Documeat of

The World BankFOR OMCIAL USE ONLY

Report No. 6415

PROJECT COMPLETION REPORT

TURKEY

SOUTH ANTALYA TOURISM INFRASTRUCTURE PROJECT

(LOAN 1310-TU)

September 24, 1986

Urban and Regional Development Projects DivisionEurope, Middle East, and North Africa Region

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

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FOR OFFICIAL USE ONLYTHE WORLD BANK

WashmSton D.C.20433U.S.A.

Oft* of DiVd40.CUSWul

September 24, 1986

NERANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on Turkey South Antalya TourismInfrastructure Project (Loan 1310-TU)

Attached, for information, is a copy of a report entitled "ProjectCompletion Report on Turkey South Antalya Tourism Infrastructure "roject(Loan 1310-TU)" prepared by the Europe, Middle East, and North AfricaRegional Office. Under the modified system for project performance auditing,further evaluation of this project by the Operations Evaluation Departmenthas not been made.

Attachment

This document has a resicted distribution and may be used by tecipients only in the perfonranceof their official duties. Its contents may not otherwise be discwsed without World Bank authoriztion.

FOR OFFMcL USE ONLY

TURKEY: SOUTH ANTALYA TOURISM INFRASTRUCTURE PROJECT(Loan 1310-TU)

Table of Contents

Page No.

Preface . * * . ........................................................ iKey Project Data ............. . ................. iiMission Data ........ ........... ............. . ................. iiCountry Exchange Rate .......... .................................. iiAcronyms and Abbreviations .... ..... ........ .... ..................... iiHighlights ............................................................. iii

I. INTRODUCTION ....................................................... 1

II. PROJECT BACKGROUND AND PREPARATION ........ ............... 1

Identification, Preparation and Appraisal ................. IProject Objectives ........................... ............... 2Project Description ........... .... ..................................... 2

III. IMPLEMENTATION ............... ...................... ... *.......* , 3

Effectiveness ............... ... ....... 3Implementation Schedule .................. ... ............. . 3Land Acquisition ..................................................... 4Project Content and Revisions ............................ 4Project Costs ....................................................... 5Disbursements ................. ................ 5Procurement and Contractor's Performance .................. 6Performance of Consultants ............................... 6Reporting .. ..................................... . ......... 6

IV. OPERATING PERFORMANCE .. ............................... .. 6

V. FINANCIAL PERFORMANCE .................... ............ . ... 8

VI. INSTITUTIONAL ASPECTS ... ................................. 9

VII. ECONOMIC RE-EVALUATION .................... 10

VIII. THE ROLE OF THE BANK ......... ....... 12

IX. CONCLUSIONS .................. 13

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

Table of Contents (Cont'd)

Page No.

ANNMES

I. Visitor Arrivals in Turkey .............. ...........*e.e.. 14II. Project Implementation, Actual and Expected ............. 15III. Project Costs, Actual and Expected ....... ............... 17IV. Loan Disbursements, Actual and Expected ................. 20V. Economic Re-Evaluation ** * ............................... 21VI. Couments from Borrower ........................ 25

TUREY:SOUTH ANTALYA TOURIS INRAYU~CTU~RE PROJECT

(Loan 1310-TU)

PREFACE

This report presents the results of the review of the Turkey: SouthAntalya Tourism Infrastructure Project (14an 1310-TU) which was approved bythe Executive Directors on July 6, 1976, and for which the last disbursementwas made on July 29, 1986.

The report was prepared by the SHEMA Urban Projects Division on thebasis of a review of Bank files, reports prepared by the Borrower, and thefindings of a Bank mission comprising Messrs. David B. Cook and J.A. 8immonwhich visited Turkey in August, 1985. The work of the Bank mission wasgreatly facilitated by the assistance provided by personnel of the Ministry ofCulture and Tourism4', particularly the Project Directorate, and of theTourism Bank, particularly the Antalya Investments Department.

In accordance with the revised procedures for project performanceaudit reporting, this Project Completion Report was read by the OperationsEvaluation Department (OED) but the project was not audited by OWD staff. Thedraft report was sent to the Borrower. the comments received are attached tothe report as Annex VI.

I/ Ministry of Tourism and Information until 1983, thereafter Ministry ofCulture and Tourism.

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,,Y SOUTh ANtALYA touRSM PROJECT - PROJECT CInPLETION REPORt(Loan 1310-tU)

IEY P R O J E T T D A T A

Appraisal Actual or1km EaXectatiane Cstimts d Achpal

Total Project Cost (US5 million) 66.0 43.0Underrun or Overrun (1) 35.0S

Loan/Credit AWunt (US$ Million) 26.0 26.0Disbursed 18.7Cancelled 7.3Repaid toOutstanding to

Cate PhtysiCal Coonents CompletedPreport1ion Caleted by Above Oats (X)Proportion of Time Underrun or overrun (EEConomic Rate ot Return (M) '72X'Financial Performnc Satisfactory SatisfactoryInstitutional Performance Satisfactory Satistactory

t HE R P I 0 8 E C T D A T A

tts, Original Actual orPlan Revisions Ecti1mtad Actual

First Mention in Files or Timetable 02-72Governmrnt's AppliCationNgotiations 05/26-OS/27/76 0S/07-06/03/76 05/07-06/03/76Bard Approval 07/06/76Loan Agre_nnt Date - - 07/09/76affectiveness Oate 12/01/76 03/01/78 03/01/78Closing Date 12/31/82 12/31/83 12/31/84 12/31/84Final Disbursent 07/09/85Berroer The Republic of Turkeytxecut1ng Agecy Ministry of Tourism and Inforation/linistry of Culture and Tourismfiscal Year of lorrowe' March 1 - February 28follow-on Proj3et Nam None

3 I 5 t a 11 A t Afto Month/Year bo. Of Wn eks Ng. of Persons Mreaek sate ot Rert

Identification 02/74 1.3 3 3.9 02/27/74Preparation 1 04/74 1 2 2 04/30/74Prepration It 08/74 2 3 6 08/22/74Preparation tIt 10/74 1.6 3 4.8 11/01/74Preparation tV 02/7s 1 1 1 02/24/7SPreparation V 06/7s I I 1 06/19/75Prepration VI 09/7S 2 4 8 10/14/75Appraisal CoPleti0n 11/75 J 6 la 04/02/76

Sub-Total 12.9 44.7

Supervision t 11/76 2 2 4 12/09/76Supervision It 02/77 1.2 2 2.4 03/01/77Supervision ttt 07/77 1.2 2 2.4 08/02/77Supervision IV 09/77 1 2 2 09/20/77Supervision V OS/78 2 2 4 OS/lS/78Supervision VI 10/78 1.2 2 2.4 10/09/78Suoervision Vtt 02/79 1.2 1 1.2 02/26/79Suoervision VIII 09/79 1.8 1 1.8 09/2'/79Supervision IX 07/80 1.6 2 3.2 08/OS/8OSupervision X 09/80 1.4 1 1.4 11'26/80Supervision XI 03/81 2 1 2 03/23.81Supervision XII 02/82 2 1 2 03/26/82supervision Xlt 08/82 2 2 4 08/10/82Supervision XIV 12/82 2.6 2 5.2 01/11,83Supervision XV 07/83 2 2 4 08/OS/83Supervision XVI 12/83 2 2 ' 01/05/84Supervision XVII OS/84 0.8 I 0.8 OS/31/84Supervision XVIII 09/84 0.5 2 1.0 10/26/84Completion 08/85 2 2 AA

Sub-Total ILL Grand Total 44.4 98.5

c Q 11 R Y E X C H A N GE R A T E

Name of Currency (Abbreviation) Turkish Lira ('L)Year

Appraisal Year Average (1975) Exchange Rate: USSI * rL 15.00Interventing Years Average (1976-1984) USS 1 TL114.6Completion Year Average US$l TSLOo.0

ACRONYMS AMD ASREVIATIOUS

tot Tourism Bank, Inc.PRO Project DirectoratePT? Post. Telegrap ane Telephone OrganiXationUNOP United Nations Oevelopwnt Programme

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TURKEY: SOUTH ANTALYA TOURISM INFRASTRUCTURE PROJECT(Loan 1310-TU)

HIGHLIGHTS

The objective of the South Antalya Tourism Infrastructure Project wasto provide the infrastructure for a new resort area with a design capacity ofsome 6,000 rooms or 12,000 beds in hotels and holiday villages by 1990. Theproject was also designed to include infrastructure and other facilitiesneeded to turn the village of Kemer into a service center for the projectarea, housing for hotel employees, hotel training facilities, rationalimprovements in the adjoining nationa, park and measures to preserve and makemore accessible to visitors the Phaselis archaeological site.

Although the project is .lot yet fully completed and is likely to takenot less than four years longer to complete than the six years envisaged atappraisal, the objectives of the project have been largely realized. Most ofthe infrastructures ar' in place, and the project has attracted great interestamong private investors who are developing hoteles and holiday villages on ascale which indicates that the capacity target will be achieved by 1990 orsoon thereafter.

Reflecting the high inflation rate in Turkey and the delays inproject execution, project costs in Turkish Lira are expected to be more thaneleven times greater than the appraisal estimate. In US dollars, totalproject costs are expected to be 352 below appraisal estimates.

Despite the decline in project costs, delays in projectimplementation and in the development of visitor accommodations contribute toa re-estimated ERR of 10.5%, substatitially below the 17.2% estimated atappraisal. This lower ERR also reflects lower visitor expenditures in realterms than estimated at appraisal. The appraisal methodology does not takeinto account, however, benefits from the project flowing to the localpopulation. These are substantial and, if included, would significantlyincrease the rate of return.

The financial returns to the Government on its investment in theproject are likely to be adequate, though the definitive charges forinfrastructure services have yet to be determined. The financial returns toprivate investors in hotels and holiday villages appear attractive on thebasis of the limited operating data available to date. The principalbeneficiaries of the project have, however, been private landowners in Kemerand investors in holiday homes and condominiums, who have realized largecapital gains. Ways for Government to share in these gains, which are adirect result of its investment, need to be considered.

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The Government is still considering the form and structure of theorganization which will be responsible for operating and maintaininginfrastructure services in the project area. The organization and staffing ofthe hotel training school have also still to be determined. A projectcomponent which has been largely overlooked in the course of projectimplementation is the providion of housing for hotel employees. With the fastgrowth of visitor accommodations, the lack of employee housing is becomingincreasingly acute. The provision of employee housing is an obligation of theGovernment under the Loan Agreement (Section 3.08 (b)), and the means forproviding housing on an equitable basis need to be agreed between theGovernment and private hotel investors.

I. INTRODUCTION

1.01 A Bank mission visited Turkey in 1970 to review with the Turkishauthorities the possibility of Bank assistance for tourism development. Atthat time, the project which appeared to have the best prospects ofimplementation was one to create a new resort near the ancient city of Side onthe Mediterranean coast, some 50 kms east of Antalya. In subsequent exchangeswith the Turkish authorities, various alternatives were considered. and asTurkish tourism planning developed, it was agreed that a coastal area south ofAntalya should be selected for further intensive study within the framework ofplans to develop new beach tourism destinations on Turkey's Mediterranean andAegean coasts.

1.02 Turkey possesses major tourist attractions, both natural andman-made. Its climate with long dry summers, the beauty and variety of itsscenery, its extensive and largely unspoiled beaches on the Mediterranean,Aegean and Black Se:a coasts and its wealth of historical and archaeologicalsites, with remains of Hittite, Greek, Roman, Byzantine, Seljuk and Ottomancivilizations, offer a combination of tourist attractions comparable with anyother Mediterranean country. Nevertheless, Turkey's share in Mediterraneantourism has for long been small (only 1-22 of international tourist arrivalsin Mediterranean countries) and well below the country's potential.

1.03 In the decade ending in 1973, foreign visitor arrivals to Turkey grewfrom just under 200,000 in 1963 to 1,341,500 in 1973, at an;average growthrate of 21% annually. During the same period receipts from internationaltourism rose from US$7.7 million to US$171.5 million, and as a percentage ofthe value of merchandise exports rose from 2.1% to 13.0Z. This consistentgrowth of traffic appeared to provide a basis for projecting further growth ifadditional tourist facilities were provided, and while the energy crisis latein 1973 contributed to a fall in foreign visitor arrivals in the followingyear, there was a sharp rebound in 1975 when arrivals rose by nearly 39% toreach 1,540,900. These two years (1974 and 1975) were the time of mostintensive preparation of the South Antalya praject.

II. PROJECT BACKGROUND AND PREPARATION

Identification, Preparation and Appraisal

2.01 Istanbul and its environs have been the principal tourist destinationin Turkey for many years but the development of hotel accommodations and othertourist facilities, first on the Aegean and subsequently on the Mediterraneancoasts has brought a diversification which the project was designed tosupport. The selection in 1973 of the 15 km coastal strip south of Antalya asthe site for the development of a new resort area followed the preparation ofa comprehensive master plan for the whole Antalya region by the Ministry ofTourism and Information. This was in turn followed by the preparation, withthe assistance of experts financed by the UNDP, of a more detailed plan and

feasibility study for the proposed resort which was completed in 1975. Theproject was appraised in November, 1975 and the Bank's loar. for the projectwas approved on July 6, 1976.

2.02 The project area was selected because of the great natural beauty ofthe site, the existence of archeological remains in the area, of which theprincipal one was Phaselis, a colony of the Kingdom of Rhodes established inthe 2nd century BC, favorable access from an airport at Antalya capable ofreceiving B727's and similar aircraft, limited agricultural development onwhich the resort would not encroach and good quality beaches safe forswimming. At the time of appraisal construction of a new runway, taxiways andparking spaces at Antalya airport was already underway. Other infrastructureservices required for the resort, - electricity, telecommunications, water,sewerage, drainage and solid waste removal - were lacking.

2.03 Matters of particular concern during the preparation and appraisal ofthe project were the arrangements for project implementation, the acquisitionof land needed for the project, the approval of detailed land use plans forKemer and of the regulations for enforcing the regional master plan, and theneed to provide training for hotel staff and housing for a portion of hotelworkers in order to attract hotel investors. These concerns were reflected inthe recommendations of the appraisal mission and subsequently in the terms ofthe Loan Agreement concluded between the Republic of Turkey and the Bank.

Project Objectives

2.04 The project's objectives were to provide the basis for thedevelopment of a new resort with some 5750 rooms, south of Antalya, having dueregard to preserving the beauty of the environment, to promote economicactivities iia an area of limited development and to augment the country'sforeign exchange earnings.

Project Description

2.05 The project was to comprise the following components:

(a) completion of the main highway from Antalya to the project area andconstruction of access roads to the tourism sites:

(b) water supply, sewerage, solid waste disposal, electricity andtelecommunications for the tourism sites;

(c) water supply, sewerage, electricity, telephone, streets, sportsaccommodations, park, health clinic and service buildings for thetourism support center of Kemer;

(d) hotel training facilities;

(e) construction of housing for hotel employees;

(f) construction of a small craft harbor at Kemer;

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(g) campgrounds, day-use beaches, beach and other facilities in thenational park;

(h) preservation works at the Phaselis archeological site; and

(i) funds for project management, studies and consultants.

III. IMPLEMENTATION

Effectiveness

3.01 Among the conditions of effectiveness of the Loan were the conclusionof subsidiary loan a&reements between the borrower and the agenciesresponsible for implementing the electrical and telecommunications componentsof the project (Kepez and PTT respectively), the adoption of detailed land useplans and regulations with supporting maps for the tourism development areaand for Kemer, initiation of expropriation procedures for the land requiredfor the development of tourism facilities through 1981 at the principaltourism s8tes and for the infrastructure and support services in Kemer, andthe appointment of the Director of the Project Directorate (PRD), responsiblefor co-ordinating project implementation. Difficulties were experienced inmeeting all these conditions of loan effectiveness, as a result of which theloan did not become effective until March 1, 1978, nearly 20 months after theloan was signeu on July 9, 1976. In spite of delays in loan effectiveness,however, consulting services were organized by the PRD and design work on thewater supply, sewerage, Kemer infrastructure and Kemer marina componentsbegan. The Tourism Bank was appointed to provide these services and in duecourse organized a special team to carry out the work. Furthermore work onthe extension of the highway from Antalya to the project area by the Ministryof Public Works continued prior to Loan effectiveness, as did the constructionby Kepez of a 31.5 kv electric power traaamission line from Antalya to servicethe project area. Work also proceeded on the design of a 154 kv transmissionline from Antalya to Finike and of step-down transformer stations for Kemerand Finike.

Implementation Schedule

3.02 The project at appraisal was expected to be completed by June 30,1982. While most project components are completed, several, including themain access road to Kemer from the Antalya-Finike Highway, the hotel schooland training hotel, the marina superstiuctures, the Kemer promenade, somestreets in Kemer and staff housing, remain unfinished. The project was about852 complete at the end of 1985. If adequate funding can be provided and thefew remaining land acquisition problems resolved, the project with minorexceptions should be completed by December, 1987. In this event, the projectwould record a time over-run of about five and'a half years or 92%. Theprincipal reasons for the delays in project execution included a reducedGovernment interest in the project during the later 970's, land acquisition(para. 3.03), the difficulties in establishing an effective ProjectDirectorate which resulted in poor co-ordination in some instances of the workof different executing agencies, and difficulties in securing adequate lirafinancing during years of rapid inflation and cost escalation. (Wholesaleprices have increased on average by over 40% annually in the past ten years).

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Land Acquisition

3.03 Despite the fact that most of the land allocated to the Projectbelonged to Government ministries, the acquisition of private land, sometimesby expropriation, and by the application of Article 42 of the Reconstructionlaw to the Kemer Urban Area proved time consuming and onerous. There are manyreasons for this including: initial delays were caused because no approvedmaster plan existed; because land owners successfully claimed that theMinistry of Tourism was not a competent authority to deal with landexpropriation; it was not always clear who actually owned the land and incertain instances, after ownership was established, funds were not availableto complete the purchase. By the time funds became available, land values hadbegun to rise, the original agreements to purchase were invalidated, and thewhole protess had to start again; certain structural intrusions into roadwaysrequired action by the Supreme Court, which was extremely time consuming; andvaluations of land did not take into account the dynamism which entered theland market in the Kemer region when urban development got under way. In theearly years of the project (1976-81), tourism investment was accorded lowpriority by the Government and the Land Registry Office was slow in handlingexpropriations. Project implementation accelerated markedly after the changein Government in September, 1960 when greater priority was accorded to tourismas an earner uf foreign exchange. Procedures for land acquisition wereaccelerated and adequate budgetary provisions were made to finance landacquisitions and permit a smoother implementation of physical works. The paceof implementation has slowed in the past year, however, reflecting thedifficult overall budgetary situation and continuing problems in acquiring thefew remaining land parcels required for project completion.

Project Content and Revisions

3.04 The implemented project when completed wili correspond quite closelywith the project as appraised. At appraisal, the simultaneous provision ofmajor infrastructure services, particularly electric power, water supply,sewerage, drainage and solid waste removal seemed an ambitious objective, butin the event these components have been completed satisfactorily. With thedelays in project execution and the increase in costs in terms of Turkishlira, some relatively minor project elements have been deleted or deferred.Sports facilities, public parks, excursion boats, a bus terminal and smallindustrial facilities in Kemer are among such elements, as are some facilitiesplanned for the aational park such as helicopters with fire-fighting equipmentand two motorboats. However three fire-fighting trucks together with new firecontrol roads and look-out towers have been provided as well as new campingfacilities though with smaller capacities than envisaged at appraisal. Anelement which has been significantly modified from the concept at appraisal ishousing for hotel employees. At that time it was argued that the projectshould include low-cost housing for about 30% of the hotel employees expectedto migrate to the project area by 1981: this was estimated to require 280units in the first stage with a further 720 units to accommodate additionalstaff needed by 1)90. Construction of 126 family units is in progress and 150sin-le quarters will also be provided, approximately the same number of unitsas envisaged at appraisal. However, these units will be used to house civilservants working in the Kemer administration and higher level staff working inthe hotel training school and the Tourism Bank's planned hotel at Kemer. Theywill not be available for hotel staff generally as envisaged at appraisal, and

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solutions to the problem of housing hotel employees have not yet beendevised. The study for promoting tourism in the project area was delayedfollowing delays in project execution. A report on marketing strategy for theproject area was completed in 1980. With the increased pace of projectimplementation in subsequent years, and the great increase in interest byprivate investors in the project area, further special efforts of promotionappeared unnecessary. The economic study of hotel profitability and tourismincentives was started by the Research Directorate of the Ministry of Tourismand Information in 1977; subsequently following personnel changes in theDirectorate, the study was suspended. A decree providing for measures andincentives to promote investment in the tourism sector was published in 1980,but the study under the project was not carried far enough to affect theprovisions of this decree. The technical assistance on hotel planning wasprovided by UJNPD/ILO in 1980, but with the delays in physical implementationof the project, this assistance did not prove timely and had no impact on theproject.

Project Costs

3.05 Project costs in Turkish lira have been affected by domesticinflation and the delays in project implementation. On the assumption thatthe project can be completed by 1987 and that the rate of domestic inflationwill not accelerate, the project is estimated to cost TL 11,022 million ascompared with the appraisal estimate of TL 990 million (Annex III). The costestimate at appraisal excluding price contingencies was approximately TL 675million. If this figure is compared dith the estimated cost at completion thedifference is more than accounted for by price inflation over theimplementation period, after adjusting for the marginal reductions effected inthe scope of the project. Project costs measured in dollars show asubstantial reduction as compared with the appraisal estimate. This reflectsprincipally the rapid devaluation of the Turkish lira, particularly since1980, which has more than offset domestic inflation. Thus the project cost atcompletion is estimated at almost US$43 million as compared with the appraisalestimate of US$66 million (Annex III).

Disbursements

3.06 With the delays in loan effectiveness and project implementation,disbursements from the Bank's loan were much slower than estimated atappraisal. By the end of FY1980, less than US$3 million had been disbursed ascompared with the appraisal estimate of more than US$17 million (Annex IV).Disbursements accelerated after 1980, but not sufficiently quickly to permitfull disbursement by the original loan closing date: December 31, 1982. Theclosing date was postponed twice, the final date being December 31, 1984. Atthe time of the second postponement of the closing date in January 1984, itwas realized that with the devaluation of the Turkish lira it would not bepossible to utilize the whole loan, and the Government requested that anamount of US$3 million should be cancelled. Despite these measures and anacceleration of project implementation, it still proved impossible to disbursethe whole of the reduced loan of US$23 million, and in the final outcome,almost US$7.262 million was cancelled (including the US$3 million mentionedabove). In total, US$14.843 million was disbursed for expenditures on theproject with the balance of US$3.895 million being capitalized interest andother charges during constructicn. Annex IV shows actual disbursements ascompared with disbursements as estimated at appraisal.

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Procurement and Contractor's Performance

3.07 Despite efforts made to contract overseas civil works bidders, allthe work was carried out by local firms, and no contracts were awarded toforeign firms. With one exception (para. 3.08), the local contractorsperformed well though they frequently had to slow down due to shortage oflocal counterpart funds.

.7.08 The contractor building the Hotel Training School, adjoining practicehotel and the Municipality Building made a slow start, encountereddifficulties and finally abandoned the work. This caused a year's delay.Subsequently a much larger package involving the Tourism Bank Hotel, TrainingHotel, Marina Superstructure and Promenade was bidded and awarded in December1983 to one of the largest construction firms in Turkey. Since that timeprogress, though hampered by shortage of local currency, has been satisfactory.

3.09 All the equipment bids pro^2eeded expeditiously and satisfactorily.

Performance of Consultants

3.10 The Ministry of Tourism appointed the Tourism Bank to act asconsultants for those aspects of the work not directly the responsibility ofGovernment line agencies (i.e., for work other than Highways, Kepez and PTT).

3.11 The Tourism Bank's consultancy group performed well in all aspectsexcept in its relationship with the Project Directorate. Unfortunately, theChief Consultant and Project Director frequently had diverging views onimplementation though each of them had the success of the project as theiroverall priority. It is to the credit of both officials that despitedifferences of approach and project difficulties, they managed to achieve somuch. The Tourism Bank was successful in developing a group of pro.essionalscapable of building and operating tourism infrastructure built tointernational standards. The consulting group visibly grew in stature,.apability and confidence during the course of the project and it will be mostunfortunate if the unit is disbanded at the conclusion of the project.

Reporting

3.12 Progress reports were prepared by the borrower rather intermittently,but they provided useful information on project implementation, commitmentsand expenditures. For a more comprehensive view of project status, majorreliance was placed on IDA supervision mission findings. Audit reports havebeen received after considerable delays.

IV. OPERATING PERFORMANCE

4.01 The operating performance of a project like the South Antalya TourismInfrastructure Project is not simple to measure. The basic objective of theproject was to provide the basis for an orderly development of tourismfacilities to attract additional foreign tourists to Turkey and augmentforeign exchange earnings, and to provide additional capacities for domestictourism.

4.02 Despite the delays in project implementation: the provision of newtourist accommodation capacity is proceeding well. Private investors, withthe support of the Tourism Bank, have moved rapidly in the past three years toconstruct tourist facilities including hotels, holiday villages andcondominiums. The Tourism Bank is developing a new high category hoteloverlooking the marina in Kemer and the Tourism Bank together with otherGovernment agencies have added substantial capacity in new camp sites. Thegreater part of these investments is promoted by domestic private investors,though with financial support from the Tourism Bank. Only the marina hotel,the school hotel and two camp sites are being financed wholly by the publicsector. Accommodations with approximately 3,300 beds are already inoperation, construction is underway on projects with a further 2,800 beds, andconstruction is about to begin on projects with a further 1,400 beds. Thedemand for the remaining available sites is high, and there appear goodprospects of achieving the target of 12,000 beds, described in the appraisalreport, by 1990 or soon thereafter.

4.03 While the objective of constructing capacity with 12,000 beds by theearly 1990's seems quite likely to be realized, there is a significantdifference between the categories of accommodation projected at appraisal andthose actually being provided. The appraisal foresaw 70% of beds in hotelsand the balance in holiday villages. In fact, in response to changing marketdemand, it is now expected that 66% of capacity will be in holiday villages,only 16% in hotels, and the balance in camp sites (Annex V).

4.04 The strength of the demand from private investors for hotel/vacationvillage sites in the project area has been stimulated by the remarkable growthin foreign tourism to Turkey in the past three years. After years ofstagnation and decline in foreign tourist arrivals during the second half ofthe 1970's, there has been a period of renewed growth since 1980. The growthrate has accelerated since 1982; arrivals increased by 162 in 1983 and by 302in 1984. In the first five months of 1985, arrivals increased by 46.3% overthe corresponding months of 1984. The fast growth in traffic has meantoccupancy rates yielding favorable returns to investors in much existingcapacity and has stimulated strong interest in developing new capacity. TheAntalya Province has shared in this growth in tourism demand and investorinterest.

4.05 A development which was not foreseen at appraisal has been theremarkable growth of the small town of Kemer. At appraisal it was envisagedthat the provision of infrastructure and housing for hotel employees wouldmake possible the development of Kemer as a service town for the hotels andvacation villages to be built in the area. In fact Kemer has attracted largeprivate investments in vacation homes of a high standard, and property valueshave risen to a point where the provision of employee housing in Kemer, unlessheavily subsidized, no longer appears feasible. As a consequence of its rapidgrowth and the influx of higher income residents and vacationers, Kemer isdeveloping new commercial activities and is expected to fulfill part of itsenvisaged role as a service center for the neighboring resort areas.Nevertheless the problem of housing hotel employees remains and is becomingmore acute with the rapid growth of accommodation capacity. It will requirecooperation between the public authorities and private investors in findingappropriate solutions to avoid the unauthorized development of slums withtheir possible accompanying environmental degradation. In this context,

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consideration should be given by the Government to providing serviced sites,core units and construction loans, as a means of providing housing foremployees who are not accommodated by their employers or are unable to findadequate rental units.

V. FINANCIAL PERFORMANCE

5.01 The financial performance of the project should be evaluated underseveral heads: the financial returns to the Government from the provision ofinfrastructure services for which financial charges are made (directly orindirectly); the financial returns to investors in superstructures (hotels,holiday villages, etc.); and the financial returns to private citizens(e.g. property owners) who stand to benefit from the project. As the projectis not yet complete and superstructure investments are still under way,definitive financial results could not be evaluated at this stage.

5.02 A draft statement of policy and criteria for establishing charges forinfrastructure services was prepared by the Ministry of Tourism in 1977. Astudy of user charges proposed for utility networks was made in 1982. Thiswas revised and elaborated by the Tourism Bank in mid-1985. The new studydistinguishes in its analysis between investments in Kemer infrastructure(roads, streets, water, sewerage, drainage, etc.), the marina, and socialhousing, and calculates the financial returns on these three categories ofinvestment. The practice hotel (part of the hotel school) is included in thefirst category; this might more appropriately be evaluated separately. Whileat present, given the level of demand for services, the charges are notsufficient to cover costs, on the basis of the assumptions made by the TourismBank, with the build-up of visitor capacity the charges proposed forinfrastructure services would be adequate, and the NPV of the investments inKemer infrastructure, the practice hotel, and the marina are positive, using adiscount rate of 122 and an operating asset life of 20 years. The NPV of theinvestment in social housing is negative, reflecting the subsidized rents paidby the Government officials and other public sector staff to whom the housingwill be assigned. The charges actually made for infrastructure services willneed to be re-evaluated and adjusted in the light of the build-up ofaccommodation capacity and the future growth of the town of Kemer.

5.03 The financial evaluation of the Tourism Bank includes in receipts tothe Government rents paid by hotel investors for sites leased by them. Annualrents are set at 5% of the value of the land; the land value is set at 102 ofthe hotel investment cost. The rents are low and are designed to provide anincentive for hotel investors. Given the amenities provided by the project,however, and the strength of demand for hotel sites by potential investors,further examination of the basis for determining rents for hotel sites iswarranted. Such a study could be made in the context of a broader assessmentof ways for Government to recapture a greater share of the benefits of theproject which have accrued to the private sector (see para. 5.05).

5.04 As the new hotels and holiday villages are either still underconstruction or were opened for their first season only in the spring of 1985,definitive data on operating results are not yet available. Projections forthe practice hotel and the marina hotel at Kemer, to be built and operated bythe Tourism Bank, show highly satisfactory operating profits and a very

9-

favorable return on investment. Though many facilities will be open for onlysix months in ea^h year (May to October), the preliminary results indicatethat high occupancies during this period combined with favorable operatingconditions (particularly in terms of low labor costs) would yield satisfactoryreturns to private investors in hotels and holiday villages.

5.05 Still greater returns have already accrued to some private landownersin the project area, particularly those owning land in the town of Kemer,where there has been a very rapid developmnent of holiday homes andcondominiums. In 1978, land expropriation prices were set at TL 500 persquare meter, which was five times greater than the value estimated atappraisal. By mid-1985, land values in Kemer had risen to TL 20,000 persquare meter and even higher in some locations. Hence, the Government'sinvestment in the project has greatly enriched some private citizens, and asmost of the land in Kemer was not acquired by the Government at projectinception, the Government has not been in a position to recover its investmentfrom the sale of land at the enhanced prices now prevailing. In retrospect,it appears that it would have been desirable for Government to have acquiredadditIonal land in Kemer to sell at developed values. As a necessaryalternat're, it is important that the Government enforces the collection ofcharges (e.g., user charges, connection fees, property taxes) to enable it torecoup its investment and earn an adequate return.

VI. INSTITUTIONAL ASPECTS

6.01 At the time of project preparation and appraisal, it was recognizedthat the complexity of the project would require special measures to ensurethe coordination of the implementation of the many different projectcomponents. Primary responsibility for project implementation rested with theMinistry of Tourism and Information, which was merged into the Ministry ofCulture and Tourism in 1983, and at the Bank's urging a Project Directoratewas established within the Ministry with responsibility for projectcoordination. In addition, the Coordinating Committees, one at the centralgovernment level in Ankara and the other at the regional level in Antalya,were set up to assist the Project Directorate in its coordination role. Thesecomponents were helpful in project execution, though they did not work as wellas expected, partly because the Project Directorav lacked the legal authorityto require other agencies to perform according to agreed timetables or toaccelerate procedures such as those involved in land acquisition.

6.02 As indicated above, the Tourism Bank was appointed by the Ministry ofTourism as engineering consultants for the project, and established a specialunit to carry out that part of the work which was not clearly theresponsibility of other agencies (e.g. the Grand Directorate of Highways, PTT,Kepez, etc.). This unit in the Tourism Bank worked effectively and deservesmuch credit for the successful implementation of the project. Theimplementation of other components (e.g. the main highway, electric power, andtelecommunications components) was handled effectively by the responsibleagencies. The Project Directorate also, despite the constraints under whichit operated, has made an important contribution to project implementation.

- 10 -

6.03 In retrospect, the arrangements agreed between the government and theBank for project implementation appear to have been broadly appropriate,though the powers and authority of the Coordinating Committee in Ankara seemto have been insufficient to overcome emerging problems as expeditiously asdesirable. Experience with tourism projects in other countries has shown thateffective coordination of a number of independent executing agencies requiresa high-level coordinating body in the government structure, perhaps even atthe ministerial level.

6.04 An organizational question which has still to be settled is thestructure for operating and maintain4ng the tourism inDrastructure facilities,particularly the water, sewerage, drainage, and solid waste removal servicesin the project area. The Government envisages the creation of a municipalityin the town of Kemer, with the election by the citizens of local officials.It is recognized that such a municipality would not be the appropriate body tooperate infrastructure services in the wider tourism zone, and a law has beendrafted providing for the creation of a special agency to do this. Theservices are at present being operated and maintained by the Tourism Bank,which is also collecting service charges, but the Bank lacks the legalauthority for this, and the imposition of service charges by the Bank hasalready been legally challenged. Hence, it is important that the neworganizational units with the necessary legal authority to set tariffs andcollect service charges should be established expeditiously and beappropriately staffed.

6.05 A further organizational matter to be addressed is the management ofthe hotel school. The decision has been taken that the management of theschool together with the school hotel will be the responsibility of theTourism Bank. It was envisaged at appraisal that technical assistance insetting up the hotel school and designing training programs would be providedby ILO with UNDP support. In fact, ILO consultants have provided assistanceduring project implementation (from 1980-82 and again in 1983 and 1984), butwith the long delay in constructing the hotel school, it was not possible tointegrate fully this assistance with the development of the trainingfacilities at Kemer. Construction of the hotel school complex is now expectedto be completed in 1986, and it is desirable that training programs should bedesigned and key staff appointed prior to completion. The Ministry of Tourismand the Tourism Bank are considering what further assistance would be neededto establish the school, and both ILO and UNDP are willing in principle toprovide further assistance. The timing of such assistance should beco-ordinated with the further progress of construction and the appointment ofthe key Turkish staff of the school and the school hotel.

VII. ECONOMIC RE-EVALUATION

7.01 Since the Bank-supported project is not yet complete andsuperstructure facilities have either just begun operating or are still to bebuilt, the re-evaluation has to be based largely on revised estimates ratherthan actual performance. The methodology for the re-evaluation is similar tothat of the appraisal report. Benefits are tourist expenditures in theproject area of visitors staying in the accommodation facilities (hotels,holiday villages, camping sites) supported by the project. The relevant costsare the capital and operating costs of the infrastructure provided under the

- 11 -

project and of the related superstructure facilities. Operating costs ofinfrastructure services are reflected in the prices paid for these services byhotels and holiday villages. These costs are, therefore, included in theanalysis in the operating costs of superstructures. Certain of the projectfacilities have and will continue to generate benefits for the localpopulation. Following the methodology of the appraisal report, only thebenefits flowing from social housing have been taken into account in theeconomic re-evaluation. Recorded investment and operating costs are assumedto reflect economic costs, while benefits flowing from tourist expendituresare assumed to be incremental. This assumption appears justified by the fastgrowth of foreign tourism to Turkey in the last three years and the shortageof accommodation capacity.

7.02 These assumptions yield a base ERR of 10.52, which compares with theSAR estimate of 17.2%. The main factors accounting for this difference are:

(a) a construction period with negative net benefit flows much longerthan projected at appraisal;

(b) a real price (expenditure) per visitor day in hotels and holidayvillages 35% below that assumed at appraisal.

These factors more than offset the impact on the rate of return of the lowerinvestment cost of the project as compared with the cost estimated atappraisal (Annex V).

7.03 In the appraisal, residual values for certain assets, namelysuperstructures, land and social housing were estimated and included in theeconomic evaluation. Because of the uncertainties attaching to suchestimates, residual values have not been taken into account in calculating theERR of 10.5%. If, however, residual values, estimated on approximately thesame basis as at appraisal, are included, the ERR marginally improves to 10.8%.

7.04 The ERR as calculated above is conservative as the benefits of theproject to the local population (except for social housing) have not beenincluded. These benefits derive from different sources including improvedinfrastructure services (water, sewerage, electricity, solid waste removal)increased amenities (health clinic, public parks, etc.) and increased landvalues. As indicated in para. 5.05, the latter are substantial, though theyare apparently very unevenly distributed. Were these benefits to be includedin the economic evaluation, the ERR would bz substantially higher than thatshown above.

7.05 The appraisal estimated the employment to be generated by the projectas well as the net increase in foreign exchange earnings. Because of thesomewhat slower build-up of accommodation capacity and the differences intypes of accommodation being provided as compared with those foreseen atappraisal, the number of jobs now expected to be created (7,300 in 1990) islower than projected at appraisal (12,400). With the fast growth of the townof Kemer, however, the number of jobs in construction is likely to have beensubstantially greater than projected at appraisal (which estimated an averageof 1,000 over the years 1976-89), though quantitative data are lacking. Netforeign exchange earnings from the project (at 1985 prices) are now projectedat about US$22 million in 1990 rising slowly thereafter. The appraisal

- 12 -

projected net foreign exchange earnings of US$28 million in 1990 at 1975prices. The reduction in real terms in estimated foreign exchange earningsreflects the slower build-up of capacity, a lower proportion of foreignguest-nights (631 compared with 80% estimated at appraisal) and lower realexpenditures per visitor day (cf. para. 7.02).

VIII. THE ROLE OF THE BANK

8.01 By providing financial support and technical inputs at differentstages of project preparation and implementation, the Bank appears to havemade a major contribution to realizing a project concept which is recognizedby the Turkish authorities as unique in Turkey and one which sets the patternfor the future development of new tourist resort areas. Development on thebasis of careful physical planning, with due regard to environmentalsafeguards, and of the simultaneous provision of all infrastructure servicesneeded for the creation of a new resort had not occurred in Turkey prior tothe project.

8.02 The initial delays in project execution reflected a variety ofpolitical, legal and economic factors in Turkey about which the Bank could dolittle. However, the Bank at appraisal appears to have been insufficientlyaware of the administrative difficulties relating to land acquisition and ofthe time required to complete them. Delays in land acquisition have seriouslydelayed project execution and completion. Had the difficulties resulting fromthis factor been fully appreciated prior to appraisal, it is possible thatanother site where Government already owned the land might have been chosen asthe project site.

8.03 The project concept appears in retrospect to have been appropriateand designs were modified where necessary without any basic changes in projectscope. The project was not over-ambitious and despite the delays and someorganizational problems, was within the borrower's capacity to implement it.In hindsight, the Bank could have given more attention during preparation andappraisal to the organisational arrangements for operating and monitoringproject facilities; appropriate cost recovery policies; and housingarrangements for staff in the project area. The Bank's supervision missionscontributed to the resolution of problems as they arose and the value of thesecontributions was recognized by the borrower. There were, nevertheless,extended intervals between supervision missions in some years, which appear tohave reflected organizational changes within the Bank (e.g. the closing of theTourism Projects Department in mid-1979), changing priorities and staffconstraints. There were several discontinuities in the staffing ofsupervision missions, but during the most critical years of projectimplementation, the coverage of supervision missions was comprehensive anddetailed. As the project neared completion, the intensity of the supervisioneffort declined.

- 13 -

IX. CONCLUSIONS

9.01 While the project is nearing completion and the prospects for thedevelopment of hotels, holiday villages and other tourist facilities appearhighly favorable, a final evaluation of the outcome of the project is notpossible at this time. Nevertheless, the basic project concept was sound andthe project objectives were realistic. The planning and environmentalstandards and regulations are appropriate though minor modifications may berequired. The basis has been laid for deve'oping an attractive resort in anatural setting of exceptional beauty, catering to the needs of a widespectrum of the tourist vacation markets. In this context, the continuedenforcement of planning and environmental regulations to preserve theamenities of the area is vital to ensure the future of the project. It isimportant that funds be provided promptly to enable the project to becompleted so that project benefits can be realized more fully with a minimumof further delay. It is also important that arrangements be made to ensurethe efficient operation and maintenance of infrastructure services, and thatattention be given to the problem of housing hotel staff. Although thisaspect was addressed in the design of the project, it has been largelyoverlooked in project execution and a solution is now becoming increasinglyurgent.

9.02 The project has provided a model of an integrated resort developmentwhich the Turkish authorities are following in developing similar coastalresorts at other locations. This was the first time in Turkey that allinfrastructure services needed for resort development were planned andexecuted more or less simultaneously in the context of a carefully studiedphysical plan. In developing new projects, it is important that theexperience gained by the tourism authorities, particularly in the Ministry ofCulture and Tourism and the Tourism Bank, in the design and execution of theproject should not be lost; conscious steps should be taken to enable thisvaluable experience to be utilized in developing similar projects in Turkey inthe future.

- 14 -

ANNE\ I

TURKEY: SOUTH ANTALYA TOURISM INFRASTRTJCTURE PROJECT(Loan 1310-TU)

FOREIGN VISITOR ARRIVALS: 1963-1985 /a

Year Arrivals ('000) Variation (%)

1963 198.8 -1964 229.3 15.31965 361.8 57.81966 440.4 21.71967 574.1 30.41968 603.0 5.01969 694.2 15.11970 724.8 4.41971 926.0 27.81972 1,035.0 11.61973 1,341.5 29.61974 1,110.3 (17.2)1975 1,540.9 38.81976 1,675.8 8.81977 1,661.4 (0.9)1978 1,664.2 0.21979 1,523.7 (8.4)1980 1,288.0 (15.5)1981 1,405.3 8.91982 1,391.7 (-1.0)1983 1,625.1 16.81984 2,117.1 30.31984 (Jan.-May) 551.4 _1985 (Jan.-May) 806.8 46.3

/a Data from State Institute of Statistic until 1971 and from theGeneral Directorate of Security - Section VI thereafter.

- 15 -

ANNEX IIPage 1 of 2

PROJECT IMPLEMENTATION: ACTUAL AND EXPECTED

1. The project was appraised on the basis of 1:25,000 scale plans andthe level of engineering and cost estimates reflected the detail which couldbe considered at sucn an overall scale. As a result, a lot of survey anddetailed engineering work was required before bidding documents could beprepared. This caused delays which were not fully appreciated at appraisal.

2. There were considerable delays in meeting the conditions foreffectiveness and even though the loan was signed on July 9, 1976 it onlybecame effective on March 1, 1978. The delay was caused mainly bydifficulties in establishing the Project Directorate. Despite thedifficulties, the Government pushed ahead with designs and construction by itsline agencies (Highways Directorate and Kepez) and appointed the Tourism Bankto act as engineering consultants for the other infrastructure and buildingsuperstructures. Even when the designs were finished, there were furtherdelays, mainly due to land organization problems. The result was that apartfrom the extension of the urban highway and 31.5 km electric powertransmission line from Antalya to the project area, there was littleconstruction activity on the actual tourism sites until 1981. Towards the endof 1980, progress was so unsatisfactory that the World Bank rated the projecta real problem project and there was consideration given to cancelling theloan. Even when contracts were let the lack of local funds delayed progress.

3. Nineteen-eighty-one, however, became a turning point, the TourismBank designs were ready for bidding; a new Director was appointed and adequatelocal counterpart funds became available. Physical progress speeded up andthe World Bank agreed to extend the loan period from December 3, 1982 toDecember 8, 1983. A revised action program was wLreed and following furtherprogress on this (albeit delayed by land acquisitiou), a further extension toDecember 31, 1984 was agreed by the Bank. At the same zime, the Bankcancelled US$3 million from the loan and agreed to increase the disbursementpercentage for civil works from 30 to 50 percent.

4. The discrepancies between forecast and actual project implementationschedules can be seen on the attached diagram.

tKPLuNKN?TATtOV SCHEDULE PO r C A S T AT AP P R A I S AL COMPARED TO ACTUAL Pet"RN3ANCI

77 78 79 80 S1 82 83 84 85 86 87

Declare Loon Effecttve x x

Port A of the Preiect

axx xxx xxx

lofreatrecture water Supply Construction --- --- --xx xxx xtxX xxx gxxx

So11 Craft NFrbour - - - - …

Sewerage System __ =-__ _ _ _ _ _ _ _ _I xxx xx: ax: xxx xxx

Kemer Iafrcstructure-xxx x

Electricity Supply (distribution)_ _ _ __ _ _ _ _ _Xs, I

Superstrecturo Kaeser ealth CenterUunicipelity Bldg_ _ __ __ _

x xxa xxx uxx

Potel Tratinig Centre

Mtarnas Superstructure REV? xxx as envisaged at appraisalx xx xx xxx xxx x a as envisaged at contract award

actual tAplementation scheduleEmployee Bousingt"$_________

Part * of the Projectxx xxx xxx xxx

Fert C of the Projectx xxx

Electricity Supply ("ain Peedre) - --

Peat * af tbe Projectax xa: xxx xxx xxx

Teleco.munications -- --- --- --- -

Part * of t%e ProjectSx xxx Its axs xxx %xa

national Park Program - --

PatPof the Projectax xs xxx xxx xxx :xx

Pbaeuil Is Archeological Site - --- - --- ---

Part C of the Prolect r x

Undeorater Research at Phaseil -1

- 17 -

AMEXIIPage 1

tUhlY S,OUTH ANTALYA TOURISA INFRA T TUTURK ,PmpECT(Loan 1310-TU)

O&IEetC COSTt ACtUAL AMO EXPECTEO

|S Far Tow lt | Total | | Tn | ---- TL million ---------------------- USS mIlion ---------______

hAUl5 96.4 150 600 750 6.43 4.84 0.97 5.81

IARIMUR 81.3 667 90 7S7 5.42 3.78 0.15 3.93

MAtINA SUP!OStRUCtIRE 360 50 410 0.79 0.08 0.87.

WATER SUPPLY

(1) Tourism Bank ) 213 213 ) 2.38 2.3886.5 3.77

(ii) 0ST ) 60 60 120 ) 0.89 0.10 0.99

5IsBAM 36.9 523 523 2.46 2.24 2.24

IALILMASTE 9.0 27 27 0.60 0.17 0.17

(1) Kepez ) 1,215 1,215 5.12 5.1270.1

,i1) Other ) 3S8 100 458 4.67 0.80 0.20 1.00

IItLECDEMUZIC_TlDS | 49.S S15 200 715 3.30 1.39 0.31 1.70

UT£L.XMhMIMAI ! 54.2 s55 200 755 3.61 1.32 0.40 1.72

KDiR LUFRASTRUCTUR;W9 114.6 7.64

(1) Health Clinic 107 107 0.37 0.37(ii) Infrastructure 198 965 1.163 0.85 1.38 2.23(i11) Promenade 260 250 510 0.62 0.50 1.12

EMPLOYEE HOUSING 133.7 134 1,100 1,234 8.91 0.26 1.67 1.93

TIONAL PAMUS 93.1 173 173 6.21 1.04 1.04

flARSE-LIS 17.4 97 97 1.16 0.41 0.41

PROJECT ADMINISTRATION 20.7 177 177 1.31 0.58 O.58

PEOFESSIONAL SERVICES 67.5 145 60 205 4.50 0.63 0.10 0.73

iLhIIl ,89.0 664 750 1,414 S.93 7.41 1.21 8.62

j- ~4 425 _120 njlZP 42A°6

- 18 -

UIIX tIII

Page 2

TURKEY SQUTH ANTALYA TOUnIaN tMAsYaUeTUQ£ PIO.iCT(Loan 1310-TU)

PROJECI COSTS I#k USS

Z6 AR Al u Al Al u AG AZSntAD1 1.33 1.10 0.98 1.43 0.83 0.14 S.81

HA&RIIQ;L 0.49 1.68 0.96 0.33 0.06 0.26 0.15 3.93

_INA SUPERSTLICTURE 0.40 0.39 0.08 0.87

WATER SUPPLY

Tourism Bank 1.20 0.S9 0.47 0.02 0.10 2.38oSt 0.53 0.28 0.08 0.10 0."

1S. L ERAGE l0.14 1.11 0.64 0.35 2.24

SoLz LMSH E 0.08 0.08 0.01 0.17

ILECTRICITY

Kepel 0.11 1.06 2.03 0.46 1.46 S.12Other 0.4S O.SS 1.00

TILECOMUZI -lD 0.12 0.40 0.49 0.38 0.17 0.14 1.70

HOTEL BAImiN6 0.32 0.01 0.43 0.63 0.33 1.72

KEMER INtRASTRUCTURE

Health Clinic 0.01 0.11 0.11 0.12 0.02 0.37Infrastructure 0.23 0.03 0.19 0.20 0.20 0.67 0.71 2.23Promenade 0.23 0.2S 0.39 0.25 1.12

INPLOYV.E HOUSING 0.26 0.67 1.00 1.93

NATIOt1AL PARKS 0.43 0.04 0.2S 0.18 0.13 0.01 1.04

PHAESg,LIs 0.20 0.17 0.02 0.02 0.41

PROJECT AOMINISTRATION j 0.01 0.19 0.11 0.24 0.03 0.58

PROFESSIONAL SERVICES | 0.09 0.09 0.09 0.09 0.09 0.09 0.09 0.07 0.03 0.73

2.10 2.18 j 1.06 0 0.36 0.32 1.17 0.02 0.20 1.00 0.21 8.62

IUIAL 31 LU 3.16 KZAIILZ 4-74 4.21 L4S "JZ IX LII 41U 4A . 42- M

- 19 -

Page 3

TURKEY SOUTH AHTALYA TOuiI!S INFRAS1tUChtL- PROJgCt(Loan 1310-tU)

PROJEDt tOSTS IN IL

ZA Z? Z1 za Al 11 U U a i U Aa AZROAOS 20 27.5 35.3 67.0 500.0 100 749.8

HURIIIR 44.0 212.0 172.0 84.0 24.8 130.4 90.0 757.2

fARtHA SUPERSTRUCtURE 160.0 200.0 50.0 410.0

ICRL SUPPLY

Tourim Bank 56.4 52.6 59.0 5.0 40.0 213.0OSt 25.0 25.0 10.0 60.0 120.0

b£|^|£ 18.0 200.0 165.0 140.0 $23.0

iUID WA.TI 10.7 13.9 2.0 26.6

Kepez (Part C) 9.8 134.0 364.5 116.5 590.0 1,214.8Other (Part A) 180.0 278.0 458.0

i3ttL 1[mUilZ l 21.0 103.0 19.0 19S.0 100.0 100.0 715.0

a RimAzI_ 5 58.0 1.6 174.0 322.0 200.0 755.6

Health Clinic 1.8 19.5 27.1 49.7 8.8 106.9Infrastructure 28.8 4.7 48.9 80.1 100.0 400.0 500.0 1,162.5Promenade 60.0 100.0 200.0 1SO0. 510.0

!MPLOYEE HOUSING 134.0 400.0 700.0 1,234.0

NATONAL Emu 20.0 4.5 44.2 45.0 54.2 5.1 173.0

PH1ILIS J 36.3 43.6 8.5 8.5 96.9

PROJECT ADMINISTRATION j 1.4 34.9 29.4 97.8 13.0 176.S

PROFESSIONAL SERVICES 4.2 8.0 11.3 16.2 23.0 36.3 45.9 40.0 20.0 204.9

LAI 52.4 78.3 50.0 32.0 40.0 1299.7 8.6 103.0 600.0 150.0 1,414.0

_& _aa ILI '22k I I. I 1LI -LZ I1- -2A 11kJ 174Z 2 -0h 1I70.t IIA2LZ

- 20 -

ANNEX IV

TURKEY: SOUTH ANTALYA TOURISM INFRASTRUCTURE PROJECT(Loan 1310-TU)

SCHEDULE OF DISBURSEMENTS

Accumulated Disbursements in US$'O00(As of July 31, 1985)

(1) (1) ActualActual Disbursement

Fiscal Year Amount Appraisal as 2 of Appraisaland Semester Disbursed Estimate Estimate

FY 1978, S.1. - 769 -S.2. 811 2,556 32

FY 1979, S.1. L1,055 5,442 19S.2. 1,900 9,262 20

FY 1980, S.1. 2,576 13,081 20S.2. 2,869 17,334 17

FY 1981, S.o. 3,460 20,705 17S.2. 4,870 23,030 21

FY 1982, S.1. 5,930 24,781 24S.2. 8,300 25,563 32

FY 1983, S.1. 10,100 26,000 39S.2. 11,100 43

FY 1984, S.o. 12,010 46S.2. 14,870 57

FY 1985, S.1. 16,450 63S.2. 17,880 69

July 31, 1985 18,738 72

Oct. 1985

- 21 -

ANNEX VPage 1 of 4

TURKEY SOUTH ANTALYA TOURISM INFRASTRUCTURE PROJECT(Loan 1310-TU)

ECONOMIC RE-EVALUATION

1. The build-up of accommodation capacity in the project area through1990, based on facilities already operating, under construction or in anadvanced planning stage, is projected as follows:.'

Number of BedsHotels Holiday Camp

Category A Categories B & C Villages Sites Total

1985 - 300 1,450 500 2,2501986 126 300 1,450 500 2,3761987 126 550 3,260 1,100 5,0361988 676 650 4,960 1,100 7,3861989 676 750 6,100 1,700 9,2261990 676 800 6,100 1,700 9,276

2. On this basis, the distribution of various categories ofaccommodation in 1990 would be: A category hotels - 7.3 percent, B & Ccategory hotels - 8.6 percent; holiday villages - 65.8 percent; camp sites -18.3 percent. This is in marked contrast to the projection of capacity atappraisal, which envisaged the following distribution: A category hotels -16.4 percent, B & C category hotels - 53 percent; holiday villages - 30.7

percent; camp sites - 0 percent.

3. The changes in the types of visitor accommodation being developedfrom those projected at appraisal are reflected in a lower average real dailyexpenditure per tourist, which was estimated at appraisal, at US$19.35equivalent, including sales tax, at 1975 prices. Dollar prices haveapproximately doubled in the past decade (measured by the U.S. consumer priceindex) which would imply an average daily expenditure per visitor in 1985 ofabout US$38.70 equivalent. Based on the prices charged presently in hotels,holiday villages and camp sites and the prices projected for the highercategory hotels now under construction, the weighted average daily expenditurefor accommodation and meals in all types of accommodation is now calculated atUS$25.30 equivalent, including sales taxes, i.e., nearly 35 percent below theappraisal estimate.

1/ excluding 1,050 beds presently in operation which either antedated theproject or were developed independently of the project.

- 22 -ANNEX VPage 2 of 4

4. The principal expenditures of visitors outside the hotels/holidayvillages are for excursions, shopping, meals and entertainment. With thepreponderance of development in vacation villages, which aim to provide allentertainment and sporting facilities within the complex, the majorexpenditures outside the hotels/holiday villages are likely to be forexcursions and shopping. Most foreign visitors currently take excursions tohistoric sites in Antalya province, and some visit more distant destinationsincluding Istanbul. Data on expenditures on excursions and shopping arelimited, but from information collected from travel agencies and hotels, itappears that the average daily expenditure per tourist is significantly belowthe estimates of the appraisal report. The average daily expenditure iscurrently estimated at US$7.0 (US$7.70 including sales tax). In real terms,this is approximately one-half the estimate made at appraisal, and againappears to reflect in part the change in the nature of the visitoraccommodations being provided as compared with the expectations at appraisal.However, the current estimate of visitor expenditures outside hotels/holidayvillages may be over-conservative, and it would be worthwhile for the Turkishtourism authorities to examine this matter in greater detail.

5. Projections of investments in hotels are derived from the costs ofholiday villages opened within the past year and those presently underconstruction. The investment costs of the hotel school and the marina hotelin Kemer were provided by the Tourism Bank. Investment costs of new "B" and"C" category hotels were estimated on the basis of the costs of vacationvillages and the new "A" category hotel projects.

6. Operating cost projections and projections of operating profits werederived from data relating to vacation villages already in operation, toprojections for higher category hotels provided by the Tourism Bank, and dataobtained from existing hotels and camp sites in the region. The ratios ofoperating costs and operating profits on expenditures by tourists onexcursions and shopping were taken from the appraisal report; these ratiosappear reasonable. On the basis of these assumptions and data provided by theTourism Bank for social housing and the operations of the Kemer marina,projections of investment costs, operating profits and net benefits are shownin the attached table. The economic rate of return on this basis is 10.5percent.

Employment Effects

7. Data on employment in holiday villages and hotels already inoperation provide the basis for estimating employment in accommodationfacilities by 1990 when the 9,300 beds shown in para. 1 are expected to be inoperation. The supporting services and facilities such as the marina,nightclubs, restaurants (outside hotels) and excursions are still only partlydeveloped and definitive data on employment are not yet available.Nevertheless, the ratios of employment in accommodation facilities toemployment in related activities and to indirect employment given in theappraisal report appear reasonable and have been used to estimate employmentcreated by the project in 1990. Using these ratios, the 1990 employment inaccommodation facilities is estimated at 3,000, while employment in relatedfacilities and indirect employment are estimated at 1,200 and 3,100respectively. Thus, the project is expected to generate about 7,300 jobs by1990. A large part of the total will, however, be seasonal employment because

- 23 -ANNEX VPage 3 of 4

much of the accommodation capacity (in holiday villages and camp sites) willbe open for only about half the year, and it is reasonable to assume that muchof the employment in related services and facilities will also be seasonal.This was not explicitlv recognized in the appraisal, which estimated thecreation of 12,600 petaanent jobs by 1991. The smaller number now estimatedlargely reflects the change in types of accommodation with fewer beds inhotels and more in holiday villages and camp grounds. The revised estimatedoes not take into account, however, employment created by the rapiddevelopment of holiday homes and condominiums which was not foreseen atappraisal. No data on employment in these facilities are available. Anothersource of considerable employment has been construction which was described inthe appraisal. The appraisal did not foresee, however, the fast growth in thetown of Kemer which has clearly generated many more jobs than forecast at thattime, though again quantitative data are lacking.

Balance of Payment Effects

8. Based on the US dollar prices of 1985, the projection of visitorcapacity shown in para. 1, and reasonable assumptions about foreign anddomestic tourist traffic (with foreign visitors accounting for 80% ofbed-nights in holiday villages - comparable with experience in the 1985 season- for 75X in A category hotels, 25% in lower category hotels and 202 in campsites), gross foreign exchange teceipts generated by the project (excludingreceipts of Turkish air carriers and other transportation) are estimated atUS$31 million in 1990. The appraisal report analysed the import component ofoperating costs of accommodation (hotels, holiday villages, etc.) and of othergoods and services consumed by tourists (excursions, shopping, restaurants,etc.) (Report No. 1051-TU: Annex XI; Appendix 3). These ratios appearreasonable overall, though some components appear to be on the high side inthe light of experience to date while others appear rather low. Using thesame ratios, the import component of operating costs is estimated at US$4millioa in 1990. The appraisal report assumed that 20% of the capitalinvested in tourist accommodation would be from abroad. This again appears onthe high side in the light of experience to date. Until the financing ofongoing projects and those in an advanced planning stage is finalized,however, and the prospects for the Tourism Bank being able to raise loans fromabroad are clearer, there is no firm basis to change this ratio. Theassumptions of the appraisal report about the terms on which foreign capitalcould be obtained appear optimistic in retrospect. Substituting a five-yearrepayment period on loan capital for the ten-year of the appraisal, and aninterest rate of 101 for the 8Z of the appraisal, the annual service chargeson foreign capital invested in accommodation facilities would reach a peak ofUS$3.95 million in 1991 and decline fairly rapidly to US$1.8 million by 1995.Service on the World Bank's loan would approximate US$2.1 million annuallyover this period. Hence, the net foreign exchange receipts from the project(in 1985 prices) would approximate US$22.3 million in 1990, drop to US$21million in 1991 and then rise gradually to US$23.1 million in 1995. Theappraisal's estimate of net receipts was US$28.3 million in 1990 rising toUS$29.5 million in 1995 at 1975 prices. The substantial reduction inestimated net foreign exchange receipts reflects the lower projection ofcapacity increases and the lower real daily expenditure of foreign visitorsreferred to in paras. 3 and 4 above.

TURKEY: SOUTH ANTALYA TOURISM PROJECT: PROJECT CoMPLETIOm REPo0T

(Loan No. 1310-TU)

Cost and Benefit Streams(USS Millions 1985 prices)

Superstructure Oevelonment __ _ Infastructure DevelonmentGross Social Rental Income Income Net

Investment Replacement Operating Land Infrastructure Housing from Social from BenefitCosts Costs 1/ Profit 1/ Acfuisition Investments Investmen5 HousAnU Z/. Farina LI St.r0P

1976 - - - 1.22 - - - (-1.22)1977 - - - 2.55 1.34 - _ _ (-3.89)1978 - - - 2.65 1.20 - - - (-3.85)1979 - - - 0.99 3.37 - - - (-4.36)1980 - - - 0.31 1.37 - _ - (-1.68)1981 1.52 - - 0.27 3.37 - - _ (-5.16)1982 1.75 - - - 5.29 - - - (-7.04)1983 7.60 - 0.50 1.26 3.18 - - - (-11.54)1984 8.28 - 0.60 0.02 5.46 - - - (-13.16)1985 10.50 0.10 4.35 0.20 2.97 0.26 - 0.10 (-9.58)1986 16.00 0.10 5.25 1.00 2.65 0.67 - 0.50 (-14.67)1987 18.00 0.10 9.90 0.21 1.02 1.00 0.06 0.50 (-9.87)1988 14.50 0.10 14.60 - - - 0.08 0.50 0.581989 6.00 0.20 18.40 - - 0.09 0.50 12.791990 4.00 0.20 19.00 - - 0.09 0.50 15.391991 - 0.50 20.00 - - - 0.09 0.50 20.091992 - 0.60 20.60 - - - 0.09 0.50 20.591993 - . 0.80 20.70 - - - 0.09 0.50 20.491994 - 1.00 20.70 - - 0.09 0.50 20.291995 - 1.20 20.70 - - - 0.09 0.50 20.091996 - 1.40 20.70 - - - 0.09 0.50 19.891997 - 1.60 20.70 - - - 0.09 0.50 19.691998 - 1.80 20.70 - - - 0.09 0.50 19.491999 - 2.00 20.70 - - - 0.09 0.50 19.292000 - 2.00 20.70 - - - 0.09 0.50 19.292001 - 2.20 20.70 - - - 0.09 0.50 19.092002 - 2.20 20.70 - - - 0.09 0.50 19.092003 - 2.40 20.70 - - 0.09 0.50 18.892004 - 2.40 20.70 - -- 0.09 0.50 18.892005 - 2.40 20.70 - -- 0.09 0.50 18.89

I/ Mission estimates. lQZ/ Tourism Bank projections. Jm4

0

- 25 -ANNX VIPage 1 of 3

ZC2C II1IT3602 J090139OEDtD3REF t TCP FCA

JUSO159 JPY639 IN 13/10357 OUT 13/1130342304 KUM TR

T E L E X

14-PLAN#.S.HD.237/D*B.1496 13TH AUGUST 1986

EMENA -R-INTDAFRADWASHINGTON DC-tSA

ATT4.OS MR.DRIAN SHIELDS

RE? PROJECT COMPLETION REPORT ON TURKEY SOUTH ANTALYA TOURISMPROJECT (LOAN 1310-TU)

OUR COMMENIS REOARDING YOUR REPORT ENCLOSED TO YOUR LETTERBATED JULY VP 1986 ARE AS FOLLOJWS*

AAA) FOR PARAORAPH 2.02.. GENERAL DIRECTORATE OF HNIHWAYSDOES NOT HAVE ANY ROAD CONSTRUCTION ACTIVITY IN ITSPROGRAMS FOR "IHE NEW COASIAL ROAD SOUTH F RON ANTALYA",

333) FOR PARAGRAPH 2.05*. THE CONSTRUCTION OF ANTALY*-KEMER-TEKIROVA ROAD WHICH IS UNDER OUR RESPONSIBLITY. WASCOMPLETED AND A STANDARD HIGHWAY CONNECTION H" SEENPROVIDED BETWEEN ANTALYA AND THE PROJECI AREA.

THE INFRASTRUCTURE OF ACCESS ROADS TO THE TOURISMSITES WAS ALREADY COMPLEED A0ND THE ROADS WILL DEPAVED AT THE END OF 1986 CONSTRUCT ION SEASON ACCORDtINTO THE PROTOCOL AGREED'WITH MINISTRY OF CULTURE ANDTOURISM. ALSO, IT HAS BEEN PROPOSED THAT THE ACCESSROADS TO TEKIROVA AND BELDIDI TO 3E CONSIDERED INOUR 1987 INVESTMENT PROGRAM.

CCC) FOR PARAGRAPH 3.02.. MAIN ACCESS ROAD TO KENER FROMANTALYA-FINIKE HISNWAY IS ALSO CONSIDERED WITHIN THEPROlOCOL AND WILL BE CONPLETED THIS YEAR.

RESARDSP

3EFUTV eiMERL MREutmRSW BEHALF OFSENERAL DIRECTOR

*00131207

- 26 -MU VIPage 2 of 3

EMBASSY OF THE REPUBLIC OF TURKEYOFFICE OF THE CHIEF COUNSELOR FOR ECONOMIC AND COMMERCIAL AFFAIRS

2523 Masschuset Avnus, N.W., Washington, D.C. 2

gm) 4"4=

31.12.46115 TELEXW04i43 YUFNUR

August 6, 1986

Mr. J. ChaffeyDivision Chief, CP IIEmena/IBRDWashington, DC

Refs South Antalya Tourism Infrastructure ProjectLoan No. 1310-TU

I appreciate the Bank*s efforts in preparing the CompietionReport on abovementioned project.

Overall, the report has been found satisfactory by therelevant agencies in Turkey however, I would like to conveymy authorities comments on some of the main issues specified inthe report. 0

a) The project has greatly contributed to the tourismdevelopment in the south Antalya region. State Planning Organization(SPO) attached great importance on the subject project and alsoapplied special monitoring process.

b) According to SPO, bhe delay in the project implementationwas related to lengthy legal procedures in land acquisition andthe difficulty in financing the local cost of the project.

c) Council of Ministers Decree No. 8292 dated June 5, 1984on the strategy and objectives of the fifth Five Year Plan,emphasized the necessity in preparing new infrastructure projectssimilar to South Antalya Project and in encouraging the formulationof necessary means for the participation of the foreign investmentsareas.

d) Section 3.04 of the Completion Report states theproblems in connection with the housing requirements for theemployees in the region. The Ministry of Culture and Tourism hascommented to the effect that allocation of necessary lands forhousing is well underway within the framework of ongoing revisionof land approptiation plan.

AUt 14 19i.

- 27 -ANNA VIPage 2 of 3

T.C. TURIZM BANKASI A.$.CHMMAN

Mr.Brian ShieldsChiefThe World BankEnergy, Infrastructure, andUrban DevelopmertOperations Evaluation Department1818 H Street, N.W.Washington, D.C. 20433 Ankara, 8.8.1986U.S.A.

Re:Project Completion Report On Turkey-South Antalya Tourism Project (Loan 1310-tu)

Dear Mr.Shields,

I have personally studied the PCR and together with my colleagues at TurizmBankas, found it satisfactory.

On this occasion I would like to thank the World Bank and each member in thedelegated team for the valuable contribution to realize the development ofthis project which becomes an impressive model for the development of similarprojects in Turkey.

kindest regards,

Yours sincerely

'""Serhan ALTINORDU