Document of The World Bank ft X FOR OFFICIAL USE ONLY Report No. P-3350-PAK REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE ISLAMIC REPUBLIC OF PAKISTAN FOR AN ELEVENTH RAILWAY PROJECT June 1, 1982 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 EQUIVALENTS Currency Unit Pakistan Rupee (Rs) US$1 = Rs 10.5 Rs 1 = US$0.095 GOVERNMENT OF PAKISTAN Fiscal Year July 1 - June 30 ACRONYMS AND ABBREVIATIONS CDLW - Central Diesel Locomotive Works KPT - Karachi Port Trust LDP - Lahore Dry Port NLC - National Logistics Cell PR - Pakistan Railways Ninth Railway Project = Loan No. 621-PAK of June 26, 1969 Tenth Railway Project = Loan No. 1372-PAK ) and ) of March 8, 1977 Credit No. 684-PAK) FOR OFFICIAL USE ONLY PAKISTAN ELEVENTH RAILWAY PROJECT Credit and Project Summary Borrower: Islamic Republic of Pakistan. Beneficiary: Pakistan Railways (PR). Amount: SDR 44.3 million (US$50 million equivalent). Terms: Standard. Relending Terms: The proceeds of the Credit would be made available to PR at a rate of interest of 11% per annum. Funds used to finance replacement investments would be repaid by PR over a period of 20 years, including 4 years of grace. Funds used to finance additions would be treated as a Government contribution to an increase in the capital-at-charge at the time of scheduled repayments. The Government would bear the foreign exchange risk. Project Description: The project is designed to improve the utilization of PR's existing assets and consists of the following main components: (a) improvement in locomotive maintenance through the introduction of a locomotive component remanufacturing facility and a unit exchange mainte- nance system; (b) installation of a management information system; (c) facilities and equipment for operating an international container service; (d) provision of spare parts; and (e) technical assistance and staff training in support of the project's objectives. The benefits would accrue mainly from increased availability and reliability of PR's diesel electric locomotive fleet. The project involves no special risks. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. -ii- Estimated Costs 1/: Local Foreign Total --------US$ million-------- Maintenance Improvements (i) Central Diesel & other shops 18.4 14.4 32.8 (ii) Unit Exchange Components 5.4 13.5 18.9 Management Information System 6.3 6.0 12.3 Containerization 9.6 4.6 14.2 Technical Assistance and Staff Training 1.5 1.9 3.4 Base Cost Estimates 41.2 40.4 81.6 Physical Contingencies 1.3 - 1.3 Price Contingencies 1.9 5.4 7.3 Revenue Spares 12.2 30.3 42.5 Total Costs 1/ 56.6 76.1 132.7 Financing Plan: Local Foreign Total --------US$ million-------- IDA 1.3 48.7 50.0 Government 55.3 27.4 82.7 Total 56.6 76.1 132.7 Estimated Disbursements: FY83 FY84 FY85 FY86 ---------US$ million-------- Annual 4.5 22.5 19.5 3.5 Cumulative 4.5 27.0 46.5 50.0 Rate of Return: About 18% Appraisal Report: No. 3818-PAK, dated May 25, 1982 Map: IBRD 16207 1/ Including taxes and duties amounting to about US$32 million. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE ISLAMIC REPUBLIC OF PAKISTAN FOR AN ELEVENTH RAILWAY PROJECT 1. I submit the following report and recommendation on a proposed Credit to the Islamic Republic of Pakistan for SDR 44.3 million (US$50 million equivalent) on standard IDA terms to help finance an eleventh railway * project. The proceeds of the Credit would be passed on to Pakistan Railways (PR) with interest at 11% p.a. for 20 years, including 4 years of grace, except that portion of the Credit used by PR to finance additional (as opposed to replacement) investment which would, as is customary in Pakistan, be added to PR's capital-at-charge and not repaid to the Government. PART I - THE ECONOMY 1/ 2. The most recent economic report "Pakistan: Economic Developments and Prospects" (No. 3802-PAK, dated April 14, 1982) was distributed to the Execu- tive Directors on April 16, 1982. 3. The past four years have witnessed a significant economic recovery in Pakistan. Between FY77 and FY81 GDP growth averaged over 6% p.a. This growth was accompanied by a recovery in agricultural and industrial produc- tion well above the rate of population growth, currently averaging 3% p.a., and by a rapid growth in exports. Exports increased in real terms by 11% p.a. Value added in agriculture rose by an average of 4.2% p.a. and in industry by 8.1% p.a. This performance contrasts markedly with the economic stagnation of the early and mid-1970s, when the growth of GDP averaged only 3-4% and goods production 1.1% p.a., and export growth was negligible. Fol- lowing a number of other favorable developments, including the conclusion of an Extended Fund Facility arrangement with the IMF, a short-term debt rescheduling arrangement with bilateral creditors of the Pakistan Consortium and improved external aid inflows, both the budget and the balance of pay- ments are under reasonable control and the short-term economic outlook has considerably improved. 4. The recovery in the economy since 1977 has been aided by several factors, including favorable weather, improved foreign demand for Pakistan's exports and higher domestic demand associated with better crops, rising rural 1/ Parts I and II are substantially the same as Parts I and II of the Presi- dent's Report No. P-3323-PAK (Fertilizer Industry Rehabilitation Project) dated May 17, 1982. 2- incomes and workers' remittances from the Middle East. Various policy chan- ges introduced by the Government have also contributed significantly to the recovery. 5. In recent years the Government has taken a number of initiatives to improve agricultural production. Particular attention has been given to improving farmer incentives and input supplies. Support prices for all major crops have been raised so that they are now closer to world prices; and efforts have been made to improve the fertilizer distribution system by expanding the marketing network and by ensuring adequate supplies and timely delivery of fertilizer imports. Steps have been taken to reduce the fer- tilizer subsidy (which has been creating budgetary problems) and by separat- ing it from the development budget for agriculture in order to protect allocations for other priority agricultural projects and programs. An Agricultural Prices Commission has been set up to make recommendations on appropriate changes in crop support and input prices on a consistent and timely basis. 6. In addition, the Government has begun to address the deep-seated problems affecting productivity at the farm level. A start has been made in improving extension services through the adoption of the so-called training and visit system. Reforms have been initiated to the agricultural research system in line with the findings of a USAID/World Bank study. The Government has formulated and begun to implement a new agricultural policy based on the main recommendations of a UNDP study on irrigated agriculture which emphasizes the need to improve the efficiency of the water delivery system through the rehabilitation of distributaries and better scheduling of water deliveries to the farmer; and to expand the role of the private sector, for example, through the promotion of private tubewell development in sweet groundwater areas. Other programs--in pesticides, seeds, agricultural credit and farm power--have also been strengthened. These initiatives are still at an early stage and a breakthrough from the problems of low productivity at the farm level is yet to take place. 7. Major changes have been made during the past four years in Government policies in the industrial sector. The policies pursued in the early and mid-1970s of extensive nationalizations, tight restrictions on the private sector, and rapid expansion of the public sector to spearhead industrial investment and growth have been gradually reversed. Most agricultural processing and some industrial units have been denationalized; constitutional safeguards have been provided to private industry against further arbitrary government acquisitions; and the areas open to the private sector have been widened. A wide range of incentives including tax holidays, excise and import duty concessions, concessionary credit and income tax provisions, and direct cash rebates have been granted to encourage private investment and exports. These have been supplemented by a partial liberalization of imports which will improve the availability of inputs. The investment sanctioning procedure has been streamlined. These measures have led to an improvement in -3- private sector confidence and to a sharp increase in proposals for relatively smaller-scale private investment projects. There is also evidence of increased interest by investors in larger projects, especially in the cement, chemicals and fertilizer subsectors. 8. At the same time, the Government has embarked on the difficult and inevitably long process of reforming the public industrial sector, which has been plagued by low efficiency and profits. Major studies have been com- pleted of the management and organization of the public sector, and the performance of individual enterprises. In accordance with the recommenda- tions of these studies, the Board of Industrial Management (BIM) has been abolished, the number of sector holding corporations has been reduced, and boards of directors have been established which have helped to increase autonomy at the enterprise level. Some public sector units which have little prospect of improved financial performance have been closed down. These measures, together with additions to capacity and steps to retain skilled technical personnel through salary adjustments, for example in the fertilizer subsector, have helped to increase production and capacity utilization sub- stantially in the public sector. In addition to the denationalizations mentioned earlier, further public disinvestment is being considered on a case-by-case basis. 9. The higher level of economic activity during the past four years and the Government's efforts to raise existing tax rates, introduce new taxes and reduce tax evasion have helped to improve public revenues. Nevertheless, the budget remained under strain as expenditures rose as rapidly as revenues. The Government's policies of encouraging production and exports through subsidized inputs and export rebates, and the political and social con- straints to making substantial price adjustments on a number of items of mass consumption, inflated subsidies. Rising debt service, following the expira- tion at the end of FY78 of the four-year debt relief arrangement with member countries of the Pakistan Consortium, and increased defense spending con- tributed to the growth in non-development expenditures. In addition, commit- ments under the ongoing public investment program and higher subsidies for agriculture led to further increases in development spending between FY77 and FY79. Despite the increased revenues, the overall budget deficit remained around 8% of GNP and the bank-financed deficit around 3-4% of GNP. 10. The budgetary situation improved significantly during FY80 and FY81. Government revenues, following increases of 21% in FY78 and 16% in FY79, rose by an average of 22% p.a. during the two years as a result of the continued growth of the economy, tax and tariff increases announced in the FY80 and FY81 budgets, and intensified efforts to improve tax collections. Although political developments outside Pakistan's borders led to unplanned expendi- tures, tight restraints were maintained on total spending; the growth of public expenditures was limited to 11% p.a. Both development and administra- tive expenditures were cut back, while subsidies other than those on farm inputs were held to the previous year's level in nominal terms. These -4- restraints on expenditures, continued revenue growth and some improvement in surpluses generated by public sector agencies helped to increase the availability of non-inflationary domestic resources. During FY80 and FY81, the overall budget deficit averaged 5% of GNP and bank-financed budget deficit of 1.6% of GNP; both figures are well below those of the late 1970s. 11. Pakistan's export performance has improved considerably in recent years. Rapidly rising workers' remittances from abroad, from US$578 million in FY77 to over US$2.1 billion in FY81, have also greatly assisted the exter- nal position. These increases have, however, been partly offset by an increase in the value of imports, mainly petroleum, oil and lubricants, fertilizer, edible oil and capital goods. The current account deficit was US$947 million or 3.1% of GNP in FY81, compared to US$1,050 million or nearly 7% of GNP in FY77 in current prices. The financing of these deficits had presented considerable difficulties to the Government during the past few years, since program-type assistance from OPEC countries (which was substan- tial in the mid-1970s) as well as net aid flows from Consortium sources declined through FY79. However, a strong upsurge of remittances during FY80, a marginal increase in net long-term capital inflows and substantial extraor- dinary receipts from OPEC countries eased the external financing problem in the second half of FY80 and helped to build up foreign exchange reserves to about US$750 million at the end of FY80, the equivalent of six weeks' imports. 12. A number of favorable developments substantially improved the balance of payments situation in FY81. These included the conclusion of an Extended Fund Facility arrangement with the IMF in November 1980; a positive response from aid donors to the country's improved economic performance resulting in increased aid commitments and inflows; and an agreement with bilateral creditors in the Pakistan Consortium for rescheduling of debt service pay- ments on official concessional debt falling due over an 18-month period beginning mid-January 1981. In addition, both merchandise exports and migrant remittances expanded by over 20%. As a consequence of improved performance on both current account and capital account, foreign exchange reserves increased from US$748 million to US$1,058 million during the year; the latter is the equivalent of about two months' worth of import of goods and services. 13. The recent favorable developments represent modest, though welcome, steps towards the solution of a set of problems which are essentially struc- tural and long-term in nature. Notwithstanding these improvements, further wide-ranging measures to address the basic issues which are limiting economic growth in the longer term are necessary if Pakistan is to sustain its recently improved economic performance over the present decade and bring about a modest improvement in the living standards of its population. These issues include the farm-level factors affecting low productivity in agricul- ture; the structure and competitiveness of the industrial sector; the need to improve performance of public sector enterprises; the factors lying behind -5- continued rapid growth in population; the need to redirect social service expenditures; and the problems of resource mobilization. 14. Agriculture remains the economy's mainstay, accounting directly for roughly a third of GDP, employing about 60% of the labor force and, directly or indirectly, providing nearly two thirds of total exports. Despite recent improvements in output and yields, a number of fundamental factors continue to limit agricultural productivity at levels well below the potential implied by the resources and technologies already available. Generally, output growth has not been commensurate with the substantial increases in available inputs, especially water and fertilizer. While considerable potential still exists for the additional use of fertilizer and other inputs, it appears essential to give greater priority to evolving complementary policies and programs which would have a direct impact on yields at the farm level. The importance of increasing farm productivity is now more widely recognized in the Government and a beginning has been made in addressing this problem. Nevertheless, support for programs to strengthen research, extension, water management and other programs in the agricultural and water sectors needs to be intensified, while fertilizer subsidies must be further reduced, accom- panied by necessary adjustments in output and consumer prices. 15. Manufacturing contributes about 15% of GDP and during much of the 1950s and 1960s provided a major stimulus to growth. Growth rates in manufacturing production, though recently better, remain well below those attained in the 1960s. The textile industry, in particular, which accounts for nearly 40% of value added in large-scale industry, has suffered from problems of inefficiency, excess capacity and a lack of competitiveness in foreign markets, while manufacturing growth has been generally affected by the inadequate performance of public sector enterprises. Although there have been some recent improvements in the output and profitability of public enterprises, these improvements need to be carried further through appropriate reforms to remove distortions in pricing, improve performance criteria and incentives to managers and to further rationalize the sector. To assist and further encourage the recovery in private investment and to maintain the increased momentum in the industrial sector will require, among other things, an adequate supply of local and foreign financing, both for investments and current inputs, and the more rapid provision of necessary utilities and other infrastructure requirements. At the same time, it is necessary to ensure that the Government's incentive system supports those industries in which Pakistan has a comparative advantage; more analysis is needed to determine levels of effective protection for formulating an appropriate industrial development strategy for the 1980s. The recovery in industry also needs to be reinforced by improvements in labor-management relations and by further measures to rehabilitate the textile industry and generally to increase exports. 16. The Government's efforts to deal with the energy situation by adjust- ing domestic oil prices, and by encouraging the substitution of other energy -6- forms and the exploration and development of domestic oil resources, have met with some success. Growth of petroleum consumption has been restrained by the development of hydro electricity and natural gas resources as well as by petroleum price adjustments. At the same time, activity in the oil sector has been stepped up, in some instances through joint ventures with foreign private companies. Nevertheless, due to a variety of technical, geological and other reasons, progress on exploration of new fields as well as the development of existing fields has been slow; and the benefits of Pakistan's considerable potential in the oil and gas sector are yet to be realized. A number of issues relating to such matters as energy planning, pricing and organization will need to be addressed in order to realize this potential. 17. While it is clearly vital to sustain rapid growth in the com- modity-producing sectors, it is also necessary to contain the rapid growth in population, currently running at about 3% p.a., which has seriously hand- icapped the country's ability to improve living standards. Family planning programs have so far had little effect and there have been few changes in the socio-economic environment of a type that usually accompany declines in fertility. Rapid population growth places severe burdens on government resources simply to maintain education and health programs at their current inadequate standards. However, without higher literacy rates, improved health facilities and a reduction in child mortality, it is doubtful that population growth rates can be much reduced. Expenditures on social services remain comparably low and undue emphasis has been given to higher education and urban health facilities. High priority needs to be given not only to increased allocations for family planning and social service expenditure but also to its redirection to serve the wider interests of the population and the economy. While the substantial migration from Pakistan to the Middle East over the past few years has to some extent relieved the pressures resulting from rapid population growth, this clearly cannot be relied upon to provide an answer to the situation in the long run. The Government has recently shown more awareness of this problem; a new population program has been adopted and is in the initial stages of implementation. 18. Policies that face the longer-term issues in both the productive and the social sectors will take time to have an appreciable effect and will have to be implemented in the context of continued domestic and external resource constraints. To improve the budget and the balance of payments, a fundamen- tal improvement is required in the overall savings levels in the economy, particularly in public savings. At 13% of GNP, national savings are substan- tially above the levels of the early and mid-1970s, but are still low for a country at Pakistan's per capita income level and stage of development. The continuation of the Government's recent efforts to restrain public spending, improve the performance of the public sector and encourage private investment will help to reduce present imbalances between investment and savings flows. At the same time, an increase in savings inevitably calls for restraining private consumption through appropriate price adjustments and selective duty increases on non-essential imports. While the Government has made several -7- price increases in the recent past, further adjustments will directly reduce the budgetary burden of subsidies. Continued restraints on spending and measures to further improve revenues through improvements in tax administra- tion and tax and rate increases (for example, property taxes, domestic water rates and irrigation water charges) are also needed. 19. Increased agricultural production of major crops (particularly rice and cotton) will help directly to sustain export growth. Efforts are also necessary to stimulate the output of minor crops, for example, pulses, potatoes, onions and fruits, for which markets exist in neighboring countries. In addition, substantial scope exists for increasing Pakistan's exports of manufactured goods such as textiles and engineering products, as well as of a wide range of goods produced by the small-scale industrial sector. Increased domestic output of wheat, edible oil, sugar, mineral fuels and fertilizer would help to moderate import growth considerably. 20. As described above, Pakistan's policies and economic performance have improved considerably over the past several years. Improvements in demand management and in planning, incentives and government programs in agricul- ture, industry and energy have helped to create a climate more conducive to rapid economic growth and better international trade performance. While Bank long-term forecasts show that foreign borrowing on commercial as well as concessional terms would be necessary to support economic growth of 5-6% p.a., recent policy initiatives have substantially improved Pakistan's creditworthiness for commercial borrowing and for a blend of Bank and IDA borrowing. 21. At the end of FY80, Pakistan's external public debt (excluding the undisbursed pipeline) stood at US$8.8 billion, of which US$5 billion was owed to bilateral members of the Pakistan Consortium, TJS$1.3 billion to OPEC and US$1.5 billion to multilateral agencies and the balance to other bilateral and private lenders. In 1980, the Bank Group's share in Pakistan's external public indebtedness was 13% and in external debt service was 11%. According to Bank forecasts, provided recent policy improvements are sustained, Pakis- tan's debt service ratio (debt service divided by exports of goods and factor and non-factor services), which was about 12% in 1981, should remain roughly constant through 1985 and, even assuming substantial commercial borrowing, should rise only slowly thereafter to about 17.5% in 1990. PART II - BANK GROUP OPERATIONS IN PAKISTAN 22. The cumulative total of Bank/IDA commitments to Pakistan (exclusive of Loans and Credits or portions thereof which were disbursed in the former East Pakistan) now amounts to approximately US$2 billion. During its long association with Pakistan, the Bank Group has been involved in almost all sectors of the economy. This has included its involvement with other donors, -8- over a 20-year period, in the major program of works to develop the water resources of the Indus Basin. Approximately 38% of total Bank/IDA commit- ments to Pakistan have been for public utility services, 30% for agriculture, 31% for industry (of which 9% was for industrial imports) and 2% for educa- tion. Lending for public utility services has included Loans and Credits for railways, electric power, gas pipelines, ports, highways, telecommunications and water supply. 23. Lending operations in Pakistan have three main objectives: first, to support the directly productive sectors of the economy; secondly; to support the expansion of, and to improve the institutions which are respon- sible for, the principal public services supporting economic growth; and thirdly, to meet basic needs in the areas of rural and urban development. 24. In pursuit of these objectives, the Bank Group has placed special emphasis on lending for agriculture, which is the mainstay of the Pakistan economy. Projects in this sector are aimed at augmenting the supply of essential inputs, principally irrigation water, fertilizer, seeds and credit; strengthening research, extension and other agricultural supporting services; improving water management; reclaiming land by controlling salinity and water-logging; and providing essential facilities including tubewells, live- stock development and dairy processing. An important purpose of this lending is to assist the Government's program to increase the productivity of avail- able land and water resources in the Indus Basin through quick-yielding investments, as recommended recently in a UNDP-financed study for which the Bank was executing agency. 25. In industry, most lending for the private sector has been through the DFCs, principally through eleven Loans/Credits amounting to US$270 mil- lion for the Pakistan Industrial Credit and Investmient Corporation (PICIC), and two Credits to the Industrial Development Bank of Pakistan (IDBP), total- ing US$50 million. Direct lending for industry has also included assistance to three large fertilizer plants, as well as for small-scale industry. IFC has made investments in 14 Pakistan enterprises for a total of US$73.7 mil- lion, of which US$63.9 million was by way of loans and US$9.8 million by equity participations (these are shown in Annex II). About US$33.9 million of these investments remains outstanding. The enterprises assisted by IFC include three in the field of pulp and paper products, two in textiles, two in food and food processing, and one each in cement, steel, fertilizers, plastics, wood processing and petrochemicals. IFC is also a shareholder in PICIC. 26. The focus of Bank Group lending for transport and communications has shifted increasingly towards assisting Pakistan to better utilize existing capacity by improving the efficiency of operations and strengthening the institutions responsible for these services, especially the Karachi Port Trust, Pakistan Railways, the Telephone and Telegraph Department, and Federal and Provincial highway agencies. In the power sector, the Bank Group has -9- assisted the Karachi Electric Supply Corporation (KESC) and the Water and Power Development Authority (WAPDA) with four and three projects respec- tively; the sector has also been assisted by the construction under the Indus Basin Development Program of Mangla and Tarbela Dams. 27. In the oil and gas sector, the two Sui gas transmission companies have been assisted with five projects, while IDA has recently financed a petroleum development project and begun to play an important role in strengthening the Oil and Gas Development Corporation. These efforts are assisting in the efficient development and utilization of Pakistan's domestic energy resources. A second water supply project in Lahore is currently under implementation. Five Credits for education, totaling US$62.5 million, have assisted in upgrading primary, post-secondary and higher technical and agricultural education, middle-level training of primary teachers and agricultural extension agents. 28. Annex II contains a summary statement of Bank Loans and IDA Credits as of March 31, 1982, and notes on the execution of ongoing projects. Credit and Loan disbursements have been generally satisfactory. Some projects have experienced initial delays due to government procedures for project approval, which are now being strengthened, and to slowness in appointment of consult- ants. Rapid turnover of managerial and technical staff, in part due to migration to the Middle East, and budgetary constraints have been problems in the case of some projects. 29. A number of further projects for Bank Group financing are currently under appraisal or being prepared in Pakistan. These include projects for water supply, population planning, oil and gas development, and education. Pakistan continues to have domestic resource constraints for the reasons set out in Part I. To assist the Government to finance agricultural and other high-priority projects which have a low foreign exchange component, financing of some local expenditures in specific cases is justified. 30. In addition to lending, economic and sector work provides the basis for a continuing dialogue between the Bank Group and the Government of Pakis- tan on development strategy, and for the coordination of external assistance within the Pakistan Consortium. PART III - THE TRANSPORT SECTOR 31. The transportation system and patterns in Pakistan reflect the geographical and economic configuration of the country. The bulk of traffic, including imports and exports, moves along densely trafficked corridors extending for approximately 2,000 km from Karachi, the main port and industrial center of Pakistan in the south, through the generally flat rich agricultural areas of Sind and Punjab in the Indus Basin, to the provincial -10- and administrative centers of Lahore and Rawalpindi/Islamabad in the north. Inland surface transport services are operated by Pakistan Railways (PR), some provincially owned bus companies, the National Logistics Cell of the Federal Government and numerous small private truckers and bus owners. Pakistan International Airways provides both domestic and international service. 32. The growth in traffic in the transport sector has been faster than the growth in GNP, particularly for passenger traffic. Domestic freight transport (ton-kilometers) grew during the 1970s at approximately 7% p.a., compared with the GNP growth rate of 4.5% p.a. Passenger traffic (passenger-kilometers) increased at a rate of 9.7% p.a. 33. The Pakistan railway system connects most of the major cities throughout the country, and provides connections with India, Iran and Afghanistan. Although historically the railways have handled the bulk of freight traffic (especially long-haul movements) and considerable passenger traffic, the proportion of freight traffic carried by rail has decreased steadily over the past decade, from 48% of total ton-kilometers in 1971/72 to a low of 26% in 1978/79. While total tonnage transported by the railways has been decreasing, the average haul of revenue freight has increased from 720 kilometers in 1976/77 to 860 kilometers in 1980/81. The railways' share of passenger traffic has declined from 20% in 1971/72 to 15% in 1980/81, although over the same period passenger-kilometers have increased by about 70%. 34. Pakistan has a principal road network of about 40,000 km, of which about 24,000 km have bituminous surfacing. Nearly 50% of the paved roads are in Punjab, which is located in the heart of the Indus Basin and contains over 50% of the country's population; Baluchistan, the largest but least populated province, has about 11% of the paved roads. Most of the non-paved roads in the principal network are gravel surfaced and provide all weather access. In addition to the main network, there are some 55,000 km of fair-weather roads which provide access to the rural areas during the dry season. 35. The principal roads link most of Pakistan's cities and industrial productive areas, but present transport demands are not economically met as much of the road system is narrow, has been inadequately maintained and has inadequate pavement strengths, leading to failures on major roads under heavy traffic conditions 1/. On the main roads, traffic volume is high, ranging from 2,500 to 4,000 average daily traffic (ADT); on secondary roads, traffic volume of 400-800 ADT is common. About 70% of the traffic volume in rural areas is heavy traffic (trucks 50% and buses 20%). Based on traffic count, 1/ These problems are being addressed in the context of the Third Highway Project (Credit No. 974-PAK, dated April 9, 1980). -11- fuel consumption and vehicle registration data, average traffic growth appears to be of the order of 7-8% per year. 36. Trucking routes and rates are unregulated and the road haulage industry is competitive. Most trucks are privately owned, with many small firms and a large number of driver-operators. The 8-ton capacity truck is the common vehicle used, although in the last few years small 3/4-ton trucks have become popular. As road transport has developed, the railways have increasingly concentrated on carrying long distance bulk commodities. 37. The bulk of road passenger transport services, i.e., urban and inter-city bus services, are provided by small firms and owner-operators. There are also four large provincial bus corporations which operate urban and inter-city services. Registration figures indicate that from 1969 to 1979 the bus fleet grew more rapidly (9% p.a.) than the automobile (8% p.a.) and truck fleet (6% p.a.). Inter-city bus transport is largely unregulated, buses are not subject to regular mechanical inspection, drivers' behavior is undisciplined and the safety record is poor. Bus fares are about 60% higher than second class rail fares which are currently subsidized (see paragraph 58 below). As a result, passengers normally prefer rail over bus when both services are available. 38. The role of the private trucking industry, as well as that of PR, has been significantly affected in recent years by the activities of the National Logistics Cell (NLC). The Government, faced with an emergency need to import and distribute substantial volumes of wheat and fertilizer in 1978 because of a poor wheat crop, established NLC within the Army to be responsible for the day-to-day operation of Karachi Port and to coordinate rail-port transport movements; NLC was also provided with a fleet of 500 new 20-ton trucks to supplement existing carrying capacity. NLC handled the crisis situation efficiently and the Government decided to give it permanent status. In 1979/80 NLC acquired additional trucks and tankers; its current carrying capacity is estimated to be about 820-1,080 million ton-kilometers per year. As a result, NLC has become a major competitor to the railways as well as to private truckers. Its effect has been mainly felt upon north-south freight traffic; according to PR's own assessment, in 1979/80 the railways lost to NLC the transportation of about 0.6 million tons of fertilizer, 0.2 million tons of cotton and 0.2 million tons of rice. Allocation of traffic to NLC (which has been largely determined by NLC itself) has not always been consis- tent with economic considerations; NLC has been assigned public-sector long-haul traffic that could have been more economically transported by rail, while PR has been assigned less profitable and operationally more complex cargoes or routes, particularly in mountainous terrain. The Government has become aware of this problem and since 1981 better freight allocation has resulted from changed NLC policies and improved coordination between NLC and PR resulting from placing both organizations under the same Minister. Agree- ment has been reached with the Government that, in the allocation of public sector freight traffic, due consideration would be given to the relative -12- economic advantages and capacities of various transport modes (Section 3.10 of the draft Development Credit Agreement). 39. Transport Policy and Investment. Responsibility for transport is divided among three federal ministries. The Ministry of Communications is responsible for roads and road transport, shipping and ports; the Ministry of Railways for railroads; and the Ministry of Defense for civil aviation. In the case of roads, responsibility is further subdivided among the four provincial governments. A National Transport Research Center (NTRC) was set up in 1975 to undertake multi-modal transport research and coordinate the research work of the ministries. 40. The Government's general strategy for the transport sector outlined in the Fifth Five-Year Plan (FY79-83) is to emphasize improved utilization and modernization of existing facilities in order to increase capacity; to promote the integration of different modes of transport; and to give high priority to completion of ongoing schemes. About 23% of the Fifth Plan investments was allocated to the transport sector; actual expenditures, however, have been lower than anticipated because of resource constraints. The Government's revised Public Sector Development Program for FY82-84 aims at iinplementing the Fifth Plan strategy within prospective resource availabilities; allocations to the transport sector in the program account for about 21% of total planned expenditures through FY84. 41. Pricing in the road subsector is largely unregulated and there is considerable competition among operators. A revision of the tariff structure at Karachi Port on the basis of replacement cost accounting is underway. The main tariff policy issue in the transport sector, the cross-subsidization of rail passenger services by rail freight operations, is being addressed under the proposed project. 42. Petroleum consumption in the transport sector has accelerated rapidly since 1972, reflecting a substantial increase in the motor vehicle fleet and road transport services. In 1979, the sector accounted for 57% of all petroleum products consumed in Pakistan. Price increases in 1979 and 1980 set the domestic prices of gasoline and diesel fuel considerably above import parity prices, although a sizable price differential is maintained between diesel and gasoline to discourage gasoline consumption. Pakistan Railways 43. Pakistan Railways (PR) is owned and managed by the Government of Pakistan. Until April 1982 the functions of operating the Railways were performed by a five-member Board headed by a Chairman and located at Lahore, while the policy and monitoring controls were exercised by the Ministry of Railways, headed by a Secretary, Ministry of Railways, established at Islamabad. To streamline the management and organization of the railways, the Railway Board and the Railways Ministry have been merged and the Board -13- has been moved to Islamabad. The Chairman, Railway Board is now the ex-officio Secretary, Ministry of Railways and the other riembers of the Board have been designated as Additional Secretaries, Ministry of Railways. 44. For decades, the members of the Board and other senior officers of PR have been senior railwaymen with a deep attachment to tradition and slow to adapt to changing circumstances. Although PR possesses competent and skilled managers, the organization, with its rigid departmentalization, has not been conducive to efficient management. To rectify this situation, PR operations have now been placed under a single authority (the General Manager), account- able to the Railway Board for all aspects of day-to-day operation. In addi- tion, the marketing and costing functions of the railways need to be merged into one single department separate from the transport function; steps are also needed to completely overhaul PR's purchasing and stores, and establish them as a unified streamlined department. These matters are being addressed under the proposed reorganization. 45. With about 130,000 employees, PR is the largest public sector employer in Pakistan. However, since PR's traffic growth has been slow, and since staff productivity has increased very little, less than full benefits have been obtained from modernization measures such as dieselization. There is need for reductions in staff strength through attrition and improvement in efficiency. Under the ongoing Tenth Railway Project, PR has reduced staff levels over the period 1977-1981 by some 3,500 and maintained a program of further reductions of non-professional and unskilled staff through attrition. Under the project, PR would carry out detailed action plans, satisfactory to the Association, to strengthen PR's organization and management, including staff reductions. Progress would be reviewed annually and actions to be taken each year would be determined in consultation with the Association (Section 3.09 of the draft Development Credit Agreement). 46. The training of PR staff is carried out at either PR's training schools or government training institutes and has generally been satisfac- tory. While many long-service officers are expected to retire from PR in the near future, the staffing problem so created will be eased by training car- ried out under the Tenth Railway Project in such areas as locomotive and track maintenance, freight train operations and accounting modernization. 47. Operations. The railway network consists of about 8,800 route-kilometers. Currently overage track structure on the Karachi-Lahore main line has required the imposition of speed restrictions at many loca- tions. Track maintenance procedures were examined by PR with assistance from consultants financed under the Ninth Railway Project and new maintenance procedures have been introduced. A new bridge completed in February 1980 at Kotri provides a second track over the Indus River, thus removing a major bottleneck on the main line. A new marshalling yard at Pipri, designed to remove congestion in the Karachi area, was completed in February 1980, with -14- partial financing under the Ninth Railway Project. Modernization of telecom- munications facilities and signaling being undertaken under the Tenth Railway Project is scheduled for completion by mid-1983. 48. An improvement of PR's operations has been a major objective under previous Bank-assisted railway projects in Pakistan. Although a number of large investments included in the Fifth Five-Year Plan have now been com- pleted, PR's operating indicators are not yet in line with the targets set under the Tenth Railway Project. The main areas where progress has fallen short of expectations are those of motive power availability and use, and average wagon turnaround time. It was expected that by 1979/80 available locomotives would produce 576 locomotive-kilometers per day on passenger trains, and 288 locomotive-kilometers per day on freight trains; the actual results were 459 and 197, respectively. System-wide turnaround time for wagons, which was expected to be reduced from 16.7 to 12.5 days, was brought down to only 15.3 days in 1979/80. Steps to attain these targets have been included in the plans of action to improve PR's operations (paragraph 45 above). 49. PR's motive power consists of 474 diesel electric units produced by seven manufacturers in five different countries, an electric locomotive fleet which was introduced in 1970/71, and a considerable number of steam locomo- tives of which about 90% are over 40 years old. The problems associated with the proliferation of types and age of PR's fleet are further aggravated by PR's inadequate maintenance facilities and chronic shortages of critical spare parts. Low motive power availability and reliability have been impor- tant factors adversely affecting PR's performance. The proposed project would provide assistance in improving PR's locomotive maintenance organiza- tion and facilities. Before any decision is taken on the extent to which the locomotive fleet should be replaced or expanded, it is desirable to await the expected benefits of improved maintenance as well as the results of an elec- trification study under the proposed project (see paragraph 78 below). 50. Another major factor contributing to the operational deficiencies of the railways has been the policy of the Government and PR that passenger traffic should receive higher priority than freight in the allocation of available motive power. This policy has important operational, economic and financial consequences. It has prevented PR from carrying the traffic it is best suited to carry and which would significantly benefit the country's economy, and it has been a major reason for PR's recent poor financial results. PR has identified some 60 passenger trains, of the 450 operated daily, whose variable costs exceed revenues by Rs 95 million. These trains have three characteristics viz., (a) their ridership is on average less than 50% of capacity; (b) they are on lines where there is at least one other train a day; and (c) there is an alternative bus transport service. 51. There is also substantial room for improvement in PR's freight opera- tions, while maintaining a reasonable passenger service. Agreement has been -15- reached on action plans (see paragraph 45 above) to improve train operations including, inter alia, elimination of underused and uneconomical passenger trains; implementation schedules; measures to increase the average speed of freight trains; and increases in unit and block trains for movement of bulk commodities. 52. PR's Finances. There have been a number of improvements in the financial arrangements between PR and the Government since appraisal of the Tenth Railway Project in 1976. Financial reporting has been improved, and fixed assets have been valued at replacement cost which is now used as the basis of depreciation. A Costing Cell has been established and would be enhanced under the proposed project. In 1979, the Government set up an "Experts Committee on the Railways" to examine the financial arrangements between the Railways and the Government. In October 1981, the majority of the committee's recommendations were accepted and implemented. The major changes are: (a) Dividend on Capital at Charge: Previously PR was required to pay a dividend to the Government each year, even if its earnings were insufficient to generate the required cash. The shortfall was financed by PR taking up an interest bearing loan from the Treasury. This practice has been changed and the dividend will be paid to the Government only when the cash to do so is available after meeting operating costs, appropriation to funds and debt service. (b) Cash Deficits on Operations: Interest due to the Government was treated similarly to dividends, i.e., payments had to be made and, if necessary, financed by further borrowings. In the future, any such cash deficits in operations will be met by a grant from the Govern- ment. (c) Depreciation of Fixed Assets: The charge for depreciation, which is termed an appropriation to the Depreciation Reserve Fund, was pre- viously determined annually at about 12% of total revenues. It is now based on the annual depreciation of the fixed assets valued at replacement cost. The effect has been an increase in the charge to a level considered satisfactory. 53. These changes are sound and remnove some unnecessary burdens on PR's finances. The Government also decided that loans made since 1972 should be cancelled and that the amount of these past loans should be added to PR's capital-at-charge on which PR would be liable to pay dividends in perpetuity. The capital-at-charge is regarded as government equity investment in PR and to increase it by the amount of losses or unpaid dividends is not consistent with normal financial practice. Agreement has been reached with the Govern- ment that the value of past loans and any future sums transferred to PR to meet cash deficits on operations should be accounted for in PR's balance -16- sheets but should not be added to the capital-at-charge (Section 4.03 of the draft Development Credit Agreement). 54. The Governmenit's policy is that PR should earn revenues sufficient to cover all operating expenses (including a depreciation charge) and debt service, and to pay a dividend to the Government. Agreements reached under the Tenth Railway Project envisaged that PR's finances would improve so that from FY77/78 revenues would be sufficient to cover operating expenses and debt service and that, from FY78/79, they would also be sufficient to earn an increasing percentage of the dividend until 100% was reached by FY81/82. The covenant was met in 1977/78 and 1978/79 but not since. There are two under- lying reasons for this decline in PR's financial position: (a) costs have risen faster than anticipated, particularly fuel prices. Between 1976 and 1981 total revenues increased by 170% while total working expenses went up by 185%. The cost of labor shows the lowest percentage increase due to action by PR to reduce staff numbers; and (b) the low rates charged for passenger services, which do not cover the variable costs of operation, and the priority given to passenger traffic which has limited the earnings from the profitable freight traffic. 55. The agreements under the Tenth Railway Project also provide that from FY79/80 the revenues of each service, passenger and freight, would be at least sufficient to cover its variable costs; this was also recommended by the "Experts Committee" (paragraph 52 above). The extent of losses on pas- senger services was revealed in 1978 by a costing and traffic study carried out by consultants under the Tenth Railway Project. Passenger fares were increased by 20% in July 1979 and by 30% in January 1980 to a level where revenues exceeded the variable costs of services. However, further increases did not keep pace with costs; by FY80/81 revenues from passenger service were estimated to cover only 86% of the variable costs and 60% of total costs. In the same year freight revenues exceeded variable costs by 68% and total costs by 18%; the net operating deficit of Rs 462 million was made up of Rs 750 million deficit on passenger services and a surplus of Rs 288 million from freight. 56. The costing and tariff study referred to above also recommended a number of changes in the tariffs for freight traffic designed to simplify the charging system. The majority of these were implemented in the first half of 1980. Recent studies demonstrate that there is no shortage of potential freight traffic and that rail is more economical than road haulage, par- ticularly for distances over 250 km. 57. Changes in passenger train services and fares are sensitive political issues in Pakistan. There is a strong public demand for more seats, par- ticularly on long distance services which are chronically overcrowded. The -17- Government is attempting to meet the increasing demand and to minimize fare increases. Wghile recognizing that decisions on passenger services and prices have wider implications than PR's profitabilitv, the Government is also aware that the extent of PR's losses should be constrained and its finances placed on a sound basis. 58. Agreement has been reached on the following objectives, and on various operational and other remedial measures necessary to achieve them (Sections 4.03 and 4.04 of the draft Development Credit Agreement): (a) commencing in FY82/83, PR's total revenues from passenger and freight operations should be sufficient to cover the costs of operation (including depreciation), debt service requirements and fund appropriations and, by FY85/86, provide an operating surplus at least equal to the prescribed dividend on capital-at-charge; (b) in FY83/84 and thereafter, revenues from passenger services should be at least sufficient to meet the variable costs of such services; and (c) additional fare increases would be made on air-conditioned sleeper services so that revenues cover total costs by 1984/85. 59. In order that PR's annual budget estimates would show separately the results of its passenger and freight operations and the financial burden of facilities not directly related to railway operations, PR will be required from FY82/83 to present with its estimates and accounts a set of Proforma Accounts which would separately show revenues/costs/profits/losses from freight and passenger services, and the cost of non-commercial services including medical, welfare and police (Section 4.01(c) of the draft Develop- ment Credit Agreement). Bank Group Involvement 60. The first Loan to PR (formerly Pakistan Western Railway) was made in 1952. Since then six other projects have been assisted by the Bank Group 1/. The main objective of this assistance to PR was to rehabilitate the railways' facilities and equipment; physical implementation under these projects was generally satisfactory. Through technical assistance under the projects, there have been substantial improvements in the accounting and financial procedures of PR. However, as discussed above, operational and financial performance of the railways has deteriorated in recent years. A major con- tributing factor to this deterioration has been the priority given by the 1/ The numbering of railway projects in Pakistan includes Bank Group opera- tions with the former East Pakistan Railway, now Bangladesh Railways. -18- Government to passenger services (which are subsidized) over freight services (which are financially viable). 61. A Project Completion Report (PCR) for the Ninth Railway Project was prepared in 1979 and a draft Project Performance Audit Report (PPAR) has recently been circulated. The PPAR noted that, though performance under the project had been rather disappointing, a mitigating factor was the severe political and economic disturbances during the implementation period. The PPAR concluded that, as a result of the investments under the project, there had been improvements in the efficiency of the railways. Some improvements were achieved in operations but the financial situation of PR had deteriorated. The most serious problems concerned railway tariffs and tran- sport priorities, which were distorting the demand and supply position for rail services. The main findings and recommendations of the PCR and PPAR pertain to subjects which have either been addressed under the ongoing Tenth Railway Project or are the main objectives of the proposed project. 62. The Tenth Railway Project was approved in March 1977. Physical progress under this project has been generally satisfactory. PR has made considerable efforts to meet the covenants and undertakings under the project; the principal shortcomings relate to financial targets which have been mainly dependent on actions by the Government relating to passenger services. These and other outstanding issues will be addressed under the proposed project. PART IV - THE PROJECT 63. The proposed project was prepared by Pakistan Railways and appraised in October/November 1981. Negotiations took place in Washington from May 4-12, 1982. The Pakistan delegation was headed by Mr. A. Kalam, Secretary, Ministry of Railways. A Staff Appraisal Report entitled "Pakistan: Eleventh Railway Project" (Report No. 3818-PAK, dated May 25, 1982) is being circu- lated separately to the Executive Directors. A supplementary data sheet is attached as Annex III. Project Objectives and Description 64. The railways remain a vital part of Pakistan's transport system and, given the terrain, the distances involved and the large amounts of bulk cargo, it should continue to have an important role to play in the economy. Its future, however, depends critically on its ability to improve operations substantially and to adapt to overall changes in the transport situation resulting from inevitable losses of freight to other modes (e.g., transporta- tion by pipeline of petroleum, oil and lubricants, which are PR's main revenue freight earners), increasing competition from the road subsector and shifts in the pattern of total demand for transport in the country. -19- 65. The proposed project is designed to assist PR to help meet the tran- sport requirements of the productive sectors of the economy effectively. To achieve these objectives, the project would: (a) improve the reliability of PR's diesel electric locomotive fleet through modernization of maintenance; (b) introduce a modern management information system in PR; and (c) establish a regular export/import container service between Karachi and an inland terminal at Lahore. The physical investments under the project would comple- ment the various operational and financial reforms described in Part III above. 66. The proposed project includes: (a) improvements in locomotive maintenance, consisting of: (i) expansion, equipping and modernization of the Rawalpindi Central Diesel Locomotive Works to remanufacture critical components and assemblies; (ii) provision of critical machinery and layout modifications at the Karachi Locomotive Shed to enable this facility to change over to a unit exchange maintenance system; and (iii) provision of components and assemblies for the initial stock required for a unit exchange pool; (b) acquisition and installation of a data network and hardware and software for the development and implementation of a management information system; (c) expansion of Lahore Dry Port (LDP), construction of tracks and storage, and acquisition of rolling stock and handling equipment for the operation of an international container service between Karachi and Lahore; (d) staff training and technical advisory services in support of the project objectives; and (e) provision of maintenance spares (revenue spares) for locomotives. 67. Locomotive Maintenance Improvements. The economic first life of a diesel electric locomotive is generally considered to be 15 to 20 years. At this age, the mechanical components are either in need of major overhaul or are obsolete. The electric traction and control system also deteriorates with age. Both of these conditions result in costly in-train failures, with severe adverse repercussions on operating efficiency. It is also generally agreed that remanufacture of a locomotive at 15 to 20 years is economically sound and will result in an additional life cycle of about equal length. The -20- introduction of the latest technological developments as a part of the remanufacturing process provides additional efficiency and reliability. 68. As stated above (paragraph 49), PR's existing locomotive fleet is a mixture of models from seven different manufacturers in five countries, and yet another type is expected to be added in the near future. The variety of manufacturers in itself creates a cumbersome maintenance situation. When viewed in light of the fleet's age and problems associated with importing spare parts, the maintenance plans must be comprehensive and well laid and remanufacture becomes a necessity if the fleet of locomotives is to perform reliably. In the absence of such arrangements, PR has suffered from high in-train failure rates, poor availability and reduced tractive effort. Unless this situation is changed, low availability and reliability will continue and early replacement of a large number of units will be required. The proposed project would provide facilities for remanufacture. 69. In addition to remanufacturing capacity, a locomotive maintenance scheme, especially for an older fleet, should include a unit exchange main- tenance system (UEMS). The major advantages of the UEMS over the remove-repair-replace approach now practiced by PR are: (a) parts can be salvaged which would otherwise be scrapped; (b) a smaller inventory of parts is required because the remanufacture and assembly process is centralized; (c) reliability and longevity of the part (and ultimately the locomotive) is improved because high quality is maintainable at a central workshop where manpower and machines are specialized; and (d) technical improvements can be incorporated uniformly by the central- ized work program. 70. An attempt by PR to introduce a UEMS several years ago was unsuccess- ful because of inadequate import of spares (due to foreign exchange shortage) and the lack of remanufacturing capability. The proposed project would provide PR with the needed pool of spare parts for the establishment and operation of a UEMS as well as with facilities for the remanufacture of components. 71. It will be important that PR's pool of spares be naintained and expanded as fleet size increases or other changes take place, and as com- ponents become worn or damaged beyond repair. Under the project, agreement has been reached that PR would maintain and expand the unit exchange pool of components, as required by maintenance needs and as agreed from time to time with the Association (Section 3.08 of the draft Development Credit Agree- ment). -2 1- 72. In addition to these components (so-called capital spares), PR requires other items (revenue spares) which are critical for proper main- tenance. PR has experienced severe difficulty in parts acquisition, not only because of a shortage of foreign exchange but also because of the complexity of its spare parts requirements and its procurement procedures. In 1981, PR studied this problem in depth and has recently produced a report on the supply management of diesel electric locomotive spares. This report includes a number of sound recommendations for removing the institutional and finan- cial obstacles preventing the smooth functioning of the spare parts procure- ment and supply system. During negotiations for the proposed project, agree- ments were reached aimed at removing the remaining institutional and finan- cial obstacles for a smooth functioning of the spare parts system. 73. The proposed project includes PR's locomotive spares needs for the next three years. This component is estimated to cost Rs 445 million (US$42.5 million equivalent) with a foreign exchange component of Rs 318 million (TJS$30.3 million equivalent). To ensure coverage of immediate needs and make a timely start in implementing the agreed program, US$5.0 million of the proposed Credit has been provided to assist the Government and PR in a program to eliminate bottlenecks in spare parts acquisition. 74. Under the project, much of the locomotive maintenance and remanufac- ture, as well as the remanufacture of critical components, would be central- ized at one workshop; this would optimize quality control and the use of scarce skilled manpower and specialized facilities. The Central Diesel Locomotive Works (CDLW) at Rawalpindi would be expanded and equipped to enable it to play this central role in the system. In addition, to supple- ment CDLW and to bring the fleet up to an acceptable standard of reliability as quickly as possible, modest investments would be made to improve the Karachi locomotive shed. Technical assistance would be provided for CDLW during preparation of specifications, construction, commissioning and start up. In addition, training of CDLW staff in respect of specialized tech- nologies required for operation and maintenance of the remanufacturing facility would be carried out by the machinery suppliers and foreign railways with similar facilities. By December 31, 1982, the Government would furnish to the Association, for review and comment, a comprehensive training program for CDLW (Section 3.06 of the draft Development Credit Agreement). 75. Management Information System. Recognizing PR's difficulty in con- trolling an increasingly complex transport system, provision was made under the ongoing Tenth Railway Project for installation of a modern telecommunica- tions network for the railways; implementation of this component is expected to be completed by mid-1983. The installation of the telecommunications network will provide PR with the means to improve utilization of rolling stock and motive power, adjustment to changing freight traffic patterns and control over day-to-day operations and costs. -22- 76. In order to further exploit the improved communications system and handle the increased information which will be available, PR will need to improve its data processing capability. The proposed project would provide for implementation of a management information system, including a data network, hardware and software, technical assistance and staff training. The introduction of this management tool would be supported by the proposed changes in the organization and management structure of PR and would facilitate the implementation of the proposed plan of action to improve PR's train operations described in Part III. 77. Containerization. There has been a sharp increase in international container traffic to Pakistan in recent years. Until recently containers were broken at the Karachi Port. The establishment of a regular container service between Karachi and Lahore, with custom formalities performed at Lahore Dry Port, which is owned and operated by PR, would facilitate interna- tional traffic including exports; generate important savings in cargo han- dling time, pilferage and spoilage; and reduce transport costs. The proposed project would assist PR in developing an efficient container traffic service by providing mobile cranes and forklifts, modification of 60 existing rail flat wagons, and procurement of 100 additional flat wagons especially designed for container handling. Ancillary facilities at Lahore Dry Port for handling unit container trains would also be provided. In order to route and keep track of containers leaving Karachi Port, the Karachi Port Trust (KPT) would need to develop a container information system. Technical assistance would be provided to KPT for this purpose. 78. Technical Assistance and Training. The proposed project would provide technical assistance and training in a number of areas such as the formulation of detailed plans for removing bottlenecks in train operations, mechanical maintenance and optimal utilization of carrying capacity, and the development of information systems for PR and KPT. Technical assistance would also be provided in the following areas: (a) Traffic Costing. Under the Tenth Railway Project, PR carried out a comprehensive traffic costing exercise with the assistance of con- sultants, to provide PR with the basis for adjustments to its fares and tariff structure and to strengthen its marketing activities. Under the proposed project, technical advisory services and training would be provided for improving and strengthening PR's Costing Cell; and (b) Electrification. A part of PR's mainline (the 288-km Lahore- Khanewal section) was electrified a decade ago. The original inten- tion was to continue electrification of the mainline another 925 km from Khanewal to Karachi; however, because of resource constraints and investment priorities, this extension has not taken place. There is a pressing need to arrive at a decision on the feasibility of further electrification based on sound technical and economic -23- analysis; in addition, PR has shortly to make decisions concerning the replacement of its diesel electric and steam locomotives. A study to determine the feasibility of further electrification is included in the proposed project. This study would be carried out in accordance with a timetable, and on terms of reference, satisfactory to the Association (Section 3.07 of the draft Development Credit Agreement). Project Implementation 79. PR would be responsible for implementation of the project as part of its ongoing development program, except for the port container yard informa- tion system which would be implemented by KPT. Detailed engineering and design of the CDLW is completed. Plans and designs for all other components including technical assistance and training have been substantially com- pleted. Construction of CDLW, which is scheduled to start by October 1982, would be completed by December 1984. Tendering of plant and machinery is scheduled for January 1983 with completion by July 1983. Consultants to be financed under the Credit would assist PR in the implementation of the project; technical support would also be provided by suppliers in installa- tion of equipment, start up and monitoring of operations. Cost Estimates and Financing Plan 80. The total estimated cost of the proposed project, including taxes and duties, is US$132.7 million. Detailed cost estimates are shown in the Credit and Project Summary. Costs are based on estimated April 1982 prices, adjusted for physical and price contingencies. IDA-financed expatriate consultant costs (including allowances and overheads) have been estimated at US$11,000 per man-month. Physical contingencies have been provided at 10% of base cost estimates for civil works, and 7.5% for limited items of machinery and equipment. Price contingencies for all items in the proposed project are based on expected local cost increases of 12% in 1982 and 1983 and 11% in 1984; and 8% in 1982 and 1983 and 7.5% in 1984 for foreign costs. The rate of inflation in Pakistan in recent years has averaged 10-12% p.a., and is expected to remain around this level during the next few years. 81. The proposed Credit of US$50 million, which represents about 49% of project costs excluding taxes and duties, would finance the foreign exchange component of all items (except the cost of revenue spare parts of which US$5 million (15%) is to be provided), as well as about 70% of the local costs of technical assistance and staff training. The proceeds of the Credit would be passed on by the Government to PR at 11% p.a. for a period of 20 years, including 4 years of grace, except for those funds used to finance additions which would be treated as a Government contribution to an increase in the capital-at-charge. The Government would bear the foreign exchange risk. -24- Procurement and Disbursement 82. Items to be financed by the Association would be procured through international competitive bidding (ICB) in accordance with Bank/IDA guidelines except for: (a) proprietary items which PR would procure from particular sources because of the need for procurement under license or for continued standardization of equipment; and (b) contracts of US$50,000 equiv- alent or less, where the advantage of ICB would be outweighed by the administrative burden thereof. The proprietary items to be financed under the project are estimated to cost about US$5 million equivalent, or about 10% of the proposed Credit; these items would be used for the unit exchange maintenance system for existing locomotives. The list of proprietary items to be financed under the project has been agreed with PR. The total amount of contracts less than US$50,000 equivalent not covered by ICB is estimated to represent a very small portion (less than US$1 million equivalent) of the proposed credit. 83. Disbursements from the Credit would be made for (a) 100% of the foreign exchange cost of imported items; (b) 100% of the foreign exchange cost of training, technical advisory services and installation and inspection of equipment; and (c) 70% of local costs of training and technical advisory services. In order to avoid implementation.delays, an amount of US$1.25 million has been included for retroactive financing of the foreign exchange costs of the data network and software selection for PR's Management Informa- tion System and KPT's container marshalling program made after February 1, 1982 (Schedule I, paragraph 4 of the draft Development Credit Agreement). Project Benefits and Risks 84. The primary objective of the proposed project is to assist PR in improving its operational performance, particularly to increase the availability and reliability of its motive power through improved maintenance and the introduction of a management information system. The justification of the project is predicated on the higher utilization of PR's existing assets, which would be achieved through: (a) the establishment and operation of a Unit Exchange Maintenance System that would increase the availability of motive power by reducing the amount of locomotive downtime required for repair and maintenance. Under the proposed system, locomotives would not have to remain idle while their worn-out components are repaired; instead they would be able to leave the workshops and sheds as quickly as the worn-out components are removed and new or remanufactured ones are installed and tested. In addition, quality control and testing equipment to be provided under the project would result in improved quality of remanufactured components, which would increase locomotive reliability; -2- (b) the creation of a Management Information System that would utilize the telecommunications infrastructure financed under the Tenth Rail- way Project; and (c) the development of container rail services between Karachi and Lahore, which would attract to the railways a significant share of inland container traffic between these major industrial centers. 85. The overall economic rate of return for the project is estimated at about 18%; the rate of return of the Unit Exchange Maintenance System is estimated at 17%, and that of the rail container service at 29%. The overall rate of return would drop to 14% if benefits turn out to be 15% less than expected or if costs are 15% higher than estimated. If benefits materialize two years later than anticipated, the rate of return would fall to 10%. 86. The projecc's success depends critically on the Government's and PR's continued commitment tc streamline PR's management and to give priority to freight traffic in the allocation of motive power and line capacity. The decisions alreadk: taken witF respect to PR's organization and management and the eliminatior of some passenger services to provide additional train paths for freight traffic is an encouraging indication of this commitment. Since the proposed Unit Exchange Maintenance System, Management Information System and container rail services are new to PR, it will be necessary to monitor them closely during project implementation; to this end, the project is likely to require higher than usual supervision on the part of Bank staff. PART V - LEGAL INSTRUMENTS AND AUTHORITY 87. The draft Development Credit Agreement between the Islamic Republic of Pakistan and the Association and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement, are being distributed to the Executive Directors separately. Special conditions of the project are listed in Section III of Annex III. 88. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 89. I recommend that the Executive Directors approve the proposed Credit. A. W. Clausen President Attachments June 1, 1982 -26 - ANNEX I TABLE 3A PAYISTAN - SOCIAL INDICATORS DATA SHEET PAKISTAN REFERENCE GROUPS (WESIGHTED AVFRACES LAND AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE)- TOTAL 803.9 MOST RECENT LOW INCOME MIDDLE INCOME AGRICULTURAL 249.9 1960 lb 1970 /b ESTIMATE /b ASIA & PACIFIC ASIA 6 PACIFIC GNP PER CAPITA (USS) 60.0 130.0 260.0* 232.3 1136.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 136.0 196.1 218.2 499.4 1150.6 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 45850.5 60448.9 79705.0* URBAN POPULATION (PERCENT OF TOTAL) 22.1 24.9 27.8 17.3 40.8 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 141.2 STATIONARY POPULATION (MILLIONS) 340.0 YEAR STATIONARY POPULATION IS REACHED 2100 POPULATION DENSITY PER SQ. KM. 57.0 75.2 99.1 153.6 373.1 PER SQ. KM. AGRICULTURAL LAND 201.0 249.0 309.4 360.3 2382.8 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 43.8 46.3 46.4 37.4 39.8 15-64 YR9. 51.8 50.5 50.7 59.2 56.7 65 YRS. AND ABOVE 4.4 3.2 2.9 3.5 3.5 POPULATION GROWTH RATE (PERCENT) TOTAL 2.3 2.8 3.1 2.1 2.3 URBAN 4.6 4.0 4.3 3.4 3.8 CRUDE BIRTH RATE (PER THOUSAND) 48.4 47.3 44.4 27.7 29.7 CRUDE DEATN RATE (PER THOUSAND) 22.6 17.4 14.3 10.2 7.5 GROSS REPRODUCTION RATE 3.2 3.7 3.2 2.5 1.9 FAMILY PLANNING ACCEPTORS, ANN`UAL (THOUSANDS) .. 1908.1 2085.0 USERS (PERCENT OF MARRIED WOMEN) .. .. 6.0 20.4 44.1 FOOD AND NUIRlTION INDEX Ot NOOD PRODUCTION PER CAIITA (1969-71-100) 89.0 102.0 101.0 107.1 123.7 PER CAPITA SUPPLY OF CALORIES (PERCENT OU REQUIREMiENTS) 83.0 97.0 99.0 98.6 112.6 PROTEINS (GRAMS PER DAY) 55.0 60.0 63.0 56.9 62.5 OF WHICH ANIMAL AND PULSE 22.0 20.0 20.0 14.2 19.7 CHILD (AGES 1-4) MORTALITY RATE 24.0 18.4 14.8 14.6 4.8 HEALTH LIFE EXPECTANCY AT 3IRTH (YEARS) 43.5 48.8 52.2 57.7 64.0 INFAt.T MORTALITY RATE (PER THOUSAND) 135-0/c .. .. 89.1 50.2 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 21.0 29.0 30.1 45.9 URBAN .. 77.0 60.0 65.8 68.0 RURAL .. 4.0 17.0 20.1 34.4 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 3.0 6.0 17.6 53.4 URBAN .. 12.0 21.0 71.0 71.0 RURAL .. .. .. 4.8 42.4 POPULATION PER PHYSICIAN I100O.O/d 4299.0/e 3758.0/e 3857.7 4428.7 POPULATION PER NUHSING PERSON .. 13305.9/e 9984.8/e 6411.8 2229.7 POPULATION PER HOSPITAL BED TOTAL 1742.9 1860.1 1894.8 1132.8 588.5 URBAN 507.2 648.5 709.2 322.3 579.6 RURAL 22850.0 12476.0 11819.6 5600.5 1138.5 ADMISSIONS PER IIOSPITAL BED .. .. .. HOUSING ATVERAGE SIZE OF HOUSEHOLD TOTAL 5.4 5.3 URBAN 5.5 5.5 RUB-AL 5.4 5.2 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 3.1 2.8/f URBAN 3.1 2.77 ... RURAL 3.1 2.87T .. ACCESS TO ELECTRICITY (PERCENT OF DWLI'L.tINGS) TOIAL .. 17.9/f .. URBAN .. 54.4/f . . RUKAL .. 4.97 . - 27 - ANNEX I TABLE 3A PAKISTAN - SOCIAL INDICATORS DATA SHEET REFERENCE ChOUPS (.EICHGED A 't; AES PAKISTAN - MOST RECENT EST1M,E) MOST RECENT LOW INCOME MIDDLE INC(-ME 1960 /b 1970 /b ESTIMAT£ /b ASIA & PACIFIC ASIA 6 PACIFIC EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 30.0 44.0 51.0 85.9 99.8 MALE 46.0 62.0 69.0 94.4 100.6 FEMALE 13.0 24.0 32.0 64.5 98.8 SECONDARY: TOTAL 11.0 14.0 17.0/ 38.0/aa 53.5 MALE 18.0 22.0 25. OI. 34 . 6/as. 58.4 FEMALE 3.0 6.0 8.07 18.0o7a 48.6 VOCATIONAL ENROL. (Y OF SECONDARY) 1.0 1.5 1.5/l 3.8 21.1 PUPIL-TEACHER RATIO PRIMARY 39.0 41.0 40.0 32.8 34.2 SECONDARY 24.0 20.0 19.0/1 19.9 31.7 ADULT LITERACY RATE (PERCENT) 15.0/Sj 20.7 24.0 52.8 86.5 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 1.0 2.6 2.8 1.7 12.7 RADIO RECEIVERS PER THOUSAND POPULATION 6.0 17.1 66.8 35.3 174.1 TV RECEIVERS PER THOUSAND POPULATION .. 1.6 8.3 3.7 50.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCLLATION PER THOUSAND POPULATION 7.0 .. 13.3 14.6 106.8 CINEMA ANNUAL ATTENDANCE PER CAPITA 0.8 3.0/h .. 3.4 4.3 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 14447.6 17364.1 21787.1 F.MALE (PERCENT) 8.6 9.3 10.4 29.3 37.4 AGRICULTURE (PERCENT) 60.8 58.9 57.2 69.8 50.2 INDUSTRY (PERCENT) 17.9 18.7 19.9 14.1 21.9 PARTICIPATION RATE (PERCENT) TOTAL 31.5 28.7 27.3 39.7 40.Z KALE 55.2 50.4 47.5 51.5 49.8 FEMALE 5.7 5.5 5.9 23.3 31.1 ECONOMIC DEPENDENCY RATIO 1.5 1.7 1.8 1.1 1.1 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 20.3/i 17.8 HIGHEST 20 PERCENT OF HOUSEHOLDS 45.3/i 41.8 LOWEST 20 PERCENT OF HOUSEHOLDS 6.4/i 8.0 LOWEST 40 PERCENT OF HOUSEHOLDS 17.5/i 20.2 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. 68.0 176.0 134.1 248.6 RURAL .. 47.0 122.0 111.6 193.7 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. 34.0 88.0 .. 249.8 RURAL .. 22.0 58.0 .. 234.3 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. 42.0 32.0 41.7 21.2 RURAL .. 43.0 29.0 51.7 32.2 Not available Not applIcable. NOTES /a The group averages for each indicator are population-eighted arithEmetic means. Coverage of coontries among the indicators depends on availability of data and is not uniform. /sa China included in total only. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estioate, between 1976 and 1979. /c 1962-65; /d Includes Bangladesh; /e Registered, not all practicing in the country; /f 1973; /g 1960-62; /h 1972; /i 1963-64; /L 1975. * The updated 19: 0 r NP pr p -pita od Tp-pu ,UIi Cti''atC- o ,300 (at 1978-1980 SO a g.' pricS) acS 82,153,(00 re-pr cti.' 15. Kay, 1981 -28 - AMNEX I 9.tea Oithorsf the detect..: drava tro I,negneal ndsed oh. st1 auhr toi ed rs1(chit, it ehold elan ha tote that tly sa both ta-a-- saicelyoo rtl e aeo cha ako tadrfa deficiit-otnadrnn-ertaoas by dtfftreoooctracit olc o o data ma dat te et tha.1£.. -f1 td-srr th od... of saotd.fdbt ooe n nrcefa'rats7 diff--e.t btateo ontte ttertersoa gorapara If heecotyrctftaofcr.or a latoc arohitsoeeahl5h- .srs ,.tega tcetntha. atyr ton tad Oato etth, , the cutrycdrfcso,ore forocu.. eatres ta ke-co ofoh-, gerdura t. noi(h !ahoo; (979 date, forho - itcorcee.np.i.estu tett atctl stff Aby tolaroephy,r. tt Et-blfal nacrodo tfop-iosn 219ff sod 1009 dats. taolacfont ote .aditeoIhrofert- pa,tfnao - datfo an prf-da a Ifata rc- oftdfateltas ete i- 1trtotty ft kflstac of roe r -taao e -spc- 1900] (970, ed1979 -srr.Oe a . oeetl r oldlcly -rd- torsO Pen haspftals dloOded by t. oah-r of bade. Intl ftcafio.fOd-br choaada)- e f Jnly 1; 1960, 1970. and 1979 MMhI70 Orbo Ppucfr (ec t of cocel) A- je f, toru 00frfppfto oshl osaer aopo offcnesnsatfea at dlffl, e ff oc, thraessynfaoreeablt fdt adtctst sas: crdro otoea osyathafM.ddb afia nofffa;lu I, 1]] en 979 data,teknaadfrstteha otee frl, nh eel fes peracf aobfftio c 7]I aer. he -re -noteornnn defllj r th cfrtr-ft On Iof;ortesoarnee ttrttfttperrcrotro co torreo liner coo peso feeclc platoine perfootceoa. ~ _tt. :".-d I 1 ti. taohrouory c o.sr esfordcoo f ceat Oosrocoonou ho oftralo lIdIO and fsrct.bycso for proirrf cr urpeaaiho .es tnrflno taoooe = : Stronr o. or-l2riro-(Moesce frdnnrr. pouafotcor a ogrsh ic frft. ahool - coa. aaca fcla - Grs e . see ad-1 thatchrts sroacohacncrts.edesohatasrncuars arolsotoelasoeotrpceeylooelsPercr-tagsfacatt eaborutcao ole saareaesd cj fo cr01fy ae-nrly onpOetecol-eepploor;tral fcna blde s ho .hrreeaorec btntrtdrioes recahatrto..r ntducdedtssoascafc.reaatn a sta 9h 0.h !Cr -d17 re -0.eP-,n,l a 12 . to0 fneofeecoraoear coee r soel ontal area; 190], 197) sod 1000 doos. tolada tehofre. on"tra. roce ptr eboch oprtehde fco; 190],97, to7ri, 1 7itn %. too-tyltrr nacaoai-Irrt dlefhst ae eta yea 9ppuarbr f9c :07RL16-1.adlc-O fntlsfr Goa cae oeoeo--.1 fcn d-lahnu l.srn as of1 urhe earn I f599 le_1oa tr pi 0-3 -903.an 007 fca-r as(a tico p.rolefOoof -;T ycswr ar .As ase fopultOon;1900,1970 sod 079 non.iOlitay ctbrlta frod teah tco 7tc rous-c -hocol dachapettlh--ad f O-er a ecor corboen onaoc fftrso ator a eh Yom Ms Oo;10] 13. oMlr fet, rodoascet teIf s I rt - - pa1-o-oa off rsftoe aaa Gron crcdooir h o-ocrat oaar f argctre araneni barbeifRMo.e..de astore Onorotoa ad t ysr shL- netrtta t panrelrrouocedrrdofaeopostn-'csocsd oeffot-casnatsf" -itco;ettrrrotaeraye1-renrtee tfOypte; se lyfc-traanetdt 010,0M.ad17.fs otntro. ehl ai lca.fg Peec _d Olofoa_ctooce. ora 2rueo -t- ona nuhs cI sftoarr:0tofes(r ioardoolor tooteatobad tb ofhottrocnidrcraoctcuecce.fnaion fe..yrloon fose. ante rhfrfr rooet. ptusoa; otucaaloees 0 aCber ?ant-otlenr --op-t -t-ero t-re191oo5faar-deu-T-ost-or-pacoaeofU,- oororsedeynsOnaieitetuo otlyacassP- . .t. 1. 't.d Id 1.0 b ~ ~ ~ ~ ~ ~ ~ ~ ~ phlrefn dprord- polerol toti. 1enctn gos Mosa ft 9s79 ada te ofloe rchel.0 0foeroc rsr of ag bugtoraen a'Il . no...ft ._s,f~ 190 ratto holarfde pr-d1 19 or1- e ot970 ; 1901-90.L 37.e. 90dt. Too9ooo Poror otoad(-fa-sc7yato etna eld sesce tare eafee by - f hoar cc p-1dco0cn byed tor rrse soof Thirehlo te cordoeg of1 ros Ulaho force;l 199. 1971 en617 dAca enld son-ot-b-fo of65 ouyleoon no- irio1 sretfrtasad sin t Irccy Ieter anf a e acoat fttl ee;a-e O heanehfd toer 01-5 197" and 007] 9-. 90 17 d.te. 107- cod 1009 dar PaMsild arcyo croon, ¸tckea 0c - cyC-PrrIcroroeh of, pe LaOe.ytoa o orftcor ntl le o rae-Probetse qg ..nis r 1 l4 rnotioa..1 ssstihrd by 10_ prof. _Or Oc nfprersa-ffca.ai o fatala.. .ocaoo f l a t eaetie aloorrctrno ]feso oe A_Iootf196ar day. snd 190 octeec ci. n 190.19,ndl79dc, Tsnraasdn 0 'prfte atte atOna "ooefo sa arc ensag fo o olo ypsd yrdt haTId SootcDooyorh - 1hif of-pon-itin cadt If- sCedts tarO fndtoref 19r-o. 00 nr -Ir dern. cf the toAlb ehrore Per osnton proorfo.ndojy Occa anferel ar~~~pyiso - trroercAt.,ryly of1fnod-dr- trts dta rrtsd rceltf celes 190, 97 ..rd.. 1979 T'11~ Anc. o-tnea-ld. " I _ _ I - gtdt.T i .... f .0t _o__ntTUto-D-o h Icfstcrlortalooy,3orairtnchnuaardl-honoai desoranftrfercsncdar otsyter ~ ~ ~ ~ 7". dl-d ft koocetotaf lecooj11cec cOpocuet orj c,Snl a ar.endintl,-. bot o irtOrll edeq--ts tt pine .. caact i co-on i aqo-r,t. ...... her f popte]frei.urha. eO roelltcirencrnhsaccsacesf efod IaOfep.til eae= ool fcdaefabdeo r snr ruornr u urraioodIosae eeln ororlrs ow Lh .a soel-uhnea oa rsfrerhofhof.cs _ttt . t _ prcrebrhoe.coo.et eetoroel;a urfricoscoerhocsiclOoa-orffrashprer of p I cceysrnacooao-e. leoohnrreuti fnnaoOcauoalrodorre-]totfoenesneproeo...fh-onr.. Uhoeefdttsforant coeOdatd c aot srbo feeoro lcrsseof he hose.Iruraacts loa eOO e]carstt eyhocer oelofD-nce n rha nr 1e -h 1.t.- pit pli-. foierdftnnornrOnpccurros 1r rrsieei(erecidr osocoals crce rrc sy I. ohr-i.t d- ecf r tbrdf h ooehi n0rus ereto 1rcsOnlrtnndmtofacoe aelt dctthoecccrid:cronrOoeoard-dctdnyb ct-o-hfo htpc - 29 - ANNEX I ECONOMIC DEVELOPMENT DATA ;Doss NATIONAL PRODUCT IN 1980/81 ANNUAL RATE 0i GRDWTE (7, constant prices) 108$ billion Z .9b9/70-1974/75 1975/76-1980/81 1980/81 GNP at Marker Prices 29.99 100.0 3.5 6.3 6.2 Cross Domest-r investment 4.87 16.2 N.5 5.4 4.4 Gross National Saving 3.94 13.1 -2.1 8.2 10.3 Cr-ent A.ccount Balance -0.95 .es...rc Gap -2.93 -9.8 6.7 13.1 -29.4 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 197918/OL Value Added Labor Porce V.A. Pen Worker US$ million Millin i US$ million N Agric-lt-re 7,338 30 13.2 54 571 56 lndostry 6,490 26 4.5 18 1 ,442 141 iernices 11,127 44 6.9 28 1,o13 158 Toct./Averoge 25,155 100 24.6 100 1,021 100 COVERNMENT FiNANCE lonco-l Co-ernaroc Central do-ernonot (Rs billion) Z of COP _IR billion- 7 of GDP 1980/81 1980/81 1976/77-I98y - 1980/81 1980/8E 1976/77-1980/81 C-rrent Receisrt 46.8 16.9 10.2 In.! 13.0 12.4 Correct Esp-oditure- 36.9 13.3 14.0 2d.o 10.3 10.5 Current S-rpl-o/Defic-t 100.0 3.6 2.2 7.5 2.7 1.9 C.apital Expeoditunes 25.0 9.0 9.7 C 7.8 7.8 E.ternal Assistance (net) 5.7 2.0 3.0 5. 2.0 3.0 MONEY, CREDIT AND PRICES 1974/75 1975/7b 1976/77 1977/76 o572n75 1979/nD Moe-y and Quasi Monet 33.1 41.6 51.7 o3.7 7,.5 90.7 :04.0 Bank Credit -o Pobl-c Sdocor t-st) 17.7 22.9 29.1 34.3 1i.1 u8.1 33.8 Bank Credit to Privote Sector (grson) 19.7 23.1 30.1 35.7 42.1 50.t 538. Money ond Quasi Mosey ob Z GDP 31.s 34.3 38.1 40.' >2.N -.7 11.2 Wholes-le Pri-e Index (1969/70 = 100) 211.3 229.4 '55.3 271.4 CB. 316.7 358.8 Anoual Percentage Change in: Wholesale Price loden 23.6 5.6 11.3 9.3 s.7 9.c 13.3 ank Condot to Publ- SDctor (lot) 21.2 29.4 28.8 16.6 '5,h 1:0 '1.8 a-k Credut to Private Sector (gross) 26.3 17.3 30.3 18.6 i9.G 8.l. 16.0 /a Labor force data arc official figures of the Mionstru of Pin... nod Plaing. dri:n oden-rao a it. -peia11, s omen. /4 Poovosiosal. Not applicable. Fehb-vry 1982 * 30 - ANNER I BALANCE OF PAYMENTS (US$ million) MERCHANDISE EXPORTS (AVERAGING 1977/78-19O/oi2 1976/77 1977/78 1978/79 1979/80 1980/81 /a us$ million 7 Exports of Goods., NFS 1,404 1,651 2,107 2,955 3,450 Raw Cotton 259.4 8.5 I=ports of Goods., NFS 2,877 3,297 4,485 5,709 6,385 Cotton Yarn i79.3 9.8 Resooree Gap (deficit = - ) -1,473 -1,646 -2,378 -2,754 -2,935 Cotton Cloth 219.2 12.4 Rice 393.7 19.6 lnterost Pay=entn -172 -183 -261 -285 -322 All Other Coneodition 1,034.6 49.7 Workers' Renittasnes 578 1,166 1,395 1,748 2,117 Total 2,085.7 1l0.0 Othir Factor Payments (sot) 15 62 134 151 193 Net Transfers .. .E. .. .. .. XTERNAL DEBT, DECEMBER 31, 1980 Balance on Correct Account -1,052 -601 -1,110 -1,140 -947 iSS millicn Diront Foroigs Investment .. ._. .. Net MLT Bornowing Public Debt, Including Guaranteed 8,775.3 Disburse=ents 961 841 813 1,134 1,067 Non-gorn-tned Prinate Debt If Amortization -175 -122 -235 -310 -358 Total Ontstanding and Dinbonsed 8,775.3 Sub Total 786 719 578 824 709 Trans actions with IMF /b 44 41 -14 78 331 DEBT SERVICE RATIO FOR 1979/80 afg Other Items n.e.i. /n 24 163 238 600 217 USi eillion Increase in Renerves (- 198 -322 308 -362 -310 Poblic Debt, lcloditig Guran.teed 12.1 Grons Reserves (yeon end) /d 372 694 386 748 1,058 Non-gooranteed Pri-cte Debt Net Renervos (year end) /e -146 150 -92 340 330 Official Gold (year end; illi-n onces) 1.6 1.7 1.8 1.8 1.8 IBRD/IDA LENDINi (SEPTEMBER 1981) (USS million) Fnel and Related Materials RD IDA Petroleu= Imports 413 497 530 1,079 1,535 Outs-anding and Dinbunsod 312.2 825.6 Petnoleom EDports 27 63 61 178 169 UCdisbur-ed 36.5 549.9 Outstanding, including Udisbursed 348.7 1,375.5 RACE OF EXCHANGE Throngh May 11, 1972 May 11, 1972 - Febr-any 15, 1973 February 15, 1973 - January 8, 1982 Jan/h US$ = Rn 4.7619 US$ = 11.09 USS = 9.90 US$ = 10.1 R. = USSO.2100 Rn = 0.0909 Rn = 0.1010 R. = 0.09 /a Gioeremn. t estimate. /b Including Tront FPnd. /c Including net short-term borrowing and ernor- and omissions. /d Foreign exchange and SDR holdings of the State Bank. /e Exc-iding use of IMF credit. If Private debt is negligible. /g Ratio of debt service to exports of goods, non-factor services and workers' r-nittuncs; not including uhort-tern cr IMF charges. /h Since January 8, 1982, valne of rupee is being mnoaged with reference to a weighted basket of currencies. .ot availoble. Feb.uary 1982 - 31 - ANNEX II STATUS OF BANK GROUP OPERATIONS IN PAKISTAN A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of March 31, 1982) (US$ million) Loan/ (Amount net of cancellations) Credit Fiscal Undis- Number Year Purpose Bank TW IDA bursed Eighty loans and credits fully disbursed /a 611.2 634.3 492 1974 Fourth Karachi Port -- 16.0 0.4 1107 1975 Fourth Sui Northern Gas 53.0 -- 0.7 546 1975 Industrial Development (NDFC) -- 30.0 0.5 1208T 1976 Power (Second WAPDA) -- 32.0 -- 1.8 620 1976 Seed Project -- 23.0 7.5 1326 1976 Development Finance (PICIC X) 25.0 -- 0.4 630 1976 Second Lahore Water Supply -- 26.0 7.4 648 1976 Irrigation & Drainage (Khairpur) -- 14.0 7.0 1366T 1977 Livestock Development (Punjab) -- 10.0 __ 9.8 1372) 1977 Railways 35.0 -- 12.8 684 ) 1977 Railways -- 25.0 1.3 678 1977 Third Education -- 15.0 7.8 751 1977 Hill Farming Development -- 3.0 1.6 754 1978 Salinity Control & Reclamation -- 70.0 69.1 755 1978 Hazara Forestry Pre-investment -- 1.7 1.5 813 1978 Punjab Ext. & Agric. Dev. -- 12.5 7.8 846 1978 Fauji Fertilizer -- 55.0 6.6 867 1979 Toot Oil & Gas Development -- 30.0 2.5 877 1979 Salinity Control & Recl. (Mardan) -- 60.0 58.8 892 1979 Primary Education -- 10.0 8.6 922 1979 Sind Agricultural Extension -- 9.0 9.0 957 1979 Agricultural Development (ADBP) -- 30.0 17.6 968 1980 Power (Third WAPDA) -- 45.0 39.2 974 1980 Third Highway -- 50.0 41.3 1019 1980 Development Finance (PICIC XI) -- 40.0 29.2 1066 1981 Fertilizer Imports -- 50.0 29.4 1109 1981 Vocational Training -- 25.0 25.0 1113 1981 Small Industries -- 30.0 29.9 1157 1981 Grain Storage -- 32.0 32.0 1158/b 1981 Agricultural Research -- 24.0 24.0 1163 1981 On-Farm Water Management -- 41.0 41.0 1186/b 1982 Industrial Development (IDBP II) -- 30.0 30.0 Total 724.2 42.0 1,432.5 561.5 of which has been repaid 432.3 -- 28.4 Total now outstanding 291.9 42.0 1,404.1 Amount sold 23.9 of which has been repaid 23.9 -- -- -- Total now held by Bank and IDA/c 291.9 42.0 1,404.1 Total undisbursed 13.9 11.6 536.0 561.5 /a Excludes the disbursed portion of loans and credits wholly or partly for projects in the former East Pakistan which have now been taken over by Bangladesh. /b Not yet effective. /c Prior to exchange adjustments. - 32 - ANNEX II B. STATEMENT OF IFC INVESTMENTS (as of March 31, 1982) Fiscal Amount In US$ Million Year Obligor Type of Business Loan Equity Total 1958 Steel Corp of Rolled Steel 0.63 -- 0.63 Pakistan Ltd. Products 1959 Adamjee Industries Textiles 0.75 -- 0.75 Ltd. 1962- Gharibwal Cement Cement 5.25 0.42 5.67 1965 Industries Ltd. 1963- PICIC Development -- 0.52 0.52 1969- Financing 1975 1965 Crescent Jute Textiles 1.84 0.11 1.95 Products 1965- Packages Ltd. Paper Products 4.43 0.84 5.27 1980 1967- Pakistan Paper 1976 Corp Ltd. Paper 5.38 2.02 7.40 1969 Dawood Hercules Fertilizers 1.00 2.92 3.92 Chemicals Ltd. 1969 Karnaphuli Paper Pulp and Paper 5.60 0.63 6.23 Mills Ltd. 1979 Milkpak Ltd. Food and Food 2.40 0.39 2.79 Processing 1979 Pakistan Oilfields Chemicals and 29.00 1.82 30.82 Ltd. and Attock Petrochemicals Refinery Ltd. 1980 Fauji Foundation Woven Polypropy- 1.78 -- 1.78 lene bags 1980 Premier Board Particle Board 2.70 -- 2.70 Mills Ltd. 1981 Habib Arkady Food and Food Processing 3.15 0.17 3.32 Total Gross Commitments 63.91 9.84 73.75 Less: Cancellations, Terminations, Repayments and Sales 38.85 1.01 39.86 Total Commitments Now Held by IFC 25.06 8.83 33.89 Undisbursed (including participants) 3.15 0.53 3.68 - 33 - ANNEX II C. PROJECTS IN EXECUTION 1/ Credit No. 771 Tarbela Dam: US$35 Million Credit of March 10, 1978; Effective Date: April 4, 1978; Closing Date: June 30, 1982 Work to construct a flip-bucket at the outlet of Tunnel No. 4 is in progress and will be completed in 1983. Serious erosion in the plunge pool below the service spillway during 1977 necessitated additional protection works which, together with work in the downstream channel, were completed in June 1980. Similar protection work in the auxiliary plunge pool is virtually completed. Since 1975, irrigation requirements from the dam have been met. Power generation by the first four units began in 1977. Construction of a second power plant with six units is in progress. All Credit proceeds have been disbursed; the Bank continues to administer the Tarbela Development Fund. Credit No. 492 Fourth Karachi Port: US$16 Million Credit of July 8, 1974; Effective Date: September 18, 1974; Closing Date: December 31, 1981 The project is completed and, as of March 31, 1982, disbursements amounted to US$15.6 million. The balance is committed and final withdrawals are expected by end-April 1982. Loan No. 1107 Fourth Sui Northern Gas: US$60 Million Loan of May 15, 1975; Effective Date: July 5, 1975; Closing Date: December 31, 1982 The Closing Date of the Loan has been extended to December 31, 1982 to allow the Borrower to utilize undisbursed funds toward increasing the capacity of the Islamabad/Rawalpindi natural gas distribution system. Con- struction should be completed in June 1982. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understand- ing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. - 34 - Credit No. 546 National Development Finance Corporation (NDFC): US$30 Million Credit of May 15, 1975; Effective Date: July 17, 1975; Closing Date: December 31, 1981 The Credit was closed on December 31, 1981. The undisbursed amount (about US$0.5 million) will be cancelled in April 1982. Loan No. 1208-T Second WAPDA Power: US$50 Million Third Window Loan of February 19, 1976; Effective Date: April 30, 1976; Closing Date: December 31, 1981 Most of the project components were commissioned in the last quarter of 1980. Some payments are outstanding pending final commissioning of the remaining components. The Government has requested an extension of the Closing Date to September 30, 1982 to accommodate payment of these sums. Credit No. 620 Seed Project: US$23 Million Credit of March 29, 1976; Effective Date: November 29, 1976; Closing Date: June 30, 1983 Project implementation remains behind schedule, with the most impor- tant delays being the construction and equipping of three processing plants in Punjab due to disputes with civil works contractors. As presently scheduled, the Punjab component should be completed by June 1983. The plant in Sind is complete except for some silos and the machinery is installed. The Closing Date, originally December 31, 1981, has been extended to June 30, 1983. Loan No. 1326 Development Finance Company (PICIC IX): US$25 Million Loan of September 14, 1976; Effective Date: November 29, 1976; Closing Date: December 31, 1981 This Loan was closed on December 31, 1981. The undisbursed amount (about US$0.4 million) will be cancelled in April 1982. Credit No. 630 Second Lahore Water Supply, Sewerage and Drainage Project: US$26.6 Million Credit of June 8, 1976; Effective Date: September 21, 1976; Closing Date: December 31, 1982 All major works have been contracted. Construction delays, however, continue and will probably cause a further delay in project completion. - 35 - Credit No. 648 Khairpur Tile Drainage and Irrigated Farming Development Project: US$14 Million Credit of July 22, 1976; Effective Date: March 14, 1977; Closing Date: July 31, 1982 Overall progress is currently about two years behind schedule due to delays in employing consultants and procurement problems. Canal remodeling, surveys, and extension services are proceeding satisfactorily but the tile and collector drain construction has progressed slowly. Actions have been initiated with the Association's concurrence to curtail cost overruns and reduce completion delays. Loan No. 1366-T Punjab Livestock Development: US$10 Million Third Window Loan of February 18, 1977; Effective Date; August 3, 1977; Closing Date: December 31, 1982 The Government and the Bank have conditionally agreed on a revised project which would aim to rehabilitate the Lahore Milk Plant and to estab- lish about 300 Village Livestock Associations and their related service activities. The contract of the milk plant consultants has been extended to cover the period of construction and commissioning of the plant. Loan No. 1372 Tenth Railway: US$35 Million Loan and US$25 Million and Credit of March 8, 1977; Effective Date: May 9, 1977; Credit No. 684 Closing Date: June 30, 1982 The project is proceeding satisfactorily. The telecommunications and signaling scheme is making good progress and the complete network is expected to be commissioned before mid-1983. Procurement has been completed and the total proceeds of the Loan/Credit have been committed. Credit No. 678 Third Education: US$15 Million Credit of February 18, 1977; Effective Date: July 6, 1977; Closing Date: December 31, 1982 The project is generally making good progress. Nearly all of civil works contracts have been awarded and about 80% have been completed. One project study has been completed and the two others are nearing completion. About 70% of the project equipment has been procured and the balance is in the process of procurement. Technical assistance specialist services are now being provided satisfactorily and about 90% of the fellowships have been used or committed. Project implementation in Sind and Baluchistan is behind schedule by about one year, due to initial delays in building construction. - 36 - Credit No. 751 Hill Farming Technical Development: US$3 Million Credit of December 1, 1977; Effective Date: March 7, 1978; Closing Date: September 30, 1983 Staff vacancies are causing implementation problems, and the com- ponents dealing with fodders, demonstration farms, apples and land-use are progressing slowly. Nevertheless, most technical developments are progress- ing satisfactorily and the training program is on schedule. A draft proposal for a follow-up project has been received. Expenditures and disbursements have been less than expected because of cost savings and procurement delays. Credit No. 754 SCARP-VI: US$70 Million Credit of January 19, 1978; Effective Date: December 28, 1978; Closing Date: November 30, 1986 Although the project is about three years behind schedule, sig- nificant momentum has now begun in project implementation following the resolution of budgetary and other initial problems. Progress has been made in awarding the first civil works contracts and obtaining necessary equip- ment, vehicles and materials. Credit No. 755 Hazara Forestry: US$1.7 Million Credit of January 29, 1978; Effective Date: July 14, 1978; Closing Date: December 31, 1983 There has been significant progress in different project activities. The Guzara socio-economic study, chir pine forest inventory and pulping test for chir pine, and the first phase of the feasibility study have been com- pleted. As a result of these developments, the final phase of the feasibility study is expected to commence in the Fall of 1982. Credit No. 813 Punjab Extension and Agricultural Development: US$ 12.5 Million Credit of June 6, 1978; Effective Date: September 12, 1978; Closing Date: June 30, 1984 The project is behind schedule despite some progress in staff recruitment, acquisition of building sites and construction work. Implemen- tation of the T&V system and the research-extension linkages continue to be weak. Low salaries for village level staff and delays in recruiting consult- ants remain problems. Credit No. 846 Fauji Fertilizer: US$55 Million Credit of September 14, 1978; Effective Date: December 19, 1978; Closing Date: June 30, 1982 The plant is nearing completion and commercial production is due to start in April 1982. - 37 - Credit No. 867 Toot Oil and Gas Development: US$30 Million Credit of January 12, 1979; Effective Date: April 25, 1979; Closing Date: March 31, 1983 Two new producing oil wells in the Toot field have recently been completed despite very difficult drilling problems. However, serious well-drilling and management problems still persist. Project implementation is about 15 months behind schedule. The Closing Date, originally December 31, 1981, has been extended to March 31, 1983, to allow completion of the original 8-well drilling program. Credit No. 877 Salinity Control and Reclamation Project (SCARP) Mar- dan: US$60 Million Credit of February 7, 1979; Effec- tive Date: October 16, 1979; Closing Date: June 30, 1986 Initial budgetary and other problems have been resolved and CIDA (the project co-financier) is assisting WAPDA in scheduling implementation activities as well as in preparing subsurface drainage design and specifica- tions. The project is about two years behind schedule. Credit No. 892 Primary Education: US$10 Million Credit of April 18, 1979; Effective Date: October 23, 1979; Closing Date: June 30, 1985 Good progress is being maintained. About 80% of the project inputs including civil works, equipment, staff appointments and training have been provided with less than six months' delay. The evaluation program is being redesigned after the experiences gained in the first 18 months of evaluation. Credit No. 922 Sind Agricultural Extension and Adaptive Research Project: US$9 Million Credit of June 12, 1979; Effec- tive Date: June 26, 1981; Closing Date: June 30, 1984 Critical staff has been recruited and project implementation has started. Recruitment of consultants has been delayed pending signing of a project agreement between UNDP and the Government. Credit No. 957 Fourth Agricultural Development Bank: US$30 Million Credit of December 7, 1979; Effective Date: June 5, 1980; Closing Date: December 31, 1982 Overall progress of the agricultural credit component has been satis- factory and the agricultural engineering training component has begun. It is anticipated that project completion will be about one year behind schedule. - 38 - Credit No. 968 Third WAPDA Power: US$45 Million Credit of January 10, 1980; Effective Date: July 30, 1980; Closing Date: December 31, 1984 Despite some delays, mainly in land acquisition, execution of the project is proceeding satisfactorily. Procurement action schedules and construction targets for substations and transmission lines are generally being met. Credit No. 974 Third Highway: US$50 Million Credit of April 9, 1980; Effective Date: August 21, 1980; Closing Date: June 30, 1984 Of the five rehabilitation contracts, two are nearing completion, one has been terminated due to poor performance by the contractor and re-awarded, and work is progressing slowly on the remaining two contracts. Discussions are in progress on equipment procurement and provision of technical assis- tance to two provincial governments to improve road maintenance, and several contractors have shown interest in using loans through IDBP for purchase of mechanical equipment. Credit No. 1019 PICIC Industrial Development: US$40 Million Credit of May 30, 1980; Effective Date: October 29, 1980; Clos- ing Date: March 31, 1984 As of March 31, 1982, about US$29 million had been authorized for sub-loans and US$10.8 million disbursed. The Government and PICIC have taken corrective measures to improve collections on past sub-loans, and implementa- tion of the project is proceeding well. Credit No. 1066 Fertilizer Imports Credit: SDR 38.2 Million Credit (US$50 Million equivalent) of October 17, 1980; Effec- tive Date: December 1, 1980; Closing Date: September 30, 1982 As of March 1982, about US$21 million had been committed. The Clos- ing Date, originally June 30, 1981, has been extended to September 30, 1982 to accommodate the award of contract for and shipment of the remaining fer- tilizer under the project. Credit No. 1109 Fifth Education (Vocational Training): SDR 19.7 Mil- lion Credit (US$25 Million equivalent) of April 24, 1981; Effective Date: October 27, 1981; Closing Date: December 31, 1986 Agreements have been reached with ILO for the provision of technical assistance services and for procurement of equipment, and a contract signed with architectural consultants for the provision of design services. The - 39 - institutional and in-plant training components are about six months behind schedule. Credit No. 1113 Small Industries: SDR 23.6 Million Credit (US$30 Million equivalent) of April 24, 1981; Effective Date: October 6, 1981, Closing Date: December 31, 1985 Sub-loan commitment started in January 1982 after key commercial bank loan officers were trained in November/December 1981. Bidding for equipment and selection of consultants for the service centers are in progress. Evaluation of proposals and selection of consultants for the export promotion and the project development components are ongoing. Credit No. 1157 Grain Storage: SDR 26.1 Million Credit (US$32 Million equivalent) of October 21, 1981; Effective Date: March 15, 1982; Closing Date: December 31, 1985 This Credit was declared effective on March 15, 1982. Credit No. 1158 Agricultural Research: SDR 19.7 Million Credit (US$24 Million equivalent) of August 19, 1981; Effective Date: April 29, 1982; Closing Date: December 31, 1986 This Credit is not yet effective. Credit No. 1163 On-Farm Water Management: SDR 33.4 Million Credit (US$41 Million equivalent) of August 19, 1981; Effec- tive Date: March 31, 1982; Closing Date: December 31, 1984 This Credit was declared effective on March 30, 1982. Credit No. 1186 Second Industrial Development Bank of Pakistan (IDBP II): SDR 26.7 Million Credit (US$30 Million equivalent) of February 19, 1982; Effective Date: May 19, 1982; Closing Date: June 30, 1985 This Credit is not yet effective. - 40 - ANNEX III PAKISTAN ELEVENTH RAILWAY PROJECT Supplementary Project Data Sheet Section I: Timetable of Key Events (a) Time taken to prepare the project: Two years (b) Agency which prepared the project: Pakistan Railways (c) Date of first presentation to the Bank, and date of first Bank Mission to consider the project: April 1979 and August 1980 (d) Date of departure of appraisal mission: October 30, 1981 (e) Date of completion of negotiations: May 12, 1982 (f) Planned date of effectiveness: September 1982 Section II: Special IDA Implementation Actions None - 41 - ANNEX III Section III: Special Conditions (i) PR to carry out detailed action plans to strengthen organization and management, including staffing. Progress to be reviewed annually and actions for following year to be determined in consultation with the Association (paragraph 45); (ii) PR's total revenues should be sufficient to cover variable costs of passenger/freight operations and services and provide operating surplus (paragraph 58); (iii) By December 31, 1982, Government to furnish to the Association, for review and comment, a comprehensive training program for CDLW (paragraph 74); and (iv) Study to determine feasibility of electrification to be carried out in accordance with timetable and on terms of reference satisfactory to the Association (paragraph 78). I IBRD 16207R RIO' U. , ' S X r ; 5 R dD3ne7Fg { t 64Q 58 A \ / 5 APRIL 1902 64~~~~~~~~~~~~ ~~~U.S.S.R. r N '- - F5ADEMOCRATIC REPUBLIC OF - UT'J -AFGHANISTAN IAI~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ I PAKISTAN A ANR, rn ELEVENTH RAILWAY PROJECT V jS p SNAtHRE DRY PART 'UKbCNwtSwPz !0 N -AAlhNP DAD Il T I T. WA| RN^ f'-**F Cot Rl, NF TRC Br i) - -32~~~~~~N4 NFOAGUNE. 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