Document of The World Bank FOR OFFICIAL USE ONLY Report No: 16062 PROJECT COMPLETION NOTE FORMER SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA THIRD HIGHWAY SECTOR PROJECT (LOAN 3230 - 5 YU) October 22, 1996 Energy, Environment and Transport Division Country Department II 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 be disclosed without World Bank authorization. Currency Equivalent Currency Unit = Yugoslav Dinar (Din) Exchange US$1.00 = 13.8 Din (1991) WEIGHTS AND MEASURES Metric System FISCAL YEAR OF THE GOVERNMENT OF FORMER SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA January I - December 31 ABBREVIATIONS PCN - Project Completion Note RO - Road Organization SFRY - Socialist Federal Republic of Yugoslavia FOR OFFICIAL USE ONLY PROJECT COMPLETION NOTE FORMER SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA THIRD HIGHWAY SECTOR PROJECT (Loans 3230-5 YU) This is the Project Completion Note (PCN) on Former Socialist Federal Republic of Yugoslavia - Third Highway Sector Project (Loan 3230 - 5 YU). It was prepared by Peter Parker, and reviewed by Messrs. Christian Duvigneau, Acting Chief (EC2ET) and Franz Kaps, Acting Director (EC2DR). This Note is in lieu of an Implementation Completion Report because the loans were lapsed prior to effectiveness. It is based on internal Bank memoranda, supervision reports and direct knowledge of the project. A. Background 1. The Project was appraised in October 1988 with a view to supporting the economic development program of the former Socialist Federal Republic of Yugoslavia (SFRY). The Project was an integral part of the Bank's development strategy for the transport sector. The objectives of the Project were to: (a) improve highway planning and implementation of works through rationalizing expenditure programs and financing plans; (b) institute a nationwide maintenance management system and a funding mechanism to improve operational efficiency and meet maintenance requirements on a continuous basis; (c) improve roads for transit and tourist traffic, thereby generating additional foreign exchange; (d) reduce road vehicle emissions; and (e) rectify incentive distortions, encourage private contractors and consultants, and reduce costs. B. Project Objectives and Description 2. The Project comprised a two-year time slice of the road programs of the four Road Organizations (ROs) of Bosnia-Herzegovina, Croatia, Macedonia, and Serbia (including Vojvodina), and the Republic of Slovenia, who were the borrowers. The loans were guaranteed by the SFRY. The Project was financed by Bank Loans totaling $292 million to the ROs of Bosnia-Herzegovina ($55 million), Croatia ($75 million), Macedonia ($22 million) Serbia ($55 million) Vojvodina ($25 million), and to Slovenia ($60 million). The total financing package of $2,343 million included, in addition to the Bank loans, $33 million from the Bank's First and Second Highway Sector Projects, EIB financing of $190 million, local funds totaling $1,688 million and funds from other foreign sources totaling $140 million. 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 wiLhout World Bank authorization. 3. The Project included: (a) the construction and pavement strengthening/betterment and maintenance of high priority roads - particularly those serving transit, port access, and tourist traffic - included in the borrowers' road expenditure programs; (b) construction of Section I of the Belgrade-Pancevo road by the Serbia RO; (c) implementation of pavement strengthening and betterment works by the Serbia RO; (d) adoption and implementation of a maintenance planning system; (e) carrying out a study on the reduction of road vehicle emissions; and (f) strengthening the capability of highway staff through training. C. Major Factors 4. The Loans were approved by the Board on June 20, 1990, but signed only on May 7, 1991 due in part to delays resulting from the deteriorating political situation. The original terminal dates of effectiveness of September 9, 1991 were extended once to March 6, 1992 in the hope that the situation would improve. Due to the actual and impending breakup of the country, the Bank then informed all Borrowers except Serbia (including Vojvodina) by letters dated May 6, 1992 that it was not possible to declare the Loan and Guarantee Agreements for the Third Highway Sector Project effective, that the terminal dates of effectiveness would not be extended, and that the Loan and Guarantee Agreements had lapsed as of that date. The Bank extended the terminal dates of effectiveness of the Loans to Serbia (including Vojvodina) to December 31, 1992, but then similarly informed them by letter dated June 15, 1993 that the Loan and Guarantee Agreements had lapsed as of that date. The borrowers were not required to pay commitment charges on their respective Loans. C. Lessons Learned 5. The outbreak of the war, and consequent inability to achieve project objectives, could not have been anticipated at the time of project approval. m:\pp\yug\2road I cn.dot    M r$ROßRPHCT Recort Noý: 6 Tvpe: PCN