Turkey - Second Railway Project

Document of The World Bank FOR OmCIAL USE ONLY Report No. 14027 PROJECT COMPLETION REPORT TURKIEY SECOND RAILWAY PROJECT (LOAN 2739-TU) March 7, 1995 Infrastructure Operations Divison Country Department I Europe & Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  ACRONYMS AND ABBREVIATIONS CTC = Centralized Traffic Control DLH = General Directorate of Construction of Harbor, Ports, Airports and Railways, Ministry of Public Works and Settlement EDP = Electronic Data Processing ELMS = TCDD Locomotive Factory in Eskisehir ER = Economic Return FYR = First Year Return GTKM = Gross Ton - Kilometer MOF = Ministry of Finance MPW = Ministry of Public Works and Settlement NTKM = Net Ton - Kilometer PEE = Public Economic Enterprise PKm = Passenger Kilometer SEE = State Economic Enterprise SMIS = Specialized Management Information System SOE State Owned Enterprises SPO = State Planning Organization TCDD = Turkish State Railways TDC = Iron and Steels Works Industry TDI = Turkish Maritime Organization TU = Traffic Units UB = Ministry of Transport and Communications CURRENCY EQUIVALENTS Unit = Turkish Lira (TL) Year Value of US$1.00 January 1980 - 70.00 January 1981 - 91.00 January 1982 - 139.00 January 1983 - 191.15 January 1984 - 309.20 July 1985 - 540.00 July 1990 - 2,608.00 July 1991 - 4,171.00 July 1992 - 6,872.00 July 1993 - 11,185.20 July 1994 - 30,966.90 FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation March 7, 1995 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Turkey Second Railway Project (Loan 2739-TiL) Attached is the Project Completion Report on Turkey - Second Railway Project (Loan 2739- TU), prepared by the Europe and Central Asia Regional Office with Part II contributed by the Borrower. The project had these main objectives: to relieve bottlenecks in rail transport and raise the railway's operational efficiency; to improve the railway's competitiveness and financial health; and to introduce the railway to modern management concepts and practices. The project was to reverse a trend of declining rail traffic. Improvements in locomotive maintenance and track overhaul were the main items financed. Implementation of physical components went well on balance, though it lasted over two years longer than planned. A study on locomotive maintenance management was cancelled. Actual project costs were below projected costs. The project largely achieved its physical and operational objectives, and it led to selective improvements in railway management. However, it strengthened the railway's competitiveness by little, and it did not prevent a further deterioration of the railway's financial health. The borrower defaulted constantly on financial covenants. Rail traffic, which the appraisal had projected to rise, remained stagnant. Railway expenditures rose much faster than revenues, and cost coverage deteriorated to an all-time low. The weak competitive situation precluded tariff increases. Based on imputed savings in railway costs, the PCR calculated the ERR on physical investments at 17 percent overall, as compared to the 22 percent estimated at appraisal. But the ex- post ERR is a poor measure of project economics as it ignores (large) operating subsidies to support traffic demand. Without the subsidies, the demand would have been much lower and some investments may not have been needed. Since the key objective of financial viability was not met, project outcome is unsatisfactory. Further, institutional impact is modest, and sustainability uncertain. PCR quality is satisfactory, though vital statistics (on traffic and finance) are lacking for the years after 1990. This omission leaves an unclear picture about the most recent railway developments. No audit is planned. Attachment I This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   FOR OFFICIAL USE ONLY TABLE OF CONTENTS Preface ............. i Evaluation Summary ............. ii PART I - PROJECT REVIEW FROM THE BANK'S PERSPECTIVE I- Project Identity. 1 11 - Background. 1 IIl - Project Objectives and Description .......................... 2 IV - Project Design and Organization. 4 V - Project Implementation. 5 Loan Effectiveness and Project Start-up. 5 Implementation Schedule. 5 Procurement. 6 Project Costs and Financing .7 Disbursement. 7 Loan Covenants. 7 VI - Project Results. 7 Project Objectives. 7 Physical Targets. 8 Economic Performance. 8 Financial Performance .9 Technical Assistance and Training. 9 VIl - Project Sustainability ............ ....................... 10 Vill - Bank Performance ....................... 11 IX - Borrower Performance ....................... 12 X - Bank-Borrower Relationship .13 Xi - Consulting Services. .Service 13 XII - Project Documentation and Data .13 PART II - PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE ...... 14 PART Ill - STATISTICAL INFORMATION ..... . ......................... 17 MAP - IBRD 19221 - Turkey - Transport Infrastructure ..................... 40 This document has a restricted distribution and may be used by recipients only in the performance of their I official duties. Its contents may not otherwise be disclosed without World Bank authorization.   PROJECT COMPLETION REPORT T U R K E Y SECOND RAILWAY PROJECT (LOAN 2739-TU) PREFACE This Project Completion Report (PCR) refers to the Second Railway Project in Turkey for which Loan 2739-TU in the amount of US$197 million equivalent was signed on July 24, 1986. The Republic of Turkey was the Borrower and the Turkish State Railways (TCDD) and General Directorate of Construction of Harbor, Ports, Airports and Railways (DLH) were the immediate beneficiaries. The Loan became effective on January 27, 1987 and it was closed on December 31, 1993 after a one year extension. The Bank did not agree to further closing date extensions due to maJor defaults in compliance with financial loan covenants and the Government's inability to support a comprehensive restructuring of TCDD to reflect its changing role in the transport sector following the development of road transport (para. 5.10). Ultimately, US$171.83 million was disbursed and about US$25.17 million was cancelled. This Completion Report (Parts I and ll) was prepared by the Infrastructure Division of Country Department I (EC11N) of the Europe and Central Asia Region. The report is based on information obtained from Project files, Staff Appraisal Report, President's Report, Staff Supervision Reports, procurement documents and working papers prepared in connection with the project. The Borrower prepared Part II of the PCR and provided basic statistical information incorporated in Part III of the PCR.   PROJECT COMPLETION REPORT T U R K E Y SECOND RAILWAY PROJECT (LOAN 2739-TU) EVALUATION SUMMARY Objective 1. The project was mainly designed to relieve key transport bottlenecks and to improve TCDD's operational efficiency and loco availability by restructuring TCDD's locomotive technology and maintenance and promoting institutional development measures, such as introduction of modern management methods and technology transfer (paras. 3.01, 3.02, 3.03 and 4.01). The project also included as one of its main objectives to support the Government's efforts towards TCDD's financial recovery so as to reduce the burden of subsidies on the budget (paras. 3.01 and 4.01). The project made a positive contribution to the reorganization of the whole system of Turkey's locomotive maintenance and operation (paras. 5.02, 5.06, 6.01, 6.03, 7.01 and 8.01) - the center- piece of the project - and provided much needed technology transfer through technical assistance and training. The project, however, failed to bring about TCDD's financial recovery. TCDD's financial performance became worse during project implementation and the Borrower was continuously in default of financial loan covenants (paras. 5.10, 6.01, 6.05-6.06, Annex 3A-D Pt. III, 7.02, 7.03, 7.04). Implementation Experience 2. The Republic of Turkey was the Borrower and TCDD was responsible for implementation of all project components except new line works, for which DLH was responsible. The proceeds of the Loan were passed on to TCDD and DLH for execution of the respective components (para. 4.04) and the arrangements proved to be satisfactory. Once the Loan became effective, the physical implementation, technical assistance and training (para. 5.01) progressed smoothly. A substantial number of civil works including the track renewal of 740 km and improvement of diesel loco component proceeded according to schedule and were completed on target dates (sometimes earlier - paras. 5.02 and 5.03). The execution of a few sub-projects, namely: signalling improvement, new line works, 'part-exchange' system, and procurement of a few track overhaul and maintenance machinery faced significant delays mainly due to shortage of financial resources, especially local funds, project re-design, delay by the Ministry of Finance in import authorization of track steel material financed by the Bank Loan and necessity of rebidding the signalling and telecommunications components (paras. 5.02, 5.03, 5.04 and 5.05). The quality of construction of civil works was satisfactory.  iii 3. The project encountered no serious procurement problems excepting purchasing track steel material (para. 5.05) due to a delay in contract approval and import authorization of track materials. Significant delay was also experienced in procuring inspection cars because of the problems of car stability and excess axle loads (para. 5.03). At an early stage, the Bank mission found that the technical specifications, schedules of delivery and Bill of Quantities (list of unit prices) prescribed at the time of bid invitation of some works needed amplifications to permit an adequate response from international competitors. The Borrower readily revised the necessary documents and on the whole procurement action proceeded without serious difficulty (paras. 5.03, 5.05 and 5.07). 4. The Loan (2739-TU) was scheduled to close on December 31, 1992. However, due to numerous delays in contracting, the signalling component of the project progressed slowly. The concerned contractor notified TCDD of further possible delays in its services due to force majeure caused by the Gulf War and the civil war situation in Yugoslavia affecting its Yugoslav partner (para. 5.04). This contract was of a turn-key type covering both supply and installation. Although a considerable part of the equipment was delivered, the installation was delayed. At the Borrower's request, the Bank extended the Loan closing date up to December 31, 1993 to enable the railway/contractor to install about US$35 million worth of expensive electronic signalling equipment which was delivered but lying uninstalled. This reasonable and flexible approach helped TCDD to improve further the technical parameters and avoid about US$3 million in penalties. 5. The expert services enlisted in "in-line" positions in TCDD for technical assistance and training program secured through "twinning" arrangements with other European railways progressed exceedingly well (paras. 5.06 and 6.08) and the benefits permeated through the entire system and were reflected in the results (paras. 7.01 and 9.01) of locomotive availability and maintenance including improvement in traffic safety and increasing fuel efficiency. 6. The total cost of the project, US$ 420 million, was below the estimated total cost at appraisal of US$582.2 million. A part of the reduced cost, US$ 25.2 million, is explained by the fact that a portion of the Signalling and the Specialized Management Information System (SMIS) components were cancelled. The remaining part of the cost reduction (US$ 137 million) was due to the redesign of the Hanli-Bostankaya line using new technology for salt water protection of lines, reduced costs of ICB, and some reduction in the quantity and costs of imported and locally procured goods and services. Results 7. The project produced tangible benefits by improving diesel locomotive operations and availability (paras. 6.01 and 7.01) - the main focus of the project. As a consequence, during project implementation TCDD covered all loco requirements and has had for the first time a surplus of more than 40 main line locomotives, some of which were leased  iv to Iranian Railways. The improvement in loco availability helped TCDD to avoid planned additional investments of up to US$200 million (para. 6.03). 8. Track renewal and signalling improvement together with the training component including loco drivers' simulator, contributed to increased traffic safety and in 1993, accidents came to about half the level in 1985 (para. 6.03) Furthermore, the project's training program helped to increase TCDD's trained staff from about 3,000 (about 5% of staff) in 1986 to about 32,000 (about 55% of staff) in 1990 (para. 5.06). 9. TCDD's volume of traffic declined since 1985, while the SAR and TCDD had projected that overall freight traffic would increase by about 1 million tonnes per year (para. 6.04). The cost of civil works were well maintained and are generally 28% below appraisal estimates (para. 5.08 and Table 5A Pt. ll). These results had opposite influence on the re-assessed E.Rs. The declining traffic depressed the ERs while the cost savings boosted up the same. On the whole, the recalculated ERs remain within a reasonable range of 12% to 22% (Table 6 Pt. Ill) but are consistently lower than the appraisal estimates. The overall project remains economically well justified with a weighted ER of 17% (Table 6). 10. The financial performance of the railways during 1985-89 and thereafter did not come up to appraisal expectations (paras. 6.01, 6.03-6.07 and Annex 3 (A-D), Pt. ll). The project completely failed to assist the railways in its financial recovery and thereby reduce the burden of subsidies on the budget, one of its principal objectives (paras. 3.01 (d) and 6.01). The financial position of the railways worsened almost continuously during the project implementation period (Annex 3A-D, Pt. Ill). During the period 1985 to 1990, revenues increased by 26%/ (in constant 1985 terms), whereas costs increased by 42%. Due to TCDD's lack of autonomy, its management had limited control on, reducing costs and enhancing revenues. For example, the real cost of wages and salaries increased 82% between 1985 and 1990 (in constant 1985 terms), in spite of a staff reduction of about 5,000 (para. 6.06). This was because salary increases for civil service employees is determined nationally according to Law 657. Although, operations were partially rationalized by the closure of some stations (about 250) to freight services/parcel operations and cancellation of passenger trains (40 main line and regional passenger trains since 1988), the approach was piece-meal and significant staff reduction on account of such closures was not possible. TCDD management could not raise tariffs, although on paper they are entitled to do so. Under the circumstances, the major financial covenants of the Loan were continuously in default (paras. 5.10, 6.03, Table 7 Pt. Ill). 11. The poor financial performance of TCDD is not just an organization/sector-specific problem. This is a wider problem covering most of SOE's in Turkey (paras. 6.07 and 7.03). Financial recovery could be hoped for only by restructuring the railway. The Bank correctly identified the needs of TCDD's restructuring (paras. 6.03, 6.04 and 7.04). This would require significant down-sizing of the railway while improving quality of services, providing managerial autonomy and developing an aggressive commercial orientation.  v All parties concerned (including TCDD, MOT, SPO and the Treasury) expressed willingness to support the restructuring program suggested by the Bank. However, no significant action in this direction has yet been taken (paras. 6.07 and 7.04). Sustainability 12. The Bank felt greatly concerned that if the deteriorating financial trend was allowed to continue unchecked, the benefits accruing to the project (para. 7.01, 6 and 7) would not be sustainable. Higher freight rates may, no doubt, reduce the TCDD's deficit in the short run but would only address the symptoms rather than causes of the structural problems plaguing the sector (paras. 7.03 and 7.04). In practice, the railways approach to simply adjust freight rates on a cost-plus basis without considering the commercial viability or making necessary efforts to reduce costs was likely to outprice TCDD and make it more and more vulnerable to traffic losses to competing road transport. (paras.7.02 and 8.03). Passenger traffic on the other hand has become a major source of losses; many such services cannot be justified and are only being provided for social and political reasons since passenger rates only cover about 15% of the costs attributable to the main line passenger services (in 1992/93). Lessons Learnt 13. Although the project has been successful in meeting some of its objectives, a number of lessons can be drawn. These lessons are summarized below: (i) With hindsight, the Bank must be faulted for failing to forcefully address the need for restructuring the railway as a condition for involvement with a state- owned agency hampered by red tape and political constraints and unable to compete with other transport modes.; (ii) provision of an overall coordination agency (TCDD) for all project-related activities with appropriate counterpart from each project-executing agency (DLH) contributed to successful monitoring project progress (para. 4.04); (iii) establishment of a Special Account (revolving fund) greatly facilitated the timely flow of funds to the beneficiaries to finance eligible project expenditures with minimum administrative delay (para. 5.09); (iv) technical assistance of expert services enlisted in "in-line" positions in TCDD and training program secured through "twinning" arrangements with other European railways proved very successful (paras. 5.06 and 6.08); and (v) the Bank should have been more forceful in seeking to persuade the Government, particularly TCDD management, to make an all-out effort to capture more bulk traffic, ideally suited for railways, to reduce unit cost  vi significantly, intead of concentrating prmarily on tariff adjustment on a cost-plus basis (pars. 8.03); and (vi) as in most Bank-financed railway projects the demand projections were too optimistic, suggesting that the pressure of competition from truckers was underestimated (para. 7.02).   PROJECT COMPLETION REPORT T U R K E Y SECOND RAILWAY PROJECT (LOAN 2739-TU) PART I I. Project Identity Project Name Second Railway Project Loan No. : 2739-TU RVP Unit : EC1IN/EMTIN Country Turkey Sector : Transport Sub-sector Railways II. Background 2.01 In response to the crisis of the late 1970s, characterized by a massive extemal debt burden, sharp deterioration of credit-worthiness, and high domestic inflation, the Turkish authorities implemented a program of stabilization combined with structural change that reduced the external deficit and inflation and increased reliance on market forces for the allocation of resources, also shifting from an inward to an outward oriented development strategy. On the external side, the policies achieved an impressive growth of exports and contributed to restore international credit-worthiness. On the domestic side, however, since 1986 the achievement of stabilization has been undermined by a large public sector deficit. In spite of large internal imbalances, Turkey was able to grow at an average rate of 5 percent per year during 1985-93. 2.02 Transport plays a vital role in the Turkish economy by providing essential support for commercial and industrial activity, foreign trade and transit traffic. Turkey serves as a vital transport link between Europe and the Middle East; its trunk routes and international connections are particularly important to its development prospects because Turkey aims to improve its integration with the world economy, and particularly with Europe, through increased international trade. 2.03 Despite the existence of extensive mountainous areas, Turkey has a fairly well developed and evenly distributed transportation network (see Map) which has served to integrate its 780,000 sq. km. of territory and its population of over 55 million. The current transport system in Turkey consists of about 300,000 km. of state, provincial and local roads, about 8,000 km. of railways, 12 major public ports, and civil and military pipelines  2 and airlines which serve several domestic and international routes. During the last decade, the transport and communications sectors accounted for about 20-25% of total public investment in Turkey. 2.04 Road transport now dominates the transport market. The railways' share in the freight transport market declined continuously during the last three decades from about 55% to about 10% with road transport gaining the railway's loss in market share. Road transport today carries more than 95% of domestic passenger traffic. The road transport has been able to cope with this increase in traffic due to the responsiveness of private operators who enjoy considerable freedom to negotiate rates and operate commercially. 2.05 The railways have lacked a commercial orientation and have been unable to rise to the challenge posed by road transport. Despite seeming comparative advantages for transportation of bulky products over long distances the railway has persistently lost market share to trucking. The poor performance of the railway has become an issue for the development of the core sector of the economy, namely: mining, iron and steel and other key bulk industries. Heavy bulk commodities such as lignite, iron ore, cement, fertilizers which should economically be carried by rail over long distances are carried by road transport because of the railway's poor operational efficiency and poor reputation for reliability. Moreover, energy consumption has become an important concern for the Turkish economy and transport accounts for about half of total oil product consumption because of the rapidly increasing and widespread role of road transport. The Government is anxious, therefore, to make better use of the energy efficient railway and shipping transport modes wherever appropriate. Ill. Project Objectives and Description 3.01 The objectives of the project were to: (a) overcome key bottlenecks in railway operations; (b) increase railway operational efficiency and to provide essential maintenance and technical assistance for the. improvement of diesel locomotive maintenance, technology and operation with the aim of increasing locomotive availability; (c) enable the railways to handle the ttaffic for which they are inherertly the most economic mode, particularly long-distance bulk traffic; (d) improve railways competitiveness and assist in the railway's financial recovery and thereby reduce the burden of subsidies on the budget;  3 (e) introduce corporate planning, action and operational plans and improve poor track conditions (overhauling of about 740 km. of mainline), provide track overhaul equipment and replace out-moded signalling (about 700 km of obsolete mainline signalling) on a phased basis to match capacity needs; (f) construct about 65 km. of new track (Bederli-Bostankaya) consisting of a second track on a new alignment to remove a critical bottleneck to the movement of bulk commodities; and (g) familiarize the railway staff with recent developments and expected trends in operating, monitoring and maintenance techniques utilizing the latest state-of-the-art techniques. Description of the Project 3.02 The project consisted of high priority items included in TCDD and DLH's Investment Plan (1985-89). Improvement of locomotive availability and efficiency was the 'centerpiece' of the project. This task included improvements in the technology of the locomotives and in the efficiency of their operations. The re-organization of the whole locomotive maintenance and operation system involved systematic use of the 'part exchange' method, centralized reconditioning of the dismantled parts, improved planning to reduce turn-around time, deployment control, modernization of the workshop and stores equipment, and procurement of a basic stock of component and spare parts. 3.03 The other components included: (i) overhaul of 740 km. of poor mainline track which had serious safety problems, (ii) acquisition of track renewal and maintenance equipment to meet the urgent track rehabilitation needs; (iii) replacement of obsolete signalling systems on 700 km. of the Kayas-Cetinkaya line with modemized station signal-equipment (TAS); (iv) improvement of line capacity on the short stretch between Bedirli/Hanli and Bostankaya (see Map) to facilitate long distance movement of iron ore from Divrigi mines to the steel plants as well as international transit traffic. The project also included as an important component technical assistance and training to be provided by three senior experts supported by five middle-level assistants appointed to "in-line" positions within TCDD for 48 man-months. These experts and their assistants were expected to contribute significantly to institution building, management improvement and introduction of new technology. In addition, the Bank assistance also provided for more than 300 man-months of technical visits and training for railway (TCDD and DLH) managers, operation specialists, craftsmen, etc., through "twinning" arrangements with appropriate European railways engaged in similar works. The project also included the procurement and installation of a 'simulator' for training of locomotive drivers and a computer-assisted specialized management information system (SMIS) study for locomotive maintenance and operation.  4 IV. Project Design and Organization 4.01 The project was designed to address the complex but worthwhile task of modernizing TCDD to improve operational efficiency, and loco availability, and to support the Government's efforts towards TCDD's financial recovery. This was in accord with the country's objectives of decreasing budgetary support to state-owned enterprises and to introduce commercial management methods to improve competitiveness. The major thrust in the project design was to improve locomotive availability (paras. 3.01 and 3.02) and to improve operational efficiency by restructuring TCDD's locomotive technology and locomotive maintenance (para. 3.02) and by supporting institutional development measures, such as introduction of modern management methods and to provide for technology transfer. 4.02 At the project formulation and design stage the Bank was involved in detailed policy discussions on institutional issues in the transport sector and on modal investment plans through a Transport Investment Review concluded in July 1985. The total railway investments proposed by TCDD and DLH were then considered to be far in excess of the country's Fifth Five Year (1985-89) Plan provision. Based on discussions with users and operators, the Bank mission made specific recommendations to avoid over-investment. The investment program in railways endorsed by the Bank mission was about 55% of the level originally requested by the railways. The mission's recommendations were reviewed further by the Bank multi-sector investment review mission and the size, and composition of the railways program as recommended by the Bank's transport mission was confirmed. During project preparation, the long-standing issues of the construction of the Ariflye- Sincan (260 km), an expensive high speed line from Istanbul to Ankara, was resolved. It was decided that there would be no further investments on this line beyond the on- going contracts (to be completed by the end of 1986) unless and until a feasibility study demonstrated the economic viability of further investment. This arrangement saved about 85% of the total investment cost of the high-speed line. 4.03 Based on an approach suggested by the Bank mission at the design stage, TCDD prepared and agreed on an Action Plan to be periodically up-dated and monitored on a continuing basis for the railway operation and management. 4.04 The Republic of Turkey was the Borrower. The beneficiaries of the project were TCDD and DLH. The latter, as a government Department and a non-revenue earning entity, received project funds through the budget. The Bank entered into a Project Agreement with TCDD to which the Govemment on-lent loan funds under the same terms and conditions as the Bank loan. DLH was responsible for the implementation of the new line works and TCDD for all other project components. TCDD appointed a suitably qualified project coordinator responsible for planning and coordinating implementation of its part of the project. Similarly, DLH appointed a counterpart project coordinator to carry out similar responsibilities with respect to its component, in close liaison with the TCDD project coordinator. The entire arrangement worked out smoothly throughout the project  5 implementation period, particularly with reference to physical and technical aspects (Sec. V, paras. 5.01 - 5.07). V. Project Implementation Loan Effectiveness and ProJect Start-up 5.01 The Loan (2739-TU) was approved on July 8, 1986 and was signed on July 24, 1986 (Table 2, Pt. IIl). The loan became effective on January 27,1987 (para 8.02). Once the loan was effective, the physical implementation, technical assistance and training progressed smoothly. !mplementation 5.02 Improvement of diesel locomotives - This task included the modernization of the workshop and stores equipment, phasing-out weak points in locomotive design, systematic use of 'part exchange' method, one-time basic overhaul of the immobilized and the unreliable locomotives and procurement of a basic stock of components and spare parts. Most of these sub-components were scheduled to be completed between the end of 1988 and 1989 (SAR and Table 4, Pt. III). All machines, materials, laboratory equipment, loco components and spare parts were procured and assembled before 1992, except for the work-bench for Derince Workshop. However, the part exchange system could not be fully put into operation as scheduled due to lack of local funds and insufficient number of qualified staff. The situation was remedied by 1992/93 and this very important project component yielded very good results (paras. 6.01 and 7.01). 5.03 Track overhaul and maintenance machinerv - The track rehabilitation program (about 740 km - Table 4, Pt. Ill) was completed in most part one year ahead of schedule and the quality of works was satisfactory. A substantial number of track maintenance machinery was procured according to schedule with minor variations (up to a maximum of one year). There was, however, substantial delay (about 3 years) in putting into operation eight heavy track maintenance cars (draizines). These cars from Krupp - Germany were assembled at the Tulumsas factory in Turkey but were not accepted by TCDD due to problems of car stability and excess axle load which were solved satisfactorily in due course and technical acceptance was issued after appropriate testing. 5.04 Signalling and telecommunications (700 km) - Due to the numerous delays in contracting for the works, progress on this component was unduly delayed. The contractor, SEL, notified TCDD of possible delays in its services due to Force Majeure caused by the Gulf war and the civil war situation in Yugoslavia, affecting one of its Yugoslav partners, Iskara. This contract was "turn-key" type covering both supply and installation. At the Borrower's request, the Bank extended the Loan Closing date by one year to December 31, 1993 to enable the railway/contractor to instal about US$35 million  6 worth of expensive electronic signalling equipment which was delivered but lying uninstalled. This extension helped TCDD to further improve some of the technical parameters within their control and avoid about US$3 million in penalties. However, since the project was in serious default of major financial covenants and the government was unable to submit a program to resolve this issue, the Bank did not agree to extend the loan closing date beyond December 31, 1993. The Bank did allow disbursements against expenditures incurred on signalling works up to April 31, 1994. 5.05 Now Line Works - The implementation of this component by DLH was more than two years' behind the appraisal schedule (Table 4, Pt. Ill). The reasons for this delay were: shortage of local financial resources; project redesign; delay by the Ministry of Finance's in approval of contracts and authorization of imports for track steel material financed by the Bank Loan; and need to rebid the signalling and telecommunications component included in TCDD's Kayas-Cetinkaya package. 5.06 Technical Assistance and Trainina - Expert services were enlisted for "in-line" positions in TCDD to provide technical assistance and training. They were secured through "twinning" arrangements with other European railways. This component progressed well and according to schedule (Table 4, Pt. Ill). The project's training program helped to increase TCDD's trained staff from about 3,000 in 1986 to about 32,000 in 1990. Procurement 5.07 By the time of implementing the second railway project, the implementing agencies were more familiar with Bank procurement guidelines due to their experience with the first railway project. The Second Railway project costs were well maintained and are about 28% below appraisal estimate primarily due to positive ICB results and Bostankaya-Hanli project redesign (para. 5.08). Still in several instances, the Bank mission found that technical specifications, schedules of delivery and Bill of Quantities (Ust of Unit Prices) needed clarifications/amplifications to permit an adequate response from intemational competitors. Based on Bank's suggestions, the Borrower readily revised the necessary documents and on the whole, procurement actions proceeded satisfactorily. Overall, the project did not encounter serious procurement problems excepting procurement of track steel material (para. 5.05) for Hanii-Bederli-Bostankaya line and the need to rebid the signalling and telecommunications component included in TCDD's Kayas-Cetinkay package (para. 5.05). Project Costs and Financing 5.08 The estimated total project cost of the project at appraisal was US$582.2 million. The final cost came to US$420 million (Table 5A). The decrease in total cost of about 28% in terms of LIS$ was partly (3%) due to the cancellation of the Specialized Management Information System (SMIS) component and a part of the signalling  7 component. The remaining savings (25%) was primarily due to the redesign of the Hanli- Bostankaya line using new technology for salt water protection, reduced costs of ICB procurement and some reduction in quantity and costs of imported and locally procured goods and services. The structure of project financing was very similar to what was planned at appraisal (Table 5B). Disbursements 5.09 The Loan was disbursed as provided in the loan agreement. Statements of expenditures, against which the Bank disbursed, were submitted at regular intervals by the Borrower. As agreed, the Borrower also established a Special Account (revolving fund) to maintain an adequate flow of funds to the beneficiaries to finance eligible project expenditures with a minimum of administrative delay. Actual disbursements, however, consistently lagged behind (about 30 to 40%) the appraisal estimate (Table 3, Pt. Ill). Loan Covenants 5.10 Compliance with Loan Covenants was generalty satisfactory excepting those relating to financial performance (paras. 6.01, 6.034.05) which were in serious default (rable 7, Pt. Ill). Accordingly, the Bank did not agree to further extension of the loan closing date beyond December 31, 1993 and about US$25.2 million of Bank Loan was cancelled. This decision largely reflects the inadequate compliance with the financial covenants and the Government's inability to support a comprehensive restructuring of TCDD to reflect its role in the transport sector in Turkey following the development of road transport. VI1. Proiect Resus 6.01 Project Oblectives: Overall, the project was successful in meeting its physical objectives of relieving key bottlenecks in railway operations and increasing railway operational efficiency by improving diesel locomotive operation and availability (paras. 3.01 and 7.01). Furthermore, technical assistance and training helped to successfully transfer modem state-of-the-art technology to improve locomotive maintenance as well as the maintenance system and efficiency of locomotive operation. The project produced tangible benefits (paras. 7.01) and improved traffic safety and fuel efficiency (para. 7.01). However, one of the major objectives of the project was to assist the railways in its financial recovery and thereby reduce the drain on government budgetary resources. The project failed to achieve this important objective and witnessed a continued worsening in the financial position of TCDD compared to past years (paras. 6.03-8.06; Annex 3A-D, Pt. Ill; Table 6C, Pt. Ill). During the period 1985 to 1990, revenues increased by 26% On constant terms), whereas costs increased by 43%. Costs increased porimarily due to massive increases in wages and salaries (82% In constant terms) from 1985 to 1990. The approved tariff Increases were cearly Inadequate and were granted with a time-lag that  8 contributed to continuous deterioration in TCDD's financial situation. In addition, the deterioration of market share indicates that the problems faced go far beyond what could have been resolved through tariff increases. 6.02 Physical Targets: The physical targets of the project, improvement of locomotive maintenance and operation, track renewal and procurement of track maintenance machinery were generally achieved as planned (paras. 5.02 and 5.03) with substantial slippage in time schedule for signalling and new line works (paras. 5.04 and 5.05). Technical assistance and training progressed very well though the SMIS component had to be cancelled when the loan closing date was not extended (paras. 3.03 and 5.01). 6.03 Economic Performance: The general and sub-project specific methodologies followed for the economic re-evaluation of the completed project are, basically, the same as those used at appraisal. The quantified economic analysis for the improvement of locomotive availability takes into consideration the savings in procurement of new locomotives (including benefits due to lease of surplus locomotives to other railways - para. 7.01) due to improved loco availability. The improvement in efficiency of mainline locomotives helped to avoid planned additional investments of up to US$200 million. The main benefits from track rehabilitation accrued from decreased maintenance of track and operating costs of rolling stock due to reduced wear and improved safety. The economic benefits from modernization of main line signalling and telecommunications resulted mainly from increased line capaciy at a smaller cost and greater safety. Track renewal, signalling improvement together with the training component (including loco drivers' simulator), contributed to reducing railway accidents in TCDD in 1993 to half the level prevalent in 1985. The expected benefits for one new short link (Hanli-Bostankaya) include savings due to avoidance of considerable detour for heavy bulk traffic on circuitous routes. 6.04 The actual traffic growth and its projection (para. 7.02 and Annexes 1 and 2, Pt. Ill) has been re-assessed at completion. TCDD's volume of freight traffic declined since 1985 (para. 7.02) though SAR/TCDD projected that overall freight traffic would increase by about 1 million originating tonnes every year. This declining traffic pattern has particularly affected the anticipated traffic flows on Kayas-Kayseri-Sivas-Cetinkaya and Hanli-Bostankaya sections where substantial growth of bulk traffic was anticipated at appraisal. On the other hand, the cost of civil works (track overhaul, signalling and new works) were well maintained and are generally below 28% of appraisal estimates (paras. 5.08 and Table 5A, Pt. Ill). These characteristics had an opposing influence on the re- assessed ERs. The declining traffic depressed the ERs while the cost savings of civil works boosted up the same and on the whole, the recalculated ERs remain within a reasonable range of 12% - 22% (Table 6, Pt. Ill). Re-evaluated economic returns are, however, consistently lower than the appraisal estimate(s) but still all the project components remain acceptable and are individually higher than 12%. T he overall project remains economically well justified with a weighted ER of 17% (Table 6B, Pt ll).  9 6.05 Financial Performance (TCDD): The financial statements, including both appraisal estimates and actual results for 1985-1990 are given in Annex 3 (A-D), Part IlIl and Table 6C, Pt. Ill. The Bank felt grave concern over TCDD's continuing rapid financial deterioration which brought into question the sustainability of the physical gains achieved through improved technical parameters (Section VII, paras. 7.01-7.04). 6.06 Deterioration of TCDD's financial situation was partly due to conditions beyond its control. For instance, wages and salaries increased 128% (in real terms) between 1988 and 1991, in spite of a staff reduction of about 5,000, mainly because of large semi-annual wage increases sanctioned by the Government. Though operations were partially rationalized by the closure of some stations (over 250) to freight services, parcel operations and cancellation of passenger trains (40 main line and regional passenger trains since 1988), still the approach pursued was very limited and piece-meal. TCDD's lack of autonomy in the closure of uneconomic lines, and of control over costs, particularly wage and salary increases and over tariff increases was a key factor in this development, which the Government failed to address by imposing a hard budget constraint. Hence, the easy solution of relying on financial support from Treasury led to a progressively worsening performance. TCDD identified (1993) 22% of Its network to be uneconomic, carrying less than 100,000 tonnes per year. The cost coverage ratio for mainline passenger trains which was faltering around 17% in 1992 declined to 12Y% in 1993 and still most of the uneconomic services continue to be in operation. Under these circumstances, the major financial covenants of the loan were continuously in default (para. 5.10 and Table 7, Pt. Ill). 6.07 The poor financial performance of TCDD is not just an organization/sector-specific problem. This is wider problem covering most of the SOEs in Turkey (para. 7.03). The Bank must be faulted for failing to require a comprehensive restructuring that addressed most causes for TCDD's problems as a condition of its Involvement. This would have involved significant downsizing of the railway while improving quality of services, reducing dependence on Government budgetary support, providing managerial autonomy and developing an aggressive commercial orientation. All parties concerned (including TCDD, MOT, SPO and the Treasury) have recently expressed willingness to support the restructuring approach suggested by the Bank during implementation but no action has yet been taken. 6.08 Technical Assistance and Training: Senior foreign railway experts supported by middle-level professionals appointed in "in-line" positions in TCDD greatly assisted to strengthen railway operations and locomotive maintenance (paras. 5.06 and 11.01). Training secured through 'twinning" arrangements with SOFRERAIL and DECONSULT also yielded rich dividends and the benefts due to transfer of technology permeated through the entire system and were reflected in the results (paras. 5.02, 6.01 and 7.01). The locomotive drivers' simulator was put into operation in early 1992 at the Eskisehir training center and the training program with North American Railroads (NAR) was also completed on schedule.  10 VII. Project Sustainability 7.01 Overall project results and project performance are mixed. In terms of physical implementation, the project progressed well, a major number of components were completed according to schedule, sometimes earlier, with only a few exceptions (e.g. signalling of Kayas-Cetinkaya line and new line works - Hanli/Bederli-Bostankaya) and the project costs were well maintained (about 28% below appraisal estimates, paras. 5.02, 5.03, 5.04, 5.05 and Table 5A, Pt. Ill). The principal focus of the project, namely: improvements of locomotive availability (para. 3.02) and the reorganization of the whole locomotive maintenance and operation system progressed satisfactorily and showed very good results. Availability of mainline diesel locos increased from 64% in 1988 to about 81/82% in 1991/92. Technology transfer to achieve a radical change in traction system and technology for maintenance and locomotive control was a formidable task which was successfully pursued. As a consequence, TCDD during project implementation period covered all loco requirements and has had for the first time a surplus of more than 40 locomotives, some of which TCDD leased to Iranian Railways. By introducing modern technology with particular reference to rehabilitation, the number of immobilized diesel locos was significantly reduced (from 110 in 1988 to 8 locomotives which were also ultimately put into operation in 1992/93) - a remarkable feat. 7.02 TCDO, however, failed in two important areas, namely: (i) recapturing traffic, and (ii) financial performance. TCDD's volume of freight traffic declined from 14.8 m. tons in 1984 to 13.1 m tons in 1989 in spite of its improvements in technical efficiency. Passenger traffic remained stagnant at about 6.5 billion passenger-km since 1985 (para. 6.04 and Annexes 1 and 2, Pt. Ill). The SAR had projected that freight traffic would increase by about 1 million originating tonne every year during project implementation period. A major share of increased freight traffic was expected to comprise bulk commodities such as iron ore, hard coal and lignite. TCDD's performance fell far short of expectations and TCDD failed to take advantage of the economic role for railways in Turkey for TCDD's trunk lines which should be ideally suited to low-cost, long distance bulk transport. However, in 1990 TDC, the Iron and Steel SEE transported about 400,000 tonnes of iron ore by trucks in preference to rail. The continuing deterioration of TCDD's financial performance was even more alarming. TCDD suffered a loss of over TL2.1 trillion (about US$515 million or over US$1.4 nmillion per day) in 1991 and this loss was further increased to more than TL3 trillion in 1992. The cost coverage of rail traffic declined (Annex 3A, Pt. Ill) from 51% in 1988 to a very low 34% in 1991 and faltered around 30% in 1992 against a target of 65%. 7.03 There are multiple arguments behind the deteriorating financial and disappointing traffic performance of the railways throughout the project implementation period (paras. 6.06, 6.07, 7.04 and 8.03). However, if this trend is not soon reversed, the benefits accruing to the project (paras. 7.01) cannot be sustained. This poor financial performance was not unique to TCDD. This was a wider problem covering most of the SOEs. It has been widely rerognized that higher public tariffs may, no doubt, reduce the  11 sectors'/enterprises' deficit but would only address the symptoms rather than causes of the structural problems plaguing the sector. At the root of these problems is an outdated view of the role of the state, which concentrates on a wide range of responsibilities. The problems were exacerbated by the monopoly position of the SOEs and the lack of a hard budget constraint. 7.04 The SOEs/SEEs including TCDD have been hampered by government intervention in pricing and employment, and have carried the burden of the Government's wage policy while lacking the instruments to adjust their tariffs or improve their efficiency. The legal framework is inadequate to promote the participation of the private sector in activities where it may play a role or let the SOE's enterprises be run as commercial enterprises. It precludes them from being subject to the commercial code, especially from the provisions on bankruptcy, provides inadequate managerial autonomy, and leads to a lack of accountability. The Bank correctly identified the needs of TCDD's restructuring program and all parties (including TCDD, MOT, SPO and the Treasury) involved in the project expressed their willingness to support the program. But, regrettably, no action has yet been taken. VIII. Bank Performance 8.01 Through the Second Railway Project, the Bank made a positive contribution to the reorganization of the whole system of Turkey's locomotive maintenance and operation (paras. 7.01 and 6.03) and through technical assistance and training provided much needed technology transfer (paras. 6.01 and 6.08). At the project formulation, design and implementation stage, the Bank was involved in modal investment plans through a transport sector investment review, particularly, those of TCDD and DLH and helped to sharpen the investment profile and avoid over-investment (para 4.02). For rolling stock, TCDD agreed to use the Bank methodology for up-dated operational plans and to make successive procurement tranches for rolling stock under a 'rolling plan' commensurate with actual traffic growth to avoid possible over-investment (paras. 4.02 and 4.03) and considerable savings were realized. 8.02. The Bank made provision of an overall proJect coordinator (TCDD) for all project related activities with appropriate counterpart from DLH, a project executing agency, a special condition of loan effectiveness. This arrangement went a long way to successfully monitoring progress and complying with Bank requirements (para. 4.04). The Bank's insistence on the establishment of a Special Account (revolving fund) facilitated the timely flow of funds to the beneficiaries and allowed financing of eligible project expenditures with minimum administrative delay (para. 5.09). 8.03 However, in retrospect, the Bank should have been more forceful in persuading the Government to address the root causes of TCDD's inefficiency, which should have been evident at the time of project preparation. In addition, the Bank should have sought  12 from TCDD management, an all-out effort to capture more bulk traffic ideally suited for railways and to reduce unit costs. Instead, the Bank and the Borrower's main thrust appears to have relied more on the railway's ability to adjust the tarfff on a cost-plus basis to reduce budget deficts which, in turn, caused TCDD to be out-priced and more and more vulnerable even to losing traffic (such as iron ore) that previously had remained captive (para. 7.02). In addition, the Bank must be faulted for failing to take more decisive action when the financial covenants were not met and no satisfactory plan could be agreed on to improve TCDD's financial performance. 8.04 Furthermore, the Gulf crisis affected the Turkish transport situation significantly and left the road transport system with a large surplus capacity due to substantial reduction of transit traffic through Turkey to Iraq. The elasticity and resilience of the privately managed road transport operators in adapting to the changing situation resulted in a severe cut-throat competition and put the railways to a greater disadvantage as they were still largely motivated by public service obligations with very little commercial autonomy. IX. Borrower's Performance 9.01 On the whole, the Borrower's performance was satisfactory as regards technical considerations and physical implementation of the project but unsatisfactory so far as financial performance was concerned. A substantial number of civil works proceeded according to schedule and were completed on target dates or earlier (paras. 5.02, 5.03 and 6.02). The project costs were well maintained and are about 28% below appraisal estimates (paras. 5.07 and 5.08). The quality of construction of cMl works included in the project was satisfactory (para. 5.03). The twinning" arrangements of training of railway professionals with appropriate European railways progressed smoothly (para. 5.06 and Table 4, Pt. 111). The technical approach to the improvement of locomotive technology and effective utilization of expert services in "in-line' positons in TCDD proved very satisfactory (para. 5.06). However, the implementation of the 'part exchange' method system suffered a 'delay' due to Borrower's inability to provide local funds. The locomotive drivers' simulator with two control desks (for Alsthrom and EMD locomotives) was successfully put into operation by the Borrower at the Eskisehir Training Center. This improved traffic safety (para. 6.03) and increased fuel efficiency. Compliance with the Loan covenants was generally satisfactory except for 'financial' covenants (para 5.10, Table 7, Pt. Ill) and for the 'boiler plate' clause regarding management practices (Section 3.01 (b) of the Loan Agreement which in view of the poor overall performance cannot be considered to have been met. X. Bank - Borrower Relationship 10.01 Good relations between the Bank and the Borrower contributed to clarification and resolution of many issues that arose during project implementation (para. 5.07). At the  13 Bank's suggestion, the Borrower introduced corporate planning and prepared Action and Operational Plans on a continuing basis following a methodology agreed with the Bank (para. 4.03). The Bank's involvement with the Borrower on modal investment plans through a Transport Investment Review (para. 4.02) bore ample testimony to their joint collaborative effort. 10.02 This Loan was scheduled to close on December 31, 1992. However, the Bank agreed to extend it up to December 31, 1993, on the understanding that TCDD, with the support of the Government, would make progress towards addressing the restructuring issue, as well as on the ongoing signalling and telecommunications prcject component. The Bank's flexible approach enabled the railway to instal about US$35 million worth of expensive electronic signalling equipment which was delivered but lying uninstalled, avoid US$3 million in penalties and further improve some of the railway operational parameters within their control (para. 5.04). The Borrower fully appreciated the Bank's understanding and flexible approach. However, the project was in serious default of financial covenants and the poor financial situation resulted in acute cash flow problems for the railways. Direct and indirect subsidies were costing the Government over US$2 million a day (para. 7.02) in 1992. TCDD's resource crunch was already undermining the improvements made in productivity, locomotive efficiency and safety from the Second Railway Project. Under these circumstances, the Bank did not agree to extend the loan closing date beyond December 31, 1993. XI. Consulting Services 11.01 Technical assistance to strengthen railway operations, locomotive maintenance and management information system was undertaken with the help of foreign experts supported by middle-level specialists appointed to "in-line' positions within TCDD and the arrangement proved highly satisfactory (paras. 5.06 and 6.05). However, the study of a computer-assisted specialized management information system (SMIS) which was to be carried out by TCDD's electronic data processing (EDP) center with close cooperation of the above railway experts could not be carried out and had to be cancelled because the closing date was not extended (para. 6.02). XII. Project Documentation and Data 12.01 The appraisal report and the Loan documents were well-documented and provided a useful framework for both the Bank and the Borrower for review of project implementation. Supervision reports, procurement documents and the Bank's response to the procurement documents, contained in-depth on-going analysis of physical, financial and operational aspects of the railways (TCDD) in general, and on each project component as well. Submission of progress reports and audit reports also facilitated preparation of the PCR.  14 PROJECT COMPLETION REPORT PART II Project Name : II Railway Project Loan No. : 2739-TU Project Cost : US$420 million Establishment : Turkish State Railways (TCDD) and General Directorate for Railways, Harbors and Airports Construction (DLH) Evaluation of Bank's Performance and Lessons Learned 1. The mission members coming to TCDD between 1987, when the implementation of the project began, and 1993 when it ended, were experts in the fields. The missions were technically strong and there was good staff continuity between missions. This has very positively contributed to the solution of problems sowing up from time to time during the implementation of 5 sub-projects of the II. Railway Project. 2. Thanks to confidence as a result of the rapport with the Bank officials, a year extension was favored for the Kayas-Cetinkaya Signalization project which had not been completed in time. The important lesson learned is that project management type of organization is indispensable for the success of projects that embrace several different technical fields. Evaluation of Borrower's Performance 3. TCDD's performance, in terms of physical implementation,was of success in most of the project components. The total project was composed of the following 5 components: * Diesel locomotive Improvement: This very important project component was completed with success resulting in the improvement in the operation and thus high availability of diesel mainline locomotives. The capacity at main workshops and depots has been increased as well. As a consequence, some surplus locomotives were even leased to Iran in 1991 and 1992. * Track rehabilitation program: The track rehabilitation program (about 740 km) was completed on time and track maintenance machines have  15 ben put into operation, that have been yielding satisfactory resuits. * Technical Assistance and Training: All training programs were completed on time and the locomotive driver's simulator with two control desks has ben put into operation, that has been measuring driver skills and thus improving traffic safety and increasing the efficiency of fuel usage. * The other very important component of the project was the signalling component that could not be completed on time, mainly due to the rebidding process; Gulf war and the unexpected events in Yugoslavia. Though TCDD had exerted every effort to speed up the project, there still remains some work to be completed in 1994. The physical realization as of the end of April 1994 is 81%. As for DLH components, procurement of super-structure materials, substructure works and the following technical acceptance on Hanli- Bostankaya line and the training program were completed. Track laying work on the same line has been going on. After the cancellation of the Bank loan, TCDD is in a financially difficult position that would jeopardize the completion of the project. * The Bank cancelled the part of the loan that would be used to finance Specialized Management Information System (SMIS) due to the reason that TCDD lacked the commitment to efficiency improvement. The establishment of such system would be the first step to an integrated information system that would provide an essential amount of cost reduction. It is TCDD's understanding that recognition of the need for such system is, in itself, one of the indicators for the commitment to efficiency improvement and TCDD has been looking for sufficient financial sources to back up the establishment of such systems. As for the operational and financial targets set by the loan agreement, TCDD has been quite successful in attaining the operational targets but not the financial covenants. TCDD has taken several such measures for cost reduction as reducing staff and increasing productivity which are the main areas under control, but it has not been able to cover its operational costs mainly due to the factors beyond its control. Operational expenses have increased more than the revenues in real terms. This is primarily, on the one hand, due to the increases in wages  16 and salaries which lie outside the jurisdiction of TCDD. Wages and salaries account for 63% of the operational expenses. On the other hand, tariff increases have not been sufficient to cover the variable cost, since the strong competition from the roads results in high price elasticity in the railways. Failure in attaining even the revised financial covenants has forced TCDD to carry out studies for efficiency improvement. TCDD is now fully aware of the fact that it is only through restructuring it can ensure financial viability and this is the most important lesson learned. With the help of Bank's experts, TCDD management has started discussing this new concept of restructuring the related strategies in different railways; TCDD's probable strategic approach etc., and work has been going on within the Ministry together with TCDD to prepare the ground for restructuring. Relationship Between the Bank and the Borrower The Bank relationship with TCDD and the Ministry was very constructive, that contributed much to the progress of the project.  17 LROJECT MLION RBERT PART HI: Statistical Tables Table 1: RELATED BANK LOANS IN THE RAILWAY SECTOR Title Loan No. Year of Loan Amount Purpose Comments Approval (US $ Mill.) The First 893-TU 1972 47.00 To cover the first Completed in 1981 and an Audit Railway three-year tranche Report (No. 5768 of June 30, 1985) Project of the railways has been issued. Operational and 1972-77 Investment financial improvements Plan and to contemplated in appraisal were not improve operational achieved due to poor availability of and financial locomotives, lack of spare pau and performance. insufficient tariffadjustment. Cost overrun was 100% mainly due to inflation and time overrun wa 220% primarily due to delay in procurement actions and slow progres in arranging technical auitance. Source: Bank Mission  18 Table 2: PROJECT TIMETABLE Item Date Planned Date Actual Time taken to prepare About one year - TCDD project by the Country. and DLH prepared the project. First Presentation to the June 1984 Bank and first Bank Mission to consider the project. Appraisal mission. July 1985 July 1985 Negotiations completion February 1986 date. Board Approval July 8, 1986 Loan Signature July 24, 1986 Loan Effectiveness January 27, 1987 Loan Closing December 31, 1992 December 31, 19931 Project Completion May 11, 1994 Source: Bank Mission / President's Report P-4223-TU I/ Delayed due to difficulties experienced in shortage of financial resources, sub-project redesign, invoking rebidding and import authorization of trak materials for new construcion.  19 Table 3: LOAN DISBURSEMENTS (in Millions US Dollars) IBRD Appraisal Actual Actual as % Fiscal Year Estimate Disbursement of Estimate 1987 September 1986 1.00 December 1986 4.00 March 1987 12.00 June 1987 22.00 .07 3.2 1988 September 1987 33.00 12.90 39.1 December 1987 44.00 20.84 47.4 March 1988 54.00 26.52 49.1 June 1988 64.00 31.26 48.8 1989 September 1988 76.00 39.28 51.7 December 1988 87.00 49.61 57.0 March 1989 98.00 68.08 69.5 June 1989 109.00 75.84 69.6 i99 September 1989 119.00 85.37 71.7 December 1989 128.00 92.97 72.6 March 1990 137.00 101.45 74.1 June 1990 146.00 108.29 74.2 1991 September 1990 154.00 114.55 74.4 December 1990 162.00 123.58 76.3 March 1991 169.00 127.19 75.3 June 1991 176.00 133.34 75.8 1992 September 1991 182.00 138.42 76.1 December 1991 186.00 139.72 75.1 March 1992 190.00 150.05 79.0 June 1992 193.00 153.43 79.5 1993 September 1992 195.00 155.70 80.0 December 1992 197.00 158.20 80.0 March 1993 197.00 159.75 81.0 June 1993 197.00 161.76 82.0 1994 September 1993 164.64 84.0 December 1993 169.41 85.0 March 1994 171.81 87.0 June 1994 171.83 87.0 Source: Supervision Mission & SAR  20 Table 4: PROJECT IMPLEMENTATION Schedule of Completion at Actual Completion Appraisal Date Comments A. Imorovement of Diesel Locos Resulted in increased availability of Workshop equipment modernization December 1988 December 31, 1992 diesel locos. from 62% at appraisal Phasing out of weak points in diesel September 1988 December 31, 1992 (1986) to more than 80% in the 90s loco. design allowing TCDD to lease surplus Part exchange system December 1988 December 31, 1992 locomotives and cut down investment Fundamental overhaul of June 1988 December 31, 1992 in new loco6. immobilized locos. Improvement of communication links December 1986 December 31, 1992 for loco. control Data Processing (SMIS) December 1989 Incomplete contract negotiations took too much time, the loan dosing date expired and all remaining items incduding SMIS were cancelled. B. Track Overhaul Quality of work is satisfactory and most Ankara-Hyderpasha (164 km) March 1991 December 1990 of these works were completed ahead Irmak-Kayser (98 km) March 1988 December 1987 of schedule. Irmak-Zonguldak (137 km) March 1991 December 1990 Samsun-Kalin (199 km) June 1989 December 1990 Bogaz Kopru-Kardesgedigi (142 km) March 1991 December 1989 C. Track Overhaul Machinery The procurement of the main pails of Tarnping, linning and levelling June 1989 March 1990 the track maintenance machinery Machines progressed satisfactorily though slightly Workshop rail welding machines June 1988 September 1990 behind schedule excepting Track overhaul cars June 1988 June 1991 procurement of 25 track maintenance Workshop equipment and tools September 1988 September 1990 overhaul cars (draizine) where the Snow ploughs December 1988 September 1990 delay was more pronounced. These cars were not accepted by TCODD for a long time due to problem of car stability and excess axle load. D. Sianallino and Telecommunications Substantial delays occurred. Reasons of Kavas-Cetinkava Line (including for the delays are: (i) rebidding due to Hanli-Bostankaya section) June 1987 Mid 1994 long negotiation hme and bid validity Station preparation works March 1987 expiration (ii) shortage of financial Designing September 1988 resources provided by the govemment Delivery of materials and equipment December 1989 (iii) frequent changes of the project Cabling and installation June 1990 management, and (iv) the Gulf war and Testing and commissioning civil war in Yugoslavia affecting one of the Yugoslav contractors in SEL consortium. E. Line Caoacitv Works on Hanli- Bostankava Line (66km) Sub-structure works June 1988 Mid 1994 - do - Super-structure works * Tendering & contract awards March 1987 - Delivery of matenals/equipment October 1987 Track laying March 1989 Irstallation June 1989 ,esting and commissioning December 1989  21 Schedule of Completion at Actual Completion Appraisal Date Commets F. Technical Assistance and Training Trained staff of TCDD increased from Consultancy June 1987 Continuous about 3000 in 198 to 32,000 in 1992 Training December 1989 process and The- 'winning' arrmngement worked Procurement of Teaching Equipment June 1989 completed by satisfactorily (see Table 7 Status of December 1992 Loan Covenant) and the locomotive drivers' simulator wis instaled and put into operation in 1992 at the Eskisehir training center. Source: SAR/Mission Report  22 TIable 5: PROJECT COSTS AND FINANCING A - PROJECT COSTS Appraisal Estimate Revised Estimate Actual Items Local Foreign Total Local Foreign Total Local Foreign Total US$ million- - USS million- USS million- Improvement of diesel loco., 82.43 62.70 145.13 82.43 74.53 156.96 82.43 72.33 154.46 maintenance and operation Track overhaul (740 km) 73.11 45.25 118.36 72.12 38.47 110.59 72.12 38.47 110.59 Track overhaul machinery 5.72 13.50 19.22 5.72 17.18 22.90 5.72 17.15 22.90 Signalling and 28.57 30.60 59.17 15.50 51.36 66.86 15.50 51.36 66.86 Telecommunications of Kayas-Cetinkaya line (700 km) Line capacity works 75.55 18.89 94.44 33.00* 9.34* 42.34 33.00 9.34 42.34 (Bedinli/Hanli Bostankaya Section about 65 km) Technical Assistance and 1.71 3.12 4.83 1.71 2.75 4.46 1.71 2.75 4.46 training Total Base Cost 267.09 174.06 441.15 210.48 193.63 404.11 210.48 191.48 401.91 Continaoncdes Physical 25.96 15.74 41.70 10.74 - 10.74 2.86 - 2.86 Price 64.65 34.71 99.36 24.38 19.52 43.90 7.12 7.70 14.82 Total Contingencies 90.61 50.45 141.06 35.12 19.52 54.64 9.98 7.70 17.68 Grand Total 357.70 224.51 582.21 245.60 213.15 458.75 220.46 199.13 419.59 * Approximate break-up. Source: SAR, Mission Reports B - PROJECT FINANCING Source Planned Final -U USS Millio n-- World Bank 197.0 171.83 Govemment 376.0 245.17 Suppliers' Credit 9.2 2.59 (or Cofinancing)* 582.2 419.59 Govemment rtined financing responsibilty In cae the anticipated suppliers' credi (or Co-financing) did not materialize. Source: SAR and Mission Report  Table 6: PROJECT RESULTS A - OPERATIONAL TARGETS AND ACHIEVEMENTS - 1985-90 ITEM UNIT 1985 1986 1987 1988 1989 1990 PLANNED ACTUAL PLANNED ACTUAL PLANNED ACTUAL PLANNED ACTUAL PLANNED" ACTUAL PLANNED ACTUAL Eleciric Locomotives Passenaer Service Availability % 83 78 85 61 88 58 89 68 75 86 82 82 Performance km/day 394 372" 398 4230 402 399" 406 393 400 336 500 420 Train Load Ions 300 250 320 250 340 252 350 222 225 217 225 262 Freighl Service Availabiliry 83 78 85 61 87 58 88 68 75 86 80 85 Perfornnace km/day 184 372" 188 4230 192 399" 196 120 130 135 250 249 Train Load tons 670 847" 680 818" 690 916W 700 948" 765 811 770 782 Diesel Locomotives Passeneer Service Availability % 75 73 77 70 79 65 87 64 68 77 70 81 Perfonnance kn/day 547 306" 559 316" 573 282" 585 562 500 516 630 597 Train Load tons 310 250 320 250 330 252 335 287 290 278 300 274 Freieht Service Availability % 75 73 75 70 78 65 80 64 68 77 70 81 Performance kn/day 238 386" 241 316" 244 282" 248 225 255 256 255 210 Train Load tons 790 817" 798 818" 800 916" 814 948" 750 893 755 869 Passenier Cars Availability 7 83 84 85 86 82 75 82 75 82 Perfornance km/day 318 325 331 340 420 420 449 425 452 Freithl Wagons Availability % 92 84 92 87 92 89 93 91 90 89 90 91 Performance O00 nr}nV/ons cap. 11.9 11.0 12.1 10.5 12.4 10.4 12.6 11.7 12.1 10.8 12.7 11.3 Average Turn-around days 10.7 13.7 9.9 15.2 9.1 16.1 8.6 12.8 12.5 13.8 12.5 13.2 lime Staff Producaivity 000 TU/ernployee 306.0 326.0 317.0 299.0 328.0 316.0 340.0 357.0 355.0 375.0 390.0 400.0 TU - Traffic Units in lerms of NTKM + PKM Source: SAR/Mission Reponrs " As revised on Decenber 22, 1989 2 Average-passenger and freight carriers W " Average-freight train load of electric and diesel locomotives. Table6.A  24 Table 6: PROJECT RESULTS B - ECONOMIC RATE OF RETURN (ER) RE-EVALUATED AT PROJECT COMPONENTS APPRAISAL PROJECT ESTIMATE COMPLETION A. Improvement of diesel locomotive 26 22 maintenance and operation B. Track Overhaul (740 km) and 16 14 Maintenance Machinery (i) Ankara-Hydar pasa (164 km) 18 16 (ii) lrnak-Kayser (98 km) 17 15 (iii) Irmak-Zonguldak (137 km) 16 14 (iv) Samsun-Kalin (199 km) 14 12 (v) Bogaz Kopru-Kardezgedigi (142 14 13 km) C. Signalling and Telecommunications (700 20 14 km) - Kayas-Kayseri-Sivas-Cetinkaya D. New Works (about 65 km) (Bedirli/Hanli- 26 20 Bostankaya) Grand Total Weighted Average 22 17 Source: SAR/Mission Reports  Table 6: PROJECT RESULTS C - FINANCIAL IMPACT - TURKISH RAILWAYS OPERATING RATIO OPERATING RATIO+ CUSTOMER WITH GOVERNMENT WITHOUT GOVERNMENT CONTRIBUTION TO CURRENT ASSETS / DEBT/EQUITY PAYMENT PAYMENT OPERATING EXPENSES CURENT UABIUTIES YEAR APPRAISAL ACTUAL' (WITH APPRAISAL ACTUAL1 APPRAISAL ACTUAL' APPRAISAL ACTUAL' APPRAISAL ACTUAL' ESTIMATE GOVERNMENT ESTIMATE ESTIMATE ESTIMATE ESTIMATE PAYMENT) 1985 103 106 210 214 48% 47% 4.04 2.1 0.32 0.22 1986 136 136 163 188 61% 53% 3.02 1.3 0.29 0.27 1987 126 151 150 223 67% 45% 1.69 1.0 0.36 0.32 1988 117 140 135 194 74% 51% 1.42 0.7 0.34 0.35 1989 108 145 124 222 81% 45% 1.38 0.8 0.34 0.48 1990 101 152 115 243 B7% 41% 1.21 0.6 0.36 0.34 Souroe SAR/Supeuivon Mleeions + Openin ratio e operating s4ene operatng revenues 1/ fluid an aWihad fai _ms - Deuals we gn ian Aism 3A ad 3C.  26 Table 6: PROJECT RESULTS D - PROJECT STUDY TYPE OF STUDY PURPOSE AS DEFINED STATUS IMPACTOF STUDY AT APPRAISAL (i) Traffic To improve TCDD's The railway traffic costing specialist Study results could not be Costing accounting system in (a consultant from SNCF) reviewed satisfactorily applied because Study accordance with the TCDD's costing system and of TCDD's lack of autonomy (included in methodology and submitted an Analytical Report in and limited control over Third Port recommendations of the April 1989. These recommenations costs, e.g. a 128% real Project - study recommendations have been accepted by TCDD. The increase in the cost of wages Ln.2435-TU) within a year of its quality of the study is satisfactory. and salaries between 1988 completion. and 1991, inspite of staff reduction of 4,900 due to large semi-annual wage increases sanctioned by the Government over which TCDD appears to have no control. (ii) A computer- The study would be Study implementation was delayed. Does not apply as the study assisted carried out by TCDD's Seven bids (CANACCanada, RITES could not be completed (see Specialized electronic data - India, FINRE - Finland, ICF - USA, previous column). Management processing (EDP) center. Siemens - Germany, AYDIN- USA Information The study should be and TLC - Germany) were received System started not later than by September 1991 and bid (SMIS) for June 30, 1987 and evaluation was in progress. locomotive completed by June 30, However, since various hardware maintenance 1989. The terms of and software together with network and reference (Annex 5, SAR) configurations were quoted in the operation. for the study was agreed proposals, the bid evaluation to during loan became time-consuming as it negotiations. needed a lot of clarifications. The overall financial situation of TCDD in the meantime, continued to deteriorate at an alarming rate and the Government was not able to establish political support to reverse the trend- and made necessary structural adjustments recommended by the Bank. In the circumstances to avoid prolonged delay in project implementation, Bank Management preferred to cancel this project sub-component and the study could not be completed.  27 Table 6: PROJECT RESULTS E - TRAINING PROGRAM AND TECHNICAL ASSISTANCE PURPOSE AS DEFINEDAT APPRAISAL STATUS REMARKS Forty-eight man-months of TCDD's training program and The technical assistance and technical assistance to DLH'sprogram have been trainng program yielded good strengthen railway operations, satisfactorily completed. The results. Diesel locomotive locomotive mnaintenance and 'twinning' arrangement with availability increased from 62% management information SOFERAILand DE CONSULT at appraisal to 81% in 1990. system by providing senior 'in progressed satisfactorily For the first time during project line' positions to international according to schedule. The implementation, TCDD had a experts/professionals within simulator was installed and put significant surplus of diesel TCDD. In addition, about 350 into operation at the beginning locos in 1991 postponing the mon-months (Table 9 - SAR, for of 1992. need to acquire the new ones details) of technical visits and indefintely. Due to over- training for railway capacity of locomotives TCDD senior/middle management and negotiated (1991) a leasing specialists (including craftsmen, arrangmenent with Iran to loco drivers, etc.) through provide some locomotives. "twinning"arrangements with other European Railways engaged in similar works. The project provided fortraining equipment and materials including a 'simulator' for training of locomotive drivers.  28 Table 7: STATUS OF COVENANTS Loan Agreement (LA) Project Agreement (PA) DESCRIPTION STATUS REFERENCE A. General LA3.02 The Borrower shall cause DLH to take Complied with. timely action to complete all sub- structural works on the Hanli-Bostankaya line. LA3.03 The Borrower shall cause TCDDto Complied with. designate a project co-ordinator and DLHshould designate a counterpart to the project co-ordinator. LA3.04 The Borrower shall cause DLHto furnish Complied with. to the Bank, for its approval, a detailed plan for the training program under Part C (2) of the Project. LA4.02 The Borrower shall take all actions The Action Plan Program was established necessary on its part to enable TCDDto and achievements were reviewed periodically carry out its Action Plan. and monitored on a contimuous basis. Action Plan was implemented in many areas but performed poorly in operational f _acng where adequate Government support/commitment fell far short of expctations. LA/PA 4.03 Until completion of the project and prior No major investments were undertaken. to undertaking any investment exceeding the amount of USS20 million equivalent, the Borrower shall carry out economic feasibility studies to justify such investments. B. Financial Covenants Complied with from 1990 onwards with some LA4.01 (a), (b), (c) The Borrower shall have separate . minor time adjustments. accounts to record all project funds and expenditures relating to TCDD and DLH. The Special Account should be audited each year by an auditor acceptable to the Bank and the audited annual financial statements willbe sent to the Bank within 9 months of the end of the financial year.  29 Loan Agreement (LA) Project Agreement (PA) DESCRIPTION STATUS REFERENCE PA 4.02 (a) TCDD shall take all measures required to The Bnlk and the Government revised the achieve the following percentages of targets as follows: payment by customers to operating expenses: 128 1990 1991 % of cost 1986 1988 1990 coverage for all categories Freight 65 85 100 of railway Passenger - users 44 55 58 65 Sub-urban 50 70 75 Passenger - Actual Main Lines 35 45 50 achievement 45 41 34 36 PA 4.02 (a) (ii) TCDD shall, as from 1986, generate total The objectives were not met and overall revenues equivalent to Dot less than the financial performance was too poor. sum of (a) its total railway operating expenses, and (b) the amount by which debt services requirements exceed depreciation. C. Execution of Part A and B of the Proiect PA 2.04 (a) TCDD shall, by December 31, 1987, Most of the works were completed by the complete the necessary preparatory end of 1988. Delay was primarily due to a work to enable installation of the shortage of materials. signalling equipment under Part A (3) of the Project (Kayas-Cetinkaya line). PA 2.04 (b) TCDD shall establish within its Traction Complied with. Department a central division with responsibility for locomotive deployment and maitenance. PA 2.08 (a) TCDD shall implement the foreign Complied with and the training progm with training program under Part B (2) of the SOFERAILand DECONSULT progresed Project. according to schedule and completed. PA 2.08 (b) TCDD would submit a proposed plan for The utilization plan was received and agreed utilization of the simulator for the training in 1989. The simulator was installed and put of locomotive drivers by June 30, 1987. into operation at the beginning of 1992. D. Management and QOerations Generally complied with excepting financial PA 3.01 (b) (i), (ii), (iii), TCDD shall carry out the Action Plan performance pan. (iv) agreed between the Borrower and the Bank; annually review and update its Action Plan; prepare and furnish to the Bank annual progress reports.  30 Loan Agreement (LA) Project Agreement (PA) DESCRIPTION STATUS REFERENCE PA 4.02 (b), (c), (d) Before October 31 in each fiscal year, Generally complied with. TCDD shall review its financial performance and furnish to the Bank the results of review upon its completion. PA 4.04 (a) and (b) TCDD shall improve its accounting The railway traffic costing specialist (a system in accordance with the consultant from SNCF) reviewed TCDD's methodology and recmmendations of costing system and submitted an analytical the study included in the Third Port report (April 1989). The recommendaions Project (Ln. 2435-TU) and implement the have been accepted by TCDD but could not study recommendations within a year of be successfully implemented because of its completion. TCDD'slack of autonomy and limited control over costs (c.f. Table 6 - Project Study). Source: Supervision Missions  31 Table 8: STAFF INPUTS A - BANK MISSIONS STAFF STAGE OF PROJECT NO. OF NO. OF WEEKS IN CYCLE MONTH/YEAR STAFF WEEKS FIELD DATE OF REPORT Identification } June 1984 to Preparation } May 1985 4 to 5 8 35 Pre-Appraisal } Appraisal July 1985 5 4 20 August 1985 Sub Total 55 Supervisions 1. June 1988 4 1 4 August 1988 2. April 1989 4 2 8 June 1989 3. October 1989 4 2 8 November 15, 1989 4. May/June 1990 1 2 2 July 5, 1990 5. November 1990 3 2 6 January 4, 1991 6. June 1991 1 2 2 August 7, 1991 7. September 1991 2 2 4 October 17, 1991 8. June 1992 4 2 8 July 24, 1992 9. Aug./Sept. 1993 2 2 4 September 17, 1993 Sub Total 46 Grand Total- 101 Doc: M:\GanguBl\Turkmy\PCR-94\Tabio.A  32 Table 8: STAFF INPUTS B - AT HEADQUARTERS STAGE OF PROJECT NO. OF NO. OF STAFF WEEKS AT CYCLE MONTH/YEAR STAFF WEEKS HEADQUARTERS Preparation/ July 1984/ Preappraisal June 1985 4 6 24 Appraisal August 1985 5 5 25 Loan Negotiation February 1986 4 1 4 Sub Total 53 Suenrvision 1. August 1988 4 1 4 2. May 1989 4 1 4 3. November 1989 4 1 4 4. July 1990 1 1 1 5. December 1990 3 1 3 6. July/August 1991 1 2 2 7. October 1991 2 2 4 8. July 1992 4 1 4 9. September 1993 2 1 2 Completion Report March-June 1994 2 4 8 Sub Total 36 : O . A: . 4 I - ) T O TA L : 89::. . : i . ..................: -:.E i : :!; T: 7:X E. E i :2 Ti -;| 7.; . E:: -?f --.-iS T:t i T;-::T :: :.ii. .... ..-:: .. _To _T  33 Annex 1 TURKISH RAILWAYS - TCDD'S & DLH'S INVESTMENT PLAN - 1985 & 1989 AND ACTUAL IMPLEMENTATION PLAN ACTUAL* 1985-89 198S-89 ---(in US S MILLION)--- ----- T.C.D.D. A. Infrastructure Capital Overhaul 172.8 176.7 (track, Str., Jn.) Track Material 33.2 25.2 Track Reinforcement 13.9 4.2 Track Doubling 24.7 2.7 Connecting Lines 24.7 4.3 Telecommnunications 4.0 3.7 Signalling 161.7 85.9 Electrification 192.9 48.6 Sub Total 627.9 351.3 B. Traction & RollinR Stock Diesel Main Line Locos 191.8 138.1 Diesel Shunters 48.5 88.5 Electric Locos 82.6 60.0 Electric Commuter Trains 48.5 38.7 Loco Renovation 15.6 18.5 Passenger Coaches 28.9 38.6 Wagons 145.2 89.1 Sub Total 561.1 471.5 C. Others (Building, Workshop, Depots, 226.2 122.9 etc.) GRAND TOTALTCDD - A+B+C- 1,415.2 94. D. DLHProject Construction Works 213.9 134.6 TCDD + DLH- 1,629.1 1,080.3 Source: SAR/Supervision Missions + Some adjustments in progress. Doc: M:AGanguIATurkeykPCR-94'Arnnx. I  TURKISH RAILWAYS (TCDD) OVERALL TRAFFIC TRENDS A - FORECAST/ACTUAL (1985-1990) 1985 1986 1987 1988 1989 1990 Traffic Unit Approx Approx Approx Approx Approx Approx Forecast Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual Freight Gross ton-km 16.5 16.5 17.9 15.7 19.0 15.1 20.0 16.3 21.3 15.8 21.3 17.0 in billions Passenger Sub- Gross ton-km 1.5 1.4 1.7 1.4 2.0 1.4 2.1 1.5 2.2 1.4 2.2 1.5 urban in billions Passenger Others Gross ton-km 5.5 5.5 5.9 5.4 6.1 5.4 6.3 5.1 6.5 5.2 6.5 5.2 in bilions Freight Net ton-km in 8.0 8.0 8.3 7.4 8.8 7.4 9.3 8.0 9.9 7.6 10.0 7.9 billions Passenger Sub- Net pass-km 3.0 2.9 3.4 2.8 4.0 2.8 4.2 2.9 4.6 3.2 4.6 2.9 urban in billions Passenger Others Net pass-km 3.6 3.6 3.8 3.3 3.9 3.3 4.1 3.8 4.2 3.7 4.2 3.5 in billions Source: SAR/Supervision Reports. Doc: M:\Ganguli\Turkey\PCR-94\Annex.2a  35 AXNEX 2B TRAFFIC TRENDS - TCDD Appraisal Forecast (1989) and Actual 1984 and 1989 (Commodity-wise Freight Traffic 1984 1989 1989 (Actual) Appraisal Forecast+ (Actual) Freight Traffic ('0W0 net (Mill. net ('000 net (MM. net ('000 net (Mill. net ton tonnes) ton Km.) tonnes) ton Km.) tonns) Km.) Domestic 14,154 6,908 19,600 9,400 11,931 6,516 Intemational transit 617 592 600 600 1,172 1,031 Commodity-wise Frlohht 1. Coke 211 188 200 200 118 76 2. Lignite 1,823 562 2,800 700 2,013 1,005 3. Anthracite 1,867 372 2,400 400 1,757 576 4. Sugar beet 1,331 142 1,300 150 312 49 5. Molasses 35 15 - 64 17 6. Iron ore 3,760 2,396 6,300 4,000 3,298 2,021 7. Other ores 558 209 500 200 8. Chrome 326 185 300 200 1.307 670 9. Cereas 488 329 500 350 357 233 10. Fertilizer 465 264 500 300 1'1 85 11. Stee & iron products - - 195 114 i2. Cement 6 2 - 13. Petrol, oil & lubricant 293 110 300 100 316 116 14. Other goods 2,991 2,134 4,500 2,800 2,085 1,554 Total Domestic 14,154 6,908 19,600 9,400 11,931 6,518 International 617 592 600 600 1,172 1.031 GRAND TOTAL 14,771 7,500 20,200 10,000 13,103 7,547 Sources: SAR/Suporvision Report/Mission Reports * Approximate. Doc: M:\Gangull\Turkoy\PCR94\An.x.2  TtJRKISH RAILWAYS (TCDD) AUDITED FINANCIAL STATEMENTS INCOME STATEMENTh (TI. Billion) BASC ACTIVrrY 1985 19i6 1937 19U 1939 1990 APPRAISAL APPRAISAL APAWSAL APPRAISAL APMAISAL APPRAISAL FORECAST ACTUAL FORECASr ACTUAL FORECAST ACTUAL FORECAST ACIUAL FORECAST ACTUAL FORECAST ACTUAL Flegk 59.6 58.3 9t.9 32.2 1364.4 48.$ 17.3 166.7 249.3 300 314.8 540.6 P Sab-w 3.9 4 6.2 5.7 10.2 9.7 15.0 15.9 19.9 25.7 24 56.1 Paa_u-Mi.Lia Is.S 10.3 16.6 14 23.7 23.7 32.4 37.5 43 65 53.7 110.9 S9.TeliOC omu . 74 72.6 121.7 101.9 170.3 1172 234.7 220.1 312.2 390.7 392.5 707.6 Uuecmwic Lima 4.7 5.1 0 12.5 0 19.7 0 28.7 0 69 0 132.3 Trac Upkeep 23 21.3 25 26.2 31.2 36.6 37.5 53.3 45 112.7 54 232.9 F_*kqavcu 46 44.2 0 0 0 0 0 0 0 0 0 0 P - C Saw 3.3 3.1 0 0 0 0 0 0 0 14.4 0 36.1 S+.TowI (Subi") 77 73.7 25 31.7 31.2 56.3 37.5 S2 45 196.1 54 40123 TOTALOPERATING*EVNUES 151 140.3 146.7 140.6 201.5 173.5 272.2 302.2 357.2 586.3 446.5 1108.9 Wm" u Suabdis 62.3 60.7 75.4 75.7 90.4 1t2.7 103.5 178.1 130.2 411.2 156.3 352.6 Fuel 34.8 37.7 49.1 39.6 65.3 37.7 t2.1 70.6 93 143.1 114.6 255.3 mulias 15.9 3.8 22.4 11.2 29.8 15.4 36.9 21 45.9 53.3 53.3 U O.he 21.6 25.5 30.4 34.9 40.4 47.7 49.9 75.5 61.7 120.5 71.6 247.6 Su&ToeaWorkingExpe4ms 135.1 132.7 177.3 161.4 225.9 213.5 277.4 . 345.2 335.5 723.6 395.3 1444 Depeciation 20.2 22.7 21.6 30.3 29 47.6 40.3 32.2 51.2 138.1 56 272.6 TOTAL (ERATIDO : E - 1255.3 155A IS5.9 191.7 254.9 261.3 3277 427.4 337 t66.7 4512. 1716.6 NetOperaingReveinue(widtGov. psyman) (4.3) (9.1) (52.2) (51.1) (53.4) (S7.3) (45.5) (125.3) (29.8) (279.9) (S.3) (607.7) Nd _Opuig Re*vemsm(m1hVA GOVL psyMnct) (t1.3) (32.3) (77.2) (89.1) (84.6) (244.2) (33.0) (207.3) (74.8) (476.0) (59.3) (1.009.0) Opaaling Raio( wih GOoVtpsynad) 202.85 206.22 235.53 236.34 126.50 150.62 116.72 141.48 105.34 247.70 202.29 154.30 Operi nRao i(willmuloavtpaynln) 209.t6 224.05 263.43 258.23 149.63 222.95 135.36 194.15 123.96 221.53 225.11 242.59 Cuaanm Coninbriutiini _peing Expcusi 48% 47% 61% 53% 67% 45% 74% 51% 32% 45% 87% 41% Sw5 SAt. SWamI RImi La  TURKISH RAILWAYS (TCDD) AUDITED FINANCIAL STATEMENTS INCOME STATEMENTS (USS MilUib) BASIC ACTIVllY 1915 19t6 1987 19S8 19S9 1990 APPRAISAL APPRAISAL APPRAISAL APPRAISAL APPRAISAL APPRAISAL FORECAST ACTUAL FORECAST ACTUAL FORECAST ACTUAL FORECAST ACTUAL FORECAST ACTUAL FORECAST ACTUAL Revenuecs FPrigh $114.18 $111.69 S146.63 S121.87 S159.12 $103.59 $131.69 $117.20 S117.50 S141.40 5120.681 5207.24 Puaeqc--Sub-ura.n S7.47 $7.66 S9.19 S8.45 1I1.90 $11.32 S10.55 Si1.18 S9.38 S12.11 S9.20 S21.51 Passenger - Main Line S20.11 S19.73 S24.61 S20.76 $27.65 $21.S2 $22.78 S26.37 $20.27 $30.64 $20.59 S42.51 Sub-Totalt romCustomer S141.76 S139.08 S180.43 S151.07 S198.67 $136.72 $165.01 S154.75 $147.15 S184.14 $150.46 $271.26 Fmrn Govemmnent (Stubsidiesl Uneconomic Lines S9.00 S9.77 $0.00 S18.53 $0.00 $22.98 $0.00 S20.1S $0.00 $32.52 $0.00 $50.72 TmckUpkeep $44.06 S40.80 S37.06 $38.84 $36.40 $42.70 $26.37 $37.47 $21.21 $53.12 S20.70 $89.28 FeightServices S88.12 $S4.67 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 S0.00 $0.00 S0.00 $0.00 Pa_see Services $6.32 S5.94 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $6.79 S0.00 $13.84 Sub-Total (Subsidies) S147.51 S141.19 $37.06 $57.38 S36.40 $65.68 $26.37 $57.65 $21.21 $92.43 $20.70 $153.84 TOTALOPERATINGREVNUES $289.27 $280.27 $217.49 $208.45 $235.07 S202.40 $191.31 $212.40 S168.36 $276.57 $171.16 $425.09 OF=iang ExDecf WagesandSalanes S120.31 S116.28 $111.79 $112.23 $105.46 S131.47 . $76.21 S125.22 $61.37 $193.81 $59.92 $326.14 Fuel $66.67 S72.22 $72.79 $58.71 $76.18 $43.98 $57.72 S49.64 S46.19 S67.45 $43.93 $98.06 Malesials $30.46 $16.86 S33.21 $16.60 $34.76 $17.97 $25.94 S14.76 S21.63 $25.36 $20.43 S33.73 Other $41.38 $41.85 $45.07 $51.74 $47.13 S55.65 $35.08 S53.08 S29.0S S56.79 $27.45 $94.92 Sub-Total WorkingExpenses $258.81 $254.21 $262.86 $239.29 $263.53 $249.07 $195.04 $242.71 $158.27 $343.40 $151.73 S553.55 Depreciation $38.70 $43.49 $32.02 $44.92 $33.83 $55.76 $28.33 $57.79 $24.13 $65.09 $21.47 $104.50 TOTALOPERATINOGEXPENSES $297.51 $297.70 $294.89 S284.21 $297.36 $304.13 $223.37 $300.50 $182.40 $408.49 $173.20 $651.05 Net Opeating Revenue (with Govt. payment) ($8.24) ($17.43) ($77.39) ($75.76) (S62.30) ($102.43) ($31.99) ($88.10) ($14.05) ($131.92) (S2.03) ($232.96) NetOpeatingRevenue(withoutGovL payment) (S155.75) (S158.62) (S114.46) (S133.14) ($98.69) ($168.11) ($58.36) ($145.75) ($35.25) ($224.35) (S22.73) ($386.80) OpuatingRutio(withGovLpaymnent) $197.03 $203.49 $201.01 S202.14 $147.57 $175.69 $82.06 $99.47 $51.06 $69.61 $38.79 $59.34 Operating Ratio (without GovL payment) $402.04 $410.06 $242.30 $278.91 $174.61 $260.09 S95.17 $136.53 $58.42 S104.55 $44.13 $93.00 CuaomnerContributionlOperatingExpenses 48% 47% 61% 53% 67% 45% 74% 51% S1% 45% 87/ 41% I0 LI) .-  TURKISII RAILWAYS (TCDD) AUDIMD IANCIAL STATEMNUTS Babnee Slo _"mm 1s5 10 J157 am Mp9 89o ASSETS APPRALSAL APPRAISAL APPRASAL APPKAAL AP99.SAL APISAL FORECASr ACTUAL FOR.CAST ACTUAL FORECAST ACltAL FORECAST ACIUAL FORECAST ACUAL FORECAST ACtUAL Cub RedBombA31. 30 35 6.1 42 6.7 5.0 112 6.0 113 6.3 17.6 5aml. 107.0 1242 1141 117.3 948 10* 84.1 139.2 96O 270.7 94.0 450.2 22l7 28.7 262 32.0 30.1 4.4 34.6 53.2 329 121.2 43.7 212 o_Z 49 81.9 1i 14.0 3.2 23.1 3.2 44.0 3.3 91.1 5.5 18.4 4A162 1671 140 10.4 1343 1791 129.6 247.7 1451 491- 151.7 92.M _ _ o Mis. 43.7 55.1 53.0 55.1 69.1 55.1 73.6 53.1 12.3 35.1 135.9 <_ _A nftf.u 452.3 50.5 331.2 7X2 7063 1046s 7. 1812 1126. 3272.5 13.7 4531 IA _ p"m 11 13336 12.6 1885. 155.6 27" 195.9 8s9 347.1 A1 3011 .4 3173 4e 4& 3512 3s0.7 711.7 7n0.1 13DNA 5.2 234.0 917.4 3254A wa m p2.o 4 103 4as 1041 32 177.5 105.S 420.3 91 361.2 96. 6.3 I DAA 361.0 W5 60.4 MA.1 0533 12115 8076 20s3s 1175.5 33331 1220. 5a37.7 tL M u 41.1 701 493 1349 792 110.2 911 331.6 205.3 6301 123e 151" La1_D1 113 133 126.4 8l9 137.4 3281 2392 595.7 361.1 S2LI 032 I.s NOWCON"Lkww 35" * 3.8 45.7 49 3213 253 * 2049 212J 21U.S 331. 39.3 310.2 377.i 9273 514.7 1433.0 435. 2005S Cq1 1301 390 227.4 210.6 3333 22. 5. 305.7 681 626.1 .3 901.4 l_w 4.7 14J ISJ 241 3.8 112 11"Mil" __ovin 17/S 314 171. 351J 17V J09.9 1719 9381 175t9 17154 17.9 27S45 -s_"&Mk>&ftM 11. 4 (154 ( 0(11.2) (96 (871.0 (23) 31.1) (337) (264. (lip") T1 _ afaPus 3S.3+ 231 73.5 38.3 115.0+ 42 160.1+ 71, 109. 93.2 2623+ I9.6 STOKBV 3502 41.1 430. 3539.1 36.0 705.3 03.6 1127s 670.7 21021 7530 2672L ToldL 361.1 4919 640.4 370.1 253 1215.5 1070.7 75.2 1175.4 353531 123.6 5577.7 4AUU l.l 4.0 271 3.0 1.5 1.7 8.0 1.4 0.7 1.4 0.8 1.2 0.6 Debtff4A1 032 0.2 029 027 036 0.32 0.34 0.33 034 0.28 036 034 + _uh Ph3 Tax 5S S AALdIa'V.m Rap2 1N ICJ (..  TURKISH *AILWAYS (TCDD) AUDITED IAiJCIAL XTATUMINTS Balane mt Suammry (USS MEN) 1965 1966 19S7 198S 1969 1990 ASSET S APPRAISAL APPRAISAL' APPRAISAL APPRAISAL APPRAISAL APPRAISAL FORECAST ACTUAL FORECAST ACTUAL FORECAST ACTUAL FORECAST ACTUAL FORECAST ACTUAL FORECAST ACTUAL C d B1 60.5 S5.7 S5.2 S9.0 14.9 $7.8 13.5 S7.9 $2.8 S7.2 S2.5 $6.7 R*uvk 1205.0 S237.9 S169.2 S173.9 Sll0.6 S1269 S596 $97 S144.3 S127.6 S36.0 s172.6 4.5 S55.0 S33.8 S47.4 135.1 47.4 124.3 $37.4 Sil.l 557.1 S17.5 S10.4 oh, S9.4 S22.8 S76 S202 16.1 1269 S3.7 S309 125 1429 1221 S649 _ub-ToW Cwmt ago S318.4 1321.5