Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-2645-YU REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMEN1 TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO PORT OF BAR WORKING ORGANIZATION WITH THE GUARANTEE OF THE SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA FOR A MONTENEGRO EARTHQUAKE REHABILITATION PROJECT - PORT OF BAR November 12, 1979 This document bas a restricted distribution and may be used by recipients only in the performance of their *fficlal duties. ItS contents may not otherwise be disclosed without World Bank uthoriMtlon. CURRENCY EQUIVALENTS * Currency Unit Yugoslav Dinar (Din.) US$1 Din.18.70 Din.l US$0.0535 Din.1,000 US$53.48 Din. 1,000,000 US$53.476 * The Yugoslav Dinar has been floating since July 13, 1973; as of June 29, 1979 the rate was Din.19.076 = US$1.00. FISCAL YEAR January 1 - December 31 GLOSSARY OF ABBREVIATIONS BOAL = Basic Organization of Associated Labor COI = Community of Interest IBT = Investment Bank of Titograd - Associated Bank ICB = International Competitive Bidding LDR = Less Developed Region MCS = Mercalli Intensity Scale PBWO = Port of Bar Working Organization RTE = Railway Transport Enterprise RTO = Railway Transport Organization SFRY = Socialist Federal Republic of Yugoslavia SR = Socialist Republic USAID = United States Agency for International Development FOR OFFICIAL USE ONLY YUGOSLAVIA MONTE]iEGRO EARTHQUAKE REHABILITATION PROJECT PORT OF BAR Loan and Prolect Summary Borrower: Port of Bar Working Organization (PBWO) Guarantor: Socialist Federal Republic of Yugoslavia (SFRY) Amount: US$50.0 million equivalent in various currencies. Terms: Amortization in 15 years, including a three-year grace period, with interest at 7.95 percent per annum. Project Description: The proposed project will enable PBWO (i) to repair and restore the essential services and facilities of the port that can be repaired economically which were severely damaged or destroyed by the earthquakes of April 15 and May 24, 1979; and (ii) to provide facilities and cargo- handling equipment to partially replace those damaged beyond repair. Project Objective: To provide the essential services for the industrial and commercial activities in the hinterland. Economic Benefits: Benefits arise from restoring the movement of traffic and imaports through Southern Yugoslavia's major seaport and enitrepot for Belgrade and the industrial and agricultural areas surrounding the capital. Staff Appraisal Report: In view of the need to provide resources to Yugoslavia with minimum delay, no separate Staff Appraisal Report has been prepared to accompany this Report. Estimated Cost: Bank Local Foreign Total Participation U---------- (S$ millions)------------- Repair siiAr restoration 50.4 35.3 85.7 24.4 Extension o: facilities and new eiiuipment 12.9 25.6 38.5 25.6 Technical assistance 0.6 - 0.6 - Total 63.9 60.9 124.8 50.0 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii - Financial Plan: Local Foreign Total ------(US$ millions)----- IBRD loan - 50.0 50.0 Republic's contributiorn 63.9 10.9 74.8 Total 63.9 60.9 124.8 Estimated Disbursements: FY80 FY81 FY82 FY83 -----(US$ millions)----- Annual 12.0 20.0 16.0 2.0 Cumulative 12.0 32.0 48.0 50.0 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO PORT OF BAR WORKING ORGANIZATION (PBWO) WITH THE GUARANTEE OF THE SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA 1. I submit the following report and recommendation on a proposed loan equivalent to US$50.0 million to Port of Bar Working Organization (PBWO), with the guarantee of the ',ocialist Federal Republic of Yugoslavia (SFRY), to finance the estimated foreign exchange costs of a project for the rehabilita- tion of the Port of Bar which were damaged in the earthquakes of April and May 1979. The loan would bear interest at the rate of 7.95 percent per annum and would have a term of 15 years, including a grace period of 3 years. PART I - THE ECONOMY 1/ 2. A Basic Ecolnomic Mission to review the Social Development Plan 1976- 80 and to assess the economic implications of the new institutional framework emanating from the 1974 Constitution visited Yugoslavia in October and Novem- ber 1976. Its report entitled, "Yugoslavia: Self-Management Socialism and the Challenges of Development", 1615a-YU, was distributed to the Executive Directors on April 5, 1978. Basic data on the economy are given in Annex I. Institutional Setting 3. The social sector in Yugoslavia, which includes government, enter- prises and public institutions has the leading role in economic and social development. It accounts for 85 percent of GDP and employs over half of the total labor force. The private sector is comprised predominantly of peasant farms and small enterprises, mainly in handicrafts, construction, trade, transport and tourism. Decision making at all levels is governed by the principle of workers self-management bringing with it its own set of unique institutions and instruments of economic policy. The current system has gradually evolved over the years with important new changes introduced in the Constitution of 1974. These changes reaffirm and further extend the decision making power of workers. The federative structure of the state has been strengthened. Responsibility foc important social and economic decisions has been shitted from the federation to the republics and provinces and communes. Concurrently, the control of workers, through their workers' collectives, over the socially owned means f production has been potentLally increased by a 1/ Part I of this report is substantially unchanged from Part I of the Report and Recormiendation of the President for rLe Mcntenegro Earthquake Rehabilitation Project--Highways (Report No. P-2622¼-'T) of August 31, 1979. restructuring of all economic organizations. All economic organizations e.g. enterprises, now consist of legally autonomous Basic Organizations of Asso- ciated Labor (BOALs) which are the smallest units of production producing a marketab'e output. The creation of BOALs as the basic decision making cell provides workers with a more wieldy unit to manage particularly as the product of their work becomes more easily identifiable. 4. In addition to strengthening decision-making power of workers at the micro level, recent changeF have extended workers' self-management to the macroeconomic sphere. New instruments of macro-economic policy have been introduced which are formulated on the basis of participation of all economic agents. These new measures are expected to strengthen macro-economic manage- ment. The impact of these changes is apparent in incomes, prices and employ- ment policy and in the foreign exchange and commercial policy. The most significant development, however, is the introduction of a new system of planning. 5. The new system of planning--self-management planning--is based as in central planning on an ex ante medium-term view of the development of the economy. Similarly, it is based on legally binding undertakings, in the form of medium term contractual arrangements between all economic units, thus reflecting a strong commitment to plan implementation. However, in sharp contrast to central planning, plan formulation is based on participation of all economic units, including government planning bodies, on a non-hierarchical basis. Following an exhaustive exchange of information, the planning process involves a series of iterations to achieve consistency amongst the plans of economic units. Once an acceptable degree of consistency is achieved, eco- nomic units enter into legally binding medium-term agreements on supply and demand. In case agreements cannot be reached by the prescribed date the state can impose a temporary injunction. Economic Trends and Development Issues 6. The economic development of Yugoslavia over the past two decades has been impressive, characterized by rapid economic growth and structural trans- formation. GDP between 1954-75 grew at an average annual rate of about 7 percent in real terms. The share of investment in GDP has been high through- out the period, averaging 30 percent of GDP in recent years. Since population grew at only 1 percent per annum, real per capita income more than tripled during the period to an estimated $1,960 at 1977 market prices. 1/ The social sector, in particular industry, was the driving force of the economy. The share of industry in GDP has increased to 47 percent while agriculture has declined to 16 percent, paving the way for development of a modern industry/ service oriented urban society. The past two decades have also been asso- ciated with a growing integration of Yugoslavia into the world economy. Between 1954-76 exports and imports of goods and non-factor services have grown by around 8.8 percent and 9.5 percent per annum in real terms, respec- tively; much of this in the convertible currency areas. 1/ According to the 1978 World Bank Atlas. - 3 - 7, Although Yugoslavia's overall performance has been impressive, Yugoslavia has been characterized by large regional income disparities. Four of the regions, namely Bosnia-Herzegovina, Macedonia and Montenegro, with two-thirds of the national average per capita income, and Kosovo, with one- third, are officially ^iesignated as less developed regions (LDRs). The differ- ence between the most leveloped region, Slovenia, and the least developed, Kosovo, is 6 to 1. Parallel to these inter-regional disparities there are large intraregional per capita disparities ranging 10 to 1 between communes. These differences are a product of diverse factors notably differing shares of the low productivity agricultural sector and unfavorable demographic conditions e.g. higher dependency ratios and population growth rates. Until recently regional income disparities tended to widen. Since 1971 sizeable concessionary credits (with about 50 percent grant element), equal to about 9.3 percent of the GDP of the LDRs in 1974, have been transferred to the LDRs through the Federal Fund for the Accelerated Development of the Less Developed Regions. 8. Linked to the issue of regional income disparities has been the problem of providing adequate employment opportunities in the expanding modern sector. Between 1954-76 employment in the modern social sector increased by around 4 percent per annum facilitating rapid outflows from the agricultural sector. Despite this impzessive record, considerable imbalances exist. Large productivity and income differentials exist between the modern (mainly social) and the traditional (private agricultural) sectors. Large numbers of Yugoslavs have sought temporary employment abroad since the late 1960s. At its peak in 1973 Yugoslavia had about 1,100,000 external migrants. However, since 1973, with changes in policy and the slower growth in the host countries, this trend has been reversed, accentuating domestic imbalances and placing considerable pressure on the social. sector to create new work places. Unemployment rates have risen rapidly fran about 7 percent in 1971 to nearly 13 percent in 1976. 1/ This problem has taken an added urgency as the incidence of unemployment has been highly regionali2ed. In 1975 unemployment rates ranged from 23.5 percent in Kosovo to 1.5 percent in Slovenia. Recent Developments 9. Yugoslavia's economic development in recent years has been charac- terized by stop-go poLicies and cyclical behavior. Periods of rapid economic growth and inflationary pressure have resulted in balance of payments diffi- culties, leading to measures restricting the level of economic activity. This has been followed by periods of relatively modest growth and improvements in the balance of paymen-s situation. In 1974, rapid domestic economic growth, 1/ These rates are not strictly comparable to those in other countries. They represent the ratio of registered unemployment to social sector labor force. The ratio of registered unemployment to total resident labor force would have been about 7.5 percent in 1976. - 4 - recession in Western EurcDe and higher oil prices resulted in a sharp deterio- ration of the balance of oayments situation and a $1.2 billion current account deficit. In the same year domestic inflation (retail prices) fueled by external price rises. acce'lerated to 26 percent. Both 1975 and 1976 were marked by policies aimed at stabilizing the economy through moderating the rate of growth, improving the balance of payments situation and reducing inflation. GDP grew by 3.") percent per annum in 1975 and 3.9 percent in 1976, well below the historical trend rate. Weak domestic demand reduced import requirements and placed pressure on enterprises to export. This, and the recovery of activity in the OECD, led to a 15 percent real increase in merchandise exports in 1976. Merchandise imports during the same period fell by 7 percent. As a result, the current account deficit was transformed to a surplus of $165 million. Inflation also dropped perceptibly to 9 percent. This was partly due to slack domestic demand but also due to stringent price controls. 10. A strong upturn i5in economic activity driven by a revival in invest- ment activity began in mi4>1976 and has continued since. There was a rapid increase in money suppli,- in 1976. Enterprises began to adjust to the new financial and accounting system introduced early in 1976 which, through increasing financial accountability of enterprises, had been an important factor in dampening the level of economic activity in early 1976. GDP is estimated to have grown by 8.1 percent and the industrial sector by 9.6 per- cent in 1977. This upturn led to a revival of inflationary pressure and a sharp deterioration in the balance of payments situation. Inflation increased to 13 percent, exports declined in real terms by 4 percent and imports rose by 15 percent. The current account recorded a deficit of $1.6 billion. There was some slackening in the level of economic activity in 1978. GDP is esti- mated to have increased by 6.6 percent despite a drop in agricultural produc- tion of 5 percent due to adverse weather conditions. The current account deficit is estimated to have fallen to around $1.0 billion. The rate of inflation is estimated to be 13 percent. Policies for 1979 aim at maintaining a 6 percent growth in GDP, a 5 percent growth of exports, a 2 percent growth in imports and a current account deficit of around $1.2 billion. Preliminary trends in 1979 indicate that although the economy has continued to grow rapidly, growth has been associated with a rapidly deteriorating balance-of- payments situation. This has been a consequence of a sharp revival in demand for imports following a year in which import volume declined and has been exacerbated by the rise in the price of oil and less favorable prospects for tourism following the devastating earthquake of April 15 in the coastal areas of Montenegro. Oil price increases are likely to add a further $0.5 billion to the import bill in 1979. This, and the anticipated more rapid growth of imports than exports, is likely to lead to a sharp deterioration in the current account deficit to over $2 billion in 1979. Furthermore, the rate of inflation has risen sharply. Producer prices rose by 17 percent on an annual basis during the first eight months of 1979. As a result a price freeze was introduced in August 1979. This, and the anticipated slow growth of the economy should lead to a reversal of the rising inflationary trend. 11. Despite the uneven growth rate of GDP since 1974, employment has expanded steadily and rapidly. An important factor in this has been the social pressure on enterprises to create additional work places. Employment grew by 4.5 percent per annum between 1974 and 1978. Labor productivity has, as a result, grown little during this period. Since real personal incomes have continued to rise, unit labor costs have risen. Medium- and Long-Term Objectives and Prospects 12. The external events of 1973 and 1974 had an important impact on Yugoslavia's medium-term outlook, particularly in two areas. The first was the balance of payments. The sharp increase in the price of oil led to a sudden increase in the country's import bill. More importantly, the decline in the number of Yugoslav workers abroad inhibited the growth of workers' remittances, which acccunt for about one fifth of Yugoslavia's foreign exchange earnings. The prospects for growth of merchandise exports also deteriorated because of the slower growth in Western Europe. The balance of payments con- sequently became a more: binding constraint on economic growth. The second area was employment. External migration was a key factor in allowing the low-productivity, privaLte agricultural labor force to decline rapidly between 1965-73. Return of Yugoslav workers placed considerable pressure on the labor market and in particular the social sector, which is the main source of new jobs. 13. The policy response to these issues was the 1976-80 Five Year Plan which foresaw important structural changes to deal with the new external circumstances. On the question of the balance of payments, Yugoslavia, by and large, opted for the import substitution route. To ensure greater self-sufficiency the Plan called for a major restructuring of the economy with emphasis on raw materials and intermediate goods, and particularly the power sector. Included in the priority sectors were basic chemicals, ferrous metallurgy, parts of non-ferrous metallurgy, agriculture, food processing and inter-republic transportation. These were areas where production had lagged and where import dependency had increased most after 1965, despite consider- able possibilities for local production. Rapid expansion of employment opportunities remained one of the key objectives of the plan. To compensate for the generally more capital-intensive investments involved in developing raw materials and intermediate goods, a number of measures were introduced to ensure a sufficiently rapid growth of employment opportunities. Emphasis was placed on development of labor-intensive activities and small scale industry. An employment policy was adopted to facilitate an orderly growth of work opportunities in existing enterprises. New incentives were also provided to the private sector to encourage investment in productive activities. These measures were expected to lead to a 3-4 percent growth in modern sector work places. Such a growth would be sufficient to absorb returning migrants and some outflow of workers from the agricultural sector albeit at a slower pace than in the past decade. 14. To achieve these objectives the plan foresaw a growth in GDP of 7.0 percent. Exports were projected to rise by 8.5 percent in constant dollars. However, imports were projected to rise by only 4.5 percent reflect- ing the significant degree of import substitution anticipated. Such a sharp fall in import growth, however, appeared somewhat excessive and not likely to be attainable during the plan period. Consequently, if Yugoslavia adhered to the ceiling it set in the plan on the level of indebtedness and debt service ratio, a somewhat more modest overall economic growth rate of 5-6 percent was likely to be achieved. -6- 15. Developments in the first three years of the plan period have been mixed. The economy has grown rapidly as planned (average annual growth of of GDP of 6.2 percent) and modern sector employment opportunities have also increased significantly. However, merchandise export growth at 2.6 percent per annum has been very disappointing. The current account deficit has been kept in check by limiting merchandise import growth to 1.8 percent per annum since 1976. Despite this, external indebtedness has increased significantly and will be further exacerbated with the anticipated deterioration in the balance-of-payments situation in 1979. Thus, although the economy is likely to achieve a 5-6 percent overall economic growth rate for the period 1976-80, the balance-of-payments situation is worse than anticipated. Consequently to deal with the deteriorating balance-of-paymenats situation Yugoslavia will need to accept a more moderate medium-term growth target and instigate policies designed to improve the country's export performance. Based on the recent trends in external borrowing and our balance--of-payments projections, Yugo- slavia is expected, even with slower growth, to experience gradually rising debt service ratios in the early 1980s. The Yugoslavs, aware of the balance- of-payments situation, are presently introducing stabilization measures to curb the rate of economic growth. They are also in the process of reassessing the economy's medium-term growth targets. 16. Finally, the reduction of regional disparities is also a priority objective of the plan. The previous financial transfer mechanism continues as the principal instrument for regional devielopment. However, in addition to this, provisions have been made for direct joint venture investment by enterprises in the developed, into the less dleveloped regions. This measure is expected to facilitate a transfer of managerial and technological know-how in addition to the financial transfers of the past few years. The regional problem, however, is expected to remain as one of the least tractable issues facing the Yugoslav economy and one that will only be resolved in the longer run. Creditworthiness 17. In the period 1974-77 gross capital inflows averaged just over $2.0 billion per annum increasing the total level of medium- and long-term debt outstanding and disbursed to $8.9 billion by the end of 1977. About 75 per- cent of Yugoslavia's debt contracted during this period was contracted from commercial sources in convertible currencies. The bulk of this has been suppliers credits though financial credits in the Euro-currency market have become increasingly important in financing the economy's residual external capital needs. The World Bank is the principal source of non-commercial long-term credit to Yugoslavia. Yugoslavia will continue to need substantial credits in the commercial markets to achieve its medium-term economic objec- tives. The debt service ratio averaged 17 between 1974-78. The debt service ratio is expected to increase to over 20 in the early 1980s in spite of lower anticipated growth rates of GDP. Given Yugoslavia's past debt service record, pragmatism and demonstrable control over the balance of payments, Yugoslavia remains creditworthy for a substantial amount of Bank lending. PART II - BANK GROUP OPERATIONS IN YUGOSLAVIA 1/ 18. The Bank has made 57 loans to Yugoslavia totalling about $2,337 million. Of this amount, approximately 44 percent ($1,025.4 million) has been for 19 loans for the transportation sector--11 for highways, 5 for rail- ways, and one each for a natural gas pipeline, an oil pipeline, and a port project. Bank lending has generally concentrated on infrastructure including, in addition to the transportation loans, four power loans, one telecommunica- tions loan, two water supply and sewerage, a drainage and five multipurpose loans (two of which include substantial irrigation components). Seven loans totalling $394 million (about 17 percent of the total amount lent to Yugoslavia) have been made for agriculture (including two for irrigation and one for drainage) and agro-industries. Fourteen loans amounting to $300 million (about 13 percent of the total) have also been made for industry and two for tourism amounting to $30 million. The $27 million first Bank loan for air pollution control was approved May 25, 1976. In addition, IFC has made investments in twelve Yugoslav enterprises totalling about $172 million. Annex II contains a summary statement of Bank Loans and IFC investments as of September 30, 1979 and notes on the execution of ongoing projects. 19. The interrelated objectives which the Bank has pursued in its lend- ing to Yugoslavia remai.n essentially unchanged. These objectives are: (i) to support Yugoslav efforts to address the critical issues of regional disparities and unemployment; (ii) to promote agricultural development in both the individual farmer and social sectors by providing basic infrastructure and credit facilities; (iii) to encourage structural reforms in the major sectors through improved coordination, institution-building and technical assistance; (iv) to help in identifying and financing gaps in basic infra- structure-particularly transport and energy; and (v) to alleviate critical shortages of convertible foreign exchange by providing part of the required long-term capital, encouraging and promoting Yugoslavia's efforts to tap other sources of medium- and long-term capital, and supporting projects which generate or conserve foreign exchange. It is obvious that each and every Bank operation cannot address all these objectives nor be entirely oriented towards the welfare of the LDRs, but the 1/ Part II of this report is substantially unchanged from Part II of the Report and Recommendation of the President for the Montenegro Earthquake Rehabilitation Project--Highways (Report No. P-2622-YU) of August 31, 1979. - 8 - basic thrust of the Bank's activities in Yugoslavia has increasingly been towdards the development of the LDRs and the agricultural sector in particular. 20. The Bank's emphasis on assuring the accelerated development of the LDRs is fully in accord with the Federal Government's avowed policy to narrow the gap between the richest and the poorest regions. The new development Plan assigns even higher priority to redressing such disparity, and to that end the Federal Government has now obtained consensus of its constituents, not only on the channeling of domestic resources to the LDRs through the Federal Fund mechanism (see para. 7 of this Report) but also on the distribution of external resources including Bank lending. The Bank 'has actively cooperated with the Government in evolving a distribution pattern for Bank lending which gives weight to the income levels and population size of particular regions and has on this basis over the last three years effectively directed more than two- thirds of its lending to the LDRs. Moreover, lending to regions other than the LDRs frequently has had as its basis the alleviation of disparities be- tween the urban and rural areas. While the Bank's ability to achieve such a distribution is clearly influenced by the ab:ility of the regions to generate viable projects, recent experience in bringing forward well designed and eco- nomically sound projects for the LDRs is cause for confidence in our ability to maintain the level of Bank activity in the LDRs, though there will undoubt- edly be year-to-year fluctuations. 21. In recognition of the fact that such an expanded investment program for the LDRs would need to be preceded by a systematic survey of these regions to take stock of development potential and identify constraints, the Bank undertook and completed economic surveys of the four LDRs (Kosovo, Bosnia- Herzegovina, Macedonia and Montenegro). These regional surveys, coupled with intensified Bank assistance in project formulation and ongoing economic and sector analysis, reinforce the impact of the Bank's participation in the development of these regions. 22. Over the past several years, more than two-thirds of our lending, as noted in paragraph 20 above, has been to the LDRs. Operations, such as the Tenth Highway Project (approved March 27, 1979), the Bosanska-Krajina Agricul- ture and Agro-Industries Project (approved October 5, 1978), the Macedonia Strezevo Irrigation Project (approved August 8, 1978) and the Third and Fourth Industrial Credit Projects (approved July 11, 1978), as well as operations envisaged for LDRs over the next two years, including loans for water supply and sewerage and multipurpose water resource and agricultural development, emphasize our continuing orientation to the needs of the LDRs. Previously approved loans for a Ninth Highway Project and a Fifth Railway Project (Fiscal Year 1978) and a Middle Neretva Hydro Power project (also Fiscal Year 1978), as well as the Second Power Transmission Project approved in Fiscal Year 1977, will both assist the LDRs and promote structural reforms in the transport and energy sectors. A recently approved (September 4, 1979) Croatia Sava Drainage Project will increase incomes of the disadvantaged rural population in a relatively well developed region and reduce the disparities in incomes between the rural and urban population. IFC is currently investigating several new investment opportunities to encourage joint ventures which would provide technical, management and marketing expertise as well as long-term capital. - 9 - 23. The Bank helped formulate the 1973 "Green Plan", a comprehensive framework for agricultural development, which recognized the need to encourage the role of the individual, low-income sector (which holds almost 85 percent of the cultivated land and employs over 90 percent of the farm population). As a follow-up, the 1976 "Green Plan" calls for even greater attention to agriculture and clearlv recognizes that the impetus for accelerated growth must necessarily be derived from the underexploited resources of the indi- vidual farming sector. It is now generally appreciated that the individual farmer sector can generate significant increases in production if provided with sufficient suppor: in terms of extension services, credit for inputs and basic infrastructural facilities. 24. The agricultural sector deserves attention for a number of develop- mental considerations. It is the obvious vehicle for addressing the problems of rural poverty which underlies regional disparity; it can provide opportuni- ties for productively employing the rural population, thus reducing the pres- sure for creating non-agricultural employment; and it contributes to reducing reliance on imports and improving the prospects for exports of food and other agricultural products. Forthcoming projects for agricultural credits, irriga- tion and rural development will support agriculture development in general and in particular, the individual farmer sector. 25. Decentralized management, which is the cornerstone of Yugoslavia's socio-economic philosophy, adds to the inherent difficulties involved in formulating coherent sector plans. One of the principal features of the 1974 constitutional changes and subsequent legislation, however, has been to revamp the institutional framework and to introduce mechanisms for coordination. The new system of self-management planning requires that the programs of all enter- prises are discussed, negotiated and reflected in legally binding agreements. In order to support these efforts for improved coordination, the Bank intends to pursue vigorously the initiatives it has sponsored in terms of establishing the basis for evolving coherent sector policies. 26. Given the c,mplexity of the Yugoslav system, which requires reaching a consensus of all parties affected by any substantive decision, the process of dealing with problems and of evolving acceptable solutions is cumbersome. The Bank sees it important, however, to continue exerting its influence in shaping the policy framework and having a further beneficial impact on foster- ing coordination, particularly in the power and transport sectors where sig- nificant progress has already been achieved. For instance, the Eighth Highway Project (Loan No. 1377-YU) approved March 15, 1977, provides for studies of road-user charges and railway costs which the Government and we believe essen- tial for developing *ntermodal coordination and devising a policy framework for the transport sector. The Second Power Transmission Project (Loan No. 1469-YU approved June 28, 1977), an extension of the interconnected transmis- sion system, partly financed by the Bank in 1972 (Loan No. 836-YU), will enable the supply of power throughout the country and thereby encourage power exchange coordination among all Republics/Provinces. - 10 - 27. A persistent foreign resource gap looms as the major impediment to Yugoslavia's ability to maintain its growth momentum and ability to address the critical issues of unemployment and regional disparities. While the Yugoslavs are making concerted efforts to open up and enlarge access to Western financial markets and institutions (including the European Investment Bank), there is no concrete evidence of substantial additional inflows. The Bank, therefore, remains a major source of Long-term external capital for the foreseeable future, and its significant level of operations in Yugoslavia not only constitutes the largest source of long--term external capital but, equally important, is regarded by international financing institutions as evidence of international confidence in Yugoslavia's economic performance, policies and prospects. In financing of infrastructure as well as industrial and agro- industrial projects, we continue to devote particular attention to possibili- ties for attracting co-financing. In our support of projects in the directly productive sectors, we have and will continue to devote attention to those which generate or conserve foreign exchange. 28. Yugoslavia's debt to the Bank amounted to 8.5 percent of Yugoslavia's total debt, outstanding and disbursed in 1979. The outstanding debt to the Bank is expected to remain a fairly stable ratio of Yugoslavia's total debt outstanding and disbursed. Service on Bank loans as a proportion of total debt service was 5.3 percent and is projected to be about 6 percent by 1980. PART III - THE 1979 EARTHQUAKE 1/ Background 29. On April 15, 1979 at 7:19 a.m. local time a devastating earthquake measuring IX on the modified Mercalli Intensity Scale (MCS) with an epicenter on the Adriatic coastline of Montenegro near Kotor, hit Yugoslavia. Five more earthquakes of over VII MCS, as well as hundreds of lesser after-shocks, struck the same area thereafter, with the last quake, an VIII MCS, on May 24, 1979. During this period earth tremors of strong intensity were felt in most of the area of Montenegro, the southeastern parts of S.R. Croatia, the S.R. Bosnia-Herzegovina, as well as the northern part of Albania (see Map IBRD 14637). 1/ Part III of this report is substantially unchanged from Part III of the Report and Recommendation of the President for the Montenegro Earthquake Rehabilitation Project--Highways (Report No. P-2622-YU of August 31, 1979. Some updating has been provided in those paragraphs related to the railways and ports sector to take account of updated information. Earthquake Damage, General 30. The physical consequences of the earthquake were most evident along the total length of thes Montenegrin coastline in a belt 10 to 12 km wide. In this area over one hundlred people lost their lives and about 500 people were injured as a result of the earth tremors. The casualties could well have been much higher except for the fact that the major shock was preceded by one of lesser intensity which served as a warning, that April 15 was not a business day (it was a Sunday) and that the major tourist season was not yet underway. 31. The earthquake seriously damaged the basic infrastructure of the area. The basic transport system, schools, hospitals, houses, hotels, indus- trial plants, apartment buildings, cultural-historical monuments, the water supply system, and the electric and telegraph-telephone grid were all exten- sively and heavily damaged. The full extent of this damage has not, even now, been ascertained. However over 12,500 of the approximately 60,000 housing units in the area were destroyed, and a further 12,000 heavily damaged. Over 4,000 industrial buildings, schools, hospitals, hotels, etc., were completely destroyed and about 3,000 more severely damaged. The total area of these 7,000 structures amounts to about 1.25 million square meters. About one- quarter of Montenegro's primary and secondary road system, which totals some 3,500 km of roads, was heavily damaged, including almost the entire length of the Adriatic Highway situated in Montenegro and almost all the other main roads (about 600 km total) in the area. The Republic's main rail line, its main port and the area's airport were also heavily damaged. The ancient cities of Kotor, Budva and Herceg-Novi, which are important cultural and tourist attractions were all heavily damaged and much of this historical area may be beyond repair. 32. The earthquake dealt a devastating blow to the tourist industry, coming just before the season was to start in an area which contained more than 90 percent of the Republic's 125,000 tourist beds. The damage to the road network and the railway from Titograd to Bar as well as to the airport at Tivat resulted in a situation immediately after April 15 in which the only possilble communication between the Montenegrin coast and the rest of the coun- try was by radio railway's communications system, and helicopters. Although land communication was partially restored within a few days, and largely maintained even after subsequent earth shocks, economic activity has been severely curtailed. More than 5,000 people who would ordinarily be employed in the tourist industry are now unemployed. 33. Overall the economic consequences of the earthquakes are critical to Montenegro which is one of the least developed regions in Yugoslavia. This lag in development has been due in large measure to the topography which not only makes communication to and within the region difficult and costly to build and maintain but which also dictated the historical development of the main terrestrial transport links to the north and east of the region. How- ever, during the last two decades the Government has made major efforts to improve transportation to and within Montenegro through the construction of four major transport projects, including the Adriatic Highway along the coast, a major highway linking the Adriatic Highway and the Port of Bar with Titograd, - 12 - -he capital of S.R. Montenegro, and eastern Yugoslavia, the Belgrade-Bar rail- way and a modern port at Bar. All but the highway from Titograd to the coast, which was built with the financial assistance of USAID were components of Bank financed projects. All were heavily damaged in the April 15 and subsequent earthquakes. Specific damage to the terrestrial transport modes and the Port of Bar are briefly detailed below. Earthquake Damage, Highways 34. Although the road maintenance services and civil engineering con- tractors of Montenegro, aided by the Yugoslav army, were able to get limited traffic movement along most highway links within a few days after the first earthquake, the further earthquakes between April 15 and May 24, 1979 brought additional damage to infrastructure generally and the road network specific- ally, again closing major sections of coastal and inland routes for various time periods. However, traffic-blocking debris has now been cleared on the main roads and some temporary detours have been constructed around those areas too badly damaged to handle any roadway traffic, with the result that most roads have been opened to at least limited traffic (passage by truck trailers is still widely restricted). 35. Many damaged road sections are extremely vulnerable to further damage where the earthquakes have disrupted drainage systems and/or did other structural damage leaving the sections open to water intrusion. Although Montenegro (and the rest of Yugoslavia) had an extremely dry summer, it was imperative that certain remedial work be undertaken before the rainy season started in the fall. 36. Of all the roads damaged by the earthquakes the most important is the Adriatic Highway, which is the main national and international route and which services the major tourist area in Montenegro. Also heavily damaged were the major east-west road from Titograd, the Republic's capital, to the Port of Bar on the coast and from Cetinje, the cultural center and ancient capital of Montenegro, to Budva, a tourist center on the coast. In addition many of the regional as well as local and access roads, particularly around Kotar and Ulcinj, were heavily damaged. Earthquake Damage, Railroad 37. The April 15 earthquake severely damaged about 40 km of the Lutovo- Titograd-Bar section of the Belgrade-Bar line and about 10 km of the Titograd- Niksic branch line. The five major earth tremors that followed did further damage so that some 33 km of the main line was corrugated, with irregularities up to 65 cm. About 6 km of track had to be renewed completely because of damage caused by falling rocks on the line. These rocks made renewal of 3 km and repairs of 20 km of the overhead contact line system necessary. The sig- nalling system on the Titograd-Bar section and the Ostiog and Bare Sumanovica tunnels near Niksic also suffered considerable damage. In 6 km of the Sozina tunnel the basic geometry has been distorted and water seepage stopped temporarily the use of electrical traction. At the 200 m long Skadar Lake 1,, bridge a lateral movement downward of one side oI 12 cm has been noted, and at the 80 m long Moraca River bridge a similar movement of both sides of 2 and 9 cm and a transversal movement of 4 to 6 cm has occurred. The total exter,t of the damage to the bridges is still under investigation, and underwater inspection of the foundation is being carried out to verify the extent of the damage. Emergency repairs enabled train traffic to be restored after 13 days but with speed restrictions on bridges (10 km/h) and in areas with unstable slopes (20 km/h). These restrictions are now raised to 20 and 30 km/h awaiting final investigations and repair of the damage. Building of galleries, anchoring of rocks, installing steel nets with signalling devices and repair of drainage systems are major works still to be done to protect the line in unstable areas. A number of railroad stations have suffered damage, in particular those at Zeta, Virpazan and Sutomore; the last one is so badly damaged that it has to be rebuilt. The locomotive depot at Bar was destroyed; other railway buildings are heavily damaged but can be repaired. RTO Titograd has apartment buildings for its workers in Titograd, Sutomore and Bar. The buildings in Sutomore with 36 apartments are badly damaged but can be repaired. Three buildings in Bar with 70 apartments have to be demolished and rebuilt. One locomotive and 13 freight wagons are so heavily damaged that repair is not economical. Earthquake Damage, Port of Bar 38. As a conseqtLence of the earthquake, all structures - breakwaters, quay walls, transit sheds, storage areas and administrative buildings in the Port of Bar were damaged in varying degrees from minor cracks to total destruc- tion. Both breakwaters and all quay walls sustained extensive damage partic- ularly to underwater sections. The quay walls of the older Pier II area have been so extensively damaged and buckled as to be inoperable and only safe for reduced and restricted operations. The newer, Bank-financed, quays of the Pier I area sustained considerable damage but can be rehabilitated without major demolition and -rebuilding. The non-mineral oil tanks, under construc- tion, received only minor damage. A heave of the access channel in the port left some 450,000 m3 of spoil above the previous bed level thereby reducing the operational depth of the port by 0.5 meters. Mechanical equipment such as portal quay cranes, and the Bank-financed container and bulk-handling equip- ment all "jumped the tracks" with consequent excessive stress and deformation of structural members. One 8 ton crane was completely destroyed. All port services - water, eleatricity, drainage, telephones, etc. were put out of operation. The Volujica Hill, next to the bulk-cargo berths, produced several rock-slides which covered roads, railway sidings and part of the adjacent storage area. Economic Implications of Earthquake Damage 39. The direct economic implications of the earthquakes are obvious. A great deal of expensive infrastructure has been damaged and destroyed and will have to be repaired or replaced in one form or another. In addition, essential economic activity has been interrupted and slowed& To the extent that a return to normal activity depends on the restoration of the damaged and cestroyed infrast'rucure, there are further, time-related, econom-ic costs - 14 - (losses). A case in point, which also serves to illustrate the interdepend- ence of the necessary remedial works, is the international tourist industry which is basic to Montenegro's economy. 1978 was a record year for tourism in Yugoslavia and since, prior to the earthquakes, advance bookings for 1979 were about 15 percent ahead of equivalent 1978 advance bookings, Yugoslavia generally and Montenegro, in particular, were expecting a substantially improved tourist season and contribution to foreign exchange earnings. The earthquakes damaged a considerable amount of the direct tourist superstructure in Montenegro (hotels, restaurants, historical buildings, etc.). Although a good deal of this superstructure suffered only repairable damage, the opera- tion of these hotels, restaurants, etc., depends on the rehabilitation of the damaged water supply systems and electric grid system. But even when remedial work on these items of infrastructure is made, the tourists will still have to get to the hotels, restaurants, etc., and this will depend on remedial work on the damaged transport system. Further, the repairs to the water systems, electric grid, etc., will, themselves, depend in large measure on an ade- quately functioning transport system. As a result the tourism industry is virtually at a standstill and can only be expected to recover gradually as repairs are made in all the related sectors. 40. Obviously, then, there is a basic interrelationship among the various classes of infrastructure and the minimization of time-related economic loss depends on prompt remedial action in many sectors. However, equally obvious, the restoration of the bas:Lc land transport network is the sine qua non of economic recovery. In this context another example both of interdependence and the critical need to restore the land transport network involves the Port of Bar. This port, severely damaged by the earthquake, not only is the major seaport for all of southern Yugoslavia, but is also a major entrepot for Belgrade and the industrial and agricultural area surrounding the capital. Prompt restoration of effective port operations is not only critical to the economy of Montenegro but to that of southern Yugoslavia as a whole. Yet the restoration of the port in large part depends on reestablish- ment of the rail and highway links to the port from Titograd and thence to the rest of the country, both in terms of mobilizing the necessary materials and labor for repairs and in the movement of goods into and out of the port. Request for Special Bank Lending 41. The Government of Yugoslavia has requested the Bank to provide financial assistance for the rehabilitation of the earthquake damage in S.R. Montenegro, one of the four LDRs in Yugoslavia. Assessment of the cost of physical damage is well advanced but still proceeding. Present indications are that the final estimate may well be as high as $3.5 billion. In addition the economy of the Republic will suffer a severe loss of earning capacity, both currently and for several years to come, as a result of the damage to the tourist facilities and the industries in the region of Bar. 42. A law providing funds for reconstruction was published in the Offi- cial Gazette of SFRY on July 27, 1979. This legislation specifies interim contributions to be deposited by each of the Republics and Autonomous Prov- inces into a Reconstruction Fund (Fund) to be established by S.R. Montenegro. These interim contributions amounting to Din 5 billion (US$267.4 million) will 1 * be paid into the Fund in equal installments at the end of August, October and December 1979. The law also provides that the total contributions to be eventually made will be determined, on the basis of final damage estimates, and enacted into law by December 15, 1979. Provision is also made for equal contributions to be prDvided monthly in 1980 and that these, and any further contributions which may subsequently be provided, will be increased by an amount equal to the increase in the consumer price index for the preceding year. S.Ro Montenegro has passed legislation establishing the Fund on July 31, 1979 and has thereafter earmarked funds for specific sectors of rehabilitation. A large proportion of the interim contributions are being earmarked for housing and rehabilitation of the transport sector. Additional contributions received and being sought from other domestic and interna- tional sources will also be channelled through the Funde Both SFRY and S.R. Montenegro are convinced that financial assistance provided by the Bank would serve as a catalyst for obtaining other external assistance. Discussions with a number of countries and agencies who have expressed interest are underway. 43. In addition to its direct financial contribution, SFRY has under- taken to service the domestic and foreign debt of enterprises struck by the earthquake and will provide supplementary financing for social services. 44. In view of t:he Bank's past substantial financial assistance to and depth of knowledge of the transport sector in Montenegro, it is proposed that loans totalling $85 m:Lllion should be made for specific projects for the rehabilitation of highways, the Titograd-Bar railroad and the Port of Bar. These proposals will cover specifically identified works in an effort to ensure that the loans can be used effectively and quickly. 45. Several Bank transportation missions have visited the area and have reviewed the damage and the Republic's rehabilitation plans. The detailed assessment of damage and the reconstruction plans have already been made for the highways, the railways and the Port of Bar. Because the damage at the Port of Bar is severe, the design and layout of the original facilities are being reviewed with a view to ensuring that the reconstruction will provide the optimal means of 'handling present and future traffic. 46. Highway rehabilitation being urgent both to permit restoration of normal economic activity and to prevent further damage which would have occurred during the next rainy season if essential repairs were not completed promptly, a loan of US$21 million for highways rehabilitation was approved by the Board on September 18, 1979 and signed on September 21, 1979. This represented the first part of the total rehabilitation loans of US$85 million for the transport sector. Specific projects suitable for Bank financing in railways and the Port of Bar are now recommended for US$14 million and US$50 million respectively. - 16 - PART TV - THE PROJECT Background 47. As described earlier, the series of earthquakes had a devastating effect on the Southern Adriatic coastal area (see Map, IBRD 14637). Because of their proximity to the epicenter, the town and port at Bar were exten- 3 ively damaged. Out of a total population in the area of 32,000, some 22,000 were rendered homeless when about 48 percenit of the housing was destroyed or rendered unsafe for habitation. 48. In the Port of Bar (see Map, IBRD 10916-R), all structures (break- waters, quay walls, transit sheds, storage areas and administration building) were damaged in varying degrees from minor cracks to total destruction. Both breakwaters and all quay walls sustained extensive damage, particularly under- water. The quay walls at the old Pier II were so heavily damaged as to be inoperable. The newer Bank-financed Pier I sustained considerable damage, but can be restored without -vajor demolition and rebuilding. The operational depth of the port has been reduced by 0.5 meters, and mechanical equipment-- such as quay cranes, container crane and bulk handling equipment--suffered stress and deformation. All port services were put out of operation and the Volujica hill, next to the bulk cargo berths, produced rock slides which covered roads, railway sidings and adjacent storage areas. Virtually all con- tainer and general cargo traffic has ceased because of non-availability of equipment and working areas. This traffic is being handled through the ports of Rijeka and Koper, both longer and less economical routes for serving Bar's hinterland. Immediate Action Program 49. After the first earthquake, all ships were ordered from the port, and the port was closed to shipping for three days. Safety and salvage security measures were carried out: fires were extinguished, services tempo- rarily restored, buildings made secure, cargo protected from the weather and dangerous areas roped off. Efforts were directed to clearing rocks and debris from working areas and to removing quay cranes from damaged areas for inspec- tion. Experts from technical institutes and specialist engineers were engaged to undertake land and underwater surveys of the port. The provision of such "first aid" measures cost about Din 270 million (US$14.4 million) which is not covered by insurance because of "force majeure." Short-Term Remedial Measures 50. The objective of the Port of Bar Working Organization (PBWO) is to res-o re efficient services in the Port of Bar as quickly and economically as possible. This is to be done with sufficient flexibility so as not to inhibit the port's future development. The hinterland of the port is closelv linked with Yugoslavia's industrial expansion, and PBWO sees -he presPnt disaster as an opportunity to improve the facil'ities to ensure that the reconstruction will provide the optimal means of handling present and future traffic. - 17 - 51. By the beginn:Lng of July 1979, PBWO had repaired and made available a berth on the south side of Pier II for the import of scrap iron. Grain, coal, phosphates, non-ferrous ores and iron ore continue to be handled to a limited extent at the bulk cargo berths; work on building the grain silos (Loan 1060-YU) is about to resume. Vehicular and passenger ferries to Greece and Italy continue to ply from the damaged passenger berth on the lee break- water. These examples indicate the energetic and commendable efforts to get the port working, albeit to a limited extent due to lack of equipment and working areas and resultant low productivity and inefficient services. The Project 52. The proposed project was appraised by the mission that visited Yugoslavia in August 1979. Negotiations were held in Washington with a Yugoslav delegation led by Mr. Veselin Djuranovic, President of Republican Committee for Transport, S.R. Montenegro, from October 24-29, 1979. The project scope, dimensions and cost estimates are based on the "Report on Earthquake Effects and Possible Ways of Port of Bar Rehabilitation," prepared by PBWO with' the assistance of local experts, as reviewed and modified by the Bank. Objectives 53. The objective of the project is to rehabilitate and restore port capacity to enable the port to handle bulk and general cargo traffic generated by industrial development within the port's hinterland. To achieve this objective the project consists mainly of: (a) Repair and restoration of port facilities and equipment that can be repaired economically; (b) Provision of new facilities and equipment both to partially replace those which are damaged beyond repair and handle short-term requirements; and (c) Technical assistance required to assist PBWO in the implementa- tion of the project. Scope and Dimensions of the Project 54. As the present project covers only short-term development to enable the port to handle current and short-term projected traffic, berthing capacity requirements were analyzed as follows: (a) Before the earthquake, the port was able to accommodate about 18 ships; at, present, berthing capacity is reduced to 12 berths, some of them operating under hazardous conditions. With the project the port will have 14 berths fully operational. (b) Before the earthquake the 18 berths were used as follows: nine for general cargo, two for bulk cargo, two for cement, four for passenger and car ferry traffic and one for petroleum products. - 18 - (c) At present, the nine berths for traffic other than general cargo continue to operate as formerly, but some to a limited extent; only three of the original nine general cargo berths are cur- rently in service; the other six were so severely damaged that only one of them can be repaired economically; (d) The proposed project includes the restoration of 13 berths, breakwaters and Volujica hill and repair of services and work- ing areas, the constructiorn of one general cargo berth, and the extension of about 100 m that, added to the existing 391 m of bulk cargo berths, will ensure that two 65,000 dwt bulk carriers can be accommodated simultaneously, the repair of cargo-handling equipment and acquisition of additional port equipment. 55. Berthing capacity analysis shows also that the two existing special- ized cement berths are underutilized. Having a narrow quay apron and no back- up areas, the possibility of utilization to handle other kinds of traffic is unlikely. 56. A summary of available berths and use is given below: Before the With Berth per type earth- Proposed of commodity quake Present Project Passenger ships and car ferries 4 4 4 General cargo 9 3 5 Bulk cargo 2 2 2 Cement 2 2 2 Tankers 1 1 1 Total 18 12 14 A detailed description of the project (see Map, IBRD 14630) is contained in Annex IV. It is expected that the project would be completed by June 30, 1982. 57. A further review of national port capacity requirements is being undertaken in the ongoing national port sector planning study, in which the Bank is involved. An agreement has been obtained from the Borrower to ensure that any study for the future development of the Port of Bar will be carried out in coordination with this national port sector planning study and that the results of future development studies for the Port of Bar would be reviewed with the Bank before undertaking other major investments in the Port of Bar (Loan Agreement, Section 4.07). Cost Estimates and Financing Plan 58. The estimated cost of the port rehabilitation project is Din 2,334 million (US$124.8 million equivalent) excluding customs duties on imported - 19 - goods which amount to 20-30 percent ad valorem. The foreign exchange cost component is estimated to be US$60.9 million, or about 49 percent of total cost. The project cost estimates are summarized in the Loan and Project Summary and Annex V presents them in the standard appraisal format. The esti- mate includes provision for physical contingencies, which amount to 10-25 percent due to the nature of the works, and provision for price escalation on the basis of 12 percenl: annually for local costs over the next two years and 7 percent for foreign costs. 59. The Bank loan of US$50.0 million equivalent would finance 82 percent of the foreign exchange component, and the SR Montenegro Reconstruction Fund would provide the balance of US$10.9 million equivalent and the local costs of US$63.9 million equivalent. Procurement and Disbursement 60. Project content and description (see Annex IV) show that some of the project items are either limited in scope, involve a diversity of detailed works, and/or the exact nature of the works and consequently the unit prices cannot be defined until construction is under way. Under this category, the following items have been identified as not being suitable for Bank financing and consequently have been excluded from the loan: dredging; repair of build- ings, of port workers' houses and of transit sheds. 61. The extension of Pier I and of Volujica wharf (bulk cargo berth) will be financed by the Bank. These works may be procured under an extension of an existing contract after negotiations on the basis of updated unit prices of that contract and on terms and conditions, all satisfactory to the Bank (Loan Agreement, Schedule 4 C(a)). 62. Trimming back the Volujica hill to a safe profile involves removal of about 450,000 cubic meters of rocks, part of which will be used to repair the breakwaters and the rest to reclaim the backup area of the Pier 1 extension. Since these works are closely related to each other and in view of the urgent need to start the works as soon as possible, the corresponding contract would be awarded by an extension of the existing contract with the resident Yugoslav contractor through negotiations on terms and conditions acceptable to the Bank. 63. All other contracts for civil works should be awarded following ICB procedures, but contracts for civil works under US$1 million can be awarded on the basis of competitive bidding advertised locally and in accordance with PBWO's procurement procedures, which are satisfactory to the Bank. 64. The various items of equipment, damaged and able to be repaired in the port, could be entrusted to the original suppliers through negotiated contracts satisfactory to the Bank (Loan Agreement, Schedule 4(c)), in order that compatibility is assured and responsibility for satisfactory performance remains with the original contractor. 65. Procurement. of bulk-handling equipment consistent with the char- acteristics of existing equipment procured under the present Bank loan should follow ICB procedures. - 20 - 66. Other cargo-handling equipment and tugboats, if new, should be procured under ICB. However, due to the emergency conditions PBWO should be allowed to canvass the international market to seek suitable second- hand tugboats and cranes that can be delivered on short notice. In that case direct purchases should be accepted by the Bank provided prices are favorable and technical evaluation of the equipment offered is satisfactory to the Bank (Loan Agreement, Schedule 4C(d)). 67. Disbursements from the loan account will be on the basis of the foreign exchange component of the various items as follows: (a) for civil works: 41 percent of total expenditures; (b) for equipment: 100 percent of foreign expenditures for imported equipment (C.I.F. prices) and 100 percent of local expenditures for locally manufactured equipment (ex- factory prices); (c) for equipment repairs: 100 percent of total expenditures. It is expected that the loan would be fully disbursed by December 31, 1982. The Loan and Project Execution 68. The loan would be made to the Port of Bar Working Organization (PBWO) in an amount of US$50.0 million on standard Bank terms and would be guaranteed by the Socialist Federal Republic of Yugoslavia (SFRY). A condi- tion of loan effectiveness would be that the Republic of Montenegro will have adopted decisions or given assurances satisfactory to the Bank for the financing for the rehabilitation program, including a guarantee to cover possible cost overruns (Section 7.01 (a) of the Loan Agreement). Supervision of the repair and rehabilitation works would be effected by the Borrower, who has agreed to expand its present engineering and support staff, who will be assisted by Yugoslav specialists and by consultants (Loan Agreement, Section 3.02). The Investment Bank of Titograd (IBT) would act as fiscal agent for the Bank loan and the Fund proceeds, and the signing of an agreement to this effect between PBWO and IBT would be a condition of effectiveness of the proposed loan (Loan Agreement, Section 7.01(b)). Retroactive Financing 69. In order that the Bank may assist as fully as possible PBWO's earthquake rehabilitation efforts, expenditures as determined in agreement with the Bank incurred for the emergency works, on or after April 15, 1979 up tc the time of loan signature, not expected to exceed US$2.0 million, will be eligible for financing under the loan (Loan Agreement, Schedule 1, para. 4). Project Risk and Environment 70. Since the project is designed to restore the Port of Bar, no addi- tional environmental hazard is involved. A potential risk, the magnitude of - 21 - which cannot be foreseen, is that further subsidence of quay walls and break- waters may occur. But the project contingency element would provide to a reasonable extent for additional works to reduce the potential for damage resulting from future earthquakes. PBWO and its consultants will ensure that structural designs will be in accordance with appropriate seismic design criteria, in conformity with Montenegrin legislation in effect (Loan Agree- ment, Section 3.02(a)). Economic Assessment 71. The hinterland of the Port of Bar covers about half the territory of Yugoslavia, and half its population. It includes two of the less-developed regions in the country (SR Montenegro and SAP Kosovo) and also most of Serbia (including Belgrade) an(d Macedonia. A large part of Yugoslavian industry is located within the port's hinterland, particularly steel and fertilizer plants and other mineral industries which depend on the port for both imports and exports. The main trafEic centers within the hinterland are about 200-500 kms closer, by overland routes, to the port of Bar compared to alternative Adriatic ports like Rijeka and Ploce. 72. The Port of Bar and the Belgrade-Bar railway cannot be treated in isolation; they are interdependent. They were planned and constructed over the past two decades or so, mainly with a view to opening up and developing the less-developed regions like Montenegro and to boost the economy of eastern Yugoslavia. Unless both are repaired and restored the initial investment in these facilities of about US$800 million (1979 prices) and the benefits stemming therefrom will largely be lost. The cost of repairing and restoring the port and the railway is estimated to be approximately US$180 million. The economic benefits from the rehabilitation investment would consist of increased production and income in the region from their present depressed levels. Given the large investment in existing facilities they may be assumed to be high. 73. In the absence of the proposed port investments in Bar, it is conservatively estimated that a minimum of 1.5 million tons of traffic would have to be diverted from the port of Bar through other ports (mainly Rijeka and Ploce) by about 1985. Such traffic would have to be carried overland over a much longer route into Bar's hinterland (average additional distance, 300 km or more per ton of cargo) involving higher transport costs. In addition, such diversion would render superfluous a good part of the railway and road capacity built up at high cost from Bar to its hinterland. A more compelling fact is that to handle such extra traffic, additional capacity would have to be created in the alternative ports as well as in the overland rail routes (in view of the absence of any spare capacity), which together would require a much higher investment than now proposed for rehabilitating the port of Bar and its railway links. Moreover, use of a more distant port on a regular basis would hinder the further growth of the industries in the immediate hinterland of the port of Bar. The initial development of the port of Bar facilities financed by the Bank was precisely to avoid such a costly diversion of potential traffic. These factors underline the basic justification for the proposed port rehabilitation. - 22 - 74' It should be added that the proposed project does not seek to restore all the facilities damaged or destroyed by the earthquake, the objec- tive being to restore only what is most essIential for the near future (up to about 1985). For example, of the five general cargo berths destroyed on Pier II, the reconstruction at a new location of only one berth is sought under the project; at the same time the bulk-handling facilities would be further improved over the pre-earthquake situation, mainly to accommodate the larger bulk carriers now expected to come to the port and to handle bulk cargos more efficiently. These changes are proposed because, judging from recent traffic trends and short-term traffic prospects, it is clear that the port's facili- ties should place more emphasis on bulk cargo than on general cargo which has increased only slowly. 75. The long delay in completing the Belgrade-Bar railway line (com- pleted in 1978 as against the earlier schedule of 1972) has adversely affected the build-up of traffic in the port of Bar, and therefore the port's traffic has not so far reached the levels earlier projected for the Port of Bar Proj- ect (Loan No. 1060-YU). The present rehabilitation is designed to meet a modest growth projection starting from the levels reached in 1978 and 1979. In 1978, the port's traffic was about 1.3 million tons, consisting of 0.4 mil- lion tons of general cargo, 0.6 million tons of dry bulk cargo, and 0.3 million tons of liquid bulk (mainly petroleum traffic). Traffic handled in the first seven months in 1979, in spite of the dislocation due to the earthquake, has been about 30 percent more than in the corresponding period in 1978. Indeed, this volume of traffic in 1979 has been handled under great strain by stretch- ing all available resources and working on a round-the-clock basis and also working under some physical risks to the cargo and workers--all these because of the emergency situation. The above increase in traffic in 1979 reflects the gathering pace of traffic development through the port, which is expected to continue. 76. The proposed project is designed to handle an expected traffic of about 0.5-0.6 million tons of general cargo, and about 1.5 million tons of dry bulk cargo by 1985. While the dry bulk cargo facilities, with the pro- posed modest improvements, are essential to handle this volume of traffic in view of a variety of items involved, the port will have sufficient reserve capacity to absorb a larger volume if needed. Borrower's Finances 77. While PBWO has been able to cover operating expenses including depre- ciation, there is serious concern in PBWO, IBT and the Secretariat of Finance and Economy of SR Montenegro regarding PBWO's cash flow situation in 1979 and subsequent years. Delays in completing the railway marshalling yards at the port previously imposed constraints on port capacity and on its earnings. This situation has now been exacerbated by the earthquake and on present esti- mates the port's own resources would be insufficient to meet existing debt service commitments. These problems will continue to be addressed as part of the Bank's supervision of Loan 1060-YU. However, as stated in para. 43, SFRY has undertaken to service both the foreign and domestic loans of enterprises affected by the earthquakes to the extent that this may be necessary. - 23 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 78. The draft Loan Agreement between the Bank and the Port of Bar Working Organization (PBWO); and the draft Guarantee Agreement between the Socialist Federal Republic of Yugoslavia and the Bank, and the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement are being dijstributed to Executive Directors separately. 79. Provisions in the agreements of special interest are noted in para- graphs 57 through 70 of this Report and the most important provisions are listed in Section III of Annex III. Special conditions of loan effectiveness are described in paragraph 68 of the Report and set forth in Section 7.01 of the draft Loan Agreement. These conditions specify that: (i) the Republic of Montenegro has adopted decisions or given guarantees in form and substance satisfactory to the Bank to cover the financing of the Project including cost over- runs; and (ii) the agreements between Investiciona Banka Titograd (IBT) and the Port of Bar Working Organization under which IBT is to act as fiscal agent for the Project are in full force and effect. PART VI - RECOMMENDATIONS 80. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President hy Ernest Stern Attachments November 12, 1979 Washington, D.C. -24- AMNEX I - OS11VA -S0AL :!MCtICATOWS OUA SWEET Page 1 of 6 ALF,-1cr ZRaOULS "US.'D i. rcss LA AA f°USA.M SM. - 9IS- RCZ' !'S- , - .ceA. 125.4i sa* S&M ST -:!.iEil ACEICUL.:7AL 143.2 VCST ALE1 C=OCRAPRro ;N:O C 19DS lb 1970 /l ESMmTA ib uc;oa Ic C7CL? !d ZOUP I. CYP 911 CAt'-.A (uS5) 430.0 940.0 13) .0 2;06.3 1942.6 3t75.3 K5Y21C? C0NS.YS206 D9 U (X.LOG'iS OF COAL. ZjUVALUNT) 872.0 1459.0 201!i.0 2033.2 164.7 25:S.6 P0Ptt.A=rOq bY 7'.-AL ,:.kl:mC_ FoPnuahIc, !. iD-f-YAA v.Y.LLCS) 13.4 20.4 21.7 U1JAN iOPULATI. (FEICMT 0 TOTAL) 27.9 34.8 38.4 4.3 53.2 n. POPULATION . ?%C-02C5 oPVFuLA.-o L .-AR 2000 D.NLf65) 2S .0 STATI0NART POCPLA2ION (MZLLICNS) 29.0 1AA 5TATI6R! POP7CA?JION LS UACED 2100 FPOPLATION 01SS PER 5Q. m. 72.0 80.0 85'.0 81.5 28.2 23.5 PER SQ. >. AQICULTMAL LXTD 124.0 139.0 152.0 138.8 100.5 91.3 ?O?LA.IO AGE $12.2 (PERCENT) 0-1' 21S. 30.5 27.4 25.0 25.6 35.4 33.3 15-6 ru. 63.2 64.8 66.0 62.9 56.3 S7.5 65 usS. AID ao= 6.3 7.8 91.0 10.2 5.1 S.7 O9.ATI0N G&OWTK AT2 (PETR ) TOTAL 1.2 1.0 0.9 0.9 1.7 2.1 0134ff 3.6 3.2 3.0 2.6 3.0 0108 SIM31 6TY. (P?l TM!00SA.MD) 24.0 19.0 1!.0 18.5 27.5 31.4 CRUDE DEAT; RA2T (P1R 2OiSAS) 10.0 9.0 9.0 9.2 9.1 8.2 3nSS REPKODarTtON 1ATE 1.4 1.3 1.1 1.2 1.8 1.9 fAMILY ?L.ASSfTG ACC1TOtS, ASVAL (1HOUSA.XDS) .. .. .. USErs (UZERCIN OF MASSE. WO1t?M) .. 59.0 .. FOOD A-ND NllN =SCN 0D1EX Of FOCOD ?RCDUCtION PER CAPI16 (1906-71-LO) 83.6 92.0 120.0 115.7 102.0 98.7 M CAPITA SU.P?LY oF CALOitI'S (9!'RC11 OF 81QUIa L.N2S) 115.0 124.0 136.0 134.2 120.8 112.7 PIOTEINS (t s3 pelt OAT) 91.0 92.0 97.5 95.4 r0.9 70.3 of WHICH ANIMAL &%M PCL.E 27.0 29.0 35.4 45.4 31.3 CL= (6ACS 1-') 01Z-20X.Y 2AT.2 4.0 3.0 2.0 1.3 5.1 2.3 UALTR LIFE !PE11ASCy A.- 3112! (T--as) 62.0 67.7 .69.0 70.0 45.6 68.7 216ANT MORTALITY RATE (PCE UISANO) 88.0 55.5 35.0 31.5 45.5 20.8 ACCES5 T0 SAfE WAV2 (PZICZY? 0? 1OP1LATIONI) TOTAL 9. .. .. . 9.6 73.9 I1 .. .. .. .. 85.1 I 94 .6 *01 -. .. .. 43.0 64.6 ACCESS 20 EfClZ?A DISPOSAL (PElCR TOtAL . . . . 70.1 A .. .. .. .. 8.3 RAL ... .. 3.2 . POPUtATION PEC PETSZCZA1N 1400.0/1 1010.0 790.0 661.6 1343.2 981.8 POPULA.ZON PER .L'SINC PERSON 1330.0/f 410.0 390.0 677.1 765.0 397.8 POPWLAT:'O PC1 KOSPITAL 3D TOTAL 200.0 170.0 170.0 180.1 197.6 240.6 U1U,S .. 70.0 70.0 .. 260.2 U.AL *- 1610.0 1770.0 .. 1055.0 AmaSS1ONs PER .9OSPTAL 3 .. 17.0 17.0 15.3 17.3 19.2 WOOSINC AVELAOO E2S Of ROUSE0C0D TOTAL 4.0 3.8 5.J .. 4.7 LR-S 3.3 3.2 3.3 .. 4.4 W301L 4.4 4.3 4.1 . 3.1 ATELAaE NYL'1 OF PERSONS PUR ROOM TOTAL 1.6 1.4 . .. 1.. ilN 1.7 1.3 .. .. 1.2 3L'aL :. 1.3 1.5 .. .. 1.2 ACCZSS -0 ELZCc7IC:TY (PE91116 Ot OWELLINCS) TOTAL 33.4 87.9 .. .. ...0 U11841 92.7 98._. 4..1 RRAL'.1 36.1 80.1 , -25- ANNEX 1 TABLE IA YJCOSLAV1A - SCAL ISDtCATORS OATA StXVTS Page 2 of 6 IzF!2Z.NCO oiRCUPS .sA Eo A7£ES YUGOSLAVIA~,ts aC:~ S?'A: .1S SA.¶ ZZ60 AMME SAM W77 KlClE£t 40ST ALCE CZOCkAPtC XNCO0 DICOW2 1960 lb 1970 lb E 2TAVE /b REC28 Ic CROUP /t CROL? it SDUCATUON A;USTEiD OLL.SMT tATSCS PRL2AZY: SOTAL %.0 94.0 97.0 103.7 101.7 107.6 100.0 96.0 100.0 107.2 10.0. MLALZ 91.0 59.0 94.0 104.5 CJ SECONDAR'Y: TOTAL 34.5 46.0 55.0 65.9 S1.2 39.7 lYLE 43.0 50.0 59.0 70.3 56.4 MYALE 24.0 42.0 50.0 62.2 43.7 VOCATIONAL ENROL. (: OF 1SZCONDART) 72.0 72.0 75.0 20.4 1U.3 PtrIL-EA-M RATT0 P1R6ARY 33.0 24.0 22.0 26.7 27.1 SECONDAX 13.0 27.0 30.0 .. 25.3 ADULT LITZRACY T (PcnEjT) 77.0 53.0 85.0 86. CONSEQtO0N PASSELCER CARS PER THOUSAND OPUtATION 3.0 35.0 50.3 105.5 53.4 8.1 ADIO LECZIVERS PEI 21SA0mD POPULAtION 05.0 163.0 210.0 233.7 225.9 210.3 TV lCE?vm3S ?-I 210SAhD I POPUATION 1.4 U.0 IU.0 14.0 102.6 117.7 Dt¶SPAPER (C"AXLT C£LOMR INTERESOr) CIRCULATION Z0n VEOUSAD POPUILATON 69.0 t5.0 89.0 . 785.3 CT3UESA AMUAL AT1N1A2 PU CAPtIA 7.0 4.0 3 A 6.4 3.6 LABOR FORCE TOTAL S0.R FORCE (THOU&MbOS) 8345.0 9175.0D 9779.0 FISLE (PERCENT) 35.0 36.5 36.3 32.3 21.5 27.2 ACICULULE (ESCE'T) 63.7 49.6 42.0 23.8 25.9 23.t LNOUSVZ (PECLIM) 23.5 29.2 34.0 33.1 30.6 PARTICI?ATION RAT. (PERCENT) TOTAL S. '5.0 43.9 37.6 33.0 40.4 MALZ 60.3 38.3 59.4 57.0 51.3 55.7 FrMA 31.0 32.3 32.7 2t.0 16.3 24.7 ZCiONOKC DEPL'DENCT SAM 0. 0.1 0.7 1.0 1.3 1.0 INCOME 015-aTRlON MWPZCEV7 OF PRIVATE mNCC* ZECELVED BY 9G1ST 5 PERCENt OF EOUSEROLDS 16.4/b 15.11t hIOXESV 20 PRCENT OP EIOUSEFOLDS 41.5/h 41.4/i 40. O/ 47.9 57.6 LOWEST 20 PERC2ENT OF LNOUSEbOL3S 6.97i 6.671 6.5 5.0 3.4 LOWEST iO PERCENT O dOUScdOLDS 19.0/b 1B.4ii 8.4/ 13.4 11.0 POVERTV TA?.CE CROOPS ES-7 tATE7 A3Lmc POV?EZr L1600 LEVZL (USS PER CAPITA) RBAN .. .. .. .. RURAL .. .. .. ESTINATED RELATIVE POVERT U=l LEVEL (US$ PER CAPITA) 0L5A1 .. .. .. .. 550.0 . Rum .. .. U20.0 4U6.1 603.4. ESTIMATED ?0P0.ATTON KSELC A.SOLUTE POVERV? ZXCO.E LSVEL ( PRCENT) UsRIA) .. .. .. . .. 9MAL .. .. .. Not avail1bl1 iot applicable. NOTE /a The adjuseed group a.errpes for each Idn.atur art pop.lation-weighted 3eoeetoLr: means, excluding the extram. values of the Iultactor and the nos, Porlated count.7 in each group. Coverage of countries among tht Indlcacors d.petds on avallabilIt, of c4ata &0 ts co:t umilorz. 7b Unless ochervis. noted, asca fot !960 refer to any year between 195; and 1961; fer 1970, between 1969 and 1971, *ad for eot ket: t, ::. betwert 1974 &ad J977. /c Europe; Id uppo " ddle Inneo (SU116-2500 per capits, 1976); /1 Nigh ncce (over 52500 por capita, 1976): /' .962; /g tc"ivdtntg "grat woro.rs wortKig abroad; lb 1963; /L 1968; /1 1972. Post actent Estimate of CP p4r oaplsa i. for 1978. AugwS 1979 mrti? A _01 L' T~~~~ae 2 f 6 -P., r rOt. 020 _000 0010 ira fri st-00 7m > j&sadn n anoi otb .nt or r7 I 0 2-C tajL.d in, tot --,000<40 0 Of 000 vbe thOo-, ~1 Oo 000. le.r.tOo of Of17o t tooO -2.x mC0bott0 010 . l00rzOneS O&!y 207!-.-- 4eo-.ois On cti'th 0 . 130r-,netla >:4200 r- llp± r ao ir-dlron - oy1000aito Swtoatri oane.ozot tto -ntr-so o0.2.L- of t1nc trLotf o the -0t onpmOnto 12>00000 -bsOto I--- iooltto ol oot ': iOOO ho000000,toO.o trracon n3 ~A-TonfVo:%jll12OLtO.O_0 If~Lo 1w, W ooooo Thon -itt- L, .-!on 0oo.aotpfrn-h,psaor,arat d i Sardg s laor to 1l ito adflaolo tot dispoaefo, ino'to lto tf-o' o of h-tan -t - bicaptoa nntlataO at ,rOOr-it see-tnt prison, -.tlsO:- bti ooaOzir00t .tor or?ttbIeoyit ~~O'0 ~~9~~itoroofoes, pracoltol ~~~~~~Ognea too -o.stot hors.... CAt-dn2m. stawia dtOl 000bto n )tnoOta,tn - oOt. 010% 0000 tyo .ot ~totol,i-an tle-'roa nieatrll -ray) in bflape of anal asltoost 1 toln y0-so opot arns o ohs,oaotite co1012Lo M0 fP?r)l N7222flblto-o,oreto- p000242 -ooepnl ronodo l`or r" 0 tlrn o btrolbkonir77r0ˇ2SoO -9!~t 4 ---- rA- ' po elt tnseLb bsyl scot te M alf Iotsooc No:oobl ama f tenooit fo- talitos e, -b-naeo- oOllt obator parfosana. taco -rtartoat exI 00 .otofs too " of-ooo aayootaolo-u. 19tcliln n nable ho-eoten 0-t o 0010, oro t.or -to Jilotbing oife ano-twey ot bra-ltty booot.-os farl peoclselayant -1,otolottA Ton-uetdo. ho? ro -r 000: -roto t' l - o--o .,,rtr -oaolo fooorooo tnf- tO aacltn oo t-'0ltOa1ta lOh t-ott oot 000 :0 .oe nn onooroog 3o-ulsh ts I anityIrrovo Itself --otei.ottTnMon -salt- ooooorEARTHQUAKE REHABILITATION PROJECT NOSA- VASEISMIC IMPACT OF APRIL 15, 1979 EARTHQUAKE //s\ 'Sso.. ____ -_ - Paved roads 7- '~~~~~~~~*. "a' ~~~~~~~~Grovel roads ,Sua __ 04a 'A: ala - ~ ~ ~ cSi~~~ud~nic&. ulu epdn . ol \ PLJEVUA Autonomous province boundary I' Scepanl5olj~~~~~~ tTriica. ~ ~ ~ ~ ~ Republic boundaries .. \ ) ... !> : t \. _ ._ International boundary ( ) r t \ 6 MCS t Modified Mercalli Scale) K' I ~~~~~~~~~~~~~~~~~~~~7 Kosonica j- . r[A ,pErso s_s OKourr r.. - Pluiine° * i Zabliak DjurdevicdTra; . '_ 1 > > W I X 5ERB/A~~~~~~~~~ 5- N ( Pluiine0 i '-- ___,' 1Pasina Vada ... t t|SERBIA r % P IJELO POLJE .. - ~~~",rs~tc BoB;jov:) Po(je e Savnik oikovac t GPornie l / ($Koio-in IVANGRAD _roje '1 Kuside Kolajin~Poll KuseSC ManostirMorocaJ MateievoKua ------------- ndriievicca Viusi Podbozur \i Nudo -------- Grohovo Muin KOSOVO nibovgrad r 0 . ~~~~~~~~~~Cevo v9a . sinle - |:1~E\ Ce~nje GOAD / A L B-A A I A" Rod novkci -: R - ijetlFs~notieoZq IUv5tv , .. ; . . *A d U ; 5 tCAc PeyrovoJ 8ar 'iak ros/ I- Austt ,r i cv\; , X -. i_; - . . AUSTRIAo\./ $N ; . M e N 4 -;A< ; , , . b . . .. 'i1 MONT t A0E G OSCAVAC . I tb. rO,IdSo4usev Ad,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~5 vv EhJi,,uN'Tv1',I~'h 5-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~a,NoN 'TTR,Evp~ hvW2n(vN. LMHA1 -I vOu o~I,gancv vavm;~, Nuv tc*n, -a n I I IBRD 10916R O,r.,b,, '574 0 II ~~~~~~~~~~~~~~~~~YUGOSLAVIA 0~~~~~~~~ ~~~PORT OF BAR PROJECT -, TIT~~~~EARWATTIT I~~' AAQIR ON FOR P600 NAM RRRTr0 ~~~~~~~BLACK Et, VETTIC rEFERS ~~~~~~~~~~~~~~~Project and F/urwe Ex ens,on I ---~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- - Inte-rnorioml BounddcIes I ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-16-- Depth In Meters Del ow W (15 T ENTRANCE TO FORT AREA 0) IOU 200 300 4CR C i - OAR 4-A~~~~~~~~~~~~~~~~~~~~~~~7PRKIN BIRTl, ;~~~~~~~~~~~~~~~~~~~OFFICE f 'N I,'r ANST HE I / " ~~~~~~~~~T0o - '0~~~~~HED OWN., BY I / K i/pd /CEII~~~~~~~~~~~~~~~~~~~~RE2P~1OTR AND 14: P;IER I /'. TO-""A6 N 'y 'I 0 160~~~~~~~~~~~~~~~~~~E0W Lwo0T N< N A t I - 6/ N>7 <~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Nj/N / AU-IRA~~~~~~~~~~~~~~~~~~AlsIR , HLJN13 / N OR K -A n~~~~~~~~~~~~~~~~~~~C ROT/A A. SCA115TI, - IS 4RG K\'< SODA SANKES - 5 K-,KRN /, R' -- /7'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Y <5LAI 6' MSR- / - /6 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~" A/~~~~~~~~~~~~~~~~~~'4 FR, SN'C~~~~~~C S ARIA ~~~~( N-V~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. // -<~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~"-E l I~~~~~~~~~~~~~~~~~~~~~~~~~~ IBRD 146r2f 6 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~YUGOSLAVIA PORT OF BAR EARTHQUAKE REHABILITATION PROJECT AERIEP RRR, Severely Damaged, Temeporarily Abandoned A~~~~~~~~~~~~~~~~~~S T . o be Restored GREEN Previous Project ENRNET OTAREA BLACK Existing 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- --.AIN R,OAD- International Boundaries 7 ANKER~~~~~~~~~~~~~~~TR rARIG- '- Depth in Meters belo. L.W.C.S.T. K ~~~~~~~~~~~~~~~ IL ~~~~~~~~~~~~~~~~~~0 100 2(0 3010 400 000 ~~' I N, -,,'. /1 ~~~~~~~~~~~~~~~ ' / ~~~~MEIERE IT S KP' 1 2'' 0,, ".Av'O' ~~~~~~~~~~~~~~~~~~~~~~~~~~, (010/ ~ ~ ~ 5.-0 N j H U N A R O'N'. 46'~~~~~~~'~~6 UR ROMAWA'3' R A, 1 ',,, K ' 4;, I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 'K R~~DrC)R 'RrCu, 5 / ~~~~~ IK'REE/ 77~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~