Romania - Tire Project

FILE G0PY ~~~~~~~~Documlent of FILE COPY ~~~~The WoErld Ban:k FO;R OFlFICIAL USE ONLY Report No. P-22)45-RO REPORT AND RECOMMEVOATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT T'O THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN To THE INVESTMENT BANKX OF ROMANIA WITH THE GUARANTEE OF THE SOCIALIST REPUBLIC OF ROMANIA FOR A TIRE PROJECT March 9, 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 he disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit: Leu (plural Lei) 1. Official Rate Lei 4.97 = US$1.00 Leu 1.00 = US$0.20 2. Tourist Rate Lei 12.00 = US$1.00 Leu 1.00 US$0.08 3. Conversion Rate for Traded Goods Lei 20.00 US$1.00 Leu 1.00 = US$0.05 The official exchange rate of lei 4.97 per US$1 is used only for accounting purposes. The rate used for tourist transactions is lei 12 per US$1, having been revalued from a rate of lei 14.38 per US$1 in October 1974. Beginning in July 1973, a trading rate of lei 20 per US$1 has been used to convert the prices of all traded goods; this rate is considered representative of the average cost of convertible foreign exchange. The rate of lei 20 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 COFACE - Compagnie Francaise d'Assurance pour le Commerce Exterieur, France DANUBEXIM - Danubia Export-Import Agency for the Chemical Industry ECGD - Export Credit Guarantee Department, United Kingdom HERMES - Hermes Kreditversicherungs-Aktiengesellschaft, Federal Republic of Germany IITPIC - Technological Engineering and Design Institute for Chemical Industry OTR - Off the road (tires) ROMCHIM - Import Agency for Chemical Equipment and Technology  FOR OFFICIAL USE ONLY ROMANIA: TIRE PROJECT LOAN AND PROJECT SUMMARY Borrower: Investment Bank of Romania Guarantor: Socialist Republic of Romania Beneficiaries: Zalau Tire Enterprise, Drobeta-Turnu Severin Tire Enterprise Loan Amount: US$85 million equivalent Terms: Repayable in 15 years, including a 3-year grace period, through semi-annual installments. Interest at 7.45 per- cent per annum. Pro_lect Description: The project seeks to increase production of truck, tractor and off-the-road (OTR) tires in order to meet increasing domest:ic demand for these types of tires and to save or earn foreign exchange. It consists of a new tire manufac- turing plant at Zalau to produce annually one million all steel, radial truck tires and a new tire manufacturing plant at Drobeta-Turnu Severin to produce annually 150,000 tractor tires and 20,000 OTR tires. Tires produced in the two plants will be used in virtually all phases of Romania's continuing development effort, including agri- cultural mechanization, major civil construction and transport of goods. Substantial transfer of technology will itake place as a consequence of financing the OTR tire component of the project. About 4,300 new jobs will be created, and net foreign exchange benefits are esti- mated at about US$150 million annually. Technical risks associated with Romanian manufacture of equipment and the possibility of commercial risk in concentrating tire exports in other COMECON countries have been reviewed and are considered acceptable. This document has a restricted, distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Cost Estimate: Foreign US$ Millions as % Item Local Foreign Total of Total Zalau Truck Tire Plant 85.8 30.8 116.6 26 Drobeta-Turnu Severin Tractor and OTR Tire Plants 52.7 44.5 97.2 46 Base Cost Estimate (BCE) 138.5 75.3 213.8 35 Physical Contingencies (10% of BCE) 13.9 7.5 21.4 Price Escalation (3% of BCE + Phys. Cont.) 1.8 4.7 6.5 Sub-total 154.2 87.5 241.7 Working Capital 9.2 0.9 10.1 Total Project Cost 163.4 88.4 251.8 Interest During Construction - 6.4 6.4 Total Financing Required 163.4 94.8 258.2 Financing Plan: US$ Millions Local Foreign Total State Budget 163.4 9.8 173.2 IBRD - 85.0 85.0 Total 163.4 94.8 258.2 Estimated Disbursements: US$ Millions Bank FY 1979 1980 1981 1982 Annual 20.8 51.6 10.2 2.4 Cumulative 20.8 72.4 82.6 85.0 Internal Economic Return: 22 percent. Staff Appraisal Report: No. 1779-RO; February 23, 1978 Industrial Projects Department EMENA March 1, 1978  REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE l]BRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INVESTMENT BANK OF ROMANIA FOR A TIRE PROJECT 1. I submit the fo'Llowing report and recommendation on a proposed loan to the Investment Bank of Romania, with the guarantee of the Socialist Republic of Romania, for the equivalent of US$85 million, to help finance a project for tire production. The loan would have a term of 15 years, includ- ing three years of grace, with interest at 7.45 percent per annum. PART I - THE ECONOMY 2. The latest economic memorandum for Romania (818a-RO) was circulated to the Executive Directors on December 29, 1975, and an agricultural sector survey (953a-RO) was circulated on November 15, 1976. A basic economic mission visited Romania in October/November 1976 and its report will be circulated to the Executive Directors in the near future. The findings of this mission are incorporated in this report. Country social and economic data are given in Annex I. 3. Since the founding in 1947 of the People's Republic of Romania, which in 1965 was reconstituted as the Socialist Republic of Romania, economic management has been organized along socialist principles which have included state and cooperative ownership of almost all productive resources, and the absence of private enterprise. Economic activity is directed by means of obligatory development planning coordinated by the central authorities. Productive enterprises op,erate within the framework of the development plan which defines the scope of their activity, the outlines of their production and investment goals and their targets for operating efficiency. The plan is elaborated within a five-year time frame, each year having a separate Annual Plan. The country began its latest Five-Year Plan in January, 1976. 4. The technical and functional Ministries are the State's chief agents for the administration ol economic activity. They are assisted by subordinate units known as Centrals, which coordinate and supervise activities within a common branch or industry without being directly engaged in production. En- terprises subordinate to the Centrals are responsible for production which is controlled through a system of physical production and financial targets. Production enterprises generally are not authorized to engage directly in foreign trade and rely on specialized foreign trade enterprises for this purpose. In agriculture, large State farms and cooperatives are the pre- dominant units of production. 5. Economic development is of paramount concern to the Romanian Gov- ernment. Rapid industrialization is a major objective with priority being given to heavy industry including steel, engineering products and chemicals. To achieve their growth objectives, the Romanian authorities have made consid- erable efforts to mobilize domestic resources for development and to maintain a high rate of capital formation. In the 1971-75 Five-Year Plan, planned and actual investment rates of around 30 percent of GNP were the norm. As a  - 2 - consequence, consumption has been restrained, and the development of the consumer goods industry has been less strongly emphasized than that of heavy industry. In 1976, heavy industry (led by engineering and metal working, chemicals and ferrous metallurgy) accounted for about 62 percent of industrial production. 6. As a result of this strategy, a marked change has been achieved in the structure of Romania's economy. Rapid industrial growth, which over the last decade has averaged more than 13 percent per annum, has expanded the share of the labor force employed in industry (including power and construc- tion) from about 14 percent in 1950 to approximately 40 percent in 1976. During the same period, the share of labor force engaged in agriculture has declined from 74 percent to around 36 percent; and while agricultural output almost tripled, its share in GDP (1963 prices) amounted to only 12 percent in 1976. 7. Notwithstanding the emphasis on industrialization, more than half of the population (about 57 percent in 1976) still live in rural areas and agriculture remains a key sector of the economy. Apart from supplying food, industrial inputs and the residual labor increment for industrial growth (which requires an increase in agricultural productivity), the sector also supplies about 30 percent of the nation's convertible foreign exchange earn- ings. These earnings, which are largely used to buy imported inputs for in- dustry, have often been jeopardized as a result of unstable production growth in agriculture. The maintenance of the industrial development program, there- fore, is dependent to a certain extent on the performance of the agricultural sector. 8. Romania's population growth is around one percent per annum. Thus, the impact of rapid economic growth on per capita incomes has been only mar- ginally diluted by the population increase. In the last decade, GNP growth has averaged nine percent per annum, implying a growth of about eight percent per annum of per capita GNP. It is estimated that GNP per capita in 1976 was US$1,450 based upon official national income information and using the World Bank Atlas methodology. 9. The organization of production in both the urban sector and in agri- culture is such that all labor is employed and there is no open unemployment. There is, however, some seasonal labor surplus, mainly in agriculture. Income distribution is also relatively equal. In 1976, average monthly wages were 1,964 lei (about US$100 equivalent) up eight percent over the previous year. Data on 1975 wages (latest available) show that about 87 percent of all. monthly wages were within the range of 1,300-2,500 lei; four percent were under 1,300 lei and about nine percent were above 2,500 lei. Prices for essential consumer goods and services such as basic foodstuffs, rents and urban transport are relatively low and most social services, notably education and health care, are provided without charge. Standards of living, while still modest, have been increasing because of the rapid growth of national income. Romania also pursues an active regional policy which has sought to bring a balanced development of both human and natural resources to all parts of the country.  -3- Recent Developments 10. Since the National Party Conference of 1967, which set the stage for major qualitative advances in Romania's economic and social development, there have been important new emphases in Romania's economic management. Measures were taken to improve the institutional basis of planning (e.g. by creating centrals to assist in plan administration), to increase the effi- ciency of economic managemnent and to improve the quality of products in industry. In agriculture efforts were made to raise productivity and stabilize growth through irrigation, mechanization and the expanded use of chemical fertilizers. To promote the growth of foreign trade and technical-economic cooperation the Government has concluded trade and cooperation agreements with a wide range of countries. In this context, Romania has also made positive efforts to expand its multilateral external relations and to pursue full cooperation with international agencies, in- cluding UN, UNCTAD, UNESCO, FAO, UNIDO, GATT and more recently, the IMF and the Bank. 11. Measures aimed at continued improvement of the management system have included reorganizations (involving a reduction from 217 to 112 in number) of industrial centrals and a concentration within the centrals of all plan- ning, control and research functions. The pursuit of purely physical goals in production and trade, while still an important element in the system, is being supplemented by much greater emphasis on production and investment efficiency, product quality, pricing and foreign competitiveness. To eliminate wasteful investment and production expenditures, a Superior Court of Financial Control has been established, among other things, to oversee a new system of financial control. A campaign to increase efficiency in the utilization of existing capacities and to effect significant economies in the consumption of raw materials and intermediate goods is being implemented throughout the economy. Targets have been established to reduce by 30 percent the previously antic- ipated construction and installation costs of industrial projects between 1976-80. Substantial savrings have also been prescribed for most other industrial inputs during 1976-80. 12? Foreign trade has expanded rapidly in recent years both in volume and in regional diversity. There has also been a tendency to move away from trade on a bilateral basis towards trade involving multilateral payments, within the framework of ithe general cooperation agreements signed with almost all of the country's trading partners. These cover not only the volume of trade but also arrangements for cooperation in production, technical assis- tance and related matters in the field of international economic relations. During the 1971-75 plan period, total trade grew at approximately 18 percent per annum in current prices. The 1976-80 plan envisaged an acceleration in the rate of growth of trade, projecting that the volume of trade between 1976 and 1980 would be twice that obtained between 1971 and 1975. The rapid growth continued in 1976, although it did not quite keep pace with the plan target which required an increase of 13 percent per annum in real terms. In 1976, the total value of trade in current prices rose by 14.5 percent, with exports increasing by 14.9 percent to US$6.14 billion and imports by 14.1 percent to US$6.10 billion. As in past years, trade with the convertible currency area,  -4- which was 55 percent of the total in 1976, grew more rapidly than with the non-convertible area, largely because of a 20 percent increase in exports. As a result of these developments, Romania had, for the first time since the mid-1960s, a surplus (of US$72 million) on its convertible currency trade, and for the first time since 1973 a surplus on overall trade (of US$43 million). As planned by the government, imports from the non-convertible currency area were larger than exports to that area in 1976. Because of the deficit on the invisibles account, Romania had a deficit on current account both in overall terms and with the convertible currency area. However, these were considerably smaller, US$20 million and US$60 million respectively, than in previous years. 13. In spite of these developments, the structure of Romania's trade with the developed market economies remains essentially unfavorable. Raw materials and agricultural commodities, both of which are subject to unstable price and production conditions, comprise about 60 percent of total exports to these countries. At the same time imports from these countries are largely of machines and equipment and other manufactures. Because of the present low level of reserves, any instability in export earnings, as frequently arises from shortfalls in agriculture (paragraph 7 above), tends to place the import program in immediate jeopardy. 14. In 1976, the momentum of economic growth continued, with most major targets of the 1976 Annual Plan being met. National income rose by 10.5 per- cent, gross industrial production increased by about 11.5 percent, and gross agricultural production was a record, exceeding the flood affected 1975 level by 17.2 percent. These achievements were realized despite a lower than planned investment growth rate (8.2 rather than 19.4 percent). The volume of trade increased less than plan targets, but an overall trade surplus of US$43 million was attained because of measures to economize on imports. The 1977 plan and budget provided for continued high rates of growth. National income was expected to rise by 11.3 percent and gross industrial production by 10.5 percent. The Plan provided a range of 1.9-13.6 percent growth for the gross farm output. This wide range was provided because of the uncertain impact climatic conditions might have on production. Investments in the national economy were expected to increase by 16.7 percent and total foreign trade volume by 15.5 percent. Details of achievements during 1977 are not yet available, but it appears that, in spite of the earthquake (paras. 15 and 16), targets for industrial production were more or less attained. Published details on the 1978 Plan indicate growth rates similar to those planned for 1977. National income is planned to increase by 11 to 11.5 percent, indus- trial production by 10.6 percent and agricultural production by between 6.9 and 16.1 percent. Investment is planned to increase by 16.8 percent and foreign trade by 19.1 percent. Real incomes will increase by 7.9 percent. 15. The economy was dealt a severe blow on March 4, 1977 when a violent earthquake occurred in the east of the country. The earthquake, the effects of which were most severe in the vicinity of Bucharest, killed 1,570 people, injured 11,300 and caused damage valued at US$2 billion. US$1.4 billion of the total damage was to buildings, of which US$1 billion was in housing. Of the remaining 30 percent of damage, almost all was in inventories and produc- tion. The earthquake also had a substantial effect on the country's balance  -5- of payments' prospects. Government projections suggest that the impact on the balance of payments will be approximately US$630 million during 1977 and 1978, broken down into US$350 million in lost exports (as a result of loss of orders, production losses and diversion of production to the domestic economy), US$250 million in additional imports, chiefly machinery and equipment required for the increase and advancing of capacity in the construction sector, and US$30 million in lost tourist receipts. 16. Immediately after the earthquake, the Government began clearance and reconstruction work and was remarkably successful in overcoming its immediate effects. Debris was cleaLred, housing was found for the vast majority of those left homeless, chiefly by giving them priority for newly completed housing, and most enterprises were returned within a few weeks to full production. To deal with the substantial longer-term effects of the earthquake, the Government instituted a comprehensive reconstruction program, which, it is planned, will permit both the impact of the earthquake to be eliminated by 1980 and the tar- gets of the 1976-80 Plan to be met. The resources for the additional tasks during this plan period are expected to be secured through greater efforts of the population (notably compulsory and unpaid work on one Sunday each month for the reconstruction effort, voluntary work and financial contributions), utilization of the army For reconstruction work and from savings of production expenditures obtained from improvements in efficiency of production which are to be greater than originally anticipated (para. 11). The reconstruction effort will impose additional tasks upon the construction sector which, in recent years, has been operating very close to its capacity; as a result, the reconstruction program is designed to relieve the constraints of the sector by advancing the commissioning of new capacity in the construction sector and those industrial branches which supply building materials, construction equip- ment, and equipment for the building materials industry. In July 1977, it was announced that the improvements in economic efficiency were expected to be sufficient to permit not only those increases in investment, in particular in housing, but also improvements in living standards to compensate the population for its additional efforts. In December 1977, the Romanian Communist Party announced that revised targets throughout the economy were to be introduced to perm,it the fulfillment of the plan ahead of schedule. External Assistance 17. The expansion of Romania's trade with the non-socialist industrial countries has led to an increased need to obtain convertible currencies to pay for imports from those countries. Romania has met this need both by bor- rowing abroad and by mounting a major effort to expand exports and tourism. Gross inflows of convertible currency through medium- and long-term loans were US$946 million in 1976) consisting mostly of financial and suppliers' credits with relatively short repayment periods. This gross inflow repre- sented a net inflow of some US$464 million after accounting for the country's repayment obligations. In the first six months of 1977 the gross medium and long-term capital inflow on convertible account was US$501 million, consisting largely of suppliers credits. The net inflow for the same period was US$151 million.  - 6 - 18. As part of its effort to expand its foreign trade and cooperation relationships, Romania has also taken active steps to attract long-term pri- vate capital. A regulation passed in 1972 defines the conditions under which foreign firms can establish joint ventures with domestic enterprises, prefer- ably in foreign exchange earning or saving industries. As of December 1977, eight joint venture agreements had been signed and two more announced. In contrast with the earlier ventures, which were of small scale involving total direct foreign investments of about US$10 to 15 million, the latest ventures 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 approximately US$250 million. Even larger inflows are expected as a result of an agreement with Kuwait for the construc- tion of a petrochemical complex costing US$1.25 billion. Romania also receives medium-term trade credits from U.S. Eximbank and trades under ECGD, COFACE, and HERMES credit guarantees with the United Kingdom, France and the Federal Republic of Germany, respectively. During 1977, Romania became the first East European recipient of a Japanese Eximbank loan, receiving US$80 million for the expansion 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 agreement and also a US$420 million loan from Iran on concessionary terms. During 1977, it negotiated two Eurodollar loans totalling US$125 million, and a banking consortium is now putting together a US$53 million loan to finance Romania's purchase of a 49 percent share of a coal mine in the United States. It was announced in January 1978 that Romania had negotiated a further US$100 million Eurocurrency loan. In addition, Romania has access to non-convertible currency investment credits from the International Investment Bank, Moscow. 19. As it stands Romania's access to long-term finance in convertible currencies is still very restricted. The IBRD is the major source of such long-term development finance, though Romania is making efforts to improve its access to financial markets. The Bank's presence on a significant scale would have a positive influence in this regard and serve to build outside confidence in the country, thereby enhancing in the long-term its independent access to the world's financial markets. Prospects- 20. The 1976-80 Five-Year Plan reflects Romania's continued strategy of rapid growth. Investment rates of some 30 percent of GNP are to be main- tained, and the major thrust is in industry. The plan targets are impressive. National income and gross industrial output are expected to grow at 10-11 percent per annum, with more rapid growth in heavy industry than in consumer goods. Continued emphasis is to be placed on foreign trade which is planned to double in real terms, with the aim of securing the technology needed for the modernization and diversification of Romanian industry and the raw mate- rials required by industry. Greater emphasis than in the 1971-75 Plan is to be given to developing the infrastructure in agriculture, particularly irriga- tion and drainage, while the plans for fertilizer production envisage an increase in supply sufficient to double the 1974 application rates by 1980.  - 7 - 21. Romania has good potential for further economic growth. Endowed with important natural resources (fuels, some minerals, timber, rich soils and sources of irrigation water for agriculture, and a favorable climate for agriculture and tourism) and located conveniently with respect to its major international markets in the East and West, the country has built a broad industrial infrastructure (power, metallurgy, chemicals) which will serve as a base for the expansion of secondary manufacturing sectors such as machine building and consumer durables. Above all, Romania has a hard-working and increasingly skilled population. In order for Romania to attain its growth objectives, however, it will have to rely on a major expansion of exports of manufactured goods in order to finance modern foreign technology and an increasing dependence on imported raw materials and fuel. 22. Romania's growth rate is expected to remain quite high by inter- national standards and, assuming its present momentum is maintained, Romania will be among the more developed of the high income developing countries in the 1980s. This high growth will be achieved by continuing Government emphasis on, 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 plans for creasting a competitive industrial economy, it will have to attract foreign resources and technology, and secure loans to support its development efforts. 23. 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 require improvements in the quality of products and responsiveness to customer demand, areas in which the economy appears to have lagged behind targets in past years. The increasing diversity and com- plexity of Romania's economic structure require continuing improvements in the efficiency of economic planning and coordination and further refinements in economic management. To keep up with these changes and requirements, large programs of education and manpower training have been mounted, investments in scientific and technological research have been emphasized, and efforts are being made to strengthen technical cooperation with industrialized countries and international organ:Lzations. Creditworthiness 24. As of June 1977, Romania's total medium and long-term external debt amounted to US$3,266 miLlion. Most of these debts (US$3,174 million) were denominated in convertible currencies, the major creditor countries being Germany, France, UK and Italy. While the total debt does not appear excessive in relation to the volume and growth of external trade, average maturities are relatively short and convertible debt service payments are estimated to be in the order of US$680 million a year during 1976-77. The convertible debt ser- vice ratio in 1976 was 17 percent and is expected to be 19 percent for 1977. 25. The organization of economic activity in Romania, the pursuit of a development strategy involving high investment and saving rates, and rapid  - 8 - 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 in 1976. The preferential trade status accorded to Romania by the European Communities in June 1973 is facilitating the expansion of such exports as is the granting of most favored nation status by the U.S. 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 pay- ments, the Government indicated that there would be a temporary reversal of this trend and short-term debt increased again in the first six months of 1977. Assuming a continuation of present export and debt management policies, we estimate that the debt service ratio will be somewhat above 20 percent during the remainder of the 1976-80 plan period, after which it will decline, reaching about 15 percent in 1985. The country's present outward-looking posture, the success of both its domestic growth and foreign trade policies, and its potential for continued development, all support the judgment that Romania is creditworthy for substantial Bank lending. 26. When Romania joined the Bank, most pre-war foreign debts of the country had been settled. Settlements which were still under discussion at that time concerned claims in the United Kingdom and in the United States. With regard to the settlement of these claims, the final payments of U.S. claims began in September 1975 and were completed in October 1976 based upon agreements reached in May 1975. Settlement of British 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 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, therefore, urged the Romanian and Swedish authorities to clarify their respective positions directly with each other as soon as possible. PART II - BANK GROUP OPERATIONS IN ROMJANIA 27. The proposed loan would bring total Bank commitments to Romania to US$822.8 million for sixteen loans in agriculture, industry and power. Dis- bursements 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 January 31, 1978.  -9- 28. 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. 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 pro- duction 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. 29. A number of further loans are under consideration. Projects for irrigation and drainage, dairy cattle development, earthquake reconstruction, power, livestock productiLon, chemical plants and seamless pipes have been proposed. The Government: has also requested that the Bank consider lending for a major navigation canal linking the Danube and Black Sea. 30. In addition to lending, the Bank (through EDI) has assisted Romania by conducting industrial and transportation project appraisal training courses for Romanian officials in Belgrade in October 1973 and in Bucharest in January/ February 1975, November/December 1975, January/February 1976 and October/ November 1976. 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 appLied by the Romanian planning authorities. 31. The projects, for which assistance has been committed or is being considered, represent only a small portion of Romania's total need for ex- ternal financing and of its total disbursed convertible debt. However, they will provide a substantial net addition to the inflow of convertible currency finance, and may set a pattern for obtaining longer term convertible finance from other sources. The disbursed debt outstanding to the Bank is expected to constitute about 12 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 3 percent. PART III - THE INDUSTRIAL SECTOR IN ROMANIA Industrial Development 32. Performance of Romania's industrial sector during the last 25 years has been impressive, and great efforts have been made to transform a nation that once specialized in the exportation of raw materials into a country with a strong and broad based industrial sector. Large capital investments, at annual rates in the order of 30 percent of GNP have been concentrated on basic  - 10 - and heavy industry, particularly on fuel, electric power, metallurgy, machine building and chemicals and have resulted in a rapid expansion and diversifica- tion of industrial output. During the last Five Year Plan gross industrial output increased by about 85 percent surpassing significantly plan targets. Growth in the chemical, engineering and metal working, and ferrous metallurgy sectors has been the fastest with production about doubling. 33. In the process of this impressive development the industrial sector of Romania has assimilated in a relatively short period of time vast amounts of technology and know-how, and it is assuming a sophistication with which it is increasingly capable of solving complex technical problems and producing products that require a high degree of technological achievement. One of the comparative advantages of Romanian industry is its relatively low-cost, skilled and unskilled man-power, supported by well organized training programs. 34. Industrialization will remain the first priority of development both in the 1976-80 Five Year Plan and in the longer rum with output expected to grow seven fold in the period 1970-1990 (or roughly 10 percent per annum). While previous growth was often achieved at sacrifice of quality, efforts for quality and productivity improvement are more evident now. Internally, the areas of major emphasis will be manpower planning and development, growth in technological capabilities, industrial modernization, and central efficiency auditing. By applying the most advanced scientific methods and by stressing scientific organization of manpower, substantially more value will be incor- porated per ton of product. The thrust of the sector's development will continue to be the growth of the chemical, engineering, metal working and ferrous metallurgy sectors. Industrial Organization 35. At present nine industrial ministries are responsible for the indus- trial sector in Romania. Subordinate to each Ministry are several foreign trade enterprises, research and design institutes and a number of Centrals, which in turn direct the activities of a group of related enterprises. The work on overall design and supervision of projects is delegated by each Min- istry to one of its research and design institutes. The enterprises, Centrals and Design Institutes, which have not been authorized to trade abroad (see also para 4 above) conduct their foreign business through the foreign trade enterprises which normally belong to the same Ministry. The Chemical Industry 36. Petrochemicals have provided the basis for development of the chemical industry in Romania. While Romania is no longer a significant exporter of simple petroleum products, it has established a flourishing petro- chemical industry based upon domestic oil and natural gas resources, and has a highly trained workforce on which to base further development of the sector. Beginning from a relatively small base in 1950, the chemical industry grew  - 11 - at an average rate of 21 percent per annum from 1950-75. Growth rates in the past decade have also been substantial, at about 21 percent for 1965-70 and 16 percent for 1971-75, with, the decline in growth rate reflecting increasing absolute size of the industry and delays in commissioning new plant. In 1976, the chemical industry accounted for 12 percent of industrial output (compared with 2.1 percent in 1950) and 8.3 percent of industrial exports (compared with 1.7 percent in 1950). TbLe sector received 14.7 percent of industrial sector investments during the 1971-75 Five-Year Plan period, and 13 percent in 1976. 37. Chemical industry facilities are largely concentrated in the center and the south of the country, where large refinery and petrochemical complexes have been developed around the Ploiesti and Pitesti oil fields to produce a broad range of refinery products, petrochemical intermediates and end-products. The Government is making an effort to locate new plants for production of end products, such as fertiliLzers or synthetics, away from these traditional indus- trial centers, partly to promote a more balanced regional growth and to avoid industrial congestion, anld partly to take advantage of the availability of labor. The Tire Industry and Market 38. Production of itires in Romania began in 1939 when Goodrich (USA) established a tire manufacturing company (Victoria) at Floresti (22 km north- west of Ploesti). In 1950 the USSR provided technology and equipment for manufacturing truck and tractor tires in that plant. Growth in production through 1960 was slow, although Romania gained considerable experience with imported tire technologies and their adaptation to domestically available raw materials. In 1962, the Victoria plant was expanded and a new plant was commissioned on the outskirts of Bucharest (Danubiana) to produce diagonal truck, tractor and passenger car tires. This expansion was carried out by the Romanians with equipment and technical advice from the United Kingdom, enabling Romanian production to reach 1.2 million tires in 1965. Further expansion at these two plants for radial passenger car and tractor tires brought production in 1970 to 2.5 million tires. New technology for this expansion was supplied by Pirelli with equipment supplied by the United Kingdom and Germany. Further expansion at Victoria in the early 1970's was undertaken with technology and equipment from General Tire International of the United States. Production in 1975 was 3.7 million tires and is estimated to have reached 4.7 million tires in 1977. In addition to the two plants included in the proposed project, further expansion of capacity by 400,000 truck tires a year at DaLnubiana and 1.5 million passenger car tires a year at Victoria are planned, arnd a Romanian joint venture with Citroen (France) is expected to produce 300,000 tires annually in a new plant by 1985. Over the last 30 years, Romania has systematically developed its indigenous capability for supplying nearly all of the raw materials required for the tire industry. Of the more important inputs, only natural rubber and wire tire cord are imported; a plant started producing the latter in mid-1977 to supply about 50 percent of domestic requirements. Successive expansions of this plant are scheduled to provide for all of the domestic requirements of wire tire cord by 1985. Synthetic rubber, carbon black, fabric cord and most chemicals needed for tire production are produced in Romania, and tire technology has been adapted where neceissary to meet the specifications of domestic materials.  - 12 - 39. Tire consumption in Romania is, as in any country, a function of new vehicle production and the stock of vehicles in use. Both of these variables are controlled by central planning authorities, and priority has been given in the past to increasing truck and tractor production rather than to pas- senger cars. Although future production plans now call for relatively more passenger cars, vehicle ownership in 1985 is expected to be lower than in other countries at comparable levels of income. Vehicle production is expected to increase from 168,000 in 1975 to 540,000 in 1985 (with about 25 percent of pro- duction exported throughout the period), and vehicles in service are expected to increase from 771,000 in 1975 to about 1.9 million in 1985. Included in these figures are Romanian plans to begin manufacture of large "off the road" (OTR) equipment such as scrapers, loaders, dump trucks and bulldozers, which will require OTR tires of the type to be produced by the project. Even after the substantial increases in vehicle production and use anticipated through 1985, the number of vehicles expected to be in use (81 per 1,000 inhabitants) will be low in comparison with other countries at a similar stage of develop- ment. This reflects the considerable growth potential of the Romanian tire market, which is expected to increase at 11 percent per annum overall through 1985. Growth of the OTR market segment is expected to be greatest at 22 per- cent per annum, followed by passenger car tires at 16 percent, tractor tires at 9 percent and truck tires at 6 percent. 40. Romania is currently exporting about 25 percent of its tire produc- tion, and expects to increase this share to about 40 percent in 1985. The quality of Romanian tires meets the standard necessary for export markets. Passenger car tires -- which require minimum technical support services and are basically traded and marketed as consumer goods -- have been exported primarily to convertible currency areas, and now account for about 60 percent by volume of all tire exports; truck and tractor tires, on the other hand, have been exported predominantly to COMECON countries. This pattern is expected to become even more pronounced by 1985. The leading importers of tires among about 30 western countries are the Federal Republic of Germany, Iran and The Netherlands -- which together account for 63 percent of Romanian tire exports. Romania also plans to enter the US market for radial truck tires in 1978. Although significant in relation to total Romanian production, tire exports accounted for only about 1 percent to 2 percent of total inter- national trade, and this share is expected to increase to only about 3 percent to 5 percent by 1985. With increasing volume of tire exports, particularly to non-COMECON countries, the organization for tire marketing (DANUBEXIM) will have to be strengthened, and the Government is considering establishment in the early 1980's of a separate Romanian export agency to deal exclusively with tires. Exports to COMECON are carried out within the framework of long term trade agreements covering the next 10 to 15 years, and 80 to 90 percent of project exports would be to other COMECON countries. Under such agreements, Romania (along with Hungary) is responsible for developing and producing radial truck and tractor tires of the type to be produced under the project to help meet planned consumption of such tires in COMECON. These arrangements recognize Romania's comparative advantage in producing high quality tires at competitive costs. Specific trade agreements are routinely renegotiated within the framework of the specialization agreements noted above. The latest such agreement for truck and tractor tires extends to 1982, and no exceptional problems are anticipated in marketing project output profitably.  - 13 - The Borrower 41. 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 has 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 finan- cial plan for every enterprise. It is the Investment Bank's obligation to ensure that a project is executed according to the financial and technical data included in the final technical and economic study approved by the Council of State. Its inspectors check whether the project is proceeding according to the schedule approved inL the Plan. 42. 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 obliga- tion to verify that an enterprise is meeting the targets set in the investment plan, it has no legal authority to influence directly the management of the enterprise or to force the enterprise directly to take operational actions which it considers necessary. In practice, however, it can request such actions very effectively by reporting through the Ministry of Finance to the Government. 43. The Investment Bank is the channel for all sources of major domestic investment financing ot'her than in agriculture, but its own funds for onlend- ing as credits are relatively small. The primary source of its funds is the state Budget. The Government will ensure the availability of sufficient funds including foreign exchange requirements for the implementation and operation of the project (Section 2.02 of the Guarantee Agreement). The Guarantor will also ensure that the Investment Bank can meet the debt service on the Bank loan. PART IV - THE PROJECT 44. 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. Following preparation of project data requested by the Bank, it was identiLfied as a project of further interest to the Bank in May 1976 by a mission which reviewed ten chemical subsector projects. A preparation mission visited Romania in January 1977 to further discuss the project. More complete information on the project was received in March 1977, and a second preparation mission visited Romania in April 1977. The project  - 14 - was appraised in July 1977, and negotiations were held in Washington in January 1978. The Romanian delegation was led by Mr. Ion Ratoi, First Vice President of the Investment Bank, and included representatives of the Minis- try of Chemical Industry, Import Agency for Chemical Equipment and Tec!-"--y (ROMCHIM) and the Investment Bank. The Project 45. The objective of the project is to increase production of truck, tractor and OTR tires in order to meet increasing domestic demand for these types of tires and to save or earn foreign exchange through import substitu- tion and exports. Two new tire plants would be constructed in recently dev- eloped industrial estates at Zalau in the northwestern district (judet) of Salaj and at Drobeta-Turnu Severin in the southwestern district of Mehedinti (see map). The plant at Zalau would produce one million truck tires annually, about half to meet expected increases in domestic demand and about half for export. The production of all steel 1/ radial truck tires, including tubeless, forms an excellent technological base for exports since these types of tires are in increasing demand. The plant at Drobeta-Turnu Severin would produce about 150,000 tractor tires and about 20,000 OTR tires. The increased avail- ability of radial truck and tractor tires and the new production of OTR tires will allow Romania to extend its tire production program to new sizes and will modernize the overall product mix. About 20 percent of tractor tires and about 15 percent of the OTR tires would be exported. Eighty to ninety percent of all project exports are expected to go to COMECON countries, but the Romanians would also take advantage of specific market opportunities in convertible currency areas as they arise. Facilities for power generation, steam and water will be provided by the industrial parks, and are not included as part of the project. Selection of locations for the two new tire plants has been made under Government policy for decentralization of industrial facilities and has taken into account the availability of labor, raw materials and utilities. The Staff Appraisal Report (No. 1779-RO, of February 23, 1978) is being dis- tributed separately to the Executive Directors. Project Implementation 46. Two new project enterprises would be responsible under supervision of the Central for rubber goods and plastics under the Ministry for Chemical Industry, for execution of the project. Commercial production is expected to begin by January, 1980 and January 1981 for the Zalau and Drobeta-Turnu Severin plants, respectively. The Zalau Tire Enterprise will be responsible for construction and operation of the truck tire plant and was established in March 1977. The Central has provided experienced project management and senior staff to the enterprise, the Government has approved detailed project parameters (technical and economic indicators) to provide the legal basis for financing and implementing the project, and site organization has begun. The Drobeta-Turnu Severin Tire Enterprise has not yet been established, as the construction of the tractor and OTR tire plant has been planned to follow that 1/ All steel tires are those in which both belts and plies are made of steel wire.  - 15 - at Zalau by about one year. The Drobeta-Turnu Severin enterprise is expected to be established by mid-1978 and will be responsible for construction and operation of the tractor and OTR tire plant. Establishment of the Drobeta- Turnu Severin Enterprise and approval of detailed project parameters for the tractor and OTR tire plant by the Government will be conditions of disburse- ment for the major portion of the proposed loan allocated for the Drobeta- Turnu Severin plant, but up to US$6 million intended for down payments on key contracts could be disbursed before these actions in order not to delay the project (Schedule 1, paragraph 4(c) to the Loan Agreement). Under the terms of the Loan Agreement (Section 1.01 (e)), the Central would assume all respon- sibilities of the enterprise until the latter is established. The key to success of the OTR tire component will be securing imported technology and engineering. Discussions are already underway with eight suppliers (para. 50), and a contract for this component of the project is expected by mid-1978. No funds for any part of the OTR component of the project would be disbursed until conclusion of this contract (Schedule 1, para. 4 (b) to the Loan Agreement). 47. The Central responsible for the two new enterprises has a long experience in tire production in two older plants under its administration, and is in a position to draw on experienced staff to ensure successful execu- tion of the project proposed for financing. It has already recruited workers from the Zalau and Drobeta-Turnu Severin regions for training in existing tire plants in order to establish a nucleus of skilled workers for the new plants. A project management team has been established and includes staff from the several specialized agencies responsible for particular aspects of the proj- ect. IITPIC (Technological Engineering and Design Institute for the Chemical Industry) is responsible for engineering and design of the project, and will work closely with the foreign supplier of technology and engineering for the OTR plant. Civil works and construction work will be carried out, under supervision of IITPIC, by construction trusts from the Ministry of Industrial Construction. International procurement will be handled by ROMCHIM (Import Agency for Chemical Equipment and Technology under the Ministry of Chemical Industry), subject to technical review by IITPIC. Although these arrangements may appear rather fragmented, the responsibilities of each party are mandated by law after the Government has approved the detailed parameters of the proj- ect. Arrangements of this sort are well-established under the Romanian system and have worked satisfactorily for previous projects. Project Cost and Financinag 48. The estimated total cost of the project (excluding import duties and taxes) is US$251.8 million, with an estimated foreign exchange component of US$88.4 million. The cost of equipment and materials to be procured from foreign suppliers has been estimated at the international prices prevailing in 1977. Physical contingencies have been estimated at 10 percent of the base cost. Price contingencies on foreign exchange cost are based on an annual increase of 7.5 percent during the construction period. Due to near zero inflation under the Romanian system of administered prices, price contingen- cies on local costs have been calculated at one percent annually.  - 16 - 49. The proposed Bank loan of US$85.0 million would finance 96 percent of the foreign costs of the project. The proposed loan to the Investment Bank would be for 15 years including a grace period of 3 years and would be guaran- teed by the Government. It is Romanian practice for the State to invest virtually all funds in industrial projects through the Investment Bank without formal onlending agreements and to recover investment costs from project beneficiaries through a variety of financial mechanisms including net income transfers from state enterprises, taxes and depreciation payments. For this reason, the Investment Bank would not actually relend the Bank loan to the project enterprises. However, the enterprises would be the beneficiaries of the Bank loan and their provision of funds to the State Budget and Investment Bank would be sufficient to cover the Lei equivalent of the debt service on the Bank loan including (notional) payment of principal plus interest at 10 percent (Section 4.01 (a) (viii) of the Loan Agreement). This arrangement is in line with our practice in previous industrial projects, and the Investment Bank would bear the foreign exchange risk on the Bank loan. The remaining project costs and an estimated US$6.4 million of interest during construction would be financed by the Government. Procurement and Disbursement 50. US$82 million of items for the Zalau and Drobeta-Turnu Severin plants to be financed under the proposed loan would be procured through international competitive bidding in accordance with the Bank's guidelines. Included among these items is a major package, estimated to cost about US$28 million, of imported technology, engineering and specialized process equipment for the OTR tire plant to be constructed at Drobeta-Turnu Severin. At the Bank s request, this package, as well as other equipment and materials to be imported, was internationally advertised in September 1977, and embassies of all Bank member countries and Switzerland represented in Bucharest were informed of the project at the same time. Eight suppliers from three coun- tries have shown interest in the OTR package in response to these initiatives. Bidding for the OTR package will be conducted under a modified, two-stage procedure under which initial technical bids were received in January, 1978 and final technical and price bids are to be submitted in May 1978. In addi- tion to the OTR tire package, US$54 million of equipment and bulked materials will also be procured through international competitive bidding. Romanian suppliers participating in international competitive bidding would be accorded a margin of preference of 15 percent or applicable customs duty, whichever is lower, and it is expected that Romanian suppliers would win about US$17 mil- lion of contracts, largely for tire molds, small presses and transport systems for finished products. Imported items costing less than US$100,000 each may be purchased after solicitation of bids from at least three member countries and Switzerland, unless this would be impractical for technical reasons, in which case the items involved would be procured by prudent shopping. The total of such exceptions from full international competitive bidding would not exceed US$3 million. 51. The Bank loan would be disbursed over four years for (i) 100 percent of foreign expenditures for imported technology, equipment and materials, and (ii) 100 percent of local expenditures ex-factory for equipment for items  - 17 - procured from Romanian suppliers following international competitive bidding. Special conditions of disbursement relating to project implementation have been noted in paragraph 46. Benefits and Risks 52. The project will contribute to meeting Romania's growing demand for truck, tractor and OTR tires, will help to save scarce foreign exchange and will provide a base for increased tire exports, primarily to other Eastern European countries. Tires produced in the two new plants will be utilized in virtually all phases of Romania's continuing development effort, including agricultural mechanization, major civil construction and transport of goods. Substantial transfer of technology would also take place, in line with Bank objectives for industrial lending in Romania, through the financing of the technology, engineering and equipment for the OTR tire plant. Net annual foreign exchange benefits of the project are estimated at US$150 million. Substitution of imports from convertible currency areas is expected to account for about two-thirds of this foreign exchange benefit. Exports, primarily to GOMECON, are expected to account for the remaining one-third. In addition, the project will develop major industry in two less developed parts of the country and will provide employment for about 4,300 people. Virtually all costs and benefits of the project have been quantified. The expected economic rate of return is estimated to be 24 percent for the Zalau truck tire plant, the cost of which is US$138.2 million; 19 percent for the OTR plant at Drobeta- Turnu Severin, the cost of which is US$52.3 million; and 17 percent for the tractor tire plant at Drobeta-Turnu Severin, the cost of which is US$61.3 million. The average economic rate of return for the project as a whole is 22 percent. These returns are relatively sensitive to price changes, but the project would show aLn acceptable return of about 14 percent even in the unlikely event that tire prices were 10 percent less than anticipated. 53. Three potential technical and commercial risks have been taken into account in evaluating the project. First, the Zalau truck tire plant and the tractor tire section of the Drobeta-Turnu Severin plant will be the first com- plete tire plants designed and implemented by the Romanian design institutes and the Central with the only outside assistance being extended to the OTR tire section of the Drobeta-Turnu Severin plant. However, given the fact that Romania has gained consiLderable experience in the execution of tire projects through numerous and substantial expansion programs in two existing plants, this risk is acceptable. Second, a substantial portion of the process equip- ment for tire production and not proposed for financing under the proposed loan will be designed and manufactured for the first time in Romania. The technical risk associated with this approach is reduced because the designs are based on proven equipment and have been adapted to Romanian condi- tions. Romanian manufacturing capabilities are satisfactory for this type of work, and the Romanian authorities have indicated that provisions have already been made to produce thie necessary equipment to meet the construction schedules of the two new plants. Finally, eighty to ninety percent of tire exports from the project would be to other COMECON countries. The potential market risk of concentrating exports on these countries has been considered (para. 40), and no exceptional problems are anticipated in marketing project output profitably.  - 18 - 54. The potentially most serious pollutant from the project is carbon black which could contaminate the atmosphere, and surface and groundwater. IITPIC's specifications for the carbon black handling system call for enclosed conveyors, and for silos to be kept at below atmospheric pressure and provided with devices to prevent leakage. The project sponsors have also indicated their willingness to introduce strict ecological and safety standards. The Loan Agreement (Section 4.01 (i)) requires that the project be operated with due regard for ecological, environmental and safety standards. PART V - LEGAL INSTRUMENTS AND AUTHORITY 55. 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. 56. Special conditions of the project have been noted in paragraph 46 and are listed in Section III of Annex III. 57. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 58. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments March 9, 1978 Washington, D. C.  TABLE 3A ANNEX I RCFUUNIA RIP. OF - SOCIAL INDICATORS DATA SHEET Page 1 of 4 pages LAND AREA (THOU KM2) ------------- CMRCtiNlA RIP. OF REFERENCE COUNTRIES (1970) TOTAL 237.5 MOST RECENT AGRIC. 149.0 1960 1970 ESTIMATE YUGOSLAVIA ITALY GCRMANY D. REP.EC OF*** GNP PER CAPITA (USS) .- 550.0** 1450.0** 830.0* 1910.0* 4420.0* POPULATION AHD VITAL STATISTICS POPULATION (MID-YR. MILLION) 1S.4 20.3 21.4/a 20.4 53.7 61.6 POPULATION OENSITY PER SCUAE KM. 77.0 9S.# 90.0/a 10.0 171.0 240.0 PER SQ. AN. AGRICULTURAL LANO 126.0 136.0 144.07 139.0 266.0 439.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 23.9 19.0 19.7 21.0 10.6 17.3 CRUDE OEATH RATE (/THM0.AV) 10.9 S.9 9.3 9.1 9.7 11.6 INFANT MORTALITY RATE (/THOU) 75.7 49.4 34.7 55.5 29.6 23.6 LIFE EXPECTANCY AT BIRTH (YRS) 6S.9 67.7 69.1 67.7 71.9 70.3 09D5S REPRODUCTION RATE 1.2 1.3 1.3 1.3 1.3 1.2 POPILATtOM 0SOUWTU.ATS (I.) TOTAL 1.2 1.0 1.0 1.0 0.8 1.0 URBAN 3.8 3.4 2.1 4.6 0.9 4.1 URBAN POPULATION (% OF TOTAL) 32.0 40.8 43.0 38.7 51.5 82.4 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 27.9 /a 25.9 ?2.4La 28.3 24.4 23.2 15 TO 64 YEARS 64.9R 6W5.5 D'. BTK 64.3 65 2 63.6 65 YEARS AND OVER 7.27w s.6 9.8IT 7.4 10.4 13.2 AGE DEPENDENCY RATIO e.s 0.5 0.5 0.6 0.5 0.6 ECONOMIC DEPENDENCY RATIO 0.7/b 0.7/a 0.7/a,b Q- 0-9/a 0.9 FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) .. . .. USERS (% OF MARRIED WOMEN) .. . *- EMPLOYMENT __________ TOTAL LA8OR FORCE (THOUSAND) 3600.0 9608.0 10200.0/a *- 19600.0 26500.0 LABOR FORCE IN AGRICULTURE (%) 60.0 49.0 360oT .. 19.0 0.9 UNEMPLOYED (% Of LABOR FORCE) .. .. . .- 3.1 0 7 INCOME DISTRIUUTIGN X OF PRIVATE INCOME RECOD BY- HIGHEST 5% OF HOUSEHOLDS .. .. .. 15.1 HIGHEST 20% OF HOUSEHOLDS ,, . .. 41.4 LOWEST 20% OF HOUSEHOLDS .. . .. 6.6 LOWEST 40% OF hOUSfS1LDS .. .. .. 18.4 DISTRIBUTION OF LAND OWNERSHIP _______________________ _____ % OWNED BY TOP 10% OF OWNERS .. .. .. 15.1 /a % OWNED BY SMALLEST 10% OWNERS .. .. .. 84.9.. HEALTH AND MJTRITION POPULATION PER PHYSICIAN 740.0 680.0 620.0 1010.0 550.0 580.0 POPULATION PER NURSING PERSON 300.0 200.0 180.0 410.0 470.0/b 350.0 POPULATION PER HOSPITAL BED 180.0 /C 140.0/b 120.0/C 170.0 90.0 90.0 PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) 105.0 118.0 11B.0/d 124.0 126.0 121.0 PROTEIN (GRAMS PER DAY) *1.0 92.0 90- 07 92.0 100.0 88.0 -OF WHICH ANIMAL AND PULSE 24.0 28.0 *- 29.0 42.0 56.0 DEATH RATE (/THoU) AGES 1-4 4.9/a 2.4 2.1 2.6 1.0 0.9 EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 98.0 113.0 108.0 94.0 110.0 129.0 SECONDARY SCHOOL 24.0 44.0 49.0 45.0 60.0 66.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 12.0 14.0 14.0 12.0 13.0 15.0 VOCATIONAL ENROLLMENT (X OF SECONDARY) 54.0 5.0 67.0 72.0 26.0 48.0 ADULT LITERACY RATE (%) .. .. 98.e B5.0 97.0 99.0 HOUSING PERSONS PER RoOM (URtBAN) ,. 1.3/C *- *- * 0.7/a OCCUPIED DWELLINGS WITHOUT PIPED WATER (%) *- S8.0/c,d .. .. .. 0.3/b ACCESS TO ELECTRICITY (X OF ALL DWELLINGS) .. .. 100.0 RURAL DWELLINGS CONNECTED - TO ELECTRICITY (5) .. 27.0/C *. CONSUMPTION ___________ RADIO RECEIVERS (PER THOU POP) 109.0 152.0 146.0 165.0 218.0 31B.0 PASSENGER CARS (PER THOU POP) .. . 35.0 190.0 220.0 ELECTRICITY (KWH/YR PER CAP) 414.0 1615.0 2411.b 1288.0 2262.0 4128.0 NEWSPRINT (KG/YR PER CAP) 2.1 2.6 2.1 4.3 5.3 17.7 SEE NOTES AND DEFINITIONS ON REVERSE  AttiR I Page 2 Of 4 Pages Utoisso otherise noted, data for 1960 refer to any year betwean 1959 and 1961, for 1970 bstween 1968 and 1970 and for Most Recent Estimate between 19 73 ad1975. o GCP per capita dat.arer base.d on the World Bank Atisa mesthodology (1974-76 basis). 00 Not conparahir to those for othor Centrally Planne d Ecoomiso. Derived by using the Sank Atlsa methodology, by edjuating official Rousanlen National Accounts data and conveting th into US dollars at the effective exchange rate for foreign trade transactions which approximaesa LO.i 20 per US dollar. asa he Federal Ropublic of Germay has been selected as an objective coutry bec.u.o it is an iuduetrilallod European country with maJor trade cien with Roasei.l. itOtANIAO 1960 / 1962; /b Rati.ocf populatIon coder 15 and 65 ond over to total labor forc; /c Hospitals only, ecolodes asnitaria and materity bh-e.. 1970 I Rstio of population under 15 sod 65 and -oer to total labor force; /b Hospitals only, encludes saniteris and maternity hosae; /c 1966; /d InsIde onhly. MOST RECENT ESITKAYR: Is 1976; /b Ratio of population under 15 end 65 sod over to total labor force; Ic Raspitals only, excludes sanitsri.soad materity hones; Id 1969-71 swerge; /e 1974, official netinste is 100 percant. YI.ECSLAVIA 1970 I Agric-ltore land held by social sector 'Ksmbimste'; /b Agriculture land held by private small-holders "10 hsctsresmelma" /0 Including midwives, assistant midwives, sasistnt n esand nursing seilseisa. ITALY 1970 I Ratio of population under 15 and 65 end over to total labor force; /b Hospital personnel. GElIf riN . FED iREP OP 197 /s Total, urban and rursl; /h I-aid. only. Elf, February 21, 1978 oErfliITIONu Or ocLa DIICAT S Land Area (thou us2) PoPulaotin par nura in Pareo - Population divided by nmbor of prttotioig Total -Total -ofa- area oneprining land ares and inland waters,1 mae.ad f-1al gradut caenro,trained or 'crtifiad' nurses and cArin.- Moe troont as cmate of agrioultur1 ares used tcaporarily or Pace- auniliary pereonn1 vith traiting oreprine tenly for crop., patr,mrket 6 hitchen gardes- or to lie fallna. FoPo1atin par hosoita1 bed - Population divided bY osebar of hospital beds avsilabta in public and private general and specialteed hospital and GNP Per ..plt. (1US$) - GNP Per capita estimates at currant markt price, rehabilitation centers; e..lodna onring homes. and establietnents for caI.lclted by osm conerion s tbhd as World Rank Atlas (1973-75 basis); tooatodia1 and prevenive care. 1460; 1970 and 1975 dora. Per SePita coonly of oslorias f of reoureasesta) - Csepted foam a_ergy equivalet of met food suPIe avalable En country par capita per day; PPcolatin and itu1 -ttisti-: available soPPles comprise d-mntic production,imports less nperts, and Fonolrion(oldyearnillool 0 ofJuly firer: if not o-ilablo, vorge changes in stok; nor soPPlies so-t ld uninaI feed, esads, quenitisnousad of two eed-yeu ..si omter; 1:60, 1970 and 1975 data. in food prucesing sod lbases in distribuotion; reqairoenets were eatiasred hY PAO based on Pbysiolgicl needs for normal activity and halth osonid- PonlatIion desr -o or be - Mid-yea Ppoplatio per squar kilooerar erin snirota1 toperaturs, body -eight, age an...d sax distribution of (10hctm)of ctu-I area. poplation, end alnuing 10% for wast sat household I.-eJ. Poclaios, dneity-ar soure be of acric . lad - Conpured as above for Per ..eita sueply of protein (rae, ear dy -Prti oenofPar caPita egricolcucal lend only. co~~~~~~~~~t:supply of food per day; net suPPlY of food is defined as above; require- it-1 -t ~~~~~~~~~~~~~~~~~~~asr for all co"trie es,ta,bliebed by lIDA Etoonoic .. Ra hse er_ic.a Vitl-sttis-tics proide for a minlos aInon_ of 60 gatao of total protein Per day, and Crudo bircb rato ear th-onnd. --vers - Annul live bictbo per th-ou d of 20 gras of animal sod pulac protein, of which 1 0 gras soold he animal mid-year poplation; ten-year ari teetic avrgages eding int 1961 and 1970, Protein; theso standardn ar I-or thon those of 75 grna of totsl protein and fiv- Y-ear g aveaeeding in 1975 Pe.r mat recet estimae en-d 23 gr-n of anima Protein as a avrag for the wold, proposed by FAO Crude deoth rat nr obcad vrae-uos datha per thowasd of mid-year in oho Third World Foo Survy. ooato; o-ya artemi avrafe ending in 1960 sod 1970 and fiv- Pee ' capta orti c rm nmlad pulse - Frotnie supply of food yea aaog ndn in~ 1971 fo -oetrcet estimate, derive from anIal end p1n.. in grees per day. Inatmraiyrace f/thou) - Inna deaths of infants under one year of age Death rate fltbo sane9. 1-4 - An- a doatho per thootad to age grop 1-A per thousndlive births. yeare, to children io thi.ago gercup; suggeated aanindicator of .ifo cetnoa birth (oral - Aversge nmbar of years of life rosicing at malnutrition. birth; ucosiy fiv-year avrages ending in 1960, 1970 and 1975 for develop- tgr. =o dstrio Educetion lrncp Ionio rate - vA-rage ,mb-r of lis deoghtera a as ill bear odlute nrolleectrai-ciarscol-Eolenofllgsaspr tn he torul rprodctiv perod I ohs nperenoe prsenc ge-secifc ostsa of pomary scolaeppltion includes childr. cnnaad 6-11 years crlIorat one o-Ily fiv-yea averages ending in 1960, 1970 and 1975 but adjusted for different lengths of primary edu..stion; foe countries with for evc~piugcoutris unvra ;dctmon, anrollnn may emceed 100% alone s Ppupls are bel1o Popula.t io arco,rr 71-total - Compound annua genth rataa of aid-yearor aboveth oficial school age. popuiscioc foe19-60 "'1960-70 and 17075. Adlusted enrel1met ratio - eecondarr school - Compared as abv; secondary "ouat growth rate (T - urban - Conpored like grnoth rste of total education reguires at lesI oryaso prvdpiayisrcin ppuaI Ition di fferant definitlom of urban areas may affect tparsbility of Proides genera, -aaos orI' tesoh'a1r trining instructions for popln data auong countries, ~~~~~~~~~~~~~~~~~~of 12 to 17 yearsr of age; correPonene-orss1r gs .r.yeluded. Urban p=eltion M of total) - Ratio of urban to coral populattion; different Yasr of schooling eroidd (Cleat and second Jevle - Total ysre ofI deii.tions of orban .am -y affect caparsbility of daetsa*q carries. somle; at aseendary level, v-etionel isateutin may bs Partially or aesructur (eercooi) - Childre (0-14 er)*eukn-g (11-64 years) Vonasianal erlamftof ascondary) - Fonational icatitutiosn include ond rerorad (65yaran ovr) as.t po"tages ef aid-year papaslties. technical, indutrial or other progres ahith operate indapodently or as ocr depnodoccy ratt _R cui fpptionfu.der 11 and 61 and ove to these depsr- -t of secondary -inti-it_a of agac 1) throuh 64. Adu.lt literacy rate MT - Litarote ado1ta (able to read and write) as per- iccoicdaedrcyrai - RatIo ot population under 15 and 61 and ovr tc ctnrge of total adult populatio a ged 11 year andaer the labor furor it age group of 15-64 years. Fonilo olannicu-acceeroru (cunulatioc, thou) - Cmltio- comber of acceptors Hoo-ing of blrh-ccorol dor ce onde aus icco f national fenily planning progran Peroner roo (urbat) - dcA-ne nunbr of per-our Per ron e opind ""o cPtin covniona dwellings in urbse areas; dec11itgs euc lode n-pe- -cn folly Pelanic - usrs f of married oe)-Percenta-ges of -atied -cc of stutrsad auoctddprs child-beariog age (15-44 years) uhc.n birth-control devicac to all married f..uPied d_alinsa without ripd wacer (ZI - Occupied --cetional duslliugs wome Ic sne ge roup. inorban sod rural areas. without inside or ourtide Piped aste fa-ilitiss Pluelovmoc 6c0555 cc alectric~~~~~~~ito to l anlna C- footic...l dwellings with loca1l.bshr forcc (thousand) - Fconomioally -cio- persona, t-cuding armd alectr.ici1cyin livig quarters a parcot of total dwe1litgn in orhan and forces and uneployd.butexcluding hcusaion, stdents, et. dofiritiooa trurl res ic oarioa. countries are nt conparable. Rua isliscnectad to electricit, CT-iputed as above for rura Labor force In agrtlcotorT -Agricultural labor force(to farming, forestY, dwlinsony buooting and fiehiug) an percet.ge of coral labor forc. tlnnoi"yd (.a labor foce - UinmplLyad.arc usualy defined as persons who togatto are able sd wiklo t al job, ou fajbo ivo day, rsaind out Radio aevr (eer thou asp) - All types f r-ci-era for radio broadcasts of s job, and aseking.work foe a specified miiamperiod not ....eding one to geneal public per thousand of population; excldes unlicensdreien wash; maY oa be comparable hstween coutries due to diff-rsa definition in coutries and in years when registration of rsdioae.tswss in effect; of noplcynd sod source of dats, e.g., eptay5en office statistics, se_ple data far recent years may not bs coParable alca east countries abolished _uvys opulsory onenpicon-t inuaneicensing. Passnge: ors ea thou eon) - Passenge9r car tcnprias mator cers sea rig Inr= "diatributio-Percenrage of prio-co i-rs Ibo-h in osab end kind) lethnigt persona; -eoldes obul...n.. hsarase sad military recetod by cchea 5%, riches 200%, Poorest 200, and poorest 40% at house- -hbila.. holds. Electricity 2(kobvtne'r ca,p) - Annua conamption of industrial,ce ia pulcadprivate electricity in kilowatt hours Per capita, generally Distrributin of laud oe -rhipe- Per-tccae of iod owod by voalthieet 10% base.d on prudocrmt data, sithout allasance far looses Ln grids hut alIn-- and poorest 10. of land owesoig fur importsoad ooporta of electricity. NewaPrime .(be/vt1y ear use) - Per capita annal conomaption in kilagresa Health sod Nctriti estmedfe domestic Production Plus net LaPorts of newasprint. Foai"nea esicia - Population divided by umber of Prec ticing pstanqulIfied froma, meialahool a tuni-rstty leve.  Page 3 of 4 pages ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1976 ANNUAL RATE OF GROWTH (Z. constant prices) US$ Mln. % 1961-65 1966-70 1971-75 1975-76 GNP at Market Prices 27,400 100.0 9.MP/ 7.71/ 11.3V 10.5-/ Gross Fixed Domestic Investmelnt 7,450 27.2 11.3 11.2 11.2 8.2 Gross National Saving 7,434 27.1 .. .. .. 10.1 Current Account Balance -16 0.1 2/3/ 2/3/ 2/_/ Exports of Goods, NFS 6,504 23.7 9.0-- 1092/3/ 23F'i 14 03/ Imports of Goods, NFS 6,447 23.5 10.7. - 12.7- - 22.3-l- 13.2./ OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1976 Value Added Labor Force V.A. Per Worker US$ Bln. 7 Mln. 7' US $ 7 Agriculture 3.66 18.3 3.64 35.6 1,005 51.4 Industry 11.18 55.9 3.27 31.9 3,419 174.9 Construction 1.44 7.2 0.85 8.3 1,694 86.6 Other 3.72 18.6 2.47 24.2 1,506 75.0 Total/Average 20.0 100.0 10.23 100.0 1,955 100.0 GOVERNMENT FINANCE IN 1976 Central Government Lei Billions % of GDP Total Receipts 254.5 46.4 Total Expenditures 250.1 45.6 Total Surplus 4.4 0.8 MONEY, CREDIT AND PRICES (in billions of Lei, end of year) 1971 1972 1973 1974 1975 1976 Money Supply .. .. .. 160.1 176.4 201.4 Short-term Bank Credit . .. 131.3 155.3 170.2 194.0 Retail Prices (1970 = 100) 101.6 101.6 102.4 103.7 103.9 104.4 Percentage Changes in Retail Prices 1.6 - 0.8 1.3 0.2 0.5 1/ Growth rate of national income. 2/ In current prices. 3/ Growth rates of exports and imports only.  Page 4 of 4 pages BALANCE OF PAYMENTS (Convertible Currencies) MERCHANDISE EXPORTS 1976 (All Currencies) 1971 1975 1976 (Millions US $) US $ Mln Exports of Goods & NFS +944 +3,105 +3,653 Capital goods 1,578 26 Imports of Goods & NFS -988 -3,217 -3,592 Consumer goods 1,005 16 Resource Gap (deficit = _) -44 -112 +61 Foodstuffs 596 10 Intermediate goods 508 8 Interest Payments -40 -143 -122 Raw materials 2,450 40 Other Factor Payments (net) -25 -5 0 Industrial 2,061 34 Balance on Current Account -109 -260 -61 Agricultural 389 6 Direct Foreign Inystment Total 6,137 100 Net MLT Borrowing- Disbursements +312 +859 +912 EXTERNAL DEBT (June 30, 1977) Amortization -190 -370 -482 Subtotal +122 +489 +430 US $ Mln Export Credits Extended- (net) 2/ -41 -274 Short-term Credit (net) -20 -162 -44 Total M & LT 3,266 Net Errors & Omission - - - of which convertible Increase in Reserves (+) -7 +26 +52 currencies 3,174 Fuel & Related Materials Imports 635.6 2,042.9 2,496.8 DEBT SERVICE RATIO 1976 of which Petroleum Exports 425.5 1,189.5 1,477.5 % of which Petroleum 142.9 539.5 Convertible currencies only 17.4 EXCHANGE RATES IBRD LENDING (January 31, 1978) (US $ Million) 1. Official Rate Outstanding & Disbursed 297.1 Before August 1971 6 lei:US$l Undisbursed 440.7 August 1971-February 1973: 5.53 lei:US$1 Outstanding incl. Since February 1973 : 4.97 lei:US$l Undisbursed 737.8 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$1 Since October 1974 : 12 lei:US$l 3. Conversion Rate for Traded Goods Since July 1973 : 20 lei:US$1 EMENA March 1, 1978 1/ Includes use of IMF credit. 2/ Included in M & LT Capital. 3t/ Includes S, M & LT credits extended.  ANNEX II Page 1 of 4 pages STATUS OF BANK GROUP OPERATIONS IN ROMANIA A. STATEMENT OF BANK LOANS (As of January 31, 1978) US$ Million Loan Amount (less cancellations) Number Year Borrower Purpose Bank TW IDA Undisbursed One loan fully disbursed 20.0 - Ln. 1020-RO 1974 Investment Bank Fertilizer 60.0 21.3 Ln. 1027-RO 1975 Investment Bank Special Steel 70.0 27.6 Ln. 1028-RO 1975 Investment Bank Thermal Power 60.0 4.1 Ln. 1082-RO 1975 BAFIA" Irrigation 70.0 10.2 Ln. 1083-RO 1975 BAFI Agricultural 30.0 10.8 Credit Ln. 1169-RO 1976 BAFI Flood Recovery 40.0 3.4 Ln. 1242-RO 1976 Investment Bank Hydropower 50.0 32.6 Ln. 1247-RO 1976 BAFI Irrigation 60.0 58.0 Ln. 1368-RO 1977 BAFI Irrigation 60.0 59.7 Ln. 1436-RO 1977 Investment Bank Bearings 38.0 38.0 Ln. 1447-RO 1977 Investment Bank Glass Fiber 18.3 15.0 Ln. 1448-RO 1977 Investment Bank Polyester 50.0 48.5 Ln. L479-RO 1978 BAFI Agricultural 71.0 71.0 Credit Ln. 1509-RCr- 1978 BAFI Irrigation 40.5 40.5 Total 737.8 440.7 Of which has been repaid - Tota:L now outstanding 737.8 Amount sold 18.6 - Of which repaid 0.0 18.6 Total now held by Banc0/ 719.2 Total undisbursed 440.7 440.7 a/ Bank for Agriculture and Food Industry b/ Not yet effective. c/ Excluding exchange adjustments.  ANNEX II Page 2 of 4 pages B. PROJECTS IN EXECUTION Ln No. 1020 Bacau Fertilizer Project; US$60 Million Loan of June 28, 1974; Date of Effectiveness: December 31, 1974; Closing Date: December 31, 1978. 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 is committed, and construction is well advanced. The ammonia and the DAP plants are expected to be commissioned by June 1978, and the urea plant at the beginning of 1979, about 15 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 several months, primarily be- cause of the complexity of two large bid packages and because of the Romanians' lack of familiarity with international competitive bidding procedures under the Bank's Guidelines. Progress on procurement has been closely monitored by several Bank supervision missions, and US$50,000 allocated for procurement consultants but not used was cancelled. 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 about US$20 million less than appraisal estimates, but this is not expected to affect disbursement of the loan which is now fully committed for two main supply contracts. Due in part to changes in exchange rates during 1977, the loan amount is expected to be insufficient to cover the full costs of the project despite the cost reduction noted above. 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 five 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: December 31, 1978. Construction of project works is progressing satisfactorily and about 75 percent of the project has been completed. Procurement is 93 percent completed. About half of the project area was irrigated during 1977. All remaining works are expected to be completed by December 1977. Savings of about US$25-30 million below original project cost estimates are expected,  ANNEX II Page 3 of 4 pages and about US$4 million of the loan amount is expected to be cancelled if not required for the project before the closing date. Ln No. 1083 Sadova-Corabia 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, will be carried out under bulk contracts being tendered :Lnternationally for 1978 requirements by the Romanians. About 80 percent of loan fEunds are committed. Ln No. 1169 Flood Recovery Project (Agricultural Component); US$40 Million Loan of November 12, 1975; Date of Effectiveness: December 2, 1975; Closing Date: June 30, 1979. Project execution is proceeding well and disbursements are ahead of 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 have advised us that bid evaluation has been delayed because of the technical complexity of the package, but the Romanians are expected to submit a bid evaluation report to the Bank in the near future. 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 being investigated. Project execution is according to plan. 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. Bids for all contracts were received during March 1977, and the Bank has received bid evaluation reports for several contracts and have approved contracts valued at about US$30 million. Facilities for four dairy farms are nearing completion, and contracts for purchase of about 4,600 im- ported heifers (50 percent of total) valued at over US$3 million have been awarded. Construction of pumping stations, canals, and other project works has begun and progress on these facilities is satisfactory.  ANNEX II Page 4 of 4 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 contracts for about US$36 million have already been awarded. Construction of some project works has begun. 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. First bidding documents were issued at the end of October, and progress on procurement is satisfactory. 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. Main supply contracts have been signed, 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. BAFI has begun to make subloan commitments and tender documents for three major contracts for construction materials have been approved by the Bank. Ln No. 1509 Viisoara Irrigation Project; US$40.5 Million Loan of January 27, 1978; Closing Date: December 31, 1983. This loan was signed on January 27, and the deadline for its effec- tiveness is April 27, 1978. EMENA March 1, 1978  ANNEX III ROMANIA: TIRE PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken by the country to prepare the project: Unknown (b) Agency which prepared the Project: Ministry of Chemical Industry (c) Date of first presentation to the Bank and date of Bank mission to consider the Project: February and May 1976 (d) Date of departure of Appraisal Mission: June 27, 1977 (e) Date of completion of negotiations: January 18, 1978 (f) Planned date of effectiveness: June 1978 Section II: Special Bank Implementation Actions None Section III: Special Conditions There are two special conditions of disbursement for the tractor and OTR tire plant at Drobeta-Turnu Severin. Loan funds will be disbursed: (a) for the off-the-road (OTR) tire section of the plant, only after the contract with the supplier of technology and engineering has been signed and shall have come into force (para. 46); (b) for the plant in amounts in excess of US$6 million, only after the Drobeta-Turnu Severin Tire Enterprise is established and the Government has approved the technical and economic indicators for this part of the project. The approval of detailed project parameters is normal under Romanian planning procedures and will provide the legal basis for implementation and local financing for this part of the project. The Central will assume all responsibilities of the enterprise until the enterprise is established (para. 46). EMENA March 1, 1978   IBRO 13109 //'4 a e' 6 ~ ;d 1E.- a.,. - . jW ji ji, ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ .I ~ , M ;jli J6rU' <;.1' 0i to i:Mn \ / i @ / / x V A A U/N \ / SIBIU