Romania - Viisoara Irrigation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-2196-RO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE BANK FOR AGRICULTURE AND FOOD INDUSTRY OF ROMANIA WITH THE GUARANTEE OF THE SOCIALIST REPUBLIC OF ROMANIA FOR THE VIISOARA IRRIGATION PROJECT December 29, 1977 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS lo 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 Conversion Rate for Traded Goods Lei 20.00 = US$1.00 Leu 1.00 = US$0.05 FISCAL YEAR January 1 - December 31 GLOSSARY OF ABBREVIATIONS BAFI - Bank for Agriculture and Food Industry COFACE - Compagnie Francaise d'Assurance pour le Commerce Exterieur ECGD - Export Credit Guarantee Department HERMES - Hermes Kreditversicherings-Aktiengesellschaft ICA - Intercooperative Association NWC - National Water Council POMAGRIK4EX - Romanian Foreign Trade Company for Agriculture.  FOR OFFICIAL USE ONLY ROMANIA VIISOARA IRRIGATION PROJECT Loan and Project Summary Borrower: Bank for Agriculture and Food Industry (BAFI) Guarantor: Socialist Republic of Romania Beneficiaries: State enterprises and Cooperative complexes Loan Amount: US$40.5 million equivalent Terms: Repayable in 15 years, including a 3-year grace period, through semi-annual installments. Interest at 7.9 per- cent per annum. Project The project consists of construction of irrigation, Description: drainage and other facilities to increase and stabilize agricultural production on an area of about 115,340 ha, and to increase labor productivity. It includes: (a) two floating pumping stations, one with a capacity of 69.5 m3/sec and the other of 5.3 m3/sec and four fixed pumping stations; (b) a system of concrete-lined main and distribu- tion canals; (c) about 46 fixed pumping stations and about 180 semi-mobile pumping stations to supply water to buried pipe distribution networks; (d) portable furrow and sprinkler irrigation equip- ment, operation and maintenance equipment, farm tractors and other farm machinery; (e) surface drainage networks to serve about 77,540 ha, tile drainage networks to serve about 5,000 ha, construction of 8 new and remodelling of 5 existing drainage pumping stations; (f) about 467 km of 20 kv power lines and trans- former substations; (g) river training works to protect about 2,000 ha from floods, soil erosion control works on 10,800 ha, land leveling of about 30,350 ha, deep plowing of about 63,400 ha and deep ripping of about 2,160 ha; and This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - (h) construction of about 50 groundwater monitoring wells and facilities for operation and main- tenance staff. Cost Estimate: Foreign Estimated Cost as % Item Local Foreign Total of Total --------(US$ million)---------- Irrigation Works 62.4 22.9 85.3 27 Drainage Works 8.7 2.1 10.8 19 Miscellaneous Works 10.0 2.0 12.0 17 Land Compensation 2.1 - 2.1 - Equipment 10.8 5.5 16.3 33 Engineering and Administration 9.5 0.5 10.0 5 Base Cost 103.5 33.0 136.5 24 Physical Contingencies 6.9 2.2 9.1 24 Price Contingencies 2.6 5.3 7.9 68 Total Project Cost 113.0 40.5 153.5 26 Financing Plan: US$ million Local Foreign Total State Budget 83.0 - 83.0 Bank for Agriculture and Food Industry 21.0 - 21.0 Cooperatives 9.0 - 9.0 IBRD - 40.5 40.5 Total 113.0 40.5 153.5 Estimated Disbursements: Bank FY 1979 1980 1981 1982 1983 --------------- (US$ million) -------------- Annual: 10.0 20.0 7.0 3.0 0.5 Cumulative: 10.0 30.0 37.0 40.0 40.5 Economic Rate of Return: 14 percent. Appraisal Report: No. 1719-RO of December 21, 1977 EMENA Projects Department  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE BANK FOR AGRICULTURE AND FOOD INDUSTRY OF ROMANIA, WITH THE GUARANTEE OF THE SOCIALIST REPUBLIC OF ROMANIA, FOR THE VIISOARA IRRIGATION PROJECT 1. I submit the following report and recommendation on a proposed loan to the Bank for Agriculture and Food Industry of Romania, with the guarantee of the Socialist Republic of Romania, for the equivalent of US$40.5 million, to help finance an irrigation project. The loan would have a term of 15 years, including three years of grace, with interest at 7.9 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 operate within the framework of the development plan which defines the scope of their activity, the outlines of their production and investment goals and their targets for operating efficiency. The plan is elaborated within a five-year time frame, each year having a separate Annual Plan. The country began its latest Five-Year Plan in January, 1976. 4. The technical and functional Ministries are the State's chief agents for the administration of economic activity. They are assisted by subordinate units known as Centrals, which coordinate and supervise activities within a common branch or industry without being directly engaged in production. En- terprises subordinate to the Centrals are responsible for production which is controlled through a system of physical production and financial targets. Production enterprises generally are not authorized to engage directly in foreign trade and rely on specialized foreign trade enterprises for this purpose. In agriculture, large State farms and cooperatives are the pre- dominant units of production.  -2- 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 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 53 percent in 1977) 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  - 3 - 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. 10. The official exchange rate of lei 4.97 per US$1 is used only for accounting purposes. The rate used for tourist transactions is lei 12 per US$1, having been revalued from a rate of lei 14.38 per US$1 in October 1974. Beginning in July 1973, a trading rate of lei 20 per US$1 has been used to convert the prices of all traded goods; this rate is considered representa- tive of the average cost of convertible foreign exchange. The rate of lei 20 per US$1 has also been used to convert national income statistics from lei to dollars. Consequently, this rate has been used as the base rate for calcula- tion in the appraisal. Recent Developments 11. Since the National Party Conference of 1967, which set the stage for major qualitative advances in Romania's economic and social development, there have been important new emphases in Romania's economic management. Measures were taken to improve the institutional basis of planning (e.g. by creating centrals to assist in plan administration), to increase the effi- ciency of economic management and to improve the quality of products in industry. In agriculture efforts were made to raise productivity and stabilize growth through irrigation, mechanization and the expanded use of chemical fertilizers. To promote the growth of foreign trade and technical-economic cooperation the Government has concluded trade and cooperation agreements with a wide range of countries. In this context, Romania has also made positive efforts to expand its multilateral external relations and to pursue full cooperation with international agencies, in- cluding UN, UNCTAD, UNESCO, FAO, UNIDO, GATT and more recently, the IMF and the Bank. 12. Measures aimed at continued improvement of the management system 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 savings have also been prescribed for most other industrial inputs during 1976-80.  - 4 - 13. Foreign trade has expanded rapidly in recent years both in volume and in regional diversity. There has also been a tendency to move away from trade on a bilateral basis towards trade involving multilateral payments, within the framework of the 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, 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 $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 consider- ably smaller, $20 million and $60 million respectively, than in previous years. 14. 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. 15. 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.  - 5 - 16. 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 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. 17. Immediately after the earthquake, the Government began clearance and reconstruction work and was remarkably successful in overcoming its immediate effects. Debris was cleared, 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. 12). 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 RCP announced that revised targets throughout the economy were to be introduced to permit the fulfillment of the plan ahead of schedule. External Assistance 18. 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'  - 6 - 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. 19. 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 petting together a US$53 million loan to finance Romania's purchase of a 49 percent share of a coal mine in the United States. In addition, Romania has access to non-convertible currency investment credits from the International Investment Bank, Moscow. 20. 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 21. 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. 22. 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. 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 in- creasing diversity and complexity of Romania's economic structure require continuing improvements in the efficiency of economic planning and coordina- tion and further refinements in economic management. To keep up with these changes and requirements, large programs of education and manpower training have been mounted, investments in scientific and technological research have been emphasized, and efforts are being made to strengthen technical coopera- tion with industrialized countries and international organizations. Creditworthiness 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 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  - 8 - 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 has also been informed recently 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 and most recent meeting to discuss these claims was held in Bucharest in October 1976. The Romanian and Swedish authorities have also dealt with this matter in April 1977 in the context of more general dis- cussions of bilateral trade, and further discussions are planned at a date to be established through diplomatic channels. PART II - BANK GROUP OPERATIONS IN ROMANIA 27. The proposed loan would be the Bank's fifteenth to Romania and would bring total Bank commitments to Romania to US$737.8 million. Disburse- ments under the Bank's initial loans were slow during 1975, but this situa- tion improved considerably during 1976 and 1977. Annex II contains a summary statement of Bank loans to Romania and notes on the execution of ongoing projects as of November 30, 1977. 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 for irrigation and drainage, tire production, earthquake recovery, cattle development, poultry production, horticulture, chemical, and seamless pipes projects. Further  - 9 - power projects will be considered in context of a sector investment study to be reviewed shortly with the Government. 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, October/November 1976 and November/December 1977. Additional courses, including one in agri- cultural project appraisal, are planned. 31. The projects, for which assistance has been committed or is being considered, represent only a small portion of Romania's total need for external financing and of its total disbursed convertible debt. However, they will provide a substantial net addition to the inflow of convertible currency finance, and are seen,by the Romanians as aiding their efforts to obtain convertible currency financing from other sources. The disbursed IBRD 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 AGRICULTURAL SECTOR IN ROMANIA Agriculture 32. Agriculture continues to be a key sector in the Romanian economy, providing both convertible foreign exchange earnings and industrial raw materials which contribute to progress in other sectors, especially industry. In 1976, agriculture accounted for 18 percent of national income and 36 per- cent of the labor force (compared with 74 percent in 1950). About 14.9 mil- lion hectares, or almost two-thirds of the land area, are used for agricul- ture. Of this area, 65 percent is arable, 30 percent is under pastures and the remaining 5 percent is used for orchards and vineyards. About 8.5 mil- lion hectares of all agricultural land is in Wallachia, the region composed of the southern plains of the Danube valley. Approximately 64 percent of all arable land is used for grain production (mainly maize and wheat), while industrial crops (mainly sunflower and sugar beet) are the next most impor- tant. Vegetables are also produced for domestic consumption and export, pre- dominantly by private farmers and individual members of cooperatives, but also often in large-scale commercial greenhouses operated by State farms and cooperatives. Livestock accounts for a relatively high 43 percent of agricul- tural production. 33. Investment in agriculture accounted for 12.7 percent of actual total investment in the 1966-70 plan period and 14.1 percent in the 1971-75 plan period. The proportion of investment for agriculture in the 1976-80 plan period is expected to be 11.6 percent of the total. However, total investment in agriculture during the 1976-80 plan period is expected to be 116 billion  - 10 - lei (US$5.8 billion), about 50 percent more than during the 1971-75 plan period. In addition to investment, the Government has also taken other mea- sures, including institutional reforms, price incentives, and production targets and delivery schedules to stimulate agricultural production. Growth achieved in agricultural production has been slower than in other sectors and has been characterized by year-to-year variations. The major problems of Romanian agriculture are the instability of its output and low productivity. A major program of irrigation investment, including farm mechanization and supported by three earlier Bank loans, has been undertaken to help address both of these problems. In addition, a number of other specific measures have been taken to increase agricultural productivity including increases in the supply and utilization of fertilizers, investments in livestock production and the promotion of agro-industrial enterprises to provide processing and market- ing facilities. The Need for Irrigation Infrastructure 34. Instability in agricultural production results from vulnerability to erratic weather conditions and the lack of infrastructure to mitigate their impact. Excessive precipitation and flooding during planting and harvest seasons, and inadequate rainfall during summer growing seasons, have resulted in year to year fluctuations in national output of the order of 10 to 20 per- cent. Fluctuations of production in particular regions can be even greater. Only production of vegetables has increased steadily, reflecting the rela- tively more controlled conditions under which they are produced. The Govern- ment is well aware of this problem and has placed high priority within the agricultural sector on solving it. Forty percent of agricultural investment in the 1971-75 Five-Year Plan was for land reclamation, irrigation and drain- age; the comparable figure for the 1976-80 Five-Year Plan is about 20 percent, reflecting a relative decline in infrastructure investment and increasing emphasis on investments to make productive use of irrigation facilities already established. Since 1965, total irrigated land has been increased from about 0.2 million hectares to 1.9 million hectares in 1977, and, the relative reduction in the share of the agricultural budget allocated for irrigation notwithstanding, another 700,000 hectares are expected to be brought under irrigation during the last three years of the 1976-80 plan period. This con- tinued emphasis on irrigation and drainage reflects the high priority which is being given to reducing vulnerability to weather and to stabilizing produc- tion in agriculture. Irrigation works to date have concentrated on large schemes using waters pumped from the Danube. Three such projects, similar to that for which financing is proposed in this report, have already been financed by the Bank; execution of these projects, which also include drain- age and farm mechanization components, is proceeding satisfactorily (see Annex II), and the proposed project would continue Bank support in this subsector. Agricultural Productivity 35. While some productivity gains have been made in recent years, agri- cultural productivity per worker remains less than one-third of that of indus- try. In addition to improving its irrigation infrastructure, Romania is also taking measures to improve productivity through upgrading the quality of farm  mechanization, increases in the supply and utilization of fertilizers, and the promotion of agro-industrial enterprises to provide processing and marketing outlets for increased farm production. Steps are also being taken to reduce inequality between State farms and cooperatives in access to farm inputs. State farms, which own 30 percent and cultivate 14 percent of agricultural land, received about 42 percent of on-farm investment in the 1971-75 Plan period. Productivity on State farms is correspondingly higher than that on cooperatives, but the Government is now moving toward elimination of the disparities between the two types of farm organization in order to stimulate general improvement in agricultural productivity. Eighty percent of the land to be irrigated under the project is owned by cooperatives. Sector Organization 36. State agricultural units and cooperatives account for the major portion of agricultural production; individual farmers play a much less sig- nificant role, except in the production of a few selected commodities. The current sector organization is primarily a result of collectivization and increased government participation from 1949 to 1962, when small-scale, peasant-oriented agriculture was replaced by large, state-owned or state- controlled production units. The dominant form of state-owned agricultural unit is the state enterprise. There are 392 such state farms averaging about 5,300 hectares and about 650 workers each. These large scale, capital inten- sive farms have been considered a pilot sector in Romania and, as such have been favored in terms of land allocation, fertilizer distribution and invest- ments in irrigation and mechanization. About 2.1 million hectares of agricul- tural land are cultivated by these farms, which also own substantial grazing and pasture lands. Workers on the farms are employed on salaries which are fixed by law but vary according to skill levels. Eighty percent of salaries is paid at least monthly; the remainder is paid at the end of the crop season provided planned targets have been met. The state farms are generally well managed by directors (usually agricultural engineers) who are appointed by the Director General for State Farms of the Ministry of Agriculture and are responsible to workers' councils. The Ministry of Agriculture determines the production plans for individual State farms; it also has a role in deter- mining the use of their net income, a portion of which is remitted to the State treasury. 37. In 1976 there were 4,400 agricultural production cooperatives with about 3.4 million member families and cultivating about 9.0 million hectares. Workers in cooperatives are entitled to a minimum salary, which is lower than the salaries of their counterparts on state farms by about 20 percent. Sala- ries of cooperators may be supplemented with the cooperator's shares of profits in excess of plan targets. More than one member of a family frequently works (on a full- or part-time basis) in the cooperative, and some family members are employed outside of the cooperatives. Cooperators are also allowed to farm about 0.15 hectares each in and around their villages for their personal use, and they are allowed to own livestock. Production on personal plots is always intensive, and produce is either self-consumed or sold to consumption cooperatives to supplement other income of the cooperators. About 8,000 hectares of such plots farmed by about 35,600 cooperative members would be  - 12 - irrigated under the project. A cooperative is managed by a General Assembly of cooperators and its elected President; it reports to the District Director General for Agriculture, the local representative of the Ministry of Agricul- ture. Some cooperatives have begun to pool their resources for large-scale investments in agroindustries and livestock production. These intercoopera- tive associations (ICA) are operated by state employees paid from ICA revenues. Part of the net income from ICA sales is retained for further ICA development; the balance is divided among member cooperatives in proportion to their con- tribution to shares in the ICA. 38. Individual farmers number only about 150,000 families and own about 10 percent of total agricultural land. Their lands are often located in moun- tainous regions, and include 19 percent of pasture lands and 21 percent of orchards. Private farmers own 16 percent of all cattle, 14 percent of sheep, and 6 percent of pigs. The individual farming subsector has not received strong government support but is significant in production of potatoes (16 per- cent of production), meat (13 percent of production), milk (20 percent of pro- duction), eggs (14 percent of production) and wool (12 percent of production). 39. At the national level, the State institution in the agricultural sec- tor is the Ministry of Agriculture and Food Industry. It plays a major role in preparing the Five-Year Plan for the sector and is the supervisory institu- tion for plan implementation. In each district, the Ministry is represented by a general directorate, which is responsible for all agricultural activity in the district including both cooperatives and State farms. Marketing is organized nationally under 13 centrals accountable to the Ministry and respon- sible for processing and marketing specified commodities. Each central obtains produce at the district level and allocates it among domestic retail, processing, storage and export channels. A foreign trade company is respon- sible for the exports of each central. The Borrower 40. The Borrower for the proposed loan would be the Bank for Agriculture and Food Industry (BAFI), which is the Government's specialized agency for financing projects in agriculture, irrigation and food processing. BAFI was established in 1968 as a channel for, and administrator of, all investment funds provided under the State plan for the agricultural sector. Financing in agriculture had previously been done by a department of the National Bank of Romania. BAFI is involved in all phases of project appraisal, execution and supervision, and it has a large technical and economic staff located in Bucharest, in 39 county (judet) branch offices and in 92 sub-branches through- out the country. One of BAFI's more important functions is that of fiscal agent administering for the account of the national budget, all government investments in State farms and enterprises. BAFI also receives interest-free funds from the State budget for investment lending to cooperatives (and in some cases State Farms) and repays the Government as it receives repayments of the sub-loans. BAFI has thorough review and approval procedures for all investment projects. In addition to BAFI's review, all agricultural invest- ments for more than Lei 10,000,000 (US$500,000) are reviewed and approved by the Ministry of Agriculture and those greater than Lei 70,000,000 (US$3.5 million) must be approved by the Council of Ministers. BAFI also provides  - 13 - short-term credit to, and maintains settlement accounts for all cooperative and state agricultural enterprises; it also acts as fiscal agent for the Government for collection of state revenues from these enterprises. As the Government's channel for investment financing in agriculture, BAFI's primary source of funds is the State Budget; the Guarantee Agreement therefore in- cludes a provision (Section 2.02) that the Guarantor shall provide all neces- sary funds for the implementation and operation of the project. PART IV - THE PROJECT 41. The project is part of Romania's 1976-80 Plan for bringing an addi- tional 1.1 million hectares under irrigation and was proposed for Bank finan- cing in February 1976. A feasibility study for the project was submitted to the Bank in January 1977 and further data was provided in March 1977. The project was appraised in May 1977 and negotiations were held in Washington in November 1977. The Romanian delegation was led by Mr. Ion Rusinaru, President of BAFI, and included representatives of the Ministry of Agriculture and Food Industry and BAFI. Project Description 42. The objectives of the project are to increase and stabilize agricul- tural production on an area of about 115,340 hectares in the judet (county) of Teleorman about 100 kilometers west of Bucharest (see map) and to increase labor productivity. This would be accomplished through construction of an irrigation and drainage system and related facilities. About 91,800 hectares of the project would be cultivated by cooperatives, including about 8,000 hec- tares cultivated by individual members of the cooperatives, and about 23,540 hectares would be cultivated by State farms. Irrigation water for the major portion of the project would be taken from the Danube, either by diversion or by floating pumping stations, depending upon the level of river flow. The water would then be lifted by fixed pumping stations and distributed through a system of lined canals. About 2,930 hectares of the project area would receive water to be diverted from the Olt River and stored behind the Cringeni Dam on the Calmatui River, after the dam is raised under a separate project. These waters would be released to the Calmatui River channel and would be pumped from the channel to the project area. The raising of the Cringeni Dam is not included in the project, and in order to ensure adequate water supplies to the 2,930 hectares in the Calmatui River valley, the Loan Agreement (Sec- tion 4.01(c)) and related requirements of the Guarantee Agreement (Section 2.03) provide a schedule for proceeding with the project and for an increase in the storage capacity of the dam to assure inter alia adequate supplies of irrigation water to the 2,930 hectares. Water would be distributed to the entire project area through a system of concrete-lined canals to pressure pumping stations, which would supply water to distribution networks consisting of buried pipes for sprinkler and furrow irrigation. Also included in the project would be portable on-farm sprinkler and furrow irrigation equipment, surface drainage works to serve 77,540 hectares, river training works to protect about 2,000 hectares from flood, tile drainage for 5,000 hectares, erosion control works for 10,800 hectares, land leveling of 30,350 hectares,  - 14 - power lines serving the irrigation system, operation and maintenance equipment, and farm machinery. The Appraisal Report (No. 1719-RO, dated December 21, 1977) is being distributed separately to the Executive Directors. Project Execution and Operation 43. The Ministry of Agriculture and Food Industry, through its various departments and trusts, and the National Water Council (NWC) would be respon- sible for planning, construction and supervision of the project. Design and construction of river training works would be carried out by NWC. Planning and design of all other project works would be carried out by the Institute for Land Reclamation Studies and Design, and construction by the Construction Trust for Land Reclamation Works. Both organizations are part of the Minis- try's Department of Land Reclamation and Agricultural Construction. The irrigation and drainage works would be operated and maintained by the Minis- try's Central for operation of land reclamation works. BAFI would serve as financing agency for all project works under the arrangements noted in para- graph 39 above. All agencies are competent to carry out the proposed works satisfactorily. Project Cost and Financing 44. The estimated total cost of the project, net of taxes, is US$153.5 million with an estimated foreign exchange component of US$40.5 million. The cost estimates are based on unit rates of work that are prevalent in Romania under the system of regulated prices of materials and wages. The cost of equipment and materials which are likely to be procured from foreign suppliers, has been estimated at the international prices expected to be prevailing at the end of 1977. Because detailed engineering has already been carried out, physical contingencies have been provided at 7.5 percent for irrigation and dralnage works and at 5 percent for other minor items. Price contingencies on foreign exchange cost are based on annual increases of 7.5 percent for 1978 and 1979, and of 7 percent thereafter. Due to a near zero rate of inflation under the Romanian system of administered prices, annual price contingencies on local costs are one percent. 45. The proposed Bank loan of US$40.5 million would finance the foreign cost of the project. The remaining project costs would be financed by the Government budget (US$83.0 million), BAFI loans to cooperatives (US$21.0 mil- lion) and cooperatives (US$9.0 million). 46. The proposed loan would be made to the Bank for Agriculture and Food Industry (BAFI) with the guarantee of the Socialist Republic of Romania, and would be for a term of 15 years, including three years of grace, at an interest rate of 7.9 percent per annum. It is the normal practice in Romania for the State to invest virtually all funds in agricultural infrastructure projects through BAFI without formal lending agreements and to recover invest- ment costs from project beneficiaries through a variety of financing mechanisms including the incomes of state farms, taxes, pricing mechanisms for traded commodities, and payments by cooperatives for mechanization services. For this reason, BAFI would act as a channel for, but would not actually relend, the proceeds of the Bank loan, and funds would be made available to BAFI from  - 15 - the state budget for repayment of the Bank loan. With regard to on-farm irri- gation for cooperatives, however, it is Romanian practice for BAFI to finance such investments from its own resources with agricultural credit subloans to the cooperatives at a rate of interest of 3 percent per annum; recovery of funds for these components of the project would be made through subloan repay- ment. As in all earlier projects, this may be considered a real rate of interest because of the near-zero rate of inflation in Romania. Since BAFI receives most of its funding from the government budget at very low rates, its overall borrowing cost is below one percent which allows it to operate profit- ably despite the negative spread on the Bank loan. Audit 47. BAFI would keep separate accounts for all project expenditures and its transactions are subject to continuous control by internal auditors appointed by the Ministry of Finance and to an annual audit by inspectors from the Court of Superior Control which reports directly to the Council of Ministers and the President. BAFI's accounting system and the audit of its transactions are satisfactory and BAFI's audited operating and financing results would be sent to the Bank not later than five months after the end of BAFI's fiscal year (Sections 6.01(c) and (e) of the Loan Agreement). Procurement 48. Although Romanian laws provide for international competitive bidding and for joint ventures involving foreign and domestic enterprises, in practice all irrigation works are constructed by Romanian Construction Trusts, which are experienced and familiar with local conditions, methods and regulations. This practice is acceptable because Romanian construction costs based upon regulated wages and prices of materials are likely to be less than those which might be bid by international contractors. Equipment and materials equivalent in cost to the estimated foreign exchange cost of the project, US$40.5 million including contingencies, would be procured following international competitive bidding in accordance with the Bank Guidelines. (Annex 7, Table 1 of the Appraisal Report lists items to be so procured.) Romanian manufacturers would be allowed a margin of preference of 15 percent or the applicable customs duty, whichever is lower, but the application of the preference is not expected to significantly affect the outcome of bidding. It is expected that foreign suppliers would win contracts for most construction equipment (motor graders, motor scrapers, dozers, tile laying machines and cranes) estimated to cost about US$8.0 million. Other items to be procured through international com- petitive bidding (estimated to cost US$32.5 million) are available domestic- ally and, based on experience with previous Bank-financed projects, it is expected that Romanian manufacturers would be successful in bidding for these items. The remaining equipment and materials (estimated to cost US$34.4 mil- lion) would be procured under Romanian procedures and would not be eligible for disbursement under the proposed Bank loan. Disbursements 49. The Bank loan would be disbursed for (i) 100 percent of the foreign expenditures for imported equipment, spare parts and materials procured  - 16 - through international competitive bidding, and (ii) 100 percent of the ex- factory prices of equipment, spare parts and materials manufactured locally and procured through international competitive bidding. International Water Rights 50. There is no international agreement among the Danube river riparian states for the use of its water for irrigation but a convention exists for development of the river for mutual benefits, and for protection of navigation and water quality. The International Water Commission for the Danube, of which Romania is a member, is mainly concerned with schemes which may interfere with navigation and water quality. The maximum diversion for the project, in July, would amount to 1.4 percent of the minimum river flow in that month. The Government has confirmed that diversions for the project would not reduce the Danube flow below the minimum to sustain international navigation as agreed with the International Water Commission. There is, therefore, no reason to expect that the project would raise issues on the use of Danube waters, and no agreement of other riparians would be required, Environment and Health 51. The project area is free of endemic diseases such as malaria and bilharzia. The project would not adversely affect the environment or public health. Construction of irrigation works, with variable water flows in the canals, and a piped distribution network would not promote mosquito breeding and spread of malaria. Fertilizer and salt draining from the project area are not expected to damage the quality of the Danube's waters. Benefits and Risks 52. The project would contribute to Romania's overall effort to increase and stabilize agricultural production through investment in irrigation and re- lated farm development. The cost of irrigation works is estimated at US$1,390 per hectare irrigated. Without the project, production in the project area under rainfed agriculture could be expected to fluctuate from year to year with an annual average gross production of about US$24.9 million. The project is expected to increase the gross value of output to a relatively stable US$53.5 million annually (an increase of 115 percent). This would be achieved through (i) a 13 percent increase in cropping intensity made possible by irri- gation, and (ii) increases in the yields of various crops ranging from 48 to 110 percent. The major crops to be produced in the project area are maize, wheat, alfalfa, soybean, sugar beet and sunflower. The benefits of stabiliz- ing output have not been quantified but are considerable. The project would also reduce underemployment in the project area and would double labor produc- tivity. About 35,600 members of cooperatives and 3,100 employees of state farms would participate in the project. This group would not share directly in the benefits of the project, which accrue to the state, as their incomes are regulated to correspond with those of workers with similar skills else- where in the economy. Benefits to the project participants are indirect in the sense that they flow back to the population at large over a period of time through increases in public services and general compensation packages. It is expected that direct and indirect recovery of project costs (including  - 17 - inter alia water charges, profits of state farms credited to the national budget, contributions of state farms to a depreciation fund kept by BAFI, net returns to the government from investments in the development fund for cooperatives, repayment of loans to cooperatives for on-farm development, profits made by government trading companies buying output at relatively low domestic prices and exporting them at much higher world market prices, and general linkage benefits to the economy as a result of increased and stable output of the project) would enable recovery of all project investments. The economic rate of return of the project is estimated at about 14 percent. 53. The risk of not attaining project benefits is low. Designs have been prepared in detail. The Government has satisfactory plans to supply the farms with the necessary complementary inputs and supporting agricultural services. Farm workers are receptive to new technology and would have ade- quate incentives to participate in the project. Anticipated crop yields are comparable to or lower than the average yields obtained from other irrigated areas in the region. The marketing system is well organized. Attainment of the project's objectives is therefore reasonably assured. PART V - LEGAL INSTRUMENTS AND AUTHORITY 54. The draft Loan Agreement between the Bank and the Bank for Agricul- ture and Food Industry of Romania, the draft Guarantee Agreement between the Socialist Republic of Romania and the Bank, the report of the Committee pro- vided for in Article III, Section 4(iii) of the Articles of Agreement and the draft resolution approving the proposed loan are being distributed to the Executive Directors separately. 55. A special condition of effectiveness of the loan is the approval by the Council of Ministers of the technical and economic indicators of the project (Section 7.01 of the Loan Agreement). This approval of detailed project parameters is normal under Romanian planning procedures and will provide the legal basis for financing and implementation of the project. The special conditions on completion of the Calmatui River dam (Section 4.01(c) of the Loan Agreement and Section 2.03 of the Guarantee Agreement) have been noted in paragraph 42. 56. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank.  - 18 - PART VI - RECOMMENDATION 57. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President By J. Burke Knapp Attachments Washington, D.C. December 29, 1977  TABLE SA ANhRXi RCANIA REP. OF - SOClAL INDICATORS DATA SHEET Page 1 of 3 pages LAND AREA (THOU KM2) _______________--RANIA REP. OF REFERENCE COUNTRIES 11970) TOTAL 237.5 MOST RECENT AGRIC. 149.0 1960 1970 ESTIMATE YUGOSLAVIA ITALY GERMANY FED. UEP. OF*** GNP PER CAPITA (USS) .. 550.0** 1450.0** 830.0* 1910.0* 4420.0* POPULATION AND VITAL STATISTICS _______________________________ POPULATION (MID-YR. MILLION) 18.4 20.3 21.4/a 20.4 53.7 61.6 POPULATION DENSITY PER SQUARE KM. 77.0 85.0 90.0/a 80.0 178.0 240.0 PER SO. KM. AGRICULTURAL LAND 126.0 136.0 144.07a 139.0 266.0 439.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU. AV) 23.9 19.0 19.7 21.0 18.6 17.3 CRUDE DEATH RATE (/THOU.AV) 10.9 8.9 9.3 9.1 9.7 11.6 INFANT MORTALITY RATE (/THOU) 75.7 49.4 34.7 55.5 29.6 23.8 LIFE EXPECTANCY AT BIRTH (YRS) 65.9 67.7 69.1 67.7 71.9 70.3 GROSS REPRODUCTION RATE 1.2 1.3 1.3 1,3 1.3 1.2 POPULATION GROWTH RATE (X) TOTAL 1.2 1.0 1.0 1.0 0.8 1.0 URBAN 3.8 3.4 2.2 4.6 0.8 4.1 URBAN POPULATION (X 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 25.2 28.3 24.4 23.2 15 TO 64 YEARS 64.97; 65.5 65.2 64.3 85.2 63.6 65 YEARS AND OVER 792 8.6 9.6 7.4 10.4 13.2 AGE DEPENDENCY RATIO 0.5 0.5 0.5 0.6 0.5 0.$ ECONOMIC DEPENDENCY RATIO 0.7/b 0.7/a 0.7/b .. 0.9/a 0.9 FAMILY PLANNING ACCEPTORS (CUMULATIVE. THOU) USERS (X OF MARRIED WOMEN) EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 9600.0 9900.0 10200.0/a 19600.0 28500.0 LABOR FORCE IN AGRICULTURE (X) 66.0 49.0 36o Ta 19.0 8.9 UNEMPLOYED (% OF LABOR FORCE) .. .. .- .. 3.1 0.7 INCOME DISTRI8UTION X OF PRIVATE INCOME REC O eY- HIGHEST 5% OF HOUSEHOLDS 15.1 HIGHEST 20% OF HOUSEHOLDS 41.4 LOWEST 20% OF HOUSEHOLDS .. .. .. 6.6 LOWEST 40% OF HOUSEHOLDS .. .. .. 16.4 DISTRIBUTION OF LAND OWNERSHIP X OWNED BY TOP 10X OF OWNERS .. .. *- 15.1 Ia X OWNED BY SMALLEST 10% OWNERS .. .. ..4.9 HEALTH AND NUTRITION POPULATION PER PHYSICIAN 740.0 680.0 820.0 1010.0 S50.0 580.0 POPULATION PER NURSING PERSON 300.0 200.0 180.0 410.0 470.0/b 350.0 POPULATION PER HOSPITAL BED 180.0 Ic 140.0/b 120.0/C 170.0 90.0 90.0 PER CAPITA SUPPLY QF - CALORIES (X OF REQUIREMENTS) 105.0 116.0 118.0/d 124.0 126.0 121.0 PROTEIN (GRAMS PER DAY) ai.0 92.0 90.87H 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 .. 2.8 1.0 0.9 EDUCATION ADJUSTED ENROLLMENT RATIO 98.0 113.0 108.0 64.0 119.0 129.0 PRIMARY SCHOOL SECONDARY SCHOOL 24.0 44.0 49.0 45.0 60.0 68.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 12.0 14.0 14.0 12.6 IO 1t.0 VOCAIIONAL ENROLLMENT (X OF SECONDARY) S4.0 58.0 61.1 72.0 26.0 48.0 ADULT LITERACY RATE (X) .. .. g8.0/ 65.0 97.0 99.0 HOUSING PERSONS PER ROOM (URBAN) .. 1.3/C *- .- ., 0.7/ OCCUPIED DWELLINGS WITHOUT PIPED WATER (X) *- 88..0/c,d - *- *- 0.3/b ACCESS TO ELECTRICITY (X OF ALL DWELLINGS) .. 49.0/C .. .. .. 100.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY (X) .. 27.0/C .. .. CONSUMPTION RADIO RECEIVERS (PER THOU POP) 109.0 t52.0 148.0 165.0 218.0 319.0 PASSENGER CARS (PER THOU POP) .. 35.0 190.0 220.0 ELECTRICITY (KWH/YR PER CAP) 414.0 1615.0 2411 .0 1288.0 2262.0 4129.0 NEWSPRINT (KG/YR PER CAP) 2.1 2.6 3.0 4.3 5.3 17.7 SEE NOTES AND OEFINITIONS ON REVERSE  AhmaIWE page 2 of 3 pages Un1evo otherwise oted, data for 1960 refer to any yea between 1959 and 1961, for 1970 between 1968 and 1970 and for Moat aen"t Estinate between 1973 and 1975. A GNP per caPita data ra- based on the World Bank Atlas netbodolagy (1974-76 beasts). 00 Nt coparable to those for other Centrally Planned leonotes. Derived by using the bank Atlas methodology, by adjusting official Ronanian National Accounts data a!nd convrting thus into Un dollars At the affactiva exchange rats for foreign trdad trans.eetione. which approninetes Lci 20 Par US dellt 000 The Federal Repoblic nf Gerneny has been selected as an objective country because Jr is an industrializedl European Country with najor trade ties with Ronania. ROMiANIA 1960 /A 1962; /b Ratio of Population under 15 and 65 And over to total labor bores; /C Hospitala only, eacludes satitaria and nater'nity hones. 1970 IA Raetio of population under 15 and 65 and over to total labor farce; _1 Hiospitala only, excludes senitaris and naternity homes: /c 1966; Ldinsaids only. MOST gECENST ESTIPiATE: Is 1976; lb Ratio of population under 15 ad 65 And over to total labor for ce; Li Hospitals only, exclu-des eaniteris sod neternity bases; Li 1969-71 average; It 1974, official eatinate La 100 percent. YUGCOSLAVIA 1970 /a Agriculture land held by social sector "ranbinate"; /b Agriculture land held by Private snaI-holders "10 hectares maxcimumc"; Ic Tncluding nidwives, assistant nidwives, assistant nurnes end nursing suxt laries. ITALLY 1970 Ia Ratio of population under 15 end 65 and over to total labor force; /. Hospital personnel. G10RMAff PED. REP. OP 1970 /a Total, urban and rural; lb Inside only. R17, December 20, 1977 ngnsrrtg OF sotu. D5DCATOR Lead Area (thou koZ) pelaln50 uring Perso - Population divIded by asukar Of practicing Ttl- Total surface ares conprisisig Loand area ad Inland .aters. m n ia sgrduate nurses, tcrained` or cried nus,d Agric. - Mast recent eatdntt of agricultural Area used temporarily or panes sallies1 PerOelsol With trainin Or eaperienee. neatly for crops. pacures, market 6 kitchen gardena or to lits felIne. PQ:usaletian oar heesital bed - Population divided by n,nbr of hospital beds avilbl in Publ ic end priwte general And spa.oilissd hospital And GN{P oar soPtta (00S - IMP per capita astimates at correct nArkat prices, rehabilitation ranters; aeciosas nursing hs sAnd gotst,lisbanta far eaI.leltod by sans ce-rsten cachead As WarId seek Atlas (1973-75 basis); custodial and Preventive care. L9b0, 1970 And 1973 data. Per -astr saeyo)aoi tc suena - Computed iron anry squivalet: of neJ.Yt fond suppiesaalbei csty par ca -pita per day; fopttatien and vital aosi:available supplies Comprise damstic prodwetta, tIports less exports, and PecUlation (aid-year million) As of Jo1y first: if oat available, warersg change. is stock; net aupplias ealude anmalel fsad, ends, qusAt1tins used of rae end-year estimates: 15,60, 1970 and 1975 data, in food processing and losses in distribution; equir-metan wrar satioated by PAO based on phyiological needs for nroArl activity sod health ronsid- Peculation deceit, - par osur. kms - Mid-year population Par square hilomtar rATgU en-trOten,tal temperature, body weightst A age and ase dintributiesi of (100 htu,teras) of total Area. PoPulation, end aloniag lOXtfor, waste at hosseesold level. Peculation doenaity - ar soosc ko Of sari-. tend - Computed as shove for Pe aisapl faoanfr e a) - Protein content of par Capita agriclturel lar onytaCc a.ptplyoffndpe7ay - uplyo fond ia defiosad as habos, raquire- naest for~ all ecoAtries established by USDA Eccnoit ResaKrch tervice fatal statistics ~~~~~~~~~~~~~Provide faor a aisimul ellmossea Of 60 gras of total prorte1 par day, and truda birth race Per thousnd, Iaveag - Annual live births Par thausnd af 20 gras of animal And pulse proteIn, ef Which 10 greas should be animal1 nid-year poplto; Ira-year Arithmestic avarages ending in 1960 and 1970, proteIn; these standards are lssr than those of 75 greas of total protein sad five-year Average ending do 1975 for -ast recant %testias. end 23 gras of aninal protein as en sverags for the werld, Proposed by F6O Credo death rats Per td-cd aeee-Annual deaths per thousand of aid-year in tha Third world rood forwe. popuL.tatln; tao-year ath ti avrgsending in 1960 and 1970 end five- par ceit prti ea,(o nmt And Putss - Protele supply of feed ,yea ovrgeadigin173fr mast raceoat estimate. deIeBieaial a ussI rame Par day. nftnoclLty rate f/thou) - Annual deaths of infants under ens year of age Death rata i/thou), ase, I-A - Annul deaths Par thousoand in age grop 1-h per thousand live births. yArs, to children in this age grnup; suggestad as As indicator od Life oaoetancvy At birth fyra) - Averegs osubar of yeArs of Ilfe remaining at malnutrition. birth, ususilly firs-year averages nding in 1960, 1970 And 1975 for devetop- Lag cocotrisa. Rdsration Cr060 -racoduction rate - Average eabar of lIve daughters a woan will bear RAdl"ed enrILlUSt ra.tio - oiarvschoo - Barolleast of elI .ages Papr- in bar stornol repr-doctile period if ah. experience present age-scific renatgs of ptnarty scholag po lation; icludes children aged 6-It years fertility rates; unmlly fiv-yea avr.age ending in 1960, 1970 And 1975 but adjastad for different langtha of primary education; fnc ceutrias with ,for develping nosre.universal educetion, enralinAnt may exceed 100X since Saw puplsg ars halo Popultion crarlh rate (%) - tota!l - CnsPAOnd annlual growth rates of Iai-year or above the official school age. population for 1950-60, 1960-70 And 1970-75. Adjute erolmat ra.tio -O seodr school - CamptadAas sAbve ; seoodary poplaton roeh rte t)- urban - Conputed like growth rate of totaledcto rquesalatfuryrsfapovd riryituto; population; different dofinitiama of urban area nay effect ceoparability of Provides general, vocational. or tearher tra1inin Instructions for pupils da~ta anong countries, of 12 to 17 peers Of aga; Correapondence courses ers gesarlly secluded. -rbe pulation (I of total) - Ratio Of urhar to total Ppoulation; differsot Yer fahai. rvddfis eodlvl)-TtlYear of daiition Of urban Area mas Affect 0e"asprbility of dat.a sag camtries. -to,ag t e~n eel eaia nsrtin ybeprilya coPsplael7 seluded. se tuture (percet) - Children (0-14 years) , workingags. (15.6.4 pees) * VsC`c.nlarlsn I fscnay oatoa ncrca Aci and etired (65 Yeers And over) so perocntages af aid-year population. tachtr, industrial or other progress Which *gents independently or As Age dependeet ratio - Ratio of Ppoplation under 15 sad 65 and over to those dapartwents of secondary inatitutions . of ages 15 through 64. A~~~~~~~~~dult liteary rats Mi -Literate adults (able to read And writ.) as Par- tconniodeosdoay raio R.laia of papolation under 15 sad 65 end over to teatage of total adult populetton aged 15 y-ar. end over. the labor force in Ago groap of i5-bi yeses. Paily olancing - accootora (ronclatlva. thos) - Cunulatia nmbashe of sccaptore ou fLg5fg of birth-control devices under sospices of national family plasoLog program Persun os ros rban) - Average numober of persona Ptr rams in oc.up'ted siecs =ncprion. rOoeeri l dwellings in urban areas; dwellings minds non-permanentr PIlII Planing -users C% of married esonen) - per.categas ef married woman of structures and unorenpied parts, child-bearing aga (15-41 yerar) Who use bitth-concrol devices to all naurriad LruldA ossg esithour eised water Cl - occupied conwentional dWetlinga woman in sas Age group. inubnedrural eras Without Imaids or outsIde Piped wetar fa.tlities fnlem aac cces t ecticity CCft of all dwsllinxs) - Ceevootiens dwellings with Total labor forte (thousand) - gnononically active parson,. including sewed electricity In living qacrtars es Percent of cetal dwetllgs Ia orkn and forosa end nAmplayed but secluding b.soesaves, studets, etc..; definitions coel .ares. is~ anoe countries are nt conpV.arbIA. Rursl dwellings cosseted ta electricity it.) - Cosputed As shon for .ro 1 Labor (ores in sgricuiture (1) - CgICoItursti.lbor force fin faming, forascry, dwellings only. h,untingand fishing) As prentage of totat lsbor force. nnpyd 1of labr forte) - fnonpioyad are usulY defined asproaWho Ccnabnrplsti Are Able end Wilting to ta ke a )b, out ofa b on 5ie day randot Radio receivers (per thou eOP) - All typos Of racaie-rs for radiohre,st of a jet, sad seeking work for A specified Intinin Period not e-acadiog one to general public par thousand of population. soeludes onilcesad r-cLvers week, may not be conparbhs between countries due to differsat deftoition, in countries And inV years whes registration of radio sacs sA. In effect; of ucusPlayed and soure. of data, e.g., empleyeant office statistics, satpla dsts for recsnt years esy nor he reparable ticc set countries sbolishsd surveys, - cepul.ary unaploynat insurance, ICensin.. Passenger cars (Mee thou eo) - Pas-ASOgr cars cQaprice eacor crar seating Incas dIstribution - Percentage of Private Income (boths ins .ash ad kind) Iesa tban eighit persona; eaciud.a ambulanes, besesto act military received by richest 5%, ri.heot 20%, poorest 20%, And pooreat 407. of hoass- nahicl.s. holds. tlactriotty (kwh/yr ear rae) ~~~~~~~~~- Aneusi cnassptios of leduatrial. caseercial. public and private ectricity In bilosae bone per- .sPits. gans-ally Distribution of land ownership - Pernantsgea of land cursd by wealthiest lo,% bsaad on preduCtian data, Without allWenca for Iloses Se grids but allo-- sad pooes.t lit of land oen.rs. Lag f or imports and aepote of alatririty lieenret(haveperca) - Per capita Annual coasuprion in kiloggams Health and Nutrition estimatedfn domes9titc prodoction plu,. net imparts of newprint Ponslation pr! physician - Population divided by osuher of practicing physician qualified fine A nadicsl school At university Iev-L.  UNL4 I Peg. 3 of 3 page. ECONOMIC INDICAMTRS CROSS NATIOKAL PRODUCT IN 1976 ANNUAL RATE OF GROlT -- (2 *nd in ..n.ttnt pri..) USS H1.l % of GNP 1961-65 1966-70 1971-75 1976 GNP at Merket Prict. . 27600 100 9.0 1/ 7.7 1/ 11 3 1/ 10.5 1! Grost Fixed Domtic Inteetosnt 7 450 27 11 3 11.2 11 2 S 2 E.ponrt of Good. 6 138 22 9 0 2/ 10 9 }/ 23 6 2/ 14 9 2/ lport. of Goode 6,095 22 10.7 2/ 12.7 2/ 22.3 2/ 14.1 2/ LOOR CIt rA 1976 GOVERNKIENT FINANCE Mln " General Covrnmeot A8lnrtlt.r. 3.6 36 (I.i bill6 ) Iondtry 4.1 40 1976 1976 Servic.& .L.1. .. Tot-l 10.2 100 Total Rane.pt. 254.5 46.1 Total Eependit.r. 250.1 45.3 Total Surplw 4.4 0.8 RETAIL PRICES 1971 1972 1973 1974 1975 1976 (1966 - 100) 101 6 101.6 102.4 103.7 103.9 104 4 BALANCE OF PAYHENTS PMRAJADIW b 7MS 1976 (Mlt USS) 1971 1972 1973 1974 1975 1976 US$ 850 E.pOrta of good. 2,102 2,884 3,667 4,858 5,341 6,138 IWont. of good. 2,102 2,910 3,424 5,049 5,342 6,095 Capital gooda 1,578 26 Coo-.t good. 1.005 16 Tr.d. bal1no- 0 -26 +243 -191 -I +43 Fodn goff. 596 Is Not ervIn.. -23 -34 -107 -168 -134 -63 Int.r.edi.te good. 508 S Ra -terial. 2,450 0 Balonc. on good. IndtrlIal 2,061 34 .nd e. L...e -23 -60 +136 -359 -135 -20 AgtOi.ltort l 389 6 Ntt MLT Capital +5 +24 +83 +643 +437 +t44 Totel 6,13il Diabortent. 350 516 589 1,055 817 742 A-ortiatio- 345 492 506 412 380 502 Reald-l B.o1.0. +18 +36 -219 -284 -302 -220 EYTERNAL OEBT, Jen. 30, 1977 OffifAal Rate: T iorat Rat. Total M 6 LT 3_246 USS 1.00 - Loi 4.97 US$ 1.00 - L. 12 00 of h .h nov-rttbl. Lao 1 00 - USS 0.20 Le. 1.00 - US5 0.08 currenboo 3,174 Officlal TradInd Rate DEBT SERVICE RATIO FOR 1976 USS 1.00 - eiA 20 La. 1.00 - USS 0.05 Convertibl, cnrrencie. only 17-4 1/ Natlonal lnco (SlI) Country Progreo Oepart t I 2/ Cornoot Pri.es En-p., Middl. lot and North Afri29 R197 D-ober 29, 1977  ANNEX II Page 1 of 4 pages STATUS OF BANK GROUP OPERATIONS IN ROMANIA A. STATEMENT OF BANK LOANS (As of November 30, 1977) Amount in $ Millions Loan Less Cancellations Number Year Borrower Purpose Bank IDA Undisbursed Ln. 1020-RO 1974 Investment Fertilizer 60.0 - 22.6 Bank Ln. 1027-RO 1975 Investment Special 70.0 - 39-9 Bank Steel Ln. 1028-RO 1975 Investment Thermal 60.0 - 9.8 Bank Power Ln. 1082-RO 1975 BAFI Irrigation 70.0 - 11.5 Ln. 1083-RO 1975 BAFI Agricultural 30.0 - 12.3 Credit Ln. 1169-RO 1976 BAFI Flood 40.0 - 3.4 Recovery Ln. 1170-RO 1976 Investment Flood 20.0 - 0.0 Bank Recovery Ln. 1242-RO 1976 Investment Hydropower 50.0 - 40.1 Bank Ln. 1247-RO 1976 BAFI Irrigation 60.0 - 58.4 Ln. 1368-RO 1977 BAFI Irrigation 60.0 - 60.0 Ln. 1436-RO 1977 Investment Bearings 38.0 - 38.0 Bank Ln. 1447-RO 1977 Investment Glass Fiber 18.3 - 15.5 Bank Ln. 1448-RO 1977 Investment Polyester 50.0 - 48.5 Bank Ln. 1479-RO 1978 BAFI Agricultu- 71.0 - 71.0 ral Credit Total 697.3 431.0 Of which has been repaid - - - Total now outstanding 697.3 Amount sold 18.6 - Of which repaid 0.0 18.6 Total now held 678.7 by Bank 2/ Total undisbursed 431.0 431.0 1/ Bank for Agriculture and Food Industry 2/ 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; Effective Date: December 31, 1974; Closing Date: December 31, 1978. By agreement between the Bank and the Borrower, the project site was changed from Tecuci to Bacau which is more advantageous from the point of view of controlling effluents. The project, though slightly behind sched- ule, is proceeding satisfactorily, and the ammonia production facilities are expected to be commissioned before the end of 1977. Ln No. 1027 Otelinox Special Steel Project; US$70 million Loan of July 10, 1974; Effective Date: 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 has been 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. Ln No. 1028 Turceni Thermal Power Project; US$60 million Loan of July 10, 1974; Effective Date: 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 the first generating unit. 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; Effective Date: May 5, 1975; C1osiuR 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, and about US$4 million of the loan amount is expected to be cancelled if not required for the project before the closing date.  ANNEX II Page 3 of 4 pages Ln No. 1083 Sadova-Corabia Agricultural Credit Project; US$30 million Loan of February 6, 1975; Effective Date: 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 internationally for 1978 requirements by the Romanians. About 80 percent of loan funds are committed. Ln No. 1169 Flood Recovery Project (Agricultural Component); US$40 million Loan of November 12, 1975; Effective Date: 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 have been received for the flood early warning system equipment and the Romanians are expected to submit a bid evaluation report to the Bank in the near future. Ln No. 1170 Flood Recovery Project (Industry, Mining and Transport Com- ponent); US$20 million Loan of November 12, 1975; Effective Date: December 2, 1975; Closing Date: September 1, 1977. After a slow start due to difficulties encountered in Romania in preparing and assembling documentation on procurement of imported industrial machinery, disbursements have improved considerably since September 1976. The closing date was extended from March 31 to September 1, 1977, and the loan has now been fully disbursed. Ln No. 1242 Riul Mare Retezat Hydropower Project; $50 million of April 28, 1976; Effective Date: July 26, 1976; Closing Date: December 31, 1981. Project execution is according to plan. Civil works for the dam and underground power station are well underway, and about 73 percent of the loan amount has been committed. Ln No. 1247 Rasova-Vederoasa Irrigation and Agriculture Development Project; $60 million of April 28, 1976; Effective Date: 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; $60 million of March 2, 1977; Effective Date: 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; $38 million of June 15, 1977; Effective Date: August 11, 1977; Closing Date: December 31, 1982. This loan became effective on August 11, 1977. First bidding documents were issued at the end of October. Ln No. 1447 Bucharest Glass Fiber Project; $18.3 million of June 15, 1977; Effective Date: August 11, 1977; Closing Date: June 30, 1980. The project is proceeding satisfactorily. Main supply contracts have been signed, and implementation is proceeding within planned schedule and budget. Ln No. 1448 Cimpulung Muscel Polyester Project; $50 million of June 15, 1977; Effectiveness Date: October 3, 1977; Closing Date: March 31, 1981. This loan became effective on October 3, 1977. The main supply contract has been signed, and execution of the project is proceeding satis- factorily. Ln No. 1479 Pig Production and Processing Project; $71 million of July 15, 1977; Effective Date: September 28, 1977; Closing Date: June 30, 1982. This loan became effective on September 28, 1977, and BAFI has begun to make subloan commitments. Tender documents for three major contracts for construction materials have been approved by the Bank. EMENA December 29, 1977  ANNEX III ROMANIA VIISOARA IRRIGATION PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Project first identified by the Bank: April 1976 (b) Time taken by the country to prepare the project: Unknown (c) Agency which prepared the Project: Ministry of Agriculture (d) Date of first Bank mission to consider the Project: January 1977 (e) Date of departure of Appraisal Mission: May 3, 1977 (f) Date of completion of negotiations: November 15, 1977 (g) Planned date of effectiveness: April 1978 Section II: Special Bank Implementation Actions None Section III: Special Conditions Special conditions of the loan would be as follows: (i) Approval by the Council of Ministers of the technical and economic indicators of the project would be a condition of loan effectiveness. This approval of detailed project parameters is normal under Romanian planning procedures and will provide the legal basis for financing and imple- mentation of the project (para. 55). (ii) Construction of the Cringeni Dam on the Calmatui River would be formally approved by the Council of Ministers by December 31, 1980, and the storage capacity of the dam would be increased by December 31, 1982 in order that suf- ficient water could be made available to the 2,930 hectare Calmatui portion of the project (paras. 42 and 55). EMENA December 29, 1977  Rosorir e Vede\ Re r 20 rm. o-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ RED 13020 A. JULY 19i 7 U S S R SOCIALIST REPUBLIC OF ROMANIA