RESTRICTED

Report No. TO-517d

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

A.PPRAiSAhL OF

SECOND ROAI) PROJECT

FINLAiND

April 14, 1966

Projects Departm.ent

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CURRENCY EQUIVALENTS

1 U.S. Dollar = IT. Mk. 3. 20F MVk . 1 IillIon - '3 $ , 500

Fiscal Year - calendar year

FIN_ND

SECOND ROAD PROJECT

Table of Contents

Page

SUOlARY i

I. INTRODUCTION 1

II. BACKGROUND 1

A, General IB. Transpcrt 2

a) General 2b) Inland WiJater Transport; 3c) Railways 3d) Road Transport 3

e) T1'ransportl- Co-ordin-atlc,n ar.d the P.esiUltsof the Road Transportation Survey 4

f') Fu.rther Inyvestments in; thL-e; T'r a nportSector 5

C. National Board of Roads and W.Taterways 6

III. THE PROJECT 7

A. Description 7B. Consultants 8C. Cost Estimates 9D. Execution of the Project 10E. Financing of the Project 10

IV. ECONONIC JUSTIFICATION 10

A. Forecast of Vehicles and Traffic 10B. The Kulju-Tampere Freeway i1C. The Savonlinna Bridge 11D. Asphalt Pavement Program 12

V. CONCLUSIONS 13

The appraisal of the Project is based on final survey and designof the roads now completed by consultants, and on the findings cfa Bank Mission that visited Finland in August-Septe-mber 1965,composed of Messrs. Bergan, Ronday and Haker.

Table of Contents Page two

Table 1

Number of VehiLcles 1953-64

Table 2

Summary of Preliminary Road Paving Program for the year 1966

Table 3

Summary of Preliminary Road Paving Program for the year 1967

Table 4

Second Road Project - Cost Estimates

Table 5

Second Road Project - Estimated Schedule of Expenditures

Table 6

Expected Annual Rates of Growth for Traffic Volume f'orCountry and for Projects

Table 7

lT;C m-1 foQ 1 11. 107n

r .Lnlan.d [U ILoadM.I Ca p - RD-iALL"4L4'IL_

FINLAND

SECOND ROAD PROJECT

'SUIVIRY

i. The Government of Finland has asked the Bank for a loan of $ 20.0million to help finance a road project. It would be the second Bank loanto Finland for highways. The project would consist of: (a) the constructionof a four-lane freeway; (b) the construction of a bridge, with its accessroads; (c) a pavement program of about 2000 km over a two-year period (1966-1967); and (d) the engineering of a future road program by consultants. Theroad project financed by the first Bank loan is progressing satisfactorily.

ii. The total cost of the project based on completed final design isestimated at Fmk. 127.5 million, or US$ 40.0 million equivalent; the foreignexchange component is within the range of 30 to 40%. The proposed loan wouldcover 50% of the total cost of the project.

iii. Road construction and road maintenance are the responsibility ofthe National Board of Roads and waterways (N.B.R.) an organization withinthe linistrv of Cnmmunications and Puhlic Works. The N.B.R. has its headoffice in Helsinki with 13 district offices in the country. N.B.R. is 'piellorganized and operates efficiently.

iv The projec^t would be) ca-rrierd ouit. hby nontrartors on the basis ofinternational competitive bidding.

v. Road traffic is increasing rapidly, which has necessitated the up-gorading lnd im'Pro-lV-men.t of the main ro:ad n=+_WnY-1r frnom -av1r:_TC:_qrf::M(o0 roads

with poor alignment to paved roads designed to modern standards.

vi. The proposed construction works and the execution of the pavementprogr-am woul'd yield a satisfactory L ecrLo-IIc return on the investment, rang-ing from 1:3 to 24%.

vii. The project is suitable for a loan of US$ 20.0 million equivalent.A 5< -v ear I-;erm11 inclUd,9din.- a C--a rJU.eriod oftae rco.ne

FINLAND

SECOND ROAD PROJECT

I. INTRODUCTION

1. The Government of Finland has asked the Bank for a loan ofUS$ 20.0 million equivalent to help finance a second road project consist-ing of (a) the construction of a 4-!ane freeway 12.2 km long with neces-sary approach roads, (b) the construction of a 390 m. long highway bridgewith adJacent approach road sections. (c) a 2-year asphalt pavement programand (d) engineering of a future roacl program by consultants.

2. The proposed project forms part of the Government's road invest-ment program for the next ten years and is estimated to cost Fmk. 127.5million, or US$ 40.0 million equivalent, of which the Bank would finance$ 20.0 million or 50% of the total cost. The nronosed Bank loan renresentsonly about 1% of the National Board of Highways 10-year road program.

3. The appraisal of the Project is based on finalL survey and designof the roads now completed by consuvltants, a.n.d on the findings of a %nnkMission that visited Finland in August-September 1965, composed of Messrs.Bergan Ronday and Haker.

14.* This loan wo'd be the second road loan to F in.lan The firstroad loan, 384-FI, of US$ 28.5 million was signed on July 10, 1964 andbecame ef'fective on Augast 1 94. I t incude the 4-lane,1 freewa G,m-~ ~ ~ U..L V~ UJ..L U _L. L7'-L4. _ I J..1-_LLAUU 0~ UL.L L4 .L.~ ULt

bole-Veikkola, now under construction, the asphalt pavement program for±7~J4 cLLIU ~ WLIJ.L1L LMO Ut=U1 t:;AtUULt:UL ULU%±1_1i6 U ZA) LJit_UA _LCU± , UL ; jU..LC LL ase1964 and 195 hc a eneeue codn oshd',tepc.s

of maintenance equipment for which orders have been placed, and a longrange transportatio.n study, now completed. The proJect is about 70% com-plete and performance is most satisfactory.

!I. BACKGROdUI

A. General

5. Finland is one of tne most nortnern countries in tne world. Itcovers 337,000 square kilometers, which makes it the fifth largest couztryin Europe. it is about 1,150 iKm long ana 550 Km wide. UI the land surface,70% is covered with forests - the country's principal economic resource -and some 55,000 lakes cover about 10%0. Most of the country is flat at 200meters above sea 'Level. Only the eastern and northern parts of the colntryare mountainous w:ith the highest peak at 1,324 meters.

6. The population of the country is 4.6 miLlion and has been growingat a rate of 1% per annum. Gross national product was US$ 7.3 billionequivalent in 19614 or $1,550 per capita. It has been growing at a rate of6% per annum between 1959 and 1964. The rate of growth has been particularlyhigh for the industrial sector which by 1964 contributed 24% of the GN]P.

B, Transport

a) General

7. The transport situation im. Finland is largely influenced by twomajor factors:-

(i) the majority of the population and most of the country's economicactivity are concentrated in the South. Southern Finland, whichcomprises 21% of the total area of the country, contains 56$ ofthe population and contritutes 64% of the GNPo This degree ofconcentration is expected to increase further;

(ii) the country's primary source of economic activity and the basis of7QC of its exports is timber. Most of the country's forests,however, are in central and northern Finland.

6. The maizn transport arteries of the country are of two principaltypes:-

(i) those connecting timber supply areas with the woodworkingindustries and the ports in southern Finland, most of thesearteries flowing from north to south;

(ii) those that connect the major population and economic centers ofthe sou-th with one another and with the ports, which are locatedin the same area.

9. The low overall density of population and the lack of large urbancen-ters have resulted in a widespread network of transport lines carry-ingrelatively low volumes of traff'ic. Furthermore the distances to be coveredtend to be long because of the economic and demogranhie influences mentionedin paragr,3ph 7.

10. The relatively unfavourable conditions for internal transportationare often aggravated hv the severe winter cnnditions- TMip to the fnctnrsmentioned above,the costs of the transportation system, both in terms ofoperating oSrtS and investment re-quirements tend to be high-

11. The principal modes of transportation in the couintrv are rai:Lways,highways and water-ways. The volume of goods traffic was 11,800 million ton-kiloDmeters n1963. TIhe railwnrays carried )i2% of this amount, thea h,rid TJrs

41% and the waterwqays 17%. Passenger traffic amounted to 13 billionpassenger-4ilometers 'in 1962 of which 83% was carried by road transport,.

12. A detaile-d description of the transport sector ha 1ra, 'heen

presented in the appraisal report on the first Finnish Highway Loan (T(-429a-J- - -I 041. \ I n + nh f-1-A) n .. ; - -e -4 ad-o X --. : --v -j -/*+4 J C l UA VwC JiJ r,6 C'.JLJ.Q JUuAiIIIL LLCII Us UIL'Z JJv u v F

information,

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b) Inland TJater Transport

13-. The lakes provide good possibilities for cheap water transportation.in summe:rtime, especially for floating timber. The channels, which flowfrom. north t o sUth, T1-re + tot+n1 1 - rh f ahbout 10 0n0 L, Thcn yrn1 liim P

traffic carried by the waterways hid, remained at about the same leve;! in"he past seven year.s, nro-d the of - 2 o 1 blllon +ton=kl-m1et+es.c

c ) Railwva,ys

LL4,; Th1-1e FnnihSaeR:wy prtdi tle ihat4a.~~-ii~ LIUL± V I LI' C;l I~ i~L J"W y ) 2 IJU j .A LI I _L 7 .JLO J_jJI Oa VV±I i Lallength of 5,300 hcmn., of which 420 km. w(ere double track. Private railwayoperati ---- are ori a very- small-. scale,' The- strngt of__ road-_-4 -opti; has

u.LI4uI""Dla ± ULLI d ly~A±±ad'~ it, IJUL ,±IgUIL U± .L LJdU ~UV1IjUU±Li.U.LVl iIdO

been increasingly felt by the Railways over the past years, They have triedto meet Ithis competitiion by applying, special rates for large supplierts andby reorganizing their freight services, providing express services ancdmaking use of trucks in appropriate cases.

15,, Despite these steps T"he Railwayss traffic, both in ton-kilometersand passenger-kilometers, has remained about the same in the past years.This has been the case even though the volume of over-all land transpor-tat;ion has been increasing at an annual rate of 3.5% for freight and 7.5%for passenger traffic. As a result, the share of the Railways Intransportation activity has declined1 between 1955 and 1963 from b8% to 12%for freight traffic and from 28% to 13% for passenger traffic.

16e Competition from private road transport is strongly felt,especially for piece goods, and also for wagon loads for distances up toabout 300 km. Even the timber sector, which until recently was consideredas "safe" for the Railways is being affected by this competition. Thetransport of timber by truck has increased at the annual rate of 12% in thepast five years while the amount carried by the Railways has remained aboutthe same,

d) Road Transport

17. Finland has a road network of 65,200 kIms. in 196$ of which only4,900 kms. are paved. The vehicle population amounted to 470,000 vehiclesin 1964L including 375,000 private cars; the private car population has beenrising at the rat;e of 18% per annum during the past ten years. (see table 1)lVehicle density amounted to one vehicle for eight persons.

18. In 196Lh there were about 16,000 trucks. The annual growth cf thenumber of trucks has been only 3% in the past ten years. This slow rate ofgrowth can be explained by the incresase in the individual carrying capacityof trucks following a rise in the maximum authorized axle load from 6.2 to8 t;ons in 1962. In terms of total carrying capacity, the annual rate oferowth has been close to 6% durine1 the same Deriod. Productivitv wasfurther increased by a higher annua:L mileage per vehicle for trucks ir! non-schedPnued serviees which in 196ht. was f3 _8 over the 1963 fieure and hl'%over 1962e

197 IMO UstansIpIJOrtU.atd ion is weULl UdevULUopeU l1 11Fi'Ld1U, UbU UUs UJatoLrs 1D

in rural areas are experiencing increased competition from private cars andfrom the Finnish Railways! express passeUger services. To compensate forthe financial effects of this competition, there is a tendency to concentra-tion, especially among the smaller operators.

20. Betweeni 1954 and 1963 traffic volume on highways has been risingat an annual rate of 18.5%" for private cars, 10% for pick-up trucks and 6%for trucks and buses.

e) Transport Coordination and the Results of theRoad Transportation Survey

210 The degree of transport coordination is still not adequate. Thereis an advisory committee to the Minister of Communications and Public Workswhich is consulted before major decisions on transportation matters aretaken. A sound factual backgroumnd on which to base a consistent coordi-nation policy is lacking. However, the Government, recognizing the need,requested the Bank to assist in organizing a transport survey as part ofthe projeact financed under Loan 384.-FI.

22, Basic data prepared in connection with the transport survey onsuch subjects as recent developments in the transportation sector, expectedfut;ure economic t;rends, and revenues and costs of each of the transportmodes, were made available to the Mission and have been used in this report.

23. The transport survey has n0ow been completed and the main con-clusions were published in December 19650 The survey confirms the inadequacyof transport coordination in the country, analyzes the deficiences of thetransport system in general, and sets out the transport reouirements for thecoming ten years together with the relaited future investments.

24. The conclusions of the survey will be discussed further in :LaternaragrPrThs One nf the principal subieots cnvered in the report is whetherthe! stagnation in the railway and waterway sectors, as against the rapidgrowth of highw2v traffie; is the result of govrrnnmnt fisc,al and tanriffpolicies, and this is found not to be the case.

25. According to the survey, the revenues obtained by the Gove imentfro,m road users amounted to Fnk. 319 million for 1962 and 602 million for1963. About two-thirds of these revenues were obtained from vehicle taxesanc most of the remainder . t on fuel Tn JTn r 1965 the r-tes ofvehicle import duties and other taxes amounted to about 78% on CIF valuesforv smal]

1cars, 13n fo4ZCr lag car an ,,c/ fr,, trucks;e t..axes. o .Cn h gas]in

amounted to 62% and those on diesel fuel to 30% of their respective reitailAF--4 ceA

CLU 4 U UL V1 EllV l U - SU . LJIi1L U .vIIU[~-LiJ-L UJI10 lLL

local authorities for roads amounted to Fmk. 5h9 million in 1962 and 60or,1illio inu .1963 These fgrsaetihnlcoeto the tax revenuiesIILL1±U1 ±11±27') . IL1t"O .LJ-L8U1__ .L dl 0 dUli..±I uUOUd UU ULItLa

obtained from road users; they include the costs of administration,mU[aintenaice of Uhie roaUd andU total .L-vUs bIt[ in each year.

9 7 +~F,- ..+liti +nr ~vi~'ivr~ i-nrl i~rn +~rv?- .T nc +I-,-"l.,v ~-,-~ 1r01,4-11

types of road and their replacement values were estimated. According tothis std th Ajlu of~ hL I -hc-y inventiory at replacem,ent- costu aamounted too6.' bill:ion Fmks in 1963. On the basis of an average useful life of 25yeJurs a,d. intIerest oI 71. f 4 the annual cap.a. cos of the 11.LIW ay -I V e L1;ory

would amount to Fimk 510 million,

28. IWJhen the costs of administration and maintenance are added t;o thedUUVe imenItUUL[neU Udpitld.L cUUos s b11ie tUvd.L UoUs U1 AIe Iigh ±ll day eltUWU±lk Wci-

Fmnks 678 million for 1962 and Fmk 691 million for 1963. Revenues thuscovered 'r5% O the costs in 1962 and 85% in 1963.

29, The deficit of the Railways, on the other nand, appears To bemuch largter than that of the highway sector. The profit and loss statementof the Railways shows that during 1964 revenues amounted to Fmk 382 mi-llionancd out-of-pocket; costs to Fimk 417 million. If depreciation on replacementval-ues and imputed interest on investments were allowed for, the total. costof runni ng the Railways would be Fmik 734 million, giving an operating ratioof 1.92. In other words, railway users pay for only 52% of the estimatedcost of the service.

30. The use of Railways' facilities is therefore subsidized to a con-siclerable extent. This situation is not the same in different parts of thecountry. From the data that have been presented it appears that theRailways' deficits are mainly caused by the lines in central and northernFinland. The road system in these areas would also show a deficit, thoughin smaller proportions than for the Railways. The roads in the south leaveconsideraible surpluses over their costs. But there is little doubt thatthe fact that road traffic has developed while railway traffic stagnatedcannot be attributed to the fiscal and tariff nolicies of the government,which on balance have favoured the Railways.

f) Further Investments in the Transport Sector

31. According to forecasts prepared for the survey, the road sectorwill cont inue to develop at a rate faster than that of other sectors. Forexample, it is expected that for goods traffic, the share of ton kilometerscarried by the highways will increase from 41% to 70% of the total by 1975whereas t;he share of the railways will decline from 42% to 23%. Trafficcarried by the waterways will also dfecline from 17% to 7% of the totalduring the same period.

32. The investment program which is presented by the survey puts theprimary enmphasis on road deve1opmenrt. Tt is recnmmended that between1966-1975 12.5 billion Finnish Marks be invested in the transport sectorof which 9.5 billion is allotted to the highwaysj 2.3 billion to-n t.he rnil-

ways, 0.c; billion to inland water ports and the balance to air transportani l n -r+. c!

I `~~ 0 Ti h 4 v vr e t+v cn ~I. -c s -i - 1,r. Trye 'r41 1 Ik-n m , -i y iiv C4s.-N - 4-,-~ _p hei.3smet in ndlwa,ys wvill be maitdj confined uo costreduction projects, The investments in inland waterways w-ill remain atrIdesUt. UO U I'heG 11It U[lJLy mdJu1 v.UiriU Lir t 1ha Uisering U1IUtider.trUj1 -ls thel re-

activation of the Saimaa Canal, which has not been used for 25 years and

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needs large improvements Some sections of the Canal are Inented in EasternKarelia which is now Soviet territory. A 49 year concession has been ob-tained from the Soviet Unio.n by the Finnish Govermment for the operation ofthe Canal. The Canal system will be opened to traffic in 1967/68 and willenable rshipsup to 1 500 tons deadweight to sail some 500 km landand loadtimber, paper, cellulose and wood products. Total traffic is estimated at1 )10 r0,)r%t4n,- w.hch, 4ill be_ :vre ms+ r,--eP lasa-. .JW)JV U~iJJ VVL"L'11 VV_L_J. LIU~ U..LV~- VJ. J A 111OJ-1.1J, _± il UIU lIit; iLCI.L .JJV c Jo.

.31. The _4-_-.L -. _ inetmn tota of 9.5 bilo Fr,,ks _ ir, 4tl.e road3 - -- ir-_)"O ~ .Ile .LTlVE--W tMJ,Lej UOUU4 O.l 7.) U.LJL±L± 11OII £IiK ±11 uiie- U-UdU. -UL OJ7±

volves some 30,000 kms of highways and includes costs of construction, im-provemernt and paving0 The proposed a-nmual raue of expenditure is rhO m4i-llionFmks for 1966, which is 30% higher than the 1963 figure which is the latestfor actual invest-ment. The annual rate of investment is to be stepped upgradually until it reaches 1,350 million Fmk in 1975.

35. The consultants are very much aware of the need to keep the roadinvestment program To a minimum, ana. suggest steps to arrive at a greaterdeg:ree of concentration in economic activity in Central and Northern Finland,They are recommending that some 5 urban centers of primary and o centers oIsecondary importance be chosen in these areas with the aim of channelingfuture economic growth into such centers rather than spreading economicactivity thinly t:hroughout the country, which would aggravate further thelow traffic density problem of the Finnish road system. The Bank associatesitself generally with the consultant's recommendations and the Government ispresently studying their implications.

C. National Board of Roads and Waterways

36. The National Board of Road.s and Waterways (N.B.R.), an organizationwithin the Ministry of Communications and Public Works, is responsible forthe construction and maintenance of all public roads in Finland. It is alsoresponsible for inland waterways and airports, but its main activity isrelated to roads.

37. The N.B.R.'s main office in Helsinki and its 13 district officesare well organized and are being operated efficiently by a staff of about3,500 employees. In the past most cf the road construction and improvementworks have been executed by N.B.R.'s own forces, using small local sub-contractors for certain types of work. The road project financed by theBan'k Loan 38L-FI in 1964 introduced for the first time in Finland the use ofcontractors for the entire work and established the principle of internationslcompetitive bidding.

38. The change from the old svstem of executing works bv own forces toa more extensive use of contractors, and also of consultants for planningand supervision, 'has created certain problems among the staff of N.B.R..many of whom were opposed to such a radical change. The difficulties havenow been overcome, and N.B.R. realizes the advantages in shorter constructiontime and reduced costs, of a more extensive use of contractors and consultantsin order to cone with the nepd for a rapid upgrading of thle road network tomodern standards.

39. The p nf' nrf.rco tr-acrq to the Pnl 1tt possibl petent will

gradually be adopted also for road improvement works outside the Bank.-financed projectsr The N.B.R. has stll to cp w.itlh +he seaona1 iinh-.l-i_

ment problem of farmers during wintertime. In conformity with State policy+he 1M B R e o:1r<s Puch farm errs -i ra o - _ A.._;,, s.i+

V_ W b tJ-S *a VGVVA

Special funds are made available by the Government each year and the,n,Ann ,.rn 1" Ji u .n'n'%-. -l.-A " .rn ni1 ,-,L _ ...,4. -y, and g. -, ven

'.mploYe la-orers are gath1-1ere from, a'll over the otJardgvniusing and food in camps near the work sites. Work is done by hand to the

Grc-atest U- psfleexent, butuj equipmsent such as tr-ucks,gaes rols

is also used.

40. There are today about 39,000 km of public roads, under theJuLrisdicuion of the N.B.R. which can be divided into the following typ?es:-

Paved roads, asphalt carpet 4,900 km

Oil gravel roads 9,200 km

Gravel roads 24,800 km

Total 38,900 km

The 11.BZ.'R roads are well maintained and the N.B.R. is constantly imD.rov-ing its performanlce by adding equipment to its equipment pool and stream-lining tihe maintenance operations.

III. THE PROJECT

A. Description

41.. The second road project would consist of:-

(a) Road construction

(1) A 4-lane freeway (12.2 km) between Tampere and KuljuT.^t aproac rods.

(2) T)l. Kyron-alm bridge a+t c 4z avon,ia with adjacentroad seeLions.

(b) An asphalt pavement program of about 2,000 km of roads during-I966 an.d 19647..)".J'.J 0I%A L..L7 J f

(cI) The.-4A eLL. LeeV±Iig dIU Ue n,L1 Uby cOnsLU'tantUs 0o aUout. lilfL

of roads to be improved or constructed as part of the 1966,:L975[I I opWdh)/ prVgram.

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42. The 12.2 km 4-lane expressway from the outskirts of Tampere toKulju is required to cope with the extensive traffic between the town andthe southern suburbs. The present 2-lane road has an unsatisfactory a:Lign-ment, and cannot be improved to 4-lane standards. Survey and design o:F thenew road was star-ted two years ago by N.B.R.'s own forces, but was handedover to t'he Finnish consulting firm of Viatek last year for completion.Via-tek completed final design including tender documents in December 1965.The new road passes through flat to rolling terrain and its alignment issatisfactory.

43. The Kyronsalmi bridge project consists of the construction of a390-meter long steel structure crossing a bay to the island town of Savon-linna and about 3 km of 2-lane access roads connecting the bridge with exist-ing roads. The present bridge, which is the only connection from the east,is a sing:le track railway bridge that is also open to road traffic as a one-lane facility dur:Lng the intervals between the passing of trains.

44. Final design of the bridge has been prepared by a German consult-ing firm, with quantities for the superstructures and substructures of thebridge firmly established. The tender documents for the bridge are now ready.The 2-lane access highway has been finally surveyed and designed by N.]3.R.'sdistrict office in Savonlinna and checked by the main of'fice in Helsin]ci.Tender documents are now available.

45. The asnhalt pavement nrogram of about 2;000 km of roads for 1966and 1967 :is a continuation of the pavement program of 1964 and 1965 financedunder the first road projiet (Ioan 1R)1 -PT)_ Tahles 2 and 3 give a sunmmarvof the 19656-67 program and show the type of pavement to be applied.

46. The policy adopted by the N.B.R. is to replace oil gravel pave-men! l by ain. asph.al 4; carpet for traffic ab1ove 500 veh cl s per da On exis

ing base in good condition, two types of asphalt carpet are applied: anasph-'t opr-r,-e --avl carpet of 1 4to 2 inche 4for 4 trafi abve V,)00 4~ V GICV_. ~ ,LL V '-)J I. UVO 0 U± .L± . aL J 00VV 1.,

vehicles per day, and a 2 to 3 inch asphalt concrete carpet for trafficvol;urmI h:Lgher LthaLn11 abVUt 1,50J V,=cL1 L pJer daCy. For nitW base 1OUIJAL& ,onUtio,

an asphalt-stabiliLzed gravel base of 6 to 8 inches is laid and temporarilyopened fCor trCai; It4 is covred afe -n -- o -w years by a- 4w4-a-r-- --- 4-0jJ~1~u .LJ.L L.L. O±.L%, .LU .LO L1.VVV± '-" =L IQC± vuI V U bV Juw ± 'Y CLD UJY m VV tZd.± -Li J

course of asphalt carpet. The individual sections to be paved in 1966-1967are located all over the country. During loan negotiations, a fina- liLstof the roads to be included in the two-year program was discussed in detaildaiU dgreedi u-lpon.

D. ConsuI±tants

47. Tne N.B.R. has for years 'been short oI pianning and designengineers, and tried in vain to cope with the increasing demand for prepara-tion of f:inal design for urgently needed improvements of existing roads andconstruct:ion of new roads. The services of foreign and local consultantsfor final engineering and design of about 350 km of roads for a future roadprogram have therefore been provided for in the project. Today there areonly a few Finnish consulting firms experienced in road pLanning. During

loan negotiations a detailed list of roads to be designed by consultant.s wasdisrussed and arr!Pd iinon with the NBR.

!h8. A siwnmnary of the estimatedl cost of the project is gv r kl Tr(for details, see table 4):-

Fimk US Equivalent

(a) aUda ar,dJ bridge constJruLctior1 43.2 1) .105 contingency 4.3 1.4

47.5 1h.9

(b) Pavement program 1966 & 1967 75.0 23.5

(c) Final engineering of futureroad program 5.0 1.6

Total 127.5 40.0

Accurate auantities of the work to be executed have been established forall elements of the project. The consultants expect their estimatedquant.ities to be within a liTmnit of 51 of the antmal nuiantitips to 'h p eted.

)'Q_ Rn-rHaegarding uni. i rices, large rcn+.rcn+. wnrks.c wor nnt. rnmmnn inFinland until recently and N.B.R. does not have wide experience on this

tlbject The ,it prices applied h,r t- ,rcnsl 1 fr ---- t cs tm.ats are

based on N.B.R.'s experience in force-account work. The prices arrived atare. some.Aniats bhig than tnan 0+tat ions recer.ntly obta4ined fror. rntaratrvr' *nder

international competitive bidding. I:n fact, the average unit price recentlyr, iirn+A huir PM"+vau+i frr. -in f+n c!-+ 4Tinrv+an+ runi+?'lir+;in T.yri.! +hQ lVra4ilAl1 a

1 _ S iStV VJ WV- VZ~* AVI V - V V,w LV AVV sV' . V E V -V-_

Gumbole road, are on average about 5"% lower than the prices based on NJ.B.R.

50. Nevertheless, La V ;U11 UGLAI;J 10 cngey as lbee. aduded to.L U safeguad aain

variations in the final quantities, and against future price increases. Thecost esti-ates were re-vewed and confinmed dur-ing loan negotiations.

1L. The cost of the asphdit pa.vemLenlt prg-.r,m is based on last yeart sexperience with pavements laid under the 196h-1965 program. The totalestimated cost for the final engineering anu design of about 350 km of roads(Flnk 5 million) was discussed and agreed during negotiations.

52. It is proposed that the Bankc finance 50% of all expendituresresuilting from the project, wnich would mean a loan of US$S 20.0 millionequivalent. The actual foreign exchange cost of the project varies dependingon whether the contractor is foreign or local, or a joint venture involving

- 10 -

both. It should also be kept in mind that part of the equipment used inroad construction in Finland is manufactured locally. with a foreign c:ostcomponent such as imported steel and engines. The estimated foreignexchange corrponernt of the project is within the range of 30 to 40%.

D. Execution of the Proiect

53. Final design and tpndpr dolrnuents for the road and bridee con-struction included in the project are now ready. Offers will be receivedin April/Mqy and work started shorrtlv thereafter ThA construction periodof the expressway and the Savonlinna Bridge is about three years.

54. The contracts will be awarded on the basis of international com-petittive bidding ar,.ong pr=cl.idcontranctors. Th prjc ?^roads Tv7ill

be divided into several sections (see table 4), with each section to beaw-arded as a separate contract on the un.derstandng that the samre contractormay bid on several sections simultaneously. As in the case of the currentDr.k proAeC4t, the- -ork 4- 4the f4eld would be -upervise byegers-o,

N.B.R. assisted by consultants to the extent necessary.

55. The asphalt program for 1966 and 1967 is a continuation of theprogram executed under the first road project in 196U and 1965*. Contractswill be awarded to pre-qualified contractors on the basis of internationalcom-petJitive biddi-g. Work is to be carried oUti between Ntay and October-of each year.

E. Financing of -bhe Project

56. Adequate funds will be included each year in the budgetaryallocations of the M1inistry of Communications and Roads and will be speciallyearmarked for the Bank-financed project. An estimated disbursement scheduleis given :Ln table 5.

IV. ECONOilIC JUST:IFICATION

A. Forecast of Vehicles and Traffic

57. It is expected that the GNP will continue to increase at the rateof 6% per annum, assuming a yearly population increase of 1% and a percapita GNP growth of 5%. The total number of vehicles would rise from575,000 in 1965 to 1.5 million in 1974, corresponding to an amnual rate ofgrowth of 11%. The rate of growth is assumed to be 15% per annum between1965-1969 and 8% between 1970-1974. For purposes of comparison with actualrates of growth, the vehicle fleet grew at the rate of 17% per annumbetween 15959 and 196L4.

53. The fastest rate of growth is expected to take place for privatecars at an anmual rate of 12% betweern 1965-1974. For trucks and pick-upvans, it has been assumed that the annual rates of growth will be 6% andlOo respectively. These rates of growth are pDrticularly conservative

- 1:L -

considering that; even for timber transport, which one might expect tc) be moreeconomical 'or railways and inland waterways. the amount of ton-kilometerscarried by road has been growiing at a rate of 121 per annum over the pastfive years.

59. To fnreRnaq. traffic- it. has been nqqimerd t-hnt the avrnerg annualmileage of each vehicle will remain the same, so that road traffic wouldgrow,r at. the same rate a the + r.T,-f-h in t.he vehinrlie stonk. The avai I bhl e

information shows that this is a conservative assumption (see paragraphs 17to 20).

*o rPhsh ta"fn'4 forecast beenn iic!A z a of A"^+4i i

each of the roads in the project. In making forecasts for the indivLdual- -'.'..j, 1.avvWe - '.. vL, L.a VU.L'J,.L. .5'., .a ta IJ V 1Oa vv' OA.AJ LAO '.,10.4 UJJ VIAL *tOO.L* .LL

agreemenLt with the representatives of the Ministry of Public Works, accord-ing toLUFLAUL. theL. partLcL (AL, cacteristics'.;, ofL ea,ch%L Iod The anr.ua MI ateu Or

growth so assessed are given in table 6.

61. The benefit coefficients constituting the basis of the rate ofret -urn analy-sis that follows were calcQulated uy the FinnV.sh AuthortLULesusing a detailed Norwegian study on vehicle operating costs for varioustypes of roads under Scandinavian conditions. ine coefficients wereexamined by the mission and found to be reasonable. A summary of thesecoefficients are given in table 7.

B. Tne Kulju-T.ampere Freeway

62. TIampere is Finlandis second largest city with a population ofabout 160,000. It is the most heavily industrialized town of Finland andan important center of the textile and metal industries. Kulju is a smalltowm 12 km south of Tampere on the trunk line to Helsinki and other portson the south coast of Finland. It, was found that the majority of the 570industrial enterprises in the area are transporting their rawi materialsand products on the existing Kulju-Tampere road.

63. The present road had a 1965 Average Daily Traffic (ADT) of 4,200cars and 1,200 heavy vehicles amoumting to 8,200 equivalent passenger cars.The present 2-lane road is being used beyond its practical capacity. Theannual rate of growth has been 24%' in the past five years; the ADT isexpected to reach 14,500 equivalent umits in 1970 and 24,500 equivalentunits in 1980, on the new road.

64. The proposed four-lane divided highway will produce savings invehicle operating costs and time, and reduced accident costs. These savingsamount to a cost reduction of 16/ for passenger cars and 31o for trucks.These benefits represent an econormic rate of return of about 15Y per' annumon the investment, over the 25-year economic life of the road.

C. The Savonlinna Bridge

65. The Mikkeli province in which Savonlinna is situated is an areaof extensive forests and lakes in the eastern part of Central Finland near

- 12 -

the border with the Soviet Union. Savonlinna itself is located on an :1sland.Tt is a niajor resoyrt for Finnrh nonll as c foreign tour4ists Its -iTnrv-tance

as a manufacturing and educational center is also growing. Its connectionw. ith the vnan road4 -tm. centers of' southern F1'4 ,nd Js

secured thirough a single bridge writh a carriageway width of 3.25 meters. It-t ~LJ.¼ -J -tst± vnv . a aziu M I JJ .1 J' ta..L . '..VaJ. a L .LtA.. J~~%k

the bridge for about two hours a day. During the remainder it can be usedfor road V;rtfi o. Va sige-a. ba,is.D-

I d.L.L±I; kLce r,LVVWU U.' )kV/O UUV±J.16U LML _LdCLO LWVL JULLD UUJ.LLLJ-116

the ADT reached 5,4Co vehicles which is far beyond the practical capacity of1 i: I__ _ _J__ and ? co_nge__t____Ion_A_ _I. _Av_e__l__dg _ 'I

ULe VIdge aiiu resiu US -in Irequent ana cser1ous congesslor Average wactilgtime throughout the year was 4.5 minutes for every vehicle using the bridge.

-urnlg the peak hours oI summer weekends the waiting time per vehicle reachedthe figure of two hours. After 1965 the extent of the protracted congestionis expected to spread into all the days oI the week. It is essential that anew bridge be built to provide adequate services as soon as possible. Therate of return of economic benefits over the first year of operation aloneamounts to 24L.

67. The time costs taken into account for the calculation of the rateof return are driver wages, imputed :interest and fixed overheads for trucks,imputed interest on the value of private cars and the value of passengers'time at a rate that equals 1/3 of a -bruck driver's wage.

D. Asphalt Pavement Program

68. The asphalt pavement program includes about 2,000 km of roaclsover a period of two years. As explained in paragraph 17, less than 10%of the road network is paved, wihile traffic between 1954 and 1963 has beenincreasing at an annual rate of 18,5%. This rapid build-up in the volume oftraffic has caused a tripling of annual maintenance expenses from Fmk i53million in 1954 tc Fmk 150 million in 1963. Much of this has been for themaintenance of gravel roads because the maintenance costs increase rapidlyafter the daily traffic exceeds 500 vehicles (see paragraph 46 for pavementpolicy of N.B.R.). The N.B.R. estimates that at 500 vehicles maintenancecosts for clay gravel roads amount to Fmk 3,500/lIm per annum; at 1,000vehicles t;hey rise to Fmk 5,500,and at 1,500 vehicles to Fmk 8,500. On theothetr hand, for oil gravel roads maintenance costs amount to Fmk 7,500 kmfor 1,500 vehicles and Fmnk 5,500 for bituminized surfaces.

69. Improving the road surface will also reduce vehicle operatingcosts. Studies made for Scandinavian countries indicate that improving aclay gravel to an oil gravel surface will reduce these costs by 0.3¢ per kmfor cars and 2d per km for trucks. or about 10% of vehicle onerating costs.When an oil gravel surface is improved to a bituminized surface, additionalsavings inr vehilem one.rating costs of a similar amonint are generated.

70. When savings in maintenance and vehicle operating costs areconsidered together, it is estimated that at 600 vehicles per day, impIrovinga cla- gravrel to an oi rvel -a. surface wrill bi aern of ablout. J14-16

- 13 -

on investment. ht 1,500 vehicles per day, the replacement of an oil gravelpavement by a bituminized surface brings a rate of return of 12-1h%. Theapplication of these criteria to the various sections of road contemplatedundcer the naving nroiect lead in general to satisfactory returns on invest-merit.

7V= rONLT.ITSTOnNS

71. The protec-t is technically sound and econom.calLy jI tifiep!.The final engineering is completed, and the cost estinates, wrhich are con-sqiderpred n 'hp raonarbhly e--eifowere cneckeda agin dlrino lonne ncotin-tions.

72. The project provides a suitable basis for a highway loan ofUSTO$ 92 0 mri Ion i niiarmle n. a 1 Cronn + zrm incluAinra n yar period of

grace,is recommended.

April 11, 1966

tV | r-i in N- '' ) r-l aD r-i _t l\ \No C- ON \0czi , 0 * *0 S S * 0 0 0 0(( .4Z CC) C) 4 El- cr (D r- co (N ou 1' oNE-- cg C) c\j -:I \) a:) CD c\u LrN (: _-j C<\ \0

E-1 rH rH r1 rH r-l CQ C\j CV in in\ n __t

mH O)P CO

Q. T

C Cll (LI tH H- CN r-l -_"t (C (y'\ "D C1 r-i

t0D7 S. i _t _t _; _? _ t u~~~~~~~~ Ll= LA s 4D < 0 0 s0 [c rz~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~r Ir\ 'O C)

C OH (Ni~~C c

r_ * * a 0 * *HO-- 07 *rl ~ NO '- E-U2rj ° o

10)£

07~~~~~~~~~~~~~~~ 0 ta a'r r 6C CO rE cr c- 4D O -O

O *rS ¢3 Sj 2~~~ lr^ _t. CC C) -t f" sD) a:) rD 'r (D r- H

o V

to r4~~~~~~~~~- - i - - \) O n r-

07 % Cl ( IA a- C) Cl r- OC C) Nr- C\ ON -.:a

0 ~ ~ I- am m * * * e . * . . . ,

*w3 I- ' O U\ kr\ cUl\ U'i rU\ r0 9-D CD \D D 0t:j (N CO r-- C) H O- CJ) aDN ON (NJ 0 c-*r~~~~~ ams rl r r-l 'C' OU *; .4.,

z- ca- -4 UN NO) r- x) Cr-, C) H- C'- a-'N zi D-IU uNs UN UN 'UN UN UN UN NO NO '- NO NO

OD CN ON ON oN ON ON G\ CC CO CON ON CON OH r al r- r-I rH ra- ra- rH r-I rH r-- rI l r-l C)

Table 2

'FTNIT.A?'nf

Si1mYTmLn of' Predi.-in m r." Pond P2u', infl

Program for the year 1966

Total Amount PayableC4ost 1/ to C'ontr-+tc- O/'..#I-- U _.3.4 V' J'U Li a~. U..'

(Amounts in Million Eck)

1. Asphalt concrete carpet 96 Km 6.7 4.7

2. Bituminous gravel pavement 537 Km 31.5 16.5

3. Asphalt stabilized gravel base 248 Km 18.0 9.5

4. Asphalt surface treatment 27 Km 1.7 o.6

Total 905 Km 57.9 31.3

I/ To)ta.l cost. inc-ludes nrepa,rat.ion of roadi bedf annd

crushing of aggregates, undertalcen by N.B.R.

2/ Basis for Bark disbursement.

Table 3

!ITMT A iVrT

0 n -j~~

)ummaryLa- of Freliminar.y Ro-u Pa.vi

Program for the year 1967

Total Amount rayaDle

Cost 1/ to Contractor 2/

(Amount in Million Fmk)

1.* Asphalt "concre'e c5 m 17.8 10 *'7

2. Bitwminous gra-vel pavemrent 11 Km 3).0 17.83. Asphalt stabilized gra~~~-re bas 371A Y 24.0 %J.

4. A sph 'I ufe4 ----. LLA

Total 1,137 Km 75.8 43.7

1/ Total cost includes preparation of road bed andcrushing of aggregates, undertaken by N.B.R.

2. Basis for Bank disbursement.

Table 4

FIN _ND

Second Road Project

Cost Estimates

No. of Cost inSections Million Fink

I. Road Construction

Rtoad: Kulju-Tampere 3 33.2

Road: Kyronsalmi bridge, SavonLiinna 1 10.0

4 43.2

+ 10/Z contingencies 4.3

47.5

II. Pavement Program

1966 and 1967 (amount payable to con-tractors) 31.3 + 43.7 = 75.0

75.0

III. Engineering of Future Road Program

350 km at Fik :L4,500 5.0

Total Fmk 127.5

or US$ 40.0 million

Bank's participation 50% = US$ 20.0 million

Table 5

FINLAND

Second Road Project

Estimated Schedule of Exenditures-7-77 = - -- - X M -A(Vmounis n jliolsoiFb^

Annual AllocationsTotal

Roads Cost 1966 1967 1968

Ku1Ju-Tampere 36.4 9.0 16.9 lo.5

Kyronsalmi Bridge, Savonlinna 1.1.1 3.0 5.0 3.1

47.5 12.0 21.9 13.6

Pavement Program

1966 31.3 31.3 -

1967 43.7 - 43.7

Engineering 5.0 2.0 3.0 -

Total FmIc 127.5 45.3 68.6 13.6

Bank's participation (50%) = Fmk 63.7 22.7 34.3 6.8

(in lillion) US$ 20.0 7.1 10.7 2.2

Table 6

FINLAiD

Expected Annual Rates of Growrth for TrafficVolume for Countrv and for Projects

(in Per Cent)

Kulju Savonlinna CountryTampere Bridge Total

A. Cars

i965-7() 15 17 15

1970-75 10 12 8

B. Vans

1965-70 8 8 13

1970-75, 6 6 8

G Truilcs

]970=75 5 5

D Buses

141ju-f;) 2.3'I 70-7t 2 22.

Table 7

FINLAND

Vehicle Costs for 1970in Fmik/Venicle IKm

Kul Ju SavonlinnaTampere Bridge -

A. Private Cars

Old 0.19 0.78 *

New 0.16

S Saved 16

B. Trucks

Old 0.62 1.5 *

New 0.43 -

/0 Saved 31%

* Time costs only due to congested conditions on the bridge;-veh:Lcle bperating savings are ;relatively insignificant for 2

390--meter bridge.

ltoMunio and KiIvis6r,vi

0 t 0 th t < ~~~~~~~~~~~~~~~~~~Korigosniemi/

R 0 A 0 S g R '

- = ~~EXISTING ROD2h\

F'ROPOSED ROADS FOR A ' f&/I{SECOND PROJECT 1t\

| XISTING RAILWIAYS -',|

p t~~~~~~~~~~~~~oo> ~o kOS

0 20 40 60 80 100 KM (LARGE MAP)

0 10 20 30 40 506KM (!NSET VAPS)..

| 2 . . :.st5-'h,$ ........... rOULU .......tdA

Ronh 1 ah\ 2h

| <+4k7 . 4; ,/pojok / k o k .

- 47~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ |- ~ ~J4I3n oSt0d ' m s Nynco,Vby UV . zu Ine

KUP )

|Kristln'estc 0 j m/.

{jyW ~ V L '\7 /9

0~~~~~~~~L nsa

, .cil ,,,,sg -,/ - HdE L' I fr [ rk u- 4 Al~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~,ollit 14

MARC!] 1966 BD 14 R