口口華啊跚卹響馴細口口口口口皂口口口 (‘往奮騙t.l幼t L．口討“勰鰓么，以輯！.1之騖〔，I•寫騙，鱸U,，州閱么．01己I藝，的必必．寫幼露·奮．開馴一1’寧膩I·，，權祝I一f•U群·C．朋，間U縱開】1馴 一‘•■闖．,.，••，■•••．唱••目•••■間•目．■州■目■自劉．••••••闔■闕．•，•哺••．..，•■闔．.．綢，中唱．．•■隨■國．•■•■．•哺口，•目■．•．■間••州■』•．■憫•細•唱．0．■“■，．•哺■，．■．.．口．&..．唱，.,,．•．卜．州．目••••．開口國••．■．•．細••細，響月•啗•個‘•由•陶•目■•．．■纏．．■．••叫•，■．州，．開．. －·。·－·之．1,11‘召－．·f，趁d 0．之以唱，馴邊擊．《個吃l必．•可必I【．視綢劉邑劉馴！寫l萬勰】個劉I」 乙”廳l當•，i辭露《．必辟露必．山囉矗．以令認t&I之寫‘,Cn必f．往比1．州開舀，O寫之I〔，磚t擊，H斗名，啊卜‘．之麗一必•體•各．f··間閱織閑一I州離T開開開 •■■•••••開•．．婦口•自．州■咽•口目•口•■目■•．■••■■•．啊•唁j口叫口，自，•開計口州口自開■目■•■口自口•口d．個口必州勵口倘細由口．，•■•■個口•口唱口哺口口網自目口口闔■唱州口唱目自■•申•．■唱用叫口叫目個口，細哺自國向口間口口口卜口目細口唱•■•■口h口b口•，•間．•，•．■•■目■口口自口自個勵•個細唱細唱細口•自口．細••••闔．•目■••闖■，•．• ,．以輪1，權輪1．州輪矗，的O,’朧什‘，韶驕認，n時•．狀鈴C.‘忙令•，驢勵擊唱．州膩1．呢蠶必名，勵觀寫，,.1名乙，付f，召·，l物J絮N觸爾口l •••■•口•．口口口口■■目口口口自．■•■•■•纏．口．目．•■•■啊戶哺．，自叫■，•口唱口哺．口勵自開．•口馴．唱申自遛口綢口口細d勵．．由•••■．•間■．■•■闢■妒■口•個口••闕■目■口戶唱．口口口•■•■•■•口■•■•．啊戶響個申個『■門口，■唱•口唱開個開■目••口口纏口•卹綢勵j么■間•’口由••口開■目■口口個．口口口目口煙口咽細自••．．•■“‘■•■用唱刈妒唱鬥 露．擊鷓l’擊必‘I，會召I’合鵝l’中比I’今：C 1．計馮！，擊認l，擊馮I，擊之騙乙，膩唱電．d鳥•，以己：I必1’邊必，．·tl馴勵較叫． 騙，.！化．開I編，.19,.1鳥，.1寫”.1名，.1“一I協二寫g.d•I寥，口I擊，關己計，111之，麗I’露寥”卜一寫l閱】誠辭】 &，鉀勰弓．。勰騙，以勰乙，個隴‘，必l‘度吃，馳觀9，訪伏I&Oldt必，吋體d．•Ia號．“驢f．開以實．驢t t．度d•，髡t，蒙·口刀」馭躍〔寫叩 ．•，•••闔■．•■．••••••．...．•．••■•■•．．■口■•■一目．••國■口■‘•闕■．■••州．•喝■細••．■悶■一•“■．叫，,．月■哺．.．••，••．•．•■哺•間•．,...．州■•州■劉••．•，■甲．&.,&..．••■州•．■．■■，■闕••．..-．•闔．哺．••，•間•囑••州••開••．■口•自闖•．目■．目•．.．自•．■．啼．’叫，.,，••劍口． •，01觔‘.1《視必I，麗寥症g”開鰓弓，言01之乙．al必•，驢IL電’號I必‘11之l之矗二體6，鱸－：叔n中，辭唱．,al一矗．1－·S】頂階萬闐15瀾萬IJ瀾 一•，，哺••．•州■口■叫，．•．•哺•‘開．•．..．目■•綱••．•．一•．．••開．.．■．•■月•■，•．州••．自”．•個．，••．•．•，■．‘■一口．&．→■．•’■••一•．■•國口•．.．•．•■．..&‘審一個．，•目劉■■“•唱，口．•．．•個“•．■細．國．‘由•由．&．•．•．叫• 日，‘館1．矗吃瞥，計必勵，舛必己．之付•，辭必f，鯽韶C&“必•，&Ct,l髡l’編江協．9鴉1’戲紹1．館必必一d卜必，度·倡翁馴灘開•IJ弱劉 f‘開鬨I之．1鈴之【”之什e 1．必擊U,．州馭1’韶以吃”g儲之鳥，計必忖L,I杳卜必露，馴鵬9，〔奮卜卜g，矓乙I”忖I蓄俗，O魄必‘之計‘，萬·藝11」取閑騙匐網 •．■闔■．■．．•■．■細•，■．••■一■•申•‘,,，■－－一，•••••■目．目．磧細纏區••一•d．心自間•．■••，•••．■纏口遛口唱妒口口口卹，••目■唱口目口•口申■間■•．•．•．.．■■•甲－一個，■，■個•••••目申個個口•口■‘■－一哺•dh■■目■••••■闔■一口．州開自唱自■馴•悶•個口口戶■自目■•■•■．..．•■‘•．■•．.．•．.，•．..,- .l劇朧■－－•••。。．．••■－二劉頂臉開開Is啊 必．1手忙C.I卜卜必C，《鈴dl’之肢必f．州劇I’劇以盧．必參勵必，，計g中《g&！計中乙蠶，合細寫0,!l卜計露，H矓I•n言寫勵”飼電9．之計矗．1一編〕頂甩，IJ •■州■••••，■州■•．．■一•■，■闔■•■•．.d■••’口■，.－一•們甲犢••－－一••．．一•••••一j’細，由•■••－.-．•■•■一■．...,．•••，．••．司．二網•國••綱■州■－一•一－-－一，，■一••••．．州．，••■．•••‘••州••州．..，■••••■•．網••，■•州■口．．•．■．•中．．■．．•，••．•■闔■．••••自•．••■■，• ，矗斗一U 16結胡開《•胞啊神購之•寥I開勰kU劉弘 ..．•綢■，■■，．•．■，■．..．•綢■卜•骨會，,,．•．開•州．國．•••網－.，••口■•■．■間•，•，州■■纏．•••■••．••．口••二••■目■－．■d．一•．．■一■．叫■勺j口唱‘•‘■鬥■仰月申一，哺口唱■，•開•••口州自藝口區騙•■國抽飾州．勿•■••間•間■，•纏•，■間■目•■唱口口目訕•唱■■••個•．•自磚一••．．•■•．唁唱‘巒叫曆個口，曆•一• 《SUI馴！嚇！二闖訕1311劉L點O】S啊亂啊I騙 渥遞！絮田觔剎戲朋·閱11閱卹開，IJ間甘縱闖〕11州閱〕l 1】萬開J開I&，】闐開寫閱I二叩闐細•Ij 輩l啊啊萬 • 71 ROMANIA PIG PRODUCTION AND PROCESSING PROJECT Loan 1479-RO PROJECT COMPLETION REPORT ANNEXES February 10, 1984 Regional Projects Department Europe, Middle East end North Africa Region Agricultural Division III - 72 - Pic PAOMICT0 3 PROCESSD PROJECT CASH FLOH PIG PRODICTION - POOR FEED QUALITY NILLIONS LEI CIRRENT PRICES - NO INFLATION FRON OCT 1983 ON YEAR 77 78 79 90 81 82 83 84 83 86 87 88-95 96 PIG SALES - 1.0 21.0 156.0 592.0 1731.0 3332.0 3967.0 4031.0 4031.0 4031.0 4031.0 4031.0 RESIMJAL VALUE - - 1731.0 GROSSmBEFITS - 1.0 21.0 156.0 592.0 1731.0 3332.0 3967.0 4031.0 4031.0 4031.0 4031.0 5762.0 LESS PIG PUDASES - 2.0 21.0 191.0 2M.0 400.0 256.0 177.0 177.0 177.0 177.0 177.0 177.0 NET LIVESTOCK SALES - -1.0 - 55.0 304.0 1331.0 3076.0 3710.0 3954.0 3954.0* 3954.0 5385.0 CONCENTRATE FEED - 1.6 28.8 135.4 433.8 1312.5 2156.2 2380.2 2429.9 2427.9 2429.9 2421.9 2429.9 LAOR COSTS - 1.6 6.0 61.4 143.2 290.8 28.9 292.7 294.7 2194.7 294.7 294.7 2f4.7 OTHER COSTS - 0.6 6.1 62.5 211.3 482.0 520.6 524.1 524.1 524.1 524.1 24.1 524.1 TOTALIII COSTS - 3.9 41.0 259.3 798.3 2075.3 2963.7 3197.0 3248.8 3248.8 3248.8 3248.8 3248.8 ANINAL TRADING CASH FLOII - -4.8 -41.0 -204.3 -464.3 -744.3 110.3 593.0 605.2 605.2 605.2 605.2 2336.2 FIXED CAPITAL IDUESTHENT 54.0 804.0 752.0 686.0 576.0 841.0 - - 2.1 161.2 - - NET CASH PLOi -54.0 -808.8 -793.0 -990.3 -1060.3 -155.3 110.3 593.0 605.2 603.1 444.0 605.2 2336.2 - mmm -c -- --- mp- -- SENSITIVITY TESTS NPy AS A Z PRESENT OF PRESENT INTERNAL VALUE AT OCC COSTS AT OCC RATE OF TEST CASES TEST CASE VARIATIONS OF 10.0 OF 10.0? RETURN BASE CASE -1017.5 -5.701% 6.082% TEST CASE 1 CINUEST UP 10? -1281.2 -7.074Z 5.308 TEST CASE 2 C.EED IP 10Z -2124.1 -11.206X 1.192Z TEST CASE 3 C.EED DOW 10% 89.1 0.532 10.323: TEST CASE 4 B.ETSALE DOW 10% -2700.6 -15.131% -2.213% TEST CASE 5 3.NESALE UP 22 -680.0 -3.8153 7.444Z PIG PRODUCTION l FROCESSIP6 PROJECT CASH rL PIG FROPUtCION-POOR QUALITY FEED HILLIONS LEI CUENT PRICES - 51 INFLAIION P.A. 1983 m hAR 77 79 79 0 81 92 83 84 85 86 87 88 89 90 91 92 93 94 95 96 P16 SALES - 1.0 21.0 156.0 592.0 1731.0 3332.0 4113.8 4389.8 607.4 4837,2 5083.1 5333.0 5599.1 5881.2 6171.5 6481.6 608.4 7142.9 7505.7 RESIDUAL VALUE - - - - - - - - - - - - • - - - - - 3223é1 MAOSS KEFITS - 1.0 21.0 156.0 592.0 1731.0 3332.0 4113,8 4319,8 4607,4 4837.2 5083.1 5333.0 5599.1 581.2 6171.5 6481. 6808.4 7142.9 10728,g LESS FIG PMRCHASES - 2.0 21.0 101.0 288,0 400.0 256,0 183.5 192.1 202,3 212.4 223.2 234.2 245.9 258.2 271,0 284,6 299.0 313.6 329.6 ET LIVESTOCK SALES - -1.0 - 55.0 304.0 1331.0 3076,0 3930.2 4197,0 4405.1 4624,9 4859.9 509.8 5353.2 5623.0 5900.5 6197.2 6509.4 6829.3 10399.3 CONCENRIA FEED - 1.6 28.8 135.4 433.8 1312.5 2156.2 246 .2646.2 2777.4 2915.9 3064.1 3214.8 3375.1 3545.2 3720.2 3907.3 4104.1 4305.1 4524.5 LA" COSIS - 1.6 6,0 61.4 143,2 290.9 288.9 299,2 309,8 317.9 325.7 333.3 140,0 346.1 351.7 356,1 359.4 361.6 361,9 361,0 01HER C0515 - 0.6 6.1 62.5 211.3 482.0 520.6 56.4 552.4 567.1 582.9 597.9 6511.2 624.0 635.9 645.9 654.5 661.2 664.9 667.1 ---- ---------------------------------- ----------~_ - - ----- --- --------l TOTAL ANNUAL COSIS - 3,8 41.0 259.3 78.3 2075.3 2965.7 3303.8 3508 3 3663 0 3824.5 3995.3 4165.9 4345.3 4532.9 4722.1 4921,1 5126.9 3332.6 3552.5 A*MAL TRADIN CASH FLOU - -4. -41&0 -204.3 -484.3 -744.3 110.3 626.4 688.7 742,1 800.3 t64.6 932.9 1007.9 1090.1 1178.4 1276.1 1382.5 1496.7 4846.7 FIXED CAPHAL IKSTRENT 54.0 804.0 752.0 686,0 576.0 841.0 - - - 2.4 193.4 - - - - - - - - - mu CASm FLo -54.0 -808.8 -793.0 -890.3 -1060,3 -15M5.3 110.3 626.4 688.7 73917 606.9 864.6 932.9 1007.9 1090.1 1179,4 1276.1 1382.3 1496.7 4846.7 zeea.. .* n a.... ZZ... ..... ....... .=.d Z.gz= ----.s r.z.5 .z...~ .*~a t.=a &== ....a = ..=. z=.. m . SENSTIVIT TESB IE' AS A 3 tESENT OF FUSNI INTELA. . MU AT OCC COSTS AT OCC RATE O. 1S1 CASS 1ESI CASE VARIA110NS OF 10.01 OF 10.01 RETLN 8ASE CASE 459.0 2.1701 11.3361 TEST CASI 1 C.INESI UP 10% 194.2 0.90 10.540% TEST CAS 2 C.FEID UP 102 -935,1 -4,1471 7.1002 TEST CAE 3 C.FIE DOUN 101 1853.1 9.378% 15.110% TEST CASE 4 IETSALE D0W 10% -1702.3 -8,0472 4.313x TEST CA5E 5 I.EITSAE UP 21 891.3 4.2131 12.5361 - 74 - ANNEX 1 Table 3 ROMNIA PIS PRODUCTION I PROCESSING PROJECT CASH FLOW COOP BREEDING/FATTENING MODEL - BAFI ESTIVATE MILLIONS CONSTANT LEI (OCT 1983 PRICES) YEAR 77 78 79 80 91 82 83 84-86 87 88-95 96 PIG SALES - - 22.9 127.2 767.9 18999.7 1977.0 1941.4 1941.4 1941.4 1941.4 RESIDUAL VALUE - - - - - - - - - - 301.2 GROSS BENEFITS - - 22.9 127.2 767.9 1899.7 1977.0 1941.4 1941.4 1941.4 2242.6 LESS PIG PURCHASES - - 12.5 58.2 132.6 197.3 87.6 86.0 86.0 86.0 96.0 NET LIVESTOCK SALES - - 10*4 69.0 635.2 1712.4 1889.4 1855.4 1855.4 1855.4 2156.6 CONCENTRATE FEED - - 11.9 125.6 567.9 1308.9 1246.0 1223.6 1223.6 1223.6 1223.6 LABOR COSTS - - 0.1 13.8 84.9 194.1 195.6 192.3 182.3 182.3 182.3 OTHER COSTS - - 0.6 15.4 110.8 254.3 261.5 256.8 256.8 256.8 256.8 TOTAL ANNUAL COSTS - - 12.6 154.9 763.6 1757.3 1693.2 1662.7 1662.7 1662.7 1662.7 FIXED CAPITAL INVESTMENT - 235.8 442.1 439.0 365.1 618.5 - - 72.0 - - NET CASH FLOW - -235.8 -444.3 -524.9 -493.5 -663.4 196.2 192.7 120.7 192.7 493.9 STREAM NAVE INTERNAL RATES OF RETURN FOR NET STREARS N.CT 2.261 -75 - ANNEX 1 Table 4 ROMANIA PIS PRODUCTION I PROCESSING PROJECT CASH FLON IAS BREEDING/FATTENING NOBEL - BAFI ESTIMATE MILLIONS CONSTANT LEI (OCT 1983 PRICES) YEAR 77 78 79 80 81 82 83 84-86 87 68-95 96 PIG SALES - - - 283.4 880.4 1288.7 1242.7 1220.3 1220.3 1220.3 1220.3 RESIDUAL VALUE - - - - - - 25B.0 GROSS BENEFITS - - - 283.4 880.4 1218.7 1242.7 1220.3 1220.3 1220.3 1478.3 LESS PIG PURCHASES - - 10.3 90.0 150.9 129.3 53.1 52.1 52.1 52.1 52.1 NET LIVESTOCK SALES - - -10.3 193.4 729.5 1159.4 1189.6 1168.2 1168.2 1168.2 1426.2 CONCENTRATE FEED - - 18.1 205.8 573.5 747.0 717.1 704.2 704.2 704.2 704.2 LABOR COSTS - - 2.5 52.0 80.4 83.2 76.0 74.6 74.6 74.6 74.6 OTHER COSTS - - 2.5 4B.0 118.3 188.1 175.4 172.2 172.2 172.2 172.2 TOTAL ANNUAL COSTS - - 23.2 305.8 772.2 1018.3 960.4 951.0 951.0 951.0 951.0 FIXED CAPITAL INVESTHENT - 541.8 511.7 416.6 246.6 130.3 - - 64.0 - - NET CASH FLOV - -541.8 -545.2 -529.0 -289.3 10.8 221.2 217.2 153.2 217.2 475.2 Zu= = = = = == =s = = =m UiN=3= STREAM NAME INTERNAL RATES OF RETURN FOR NET STREAMS N.CT 5.329 -76- ANNEX I Table 5 ROMANIA PIS PRODUCTION I PROCESSING PROJECT CASH FLO COOP MREEDINC MODEL - 9AFI ESTIHATE MILLIONS CONSTANT LEI (OCT 1983 PRICES) YEAR 77 78 79 80 81 82 83 84 95-86 87 88-95 96 FIG SALES - 21.5 52.9 216.4 273.6 273.6 273.6 273.6 RESIDUAL U.JE - . - - 43.5 GROSS 3EEITS - 21.5 52.9 216.4 273.6 273.6 273.6 317.1 LESS PIG PURCHASES - - - - 4.7 6.6 32.5 13.6 13.6 13.6 13.6 13.6 NET LIVESTOCK SALES - - - - -4.7 14.9 20.4 202.8 260.0 260.0 260.0 303.5 CONCENTRATE FEED - - - - 10.8 30.2 116.1 148.2 148.2 148.2 148.2 148.2 LAOR COSTS - - - - 1.3 4.0 13.3 18.7 20.7 20.7 20.7 20.7 OTIER COSTS - - - - 1.3 3.1 18.8 23.8 2.8 23.8 23.8 23.8 TOTAL ANNUAL COSTS - - - - 13.4 37.3 148.3 190.7 192.7 102.7 192.7 192.7 FIXED CAPITAL INVESTRENT - 22.0 20.7 33.5 38.4 150.9 - 9.7 - - NET CASH FLO1 - -22.0 -20.7 -33.5 -56.5 -173.4 -127.9 12.1 67.3 57.6 67.3 110.8 STREA= NAME INTERNAL RATES OF RETURN FOR NET STREAMS M.CT 8.164 - 77 - Table 6 ROMNIA PI8 PRDUCTION £ PROESSING PROJECT CASM FLON IAS ~REDING NODEL - AFI ESTIMTE NILLINS CCSTAKT LEI (OCT 1983 PRICES) YEAR 77 79 79 90 81 92 93 9495-6 B7 89-95 96 PIS SALES - - - - - 13.8 110.8 184.6 19.6 198.6 198.6 198.6 RESIML VALUE - - - - - - - - - - - 28.4 6R1S BEEFfITS - - - - - 13.8 110.8 184.6 198.6 198.6 198.6 227.% I.ES PIG PURCSES - - - - 3.0 20.2 14.8 9.7 9.7 9.7 9.7 9.7 NET LIuESTCK SALES - - - - -3.0 -6.4 96.0 174.9 189.9 188.9 199.9 217.3 C0NTMTE FEED - - - - 9.5 63.8 99.7 107.9 107.9 107.9 107.9 107.9 LABR CISTS - - - - 1.2 7.7 7.7 7.6 7.6 7.6 7.6 7.6 oTIER CSTS - - - - 0.8 9.0 15.9 17.2 17.2 17.2 17.2 17.2 TOAL. ANN~L COSTS - - - - 10.4 90.5 123.3 132.7 132.7 132.7 132.7 132.7 FIE CAPITAL INUESTNENT - 29.7 59.4 50.2 44.1 15.7 - - - 6.4 - - N4ET C"ßR FLOM -- -29.7 -59,4 -50.2 -57.6 -102.6 -27.3 42.2 56.2 49.3 56.2 84.6 STREAN - = = 3 == = E INTERM. RATES OF rETUI FR NET STREAS N.CT 9.327 - 78 - ANNEX 1 Table 7 ROMANIA PIG PRODUCTION & PRCESSING PROJECT CASH FLOW COOP MODERNIZATION MODEL - BAFI ESTIMATE MILLIONS CONSTANT LEI (OCT 1983 PRICES) YEAR 77 78 79 80 81 82 83 84-85 86 87-95 96 PIG SALES 612.5 623.3 62.0 686.8 616.7 652.6 596.1 585.4 585.4 585.4 585.4 RESIDUAL UALUE - - - - - - - - - 12.1 GROSS BENEFITS 612.5 623.3 682.0 686.8 616.7 652.6 596.1 585.4 585.4 585.4 597.5 LESS PIG PURCHASES 50.3 51,2 61.4 65.8 59.4 50.7 46.3 45-5 45.5 45.5 45.5 NET LIVESTOCK SALES 562.2 572.1 620.7 621.0 557.3 601.9 549.8 539.9 539.9 539.9 552.0 CONCENTRATE FEED 420.8 428.6 469.5 464.3 417.0 405.7 370.6 363.9 363.9 363.9 363.9 LABOR COSTS 59.4 58.9 62.6 68.1 61.2 66.3 60.6 59.5 59.5 59.5 59.5 OTHER COSTS 80.6 80.5 86.2 87.0 78.1 99.9 91.2 89.6 89.6 89.6 89.6 TOTAL ANNUAL COSTS 560.8 568.0 618.3 619.5 556.3 571.9 522.4 513.0 513.0 513,0 513.0 FIXED CAPITAL INVESTMENT 82.9 7.6 12.2 1.5 - - - - 2.1 - - NET CASH FLOU -81.5 -3.5 -9.8 - 1.0 30.0 27.4 26.9 24.8 26.9 39.0 NET SALES VITHOUT PROJ 562.2 552.0 541.3 527.2 472.9 497.2 454.1 446.0 446.0 446.0 446.0 COSTS WITHOUT PROJ 560.8 537.9 530.2 522.2 482.8 515.4 485.4 479.2 479.2 479.2 479.2 NET CASH FLOW V-0 PROJ 1.4 14.0 11.1 5.0 -9.9 -18.2 -31.3 -33.2 -33.2 -33.2 -33.2 INCREMENTAL NET SALES - 20.2 79.3 93.7 84.4 104.7 95.7 93.9 93.9 93.9 106.0 INCREMENTAL COSTS 82.9 37.7 100.2 98.8 73.5 56.5 37.0 33.8 35.9 33.8 33.8 INCREMENTAL CASH FLOM -82.9 -17.5 -20.9 -5.0 11.0 48,2 58.6 60.1 58.0 60.1 72.2 STREAM NAME INTERNAL PATES OF RETURN FOR NET STREAMS N.CT 15.081 N.CINC 22.398 - 79 - ANNEX 1 Table 8 ROMANIA PIG PRODUCTION I PROCESSING PROJECT CASH FLON IAS MODERNIZATION MODEL - BAFI ESTIMATE MILLIONS CONSTANT LEI (OCT 1983 PRICES) YEAR 77 7B 79 80 81 82 83 84-86 87 88-95 96 PIS SALES - 788.2 800.6 1078.7 1325.5 1375.1 1256.1 1233.5 1233.5 1233.5 1233.5 RESIDUAL VALUE - - - - - - - - - 01 GRDSS BENEFITS - 788.2 800.6 1078.7 1325.5 1375.1 1256.1 1233.5 L233.5 1233.5 1242.6 LESS PIG PURCHASES - 46.2 47.3 121.7 274.5 234.4 214.2 210.3 210.3 210.3 210.3 NET LIVESTOCK SALES - 742.0 753.3 957.1 1050.9 1140.7 1042.0 1023.2 1023.2 1023.2 1032.3 CONCENTRATE FEED - 567.1 572.2 723.1 782.6 748.4 683.6 671.3 671.3 671.3 671.3 LABOR COSTS - 60.8 59.6 73,4 75.6 74.5 68.0 66.8 66.8 66.8 66.8 OTHER COSTS - 113.3 112.6 133.9 158.9 175.7 160.5 157.6 157.6 157.6 157.6 TOTAL ANNUAL COSTS - 741.2 744.4 930.4 1017.1 998.6 912.1 895.7 895.7 895.7 895.7 FIXED CAPITAL INVESTHENT - 381,2 71.5 57.1 56.1 21.7 - - 9.1 - - rET CASH FLOWl - -380.5 -62.6 -30.4 -22.3 120.4 129.8 127.5 118.4 127.5 136.6 NET SALES WITHOUT PROJ - 742.0 727.6 712.8 639.3 668.3 610.5 599.5 599.5 599.5 599.5 COSTS VITHaUT "RJ - 741.2 730.3 718.9 662.8 709.4 666.6 657.7 657.7 657.7 657.7 MET CASH FLOW -0 PROJ - 0.8 -2.7 -6.1 -23.5 -41.2 -56.1 -58.2 -58.2 -58.2 -58.2 UNCREHENTAL NET SALES - - 25.7 244.3 411.6 472.4 431.5 423*7 423.7 423.7 432.8 DCENENTMAL COSTS - 381.2 85.6 268.5 410.4 310.8 245.6 238.0 247.1 238.0 238.0 INCREMENTAL CASH FLOW - -381.2 -59.9 -24.3 1.2 161.6 186.0 185.7 176.6 185.7 194.8 STREAN NANE INTERNAL RATES OF RETURN FOR NET STREMS N.CT 15.376 N.CINC 21.395 ROMANIA PIG PRODUCTION AND PROCESSING PROJECT Cash Flow of OveralC oI Poduction Component - BAF1 Estimate HL11ons Constant Lef (OcCt 1983 Pritces) SENSITIVITY ANALYSIS AWSREGATID STREAMS FOR BASE CASE TOTAL TOTAL NET IMPUT STREAMS FOR BASE CASE IEREEIAL 1CREMlENTAL INCRMIN ux."2x.z.W.. r=N...... 2 .. PERIODS KNEFITS COSIS UNEFITS PERIODS .31AFI C,.q.AFI C.NOSWI C,NFWIFI 1 0.0 82.9 010 0.0 1 0.0 02.9 -82.9 2 20.2 1218.0 '0.6 30.7 2 20.2 1248*1 -1228.0 3 105.2 1117.5 12.6 125.4 3 105.2 I255.5 -1150.3 4 600.4 997.8 177.7 59118 4 d00,4 1767.3 -1166.9 5 1853.1 750.4 450.6 1529.9 5 1851 2737.8 -884.7 6 3457.5 937*2 84508 2393.2 6 3457.5 4176.3 -718ol 7 3722.6 0.0 620.6 2395.2 7 3722.6 3215.8 506. 8 399.00 010 012.7 2396.3 8 3919.0 320669 710.0 0 9 3990.2 0.0 814.7 2396,3 9 3990.2 3210.9 779.2 10 39902 2.1 814.7 2396.3 10 3990.2 3213.0 777*1 If 390.2 161.2 314.7 2396.3 11 3990.2 3372.1 618.0 12-19 3990.2 Oo 814.7 2396.3 12-19 990.2 3210.9 779.2 20 4642.5 0.0 8147 2396,3 20 4642.5 3210.9 1431.5 SENSITIVITY TESTS NPV AS AZ PRESENT OF PRESENT INTERNAL VALUE AT OCC COSTS AT OCC RATE OF TEST CASES TEST CASE VARIATIO OF 10#0,0 * OF 100 PETURN ....... . . ....... ------- ---- ------- - ASE CASE *-598,6 -2,888% 7.9011 rEr CASE I iFAFI uP m0t 1414,1 6.9231 14.5092 ii ~ iial ll§i ja. aI * 3 ii II Ø - 82 - ANNE1 Table 11 PIG PROUOTIN I PROCESSIli PRM.ECT FDIAEIAL CASH FLOM MAT PROCESSIM FACILITIES MILLIMN CONSTANT LEI (MCT 1983 PRICES) YEAR 77-78 79 80 81 82 83 84-87 88 89-94 GRS ENEFITS - - 52.0 201.7 498.8 727.7 1057.8 1057.8 1057.8 TOTAL AMOAL CSTS - - 49.2 187.6 459.1 679.0 929.6 929.6 929.6 AOIUML TRADIS CAS FLIM - - 3.8 14.1 39.7 48.7 128.2 128.2 128.2 FIZED CAPITAI. DPUSTIENT - A06.1 115.1 99.6 78.9 17.4 - 32.4 - NET CASH FLOW - -106.1 -111.4 -5.5 -39.2 31.3 128.2 95.8 128.2 SENSTIIT TEST ØIV AS A Z PRESET ØF PRESENT INTERNML LE AT OCC COSTS AT OCC RATE ØF TEST CASES TEST CASE VRATIS OF 10.0 .F 10.0 RETURU JASE CASE 242.0 5.464% 20.459 TEST CASE i C.CI Ip 1Z 213.6 4.792 18.6622 TEST CASE 2 B.CT UP 25% C.COT UP 2I 373.5 6.8342 24.977% TEST CASE 3 B.CT DM 25% C.COT D0MI 25Z 110.5 3.257Z 15.251Z TEST CASE 4 C.CT LAS I YEAR B.CT LA6 1 YER 176.9 4.504Z 17.134Z ROMANIA PIG PRODUCTION I PROCESSING PROJECT ECONOMIC CASH FLOW SLAUGHTERHOUSES AND HEAT PROCESSING FACILITIES MILLIONS CONSTANT LEI (OCT 1983 PRICES) YEAR 77-78 79 80 81 82 03 84 95 96 87 98 89 90 91 92-96 GROSS PENEFITS - - 52*0 2017 496.8 719.5 1029.5 1034.5 1034,0 1033.5 1033.0 1032.4 1031.9 1033.5 1034.5 TOTAL ANNUAL COSTS - - 90t5 252.7 504.5 7415 11285 1154s1 1151*6 1149.1* 1146,6 1143,5 1140o4 1149.1 1154.1 FIXED CAPITAL INVESTMENT - 106.1 115.1 99.6 78.9 17.4 - - - - 32.4 - - - - NET CASH FLOi - -106,1 -143.7 -150,6 -64.6 -39.4 -99.0 -119o6 -117.6 -115,6 -146.0 -111.1 -108.6 -115,6 -119.6 STREAM NAME INTERNAL RATES OF RETURN FOR NET STREAMS N.CT NO RATE OF RETURN EXISTS ROMANIA PIG PRODUCTION I PROCESSING PROJECT ECONOMIC CASH FLOV NEAT PROCESSING FACILITIES MILLIONS CONSTANT LEI (OCT 1983 PRICES) YEAR 77-78 79 00 81 82 83 94 95 86 7 88. 89 90 91 92-96 GROSS BENEFITS - - 91.0 283o2 557%4 7973 1242.0 12736 1270.5 1267.4 1264,3 1260.5 1256.6 1267.4 1273.6 TOTAL ANNUAL COSTS - - 90.5 252.7 504,5 .741.5- 1128.5 1154,1 1151.6 1149.1 1146,6 1143.5 1140.4 1149.1 1154.1 FIXED CAPITAL INVESTMENT - 106o1 115.1 996 78.9 17.4 - - - - 32,4 - - - - NET CASH FLOt - -106.1 -104.6 -69.0 -26.0 38.4 113.5 119.4 118.9 110.3 95.3 117.0 116.3 118.3 119.4 --3gm ------ mn-s. a s asaam m=asee ass"Zoa asa s alm s wmaxms WUMUMM amhmaUs asse"W 2s2= ==.== STREAM NMIE . INTERNAL RATES OF RETURN FOR NET STREAMS N.CT 209798 ell - 85 - ANNEX 1 Table 14 ROMANIA Livestock I (Pigs) Project - Loan 1479-RO Completion Report Financial Switching Values I/ No Inflation With Inflation Good Feed Poor Feed Poor Feed OCC 2/ 5% 10 5% 10Z 5% 10% Benefits -4.4 +5.2 +3.2 +13.0 -9.1 -2.1 Feed Costs +7.0 -7.9 -4.9 -19.6 +14.5 +3.3 Investment Costs +35.6 -28.0 -21.7 -60.7 +114.1 +17.3 Other Costs +21.7 -24.0 -13.2 -51.9 +46.4 +10.1 Economic Switchins Values l Processing Processing Pigs - Pigs - (a) (b) Poor Feed Good Feed OCC 2/ 1 % 12% 101 12% 10% 12% 10% 12% Benefits +16.7 +17.5 -4.1 -3.5 -1.6 1.6 -15.4 -12.3 Feed Costs NA NA NA NA 2.3 -2.4 +26 +20.5 Investment Costs -249.6 -269.6 4.6 3.8 11.4 -9.8 +123.3 +84.6 Other Costs -15.1 -15.8 81.1 60.0 10.8 -10.8 +120.9 +93.8 1 % change needed to bring FRRs or EIRs to opportunity cost of capital. OCC - opportunity cost of capital. - 86 - ANNEX 2 ROMANIA Pig Production and Processing Project Project Completion Report Annex 2 - Basis for Financial and Economic Analysis of Pig Production Component jig Production and Concentrate Feed Use Estimates 1. Detailed investment costs for all pig production units under the project have been kept by BAFI. In their draft PCR, BAFI also presented estimated aggregated cash flow statements for the six types of units funded under the project; that is pig fattening and breeding complexes, pig breeding farms, and modernization of existing farms for both the CAPs (cooperatives) and the IASs (State units). Perusal of the BAFI figures indicated considerable inconsistencies, particularly in reconciliation of livestock numbers. Furthermore, the actual phasing and apparent results of the 3 production units visited during the mission all differed markedly from the BAFI estimates for those units. It appears, therefore, that the BAFI cash flows for each unit were er-ante rather than ex-post, that is they were estimates made some 1-2 years ago probably at the time of setting up the detailed financing plans for each unit. However, the likely breeding stock capacity figures achieved are thought to be closely in line with the breeding stock projections made by BAFI. In the light of this, a new set of estimated pig production data for the units funded under the project has been made by the Project Completion Mission. This takes the phasing given by BAFI for the numbers of breeding stock and estimates the production from these on the basis of technical coefficents estimated by BAFI and confirmed at the various breeding farms visited both during the completion and previous supervision missions. Details of herd and physical production projections are given in Table 5, Main Text. The estimates of concentrate feed usage are based on the conversion rates currently being achieved in Romania using low quality concentrate feed with a protein content of 3-4 percent below the optimum level. Financial Cost Estimates 2. The financial analysis is done for the whole aggregated set of farms and is based on the assumption of a 20 year project life. Estimated labor costs and other costs are taken from the BAFI estimates. 3. This financial analysis is estimated in terms of constant Lei. The current Lei figures being standardized on the basis of 1983 constant Lei terms by dividing by a deflator as shown in Table 9, Main Text. For the period 1979-1983, the deflator used was the World Bank's Programs Department estimate of the Romanian producer price index, while for the 1977 and 1978 periods it was necessary to use a consumer price index which is assumed to have parallelled changes in producer prices over that period. - 87 - ANNEX 2 Page 2 Economic Analysis of Pig Production 4. Prices: The economic analysis is made on the basis of the same physical flows as the financial analysis. Border prices have been used for the main tradeable items, pigs and concentrate feed, while labor and other costs have been taken at the same levels as in the financial analysis, except that in the case of labor costs, an adjustment has been made for taxes. The value of livestock sale has been calculated on the basis of border prices derived from Romania's historical average export price for pigmeat carcasses modified for the economic cost of transport and slaughtering. Future projected pig meat prices are estimated to parallel movements in the projected price of beef (using the World Bank commodities division forecast) and of a "feed index" calculated on the basis of maize and soybean meal, also using World Bank's projections. Estimated long run prices using the two methods are within 3 percent of one another and for the purposes of this analysis, an average of the two is used. Details of the calculations are given in Tables 1, 2, and 3. Concentrate feed prices are estimated on the basis of the economic cost of imported protein and the export parity price of maize (Table 4). within the basic analysis it is assumed that a low protein ration averaging 11% CP concentrates be used. Estimates of the economic cost of both low and high quality concentrate feeds are given in Tables 5 to 7. For other cost items, the local price in financial terms is assumed to be the same as the economic price. The economic analysis is carried out using constant Oct/Nov 1983 currency. Historical prices of items calculated from world prices in dollars are cznverted to Lei at the exchange rate appropriate to the year in which those costs were incurred and then deflated by the domestic deflator (Table 8). - 88 - ANNME 2 Table 1 ROMANIA Livestock I (Pigs) Project - Loan 1479-RD Completion Report Relationabip between Romanian Export Pigmeat Prices and World Prices of Feedstuffs and Beef 8-Yr. 1975 1976 1977 1978 1979 1980 1981 1982 Ave. -- --------(Sceue-85eco-- - - - - Carcasses - Fat On 1507 1768 1761 1288 1419 1376 1557 1599 1534 Cuts 2029 2737 2260 2030 1863 11798 1937 2115 2096 Semicured Rams 3614 3051 3130 2880 2647 2799 2833 3369 3040 Sibiu Salami 4728 4907 473.3 4184 3900 3659 3661 3766 4193 Lard 674 603 637 390 408 387 445 559 513 Soya Meal 1/ 234 294 315 247 254 253 256 225 260 Maize 2/ 201 187 150 137 140 L40 152 133 155 Beef 3/ 2010 2350 2040 2480 3000 2660 2500 2470 2440 Feed Index 208 208 183 159 163 16. 173 151 176 Ratio- Carcass Price:F.I. 7.2 8.5 9.6 8.1 8.7 8.4 9.0 10.6 8.7 Ratio- World Beef Price: Romanian Pigs Carcass Price .75 .75 .86 .52 .47 .52 .62 .65 .63 1/ World Bank forecast price (Europe) Y/ World Bank forecast price plus $20/ton for transport to Europe / World Bank forecast price -89- ANNEX 2 Table 2 ROMAIA Livestock I (Pigs) Prect - Losa 1479-10 Completion Report Calculation of Economic Price of Pigmeat 1990 1995 anscant Ucon Export Price - Carcasses (fat on, head off) Beef based estimate (Oct/Nov '83 $) 1638 1703 Feed Index based estiate (Oct/Nov '83 *) 1702 1680 Figure used in Analysis (f.o.b. Romania) 1670 1692 Lei/ton Lei/ton Convert to Lei at Le I - 17.6$ 29392 29779 Transport to border and special export packing -720 -720 Ex Slaughterhouse Price 28,672 29,059 kg/too d.c.v. Byproduct Recovery Non carcass fat 42 390 390 Edible offals 41 1,700 1/ 1,700 1/ Read and legs 86 860 860 Casings 2/ 460 460 Rendered material 2/ 260 260 Ex-slaughterhouse value per ton d.c.v. 32,342 32,729 Less slaughterhouse costs 3/ 2,270 2,270 Into slaughterhouse net value per ton d.c.w. 30,072 30,459 Killing Out Z 70.8 70.8 Into slaughterhouse price per ton 1.v. 4/ 21.291 21,565 1/ Based on local price relstivities. / 1978 price + 30Z 3/ 1430 Lei/ton DCW operating costs + depreciation and imputed IRR of 10% on investment of Lei 5300/ton, i.e. Lei 840/ton d.c.v. 4/ Year by year estimates for 1977 to 1996 are given in Table 5. Note: d.c.v. - dressed carcass veight (fat on, head off) 1.v. - liveweight ROMANIA PI Pk10MUC0N & PROCESSINO PROJECT CALiULATION CF ECONOMIC PRICE CF PIOS PER KILOGRAMNE VEAR /? 78 79 80 81 82 83 84 85 86 87 30 89 90 91 92.96 F00 PICE (CUkkENI UStì 1,28'i 1.108 1.363 1.431 1.542 1.550 1.472 1.651 1,692 1.608 1*694 1.600 1.675 1,670 1. 4 1,692 IctI3 unIAIGE kAE 18.000 18.000 18,000 19,000 15.000 15.000 17,200 17600 17.600 17.600 17.600 17.600 17.600 17.600 17,600 17,600 I VP ffICL <CiuRìRi:ir LCi 231130 19s944 24,534 25,759 231130 231250 25,318 29,058 29,779 29,709 29,638 29,568 29,490 29,392 29,638 29.779 I111.L 1',J1C PiTI.OR 0.648 0.669 0,673 0.687 0.766 0.897 0.982 1.000 1.000 1.000 1s000 1.000 1,000 1,000 1,000 1.000 rfi MICE trONSIANI LEI) 35.694 30,218 36.455 37,493 30.196 25.920 25.782 29.059 29.779 29.709 29.638 29.568 29.490 29.392 29,638 29.779 TRMAPrOlti COSiG 0.720 0.720 0.720 0.720 0.720 0.720 0.720 0.720 0.720 0,720 0.720 0.720 0.720 0.720 0.720 0,720 (il AUilU10115L ostis 2*2710 2,270 2.270 2,270 2*270 2.270 2,270 2.270 2,270 2s270 2,270 2o270 2,270 2.270 2,270 2.270 1:1lVULIC1 Ld tlU'CtO J..s70 3.670 3.670 3,670 3,670 3.670 3,670 3,670 3,670 3.670 3,670 3,670 3.670 3.670 3,670 3,670 NLf uI* I iU01'9 W 46.374 30.090 37.135 38.173 »0.876 26,600 26.462 29.730 30.459 30.389 30.318 30,249 30.160 30.072 30,318 30.469 gli[ llif UI Fis 1-uk 0.708 0,708 0.709 0,70B 0.709 0.708 0*708 0,708 0.708 0,709 0,709 0,709 0.709 0,708 0.708 0.708 t '41.u11 UW VIU .5,7 21.976 26,291 27.027 21.060 18.833 18,735 21,054 21#56b 21,515 21#465 21.416 21,353 21,291 21,465 21,565 W.. N - 91 - ANNEX 2 Table 4 RONANIA Livestock I (Pixs3 Project - Loan 1479-RO Completion Report Economic Price Calculations - Concentrate Feed Imports Sobean Meal Sunflower Meal Maize (44% CP) (38% CP) 1990 1995 1990 1995 1990 1995 Basis Import Parity E ParEot NB Price Estimates (Oct. 1983 Cost $) 302 292 215 206 148 148 International Freight Adj. +10 2/ +10 2/ +7 1/ +7 11 +20 3/ +20 3/ f.o.b. Value 312 302 222 213 168 168 Quality Adj. -10 4/ -10 4/ -7 1/ -7 1/ -17 5/ -17 5/ Adjusted f.o.b. Value 302 292 215 206 151 151 Convert to Lei/kg 5.32 5.14 3.78 3.63 2.66 2.66 Local transport -+0.20 +0.20 +0.14 1/ +0.14 1/ -0.20 -0.20 At Mill Value 5.52 5.34 3.92 3.77 2.46 2.46 1/ Taken as 70% soybean meal. 2/ Transport costs US to Romania estimated at $10 higher than US to Rotterdam. 3/ f.o.b. Europe price typically is $20 per ton above f.o.b. US Gulf ports. 4/ Adjustment for bags - World Bank price is for soybean meal in bags, whereas Romanian Feed Mills buy product in bulk. 51 102 quality adjustment. - 92 - ANNE 2 Table 5 ROM&NIA Livestock I (Pigs) Project - Loan 1479-R0 Completion Reporc Concentrate Feed Prices - Economic Adequately Formulated Ration Low Protein Ration Composition % % Maize (8.2% CP) 77.5 87.5 Soya Meal (44% CP) 10.0 2.5 Sunflower Meal (38% CP) 10.0 7.5 Others 2.5 2.5 Crude Protein Content 14.5% 11.1% 1985 1995 1985 1995 - - - Oct 1985 Constant Lei/kg - - - Grain 1.75 1.91 1.97 2.15 Proteins 0.81 0.91 0.38 0.41 Other 0.12 0.12 0.12 0.12 Total Ingredients 2.68 2.94 2.47 2.68 Killing and Mixing 0.15 0.15 0.15 0.15 Ex-Feed Mill Price 2.83 3.09 2.62 2.84 $/ton 161 175 149 161 RMIA pie "OUTION a PROCESSIN PROJEC ECOMIC COST OF LON PROMNl1 CONCENTRATE CONSTANI l1 PER KS' YEAR 77 i8 79 80 oI 62 63 84 65 86 87 88 89 90 91 92-96 HAlE (97.52) 2.21 2.35 2.66 2.62 2.14 1.51 189 2.06 1.97 200 203 2.07 2oll 2.15 2.15 2.15 SOYVEAN REAL (2.5l) 016 0,15 0.17 0.36 0.13 O.M 0,11 0.1 0.12 0.12 0.13 .13 013 014 0.14 0.3 UNFLOUER HEAL (7.51) 0.38 0.33 0.37 0.40 0.31 0&22 023 025 0.26 0.26 027 0.28 0.29 029 029 02 OTHERS 42.51) 0.12 0.12 0.2 0.2 0.12 0.2 012 0,J2 0.2 0.42 0.12 0.12 O.2 O.M 0.12 0.12 HILLING I MIXING 0a15 015 15 015 0.15 0.15 05 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 1ll PROTEIN CONCENTRATE 3.02 3.10 3,47 3.66 2.85 2.10 2.49 2s48 2.62 2d6 2.69 2075 2460 2o86 2M85 2o84 2.2a8 usxa=szaaa osseass 22228xx a ass .=... as.a. aa.a.lm xas. ...a.. .a.... ..aa. .... .. . . * ch ROHANIA PIG PRODUCTION I PROCESSING PROJECT ECONOMIC COST OF ADEQUATELY FORMULATED CONCENTRATE CONSTANT LEI PER KG ------------------------------------------------------------------------------------- ----------------------------------------------- YEAR 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92-96 MAIZE (77.5%) 1.96 2.08 2.36 2.50 190 1.34 167 1i62 175 177 1,80 1.93 ti87 1,91 1.91 1.91 SOYBEAN HEAL (101) 0,66 0.60 067 0971 0.52 0.39 0,42 0.44 0.47 0s49 0,50 0952 0,53 0,55 0.54 0*53 SUNFLOWER MEAL (10%) 0.50 0.44 0.50 0.53 0,42 0.29 0.31 0.33 0.34 0.35 0.36 0.37 0.38 0,39 0.38 0.36 OTHERS (252) 0.12 0.12 0,12 0,12 0.12 0.12 0.12 0,12 0.12 0,12 0.12 0.12 Osl2 0,12 0,12 0.12 MILLING A MIXING 0.15 6.15 0.15 0.15 0,15 0615 0,15 0.15 0.15 0.15 0.15 0.15 015 0,15 0,15 0.15 TOTAL 3,39 3.39 3.79 4.00 3,10 2.29 2.67 2.96 2o83 2.88 293 2.99 3.06 3.12 3.10 3.09 =an*===u mommuss usussu mManna NaUumannU Samoans; Numannu uunx azzanxn noswan usuxm xsgxzz =star== :zznzxz zxaa ROM IA PIG PROD4NTIO0 I PROCESSIKS PRUCT ECONOIC PRICES OF IRADl ITENS CONSTANT LEI PER KILOGR~E YEAR 77 78 79 90 a1 82 33 94 85 86 87 88 89 90 91 92-96 FNIMED PIG LIVE VEIGHT 25.75 21,88 26.29 27.03 21.86 1.83 18.74 21.05 21.57 21.52 21.47 21.42 21.35 21.29 21.47 21.57 HAliE 2.53 2.69 3.04 3.22 2.45 1.72 2.15 2.35 2.26 2.29 2.32 2.37 2.41 2.46 2.46 2.46 SOYA8EAN HEAL 6.59 6,01 6.70 7.06 5.15 3.96 4.23 4.44 4.71 4.6 5.02 5.18 5.34 5.52 5.41 5.34 SUL0ER KAL 5.00 4.39 4.95 5.29 4.15 2.95 3.12 3.27 3,43 3.52 3.61 3.71 3.82 3.92 3,92 3.77 14.5% PROTEIN C0EENTRAT 3.39 3.39 3,79 4.00 3.10 2.29 2.67 2.86 2.93 2.88 2.93 2.99 3.06 3%12 3.10 .3.09 11 PROIEIN CONCENTRATE 3.02 3.10 3.47 3.66 2.85 2.10 2.49 2.68 2.62 2.66 2.469 2.75 2t80 2.86 2.85 2.84 sa4 m1 - 96 - ANNEX 3 ROMANIA Pig Production and Processing Project Project Completion Report ANNEX 3 - Slaughtering and Meat Processing Facilities A. Number, Kind and Size of Subprojects 1. Under the Project, 10 new slaughterhouse and processing facilities and 8 new meat processing facilities were constructed and 47 existing slaughterhouses and meat processing plants were modernized. The number of plants constructed and their location differed markedly from that planned at appraisal when it was proposed to construct 15 slaughterhouses and processing facilities and 4 meat processing facilities 1/. A comparison of plants planned to be constructed with plants actually constructed is set out in the following table. TABLE 1 Slaughterhouses & Meat Processing Processing Plants Plants Judet Proposed Actual Proposed Actual Arad 1 1 Bacau 1 - Bihor 1 - - Bistrita N. 1 1 1 Botosani 1 Brasov 2 Braila I - Buzau 1 Cluj 1 Constanta 1 Covasna 1 Dimbovita 1 Gorj 1 Harghita 1 1 lalomita 1 1 lasi 1 1 Maramures -1 1 Neamt 1 - Olt - 1 Satu Mare - -1 Salaj 1 Sibiu 1 1 Timis 1 Tulcea 1 1 Vaslui 1 1 Mun. Bucharest -1 15 No. 10 No. 4 No. 8 No. 1/ At appraisal these were specialized dry salami plants and were referred to as sausage processing facilities. - 97 - 2. It can be seen that only half the plants were constructed in the locations planned at the time of appraisal. The mission can only explain this on the basis that at the time of appraisal the number of plants and their locations had not been finally decided. 3. Dealing first with the slaughterhouses and processing facilities, the number planned was 15 and the number built, 10. The total of the slaughtering capacities of the plants built, on a single shift basis, is 256,742 tons liveweight per year compared with 252,220 tons planned, an increase of about 2%. However, the processing capacity built has increased more significantly, from the 37,341 tons planned to 51,790 tons per year, or by 39%, on a single shift basis. Total staff employed at full capacity has risen by 457 from 4,581 to 5,038, an increase of about 10% due partly to the greater processing capacity. Total investment cost (not including working capital) was Lei 1,828,300,000. Details of capacities of individual plants and investment costs including a breakdown between civil works and equipment and plant are given in Table 1. 4. Eight meat processing facilities were constructed compared to the four sausage processing facilities planned (Table 2). only one of the plants, the dry salami facility at Medias in Sibiu Judet bears any resemblance to the model used in the appraisal. The remaining seven plants are designed for a wider range of processed meats, including sausages of various types, smoked and smoked-cured meat products, canned meat products, semi-canned (pasteurized) hams and picnics, and catering products consisting of prepared meat and vegetable packs for the restaurant and institutional trade. As a result, it is not really relevant to compare the facilities actually built with those planned at the time of appraisal. Actual processing capacity on a single shift basis is now 31,455 tons of all types of products, including byproducts compared to 7,581 tons at appraisal, which is about four times as great. Total staff employed has correspondingly risen by 543 from 452 to 995, about twice as great. Total investment cost (not including working capital) was Lei 314,700,000. Details of capacities of individual plants and investment costs including a breakdown between civil works and equipment is given in Table 2. 5. The investment cost estimates for the slaughterhouse/meat processing and sausage processing facilities given in the appraisal project cost amounted to Lei 2,106,180,000. This total included an adjustment of about 4% for physical contingencies and a 5.4% average price contingency to allow for expected inflation in foreign and local costs during the implementation period. In fact, the actual investment costs for these two components under the project amounted to Lei 2,128,200,000, which amounts to an increase of Lei 2,020,000 or 1% over the original estimate. During 1981 and 1982, three decrees increased construction material and fuel prices and therefore costs on the work still to be constructed by an estimated 15%. These decrees were numbered 48/1981, 199/1982, and 232/1982. 6. The third component of the project applying to slaughter and meat processing was the modernization of existing slaughterhouses and processing plants. Modernization was carried out on 47 plants and in 3 cases (Table 3) resulted in an increase in slaughtering and processing capacity. Modernization involved such items as the complete separation of clean and unclean areas to meet EEC requirements in at least one plant, the resurfacing of walls and floors with tiles, the replacement or resurfacing of timber doors - 98 - and windows and jambs with stainless steel, the improvement of layouts and process flows, the provision of ventilation systems, the renovation and re-insulation of chillers and cold stores, the mechanization of "on the rail" dressing systems, the reorganization and replacement of services piping reticulation (water, steam, electricity, air) to remove it wherever possible from process areas thereby easing the hygiene and sanitation cleaning load, and the replacement of obsolete equipment. In the appraisal, the amount set aside for modernization was Lei 167,000,000. The actual amount expended was Lei 466,500,000, an increase of Lei 314,000,000 or three times as great. 7. Overall the three components resulted in an investment cost of Lei 2,609,500,000 compared to Lei 2,273,180,000 estimated in the appraisal. This represents an increase of Lei 336,320,000, or 14.8%. It is considered that the increase was due mainly to the marked increase in processing capacity over that included in the appraisal, and the increases in construction costs as a result of the rise in prices of fuel and materials, resulting from decrees promulgated in 1981 and 1982. B. Slaughterhouse Location and Capacity Utilization 8. Slaughterhouse Location Ten new slaughterhouse and meat processing plants were constructed under the project and 3 plants modernized with a resulting increase in capacity (Table 4). Eight are located in Judets with adequate existing pig production or when combined with incremental production from Pigs I & II, give reasonable loadings to the plants. The remaining 5 are either in regions with high pig production, e.g. ARAD and CONSTANTA, which should ensure adequate loadings or in low production areas requiring offtake from a number of other Judets. Table 5 gives a summary of industrial slaughterhouse design capacity by Judets. 9. Capacity Utilization The capacity utilization of the industrial type slaughterhouses in Romania as a whole has been assessed at three periods, the commencement of implementation of the project in 1978, the year of completion 1983, and the year that all plants will be capable of full production 1986. Capacity utilization is defined as the ratio of pigs slaughtered compared to the design capacity of a plant on a single shift basis. The information used in determining the capacity utilization together with the assumptions made is set out in the following table. - 99 - Table 2 1978 1983 1986 - - - - - - - Tons Liveweight - - - - - - - A. Total pigs slaughtered (B+C) 1,077,000 1,250,000 1/ 1,600,000 2/ (1,350,000)- B. Pigs slaughtered in local abattoirs and by individuals 400,000 1/ 400,000 1/ 500,000 2/ (350,000) C. Pigs slaughtered in industrial slaughterhouses of MIC & GOSTAT, and other ministries 677,000 1/ 850,000 1/ 1,100,000 1/ (1,000,000)-s/ D. Capacity of industrial slaughterhouses 775,000 950,000 1/ 1,443,000 1/ E. Capacity utilization (C/D) 0.87 0.89 0.76 (0.69) 1/ Estimates by the mission. 2/ Assumes feed supply situation improves. Figures in brackets show estimated level if feed situation remains unchanged. 3/ GOSTAT slaughterhouses and meat processing facilities are integrated in pig production units and come under the jurisdiction of MAFI. 10. It can be seen from the mission estimates that the capacity utilization will fall from 0.87 in 1978 to 0.76 in 1986 when all the plants being constructed under the Pigs I & II projects and local abattoir construction programs will be capable of full production. This represents a considerable underutilization of plants compared with the situation which prevailed in the late 1970s and early 1980s. Thus, by the end of the current construction program (by the end of 1983) there will be a surplus of pig slaughtering capacity over the country as a whole. Any future investment should thus concentrate on the modernization, upgrading, and re-equipment of existing plants. Some replacement of old outdated plants and the relocation of slaughter plants to pig production areas may be necessary from time to time, but these should be minimal. C. Construction Program Implementation 11. A disappointing feature of the project was the long construction periods required to complete the new slaughterhouse and meat processing facilities. The appraisal phasing of investments allowed liberal construction periods for both types of subprojects: 3 years for slaughterhouses and 2 years for meat processing facilities (although the phasing of investments was over 3 years for both). The actual construction periods were in fact very much greater. Some of the larger subprojects, e.g. Slobozia (investment Lei 310,100,000) had investment expenditures over 6 calendar years while even small subprojects, e.g. Tirgoviate (investment Lei 53,000,000) had investment expenditures over 4 calendar years and a construction period of 34 months. - 100 - 12. Of significance, is the sudden increase in construction activity, as evidenced by the investment expenditure, in the years 1982 and 1983. Again taking the Slobozia subproject as an example, about one third of the investment was expended in the years 1978 to 1981 inclusive while two thirds was spent in the final two years 1982 and 1983. It is quite apparent, that for a considerable period of project implementation, the construction industry was overcommitted. It is regrettable also that the burst of activity occurred subsequent to the promulgation of decrees (para. 5) increasing fuel and construction material costs as this undoubtedly added to the cost of the work still remaining to be completed. Other aspects which contributed to the extended construction periods were: (a) Shortage of construction enterprises experienced in working in the food industry. (b) Shortage of skilled workers. (c) Changes in design in some instances. (d) Shortages in materials and equipment, often due to inadequate construction planning and management. (e) Administrative delays on the part of the client organization in signing contracts, making construction sites available, and actioning progress payments. D. Quality of Facilities, Machinery, Equipment, and Services 13. Based upon the small sample of subprojects inspected by the PCR mission and the short time spent in each, the facilities built or modernized under the project appear to be of a reasonable standard and the technology appropriate. 14. Civil Works Overall, designs and process flows appear to be good, taking into account the constraints applying in some instances due to the necessity to use existing facilities and services. The buildings usually are precast concrete frames with masonry infill panels and walls. This leads to rather massive structures which are difficult to adapt when required by changing process needs and revised process flows. 15. In process rooms, walls are usually tiled to a height of 2 or 3 meters. Floors are also tiled. The tiled walls and particularly corners have already suffered considerable damage, mainly from product trucks and trolleys due to lack of protection, e.g. bumper bars. In at least one plant, stainless steel strips are being inserted into the tile work at truck height for tile protection. In others, such as the dry salami plant at MEDIAS, pipe rails are being provided to protect the walls. Above the tiles, usually painted concrete plaster finishes of varying texture are provided. Some of the surfaces are rough and can only be cleaned with difficulty. As an example, the wall surfaces of the drying rooms in the dry salami plant at Medias are finished with a rather coarse textured wood float finish. Such surfaces are difficult to clean and sanitize, a matter of particular importance in dry salami processing where the objective is to avoid the growth of undesirable microorganisms. - 101 - 16. In many cases, unpainted hard cement plaster finished with a steel float and containing additives to give a light colored finish would give a more satisfactory and durable surface. Metal coated sandwich panels, with polystyrene or polyurethane cores, particularly those with precoated finishes, have the advantage of ease of cleaning, insulation properties to avoid condensation, and flexibility for changing process requirements. As these panels are manufactured in Romania in thicknesses up to 50 m, their use should be evaluated and encouraged. Such panels would, of course, require protection from damage by trucks and trolleys. Painted hard cement plastered or precast element ceilings are also problematic, with many examples of peeling paint in evidence even in newly finished facilities. With the unnecessary high studs used in many areas, consideration should be given to the use of false ceilings of sandwich panel construction with the ceiling space used for service mains, etc. to keep service mains out of process areas. 17. Condensation is a problem in a number of chillers and process areas. This results basically from the design of the air distribution system, but is also affected by coil surface areas, the presence of service mains, e.g. water pipes, electrical services, and the design of the rooms. More attention needs to be paid to these problems at the design stage as remedial measures, such as heating, are expensive. 18. In most chillers, a drainage system is not provided so that wash down can only be carried out through the door, usually into the passageway where product is being transported. This is an undesirable feature as it contributes to the condensation problem in other areas; it also tends to lead to inadequate cleaning and sanitation of chillers following the removal of the previous days production. 19. Ceramic floor tiles are used extensively in process areas. There appears to be already considerable damage to these tiles, possibly due to poor bedding techniques and/or impact damage. More use could be made of good quality concrete floor finishes with low water/cement ratios and adequate curing. Overall, most floors in process areas appear to have adequate falls, but there were some areas which hold water and cause ponding. The use of smaller floor areas per suap should thus be considered. 20. Machinery, Equipment, and Services The slaughterhouses, built under the project or modernized, utilize modern concepts of 'on the rail' dressing for pigs and cattle with powered conveyor systems, evisceration onto moving top viscera tables, and hide and skin strippers. This technology is appropriate. Equipment used appears to be robust and generally of an adequate but simple design, manufactured in Romania. However, some of the older slaughterhouses supplying carcass meat for further processing appear to still use dressing methods which are not acceptable by modern hygiene standards, e.g. hide removal with the cattle beast lying on the floor. 21. Some items seen during the plant visits which, it is suggested, could be improved include: (a) Electrical stunning handpieces with no obvious safety devices and with incorrect voltage, current, and frequency characteristics requiring lengthy periods of application for stunning with resulting burning of the skin and greater occurrence of blood splash in the carcass. - 102 - (b) Sticking following shackling. Table sticking at the end of the restraining conveyor and then shackling would allow the elimination of one operator and give improved sticking. (c) Slat-type viscera tables. Consideration should be given to the use of stainless steel pan-type viscera tables rather than the stainless steel slat-type which are used currently. The difficulties of cleaning and sterilizing the slat-type viscera table was obvious at the two plants visited. A cold water spray at the discharge end would assist in the initial removal of blood. (d) Operators working on cattle viscera tables. Evisceration from a fixed platform mounted over the table or at the end of the table should be investigated. This would avoid the necessity for the operator to walk on the table itself, eliminate the boot sterilizer, and improve operator safety. (e) The use of downward pulling hide strippers would improve the hygiene of the process. (f) Raising the rail height in the pig chillers to ensure that carcasses have adequate clearance from the floor. (g) The greater use of hot dip galvanized components to eliminate paint systems and the simplification of support systems to reduce the cleaning problems. 22. The new processing facilities either as part of the slaughterhouse or as separate plants, have equipment, plant, and technology of an adequate standard. Some of the grinding, chopping, mixing, and stuffing equipment in the new meat processing plants is of an older design and is being reused. This is regarded as entirely appropriate as the items still retain a useful life. It needs to be recognized however that maintenance, cleaning, and sterilizing are more difficult than with more modern equipment. 23. Aspects which could be improved include: (a) More practical positioning of recording and control equipment so that it is easier for operators to use, e.g. amokehouse temperature and humidity recording devices and control equipment for vacuum tumblers. (b) Better and more effective cleaning facilities for smoke trolleys and smoke sticks. (c) Replacement or repair of badly dented or fractured stainless steel product trucks which are impossible to clean adequately. (d) Cleaning and sanitation could be improved both for equipment and wall and floor surfaces if modern high pressure cleaning installations--preferably fixed systems with adequate outlets--and foams were available. (e) More handwashing facilities and knife sterilizers for personnel use should be installed in process areas. - 103 - 24. Overall, services including utilities appear to be adequate for all types of facilities built under the project. Refrigeration plants are of conventional ammonia-type with all components, including compressors and controls manufactured in Romania. Ammonia leakage was apparent in the few plants visited. In one plant, atmospheric condensers are still used. 25. In all the plants visited, waste water is discharged into city sewerage reticulation systems after screening and fat removal. The screening systems are crude, do not produce a product of any value, and hence, the screenings are dumped. The fat removal systems are also crude under and over types not suitable for this application. Efforts should be made to recover trimmings, fats, etc. from process waste waters before they become contaminated with foul sewage. Various types of rotary screens or sieves are available for this purpose, and the technology is simple and well known. The use of aeration systems to remove fats should also be evaluated. Such treatment systems should produce products suitable for rendering thereby resulting in an additional source of protein for stock food. 26. In many cases, service mains, particularly steam and electrical mains, pass through process areas. This adds considerably to cleaning problems. Every effort should be made at the design stage to avoid this in the future. Where possible, false ceilings should be provided or mains located through non-process areas. Lighting levels at work stations and inspection points are low and should be increased. Cleaning of light fittings would improve their light values. 27. Taken overall, the standard of workmanship evidenced on all the projects visited was disappointing. It is considered that with a little more care and attention to detail, construction standards could be improved significantly. It was stated on a number of occasions that the problems resulted from a lack of skilled workers. However, good management and supervision is also a vital construction input as evidenced by the good results achieved by the Tomesti/Iasi slaughterhouse which was not visited by the PCR Mission but by two previous Supervision Missions. Examples of poor workmanship observed were poor finishes to precast concrete elements (resulting from grout leakage), segregation, and poor reinforcing steel placement; poor fit up of precast concrete elements; poor or dusting concrete floors due to high water/cement ratios and inadequate curing; poor fit up of doors and windows; poorly fitting freezer and chiller doors with inadequate gaskets and resulting air leakage; poor welding of structural steel and mechanical components; inadequate surface preparation and poor priming and paint systems to steel components in process areas; and the use of uncoated steel fixings to ducts in process and caner wet areas. E. Quality of Products 28. A wide range of products are produced in the slaughterhouses and processing and meat processing facilities constructed under the project. They include pork, beef and sheep carcass meats and primal cuts; high value processed products such as pressed and semi-canned (pasteurized) hams and picnics, pork fillet; specialty products, particularly those popular in the region, including smoked and cured pork fillet and special cuts; fresh sausages of various types; dry and semi-dry sausages, including dry salami; and smoked and smoked-cured products, including bacon. - 104 - 29. Carcass dressing standards, based upon the limited number of plants visited, are fair to poor. Typical dressing defects applying to pig carcasses are hair and dirt contamination; inadequate head work up; inadequate hair and bristle removal from hams, hands, neck and folds; and poor trimming of the body cavity. In the case of beef carcasses, defects were poor hide stripping with inadequate knife work to free the skin and fat from the rump and loin, inadequate trimming of body cavity and random knife cuts. On the other hand, the quality and conformation of the beef carcasses inspected were not good, and it was stated in one case that the carcasses were for manufacturing purposes and in another case that they were for an export market which did not require high standards. Based upon flavor and appearance of the processed me±t products and inspection of the ingredients, the quality of these products appeared to be good. F. Management 30. On the whole, at the plants visited management appeared to be satisfactory. From the information obtained, the management structure appeared adequate, although rather high in numbers by Western standards. Some operating cost data was made available for individual plants but the allocation of costs by cost centers appeared somewhat arbitrary. There was no evidence to suggest that cost accounting systems were available to assist management control and decision making. 31. Using the general standards that apply in Romania as a yardstick, the appearance of the plants and their general housekeeping was good, although it is considered that greater management input would improve the situation. Management should thus take a greater interest in the cleaning, sanitation, and maintenance of buildings, plants, and equipment, despite the fact that satisfactory cleaning equipment and detergents may be a constraint. 32. The meat inspection service has the responsibility and authority to check the hygiene and sanitation of equipment and processing departments and carries out a testing program to determine microorganism counts on equipment and surfaces of processing departments. It was, however, not possible for the mission to determine how effectively this is being carried out. 33. Requirements that management arrange for regular medical examinations of workers who come in contact with meat or meat products appear to be operating effectively. However, on-the-job training programs for workers to improve the standard of dressing of carcasses and the hygienic handling of meat and meat products appear to be nonexistent on the basis of the information available to the mission. G. Environmental Aspects 34. A naber of the plants are located in towns and cities and even adjacent to houses; others it is known are sited on industrial estates. The general appearance of the plants, emission of smells, and noise do not appear to create problems. 35. Effluent disposal appears to be adequately catered for, usually by treatment in municipal sewage treatment systems. As stated in para. 25, pretreatment systems for removal of fats and screening could be improved to obtain material suitable for rendering as meal and tallow. At present, screenings are dumped. - 105 - 36. Consideration should also be given to the merits of installing physico-chemical treatment systems for the recovery of protein from slaughterhouse and processing plant waste water. New Zealand experience is that about 0.9 kg of dewatered cake with a 5% moisture content can be recovered from a cubic meter of waste water. The cake contains 30Z protein and 20% fat and is used as an animal feed supplement for pigs and poultry. H. Efficiency of Slaughtering and Processing 37. Apart from labor productivity which is discussed later, the efficiency of the slaughtering and processing operations is good. Reception of livestock, slaughter, chilling dispatch, boning, curing, and processing appear to be carried out in an efficient manner overall. Unsatisfactory aspects of the process are discussed in more detail in paras. 20-23, 29 and 46. I. Labor Productivity 38. The total number of workers employed in the slaughterhouse and processing plants and meat processing plants constructed is some 20 to 30Z higher than for equivalent western plants. At appraisal, worker productivity based upon the total production was assessed at 44 tons per worker per year for slaughter and processing facilities and 17 tons per worker per year for sausage processing facilities. By comparison, the actual worker productivity is 42 tons per worker per year for slaughter and processing and 33 tons per worker per year for meat processing facilities. 39. It is not possible to compare directly the dry salami plants projected in the appraisal report with the meat processing plants actually built. Based upon the Medias dry salami plant however, the productivity is estimated at 22 T per worker per year of dry salami, which is quite satisfactory. 40. Equivalent plants in the Western World have higher productivity. For slaughterhouse and processing, productivity figures on the order of 70-80 tons per worker per year are common and for meat processing 58-60 tons per worker per year. It should be noted that these figures are based upon total production, which includes all byproducts. J. Capital Productivity and Meat Processing Facilities 41. For the slaughterhouse and processing facilities, capital productivity has been calculated on two bases: (a) kilograms of total product, including byproducts, per 1,000 lei of investment; and (b) investment per worker. These were compared to the same criteria used at appraisal. Capital productivity for modernization of slaughterhouses has been calculated on the basis of increase in slaughter capacity in terms of incremental carcass weight per 1,000 lei investment, based upon results obtained from three plants--Bacau, Braila, and Constanta--with an incremental capacity of 28,585 tons. Results are as follows; - 106 - Appraisal Actual (a) Slaughterhouse & Heat Processing Facility Total production in terms of investment 120.5 kg/1,000 lei 113.4 kg/1,000 lei Investment per worker 364,270 lei 371,660 lei (b) Meat Processing Facility Total production in terms of investment 32.4 kg/1,000 lei 1/ 94.6 kg/1,000 lei Investment per worker 530,285 lei 1/ 350,210 lei (c) Modernization of Slaughterhouses Incremental carcass weight in terms of investment (3 plants only) 206 kg/1,000 lei 1/ Dry salami plant only. Although not quite comparable with new slaughterhouses and meat processing facilities, the capital productivity benefit from modernization is substantial. K. Hygienic Standards in Project Plants compared with International Standt.rds 42. General A number of slaughterhouses and processing plants in Romania are approved for the export of meat and meat products to the EEC and the USA. These plants are situated in the following Judets and have 5 EEC and 5 USDA approvals listed in the table below. Judet Type of Approval Bacau USDA EEC Buzau EEC Constanta EEC Dolj USDA Galati USDA Memedent USDA EEC Mures EEC Teleorman USDA Total Approvals 5 5 None of these plants was visited by the completion mission. 43. On the basis of the small sample of slaughterhouses and processing plants visited by the PCR mission and a quite significant number of such facilities visited at the occasion of Project Supervision Missions, the following comments are made where standards in practice depart from the international codes of hygienic practice for fresh meat and processed meat - 107 - products. Ante-mortem and post-mortem inspection are outside the scope of these comments. For convenience, the comments are under three headings. The list is not all embracing and the points made are probably well known by MIC officials. 44. Buildings, Process Layout and Facilities (a) Edible and inedible product (clean and unclean) working areas should have complete physical separation. This applies to gnt stripping and cleaning, which should be separated from soaking and further processing and also to stock yards. Separate facilities and amenities should be provided for 'unclean' workers from "inedible" departments. (b) Viscera which has been inspected and passed should be removed from the viscera table, and only condemned viscera should pass over the end of the viscera table. (c) A detain rail, following final inspection, should be provided, particularly on pig lines to allow further work up on the carcass or removal of parts of the carcass under the control of the meat inspector. (d) In a number of areas and particularly chillers, rails are too low and give insufficient clearance to the carcass from the floor. (e) Chillers, in particular, but also other process areas suffer from condensation and water drip. More attention needs to be paid at the design stage to avoid condensation problems including design of the room, air distribution, coil surface area, the presence of service mains, hangers, surplus equipment, and as a last resort the provision of surface heating. (f) More sumps should be provided in process areas and particularly chillers. (g) Greater attention needs to be paid to the provision of walls which are easy to clean and disinfect. (h) Ample coves (75 mm radius) should be provided at all wall to wall junctions and wall to floor junctions. (i) Painted ceilings, which give rise to peeling paint, should not be used. (j) The cleaning and disinfection of refrigerated and insulated vehicles for meat transport should be carried out in separate facilities from those used for stock trucks. 45. Equipment and Services (a) Better cleaning and sterilization of viscera tables is required. The use of pan-type tables rather than slat-type tables would help. In addition, the use of a cold water wash at the discharge end to remove blood prior to hot water washing is recommended. (b) More hand washing facilities and sterilizers for hand tools are required in slaughter and processing areas. - 108 - (c) Washing facilities and sterilizing protective waterproof clothing, such as aprons, should be provided. (d) The lighting intensities do not appear to comply with the accepted minimum levels of 540 lux at inspection, 220 lux in work areas, and 110 lux in other areas. (e) Repair or replacement of product bins, which are battered or fractured and impossible to clean and sterilize adequately, should be undertaken. 46. Dressing and Hygienic Handling of Meat and Heat Products The dressing standards of beef and pig carcasses of plants visited by the PCR mission was poor, with hair, dirt, and poor knifing techniques apparent. There was also inadequate trizming of body cavities. An 'on-the-job' training scheme for adequate and continuing training of workers on dressing procedures and hygienic handling of meat and meat products should be instituted in each plant. Apart from poor removal of hair and bristles from pig carcasses, other dressing work up which does not comply with international standards is the nonremoval of toenails (claws), eyelids, and the external acoustic duct. No effective alternative form of cleaning was apparent for the latter items. 47. Energy The cost of electricity, fuel, and water rose significantly in 1982 from the prices prevailing in 1980/81. Figures supplied by the slaughterhouse at Harteg showed that between 1981 and 1982 electricity rose from Lei 0.339 to Lei 0.510 per kWh, natural gas from Lei 0.2 to Lei 1.0 per cubic meter, and water from Lei 0.86 to Lei 1.75 per cubic meter. As a result of these cost increases, fuel costs are now a greater proportion of the total cost of energy and water, as the following comparison shows: 1981 1982 Electricity 51% 27% Natural gas 29% 58% Water 20% 15% The effect has been to decrease the importance of electricity when considering total energy costs. 48. The saving of electricity was very apparent in all the plants visited, with alternate light fittings not operating or tubes removed from fittings. As a result, the lighting levels were substandard. Some information was obtained for electrical usage on a departmental basis and these are compared with figures obtained by Supervision Missions. Completion Mission Previous (1981) Slaughter - kwh/ton carcass weight 21-23 76 Meat Processing - kwh/ton product 90-156 96-190 These are low electrical inputs by Western standards. - 109 - 49. Because of the high cost of fuels, attention should be given to achieving savings in steam and hot water consumption. There was no information available to the mission on the use of waste heat recovery systems nor were any seen at the plants visited. 50. Sources of heat with potential for waste heat recovery systems are rendering cookers, scalding tubs, refrigeration cooling towers, and chimneys to name the most important ones. New Zealand experience suggests that more than 30% of the hot water requirements of a slaughterhouse can be produced by such sources. Their use under Romanian conditions should be evaluated by MIC. i rna i 1W 1 Livestock I NaGS-) Project 1m 1479-11 MHat Procesairg Facilities - Design Capacities and Actual Lovem t Coots Amual Capacity (Stogle Shift)(Tons) Final imatmnot Costs (11 '0OOD) Equ4ipmn. meat Semicamed Camel Dry Caterlg Plant ad Ju&t lncation Fro&wts Hanm hat Salai. Proate Civil WO&S Otber Item Total Bitrita N. Biatrita 3000 - - - - 15500 10400 250000 Brasow Brasov 3000 - - - - 30800 12900 43700. Brasov Fagar"a 2000 - 16000 14500 30 Buaw Iuran - 2000 - . 19400 15500 34900 IrsIvita Deva 3000 27200 45300 72500 Maramres Baiamare 3000 - 455 - - 17600 12100 29700 Sibiu Halias - - - 1200.1/ 40600 22400 63000 Man. -Xicureat Iucureat - - 4000 8200 6300 1450 TU1FAL 14000 200) 455 1200 4000 175300 13940 314700 " Nem Capacity 120 - Old Capacity 300F H oirces API - 112 - ANNEX 3 Table 3 ROMNIA Livestock TtI'iqz) Project Completion Report Slauxbterbouase & Processing Facilities Slaugbterbouse Moderoisation Resulting io Increased Capacity Investment Carcass and Heat Canned Cost Judet Location Edible Offals Products Meats (Lei '000) Becau Bacau 7200 - 600 49800 Brails Braila 8000 750 - 47400 Constants Coostanta 17000 - 1200 41300 Total 32200 750 1800 138500 Incremental Capacity 28585 750 1780 - Source: BAI - 113 - ANNE 3 Table 4 Lam 1479-D mapletion Rpar - wZking Pape Cair~n af Pig mbes wit Slyute Capacity for Jad~ts ide CapAcitY m s due to Pi T Sm'Ohr=r Total SLut Pig pig Car--~y Udr Car~-iy Pig NUb Nbr Total Pig. I E m198 Pig NL rs Inr t Inrmet Pig Tu Ceredse wei cam v* a 1981_ i Pi II D Rbe '000 co tOn Ara 25.0 50.7 660,000 363,700 1,400 118,100 483,2® B~es 7.2 29.3 382,000 247,000 38,400 5,400 290,800 Bistritza N. 10.0 12.3 160,000 95,0 30,200 - 126,000 Daila 8.0 26.5 345,000 523,900 29,600 93,500 647,000 Comstanta 17.0 48.9 637,000 379,00 - 8,100 459,900 Q~@ 6.0 7.4 96,400 11,300 52,200 - 163,500 Diaboqit. 10.0 14.6 190,100 164,300 96,000 - 260,300 Gos 6.0 17.6 229,200 153,200 38,200 44,200 235,600 Mmindea 6.0 15.7 204,400 169,8 96,600 57,700 324,100 Ilaia 40.0 60.3 785,200 727,300 .88,500 Cial Olt 25.0 29.9 389,300 339,90 159,700 36,300 535,900 31hces 25.0 30.4 395,800 247,000 139,900 160,500 -547,400 Vaslui 25.8 30.1 391,900 167,400 34,000 44,200 245,600 ROMANIA Livestock pa ) Project Loan 14/V-Ro Completion Report Industrial Slaughterhouse Design Capacities by Judets 1977 and 1983 Single Shift Basis '000 Tons Carcass Weight Capacities as at 1977 Increases in Capacities Capacities as at End of 1983 Total Total HIC Otherl/ by type Under Under by type HIC Other Judec Plants Plants Total Pigs Cattle Pigs I Pigs 11 Others Total filL Cattle Plants Flants I Alba 12.0 1,4 13.4 6.4 7.0 - - 13.4 5.7 7.7 12.0 1.4 2 Arad 29.5 4.4 33.9 25.3 8.6 25.0 - 1.6 60.5 50.7 9.8 54.5 6.0 3 Arges 21.5 2.5 24.0 13.6 10.4 - - 2.6 26.6 15.2 11.4 21.5 5.1 4 Bacau 16.9 8.6 25.5 11.8 7.7 7.2 - 4.9 37.6 29.3 8.3 24.1 13.5 5 Bihur 38.7 5.5 44.2 32.2 12.0 - 5:0 - 49.2 39.1 10.1 63.7 5.5 6 Bistrita N. 4.5 0.4 4.9 2.7 2.2 10.0 - (-0.4) 14.5 12.3 2.2 14.5 - 7 Botomani 4.5 1.8 6.3 4.2 2.1 - - 25.5 31.8 29.0. 2.8 4.5 27.3 8 Brasay 34.3 6.0 40.3 26.3 14.0 - - 0.1 40.4 24.4 16.0 34.3 6.1 9 Bralla 19.7 3.1 22.8 14.8 8.0 8.0 - 4.1 34.9 26.5 8..4 27.7 7.2 10 Buzan 20.5 1.0 k1.5 15.2 6.3 - - - 21.5 1.8 6.7 20.5 1.0 11 Caras-severin 7.9 0.3 8.2 3.3 4.9 - - 1.7 9.9 5.0 4.9 7.9 2.0 12 Calarasi 7.2 - 7.2 5.5 1.7 - - 41.3 48.5 46.3 2.2 7.2 41.3 13 Cluj 25.0 1.1 26.1 15.0 11.1 - - - 26.1 14.7 11.4 25.0 1.1 14 Constants 40.1 1.1 41.2 32.3 8.9 17.0 - - 58.2 48.9 9.3 57.1 1.1 15 Covasna 3.2 0.4 3.6 1.5 2.1 6.0 - - 9.6 7.4 2.2 9.2 0.4 16 Dimbovita 5.2 3.4 8.6 6.1 2.5 10.0 -. - 18.6 14.6 4.0 15.2 3.4 17 Dolj 40.0 1.9 41.9 31.4 10.5 - - 3.1 45.0 33.9 11.1 40.0 5.0 18 Calati 36.0 4.4 40.4 34.0 6.4 - - 6.0 46.4 38.8 7.6 36.0 10.4 19 Glurgiu 7.7 2.2 9.9 7.4 2.5 - - - 9.9 6.2 3.7 7.7 2.2 20 corj 4.3 - 4.3 2.6 1.7 6.0 10.4 0.7 21.4 17.6 3.8 20.7 0.7 21 Harghita 17.5 0.5 18.0 3.2 14.8 - 1.0 0.7 19.7 6.9 14.8 18.5 1.2 22 HunedoAra 16.6 2.5 19.1 10.2 8.9 6.0 - - 25.1 15.7 9.4 22.6 2.5 23 Islomita 9.3 4.8 14.1 10.0 4.1 40.0 - 11.0 65.1 60.3 4.8 49.3 15.8 24 last 20.9 7.7 28.6 21.2 7.4 23.0 - 11.3 62.9 53.0 9.9 43.9 19.0 25 MarasfAres 15.3 0.5 15.8 7.6 8.2 - - (-0.1) 15.7 7.5 8.2 15.3 0.4 26 Hehedinti 22.8 0.5 23.3 19.9 3.4 - - 16.4 37.7 34.3 3.4 22.8 14.9 27 Hurea 27.1 6.3 33.4 17.2 16.2 - - 1.3 34.7 15.3 19.4 27.1 7.6 28 Noset 17.0 2.5 19.5 8.3 11.2 - - 12.9 32.4 20.5 11.9 17.0 15.4 29 Ot 5.6 1.0 6.6 4.1 2.5 25.0 - 1.3 32.9 29.9 3.0 30.6 2.3 30 Prahova 21.7 1.6 23.3 16.3 7.0 - - - 23.3 15.8 7.5 21.7 1.6 31 Satu Hare 9.2 2.3 11.5 7.3 4.2 - - - 11.5 6.8 4.7 9.2 2.3 32 SalaJ 3.6 - 3.6 t.6 2.0 - 8.0 2.6 14.2 12.2 2.0 11.6 2.6 33 Siblu 22.3 3.5 25.8 18.2 7.6 - - - 25.8 16.7 9.1 22.3 3.5 34 Suceava 28.9 4.2 33.1 15.5 17.6 - - 3.0 36.1 17.6 18.5 28.9 7.2 35 Telsorsan 30.7 1.0 31.7 25.7 6.0 - - - 31.7 25.5 6.2 30.7 1.0 36 Timia 45.3 4.2 49.5 36.7 12.8 - 90.0 40.0 179.5 165.5 14.0 135.3 44.2 37 Tulcea 4.0 0.9 4.9 3.6 1.3 25.0 - 2.2 32.1 30.4 1.7 29.0 3.1 38 Vaslui 8.8 - 8.8 4.3 4.5 25.8 - - 34.6 30.1 4.5 .34.6 - 39 Viles 7.0 0.6 7.6 3.6 4.0 - - - 7.6 3.4 4.2 7.0 0.6 40 Vrances 13.1 1.2 14.3 8.6 5.7 - - - 14.3 8.0 6.3 13.1 1.2 41 Hun. Bacurest 61.6 - 6t.6 54.2 7.4 - - 61.6 54.2 7.4 61.6 - TOTALS 187.0 95.3 882.3 594.9 28?.4 228.0 114.4 191.8 1422.5 1108.0 314.5 1135.4 287.1 11 Includes Costat of MA and other inistries Source: BAFI - 115 - ANNEX 3 BMMlA - Table 6 Livestock I (Fis) Project Lon 1479-M Slaughtechause and Processing Facilities Incme Statemanc Year 1981 1982 1983 1984 1985 1/ ------- - 0 0---- evenue Meat 2/ 170,1404 315,446 726,946 1,955,587 2,348,200 Meet Products 41,282 121,617 236,127 617,950 707,690 Camed Heat Products - 413 28,919 185,909 297,450 Semi Canned Products (Pasteurized) - 644 58,576 723,999 932,529 Caterivg Pads 1,910 2,100 2,340 2,340 2,340 Other Products 3/ 126500 2 252,432 Total 231,626 491,500 1,179,408 3,711,665 4,540,641 Operating Expenses Salaries - Myc. & Technical 400 1,050 2,440 6,930 8,060 Workers 4,900 13,000 36,580 87,920 115,220 Ta3es (16%) 848 2,392 6,243 15,176 19,725 Social Security Fund (151) 795 2,243 5,853 14,228 18,492 Other Labor Costs 600 3,670 8,350 23,810 33,700 Livestock Purchases 4/ 183,757 357,704 871,210 2,619,570 3,186,470 Other MateriaLs 11,370 30,226 82,663 253,588 308,466 Fuel, Oils & labricants 940 2,730 4,890 13,940 19,480 Electricity, Water & Steam 6,200 12,590 31,400 98,830 143,716 Maintenance and Repairs 5/ 4,430 8,164 19,637 59,042 89,775 Other Expenses 3,740 9,270 174,200 Tocal 217,980 443,939 1,099,066 3,335,424 4,117,304 eC IMCM. 1,4 4ld6..1 so_3 376624 423,3 I/ Assumed 80% capacity 2/ Carcass, fat and sane edible offals 3/ Includes casirgs, meat, bone, and blood meul, technical fats, skins and hides 4/ Purchase of pigs and cattle 5/ Assumed 5% of total investaet cost - 116 - BONANZA Table 7 Livestockj (Pit) Project Loan 1479-20 east Processing Facilities Income Statement 1980 1981 1982 1983 1984 - - - - - - - - - - reI00 - - - - - Revenue Moat Products 33,611 134,359 347,499 513,080 513,080 Canned Meats - 3,581 17,929 17,929 17,929 Semi Canned Products - - - 8,750 116,670 Dry Salami - - - 20,480 122,880 Catering Packs - - - 13,360 133,600 Other Products 1/ 2,120, 16,550 82,010 140.980 153.690 Total 35,731 154,490 447,438 714,579 1,057,849 Operating Expenses Salaries - Mgmt. & Tech. 40 200 490 1,020 1.440 - Workers 500 2,670 6,440 11.390 20,730 Taxes (16%) 86- 459 1,109 1,986 3,547 Social Security Fund (15Z) 81 431 1,040 1,862 3,326 Other Labor Costs 90 600 1,470 2,530 4,990 Raw Materials 2/ 29,756 125,500 364,527 584,813 801,370 Other MateriaGs 3/ 100 2,020 6,590 14,720 23,410 Fuel Oils & Lubricants 60 190 560 950 1,930 Electricity, Water & Steam 810 5,130 14,140 21,750 31,800 Maintenance & Repairs 4/ 980 3,470 7,640 12,170 16,640 Other Expenses 620 3,080 7,830 13,580 20,430 Total 33,123 143,750 411,836 666,771 929,613 Net Income 2,608 10,740 35,602 47,808 128,236 1/ Includes fats, trimings, bones and scraps 2/ Includes carcass meat, edible offals, casings, etc. 3/ Includes packaging materials 4/ Taken as an overall 5Z of investment cost - 117 - ANNEX 4 ROMANIA Pig Production and Processig Project - Loan 1479-RO Project Completion Report Important Pig Production Efficiency Data to be Monitored on Farm Level 52 Weeks Rolling A. Breeding Herd Target Actual Average 1/ Matings/Week Repeats/Week Farrowings/Week No of Sows in Herd x 2.1 52 Pigs Born Alive/Litter Pigs Born Dead/Litter Net Alive/Litter No. born/week minus No. dead/week No. sows farrowed/week B. Feed Conversion Efficiency Total feed delivered/week Total livestock sold/week 1/ Average of previous 52 weeks to be obtained by dropping the 1. week's data and adding the new data weekly. 2068Z POLANC 2d u.5 5 R E-KIA SOCIALIST REPUBLIC OF ROMANIA ÷ - ROMANIA T-YUGOSLAA PIG PRODUCTION AND PROCESSING - -BULGARI P ROJ ECT STEPROJECT COMPLETION REPORT 2r S. -L OTO ANI SATU MARE ARAMURE r - -0--- S U C E A V A - s BISTRITA- LANSAUD \ A SALAJ - H OR N E A M T - C L U J- R E - - HARGH l AVASLUI BA C - . A R AA D - D a A L BlA SiBIU C 4ASN A%GAAT T - T - HUNEDOARAB O ----a B U z CARR\ S- SEAE VI LCEAi 1,RAHVTULC l G R AG B R Al L - \ R i A L-OMiT --B HA S - . . - - TC A LARS - o 0 L J (G l UR G WCONSTANTAd TELEORMAN DA NB UL G A RA 2I *1 * p ( PCR) 21 DECEMBER 198I .0CIALIST REPUBLIC OF ROMANIA DUCTION AND PROCESSING New Slauhterhouse and Meat Processing PROJ ECT Facility Modernized Slaughterhouse with JECT COMPLETION REPORT Inc-ental Capacity New Dry Salami Plant New Meat Processing Facility AGRO-CLIMATIC ZONES: U). sPlains Faothills Transylvania rnountains and tablelands 48'· Zone boundaries \BOTO5AN: District (Judet) boundaries E5 -- -International boundaries S U C E A V A\ S A0 20 40 60 80 100 120 140 160 - A i KILOMETERS N E A m T 0 ASNAM, u ~GALATI , BR A 0OV fVRANCEA .PRAHOVA1- T U L C E < ARGE BR A l L - ALOMITA B T- -- C A L A R S - R CONSTANT HTELEORMAN l U ANI1 U 5 r This PCR map ii bued an 1BRD 12689. Janry 1977. Chan~ in lacution and ~~aore of Sauåtrhouss~n L G A R Me.t Pr~aKn P%nt hamw beun mede. 26r