Turkey - Second Phase-Out of Ozone Depleting Substances Project

*M(?NTREAL /'4-'S "-' PROTOCOL .* _ .-. , ' TURKEY -. OZONE PROJECTS TRUST FUND GRANT PHASEOUT OF OZONE-DEPLETING SUBSTANCES (ODS PHASEOUT 2) PROJECT INFORMATION DOCUMENT NOVEMBER 1995 THE WORLD BANK GLOBAL ENVIRONMENT COORDINATION DIVISION ENVIRONMENT DEPARTMENT  14455-TU TURKEY OZONE PROJECTS TRUST FUND GRANT PHASEOUT OF OZONE-DEPLETING SUBSTANCES (ODS PHASEOUT 2) PROJECT INFORMATION DOCUMENT NOVEMBER 1995  1 TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PROJECT Grant and Project Summary Recipient: Republic of Turkey Beneficiaries: Private Sector Enterprises Amount: US$14 million Financial Intermediary: Technology Development Foundation (TIF Terms: (a) Grant to Republic of Turkey, which will pass it on to TDF on grant basis; and (b) TDF will provide funds to beneficiary enterprises as follows: Refrigeration Sector Funding would be provided on a loan basis except for technical assistance, prototype and testing and safety related investments which would be provided on grant basis. Other Sectors: Funding up to a maximum of US$05 million equivalent would be provided on grant basis and the balance on loan basis. The loan would be denominated in US Dollars with zero interest and payable in four to six equal semi-annual installments, commencing after a grace period not extending beyond sub-project completion. Project Costs and Fiancing Plan: (1995-1998; US$ Million) Description Project Cost Financing l OTF Enterprises Total A. Prepared Projects 10.10 540 4.70 10.10 of which: investment 5.90 2.90 3.00 5.90 recurring 4.20 2.50 1.70 4.20 B. New Projects 14.00( 8.20 5.80 14.00 C. Financial Agency Fee 0.40 0.40 - 0.40 Total 24.50 14.0 10.50 24.50 Project ID: TR-MT-38404 EIRR: N/A Map: N/A  2 OZONE PROJECTS TRUST FUNDS GRANT REPUBLIC OF TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PROJECT Country/Sector Background 1. Al ODSs utilized in Turkey are imported, with cdnsumption of about 6286 tons (equivalent to about 5030 ODP tons1) in 1993. The primary uses of ODSs were for refrigerants (22 percent), refrigerator and polyurethane feams (48 percent), and solvents (22 percent). There are five large domestic and comrnercial refrigerator manufactrers who account for over one-half of ODS consumption in Turkey. There are an estimated 1500 workshops for servicing refrigerators, about 1200 of which are manufacurer- authorized workshops and the remainder independently owned. In addition to the refiigerator manufacturers who produce tlheir own requirement of rigid foams, there are four large and over ffty snall to medium producers of rigid foams used in building insulation. Flexible foamns for seating and furnishing applications are produced by ten large and a number of small to mnedium firms. A variety of solvents are used for diverse applications across the industry. The highest ODP is associated with the ODSs used in the refrigeration and foam sectors. Turk-ey's consumption of ODSs for the period 1986 to 1993 and a list of large enterprises in the various sectors are provided in Annex 1. 2. The use of aerosols has been almost completely phased out, largely due to industry initiatives tak-en im response to market forces. ODS usage in other sectors, particularly refrigeration and foams, has contmued to increase due to expanding domestic markets. The exports of refrigerators and building insulation foams has also increased over the past few years. In the short- to medimn-tmn, most western European nations will ban imports of products containing ODSs, as well as impors and exports of ODSs themselves. If measures to encourage adoption of non-ODS technologies are not implemented soon, Turish industies in the refrigeration, foams and solvents sectors will not be able to continue wit production due to shortages or lack of supply of ODSs, and the country will lose export markets and earnings. 3. The Goverment of Turkey (GOT) has already taken significant steps toward the phaseout of ODSs. Prior to ratifying the Montreal Protocol on September 20, 1991, Turkey passed the entire text of the Protocol as law. Although it qualifies under paragraph 1 of Article 5 of the Protoeol for a ten year period to phaseout the use of ODSs, GOT has opted for an accelerated program aimed at phasing out usage of these substances, except for recharging, by 1998. ODSs used for recharging refrigerators and other appliances are to be phased out by 2007. GOT is taking steps to develop a regulatory framework which identifies specific policy and regulatory measures needed to achieve ODS phaseoul Strategy for ODS Phaseout 4. GOT developed a straegy for the phaseout of ODSs as part of the Country Program in 1992, with the assistance of fte Wodd Banlt The strategy, which is outlined in Annex 2, calls for policy actions and investments, including a public awareness campaign, to achieve the effective phaseout of ODSs. I ODP tons are weighted according to the Ozone Depleting Potential (ODP) of each substance.  3 Policy Actions 5. The ODS phaseout strategy calls for the establishment of a policy and regulatory framework to support the phaseout of ODSs in Turkey. Specific regulatory measures contemplated under the stmtegy include, inter alia: * establishing ODS import monitoring procedures to account for all ODS usage and track ODS consumption; * developing a licensing program to control ODS imports, encourage environmentally responsible handling practices, and restrict distribution of ODSs to qualified users; and * introducing levies on ODSs to encourage the adoption of non-ODS technologies and developing a timetabie for the implementation of bans on certain ODSs. 6. The development of policy actions under the ODS phaseout strategy is the responsibility of the Ministry of Environment (MOE), whose jurisdiction includes legislation, policy development, and ensuring the enforcement of environmental protection activities. Responsibility for the day-to-day implementation and enforcement of environmental regulations lies at the regional level, under the supervision of the provincial governors. The MOEs specific duties related to the Ozone Issue are to supervise and coordinate international and national activities related to the Montreal Protocol and to enforce the Governments action plan for the Phaseout of ODSs. The identification and implementation of certain policy measures required to achieve ODS phaseout, including bans, levies, and licensing, requires coordination between the MOE and other Govemrment agencies, such as the Ministry of Fnance and the Customs Department in the Ministry of Foreign Trade. The institutions in the Govemment and in the private sector that have an interest in the Ozone Issue are described in Annex 3. 7. MOE has established an Ozone Panel to advise on ozone-related matters, including the policy measures needed to facilitate the accelerated phaseout of ODSs. The panel comprises representatives from the Goverment, the private sector, the scientific community and international experts in ODS phaseout. The Ozone Panel will meet twice a year for 2-3 years, a preliminary meeting of which was held in August 1994, and the first formal meeting was held on March 31, 1995. The Government has also set up a sub- comnittee of the Ozone Panel consisfing of representatives from the Ministries of Fmance, Environment, Industry & Trade and Customs Department to review policy and regulatory options and ilitate implementation by early 1996. Investments for non-ODS Technologies 8. The adoption of non-ODS technologies by enterpnses involves converting and/or replacing existing production equipment and processes. Investments would also be needed for converting service facilities to handle non-ODS substances, especially for refrigerator and freezer servicing, and recovery and recycling of ODSs. Commercialy provei alterative non-ODS technologies are available for enterprises in the refrigeration, foarn, solvents and aerosoi sectors. In view of the large consumption of ODSs and their high ODP. the refrigeration wnd foam sectors would be targeted for priority phaseout under the strategy. Phaseout ot J3DSb in the refrigeration sector is already underway, with four of the principal manufactuers at advanced stges of conversion, with assistance from the Bank. Conversion in the foam sector has been initiated under a project financed by the IFC. Some enterprises in the solvents sector (e.g. Netas, the Turlksh partner of Northern Telecom) have converted to non-ODS technologies, thereby setting a trend. The use of aerosols h4s been completely phased out largely due to the favorable cost benefits of conversion to non-ODS technologies. Since the incremental costs of conversion in the other sectors are considerable, financial incentives would be necessary to support accelerated phaseout. GOT intends to provide grants and/or similar financing to enterprises proposing to convert to non-ODS technologies.  4 9. The Technology Development Foundation (TDF) will be responsible for identifying eligible investments; it has hired a consulting firm to assist in identifying ODS users in each sector. TDF will work directly with large enterprises in each sector to identify investments needed to achieve ODS phaseout, and will work closely with KOSGEB, the Ministry of Industry's development organization for small and medium industries, to identify investments in srmall and medium enterprises. KOSGEB, which was established in 1990 to provide technical and management support to srall and nedium enterprises, has 30 extension service centers located in cities and townships where such enterprises are concentrated. TDF proposes to develop demonstration projects and disseminate information through seminars and workshops, especially for small and mcdium enterprises. Ozone Awareness Campaign 10. MOE will undertake a promotional campaign to support the implementation of Country Program for ODS phaseout. The campaign will communicate the importance of ODS phaseout to industry and the general public and the Govemrnent's programs for achieving this objective. Methods for public outreach will include a spot film for broadcast on television, brochures, posters, billboards, and newspaper advertisements. MOE is in the process of recruiting consultants to assist in the development and managennt of the awareness campaign. which is expected to be launched by the end of 1995. Assessment of Government's Strategy 11. The GovernmenCs strategy for ODS phaseout, which has been reviewed and approved by the Montreal Protocol Executive Conmittee (MPEC), is satisfactory. Concerted actions, including the development of an ozone awareness campaign, the implementation of monitoring and regulatory measures, institutional and management strengthening of MOE and TDF, and the provision of soft financing to industry for investments in ODS phaseout activities, will synergistically support imnplementation of the strategy. In particular, the approach to developing industry-government and intra-govemrnment consensus through the Ozone Panel will facilitate snooth implementation of specific policy and regulatory measures. Turkey is expected to be a fore-runner among the Article 5 countries of the Montreal Protocol in the adoption of policy and regulatory measures to support ODS phaseout. Such measures have been succesfully adopted by westem European and other advanced countries. The progress nude by MOE is satisfactory and the development and implementation of a monitoring and regulatory framework by early 1996 is feasible. 12. The priority phaseout of ODSs in refrigeration, to be followed by foams, solvents and other sectors, is consistent with the sectal consumption of such substances, and the approach to target large users in each sector is cost effective and would also help set the trend in each sector. The progress already made in conversion to non-ODS technologies by Lhe four large enterprises in the refrigeration sector, initiation of phaseout activities in large entexprises in the foams and solvents sectors and the phaseout achieved in the aerosol sector indicate the momentum already gained for ODS phaseouL The proposed plan to involve KOSGEB to taget small and medium enterprises will help u2ilize established networks and will enable adoption of selected cost-efficient technologies by groups of enterprises using similar substances in their productionlprocessing. The involvement of TDF would provide the necessary admuinistrative framework to facilitate identification and implementation of investments for technology conversion. Therefore, the targetd phaseout of ODSs by 1998, except for recharging is feasible under the government's strategy. Project Setting 13. The implementation of the strategy has already started and is being supported through an OTF grant of US$6.165 million approved in January 1994 for the first Phaseout of Ozone Depleting Substances (PODSI) Project (OTF Grant No. 021934). The PODS-I project supports institutional and management strengthening of the MOE including setting up the Ozone Pane, implementing an ODS monitoring framework, promnoting ozone awareness, and preparing a framework for the regulation of ODSs in the  5 future; conversion to nonl-ODS technologies at Turkey's largest domestic refrigerator manufactuwir, Arcelik A.S.; and idrntificauion and preparation of additional projects for ODS phase-out, The MOE, Arcelik A.S. and the 'rDF are, respectively, responsible for implermntation of the three components. Overall project implemrentation of PODS-I has been satisfactory and Arcelik is expected to complete its project ahead of schedule. 14. Following the successful launching of the PODS-I projec4 and ih light of the progress made by Arcelik in conversion to non-ODS technologies, three other refrigerator manufacturers-PEG Profilo, Kliniasani, and Pekel Teknik--submitted their proposals to the Bank for financial assistance. The propusals. which were appmised by TDF, have been reviewed by the Bank and the MPEC. The proposals of Peg Profilo and Kliumasan have been approved by the MPEC; Pekel's revised proposal has been submitted to MPEC for formal apprwal at its July 1995 meeting. Summanes of these project proposals are included in Annex 4. It is expected that, with TDFs support and active sulicitation, other private sector enterprises wouki prepare proposals for funding over the next 2-3 years. 15. The proposed project is consistent with Turkey's strategy for the Phaseout of ODSs, would build on the progress made under PODS-L and would extend coverage by supporlting additional private sector enterprises in phasing out their use of ODSs. Project Objectives 16. The objective of this Project is to assist GOT in ensuring that ODS-using industries in Turkey effectively and efficiently phaseout ODS usage through the adoption of non-ODS technologies. The policy and regulatory measures will also be monitored as agred under the PODS-I project The phaseout is to be effected in conql)iance with the Protocol, as ratified by the Republic of Turkey, and in accordance with the recommended ODS phaseout strategy and action plan outlined in the Country Program. Project Description 17. The proposed Project would provide financial assistance to enterprises in all sectors for adoption of non-ODS technologies. Eligible investment costs and recurring costs would be financed in accordance with prevailing MEC guidelines. Investment costs include manufactuning and processing equipments, prototyping & tesdng, safety equipments for handling hazardous substances such as cyclopentane, and technology transfer and safety training. Recuning costs cover incremertal operating costs arising from the technology conversion; the amount of recurring costs eligible for financing depends on the sector and would be determined in each case at the time of sub-project agreemenL Sub-projects in the refrigeration sector involve both investment and recurring costs, while those in the other sectors prinarily involve investment costs. 18. Funding assistance would be proportional to the Turkish ownership in the sponsoring enterprise and would also be adjusted downward corresponding to the enterprise's exports to non-Article 5 countries, if any, as per MPEC guidelines. The strategy identifies priority sectors; in addition, the cost effectiveness of ODS phaseout (eligible amount of OTF assistance divided by amount of ODSs phased out per annum) would be used to rank sub-projects for financing in each sector. 19. TDF is currently developing sub-projects for assistance to large enterprises in each sector. Based on the number of large enterprises in each sector and their ODS consurnption, the mission estimates US$12.0 million would be needed to finance about four large enterpises in the refrigeration sector and six to eight in the foams and solvents sectors; and some US$1.5 million would be required to finance investments for small and medium enterprises. A Trust Fund Grant of US$14 million from the Multilateral Fund of the MP, including a financial agent fee of 3 percent to be retained by TDF, is thus proposed. Funds will be used to finance all eligible incremental project costs for conversion to non-ODS technologies, including recurrent costs.  6 Project Costs and Financine 20. Project costs consist of the incremental investment and recunring costs incurred in ODS phaseout activities. Detailed costs for new sub-projects would be determined as proposals are deve-loped. Cost estimates of most of the equipment will be assessed against quotations from major suppliers and/or against costs of similar equipment in other sub-projects and countries. Allowance of about 15 percent would be made for physical and price contingencies. Cost estirmates for consultancy services would be based on average costs, including consultant fees, transportation, living expenses, etc. Incremental recurring costs would be reviewed one year after commencing production. Estimated project costs and proposed financing plan are summarized in Schedule A. The Implementing Agency - TDF 21. The TDF was established in 1991 as part of Turkey's Technology Development Project (Ln. 3296- TU), cofinanced by GOT, private sector investors, the World Bank and other Development Banks. The foundation has an executive conunittee consisting of private sector representatives and has the mandate to fund activities on the basis of grants, income notes, and conditional loans that match private sector contributions. TDF has established an institutional framework for soliciting, selecting and monitoring the implementation of technology projects. It has helped promote public and private sector cooperation in applied research and development and has been able to develop a network of outside experts and consultants for carrying out its work 22. TDFs institutional background, role and responsibilities in ODS phaseout are provided in Annex 5. TDF currently has eight professional and three support staff, including two computer analysts. TDF has established a small PODS Group in its Secretariat, comprising a Project Coordinator (an environmental engineer with five yearst experience in the mranagement and coordination of research projects) and a computer analyst to administer the PODS-I project. The TDF would assist enterprises in the preparation of funding proposals and the Bank will review the proposals after appraisal and evaluation by TDF in accordance with Montreal Protocol guidelines. TDFs main responsibilities include: * reviewing each sub-project's eligibility under the MP, its conformity with the priority set in the Country Program in terms both of the quantity of ODS it helps to phaseout and cost effectiveness; and * carrying out a detailed environmental analysis and technical and financial appraisals of each sub-project for approval by the Bank and/or the MPECG A schematic plan of how these tasks will be caried out by TDF is given in Annex 5. TDF wiil cruit consultants to provide sector-specific assistance in conducting workshops, develop demonstration projects, and appraise sub-projects for ODS phase-out. The terms of reference for these consultancies Munl be reviewed by the Bank. Grant assistance of US$0.5 million has been provided under the PODS-I project to enable TDF to carry out these tasks. As TDFs responsibilities will expand to include monitoring and supervision of sub-project implementation under the proposed Project, TDF proposes to add up to two more professionals and two support staff to the PODS Group gradually in line with the increasing workload. TDF will also recruit consultants to assist in supervision of sub-projects TDF will finance these activities from the finacial agency fee to be provided under the proposed Project TDFs operating budget for the 1994-98 period (Annex 5) is based on its experience gained under the PODS-I and Technology Development Projects and is adequate to carry out the required tasks under PODS-IL TDF would appraise sub-projects in accordance with MPEC guidelines, recommend sub-projects to the Bank for financing in accordance with Country Prugram priority and cost effectiveness, and ensure sub-project implementation in a manner satisfactory to the Bank. TDFs work program will be reviewed by the Bank by June 3,1996.  7 Project Implementation 23. The private sector enterprises proposing to convert to non-ODS technologies would be responsible for implementation of the respective investments (sub-projects). TDF will serve as the financial intermediary and will be responsible for preparation, appraisal and supervision of sub-projects. The MOE will develop the policy and regulatory measures for ODS phaseout and will ensure the enforcemnent of other relevant regulations. The implementation arrangements, issues and actions to be agreed are described below: Terms of Financing to Beneficiary Enterprises 24. The grant funds to be made available to TDF will be provided to enterprises on the following terms: (a) for enterprises in the refrigeration sector, funds will be provided on a soft loan basis except for safety equipments. prototyping and testing and technical assistance; and (b) enterprises in other sectors, financing of up to US$0.5 million would be on grant basis and the balance would be on soft-loan basis. The soft-loan terms would be a zero percent dollar denominated loan with repayment over 2-3 years, commencing after a grace period not extending beyond sub-project completion. The three enterprises in the refrigeration sector have agreed with the above terms and other enterprises in contact with the TDF are aware of the terms of financial supporL These terms would facilitate the financing for additional ODS projects through a revolving fund while at the same time providing grant financing to small and medium scale industries to ensure that they undertake the needed adjustments at minimal cost to them. The enterprises will repay the loans into d'e revolving fund set up by the TDF under PODS-I to support ftimre ODS phaseout activides. Cost Sharing by Enterprises 25. Funding support for each sub-project is determined based on foreign ownership of the enterprise and its exports to non-article 5 countries in accordance with prevailing NIP guidelines (twpra 19). Sub-projects would, therefore, have different proportions of incremental project costs supported from the TIF and the balance of expenditures would be financed by the beneficiary enterprises. In order to ensure counterpart funding and implementation of all components of the sub-project, funding from OTF and from the enterprise for each contract would be agreed between TDF and the enterprise based on project costs and amount of OTF financing for each sub-project and would be set in the respective Sub-project Ageement between the TDF and the beneficiary enterprise which would be reviewed and approved by the Bank Further, TDF would ensure in each case that the balance of expenditures, including any cost overruns, will be financed out of the respective enterprise's own resources. Procurement Arrangements 26. Procurement of goods under the sub-projects would be in accordance with Bank Guidelines (January 1995) for intermediation loans which permiit the use of standard and acceptable commercial practices. Due to their specialized nature and new technologies, most items would be purchased from foreign sources. Enterprises with foreign licensing and/or partners are likely to procure from sources or suppliers reconmmended by them which is considered as sole soure procurement In view of the significant technical and other support that could be obtained from the foreign partner, this is acceptable. International Competitive Bidding (ICB) procedures would be followed for procurement of items exceeding US$0.7 rrillion equivalent. For ICB procurement, the enterprises would use the Bank's Standard Bidding Documents. All procurement involving sole source and those exceeding UTS$0.7 million equivalent would be subject to prior review and approval by the Bank. Also. selective post review of awarded contracts would be made during project supervision. As regards consultancy services, only those approved by the MPEC as part of the subprojects would be financed under the Project. Consultancy services would be needed for technology tansfer, supervision and training under subprojects which are expected to be procured both as part of the related goods/works contract and as separate contracts when necessary. Consultancy services will be procured in accordance with Bank Guidelines for Use of Consultants (August  8 1981). All terms of reference would be reviewed by the Bank and consultancy services above US$50,000 would be subject to prior review procedures of the Bank. Retroactive Financing 27. PEG Profilo and Pekel Teknik have nearly completed conversion to non-ODS technologies and Klimasan has only to complete the cyclopentane handling system. In accordance with Montreal Protocol guidelines, retroactive financing is available to cover eligible incremental costs. The three enterprises have procured goods and services under their respective subprojects valtued at about US$5.5 million through a total of 41 contracts, the tctal eligible OTF financing for which is estimated to be about US$2.5 million equivalent. Therefore, retroactive financing of up to US$2.5 million equivalent would be provided for procurement of goods and services which has occurred before October 15, 1995, the expected signing of the proposed Grant. Contract sizes va;y from US$25,000 for small items to US$900,000 for foam insulation system. The enterprises obtained muitiple quotations from intemational suppliers for most items aid from local suppliers where available. Certain proprietary items have been procured on sole source basis. The mission has reviewed the procurement documents (invoices, internal evaluation and contracts). Justification for sole source. and iinal contracts would be reviewed and payments to contractors would be verified before disbursement. Disbursenents, Accounts and Audit 28. The OTF funds would be disbursed through the TDF. Funds would be disbursed against 100percent of cif costs of imported goods, of ex-factory costs of domestically mnufactured goods, and of the cost of technical assistance, and 85 percent locally procured items, subject to a maximum of the approved amount for each contract (para 26). Allocation of funds to different disbursement categories and an estimated schedule are provided in Schedule B. A special account with an initial deposit of US$0.5 million would be established at the Central/Commercial Bank on terms and conditions satisfactory to the Bank, and would be increased lip to US$1.0 mnillion when disbursements reach US$4.0 million. Request for replenishment of the special accoumt would be submitted on a quarterly basis, or when the balance of the special account is one half of the special account deposit, whichever occurs first. In addition to the evidence of paynments, each replenishment application would be supported by monthly bank statements of the special account which have been reconciled by TDF. All other applications for direct payments or special commitments would be for an amount not less than 20 percent of the special account deposit. The use of statement of expenditures would also be permnitted on contracts valued at US$50,0C0 or less to facilitate timely payments to contractors. The TDF would retain the supporting documents and make them available for inspetion by Bank supervision mission and by external auditors. The Grant closing date would be June 30, 1999. The Govemment would submit audit reports of the Special Account, including statement of expenditures, within six months after the end of the financial year. TDF would submnit audit reports of its financial accounts within six months after the end of its financial year. Legal and Administrative Framework 29. In order to encourage sector-wide operation and to ensure implementation without delay, a Grant Agreement between the Bank and GOT will provide an 'umbrella' fiework for the Project GOT would makre available OTF grant funds to TDF which would in tun provide the fumding and other support to beneficiary enterprises for ODS phaseout activities on agreed terms (para 25). All sub-project proposals for funding support under the Project would be reviewed and approved by the Bank. Further, proposals exceeding US$0-5 million in financial support would be submitted to MPEC for review and approval. TDFs role and responsibilities would be set forth in the Project Agreement between the Bank and the TDF, while sub-project implementation arrangements would be set forth in the Sub-project Agreements between 2In accordacLce with BP 10.21 (Annex F) dated April 25, 1995.  9 the TDF and each beneficiary enterprise. The Government and TDF have agreed to the proposed legal and administrative framework. The agreement between the Government and TDF spelling out, inter alia, the respective roles and obligations satisfactory to the Bank, is a condition of effectiveness of the proposed Grant. ODS Policy and Regulatory Framework 30. Government actions concerning development and implementation of an appropriate ODS policy and regulatory framework consistent with the strategy for ODS phaseout has been agreed under the PODS-] project. Also, US$0.3 million are provided under PODS-I for technical assistance to the Ministry of Environment for institutional and management strengthening, ozone awareness campaign and ODS monitoring and regulatory framnework development. The MOE has developed a monitoring program to track ODS imports and has made satisfactory progress as agreed. The MOE will rely on the ozone panel and its sub-committee (para 8) for developing stakeholder consensus on policy and regulatory measures. MOE has recruited consultants to assist in preparing a policy and regulatory action program which is expected to include, inter alia, measures for monitoring ODS usage, licensing ODS users, and other policy measures to support ODS phaseout. The Government wiDl develop a detailed proposal describing this action program for discussion with the Bank by December 31, 1995 and has agreed to implement an agreed action program by June 30, 1996. Project Monitoring and Supervision 31. The primary responsibility for monitoring and supervision would lie with the TDF, which will closely monitor the implementation of the sub-projects. TDFs activities would be supervised by the Bank and TDF would furnish quarterly progress reports with format and contents satisfactory to the Bank. Govemment actions regarding policy and regulatory framework will be monitored by the Bank as agreed under the PODS-I project. The Project closing date would be December 31, 1998. The success of the Project will be judged by the extent to which it fuifills, efficiently and effectively, the strategy outlined in the Country Program, the amounts of ODSs phased out, and the cost effectiveness of such phaseout. Project Sustainability 32. The primary purpose of the OTE is to provide a financial incentive to facilitate ODS phaseout by compensating beneficiaries for incremental costs incurred as a result of converdng to non-ODS technologies. In addition, the Fund aims to ensure that beneficiary nations achieve phase-out without impairing their industrial development processes. The assistance provided to Turkish industry through the project would help to ensure that the accelerated scenario of phaseout is achieved, and would permit the sector to remain competitive on the international market as demand for non-ODS products increases and the market for ODS-based technologies contracts. Lessons From Bank Projects 33. Turkey's first ODS Phaseout Project is currently under implementation, and the institutional arrangements established for this project provide a framework within which the proposed umbrella project will be implemented. Implementation has been satisfactory, although the MOE encountered some initial delays in executing its component- The Technology Development Project (In.3296-TU) currently under implementation has also provided lessons relevant to the design of ODS Phaseout Projects in Turky. The fTDF is fully functional and has successfully promoted public-private cooperation in applied research and development. Under thre project, TDF has successfully established an institutional framework for developing and implementing projects.  10 Ratlonale for Fuunding from the Montreal Protocol MultIlateral Fund 34. In the short term, conversion of munufacturing processes to non-ODS technologies does not provide a competitive advantage to participaling industries, nor does It lend to Increased production quantities. As a result, witliout the grant and coneqsslonal funding prosided by the 07F. there is little incentive for industries to convert to non-ODS technologies. Provision of funding through the OTP will encourage effective and efficient conversion to non-ODS technologies in Turkey's industrial sector. Project Benerl1s 35. 1'he major benefit of this project is the accelerated phaseout of ODS usage in mfanufacturing processes, and the elimination of ODS leakage during maini'mance procedures. In addition, the project will ensure that Turkey maintains Lhe capacity to export iroducts as the ban on ODS-based technologies comes into effect. Rik 36. There are no signiricant technical risks, since only technologies which have already been proven through application in the industry would be supported. Expanding the project to cover all sectors would eliminate any economic risks faced by the portion of the sector not covered in the initial investment. TDF would have to rely on consultants as it does not have in-house expertise to cary out full scale appraisal of sub-projects which poses a riskl to timely implementation; however, the on-going assistance and institutional strengthening which the Bank is providing to the TDF through the Technology Developnent Project should mitigate such risks. Environmental Aspects 37. The elimination of ODS consumption is the primary objective of this project, and as such the project provides significant environmental benefits. There are no major environmnental concerns associated with the installation or operation of the non-ODS technologies, but the flammability of cyclopentane requires that adequate safeguards be in place for this phase of manufacturing. Installation of safety equipment and establishment of procedures to ensure the proper handling of cyclopentane will be required for sub-projects using this substance. Every sub-project proposal will be subject to an environmental analysis, conducted by experts approved by the Bank, which will be fully integrated into sub-project preparation and appraisal. Enterprise obligations to implement recommended environrental and safety measures will be set out in the sub-project agreement, compliance with which would be monitored by the TDF. Also, regulations are in place for the control of hazardous substances and for occupational safety and health, and GOT has agreed to inspect sub-project enterprises on a yearly basis to ensure compliance with applicable regulations. The Project is classified as a Category B in accordance with OD 4.01. Agreed Actions 38. The following agreements were reached with the Government. The Government to: (a) develop a detailed proposal describing policy and regulatory alternatives and providing recommendations for acdon by December 31, 1995 and implement the agreed recommendations by June 30, 1996; (b) ensure inspection of sub-project enterprises on a yearly basis for compliance with applicable environmental and safety regulations; and (c) have the special account and statement of expenditures audited by independent auditors and submit the audit report to the Bank within six mnonths after the end of the financial year. The following agreements were reached with TDF. TDF to (a) ensure that sub-projects would be (i) appraised in accordance with MPkC guidelines, including a detailed environmental, technical and financial appraisal in a manner satisfactory to the Bank, (ii) recomimended for financing in accordance with Country Program priority and cost effectiveness; and (iii) supervised and monitored during implementation in a manner satisfactory to the Bank; (b) rewmit consultants with tenns of references satisfactory to the Bank; (c) review  11 its work program with the Bank by June 30, 1996 and make agreed adjustrents; and (d) provide stab-grants and sub-loans in accordance wit'i criteria agreed with the Bank, and ensure that the balance of expenditmes, including any cost overruns, will be financed out of the respective enterprise's own resources; and (e) have its accounts audited by independent auditors and submit the audit report to the Bank within six mnonths after the end of its financial year. An agreement, satisfactory to the Bank, between the Government and TDF spelling out their respective roles and obligations is set as a condition of effectiveness of the proposed Grant.  12 Schedule A TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PROJECT Project Costs and Financing Plan (1995-98) (US Dollars million) Financing Description Project Cost OTF Enterprises Total A. Prepared Projects a 10.10 5.40 4.70 10.10 of which: investment 5.90 2.90 3.00 5.90 recurring bJ 4.20 2.50 1.70 4.20 B. New Projects c/ 14.00 8.20 5.80 14.00 C. Financial Agency Fee dl 0.40 0.40 - 0.40 Total 24.50 14.0 10.60 24.50 a/ PEG Profilo, Klimasan and Pekel Teknik. b/ To be reviewed after the first year of production. Mission's estimates using current MPEC guidelines. c/ OTF financing assumed to be 60% of project costs. d/ 3% of OTF financing. A:WIEDULEA  13 Schedule B TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PRO Disbursement Cate0ories Category Amount Percent 1. Goods and Related Services 13,600,000 100% of foreign expenditures and 100% of local expenditures (ex-factory costs) and 85% of local expenditures for other items l _______________________ ___________ procured lo aly 2. Financial Agent Fees 400,000 100% Total 14,000,000 Estimated Disbursement Schedule (IJS$ million) FY96 FY97 FY98 FY99 Fiscal Year 4.0 5.0 3.0 2.0 Cumulative 4.0 9.0 12.0 14.0  14 Schedule C TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PROJECT Processing and Review Arrangements A. Prepared by: PEG Prorilo, Klimasan, Pekel Teknik, TDF with IBRD assistance B. Engineering Consultants: Mr. Karim Amrane and Mr. Charles Caranach, Refrigeration Specialists C. Bank StaffConsultants: MessrsiMmes. Varadan Atur, Task Manager (EC IITI); Jennifer AMlen, Environmental Specialist (Consultant); Fumzan Batumlu (Resident Mission Turkey); Viren Sirohi, Environmental Engineer (EMTEN) is the Regional Technical Reviewer, Bill Rahill, Environmental Specialist (ENVGC) is the Bank technical reviewer and Dr. Anil Markandya, Environmental Economist is the external reviewer. Messrs. Sherif Arif (EMTEN) and Tom Waltz (ENVGC) are peer reviewers. D. First IBRD Mission: June 1994 E. Pre-appraisal/Appraisal: March 1995 F. Negofations: July - September 1995 (by correspondence) G. RVP Approval: October 1995 H. Planned Date of Effectiveness: October 30, 1995  15 Annex 1 TU3RKEY Second Phaseout of Ozone Depleting Substances ProJect ODS Consumption in Turkey 1986 1987 1988 1989 1990 1991 1992 1993 Refrigeranis CFC 11 7 10 13 50 53 75 102 t1O CFC 12 593 700 77a 509 590 804 1124 1225 CFC 115 0 0 0 0 14 20 26 29 HCFC-22 500 540 583 480 Total tonnes 600 710 791 560 1157 1475 1835 1412 Total ODP tonnes 600 710 791 560 678 921 1274 1378 Foam CFC 11 1430 1840 1900 1246 1454 2081 2786 3038 Total and ODP tonnes 1430 1840 1900 1246 1454 2081 2786 3038 Aerosols CFC 11 200 260 165 91 46 0 0 0 CFC 12 660 950 865 1000 937 200 10 10 CFC 114 40 50 20 26 16 0 0 a Total and ODP tonnes 900 1260 1050 1117 999 200 10 10 Solvents CFC 113 tonnes 100 125 160 360 327 11 96 50 Carbon tetrachloride 200 28 148 276 1,1,1-trichloroethane 1248 1373 1511 1036 Total tonnes 100 125 160 360 1775 1412 1755 1362 Total ODP tonnes 80 100 128 280 607 176 532 448 Halons Halon 1211 15 17 20 0 23 27 18 22 Halon 1301 8 8 9 0 2 11 10 Total tonnes 23 25 29 0 25 27 29 32 Total ODP tonnes 125 131 150 0 89 115 120 126 Total CFCI1 1637 2110 2078 1387 1553 1814 2458 2564 CFC 12 1253 1650 1643 1509 1527 1398 1574 1842 CFC 113 100 125 160 360 327 11 96 50 CFC 114 40 50 20 26 16 4 CFC 115 0 0 0 0 14 4 16 2 HCFC-22 500 540 583 480 Carbon tetachloride 200 28 148 276 1,1, 1-trichloroedtane 1248 1373 1511 1036 Halon 1211 15 17 20 0 23 27 18 22 Halon 1301 8 8 9 0. 2 11 10 Total tonnes 3053 3960 3930 3282 5410 5195 6400 6286 Total ODP tonnes 3135 4041 4019 3203 3827 3493 4722 5000 Sources 1986-88 World Bank Mission Report 1989-90 Total from Govemment of Turkey figures as repoted to Nairobi; sector brealkdown from discussions with industry 1991-1993 Totals from Ministry of Environment; sector breakdown estimated based on 1990 usage.  SECOND PIIASEOUT OF OZONR DEPLEilNG SUBSTNCES PROJECr _Am Euternruua Congumin, OD9e On ordet of enreipfise lize) Sector Enterpdi Prduction No. of Solvent WPER ELECMRDC SAN.VE TIC Clrcuk Board 120 Sotveri MUCI-SMUCODAWLA ELEIRONIK 5IST1MLER Equlpment fot Army Planes 195 Solvent TURK HENKEL KIMYEVI MADO 8AN.V TIC Cleaning Matbralb for Metal Surface 346 Solvent KARACA ORME SAN.VE TIC Dqy Cleaning 4SS Solvent VESTEL ELEIIRONHK SAN.VE Trc Ciruit Board 1587 Solvent BEKOYIEKNDK SAN Circuit Board 1743 Solveiw ASELSAN ASKERI ELEKIRON0C SAN.VR TIC Clecult Board 2003 Solvent SIMXO TIC.VE SAN Different TR* Electrnic Equiprnet 3747 Foam IZOCAM TIC.VE SAN Poyadyren rbf Building Insulation 104 Foam PWSA POLIUREIAN1ALAT SAN.VB TIC Flexible Foam for Veh. Seat Cudhionu 117 Foam UROSAN KIMYA SAN Flexible Shbdock Foam 125 Foam MARMARA SUNEP SAN.VE TIC Flexible Foam (edding) 140. Foam TIK.IZ IZOLASYVN VEYAPt ELEIANLARE SAN Myucethanm RIgSd Fomsm 149 Foam SUNTAS SUNGaER VB YATAK SAN.IC Flexible Foina 163 Foam MEIAN YATAI KAPTFONE SANVE TIC Flexible Foam (Bedding) 186 Foam FORMFLEKS YALW URUNLERI SAN.V TIC Polyurethane Rigid Feania tof bnsulat. 18 Foam GRAMMEt KOLTUK Sl5TEMLERI SANVE TIC Flexible Foam for Veh. Seat Cusbiona 282 Foam PILSA PLASTIK SAN Flexible Foam rior Veh. Seat Cuailons 298 Foam TEKNIK MAALZEME TICN SAN Flexible Foam for Veh. Seat Cushkon 299 Fo4m DAS-ISTANBUL DOSEDE SAN Flexible Foam (Bedding) 330 Foam MARTUR SUNGER VE KOLTUK TESISLEI Flexible Foam for Veh. Seat Cudhicoa 491 Fo4m TURKIYE GElMI SAN Flotadot Devices 871 Foam PETXIM PEROKIMYA HOLDING Ctlyalyren 2418 Re.t -Ar Cond. ETIL ENDUSRI YATIRIMLARI VIl TIC Cen,preuon for Refwieraeon 100 Reftr.-Ar Cond. KLIMASAN KLIMA SAN.VS TIC Reftgertion Undtr 106 Refr.-Air Cond. MELTEPA SOGUTMA I1ffMA SAN.VB nC Air Conditioning Systems 122 Refr.-AMr Cord. DIRLESiK OKSUEN SAN Mixing of Special Game. 124 Reft.-Air Cond. HABAS ENDUSTi TESISLERI Water Cooling Sydermn 147 Reftr-Air Cond. ENrE ENDUSMi VE TESISAT Air%Cooled Syalams i8 Reft.-Air Cond. SELNIKEL ISfTMA VS KLUAA CiHAZLAIU SAN Equipnent or fleating and Air Coei. 227 Rerft-Air Cond. ALARCO SAN YE TIC Air Conditiodng Systan 280 Refr.-Air Cond. KUMTEL DAYANIllU TUXE1M MALLARI PLASIM Mini Air Conditioning Systens 307 Refr.-Air Cond. SIMBAY.SMTL VB BAYILERI ELEXTIKU Refidprton Unit 323 Refr.-Alr Cend. TOKAR YAPI ve ENDUSMRi TESISLERI Water Coollng Sysem 400 Refr.-Air Cnno. PEKEL TENIIK SANVI TIC Refigeatdon Unibt 460 flX Rlte.-Air Cond, P.T.T. lMOCSAN MUESSESEII Air Candidoning Sytem 520 " - Refr.-Air Cond. PEG PROFILO ELEICIRR1LI (ARECLER SAN Reftgsere(on Units t30 Raft.-Air Cond, ARCELIK , Refigeratlion Units 114S Fire xting. PEKCENS YEDEX PARCA VE MAKINA Fir ExAbylgle. for Vehicles 123 Fir Ex ling. EULEE GAZ ARMATURLERi SAN.VS TIC Fire Ixalngulihing EquIpments 232 Fir Exting. P.T.T. BLOOSAN MUESSES6SI Fire Exingulaher 520 Fire Bxiing, VALPSEL ARMATUR SAN fire Exlinguishing Syctems 657  17 Annex 2 Page 1 of 4 TURKEY Second Phaseout of Ozone Depleting Substances Project Strategy for ODS Phaseout I. Background In 1992, the Government of Turkey (GOT), with the assistance of the World Bank, developed a strategy for the Phaseout of Ozone Depleting Substances (ODSs) as part of the Country Program. Although Turkey is an Article 5 country, the GOT has decided to phase out ODS usage under an accelerated scenario. Consistent with this scenario, the objective of the ODS phaseout strategy is to elimiinate the use of ODSs, except for those required for recharging, by 1998. The strategy calls for policy actions and investments to achieve the efective phaseout of ODSs. The development of policy actions under the ODS Phaseout Strategy is the responsibility of the Ministry of Environment (MOE), whose jurisdiction includes legislation, policy development, and enforcement of environmental protection activities. Specific duties related to the Ozone Issue are to supervise and coordinate international and national activities related to the Montreal Protocol and to enforce the Government's Action Plan for the Phaseout of ODSs. The Technology Development Foundation (TDF) has been given the responsibility for identifying and preparing investment projects for ODS phaseout in all of the ODS sectors. The strategy calls for the development of a framework for policy actions to ensure the achievement of ODS phaseout A consultant will be chosen to develop a detailed proposal for such a regulatory framework, which will be discussed at the Second Ozone Panel Meeting scheduled for September 1995. Specific regulatory activities under the policy framework are expected to include: * establishing ODS import monitoring procedures to account for all O)S usage and track ODS consumption; * developing a licensing program to control ODS imports, encourage environmentally responsible handling practices, and restrict distribution of ODSs to qualified users; * intrducing levies on ODSs to encourage the adoption of non-ODS technologies; * intoducing bans on ODS substances as conversion to non-ODS technologies takes place.  18 Annex 2 Page 2 of 4 Investment activities under the strategy will support conversion to non-ODS technologies at enterprises in each of the ODS sectors. The Technology Development Foundation (TDF) is responsible for identification and appraisal of investment projects. Actions to support identification and implementation of investment activities include e targeting specific sectors on a priority basis, specifically refrigeration and foams; * the development of action plans to achieve ODS phaseout in each sector. II. Strategy A. Policy Actions The government has made significant progress in implementing policy measures to support ODS phaseouL The MOE has been given the authority to issue licenses for ODS importation and use, and has established a system of control certificates for ODS imports. The Customs Department has also established a system for monitoring ODS imports. The development of a regulatory framework for ODS phaseout will support the Government's efforts toward this objective. The framework will establish the regulatory instruments to be used to achieve ODS phaseout, taking into account the future demand for ODS by different sectors, Turkeys tading treaty obligations, and the political and technical feasibility of different instruments in the country. The specific regulatory actions which the Government is expected to incorporate into the regulatory framework are summarized below: Licensing A licensing system will be established to enable the government to control and monitor ODS imports, encourage environmentally respon;ible handling practices, and restict distibution of ODS to qualified users. The licen;ing program will include mandatory registration of all ODS users. In addition, the govenment will develop a licensing program for individuals and companies involved in the repair and maintenance of refngerators and other products which require ODS for their continued functioning. This program will ensure that the recovery, recycling, and recharge of ODSs will be consistent with the overall goal of ODS phaseout.  19 Annex 2 Page 3 of 4 Monitoring The MOE will utilize the registration system established under the licensing program to gather information on ODS usage and to track the progress of ODS pbaseout in each sub-sector. Levy on ODSs A system of levies on ODSs will be established to support technology conversion dand encourage the adoption of ODS altematives. The government will develop a timetable specifying when levies will be imposed on each type of ODS, and will implement a program to enforce the collection of these levies. Bans The government will develop a detailed timetable indicating when bans will go into effect for each type of ODS. Bans will be introduced on ODS usage in each sector as conversion to non-ODS technologies progresses. B. Investment Activities Investment aclions under the strategy involve the identification and implementation of specific projects directed at reduction of ODS use and adoption of substitute chemicals and technologies. The TDF has been given the responsibility for identifying and preparing investment projects for ODS phaseout in all of the ODS sectors, and four investment projects for ODS phaseout in the refrigeration sector are under implementation. Specific actions will be taken to support the identification, preparation, and implementation of these investment projects: Development of Sector-Specific Action Plans: Action plans will be developed for each sector, identifying the policy measures needed to support ODS phaseout and establishing a time-frame for eliminating ODS usage in each case. The policy measures under each action plan will incorporate both market-based instruments and regulatory measures required to support conversion to non-ODS technologies. Establishing Priorities for Phaseout: Due to the level of ODS usage in the refrigeration and foam sectors, phaseout of these uses will be taretd on a priority basis through the development of policies and investment projects.  20 Annex 2 Page 4 of 4 Extending Coverage to Small and Medium Finns: Policies and investment activities needed to support conversion in small and medium enterprises in all sectors will be developed and implemented. C. Public and Industry Awareness Campaign The ODS phaseout strategy calls for the MOE to develop a public awareness campaign targeting both industry and the general public to support the implementation of policy measures and investment activities. The campaign, which is expected to be under implementation by June 1995, will communicate the importance of ODS phase-out to these target groups and will inform both industry and the public about the govemment's programs for achieving this objective. Methods for public outreach will include a spot film for broadcast on television, brochures directed at both industry and the general public, posters, billboard advertisements, and newspaper advertisemnts. D. Ozone Panel The specific policy measures and investment activities under the ODS phaseout strategy, which are summarized in Attachment L require ongoing review and guidance from the Ozone Panel. The Ozone Panel has been established to guide the fornnulation and promulgation of specific policies and to develop voluntary agreements within industry to establish specific end-use bans consistent with the ODS phaseout program. The Panel comprises representatives from the Govenment, the private sector, the scientific community, and international experts in ODS phaseouL A preliminary meeting of the Ozone Panel meeting was held in August 1994, and the first formal Ozone Panel meetng was held on March 31, 1995. The next meeting is scheduled for October 1995.  21 Annex 2 Attachment 1 Page 1 of 2 TURKEY Second Phaseout of Ozone Depleting Substances Project Action Plan Item i Actions Proposed Status A. Policy Actions Monitoring Develop a monitoring system for Monitoring system for ODS imports ODS imports to track progress of established in Customs Department ODS phaseout and support levy collection Permitting program for ODS imports established within MOE Develop mandatory registration and reporting program for ODS users Licensing Conduct workshops for refrigeration Permitting system established at personnel and other personnel MOE, including system for involved in repair and maintenance imposing fines of ODS-using equipment Institute licensing program for ODS importers and users Levy on CFCs Establish levies on imported ODS To be discussed at Ozone Panel to discourage ODS usage and Meeting encourage adoption of n3n-ODS technologies Bans Recommend bans as required to To be discussed at Ozone Panel achieve ODS phaseout under agreed Meeting timetable  22 Annex 2 Attachment I Page 2 of 2 Action Plan (continued) Item Actions Proposed |Status B. Investment Activities Project Develop action plans for ODS Four phaseout projects under Identification phaseout for each sector, giving implementation in refrigeration and priority to refrigeration and foams sector Implementation Identify, evaluate, and arrange for Preliminary information collected implementation of demonstration on sectoral distnbution of ODS projects in the key sectors, usage especially refrigeration and foams C. Public and Direct media attention to Government commitment to phase- Industry importance of ODS phaseout out formally announced Awareness Campaign Inform industry and the public Industry notified about government about government programs to commitment to phaseout achieve this objective D. Ozone Panel Establish joint industry-government Ozone Panel established panel to encourage dialogue on key issues and broker agreements on Preliniinary meeting held in 1994; conservation, bans, and other industry proposals for phaseout policies solicited First meeting held on March 31, 1995 Second meeting scheduled for October 1995 A detailed timetable for implementation of the Action Plan will be developed as part of the regulatory framework strategy study. The Ozone Panel will review and recommend actions, which are expected to be implemented beginning mid-1996. ataction.pln  23 Ane3 Page 1 of 3 TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PROJECT Institutions Involved A. Govemment Agencies Undersecretariat of Treasury (The Treasury) 1. This organization is authorized to issue Regulations and Communiques in relation to matters in Import Regime Decree, to grant permissions and instructions, to make amendments or to take measures that are deemed necessary at each stage of importation, to control or have controlled the import prices, to examine, to conclude the special and compulsory cases. Concerning the Ozone Issue, the specific interest of the General Directorate of Importation will be to control imports of ODSs and products containing ODSs and to introduce custom duties and levies on the ODSs. In addition, the General Directorate of Foreign Economic Relations (Department of World Bank Projects Transport, Infiastructure and Environment Section) will also act as the focal point for deciding whether grants, soft loans, subsidies or other forms of assistance will be given for project financing during the implementation of the Action Plan. State Planning Organization (SPO) 2. The duties of this organization are to plan, fund, and direct the economic, social as well as the cultural life of the country and to take the appropriate corrective measures if necessary. The specific role of the State Planning Organization in the Ozone Issue will be to establish the measures which have to be taken by industry and govemment agencies in order to enforce the Action Plan with minimal upset to the economy during the phaseout of ODS. State Institute of Statistics (SIS) 3. The present duty of the State Institute of Statistics (SIS) with respect to the Ozone Issue is to compile, classify and publish data on the import of chemicals that are controlled by the Montreal Protocol. The specific responsibility of the Departrmnt of Environmental Statistics of SIS on the ozone issue will be to record and assess the import and export of ODS in chemical forrm, andlor as part of a product, and to inform the relevant institutions of these figures as required by the Montreal Protocol. Turldsh Scientific and Technological Research Oganization (TUBiTAK) 4. The main responsibility of this organization is to organize and finance research. The possible involvement of this organization regarding the Ozone Issue is to find alternative chemicalstcompounds and new technologies suited to Turkeys industrial structure.  24 Annex 3 Page 2 of 3 Ministra of Environment 5. Prior to the establishment of the Ministry of Environment (in August 1991) as a separate ministry, there was an undersecretaiat under the Prime Minister that dealt with environmental issues. The short term duties of this new ministry are: legislation, policy development and enforcement of the environmental protection activities. The specific duties related to the Ozone Issue are to supervise and coordinate international and national activities related to the Montreal Protocol. This ministry would be responsible for the enforcement of the Action Plan. Ministry of Finance and Customj 6. Responsibilities for the Ozone Issue fall upon three departnents of the Ministry of Finance and Customs: the General Directorate of Revenue, General Directorate of Customs, and Foreign Relations Department. The General Directorate of Revenue deals with taxes. The General Directorate of Customs is responsible for setting up the statistical positions in the Custom Tariffs, and the Foreign Relations Department is responsible for making the necessary preparations for adopting the International Instruments to the national legislation. Ministry of Foreign Affairs 7. The duties of the General Directorate of Multilateral Economic Relations within this ministry is to act as a link between intemational and Turkish organizations. The specific role of the department of International Social and Technical Affairs with regard to the ozone issue is the transfer of information from the international institutions to national associations and institutions. The Ministry of Foreign Affairs will ensure that the commitments made by Turkey in its Country ProgramE are followed by govemment and other organizations within Turkey. Ministy of Idustry and Trade 8. One of the responsibilities of the Generl Directorate of Industrial Research and Development are to study policies regarding Turkish trade in view of existing industry and determine how to apply the policies decided by the govemment. The specific involvement of the Department of Science and Technology regarding the ozone issue is to collect the information from intemational organizations through the Ministry of Foreign Affairs as well as other organizations and to set up policies for technology transfer. This department will study ways to handle the cost of new alternative technologies and processes and encourage technological transformation leading to ODS phaseout.  25 Annex 3 Page 3 of 3 B. Industy Associations and Non 'Jovemment Organizations 9. The General Union of Chambers of Commerce and Commodity Exchange of Turkey provides guidance to industrialists in the introduction of new technologies to Turkey. It also collects the views and complaints of industrialists regarding environmental issues. On the Ozone Issue, the General Union of Chambers of Commerce is concemed by the cost of technology transfer and alternative chemicals. It is especially concerned about the small and medium size manufacturers using ODSs. In the transition period towards total ODS phase-out, the Union will provide assistance and advice to its members. 10. The White Appliances Association is an association of industrialists that manufacture and sell white appliances (washers and dryers, refrigerator, etc.) in Turkey. The industrialists meet to discuss problems common to their particular industries. Common actions may be recommended by the association and representations made to the authorities. 11. KOSGEB, the development organization for small and medium industries, was established in 1990 by the Ministry of Industry to provide technical and management support to small- and medium-sized enterprises. KOSGEB has 30 extension service centers located in cities and townships where small and medium enterprises are concentrated. 12. The Environmental Problems Foundation and the Society for the Protection of the Environment and Greening of Turkey are two of five organizations in Turkey that have an interest in the environment issue. These two groups are the only ones that have an interest in the Ozone Issue. The others deal with biodiversity issues. The Environmental Problems Foundation makes research on environmental problems and publicizes the findings to increase public awareness. The specific interest of the foundation in the Ozone Issue is to research literature, issue bulletins and books, as well as anrange meetings to inform interested parties of policies and trends.  TURKEY Phasqeout of ozone nenleciner Substances Proiect Governmental Oroanization Chart of Republic of Turkev on the zone Issue IPrime Hiniaterj-T-4 State Planning organization j- I General Directorate of H Department of Planning j I ~~~~~~~~~~~~Social Planning H State Institute of statistics H Department of I Environmental Statistics |HTurkish Scientific and Technological l Marine Sciences and | | Transport, Infrastructure and Research Organization Environmental Research Group Environment Office H Undersecretariat of Treasury |as -H dGeneral Directorate of Department of World and Foreign TradeEconomic Rlations Bank Projects l l < ~~~~~~~~~~~F-Ganeral Directorate of Economic R. search and Assessment Department of Statistic I ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ II General Directorate of - Department of International | 1 s~~~mportation Reain and Asesmn IMinisters I H General Directorate of - Department of Research Meteorolcgy and Data Processing Ministrinist iist o Ministry of 1 Ministry of Environment Finnce and Custons Foreign Affairs Industry and Trade I ~ ~~~ I , I .- ileneral Directorate of I General Directorata I I General Directorate of I I General Directorate of IEnvironmental Pollution I I of Revenue j I Multilateral Economic I I Industrial Researches and Relations I Development Department of Air I General Directorate I IDepartment of International I I Department of Management f Customs Social and Technical Affairs j Science and Technology Foreign Relations | Department 010 a: \chart rt 1-I  27 Annex 4.1 Page 1 of 3 TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PROJECT Klimasan A.S. Subproject Sumry Enterprise Background 1. Klimasan (Klima Sanayi ve Ticaret, A.S.) is a private company manufacturing commercial refrigeration products. Klimasan is 75% Turkish owned, with the balance of ownership held by Derby A.S. and the Industrialization Fund for Developing Countries of Denmark. From May 1993 to May 1994, Klimasan manufactured 27,217 coolers and freezers c,Mprising eleven different models that can be categorized as follows: one model of water dispenser/cooler, four models of beverage and soft drink coolers, three models of display cabinets, two models of ice cream conservatories and two models of chest freezers. Klimasan buys its compressors from a number of manufactrers including TEE, Danfos, Electrolux and Aspera; these companies have provided Klimasan with a number of trial units to test BFC-134a and are ready to supply larger quantities of compressors when Klimasan requests iL About 10% of Klimasan's production is exported, mainly to East European countries including Romania, Bulgaria and Russia. The rst is sold domestically and represents a market share of about 40 percent. The plant has two production lines with a total capacity of 50,000 sets a year, and expects to reach its maximum capacity by 1997. 2. In 1993, Klimasan consumed 5.9 MT of CFC-12 and 20.5 MT of CFC-1 1. The average CFC-12 charge size in its freezers and cooleis is 0.2 kg. Klimasan is still using full CFC-1 formulation for its foam and uses about 0.75 kg of CFC-l 1 per set. Project Description 3. Klimasan, which plans to eliminate the use of CFCs by the beginning of 1996, has requested assistance to convert its production systems and materials to enable substitution of non- ODSs for CFC-12 and CFC-l 1. Specifically, Klimasan proposes to eliminate the use of CFC-12 and CFC-ll in freezers and coolers by converting its manufacuring facility to one that is compatible with HFC-134a, the new refrigerant, and HCFC-141b and cyclopentane, the new foam blowing agents. The first phase of the proposed two-phase conversion will provide for the acquisition of the new technology, the procurement and installation of the necessary machiney and equipment, and engineenng assistance and training, while the second phase will provide for the progressive elimination of CFC- 12 and CFC-l 1 through actual production of CFC-free freezers and coolers.  28 Annex 4.1 Page 2 of 3 4. In order to minimize the risks associated with the conversion process, Klimasan will request technical assistance during Phase I from its joint venture partner Derby A/S of Denmark. The emphasis in Phase I is to provide Klimasan with the technology developed by the joint venture partner in Denmark, modifying it where necessary to account for differences in Turkish manufacturing conditih ns and refrigerator models. As part of the technical agreement, Derby S/A of Denmark will assist Klimasan with the redesign of the different freezers and coolers; the construction, protoype manufacturing; short- and long-term testing of the different freezers and coolers; and training on manufacturing, maintenance and quality control. 5. During Phase L Klimasan plans to invest in an explosion-proof high pressure (HP) polyurethane foam injection machine that will allow the use of flammable and explosive foam blowing agents such as cyclopentane. The LP injection machine will be selected and configured at the start such that there will be no redundant parts at the changeover to cyclopentane. This period of transition will allow for the reconfiguration of the production layout at the factory if need arises. 6. The second phase of the project will complete the transition to CFC-free technology for mass production; during this transition time, both CFC and non-CFC freezers and coolers will be produced. Klimasan will install, in Phase IL all the necessary equipment for the use of cyclopentane; to ensure a safe and effective transfer to cyclopentane technology, the company will seek technical assistance from Polyfa Trading A/S, a company which specializes in the design and installation of cyclopentane systems. As part of the agreement with Klimasan, Polyfa Trading A/S wfll design the complete cyclopentane system including storage tank, piping, safety and alam systems; supervise the installation of the entire cyclopentane system; and provide extensive training on safety issues. 7. As part of the conversion process to non-CFC technology, certain equipment used in the refrigeration system will need to be replaced, purchased, or modified; this equipment includes charging boards, leak detectors, vacuum pumps, a data acquisition system, a regulation system for temperature, humiditv and voltage, and an air drying system. Equipment used in th-e foaming system, including injection machines, pre-mixing stations, safety equipment, a cyclopentane storage tank, and foaming jigs, will also be replaced, purchased, or modified. In addition, the floor area in the foaming departnent and the neighboring areas will be coated with an anti-static material and all the machinery and the equipment in the foaming area will be grounded to prevent potential fires. 8. The investment costs under this would be financed with OTF funds amounting to US$ 690,903 and contributions from Klimasan totaling about US$700,705. Incremental operating costs will be reimbursed on an annual basis, as incurred and according to the percentage of Turkish ownership of the enterprise. The time fame for implementation is about 20 months.  29 Annex 4.1 Page 3 of 3 Klimasan A.S. Summary of Project Costs and Financina (in US Dollars) Foreign Local Total A. Investment Cost Phase I Refrigeration System 149,603 1,150 150,753 Foam Insulation System 199,700 24,900 224,600 Prototypes & Testing 69,120 69,120 Transportation and Insurance 37,498 37,498 Technical Assistance and Training 170,897 170,897 Phase II Cyclopentane System 322,450 170,360 492,810 Testing 73,440 73,440 Transportation and Insurance 39,425 39,425 Technical Assistance & Training 21,500 21,500 Total Investment Costs 671,753 608,290 1X280,043 Contingency 48,000 46,000 94,000 Financial Agency Fee 17,565 17,565 Total 719,753 671,855 1,391,608 Investment Cost Financing OTF 357,342 333,561 690,903 Klimasan 362,411 338,294 700,705 | Total 719,753 671,855 1,391,608 |B. Incremental Recurrng Costs (I st year) al 269,201 Financing for Recurrng Costs IOTF Klimasan 201,900 Total 67,301 ._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ .__ _ _ _ _ _ _ _ _ _ 2 6 9 ,2 0 1 Project Impact ODS Weighted Savings 36.9 MT @ Unit Abatement Cost ($/kg) b/ 12.56 a/ Net present value of first year's operating coststsavings. These will be fmnanced retroactively; the amount eligible for OTF financing is reflective of the percentage of Turkish ownership in the enteprise and the percentage of exports to non-Article 5 counties. b/ Based on allowable costs.  30 Annex 4.1 Attachment 1 TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PROJECT Klimasan. A.S. Procurement Arrangements (in US Dollars) Procurement Method Investment Component ICB Other a/ Total A. Refrigeration System 167,753 167,753 B. Foam Insulation System 245,098 245,098 C. Technical Assistance and Training b/ 192,397 192,397 D. Cyclopentane System 582,810 582,810 E. Prototyping and Testing 185,985 185,985 Total - 1,374,043 1,374,043 a/ Standard Industry Commercial Practice as per Bank Guidelines (January 1995) bi In accordance with Bank Guidelines for Consultants (August 1981) Note: Technical assistance and training includes consultancy for refrigeration, compressor and foam technology adoption, and training.  31 Annex 4.2 Page 1 of 3 TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PROJECT Summary of PEG Profilo Subproject Enterprise Background 1. PEG (Peg Profilo Elektrikli Gerecler Sanayi A.S) is 80% Turkish owned, with the balance of ownership held by AEG of Germany. In 1993, PEG produced approximately 400,000 refngerators comprsing twenty-ree different models that can be categorized as follows: twelve single-door models, five two-doors models, five no-frost models and one deep freezer model. About 20 percent of PEG's refngerator production is exported to several countries, including Canada, Spain, France and the U.S. The rest is sold domestically and represents a market share of about 40 percent. The Cerkezkoy plant has five production lines with a total capacity of 750,000 sets a year. PEG exuects to reach maximum capacity by 1996. 2. PEG produces its own compressors based on a design provided by AEG of Germany. In 1993 the production reached 400,000 units comprising three different size models: 1/8, 116 and 115 horsepower. During the same year PEG imported about 80,000 compressors from a number of manufacturers, including Necchi, Sumsung and Embraco. The majority of these compressors were mounted on refrigerators intended for the export market. 3. In 1993, the company consumed 90 MT of CFC-12 and 200 MT of CFC-11. The average CFC-12 charge size in PEGs refrigerators is 0.2 kg. PEG has been using 50 percent CFC-1 1 reduction formulation in its foam since 1992 and uses about 0.5 kg of CFC-11 per set The company plans to eliminate the use of CFCs by the beginning of 1996. Project Summary 4. PEG has requested assistance for a two-phase conversion process. The first phase of the project will provide for the acquisition of the new technology, the procurement and installation of the necessary machinery and equipment, and engineering assistance and taining. The second phase will allow for the progressive elimination of CFC-12 and CFC-11 through actual production of CFC-free refngerators. PEG will eliminate the use of CFC-12 and CFC-l1 in houszhold refrigerators by converting its manufacturing facility to one that is compatible with HFC-134a and cyclopentane-the new refrigerant and foam blowing agent, respectively-and will modify its compressor production facility to account for the differences in the design of the new ECF-] 34a compressors. 5. With technical assistance from a number of companies, including its joint venture partner AEG of Germany, PEG has been successful in developing a new line of refrigerators and compressors suitable for the alternative refrigerant. This technical assistance involved the redesign  32 Annex 4.2 Page 2 of 3 of the different refrigerator and compressor models, the construction, prototype manufacturing, short- and long-term testing of the refrigerators and compressors, and training on manufacturing, maintenance and quality control. Having started production of non-CFC refrigerators in early 1995, PEG has already made a large investment in maclhinery and equipment; for example, most of the foaming equipment has already been purchased and installed at the factory. The compressor facility is being retooled to accommodate the design changes made in BFC-134a compressors, and new piston dies have already been manufactured. 6. During the first phase of the project, all the necessary equipment for the use of cyclopentane will be installed. To ensure a safe and effective transfer to cyclopentane technology, PEG will seek technical assistance from AEG Impianti of Italy, a company which specializes in the design and installation of cyclopentane systems. As part of the agreement with PEG, AEG Impianti will design the complete cyclopentane system including storage tank, piping, safety and alarm systems; supervise the installation of the entire cyclopentane system; and provide extensive tmining on safety issues. 7. The second phase of the project will complete the transition to CFC-free technology for mass production. During this transition time, both CFC and non-CFC refrigerators will be produced. Phase II will enable PEG's personnel to become more acquainted with the new equipment and will fine-tune the production lines, resulting in better quality products. 8. As part of the conversion process to non-CFC technology, certain refrigeration equipment, including evacuation and charging boards, leak detectors, vacuum pumps, and testing equipment, have been or will be replaced, purchased or modified. Equipment related to the foaming system also requires replacement, purchase, or modification; this includes safety equipment, door foaming units, injection machines, the heating system for the cabinet foaming jig, and a storage tank for cyclopentane. In addition, all the machiney and the equipment in the foaming area have been grounded to prevent potential fires. Equipment related to the compressor system, including pistons, gauges and length measuring instruments, and an oil charging unit with a dryer will also be replaced, purchased or modified. 9. Investment costs under this project will be financed with OTF funds amounting to US$1,578,000 and contributions from the enterprise totaling about US$793,655. Incremental operating costs will be reimbursed on an annual basis, as incurred and according to the percentage of Turkish ownership of the enterprise. According to MN guidelines, eligible incremental costs which have already been incurred by the enterprise may qualify for retroactive financing. The time frame for implementation is about 10 months.  33 Annex 4.2 Page 3 of 3 PEG Profilo Summary of Project Costs and Financing (in US Dollars) I _____________________________ Foreign Local Total A. Investment Cost Refrigeration System 778,944 778,944 Foam Insulation System 927,200 927,200 Safety Equipment for Cyclopentane 211,787 70,300 282,087 Compressor System 228,952 8,065 237,017 Prototyping and Testing 23,000 23,000 Technical Assistance and Training 78,830 78,830 Total Investment Costs 2,146,883 180,195 2.327,078 Financial Agency Fee 44,577 44,577 Total 2,146,883 224,772 2,371,655 Fmancing for Investment Costs Financing from OTF 1,353,228 224,772 1,578,000 Financing from PEG Profilo 793,655 - 793,655 Total Investmnent Financing 2,146,883 224,772 2,371,655 B. Incremental Recurring Costs Estimated Incremental Recurring Costs (lst year) a/ 2,763,636 Financing for Recurring Costs Financing from OTF Financing from PEG Profilo 1,989,817 Total 773,819 _________ . . _._ . 2,763,636 Project Impact ODP Weighted Savings 290 MT @ Unit A-batement Cost ($Ikg) b/ 12.75 al Net present value of first year operating costs/savings. These will be financed after one year of conversion to new technology, the amount eligible for OTF financing is reflective of the percentage of Turkish ownership in the enterprise and the percentage of exports to non-Article 5 countries. b/ Based on allowable costs.  34 Annex 4.2 Attachment 1 TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PEG Profilo Procurement Arran2ements (in US Dollars) Procurement Method Investment Component ICB Other a/ Total A. Refrigeration System 778,944 778,944 B. Foam Insulation System 927,200 927,200 C. Safety Equipment for Cyclopentane 282,087 282,087 D. Compressor System 237,017 237,017 E. Prototyping and Testing 23,000 23,000 F. Technical Assistance and Training h/ 78,830 78,830 Total 2,327,078 2,327,078 a/ Standard Industry Commercial Practice as per Bank Guidelines (January 1995) hi In accordance with Bank Guidelines for Consultants (August 1981) Note: Technical assistance and training includes consultancy for refrigeration, compressor and foam technology adoption, and training.  35 Annex 4.3 Page I of 3 TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PROJECT Sum of Pekel Teknik Proposal Enterprise Background I. Pekel (Pekel Tcknik Sanayi) is 54% owned by the Merloni group, an Italian conglomerate. In 1994, PEKEL produced approximately 200,000 refrigerators comprising ten different models that can be categorized as follows: three single-door modcls, four double-doors models, and three table-top models. About 50 percent of PEKEL's refrigerator production is exported to several countries, including France, Italy, Holland and Portugal. The rest is sold domestically and represent a market share of about 12 percent. The Manisa plant has one production line with a total capacity of 300,000 sets a year. PEKEL expects to reach its maximum capacity by 1996. 2. In 1993, the company consumed 40 MT of CFC-12 and 55 MT of CFC-l 1. The average CFC-12 charge size in PEKSELs refrigerators is 0.2 kg. PEKEL has been using 50 percent CFC- 11 reduction formulation in its foam since 1992 and uses about 0.3 kg of CFC- 11 per set. PEKEL buys its compressors from a number of manufacturers including TEE, Embraco, Unitad Hermetica and Necchi. These companies have provided PEKEL with a number of trial units to test HFC- 34a and are ready to supply larger quantities of compressors when PEKEL requests it. 3. PEKEL started to eliminate the use of CFCs at the beginning of 1995. The company has requested assistance to eliminate the use of CFC-12 and CFC-1 1 in household refrigerators through converting its manufacturing facility to one that is compatible with HFC-134a and cyclopentane, the new refrigerant and foam blowing agent, respectively. The project will provide for the acquisition of the new technology, the procurement and installation of the necessary machinery and equipment, engineering assistance, and training. At the completion of the project, PEKEL will have completely converted its production lines to the altemative technology and will start full production of CFC-free refrigerators. 4. With technical assistance from a number of companies including its joint venture partner Merloni Elettrodomestici of Italy, PEKEL has been successful in developing a new line of refrigerators suitable for the alternative refrigerant. PEKEL has received technical assistance in the redesign of the different refrigerator models, construction, prototype manufacturing, short- and long-term testing of the refrigerators, and taining on manufactring, maintenance and quality control. Having commenced pilot production of non-CFC refrigerators in early 1995, PEKEL has aleady made a large investment in machinery and equipment; for example, most of the foaming equipment has already been purchased and installed at the factory.  36 Annex 4.3 Page 2 of 3 5. PEKEL has agreed to install all the necessary equipment for the use of cyclopentane. To ensure a safe and effective transfer to cyclopentane technology, PEKEL will seek technical assistance from Impianti OMS of Italy, a company which specializes in the design and installation of cyclopentane systems. As part of the agreemcnt with PEKEL, Impianti OMS will design the complete cyclopentane system including storage tank, piping, safety and alarm systems, supervise the installation of the entire cyclopentane system, and provide extensive training on safety issues. 6. The last stage of the project will complete the transition to CFC-free technology for mass production. During this time, production trials of non-CFC refrigerators will be conducted to enable PEKELs personnel to become better acquainted with the new equipment and to fine-tune the production lines, resulting in better quality products. As part of the conversion process to noni- CFC technology, refrigeration system equipment, including a charging board, leak detectors, vacuum pumps, environmental testing chambers, need to be replaced, purchased or modified. Equipment for the foaming system, including a cabinet foaming plant, a door foaming plant suitable for cyclapentane, a cyclopentane safety system, and an underground storage tank for cyclopentane will also be replaced, purchased or modified. In addition, all the machinery and the equipment in the foaming area will be grounded to prevent potential fires. Status of Pekel Project 7. PEKEL has already substantially completed the conversion to non-ODS technologies in its manufacturing processes; as a result, most of the eligible costs will be financed retroactively. PEKEL's revised proposal for funding has been submitted for funding consideration at the July 1995 meeting of the MPEC. The financing plan presented below is subject to revision based on the final decision of the MPEC.  37 Annex 4.3 Page 3 of 3 PEKEL TK Summary of Project Costs and Financing at (in US Dollars) _________________________ Foreign Local Total A. Investment Cost Refrigeration System 211,079 - 211,079 Foam Insulation System 1,863,218 55,700 1.918,918 Prototyping and Testing 10,000 10,000 Technical Assistance and Training 37,650 37,650 Total Investment Costs 2,074,297 103,350 2,177,647 Financial Agency Fee 32,880 32,880 Total 2,074,297 136,230 2,210,527 Financing for Investment Component OTF 489,170 136,230 625,400 PEKEL 1,585,127 - 1,585,127 Total 2,074,297 136,230 2,210,527 B. Incremental Recurring Costs (1st year)b/ 1,136,000 Fir,ancing for Incittmental Recurring Costs OTF 313,536 Pekel 'reknit 822,464 Totai 1,136,000 Protect Impact ODP Weighted Savings 95 MT @ Unit Abatement Cost ($/kg) c/ 18.36 at A revised proposal submitted for consideration at the July 1995 MIPEC meeting requests funding for 6 months of incremental recurring costs in advance. The figures in this table will be revised to reflect the final decision of the MPEC regarding this request. bJ Net present value of first year operating costs/savings. These will be financed retmactively; the amount eligible for O(TF financing is reflective of the percentage of Turidsh ownership in the enterprise and the percentage of exports to non-Article 5 countries. c/ Based on allowable costs.  38 Anne 43 Attachment I TURK1;Y SE3COND EPHAS13OUT OF OZONE! 91PZa=GI SUBSTANCE;S PROJEiCT Procur-ment Amngements (in US Dollars) Procurement Method Investmenl Component ICB Other a/ Total A. Refrigeration System - 211,079 211,079 B. Foam Insulation System - 1,918,918 1,918,918 C. Technical Assistance and Training bJ 10,000 10,000 L. Cyclopentane System _ _ _ 37,650 37,650 Total - 2,177,647 2,177,647 a/ Standard Industry Commercial Practice as per Bank Guidelines (January 1995) b/ In accordance with Bank Guidelines for (Ccnsultants (August 1981) Note: Technical assistance and training includes consultancy for refrigeration, compressor and foam technology adoption, and training.  39 Annex 5 Page 1 of 4 TURKEY SECOND PHASEOUT OF OZONE DEPLETING SUBSTANCES PROJECT The Technology Development Foundation of Turkey Background & Omanization 1. The Technology Development Foundation of Turkey (r`DF) was established in 1991 as part of Turkes Technology Development Project C(DP), cofinanced by the Government of Turkey, private sector investors, the World Bank and other development banks, to facilitate the commercialization of tech-nology, preferably through collaboration between the private sector and the research establishment. TDF is structured as a "Vakif"' or Foundation, that under Turkish law is equivalent to a non-profit organization. It is exempt from income tax, though like other entities it is subject to payment of VAT on all purchases of goods and services. 2. At the top of TDFs organization structure is the 'Tounders' Assembly," which is made up of representatives of contributors to the Foundation and acts as a Board of Trustees. At the operational level, decision-making authority is vested in a nine-member "Board of Executives." Three of its members arm appointed, under TDFs Articles of Incorporation, by the Treasury, the Turkish Scientific and Technological Research Organization (or TUBITAK, which is the main Goverment organization for organizing and funding research) and the Small and Medium Industry Development Organization (or KOSGEB, which is administratively under the Ministry of Trade and Industry). The remaining six members are elected by the Founders' Assembly. The Board, in turn, appoints the Secretary General, who is responsible for the day to day working of TDF. He is assisted by a small secretariat made up of five professionals and four support personnel (Attachment 1). 3. The TDF Secretariat essentially initiates, coordinates and monitors the activities of the Foundation and leverages its role by making widespread use of part-time advisors, technical experts and consultants. Under the Technology Development Project, for example, the Secretariat solicits proposals, which are then evaluated in detail by a committee of experts ("Area Committee" constituted for each project by the Board of Executives from a roster of outside technical experts maintained by the Secretariat), and a financial consultant, btfore being taken back to the Board for approval. Technical and financial auditing and supervision of the proJect is also performed by outside consultants/auditors (Attachment 2). 4. TDF draws primarily on Govermment contributions, bi- and multi-lateral grants and income obtained from the development and support fund to support projects. Its own resources are limited, although internally generated revenues are expected to grow in importance over tine.  40 Annex 5 Page 2 of 4 Existing Operations 5. TDF has been able to establish an institutional framework for soliciting, selecting and monitoring the implementation of technology projects. It has helped promote public and private sector cooperation in applied research and development and it has been able to develop a network of outside experts and consultants for carrying out its work. While the Foundation's operations are not large in dollar terms, they have been growing each year. The World Bank has on-going projects with TDF under TDP and PODS-I. TDP Onerations: Under the Technology Development Program, TDF provides matching funds for research and development projects that help commercialize technology alnd develop Turkey's technology infrastructure. In the three years up to the end of 1994, it has approved assistance totaling about US$ 13 million to 37 projects and has disbursed about US$ 5 million. Most of this has been in the form of conditional loans, whose terms are tied to the financial success of the project. So far a total of six projects have been successfully completed. PODS Activities: Under the First PODS Project (PODS-I), TDF's main responsibilities are to: * act as the financial intermediary for the disbursement of funds to the single private sector investment project; * administer the rollover of the loan component of the assistance being provided to the sub-project according to agreed criteria, and more importantly to: identify all ODS users; = inform such users, specially small and medium enterprises, of the requirement to phase-out ODS use and the technology options and assistance available to them to switch to alternatives; * prepare demonstration projects to further assist in providing information on phase- out possibilities in each sector, and * help enterprises prepare investment project proposals for assistance from the OTF under the Montreal Protocol. 6. To execute the Project, TDF has carried over essentially the same organizational structure and procedures used in TDP operations. Following the execution of the Grant Agreement for PODS-I in 1994, TDF has established a small PODS Group in its Secretariat, comprising of a Project Coordinator (an environmental engineer with five years' experience in the management and coordination of research projects) and a computer analyst. It has retained a market research firm to help survey ODS users and identified a ffew academicians to provide sector-specific assistance in conducting workshops, develop demonstration projects and technically evaluate firther projects for ODS phase-out. 7. TDF is presently actively engaged in the task of idenifying and surveying ODS users and plans to complete this activity by May 1995. ft has also assisted in the preparation of three proposals for funding under PODS-IL Despite a slippage of five or six months in the overall work plan, the revised plan is broadly consistent with the progress in other areas and there is now a need  41 Annex 5 Page 3 of 4 to maintain the proposed schedule in future and expedite the preparadon of fiuther proposals, especially in the refrigeration and foams sectors, for possible funding under PODS-Il. There is also a need to strengthen the task of identifying and reaching small and medium enterprises (SMEs). Role Under the ProRosed PODS-fl Project 8. Under the proposed PODS-D TDFs main responsibility will be the detailed evaluation, appraisal and supervision of each investment sub-project to be assisted under PODS-K, the majority of which are expected to flow from TDFs own efforts to identify and develop proposals under PODS-L TDFs main responsibilities will include: * reviewing each sub-project's eligibility under the MP, its conformity with the Country Action Plan and priority in tears both of the quantity of ODS phase out and its cost effectivcness; * carrying out a detailed environmental analysis and technical and financial appraisals of each sub-project for approval by the Bank and, where the project cost exceeds US$ 500,000, the MPEC as well; * to supervising and monitoring the sub-projects, and * administering that portion of the assistance being extended to sub-projects as loans and which would be subsequently rolled over. 9. A schematic plan of how these tasks will be carried out by TDF, is given in Atachment 3. Since there will be several individual investment sub-projects under PODS-IL there will be a greater workload and responsibility on TDF in terms both of the functions to be performed by it and in the number of cases to be processed. For this, TDF proposes to add up to two more professionals and an equal number of support staff (Attachment 4). Simultaneously it plans to identify a broader list of foreign and local environmental, technical and financial consultants to effectively evaluate, appraise and monitor sub-projects. TDFs revised work plan for implementing the project is given in Attachment 5. Key Issues and Actions 10. Unlike DFEIs or commercial banks, TDF does not mobilize significant resources or provide credit and make investments primarily on its own account, nor does it have staff with appraisal and supervision skills. Through extensive use of consultants its institutional capacity is to a large extent externalized. 11. TDFs organization and use of consultants offer both advantages and disadvantages. Its flat structure and small size provide greater flexibility and responsiveness. At the same time, overheads can be kept low and the Foundation has flexibility in being able to use consultants and experts with the most appropriate skldls and expertise. However, TDFs operations are susceptible to considerable disruption if a key person leaves or is not available for some reason and the use of consultants can make it difficult to achieve consistent quality and to deliver training for meeting specific skldls and expertise. This makes the appropnate selection of consultants by TDF particularly important to the entire process. Greater reliance would also have to be placed on a  42 Annex 5 Page 4 of 4 continuing basis on foreign consultants acceptable to the Bank where adequate skills are not available locally. * There is a need for relatively greater World Bank supervision throughout the life of the project in the selection and constant evaluation of experts and consultants used by TDF, and in ensuring consistency and quality of appraisal. The Bank will review and approve the terms of reference for all consultancies. The procedures and conditions of appointment of consultants should also follow appropriate Bank Guidelines. As a practical matter, rather dtan approve each appointment, which could be rather time-consuming, a system of empanelment would be followed and each consultant approved before being added to the pool. Standard terms of reference would also be developed for each major activity. Consultant performance would be monitored by the Bank at the time of approval of each proposal; * Appropriate agreements would be executed to ensure that sub-project processing is done in accordance with MPEC and Bank requirements and that in each case the Bank (and where appropriate the MPEC) approves sub-projects submitted for financing, * Local capacity would be built up primarily by teaming local consultants with experienced external consultants during the appraisal process. TDF would develop a set of detailed guidelines (for each activity and sector) for use by the consultants, with the assistance of the World Bank, * Local industry associations and the Government-owned Small & Medium Industry Development Organization (KOSGEB), which have established links with SMEs, would be involved to strengthen coverage of and contact with small and medium enterprises X While the organizational, staffing and funding arrangements and the work plan are satisfactory, it will be necessary to review the situation in the light of actual experience once the expanded work program commences. A detailed review would be carried out twelve months from the commencement of the Project and specific actions taken up with TDF. 12. TDF is eligible for US$ 0.5 million as a grant under PODS-I and will receive financial agenes fees (currently 2%-3% of the funding) as per MPEC guidelines, under PODS-IL In addition, it could get a further US$ 50,000-60,000 as processing fees against roll-over of loans. The funding available to TDF is adequate to meet TDF's requirements.  43 Annex 5 t-taElWent 1 Page 1 of 6 The Technology Development Foundation of Turkey QrgQiatiW hart Founderss Assembly EXTERNAL Board of Executives AUDITING - ND L * IBRD . Treasury IW Auditors . recerat General Secretariat of Foundations . Ministry of Finance GENERAL SECRETARY(GS) ADVISORS -Financial (1 ACCOUNTING TDP GROUP G SERIVICE - t * Proj ect -Project -Staff Includes Coordlnator Coordinator 2 Accountants -Staff Includes -Staff Includes I Engineer I Computer Analyst 1 Computer Analyst SS's OFFICE -Staff Includes a Secretary and an Office Boy  The Technology Devel ant Foundation of Turkey PropQsed Ognisation chart GENERAL SECRETARY(GS) ADVISORS _________ ___ I -Legal (1) -Financial (2) ACCOUNTING TOP GROUP PODS GROUP SERVICE -Project -Staff Includes Coordino tor Coordinator 3 Accountants -Staff Includes -Staff Includes I Engineer C pEngineer 1 Computer 1 Computr Analyst L GS'S OFFICE -Staff Includes 2 Secretaries .nd an Office Boy Ii, --~~~~~~~~~~~~~~I,  The Technology Development Foundation of Turkey Assessment. ApprmisaL & Monitoring of ODS Sub-Projecg9 I PPROPOSALS l(It Needed,Assistance is Made Available to Prepare the Proposals) - ........... _ . AMOE - -..._--w >- 9 F O RIIAT C HECK]4F AT T TREASURY LAPPROVAL - , * _. __.- ... I FoUNDATIoNs