Romania - Bucharest Glass Fiber Project

Document of FILE CoPY The World Bank FOR OFFICIAL USE ONLY Report NF.2089-RO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INVESTMENT BANK OF ROMANIA WITH THE GUARANTEE OF THE SOCIALIST REPUBLIC OF ROMANIA FOR THE BUCHAREST GLASS FIBER PROJECT May 20, 1977 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS 1. Official Rate Lei 4.97 = US$1.00 Leu 1.00 = US$0.20 2. Tourist Rate Lei 12.00 = US$1.00 Leu 1.00 = us$o.o8 3. Conversion Rate for Traded Goods Lei 20.00 = US$1.00 Leu 1.00 = US$0.05 FISCAL YEAR January 1 - December 31 GLOSSARY OF ABBREVIATIONS COFACE - Compagnie Frangaise D'Assurance Pour Le Commerce Exterieur ECGD - Export Credit Guarantee Department HERMES - Hermes Kreditversicherings- Aktiengesellschaft tpy - Tons per year UNCTAD - United Nations Conference on Trade and Development UNESCO - United Nations Educational, Scientific and Cultural Organization UNIDO - United Nations Industrial Development Organization  FOR OFFICIAL USE ONLY ROMANIA BUCHAREST GLASS FIBER PROJECT LOAN AND PROJECT SUMMARY Borrower: Investment Bank of Romania. Guarantor: Socialist Republic of Romania. Beneficiary: Enterprise for Glass Fiber. Amount: US$18.3 million equivalent in various currencies. Terms: Amortization in 15 years, including 3 years of grace, at an interest rate of 8.2 percent per annum. Project Description: The project consists of the construction of facilities for a new glass fiber plant in the outskirt of Bucharest: (i) to produce 6,000 tons per year (tpy) of continuous "E" glass fiber in the form of roving and yarn (Section I), and (ii) a weaving and finishing plant to convert 1,270 tpy into woven roving, fabrics, tapes and braided tubes (Section II). The part of the production of Section I that will not be used in Section II, i.e. 4,730 tpy will be sold as roving and yarn. The plant will be located in "Militari", an area that is being developed as an industrial estate and provides common facilities for the supply of utilities. The project will use the direct-melt process where continuous glass filaments are drawn directly from the molten glass. Know-how, machinery and equipment for Section I will be supplied under a turn-key contract which will also provide for erection supervision, training and start-up assistance by the foreign contractor. The plant will be operated by a new enterprise established under the Central for Glass and Fine Ceramics, which belongs to the Ministry for Light Industry. The Project is scheduled to be com- pleted by end-1979. I This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Dank authorization.  Cost Estimates: Estimated Cost Local Foreign Total X (US$ million) Equipment & Spares /a 5.4 14.9 20.3 53.3 Import Duties 6.2 - 6.2 16.3 Erection 0.2 0.6 0.8 2.1 Civil Works 4.9 0.8 5.7 14.9 Know-How & Engineering 0.7 2.0 2.7 7.2 Preoperating & Start-up Expenses 1.5 0.9 2.4 6.2 Base Cost Estimate 18.9 19.2 38.1 100.0 Contingencies: Physical (5%) 0.9 1.0 1.9 5.0 Price (6.4%) 0.2 2.2 2.4 6.4 Installed Cost 20.0 22.4 42.4 111.11 Working Capital 1.2 - 1.2 3.2 Total Project Cost 21.2 22.4 43.6 114.6 /a c.i.f. cost at plant site. Financing Plan: US$ Millions Local Foreign Total State Funds for Fixed Assets 20.0 4.1 24.1 Working Capital 1.2 - 1.2 IBRD - 18.3 18.3 Total 21.2 22.4 43.6 Estimated Disbursements: Calendar Years 1977 1978 1979 1980 ---------US$ Million)------- Annual 3.1 8.3 6.5 0.4 Cumulative 3.1 11.4 17.9 18.3  Procurement Bank financed goods and services are being procured follow- Arrangements: ing international competitive bidding in accordance with Bank Guidelines. Most of the items for which Bank financ- ing is proposed have been included in a lump sum turn-key contract for the supply of know-how, machinery, and equip- ment, as well as training, erection supervision and start-up assistance for Section I of the project. This approach is consistent with common practice in high technology indus- tries, such as the synthetic fiber industry, and is con- sidered to be the optimal solution for executing the project. In order to ensure maximum competition among the limited number of potential suppliers, the Romanian authorities have, in accordance with Bank procurement guidelines, invited bids from all known qualified suppliers. Detailed technical discussions were held during 1976 with the qualified suppliers who had expressed interest to par- ticipate in the bidding. Bids were received at the end of December 1976; the bid evaluation was reviewed and accepted by the Bank. The contract was signed in April 1977. The specific data required for Bank appraisal in this type of project, where one lump sum turn-key con- tract covers know-how, equipment, training, etc.(., is available only late in the procurement cycle. This is particularly true in Romania. Therefore, advance contract- ing and retroactive financing of the initial down payment under the contract is unavoidable if costly and unwarranted delays are to be avoided. Additional equipment in a total amount of US$1.5 million, also proposed for Barik financing, will be purchased under single contracts following interna- tional competitive bidding except for items under US$100,000 which would be purchased after soliciting bids from poten- tial suppliers from at least three member countries of the Bank and Switzerland. Romanian suppliers will participate in the bidding for these items and are expected to win the competition. The normal 15 percent preference will be applied to the Romanian bids. Other imported equipment for Section II, which is not proposed for Bank financing, will be purchased in accordance with Romanian procurement procedures using suppliers' credits. Economic Rate of Return: 16.5 percent. Appraisal Report: No. 1504-RO, dated April 28, 1977 Division III Industrial Projects Department   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INVESTMENT BANK OF ROMANIA, WITH THE GUARANTEE OF THE SOCIALIST REPUBLIC OF ROMANIA, FOR THE BUCHAREST GLASS FIBER PROJECT 1. I submit the following report and recommendation on a proposed loan to the Investment Bank of Romania, with the guarantee of the Socialist Republic of Romania, for the equivalent of US$18.3 million, to help finance a glass fiber project. The loan would have a term of 15 years, including three years of grace, with interest at 8.2 percent per annum. PART I - THE ECONOMY 1/ 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 mis- sion visited Romania in October/November 1976 and its report is under prepara- tion. Preliminary findings of this mission are incorporated in this report. Country social and economic data are given in Annex I. 3. Since the founding in 1947 of the People's Republic of Romania, which in 1965 was reconstituted as the Socialist Republic of Romania, economic management has been organized along socialist principles which have included state .and cooperative ownership of almost all productive resQurces, 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. 1/ This part is identical to corresponding section of the President's Report for the Brasov Bearings Project which was distributed to the Executive Directors on May 16, 1977.  - 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 1975, heavy industry (led by engineering and metal working, chemicals and ferrous metallurgy) accounted for about 61 percent of industrial production. 6. As a result of this strategy, a marked change has been achieved in the structure of Romania's economy. Rapid industrial growth, which over the last decade has averagec more than 13 percent per annum, has expanded the share of the labor force employed in industry (including power and construc- tion) from about 14 percent in 1950 to approximately 40 percent in 1975. During the same period, the share of labor force engaged in agriculture has declined from 74 percent to around 38 percent; and while agricultural output almost tripled, its share in GNP amounted to only 15 percent in 1975. 7. Notwithstanding the emphasis on industrialization, more than half of the population (about 57 percent in 1975) still lives in rural areas and agriculture remains a key sector of the economy. Apart from supplying food, industrial inputs and the residual labor increment for industrial growth (which requires an expansion in agricultural productivity), the sector also supplies about one quarter of the nation's convertible foreign exchange earn- ings. These earnings, which are largely used to buy imported inputs for in- dustry, have often been jeopardized as a result of unstable production growth in agriculture. The maintenance of the industrial development program, there- fore, is dependent on the performance of the agricultural sector. 8. Romania's population growth is around one percent per annum. Thus, the impact of rapid economic growth on per capita incomes has been only mar- ginally diluted by the population increase. In the last decade, GNP growth has averaged nine percent per annum, implying a growth of about eight percent per annum of per capita GNP. It is estimated that GNP per capita in 1975 was US$1,300 based upon official national income information and using the World Bank Atlas methodology. 9. The organization of production in both the urban sector and in agri- culture is such that all labor is employed and there is no open unemployment. There is, however, some seasonal labor surplus, mainly in agriculture. Income distribution is also relatively equal. In 1975, average monthly wages were 1,813 lei (over $90 equivalent) up nine percent over the previous year. About 87 percent of all monthly wages in 1975 were within the range of 1,300-2,500 lei. Four percent were under 1,300 lei and about nine percent were above 2,500 lei. Prices for essential consumer goods and services such as basic foodstuffs, rents and urban transport are relatively low and most social services, notably education and health care, are provided without charge.  -3- 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 include a reorganization (involving a reduction from 217 to 95 in number) of industrial centrals and a concentration within the centrals of all plan- ning, control and research functions. The pursuit of purely physical goals in production and trade, while still an important element in the system, is being supplemented by much greater emphasis on productibn and investment efficiency, product quality, pricing and foreign competitiveness. To eliminate wasteful investment and production expenditures, a Superior Court of Financial Control has been established, among other things, to oversee a new system of financial control. 13. Foreign trade has expanded rapidly in recent years both in volume and in regional diversity. There has also been a tendency to move away from trade on a bilateral basis toward trade involving multilateral payments. During 1971-75, total foreign trade grew at approximately 18 percent per annum in current prices. In 1975, however, after the very rapid growth in the value of trade of 33 percent in 1974, trade grew by only 6.6 percent, with exports increasing by 9.6 percent to US$5.34 billion and imports by 3.9  - 4 - percent also to US$5.34 billion. This slower increase in 1975 was explained chiefly by the floods of July 1975 which resulted in a smaller exportable surplus of agricultural goods and necessitated cancellation of some imports. About 54 percent of 1975 trade was with the convertible currency area. Over- all current account deficits have generally remained small; in 1975 the deficit was only US$135 million, while the deficit with the convertible currency area was US$260 million. In recent years, imports from eastern European socialist countries have been slightly lower than Romania's exports to that region. In Romania's trade with western industrialised countries, on the other hand, exports have typically been considerably less than imports. These deficits have generally been increased by deficits on the invisibles account with western countries. 14. The structure of Romania's trade with the developed market economies remains essentially unfavorable. Raw materials and agricultural commodities, both of which are subject to unstable price and production conditions, com- prise about 60 percent of total exports to these countries. At the same time imports from these countries are largely of machines and equipment and other manufactures. Because of the present low level of reserves, any instability in export earnings, as frequently arises from shortfalls in agriculture (para- graph 7 above), tends to place the import program in immediate jeopardy. 15. Preliminary results for 1976 indicate that most major targets of the 1976 Annual Plan have been met. National income rose by 10.5 percent, gross industrial production increased by about 11.5 percent, and gross agricul- tural production was a record, exceeding the flood affected 1975 level by 17.2 percent. These achievements were realized despite a lower than planned invest- ment growth rate (8.2 rather than 19.4 percent). The volume of trade increased less than plan targets, but a reported overall trade surplus of US$40 million was attained because of measures to economize on imports. In November 1976, Romania's National Assembly approved the country's 1977 Annual Plan and Budget, which calls for continued high rates of growth. National income is expected to rise by 11.3 percent and gross industrial production by 10.5 percent. The Plan provides a range of 1.9-3.6 percent growth for the gross farm output. This wide range is provided because of the uncertain impact climatic condi- tions might have on production. Investments in the national economy are expected to increase by 16.7 percent and total foreign trade volume by 15.5 percent. Insufficient information is available to assess the full impact of the earthquake in March 1977. The Government has announced that production targets for 1977 will be met and that no revisions of the annual plan will be made. While it is possible that planned production levels will be attained, it is likely that replenishment of the damaged capital stock will take longer and require additional resources and/or diverting of investment resources from new projects. 16. A campaign to increase efficiency in the utilization of existing capacities and to effect significant economies in the consumption of raw materials and intermediate goods is being implemented throughout the economy. Targets have been established to reduce by 30 percent the previously antici- pated construction and erection costs of industrial projects between 1976-80. Substantial, but as yet unspecified, savings have also been prescribed for  - 5 - most other industrial inputs during 1976-80, while the global production targets as set in the Five Year Plan remain unchanged. External Assistance 17. The expansion of Romania's trade with the non-socialist industrial countries has led to an increased need to obtain convertible currencies to pay for imports from those countries. Romania has met this need both by bor- rowing abroad and by mounting a major effort to expand exports and tourism. Gross inflows of convertible currency through medium- and long-term loans were US$946 million in 1976, consisting mostly of financial and suppliers' credits with relatively short repayment periods. This gross inflow repre- sented a net inflow of some $312 million after accounting for the country's repayment obligations. 18. As part of its effort to expand its foreign trade and cooperation relationships, Romania has 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 January 1977, seven joint venture agreements had been signed. In contrast with the first six which were of a small scale involving total direct foreign investment of about US$10-15 million, the seventh agreement which was signed a few months ago with Citroen, involved a contract of FF 2.5 billion (about US$500 million) of which 49 percent is direct foreign investment. Romania also receives medium-term trade credits from U.S. Eximbank and trades under ECGD, COFACE, and HERMES credit guarantees with the United Kingdom, France and the Federal Republic of Germany, respectively. Romania succeeded in securing a US$60 million, eight-year loan from Kuwait as part of a general cooperation agree- ment and more recently a $50 million Eurodollar loan. In addition, Romania has access to non-convertible currency investment credits from the Interna- tional Investment Bank, Moscow. 19. As it stands Romania's access to long-term finance in convertible currencies is still very restricted. The IBRD is the only major source of such long-term development finance, though Romania is making efforts to improve its access to the major financial markets. The Bank's presence on a significant scale would have a positive influence in this regard and might serve as a catalyst for involving other lenders in Romania. This could serve both to increase the total amount of Bank-sponsored funds available to Romania and to build outside confidence in the country, thereby enhancing in the long-term its independent access to the world's financial markets. Prospects 20. The 1976-80 Five-Year Plan reflects Romania's continued strategy of rapid growth. Investment rates of some 30 percent of GNP are to be main- tained, and the major thrust is in industry. The plan targets are impressive. National income is expected to grow at 10-11 percent per annum and gross industrial output by 10.2-11.2 percent per annum, with more rapid growth in heavy industry than in consumer goods. Continued emphasis is to be placed  - 6 - on foreign trade which is expected to double in real terms, with the aim of securing a continued transfer of technology needed for the modernization and diversification of Romanian industry and the raw materials required by indus- try. Greater emphasis than in the 1971-75 Plan is to be given to developing the infrastructure in agriculture, particularly with regard to irrigation and drainage and the plans for fertilizer production envisage an increase in supply sufficient to double the 1974 application rates by 1980. 21. Romania has good potential for further economic growth. Endowed with important natural resources (fuels, some minerals, timber, rich soils and sources of irrigation water for agriculture, and a favorable climate for agriculture and tourism) and located conveniently with respect to its major international markets in the East and West, the country has built a broad industrial infrastructure (power, metallurgy, chemicals) which will serve as a base for the expansion of secondary manufacturing sectors such as machine building and consumer durables. Above all, Romania has a hard-working and increasingly skilled population. In order for Romania to attain its growth objectives, however, it will have to rely on a major expansion of exports of manufactured goods in order to finance modern foreign technology and an increasing dependence on imported raw materials and fuel. 22. Economic growth and structural change call for the introduction of new technologies, improvements in the quality of products, more efficient use of materials and factor inputs, and reductions in production costs. The in- creasing diversity and complexity of Romania's economic structure require continuing improvements in the efficiency of economic planning and coordina- tion and further refinements in economic management. To keep up with these changes and requirements, large programs of education and manpower training have been mounted, investments in scientific and technological research have been emphasized, and efforts are being made to strengthen technical coopera- tion with industrialized countries and international organizations. Creditworthiness 23. As of December 1976, Romania's total medium and long-term external debt amounted to US$3,095 million. Most of these debts (US$3,023 million) were denominated in convertible currencies, the major creditor countries being Germany, France, UK and Italy. While the total debt does not appear excessive in relation to the volume and growth of external trade, average maturities are relatively short and convertible debt service payments are estimated to be in the order of US$550 million a year during 1975-76. The convertible debt service ratio was approximately 14 percent in 1975. The corresponding figure for 1976 is estimated to have been about 19 percent and is expected to be 18 percent for 1977. 24. The organization of economic activity in Romania, the pursuit of a development strategy involving high investment and saving rates, and rapid income growth ensure the effective use of foreign credits. Moreover, the country's major efforts to expand exports (particularly to convertible cur- rency areas) are increasing the foreign exchange available for debt service. Convertible export earnings rose from US$830 million in 1971 to US$2,839  - 7 - million in 1975, and are estimated to have been about US$3,250 million in 1976. The preferential trade status accorded to Romania by the European Communities in June 1973 is facilitating the expansion of such exports as is the granting of most favored nation status by the U.S. In 1973, the Govern- ment also restricted the use of short-term credit facilities from western suppliers in an effort to improve the structure of the country's external debt. Assuming a continuation of present export and management policies we estimate that the debt service ratio will remain around 20 percent during the implementation of the Five Year Plan 1976-80 and decline thereafter to about 15 percent by 1985. The country's present outward-looking posture, the success of both its domestic growth and foreign trade policies, and its potential for continued development, all support the judgment that Romania is creditworthy for substantial Bank lending. 25. When Romania joined the Bank, most pre-war foreign debts of the country had been settled. Settlements which were still under discussion at that time concerned claims in the United Kingdom and in the United States. With regard to the settlement of these claims, the final payments of U.S. claims began in September 1975 and were completed in October 1976 based upon agreements reached in May 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 discus- sions of bilateral trade, and further discussions are planned at a date to be established through diplomatic channels. PART II - BANK GROUP OPERATIONS IN ROMANIA 1/ 26. The proposed loan would be the Bank's twelfth to Romania and would bring total Bank commitments to Romania to US$576.3 million. 2/ Disbursements under the Bank's initial loans were slow during 1975, but this situation improved considerably during 1976. Annex II contains a summary statement of Bank loans to Romania and notes on the execution of ongoing projects as of April 30, 1977. 1/ This part is substantially the same as the corresponding section in the President's Report for the Brasov Bearings Project which was distributed to the Executive Directors on May 16, 1977. 2/ Assuming approval of the $38 million Bank Loan for the Brasov Bearings Project,  - 8 - 27. Foreign exchange, especially in convertible currencies, continues to be a major constraint and one of the major objectives of Bank lending con- tinues to be to help alleviate the country's shortage of foreign exchange by providing long-term external capital and by financing projects which will expand foreign exchange earnings or savings. Bank lending also aims at sup- porting the Government's efforts to introduce new industrial technologies to improve the quality of products and production efficiency, to reduce produc- tion costs and to provide for necessary electric power development. Market aspects and marketing, especially for export goods, are also emphasized. Special attention is given to agriculture which is heavily dependent upon favorable weather and where productivity levels are still comparatively low. 28. A number of projects are under consideration for future lending. A project for pork production and processing has been appraised and is expected to provide the basis for an additional loan proposal during 1977. In addition, projects for further irrigation works, grain storage and poultry production, chemical and tire plants, and seamless pipes have been proposed, and further power projects will also be considered in context of a sector investment study currently being prepared by the Government. 29. In addition to lending, the Bank (through EDI) has assisted Romania by conducting industrial and transportation project appraisal training courses for Romanian officials in Belgrade in October 1973 and in Bucharest in January/ February 1975, November/December 1975, January/February 1976 and October/ November 1976. Additional courses, including one in agricultural project appraisal, are planned. 30. The projects, for which assistance has been committed or is being considered, represent only a small portion of Romania's total need for ex- ternal financing and of its total disbursed convertible debt. However, they will provide a substantial net addition to the inflow of convertible currency finance, and may set a pattern for obtaining longer term convertible finance from other sources. The disbursed IBRD debt outstanding to the Bank is ex- pected to constitute about 12 percent of Romania's total projected convertible currency debt in 1980; the Bank's share in Romania's debt service payments in 1980 would be about 3 percent. PART III - THE INDUSTRIAL SECTOR IN ROMANIA Industrial Development 1/ 31. Performance of Romania's industrial sector during the last 25 years has been impressive and great efforts have been made to transform a nation 1/ This part is identical to the corresponding section of the President's Report for the Brasov Bearings Project which was distributed to the Executive Directors on May 16, 1977.  - 9 - that once specialized in the exportation of raw materials into a country with a strong and broad based industrial sector. Large capital investments at annual rates in the order of 30 percent of GNP have been concentrated on basic and heavy industry, particularly on fuel, electric power, metallurgy, machine building and chemicals and have resulted in a rapid expansion and diversifica- tion of industrial output. During the last Five Year Plan gross industrial production increased by about 85 percent surpassing significantly plan targets. Growth in the chemical, engineering and metal working, and ferrous metallurgy sectors has been the fastest with production about doubling. 32. In the course of this impressive development the industrial sector of Romania has assimilated in a relatively short period of time vast amounts of technology and know-how, and it is assuming a sophistication with which it is increasingly capable of solving complex technical problems and producing products that require a high degree of technological achievement. One of the comparative advantages of Romanian industry is its relatively low-cost skilled and unskilled man-power, supported by well organized training programs. 33. Industrialization will remain the first priority of development both in the 1976-80 Five Year Plan and in the longer run with output expected to grow seven fold in the period 1970-1990 (or roughly 10 percent per annum). While previously growth was often achieved at sacrifice of quality, efforts for quality and productivity improvement are more evident now. Internally, the areas of major emphasis will be manpower planning and development, growth in technological capabilities, industrial modernization and central efficiency auditing. By applying the most advanced scientific methods and by stressing scientific organization of manpower, substantially more value will be incorporated per ton of product. The thrust of the sector's development will continue to be the growth of the chemical, engineering, metal working and ferrous metallurgy sectors. Sector Organization 34. Nine industrial ministries are responsible for the industrial sector in Romania. Subordinate to each Ministry are several foreign trade enterprises, research and design institutes and a number of Centrals, which in turn direct the activities of groups of related enterprises. The work on overall design and supervision of projects is delegated by each Ministry to one of its research and design institutes. The enterprises, Centrals and Design Insti- tutes, which have not been authorized to trade abroad (see also para 4 above) conduct their foreign business through the foreign trade enterprises which are under supervision either of the technical ministry or of the Foreign Trade Ministry. Glass Fiber Industry 35. The Central for Glass and Fine Ceramics under the Ministry for Light Industry is responsible for the planning and production of glass products, chinaware and pottery. It employs about 40,000 people in its 26 enterprises. Romania's glass and ceramics industry is well established with an average growth rate since 1950 of 13 percent p.a., very close to the average growth  - 10 - rate of 12.9 percent of the entire industrial sector. In 1975 it produced 358,000 tons of glassware. About 20 percent of its production is exported. The Central also has an institute responsible for all research in the glass industry. 36. Glass fiber production in Romania started in 1974 when the country's first production facility of this kind became operative. This relatively small plant for the production of continuous glass fiber has a design capa- city of 1,000 tpy. It uses the so-called marbles process where glass is first produced in the form of marbles and then re-melted for conversion into fibers. This inefficient process is gradually being replaced by the direct-melt process. The plant started production with 76 tons in 1974, increasing to 436 toi.; in 1975 and 516 tons in 1976. It uses imported glass marbles and is to real-, full capacity utilization in 1977. The plant employs 110 people and is located next to the project site. While the technology used in this plant is much simpler than that of the project plant, it will be very useful for training some of the operators for the new plant. The Market 37. Romanian glass fiber consumption began in the late sixties and de- veloped at a very rapid rate of growth of about 50 percent per year on average; electrical insulation and reinforcement of plastic tanks and pipes for the chemical industry are the main applications. Most of the country's glass fiber consumption is imported and local production started only in 1974 with the small plant near Bucharest for roving and mat (see paragraph 36 above), which produced about 38 percent of the country's glass fiber consumption in 1976. During the current Five Year Plan, glass fiber consumption is expected to increase from about 1,345 tons in 1976 to about 3,930 tons in 1977 (192 percent) and reach about 7,100 tons by 1980. Consumption increases after 1980 have been assumed at 10 percent p.a. which is considered conservative in the light of the actual growth rates during recent years and the expected growth rates of the main glass fiber utilizing industries, including the important field of building materials. While these projected growth rates in glass fiber consumption are substantial, they would still leave the level of per capita consumption in Romania well below other countries. Thus Romania's projected per capita consumption for 1980 would correspond to the US per capita consumption of the late 1950's and the 1975 per capita consumption of Spain, Italy and Austria. On the basis of the projected consumption of glass fiber, Romania would continue to import glass fiber, reaching a peak of 4,767 tons in 1978. After the project is expected to reach full production imports would still be 967 tons in 1981. The Borrower 38. The borrower for the proposed loan would be the Investment Bank, which is the specialized agency, under the Ministry of Finance, for invest- ment projects in all sectors of the economy except agriculture (including water resources) and food processing. It has a large technical and economic staff with branch offices in all districts of the country. The Investment Bank's involvement in investment projects commences in the preparation phase  - 11 - of a project; its staff appraises all major investment projects technically and financially and recommends approval or otherwise of their financing to the Council of Ministers. When a particular project and its financial plan has been approved by the Council of Ministers, all funds are channeled through the Investment Bank in accordance with the approved financial plan. All pay- ments for the execution of a project have to be authorized by the Investment Bank which keeps separate accounts for each category in the financial plan for every enterprise. It is the Investment Bank's obligation to ensure that a project is executed according to the financial and technical data included in the final technical and economic study approved by the Council of Ministers. Its inspectors check whether the project is proceeding according to the schedule approved in the Plan. 39. While the Investment Bank's supervision and control function is thus rather strong during the implementation phase of a project, its functions are much more limited during the operation phase of a project. Although it has the right and obligation to verify that the enterprise is meeting the targets set in the investment plan, it has no legal authority to influence directly the management of the enterprise or to force the enterprise directly to take operational actions which it considers necessary. In practice, how- ever, it can request such actions very effectively by reporting through the Ministry of Finance to the Government. 40. The Investment Bank is the channel for all sources of major domestic investment financing, but its own funds for onlending as credits are still relatively small. Its prime source of funds is the State Budget. The Guar- antee Agreement, therefore, includes the usual provision that the Guarantor will ensure availability of sufficient funds including foreign exchange requirements for the implementation and operation of the project. The Guarantor will ensure that the Investment Bank can meet the debt service on the Bank loan. In view of the status of the Investment Bank within the government system, it is considered sufficient to rely in this respect on the Guarantee Agreement. PART IV - THE PROJECT 41. The project was identified for Bank financing in April 1976 and appraised in November 1976 on the basis of a technical and economic study prepared by the Romanian Design Institute for Light Industry. Negotiations were held in Washington in April 1977. The Romanian delegation was led by Mr. Gavrilescu, Deputy Director of the Investment Bank. Project Description 42. The project consists of a spinning plant with a capacity of 6,000 tpy of glass fiber in the form of roving and yarn (Section I), and of a weaving and finishing plant with a capacity of 6 million m2 of fabrics, 10 million linear meters of tapes, and 3.3 million linear meters of braided tubes (Sec- tion II). Section II at full capacity will use 1,270 tpy of yarn and roving  - 12 - from Section I, the balance (4,730 tpy) will be sold as roving and yarn. The plant will be located in Militari, an industrial area in the outskirts of Bucharest. The area is being developed as a major industrial estate and provides common facilities for power, steam, water and natural gas supply. Process Technology 43. The manufacture of glass fiber can be divided into three stages: (1) the manufacture of glass, (2) the drawing of continuous filaments, i.e. the conversion of molten glass into strands, and (3) the conversion of glass fibers into saleable products. Originally, these three stages constituted separate manufacturing activities. Some 15 years ago, the "direct-melt" process was introduced which converts the molten glass directly into fibers. The project will use the direct-melt method, a highly specialized technology for which only a limited number of companies in the world have developed production processes. The weaving and finishing plant (Section II) will utilize conventional technology similar to that for other fibers in the textile industry. Principal raw materials for the production of glass fibers are quartz sand, limestone, calcined alumina and boric acid. Except for a small quantity of calcium fluoride which will be imported, all raw materials are available locally. Project Execution 44. The project is in an advanced stage of preparation and building construction started in 1976. Commissioning of the two Sections is planned in different stages to allow for a proper phasing-in of the highly specialized technology in Section I. While the weaving and finishing plant is scheduled to start operations in mid-1978 by using imported yarn and roving, Section I is expected to commence production in mid-1979. Primary responsibility for project execution, including procurement of equipment and services from within Romania is in the hands of the recently established project enterprise. The engineering enterprise of the Ministry of Light Industry is responsible for the design of the entire plant (based on the information and design provided by the licensor and the suppliers). The Trust of Industrial Buildings is constructing the plant facilities, and the foreign trade enterprise of the Ministry of Light Industry is handling the procurement of imported equipment and services. Employment and Training 45. The project aaterprise is headed by a recently appointed, well qualified manager who is in the process of forming a team to constitute the management of the enterprise. A total staff of about 1,200 (about 60 percent female staff), is expected to operate the plant, including about 15 percent maintenance personnel needed for the sophisticated machinery. Training of the staff in the weaving and finishing plant (Section II) will be carried out in existing textile facilities in Romania and, if necessary, by machinery suppliers abroad; the operators for Section I will be trained mainly by the licensor, abroad and in Romania. A tentative training program has been prepared from which about 820 staff will benefit. The project enterprise  - 13 - would submit to the Bank by December 31, 1977 a detailed training program that is acceptable to the Bank (Schedule 2, Part B of the Loan Agreement). Project Cost and Financing 46. The total cost of the project is estimated to be the equivalent of US$43.6 million. The foreign exchange component is US$22.4 million. The capital cost estimate is based on the main fixed-price contract for Section I, which was signed in April 1977, on three contracts signed with suppliers for Section II and on recent quotations received for the remaining contracts to be signed. Physical contingencies have been provided at 5 percent. Price contingencies on foreign exchange costs are based on annual increases of 7.5 percent. Due to near zero inflation under the Romanian system of administered prices, annual price contingencies on local costs have been calculated at one percent. 47. The proposed Bank loan of US$18.3 million, covering the cost of the main contract and of identified additional equipment (see paragraph 48 below), would finance 82 percent of the foreign exchange cost of the project, and 42 percent of total cost. The loan to the Investment Bank would be for 15 years including a grace period of 3 years; it would be guaranteed by the Government. It is Romanian practice for the state to invest virtually all funds in such projects through the Investment Bank without formal onlending agreements and to recover investment costs from project beneficiaries through a variety of financial mechanisms including net income transfers from state enterprises, taxes and depreciation payments. For this reason the Investment Bank would not actually relend the Bank loan to the enterprise. However, the enterprise would be the beneficiary of the Bank loan and its provision of funds to the State Budget and Investment Bank would be sufficient to cover the lei equiv- alent of the debt service on the Bank loan including (notional) payment of principal plus interest at 10 percent (Section 4.01 (a)(viii) of the Loan Agreement). This arrangement is in line with our practice in previous indus- trial projects in Romania. Procurement and Disbursements 48. Bank financed goods and services are being procured following inter- national competitive bidding in accordance with Bank Guidelines. Most of the items for which Bank financing is proposed have been included in a lump sum turn-key contract for the supply of know-how, machinery, and equipment, as well as training, erection supervision and start-up assistance for Section I of the project. This approach is consistent with common practice in high technology industries, such as the synthetic fiber industry, and is considered to be the optimal solution for executing the project. In order to ensure maximum competition among the limited number of potential suppliers, the Romanian authorities have, in accordance with Bank procurement guidelines, invited bids from all known qualified suppliers. Detailed technical discussions were held during 1976 with the qualified suppliers who had expressed interest to par- ticipate in the bidding. Bids were received at the end of December 1976; the bid evaluation was reviewed and accepted by the Bank. The contract was signed  - 14 - in April 1977. The specific data required for Bank appraisal in this type of project, where one lump sum turn-key contract covers know-how, equipment, training, etc., is available only late in the procurement cycle. This is particularly true in Romania. Therefore, advance contracting and retroactive financing of the initial down payment under the contract is unavoidable if costly and unwarranted delays are to be avoided. Additional equipment in a total amount of US$1.5 million, also proposed for Bank financing, will be purchased under single contracts following international competitive bidding except for items under US$100,000 which would be purchased after soliciting bids from potential suppliers from at least three member countries of the Bank and Switzerland. Romanian suppliers will participate in the bidding for these items and are expected to win the competition. The normal 15 percent prefer- ence will be applied to the Romanian bids. Other imported equipment for Section II, which is not proposed for Bank financing, will be purchased in accordance with Romanian procurement procedures using suppliers' credits. 49. Since signing of the main contract has always been scheduled to precede the presentation of the project to the Bank's Executive Directors, the Romanians had requested the bidders to include in their bids an offer for financing to be utilized if a Bank loan were not forthcoming. Two offers of financing were received. However, the lowest evaluated bid, which will now be financed by the Bank loan proposed highly onerous credit terms which were rejected by the Romanian authorities since they would have resulted in con- siderably higher total project costs. 50. The Bank loan would be disbursed against 100 percent of the foreign expenditures under the turn-key contract for the supply of know-how, engineer- ing, machinery and equipment, erection supervision, training and start-up assistance for Section I. Disbursements for additional equipment in an amount of US$1.5 million would be made at 100 percent of foreign expenditures or 100 percent of local expenditures ex factory. Retroactive financing of up to US$1.4 million for expenditures made after signing of the main contract on April 27, 1977 is recommended. Environment 51. The project does not pose any difficult environmental problems. The proposed pollution control facilities, as designed for the project, are considered adequate, and the Loan Agreement (Section 4.01(a)(i)) would provide that the project enterprise will operate these pollution control facilities with due regard to ecological, environmental and workers safety considerations. Audit 52. Romania has developed an elaborate control and audit system, under which enterprises submit periodic operational and financial reports to their Central, the technical ministry and the banks concerned. The Central and the technical ministry, as well as a special unit in the Ministry of Finance and the National and Investment Bank, conduct extensive audits of these reports to ensure achievement of Plan targets and proper use of funds. The Bank would receive monthly project progress reports, annual financial statements on the enterprise and Investment Bank, and copies of annual audit reports prepared by the Ministry of Finance.  - 15 - Benefits and Risks 53. The project will provide for necessary expansion in Romania's glass fiber production capacity to supply anticipated expanded demand of important local industries. The project will also introduce new technology in the production of glass fibers and the supplier of the technology will undertake to provide for a period of five years after start-up, free of additional charge, information on all improvements in design or operation that becomes freely available to him from the operation of his own plant or other plants which use his technology. At full capacity the project will yield net annual foreign exchange savings of about US$12 million. Based on world market prices and production costs comparable to international standards, the project yields an economic rate of return of 16.5 percent. 54. The project faces few risks. Since the output of the new plant will be exclusively utilized to substitute for imports there are limited market risks. Initial technical problems in reaching full capacity utilization or high quality production in Section I, due to operator inexperience, are con- sidered the only important risk. However, through the proposed training program and the guarantee from the licensor/supplier, who will ensure that the plant will achieve the specified production program quantitatively and qualitatively, all reasonable precautions against this eventuality have been taken. PART V - LEGAL INSTRUMENTS AND AUTHORITY 55. The draft Loan Agreement between the Bank and the Investment Bank of Romania, the draft Guarantee Agreement between the Socialist Republic of Romania and the Bank, the report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement and the draft resolution approving the proposed loan are being distributed to the Executive Directors separately. 56. Features of the Loan Agreement of special interest are listed in Section III of Annex III. 57. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 58. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments Washington, D. C. May 20, 1977   C. S~~~~~~~~~~~~~~~~~~~a )Q I 1 0 0-4uas .- 0 1 7 ti 050 sa 4CC 0 a Ad am. o m am* . e-. .C C C C * C C It00 00 Z a n -.t. a Oam 40S EW - S 5 0 o so no Nb 50 - - 0.4- 0~lo " X G to so a C 5 s' 5tl lo no 0- - z so -n~~ . G aa M ,Ina M ~ tI a N It --l Oott i t 1:It Vt I * 5~~~~O 0-50 S 5~~~~~~ft 0 ftI * a -~~~ 4 -m n r.* cc Cm CCC CC ..4O% S -.0 C~~~~~~w o Om SK ~ ~ ~ ~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~s. 55 .. . ***-. h So - S o v.a see.--__ Z - monoC a.Ca ems m a I 5 - - - m m * .. e is 0 0 .m0 NMi 3 m- ~~~~~~~ ! - ~~~~~~~~~~~~~~~~~~~~~~~~~~~a- -S...a s 5151.1 .01 iii NI ao c - _& P- Oe CC I' W5-.4O mc a O. MS cc ... . I,C coel.c ox .M . . .*C 0 0C OUSf - - . '00 CC00CC a- aNfta . "am ut - 4 db~~~~*.-~ - C - 0-n .4.5-a - 'isa0930 a so A 56_ m V w 90Za =~dr .0a204eS-s. M! a -~~~~~~ - 4.~~~it I- -s' V I- a aA - -.- : ~ ~ ~ 5- s~~ Lis~~;~. .- _ T  Page 2 of 3 peoa Unless otherwise noted, data for 1960 refer to any year between 1959 end 1961, for 1970 beweaw 196S and 1970 end for Moat lament Rtatbt betWO 1973 and 1975. Esttimate based an official data and Bank Atlaa metho-dology. eno The Federal Republic of Germany has in oalected aa An objective countoty tieneasse it is iodtrta%ised IRatpoan couontxw with sajor trade ties with Roeis.. *ee The calculation of theme figures is under discussion. 10HAM 1960 /a4 1962; Lb Ratio of Population seeder 15 end 65 sod w to total laber force; /c Hoepitela only, saccindee emsitarie and asternity bins. 1970 La Ratio of population under 15 and 65 And ower to total Labor fence; Lk Doopitala only, ancludso sanitaria end maternity hoe; Li 1966; 1d inside only. 7m RICTr BUTDWS: /a 1970-75; /b Ratio of populAtian under 11 and 65 and over to total labor force; 14 Hospitals omly, exocludes saniterte and waternity hone; 14 1969-71 vavrage; La Unadjusted, 1974-75 enrlmenuts taken as a percentage of the 6-14 And 15-19 age groups respectively of mid-1974 population; /f 1974, official estimtat is 100 percent. XI~~Zs6ZZ& 1970 /a Asriculture Lend held by social sector 'EAmbinate"l; lb Agricultvre land held by privtat small-bolders '.10 hecturns nadimum' 14 Includins midwives, assistant midwives, assistant nurses end nursing aSUInlaries. ITALY ~~1970 /a RAtio of populationm under 15 end 63 and over to total labor force; 1b Hospital personnel. GERANYFRO IZI. 97 /a Total, urban And rural; 1b Inside only. Rap, JndZ 25, 1977 mDi1tIm OF? RaCUIA ThCATORS Land A"e, (thouha oclto ker orima perso - Population divided by number of practicing Total -Total surface area comprising land area ed Inland cetera. %mis fMa-1le rduate nurses, "trained" or "certified" nurses, mud tArLc. -Most recent estinate of Agricultural area used temporarily or peim- auxiliary personnel with training or experience. nently for crops, pastures. market & kitchen gardense or to Ies fallow. Pouainorhsital bed - Popul.tion divided by onber of hospital beads avial npb'lic adprivate general anid aperi1alisd boepital and GNP per capita (US$) - GNP per capita esttmates at currant market prices, rehabilitation center; sexcldes ours ing homs and ostablisamets for calculated by same conversion osthod as World Bank Atlas (1973-75 basia): cmstodial and Preventive cams. 1960; 1970 and 1975 data. Per capita supply of cal9riaa (Cl oafvraoirints -Computed fre anmrgy equivalent of t fond suplie aailable in country per capita par day; Population and'vital statistic, availsble supplies comprise domestic production, imports less e,ports * and Population (mid-veer nillion) As of July first: if not available, average changes L. stock; net supplies exclud animal feed, seeds, quantities ua.d of ro- end-year estimate; 11i60, 1970 and 1975 data, in food processing and losses in distribution; requirements were estimated by PAO based on physiological needs for normal activity mdhealth coasid- Population dous ity - Per square km - Hid-year populatimn per square kilinter aring envirmn~tal temeature, body weights, Aae and sex distributions of (100 hactares) of total area, Population, and allowing lOt for waste at household lavel. Population derniity - per square he of apric. land - Canputad as above for Per capita su~Ply Of roteIq fatrmw par day) - Protein content of per capita agricultural loand only. net supply of food per day; net supply of food is defined as above ; reqire- me.ts for all countrieseAnstablished by USDA Economic Research Services Vital statistics ~~~~~~~~~~~~~provide for a ainlinu allowensc of 60 grins of total protoin per day, end Cruebrhrae.rtosad,vrx - Annual live births per thousad of 20 granD of aninal and pulse protein, of witch 10 gris should be animal nid-year population; tan-year aritimatic averages ending In 1960 and 1970, protein: th"ea standards a"e Inca than those of 75 graws of total prataio and five-year "avrage ending in 1975 for most recent estimaite, and 23 grame of anmal protein as an aeaefor the world, propomed by F1.O Crude death rate per thousand. aver.x* - Annual d4aths per thousand of mid-year L. the Third World Food Survey. Population; ten-year aritheetic averages, ending in 1960 and 1970 and five- Per capita protein samply from animal and pulse - Protein supply of food year "avrage ending in 1975 for moet recent estimate, derived from animals and Pulses in grems per day. Inant mortality rats U/thou) A-Anual deaths of infants under one year of .ag Death rate (/thou) easa 1-4 - Annual deatho per thousand in Ago group i-4, per thousand live births. years, to children in this age group; suggested as am indicator of LifeT absctanc atbirth (yrs) - ovrsag masher of years of life ronseining at lmlntrition. birth; usuaflylytive-year averages ending in 1960, 1970 man 1975 for dwvelop- ing countries. Education Gross reproduction rate - Average number of live daughters a woman will hoar Adjustad enrollment ratio - primr school - Enrollment of all ~a as per- in her normal reproductive period if she experien:es present age-specific courage of primary school-age population; includes children ed 6-Il years fertility rates; usually five-year averages ending in 1960, 1970 and 1975 but edjusted for different lengths of primary education; for co,mtrias with for developing countries, universal education, enrollment nay exceed 1001 since msm, Pupils ea" below Population xrowth rate Cl) - totalI - Comspouod annual growth rates of mid-year or shove the official school age. population fur 1950-60, 1960-70 and 1970-75. Adiuated enol1osoL ratio - .econdary school - Computed as Above: seCcdary population growth rate Cl) - urban - Computed like growth rate of total education requires at least four years of approved primary instruction; population; different definitions of urban amrea my affect acomparability of provides general, vocational or teachebr training instructions for pupils data among co,astries. of 12 to 17 years of age; correspondence courses are generally excluded. uREL souloties lofttl - Ratio of urban to t.tal Population; different Yer fshoigpoie frradacon laea Is - Total years of deiitiem of urban arams may effect ccewebility of data ama comatrise. seheelih;~ atanyyLwl eaiml atmte be paeiuib ar c etely ildd Ans Structure isarcant) - Children (0-14 FeArs), costin-age (15-66 years), Vecaisa 0mrolaset of peconiary) - Vaeastimd nstio tutg ioes Lesl& and retired (65 years And over) as percetages of aid-years populti.on. teshaeial, industrial or Otter progmrn obich spe-ete iodepoeduacly or Age dependency ratio - Ratio of population under 15 and 65 and over to those depertmnts of secondary insrtrutions. of ages 15 through 64. Adult literacy rate Cl) - Literate adults (able C tored and -rits) as per- Ecconic dependency ratio - Ratio of population under 15 and 65 and over to cantags of total adult population aged 15 years and over. the labor force in age group of 15-64 years. Fenily Plening - acceptors (-l.olt iva. thou) - Cumulative number of acceptors Sa of birth-control devices under A uspices of national fanily plamning progran Persama per roon (urban) - Average number of persons per rooes in occupied since inception. Conventional dwellings is urban areso; dueling. exlude noo-pemenent Fanily planning - users C% of married women) - Percentage, of married -in of structures and unoccupied parts. child-bearing age (15-44 years) who use birth-control devices to all married Occupied dweltinam without pipud watr Cl) - Occupied convaenional& dwellings .coane in sanse .Ag group. in urban and rural areas without inside or outside piped water facilities An, percentage of all occupied dwellings. Emplyownnt 1&caaa to elactricity C%. of all dwllin.a) - Conweati-eal diniliz,gs with Total labor force (tho-us And) - Econaically estiv persona, including armed electricity in living quartws as percent of total 4kllinag is ceba nod forces And unemployed hut secluding housewives, students, etc.; definitions mrus *area. In various countries are mat comparable. tural dwellina comAected to electricity Cl) - Comp~ d as soe for rural Labor force in agtriculture, C%) - Agricultural labor force (is faming, forestry, dwellings only. htinting and fishing) as percentage of total labor force. lnmaploved Cl of labor force) - Ulameloyed are usually defimad as perona who Causmot _In Are able And willing to take a job, out of a job on a given day, reimand out Radio receivers (per thou poo) - All typem of receivere for radio broadcAtst of a job, and seeking cork f or a specifiad minissom period not exceeding one to general public per thousand of population; excluwteemlicessed receivers week; may not be canparable between countries due to different definitions in countries and in years sties registration of radio snaftw in erffect; of unasployad and s ource of data, e.g., smployment offica tattietics, sample data for recent years may not be comparable since moat eonntwfee sholiahd surveys, compulsory unonplayment ineurance. 1mon tog. lasseegoer cern (per thou pM) - Passenger car ecmprise mocr sas searting 10cma distributio - Percentage of private income (both in cash And kind) less than eight Persons; excludes, Ambulances, hearses and military received by richest 57., richest 201, poorest 207., snd poorest 407. Of honse- vehicles. holds. Electrictity (bewh/r pear cap) - Annual conausption of indistrial, commercial, public and Private electricity in kilowett hours per capita, gnrally Distribution of land ownrerhip - Percentages of lend owned by wealthiest 107. based on production data, without allowance, for losses in Snide but ellow- end poorest 107. of lend Owners, Log f or Imports sod exports of electricity. tNeomrint fka/vr Per cap) - Per capita Annual consumption in kilogrome Realm and gutrition estimated from domestic production plus met imports of agrpcist. puplatom er bgiien- Population divided by sumbor of practicing pylicions qualified freem a medical school at univrerity level.  PFe. 3 of 3 peps ECONOMIC INDICATORS (% and in GROSS NATIONAL PRODUCT IN 1975 ANNUAL RATE OF GROWTH -- constant prices) US$ Mln. % of GNP 1961-65 1966-70 1971-75 GNP at Market Prices 24,900 100 9.0 7.7 I" 11.3 Gross Fixed Dbzestic Investment 7,560 30 11.3 2/ 11.2 21 11.2 Exports of Goods 5,341 21.4 9.0 - 10.9 2 23.6 2 Imports of Goods 5,342 21.4 10.7 12.7 - 22:3 - LABOR FORCE IN 1975 GOVERNMENT FINANCE Mln. % General Government (lei bill.) % of GDY 3/ Agriculture 3.9 38 1975 1975 Industry 4.0 40 Services 2.3 22 Total Receipts 238.6 47.9 Total Expenditure 236.2 47.4 Total Surplus 2.4 0.5 RETAIL PRICES 1971 1972 1973 1974 1975 (1966 - 100) 101.6 101.6 102.4 103.7 103.9 BALANCE OF PAYMENTS (Mln. US$) 1971 1972 1973 1974 1975 MERCHANDISE EXPORTS 1975 Exports of goods 2,102 2,884 3,667 4,858 5,341 Imports of goods 2,102 2,910 3,424 5,049 5,342 US$ Hln. _ Trade balance 0 -26 +243 -191 -1 Capital goods 1,351 25 Net Services -23 -31 -107 -168 -134 Consumer goods 860 16 Foodstuffs 566 11 Balance on goods Intermediate goods 577 11 and services -23 -60 +136 -359 -135 Raw materials 1,986 38 Industrial 1,682 32 Net MLT Capital 5 24 83 643 437 Agricultural 304 6 Disbursements 350 516 589 1,055 817 Amortization -345 -492 -506 412 380 Total 5,341 100 Residual Balance -18 -36 +219 +284 +302 RATE OF EXCHANGE EXTERNAL DEBT. Dec. 31. 1976 Official Rate: Tourist Rate: US$ Hln. Total 3,095 US$ 1.00 - lei 4.97 US$ 1.00 - Lei 12.00 of which convertibre Leu 1.00 - US$ 0.20 Leu 1.00 = US$ 0.08 currencies 3,023 Official Trading Rate: DEBT SERVICE RATIO FOR 1976 (Est.) a- US$ 1.00 - Lei 20 Convertible currencies only 19.0 Leu 1.00 - US$ 0.05 1/ Net National Income 2/ Current Prices -3/ Gross Domestic Income 3/ Gross Domestic Income Country Programs Department 1 Europe, Middle East and North AfriOs Region May 18; 197T  ANNEX II Page 1 of 4 pages STATUS OF BANK GROUP OPERATIONS IN ROIMANIA A. STATEMENT OF BANK LOANS (As of April 30, 1977) Amount in $ millions Loan Less Cancellations Number Year Borrower Purpose Bank IDA Undisbursed Ln. 1020-RO 1974 Investment Fertilizer 60.0 - 37.0 Bank Ln. 1027-RO 1975 Investment Special 70.0 - 63.7 Bank Steel Ln. 1028-Ro 1975 Investment Thermal 60.0 - 18.0 Bank Power Ln. 1082-RO 1975 BAFI 1/ Irrigation 70.0 - 22.5 Ln. 1083-RO 1975 BAFI Agricultural 30.0 - 15.8 Credit Ln. 1169-RQ 1976 BAFI Flood 40.0 - 3.6 Recovery Ln. 1170-RO 1976 Investment Flood 20.0 - 1.9 Bank Recovery Ln. 1242-RE 1976 Investment Hydropower 50.0 - 46.4 Bank Ln. 1247-RO 1976 BAFI Irrigation 60.0 - 59.5 Ln. 1368-RO 2/ 1977 BAFI Irrigation 60.0 - 60.0 Total 520.0 4/ 328.4 of which has been repaid _ Total now outstanding 520.0 Amount sold 1.6 - of which repaid 0.0 1.6 Total now held by Bank 3/ 518.4 Total undisbursed 328.4 - 328.4 1/ Bank for Agriculture and Food Industry 2/ Not yet effective. 3/ Excluding exchange adJustments 1 Excludes proposed loans for the Brasov Bearings Project ($38 million) and Cimpulung Polyster Project ($50 million).  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. After a slow start, due mainly to the change of site, lack of familiarity with Bank procurement procedures, and the floods of spring 1975, the project is now proceeding satisfactorily. 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 has begun. 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. Financial performance has been satis- factory despite a reduction in energy sales growth in response to energy conservation measures. Ln No. 1082 Giurgiu-Razmiresti Irrigation Project; US$70 million Loan of February 6, 1975; Effective Date: May 5, 1975; Closing Date: December 31, 1978. Construction of project works is progressing satisfactorily and about 60 percent of the project has been completed more or less on schedule. International procurement was delayed initially by the Romanians' lack of familiarity with international bidding procedures required by the Bank, and by a delay in appointing consultants to assist with this work. All contracts have now been awarded. The project is expected to be completed by October 1977, ahead of the December 1977 schedule anticipated at the time of appraisal.  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 of the project is satisfactory. Contracts for chemicals were not awarded after international competitive bidding because the Romanians judged all bid prices to be too high; the Bank has advised the Romanians that Bank financing for these items would be possible only if the contracts were retendered. The Bank has concurred in the award of a contract for technical know-how and for supplying equipment for the premix feed mill as recommended by the Romanians. 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 early warning system equipment and bid evalua- tion is in progress. 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 the 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 has been extended from March 31 to September 1, 1977 to permit full disbursement of the loan. 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. Commitments concerning some 73 percent of the loan amount have been made and although disbursements are delayed they are expected to catch up by mid 1977. 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. Advertisement for international competitive bidding has been com- pleted and the Bank has approved tender documents. Bids for virtually all items have already been opened, and bid evaluation reports are expected to be submitted for IBRD review during the spring of 1977.  ANNEX II Page 4 of 4 pages Ln No. 1368 Ialomita-Calmatui Irrigation Project; $60 million of March 2, 1977; Closing Date: June 30, 1982. Loan documents were signed on March 2, 1977 and the deadline for effectiveness is June 2, 1977. Tender documents for this project were combined with those for the Rasova-Vederoasa Irrigation and Agricultural Development Project (Loan No. 1247) and have been approved by the Bank. Bids for virtually all items have been opened, and bid evaluation reports are expected to be sub- mitted for IBRD review during the spring of 1977.  ANNEX III ROMANIA BUCHAREST GLASS FIBER PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Project identified by the Bank: April 1976 (b) Time taken by the country to prepare the project: 2 1/2 years (c) Agency which prepared the project: Ministry of Light Industry (d) Date of departure of Appraisal Mission: November 8, 1976 (e) Date of completion of negotiations: April 7, 1977 (f) Planned date of Loan effectiveness: About August 2, 1977 Section II: Special Bank Implementation Actions None. Section III: Special Conditions (a) The project enterprise will submit to the Bank by December 31, 1977 a detailed training program that is acceptable to the Bank (paragraph 45). (b) The project enterprise will operate the pollution control facilities of the plant with due regard to ecological, environmental and workers safety considerations (paragraph 51).  \< U. S. S. R. tt SOCIALIST REPUBLIC OF ROMANIA ,0 gAN