Romania - Second Turceni Thermal Power Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. P-2439-RO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INVESTMENT BANK OF ROMANIA WITH THE GUARANTEE OF THE SOCIALIST REPUBLIC OF ROMANIA FOR A SECOND TURCENI THERMAL POWER PROJECT December 21, 1978 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit : Leu (plural Lei) 1. Official Rate Lei 4.47 = US$1.00 Leu 1.00 = US$0.22 2. Tourist Rate Lei 12.00 = US$1.00 Leu 1.00 = US$0.08 3. Conversion Rate for Traded Goods Lei 18.oo = US$1.00 Leu 1.00 = US$0.06 The official exchange rate of lei 4.47 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 March 1978, a trading rate of lei 18 per US$1 has been used to convert the prices of all traded goods; this rate is considered representative of the average cost of convertible foreign exchange. The rate of lei 18 per US$1 is being used by the Government to convert national income statistics from lei to dollars. Consequently, this rate has been used as the base rate for calculation in the appraisal. Fiscal Year January 1 to December 31 GLOSSARY OF ABBREVIATIONS CIEET - Industrial Central for Electric Power and Heat CIPEET - Industrial Central for Production of Electric Power and Heat CIRE - Industrial Central for Transmission and Distribution of Power ISPE - Design Institute for Thermal Studies MEE - Ministry of Electrical Energy GWh - Gigawatt-hour = 1 million kWh toe - Tons oil equivalent  FOR OFFICIAL USE ONLY ROMANIA SECOND TURCENI THERMAL POWER PROJECT LOAN AND PROJECT SUMMARY Borrower: Investment Bank of Romania Guarantor: Socialist Republic of Romania Beneficiary: Turceni Enterprise Loan Amount: US$70 million equivalent Terms: Repayable in 15 years, including 3 years of grace, through semi-annual installments, with interest at 7.35 percent per annum. The Investment Bank will carry the foreign exchange risk. Project The project would consist of a thermal power station with Description: four 330-MW lignite-fired units. It would also include about 288 km of 400-kV transmission lines connecting Turceni with Cluj. It would be a second stage extension to the first 4x330-MW thermal power station at Turceni which is being assisted with Bank financing under Ln. 1028-RO. Cost Estimates: Foreign US$ Millions as % Item Local Foreign Total of Total A. Thermal Power Station 302.8 85.6 388.4 22 Physical Contingencies (10%) 30.3 8.5 38.8 22 Price Escalation (13.3% on foreign exchange costs) - 12.5 12.5 100 Sub-Total 333.1 106.6 439.7 24 B. Transmission Lines and Substations 29.6 8.6 38.2 23 Physical Contingencies (10%) 3.0 0.9 3.9 23 Price Escalation (9.5% on foreign exchange costs) - 0.9 0.9 100 Sub-Total 32.6 10.4 43.0 24 Total Project Cost 365.7 117.0 482.7 24 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.  Financing Plan: US$ Millions Local Foreign Total Turceni Enterprise) 365.7 47.0 412.7 Government ) IBRD - 70.0 70.0 Total 365.7 117.0 482.7 Estimated Disbursements: US$ Millions Bank FY 1979 1980 1981 1982 Annual 6.2 33.0 28.4 2.4 Cumulative 6.2 39.2 67.6 70.0 Rate of Return: At least 6.4 percent Staff Appraisal Report: No. 2243-RO; December 19, 1978 EMENA Projects Department  REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INVESTMENT BANK OF ROMANIA FOR A SECOND TURCENI THERMAL POWER 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 $70 million to help finance a Second Turceni Thermal Power Project. The loan would have a term of 15 years, including 3 years of grace, with interest at 7.35 percent per annum. PART I - THE ECONOMY I/ 2. The first basic report on Romania (Report no. 1601-RO, "The Indus- trialization of an Agra:rian Economy under Socialist Planning") was circulated to the Executive Directors on April 20, 1978. An economic mission visited Romania in mid-May to collect information on economic performance in 1977 and to discuss the 1978 Annual Plan and the new economic measures announced in February 1978. This part incorporates its findings. Country social and economic data are given in Annex I. 3. Over the past 25 years the Romanian economy has undergone a radical transformation and has 3sustained one of the highest growth rates in the world. The average growth rate of national income during the period has been 9.7 percent per annum. The level and diversification of industrial production has increased rapidly, providing the basis for the modernization and expansion of other economic sectors and a general increase in labor productivity and national income. With the transfer of labor from agriculture to industry, the population has becorme increasingly urbanized. Standards of living have increased substantially!, not only because of the growth of personal incomes but also because of the provision through the state budget of expanded and improved education, medical services, housing and social expenditures of other kinds. Furthermore, Romanian participation in the world economy has changed significantly as the level of trade has risen and its composition altered. 4. The changes in the level and structure of economic activities be- tween 1950 and 1975 represent the outcome of a development strategy designed to accelerate the rate of growth and to catch up, as quickly as possible, with the level and structure of development in the developed countries. The main features of the strategy can be summarized as: high and increasing rates of saving and investment; the creation of a broad industrial base; the devel- opment of local natural resources; the reorganization and modernization of agriculture; the balanced regional distribution of production and income; the expansion of foreign trade and international economic relations; and the development of human resources. 1/ This part is identical to the description of the economy included in the President's Report for A Roman Seamless Pipe Project, to be considered by the Executive Directors on the same date as the proposed project.  - 2 - 5. The main instrument for carrying out the strategy has been the system of comprehensive central planning and management. Economic management is organized along socialist principles which include state and cooperative ownership of almost all productive resources. Economic activity is directed by means of obligatory development planning coordinated by the central party and government authorities. The national plan, drawn up on a five-year time frame and elaborated each year in an Annual Plan, sets out for the economy as a whole, by sector and branch and on a regional basis, specific tasks for economic and social units. The plan is drawn up through a combination of central directives and aggregation of individual enterprise plans, any dif- ferences being reconciled through discussions between the entities involved. During the late 1960s and throughout the present decade, Romania has under- taken measures to improve the planning and management system, to increase the responsibility of enterprises in preparing and implementing the plan and to orient the economy to a more efficient use of resources (see para 20 for the latest changes). 6. 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. Enter- prises subordinate to the Centrals are responsible for production which is controlled through a system of financial and physical production targets. In agriculture, large State farms and cooperatives are the predominant units of production. 7. To achieve the objectives of rapid growth and structural change, the Romanian authorities have made great efforts to mobilize domestic resources for development and to maintain a high rate of capital formation. Over the past 25 years, investment has grown at 13 percent per annum, and by the 1971- 75 Five-Year Plan, the proportion of national income utilized for accumulation had risen to 34.1 percent (equivalent to 27-28 percent of GNP). The sectoral allocation of investment throughout the period reflected the priority of industrialization and the creation of a broad industrial base oriented towards self-sufficiency; approximately 50 percent of investment has been allocated to industry and, of this, by far the largest part has been directed to the producer goods sector. This has resulted in rapid growth of the industrial sector, over 13 percent per annum during the last decade, with the producer goods sector growing more rapidly than consumer goods. In 1976 industry was the leading sector of the economy, accounting for almost 60 percent of national income, and employing approximately 32 percent of the labor force (and almost 33 percent in 1977) compared with 14 percent in 1950. Heavy industry, led by chemicals, ferrous metallurgy, engineering and machine building, comprised 62 percent of gross industrial production. 8. This industrialization strategy has greatly increased the demand for raw materials and energy. Romania has concentrated on exploiting local resources of fuels, metals and minerals to be as self-sufficient as possible in these items. However; in spite of the rapid growth in production of the wide range of raw materials found in Romania and recent efforts to conserve and economize in the use of raw materials and energy, Romania has become a net  - 3 - importer of many important items, particularly coal, iron ore and oil. The rapid growth of energy consumption, 8.6 percent per annum since 1950, has outpaced the growth of domestic production. Romania started to import oil in 1968 and became a net importer of energy in 1972. 9. Notwithstanding the emphasis on industrialization, agriculture remains a key sector of the economy, still employing 34 percent of the labor force in 1977 (compared with 74 percent in 1950). Apart from supplying foods and other agricultural products as inputs for agro-industries, the sector also supplies about 30 percent of the nation's convertible foreign exchange earn- ings. Though agricultural output almost tripled in the last 25 years, the faster growth of non-agricultural sectors has reduced the share of agriculture in national income to about 18 percent by 1976. Over the past decade, agricul- tural performance has improved with the increased emphasis on agricultural development and the increased investment funds made available. However, the level and growth of production have remained below the sector's potential. 10. Romania's population growth is about 1 percent per annum. The rapid growth of industrial employment has therefore drawn labor from the rural areas. The average GNP growth of 9 percent per annum implies a percentage growth in output per head of about 8 percent per annum, up to an estimated GNP per capita of US$1,580 in 1977, based upon official national income information using the World Bank Atlas methodology. 11. The organization of the economy is such that all labor is employed (indeed, required to work). There is, however, some seasonal labor surplus in agriculture. Income distribution is also relatively equal, through govern- ment policy controls over the level, growth and structure of wages. By law the maximum wage is limited to five and a half to six times the minimum. Monthly wages were increased by 8.3 percent in 1976 to an average of 1,964 lei. The Government also promotes its income distribution policies through regional allocation of iindustrial investment. 12. The Government: aims to give the population a basic needs package, partly by providing services such as education, health and housing. From this basic level, the Government has planned annual increases in living standards. Real incomes have risen at an annual rate of 6.6 percent since 1950, with the growth rate accelerating particularly in the last decade as more benefits of a rapidly expanding national income were channelled to consumption. Prices of essential consumer goods and services such as foodstuffs, rents and urban transport remain low and most social services, notably education and health care, are provided free of charge. 13. The value of Romania's trade grew at an average annual rate of 13 percent in the past 25 years, with a gradual acceleration in the last decade, reflecting not only the effects of international inflation but also an increase in the importance of trade, particularly industrial imports, to the economy. The level of imports rose in response to the need for capital goods and raw materials, reaching US$7.02 billion in 1977. Exports also grew rapidly, reaching a level of US$6.88 billion in 1977, and the share of manufactured  - 4 - goods increased to 50 percent, reflecting the progress of Romania's indus- trialization. Trade with LDCs and developed market economies has also been increasing rapidly in response to policies of diversifying sources of raw material supply and as a consequence of exports of more manufactured goods. In recent years, there has also been a tendency to move away from trade on a bilateral basis towards trade involving multilateral payments, within the framework of the general trade cooperation agreements signed with almost all of the country's trading partners. These agreements also covered cooperation in production, technical assistance and economic relations. In 1977, the convertible balance of payments deteriorated, reversing the trend of the previous three years. After a surplus of US$76 million in 1976, the trade balance had a deficit of US$81 million in 1977, as a result of additional imports made necessary by the earthquake, the diversion of export goods to the domestic economy for reconstruction and continued weak demand in the developed countries for some Romanian exports. With an increased deficit on the invisibles account (US$192 million compared with US$137 million in 1976), there was a current account deficit in 1977 of US$273 million compared with the 1976 deficit of US$61 million. 14. In spite of these developments, the structure of Romania's trade with the developed market economies is still characterized by exports of natural resources and imports of capital goods. Because of the present low level of reserves, any instability in export earnings, as frequently arises from shortfalls in agricultural output or softening in prices tends to place the import program, largely sophisticated machinery and components, in imme- diate jeopardy. Recent Economic Developments 15. The Five-Year Plan under implementation covers the period 1976-80. The high growth rates experienced during 1971-75 are planned to continue. The pattern of growth planned for this period suggests that the present decade has been viewed as a decisive period in the achievement of long-term objectives, during which Romania will overcome the major constraints on its transformation from a developing country into a developed and technologically advanced coun- try. There have been substantial and comprehensive revisions to the Five-Year Plan targets during 1977 to help accomplish this. In July, increased targets for standards of living were announced and in December, following the Eleventh Conference of the Romanian Communist Party (RCP), revised targets for all other areas of the Plan were announced. Also, in January 1978 important decisions were taken to increase work incentives substantially by allowing workers to participate in sharing the profits of enterprises (see-para 20). 16. According to the revised plan, national income is to grow at 11 percent per annum between 1976-80, practically the same rate as was achieved between 1971 and 1975. Gross industrial production will increase at 11.5 percent, compared with the original target of 10.2-11.2 percent, while gross agricultural production is expected to grow at a rate of 6.9-9.0 percent per annum, which would require a significant improvement over previous results in that sector. In addition, investment is to increase by 12.7 percent per annum, approximately the same rate of growth as in the original plan. However,  - 5 - the revised plan contains a larger number of investment projects, as new projects were added folLowing a reexamination of existing projects which led to a reduction in investment costs of about 10 percent on average. This reexamination, which took place in 1976 and 1977 was part of the general campaign to increase utilization of existing capacity and to economize on the consumption of raw materials and intermediate goods. The volume of foreign trade is to increase by 109.1 percent in real terms over the five years, a much faster rate of growth than in 1971-75 when trade merely doubled in current prices. Furthermore, the Government plans to encourage the growth of exports so that it exceeds that of imports, so as to pursue its long-term objective of reducing external debt and allowing for the accumulation of reserves. While the rate of growth of consumption will remain below that of production, it will neviertheless be increased under the revised plan. Real wages are now to increase by 32.3 percent over the five years compared with the previous target of 22 percent. As a result, targets for socialist retail trade and services for the population have been increased. 17. The economy was dealt a severe blow on March 4, 1977 when a violent earthquake occurred in the east of the country, causing severe damage in the vicinity of Bucharest. The Government estimated that 1,570 people were killed, 11,300 injured and that it caused damage valued at US$2 billion. US$1.4 billion of the total damage was to buildings and associated utilities, of which US$1 billion was in housing. Of the remaining 30 percent of damage, almost all was in inventories and production. The earthquake also had a substantial detri- mental effect on the country's balance of payments' prospects; the net balance of payments cost is estimated to be approximately US$630 million during 1977 and 1978. 18. The Government organized immediately an intensive reconstruction effort with the stated aim of avoiding any impact upon the implementation of five-year plan targets. This required additional efforts from the population in the form of labor, e.g. work on one Sunday per month, and money. While these efforts enabled the economy to continue its growth, 1977 plan targets were only partially fulfilled. National income increased by 8.6 percent com- pared to a plan target of 11.3 percent and an increase in the previous year of 10.5 percent. Industrial production increased substantially more than the plan target (12.5 versus 10.5 percent). In net production or value added terms, however, growth was significantly lower, since reductions in production costs were less than planned and because of the need to make repairs after the earthquake. For reasons other than the earthquake, chiefly climatic and management problems, gross agricultural production fell 1.3 percent short of the 1976 level, and was far below the plan target of 2-4 percent growth. The gross output of the construction sector rose rapidly; much of the addi- tional output constituted repairs and the sector provided a relatively large share of growth in national income. The impact of the earthquake showed up clearly in the growth rates of investment and trade. The volume of investment increased by 11.5 percent rather than the 16.7 percent planned, reflecting the diversion of construction resources and manpower to repair work. The volume of trade increased in current prices close to that planned (14.8 versus 15.5 percent) but with imports increasing more rapidly and exports less rapidly than planned.  - 6 - 19. The 1978 Annual Plan indicated growth rates similar to those planned in 1977. National income was planned to increase by 11-11.5 percent, gross industrial production by 10.6 percent and gross agricultural production by between 6.9 and 16.1 percent, with the respective net production growth rates being somewhat higher as a result of planned decreases in material expenditures per unit of final product. Investment was planned to increase by 16.8 percent and foreign trade by 19.1 percent. Real incomes of the population were projected to increase by 7.9 percent. Mid-year reports suggested that the growth of production during 1978 was likely to approxi- mate targets, although there have been indications of delays in carrying out investments. The recently published Annual Plan for 1979 signals no significant deviation from the previous path, although the target for national income (8.8 percent) does suggest a slight deceleration in growth. Net indus- trial production is planned to grow at 11.5 percent (in keeping with the new economic measures, the 1979 Plan specifies industrial growth in net rather than gross terms), with particularly high rates of growth planned for such indus- trial branches as machine tools, engineering and electrical goods. Gross agricultural production is planned to increase at 5.1-5.6 percent, foreign trade at 16.6 percent and investment at 9.1 percent, substantially below the 1978 target. Real incomes of the population are expected to increase by 7.5 percent. 20. In February, 1978 the Government announced changes in economic and financial mechanisms designed to improve the planning and management of the economy, to stimulate improvements in labor productivity, in cost reduc- tion and efficiency of production and also to make existing provisions for enterprise self-management more effective. The major change announced was the introduction of net production as a major plan target, both for inducing enterprises to fulfill plan objectives, particularly in the areas of increased efficiency and reduction of costs and as the basis upon which worker's wages and bonuses are paid. In future enterprises are also to retain a higher pro- portion of profits, have increased responsibility for socio-cultural expendi- tures, be more concerned in the final stages of the annual plan preparation, be permitted to enter into longer term contracts to ensure a closer correla- tion between the plan and actual contract provisions and will have more direct responsibilities for the achievement of foreign trade targets. These measures are now under detailed discussion within Romania and are expected to become law in 1979. It is too early to make a definite judgment, but it does appear that they are designed to make the existing management and planning system operate more efficiently rather than to cause radical changes. However, they are a step in the direction that the basic economic report suggested was desirable if the economy was to meet its objectives. Furthermore, they will set up new pressures between the various levels of the economy which may lead to more substantial changes in the future. External Assistance 21. The expansion of Romania's trade with the non-socialist industrial countries has led to an increased need to obtain convertible currencies to pay for imports from those countries. Romania has met this need both by  - 7 - borrowing abroad and by mounting a major effort to expand exports and tourism earnings. In 1977, new commitments of convertible medium and long-term loans totalled US$843 million and consisted mainly of supplier and financial credits with relatively s'hort repayment periods. The gross inflow of conver- tible medium and long-term loans during the year was US$890 million (not counting US$38 million from the IMF). This represented a net inflow of US$329 million after accounting for the country's repayment obligations. There was also a net inflow of US$156 million on short-term during 1977; this was the result of the Government's temporary reversal, because of additional financing needs generated by the earthquake, of its policy to reduce reliance on short- term credits. 22. As part of its effort to expand its foreign trade and cooperation relationships, Romania has also taken active steps to attract long-term private capital. A regulation passed in 1972 defines the conditions under which foreign firms can establish joint ventures with domestic enterprises, preferably in foreign exchange earning or saving industries. As of November 1978, eight joint venture agreements had been signed and a number of others announced. In contrast with the earlier ventures, which involved total direct foreign investments of only US$10-15 million, the seventh and eighth involve far larger sums. The seventh agreement, signed in early 1977 with Citroen, involves a contract of FF' 2.5 billion (about US$500 million) and will lead to a total capital inflow of aproximately US$250 million. Even larger inflows, appproximately US$500 million, are expected as a result of the eighth agree- ment, with Kuwait, for the construction of a petrochemical complex costing US$1.25 billion. In the past twelve months, several more ventures have been announced; a joint shipping company in cooperation with Libya, a joint produc- tion company with British Aircraft, a joint production enterprise with Data Products Corporation of UISA and a joint venture for passenger aircraft with VFW-Fokker. Many other joint venture proposals are at various stages of negotiations. 23. Romania also receives medium-term trade credits from the U.S. Exim- bank and trades under Government guaranteed supplier credit schemes, ECGD, COFACE, and HERMES with t:he United Kingdom, France and the Federal Republic of Germany, respectively., During 1977, Romania became the first East European recipient of a Japanese Eximbank loan, receiving US$80 million for the expan- sion of the port of Constanta. In 1975 Romania succeeded in securing a US$100 million, eight-year loan from Kuwait as part of a general cooperation agree- ment and also a US$420 m:Lllion loan from Iran on concessionary terms. How- ever, it is in its Eurocurrency borrowings that the Government has made most progress in improving its access to capital markets and in raising substantial sums at good and improving terms. During 1977, it negotiated two Euro- dollar loans totalling US$125 million. In January 1978, Romania negotiated a further US$100 million on the Eurocurrency market, and it was recently announced that the Government has negotiated a new Eurocurrency borrowing of US$200-300 million. The terms for this eight-year loan, with four years grace are 0.625 percent above LIBOR for the first three years and 0.750 percent for the remaining years. As part of its strategy to secure long-term energy supplies, Romania has concluded a long-term contract with Occidental Petroleum for the purchase of coal from the U.S.; a banking consortium raised a US$53 million loan in April 1978 to finance Romanian participation in the Island  - 8 - Creek Coal Mine in West Virginia. In addition, Romania has access to non- convertible currency investment credits from the International Investment Bank, Moscow. 24. Nonetheless, Romania's access to long-term finance in convertible currencies is still very restricted. The IBRD is the major source of long- term development finance, though, as shown above, Romania is making efforts to improve its access to financial markets. The Bank's presence on a signi- ficant scale, and its effort to associate Bank financed projects with co- financing through supplier or financial credits, has a positive influence in this regard and serves to build outside confidence in the country, thereby enhancing in the long-term Romania's independent access to the world's financial markets. Prospects 25. 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. To attain its growth objectives, however, Romania will have to rely on a major expansion of exports of manufactured goods in order to finance modern foreign technology and an increasing depen- dence on imported raw materials and fuel. 26. 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 achievement of export targets requires improvements in the quality of products and responsiveness to customer demands, areas in which the economy appears to have lagged in past years. To keep up with these changes and requirements, large programs of education and manpower training have been mounted, invest- ments in scientific and technological research have been emphasized, and efforts are being made to strengthen technical cooperation with industrialized countries and international organizations. The increasing diversity and com- plexity of Romania's economic structure also require continuing improvements in the efficiency of economic planning and coordination and further refine- ments in economic management. 27. The growth rate is expected to remain quite high by international standards and if its present momentum is maintained, Romania will be among the more developed of the high-income, developing countries in the 1980s. The Government plans to achieve this high growth rate by emphasizing, first, the utilization of the country's own resources and a large local investment effort, and second, more effective use of human, capital and natural resources. However, in order for Romania to attain its growth targets and its long term  - 9 - plans for creating a competitive industrial economy, it will have to attract foreign resources and technology and secure loans to support its development efforts. Creditworthiness 28. As of December 1977, Romania's total medium and long-term external debt amounted to US$3,491 million. Most of these debts (US$3,402 million) were denominated in convertible currencies, the major creditor countries being the Federal Republic of Germany, France, the United Kingdom (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 con- vertible debt service payments are estimated to be in the order of US$900 million a year in 1978 and 1979. The convertible debt service ratio was 19 percent in 1977 and is expected to be 18 percent in 1978. 29. 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$3,403 million (not counting U:S$580 million in non-factor services) in 1977. The preferential trade statuas accorded to Romania by the European Community in June 1973 is facilitating the expansion of such exports as is the granting of most favored nation status by the U.S. Since the early 1970s, the Government has restricted the use of short-term credit from Western suppliers in an effort to improve the structure of the country's external debt. In view of the earthquake's impact upon the balance of payments, the Government indicated that there would be a temporary reversal of this trend and short-term debt increased again in 1977. Assuming a continuation of present export and debt management policies, we estimate that the debt service ratio will be about 20 percent at the end of the 1976-80 plan period, after which it will remain fairly stable. 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 substantial Bank lending. 30. 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 U.K. and in the U.S. 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 1975. Settlement of the U.K. claims proved more difficult, but a final agreement was signed in January 1976. The Bank was also informed in late 1976 of certain Swedish claims concerning public loans from the pre-war period, nationalized Swedish property and other interests, such as concessions granted to Swedish companies before the Second World War. The eleventh meeting to discuss settlement of these claims was held in Bucharest in October 1976 and further discussions were planned at a date to be established through  - 10 - diplomatic channels. The Bank has been unable to obtain a consistent picture from the two Governments of the present status of this matter and has, there- fore, urged the Romanian and Swedish authorities to clarify their respective positions directly with each other. PART II - BANK GROUP OPERATIONS IN ROMANIA 31. The proposed loan and the proposed loan for the Roman Seamless Pipe project ($40 million) would bring total Bank commitments to Romania to US$1,032.8 million for twenty loans in agriculture, industry and power. Disbursements under the Bank's initial loans were slow during 1975, but this situation improved considerably during 1976 and 1977. Annex II contains a summary statement of Bank loans to Romania and notes on the execution of ongoing projects as of November 30, 1978. 32. 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 expand foreign exchange earnings or savings. The Bank is assisting the Government by helping to mobilize cofinancing for appropriate projects. Bank lending also aims at supporting the Government's efforts to introduce new industrial technologies, to improve the quality of products and production efficiency, to reduce production 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. 33. A number of further loans are under consideration. Projects for irrigation and drainage, poultry production, pig production, horticulture, power and a number of industrial projects, have been proposed. The Government has also requested that the Bank consider lending for a major navigation canal linking the Danube and Black Sea. 34. In addition to lending, the Bank (through EDI) has assisted Romania by conducting industrial and transportation project appraisal training courses for 163 Romanian officials in Belgrade in 1973 and in Bucharest in 1975, 1976 and 1977. Additional courses, including one in agricultural project appraisal, are planned. The methodology taught in these courses is becoming more widely known in Romania and is expected to begin to supplement the methodology normally used by the Romanian planning authorities. 35. The projects, for which assistance has been committed or is being considered, represent only a small portion of Romania's total need for external financing and of its total disbursed convertible debt. However, they will provide a substantial net addition to the inflow of convertible currency finance, and may set a pattern for obtaining longer-term convertible finance  - 11 - from other sources. The disbursed debt outstanding to the Bank is expected to constitute about 13 percent of Romania's total projected convertible currency debt in 1980; the Bank's share in Romania's debt service payments in 1980 would be about 4.5 percent. PART III - THE ENERGY SECTOR Energy Resources 36. Romania relies predominantly on domestic sources of primary energy and still meets more than 80 percent of its energy needs from domestic oil and gas resources. Natural gas has been the country's most important source of primary energy since 1965, and accounted for 44 percent 1/ of total consump- tion in 1975. Of the balance, oil accounted for about 33 percent, coke and coal for about 19 percent, and hydroelectricity for about 3 percent 2/. However, domestic production of crude oil and gas is now slowly declining despite intensive secondary and tertiary recovery efforts. Although major efforts to increase the use of other domestic sources of primary energy such as coal, lignite, bituminous shales, and hydropower are underway, and a successful conservation program has been running since 1973, Romania became a net importer of energy, in 1972/73. It is estimated that by 1985 fifty percent of Romania's commercial energy needs may have to be imported, mostly in the form of crude oil. 37. Energy demand overall in Romania increased from 6.8 million tons oil equivalent (toe) in 1950 to about 52.1 million toe in 1975 as a result of rapid industrialization. This trend is expected to continue and energy demand is expected to reach 78 million toe in 1980, in spite of planned conservation savings of 8 million toe in the industrial sector and 5 million toe of savings through increased waste heat recovery. Total gas consumption in 1975 was about 36 billion m3, of which about 3 billion m3 was produced in association with oil. Future production is expected to remain static at about 27 billion m3 and increased consumption in the future will be met through imports. Known reserves are expected to provide 30-50 years supply of natural gas at these extraction rates. Romania consumed or processed 19.7 million tons of crude oil in 1975, of which 14.6 million tons was domestically produced. Domestic crude is generally of very high quality with less than one percent sulphur content. About 90 percent of Romania's coal reserves are in the form of relatively low-grade lignite (1700-1800 kcal/kg compared to 7000 kcal/kg for conventional coal). Of a total reserve of around 9 billion tons, most of which is in the Oltenia region, about 3 billion tons is considered economically exploitable at present. 1/ Including natural gas liquids (NGL); 0.2 percent. 2/ Including imported electricity, 0.2 percent.  - 12 - 38. The Government's energy policy aims at diverting Romania's limited gas reserves increasingly for use as feedstock in the chemical industries, and basing additional power generation on low-grade domestic solid fuels such as lignite and shales; and on hydropower and nuclear. This places as much reliance as possible on domestic energy sources, increases the value added obtained from gas and some crude oil, and saves scarce foreign exchange by keeping imports of crude oil to the necessary minimum. The Power Subsector 39. In 1977 total interconnected generating capacity was 13,184 MW, accounting for about 97 percent of total installed capacity. Gross genera- tion and purchases were 61,595 GWh. The interconnected capacity comprises 2,951 MW hydro and 9,487 MW thermal under the Ministry of Electrical Energy (MEE), and 746 MW of plant, mostly thermal, operated by auto producers. Gross output from MEE power stations was 56,551 GWh; mostly generated from gas and fuel oil, coal and lignite, a minor amount from combustion turbine plants, and 9,800 GWh from MEE's hydro plants. Auto producers generated an addi- tional 3,306 GWh. With the completion of the final four units of the Turceni station, almost the full potential of Romania's lignite deposits will have been committed. 40. Romania's hydropower potential is assessed at 12,300 MW capable of providing 37,000 GWh p.a. from 630 sites. The present capacity of 2,951 MW is 24 percent of total hydropower potential. The government will carry out future hydropower development as far as economically justified, and with the exception of Danube schemes, this will be to meet system peaking needs. Romania's first nuclear plant is now under construction using USSR technology. Romania is actively negotiating for a second nuclear plant, probably based on Canadian technology, but the construction schedule has not yet been deter- mined. However, given the growing energy deficit it is likely that nuclear power will figure prominently in Romania's long-range energy program. The Market for Electrical Energy 41. Electricity supply is available to all towns and cities and to about 99 percent of the villages. The electrification of villages was effectively completed in 1976. Total electricity sales in 1977 were 49,690 GWh, an increase of 4.4 percent over 1976. This was a substantial decline from the 10 percent annual sales increase averaged between 1970-76 and was probably caused by the slowdown in construction activities caused by the March 1977 earthquake, and by reduced irrigation pumping as a result of favorable rainfall in 1977. It also reflects strong energy conservation measures introduced in 1973. 42. For the period 1978-85, it is estimated that load growth will be at an average annual rate of 6.1 percent. This primarily reflects a slower rate of growth in the industrial load of 5.3 percent p.a. compared with 11.3 per- cent p.a. over 1970-77; industry accounted for 71 percent of all power sales in 1977. Industrial investment will continue to be very large up to 1985,  - 13 - although the absolute growth rate of industrial production is expected to slow. The Government iis vigorously introducing a series of new energy con- servation measures across all sectors of the economy. Development Program 43. The Governmenit continues to attach high priority to the development of the electric power sector because it considers its development a necessary condition for the overall economic development of Romania. In planning to meet the expected load growth up to 1985, Romania follows a least cost develop- ment program that is consistent with its national energy policy objectives. It also takes into account adequate system reserve planning and performance criteria. Total investment by the MEE between 1978-85 in generation expansion, transmission and distribution is estimated to be $7.9 billion equivalent. Of this about $2.9 billion or 36 percent would be for thermal plants, $3.3 billion or 42 percent for hydro plants, and the balance for bulk transmission and distribution, dispatching and other sector investments which are the responsibility of the Ministry of Electrical Energy. The large amount for hydro plants reflects Romania's emphasis on multipurpose hydro installations, most of which have high initial costs. 44. While in making development plans for the power sector, the develop- ment needs and financial resources of the whole economy are taken into con- sideration, it is the Government's policy to ensure that a substantial part of the investments in the sector are financed from funds which are generated in the sector itself. Thus, in the period up to 1985 it is forecast that about 30 percent of the investments in the sector will be financed from funds generated by power sector enterprises. Role of the Bank 45. The Bank has made two previous loans to Romania in the power sub- sector to support its essential contribution to overall economic development; a $60 million loan in 1974 to help finance the first stage of Turceni thermal station (1,320 MW) and associated transmission (Ln. 1028-RO), and a $50 million loan in 1976 to help finance the Riul Mare-Retezat hydro station, a key component of a cascade development designed to supply hydro peaking power to the system (Ln. 1242-RO). Progress on Turceni I is good, and in spite of a nine-month delay, the last of the four units is expected to start up in December 1979, the original target date. Progress on the Riul Mare project has been delayed about one year because of recurrent shortages of manpower for tunnelling. These shortages are expected'to be overcome by the introduction of a tunnel boring machine in early 1979. Organization of the Sector 46. The Ministry of Electrical Energy (MEE) administers the sector through a board comprising the minister, three deputy ministers and the various directors of subordinate units. Power production, transmission and distribution facilities are operated by enterprises of which there are 21 for  - 14 - generation of power and heat under the Industrial Central for Production of Electric Power and Heat (CIPEET), and 19 for transmission and distribution under the Industrial Central for Transmission and Distribution of Power (CIRE). The Centrals serve as head-offices for the enterprises, collating and monitor- ing their investment and production plans, supervising their activities and reviewing their finances. They replaced the Industrial Central for Electric Power and Heat (CIEET) in October 1977, which was responsible previously for generation, transmission and distribution. 47. The financial performance and position of the electricity central (CIEET) in 1977 is considered to be satisfactory even though the financial rate of return was 2.2 percent. Costs per unit of power sold have remained virtually unchanged since 1974, and despite various financial changes in 1977 which adversely affected the financial rate of return, the central contributed about 30 percent of investment costs in the power sub-sector in 1977, a level that is expected to be maintained during 1978-85. One of the financial changes made in 1977 was a reduction of about 30 percent in power tariffs. However in Romania tariff levels do not convey to major power consumers the value of the resource inputs used for production of electricity, nor do they affect the level of electricity consumption which is controlled by strong and effective penalties and incentives which encourage energy conservation. Penalties amounting up to 200 percent are imposed on consumers who exceed their planned energy allocation while bonus payments to workers in power plants are related to efficiency and reduction of losses. The Government plans that the power sector will generate on average 30 percent of its own investment capital at least to 1985. The financial rate of return for the power sector is likely to continue to be low through 1985 reflecting the reduced tariff levels established in 1977. Nevertheless the net income of the electricity sector enterprises is expected to be sufficient to realize Government plans for the power sector to generate on average 30 percent of its own investment capital up to 1985. The Government has agreed that as part of the reporting requirements for the Project it would provide data on actual and planned performance of the power sector as measured by the physical and financial indicators now used by MEE or to be used in future by MEE; and that it would submit consolidated audited accounts annually for the two Centrals CIPEET and CIRE responsible for generation, and transmission and distribution respectively within four months of the end of each fiscal year. 48. The design institutes and the construction trusts are subordinated to the MEE and are responsible for the preparation, design, construction and supervision of major power projects in Romania, including the proposed project. There are also foreign trade enterprises dealing with the sector which serve as agents in the procurement of equipment from abroad. 49. Each enterprise is headed by a General Assembly of the Working People which is represented by a Working Peoples Committee and an Operating Management Collective which are responsible for overseeing the execution of plan targets in their enterprise. Executive responsibility is in the hands of the general manager who decides on and supervises the daily operations of the  - 15 - enterprise. Execution of the project is the responsibility of Turceni Enter- prise which was established in 1973 and is now carrying out the first-stage Turceni Project (Ln. 1028--RO). The Borrower 50. The borrower for the proposed loan would be the Investment Bank, which is the specialized agency, under the Ministry of Finance, for investment 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 begins with preparation; its staff appraises all major investment projects technically and financially and recommends for or against their financing to the Government. When a particular project and its financial plan have been approved by the Council of State, all funds are channeled through the Investment Bank in accordance with the approved financial plan. All payments for the execution of a project must be authorized by the Investment Bank which keeps separate accounts for each category in the financial plan for every enterprise. The Investment Bank is required 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 State. Its inspectors check whether the project is proceeding according to the schedule approved in the Plan. 51. While the Investment Bank's supervision and control function is thus rather strong during implementation of a project, its functions are much more limited during operation of a project. Although it has the right and obligation to verify that an enterprise is meeting the targets set in the investment plan, it has no legal authority to influence directly the manage- ment of the enterprise or to force the enterprise directly to take operational actions which it considers necessary. In practice, however, it can request such actions very effectively by reporting through the Ministry of Finance to the Government. 52. The Investment Bank is the channel for all sources of major domestic investment financing other than in agriculture, but its own funds for onlending as credits are relatively small. The primary source of its funds is the State Budget. The Government would ensure the availability of sufficient funds including foreign exchange requirements for the implementation and operation of the project (Section 2.02, Guarantee Agreement). The Government would also ensure that the Investment Bank can meet the debt service on the Bank loan (Section 2.01, Guarantee Agreement). The Government confirmed that the new economic reforms (see para. 20) will not affect the role of the Investment Bank as a channel for Bank funds, nor the agreements reached for the proposed project.  - 16 - PART IV - THE PROJECT 53. The Project was proposed to the Bank in February 1976 as one of a number of projects for which the Romanians sought Bank financing during the 1976-80 Five-Year Plan. In connection with the preparation of this project, the Government submitted a least cost development study (LCD) for the power sector in July 1977. A preparation mission visited Romania in January/February 1978 to discuss the project further, and the project was appraised in May 1978. Negotiations were held in Washington in December 1978. The Romanian delegation was led by Mr. Gheorghe Popescu, President of the Investment Bank, and included representatives of the Investment Bank and the Ministry of Electrical Energy. The Staff Appraisal Report (No. 2243-RO of December 19, 1978) is being distributed separately to the Executive Directors. Project Description 54. The project would consist of a thermal power station with four 330- MW lignite-fired units delivering 7,920 GWh p.a. to the interconnected system at a plant factor of 74 percent. The project would also include about 288 km of 400-kV transmission lines connecting Turceni with the city of Cluj to the north (see map). The project would be a second stage extension to the first four 330-MW thermal power station at Turceni (Turceni I), which is being assisted with Bank financing under Loan 1028-RO, and which is now under construction in southwestern Romania. The basic fuel to be used will be lignite. The project will consume about 11 million tons of lignite p.a. at full operation starting in 1984-85, and will require the opening of new mines. Total annual lignite consumption for all the existing and planned lignite-fired stations is estimated at 55 million tons p.a. beginning in 1985. Lignite production from existing known deposits would be capable of supplying this estimated consumption. Thus basic fuel supply is adequate and satis- factory arrangements to open the required new open cast and underground mines are in hand, and this was confirmed at negotiations. In addition to lignite, the Turceni station will also burn fuel oil for start-up and stabilization of lignite burning at partial load. This will consume an estimated 0.8 million tons of fuel oil p.a. The Government would furnish every six months lignite production data for the previous six-month period and production estimates for the next six-month period immediately following as was agreed for the first Turceni project. Project Implementation 55. The project would be implemented by the existing Turceni Enterprise, which has the experience of implementation of Turceni I, and is suitably staffed with experienced operational management. A project management team has been selected. It is being assisted by the Design Institute for Thermal Studies (ISPE), the design institute of CIPEET, which will provide overall project supervision and start-up engineering. Civil works and construction will be carried out by the Thermal and Electro-Mechanical Construction  - 17 - Trusts respectively from the Ministry of Electrical Energy, under the super- vision of ISPE. Design engineering is complete and construction of the building exteriors and foundations are about 25 percent complete. Interna- tional procurement will be handled by ROMENERGO the responsible foreign trade enterprise (see para. 48) and local procurement by the Turceni Enterprise. These sorts Af arrangements are the same as for the first Turceni project, are well established under the Romanian system, and are satisfactory. The develop- ment of the new mines to supply lignite to the project is expected to proceed smoothly. The project is scheduled for initial operation by 1982 and to operate at full capacity by 1983. Project Cost and Financing 56. The estimated itotal project cost including import taxes (about $1.3 million equivalent) is $482.7 million equivalent, with a foreign exchange component of $117.0 million. The Government has approved a convertible foreign exchange ceiling of $8.9 million for the purchase of direct imports for the Project (see para. 57). The costs of equipment and materials have been estimated including escalation covering the construction period (1978- 84). Physical contingencies have been estimated at 10 percent of the base cost. Price contingencies on foreign exchange costs are based on estimates of 9 percent for 1977, 7 percent for 1978, 6.5 percent for 1979 ind 6.0 percent for 1980-1984, for imported equipment, materials and components. Because local costs in this project are based on existing negotiated contract prices not subject to escalation, there is no price contingency on local costs. 57. The proposed Bank loan of $70 million would finance 60 percent of the estimated foreign exchange costs of the project. The proposed loan to the Investment Bank would be for a term of 15 years, including a 3-year grace period, and would be guaranteed by the Government. The Investment Bank would carry the foreign exchange risk on the Bank loan. The balance of the project cost would be financed by the Turceni Enterprise from its own sources of funds and by the State Budget. The project's construction and expenditures so incurred are authorized by Decree No. 239 of July 26, 1977 of the Council of State. Its approval and effectiveness would be a condition of effectiveness of the loan (Section 7.01, Loan Agreement). Procurement 58. Contracts for three complete turbine generator sets and minor elec- trical and mechanical equipment will be awarded through international competi- tive bidding (i.c.b.) in accordance with the Bank's Guidelines. Romanian thermal power equipment manufacturers are competitive, and are expected to win the turbine-generator contract. On the other hand, the contracts for the balance of i.c.b. items totalling about US$8.9 million are expected to go to foreign manufacturers. Participating Romanian manufacturers would be granted a margin of preference of 15 percent or the applicable customs duty, whichever is lower. To help maintain the planned implementation schedule, advance con- tracting on the items totalling $8.9 million has been allowed. There would be no advance contracting for the three turbine generator sets.  - 18 - Disbursements 59. The Bank loan will be disbursed against (i) 72 percent of foreign currency expenditures for imported equipment, components and materials and against 72 percent of the ex-factory cost of locally manufactured items for the 3 turbine generators; and (ii) 100 percent of foreign expenditures for other equipment for the thermal power station. Benefits and Risks 60. The project will help meet Romania's anticipated increase in power demand over the next 5 years. The need for the project was analyzed in a least cost development study for the power sub-sector prepared by the MEE and submitted to the Bank in July 1977. The Second Turceni Thermal Power Project forms part of a least cost investment program and was selected by the Romanians from available alternative schemes. This least cost program was acceptable to the Bank within the context of Romanian economic policy. 61. The electricity sector is an integral part of Romania's centrally planned economy under which all enterprises conform to national development plans which are financed from the State Budget. Since the various financial changes made in 1977 including the reduction of power tariffs (see para. 47), the profits of power sector enterprises have been reduced but this is intended to permit enterprises in the industrial and agricultural sectors to correspondingly increase their profits. In essence, part of the former benefits of the power sector are being transferred to these other sectors. For this reason, the performance of the power sector cannot be viewed in isolation from the rest of the economy. Since it is impossible to separate these former benefits from the sum total of benefits accruing to electricity users, it is not possible to calculate a true economic return for the project. The rate of return is at least 6.4 percent, using the pre-1977 price which is more representative of consumers' willingness to pay than is the present price. This figure is comparable to the economic returns of 6.5 percent and 8.6 percent calculated for the two previous power loans in Romania, respectively Riul Mare Retezat Hydropower and Turceni I. The rate of return is sensitive to changes in average revenue, but less sensitive to changes in the capital cost of the project. 62. No special risks are associated with this project. The agencies concerned with the project are all performing well under the first Turceni project (Ln. 1028-RO). No difficulties with respect to operational aspects, including fuel supply, are anticipated. No cost overrun is expected, but should additional funds be required for completion of the project, they would be provided either from MEE's own sources or from the State Budget.  - 19 - PART V - 1.EGAL INSTRUMENTS AND AUTHORITY 63. The draft Loan Agreement between the Bank and the Investment Bank of Romania, the draft Guarantee Agreement between the Socialist Republic of Romania and the Bank, and the report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement are being distributed to the Executive Directors separately. 64. Features of the project of special interest are listed in Section III of Annex III. 65. The special condition of effectiveness of the proposed loan is that the technical and economic indicators for the project have been approved by the Government and have become effective (Section 7.01, Loan Agreement). 66. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 67. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments December 21, 1978 Washington, D.C.  -20 - ANNEX I Page 1 of 5 pages TABLE 3A ROMANIA - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES ROMANIA /a LAND AREA (THOUSAND SQ. KK.) - MOST RECENT ESTIMATE) TOTAL 237.5 SAME SAME NEXT HIGHER AGRICULTURAL 149.0 MOST RECENT GEOGRPHIC INCOME INCOME 1960 Lb 1970 /b ESTIMATE Lb REGION /C GROUP d GROUP e GNP PER CAPITA (US$) 190.0 530.0 1580.0 1898.8 1796.4 2839.0 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 1342.0 3013.0 3803.0 1869.3 1525.0 2376.4 POPULATION AND VITAL STATISTICS TOTAL POPULATION, MID-TEAR (MILLIONS) 18.4 20.3 21.7 URBAN POPULATION (PERCENT OF TOTAL) 32.0 40.8 43.0 43.0 52.2. POPULATION DENSITY PER SQ. KM. 77.0 85.0 91.0 81.4 27.6 55.8 PER SQ. KM. AGRICULTURAL LAND 126.0 136.0 146.0 135.2 116.4 83.6 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 27.9 /f 25.9 25.4 26.2 34.8 40.0 15-64 YRS. 64.9 /f 65.5 64.8 63.4 56.0 55.3 65 YRS. AND ABOVE 7.2 Lf 8.6 9.8 9.9 5.7 3.8 POPULATION GROWTH RATE (PERCENT) TOTAL 1.2 1.0 1.0 0.8 1.6 2.9 URBAN 3.8 3.4 2.1 2.2 3.4 CRUDE BIRTH RATE (F_k THOUSAND) 23.9 19.0 19.7 19.2 27.0 31.7 CRUDE DEATH RATE (PER THOUSAND) 10.9 8.9 9.3 9.0 9.9 7.9 GROSS REPRODUCTION RATE 1.2 1.3 1.3 1.3 1.9 1.6 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. .. .. USERS (PERCENT OF MARRIED WOMEN) .. .. .. 38.0 19.3 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1970-100) 96.2 100.0 146.1 113.7 103., 114.7 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 105.0 118.0 118.0 /R 127.4 110.4 113.4 PROTEINS (GRAMS PER DAY) 81.0 92.0 90.0 /R 92.8 77.7 89.9 OF WHICH ANIMAL AND PULSE 24.0 28.0 .. 39.3 22.2 48.0 CHILD (AGES 1-4) MORTALITY RATE 4.9 /f 2.4 2.1 1.6 1.9 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 65.9 67.7 69.1 68.9 63.0 60.2 INFANT MORTALITY RATE (PER THOUSAND) 75.7 49.4 34.7 34.5 38.2 22.1 ACCESS TO SAFE WATER (PERCENT OF POP ULAT ION) TOTAL .. .. .. 68.3 67.7 83.0 URBAN .. .. .. 74.3 83.5 100.0 RURAL .. .. .. 64.4 41.5 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. .. 94.0 70.3 57.8 URBAN .. .. .. 94.0 90.7 99.3 RURAL .. .. .. 93.0 38.3 POPULATION PER PHYSICIAN 740.0 680.0 620.0 686.5 1310.8 976.9 POPULATION PER NURSING PERSON 300.0 200.0 180.0 339.0 849.2 676.1 POPULATION PER HOSPITAL BED TOTAL 130.0 /f 120.0 108.0 178.0 275.4 325.8 URBAN 50.0 If 50.0 60.0 70.0 129.9 250.0 RURAL 620.0 /t 770.0 730.0 1770.0 965.9 770.0 ADMISSIONS PER HOSPITAL BED .. 23.0 .. 15.3 18.9 18.7 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. 3.2 / .. .. 3.9 URBAN .. 2.8 /h .. RURAL .. 3.4 /h AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. 1.4/ .. 0.9 0.9 URBAN .. 1.3 /h .. 0.8 0.8 RURAL 1.4 /h .. 1.0 1.0 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. 49.0 /h .. 57.5 59.2 URBAN 86 0Lh 99.0 78.0 RURAL .. 27.0 L . 12.5  - 21 - ANNEX I 3ALK 3A Page 2 of 5 pages RIOmAYIA - SOCIAL INDICATORS DATA SHIET IREnRENCE GROUPS (ADJUSTED AVNEltS - MOST RECENT ESTIMNAT) sAe SAME NEXT 3I133U NOST RECENT GEOGRAPHIC INCORME INCOOK 1960 b 197 /b ESTILATE b REGION c GROUP /d GROUP L EDUCATION ADJUSTED ENROLLHEWT RATIO PRIMARY: TOTAL 96.0 113.0 109.0 108.0 97.6 104.1 PEuLL 95.0 114.0 109.0 99.5 87.4 120.3 SEMNDARYt TOTAL. 24.0 45.0 62.0 62.8 47.8 44.r rUow 22.0 36.0 59.0 63.4 42.6 44.0 VOCATIONAL (PRCEUIT OF SECODARY) 54.0 56.0 70.0 28.2 22.7 18.7 PUPIL-TEAIEt RATIO PRIMARY 25.0 21.0 21.0 24.9 25.4 30.4 SE0NDAEAY 16.0 18.0 19.0 17.3 24.9 16.3 ADULT LITERACY RATE (PERCENT .. .. 98.0 8.3 96.3 CONSUKPTION PASSENGER CARS PER THOUIS POPULATION .. .. .. 90.4 32.3 53.4 RADIO RECEIVERS PER TUSANID P1 PULATION 109.0 152.0 143.0 199.0 201.9 193.5 TV FECEIVERS PER TODUN POPULATION 3.0 73.0 127.0 132.5 97.7 108.4 NEWSPAPER ("DAILY GENRIAL INTEREST") CIRCULATION PER THOUSAND POPULATION 147.0 119.0 129.0 97.1 70.9 108.0 CINEdA ANNUAL ATTENDANCE PER CAPITA 9.0 9.8 8.9 6.6 4.4 EMPLOYMINT TOTAL LABOR PORCE (THOUSANDS) 9600.0 99D0.0 10400.0 FUIALE (PERCENT) 44.9 ,4.5 44.6 32.4 17.4 26.J AIt.ICULTURE (PECPWtS) 65.4 49.0 34.4 32.8 38-'. 25.7 IIDUSTRY (PERC=T) 15.1 23.0 32.7 PARTICIPATION RATE (PEnCEN2) TOTAL 57.1 56.0 55.9 39.1 33.7 40.1 MALE 64.5 63.3 62.8 56.7 50.8 55.8 FEKALE 30.1 49.0 49.1 29.7 12.6 24.7 ECONOMIC DEPENDENCY RATIO 0.7 0.7 0.7 0.9 1.4 1.6 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY :ICHEST 5 PERCENT OF HOUSEHOLDS .. .. .. 31.9 20.2 HICHEST 20 PERCENT OF HOUSEHOLDS .. .. .. 59.7 47.9 LOWEST 20 PERCENT OP HOUSEHOLDS .. .. .. 4.0 3.2 LOWEST 40 PERCENT OF HOUSIEOLDS .. .- *- 12.9 13.7 POVERTY TARGET GROUPS ESTiIMATED ABSOLUTE POVERTY IJICSMi LEVEL (US$ PER CAPITA) URBAN .. .. .. RURAL .. .. .. 194.9 157.9 ESTIAATED RELATIVE POVERTY lNCtv[E LEVE: (USS PER CAPITA) URBAN .. .. .. 295.1 448.8 RURAL .. .. 325.0 309.2 313.1 ESTmIATED POPULATION BELOW POVERTY INCOME LEVEL (PERCENT) UR3AN .. .. .. 18.2 23.2 RURtAL .. .. 10-20 24.2 54.5 HNot aailable Not applirable. NOTES /4 rh adJuStd gsroup av.'ra8.-.. fur ca..I* IndItor are POpuItiotro-vghted Reu trIc Pclant. e.cldtn. the e.t.rem. values of the indicator and the mot populated country in each group. Coverage of countrles amno the indicator. depernds on availability of data and is nlot uniform. Ib Unes. oth,rwl- n-tcd, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; .n. f,ur MHht P, ernt Eetimate, between 1973 and 1977. /c turope; d Upper Mlddle Income (51136-2500 per capita. 1976) /e High Inome loer 2500 par capit. 1976); /f 1962; La Av. 1969-71; /h 1966. September, 1978  - 22 - DEPINITIONS OP SOCIAL INDICATnitS ANNEX I Page 3 of 5 pager lisa The adjusted group averages for each indicator ar pepulatin-w.eightrd geometric oes, excluding the extremt voices of the indicator and the most populated country in each group. Coverage of countries aong the indicators depend. on availability of data and to not uniform. Due to lack of data group verages for Capital Surplus Oil Exporters and indicators of access to water and excrete disposeal. houing incom.e distribution ond poverty or. simple populetiox-vewihted geometric means without the exclusion of extroem values. LAtND AREA (thousand sq. km) Population Per hoxpital bhd - total. urban. and rural - Pupulation (total. Total - Total surface area comprising land ares and inland water. uren, end rural) divided by their respective musber of hospital beds Asricultural - Nest recsnt estimate of agricultural area used temporarily availaible in public and private general and nyocilleed hospita1 and re- or permanently for crops, pastures mrket and kitchen gardens or to habilitation centers. Nospitals are establishmentx permanently ntuffod by lie fallow. at least one physician. Ettablishments providing principally custodial care are not included, Rural hospitals, however, Include health and sedi- INP PER CAPITA (US$) - tNP per capita estimates at current market prices. ca1 centers not pemanently staffed by a physician (but by a medica1 as- calculated by .sae conversion method as World Sank Atlas (1975-77 bheis); sistent nurse, midwife, etc.) which offer in-patient accommodation and 1960. 1970i d 1977 data. provide a limited range of medica1 facilities. Admissions Per hospital bed - Tota1 number of admissions to or discharges ENERGY CONSIMPTIO:: PER CAPITA - Annual consumption of cotsorcial energy from hospitals divided by the number of beds. (cral and lignite ptroleu, natural gas and hydro-, nuclear and gao- thermal electricity) in kilograms of coal equivalent per capita. HOLUSING Averase sioe of household (persons per household) - totl. urban, and rura1- POPULATION AND VITAL STATISTICS A houxshxld consists of A group of individuals ohs shore living quarters Total population, mid-year (millions) - As of July 1; iE bot available, and their main meals boarder or lodger may or ray not bh included in overage o two end-year estimtes; 1960, 1970, snd 1977 data. the household for statistical purposes. Statistical definitions of house- Urban population (percent of totil) - Ratio of urhbn to total popula- hold vary. tion; different definitions of urban areas my affect comparsbility Averase number of persons per rosn - total, urban and rural - Average nue- of dt ong countries. ber of persons per room in a11, urban, and rural occupied cooventio.aI Poulatien dnsity dwellings, respectively. Dwellings exclude ron-permanent structurex and Per sQ. k. - Mid-year population per square kilometer (100 hectares) unoccupied parts. of total aresc Access to electricity (percent of dwellings) - tota1, urban. und rural - Per sQ. . agriculture land - Computed as above for agricultural land Conventional dwellings with electricity in living quarters os percentage only. of total, urban, and rural dwellings respectively. Population eas structure (percent) - Children (0-14 years), orking-age (15-64 years). and retired (65 yesrs and over) as percentagee of sid- EDUCATION year population Adjusted enrollment ratios Population growth rate (percent) - total. and urban - Coapound annual Primary school - total, and fenale - Total and female enrollment of all ages growth rates of total and urban mid-year populations for 1950-60, at the primary level as percentages of respectively primary school-age 1960-70, nd 1970-75. populations; normaily includes children aged 6-11 years but adjusted for Crude birth rate (per thousand) - Annual live births per thousand of different lengths of primary education; for -otries with univorsul edu- mid-yesr population; ten-year arithmetic averages ending in 1960 and cation enrollment may exceed 100 percent einct some pupils are below or 1970 and five-year average ending in 1975 for most recent estiate. above the official school age. Crude death rte (npr thusand) - Annual deaths per thousand of mid- lecondary schoel - total, nd female - Computed as above; secondary oduca- year population; ten-year srithetic averages ending in 1960 and 1970 tion requires at least four yeers of approved primary instruction; pro- and five-year average ending in 1975 for most recent estimate vides general vocational, or teacher training instructions for pupils Gross reproduction rate - Average number of daughters a woman will bear usually of 12 to 17 years of ago; correspondence courses are generally in her normal neproductive period if she experiences present age- excluded. specific fertility rates; usually five-year averages ending in 1960, Vocational enrollment (Percent of secondry) - Vocational institutions in- 1971, and 1975. clude technical, industrial, or other programs uhich operate independently Family plannins - acceptors, annual (thousands) - Annual number of or as departments of secondary i,rstitutions. acceptors of birth-control devices under auspices of national family Pupil-teacher ratio - primary, and secondary - Total students enrolled in planning program. primry and secondary levels div -d by numbers of teachers in the corre- Family dlanning - users (percent of mrried women) - Percentage of ponding leve1s. married women of child-bearing age (15-44 years) who use birth-control Adult literacy rate (percent) - Literate adults (able cc read and crit-, an devices to a11 mrtried women in same age group. a percentage of tota1 adult population aged 15 yearn and over FOOD AND NUTRITION CONSUMPTION Index of food production per capita (1970-100) - Indem number of per Passenger carm (per thousand population) - Passenger car co-prise motor cars capita nnual production of a11 fond roeodities. sting les then sight persons; excludes asbulances, hearses and military Per capita supply of calories (percent of renuirem nts) - Computed from vehicles. energy equivalent of net food supplies available in country per capita Rgdi receivers (per thousand Population) - All types of receivers for radio per dy. Available supplies comprise domestic production, Imports less broadcasts to general public per thousand of population; excludes unlicensed exports, and changes in stock. Net supplies exclude animal feed, seeds, receivers in countries and in years when registration of radio sets was in quantities used in food processing, and losses in distribution. Re- effect; data for recent years ay not be comparable since most countries quirements wer estiatad by FAQ based on physiological needs for nor- abolished licensing. mal activity nd helth considering environmental temperature, body TV receivers (Per thousand population) - TV receivers for broadcast to gener. a weights, ge and ses distributions of population, and allowing 10 per- public per thousand population; excludes unlicensed TV receivers in coun- cent for weate at household level, tries and in years when registration of TV' sets was in efect. Per capita supply of protein (grams Per day) - Protein content of per Newspaper circulation (per thousand population) - Shows the average circula- capita net supply of ood per day. Net supply of food is defined as tion of "daily genere1 interest newspaper", defined as a periodical publi- bove. Requirements for all countries astablished by USDA provide for cation devoted primarily to recording general nes. It is considered to a minimum allowance of 60 Srams of total protein per day and 20 grams be "daily" if it appears at leant four times a week. of anil and pulse protein, of which 10 greas should be animal protein. Cinema annual attendance per capita per year - Based on the number of tickets Thoe standards are lower than those of 75 grams of tota1 protein and sold during the year. including dnisluon to drive-in cinnoas nd nobile 23 grams of animal protein as an average for the world, proposed by unite FAO in the Third World Food Survey. Per capita protein supply from animal and puise - Protein supply of food EMPLOYMENT derived from animals nd pule in grams per day. Total labor force (thous.nds) - Economically active persons, including armed Child (agas 1-4) mortality rate (Per thousand) - Annual deaths per thous- forces and unemployed but excluding housewives, students, etc Defini- and in age group 1-4 years, to children in this age group tions in various countries ore not -omparable. Fema1l (Percent) - Female labor force as percentae of total labor force HEALTH Agriculture (percent) - Labor force in farming, forestry, honting and fixhing Life expectancy at birth (years) - Average number of years of life as percentage of total labor force. remaining at birth usually five-year verages nding in 1960, 1970, Industry (percent) - Labor force in mining, construction, manufacturing and and 1975. electricity, uater and gas a percentage of total labor force. Infant mortality rata (per thousand) - Annual deaths of-infants under Prtioipation rate (percent) - total, male, and female - Total, male, and one year of age per thousand live birhts. emale labor force as p-rcentage- of their reypective populations Access to safe water (percent of population) - total, urban, and rural - These are ILO's adjusted participation rates -cflecticg a-e-tev Number of people (total, urban, and rural) with reasonable access to structure vf the population. ond lonf tine trend. safe water upply (includes treated surface waters or untreated but Economic dependency ratio - Ratio of population under 15 ond 65 and oven tO uncontaminated water such as that from protected boreholes, springs, the labor force in age group of 15-64 years. and sanitary wells) as percantages of their respective populations. In an urban are a public fountain or xtandpost located not more INCOME DISTRIBUTION than 200 meters from a house may be considered as being within rea- Percentag of private income (both in cash and kind) received by richest 5 nnahie access of that house. In rural areas reasonable access would percent, richest 20 percent, poorest 20 percent, and Poorest 40 percenc imply that the houseife or mbers of the household do not have to of households. spend a disproportionate part of the day in fetching the family's water needs. d POVERTY TARGET GROUPS Acces t esretadien2o (tpercent ofnnlation) - total, urban. end Estimated absolute poverty income levl-(S prcpt)-uban and coral- rural - Number of peop (total urbn,Poapud rural) served by escrata Absolute poverty income level is that income level belu which a minimal disposal as percentages of their respective populations. Excreta nutritionally adequate diet plus essential on-food requirenents is not disposal may include the collection and disposal, with or without affordable. treatment, of human emoreca and wsate-warer by water-borne systems Estimated relative poverty income level (US$ per c.Pita) - urban nd rural - orthio-e.ue f.ptit riviessand: similar,inetallatiens. Relative poverty income level is that iooe.. level less than one-third PoPulation er phvsician - Population divided by number of practicing per capita personal income of the country. physicians qualified from a medical school at university level. Estimated population below poverty income lee (percent) - rban and rura - Population per nursing Person - Population divided by number of Percent of population (urban and rural) ho re either -hurclute pdru" or practicing male and femle graduate nurses, practical nurees, and "relative poor" whichever is greater. assistant nurses. Etonomic and Iocial IDta Divisio- Etonomio Analpsiu and Projections Department  ANNEX I Page 4 of 5 pages - 23 - ECONOMIC INDICATOI, GROSS NATIONAL PRODUCT IN 1977 ANNUAL RATE OF GP.CWTH (7. constant prices) USS Min. 1 1961-65 1966-70 1971-75 1975-77 GNP at Market Prices 30,300 100.0 9.011 7.71V 11.31f 9.6X1 Gross Fixed Domestic Investmaent 8,463 27.9 11.3 11.2 11.2 9.9 Gross National Saving 8,157 26.9 .. .. Current Account Balance -306 1.0 9 213/ Export of Goods, NFS 7,523 24.8 9-O- ' 10 92/31 23 6- - 14,7y:3- Imports of Goods, NFS 7,537 24.9 10.7_/3/ 12.7 I/ 22.3Yl3' 14.6 !tI OtlTPUT. LABOR FORCE PRODUCTIVITY IN 1977 National Income 4A Labor Force N.I. Per Worker US$ Bln. % MIn . US $ __L% Agriculture 3.29 13.2 3.53 34.4 932 !A.3 Industry 13.22 53.0 3.36 32.7 3,935 161.7 Construotion 2.33 9.3 0.90 8.8 2,589 106.4 Other 5 6.12 24.5 2.47 24.1 2,478 101.8 Total/Average 24.96 100.0 10.26 100.0 2,433 100.0 GOVERNMENT FINANCE IN 1977 Central Government Lei Billions 7. of GDP Total Receipt& 282.0 46.2 Total Expenditures 280.4 45.9 Total Surplus 1.6 0.1 MONEY, CREDIT AND PRICES (in billions of Lei, end of year) 1971 1972 1973 1974 1975 1976 1977 Money Supply .. .. .. 160.1 176.4 201.4 207.5 Short-term Bank Credit . .. 131.3 155.3 170.2 194.0 194.5 Retail Prices (1970 - 100) 101.6 101.6 102.4 103.7 103.9 104.4 105.0 Percentage Changes in Retail Prices 1.6 - 0.8 1.3 0.2 0.5 0.5 1/ Growth rate of national income. 2/ In current prices. 3/ Growth rates of exports and imports only. - 4/ System of miaterial production w-ebthodology, 5/ Includes net output of the nor-productive sector. E1ENA CPDI ID December 13, 1978  ANNEX I - 24 Page 5 of 5 pages BALANCE OF PAYMENES (Convertible Currencies) MERCHANDISE EXPORTS 1977 (All Currencies) 1971 1976 1977 (Millions US $) US $ Mln _ Expoits of Goods & NFS +944 +3,653 3,983 Capital goods 1,837 27 Iuports of Goods & NFS -988 -3,592 4,080 Consumer goods 1,142 17 Resource Gap (deficit - -) -44 +61 -97 Foodstuffs 888 13 Intermediate goods 592 9 Interest Payments -40 -122 -195 Raw materials 2,422 35 Other Factor Payments (net) -25 0 +19 _l'ndustrial 2,016 29 Balance on Currett Account -109 -61 -273 Agricultural 406 6 Direct Foreign Inv stment Total 6.881 100 Net M'LT Borrowing1' Disbursements +312 +912 +928 EXTERNAL DEBT (Dec31, 1977) Amortization -190 -482 -561 Subtotal +122 +430 +367 US $ mln Export Credits Extended2' (net) / -274 -171 Short-term Credit (net) -20 -44 +156 Total M & LT 3,491 Net Errors & Omission - - - of which convertible Increase in Reserves (+) -7 +52 +32 currencies 3,402 -uel & Related Materials Imports 635.6 2,496.8 2,622.1 DEBT SERVICE RATIO 1977 of which Oil and Oil Products 36.6 717.1 875-4 Zxports 425.5 1,477.5 1,463.0 of which Oil and Oil Products 143.0 735.1 688.1 Convertible currencies only 19.0 EXCHANGE RATES 1. Official Rate Before August 1971 6 lei:US$l August 1971-February 1973 5.53 lei:US$1 February 1973-March 1978 4.97 lei:US$1 Since March 1978 4.47 lei:US$1 2. Tourist Rate Before August 1971 18 lei:US$1 August 1971-February 1973 16 lei:US$l February 1973-October 1974 14.38 lei:US$l Since October 1974 12 lei:US$l 3. Conversion Rate for Traded Goods July 1973 - March 1978 : 20 iei:US$l Since March 1978 : 18 lei:US$l EMENA CPDI ID December 13, 1978 1t Includes usc of IMF credit. 2/ Included in 'l & LT Capital. 3/ Includcs S, M & LT credits extended.  ANNEX II Page 1 of 5 pages - 25 - 1A3 orla n !O!P OPA?OW TV STATDET OF BAJK BWANS (As of Xalober 30, 19763 Amount (less cancelleatlox *L _oan Number Jorr ose Bank TV IDA Undisbu]sd GOloan ul diasbuare. 20.0 - la. 1020.30 190 Investwet Bank ertilizr 60.o 11 to. 1027430 975 Investment ak Specia 70.0 T.9 Ia. 1028-30 1975 inwetment Dank Therml 60.0 o.r Poaw la. 108W-30 1975 amAt I*f igation 70.0 4.g re. 1083-1o 19V75 UI Agricultma1 30.0 TA credit Zn. 116N-30 1976 WI Flood Recov- Ii0.0 3.3 057 In. 12k2-20 1976 Investuact Dank lydrompoer 50.0 25.1 in. 1197-R0 1976 rrigation 60.0 3. in. 1 68-3 1977 NM Irrigation 60.0 1..3 in. 1136-30 1977 lntautot onk BDering 36.0 38.0L to. 1.T-R0 1977 Inetmet Da GMass Fiber 18.3 lo.5 La. 14.8-3 1977 Investmet Dank Polyster 50.0 29.0 la. 1179-so 1978 DII Agricultural 71.0 S.5 credt Zn. 1509-30 1978 Am Irrigation 1.0.5 10.5 Zn. 1536-R0 1978 Investmnt Dan Tire 85.0 65.0 Zn. 158140 1978 Investment Dank Pot 60.0 60.0 Earthquake Total 8W.6 1s61.6 Of thieh bas been repaid Tota now outstandin M2 Aiunt sold 18.6 - of vbich repaid 0.0 18,6 Total nov held by Bank 86".2 Total andiabtwsed 461.6 1.6 B ank for Agriculture and Food Industr? k Excluding exchange adjuotments. Note: A loan of $40 midlion to the Investment Bank ror the Craio-v Chemical Project was approved subse',',ent to the above date of this Statement; it is not yet signed.  - 26 - ANNEX II Page 2 of 5 pages B. PROJECTS IN EXECUTION 1/ Ln No. 1020 Bacau Fertilizer Project; US$60 Million Loan of June 28, 1974; Date of Effectiveness: December 31, 1974; Closing Date: December 31, 1979 The project is proceeding satisfactorily after initial delays due to changes in site and project scope, and delays in design and construction. About 85 percent of total procurement has been completed, and construction is well advanced. The ammonia and the DAP plants are expected to be commis- sioned by the end of 1978, and the urea plant by the second quarter of 1979, about 18 months later than expected. The final project cost is expected to be close to the appraisal estimate. Ln No. 1027 Otelinox Special Steel Project; US$70 Million Loan of July 10, 1974; Date of Effectiveness: April 3, 1975; Closing Date: December 31, 1979 Execution of the project was delayed about one year, primarily because of the complexity of two large bid packages, the Romanians' lack of familiarity with international competitive bidding procedures under the Bank's Guidelines, and lack of interest and competition among suppliers. The contracts for the two steel mills under the loan have been signed and construction is progressing in accordance with contracted schedules. Total project costs are expected to be essentially equal to appraisal estimates. The Bank loan is expected to be fully disbursed in early 1979 and the project is now expected to be completed in September 1979. Ln No. 1028 Turceni Thermal Power Project; US$60 Million Loan of July 10, 1974; Date of Effectiveness: November 6, 1974; Closing Date: June 30, 1979 Delays in construction due to late delivery of equipment are likely to result in a nine month delay in commissioning of generating units. Project execution is otherwise according to plan and satisfactory. Training of future operational staff is in hand. Ln No. 1082 Giurgiu-Razmiresti Irrigation Project; US$70 Million Loan of February 6, 1975; Date of Effectiveness: May 5, 1975; Closing Date: June 30, 1979 Construction of project works is progressing satisfactorily and about 99 percent of the project has been completed. Procurement is almost 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution and, in particular, to report any prob- lems which are being encountered, and the action being taken to remedy them. They should be read in this sense and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  - 27 - ANNEX II Page 3 of 5 pages completed. About 70 percent of the project area was irrigated during 1978. All remaining works are expected to be completed by April 1979. Total project costs are expected to be about US$33 million less than appraisal estimates, and about US$4 million of the loan amount is expected to be can- celled if not required for the project before the closing date. Ln No. 1083 Sadova-CoraLbia Agricultural Credit Project; US$30 Million Loan of February 6, 1975: Date of Effectiveness: April 29, 1975; Closing Date: December 31, 1979 Progress continues to be satisfactory in implementing subprojects. A contract for the pre-mix feed mill has been concluded and remaining project procurement, for chemicals and fertilizers, is being carried out under bulk contracts tendered internationally for 1978 Romanian requirements. Disburse- ments amounted to US$22.5 million as of October 31, 1978 and are 10 percent ahead of the appraisal estimate. Ln No. 1169 Flood Recovery Project (Agricultural Component); US$40 Million Loan of November 12, 1975; Date of Effectiveness: December 2, 1975; Clos:Lng Date: December 31, 1979 Project execution is proceeding well and disbursements are on schedule. Equipment procured under international competitive bidding has been delivered and only small quantities of spare parts remain to be procured. Bids were received in March 1977 for flood early warning system equipment. The Romanians advised us ithat bid evaluation was delayed because of the tech- nical complexity of the package, but the bid evaluation report has been sub- mitted to the Bank, approved by the Bank, and the contract has been signed. Disbursements as of Octobier 31, 1978 totalled US$36.9 million or 92 percent of the loan amount. Ln No. 1242 Riul Mare Retezat Hydropower Project; US$50 Million Loan of April 28, 1976; Date of Effectiveness: July 26, 1976; Closing Date: December 31, 1981 Due to shortage of manpower, tunneling works have been delayed and mechanized excavation methods are expected to be introduced in early 1979. Project execution is currently about one year behind schedule. Civil works for the dam and underground power station are well underway, and about 75 percent of the loan amount has been committed. Ln No. 1247 Rasova-Vederoasa Irrigation and Agriculture Development Project; US$60 Million Loan of April 28, 1976; Date of Effectiveness: November 3, 1976; Closing Date: June 30, 1981 Construction of pumping stations, canals, and other project works is well underway and progress on these facilities is satisfactory. Facilities for four dairy farms are complete and contracts for purchase of 9,130 imported heifers (100 percent of total) valued at over US$8 million have been awarded. Procurement contracts for all equipment have been awarded. The feedmill and silo in Negruvoda is 62 percent completed. Work on soil erosion control and the land levelling is behind schedule.  - 28 - ANNEX II Page 4 of 5 pages Ln No. 1368 Ialomita-Calmatui Irrigation Project; US$60 Million Loan of March 2, 1977; Date of Effectiveness: June 23, 1977; Closing Date: June 30, 1982 Procurement for this project has been consolidated with that for the Rasova-Vederoasa Project (Ln. 1247) noted above, and all contracts have already been awarded. Some construction equipment and about 35 percent of pipe has been delivered. Construction of project works is underway, progress is satisfactory, and about 25 percent completion has been achieved. Ln No. 1436 Brasov Bearings Project; US$38 Million Loan of June 15, 1977; Date of Effectiveness: August 11, 1977; Closing Date: December 31, 1982 Bids on most major bid packages have now been received and procure- ment is proceeding satisfactorily. Overall project costs are expected to be close to, or slightly over, appraisal estimates, according to the initial cost data. Ln No. 1447 Bucharest Glass Fiber Project; US$18.3 Million Loan of June 15, 1977; Date of Effectiveness: August 11, 1977; Closing Date: June 30, 1980 Procurement is being completed, and execution of the project is proceeding satisfactorily. Ln No. 1448 Cimpulung-Muscel Polyester Project; US$50 Million Loan of June 15, 1977; Date of Effectiveness: October 3, 1977; Closing Date: March 31, 1981 The main supply contract has been signed, and execution of the project is proceeding satisfactorily. Ln No. 1479 Pig Production and Processing Project; US$71 Million Loan of July 15, 1977; Date of Effectiveness: September 28, 1977; Closing Date: June 30, 1982 Project implementation is proceeding satisfactorily. BAFI has made subloan commitments of US$298.4 million or 62 percent of total project costs. Disbursements as of October 31, 1978 were US$11.6 million which equals the appraisal estimates. Ln No. 1509 Viisoara Irrigation Project; US$40.5 Million Loan of January 27, 1978; Date of Effectiveness: May 15, 1978; Closing Date: December 31, 1983 Contract documents for procurement have been cleared by the Bank and bids invited for all project procurement. Construction of some of the project works has been started.  - 29 - ANNEX II Page 5 of 5 pages Ln No. 1536 Tires Project; US$85.0 Million Loan of March 30, 1978; Date of Effectiveness: June 9, 1978; Closing Date: December 31, 1981 Procurement has been started, but difficulties are being encountered in obtaining proposals for the main technology/equipment package for OTR tires. Ln No. 1581 Post Earthquake Construction Assistance Project; US$60.0 Million Loan of June 12, 1978; Date of Effectiveness: September 5, 1978; Closing Date: June 30, 1981 Initial procurement is proceeding satisfactorily.  - 30 - ANNEX III ROMANIA - SECOND TURCENI THERMAL POWER PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken by the country to prepare the project: Not known (b) Agency which prepared the project: Ministry of Electrical Energy (MEE) (c) Date of first presentation to the Bank: February 1976 (d) Date of Bank mission to consider the project: January 1978 (e) Date of departure of appraisal mission: May 15, 1978 (f) Date of completion of negotiations: December 7, 1978 (g) Planned date of effectiveness: Within three months of loan signing Section II: Special Bank Implementation Actions None Section III: Special Conditions The special condition of effectiveness of the proposed loan is that the technical and economic indicators for the project have been approved by the Government and have become effective (paras. 57 and 65). Other special conditions are: (a) The Government plans that the power sector will generate on average 30 percent of its own investment capital at least to 1985 (para. 47). (b) The Government would furnish every six months lignite produc- tion data for the previous six-month period and production estimates for the next six-month period immediately following (para. 54).  WOW JU~~~~~~~~~~~~~~~~~~~~~~~~~~~~iLY TOTS r IZ~~~~~~~~~~~~~~~~ 77 V~~~~~~~~~~~~~~~~~~~ X-5 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~* THERMAL POWER STATION EXTENSION * TH ERMAL POWER STATIONS or 3Z?r~~~~~~~~~~~t"49R~~~~~~~~~ U IRS'IERIS POWER STATIORO~~~~~~~~~~~~~~~~~~~iVRVPOERSTTIU A SUBSTATIONAS ROOSTV TRANOSMISSION LINES 4OSES TRANSMISSION LINES SOVOSANI ~~~~~~~~~~~~OPARARINS, AT 200EV A ~~~~~~~~~~~~~~~~~~~~~~~~~~~22050 TRANSMISSONS LINES - 1105 TRAAOSWiOION LIRES EUROPEAN HRRIIWAY'S i *~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A ISA NSATIONAL MIISHWASY 0 '-+ S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~AILROASS WF LA f~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ NTERNATIONAL EOUNOARIVS