Turkey - Igdir - Aksu - Eregli - Ercis (IAEE) Irrigation Project

Document of The World Bank |'u, FOR OFFICIAL USE ONLY Report No. P-3581-TU REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$115.3 MILLION TO THE REPUBLIC OF TURKEY FOR THE IGDIR-AKSU-EREGLI-ERCIS (EAEE) IRRIGATION PROJECT May 17, 1983 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  TURKEY CURRENCY EQUIVALENTS Currency Unit Jan. 1980 /1 Jan. 1981 January 1982 March 1983 US Dollar - TL 70.0 TL 91.00 TL 127.00 TL 195.00 TL 1 - US$ 0.014 US$ 0.011 US$ 0.008 US$ 0.005 /1 Since January 1980, the rate is being adjusted for the differential inflation between Turkey and its major trading partners. TL 195/$1 was used for Parts III and IV of this report. FISCAL YEAR Republic of Turkey March 1 to February 28 (through 1981) March 1 to December 31 (1982) January 1 to December 31 (from Jan. 1, 1983) LIST OF ABBREVIATIONS ha - hectare. DSI - General Directorate of State Hydraulic Works of the Ministry of Power and Natural Resources. IAEE - Igdir-Aksu-Eregli-Ercis. ICB - International Competitive Bidding. O&M - Operation and Maintenance. PPAR - Project Performance Audit Report. SAL - Structural Adjustment Loan. SEE - State Economic Enterprise. TCZB - Agricultural Bank of Turkey. TOPRAKSU - General Directorate of Land and Water Conservation of the Ministry of Village Affairs.  FOR OFFICIAL USE ONLY TURKEY IGDIR-AKSU-EREGLI-ERCIS(IAEE) IRRIGATION PROJECT Borrower: Republic of Turkey. Beneficiaries: General Directorate of State Hydraulic Works (DSI). General Directorate of Land and Water Conservation (TOPRAKSU). General Directorate of Agricultural Affairs. Amount: US$115.3 million (including capitalized front-end fee). Terms: Fifteen years including five years of grace, with standard variable interest rate. Project The project supports the Government's efforts to accelerate Description: completion of priority irrigation schemes. Four subprojects have been selected: Igdir, Aksu, Eregli and Ercis (IAEE) and for each the project would assist in financing (i) completion of irrigation and drainage infrastructure; (ii) on-farm development works; (iii) strengthening of the extension system; (iv) operation and maintenance equipment; and (v) staff training. The project would also include preparation of an irrigation investment master plan and strategy review. Benefits and At full development, about 113,000 hectares (net) will Risks benefit from new or more efficient and secure irrigation, and improved extension services. About 25,000 farm families will have their average net incomes increased to about 2.5 times their income without the project. About 20,000 more people will find temporary employment during the three months of peak farm labor. Incremental annual agricultural production is estimated at about $107 million equivalent in 1982 prices. The irrigation strategy review is expected to lead to a significant improvement in the Government's investment priorities and implementation capabilities in this subsector. There are no unusual technical risks. The major risk is that inadequate budgetary support could delay project implementation. Arrangements for an annual review of the local currency budget should give the Bank an early opportunity to press for additional funding, if necessary, and the establishment of a revolving fund for payments on civil works contracts should facilitate timely payments to contractors. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii- ----- $Million Equivalent ---- Estimated Project Costs: Local Foreign Total Main irrigation & drainage works 54.5 36.5 91.0 On-farm development works 33.6 19.1 52.7 Machinery & equipment 7.3 28.3 35.6 Engineering 14.4 - 14.4 Land acquisition 15.7 - 15.7 Buildings 1.0 0.3 1.3 Training and consultants - 0.6 0.6 O & M main works 8.1 2.7 10.8 Extension services (operation) 1.3 1.1 2.4 Total Base Cost 135.9 88.6 224.5 Physical contingencies 16.5 11.4 27.9 Price contingencies 24.3 15.0 39.3 Total Project Cost 176.7 /1 115.0 291.7/1 Front-end fee - 0.3 0.3 Total Financing Required 176.7 115.3 292.0 Financing Plan: Local Foreign Total Bank - 115.3 115.3 Government 176.7 - 176.7 Total 176.7 115.3 292.0 Estimated Bank Disbursements: --------------$Million-------------- Bank FY 1984 1985 1986 1987 1988 1989 Annual 9.8 11.5 40.8 23.6 18.6 11.0 Cumulative 9.8 21.3 62.1 85.7 104.3 115.3 Economic Rate of Return: 20 percent. Appraisal Report: 4299-TU dated May 13, 1983. /1 Includes about $6.6 million equivalent of taxes and duties.  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TURKEY FOR THE IGDIR-AKSU-EREGLI-ERCIS (IAEE) IRRIGATION PROJECT 1. I submit the following report and recommendation on a proposed loan to the Republic of Turkey for the equivalent of US$115.3 million (including capitalized front-end fee) to help finance completion of four irrigation subprojects. The loan would have a term of 15 years including 5 years grace at the standard variable interest rate. PART I - THE ECONOMY 2. A report entitled "Turkey: Policies and Prospects for Growth" (No. 2657a-TU) and the Postscript thereto, were distributed to the Executive Directors in December 1979 and March 1980, respectively. Updating of economic prospects has since been undertaken through the continuing work on structural adjustment loans (SALs) to Turkey and several special economic missions. The report of a mission to evaluate the investment program and entitled "Turkey: Public Sector Investment Review" (No. 3472-TU) was distributed to the Executive Directors in December 1981. The report of a mission to review Turkey's industrialization and trade strategy entitled "Turkey: Industrialization and Trade Strategy" (No. 3641-TU), was distributed to the Executive Directors in March 1982. The report of a mission to review energy sector policies entitled "Turkey: Issues and Options in the Energy Sector" (No. 3877-TU) was distributed to the Executive Directors in March 1983. Missions to review recent economic developments and analyse the medium-term prospects, to study the agricultural sector and the financial system visited Turkey at various times in 1982. Their findings are reflected in this section. 3. Turkey is about as big as France and Germany combined, with a population of around 46 million and an estimated GNP per capita of US$1540. The density of population is low (78 per square kilometer of agricultural land), and about 45 percent live in urban centres. Although population growth is below the median for middle-income countries (2.2 percent per annum), and despite rapid economic growth in the mid-1970s as well as substantial emigration of workers (to Western Europe and more recently, to the Middle East), the employment situation has deteriorated steadily with an unemployment rate currently about 16 percent. There is, however, little or no absolute poverty, although income distribution is relatively skewed. There are also considerable regional differences and large rural-urban disparities. Recent data indicate a probable worsening in income distribution, especially of wage and salary earners, and a sharp real decline in the minimum wage. Educational enrollments have expanded greatly but the rate of adult literacy remains relative low (60 percent in 1975).  - 2- Development Strategy Prior to 1980 4s. Turkish development strategy during the 1960s and 1970s aimed at rapid growth through high rates of investment with the main emphasis on industrialization. Import substitution was favored over exports, with State Economic Enterprises (SEEs) playing an important role in the industrialization strategy as well as in regional development. These policies, supported by agricultural expansion and growing workers' remittances, helped to bring about a favorable growth record throughout the First and Second Plan periods (1963-72). A continuation of these policies in the face of the various exogenous shocks of the 1970s, including the rise in world oil prices and stagflation in the OECD economies, helpted to maintain growth well into the 1970s, but finally proved unsustainable. 5. To maintain its growth momentum in the Third Plan (1973-77), Turkey financed a large part of its investment and import requirements through reserve decumulation and heavy external borrowing, particularly short-term. The rapid GNP growth, averaging around 7.7 percent per year in 1973-76, came to an abrupt halt in mid-1977 as the massive external debt burden led to a sharp deterioration in credit-worthiness, severe shortages of imports and disruptions in industrial production with a rise in urban unemployment; GNP growth slowed down sharply to 4.0 percent in 1977 and to a negative figure in 1979. At the same time, domestic inflation accelerated from 24 percent in 1977 to an average of 64 percent in 1979. 6. By the end of 1979, the rate of domestic inflation had reached over 100 percent and had become an issue of critical importance. Although international price increases and domestic cost-push factors influenced the inflationary process, as substantial monetary expansion was the main cause. The monetary imbalances originated mainly from the Government's budget deficits and the huge financing requirements of the SEEs. Political and social unrest aggravated the economic difficulties. It was in these exceptional circumstances that the January 1980 reform measures were adopted. The Government's New Policy Priorities and Actions 7. The Government's program for stabilization and restructuring of the Turkish economy was initiated in January 1980 and is now entering its fourth year. The program has involved policy measures which have effects both in the short- and medium-term. In an effort to stabilize the crisis situation, a series of urgent measures were introduced to restrict domestic demand. These measures included enforcing tight credit ceilings by the Central Bank, reducing the budget deficit through expenditure control and increased taxation, and restraining growth of wages and salaries. Over the medium-term, the program is designed to restore a better balance between the public and private sectors of the economy and achieve sustainable growth. The key elements of this program are: the adoption of a realistic and flexible exchange rate and incentives to encourage producers to export; deregulation of interest rates to reflect market conditions and encourage private savings; the strengthening of public finances through tax reform; measures to improve institutional efficiency in key sectors; a rationalization of the public investment program; and a reform of the SEEs designed to reduce their burden on the budget and improve their efficiency.  - 3 - 8. The adjustment program, which has been supported by the Bank through three structural adjustment loans, involves far-reaching changes affecting all facets of the Turkish economy. It entails substantial changes in attitudes, institutions, and the legal and policy framework, all of which take time and face considerable resistance. In view of the severity of the crisis, and the urgent need to bring down inflation and stabilize the balance of payments as quickly as possible, the Government accepted the need for a temporary sacrifice of growth and social objectives. Drastic structural changes were made in the operation of the exchange rate regime, the tax system, interest rate policy, export strategy, the SEE sector and public investment policy. 9. The implementation of the program is being carried out by a military regime which assumed power in September 1980 following a period of sustained unrest, terrorism and deterioration in the parliamentary process. This Government, like previous military regimes in 1960-61 and 1971-73, has emphasized its commitment to restore civilian rule. A Consultative Assembly was set up to draft a new constitution, which was overwhelmingly endorsed in a nationwide referendum in November 1982. New election and party laws are expected to be promulgated soon, and parliamentary elections are scheduled for October 1983. Effects of the Structural Adjustment Process -- 1980-83 10. The Turkish economy has shown an impressive response to the program launched in 1980, and in many cases actual performance has met or exceeded the Government's own targets. Real GNP, after falling for two consecutive years, expanded by 4.2 percent in 1981 and 4.4 percent in 1982. Growth has been mainly export-led, with less than one quarter of the growth in 1982 due to domestic demand. Demand for consumption increased by 3 percent while fixed investment grew at a modest 4.1 percent (both in real terms) in 1982, and depletion of inventories helped to expand supply. Public investment grew significantly slower than private investment, thus reversing the trend of previous years. However, unemployment continued to grow in 1981 and 1982, as employment opportunities did not increase fast enough to absorb the expansion of the labor force. 11. Through a combination of fiscal, monetary and income policies, the Government has been remarkably successful in reducing the rate of inflation. After peaking at 107 percent in 1980, the annual average rate of increase in the wholesale price index declined to 37 percent in 1981 and around 25 percent in 1982, which was the program target. However, the degree of credit restraint needed to reduce inflation this rapidly, has had a marked effect on liquidity in the economy and has helped to maintain interest rates at high real levels. 12. Commercial bank interest rates which were deregulated in July 1980 have increased substantially; with inflation gradually coming down, they are now markedly positive in real terms. As a result, total bank deposits increased by 72 percent in 1980 over 1979, and in 1981 this trend accelerated, with total deposits growing by 104 percent and time deposits by 263 percent. Growth in deposits slowed somewhat in 1982, and the bankruptcy in late June 1982 of a major non-bank financial institution shook depositor confidence and  - 4 - was followed by a shift of funds into the larger banks. While the Government has averted an immediate crisis in the banking sector, additional actions to reform and strengthen the financial sector as a whole are urgently required. Tbe Government is at present preparing a new banking law which aims to strengthen the equity position and management of banks. 13. While positive real interest rates have provided an incentive to save, they have also meant high borrowing costs. The current real interest rate for non-preferential credits is about 28 percent. These high interest rates, together with the limited availability of credit, have led to considerable liquidity problems for the private business sector, particularly for businesses supplying the domestic market. The banks have taken steps to lower rates on deposits and reduce the tax on interest received by banks with the aim of reducing interest on credit. But the liquidity problem of the private business sector is compounded by under-capitalization which had been erncouraged by easy access to cheap bank credit in the past. Tax changes and other measures are under preparation to encourage the corporate sector to raise paid-up capital to levels commensurate with those in other countries. 14. There has been encouraging progress in the fiscal area. The budget deficit was reduced from 4.6 percent of GNP in 1980 to 1.2 percent in 1982. Government expenditures as a percentage of GNP declined from 22.6 percent in 1981 to 21.5 percent in 1982, but the impact on the deficit was offset by a slower growth in revenues than programmed. The SEE accounts showed a marked improvement, with net profits climbing to 0.5 percent of GNP in 1982 from 0.1 percent in 1981 and their financing requirements falling from 8.8 percent of GNP in 1981 to 5.7 percent in 1982. Moreover, supplementary appropriations were cancelled. Public sector borrowing requirements dropped from a level of 6.,5 percent of GNP in 1981 to 5.2 percent in 1982. 15. On the external account, the flexible exchange rate policy under which the Turkish lira has been adjusted daily since May 1981, together with the new export-oriented policies, led to an unprecedented export growth in 1981 when exports amounted to US$4.7 billion, or 63 percent higher in dollar terms than the 1980 level. Increases were concentrated in manufactured goods which experienced a rise of nearly 120 percent; product groups with the largest increases included textiles, clothing, cement, iron/steel, and non-electrical equipment, with the Middle East becoming an increasingly important market. Exports in 1982 reached US$5.75 billion, about 22 percent increase over 1981, despite a significant decline in export prices, particularly prices of agricultural products. As in the previous year, manufactured exports were the major source of expansion, as exporters continued to make inroads into the Middle East. 115. A new and rapidly growing source of foreign exchange is income earned from construction contracts (with a gross value of around US$11 billion in 1982) in the Middle East and North African countries. These activities are also expected to add to the normal flow of worker remittances, which remained strong throughout 1981, although declining slightly in 1982, reflecting the appreciation of the US dollar vis-a-vis European currencies as well as the iimpact of the recession in Western Europe.  17. Imports declined in dollar terms by 2.3 percent in 1982 compared to 1981, due mainly to weaker prices of oil and raw material imports, a stronger US dollar, a reduction in stocks and the elimination of a risk premium previously paid by Turkish importers. As a result of these developments, the current account balance showed a significant improvement in 1981 and 1982, with the deficit reduced from 5.6 percent of GNP in 1980 to 3.5 percent in 1981 and about 1.7 percent in 1982, well below program targets. By the end of 1981, outstanding external disbursed debt amounted to US$17.5 billion equivalent or about 30 percent of GNP. Multilateral agencies and official bilateral sources accounted for about two-thirds of the total outstanding. Of the total, only 12 percent constituted short-term debt, a marked contrast to the position in 1978 when short-term debt accounted for half of total outstanding debt. 18. A modest pickup of growth (4.8 percent) is anticipated in 1983 concurrent with a slowdown of inflation (to about 20 percent), based on a slight recovery in private investment and higher capacity utilization rates. The current account deficit is expected to decrease to US$870 million in 1983 from US$1 billion in 1982, representing a slight fall in relation to GNP (1.5 percent as against 1.7 percent). These results are based on a 17 percent projected growth in exports, a marginal improvement in workers' remittances, (both predicated on a revival of growth in the industrial economies) and a 13 percent growth in imports (required by the upturn in domestic demand). Medium-term Prospects 19. It is expected that the draft Fifth Five Year Development Plan (1984-1988) will be completed by mid-1983. Projections prepared by the recent Economic Mission indicate the need for a continuation of the stabilization program until 1985, which can be followed by a growth strategy aiming at about 6-6.5 percent per annum GDP growth consistent with a manageable balance of payments. 20. Two basic assumptions on the sustainability of export growth and on fiscal discipline have guided the projections. The continued growth of exports is based on the view that conditions that have made possible the 1981-82 upsurge are not temporary. Specifically, it assumes continuation of a flexible exchange rate policy, export incentives and import liberalization. Secondly, it also assumes that the monetary and fiscal policy restraints will not be relaxed to a point that will revive inflation, thus disrupting the basic shift in development strategy. 21. The projections of key economic variables for the period 1983-1990 are presented in Table below. Merchandise exports are projected to continue to grow at 9.5 percent in real terms into the late 1980s on the basis of a continuation of present policies for export promotion. Such a scenario would also require improvement in the pace of import liberalization in order to reduce the profit bias against exports.  -6- Table 1: Turkey - Projection of Selected Economic Indicators 1981 1982 1983 1985 1990 Average Annual Real Growth Rate Units Actual Estimte Program- Projected 1981 1982 1982-85 1985-90 GDP 1980 TL b 4518 4717 4943 5455 7349 4.4 4.4 5.0 6.1 Consumption " 3611 3757 3943 4310 5716 1.9 4.1 4.7 5.8 Fixed Investment " 898 924 977 1129 1617 4.2 3.0 4.9 7.4 Exports of Goods Current $ m 4703 5746 6800 9811 21505 79.0 23.0 8.6 9.5 Imports of Goods " 8933 8735 9697 12825 27433 10.2 -4.1 7.7 9.1 Trade Balance " -4230 -2989 -2897 -3014 -5928 Current Account Balance Current a m -2089 -1035 -870 -485 -1757 Ratios Investment/GDP S 24.7 22.3 22.2 22.7 24.0 Savings/GDP S 18.9 19.0 19.4 20.7 21.9 Exports of Goods/GDP S 8.9 10.5 10.6 11.6 13.5 Current Account Deficit/GDP S -3.5 -1.7 -1.5 -0.8 -1.8 Debt Service Ratio a/ S 13.8 24.2 20.6 20.6 18.1 Public Fixed Investment/ S 60.9 60.6 60.3 57.5 50.0 Total Fixed Investment a/ Total Debt Service including Debt Relief - Exports of Goods and NFS plus Workers' Remittances. Source: State Planning Organization and IBRD Projections. 22. Merchandise imports are projected to grow slowly in real terms through 1984 and then to pick up from 7-8 percent to an average of a little over 9 percent for the 1985-90 period in line with the growth of demand. 23. The current account balance, under these assumptions, would show a decreasing deficit for 1982-85 as stabilization curtails imports while encouraging exports. As growth sets in, the trend would be reversed for the 1985-90 period, and Turkey's current account deficit would increase again. The terminal year 1990 would show a deficit of US$1.8 billion as compared to a 1985 projected deficit of US$485 million. 24. The projected capital account would remain manageable throughout the projection period given the need to restrain the growth of debt and maintain a reasonable debt service ratio. This would permit Turkey to meet the amortization and interest payments arising from the US$9.6 billion of debts rescheduled between 1978-82 and maintain an exchange reserve equivalent to two months' imports. 25. Consistent with this scenario, the projections indicate a GDP growth of 5 percent per annum for 1982-85 (stabilization period), and a higher figure of 6.1 percent per annum for 1985-90 (growth period). Achievement of these growth rates will be necessarily dependent on the growth of the productive sectors, namely agriculture and manufacturing. The achievement of sectoral growth will depend to a large extent on the Government's determination to render the public sector more efficient and to create a more favorable investment climate for the private sector.  26. The medium-term scenario presented above assumes an increasingly important role for private sector investment in line with the policy of rationalizing public sector investment in the manufacturing sector. Accordingly, private investment is expected to grow at an average annual rate of 9.6 percent during 1982-85 and 11 percent during 1985-90. As a corollary, the real growth of public investment will slow down from a high of 7.8 percent per annum during 1980-82 to a more moderate 5.0 percent during 1982-85 and eventually to 4.4 percent per annum for 1985-90. This is consistent with the framework of achieving the medium-term goal of an equal balance in the ratio of private and public fixed investment by 1990. Creditworthiness 27. At the end of 1978, Turkey faced an overwhelming debt burden of US$7.5 billion in short-term debt and US$6.8 billion of medium- and long-term debt. Turkey was faced with service payment ohligations (mostly on short-term debt) of US$5.1 billion (including arrears), or nearly three times the value of merchandise exports in 1977. Following the resolution of the 1978 debt crisis, Turkey pursued a very conservative policy of external borrowing which was restricted almost entirely to long-term borrowing. Much of this was arranged through the OECD Consortium for Turkey and was extended on concessional terms. Also, between 1978-1980 Turkey rescheduled some US$9.6 billion of outstanding obligations through a series of rescheduling arrangements concluded with official and commercial creditors. Approximately US$6.0 billion of short-term debt, including US$2.6 billion in convertible Turkish lira deposits and bankers credits and US$1.2 billion of non-guaranteed suppliers credits, were consolidated into medium-term loans or partially converted into Turkish lira obligations. As a result of the these measures, short-term debt as a percentage of total debt outstanding fell from 51 percent in 1978 to 12.5 percent in 1981. Inflows were mostly from official sources -- major creditors being the OECD countries, the World Bank and the IMF. Of the total debt outstanding at end-1981, 87 percent constituted medium- and long-term debt. Based on the growth scenario outlined earlier, debt outstanding and disbursed as a percent of GDP is projected to rise from 28 percent in 1981 to 31 percent in 1982 and then fall to 29 percent in 1985 and 26 percent in 1990. 28. Debt service obligations are likely to be high over the coming years. Accordingly, the debt service ratio is projected to increase to 24.2 percent in 1982 from about 14 percent in 1981 as a result of a large repayment of previously rescheduled debt under the earlier OECD agreements. Projections beyond 1982 show a decline of the debt service ratio to 19.4 percent in 1984, an increase to 20.6 percent in 1985 (again on account of repayments of rescheduled debt), and then a fall to 18.1 percent in 1990. The debt burden should remain manageable, provided current policies are successfully implemented, the export drive is sustained, and Turkey continues to receive further international support from private and official donors. 29. On all aspects of economic analysis, the IMF and the Bank have coordinated closely with each other, and Turkey continues to be in good standing with the IMF. A three-year standby arrangement in an amount equivalent to SDR 1,250 million was approved by the IMF's Board and became effective on June 18, 1980. Under the arrangement, Turkey has thus far made ten purchases totalling SDR 1,060 million. The present standby is to expire on June 17, 1983 and a one year extention is being sought by the Turkish authorities.  - 8 - PART II - BANK GROUP OPERATIONS IN TURKEY 30. Through May 31, 1983 the Bank/IDA have lent US$3,939 million to Turkey, through 71 projects. Agriculture accounts for 18 percent of funds lent, industry and DFCs for 34 percent, power for 13 percent, structural adjustment and program loans for 26 percent, and urban development, transportation, education and tourism for the remaining 9 percent. As of March 31, 1983, IFC commitments to Turkey totalled about US$236 million, of which about $82 million were still held by IFC. Annex II provides a summary statement of Bank loans, IDA credits and IFC investments as of March 31, 1983, with notes on the status of ongoing projects. 31. The execution of Bank-financed projects in the public sector has been slow, due in part to weak management, limited coordination amongst ministries, staffing problems, and the serious external and domestic financial crisis from 1977 to 1979. There has been notable improvement since September 1980. Nevertheless, problems persist in many cases, reflecting difficulties in staffing the public sector at current salaries, over-centralized bureaucratic structures, and continuing constraints on the availability of local funds. The implementation of private sector projects has generally been more satisfactory. Recently, however, the high interest rates for working capital combined with depressed domestic demand and reluctance of investors to take the foreign exchange risk, have led to slow commitments under DFC lending. Disbursements average 53 percent of appraisal estimates (excluding structural adjustment loans) as compared to 55 percent for Tunisia and 45 percent for Morocco. 32. Bank lending is aimed at supporting Turkey's medium-term objectives of redirecting the Turkish economy towards a development path placing more reliance on market forces and adopting a more outward-oriented strategy. These objectives also include increasing domestic savings and reorienting a restrained public investment program to reflect the Government's priorities of completing ongoing projects faster and emphasizing quick-yielding new investments with positive balance of payments impact. The main vehicle for the Bank's operational discussions with the Government has been the structural adjustment lending (SAL) program. Three SALs have so far been approved and a fourth is expected to be ready for Board presentation shortly. 33. Agriculture, industry, transportation and energy will continue to be the key sectors for project lending. In agriculture, projects are expected to emphasize irrigation, credit, and reform of the extension and research services. In industry (including DFCs), the emphasis will he on the promotion of exports, employment, and increasing operational efficiency. Energy projects underway are for power generation based on domestic hydro and lignite resources, as well as enhanced oil recovery and oil and gas exploration. Future projects will emphasize both the oil/gas and coal/lignite sub-sectors. In addition, transportation projects will focus on developing the infrastructure to facilitate exports and improve the efficiency of operations. Projects for industrial training, urban and regional development and public utilities may supplement these efforts.  - 9 - 34. The close macroeconomic and sector dialogue established with the Government in recent years is expected to be pursued. The economic and sector work undertaken recently includes studies of the agricultural and financial sectors. Topics likely to be covered in the future include a review of the next five-year development plan, employment, SEEs, transportation and the agro-industrial subsector. 35. This is the first loan to Turkey to be presented to the Executive Directors this fiscal year. Loans for agricultural credit, power transmission, development of the Thrace gas field, and a fourth loan for structural adjustment are also expected to be ready for Board presentation shortly. Other projects being processed include: technical assistance to SEEs, industrial training, agricultural extension, gas utilization and rehabilitation of the paper industry. 36. The Bank Group's share of the estimated total external debt was 9 percent in 1981, and is expected to grow to about 17 percent by 1985; its share of total debt service payments is projected to increase from about 13 percent in 1981 to about 14 percent in 1985. 37. IFC has invested in synthetic yarns, pulp and paper, glass, aluminum, iron and steel products, meat processing, motor bicycle engines, truck manufacture, piston rings and cylinder liners, and tourism. It has also invested in the Turkish Industrial Development Bank (TSKB). New investment opportunities are being pursued. PART III - THE AGRICULTURAL SECTOR 38. While the importance of the agricultural sector in the economy is declining, it still represents about 20 percent of GDP, about half of export earnings and about 60 percent of civilian employment. The growth rates of agricultural GDP and exports are projected to remain below those for the rest of the economy. Nevertheless, agricultural growth has a significant role to play in providing foreign exchange earnings and employment. 39. Through the 1970s, Turkey's agricultural policies were inward-looking, stressing food self-sufficiency through subsidized inputs and producer prices. This led to relatively rapid growth of production initially, but this could not be maintained due to the strain placed upon the budget and competing demands for resources from the manufacturing sector. An over-valued exchange rate discouraged exporting and exports in 1979 amounted to less than one percent of production. The foreign exchange crisis in the late seventies led to the adoption of new policies in 1980 featuring the maintenance of a realistic exchange rate and reduction of agricultural subsidies. These policies, combined with improved export incentives, led to an increase in agricultural export earnings in 1980 and 1981 at an annual average rate of 29 percent. This trend is expected to continue, although at a less rapid rate, over the next few years. The rate of growth of agricultural production fell initially with the reduction of subsidies, but has rebounded in 1982 due to good weather and an adjustment by farmers to a more market-oriented farming environment.  - 10 - 4-0. The possibilities for growth through expansion of the cultivable area were largely exhausted by the mid-1970s. Growth must now come primarily from increased productivity and changing the crop mixture to reflect better rurkey's comparative advantage. The demands of an export oriented approach imply a change of emphasis from food self-sufficiency to increased net agricultural contribution to the balance of trade, and thus food imports must increase if food consumers are not to be penalized. Increased productivity will require expansion in the irrigated area through increased efficiency of The implementing agencies, better extension and research programs, and i:ncreased imports of improved seeds and appropriately-sized equipment. Other important issues in the sector include improved sector planning, continued progress in reduction of subsidies, increased availability of credit (particularly for small and medium scale farmers), and reform of agricultural SEEs and marketing agencies. With adequate progress on these issues and continued adherence to policies designed to encourage exports, it should be possible for agricultural sector GDP to grow at about 3 percent per year over the next decade. The Irrigation Subsector 4F1. One of the most important opportunities available for increasing agricultural production and employment is through expansion of irrigation. Out of a total cultivated area of about 27.7 million hectares (ha) only about 3 million ha are irrigated and substantial potential exists for increasing the irrigated area. Most of the currently irrigated area is not used very intensively. Most of about 1 million ha of private irrigation schemes is handicapped by unreliable sources of water, use of traditional irrigation methods, lack of land levelling and suboptimal cropping patterns. Of the 2.0 million ha under the command of public irrigation infrastructure, about 0.3 - 0.4 million ha have not yet been fully equipped with on-farm works to make efficient use of the water provided. Finally, part of the area with adequate facilities is inadequately operated leading to low water efficiency and less than optimal yields. 42. Two public agencies are responsible for construction of irrigation facilities. The General Directorate of State Hydraulic Works (DSI) of the Ministry of Power and Natural Resources is responsible for the construction of the basic irrigation infrastructure of large scale projects (requiring water supply of more than 500 liters/second). The General Directorate of Land and Water Conservation (TOPRAKSU) of the Ministry of Village Affairs handles the development of small-scale projects and the construction of on-farm development works on DSI's schemes. These agencies have not been able to contribute fully to agricultural productivity increases because of budget constraints, attempts to work on too many projects, excessive reliance upon force account work, and poor supporting services resulting in slow project completion and limited agricultural benefits. Whereas about 50-60,000 ha were being completed annually by DSI in the early 1970s, this has declined to less than 30,000 ha per year in the last 3-4 years. Similarly TOPRAKSU has recently been able to complete only 20,000 ha per year of small-scale projects, as compared to 45-50,000 ha annually in the early 1970s. TOPRAKSU's backlog of work for on-farm development on DSI's schemes is now about 300-400,000 ha.  - 11 - 43. To meet the 3 percent per year growth target for agricultural GDP, sufficient budgetary allocations will have to be made to these two public construction agencies, and their capability to complete irrigation projects will have to be increased. This particularly applies to TOPRAKSU, considering the magnitude of its work backlog. TOPRAKSU has a theoretical capability to irrigate only 30-50,000 ha/year by force account. Therefore, much more extensive use of contractors under TOPRAKSU's supervision is essential, and could increase the capability to about 100,000 ha/year. To support a public investment program of this magnitude, the following will also be required: (i) a continuation of the emphasis given since 1980 to quickly gestating irrigation investments and completion/rehabilitation of areas presently under the command of existing or nearly completed infrastructure; (ii) the preparation by DSI and TOPRAKSU of a detailed medium-term investment program to establish investment priorities among the various partially completed projects and to develop implementation plans, taking account of financing constraints and availability of staff and equipment; (iii) in parallel with a rapid expansion of the agencies' construction capacity (in particular through a marked increase in the use of private contractors by TOPRAKSU), a corresponding expansion of the agencies' technical and engineering staff to refine their longer term scheduling and planning as well as project identification and evaluation capabilities, accelerate the rate of project prepa- ration and finalization of designs, and expand their construction and operation and maintenance (O & M) training capabilities; (iv) improved measures for recovery of construction and 0 & M costs and collection of on-farm development costs so as to generate additional resources for sustaining further public investments in the subsector and foster more intensive and efficient land use in irrigated areas; and (v) the development of effective agricultural extension services able to introduce irrigated techniques to first time users and to forge a link between applied research and the farmers for the dissemination of improved technology. 44. In accordance with the recommendations of the Public Sector Investment Review (para 2), the Government has reoriented its annual irrigation investment budgets to concentrate on projects close to completion. It has also agreed (see para. 58) to complete a detailed irrigation investment master plan embodying the above objectives. In an effort to intensify the use of existing irrigated areas, the Ministry of Agriculture has started a project in 1981 in 15 provinces in the southern and western parts of the country, which aims at introducing a second crop and providing agricultural supporting services in irrigated areas. The Ministry of Agriculture has also started a general reorganization of its extension services which will include an emphasis on improving services to irrigated areas.  - 12 - Water Charges 45. With regard to DSI major irrigation works, legal provision exists for recovery of investment and 0 & M costs. These charges have to be approved by the Council of Ministers. In practice DSI computes the capital charges for completed irrigation works on the basis of recovery over 50 years without interest and without any adjustment for inflation. Moreover, the 0 & M charges approved by the Cabinet have normally been significantly below actual costs. Collection averages less than two-thirds of assessed charges. A one-time 10 percent late penalty surcharge for delinquency of over one year has been insufficient to induce adequate recovery. With respect to TOPRAKSU minor irrigation and on-farm development works, there is currently no legislation permitting cost recovery. 46. The Government has recently taken measures to improve cost recovery. Thle Government has agreed to increase 0 & M charges for DSI works progressively to 100 percent of the previous year's actual 0 & M charges (]oan Agreement, Section 4.05 (a)(i)). For 1983, charges have been increased to cover 37.5 percent of 0 & M costs, and coverage would be increased to 50 percent in 1984, 75 percent in 1985 and 100 percent in 1986. The Government has also agreed, to adjust its capital recovery charge to include interest (loan Agreement, Section 4.05 (a)(ii)) and to institute appropriate legal procedures in cases of delinquency of over 12 months (Loan Agreement, Section 4.05 (b)). In addition, the Government has indicated its intention to seek legislation to increase substantially the penalties for delinquency in payment of such charges. With respect to TOPRAKSU, the Government has agreed (Loan Agreement, Section 4.06) to take necessary action, not later than September 1, 1]984, to cause TOPRAKSU to assess and collect from farmers receiving on-farm development investments under the project, charges sufficient to recover the cost of such investments, including interest, amortized over a period not to exceed 20 years from the completion of such investment. Completion of sucb action is a condition of disbursement for DSI or TOPRAKSU force account work after September 1, 1984, for DSI or TOPRAKSU contracts entered into after September 1, 1984, or for disbursements exceeding $30 million equivalent on DSI contracts (Loan Agreement, Schedule 1, para 4). Since most operation and maintenance for TOPRAKSU investments is carried out by the farmers concerned, no 0 & M charge is considered necessary. 47. In 1981 the Government adopted a sales tax of 5 percent on agricultural products. This is intended to compensate for the difficulty in collection of income taxes on agricultural income. The increase in sales tax collection due to irrigation is estimated to be about equal to current 0 & M costs for DSI works. Performance under Previous Irrigation Projects 48. The Bank and IDA have provided financing for five irrigation projects in Turkey through loans and credits totalling about $159 million. Some of these projects also included power components. All but one have been completed, with the last one (Ceyhan Aslantas - Loan 883-TU and Credit 360-TU of 1973) expected to be completed by December 1983. Aside from components under rural development projects, no irrigation lending has taken place since 1973 due to failure hitherto to agree on adequate measures regarding cost recovery (see paras. 45 and 46). Project Performance Audit Reports (PPARs) on  - 13 - the two projects completed most recently found them to have been generally successful and to have high economic benefits. But, in addition to the issue of cost recovery, the PPARs noted inadequate extension support, initial delays in establishing project implementing units and periodic delays in providing adequate local cost financing as major problems. The proposed project has been designed to take full account of these lessons. In the areas served by the Ceyhan-Aslantas project and the Corum-Cankiri Rural Development Project (Loan 1130-TU, 1975) the extension service is performing well using an improved approach pioneered under several Bank projects. The Government has recognised the need to reorganize and strengthen its extension activities and is developing a plan to introduce the new extension system on a nationwide basis. A first phase extension project is expected to be ready for appraisal this calendar year. Since the proposed project is accelerating on-going works, most of the implementation units already exist. Arrangements are proposed for Bank review of proposed project budget provisions (para 59) which would provide an early warning system and facilitate compliance with Government undertakings to provide adequate financial support for the project. PART IV - THE PROJECT Project History 49. The proposed project originated with the Government's request to the June 1980 Agricultural Sector Identification Mission for Bank financing to assist completion of irrigation schemes under construction. Consideration of the project was made possible by changes in Government investment policy for the irrigation subsector to concentrate resources on a few priority projects to accelerate their completion and by measures taken to improve cost recovery. The proposed project was prepared under the leadership of DSI which coordinated its input with contributions from TOPRAKSU and the Ministry of Agriculture and Forestry, with the assistance of the FAO/World Bank Cooperative Program. The project was appraised in September 1982. A Staff Appraisal Report entitled "Turkey - Igdir-Aksu-Eregli-Ercis (IAEE) Irrigation Project" (No. 4299-TU dated May 13, 1983) is being distributed separately to the Executive Directors. The key features of the proposed project are listed in the Loan and Project Summary and in Annex III. Negotiations took place in Washington in March 1983, with a delegation headed by Mr. Tunc Bilget, Chief Financial and Economic Counselor of the Turkish Embassy in Washington, and including representatives of Treasury, DSI, TOPRAKSU, the Ministry of Village Affairs and the State Planning Office. Final agreement was reached in May 1983. The Project Objectives and Loan Features 50. The proposed project conforms to the Government's strategy for accelerating growth of production through giving priority to completion of irrigation schemes which will bring about quick returns. Government agencies are presently attempting to complete construction of some 79 irrigation schemes involving in excess of 900,000 hectares. Due to budgetary constraints and the attempt to handle too many projects simultaneously, construction periods and project benefits have been delayed. Contractor construction capacity and staff capacity of administering agencies are considered adequate to permit an acceleration of construction if sufficient finance can be made available. The project objective is to accelerate completion of several of  - 14 - those schemes which are nearest to completion, have no technical difficulties to delay completion, do not have a significant energy requirement and are financially attractive and economically viable. Four such irrigation schemes hiave been selected which meet the above criteria and which would bring about 113,000 ha (net) under improved irrigation (from dryland or inadequately irrigated areas) and affect about 25,000 farm families. In addition an irrigation strategy review (para 58) would assist Turkey to design its future irrigation investment program so as to achieve a more rapid increase in .irrigated area. 51. In the selected subprojects all dam construction is either completed or close to completion. The Government has committed itself to provide all required funds and facilities to ensure completion of the remaining work in a timely manner (Loan Agreement, Section 3.01 (b) and (c)(i)). However, additional investments are required to use the available water efficiently. The project would include the construction of additional irrigation canals, intakes, drainage networks, rehabilitation and improvement of existing irrigation and drainage systems, and provision of on-farm developments in the form of land levelling, surface and subsurface drainage, correction of salinity and alkalinity problems, and feeder roads. It would also include strengthening of extension services, equipment for operation and maintenance of the irrigation scbemes, staff training, and preparation of an irrigation strategy review. Independent qualified experts, acceptable to the Bank, would be employed to periodically inspect on an agreed schedule the construction, operation and maintenance of the dams, in accordance with sound engineering practice (Loan Agreement Section 4.03 (b)). Project Components 52. The Igdir Irrigation Scheme would benefit a net area of about 53,000 ha (net) in Eastern Turkey in a valley along the border with USSR. Presently 23,000 ha are irrigated using the Serdarabat Dam which was jointly constructed in 1927 by Turkey and the USSR. The proposed subproject would rehabilitate the existing irrigation system and expand the system by about 30,000 ha, making use of additional water from the Arpacay Storage Dam upstream (also jointly built by Turkey and the USSR). The subproject would also include on-farm development work, feeder roads, and reclamation of about 12,500 ha of saline and alkaline soils. About 14,300 farm families are expected to benefit. Increased production of cereals, sugarbeets, cotton, alfalfa and fruits and vegetables is expected to result from the project. 53. The Aksu Irrigation Scheme would benefit an area of about 23,000 ha in the Mediterranean region near the city of Antalya. About 9,000 ha are currently irrigated using the Aksu Dam (constructed in 1961) but little on-farm work (land leveling or surface drainage) has been carried out. An additional 3,000 ha are currently irrigated using pumps or through the remnants of an old irrigation scheme. The proposed project wTould extend the area irrigated from the Aksu Dam by about 14,000 ha, rehabilitate the existing irrigation system, and provide on-farm works and feeder roads. It would also provide flood protection, since flooded areas of up to 7,000 ha are common. About 5,800 farm families are expected to benefit. Increases in production of wheat, cotton, and fruit and vegetables are expected.  - 15 - 54. The Eregli Irrigation Scheme would benefit an area of about 32,000 ha in Konya province in Central Anatolia. About 14,000 ha are currently irrigated, although inadequately. The Irviz Dam (begun in 1979) is about two-thirds completed and should be in operation in time for the 1985 irrigation season. This will permit expansion of the irrigated area by about 18,000 ha and improvement in the areas currently inadequately irrigated. The subproject would not finance any head or canal works since these are already contracted and construction is already underway. The subproject would include about 17,000 ha of land leveling and drainage works, feeder roads and reclamation of about 4,000 ha of saline and alkaline soils. About 4,360 farm families are expected to benefit. Increased production of fruit, wheat, sugarbeets, and vegetables is expected. 55. The Ercis Irrigation Scheme would benefit an area of about 7,000 ha along side Lake Van in Southeastern Turkey. The subproject area, currently farmed under rainfed conditions, would be irrigated from the Kockopru Dam, which was started in 1979 and is scheduled for completion in 1984. The subproject would include irrigation canals, drainage networks, on farm development, and feeder roads. About 850 farm families are expected to benefit. Increased production of alfalfa, cereals, sugarbeets, and vegetables is expected. Agricultural Extension 56. An agreed extension system would be introduced in the subproject areas (Loan Agreement Section 3.06). Under this system one day of training by district engineers and subject matter specialists would be given to the agricultural technicians every two weeks, to be followed by nine days of field extension work. The training would outline, in accordance with the season, the cropping pattern, and specific agricultural practices to be promoted. The extension services would be strengthened by three or four subject matter specialists for each irrigation scheme and a county agricultural engineer for three of the schemes. A ratio of at least one agricultural technician per 400 farm households would be maintained. The project would include the construction of offices and staff accommodation where appropriate and the provision of field demonstration equipment and vehicles. 57. Training: In order to tailor extension skills to project objectives, the Ministry of Agriculture would, by February 29, 1984, carry out a survey of training needs of extension staff to be assigned in the four irrigation scheme areas. Tbereafter, the Ministry would prepare and submit to the Bank by June 30, 1984 a program for training of extension staff to be assigned to the project areas, and carry out a program acceptable to the Bank for training such staff (Loan Agreement Section 3.07 (b)). Short-term consulting assistance would be provided for analysis of training needs and design of project training programs. In addition about 170 man-months of Bank-approved overseas training would be financed under the project for appropriate staff of DSI, TOPRAKSU and the extension services. 58. Irrigation Strategy Review. Over the past two years the Government's annual investment programs have concentrated resources on those priority projects nearest completion. This policy is being continued under the 1983 investment program. Nevertheless, a further planning exercise is required to  - 16 - establish future investment priorities among the various partially completed projects and to develop implementation plans taking account of financing and implementation constraints. The Government would therefore, by July 31, 1984, prepare under agreed terms of reference, a ten-year irrigation master plan designed to bring the average annual increase in irrigated area during the next 10 years to about 100,000 ha per year, (Loan Agreement, Section 4.04), and would employ specialist consultants to assist its staff in this work (Loan Agreement, Section 3.02). The master plan would be based on a detailed inventory and assessment on a project-by-project basis of existing and projected DSI irrigation and TOPRAKSU on-farm development investments and of financial and implementation constraints. It would include detailed implementation plans for the first five years including additional works required, cost and timing. The master plan is expected to serve as a basis for selection and preparation of future irrigation projects suitable for Bank assistance. Cost Estimates and Financing 59. The estimated total cost of the proposed project is $292 million including $115 million in foreign exchange and about $6.6 million of taxes and duties. The above estimates include an average of about 12 percent physical contingencies and about 16 percent price escalation. (While local costs are expected to increase at a faster rate, the floating TL automatically accommodates the difference between local and foreign inflation.) The proposed Bank Loan of $115.3 million would finance 100% of the foreign exchange costs of the project (about 40% of total costs) plus the front-end fee. The remaining 60% of costs would be provided by the Government. The Bank has reviewed at negotiations the allocations for the various project components included in the 1983 budget and found them to be adequate. For later years the Government would, by September 30 each year, provide to the Bank for comment, an annual updated financing plan giving the proposed budget allocations for the project (and associated dams and facilities), and updated project schedules and cost.estimates (Loan Agreement, Section 3.01 (c)). Consultants services are to be provided for assistance in preparation of the irrigation master plan (about eight man-months) and of project training programs (about one man-month), at an estimated average cost of $12,000 per man-month (including salary, costs, fees, international travel and subsistence). Fellowship costs are estimated at $2,500 per man-month to Europe and $4,000 per man-month to the USA. In order not to interrupt progress on the project, up to $4 million of retroactive financing would be provided for expenditures after January 1, 1983 under contracts which were awarded in accordance with approved procedures. 60. The above cost estimates exclude additional agricultural credit the farmers would require to take full advantage of the irrigation facilities to be provided. This incremental credit required is estimated at about $42.5 million equivalent including about $15 million in foreign exchange and is expected to be provided by the Agricultural Bank of Turkey (TCZB), either directly or through cooperatives. The proposed Second Agricultural Credit Project, expected to be ready for Board presentation shortly, would include funds for financing the estimated foreign excbange component of such credit over a period of four years. The proposed credit project would also include  - 17 - measures to strengthen TCZB's organization and procedures which would facilitate provision of this credit. The Government has agreed to guarantee that agricultural credit would be provided in adequate amounts to meet the incremental requirements of farmers for efficient cultivation of the land receiving new or improved irrigation under the project (Loan Agreement Section 4.07). Implementation 61. Implementation of project components would he the responsibility of the Government agencies concerned, namely DSI, TOPRAKSU, and the Ministry of Agriculture. Since each irrigation scheme represents an acceleration of an on-going program, most of the required implementation organization is already in place. The increased use of private contractors by TOPRAKSU and the project financed training programs would help to improve the implementation capacity of the involved agencies. A coordination committee would be formed by December 31, 1983 in each province served by the project (Loan Agreement Section 3.08 (a)), to be chaired by the provincial Governor and including representatives of DSI, TOPRAKSU, the extension service, and TCZB. These committees would meet at least monthly. Preliminary designs and cost estimates have been prepared by DSI and TOPRAKSU with some assistance from the FAO/World Bank Cooperative Program. DSI and TOPRAKSU would have the responsibility of preparing final designs, cost estimates and bidding documents and have done so for the first year's contracts. These agencies are adequately staffed to prepare the remaining final designs and to supervise construction, operation and maintenance, except for TOPRAKSU staff for the Igdir subproject area, which requires strengthening. A suitably staffed TOPRAKSU project section would be established for the Igdir subproject by December 31, 1983 (Loan Agreement Section 3.08 (b)). Contracting and Procurement 62. All DSI new construction (estimated at $86.9 million equivalent, including price and physical contingencies) and all building construction for the extension service ($1.8 million) would be performed by private contractors. DSI work in rehabilitation of existing irrigation networks ($33.2 million equivalent) would be carried out by force account, since such work can only be accomplished during periods when irrigation services can he interrupted. With respect to TOPRAKSU, at least 75 percent of civil works for land leveling, surface drainage and farms roads would be performed by private contractors, representing a significant change from prior TOPRAKSU practices under which most of such work was done by force account. While private contractors have up until now not been used for TOPRAKSU subsurface drainage work due to the need for specialized equipment, at least 10% of such civil works under the Project would be carried out by private contractors. Contractors would he given special assistance to enter this field through being allowed to use less specialized equipment. In total, about $43.2 million equivalent of TOPRAKSU works would be carried out by contractors and about $30.3 million eauivalent bv force account. About $33.0 million of DSI civil works contracts, including all of such contracts except for the Igdir subproject and one small ($4 million) contract under the Ercis subproject would be awarded through international competitive bidding (ICB). Because of the remoteness and inaccessibility of the area, DSI construction contracts for  - 18 - the Igdir subproject (estimated at about $49.9 million) would be awarded through local bidding procedures acceptable to the Bank. TOPRAKSU and Ministry of Agriculture construction contracts ($44.8 million), which are for small works unlikely to be of interest to international firms, would be awarded through appropriate local bidding procedures. Contracts for vehicles and equipment ($42.0 million) would he awarded through ICB. Equipment tenders would provide for adequate servicing capacity and spare parts within Turkey. Purchases of small items of equipment of value less than $50,000 and not to exceed $250,000 in total for the Project, may be procured off-the-shelf on the basis of at least three offers. 63. The project is expected to be implemented within five years. This is faster than previous irrigation projects in Turkey, but is considered to be a reasonable schedule since the project consists of acceleration of on-going works, the implementation units already exist and the arrangements for prior review of proposed project budget provisions (para. 59) and the establishment of a revolving fund for civil works contracts (para. 64) are expected to facilitate timely provision of adequate financial support for the project. Disbursement and Audit 64. The Bank loan would be disbursed against (i) 50 percent of the costs of civil works executed by contract; (ii) 25 percent of the costs of civil works executed by force account; (iii) 100 percent of foreign expenditure and local expenditure ex-factory and 60 percent of other local expenditure for vehicles and equipment; (iv) 100 percent of foreign expenditure for overseas training, and (v) 100 percent of foreign expenditure for foreign consultants or 75 percent of total expenditure for local consultants. A revolving fund of $4 million equivalent would be established for civil works contracts to avoid the need for the Government to first provide the funds for the full cost of contractor services and then await Bank reimbursement (Loan Agreement, Schedule 5). Completion of necessary action to cause TOPRAKSU to assess and collect water charges on farmers receiving on-farm development investments under the project (para 46) would be a condition of disbursement for DSI or TOPRAKSU force account work after September 1, 1984, for DSI or TOPRAKSU contracts signed after September 1, 1984, or for disbursements exceeding $30 million equivalent on DSI contracts (Loan Agreement, Schedule 1, para 4). 65. DSI, TOPRAKSU and the Ministry of Agriculture would each maintain separate accounts for the project. Staff of the three agencies involved would prepare at the end of each quarter a detailed statement of project expenditures during the period and submit such statement to the Bank within 45 days after the end of each quarter. Such statements would, inter alia, be uised as the basis for Bank review of progress and supervision of costs of force account works. An annual audit would be carried out by the Auditor General's office and submitted to the Bank within nine months of the end of each fiscal year (Loan Agreement, Section 4.02)). O)ther Special Project Features 66. Government Owned Land: Of the 56,300 ha (gross) to be irrigated in the Igdir subproject area, 10,200 ha are Government or village owned land. The prior land reform legislation in Turkey has been repealed, and replacement Legislation has not yet been proposed to the Assembly. Therefore, for the  - 19 - time being, there is no legal provision for the sale of Government land to farmers. The Government intends to have the Government and village owmed land in Igdir Subproject area become the property of the Treasury Department after TOPRAKSU has completed the on-farm development works. The Treasury plans to lease this land for three to five years to, in order of priority, farmers with no land, small landholders, farmers renting or sharecropping, and other farmers in the immediate vicinity of the project area. Most of this land will not be available until 1985 by which time new land reform legislation may bave been passed. The Government has agreed that it would (a) submit to the Bank, by July 1, 1984, a detailed plan for disposition of such land, and (b) lease or sell Government and village owned land irrigated under the Project to farmers under arrangements acceptable to the Bank (Loan Agreement, Section 3.05 (b)). No significant amount of Government owned land is included in the areas of the three other subprojects. International Water Rights 67. No issues of international water rights affect the Aksu, Ercis or Eregli subprojects. However, the Aras River, which provides water for the Igdir subproject, forms the border between Turkey and the USSR, and further downstream the border between Iran and the USSR. There is an international agreement between Turkey and the USSR on the use of the Aras River, which provides that each country has a right to a 50% share of the river flows. Pursuant to this, both countries jointly built in 1927 the Serderabat Diversion Dam, with two intakes dividing the Aras River flows between Turkey and USSR. The countries' representatives meet monthly to discuss operations and maintenance. Recently the two countries jointly built the Arpacay Storage Dam upstream, but it has not yet been put in operation. A supplementary agreement was signed in 1973 governing the use of this water. The Arpacay Dam will store water during winter and spring months to permit increased river flows during the summer, which will be diverted through the Serderabat Diversion Dam. This treaty between Turkey and the USSR satisfactorily deals with the water rights issues for the Igdir subproject. The arrangements in effect since 1960 have led to full utilization of all available water by USSR and Turkey during the growing season. No such treaty exists between Turkey and Iran. But the storage of additional water during the winter (8 percent of the total flow) for release during the growing season appears not to have any significant adverse effects on Iran. These findings were conveyed to Iran and no objections have been received. Benefits and Risks 68. The project, at full development, would lead to improved agricultural practices on 119,000 ha gross of land (112,700 ha net) which will benefit from new or better irrigation. The project is expected to benefit directly over 25,000 farm families. Of these about 23,000 presently own and cultivate land in the project areas, and about 2,000 are expected to start cultivation on Government-owned land to be reclaimed and redistributed or leased in the Igdir scheme. The net disposable farm incomes of these farmers at full development will average about 2.5 times higher than without the project, after taking into account increased water charges (see para. 46). In addition, as a result  - 20 - of the intensification of cropping patterns and practices under the project, the annual demand for seasonal labor will increase; it is estimated that at full development, about 20,000 more people will find temporary employment on farms in the project area during the 3 months of peak farm labor. 69. Full development would be achieved in year 12 of the project (1994). At that time total incremental benefits would amount to about $107 million equivalent in 1982 economic prices. Of this, about 49% would be derived from increased production of fruit and vegetables, 13% from cotton, 12% from sugarbeet, and the remainder from cereals, fodder, oil seeds, tubers and poplar wood. No problem is anticipated in the domestic marketing of most of the additional output. However, at full development the total production of fruit and vegetables from the project area would be quadrupled. During the last decade, the national production of vegetables has increased by about 4% per year, and the production of citrus, apple and apricot by about 5-6% per year. This increase has been partially absorbed by the growing national demand, as well as by rapidly rising exports during the last 2-3 years, mostly towards Middle-Eastern and European countries. Part of the incremental project output would be exported, particularly most of the citrus and early vegetables from the Aksu scheme in the Antalya province, where the World Bank-supported Fruit and Vegetable Project (Loan 1967-TU) is currently assisting in improving production and marketing of these commodities. In this province during recent years the growth in fruit and vegetable production has been matched by private investment in marketing and storage facilities, and increased trucking capacity has permitted a surge in exports, particularly of citrus to the Persian Gulf and Libya. In the medium term however, further expansion of export markets would require improvements in marketing efficiency, packaging and quality control. The marketing organizations to be set up under Loan 1967-TU are intended to assist in bringing about such improvements. 70. Economic rates of return have been calculated for each of the subprojects. Rates of return vary from about 15% for the Ercis subproject to about 30 percent for the Eregli subproject, and average about 20% for the project as a whole. These estimates assume rather conservative rates of progress in introducing improved practices and changing cropping patterns after the introduction of irrigation. If benefits were delayed by two years due to delays in completion of construction, rates of return would still be satisfactory, ranging from about 12 percent for Ercis to about 22 percent for Eregli, and averaging about 16 percent for the project as a whole. Project Risks 71. There are no unusual technical risks associated with the project, and those normally associated with project benefits, costs, development period and implementation delays have been taken into account in sensitivity analyses which demonstrate project viability in the face of any reasonable combination of such risks. On the organizational side, collaboration and cooperation between DSI and TOPRAKSU is already quite satisfactory. The fact that the project would accelerate implementation of on-going subprojects means that the initial delays in setting up implementation units have already been overcome. The only organizational risk is that delays may take place in strengthening  - 21 - the extension service, which would delay adoption of improved farming practices. While this has been a problem in some of the earlier Bank financed irrigation projects, experience under our ongoing projects has been reasonably good and the Government's attitude to the new extension system has moved from acceptance for Bank projects only to endorsement as the intended nationwide extension model. One risk which could reduce project returns and which other Bank-assisted projects in Turkey have faced periodically would be inadequate local budgetary support resulting in delays in construction schedules. To minimize this risk, assurances have been received (see para 59) that the necessary budget will be provided on time and that the Government would, for each year of the implementation period, give the Bank an opportunity to comment on the proposed allocations for the project prior to finalization of the budget. PART V - LEGAL INSTRUMENTS AND AUTHORITY 72. The draft Loan Agreement between the Republic of Turkey and the Bank and the report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement are being distributed to the Executive Directors separately. The special features of the Loan Agreement are referred to in the text and listed in Section III of Annex III. There are no special conditions of loan effectiveness. Completion of necessary action to cause TOPRAKSU to assess and collect water charges from farmers receiving on-farm development works under the project would be a condition of disbursement on some components (para. 46). 73. I am satisfied the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 74. I recommend that the Executive Directors approve the proposed loan. A.W.Clausen President Attachment May 17, 1983 Washington D.C.  -22- ANNEX 1 PagelI o f 5 TABLE 3A TURKEY - SOCIAL INDICATORS DATA SHEET TURKEY REFERENCE GROUPS (WEIGHTED AVlRAGES AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE)- TOTAL 80.6 MOST RECENT MIDDLE INCOME INDUSTRIALIZED AGRICULTURAL 377.4 1960 /b 1970 /b ESTIMATE /b EUROPE MARKET ECONOMIES GNP PER CAPITA (US$) 320.0 580.0 1470.0 2323.9 10328.2 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 249.6 488.4 770.9 2107.4 7277.7 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 27509.0 35321.0 44858.0 URBAN POPULATION (PERCENT OF TOTAL) 29.7 38.4 47.4 47.9 78.0 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 67.1 STATIONARY POPULATION (MILLIONS) 108.5 YEAR STATIONARY POPULATION IS REACHED 2075 POPULATION DENSITY PER SQ. KM. 35.2 45.2 56.2 83.3 138.6 PER SQ. KM. AGRICULTURAL LAND 73.9 92.0 116.2 155.4 509.7 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 41.2 41.0 39.0 31.1 22.7 15-64 YRS. 55.2 54.3 56.5 61.2 65.7 65 YRS. AND ABOVE 3.5 4.7 4.5 7.7 11.6 POPULATION GROWTH RATE (PERCENT) TOTAL 2.8 2.5 2.4 1.6 0.8 URBAN 6.1 5.1 4.5 3.5 1.4 CRUDE BIRTH RATE (PER THOUSAND) 42.8 38.3 32.2 23.6 14.5 CRUDE DEATH RATE (PER THOUSAND) 15.6 12.7 9.6 9.2 9.3 GROSS REPRODUCTION RATE 3.1 2.7 2.1 1.6 0.9 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 65.6 66.6/c USERS (PERCENT OF MARRIED WOMEN) 5.3/d 8.2 38.0/e FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 96.0 100.0 110.0 116.0 111.1 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 115.1 110.5 115.8/f 125.1 130.8 PROTEINS (GRAMS PER DAY) 85.1 80.2 82.7/f 92.7 97.1 OF WHICH ANIMAL AND PULSE 25.0 22.9 24.9/f 35.9 61.3 CHILD (AGES 1-4) MORTALITY RATE 50.0 31.2 21.0 9.2 0.5 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 50.5 56.6 61.8 67.6 73.8 INFANT MORTALITY RATE (PER THOUSAND) 189.5 147.5 122.6 65.1 11.3 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 52.0 75.0/S URBAN .. 51.0 70.0/j RURAL .. 53.0 80.0/. ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. URBAN .. .. 20.0 RURAL .. .. POPULATION PER PHYSICIAN 2799.6 2227.6 1762.5/f 1105.4 620.7 POPULATION PER NURSING PERSON 7492.4/d 1883.8 922.6/f 634.4 246.9 POPULATION PER HOSPITAL BED TOTAL 600.5/h 490.3 503.6/f 286.8 122.0 URBAN 340.8/Ei 313.4 311.07? 192.0 140.6 RURAL 5098.571i 5912.2 ADMISSIONS PER HOSPITAL BED .. 20.2 22.3/f 20.0 17.7 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.7/i 5.9 URBAN .. .. RURAL .. .. AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.4/i 2.2 URBAN 2.0/i 1.9 RURAL 2.7/i .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 29.0 41.1 57.0/1 URBAN .. 78.2 .. RURAL 2.0 18.0 ..  -23- ANNEX 1 Page 2 of 5 TABLE 3A TURKEY -SOCIAL INDICATORS DATA SHEET TURKEY REFERENCE GROUPS (WEIGHTED AVSRAGES - MOST RECENT ESTIMATE)8- MOST RECENT MIDDLE INCOME INDUSTRIALIZED 1960 lb 1970 /b ESTIMATE /b EUROPE MARKET ECONOMIES EDUCATION ADJLSTED ENROLLMENT RATIOS PRIMARY: TOTAL 75.0 110.0 105.0 102.4 101.7 MALE 90.0 124.0 115.0 107.1 103.9 FEMALE 58.0 94.0 96.0 99.0 103.6 SECONDARY: TOTAL 14.0 27.0 34.0 60.2 88.4 MALE 20.0 38.0 46.0 66.4 83.4 FEMALE 8.0 15.0 22.0 54.0 84.2 VOCATIONAL ENROL. (Z OF SECONDARY) 17.7 13.7 17.5/f 31.6 18.2 PUPIL-TEACHER RATIO PRIMARY 45.8 37.8 29.6/f 25.8 20.3 SECONDARY 19.3 27.6 22.8 22.2 16.1 ADULT LITERACY RATE (PERCENT) 38.0 51.3 60.3/1 75.9 98.9 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 1.7 3.9 11.5/j 51.0 338.4 RADIO RECEIVERS PER THOUSAND POPULATION 49.1 87.7 97.6 157.2 1021.7 TV RECEIVERS PER THOL'SAND POPULATION 0.0 1.8 70.7 123.7 403.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 51.3 41.0 88.5 112.3 331.2 CINEMA ANNUAL ATTENDANCE PER CAPITA 1.1 6.7 1.9 4.0 3.6 LABOR IORCE TOTAL LABOR FORCE (THOUSANDS) 13782.1 15828.8 19400.5 FEMALE (PERCENT) 40.2 37.0 36.4 36.6 36.0 AGRICULEURE (PERCENT) 78.5 67.7 53.5 38.7 6.2 INDUSTRY (PERCENT) 11.5 12.1 12.8 25.9 37.8 PARTICIPATION RATE (PERCENT) TOTAL 50.1 44.8 43.2 44.5 45.4 MALE 58.7 55.7 54.3 56.3 58.9 FEMALE 41.2 33.6 31.9 32.8 32.4 ECONOMIC DEPENDENCY RATIO 0.9 1.0 1.0 0.9 0.8 INCOME DISTRIBUTIuN PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 33.0/d 32.8/k HIGHEST 20 PERCENT OF HOUSEHOLDS 61.077 60.67r 56.5/e *- 43.0 LOWEST 20 PERCENT OF HOUSEHOLDS 4.271 2.9Th 3.57 .. 5.5 LOWEST 40 PERCENT OF HOUSEHOLDS 10.67a 9.47T 11.57i .. 16.5 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 342.0 RURAL .. .. 270.0 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. RURAL .. .. 220.0 406.6 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. RU'RAL .... . Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries aong the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent''svtcite, between 1978 and 1980. /c 1974; /d 1963; /s 1973; /f 1977; /. 1976; /h 1962; /i 1965; . 1975; k 1968. May, 1982  -24- ANNEX I Pase. 3of 5 DEFINtTIONS OP SOCAL. INDICATOIS ENem; although the dta ar draw fro Sure generally judged the mest anthoritative aad reliable, It hboild .e he rad that they may net hr inter- netinaily comparable h. a.s. of the lack of tnadardleod definittona and concpts seed by different notsites In collecting the data. The datar. sane themes, safol to docrlbe orders of magitado, indictet t-ods. and caacei - etain majort dif esf--h t.-eem oatie Th' roforonce Sroops are (I) tho san canatcy Stop of dhn nobject coantry sod (2) a Ic.antry Stop wIth ansanhat higher a-erge Iscom than rha cn..ntry goap at the sobjoicootr..yt (eace.yn f. on Eigh Inco- Ol op-rtars" gooopwh.t. "MIddle Income N-rtb Africa aed MidAir taat" Is chosen.. hnaoef etrosger ni-ctraaffinities). In the -nferenco grony dana the avanges ac poplation weighted arithmetic acts for each aicaton ad show only when majoity of the t Itta in a-feo ban data f on that indicator, line. oh a -ovrge of cesotrire amog rhe edicaror depends as tb availability nf data and Is not atto. ostiac mast bo etr-i-nd in ralatlag a-eage of non indlcatn tn another. These -veges ce only asfal to tempering the wise aS one indi.taro at a tier asce the ...atry and inference gaps. AREA (tbhaaand sq.a.) Panalanio.noa Onnnitat SeA - tona.1 a-ha,tcd ntl-Pepalatien (total, Total - Total-f. aa ...e see coPriei. land area and inlad eater; 1979 data-b- ara. ad cara) dividd by the ir ra Itv smeat ofhoapita1 beds AgeiaaItltu - Estimstr of arcltrlaea .and tmepra-ily or peemntly available In pablic asiA private generload specialiod haspitm1 end re- for acepa, p -trs aket and kitchen ga-dee or to lIe tallow; 1979 data. habilitation cetr . Spitls ace esteblishmeat peremstly ettffed by atlea ose paoto. Satblishmeta providing pri-oipally -tuet- GNP PSR CAPtTA (US$) - GNP Per capita -iestat at Icaceatmaket prices. c1- dia caeI remt isIded. gsR1 hospitals. ho-ve, imalade health calated by -emcnesinmthod as World Sank Atlaa (1978-Si basia); 1960. and medicat nnt1 st permnetly staffed by a physician (bat hy 19yt an' d;190 data, medical amaiteotan. nara., midwife. eta.) hicb offer is-patient accem- dation end provide a limited range of medicali faclties Par etatia- ENERGYT CONSUMPTION PER CAPITA - dAnol conoamption of -9aatlenry (cosi tital pneposee arba haspitals teldseos princpaI/grmea hospitals. and ligeite.,ptare natan1 gao and hydn-, lalrend geatherma elc- and nata hespinle. a-a or earsI haspitale and medita1 seA mteitery tr icity) In kilogran of col qivlePan .apit.a; 1960. 1910,..ad 1979 tener. Speialined ha-pita1n are i-ded only ondar ftatl. data. Omsis a pietta Sad - Total e,-hae of edmioios te a- diacharge fto hopitals divde by the na.te of hede. POPUIATION A15D VITAL. STATISTICS Tonal Popolation. Mid-Year (thensada) - A. of JaIy 1; 1960, 1970,. ad 1980 5000Sfti dat., Averag ilso of.Saeeol If.p-ro en aaha-ld - a bl.noa, cad aa-I Urban op iato (pretof total) - Ratia of arha to total Popaation; A aehl eeseo en tidinini aserliving qantere diftfrntdetinit Ion of han ae- may effete -apanaility at data and their main meal. A haa-d- orldger may or -y not he inlded In ameg catre; 1960. 1910, and 1960 date. the heam.ahald foe statietical parposes Porniat!ti.on Ocojonrinne A-etno nnte at "erson pet- ro- total, urban, sad natl - averge ew .P.nlto inya 000 - torren popalaronprjorinac boned on 1900 her of Peneom Per roo In all aba, =n ua ceidcnetional total popa1atian by ago and inc end them motality and fetilityrae.dligs traetively. ein reclde a-emnn atr are and Projeto paamten f metl ty _atr _omyino of htheelvl semen- cacpied p-tn.. in -lte eP'tac at b%irth increasing eithcory' Per capita tanne Aomma to rlectnility (percet at dee11ing)-ttl rbn n oa level, end female lif.e.rpoct .a.y -bailielag at 77.5 year. The para- tov_tioaa.l dnIlieg. wish eleonraity in llivin qantere as percetage meters far fertility rare alc hoe three lI.-I. senaing declise In ef total, urban, and nata dwellings renpoeively. fertility according to incm levelI and past family planning perfermnc.. Each -otry Is than aeoiged foe tthe e nine cboslations of -artatY EDfICATIOIO cd fertility tr-de f c projection parpoee. adjatd Enrollment Ratioa Otat -n papalaion -I In. a stationary poPulation thno Is no grothein Pcir aced- total, mole and female - G-na total, ale amd femal the birthtInt Is eqal to the dooth -ete and alan the ege tratare c- seI=en of llagst th primary - Ie an peretages nf rnpentive _ai_cnsat ThIa inahiev-d only after forttiity Ltae detlime to primay eche-ags. pgepulatian; normlly inllden ahild- aged 6-il rho roplacemet lo-n of colt not -eprd-cio rate, nhe. each g-nortio yearn. hot ndjseted tat diff-rant lengtb o at c ..r tdeion; far of seme rePlaces iteelf -natly. Tho etatinnary popultion n-eewa tatnie withatena ednotine enrolmet any eaned 100 pectoet estimated on the basic of the projected charateristicsof thepopulaion since som papils are below or abor the fotL1 school age.... " inthe yea 2000 and tbe rtet of delinehof fertility rtet to reyl.c.- irnadary7 thn-I ntal., male and femle - Compated an ahev;nendr mont lecel. edocat~~~~~ ~~ionrqaie t leat tour year at apn-ed primery in -tnaton; Yearts-t nory po a Ic is ..achad - The yea when steti-nay ppala-ioe provides gennl venaiaa, or teacher trining intentione far pepile niar will ho couched. sanally of 12 tc 17 years of ago; norms. pandaace cetsea ace generally Pooltin arit eocldod. Par en. ha.- Mid-yea .poya-atla pen qa... kilometer (100 h-ctarm) of va..atiose enrelant (rerloant secondary) - Veta tiosa inetiturto.. .totlar; 1960, 170 and 1979 data, include toohoica, ind-stial, orether pegram eihie operet iodepend- Per s.: ha.aiclturl land - Compatod on bhov tar agrialtocsl land entlyats depantants of -oo,day inatiet'IonF ony l90 970 an 1979 data, yPpll-teanhc coi piay, and Meoodary - Total at-doote earlld In porlaic MeSeucar (prnci -Children (0-14 years). woking-age (15- polesryenecndrlvlsiiedbnarsotehem nte 64 ysnrm), n 'etin (65 yearn and a-e) an pencenrages at aid-peon papa- carnoding rvol.- latina; lOh6. 19d'79, and 1900 data..odlt lipteracy rate (perct) - Literate du1te (able to read ed s-ite) P,~Po.dstion troh ha,te (percent) - total - Aosna grawh taceof a .t.tta mid- aspe-etagoa totl sdalt population, aged 15 yearn an. at yeryplttat tI_ 1950-60. 1960-7i. and 1970-a0. Panoletion iGeth Sat (peccant) -arbea - hAsel g-hwe -ate of orban ypo- COtaOlOf0TIOt lotions f no 1950-60, 1960-7i, and 19 70-S0 snne Cars (pe thoed population) - Paasengec .. car cepise meta trade Bttrh Sate .(per' ...on.d) A- hnl Ine birtha Per iho.o.and of mid-year care matig ea tthan eigt perman; encledasatlcn h.an.m aed papalatis 190 D17. an180dana. militay vehicl.- trade Death Sata (par ibae-d) - Ansel dotha Pen thna-and at aid-yea Sadi Recevrelsttoa d eanaitian) - ALll types nof roonier fat rsdlo pepuaris; 960,19. ed 1999 data. broadoa..te in general pablic per thenosd at popelatioe; enlsdeaan irn oerdacIns Oat-Atge -ab-t at dangbteeacmn ill hea In licensedr ive In -nmttieg and inyear -hen -egiatntan af radio he -ana r-pradoativo penind if she ropo-l.ca. pramsa. tgs-opscifte f-t sets was In Io; data f- or-eon years may net ho tmParabia ai.. riutty rates; a-nlly five-Ayearl.. a,ragr ending in 1960. 1970. ed1950 mast contiam: al=hd licesig i'_niy Pl_sin - ce Pt.ra has (thac:.nds) - A-.osI nanho of acce:ptors TV gae=vt(per teasad Pepolati= ) - TV toreive- far bradeat te of irt-notro deic - adon soepi... cf nat innl amlyPlanin p-ns- gensrn1 pablit Per thanuand population; aldas anlicensd TV -eri-e fail Plran - On- (peccant of maridA sca) - Peretg of -ma Ai cas tries and In yeara wh- r-giteati-of a TV sets -m In affect. woe at child-hearing age (15-44 y-ar) h. seaitth-...ette1 devices to .see Cialation (Par th,-an enralti- - Shows the avcmg cII- all married _oco Is sane ago grup. . cnliai of "dail genera interest newpaper", defined as R periodical PebliCatias deveLad priascily te recording genra -aa It Is nenidered POOP AND0 HUMTIONS nob he daily" if It appeae atleant four time a mesh. Inex of Food Prodoci par C.oe (9971-400) - lodea of pet capite --Ine Cinem AselI Attendac per Capita on Tea - Based en the asbte at p-ad-tiocatal fnd cownditis.. Peodcio ...cloden need and fond aed tiehats ..Id duriog the year incladig admisian te delv-ha. cieLe Is as Iabadar yea basin. C-mditi.. cove primary gooda (e.g. agarcan. and -bile seine.. Insto. of angst) which son dibit and contain cotrina- (e.g. c-fte and tincaroe-olded). Agg-egat prod-ctinof atoah costry In base.d noLABOR PORIt ss-ti-ra avrge producer pric eight,; .1961-65. 1970. and 1900 dora. Total Labo Force (thoseads) - Ocanainally atire Perso.-. innlding Pe apt nny at _alate (pencentofcatreimasta - apated ftra armed tortes and seemlayed hot enclding hoswvn tadests, ett enertgy eqaivalont at ar tood npplia avilable-In cetry pen capita coeig Poplation of all ages. D.efiitio.. In v-io c-mt.i are per day. Available epplies coepriae dcantic prdodatic, impette less net -amparle 1960. 1970 and 1990 dana onpots.sadchogen e aoch no aeplio enlad snial ood erde,femal (earcoot) - Pemle labor facce ss p.eretage at totl labe foene. q=aitien serd infod ronin.g and Icea.. In dintnibhatin. Raqairotgiatr arot Labor forc Is farmig. fo-etay. h-ets and mania veto esim _tediby PFA0 bh..ed an physiological nnde f. an -onml -ct- fighigS an pteretage at total leba fare; 1960. 19.70 nsA1980tdata. vity and helh toadetieg -nit.oanosta tempa_a-, body noights. age indnsery (percent) - Iaboo forte is mining. catrratin mnfacotriag and us dietribasian of ppolatiac, and alb-onig 10 percent tar san tad electricity, mater and gas as p-eretage at tata1 lahor fame; bannehald level; 1961-61. 1970 and 1977 data. 1960, 19 70 and 1080 .data.- Per capita napoy a t proei (gran pe day) -Protein cntnt at pan caPite P-tricipati. Sate (Poret - ai, le, and temale - Participationa oa -opply of fond Per da. a n lyc food Is detod as above. Se- activtty rtes are competed en tatel, male anftmle lebectee as qoiremasta f. oral contale, established by U00A provide f0 atisim perctage of totl, ale and temole popalatios of all ages -eseptivly; ala ofesa 60 gRam of total protein pea day ad 20 grU f sima and 1960, 19g70, and1980' data. Thes ato base.d an ILO's PaniciPaiow rton palen. pn.oeen of which 17 gnm ahoold heanmletein.mea tand- rnflsctag ag-a tnotarn at tie yapatien, and long time tread. A a-d see lase than those of75 g-am of t-t1l pootin and 23 fram of ton t.to ses fran notional n e.. a-ina pn -i no - an aeao ta the -1ci, ponp....d by PAO Ie the Third tEoomi Opeadey Satia -RStin of ppelation anda 15 and 65 and a Worl Pad brry 191-6, 1970 ad1977 dat, oh total laborCoa Per caPita p-ctineapl f a1aialad - Pro tom nayply tf facd do- rivd fomaImle and poceIn Reco Per day; 1961-65, 1970 and 1977 data. INfCOMEt DISTRIBUTION Child (anon"1-4) OnbOt foot -ccnad) - MAcal denh 11,pan thanoad In Perceoncoc of Priv-ta tt (bath is -ch and kind) - Recaiv-d by riches 050 Stoop I~ your, ra children is thm. age grcy; ft or at daveaping aa- 5 Percent, richest 20;percet , p..c..un 20 percet, nod peoest 60 per-ant totem data derived fro life tablee; 1960. l970 cod 1980 data, of h.osebhlda. HEAL.TH POVERTY TAdGEf GOUSOO U!, aEtaetency.at Birth (year) d- boa-.e onabet of Toots of lif e raining TheIfloigetmteaereyapataemaae f povry levels. atbirth; 1960 1970 and 1900 dat.adaol ritrrtdwt ondrbensis Intant ifartlirSaenc thanond) - Ansoal drache ot icfantn eder coo yea Sativ d Abmlcint Povat lace Levl (TOO per -ta.r) - urban sad toal-I of age pe hocdlr its 90 90ad16 aa bauepvryiom ee tthtinn =eelhlowic ini_al aemto Safe Wate (pecnofppltic t oa,uban, sod rura - Nc- atItnaly adqante diet PI.: esetial sa-facd esqaitrats in mat he tpepe(ttl Pebe ..an toal with reanonbhi aces to safe affedable. maeta eapl (P...d tratd .orac wtesor atI ted bat anttainated ttimated Rliatie Pover ty mamee (US$ per raine) - urban an card- mater eah aathat foa prtece-d b-nehalo, spig,ed acitry wall) em_.ta re-i-nv povecty inome levelis n-third fa aveag Pet capita perceatages at the it rapootive rpaPlatiane. In an enaneb o public personal Incta ad the -ontry. lehan leve Le derived from the --ra fountain, on standpat loca.ted not mar than 200 mtotec fmabo- a h ra with odjantant for highen cost of living in, arenace to-idered es being wirhi reasonble. access of that Ion . I rura areas Satimted Popalatian Below Absels.. Povety Intem Level (percet) -ur,ban I.msel access woulId imply then the ha.-e.if. ce meers at the haneheld and nata P-oPet of papsiation (-ca and tar1) wh ee5bslt da not bane to eped a diepr-p-tninete part at the day in fetching the peat. tamdly's art- erode. -Sea E' tstretaDi-rr ieos atpLnain)-ntal, noba, end tota - Nanbe- of peopl (totl than co rr) merved by eacrote diepomal ma percentges at the it ep_ttl_ popaint_na ttoet diposal Ymay inlde the an-ienin anddipsl with cc wiaUt tratet, aS hs_ mnrt and masi-wete by wate-batn mYstem or the aa of pit peivico and mIm PasainecPvIctI Paplta dvddbyewe of pratIiae physi- Unemaic sad Satia atta giel.ini agana qanlta :fre a.m= Ill arhol. tl oninersiy leve. OmmcAnelysia end Projections Ompatat Pessatanee g Ras Pees- Pepetion divided by -sshe at petisgeg Kay 1982 ala ad female gred-eeetn a-ienlongnea patica1 enem and  -25- ~~~~~~~~~~~ANNEX 1 - 25 -Page 4 of 5 TURKEY - COUNTRY DATA Population: 45.5 million (1981) GNP Per Capita: US$1540 (1981) Amount Average Annual Increase (Z) Share of GDP at Market Prices (%) (million US$ (at constant 1980 prices) (at current prices) Indicator at current prices) 1981 1965-70 1970-75 1975-80 1965 1970 1975 1980 NATIONAL ACCOUNTS Gross domestic product /a 57,655 6.6 7.5 2.8 100.0 100.0 100.0 100.0 Agriculture 11,903 3.1 4.4 2.7 30.7 26.4 26.2 21.4 Industry /b 14,218 9.5 9.5 2.8 16.6 17.2 18.0 28.6 Services 28,130 8.2 8.0 3.7 42.9 46.5 46.0 44.3 Consumption 46,717 5.8 7.0 2.7 84.6 82.8 85.2 81.8 Gross investment 14,392 11.7 12.9 0.6 16.7 20.1 23.3 26.4 Exports of goods and NFS 6,372 7.9 7.3 4.4 6.1 5.8 6.1 7.1 Imports of goods and NFS 9,826 11.2 13.8 -3.1 7.4 8.7 14.5 15.2 Gross national savings 12,317 11.6 11.9 2.4 15.8 18.8 18.1 18.3 Average Annual Increase (Z) Composition of Merchandise Trade (%) (at constant 1980 prices) (at current prices) 1972-75 1975-80 1972 1975 1980 MERCHANDISE TRADE /c Merchandise exports 4,703 -6.1 2.8 100.0 100.0 100.0 Primary 2,413 -6.3 4.0 72.6 64.1 64.0 Industrial products 2,290 -5.8 0.9 27.4 35.9 36.0 Merchandise imports 8,933 11.2 1.2 100.0 100.0 100.0 Agriculture and livestock 125 27.9 -23.8 2.2 4.3 0.7 Mining and quarrying 221 17.4 6.8 1.2 1.6 1.8 Petroleum 3,878 5.4 11.0 9.9 17.1 48.8 Machinery and equipment 1,996 14.0 -12.1 45.0 35.6 18.2 Other industrial products 2,713 9.9 4.5 41.7 41.4 30.5 1977 1978 1979 1980 1981 PRICES AND TERMS OF TRADE GDP deflator (1980 - 100) 20.2 29.0 49.4 100.0 141.9 Exchange rate 18.0 24.3 31.1 76.0 111.2 Export price index 63.8 63.0 78.2 100.0 99.3 Import price index 61.2 61.2 71.9 100.0 109.3 Terms of trade index 104.3 102.9 108.8 100.0 90.6 As X of GDP (at current prices) 1965 1970 1975 1980 PUBLIC FINANCE Current revenue 15.0 22.6 22.0 19.8 Current expenditure 10.0 11.8 12.6 11.5 Surplus (+) or deficit (-) -2.0 -2.3 -0.4 -4.8 Investment expenditure 4.7 5.7 4.2 3.9 Transfers 5.0 7.5 5.5 9.2 Foreign financing 1.8 1.6 0.3 0.2 1965-70 1970-75 1975-80 OTHER INDICATORS GNP growth rate (Z) 6.8 7.7 2.6 GNP per capita growth rate (X) 4.1 5.0 0.3 ICOR 2.9 2.9 5.7 Marginal savings rate (X) 28.2 19.5 30.8 Import elasticity 1.7 1.8 -1.3 /a At market prices; components are expressed at factor cost and will not add due to exclusion of net indirect taxes and subsidies. 7W Includes mining and quarrying, manufacturing, and electricity, gas, and water. 7W In accordance with Turkish Government's specifications, which are not compatible with SITC's. EM2DA 2/22/83 (0184I)  ANNEX I -26- Page 5 of S TURKEY - BALANCE OF PAYMENTS, EXf RALCPInTAL. AND DEET /a (million USS at current prices) Population: 45.5 million (1981) GNP Per Capita: US*1540 (1981) Actual Estimate Pro ected 1970 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 BALANCE OF PAYMENTS Net exports of goods & NFS 342 3880 1984 2442 4658 3476 -2021 -1960 -1788 -1771 -1956 Exports of goods & NFS 754 2556 3075 3247 4102 6416 7620 8894 10613 12523 14545 Imports of goods 6 NFS 1096 6436 5059 5689 8760 9892 9641 10853 12402 14293 16501 Workers' remittances 273 982 983 1694 2071 2490 2187 2350 2450 2622 2779 Net transfers 91 12 - - - - - - - - - Current account balance -58 -3572 -1741 -1771 -3207 -2089 -1035 -870 -693 -485 -602 Direct private investment 92 169 147 200 148 129 125 127 131 144 158 Public M&LT (gross) /b 271 997 1017 4321 2354 2188 2076 1690 1593 1487 1671 Amortization on X&LT7b -146 -234 -336 -414 -434 -545 -1230 *1105 -1258 -1783 -2040 Public M6LT (net) /b 125 763 681 3907 1920 1643 846 585 335 -296 -369 Other capital /c 27 2074 1061 -2410 1642 983 264 130 29 924 1151 Change in reserves (- - increase) -186 566 -148 74 -503 -667 -200 28 199 -288 -339 International reserves 612 726 874 800 1303 1970 2076 2049 1850 2138 2477 Reserves as months of imports 7 1 2 2 2 2 2 2 2 2 2 Actual 1972 1977 1978 1979 1980 1981 GROSS DISBURSEMENTS Gross disbursements of M6LT loans 372 759 857 4198 /d 2279 2116 Official grants - - - - 300 Concessional 261 193 228 588 812 522 Bilateral 139 100 129 406 749 499 IDA 4 19 8 3 - - Other multilateral 118 74 91 179 63 23 Non-concessional 111 566 629 3610 /d 1466 1294 Official export credits 1 47 133 250 288 355 IBRD 25 146 165 277 313 454 Other multilateral 27 5 35 15 150 162 Private /d 58 368 296 3068 /d 715 323 EXTERNAL iEBT Debt outstanding and disbursed 2450 4293 6322 10942 13415 13804 Official 2273 3657 3Si 7189 828 8 IBRD 92 512 648 890 1158 1546 IDA 99 181 188 190 189 188 Other 2082 2964 4653 6109 6934 7172 Private 177 636 833 3753 /e 5134 4898 Debt outstanding including undisbursed 3560 7128 9879 14620 16807 17093 DEBT SERVICE Total debt service /e 224 363 428 627 1001 1168 Payments 161 196 264 403 405 510 Interest 63 167 164 224 596 658 Total debt service as X exports of goods * NFS I workers' remittances 11.8 10.3 10.6 12.7 16.2 13.1 Total debt service as 2 GNP 1.3 0.8 0.9 0.9 1.7 2.0 Average interest rate on ne. loans (Z) 4.4 7.7 6.9 11.3 6.5 7.9 Official 4.5 7.7 5.6 3.5 5.5 5.3 Private 6.8 7.8 8.2 13.6 10.6 15.4 Average maturity of new loans (years) 22.1 11.6 13.3 11.1 17.4 15.0 Official 26.0 12.7 15.2 25.1 16.6 16.3 Private 11.0 9.2 7.6 7.1 6.4 4.5 BANK GROUP EXPOSURE (Z) IBRD DOD/total DOD 3.7 11.9 10.2 8.1 8.6 11.2 IBRD disbursements/total gross disbursements 6.7 19.1 18.4 6.5 13.7 25.0 IBRD debt service/total debt service /e 5.1 17.2 19.2 16.8 13.3 14.0 IDA DOD/total DOD 3.9 4.2 3.0 1.7 1.4 1.4 IDA disbursements/total gross disbursements 1.1 2.5 0.9 0.1 - - IDA debt service/total debt service /e 0.4 0.6 0.5 0.4 0.3 0.2 As Z of Debt Outstanding at End of Most Recent Year (1981) TERMS STRUCTURE Maturity structure of debt outstanding (Z) Maturities due within 5 years 37.4 Maturities due within 10 years 76.4 Interest structure of debt outstanding (Z) Interest due within first year 6.5 /a All entries on external debt are defined as in the Bank's Debtor Reporting System (only public and private guaranteed d,!bt). 75 Includes private guaranteed and non-guaranteed debt, debt relief, and grants. /c Includes error. and emissions, and for projected years it includes net IMF, short-tern, and unidentified capital inflows. 7- Includes 52,638 million of consolidated short-tern debt. /e rakes account of debt relief due to debt rescheduling, and excludes interest on short-tern debt and private non-guaranteed. EI2DA 2/:22/83 (0:1841)  -27- ANNEX II Page 1 of 9 STATUS OF BANK GROUP OPERATIONS IN TURKEY STATEMENT OF BANK LOANS AND IDA CREDITS (As of March 31, 1983) Loan Amount ($ millions) Number Year Borrower Purpose Bank IDA Undisbursed Thirty-three loans and fourteen credits fully disbursed 1493.0 177.4 883-TU 1973 Republic of Turkey Ceyhan Aslantas 44.0 8.5 1023-TU 1974 TEK/TKI Elbistan Power 148.0 6.8 1130-TU 1975 Republic of Turkey Rural Development 75.0 18.7 1248-TU 1976 Agriculture Bank of Turkey (TCZB) Agriculture Credit 54.3 26.8 1258-TU 1976 State Pulp and Paper Industry (SEKA) Newsprint 70.0 1.6 1265-TU 1976 Republic of Turkey Livestock III 21.5 6.1 1310-TU 1976 Republic of Turkey Tourism 26.0 15.1 1379-TU 1977 DYB Industry 70.0 7.0 1585-TU 1978 Republic of Turkey Northern Forestry 86.0 50.8 1586-TU 1978 Republic of Turkey Livestock IV 24.0 18.2 1606-TU 1978 Republic of Turkey Erdemir Steel Stage II 95.0 34.2 1741-TU 1979 Republic of Turkey Ports Rehabilitation 75.0 37.0 1742-TU 1979 Republic of Turkey Grain Storage 85.0 81.5 1748-TU 1979 TSKB Industry 60.0 16.6 1754-TU 1979 TSKB Private Sector Textiles 65.0 39.5 1755-TU 1979 SYKB Private Sector Textiles 15.0 10.8 S-15-TU 1979 Republic of Turkey Ankara Air Pollution Control 6.0 5.1 1844-TU 1980 Republic of Turkey Karakaya Hydropower 120.0 95.7 1847-TU 1980 Republic of Turkey Sumerbank Cotton Textiles 83.0 75.2 1862-TU 1980 Republic of Turkey Livestock V 51.0 47.2 1916-TU 1980 Republic of Turkey Petroleum Exploration 25.0 23.0 1917-TU 1980 Republic of Turkey Oil Recovery 62.0 47.1 1952-TU 1981 Republic of Turkey Labor Intensive Industry 40.0 36.2 1967-TU 1981 Republic of Turkey Second Fruit and Vegetables 40.0 39.5 1985-TU 1981 Republic of Turkey Fertilizer Industry Rehabilitation 110.0 100.3 1998-TU 1981 Republic of Turkey State Industrial Enterprise Finance 70.0 65.2 2093-TU 1982 TSKB Export-Oriented Industries 100.0 99.8 2094-TU 1982 Republic of Turkey Erzurum Rural Development 40.0 38.2 2131-TU 1982 Republic of Turkey Second Fertilizer Rehabilitation 44.1 44.1 2137-TU 1982 Republic of Turkey Highway 71.1 69.8 2158-TU 1982 Republic of Turkey Third Structural Adjustment 304.5 104.5 2159-TU 1982 TSKI Istanbul Sewarage 88.1 86.4 Total 3761.6 177.4 1356.5 of which has been repaid 386.2 8.1 Total now outstanding 3375.4 169.3 Amount sold 3.6 of which has been repaid 3.6 - 0 - - 0 - Total now held by Bank and IDA /a 3375.4 169.3 Total undisbursed 1356.5 0 - 1356.5 /a Prior to exchange adjustments.  ANNEX II -28- Page 2 of 9 STATUS OF BANK GROUP OPERATIONS IN TURKEY STATEMENT OF IFC INVESTMENTS (As of March 31, 1983) Fiscal Amount ($ Millions) Year Obligor Type of Business Loan Equity Total 1964 TSKB DFC - 0.92 0.92 1966 SIFAS I Nylon Yarn 0.90 0.47 1.37 1967 TSKB II DFC - 0.34 0.34 1969 TSKB III DFC - 0.41 0.41 1969 SIFAS II Nylon Yarn 1.50 0.43 1.93 1970 Viking I Pulp and Paper 2.50 0.67 3.17 1970 ACS Glass 10.00 1.58 11.58 1971 NASAS Aluminum 7.00 1.37 8.37 1971 SIFAS III Nylon Yarn 0.75 - 0.75 1971 Viking II Pulp and Paper - 0.12 0.12 1972 SIFAS IV Nylon Yarn - 0.52 0.52 1972 TSKB IV DFC - 0.43 0.43 1973 TSKB V DFC 10.00 - 10.00 1973 Akdeniz Tourism 0.33 0.27 0.60 1974 Borusan Steel Pipes 3.60 0.43 4.03 1974 AKSA Textiles 10.00 - 10.00 1975 Kartaltepe Textiles 1.30 - 1.30 1975 Sasa Nylon Yarn 15.00 - 15.00 1975 Aslan Cement 10.60 - 10.60 1975 DOKTAS Steel 7.50 1.37 8.87 1975 TSKB DFC 25.00 1.23 26.23 1976 NASAS Aluminum 1.58 - 1.58 1976 TSKB DFC 25.00 - 25.00 1976 Asil Celik Steel 12.00 2.20 14.20 1977 Borusan Steel Pipes - 0.06 0.06 1978 DOKTAS Steel - 0.09 0.09 1979 Ege Mosan Engines for Mopeds 2.15 - 2.15 1979 ISAS Motor Vehicles & Accessories 8.85 0.45 9.30 1979 Asil Celik Steel - 1.80 1.80 1979 Trakya Cam Glass 33.15 2.84 35.99 1980 TSKB DFC - 1.09 1.09 1980/82 ISAS Motor Vehicles & Accessories - 1.20 1.20 1980 MENSA Textiles and Fibers 4.0 4.0 1981 Kirklareli Cam Sanayii A.S. Glass Tableware 13.09 - 13.09 1982 M.A.N. Motors Motor Vehicles & Accessories 9.07 - 9.07 1982 TSKB DFC - 0.35 0.35 Total Gross Commitments 214.87 20.64 235.51 Less Cancellations, Terminations, Exchange Adjustments, Repayments and Sales 144.80 8.30 153.10 Total Commitments now held by IFC 70.07 12.34 82.41 Total Undisbursed 10.41 0.07 10.48  - 29 - ANNEX II Page 3 of 9 C. STATUS OF PROJECTS IN EXECUTION AS OF March 31, 1983 1/ Ln. and Cr. Nos. 883/360 - Ceyhan Aslantas Multipurpose Project: US$44 million loan and US$30 million credit of March 22, 1973. Effective Date: March 20, 1974. Closing Date: December 31,1983. The project is expected to be substantially completed by the current Closing Date of December 31, 1983. As of March 31, 1983, about $35.5 million has been disbursed of this $44 million loan. Ln. No. 1023 - Elbistan Lignite Mine and Power Project: US$148 million loan of June 28, 1974. Effective Date: June 1, 1976. Closing Date: June 30, 1983. Progress has been made on the power component in line with the measures recommended in February 1982. The civil works contracts have been renegotiated and additional contractors brought in. TEK has delegated site management to STEAG, a German project management firm. The main contractor, Foster Wheeler (FW), has revised the work plan taking into account the use of erection personnel being made available by the main equipment suppliers. The revised work plan concentrates maximum effort in completing Unit No. 1 by end 1984. Units No. 2, No.3 and No. 4 would follow at one year intervals. With the arrangements made through the US EXIM Bank, and the proposed reallocation of an additional US$6.8 million from the IBRD loan, financing for the FW contract through end 1983 is assured. Social infrastructure and salary problems persist. The contract for operation and training for the mining component expires in July 1983. Decision on renewal has not been taken. The contract for mine consulting is continuing. TKI has not negotiated frame contracts for mine equipment maintenance. Maintenance of mine equipment is inadequate. TKI's ability to mine lignite in sufficient quantities to adequately supply the power station (17.6 million tons/a) will be assessed in connection with the appraisal of a supplemental loan tentatively scheduled for September 1983. Ln. No. 1130 - Corum-Cankiri Rural Development: US$75 million loan of June 23, 1975. Effective Date: January 22, 1976. Closing Date: June 30, 1984. Satisfactory progress is being maintained except for delayed payment to contractors by DSI. The Bank has agreed to the Government's request for reallocation of proceeds so as to provide additional funds for short-term credit, which is expected to be sufficient to cover needs until a proposed second agricultural credit project, now scheduled for Board consideration in June 1983, becomes effective. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  -30- ANNEX II Page 4 of 9 Ln. No. 1248 - Agricultural Credit and Agro-industries: US$54.3 million loan of May 5, 1976. Effective Date: May 11, 1977. Closing Date: June 30, 1984. The supervised credit and ferryship components are fully disbursed and the study of TCZB organization and operations has been completed. Due to reluctance of sub-borrowers to assume foreign exchange risk and availability Of other sources of credit without this risk, only 11 percent of the agro-industries component has been disbursed. The Government is considering proposals for dealing with this issue. Ln. No. 1258 - Balikesir Newsprint: US$70 million loan of May 21, 1976. Effective Date: October 15, 1976. Closing Date: December 31, 1982. Although the Closing Date has not been extended, accounts are being kept open pending settlement of final payments. As of March 31, 1983, $68.4 million, or 98 percent of the total loan amount, has been disbursed. A project completion report is under preparation. Ln. No. 1265 - Livestock III: US$21.5 million loan of May 26, 1976. Effective Date: February 25, 1977. Closing Date: March 31, 1984. The Closing Date has been extended to March 31, 1984 to allow for utilization of the remaining $6.8 million of undisbursed loan funds. Project implementation has been satisfactory. However, the increased availability of locally bred offspring of imported cattle at considerably cheaper prices than for comparable directly imported cattle, has caused a serious reduction in the demand for sub-loans. The Bank is currently considering a request from the Government for restructuring all three ongoing livestock projects to include financing for the foreign exchange component of loans for sheep and beef fattening in addition to dairying; locally bred improved cattle and sheep, as well as imported ones; and farm machinery and equipment, livestock housing, pasture and forage production, feeds and other inputs in addition to livestock. Ln. No. 1310 - South Antalya Tourism Infrastructure: US$26 million loan of July 9, 1976. Effective Date: March 1, 1978. Closing Date: December 31, 1983. Project implementation is about two years behind schedule due to initial difficulties relating to land acquisition and project organization. At present most project works are either completed or under advanced implementation. The Closing Date has been extended for the first time by one year to December 31, 1983. As of March 31, 1983, $10.8 million, or 42 percent of the total loan amount, has been disbursed. Ln. No. 1379 DYB (State Investment Bank of Turkey): US$70 million loan of March 23, 1977. Effective Date: July 21, 1977. Closing Date: December, 31, 1982. The Closing Date for this loan has not been extended, but the accounts are being kept open for settlement of final payments. As of March 31, 1983, the undisbursed balance of this loan is $7.0 million.  -31- ANNEX II Page 5 of 9 Ln. No. 1585 - Northern Forestry: US$86.0 million loan of June 5, 1978. Effective Date: October 30, 1978. Closing Date: March 31, 1986. Overall physical achievements are about 60 percent of targets. Local funding, which is almost totally dependent on timber sales, has been inadequate due to a depression in the construction industry. Although equipment procurement is still behind schedule, proposals for foreign equipment procurement have been agreed, providing for initiation of remaining procurement in 1983/84 witb completion of disbursement expected by early 1986. A management consultant to assist the project implementation is expected in Ankara shortly. Ln. No. 1586 - Livestock IV: US$24.0 million loan of June 5, 1978. Effective Date: October 31, 1978. Closing Date: June 30, 1985. Implementation of the supervised credit program is extremely slow due in part to the increased availability of locally bred offspring of imported cattle at considerably cheaper prices than for directly imported cattle. A Government request for restructuring of all three ongoing livestock projects (see Loan No. 1265) is under consideration. Ln. No. 1606 - Erdemir Stage II Steel: US$95.0 million loan of June 30, 1978. Effective Date: July 30, 1979. Closing Date: June 30, 1983. Inflation and the devaluation of the Turkish Lira have caused serious financial problems for the company. Proposals to tackle the situation are being considered by the company and the Government in consultation with the Bank. Implementation of the main components of the original project is one year behind schedule with additional delays now expected on some non-critical support facilities and several additional items recommended by consultants to improve productivity, quality, and efficiency. A financial plan prepared by the company is being reviewed. Extension of the Closing Date to permit utilization of the remaining loan funds is dependent upon development of a satisfactory financial plan. Ln. No. 1741 - Ports Rebabilitation: US$75 million of July 2, 1979. Effective Date: January 22, 1980. Closing Date: June 30, 1983. Cumulative loan disbursements of $38.0 million up to March 31,1983 were only about 51 percent of the total loan amount due to initial delays in tendering, awarding contracts, appointing consultants for port planning study, and finalizing specifications of a 250-ton floating crane. Physical implementation is now progressing satisfactorily. Extension of the Closing Date is under consideration. Ln. No. 1742 - Grain Storage: US$85 million of July 2, 1979. Effective Date: January 21, 1980. Closing Date: June 30, 1985. Prequalification procedures for silo construction contractors are in progress. The Government is currently examining the merits of possible adjustments in the project contents to take account of changes in relative prices and cost increases due to previous delays.  - 32 - ANNEX II Page 6 of 9 Ln. No. 1748 - TSKB XIII (Industrial Development Bank of Turkey): US$60 million of July 12, 1979. Effective Date: October 25, 1979. Closing Date: September 30, 1983. Delays in committing this loan have resulted due to sub-borrowers' reluctance to bear foreign exchange risk and cancellation of loan contracts because of financial distress caused by high interest rates and shortage of Local currency. These financial problems which are endemic in the Turkish private sector have prevented TSKB's serious arrears position from improving. The current Closing Date of September 30, 1983 is not likely to be extended. As of March 31, 1983, about $43.4 million has been disbursed. Lns. Nos. 1754 and 1755 - TSKB (US$65 million) and SYKB (US$15 million) Private Sector Textiles loans of September 17, 1979. Effective Date: February 29, 1980. Closing Date: December 31, 1984. A lower than anticipated level of commitments (about $38 million or 55 percent of forecasts) still prevails due to depressed conditions in the textile industry and the sub-borrowers' reluctance to assume foreign exchange risk. Local consultancy service has been reorganized on schedule, as a private sector joint venture without further need of the Bank's financial support. Ln. No. S-15 - Ankara Air Pollution Engineering: US$6 million loan of December 12, 1979. Effective Date: April 4, 1980. Closing Date: December 31, 1983. Out of the five components of this project, only two (Seyitomer Plant and Air Pollution Monitoring Equipment) have so far been partly implemented, representing US$0.9 million or 15 percent of the total loan amount. The test results from the MTA pilot plant showed that investment in a larger scale pilot plant would not be warranted. The Alternative Technology Study will not be executed since no feasible processes exist for coke or hot briquetting manufacture based on Turkish lignite. The Gas Production Study will be implemented, but the cost for the study might be significantly higher than the appraisal estimate. Revision of the cost estimates and extension of the present Closing Date are under consideration. Ln. No. 1844 - Karakaya Hydropower: US$120 million loan of May 21, 1980. Effective Date: August 15, 1980. Closing Date: December 31, 1988. Implementation after initial delays is now satisfactory. The cash generation covenant was not met for 1982, and is not likely to be met for 1983. This matter is now being pursued with the Government.  -33- ANNEX II Page 7 of 9 Ln. No. 1847 - Sumerbank Textiles Modernization and Rationalization: US$83 million loan of May 28, 1980. Effective Date: February 27, 1981. Closing Date: June 30, 1984. After initial delays of about one year due to delayed loan effectiveness and staffing problems of the project implementation unit, project implementation is now progressing satisfactorily and the costs are within appraisal estimates. The reorganization plan for the Cotton Textile Division was approved by the Sumerbank Board in March 1982. Recruitment of competent personnel for the Cotton Textile Division and the project implementation unit has been hampered by salary limitations on State Economic Enterprises. The situation is expected to improve after the passage of the SEE reform decree. Ln. No. 1862 - Livestock V: US$51 million loan of June 6, 1980. Effective Date: October 22, 1980. Closing Date: June 30, 1987. Progress on the credit component for livestock development, with the exception of boilers, is extremely slow. The Government has decided not to implement the meat processing component due to changes in its investment priorities, and a request has been received to reallocate the funds. Implementation of the animal health and breeding components is reasonably satisfactory. A Government proposal for increasing the types of livestock credit eligible for financing (see Loan No. 1265) is under consideration. Ln. No. 1916 - Petroleum Exploration Project: US$25 million loan of November 24, 1980. Effective Date: June 30, 1981. Closing Date: December 31, 1984. Project implementation is slow due to delay in contracting consulting services and initiating technical studies. Acceptable drilling locations have not yet been identified in southeast Turkey. The Bank has recently approved the Government's request to extend the scope of the loan to include the Thrace basin, which has been found to have a highly attractive potential for hydrocarbon exploration, and to reallocate a portion of the proceeds of the loan to finance computer equipment for higher quality seismic data processing needed for the Thrace program. Progress in separation of TPAO's import-related operations is also behind schedule because of its relation to the broader issues under consideration in the SEE reform legislation. Energy audits for five major industries are currently in progress. Ln. No. 1917 - Bati Raman Enhanced Oil Recovery Field Demonstration Project: US$62 million loan of November 24, 1980. Effective Date: June 30, 1981. Closing Date: December 31, 1984. The project is about one year behind schedule due to initial delays in equipment procurement and delivery. Bids for the enhanced recovery studies for other fields are under review, and the studies are expected to start shortly. The fracturing of the Hamitabat gas field has been completed successfully and has demonstrated the feasibility of full commercial development of the field. Progress in separation of TPAO's import-related operations has also been delayed because of its relation to the broader issues under consideration for the SEE reform legislation.  -34- ANNEX II Page 8 of 9 Ln. No. 1952 - Labor Intensive Industry Project: US$40 million loan of March 13, 1981. Effective Date: June 12, 1981. Closing Date: June 30, 1986. A poor investment climate still continues to hamper loan utilization. As of January 31, 1983, subloans totalling $16.8 million had been approved by SKYB. Ln. No. 1967 - Second Fruit and Vegetable Project: US$40 million loan of April 6, 1981. Effective Date: August 1981. Closing Date: June 30, 1986. Project implementation is proceeding more slowly than projected, but should improve as a result of experience gained to date: all consultants have been engaged and are in place. Three of the four Regional Marketing Corporations will become operational as soon as TCZB's contribution is received in early May 1983. Ln. No. 1985 - Fertilizer Rationalization and Energy Saving Project: US 110 million loan of May 15, 1981. Effective Date: August 28, 1981. Closing Date: December 31, 1986. The project components of AZOT and IGSAS are progressing satisfactorily. GUBRE, one of the three beneficiaries, has not yet signed a contract with an engineering company for project implementation because of changes proposed in the scope of the project by GUBRE management to further improve its economic viability. Ln. No. 1998 - State Industrial Enterprise Finance Project: US$70 million loan of June 3, 1981. Effective Date: August 27, 1981. Closing Date: December 31, 1986. Project implementation is proceeding satisfactorily. The Bank is considering the Government's request for an extension of the deadline for completion of a study of DYB's future role. Ln. No. 2093 - Export-Oriented Industries Project: US$100 million loan of March 5, 1982. Effective Date: May 28, 1982. Closing Date: June 30, 1987. Although the special task force for dealing with problem projects is now functioning relatively effectively, prolonged low capacity utilization rates in industry and high interest rates make a substantial improvement in arrears unlikely in the near future. Demand for direct foreign exchange fixed asset financing has been declining due to reduced private sector investment demand as a result of current economic conditions and the unwillingness of sub-borrowers to bear foreign exchange risk. The technical assistance program for potential exporters has been proceeding on schedule.  -35- ANNEX II Page 9 of 9 Ln. No. 2094 - Erzurum Rural Development Project: US$40 million loan of March 5, 1982. Effective Date: November 24, 1982. Closing Date: June 30, 1987. Since the loan became effective in November 1982, implementation has been on schedule for the irrigation, soil conservation, new roads, plant protection, and veterinary services components. However, progress is slow with extension services and recruitment of consultants, and it has proved difficult to recruit and retain a project manager in Erzurum. Ln. No. 2131 - Second Fertilizer Rationalization Project: US$44.1 million loan of May 13, 1982. Effective Date: April 13, 1983. Closing Date: June 30, 1987. This loan became effective in April 1983. The Government has requested cancellation of Part A of the project which relates to GUBRE, one of the four beneficiary ferti]izer manufacturing companies of the project, which is no longer interested in proceeding with its portion of the project. The total loan amount will accordingly be reduced from $44.1 million to $38 million to reflect this cancellation. The other project components are making satisfactory progress. Ln. No. 2137 - Highway Rehabilitation Project: US$71.1 mi]lion loan of May 13, 1982. Effective Date: August 13, 1982. Closing Date: June 30, 1987. Progress continues to be good. All civil works and procurement contracts have been bid and feasibility studies have been completed for all the remaining road sections included in the loan. Ln. No. 2158 - Structural Adjustment Loan III: US$304.5 million loan of May 28, 1982. Effective Date; July 16, 1982. Closing Date: December 15, 1983. This loan became effective in July 1982. The first tranche of the loan has been fully disbursed. Release of the second tranche is expected to be authorized shortly. Ln. No. 2159 - Istanbul Sewerage Project: US$88.1 million loan of May 28, 1982. Effectuve Date: January 24, 1983. Closing Date: December 31, 1988. This loan became effective in January 1983.  -36- ANNEX III Page 1 of 2 TURKEY - IGDIR-AKSU-EREGLI-ERCIS(IAEE) IRRIGATION PROJECT SUPPLEMENTARY PROJECT DATA SHEET :[,. Timetable of Key Events (a) Time taken by Government to 12 months. prepare project: (September 1981 to September 1982) (b) Agency which prepared the General Directorate of project: State Hydraulic Works (DSI). (c) Project first identified: July 1980 for project 6 concept, July 1981 for specific subprojects. (d) Date of Bank Appraisal Mission: September 1982. (e) Negotiations completed: May 4, 1983. (f) Planned date of effectiveness: September 1983. II. Special Bank Implementation Actions Revolving fund for payment to contractors (para. 64). 111. Special Conditions A. Special Conditions of Disbursement Completion of necessary action to cause TOPRAKSU to assess and collect water charges on farmers receiving on-farm development works under the project would be a condition of disbursement on some project components (para. 46). B. Other Special Conditions (i) Preparation of an irrigation strategy review (para.58); (ii) Increased water charges and penalties for delinquency in payment (para. 46); (iii) Completion and inspection of dams providing water to project facilities (para. 51); (iv) Introduction and maintenance of improved extension system (para. 56);  - 37 - ANNEX III Page 2 of 2 (v) Preparing program for training of extension services staff (para. 57); (vi) Review by the Bank, not later than September 30 each year, of implementation plan and proposed budget allocations (para. 59); (vii) Provision of adequate agricultural credit (para. 60); (viii) Establishment of provincial project coordinating committees (para. 61); (ix) At least 75 percent of civil works for land leveling, surface drainage, and farm roads and at least 10 percent for subsurface drainage to be carried out by contractors (para. 62); and (x) Satisfactory arrangements for leasing or selling Government land to farmers (para. 66).   IBRD 16804 U. S. S. R A3A5 N. _*N C R. ; 2f1\ a 2m A N' - 9_' r---~)C7 \ - - - D o vvbawm t of kS eM IGDIR SCHEME ISEAIS H k ..4- -"AR-45-5EP OF rGYP.h.bil ARA51A k, 4p' _. ti-_ -'- IntErnatlOnal bound-Kio 9-,'999n,o,2~w90~co {>H. h Proposed o--f- -roks and co-pit- onf . ...... ~~~~~~~~~~~~~~~~~~~~~~~~~Unitli M R-,~~~~~~~~~~~~~~~~ c-. c 9- / / q~tcw/ //~Uni.U- Pr-wry ~~~~~~~ /30 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ -d, F E ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~therwse indicted) flcEiTSO /$AAsAX 2R0 Q R AN 2 3 5 0 9 Seonar ~~ - - Internatirnal noondatirs T.- LP, A0 92219L   _____ ____ ____ _____ ____ ____ _____ ____ __ _ BRD8 16859