Document or The World Bank FOR OFFCIAL USE ONLY jgW. '2 s- 'o flmtN.L P-38f2-PO iPORT ARD RcWEEOMT105 PRESI3ETr w TE INfElkT1O5AL BANK FCR UIECONSr=CIEOC ANID DEVELOPEK TO E ]ECUTIVE DIRTORS L A PROPOSED LAli IN AN AUMC EQUALENT TO US$30.5 MlLL TO TEEE RERIBLIC OF PORUlGAL FOR A * NANMWE TRAINER AND DEVELOPENr PROtJT Nay 31, 1984 IT&inm bw a resdgidu mdht.uS =mayo be Wui by tepk euijoony In the peurumeme of ther si duma co m W so e& gobe be d_imj ished WediU a d. EBLIC OF PORTUGAL aUIEG E T5VA CGrency lunit Portguese Escido Calendar 1983 April 1984 (Average) Esc. 110.78 - USS1.00 ESC. 135 - US51.00 Esc. 1.00 - 1JSUw.0"90 Ese. 1.00 - USS0.0074 Fi8cal Year January 1 - December 31 AIBREVIATIS CE Council of Europe EEC European Economic Conity CCEE Office for External Economic Cooperation IEF Institate of Employment and Skill Traing lEFT National Institute of Tourism Training IRA National Institute of Administration LNEfl National Laboratory ror Engimeering and Industrial Technology EPE Non-Financial Public Enterprises STC Skill Training Center it The exchange rate of the escudo is being adjusted nonthly on the basis of a "crawling peg" syst FOR OFFICIAL USE ON4LY REPUBLIC OF PORTUGAL MANPOWER TRAINILSG AND DEVEL'PMEJT PROJECT Loan and Proiect Sinary c Borrower; Republic of Portugal A:0unt: $30.5 million equivalent. Terms; 15 years including 3 years' grace at the standard variable interest rate. Project Description: The project2s objective would be to help the Govern- ment strengthen its capability for meeting trained manpower requirements in support of its industrial restructuring and medium-term economic development programs. It would focus on the needs for skilled personnel in industry and tourism, and on the improve- ment of public administration. It would expand the training facilities for skilled workers, engineering and scientific personnel, tourism-related workers and public administrators, upgrade the quality of their training and promote institutional development. The project vould include; the cor-struction and equipping of five skill training centers under the Ministry of Labor; the renovation and equipping of a profes- sional engineering development center under the Ministry of Industry; the expansion and equipping of facilities of the National Institute of Administra- tion under the office of the Presidency of the Council of Ministers, the construction and equipping of a hotel/tourism training center and technical assistance. When fully operational in 1989, the project would help to increase the annual supply of industrial skilled workers by 1,700, train annually 2400 of the nation's public administrators and civil service technical staff, upgrade the technical and professional skills of about 1200 engineering and scientific personnel in industry, and train 1,100 skilled personnel for the tourism sector. There is the possible risk of delays in project implementation due to budgetary constraints but special measures have been incorporated to minimize this risk. This documt h a resricd dibutio and may be used by recipients onb in the performunce of their cial dut Ies cotens my oat otherw be disclod without World Bank authoon. Us$ million Estimated Costs; Local Foreign Total Skill Training Centers 11.27 11.74 23.01 Professional Engineering Development 0.99 4.10 5.09 Center National Institute of Administration 1.13 2.00 3.13 Hotel and Tourism Training Centers 3.84 3.48 7.32 Sub-total 17.23 21.32 38.55 Physical Contingencies 1.72 2.13 3.85 Price Contingencies 5.49 7.03 12.52 Total Project Costs 24.44 30.48 54.92 Front-end fee - 0.08 0.08 Total Financing Required 24.44 30.56 55.0 iZit million Financing Plan: Local Forei_n Total Bank Loan - 30.5 30.5 Government 24.4 0.1 24.5 Total 24.4 30.6 55.0 Estimated Disbursenents USt million Bank FY 1985 1986 1987 1988 1989 1990 1991 Annual 1.2 2.1 3.7 4.4 6.5 6.5 6.1 Cumulative 1.2 3.3 7.0 11.4 17.9 24.4 30.5 Rate of Return; Not applicable Staff Appraisal Report; No. 5033-P0, dated Nay 25, 1984. IlTERNATIONAL BANK FOR AND DEVOPHEIT REE?ORT AND RECOtIENDATION OF THE PRESIDENT OF THE D TO THE EXECUTIVE DIECTORS ON A PROPOSED WAN TO THE REPUBLIC OF PORTUGAL FOR A NAMOR E AM TRAININ PROJECT 1. I submit the following report and rec ation on a proposed loan to the Republic of Portugal for the equivalent of 1USS30.5 million, to help finance a Manpower Training and Development project. The loan ould have a term of 15 years, including 3 years of grace, with interest at the standard * variable rate. PART I - THE ECOKUIY if 2. The latest economic report, entitled "The Portuguese Economy, 1980- 82, An Updating Report" (No. 4004-PO, dated March 1, 1983) was distributed to the Executive Directors in March 1983. Country data sheets are attached as Annex I. An updatimg economic report is being prepared and will be discussed with the Governent in the next fiscal year. Background 3. The revolution of April 1974 radically transformed Portugal's economy. Major sectors of the economy were nationalized, and a comprehensive land reform was carried out in the central and southern parts of the country. Trade union activity was legalized and workers' rights safeguarded. The Government increased its intervention in the economy through wage and price controls, as well as by a significant increase in public expendfitres. The disruptions from these structural changes, together with a combination of adverse external factors, resulted in a sharp deterioration in the balance of payments by 1977. In 1978, the Government adopted a comprehensive adjustment program, including a Standby Agreement with the DIF. which reduced the carrent account deficit to virtually zero. The period since 1979 has seen the pro- gressive deterioration of economic performance in most major aspects and again in relation to the balance of payments. Recent Developments 4. The combination of high accumulated current account deficits since 1980, the political uncertainty which followed the fall in December 1982 of the AD coalition, which had been in power for about two years, and lack of economic leadership during the first semester of 1983 (pending general elections), led to a serious deterioration in Portugal's credit rating in 1/ Identical to Part I of the President's Report No. P-3798-PO dated April 27, 1984, for the Textile Restructuring Project, approved by the Executive Directors on May 21, 1984. - 2 - international capital markets. Difficulties were encountered in renewing part of the short-term external debt of public enterprises and payments on external short-term capital, mainly by public enterprises, exceeded receipts by about $600 million during 1983. A large part of the current account deficit in 1983 was financed through reductions in net foreign assets (about $1.1 billion). 5. The new Government, which took office in June 1983 arranged immediately a number of measures (including devaluation of the escudo and reduction of subsidies) to start addressing the country's deteriorated economic situation; it has developed a comprehensive adjustment program aimed at reducing the balance of payments deficit and at maintaining indebtedness at a sustainable level. A Standby Agreement with the IMF was signed on October 9, 1983, which includes ceilings on domestic credit and on external borroving. It appears that the economy has already started to respond to the Government's economic policy measures. For 1983 as a whole, imports are estimated to have declined by at least 10 percent and exports have increased by at least 15 percent in volume, compared with 1982 levels. The current account deficit for the first semester of 1983 declined to $1.4 billion from $2.2 billion during the first semester of 1982, and for the whole year 1983 the current account deficit is estimated at about $1.7 billion, compared to $3.2 billion for 1982. However, GDP growth in 1983 is estimated at close to zero; consumption has declined and investment has deelined even more. 6. Inflation accelerated during 1983, exceeding 33 percent in December 1983 on an annual basis. It seems that expectations have not changed and that capital flight continued in 1983 despite a competitive exchange rate, largely positive real interest rates, and the agreement with the DFf. Because inventories have been run down, a continuation of the growth of exports will require increased imports, which in turn, depend largely on the availability of foreign exchange. The principal source of weakness in economic management remains in the area of public sector finances. The deficit of the general government on a cash basis reached 11.7 percent of GDP in 1982. In addition, arrears equivalent to about 6 percent of GDP remained outstanding from the Supply Fund towards public enterprises. The Government has taken some measures to pave the way to financial rationalization, but much remains to be done. Ihe Need for Structural Change 7. Stabilization must once again dominate the formulation of economic policy in Portugal. Growth rates of the order of 4 to 5 percent per annum, which were earlier thought to be possible, now seem to be inconsistent with the maintenance of reasonable equilibrium in the balance of payments over the next three to four years. The dilemma which the Government is now grappling with is to address the serious deterioration in the economic situation, while at the same time undertaking structural changes. Efforts to restructure industry, to encourage investment attuned to energy-saving and to improve the generally weak productivity performance of Portuguese agriculture will need - 3 - to be pursued in a framework which is consistent with stabilization policies. If reasonable domestic growth is to be achieved in spite of oil, food and other structural dependencies on the import side, Portugal will require continued growth of visible exports at rates significantly higher than the growth of world trade. Portugal will also need to follow policies which can maintain migrants' remittances at a high level. 8. Industry is the leading sector for exports, and particularly in 'line with the prospective EEC accession, require restructuring to fully exploit its comparative advantage. This vill mean emphasis on labor-inrtenSive industries, both light industries (textiles and footwear) and heavier items (including electrical machinery and transport equipment). Although Portugal's industrial strategy must give priority to exports, the development of basic industry to supply the domestic market should also be pursued whenever adequate returns can be demonstrated. It will also be important to simplify (and in some cases dismantle) many of the complex Government interventions to which Portuguese industries have become accustomed. These include the system of investment incentives, the price control apparatus, the arrangements for export incentives, and extensive non-tariff bar-iers to trade. 9. The need for structural change is particularly acute for non-financial public enterprises (NFPE). This is true for several reasons. First, there has been little direct pressure on these enterprises to adjust to changed circumstances, resulting in low profits, if not losses, for many of them. Administered prices, rigid labor laws, inadequate managerial incentives/accountabilizy, and insufficient self-financing requirements for investment have retarded rationalization at the enterprise level. Second, exogenous circumstances have aggravated the adjustment problem; these include the concentration in the public sector of industries which are economically depressed worldwide (e.g., shipbuilding, steel, cement, and international transport); the delays and uncertainties in budgetary transfers and investment approvals due to changing governments; and the strong position of labor unions in the large public sector enterprises. Social service obligations, such as maintaining strategic reserves or uneconomic services, might also fall into this category. And third, the NFPEs have been required, to some extent, to bear the burden of adjustment of the rest of the economy through accumulated net budgetary arrears. It seems essential, therefore, that some financial restructuring at the enterprise level should take place to relieve liquidity pressures. It must also be closely tied to institutional changes and physical restructuring to increase long-run profitability. The Bank is closely associated with work under way at the Government level to formulate a restructuring program for NFPEs. 10. The private sector is likely to be the major contributor to economic growth foreseen for the 1980s and is expected to account for about 60 percent of the investment in the period. The large increases in exports in 1979 and in 1983 are evidence of the gains that the private sector can make in major markets. However, private investment is still hindered by several factors. - 4 - Profitability, though rising in recent years, is still relatively low by historical standards and is likely to be squeezed in the near future. Credit availability to the private sector may be restricted by the continuing large public sector borrowing requirement. Potential investors have considered current interest rates too high and the investment incentive schemes are essentially designed to mitigate the perceived high cost of capital. Given the relatively poor response to its incentives programs, the Government is considering ways to revise them, through better targeting and reducing their overall cost. . 11. Measures to improve the conditions in the agricultural sector are also underway, but are slow in producing results. Credit needs to be expanded further and focussed on production-oriented investments. The mechanism and structure of agricultural lending rates needs to be rationalized to provide appropriate incentives for long-term investments. While increased on-farm investments are necessary, little will be achieved without substantial advances on the technical side as well. The extension services of the Ministry of Agriculture, Food and Forestry need to be upgraded, and their links to research and to the farmers need to be strengthened. Recent efforts to train agricultural extension manpower and the farmers themselves need to be intensified. The Bank has carried out a joint review with the Government of the prospects for improving the performance of the agricultural sector, and its report is expected to provide a basis for further collaboration. External Assistance and Creditworthiness 12. The total external debt of Portugal increased from $7.3 billion at the end of 1979 to $14.5 billion by August 1983; at the end of 1982, total external debt amounted to about 57 percent of GDP. Almost 80 percent of the total outstanding debt has been contracted by the public sector, with public enterprises accounting for 60 percent. Public and publicly guaranteed debt accounts for 96 percent of all medium- and long-term debt. Short-term debt, which is estimated at the end of 1983 at $3.5 billion, has been the fastest growing component of Portugal's external debt. More than 91 percent of the short-term debt has been contracted by NFPEs, essentially four of them. During the first semester of 1983, the short-term borrowings of the Treasury and NFPEs were contracted at rates one-half to five-eighths above LIBOR. 13. Portugal is a regular borrower on international capital markets, either directly by the state or through public enterprises. About two-thirds of total borrowings, and virtually all of the short-term borrowing, has been contracted from financial institutions. Multilateral lending constitutes only about 13 percent of Portugal's medium- and long-term debt outstanding, and is slightly less than bilateral lending. 14. The steady increase in Portugal's external debt, coupled with a weakening in the rate of growth of foreign exchange earnings, has resulted in a considerable deterioration in the various debt service indicators. The broadly defined debt service ratio (including interest payments but not amortization on short-term debt) rose from 14.5 percent in 1980 to 27.5 percent in 1982. For 1983, it is estimated that debt service payments, excluding the rollover of the outstanding in short-term debt, exceeded $2.2 billion (or about 28 percent of foreign exchange earnings). In addition to the rapid build-up in Portugal's external debt, the recent deterioration in the debt service ratio has also been the result of large amortization payments falling due on the medium-term. debt contracted in the late 1970s. Keeping the external debt situation manageable in the next few years will require a reduction in the current account deficit as a proportion of GDP, attended by relatively slow GDP growth (not exceeding 3 percent), and a greater effort to expand exports (by at least 7 percent per year). 15. The IMF agreement mentioned in preceeding paragraphs established a ceiling on the increase of total external debt outstanding by the end of 1984 of t1.2 billion, of which t200 million can be short-term. Despite Portugal's gold reserves (20.44 million troy ounces in June 1983), which are still perceived as Portugal's main guarantee by most lenders, some difficulties way be encountered over the next 12 months to roll over the existing debt and to extend the needed additional loans. The necessity of carefully managing its foreign exchange position and external financial arrangements will remain an issue for Portugal until the end of the decade. PART II - BANK GROUP OPERATIONS IN PORTUGAL 1/ 16. The first phase of Bank lending to Portugal, during the period 1963-66, was concentrated in the power sector; this reflected the Government's development priorities to meet the power needs of a rapidly developing industrial sector. The events of the more recent past have created special problems; the transition to an open political system has revealed social and economic weaknesses which are unusual for a relatively high-income developing country. The Bank has responded to Portugal's needs by identifying, preparing and financing projects, and through economic and sector work in a number of areas. 17. The proposed loan would be the twenty-sixth to Portugal,V' the twenty-first since the resumption of lending in 1976. Bank operations since 1976 amount to about $851.7 million (net of cancellations), and have been concentrated in the industry (7 projects for 357.9 million) and energy (4 projects for t212.4 million) sectors. About 39 percent of the total lending has been channelled to public enterprises, about 39 percent via lines of credit for onlending to individual enterprises, with the remaining 22 percent in support of activities undertaken by the Government administration. 1/ Substantially the same as in the President's Report No. P-3798-PO dated April 27, 1984, for the Textile Restructuring Project, approved by the Executive Directors on May 24, 1984. 2/ Including the Agricultural Services Project Loan (¢7.4 million). - 6 - 18. As of March 31, 1984, total disbursements from loans made after 1976 amounted to over $343 million. The first three loans (Sixth Power, First Banco de Fomento and First Highways) are fully disbursLd. Given the profile of commitments and some recent improvexents in the implementation of the projects under Government administration, overall disbursement performance has been improving; disbursements in FY1983 amounted to $97.5 million equivalent. A full review of the performance of the portfolio was held in Lisbon recently, to seek further improvements. Annex II contains a summary statement of Bank loans and IFC investments as of March 31, 1984. 19. Ongoing projects with public enterprises are all progressing well in physical project terms, with all but the most recent loan to the electricity corporation (FY1983) nearly fully disbursed; as noted above, many public enterprises (including some public enterprises which are Bank borrowers) are experiencing serious financial difficulties. This situation is under close scrutiny by the Bank and the Government, and special efforts to address the underlying and institutional causes are being designed. The loans for onlending via lines of credit have recently slowed in disbursements. With the devaluation of the escudo over the course of project execution, the first Small and Medium Industry (SMI) line of credit required about twice as many sub-loans denominated in local currency to be fully committed than was expected at appraisal. Commitments under the second National Development Bank loan have been adversely affected by the slowdown in investment in Portugal, which appears to have particularly affected its larger-scale enterprise clients. The agricultural and fisheries credit project experienced severe institutional difficulties and was never able to reach the target population, and consequently most of the line has been cancelled. 20. The Bank is also assisting the Government in an intense parallel effort at macroeconomic and sectoral levels to review policy and management issues. The report "Policies for Industrial Restructuring", dated August 4, 1982, laid the basis for a number of policy improvements and identification of projects for possible Bank assistance, including the recently approved Textile Industry Restructuring Project. This report was followed-up by an updated economic memorandum and a special report on "Prospects for External Trade in Light of EEC Entry - with Special Reference to Agriculture," both of which were distributed to the Executive Directors in March 1983. At the sectoral level, we are nearing completion of an Agricultural Sector Survey, which will be discussed with the Government by mid-1984, and an Energy Assessment Report, which has already been discussed with the Government and will be distributed to the Executive Directors shortly. The major ongoing effort is the preparation, at the request of the Government, of a report on the public enterprise sector. We also expect to launch additional work on the overall financial sector, in close association with the IFC, in the near future. 21. The industry, energy, and agriculture sectors have been identified as the most appropriate areas of concentration for Bank work. The importance of the industrial sector cannot be overemphasized, as it is expected to be the major growth point for the Portuguese economy and exports. The main - 7 - objectives of Bank assistance to the industrial sector are structural reform, export promotion and efficient import-substitution, employment creation and preservation and promotion of energy-saving. Restructuring projects for a number of industrial subsectors are being prepared, as well as a project to promote technological improvements. Bank activities in support of the development of the energy sector in Portugal are also important, given the continuing high dependence of Portugal on imported petroleum products, the attractive potential benefits from energy conservation, and the very large share of energy investments in the overall public investment program. Follow-up projects for the electricity corporation and energy savings projects are planned, and a project for coal handling port facilities is being prepared. In the agricultural sector, Bank assistance will be focused on institution-building programs and technical assistance. A program of technical assistance has been defined and has been formulated into a project proposal for consideration this fiscal year. Other project proposals identified in the draft Agriculture Sector Survey include programs for livestock and dairy development, wheat, and regional agricultural development services. 22. In the context of the stabilization program, the overall investment program of the Government and the public enterprises has been severely constrained; in 1984, public investment is expected to decline in real terms. The slowdnwn of growth for the general economy will also dampen private sector investment levels as well. The Bank program of assistance is therefore designed to address policy level issues which will facilitate the progressive return to robust growth, and targetted at those specific investment areas which should receive priority, especially in the constrained circumstances. PART III - MANPOWER TRAINING AND DEVELOPMENT Background 23. Building on its economic stabilization program, the Government is currently designing a policy for restructuring the economy and making it competitive so as to ensure growth over the medium-term consistent with equilibrium in its external payments. While the restructuring program would embrace all sectors of the economy, its thrust will concentrate on industry, tourism and other sectors which generate foreign exchange earnings. The Government's industrial policy is evolving, and is guided by the need (i) to rehabilitate existing enterprises in traditional export industries (textile, manufacturing, pulp and paper, and food are of high priority); and (ii) to * promote new investments in technologically advanced areas. The global objectives are to increase exports and to create new, viable employment. 24. The scope of the restructuring program for existing subsectors involves industrial reorganization (phasing out of non-viable units or merging them into plants of more efficient size), changes in outputs (better design and quality of products), and improvement in plant efficiency, particularly in worker productivicy. -8- Population and Manpower Development 25. Due to an increase in population in the mid-1970s caused by the return of Portuguese people from its former colonies, Portugal's population grew at an annual average rate of 0.9 percent per annum during the 1970s. This would imply an annual growth of 0.4 percent in its labor force. A sustained modest economic growth would permit expansion of employment opportunities sufficient to absorb this growth in the labor force. To facilitate the long-term adjustment of its education and training systems to absorb the increases in the labor force, the Government completed in 1980 a study to determine Portugal's needs for trained manpower in all major occupational categori:s up to 1990. This study, for which the Bank provided assistance, indicated that there would be a substantial deficit in the availability of skilled workers and technicians unless measures are taken to expand training capacity. The Government is updating the 1980 manpower study to determine what impact its industrial restructuring program would have on the labor force and manpower requirements. The Bank is assisting the Government in this endeavour. The results of this study will provide useful data for further sectoral policy dialogue. Training 26. The Government has initiated programs to provide both pre-service and in-service training to meet the country's long-term manpower needs. Most of the pre-service training is organized under the auspices of the Ministry of Education (MOE), in its comprehensive secondary schools with vocational training programs, and in technical institutes and universities. The main function of the higher education institutions as regards the industrial sector is to provide engineering, technician and skilled worker manpower. The Ministry of Labor (MOL) also provides pre-service training in its skill training centers to prepare skilled manpower for the industrial sector. The National Institute of Tourism conducts pre-service training for hotel and tourism-related occupations, and some operational ministries conduct pre-service training of a limited and specialized nature. 27. In-service training programs have also been established for various occupational areas. The Ministry of Industry, through its National Laboratory for Engineering and Industrial Technology (LNETI), conducts programs for upgrading industrial managers. It has also established, in cooperation with the various industries, a network of 11 technology centers located throughout the country which presently conduct research and product development and will be expanded to provide training services for engineers and scientists. Most in-service training to upgrade industry's skilled manpower is conducted by MOL in its network of skill training centers (STCs). These efforts have been supported by the Bank under the first education project. The National Institute of Administration (IRA) provides in-service training for public administrators. However, these efforts fall short of meeting the overall basic and long-range manpower training needs of a developing industrial, technologically-oriented society. There is a need to weave the training programs of the various ministries into a more coherent longer-term strategy at the departmental, ministerial or national levels, and an interministerial manpower coordinating council has been established for this purpose. 28. To overcome difficulties faced in the past regarding the integration of engineering graduates into suitable industrial employment, the Government introduced in 1975 a scheme for placing graduates with industrial units for a six-month apprenticeship period during which their salary is paid by the Government. This scheme has proved successful and is being extended to train senior managers in areas such as financial management and production control and, in some circumstances, to send them on overseas plant visits- 29. In expanding its training programs, the Government works closely with tne private sector. It decides the location, capacity, and the training programs to be offered in the training centers in close consultation with the private sector, so as to ensure that they are relevant to the needs of indus- try in the selected areas. The private sector provides some in-plant train- ing programs, which are generally oriented towards training skilled manual workers for job-specific requirements. The private sector also contributes to training, when necessary, by allowing its employees to serve, free of cost, as instructors in the centers run by the Government. While pre-service training programs are provided at no cost to the trainees, the Government charges fees for its in-service training programs, most of which are utilized by the private sector. These fees help to cover a part (about 30 percent) of the operating costs of these programs. To promote industrial training in- cluding retraining, the Government (i) has introduced an apprenticesnip law to provide practical training in enterprises, following academic training in the skill training centers or in any other institution; (ii) is preparing a reorganization of the Institute of EE?loyment and Training; (iii) is prepar- ing twc legal tools, one about the main guidelines of the vocational training system and the other about the vocational training in cooperation between IEFP and other entities and through several specific training programs de- fined in the Institute of Employment. 30. While the Government is justifiably increasing its efforts to expand training facilities to improve labor productivity, these efforts also have to be accompanied by measures to promote greater labor mobility, especially in view of the large excess labor force in several industries. The elaborate labor laws governing the collective bargaining process and the collective labor conventions inhibit the mobility of labor so vital to the ultimate success of the industrial restructuring program. In practice, these problems have been mitigated through the Government's use of available legal procedures by providing for short-term labor contracts, and by the recent legislation permitting "lay-offs" in enterprises in economic distress. With a view to ensuring that its labor policy is attuned to the needs of restructuring the economy, the Government has initiated a review of the existing legal framework and practices with a view to formulating needed - 10 - changes in the system. Governmt is working on measures to revise the laws relating to collective dismissals, individual contracts and collective bargaining. Tn view. of the sensitive nature of these issues, and to promote a social consensus, the Government has established a Permanent Council on Social Concertation, comprising representativese of Government, labor unions and employers' organizations. The proposed revisions to the existing laws, following discussions in the Permanent Council, are expected to be presented to the Parliament by October 1984. These measures are expected to overcome the constraints affecting labor nobility. Bank Involvement in Manpower Training 31. The Bank has assisted Portugal in its efforts to initiate training activities in key sectors, where manpower needs were identified to be substantial, through two Education projects (Loan 1559-PO, approved in 1978), and (Loan 1793-PO, approved in 1980). The objectives of the projects were to; (i) improve and expand mwangement training; (ii) introduce vocational training in skill training centers for early school leavers; (iii) upgrade teacher training and curricula; (iv) expand agricultural, industrial, and commercial technician training; Cv) expand vocational training in secondarv school; and (vi) upgrade university engineering, agricultural and science teaching. Five vocational skill training centers, six technician training institutes, and four teacher training institutions have become operational; other institutions are expected to be completed by the end of 1984. The first project is expected to be completed in 1984, and the second in 1986. These projects have encountered considerable delays initially, due to legal constraints and the lack of familiarity of the agencies with Bank procedures. 'hen these initial problems were resolved and the Government strengthened its project implementation and management capabilities, the projects were affected by funding difficulties in the Ministry of Education. The Portuguese Government coutinues to require substantial technical and financial assistance in modernizing its educational and training system. The Bank's involvement in the proposed project would help towards such institutional development and improvement of sectoral planning and policies. PART IV - THE PROJECT Project Background 32. This project has its origin in the continuing dialogue with the Government on the development of the education and manpower training sector during the course of implementation of the Bank-assisted education projects. It was identified in June 1982, and prepared by the Government with Bank assistance. It was appraised in January/February 1984. Negotiations were held in Washington from May 14 to 18, 1984. Portugal's delegation was led by Dr. Carneiro of the office of the Presidency of the Council of Ministers and included representatives of the Ministry of Finance and Planning, the Ministry of Labor and the Institute of Tourism Training, . A Staff Appraisal Report entitled "Manpower Training and Development Project" dated May 25, - 11 - 1984, is being circulated separately to the Executive Directors. The main features of the loan and the project are shown in the Loan and Project Sumaary and in Annex III. A map (IBRD__) showing the location of project institutions is attached_ Project Objectives 33_ The project's main objective is to strengthen Portugal's capabilitv for meeting trained manpower requirements in support of its industrial restructuring and economic development programs. It would focus on upgrading the skills of scientific and engineering personnel in industrv, increasing the supply of skilled workers for the industrial and tourism sectors, strengthening public administration so as to improve the quality of policy planning, and of the implementation and management of development projects and to improve public administration in general. Besides the qualitative contribution, it would increase the annual supply of skilled workers for the industrial sector from 1,200 to 2,900, upgrade the technical skills of about 1,200 of industry's engineering and scientific personnel, upgrade the skills of about 2,400 public administrators annually, and provide annually about 1100 trained workers for the country's tourism-related occupations. It would help to increase the productive output of export-oriented industries and foreign exchange earning activities and services. 34. In support of the above objectives, the proposed project would include (a) the construction and equipping of- (i) five skill training centers (STCs); (ii) a Professional Engineering Development Center; (iii) a hotel and tourism training center; and (iv) the expansion of facilities at the National Institute of Administration (IRA); (b) technical assistance in curricula and institutional development; and (c) fellowship training. Skill Training Centers (STCs) 35. To help overcome the serious shortage of skilled workers in the industrial sector, the project would include five new skill training centers as part of a larger program to establish 2& such new centers. These would be located in the highly industrialized regions of the country and would focus on training for the employment needs of the region. Eleven such centers already exist, five of them supported by the Bank. The locations and training programs to be provided are based on local employment office studies of the manpower needs by industry and occupation, level of training required, local employer support for training and availability of trainees. Such studies have been completed for all the centers proposed under the project. These studies are reviewed by a local advisory comittee with participation from industry and the local community. The STCs would serve early school leavers, as well as unemployed and displaced workers, and prepare them with entry level skills as artisans, tradesman, or operators. The new training programs would span 20 occupational groups. When these 24 centers are operational, it would increase the training capacity to about 9,000 individuals annually. To meet the needs for increased instructors, estimated - 12 - at about 500, the Institute of Employment and Skill Training (IEFP) would expand the instructor training program under which it recruits experienced workers from industry and provides a nine-month formal training. As they will be supplemented by instructors from the relatively large pool of local workers, it is expected that the recruitment of needed instructors will not present a problem. The project would include technical assistance to help improve and lpdate the training curricula and to expand a modular system of training based partially on the International Labor Organization model. 36. Professional EngineerinZ Development Center; To help upgrade the quality of employed engineering and other scientific professionals and to keep them abreast of new developments and techniques in their specialised fields, the proposed project would establish a central training facility in Lisbon lnder LDETI. It would introduce an extension-type program with courses offered in each of the categories of (a) engineering specializations; (b) engineering sciences; (c) technology development, and (d) training and education technology. The program would concentrate on improving industrial procedures and increasing productivity, especially in major growth and export-oriented industries, a critical element in the Government s planned industrial restructuring program. Uhen fully operational in 1989, the proposed Center would cater to about 1200 persons annually. LRET1 engineers and scientists. trained in instructional methodology, would serve as instructors, supplemented by others recruited as needed from private industry, local universities and technical institutions. Tbe project includes, besides renovation of IXETI's building and provision of equipment and materials to meet the needs of additional traiuing programs, 12 m-aimouths of consultant services to help develop the courses for the program and abolt 156 man-months of fellowship abroad. 37. Rational Institute of Administration (INk); To help improve the quality of public administration and promote rmch needed administrative reforms, the Proposed project would assist IfA, established in 1979 under the office of the Presidency of the Council of Ministers, to expand and upgrade its in -service training for public administrators and civil service technical personnel. The project would include the financing of construction and equipment to extend the institute's instructional facilities, and technical assistance for program development, especially in the applications of technology in administration and improved administrative procedures. IRA's existing capacity of 1500 is fully utilized, and the proposed project would add 300 new training places with an additional capacity of 900 persons per year. INA charges the government agencies sponsoring the trainees a fee for participation in its courses, to ensure that its training programs are relevant to the needs of the agencies, and to defray a part of its recurrent operating costs. The project also includes fellowships for a total of 76 man-months to assist in IRA's institutional development, besides consultants' services for a total 46 man-onths. 38. hotel and Tourism Training Centers; To help Portugal realize its tourism Potential, taking advantage of its climate, location and historic as - 13 - well as modern attractions, the project would assist the National Institute of Tourism (IIFT) under the Ministry of Commerce and Tourism in expanding its training facilities and upgrading the quality of training for skilled workers. It would include the construction and provision of equipment for a hotel/restaurant training center in the Estoril resort area near Lisbon, 23 man-months of consultants' services, and 60 man-months of fellovships for institutional development. When fully operational in 1989, this center would provide full-time pre-service training for about 1100 and in-service training for about 600 persons from the private sector. The program envisages that besides formal intensive classroom instruction in the off-season, some of the trainees would be given relevant practical training at the centers during the tourist season when the centers would be ran as coumercial establishments, * managed by professional hoteliers. Other INFT trainees would be provided with practical training in private hotels. Iurr works closely -:ith the country's rnational hotel and restaurant association through advisory comittees, with representation from these associations, vorkcers and local organizations in developing its training programs and facilities. The demand for its training programs is high, and there is strong competition from employers for its graduates. Trainees pay a modest tuitior fee for the pre-service and in-service training. Tuition fees, and iucome realized from using the centers during the tourist season *s commerrial hotels and tourist facilities, are expected to exceed their r curr-nt costs. Project Costs 39. The total cost of the project exclrding the front-end fee is estimated at t54-9 million of which t30.5 million (about 56 percent) is in foreign exchange. The cost estimates include t16.4 million for physical and price contingencies. Physical contingencies are estimated at 10 percent of the base cost. Price contingencies for the fore4-n component have been calculated at 3.5 percent for 1984, 8.0 percent for 1985, 9.0 percent for 1986-1988, 7.5 percent for 1989, and 6 percent for 1990. Local price contingencies have been calculated at the same rates, assuming maintenance of purchasing power parity exchange rates. The cost estimates include Ill man-mnths of consultant services, and 313 man-months fellowships for overseas training. The cost estimate does not include direct taxes and import duties, as the project is exempt from such taxes, but includes an estimated USt3.0 million for indirect taxes on construction materials and other locally procured items. The recurrent costs for each project component are expected to range from I percent for the National Institute of Administration to about- 2 percent for the skill training centers, of their respective Ministry's total1-recurrent budgets. The cost recovery provisions *w for components other than the skill training centers Would partly offset incremental recurrent costs. The fees charged for training are expected to cover 75 percent of LNETI's, 50 percent of IRA's recurrent costs, and together with income from the tourism training center, 100 percent of the operating costs of the tourism training center. The Ministry of Labor skill training centers derive some operational support through private industry contributions to the national unemployment fund. - 14 - Financing Plan 40. The proposed Bank loan of $30.5 million would fir1arice 100 percent of the foreign exchange costs, or about 56 percent of the total project cost. The Government would finance the remaining S24.4 million representing the local costs, and the front-end fee. As a large part (about 90 percent) of the local costs are expected to be met by the Institute of Employment and training, and the Institute of Tourism Training from their own sources, through earmarked taxes, the burden on the Government budget is expected to be significantly reduced. Project Implementation 41. The project would be implemented over six years, in accordance with an agreed schedule (Loan Agreement, Section 3.01). The Ministries of Labor, Industry and Energy, Commerce and Tourism, and the office of the Presidency of the Council of Ministers would be responsible for implementing their respective project components. The Office for External Economic Cooperation in the Ministry of Finance (GCEE) would provide coordination as needed. To ensure that project implementation is not constrained by inadequate funding, understandings were reached that implementing agencies would review with the Bank, not later than July of each year, their annual budgetary requirements for the following year and the amounts provided in their proposed budgets and wuld make necessary adjustments within the total ceilings to cover required project costs. To facilitate smooth project implementation, the Government wuld establish and maintain a special account, with an initial deposit of $t.0 million. The establishment of this special account would be a condition of loan effectiveness (Loan Agreement Section 2.02 (b) and Section 5.01). The deposit in the Special Account could be progressively increased to meet project disbursement needs (Loan Agreement, Schedule 5, para. 4). To ensure that the training programs are successful in meeting their objectives, and to facilitate their continued improvement, it was agreed that each implementing agency would evaluate the training programs under the proposed project one year after they become fully operational and would make its evaluation available to the Bank for review by December 31, 1990. In addition, the Ministries of Labor and Commerce and Tourism would carry out a follow-up study of the first and second class of trainees to t-race their placement and performance and provide the results of the study to the Bank by December 31, 1991 (Loan Agreement 3.03 (b)). Thereafter, the Government would, taking into account the conclusions of the evaluation programs, adopt necessary measures to derive the maximum benefit for the project facilities and programs. 42. All the implementing agencies have designated kev staff to work on the proposed project. Adequate sites for all project institutions have been acquired. Preliminary civil works designs have been prepared for the National Institute of Administration and complete tender documents for the Tourism Training Center of Estoril. LNETI would employ local consultant architects for reviewing its preliminary designs and preparing final tender 4b - 15 - documents. Schedules of accommodations for the STCs are already completed for each individual center. Furniture and equipment lists for all project components, including preliminary ones for the M0L skill training centers, have been prepared and were reviewed by the Bank during negotiations. Procurement and Disbursement 43. Procurement arrangements are summarized in the following table; (US$millions) Procurement Method a/ Total Project Element ICB LCB Other Cost Construction 26.8 2.1 - 28.9 (10.2) (O.8) (-) (11.0) Building Designs - - (1.6) (1.6) - - C-~~() (-) Equipment 14.9 2.0 0.5 17.4 (12.9) (1.8) (0.4) (15.1) Furniture - 3.3 - 3.3 C-) (1.2) (-) (1.2) Technical Assistance - - 3.7 3.7 and Studies [-) (-) (3.2) (3.2) Total 41.7 7.4 5.8 54.9 (23.1) (3.9) (3.6) (30.5) (Figures in parantheses represent the amount of Bank financing.) Contracts for civil works, other than estimated to cost more than the equivalent of S1.5 million would be awarded and procured through international competitive bidding (ICB). Contracts for works estimated to cost S1.5 million equivalent or less would be awarded through local competitive bidding (LCB) procedures which are satisfactory to the Bank. Contracts for equipment estimated to cost not more than $100,000 each, and not exceeding $2.0 million in the aggregate, would be procured on the basis of local competitive bidding. Individual contracts for furniture estimated to cost not more than *500,000 and $3.3 million in the aggregate, and for books and training materials not exceeding $50,000, and $500,000 in the aggregate would be procured in accordance with Government's normal procedures, which are satisfactory to the Bank. Specialist services for technical assistance would be procured in accordance with the Bank's "Guidelines for the Use of Consultants'. Disbursement 44. The Bank loan would finance 100 percent of foreign expenditures for directly imported equipment, and educational materials or 100 percent of the ex-factory price of items procured locally following ICB, 90 percent of the foreign expenditures for consultant services and overseas fellowships, 85 percent of locally procured items of equipment, and 40 percent of the - 16 - expenditure on civil works and furniture. Disbursement for foreign expenditures up to t10,000, and for local expenditures up to t20,000 would be made on the basis of statements of expenditures. The loan is expected to be fullv disbursed in seven years, and the closing date would be June 30, 1991. Project Justification, Benefits and Risks 45. The proposed project would make a contribution to Portugal's efforts to expand manpower training in support of its industrial restructuring, increased labor productivity and medium-term growth. It would contribute to the expansion of export-oriented industry and tourism, and to improving the effectiveness and improving the efficiency of public administration. It would help to increase the annual supply of industrial skilled workers and trained hotel and restaurant workers, and contribute to foreign exchange earnings. It would enable the country to uDgrade each year the technical and professional skills of about 1,200 of industry's engineering and scientific personnel, and 2,400 of the nation's public administrators. Finally, it would help establish a training base for the continuing long-term development of Portugal's human resources in line with its needs. 46. The project faces no special risks, except possible delays in project implementation due to inadequate funding. The measures incorporated in the project to ensure that the project's annual financial requirements are reviewed with the Bank, and the budgetary allocations correspondingly adjusted would minimize this risk. PART V LEGAL INSTRUMENITS A1D AUTHORITY 47. The draft Loan Agreement between the Republic of Portugal and the Bank, and the Report of the Committee provided for in Article III Section 4 (iii) of the Articles of Agreement are being distributed to the Executive Directors separately. 48. Features of the Loan Agreement of special interest are listed in Section III of Annex III. The establishment of a special account with an initial deposit of kl.0 million to finance project expenditures would be a condition of effectiveness. 49. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATIONS 50. I recommend that the Executive Directors approve the proposed loan. A.W. Clausen President Washington, D.C. May 31, 1984 ANMi I - 17- Page 1 of 5 TABI! 36 IORMCT. SOCZN ME-scoi. 2n DAT PORTUGAL -NDE ..._15 CW1n Az1UI ) ra INS= OeST MMr 22TUDATS) lb - 1960! P97 T _K 1970m OCSG mIADL isT1NEAThE WABDT 1ER11un- wA tnm st. eo TOTAL 92.1 82.1 92.1 AGRICULTURPL 48-4 43.1 40.8 GOP PM CApr COSS) 35G00 390.0 2S20.0 24S.6 11112_7 iNEr aco_wzu PER: CA CORS OF CAL VIJVAMEr) 534.0 1077.0 iLO 1sms. 7500.6 LAT10W AM VITAL S _TSr9CS POPULATIO.MD-TEAR CIIROAuSn,) 3826.0 904.0 9W26.0 mum POPLATIOS z OF TOML 22.5 26_2 31_2 47.8 78.2 POPULATIOR PROIeCTIONS POPULATIOS I lEAR 2000 (KUL) 11.4 STATIOAR PDPULATION (MIL) 14.0 YEAR SMnTAO.RT POP. REEACH 2070 POPULATION DFI6UY PER sq. w.! 95_9 98.2 105.9 82.0 139.0 PER SQ. KM. .R1. LAUW 182.4 210.1 239.0 157.2 514.2 POPIATION zCE STRUCTRE CZ) 0-14 WRS 29.2 28.4 26_5 31.9 22.4 15-64 IRS 62_9 61.9 63.3 60.9 64.0 65 AND ABOVE 8.0 9_7 10.1 7.2 11.6 POPULATION GlWr RATE CZ) TOTL 0.5kC 0.21c 08/k 1.4 0.8 UR;AN 2. 1.8 2.3 3.4 1.4 CRUDE DIRTH RATE (PER TW) 24.2 19.1 16.3 25.0 13.8 CRUDE DEATH RATE (PM t139S) 10.8 10.3 9.9 9.1 8.9 RO5 REPROtMO RATE 1.5 1.5 1.1 1.7 0.9 VA-MUlY PLL5IN ACCEPrOSS. ANUWL (TWL UERS C OF RAE IN) .. . FOO D A rXrITMl INDEX OF FOOD PROD. PER CApITA (t969-7t-1o0) 92.0 105.0 63.0 106.4 112.4 PM CAPIT SUPPLY Of CALORIES (2 OF RD)UIRRNS) 119.0 1230 129.0 129-6 135.4 PROaEMIS (CRAMS PER DAV) W0.0 89.0 85.0 92.3 99.0 OF ICII AHISML AND PULSE 33.0 39.0 39.018 34.6 61.4 CtfD (ACES 1-4) DE^Al RATE 9.2 5.0 1.4 10.4 0.4 LIFE EXPECT. AT 8R1ST CyEARS) 63.3 67.1 721 67.Z 74.9 INFANT DRT. RATE (PER TOS) 2.0 580 26.0 71.4 10.7 ACCESS TO SAFE WATER (IPDP) TOTA- 23L9 34.5 65.0/w URBAN 82t1 __ 9007_ IWRI.U 14.4 .. 56_;__ A;CESS TO EXCRETA DISPOSIIL (Z OF POPULATION) TJOTAL _. _ RU.RA_L .. . .. POPULATOR. E SItcIA 1250.0 1110.0 350.0 19.8 553.6 POP. PER NURSIrC PERSON 1420.OIf 10.0 650.0k 7Q_5 IQ.9 POP. U HOSPITAL BED roTAL 180.0 170.0 190.0/d 334.0 119.8 URBAI 70.0/f 70.0 800oo 216.0 143.2 RURAL .. __ ADPISSIONS PER ROSPTML NWEO . 9.6 13.51d 20.0 17.7 AVERCE SIZE OF ouUsEOL.D TOVTl. 3.9 3.7 URBAN 4.0 ._ RRAL 3.9 __ .. __ LVERAGE NO. OF PERSDNS/ROGN TOTAL t.1 0.8 UlRJAN 1.0 _______ RURAL 1_1 _ ACCESS TO ELECTr ( OF orlwULLIs) TOTAL 40.5 64.2 RAN 8J.5 .2_. RUA 27.4 ----*-. - 18 - ANNEX I Page 2 of 5 T A 6L E 3. PO0TU1GM - soctL 1IDICAR DS SDAT PORDOCAL REFEZEE! COFPS (CMIGED la3MCS) / !105T tMloS? RECST ESLDIAU) /b RECENT IIDDLE INCOM INDSThZhL 190199b i. EUROPE M IS IT ECD Ncrl s ADMUSTED E3ROLLMETS RATIOS PRLWARY: TCTAL . 98.0 118.0Jg 102.2 101.5 MALE _01 99.0 10.0g 107.2 103.3 FE ALE .. 96.0 116.49 9 7.9 103.3 SECOSNART: TOTAL . 57.0 55.01d 56.5 89.2 63.0 5.0 d 63.4 84.5 FEJLE .. 51.0 56.0/d 68.9 86.0 VWCATIOVL CZ OF SEC03103) 46.4 33.6 t6.51id 22.4 18.3 WPUP.-TEAWE RATIO PrI24W 3. 0 3ae0 19 0J 24.7 20.2 SECflSDArn 19.0 17.0 23.0/d 22.1 14.4 AoLT LrrERACY RAME (3) 62.9 71.0 78.0 69.7 98.9 PAsS - =eaCARS/THOUSASD POP 17.9 60.9 12O.9/1L 52.9 356.5 RADWO RECEIV!RS/TBUSD POP 96.1 151.3 161.6 165.5 1085.6 T:V LECEIiEsTHO05UAD POP 5.2 43.0 141.7 124.2 449.5 SEgS?Am (DAILY E3L 11)EZr) ClRCaQATrOl PER THOUSAND POPCLATIOS 63.2 82.2 50.8 96.3 331.3 CISEZA ASUL ATTIENDACEICAPnTA 2.9 3.1 3.4 2.9 3.5 TOrAL LABOR FORMC CtTOCS) 3397.0 3550.0 3797.0 FE!LE CPERcES7) 17.9 24.8 25.9 34.5 36.1 AIRICCLTCL tPERCEN) 44.1 33.3 28.2 40.7 6.2 INDUsTXY (PECE5r) 29.0 33.Z 35.1 23.4 37.8 PARTICIPATION RATE (PERCES?) iLvff. 38.5 39.3 38.6 42.0 45.5 KALE 66.0 62.3 60.4 55.2 59.0 FEQUILE 13.2 18.5 19.0 29.1 32.5 ECED05IC DEPENDE= RATIO 1.0 1.0 0.9 0.9 0.8 I1ON Drssxumr PERCEST CF PRIVATE INCOME RECIED By it03EST 5 OF ROGSEDOLDS .. fI02ES. 202 OF OUSEIIOS .. 56.1bh 56.3th. .. *3.1 jnE52 202 OF C ENSM S .. 6. 7T 7 . 5.5 LOUEST 40S OF HUSERLDS .. 2 Q. 21:4 i 16.5 ESL FA7ED amOLUT- POVERTY rnESS LEm CUSS PER CAPITA) 1133d .. .. . .. RURAL ESTD(AZED RELATIVE POVERM nESc LEVE. CUSS PER CAPITA) URIUA .. .. 480.014 .. . RMAL .. .. 4so.o7d 409.0 ESiNATED POP. 30.0 ASLUSE POVER IBCS LEVI.EL t ) URiA!W .. ..... RuRiL .. .. .rT AVAILABLE MrO APPLICABLE SO T E S /a The group *ver-as for each indicator are population-uighted arSthetie ans. Cer~aeof countrtie mt the indicators depends on ailabSiity of dta and Is not nIetfora. lb Unlerc atberiai. noted. D-at for 1960- refer to any year batvan 1959 and 1961; Data for 1970 between 1969 and 1971; and data for ouet Recant Easiee between 1979 and 1931. /c De to emigration population growth rate to lower then rote of natural Increase; Id 1977; Ia 19161 If 1962; /L 1978: lh llbgheat 25?. loumat 253 and 50: of households; It 1968; Li 1973-74. 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J Bal4t *aetas enstss,a ane ass -tas A1 -ws- aItae e enrl6 .5aeaaprS a..... slaeM eq n a3 j an -aesen easedaae t.." -tsr5 tft P Slise *ttdad-ste e-ns mea-6 ma- eaese Las-e isee-pnl-eteapaai a- ,.eazc asemeass Si-1. -man e-Md th--Tt.tji elena m epe; *jie 1.) -A eAl me -,,-J 5c etLntasepa 3- eP- SiaBfldt aS stPa-a. Iee? rtSa5ls as -sInpp d -.W 3- isselt rt esar -Iset Banases e - flIljWStU -Slesasdee etilli tsSS e airn-4ls B -eacesse seicIdRe Be eea1 aisa me -lspteaae pI l en aanrn sUsaans a esnAm laes el Scasst en.Cse. e.eeesel ea e r er 3.i an eaaasm - seaw eae- eeneeslaPasse-)astsslea eae5t- rndm janjees 3SsprereAttae e tan utaa V ~ ~ ~ ~ ~~-as aSash. efsa u aeeaaLteelaP eial eselin e-m: rnca, me rssecaseenaes-e epaan eatseq Sat esas-rnalil.c -Pg pacsstei Lte e515j4atlas meM l-fo4 SP -Seid "'assme ase-a - Isaid nen 1-"a-Bees31 *lana a. -n etI-fffi ClW s-fas me gansi 5s"I5 ea-FINO rnqerePetenelsa Slrn eiaans a etea s mess eai ~ Wle Pmag- p 5- a A w wjj~~~ *lenn a Sp ps-tndt 1aBe rnlsstieet -Tentlst tanM " -name=Aiese a. el- pee Ia-- a5earde tPe- teat eieatdMemean tenm eess teaniarn . ma mea erss Z aeree etsecg eaa tsetelueie a eette wteB aa-elsteales eler i eltsei B aau et feleasale crnaar me ~t5a ae5nid-t ate 5.. f-n rnjsese eaee enseernr snie - ipas me et-taca -nlTSa Ime, sema~t i epstia d '_ -WIn MUM ese nsa-W 5 tese .A1ees paaei.a s ele_aderA . sse a.lesltan faec is-ast) eel u Pm M" mel ed5-s-M me1lsti. sectleleAn metnesw asr-i me asqde twls eld ee reas eafs ctaad -155 a -ttl) Ifseern t me -ceqarn M -laa-w tel saa ae -eadssetasat--A--J -ta~ 0-U JlSP M -at l sat me sut WPM- - P Aal - ~ Al -M- -alvSe5flne imseast rna5e teeleveA . -m mamma c eate meW seaf-il aatrnV 'Csnae en aen. Patseide-ft- ens-~ sa n ,aj eie - Meta a-m 1ea, -.Lseae eecs tcsseeeliendse cess A- I -14i diteeetetcse eete rna5jflfpeael5paq ame ssese elt m ease m"W tietadee as e".yBsa metiL ~Wptt meA si. saSer as-1erneaseatmen a alesa. ataaceees eae ape,e a=as d at3 -A lae-aen e-aa enm n s4ases %tates .r metel. em te -sme aceasa met me eep s Laltirnlcee ee a 4a- 1a eADset es m eaneB eeeaa n meate sm e cc qLs ;C lreaat tB ssrl m SeEr eaeele ei e sa iesa eienStetsae see1ee eSelna ci fsaeB I ieaae.ee eeere Kmea aea ta61sae naa -aests lP~aa its tael nSe an ai - 20 - MANNEX I 20 - ~~~~~~~~~~~~Page 4 of 5 ECONMIC DEVELOPMENT DATA (Amounts in Millions of U5 Dollars) Actual Annual Crowth Rate (S) Share of CGP at Market 1982 Actual Prices (Current Prices) (sL-Esc. 79-473) 1977 1978 1979 1980 1981 1982 1977 1980 1981 1982 nrlow&L ACCOUNS Gross Domestic Proauct ai 23,711 5.6 3.2 4.5 4.9 0.8 3.0 100.0 100.0 100.0 100.0 Agriculture 2,028 -10.0 4.0 9.0 3.D -13.2 6.0 12.2 10.2 8.3 8.6 Industry 9118 9.5 3.2 5.0 6.0 1.6 2.4 25.4 30.0 29.4 29.3 Services 12.565 5.9 3.0 3.5 4.5 2.8 2.8 62.4 59.8 62.3 62.1 Consumption h7 I9,6L5 2.6 1.5 2.4 4.5 3.2 2.8 88.7 80.9 83.4 82.7 Gross Investment 8,662 34.7 -4.7 -2.1 14.7 5.1 4.9 29.7 33.8 35.9 36.5 Exports of GNF5 5.804 5.9 14.6 27.3 8.3 -2.8 5.8 17.1 27.1 25.5 24.5 Imports of GNFS 10,370 12.0 -1.8 7.8 12.8 6.7 5.6 33.2 41.8 64.8 43.7 Cross NationaL Savings 25.9 23.6 34.3 17.8 -1O.5 -0.2 17.3 Z0.5 23.8 23.3 PrLces Rate of InfLation (CAn *aer Price Index) 26.0 19.3 24.3 17.0 20.0 22.4 Exchange Rate 38.28 43.94 48.92 50.06 61.5 79.5 EERU1HANDISE TRADE Annal Growth Rates at Constant 1970 Prices As Percent of Total 1970 1975 1980 1982 lmports 9,528 12.8 -2.1 6.7 9.0 5.6 6.4 100.0 [00.0 100.0 100.0 Foao 1,117 -7.5 -3.1 16.9 8.7 .6 4.4 11.0 16.6 9.3 11.7 Otner Consumer Goods 948 -23.9 -9.7 4.1 10.9 1.7 6.7 9.3 8.3 6.1 10.0 Petroleum Products 2,470 -1.5 10.6 15.3 2.5 -7.7 14.7 9.5 16.4 24.3 25.9 Intermediate Goods 2,507 19.4 -3.5 3.3 10.9 0.0 2.6 41.5 36.8 37.5 26.4 Capital Goods 2,486 26.7 -5.8 3.6 11.0 16.0 4.5 28.6 21.9 22.8 26.0 Exports 4,187 4.1 11.1 29.3 7.1 -2.0 I1.2 100.0 100.0 100.0 100.0 Agriculture and Food 486 1.3 3.0 15.3 -1.0 =4-8 7.0 20.9 16.8 12.1 1i.6 Wood. Cork, Paper and Pulp 620 -3.8 3.3 28.2 17.3 -6.8 6.4 16.1 15.9 17.7 14.8 Textiles and Clothing 1,218 -0.5 22.1 26.2 -8.0 4.1 18.9 26.4 27.3 25.2 29.1 Petroleum Products 292 11.0 9.6 33.6 50.0 10.0 23.3 ,, ,, 6.3 7.0 Other Manufactures 1,571 13.0 -5.2 16.3 36.7 40.0 38.8 37.5 HERLAD1ISE TRADE INDICES 1975-100 1980-100 Export Price Index 145.1 179.0 229.1 315.7 113.2 131.9 Import Price Index 143.9 177.5 240.0 381.0 121.2 141.7 Terms of Trade lndex 100.8 100.8 95.5 82.9 93.4 93.1 Current Prices (Billion Escudos) As Percent of GDP at Market Prices PUBLIC FINANCE 1977 1978 1979 1980 1961 1982 Current Receipts 173.6 212.2 264.3 362.6 449.7 536.7 27.9 27.2 26.9 293 301 1 t6urrent ExpendLtures 182.1 231.5 302.2 404.6 526.3 643.6 29.3 30.6 30.7 32.6 35.2 34.1 Current Surplus/Deficit (-) of the State -8.5 -26.3 -37.9 -42.0 -76.6 -79.9 -1.3 -3.4 -3.9 -3.4 -5.1 -4.2 Capital Expenditures (Net) 34.5 39.1 42.7 64.3 68.2 83.8 6.4 5.0 4.3 5.2 4.6 4.5 Net Financing Requirements 43.0 65.4 80.6 106.3 144.8 163.7 8.0 8.4 8.2 8.6 9.7 8.7 Financing Needs 44.7 75.8 97.1 127.4 163.8 189.6 7.2 9.7 9.9 10.3 10.9 10.1 Debt Amortization -1.7 -10.4 -16.5 -21.1 -18.2 -25.9 0.3 1.3 1.7 1.7 12.2 1.4 d1 LABOR FORmE TOTAL LABOR FORCE c/ in Thousands Percent of Total Annual Growth RateCt) 1978 1979 1980 1981 1982 d/ 1978 1979 1980 1981 1982 l980-81 Agriculture 1,187 Cll76 lT7lz 1.058 1,051 31.8 30.9 29.9 2 6..7 -5.5 Industry 1,283 1,323 1,387 1,424 1,440 34.4 35.1 35.6 35.9 36.3 42.7 Services 1.259 1,352 1,4l7 1.486 1,477 33.8 34.0 34.5 37.4 37.2 *4.9 Total 3,729 3.851 3.924 3,968 3.968 100.0 100.0 100.0 100.0 100.0 1.1 a/ At mrket prices. For 1960-79 sectoral components are expresWd at factor costs and will not add due to exclusion of net indirect taxes and subsidies. 0/ Statistical discrepancy is included in the consumpticn dsta. c/ Total employed labor force excluding workers abroad and unemployed. d/ First semester. February 17. 1984 (0340G) -21 - ANt T mLANcG or PAIHrSrs Sb EXTD L assisraNct AIID DIT Ameunts in Hilbleot of US Dollars at Curret Prices Actuat got. htlY61 OF BALANCE OF PA1ET 1974 1971 1976 1977 1976 1979 1960 1981 1912 1983 mportc V.0.s.) 2238 193b 1790 2001 2379 3550 4375 4ON 4119 4597 lpoarts (u.o.s.) 4277 3606 3965 4533 4787 6152 8781 9240 3590 7259 Trame SLince 14()- -2039 -1170 -217 5 -53 -2-40 -2032 .fl 4E51 -an 4U at lor-Factor Services -74 -170 54 82 276 541 36 431 176 230 Tourism Receipts (Gros) (313) (326) (327) (403) (592) (9421 (1148) (102241858Z ) Clan) Resource a-cj-- -2113 -i839-z2iat-1450 -212 -2 -3S31 _4721 -2 -12 1et Investnt Income */ 129 -14 -133 -179 -329 -437 -612 -991 -1245 -1500 V-t Transfers bi 1111 1037 964 1134 1635 2476 30W 2917 2661 2207 Mince en Currnt Accomnt -a73 -617 -1290 -1495 -826 -52 -1250 -2795 -3231 -1701 Direct ForLS. Invesment lo 122 51 52 56 59 126 147 122 Crangee in Officalt Liquid Foreiun Exchange Reserwes t- -Increase) 554 68B 126 359 -103 -68 179 2U 71 54 Of fica ScL 1 enres" Grois Eid of Yer c/ 6317 4273 3905 4343 5872 12262 13064 9335 9609 7785 o0 uhich: Geld 5192 3357 3729 3971 50D1 11331 13069 6801 9162 7448 Foreign atchenge 1125 390 176 366 671 931 - 795 53i 447 337 Actual get. CGAMT AND LOR CCUlENTS oDT AD DOT REr G dt 1976 1977 1978 1979 19U0 1981 1952 OUicLss Greece and grec-liike 3 - - - - Total NIT Debt Oetetand- irg4 nd Dimburcznd - PubLiC HALT Lase Public Debt Ontly 1378 2266 2862 5283 6363 7160 9099 lUND . - - 36 74 131 143 134 120 - Ieerset on Public Debt 41 76 154 324 467 797 871 154 - - - - - - - tepeymeea men Public Debt 102 140 257 417 510 689 703 Other NuitLateral - 123 87 112 59 187 2L3 472 Total Public Debt Srvice 143 218 411 742 97? 1486 1574 Governmes . 71 156 428 915 237 167 176 24 bappitr - 54 41 73 56 4 106 142 14 Pebllc Debt Service Rstia 4.1 5.4 7.9 9.5 144. 16.3 18.6 hi FtasiLk Harlets . 99 388 406 766 1063 1217 2115 1750 P-ubli Loa ns .e-i- - . Total Public ISLT Lomea 460 221 744 12wT TI9D 133b 1631 271 2260 Averag Te of FPblic Debt (irsnt Elemt) 11.1 12.9 4.5 -2.6 0.4 4.2 4.1 Dsbt Outstaedins an Dec r 31. 1952 nterst -l Fblic 71bt Z 6.3 6.6 7.6 7.5 6.1 9.6 9.6 1XEIA DEBT DLiaburSd OnlY ee 1UD If S 2.0 erdttain as I Prier IDA - - Yaer Public 106D 9.6 10.1 11.3 14.6 9.7 10.8 9.6 Other tulclaecera1 972 10.7 7UD Debt Ottsteding CG eroments (Bilateral Loan) 130U 14.4 and Desbaread 35.6 32.2 36.1 63.1 109.4 132.0 164.7 Suppliers' Credits 307 3.4 18 D306D an Public Debt Financial IDeLatutios 6327 69.5 Outatading end Dlsbured 2.6 1.4 1.3 1.2 1.7 1.6 2.0 Total Public and Publicly Guarantced Debt 999 oI 96.2 1iUD Debt Serice as S te-1 PuVl.C end Private HILTbt D i 7 Z0.0 Public Debt Srvic 4.3 3.1 1.8 1.7 2.D 1.7 2.6 Short-tem Debt CEstatsed) I/ 3917 - Lerly interest payments. Largely urkerer rosittaqcga. Si Cold velied at the and Of perttd London mrket price, and Special Drauin Rigebte tI Dent envies an a ratieof ea*rnie from enports *e-fecter services and workers rmittecee Can mdiu- and long-tern debt only). i/ Erla te for public debt end peblicly uranteed debt baaed ou Tcraury data processed by the World ank Debt Reporting syte. V/ lciude S3538 nillioa of private am-guranteed debt (not included in CS). Ii' Source: 7ank of Portugal. hi It enort-c i.ntrst paes.t. en Public Debt end totel debt ervice - neo-guarant-ed private debt are eddd. trh debt service rtio vould reach 27.82 Ln 19g2 (VW extiastes). . .aet vabiae. EUrope. fiddle Uwt and nrtb Afiie Region Hlrc 6. TIV" C340C) - 22 - ANNEX II Page 1 of 2 STATUS OF BANK GROUP OPERATIONS IN PORTUGAL As of March 31, 1984 ($ million) A. STATEMENT OF BANK LOANS I/ Loan Amount (less cancellation) No. Year Borrower Purpose Bank Undisbursed Six loans for power development, one for industrial finance, and one for industry fully disbursed 197.5 - 1334 1977 Republic of Portugal Highways 24.0 0.1 1541 1978 Republic of Portugal Water Supply 40.0 16.6 1559 1978 Republic of Portugal Education I 21.0 12.1 1603 1978 Republic of Portugal Agricultural Credit 15.0 11.9 1700 1979 Republic of Portugal Highways II 40.0 27.0 1701 1979 Republic of Portugal Small and Medium Industry (SHI) I 45.0 18.2 1793 1980 Republic of Portugal Education II 40.0 34.8 1853 1980 Republic of Portugal Forestry 50.0 37.3 1874 1980 COMETNA 2/ Mechanical Industry 25.8 6.7 1875 1980 SOREFAME 2/ Mechanical Industry 8.1 0.1 1942 19BlBanco de Fomento Nacional Development Finance 100.0 76.4 2024 1981 PETROGAL Petroleum Exploration 20.0 5.7 2168 1982 Republic of Portugal Industrial Energy Conservation 30.0 29.6 2175 1982 Republic of Portugal Tras-os-Montes Rural Development 51.0 50.9 2240 1983 Electricidade de Portugal, EdP Power VII 126.4 105.6 2263 1983 Republic of Portugal SKI II 40.3 40.0 TOTAL 874.1 473.0 of which has been repaid 129.0 TOTAL now outstanding 745.1 Amount sold 2.6 of which has been repaid 2.5 0.1 TOTAL now held by Bank 31 745.1 TOTAL undisbursed 473.0 1/ The status of projects listed in Part A is described in a separate report on all Bank/IDA financed projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31. 2/ Loans to two companies under the same project. 3/ Prior to exchange adjustments 23- AHEXI l Page 2 of 2 . STATE OF IFC IIVESlEIS Year Oblitor Type of Business Loan Equity Total 1981 SPI Sociedade Portuguesa Developmet Finance 10.0 1.0 11.0 de Investintos, S Company 9983 Sociedade Portuguesa de Mey and Capital - 0.3 0.3 LocaIao Fi:anciera, SARI Market 1984 Soltejo - Sociedade Hoteleira 2_0 - 2.0 DoTejo, SAIL TouriS TOTAL Gross Comitments 10.0 1.3 11.3 Less Cancellations, Terminatiou3, Repayments. Sales _ - - TOTAL Commitments now held by IFC 12.0 1.3 13.3 TOTAL Undisbursed 3.1 - 3.1 - 24 - REPUBLIC OF PORTUGAL TEHID EDUCATION PROJECT Spplementarv Proiect Data Sheet Section I: Timetable of Key Events (a) Time taken to prepare the proiect 3 munths (November 1983- Junury 1984) (b) Agencies which prepared the project Ministries of Labor, Industry and Energy, ece and Tourism, and Office of the Presidency of the Council of Ministers. (c) Project first identified tune 1982 Cd) Date of Bank appraisal mission Jan yFebruary 1984 (e) Negotiations Completed may 1984 Cf) Planned date of effectiveness October 1984 Section I1 - Special Bank Implementation Actions: None Section III: - Special Conditions: Condition of Effectiveness Establishment of a special account with an initial deposit of $1.0 million to umeet project expeuditure (para. 41). Other conditions (a) Project entities would evaluate the training programs, and make the results of such evaluation available to the Bank by December 31, 1990 (para. 41). (b) The Ministry of Labor and the Ministry of Crmerce and Tourism would complete their follow-up study of the first and second class graduates, and the results of the evaluation will be submitted to the Bank by December 31, 1991 (para. 41). IBRD 1811C* PORTUGAL MANPOWER TRAINNG / _ AND DEVELOPMENT PROJECT - A s6.n m_- c_ s _ awefe_ ro--__C g \E {^awm r ~~~~~S =°-. -f-- M I-. d 1~~~7 _~~~ °- ' . - :~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 RANCE, - \ f Y's -' ,+ f S- -- -~~ '_ X~- _, -.- \ 5---.'' Xf j~~~~MR-5 7> - .- - '-9+ _._ -- a --- -! a z U __ =_ , ' f L __ f __ , cx,< zr C~_____________ X.' 19 14I.I I,I wF, U o 2i i -CA . ....... =0 -0 - S..~~~~~~~~~~~~~~~ ~~. ... ........ ..... 0 ~ ~ ~ ~ ~~~~-ll0 -S P A I R. 5.OL Alnr ..o.o-o0oo,'-.co Z00 .O.6OLJ.4300.o1