Document of
The World Bank FILE COPY
FOR OFFICIAL USE ONLY
Report No. P-2563-GR
REPORT AND RECOMMENDATION
OF THE
PRESIDENT OF THE
IIN E.N7AIONAL BANR FOR RECONSTRUCTION AND DEVELOPMENT
TO THE
EXECUTIVE DIRECTORS
ON A-
PROPOSED LOAN
T1 THE HELLENIC STATE
FOR AX
:IT1 :E G FORESTRaY DEVELOPMENT PROJECT
Z"_, 197S.
This d1cument kms a resteted distributin d may be med by recipints only In the perfomae of
their official duties. Its etents may not oberwbe be dlaslumd without World 1ak autboration.
CURRENCY EQUIVALENTS
Currency Unit - Drachma
The Greek Drachma is now defined in terms of a basket of
currencies including the US dollar and those of its other major
trading partners, and is floating. For this report, the following
currency equivalents were used:
Dr. 1 US$0.03
US$ 1 - Dr. 36.7
Dr. 1,000 = US$27.25
Dr. 1,000,000 = US$27,250
FISCAL YEARE
January 1 to December 31
ABBREVIATIONS
ABG Agricultural Bank of Greece
DGF Directorate General of Fbrests in the
Ministry of Agriculture
EEC European Economic Community
m3(r) Cubic meters roundwood
RPDS Regional Policy and Development Service in the
Ministry of Coordination,
UNDP United Nations Development Program
FOR OFFICIAL USE ONLY
GREECE
INTEGRATED FORESTRY DEVELOPMENT PROJECT
Loan and Project Summary
Borrower: The Hellenic State
Beneficiary: Agricultural Bank of Greece (ABG) for the logging equip-
ment credit component equivalent to $1.2 million
Amount: $25 million
Terms: 15 years, including 3 years of grace, with interest at
7.9 percent per annum.
Relending Terms: Government would on-lend to ABG $1.2 million of the loan
for the logging equipment credit component, on the same
terms and conditions as the Bank loan. The Government
would bear the foreign exchange risk.
Project
Description: The project is a five-and-a-half year (1979-84) time slice
of a long-term forestry development program to introduce
intensified forest management in north-western and western
Greece, which account for about 55 percent of national
forest resources. Components include:
(a) construction of about 3,500 km and improvement of
about 2,000 km of forest truck and tractor roads,
and provision of equipment for road and machine
maintenance;
(b) provision of logging equipment and fire protection
equipment and works, and transport and housing
facilities for about 3,000 forestry workers and
staff;
(c) establishment of about 16,000 ha of industrial
plantations, three seedling nurseries, and pilot
range management on about 20,000 ha;
(d) construction or improvement of connection roads,
water supply, drainage and sanitation systems,
community centers and other infrastructure works
for about 37 selected forest villages;
(e) programs for training in mechanized logging methods,
industrial plantation research and range management
techniques including the provision of equipment,
facilities, about 9 manyears of consultant services
and 14 manyears of training abroad;
I This document has a restricted distribution and may be used by recipients only in the performance
of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.
- 1.1 -
(f) a forest and forest industries sectoral development
strategy study and a regional development study for
Western Greece including the provision of about 11
manyears of consultant services and a revolving
Fund totaling $2.4 million equivalent for short term
specialists.
The project would substantially increase forest production,
create additional permanent employment and improve labor
productivity as well as the quality of life in remote
mountain villages in the project area. Estimated net
foreign exchange savings of $180 million and incremental
stumpage revenues of $182 million would be realized over
the project development period of 15 years. Institution-
building benefits would result from improvements in
long-term strategy planning and project preparation
capabilities, and from demonstration effects of the
training and research programs. About 35 percent of the
project beneficiaries would be below the relative poverty
level and receive about 10 percent of the quantifiable
benefits of the project and most of the non-quantifiable
benefits from the village component. Risks are tow since
project organization is structured within the existing
administrative framework, the technology is not new, and
financial incentives are adequate.
Estimated Cost: % of
US$ Million Project
Local Foreign Total Base Cost
Forest Roads 22.0 14.2 36.2 36.7
Plantations 11.7 3.9 15.6 15.8
Fire Protection 2.0 1.8 3.8 3.9
Village Infrastructure 14.3 7.0 21.3 21.6
Maintenance Equipment 0.4 2.8 3.2 3.2
Logging Equipment 1.0 1.9 2.9 2.9
Transport/Housing 3.2 2.1 5.3 5.4
Training and Studies 5.0 2.9 7.9 8.0
Project Administration 2.3 0.2 2.5 2.5
Base Cost 61.9 36.8 98.7 100.0
Physical Contingencies 7.2 3.8 11.0 11.1
Price Contingencies 26.5 8.4 34.9 35.5
Total Project Cost /a 95.6 49.0 144.6
/a Cost estimates include about $23 million of taxes and duties.
- iii -
Financing Plan: US$ Million
Local Foreign Total %
IBRD /a - 25.0 25.0 17.3
Foreign commercial bank - 24.0 24.0 16.7
ABG 2.1 - 2.1 1.4
Beneficiaries 6.7 - 6.7 4.6
Government 86.8 - 86.8 60.0
Total 95.6 49.0 144.6 100.0
Estimated
Disbursements: US$ Million
FY80 FY81 FY82 FY83 FY84 FY85
Annual 1.2 5.7 5.8 4.8 3.8 3.7
Cumulative 1.2 6.9 12.7 17.5 21.3 25.0
Rate of Return: 18 percent (21 percent excluding village development and
the two studies)
Staff Appraisal
Report: "Integrated Forestry Development Project, Greece"
(No. 2425-GR), dated May 7, 1979
/a The Bank's share of total cost net of taxes and duties is 20.5 percent.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
REPORT AND RECOMMENDATION OF THE PRESIDENT
OF THE IBRD TO THE EXECUTIVE DIRECTORS
ON A PROPOSED LOAN TO THE HELLENIC STATE
FOR AN INTEGRATED FORESTRY DEVELOPMENT PROJECT
1. I submit the following report and recommendation on a proposed loan
to The Hellenic State for the equivalent of $25 million, to finance a portion
of the foreign exchange cost of a forestry project. The loan would have a
term of 15 years including 3 years of grace, with interest at 7.9 percent per
annum. The equivalent of $1.2 million would be relent to the Agricultural
Bank of Greece for 15 years, including 3 years of grace, with interest at 7.9
percent per annum.
PART I - THE ECONOMY
2. A report entitled "Country Economic Memorandum - Greece" dated
February 8, 1978 was distributed to the Executive Directors on February 21,
1978 (1755a-GR). It was based on the findings of an economic mission which
visited Greece in mid-1977. Its conclusions, modified as necessary in light
of subsequent developments and updated information on the economy, are pre-
sented below. Country data sheets are attached as Annex 1.
Recent Developments
3. Premier Karamanlis' Government was re-elected to power in November
1977. Since then, it has worked further to strengthen the reestablishment of
democracy in Greece, besides restoring and broadening international economic
relations. Its efforts to make Greece a full member of the European Economic
Community (EEC) met with success when the EEC and Greece agreed in December
1978 on the basic principles governing Greece's membership. The treaty is
scheduled to be signed on May 28, 1979, and following ratification by all EEC
members, Greece is expected to become an effective member on January 1, 1981.
4. Although real GDP growth averaged 7.4 percent annually and consumer
prices increased less than 3 percent between 1963 and 1973, supply constraints
developed in the early seventies, as a result of which prices came under
increasing pressure. Import prices also increased sharply. The restrictive
policies then adopted, together with the impact of the Cyprus crisis on Greece,
led to a 2 percent decline in GDP in 1974, and a record 27 percent increase
in consumer prices. The Karamanlis Government's immediate objective was to
reverse this trend, by resuming growth, while reducing inflation and contain-
ing the balance of payments deficit. Its economic policies since then have
essentially achieved this objective. Public sector investments played a key
role, unusual for Greece, in stimulating the economy, while defense expendi-
tures and salaries also rose rapidly. The public sector deficit, equivalent
to about 6 percent of GNP in 1975 and 1976, was financed mainly by the Bank of
Greece. Credit to the private sector expanded by 24 percent per annum. The
other dynamic forces on the demand side were private consumption and invest-
ment in residential construction. The economy responded with real GDP growth
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of 5.1 percent in 1975 and 5.9 percent in 1976, despite the unfavorable inter-
national economic environment and poor climatic conditions for agriculture.
Industry was the leading sector with an 8 to 10 percent annual growth rate. At
the same time, inflation was brought down to 13 percent in 1975 and 1976. The
current account deficit was stable at $1.1 billion in both years. Almost half
of it was financed in 1975, and 80 percent in 1976, by large inflows of private
capital, mainly foreign exchange deposits at advantageous rates made by Greek
seamen and emigrant workers, and funds for real estate investments.
5. In 1977, however, GDP growth dipped to 3 percent, with a weakening
of private consumption growth and foreign demand for Greek manufactured
exports, restrictions on some textile exports, and hence a slowing of manufac-
turing growth to only 2 percent. Agricultural production fell for the second
successive year while housing investment boomed and offset the stagnation or
decline in investment in other sectors. Unemployment fell to a record low
level of 2 percent of the labor force and inflation stabilized at 13 percent.
Government current expenditure maintained the public sector deficit at 6.5
percent of GNP, and money supply and credit expansion exceeded official
targets. Imports of goods rose 15 percent to $6.4 billion, while exports of
goods grew more slowly by 13 percent to reach $2.5 billion despite deprecia-
tion of the drachma. While receipts from shipping rose to $1.1 billion, and
tourism earnings to $1.0 billion, the current account deficit was somewhat
higher at nearly $1.3 billion. However, capital inflows reached $1.5 billion,
permitting reserves to increase for the first time in four years.
6. For 1978, the Government set targets of 5 percent real GDP growth
and not more than 10 percent inflation. Preliminary estimates show that real
GDP growth was 5.8 percent, with both agriculture and manufacturing growing by
6.5 percent. Private consumption continued to grow at 5 percent, while the
growth of public consumption fell to 3 percent. However, public fixed invest-
ment grew faster (by 7.7 percent) than did that of the private sector (4.5
percent), recovering from its sharp fall in 1977. Unemployment remained at
the 1977 level. The initially budgeted increase in the public investment
program (to Dr. 55 billion) was halved in June to restrain demand. New taxes
aimed at reducing luxury imports and speculative investment in real estate
were introduced. To contain public expenditures, a freeze on civil service
salaries and new hiring was also introduced in June. Despite these measures,
there was a large budget deficit again financed by the Bank of Greece, so that
credit to the public sector expanded by 26 percent in 11 months. This contri-
buted to the rate of inflation declining only slightly from the 1977 level,
despite slower credit expansion to the private sector and a partial price
freeze imposed at mid-year. To stimulate savings and investment, deposit
rates were raised 2.5-3 percent, while the increase in long-term lending
rates was held to 1 percent (see paras. 31 and 32). New investment incen-
tives were approved in fall 1978, including the removal of import duties on
farm machinery, tax exemptions for reinvested profits, special loans for
modernization, energy conservation and pollution reduction, and easier credit
for investment. Some of these incentives were extended for investment in
Greater Athens for the first time in several years, albeit at less favorable
rates.
7. Imports of goods grew by 15 percent again to $7.4 billion, and might
have been higher except for delays in licensing. Exports and tourism were
stimulated by the depreciation of the drachma along with the U.S. dollar.
Exports of goods grew by 19 percent and reached a record of $3 billion, des-
pite EEC curbs on some textile products. The number of tourists reached 5
million, and earnings were around $1.3 billion. The current account deficit
was maintained at nearly $1.3 billion, as in 1977. Capital inflows reached a
new peak and included a strong growth of foreign exchange deposits, and per-
mitted reserves to increase again to $1,171 million at the end of December
1978, equivalent to about two months of imports.
Short-Term Prospects
8. For 1979, the Government plans real GDP growth of 6 percent. Demand
for manufactured exports may accelerate, since the 1979 textile export quotas
agreed with the EEC are larger than those for 1978. However, the oil price
increase is likely to have an important impact, in addition to the measures
resulting from the Government's determined effort to reduce the rate of infla-
tion. The budget envisages significant reductions in consumer goods subsi-
dies. The freeze on new civil service recruitment has been extended. Public
investment is contemplated to be about Dr. 64 billion and, in principle, will
not involve new projects, except in agriculture (especially in preparation
for EEC entry) and for Salonica earthquake reconstruction. Although there
will again be a large budget deficit, the Government is for the first time
considering a bond issue to reduce its inflationary impact. At the same time,
it is determined to hold real wage increases close to the rise in productivity.
Finally, it is requiring prior approval of all price increases on manufactured
goods. As for the balance of payments, imports of goods are expected to grow
by 17 percent to $8.6 billion, including the effect of the oil price increases.
Exports of goods may rise 15 percent to almost $3.5 billion. Tourism should
continue to grow strongly, with nearly 6 million visitors bringing in $1.7 bil-
lion. However, the increase in the trade deficit will probably be reflected
in a somewhat larger current account deficit. On the other hand, prospects
for capital inflows remain good, and reserves are likely to increase again.
Medium-Term Development Issues and Prospects
9. Since early 1975, well-designed economic policies have enabled
Greece to enjoy modest, but sustained, economic growth of between 3 and 6
percent per annum, considerably above EEC and OECD averages, although these
rates were well below Greece's rapid growth rate in the previous decade. In
1977, GNP per capita reached $2,810 (Atlas methodology), which is roughly half
of the EEC average. Industry (including construction) and tourism have been
the mainstays of growth, which has been stimulated by large public sector
deficit financed investments, besides housing investment. Unemployment has
remained very low, despite some net return of migrant workers. The balance of
payments constraint to growth has diminished in importance, as Greece can rely
on large and rapidly increasing invisible receipts from shipping, workers'
(including seamens') remittances, and tourism to keep the current account
deficit around 5 percent of GNP. It also enjoys large private capital inflows
of two special types: foreign exchange deposits and funds for investment in
real estate. Public sector external borrowing has remained quite modest.
10. However, Greece still faces structural problems similar in many
ways to those of developing countries with considerably lower income per head.
- 4 -
Agciculture still accounts for almost one-third of both exports and employment,
and 14 percent of GDP. Its growth is hampered by very small and fragmented
farm holdings, insufficient irrigation, and lack of marketing facilities.
Also, despite its past rapid growth to a 21 percent share of GDP, and rising
productivity, manufacturing is still restricted by a small domestic market,
limited export orientation, heavy dependence on capital goods imports, and
the dominance of small family units with limited financial, managerial and
technical knowhow. Both these sectors would need significant adjustments in
termis of both structural changes and investments to enable Greece to obtain
the expected medium-term benefits from its entry into the EEC.
11. Greece's foreign trade retains its long standing structural weak-
nesses, with exports still covering only 40 percent of imports, which in turn
include significant imports of luxury consumer goods and consumer durables.
Despite regional investment incentives and other efforts, especially over the
last three to four years, sharp disparities remain between highly affluent
Athens and Salonica and other much poorer regions which have per capita
incomes substantially below the national average. Greece's public administra-
tion remains weak in the face of the need to articulate and implement long-
range development strategies and structural change--especially in connection
with EEC entry--as well as develop sound projects.
12. While Greece should effectively become a full member of the EEC by
1981, there will be a general transition period of five years for adjustments
by both sides. The principles agreed in December 1978 between the EEC and
Greece reflect the need for adjustments and the flexibility necessary towards
that end. The EEC will remove all restrictions on Greek agricultural exports
over five years, except for peaches and tomatoes (for which seven years are
provided). It already accepts Greece's non-agricultural exports effectively
without restrictions, except for temporary ones on some textiles. The EEC
will permit the free entry of Greek workers seven years after membership;
but meanwhile, Greek workers already in the EEC will begin to receive job and
social benefits protection. Tariffs on imports from the EEC will be fully
phased out by 1984, but imports of certain manufactures in which Greek indus-
try is especially vulnerable to EEC competition will be restricted by quotas
for five years. Greece will adopt the Common External Tariff of the EEC over
five years, but vulnerable products (including textiles) will also be pro-
tected meanwhile by quotas on imports from third (non-EEC) countries. On
accession, Greece will have to terminate its bilateral clearing account
agreements, as it has already begun to do. More important, it will also have
to eliminate its direct export subsidies. On the other hand, it will be able
to rebate the value added tax, which must be introduced within three years, in
the case of exports; draft legislation for this tax was published in fall 1978.
13. Over the long term, Greece stands to gain significantly from full
membership in the EEC, mainly by hastening its development of a more efficient,
and hence competitive, production structure. The benefits may include greater
inflows of foreign investment and technology and more efficient management.
Membership may, in particular, help the Government overcome institutional
rigidities, and enact and implement far-reaching and otherwise difficult
socio-economic reforms. In the interim, however, significant infrastructure
investment and considerable adaptation will be required within Greece, given
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the differences of economic structure and standards between Greece and other
EEC member countries. Besides, the administrative requirements of implement-
ing European policies and directives, such as the Common Agricultural Policy,
are likely to be considerable. To assist Greece in meeting these challenges,
the EEC is providing about $316 million through late 1981 under the existing
Association Agreement, of which about $250 million will be EIB loans. In
addition, a net financial inflow rising from some $110 million in 1981 to
some $670 million per annum after the transition period is expected as direct
budgetary support, mostly for agriculture and regional development, after
formal entry. However, Greece's access to external assistance on conces-
sionary terms is extremely limited. With the cessation of Bank lending after
the loan proposed in this report, the EEC will be virtually the only source of
such assistance.
14. The 1979 budget documents contain Government projections for the
period 1979-81. Real GDP growth is expected to average 6 percent per annum,
with agriculture growing at 4 percent, the broad industrial sector at 7-7.5
percent, and services at 5-6 percent. The investment rate will rise slowly
to 21 percent in 1981. The current account deficit is expected to decline
from 5 percent of GNP in 1979 to 4.6 percent in 1981. A development plan for
the period 1978-82 is being debated in the Greek Parliament. It envisages
the same 6 percent annual growth rate in real GDP, with a recovery in agricul-
tural growth; investment growth near the 1960s rate; investment in industries
with a competitive edge, and preferably based on indigenous resources; devel-
opment of basic domestic resources such as forestry and minerals (especially
energy-related ones such as the Thassos oil field), in view of their foreign
exchange earning or saving potential; preparations for EEC entry; the lessen-
ing of disparities in regional development; continuing full employment; moving
progressively closer to the EEC average rate of inflation; and a current
account deficit no higher than $1.7-2.0 billion per annum. Assuming maximum
effort to achieve planned investment expenditures, Greece should be able to
sustain annual GDP growth of nearly 6 percent over the Plan period, with
a current account deficit of about $1.4 billion annually, which is slightly
lower than the Plan forecast. Assuming gradually tapering inflows of foreign
exchange deposits, the Government may need to borrow up to $800 million to $1
billion annually (in gross terms) to finance the current account deficit,
increasing amortization payments and normal increases in reserves. Most will
have to be borrowed on commercial terms from European capital markets. In
view of the liquidity of the Eurodollar market, it should be possible for
Greece to tap it on reasonable terms.
15. Greece's public external debt outstanding (including undisbursed) at
the end of 1977 was about $3.5 billion, including $341 million from the Bank.
The disbursed portion was $2.6 billion. There was also an estimated $2.0
billion in private external debt outstanding. Service payments on public debt
in 1977 reached $533 million (of which $19 million on Bank loans), and repre-
sented almost 11 percent of exports of goods and non-factor services. Inclu-
sive of external private debt, the ratio is estimated to have been about 17
percent. On reasonable expectations regarding export growth and future
borrowing, the debt service ratio should remain at similar levels through the
1980s. About 5 percent of total service payments in 1980 would be due to
the Bank. In view of its good prospects for future economic growth, Greece
is creditworthy for Bank lending.
PART II - BANK GROUP OPERATIONS IN GREECE
16. Bank lending to Greece started in 1968, after disputes in connec-
tion with the country's pre-war external debt had been substantially settled.
Greece has so far received sixteen loans totalling $464.9 million (net of
cancellations), of which $381.8 million was held by the Bank as of April 30,
1979. These include five loans totalling $96.6 million to the National
Investment Bank for Industrial Development (NIBID), four loans for education
($142.3 million), three loans for irrigation ($95 million), a highway loan
($30 million), a wastewater disposal loan ($36 million), a loan for regional
development ($35.0 million), and a vegetable production loan ($30.0 million).
17. The execution of Bank-financed projects has generally been accept-
able, although that of the irrigation and education projects has been espe-
cially slow and subject to significant cost overruns due to both domestic and
international inflationary pressures. As of December 31, 1978, disbursements
amounted to 33 percent of initial appraisal estimates, and to 87 percent of
revised estimates. Recognizing the need to improve project performance dras-
tically, the Government and the Bank have instituted a system of joint proj-
ect reviews. The first of these reviews took place in December 1978 and
the second one in May this year. During these reviews, a series of actions
have been agreed for both the irrigation and education projects which have
since begun to be put into effect by the Government. It is expected that the
gradual effects of these actions will begin to manifest themselves, in terms
of prompter implementation of project works as well as increased disbursements
against Bank loans, in the course of the second half of calendar 1979. Annex
II contains a summary statement of Bank loans and IFC investments as of April
30, 1979.
18. Bank assistance to Greece has had the following objectives: sup-
porting institutional reform and essential infrastructure in key sectors,
including agriculture, wastewater disposal, and highways; modernizing key
sectors such as agriculture and education; and reducing substantial regional
income and social disparities through support for selected regional develop-
ment programs and regional balance in projects. In accordance with previous
plans, the proposed forestry project is the last loan to Greece.
19. IFC has made investments totalling $56.3 million in six Greek com-
panies. An equity and loan investment of $0.6 million was made in a fertili-
zer factory in 1962 and sold in 1970. An equity investment of $0.7 million
was made in NIBID in 1965, reduced to $0.1 million in 1974. In 1977, IFC
made a $40 million loan to NIBID, of which $5 million was for IFCs own account.
Loan and equity investments totalling $8.7 million were made in an aluminium
company in 1970 and 1972. In early 1975, IFC invested $1.1 million in an
agro-industry project in Larisa for processing of tomatoes from the area of
the Groundwater Development Project assisted by the Bank (Loan 754-GR). IFC
recently contributed another $0.2 million to expansion of this project to
include the growing and harvesting of tomatoes as well as the canning of
apricots and peaches.
PART III - THE FORESTRY SUB-SECTOR
Forestry in the Economy
20. Forests cover about 2.5 million ha or 20 percent of Greece's total
land area. Of this, 1.8 million ha are exploitable forests. About 60 percent
of the total growing stock is coniferous (fir, black pine and Aleppo pine) and
the rest is broadleaf (mainly beech and oak).
21. Largely as a result of traditional and conservative forest manage-
ment policies, Greek forests, with a growing stock of 134 million m3(r)*, are
currently only yielding less than a third of their potential sustainable
annual cut of about 4 million m3(r). Industrial roundwood production is thus
less than 1 million m3(r) per annum. As a consequence, despite substantial
untapped forest resources, most of the country's sawmills and other forest
industries operate well below capacity, and a sizeable proportion of domestic
wood product requirements has to be met by imports. Forest product imports
cost more than $265 million in 1977 and have been growing at nearly 15 percent
per annum in the last decade. Imports are projected to continue to rise
rapidly to about $400 million by 1985, unless steps are taken to increase
local wood production. Over the past decade, the Government has received
technical assistance for studies in the forestry sector from several multi-
lateral and bilateral sources, which have addressed the problems of more
intensive forest management and access and laid the basis for formulating the
sector's development plans to redress this situation. The project is a major
component of these plans, and provides for their accelerated implementation.
22. Two thirds of the forests in Greece are owned by the State; the
balance are owned by communities, monasteries, various public and private
organizations, groups or individuals and some jointly by other owners and the
State. Because of the steep terrain in Greece, forests play a vital role in
protecting the natural watersheds against erosion by water runoff. They also
provide substantial grazing areas to an estimated 13 million animals, mostly
sheep and goats. Moreover, because the forest areas include some of the
least developed parts of Greece, with per capita incomes and access to social
facilities substantially lower than the national average, forest development
is central to the Government's policy of improving income distribution through
regional development.
Forest Management and Development Needs
23. Because of heavy destruction of the forests during and immediately
after World War II, Greek forest management policies over the last 20 years
have correctly put emphasis on the need to restore the forest cover and to
build up the growing stock volume to ensure soil protection. However, these
policies have now led to over-stocking, which in turn is causing reduced
growth, high mortality and poor regeneration. The Government is therefore
re-orienting its forest management policies. Experience from other countries
* r = roundwood equivalent.
- 8 -
indicates that more intensive management and extraction can be safely intro-
duced without causing serious ecological problems. In addition to more
intensive management of the existing forests, there is a huge potential in
Greece for substantially expanding production by planting fast-growing species
on the approximately one million hectares of land with suitable soil and other
conditions which could be made available for this purpose. An annual planting
program of up to 40,000 ha per year (10 times the present rate), would permit
reaching long-term self sufficiency in wood supplies at considerable economic
savings to the Greek economy. In the past, ill-defined grazing rights for
villagers' livestock in forest regeneration areas have been one major con-
straint to expanding the use of fast-growing plantation species. The Govern-
ment now proposes to meet this problem through intensive development of pilot
range areas, improved animal husbandry and protecting regeneration areas by
fencing.
24. Before increased production from forests can be realized, however,
an accelerated program of road construction and maintenance is needed to
permit access to the forests. Increased access will also lead to improved
labor productivity by allowing logging crews to operate for up to 200 days per
year compared to the present 70-100 days, and would encourage the adoption of
more efficient mechanized skidding methods. To complement the road program,
policies and facilities are needed to encourage further mechanization of
forestry operations, which in general would offset growing shortages of labor
and trained animals as well as permit more attractive incomes for those
workers remaining in forestry. In particular, timber allocation policies
should be adjusted to allow larger-volume, longer-term contracts. Access to
sufficient credit for equipment purchases should be maintained, and mechani-
zation should be phased in to minimize conflict with existing methods. In
addition, training of logging operators to use the equipment, and improvement
in the physical and social infrastructure in forest villages, better housing
for workers, and better transport are required to retain an adequate supply
of workers and operators in the forest areas.
Forestry Development Plans
25. The Government's forestry development plans for the whole of Greece
during the period 1978-83 aim at: improving accessibility into forest areas by
construction of up to 7,500 km of new roads; substantially increased wood
harvesting and log production; improvement and upgrading of natural forest
potential through natural and artificial regeneration of about 10,000 ha of
felled-over areas annually; establishment of about 6,500 ha a year of fast
growing industrial plantations; fire protection; improvement of livestock
grazing ranges located in forest areas; improvement of workers' housing and
social facilities in mountainous forest regions; and continued expansion of
pulp and paper and other forest industries. The Government's annual budget
for forestry is currently running at about $90 million, about half of which
is allocated for investments. Forestry revenues derived mainly from log sales
amount to some $36 million a year. The Ministry of Agriculture operates a
revolving fund ("Central Fund for Agriculture, Livestock and Forestry Devel-
opment"), under which most of the forestry revenues are retained and ploughed
back into forest development. The European Investment Bank has provided about
$13 million to finance a six year (1977-82) slice of this plan covering six
forest districts of eastern Macedonia and Thrace, and including provision for
634 km of forest road construction, 660 km of road improvement, housing for
360 workers, and other facilities. The proposed project covers a larger area
in the west and south.
26. The Government currently provides various incentives for exploita-
tion of non-State forests and for the operation of wood-based industries,
including direct investment grants, protection from imports, and subsidized
interest rates. Logging equipment purchases have been subsidized up to 15
percent in recent years. Roads in non-State forests are regarded as essen-
tial infrastructure and, as such, part of the costs of constructing them are
borne by the State. These roads are an integral part of the overall forest
road network and would have to be built, to achieve the Government's forestry
development objectives. They are accessible to the general public and are
used by the Government for fire protection and other purposes. Hence, such
road construction is eligible for direct grants from Government ranging from
20 percent to 40 percent (depending on location) and for medium/long-term
loans at an effective interest rate of 4.5 percent per annum. These and
other subsidy policies in the forestry sector will have to be adjusted as part
of the process of alignment of domestic policies following Greece's expected
entry into the EEC. The sectoral development strategy study to be financed
under the project would also look into the entire tax-subsidy regime in
forestry and make recommendations for appropriate changes to ensure efficient
resource allocation while maintaining adequate incentives.
Forest Production Constraints
27. As indicated above, Greece has the potential for achieving self-
sufficiency in forest products on a sustainable basis from its domestic
forests. The main constraints hindering achievement of this objective are:
(a) overly conservative forest management and timber allocation systems,
which are incompatible with an acceleration in wood extraction programs;
(b) inadequate all-weather access roads and tractor roads, which prevent
effective harvesting of the forest; (c) low productivity due to insufficient
mechanization, partly the result of allocating and contracting policies which
discourage the adoption of mechanized methods; (d) shortage of trained animal
and man power, in part due to the lack of permanent employment opportunities
and poor living conditions in the mountain areas; and (e) land-use conflicts
between grazing and forestry, which because of the lack of effective range
management methods have led to unnecessary destruction of forest regeneration
areas.
Forest Industry
28. Most forest industry is private, including some 1,500 small saw-
mills, 30 medium to large sawmills, 2 pulp mills, 6 paper or paperboard mills,
and 19 plywood, particle board or fiberboard factories. Output from these
industries grew at a faster rate (17 percent per annum) between 1963 and 1973
than the rest of the manufacturing sector (12 percent per annum), and the
sector accounts for about 5 percent of industrial production and 7 percent
of industrial employment. The sawmill industry is currently operating at
less than 50 percent of capacity because of raw material shortages; other
- 10 -
wood-processing industries depend to a considerable extent on imported raw
materials. With sufficient raw materials, both the sawmill industry and the
manufactured board factories could meet domestic demand until the latter half
of the 1980's without significant expansion. However, there is a major need
for additional capacity in the pulp industry. Chemical pulp imports are
presently 80,000 tons per year and expected to rise to about 140,000 tons by
1985. Thus, domestic demand warrants early consideration of the construction
of a chemical pulp miil of about 150,000 tons per annum capacity, especially
since pulpwood supply is not expected to be a constraint after the execution
of the project. The possibility of such a mill in the project area has been
identified and the project includes a study to verify its economic viability
and evaluate alternative wood supply patterns to meet the needs of such a mill
as well as of other wood industries.
Forestry Organization
29. Conservation and management of all forest resources are the respon-
sibility of the Directorate General of Forests (DGF) in the Ministry of Agri-
culture. DGF is organized into nine Directorates in Athens, each responsible
for overall planning and coordination of a particular aspect of forest devel-
opment. Forest production, protection and management programs are carried out
in about 100 Forest Districts, each with its own decentralized organization,
controlling wood extraction operations in both State and non-State forests.
DCF has a demonstrated capacity to implement large-scale forest production
and management programs; during the period 1971-76, annual industrial wood
production in Greece averaged 651,000 m3(r), DGF's road construction program
increased from 700 km to 900 km per year and reforestation programs averaged
4,000 ha per year. DGF's professional staff of about 1,440 is generally
well-qualified and experienced. Support is provided by an ongoing program
of forestry research and training, though weaknesses appear in mechanized
logging and plantation establishment methods, and in modern forest management
techniques.
The Agricultural Bank of Greece
30. The Agricultural Bank of Greece (ABG) is practically the only insti-
tutional source of credit to the agricultural and forestry sectors. It is the
main executing agency for the Vegetable Production and Marketing Project (Loan
1588), approved in 1978. ABG is a well-managed, professional organization,
reaching over 90 percent of all farmers through nearly 190 branches and a
staff of more than 5,500. Nearly half of its outstanding loan portfolio of
some $3 billion equivalent consists of medium/long-term loans. Loans in the
forestry sector account for less than 2 percent of this total. ABG's lending
procedures are well-established, with a large measure of decentralization in
approval authority permitting quick and flexible responses to borrowers'
needs. Supervision of borrowers is also very effective; loans are almost
fully recovered within a year of falling due and arrears are under control.
In connection with the Vegetable Project, ABG's equity is being increased by
about $550 million over five years.
31. The interest rate mechanism in Greece has traditionally played a
relatively minor role as an instrument of either maintaining monetary stab-
ility or influencing resource mobilization. Rather, its role has been geared
- 11 -
towards medium- and long-term development management as a tool for stimulating
and directing investments into those sectors, for example, agriculture, which
the Government has determined need development. As a result, interest rates
do not necessarily reflect either market conditions or the availability of
capital in Greece. With the decline of the inflation rate from 27 percent
in 1974 to 12 percent in 1978, some rates have moved much closer to positive
rates of interest. 1/ The interest rate structure in Greece has been centrally
controlled since the spring of 1973 by a ministerial level Currency Committee,
which establishes rates for each type of deposit and credit. In administer-
ing interest rate policies, the Central Bank uses a combination of adjustments
in its rediscount rate and concomitant adjustments upwards or downwards in
deposit rates.
32. Since June 1978, the rediscount rate has been 14 percent, rates on
saving deposits have ranged up to 11.5 percent, the highest lending rate has
been 17 percent for imports and domestic trade, and the lowest lending rate
4.5 percent for long-term loans for livestock. The maximum interest rate
for long-term loans to industries has been 11.5 percent, while the interest
rate for medium- and long-term lending for general agriculture has ranged from
7.0 percent to cooperatives (plus a 0.5 percent appraisal fee) to 11.5 percent
to private agroindustries (plus a 1.0 percent appraisal fee). Short-term
interest rates in agriculture have varied from 8.5 percent to 10.5 percent,
plus various charges and fees. Since 1974, there has been a gradual increase
in the rates for the agricultural sector, most recently in June 1978, when
short term rates were increased by 2 percent and long-term rates by 1 percent.
Regional Development
33. About one-half million people or 5 percent of the Greek population,
live in villages in or near the forest areas and are largely dependent on
forest activities or grazing for their livelihood. A substantial majority of
these people have per capita incomes less than one third the national average.
With poor facilities, difficult working conditions, and limited opportunities
for employment outside of agriculture and forestry, mountain villages have
suffered substantial migration of younger people to urban areas and abroad,
and a serious labor shortage is developing in some forest regions. Even in
a relatively wealthy region like Thessaly, government studies show that the
mountain villages have a substantially lower standard of living than the rest
of the rural population in the same region. The Government policy is to
promote regional development through a number of measures, including improve-
ments in physical and social infrastructure and the quality of life in the
poorer regions. Moreover, along with mechanization and training, the improve-
ment in social services, transport and housing facilities for forest workers
and villagers, will be key factors in retaining an adequate supply of workers
and operators in the forest areas.
1/ Expected inflation in 1979, 1980 and 1981 is 12 percent, 11 percent and 10
percent respectively.
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PART IV - THE PROJECT
Project History
34. The project was identified by the Government and by Bank missions
visiting Greece in November 1977 and January 1978. It was prepared by the
Government between March and August 1978, with the assistance of consultants
financed by OECD. Bank appraisal took place in November/December 1978. Nego-
tiations were held in April 1979, with the Greek delegation headed by Mr.
Petros Papadakis, Director General of the Ministry of Coordination and includ-
ing representatives of the Directorate General of Forests (DGF) and the
Regional Policy Development Service (RPDS).
Project Objectives and Area
35. The project is a five and half year (1979-84) time slice of a more
intensive long-term forestry development program for continental western and
north-western Greece, including the regions of Epirus, the western parts of
Macedonia, Thessaly and Central Greece, and the Peloponnessus (see Map 14031R).
It aims to: (i) increase wood production from currently underutilized forests,
thereby providing additional raw material to help meet domestic demand and
reduce dependence on imported wood products; (ii) assist in developing sound
long-term strategies for forest resource and industry development, including
introduction of more intensive forest management and extraction systems; (iii)
improve incomes and the quality of life in selected forestry villages in the
project area which includes some of the poorest prefectures of Greece; and
(iv) strengthen local capabilities for planning and preparation of projects.
36. The project area covers about 5 million ha, or about 40 percent of
the total land area of the country. It also includes about 40 percent of the
country's commercial forest area and 57 percent of the growing stock, includ-
ing both coniferous and decidous species. The State owns 380,000 ha or 56
percent of the project area forests; the rest are owned by various communities,
organizations and private individuals. Current wood production in the project
area is only about 650,000 m3(r), or about 33 percent of potential yield.
About 260,000 people live in some 1,750 mountain villages in the area. Most
are employed in agriculture, forestry and related industries (including about
640 sawmills), and have incomes considerably lower than the national average.
Project Description
37. The project, which constitutes an integrated investment program,
includes the following components: forest roads and equipment for road and
machine maintenance, logging equipment, tree nurseries and industrial planta-
tions, pilot range management, fire protection equipment and facilities,
worker housing and transport facilities, village development and technical
assistance. Details of the project are provided in the Loan and Project
Summary and in a Staff Appraisal Report entitled, "Greece - Integrated
Forestry Development Project" (No. 2425-GR) dated May 7, 1979, distributed
separately to the Executive Directors, and are summarized below. A Supple-
mentary Project Data Sheet is also attached as Annex III hereto.
- 13 -
38. The construction of roads to provide access and the provision of
additional logging equipment can themselves lead to increased wood production.
However, these steps will not be fully successful or lead to further sustain-
able increases over the long term, unless complemented by changes in forest
management, planning, worker training, and living conditions.
39. The project's industrial plantation component provides for accel-
erating the planting of fast growing industrial species from the current rate
of 1,000 ha/year to 4,600 ha/year by 1984, or a total of about 16,000 ha.
This, in turn, will permit increased extraction from existing over-mature
forests without long-term ill effects. The pilot plantation research program
supports this effort by identifying areas for planting, developing more effi-
cient methods of planting and testing appropriate species. About 10 man-years
of technical assistance and 12 man-years of training are required in support
of this program, of which about 6 man-years of technical assistance and 8
man-years of training are expected to be financed bv UNDP. Arrangements for
obtaining the additional technical assistance will be completed by March 31,
1980 (Loan Agreement, Section 3.05(b)(ii)).
40. The pilot range management and fire protection components will
reduce damage to the forests respectively from overgrazing and fire. The
former will test, on about 20,000 ha, the feasibility of various approaches to
the problem of harmonizing livestock and forestry development. A survey will
determine how the findings can be extended to other parts of Northern Greece.
About 6 man-years of technical assistance and training are provided for this
component. The fire protection component provides about 5 watch towers, 500
fire breaks, 200 fire tracks, 30 water reservoirs and about 30 fire and tanker
trucks and other equipment to improve fire protection in the project area.
41. The logging training and demonstration component will ensure that
the full benefits of the new equipment and techniques are realized. Short
practical courses will be offered each year to about 100 staff, operators and
contractors in the use, operation, and repair of mechanized skidding and
logging equipment. The project provides equipment, about 3 man-years of con-
sultants' services and about 6 manyears of training abroad.
42. The forest and forest industry sector development strategy study,
for which about 5 man-years of consultant services are provided, will develop
the planning and management framework for accelerated forestry and forest
industry development. The study will review stocking and growth patterns,
analyze pricing, taxing and subsidy policies, investigate forest management
and harvesting practices, explore options for forest development to the year
2000, examine the preliminary economic viability of major new forest based
industries, particularly the proposed chemical pulp mill, and recommend
appropriate changes in policies and practices.
43. The village development component will construct or improve connec-
tion roads and streets, water supply, drainage and sanitation systems, street
lighting, community centers and other infrastructure facilities in about 37
villages (with a total population of about 20,000) selected from over 100
potential villages on the basis of population trends, amount of forestry
employment and location in relation to forests (Map 14162R) The investments
- 14 -
are similar to those being financed under the Evros Development Project
(Loan 1457-GR) and would be a pilot for investments in other forest villages.
Location, phasing and design standards for these investments, stressing simple
construction, have been agreed upon.
44. The regional development study would assist in formulating a plan
for the development of western Greece up to the year 2000, but its primary
purpose is to assist the Government in identifying and preparing specific
viable investments which could be a basis for financing by external sources,
such as the European Investment Bank as well as by the Greek Government and
private sources. While not limited to forestry, it would address the major
problem of long-term development in a region of the project area which is one
of the poorest in Greece and which has substantial development potential in
forestry and other sectors, such as livestock and tourism. The study has been
designed to create an ongoing capability in Greece to manage the process of
identifying, financing and implementing such projects in the future. About
6 man-years of long-term consultants, about half locally recruited, and a $2.4
million revolving Fund for short-term specialist services are provided for
this component.
Project Costs and Financing
45. Total project cost (including an average 32 percent price and 11
percent physical contingency) is estimated at about $145 million. It includes
about $23 million of taxes and duties. The foreign exchange component is
estimated at $49 million, or 34 percent of total cost. Costs of expatriate
consultants have been estimated at $7,000 per man-month on average. The
proposed Bank loan of $25 million will finance 21 percent of the total costs
net of taxes and duties, or 51 percent of the foreign exchange component.
Government has selected the commercial banks to finance the balance of the
foreign exchange, and are now negotiating the final terms. The Government
will contribute about $87 million and the Agricultural Bank of Greece (ABG)
about $2 million of local costs. Greece will be the Borrower of the Bank
loan, onlending about $1.2 equivalent to ABG on terms similar to that of the
Bank loan; ABG, in turn, will relend these funds to logging cooperatives and
individual operators (see paragraph 54). The Government will bear the foreign
exchange risk.
46. At least twelve foreign banks, several new to Greece, made specific
offers to finance the remaining foreign exchange needs of the project. Most
of these offers were on a floating LIBOR basis and equal to the best terms
available on the Eurodollar market. There were also several fixed term
offers. The terms obtained from the commercial banks selected, and which the
Government is endeavoring to improve, are a maturity of 12 years, including 6
years grace, at 1/2 percent over LIBOR for the first three years and 5/8
percent over LIBOR thereafter. The several attractive offers received, and
the very favorable one selected and being finalized, demonstrate the current
availability of LIBOR funds, as well as the effect of the Bank project in
interesting new lenders in Greece.
- 15 -
Project Implementation and Sublending Arrangements
47. The forestry components of the project will be implemented by the
Directorate General of Forests (DGF) in the Ministry of Agriculture, pri-
marily through its existing organization in the 42 Forest Districts in the
project area. Onlending for logging equipment will be the responsibility of
the Agricultural Bank of Greece (ABG), which is the implementation agency
under the Vegetable Production and Marketing Project (Loan-1588). The village
infrastructure development component and the regional development study will
be implemented by the Regional Policy and Development Service (RPDS) of the
Ministry of Coordination, which is responsible for the Evros Development
Project (Loan-1457).
48. Within DGF, a Project Planning and Management Office will be estab-
lished to coordinate the activities of the several relevant Directorates and
Districts responsible for the forestry components. This DGF Project Office
will supervise the preparation of project operational plans, prepare project
progress reports for the Bank, monitor and evaluate progress in the Forest
Districts concerned, and identify problems for higher authority. It will also
handle procurement and withdrawal documentation and submit a proposed annual
program of works to the Bank for approval by December 1 of each year (Loan
Agreement, Section 3.05(b)(i)). As mentioned earlier, DGF has a demonstrated
implementation capacity and is considered well-qualified to undertake an
increased work program envisaged under the project.
49. The DGF Project Office will be headed by an experienced forester
assisted by at least two other foresters, two forest technicians, an account-
ant and other support staff, all assigned full-time to the project. Estab-
lishment and provision of at least two staff for the DGF Project Office is a
condition of effectiveness of the proposed loan. In addition, assurances were
obtained that the Forest District offices in the project area will be kept
adequately staffed and expanded as required during project implementation,
and, in particular, that each Forest District with an industrial plantation
program will have at least one specialized forester responsible for planting
operations (Loan Agreement, Schedule 5, Part B2).
50. The forest sector development strategy study, the pilot range man-
agement program, and the logging training and demonstration program will all
be carried out under arrangements acceptable to the Bank. Detailed proposals
for the training, pilot plantation and range management programs will be sub-
mitted to the Bank for comment by March 31, 1980 (Loan Agreement, Section
3.05(b)(ii)). Essentially, appropriate officials in DGF will be designated
responsible for each program and supported by the requisite technical and
support staff and the necessary facilities, equipment and vehicles.
51. To ensure appropriate revision of forest management policies and
achievement of project production targets, assurances were obtained that DGF
will change current timber allocation systems to allow larger-volume, longer-
term logging contracts, and will see that all management plan revisions in
project area forests after July 1, 1979 take account of the production targets
under the project, which targets were agreed during negotiations (Loan Agree-
ment, Section 3.08). In addition, DGF will review the findings of the forest
- 16 -
sector development strategy study with the Bank, and taking the Bank's comments
into account, take appropriate measures to implement the findings, including
appointing 10 teams within six months of the study's completion to revise the
management plans for all the Forest Districts in the project area (Loan Agree-
ment, Section 3.05(b)(iii) and Schedule 5, Part B3(c)).
52. The Regional Policy and Development Service (RPDS) will implement
the village infrastructure development component and the regional development
study. The majority of the works will be carried out under the overall
direction of four RPDS regional project offices to be set up in each of the
regions (comprising, in all, nine prefectures) covered by the village devel-
opment component, under the supervision of nine prefectural coordination
committees chaired by the governor. Each office will have a full-time staff
of at least two professionals and a technician. The RPDS regional project
office in Ioannina would also be responsible for implementing the regional
development study covering Ioannina and six additional prefectures, with
assistance from consultants, and will be provided with additional staff of
at least 8 multidisciplinary professionals for this purpose. Studies and
surveys financed from the revolving fund will be selected under criteria
acceptable to the Bank and reviewed and approved by the prefectural coordina-
tion committee in the relevant prefecture. Those costing more than $200,000
equivalent will require the prior approval of the Ministry of Coordination
and the Bank, which in any case, will receive a justification for all studies
(Loan Agreement, Schedule 5, Part C4).
53. Actual planning, design and supervision of construction of village
project works will be carried out in the local departments of the technical
ministries concerned, coordinated by the regional project office. A project
office in RPDS' Athens headquarters, headed by a project coordinator and
assisted by two engineers will provide technical support for the regions and
prefectures. RPDS will establish the regional and central project offices,
appoint the project coordinator and accountant in Athens and at least one
staff member for each regional office by March 31, 1980 (Loan Agreement,
Schedule 5, Parts Cl and C3). The exact nature and phasing of works under
the village development component would be determined on the basis of an
annual program to be submitted by RPDS to the Bank for comment and approval
by December 1 of each year (Loan Agreement, Section 3.05(b)(i)). Charges
will be levied sufficient to at least cover the operating and maintenance
costs of the water supply and sanitation facilities provided by the project
(Loan Agreement, Section 4.05).
54. ABG will onlend the proceeds of the loan for the logging equipment
credit component (about $1.2 million) to sub-borrowers through its existing
branch network in the project area. Subloan appraisal procedures and criteria
used will be similar to those under the Vegetable Production and Marketing
Project (Loan-1588); preference would be given to logging operators who have
received training under the proposed project's training program. ABG will
appoint a full-time credit officer by March 31, 1979 to monitor progress under
the credit component and to prepare withdrawal applications and progress
reports. Subloans to beneficiaries will be made at ABG's normal interest rate
of 7.5 percent per annum for individuals and 7.0 percent for cooperatives
(plus 0.5 percent appraisal fee), for a maximum term of eight years and with a
- 17 -
subborrower contribution of 20 percent of the investment costs; such contribu-
tion may be reduced for subborrowers with incomes less than one third the
national average. Since ABG's income from subloans will not fully cover its
administrative and financial costs, the Government will compensate it for any
deficits. Assurances were obtained that the sublending arrangements will
be satisfactory to the Borrower and the Bank (Loan Agreement, Section 3.02(a)
(ii)).
55. To coordinate the activities of the various agencies, an overall
Project Steering Committee will be established, headed by a Director General
of the Ministry of Coordination and including representatives from DGF, RPDS,
ABG, and the Ministries of Agriculture, Public Works and Interior. The
Committee will meet at least quarterly to review project progress. Assurances
were also obtained that the consultants will be hired under terms and condi-
tions acceptable to the Borrower and the Bank, and, in particular, that the
consultants for the forestry sector study and for the regional development
study would be employed no later than March 31, 1980 (Loan Agreement, Section
3.03).
Procurement and Disbursement
56. Equipment and machinery costing a total of about $10 million will
be bulked and procured by DGF and RPDS under international competitive bidding
(ICB) in accordance with Bank guidelines. Local manufacturers will be allowed
a margin of preference of 15 percent or the applicable customs duty, whichever
is less. Equipment costing less than $50,000 up to an aggregate limit of $1.5
million will be procured under local competitive bidding procedures, accept-
able to the Bank. Foreign firms are well represented in Greece and would be
allowed to participate in local competitive bidding. Logging equipment (cost-
ing about $4 million) will be procured by the beneficiaries of sub-loans under
the supervision of ABG (and on the basis of standard criteria to be agreed
with the Bank) through regular commercial channels, since bulk procurement of
this equipment will be impractical and there is an adequate choice among local
and foreign suppliers.
57. Civil works for contractable items in the forestry component, mainly
roads and workers housing, and for all the village works (costing a total
of about $70 million) will be contracted on the basis of local advertising
according to competitive bidding procedures, which are acceptable to the Bank.
International bidding is not suitable for these civil works due to the wide
dispersion of the facilities, the different types of construction required,
the phasing of contracts over 5-1/2 years, the relatively small size of each
contract and the short construction season. The remaining civil works (cost-
ing about $50 million) will be carried out on force account with contracted
labor and equipment and financed from sources other than the Bank loan. The
force account work is economical, since due to the short construction season,
the remoteness of location and the small size of contracts, there is likely to
be insufficient contractor interest to warrant tendering and contractor prices
would have to be higher to compensate for these disadvantages. Also, as a
result of contracting difficulties, it would be more difficult to reach wood
production targets.
- 18 -
58. The Bank loan will be disbursed against: 20 percent of the total
expenditures for civil works; 37 percent of the sub-loan amounts disbursed
for logging equipment; 100 percent of foreign expenditures, 100 percent of
local expenditures ex-factory if manufactured locally, and 75 percent of local
expenditures if purchased from local suppliers for equipment; 50 percent of
disbursements under the revolving Fund, 87 percent of expenditures for consul-
tants' services; and 100 percent of foreign expenditures for fellowships.
Production and Markets for Project Products
59. At project completion in 1985, Greece's annual consumption of in-
dustrial roundwood is projected at an equivalent of about 5.9 million m3(r).
Domestic production is projected to provide only 1.4 million m3(r), of which
the project area will produce 0.8 million m3(r), or 55 percent of total
production and 13 percent of total demand. By 1995, when full production is
reached in the project area, demand for industrial roundwood is projected to
be 8.6 million m3(r) and total production 3.0 million m3(r), of which project
area production would be 1.7 million m3(r).
60. Sawlog production from the project area will be processed by exist-
ing saw mills located in or near the forests until at least 1985. Pulp wood
production, which currently accounts for about 20 percent of total wood pro-
duction, will largely be available for use in new industries. Since deficits
of nearly 150,000 tons per annum of chemical pulp are expected by 1985, an
assured market exists for the output of a chemical pulp mill of this capacity
which could almost fully absorb the 650,000 m3(r) pulp wood production from
the project area expected in 1995. The forest sector development strategy
study under the project will provide a wood extraction program and preliminary
economic analysis needed to induce private investment in such a pulp mill.
61. Wood output from the project area is expected to be sold in open
auction and, as in the past, with minimum floor prices adequate to cover
extraction and overhead costs. Domestic sawnwood and lumber prices are cur-
rently 25-30 percent above international prices reflecting the protection
afforded by duties and taxes on imports. With entry into the EEC, a downward
adjustment in tariffs would be mandatory, which, together with an expected
real price increase in international lumber of about 1.5 percent per annum,
would result in a balance between domestic and international prices by 1985.
62. Stumpage revenues (auction prices net of extraction costs) received
by DGF from State forests in the project area are expected to average $29 mil-
lion annually in constant prices over the project development period through
1995 (an average increase of about $13 million over current levels) and will
be sufficient to fully recover administrative and investment costs, including
interest on the loans. At the present time, stumpage revenues are paid into a
general revolving fund for agriculture and then allocated to the budget of DGF
to cover a portion of its expenses. Assurances were obtained that project
area stumpage revenues will continue to be used to cover at least DGF's admin-
istrative expenditures in the project area, and, in addition, project invest-
ments operating and maintenance costs (Loan Agreement, Section 4.03).
- 19 -
Benefits and Beneficiaries
63. The project would contribute to tripling the annual rate of indus-
trial wood extraction in the project area from about 550,000 m3(r) to 1.7
million m3(r) by 1995, resulting in better industrial capacity utilization
and in net foreign exchange savings of about $180 million by 1995. Because
of the value of the additional wood sales, the Government would expect to
realize nearly $200 million of additional revenues between 1980 and 1995.
64. The economic rate of return, excluding the village infrastructure
component and the two planning studies whose benefits are difficult to quan-
tify, is estimated at 21 percent. Including the cost of the components whose
benefits are non-quantifiable, the rate of return would be 18 percent. If
production increases were delayed by one year with no corresponding delay in
cost, the rate of return would be 17 percent. The economic net present value
of the project, assuming a cost of capital of 12 percent, exceeds its invest-
ment, operating and maintenance costs by about $44 million.
65. The main quantifiable benefits of the project would accrue to:
(a) the Government; (b) more than 20,000 non-State forest owners, including
communities, organizations and private individuals; and (c) about 30,000
forest villagers, logging cooperative members and equipment operators in the
project area. About 60 percent of the last group of beneficiaries and 35
percent of all beneficiaries are estimated to have present incomes below the
relative poverty level of $936 per capita, and would receive about 10 percent
of the project's quantifiable benefits and most of the non-quantifiable bene-
fits from the village component. Nearly all beneficiaries have incomes below
the national per capita income. About 1,500 new jobs are expected to be
created, with additional wages of about $2,200 per worker. All workers would
benefit from a doubling of the logging season to at least 150 days (due to
mechanized methods, all-weather roads, better housing and transport facili-
ties). Project works will employ an additional 400,000 man-days of labor
during the five-and-half years of project implementation.
66. In addition, major non-quantifiable benefits include strengthening
Greece's institutional capability to manage its forest resources so as to
achieve increased and sustainable yields without damaging the long-term
ecosystem and viability of the forests; setting the stage through industrial
plantations for significant future increases in the annual allowable cut from
forests; providing the wood supply foundation for the subsequent development
of a domestic chemical pulp industry, which could lead to significant addi-
tional import savings in future; and controlling soil erosion and damage to
the forests from fire and grazing. The regional development study would
build up local project preparation and planning capabilities and prepare a
regional development project for financing by other external agencies.
Finally, project works, particularly the village infrastructure development
component, would directly address the problem of improving living standards
in the poor rural regions of Greece, thereby improving labor availability.
Risks
67. The project faces no special risks, although the speed of intro-
duction of the new forest management policies may be slower than projected.
- 20 -
Attention has been taken to avoid the problems leading to slow physical imple-
mentation in some other Greek projects. The project organization is based
upon either an existing administrative structure (the forestry components)
or on a framework which has been successfully introduced in other Bank proj-
ects (the village development and credit components). Adequate staff have
been provided to allow for the additional work being undertaken. The tech-
nology involved in construction, operation and maintenance of project works
is not new to Greece. While some of the project benefits depend upon the
response of private logging operators in adapting to new and more efficient
methods, this is not expected to be a problem, in view of increasing labor
shortages, the introduction of new contracting methods, and the improved
availability of credit under the project.
PART V - LEGAL INSTRUMENTS AND AUTHORITY
68. The draft Loan Agreement between The Hellenic State and the Bank,
and the Report of the Committee provided for in Article 3 Section 4 (iii) of
the Articles of Agreement are being distributed to the Executive Directors
separately. The draft Agreement conforms generally to the normal pattern for
loans for forestry projects. Features of the Loan Agreement of special
interest are referred to in the appropriate paragraphs of this Report and in
Annex III. Since the agreement must be ratified by Parliament, the Loan
Agreement provides for a date of effectiveness 180 days after signing.
69. Special conditions of loan effectiveness are: (a) the DGF Project
Office has been established and the two key staff have been appointed; and
(b) the subsidiary loan agreement between the Borrower and ABG is in effect
(Loan Agreement, Section 5.01).
70. I am satisfied that the proposed loan will comply with the Articles
of Agreement of the Bank.
PART VI - RECOMMENDATION
71. I recommend the Executive Directors approve the proposed loan.
Robert S. McNamara
President
by I. P. M. Cargill
Attachment
May 22, 1979
Washington, D.C.
- 21 -
ANNEX I
TABL! 3A
GREECE - SOCIAL INDICATORS DATA SHEET Page 1 of 6
REFERENCE GROWS (ADJUSTED AVERAGES
GREECE /a
LAND AREA (THOUSAND SQ. RN.) - MOST RECENT ESTIMATE)
TOTAL 131.9 SAME SAME NEXT HIGHER
AGRICULTURAL 91.6 NDST RECENT GEOGRAPHIC INCOME INCOME
1960 ab 1970 Lb ESTIMATE Lb REGION /c GROUP /d GROUP /
GNP PER CAPITA (US$) 510.0 1350.0 2810.0 1898.8 2839.0 5835.1
ENERGY CONSUMPTION PER CAPITA
(KILOGRAMS OF COAL EQUIVALENT) 460.0 1222.0 2090.0 1869.3 2376.4 4296.1
POPULATION AND VITAL STATISTICS
TOTAL POPULATION, MID-YEAR
(MILLIONS) 8.3 8.8 9.2
URBAN POPULATION (PERCENT OF TOTAL) 57.0 62.6 64.8 Lf 43.0 .. 73.9
POPULATION DENSITY
PER Sq. KM. 63.0 67.0 70.0 81.4 55.8 91.6
PER SQ. KM. AGRICULTURAL LAND 93.0 96.0 100.0 135.2 83.6 153.7
POPULATION AGE STRUCTURE (PERCENT)
0-14 YRS. 26.7 24.9 24.2 26.2 40.0 24.1
15-64 YRS. 65.1 64.0 63.8 63.4 55.3 63.4
65 YRS. AND ABOVE 8.2 11.1 12.0 9.9 3.8 11.0
POPULATION GROWTH RATE (PERCENT)
TOTAL 1.0 0.6 Ia 0.5 0.8 2.9 0.8
URBAN 2.1 1.5 .. 2.2 .. 1.0
CRUDE BIRTH RATE (PER THOUSAND) 19.4 18.1 15.4 19.2 31.7 17.3
CRUDE DEATH RATE (PER THOUSAND) 7.3 8.0 9.4 9.0 7.9 10.4
GROSS REPRODUCTION RATE 1.1 1.0 1.0 1.3 1.6 1.2
FAMILY PLANNING
ACCEPTORS, ANNUAL (THOUSANDS) .. ..
USERS (PERCENT OF MARRIED WOMEN) .. .. .. 38.0
FOOD AND NUTRITION
INDEX OF FOOD PRODUCTION
PER CAPITA (1970-100) 62.0 100.0 117.6 113.7 114.7 103.1
PER CAPITA SUPPLY OF
CALORIES (PERCENT OF
REQUIREMENTS) 120.0 116.0 132.0 127.4 113.4 126.8
PROTEINS (GRAMS PER DAY) 99.0 99.0 102.0 92.8 89.9 90.7
OF WHICH ANIMAL AND PULSE 39.0 48.0 ft 50.0 39.3 48.0 54.3
CHILD (AGES 1-4) MORTALITY RATE .. 0.9 0.8 1.6 .. 0.8
HEALTH
LIFE EXPECTANCY AT BIRTH (YEARS) 68.0 70.9 71.8 68.9 60.2 72.4
INFANT MORTALITY RATE (PER
THOUSAND) 40.1 29.6 24.1 34.5 22.1 14.3
ACCESS TO SAFE WATER (PERCENT OF
POPULATION)
TOTAL .. .. .. 68.3 83.0
URBAN .. .. .. 74.3 100.0
RURAL .. .. .. 64.4
ACCESS TO EXCRETA DISPOSAL (PERCENT
OF POPULATION)
TOTAL .. .. .. 94.0 57.8
URBAN .. .. .. 94.0 99.3
RURAL .. .. .. 93.0
POPULATION PER PHYSICIAN 790.0 /i 620.0 500.0 686.5 976.9 669.4
POPULATION PER NURSING PERSON 2081.0 1i 1530.0 1360.0 339.0 676.1 259.9
POPULATION PER HOSPITAL BED
TOTAL 170.0 160.0 160.0 178.0 325.8 101.6
URBAN .. .. .. 70.0 250.0
RURAL *- *- *' 1770.0 770.0
ADMISSIONS PER HOSPITAL BED .. 17.0 17.0 15.3 18.7 14.1
HOUS ING
AVERAGE SIZE OF HOUSEHOLD
TOTAL 3.8 3.3 . . .. 3.3
URBAN 3.6 3.2 . . .. 3.3
RURAL 4.1 3.5 .. .. .. 3.7
AVERAGE NUMBER OF PERSONS PER ROOM
TOTAL 1.5 0.9 .. 0.9 .. 1.1
URBAN 1.4 0.9 .. 0.8 .. 1.1
RURAL 1.6 1.0 .. 1.0 .. 1.1
ACCESS TO ELECTRICITY (PERCENT
OF DWELLINGS)
TOTAL 53.2 88.0 .. 57.5
URBAN 81.5 97.6 .. 99.0
RURAL 13.5 77.0 ..
- 22 -
ANN I
TABLE 3A Page 2 of 6
GREECE - SOCIAL INDICATORS DATA SHEET
REFERENCE GROUPS (ADJUSTED AVERAGES
GREECE /
- MOST RECENT ESTIMATE)
SAHE SAME NEXT HIGHER
KOST RECENT GEOGRAPHIC INCOME INCOME
1960 b 1970 b ESTIMATE /b REGION /c GROUP /d GROUP e
EDUCATION
ADJUSTED ENROLLKENT RATIOS
PRIMARY! TOTAL 105.0 110.0 106.0 108.0 104.1 105.6
FEKALE 103.0 107.0 104.0 /h 99.5 120.3 104.7
SECONDARY: TOTAL 41.0 69.0 79.0 62.8 44.7 80.9
FEMALE 32.0 59.0 66.0 /h 63.6 46.0 75.9
VOCATIONAL (PERCENT OF SECONDARY) 17.0 20.0 23.0 /h 28.2 18.7 18.5
PUPIL-TEACHER RATIO
PRIMARY 40.0 31.0 /I 24.9 30.6 22.8
SECONDARY 26.0 35.0 .. 17.3 16.3 15.6
ADULT LITERACY RATE (PERCENT) 81.0 84.0 .. 88.3 .. 99.0
CONSUMPTION
PASSENGER CARS PER THOUSAND
POPULATION 5.0 26.0 42.0 90.4 53.4 232.1
RADIO RECEIVERS PER THOUSAND
POPULATION 85.0 111.0 279.0 199.0 195.5 377.7
TV RECEIVERS PER THOUSAND
POPULATION .. 31.0 106.0 132.5 108.4 260.1
NEWSPAPER ("DAILY GENERAL
INTEREST") CIRCULATION PER
THOUSAND POPULATION 121.0 79.0 107.0 97.1 108.0 313.7
CINEMA ANNUAL ATTENDANCE PER CAPITA 6.0 15.0 .. 6.6 *- 2.8
EMPLOYMENT
TOTAL LABOR FORCE (THOUSANDS) 3600.0 /1 *- 3300.0
FEMALE (PERCENT) 31.1 32.4 32.9 32.4 26.9 35.0
AGRICULTURE (PERCENT) 54.0 46.0 34.0 32.8 25.7 10.4
INDUSTRY (PERCENT) 19.8 24.1
PARTICIPATION RATE (PERCENT)
TOTAL 45.0 42.7 42.3 39.1 40.1 42.4
MALE 63.5 59.1 58.3 56.7 55.8 58.8
FEMALE 27.4 27.0 27.1 29.7 24.7 27.9
ECONOMIC DEPENDENCY RATIO 0.9 .. 1.1 /f 0.9 1.6 0.8
INCOME DISTRIBUTION
PERCENT OF PRIVATE INCOME
RECEIVED BY
HIGHEST 5 PERCENT OF HOUSEHOLDS 18.7 /k .. 31.9
HIGHEST 20 PERCENT OF HOUSEHOLDS 44.7 /k .. .. 59.7
LOWEST 20 PERCENT OF HOUSEHOLDS 6.3 /k .. .. 4.0
LOWEST 40 PERCENT OF HOUSEHOLDS 17.4 /k .. .. 12.9
POVERTY TARGET GROUPS
ESTIMATED ABSOLUTE POVERTY INCOME
LEVEL (US$ PER CAPITA)
URBAN .. ..
RURAL .. .. 435.0 194.9
ESTIMATED RELATIVE POVERTY INCOME
LEVEL (USS PER CAPITA)
URBAN .. .. .. 295.1
RURAL 936.0 309.2
ESTIMATED POPULATION BELOW POVERTY
INCOME LEVEL (PERCENT)
URBAN .. .. .. 18.2
RURAL .. .. 45.0 24.2
.ot avaIlable
Not applicable.
NOTES
/a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme
values of the indicator and the most populated country in each group. Coverage of countries among the
indicators depends on availability of data and is not uniform.
/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 Estimate, between 1973 and 1977.
/c Europe; /d High Income (over $2500 per capita, 1976); /e Industrialized Countries; /f 1971; I& D".e
to emigration, population growth rate is lower than rate of natural increase; Ih 1972; Li. 1962;
Li Excluding persons in compulsory military service; 1k 1957-58, urban only.
September, 1978
-23 - ANNEX I
DEFINITIONS OF SOCIAL INDICATORS' Page 3 of 6
eal: The adjusted group averages for *ach indicator sre populati-n-eighted geometric means, excluding the axtr-em values If the idicator and the most
populated cauntry in each group. Coverega of countries among the indicators depends on availability of data and is mot uniform. Due to lack of data,
group averages for Capit-l Surplus Oil ERporters and indicators of acc-ass to water and emoft diapaal. housing, incose distributios and poverty or
aiple populatiun-weighted geomtric means without the exclusion of extreme valuas.
LAND AREA (thousand sq. km) Populatien per hospital bed - total, urban, and rural - Population (total.
Total - Total surface area comprisiag land area and inland waters, urban, and rural) divided by their respertive umber of hospital beds
Agricultural - Most recent estimate of agricultural aresa used temporarily avgilable in public and private genaral and specialized hospital and re-
or permanently for crops, pastures, market and kitchen gardens or to habilitation centers. Hospitals are establishments permanently staffad by
lie fallow at least one physieian. Establishments providing principally custodial
cars are net included. Rural hbspitala, however include health and medf-
CNP PER CAPITA (US$) - GNP per capita estimates at current mrket prices, c-l c nters sat pernently staffed by a physicien (but by a medical s-
calculated by same conversion method as World Bank Atlas (1975-77 basis); sistant. nurse, midwife. tc.) which offer in-patient accommodation sod
1960, 1970, and 1977 data. pravide a limited range of madical facilities.
Admisions per hospital bed - Total number of adeissions to or discharges
ENERGY CONSUMPTION PER CAPITA - Annual consumption of co_mercial energy free hospitals divided by the number of beds.
(coal and lignite, petroleum, natural gas and hydro-, nuclear and Sto-
thermal electricity) in kilograms of coal equivalent per capita. HOUSING
Average size af household (fersona per household) - total, urban, and rural-
POPULATION AND VITAL STATISTICS A household consists of a group of individuals who share living quarters
Total population, sid-vea millions) - As of July 1; if not available, and their main mals. A boarder or lodger say Pr may not be included in
average of two end-year est imates; 1960, 1970, and 1977 data, the household for statistical purposes. Statistical definitions of hou.e-
Urban nopulatirn (percent of total) - Ratio of urban ti total popula- hold vary.
tion; different definitions of urban areas may affect comparability Average nu-ber of persons per room - tutal. urban. agd rural - Average nor-
of data aesog countries. ber of persons per room in all, urban, nd rural oecupied conventional
Populatien density dwellings, respectively. Dwellings exclude son-permanent structures and
Per s. kh. - Mid-year population per square kilometer (100 hectares) unoccupied parts.
Df total area. Access to electricity (percent of dw4ellings) - total, urban, and rural -
Per sq. k. agriculture land - Computed as above for agricultural land Conventional dwellings with electricity in living quarters as percentage
only. of total. urban, and rural dwliiesga respectively.
Population age structure (percent) - Children (0-14 years), working-age
(15-64 years), and retired (65 years and over) as percentages of mid- EDUCATION
year population. Adiusted enrollment ratios
Population growth rate (percent) - total, and urban - Compound annual Primary school - total, and feale - Total and female enrol Ifeot o. a11 ageu
growth rates of total and urban mid-year populations for 1950-60, at the primary level as percentagas of respectively primary achool-age
1960-70, and 1970-75. populations; norsally includes children aged 6-11 years but adjusted for
Crude birth rate (per thousand) - Annual live births per thousand of different lengths of primary education; for countrieo with universal adu-
mid-year population; ten-year arithmetic averagee ending in 1960 and cation enrollment my exceed 100 percent since some pupils are below or
1970 and five-year average ending in 1975 for -sat recent estimate, above the official school age.
Crude death rats (per thousand) - An-a. deaths per thousand of sid- Secondarv school - total, and fele - Computed as above; secondary educe-
year population; ten-year arithmetic averages ending in 1960 and 1970 tion requires at least four years of approved primary instruction; pro-
end five-year average ending in 1975 for east recent estimate. vides general vocational, or teacher training instructions for pupils
irons reoroduction rate - Average number of daughters a woman will bear usually of 12 to 17 years of age; correspondance courses are generally
in her normal -producci-s period it uhe h aperisores present age- excluded.
specific fertility rates; usually five-year everages andi.g in 1960, Vocational enrollment (percent of secondarv) - Vocatioral institutions in-
1970, and 1975. elude tech.ical, industril, or other programs whirl operate independently
Foily pleuniso - -ccectors. annual (thousands) - Annual number of or as depastoasts of usecodary tnrtitutions.
ccceptoru af birth-control devices under auspioes af national family Pupil-teacher ratio - primary. and e4ond-cv - Iotul sud ntes enrollod it
planning program. primary and secondary levels divided by numbers of teachers in the corr-
Family planning - usr (percast uf ma.rried wonsa) - Parcnsage of spending levels.
married women of child-bearing age (i-44 years) who use birth-control Adult literacy rate (nercent) - Literate adults (able to read and write) a:
devices to all married women in same age group. a parcntaga of total adult population aged 1S year and ovIr.
FOOD AND NUTRITION CONSUMPTION
Index uf food production Per capita (1970-100) - Indes Dumbar of par Passenger care (per thousand population) - Pasger co.rs comprise motor carn
capita annual production of a11 food commodities, seating less tibs eight persons; excludes abulanes, hsaruou and military
Per capita supply of calories (percent of requireents) - Computed from vehicles.
energy equivalent of net food supplies available in country per capita Radio receivers (per thousand oopulatioo) - All types of receivers for radio
per day. Available supplies comprise doaestic production, imports less broadcasts to general public per thousand of population; encludes unlicensed
exports, and changes in stock. Net supplies exclude animal feed, seeds, receivers in countries and in years when registration cf radio sets w-s in
quantities used in food processing, and losses in distribution. Re- effect; data for recent years may not be comparable sicce most countries
quiroments were estimated by FAO based on physiological needs for nor- abolished licensing.
sal activity and health considering environmental temperature, body TV receivers (per thousand ponulation) - TV receivers for broadcast to genera
weights, age and sea distributions of population, and allowing 10 per- public per thoosand populaeion; excludes unlicensed TV receivers in coon-
cent for waste at household level, tries and in years when registration of TV sets was in effect.
Par capita supply of protein (armsps per day) - Protein content of per Newspaper circulation (ner thousand population) - Shows the average circula-
capita net supply of food per day. Net supply of food is defined as tion of "daily general interest n-wspaper" defined as a periodical publi-
above. Reqoiremente for all countries established by USDA provide for cation devoted primarily to recording general news. It is considered to
a minimum allowance of 60 grams of total protein per day and 20 grama be "daily" if it appears at least four times a week.
of niunal and pulse protein, of which 10 grams should be animal protein. Cinema anmual attendance per capita per year - sased on the nubehr or tickert
These standards are lower than those of 75 grums of total protein and sold during the year, including admissions to drive-in cinenas and cobile
23 grams of animal protein as an average for the world, proposed by units.
FAO in the Third World Food Survey.
Per capita Protein sunply from animal and pulse - Protein supply of food EMPLOYMENT
derived from animals and pulses in grams per dy. Total labor force (thousands) - Economically active persons., including oroed
Child (ages 1-4) mortality rate (per thousand) - Annual deaths per thous- forces and unemployed but occluding housewives, students, etc. Defini-
and in age group 1-4 years, to children in this age group. tions in various countries are sot comparabl.
Female (perceot) - Female labor forte us percentage of total lohbr forc.
HEALTH Agriculture (Percent) - Labor force in farming, foreutry. hunting and fiohiog
Life espeltany eat birth (vears) - Average number of years of life as percentage of total labor furce.
raeaining at birth; usually five-year averages ending in 1960, 1970, Industrv (percent) - labor force in minlg, constructlon, manu-acturing ond
and 1975. electricity, water and gas as percentage of total labor frce.
Infant mortality rats (per thousand) - Annual deaths of infants under Participation rrat (percent) - total, sale, and female - Total, nale, and
i one year of age per thousand live birhts. female labor force as percentages of their r-spective pcpuloti.n.
Acc.es to eafe water (percent of opulation) - total, urbn and rural - Thsse ore 1LD's adjusted participarion raeo. r-tel- ifaong r
Sunber of people (total, urban, and rural) with reasosable access to structure of the population. ond long tine trend.
eafo wator supply (icoluda. treascd surf... w-rer or unrerat d but ronomic dependency ratio - Ratio of population onder 15 and 65 and over to
u_costaminsted water such as that from protected boraholes, springs, the labor force in ag group of 15-64 yearn.
and sanitary wells) as percentage of their respr tiva populations.
In an urban ares a public fountain or standpost located not more INCOME DISTRIBUTION
than 200 meters from a house may be considered as being within re- Percentage of irivate income (both in cosh end kind) recrived by riche-t s
sonabla access of that hous, i rural areas reasonable occess would percent richest 20 percent, poorest 20 percent, and poorest 40 porcent
imply that the housewife or members of the household do not have to of households.
spend a disproportionate part of the day in fetching the family's
water needs. POVRTY TARCET GROUPS
Access to eucreta disposal (percent of population) - total. urhan, and Estimated absolute poverty Income level (US$ per capita) - urbon and coral -
ruro1 - Ntmber of people (total, urban, and ror1) served by ectrata Absolut povetry income lets1 is that incono level belaw which c =iini=l
diaptool as porceotages of their respective populations. Excreta nutritionally adequate diet plcs e-ssotiol non-focd reqn-oeontt it cot
disposal nay include the collection and dispoaal, with or without affordable.
treutment, of hboan .ecrets and waste-wator by water-borse systems Eitimated relative povertv income level (US$ per cypit.) - urban and rarsl -
or th use of pit privies and nimilac inutullatious. Relatos poverty mcc- laud to that incor evel .. s thun one-thlrd
Poyplation per physician - Population divided by number of procticing per capita personal income of the country
phynicians qualified from a redical school at university level. Estimated popnlation below poverty incs level (prrcent) - orhor cod coral -
fonulatlon per nursing person - PoPplation divided by number of Percent of population (urban sed rural) who ore oith-r "sbtoluet pyr or
practicing solo and fe=mle groduete nurses, pructict1 nurses, and relative poor whicheve is ereater.
assintant nuuoses
Sco...mic end S1oc1 Iota Di-cict
Economic Analysie and Pro jections Deypriocot
- 24 -
ANNEX I
Page 4 of 6
GREECE: ECONOMIC DEVELOPMENT DATA SHEET
Average ac.al Growth Rdte. Share of
Actusl Prey. Est. hreit.d 1970 1974 1978 GDP
1970 1974 1976 1971 78 1979 19dO 1982 1904 1978 1982
A. NATIONAL ACCOUNTS
(1970 _1001 iiliton doachams)
CDP (at narket pi.ces) 298.9 360.5 405.9 420.2 446.2 474.0 502.2 562.9 4.8 5.5 6.0 100.0
Eaporta (goofs) 30.0 60.8 78.3 80.9 86.0 93.5 101.8 120.9 21.7 6.9 8.9 19.3
Inpores (gorla) -55.0 -100.1 -110.8 -114.1 -116.2 -123.1 -130.4 -146.2 16.2 3.8 5.9 26.0
Oeronrce Balance -25.0 -34.3 -32.5 -33.2 -30.2 _29.6 -28.6 -25.3 6.8
Co-sumptioo 244.1 301.1 339.1 357.0 373.8 391.3 409.2 445.5 5.4 5.6 4.5 83.8
Government 37.0 00.1 58.9 62.8 64.7 68.6 72.9 82.2 7.4 6.6 5.9 14.5
206.4 2501.0 280.2 294.2 309.1 322.7 336.3 363.3 5.0 5.3 4.1 69 3
Total Inneestent 84.0 97.1 99.2 102.9 99.2 106.9 115.2 133.8 3.7 0.3 7.8 22.2
fIord Itoestinent 70.7 74.0 79.8 86.6 91.1 98.4 106.3 123.9 1.3 0.2 8.0 20.4
Donestlo Santo8. 59. 0 7.5 77.7 78.4 82.4 91.6 102.2 126.6 -0.6 9.4 10.3 18.5
Nacloogi SeoiogR 74.7 79.3 100.1 103.0 92.4 101.1 110.9 134.0 1.5 3.9 9. 7 20.7
GDP (ourrent poices) 25B.0 507.3 727.2 846.5 1005.4 1193.4 1390.3 1886.9 18.4 18.6 17.1
FIord Ionasnraent (currero prOtein) 70.7 125.5 175.0 222.3 269.6 326.1 390.9 551.7 15.4 21.1 19.6
Fla4d Inv.soveor) CDP utrrent prIoes) 27.4 24.7 24.1 26 3 26.8 27.3 28.1 29.2
B. SECTOR OUTPUT (Pr.en.taRe Share of CD)P (Factor Ctst) at 1970 oitte.)
Agolc-lt-re 18.2 16.6 15.6 14.1 14.1 13.9 13.6 13.0
Ind,"try 31.4 31.3 32.7 33.2 33.5 33.6 34.3 35.7
co.lr.s 50.4 51.9 51.7 02.7 52.4 52.5 52.1 51.3
C. PRICES
1970 - 100)
DEport PTice Iod-e 100.0 177.0 215.5 238.6 250.4 266.4 284.2 324.3 15.4 9.1 6.7
Import PrIce loden 000.0 195.4 209.8 272.4 305.5 324.8 346.1 394.4 18.2 11.8 6 8
Tet of Trade Indeg 100.0 90.6 83.0 86.7 82.0 82.0 82.2 82.3 -
GDP Deflator 100.0 156.9 202.2 228.4 256.3 287.1 318.7 385.6 12.0 13.1 10.8
Average DEthacRe ReeR (31 D Irs.) 30.0 30.0 36.6 36.8 36.6
D. PYbli Fi.anoe
(Ceotrol Gov-nmnG- t)(-ercro- of GE' .1 Cornot rcln) Peon. Peon. F. LAY08 FORCE 1971 1975
Correot Reneour 18.2 18.9 21.1 21.0 Labor Forte In) 3.39 3.30
Tao Revenne 17.9 (7.4 20.2 20.3 One,splepsanI In) D0.11 0.10
Coerret E.penditoem 16.0 19.5 22.4 23.0 (% ef IF) (3.2) (3.0)
Oo-erer.mnt SavIngs 2.2 -0.6 -1.3 -2.0 lapleymeen In) 3.28 3.20
CapItal Eapenditorm 5.0 4.6 5.5 5.4 4 share of:
E. SSELECTED INDICATORS 1965-73 1976-82 AnOtre 40.5 34.0
Endostry 20.6 30.0
Incremntal Cpital/Oo-put Ratio 3.0 4.4 Sernines 33.9 36.0
Import Olas-iEity 1.2 1.2
Average Kallenal Savlcgs Rate 16.7 22.8
Marginal National SavIngs Rate 24.2 21.6
Import/GDP 24.0 26.5
EMENA CPITA
May 7, 1979
- 25 -
GREECE _ BALANCE OF PAYMENTS AND EXTERNAL ASSISTANCE ANNEX5 I
(in current US $ millions)
Actual Eat. Projected
19/4 1976 1977 1978 1979 1980 1982
A. SUXMARY OF BALANCE OF PAYMENTS 1/
1. Exporta (Goods and NFS) 3443 4330 5016 6014 6884 8000 10846
2. Imports (Goods and NFS) 5232 6123 7071 8122 9056 10218 13056
3. Resource Balance -1789 -1793 -2055 -2108 -2172 - 2218 - 2210
4. Total net factor income 576 692 787 839 752 779 866
a. Interest and profits (net) 2/ - 97 - 111 - 138 - 152 - 260 - 314 - 409
b. Workers, remittances 674 803 925 991 1012 1093 1275
5. Net transfers 9 1 I
6. Balance on current account -1213 -1092 -1267 -1269 -1419 - 1439 - 1344
7. Direct Foreign Investment St 293 346 437 466 476 518 616
8. Net Private Borrowing 4/ 200 307 329 344 321 264 150
Disbureements ( 283) ( 352) ( 437) ( 380) ( 400) C 400) ( 400)
Amortization (- 82) (- 45) (- 108) (- 36) (- 79) (_ 136) (- 250)
9. Net Public Borro-ing 51 333 _ 110 147 233 258 284 220
Disbursements ( 432) 174) 438) 533) 866) 946) 1038)
Arortization (- 98) (- 284) (- 291) (- 300) (- 608) (- 66Z) (- 817)
10. Foreign Exchange Deposits 6/ 196 545 632 650 425 400 400
11. Other Items n.e.i. 7i 81 - 11 _ 130 - 315 110 166 210
12. Increase in Reserves (- = increase) 110 6 - 137 - 109 - 170 _ 194 - 252
13. Official Reserves (and year) 936 925 1062 1171 1341 1535 2009
B. LOAN COMMITMENTS
1. Total public M 6 LT loans 221.0 225.7 334.6
a. IBRD 110.0 30.0 71.0
b. EI 56.7 - -
c. Others 54.3 195.7 263.6
2. Total public commercial loans 361.8 247.6 383.6
C. MEMORANDUM ITEMS
1. Grant element of tote1 coosoltoects - 0.6 12.3 8.6
2. Avoaa6e interest 1UecceoI) 1u.5 7.1 6.1
3. Average maturity (years) 9.6 9.9 10.6
1/ Data for 1974-78 are estimated in dollars on the basis of current exchange rates.
2/ Includes net direct investment income and net dividends.
3/ Includes direct investment under Law 2687/53, real estate investment and other net private investment.
4/ Includes loans to private corporations, net suppliers credits and loans to private backs.
R/ Borrowing by the Bank of Greece and other public agencies.
6/ Foreign currency deposits of Greek nationals abroad with Bank of Greece and local commercial banks.
7/ Residual balancing items including errors and omissions.
EMENA Region
CPD II_A
May 2, 1979
- 26 - A_NEX I
Page 6 of 6
GREECE - EXTERNAL DEBT AND CREDITWORTHINESS
1974 1976 1977
A. MEDIUM AND LONG-TERM DEBT (disbursed only)
(millions of US dollars)
1. Public debt outstanding (DOD; end of period) 2037 2377 2635
2. Including undisbursed 2763 3044 3495
3. Public debt service 330 487 533
(Interest) ( 143) ( 177) ( 169)
B. DEBT BURDEN (percentages)
1. Debt service ratio (exports incl. NFS) 9.6 11.2 10.6
2. Debt service ratio (exports incl. NFS & workers' remittances) 8.0 9.5 9.0
3. Debt service/GDP 2.0 2.5 2.3
4. Public debt service/Government revenue 11.2 12.7 12.0
5. Total DOD/GDP 12.0 12.0 11.5
C. TERMS (percentages)
1. Interest on total DOD/total DOD I 9.3 6.9 7.1
2. Total debt service/total DODI/ 21.4 19.1 22.4
D- DEPENDENCY RATIOS FOR M< DEBT (percentages)
1. Gross disbursements/imports (incl. NFS) 12.2 4.2 7.7
2. Net transfer/imoorts (incl. NFS) 8.7 - 0.9 2.5
3. Net transfer/gross disbursements 70.8 -21.1 32.8
E. EXPOSURE (percentages)
1. IBRD disbursements/Total disbursements 2.4 7.5 3.6
2. IBRD DOD/Total DOD 3.0 3.4 3.5
3. IBRD debt service/Total debt service 2.5 3.0 3.5
F. PUBLIC EXTERNAL DEBT Outstanding December 31, 1977
(disbursed only) Amount Percent
1. IBRD 91.2 3.5
2. Other Multilateral 141.9 5.4
3. Governments 470.0 17.8
4. Financial Institutuions 1702.7 64.6
5. Suppliers Credit 100.7 3.8
6. Others 128.9 4.9
TOTAL 2635.4 100.0
G. DEBT PROFILE
Total debt service 1978-82/Total DOD end-1977 (percent): 117
4
1/ DOD at end of previous year.
EMENA Region
CPD II-A
May 3, 1979
- 27 - ANNEX II
Page 1 of 5
THE STATUS OF BANK GROUP OPERATIONS IN GREECE
A. STATEMENT OF BANK LOANS (As of April 30, 1979)
US$ Million
Amount
Loan (Less
Number Year Borrower Purpose Cancellation) Undisbursed
Five loans fully disbursed 96.6 -
711 1970 Hellenic State Education 13.8 .2
754 1971 Hellenic State Irrigation 25.0 6.1
859 1972 Hellenic State Education 23.5 19.0
991 1974 Hellenic State Irrigation 30.0 28.0
1134 1975 Hellenic State Education 45.0 45.0
1165 1975 Hellenic State Irrigation 40.0 39.0
1240 1976 Hellenic State Highway 30.0 22.0
1345 1977 Hellenic State Sewerage 36.0 36.0
1457 1977 Hellenic State Evros 35.0 34.8
1539!/ 1978 Hellenic State Education 60.0 60.0
15881/ 1978 Hellenic State Vegetable Production 30.0 30.0
TOTAL 464.9 230.1
of which has been repaid 53.7
Total now outstanding 411.2
Amount sold 42.4
of which has been repaid 13.0 29.4
Total now held by Bank 381.8
Total undisbursed 230.1
1/ Not yet effective and not included in total undisbursed.
-28 - ANNEX II
Page 2 of 5
B. STATEMENT OF IFC INVESTMENTS (As of April 30, 1979)
Fiscal Amount in US$ Million
Year Obligor Type of Business Loan Equity Total
1962 Aevol Industrial Company
Organic Fertilizers, S.A. Fertilizers 0.60 - 0.60
1965 "Titan" Cement Company, S.A. I Cement 1.00 0.50 1.50
1966 NIBID Industrial
Finance - 0.72 0.72
1966 General Cement Company, S.A. Cement 3.50 - 3.50
1966 "Titan" Cement Company, S.A. II Cement - 0.03 0.03
1970 Aluminium de Grece, S.A.
Industielle et Commerciale I Aluminum 3.50 5.10 8.60
1972 Aluminium de Grece, S.A.
Industielle et Commerciale II Aluminum - 0.05 0.05
1975 Hellenic Food Industries, S.A. Food Processing 1.00 0.13 1.13
1977 Hellenic Food Industries, S.A. Food Processing - 0.11 0.11
1977 NIBID Industrial
Finance 40.00 - 40.00
1979 Hellenic Food Industries, S.A. Food Processing - 0.08 0.08
Total Gross Commitments 49.60 6.72 56.32
less cancellations, terminations,
repayments and sales 45.74 5.72 51.46
Total Commitments now held by IFC 3.86 1.00 4.86
Total undisbursed - - -
- 29 - ANNEX II
Page 3 of 5
C. PROJECTS IN EXECUTION 1/
Loan No. 711 - First Education Project; $13.8 million Loan of November 5, 1970;
Effectiveness Date: March 31, 1971; Closing Date: June 30, 1979.
The five project post secondary technical schools (KATEs) are com-
pleted. Procurement of the remaining furniture and equipment is expected
to be completed during 1979. Most of the funds have been disbursed and the
balance will be fully absorbed as this remaining procurement is completed.
Despite delays in construction and procurement, the higher technical educa-
tion program has been in operation since 1974, both in temporary facilities
and in the partially-finished project schools. At present, about 9,000
students are enrolled in the program, or more than 45 percent above original
design capacity.
Loan No. 754 - Groundwater Development Project (Irrigation); US$25 million
Loan of June 21, 1971; Effectiveness Date: November 15, 1971; Closing Date:
June 30, 1981.
Implementation of this project has been slow due to delays in con-
tract awards, changes in design of the distribution network following consul-
tants' recommendations, technical problems in well drilling and a protracted
search for a satisfactory solution, found in December 1973, to the question
of farmers' contributions to the capital cost of the project. Meanwhile,
project costs have increased substantially. The Government proposals to phase
the construction of the permanent irrigation network through 1985 were
approved by the Executive Directors on November 10, 1977 ((R77-275). Drilling
of the wells is completed, about 60 percent are in operation, irrigation has
started on about 22,000 ha of the 40,000 ha using temporary facilities and
good yields have been obtained in these areas. The substantial cost overruns
are being borne by the Government. Sand has infiltrated into about 25 percent
of the wells and a program of rehabilitation is underway.
Loan No. 859 - Second Education Project; $23.5 million Loan of October 2, 1972;
Effectiveness Date: March 30, 1973; Closing Date: December 31, 1981.
Architectural designs for all of the 31 project institutions are
completed. 22 construction contracts have been awarded and another 5 are
expected to be awarded soon. Procurement of equipment for existing schools
has started and some 19 contracts have been awarded. However, due to initial
delays in preparing designs and bidding documents, project completion is now
expected only in 1981. These delays, together with changes in educational and
1/ These notes are designed to inform the Executive Directors regarding the
progress of projects in execution, and in particular to report any prob-
lems which are being encountered, and the action being taken to remedy
them. They should be read in this sense, and with the understanding
that they do not purport to present a balanced evaluation of strengths
and weaknesses in project execution.
- 30 ANNEX II
Page 4 of 5
technical designs, have led to cost increases about 70 percent above the
appraisal estimates, for which the Government is providing funds. Meanwhile,
$13.8 million of the loan has been committed. Agreements have been reached
to revise the administrative and related arrangements, which should ensure
improved implementation of this, as well as the Third and Fourth Education
Project.
Loan No. 991 - Yannitsa Irrigation Project: $30.0 Million Loan of June 3,
1974; Effectiveness Date: July 29, 1975; Closing Date: December 31, 1979.
Because of political changes in 1974/75, delays were experienced
in completing the conditions of effectiveness and project costs increased
significantly. Project implementation has however begun; the first (of three)
contracts was awarded in September 1976, the second in December 1977, and the
third is expected shortly. Construction began in June 1977 and completion is
expected by December 1981, about 1-1/2 years later than appraisal estimates.
Due to delays, costs have increased substantially.
Loan No. 1134 - Third Education Project; $45 million Loan of June 27, 1975;
Effectiveness Date: April 29, 1976; Closing Date: December 31, 1980.
Start up has been quite slow; architects were selected only in
October 1977 to design the project schools but preliminary designs for all of
the 17 institutions are now completed and 7 approved. Agreements have been
reached on revisions to the administrative and related arrangements, which
should ensure improved implementation of this, as well as the Second and
Fourth Education Project. Design finalization and review is being shortened
to 21 months. The Government has passed the legislative framework for reforms
in technical education. Some delay resulted from having to reflect these
developments, which do not affect enrollments or costs, in the project school
designs.
Loan No. 1165 - East Vermion Irrigation Project: $40.0 Million Loan
of October 3, 1975; Effectiveness Date: August 12, 1976; Closing Date:
December 31, 1980.
Progress is slow and completion is now expected to be about three
years behind schedule. Two (of three) contracts have been awarded and con-
struction started. The tender documents have been issued for the third
contract. A Project Manager and a steering committee have been appointed and
are functioning.
Loan No. 1240 - Highway Project: $30.0 Million Loan of May 24, 1976;
Effectiveness Date: January 5, 1977; Closing Date: December 30, 1980.
Progress is satisfactory; most of the road maintenance equipment has
been delivered; the road maintenance directorate is now operating but remains
short of staff although this is improving and 234 staff are being recruited.
Construction is underway on the project road and is proceeding satisfactorily.
Consultants for transport planning have been hired. Construction and equip-
ment costs are below estimate, due to favorable prices received on bidding.
- 31 -
ANNEX II
Page 5 of 5
Loan No. 1345 - Salonica and Volos Sewerage Project: $36 Million Loan of
February 3, 1977; Effectiveness Date: November 30, 1978; Closing Date:
June 30, 1982.
The draft law for the Volos Authority has passed Parliament in
March 1979. Final designs are completed for Volos and nearly completed for
Salonica, although the latter still faces technical issues. A project
manager has been appointed and staff are being recruited.
Loan No. 1457 - Evros Development Project: $35 Million Loan of June 27, 1977;
Effectiveness Date: October 19, 1978; Closing Date: December 31, 1982.
The project is now fully operational with a competent project
manager and staff. All subprojects are either underway or in the final
design stage. Procurement arrangements have been satisfactorily worked out.
Priorities have been set for the road subprojects but costs for roads are
higher than estimated. The specifications for the flood control works have
been reviewed and are satisfactory.
Loan No. 1539 - Fourth Education Project: $60 Million Loan of April 14, 1978;
Effectiveness Date: Not yet effective; Closing Date: December 31, 1982.
Design development is underway but behind schedule. About 17 addi-
tional staff are being recruited to accelerate progress. Effectiveness is
awaiting Parliamentary ratification of the Loan Agreement.
Loan No. 1588 - Vegetable Production and Marketing Project: $30 Million Loan
of July 10, 1978; Effectiveness Date: Not yet effective; Closing Date:
June 30, 1983.
Effectiveness is awaiting Parliamentary ratification of the Loan
Agreement. The project unit is fully operational in the Agricultural Bank
and project implementation is proceeding well. Lending has commenced for
greenhouses and about 100 ha of the 900 ha under the project are under con-
struction. Consultants are being recruited and marketing companies are being
formed.
- 32 -
ANNEX III
Page 1 of 2
SUPPLEMENTARY PROJECT DATA SHEET
Section I - Timetable of Key Events
(a) Time taken by the country to prepare
the project: Nine months (March to November
1978)
(b) Agency which prepared project: Directorate General of Forests
(DGF) assisted by consultants and
Regional Policy and Development
Service (RPDS)
(c) Date of first presentation to Bank: Draft preparation report submitted
August 1978
(d) Bank missions:
(i) Identification November 1977 and January 1978
(ii) Preappraisal September 1978
(iii) Appraisal November/December 1978
(e) Date of negotiations: April 1979
(f) Planned date of effectiveness: December 1979
Section II - Special Bank Implementation Actions
None
Section III - Special Conditions
(a) DGF has agreed to ensure that all management plan revisions after July 1,
1979 for the project area take account of accelerated wood production
targets and to implement necessary changes in timber allocation and con-
tracting procedures from the 1980 logging season (para. 51, Loan Agree-
ment, Section 3.08);
(b) DGF has agreed to employ before March 31, 1980 consultants to assist in
carrying out the forestry sector development strategy study and, on its
completion and taking into account the Bank's comments, to carry out
appropriate measures for accelerated forest and forest industries devel-
opment (paras. 51 and 55, Loan Agreement, Sections 3.03 and 3.05(b)(iii));
(c) The Government has agreed to continue to use project area stumpage
revenues to cover at least DGF's administrative expenses in the project
area and, in addition, project investments operating and maintenance
costs (para. 62, Loan Agreement, Section 4.03);
- 33 -
ANNEX III
Page 2 of 2
(d) RPDS has agreed to establish the four regional and one central project
offices and appoint the regional project coordinator and accountant and
at least one staff member each in the regional offices by March 31, 1980
(para 53, Loan Agreement, Schedule 5, Part Cl and 3);
(e) RPDS has agreed to appoint consultants before March 31, 1980 to carry out
the regional development study working with a local team of at least 8
experts (para. 52, Loan Agreement, Section 3.03 and Schedule 5, Part C);
(f) RPDS and DGF have agreed to submit for review and approval by the Bank
a detailed annual program of works proposed for their components in the
following year by December 1 of each year (para. 53, Loan Agreement
3.05(b)(i)).
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IA ~~~~~~~INTEGRATED FORESTRY DEVELOPMENT PROJECT
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