Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 6565

PROJECT PERFORMANCE AUDIT REPORT

ROMANIA: DANUBE-BLACK SEA CANAL PROJECT

(LOAN 1794-RO)

December 23, 1986

Operations Evaluation Department

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without "orld Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

COUNTRY EXCHANGE RATES(Lei per US$)

Year Rate

1976 15.001977 15.001978 18.001979 18.001980 18.001981 15.001982 (to June) 16.501983 (July-December) 17.501984 (to October) 21.561984 (Noven.ber-December) 17.501985 17.501986 (to June) 17.50

THE WORLD BANK FO OFFICIAl USE ONLYWash-m1ton DC 20433

U S A

O1fire nt OntectoI-neWa

December 23, 1986

MEMORANDUM TO THE EXECLTIVE DIRECTORS AND THE PREJIDENT

SUBJECT: Project Performance Audit Report on Romania: Danube-Black SeaCanal Project (Loan 1794-RO)

Attached, for information, is a copy of a report entitled "ProjectPerformance Audit Report on Romania: Danube-Black Sea Canal Project (Loan1794-RO)" prepared by the Operations Evaluation Department.

Attachment

rits document as a restricted distribution and may be used by recipients only in the performanceOf !heir offcial duties Its contents may not otherwise be disclosed without World Bank authorization

ACRONYMS AND ABBREVIATIONS

IB Banca de InveEtitii (or Investment Bank of Romania)DBSCA Danube-Black Sea Canal AdministrationMTTc Ministry of Transport and Telecommunicationsdwt deadweight tonsmt metric tonsIPTANA Road, Water and Aerian Design Institute

FOR OFFICIAL USE ONLY

PROJECT PERFORMANCE AUDIT REPORT

ROMANIA: DANUBE-BLACK SEA CANAL PROJECT(LOAN 1794-RO)

TABLE OF CONTENTS

Page No.

. Preface... .... ..... .. ..... . . . ... .. ... .iBasic Data Sheet................................................... 11Evaluation Summary.......................................... iv

PROJECT PERFORMANCE AUDIT MEMORANDUM

I. BACKGROUND............................................... 1

The Danube International Waterway........................ 1River Traffic...6&. . .. . . ... *. . .. . .. . .. . .. .... 2Legal and Administrative Provisions for Navigation....... 2Improvement of Navigation on the Danube.................. 3Formulation of the Project ............................... 5Objectives of the Project................................... 9

I1'. PROJECT IMPLEMENTATION ...................................# 9De s i gPROJECT .IM.PLE.E..TATION. . . . . . . . . . . 0 . . . . . . . . . . . 0 . . 6 0 . . . . . .. 9

Construction........,........0....4.................4....... 1Other Essential Investmens.. ......... 13Cost of the Project...................................... 15

Ill. PROJECT RESULTS.......................................... 16

Overall Objectives................................ 16Ca&nal Traffic.. . . . . . . . . . . . . . . . . ....... 17Financial Performance of DBSCA................. .... 19Economic Reevaluation................................... 21Sustainability ..... ..... . . . . . . . . . . . . ....... 23Findings and Lessons............. ...... ....... * . ... 24

PPAM TABLES

1. Appraisal Estimates and Actual Project Costs............. 272. Estimated and Actual Traffic ........................... 283. Canal Tariffs.,........ ............... . 0....0............. 294. Balance Sheets for 1984 and 1985....................... 305. Appraisal and Audit Estimates of Economic

Rates of Return.......................... 31

CHART Shipping, Dry Cargo, One-Year Timecharter Rates.......... 32

ANNEX A Borrower Comments..*$..* ....... . * .......... ......... 33

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties Its contents may not otherwise be disclosed without World Bank authorization.

Table of Conteuts (cont'd.)

Page No.

PROJECT COMPLETION REPORT

I. Introduction ............................II. Project Preparation and Appraisal......................... 38

III. Project Implementation. ......... **...... ........ ... . 39IV. Economic Reevaluation... . ............... C............. . 43V. F inancial Evaluation.00* 0*0C C C * e .. . . .e . e C* e * * * 47

VI. ConclusiEnsvaluat ....... . .......... ............ 49

ANNEXES

1(a). Danube-Black Sea Canal Administration Organization

37

1(b). Trcinslation of the Decree Creating the Administration..,.. 522.~ Construction Pors................... . *CC C54

3 . Dis8burs eme nts a .. *. . .... . ..... . . e e.e .... 5 54. Project Exedtrs .... ~ *~*** C...C 565. Meeting of the Executive Political Committee of the

Central Committee of the Romanian Communits PartyOf July 21, 198, (Excerpt)ooo,,,........................ 57

6. Details Of Pusher Tugs and Barges for Canal Use PresentlyAvailable and Prjce.CCCCeCCCCCCSCCCeCCCCCCCCCCCC. 58

7. Operating Costs .... Cc.eCe.eCCeeeCe Cee 598. Map of ntermediate Canalrs. ............ 60

BORROWER'S PROJECT COMPLETION REPORT

Basic Data Sheet .............................. 69*SuCmary and Conclusionsr. ........ ....................... 5

I. rIntroduction e C r C C e C a C C t n C C C C C C C C C C A C C C C C d.. 5 C C C C 67II. Project Preparationand. ....................... 68III. Project mplementationuandrCost........... .... .. . 71IV. Traffic and Operations.e 0 P C C C Ca l 6 C C C C C Com m C C Ct e C C C C C C e 76V. Financial Performance of Danube-Black Sea Canal

Ofministration July... 278VI. Dnstitutional DevelopmentdBage CforCCCCC Ca CUseCCCCCo 78

VII A *Economic Reevaluation.Cte......................... 5

7II . Opr atluin * os s..C C .CC ..... C..C....CC..C..C..C..C..C..C..C..C..C..C..C..C C59

ANNEX Implomentation Schedule and Critical Path................. 81

TABLERS

2A. Actual and Origin. Estimates of Project Costs...... ... 822B. Original Estimsd and Actual Project Expenditure

andDisbursementfromLoani. ............ .......... 833. Actual and Original Estimates of Loan Allocation.......... 844. Actual and Projected Traffic by Main Comodities.......... 85

Table of Contents (cont'd.)

Page No.

5. Actual and Projected Bal.nce Sheets of Danube-Black Sea CanalAdministration.......................... 86

6. Actual and Projected Income Statements of Danube-Black Sep Canal Administration......e.................. 87

7. *Ex-Post and Original Estimates of Economic Rate of

*Not received from borrower.

MAPS

IBRD 14313RIBRD 19040IBRD 19041

- 1 -

PROJECT PERFORMANCE AUDIT REPORT

ROMANIA: DANUBE-BLACK SEA CANAL PROJECT(LOAN 1794-RO)

PREFACE

This is a Project Performance Audit Report (PPAR) on the Danube-Black Sea Canal Project for which Loan 1794-RO for US$100 million to theBanca de Investitii (IB) was approved January 22, 1980. The Closing Date wasDecember 31, 1983, but the loan was fully disbursed May 13, 1982. Theproject is not yet fully completed, but the canal has been open to trafficsince May 26, 1984.

The PPAR consists of an Audit Memoraudum (PPAM) prepared by theOperations Evaluation Department (OED), a Project Completion Report (PCR)prepared by the Europe, Middle East and North Africa Regional Office datedJuly 31, 1985, and a PCR prepared by the Borrower, dated March 6, 1985. ThePPAM is based on a review of the Appraisal and President's Reports for theproject, the Minutes of the Executive Directors' meeting at which the loanwas approved, the Loan Agreement, Bank files and records, interviews withBank staff familiar with the project, and a field visit in May 1986, duringwhich interviews were held with representatives of shipping companies andgoverment transport officials in other Danubian countries, officials of theDanube Commission, and staff of the borrower, especially of the 18 and theMinistry of Transport and Telecommunications (MTTc).

The Audit found that the PCR fairly described the implementation ofthe project and agrees generally with its comments. However, the Audit hassome additional comments on the formulation, composition and execution of thproject and expands on the relationship of the project to other major workswhich together constitute a very large international cooperative effort t,greatly increase transport capacity and efficiency of the Danube. It reache-slightly less optimistic conclusions on the economic and financial aspects ofthe project, at least in the short and medium terms. But it acknowledge,,that ..n the long term the project, as part of the current major upgrading o"navigational conditions on the Danube, wilL probably significantly assistindustrial development of the Danube Basin, and that its contribution to sucibenefits are only partly included in the economic analysis.

The draft report was sent to the Borrower ior comments which have.been reflected in the report as well as reproduced as Annex A to the PPAM.

- ii -

PROJECT PERFORMANCE AUDIT BASIC DATA SHEET

ROMANIA: DANUBE-BLACK SEA CANAL PROJECT

(LOAN 1794-RO)

KEY PROJECT DATA

Appraisal Actual or CurrentItem Estimate Estimate (E)

Toral Projevt Cost (USS Million) 1,750.0 1,897.0 (E)Overrun (%) 8%

Financing (USS Million) 1,750.0 1,897.0 (E)Internal Funds 1,427.8 1,597.0External Aid Agencies 551.7 300.0

of which - IBRD Lan 100.' 100.0- Co-f i nanc ing 200. 0 2030.

Other Sources 251.7Lå)an Amount (USS Million) 100. f).

Di s hu rsed 101.0 lr .3fCancel led -

Completion of Physical Components- Bank-f inanced vomponents 06/83 36/82- Canal open for traffic 12,82 05/8'- Final Completion 12/84 la 12/87 (E) /b

o nic Rate of Return ( /) 19 9 ( E) /c

Cumulative Estimated and Actual Dishursementsrs , i iTT -)

Y FY 1 1-Y82 FY83

t imrated .l 6 ' 87. 5 1 op. fA1tal - /7. 1 . f

Etal/[stimated - 4

MTHE R P 3>.3-EC1I.DAT AAktual orE-cimated

item Original Plan kevislons Actoal

First Mentioned in FIles 06/06/?5,vernmentÄ's Application - 03/L1/77

Appral sal - 07/ 16/79Negot iat ions - - 12/03/79Board Approval ()1/22/80 - 01/22/8L.oan Agreement 04/ 3)/>18' - 04/ 30/ 80Effectiveness Dat e 07/30/80 - 09/0 5/80Closing Dato 12" 31 /83 - 12/ /83

Brrower: Baca de InvestitilE.xecuting Agenv: Ministry of Transport. & Telecommunl(-atitons (MTrfe)

')anuhe-Bla,k Sea (inal *iministration (DBSCA)Fiscal Year of Borrower: Janoary 1 - De(tmher 31Fc 1 w-on Pr iec t: None

9a Esstimated date for <ompletion ot a l ca nal w,rks ( L.A. #3.02)'h stimated date for completion of ali canal works based on most recent

s upervtstlon mission. Remaining works comprise mainlv trimming andstahiltzation of side slopes to the east of km 48.

Z 9t hased on audit estimates; 11% hased on Danuhe-B1lak Sea Cana lAd-fi nistrat lon ( DBSCA) estimats and on PCR estimates.

- iii -

MISSION DATA

Month/ No. of No. of Person- Date ofItem Year Persons Weeks Week& Report

Identification 03/78 2 1 2 03/10/78Preparation 10/78 2 2 4 11/14/78Preappraisal 02/79 3 5 15 04/23/79Appraisal. 07/79 3 1 3 12/20/79

Total 24

Supervision I 04/80 2 1.5 3 04/11/80Supervisior. II 11/80 2 1 2 11/24/80Supervision III 03/81 4 0.5 2 04/15/81Supervision IV 11/81 2 1 2 11/19/81Supervision V 10/82 2 0.5 1 10/20/82Supervision VI 09/83 2 1 2 09/30/83Supervision VII 08/84 2 1 2 08/25/84Supervisicn VIII and

Completion 05/85 3 1 3 07/09/85

Total 17

- iv -

PROJECT PERFORMANCE AUDIT REPORT

ROMANIA: DANUBE-BLACK SEA CANAL PROJECT(LOAN 1794-RO)

EVALUATION SUMMARY

Incroduction

Proposals for a Danube-Black Sea Canal were first made as early asthe mid nineteenth century. Construction was started in 1947, but halted in1953 for lack of adequate resources and the excavation was incorporated intoan irrigation canal. By the mid 1970s economic expansion of Romania andother countries in the Danube Basin had created greatly increased freighttraffic, including the transport of growing volumes of heavy raw materialsfrom oversear.

The Danube was seen to offer great po#ential for such traffic,especially in view of the major upgrading of the river's navigationalconditions and capacity which has been made through the construction of dams

and locks, and more are under construction and proposed. These developments,together with a canal link, Danabe-Main (and hence with the Rhine), alsounder construction, represent a great international cooperative effort toincrease the capacity and efficiency of transport on the Danube and haveimportant implications for transit traffic; they are detailed in the

Memorandum (PPAM, paras. 8-13).

However, a Black Sea deep water port, connected with the Danube,was also needed for the economical oean transport of bulk materials. TheRomanian Government rejected the construction and op..cation of such a port at

the Danube delta as too expensive because of silting. The Government decjiod

instead to build a 64 km canal from Cernavoda on the Danube to the Black Seaat the existing deep water port of Constanta, which would be extended to take

large bulk carriers. Construction was started in late 1975 (PPAM, paras. 15and 16).

An informal approach by the Government to the Bank for financingwas made in 1973; and a formal approach in 1975. However, it was not until,late 1978, three years after construction of the canal had been started, that

the Bank reviewed the feasibility of the project on the basis of datasupplied in the meantime by the Government. Since the main elements of the

project had already been committed, the Bank's review was largely limited to

satisfying itself that what was being done was acceptable for Bank financing

(PPAM, para. 22). It was decided not to include in the project otheressential investments, particularly the expansion of the Port of Constanta,and two river ports needed to handle materials for new or expanded ste..

plants (PPAM, para. 24).

-v -

Objectives

The principal objective of the project was to peovide Romania withlow cost inland water transport via the Danube, especially for imported heavybulk raw materials. An additional objective was to bring in toll revenue toRomania from transit traffic of other Danubean countries expected to beattracted to the canal (PPAM, para. 26).

Implementation Experience

Construction of the canal involved a huge volume (300 million cubicmeters) of excavation, mostly in a 20 km plateau section with cuts up to 70 mdeep. The canal opening was 17 months later than scheduled, but this wasstill a good performance in view of the magnitude and difficulty of theproject. The work was generally good (PPAM, para. 34). Slides occurred inthe deep cut section; repairs are in progress and will continue for a year ormore (PPAM, paras. 31 and 32). Loading/unloading equipment is mostly yet tobe provided for the canal ports (PPAM, para. 33). The estimated final costof the project is less than 10% over the appraisal estimates, includingcontingency allowances (PPAM, paras. 44 and 45). But failure to complete theConstanta Port extension and the river port of Calarasi has significantlyaffected traffic through the new canal (PPAM, paras. 47 and 49).

Results

The project is not yet producing the expected financial results oreconomic benefits because canal traffic is, so far, much below appraisalestimates (PPAM, para. 48). The main reason is the the 1981 world recessionwhich caused a decrease in ocean freight traffic and led to a slowdown incomplementary investments, that is in the construction of steel and otherplants, in expansion of Constanta port and construction of Danube river ports(PPAM, paras. 49 and 50), including the provision of efficient cargo handlingfacilities (paras. 38, 39, 52 and 53).1/ Consequently, the financial results

1/ Banca de Investitii (IB) has commented (Annex A, pages I and 3):

"As you know, in the first few years of operation, the actual traf-fic on the Danube-Black Sea Canal was under the Appraisal estimationsand this was due, mainly, to the general decrease of the ocean trafficunder the unfavourable world economic conditions. Under the conditionsof a lower traffic dr.mand, uncompletion of "Other Essential Investments"had not seriously aflected the canal use, as it is shown in PPAM (items37 to 41 and 52)...

""Evaluation Summary", pag. vii, "Results", the first phrase to becompleted with: "...much below appraisal estimates (PPAM, para. 48),due, mainly, to the ui. avourable world economic conditions leding on theone hand to the general decrease of the ocean traffic, and on the otherhand to the temporization of some Investments in the local Industriesusing the canal and of the investments related to the canal."'

- vi -

are below appraisal estimates (PPAM, paras. 58 and 59). Economic benefitsare also lower than estimated because of the shortfall in traffic, but alsoare further substantially lowered because the sharp fall in ocean freightrates has so far reduced to less than half the expected savings throughswitching to larger bulk carriers (PPAM, paras. 62 and 63). Futureprojections of economic benefits depend on estimates of t-affic and also ofchanges in ocean freight rates which are sensitive to oil price variations.But it now apears likely that the economic rate of return will be reducedfrom the 19% estimated at appraisal to the range of 11% to 9% (PPAM, paras.66-68). However, the analysis does not include all the benefits from lorgterm regional development which might be apportioned to the project (PPAM,para. 79).

Sustainability

In the short term, the canal project is not yet operating effi-ciently, pending completion of port and cargo handling facilities (PPAM,para. 52), nor can it sustain itself financially without Government (Ministryof Transport and Telecommunications) subsidies (PPAM, paras. 55, 58 and59).2/ However, the Government is proceeding with the remaining port worksand is also continuing to support financially the Danube-Black Sea CanalAdministration (DBSCA) until it becomes self-supporting. In the meantime,the DBSCA has trained adequate staff and is technically and administrativelywell qualified to operate the canal. WiLh a reasonably cautious estimate oftraffic growth, it is likely that the project will become fully sustainableby about 1992 (PPAM, paras. 58 an,d 69-71,.

Findings and Lessons

Two questions are posed by the project. First is the Bank's role.This became mainly one of supplying finance (about 5% of the total) a.,!helping to encourage co-financing (about 1C%) because of the Bank's lateeffective involvement. The second main auestion concerns the inclusion ofessential complementary works (particularLy the Constanta port extension a;!the river ports) in a loan covenant rather than directly in the project(PPAM, paras. 72-76).

2/ 18 has commented, Annex A, page 3:

"Also, in pag. vtil, "Sustainability", in the first phrase,"...without Government subsidies" to be replaced with: "...withoutMinistry of Transport and Telecommunications subsidies out of the over-all results of this ministry." Accordingly, in the second phrase, to bespecified that temporarly the Ministry of Transport andTelecommunications will support financially the Danube-Black Sea Cana'Administration."

- vii -

It would have been preferable for the Bank to participate earlierin the project cycle so as to have an opportunity to review and comment ontechnical and economic analyses before decisions were made. Also, theessential port investments should have been integral parts of the project tohelp ensure the better synchronization of the closely interdependent works(PPAM, paras. 76-77).

Nevertheless, the canal works were well carried out. Moreimportantly, the project forms a vital link in the efficient use of theDanube as a major low cost transport facility. As such, it is likely to helpin the long term industrial aevelopment of the countries in the DanubeBasin. The benefits of the canal's contribution to such development are onlypartly captured in the revenue from canal tariffs, and therefore in theeconomic analysis (PPAM, paras. 68 and 79).

- 1 -

PROJECT PERFORMANCE AUDIT MEMORANDUM

ROMANIA: DANUBE-BLACK SEA CANAL PROJECT(LOAN 1794-RO)

I. BACKGROUND

The Danube International Waterway

1. To place the Danube-Black Sea Canal project in perspective it isnecessary to understand the major developments of the Danube, as a waterway,which have already taken place and the further developments in progress andplanned . The canal may then be preceived as an important link in this longterm upgrading process, affecting the entire Danube Basin, in addition to itsdirect use for transport within Romania. The Danube has historically beenone of the more important navigable waterways in Europe. The main navigablelength is 2,414 km from the Romanian Coast at Sulina to Kelheim in Germany.A farther 173 km, from Kelheim to Ulm, also in Germany, is navigable bysmaller vessels.

2. Long as the Danube waterway is already, it will soon be linked withthe river Main by a canal now under construction and hence via the RiverRhine with Rotterdam and the North Sea. The Danube-Main canal is 171 km longbetween Kelheim and Bamberg. The 72 km section between Bamberg and Nurembergwas completed about ten years ago and the remaining 99 km between Nurembergand Kelheim is well over half finished and scheduled for opening by 1992.This section rises to a summit 406 m above sea level before falling again to338 m above sea level at Kelheim. The total length of the Black Sea-NorthSea Waterway will then be 3,870 km:

Section km No. of locks

1. River Danube from Black Sea 2,415 19 (incl. four under(Sulina) to Kelheim construction)

2. Danube-R. Main Canal, under 171 16construction, from Kelheim toR. Main at Bamberg

3. R. Main, Bamberg to Mainz 384 35

4. R. Rhine; from Mainz to North 900 -Sea

3,870 70

-2-

River Traffic

3. The total freight traffic on the River Danube in 1984 was about 89million tons. The average haul was about 260 km. About 402 of total weightof cargo was national traffic and the remainder was international traffic.The river passes through, or borders, eight countries: USSR, Romania,Bulgaria, Yugoslavia, Hungary, Czechoslovokia, Austria and Germany. For thesections of river in Romania, Bulgaria, Yugoslavia and Hungary, about 30% ofthe total cargo in each section is transit traffic, that is passing throughthe section from end to end. Czechoslovakia, which has a relatively shortsection of the river, has 45% transit traffic. As the head of the river isapproached, Austria has 15% transit traffic, and Germany has none. Recentannual growth of traffic va the Danube has been about 5%. The traffic levelsare greater in the lower part of the river, than in the upper part of theDanube. The volume in the Romanian section of the river is about 60% higherthan the average. The total freight in the Romanian section was about 30million tons in 1984.

4. By comparison, freight traffic on the river Rhine (just overone-third the length of the Danube) in 1981 was about 270 million tons,reflecting the very heavily industrialized areas of Germany, as well as ofthe Netherlands and part of Eastern France and Northern .witzerland which areserved. Traffic on the Rhine grew strongly till about 1970, but it hasstagnated since then. The less mature economies of the Centrally PlannedEastern European countries, are still developing heavy basic industries,which accounts for their continued growth of inland water transport.Nevertheless, the total of inland waterway traffic in ton-km in the countriesbordering the Rhine is still nearly 20% of those countries' total freighttraffic volume. Rail traffic is growing slowly and takes about 30%, whileroad traffic has grown strongly and is over 50% of the total.

5. The relevance to the Danube-Black Sea Canal project is thepossibility of increased transit traffic when the Danube is linked with theRhine around 1992. Since the combined waterway will traverse the mostheavily industrialized parts of Europe, it seems likely that significanttraffic will develop. A certain amount of traffic may appear fairly quicklyby diversion from other modes.Nevertheless, any substantial volume of trafficwould probably depend on a shift in sources of supply for bulk materials, andchanges in patterns of trade. Such changes are likely to take a number ofyears to occur.

Legal and Administrative Provisions for Navigation

6. The Danube functions as an international waterway under the termsof the 1948 'elgrade Convention. This covers navigation on the Danube fromUlm to the Black Sea, including the Sulina Canal through the river delta.The terms of the convention are administered by the Danube Commission,consisting of representatives of the eight riparian countries, with officesin Budapest. The terms of the convention provide for the free use of thewaterway by all nations, except for toll charges (or tariffs) for use of the

- 3 -

Sulina Canal and the locks at the Iron Gates (on the Yugoslav/Romanianborder). These charges are accepted because the Sulina Canal was built latein the last century and requires constant dredging, while the dams and locksat the Iron Gates eliminated the need for towing river craft by locomotivesagainst the previously strong river current. The Rhine, also, is aninteraational waterway freely used by all countries, and is administered by acommission located in Strasbourg. However, there is one important differencebetween the two systems. In the case of the Rhine, trade and traffic isfully liberalized. But in the case of the Danube, traffic within a countryis subject to the laws of that country, which has resulted in local shippingon the Danube within the borders of each state being restricted to itsnational fleet.

7. The Danube Commission administers only the navigable waterway ofthe Danube. It does not have any jurisdiction over ports, links with otherwaterways, such as the new Danube-Black Sea Canal, or the proposed Danube-Main Canal. However, the Government of Romania issued a unilateral declara-tion, at the time of negotiation of the Bank loan, indicating that theDanube-Black Sea Canal would be open to use by all nations without discrimi-nation in regard to tolls (tariffs) or otherwise.

Improvement of Navigation on the Danube

8. The Danube has always been navigable but it had serious limitationsparticularly in regard to the depth at times of seasonal minimum flow, and insome places because of the swift current and narrowness and curvature of thechannel. Gradual improvements have been made over a great many years, andthe pace has accelerated in more recent times. The main navigational part ofthe Danube starts at Kelheim, about 60 km up river from Regensburg. On the"Upper Danube," from Kelheim to about 100 km east of Vienna, the river isrelatively steen and falls 220 m over a distance of 600 km. A total of thir-ceen dams, with locks for river traffic, have been completed on this sectionand a further three are still under construction. Another eight are plannedbut not yet scheduled. Mostly the dams are multi-purpose, including powergeneration with a high volume of water but rather low head of about 15 m.When all these dams are complete, the entire length of the upper Danube willhave been converted to a contin-ious series of reaches between the dams.

9. The "Middle Danube" extends about 900 km, running through Budapestand Belgrade to the Iron Gates, about 200 km east of Belgrade. The firstapproximately 600 km, through Belgrade, has a relatively gentle gradient witha total fall of about 40 m. On the next 300 km, including the Iron Gatesgap, the river falls about 75 m. However, two dams at the Iron Gates, onerecently completed, have eliminated about 40 m of the river's gradient in itssteepest part. A further dam west of Budapest is under construction byHungary which will provide a reach more than 100 km upstream to the beginningof the upper Danube and will still further improve navigation in thissection.

10. The "Lower Danube" is about 900 km from the Iron Gates to Sulina,at the Black Sea end of the 110 km Sulina Canal constructed through theriver's delta during the late nineteenth century. The canal has no locks,but it is subject to silting, and there is also heavy silting at the sand barbeyond its mouth. The can&l and the bar have to be regularly dredged tomaintain a minimum depth of 7.3 m. This allows ships up to about 15,000 tonsfully loaded to reach the river ports of Izmail and Reni, on the USSR side ofthe river, and the river ports of Galati and Braila in Romania. Galati isabout 150 km upriver from Sulina, and Braila about 170 km. From these portsupriver, transport is mainly by barges and tugs, and sometimes by self-pro-pelled barges.

11. There are no serious problems on the lower Danube for navigation ofbarge convoys, thoup,i a few sections require maintenance dredging to providea minimum depth when the river is at its lowest level. The Danube has a goodflow of water, averaging about 6,000 cubic meters per second, but it variesfrom about 2,000 cubic meters at its lowest level, which occurs between lateAugust and October, and maximum flow of about 12,000 cubic meters persecond. Two dams for hydroelectric power are planned for constructionjointly by Romania and Bulgaria in the lower Danube. One is under design,but no construction schedule has been established yet. The new 64 km longDanube-Black Sea Canal joins the Black Sea deep water port of Constanta withCernavoda on the lower Danube 300 km upstream from its mouth at Sulina.

12. It will be seen that all these works on the Danube are having amajor impact on navigational conditions. The reaches above the many dams notonly increase the navigational depth and width, but greatly reduce the strongcurrents which previously existed on the steeper parts of the river. Thenormal size of barge was about 1,500 to 1,800 tons and convoys were usuallylimited to two or four. In the upper parts of the river, generally onlyself-propelled barges were used. With the improvements, the standard bargefor the lower Danube, and through the Iron Gates to Belgrade and Budapest, isnow 3,000 tons capacity. It is a little over 80 m long, 11.4 , wide anddraws 3.8 m when fully loaded. They are operated in convoys of s thustotaling 18,000 tons cargo capacity, with a pusher tug. When the three .'6msnow under construction above Budapest are completed, such convoys will beable to reach Bratislava in Czechoslovakia, about 1,850 km from the mouth ofthe Danube. The three future dams between there and Vienna are also plannedto have locks large enough for the six-barge convoys. Above Vienna thelocks, and river configuration, will probably allow four-barge convoys andabove Regensburg to Kelheim only two-barge convoys may be possible.

13. When the two dams on the lower Danube are constructed, a minimumdepth of 6 to 7 m will be maintained up to Belgrade, allowing the passage ofsmall seagoing ships of about 5,000 tons. Such ships can also pass throughthe Danube-Black Sea Canal. Navigation on the Danube is subject tointerruption from ice. The closures vary widely according to the severity ofthe winter. Some years there are virtually no closures, but under rareextreme conditions traffic may be Interrupted for about two months. Work isabout to start on another canal 70 km long to join Bucharest with the

- 5 -

Danube. It will have similar dimensions to those of the Danube-Black SeaCanal, with a depth of 7.5 m. The terrain conditions for the Bucharest Canalare apparently easy and it follows the Argesul River which is a tributary ofthe Danube.

Formulation of the Project

14. The large scale works undertaken on the Danube, chiefly inconnection wit hydroelectric power projects, have steadily upgraded theriver's capacity and efficiency as a major inland water transport artery. Asdescribed above, the improvements are continuing. The river's transportfacilities have attracted the establishment and expansion of heavy industryrequiring large quantities of heavy bulk raw materials, an increasingproportion of which are imported from overseas. But the efficient use of theriver for this purpose has been severely 'ondicapped by the lack of a deepsea port. As noted (para. 10), the river ports near the Sulina Canal and atits mouth can take only relatively small ships. But the efficienttrans-oceanic transport of large quantities of materials such as iron ore,coal, phosphates, etc., requires the use of large bulk carriers of 80,000tons and upwards. The problem which was becoming acute by the early 1970swas, therefore, to connect the Danube with a deep sea port whece the bulkcargoes could be transshipped to barges for river transport. In the absenceof such a port facility, increasing use was being made of the only deep seaport available, Constanta, where ships of up to about 50,000 tons could behandled. But this involved hattling the materials by rail to the inlandplants. Apart from rail transport being much more expensive, in terms ofoperating costs, than water transport, the capacity of the railway wasbecoming inadequate, particularly in the summer when there is a large volumeof passenger traffic.

15. Three possible solutions were apparently considered:

(1) construction of a deep sea port at Sulina at the mouth of theDanube;

(1i) a major extension of the port of Constanta to the south (at Agigea)and linking it with the Danube (at Cernavoda) with a new canal 64km long;

(iii) extension of the port of Constanta (as in (ii) above) and expandingthe capacity of the railway from Constanta either (a) to a Danuberiver port to be constructed at Cernavoda to transfer the materialsto barges; or (b) to expand the railway system beyond Cernavoda asnecessary to transport the materials entirely by rail.

16. For alternative (i), it is not clear what investigations werecarried out, but the possibility of constructing a port at Sulina was

discarded on the grounds that silting problems at the delta would make thecost of construction and of maintenance dredging prohibitive. The

Government, in 1973, decided to adopt solution (ii), that is the extension of

- 6 -

Constanta (Agigea) port together with construction of a canal, and designwork was started. Informal approaches were made to the Bank for financebeginning in April 1975, in response to which the Bank requested informationon the project. Apparently some information was provided with a formalrequest for financing in March 1977. The Bank found this informationinadequate for the consideration of financing and responded with a detailedquestionnaire including requests for data on its economic justificationinvolving a comparison of the canal solution versus other modes oftransport. The questionnaire was wide-ranging to provide the kind ofbackground material and other information needed for preparation of anappraisal report. However, the Government, in October of 1977, respondedthat it could not provide such wide and detailed information. Meanwhile, theGovernment had started work on the construction of the canal in the lastquarter of 1975.

17. The Bank sent an indentification mission for this project in March1978, followed by a preparation mission in October 1978. On the basis ofinformation obtained, and further information requested from the Government,a mission was sent in February 1979 to appraise the project. However, somequestions arose, mainly concerning the operating institutions to be set upand a further shorter mission was sent in July 1979.

18. A review of the investigations which were carried out as to thefeasibility of the project, including possible alternative solutions,presents difficulties since there were apparently no formal studiesundertaken, leading to consolidated reports and conclusions. The appraisalmission presumably had some problems in this respect and the availabledocuments consist essentially of working papers, largely in manuscript, anumber of which were prepared in July 1979 during the follow-up appraisalmission. However, from these it is evident that evaluations were carried outfor possible alternatives based on an extension of Constanta (Agigea)together with either: a canal to Cernavoda [alternative as para. 15(ii)]; orwith a new rail line from Agigea to Cernavoda together with a new river portthere for transshipment to barges [alternative para. 15(iii)(a)]; or with anew rail line from Agigea to Cernavoda and increased capacity of other raillines as needed for transport of materials entirely by rail (alternative asin para. 15(iii)(b)]. There is no documentation of investigations, if any,in regard to a possible port at Sulina (alternative para. 15(i)].

19. The economics of the canal project hinged on a rapid and very largeincrease in traffic volume of bulk materials which depended heavily on theconstruction or extension of steel plants at Calarasi and Galati on theDanube and, to a lesser extent, the supply of materials for cement andchemical plants (particularly fertilizer) and for an older established steelplant at Hunedoara in western Romania. The analysis also anticipated largeexpected savings in ocean freight by substituting large bulk carriers madepossible by the new port extension at Constanta instead of using smallerships to the river ports via the Sulina Canal at the mouth of the Danube. Onthis basis it was concluded that the extension of the Constanta Port wasjustified together with the construction of a canal to Cernavoda.

- 7 -

20. The canal was chosen over the rail alternative on the grounds thatthe much greater capital cost (then estimated at about US$2 billion, comparedwith about US$1.2 billion for the railway expansion) would be more thanoutweighed by the much lower operating costs by water, which were calculatedto be only about 23% of those by rail. This conclusion would apply unlees adiscount rate higher than 16% were chosen. Some tests were run as tosensitivity in regard to possible alternative variations (each consideredseparately) in canal costs, traffic volumes, rail costs, etc., and noneresulted in a "cross-over" discount rate of less than 14%. The analysisassumed that construction would be completed by the end of 1982, with 1983 asthe first full year of operation. Traffic was expected to build up quicklyand it was predicted to reach 51 million tons in 1985, 75 million in 1990 and102 million in the year 2000. No test was done to determine whether afurther alternative, such as partial expansion of railway capacity (includingreplacement of the bottleneck single line bridges by new double linebridges), would have been adequate until the Agigea port expansion had beencompleted, thereby delaying the need for the very heavy capital expenditureon the canal by perhaps several years. For that matter, since the new steelplant at Calarasi is only about '50 km from Constanta and the other steelplant at Galati about 200 km, perhaps road transport either instead of, or tosupplement, rail capacity might have been possible during the interimperiod. Presumably these or other alternatives were not raised, or seriouslyconsidered during appraisal, since construction of the canal nad already beenunderway for over three years. Even before that, a start had been made in1947 on excavations for a Danube-Black Sea Canal between Cernavoda andConstanta but the work was interrupted in 1953 for the lack of adequatefinancial, physical and technical resources. The works which had beencarried out were incorporated into an irrigation canal.

21. The possibility of a substantial delay in completion of the canal,the Agigea Port works, or the steel plants was apparently not considered inthe evaluation, though such events could have a significant effect on theresults of the economic justification in view of the heavy front end loadingof the high project costs.

22. We may summarize the formulation of the project in relation to theBank's involvement. In 1975, when the Bank was first formally approached bythe Government, it was already clear, as described above, that the Danube hadbeen developed as a high capacity inland waterway transport route. Itsefficiency and capacity was continually being further enhanced by on-goingand proposed construction of additional dams and locks. It was also clearthat its major weakness was the lack of adequate facilities to handle largevolumes of overseas bulk freight traffic. For this, a deep water port andfacilities for cargo transfer to Danube barges was needed. Although designwork had been in progress for a canal, construction had not yet started (itwas begun in late 1975). It was, therefore, possible at that stage toconsider alternatives, including interim measures, to be followed byconstruction of a canal later, as indicated in para. 20. However, by thetime the Bank had decided to seriously consider the project for the lendingprogram, and the Government had provided some information on the proposed

- 8 -

project, the Government was already committed to the canal as constructionwas in progress. Also, the Government was committed to the expansion ofsteel output at the Galati plant where work had been started in 1976, and theconstruction of a new plant at Calarasi where work was started in 1977, sothere was no possibility of considering resiting steel plants to minimizehandling and transport of imported materials. At the time of appraisal in1979, therefore, the only alternetives available to the Bank were in effectto oarticipate in financing the canal or not to participate. In regard tothe expansion of Constanta/Agigea Port also, work was started in 1979 and thescope for any possible suggested changes were very limited. The economicanalyses of possible railway alternatives carried out during appraisal were,therefore, intended to satisfy the Bank that what had already been decidedappeared reasonable, rather than to seriously consider any alternatives orsignificant changes.

23. The project as finally negotiated consisted essentially of: (a)construction of the canal, including locks, canal ports, utilities,buildings, etc.; (b) provision of equipment to be installed for operating thelock gates, pumping stations for operating the locks, and cargo handlingequipment for the canal ports; (c) provision of control, communications andnavigational equipment; (d) reclamation of agricultural land to replace, asfar as possible, the land to be occupied by the canal; and (e) provision ofequipment, materials and facilities required for implementing the project.

24. As noted, a large proportion of the estimated benefits at appraisalwere expected to be obtained from savings in ocean freight costs. Thesesavings were to be achieved through the Agigea/Constanta Port extension whichwould enable a switch to be made to large bulk carriers of 80,000 to 150,000tons, and would reduce ship waiting time caused by congestion at the existingConstanta Port. Furthermore, the Agigea Port extension was essential to theuse of the proposed canal. The initial approach of the Bank was to includeboth the canal and the port in the project. However, prior to negotiations,not only the construction of the south Constan*a/Agigea Port was omitted fromthe project description, but also consttuction of the Danube River Ports ofGalati and Calarasi which were essential for barge traffic to supply the twosteel plants, dredging of the river where needed between Cernavoda and thesetwo ports, and provision of the barge and tug fleet. Instead, a covenant wasincorporated in the Loan Agreement obligating the Government to completethese works, and to expand the fleet to the extent necessary to handle theforecast traffic for the canal by the time it was opened. It is not clearwhy this change was made. It would have been more appropriate to haveincluded these items in the project since they were in effect vital parts ofan integral transport project.

25. Apart from the covenant described in para. 24, for the Governmentto undertake the Constanta/Agigea Port extension and other essentialinvestments, issues which were agreed upon before or during negotiationsincluded, (i) a Government letter confirming its undertaking to operate thecanal permitting its use by other nations in a non-discriminatory manner; aletter to this effect was issued to the Bank December 14, 1979; (ii) the

- 9 -

Government, by decree of May 1, 1979, established the Danube-Black Sea CanalAdministration (DBSCA) to operate the canal when completed; and (iii) theGovernment confirmed its intention to seek substantial cofinancing for theproject; the Bank was providing assistance to the Government in this regard.

Objectives of the Project

26. The overall objective of the project was to provide Romania withlow cost inland water transport via the Danube, chiefly for large volumes ofbulk raw materials from overseas to serve rapidly growing industries on ornear the Danube. A further objective was to attract transit traffic of othercountries to the canal and so bring in toll revenue for Romania.

II. PROJECT IMPLEMENTATION

Design

27. Following the June 1973 decision by the Government, the designs ofthe canal and the extension of Constanta/Agigea Port were undertaken by theRoad, Water and Aerian Design Institute (IPTANA), which is the design agencyfor the Ministry for Transport and Telecommunications (MTTc). But assistancewas given by about 37 other specialized institutions in regard to hydrograph-ical, geological and soil and construction material investigations, modelstudies for the canal and operating systems, and other specialized services,These studies, and the designs produced, were apparently reviewed by theappraisal mission in Romania. However, as they were prepared "in-house" bymany Government institutions, there is no consolidated report of the studiesand findings which can now be reviewed. Similarly, the engineering designsdo not have any consolidated report on methodology, summarizing the data anddesigns prepared, etc. However, a brief site inspection does not indicateany obvious major deficiencies in the ovorall design or details. But, in theabsence of reports and data concerning investigations and analyses, it is notpossible to confirm some design features and decisions.

28. For example, in regard to The canal, a major problem was theplateau ranging from 50 to 70 m above sea level for about 20 km at theConstanta end of the canal. The material underlying the plateau is chalk andlimestone. An earlier brief description sent to the Bank indicates thatconsideration was given to two possible designs. One was to construct thecanal all at a single level, slightly below the normal river level atCernavoda, but above the sea high water level at Constanta. This would havetwo locks only, one at each end. An alternative three-lock layout wasconsidered with the canal level raised perhaps to 20 m through the plateausection to reduce the volume of ,xcavation. However, this alternative wasevidently discarded and the two-lock, one-level canal design was adopted.The remaining 44 km of the canal is In relatively flat terrain requiringlittle excavation. But the massive cut through the plateau involves about300 million cubic meters of excavation, including a substantial amount of

- 10 -

rock which had to be blasted. There were also groundwater problems to bedealt with, especially at the many faults in the limestone. The additionalvolume of earthworks for the selected one-level design would obviously bevery costly. However, this would have to be balanced against the moredifficult operation with additional locks and the need to pump wrter for thehigh level portion of the canal, in other words, higher 3p,rating andtransport costs. The high locks would have been comparable in size andheight with those at the Iron Gates on the Danube.

29. Apart from the question of cost of the huge volume of excavationinvolved, the one-level canal design adopted performs well. As the canalbottom is abo-t 1 m above the Black Sea, which is entered through a lock,there is no possibility of the canal, which is used also for irrigationpurposes, being contaminated by sea water. At the junction with the Danubeat Cernavoda the canal is sufficiently below river level to enable it to besupplied by gravity fLr nearly all the year. However, a pumping station wasconstructed to provide water to the ca!al. whet; the river is at its lowestlevel for about a month during the autumn. The canal is 7 m deep. The widthin the flat terrain section is 70 m at the bottom and 124 i at the watersurface leveL. In the plateau, deep cut section, the waterway is 90 m widebetween vertical retaining walls. The width is sufficient for the standard6 x 3,000 ton barge convoys, with pusher tugs, to pass in each direction.The depth is sufficient for small ocea;, going vessels of up to about 5,000tone. The twin locks at each end of te canal also permit two-way trafficand with a length of 310 m and a widtr! of 25 m can take the full assembledbarge convoys. At the time of the audit mission, convoys were seentransitting the canal, including one wi iron ore for Yugoslavia. The ranaloperation was proceeding smoothly.

30. The design of the canal bank appeared satisfactory for stabilityand for orcrection against wave acti1. The craft usin the canal areallowed to travel. up to 12 kph.

31. There is a major question concerning the stability of the deepcuts. These were evidently initially designed, and constructed, withrelatively steep slopes which are stable where the ground conditions arefavorable. However, massive slides have occurred in many places, such aswhere large quantities of grourdwater have been encouncered, at faults in therock, etc. Many have already been dealt with and remedial works are inprogress at others. But it must be expected that other falls will occur overperhaps a prolonged period. The forecast was that ti,is work would becompleted by the end of 1986, but this seems unlikely. 1le question may beposed whether this represents an important failure of desigi. It is possiblethat more extensive field investigations would have located sime of thesedifficult zones before the cut was made. However, it would have beendifficult to identify precisely these areas in variable material andgroundwater conditions. Of course, one way to minimize such slides wouldhave been to greatly flatten all the slopes, but that would have involved agreat and unnecessary quantity of a1ditional excavatlon. The slides are notinEefering with canal traffic, s0 we the sides of the canal itself have

- 11 -

concrete retaining walls to a height of 10 m and from this point there is alevel berm 11.5 m wide which provides space to deal with the earth slides.It is likely, therefore, that the excavat! n of the cutting with a slopesuitable only for the better soil conditions, and accepting that furtherworks would have to be carried out over a period as found necessary, may wellbe the least cost solutinn even though it means dragging out the completionand does not create a superficially good impression.

32. Where repairs were needed, they are being well carried out, using avariety of methods appropriate to the conditions. These included theprovision of gabions, and other means of support and revetment, together withthe provision of culverts and drainage channels to deal with the subsoil andsurface water and slopes were being flattened to a stable condition. Thesection of the canal over flat terrain did not show any sign of problems.There was no indication of water leakage and the standard bank protectiunconsisting of stone pitching, or 15 cm concrete slabs to below water leveland stone oit:hing on fascines below water, all usually laid over plasticgeotextile sheeting was performing satisfactorily. Indications are thatafter another year or so, when the deep cut slides should largely havefinished, and been dealt with, the canal should need only normal maintenance.

33. The designs, and completed civil works, of the canal ports ofCernavoda, Medgidia and Basarabi appear satisfactory, though most of theloading/unloading equipment has not yet been provided. The four rail andfour road bridges have been satisfactorily designed and completed and theirrigation system is in operation. The total draw-off from the Danube to thecanal for all purposes, including supplying the irrigation system, is only150 cubic meters per second. This is insignificant in relation to the totalflow in the river; when it is at its lowest level of about 2,000 cubic metersper second, water is not drawn off the canal for irrigation.

Construction

34. Construction of the project has been carried out by a special stateagency set up for the purpose, the Danube-Blick Sea Canal Central (CCDMN).Its initial nucleus was staff transferred from the "Iron Gates" Danubeproject. Supervision has been by the design agency IPTANA. On the canal,canal ports, and other associated works have to be accepted by the DBSCAbefore payment can be made According to the Government's schedule, thecanal should have been opened by the end of 1982, though the Bank hadreservations on this forecast. It was actually opened 17 months later,May 26, 1984. The delay was attributed mainly to unexpected difficulties inthe excavation of the very large volumes of chalk and limestone in theplateau region. Major difficulties were undoubtedly experienced, but it isless clear why they should have been unexpected, unless there was a failureto undertake adequate site investigations, borings and laboratory tests.Although the construction equipment was almost entirely of Romanianmanufacture, difficulties were reported in obtaining spare parts and tiresand this contributed to the delay. Nevertheless, it was still a veryconsiderable feat to opjn the canal within 8 years of construction,

- 12 -

especially as a substantial part of the equipment was not available untilaround 1980. The quality of the work is good but, as noted under "Design"above, work will continue probably until the end of 1987, or beyond, inrepairing the earth slides in the deep cut section (para. 31). Meanwhile,the canal is in full operational condition.

35. The main civil works have been completed on the canal ports andother associated works, but the loading and unloading equipment is mostlystill lacking. The largest of these ports is Medgidia. It is intended tohandle over 5 million tons of raw materials and output of a cement factory,which has started operation, as well as coal for a power station. So far theport has only a single crane for general cargo and loading equipment for bulkcement to barges rated at 300 tons per hour.1/ It does not yet haveunloading equipment for limestone and coal. The limestone will be brought inbarge through the new Midia canal which is being constructed between theDanube-Black Sea Canal at Poarta Alba and Navodari near the site of theproposed Midia port which is intended to serve a repair shipyard andfertilizer and chemical industries.

36. The Midli canal is about 30 km long and is scheduled for completionabout the end ot 1987.2/ It is being built to the same dimensions as theDanube-Black Sea Canal. It will be used to bring limestone from nearNavodari by barge to the cement factory at Medgidia. In the meantime, thelimestone is being transported by railway. Construction of the Midia canalis not part of the Danube-Black Sea project. However, it is being designedand constructed under the supervision of IPTANA and for the time being atleast the works are also subject to acceptance by the DBSCA. It has not yetbeen decided whether the operation 'f the Midia canal, when it is completed,will be under the DBSCA or whether there will be a separate autho 'ty. TheGovernment stated that adequate loading/unloading facilities will have beeninstalled at Medgidia by the time the Midia canal is opened.

1/ IB has commented, Annex A, page 2:

"In connection with the actual traffic on the canal, we mention thatthe cement traffic is normally done between Medgidia and Constants wherethere are used specialized floating facilities for the unloading thebarges; similarlly for phosphates and ore traffic. Also, the construc-tion materials (ballast and broken stone) traffic is normally done withbarges from the Danube on the canal to the port for the constructiontrust's requirements there; the unloading, the stacking aid the forward-ing are fully mechanized, the respective equipment being into commis-sioning."

2/ IB has commented, Annex A, page 2:

"Also, in the item 36, in the second phrase, to result that, how-ever, the length of Midia canal is different from those of Danube-BlackSea Canal."

- 13 -

Other Essential Investments

37. While the Danube-Black Sea Canal suffered only moderate delay of 17months to its opening in May 1984, the "Other Essential Investments" havesuffered much more serious delay and are still far from fully operational.As a result, the canal usage has been seriously affected. This situation isof course contrary to the provisions of Section 4.01(b) of the Loan Agreementand the provisions of the Supplimental Letter No. 2. Since these works areessential for realization of the full project benefits, it is necessary toreview their progress even though they were not financed under the projectnor part of the project itself.

38. Construction of the Constanta/Agigea Port Extension is the princi-pal item of the "Other Essential Investments." The part of this port chieflyaffecting the canal traffic is the provision of berths for large bulk carri-ers, loading and waiting berths for barge convoys, and unloading and loadingequipment, and the provision of large stockpile areas for bulk materials,together with conveyors and equipment for stacking and reclaiming. Fiveberths are being provided, two are for vessels up to 150,000 tons and threefor vessels up to 100,000 tons. So far, the quay walls have been constructedand the access channel. dredg-d, but the fill has not been completed for theareas of the quays and for the stockpiling of up to 1.8 million tons of bulkmaterials. 3/ The equipment has not yet been procured and installed for un-loading the ships, conveying and stockpiling the bulk materials, and forreclaiming them and loading them onto barges. The work is being designed andsupervised by IPTANA under the general direction of the Constanta PortAuthority. The works, including the tnstallation of material handling equip-ment, were said to be scheduled for completion about the end of 1987. Someof the handling equipment had been ordered. It was being manufactured inRomania, though with some collaboration with foreign firms.

39. In the meantime, bulk carriers of about 50,000 tons were using theexisting quays at Constanta Port which had a total of 6 bulk unloaders,though not of very large capacity. A temporary conveyor system had been laidfrom those berths to the barge loading quay, but this also has low capacityand could only load one barge at a tlme. One of the new berths was beingpartially used by ships of up to 85,000 tons. However, unloading was by astop gap method using a floating crane And off-loading directly into barges.This was slow and could take more than 5 days to unload a ship. Much of thebulk material is still being transported from the port by railway. Accordingto shipping companies from other countries on the Danube, the arrangementsfor unloading and transshipment of bulk materials at Constanta are slow andexpensive. They expected to use Constanta/Agigea Port and the Danube-BlackSea Canal when the Agigea Port and hnandling arrangements were satisfactory.

3/ 18 has commented, Annex A, page 2:

"We also specify that, there is completed the required dredgingeusuring the access of the larger bulk carriers Lo tho herchs in the neware of the port."

- 14 -

However, in the meantime, they expected that bulk materials would, to a con-siderable extent, continue to be imported via the Sulina canal and riverports, even though smaller ships were involved.

40. A further problem for the use of Agigea Port by barges is the ques-tion of waves from the Block Sea. Loaded barges can only take waves up toabout 0.5 m. The original intention had been to build a north-south break-water outside the harbor. But this would be about 4 km long in water over 20m deep and would be extremely expensive, so its construction has been indef-initely postponded. However, the walls have been constructed for a number ofnew berths and areas to be reclaimed in the Agigea harbor, as well as a newsecondary breakwater. These largely protect the mouth of the Danube-BlackSea Canal and the new harbor area, including the barge loading and waitingberths. Also a barge channel has been constructed to give access for bargesfrom the canal mouth and new harbor arpa to the new mineral quay (for largebulk carriers) without having to go around via the open sea, thus greatly re-ducing the barges' exposure to wave action. 4 / Nevertheless, there is stilla significant gap at the mouth of the new harbor not protected by break-waters. At certain times of the year, chiefly in spring and autumn, thereare occasions when rough weather in the Black Sea, especially with a south-east wind, causes waves greater than 0.5 m to enter the harbor through thegap and prevent the movement of loaded barges. This could affect barge traf-fic for up to about 50 days per year. The problem may be somewhat reducedwhen the cargo berths now under construction on the south side of the canalmouth have been completed, thereby further narrowing the gap to the open sea.

41. The new Danube river port of Calarasi has also not been completed.It is being constructed to serve the new steel plant at Calarasi which isunder construction but also delayed. However, the first stage, to produce0.4 million tons of steel per year, originally scheduled for 1980, has beenin operation since 1983. The raw materials for it are being transported byrail. The second stage, to bring production up to 4.0 million tons of steel,

4/ IB has commented, Annex A, pages 1 and 2:

"We would like to specify that the works implementation inConstanta/Agigea Port in the acces area into the canal is correlatedwith the traffic demand for the canal and would be completed by aboutChe end of 1987. No matter what is the implementation status of theworks in Constanta/Agigea Port, in the acces area into the canal, thetraffic on the canal may be normally done, without any restrictions, dueto the possibilities offered by a connecting channel (of about 800 mlength) which was implemented from 1985 ensuring the connection betweenthe new area and the old area of Constanta port. In this way, thebarges have a simplier acces in to the existing port where from they maytake, using the exis ig facilities, as large as volumes of differentcommodities.

"The connecting channel also ensures the barges circulation in theprotected area of the port, thus the aspects shown in the item 40 inPPAM regarding the safety of the barges circulation are avoid."

- 15 -

originally scheduled for end 1984, is now scheduled for end 1988. The 5 kmlong canal connecting the new port with the Danube has been constructed, ex-cept for the bank protection, which' is about half complete. Quay walls havebeen built for the barge berths, but here, also, a large volume of fill isstill required to bring the area of the quays, and particuarly the bulkmaterial storage areas, up to level. General cargo cranes have beeninstalled for loading steel products onto the barges, but equipment has yetto be provided for unloading bulk materials from barges, conveying it tostockpiles, and reclaiming it and conveying it to the steel plant nearby.5/

42. There was no opportunity to visit the Danube port of Galati whtchwas reuidred to be extended under the covenant for "Other EssentialWorks". / However, the Government reported that both the expansion of thesteel works to 10 million tons capacity, and extension of the river port hadbeen completed. It was also reported that dredging had been carried out, asrequired, on the Danube between the Danube-Black Sea Canal entrance atCernavoda and Galati, as well as Cernavoda to Calarasi, and that maintenancedredging would be undertaken as necessary. The Government barge and pusherfleet was stated to be adequate for the present traffic requirements and thatit would be increased to keep pace with increasing demand. So far, the traf-fic is far below the appraisal estimates.

43. The DBSCA provides pilots for all craft using the canal. Amplenumbers of pilots and other canal staff have been trained and should be ade-quate to meet substantially increased traffic demand.

Cost of the Project

44. The project is not yet completed. As noted, considerable remedialand finishing work is still being carried out, and will continue over thenext I to 2 years, on the deep cut faces of the canal, reinstatements of landdisturbed during the construction and the procurement and installation ofequipment, mainly for the canal ports. The Government estimated that as ofJanuary 1, 1986, a total of USS324.9 millio: equivalent was required to

5/ j8 has commented, Annex A, page 2:

"As regarding Calarasi port, we would like to mention that the worksimplementation in this port is, also, correlated with the traffic demandof Calarasi Steel Plant, of which completion by the final capacity wastemporized under the unfavotirable world economic conditions."

6/ TB has commented, Annex A, page 2:

"Other specifications are required for tI: other items in PPAM.This, in the item 42 there is required to resu that the audit missiond4d not visit Galati port for lnck of time, but " supervision missions-f the Bank had vIsited both CalatI port and t; , ther ports: Braila,Calarasi, Constanta-south/Agge ., duriug the pr .t .trmplementation."

- 16 -

complete the project. Including this sum, the total cost of the project isestimated at US$1,897 millicn equivalent, compared with US$1,750 millionequivalent at appraisal, including contingency allowances. Expenditures inRomanian currency have been converted to US$ at current exchange rates at thetime of the expenditure. On this basis, the total cost overrun would be alittie over 8% (Table 1).

45. The bulk of the overrun is in "Land Replacement," that is restoringland where disturbed by the works, under the item "Expropriation andCompensation." Other overruns were in "Miscellaneous Including Supervision,"due mainly to the time overrun for completion, and a smaller overrun for"Equipment and Its Installation." The cost of the main item "Civil Works"which includes the canal construction, was slightly less than the costestimates, including contingency allowances. Altogether, an overrun of lessthan 10% in a project of this magnitude, extending over a period of about 12years in total and over 8 years since the appraisal estimates were made, mustbe considered good. These costs, of course, refer only to the project asdefined in the Project Description. They do not include the "Other EssentialInvestments" such as the Constanta/Agigea Sea Port Extension, theconstruction and extension of Danube ports and the provision of new barge andpusher fleet, though these are included in the economic evaluations.

III. PROJECT RESULTS

Overall Objectives

46. When the project is completed, it will undoubtedly fulfill itsprimary objective of providing low cost inland water transport of bulkmaterials to the Romanian industries along the Danube. In fact a significantimpact !s likely to be felt throughout the 2,415 km length of the navigableDanube. With completion of the works already underway on the Danube, it willsoon be possible to operate 18,000 ton barge convoys (6 x 3,000) fromConstanta to Belgrade, Budapest and Bratislava. With further works planned,such convoys will be able to reach Vienna and smaller convoys of such bargeswill reach Kelheim in Germany.

47. However, delay in completing the extension of the Port ofConstanta, to provide facilities for large bulk carriers and rapidtransshipment to barges, has prevented the full efficiency of the system frombeing realized. Also, the delay in completing the project and otheressential investments increases the effective economic cost, even if totalcurrent financial costs are not significantly raised. For this reason, andbecause traffic demand so far, and at least for some years to come, is lessthan was forecast, the economic eLurn on the project will be much lower thanthe 19% predicted it appraisal.

- 17 -

Canal Traffic

48. Traffic so far is falling far short of the appraisal estimates.These assumed an immediate diversion of traffic to the canal on opening (thenassumed to be end 1982) of 40.7 million tons in 1983; in fact the canal wasnot opened until mid 1984. Traffic estimated and actual in the first fewyears may be summarized (million tons):

Estimated Traffic ActualYear Appraisal PCR Traffic

1983 40.7 - -1984 48.0 8.0 8.01985 56.4 27.0 18.01986 58.5 42.5 (9.0 for 4 months

Jan-April)

49. Detailed traffic projections, by commodities, were given in theAppraisal Report for the years 1985, 1990 and 2000 and these have beenrevised in the PCR (Table 1). In addition, during the audit, the DBSCAprovided revised detailed forecas's by commodities, for the years 1987 and1990, and total for the year 2000. These estimates, together with estimatesmade by the Audit, are shown in PPAM .'able 2. These projections show widedivergencies and clearly the various estimates of economic return will varyaccordingly. The traffic in the first few years is grossly under theAppraisal predictions, but this forms only a limited guide %o the futuresince port and transshipment facilities at Constanta are not yetsatisfactory; nor is the canal port for the new steel plant at Calarasi yetoperational. Overall traffic will, of course, depend substantially ongeneral world economic conditions. These have been less buoyant than wasprobably expected at the time of appraisal in 1979, since shortly afterwardsthere occurred the second oil price rise and the world recession of 1981. Atthe same time the deteriorating conditions led to a cut-back in the rate ofpublic investment in Romania and this was one of the factors which doubtlesshas delayed the completion of Constanta port extension and other works. Ithas also resulted in a slowdown of investment in the Romanian steel industry,which was expected to account for nearly 50% of total traffic to use theDanube-Black Sea Canal.

50. In 1979, the Government's steel expansion projects aimed at anincrease of about 8 million tons by 1985, to a total of about 20.4 milliontons. Most of this expansion was to take place at two steel plants on theDanube: a major existing one at Galati, and a new one being built atCalarasi. The additional 3 million tons projected at Galati has now beenprovided. However, at Calarasi, the first production of 0.4 million tonspredicted for 1980 was not achieved until end 1983, while the increase of 3.6million tons to 4 million tons pradicted for 1984 is not now expected to beachieved until end 1988. A further 6 million tons expansion of Calarasi, by

- 18 -

about 1990, was originally contemplated; if this expansion in fact takesplace, it seems unlikely to occur before the period 1995 to 2000. It wasexpected that 8 million tons of imported raw materials fir Calarasi would usethe canal and about 19 million tons (out of a total of over 25 million tons)of raw materials at Galati would use the canal by 1985. Even if the canaland supporting port facilities were in full operation, the canal trafficprojected for 1985 could clearly not have been achieved. The AppraisalReport's projections of steel related traffic beyond 1985 were in factsomewhat reduced compared with the Government's long range projections forsteel capacity.

51. The DBSCA produced, through the IB, revised projections of canaltraffic, broken down by commodities, for 1987, 1990 and 2000 (PPAM Table 2).These were stated to be on the basis of forecasts provided by the variousministries concerned. The projection for 1987 was reduced to a totalof 45 million tons compared with 61.6 million at appraisal. However, by1990, DBSCA predict 80.0 million compared with 75.2 million at appraisal and72.1 million in the PCR. For the year 2000 the original estimated total ofabout 102 million tons is retained both in the PCR and by DBSCA. It is notimpossible that the new DBSCA forecasts will be achieved. Clearly it willdepend on world economic conditions (which also affect other industries whichinfluence canal traffic) and the ability of the internal economy to use thesteel produced, even if the steel plants are expanded as planned. Obviouslyother projections could be made based on different assumptions. However, byway of comparison, the Audit has assumed an alternative lower rate of trafficbuild up, particularly in the earlier years, with total traffic only reachingthe DESCA targets by 1995. The assumption of lower total traffic in theearlier years is also based on a belief that it takes several years fortraffic patterns to readjust, for example to new sources of supply, as wellas to induced new activities, when a major new transport fIcility isprovided, or a substantially upgraded one as in this case.

52. Tn any case the build up of canal traffic will depend not only ontotal traffic demand but on the combined competitIve position of the canaland its port of Constanta/Agigea. Constanta port traffic has so far beenrestricted by its overall capacity. The Audit noted about 20 sh1ps waitingfor berths. This situation should be relieved by the port's southernextension at Agigea, but its construction is lagging the canal by severalyears. For the bulk traffic, which uses the canal, although one of the newbulk carrier berths has been constructed to a stage where it is partlyusable, its unloading equipment has not been provided, nor c,nveyors,stacking areas and barge loading facilities. The improvised arrangements forunloading directly into barges is slow and inefficient. So far, only limitedquantities of bulk materials have been attracted to Constanta port and thenew canal, as can ne seen from the port traffic in 1985:

- 19 -

Traffic Throurh Constanta Port in 1985(million tons)

Oil: 20

Bulk Commodities:

Ore 7Phosphate 3Cereals 3Coal 1

Subtotal 14

Other Cargo: 15

Total 49

53. It is clear that until speedy and efficient bulk cargo handlingfacilities are provided at Constanta Port, the canal cannot realize itstraffic potential. In the meantime, much of the transit, as well asdomestic, traffic may continue to be handled via the lower Danube deltaports, of the USSR as well as Romania, even though involving the use ofsmaller ocean ships. This point was made to the Audit by representives ofshipping companies and transport ministry officials of other Danubeancountries. They were clearly keen to use the canal. But they would only doso when Constanta has handling and stacking facilities to provide for rapidunloading and loading at low cost. The early completion of bulk cargo berthsand cargo handling installations at Constanta/Agigea, and also at the Danuberiver port of Calarasi, should be a high priority to permit the benefits ofthe heavy investments already made in the canal to be realized.

54. European industries are becoming more dependent on overseas rawmaterials. When Constanta/Agigea port is well developed for bulk cargoes,and with the past and on-going upgrading for navigation of the river itself,the Danube's low-cost transport facility should offer strong competition forthe traffic and help accelerate the switch to new overseas sources ofsupplies. In the process it may also divert some bulk traffic from raillines in central Europe, and perhaps in Yugoslavia, which supply materials tothe Danube area.

Financial Performance of DBSCA

55. The DBSCA is an entity under the Ministry of Transport andTelecommunications (MTTc). DBSCA is intended to become self-financing. Butthis is within the context of the MTTc providing all the capital needed onvery easy interest terms. For external loans, the interest rate to DBSCA is

- 20 -

only 2% and it pays no interest on capital provided from local funds whichmake up by tar the greater part of the DBSCA's capital for investment in thecanal construction and related works. For capital repayments, the aim is forDBSCA to meet repayments on external loans as they fall due. For localfinances, the repayments are spread over 65 years. These payments in effecttake the place of provisions for depreciation. Furthermore, MTTc meets anyshortfalls, capital or current, and adds the funds so provided to the DBSCA'stotal debt in local currency. DBSCA is thus effectively subsidized.

56. Income of DBSCA is primarily a function of traffic volumes and thelevels of Tariffs (or tolls). Their rates are proposed by DBSCA but have tobe approved by the Government. They are set at levels intended to avoiddiverting potential traffic away from the canal (PPAM Table 3). The tariffsare incremental according to the tonnage brackets of each vessel. However,for the main category of river-going barges or self-propelled vessels, whichare normally of 3,000 tons, the actual charge amounts to just under US$1.00pet metric ton, when loaded, and about US$0.75 for vessels when empty. Forvessels partly loaded, the charge is made as for a fully loaded vessel.

57. The charge for sea-going vessels which can use the canal is on asimilar basis, but is levied per net registered ton (NRT) and tapers fromUS$2.7 to US$2.1. The charge would thus average about US$2.24 per NRT. Thiscompares with about US$1.16 per NRT, when loaded, using the Sulina Canal.However, the traffic on the Danube-Black Sea Canal is overwhelmingly barges.Few sea-going vessels seem likely to use it at present, though ships of up toabout 5,000 tons could do so. They would, in any case, be travelling up theDanube and use of the canal would save them nearly 250 km of canal/rivertravel compared with entering the Danube via Sulina. But of course most ofthe sea-going vessels using Sulina are off-loading, or transshipping tobarges at the delta ports. Clearly the DBSCA's rates for barge traffic,combined with the use of large bulk carriers to Constanta (when -atisfactoryfacilities exist) should be very competitive compared with the u8e of smallships and the extra travel distance, via Sulina.

58. DBSCA provided audited Balance Sheets, as required by the LoanAgreement, for each year 1979 through 1983 (IB's PCR, Table 5). It has sincealso provided audited Balance Sheets for 1984 and 1985 (PPAM Table 4). DBSCAhas not provided Income and Expenditure Statements. However, the Bank's PCR(Annex 7) indicates traffic, average tariffs and cost per ton, operatingrevenues and operating expenses, as well as amortization, interest andcapital payments, for 1984 and projections for 1985 through 1990. Theseindicate 4--ficits through 1988, but surplusses thereafter. But this was onthe basis of PCR revised forecasts for traffic which are not being realized,at least in the earlier years. DBSCA's revised forecast at the time of theaudit would indicate traffic at the PCR forecast levels by 1988. "his seemsuncertain, and the Audit estimate is for traffic to lag behind the DBSCA'srevised estimates, and PCR estimates, until around 1995. In the latter caseit would probably be about 1992 before a small surplus is achieved.

- 21 -

59. In any event, as noted (para. 55) DBSCA's payments for interest onloans is far below the usual levels. If it had to meet such interestpayments at normal rates, it is likely that deficits would persist far intothe '90s at present tariffs. In any event, the MTTc continues to providefinance from its budget to meet deficits in current finance as well as forcontinuing capital expenditure to complete the project, and for constructingnew projects, such as the Midia Canal. However, one point of note is thatthe tariff level of Lei 12.4 per ton shown in the PCR Annex 7 corresponds toconversion from the US$ at the "Official Pate" of Lei 12.7 - US$1. If thetariff receipts (which are collected in US$ or Roubles) were converted at theeconomically more realistic "Commercial Rate" of about Lei 17.5 - US$1,DBSCA's revenues, which are expressed in Lei, would be 38% higher. On thatbasis the deficits might in fact be eliminated by about 1989, according tothe present method of accounting.

Economic Reevaluation

60. A project so large in scope raises a question as to an appropriateapr.oach to its economic evaluation. Since the project is intended toprovide the principle means of transport for imported bulk raw materials(including solid fuels) it will have a wide impact on many industries whichuse such materials. One view is that the project should, for economicpurposes, include, in addition to the canal, not only the necessary expansionof the Port of Constanta and the river ports, but also the main industries tobe served. This would particularly include the steel industry which wasscheduled to generate nearly half of the total traffic. Furthermore, asnoted under "Formulation of the Project" (para. 15), a number of alternativesmight have been considered for the composition and timing of the transportpart of such a project. However, the global project concept was not pursuedand the question of transport alternatives was in any case overtaken byevents. Nevertheless, the adopted project remained dependent on the trafficto be generated by the various industries and traffic projections were madeon the forecasts of the industries' parent ministries. The project Istherefore reevaluated as a transport project, including the port developmentand barge transport fleet, which were not included in the project itself, aswell as the effect of ocean shipping costs, as in The appraisal.

61. The appraisal analysis, after first discarding a railwayalternative, compared the project with an alternative of increasing capacityas necessary on the then existing routes. That meant expanding the deltariver ports, and the barge fleet, to handle growing volumes of bulkcommodities, and to expand rail capacity for other traffic. As noted, theseevaluations, and other studies, are not available in any final consolidatedform. They appear to have been carried out as working papers, largely inmanuscript. It was not possible to reconstitute the details of the analysiswhich had been performed. The Audit therefore focussed on determiningwhether rElative costs of various modes had changed and then adjusted thecosts and benefits in proportion to the revised costs and to actual trafficvolumes so far, and revised estimates of future traffic volumes.

- 22 -

62. It was verified that there had been very little change in relativecosts as between inland water transport and rail. The operating costs forthese could therefore be reasonably proportioned according to traffic.However, there was a major change in the relative costs of ocean fre:'ghtsince the appraisal in 1979. This is important as approaching 502 of thetotal benefits assessed at appraisal would be derived from the saving inocean freight costs through switching from small ships using the Sulina Canalto large bulk carriers discharging at Constanta Port.

63. Ocean freight rates at the time of appraisal in 1979 were risingsteeply and they continued to do so until about the end of 1980. However,they then plunged until they hit bottom about the end of 1982 (Chart, showingShipping, Dry Cargo, One-Year Time Charter Rates). The rates were then onlyabout half the amounts they had been at appraisal in mid 1979. They haveremained depressed since. They had a slight gentle rise through 1983,remained flat through 1984, but again dipped in 1985 and early 1986 almost tothe floor reached in 1982. The result is that the "savings" per ton, throughthe differential between the rates of large bulk carriers and ships of around20,000 tons, have also been halved. In 1979, the rates for 20,000 ton shipswere around US$8/DWT/month against about US$4 for large bulk carriers of70,000-120,000 DWT. In 1986, the rates for 20,000 DWT ships had fallen toaround US$3.50-US$4.00, while the rate for 70,000-120,000 DWT ships hadfallen to a little under US$2. The differential has therefore halved, evenin current prices, since 1979. Consequently, the savings in ocean shippingcosts estimated at appraisal have also been halved at the present time, forequivalent volumes of traffic in current prices, or to only about 34% in 1979prices. A major problem in reevaluating the project is therefore todetermine a reasonable projection for ocean shipping costs in future.

64. Ocean shipping rates are, of course, determined partly by worldconditions and the resulting demand for shipping, and partly by theunderlying cost of building and operating the ships. In the short run, thecurrent market conditions tend to dominate, though costs must prevail in thelong run. The sharp run up from 1978 into 1980 was largely a market boom.However, from 1979, it was also probably fueled by the doubling of oil pricesfrom the region of US$15 per barrel to over US$30. The oil price isimportant, as it represented about 30% of the total cost of operating bulkcarriers at 1979 prices, but this ratio rose to about 50% in late 1981. Thisrise in fuel costs may have helped drive the rise in shipping rates.However, from its peak in 1979, world oil consumption fell gradually by about10% to 1985, as a result of the high oil prices and linked world recession of1981. Oil prices slipped slightly between their peak in 1980 and early1985. But from late 1985 through early 1986 prices fell precipitously andremained for several months in a range of about US$9-US$12 per barrel. Therewas a slight recovery in August 1986 to about US$12-US$15 per barrel (incurrent prices).

65. A prediction of future shipping rates depends substantially on aprediction of oil prices. There is little sign of a major sustained recoveryyet, but a massive fall in drilling and exploration activity, together with a

- 23 -

probable resumption of at least some rise in oil use stimulated by the lowprice, is likely to lead to eventual equalibrium and, presumably a recoveryin oil prices. A long term prediction is difficult, but a fairly cautiousassumption may be that the price will gradually recover to the 1979 level inreal terms by say 1995.

66. Similarly, with shipping rates, the presently very depressedcondition may be expected eventually to begin to recover as an aging fleet,combined with reduced new building and probably some recovery in trafficdemand, ake effect. Short term flucuations are likely to occur, but anassumption of a gradual return to 1979 prices, in real terms, by 1995, inparallel with oil prices, may be reasonable.

67. The PCR indicates that the economic rate of return will have beenreduced to about 11% from the 19% (not 13% as stated in the PCR) estimated atappraisal, including sunk costs. This revision is based on the sensitivityanalysis of the appraisal calculation, and on the PCR's revised trafficforecast, but apparently does not take into account the change in relativecosts of ocean freight. The Audit has computed revised estimates of theeconomic rate of return using the appraisal streams of costs and benefits (at1979 prices) adjusted on two bases (PrAM Table 5):

(1) Using DBSCA's revised traffic projections of mid 1986, with nochange in the 1979 real price levels; that is, it is assumed thatocean shipping rates will recover swiftly and not significantlydistort the benefit streams; and

( ) Using Audit's projections of traffic, and adjusting ocean freightrates downward to 50% of 1979 levels in current prices (to 34% inreal terms) through 1986, with a gradual recovery thereafter to1979 real price levels by 1995.

68. The revised economic rate of return on the basis of ki) above isabout 11%; on the basis of (ii) above it is about 9%. However, even theAudit's estimate (Ii) of 9% assumes that there will be no further delay inthe expansion of Constanta/Agigea deep water port and the completion of theriver port at Calarasi, including provision of efficient bulk handlingfacilities In each case, and in completing the steel plant at Calarasi.

Sustainability

69. The Danube-Black Sea Canal is essentially a long term investment.The Government has attributed to it a nominal 65 years useful life and infact it will almost certaLily continue beyond without substantialreconitruction. There has so far been no real test of its full operation asthe associated sea port works have not yet reached a stage to accept thelarger bulk carriers and to provide efficient and cheap transshipment tobarges. Also development of a3sociated industries has been somewhat slowed.The economic rate of return of the whole project has thus been significantlyreduced to a rather disappoint Ip 9%-1 1% ra:ge. But the canal has been well

- 24 -

constructed and will probably have adequate capacity for the 30 year periodused for its economic evaluation. It is possible that an increase incapacity, at least of the locks, may be needed later to meet traffic demands,especially if a large volume of transit traffic for other Danubean countriesbuilds up. Such traffic may well be generated by the canal and thecontinuing navigational improvements throughout 1he Danube's length. Thereshould even be some traffic with northern Europe after the Danube-Main Canalis opened about 1992. Also further additions to the port of Constanta/Agigeawill be needed in stages to keep pace with traffic demand; this will requirethe preparation and periodic updating of a long range overall plan for theport and associated developments.

70. A satisfactory management and operational organization has beenestablished. Staff has been trained and in fact there is some surplus, whichis temporarily employed elsewhere as required, pending the build-up oftraffic. The canal is functioning smoothly and is unhindered by the remedialanJ finishing riorks which are still in progriss in the deep cut section.Furthermore, when the expected traffic builds up over the next few years, theDBSCA should become self-financing, at least on the bas.s of the favorable(subsidized) debt servicing accorded to it by the Government. Even withoutsuch a subsidy, the DBSCA could be self-financing if it were allowed a morefavorable and economically realistic rate of exchange (say the "Commercial"rate instead of the low "Officiai" rate for conversion of its receipts whichare collected in US$ or roubles).

71. Clearly the Government intends to push the project, including itsessential associated developments, to early completion. When that isachieved, and with the continuation of the Government's financial support forDBSCA until it becomes self-financing, the project will thereafter be fullysustainable.

Findings and Lessons

72. The first question is perhaps "What was the Bank's role?" Theproject did not follow the normal project cycle of the Bank in that it wasnot involved significantly, if at all, in the project's formulation anddesign. The Bank's first tentative contact concerning this project was madebetween the Government and the Bank in early 1975, a few months beforeconstruction was started. But it was not until 1978, when the project hadbeen under construction for nearly 3 years, that the Bank became closelyinvolved in reviewing the project and preparing for its appraisal. A closeexamination and economic analysis were not undertaken until the appraisalmission in 1979.

73. This situation seems to have occurred largely because all studiesand designs were done "in-house" by a large number of Romanian Wovernmentinstitutions. Formal consolidated reports were not prepared as they normallyare by consultants or the borrowers in the more usual Bank financedprojects. Also, on the Government's side there may have been reluctance, atleast in the early stages, to provide information to the Bank. This applied

- 25 -

especially to information of a broader nature concerning the transport sectoras a whole, which was required by the Bank to help see the project inperspective and in relation to overall transport needs, priorities, andplans.

74. By 1978 there was no possibility of the Bank having any effectiveinfluence on the scope, phasing or design, at least of the canal componentitself, and no alternatives could in practice be considered. The Bank'sappraisal examination could then only seek to confirm that what was beingdone was economically acceptable for financing, but not necessarily theoptimum composition or phasing. It seems to have been for that purpose thata comparison was made at appraisal with a railway alternative.

75. The main purpose of the 'ank's involvement seems to have been toassist Romania financially by a loan, though it only covered about 5% of thetotal project cost, but also indirectly by encouraging cofinancing whichamounted to a further 10% of the cost. This was achieved. But clearly moredirect and earlier participation by the Bank, together with a willingness ofthe Government to provide more information, would have been preferable.

76. A second question is whether the "Other Fssential Investments"should have been included as items in the project itself instead of being thesubject of a covenant. These investments were the Agigea extension ofConstanta Port, and the construction and extension of the canal ports ofCalarasi and Galati, all provided for the purpose, and with suitableequipment, for the rapid and efficient handling of bulk materials. In factthese items have lagged several years behind the opening of the canal. Thishas inhibited the full use of the canal, even though temporary arrangementshave been made at Constanta to use existing berths for transshipping the bulkmaterials to the canal barges. But those berths are limited to about 50,000ton ships and cannot take the larger bulk carriers. Also the handling systemis necessarily improvised and slow in operation and port congestion willcontinue until the 5 new large bulk carrier berths are completed and inoperation. The river port at Calarast is not yet in operatioi for bulkcargoes and the iron ore and other materials for the new steel plant thereare so far transported by rail.

77. A further reason for including the Constanta/Agigea Port extensionin the project would have been to integrate better the physical constructionworKs. In particular, the canal required the excavation of a very largevolume of soil and rock totalling about 300 million cu m, while the portrequires large quantities of fill material. The actual amounts depend on thenumber of berths, not only for bulk materials, to be built at this time aswell as on building up a large area which is intended for a future free tradezone (see map). The canal excavation material is being used for the port.But better synchronization of the works would have enabled the material forthe port to be mainly d-eposited as it was excavated from the canal. Thiswould have reduced the amount of double excavation and handling resultingfrom the need for much of the required excavated material from the canal tobe dumped in large tempotary stockpiles and moved later for use in the port.This operation is now in progress.

- 26 -

78. The difficulties in synchronizing the works seemed to have arisenlargely through the economic recession and the consequent financing problemsand slowdown in investments. Perhaps such risks are inherent in tackling avery large project and related investments as in this case. That tends topoint to the need to select and design projects to be executed in smaller butcomplete stages as far as possible. In the case of the canal this would havebeen difficult, but even there, a relatIvely modest redistribution of effortand finances from the canal to the works most closely related might haveproduced better synchronization.

79. Nevertheless, the project must have very positive futureimplications. The canal is in itself a remarkable engineering feat. Inconjunction with adequate expansion and equipment of the Constanta deep seaport, it makes possible for the first time very large quantities of rawmaterials to be brought economically across the oceans to the Danube usinglarge bulk carriers. The river is of course well suited for this type oftraffic and it, also, has been the object of many large investments in theform of dams for power generation but which, with locks, have also greatlycontributed to the improvement of navigation. With the completion of furthersuch works now under construction, the Danube will have a formidable carryingcapacity, in 18,000 ton barge convoys, for over 1,800 km from its mouth, asfar as the Hungarian/Czechoslovakian/Austrian frontiers near Bratislava, andeventually the further 150 km to Vienna. Smaller convoys will be able toreach Kelheim in Germany 2,400 km from the river mouth. Traffic hetween theDanube at Kelheim and the Rhine will be possible from about 1992 when theDanube-Main Canal is completed. The project must therefore be seen as animportant link in the completion and upgrading of a major transport arteryrunning from the Black Sea right th-!gh the Danubean couiitries as far assouthern Gprmany, and eventually 'on .'ecting with the North Sea. Theresulting substantial reduction 1, tra .port costs must have a wile long termeffe-t on the devel pmert not oniy oft Romania but of the entire Danubereg 'on. The benefits of such developrwnt which could be apportioned to thecanal are only partly repregented hy the canal tariff revenues and thu;included in the economic analysis.

- 27 -

PPAN TABLE I

PROJECT PERFORMANCE AUDIT MEMORANDUM

ROMANIA: DANUBE-BLACK SEA CANAL PROJECT(LOAN 1794 - RO)

Appraisal Estimates and Actual Project Costs(Expressed in Le Million and US$ Mllion Equivalent)

raisl Estimate Actual Cost /a Actual Cost as ain Let in US$ mil in tLei in USF mil % oq Appraisalmillion E tuivalent million equivalent Estimate

1. Civil Works

Canal 17,825 990.3 17,819 1,038.5 105Locks 1,807 100.4 1,741 123.8 123Canal Port 1,343 74.6 ',152 68.8 92Utilities )04 16.9 304 17.5 104Buildings 144 8.0 44 2.4 30Reinstatement of 1,581 SY.A 1,.,59 108,2 123affected facilities

Subtotal 23,004 1,278.0 22,61 1,359.2 106

2. naLMM

Equipment Cost 1,024 56.9 1,146 65.9 116Installation 2t3 14.6 57 26.2 179

Subtotal 1,287 71.5 1,60 92.1 129

3,Si alingand Control

Signalling 54 3.0 75 3.8 127Control System 26 1.4 22 1.6 114

Subtotal 80 4,4 97 5.4 123

4. Kxpropriation and Compensation

Exploration 61 3.4 /. 8.4 114Compensation 153 8.5 14 0.8 10Land Replacement 140 7.8 4,002 228.3 2,927

Subtotal 35., 19,7 4.,086 237.5 1,2 06

5. Miscellaneous, IncludingSupervision 1,43 /9.H 2,911 164.7 206

studies and Design

Studies and Research 228 12.7 158 13.6 106Design 395 21.9 425 24.7 113

Subtotal 623 34.6 583 38.1 110

Subtotal Items 1-6 26,784 1,488.n 31,799 1,897.0

7. Contingency Allowances

Physical 2,410 133.9 - - -

Price 2,306 128.1 - - -

Subtotal 4,716 262.0

Total Project Cost 31,500 1,750.0 31,799 1,891.0 108.4

Project Expenditures Per Year (Calendar)(USS Million Equivalent)

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 19873.7 86.2 151.1 87.0 88.7 253.3 324.2 379.9 i117 86.7 210.0 114.5

/a Includes estimated cost of Let 5,680 million (USS324.5 million equivalent), as ofJanuary 1, 1986, to complete the project . The remaining works are mainly to complete

sloping and revetment of ranal banks, reinstatement oi land and procurement andinstallation of equipment.

Source: IB

July 1986

PROJECT PERFORMANCE AUDIT MEMORANDUM

ROMANIA: DANUBE-BLACK SEA CANAL PROJECT

(LOAN 17Q4-RO)

Estimated and Actual Traffic

(Cargo, in million tons)

Actual Estimated

June- Jan.- 1985 1987 1990 2000

Dec. Apr. DHSCA DBSCA DBSCA

1984 19f. 1986 Appraisal PCR PCR Revised Audit Appraisal PCR Revised Audit Appraisal PCR Revised Audit

Imports

Iron Ore 1.7 7.2 13.5 10.2 15.0 2i.6 26.6 28.3 20,3 28.5

Coal 1.0 3.4 13.1 2.5 5. r. 5 8.0 9.6 10.6 10.0

Coke - 0.1 1.2 0.4 0.6 1.3 1.0 0.6 1.4 1.4

Non-ferrous metals - 0.5 1.4 0.8 2. 1.9 2.5 2.5 2.3 3.5

and Concentrates

Chemicals( Phosphates) 0.1 0.2 1.8 0.6 '.9 2. 2.0 4.8 4.5 5.0

Other Commodities - - 0.2 - 0.3 0.2 0.2 0.2 0.2 am

Total Imports 2.8 11.4 21.2 14.5 23.5 32.6 40.3 46.0 39.3 48.6

Ex port a

Rolled Products 0.7 0.6 2.0 1.5 2.5 2.4 2.4 3.0 2.8 3.0

Cement - 0.4 1.5 1.1 2.0 1.5 1.5 1.6 1.5 1.6

Cereals at.d other Agri- - 0.4 0.8 1.0 1.5 0.8 1.4 1.4 1.3 1.4

cultural ProductsFertilizer 0.2 0.3 3.0 1.0 2.0 3.0 2.2 2.2 3.0 2.8

Other Commodities - 0.2 1.7 0.5 1.0 1.9 1.5 2.7 3.1 3.2

Total Exports 0.9 1.9 9.0 5.0 9.0 9.6 9.0 10.9 11.7 12.0

Internal Traffic

(Quarry products, 3.2 2.2 13.6 3.5 5.5 22.6 10.0 10.3 37.1 25.0

cereals etc.)

Transit Traffic 1.1 2.5 7.5 4.5 7.0 10.4 12.8 12.8 13.8 14.0

Total 8.0 18.0 9.0 51.3 27.0 50.1 45.0 40.u 75.2 72.1 80.0 60.0 101.9/a 101.9 101.9 101.9

/a Total traffic is assumed to grow at 2% p.a. beyond the year 2000.

Source: Appraisal, DBSCA. Bank PCR and Audit estimates.

July 1986

- 29 -

PPAM TABLE 3

PROJECT PERFORMANCE AUDIT MEMORANDUM

ROMANIA: DANUBE-BLACK SEA CANAL PROJECT(LOAN 1794-RO)

Canal Tariffs

Rate /aNo. Vessels designation and class Unit Passage Lb Pilotage

1. Loaded cargoboats

1.1 Self-propelled cargo inland vesselswithout train for one passage:

- the first 1000 MT; MT 1.20 0.110- the following 1000 MT; MT 1.00 0.040- the rest of the tonnage. MT 0.75 0.030

1.2 Self-propelled cargo inland vesselswith train, or non-propellea cargoinland vessels, either pushed or intandem, for one passage:

- the first 1000 MT; MT 1.20 0.040- the following 1000 MT; MT 1.00 r.030- the rest of the tonnage, M. 0.75 0.020

1.3 Sea-, and river-going vessels orsea-going argoboats for one passage:

- the first 500 NRT; NRT 2.70 0.130- the following 1000 NRI; NRT 2.50 (.85- the rest of the tonnage. NRT 20 .nf

2. Technical and auxiliary vessels andpassenger vessels

2. elf-propelled push boats, tug boatsand other technical and auxiliary vessels,withrut train, for one passage:

- the first 100 HP; HP 1.35- the following 400 HP; HP ).4 .8- the following 1000 HP; HP '.15 0.020- the rest of the power. HP .07

2.2 Technical vessels and floatinginstallations, non-propelledpassenger vessels, included ina train for one passage;

- the first 100 cu.m; co.m LWD 1. 35 . In- the following 400 cu.m; cu.m LWD 1,10 0.u50- the following 100 cu.m; cu.m LWD 0.80 0.030- the rest of the volume. cu.m LWD 0.50 0.010

2.3 Self-propelled passenger vesselsand floating hotels, for one passage:

- the first 100 cu.m; oun.m LWl ) tk 0.00- the following 400 cu.m; cu.m LWD 1.15 0.080- the following 1000 cu.m; cu.m LWD 0.80 0.020- the rest of the volume. cl.m LW) (,50 0.010

a- Rate (*S$ or roubles). Rates for categories 1.1, 1.2 and 1.3 are reduced by 25*for vessels which are empty or in ballast. Rates in those categories areincreased by 20% for vessels carrying dangerous cargoes.

h Rates for -essels to and from the inland canal ports, that is not travelling thefull length of the canal, are reduced proportionateiy to the distance travelled,but not less than 50 US$ or roubles and 25 'SS or roibles for pilotage.

Source: DRSCA

July 1986

- 30 -

PPAM TABLE 4

PROJECT PERFORMANCE AUDIT MEMORANDUM

ROMANIA: DANUBE-BLACK SEA CANAL PROJECT(LOAN 1794-RO)

Balance Sheets for 1984 and 1985(Lei Thousand)

1984 1985

ASSETS 30,182,133 27,717,0C9

1. Fixed Assets 19,747,393 20,150,463

- Gross Fixed Assets 19,820,927 20,399,255- Less: Accumulated

Depreciation 73,534 248,792- Net Fixed Assets 19,747,33 20,150,463

2. Current Assets 8,977 28,876

- Cash and other assets 468 1,569- Inventory 6,630 19,682- Receivables (clientsand debtors) 1,879 7,625

3. Means and Expendituresfor Investment 10,365,332 7,432,752of which:

- Investments in progress 4,712,893 7,36,252- Equipment and materials

for investments 80,372 64,672- Commissioned investments 5,03,071 259- Receivables for investments 68,996 2,569

4. Profit Payments andProvisions, and Losses 60,431 104,918

LIABILITIES 30,182,133 27,717,009

1. Fixed Assets Fund 19,747,393 20,150,463

2. Current Liabilities 69,408 133,794

3. Sources for Investments 10,365,332 7,432,752

- Funds from MTTc andState Budget 5,950,567 3,653,750

- Foreign Loans 4,365,790 3,534,816

- IB Loans - -- ther Sources 48,975 244,186

Source: IB

July 1986

州轟· ｝&&,’豐’中”&’韭”一朧唱； 民叔 丰汗丰 不 ：‘ 乞‘ 三

〕〕〕：__:!，、：:!_：一＿_:！〕！〕！

’〕！一＿_＿一＿一＿一！、。，。’騷蔆；震造蘿：‘言露名言造／,/\, ，〔〕！ 1

中可”聶讓聶訕

ROMANIADANUBE-BLACK SEA CANAL PROJECT (LOAN 1794-RO)

PROJECT PERFORMANCE AUDIT MEMORANDUMShipping, Dry Cargo, One-Year Timecharter Rates

(US per Deodweight Ton per Month)pm, Mol-14

13 J1- +

+

t +

+

Ä

5 OG -A

4.x

3,-x, C

X, D

1 4

j A j A i 1,) A J j A i J A rý A i 4 j C i A J 0 A i 0 J1,4 1974 ~Mo 1982 1983 1984 1985 1986

Mull! dockerý 10 20 OOC DW, Worla Bank-31~6-ilk Corners 20 3t OOC DWSulk camers 31) 50 0013 DWI

------ Bulk ComerS 50 70 000 DW't - -- qjIk L,),fle,s ± 12C OX DW!

~oc.

- 33 -ANNEX APage 1 of 3

kSast, havember 21 6NANCA D3 INV2STI8 I ---------...-.. -

(LetatesiW at data)

Pereia lationsunicates...........

Serviu Da u -..(A s tre" o rG. v.)

We,. /JCZZ

Mr. Brian ShieldsChiefInergy Infrastructure andUrba Uvelopment

Operations Evaluation Department

WORLD BANK

Re: Project Performance Audit Report on RomaniaDanube - Bleak Sea Canal Project

(Loan 1794 - RO)

We received the Project Performance Audit Report

on the Danube - Black Sea Canal Project and we appreciate very

much the efforte made by the Bark's Staff in drawing up a such

large report and with very many details.

However, we would like to make some additions

and specificaticus to define more accurately some aspects inrelation with Canal's implementation and operation. Thus:

OED Comment: The 1. As you know, in the first few years of operation,comments of the the actual traffic on the Danube - Black Sea Canal was under theBanca de Investitti(IB) have been incor- Appraisal eatimations and this was due, mainly, to the general

porated in "Evaluationdecrease of the ocean traffic under the unfavourable world eco-Summary, Results" nomic conditions. Under the conditions of a lower traffic demand,(PPAM, page v). uncompletion of "Other Essential Investments" had not seriously

affected the canal use, as it is shown in PPAM (items 37 to 41and 52).

OED Comment: The We would like to specify that the works implemen-comments of IB, tation in Constanta/Agig*a Port in the acces area into the canalAnnex A, pages 1 and is correlated with the traffic demand for the canal and would be2, concerning thebarge channel have completed by about the end of 1987. No matter what is the imple-been incorporated mentation status of the works in Constanta/Agiges Port, in thein para. 40. acces area into the canal, the tr-ffic on the canal may be

normally done, without any restrictions, due to the possibilities

- 34 -ANNEX APage 2 of 3

offered by a connecting channel (of about 8oo m length) which was

implemented from 1985 ensuring the connection between the nw

area and the old area of Contani port. In this way, the brrges

have a simplier acces in to the existing port where from they may

take, using the existing facilities, as large as volumes of dif-

feOEnt commodities.

Tce connecting channel also ensures the barges circu

lation in the protected area of the port, thus the aspects shown

in the item 40 in PPAN regarding the safety of the barges circu-

lation are avoid.

OED Comment: IB's We also specify that, there is completed the requirecomment has been in- dredging ensuring the acces of the larger bulk carriers to thecorporated in paza. bertha in the new are of the port.38.

In connection with the actual traffic on the canal,

OED Comment: IB's we mention that the cement traffic is normally done betweencomments have been Modgidia and Constants where there are used specialized floatingnoted in para. 2. facilities for the unloading the barges; dimilarlly for phosphat

and ore traffic. A.ls ,, the construction materials (ballast and

broken stone) traffic is normally done with barges from the

Danube on the canal to the port for the construction trust's

requirements there; the unloading, the stacking and the foeaginj

are fully mechanized, the respective equipment being into comis-si oniazg.oED Comment: bB's As regarding C l(rfi port, we would like to mention

comment has been that the workA implementation in this port is, also, correlatednoted in para. 41. with the traffic demand of Clrai pteel Plant, of which comple-

tion by the final capacity was temporized under the unfavourableworld economic conditions.

lED Comment: iB's 2. Other specifications are required for the othercomment has been items in PPAM. Thus, in the item 42 there is required to resultnoted in para. 42. that the audit mission did not visit Galai port for lack of

time, but the supervision missions of the Ban had visited both

Galati port and the other ports: Brila,Cglgraqi,Constanta-eouth/

Agigee, during th pro ect implementation.

wED Comment: mB's Also, in the item 36, in the second phrase, to resultcomment has been that, however, the length of Midie canal is different from thoseincorporated by in- of Danube - Black lSea Canal.serting the lengthof the Midia Canalin para. 36.

- 35 -ANNEX APage 3 of 3

OED Comment: IB's 3. "Ivaluation Summary", pag.vii, "Results", the firstcomment has been incor- phrase to be completed with: ". . . . much below appraisalporated in the "Evalua- estimates (PPAM,pers.48), due, mainly, to the unfavourabletion Summary, Results t(page v). world economic conditions leding on the one hand to the genera

decrease of the ocean traffic, and on the other hand to the

temporisation of some investments in the local industries usinEthe canal and of the investments related to the canal."

OED Co=ment: IB's Also, in pag. viii, "Suatainability", in the firstcomments have been phrase, ". . . . without Government subsidies" to be replacednoted under "EvaluationSummary, S'istainability" with: ". . . . without Ministry of franeport and Telecommunice-(page vi). tions subsidies out of the overall results of this ministry."

Accordingly, in the second phrase, to be specified that tempo-

rarly the Ministry of Transport and Telecommunications will

support financially the Danube - Black Sea Canal Administratioc

Thank you for your cooperation and of the Bank's

staff with whom we collaborated during the implementation of

this huge project and we would kindly ask you that in drawing

up the final report to take into account our above additions.

Youre in crely,

Alexandru teenu

/Director

-- 3 ' -

én ce r

- 37 -

PROJECT COMPLETION REPORT

ROMANIA

DANUBE-BLACK SEA CANAL PRCJECT - LOAN 1794-RO

I. INTRODUCTTON

The Transport System

1.01 The Socialist Republic of Romania is bordered to the south byBulgaria, to the west by Hungary and Yugoslavia, Pnd to the north by USSR.The River Danube, which is the most important navigable river in south-eastEurope, flows along much of its southern border before swinging north theneast to enter the Black Sea at the northern end of the country's 245 kmlong coastline near the USSR border.

1.02 Historically the River Danube has served as an importanttransportation facility for all of its riperian countries, which havecontinued to use it for imports and exports as well as for local traffic.In Romania with the central range of the Carpathian mountains, there hasbeen the tendency to locate major industrial complexes which consume largevolumes of bulk raw materials on or close to the Danube (I.B. PCRpara. 2.1).

1.03 Due to the depth limitations on the bar at the entrance to theSulina Channel in the Danube estuary, and to the economic need to uselarger ships to carry import cargoes, particularly dry bulk, there were twopossible options to facilitate extension of Danube traffic. The first wasto construct a deep-water port at Sulina for large bulk carriers, but thiswas discarded due to the high investment costs and the substantialrecurring costs to maintain adequate water depths. The second alternativewas to bypass the north-east loop of the Danube and its delta problems byconstruction of a 64 km canal linking the port area of Constanta (and itsavailable development area to the south) with the Danube at Cernavoda,which would also reduce the navigation distance by over 200 km. Thisbypass canal would also open up the Danube for international transittraffic which had been severely inhibited by the Sulina depth limitations(see Map IBRD 14313).

1.04 The decision was taken by the Romanian Government to construct thecanal, and designs commenced in 1973 and were undertaken by IPTANA, aDesign Institute within the Ministry of Transport and Telecommunications(MTTc) and site work was commenced in 1976 by the Construction Central, aspecial entity created specifically to be responsible for the construction

- 38 -

of the canal. The first 36 km of canal from Cernavoda utilized theexisting Carasu irrigation channel which enabled about 15 km of canal to becompleted by mid-1979.

1.05 In 1979, a Romanian Government Decree (No. 180) formallyestablished the Danube-Black Sea Canal Administration (DBSCA) to operateand maintain the Canal. The DBSCA organization chart is attached -- seeAnnex 1(a), and the enabling Decree is shown in Annex 1(b).

II. PROJECT PREPARATION AND APPRAISAL

2.01 The principal objective of the project is to provide low-costinland waterway transportdtion for large and rapidly growing bulk rawmaterials needed for Romania's expanding industries and which will alsoencourage and facilitate the growth of international transit traffic.Briefly, the project comprises the construction of a canal 64 km in lengthwith a minimum width of 70 meters and a water depth of 7 meters. Threeport areas are provided, one at upstream end of the Canal at Cernavoda, andtwo intermediate ports, one at Medgidia (at Km 26) and one at Basarabi (km40) - see Map 1794/2 for layout plans of each port. At each end of theCanal, at Cernavoda and Agigea, two pairs of locks are provided eachcapable of taking barge trains of 6 x 3,000 ton barges and one pusher tug,or small ships up to about 5,000 dwt. The full description of the projectcontent is given in para. 2.09 of the IB report.

2.02 In parallel with the design and early construction of the Canal,plans were prepared for utilizing earth excavated from the Canal to reclaimareas to the South of the existing port of Constanta for future developmentup to and beyond the year 2000 including the more immediate needs for bulkhandling facilities to service the country's steel industry through thetransshipment of coal and iron ore via the new Canal. These plans alsoincluded the construction of a new mineral quay capable of handling up to150,000 dwt ore carriers (see Map 19040R), the extension of ore unloadingfacilities at Galati and construction of a new fuel plant at Calarasi withassociated inland port facilities adjacent to the Danube (see Map IBRD14313), and the improvement of dredged channels in the Danube to ensureyea7 round access to the steelworks by new barges and pusher tugs using thecanal.

2.03 By 1978, discussions between the Government and the Bank hadascertained that assistance in financing the foreign exchange component ofthe canal construction was needed, and the Bank carried out a detailedappraisal of the project in 1979 and finally agreed on a list of equipmentand materials which it could finance (see para. 3.17 of IB report and Table3, page 20). However, since the amount equated to only US$100 million,other co-financing loans were needed - and in fact, as a result of theBank's appraisal report, international commercial banks became interestedin the project and subsequently provided a loan of US$200 million.

- 39 -

2.04 As stated in para. 2.04 of the IB report, the designs prepared byIPTANA followed exhaustive research and study, and no significant changeswere found necessary to the original designs. Work was already in progressby the time the Bank's loan was approved, and the Bank's involvement in theproject (although to the extent of only 5% of the total project cost) had afavourable impact upon project implementation by assisting in securingfinancing from other external sources, and also regarding some technicalmatters.

111. PROJECT IMPLEMENTATION

3.01 As stated in paras. 1.04 and 2.03 above, the project had alreadybeen in progress for three years when appraisal of the Bank's componenttook place. At that time, excavation work had made reasonable progress,and by the effective date of the Bank's loan, about one-third of the totalexcavation for the canal had been completed. However, the need to excavate(and dispose of) a gross total of some 300,000,000 cubic meters of earthand rock, construct some 46 km of canal protection .,alls, lay about 8.7million square meters of side slope protection works, and using about 3.5million cubic meters of concrete, construct the locks, intermediate ports,associated roads, railways and 36 bridges gives an indication of theenormity of the engineering undertaking. During the earlier part of theproject, the winter weather was fairly average, but during the later years,the winter weather was generally more severe, and created delays due tolower rates of excavation and concreting than scheduled - see Annex 2. Inaddition, there were delays due to unexpected difficulties in the deepexcavation of the chalk near Basarabi - see Map 14313 for cross section ofcanal showing strata to be excavated. The heavier strain on the excavatorsand dump t-ucks for moving the material from the sites took its toll onequipment availability and this was also aggravated by shortages of sparepart. and tyres. In addition, the consistency of the soil removed wasoften so glutinous due to high moisture content that it could not be loadedonto conveyors for disposal at normal dump areas or at the reclamationareas in the South Constanta port. As a result, large temporary spoildumps had to be created on adjacent agricultural land - one such dump isabout 15 km upstream from the Agigea lock and stores over 30 million cubicmeters. The projected and actual implementation schedule is shown inAnnex 1, page 17 of the I.B. report. In sum, the performance of theconcerned agencies within the Ministry of Transport and Telecommunicationsin implementing the project has been competent and the quality of work ingeneral. satisfactory. Considering the fact that they had to work underdifficult conditions such as severe adverse weather in winter, worse thanexpected soil characteristics and chronic shortages of spare parts oflocally manufactured construction equipment, this was a considerableachievement.

3.02 The net delay of 17 months in opening the canal on which workcommenT(ed in early 1976 represents a percentage delay equivalent to about

- 40 -

20%, which, bearing in mind the magnitude of the project, and the problemsas described above, represents a considerable achievement. Otherassociated canal works yet to be completed (which do not affect throughtraffic) are at the intermediate ports of Medgidia and Basarabi. Medgidiaport will handle limestone for the local cement works and the export ofcement, and is expected to become fully operational in about mid-1986.Basarabi port will handle construction materials, and should be open foroperations by end 1985/early 1986. Further trimming and stabilization ofupper side slopes of the canal banks between km 41 and km 60 where deepexcavation was necessary, is still in progress, and is forecast forcompletion by the end of 1985 (although this appears optimistic bearing inmind the ground water problems as anticipated at appraisal and apgravatedby the recent severe winter). Canal traffic is not affected by thiscontinuing work.

3.03 Partly as a result of the delay in opening the canal, traffic hasnot de!veloped as forecast. In addition, the canal froze ovcr for about tenweeks during the past exceptionally severe winter. However, thedevelopment of the new steelworks facilities at Calarasi and extensions atGalati have not been completed to schedule, such that to date only (alatihas been supplied with iron ore and coal via the canal. In addition, sinr:ethe Danube dredging between Cernavoda and Galati will not be fullycompleted until the end of 1985, barge loads are limited to only 2,000 tons

(instead of the planned 3,000 tons) due to localized river depthrestrictions. Thus some ore traffic to Galati is still handled via theSu1lina Canal, pending completion of dredging. Because of these knownsituations, it is not surprising that other Danubian countr es have beenreticent about making advance commitments to use the canal before it was

fully operational.

3.04 The steelworks at Calarasi are forecast for completion by *986.

Construction of the steelworks and the associated inlind purt hAs proceededslowly, and thus the demand for iron ore and roal for Calarasi has iut yeLmaterialized. Para. 4.06 of the I.B. report expects Calarasi p.-! to havea capacity of L million tons by the end of 1985. The relative detailedtraffic forecasts for the years 1985, 1990, and 2000 are set out in detaiiin para. 4.10, Table 1, and the following summarizes the l.b. and Y8RDforecasts (in million tons):

Year 1985 Year 1990 Year 2000

Traffic APR. I.B. Bank APR. I.B. Bank APR. I.B. BankImports 21.2 20.0 14.5 32.6 46.0 40.3 39.3 - 48.6Exports 9.0 6.3 5.0 9.5 10.9 9.0 11.7 2 12.0

Sub Total 30.2 26.3 19.5 42.1 56.9 40.3 .0 0bInternal 13.6 3.8 3.5 22.6 10.3 10.0 37.1Transit 7.5 4.9 4.5 10.4 12.8 12.8 13.8 - 14

TOTAL 51.3 35.0 27.0 75.1 80.0 72.1 101.9 101.i 99.6

- 41 -

The steelworks development and its rate of production build-up can thus

have a significant effect upon the canal traffic and the resulting revenue.

3.05 The other work closely related to tho canal project was the

development of the new ore quay in South Constanta port from which the

canal mineral barges were to be loaded. The new quay has already been

constructed (1,000 meters long) - see Map 19040 - but has not been equipped

with unloaders and other support equipment. As a result, the existing ore

unloading facilities have been utilized for up to 65,000 dwt ore carriers,

whereas the new berth is designed for up to 150,000 dwt carriers so that

the full benefits of the larger ore carriers are not yet being realized.

Temporary arrangements have been made to load barges via conveyors at both

the return quay adjacent to the new mineral quay and in the nearby basin.

In addition, a "cut" has been made from the mineral quay basin to the barge

basin so that loaded barges do not have to negotiate areas of open sea to

get to the Agigea entrance to the Canal. The use of these temporary

arrangements has not, to date, inhibited Canal mineral traffic since the

demand has not yet developed. However, during the next two years, ship

unloading and barge loading could be critical should steel production

increase significantly before the new mineral berth unloaders are provided

by the user. The other related works are the completion of extensions at

Galati (due end 198), complFetion of the inland port facilities and

associated dredging at Calarasi (by end 1986), completion of all Danube

river improvement dredging (by cnd 1986), and the provision of the barge

and pusher tug fleet as necessary to handle the forecast traffic. The

details of the present and projected barge and pusher tug fleet are given

in Annex b.

R por-ti tig

3.06 The Investment Bank has reported regularly on the progress of

works (although sometimes late) and has provided the basic data required,

Procurement and Disbursement

3.07 Procurement of the equipment and materials financed by the Bank

has been in accordance with the Guidelines, and all contracts were won by

Romanian bidders, who delivered the goods such that no delays to the works

occurred. Disbursement of the loan was completed about one year ahead of

the appraisal estimate - see Annex 3 for graphical presentation of

disbursements.

Proect Costs

3.08 The project costs have been assessed in both lei and US$ and

converted by I.B. on the basis of the appicable exchange rate at the time

payments were actually made. Bank supervision reports in L981. showed an

estimated total cost (as provided by I.B. at the time) of US42,100 million,

but subsequent changes in the exchange rate and a moe up--to--dat.e

assessment of actual costs by I.B, have Thown a total cost of USti,320

- 42 -

million equivalent (or 4% above the original estimate of US$1,750 million),after allowing for completion of the side slope trimming and stabilizationreferred to in para. 3.02. The appraisal and estimated actual costs areshown in Table 2A, page 18 of the I.B. report and expenditures in BankAnnex 4. The foreign exchange component was reduced by the manufacture ofitems within Romania for which international financing was not availablewith the result that the F.E. component of the project was reduced fromUS$551.7 million to US$322.9 million, of which US$300 million was financedby the Bank loan of US$100 million and the international commercial banks'loan of US$200 million with the balance provided by the Government.

Training

3.09 As described in para. 4.09 of the I.B. Report, training of Canaloperacing and maintenance staff was undertaken as scheduled includingtraining of canal pilots, the use of whom is mandatory. Canal maintenancefor the first year of operations was the responsibility of the ConstructionCentral, who were also training maintenance staff during that period.

Institutional Devel opment

3.10 The Decree setting up the PBSCA defined specifically the duties ofthe Administration, and the Director appointed in 1979 has continued inthat position through constrtiction and to date, so will be well preparedfor the overall runninig at thte Caiai. Te statt met by the missions also

appear capable and suit6ly evpErvi

Role of the Bank

3. 11 The Bank, in ippra i si ng the project and approving a loan ofUS$100 mill to for ptoviding equipment and materials, acted as a catalystfor other internaLiunal cummrcial banks to participate also in the projectby loaning US$200 miilI ion, thus together financing 93% of the actualforeign exchange ut iizicd for ti project.

3.12 Participation by the Bank in this project enabled the Bank toassist with the review of the future development proposals for the Port ofConstanta. The Po7t was intending to construct about 11 km of breakwatersat an estimated cost of US$133 million. As a result of discussions withthe Romanian agencies involved, the initial design length was modified toabout 4.5 km with consequent reduction in financial commi ment pending theestablished need for further breakwater extensions.

3.13 Prior to appraisal, the Bank reviewed various aspects otconstru-tion and suggested certain improvements, particularly regarding theuse of the largest and most efficient excavating equipment available, whichwere accepted. The Rank in tact, tinanced some of this heavier equipmentfrom the loan. In additio, in early 1981, the Bank had detailed

- 43 -

discussions in Romania on some technical aspects of the canal lock gatesdesigns and associated equipment to help minimize maintenance problems inlater years, and on resolving potential procurement problems in relation tothe Bank's Guidelines.

IV. ECONOMIC REEVALUATION

General

4.01 The economic evaluation of the Danube-Black Sea Canal, as carriedout in the Appraisal Report, was based on transport cost savings whichwould result from the elimination of the navigational difficulties of theSulina Channel. As indicated earlier, the primary objective of the projectwas to link the River Danube with deep-water port facilities at SouthConstanta and thereby to utilize fully the great potential offered by theDanube as an energy-efficient and low-cost water transport system.Although the canal was opened to traffic only about a year ago, the meritsof its primary objectives have already become visible and should be fullydemonstrated in the future.

4.02 Romania is now at the threshold of having an extensive waterwaysystem which is suitable for efficient barge operations. Construction ofthe South Constanta port is underway; the facilities which will serve thecanal traffic (deep sea mineral berth, barge basin and related structuresand equipment) are expected to be completed by the end of 1985 or shortlythereafter. With the availability of these facilities, raw materialrequirements of the Galati and Calarasi steel combines will utilize thecanal and the River Danube. In July 1984, the Central Executive Committeeof the Romanian Communist Party approved the construction of two newcanals: one linking Porto Alba on the Danube-Black Sea Canal and Lhe MidiaPort, and the other, the Danube-Bucharest Waterway (see Map IBRD 14313 andAnnex 5). The construction of the Porto Alba-Midia Canal has alreadycommenced. When completed the new 30 km-long Midia canal is expected tocarry about 5 million (US) tons of traffic in its initial years increasingto 12 - 15 m tons by 1990, consisting mainly of raw materials for chemicalplants located at Midia and Navodari. The 72 km-long Danube-BucharestWaterway will be a part of the multi-purpose development project on theArges River Basin including irrigation, power generation, water supply andnavigation. The waterway will link various industrial plants located on ornear the Arges River with the Danube. As a result, the modern facilitiesof the South Constanta Port will be accessible to these traffic-generatingcenters through the Danube-Black Sea Canal.

4.03 The advantages offered by the deep sea port facilities and thecanal are already being utilized by some riparian countries. TheGovernment of Romania has alieady reached agreements for transport of 2.9 mtons of traffic through the canal in 1985; negotiations are underway for anadditional 2.0 m tons of transit traffic. With the expected completion of

- 44-

the final section of the Rhine-Main-Danube canal, the Danube-Black SeaCanal will provide a direct link between the North and Black Seas openingthe way for additional transit traffic.

4.04 The cost of implementing the project was close to appraisalestimates (see para. 3.08). However, the development of traffic is likelyto be below those forecast at the time of appraisal projections. Becausethe economic returns are sensitive to the level of benefits during theinitial years, the appraisal economic rate of return estimates are modifiedto take account of the short-falls in traffic.

Traffic Project ions

4.05 The appraisal traffic torecasts primarily were based on investmentprograms of the steel and chemical industries after they had been reviewedand endorsed by the Bank. However, because of Government's decision toslow down the rate of investments in industrial development, it now appearsthat the appraisal forecasts will not be achieved during the initialyears. In addition, although the canal has been opened to traffic, worksare still continuing at some major river ports which serve the canaltraffic and in the Danube dredging. This will also adversely affect thedevelopment of canal traffic during the initial years. Moreover, becauseof the unusually severe winter, the canal traffic was disrupted during thefirst three nionths of 1985 (para. 3.03). This is likely to reduce furtherthe 1985 trattic despite the compensating measures taken by the Romanianauthorities.

4.06 With th completion ot the facilities at South Constanta Portwhich wIll taclitate the movement of bulk cargo through the canal, and thestart of steel production at the Calarasi plant now scheduled for 1987(Phase I) and 1989 (Phase II), it is expected that the appraisal's totaltraffic fore,asts will be attained with a delay of about five years. Theshort-fall in the traffic volume oturing the initial years is estimated tobe in the o r ?40% in .8 , deciniiig to 20% in 1987 and to about 10%

in 1989.

4.07 In the revised traffic forecasts, the steel-related trafficrepresents a predominant portion of the traffic. According to the newsteel development plans, the production of raw steel will reach about 20 m

tons by 1990. Of this amount, Galati will account for about 10.0 m tonsrequiring about 23 m tons of raw materials including ores, coal and coke.About 6.5 m tons of this amount will be transported by rail (coal and ores,from Poland and the Soviet Union), and through the Sulina Channel. rheremaining 17.6 m tons are expected to be received at the South ConstantaPort and transported through the Danube Canal. The Calarasi steel plantwill rely completely on the canal for its raw material requirements. By1989, the production of steel is expected to reach 4.1 m tons requiringabout 10 m tons of raw materials. The other smaller steel plants, Resita,Hunedoara and Tr. Magurale, will account for 6 m tons of steel. However,only about 8 m tons of their total I I m tons of raw material requirementswill be trans port ed throigh the ranal.

- 45 -

4.08 Among exports, rolled steel products, fertilizers and cement arethe most important. Steel exports will be generated primarily by theGalati and Calarasi plants with Hunedoara, Resita and Tr. Maguraleproviding the rest. The canal's steel export traffic is estimated to beabout 1.75 m tons in 1985 increasing to 3.0 m tons in 1990. Fertilizertraffic will reach about 2.25 m tons in 1990 from the expected level of 1.0m tons in 1985. Exports of cement, cereals and other agricultural productsare projected to amount to 3.0 m tons in 1990 from 2.8 m ton in 1985.

4.09 The canal's internal traffic will be confined mainly toconstruction materials needed for the planned civil works along theCernavoda-Cinstanta corridor. The projected internal traffic for 1985 isabout 3.8 m tons reaching about 10.0 m tons in 1990.

4.10 Transit traffic projections are based on the contracts which havealready been signed or are under negotiation with several Danubian ripariancountries. The transit traffic in 1985, on this basis, would reach about5.0 m tons. After completion of port facilities at South Constanta portwhich will serve the canal, the transit traffic is expected to reach some10.0 m tons in 1990. Table I below shows revised traffic projections forthe period 1985 to 2000.

- 46 -

Table 1: Traffic Projections : 1985 - 2000(In tons)

1985 1990 2000COMMODITIES Appraisal Projected Appraisal Projected Appraisal Projected

IMPORTS

Iron Ore 13.5 10.2 21.6 26.6 20.3 28.5Coal 3.1 2.5 5.5 8.0 10.6 10.0COKe 1.2 0.4 1.3 1.0 1.4 1.4Non-ferrous Metal

and Concentrates 1.4 0.8 1.9 2.5 2.3 3.5Chemicals 1.8 0.6 2.0 2.0 4.5 5.0Other 0.2 0.3 0.2 0.2 0.2

21.2 14.5 32.6 40.3 39.3 48.6

EXPORTS

Rolled Products 2.0 1.5 2.4 2.4 2.8 3.0Cement 1.5 1.0 1.5 1.5 1.5 1.6Cereals ana Other

Agricultural Prod. 0.8 1.0 0.8 1.4 1.3 1.4Fertilizer 3.0 1.0 3.0 2.2 3.0 2.8Otners 1.7 0.5 1.8 1.5 3.1 3.2

9.0 5.0 9.5 9.0 11.7 12.0

INTERNAL TRAFFIL. 13.6 3.5 22.6 10.0 37.1 25.0

TRANSIT TRAFFIL 7.5 4.5 10.4 12.8 13.8 14.0

GRAND TOTAL 51.3 27.0 75.1 72.1 101.9 99.6

June 1985

527UD

- 47 -

Reassessment of Economic Return

4.11 As noted above, the current traffic projections are below those ofappraisal for the initial years of operation of the canal until about1990. By reducing the appraisal estimates of the project benefits by thesame proportions as the short fall in traffic and utilizing all appraisalassumptions, a new rate of economic return on the project is estimated. Itmust be noted, however, that this approach underestimates the benefits asthe cost differential between rail and barge transport has changedsignificantly in favor of the latter. Utilizing the sensitivity analysisof the appraisal economic rate of return calculations, the expectedshortfall in traffic will likely reduce the return on the project to about11% from the 13% estimated at appraisal. However, further delays ininvestments in the ongoing steel plants and resulting shortfalls in theforecast traffic would further reduce the rate of return.

V. FINANCIAL EVALUATION

Financial Performance

5.01 The Danube--Black Sea Canal, is operated and maintained by theDanube-Black Sea Canal Administration (DBSCA) which also collects the canaldues. As such, this financial evaluation is concertied with the affairs ofDBSCA only. The main problem facing DBSCA is development of the requiredtraffic, and the added problem of the caii,l waters freezing onder severewinter conditions (as happened in early 1985;. The resultant loss ofrevenue has inhibited the financial growth ot DBS,A, which needs to improveits earnings to cover its working expenses and to provide for theamortizations stipulated under Section 4.01 (a) (ix) of the Loan Agreementwhich is the main financial covenant . At the levels of future traffic nowforeseen, DBSCA is expected to break even financially at a traffic level ofabout 60.0 million tons per anum in or about 1t489 at thQ existing level oftariffs. DBSCA and the Government authorities are under tandably reluctantto increase the tariffs which are presently considered opetitive toattract international traffic. DBSCA will be operating Aedgidia andBasarabi ports on the canal when they are opened to trattir, but, theirfinancial impact is expected to he minimal diiring the lnitial period.

5.02 The operating results shown in Annex 7 are based on revisedtraffic forecasts as compared with the levels forec,st at appraisal asshown in Chapter IV Table 1. They are broken down to show:

(i) Revised forecasts by the Bank mission;(ii) Latest forecasts by the Borrower; and

(iii) Forecasts at appraisal.

5.03 Annex 7 has been prepared to takt ic-cirt t the amortizationsrequired under Section 4.01 (a), (ix) of the Lan Aur-rnent. ThevariatLiois among these rolumns are noted heI

- 48 -

Traffic - Appraisal forecast over-optimistic for reasonsexplained in paragraph 4.05; Borrower's latest forecast alsooptimistic; Bank mission's lower forecast is assumed to be morerealistic.

Tariffs - Appraisal levels (average rates per ton of cargo) arehigher than existing levels, and thus not so competitive forattracting and retaining traffic; existing levels are consideredto be more competitive.

Traffic Revenues - Dependent on the traffic volumes and tariffrates assumed above.

Personnel Costs -- Revised forecasts prepared by Borrower andaccepted by the Bank mission are expected to be higher thanappraisal estimates since the former is assumed to include cost ofmaintenance personnel.

Repair and Maintenance - Revised forecasts prepared by Borrowerand accepted by the Bank mission are expected to be lower thanappraisal estimates since the latter is assumed to include rost ofmaintenance personnel.

Amortizations

Investment - The revised Bank forecasts take into account theexpected total cost of the project of Lei 31.8 billion amortizedover 65 years, amortization slightly higher (6.5%) due to smallproject cost increases.

interest - The revised Bank forecasts take into account theamortization of interest costs of some Lei 2.0 billion amortizedover 12 years. The appraisal figures are considerably higherpossibly because of anticipated higher costs for the co-financedamounts.

WorkingCapital The revised Bank forecasts take into accountover 15 years the amortization of the initial working capital ofLei 45 million advanced to DBSCA by the Government.

5.04 The net results show that the above levels of amortizations as perLoan Agreement Section 4.01(a) (ix) are expected to he covered in the year1989 according to the revised forecasts prepared by the Borrower and theBank, whereas the appraisal expectations anticipated this in 1985.However, under the operating expenses concept developed in Annex 7, andbased on the revised forecasts prepared by the Bank, the operating expensesincluding the amortizetion of investment should be covered in 1987. TheGovernment will subsidize DBSCA until financial viability is achieved.Operating ratios which are over 100 in the years through 198 6 hegin toreach satisfactory levels by 1988 onwards as traftic increases.

- 49 -

Canal Dues

5.05 The appraisal forecasts assume a canal user rate of Lei 16.9 perton through 1987 and Lei 14.4 thereafter. The existing level is about Lei12.4 per ton. As Annex 7 shows, the actual cost per ton is much higher inthe earlier years, but when the annual traffic reaches 65.5 million tons in1989, the operating costs and the total costs would be fully covered.According to information obtained from the Borrower, the alternativerailway mode charges about Lei 45.1 per ton to move traffic from Galati toConstanta over a distance of 275 km, the estimated cost per ton being Lei81.3 per ton. The corresponding waterway tariffs are Lei 21.0 per ton fora distance of 215 km, the estimated cost at optimum traffic levels beingLei 15.0 per ton. The conclusions to be drawn in favor of the canalalternative are clear in comparison with the railway tariffs, which arehigher and cover only some 55% of the estimated railway costs.

5.06 In retrospect, too much reliance appears to have been placed onthe transfer to and development of international traffic on the canalimmediately upon its completion. The canal was a new concept as a routeand a mode for carrying bulk traffic, and no country would make commitmentsto use the canal until it was operating satisfactorily, especially in viewof the construction delays during the past 3 years (para. 3.03). Asregards internal traffic, some additional time should also have beenallowed for delays in the development 0. new traffic such as those relatedto the new steel mill at Calarasi (para. 4.05). Under these circumstances,the achievement of financial viability is likely to be about four yearsbehind original expectations.

Accounting Activities and Audit

5.07 DBSCA's accounting practices follow the uniform system ofaccounting under the National Accounting Plan of accountingclassifications, record-keeping, analysis and reporting systems. Internalchecks and controls are also basic requirements, as are budgetary controlsand reporting. These are considered satisfactory.

5.08 Audits are conducted by auditors from the overseeing Ministry (inDBSCA's case the Ministry of Transport and Telecommunications) andinspectors from the Ministry of Finance. The Loan Agreement provides forthe submission of audited annual financial statements by DBSCA and theInvestment Bank (Loan Agreement Section 6.01 (e) and (f)). The Bank has

received the 1983 audit reports; 1984 financial statements are still underaudit.

VI. CONCLUSIONS

6.01 The overall project was a highly ambitious undertaking which the

Romanian Government approved and commenced depending primarily upon its ownresources and expertise. That the 64 km-long canal was opened to traffic

- 50 -

17 months late in a construction period from early 1976 to mid-1984 of someeight years, and within 4% of the budgeted cost is a major achievement(paras. 3.02 & 3.08).

6.02 The Bank's participation in the project, although only 5% infinancial terms, provided the stimulus for other international commercialbanks to participate in financing the foreign exchange component, suchfinancing providing 93% of the actual foreign exchange required. Thisenabled the project objectives to be met, namely the provision of animportant water transport link between the River Danube and the Black Seato serve the hinterland industries as well as international transit trafficto other riparian countries (para. 2.03).

6.03 At the time of Bank appraisal of the project, the steel industryin Romania was expanding, but the economic adjustments after 1982 sloweddown the completion of new steelworks development and the demand for ironore and coal has not reached forecast levels so far. While the Governmentis optimistic that latest traffic forecasts will be achieved, the Bank isnot so optimistic and has forecast lower figures for 1985, 1990 and 2000(para. 4.05 et seq).

6.04 With any very large project, the ultimate utilization of whichwould require commitments by users, such potential users, especiallyinternational companies, would not be prepared to commit themselves beforeit became clear that the project would be completed and operatesatisfactorily. It is not surprising, therefore, that other countries havebeen slow in utilizing the new canal resulting in a slow build-up ininternational traffic (para. 5.06).

6.05 Based on revised traffic forecasts, operating expenses includingamorti.zation of investment should be covered by revenues in 1987 withoperacing ratios at satisfactory levels by 1988. The Government willsubsidize DBSCA until financial viability is achieved (para. 5.04).

b.06 Since traffic projections are not now expected to reach appraisalestimates until about 1990, the shortfall in traffic would reduce theeconomic rate of return to about 11%. This is, in fact, the type ofproject where economic re-evaluation so soon after completion is based onestimates rather than on reasonably firm facts, and this should be borne inmind when viewing the re-evaluation (paras. 4.11 and 4.12).

6.07 Principal lessons learned from this project include the need tohave tempered the high optimism implicit at appraisal in assuming thespontaneous movement of traffic to the canal immediately upon its openingwithout paying sufficient attention to possible delays in domesticindustrial growth, difficulties in attracting international traffic awayfrom their existing routes and the dredging requirements of the Danubeitselt; however, on the positive side the role of the Bank in acting as acatalyst in attracting co-financing deserves special mention.

- 51 -

ANNEX 1(a

] i -7-. 1

- 52 -

ANNEX 1(b)

PROJECT COMPLETION REPORT

DANUBE-BLACK SEA CANAL PROJECT

ROMANIA

Translation of the Decree Creating the Administration

DECREEregarding the establishment of the Danube-Black Sea

Canal Administration

The State Council of the Socialist Republic of Romania enacts:

Article 1: On May 1, 1979, the Danube-Black Sea Canal Administra-tion is hereby established, located in Agigea, Constanta Municipality, sub-ordinated to the Ministry of Transport and Telecommunications, Water TransportDepartment, for the purpose of operating and maintaining the canal.

The Danube-Black Sea Canal Administration shall be organized accord-ing to the principle of financial self-sufficiency, with legal status andshall be operated pursuant to legal provisions for the organization andoperation of state enterprises.

Article 2: The Danube-Black Sea Canal Administration has thefollowing main duties:

(a) contracts the machines, installations and equipment requiredfor operation and ensures their reception;

(b) contracts ships for maintenance and operation, and the portcranes;

(c) contracts design documentations, verifies and approves theexecution designs, approves payment of the works;

(d) carries out quality control and reception of the construction-erection works;

(e) participates in the technological tests of the fixed assetsthat are going to be part of the Administration's endowment;

(f) draws up operation and maintenance norms for the navigableDanube-Black Sea Canal; supervises the operation of themachines, equipment and buildings;

(g) ensures recruitment and training of personnel required for

maintenance and operation of the canal;

- 53 -

ANNEX 1(b)Page 2

(h) draws up regulations and technical instructions for opera-tion and maintenance personnel;

(i) manages and coordinates water consumption required fornavigation, irrigation, industrial and potable water supply;

(j) secures control and guiding of navigation on the canal;

(k) operates and ensures maintenance of telecommunications,automation, dispatching and signaling installations, aswell as installations for information feed-back that con-tribute to the safety of navigation and water management onthe canal;

(1) ensures all operation and maintenance activity.

Article 3: During the period up to the commissioning, the averagenumber of technical, economic, administrative and other skills is of 30 jobsin 1979, 50 in 1980 and 80 in 1981 and 1982. The Danube-Black Sea CanalAdministration is placed within the I-st grade of organization, Group IV ofbranches.

Article 4: Expenditures for the operation of the Danube-BlackSea Canal Administration, including the training up to the commissioning ofthe canal are covered from the investment cost of the project.

Article 5: Workers shall be employed within the operational depart-ments of the Administration taking ilto account the remuneration indicatorsapproved by the Ministry of Transport and Telecommunications for the transpor-tation sector.

Article 6: The personnel of the Administration having the duties

of site surveyors will have the remuneration approved by Decree 109/1975 forthe workers of the Danube-Black Sea Canal Central and the other rights up tothe completion of the works.

PRESIDENTNICOLAE CEAUSESCU

Bucharest, May 12, 1979No. 180

PROJECT COMPLETION REPORT

ROMANIA - LOAN 1794-RODANUBE/BLACK SEA CANAL - CONSTRUCTION PROGRESS

100. --- -- - __ -

90 -- -90

00 --

- -- - _ -_ - - ___ _ - - -_ __

ESTIMAT D - - ¯.

7C0 - - -0-

Mi - -¯00

r60 -_ -

- ACTUAL PR3GRESS --- ---

O 50 ---- - -- -5019

o -- --- ---------- -- _-- - -- _-_-_-

_ _ _ _ _--‡_ _ --- - - - --- - - -204 0 -- -0~30 __0

10 - 1---- - -- 4 - - 1111 1 ii i --_ -_

0, 81o 3s1 t_z__as__a___

CALENDAR YEAR

- 55 -

2 3 2

}i ANNEX 3

i Øn

jdV

jewy

AI

o .

a , a

oCL.~tJ L

r4u--j ~

Q C

5N1,11 Is 122ws s

1’·나� 。

Z

- 57

A,"L E X 5

MEETING

OF THE EXECUTIVE POLITICAL COMMITTEEOF THE CENTRAL COMMITTEE

OF THE ROMANIAN COMMUNIST PARTYOF JULY 21, 1984

(Excerpt)

The Executive Political Committee examined and approved theproposals for the construction of the Poorts Albi-MIdis-Nivo-darl and the Danube-Bucharost navigable canals.

Examining ft proposals for the construction of the PoortsAft-Midis-Nivodari Canal, the Executive Political Committeehighlighted both the opportuneness and necessity to have thisproject completed, meant to provide a direct connection betweenthe Danube-Black Soo Canal and the MIdIs sesport. At a firststage, the now canal will take over an annual traffic of 5.4 million t,with avoilabilities to go up to 12-15 million t, mainly raw materialsfor the Modgidla Aggregate Mill for binders and asbestos cementgeneral cargoes, stevedored In MIdIa "sport, products of theMidla and Nivadarl plants, coal and ores mined In the sron. Thenow 30 km-long waterway will accommodate navigation 1.. doublefile of the cargoboats to and from the Danub"lack See Canal.

The Executive Political Committee examined the proposals forthe construction of the Danube-Bucharest Canal and pointed outthe great significance of having such a waterway opened to linkRomania's capital city with the Danube and provide the complexmanagement of the Argcq River basin. The proposals submitted toapproval have stemmed from President Nicola* Cosu oscu'srecommendations on the most effici*nt utilization of the Arg"river water. resources for Irrigation, navigation, electric powergoneration7 drinking and Industrial water supply of towns andeconomic units, local flood-control, drainage of *xcessive water-areas. The total length of the over 80 m-wide canal will be of 72km to the Part of Bucharest

- 58 -

ANNEX 6

PROJECT COMPLETION REPORT

ROMANIA

DANUBE-BLACK SEA CANAL PROJECT - LOAN 1794-RO

Details of Pushel Tugs and Barges for Canal UsePresently Available and Projected

Date No. of Units 1/ Capacity

By 12/84 754 Barges 2/ 991,000 DWT1985 + 77 " + 139,5001986 + 62 " + 105,0001987 + 67 " + 110,0001988 + 69 " + 115,0001989 + 71 " + 119,0001990 + 73 " + 123,000

By 12/84 109 Tugs 148,970 HP1985 + 25 " + 68,8001986 + 11 " + 27,2001987 + 12 " + 30,8001988 + 13 " + 34,4001989 + 13 + 34,4001990 + 13 " + 34,400

1/ Bised on forecast volume of traffic using canal.2/ All barges dedicated for canal use only.

Source: MTTc5270D

一，,-

糅興邢 7

，。！―·！〕―〕〕〕〕〕〕！,-，、！！。

- 60 -ANNEX 8

ROMANIA

LOAN 1794-RO: DANUBE-BLACK SEA CANAL PROJECT

INTERMEDIATE CANAL PORTS

........ ..---.

rC=

4ft

CERNAVODA BASARABI

Commercial port on the Danube located Comm2rcis' porl equipped for a yearly

i the Camel entrance equipped for a traffic of Too thousand tons

arty traffic of 1 million tons and the pos- a operating berths 4

mitty to extend It to 7 million tons per Shipyard - mpait of lechnicall ships

lost .9 walling beirths 4

0 operating berths 11 0 water system area 14 he

walting berths 9 platform area 9 he

water system area 10 he minimum depth 6.5 M

is pla"orm area 9 ha

0 minimum depth 6 m The port Is provided with

0 river station

The porl is provided with 0 general goods store

0 rker station a Passenger beirths

gwieral goods and grain store 0 specialLaed befts FNI goods

patsengtir berths product

0 specialized berths general goodsbuilding materialsfarm produceoll products

OMcoke

MEDGIDIA

C=

Commoircial port equipped for a yearly The poM is provided wtM rivet siAl,on. ge-

itirafflic of 12 miNion tons yearly neral goods store. service shop, as well as

6 operating b*fts passenger and specialized herths

Industrial porl equipped for a yearly traffic general goods

Of 11.5 million tons form product

Operating berths 17 oH products

waiting Whs 11 building materials

0 water system area 19 he or"

platform area 18 ha coke

Minimum depth 7 m coallimestone r9ceplion

carnisint shipping 1794/'_4 T. 9- T. i i t, nn r - Rijr+ a rpst

- 61 -

PROJECT COMPLETION REPORT

ROMANIA: DANUBE - BLACK SEA CANAL PROJECT

(LOAN 1794-RO)

March 6,1985

- 63 -

PROJECT COMPLETION REPORT

DANUBE - BLACK SEA CANAL PROJECT

TABLE OF CONTENTS

BASIC DATA SHEET

SUMMARY AND CONCLUSIONS

I. INTRODUCTION

II. PROJECT PREPARATION AND APPRAISAL

III.PROJECT IMPLEMENTATION AND COST

IV. TRAFFIC AND OPERATIONS

V. FINANCIAL PERFORMANCE OF DANUBE - BLACK SEA CANALADMINISTRATION

VI. INSTITUTIONAL DEVELOPMENT

VII.NCONOMIC REEVALUATION

VIIL CONCLUSIONS

TABLES

1. Actual and Expected Project Implementation

2. Actual and Original Estimates of Project Costa

3. Actual and Original Estimates of Loan Allocation

4. Actual and Projected Traffic by Main Commodiiies,19 83 - 1990

5. Actual and Projected Balance Sheets of Danube - Black SeaCanal Administration

6. Actual and Projected Income Statements of Danube - Black SeaCanal Administration

7. Ex-post and Original Estimates of Economic Rate of Return

Map

Organization Chart of Danube - Black Sea Canal Administration

-d e -

f-tGe r 1¢e

- 65 -

BASIC DATA SHEET

Key Project Data

Original Actual or CurrentExpectation Estimate on Decem-

ber 31,1984

Total Project Cost (US$ million) 1,750.0 1,819.6

Overrun (%) 3.9

Cost of Fixed Assets (U$ million)Working Capital (US$ million)

Financing (US$ million) 1,750.0 1,819.6

Internal funds 1,427.8 1,519.6External Aid Agencies 322.2 300.0

-IBRD Loan 100.0 100.0

-Co-financing 222.2 200.0

Other Sources -

Loan Amount (U3S million) 100.0 100.0

Disbursed - 100.0

Cancelled -

Repaid to December 31,1984 - 8.7

Outstanding to December 31,1984 - 91.3

Completion of Physical components December 31, By the end of(date) 1984 1985

Canal opening for traffic (date) End of 1982 May 26,1984

Achievement of maximum traffic 2000 2000(year)

Maximum Traffic Level (millioncargo metric tons) 101.9 101.9

OTHER PROJECT DATA

Original Plan Revision Actual

Board Approval - January 22,1980

Loan Agreement Date - April 30,1980

Effectiveness Date July 30,1980 September 15, September 5,1980 1980

Closing Date December 31,1983 - December 31,1983

- 66 -

OriginalPlan Revision Actual

Borrower Investment Bank - Investment Bank

Executing Agency Danube Black Sea Danube Black SeaCanal Adminis- - Canal Adminis-tration (DBSCA) tration (DB3CA)

Fiscal Year of January 1 - December 31Borrower

COUNTRY EXCHANGE RATE

Name of Currency: Lei

Year Exchange Rate

1976 - 1977 US 1 Lei 15.oo

January 1,1978-December 31,1980 US 1 Lei 18.oo

(Project Appraisal Year - 1979)January 1,1981-December 31,1982 US 1 Lei 15.o

January 1,1983-June 30,1983 US S 1 = Lei 16.5o

July 1,1983-December 31,1983 US $ 1 = Lei i7.5o

Starting January 1,1984 4eekly exchange rate,star-ting with US$ 1 Lei 21.56

Starting November 1,1984 UJ $ 1 = Lei 17.1o,weeklyrevised

- 67 -

I. INTRODUCTION

The Romanian transportation system is unitary, each

transport mode complements the rest and does not compete with

each other. The main objective is to combine and to coordinate

different modes so as to provide the needed transport services

at the minimum cost to society and with the least energy

consumption.

River transportation hes growing importance in the natio-

nal transportation network, many large industrial enterprises

which need large volumes of bulk raw materials being located on

or close to the Danube. Thusfar the traffic link between the

Danube river and the Black Sea has been made through Sulina Ship

Canal which imposes draft restrictions (maximum 7.0 m) becauseof the physical conditions of the delta, tranashippment from

oceangoing ships to barges and heavy uneconomic costs.

The linkage provided by the Danube-Black Sea Canal enables

avoidance of the Lower Danube Navigation with all the restric-

tions and uneconomic costs and decongestion of the railway

transport linking the country to Constanta, the main Black Sea

port.

The Danube-Black Sea Canal was constructed in order to

secure a river transportation way for the large and ever grow-

ing volumes of bulk raw materials needed by the Romanian indus-tries in expansion and enable the growth in international transit

traffic.

The Project is not merely a transportation way, but amultipurpose navigation complex, with particularly favorable

implications for the social and economic life of the area of

its location and for the entire country.

The Danube-Black Sea Canal Project is the largest

investment project implemented thusfar by Romania, unprecedented

in size and nature and one of the largest civil works recentlyachieved in the world.

The Danube-Black Sea Canal has been entirely implemented

due to Romanian technical knowledge, being the result of the

Romanian science and technique, of the substantial technical

endowment of the Romanian industry at present.

0/*

- 68 -

The Danube - Black Sea Canal is 64.2 km long, comprising

2 locks, at Cernavoda and Agigea, and 3 new ports at Cernavoda,

Medgidia and Basarabi, 61 quays for ships waiting and handling,

43 ha of bassis, 36 ha of port platforms. The Canal's construc-

tive features enable the double way navigation of barges convoys

with total capacity up to 1,000 tons; the total annual traffic

possible through the Canal is of 60 million tons.

The main financing source was secured by the Ministry of

Transports and Telecommunica tions and the itate Budget. There

were also used a Uo $ 100 million loan from 11I880 and a Uo $ 200

million syndicated loan from a group of international coirercialbanks.

II. 2ROJECT PRPAiATION AND JPPHAIJAL

2.1. The development of the industrial sector in the lIezt twodecades hss had the effect of increasing trans;)ort demand in thelong run, lowering the surplus capacity in the ystem. arnd the

flexibility to adjust to seasonal variations and also led to

creation of heavily used corridors, ouch as tne one. ining

the production centers with the country's main port it Con,stan 7a

Inland waterways accounted for 3% of ton-ka in tue ia tomr1l

transportation network, despite the permanent preocupation in

Romania to locate the industrial enterprises needing iirge

volumes of raw materials close to the Danube Iiiver. The Danube

iiver flows through and along the borders of :iomania over a

distance of 1,015 km; it offers great potential for complementing

the country's transport network by providing energy efficient

transportation for bulk commodities. However, the use of the

barges transportation on the river has been obstructed by the

navigation conditions of the Delta. The 61 kin long ..ul.:na O'hip

Canal, which traverses the Delta from Julina to Tulcta, does

not enable the use of oceangoing ships, thus imposing uneconomic

transportation costs. Because of the effect of the southerly

flow of the littoral drift and the creation by siltation of the

&hallow berm at :;ulina it is not possible and economi-cai to

relieve the si uation by constructing a deep water part at

.ulina for the accomodation o; large buIK carriers. Initini

- 69 -

investment costs would be extremly high while sutatantial recur-

ring costs would be incurred in maintaining adequate water depths.

On the other hand the deep sea port of Constanta is beyond the

influence of the Delta and can be expanded southward. Romania,

therefore decided to construct a barge canal from the Danube at

Cernavoda to new South Constanta in order to use the potential

offered by the waterway transportation for the raw materials and

Romanian industries production at lowest costs, together with

the advantages of transiting through the Canal and increased in-

ternational traffic attracted by the elimination of navigation

limitations on the Lower Danube.

The construction of the Danube - Black Sea Canal serves

the tomanian transportation strategy general objective which

consists in coordinating and combining different modes so as

to provide the needed transport services at the minimum cost

to society and with the least energy consumption.

The elaboration of the Danube - Black 6ea Canal Project

design was entrusted to the ioad, Water and Aerian Design Insti-

tute (IPTANA) within the Ministry of Transports and Telecommuni-

cations, supported by a series of specialized institutes which

prepared many studies and designs for locks, hydrology, geology,seismology, land reclamation, transport, ecology, construction,

etc.

In the identification ,jnd preparation stages, the Project

was ;nalysed by the central synthesis organs, according to the

Romanian legislation, in view of its cost and social and econoiicimplications estifated.

A special entity - the Danube - 31ack Jea Canul Centri -was created for the Project construction with a view to :ecui-e

the technical capacity necessary for the construction iind firnl-lization of the Project.

The preparation and denign ,:' the Danube - ilucr J

Canal started in 1973, three years before the construction

commencement, in order to ensure the details required Ly the

planned construction pace.

- 70 -

The Danube - Black Sea Canal is the first Project of

an investment program meant to develop the inland waterwaysof the countrI, which comprises other two Canals - Bucharest-

Danube and Poarta Alb - Midia - N&voderi. The main objective

of the program is to provide transportation capacities at

lowest costs for the country's industry; at the same time,

the projects are multipurpose - irrigations, tourism, power

generation, environment improvements, etc.

2.2. Description of the Project

The Project consists of the following Parts:

Part I: Civil Works

- A canal of 64.2 km long, 7 m deep, 70 to 90 m vide

at the bottom and 135 to 95 m wide at water surface betwe--.i

Cernavoda on the Danube and south Constanta on the Black Sea,

provided with signaling and control system for navigation and

water quality and quantity monitoring system4

- Two locks, one at Cernavoda and another at Agigea.

Each lock has: two reinforced concrete chambers of 310 in

arnd 25 m wide; double drop-type gates at one end and mitre-type gates with protection devices at the other end;

- Three canal ports at Cernavoda, Medgidia and Basarabi

equipped with necessary equipment;

- Jervice roads, railway connection8, power fAcilities,

water supp , 9nd sewerage, telecommunication system and neces-

sary equipment;

- Administrative buildings for canal construction and

operation, as well as a pumping station at Cernavoda ;

- Aeplacement or reconstruction of transport facili-

ties, irrigation and other facilities dismantled or removed

as a result of canal construction.

Part II: Miscellaneous

- Expropriation, reclamation and compensation for

the land occupied by the canal,ports and other works included

in the Project

- 71 -

- Facilities needed to implemeit the Project: housing

for workers, concrete plants, gravel and sand sorting plants,

tra,isport means and workshops;

- Equipment for lock gates operation, for barges'marshal-

ling in the locks, for pumping station at Cernavoda and for

goods'handling in the canal ports.

The Danube - Black Sea Canal Administration was

established for the organization of the supervision during

construction and for the canal's operation.

III. PROJECT IMPLEMENTATION AND CO&3T

3.ol. Project implementation and commissioning

The construction period was estimated on the occasion

of Project appraisal to last until December 31,1964, with the

opening for traffic by the end of 1982. The oMcial opening

of the canal for traffic took place at the end of May 1984;

in June 1964 a traffic of about a quarter of a million tons

had already passed through the canal. The implementation of

this Project which began in 1976 required outstanding efforts

both as volume of work and as technical mobilization. The

machines and equipment were supplied by a great number of

factories and plants from all the Romanian industrial sectors.

The sophistocated high technique installations of the canal,

of which many are unique in the world, were entirely designed

and manufactured locally. In their design more than 35 research

and design institutes were involved.

The works involved the excavation of 300 million c.m.

of earth and rock; the construction of the 45.9 km protection

walls,locks, bridges and other there were concreted 3.6 million

c.m., there were used more than 11 thousand tone of plates and

other important volumes of metallic structures, there were

erected 20 thousand tons of equipment. The canal implementation

also involved the construction of 8.7 million sq.mn. bank pro-

tections using rocks and other constructive systems, 150 km of

roads and crossings, about 800 km of construction roads, 60 kmof railways and 36 bridges with a total length of more than

- 72 -

3,650 m, of which 11 bridges are real engineering art if con-struction sophistication is taken into account.

Despite all the efforts made for the canal commis-sioning when it was planned initially, the Canal opening fortraffic took place with a delay of 17 months as compared withthe date estimated during the project appraisal, mainly becauseof the unexpected difficulties encountered in excavating thelimestone area at Basarabi and the unusually hard wintersduring three years which caused the reduction of the construc-tion pace under the one initially estimated. The difficultiescaused by the excavations and the unfavorable weather conditionscould not have been foreseen nor avcded. The actual and esti-mated implementation schedules are given in Annex 1.

No delay was experimented because of design, tech-nical endowment and labor force ensuarance by the construc-

tion enterprise. There were no changes in Project scope anddesign after the construction began and the Project componentswere achieved as they had initially been planned.

At the canal opening the main components whichensure the normal traffic were commissioned: the canal, the twolocks at Cernavoda and Agiges, Agiges flooding gallery, Cerna-voda pumping station, Cernavoda port, tributories' valleysjunctions. There were also commissioned other works which arenot directly linked with the traffic on the canal (railwaysreconstruction, relocation and protection for telecommunicationinstallations, roads and bridges reconstructions).

There are still to be finalized works in the ports3asarabi and Medgidia, as well as the bank protection of thesupper side of the canal banks, which do not affect the traffic.These works are planned to be finalized during of 1io.

The progress reports periodically submitted to B:Dand the cofinancing at nt reffered to the Project implementationstatus.

- 73 -

3.02 Project Cost

The total project cost estimated at present on basis of

actual expenditures by September 1984 and of remaining works

estimates is of Lei 31,799 million ( US $ 1,819.6 million),

as compared with Lei 31,500 million ( US $ 1,750 million)

estimated at appraisal. The total capital cost, in Lei and US

dollars, in comparison with the appraisal estimate is shown in

Annex 2. The table presented below summarizes on main categories

of expenses the capital cost estimates.

CAPITAL COST AT APPRAISAL AND ACTUAL

- US $ million -

Local Cost Foreign Cost Total Cost

Appraisal Estimate Appr9isal Estimate Appraisal Estimateestimate on Spt. estimate on Spt. estimate on apt.

3o,1984 3o,1984 3o,19b4

Civil works 860.6 ,084.4 417.4 312.2 1,278.0 1,396.6

Equipment 58.1 68.5 13.4 10.6 71.5 79.1

Signalinz andcontro 3.7 6.5 0.7 0.1 4.4 6.6

Expropriationand Compensatim 19.7 144.8 - - 19.7 144.tMiscellaneous,includingsupervision 79.8 157.8 - - 79.b 157.8

Studies andDesign 34.6 34.7 - - 34.6 34.7

ContingeniAs 141.8 - 120.2 - 262.0 -

otal poso- 1,198.3 1,496.7 551.7 322.9 1,750.0 1,819.6

Having in view the Project's magnitude, we can say that the

cost estimate at the time of appraisal (year 1979) is very close

at the real one, even with the capital cost overrun of US $ 69.6

million (3,9 %).

- 74 -

The detailed analysis by main categories of the Project

cost, expressed in US $, should allow for the following:

- the prices resettings in the Romanian economy in 1980

and 1983 led to the increase of the Project cost expressed bothin Lei and in US dollars, the contingencies being higher than

1% annually estimated at appraisal;

- the imports substitution policy adopted in the meanwhile

which determined that a major part of the machines and equipment

provided initially to be imported, to be manufactured and supplid

in due time by local manufacturers; this also led to the reduc-

tion of the foreign exchange cost and to the increase of the

local coat;

- the succesive changes o: the foreign exchange rate of

Leu/ US dollar from 18 Lei/1 US$ in 1979-1980 (used at appraisal)

to 15 Lei/l US$ in 1981-1962, 16.5o Lei/1 US$ and 17.5oLei/l US$in 1983, 21.5b Lei/l US$ in 1964, and use of a weekly excange

rate based on a basket of currencies from December 1983.

3.03. Project Financing

The Project was assisted in financing mainly by the

Romanian Government with funds from the State Budget and Ministry

of Transports and Telecommunications and partially by the World

Bank with a US $ 100 million loan and a group of commercial

banks with a cofinancing loan of US $ 200 million.

The actual financing plan compared with the one estimated

at the time of Project appraisal is as follows:

US $ million % of totalequivalent cost

Appraisal Actual Appraisal ActualEstimate Estimate

Foreign exchange Cocts

Romanian Government 229.5 22.9 13.1 1.3IBRD Loan 100.0 100.0 5.7 5.5Co-financing 222.2 200.0 12.7 11.0

Subtotal 551.7 322.9 31.5 17.8

Local costsRomanian Government 1,198.3 1496.7 68.5 82.2

Total 1,750.0 1,819.6 100.0 100.0

- 75 -

The World Bank loan of US $ 100 million was fullydisbursed until January 1982; the Loan Agreement closing date

was December 31,1983.

The co-financing loan of US $ 200 million was obtained

in January 1981 and entirely drawn down shortly afterwords.

3.04. Procurement and IBRD Loan Allocation

All the goods financed from the IBRD loan were procurred

through International Competitive Biddings. There were held

seven ICBs, one for each category of goods. The contracts were

awarded to the Romanian firms representatives of the Romanian

manufacturers. The provisions of the IBRD/AID guideliness for

procurement were fully observed in the goods procurement from

the IBRD loan.

At the time of the Project appraisal it was estimated

that,for goods of US $ 95 million, the ICBs could have been

won by local manufacturers and suppliers. The remaining of US $5 million had been estimated to be used for imports of machines

and equipment specialized for locks. Because of the prices

increases, some of the goods initially proposed be financed from

IBRD loan had to be financed by the Romanian Government.

The IBRD loan allocation as provided in the Loan Agre-

ement compared with the actual situation is the following:

IBRD Loan Allocation

- in US $ equivalent -

Category According tothe Loan Reallocated ActualAgreement

1. Equipment to beincorporated in 25,000,000 14,000,000 14,149,697.47facilities includedin the project

2. Constructionmaterials 35,000,000 40,000,000 39,904,513.ol

3. Constructionequipment 40,000,000 46,000,000 45,945,789.52

Total 100,000,000 100,000,000 100,000,000

0 /.

- 76 -

The detailed situation of the loan allocation to goods

categories, actual and estimated at appraisal is shown in

Table 3.

IV. TRAFFIC AND OPERATIONS

4.01. The traffic forecasts for the Canal are based on the

development plans of the industries which will be served by

the canal, mainly of the steel combines, as such plans have

been revised for the yeare 1984 and 1985 and on the provisions

of the XIII th Congres'Directives of the Romanian Comunist

Party regarding the development strategy for the following

period.

From Table 4, which gives the traffic forecast by main

commodities at appraisal with the traffic forecasts at present,

it results that the present traffic forecasts for the first

operational year of the canal are below the appraisal forecasts

However, beginning with the fourth operational year of the

canal, the traffic forecasts exceed the traffic volumes esti-

mated at appraisal. The canal will operate at maximum traffic

capacity from 1990 instead of 2000 as estimated at the Project

appraisal.

The failure to achieve the traffic volumes estimated at

appraisal for the first year of the Project operation are

mainly caused by:

- the reduction of activities in the port of Constanta as

a consequence of the prolonged world economic crisis;

- the temporization of the Calara;i Jteel Plant implemen-

tation; the plant will reach the total capacity designed in

the period 1965 - 1990.

4.02. In correlation with the traffic volumes to be accomo-

dated by the Danube - Black Jea Canal, there have been

achieved the port constructions devoted to the canal traffic.

Works are in progress in the Jouth Constanta Port, the river

bassin; the works will be completed gradually by 1)b7, cor-

related with the estimted traffi volumes. Until the worki

- 77 -

completion in the South Constanta Port, there will be used

the existing equipment in the Constanta Port, without any

adverse effect on the Canal traffic.

In the Galati Port there were completed in 1983

capacities for 17.4 million tons of ore, coke, coal, limestone

and rolled products; during this year there will be commissioned

new capacities for another 6.7 million tons.

Chara§i Port will have in 1965 a capacity of 1.0

million tons/year for coal, following to reach a total capacity

of 12 million tons/year of coal, limestone, ore, roiled products,

slag,by the end of 1990.

The fleet is now equipped with the barges and pushers

required by the commodities traffic on the canal: 32b barges

of 1,500 - 3,000 tons with a total capacity of 550,500 tons

and 16 pushers of 600 - 2,400 HP with a total power of 29.4

thousand HP. The provisions for future endowment of the fleet

with barges and pushers are correlated with the traffic forecesta

The dredging provided for to be undertaken periodi-

cally in Cernavoda - Galati and Cernavoda - Ciiiragi sections

secure the necessary depth in order to secure navigation condi-

tions for the barges of 3,000 tons loaded at full capacity.

4.03. Trainning

In order to secure good tra'fic conditions through

the canal, 114 navy officers and electromechanics were trainned

in the period December 1962 - July 19t3, according to the train-

ning program. The trainning for the canal personnel was made at

the Iron Gates Hydropower itation for the navigation on the

Danube and at the Constanta Trainning Center for Civil Navy.

The trainned personnel participated in the technologycal tests

for the locks during all the period until the canal opening.

At present, due to the low volume o' traffic on the canal, part

of the staff works in the Constanta Port and will be transfered

to the Danube - Black Sea Canal 1administration when the traffic

increases.

- 78 -

V. FINANCIAL PERFORMANCE OF DANUBE - BLACK SEA CANAL

ADMINISTRATION

5.01. For the purpose of an estimate of the project's rate

of return, the following major assumptions have been made: (i)

capital cost in foreign currencies (which are expressed in US

dollar equivalent) were converted into Lei at the prevailing

rate of exchange on the date of disbursements; (ii) 19b4 tariffs

for the traffic through the canal and 1984 prices and tariffs

for the annual costs'calculation were used and were assumed

to remain unchanged in future years; (iii) the traffic volume

was assumed to increase according to the schedule shown in

Table 4 and presented in Chapter IV.

5.02. fegarding the financial position of the Danube -

Black Sea Canal Administration, as shown in Table 6, the

following comments have to be made:

- due to short repayment terms of co-financing (in iline

semi-annual installments) during 1981 - 1987, the Danube -

Black zea Canal Administration has very high repayment obliga-

tiorns. But, this debt would be partially serviced by MTTc out

of its funds which would be covered from the Danube - Black Sea

Canal dmini3tration's financial results after l9d).

- the fact that the Danube - Black Sea Canal Adminis-

tration's obligations would be covered out of MTTc's funds,

there is no risk of financial difficulties and ensure the

Danube - Black Sea Canal Administration's financial viability.

The actual and projected balance sheet of DBSCA is in Table 5.

VI. INSTITUTIONAL DEVELOPMENT

6.01. The Danube - Black Sea Canal Project was entrusted

to a separate entity. In May 1979 the Danube - Black Sea Canal

Administration was established, and became the investment bene-

ficiary. The Administration is an entity with legal status,

operating on basis of the self-financing principle; it is subor-

dinated to the Department of Water Transport within the Ministry

of Transports and Telecommunications.

- 79 -

The Danube - Black Sea Canal Administration,as Project

beneficiary, has the following duties and obligations:

(i) to contract the designe,machines, installations,as

well as the fleet and cranes required by the canal and

canal ports operation;

(ii) to ensure recruitment and trainning of operation personnel;

(iii) to carry out quality control and reception of the

construction-erection works;

(iv) to ensure the operation and maintenance of the canal

and of the telecommunication installations, to draw up

operation norms for the canal;

(v) to secure control and guidance of navigation on the canal.

The organization chart of the Danube - Black Sea Canal

Administration is given in annex.

6.02. The design was insured by the Road, Water and Aerian

Design Institute (IPTANA) which had the support of other 37

Romanian institutes specialized in research and design for tests

on hydraulic models, geology, seismology, land reclamation,

transport, energy, Hydromechanical equipment manufacture, etc.

The studies and research for the project preparation

and the design itself started in 1973, three years before

the Project's implementation. Due to wide profe'.ional experiere

and adequate tecnnical endowment, IPTANA and the specialized

institutes secured the design in due time and of the quality

required for the implementation in good conditions of a Project

unprecedented in size and complexity for Romania.

6.03. The Danube - Black 2ea Canal implementation was under-

taken by Danube - Black 3ea Canal Central (CCDN), npecially

created for the amplementation of this project and endowed

with the labor force and equipment required for this project.

- 80 -

The CCDHN management was entrusted to a deputy minister

of the Ministry of Transports and Telecommunications who had

previously been responsible for the implementation of sizable

and sophisticated projects.

During the Project implementation, CCDMN had used

almost 2,500 thousand workers specialized in all the skills

required for the construction and 3,000 engineers.

巨コ ，，・

ROMAN IA

DANUBE - BLACK SEA CANAL PROJECTPROOCT COMPLETION REPORT

ACTUAL ARD ORIGINAL ESTIMATES OF PROJECT COSTS

Uriginal Be Actual estimatesLai million W11rilion Lai million US S million

Local Foreign Total Local Foreign Total % Local Floreign Mal Local Poreign TotaT %Civil WorisU 0n-87 - 12,229 5,596 17,825 679.4 31U.9 990.3 56.6 14,127 3,741 17,866 797.3 249.4 1,046.7 57.5Locke 1,066 741 1,807 59.2 41.2 100.4 5.7 1,872 496 2,368 103.6 33.1 136.7 7.5Canal porta 68o 663 1.343 37.8 36.8 74.6 4.3 1,049 446 1,495 54.2 29.7 83.9 4.6

Utilities 218 b6 3o4 12.1 4.6 16.9 1.0 4o4 - 4o4 2o.7 - 2o.7 1.1

Buildings 141 3 144 7.8 0.2 8.0 0.4 41 - 41 2.2 2.2 0*1

Reinistatement of IP157 424 1,5,61 64.3 23.5 87.b 5.0 1,784 - 1,784 106.4 106.4 5.9affected facilitJoe

jub-totai 7777 -77517 -7TTWT 90-7 T T 7 .7 1, 7 Mo =,. T79= 4,b83 27773' TXT .7 -7=. T-,79r.T 7Equipment

11.0 227 1,109 46.7 57.3 3.1IquipmenT cost 8A 19b 1,024 4'_).9 '56.9 3.2 b62 10.61 ns t a I I a t i o r, 2 "1 0 43 2b3 12. !.4 14.6 c.e 456 - 458 21.6 - 21.8 1.2Signali! g and ControlSignallng 4j 11 A 2.4 0. 6 3.0 0 93 - 93 4.7 - 4.7 0.3Control systems 24 2 26 1.- 0.1 i.4 C.1 J9 i 40 I.b 0.1 1.9 0.1Expropriation and compensationExpropriation bi - 61 3.4 - .4 C.2 lb9 - lb9 11.1 - 11.1 0.6Compensation 153 - 153 b. 14 - -

14 o.6 0.6 0.1Lana replacement 140 - 140 7.c !.t, 0.4 7 C. - 2- 5 7 0 133.i - 133.1 7.3Miscalloneoue,incl.

3upervision 1,436 - 1,43b '7,).L-. 74.b 4.6 1,763 2,763 157.8 - 157.8 8.7.

Studies and Des nStudies and Research 22b 22d 12.7 i2.7 0.7 05 205 13.4 13.4 0.7Deiagn. - 395 21.9 21.9 1.3 39b - 398 21.3 - 21._ 1.2

Sub-total -77767 2 6, 713 W Z55F.T, T= . i,4n-.o 777 7,M 228 -7777 Trr.7 -17.7Contingenciesrhys_ Cal 1,712 698 2,410 95.1 36.b 133.9 7.7Price b4l' 1,465 2,jo6 46.7 tU.4 12b.i 7.2

-1,570 t '91 -31,799 1,496.7 322.9 1,819.6 100.0Total crojectcoot 9,930 31,500 1,.Vb .3 551.7 1,75oo loo.o 2 6,6bb 4 1 I>

- 83 -

TABLE 2

ROMANIA

DANUBE - BLACK SEA CANAL PROJECT

PROJECT COMPLETION REPORTORIGINAL ESTIMATED AND ACTUAL PROJECTEXPENDITURE AND DISBURSEMENT PROM LOAN ACCOUNT

Quarter PROJECT EXPENDITURES DISBURSEMENT PROM LOAN ACCOUNTending Original Estim.Actual and Original Estimated Actual

e CEtim. PatureCalend r Cumula-Expenditures Quartor Cumulative Quarter uyear tive mula-

Calendar Cumu- tiveyear lati-

ve

Lei Million US $ Million

1976 66 66 66 66 - - - -

1977 1,551 1,617 1,551 1,617 - - - -

1978 2,72o 4,337 2, 72o 4,337 -1979-198o

Sept.'79 -Dec.1979 4,491 8,b2o - - -

March' c 0June'bo 5.0 5.0 - -

1900-19b1Sept.'8o 10.0 15.0 - -

Dec.'80 6.o61 14,6b9 7,474 15.0 30.0 14.) 14.9March'8L 15.0 45.0 20.7 35.6

June'81 15.0 60.0 41.4 77.01 9&1-1982

Sept.'61 10.0 70.0 b.8 85.8Dec.'81 6,83 21,772 3,b05 11,273 7.5 77.5 10.2 96.0March'82 5.0 82.5 3.1 99.1June'82 5.0 87.5 0.9 .oo.o

1982-1983Sept.182 5.0 92.5 - -

Dec.'82 6,55& 28,330 4,573 15,5 3.0 95.5 - -March'b3 3.0 98.5 - -June'83 1.5 100.0 - -

1983-1984Sept.'83Dec.'83 2,5o7 3o,917 6,425 22,277 - - - -

March'4June '84

19t4-1985

'ept. '84-Dec.'L4 583 31,oo 1,Lb4 X5,828 - - - -

Total 31, 50o 31,5oo loo.o loo. aoo.o loo.t

ROMAN IAPROJECT COMPLITION RIPORT

DANUBI - BLACK SA CANAL PROJZCT

ACTUAL AND ORIGINAL 8STIMATES OF LOAN ALLOCATION

Quanti- Cost and loan allocation % of totalCategory ty Appraisal According Loa loan

estimates the con- actually Appra-tracts con- used isal Act.-cluded based estim. ualon ICB

1.Equipment to be Incorporatedinto the Project

1.1 Lock gates,incl.spares 7,8oo,ooo 12,12o,ooo lo,757,697.47 7.8 1o.7

1.2 Hydraulic equipment 4,50o,ooo 2,157,ooo 2,157,ooo 4.5 2.2

1.3 Pipes,metal plates 3,30o,ooo - - 3.3 -1.4 Floating pontoons 2,5oo,ooo 1,235,ooo 1,235,ooo 2.5 1.2

1.5 Gaskets and paints 1,6oo,ooo - - 1.6 -1.6 Pumping station 3,000,000 - - 3.o -

1.7 Communication andInformation system 1,ooo,ooo - - 1.e -

1.8 Miscellaneous equtp. 1,3oo,ooo - - 1.3 -

Subtotal 25,ooo,ooo 15,512,ooo 14,149,697.47 25.0 14.1

2. Construction MHaterials

2.1. Bitumen 4o,ooo t 9,14o,911o 9,14o,911.o2 9.12.2. Concrete rein-

for,ing steel 8o,ooo t 3o,763,6o4 3o,763,6o1.99 3o.E

Subtotal 35,ooo,ooo 39,904,5131 39,9o4,513.ol 35.o 39.5

3. Construction Xquipment

3.1. Excavatora(7-8 i) -8 cs. 6,721,o91A 6,721,o91.58 - 6.7

3.2 Excavators(2.5 - 3.2 m7 -5o pca. 13,266,874oJ 13,266,874.05 - 13.3

3.3 Dump trucks So t - loo pcs. 25,oo8,8183 25,oo8,818.83 - 25.o

3.4 Mobile & tower cranes110 mt - 12 pce. 949,oo5.o6 949,oo5.o6 - 1.o

Subtotal 4o,ooo,ooo 45,945,789.52 45,945,789.52 4o.o 46.o

Total loo,ooo,ooo lol, 362,3o2.53 loo,ooo,ooo - loo.c

Note: Categories 1.3, 1.5, 1.6, 1.7,1.8 and the remaining amount from

category 1.1 which were not able to be f out of the loan

were financed out of Romanian Government' iand

TABIN 4

ROMANIA

DANUBE-BLACK SEA CANAL PROJECTPROJECT COMPLETION REPORT

Actual and Projected Traffic byMain Commodities

- million tons -

June- 1985 1987 1990Dec.1984 Apmaiel Pro- Appraial Pro- AppraLsal Pro-

Es imate jected Estmte jected Estinmte jected

A. ImportsIron 1.69 13.5o 13.27 19.oo 21.6o 28.26Coal 0.95 3.1o 4.19 6.oo 5.5o 9.6oCoke - 1.2o o.42 0.6o 1.3o o.64Nonferrous metaland concentrates - 1.42 1.40 2.oo 1.95 2.54Fosphates 0.14 1.80 0.70 1.oo 2.vo 4.80Other commodities - 0.23 - - 0.25 0.16

Total imports 2.78 21.25 19.98 28.6o 32.6o 46.00

B. Exports

Rolled products 0.74 2.oo 1.75 2.5o 2.40 2.99Cement - 1.5o ].4o 2.oo 1.50 1.6oCereals and otherfood products - 0.80 1.40 1.50 o.8o 1.4oPertilizers 0.15 3.oo 1.o5 2.oo 3.oo 2.24Other commodities - 1.7o o.7o 1.oo 1.85 2.67

Total exports 0.89 9.oo 6.3o 9.oo 9.55 10.90

C.Internal traffic 3.17 13.6o 3.84 5.50 22.63 10.30(coary products,cereals,foodproducts,etc.)

D. Transit tmffc 1.16 7.50 4.9o 7.oo 10.4o 12.8o

Grand Total 8.00 51.35 35.oo 56.10 50.10 75.18 80.oo

- 86 -TABLE 5

ROMANIA

DANUBE-BLACK SEA CANAL PROJECT

PROJECT COMPLETION REPORT

Actual and ProJected Balance Sheets ofDanube-Black Sea Canal Adminiatration

(in Lei Thousand)

Frojected1979 1980 1981 1982 1983 1984

ASSETS 488o 75o 1171132 16134. 2361,928 3Q&3L Pized Asseste 12Z ?A] 5 76 9,966 14371 19,747,393-Gross Fixed Assets 137 373 5,439 11,014 16,488 19,82D,97-Lehs:Acumulated 3o 126 263 1,o48 775 73,534

Depreciation-Net Fixed Assets lo7 247 5,176 9,966 14,713 19,747,393

2.Current Assets - - 4- _8,977

-Cash and other assets - - - - 64 468

-Inventory - - - - - 6,63o

-Recet.ables (clientsand debtors) - - - - - 1.879

3.h&eanis and Expendi-Tures9for Invest- 4,649,773 7,55o,56 11,565,956 16,124,51d 23,147,151 10,365,332ments

of which:-Investments inprogress 4,843,664 7,474,4o 11,276,693 15,852,276 22,276,674 4,712,893

-Equipment and ma-terials for invest- 6,o3 J 76,o29 1j5,63j 264,76o 127,992 bo,372ments

-Commissioned invest- '10 7o 459 - 2,253 5,5o3,o7lments

-Receivables for in- 5o 33,117 7,462 74,232 66,996vestments -

4.Profit Payments andFrelevation,and Losses - - 6o,431

LIABILITIES 4,849,88o 7,550,613 11,571,132 16,134,464 23,161,928 3o2,133

1.Pixed Assets Fund lo7 247 16 9,966 14713 19,747,393

2.Current Liabilities - - - - 64 6.o

3.Sources for Invest-mae 4,849,73 7 6 11,565,956 16,124,518 23,147,t5l 1.365,332

-PUnde from MTTcand State Budget 4,b49,591 7,o6o,115 7,671, 237 11,95b, 090 18,561,b8o 5,950,57

-Foreign Loans - 267,493 3,6o,757 3,b44,95o 4,485,547 4,365,79o-IB Loans - 72 32,916 - - -

-Other Sources 182 222,bd6 261,o46 321,478 159,724 48,9754.Benefits - - .

ROMANIA

PROJIMT COMPLETION REPORTDAUB-Z4BAOX, SBA CAWAL PTUMET_

ACTUAL AND PROJECTED INCOME STATEMENT OF DANUBE - BLACK SEA CANAL ADMINISTRATION

19b3 1964 1985 1986 1987 1988 1989 1990 1994 1995 2000A. Traffic

Tons of commodities (t)-million - b.0 35.0 42.5 5o.1 6o.o 7o.o 8o.o 80,0 80.0 101.9Cargo metric tons (cmt)-million - 8 38.5 46.b 55.1 6 6 .o 77.0 88.o 88.o 88.0 101.9Cargo metric tons km (cmtk)-million - 46c.8 2217.6 2657 3173.8 381*6 4435.o 5o6b.8 5o6B*b 5o6&8 581Barge ton kilometers equivalent -million - 7ob.9 3411.7 4147.2 488:.7 5848.6682a4 7798.2 779.2 7798.2 874o

B. Annual Costs to be covered -Lei millionAmortization of Invetament Funds:Cost of investment '47 747.2 747.2 747.2 449.2 152.2 152.2 75.2 -Interest on external loans 4 1 o o!. 234.5 162.9 89.6 63.5 15.1 3.o -Recurring ExpensesLabor costs: -Gross wages J3.5 e6.5 29.5 34.5 4o.o 4o.o 4o.o 4.-3ocial security 7.1 7.7 6.7 9.7 11.4 17.o 17.o 17.o 17.@Repairs and maintenance - . .6 9.5 ll.o 13.5 14.o 15.o 15.o 15.o 15.oMiscellaneous 7.1 10.2 1 1 18.5 2o.o 2o.o 2o.o 2o.o3ubtotal 5 =. 7- 7b.4 7 o 17.o = 9

Total 3?- .1 116.1 11o4.o 1o41.4 976.3 617.2 3o7.7 259.3 l7o.2 92.oC. Hevenues - Lei million 41./ 4i4.o 1 7.o 621.2 744 668.o 992.o 992.o 992.o123.6D. Biefit (deficit) - L,ei taillio (4t)3b) ('134.1)(4, (42o.32(234.30 254o.8 64.3 732.7 821.8l6

0'

- 8. 38. 468 551 66o 7.o 8.o 8.o 8.oCol.

Propose

LadinPacilli

for I

.A.CernavodaNavodar

CERNAVODA '.OCK

Ar I)

K m10 Medg id iaCoch r ieni

OuidiuKm 20 m3

RosovaPoarta Alba

BasarobiKm40

Ville Noi

Cumpana

StraK

Km 60

~AGISLOC

LONGiTUDINAL PROFILE 702

55.5 m

verhead highwayand railway Overheod Overhead Overhead

highwoy railway highway «bridge bridge bridge/

(Medgidia) (Medgidio) (Basorabi)

CERNAVODALOCK

cx 12m Embankment 0n -- -

in. Canal bed 0.5 m

0 5 10 15 20 25 30 35 40 45 50 55KILOMETERS

IBRD 143131(PCR)

ROMANIA

DANUBE-BLACK SEA PROJECT SCHEME-Midia Canal (Under Construction)

Danube - Black Sea CanalProposer' Midia Port M Locks

Overhead bridges, road ir railway

Hydrographic basin of rhe canal

--- Roads

Railways

Towns

LONGITUDINAL PROFILE:

Slit

CONSTANTA Sand, gravel

Red clay

limestone-Existing Constanto port Cholk

Future expansion

jur nPCW MAP SBASE D' )N IBRE 14313R NOVEMBER 1979

''jftrH. I New port - E r UAMATIUN HAS BEE N u DAT EDSouth Crnstanta - Agigea,for detel seetBRD 190 0(PCR).

E A K lometers 0 5 ic 15 20 25

64.5 m 24 28

-/-U. . S R.HUNGARY

Overheadnighway bridge

Overheod

bridge R 0 M A N l AAGIGEA Hunedocora

t2~ LOCK ajo

-0 Sm Tuceae Sulina

75mD,oiect-7.5m]t- Bucharest cf~ a

YUGOSLAVIA Constonfa

60 65

24. BULGARIA 2 O0(MTOBERA 1986

iii

Hune~om

.45

BULGAW,A

* \CC

EXISTNG

CONSTANTA PORT

>7n

S 1 CV-a er r

pa4

p

~Yj BR D 9 4 R(PC

FLITUIRE NORflH-SOUTH BR~EAR

FUTURE

DEVELOPMENT

AREA

FUTURE FREE

AR\A TRADE ZONE

UNDER -. -

RFCLAMATON

ARGE ADIN E?AGE 4AJiNG BEJTHS

ROMANIA

DANUBE - BLACK SEA CANALPORT OF CONSTANTA / AGIGEA

S5W E DE NioNORWAY Otockholm

44

UN T-P N M A R KLso'~oé M n,n Mom

Dubi.n L.0,0.0iSE I AN D 0 V 6 GERMAN 'L A N

1 -N G D 0 M NETHERLANDS,Amsterdam fEDEkA- -å£

cor ondon *

BELGIUM -1 R 34 0

so.~O -. ,,SY'ERXANY 0 CJZEC-HOS-IŽvA: --

Cheborg 0- f eöbe

-1 1 ,ý, R

er0, 'Rcc

k S MARR

tco~ oc,ý :,. e g5ae10oOcs VG Sooond r * IV-90 B a e -

Tirane aPorto cB..,

PORTUf-AL40, Nj 0 kli C E

Lisoo Ms a 8 r,'

cordo lcoe

4 aienAs ans

Codoo bi ~r !; ~,r

T ,14 e

91-01

Robot. 0 o- i1 -'~,--

;p lboyde

1BRD 19041R(PCRs'o•0 ö0

EUROPEAN TRANSPORT NETWORK

I ntended connecting canal

SOJO< highways

* :ar ro, 'c(15

Major r. rR S

piopel nes

E evaon Qoe !iUC e' s

I1 ms pf,H MA- z A tll; i) 1. lWoa A <3 PRI 1985

4 30 3cJ 2C4 10 00 200 300 400

-, 7,

- - - -f

ro k ETQ

50'

cywkers ras V se t0 me ,4na ' s' &. m a" ,e w .o.,C.nan,ce corporghor ' Jeraon,fs .se and me. twÄ~anes eonass t fns mnéj do

AEB O,

Ode.io

-vca onm

Ae A

- .O.TOB...194 - -nn<

0 -. .r- . .

ro n'~s'ae- ron

- T"'- C

1: etry AR £ AFGHANGITAN :CYPRU *a'.~e. dad

sRA Es>b