PROPOSED LOAN FOR THE

Transcription

1 Document of The World Bank Report No: BUL PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF EUR 7.73 MILLION TO REPUBLIC OF BULGARIA FOR THE TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT May 3, 2000 Infrastructure Sector Unit Bulgaria and Romania Country Unit Europe and Central Asia Regional Office

2 ASYCUDA APL BCA BCCI BCP BICIS EDI EU FMS GDP IRU LAN MOF MOU PIT RSC SAD SECI SOE TIR TOR TTFSE UN-ECE WAN WCO CURRENCY EQUIVALENTS (Exchange Rate Effective April 7, 2000) Currency Unit = Lev (BGL) 1 BGL= US$ 1 US$= 2.01 BGL 1 US$ = Euro FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS Automated System for Customs Data Adjustable Program Lending Bulgarian Customs Administration Bulgarian Chamber of Commerce and Industry Border Crossing Point Bulgarian Integrated Customs Information System Electronic Data Interchange The European Union Financial Management System Gross Domestic Product International Road Transport Union Local Area Network Ministry of Finance Memorandum of Understanding Project Implementation Team Regional Steering Committee Single Administrative Document Southeast European Cooperative Initiative Statement of Expenditures Transport International Routier Termns of Reference Trade and Transport Facilitation in Southeast Europe United Nations Economic Commission for Europe Wide Area Network World Customs Organization Vice President: Country Director: Sector Director: Sector Manager: Program Team Leader: Task Manager: Johannes F. Linn, ECAVP Andrew N. Vorkink, ECCO5 Ricardo A. Halperin, ECSIN Eva Molnar, ECS1N Graham Smith, ECSIN Gerald Ollivier, ECSIN

3 REPUBLIC OF BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT CONTENTS A. PROJECT DEVELOPMENT OBJECTIVES PROJECT DEVELOPMENT OBJECTIVES KEY PERFORMANCE INDICATORS... 3 B. STRATEGIC CONTEXT SECTOR-RELATED COUNTRY ASSISTANCE STRATEGY (CAS) GOAL SUPPORTED BY THE PROJECT MAIN SECTOR ISSUES AND GOVERNMENT STRATEGY SECTOR ISSUES TO BE ADDRESSED BY THE PROJECT AND STRATEGIC CHOICES C. PROJECT DESCRIPTION SUMMARY PROJECT COMPONENTS KEY POLICY AND INSTITUTIONAL REFORMSUPPORTED BY THE PROJECT BENEFITS AND TARGET POPULATION INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS D. PROJECT RATIONALE PROJECT ALTERNATIVES CONSIDERED AND REASONS FOR REJECTION MAJOR RELATED PROJECTS FINANCED BY THE BANK AND OTHER DEVELOPMENT AGENCIES LESSONS LEARNED AND REFLECTED IN THE PROJECT DESIGN INDICATIONS OF BORROWER COMMITMENT AND OWNERSHIP VALUE ADDED OF BANK SUPPORT IN THIS PROJECT E. SUMMARY PROJECT ANALYSIS ECONOMIC FINANCIAL AND FISCAL TECHNICAL INSTITUTIONAL SOCIAL ENVIRONMENTAL ASSESSMENT PARTICIPATORY APPROACH.17 F. SUSTAINABILITY AND RISKS SUSTAINABILITY CRITICAL RISKS POSSIBLE CONTROVERSIAL ASPECTS.20 G. MAIN LOAN CONDITIONS EFFE CTIVENESS CONDITIONS OTHER. C H. READINESS FOR IMPLEMENTATION I. COMPLIANCE WITH BANK POLICIES iii

4 ANNEXES ANNEX I ANNEX 2 ANNEX 3 ANNEX 4 ANNEX 5 ANNEX 6 TABLE A TABLE Al TABLE A2 TABLE B TABLE B 1 TABLE C ANNEX 7 ANNEX 8 ANNEX 9 ANNEX 10 ANNEX 11 ANNEX 12 ANNEX 13 PROJECT DESIGN SUMMARY DETAILED PROJECT DESCRIPTION ESTIMATED PROJECT COSTS COST BENEFIT ANALYSIS OF THE TOTAL PROJECT INVESTMENT FINANCIAL SUMMARY PROCUREMENT AND DISBURSEMENT ARRANGEMENTS PROJECT COSTS BY PROCUREMENT ARRANGEMENTS CONSULTANT SELECTION ARRANGEMENTS PROCUREMENT PLAN THRESHOLDS FOR PROCUREMENT METHODS AND PRIOR REVIEW CAPACITY OF THE IMPLEMENTING AGENCY IN PROCUREMENT AND TECHNICAL ASSISTANCE REQUIREMENTS ALLOCATION OF LOAN PROCEEDS PROJECT PROCESSING BUDGET AND SCHEDULE DOCUMENTS IN PROJECT FILE STATEMENT OF LOANS AND CREDITS ENVIRONMENTAL MANAGEMENT PLAN BULGARIAN CUSTOMS ADMINISTRATION STRATEGY EU SUPPOR TO CUSTOMS REFORM IMPLEMENTATION COUNTRY AT A GLANCE MAPS No AND iv

5 REPUBLIC OF BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT Project Appraisal Document Europe and Central Asia Regional Office Bulgaria and Romania Country Unit Date: April 28, 2000 Country Manager/Director: Andrew Vorkink Project ID: 7E-PE Lending Instrument: Sector Investment Loan Program Team Leader: Graham Smith Sector Director: Ricardo Halperin Sector: TY- Other Transportation Theme(s): Public Sector Poverty Targeted Intervention: [ ] Yes [X ] No Project Financing Data [IX] Loan [ ] Credit [] Guarantee [] Other [Specify] For Loans/Credits/Others: Amount: EUR 7.73 million (US$7.4 million equivalent) Proposed terms: L ] Multicurrency [X] LIBOR-based Single Currency Loan in Euro [ ] Standard Variable [] Fixed Grace period (years): 5 Years to maturity: 20 Commitment fee: 0.75% on undisbursed credit balance, beginning 60 days after signing less any waiver. Front-end fee on Bank loan: 1 % Financing plan, including taxes (US$m): Source Local Foreign Total Government United States (US) IBRD Total: Borrower: Bulgaria Guarantor: N/A Responsible agency: Ministry of Finance Estimated disbursements (Bank FY/US$M)- FY FY2001 FY2002 FY2003 Annual Cumulative Project implementation period: 3 years Expected effectiveness date: August 31, 2000 Expected closing date: December 31, 2003 Implementing agency: Capital Investments Department, MOF Contact person: Nedialka Cholakova Address: 102 Rakovsky Str Sofia, Bulgaria Tel: /09 Fax: n.cholakova@minfin.aovernment.bg

6 Page 2 The TTFSE Proiect: Key Design Concepts How does this project differ from the typical project? Reszional Character. The six TTFSE projects are regionally linked in a program supporting Bulgaria, Romania, FYR Macedonia, Albania, Bosnia and Herzegovina, and Croatia in their efforts to foster trade. All these countries are beneficiaries of the Stability Pact'. They seek to promote more efficient and less costly trade flows across their borders and provide EU-compatible customs standards. This requires cooperation among the participating countries and a mutual sharing of concerns for the reform of their Customs services. To assist such cooperation and facilitate the sharing of informnation, a Regional Steering Committee (RSC) has been created. All participating countries are represented on this committee and have signed a Memorandum of Understanding detailing its role and activities. The United States (US) is funding a secretariat for the RSC and experts to assist each government in procurement management. Reform Combined with the Provision of Infrastructure. The project will support the implementation of on-going customs reforms and focus on integrated solutions at selected pilot sites located on main European corridors. Customs reform is an essential part of the activities Bulgaria needs to undertake to join the European Union. These pilots will increase the productivity of border agencies, enabling shorter processing time at border crossings and inland terminals. Reforms and pilots will need to be supported at some border crossings by the upgrading of infrastructure. The project will finance physical improvements at these border crossings, once critical elements of reform proceed. Non-Duplicative Structure. The TTFSE program seeks to help the Customs services implement reform in a way least costly to the government. Governments will continue on-going customs reforms supported by the European Union (EU) and will use grant funding from the EU and the US for most of the technical assistance. Participatory Approach. The design and implementation of the TTFSE project is based on participatory methodology to ensure that the projects belong to the participating countries and are endorsed and owned by the various stakeholders, including the beneficiaries. Consultations with customs officials and users have occurred during the design phase and mechanisms are built into the project to obtain regular user input in the monitoring and, evaluation process. Building on Previous/Ongoing Initiatives. Several international organizations have recognized the need to help countries in the region improve transit across borders and have provided assistance to start addressing it. The EU was the first to assist countries in the region to address this issue. Its experience highlights the need for comprehensive reforms and carefully selected upgrading of infrastructure. The Southeast European Cooperative Initiative 2 also promotes economic and environmental cooperation among the countries in the region, with a focus on efficient transit, and combating corruption and smuggling. 'The Stability Pact for South Eastern Europe, adopted in Cologne on June 10, 1999 at a special meeting of foreign ministers, representatives of international organizations, institutions and regional initiatives concerned with South East Europe, commits these parties to the adoption of a comprehensive, coordinated and strategic approach to the region, replacing crisis management with preventive diplomacy. 2 Consisting of Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Hungary, Moldova, Romania, Slovenia, FYR Macedonia and Turkey, established in December 1996.

7 Page 3 A: Project Development Objectives 1. Project Development Objectives (see Annex 1) The proposed project forms part of a regional program for Trade and Transport Facilitation in Southeast Europe 3 that aims to strengthen and modernize the customs administrations and other border control agencies in Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the former Yugoslav Republic of Macedonia and Romania. The Program, the result of a collaborative effort between the Governments, the Bank, the EU and the US, seeks two development objectives: (i) to reduce non-tariff costs to trade and transport; and (ii) to reduce smuggling and corruption at border crossings. The Program will achieve these objectives by: (i) supporting customs reform; (ii) strengthening mechanisms of interaction and cooperation between border control agencies and the trading community; (iii) disseminating information and providing training to the private sector; (iv) financing infrastructure and equipment at selected border crossings; and (v) implementing, at pilot sites, an integrated set of new customs procedures, information technology, human resource management techniques, supporting infrastructure, and cooperation mechanisms 4 for agencies at border crossings. The financing of infrastructure will be dependent upon the successful implementation of the reforms, notably the application of targeting and selectivity techniques. In Bulgaria, the EU, based on its long experience in the country, will continue to lead external support for the implementation of the Strategic Plan (Annex 11) of the Bulgarian Customs Administration (BCA). This is part of the EU pre-accession process. The EU support to the customs reform strategy (Annex 12) includes the following main activities: (i) legal and operational strengthening of customs; (ii) border control and efficiency improvements; and (iii) enforcement and combating corruption. The reform process necessary to change institutional cultures and ingrained behavior is expected to take a substantial time, about 8 to 10 years. The reform involves simultaneous and sustained actions on (i) change in administrative and operational procedures; (ii) definition of staff profiles for the organization and hiring, training and deployment according to them; (iii) elaboration and implementation of a staff development plan; and (iv) introduction of up-to-date information technology and regional interconnections. This project will provide support to implement the customs reform at border crossings and inland terminals during the first phase of the process. 2. Key Performance Indicators (see Annex 1) Progress toward the objectives will be monitored by key performance indicators covering BCA's performance at a pilot inland terminal and at two selected pilot border crossings, and overall efficiency indicators for the BCA as a whole. The indicators include: (i) transport costs to/from the three main trading partners and the transaction costs at these pilot sites; (ii) the number of physical or documentary examinations and their effectiveness; (iii) processing times; (iv) the value of recorded trade; and (v) reported occurrence of corruption. In addition, a set of regional indicators will be used to measure cost/time reduction in regional transport on three major corridors to evaluate the overall impact of the program. A detailed set of indicators has been defined to follow the national and regional progress throughout the project life (Annex 1). 3 Referred to in this document collectively as "the program" and nationally as the "TTFSE project". 4Including shared access to information and intelligence systems, and training for interagency awareness.

8 Page 4 B: Strategic Context 1. Sector-Related Country Assistance Strategy (CAS) Goal Supported by the Project (see Annex 1) CAS document number: R98-84; IFC/R98-59 Date of latest CAS discussion: April 28, 1998 The assistance strategy of the Bank Group for Bulgaria emphasizes the four priority areas outlined in the Government's key strategy document "Bulgaria 2001: Program of the Government of the Republic of Bulgaria ". (i) Promoting Structural Reform and Private Sector Development. The highest priority is given to support for policy reforms to further liberalize trade, eliminate direct government participation in the sector, and establish the prerequisites for efficiency in markets. (ii) Strengthening and Rationalizing the Role of the State. The Bank will support a key criterion for EU accession, the strengthening of public administration. (iii) Fighting Poverty and Developing Human Capital. The Bank is helping strengthen the pension system and such social assistance systems as health financing regime and primary health care services. (iv) Protecting and Enhancing the Environment. The Bank is supporting the efforts of the Government to comply with EU environmental standards by focusing on environmental liabilities of enterprises to be privatized and raising public awareness. The proposed project is especially in line with the objectives (i) and (ii) above. It will support the restructuring of the BCA to better serve trade activities by reducing non-tariff transport costs, decreasing the price of imported goods, and improving the competitiveness of Bulgarian products, thereby promoting private sector growth and job creation in the country. The project will also support the BCA in strengthening its tax collection capacity and enforcing several international conventions relating to the environment, while reinforcing on-going efforts against corruption. 2. Main Sector Issues and Government Strategy Trade is highly significant to the Bulgarian economy, representing 86 percent of GDP in 1998 (Statistics in Annex 4, page 5). The main trading partners are EU members (Italy, Germany and Greece) and Russia (oil imports) (see Map 30431). Among the countries in Southeast Europe, only Greece and Turkey are major export markets. Bulgaria's main exports include textiles, clothing and footwear, various metals, and to a lesser extent food, machinery and equipment, and chemicals. Main imports include oil products, chemicals, and machinery and equipment. Bulgaria has strengthened trade links with its neighbors. It has entered into trade agreements with the Czech Republic, Slovakia, and Slovenia and liberalized trade with Poland, Hungary, and Romania through its accession to the Central European Free Trade Agreement in A similar free-trade agreement with Turkey has been effective since January 1999, and another with the former Yugoslav Republic of Macedonia has been effective since January 1, The BCA describes its mission in its strategy (Annex 11) as: (i) to protect society by applying legislated restrictions and prohibitions on import, export and transit; (ii) to support the development of the economy by maintaining a balance between the facilitation of trade and the effective application of laws and regulations; (iii) to combat smuggling; (iv) to collect the customs duties and other state revenues (VAT, excise and others) assigned to it by law; (v) to collect and analyse statistical data on international trade; and (vi) to suggest government initiatives and measures within the framework of its competence. The Inter-Ministerial Council on Border Point Issues, created early in 1999, provides a forum for coordination and resolution of issues among government entities. The BCA plays a critical role in serving both the State and the trading community. The BCA collected about 42 percent of the total State budget revenues in 1998 (almost US$1 billion equivalent). The Government has achieved partial success in improving the services of BCA and reducing trade and transport impediments. Private sector observers recognize these efforts but underline that much remains to be accomplished. The following obstacles to trade and transport have been identified by the various stakeholders.

9 Page 5 a Modernizing Customs Code and Procedures In preparation for eventual EU membership, the BCA has aligned its Code fuilly with the EU Customs Code. The use of the Single Administrative Document (SAD) 5 was introduced in the BCA in 1993, and the new Customs Code came into force in January Additional work is going on to cover third-level legislation. The nomenclature of goods in the Customs Tariff is based on the nomenclature of the Harnonized System Convention for description and encoding of items and on the Combined Nomenclature of the European Union. Despite this modernization, the implementation of BCA procedures needs further attention to facilitate trade and transport activities. Stakeholders have said that they have concerns 6 about: (i) the overall efficiency of the BCA and other border agencies; (ii) variations in interpreting, understanding and implementing new legislation and procedures; (iii) transparency of procedures; (iv) uncertainty and lack of predictability in clearance time based on point (ii); (v) lack of computerization of procedures and telecommunication means; (vi) lack of coordination between groups carrying out inspections at border points, and (vii) lack of effective interaction 7 with the Government. Transport companies also mentioned the frequent inspections of vehicles, due to the absence of a properly working uniform system of riskbased targeting and selectivity. The BCA intends to address these issues by re-engineering and automating its procedures, and providing training to ensure uniform dissemination of these procedures. The EU plans to provide assistance on that issue particularly through a twinning arrangement with German customs. b. Upgrading Customs Facilities Even if procedures are reformed and professional standards are strengthened, the design and facilities of some of the main border crossing points will prevent BCA from fulfilling its trade facilitation, collection and enforcement functions. Insufficient infrastructure at the border crossing points (BCPs) is one of the reasons for delays. Six Bulgarian BCPs are in need of improvement. These BCPs process over 80 percent of the commercial vehicles entering and leaving Bulgaria. Rousse and Kapitan Andreevo are the two most important (in terms of.traffic load, strategic location, and most other measures), and all the points are on important European corridors: Vidin-Kulata on Corridor 4, Varna, Bourgas and Gyueshevo on Corridor 8, and Rousse and Kapitan Andreevo on Corridor 9 (see Map 30859). The Government has already started to rehabilitate BCPs with its own funds and with assistance from development partners. PHARE has financed the improvement of port and parking facilities at Rousse, has supplied computers and training at the station at Kulata, and has rehabilitated approach roads to Gyueshevo. PHARE also supports a cooperative program between Bulgaria and Romania on cross-border projects. PHARE and EBRD are involved in several transport projects, including the rehabilitation of road E79 from Sofia to Kulata, and the road from Sofia to Gyueshevo. A US grant administered by the UN Development Programme is contributing to improvements at Gyueshevo and at Rousse. The Government, however, does not have sufficient funds to complete these stations and so has requested that the Bank fund completion of these works under new contracts. With respect to equipment and information systems, the BCA started its modernization process in The process included the evaluation and rejection of the UN's ASYCUDA++ system and a decision to introduce a self-developed customs system (Automated Information System 3.0) compliant with new laws and procedures. The BCA has prepared a "Strategy for the establishment, implementation and development of the Bulgarian Integrated Customs Information System" (BICIS). The strategy includes the rollout of the automated information system under operation in the Vama region to all locations, with the simultaneous development of additional modules to meet the requirements of a modern customs administration. The BCA expects the process to require two and a half years. A standardized format for customs declarations, aligned to the UN key layout for trade and transport documents. 6Rated 7.5 and above on a scale of 10 by a focus group. 7Although mechanisms exist, the time allocated for the review of governmental proposals is too limited and the input from the trading community does not seem to be reflected in final decisions.

10 Page 6 The Ministry of Finance leads the development of telecommunications through its General Information Technology Directorate and intends to provide proper telecommunications access at border crossings in the future. Various alternatives are being tested, but leased lines are already available at the major border crossings. In Bulgaria, telecommunications net topology is a triple star with TCP/IP 8 protocol. The first level of the star is the connection between the Data Center, located in Sofia, with all regional 9 customs centers. The second level is between each regional customs center and its customs offices. The third level is between each customs office and its customs bureaus (inland or border points). Further investments are required to complement the significant information system improvements made to date. The safety and protection of such mission-critical equipment as servers in Sofia and in inland offices require strengthening to prevent any system failure. Features to be improved under the project include access control, fireproof walls, adequate illumination, and air-conditioning. c. Combating Smuggling and Corruption Despite the efforts of the BCA and the Government, users report that corruption and lack of transparency generate significant additional costs'. Freight rates set by companies operating in the region frequently include a mark-up to cover unofficial payments. Users complain that procedures which give Customs discretionary power in setting fines are conducive to irregularities. While users may exaggerate, the widespread mention of corruption by users interviewed implies that this warrants priority. BCA's strategy addresses this problem. A major priority of the Bulgarian government is to fight corruption in both the public and private spheres. Bulgaria has laws, regulations, and penalties against corruption, including a 1996 Law on Measures against Money Laundering. Bulgaria became a signatory to the OECD Anti-Bribery Convention in December An EU-funded twinning arrangement with the French Customs Administration will contribute to the fight against smuggling and corruption. Smuggling attempts are frequent and cover a wide range of products (excise goods, narcotics, forged bills, counterfeited goods, and Uranium 235). The BCA cooperates with the Border Police to prevent smuggling and can claim a fair success, being the third country in Europe for drug seizure. Intelligence systems and databases are being built, and joint police/ customs mobile units will be introduced in 2000, but could be insufficiently funded. Changes in the Penal Code and the Criminal Procedures Code, when combined with the newly adopted Customs Code (some of its provisions are due to be introduced only in 2000) and legislation on public administration, seem to provide the BCA with appropriate enforcement and prosecution powers. Adjustments are nonetheless needed in the relationship between the Border Police and the BCA, and their respective powers. d. Improving Private-Public Interactions Limited and sometimes late prior consultation with the trade community prevents meaningful and constructive interactions. The Chamber of Commerce and Industry and the Bul-PRO 1 committee provide mechanisms to reach more consensual decisions. The lack of accountability of the BCA in facilitating trade is a core reason for the disconnection betwqen users and the BCA. There are no mechanisms in place to account for such impacts as delays caused in the departure of goods and cargo transfer, or downtime suffered by vehicles, whether these delays are justified or not. The related costs are solely borne by the cargo owners. Limited foreign language skills among operational officers cause time-consuming and costly transactions requiring translations. The BCA increasingly provides training to its officers to improve the quality of the interactions with the private sector or offers consultation mechanisms such as 8 Transfer Control Protocol/ Information Protocol. 9 Regional here refers to geographic subdivisions of Bulgaria. '0 The stakeholder focus group, measuring the major obstacles encountered by traders impacting on costs, rated corruption and the lack of transparency a 10 on a scale of 1 to 10. " Professional body that seeks to improve international trade through the simplification and harmonization of procedures and practices in administration, commerce and transport, in accordance with UN/CEFACT guidelines.

11 Page 7 drop-boxes for suggestions at border locations. Further efforts will be required to achieve the quality of services available in and compatible with the European Union. e. Strengthening Regional Cooperation Bulgaria, like all other participants in the Southeast European Cooperative Initiative (SECI), recognizes the importance of coordinated actions to address the above issues12 and achieve the objectives of the Stability Pact. It is also recognized that, to some degree, each country can expect to gain more from actions to be taken by its neighbors than those it should take itself. A regional view has thus emerged according to which participant countries will simultaneously apply coordinated and compatible measures to reduce trade/transport impediments and corruption/smuggling opportunities. The regional cohesion is symbolized by the signing of a regional Memorandum of Understanding by the six countries, as well as their willingness to benchmark country performance and to work on streamlined solutions at paired border crossings 13 (Map 30859). The support shown by the EU and United Nations Economic Commission for Europe (UN-ECE) as well as such bilateral donors as the US, reflects the importance attached to the development and stabilization of the region. The participating countries also see movement toward a form of integration with Europe as a major strategic goal. The proposed program hopes to demonstrate an effective approach to regional cooperation. f Border Delays to Rail Transport The proposed project addresses delays at road border crossings. Delays to trains at rail border crossings are also a cause for concem, particularly as regards long-distance freight trains operating from Hungary (and the EU heartland) through Romania and Bulgaria to Greece and Turkey. A working group bringing together the ministries of transport and national railways of these countries, as well as their customs administrations, has been meeting periodically under the aegis of SECI to agree on ways to reduce these delays. As at the road border crossings, so also at the rail crossings the most promising solutions involve simplifying procedures, shifting inspections and other formalities away from the borders to inland locations, and using information technology to speed up and make more reliable the transfer of documents about the rail wagons and their contents. World Bank loans to Romania and Bulgaria now under implementation are financing the acquisition of modem management information systems for the national railways. The proposed Project does not directly address rail transport, but rail traffic should benefit from the Project's information systems for customs, as well as from the mechanisms for enhanced cooperation among agencies and among governments. 3. Sector Issues to be Addressed by the Project and Strategic Choices The project will address to different degrees the issues described above, building on previous efforts and taking full account of on-going EU support to avoid any overlap. The project will combine resources from the IBRD and the US. Given the interest of Bulgaria in the implementation of EU-compatible standards and the need to ensure the overall compatibility of the program, close relationships with the EU will be maintained. The project will seek improvements in: (i) procedures of border agencies; (ii) border infrastructure and equipment; and (iii) trade/transport business environment and professional performance. C: Project Description Summary 1. Project Components (see Annex 2 for a detailed description and Annex 3 for a cost breakdown) The project consists of the following five components: 12 The European Conference of the Ministers of Transport (ECMT), the International Road Transport Union (IRU), the World Customs Organization (WCO), and the European Bank for Reconstruction and Development are also providing support. '3 Between Bulgaria and Romania, and between Bulgaria and FYR Macedonia.

12 Page 8 a Customs Administration Institutional Reform Includes: (i) technical services to monitor BCA's performance; (ii) technical services to streamline operations at two border posts and one inland terminal on a pilot basis; and (iii) training for inter-agency awareness and cooperation. This technical support will complement on-going EU activities to help implement the BCA strategic plan (Annex 11). Cooperating partners in the Inter-Ministerial Council on Border Point Issues will be involved in the definition of the new procedures and combat against fraud. b. Trade Facilitation Development Includes: (i) provision of technical assistance and advisory services to trade and international transport participants through the Chamber of Commerce; (ii) improvement of cooperation between public and private parties using a virtual forum' 4 ; (iii) provision of equipment to support information availability. $ c. Improvement of Bulgaria Integrated Customs Information System (BICIS) Includes a regional experience-sharing program on integrated systems for border agencies. This component will stimulate regional and interagency cooperation. d. Improvement of Border Crossing Facilities Includes civil works and improvement of the utilities at six border posts: exit and entry processing lanes; new buildings, booths and canopies; utilities; heating, sanitary and electrical systems; and truck terminal areas at Gyueshevo, Vidin, Rousse, Kapitan Andreevo, Kulata and Bourgas. It also comprises design and supervision of the civil works. e. Program and Project Implementation Includes the services required to support the regional and national implementation of the project. The regional support will consist of secretariat services to the RSC. The national support will comprise the services of an auditor and procurement advisors, the establishment of a financial management system, incremental operating costs and training to the Project Manager and her Project Implementation Team. Component Category Cost incl. % of Bank % of Contingencies Total Financing Bank (US$m) (US$m) Financing A. Institutional Reform on Consulting Services/ Customs Procedures Training B. Trade Facilitation Consulting Services/ Development Training/Equipment C. Customs Information Consulting Services/ System Improvement Training/Equipment /Civil Works D. Improvement of Border Civil Works/ Crossing Facilities Consulting Services/ Training E. Program and Project Consulting Services Implementation Total Note: Data may not sum to totals because of rounding 2. Key Policy and Institutional Reforms Supported by the Project Bulgaria has indicated its commitment to market reforms, including deregulation and privatization. The project will supplement on-going policy and institutional reforms seeking the following objectives: 14 Creation of an internet website that will enable exchange of views, user surveys and consultation.

13 Page 9 a. Strengthening of the BCA The capacity building component of the customs reform strategy addresses the following aspects: preparation of third-level legislation (special instructions, power of intervention) to complete the approximation of EU legislation with reference to the acquis communautaire 15, and implementation and enforcement of the new legislation; * review of the schedule of penalties to strengthen their deterrent effect on offenders; * adoption of simplified and standardized customs and border inspection procedures (compliance measurement and selective inspection based on risk assessment); * development of analytical expertise to develop and maintain targeting and selectivity tools; * development of analytical approach to border crossing station design; * human resource management to develop customs/border inspection expertise and enhance system integrity; * training for customs personnel to ensure the uniform application of new legislation, to improve the fulfillment of BCA's mission and to enhance integrity; * creation of a partnership among border inspection agencies and the trade/industry community to coordinate operations, procedures, and the exchange of information; and adoption of audits and account management processing to facilitate trade data exchanges. b. Strengthening of the Integrated Customs Information System Improvements in the systems in use are designed to have the following impacts: * elimination of multiple data entry; * creation of databases accessible in real time at all customs locations to support selectivity and targeting procedures; * exchange of information with other govemment agencies for processing and enforcement purposes; * monitoring of customs performance, traffic pattems and capacity use; * information exchange with other governments in the region; and reduction in corruption opportunities by decreasing and monitoring human intervention. c. Strengthening Regional Cooperation The project will lead to greater regional cohesion. The implementation of joint pilot projects with Romania and FYR Macedonia at selected border posts will strengthen regional cooperation at both local and national levels. 3. Benefits and Target Population a Benefits The customs reform and decreases in trade and transport costs will lead to transparent customs procedures, a reliable business environment, and economic growth as a result of lower prices for imports and more competitive prices/services for exports. The benefits will spill over to government agencies and private companies in other trade partner countries. This would translate into: * cheaper import goods/inputs for Bulgarian consumers and industries; * a better and more reliable business environment for private sector activities, particularly for the trade activities of SMEs; 15 Treaties and the accumulated body of agreements of substance, procedures and protocols effective in the European Union that must be accepted by countries wishing to join.

14 Page 10 * a more predictable and reliable economic setting for foreign companies; * improved facilitation for transit traffic; * reduction of corruption and smuggling opportunities; * improved revenue collection by the BCA, enabling reduction in tariffs; * uninterrupted services of information systems and better integrity of data; and * closer approximation with EU standards and procedures. b. Target Population The beneficiaries of the reform will be transport operators, importers, exporters, freight forwarders, other trade industries, foreign investors, and ultimately, consumers and producers inside and outside the region. In addition, cross-border trade in the vicinity of the borders will be made easier for local companies and individuals. Travelers and tourism will also benefit. 4. Institutional and Implementation Arrangements a Implementation Period The project is to be implemented over a three-year period (FY2001-FY2003). It would be completed by June 30, 2003 and closed by December 31, The Regional Program in its entirety would be implemented in about 8-10 years. b. Executing Agencies The Republic of Bulgaria will be the borrower. The beneficiaries will be the Ministry of Finance, the BCA, the Border Police and the Chamber of Commerce. The implementation arrangements will include the following elements: (i) a project manager and a project implementation team; (ii) a project coordinator; (iii) a facilitation coordinator; and (iv) a regional steering committee (RSC). With the exception of the RSC, these elements are extensions of existing institutions and use people already involved in similar functions. The Project Manager comes from the Capital Investments Department of the Ministry of Finance. This institution is responsible for all steps related to the physical improvements of border crossing facilities, including procurement. The Project Manager will maintain a Project Implementation Team (PIT) covering procurement, loan management and reporting functions acceptable to the Bank, submit an evaluation of the workload for this team and plan resources accordingly. The PIT will coordinate the project management for the various beneficiaries, prepare terms of reference, hire consultants, and contract for services, training, goods, and civil works as necessary for the implementation of the project. The Ministry of Finance has appointed the director of the Capital Investment Department as Project Coordinator. The Coordinator will call and chair coordination meetings of the various border control agencies and manage their input. The Coordinator will be nominated as part of the expert group of the. The Bulgarian Chamber of Commerce and Industry (BCCI) will manage the trade facilitation component and provide the Facilitation Coordinator, who will interact with the Project Manager for the implementation of the component and the coordination of the regional website. The BCCI has ample experience in this field as demonstrated by its existing website and its role in the national facilitation organization Bul-PRO. The BCA will be the main beneficiary of the institutional reform and the improvement of the BICIS. The BCA and the Border Police will both benefit from the improvement in border crossing facilities. The BCA and the Border Police will ensure that appropriate technical expertise is engaged to support the Project Manager. Cooperating partners (Ministry of Transport, Ministry of Trade and Tourism, Ministry of Foreign Affairs, and so forth) will be involved in the definition of the new procedures and of the BICIS system.

15 Page 11 Given the scope (six countries) and complexity of the Regional Program and the related policy and institutional reforms anticipated, a Regional Steering Committee (RSC), meeting periodically at the regional level, will oversee the overall implementation of the program. The participating countries signed a Memorandum of Understanding (MOU) setting up the RSC and held the inaugural meeting in Skopje in February The RSC is made up of high-level officials of participating countries - the Deputy Finance Minister in the case of Bulgaria - and donor representatives as observers. It will provide guidance for the necessary sector policy and reform decisions. Meetings will rotate among the participating countries, with the Project Manager of the host country providing support services to the Committee. The UN-ECE is providing a secretary to the RSC to support the implementation of the program. The secretary 16 will: (i) prepare the agenda, supporting documentation and minutes for the RSC meetings; (ii) consolidate on a semi-annual basis the implementation reports of the countries involved in the program; (iii) consolidate the annual review report of the PITs; (iv) assist in the trade facilitation efforts; and (v) establish a link to the SECI-PRO committees. In order to provide a model of pragmatic solving of border crossing problems, the project will include implementation of operational restructuring at two pilot border crossings located on the main international corridors (Rousse on the border with Romania and Gyueshevo on the border with FYR Macedonia) and one pilot inland terminal (Plovdiv). Romania and FYR Macedonia will similarly be treating as pilot stations the facilities on the other side of the border (Giurgiu in Romania and Deve Bair in FYR Macedonia). A more detailed set of indicators for management purposes will be developed at these pilot sites. These indicators will be used by each country to examine and allow the evaluation of comparative performance. This framework will provide an assessment tool for identifying problems and tracking the success of the solutions applied in each case, providing an evolving case study. The results will be updated each quarter by the PIT in addition to the project indicators in Annex 1 and offered to the RSC for review and comparison. The lessons learned from these case studies will be extended to other specific border crossings in the participating countries. Sharing the case studies, along with other project reports, with the customs services and transport associations in countries not associated with the TTFSE will enable the projects to stand together as a quasi pilot of customs reform for application to countries outside the Program. c. Procurement and Disbursement Civil works and services financed by the Bank will be procured in accordance with Bank procurement guidelines. The Project Manager will appoint a qualified procurement specialist satisfactory to the Bank. The procurement specialist will be supported with outside Bank procurement advisors as required 17 The project components not financed by the Bank will be procured in accordance with national regulations or the procurement regulations of the co-financing institution. The project elements, their estimated cost and procurement methods are summarized in Table A of Annex 6. Consultant selection arrangements are summarized in Table Al of Annex 6. A procurement plan detailing the packaging and estimated schedule of the major procurement actions is presented in Table A2 of Annex 6. Thresholds for procurement methods and prior review, capacity of the implementing agency in procurement and technical assistance requirements, and the allocation of loan proceeds are found in Annex 6 Table B, B 1, and C, respectively. d. Accounting, Financial Reporting, andauditing Arrangements A financial management system (FMS) including accounting, financial reporting, planning, budgeting, auditing, and proper internal control systems will be established prior to loan effectiveness. The FMS has 16 The secretary, financed by a US grant, will be sharing his time between his TTFSE responsibilities and the management of the SECI-PRO committees 17 The procurement advisors will be individuals with satisfactory country and World Bank procurement experience, to be funded by the US.

16 Page 12 met the minimum Bank financial management requirements (4-B LACI Certification) prior to board presentation. The Bank made a preliminary review of the systems in place and made recommendation for the installation of an appropriate FMS. The Bank has reviewed the FMS and prepared a report identifying weaknesses and proposing remedial actions to enhance the system and enable the development of appropriate project management reports in view of the transition to PMR-based disbursements. The Bank has defined a time-bound action plan to specify the steps necessary for: (i) board presentation; (ii) loan effectiveness and (iii) further strengthening of procedures and staff development during implementation. The development of the FMS will be monitored by the Bank before effectiveness, during the first supervision mission and throughout project implementation. The PIT has been staffed with one accountant. The company installing the FMS will assist the PIT in maintaining project accounts adequate to provide information regarding project resources and expenditures. The PIT will have accounts audited every fiscal year by independent auditors acceptable to the Bank, in accordance with International Standards of Auditing issued by the International Federation of Accountants and Bank guidelines. The reports of such audits will be submitted to the Bank no later than six months after the end of the Borrower's fiscal year. The PIT will also maintain all documentation related to project expenditures and keep financial records in accordance with sound accounting practices. A management letter giving an opinion on internal audit controls should be submitted to the Bank six months after effectiveness of the loan. e. Reporting The PIT will prepare quarterly progress reports and submit them to the Bank and the RSC secretary, which will consolidate the reports on a semi-annual basis and then forward them to the Bank. These reports will include: the progress of each project component, key performance indicators, procurement issues (actions dealt with, actions planned, and an update of the procurement implementation). The report will measure performance against the implementation schedule and compliance with loan covenants. f Supervision and Evaluation Arrangements Supervision will be managed at the national level by Bank headquarters staff with the active involvement of the Country Office and at the regional level by a program team leader from Bank Headquarters. The Bank will devote some US$50,000 per year for supervision of project progress through FY2003. This includes the Bank's contribution to the time of a senior customs specialist, jointly funded by a French Trust Fund. Each October or November during the implementation of the project, the Bank together with the PIT and the other development partners (EU, US) will conduct a review of project execution. The review will assess the status of regional and national implementation and cooperation, progress made at the level of pilot sites compared to targets, development of the BICIS, implementation of donor programs, and productivity of the BCA. The review will offer refined targets and objectives for the following year and a set of recommendations. The schedule of procurement for the coming year will be agreed at the time of the review, considering the progress to date in the institutional reform. g. Monitoring Overall, project monitoring will be based on performance targets and indicators and the Project Implementation Plan as agreed during loan negotiations. Monitoring will be carried out by the BCA, assisted by consultants as necessary. D: Project Rationale 1. Project Alternatives Considered and Reasons for Rejection a. Separate Individual Projects Carried Out by Each Country The possibility of preparing independent projects for each participating country was reviewed and rejected since the achievement of overall project objectives will be greatly aided by simultaneous

17 Page 13 standardization and harmonization of cross-border institutions, operations, and legal frameworks among the countries and with the EU. b. Regional Program of Investment Projects A regional program of coordinated border crossing facilitation projects carried out more or less simultaneously is more advantageous and was selected since it will: * generate substantial benefit spill-over to customs users, producers, and consumers in the trade partner countries of Bulgaria, which, if also implementing the program, will in turn bring benefit to Bulgarian industries and consumers; * allow the program countries to share information and introduce more consistent customs and border control procedures and operations; * be flexible enough to respond to country differences, the pace of European integration, and the impact of the EU enlargement process; * enable the Bank to coordinate with other donors that also implement regional programs; and * minimize project implementation/supervision costs by near-simultaneous implementation. c. Regional Adaptable Program Loan (APL) A regional or "horizontal" APL, including alternative b. above as a first phase, which would have enabled sequential entry of countries in the Program and the delegation to the Regional Vice Presidency of approval of operations according to a well defined operational blue print, was considered. This horizontal APL, however, was judged to be undesirable because it would involve "stretching" the APL concept. The determination of the future value of performance indicators to include potential borrowers to the program would have been a delicate and risky task, given the inherent complexity of the program. For these reasons, Alternative b was preferred. 2. Major Related Projects Financed by the Bank and Other Development Agencies (completed, on-going and planned) Sector issue Project Latest Supervision (Project Status Report) Ratings (Bank-financed projects only) Implementation Development Bank-financed Progress (IP) Objective (DO) Transportation Macedonia, FYR: Transit HS HS Facilitation Project Public Sector Management Albania: Tax Administration S S Modernization Trade Facilitation Estonia Transport N/A N/A Other development agencies EU EU-PHARE programs IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory), N/A not yet available 3. Lessons Learned and Reflected in the Project Design Bulgaria has made considerable effort to improve its border crossings with external aid. Despite the resulting progress, further efforts are still required. The border crossing problem, by its nature, requires coordinated and mutually reinforcing actions in many areas. The reform effort is integrated to ensure complementarity between assistance from the EU, the US and the World Bank.

18 Page 14 The Transit Facilitation Project in FYR of Macedonia (ICR# 19408) highlighted the need to: (i) tailor the complexity of the project's design to what can be achieved under a single loan; (ii) ensure the capability of implementing agencies; (iii) address issues perceived as real priorities by the borrower; and (iv) maintain flexibility to ease implementation. EU-PHARE's experience shows that to lessen transaction costs at border crossings, border crossing investments need to be supplemented by: (i) reliable traffic data; (ii) accurate information on waiting times; (iii) adequate remedial actions on both sides of a border crossing; (iv) attention to multi-agency needs; (v) linkage to national transport policies; (vi) reliable communication infrastructure and equipment; (vii) communication with users; and (viii) coordination and simplification of customs procedures and removal of state controls on international trade. These lessons are reflected in the design of the present project. The project design was tailored tc respond to stakeholders' concerns following active consultations. The project will support only the first phase of customs reform and focus on the implementation of integrated solutions at a national level and local level (pilot border crossings). The implementation team will be the existing Capital Investments Department of the Ministry of Finance. The pilots and interactions with the Inter-Ministerial Council on Border Point Issues will stimulate cooperation across borders and among agencies to optimize procedures, communication links and monitoring of performance. Customs users will receive training and advisory services to enhance their professional skills. They will be encouraged to voice their concerns and priorities through the regional website and PRO committees and will receive accurate and timely information on existing procedures. 4. Indications of Borrower Commitment and Ownership Bulgaria's commitment to the reforms under the project comes from its interest in legitimate trade expansion and liberalization and participation in such regional activities as those promoted by SECI. BCA's preparation and adoption of the comprehensive strategic plan summarized in Annex 1 1 is a strong and clear sign of commitment to the project and to the broader objective of EU accession, which acts as a powerful stimulus for reforms. The Minister of Finance of Bulgaria sent a letter to the SECI Coordinator in Vienna in March 1998, affirming the Government's strong commitment to implementing the project. The Government, in this letter, expressed its readiness to: (i) undertake reforms in border services; (ii) cooperate with SECI and its supporting countries; and (iii) actively interact with the private sector through the operations of a trade facilitation or "PRO" committee. The creation of the Inter-Ministerial Council on Border Point Issues and the Government's active participation on the Bul-PRO committee are actions supporting this statement. Commitment to the reform at an operational level (border posts, regional directorates) is less assured and will be a special point of focus through the pilots. 5. Value Added of Bank Support in this Project At the outset, the commitment of the participating governments to the TTFSE objectives was weak. They were unwilling to fund border crossing improvements entirely from their own budgets; long-term financing was more attractive to them. The EU and other donors have limited capacity to fund infrastructure. As to technical assistance, the governments were (and remain) reluctant to borrow for foreign technical assistance because of its high cost relative to local salaries. In addition to the extensive support which the EU is providing to Bulgaria with a view to its accession (Annex 12), the best solution therefore was to combine IBRD loan financing for infrastructure with US grants for technical assistance. The fact that the Bank was willing to finance infrastructure only on condition that Customs reform and institutional strengthening was carried out in parallel, has reinforced the attention given to the latter. Furthermore, the Bank through its broader lending and country assistance strategies is well placed to help promote cooperation and coordination of policies and public spending.

19 Page 15 E: Summary Project Analysis: (Detailed assessments are in the project file, see Annex 8) 1. Economic (supported by Annex 4) [XI Cost-Benefit Analysis: NPV=US$7.O million; ERR= 31% The project would have a good return/ low-risk profile with a potential for high return. The net present value is estimated at US$7.0 million on an investment of US$10.1 million. Two benefits have been quantified: (i) lower transport costs due to the diminution of waiting times at border crossings and inland terminals; and (ii) economic benefits of trade expansion resulting from the project. Waiting at border crossings is the concrete manifestation of inefficiency in trade related services. In the European Union, customs administrations are required to keep 90 percent of vehicles waiting no more than 20 minutes, or about 40 minutes to cross both sides of a border point. The difference between present waiting times at Bulgarian borders and a target of one hour to cross both sides of the border has been used as the basis to test the economic justification of investing in border crossing improvements. Reducing current crossing time by 25 minutes would suffice to achieve an ERR of 12 percent. The savings on transport costs are estimated in excess of US$5 million per year after 2005 for vehicles entering Bulgaria. The reduction in costs to trade and the increased reliability of delivery times are expected to lead, in the medium run, to a significant increase in trade volumes, which would make use of existing excess production capacity. Extrapolating from analysis of some specific cases, the trade expansion resulting from the project is assumed to generate a benefit equivalent to 20% of transport benefits. The switching values and sensitivity analysis indicate a robust project. 2. Financial and Fiscal The fiscal impact of the project is expected to be positive. There is evidence to suggest that the real value of trade is much higher than shown by official records, both as to quantities and unit values. The improved performance of border crossings should provide the basis for a significant expansion of the official volume of trade and generate additional customs duties and excise taxes. The Bank will finance all foreign costs and, in the case of civil works, a part of local costs. The Government will fund all other local costs, as well as all taxes and customs duties. Given its high priority, the provision of local funds (apart from taxes) is not expected to create a problem: they represent on average 6 percent of BCA's annual budget. The Ministry of Finance will service the debt. 3. Technical The proposed works consist of new and reconstructed buildings, additional traffic lanes and parking, control booths and canopies, fencing, utilities and truck terminals. The site and building works in the project do not require complex design or construction methods, but they will require scrutiny to make sure that they are dimensioned to match expected flows of traffic per hour, including provision of separate "green" and "red" channels, the separation of trucks from passenger traffic, and vehicle parking space consistent with the speeded up processing. Design capacities will allow for peak travel times but will guard against over-dimensioning. There are several cases where buildings are to be reconstructed. Such cases will be reviewed to ensure that they improve the quality of service to users, and are dimensioned in accordance with EU standards. The construction industry in Bulgaria is capable, with some contractors able to compete on an international level. Compliance with the schedule requirements, however, will require strict oversight. It will be necessary to employ the full-time site supervision services of independent consulting firms to ensure the continued acceptable quality of the constructed product.

20 Page Institutional a. Executing Agencies: Project Manager and her Project Implementation Team (PIT) Implementation will be overseen by the Project Manager and her Project Implementation Team (PIT). The Project Coordinator will assist the PIT in obtaining the input of the other agencies involved. The Project Manager will maintain a team consisting of a procurement specialist and an accountant. The established PIT will receive technical advice from the Bank's senior customs specialist and externally funded support as needed in relation to procurement and financial management. During negotiations, agreement was reached on the organization, staffing, and resources necessary for the PIT to operate satisfactorily. Its full implementation will be a condition of effectiveness. The Trade Facilitation Development component will be managed by the BCCI in collaboration with government agencies and the private sector. BCCI has designated a coordinator for this component. b. Project Management: Regional Steering Committee The Regional Steering Committee (RSC), meeting at least once every three months, will oversee the coordination and implementation of the Program and the proposed project. The RSC will be constituted of high-level officials (the project coordinators) of the participating countries empowered to implement necessary sector policy and reform decisions. 5. Social The project will have an indirect impact on the poor. The reduction in border crossing delays will reduce trade and transport costs, and in turn, the cost of imported goods, leading to benefits to consumers and lower cost of inputs required for local manufacturing, with corresponding creation of new jobs. This import effect, however, will be partly offset by losses incurred by local producers when new imports replace local products. The project aims at improving access to knowledge related to trade, transport and logistics through the training extended to the business community. The TTFSE website will allow access to all information related to border crossings in the six countries involved in the Program, improving to a large extent transparency, thereby reducing opportunities for illegal payments. The electronic forum under the website will empower the business community in the region and outside by enabling it to voice its opinion on the quality of the border services received and propose corresponding recommendations to smooth trade and transport activities. 6. Environmental Assessment Environmental Category [ A [X] B []C Since the border crossing improvements involve enhancement of existing facilities or construction of new facilities within developed areas, the Environmental Category is B. The scope of work includes some expansion but no major fills are envisioned nor disturbance of forested or wetland areas. Removal and disposal of waste and demolition materials should conform to international standards, and be a contractual obligation. All designs for station improvements will ensure compatibility with local environmental regulations and conditions. The project Environmental Management Plan (Annex 10) will minimize negative environmental impact and strengthen coordination and collaboration with the Ministry of Environment and Waters. The Environmental Management Plan has been included as an annex to the PIP and was agreed with the government at loan negotiations. Training will be provided to sensitize operational personnel in the BCA to environmental issues. In any event, the overall impact of the project should be positive, since it should lessen waiting times and vehicle emissions from trucks and other vehicles at the border crossings. The project will also enable customs officials to better enforce the terms of international conventions and agreements relating to the environment. Especially relevant will be the regulations included in such agreements as (i) the European Agreement Concerning the International Carriage of Dangerous Goods by

21 Page 17 Road (ADR) of September 1957 with its Protocol of October 1993; (ii) the Convention on the International Trade in Endangered Species (CITES); (iii) the Convention on the International Carriage of Perishable Foodstuffs and on the Special Equipment to be Used for Such Carriage (ATP), of September 1970; and (iv) Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, of May Participatory Approach The project's design reflects views expressed by principal stakeholders including such customs users as truckers and freight forwarders. Bank staff have conducted extensive interviews and stakeholder analysis to identify trade impediments and their remedial actions. In addition, activities planned under the Trade Facilitation Development component will foster opportunities for closer, more frequent and transparent contact and feedback between Customs and the trading community on a continuing basis. In support of the reform of the work culture for the BCA, the project will make available a consultant to assist focus groups of key stakeholders. This activity will be coordinated with other aid agencies and existing stakeholder groups (BCCI and Bul-PRO). The Government will also initiate a public information program designed to reach stakeholders and the public. User surveys are envisioned as a basis for performance indicators. Principal stakeholders, for example truckers, will be also involved to monitor border delays. The project will make intense use of Bul-PRO and counts on its feedback to monitor improvements. The project has been prepared in collaboration (COL), consultation (CON), information sharing (IS) with the following: a. Primary Beneficiaries and Other Affected Groups * Exporters, importers, producers, and consumers (CON) * Road transport operators and their association (COL) - Freight forwarders/shippers (COL) e Bulgarian Union for Foreign Trade and Customs Service (COL) - Bulgarian Chamber of Commerce and Industry, as well as the Bulgarian Intemational Business Association (COL) * Bulgaria State Railways Enterprise (COL) * Foreign investors (IS) * Ministry of Finance and General Customs Directorate (COL) * Inter-Ministerial Council on Border Point Issues, Ministry of Trade and Tourism, Ministry of Transport, Ministry of Foreign Affairs, Ministry of the Environment and Waters, and National Border Police (COL) b. Other Key Stakeholders * Ministry of Agriculture, Forestry and Agrarian Reform, especially sanitary and veterinary inspection agencies (CON) * The European Commission, the US Government and other development partners (COL) * IRU and FIATA" 8 (IS) * Private companies and populations in the vicinity of the border crossings (IS) A specialist in participatory methodology will assist in the design and implementation of a project launch workshop. The specialist will also provide a preliminary action plan, which will be adopted as a guide for user participation under the Trade Facilitation Development component. The Action Plan will use output 18 FIATA = Federation of International Forwarding Agents.

22 Page 18 provided by the participants that attend the Project Launch Workshop. As follow-up to the Project Launch Workshop, the Action Plan will include, for example, such activities as a series of user focus groups as well as user surveys. The focus groups will provide an open index of user satisfaction. Surveys of such key stakeholders as truckers and freight forwarders will provide the basis for more quantifiable information as part of the verification plan for the performance indicators, assuring a central role of such stakeholders in project monitoring. The Project Manager with the assistance of the BCCI will be responsible for implementing the action plan. The results will be reported as part of the annual reviews. F: Sustainability and Risks 1. Sustainability The project will support values that are critical to fulfilling Bulgaria's long-term objective of achieving sustainable growth. Once the reforms are in place, the sustainability of the effort will be assured by transparency in customs operations, regular cooperation among border crossing agencies including those of other countries, and the gains captured by all parties involved in legitimate trade. Continuous upgrading of the customs service, procedures, management, and equipment based on a reengineered budget will enable the BCA to cope with trade and traffic growth, technological advance, and continued compatibility with the EU. At the level of Bulgaria, the risks of project failure are moderate. At the level of the region, effective cooperation could greatly enhance the developmental impact, but is subject to much greater uncertainty.

23 Page Critical Risks (reflecting assumptions in the fourth column of Annex 1) Risk Risk Risk Minimization Measure Annex 1, cell 'from Outputs to Objective" Rating The flows of traffic linked to Kosovo will M While these flows may be only temporary, the disappearl9. reconstruction effort will last at least five more years. Cooperation among border agencies faces S The high-level coordinator will have the inertia and strong resistance. power to request meetings of the Inter- Ministerial Council on Border Point Issues. Reducing costs to trade and tariffs will not S The EU program of customs compliance and reduce illegitimate trade. enforcement will significantly reduce this risk and the Bank's customs specialist will advise on counter-measures as required. Political commitment is not adequate to M The prospect of entering the EU is a strong resist pressure groups (public or private) incentive to proceed with the reform and the and to ensure the success of the institutional peer pressure will strengthen the effort. program. Coordination by RSC is not effective and M Donors are an integral part of the Program. not supported by donors. The RSC will include key decision-makers of each program country and observers from donor countries. Regional cooperation issues prevent the H The MOU, the RSC, the regional website, the achievement of regional goals. benchmarking and the willingness to access the EU will create a favorable environment for proper cooperation. Annex 1, cell 'firom Components to Outputs " The willingness to introduce significant S The launch of procurement for physical changes at pilot sites across agencies is low. infrastructure components in Years 2 and 3 will be conditional on prior progress at pilot sites. The BICIS system fails to be implemented S The BICIS support to selectivity will trigger according to schedule. the launch of procurement for physical infrastructure components in Years 2 and 3. The targeting and selectivity techniques are M The launch of procurement for physical not effectively implemented at an infrastructure components in Years 2 and 3 operational level. will be conditional on effective implementation of targeting and selectivity techniques. Overall Risk Rating M This is a modest risk, good-return project with potentially high return. Risk Rating: H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 19 The Kosovo crisis has affected the Bulgarian economy and increased the volume of through traffic going there

24 Page Possible Controversial Aspects Risk Type of Risk Risk Minimization Measure Risk Rating Delays in institutional changes G M Coordination with the EU Resistance by some BCA G S The BCA has launched considerable efforts to officers (loss of revenue) address corruption. The transparency of requirements using the website will reduce opportunities. Rejection by BCA of G S Efforts to strengthen integrity are already corruption as a major issue launched and additional training provided by the EU will enhance the capacity of BCA to address corruption. Type of Risk: S (Social), E (Ecological), P (Pollution), G (Governance), M (Management capacity), 0 (Other) Risk Rating: H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) G: Main Loan Conditions 1. Effectiveness Conditions a. Establishment of a Project Implementation Team with appropriate staffing, organization, systems (including a financial management system), funds, facilities, and other resources in a manner satisfactory to the Bank. b. Selection of independent auditors acceptable to the Bank. 2. Other (according to covenant types used in the Loan Agreement) a. By November 15 of each year, the Borrower and the Bank will review progress achieved under the project including at pilot sites based on agreed performance monitoring indicators, and will confirm the implementation program (including procurement packaging) and performance targets for the following year. b. Except as the Bank shall otherwise agree, the Borrower shall ensure that the total number of customs declarations which result in a physical inspection by the BCA at its pilot inland terminal does not exceed on a monthly basis: (i) 12 percent by September 30, 2000; (ii) 10 percent by September 30, 2001; and (iii) 8 percent by September 30, c. Except as the Bank shall otherwise agree, the Borrower shall ensure that the number of trucks completing import clearance in less than 15 minutes at its pilot inland terminal will exceed on a monthly basis: (i) 10 percent September 30, 2001; and (ii) 20 percent by September 30, d. Except as the Bank shall otherwise agree, the Borrower shall ensure that the number of trucks opened at its pilot border crossings will not exceed on a monthly basis: (i) 25 percent by September 30, 2000; (ii) 20 percent by September 30, 2001; and (iii) 10 percent by September 30, e. By March 31, 2001, the Project Coordinator will establish a mechanism across all border agencies to provide the Facilitation Coordinator with up-to-date information on waiting times and opening hours at border crossings, Customs Code, bylaws, and procedures of border agencies. This information shall be binding and made available to customs users in order to contest a decision at a border post.

25 Page 21 f. The BCA will provide to the Bank quarterly progress reports on the establishment and implementation of BICIS and will ensure that BICIS will fully support selectivity at inland terminals and targeting at border crossings by November 30, g. The Borrower will actively participate in the Regional Steering Committee and support it. H. Readiness for Implementation [ ] The engineering design documents for the first year's activities are complete and ready for the start of project implementation. L I The procurement documents for the first year's activities are complete and ready for the start of project implementation. [X] The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. [ I The following items are lacking and are discussed under loan conditions (Section G): 1. Compliance with Bank Policies [X] The project complies with all applicable Bank policies. [ ] The following exceptions to Bank policies are recommended for approval: Program Team Leader/Task Manager: Graham Smith / Gerald Ollivier, ECSIN Sector Manager/Director: Ricardo Al,, Country Manager/Director: Andrew N. Vorkink, ECCO5

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27 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT Proiect Desi%n Summary Narrative Summary Key Performance Indicators Monitoing and Critical Assumptions Evaluation Sector-related CAS Goal: (Goal to Bank Mission) Promoting structural reform and Total trade increasing from US$9.3 billion in 1998 to US$ Ministry of Finance Wealth is distributed appropriately to private sector development 12.4 billion in 2003 alleviate poverty. Strengthening and rationalizing the Quality of customs services gradually improving (user Ministry of Finance Tax proceeds will be used transparently role of the state survey) and appropriately. Fighting poverty and developing Availability of information and training for the professional * BCCI Adequate social security net is human capital. involved in trade and transport activities introduced. Protecting and enhancing the One customs staff assigned to environmental impact issues Ministry of Environ. environment and better enforcement of environmental conventions by and Waters the BCA Project Development Objective: (Objective to Goal) 1. Reduce non-tariff costs to trade Transport costs to/from the four main trading partners * Annual sampling Business environment such as and transport decreasing annually by 2 percent on average from 2001 by Chambers of competitive market, post-privatization Commerce and corporate governance and judicial and evolution of regulatory systems will be improved. CIF/FOB ratio Reform in the banking/insurance sector Study performed will reinforce trade activities. at project Reduction in tariff levels and non-tariff completion costs will enhance trade incentives. 2. Reduce smuggling and corruption * Value of recorded imports increased from US4.7 * Customs agency Non-customs tax collection will also be at border crossings billion in 1999 to US$6.7 billion in 2003 annual report made more efficient. * Occurrence of border corruption (per user surveys) * Annual survey of reduced by truckers crossing the border 20 See definition of indicators, page 6 of this Annex. _ ~~~~~~~~~~~ -1

28 Outputs: (Outputs to Objective) 1.1. Strengthen the institutional and * Import clearance time at pilot terminal down from 1.5 * Logs of Customs The transport sector will offer a operational capacity of BCA and hour in 1999 to 40 min. on average in 2003 * IRU in cooperation competitive environment. other border agencies * Inland physical examination down from 30% in 1999 to with the National Cooperation between border agencies 5% in 2003 Associations of will be supported by the Coordinator and * Percentage of trucks cleared inland in less than 15 Road Transport the Interministerial Council. minutes up from 0% in 1999 to 40% in 2003 Operators * Average border entry time down from 1 hour in 1999 to * Ministry of Finance Border Agencies will be given the under 20 minutes by 2003 * Chamberof political mandate to innovate at pilot Commerce sites Support customs users * Internet framework and forums set up in 2001 for Bulgaria Chamber of The banking / insurance industry will be private/public sector information exchange. Internet site Commerce and able to provide services to the trade visits exceed 300/month in Current BCP situation Industry sector at a reasonable price. available on the internet in Improve main border crossings * All works completed by June 2003 Periodic surveys of The border crossings selected will infrastructure users on the duration remain critical in the aftermath of the and the convenience Kosovo crisis thanks to their location on of border crossing main corridors. (incl. Monitoring of congestion) 2.1. Strengthen on-site inspections * Irregularities/number of examinations up from 3 % in * Ministry of Finance Reducing costs to trade and tariffs will to prevent smuggling 1999 to 15 % in 2003 * Customs result in significant regularization of * Incidence of corruption reduced over project life trade. Political commitment is adequate to resist pressure groups (public or private) and ensure the success of the institutional program. Project Components/Sub- Inputs: (budgetfor each component) in US$ million21 (Components to Outputs) components: (see Annex 2for project description) A. Institutional Reform on 0.9 Border agencies will actively participate customs procedures in the implementation of pilots Monitoring, review and preparation 0.7 of new customs procedures 21 The costs described below are base costs, excluding contingencies, including taxes. CD1

29 Implementation & training on new 0.2 Customs brokers Procedures surveys B. Trade Facilitation development 0.4 Website 0.1 Other on-going regional initiatives for trade (Association of Balkan Chambers, etc.) will continue operating. Training & Seminars 0.3 C. BICIS improvement 0.1 Personnel Training 0.1 The modules for targeting and selectivity will be operational nationwide by.. December D. Improvement of Border 8.9 Crossing Facilities Gyueshevo border crossing 2.0 improvement Vidin border crossing improvement 2.7 Rousse border crossing 0.5 improvement Kapitan Andreevo border crossing 1.0 improvement Kulata border crossing 1.1 improvement Bourgas Border Crossing 1.1 Design/Supervision of Works 0.5 E. Program and Project 0.6 Implementation Front-end fee 0.1 RSC Secretariat and Procurement 0.2 Advisors, Auditors PIT 0.2 CD m >E 0 CD

30 Annex I Page 4 of 7 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT Performance Targets Indicators Dec 1999 Sep 2000 Sep 2001 Sep 2002 Sep Pilot Sites Clearance Performance Pilot Inland Terminal (Plovdiv) Act T Targ. Act Targ. Act Targ. Act Import Clearance Time (min) Physical Examination (%) Trucks cleared in less than 15 min.(%) Irregularities/number of examinations (%) Pilot Border Crossings (Rousse) Truck Examination (%6) Irregularities/ Number of Examinations (Are) r E e _2 Average Border Exit Time (min) Average Border Entry Time (min) Surveyed Occurrence of Corruption (%) Reported Occurrence of Corruption (count) Pilot Border Crossings (Gyueshevo) Truck Examination (%) ('% Irregularities/ Number of Examinations ) _I Average Border Exit Time (min) Average Border Entry Time (min) Surveyed Occurrence of Corruption I(% ) I_ I II II_ Reported Occurrence of Corruption (count) 2. Development Objective Achievements Revenue collected/customs staff (' DEM) _ j _ Total BCA Cost/Revenue collected % 1.3 <1.5 <1.5 <1.5 <1.5 Salaries/Revenue collected(%) 0.63 <0.7 <0.7 <0.7 < Interviews with the private sector indicate that three to four hours are required to cross this border (both sides), while BCA had a preliminary survey indicating 28 minutes. The electronic measurement to be installed as part of the project will improve the understanding of current conditions.

31 Annex 1 Page 5 of 7 Salaries/Revenue collected (%) 0.63 <0.7 <0.7 <0.7 <0.7 Trade Volume/ Number of staff (US$ /staff) Annual Number of Declarations/ Custom staff (000/staff) _ Transport Cost for the main export commodity traded with the three main trading partners (US$- base 100 in 1999) Value of Recorded Imports (US$ 4,900 5,300 5,750 6,200 6,650 million) Value of Recorded Exports (US$ 3,900 4,450 4,900 5,400 5,880 million) _

32 Annex I Page 6 of 7 Performance Indicators - Definitions Indicators Description Remarks 1. Pilot Sites Clearance Performance Pilot Inland Terminals Import clearance Time between entrance of truck into the Information on truck identification and time time terminal and its exit from the terminal after of arrival and departure will be recorded with release of goods. the use of computer terminals or time clocks installed at the terminal entry and exit points Physical Number of times that goods are examined or Information will be derived from the examination the cargo compartment is searched compared computer system that records all declarations to the total number of import, export, and and from the requirement to prepare an suspense declarations. automated report of the results of each physical examination. Trucks cleared in Number of times that a truck completes Information will be developed using the less than 15 import clearance (time between entry into the same system that provides the data on import minutes terminal and departure after release of goods) clearance times. in less than fifteen minutes compared to the total number of import clearances. Irregularities/ Number of irregularities discovered during Information will be obtained from the Number of physical examinations compared to the total automated reporting of the results of all examinations number of physical examinations carried out. physical examinations. Pilot Border Crossings Truck Number of trucks actually opened (i.e., seals Information will be compiled through the use examinations broken) compared to the total number of of computerized traffic logs and the trucks processed. requirement to prepare an automated report of the results of each truck examination. Irregularities/ Number of irregularities discovered during Information will be extracted from the Number of examinations compared to the total number automated reports of truck examinations. examinations of trucks examined. Average border For trucks exiting the country, it is the time Information on truck identification and times exit time between joining the queue and crossing the will be recorded continuously with the use of border. computer terminals or time clocks installed at appropriate locations. Average border For trucks entering the country, it is the time Same as Exit Time. entry time between crossing the border and departing the station. Surveyed Number of cases when a driver makes or is Information to calculate this indicator will be occurrence of asked to make an unauthorized payment derived from surveys of truck drivers using corruption compared to the total number of the crossing point. This survey will be trucks/locations surveyed. conducted on a continuous basis through cooperating transport companies.

33 Annex I Page 7 of 7 Reported Number of cases when a driver makes or is Information to calculate this indicator will be Occurrence of asked to make an unauthorized payment derived from records of received report- ^f Corruption compared to the total number of survey corruption maintained by the Bulgarian responses Customs Administration. 2. Development Objective Achievements Revenue Total revenues collected/total number of Information to be obtained from records collected/ customs employees maintained by the Customs Service. Customs staff Total BCA Cost/ Total budget of the Department (including Information to be obtained from records Revenue collected salaries, overtime, bonuses, and maintained by the Customs Service. benefits)/total revenue collected irrespective of its destination. Revenue/Salaries Total agency salaries, overtime, bonuses, and Information to be obtained from records collected benefits/total revenue collected irrespective maintained by the Customs Service. of its destination Trade Volume/ Trade Volume/number of customs Information to be obtained from records Customs staff employees maintained by the Customs Service. Annual number of Total number of declarations (import, export, Information to be obtained from records declarations/ suspense regimes, but excluding transit), maintained by the Customs Service. Customs staff irrespective of the number of items/total staff employed by BCA. Regional Performance Indicators 2003 Itinerary as % of 2000 I. Istanbul-Bucharest Avg Time (hours) Average Cost $1,015 $1,000 $975 $ II. Istanbul-Tirana Avg Time (hours) Average Cost $2,800 $2,760 $2,690 $2, III. Sarajevo- Avg Time (hours) Ljubljana Average Cost $750 $740 $730 $ Base-year values are estimates by Bank staff for a single 20-ton truck-load, based on a survey of freight forwarders in the Southeast Europe region.

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35 Annex 2 Page I of 5 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT Detailed Project Description (NBF) = Non Bank Financed Note: All costs in the tables are without contingencies A. Customs Administration Institutional Reform -(US) Cost with Contingencies US$ 0.9 million Component Sub InVestment Dt.omponent (US$) 1. Monitoring Monitor and 60, 000 Monitor and refine the set of productivity indicators to and review of refine (NBF) measure the performance of customs services; these BCA productivity productivity indicators should enable comparison between procedures indicators Customs Services in the region and worldwide. enabling international comparisons 1.2. Designated 660,000 Establish programs to implement new border processing border stations (NBF) procedures and practices on a test basis, with a view to and inland expanding the use of successful ideas nationwide. Those customs stations areas to be addressed include procedures, staffing, will serve as test automation and cooperation among agencies, as well as sites for ideas to border station design. improve operations. 2. Implemen Inter-agency 150,000 Enhance cooperation among the border agencies. tation and awareness and (NBF) Includes: training on training (i) sensitization of customs officers to the importance of new procedures Total (US$m) 0.9 without contingencies (NVBF) environmental issues; (ii) familiarization of customs officers with veterinary, phyto-sanitary and immigration processing; (iii) seminars for judges, police and other officials responsible for prosecution of customs violations; and (iv) assistance for the implementation of international conventions related to environment.

36 Annex 2 Page 2 of 5 B. Trade Facilitation Development (US) Cost with Contingencies US$ 0.4 million 1. Strength Establish and 100, 000 Design a regional website and mechanisms to updat it. ening of maintain a (NBF) The website will enable transparency on policies, legal Private-Public regional website and regulatory framework and cooperation at a local, Partnership to support the national and regional level among private and public program and act parties. It will offer a comprehensive information resource as a focal point on border crossings and inland terminals (pictures), on for trade facilitation procedures of border agencies in the region, and support the implementation of the TTFSE Program. All training materials developed under the Trade Facilitation Development will be made available on the site. This component includes the equipment necessary to operate the site. 2. Improve Expert 300,000 Develop and implement a series of distance learning ment of the services and (NBF) programs in trade, transport, and logistics focussed on performance of training facilitating trade. The programs will consist of: (i) a study trade guide; (ii) study sessions; (iii) reference readings; (iv) facilitation frequently asked questions; (v) exams; and (vi) agents certificationi by a lead professional association. Seminars will be offered for the most critical study sessions. Materials will be available either electronically on the website or in the form of paper copies printed out at the Chamber of Commerce and Industry. Total (US$ m) 0.4 without contingencies (1VBF) C. BICIS Improvement - (Bank) Cost with Contingencies US$0.1 million I. Exchange Regional 50,000 This sub-component will enable the organization of program experience seminars to share regional experience and find technical sharing program solutions in implementing the reformn. Total (US$ m) 0.1 without contingencies

37 Annex 2 Page 3 of 5 D. Improvement of Border Crossing Facilities Cost with Contingencies and Taxes US$10.5 million component Sub <*mponent Invet-tEent Detail Base csts-: 1. Gyueshevo 1.1. Paving and 540,000 Construction of an expanded and improved station. The fencing new station will have five entry and five exit lanes built 1.2. Adminis- 540,000 by others. The reconstructed station work under the TTFSE project will include demolition of the existing tration building administration building and construction of a new 1.3. Canopies administration building; canopies; asphalt paving and ,000 minor grading; control booths; miscellaneous buildings; 1.4. Control 120,000 and area fencing. booths 1.5. Miscellaneous 50,000 Sub-total 1,650, Vidin 2.1. Addition of 600,000 Addition of one access lane from the ferry landing with one lane necessary grading; widening of the lane processing area; creation of a truck terminal including an administration 2.2. Canopies 240,000 building and parking area; canopy extensions; a water 2.3. Booths 48,000 supply system and drainage; and control booths and fencing Fencing 75, Adminis- 500,000 tration building 2.6. Heavy 150,000 vehicle inspection shed 2.7. Parking 395,000 areas 2.8. Water supply 245,000 and drainage - Sub-total 2,253, Rousse 400,000 Construction of an administration and communication building for the border police, composed of a basement and two stories with a floor area of 1000 sqm (total). Construction of the building is reinforced concrete with brick bearing walls and aluminum curtain wall. _ Sub-total 400, No contingencies and no taxes.

38 Annex 2 Page 4 of 5 4. Kapitan 4.1. Canopy 367,000 Renovation, modernization, and rehabilitation of a major Andreevo repairs border station, consisting of: repair of the canopies, including painting, replacements and repairs of canopy 4.2. Building 162,000 boards, lighting and utilities; repair of five buildings repairs including waterproofing, exterior work, painting, interiors and utilities; a new canopy with control booths; 4.3. Canopy and 113,000 overhaul and reconstruction of the precast concrete booths warehouse; and construction of a building for waiting 4.4. Warehouse passengers. reconstruction 90, Passenger building 25, Heating and electrical repairs 100,000 Sub-total 857, Kulata 5.1. Adm. Bldg. 500,000 Construction of a new truck inspection building and a 5.2. Inspect.Bldg. 150,000 new administration building; construction of a new parking area and truck terminal; and water supply and 5.3. Truck drainage lines. terminal parking 120,000 area 5.4. Utilities 180,000 Sub-total 950, Bourgas 6.1. New 900,000 Construction of a vehicle and container inspection container building, administration building, parking area, including inspection fencing and utilities. terminal Sub-total 900, Technical 7.1. Gyueshevo 100,000 The project includes contracts for the review of the assistance 7.2. Vidin 135,000 design and supervision of construction at the six border locations Rousse 24, Kapitan 52,000 Andreevo 7.5. Kulata 57, Bourgas 60,000 Sub-total 428,000 Total (US$ m) 7.4 without contingencies and taxes

39 Annex 2 Page 5 of 5 E. Program and Project Implementation Cost with Contingencies US$0.6 million Component Sub component Investment: Deta: (U.-, Base cost PIT Operating costs 140,000 Operating costs for the three years of implementation. PIT support 100,000 Financial Management System, procurement support, training to the PIT. Front-end Fee 100,000 RSC Consultant 105,000 Secretary and procurement advisors financed by the US. Secretariat services (NBF) Procurement Advisors Auditors Consultant 100,000 services Total (US$ m) 0.5 without contingencies

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41 Annex 3 Page 1 of 2 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT Estimated Project Costs % % Total Components Project Cost Summary (US$ Million) Foreign Base Local Foreign Total Exchange Costs A. Institutional Reform of Customs Procedures Monitoring, Review and Preparation of Procedures Implementation & Training on New Procedures Subtotal Institutional Reform of Customs Procedures B. Trade Facilitation Development Website Training & Seminars Subtotal Trade Facilitation Development C. Bulgarian Integrated Customs Information System Regional Exchange Subtotal Bulgarian Integrated Customs Information System D. Improvement of Border Crossing Facilities Gyueshevo Border Crossing Vidin Border Crossing Rousse Border Crossing Kapitan Andreevo Border Crossing Kulata Border Crossing Bourgas Border Crossing Design/Supervision of Works Subtotal Improvement of Border Crossing Facilities E. Program and Project Implementation RSC Secretary, Procurement and Auditors PIT Front-end Fee I Subtotal Program and Project Implementation Total BASELINE COSTS Physical Contingencies Price Contingencies Total PROJECT COSTS Note: Figures may not add up to total due to rounding

42 Annex 3 Page 2 of 2 Components by Financiers Local IBRD GOB US Total For. (lfri. Duties & Amuant % AManut AMnxt e Amount e Ech. Taxes) Taxes A. Institutional Refonr of Customs Procedures Monitoring Review and Preparation of Procedures Implementation & Training on New Procedures SubtotallnstitutionalReformofCustomssProcedures B. Trade Facilitation Development Expertise and Advice Training & Seminars Subtotal Trade Facilitation Development C. Bulgarian Integrated Customs Infonration System Regional Exchange Subtotal Bulgarian Integmated Customs Information D. Improvement of Border Crossing Faclities Gyueshevo Border Crossing Vidin Border Crossing Rousse Border Crossing Kapitan Andreevo Border Crossing Kiulata Border Crossing Bourgas Border Crossing Design/Supervision of Works Subtotal Improvement of Border Crossing Facilities E. Program and Project Implementation RSC Secretary, Procurement and Auditors PIT Front-end Fee Subtotal Program and Project Implementation Total Disbursement Note: Figures may not add up to total due to rounding

43 Annex 4 Page 1 of 5 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT Cost Benefit Analysis of Total Project Investment Table 4.1. Summary Economic Benefit from the Project COSTS BENEFITS FY Net Benefits (in US$ million) (in US$ million) (in US$ million) Total Internal Rate of Return 31% Discount Rate 12% 12% The Principles of the Economic Evaluation The border crossings proposed for improvements under this project were selected on the basis of: (i) high traffic; (ii) geographical location (on international routes); (iii) long waiting time at present; and (iv) need for upgrading. These border crossings were designed to ensure efficient and transparent border operations, while fitting the more stringent norms of the European Union as regards to the office space occupancy. The analysis was built in close coordination with local parties (customs services, Ministry of Finance, Border Police) reviewing alternative remedial measures. The economic cost-benefit analysis compares the economic costs and benefits of the project over the implementation period and over its assumed 15-year period of expected life. Detailed calculations on costs and benefits are shown in Table 4.1. All costs and benefits are expressed in constant 1999 prices. All investment and recurrent costs are net of import duties and of either taxes or subsidies.

44 Anatx-4-Table 4.2 Economic Cost-Benefit Analy7is Bulgoa (Milons of US$ in 1999 prices) FY Coste Investrnernt Costs lth the Projact Trade Facilitation Development Customs Adm. Institutional Reform BICIS improvement 0.05 Border Facilities improvement Total 119h the Prejocr Totel Incremenital Cost: D Economic Benefit 1. Tranpert.Cost Reduction (with project) Pilot Crossinrs Other CrossingsPosts Pilot Inhta Termsiral Total Inpact of Reduced Traport Cost: on Trade Trade Benefits fiomtransport Cost Reduction Transport Cost Reduction( (withoutproject) TotalsBeefiltfiomPuject Not Benefibt frm Project #J 4>

45 Costs Annex 4 Page 3 of 5 The project cost considered for the economic evaluation amounts to US$1 0.1 million excluding taxes and including physical and price contingencies. This excludes components for which EC financing has already been committed. It includes other components under: (1) Customs Administration Institutional Reform; (ii) Trade Facilitation Development measures; (iii) Bulgarian Integrated Customs Information System; and (iv) Border Crossing Facility Improvements. It does not take into account the cost of the Advisory Services and PIT. Benefits - With Project Scenario Two benefits have been identified: (i) lower transport costs due to the diminution of waiting times at border crossings and inland terminals; and (ii) economic benefits of trade expansion resulting from the project. Trade and Transport Costs Reduction. The savings on transport costs at Bulgarian border crossings and the inland terminal under the project would progressively reach about US$5.2 million at the end of Delays at border crossings and inland terminals are symptomatic of a number of issues associated with deficiencies in trade related services: procedural complexity, cumbersome documentation requirements, slow customs clearance steps, scarce and unreliable information technology and telecommunications, absence of standard service times and inadequate infrastructure. Assumptions. The progressive reduction of border crossing time 25 to one hour for incoming traffic has been used as the basis in the economic evaluation of the project. The two pilot border crossings (Gyueshevo and Rousse) and pilot inland terminal would progressively 26 meet this objective by Other border posts scheduled for improvements under the project, but not selected as pilots, would experience similar waiting time reduction with a lag of one year. The average waiting time for trucks in the "do nothing" alternative is the mid estimate as reported by customs users and officials. The average value of time for trucks was obtained through interviews (US$250/day). Natural traffic growth was estimlated at 3 percent under the category "trade and transport cost reduction". In order to realize the economic benefit from the waiting time reduction, both the physical investments and the customs reform are jointly required because the customs reform alone can not completely reduce the waiting time. For example, the implementation of new procedures requires additional lanes to allow for traffic segregation, appropriate space covered by canopies for secondary inspection 27, proper communication capacity with limited interruption (LAN, WAN, phone, fax), access to power sources to enable computers to function or lighting to be available during evening shifts. The project will specifically address these border posts where infrastructure or equipment bottlenecks exist. Economic Impact of Increased Trade. The impact on trade under the project comes from: (i) reduction in waiting time at border crossing points; and (ii) increased reliability in the delivery of goods. In a competitive market, these two elements will be reflected in the price of traded goods, and stimulate trade. The increased reliability of international delivery times will facilitate the integration of local companies into international production chains. In the medium run (from 2003) these two elements should enable a significant increase in trade volumes. 28 Such trade gains are obtained by combining trade creation and trade-substitution effects. Imports would 25 From entering the border area in one country to exiting the border area in the next country. 26 5% in FY200 1, 30% in FY2002, 70% in FY2003 and 100% in FY2004 of the targeted time reduction (down to one hour). 27 Selectivity means not only that not all trucks are inspected, but that those inspected are subjecto a far more detailed inspection than today. 28 The trade creation effect is the increased demand in the importing country for a commodity from an exporting country, resulting from the price decrease associated with the elimination or reduction of distortions. Trade substitution accounts for the tendency of importers to substitute goods from one source to another in response to a change in the import price of supplies from one source.

46 Annex 4 Page 4 of 5 be the most affected initially, since the border inefficiencies bear mostly on imports. However the regional nature of the project would simultaneously impact exports. Increased import volumes would benefit local consumers (inclusive of local companies relying on foreign inputs for their production) by increasing their consumer surplus and would create a loss for some local manufacturers, whose products become replaced by new imports. Increased export volume would benefit local producers by opening new market opportunities and would reduce local consumer surplus by reducing the quantity available on the local market at the initial price. The broad economic impact of cheaper international transport is complex to analyze even in countries with valid statistical data and requires general equilibrium models taking into account the monetary/foreign exchange impacts of new trade patterns. Given the current level and quality of data available on the six Balkan countries, such a detailed evaluation would not be realistic. The outcome of various studies on this phenomenon shows these additional benefits ranging between 20 and 30 percent over the transport savings generated. For the purpose of this evaluation, 20% percent was considered as the most appropriate. Exhibit 4.1 provides an at-a-glance summary of trade for Bulgaria. Benefits - Without Project Scenario If the project were not taking place, reform efforts supported by the EU would continue to be implemented. The differential between the with or without project scenarios in terms of costs includes only the project costs as described above. The EU support would enable the Customs services to partly achieve the objectives of this project on a delayed schedule. The benefits associated with "the without project" scenario were subtracted from the benefits in the "with project scenario" to obtain the project benefits. It was estimated that, without the project, 25 percent of annual with project benefits would be achieved in 2003, 50 percent in 2004 and 70 percent in 2005 and onwards. The absence of needed infrastructure without Bank's financing would impose a limit to the efficiency that could be achieved, explaining that only 70 percent of the savings could be reached without the project. Sensitivity Analysis on EIRR Tables 4.3. presents the various assumptions tested and their influence on the economic internal rate of return of the project. The internal rate-of-return for the project is robust as shown by the low switching values. In all cases tested, the projected rate-of-return remains well above the opportunity cost of capital. Table 4.3. Sensitivity Analysis Table 4.4. Switching Values EIRR Daily Truck Value (l$) 40% 23% Trade Related S radets 33% 30% TraffTic Volume 40% 23% Investment cost (-43% 24% Investment cost ()and Traffic Volume 4/18 Table 4.4. Switching Values (for IRR 12 percent) Daily Truck Value (US$/day) i 150 Trade related benefits coeff. <0 Traffic volumte/existing traffic 55% Minimum Time Savings (in minutes) 25

47 Annex 4 Page 5 of 5 Exhibit 4.1. Bulgaria Goods Trade Outlook (1998) Figures are in US$ million unless otherwise noted Bulgaria- Trade Balance Tratde lidicaters: Historic ( ) Exports (FOB) inus$ bilion oum e: B±gtiar NiHrte15uBi Imports (FOE) in US$ bilion P BaLwweoxGoods Os GrowthExpofts (in%) 6% 36% -9% 1% -13% _ Growth Imports (in%0) -14% 32% -10% -3% 13% Total TradeefGoods $ see - U *t _. 2~:: * i _ Grswtk Trds vhone -5% 34% -9% -I %A 0%e - see r^ q r - _~_Real GDPinUS$builhn 11A 11S P(1$0) - Exports as % ofodp 34% 45%O 46% 49% 35% p$o5) _~ 3 ~ -! - - Imports as% ofgdp 35% 44% 44% 46% 42% * * Trade balance as % ofgdp 0% 1% 2% 4% -7% (5 $59)_ Trade ar,oefgdp 69% 90% 90O 95% 77% flmpen-goodsf05 Ulspan-GoodsFOB &bkxuue-ooods Trade Partners (1998) Main Exchanges (1998) Export Ilnport MaxPsrts (US$ udiliesn) Italy 551 Russia 1037 Bese Metals 844 Germany 449 Gesmany 723 Textiles 742 Greece 377 Italy 396 Animal and Vegetable Products 690 Turkey 339 Greece 297 Machinery and TransportEquipment 518 BalkanCountries 237 US 206 Chemicals 493 Russia 235 Ukraine 197 Mineral and Fuels 342 Others 2111 Others 2300 Other 664 Total 4299 Total 5156 EU 50% E 4596 nmparts (US$ udlios) Main Exports 1998 in US$ million (>US$ 190 million): Clothing and footwear (537), Food, beverage and tobacco (443), Iron and IlineralProducts and Fuels 1314 steel (406); Other metals (307); Machinery and Equipment (205), Machinery andctransportequipment 1030 Chemicals (201), Textiles (196) Textiles 645 Chemicals 540 Main Imports 1998 in US$ million (>USS190 million) Animal and Vegetable Products 382 Energy (1193), Textiles (504), Machinery and equipment (415), Base Metals 321 Chemicals (293), Ores (198), Food, beverage and tobacco (196) Other 763 Sources: World Bank, IMF, Bulgarian National Bank, EIU. The goods trade balance showed a tendency to surplus until 1997 (4% of GODP in 1997) prior to turning to a deficit in 1998 estimated to about US$700 million. The firsttwo quarters ofl 999 show a significantworsening ofthis deficitwith a drop in exports and an increase In Imports. Foreign trade Is highly signfficantto Bulgara. Exports of goods stood at US$4.3 billion in 1998 (nearly 35% ofodp), while imports ofgoods reached more than US$ 5.1 billion (about 42% of GDP) or in total more than 77% of GDP. The trade of goods of Bulgaria is mainly oriented towards the EU, which represents the main market (about 50% of exports and about 45% ofimports). Within the EU three countries have the most important shares (Italy, Germany and Oreece). Other significanttrade partners include Russia, Turkey and the Balkan countries. The structure of imports has gradually modified since In 1998, imports were constituted by capital goods (22%), raw materials (41 %) energy (23%) and consumer goods (14%) while the structure of exports was: capital goods (16%), intermediate goods (53%) and consumer goods (31 %). The first semester 1999 indicates a weakening of traditional heavy industry exports while clothing and footwear exports are strengthening. Imports have increased notably for capital goods. The surge In oil prices is likelyto further Increase the trade deficit

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49 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT Annex 5 Financial Summary Project Components Cost and Financing Plan By Year Total including Contingencies (US$ Million) Totals licluding Confingencies FY2001 FY2002 FY2003 Total A. Institutional Refonn of Customs Procedures Monitoring. Review and Preparation of Procedures Implementation& Training onnew Procedures Subtotal Lstitutional Reform of Customs Procedures B. Trade Facilitation Development Expertise and Advice Training & Seminars Subtotal Trade Facilitation Development C. Bulgarian Integrated Customs Information System Regional Exchange S:ubtotalBulgarianlntegrated Customs Infbmation System D. lmnrwement ofborder Crossing Facilities Gyueshevo Border Crossing Vidin Border Crossing Rousse Border Crossing Kapitan Andreevo Border Crossing KulataBorderCrossing Bourgas Border Crossing Design/Supervision of Works Subtotal Improvement ofborder Crossing Facilities E. Program and Project Implementation RSC Secretasy, Procurement and Auditors PIT Front-end Fee Subtotal Program and Project Implementation TotalPROJECT COSTS Project Financing FY2001 FY2002 FY2003 Total IBRD Government US Total Project Financing N ote: Figure s may not add up to total due to rounding

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51 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT Procurement and Disbursement Arrangements Annex 6 Page 1 of 8 Procurement The following procurement arrangements will apply to all contracts wholly or partly financed by IBRD. General. Works wholly or partially financed by IBRD will be procured in accordance with the Guidelines for Procurement under IBRD Loans and IDA Credits published in January 1995 and revised in January and August 1996, September 1997 and January Consultant's services wholly or partly financed by IBRD will be procured in accordance with the Guidelines for Selection and Employment of Consultants by World Bank Borrowers published in January 1997 and revised in January Standard documents published by the World Bank will be used by the PIT for the preparation of bidding documents and request for consultant's proposals. Procurement of Works. Civil works contracts will be financed under International Competitive Bidding procedures (ICB). Prior and Post Review by the LBRD for Works Contracts. All IBRD financed works contracts under ICB will be subject to prior review procedures in accordance with the Bank's Guidelines. Procurement of Consulting Services. Recruitment of consulting firns for the design and supervision of works will be carried out under the Quality and Cost Based Selection method (QCBS) in accordance with the Bank's Guidelines. Exception to using the QCBS method will apply to financial audits (Least Cost Selection) for an aggregate amount not to exceed US$120,000. The operating costs of the PlT for a total amount of US$140,000 will be Bank-financed on a declining basis. Consultant firms or individual selected based on Qualifications (CQ) or as individual consultants (Section V) respectively, will be hired to provide support to the PIT when needed and for the exchange programn to improve the ICIS. Prior and Post Review by the IBRD for Consultants' Contracts. All consultant contracts expected to cost above the equivalent of $100,000 per contract with firms and $50,000 per contract with individuals will be subject to prior review by the IBRD. Other contracts competitively awarded and not subject to prior review will be subject to post review. All contracts not awarded through competition and all terns of reference (TOR) will be subject to prior review. Procurement Implementation Schedule and Advance Procurement Actions. The procurement plan was agreed during the appraisal mission. The MOF and IBRD have finalized the procurement plan during negotiations (Table B2). This timetable will be used as a basis for monitoring of procurement processing. In particular, the following advance procurement actions have been identified and are hereby proposed to the BCA and the MOF as critical milestones so that main contracts can be signed soon after Loan effectiveness: (i) submit draft Specific Procurement Notice for the construction works by May 15, 2000; (ii) submit draft expression of interest for services for design and supervision by May 31, 2000; and (iii) submit terms of reference, short list, letter of intention, draft model contract for consulting services by May 31, All notices to be published in the UN Development Business should be submitted to the IBRD at least 20 days prior to publication. Retroactive financing would be provided for an amount of up to EUR 105,000 and would cover the provision of a Financial Management System, procurement specialist support, incremental operating costs and consultant services for design and supervision. Disbursement Disbursement. Disbursements against the categories described in the Table 6.C will be made upon receipt by IBRD of fully documented applications, except for contracts valued at less than US$100,000 for consulting firns, US$50,000 for individual consultants, training and expenditures for incremental costs, which will be made against certified statements of expenditures (SOE). Supporting documentation for SOEs will be retained by the Borrower and made available to IBRD during supervision. The

52 Annex 6 Page 2 of 8 minimum size of application for direct withdrawals and issuance of commitments from the IBRD Loan account will be 20 percent of the amount of the Authorized Allocation to the Special Account (see below). Special Account. To facilitate project implementation, the Borrower will establish a Special Account in one of the major foreign commercial banks or in the Central Bank on terms and conditions satisfactory to the Bank to cover the share of expenditures by the Bank. The aggregate Authorized Allocation for this special account will be EUR 750,000, representing about four months of average expenditures made through the Special Account. During the early stage of the project, the initial allocation to the Special Account will be limited to an aggregate of EtJR 375,000. However, when the aggregate disbursements under the Loan have reached the level of EUR 1.5 million, the initial allocation may be increased up to the aggregate Authorized Allocation of EUR 750,000 by submitting the relevant Application for withdrawal. Applications for replenishment of the Special Account will be submitted monthly or when one-third of the amount has been withdrawn, whichever occurs earlier. Documentation requirements for replenishment will follow standard Bank procedures as described in the Disbursement Handbook, Chapter 6. Monthly bank statements of the Special Account, reconciled by the Borrower, will accompany all replenishment requests. Project Accounting and Financial Management. A financial management system (FMS) including accounting, financial reporting, planning, budgeting, auditing, and proper intemal control systems will be established prior to loan effectiveness. The FMS has met the minimum Bank financial management requirements (4-B LACI Certification) prior to board presentation. The Bank has reviewed the established FMS and prepared a certification according to the model presented in the Loan Administration Change Initiative Implementation Handbook. The certification reflects the status of the FMS and the projectrelated isstues and is accompanied by proposed remedial actions to enhance the system and enable the development of appropriate project management reports in view of the transition to PMR-based disbursements. The Bank has defined a time-bound action plan to specify the steps necessary for: (i) board presentation; (ii) loan effectiveness and (iii) further strengthening of procedures and staff development during implementation. The development of the FMS will be monitored by the Bank before effectiveness, during the first supervision mission and throughout project implementation. The FMS will be compatible with OP/BP and with the Project Fiiancial Management Manual, published by the Bank. The PIT has been staffed with one accountant, suitable to the Bank. The company installing the FMS will assist the PIT in maintaining project accounts adequate to provide information regarding project resources and expenditures. The PIT will have accounts audited every fiscal year by independent auditors acceptable to the Bank, in accordance with Intemational Standards of Auditing issued by the Intemational Federation of Accountants and Bank guidelines. The reports of such audits will be submitted to the Bank no later than six months after the end of the Borrower's fiscal year. The PIT will also maintain all documentation related to project expenditures and keep financial records in accordance with sound accounting practices. A management letter giving an opinion on intemal audit controls should be submitted to the Bank six months after effectiveness of the loan. Accounting and Auditing. An independent auditor acceptable to IBRD will conduct an annual audit of the project accounts in accordance with International Auditing Standards. Termns of reference for the annual audits of the project accounts will be agreed upon at negotiations. Certified copies of these audits will be submitted to IBRD within six months of the end of the Government's fiscal year. Certified copies of the auditors' report will be retained by PIT for subsequent review by IBRD missions.

53 Annex 6 Page 3 of 8 Annex 6, Table A: Project Costs by Procurement Arrangements (in US$ million equivalent) International Competitive Bidding Other N.B.F. Total A. Civil Works (6.4) - (6.4) B. Equipment & Goods C. Consultant Services & Engineering (0.7) - (0.7) D. Training E. Miscellaneous (0.2) - (0.2) Total (6.4) (1.0) - (7.4) Auditors (US$ 0.12 million), design and supervision consultants (US$0.63 million) and PIT consultant support and FMS (US$0.15 million) are categorized under the "Consultant Services and Engineering". The category E corresponds to the front-end fee (US$0.08 million) and the incremental operating costs (US$0.14 million). N.B.F. = Not Bank-Financed.

54 Annex 6 Page 4 of 8 Annex 6, Table Al: Consultant Selection Arrangements (in US$ million equivalent) Consultant Selection Method Total Cost Services (including Expenditure contingencies) Category Category QCBS QBS SFB LCS CQ Other N.B.F. A. Firms (0.47) (0.1) (0.07) (0.6) B. Individuals _(0.11) (0.1) Total (0.47) (0.1) (0.07) (0.1 1) (0.7) Notes: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed. Figures in parentheses are the amounts to be financed by the Bank loan. 29 This includes auditors (US$ 0.12 million). 30 This covers notably the financial management system (US$0.015 million) under retroactive financing on a Qualification (CQ) basis. 31 This covers the procurement during the ftrst year (US$0.02 million), and other support and training to the PIT over the life of the project (US$0.11 million), on an individual basis.

55 Annex 6, Table A2: Procurement Plan -Bulgaria (GPN published on June 16, 1999) ICIS Regional Program CS 4 0Tt6 CQ N/A DrafttoBank: 1. Invitation: SPN: February5,2001 July 15,2001 May31, Dec. 31, Opening: April 15, BankNoObj: Feb. 15, 3. Eval&Recom: June31, Gyueshevo CW I Total:3.7 ICB N/A Draft to Bank 1. Invitation AprilN,2001 May 31, And Kulata Lot 1: 2.3 October 1, 2000 SPN November 30, Lot 2: 1.4 Bank No Objection 2. Opening March 1, 2001 November 30, Eval. & Recom. March 31, 2001 Vidin CW ICB N/A Draftto Bank 1. Invitation Noverber 21 March31, June SPN July Bank No Objection 2. Opening Sept. 15, 2000 Nuly 15, Eval. & Recom. October N/A Draftto Bank 1. Invitation April 15,2001 May31, October 1, 2000 SPN November 30, Bank No Objection 2. Opening March 1, 2001 November 30, Eval. & Recom. March 31, 2001 Rousse CW ICB N/A Draft to Bank 1. Invitation April 3,2001 Mayr3 1, October 1, 2000 SPN November 30, Bank No Objection 2. Opening March 3, 2001 November 30, Eval. & Recom. March 31, 2001 KapitanAndreevo CW ICB N/A Draft to Bank 1. Invitation January 30, March15, August 31, 2000 SPN Sept. 30, Bank No Objection 2. Opening Nov. 30, 2000 September Eval. & Recom. Dec. 30,2000 Bourgas CW ICB N/A Draftito Bank 1. Invitation January 1,2002 May 31, April 1, 2001 SPN June 30, Bank No Objection 2. Opening October R, 2001 Ma 30, Eval. & Recom. November 30, 2001 Technical Assistance CS 2.6,32 CBS N/A No Objection by May 30, 1. Invite proposal from shortlisted firms Oct. 15,2000 March 31, Gyueshevo 2000 Oune 30, Rousse 2. Evaluation and Recommendation Vidin SPN/EOI September 15, 2000 Kapitan Andreevo Sept. 1, 2000 No Objection by Sept 30, 1. Invite proposal ftom shortlisted firms January 15, May 31, Kulata 2000 October 15, Bourgas 2. Evaluation and Recommendation December 15, Retroactive financing will apply to the first supervision contract (estimated at US$15,000). CD '

56 Auditors CS i 0.1 LCS N/A No Objection by March 1. Invite proposal from shortlisted firms July 1, 2000 December 15, 2000 April 15, , Evaluation and Recommendation June 15, 2000 PIT support 3 CS CQ/IC TOR Feb 28, Invite qualifications: March 15, 2000 April 15, 2000 December 2. Evaluation and recommendation: April 1, 30, PIT Support 3 CS CQ/IC N/A Pl'11 Operating Costs 35 NA NA 0.2 Total CW= Civil Works, CS= Consulting Services, TR= Training, TA-Technical Assistance, QCBS= Quality and Cost Based Selection, NBF= Not Bank Financed, IS= International Shopping, IC= Individual Consultant SS=Sole Source 34 Retroactive financing for US$30,000 will be applied for the procurement support (IC US$15,000) and for the fimancial management system (CQ US$15,000). These contracts will be awarded during the project implementation as needs for evaluation support or training arise. 35 Retroactive financing for US$65,000 will apply to this component. '0C x x cr

57 Annex 6 Page 7 of 8 Annex 6, Table B: Thresholds for Procurement Methods and Prior Review Expenditure Contract Value Procurement Contracts Subject to Category (Threshold) Method Prior Review / Estimated Total Value Subject to Prior Review US $ thousand US $ million 1. Works >=500,000 ICB All / US$ 9.9 million 2. Goods N.A. 3. Services Firms QCBS >=100,000 / US$ 0.8 LCS (auditors) million Individuals Section V >=50,000 Total value of contracts subject to prior review: US$ 10.7 million N.A. Not Applicable since there are no contracts of this kind.

58 Annex 6 Page 8 of 8 Annex-6 Table B1: Capacity of the Implementing Agency in Procurement and Technical Assistance Requirements Brief Statement The Government of Bulgaria has many years of experience in implementing Bank-financed projects. They have an average performance for procurement of Works, Goods, and Services. A Country Procurement Assessment Report was prepared in It has been discussed and finalized with the Government. Are the bidding documents for the procurement actions for the first year ready by negotiations: No Training Information and Development on Procurement Estimated Date of Date ofpublication of Indicate if there is Domestic Domestic Project Launch updated General procurement subject to Preference Preference Workshop: Procurement Notice: mandatory SPN in for Goods: for Works, if Development Business: applicable: May 31, 2000 March 31, 2000 Yes N.A. No Retroactive Financing: Yes Advance Procurement: Explain: Setting up of the Financial Management System (US$0.015 No million), support to prepare first year procurement documents (US$0.015 million), consultant services for design and supervision (US$0.015 million) and incremental operating costs (US$0.065 million) Explain briefly the Procurement Monitoring System: The PIT under the Ministry of Finance will oversee all procurement activities under the project and will ensure procurement is done in accordance with World Bank procedures with support of external consultants as needs arise. TOR for all consultant services will be submitted for no-objections to the Bank. The PIT will report on procurement matters in its Quarterly Progress Reports ( See C: 4 e). Cofinancing: Explain briefly the Procurement arrangements under co-financing: There will be no joint-financing. For parallel financing, donor procurement procedures will be used. Section 4: Procurement Staffing name of Procurement Staff or Bank's staffpart of Task Team responsible for the procurement in the Project: Name: Els Hinderdael Extension: Country Office will provide back-up on procurement issues to project team and will be assisted in that regard by procurement advisors. Annex 6, Table C: Allocation of Loan Proceeds Suggested Allocation of Loan Proceeds Loan Disbursement Amount % (Euro) 1. Civil Works 6,120,000 65% 2.Consultants' services and training 730, % 3. Incremental Operating Cost 130,000 90% until June 30, 2001; 70% thereafter 4. Fee 77, Unallocated 672,700 Total 7,730,000

59 Annex 7 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT Project Processing Budget and Schedule A. Project Budget (US$000) Planned Actual (At final PCD stage) B. Project Schedule Planned Actual (At final PCD stage) Time taken to prepare the project (months) 10 months First Bank mission (identification) 03/28/ /28/1999 Appraisal mission departure 12/01/ /15/1999 Negotiations 02/15/ /10/2000 Planned Date of Effectiveness 07/01/2000 / / Prepared by: Ministry of Finance, BCA and Bank Team Preparation assistance: Bank staff who worked on the project included: Name Graham Smith Gerald Ollivier Alessandra Iorio Aly Abu-Akeel Blaga Djourdjin Els Hinderdael Bogdan Constantinescu Anca Dumitrescu Pedro Taborga Ryo Eguchi Kenneth Gwilliam James Walsh Magdalena Kusemileva Dammika Somasundaram Marie Laygo Specialty Program Team Leader Transport Specialist- Task Manager Counsel Counsel Project Officer Procurement Accredited Specialist Financial Management Specialist Project Officer Sr. Economist Project Officer Peer Reviewer Peer Reviewer Consultants who worked on the project included: Name Specialty Michel Zamowiecki Customs Specialist Ivan Taborsky Customs Specialist Philip Moeller Office Team Leader

60 Annex 8 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT Documents in the Project File* A. Project Implementation Plan B. Bank Staff Assessments * Management information System: Croatia-Romania & Bulgaria * Trade Facilitation Component Annex - Bulgaria * Customs Institutional Reform: Bulgaria * Economic and Financial Analysis of the Project * Technical paper regarding the selection of border crossings C. Other * EU Assessment of BICIS *Including electronic files.

61 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EIUROPE PROJECT Status of Bank Group Operations (Operations Portfolio) As of March 31, 2000 (In US Dollar Millions) Closed 9 Projects Last PSR Difference Between Expected and Actual Board Date Supervision Rating Original Amount in US$ Millions Disbursements a/ Fiscal Year Development Implemenitation Active Projects ieves Prolessn IBRD IDA Cancel. Undisb. Orig. Frm Rev'd 1993 P ENERGY S S P WATER COMPANIES REST S S P HEALTH SECTOR RESTRUCT'URING S S P RAILWAY REIIABILITATI S S P SOCIAL INSUR. ADMIN. S USS P ENV. REMED. PILOT S S P REG. INITIATIVE FUND lis S P SOCIAL PROTECTION ADJUSTMENT LOAN S S P AGRICULT. SECT. ADJUST. LOAN I S S P ENV. & PRIV. SUPPORT ADJUST. LOAN S S a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.

62 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT STATEMENT OF IFC's Committed and Disbursed Portfolio As of February 29, 2000 (In US Dollar Millions) Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1994 Euromerchant FND Interlease Inc Sofia Hilton Devnya Cement BAC Bank Isiklar Holding Kronospan Group Total Portfolio: Approvals Pending Commitment Loan Equity Quasi Partic 1999 BPBANK Total Pending Commitment: a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. m ) K) 'C

63 Annex 10 Page I of 3 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT 1. Overview Environmental Management Plan Since the Trade and Transport facilitation in Southeast Europe (TTFSE) Project is unlikely to have significant adverse environmental impacts, the project has been rated accordingly as Category B. To prevent, minimize or mitigate site specific negative impacts, however, this Environmental Management Plan (EMP) and a set of mitigatory measures have been prepared. Upon review with the client government it will be signed as an attachment to the PIP. 2. Minimization of Negative Impact The major concerns about possible negative site-specific impacts associated with border crossings relate to: (i) emissions from vehicles waiting for customs clearances; (ii) drainage of disinfectants and spills of oils and fuel; (iii) waste disposal and loose garbage; and (iv) site disruptions caused by upgrades or relocations of utilities or such infrastructure as buildings, parking/waiting areas, and access roads. The objective of the TTFSE, to reduce constraints on traffic flows at border crossings, including the simplification of paperwork and reduction of processing times, will correspondingly reduce standing time and vehicle emissions from trucks and other vehicles. Processed and road side waste, garbage and litter will also be reduced and better managed. The small scale of physical investment, largely limited to the improvement of in-place facilities, offers only limited potential threat. Specific actions included in the EMP (see Exhibit 1) to further minimize potentially negative impact and promote institutional development include: * Liaison with Environmental Authorities * Training and Sensitization * Site Certification * Consultations on the Harmonization of Standards * Provisions in Construction Contracts a. Liaison with EnvironmentalAuthorities Although liaison is already provided through the Inter-Ministerial Council on Border Point Issues, contact between the Bulgarian Customs Administration (BCA) and the Ministry of Environment and Waters (MoEW) needs to be intensified. This will be achieved through the appointment of an environmental officer in the BCA who will be responsible for liaison, monitoring, and reporting on environmental issues and the EMP to the Project Implementation Team (PIT) of the TTFSE. 36 Incorporation of the functions of the environmental officer into the overall, long-term responsibilities of the BCA will be reviewed as part of the reform process and capacity building process of the BCA. Environmental issues will be included in the public information program to be provided by the BCA. b. Training and Sensitization The BCA environmental officer, in collaboration with the MoEW, will assist the TTFSE training consultant in the design and provision of training and sensitization for the staff of the customs service relating to the importance of environmental issues and protection. Standard procedures and guidelines 36 The MoEW has already designated the existing MoEW support staff serving the Inter-Ministerial Council on Cross Border Points as the MoEW liaison for the TTFSE; they would be supervised by the representative of the MoEW serving on the Inter-Ministerial Council (MoEW management at the level of Deputy Minister).

64 Annex 10 Page 2 of 3 based on the national environmental regulations will be developed. In coordination with the appropriate associated ministries and agencies providing control functions at the border such specialized training in support of veterinary and phyto-sanitary pre-inspections will be designed. Training on the control of the hunting and gathering of endangered flora and fauna will also be covered. c. Site Certiflcation In order to promote acceptable practice and minimization of environmental impact at all stations, the BCA environmental officer, jointly with a representative of the Ministry of Environment and Waters, will inspect all border crossings scheduled for investment under the TTFSE or marked as pilot sites. The MoEW will review the capacity and appropriate jurisdiction to participate in these inspections. On the basis of satisfactory compliance with regulations and procedures a letter of certification of compliance will be issued. Particular attention will be given to assure corrective procedures relating to (i) the use of disinfecting pits at border crossings, (ii) the storage and use of disinfecting materials and chemicals at sanitary and disinfecting sites, (iii) the control of waste materials including hazardous materials, and (iv) the control of road-side litter and garbage. d. Consultations on the Harmonization of Standards The project supports the harmonization of standards with those of the EU. Particular attention will be given to those relating to hazardous materials. The environmental officer will consult with the Ministry of Environment and waters to ensure progressive application of appropriate standards and to ensure collaboration with relevant environmental programs and activities funded by the EU. Progress in this area will be regularly reported to the PIT and included in reports to the Bank. In addition, the project will also enable customs officials to better enforce the terms of international conventions and agreements relating to the environment. Especially relevant would be the regulations included in such agreements as (i) the European Agreement Concerning the International Carriage of Dangerous Goods by Road (ADR) of September 1957 with its Protocol of October 1993; (ii) the Convention on International Trade in Endangered Species (CITES); (iii) the Convention on the International Carriage of Perishable Foodstuffs and on the Special Equipment to be Used for Such Carriage (ATP) of September 1970; and (iv) the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal of May e. Provisions in Construction Contracts Although not required by current national environmental regulations, environmental reports will be prepared to examine the potential negative environmental impact and suggest mitigation measures for any new construction under the TTFSE. These reports would be prepared by the BCA or a qualified consultant and submitted for a 30 day review by the MoEW. The acceptance of and clearance for payment by the PIT for work contracted under the TTFSE would be dependent upon the presentation of such details and a description of supportive action if such was recommended by the MoEW. All contracts would contain clauses requiring the minimization of noise and dust during construction.

65 Annex IO Page 3 of 3 Exhibit 10.1 Liaison with Environmental The BCA will designate an environmental officer who in collaboration Authorities with the PIT will be responsible for: (i) liaison with environmental officials of the Ministry of Environment and Waters; (ii) the review and monitoring of the EMP; (iii) the provision of periodic status reports to the PIT; (iv) consultations with such interested parties as NGOs; and (iv) and the provision of support for supervision missions. The government will assure that the BCA environmental officer has access to information relevant to the project and environmental compliance. Training and Sensitization Certification of Acceptable Practice at Border Crossings The BCA in collaboration with environmental officials of the Ministry of Environment and Waters will provide training and sensitization of staff at each border crossing. Standard procedures will be specified. Special training will be offered for pre-inspection skills in such related areas as veterinary and phyto-sanitary inspections and in support of the protection of endangered species. The Ministry of Environment and Waters, jointly with the BCA environmental officer, will inspect each border crossing scheduled for investment under the TTFSE or marked as pilot sites for certification of the acceptability of practices and minimization of environmental impact at all stations. Particular attention will be given to (i) the use of disinfecting pits, (ii) the storage and use of disinfecting materials and chemicals at the sanitary and disinfecting sites, (iii) the control of waste materials including hazardous materials, and (iv) the control of roadside litter and garbage. Harmonization of Standards One of the goals of the project is to assist harmonization with EU and international standards. The environmental officer will consult with the Ministry of Environment and Waters periodically on progress and provide progress reports to the PIT. The BCA environmental officer will ensure compliance with evolving regulatory requirements and conventions. Construction Designs for new construction will include an environmental report with plans for the minimization of negative impacts. Contract documents will contain clauses requiring minimization of noise, dust, and waste disposal during construction. All works will comply with local environmental regulations where applicable.

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67 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT Bulgarian Customs Administration Strategy Strategic Goals Strategic Objectives Actions Support I. Further Legislative changes 1. Establishment of a working group from the HQ, which should examine the EU-Twinning development of to harmonise the powers of possibilities for initiating the necessary legislative changes and should introduce Arrangement with the legal base, BCA with EU practice. respective draft solution - April German Customs harmonised with the EC Establish a I. Assignment of responsible officers from the different Directorates to the HQ who EU-Twinning mechanism for should monitor on a permanent basis the changes in the EU legislation - October Arrangement with maintaining/developing 2. Establishment of a permanent working group, which should periodically prepare German Customs fcuther our legislation in compliance with EC proposals for introducing the necessary changes in the national legal base - October amendments Develop third-level 1. Preparation of instructions for application of the Customs Act and its Regulation for EU-Twinning legislation. Implementation with the support of German experts - October Arrangement with 2. Correction of the preferential rules for origin, laid down in the instructions in German Customs compliance with the amendments in the EU Generalised System of Preferences - June Preparation of the necessary changes in compliance with the expected amendments in the Common Transit Convention and the SAD Convention - June Preparation of legal base of third level on collection, full collection, reimbursement, remission, taking under account, payment, liquidation of customs duties Develop working 1. Preparation of working instructions in parallel with the OSE envisaged in EU-Twinning instructions in compliance 2. Preparation of working instructions resulting from obligations under other normative Arrangement with requithrthemlegiatie requirements. acts - for example in the field of combat against drugs trafficking, intellectual property rights, etc. - October Effective Establish integrated I. Adoption of "Strategy for building, implementation and development of the Bulgarian EU support to application of customs information Integrated Customs Information System (BICIS)"- August BICIS the customs system. 2. Selection of a System for data base management (SDBM for BICIS) - September legislation _ox

68 3. First stage of elaboration of customs activity business model, decided by the Supervisory council on building, implementation and development of BICIS - September First stage of elaboration of Target model of BICIS, according to the first stage of elaboration of the customs activity business model - November Elaboration of a Plan for the first stage of BICIS building and implementation - November Assignment of the organisation for fulfilment of the first stage of BICIS building and implementation and selection of sub-contractors - December Elaboration of Technical-economic project for the first stage of BICIS building and implementation - February Elaboration and implementation, according to the Technical-economic project for the first stage of BICIS building and implementation - March Putting the system into regular operation - May Further develop the I. Creation of a working group and a plan for elaboration of national integrated customs EU national integrated customs tariff, structured as the one of the EC - November 1999 tariff and setting it in 2. Systematization of the non-tariff measures applied and their adaptation in a way, conformity with the giving the possibility of including in the project of national integrated customs tariffstructure of the EU August 2000 TARIC. 3. Elaboration of a project of national integrated customs tariff, structured as the one of the EC - December Assignment of responsible officers for updating and maintaining the Integrated customs tariff - December II.3. Establish customs 1. Further development of the specialised teams for customs intelligence, within the EU-Twinning intelligence systems. structure of the BCA - December Arrangement with 2. Move to selectivity control of passengers and cargo, based on risk analysis French Customs 3. Preparing a proposal for establishment of a mechanism for exchange of information with other enforcement agencies - June Strengthening the role of the post clearance control Prepare for 1. Introduction of collector's function in the BCA - June EU introduction of the EU 2. Development and introduction of accounting module in the ICIS - September customs accounting system. 3. Gradual introduction of the EC methods for accounting customs debt - September d CD. os x~~~~~~

69 11.5. Establish an overall 1. Start up the project (Fight against corruption in the BCA) with the technical support of EU-Twinning system for fight against the French Customs Administration - October Arrangement with corruption. 2. Examine the activities and the achievements of other candidate member-states in the French Customs field of customs ethics. 3. Analysis of the necessary measures in the combat against money laundering Periodically analyse I. Annual updating of the strategy for qualification and re-qualification of customs EU the training needs and officers - the next one in July change in the training 2. Preparation of proposal for setting up of a regional centre for improving the programs depending on the qualification of customs officers - November needs. 3. Development of plan for language training in EU working languages - January Development of training plan on European Integration and the future EU accession matters - March IIL Develop Prepare a sectoral 1. Re-definition of the criteria for staff selection - March EU ment and strategy for staff formation 2. Revision of the job description for each working place in compliance with the legal strengthening and development,reuemns-jl200 of the adequately prepared for administrative application of the new 3. Development of draft plan for career promotion - April capacity legislation. 4. Preparation of proposals for regulatory basis, ensuring adequate staff motivation - March Develop a program 1. Development of a system for examining the discrepancies between the administrative for improvement of the structures and the number of their employees and the tasks, responsibilities and administrative structure for functions before Customs - April application of the legal 2. Analysis (review) of the conformity of the responsibilities, tasks and functions of the acts. customs administration in accordance with the requirements - July Analysis of the horizontal and vertical links between the different units (sections) in the administration - December 1999 IV. Develop- IV. 1. Improve the 1. Development of detailed instructions for the economic operators. WB-EU ment of the interaction and relationships strengthening the mutual 2. Preparation of draft standard Memoranda of Understanding with trade and transport with other trust between the operators - April organisations administration and the in the country trade and transport - with the operators. public, enterprises

70 IV.2. Ensure effective coordination of interactions with other public-sector agencies. 1. Preparation of proposal for institutionalising the cooperation with other agencies in order to improve the information environment (system of securing information at other levels in the administration) - December Cooperation with the competent state bodies in their activity on restructuring and supporting the economic growth. 3. Work out proposals for synchronising the customs legislation with that in other areas, influencing the results of customs activity. 4. Preparation of draft Memorandums of Understanding with other agencies - June IV.3. Improve 1. Development of program for targeted work with the public in order to explain the role US communications and feed and functions of customs administration - March back with the public. 2. Consistent work for securing transparency in the operation of customs administration and informing the public of the results of its activity. V. Activation of V.1. Deepen BCA's 1. Preparation of proposal for appointment of a customs attache to the Mission of the relationships cooperation with the Republic of Bulgaria in Brussels - March with corresponding EC agencies 2. Preparation of proposal for procedure on agreeing the positions with EC in orgarniationsl oraniaitions inteman international negotiations concerning customs matters - January organizations organisations in the customs area. 3. Preparation of proposal for procedure on exchange of best practice with the memberstates and the candidate countries - February L 4. Development of a program for activation of the cooperation with the WCO. 5. Participation in the programs for international exchange and technical cooperation. EU, US -e1'

71 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE Annex 12 Page l of 2 EU Support to Customs Reform Implementation A. Customs Administration Institutional Reform - Main Activities (EU financed 37) Estimated Cost US$ 4.6 million Component Sub component Investment Detail QJSS) 1. Monitoring, 1.1. Legal and 1,000,000 Twinning arrangement with the Federal Republic of review and operational (NBF) Germany including: (i) legal review of Bulgarian preparation of strengthening of customs legislation; (ii) development of supporting BCA customs legislation; (iii) preparation and implementation of new procedures procedures and associated instructions for operational and HQ staff; (iv) seminars to implement new procedures/instructions; (v) revenue collection, accounting, and budgeting strengthening; (vi) organization and management; (vii) enhanced project management and measures to guarantee results. 2. Implemen Strengthening 1,000,000 Bilateral agreement with Eurocustoms including the tation and of border control (NBF) following activities : (i) development of a strategy for training on rationalization of BCA's border operations; (ii) new procurement of specialized control equipment; and (iii) procedures establishment of a customs dog training center for the Balkans. The objective is to improve enforcement capability and increase revenue collection Fight against 2,600,000 Twinning arrangement with the French Customs corruption in (NBF) Administration to increase control and law enforcement BCA to reduce corruption. Main activities include: (i) preparation of a strategy to fight corruption (specialized equipment, stimulation fund for officers); (ii) preparation of normative documents following the acquis; (iii) strengthening the information system for anti fraud purpose; (iv) establishment of a fund for stimulation of customs officers to fight corruption Transit (Part of This program initiated in 1995 includes (i) facilitation Facilitation and multi- of intemational commerce; (ii) customs organization Customs beneficiary development (pre-accession support, Measures to Modernization program) Improve Efficiency at Border Post); (iii) operational Program efficiency (risk assessment and selectivity, guarantees and securities, transit); (iv) enforcement; (v) automation Proposed (Part of These activities under review by the EC would include activities for the multi- support for (i) pre-accession, (ii) for transit system, (iii) multi-country/ beneficiary for commercial and system-based audit, (iv) customs national program program) organization and management, (v) customs internal and external communication. 37 Financial Memorandum BG and

72 Annex 12 Page 2 of 2 B. BICIS Improvements - Main Activities (EU financed 38 ) Estimated Cost with Contingencies US$5.0 million 1. BICIS Computerization 5,000,000 This component will include the provision of computer improvement of BCA ('NB1) hardware, communication equipment, and support in the management of the BICIS improvement in the form of technical assistance (quality control, strategic planning) and training in system software. The objective is to improve management control (financial accounts/statistics) and business aspects (accuracy/ efficiency) through the implementation of an Integrated Customs Information System and the development of interfaces and additional application software. 3S Financial Memorandum BG

73 BULGARIA TRADE AND TRANSPORT FACILITATION IN SOUTHEAST EUROPE Annex 13 Page 1 of 2 Bulgaria at a glance 9116/99 Europe & Lower. POVERTY and SOCIAL Central middle- Bulgaria Asia income Development diamond' 1998 Population, mid-year (mi/ions) GNP per capita (At/as method, USS) ,710 Life expectancy GNP (Atlas method, USS billions) ,039 1,557 Average annual growth, Population (%) GNP Labor force (% GPGroass per I primary Most recent estimate (latest year available, ) capita enrollment Poverty (% of popu/ation below national poverty tine) 36 - Urban population (% of total population) Life expectancy at birth (years) Infant mortality lper 1,000 tive births) Child malnutrition (% of children under 5) Access to safe water Access to safe water (% of population) Illiteracy (56 Of population ape 15+) Gross primary enrollment (% ofschool-age population) S Bulgaria Male Lower-middle-income group Female KEY ECONOMIC RATIOS and LONG-TERM TRENDS GDP fuss billions) Economic ratios Gross domestic investment/gdp Exports of goods and serviceslgdp Trade Gross domestic savingslgdp Gross nafional savings/gdp T303 t Current account balance/gdp Domesti Interest payments/gdp omestic Investment Total debtgdp Savings Total debt service/exports Present value of debt/gdp Present value of debt/exports Indebtedness (averaoe annual qrowth) GDP Bulgaria GNP per capita Lower-middle-income group Exports of goods and services STRUCTURE of the ECONOMY Growth rates of output and investment (%) (% of GDP) 6 Agriculture Industry Manufacturing Services ic Privateconsumption General govemment consumption _ GD1 OGDP Imports of goods and services Growth rates of exports and imports 1%) (average annual growth) Agriculture T0 Industry Manufacturing n Services Private consumption X r General govemment consumption i Gross domestic investment Imports of goods and services E xports Imports Gross national product Note: 1998 data are preliminary estimates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.

74 Bulgaria Annex 13 Page 2 of 2 PRICES and GOVERNMENT FINANCE Domestic prices Inflation (%) (% change) 11,200T Consumer prices 1, Implicit GDP deflator Government finance f (% of GDP, includes current grants) o_ Current revenue Current oudget balance GDP deflator PI Overall surplusideficit d TRADE I (USS millions) Export and import levels (US$ millions) Total exports (fob) ,940 4,293 s0-0 Other metal 1,801 Other agriculture 1,479 Manufactures. 4,000 i Total imports (cif. 11,298 4,932 4,995 d I Food D0 Fuelandenergy 1, Capital goods Export price index (1995=100) B Import price index (1995=100) texports U Imports Terms of trade (1995=100) BALANCE of PAYMENTS (USS millions) i Current account balance to GOP ratio (% Exports of goods and services 11,444 6, T Inm.rnrts of goods and services ,730 5,716 3 Resource balance Net income i Net current transfers Current account balance Financing items (net) Changes in net reserves 332-1, B Memo: Reserves including gold (USS millions).... 2, Conversion rate (DEC, local/uss) , ,760.3 EXTERNAL DEBT and RESOURCE FLOWS (USS millions) Composition of total debt, 1998 (USS millions) Total debt outstanding and disbursed , IBRO G 460 A: 697 IDA Total debt service 2 1, ,296 IBRO IDA a s Composition of net resource flows Official grants Official creditors E 1,2a6 Private creditors Foreign direct investment ! F Portfolio equity World Bank program Commitments A - IBRO E - Biateral Disbursements IDA D -Other multilateral F - Private Principal repayments C-IMF G- Short-term Net flows Interest payments Net transfers World Bank 9/16/99

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76

77 Exporls, Import6s Exporl Import '65N V> 'm$400$l00, 1500 S1700 AUSTRIA N:: j ILW IN : UKRAINE moo~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~e.n N ~~~~~~SOUTHEAST EUROPE REGION ~~~TRADE AND TRANSPORT ~~~~~~~~~~~FACILITATION IN SOUTHEAST ~~~~~EUROPE PROJECT.'> 'N (BULGARIA) $3600 $3500 ~~~~~~~~~MAIN TRADE PATTERNS NHUNLo'xTcARYorI S`671 ~~~~~~~~~~~~~~~~~~~~~ (i/5s, ~~~~~~~~~~~~~~~~~~ MI/So-) PORT f M WIS sr 10/2 $A32 $ A I ~~~~~~~~~~WOSrf,,rx@ ~B-oo 33S 0 T2 l Wb, o't-poo-r,/ 2 OMANIA ~~~~~~~~~~~~~~~~~~~~~IC-1, P.0w 0 P-,,, 10/2 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~$16 o 'oo,isui S-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ '~" rorp,w/oi -r, - -INTERNATIONAL BOUNDARIES SAN MARINO 0 Mr yi ft- 1$30/32 130/3 E,,,",Ropod MAIN MACRO-TRADE INDICATORS: 218, $2100 ~~~~~~$ ~ ~ ~ $~~~~~~~~~~~~ ODE PER CAPITA, 1998 (US$) - $28000 ITALY $ GAI,~sla p-on Sect $ ~ $19 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~0 Eoli ~~S $500~~~~$70 B $80$800. 2/ xot mot.osonia & A I $ ~~~~~~~~~~~~~377 $297 NEEZEGOVINA AlCAKIHA 7 PT 8R548 '~~~~~~~~~.o'.1 - ULGSARIA o 50( 1230 S, ~~~~~~~~~~~~~~x 'CROATIA 20~ FYR MACEDONIA '77 ~~~~~~~~~~~~~~~~~~~~OANA ' N ~~~~~~~~~~~~~~~~~~~~~~ ( ') 5 NI 91 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~JKILOMETERS I' T~~~~~~ ~ ~~UREIp. o'orx/ xrz,ps'rt'4