Turkey - State and Provincial Roads Project

Ut I !M U U\ , lWM fr ID " 0'ut Iiii .~ 1,,.. ,< ,. . , .e .t .st -'-i~~~~~~~~~~~~~~~~g )~~~~~~~~~~~~~~~~7  CURR LCYE (as of end November 1990) curregy Unit. -Turkish Lira tTL US$1.00 - TL 2750 US$364 - Th 1 Million January - Decenber 31 PRINCIPL ABBREVlTIONS AND AAUBENY=S USID RE -- General Directorate of HiShways -  FOR OFCUL USE ONLY RIEPULC 01' TURE STATE AND pR0V5NCIAL RODS PROJECT LoAn and Prglect Sim9 y Borrower: Republic of Turkey. hnmsLLB-z1arn: General Directorate of Highways. Loan Amumnt: US$300 million equivalent. Terms: Seventeen years, including 5 years grace, at the standard variable interest rate. flng,ing PlGan Government US$180.0 Bank USS300.0 TOTAL US$480.0 Economic Rate of Return: 30X Staff Aunraisal Report: No. 9362-TU, April 29, 1991 IBRD 22758 - TURKEY: State and Provincial Roads Project This documnt ha a restricted distibution and may be used by mciplents only h t>O pufOnnaK of thdr oMcil dutis Its contents may not otherwise be dihcsed without Vorld Btni authodm.on  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF TURKEY FOR A STATE AND PROVINCIAL ROADS PROJECT 1. The following memorandum and recommendation on a proposed loan of US$300.0 million equivalent to the Republic of Turkey is submitted for approval. The proposed loan would be on standard IBRD terms with a 17-year term, including a five-year grace period and would help finance the improvement of state and provincial roads. 2. Background. Road transport is vital for the economy of Turkey as it handles over 80X of the freight and 951 of the inter-city passenger demands. Road transport is deregulated and operated very competitiTaly by the private sector. It is therefore imperative that the road infrpstructure also be managed efficiently to keep transport costs low, inctease safety and minimize the negative impact of road transport on the enviro.%nent. The Directorate of Roads (KGM) in the Ministry of Works and Settlements is responsible for the development and maintenance of motorways and of the state and provincial road networks, totalling about 60,000 km and catering to most of the transport requirements given above. Rural access roads (300,000 km) are provided by the Village Services Directorate of the Ministry of Agriculture. In 1985, the Government initiated an ambitious motorways' program along 1200 km of the most heavy transport corridors of Turkey; namely from the Bulgarian border through Istanbul (including the Second Bosphorus bridge) to Ankara; in the South between Mersin and Iskenderun through Adana; and around Izmir. All motorway ections tmuder construction have acceptable economic rates of return, although some of them might have been deferred for a few years in order to lower public expenditures. They will be operated on a toll basis. 3. Road traffic on the state and provincial roads network has continued to increase rapidly, at an average rate of 8.5X p.a. since 1985. A third of the 30,000 km s 'ate road network, or some 10,000 km, now carries over 1,000 heavy trucks da.;~y. With the rapid traffic increase, the high proportion of heavy vehicles and the increase in legal axle load, the network could deteriorate rapidly if strengthening and rehabilitation is not carried out. Because of the constraint on public expenditures over the last few years, the road strengthening and improvement program has fallen behind the targets set in the 1983 Transport Master Plan. Scarce funds have wisely been concentrated on maintenance and resealing rather than strengthening. However, allowed to continue, this would result in sharply reduced life of the roads and major reconstruction expenditures in the future. The proposed project is focusing on assuring an adequate level of road expenditures to improve, maintain and operate the system at the least cost to the economy. 4. Rationale for Bank Involvement. In spite of the size of the road network and its key role in the Turkish economy, the Bank's involvement with Turkish highways is relatively recent. Two loans (2137-TU and 2439-TU) were made in 1982 and 1984. The first was completed satisfactorily in 1988 and the second is 95X disbursed, only a little behind the original disbursement schedule. Both loans focused on rehabilitation of the Trans-Turkey Highway, to accommodate the sudden increase of traffic between Europe and the Middle  - 2 - East in the early 1980s. Both projects included training of KGM staff and the modernization and rationalization of the road maintenance equipment fleet through acquisitions of new equipment, purchase of spare parts and development of an equipment management program. Considerable progress was made by KGM's planning department which adopted methodologies developed by the Bank for investment analysis. This project will continue to support the modernization and increase the efficiency of KGO through technology transfer, managerial reforms and training. 5. The main lesson learnt from our past involvement with KGM is that the agency responds flexibly and enthusiastically to sound professional advice, but strongly resists advice which could appear to have been imposed from the outside. KGN is a mature organization and has proved to be a satisfactory borrower with respect to implementation of the physical and institutional aspects of projects. It has quickly developed the necessary skills and benefitted from the training programs included in the first two projects. Maintenance of existing roads is always given priority. Over the last five years, KGM staff was reduced from 44,000 to 35,000 as work previously done by force account is now contracted out. KGM has also begun a process of further modernization and reorganization, with the assistance of the U.S. Federal Highway Administration. KGM is great.y concerned with road safety and in addition to monitoring and improving black spots, is also working with the Ministry of Education and the police to improve road safety in Turkey. In 1989, KGM was given the authority to introduce proper technical inspection of road vehicles, including vehicle emission control. 6. The objectives of the proposed project are to (i) keep transport costs low in Turkey by ensuring adequate renewal and maintenance of the road network; (ii) reduce the backlog of road strengthening; (iii) continue the downsizing, modernization and improvement of the management of KGM's equipment fleet; (iv) strengthen and modernize the planning and design capabilities of KGM; and (v) improve the management and safety of the road system through reforms, modernization and training. 7. Project Description. The project would include: (a) strengthening about 650 km of high priority sections of existing state roads; (b) improvement of about 300 km of selected provincial roads; (e) procurement of equipment and materials for road maintenance, research, planning, survey and design, reorganization, computerization and training; (d) improvement of road safety; (e) training for KGM's staff; and (f) consulting services. 8. The total cost of the project is estimated at US$480 million equivalent with a foreign exchange component of US$300 million (63X). The Loan Agreement provides for retroactive financing of eligible contracts  - 3 - entered into by KGN after April 1, 1991, in an amount not to exceed US$25 million. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown ln Schedule B. A timetable of key project processing events and the status of Bank Group operations in Turkey are given in Schedules C and D, respectively. A map is attached. The Staff Appraisal Report, No. 9362-TU dated April 29, 1991, is being distributed separately. 9. Aereed Actions. Agreements have been reached that KGM would: (a) select the road sections for reconstruction and improvement under the project according to agreed criteria; (b) appoint a Project Coordinator and set up a Project Coordination Committee; (c) submit to the Bank the appropriate feasibility studies for road sections to be improved under Bank financing for review before construction bids are invited; and (d) extend traffic counting to provincial roads. 10. E m rotmental AsDects. KGM has demonstrated a high level of environmental awareness in the implementation of its road works. Proposed civil works are for the improvements of existing roads, requirements for additional land are minimal and there are no resettlement issues. Contractors are responsible for maintaining worksites pollution free and returning sites to their original conditions. The new bidding documents cover these points specifically and specify in particular that asphalt plants have to be equipped with dust collectors. The Turkish Standard Institute is working on standards for asphalt plants which will be enforced by KGM! once issued. The road safety component will assist in reducing accidents at black spots. 11. hnifts. The main benefits expected from the project are lower transport costs for freight and passengers and reduced accident rates. Benefits accruing to truck and bus owners will be passed on to users as the road industry is competitive. New equipment will enhance staff productivity and enable KG? to continue its very commendable program of staff reduction. The economic rates of return for roads to be strengthened and improved range from 10 to 67X, with an average estimated around 301. The reason for including in the project some lower return provincial roads is to provide access to lower income rural populations ln poor underpopulated regions and thereby directly contribute to mitigating the effects of poverty in these areas. 12. Rl3ka. The principal risk is any unanticipated shortage or delayed availability of counterpart funds which may delay disbursements and lengthen the project execution period. Past performance in this regard, even under severe macro-economic pressures, has been quite good. We are confldent that GOT and KG?! will continue to make the policy and instltutional changes they have announced in the following areas: vehicle inspection, road safety, emission control, pavement management and motorway operations.  - 4 - 13. Recommendations. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve the proposed loan. Barber B. Conable President Attachments Washington, D.C. April 25, 1991  -5 schedZla A |am,4 AND PA OVINIAL ROADS PROJE9 j|NATKD COSTS AND FINANCING PLAN Estimted Progect Cot: Lo. Forelgn Total .---..---...US$ million.---------- Civil Works State Roads 100.00 100.00 200.00 Provincial Roads 38.00 38.00 76.00 Bitumen 11.20 44.80 56.00 Equipment 7.60 68.40 76.00 Road Safety 1.30 11.70 13.00 Training 0.00 1.00 1.00 Consultant Services 0.00 1.00 1.00 Sub-total 158.10 264.9Q 423.00 Price Contingencies 21.902 3.50 57.0 Grand Total 180.00 300.00 480.00 FZLau bLm Pi Local hxm