Romania - Brasov Bearings Project

Document of FIwLE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2079-RO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A nR.T 9 PROPOSED LOAN TO TO REPORTS DESK THE INVESTMENT BANK OF ROMANIA WITH THE GUARANTEE OF THE SOCIALIST REPUBLIC OF ROMANIA FOR THE BRASOV BEARINGS PROJECT May 16, 1977 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 1. Official Rate lei 4.97 = US$ 1.00 leu 1.00 = US$ 0.20 2. Tourist Rate lei 12.00 = US$ 1.00 leu -1.00 = us$ o.o8 3. Conversion Rate for Traded Goods lei 20.00 = US$ 1.00 leu 1.00 = US$ 0.05 GLOSSARY OF ABBREVIATIONS COFACE - Compagnie Francaise D'Assurance Pour Le Commerce Exterieur ECGD - Export Credit Guarantee Department HERMES - Hermes Kreditversicherings-Aktiengesellschaft FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INVESTMENT BANIK OF ROMANIA, WITH THE GUARANTEE OF THE SOCIALIST REPUBLIC OF ROMANI', FOR THE BRASOV BEARINGS PROJECT 1. I submit the following report and recommendation on a proposed loan to the Investment Bank of Romania, with the guarantee of the Socialist Republic of Romania, for the equivalent of US$38 million, to help finance a bearings project. The loan would have a term of 13 years, including three years of grace, with interest at 8.2 percent per annum. PART I - THE ECONOMY 2. The latest economic memorandum for Romania (818a-RO) was circulated to the Executive Directors on December 29, 1975, and an agricultural sector survey (953a-RO) was circulated on November 15, 1976. A basic economic mission visited Romania in October/November 1976 and its report is under preparation. Preliminary findings of this mission are incorporated in this report. Country social and economic data are given in Annex I. 3. Since the founding in 1947 of the People's Republic of Romania, which in 1965 was reconstituted as the Socialist Republic of Romania, economic management has been organized along socialist principles which have included state and cooperative ownership of almost all productive resources, and the absence of private enterprise. Economic activity is directed by means of obligatory development planning, coordinated by the central authorities. Productive enterprises operate within the framework of the development plan which defines the scope of their activity, the outlines of their production and investment goals and their targets for operating efficiency. The plan is elaborated within a five-year time frame, each year having a separate Annual Plan. The country began its latest Five-Year Plan in January, 1976. 4. The technical and functional Ministries are the State's chief agents for the administration of economic activity. They are assisted by subordinate units known as Centrals, which coordinate and supervise activities within a common branch or industry without being directly engaged in production. En- terprises subordinate to the Centrals are responsible for production which is controlled through a system of physical production and financial targets. Production enterprises generally are not authorized to engage directly in foreign trade and rely on specialized foreign trade enterprises for this purpose. In agriculture, large State farms and cooperatives are the pre- dominant units of production. 5. Economic development is of paramount concern to the Romanian Gov- ernment. Rapid industrialization is a major objective with priority being given t heavy industry including steel, engineering products and chemicals. 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.  - 2 - To achieve their growth objectives, the Romanian authorities have made consid- erable efforts to mobilize domestic resources for development and to maintain a high rate of capital formation. In the 1971-75 Five-Year Plan, planned and actual investment rates of around 30 percent of GNP were the norm. As a consequence, consumption has been restrained, and the development of the consumer goods industry has been less strongly emphasized than that of heavy industry. In 1975, heavy industry (led by engineering and metal working, chemicals and ferrous metallurgy) accounted for about 61 percent of industrial production. 6. As a result of this strategy, a marked change has been achieved in the structure of Romania's economy. Rapid industrial growth, which over the last decade has averaged more than 13 percent per annum, has expanded the share of the labor force employed in industry (including power and construc- tion) from about 14 percent in 1950 to approximately 40 percent in 1975. During the same period, the share of labor force engaged in agriculture has declined from 74 percent to around 38 percent; and while agricultural output almost tripled, its share in GNP amounted to only 15 percent in 1975. 7. Notwithstanding the emphasis on industrialization, more than half of the population (about 57 percent in 1975) still lives in rural areas and agriculture remains a key sector of the economy. Apart from supplying food, industrial inputs and the residual labor increment for industrial growth (which requires an expansion in agricultural productivity), the sector also supplies about one quarter of the nation's convertible foreign exchange earn- ings. These earnings, which are largely used to buy imported inputs for in- dustry, have often been jeopardized as a result of unstable production growth in agriculture. The maintenance of the industrial development program, there- fore, is dependent on the performance of the agricultural sector. 8. Romania's population growth is around one percent per annum. Thus, the impact of rapid economic growth on per capita incomes has been only mar- ginally diluted by the population increase. In the last decade, GNP growth has averaged nine percent per annum, implying a growth of about eight percent per annum of per capita GNP. It is estimated that GNP per capita in 1975 was US$1,300 based upon official national income information and using the World Bank Atlas methodology. 9. The organization of production in both the urban sector and in agri- culture is such that all labor is employed and there is no open unemployment. There is, however, some seasonal labor surplus, mainly in agriculture. Income distribution is also relatively equal. In 1975, average monthly wages were 1,813 lei (over $90 equivalent) up nine percent over the previous year. About 87 percent of all monthly wages in 1975 were within the range of 1,300-2,500 lei. Four percent were under 1,300 lei and about nine percent were above 2,500 lei. Prices for essential consumer goods and services such as basic foodstuffs, rents and urban transport are relatively low and most social services, notably education and health care, are provided without charge. Standards of living, while still modest, have been increasing because of the rapid growth of national income. Romania also pursues an active regional policy which has sought to bring a balanced development of both human and natural resources to all parts of the country.  - 3 - 10. The official exchange rate of lei 4.97 per US$1 is used only for accounting purposes. The rate used for tourist transactions is lei 12 per US$1, having been revalued from a rate of lei 14.38 per US$1 in October 1974. Beginning in July 1973, a trading rate of lei 20 per US$1 has been used to convert the prices of all traded goods; this rate is considered representa- tive of the average cost of convertible foreign exchange. The rate of lei 20 per US$1 has a'zo been used to convert national income statistics from lei to dollars. Consequently, this rate has been used as the base rate for calcula- tion in the appraisal. Recent Developments 11. Since the National Party Conference of 1967, which set the stage for major qualitative advances in Romania's economic and social development, there have been important new emphases in Romania's economic management. Measures were taken to improve the institutional basis of planning (e.g. by creating centrals to assist in plan administration), to increase the effi- ciency of economic management and to improve the quality of products in industry. In agriculture efforts were made to raise productivity and stabilize growth through irrigation, mechanization and the expanded use of chemical fertilizers. To promote the growth of foreign trade and technical-economic cooperation the Government has concluded trade and cooperation agreements with a wide range of countries. In this context, Romania has also made positive efforts to expand its multilateral external relations and to pursue full cooperation with international agencies, in- cluding UN, UNCTAD, UNESCO, FAO, UNIDO, GATT and more recently, the IMF and the Bank. 12. Measures aimed at continued improvement of the management system include a reorganization (involving a reduction from 217 to 95 in number) of industrial centrals and a concentration within the centrals of all plan- ning, control and research functions. The pursuit of purely physical goals in production and trade, while still an important element in the system, is being supplemented by much greater emphasis on production and investment efficiency, product quality, pricing and foreign competitiveness. To eliminate wasteful investment and production expenditures, a Superior Court of Financial Control has been established, among other things, to oversee a new system of financial control. 13. Foreign trade has expanded rapidly in recent years both in volume and in regional diversity. There has also been a tendency to move away from trade on a bilateral basis toward trade involving multilateral payments. During 1971-75, total foreign trade grew at approximately 18 percent per annum in current prices. In 1975, however, after the very rapid growth in the value of trade of 33 percent in 1974, trade grew by only 6.6 percent, with exports increasing by 9.6 percent to US$5.34 billion and imports by 3.9 percent also to US$5.34 billion. This slower increase in 1975 was explained chiefly by the floods of July 1975 which resulted in a smaller exportable surplus of agricultural goods and necessitated cancellation of some imports. About 54 percent of 1975 trade was with the convertible currency area. Over- all current account deficits have generally remained small; in 1975 the deficit was only US$135 million, while the deficit with the convertible currency area was US$260 million. In recent years, imports from eastern  - 4 - European socialist countries have been slightly lower than Romania's exports to that region. In Romania's trade with western industrialised countries, on the other hand, exports have typically been considerably less than imports. These deficits have generally been increased by deficits on the invisibles account with western countries. 14. The structure of Romania's trade with the developed market economies remains essentially unfavorable. Raw materials and agricultural commodities, both of which are subject to unstable price and production conditions, com- prise about 60 percent of total exports to these countries. At the same time imports from these countries are largely of machines and equipment and other manufactures. Because of the present low level of reserves, any instability in export earnings, as frequently arises from shortfalls in agriculture (para- graph 7 above), tends to place the import program in immediate jeopardy. 15. Preliminary results for 1976 indicate that most major targets of the 1976 Annual Plan have been met. National income rose by 10.5 percent, gross industrial production increased by about 11.5 percent, and gross agri- cultural production was a record, exceeding the flood affected 1975 level by 17.2 percent. These achievements were realized despite a lower than planned investment growth rate (8.2 rather than 19.4 percent). The volume of trade increased less than plan targets, but a reported overall trade surplus of US$40 million was attained because of measures to economize on imports. In November 1976, Romania's National Assembly approved the country's 1977 Annual Plan and Budget, which calls for continued high rates of growth. National income is expected to rise by 11.3 percent and gross industrial production by 10.5 percent. The Plan provides a range of 1.9-3.6 percent growth for the gross farm output. This wide range is provided because of the uncertain impact climatic conditions might have on production. Investments in the national economy are expected to increase by 16.7 percent and total foreign trade volume by 15.5 percent. Insufficient information is available to assess the full impact of the earthquake in March 1977. The Government has announced that production targets for 1977 will be met and that no revisions of the annual plan will be made. While it is possible that planned production levels will be attained, it is likely that replenishment of the damaged capital stock will take longer and require additional resources and/or diverting of invest- ment resources from new projects. 16. A campaign to increase efficiency in the utilization of existing capacities and to effect significant economies in the consumption of raw materials and intermediate goods is being implemented throughout the economy. Targets have been established to reduce by 30 percent the previously antici- pated construction and erection costs of industrial projects between 1976-80. Substantial, but as yet unspecified, savings have also been prescribed for most other industrial inputs during 1976-80, while the global production targets as set in the Five Year Plan remain unchanged. External Assistance 17. The expansion of Romania's trade with the non-socialist industrial countries has led to an increased need to obtain convertible currencies to  - 5 - pay for imports from those countries. Romania has met this need both by bor- rowing abroad and by mounting a major effort to expand exports and tourism. Gross inflows of convertible currency through medium- and long-term loans were US$946 million in 1976, consisting mostly of financial and suppliers' credits with relatively short repayment periods. This gross inflow repre- sented a net inflow of some $312 million after accounting for the country's repayment obligations. 18. As part of its effort to expand its foreign trade and cooperation relationships, Romania has als caken active steps to attract long-term pri- vate capital. A -eguiation passed in 1972 defines the conditions under which foreign firms can establish joint ventures with domestic enterprises, prefer- ably in foreign exchange earning or saving industries. As of January 1977, seven joint venture agreements had been signed. In contrast with the first six which were of a small scale involving total direct foreign investment of about US$10-15 million, the seventh agreement which was signed a few months ago with Citroen, involved a contract of FF 2.5 billion (about US$500 million) of which 49 percent is direct foreign investment. Romania also receives medium-term trade credits from U.S. Eximbank and trades under ECGD, COFACE, and HERMES credit guarantees with the United Kingdom, France and the Federal Republic of Germany, respectively. Romania succeeded in securing a US$60 million, eight-year loan from Kuwait as part of a general cooperation agree- ment and more recently a $50 million Eurodollar loan. In addition, Romania has access to non-convertible currency investment credits from the Interna- tional Investment Bank, Moscow. 19. As it stands Romania's access to long-term finance in convertible currencies is still very restricted. The IBRD is the only major source of such long-term development finance, though Romania is making efforts to improve its access to the major financial markets. The Bank's presence on a significant scale would have a positive influence in this regard and might serve as a catalyst for involving other lenders in Romania. This could serve both to increase the total amount of Bank-sponsored funds available to Romania and to build outside confidence in the country, thereby enhancing in the long-term its independent access to the world's financial markets. Prospects 20. The 1976-80 Five-Year Plan reflects Romania's continued strategy of rapid growth. Investment rates of some 30 percent of GNP are to be main- tained, and the major thrust is in industry. The plan targets are impressive. National income is expected to grow at 10-11 percent per annum and gross industrial output by 10.2-11.2 percent per annum, with more rapid growth in heavy industry than in consumer goods. Continued emphasis is to be placed on foreign trade which is expected to double in real terms, with the aim of securing a continued transfer of technology needed for the modernization and diversification of Romanian industry and the raw materials required by indus- try. Greater emphasis than in the 1971-75 Plan is to be given to developing the infrastructure in agriculture, particularly with regard to irrigation and drainage and the plans for fertilizer production envisage an increase in supply sufficient to double the 1974 application rates by 1980.  21. Romania has good potential for further economic growth. Endowed with important natural resources (fuels, some minerals, timber, rich soils and sources of irrigation water for agriculture, and a favorable climate for agriculture and tourism) and located conveniently with respect to its major international markets in the East and West, the country has built a broad industrial infrastructure (power, metallurgy, chemicals) which will serve as a base for the expansion of secondary manufacturing sectors such as machine building and consumer durables. Above all, Romania has a hard-working and increasingly skilled population. In order for Romania to attain its growth objectives, however, it will have to rely on a major expansion of exports of manufactured goods in order to finance modern foreign technology and an increasing dependence on imported raw materials and fuel. 22. Economic growth and structural change call for the introduction of new technologies, improvements in the quality of products, more efficient use of materials and factor inputs, and reductions in production costs. The in- creasing diversity and complexity of Romania's economic structure require continuing improvements in the efficiency of economic planning and coordina- tion and further refinements in economic management. To keep up with these -changes and requirements, large programs of education and manpower training have been mounted, investments in scientific and technological research have been emphasized, and-efforts are being made to strengthen technical coopera- tion with industrialized countries and international organizations. Creditworthiness 23. As of December 1976, Romania's total medium and long-term external debt amounted to US$3,095 million. Most of these debts (US$3,023 million) were denominated in convertible currencies, the major creditor countries being Germany, France, UK and Italy. While the total debt does not appear excessive in relation to the volume and growth of external trade, average maturities are relatively short and convertible debt service payments are estimated to be in the order of US$550 million a year during 1975-76. The convertible debt service ratio was approximately 14 percent in 1975. The corresponding figure for 1976 is estimated to have been about 19 percent and is expected to be 18 percent for 1977. 24. The organization of economic activity in Romania, the pursuit of a development strategy involving high investment and saving rates, and rapid income growth ensure the effective use of foreign credits. Moreover, the country's major efforts to expand exports (particularly to convertible cur- rency areas) are increasing the foreign exchange available for debt service. Convertible export earnings rose from US$830 million in 1971 to US$2,839 million in 1975, and are estimated to have been about US$3,250 million in 1976. The preferential trade status accorded to Romania by the European Communities in June 1973 is facilitating the expansion of such exports as is the granting of most favored nation status by the U.S. In 1973, the Government also restricted the use of short-term credit facilities from western suppliers in an effort to improve the structure of the country's external debt. Assuming a continuation of present export and debt management policies we estimate that the debt service ratio will remain around 20 percent during the implementation  -7- of the Five Year Plan 1976-80 and decline thereafter to about 15 percent by 1985. The country's present outward-looking posture, the success of both its domestic growth and foreign trade policies, and its potential for continued development, all support the judgment that Romania is creditworthy for sub- stantial Bank lending. 25. When Romania joined the Bank, most pre-war foreign debts of the country had been settled. Settlements which were still under discussion at that time concerned claims in the United Kingdom and in the United States. With regard to the settlement of these claims, the final payments of U.S. claims began in September 1975 and were completed in October 1976 based upon agreements reached in May 1'75. Settlement of British claims proved more difficult, but a final agreement was signed in January 1976. The Bank has also been informed recently of certain Swedish claims concerning public loans from the pru-war period, nationalized Swedish property and other interests suJin as concessions granted to Swedish companies before the Second World War. The eleventh and most recent meeting to discuss these claims was held in Bucharest in October 1976. The Romanian and Swedish authorities ha.e also dealt with this matter in April 1977 in the context of more general discus- sions of bilateral trade, and further discussions are planned at a date to be established through diplomatic channels. PART II - BANK GROUP OPERATIONS IN ROMANIA 26. The proposed loan would be the Bank's eleventh to Romania and would bring total Bank commitments to Romania to US$558 million. Disbursements under the Bank's initial loans were slow during 1975, but this situation improved considerably during 1976. Annex II contains a summary statement of Bank loans to Romania and notes on the execution of ongoing projects as of March 31, 1977. 27. Foreign exchange, especially in convertible currencies, continues to be a major constraint and one of the major objectives of Bank lending con- tinues to be to help alleviate the country's shortage of foreign exchange by providing long-term external capital and by financing projects which will ex- pand foreign exchange earnings or savings. Bank lending also aims at sup- porting the Government's efforts to introduce new industrial technologies to improve the quality of products and production efficiency, to reduce produc- tion costs and to provide for necessary electric power development. Market aspects and marketing, especially for export goods, are also emphasized. Special attention is given to agriculture which is heavily dependent upon favorable weather and where productivity levels are still comparatively low. 28. With regard to the prospects for future lending, projects for irriga- tion, pork and poultry production and grain storage are being processed in the agricultural sector, while in the industrial sector projects for the produc- tion of glass fibers and polyester fibers are scheduled to be presented to the  - 8 - Executive Directors soon. Future lending in the power sector will be based on a least cost development study which is being prepared by the Government. 29. In addition to lending, the Bank (through EDI) has assisted Romania by conducting industrial and transportation project appraisal training courses for Romanian officials in Belgrade in October 1973 and in Buc;,arest in January/ February 1975, November/December 1975, January/February and October/November 1976. Additional courses, including one in agricultural project appraisal, are planned. 30. The projects, for which assistance has been committed or is being considered, represent only a small portion of Romania's total need for ex- ternal financing and of its total disbursed convertible debt. However, they provide a substantial net addition to the inflow of convertible currency finance, and may set a pattern for obtaining longer term convertible finance from other sources. The disbursed IBRD debt outstanding to the Bank is expected to constitute about 12 percent of Romania's total projected con- vertible currency debt in 1980; the Bank's share in Romania's debt service payments in 1980 would be about 3 percent. PART III - THE INDUSTRIAL SECTOR IN ROMANIA Industrial Development 31. Performance of Romania's industrial sector during the last 25 years has been impressive and great efforts have been made to transform a nation that once specialized in the exportation of raw materials into a country with a strong and broad based industrial sector. Large capital investments at annual rates in the order of 30 percent of GNP have been concentrated on basic and heavy industry, particularly on fuel, electric power, metallurgy, machine building and chemicals and have resulted in a rapid expansion and diversifica- tion of industrial output. During the last five year plan gross industrial output increased by about 85 percent surpassing significantly plan targets. Growth in the chemical, engineering and metal working, and ferrous metallurgy sectors has been the fastest with production about doubling. 32. In the process of this impressive development the industrial sector of Romania has assimilated in a relatively short period of time vast amounts of technology and know-how, and it is assuming a sophistication with which it is increasingly capable of solving complex technical problems and producing products that require a high degree of technological achievement. One of the comparative advantages of Romanian industry is its relatively low-cost skilled and unskilled man-power, supported by well organized training programs. 33. Industrialization will remain the first priority of development both in the 1976-80 five year plan and in the longer run with output expected to grow seven fold in the period 1970-1990 (or roughly 10 percent per annum). While previously growth was often achieved at sacrifice of quality, efforts for quality and productivity improvement are more evident now. Internally, the areas of major emphasis will be manpower planning and development, growth in technological capabilities, industrial modernization and central efficiency  - 9 - auditing. By applying the most advanced scientific methods and by stressing scientific organization of manpower, substantially more value will be in- corporated per ton of product. The thrust of the sector's development will continue to be the growth of the chemical, engineering, metal working and ferrous metallurgy sectors. Industrial Organization 34. At present nine industrial ministries are responsible for the indus- trial sector in Romania. Subordinate to each Ministry are several foreign trade enterprises, research and design institutes and a number of Centrals, which in turn direct the activities of a group of related enterprises. The work on overall design and supervision of projects is delegated by each Min- istry to one of its research and design institutes. In case of the proposed project it is being designed and engineered by the project enterprise's and the Central's Engineering Department in close collaboration with the Design and Research Center for Bearings and Fasteners and the Central Research Institute for Machine Tools. The enterprises, Centrals and Design Institutes, which have not been authorized to trade abroad (see also para 4 above) con- duct their foreign business through the foreign trade enterprises which normally belong to the same Ministry. In the case of the Brasov enterprise which falls under the Ministry of Machine Building, however, exports are handled by TECHNOEXPORTIMPORT which does not belong to the same ministry but to the Ministry of Foreign Trade. Bearing Industry 35. Romania enjoys some important advantages that have favored the de- velopment of a domestic bearings industry. First, the country has a large number of disciplined, well trained and skilled workers available at wages which are substantially below those paid in developed countries. Second, even though bearings are a precision product, the industry, until recently, used relatively simple and easily available machine tools. Third, in recent years the Romanian domestic market has been large enough to support volume production of selected bearings. And finally, due to the very large variety of products involved in this industry, inventory and/or production costs can be reduced if a reasonable degree of certainty of demand and supply can be assured, which the Romanian system of centralized planning can generally do. These factors help the country to develop a competitive bearings industry. 36. The Romanian bearings industry started in 1949 on a relatively small scale with knowhow largely developed in Romania, and has since then experienced an impressive development. In 1975 Romania's bearings industry produced in its four plants (Brasov, Birlad, Alexandria and Ploiesti) about 71 million bearings valued at the equivalent of approximately US$95 million. This production met about 86 percent of the country's own bearings needs, while 22 million bearings (31 percent of production) were exported. The Gov- ernment invited two well known foreign firms to help establish large modern production facilities at various locations and negotiations have recently been concluded with a foreign partner for the supply of advanced technology needed to produce special bearings not yet manufactured in the country. This policy  - 10 - of combining locally developed skills with foreign knowhow and technology is expected to provide also in future a favorable basis for this expanding industry. Market and Marketing 37. The primary industrial bearings consumers in Romania have histori- cally experienced rapid growth with annual consumption increases over the last 15 years of about 15 percent. Consequently, the majority of bearings produced has been consumed in the country and the balance was exported. Of the exported bearings a substantial share has been and would be continued to be sold under medium to long-term contracts with COMECON members or leading bearings producers in Western Europe and Japan. A high growth in domestic demand for bearings is likely to continue; however, increases are expected to be below historical figures due to the lower planned growth of the overall economy. The Romanians expect that about half of their export revenue will come from COMECON countries and the other half from convertible currency areas. The share of domestic consumption is forecast to decrease from 69 percent in 1975 to about 57 percent with exports increasing accordingly. Tin view of historical growth rates of domestic consumption of 15 percent per ycal versus a projected increase of only 7 percent, this forecast is considered conservative and does not adequately reflect expected growth rates of major bearings consuming industries in the country. It seems more likely that domestic consumption will be higher and exports less than projected if the national economy indeed grows at the rates planned for the 1976-1985 period. Imports of bearings will continue to be limited to high precision bearings needed for use in sophisticated machinery, aircraft and other advanced equip- ment, and other bearings which are not produced locally. 38. Distribution of bearings within the country falls under the respon- sibility of a warehousing enterprise which maintains warehouses at each plant and in each region of the country. The responsibility for the export of bearings lies with TECHNOEXPORTIMPORT, a state owned foreign trade enterprise. TECHNOEXPORTIMPORT, however, until recently maintained no overseas offices devoted mainly to bearing sales or warehouses to provide quick services to customers, which is not considered optimum for exporting precision and price sensitive products like bearings. Romanian authorities are aware of this unsatisfactory situation and are currently implementing a major reorganization of the marketing system which would, inter alia, provide for the establish- ment of overseas sales offices and assure closer cooperation between TECHNO- EXPORTIMPORT and the Central (Section 4.01(b) - Loan Agreement). This improvement, combined with higher product quality after project completion is expected to have a favorable impact on achievable export prices. 39. The project enterprise at Brasov produced in 1976 27.8 million pieces with the largest mix of bearings amongst the Romanian producers. In general more than 70 percent of its production was so far sold locally. Projections up to 1985 indicate that sales to the domestic market will be increased from 22.5 million pieces in 1975 (79 percent of total) to about 36.5 million (69 percent of total) pieces in 1985. Another 17 percent will be sold to COMECON countries under long term sales contracts and thus only  - 11 - about 14 percent of the total volume would be sold to market economies, some of it through the partner for the production of the needle and cardan bearings and part of the rest through bilateral trade arrangements. The Borrower 40. The borrower for the proposed loan would be the Investment Bank, which is the specialized agency, under the Ministry of Finance, for invest- ment projects in all sectors of the economy except agriculture (including water resources) and food processing. It has a large technical and economic staff with branch offices in all districts of the country. The Investment Bank's involvement in investment projects commences in the preparation phase of a project; its staff appraises all major investment projects technically and financially and recommends approval or otherwise of their financing to the Council of Ministers. When a particular project and its financial plan has been approved by the Council of Ministers, all funds are channeled through the Investment Bank in accordance with the approved financial plan. All pay- ments for the execution of a project have to be authorized by the Investment Bank which keeps separate accounts for each category in the financial plan for every enterprise. It is the Investment Bank's obligation to ensure that a project is executed according to the financial and technical data included in the final technical and economic study approved by the Council of Ministers. Its inspectors check whether the project is proceeding according to the schedule approved in the Plan. 41. While the Investment Bank's supervision and control function is thus rather strong during the implementation phase of a project, its functions are much more limited during the operational phase of a project. Although it has the right and obligation to verify that the enterprise is meeting the targets set in the investment plan, it has no legal authority to influence directly the management of the enterprise or to force the enterprise directly to take operational actions which it considers necessary. In practice, how- ever, it can request such actions very effectively by reporting through the Ministry of Finance to the Government. 42. The Investment Bank is the channel for all sources of major domestic investment financing, but its own funds for onlending as credits are still relatively small. Its prime source of funds is the State Budget. The Govern- ment will ensure the availability of sufficient funds including foreign ex- change requirements for the implementation and operation of the project (Sec- tion 2.02 of the Guarantee Agreement). The Guarantor will ensure that the Investment Bank can meet the debt service on the Bank loan.  - 12 - PART IV - THE PROJECT 43. The project was identified in April 1975 and appraised in May 1976 on the basis of a technical and economic study prepared by the Design and Research Center for Bearings and Fasteners of the Ministry of Machine Build- ing. Negotiations were held in Washington in March 1977. The Romanian delegation was led by Mr. Diamandopol, President of the Investment Bank. A loan and project summary and supplementary project data are given in Annexes III and IV. Project Description 44. The proposed project will increase the production capacity of an existing bearings factory at Brasov from 20 million to 33.5 million bearings and will allow the manufacturing of a wider range of bearings of signifi- cantly improved quality. The project consists of two distinct and technically separable components: (a) erection of a modern, fully automated high volume production line (the High-Volume Component) with an annual production capacity of 5.5 million bearings; and (b) modernization and expansion of low volume facilities (the Low-Volume Component) to reach a final capacity of 28.0 million pieces of a relatively heavier product mix. In addition, necessary auxiliary facilities like utilities and general maintenance shops as well as physical infrastructure would be expanded to support increased production. The high and low volume components would share a common forge shop, a ball shop, a roller shop and a small retainers shop which are also included in the project. Not part of the Bank financed project is the expansion of the production of needle, cardan and special bearings, which is now being imple- mented with the assistance of a major international manufacturer of bearings. 45. The High-Volume component of the project has been specifically designed to produce bearings needed in large numbers and on large production runs permitting the use of specialized equipment and a high degree of auto- mation. The component is technically well conceived and is comparable to new plants being developed elsewhere. The Low Volume component would produce a much greater variety of bearings in relatively short production runs and in a wider range of sizes; it would therefore be equipped with more flexible, general machining and grinding equipment. The assembly and inspection opera- tions, as also most of the material handling and machine loading, would be manual. These differences would make the Low-Volume component's relative labor requirements higher than the High-Volume component in which productivity is expected to be much higher. Product Mix 46. The choice of production process and the productivity of a bearings plant are to a large extent determined by the product mix to be manufactured and the general trend in developed countries is towards production of a limited range of similar bearings in long production runs wherever possible. Under the Bank financed High Volume Component it is planned to produce in 1985 about 5.5 million bearings in up to 10 sizes and under the Low Volume component 28 million bearings in 230 sizes. The product mix for the High-Volume line is  - 13 - comparable to that of most modern bearing plants under development elsewhere while the relatively large variety of bearings produced on the Low Volume production line reflects the Government's efforts to drastically reduce import of those bearings which the country is capable of producing and which are re- quired only in smaller quantities. The Government has agreed to review the proposed product mix of the Low volume Component and would form an industrial engineering group to carry out this review as one of the group's first tasks (Section 4.01 (a) (ix), Loan Agreement). Labor Force 47. Brasov Enterprise has currently 6,280 employees working in opera- tions which will be expanded under the proposed project and originally had planned to increase this number by 1,244 to 7,524 persons in the course of project implementation. Since it appeared that these projected labor needs were considerably above international standards, the Bank has made specific recommendations for changes in layout and labor practices in some key plant areas and proposed a general revision of expected labor needs. This review has been initiated and initial reductions in planned work force of about 200 men have already been made. The continuing labor review will be completed by March 31, 1978 by the above mentioned industrial engineering group (Schedule 2, Part DI, Loan Agreement). 48. The training of workers is well organized at Brasov, which runs a large training school next to the plant. Other institutions such as vocational and engineering schools run by the Government provide well trained supervisors and skilled technicians. Brasov Enterprise had worked out a detailed program to ensure that all required skills are available on time. These arrangements are considered adequate. Project Execution 49. Physical implementation of the project started in January 1977. Completion of the Low-Volume component is scheduled for December 1981 and the High-Volume component for December 1980. The Brasov Enterprise will have the primary responsibility for project design, engineering and implementation, and has on its staff personnel with prior experience in executing similar projects. The plant facilities will be constructed by the Enterprise for Erection of Special Industrial Buildings, a construction trust under the Ministry of Machine Buildings; the trust was responsible for erecting other bearings plants and thus would be well suited for the assignment. The pro- curement of imported equipment is being handled by six foreign trade enter- prises, coordination of which is in the hands of UZINEXPORTIMPORT, a major state owned foreign trade enterprise. Equipment and services to be supplied from within Romania and financed from the Government's own resources will be procured directly by the Brasov Enterprise. Project Cost and Financing 50. Total cost of the project is estimated to be the equivalent of US$87.8 million. The foreign exchange cost is estimated at US$38.0 million  - 14 - or 43.3 percent of the total including the foreign exchange component of goods likely to be procured in Romania as well as the cost of directly imported goods. The appraisal cost estimates allow for physical contingencies at 7.4 percent. The local cost component, based on fixed Romanian prices, is not expected to require revision during the project implementation period; for imported equipment a price increase of 22.0 percent during project execution has been assumed. 51. The proposed Bank loan of US$38 million would finance the project's foreign exchange cost. The remaining project cost would be financed by Romanian sources. The loan would be repayable over 13 years including a grace period of 3 years. It is Romanian practice for the State to invest virtually all funds in such projects through the Investment Bank without formal onlend- ing agreements and to recover investment costs from project beneficiaries through a variety of financial mechanisms including net income transfers from state enterprises, taxes and depreciation payments. For this reason the Investment Bank would not actually relend the Bank loan to the enterprise. However, the enterprise would be the beneficiary of the Bank loan and its pro- vision of funds to the State Budget and Investment Bank would be sufficient to cover the lei equivalent of the debt service on the Bank loan including (notional) interest at 10 percent (Section 4.01 (a)(viii) of the Loan Agree- ment). This arrangement is in line with our practice in previous projects. Audit 52. Romania has developed a fairly elaborate control and audit system, under which enterprises submit periodic operational and financial reports to their Central, the Technical Ministry and the banks concerned. The Centrals and the Technical Ministry, as well as a special unit in the Ministry of Finance and the National and Investment Banks conduct extensive audits of these reports to ensure achievement of Plan targets and proper use of funds. Similar to arrangements under previous loans, the Bank would receive quarterly and annual project progress and financial statements from Brasov Enterprise and copies of annual audit reports prepared by the Ministry of Finance (Sec- tion 4.01 (a)(iii) of Loan Agreement). As in case of previous Bank loans the Investment Bank would submit its annual financial reports along with the Ministry of Finance audit reports. Procurement 53. Procurement of the equipment financed by the Bank would follow in- ternational competitive bidding procedures in accordance with the Bank Guide- lines except for items not exceeding $1.7 million in total value which cost less than $100,000 each or are unsuitable for international competitive bid- ding for technical reasons. Agreement has been reached, that certain specific items of machinery and equipment, spares and related services, which are con- sidered critical to the technical viability of the project, will be imported unless the Bank should otherwise agree (see Supplementary Letter circulated with the legal documents). In an attempt to save foreign exchange the Govern- ment is expected to make every effort to limit foreign expenditures on the  - 15 - project and to replace imports by locally manufactured goods; however, it has been agreed that such changes in the source of supply would only be made with the Bank's concurrence and only if such changes would not technically weaken the project. A total of $31.5 million has been allocated under the loan to cover the -ost of these agreed imported goods and services. It has been agreed that, if tile agreed list of imports can be procured for less, or if some goods and services are shifted from the import category to local procurement, the re- sultant reduction in the foreign exchange cost of the project (taking into ac- count the possible increase in the foreign exchange component of domestically procured goods incorporated in the project) would be reflected in a correspond- ing cancellation of part of the loan. Other goods and services totalling about $6.5 million also required for the project will be procured with Romanian sup- pliers participating in international competitive bidding. For purposes of bid comparison the normal 15 percent preference would be applied to the local bid. Prequalification on the basis of bid advertisement was initiated in February 1977 and most bids are expected to be received between August 1977 and February 1978. Disbursements 54. The Bank loan would be disbursed against 100 percent of the foreign cost of imported equipment, spares and services, and 100 percent ex-factory cost of locally supplied goods and services. Disbursements are expected to be completed by December 31, 1981. A schedule of expected disbursements is given in Annex III. Environment 55. A Romanian law for environmental and pollution control, passed in 1973, stipulates that all industrial enterprises must conform to environ- mental and workers safety standards. These standards are considered adequate and in line with regulations elsewhere. The Brasov Enterprise conforms with these regulations except for inplant air quality and noise levels in the forge shop, ball shop and primary machining shop. Necessary provisions have been made under the project to develop new facilities in conformity with the speci- fied standards and to upgrade the working conditions in all existing facilities at least up to the minimum requirements (Section 4.01 (a)(i) Loan Agreement). Benefits and Risks 56. As mentioned in para 35 above, Romania is well-placed to develop a competitive bearings industry. Its basic advantage lies in low total labor costs, particularly considering the total absence of strikes; the possibility of long-term production planning, allowing detailed production and delivery scheduling for the full year in advance and facilitating reasonable capacity utilization; and the almost total absence of domestic marketing costs repre- senting some additional savings. These favorable prospects are only to a minor degree affected by the deficiencies noted in export marketing (see para 38 above) since a relatively high portion of the project's output is expected to be sold domestically or through long term bilateral trade arrangements (see para 39 above).  - 16 - 57. The project would bring about substantial foreign exchange savings which are of particular importance in the context of the Romanian economy. Thus, while the project would require a foreign exchange investment of about US$38 million, it would save foreign exchange of about US$49 million per annum after project completion. In addition the project would create about 500 additional jobs in the Enterprise and generate additional income to the state budget of about Lei 350 million per year after foreign debt service. 58. Under the project the quality of Romanian bearings would be sub- stantially increased, thereby improving the competitiveness of the bearings industry in world markets. Indirectly it would also improve the quality of machinery, machine tools, automobiles and other industrial goods in which bearings are a small but critical part. The project would make Romania more self-sufficient in bearings and introduce at the Brasov Enterprise latest production technology. 59. The economic rate of return of the project is a satisfactory 15.6 Dercent composed of an 22.1 percent return of the High-Volume component which accounts for about 14 percent and one of 14.2 percent for the Low-Volume com- ponent which accounts for about 86 percent of the base costs. This return would remain satisfactory (13.2 percent) even in the unlikely event of a 50 percent drop in export volume (or prices) to market economies, which due to the low share of exports is equivalent to only an approximately 5 percent drop in total revenues. It would decrease to 14.1 percent in case of a project cost increase of 10 percent or to 14.3 percent in case of a 5 percent produc- tion decrease. 60. The risk of not attaining project benefits is moderately low. The process and technology being adopted for the project components have been successfully used in other parts of the world for many years and also in other enterprises within Romania. Moderate risks exist for possible delays in proj- ect completion and for cost overruns due to increases in the cost of imported items, in case the Government tries to accommodate such increases by shifting some items from imports to local supply, it may increase technical risks but, as mentioned in paragraph 53 above, such shifts would require the concurrence of the Bank. The major consumers of bearings in Romania are committed to buy the agreed output at fixed prices through the mechanism of the Five Year Plans and planned sales to centrally planned economies are also assured through COMECON agreements. The major market risk is linked to the export to Western countries; however, considering the small proportion of bearings to be ex- ported to convertible currency countries (by volume about 15 percent of Brasov's production in 1980-1985 and less by value), its impact on the Enter- prise's total revenues and profitability is small. Therefore the project's overall market risk is considered acceptable and the project would remain viable even if exports to the western countries should drop to zero.  - 17 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 61. The draft Loan Agreement between the Bank and the Investment Bank of Romanla, the draft Guarantee Agreement between the Socialist Republic of Romania and the Bank, the report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement and the draft resolution approving the proposed loan are being distributed to the Executive Directors separately. 62. Features of the Loan Agreement of special interest are listed in Section III of Annex IV. 63. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 64. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments Washington, D. C. May 16, 1977   Id 1.S a~~~~~~~~~~~~~~~~~~~~~~~~~~~Wa &Z s 1 -, Ca ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ m a. 0- a'! ala 1. go go, a-.... ... as.. cc0 0C C .CC C- C I CC C C Cs e * CC --awa- a ma-. C C.,. C O O - ~~~~~~~~~~~~~~~~~~~~~~~s - soW C .C ax% ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ M . a t - 0W C I,Z o ~~~~~~* ~ ~ ~ -. M-1 aa 40I - a- ao aa...n~~~~~~" at C w W ~ -. o 0 C 'W C c S em -n a~~~~~~2Dz W a a .41 - o.M Ca- -. -~~~~~~~~~~~a :- I - V s a XSC ~~~~~~~~~~~~~~~~~~~~~~~~~~~a~~~~O M.a a. a a. * a@ *~~~~~~ma-n Ca a- CC. C . . . . . -u.s~~~~~C) C -e CC CC *CweaCr.. oo a a- a Oem * en - ma n CC -w -. -- o: s-M, CCC Lcwl _-SP -W. a, CS *S - CC.. - ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ft 1 * `-0 .~- I I S.- a-i. aa~~~~wz oab-%. V 0 1 w -. S a~~~~ . :-. ee M1 C. S a~~~~~~O V6 l.I 2S a- a a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0P *~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Ca-S J I  ANNEX I Pag. 2 of 3 pages Unl1s ot1herwia. noted, data for 1960 refer to any year between 1959 and 1961, for 1970 between 1968 and 1970 anLd for Moot Recent Estimace between 1973 an 1975. Estimaite sceed on official date and Bank Aicao methodology. eeThe Federal Republic of Germany has been selected ms an objective country because it is induatrialized European counitry with major trade ties with Rosanio. e Th. calculation, of the.e figur.e io under discuaston. RLR4ALNIA 1960 /a 1962; /b Ratio of population under 15 and 65 and over to total labor force: /c Hospitals only, excludes eanitaria and maternity homee. 1970 /a Ratio of population under 15 and 65 and over to total labor force; /b Hospitals only, excludeaseanitaria and maternity, home; /c 1966; /4 masida only. MOST RECMf ESTIMATE: Li 1970-75; /b Ratio of population under 15 and 65 and over to total labor force; /c Hoepitals only, excludes sanitaria and maetrnity hones; /d 1969-71 average; /e UYnadjusted, 1974-75 enrolnmenta taken as a percetage of the 6-l1e and 15-19 age groupa roeepctively of mid-1974 population; L.f 1974, official estimate is 100 percet. YUCOSLAVIA 1970 /. Agriculture land held by social sector 'Kabimate'; /b Agriculture land held by prtvate eamll-holdeme '10 hecturee nadimuom" !.c Including nidwiveas, assistant midwives, assistant nurses and niursing auxsilaries. ITALY 1970 /a Ratio of population under 15 and 65 sod ovr to total labor force; /b Hospital personnel. CE9MAN4Y FED. REP, 1970 /a Total, urban and rural; b Inaids only. R15, April 25, 1977 DRPIHMONa C0? SOCIAL ThOICATORS Land Ar-a(thoum 2 Popuiatin pear nursing person - Popultion divided by number of practicing Total1 Total surface area capritng loand area ad Island -atam. male and fate graduate ounc, "tranad" or ce-tified' nurses, and Agrit. M ost recent eatimats of agricultural are.avusd temporarily or Pocu- auxiliary personne with training or experience. meatly for crops, pastures, market & kitchen gardens or to lie follow. Population oar hoasital bed - Population divided by n-sb.r of hospital beds available in public sod Private general sod specialised hospital and GNP per capita (US$) - GNP Per capita estimates at current ,market Prices, rekhoilitation centars; excludas turning boom sod eetablihlxsen for calculated by same converion - thod as World Bank Atlas (1973-75 b.oia); custodial and preventie care. 1960: 1970 and 1975 data. Par capita supply of calories (% of reouiremseto) - Ccmp.ted frm energy squtoalnt of noar food auppliss avail.bla in country per ..pita per day; Populatioa and vital statistic! I aiablatoupplies cmspri.s dussa.tic production, imports teas exports, and Ponclacioc (mid-year million) As of July first: if not evailable, averge changes in atock; net supplies sonlode animal feed, seeds, qus.ttti.. used of t- nnd-yeur estimates: 1It60, 1970 and 1975 dots, in food processing and losse.s t distribution; raquirements wer.esctimated by FAO based on physiological needs for normalI activity and health conaild- Population density- par Squsre be - Mid-year population per square kilomter ering enrviroruantal temperature, body msights, age and se. distributions of (100 hector.e) of total area. Ppoplatien, and allowing 101 for wst. cc housebold level. Population density -per square Ix, of altric. loand - tCsputd as babv far Per capita supply of protein Canins oar day) - Protein con.tan of Per caPita agricultural land only. net supply of food per day; me t suppl of food is defined as above; require. ments for all counstrias eatablished by USDA Econoic Research Services Vita1 statistics Provide for a miniusus allow,ance of 60 gras of total protein per day, sed Crudo birth rats per thousand. -crage - Annual live births per thousamd of 20 greas of animal sod pulse Protein, of which If grra should be animal oid-y..r population; ton-year arithemetic evrgseding i. 1960 sod 1970, pro tein; theas standards ore losr then those of 75 grasv of total proteis sod flve-yoar -vrag. seding in 1975 for most recent estimate, sod 23 grase of animal protein as an everage for tha unrld, propoead by FAO Crude death rate per thousand, overage - AnnualI death. per thousand of mid-year in the Third World Pond Survey. population; tao-year orithusetic averages ending In 1960 ond 1970 sod five- Per capita protein supply free animal and pulse - Protein supply of food ynaraverage onding in 1975 fon oust recent estimate, derived free animale and pulses in gram per day. Infant mortality rots (/tho.) - Annual deaths of infants under on year of age Death rate (/thou) agss 1-4 - Annual1 deaths per thousan.d in age group 1-i. per thousand lIve births. yearst, to chIldren in thie age group; ewageated ae on i.dicot.r of Life ..pOct...y at birth (yr.) - Av-rege nnacer of yssrs of life remaining st malnutrition. birth; ususlly five-year averagcs ending in 1960, 1970 and 1975 for develop- ing cocre.Education r... r-pr-duction rate - Av-rogn number of liv daughters. a va w .Ill bear Adjusted snroll,unt ratio - primary school - Enr.llmest of all ages as pa- Ic her norml -productiv- pnriod if she e.periences present age-specific centgeg of primary school-age population; inc ludes children aged 6-11 years f-rtility reLeu;uo_ally five-year averages ending in 1960, 1970 and 1975 but adjusted for different lengths of primsry education; for co-trise with ir developing coutries. usivereal education, enral1,umvt ma excee.d 100% since sam pupils are bel1v Population grovib rat C%) - total - Lepoud annual growth rates of mid-year or obove the official ebhol oge. population for 1950-60, 1960-70 and 1970-75. Adjusted enrollment ratio - secondary school - Conputed as shoe; secondory P.pul.tion crovth rate (1) - urban - Cumputed like growth rate of total education requires ot least four years of aprvdpiaytsrcin population; different definitions, of urban ar..easmay sffect oeparability of provides gSmnerl, vocational or teac.her traiing Instructions for pupils data among conre,of 12 to 17 Vears of age; correspondence noureps are g...r-11y excluded. Urban population (% of total) - Rtatt of urban to total population; different Years of schooling provde sfrt n econd levels) - Total years of defiitins f uran rea ma affct onprabiityof ataceen oontree.schooling; at secondarydevel vocttional instruction may be partially or d.fi.itiona f rb..areas my offset cmpmbility of datesmou cyuntciesad. panstrctrn peren) -Chldrn (-1 yers, wrkig-ge 1164 ear),voctioalenrllent(% f acodayl Woatyna istiutinsincud As, tretired (p5 year. adovr - shide. per0 tge of.) mrid-year1-6 pouaston. techtoial, industrial or othe p.drogr- wh.ichopeate indepetindentcly oda scd dep irndenc 5 ratio - . factoao p pulation under 15 and-65and Poverationts department of secondary iottthe lpovra. hc prt .d.l ra of. dgepen.. 15 trough .I.o ...to ..r1 5 rt 64... dultpitrs.of rste d(I y i-tLitertenadut (al ora ndwie opr cofmi greneoyraio-isiao poplaionuner 5 nd654nd vedtoItag liof. rtota adult puLtiont agd.15 years anred oe.d-i. pr lie aborforc in ge Roupo of154 years.to -dr1en65adoatoetgoftt1dl olto .d1 yr .dwr othei.b. fnorce - s gce grors(aup ot1564e. to)-Cuuaierubrofacpor os of-iyp.. -it-oto dvces under auspIcenv ofan naioa faItly planning .cprtgre peronaorre ubs -Aeaenmero esnie re nocpe ucice ioception. -cnetional dwellings In urban reen; duelling. seclude non-peomanet F,osily pl.anoln - uoers (% of married w-ne) - Percentages of married wonn of structures ad unoccupied parts.- ,hl1d-b..ring ago (15-44 years) who us birth-control device to all married Occupied dwellings without piped ustar C1) - Occupied convetional dwellines cu-n sm ago group. in urban and mrur1 areas without inaide or outside piped water facilities as perrcentage of all occupied dwe1Lligs. Euployment Ac to electricity C% sf all deelinig. - Conventional dwellings with 7oto1 labor force (thou...nd) - Econonically active Persons, including armd electricity in living quarters as percent of tots1 dweilings is urbas and forc en nd u-oplayed but exclu.ding housewives, students, etc.; definitions rural areas. In -sriu coun...tries are not cespsr-ble. Rural drellings connected to electricity (%) - Conputed as shove for rurl La1bor force in ucricu1ture CT) - AgricuIturo1 loabr force (in fraring, forestry, d-ellings only. h tittg sod fishing) as percentage of total loabr farce. U.emplayed (% of labor farce) - Oeplayed are ueually defined as persons who Consumption urn able ad willing iu take aJoh, out of a job on a given day, ronsatad out Radio receivers (par thou pop) - All types of receivers for radio broadcasts of a Job, and see king work for a specified minimums period not exceeding one to As...ral public Per thousand of population ; enciude unlIcense..d receiver .rek; may not be cep-rble betwee coutries due to different defimitioma In countries and in rests when registration of redio sets wa in effect; ~f unemployedad sou rce of data, e.g., employment office etatistics, sample dats for recent years may not be conparable since meet coutries abolished P-ssemeercarsm (per thou Pop) - Passenger cars conpri.e motor cars seating Incam dietributiivn Perc...tege of private inca (both in cask and kind) lesth an ight persona; exclu.de.saublanes, hsrees and military received by richest 5%. richest 20%, poareet 20%. and Poorest 40% of house- vehIcle.. holds. Electri.ity (kwh/yr per caP) - Annual toraumption of Industrial, cnser-ial. public and priv-te electricity In kilowatt hours Per capita, generall1y DistributiOn of land ownrerhipo-Per ...toase of loand mind by wealthiest 10% b.asd on production data, without all--nc far losses in grids hut allo-- sod poorest 10% of leand awa.str. ing for imports and exports of electricity. NewsePrint (kg/yr per us)- Per -apita annual consumption in kilograme Health and Nutrition estimated free dasticl) production plus net imports of newprint. Population per physician - Population divided by mcber of practicing  ANNEX I Page 3 of 3 pages ECONOMIC IND1CATOItS (% and in GROSS NATIONAL PRODUCT IN 1975 ANNUAL RATE OF GROWI'H -- constant prices) US$ Mln. % of GNP 1961-65 1966-70 1971-75 GNP at Market Prices 24,900 100 9.0 7.7 11.3 - Gross Fixed Domestic Investment 7,560 30 11.3 3/ 11.2 21 11.2 21 Exports of Goods 5,341 21.4 9 0 10.9 23.6 2 Imports of Goods 5,342 21.4 10.7 - 12.7 2- 22.3 LABOR FORCE IN 1975 GOVERNMENT FINANCE Mln. % General Government (lei bill.) % of GDY 3/ Agriculture 3.9 38 1975 1975 Industry 4.0 40 Services 2.3 22 Total Receipts 238.6 47.9 Total Expenditure 236.2 47.4 Total Surplus 2.4 0.5 RETAIL PRICES 1971 1972 1973 1974 1975 (1966 100) 101.6 101.6 102.4 103.7 103.9 BALANCE OF PAYMENTS (Mln. US$) 1971 1972 1973 1975 MERCHANDISE EXPORTS 1975 Exports of goods 2,102 2,884 3,667 4,858 5,341 Imports of goods 2,102 2,910 3,424 5,049 5,342 US$ Mln. % Trade balance 0 -26