Romania - Cimpulung Muscel Polyester Project

Report No. 1436-RO FILE COPY Romania: Appraisal of the Cimpulung-Muscel Polyester Project May 24, 1977 Industrial Vrojects Department FOR OFFICIAL USE ONLY U Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Except where otherwise indicated, all figures are quoted in Romanian Lei and US Dollars. For all calculations, the following conversion rate has been used: US$1 - Lei 20 Lei 1 - US$0.05 Lei 1,000 = US$50.00 WEIGHTS AND MEASURES 1 kilogram (kg) - 2.205 pounds (lb) = 1,000 grams 1 metric ton - 1,000 kilograms 1 kilometer (km) = 0.621 miles 1 meter (m) 3 - 39.37 inches 1 cubic meter (m ) - 35.31 cubic feet 1 denier (den) - 1 gram per 9,000-meter length of filament, strand or yarn. PRINCIPAL ABBREVIATIONS AND ACRONYMS USED The Borrower - Banca de Investitii (Investment Bank) The Central, - Centrala Industriala de Fire si Fibre Chimice Savinesti SAVINESTI (Industrial Central for Synthetic Fiber and Yarn) The Enterprise, - Combinatul de Fibre Sintetice Cimpulung-Muscel CIMPULUNG (Cimpulung-Muscel Synthetic Fiber Enterprise) IITPIC - Technological Engineering and Design Institute for Chemical Industry ROMCHIM - Import Agency for Chemical Equipment and Technology under the Ministry of Chemical Industry CIF - Cost, Insurance and Freight FOB - Free on Board TPD - Metric Tons per Day TPY - Metric Tons per Year PES - Polyester DMT - Dimethyl terephtalate TPA - Pure terephtalic acid EG - Ethylene glycol ROMUNIAN FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY ROMANIA APPRAISAL OF THE CIMPULUNG-MUSCEL POLYESTER PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS i I. INTRODUCTION 1 II. THE SYNTHETIC FIBER INDUSTRY IN ROMANIA I A. Chemical Industry Background ................. . 1 B. History and Organization of the Synthetic Fiber Industry .............................. 3 C. The Central and the Enterprise ................ 4 D. Financial Situation and Prospects of the Central .............................. 4 E. The Romanian Financial System ................ . 5 III. MARKET AND MARKETING 6 A. Introduction ..................... 6 B. Background on World Textile Fiber Consumption ....... ......................... 6 C. Fiber Demand Projections and Prospects for Polyester Fibers ................. 9 D. Price Forecast for Polyester Fibers ......... . 10 E. Fiber Production and Consumption in Romania 10 F. The Outlook for Textile Fiber Production and Consumption in Romania ............... .. 11 G. Marketing Arrangements for the Project ....... 14 IV. THE PROJECT 15 A. Project Scope ................................ 15 B. Raw Materials and Utilities .................. 15 C. Ecology ...................................... 15 D. Technology, Employment and Training .... ...... 16 E. Project Implementation ........... ............ 16 V. CAPITAL COST AND FINANCING PLAN 18 A. Project Costs ..................... ...18 B. Working Capital .............. ................ 19 C. Financing Plan ................. .............. 19 D. Procurement ..................... 20 E. Allocation and Disbursement of Bank Loan ..... 21 This report was prepared by Messrs. Antonio S. Tarnawiecki, D. E. Brown, J. F. Rischard and A. Sandig. lhis document has a restricted distribution and may be used by recipients only in the performance of their oMcial duties. It coewints may not otherwis be discloed without World Bonk authorization.  -2- Page No. VI. FINANCIAL ANALYSIS 21 A. Revenue and Operating Cost Estimates ............ 21 B. Financial Projections ........................... 22 C. Financial Return and Risks ...................... 23 D. Fiscal Impact Analysis .................. ........ 23 E. Auditing and Reporting ................. ......... 24 VII. ECONOMIC ANALYSIS 24 A. Economic Rate of Return and Major Risks .... ..... 24 B. Economic Price for Polyester .................... 24 C. Raw Material Costs . ......................... # ... 25 D. Exchange Rate ........................................ 25 E. Capital Costs ................................... 25 F. Other Benefits ........ .......................... 26 VIII. AGREEMENTS 26  -3- ANNEXES 1-1 Glossary of Terms used in the Report 1-2 Units and Conversion Factors used in the Textile Industry 2-1 Organization of the Synthetic Fiber Industry 2-2 Organization Chart of the Savinesti Central 2-3 Proposed Organization Chart of the Cimpulung Enterprise 2-4 Financial Statements of Savinesti 3-1 General Market Background 3-2 The World Fiber Market: Trends and Prospects 3-3 Consumption and Production of Textile Fibers in Romania 3-4 Marketing Arrangements for the Project 4-1 Process Flowsheet 4-2 Environmental Standards 4-3 Description of the Process 4-4 Construction Schedule 5-1 Project Cost and Financing Required 5-2 Incremental Working Capital for the Project 5-3 Disbursement Schedule of IBRD Loan 6-1 Production, Prices and Main Operating Costs 6-2 Projected Income Statements for the Enterprise 6-3 Projected Balance Sheets for the Enterprise 6-4 Projected Sources and Application of Funds Statements 6-5 Financial Projections for the Enterprise 6-6 Financial Rate of Return under varying Assumptions 6-7 Fiscal Impact of the Project 7-1 Economic Projections 7-2 Assumptions made for the Economic Projections and Analysis 7-3 Economic Rate of Return Under varying Assumptions MAP IBRD 12628   ROMANIA CIMPULUNG-MUSCEL POLYESTER PROJECT SUMMARY AND CONCLUSIONS i. This report deals with the appraisal of a project to construct a new synthetic fiber plant with a capacity of 46,700 tons per year (TPY) of polyester to be built at Cimpulung, in the judet (district) of Arges, Romania. The plant is expected to begin commercial production in early 1980 and will increase the country's present synthetic fiber capacity by 4Q%. The feed- stocks will come from existing petrochemical plants and one now under con- struction in the nearby cities of Ploiesti and Pitesti. The project will be owned by the Government and is expected to require financing of about US$136 million, including about US$56.4 million in total foreign exchange. ii. The plant will be operated by a new enterprise (the Cimpulung- Muscel Synthetic Fiber Enterprise) which will be established as part of the Industrial Central for Chemical Fibers and Yarn (the Central), an organiza- tion under the Ministry of Chemical Industries, which also operates the ex- isting synthetic fiber plants at Savinesti and Iasi. The plant is projected to produce 10,500 TPY of cotton-type staple, 10,000 TPY of flax-type staple and 11,000 TPY of wool-type tow and tops but is designed to permit flexibility in the product-mix in line with actual demand. It will produce 15,200 TPY of chips, which will be processed into textile and industrial filament in other Romanian plants. The entire output is mainly destinated for the domestic textile and clothing industries but, in the first four years of operation, about one-fourth may be exported. iii. Romanian textile fiber production and consumption have grown very rapidly--at average annual rates of 18.4% and 9.4% respectively in the last ten years--but the net deficit of fibers has still been increasing and now amounts to more than 100,000 TPY (virtually all due to imported cotton). Production and consumption growth of synthetic fibers during the same period has been even more impressive amounting to about 40% and 27% per year re- spectively. From 1975 through 1985 fiber consumption is projected to grow at a slower pace, with annual rates of 7.1% for all yarn and 12% for synthetics. Production through 1980 is forecast to increase slightly faster than consump- tion, so that the textile fiber deficit would drop to about 90,000 tons. If no new plants were to be built after those now projected, substantial fiber imports would be again required by 1985. However, the Government is expected to initiate new synthetic projects in the early 80's with the objective of maintaining an export position in synthetic fibers and thereby reducing the net fiber deficit further. iv. The project will incorporate up-to-date technology and will be implemented by the Central with the collaboration of the foreign supplier of the main technology/equipment package as well as that of specialized agencies in the Ministry of Chemical Industries: IITPIC, in charge of  - ii - design and engineering of chemical industries, and ROMCHIM, the importing agency for process equipment. The Central's technical staff, as well as those of IITPIC and ROMCHIM, are known to the Bank and their performance is considered satisfactory. The proposed site presents no difficult con- struction problems and is well connected by road and rail to fabricators of equipment (abroad and in Romania), the sources of feedstocks and markets. No major difficulties are therefore foreseen in the implementation, start- up and operation of the project. v. The project will be financed by State funds including the proposed Bank loan of US$50 million which would be passed on to the project by the Investment Bank (the Borrower). The Bank loan would cover about 37% of the total financing including interest during construction and 89% of the direct and indirect foreign exchange required by the project. vi. Disbursements of the Bank loan will be made against goods and services procured following Bank guidelines. Licenses, technical knowhow, engineering and key equipment will be procured as a single package (US$23.6 million). Appropriate advertising and prequalification procedures consis- tent with Bank guidelines have been followed. International competitive bidding (ICB) will also be used for the procurement of materials and other equipment except that international shopping may be followed for process- critical equipment - where only a limited number of suppliers exist - and small procurement packages costing less than US$100,000 equivalent each. The total cost of packages to be procured by international shopping is lim- ited to US$1.8 million. vii. The financial situation of the Central, as well as proforma finan- cial statements for both the Central and the new enterprise to be put in charge of the project, are satisfactory. The economic rate of return has been estimated at 15.6% and the project would save about US$30 million annually in foreign exchange. Additionally, the project will link already existing upstream petrochemical industries and downstream textile and clothing plants and, through the local fabrication of equipment, help the further development of the Romanian machine-building industry. viii. The synthetic fiber industry is already well established in Romania as part of a competitive chemical industry. The potential risks are deemed to be moderate. The economic prices for the project products and tradable inputs are considered conservative. There is a possible risk associated to the Romanian decision to build locally a substantial portion of the equipment required. This risk, however, is minimized by the proposed participation of an international licensing and engineering firm, well established in polyester technology, which will provide adequate performance guarantees and technical assistance in the local manufacture of equipment, project erection and start-up operations. ix. On the basis of the agreements reached with the Government and the Borrower, the project is suitable for a Bank loan of US$50 million equivalent to the Investment Bank for a term of 15 years, including 3 years of grace, at 8.2% interest rate.  I. INTRODUCTlIN 1.01 The Government of Romania has requested Bank financing of US$50 mil- lion equivalent for a polyester plant with a capacity of 31,500 tons per year (TPY) of staple fiber 1/ and 15,200 TPY of polyester chips. The plant, to b( located in the town of Cimpulung, Arges, about 130 km northwest of Bucharest (Map IBRD 12628) will be operated by the Cimpulung-Muscel Synthetic Fiber EiiLciirise (CIMPULUNG or the Enterprise) within the Industrial Central for Chemical Fibers and Yarn (SAVINESTI or the Central), the coordinating agency for all synthetic fiber plants organized under the Ministry of Chemical Industry. At full capacity operation, the project will increase present Romanian synthetic fiber capacity from 110,700 TPY to 157,400 TPY, or by 42%. The pro;icct is part of the Government's strategy for the rapid development of industry. Total financing required, including interest during construc- tion, is estimated at about US$136 million equivalent, of which US$56.4 mil- lion is in foreign exchange. 1.02 The Bank has extended three loans for industrial projects in Romania for a total of US$168 million. 2/ The proposed loan will be the first for a synthetic fiber project. It was selected for Bank consideration from a group of ten projects in the chemical sector by an Identification Mission in May 1976 and appraised in September/October by Messrs. A. Tarnawiecki (Chief) D. E. Brown, J. F. Rischard, and A. Sandig, of the Industrial Projects Depart- ment and Mr. Geerdes, a consultant in synthetic fibers. II. THE SYNTHETIC FIBER INDUSTRY IN ROMANIA A. Chemical Industry Background 2.01 The chemical industry has been one of Romania's most dynamic sec- tors. Since 1950, it has attained an average growth of 21% a year, and ranks now in third place, with a share of about 11% of total industrial output, behind the machine building and metal working industries (31%) and the food industries (13%). It absorbed about 15% of total industrial in- vestment and employed 7% of the industrial labor force in 1975. 1/ A technical glossary of chemical and textile terms used in the report is contained in Annex 1-1 and units and conversion factors are listed in Annex 1-2. 2/ Bacau (Tecuci) Fertilizer Project (Loan No. 1020 RO), Otelinox Steel Project (Loan No. 1027 RO) and the Brasov Bearings Project (documents for which have been recently distributed to the Executive Directors).  - 2 - Romania - Selected Indicators for the Chemical Industry 1950 1960 1965 1970 1975 Gross Output Indices (1950 = 100) Total Industry /a 100 340 650 1,140 2,100 Chemical Industry 100 660 2,070 5,450 11,340 Petroleum 100 270 380 480 590 Methane Gas 100 370 860 1,320 1,740 Average Annual Growth Rate lb n.a. 45.9 25.7 21.4 15.8 % Share of Chemical Industry in: - Total Gross Industrial Output 2.1 4.1 6.7 10.1 11.3 - Total Industrial Employment 2.6 4.2 5.4 6.5 6.8 - Total Country Exports 1.7 2.2 6.4 8.0 10.8 - Total Country Imports 4.5 7.4 6.3 6.7 6.5 - Total Investments in Industry 3.3 12.6 12.3 11.3 14.7 /a Including electric energy and fuels. /b For chemical industry during preceding five years. Source: Anuarul Statistic al Republicii Socialiste Romania and foreign trade statistics. The development strategy for the chemical industry has been largely designed so as to increase the value added to the country's petroleum and methane gas resources. Accordingly, the fastest growth has occurred in fertilizers, plastics, and synthetic rubber and fibers. Long-term plans continue to attrib- ute a high priority to petrochemicals, which are expected to account for three-fourths of the chemical industry output by 1990, against about one half today. 2.02 The industry is largely concentrated in the center and the south of the country, where large refinery and petrochemical complexes have been developed around Ploiesti and Pitesti to produce a broad range of refinery products, petrochemical intermediates and end-products. The Government is making an effort to locate downstream industries, such as fertilizers or synthetics, away from these traditional industrial centers, partly to promote a more balanced regional development, thus also avoiding industrial conges- tion, and partly because of greater availability of labor and accommodations.  B. History and Organization of the Synthetic Fiber Industry 1/ 2.03 The synthetic fiber industry started only in 1960 2/ but produc- tion, initially of nylon and later of other fibers, increased rapidly as shown below. Romania - Production of Man-made Fibers (000 tons) Capacity 1960 1965 1970 1975 Jan. 1977 Polyester Staple - - 9.8 35.3 42.7 Polyester Filament - - 0.6 9.0 9.0 Total Polyester - - 10.4 44.3 51.7 Nylon 0.9 2.1 6.6 18.5 24.0 Acrylics - 1.2 12.5 32.5 35.0 Polyolefins - - - 0.3 n.a. Total Synthetics 0.9 3.3 29.5 95.6 Cellulosics 3.2 17.7 47.1 63.0 Total Man-made 4.1 21.0 76.6 158.6 Quality of output has generally been satisfactory. Capacity utilization reached 86% in 1975 which is high considering that a 41,300 TPY polyester plant became fully operative only in 1974. In 1970 all the plants then installed were operating above capacity. 2.04 In 1948, industrial enterprises were nationalized and, in the following years, many small enterprises were merged into larger ones. In 1969, units in the same branch of the chemical industry (petrochemicals, fertilizers, inorganic chemicals, rubber and plastic products and synthetic fibers) were grouped into industrial centrals and a three-tier organiza- tional structure emerged: the "enterprise" at the lowest rung, the Ministry of Chemical Industries at the top (other than national bodies such as the Grand National Assembly, the Supreme Council of Economic and Social Develop- ment and the Council of Ministers), and the centrals as middle-level produc- tion agencies (Annex 2-1). 2.05 The Ministry of Chemical Industries is in charge of all national activities in the sub-sector and in particular of: (i) translating the national economic objectives into production targets for the sub-sector; 1/ See also Bank Report No. 492-RO "Planning and the Planning System in Romania, dated October 11, 1974. 2/ Production of man-made fibers, however, began much earlier, in the mid-30's, with two small rayon plants (total capacity 300 TPY) in Bucharest and Lupeni.  - 4 - (ii) preparing the projects which are required to meet these targets; 1/ (iii) ensuring that the production and financial results of individual chem- ical industrlos conform to the Five-Year and Annual Plans; and (iv) co-ordinat- ing the sub-sector's activities with those of other industrial sub-sectors and other sectors of the economy. Also under the Ministry of Chemical Industries are the following agencies: The Technological Engineering and Design Insti- tute for Chemical Industry (IITPIC), the Import Agency for Chemical Equipment and Technology (ROMCHIM), and Danubiana, the agency for the exportation of many chemical products, including synthetic fibers. C. The Central and the Enterprise 2.06 The Industrial Central for Chemical Fibers and Yarn (SAVINESTI or the Central) is, within the Ministry's directives, responsible for the production and distribution of synthetic fibers. This Central comprises the nylon and acrylics plant at Savinesti and the polyester plant at Iasi and will have under its jurisdiction the proposed Cimpulung plant (para. 4.09) and the planned Vaslui (polyester filament) and Roman (nylon) plants (Annex 2-1). The organization chart for SAVINESTI is shown in Annex 2-2. In this, as in most other industrial centrals, there are five functional departments (production, technological, commercial, finances and person- nel). The Central's senior staff generally also act in similar functions in one of the enterprises and the Central provides technical assistance to all its enterprises. 2.07 A new enterprise, the Cimpulung-Muscel Synthetic Fiber Enterprise (the Enterprise), will be formed by June 30, 1977. Establishment of the Enterprise will be a condition of effectiveness of the Bank loan. A pro- forma organization chart for the Enterprise, when it is formed, is shown in Annex 2-3. Decision making power at the limited level of the enterprise will formally belong to the Enterprise's General Assembly including all the workers and meeting normally twice annually. A Working People's Executive Committee, chaired by the Enterprise's General Manager and consisting of elected workers' representatives and some members of the management, is to be in charge of operations. The General and Technical Managers of the Enterprise have already been appointed by SAVINESTI and will be responsible for implementing the decisions of the Executive Committee. This type of organization has worked satisfactorily in the day-to-day operations of other chemical plants known to the Bank. D. Financial Situation and Prospects of the Central 2.08 The Central is the locus for consolidation of the financial results of the individual enterprises, the over-all surplus or deficit of the Centrals then being absorbed within the Ministry's accounts and eventually emerging in 1/ Projects estimated to cost between 30 and 70 million Lei can be approved by the Ministry while larger projects require approval by the Council of Ministers.  - 5 - the St Budget. As mentioned in previous Bank Appraisal Reports on Romania, financial analyses and projections as generally applied by the Bank to evalu- ate the performance and prospects of industrial enterprises are of limited value in the Romanian system. However, to illustrate the scope of operations under present price and cost relationships, actual and projected financial statements for SAVINESTI are shown in Annex 2-4 and summarized below. Romania - Summary Financial Indicators for the Central (in million Lei) Actual Projected Years Ending December 31 1974 1975 /a 1976 1977 1978 1979 1980 Sales Value of Production 5,123 3,811 4,047 4,609 5,377 6,835 9,092 Operating Expenses 4,349 3,363 3,765 3,886 4,401 5,669 7,519 Benefits /b 774 448 282 723 976 1,166 1,573 Current Assets 1,482 1,415 1,186 1,351 1,579 2,002 2,173 Current Liabilities 1,249 1,163 900 1,067 1,259 1,654 1,813 Net fixed Assets 7,002 5,642 6,216 6,262 8,333 11,029 15,160 Projects Under Construction /c 713 562 965 2,628 3,146 4,027 1,804 Benefits as a % of Sales 15 12 7 16 17 17 17 Current Ratio 1.19 1.22 1.32 1.27 1.25 1.21 1.20 /a The drop in sales, operating costs and benefits in 1975 and 1976 reflects the transfer of rayon plants from SAVINESTI to the Central for Pulp and Paper under another Ministry and the resetting of input and output prices. /b Before allocations to the State. /c Includes the Iasi Expansion, and the Cimpulung, Vaslui and Roman Projects. The table indicates that the Central's profitability is satisfactory, although the latter reflects not only efficient operations but also Romanian pricing policies. E. The Romanian Financial System 2.09 The State determines all prices and annual financial plans are made by the enterprises and the industrial centrals so as to meet targets contained in the Five-Year and Annual Plans. Since the primary responsibility of an en- terprise is to meet established physical targets, and inputs and outputs are calculated at fixed prices, financial profitability for an enterprise - as re- lated to capital employed and output - is established by the central and the efficiency of an enterprise's management is measured by the achievement of the assigned production and profitability targets. There has been a historical  - 6 - tendency for prices to remain stable over long periods of time (para 6.01). This implies not only that there is a lack of close correlation with shift- ing supply and demand relations but also that relationships between costs and prices become distorted as industry expands and technology and produc- tivity improve. To remedy these distortions, periodic price resettings are undertaken for the whole economy, each sector being reviewed separately. The last such price resetting (since 1963) was during 1974-76 and the pres- ent internal prices for chemicals - which are now roughly in line with in- ternational prices - are expected to be in force at least through the end of the current Five-Year Plan period (1980). 2.10 The Investment Bank (the Borrower) administers and controls all investment funds of the State Budget (except for agriculture and food pro- cessing) and acts as the channel for all sources of major domestic investment financing in industry. Recently, the Investment Bank has also started to make credits on its own, though funds available for this purpose are still relatively small. The President of the Investment Bank reports directly to the Minister of Finance who has comprehensive authority in the planning and financing of all projects. The Investment Bank has wide-ranging responsi- bilities in the implementation of projects reviewing the Techno-Economic Studies before their submission to the Council of Ministers for formal approval and controlling the flow of funds during project execution. The Investment Bank has no legal authority to bring its views to bear directly on the management of an enterprise, but it can recommend necessary opera- tional actions to the Ministry of Finance, which, in turn, can act through the Ministry concerned with the project. III. MARKET AND MARKETING A. Introduction 3.01 The project's output will be predominantly for use in Romania. However, since this is the first project directly financed by the Bank in the synthetic fiber industry, and because of the need to look at the project from the perspective of worldwide trends, background information on textile fibers and their uses is given in Annex 3-1 and a detailed analysis of the world fiber market, in Annex 3-2. - B. Background on World Textile Fiber Consumption 3.02 World consumption of textile fibers has expanded by an average 3.9% a year during 1964-75. This trend has not been uniform over time, with con- sumption growing at 0.6% a year between 1964 and 1967, then at the much faster rate of 5.8% a year through the boom year of 1973; in 1974 consumption stagnated and in 1975 dropped dramatically by 10% due to a combination of the downturn in the textile cycle with the general economic recession which began in 1974. Latest indications are that fiber consumption has recovered from its lowest point in 1975 but has not yet regained its 1973 level.  -7- World Consumption - of Major Fibers, 1964-1975 (million tons) Raw Raw Artificial Total Total Cotton Wool (Cellulosic) Synthetic Man-Made Fibers 1964 11.3 1.5 3.3 1.7 5.0 17.8 1967 10.7 1.6 3.3 2.7 6.0 18.3 1973 13.5 1.4 3.7 7.6 11.3 26.2 1974 13.8 1.5 3.5 7.5 11.0 26.3 lb 1975 11.9 1.5 3.0 7.4 10.4 23.8 /a Including changes in stocks. /b Major inventory build-ups in 1974. 3.03 The structure of world fiber consumption has kept changing, with the share of natural fibers decreasing following the introduction of various man-made fibers. 1/ This trend accelerated during the last decade as new synthetics--acrylics and especially polyester fibers--started to make signifi- cant inroads into the markets held by natural and even other man-made (e.g., rayon) fibers. As the following table shows, the share of synthetics thus grew from less than 10% in 1964 to more than 31% in 1975 and among synthetics, polyester, which represented less than 2% of consumption in 1964, accounted for more than 14% in 1975, with an average annual growth rate of 26% over the decade. Shares of Major Fibers in World Fiber Consumption (in %) Year Natural Artificial Synthetic Total Raw Raw (Cellu- Other Total Cotton Wool losic) Acrylic Nylon Polyester Synthetic Synthetic 1964 63.5 8.4 18.5 1.7 5.6 1.8 0.5 9.6 100.0 1967 58.5 8.7 18.0 2.7 7.1 4.4 0.6 14.8 100.0 1973 51.6 5.3 14.1 6.1 10.3 11.8 0.8 29.0 100.0 1974 52.5 5.7 13.3 5.7 9.9 12.5 0.4 28.5 100.0 1975 50.0 6.3 12.6 5.9 10.5 14.3 0.4 31.1 100.0 1/ Cellulosics were introduced early in this century first as a substitute for silk (hence the name of artificial silk for rayon) and later for cotton; the first true synthetic fiber--nylon--was made during World War II. Polyester and acrylic were marketed in significant amounts only after 1960.  - 8 - 3.04 Home consumption 1/ of textile fibers in the centrally planned economies (CPEs) and developing countries (LDCs) has grown faster than in the developed countries largely due to the high level of per capita con- sumption (16.6 kg in 1974) already reached in industrialized countries compared to the more modest averages for LDCs (3.1 kg) and CPEs (6.2 kg). Among the latter, the USSR and Eastern Europe have traditionally enjoyed a relatively high per capita consumption (13.7 kg). The pattern of mill con- sumption in various regions and groups of countries differs substantially, with natural fibers accounting in recent years for about three quarters of total mill consumption in CPEs and LDCs while in developed countries the proportion has been reduced to an average 37%. The share of synthetics approaches 50% in developed countries but is still as low as 17% in LDCs and 14% in CPEs, despite the rapid growth rates for synthetic fibers in these countries. 3.05 Inter-fiber competition has largely centered around quality and performance considerations, price competitiveness, product development and promotion, and the ability of producers to assure a consistent supply at relatively stable prices. Man-made fibers, and especially polyester, have many of the properties possessed by natural fibers in addition to other desirable properties. Because of their strength and durability, abrasion resistance, low shrinkage, quick drying, and easy care characteristics, polyester staple fibers are particularly suitable for blending with humidity- absorbing natural fibers (cotton, wool and flax). 3.06 Inter-fiber competition has also been strongly influenced by move- ments in the relative prices of the main fibers. While rising costs of raw materials and pollution legislation have led to sharp increases in the price of cellulosics, polyester staple has steadily improved its price competitive- ness with regard to natural fibers, and in particular cotton. Fiber Prices: Cotton Prices, Polyester Staple Prices and Ratios (US domestic prices)