Turkey - Second Small and Medium-Scale Industry Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16659 IMPLEMENTATION COMPLETION REPORT TURKEY SECOND SMALL AND MEDIUM-SCALE INDUJSTRY PROJECT LOAN 3067-TU June 9, 1997 Industry, Trade and Finance Operations Central and Southern Europe Departments Europe and 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.  CURRENCY EOUIVALENTS Currency Unit = Turkish Lira (TL) 1989 US$1 = TL 2,027.0 1990 US$1 = TL 2,930.1 1991 US$1 = TL 5,079.9 1992 US$1 TL 8,564.4 1993 US$1 = TL 14,472.5 1994 US$1 TL 38,726.0 1995 US$1 = TL 59,650.0 1996 US$1 = TL 94,756.0 April 1997 US$1 = TL 130,566.0 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS EU European Union ETC Export Trading Company FE Foreign Exchange FERIS Foreign Exchange Risk Insurance Scheme FSAL Financial Sector Adjustment Loan GOT Government of Turkey THB Turkiye Halk Bankasi TSKB Turkiye Sinai Kalkinma Bankasi (Industrial Development Bank of Turkey) SYKB Sinai Yatirim ve Kredi Bankasi (Industrial Investment and Credit Bank) TVB Turkiye Vakiflar Bankasi EB Emlak Bank EXIMBANK Export Credit Bank of Turkey SIS State Institute of Statistics TSE Turkish Standards Institute SMI Small and Medium-Scale Industries SSI Small Scale Industnes MSI Medium Scale Industries ERR Economic Rate of Retum FRR Financial Rate of Return PCI(s) Participating Credit Institutions(s) SMI II Second Small and Medium-Scale Industry Project TURKEY FISCAL YEAR January I to December 31 Vice President: Johannes F. Linn, ECAVP Director: Kenneth G. Lay, EC1DR Division Chief: Franco Batzella, EC1IT Responsible Staff: Gurhan Ozdora, Financial Sector Project Officer George Zaidan, Project Adviser Rohit Mehta, Sr. Disbursement Officer Tunc Uyanik, Financial Specialist  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT TURIEY SECOND SMALL AND MEDIUM-SCALE INDUSTRY PROJECr (Loan No. 3067-TU) Contents Preface ... i Evaluation Summary ............................... ii Part I. Project Implementation Assessment .............. ................. 1 A. Statement/Evaluation of Objectives .1 B. Achievement of Objectives. 2 C. Major Factors Affecting the Project. 4 D. Project Sustainability .5 E. Bank Performance. 6 F. Borrower Performance. 6 G. Assessment of Outcome ........................................... 7 H. Future Operation. 7 I. Key Lessons Learned. 7 Part II. Statistical Table ............................ 9 Table 1: Summary of Assessments ....................................... 9 Table 2: Related Bank Loans/Credits ................................... 11 Table 3: Project Timetable ........................................... 12 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual .... ... 12 Table 5: Project Financing ........................................... 12 Table 6: Economic Costs and Benefits ................................... 12 Table 7: Compliance with Operational Manual Statements ................... 13 Table 8: Bank Resources: Staff Inputs ................................... 14 Table 9: Bank Resources: Missions .......................... 14 Table 10: Covenant Report: Latest Status of Covenant Compliance ..... ......... 15 Part III Borrowers Contributions to the ICR ........... .......................... 19 STATISTICAL ANNEXES MAP NO. 24903R 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.   i IMPLEMENTATION COMPLETION REPORT TURKEY SECOND SMALL AND MEDIUM SCALE INDUSTRY PROJECT (LOAN NO.3067-TU) Preface This is the Implementation Completion Report (ICR) for the Second Small and Medium Scale Industry Project (SMI II), Turkey, for which Loan 3067-TU in the amount of US$ 204.5 million equivalent was approved on June 28, 1989 and made effective on October 26, 1989. The loan was closed on December 31, 1996, compared with the original closing date of June 30, 1995. Total disbursements amounted to $202.3 million equivalent, including funds credited to the Special Account. Final disbursement under the loan component took place on 03/13/1997. US$2.2 million is being cancelled. Any funds in the Special Account already disbursed and not accounted for will have to be refunded, and subsequently cancelled. This issue is being addressed as of this writing. The draft ICR was prepared by Gurhan Ozdora, Task Manager, RMT. It was reviewed by Franco Batzella, Division Chief (EC 1 IT). Written contributions were provided by Undersecretariat of Treasury; Sinai Yatirim ve Kredi Bankasi (SYKB); Turkiye Halk Bankasi (THB); Turkiye Vakiflar Bankasi (TVB); Turkiye Sinai Kalkinma Bankasi (TSKB); Turkish Standards Institute (TSE); State Institute of Statistics (SIS) and the Export Credit Bank of Turkey ( EXIMBANK), and are included as appendixes to the ICR. Preparation of this ICR started during the Bank's final supervision mission in September 1996. It is based on material in the project files and data collected after the loan closing date. The Treasury and the implementing agencies contributed to preparation of the ICR by providing views and evaluation reports on the Project's execution.  ii IMPLEMENTATION COMPLETION REPORT TURKEY SECOND SMALL AND MEDIUM SCALE INDUSTRY PROJECT (LOAN NO. 3067-TU) Evaluation Summary Introduction: 1. The US $ 204.5 million IBRD loan for The Second Small and Medium Scale Industry Project was approved in June 1989 and made effective in October 1989. The Bank provided this loan to the Govemment of Turkey for supporting GOT's program for small and medium scale enterprise (SMI) development by providing financial, technical and marketing support to promote efficient SMI investments. The Executing Agencies were five Participating Credit Institutions (PCIs) for the loan; Turkish Standards Institute (TSE), State Institute for Statistics (SIS) and the Export Credit Bank of Turkey (EXIIMBANK) for the technical assistance program. The loan was closed on December 31, 1996, 12 months after the planned completion date of June 30, 1995. Project Objectives: 2. The project objectives were: (i) to further assist in the expansion and diversification of small-and-medium scale industries (SMIs), and to this end; (ii) to improve SMI's access to credit to finance their investment needs by involving an increasing number of financial intermediaries in providing such credit; (iii) to provide technical and marketing services to SMIs to assist them in improving their product quality and in competing in local and export markets; and (iv) to improve understanding of SMIs problems and prospects through the availability of more reliable statistics for better policy and project formulation. The project built on the initiatives started under two previous projects: Labor Intensive Project (1952-TU) and SMI I Project (2647-TU); it was designed to complement the financial sector restructuring efforts of FSAL II (2694-TU). It supported the Bank's sectoral strategy for: (i) strengthening the international competitiveness of the industrial sector; (ii) increasing the production and export capacity of the SMI sector; and (iii) strengthening the financial intermediaries. 3. The project's main institutional development objective was to strengthen the PCIs with particular focus on improving their project appraisal and supervision capabilities. The project also had a technical assistance component which included: (a) an Export Promotion program administered through EXIMBANK, to assist small Export Trading Companies (ETCs) to expand their exports to new markets, (b) a Quality Improvement component administered through TSE, which aimed at helping SMIs improve quality standards to enhance market acceptance for their  iii products, and (c) Sector Statistics component, administered by the SIS, aimed at providing more reliable and accurate data on SMIs for future policy formulation. Achievement of Objectives 4. The credit component of the project was to provide financing for SMI investments and operations in order to support their production capacities, financial structures and market competitiveness. These objectives were achieved. Overall, the Loan of $200 million financed 250 sub-loans with an average size of $0.8 million, compared to 900 sub-loans at an average size of $0.2 million envisaged in the SAR. At appraisal, it had been envisaged that PCIs would contribute $100 million and sub-borrowers $200 million. In reality, the PCIs' contribution was negligible, but the sub-borrowers provided $610 million, with the net result that total investment in sub-projects amounted to $810 million, some 62% higher than the $500 million envisaged at appraisal. These investments were generally viable, yielding real FRRs and ERRs exceeding 30% on average. Incremental output resulting from these investments is estimated at $716 million and incremental exports at $442 million at full capacity utilization. 5. The objective of assisting PCIs in improving their project appraisal-supervision capabilities, information systems and operating procedures related to SMI lending, was not realized through the use of loan funds. Apart from an early hardware purchase made by Emlakbank, the funds earmarked for this purpose, upon the PCIs, request were added to their credit allocations. Nevertheless, the requirements of the loan agreement relating to project preparation and appraisal and to the PCI audits contributed substantially to the institutional improvement of the PCIs and their portfolio quality. Average collection ratios on medium and long term loans had improved significantly at the closing of the loan. 6. The Export Promotion component administered by the EXIMBANK was to finance marketing consultants specialized in product lines predominantly produced by the firms in the SMI sector. The program was only partly successful. It helped increase the awareness of the related agencies to the export marketing issues faced by the SMI sector and the need for policy coordination. However, only 43% of the funds allocated to this component were utilized. 7. The Quality Improvement component administered by the Turkish Standards Institute (TSE), aimed at increasing the SMIs' awareness of the importance of standards through training programs, workshops and promotional literature. To achieve these objectives, training programs for TSE staff and SMIs were organized. Also, the procurement by TSE of calibration equipment, hardware and software, was financed by the loan. Some of these programs were also supported by other related agencies. 8. The objective of the SMI Statistics component was to help improve the statistical database on the SMI sector in Turkey. The program, administered by the State Institute for Statistics (SIS) institutionalized an annual survey of manufacturing industries to collect performance and structure data according to various size definitions. In addition to this, SIS staff attended various training programs to increase their technical expertise.  iv Major Factors Affecting the Project 9. The loan disbursed successfully during the first three years (1990 - 1992) of implementation. However, starting with 1993 there was a drastic decrease in the disbursements, and in 1994 commitments came to a virtual standstill. The reasons for this were: (i) weak market demand for investment credits due to uncertain macro-economic environment; (ii) extremely high and fluctuating real rates for foreign exchange risk insurance scheme (FERIS), the applicable pricing mechanism for SMI II funds; and (iii) the fact that many potential subprojects were receiving subsidized credits from the Government which made them ineligible for financing under the loan. In 1993 the Bank agreed with the GOT not to review and approve sub-loans which were to be used in a blend with subsidized credits from the Treasury. 10. As a result of this situation and in response to the GOT's request, some amendments were made in the loan agreement in December 1994. The loan was restructured to allow the financing of permanent working capital, pre-shipment export finance and leasing. In addition, following the amendment, loan proceeds could be on-lent on a single-currency basis in US Dollars as well as DMs with an adequate premium over their respective LIBOR rates. 11. Following this restructuring, there was a significant acceleration in loan utilization. Commitments made by the PCIs was 98% of the total loan amount and cumulative disbursements amounted to $202.3 million, with the final disbursement made in March 13, 1997. The 1994 restructuring was followed by an improved investment climate which gradually developed throughout 1995. This improvement was due to reactivation of investment decisions which were postponed because of the economic crisis and also due to new expectations arising from the customs union with EU. Another aspect of the restructuring was that numerous sub-borrowers availed themselves of the option to prepay subloans (which was not permitted under the previous FERIS arrangement), thus made additional funds available to the PCIs for recycling. 12. In addition to the improvements in the investment climate, another reason for increased demand for the loan funds, was the unavailability of other sources of medium and long-term finance. Due to the uncertain macroeconomic environment and high rates of inflation, the prospects for the banking system and foreign creditors to provide medium and long-term finance to the private sector was very weak. Given this situation, project funds proved to be very attractive to investors. Project Sustainability 13. Due to the high public sector borrowing requirement (PSBR) since 1990, the GOT has continued to finance its deficit mainly through the sale of government securities. The banks invested heavily in these instruments, which crowd out medium and long-term lending to private industry, especially SMIs. Another constraint for the banks is the unavailability of medium-to- long term funding resources. Under these conditions, it would be unrealistic to expect commercial banks to provide MLT credit on a sustained basis as envisaged in the project objectives. However, the success of the credit component in a narrow sense can be considered as sustainable because loans made in foreign exchange can be recycled: the PCIs can re-lend the foreign exchange repayments from their sub-borrowers which exceed their repayment obligations  v to GOT. The current interest rates make project lending profitable for the PCIs, by providing protection against capital erosion. 14. The other three components of the project, funded by the TA portion of the loan, will require further financial and technical support to be sustainable. The export promotion component also needs clear definitions of objectives of the relevant national agencies. The level of staff quality and technical capabilities of both TSE and SIS has improved remarkably as a result of the project; however, continued infusion of funds are needed in order to maintain these results. Bank Performance. 15. The Bank's performance at preparation and appraisal was satisfactory. Bank missions drew on the experiences of the two earlier SMI projects one of the Labor Intensive Project (1952- TU and 2647-TU). The number of PCIs involved in the project increased. The selection of PCIs was made according to their SMI loan portfolios and to their technical expertise in project lending. The Bank's performance during the implementation phase was also satisfactory. Supervision missions were fielded at regular intervals twice per year and the relationship of Bank staff with the Treasury and implementing agencies' staff was excellent. Treasury and the PCIs also rate the project implementation as highly satisfactory. Borrower Performance 16. The performance of the GOT and the implementing agencies was highly satisfactory in some aspects, satisfactory in others and deficient in some. The performance of the PCIs in carrying out the credit operations, and their compliance with the financial covenants agreed under the Project, was satisfactory in general. Treasury also contributed to a smooth operation of the credit line. Two of the PCIs, Emlakbank (EB) and Halkbank (THB) had some problems in meeting the eligibility criteria of the loan agreement and EB was suspended from participation in the project in 1992. THB's participation after the 1994 restructuring of the project was made conditional on a favorable review of its eligibility; this remained in suspense until end 1996 (when the loan was fully committed), due to strong qualifications in its audit reports and weakening of its capital base and portfolio quality. The performances of both TSE and SIS were highly satisfactory, and the technical assistance and training programs financed by the loan for these two agencies were successful and consistent with the objectives of the loan. The export promotion component administered by the EXIMBANK was unsatisfactory due to deficiencies in the design of the consultancy programs. Assessment of Outcome and Future Operation 17. The Project achieved most of its objectives. Its outcome is satisfactory, despite the delays in implementation caused to a large extent by the economic environment. A plan for the project's future operation is attached as Annex A.  vi Key Lessons Learned 18. Several lessons have been learned: (i) entrepreneurs like predictable debt service obligations and prefer assuming the foreign exchange risk rather than covering it at the cost of fluctuating relative and high interest rates; (ii) in economies with a high rate of inflation, sound economic and financial retums can be obtained if lending activities are sheltered from the effects of inflation through appropriate interest rate mechanisms; (iii) free-standing permanent working capital loans with long-term maturities, can be vital for the enterprises in economies where banks are reluctant to provide medium-to-long term financing, due to macro-economic uncertainty; (iv) for export- oriented enterprises, borrowing in foreign exchange does not entail the same degree of FX risk as is the case for non-exporting firms; (v) lending mechanisms should be simple so that sub-borrowers understand their obligations; (vi) when problems arise between the Bank and the Borrower, solutions should be sought right after the emergence of the problems; (vii) a credit line can be highly satisfactory even in an inflationary environment if negative real interest rates are avoided by lending in foreign exchange or indexing of sub-loans to foreign currencies; (viii) sub-project performance can be improved substantially through close ex-ante and ex-post review and supervision of the Bank; and (ix) the success of technical assistance programs for SMIs, implemented through government agencies, depend greatly on the degree of cooperation between these agencies and acceptance of the program by the private sector beneficiaries.  IMPLEMENTATION COMPLETION REPORT TURKEY SMALL AND MEDIUM SCALE INDUSTRY PROJECT (LOAN NO.3067-TU) Part I. Project Implementation Assessment A. Statement/Evaluation of Objectives 1. In the Loan Agreement, the project objectives were stated as follows: (i) to further assist Turkey in the expansion and diversification of small-and-medium scale industries (SMIs) and, to this end; (ii) to improve SMI's access to credit to finance their investment needs by involving an increasing number of financial intermediaries in providing such credit; (iii) to provide technical and marketing services to SMIs to assist them in improving their product quality and in competing in local and export markets; and (iv) to improve the understanding of the SMIs' problems and prospects through the availability of more reliable statistics for better policy and project formulation. The project aimed to achieve these objectives by channeling the equivalent of US$200 million through Participating Credit Institutions (PCIs) to finance eligible investments of SMIs, and by financing technical assistance and training in the amount of US$4.5 million equivalent for the PCIs and other agencies supporting SMI development, EXIMBANK, TSE and SIs. 2. The project was intended to support the Bank's strategy by: (i) assisting the GOT to achieve its "base case" macro-economic framework by focusing on priority sectors; (ii) strengthening the international competitiveness of the industrial sector by supporting export and technological development as the critical agenda for the long term; and (iii) developing a stronger and more diversified financial sector to facilitate the growth of a dynamic, competitive and export-oriented private industry. It was considered to be supplementary to the two previous SMI projects (1952-TU and 2647-TU) and to the Second Financial Sector Adjustment Loan (2964-TU) because it supported the financial sector adjustment effort at the institutional level, and assisted the PCIs in strengthening their operational policies, procedures and information systems. 3. While the two previous SMI projects helped increase the SMIs' access to financial, technical and marketing assistance, the institutional mechanisms to deliver these services effectively had to be expanded and improved with a view to enable the SMI sector to increase output, exports and employment opportunities in line with its growth potential. Therefore, continuation of Bank's assistance was needed to assure flow of funds to the PCIs to expand their SMI portfolio, and to provide technical assistance to make them more effective and efficient at SMI financing. 4. The project's main institutional development objective was to strengthen the effectiveness of the PCI's with particular emphasis on improving their appraisal and supervision methods, systems and procedures, through staff training and improvement of the software and hardware used for the evaluation of SMI investments. These objectives supplemented those of previous Bank operations, particularly FSAL II with respect to the institutional strengthening of the PCIs.  2 5. The project's other institutional development objectives were to improve the effectiveness of the agencies responsible for assisting the SMIs in the areas of export promotion, quality standards, and statistical support. These objectives were flushed through technical assistance and training program, targeted to EXIMBANK, TSE and SIS. 6. The technical assistance program for export promotion administered through EXIMBANK was intended to assist the small Export Trading Companies (ETCs) to expand their exports to new markets, and also help increase cooperation among organizations involved in various aspects of SMI exporting. The Quality Improvement component administered through TSE was aimed at assisting the SMIs to achieve quality standards that would improve the market acceptance for their products, and at increasing the quality certification capacity of TSE. The Statistics component was aimed at improving the statistical database on the SMI sector and at developing a nationwide system for data collection, processing and analysis for SMI enterprises. Administered by the SIS, this component was designed to institutionalize and improve the annual survey capabilities of SIS in order to provide more reliable and accurate database for future policy formulation for the SMI sector. B. Achievement of Objectives 7. The project aimed at expanding the financial, technical and marketing support for the SMIs to enable them to increase their contribution to industrial employment, exports and output through: (i) improving their access to credit to finance their investment needs; (ii) provision of technical and marketing services to SMIs to assist them in improving their product quality and competitive standing in local and export markets; and (iii) improving the understanding of SMIs problems and prospects through the availability of more reliable statistics. 8. The credit component of the project aimed to support efficient SMI investments and operations by improving SMIs access to credit through increasing the number of financial intermediaries for SMI finance and the volume of project financing channeled by them to the SMI sector. These objectives were fully achieved. The amount of the loan allocated for PCI subloans, which was $200 million originally, was increased to $201.5 million and later to $202.3 million, as a result of PCIs' request to use the TA portion allocated to them for subloans. Although the loan was 100 % committed, disbursements, amounted to 99% of the allocation due to some cancellations by the subborrowers at the end of the year. Overall, the Loan of $200.3 million financed 250 sub-loans with an average size of $0.8 million, compared to 900 sub-loans at an average size of $0.2 million envisaged in the SAR. At appraisal, it had been envisaged that PCIs would contribute $100 million and sub-borrowers $200 million. The actual results were that the PCIs' contribution was negligible, but the sub-borrowers provided $610 million, with the net result of total investment in sub-projects of $810 million, some 62% higher than the $500 million envisaged at appraisal. Incremental output resulting from these investments is estimated at $716 million and incremental exports as $442 million, at full capacity utilization. ERRs and FRRs were calculated for individual sub-projects. The appraisal reports prepared by the PCIs for individual sub-projects showed ERRs ranging from 14% to 189% and FRRs ranging from 16% to 162%. A post-evaluation exercise carried out by the PCIs on a sample of 14 sub-projects revealed that  3 actual ERRs range from 32 % to 41% and FRRs from 39 % to 44%. According to these reports, the Loan helped to finance $810 million in incremental investment and created 19,700 full-time jobs. 9. The original allocation of loan funds to TA to PCIs for improving their project appraisal and supervision capabilities, information systems and operating procedures, was not utilized. However, the procedures for appraisal and supervision of subloans agreed under the project contributed substantially to the institutional strengthening of the PCIs and to the improvements in their portfolio quality. Financial objectives related to the financial performance of PCIs, were fully achieved, i.e., debt-to-equity and capital adequacy as well as collection ratio covenants were complied with. Two of the PCIs had some problems with the eligibility criteria described in the financial covenants of the loan agreement. EB's participation in the project was suspended in 1992. THB's participation was suspended in 1994 and made conditional on its meeting the eligibility criteria. This was still in question when the loan was fully committed in December, 1996. In both cases these difficulties were brought out in the audit reports required by the loan covenant. 10. The Export Promotion Component administered by the EXIMBANK was designed to finance marketing consultants specialized in product lines predominantly produced by the firms in the SMI sector. These consultants were expected to bring expertise and information about the market demands and product specifications directly to the SMIs and work with Export Trading Companies (ETC) and their domestic suppliers to assist in developing their product design and competitiveness. This component was only partially successful, of the US$1.5 million equivalent allocated for this component, 43% was used for financing various surveys and studies by the foreign and local consultants and for training seminars and programs, designed to bring the related government agencies and representatives of SMI firms together for discussions and brainstorming sessions. The remaining 57% was transferred to a pool to be utilized for the credit component of the project. 11. The Quality Improvement Component was administered by the Turkish Standards Institute (TSE). This component aimed at increasing the awareness of the SMI sector to the importance of standards through training programs, workshops and promotional literature. To achieve these objectives TSE organized various training programs for the SMIs some of which were also supported by other public agencies. The other important aim of this component was to establish mobile certification capability for SMI standards. This was also achieved by procuring mobile calibration laboratories, tools, hardware and software equipment for TSE and KOSGEB which were financed through this loan. The allocation for this component was $1.0 million and almost all was disbursed. 12. The objective of the SMI Statistics Component was to improve the statistical database on the SMI sector in Turkey. Administered by the State Institute for Statistics (SIS) the program aimed to institutionalize an annual survey of manufacturing industries which would collect performance and structure data according to various firm size definitions. In addition to this, various training programs were organized to train the SIS staff and to institutionalize the program within the SIS. The allocation for this component was $0.5 million and almost all of the funds have been disbursed. The program has made substantial contribution to increasing the technological level of SIS and professional expertise of its personnel. Introduction of higher  4 technology has shortened the processing time, increased the quality of surveys and has enabled the SIS to collect and process more detailed and relevant data from the industry groups, thus enabling the SIS to create an accurate and wider database for the SMIs. The project has been most useful in increasing the level of awareness and technology orientation of the SIS as an institution. C. Major Factors Affecting the Project 13. The loan had disbursed successfully during the first three years (1990 - 1992) and cumulative disbursements were $122 million at end- 1992, 60% of the loan amount, which was in excess of the original disbursement estimates. However starting with 1993 there was a drastic decrease in the disbursements. Only 17% of the planned yearly disbursements could be realized in 1993, and only 11% in 1994. New commitments came to a virtual standstill. The reasons for this were: (i) The abundance, in the banking system of funds from roll-over foreign currency financing which, when blended with subsidized loans by the Treasury, proved to be a more attractive alternative until foreign exchange credit dried up with the financial crisis of 1994; (ii) weak market demand for investment credits due to uncertain macro-economic environment; (iii) extremely high and fluctuating real rates for FERIS, the applicable pricing mechanism for SMI II funds; and (iv) the fact that many potential subprojects benefitted from subsidized credits from the Government, which made them ineligible for financing under the Bank's project. In 1993, the Bank, in agreement with the GOT, stopped reviewing and approving sub-loans which were to be used in a blend with subsidized credits from the Treasury. 14. In addition, project implementation was also influenced by the macro-economic factors. The inflation rate which was 70% in 1988 persisted at high levels through the 1990s, averaging over 60% and reaching a level of 80% at the end of 1996. The exchange rate developed at a similar pace until early 1994, then skyrocketed with the financial crisis of April, 1994. From TL 1,875 for one US dollar in January 1989, it reached TL 17,204 in January 1994 and TL 33,408 in April 1994, to jump to TL 126,600 at the end of March 1997. Project loans initially, were made at the FERIS rate which was based on the three-month Treasury bill rate. Due to high inflation and irregularity of auctions for these bills, there were large fluctuations in the FERIS rates because in absence of three-month bills, the six-month Treasury bill rates were used, and since these rates were generally higher than the three-month bills, FERIS rates increased accordingly. Another flaw of the FERIS mechanism was the inadmissibility of prepayments. With very high real rates, debt financing for investments became unattractive, even though FERIS allowed for capitalization of half of the interest during the grace period. These factors, combined with the ineligibility of the projects benefiting from the GOT's incentive program, brought commitments to a standstill. 15. As a result of this situation and in response to the GOT's request in 1994, GOT and the Bank agreed to restructure the loan to take into account the new circumstances. Accordingly, the loan agreement was amended on December 29,1994 as follows: (i) the FERIS scheme was discontinued; (ii) onlending of loan funds was allowed on a single currency basis, in US dollars or Deutsch Marks at market-oriented interest rates no longer tied to the World Bank pool rate; and (iii) free-standing permanent working capital loans, and loans for pre-export financing and equipment leasing, were permitted.  5 16. Following this restructuring, the loan utilization and commitments resumed at a brisk pace. The disbursements by the PCIs was 98% of the total loan amount and cumulatively amounted to $202.3 million, with the final disbursement made in March 13,1997. The 1994 restructuring was followed by an improved investment climate due to reactivation of investment decisions which were postponed because of the economic crisis and also due to new expectations arising from the customs union with EU. Another aspect of the restructuring was that many subprojects availed themselves of the option to prepay the subloans (which was not allowed under the FERIS scheme). This increased the availability of funds to the PCIs for further lending. 17. In addition to the improvements in the investment climate, another reason for increased demand for the Bank funds, was the unavailability of other means of medium and long-term sources of finance after the financial crisis of April, 1994. Due to uncertain macro-economic environment and high rates of inflation, the prospects for the banking system and foreign creditors to provide medium-and-long term finance to the private sector was very weak. Given this situation, Bank loans proved to be very attractive to investors. D. Project Sustainability Project Sustainability 18. Due to high public sector borrowing requirement (PSBR) since 1990, the GOT has continued to finance its deficit mainly through the sale of government securities. The banks, attracted by their high-yield and low-risk profile, have been investing heavily in these instruments. This development in turn has resulted in a crowding-out of medium and long-term lending to industry, especially SMI, by the banks. Another constraint for the banks is the unavailability of medium-to-long-term funding resources. Under these conditions, it would be unrealistic to expect the credit component to be sustainable as envisaged in the project. However, the successful utilization of the credit component in itself can be considered as sustainable. This is because, unlike under the FERIS scheme where repaid funds could not revolve, for the sub-loans made in foreign exchange can. The PCIs have the opportunity to re-lend part of the foreign exchange repayments from their sub-borrowers which exceeds their repayment obligations to GOT. Funds recycled in this way, can be used for the same purposes and since the subloans are denominated in foreign exchange. Demand for these funds is expected to continue. The current interest rates make project lending profitable for the PCIs, by providing protection against capital erosion. 19. From the point of view of recoveries and in terms of the financial viability of the PCIs, the Project can be considered as sustainable. The interest spread of 3% to the PCIs under FERIS and the flexible margins for foreign exchange loans, are adequate. All amounts disbursed are being recovered and the PCIs, except THB and EB, met all of the financial covenants. THB, after the restructuring in 1995 was not able to participate in the lending since it could not meet the number of eligibility criteria due to the deterioration of its financial condition as highlighted by strong qualifications in audit reports of the independent auditors. The Project is also sustainable for the sub-borrowers. They have greatly benefited from the investments made under the Project by expanding and modernizing their plants, increased their outputs and capacity utilization rates and have developed good sense of financial discipline.  6 20. The capabilities of the PCIs in the appraisal, supervision and monitoring of the lending activities are satisfactory and their credit and project evaluation departments deal efficiently with the sub-projects using recycled funds. Sub-loans under FERIS carried sufficiently high interest rates to cover for the inflation losses and foreign exchange sub-loans have to be paid in foreign currency. 21. The Quality Improvement and Statistics components has been successful in supporting institution building and increasing the technical capabilities of TSE and SIS. To maintain these achievements, however, further financial and technical support will be required by the two agencies in the future. The export promotion component has been only partially successful. EXIMBANK's effectiveness has benefited somewhat from the TA financed under the loan. However, it would need clearer definitions of objectives and enlistment of support from related public agencies. E. Bank Performance 22. The Bank's performance at preparation and appraisal was satisfactory. Bank's missions had the necessary expertise to draw from the experiences and results of the two earlier SMI projects; The Labor Intensive Project (1952-TU) and SMI I project (2647-TU). The number of PCIs involved in the project was increased on the basis of sound criteria: SMI portfolio, financial strength; and project financing expertise, in line with OD 8.30 of the Bank's Guidelines. 23. Bank performance during the implementation phase was also satisfactory. Supervision missions visited participating banks, at regular intervals twice per year, and the relationship of Bank staff with the Treasury and with implementing agencies staff was excellent. Treasury and PCIs maintain that the Bank could have been more flexible in permitting the utilization of loan funds in a blend with subsidized credit and that if this had been the case, project implementation could have been much faster. Although the possibility of improving project implementation through a compromise on this issue had been explored, Bank management adhered to the principle of not supporting subsidized credit. The Bank was flexible, however, in restructuring the loan at the end of 1994, which permitted the PCIs to make subloans denominated in US Dollars or Deutsche Marks, rather than based on the FERIS scheme, charging interest at market rates. F. Borrower Performance 24. The performance of GOT and the implementing agencies were highly satisfactory in some aspects, satisfactory in others and deficient in some. The performance of the PCIs in carrying out the credit operations and meeting the financial covenants agreed under the Project was satisfactory. Treasury also contributed to a smooth operation of the credit line. Two of the PCIs, Emlakbank (EB) and Halkbank (THB) had some problems in meeting the financial covenants of the loan agreement. As a result of this, EB was excluded from participation in the project in 1992 and THB's participation was suspended after the restructuring in 1994 subject to its restoring  7 compliance with the eligibility criteria. THB's financial status had deteriorated considerably, as also indicated by their independent auditors. 25. The performance of both TSE and SIS were highly satisfactory and in both cases the performance of the implementing agencies and the consultancy and training programs financed by the loan proved to be consistent with the objectives of the loan. The export promotion component administered by the EXIMBANK was partly satisfactory due to deficiencies in the design of the consultancy services. 26. The major covenants related to the institutional development and financial strength of the PCIs were met and therefore compliance with the loan covenants must be rated as satisfactory. G. Assessment of Outcome 27. The project achieved nearly all of its objectives, but its implementation took longer than planned. The delay was caused by the difficult economic environment and problems by disagreement between the Bank and the Borrower concerning subsidized credit. The project would have been rated as unsatisfactory in November 1994, but it made a significant turn around due to the successful restructuring and to the improved investment climate. Since then, the performance of the project has been highly satisfactory. This leads to an overall rating of satisfactory. H. Future Operation 28. A plan for the future operations has been agreed with the GOT, PCIs, TSE and the SIS. It contains the following arrangements: (i) the reflow of funds will be used in lending for similar purposes until all funds have been repaid to the GOT as specified in the legal agreements; and (ii) TSE and the SIS have agreed on ways and means to make use of the findings and results of the studies and surveys and to contribute to the SMIs development in the future. I. Key Lessons Learned 29. Several lessons have been learned: (i) entrepreneurs like predictable debt service obligations and prefer assuming the foreign exchange risk rather than covering it at the cost of relative and high interest rates; (ii) in economies with a high rate of inflation, sound economic and financial returns can be obtained if lending activities are sheltered from the effects of inflation through appropriate interest rate mechanisms; (iii) free-standing permanent working capital loans with long-term maturities, can be vital for the enterprises in economies where banks are reluctant to provide medium-to-long term financing, due to macro-economic uncertainty; (iv) for export- oriented enterprises, borrowing in foreign exchange does not entail the same degree of FX risk as is the case for non-exporting firms; (v) lending mechanisms should be designed simple so that sub- borrowers understand their obligations; (vi) when problems arise between the Bank and the  8 Borrower, solutions should be sought right after the emergence of the problems; (vii) a credit line can be highly satisfactory even in an inflationary environment if negative real interest rates are avoided by lending in foreign exchange or indexing of sub-loans to foreign currencies; (viii) sub- project performance can be improved substantially through close ex-ante and ex-post review and supervision of the Bank; and (ix) the success of technical assistance programs for SMIs, implemented through government agencies, depend greatly on the degree of cooperation between these agencies and acceptance of the program by the private sector beneficiaries.  9 Part II: Statistical Annexes Table 1. Summary of Assessments Table 2. Related Bank Loans/Credits Table 3. Project Timetable Table 4. Loan Disbursements: Cumulative Estimated and Actual Table 5. Project Financing Table 6. Economic Costs and Benefits Table 7. Compliance with Operational Manual Statements Table 8. Bank Resources: Staff Inputs Table 9. Bank Resources: Missions Table 10. Status of Legal Covenants Table 1: Summary of Assessments A. Achievement of Obiectives Substantial Partial Negligible Not applicable ('4) ('v4) ('4) ('4) Macro Policies OI Cj C F Sector Policies D D n Z Li Financial Objectives i Institutional Development W LI] Physical Objectives F] [ 2 iI Poverty Reduction [ I [2] Gender Issues [m1] Other Social Objectives F l] Environmental Objectives [2 D 1 I Public Sector Management 4 Private Sector Development m LI] Foreign Exchange earnings 2]C [1] B. Project Sustainability Likely Unlikely Uncertain ('4) ('4) ('4) z CG z~~LI  10 Hi&hft C. Bank Performance Satisfactory Satisfactory Deficient (v) (4) (4) Identification Z W Preparation Assistance m E] Appraisal FT ] K Supervision m K E Highly D. Borrower Performance Satisfactory Satisfactorv Deficient (4) (4) (4) Preparation LI E] K Implementation [ E: o Covenant Compliance [] E K Highly Highlv E. Assessment of Outcome Satisfactorv Satisfactory Unsatisfactorv unsatisfactory (4) (4) (4) (4) oI K] oII o  11 Table 2: Related Bank Loans/Credits Loan/Credit Title Purpose Year of Status Approval Preceding Operations Loan 1754-TU and 1755-TU To assist financing of 09/04/79 Closed on 12/31/85. Private Sector Textiles Project subprojects to contribute to ICR Issued the development, modernization, increase in productivity and expect capacity of the private textiles sector of the country Loan 1952-TU Labor Intensive To provide credit to support 03/03/81 Closed on 06/30/86. Industry Project the development of Labor ICR Issued Intensive Small and Medium Scale Enterprises Loan 2714-TU First Financial To create a more efficient 06/10/86 Closed on 06/30/91. Sector Adjustment Loan financial sector by developing ICR Issued. a greater variety of financial instruments which would contribute to a revival of private investment Loan 2901-TU Industrial To support the efforts for 03/22/86 Closed on 06/30/93. Export Development Project expanding industrial export ICR Issued. by providing financial support to private export-oriented projects' and improving the institutional framework for export finance. Loan 2964-TU Second To support the development 06/21/88 Closed on 121131/92. Financial Sector Adjustment of a more efficient and deeper ICR Issued. Loan financial sector which would mobilize and allocate funds more efficiently thus generating a higher level of investments as well as a higher rate of return. Following operations Loan 3346-TU To assist the GOT in its 06/28/91 Closed 06/30/97. Private Investment Credit efforts to increase the capacity Project to produce tradable goods and services through activities in which the Borrower is economically efficient, especially export --- activities. Bank support and guarantee 1997 Under preparation Guarantee for Development to assist the Development (expected) Banks (SYKB-TSKB) Banks SYKB and TSKB issue bond for equivalent of $200 million. Funds to be used to finance private sector I industrial enterprises.  12 Table 3: Project Timetable Steps in Project Cycle Date Actual Identification 01/15/88 Preparation 02/08/88 Appraisal 11/05/88 Board Presentation 05/23/89 Signing 06/28/89 Effectiveness 10/26/89 Project Completion 04/30/97 Loan Closing 12/31/96 Table 4: Loan Disbursements: Cumulative Estimated and Actual (US$ thousands) FY90 I FY91 | FY92 I FY93 I FY94 I FY95 I FY96 FY97 Appraisal estimate 10,000 36,000 82,000 135,000 172,000 194,500 204,500 204,500 Actual 21,170 87,100 121,660 130,530 134,750 137,510 188,980 202,280 Actual as % of 212 242 148 97 78 71 92 99 estimate Date of final disbursement: March 13, 1997 Table 5: Project Financing Appraisal estimate Actual/atest estimates (US$ million) (US$ million) Item Local costs Foreign Total Local costs Foreign costs Total costs 1. IBRD - 204.5 204.5 202.3 202.3 2. Financial intermediaries 100.5 - 100.5 - 3. GOT 0.5 0.5 0.5 0.5 4. Sub-borrowers 200.5 - 200.5 610.0 - 610.0 Total 301.5 204.5 506.0 610.5 202.3 812.8 Table 6: Economic Costs and Benefits Economic Rates of Return (ERRs). Specific estimates of the project's ERR were not made at appraisal; PCIs were required to demonstrate the economic viability of individual projects which had to show ERRs in excess of 15% (except for projects specifically aimed at environmental amelioration). An analysis of the ex ante rates of return on investment projects for SYKB, TSKB and VB which accounts for 85% of Investments indicated a weighted average ERR from 163 projects of 34%. Ex post evaluation on 14 of these (which had ex ante ERRs of 36%) resulted in an average ERR of 33%.  13 Ex Ante ERRs and FRRs for investment Projects in SYKB and VB (represents 79% of Loan & 85% of Project investment) No Investment Av. ERR at Range Av. FRR at Range l (US$'OOO) Appraisal I Appraisal SYKB 81 372,754 32% 14%-77% 44% 190/6-134% VB 79 303,410 36% 18%/-,189% 42% 170/%-162% TSKB 3 15,529 30% 170/6-39% 28% 160/6-49% Total 163 691,693 34% 42% Ex Post ERRs and FRRs for Sample Investment Projects In SYKB, TSKB and VB (represents 26% of Loans for Investment) No Investment Av. ERR at Av. ERR Av. FRR at Av. FRR l I(USS'000) Appraisal ex Post Appraisal Ex Post SYKB 7 19,394 41% 37% 44% 38% VB 4 6,376 35% 33% 41% 32% TSKB 3 15,529 32% 30% 39% 35% Total 14 41,299 36% 33% 42% 36% Employment Impact. At appraisal, the project was expected to invest in relatively labor intensive projects with an incremental cost per job usually not exceeding US$15,385. Estimates of additional jobs made at the time of PCI appraisal was for a total of 19,700 jobs from the Investment Projects at a cost per job of $41,165. Estimates of Full Time Job Creation (at Sub Project Appraisal) No. Disbursement Investment Jobs Cost/Job l (US$'000) (US$'000) (US$'000) SYKB 81 71,979 372,754 6,385 58,380 TSKB 3 5,470 15,529 564 27,534 VB 79 79,747 303,410 6,684 45,393 THB 68 27,367 113,385 5,733 19,778 EM 6 2,948 5,902 334 17,650 Total 237 187,509 810,980 19,700 41,165 Ex post analysis indicated slightly more employment creation than had been expected at sub project appraisal. On the 14 projects reviewed, 1734 full-time jobs were created at a cost per full-time job of $41,642, compared with sub-project appraisal expectations of 1148 jobs at US$64,226 per job. Table 7: Compliance with Operational Manual Statements Basically, there was compliance with the applicable Bank Operational Manual Statements.  14 Table 8: Bank Resources: Staff Inputs Planned Inputs Actual Stage of project cycle SWS USS'ooo SWS US$'000 Through Appraisal 140.8 332.7 140.8 332.7 Appraisal Board 8.4 22.4 8.4 22.4 Board Effectiveness N/A N/A Supervision 202.6 403.5 199.3 399.1 Table 9: Bank Resources: Missions Stage of Project Month No. of Days Specialization(l) Performance Rating Cycle / Persons in Year Field Through Appraisal 11/88 5 14 E,F,T Appraisal Board 06/89 1 - F Supervision I 05/89 1 - OA NR NR Supervision II 06/89 2 - OA,F 1 1 M Supervision III 06/89 2 - OA,F 1 1 - Supervision IV 03/90 5 21 F,F,F,T,RA 1 1 - Supervision V 03/90 1 - AC,E,Fi,N 1 1 - Supervision VI 04/91 1 - F 1 1 - Supervision VII 12/91 4 20 F,E,E,C 1 1 - Supervision VIII 06/92 1 - F 1 1 M Supervision IX 5/93 1 14 F 1 3 - Supervision X 12/93 3 20 E,F,C 2 3 - Supervision XI 12/93 4 14 F,E,C,AD U S - Supervision XII 12/94 2 14 C,F S S - Supervision XIII 09/95 2 14 AC,F S S - Supervision XIV 02/96 2 22 AC,F S S - Supervision XV 09/96 2 20 AC,F S S - 1- Key to Specialized staff skills: 2- Key to Performance Ratings: 3- Key to Types of problems AC= Agricultural credit 1= Minor problems F= Financial Spec. 2= Moderate problems T= Technical E = Economist 3= Major problems M= Managerial F = Financial Analyst RA= Research Assistant C = Consultant AD= Advisor  Covensnt Report: Latest status of Covenant Compliance ECA - Europe & Central Asa RegInal 0 Table 10 EC1 - ECA: Country Department I EC1IT - Idustry, Trade & Finance Op. Div. Project ID: TR-PE-9057 - SMI II Covenant Status Original Revised Description of Covenant Comnients Class (s) Fulfll Date Fulfill Date Aereement: LOAN No: IBRD -30670 Text Reference: LA Sec. 4.02 01 c 01/28//1991 Audit of Special Account Complied widL Text Reference: LA Sec. 5.01 13 CP 01/28/1991 Acquisition ofanother entity requires prior Violated by Halkbank in 1992; admonished Bank consent by Bank Aereement: L30670 Loan Number: IBRD -30670 Text Reference: LA Sec. 4.01 01 c 01/28/1991 Operations conducted on sound and Complied with. consistent accounting practices. Text Refeence: PA Sec. 3.01 -b 01 c 01/28/1991 Audit undertaken by auditors acceptable Complied with to Bank. Text Reference: LA Sch. 4.3 03 c 01/28/1991 SSIsat least 30%ofall credits. Compliedwith. Text Reference: PA 3.03(a) 02 CP 01/28/1991 Maximum SYKB debt/equity ratio of 10:1. Legal agrments amended to replace this covenant with minimum 10% capital adequacy ratio for TSKB and SYKB. Status: C - Complied with CD - Compliance after Delay NC - Not Complied with SOON - Conpliance ExpeAed in Reasonably Short Time CP - Complied with Partially NYD -Not Yet Due  Lega Covenant Report: Latest status of Covenant Compliance ECA - Europe & Central Asia Regional 0 Table 10 EC1 - ECA: Country Department I EC1lT - Industry, Trade & Flnance Op. Div. Project ID: TR-PE-9057 - SMI If Covenant Status Original Revised Description of Covenant Comments Class (s) _ Fulfill Date Fulfill Date Text Reference: PA Sec. 3.01(b) 01 c 01/28/1991 Submission of audited statement within Complied with. 6 months after year end. Text Reference: PA 3.04 02 CP 01/28/1991 Deb-service-soverageratioSYKB&TSKB Compliedwith. Text Reference: PA 3.05 02 CP 01/28/1991 Adequate capital adequacy ratios. Substantial compliance. Text Reference: PA 3.06 02 CP 01/28/1991 Adequate provisions. Substantial compliance. Text Reference. PA 3.07 02 C 01/28/1991 Minimum collection ratio of 75% for Complied with. MT & LT loans. Status: C - Complied with CD - Compliance after Delay NC - Not Complied with SOON - Compliance Expected in Reasonably Short Time CP -Comp NYD -Not Yet Due  TURKEY SECOND SMALL AND MEDIUM SCALE INDUSTRY PROJECT (Loan 3067-TU) Plan for Proiect Overation after Closine on June 30, 1997 Project Objective 30. The project objectives as stated in the loan agreement were: (i) to further assist in the expansion and diversification of small-and-medium scale industries (SMIs), and, to this end; (ii) to improve SMI's access to credit to finance their investment needs by involving an increasing number of financial intermediaries in providing such credit; (iii) to provide technical and marketing services to SMIs to assist them in improving their product quality and in competing in local and export markets; and (iv) to improve understanding of SMIs problems and prospects through the availability of more reliable statistics for better policy and project formulation. 31. The institutional development objectives for the PCIs were to improve their project appraisal and supervision methods, systems and procedures through training and software and hardware improvements. Covenants in the Project also related to strengthening of the PCIs' financial structures and the continuation of organizational and human resource development . 32. It was a sector policy objective specified in FSAL II to bring about positive interest rates. For the SMI II Project, positive real rates were to be attained by using the Foreign Exchange Risk Insurance Scheme (FERIS) mechanism. Under FERIS, the Government converted the proceeds of foreign loans into TL-denominated loans with a variable rate set at the average of the three-month Treasury bill rate over the preceding three months. Additionally, the option of lending in foreign exchange through the Bank's pool rate was offered. Since there was no use of the foreign exchange option under the pool rate, GOT agreed in 1994 to convert the pool of currencies to single-currency sub-loans to the PCIs. 33. The technical assistance was designed to support export product and market development of SMI enterprises by selected Export Trading Companies (ETC); develop a product quality assurance program for SMI units by the Turkish Standards Institute (TSE); and help finance the effort of the State Institute of Statistics (SIS) to improve SMI data gathering, processing and analysis to increase reliability and accuracy of sector statistics. 34. These objectives remain valid after the implementation of the project and the full disbursement of the project funds. Since the PCIs have the opportunity under foreign exchange lending (not under FERIS) to roll over the funds obtained for a certain number of years, the backflow of funds will be used to support lending operations for similar purposes until all funds have been repaid to GOT as stated in the Loan Agreement. Equally important, the institutional development of the PCIs will continue along the lines that were started in this and other projects supported by the World Bank. The objectives of the technical assistance components related to the improvements in the technical capabilities of the TSE and SIS should be complemented by the cooperation of the agencies, public and private, in policy formulation for the SMI sector.  18 Future Proiect Overations 35. The Loan was made to the Government of Turkey (GOT) for 17 years including five years of grace period. On-lending maturities to the PCIs depend on the type of investment financed. Under FERIS, sub-loans are made for periods up to ten years including three years of grace and repayment by the PCIs to GOT is at identical terms, i.e., no possibility of revolving the funds exist. For sub-loans made in foreign exchange, maturities to sub-borrowers are up to eight years including three years of grace for investment projects, up to eight years with no grace period for permanent working capital. The PCIs have thus the opportunity to revolve the part of the foreign exchange repayments from client that exceeds their repayment obligations to GOT. 36. The legal agreements stipulate that the backflows of funds will be used for similar purposes. The PCIs confirm that they intend to follow this agreement and make loans to individual sub-borrowers for similar purposes until all funds have been repaid to GOT. It is likely that the bulk of funds to be reinvested will be used to finance investment loans. In this sense, this Plan of Operation foresees that the Loan will continue to benefit the SMI sector. PCIs intend to supervise the portfolio of sub-loans outstanding in accordance with the agreed procedures until all fiunds have been repaid. 37. Institutional development will remain one of the PCIs' main objectives. They will aim to further strengthen their financial position and to maintain compliance with the financial covenants set out in the legal agreements. Annex B PCI Actual as of Total Allocation Allocation in 04/3011997 04130/1997 Percentage of (USS'000) (USS'000) Total SYKB 81,029,209 81,029,209 40 TSKB 5,470,000 5,470,000 4 THB 29,095,077 29,095,077 14 TVB 81,726,157 81,726,157 41 EB 2,947,988 2,947,988 TA 2,032,304 2,032,304 Sub-total 202,300,735 202,300,735 100 Guha Ozdora n:AWAey\icrfina2.doc May 22,1997 4:04 PM  PART III REPUBLIC OF TURKEY PRIME MINISTRY THE UNDERSECRETARIAT OF TREASURY Ref: B.02.1.HM.O.DEI.01.04.155 /t , Mr. Franco BATZELLA Chief, Industry, Trade and Finance The World Bank Dear Mr.Batzella, Please see attached Part III of the Implementation Completion Report of the Government of Turkey for Second Small and Medium Scale Industry Project(Loan 3067- TU). - S N0USTR) T.R.AOiE & NA i i9