Document of

The World Bank

FOR OFFICIAL USE ONLY

e-A/ RvC-

Report No. 6955-CY

STAFF APPRAISAL REPORT

REPUBLIC OF CYPRUS

TRANSPORT SECTOR DEVELOPMENT PROJECT

January 6, 1988

Country Operations-Department IVEurope, Middle East and North Africa Region

This document has a resrcted ditrbution and may be used by redpiens only in the peronmmnce oftheir offici duties. Its contents may oot odherwse be disosed wihout Wodd Bak auh

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CURRENCY EQUIVALENTS(As of November, 1987)

Currency Unit Cyprus Pound (CE)

CE 1.00 = US$2.14CE 1,000 = US$2,1401 cent = US$0.0214US$1.00 LO *.467

WEIGHTS AND MEASURES

Metric System British/US System

1 meter (m) 3.281 feet (ft)1 kilometer (km) = 0.621 miles (mi)1 sq. kilometer (km2) = 0.386 sq miles (mi2)1 metric ton (m ton) = 0.984 long ton (1g. ton)

ABBREVIATIONS

ADT = Average Daily TrafficCPA = Cyprus Port AuthorityDA = District AdministrationDCA - Department of Civil AviationEER = Economic Rate of ReturnFD = Forestry DepartmentFYR = First Year ReturnIBRD = lntern.-tional Bank for Reconstruction and

DevelopmentICB = InternationEt Competitive BiddingLIA = Larnaca Inter ttional AizportKFAED = Kuwait Fund tor Arab Economic DevelopmentMCW = Ministry of Communications and WorksNHI = Nicosia Higher T*.chnical InstitutePWD = Public Works Department of MCWRDT = Road Transport DepartmentTEU = Twenty Foot Equivalent Unit (Standard

Container Measurement)

FISCAL YEAR

January 1 - December 31

FOR OFFICIUL USE ONLY

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPORT SECTOR DEVELOPMENT PROJECT

Loan and Project Summary

Borrower: Republic of Cyprus

3eneficiary: Ministry of Communications and Works (MCW)

Amount: US$35.0 million

Terms: Fifteen years including three years of grace at thestandard variable interest rate.

ProjectObiectives: .ne program has as its principal objectives:

(a) increasing efficiency in tranaport sector operatingsystems;

(b) strengthening the financial basis of transportsector operations;

(c) improving the quality of. transport planning andproject implementation; and

(d) upgrading priority areas of the transportinfrastructure and industry.

ProjectDescription: The proposed project which covers the 1988-91 Transport

Investment Program (except for these components alreadybeing financed under the ongoing Third and FourthHighway Projects) would include (i) construction of the23 km Dhekelia-Aridhippou-Larnaca International Airport(LIA) road; (ii) other road improvement schemes to beselected from the 1988-1991 investment program ; (iii)pavement strengthening; (iv) improvements to thepassenger and freight handling facilities at LIA; (v)improving cargo handling facilities, especially forcontainers, at Limassol port; (vi) equipping and settingup new regional bus companies; (vii) technicalassistance to undertake feasibility studies, specialstudies and support in project supervision; (viii) atraining program for the Roads Branch of the PublicWorks Department, Ministry of Communications and Works(MCW) and the Civil Aviation Department, MCW, includingbuildings and equipment, training specialists andoverseas fellowships; and (ix) construction andequipment for a new central materials laboratory and

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.

(ii)

equipment for highway management. The Bank loan willprovide financing for (i) road construction, improvementand pavement strengthening; (ii) technical assistanceand studies; (iii) the new central materials laboratoryand associated equipment; at.. (iv) training facilitiesand fellowships. The total cost of the four-yearprogram (less those items already being financed underthe Third and Fourth Highway Projects) is estimated atUS$121.0 million equivalent.

Benefits: Economic benefits under the proposed project areexpected from: (i) savings in vehicle operating costsand road accident reduction following road improvements;(ii) greater efficiency in the operation of ports and,in particular. improved international competitiveness inthe lucrative transit traffic in containers; (iii)improved operations and development of a regional hub atLarnaca International Airport; (iv) increased efficiencyin rural bus transport; and (v) improved productivityamong transport sector personnel. The economic rate ofreturn is estimated at more than 302.

Risks: The proposed project is not subject to any unusualrisks. The two areas where problems may arise are: (i)the institutional reform of container handling atLimassol port where, due to issues involving private andpublic sector interests, delays may still occur;however, agreement in principle on a port operatingcompany has already been reached and a September 1988target date is believed to be realistic for the companyto be operational; and (ii) due to the complexprocedures, procurement can be slow. Government isaware of this problem which will be addressed under theproposed project. The project schedule allows for somedelay.

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPORT SECTOR DEVELOPMENT PROJECT

Table of Contents

Page No.

I. THE TRANSPORT SECTOR

A. Introduction ...................... 1B. The Role of Transport ............................... 1C. Transport Planning Policy............................ 3D. Roads and Road Transport .............................5E. Ports and Shipping Sub-Sector. .....................13F. Civil Aviation ......................................16G. Previous Bank Experience in the Sector .............. 18

II. THE PROJECT

A. Objectives *....................................... 13B. Description ............................. 19C. Engineering and Component Preparation ............... 22D. Cost Estimates and Financing ........................22E. Procurement ........................ ...... .. *. 25F. Project Implementation .............................27G. Disbursements ...................... . 29H. Accounting and Audit ................................ 31I. Environmental Considerations ......... .............. 31

III. ECONOMIC EVALUATION

A. Economic Background ...............................B. The 1988-91 Development Program ...................... 32C. Project Risk ......................................... 35

IV. RECOMMENDATIONS ................................. *36

This report is based on the findings of an appraisal mission to Cyprus inMay/June 1986 composed of Robert Bonney (Transport Economist), JacquesTollie (Highway Engineer) and Ray Ellis (Manpower Development Expert).

Table of Contents(cont.)

Page No.

ANNEXES

1. Project File Index .................................. 32. Action Plan ..... ....... ..393. Administration of the Highway Network ......................434. Total Licensed Vehicle Registrations and New Vehicle

Registrations ............... ........................... 445. Dhekelia-Aridhippou-LIA Link: Summary of Feasibility

Study ...................... 456. Nanpower Development ....................................... 477. Cyprus Ports Authority Financial Statements ................ 518. Development Study of Larnaca International Airport:

Outline Terms of Reference ............... oo #*, 549. Previous Bank Experieuice in the Sector ..................... 5910. Guidelines for Project Evaluation ..........................6111. MCW Technical Assistance: Outline Terms of Reference ...... 6412. MCW Planning and Monitoring Ur.it: Terms of Reference ....... 7113. Project Implementation Schedule and Reporting Requirements .7414. Highway Design Standards .................*.................................... 7715. Disbursement Schedule ...................................... 78

CHART Ministry of Communications and Works

MAP

IBUD 19932 - Cyprus - Transport Sector Development Project

I. THE TRANSPORT SECTOR

A. Introduction

Background

1.01 The period of Bank involvement in supporting the development ofthe transport sector spans a period of considerable change in Cyprus'society and economy. The period extends from the time when the recognizedGovernment controlled the majority of the island, with Famagusta the mainport, and the international airport in Nicosia, to the post-1974 situationwhen alternative ports to Famagusta had to be developed, a newinternational airport had to be built at Larnaca, and a large proportion ofthe population, who had become refugees, had to be resettled in rural andurban areas creating considerable social and economic pressures. Theeconomy had to adapt to these changes and, despite some ongoing fiscaldifficulties, it has responded very well and a firm base for future growthhas been established.

1.02 The reorientation of the economy following the events of 1974required much investment in the transport infrastructure. At first, thesewere emergency operations, such as the development of Larnaca InternationalAirpcrt (LIA), followed by longer-term investments as the new balance inthe economy became established. The longer term investments includedimprovement of port facilities, construction of the new Nicosia-Limassolroad and a rural road improvement program. Parallel to this development ofthe infrastructure, important advances have been made in institutionalreforms within the Ministry of Communications and Works (MCW) and theCyprus Ports Authority (CPA). These have led to greater in-housecapability to plan and implement works. An essential part of these actionshas been the allocation of more finance to the maintenance of the existingroad network and the initiation of a modern road maintenance managementsystem.

B. The Role of Transport

1.03 Cyprus has limited domestic resources which have to support apopulation with a relatively high density of about 100 people per km' inthat part of the country administered by the Government and, hence, theseresources have to be managed efficiently. The economic activity is basedupon: (i) the production of high value agricultural produce such as wineand citrus fruit, much of which is perishable and requires both a goodrural road network and export transport facilities to maintain quality andto benefit from early markets in North Europe; although direct agriculturalproduction now accounts for only 82 of the GDP, it provides 202 of allemployment and supplies nearly 252 of exports; (ii) the tourist industry,

that requires both air communications and internal road transport of anacceptable service level: tourism receipts in recent years have amounted toabout US$ 800 per head of the population; (iii) the highly competitive eastMediterranean entrepot trade, and a growing importance as an internationalcentre for both sea and air transport; and (iv) an export orientatedmanufacturing industry concentrating vn cement, clothing, footwear andprocessed agricultural products with its main markets in the Middle-East -this sector employs about 20% of the workforce.

1.04 While adopting a prudent fiscal strategy, the Government'stransport investment policy, which is under the overall direction of theMinistry of Co=mmnications and Works (Chart) is to assist in theencouragement of the development of these export related activities whichare largely Lianaged privately, at the same time not overstraining thecountry's environmental base. Consequently, careful attention is beingpaid to the way in which individual development projects, includingtransport, contribute towards economic growth and environmentalprotection. Through the implementation of previous and ongoing Bankfinanced projects the Government is paying increasing attention toinstitutional reforms and addressing policy issues to promote greaterefficiency in the transport sector and, thus, reduce the financial supportrequired from public funds. This policy will be actively pursued duringimplementation of the proposed project, including the operation of atransport sector planning unit (para. 1.08); the rationalization ofprocurement procedures (para. 2.27), rural bus services (para. 1.32),Limassol port operations (paras. 1.38), port tariff structure (para. 1.39),civil aviation charges (para. 1.45); and a training program (para. 2.04)all with schedules and target dates in an Action Plan (Annex 2). Duringnegotiations, the Action Plan was discussed and agreed with Government(para. 4.02(a)).

1.05 The transport sector, comprising roads and road transport, portsand civil aviation together with that element of the contracting industryconcerned with transport contributes approximately 112 of Cyprus' GrossDomestic Product (GDP) and is growing at a faster rate than overall GDP.The sector employs an estimated 111 of the non-agricultural workforce.Details of individual sub-sectors are given in paragraphs 1.12 through 1.46.

1.06 Transport operations generally run smoothly and provide adequatepassenger and freight services for both domestic and international demand.However, traffic on some of the infrastructure has reached or exceededcapacity and the facilities require upgrading or replacement if bottlenecksare not to hamper the effective performance of socio-economic activity andlead to damaging effects on the environment. This particularly applies tomain road links, urban roads and to passenger handling facilities atLarnaca International Airport (LIA). The land-side infrastructure andequipment at Limassol port also needs to be upgraded if full advantage isto be taken of Cyprus' competitive position in the east Mediterraneancontainer transit trade. These constraints, as well as operational, policyand institutional issues are addressed under the proposed project.

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C. Transport Planning Policy

1.07 The Planning Bureau, which is directly responsible to thePresidency, in association with the Ministry of Finance, is responsible forthe preparation and monitoring of the Economic Deyelopment Plans inaccordance with guidelines prepared by the Council of Ministers. Plans aredrawn up for a five year period with the current plan cowering the years1987-91. The recently completed 1982-86 Fourth Emergency Economic ActionPlan represented a transition from earlier remedial measures dealing withpressing short-term needs, to the develoment of a longer-term strategy.

1.08 In Cyprus, economic evaluation and detailed preparation ofprojects is undertaken on an annual basis. Thus the transport component ofthe 1987-91 Five Year Development Plan is indicative giving broad targetsand setting total and annual expenditure limits. The targets are discussedin Chapter III. During preparation of the 1987-91 Plan and given that thesector accounts for over 20% of public investment and is critical to otherproductive activities, the authorities recognized that a longer term andbroader based planning framework was required for the transport sector.The MCW has therefore taken two initiatives to improve the planningprocess. First, the ongoing Fourth Highway Project includes provision forpreparing a Transport Sector Master Plan and, second, in parallel with thisplan preparation, a Transport Sector Planning and Project Monitoring Unithas been established in the MCW (Annex 12). The Unit will, inter alia, beresponsible for (i) coordinating the sub-sector activities under theproposed project; (ii) improving and standardizing project and sectoranalysis; (iii) introducing systematized project monitoring; (iv)maintaining updated transport sector data base; and (v) integratingindividual agencies' planning activities within Planning Bureauguidelines. The unit chief and three other staff between them coveringstatistics, transport economics and engineering have been appointed.During negotiations, the appointment by May 31, 1988 of technicalassistance personnel to be supplied by the Transport Sector Master Planconsultants was discussed and agreed (para. 4.02(b)) under terms ofreference satisfactory to the Bank. Target dates for unit activities areincluded in the Action Plan (Annex 2).

1.09 Public capital investment in the transport sector during the1982-86 plan is given in the following table.

Table 1.1: Transport Expenditure 1982-86 ̂'

1982 1983 1984 1985 1986 1982-86US$ million (equivalent)

Highways 13.6 22.5 27.1 20.5 19.8 103.5Airports 5.5 9.6 7.9 1.8 2.4 27.2Ports 7.1 3.8 6.0 2.9 2.7 22.5Total 26.2 35.9 41.0 25.2 24.9 153.2

1/ Current prices

In a small country such as Cyprus, since additioti or completion of onemajor project will cause large changes in overall figures, trends aredifficult to define. However, there has been a general levelling off intransport sector investment expenditure sine' 1984 and, allowing for priceinflation up to 1988 and the devaluation of the United States dollar in1986/87, a firm control of expenditure is being retained.

1.10 During the 1987-91 period investment is expected to risesignificantly to about US$40 million per annum as is showr. in the followingtable.

Table 1.2: Planned Transport Development Expenditures -

1987 1988 1989 1990 1991 1988-91US$ million (equivalent)

Highways 35.6 39.3 36.7 27.8 19.7 159.1Rural Passenger Transport 0.6 1.2 1.3 1.3 1.0 5.4Airports 2.7 3.0 3.2 3.3 15.2 27.4Ports 4.1 1.7 5.9 4.9 1.9 18.5

Total 43.0 45.2 41.1 37.3 37.8 210.4

Source: Planning Bureau1/ Current prices

The increase in investment is due to the planned start of further majorroad improvements including the new Larnaca-Nicosia road and the Kophinouroad improvement, financed under the Fourth Highway Project by the KuwaitFund, the Dhsekelia-Aridhippou-Larnaca International Airport road includedunder the proposed project, the development of Larnaca InternationalAirport, and modernization of container terminal operations at Limassolport. The increased level of expenditure is needed as demonstrated by thisprojects high ERR and is reasonable in relation to economic needs,financing sources and technical capacity. Such investments are not made atthe expense of maintenance. The Government recognizes the need to allocateadequate maintenance funds as demonstrated by increase of funds allocatedto road maintenance (para. 1.22).

1.11 The authorities who manage the transport sector have shown awillingness to take the Bank's views into account during projectpreparation and this will continue. The Bank will be given the opportunityto review the proposed transport sector plan on an annual basis. Thesector-wide annual review will cover the proposed recurrent and developmentbudget for the following year with components supported by feasibilitystudies in accordance with Guidelines for Project Evaluation (Annex 10).Following this annual review the Government will take the Bank's views intoaccount in finalizing the budget which will permit the program to becontinuously updated as evaluation of individual projects is refined and

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progress on ongoing works is monitored. During negotiations the followingwas discussed and agreed: that by October 31 of each year until completionof the project, the Government will furnish annually to the Bank for reviewand comment, the proposed Recurrent and Development Transport Sector Budget(para. 4.02(c)).

D. Roads and Road Transport

The Road Network

1.12 Cyprus has about 10,600 kms of roads, of which about 4,600 kms arebitumen surfaced (Annex 3). The principal routes run from Nicosla south tothe coast, then along the southern coastline. Main routes and thosecarrying high traffic volumes, about 2,100 kms are paved. The remainder ofthe network is made up of district, forestry or municipal roads, many ofthem gravel surfaced and carrying only small amounts of traffic. The highproportion of total road expenditure devoted to new construction overrecent years (Table 1.3) has been due to the need to reorientate parts ofthe network after the de facto division of the Island in 1974. The Bankand the Kuwait Fund for Arab Economic Development have assisted or areassisting in this reorientation process with the construction of theNicosia-Limassol road and the Limassol bypass under the Second and ThirdHighway Projects, and the Larnacca-Nicosia road under the Fourth HighwayProject. The proposed project plans to continue this policy withassistance for construction of the Dhekelia-Aridhipou-LIA road (para. 2.04,Annex 5 and Map IBRD 19932). This construction program should complete tJhemain network and further constiuction is likely to be confined toimprovement of existing links.

T'he Vehicle Fleet and Traffic

1.13 The road vehicle fleet, excluding motorcycles, has been increasingat the rate of about 8% per annum over the past five years, and now amountsto about 182,000 vehicles of which 71% are cars. Including motor cyclesthe fleet amounts to 226,000. There is thus a high density of vehicles onthe road network and, at about 4.5 persons per car, the present level ofvehicle ownership is significantly higher than in other countries in theregion and is comparable to many countries in western Europe. Details ofthe fleet are given in Annex 4.

1.14 A comprehensive program of traffic counting is carried out on astatistically designed census framework. Modern automatic countingequipment is used supplemented by manual classified counts. Overall, therate of growth in traffic is about the same rate as the increase in thevehicle fleet. After allowing for the trend towards more fuel efficientvehicles this rate is similar to the rate of increase in petrol and dieselcon&umption (Table 1.5). On the northern section of the newNicosia-Limassol road, present traffic flows of about 18,000 vehicles/dayare almost twice those forecast in 1978 and traffic increases of 20 % perannum or more are being recorded on some rural roads in the Paphos areawhilst traffic is growing at about 13% between Nicosia and Larnaca. Trafficcongestion has become a serious problem in and around the major towns.Traffic studies, completed under previous Bank highway projects, have

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supported the design of some remedial measures which, including thecompletion of the Limassol By-Pass, traffic management schemes in Limassoland planned construction of the Larnaca-Nicosia road, will ease thesituation. Studies on road safety and regional traffic control included inthe Fourth Highway project will also lead to corrective measures beingtaken and, under the proposed project, construction of theDhekelia-Aridhipou-LIA road will do much to divert traffic away from thebuilt-up industrial, commercial and tourist areas around Larnaca.

Axle LoadinR

1.15 Government is now taking action to enforce axle load legislationand in 1986 11,693 vehicles were weighed which led to 263 prosecutions or2.21 of the vehicles weighed, compared with 4.3% in 1985 indicating tnatthe enforcement program is having some effect. Moreover, in 1986 theaverage level of fine was also increased. Nonetheless, it is stillnecessary to extend the program to cover the entire network. Governmentagreement was obtained under the Fourth Highway Project to institute andmaintain an effective axle load control sytem including two permanentweighbridges serving the Nicosia-Limassol Highway and the use of portableelectronic weighbridges. Also the installation of a permanent weighbridgeon the new Larnaca-Nicosia road by December 31, 1989 as part of the civilworks contract was agreed. Procurement of weighing equipment and formationand training of operating units is now in hand. All pavement designcarried out during the project will take account of the actual axle loadspectrum.

PWD Administration and Staff

1.16 Responsibility for the highway network is vested in the PWD formain through routes, the District Administration (DA) in the Ministry ofthe Interior for minor, district and village roads, the Forestry Departmentof the Ministry of Agriculture for forest development and timber extractionroads, and municipalities for local streets and roads entirely withinmunicipal areas. The lengths of the network administered by theseauthorities are shown in Annex 3. As roads are widened and improved withinthe DA part of the network, they are usually handed over to PWD formaintenance.

1.17 PWD with a professional staff of 75 and about 250 technicians(Annex 6 - Manpower Development) operates under a Director of Public Workswith a Roads and Airports Branch managed by a Chief Engineer, and aBuildings Branch managed by a Chief Architect. The Chief Engineer isresponsible for planning, design, construction and maintenance of roads andhas a number o. technical sections to assist in this task.Administratively, Cyprus is divided into the five Districts of Nicosia,Limassol, Larnaca and Paphos with headquarters at these towns, andFamagusta which has its headquarters at Larnaca. Each District has aDistrict Engineer who controls all PWD operations within the district. TheDistrict Engineer reports to the Director, although having technicalresponsibility to the Chief Engineer for airport and highway work, and tothe Chief Architect for buildings. Salaries and conditions for PWDsupervisory and management staff compare well with those in the private

sector for similar posts and the quality and capability of staff isgenerally good although in some areas of work, such as contractsupervision, the younger engineers require more experience and training andat most levels there is a need for periodic refresher courses. For someyears there has been a very strict control on recruitment of extra staffinto the civil service and this has placed some strain on PWD's resources.Moreover, the very lengthy procurement procedures, inter alia, are wastefulin senior professional staff time. Under the proposed project anInter-Ministerial Committee has been established to address this issue(par. 2.27).

Construction Industry

1.18 The Cyprus construction industry is large and well organized withover 400 companies. These range from small companies, primarily concernedwith small structures and capable of undertaking contracts of up toC£50,000, to large international companies capable of undertakingmulti-million pound complex civil works contracts. All companies areclassified by the PWD according to their capacity, experience and skills.The performance of local contractors on Bank financed projects hasgenerally been good and rates and contract prices are competitive.

Engineering

1.19 Within the PWD, the Design Office under the Chief Engineer carriesout survey and design work for small and medium sized road construction orimprovement projects. Consultants are employed for large constructionprojects such as the Nicosia-Limassol road and the Limassol By-Pass. Thecentral PWD materials laboratory has a reasonable range of equipment ingenerally good condition, but the premises of the laboratory are crampedand inconvenient. Furthermore, being situated within the PWD headquartersbuildings, the noise and dust pollution of a major testing programadversely affects surrounding activities. There are plans (Annex 1 B9) forthe resiting and upgrading of the laboratory under the proposed project(para. 2.04). District engineers have small materials testing labcratoriesfor qualit) control on works, and both these and the headquarterslaboratory appear to be adequately staffed and competently operated withintheir limitations. Testing standards are generally based on British orGerman practice modified in some cases to meet Cyprus' special conditions.

Construction

1.20 Small improvements and construction works are carried out byDistrict Engineers by force account. Major road construction work is doneby contractors, supervised either by District Engineers' staff or by PWDheadquarters through a special supervision team. Bituminous material forabout 30 kms of road overlays per annum is supplied and transported to siteby contractors, but laid by PWD.

1.21 With the exception of those few who have been engaged onsupervision of major contract conitruction, PWD staff have limitedexperience in the supervision and control of contractors, and are notalways familiar with the use of contract documents and specifications. The

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"on the job" training of PWD engineers especially relating to thesupervision and control of contractors is taking place under the FourthHighway Project and will continue under the proposed project supplementedby formal training at the Nicosia Higher Technical Institute (para. 2.04and Annex 6). The employment of consultants to provide advice to PWD insupervising highway works, including the Dhekelia-Aridhipou-LIA road isincluded under the project (para. 2.28).

Maintenance

1.22 For some years now, the Government, awate of the need for adequatemaintenance, has been improving its assessment of maintenance needs and atthe same time increasing maintenance allocations. In 1987 prices, from alow of about £C1.l m in 1980, the routine and periodic maintenanceallocation has risen to £C2.5 m in 1987 with £C3.0 m proposed for 1988. Inpart this has been assisted by annual Bank reviews of the maintenancefunding proposals as covenanted under both the Third and Fourth HighwayProjects. The focus of the Fourth Highway Project is on maintenance andthe initial stages of a program to eliminate the maintenance backlog before1996. At the same time, a pavement management system is being developed byconsultants under the Third Highway Project with both a detailed assessmen.of needs and a dynamic monitoring system to be in liace, by mid 1988.Meanwhile, for the 1988 budget, PWD has prepared a maintenance programbased on the Fourth Highway Project's tentative projections and theconsultants ongoing needs assessment. During negotiations, in compliancewith the Third Highway Loan Agreement, this program was reviewed by theBank and found to be in line with Fourth Highway Project's projections.The 1989 proposals will be based on the more accurate pavement managementsystem.

1.23 All routine and some periodic maintenance is carried out by PWDforce account and the quality of work is generally good. Larger periodicmaintenance operations (e.g. pavement strengthening) are carried out bycontract and studies under the Third Highway Project are investigating thephysical and economic feasibility of extending contract maintenance tocover nearly all periodic maintenance and also to undertake selectedroutine maintenance programs: the results of this study will be availablein early 1988. However, the PWD will continue to keep capability to carryout maintenance operations and has sufficient equipment to do this: theequipment is mainta5aed to a high standard by the Electrical and MechanicalServices Department of the MCW.

Financing

1.24 Funds for highway construction and major improvements areallocated annually from the Capital 'Development Budget and those forhighway maintenance and minor improvements are allocated annually from theRecurrent Budget. Recent expenditures are set out in the following table:

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Table 1.3 Highway Expenditure I'

1983 1984 1985 1986 1987Est.

(CE million)

Construction, Major Improve-ments and Rehabilitation 12.77 14.25 10.43 9.91 11.11

Routine and Periodic Maintenance 1.48 1.44 1.93 2.20 2.50Total 14.25 15.69 12.36 12.11 13.61

Source: MCW1/ At constant 1986 prices.

The Bank's assistance in the highway sector in Cyprus has aimed at reachinga compromise between Government's needs for budgeting adjustments to matchoverall economic policy and undertaking construction projects in the mostefficient way (i.e. not spreading them over too long a period) and notusing road maintenance allocations as a budget adjusting mechanism. Thispolicy thrust will be continued in the proposed project.

1.25 The country's history of highway expenditure has reflected acautious approach to investments with strict control over proposedconstruction and improvement works. Since the Bank first became involvedin the sector, all investments have been subjected to careful study andevaluation in the context of Cy1prus economic needs and the Bank hasconsequently been able to support the proposed programs. Moreover, theauthorities have been willing to consider the Bank's views in developing ormodifying the road investment program, and this will continue under theproposed project. During project preparation and at appraisal the proposed1988-91 program of road works has been reviewed by the Bank and isconsidered to be in keeping with the country's needs and resources. Theannual road investment program will be submitted to the Bank for review andcomponents will be selected for Bank financing (para. 2.03).

1.26 Revenue from road user charges is not specifically earmarked forhighway purposes but goes into the general revenue. However, theserevenues are more than adequate to covei 'aighway maintenance and capitalinvestment. Nevertheless, the Government has decided to take steps toensure a more equitable levying of road user charges and the TransportSector Master Plan Study, financed under the Fourth Highway Project, willinclude a review of road user charges. Government agreement was obtainedunder the Fourth Highway Project to furnish to the Bank for review andcomment its proposed measures for the restructuring of its road usercharges system by March 31, 1988, and to put these measures into effect notlater than December 31, 1988.

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Table 1.4: Road User Revenues

1981 1982 1983 1984 1985(CE millions)

Vehicle Import Duties 7.66 9.42 12.10 10.84 13.31Fuel Tax 9.67 10.24 10.87 11.60 12.26Licenses and Fees 8.50 8.99 7.76 12.41 13.80

Total 25.83 28.65 30.73 34.85 39.37

Source: MCW

1.27 Most fuel is refined in Cyprus from imported crude oil and retailprices are at or higher than border prices. Approximately 96S of petrolbut only 282 of diesel is consumed by the road transport industry.

Table 1.5: Total Fuel Consumption and Prices

'000 metric tonnes(US$/Liter)t --1980 1981 1982 1983 1984 1985 1986

Petrol 99.58 98.92 104.50 110.68 117.65 123.87 130.18(0.44) (0.58) (0.58) (0.58) (0.58) (0.58) (0.56)

Diesel 160.31 158.24 177.44 197.14 209.49 218.31 233.13(0.16) (0.23) (0.23) (0.23) (0.23) (0.25) (0.19)

Source: Ministry of Commerce and Planning Bureau.The June 1987 retail prices per US gallon are, petrol US$2.12, and dieselUS$0.72.

Although diesel is no longer subsidized neither is it taxed, and the entireburden of fuel tax falls upon petrol engined vehicles. Tax on petrol isapproximately 302 of the retail price. However, it is unlikely that thishas led, except in the case of taxis, to an exceptional trend towardsdiesel trucks and buses, if only because it has been rather diff'cult formany years now to obtain petrol engined buses and trucks. For equivalentsized vehicles the annual license fee for the diesel version is nearly 432greater than for the petrol powered version. A large diesel truck will payCE500 (US$ 1000) p.a. and CE850 (US$ 1,700) for the initial registrationfee compared with the average private cars annual license fee of CE45(US$90) and initial registration fee of CE140 (US$280). Even so, it seemshighly probable that trucks do not pay adequately for the road wear andtear that they cause. The appropriate level of charges for all road usersis currently being reviewed during the preparation of the Transport SectorMaster Plan (para. 1.26).

Road Safety

1.28 The fatal accident rate (comparing vehicle ownership rates with

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accidents) in Cyprus is about three times that of the United Kingdom. Theinjury rate is also high - and could be higher as research indicates thatup to 302 of accidents, particularly those involving children and youngcyclists, are not reported. Damage only accidents do not have to bereported to the police and are thus under reported. The following tablegives official statistics for injury accidents in Cyprus.

Table 1.6: Road Accidents

1981 1982 1983 1984 1985 1986 S Increase

Number of Fatalities 87 93 105 111 116 105 3.80Number of Injuries 4,065 4,153 4,360 4,642 4.582 4,440 1.78Total Injury Accidents 4,152 4,246 4,465 4,753 4,698 4 545 1.82

Number of AccidentsReported 6L899 7,262 8,502 9,561 9,514 9,835 7.35

Source: Department of Statistics

The figures show that the numbers of road accidents reported are increasingat a similar rate to vehicle traffic and the same was true of fatalitiesuntil 1986. However, it is encouraging to note that during the last twoyears the number of injuries has declined and in 1986 fatalities alsofell: the compulsory wearing of seatbelts has been introduced in 1987.Studies which formed part of the Larnaca-Nicosia road feasibility studyexamined the problem and have evaluated its very significant cost to theeconomy (Annex lBl). The Fourth Highway project includes a component tofurther study road safety and to make and implement recommendations totackle the more serious problems which will be identified as a result ofthis study.

Training

1.29 Some specialist skills in the PWD are lacking - especiallyconcerning civil works supervision, operation of pavement managementsystems, road maintenance techniques and bituminous materials and mixcontrol. There is also a clear need to upgrade the skills of PWDtechnicians. An outline manpower development plan (Annex 6) coveringtraining needs has been proposed, most of which will be met by the NicosiaHigher Technical Institute . The Government has already appointed aTraining Officer within PWD to oversee the manpower development plan.During negotiations a training program based on the manpower developmentplan was confirmed (para. 4.01(e)).

Organization and Regulation of Road Transport

1.30 Road transport in Cyprus is mostly privately controlled. The3,385 commercial trucks are operated mainly by individual owner operatorsbut with a few companies operating small fleets of up to ten vehicles.There are about 500 operating licenses. A successful private companyoperates about 130 buses in Nicosia and there are also two relatively new

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but less successful government promoted bus companies in Limassol andPaphos. One bus line operates between Nicosia, Limassol and Paphts. Thereare also eight-passenger taxis which ply between cities.

1.31 A traditional system of about 800 owner operated buses serves theoutlying villages with each bus owned by a local inhabitant and based inthe village it serves. A study financed under the Third Highway Project(Annex 1,B4) has shown that the traditional village bus system no longermeets the needs of the developing rural society providing a service that isslow, infrequent and uncomfortable: this has increased pressure for eithermore expensive personal transport or for migration to the towns. Inaddition buses are aging, there is considerable over-capacity andoperators, loathe to give up their licences which, in the past, were givento them in perpetuity, try to continue but augment their income in secondjobs. Clearly there is a need to improve the overall efficiency of thesystem - a view shared by passengers and bus operators. For example, thereis a need to cut down on the number of buses and, instead of thetraditional daily one round trip from the village to the town and back, toinstitute more flexible services. Operating through the Road TransportDepartment (RDT) of MCW the Government has started a phased program forrationalizing the rural bus services beginning with a pilot operation inthe Nicosia region. With the cooperation of the village bus operators thisinvolves the creation of a private company with appropriately sized buses.The pilot rural bus company will be a private operation with shareholderscomposed of existing local village bus operators who wish to join. Otherswill be bought out by the new company.

1.32 Given the need to provide low cost transportation to these oftenremote villages, the companies will receive some modest initial financialsupport in the form of loans at 2% under commercial rate and acceleratedwrite off of the buses. This support, which is estimated at between 2-52of operating costs, is not confined to the newly formed bus companies butis available to other enterprises and is part of a national policy toencourage investment in Cyprus. This rationalization is in its initialstage and with the tradition bound nature of the current system, changemust be introduced slowly and with due process. The project will includefinancing: (i) from Governnent to buy out those existing bus operators whodo not wish to become shareholders in the new companies; (ii) "mGovernment as loans to procure the new equipment; and (iii) i "eproposed loan to provide technical assistance to the RTD of the MCW, interalia, to advise the new bus companies on operating and managementprocedures. The rationalization program aind technical assistance timing isset out in the Action Plan (Annex 2).

1.33 Government regulation of road transport is modest. The RDTreviews requests for changes in passenger fares and controls the number ofbus and truck operating licenses. The number of bus licenses of all typesis about 1,750 and of these about 800 are for village buses mentioned abovewhich either remain within the operator's family or, with the sanction ofthe RDT may be transferred. Requests for changes in passenger fares mustbe accompanied by disclosure of costs by the bus company and are firstdiscussed in the transport committee of the RDT. The Director General of

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RDT then makes a recommendation to the Price Commissior. (within theMinistry of Commerce) which approves or rejects the increase. Fareincreases have taken place over the last five years roughly in line withlocal inflation.

1.34 The freight transport industry is largely self regulating withnearly all mner operators belonging to one of two unions or associationswhich support their members' interests. Representatives of theseassociations sit or a committee chaired by the Director of RDT to discuss awide range of transport matters. While there would be a possibility thatthese associations might act as cartels and, indeed, some informalallocation of routes exists, except for the movement of grapes where pricesare fixed by RTD, tariffs are traditionally subject to bargaining. Hence,although entry into the transport business is controlled, competition iskeen, prices are dictated by the market place and the industry isresponsive to customers' needs.

E. Ports and Shipping Sub-Sector

Port Fazilities and Traffic

1.35 Limassol and Larnaca, situated on the south coast of the island,are the maujor Cyprus multipurpose ports serving both containerised, bulkand break bulk cargo for Cyprus national and transit trade. In addition,there are a number of special oil terminals serving the import ofpetroleum, as well as an industrial port at Vasiliko. The new ports ofLimassol and Larnaca were built in the mid 1970s with assistance from theBank under the First and Second Port Projects (Loan 628 and 1540-CY) toreplace Famagusta and outdated facilities. As a result of continuousdevelopment, the ports now offer good facilities. A container terminal isavailable in the Limassol port, which can handle up to 200,000 twenty-footcontainers annually. The total general and bulk cargo handled in theCyprus ports in 1986 was around 5.0 million tonnes (Table 1.7). The numberof vessels which called was 4,700. The strategic position and the minimalcustom formalities for transhipments in both ports are helping Cyprusbecome a transit centre of increasing importance in the Middle East area.Furthermore, one of the "round-the-world" container operators uses Limassolas one of its main transhipmeuit ports. Approximately 140,000 TEU werehandled in transit in 1986. The ports maintain satisfactory turnaroundtimes which average from 1 day for container vessels to 2-3 days forconventional ships.

1.36 Limassol port handles over 701 of general cargo, 601 of thepassengers and 802 of the container traffic, but Larnaca container trafficis showing a strong growth due to very active marketing by the localshipping agents and by expansion plans of a major container shippingcompany. The following table shows the main port traffic in Cyprus.

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Table 1.7: CyDrus Ports Traffic

X of--- Larnaca-Limassol Total - Annual

1981 1982 1983 1984 1985 1986 Growth

General and Bulk Cargo (MT) 2.8 3.2 4.5 5.4 4.4 5.0 12.24Domestic Containers ('000 boxes) 48 52 49 56 54 56 3.13Transit Containers ('000 TEU) 123 121 128 204 135 142 2.91Passengers (Thousands) 101 167 203 237 208 277 22.35

Note: Domestic container traffic statistics are available only in numbersof boxes.

Transit traffic may fluctuate as the political and security situation inBeirut changes (as can be seen by the 1984 figures) and as other ports inthe region are developed. Transit traffic is also a highly competitivebusiness and, with developments in other ports of the region, Cyprus willhave to upgrade the operations at Limassol and Larnaca ports to improve orto maintain its share of this traffic. Nonetheless, latest estimates for1987 show a likely increase of 25S in container transshipment traffic.Wvhile prospects look good, the tariff structure and system of calculationis not appropriate to modern shipping operations, i.e. tariffs based onweight rather than on value. Thus income has not kept pace with trafficand the need for investments in new facilties. The rapid growth inpassenger traffic is the result of passer.ger ferries from Larnaca nowserving Beirut in the absence of air services.

Operations and Financial Position

1.37 All ports are administered by the Cyprus Ports Authority (CPA)which has jurisdiction in matters of general policy. Port operations aregenerally carried out by private and public companies under licence to theCPA. Although Limassol port has absorbed increased traffic, thecombination of a large number of organizations involved, vested interestswhich are not development orientated, and rather outmoded operating methodsa-d equipment, have at times caused difficulties and could prejudicede1v-lopment. In particular, the landside container handling system has notbeen fully developed due: (a) to differences of opinion as to the relativemerits of straddle carriers currently being used compared with rubber tyredgantries for which the container yard has been prepared but which have notyet been procured; and (b) the type and ownership of a company to operatethe container yard.

1.38 In order to address problems of operation in Cyprus ports,especially in the important container business, the Government inconsultation with the Bank has agreed that modernization of operations mustbe accompanied by institutional reforms relating to port operation and portcharges. With, as a consultant, a former Chief of Operations of a major

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European port, the Bank has been assisting the CPA in encouraging theformation of a private operating company incorporating those with acurrent financial stake in the movement of containers. These efforts arebearing fruit and the Government's Council of Ministers is shortly expectedto reach a policy decision that a private company, incorporating theshipping agents and licensed porters, should be allowed to operate thecontainer terminal under licence from the CPA. The company would becomeoperational by September 30, 1988, and, in agreement with the CPA, wouldprocure and introduce the additional container handling equipment needed toboth handle containers efficiently and back up CPAs and shipping agents'marketing strategy of consolidating and further expanding transit trade atLimassol. The draft company structure and equipment specifications will besubmitted for review and comment by the Bank in accordance with the ActionPlan (Annex 2).

1.39 The CPA operates the ports on a commercial basis and has pursued aprudent financial policy. This is demonstrated by the Summary FinancialResults over the past five-years shown in the table below - Annex 7contains the details.

Table 1.8: Summary Financial Results in CE (000's)

1982 1983 1984 1985 1986

Revenue 4,973 4,772 5,823 6,016 6,649Operating Expenditure 2,359 2,881 3,040 3,352 3,527Depreciation 399 678 860 881 1,012

2,758 3,559 3,900 4,233 4,539

Operating Surplus 2,215 1,213 1,923 1,783 2,110Average Net FixedAssets in use 14,455 19,599 23,964 25,298 26,144

Rate of Return (X) 15.3 6.2 8.0 7.0 8.1

There has been an operating surplus each year - after providing adequatesums for depreciation. The rate of return of 8% covenanted under theSecond Port Project is largely being met. The covenant remains in force.Tariffs are proposed by CPA and approved by the government but with thechange it. the type of trade and size of vessels the pattern of port chargesmay no longer be appropriate. CPA is therefore preparing draft proposalsto restructure port charge tariffs which are currently being discussed withport users and operators. When agreement in principle is reached the Bankwill review the recommended new structure. It is proposed to introduce therestructured tariff by January 31, 1989. The activities for tariffrestructuring and the target dates are included in the Action Plan (Annex2).

1.40 The basic strength of CPA's financial structure is not in doubt.Annex 7 shows the Profit and Loss Accounts for 1986 and 1985 (summarizedabove in Table 1.8) together with the Balance Sheet and Cash Flow. With adebt equity ratio of 56:44 and e. rate of return of 8S CPA should have noproblem both in raising funds for operationa'. improvements and servicingany related debt.

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Shipping

1.41 The low shipping registration fees, the complete tax exemption toall profits and dividends arising from shipping operations and the easyavailability of the Cyprus flag to foreign operators through theestablishment of a local companty have made it increasingly attractive toshipping companies. Consequently, the Cyprus merchant marine isconsiderably larger than would be expected for a country of this size. Thetotal number of ships as of June 30, 1986, was 1,549 with a total grosstonnage of almost 11 million. Since December 1978, the Government hastaken a number of strict measures to upgrade the quality of vessels sailingunder the Cyprus flag including limitations on the age of vessels and crewterms of employment.

F. Civil Aviation

Airports and Traffic

1.42 Following the closure of Nicosia International Airport in 1974,Larnaca International Airport was developed rapidly as a replacemeut.Whilst some improvements have been undertaken in accordance with a masterplan prepared in 1978, about 70% of the buildings are still temporary.Although aircraft parking areas and the single 2,750 meter runway areadequate for the foreseeable future and a parallel taxiway is underconst,uction, other facilities have not kept pace with the traffic increaseand there are, consequently, severe passenger airport capacity problems.These problems are likely to increase as several large internationalcarriers have proposed to transfer their hub operations from Beirut toLarnaca. Table 1.9 shows the recent growth in air traffic: the futureestimates envisage a ceiling of 3 million passengers by the year 2000 butthis will be analysed in detail in the upcoming Development of LarnacaInternational Airport (LIA) study (para. 1.45).

Table 1.9: Air Traffic

Annual X1981 1982 1983 1984 1985 1986 Growth

Passengers (mill.) 1.1 1.3 1.5 1.7 1.9 2.0 11.35Freight ('000 tons) 23.7 26.9 24.6 24.6 22.3 21.5 -Aircraft Movements 16,271 18,467 20,793 22,245 26,220 24,320 8.37

Source: Department of Civil Aviation.

Paphos Airport about 150 kms to the west, which opened in late 1983, hasaircraft movement facilities built to international standards but passengerhandling takes place in modified warehouses. Although the traffic islikely to grow as tourism in the Paphos region increases, it is unlikely totake much passenger traffic from Larnaca. Paphos has, nonetheless,attracted agricultural and horticultural air freight from Larnaca as muchof this traffic originates in the Paphos hinterland.

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Developments and Finance

1.43 The Department of Civil Aviation (DCA) (a department of the MCW)manages LIA and Paphos Airport. Day to day operations are run at airportlevel in cooperation with the airlines (of which there are 26), the policeand customs. Owing to the severe passenger traffic capacity problems atLIA it is proposed, within the framework of an updated master plan (para.2.07), to build a new terminal building with supporting services. Thesefacilities are included in the proposed project as well as the feasibilitystudy and detailed engineering.

1.44 Investment in airport facilities during the past five years, mostof which was concerned with the development of Paphos airport and thetaxiway at LIA, is given in Table 1.10.

Table 1.10: Airport Facilities Investment lo

1982 1983 1984 1985 1986 Total(USt million)

5.5 9.6 7.9 1.8 2.4 27.2

Source: Department of Civil Aviation

l/ Current prices.the capital development expenditure during 1987-91 is estimated at aboutUS$27 million and is made up almost entirely by improvements at LIAstarting in 1990.

1.45 Although the revenue derived from airlines and other airport usersis reported to cover direct operating costs, no account is taken of PWDmaintenance, depreciation, development or expenditures required to providean acceptable level of service for existing and future demand. TheGovernment has decided, therefore, to study, design and implement arational system of charges for airport and other civil aviation servicesthereby reducing the current level of Government support. This work willbe undertaken as part of the development of LIA study (para. 1.43 and Annex8) and activities and target dates are included in the Action Plan (Annex2). During negotiations the terms of reference for the LIA feasibilitystudy and design were discussed and agreed (para. 4.02(d)).

Cyprus Airways

1.46 Cyprus Airways Ltd. is the national carrier. The Government isthe largest shareholder with 692 but policy is to encourage increasedprivate shareholding. The company operates a fleet of 3 Airbus 310's, 3Boeing 707's and 3 BAC 111's but it is proposed to invest in new aircraftconsisting of 4 Airbus A320's during the period 1988-91 which will permitthe phasing out of the 707's and 111's. In 1985 Cyprus Airways operatedwith an average load factor of 71.32 compared with the industry average of64.3X. After deducting depreciation and interest on loans a loss of

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C£983,OOO (US$ 1.96 million) was incurred. However, the 1986 accounts areexpected to show a CE3 million profit after depreciation and interest andthis represents a rate of return on assets of about 32.

G. Previous Bank Experience in the Sector

1.47 Begimning in 1973, the Bank has participated in six projects inthe transport sector - four in highways and two in ports. Highway projectcomponents have ranged from new construction and rural road rehabilitationto the development of road maintenance systems. With the loss of Famugustain 1974, port investment has been concentrated on developing Larnaca andparticularly Limassol ports to serve national requirements and also asforeign exchange earners by promoting transhipment traffic.

1.48 There have been some project implementation delays and the startof both the Third and Fourth Highway Projects were delayed by Governmentprocurement procedures. The Closing Date of the Third Highway Project hasbeen extended by one year to mid-1988. Although, 75-80% of theconstruction work will be completed by that time, some remaining ongoingworks may require a further Closing Date extension. The start-up of theFourth Highway Project was also delayed but is now well underway and on arevised schedule for completion within the project period. TheInter-Ministerial Committee on Procurement has been recently set up toaddress the procurement procedure issues (para. 2.27).

1.49 Notwithstanding some implementation delays, the projects have beensuccessful not only with their physical achievements but also ininstitution building and improved planning. Although, due to institutionaldifficulties, certain aspects of the Second Port Project were not fullyachieved, these are now being tackled under this proposed project (para.1.38). In particular, the Government has: adopted rigorous and technicalproject evaluation; recognized the need for adequate road maintenance andits funding and is adopting a state of the art maintenance managementsystem; taken steps to carry out a Transport Sector Master Plan including areview of road user charges; taken steps to improve port operations andinitiate a revision of port tariffs. The proposed project will provide ameans of continuing the Government's policy dialogue with the Bank,enhancing the quality of policy decisions and further increase theefficiency of the transport sector.

II. THE PROJECT

A. Obiectives

2.01 Cyprus' transport industry has been keeping pace with thecommunity's needs in the difficult period since the events of 1974.However, as the economy has grown the infrastructure in all transportsub-sectors has come under increasing strain. Furthermore it has becomeclear that operating techniques are falling behind the times and there is agrowing need in some areas to strengthen cost recovery measures, and forintegrated sector planning. Consequently, the proposed project has as itsobjectives:

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(a) increased efficiency in transport sector operating systems;

(b) improving cost recovery in revenue earning transport sectoroperations;

(c) improving the quality of transport planning and projectimplementation;

(4) upgrading priority areas of the transport infrastructure; and

(e) increasing the extent and improving the quality of trainingprovided for staff in the roads, road transport and civilaviation subsectors.

B. Description

2.02 The proposed project would encompass the Cyprus 1988-91 TransportDevelopment Plan in the Highways, Road Transport, Civil Aviation (excludingCyprus Airways Ltd) and Ports sub-sectors, excluding those elementsamounting to about US$ 56 million for which financing is already beingprovided under the ongoing Third and Fourth Highway Projects. TheDevelopment Plan has been reviewed during project preparation and shown tobe appropriate to Cyprus' needs and resources and will be implemented inconcert with a program of transport sector institutional and policy reformswhich would include:

(a) restructuring the operations of Limassol port to improveefficiency and international competitiveness and to increaseprivate sector participation;

(b) revision of port tariff structure to make it more responsiveto modern shipping technologies and needs;

(c) changes in airport and civil aviation charges so that thecivil aviation sub-sector will strengthen its financialposition and move towards a self-financing capability;

(d) continued strengthening of highway maintenance procedures;

(e) establishment of a central transport sector planning andproject monitoring unit in the MCW to integrate sector wideplanning and project implemantation; and

(f) improving MCW decision taking procedures especially in so faras they affect the procurement of goods and services.

2.03 The project components are described in the following paragraphs.Only those components starting in 1988 are precisely defined. Subsequentyears' components will be selected from the Development Program agreedanvually by the Bank and the MCW following component evaluation accordingto Guidelines for Project Evaluation which are detailed in Annex 10. Theseguidelines follow the practice established under the Third Highway Project

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- components should have a minimum ERR of 121 and should not be implementedbefore the first year rate of return is at least 101. During negotiationsthe following was discussed and agreed: (a) the Guidelines for ProjectEvaluation; (b) that by July 31 of each year the list of highway componentsproposed for Bank financing to commence the following year would befurmished to the Bank for review and approval; and (c) that this list wouldmeet the criteria set out in the Guidelines (paras. 4.02(e) and (f)).

Highway Sub-Sector

2.04 The comprehensive four-year program includes road construction,rohabilitation, a new materials testing laboratory, technical assistanceand training. The following will commence in the program's first year:

(a) Cornstruction of the 23 km Dhekelia-Aridhipou--LIA road whichbypasses the developed tourist and industrial areas in theLarnaca municipal area and diverts heavy airport traffic awayfrom the centre of Larnaca (Map IBRD 19932). The road hasbeen designed as a two lane road, however, it is anticipatedthat a second two lanes will be required within ten yearsand, hence, land acquisition will allow for this based anpreliminary designs for a four lane road prepared during thefeasibility study. The road is functionally related to theNicosia-Larnaca road, to be constructed under the FourthHighway Project with Kuwait Fund financing (Annex 5).

(b) Broadening and strengthening of the Nicosia Higher TechnicalInstitute's (NHI) training program for higher leveltechnician civil engineers to include (i) bituminous mixdesign and use; (ii) principles of traffic engineering andtraffic surveying; (iii) contract management and supervision;and (iv) pavement management systems in accordance with theManpower Development Plan given in Annex 6. The proposedproject includes technical assistance to supplement theexisting teaching staff, equipment and a bituminous materialsteaching laboratory and classroom. During negotiationsGovernment confirmed the proposed training program includingthe assignment appointment of staff to the Nicosia HigherTechnical Institute by June 30, 1988 (para. 4.01(e)). Thetraining activities and their target dates are included inthe Action Plan (Annex 2).

(c) Technical assistance and training for the Ministry ofCommunications and Works which, in addition to some in-houseand on the job training focuses on the operation of aTransport Sector Planning and Project Monitoring Unit (para.1.08). (i) reorganization of the vehicle licensing system(Annex 11); (ii) advice to the rural bus industry (para.1.32); and (iii) special consultancy services includingassistance in construction supervision (Annex 11); and

(d) Construction of buildings for a new central materialslaboratory and procurement of testing equipment (Annex 1 B9).

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2.05 Work commencing in the remaining three years of the four yearhighway sub-sector program will comprise:

(a) construction and improvement of about 150 kms of the PWDadministered road system (US$33.9 million);

(b) pavement strengthening of about 150 kms of the PWDadministered road system (US$ 11.5 million); and

(c) small projects and equipment procurement (including equipmentfor highway management) comprising about US$ 4.7 million.

Road Transport Sub-Sector

2.06 The components of the program to rationalize rural bus servicesare: (a) the buying-out of existing operators who do not wish to join thenew larger companies; (b) procurement of modern buses by the new companies;and (c) technical assistance through the Road Transport Department of MCW(para. 2.04(c) and Annex 11).

Civil Aviation Sub-Sector

2.07 A feasibility study will be undertaken by consultants to updatethe 1977 master plan (para 1.43) and to analyse alternative improvementschemes and carry out design leading to construction of a new terminal andadministrative buildings and associated works, and to make recommendationson cost recovery measures (para. 1.45). In addition the project willinclude training in airport management and operations which will take theform of overseas fellowships for specialist positions and 'ocal trainingcourses for junior and manual staff (Annex 6). The project also includes12 man-months of expert services for the counterpart training of a trainingofficer for civil aviation personnel. The training activities and theirtarget dates are included in the Action Plan (Annex 2).

Ports Sub-Sector

2.08 The project includes the procurement of 2-3 rubber tyred gantrycranes, supplementary equipment, civil works, a tug-boat for Limassol port,and civil works for some repaving and breakwater works. In additiontechnical assistance will be provided to advise on management andoperations. The Bank will continue its dialogue with CPA to help inimproving operations and, through the Transport Sector Master Plan Study(Loan 2684-CY), to assist in developing a medium term investment program.

2.09 During negotiations, the project objectives and description werediscussed and confirmed with the Government (para. 4.01 (a)).

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C. Engineering nd Component Preparation

2.10 Highways. The study and preliminary design of theDhekelia-Aridhippou-LIA road was carried out by -'nsultants withparticipation of PWD under the Third Highway Project in accordance withdesign standards (Annex 14) which are satisfactory. PWD have sincesubstantially completed the final design. Other highway components,depending on size and complexity, will be studied and designed by PWDduring project implementation and will be reviewed by the Bsnk.

2.11 Civil Aviation. The feasibility study and design and preparationof bidding documents for the improvements to Larnaca International Airportwill be carried out by international consultants working within theframework of an updated Master Plan. Other smaller works will be desigi.edeither by the PWD Architectural Department or, for civil works, the PWDworking on behalf of the Civil Aviation Department.

2.12 Ports. No large civil works are envisaged under the proposedproject; the paving work in the container terminal at Limassol port will bedesigned by local consultants on behalf of the CPA. Specifications formajor items of equipment have been prepared by the CPA with, in the case ofrubber-tyred gantry cranes, assistance from consultants.

2.13 Road Transport. The operating characteristics for new buses wereprepared jointly by the new operating companies and the consultants whocarried out the basic study under the Third Highway Project. These arebased upon Cyprus' operating conditions and experience locally withdifferent types of vehicle and are considered a satisfactory basis forguiding procurement.

D. Cost Estimates and Financing

Cost Estimates

2.14 The project 1' base cost has been estimated at US$ 104.7 millionof which US$ 60.5 million is foreign exchange; physical and pricecontingencies raise these figures to US$121.0 million and US$69.0 millionrespectively. The breakdown of these costs is given in Table 4.1.

2.15 Project cost estimates are based on November 1987 price levels.Civil works and building construction cost estimates are based on estimatesfrom final engineering design and on unit rates derived from curi ntconstruction contracts and from cost factor inputs regarding periodicmaintenance. Equipment costs, including buses, are based on recentprocurement and, in the case of ports equipment, supplemented by specialstudies. Technical assistance costs are based on man month rates inrecently awarded contracts for similar work.

1/ i.e. the 1988-91 Transport Plan less those components already beingfinanced under the Third and Fourth Highway Projects.

lqble 4.1: Prgiect Cost Estimates 1/

X Foreign US$ Million I ForeignExchange Proposed Bank Expenditures

Prolect Comnonents LAau Fore1an Total Lcal Foreti IstaJ Comnent Participation to be Financed

-- CL Million------- ----- US$ M1illion-

A. Hiussway Sector

Ohekelia-Aridthtpou-LIA Road 4.0 3.3 7.3 8.0 7.0 15.6 45 7.0 100

Other Road Projects 7.1 5.8 12.9 15.3 12.S 27.8 4S 12.S 100Pavement Strengthening 1.9 2.3 4.2 4.1 5.0 9.1 SS S.0 100

Materials Laboratory and NHI Buildings 0.1 0.2 0.3 0.2 0.5 0.7 70 0.5 100

Materials Laboratory and MHZ Equipment 0.0 0.2 0.2 0.1 0.3 0.4 90 0.3 100

Technical Assistance and Fellowships 0.1 0.4 0.5 0.2 0.8 1.0 80 0.8 100

Miscellaneous -. 2i .9 2Li-.1 4.1 _.j 90 A.d 17

Sub-Total HIGHWAY SECTOR 13.4 14.1 27.5 28.9 36.2 59.1 26.8

B. Inad.Transoort Sector

Renewal of Rural Buses 0.1 0.9 1.0 0.2 1.9 2.1 90 0.0 0

Bus Company Buy-Out 0.5 0.0 O.S 1.1 0.0 1.1 0 0.0 0

Technical Assistance 0.0 0.2 0.2 0.1 J.2 0.3 80 0.2 tOO

Equipment 0.1 _Q. _14 0l 0.8A 0.9.2 90 0A 0

Sub Total ROAD TRANSPORT SECTOR 0.7 1.4 2.1 1.5 2.9 4.4 0.2

C. Cviyl Aviation Sector

LIA Development S.0 5.0 10.0 10.7 10.7 21.4 50 0.0 0

EqLuitment 0.1 1.2 1.3 0.3 2.5 2.8 90 0.0 0

Technical Assistance 8 Fellowships O.a 0.9L s.o2 0 5 .0 .5 eo -Li 100

Sub-Total CIVIL AVIATION SECTOR 5.4 7.1 12.5 11.S 15.2 26.7 2.0

D. PorLs Sector

Container Equipment 0.2 2.3 2.5 0.5 4.9 S.4 90 0.0 0

Other Port Equipment 0.1 0.9 1.0 0.2 1.9 2.1 90 0.0 0

Tug Boats 0.0 1.4 1.4 0.0 3.0 3.0 100 0.0 0

Technical Assistance & Trair.ing 0.1 0.2 0.3 0.1 0.5 0.6 80 0.0 0

Miscellaneous and Maintenance -la -7 A 0 .. -LJ l.a .4L 55 L.i 0

Sub-Total PORTS SECTOR 1.1 5.7 6.8 2.3 12.2 14.5 0.0Physical ContingenciesPrice Contingencies

Total BASE COST 20.6 28.3 48.9 44.2 60.5 104.7 29.0

Physical Contingencies 2- 1.8 1.9 3.7 3.9 4.1 8.C 3.0

Price Contingencies 3 .1J. _2.. 3.9 32 4 5 8.4 3.0

Total PROJtCT COSTS 24.2 32.3 56.5 52.0 69.0 121.0 35.0 S5

1/ November l987 cost *stsmatesv ftsical contingencies baseC on recent experience and are 101 on civil and building works3/ Price escalation for local costs estimated at 2 p.a.

Price escalation for foreign costs estimated at 31 in 1987, 11 in 1988 90 and 3.5% in 1991-95.

Note: All totals rounded.

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2.16 The foreign exchange component of road construction, improvementand rehabilitation is estimated to be about 452 if executed by a local orlocally based contractor as, considering past experience, this is likely tobe the case. The foreign exchange component for pavement strengthening isestimated at 552 in view of the higher bitumen content. Building costs areestimated to have a foreign exchange component of 70S in the case ofbuildings such as the materials laboratory with a high content of specialfeatures. Equipment is estimated to have a foreign exchange component of902 and technical assistance 80X.

2.17 During negotiations, the cost estimates were confirmed with theGovernment (pdra. 4.01b).

Financing

2.18 The borrower would be the Government of the Republic of Cyprus.The proposed Bank loan would finance about 502 of the foreign exchangecomponent or 30S of the total cost. The proposed financing program isshown in the following table:

Table 4.2: Proosaed Financing Plan(US$ million)

Item Cost 1--inance

Prolect _CQm2angon Local foreign a. IBR Other 2/ verfment

A. Highway Sector

Ohekelia Arldhipou LIA Road 9.9 8.2 18.1 8.2 0.0 9.9Other Road Projects 18.4 15.S 33.9 15.5 0.0 18.4Pavement Strengthening S.1 6.4 11.S 6.4 0.0 S.1t-terials Laboratory and NHI Buildings 0.2 0.6 0.8 0.6 0.0 0.2

,cerials Laboratory and NHI Equipment 0.1 0.3 0.4 0.3 0.0 0.1Technical Assistance & Fellowships 0.2 0.9 1.1 0.9 0.0 0.2miscellaneous _Q0 Az -A. 7 0 Q a 3.9Sub-Total HIGHWAY SECTOR 34.4 36.1 70.5 32.7 0.0 37.8

B. Road Transport Sector

Renewal ot Rural Buses 0.2 2.0 2.2 0.0 0.0 2.2Bus Company Buy Out 1.2 0.0 1.2 0.0 0.0 1.2Technical Assistance 0.1 0.2 0.3 0.2 0.0 0.IEquipment O.1 , 0.9 1.0 .O 5 0.1Sub Total ROAD TRANSPORT SECTOR 1.6 3.1 4.7 0.2 0.9 3.6

C. CJYil Aviation Sector

LIA Oevelopment 12.7 12.5 25.2 0.0 12.5 12.7Equipment 0.3 2.6 2.9 0.0 2.6 0.3Technical Assistance & Fellowships O.5 2.1 _L, __w AA Q_q,Sub Total CIVIL AVIATION SECTOR 13.5 17.2 30.7 2.1 15.1 13.5

0. PQrts Sector

Container Equipment 0.6 5.0 5.6 0.0 S.0 0.6Other Port Equipment 0.2 1.9 2.1 0.0 1.9 0.2Tug Boats 0.0 3.1 3.1 0.0 3.1 0.0Technical Assistance & Training 0.1 0.6 0.7 0.0 0.6 0.1Miscellaneous and Maintenance 1.6 .2.0 3.60 . 2.0 1Sub Total PORTS SECTOR 2.5 12.6 1S.1 0.0 12.6 2.5

Total PROJECT COSTS Ss .. 121LfM 350 2.L6 iLI

1/ Including distributed contingencies2/ Including suppliers credits

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At negotiations the Government confirmed that satisfactory arrangementshave been made regarding the provision of sufficient funds by or throughGovernment to meet the balance of foreign exchange and local costs notcovered by the Bank loan (para 4.01c). The Kuwait Fund for Arab EconomicDevelopment has indicated its intention to assist in financing LIAdevelopment.

E. Procurement

Bank-Financed Components

2.19 The two contracts for construction of the Dhekelia-Aridhippou-LIAroad amounting to US$18.1 m would be awarded after InternationalCompetitive Bidding (ICB) in accordance with the Bank's guidelines.Construction or improvement of the 150 km of other roads to be included inthe program (estimated at US$33.9 m) would also be undertaken under ICBwith the exception of individual contracts up to $1.0 m and in aggregatecost exceeding US$5.0 m which would be awarded under Local CompetitiveBidding (LCB). Hence ICB construction contracts would total aboutUS$47.0 m (financed by US$21.4 m or 602 of the Bank loan). The works wouldbe geographically grouped in lots to make the contracts attractive tolarger contractors. Contractors wi1l be prequalified to undertake eithersingle or several lots.

2.20 The pavement strengthening works amounting to US$11.5 m arescattered throughout the country, are individually small contracts, andthus would be most efficiently procured through LCB procedures which permitforeign contractors to participate and which are satisfactory to the Bank.

2.21 Highway management equipment amounting to about US$900,000 wouldbe procured through ICB. However, due to its specialized nature,procurement of equipment for the Central Materials Laboratory, and theNicosia Higher Technical Institution totalling $400,000 would be throughinternational shopping with individual items not exceeding $75,000, up toan aggregate amount of US$400,000.

2.22 Technical assistance for the various project items would beprovided by qualified consulting firms or individuals as appropriate,engaged in accordance with the Bank's guidelines for the use of consultants.

2.23 All procurement documentation will be reviewed by the Bank beforebeing issued. However, for pavement strengthening works, this will beconfined to a review of standard bidding documents and of the procurementprograms. All proposed contract awards above $500,000 will be subject toprior review. Prior review of contracts will cover about 80% of the totalvalue of works financed under the project. The following table gives abreakdown of the proposed project by procurement method.

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Procurement Methodsl/(USS million)

--------- Procurement Method----------- TotalProiect Comnonents tfi ISL Other

A. Uigbmay Sector

Chekelia-Aridhipou-LIA Road 18.1 (8.2) 18.1 (8.2)Other Road Projects 28.9 (13.2) S.0 (2.3) 33.9 (15.5)Pavement Strengthening 11.S (6.4) 11.5 (6.4)Materials Laboratory and NHI Buildings 0.8 (0.6) 0.8 (0.6)Materials Laboratory and NHI Equipment 0.42/ (0.3) 0.4 (0.3)Technical Assistance & Fellowships 1.13 (0.9) 1.1 (0.9)Miscellaneous 0.9 (0.8) 3.8 4.7 (0.8)

B. Road Transport Sector

Renewal of Rural Buses 2.24/ 2.2Bus Company Buy-Out 1.2" 1.2Technical Assistance 0.3s/ (0.2) 0.3 (0.2)Equipment 1.0 1.0

C. Civil Aviation Sector

LIA Development 26.2 25.2Equipment 2.9 2.9Technical Assistance & Fellowships 2.63/ (2.1) 2.6 (2.1)

0. Ports Sector

Container Equipment 5.66 5.6Other Port Equipment 2.1 2.1Tug Boats 3.16 3.1Technical Assistance & Training 0.73' 0.7Miscellaneous and Maintenance 3.6 3.6

Total 47.9 22.2 17.3 (9.3) 55.8 (3.5) 121.0 (35.0)

I/ Figures in parentheses are the respective amounts financed by the Bank loan.2/ Specialized equipment to be procured through international shipping.3/ Consultants services and training.4/ Private procurement.S/ Not procurement.6/ Suppliers credit.

- 27 -

Non-Bank Financed Components

2.24 Non-Bank financed items would be procured either through localgovernment procedures which permit foreign contractors to bid or willfollow private commercial practice. Buses will be procured by the buscompanies themselves through suppliers credits or direct purchase. Theairport terminal building will be procured through Government internationalcompetitive bidding or, as is possible, following a cofinancier'sprocurement regulations. CPA and the new port operating company willprocure two (with an option on a third) rubber tyred gantries, straddlecarriers, mobile cranes and support equipment through suppliers credits.

2.25 During negotiations, the procurement arrangements were discussedand agreed with Government (para. 4.02(g)). In particular, for Governmentand public authority procurement, public bid opening would take place forcontracts above $50,000 and award will be made to the lowest evaluatecabidder without negotiation of prices was confirmed.

F. Prolect Implementation

2.26 The special project coordinating unit located in the PWD RoadsDepartment set up originally under the Third Highway Project will continueto be responsible for highway sector project components. Similar unitswill be established in the Road Transport Department to control the ruralbus service component, the Civil Aviation Department to manage the civilaviation component and in Cyprus Ports Authority to supervise the portscomponent. As appropriate these units will call upon the services of otherconcerned agencies. Overall coordination of activities will be theresponsibility of the Director General of the MCW working through the levelof the MCW Planning and Project Monitoring Unit led by an already appointedproject coordinator. All these units will submit quarterly progressreports with a covering report from the Project Planning and MonitoringUnit starting June 30, 1988 (Annex 12).

2.27 In Cyprus, the process for all types of procurement is lengthy andbeset by bureaucratic procedures leading to additional costs throughdelayed project implementation and unnecessary use of staff time; theuncertainty also makes planning difficult. Coiisequently, followingdiscussions with the relevant authorities and an exploratory review of theprocedures by a Bank consultant an Inter-Ministerial Committee onProcurement has been established under the Accountant General, that aWorking Party on Procurement shall be formed to analyse the situation andmake recommendations. Target dates for these activities are included inthe Action Plan (Annex 2).

Highway Sub-Sector

2.28 The project implementation schedule is shown in Annex 13. In thecase of the Dhekelia-Aridhipou - LIA road construction, final engineering,preparation of bid documents and acquisition of right of way are well

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advanced. Construction will start in fourth quarter 1988 with a totalconstruction time of 30 months allowed for completion by early 1991. PWDwill be responsible for construction supervision advised by consultants.During negotiations the supervision arrang.ments for theDhekelia-Aridhippou-LIA road were discussed and agreed with the Government(pars. 4.02(h)).

2.29 The remaining highway works covering construction, rehabilitationand strengthening will be the subject of annual work plans, selected fromthe total program, submitted to the Bank in June of each year for approvaland prepared according to methodology and criteria (Annex 10) agreed by theBank (para 2.03).

2.30 Outline terms of reference for technical assistance to the MCW(Annex 11) covering (i) the Transport Sector Planning and Monitoring Unit;(ii) in-house trainiig and course development of Nicosia Higher TechnicalInstitute;(iii) Road Transport Department; and (iv) specialized consultingservices have been prepared. The timing of the appointment of Cypriot andforeign experts is covered in the Action Plan (Annex 2). The component iscontinuous and there is no completion date although technical assistanceexperts will be expected to complete their assignments within three yearsof their appointment. During negotiations, outline terms of reference fortechnical assistance to the MCW (Annex 11) were reviewed and agreed (para.4.02(i)).

2.31 Preliminary designs for the new materials laboratory have beenprepared and equipment specifications and staffing have been discussed andagreed (Annex 1, Item B9). The first stage of the new laboratory togetherwith equipment and staff is scheduled to be operational early in 1990.

Rural Bus Companies and MCW Road Transport Department

2.32 The formation of new rural bus companies, including buying outexisting owner operators and re-equipping companies with new buses, will bea phased process extending beyond the duration of the proposed project.The pilot company has already been formed in the Nicosia region.

2.33 The terms of reference for technical assistance to the RoadTransport Department (RTD) of the MCW, which, inter alia, inc >d -rovisionof advice to the new rural bus companies have been prepared (Annex 11).The Cypriot counterpart staff will be designated by March 31, 1988, and thetechnical assistance advisor has been appointed. Procurement of specialistequipment for the RTD will take place after preparation of specificationsby the RTD with the help of the technical assistance advisor. Target datesfor rural bus company formation and technical assistance are included inthe Action Plan (Annex 2).

Civil Aviation Sub-Sector

2.34 Feasibility studies and design work for constructing and equippinga new terminal building at LIA and design of a revised airport chargingsystem will commence in Jwue 1988.

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2.35 After six months for bidding and contract award, implementation ofLIA improvement construction works is scheduled to commence in mid 1990with a three year construction period.

Ports Sub-Sector

2.36 The procurement of two (with an option on a third) rubber tyredgantries for container handling and additional straddle carriers andsupport equipment will be undertaken by CPA on behalf of the new operatingcompany. However, delivery of the equipment is expected to take up to 12months thus it is important that specifications are agreed and invitationsto bid and financing is arranged as soon as possible - with the target datefor this activity being April 1988. The target dates for these activitiesis contained in the Action Plan (Annex 2).

2.37 The procurement of other equipment, including mobile cranes,tugboats (or modifying existing vessels) and technical assistance to adviseon management systems, port operation and pollution control and toundertake training activities will take place throughout the course of theproject. However, as some of the technical assistance will be related tothe operation of new container handling technology the exact timing of theassistance will have to be phased with the formation of the new company andprocurement of equipment.

General

2.38 The project is expected to be effective in June 1988 and executionof the Bank financed components would be completed by mid-1994, a total ofabout 6 years. The loan closing date is scheduled for December 31, 1994,about seven years from Board presentation. The project implementationschedule and reporting requirements are given in Annex 13. Duringnegotiations, the project implementation and reporting schedule werediscussed and confirmed (para 4.01d).

G. Disbursements

2.39 With the exception of contracts valued at US$500,000 or less, allwithdrawal applications will be fully documented. Disbursements againstcontracts valued at US$500,000 or less would be made on the basis ofstatements of expenditure (80). Documentation to support expendituresfinanced under SOE would be maintained by the MCW and made available forreview by IBRD representatives upon request in addition to being audited byauditors acceptable to the Bank. The disbursements are as follows:

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Disbursements

Loan Allocation 2 of Expenditures toCategory US$ be Financed

(1) Civil works(a) Dhekelia-Aridhipou-LIA road 7,000,000 452(b) Other roads 12,500,000 452

(2) Pavement strengthening 5,000,000 552(3) Laboratory buildings 500,000 702(4) Equipment for highway

management and training 1,000,000 1002 of foreignexpenditures, 100% oflocal expenditures(ex-factory cost), and802 for other itemsprocured locally.

(5) Technical assistance andfellowships 3,000,000 80%

(6) Unallocated 6,000,000TOTAL 35,000,000

2.40 The disbursement schedule (Annex 15) has been developed from thegeneral implementation schedule (Annex 13). However, only estimateddisbursements for: (i) Dhekelia-Aridhipou-LIA Road; (ii) technicalassistance; and (iii) training can be considered reasonably firm. Thedisbursements against other highway works and the central materialslaboratory, for which annual programs will be agreed, are only indicative,but ample time has been allowed for completion of the last year's (1991)program.

2.41 The forecast schedule of complete disbursement within seven yearshas been compared with historical experience and is considered realistic.An examination of other Bank transport projects in Cyprus confirms thatthese projects have disbursed more quickly than indicated by the regionalprofile. The Third Highway Project is likely to be fully disbursed in lessthan seven years. During negotiations disbursement arrangements werediscussed and agreed with Government (para. 4.02(j)).

2.42 A revolving fund for US$2,000,000 corresponding to an average offour months of expenditure of the Loan would be established by opening aspecial account. The special account will be maintained with the CentralBank of Cyprus for eligible expenditures under the Loan Agreement, inaccordance with IBRD procedures. During negotiations the special accountarrangements were discussed and agreed with Government (4.02(k)).

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H. Accounting and Audit

2.43 The system of accounting, financial contr.l and audit is wellestablished and competently operated in Cyprus. ,he Auditor General isresponsible for the management and supervision of all accounting operationsin Government, and for the receipt and disbursement of revenues, and he hasappropriate powers to delegate his powers and duties. The Auditor Generalis entirely independent of Government and outside the civil service,reporting only to the President. The accounting and audit procedures havebeen reviewed and they are acceptable to the Bank for the purposes ofkeeping and auditing project accounts. Assurances were obtained fromGoverment during negotiations that separate accounts will be kept for allproject components. In addition an annual statement of projectexpenditures including the operation of the Special Account, duly audited,will be furnished to the Bank not later than six months after the end ofeach fiscal year. During negotiations these arrangements were discussedand agreed with Government (para 4.02(1)).

I. Environmental Considerations

2.44 Road improvement works in Cyprus have generally led toenvironmental improvements through, for example, directing traffic awayfrom the center of towns and villages. However, special attention is nowbeing paid, commencing with the environmental impact study included in theTillyria Access Road Study financed under the Third Highway Project, to theneed to study more carefully environmental factors including protection offragile ecosystems, preservation of antiquities and the proper planning ofsecondary development. In parallel with the proposed project and at theGovernment's request, the Bank, with consultant trust funds, will employ aconsulting firm to conduct an environmental impact study of road and portdevelopment - including the proposed project component - and submitrecommendations to the Government and Bank on what measures should be takento conserve and improve the environment affected by road and portconstruction and operations. The recommendations will also include actionsto be taken prior to and during project preparation and specific criteriato assess the environmental impact of a proposed project. After agreementbetween the Government and the Bank, recommendations will become operatingprocedures which will be incorporated in the regulations of the MCW, itsDepartment and the CPA. The activity is included in the Action Plan(Annex 2). The LIA feasibility study terms of reference include specifictasks to be undertaken by the consultants in relation to the environmentaffected by the new terminal building. In addition, MCW standardconditions of contract for civil works construction include specificclauses concerning the preservation of antiquities.

III. ECONOMIC EVALUATION

A. Economic Background

3.01 Cyprus' record of economic performance with high growth, lowunemployment, limited inflation and a healthy external balance was only

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temporarily affected by the events of 1974 and the world wide economicproblems steming from the major oil price shocks. This record has beenthe result of careful economic management on the part of the authoritiesand an enthusiastic and hardworking private sector.

3.02 In the past two years, particularly owing to reduced investment inthe Middle East following the decline in oil prices, economic activity hasslowed down with the GDP growth falling to 3.71 p.a. compared with 6.0% in1978-84 and unemployment has increased from 2.52 in 1981 to about 3.41 in1986. Although there has been a continued strong growth in tourism andexports of other services, including transport, this has been insufficientto match the decline in the export of goods and consequently the currentaccount remains in deficit (7.1% of GDP in 1985). Whilst this deficit hasbeen more than covered by inflows of private investment and publicborrowing this has naturally led to a rise in external debt from 251 of GDPin 1981 to 351 (US$923 million) of GDP in 1985. Preliminary data indicatethat starting in 1986 the external balance is again improving. For sometime a major danger to economic performance was a growing budget deficitresulting from high recurrent expenditures and low levels of revenuecollection. Government is at last achieving some success in addressingthis issue and the tax revenue/GDP ratio has increased from 15% in 1980 to221 in 1985. There is swill a need to reduce the budget deficit furtherand this is receiving careful attention from Government especially throughcontrol of the amount of the recurrent budget allocated to the support ofthe civil service, the numbers of which have now been frozen.

3.03 The Government's development strategy, which is supported by theBank, is to continue the encouragement of the private sector, especially inforeign currency earning areas of trade, tourism and services, through theprovision of the necessary infrastructure and by 'Limiting bureaucraticprocedures. At the same time both recurrent and capital expenditures willbe carefully assessed to ascertain that they are pertinent to thedevelopment strategy and in keeping with resources. Where feasible, therevenue earning capability of state or quasi-state run operations will berealized in order to reduce demand on the official budget and to stimulatecost effective operations.

B. The 1988-91 Development Program

3.04 It is against this economic background, and taking account ofGovernment economic management strategy that the 1988-91 transport sectordevelopment program has been evolved. Apart from those major componentsscheduled to be implemented starting in 1988 (para. 2.04) and amounting toabout 201 of the program, there is little up-to-date evaluationdocumentation. For this reason, the effective functioning of the proposedTransport Sector Planning and Project Monitoring Unit of the MCW is aninstitutional issue of paramount importance and is being addressedvigorously under the proposed project. During appraisal the preliminaryevaluations of the program were discussed with the executive and planningagencies and, in principle, the program was found to be pertinent tocurrent and predicted transport demand, taking account of the presentcondition of the infrastructure and services, dnd to be within thetransport agencies' absorptive capacity.

- 33 -

3.05 During 1987/88 earlier studies of Limassol-Paphos road andNicosia-Astromeritis road, which indicated rates of return of 322 and 842respectively, will be updated and the Tillyria Access Road Study and LIAImprovement Study will be completed. The viability of these potentialcomponents, amounting to about 402 of the total project, will be studied aspart of the joint Cyprus Government/Bank review process (para. 2.03)starting in 1988. The program, which will be reviewed annually by the Bankand the Bank's views taken into account in making modifications amounts toabout 22S of the total public sector investment program during the sameperiod. This is similar to the share of the transport seztor during the1982-86 plan and is considered to be within the financial and institutionalconstraints of the economy. Moreover, most of the proposed investment inthe Road Transport and Ports sub-sectors, comprising about 132 of thetotal, will probably be financed by the private sector or from the CPAinternal sources and, thus, will not represent a demand on public funds.Purthermore, the core of the program consists of only a small number ofprojects and there is scope for adjustment in the light of changingeconomic circumstances.

Highway Sub-Sector

3.06 In the highway sub-sector only the major component, theDhekelia-Aridhipou-LIA road, comprising about 302 of the roads program, hasbeen subjected to a detailed feasibility study and design (Annex 1 (B1) andAnnex 5). However, other road projects have been identified according tocondition assessment and traffic volumes and will be subjected to detailedevaluation before inclusion in the firm work program. In the case ofperiodic maintenance the program will be prepared according to the highwaymaintenance management system introduced under the Third Highway Project(Annex lB2).

3.07 The primary beneficiaries of the Dhekelia-Aridhippou-LIA road willbe (i) the road users, including commercial traffic between Larnaca,important agricultural and tourist areas and the rest of Cyprus, and LIAusers especially tourists; (ii) villages on the present road which will bespared the noise pollution and accident risks that exist at present; and(iii) the Government which will save the heavy maintenance expendituresrequired to preserve the operating standard of the existing weak pavement.The project is estimated to yield a rate of return over a 15 year analysisperiod of about 411. A summary of the feasibility study is given inAnnex 5. Assuming the other components of the Highway sub-sector program,which will primarily consist of road improvement and strengthening schemes,only meet the minimum rate of return of 12X, which is very conservative,the sub-sector overall rate of return will still remain at about 221.

3.08 No economic evaluation has been undertaken for the improvements tothe materials laboratory, training program or technical assistanceamounting to about 41 of the Highway Sector Programme. However, they areconsidered to be essential inputs to the development of an effectivehighway planning and management system and fully justified.

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Road Traneport Sub-Sector

3.09 While urban passenger transport services and links between themain cities are generally of a good standard in Cyprus, a recent study(Annex 1 (84)) financed under Loan 2128-CY has shown that public transportin rural areas is deteriorating. This deterioration is marked by thedecline in the level of service offered by the traditional village buses.It is feared that this will lead to a falling off in the quality of rurallife and a shift of the population to the alreaiy strained urban areascreating growing demands on government and municipal services and a declinein the important agricultural industry. Consequently, based on the study'srecommendations, it has been decided to replace progressively the old andrather ineffficient village bus services with new regional bus companieswith modern equipment. No economic analysis has been carried out tosupport this program but financial viability is a key factor in companyplanning and profit will be a main criterion in formation and opsration ofthese new private companies who will be responsible for servicing financialsupport. Financial viability will be a condition for company formation andequipment procurement: The first regional company is already being formedin the Nicosia region. As part of its annual review of the sector, theBank will monitor the program of rationalization in relation to companyfinancial performance and service levels and advise the Governmentaccordingly.

Civil Aviation Sub-Sector

3.10 The main investment proposed in the civil aviation sub-sector isthe construction of a new terminal building, other supportinginfrastructure works and improvement of existing buildings at LarnacaInternational Airport. This will be undertaken within the framework of theupdated 1978 Master Plan. At present the cost estimates are based on onlya preliminary study carried out in 1985, but a detailed feasibility studywill be completed by early 1989 and this will be supervised and reviewed bythe Bank under the proposed project and the Bank's views will be taken intoaccount in the subsequent stages of design and construction. Preliminaryreviews by the Bank, however, indicate that the investment is not onlyoperationally necessary but that it would be economically justified and,given a revised charging policy, could be financially viable. In thiscontext the Government has agreed to undertake, as part of the feasibilitystudy, an analysis of costs and airport charges in order to strengthen thecivil aviation sub-sector's financial position and to consider the optionof Larnaca airport operating as an independent agency.

Ports Sub-Sector

3.11 The major investment proposed for the ports sub-sector is therehabilitation of the Limassol container terminal infrastructure and theprocurement of new container handling equipment which amounts to aboutUS$5.5 million. This development was originally proposed under the SecondPort Project but was not implemented due to institutional problems relatingto port operation and to doubts as to whether traffic would grow fastenough to warrant the procurement of high capacity equipment. The current

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situation as regards the volume of container traffic and the competitivenature of eastern Mediterranean transit traffic clearly indicates the needfor modern equipment and the institutional problems are on their way tobeing resolved (Annex 2). The economic and financial analysis shows anexpected rate of return of about 352 for this particular investment.

3.12 No cost benefit analysis has yet been undertaken for theprocurement of a new tug or upgrading existing vessels but the CPA hasconfirmed that a feasibility study and performance analysis will beundertaken prior to the preparation of specifications and calling for bids.

Overall Rate of Return

3.13 Those investment components commencing in 1988: (i) theDhekelia-Aridhipou-LIA road; (ii) construction of a new materialslaboratory; (iii) the procurement of rubber-tyred gantries for Limassolport; and (iv) new equipment for the regional bus companies, amount tonearly 25S of total project cost. The overall rate of return on these isestimated at 40%. Should the reminder of the proposed program, consistingmainly of highway works, meet only the minimum test rate of return of 121the project's overall rate of return would be 181. However, based onrecent experience in the highway sector and the results of preliminaryfeasibility studies for the Limassol-Paphos and Nicosia Astromeritis roadsit is estimated that the overall rate of return will be in excess of 30%.

C. Project Risk

3.14 The proposed project is not subject to any unusual risks and isbased upon a program of works already agreed in principle between the Bankand the Government. The first year's program of major works has beentested against a 201 increase in costs and excluding benefits fromreductions in road accidents and remains viable. On the institutional sidethere are other principal areas of risk that may affect project performance:

Port Institutional Reforms. Institutional reform, especiallyrelating to container operations at Limassol port, involving the privatesector and CPA, has always been a thorny issue and it must be accepted thatconsiderable problems may yet lie ahead. However, preparation work,involving detailed and lengthy discussions among the parties directlyinvolved and with the Bank, aimed at building up a spirit of trust andcooperation and unbiased evaluation of the financial implications ofdifferent strategies have begun and agreement in principle has beenreached. Thus although delays may still occur, and this could postponeprocurement of equipment and hence loss of benefits, it is expected thatthe reforms will be in place by the end of 1988.

Procurement Delays. Due to the complex procedure with its manychecks and counterchecks procurement can be very slow lesding, onoccasions, to severe delays in project execution and postponment ofbenefits. However, Government is aware of this problem and, withassistance from, the Bank, it is to be addressed under both the ongoingFourth Highway Project and the proposed project (Annex 2). Furthermore,based on Bank experience in Cyprus the project implementation schedule hasallowed for long lead times.

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IV. Recommendations

4.01 During loan negotiations the Government confirmed:

(a) the project objectives and description (para. 2.00);

(b) cost estimates of the four year program (para. 2.17);

(c) that satisfactory arrangements have been made by or throughGovernment of sufficient funds to meet the balance of foreignexchange and local costs not covered by the Bank loan(para. 2.18);

(d) the project implementation and reporting schedule(para. 2.38); and

(e) the training program (para. 2.04(b) and Annex 6).

4.02 During loan negotiations the Government agreed to:

(a) the Action Plan (para. 1.04 and Annex 2);

(b) the staffing of the Transport Sector Planning and ProjectMonitoring Unit and, in particular, the appointment by May31, 1988 of technical assistance personnel to be supplied bythe Transport Sector Master Plan consultants (para. 1.08);

(c) furnish to the Bank for review and comment by October 31 ofeach year until completion of the project the proposedrecurrent and development Transport Sector Budget; (para.1.11);

(d) the terms of reference for the LIA feasibility study (para.1.45 and Annex 8);

(e) the guidelines for project evaluation (para. 2.03 and Annex10); submission to the Bank for review and approval by June30 each year of the highway components proposed for Bankfinancing to commence the following year (para. 2.03);

(f) ensure that the list of road sections submitted each year forfinancing under the program shall have an ERR greater than122 and shall not be implemented before the first year rateof return is at least 101 (para. 2.03);

(g) the procurement arrangements (para. 2.25);

(h) supervision arrangements for the Dhekelia-Aridhippou-LIA road(para. 2.28);

(i) the terms of reference for technical assistance to MCW(para. 2.30);

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(j) the disbursemnt arrangeents (para. 2.41);

(k) the use and amount of the special account (para. 2.42); and

(1) the audit of project expenditure, lncluding the specialaccount, not later than six months after the end of eachfiscal year (para. 2.43).

4.03 Subject to agreement on the above, the project would be suitablefor a Bank loan of US$35.00 million equivalent to the Republic of Cyprusfor a 15 year term including a three year grace period.

- 38 -ANNEX 1

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPORT SECTOR DEVELOPMENT PROJECT

Prolect File Index

A. General Reports and Studies

Al. Annual Report 1986 Auditor-General of the Republic ofCyprus

A2. 1987-91 Development Plan, Plan Summary, Planning Bureau,Planning Commission, Nicosia

A3. Republic of Cyprus Budget for 1987A4. Republic of Cyprus Development Estimates for 1987AS. Statistics of Motor Vehicles and Road Accidents 1986,

Department of Statistics aud Research, Ministry ofFinance

A6. Central Bank of Cyprus Annual Report 1986A7. Cyprus: The Way for Businessmen and Investors,

Coopers and Lybrand, 1987

B. Reports and Studies Related to the Prolect

B1. Feasibility Study of the Proposed Road Between Dhekelia,Aridhippou and Larnaca International Airport 1985

B2. The Study and Implementation of a Highway MaintenanceManagement System Proposal and Progress Reports 1985,1986 and 1987

B3. Aide Memoire and Supporting Documents: AppraisalMission, June, 1987

B4. The Study of Public Service Passenger Carrying Vehicles:1986

35. Cyprus Staff Appraisal Reports (Nos 3749-CY and 5983-CY)of Third and Fourth Highway Projects respectively

B6. Law on Motor Vehicles and Traffic Regulations,March 8, 1984

B7. Cyprus - Second Port Project (LN1540-CY) ContainerTechnology Limassol Port: Report by ABP Research andConsultancy Ltd 1986

B8. Larnaca International Airport 1978 Master Plan and otherReports

B9. Plans and Specifications for New Material Laboratory

C. Tables and Other Data Related to the Project

Cl. Results of 1986/87 road inventories and traffic countsC2. Cyprus Airways Ltd. Annual Report and Financial

Statements 1986

REPUBL1C OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPORT SECTOR OEVELOPMENT PROJECT

A. Establishment o Transport proiectACTION PLAN

A. L5tflblishmeft of transDorlL secur. Imlementation and Monito-'na Unit tTSPPt4 in MCW

SUXR Taraet Date Action Involved Asencies

i) Operation of Unit: May 31, 1988 Prepare and submit to MCW management TSPPW, UW mlanagement, otherreview of 1987 transport sector dev- transport agenieselopments, outlook for 1988 and out-line proposals for 1989 to 1991 for MCWcomments.

Complete appointment of consultants. WCW. Win. FinanLe. PlanningBureau, Min. Council

June 30, 1988 MCW submit review to Planning Bureau. MCW, Planning Bureau. Min. Finance"in. Finance for cinient.

Sept. 30, 1988 Prepare proposals for 1989 Transport TSPPH, CWSector Development and submit toPlanning Bureau and Win. Financefor review and modification.

Submit draft recurtent and development TSPPH. NMbudget to IBRD

Dec. 31. 1988 Prepare first statistical report and TSPP", MW. PB. "in. Finance1989-1993 transport sector planninggbidelines and indicative investmentplan. Submit to Planning Bureau,Win. Finance and IBRD for review.

This cycle should then be repeated annually.

B. PrCqurement Procodurec

(i) Prepare program Dec. 31, 1987 Prepare terms of reference and program Comuittee on Procurementand furnish to TBRM for review.

ti1) Make reconuendations Sept. 30, 1Qe8 Complete Review for submission to Committee on Procurementconcerned Government bodies.

tiii) Agree on changes and Feb. 28. 1989 Examination of Review and Action Main Tender Board. MCW. Ministerialschedule for implementation Plan Report and furnish to IBsD. Council

(iv) Implementation June 30. 1989 Prepare documentation and instructions Accountant Generalto Dec. 31, 1989

' See Loan A*reement for actual date.

0.

C. Rationalt,ation of Rural Passenoer Transport System

ntoa Tareet Date Action Involved Aaemices

(1) Technical Assistance jan. 31, t988 Provision of technical assistance MCW - Road Transport Departmentto new companies.

0i1) Financing June 30, 1988 Provision of budget allocation for MCO, Min. Financeinitial loans to set up newcompanies.

0 Limassol Port: Formation of Container Comoanv and Procurment of Eaulament

"aeo Rate Action Involved Aaencies

(0) Agreement that container company Apr. 1988 Issue policy guidelines. Council of ministerswill be formed.

(0i) Appointment of legislative May 1988 Draft company structure and operation t' Representatives of parties involveworking party (CPA, Shipping Oraft franchise agreement betwetn CPA working party CPA.Agents, Licensed Porters). and company. Prepare legislation

covering formation of new coPany andoperating franchise.

(iii) Decision eor equipment and Apr. 1988 Prepare specifications and " CPAfinancing bidding documents.

Receive equipment proposalsEvaluate ProposalsContract awardFinancing agreement.

(iv) Approval of company structure Sept. 1988 Iplementation of company: Working party and new co_anyand granting of franchise Registration, appointment of senior CPA

staff. start administrative actions.procurement

(v) Equipment delivery June 1989 Delivery and financial arrangements Suppliers

i/ Copy to 1310

O 0

Smen iarrt Date ActiQn 1nvo1Vy AeMeImO

E. Introduction of Restructured Part Tariff Svmt

() Analysis of shortcomings of completed Report to Board and Board discussion CPApresent tariff structure and recomendations

(1i) Propose measures to amend tariff completed Discussed by Board and recommendations CPAstructure to proceed with implementation.

Copy to IBQD.

Iiii) Consultative process Jan. 1988 Proposal to be discussed CPA. Cyprus Shipping Agents, Chamberwith interested parties. of Coierce, ministry of Commerce andincluding, as appropriate. IB0D. Industry. MCI, Win. Finance, Planning

Bureau, MCW

(iv) Submission to Council of Ministers Apr. 1988 Approval by Council of Ministers CPA, Council of 1inisters

(v) Approval of tariff structure Oct. 1988 Approval by House of Representatives House of Representatives,CPA

(vi) Implementation of new tariff Jan. 1989 Documentation and publicity and internal CPAstructure administrative arrangements

F. Larnaca Internatinal Airport FeasibilitY Study

Stea targrg Date Action Involved ALencies

0i) Agreement on terms of reference Nov. 30, 1987 Review and approval of terms of reference MCWfor Larnaca Airport t Crovement whichincludes terms of reference for chargingsystem study

(ii) L.I.A. Working Party established Mar. 31, 1988 Appoint members and specify duties IICW. Ministerial Councilunder chairmanship of Civil AviationDepartment. MCW

(OMi) Consultancy Award Short List Agreed Main Tender Board and Council ofMinisters

Dec. 15. 1987 Invite proposals MCWJan. 31, 1988 Receive proposals and evaluate and submit MCU, Main Tender Board

recommendations to IBMDJune 30, 1988 Award Consultancy HCW, Main Tender Board, Min.

Council(iv) Final Report Mar. 31. 1989 Review and Comment and prepare L.I.A. Working Party

recommendation for MCW. "in. Counciland IBRD 0

(v) Decision on preferred option by May 31, 1989 Submit recommendation to Win. Council MCW. Win. CouncilGovernment

0(vi) Civil Aviation Financial Mar. 31, 1989 The Government shall furnish to the Bank

operattons its proposals for the implementationof cost recovery measures and theadoption of an appropriate accountingsystem.

aneD Tarcet Date ac&iUn Involved Aaencies

G. Traininn

(a) Development of Trainina at Nicosia Hiaher Technical Institute (NHI)

0i) Du.ign buildings and specify March 31, 1988 Prepare and agree drawings. bills COW, NMIequipment of quantities, specifications &

bid documents for SBRD review.

(ii) Construct and equip. buildings June 30. 1989 Issue bid documents, award contracts. MCW

(iii) Assign local staff and recruit June 30. 1988 Prepare and agree detailed tenms of MCwexpatriate. reference and contracts for IBRD review.

advertise and select personnel.

(iv) Fellowship Training July 31, 1988 Select trainees and identify training MCW. *HH & training groupscourses.

(v) Implement & monitor training Jan. 1, 1989 - Prepare and implement annual MCMI NMIprogram continuous programs, select trainees and

follow-up on perfornce.

(b) Civil Aviation Trainin

SLe Tarnet Date Actton Imnvolved Aaenriasn

(1) Recruit expatriate training June 30, 1988 Prepare and agree detailed Cewexperts and assign Cypriot terms of reference for IBRD review andcounterparts contract, advertise and select.

(Mi) Implement Cyprus July 31, 1988 Arrange facilities, procure mCwTraining Program equipment, select trainees,

train and monitor performance

CiMi) Implement Fellowship July 31, 1988 Select trainees, identify MCW and trainingProgram training opportunities, organizations

arrange substitutes duringtraining periods and implementfellowships.

16. Environment

UNM Tareet Date Action Involved AsiLlenes ° |

Ci) Adopt environmental impact Mar. 31. 1989 Review recommendations of IBID study Ministerial Council. MCWIcriteria

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRASPORT SECTOR DEVELOPHENT PROJECT

Administration of the Hiohwav Network(Length in Kilometers)

forestryPublic Works Deoartment District Administration Miunicialithes Dept. Total

Year sitn Gravel Total sita Gravel Total sittm Grraf Total Gravel 8tm Gravel Total

1979 1.66S 59 1,724 1,222 2,596 3,818 1.135 S13 1.64U 1,906 4,022 5,074 9.096

1980 1.729 S9 1.788 1,264 2,619 3,883 1.147 51S 1.662 1,955 4.140 S.148 9,288

1981 1,793 6S 1,858 1,274 2.672 3,946 1,161 513 1.674 2,339 4,228 S,589 9,817

1982 1,835 6S 1,900 1,308 2.728 4,036 1,177 Sl 1,688 2.342 4,320 5,646 9,966

1983 1,878 64 1,942 1,34S 2,816 4,161 1,20S S13 1.718 2.432 4,423 S.825 10,253

1984 1,984 62 2,046 1,358 2,935 4,293 1.216 512 1,728 2,465 4.558 5.974 10.532

1985 2.018 76 2,094 1,4Su 2,956 4,411 1,253 502 1.755 2,494 4,726 6,028 10.754

19d6 2,053 76 2,129 1,599 2,818 4.417 1,279 506 1,785 2,761 4.931 6,161 11.092

Source: Department of Statistics and Research. 1inistry of Finance andPW District Engineer's Records.

00421

44 ~~~~~~~~~~~ANNEIX 4

-44- Or ICLA

sEurfLI OI CYPRIIT

13*1 M? ECOR ILONET ROEC

(I I d isfitrill 1079 llul

VAS and AgriculturalUKi Cal 111.1 hams EJILuus Trucks sIabaLa UC/ T.JraMtnr. -othhrs iaLa1979 () 85.1 1.3 1.5 15.2 4.0 107.9 19.5 4.8 1.3 133.5

(ii) 9.7 0.3 0.1 2.6 0.5 13.1 5.9 0.4 0.2 19.61980

(1) 90.9 1.3 1.6 18.3 5.3 117.4 31.2 4.9 1.4 154.9

(1i) 9.2 0.2 0.1 3.5 0.5 13.S 12.9 0.3 0.2 26.91981

(t) 94.7 1.4 1.5 20.9 5.5 124.0 35.9 4.9 1.4 166.2

(ii) 7.7 0.2 0.1 3.4 0.6 11.9 8.6 0.3 0.1 20.91982

S) 103.0 1.4 1.5 24.8 5.5 136.2 39.5 5.0 1.9 182.6

(93 ) 11.1 0.3 0.1 5.2 0.6 17.2 7.8 0.3 0.2 25.51983

(1) 109.1 1.5 1.5 30.6 6.0 148.7 40.8 S.0 1.8 196.3

(1i) 11.7 0.3 0.1 7.3 0.7 20.0 6.8 0.4 0.3 27.51984

(1) 116.6 1.5 1.5 35.1 6.4 161.1 43.3 S.1 2.0 211.5

(ii) 10.6 0.2 0.1 4.6 0.5 16.1 6.8 0.4 0.3 23.6

(i) 124.1 1.6 1.5 39.1 6.7 173.0 40.0 5.3 2.1 220.4

(it) 11.9 0.3 0.1 4.8 0.5 17.6 6.2 O.S 0.3 24.61986

It) 130.0 1.6 1.5 42.3 6.9 102.3 41.4 0.7 1.9 226.3

(t) 10.1 0.2 0.1 3.7 0.4 14.5 4.2 0.3 0.3 19.3

1/ tncludes Autoeycles.

Source: ODpartment of Statisties and Research. Ministry of 'snance.

00423

- 45 -

ANNEX 5Page 1 of 2

REPUBLIC OF CYPRUS

TRANSPORT SECTOR DEVELOPMENT PROJECT

STAFF APPRAISAL REPORT

Dhekelia-Aradhippou-LarnacaInternational Airport Link

Summary of Feasibility Study

INTRODUCTION

In their Final Report on the "Improvement of Road Connectionsbetween Larnaca and the New Nicosia-Limassol Highway" submitted in December1985 by the consultants, consideration was given to the construction of aLarnaca By-pass and a link to the International Airport.

Because of the restraints imposed by recent urban and suburbandevelopment and the location of housing for people displaced following theTurkish intervention, two alignments were considered for the by-pass.

(a) Corridor 4 from a junction near Kalokhorio to theDhali-Lprnaca road north of Aradhippou and to Dhekelia.

(b) Corridor 5 from the same proposed junction at Kalokhorio tothe Dhali-Larnaca road south of Aradhippou and to Dhekelia.

To divert airport traffic from the central area of Larnaca a roadLink, Corridor 6, was considered from the Kalokhorio junction to theairport via Meneou.

DESCRIPTION

The selection of alternative corridors for by-passing Larnaca andproviding a road link is constrained by the:

(a) need to avoid infringement of the Salt Lake;(b) mosque on the western lake shore;(c) area needed for the airport extension;(d) urban extension of Larnaca and the villages of Aradhippou and

Levadhia;(e) refugee settlements;(f) town plans already in advanced stages of discussion; and(g) good agricultural land which is at a premium in the area.

Forecast daily traffic flows for the year 2005, excluding some 102expected to be generated by the improved roads, were for the:

- 46 -

ANNEX 5Page 2 of 2

(a) By-pass (b) Airport link

20,700 cars 22,0009,500 LCV's 5,0004,700 HCV's 2,4001,500 Buses 600

36,400 30,000

The terrain through which the roads pass is flat/rolling made upmainly of alluvias/terrace deposits. The soils are calcarous, sandygravely with some clay and silt mixed with layers of chialk and marls.Significant rock cutting would be required near Aradhippou but for the restof the roads only soft cutting would be necessary. For drainage only onebridge, some box culverts and pipes would be required but a number ofopenings are required to allow farm vehicles and pass under the road.

Revised November 1987 construction costs show no significantchange from the feasibility study and remain at a base cost of US$16million with a US$7.3 million foreign exchange component. The proposedproject will be bid in two contracts ( Dhekelia-Aradhippou and Aradhippou -Larnaca International Airport.) but with the option for a contractor toprovide one bid covering both sections.

RECOMMENDATIONS

The Corridor 4 by-pass was recommended. A 7 metre road width wasdecided upon. This showed a higher estimated economic internal rate ofreturn than the southern Corridor 5 and than the 4-lane dual highwayalternative. At a discount rate of 102 however the 4-lane dual highwayshowed a greater net preient value. However, the study recommended that asa dual carriageway will be required within 10 years the right of wayrequired for this should be acquired immediately.

The Corridor 4 northern by-pass is more in keeping with theimprovement of the Dhali route from the new Nicosia-Limassol road toLarnaca, lessens environmental impact on the area, uses less ag-iculturalland and causes less inhibition on the spread of villages and the plannedurban area.

The by-pass could be part of the long term, road strategy formingpart of a main route between Limassol and the west and the east includingFamagusta should a settlement be achieved.

On the basis of vehicle operating cost savings alone, the combinedER of the Northern bypass and the Airport link is 411. If time savings andaccident costs are included the ER increases to 782.

- 47 -

ANNEX 6Page 1 of 4

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPORT SECTOR DEVELOPMENT PROJECT

Manpower Develo ment

A. Ministry of Communications and Works (PWD

Staffing

1. The PWD is staffed as follows:

Engineers of graduate qualifications 65Architects and Surveyors 10Technicians (including NHI graduates) 252Clerical and other Administrative staff 115Manual workers (not civil servants) 1,122

Training Needs

2. (i) Engineers: There is a clear need to update and upgrade thecapabilities of engineers and this should be done in such away as to achieve common standards and approaches. Thetraining should focus on civil works supervision, roadmaintenance, bituminous mixes and works, modern design andsurvey methods, project evaluation and contract managementand be soundly based on practical operations. For somesenior engineers management training and personnel managementare necessary. Also, to assist in the training ofsubordinate staff, at least some key engineers should receiveinstruction on training methods. Professional surveyorsshould also receive specialized training.

(ii) Technicians, Foremen. etc: there is a wide range ofstandards in this group although with an increasingproportion possessing an NHI diploma. Nonetheless mostrequire additional training and upgrading with sitesupervision being a core subject together with specializationin selected fields especially maintenance planning andcontrol, bituminous materials and project evaluation andtraffic survey and analysis. Again some on the job trainingshould be given.

- 48 -

ANNEX 6Page 2 of 4

(iii) Clerical and Other Administrative Staff: These staff requirerefresher courses upgrading in office management andaccounting, data and information systems and modern officetechnology.

(iv) Manual Workers: No formalized training is envisaged formanual workers but as far as possible groups of workersshould be kept together in order that on the job team workingmay be developed. It may, however, be necessary to providetraining to some manual workers in special maintenanceoperations such as patching and pothole repair.

Training Organization and Courses

3. It is important that a Training Officer post be established assoon as possible and an officer designated to fill it. This officer shouldthen participate in a training management course in both general principlesand PWD specific needs. Initially, it is recommended that the TrainingOfficer (following training) should be assisted by a training specialistfor about six months to analyze training needs in detail and to prepare thefirst training program.

4. In the short to medium term, courses should be provided to cover:

i) civil works supervision and contract management;(ii) road maintenance systems and techniques;(iii) materials testing and especially bitumivous mixes;(iv) procurement;(v) modern survey methods;(vi) computer applications in civil engineering and planning; and(vii) traffic engineering techniques including road safety.

5. These courses will be provided through the Nicosia HigherTechnical Institute which will be strengthened under the proposed project.The courses will probably extend over a 15-week period during the Autumnand Winter for six hours per week: four hours per week will be devoted toformal input (including practical work and laboratory work) and two hoursto seminars or tutorials. In addition, there should be about 90 hours ofsite training. Two levels of training will be provided according to thelevel of knowledge of the trainees.

6. The estimated number of participants 1988-1992 are as follows:

1988 1989 1990 19s1 1992Engineers 50 53 59 49 43Senior Technicians 15 12 8 10 8Technicians 105 105 85 85 85Foremen 40 40 40 20 20

- 49 -

ANNEX 6Page 3 of 4

B. Improvements Required at NHI

7. Facilities and staffing at the NHI will have to be enhancedto carry out this training program including a special bituminous materialslaboratory and instruction room amounting to about 150 m2, equipment andtechnical assistance.

8. The proposed project will provide 12 man months of specialist(probably overseas expert) services and a special lectureship (Cypriot) inpavement design, maintenance methods and bituminous materials for 48months; in addition technical assistance for special subjects amounting to12 man months.

9. The project would also finance special overseas training ofthe specialist lecturer in bituminous materials (four months) and othershort term overseas fellowships to supplement in-country training and forthe particular needs of middle and senior grade managing personnel (12months).

10. The cost of this program in US$ equivalent is estimated at,

Technical Assistance 30 man months at US$ 7,000 US$ 210,000Fellowships 12 man months at US$ 4,000 US$ 48,000Special Lecturer 48 man months at US$ 1,500 US$ 72,000Construction Works 150 M 2 at US$ 800 m2 US$ 45,000Equipment and Materials US$ 200,000

TOTAL US$ 575,000

C. Civil Aviation

11. The training needs are in two main categories:

(i) Specialist technical training which, in view of the expensein operating special courses, it is more cost effective tocarry out through overseas fellowships which could include:

Air Traffic Facility Administration (2) 12 man monthsAirport Management (2) 12 " "Accident Investigation 6 " "Air Traffic and Air Space Management Procedures 18 " "

Aviation Economics and Regulation 6 " iLicensing of Aircraft and Personnel 6 "Air Traffic Control Instruction (Area and Radar) 12 " o

The estimated cost of such a programme would be,

Fellowship 72 months at US$ 4,000 US$288,000

Equipment and Materials US$100,000Total US$388,000

- 50 -

ANNEX 6Page 4 of 4

(ii) Airport staff training which would best be carried out inCyprus. However, as a first step, it would be necessary toappoint a Training Officer who should receive overseastraining at an airport that operates a training scheme. Itis recommended that such a course should last for 6 months.At the same time it is recommended that the consultantsappointed to undertake the feasibility study and design ofthe new operations facilities at Larnaca InternationalAirport should define training needs in relation to theairport design including staff job descriptions. The airportstaff training courses should cover, inter alia, aircraftcleaners, equipment operators, maintenance personnel andcommercial staff. It is recommended that 12 man monthsspecial technical assistance is provided to assist thetraining officer in this programme which would operate on thebasis of two days per week, probably during November eachyear, with adequate monitoring and follow-up. The estimatedcost is:

Training Officer training at US$4,000/man month US$48,000Specialist Technical Assistance assuming 8 monthsexpatriate and 4 months Cypriot. US$64,000

TOTAL US$112_000

- 51 -

ANNEX 7page 1 of 3

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPCRT SECTOR DEVELOPMENT PROJECT

Cy,rus Ports Authority - Financial Statements

A. Revenue Accounts for the Years 1985 and 1986

1985 1986C£ CE

Revenue

Operating 4,634,812 5,208,452Storage 832,708 767,513Rents, Royalties andLicences 492,173 542,822

Investment Income 53,570 96,822Sundries 2,415 20,411Gain on Disposal ofFixed Assets 229 12,731

6,015,907 6t648,753

Expenditure

Operating 2,523,241 2,485,314Administration 499,097 634,397Provision for PensionBenefits 286,280 305,982

Non Recurrent 18,698 65,556Depreciation 881,280 1,012,366Deferred 21,950 33,290Remuneration of themembers of the Boardof Nanagement 2,593 2,063

4,233,139 4,538,971

Operating Surplus 1,782,768 2,109,782Interest on long-termloans (949,056) (931,371)

Provision for (Loss)/Gainon exchange differenceson Foreign Loans (628,980) (916,508)

Surplus for the year 204,732 261,902

Surplus brought forward 12,082,302 12.287,033

GENERAL FUND 12,287,034 12,548,935

- 52 -

ANNEX 7Page 2 of 3

Cyprus Ports Authority - Financial Statements

A. Balance Sheet as at December 31, 1986

1985 1986CE CE

ASSETS EMPLOYED

FIXED ASSETS 28,088 28,356,896

CURRENT ASSETSCash 131,411 213,184Investments 870,165 1,246,251Sundry Debtors 325,617 510,962Spare Parts at cost 426,852 475,380Deferred Expenditure 65,950 89,361

1,819,995 2,535,139

Less CURRENT LIABILITIES1987 Capital Repaymentson long term borrowings 957,682 1,210,679

Creditors 959,041 954,655Sundry Accruals 3,000 3,500

1,919,713 2,168,834

NET CURRENT ASSETS/(LIABILITIES (99,718) 366,30527,988,431 28,723,202

SOURCES OF FINANCE

General Fund 12,287,034 12,548,935Borrowings 15,415,117 15,582,004Pension BenefitsProvision 286,280 592,262

27,988,431 28,723,202

- 53 -

ANNEX 7Page- 3 of 3

Cyprus Ports Authority - Financial Statements

A. Statement of Source and Application of FundsFor the Year ended December 31, 1986

1985 1986CE C£

SOURCES OF FUNDS

Net Operating Surplus for the yearafter charging interest on longterm borrowings 204,732 261,902

Adjustments for items not involvingthe movement of funds:(1) Depreciation set aside for

replacement of fixed assets 881,280 1,012,366(2) Provision for Pension Benefits 286,280 305,982(3) Gain on disposal of fixed

assets (229) (12,731)(4) Provision for Exchange Losses 628,980 916,508(5) Deferred Expenditure

written off 21,950 33,290(6) Govt. Loan - change in method

of repayment 506,294 -2,529,287 2,517,318

Funds from Other Sources:

Realization of Investments 1,808,332 3,466,618Borrowings 220,288 627,257Disposal of Fixed Assets 229 13,617Income relating toprevious years 33,421 -

2,062,270 4,107,493

TOTAL INFLOW OF FUNDS 4,591,557 6,624,811

APPLICATION OF FUNDS:

Acquisition of Fixed Assets 1,327,550 1,338,702Repayment of Borrowings 645,938 1,123,872Investments 2,328,364 3,842,705Expenditure relating toprevious years 167,818 -

TOTAL APPLICATION OF FUNDS 4,469,670 6,305,279

NET SURPLUS OR (DEFICIT)OF FUNDS 121,887 319,532

- 54 -

ANNEX 8Page 1 of 5

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPORT SECTOR DEVELOPMENT PROJECT

Development Study of LarnacaInternational Airport

Outline Terms of Reference

A. Objective of the StudY

The objectives of the study are the following:

(i) Provide a current airport masterplan with supportingdocumentation;

(ii) Determine the operational requirement for a new passengerterminal complex and for an air cargo building for the exportand import trade;

(iii) Perform a comprehensive economic and financial analysis forthe airport to assess the financial viability of the airportas an independent operating entity and to demonstrate itscontribution to the Cyprus Economy; and

(iv) Make recommendations on airport organization, managementoperation, staffing and training needs.

B. Scope of Consultina Services

The Consultant is expected to carry out such analyses and studiesas are deemed necessary which should include but are not limited to thefollowing:

(i) Prepare a detailed inventory of the existing facilities atthe airport and its surroundings;

(ii) Study all available statistical information on aircraft andpassenger movements and carry out a detailed analysis ofprojected traffic demand based on historical trends and oncurrent traffic planning factors for long-haul and regionalair transport development;

- 55 -

ANNEX 8Page 2 of 5

(iii) assess the adequacy of aircraft operations systems (i.e.runway, taxiways and navigational aids) to support futureoperations with due consideration of aircraft types, trafficpatterns and stage lengths;

(iv) determine the requirements for:

(a) small aircraft parking and servicing (General Aviation);and

(b) aircraft maintenance/hangar facilities;

(vi) examine the visibility deficiencies of the present airtraffic control tower and recommend solutions. If it isconfirmed that a new control tower is required, a locationfor that tower should be proposed. Alternatives to beconsidered should include:

(a) a new control tower adjacent to the present location;

(b) a new control tower with the ATB complex; and(c) other locations;

(vi) assess the present condition, capacity and futureOequirements for airport operational, maintenance and supportservices;

(a) mobile equipment storage and maintenance;

(b) crash/fire/rescue;

(c) security;

(d) normal and emergency power;

(e) water supply; and

(f) employee services;

(vii) propose a system for disposai of airport and aircraftsewage. Analysis of alternatives is to include investigationof plans to expand the Larnaca municipal sewage system andthe feasibility of connecting the airport to that system;

(viii) determine in general terms (i.e., gross building area,aircraft parking area, land area) of facilities to supportaircargo operations;

- 56 -

.",NXE 8Page 3 of 5

(ix) assess the impact of military and official aircraftoperations and determine the airport facilities and servicesnecessary to support those operations;

(x) prepare an airport development plan showing the location forall major airport facilities: reserve for further expansion;and primary road, water supply, sewage collection, electricalpower and telecommunication system. This master plan shouldexamine airport requirements to the year 2010 but shouldprovide for land reserves for expansion of essential systemsbeyond the year 2010, making optimun use of existingfacilities.

(xi) Determine the facilities required for the effective operationof a passenger terminal complex including:

(a) Air Terminal Building(b) aircraft parking stands;(c) motor vehicle access and parking;(d) utilities (water, sewerage, power, communications);

(xii) Using internationally accepted criteria for defining designdemands (e.g., standard busy hour), prepare statements ofoperational requirements for 1995, 2000, 2005 and 2010.Consideration should be given to:

(a) passenger type;(b) passenger behavior patterns:(c) terminal flow patterns;(d) processing rates;(e) frontier entry/exit controls;(f) security requirements;(g) concessions;(h) airline operations;(i) airport administration;(j) aircraft mix; and(k) ground transportation system.

(xiii) Prepare and evaluate alternative design concepts for theterminal system including (but not limited to):

(a) ground level, walk-to-gate;(b) remote gates with passenger transfer vehicles (e.g.,

buses); and(c) second level, bridged loading.

(xiv) The evaluation methodology and criteria are to be defined.Criteria to be considered will include:

- 57 -

ANNEX 8Page 4 et 5

(a) passenger convenience and level of service;(b) capital cost;(c) airport authority operating cost;(d) impact on airlines operations and costs;(e) security;(f) revenue potential;(g) potential for phased implementation; and(h) potential for future expansion.

(xv) Investigate the air carriers' requirement for fixed aircraftground services, i.e., conditioned air, power and potablewater. If a requirement exists, prepare design proposals.

(xvi) For the selected concept prepare new preliminary design(1:200), project budget and implementation schedule.

(xvii) Preliminary designs will be prepared only for work requiredfor the effective operation of the passenger terminal systemunless requested by the client. Plans for other facilitiessuch as cargo sheds or a separate control tower will bedeveloped only to the stage required for the master plan.

(xviii) Determine the financial resources required for implementationof the airport master plan.

(xix) Prepare a comprehensive airport economic and financialcost/revenue analysis to the year 2010 including a full costrecovery program for the new investment and cost recovery onthe adjusted replacement value of the existing facilities,the results of the analyses, which should provide both rateof return and net present value calculations, should besubjected to appropriate risk analysis and sensitivity tests;

(xx) Prepare a benefit/cost analysis to the year 2010 which interalia addresses the overall benefits of the airport to theCyprus economy (e.g. support of the tourist industry.)

(xxi) Compare the airport fee structure with those of otherinternational airports;

(xxii) Recommend airport fee structure changes necessary to achieveairport self-financing; and

(xxiii) Identify other revenue generating opportunities.

(xxiv) Produce an operational plan and a project implementationschedule.

- 58 -

ANNEX 8Page 5 of 5

C. Reports Required to be Submitted

(i) An Inception Report six weeks after the starting date.

(ii) A Progress Report three months after the starting date.

(iii) An Interim Report six months after the starting date.

(iv) Draft Final Feasibility Study eight months after startingdate.

(v) Final feasibility study, masterplan and economic analysisnine months after the starting date.

- 59 -

ANX 9Page 1 of 2

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPORT SECTOR DEVELOPMENT PROJECT

Previous Bank Experience in the Sector

1.01 The Bank has participated in six previous projects in thetransport sector. These were: First Highway Project (Loan 904-CY), SecondHighway Project (Loan 1344-CY), Third Highway Project (Loan 2128-CY), andFourth Highway Project (Loan 2684-CY) which are ongoing and expected to becompleted in June 1987 and June 1992 respectively and the First and SecondPort Projects (Loans 628-CY and 1540-CY). The Kuwait Fund for ArabEconomic Development (KFAED) participated or is participating in parallelco-financing in the Second, Third and Fourth Highway Projects. The FirstHighway Project was amended to take account of the events of 1974 and, withthe exception of part of its studies component, was combined with theSecond Highway Project which included construction of the newNicosia-Limassol road and studies which assisted in the preparation of theThird Highway Project and Second Port Project. A combined ProjectCompletion Report (PCR) has been prepared for the First and Second Highwayprojects, and a PCR for the Second Port Project has also been completed.The Third Highway Project has the following main objectives the improvementof about 200 km of rural roads; strengthening the Nicosia-Limassol road;studies of road maintenance needs and institutions, implementation of aroad maintenance management system; feasibility studies for improved roadlinks between Nicosia and Larnaca, Larnaca bypass and the Larnaca-Airportlink, the Limassol-Paphos road, traffic management needs in Limassol andthe rationalization of public passenger services. Although contractualproblems delayed the implementation of the Second Highway Project, all theprojects have met or are meeting both physical and institutional objectives.

1.02 Not only have the physical achievements of the projects beensuccessful, they have also served as a basis for a continuing policydialogue and institution building. In particular the Government has:

(a) recognized the advantages of undertaking rigorous technicaland economic evaluations of proposed projects. This is shownin the routine application of feasibility studies to proposedhighway projects and recent expressions of intent to applyeconomic and financial evaluation to ports and airportprojects. This will be developed under the Fourth Highwayproject by moving to the next stage of integrating individualprojects into an overall policy oriented Transport MasterPlan and, under the proposed project, the establishment of aTransport Sector Planning and Project Monitoring Departmentin the MCW;

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ANNEX 9Page 2 of 2

(b) accepted the need to review road user charging policies andimplement appropriate legislation;

(c) taken action to establish a sound revenue base for financingmaintenance and development through commercial chargingpolicies at ports;

(d) adopted a policy of working towards instituting a pavementmanagement system that will not only lead to lower highwayreconstruction costs but also improve the cost effectivenessof maintenance and reduce transport costs; and

(e) accepted the advantages of using International CompetitiveBidding (ICB) in procuring a wide range of goods and servicesand has also adopted more effective procurement evaluationprocedures which reduced the earlier numbers of contractualdelays and difficulties. The proposed project will continueto support these developments.

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ANNEX 10Page 1 of 3

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPORT SECTOR DEVELOPMENT PROJECT

Guidelines for Project Evaluation

A. Context of Transport Sector Project Evaluation

1. Proposed projects of whatever size or location will be studied inrelation to Cyprus' economic and social needs and the availability offinancial, manpower and institutional resources. Thus in addition toconventional economic justification using, for example, cost savingsspecial attention will be given to:

(a) the net contribution the project makes to foreign exchangeuse or earnings;

(b) the relationship of the project to the macro-economicconditions and objectives and the transport sector plan;

(c) the net effect on the official recurrent and investmentbudgets;

(d) employment effects;(e) impact upon the environment; and(f) inter-modal implications.

Whilst some of these areas of interest may not lways be readilyquantifiable, they should be clearly described ind related to the proposedinvestment.

B. General Criteria

2. Indicators. As far as possible the analysis of projects shouldprovide economic rates of return, first year returns and net presentvalues. Furthermore, in the case of revenue earning entities a financialanalysis should also be provided. In some cases when qualitativeconsiderations are of significant importance a multi-criteria evaluationmay be used. Alternative solutions should be tested using an incrementalcost benefit analysis.

Economic Rate of Return. A minimum acceptable economic rate ofreturn based on the opportunity cost of capital should be establishedannually under the guidance of the Planning Bureau and currently 12% shouldbe used.

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ANNEX 10Page 2 of 3

Investment Horizons. The choice on time period to be used shouldbe based on a combination of the expected physical and technical life ofthe components and an assessment of likely risk including reliability ofdata, and the degree of probability. The choice of time period should bejustified.

Timing of Investments. The timing of investments is ofconsiderable importance and should be explained regarding the investmentitself and inter-investment and sector linkages. Implementation of aninvestment should not commence before the first year rate of return is atleast 102. Where possible and realistic, the effects of changing aproposed investment scheduling should be estimated and described.

Traffic Estimation. Whenever possible investment specific trafficestimation should be used. This is particularly important where service orprice competition is important such as would be the case in the ports andcivil aviation sub-sectors. However, in the case of small road projects(e.g., rural roads) or small urban road projects average traffic trendsbased on historical data may be adequate. In each case the choice oftraffic estimate should be clearly justified.

C. Types of Evaluation Study

3. Depending on the nature and size of the proposed investment thestudy methodology will be different. Broadly three types are identifiedwith approximate values.

(a) large complex projects or projects (above US$3.0 m) which mayhave far reaching network, policy or institutional effects,auch as, for example, the improvement to LarnacaInternational Airport, the improvement to the Limassol-Paphosroad or large urban traffic projects (above US$3.0 m), shouldbe the subject of major consultancy studies based on uniqueterms of reference acceptable to major financing agencies;

(b) important but relatively straightforward projects (US$500,000to US$3.0 m), especially where local knowledge andinstitutions are of considerable importance, such as theRural Road Improvement Program should be the subject offeasibility studies carried out by the concerned agency's ownpersonnel assisted where necessary by consultants and/orother interested bodies. Special attention should be paid tothis latter point of involving the major interested parties;and

1/ Described in 3.03(b) of the Loan Agreement as the first year rate ofreturn of each road section which shall not be less than 101.

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ANNEX 10Page 3 of 3

(c) small and simple investments (up to US$500,000) whichcomprise much of any investment program should be givencareful consideration but, for example, periodic highwaymaintenance can be evaluated and planned through use of thestandard maintenance management program implemented under theThird Highway Project and in other cases a simple costeffectiveness analysis would suffice.

D. Structure of Feasibility Studies

4. It is to be particularly emphasised that feasibility studiesshould be the means of identifying suitable projects and specifying optimumsolutions for subsequent detailed design and implementation. They shouldnot be merely a medium for rubber stamping already taken technical andpolitical decisions.

5. The overall layout of the reports resulting from the study levelsgiven at 3(a) and 3(b) above should be:

(a) Introduction and Socio-Economic Context;(b) Engineering, construction, specifications, standards and

costs (including percentage of foreign exchange) and, asappropriate, all alternatives to be compared;

(c) Traffic estimation, growth rates and forecasts;(d) Operating costs including where appropriate financing costs;(e) Economic and Financial benefits, beneficiaries and include

impact on public sector budgets;(f) Environmental and employment impact;(g) Description and display of costs and benefits;(h) Calculation of results and sensitivity tests;(i) Financing methods and sources including revenue generation by

the project; and(j) Recommendation including relation to macro-economic

objectives, transport sector plans and policy, inter-modallinkages and institutional resources.

The reports should be supported by appropriate technical annexes including(i) a list of sources consulted; (ii) special surveys carried out; and(iii) special methodologies used such as calculation of vehicle operatingcosts, forecasting passenger traffic passing through an airport or priceelasticity of transport demand.

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ANNEX 11Page 1 of 7

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPORT SECTOR DEVELOPMENT PROJECT

Ministry of Communications and WorksTechnical Assistance Outline Terms of Reference

A. Background

The Cyprus Ministry of Communications and Works, within theframework of the Transport Sector Development Project which covers theperiod 1988-91, is proposing:

(a) to establish a Transport Sector Planning and ProjectMonitoring Unit (terms of reference attached);

(b) to investigate the feasibility of automating record keepinganti vehicle and driver licensing procedures within the RoadTransport Department (description of Department'sresponsibilities attached);

(c) to strengthen the training capability of the Nicosia HigherTechnical Institute as it affects highway and trafficengineering (description of program attached);

(d) to provide management and operations advice to newlyestablished regional bus companies; and

(e) to obtain specialized consulting services to assist inproject implementation.

To assist in meeting these objectives it is proposed to procure technicalassistance services either as individual experts or on the basis of apackage provided through consulting firm undertaking the Transport SectorMaster Plan Study.

B. Transport Sector Planning and Project Monitoring

The personnel will be required for a period of up to two years andwill work with Cypriot counterpart staff who have already been appointed.The job descriptions and qualifications are as follows:

(i) Transport Specialist. who would act as counterpart to theHead of the Unit and would be responsible for the operationof the Unit during short absences by the Head. The TransportSpecialist would inter alia, advise on and assist in:

- the establishment of a work programme covering thecollection and storage of transport sector data and theuse of this information in a sector planning andmonitoring methodology which he will also assist indesigning and implementing;

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ANNEX 11Page 2 of 7

preparation of a medium term indicative strategy forpublic sector and para-statal investments andinstitutional and policy reforms;

preparation of a rolling five year transport investment,maintenance and management plan in relation to thecountry's economic and social targets and resourceconstraints; and

- training Cypriot counterpart staff.

This specialist should have a research degree in transport planning with atleast 5 years practical experience, or the equivalent of a United Kingdombachelors degree in economics or civil engineering or transport studieswith at least 8 years experience in transport planning and be able todemonstrate experience in all transport modes.

(ii) Statistician/Information Systems Specialist. who would,inter alia, advise on and assist in:

- the design of a computer based system for the storage,retrieval and manipulation of transport related data forthe entire transport system in Cyprus but focussingespecially on the needs of public and parastatalagencies: such a system should be compatible withsystems operated by other Government agencies;

- the integration of this system into the sector planningand monitoring methodology (see (ii) above);

- the design and monitoring of data collection systems; and

- training Cypriot counterpart staff.

This specialist would have a recognized professional statisticalqualification with at least 8 years experience in transport studies,planning and control, including computer based information systems, and beable to demonstrate experience of data collection planning and field work.

(iii) Transport Economist. who would, inter alia, advise on andassist in:

- the review of transport needs and resources and thepreparation of the medium term strategy and rollingfive-year plan;

- the economic and financial evaluation of proposedtransport projects in all modes and the development of asystem of project evaluation;

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ANE 11Page 3 of 7

- the study of road user revenues and pricing policy andthe preparation of subsequent recommendations;

- the review of cost recovery systems in revenue earningentities and subsequent recommendations; and

training Cypriot counterpart staff.

This specialist would have a recognized academic qualification in economicswith at least 8 years experience in developing country transport economicsand planning covering all modes (except railways). He should also be ableto demonstrate experience of transport pricing policies and possessadequate knowledge of the technical aspects of different transport modes.

(iv) Transport Engineer. who would, inter alia, advise on andassist in:

the technical review of transport needs and proposedinvestments;

the pricing of transport needs and proposed investments;

- the technical and quality monitoring of works inprogress to be incorporated in the computer basedinformation system;

- the review of design standards especially relating tocivil works; and

- training Cypriot counterpart staff.

This specialist would have a recognized professional qualification in civilengineering and, although having a special knowledge of roads and trafficengineering, would have at least ten years practical experience in allaspects of transport related civil engineering works including ports andairports.

C. Road Transport Department Motor Vehicle Registration

This specialist will be required for about six months for carryingout studies and making recommendations and, following installation ofequipment, a further six months for training Cypriot personnel andmonitoring initial operation. He will:

- analyse the vehicle fleet and licensing system, drivinglicense records and administrative system for processingapplications, record keeping, financial control and randomlyaccessing records;

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ANNEX 11Page 4 of 7

- develop an appropriate system for automating the aboveRrocedure including decentralizing the method of application,payment and inputting data whilst using existing facilitiessuch as post offices;

- design the appropriate computer system and specify equipment,staffing and training needs to operate the system; and

- train Cypriot personnel in the use of the system.

This specialist will clearly need to be expert in systems analysis andcomputer applications with at least 8 years experience. However, theessential requirement is to have had rigorous experience in designing andimplementing such a system.

D. Nicosia Higher Technical Institute

Two specialist will be required on a regular basis together withabout 12 man months of specialized services.

(i) Materials Lecturers/Tutors. There will be two of theseposts, one Cypriot for four years and one expatriate for oneyear with six months follow-up. Whist being general roadmaking materials specialists the work will probably focus onthe design and use of bituminous materials and mixes. TheCypriot specialist may not have the same level of experienceas the expatriate engineer and will be expected to beupgraded during the expatriate tenure of office. Inparticular the duties of these specialists will be:

- to assist in the design of appropriate training coursesdescriptions of which are attached; and

- to implement the training courses and to follow-up on theperformance of the trainees who will come from both thepublic and private sector and cover foreman, technician andgraduate engineer level.

The expatriate specialist, who should have a recognized professionalqualification must have had at least 10 years in butiminous materials andbe able to demonstrate an effective teaching and training capability. TheCypriot specialist should also have a recognized professionalqualification, at least five years practising experience of road makingmaterials work and be shown to have an interest and potential in teachingand training.

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ANNEX 11Page 5 of 7

(ii) Specialist Services. These may cover a number of subjectareas but, particularly, (a) contract management andsupervision; (b) procurement of civil engineering goods andservices; (c) principles of traffic engineering; and(d) highway maintenance management systems. Proven expertiseand experience in the relevant field will be requiredtogether with demonstrated teaching ability.

E. Training Officer Training Expert

(a) the expert in training officer training to be based atLarnaca International Airport for about 8 months should haveat least four years experience in training of trainingofficers and a background of experience in airport training(e.g., equipment operators, maintenance, general airportfunctions and commercial training) extending over a period ofat least six years. It is desirable that the trainingexperience should have been obtained as a training officerfor a training board or similar organization. The personappointed should be qualified as a trainer and haveappropriate academic/professional qualifications in one ofthe areas of training relevant to the post.

(b) the expert will inter alia:

(i) train the Cypriot TrSining Officer in all aspects ofairport training;

(ii) assist in the preparation of staff job description forairport employees;

(iii) assist in identifying training needs relevant to the jobdescriptions; and

(iv) assist in planning appropriate training courses to coverthe identified training needs.

F. Regional Bus Companies

This specialist will have the task of (i) advising the RoadTransport Department on the ongoing program of rationalization of rural buscompanies including management and equipment needs; (ii) advising the newlyformed companies on management, operational and financial matters on a dayto day basis; and (iii) designing and implementing training seminars forbus operators. It is essential that this specialist (a) has a welldemonstrated capability of successful bus company operation in anenvironment similar to that obtaining in Cyprus; and (b) complete fluency

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ANNEX 11Page 6 of 7

in Greek. These qualities are of greater importance than academicqualifications but, in addition, an ability in skill transfer is mostimportant. It is anticipated that the duration of this assignment will be24 man months.

G. Specialized Consulting Services

(a) During the course of the implementation of the proposedTransport Sector Development Project (the Project) which,inter alia, will include highway construction,rehabilitation, pavement strengthening and periodic androutine maintenance, the Government has identified a need forcertain specialized consulting services. Whilst the Ministryof Communications and Works' (MCW) Public Works Department(PWD) will be responsible for design and supervision of mostof the proposed works it has been decided to seek theservices of consultants to provide certain specialist advice.

(b) The objective of the proposed contract is to provide between20 and 30 man months of specialist services during the periodMarch 1988 to December 1994 to undertake certain highwayresearch and advisory duties in assisting the PWD inimplementing the Project. The program of work will be agreedeach year in June for the following year.

(c) ghe areas of expertise will include but not be limited to:

(i) bituminous pavement maintenance operations includingboth asphalt carpet and surface dressing operations;

(ii) planning and supervising highway maintenance by contract;

(iii) pavement testing including deflection tests,geotechnical evaluations and materials performance;

(iv) specification of pavement designs especially the designof asphalt strengthening overlays; and

(v) civil works contract management by the employer.

(d) In carrying out this work the specialists will work closelywith the staff of PWD in the relevant fields and an elementof on the job training will be required. Nonetheless, theconsultant shall be solely responsible for the analysis ofdata, the recommendations made and designs produced.

(e) The following reports will be produced in 25 copies inEnglish and submitted to the PWD.

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AMN 11Page 7 of 7

Prolect R*Ports - these will consist of two parts:

(a) a brief inception report setting out: (i) interpretation ofclients need; (il) proposed approach to solving the problem;(iii) consultants resources and costs; (iv) resourcesrequired from the PWD; and (v) schedule of work; and

(b) a final report at the conclusion of the assignment whichshall: (i) set out clearly the nature of the problem;(il) methodology and resources employed; (iii) results of thestudy; and (iv) recommendations made including designs; and(v) proposals for future work covering both additional workand monitoring of results.

Aimual Reports - These will be produced in time for each Junereview and plaming meeting and will: (i) review work and project reportsin the preceding year; and (ii) make tentative recommendations andestimates for the following year's work.

This report, after review, may be modified at the request of PWD and anannual program prepared. However, the annual program may be modified atany time at the request of the PWD according to identified needs.

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ANNEX 12Page 1 of 3

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPORT SECTOR DEVELOPMENT PROJECT

Terms of Reference for the Ministry of Communications and WorksTransport Sector Planning, Project Implementation and Monitoring Unit

A. Introduction

1. The Ministry of Communications and Works (MCW) is responsible,directly or indirectly, in cooperation with the Ministry of Finance andPlanning Bureau, for the development maintenance and management of theCyprus transport sector. From time to time, as the occasion requires,other ministries and public and private sector organizations are alsobrought into the process.

2. In association with the Fourth Highway Project and proposed FirstTransport Project the MCW created a Transport Sector Planning andMonitoring Unit. This unit is responsible for both coordinatingmulti-sector planning exercises and coordinating development planning andresource management for the entire transport sector including both publicand private sub-sectors. The unit will also be responsible for monitoringthe progress of development and maintenance programs against targets and,in consultation with the relevant Departments and agencies, will advise onsector resources needs. Individual transport departments and agencies willcontinue, however, to retain full executing management and planningresponsibilities concerning their own sectors.

3. The unit is responsible directly to the Permanent Undersecretaryof the MCW. There will be a small staff including four professionals whowill be assisted from time to time by designated specialists from otherpublic and private agencies (e.g. Public Works Department, Cyprus PortsAuthority, Municipal Authorities and Chambers of Commerce). If deemednecessary the department may employ specialists and consultants to assistit in performing its duties.

B. Scope of Work

4. The department will, inter alia, address the following tasks,

(a) supervise and monitor medium term (less than ten yearhorizon) planning studies based upon a review of existing andproposed transport capacity and forecast demand for transportby all modes to provide a planning framework for transportsector investment, maintenance and management policy in boththe public and private sectors: this work shall, in thefirst instance, be undertaken in conjunction with theTransport Sector Master Plan study to be carried out underthe Fourth Highway Project;

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ANNEX 12Page 2 of 3

(b) preparation of indicative rolling five year transportdevelopment, maintenance and management plans relating thisclosely to resource needs and resource availability includingincome from operations, tax revenue, borrowing requirements,foreign exchange and the status of skills availability;

(c) integration of sectorlannual budget proposals prepared byGovernment transport agencies (e.g. Roads Department, CivilAviation) and coordinating these with other agencies such asThe Cyprus Ports Authority, Municipalities and DistrictAdministration for all transport development and maintenance;

(d) undertaking or supervising special studies on transportrelated issues and projects which cover more than one sectorincluding international transport arrangements andconventions;

(e) overall monitoring of the implementation of development andmaintenance programs for all modes and the reporting of thison a regular basis; this should include the identification ofproblem areas and recommendations regarding remedies; and

(f) the coordination of the design, establishment and operationof a central data collection, storage and retrieval systemcovering all sub-sectors including, but not limited totraffic, project descriptions and scheduling, expendituresand revenues, employment, transport costs and prices,transport enterprises and highway safety.

C. Staffing

5. The unit will be staffed ab initio by Cypriot personnel, althoughfor the first two years of operation technical assistance specialistsoperating on a full time basis, who may be Cypriot or expatriate, will bemade available. Staff will eventually fall into two groups, four seniormembers with support staff and about eight designated officers from otheragencies.

Senior Staff

The expertise of the four members will be in the following fields:

(a) Unit Head: experienced in both general developmenteconomics and transport studies andoperations.

(b) Statistician: experienced in all aspects of transportsurvey work and computer basedinformation systems.

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ANNEX 12Page 3 of 3

(c) Transport Economist: experienced in sectoral, financial andfeasibility studies in both the publicand private sectors.

(d) Transport Engineer: experienced in all aspects of civilengineering works related to transportbut with special knowledge of roads andtraffic engineering.

It is visualized that the technical assistance specialists will correspondto the above positions and, in addition to working closely with thefull-time senior staff, would have an on the job training function and fromtime to time would substitute for the permanent staff should the latter beabsent on training courses for extended periods.

Designated Officers from Other Agencies

(a) Ports Operations;(b) Airport Operations;(c) Road Transport;(d) Urban Planning;(e) Environmental Planning;(f) Highway Engineering;(g) Macro Economics (Planning Bureau); and(h) Financing Planning/Public finance.

D. Equipment

6. In addition to normal office equipment the department should besupplied with,

(a) a personal computer with adequate storage capacity, softwareand compatibility with equipment in other agencies to be usedin the information system;

(b) a personal computer together with software to be used intransport studies including traffic forecasting, feasibilitystudies, accident studies, financial analysis, etc.;

(c) a word processor; and

(d) photo copying and report production equipment.

0042h

KPRPILIc or CYPRUSSTAFF APPRAISAL KfPOR

TRANsPORT sECTOR DEVELopwmET pRD.EcT

Proiec imlementat ion Schedule and geportina geauirements

A. Loan Administration 4 Effectiveness xClosing - x-Joint Annual Review of

Transp. Developument Plan x x x x x-Joint Annual Review of

B. TransotSct latinino

Oee1-Agree Terms of R dfrnc x.Appint Engnering I

Bi D Pocurentspmn ------

* Prequal ify Contractors ------.Right of Way & Utilities ----------Bidding Procetb 4-Construct --------------Other Road Prolects I IfII .Feasibility Evaluation---------Design & Bid Documents I --- ---.Prequalify & Advertise ----.Bidding, Evaluation,

Contract Award--------ftvemeat~ Strenath. Piroarm I -- II . Prepare Annual Progam --- --------I---------Design & Bid Documets-----------------------

-Advrtie.Bidding.Ii -

Evaluation. Award ---. ------

.Implement ----- ----Materials Laboratory.Design Bldg & Prepare

Bid Documents--- -----Equipment Spec. & Bid Docs.---------.Advertise. Bidding Evaluation

-Equipment Procurement-------- -- l!Tghnical Assistance I I-.Agree Terms of Reference I-Recruit Consultants --I--------I---. Impl ement-- - - -- - - - - - - -- -- - - - - - - - - - - - - - - -- - - - - - -

1 .4 2 3 4L2 3 A 2 _.I _ -

*Nijg.a Hiaher Tech. Inst. i.Agree Training Program x.Design Buildings 6 Specify

.Construct £ Equip. Bldgs. ----------___________________.Asstgn Staff |x __ __ _A

D. Road TranspOrt Sect-or -Agree Technical Assistance x| | | | | | i i

T.o.R. x ~-. Invite Proposals/AppointTech. Assistance -------.Implement Tech. Assistance .Bus B.atout 8 Procurement -------------------------------------- ___-_1--------.Regional Wus Cozpany I I I I I I I I I I I I I I I I I

Formation _------__--_-- __-- _______________________-- _________-- __--___,---.-.-I.Equipment Needs Study ------.Bidding for Road Trans.

Dept. Equipment - ---- 11111111.Procurement of Eauisen a t _________ __ _____

E. Civil Aviation Sector .Award 9 Implement I

Feasibility Study -----------.Final Design S Bid Docs. ---- ------ I.Prequalify Contractors -------.Bidding 8 Contract Award I.Construction I ----------- -_____--------------------------.Ag ree Training Progrm | x I | | | | I | | I | | | I I I I I I I I I .Implement Training Program ----------------------------

F. PrSSector I III.Agree on Company formation |x , I I I.Equip. Spec. rvaluation.Equipment Procurement I I I I I- Container "andling ------------------- ------ Floating E4uipment- Cranes, etc. ---------------------------------- Approval of Tariffstrtcture--L L L Li

04SZ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~

i-

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ANNEX 13Page 3 of 3

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORTTRANSPORT SECTOR DEVELOPMENT PROJECT

Progress Reports

1. A report recording physical and financial progress of projectimplementation should be submitted to the World Bank within one month atthe end of each calendar quarter commencing with the quarter ending June30, 1988. Such reports should report on:

(a) Construction of the Dhekelia-Aridhoppou-LIA;

(b) Other Road Projects;

(c) Highway Rehabilitation and Strengthening;

(d) Rural Road Improvement;

(e) Pavement Strengthening;

(f) Procurement of Equipmer.t and Materials;

(g) Consultancy Services; and

(h) Training

2. Each section of the quarterly report should give highlights of theprevious quarter including probleme rncountered, action taken, resultsachieved etc.

3. Each report should include forecasts of progress for the currentquarter identifying potential problems and action proposed tc * rcomethose problems.

4. Status of commitments and disbursements including a review ofestimated progress (see SAR) against actual progress.

.

Annexes

A. Results of axle weighing and legal actions taken against offenders.

B. When appropriate, the results of evaluation studies of proposedroad construction, rehabilitation and strengthening and periodicmaintenance projects.

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AMMEX 14

REPUBLIC OF CYPRUS

STAFF APPRAISAL REPORT

TRANSPORT SECTOR DEVELOPMENT PROJECT

Hiohway Design Standards

Table I

DESIGN SPEED k.o.h. USABLE USABLE DESIGNCLASS CARRIAGEWAY LANE SHOULDER CAPACITY

FLAT RO.LLING MOUNT WIDTH {m} WIDTH lml Pc.u./dax

6-lane 3.50 3.00 50.000A. Main Roads 120-100 100-80 80-60 4-lane 3.50 3.00 33.000

2-lane 3.50 2.50 9,000-5,000

B. Secondary 80-70 70-60 60-50 2-lane 3.25 1.50 6,000-2.000Roads

C. Tertiary 60-SO 50-30 - 2-lane 3.00 1.50 2,000- 500Roads 1-lane 3.50 1.50 500- 300

Table II

DESIGN CONIROLS DESIGN SPEED k.o.h.

120 110 180 22 IQ 70 60 9Q402(4-lane)

Min. Radius Desirable (m) 1000 800 670 550 450 350 250 120 70 45Min. Radius Absolute (m) 500 400 320 250 200 150 110 70 45 30Min. Radius of Curves without 2000 1700 1S00 1350 1200 900 600 300 ISO 80transition (m)

Min. Stopping Sight Distance (m) 300 250 200 160 130 100 80 60 SO 30Min. Passing Sight Distance (m) - 600 500 4S0 400 350 300 200 1SO 80Max. Long Gradient (X) 3 4 4-S 4-S 4-6 5-7 5-7 6-8 7-9' 8-10K Value for Crests 90 70 SO 30 20 1S 10 7 5 3K Value for Sags 75 60 SO 40 30 20 1S 10 7 SMax. diagonal slope (X) 9.0 9.5 9.5 9.S 10.0 11.S 12.0 13.0 14.0* 1S*Max. increase in longitudinalslope of outer edge of carriageway 0.5 0.5 0.5 0.5 0.5 1.0 1.0 1.0 1.0 1.Sat start of transition (O

* To be calculated at inner margin of pavement.

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ANNEX 15

CYPRUS

TRANSPORT SECTOR DEVELOPMENT PROJECT

Disbursement Schedule

IBRD Fiscal Year Cumulative Disbursementsand End of Quarter at End of Quarter

(US$ Million)

FY89September 30, 1988 0.8December 31, 1988 2.6March 31, 1989 4.0June 30, 1989 5.6

FY90September 30, 1989 7.6December 31, 1989 10.1March 31, 1990 12.6June 30, 1990 15.0

FY91September 30, 1990 16.8December 31, 1990 18.8March 31, 1991 20.6June 30, 1991 22.4

FY92September 30, 1991 24.2December 31, 1991 25.8Mprcz. 31, 1992 27.4Juiie 30, 1992 29.0

FY93September 30, 1992 30.2December 31, 1992 31.2March 31, 1993 32.0June 30, 1993 32.8

FY94September 30, 1993 33.4December 31, 1993 33.9March 31, 1994 34.4June 30, 1994 34.7

FY95September 30, 1994 35.0December 31, 1994 35.0

REPUBLIC OF CYPRUSStaff Appraisal Report

Transport Sector Development ProjectMinistry of Communications and Works

| MbASTER PO ERTR

|DIRtECTOR GENERAL PI ERTR

RESEARCH PERSONELL REGISTRY ACONT PREA LEGALPLANNNG MANAGEMENT AND SCTION

HEMAD OFSECTtONOFCSENOR CLERICAL KM PRES ANOFIE CONATOFFICER ASSISTANT

CONTROL WORKS AND CMUIAINSECTION Ii CONSTRUCTION RANDSPORTMUICTIN

HEAD OF SECTION ~PFRNCIPAL AOMIN PRINCIPAL ADMIN SENIOR TELECOMMU,NICATIONSHEAD OF SECTION I ~~OFFICEROFIEOFCR

COUNCIL FOR THE CYPRUSREGISTRATION PORTS .____

AND CONTROL OF AUTHORITY ICONTRACTORS FOR AIR LtCENCING REVt'ONAL LiCENCNGBUILDINGS AND AUHCRrrY AUTFtORtTY AUTHORITYCIVIL ENG WORKS

DIRECTOR DIRECTOR DRECTOR DRECTOR DIECTOR DIRECTOR ECTOR

R~~~ I I I I - ,-

ELECR L ANI"QUITIES PULCWRS CIVL MIATION ROAD MERCHANT DEARTMENT & MECHANICAL1 DEATET DPRMN ATET TRANSPORT SHIPPING OF POT ISER.DEPT D EP ARTMENT DEPARTMENT DEPARTMENT |1| OF O3TS |

EK40(26

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CYPRUSTRANSPORT SECTOR DEVELOPMENT PROJECT

iCOSIA Db~~~~~~~~~~- Cekella-Aradhpou-Larnoca AirportA"- \°. ? ' " " "iRood

Prewlou ProoecuFAMAGUSTA- Lanaco-Mkosia Rood (2684-CY)

Y,olto Anm ....... lkwW~~~~~~~~~~~~~~~~~~~~~~~~~~~~o Roads beprovemensts andUkmasso Bypass (21 28-CY

_ _ --- H oslo-bssssol Rood (I 344-CYLCCoso_ Port r2 -Y, i 540-CY)

JI Larnaow Port 15.0-~CY

35'W Kell ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- Hard Surfac Roods, 2 or Mare LanesHard Surface Roads, 1 Lane

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Pb ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Portspono ~~~~~~~~~~~~~~~~~~~~~~~Salt jokes

Lofkam ~~~~~~~~~~~~~~~U.K. Sovereign Base Area BoundcriesPr~es, Casefir Lnes

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